The Legacy of Oil Industry Innovation: Lessons for Bureaucrats in Emerging Economies

Long ago, seafaring was predominantly carried out by people who were convicts or those punished with excommunication from society for their crimes.

Australia, for instance, was initially settled by white people who had been sent there as exiled convicts. Many of these individuals participated in seafaring, often by rowing ships as a form of punishment or labor.

The landscape changed when oil was discovered and its vast potential as an energy source for machinery became clear. As a result, oil began to be traded across the world. Shipping became the primary method of transportation, leading to the formation of giant oil companies, which became some of the wealthiest entities in the world. These oil corporations dominated the global financial scene before modern tech giants like Microsoft, Google, Apple, and Facebook displaced them.

The younger generation may not know that the wealthiest companies of the 1970s were not the tech giants we recognize today, but oil companies such as British Petroleum, Shell, Exxon, Mobil, and Aramco. These oil giants, through their policies and operations, played a significant role in creating the myth of the "American Dream" and ushered in a paradigm shift, replacing the convict seafarers with highly educated, technologically skilled professionals.

To cut a long story short, oil companies established their own fleets to transport oil in large tanker ships from the Middle East to various parts of the world. Oil, a highly dangerous commodity to transport, required advanced technology, research, and safety systems. The bureaucratic story at the heart of these efforts can be summarized as follows:

The first thing these companies did was not wait for government orders or legislation to enforce safety measures. Instead, they formed a consortium to finance and invest in research institutes. These institutes conducted experiments and research to discover safer methods of oil transportation. This initiative led to the creation of the OCIMF (Oil Companies International Marine Forum), which still exists today and provides extensive safety guidelines for oil transportation. One such essential guide is the ISGOTT (International Safety Guide for Oil Tankers and Terminals), a reference manual that is sold by specialized bookstores and the OCIMF itself, based in London, although it was originally formed in Bermuda.

The mechanical systems developed by the OCIMF necessitated highly trained personnel to operate these specialized oil tankers. The profession of seafaring thus evolved from a labor-intensive, convict-driven task to one requiring advanced training and expertise.

To fill the gaps in trained seafarers, the oil companies took proactive measures to meet this need. Once again, instead of waiting for government mandates, they developed their own training programs to educate college-educated young people to pursue careers in the maritime industry and handle oil tankers safely. They also raised salaries for seafarers to attract skilled professionals. In fact, such policies by these private oil companies contributed to what came to be known as the fabled American Dream.

Interestingly, these training modules later became the foundation for international maritime standards. The courses were eventually adopted by governments and formalized by the International Maritime Organization (IMO) under the STCW (Standards of Training, Certification, and Watchkeeping for Seafarers) framework.

So, what key takeaway can be drawn from this history? This lesson is particularly relevant for bureaucrats in non-capitalist or socialist countries, where private companies often wait for government orders or regulations to compel them to act responsibly.

Bureaucrats in such countries should take note: private contractors should not be left unchecked when it comes to the use of public funds for service delivery. Take, for example, a government contract for operating car services. If the contractor is not properly monitored, they might exploit workers by offering low wages, hiring untrained staff, and frequently shifting employees. This would lead to poor service quality, a lack of safety, and inefficiency, ultimately defeating the very purpose of outsourcing services.

In countries like India, with its vast population and extreme poverty, contractors may exploit vulnerable workers to reduce costs. Without proper oversight, this exploitation can undermine the safety of workers and the effectiveness of the service, ultimately harming the public.

The lesson is clear: bureaucrats must ensure that private contractors are held accountable. By proactively creating and enforcing regulations, much like the oil companies did in the past, governments can ensure that private enterprises serve the public interest while maintaining high standards of safety, efficiency, and fairness.

Bureaucrats will have to take it upon themselves to build the Indian Dream, much like how American private capitalist companies acted in the past to build the American Dream.

The US was able to attract highly educated people from across the world to its land, based on such lucrative labor policies, during a time of great upheaval. While the world complained about the brain drain, the US and other oil giant home countries built their nations. In fact, in India too, entry into seafaring at that time was through the IIT entrance exams. Many brilliant students of Mathematics and Physics chose to pursue seafaring professions, working for these oil companies, because they offered much better remuneration and work environments compared to what the IIT graduates of those times could earn by acquiring a B.Tech degree and staying in India, rather than migrating abroad.