The State and the Energy Monopoly
Posted by Darian Worden on May 27, 2010 in Feature Articles • 7 commentsAn advanced society requires energy – in the form of fuel or electricity – to power the devices necessary to sustain it. Politicians and capitalists would not ignore such an opportunity to exert tremendous influence over society, and their efforts to control the market in energy harm the environment and the economy for the rest of us.
Privilege
Benjamin tucker used the term “monopoly” to describe areas where government intervention allowed some people to monopolize critical economic functions. As Charles Johnson writes [1] Benjamin Tucker described “four great areas where government intervention artificially created or encouraged ‘class monopolies’ – concentrating wealth and access to factors of production into the hands of a politically-select class insulated from competition, and prohibiting workers from organizing mutualistic alternatives.” He identified these as the Land Monopoly, the Money Monopoly, the Patent Monopoly, and the Tariff Monopoly.
Considering the common use of patents to monopolize sectors of economic activity, the patent monopoly ought to be examined here. As Kevin Carson explains in Studies in Mutualist Political Economy:
The patent privilege has been used on a massive scale to promote concentration of capital, erect entry barriers, and maintain a monopoly of advanced technology in the hands of Western corporations…
Patents are also being used on a global scale to lock the transnational corporations into a permanent monopoly of productive technology…
Only one percent of patents worldwide are owned in the Third World. Of patents granted in the 1970s by Third World Countries, 84% were foreign-owned. But fewer than 5% of foreign patents were actually used in production. As we saw before, the purpose of owning a patent is not necessarily to use it, but to prevent anyone else from using it. [2]
The company that owned the patents for nickel metal hydride battery technology, which could have been useful in developing better electric cars, was purchased by oil company Texaco in 2001. Texaco was later purchased by oil company Chevron, who owned the battery patents until 2009. [3]
Whether or not this represents some petroleum executives’ plot to kill the electric car [4], it is certainly a case of using government privileges to monopolize the production of energy. Nobody but Chevron was allowed to experiment with the technical information that Chevron owned during the time its subsidiary held the patents. Chevron used a government privilege to insulate itself from competitive innovation.
There is certainly a demand for alternative energy vehicles. After noting the difficulties that car companies placed in front of eager buyers, and the less-than-enthusiastic advertising for electric cars, reporter Matt Coker concludes:
“No one wants electric cars? No one—except just about everyone who has given one a test drive (including a certain guilty Caddy driver) and got on a waiting list for one or is about to have one taken away from them.” [5]
The excitement surrounding Tesla Motors’ electric vehicles [6] would seem to bear this out. So there existed a significant demand for electric vehicles that is still not being met, which should point to some kind of interference in the market.
Statist Oil
As Sheldon Richman notes [7], petroleum “has long been a top concern of the national policy elite, most particularly the foreign-policy establishment.” Influence over the substance that powers armies, industrial production, and the transportation of the workforce is an immense source of power. Because the goals of politicians involve exercising power over events around the world, it is not surprising that they would want to have a hand in energy production.
It is widely acknowledged that oil was a major consideration in Axis offensives during the Second World War. More recently, war profiteering by Haliburton and fighting in the Niger Delta have involved oil in a major way. World conflicts could bring to mind Mad Max II, but with better equipped gangs.
If more electricity was produced using neighborhood generators or individually-owned solar arrays, it would significantly decentralize the production of energy, leaving less for politicians to preside over and compensate campaign contributors with.
What does the state offer oil companies? Only the state that can claim massive amounts of land by force, and cut deals with companies that rotate employees between corporate and government ranks. Without the power of the globe-spanning offensive US military, it is unlikely that oil fields in Iraq could be secured. Without the state, it is also less likely for a risky prospect like offshore drilling to be accepted by the neighbors of the proposed well – those whose source of production it could threaten. And if they did accept it, they would have greater incentives to focus on safety than the government regulators and BP, neither of whom hold much accountability.
Because government, not local people own the environment, environmental regulations will be based on who has the most political pull, not on who is most immediately affected. And those with the most political pull are those with the power and wealth to give politicians what they need. [8]
The concept of “regulatory capture” is important. As Sheldon Richman writes in The Freeman:
Regulators and the industries they oversee develop mutually beneficial relationships that would appall those who idealize regulators as watchdogs. The rules that emerge from those relationships tend to foster more monopolistic industries.
