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How the Free Market Rocked the Grid
sean_nestor sends in a story at IEEE Spectrum that begins:
"Most of us take for granted that the lights will work when we flip them on, without worrying too much about the staggeringly complex things needed to make that happen. Thank the engineers who designed and built the power grids for that — but don't thank them too much. Their main goal was reliability; keeping the cost of electricity down was less of a concern. That's in part why so many people in the United States complain about high electricity prices. Some armchair economists (and a quite a few real ones) have long argued that the solution is deregulation. After all, many other US industries have been deregulated — take, for instance, oil, natural gas, or trucking — and greater competition in those sectors swiftly brought prices down. Why not electricity?"
No, the solution is MORE regulation, not less.
The rates need to be regulated, and the private companies need to be taken over by nonprofit public organizations.
Every time deregulation is tried, consumers get shafted.
Airplane tickets are fantastically cheap relative to 30 years ago when the deregulation started. You could pay $1,000 to fly coast to coast in 1980 dollars. Now, the last time I flew it was $450 in 2010 dollars.
Don't piss off The Angry Economist
<sarcasm>I am always surprised of how easily these "neocons" forget the most basic economic concepts of the system they worship... They forget things basic concepts like ROI, entry barriers and so on, as long as forgetting them favours their dogmas.</sarcasm>
In short, in Capitalism 101 we saw that, in a pure free market, if sector A has profits better than sector B, then inversions will flow from sector B to sector A, increasing supply until price drops, and profits in both sectors are the same.
In Capitalism 102, we saw that, in real life, maybe building a new enterprise in sector A is not just as easy... it may require huge inversions, a big risk (if by entering the market they lower collective profits, maybe the ROI won't be positive), and outright collusions (for example, all enterprises in sector A join and tell you "if you enter into our sector, we will presure our suppliers so nobody does provide you with the materials you need if they want to do bussiness with us").
In Campitalism 103, we all saw what happened to Enron.
In my country, the former monopoly of telcos (Telefónica, now Movistar) still is the only supplier when you need some services in some geographical areas (not by law, but the other telcos do have wanted to get the infrastructure). Sometimes when they have lost a contract with us, they have blocked providing the service through the winner to the maximum that the law allowed them (and at least we have some law forcing them to provide the service in a limit time).
Of course, some illuminated people will only repeat Capitalism 101 lessons while covering the ears to avoid realising what they are really saying...
Why can't
For the same reason "life isn't fair"
As long as 1% of the total population controls 90% of the wealth, there is no such thing as competition or free market capitalism.
I like competition and I dislike government intrusion but there is a reason FOR government and that is to protect it's citizens, that includes protection from economic crimes as well as physical ones.
The middle class is shrinking regardless of which ideology is popular that month. People are losing their homes left and right, jobs are going over seas and yet still so many people are ignorant to the real issues.
Deregulating natural monopolies doesn't solve the problem. It just hands a blank check to a corporation chosen by the government to fuck it's customers however it chooses.
Free market is an oxymoron to anyone that actually understands what the two words mean.
Seth Blumsack, the author of that offensive lie, should be forced to read aloud the live data feed of the oil and gas market prices. For the rest of his life. Oil and gas prices have skyrocketed without regulations protecting us from speculators, supply side manipulation, and every other kind of abuse the market manipulators cook up. Trucking is a random example of an industry never properly regulated enough that is also not actually deregulated.
But right there under lying Blumsack's byline is a cluster of pictures of Enron creating a faked energy crisis in California, because deregulation allowed it. Of course, that crisis also required Bush and his lying "free marketeers" to be running the Federal government, which is obligated to protect one state from interstate commerce abuses that damage it - which is what Texas deregulation allowed by keeping Enron's practices and books secret, even though California's deregulation required opening them.
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make install -not war
There are also markets controlled by cartels. That's what happens when barriers to entry are high and government regulation is lax.
Deregulation in California is what drove the sometimes 2000% increase in electricity costs that peaked in 2003. It brought us Enron and the recall of Governor Gray Davis.
Blindly recommending deregulation on a commodity that is bought and sold in an a marketplace that promotes investing and speculation instead of direct production, distribution, and consumption creates a situation that will blow up unless it is regulated in some fashion.
(Of course the SEC has shown it can really keep a handle on this type of thing... hmmm... uhhh, urrrk...