Andrew McKillop
21st Century Wire
With regards to the economics of energy debate, Europe, and the world, finds itself at a major crossroads now.
This is a complex issue, not least of all because of the politically-loaded connotations associated with the term ‘nationalization’.
From a socioeconomic standpoint, the status quo of continual rising heating and electric bills – is not sustainable at all. Arguably, there are more people in ‘fuel poverty’ now, than at any other time in modern history. Those numbers are growing by the day and politicians and energy CEOs know it. Boycotts, protests and riots are right around the corner. It’s a ticking time bomb – and they must face it, even if financiers and major shareholders are still looking the other way.
Beyond the fuel poverty issue, there are other problems emerging…
‘Oligarchic’ Nationalization
Professor Colin Robinson, in a Dec 2013 study published by the UK Institute of Economic Affairs, says the energy sector in the UK has been effectively renationalized. He sees the return of centralized energy planning as the root cause of skyrocketing fuel and energy prices, fuel poverty, and accelerating de-industrialisation of the UK economy as industrialists flee the high cost of energy. He, however, does not signal the before-and-after differences of old style energy nationalization, what we can call the ‘postwar social democrat’, waste-not-want-not austerity model, and today’s 19th century-style crony corporate and crony government energy sector takeover.
To be sure, the crony monopoly-board model is profit-only, always corrupt and thrives on waste. It was well analyzed by Thorsten Veblen is his 1899 book, “The Theory of the Leisure Class”, describing the emergence of early industrial capitalism’s super rich class he called “the lords of the manor” who employed themselves in the economically useless practice of conspicuous consumption and conspicuous leisure – treating their permanent gambling party using financial betting chips as a prime leisure activity, for which the Money Lords created banks, brokers and trading houses.
Veblen specially identified the role of new or emerging technology and science, as a means for the Leisure Class to create and play new and more gambling chips.
ROBBER BARONS: Monopolies, price-fixing and pornographic profiteering.
Railway mania, in the mid-to-late 19th century is a model of Leisure Class gaming frenzy, and a perfect model for today’s US shale gas and shale oil boom, Europe’s green energy boom, the LNG tanker-and-terminal shell game, are other energy sector examples of leisure class gambling frenzy. In the UK, railway frenzy gripped its emerging Leisure Class from the 1840s. Railroad share prices were gouged up on a daily basis, more and more money was siphoned from greedy or hopeful speculators, and the party continued until the inevitable collapse. In the UK case, the frenzy reached its peak in 1846, with about 16 000 kilometres of new rail lines proposed by hundreds of new rail companies. Less than a half were ever finished, and a third were never even started. Dozens of the new rail companies were nothing more or less than investor scams. In many regions, rail lines were uselessly duplicated by competing companies – before they collapsed.
Well before the end of the 19th century in the US, UK, Germany, France and other developed countries the Leisure Class infiltrated and corrupted the governments of each country. The crony government-and-crony corporate model existed, and was well described by Veblen, making it useless to pretend that what we have today is “surprising”.
From Social Democrat to Plutocrat
The UK was in no way alone in its 100-year jump back into the Veblen era, following the arrival of Thatcher at the start of the 1980s. Other developed countries have had a similar one-way trip from relatively responsible-minded governments treating energy as similar to food, housing, medical services and education – a basic social necessity – to “transforming” these basic needs into asset gaming chips for the Leisure Class and its 24/24/365 days-per-year gambling frenzy. The old model demanded relatively serious attempts at cutting out waste. It tried to clamp down on profit gouging, eliminate speculation and force out the other not-so-fine things that dysfunctional late capitalistic society offers us again, today. Or throws it in our faces with a sneer.
Professor Robinson says: “For a short period, around the turn of the millennium, the UK energy market was highly competitive, offering choice to consumers and keeping prices in check”, but since that time he says: “governments have reverted to centralised action, importing many of the defects of discredited Soviet-style planning”.
In fact this ignores the well-described effects of market size and competitivity on economic performance, with neither of these two attributes being infinitely scalable. More simply put, Small Is Beautiful.
Possibly for a few short years around 1995-2000, in the UK case and in several other developed countries, there was an apparent Sweet Spot with the flimsy appearance of “unbridled competition and choice for energy consumers” – at a time when world oil prices were struggling to exceed $15 a barrel. With energy that cheap, the play-act of capitalistic competition could fool and bemuse the audience. Energy that cheap enabled all kinds of fake competition, but the Sweet Spot soon disappeared.
UK ENERGY: The cost of heating and electricity in Britain has already spiraled out of control.