It took the Deepwater Horizon tragedy to bring out the fact that a single federal agency, the Minerals Management Service, is “responsible for both policing the oil industry and acting as its partner in drilling activities,” writes the New York Times. “Decades of law and custom have joined government and the oil industry in the pursuit of petroleum and profit. The Minerals Management Service brings in an average of $13 billion a year. [9]
Lobbyists are another way that energy companies are linked to the state. When industry representatives are consulted to write government policy, they obviously have their companies’ interests in mind.
Liability caps socialize the risk that drilling companies would be held responsible for in the absence of government interference, raising incentives to engage in irresponsible activity.
A law passed in response to the 1989 Exxon Valdez spill in Alaska [which still harms the area] makes BP responsible for cleanup costs. But the law sets a $75 million limit on other kinds of damages.
Economic losses to the Gulf Coast are likely to exceed that. [10]
No wonder BP took shortcuts and ignored hazards. [11]
BP, the company responsible for spewing millions of gallons of oil into the ocean over the past month, has a noticeably statist history. Looking at the well-cited historical segment of the Wikipedia article on BP, one finds a history of colonialists fighting nationalists for control of resources through covert operations, assassination, and the installation of puppet dictators [12]. For many decades the British government held a majority share in BP until the Thatcher administration sold the government’s shares [13].
Competition
Government reduces diseconomies of scale and socializes costs. This increases the difficulty for small production of new technologies to compete with large production.
As Benjamin Darrington notes in Government Created Economies of Scale and Capital Specificity:
An overriding theme of economic policy is the protection and furtherance of the interests of monopoly capitalist corporations. The production techniques necessary to overcome the multiplicity of grave flaws inherent in gargantuan operations such as these would be uneconomical if not for the government’s constant efforts to pay for them publicly, either by defraying the cost of developing and using of these technologies, or expanding the advantages of large firm organization so that it offsets the massive costs of using this flawed system. The immense mass of privileges granted to the operations of the monopoly corporations generates non-market driven economies of scale and skews competition in the favor of bigger firms.
The capital developed for and, of necessity, employed by these firms has a strong tendency towards certain characteristics including a high degree of use specificity, and geographical concentration. These features would prove a great liability to the companies that use them if it were not for the government’s frequent actions to stabilize market conditions, soak up excess supply with public expenditures, and bailout insolvent corporations when what should be minor economic upheavals turns into catastrophic disaster under the brittle and inflexible capital structure of the corporatist economy. [14]
When government issues grants for alternative energy technology, money will likely go to big, established firms. Sometimes the same companies that collect subsidies for fossil fuels will be the ones who are able to control new technologies through government privilege.
Freedom
An industry relying so much on government privilege, with links to government policy is really just another arm of political authority.
State control locks competition out of the economy, and those who want to share the controls are very willing to play along. Undermining them requires innovation and a desire to decentralize or abolish power entirely. A free economy containing strong, empowered demands for freedom and healthy environment will produce things that satisfy these demands.
Notes
[1] Johnson, Charles “Rad Geek”. “Bits & Pieces on Free Market Anti-Capitalism: the Many Monopolies” http://radgeek.com/gt/2010/05/10/free-market-anti-capitalism-the-many-monopolies/
[2] Carson, Kevin. Studies in Mutualist Political Economy, Ch 5, Sec C, pgs 189,192,193
[3] Wikipedia. “Patent encumbrance of large automotive NiMH batteries” http://en.wikipedia.org/wiki/Patent_encumbrance_of_large_automotive_NiMH_batteries
[4] For opposing views on corporate attitudes toward the electric car, see
Hari, Johann, “Big Oil’s Vendetta Against the Electric Car” http://www.independent.co.uk/opinion/commentators/johann-hari/johann-hari-big-oils-vendetta-against-the-electric-car-443388.html and
Woudhuysen, James. “The Electric Car Conspiracy … that never was” http://www.theregister.co.uk/2008/01/01/woudhuysen_electric_car/
[5] Coker, Matt. “Dude, Where’s My Electric Car?” http://www.ocweekly.com/2003-05-15/features/dude-where-s-my-electric-car/1
[6] Market Watch “Tesla Beckons to the True Believers. http://www.marketwatch.com/story/tesla-beckons-to-the-true-believers-2010-05-21
[7] Richman, Sheldon. “The Goal Is Freedom: Self-Regulation in the Corporate State: The BP Spill” http://www.thefreemanonline.org/columns/tgif/bp-spill
[8] For an example of government policy hindering environmental cleanup, see
Johnson, Charles “Rad Geek”. “The Clean Water Act Vs Clean Water.” http://radgeek.com/gt/2010/05/17/the-clean-water-act-vs-clean-water/
[9] Richman, Sheldon. “The Goal Is Freedom: Self-Regulation in the Corporate State: The BP Spill” http://www.thefreemanonline.org/columns/tgif/bp-spill
[10] Werner, Erica. “Federal Law May Limit BP Liability in Oil Spill” http://www.insurancejournal.com/news/national/2010/05/05/109562.htm
Note the Wikipedia article on the Exxon Valdez spill.
