As civilization evolves, and science advances, and democracy effects positive change in favor of human dignity and freedom, one paradigm replaces another, and we become better at managing the problems that threaten to destabilize the human environment. There was a time when authority could use command and control to maintain order, for a time, but in our democratic and informational age, that paradigm is as primitive and unworkable as it is unjust, and our problems demand subtler, more values-infused solutions.
As the subtitle of a recent Economist report on closed industries in Italy says it, “Cartels that make life cushy for insiders exact a heavy toll on everyone else”. There is no real way around this: to profit from doing business well and providing excellent quality of manufacture and service is one thing; to pad one’s profits by coordinating market strategies with close competitors that join with one to form an exclusive cartel, boxing out the influence of stakeholders is quite another.
The fossil fuels sector is consistently given to the formation of cartels that seek to use the resources they control to define and direct the markets in which they do business. This means everyone who interacts with the members of those cartels must pay at least twice for the same relationship: once for the resource and once for the tolls exacted by the cartels.
It is the dirty little secret of the fossil fuels sector that their resources of choice demand intensive regulation and close scrutiny, while the resulting business model then lends itself to the formation of powerful cartels that seek very deliberately to limit the power of consumers and individuals over the dynamics of the marketplace.
There is a resulting, and very serious and pervasive, challenge to the democratic political order, because the peculiarities of doing business with a finite resource, given to massive pollution, extremely difficult to contain once released into the environment, and which one must burn in order to use, pit powerful cartels against the interests of the people who inhabit any given marketplace, including those where democratic principles seek to impose rule of law, not of faction.
Why should combustion, cartels and other hidden costs, be a challenge to democratic systems of government? Why can purveyors of fossil fuels not do business in a way that is more friendly to democracy? Because the true cost of using their product is so much higher than markets currently reveal through pricing that they might not otherwise be able to business at all.
There is a primordial, vested interest for purveyors of fossil fuels in making sure most of the costs of their operations are comprehensively externalized—paid by others. A study released this spring found that American taxpayers are paying externalized costs as high as $345 billion per year, so the country can burn coal relatively cheaply. Those are real costs, paid by real people, and their externalization means they are not counted as part of the cost barrier related to getting into the coal business.
Instead, the conventional wisdom assumes that if consumers did not want to pay those externalized costs, they would find a way to avoid doing so, and coal extraction would be unaffordable for the coal producers. The presumed “demand” for “cheap coal” allows those in the know to hold that the market has chosen to “bear” these costs externally. But externalized costs are notoriously hard to trace, remain hidden by being pervasive, and can filter through to almost any segment of the web of generalized economic activity.
Externalized costs also include strategic and tactical costs related to locating, securing and making the resource available to those who would profit from it. It is widely understood that the United States would have little business fighting against or in support of various Iraqi governments, were Iraq not so rich in petroleum reserves.
The so-called “war on terror”, really an asymmetrical war against al-Qaeda and affiliates, is not about American freedom and democracy, but was sparked by the US effectively occupying Saudi Arabia, in order to protect an ally that is an ally only because of its vast oil reserves. The cost of having to provide this protection has been extreme and layered: not only has it sparked a costly global war against unscrupulous mass murderers, but it has forced the US to support one of the most brutal and anti-democratic regimes on Earth, fostering extremism and radically increasing the costs of doing business in that part of the world.
It has also undermined the ability of the US to effectively marshal its substantial influence as a leader on issues of democracy and human rights, instead requiring all sorts of calculations, deals and uncomfortable arrangements, to secure the same coalition that should come naturally, based on shared values and shared interests.
While many argue that the expansion of democracy is what most benefits advanced democracies, economically and in terms of security, and this has consistently been the official policy of the American government, the often cynical, often counterproductive “realpolitik” of tribes and factions, cartels and collusion, has been the norm, drastically undermining the ability of global capitalism to really contribute to the spread of authentic popular democracy.
What are the combined costs of the Iraq and Afghanistan wars, of funding our allies in the Middle East and a strategy of perpetual containment against rivals like Iran? Estimates for the total “lifetime” costs, including interest to be paid on bonds sold to finance the massive deficit spending of the wars and the rapid Defense spending ramp-up, reach as high as $2 trillion per war, with the Pentagon budget adding still more to long-term deficits. Those massive, unprecedented deficits, then have thrown the Congress into a frenzy of “deep” (read: aggressive, perilous) budget cuts for everything from public education to public health and public safety.
Members of Congress committed to building a prosperous and free American future have to literally fight to protect money that will ensure the United States leads the world in higher education and cutting-edge innovation, because the forces that seek to keep financing the massive externalized costs of outdated fuels consistently say “the money is just not there”.
What is the total long-term cost to the people of the United States, if their government commits to first of all funding interest on the unprecedented massive borrowing designed to pay for the unbearable but hidden costs of using carbon-based fuels that bring with them cartels, collusion, global political instability and questionable deals with allies who oppose our values?
What is the cost of defunding education, defunding public health, defunding consumer protection, defunding efforts to keep life-sustaining air and water clean? If the educational opportunity of the American people falls behind most of our competitors on the global stage, how will we compete in the knowledge economy of the 21st century, which will prize and reward innovation more than any other capacity?
Cartels are bulwarks against market competition. They are designed to limit the realm of democratic participation and optimum economic benefit to those inside the walls. Any extramural forces are considered hostile competitors to be kept at bay. In terms of a healthy economic metabolism, they are like cancers or parasites, aggressively extracting more than their share, and using the wider organism to power their activity, free of charge.
In this sense, the externalization of costs is a transfer of wealth, from the extramural to the intramural, from the wider market to the cartel. It is important to understand this point, because it is the nature of fossil fuels, the exorbitant up-front, collateral and long-term costs of using them, that drives otherwise decent people to build up these corrosive entities, designed to extract from everyone else what should be funded through the line of business itself.
The fossil fuels industry knows it depends on this kind of hidden, pervasive, host-organism assistance from the entire society, and so it fights with unrelenting vigor to maintain that assistance. The industry seeks to influence elections and to alter the landscape of scientific inquiry, to secure a more favorable landscape of debate and policy-making.
But for those of us outside the walls, for those of us who are funding the unscrupulous burning of fossil fuels by transferring funding away from our children’s and our grandchildren’s educational and economic opportunity, we have to learn to demand that the cartels tell the truth about the costs we pay on their behalf, or be disbanded by law.
A different future is possible, and we should be organizing, democratically and economically, to build it. We now have the technology and the know-how to harness enough clean energy to power our entire economy. In the spirit of American ingenuity, we should commit to building the infrastructure to do it, and secure a more sensible, sustainable and prosperous future.
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Originally published July 8, 2011, at IndependentsOfPrinciple.com
The Poet Economist 