What really happened in the UK as in other developed countries was a never-avowed stealth re-nationalization of the energy sector. The new government-corporate hegemony in UK energy as in other countries traces back to the “great unwinding” or “unbundling” of Britain’s oil, gas and electricity production and distribution sector during the Thatcher years, from the early 1980s.
The Fantasy of the Self-Organizing Economy
From the 1980s, basic concerns like energy supply-demand management and energy economic performance were replaced and substituted by the article of faith that “the market” was uniquely capable of resolving all problems whether this concerned energy resources, or their processing, transformation, distribution and final utilisation. The storyline was that the self-organizing economy would operate seamlessly, with Adam Smith’s Invisible Hand operated by the Money Lords reaching deep down into the pockets of every consumer of energy – and ripping them off.
Adam Smith, we can note, developed his late-18th century theories after a visit to Francois Quesnay, then adviser or soothsayer to Marie Antoinette, a royal tart who was later guillotined. Quesnay was the arch priest of Laisser Faire. Call it Devil take the hindmost.
The lopsided, corrupt and inefficient oligarchic structure we get with Laisser Faire is a 19th century hand-me-down from the world of Thorsten Veblen, in which the policy buzzword of “sustainability” is either an insult or a joke. The Oligarchic, cartel-based, monopolistic economy is in fact an opaque travesty of a “free market system”. The Mafia-Mogul crony corporate system has the sole target of profit maximisation. It is at all times encouraged and enabled by crony government.
For free-market ideological reasons, neolib apologists like Professor Robinson do not tell us why the stealth renationalization of UK energy is so ultra-capitalistic that its oligarchic concentration and domination process, or cancer, has reached heights of dysfunctionality comparable with the Stalin-era Soviet GOELRO electrification program, which supplied the ideological model for the infamous five-year economic plans of the USSR. One stark example was the coal industry wipeout in the UK. Under Free Market Maggy (Thatcher), the UK coal industry was decimated and dismantled for pure ideological reasons, later given the trimmings of climate ideological reasons when Mrs T. told the Brits how terribly worried she was about penguins in Antarctica. The millions of persons thrown out of a job by her oligarch-serving hysteria counted for nothing. They were dirt!
The UK is now a major importer of coal, importing 69.9% of the total 64.1 million tons it consumed in 2012. The coal is produced anywhere else but the UK. Importing it helps increase the “structural” trade deficit of the UK, and does nothing at all to reduce world CO2 emissions or protect the environment.
For “Maggie” Thatcher the storyline was that closing down the British coal industry was a vital need “because it was infiltrated by soviet-minded trade unions”. Conversely the UK’s already majority-private oil industry, and its only part-nationalized gas industry, both of which profited from decades of state investment – paid for by taxpayers – were rapidly and seamlessly handed over to complete private capital ownership, during the Thatcher years.
At present, the oligarchic takeover of British energy targets the national electricity system and the process is far advanced. With absolutely no surprise at all, UK electricity prices are growing on a near-vertical track. How could it be otherwise?
Bundle Up and Go
The Great Unbundling and unwinding of British energy was a handover to the Oligarchs. They returned the compliment by racking consumers and users of energy for every penny they could suck out of them.
The simplest proof of this is the Great Unbundling and the Great Ripoff are simultaneous events.
Energy privatization meaning Oligarchic takeover of British energy, as in any other developed country, did nothing to trim energy prices. They increased regularly, but since the early 2000s what was a previous inflation trot, became a mad gallop. State-corporate joint interference in the energy sector today, although Professor Robinson does not dwell on this, is far more pernicious because it is unavowed. It features both direct and indirect support from the state, and tolerance by the state, of the price-gouging and profiteering antics of the Leisure Class’ plaything, the “crony corporate sector”.
Unfortunately “oligopolistic competition”, or Oligarchic market takeover and rigging of markets can only be, and always is, inefficient. Therefore the new corporate-financial energy sector scam is above all inefficient and energy prices must rise and remain high.
Oligarchic control of the 24/24 casino playtime frenzy features an “unholy alliance” of banks, brokers and traders. For today’s energy boom, the casino players run alongside “traditional” energy production and distribution entities, who themselves have been eaten out from the inside – by financialization. When the game gets sufficiently advanced, and The New Lords suffer game-fatigue, they will dump their gaming chips and we have “crisis”.
For the Oligarchs, the only game is the next one. Behind them, they leave a Wasteland like a Nazi scorched earth raid. Since the 2008 banking and finance crisis threw a spotlight on the New Oligarchs, ordinary citizens have turned against these previously untouchable clowns and criminals who forcibly occupy the financial landscape, regularly paying huge fines to crony regulatory agencies “but not admitting wrongdoing”.
The necessity for this vermin to dominate energy is in no way God-given. The necessity for their plain and simple bloodsucking existence – is also not God-given.
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