A rchive Date
[ 04-03-2001 ]
Category
[ International Relations ]
sub-Categoy
[ U.S ]
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[Who turned out the lights in California?
Politicians, like children, should never be given more than pocket money
By ERIC MARGOLIS
Contributing Foreign Editor
March 4, 2001
BIG SUR, Calif. - The famed coastal road between Lucia and Big Sur, America's most beautiful stretch of scenery, was blocked last week by a minor landslide. It took unionized road crews three days to clear the rockfall - this from a nation whose World War II naval construction teams used to build entire airfields and harbours in 24 hours flat.
Meanwhile, California's electric system, the nation's largest, is on the verge of total collapse. Power outages and brownouts are common. Businesses, starved for power, are cutting production, or decamping to other states. This sounds more like North Korea, or Bangladesh, than high-tech California, America's most populous, dynamic state.
The most remarkable thing about California's power crisis is that it's entirely due to the stupidity, ineptitude and cowardice of the state's politicians. Some five years ago, California deregulated power utilities and ordered them to buy electric power on the spot or daily market, rather than sign long-term contracts with suppliers. The price utilities could charge consumers for electricity, however, was kept frozen. Wholesale prices were freed; retail prices fixed.
Last fall, a national shortage of power, high fuel prices, and growing demand for electricity by California's computer industry in Silicon Valley combined to produce power generation shortages and huge increases in the cost of electricity. Powerful, well-funded environmentalists, and anti-business groups like the Sierra Club, had blocked building of new power plants. The New Age dot-comers who claimed the Internet would revolutionize mankind and make obsolete "old industry" like electric utilities, refused to build the plants to power their computers.
Unable to pass surging electricity costs to consumers, California's utilities ran up billions of dollars in debt and now face bankruptcy. Unless the state rescues them, their collapse could set off a chain reaction financial panic in the U.S. banking and bond markets.
California's bland Democratic governor, Gray Davis, who has made a career of never offending anyone, desperately tried to find a solution to the crisis that avoided the simple, obvious solution: raising retail rates to realistic market levels. As the lights flickered and dimmed, Gov. Davis resorted to accusing unnamed "profiteers" for the mess he and his predecessors had created, a charge more worthy of the Soviet Union in the 1930s than California in 2001. Now, in a return to 1960s' Third World socialism, Gray is calling for re-nationalization of the power industry.
MAMMOTH COCK-UP
Watching California's self-proclaimed "progressive Democrats" struggle with this mammoth cock-up should once again remind all voters that politicians, like children, should never be given more than pocket money. In spite of 2,000 years of contrary evidence, each new generation of politicians believes it can somehow violate with impunity the immutable laws of supply and demand, Gov. Gray's flat-earth solutions to California's power problems being exhibit A.
California's folly mirrors most Americans' abysmal ignorance of basic market economics. The heads of American students are filled with trendy, leftist nonsense - sociology, anthropology, women's studies, and Marxist interpretations of history. Very little is taught about the ABCs of the free market system that makes America the world's richest, most successful nation. In fact, universities have become the last bastion of old-time Marxist thinking, passed on by one generation of academics to the next. Politicians seeking to buy votes from special interest groups lap up the economic nostrums put forth by academia. For example, everyone has the absolute right to: free medical care and to government-controlled, low-cost drugs; free education, paid for by the state; affordable housing (that is, below-market-cost rents paid by someone else); minimally priced public transportation, heavily subsidized and run by government; public-owned broadcasting to "preserve national culture" and ensure "quality" programming - whether the public likes it or not.
PRICE CONTROL
Now, one must ask, if it's logical for government to enforce artificially low prices for health care, drugs, education, housing, and transport, why stop there? Why shouldn't government also control prices of two even more basic necessities, food and clothing? Many nations massively subsidize farmers, but such programs generally raise retail prices, not lower them. Isn't it logical that government set up its own non-profit stores to sell food and apparel?
One government has tried all of the above; the late, unlamented Soviet Union. There, drugs were free; apartments rented for $12 monthly; flying Moscow to Vladivostok on Aeroflot cost $23; education for all was free; government-run stores sold food and clothing at cost. The result was not the anticipated socialist paradise, but constant shortages and brutal repression leading to final collapse. Medicines were unavailable; hospitals medieval. Russians waited 10 years for tiny, crumbling apartments, or lived in squalid dormitories. Schools were backward; the national transport system was worthy of India. State media blared propaganda and outrageous lies.
Food and clothing stores were almost empty of goods. Soviet citizens spent half their dreary lives waiting in interminable, mind-destroying lines. Everything in the U.S.S.R. was "affordable" - except that nothing was available.
When prices are set artificially low, shortages and rationing are the inevitable result - what occurred in the Soviet Union, and what is happening today in "progressive" California. Gov. Davis clearly needs some tutoring in basic free market economics.
Eric can be reached by e-mail at margolis@foreigncorrespondent.com
 World Fact Book (CIA)]]
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