http://en.wikipedia.org/wiki/Exxon_Valdez_oil_spill
[11] Granatstein, Solly and Messick, Graham. “Blowout: The Deepwater Horizon Disaster” http://www.cbsnews.com/stories/2010/05/16/60minutes/main6490197.shtml
[12] Wikipedia. “BP”. http://en.wikipedia.org/wiki/BP
[13] Funding Universe. “The British Petroleum Company plc” http://www.fundinguniverse.com/company-histories/The-British-Petroleum-Company-plc-Company-History.html]
[14] Darrington, Benjamin. “Government Created Economies of Scale and Capital Specificity” http://agorism.info/_media/government_created_economies_of_scale_and_capital_specificity.pdf
Center for a Stateless Society (C4SS.org) News Analyst Darian Worden is a left-libertarian writer and activist. He hosts an internet radio show, Thinking Liberty. His essays and other works can be viewed at DarianWorden.com.
Bravo. Without their monopolies on money and energy (which I think are the two most powerful monopolies of tucker’s four), the State would be nothing.
Darian,
Great piece. If this were baseball, I’m talking a walk off homerun. There’s no question here in my mind that the energy monopoly has used rent seeking and regulatory capture to feather it’s own nest and even more troubling is the capture of the national foreign policy apparatus and the use of state military power (monopoly force and coersion) almost as an internal organizational security operation as if a function with a corp. organizational structure. Most companies call this Loss Prevention or just Security but either way the goal is to protect the economic outcome but in this case the outcome is provided by the individual who turns over labor eg property after conversion to a state monopoly monetary unit at the point of a gun. We call it taxes. When the plains indians threaten the railroads and stage coaches, send an internal memo and in comes the cavalry. Just another bad 50′s Hollywood western movie.
Alternative energy (solar, wind, hydro) to the common man seems such a no brainer but then the reality that the technology to do it isn’t available. BullSchitt!
For example http://homepower.com/home/
It’s only “not available” because they can’t figure out how to do it in a large central grid where at the same time they protect their rent seeking and regulatory capture monopoly. Alternative energy is very doable and has been but it works best at the individual level which cuts the monopoly completely out of the action. Once you move past the inital installation and start up costs, for the most part your future costs are maintenance related and depending on design these can be minimal and done by the individual themselves with a little training. For the most part after that, all energy is free (in a manner of speaking) and more important can be created on site. And those so-called high start up/inital costs are only so because the true monoply grid costs are masked by the rent seeking and regulatory capture. I believe the actual true costs of indivudal energy generation from alternative sources are in fact far, far cheaper and make far more economic sense but that’s JMO.
The current central planning state monopoly energy grid is all driven by coal, natural gas, nuclear, some hydro and then of course there’s oil which drives all transportation. In the case of all of these, the source of energy must come from somewhere else. In the case of coal as we’ve seen recently, there is a human toll and the environmental impact just to surrounding property owners is often blown off as rantings from lunatic tree huggers. I’ve never hugged one but I love trees too! As we are learning with the Deepwater Horizon, what limited liability goodies has the coal industry enjoyed/enjoying in it’s own quest to feed the monopoly energy grid?
