Thursday, May 25, 2006

Ken Lay, Free Markets and "Deregulation."

Ken Lay Will Get Away with His Real Crimes

In the 1930s, a character named Samuel Insull created the first giant power holding companies. Insull played fast and loose with his account books, fast and loose with cash for politicians and pocketed millions by gouging electricity customers. Insull was indicted, like Lay, for crimes against his stockholders.

In 1933, President Roosevelt made Insull's power piracy a crime. FDR signed the Public Utility Holding Company Act and laws that capped the profit of electricity monopolies. The act required them to keep lights on by accounting for all maintenance expenses, barred "trading" electricity and, most important, banned donations by the power giants to politicians.

Fast-forward to January 2001. The George W. Bush administration, within 72 hours of his inauguration, issued an executive order lifting the Clinton Energy Department's effective ban on speculative trading in the California power market. The state was still in crisis, facing blackouts and 300 percent increases in power bills, the result of "deregulating" its electric system, as first suggested by Lay.

Instead of a "free" market, California's electricity bidding system became a fixed casino where Lay's operatives and a tight-knit cabal of corporate cronies jacked up prices through such tricks as "death star," "ricochet" and "kilowatt laundering."

In one instance, Enron "sold" the state 500 megawatts of electricity to go over a 15-megawatt line. Enron knew that sending that much power through those wires would have burned them to a crisp. To prevent this Enron-designed blackout, the state scrambled for other sources of electricity, which Enron and friends sold them at a big mark-up.

Now, you may think it odd that a Libertarian, Free-Market Capitalist such as I would source Greg Palast. But of course, what he's speaking of is the very opposite of free markets.

A "free market" is one where everyone is free to participate, one where consumers have choices and providers do too. The case of Enron is a case not unlike that of a small town with one butcher - who also inspects the scales for accuracy.

Who knows if HIS scales are accurate. He does. And he'll be sure to tell you so. Can you trust him?

A free market is not one that is "deregulated;" a free market is one that is regulated in order to ensure that it is fair. Not only is it fair, it's verifiably fair and secure, immune to the sorts of market manipulation Ken Lay is ultimately responsible for.

But of late, "Free Markets" have come to be equated with "Lazez-Faire" which means, in essence, no assurance against predatory or manipulative practices. If one firm "corners the market" on a commodity and can therefore choose to sell at whatever price they like, this is all well and good according to Right-wing economists of simple minds.

Whenever a powerful entity interferes with the market in order to gain it's own end, exclusive of all others - whether that end is socialistic or capitalistic, whether the ideals be purely altruistic or pure greed, the results are much the same. Competition is squeezed out, and once the market has been served by those who understand the rules of the game, why, only they can play and they become the rules comittee.

The energy market is not like the diamond trade, where it matters little in any ultimate sense if diamonds are really worth what they cost. Nobody "needs" an investment-grade diamond.

But you do need to be able to access energy at a fair price. It' s not just a personal priority - it's a major economic factor, one so critical to our nation's survival that it must be considered a national security issue if that term is to have any real meaning at all.

It is simply not permissible for corporations to be involved in creating artificial shortages in order to boost their profits, nor is collusion with government to fix prices and determine energy policy allowable. What Enron did was evil; theft and extortion on a vast scale, crippling and beggaring an entire state.

Free markets can only work if there is an assurance that those who refuse to play by the rules of the market are punished, and furthermore, that the market is well-policed so that the economic equivalent of pickpockets and armed robbers are discouraged to the greatest possible degree.

That is what a free market is. "Freedom" is not merely freedom from oppressive taxation or burdonsome regulation. It is also a markete where fraud and graft are not the defining characteristics - for these factors bring extra costs and inflate prices just the same.

These things are "the price of doing business," as if they were the same sort of thing as labor cost, or materials or admistrative overhead. But really, they are taxes. It may vary who it is that you pay it to, but the important thing is that neither you nor your customers gain any direct advantage. In the case of legitimate taxes, there are of course indirect benifits. But in the eventuality that you are in effect paying taxes to a larger competetor in order to continue to exist; there is no such reward.

It's wise to consider all such imposed costs to be the same; any price you must pay in order to do buisiness, either the business of making a living, or simply the business of living can be considered a "tax."

The only ones who get a square deal in the energy marketplace today are those with a great number of guns - and the soldiers to use them. Consider how many energy firms have stakes in private security firms!

But there are alternatives. Our current energy system is terribly wasteful and there is both money and security to be gained in raising efficiencies and turning "pollutants" into profit centers. "Greenhouse Gases" are bad for global warming - but that's because they belong in greenhouses, reducing the cost of fuel, food and transportation as a net result of an entirely new industry, one without the high overheads imposed by the corruption of the petrochemical bedfellowships.

When greed, corruption and uncertain, politically-influenced supply-chain issues threaten the petrochemical-based energy chain, it makes sense to start looking seriously at viable alternatives. Biofuels, for instance, have become increasingly attractive, especially when they can be generated with the aid of increasingly regulated CO2 emissions. What was a pure loss becomes pure profit by means of a deeply elegant solution.

Consider putting your Green where it will grow and prosper. And consider how ultimately, consumers bypass markets that have become corrupted.

It amuses me how much of this technology started out in hydroponic "grow houses" that emerged as a reaction to "the war on drugs" making it difficult and dangerous to simply let marijuana grow naturally.

Free markets, supply and demand, and of course, an environment that discourages large groups dominating the industry served us well.

But then, our vices tend to drive demand and innovation far more than any virtue.

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