As with coal and oil, all other means of feeding power to the monopoly energy grid enjoy all manner of priviledge and more important enjoy protections often not thought of in the bigger scheme. In most all locales, try building a home on your own property without complying to local codes and without obtaining a certificate of occupancy. In most locales, both state mechanisms require connection to the monopoly energy grid in order to be compliant and thus live in your own home hassle free from the state. We often overlook even how these mechanisms help protect the energy monopoly not to mention how it feathers the bed of the monopoly home builder/real estate monopoly. If you wanna see that up close, google video “The Garbage Warrior” and watch what architect Mike Reynolds did and had to fight.
State power and crony capitalism have overpowered the free market long ago and IMO energy monopoly has been a chief pillar in doing so. I believe folks like a Mike Reynolds are our natural allies and we’d be well served to learn from them. Kevin Carson has spoken about home based manufacturing as the Sloanist model implodes and again IMO Kevin’s words point squarely into this area that IMO appears to me to be overlooked across the board with freedom and liberty seekers. I think it’s there but we rarely talk about as options towards a means to an end. If I’m wrong I stand corrected and would rejoice in being so.
As for transportation, the most efficent internal combustion engine built was a massive diesel which achieved 52% efficency. The common internal combustion engine of our day is in the 30% range at best but the electric motor is commonly found in the upper 80% to low 90% range in energy efficency. And the torque curve of an electric motor smokes the internal combustion engine every time. From an economic perspective, apply the idea of sustainabilty and best alllocation of resources in a true free market environment and IMO the electric motor puts the internal combustion engine along side the stone wheel. In the 70′s and early 80′s I built drag racing motors and still love them, so I’m not anti-internal combustion but I also work daily with industrial electric motors and it doesnt take long to see where the best is. Also the energy to drive them can be local and homegrown so applying sustainablitly and best allocation of resources in a true free market, the electic motor wins again.
This crowd here at C4SS just seems a natural fit in this area and in a voluntaryist/agorist thinking, individual/local energy generation would be a huge hit and a huge advantage IMO. Even if rugged individualism is not your drink of choice and a more community based approach is the idea, alternative energy generation especially micro hydro is a perfect co-op fit. Again, I believe energy is a backbreaker for the state/elite alliance and the more we break from it, the more it will collapse under it’s own weight.
mac
Thanks for the comments!
soahc,
Tucker didn’t mention energy as one of his big four – the Land Monopoly, the Money Monopoly, the Patent Monopoly, and the Tariff Monopoly – but I was using his model to examine it. Although it doesn’t specifically address energy, I think Rad Geek’s The Many Monopolies is valuable along these lines – http://radgeek.com/gt/2010/05/10/free-market-anti-capitalism-the-many-monopolies
mac,
Your comment raises a lot of good points.
I really like the idea of solar energy and would have liked to write more about it, but the article was already long as it is. When you think about it, solar energy is already hitting everything and it makes sense to capture some. Considering how far computers have come since photovoltaics were introduced, I really don’t believe that it’s technologically impossible for PV to make up a much greater percentage of electricity generation. I would like to look more into the logistics of manufacturing and maintaining PV apparatus though.
Like you, I don’t think or desire that internal combustion should disappear, but it’s role could be greatly reduced.
I think the energy monopoly would fall in line with the patent monopoly, since patents are the primary means of slowing market pressures that would spur technological progress.
I am not impressed. This is a horribly written post with half truths and total lies.
I agree that big government is bad and it is getting bigger and badder, and I agree that state control can lock competition out of the economy, but your arguments are not compelling.
You found someone who likes electric cars with 40-50 mile range? Not too many. How about Tesla’s for $100K+ and volts for $40K sticker price? In general, people only like those because they are rich flaming liberals and can buy an extra car for in-town use. They are not a panacea.
Patents – Chevron owns THE patents for nickel metal hydride battery technology? Give me a break. I suppose they might own some NiMH patents, but that hasn’t stopped anyone from using them. And Nickel metal hydride is not what is envisioned fueling electric cars… also, remember that batteries are an energy storage device, not an energy supply device.
And the existing oil companies in the U.S. are miniscule compared to national oil companies they compete with. EXXON Is dwarfed by most of the the National Oil Companies (that may be irrelevant information from me).
Concerning the comment “no wonder BP took shortcuts and ignored hazards.” Well, no one else does, and a probable $10B (if it stops sometime soon) cleanup cost shows how stupid BP has been in the operation of their company. Add to that insight the BP Texas City explosion, additional fatalities there the next year, the BP Prudhoe Bay oil spill, the fires at their Whiting refinery, and their continued attempts (with some success) to manipulate the market on crude oil, propane, and natural gas and it shows that they are a rouge company. And why do the environmentalists continue to think they are good? Got me. The oil industry gave up on them a long time ago.
And MMS is in bed with the oil industry because they make money off it? I don’t think so… If oil companies make money the government makes money through taxes, you didn’t mention that enrichment of the government by the oil companies.
I really struggle with the innuendo that the oil industry is a bloated entity. It appears to me that it is extremely efficient. There are almost no people working in the industry compared to others and the industry competes like crazy against itself. It even posts prices on big signs outside gas stations, and raises and lowers the price as the feedstock price (crude oil) changes. on big signs outside gas stations.
>I am not impressed. This is a horribly written post with half truths and total lies.
I am not impressed with your comment.
>You found someone who likes electric cars with 40-50 mile range? Not too many. How about Tesla’s for $100K+ and volts for $40K sticker price? In general, people only like those because they are rich flaming liberals and can buy an extra car for in-town use. They are not a panacea.
As technology is developed it would be expected to get more efficient and less expensive, with a larger diversity of choices becoming available. I did not say anything resembling a claim that electric cars will solve all problems.
>Patents – Chevron owns THE patents for nickel metal hydride battery technology? Give me a break. I suppose they might own some NiMH patents, but that hasn’t stopped anyone from using them. And Nickel metal hydride is not what is envisioned fueling electric cars… also, remember that batteries are an energy storage device, not an energy supply device.
Patents prevent innovation. If anyone other than rich flaming liberals are to use electric cars, then improvements would need to be made to current technology, which is what I said. Obviously batteries don't generate energy. Where did you get the idea that I said otherwise? I admit that I didn't discuss alternative energy generation as much as I could have, but I did at least mention solar later on (another technology that could use more development).
>And the existing oil companies in the U.S. are miniscule compared to national oil companies they compete with. EXXON Is dwarfed by most of the the National Oil Companies (that may be irrelevant information from me).
So a few oil companies that work with states are not as big as oil companies that are owned by states. I don't see how this fact would weaken anything in the article.
>Concerning the comment “no wonder BP took shortcuts and ignored hazards.” Well, no one else does, and a probable $10B (if it stops sometime soon) cleanup cost shows how stupid BP has been in the operation of their company. Add to that insight the BP Texas City explosion, additional fatalities there the next year, the BP Prudhoe Bay oil spill, the fires at their Whiting refinery, and their continued attempts (with some success) to manipulate the market on crude oil, propane, and natural gas and it shows that they are a rouge company. And why do the environmentalists continue to think they are good? Got me. The oil industry gave up on them a long time ago.
After all that they are still in business and still working with the government to keep reporters out of the disaster area. Which environmentalists continue to think they are good?
>And MMS is in bed with the oil industry because they make money off it? I don’t think so… If oil companies make money the government makes money through taxes, you didn’t mention that enrichment of the government by the oil companies.
Obviously oil companies pay taxes. I might as well make sure everyone knows that oil is used to make gasoline.
>I really struggle with the innuendo that the oil industry is a bloated entity. It appears to me that it is extremely efficient. There are almost no people working in the industry compared to others and the industry competes like crazy against itself. It even posts prices on big signs outside gas stations, and raises and lowers the price as the feedstock price (crude oil) changes. on big signs outside gas stations.
If there are comparatively few people working in such a major industry, that wouldn't seem to point to open and thriving competition. I don't see how a few large corporations with government connections advertising prices on large signs undermines anything I said in the article. Are they competing in an unrestrained market against innovators with alternatives to fossil fuels or are they using privilege to exercise undue power over the energy market?
Thanks for responding in a much more constructive manner than I did.
However, I still think your post and your reply contains many invalid arguments, and I know you also think mine does as well.