David Boaz

In Zimbabwe, the government is ordering businesses to cut prices and threatening to jail executives who don’t comply, in an attempt to deal with inflation that is now variously estimated at somewhere between 4,000 and 20,000 percent a year.

Meanwhile, on Capitol Hill both houses of Congress have passed legislation establishing stiff penalties for those found guilty of gasoline price gouging. The bill directs the Federal Trade Commission and Justice Department to go after oil companies, traders, or retail operators if they take “unfair advantage” or charge “unconscionably excessive” prices for gasoline and other fuels in an “energy emergency.” (The complex energy legislation is still working its way through both houses, though both have endorsed the price-gouging provisions.)

How’d'ja like to be the bureaucrat charged with enforcing such vague and emotional language, or the businessperson trying not to incur a 10-year jail sentence for doing something “unfair” or “unconscionably excessive” It’d be sort of like living in, you know, Zimbabwe.

Did Congress offer bureaucrats and businesses any more specific guidance You bet they did. H.R. 6 and S. 1263 define an ”unconscionably excessive price” as a price that

(A)(i) represents a gross disparity between the price at which it was offered for sale in the usual course of the supplier’s business immediately prior to the President’s declaration of an energy emergency;

(more…)

A headline in the Saturday Washington Post reads:

Russia’s Gazprom Purchases Siberian Gas Field From BP

The story begins:

The state-controlled energy giant Gazprom on Friday bought a vast natural gas field in Siberia from a unit of British-based petroleum conglomerate BP, continuing the Kremlin’s policy of shifting control of the country’s major energy projects from foreign to state hands.

The last part of the sentence begins to hint at what really happened, a truth that is concealed by words like “purchases” and “bought.” In fact, the Russian government and its giant energy firm Gazprom forced BP to sell, as it has forced other companies to turn valuable properties over to Gazprom and the oil company Rosneft, often through the use of trumped-up tax or regulatory issues.

Journalists should be straightforward about such things. Gazprom did not “purchase” a gas field from BP. This was no “willing buyer, willing seller” transaction. It would more accurately be described as a seizure, a confiscation, or at best a forced sale.

The Wall Street Journal used similar language. The New York Times, to its credit, was more honest and clear: Its headline read, “Moscow Presses BP to Sell a Big Gas Field to Gazprom,” and the story began, “Under pressure from the Russian government, BP agreed on Friday to sell one of the world’s largest natural gas fields to Gazprom, the natural gas monopoly, in the latest apparently forced sale that benefited a Russian state company.”

Footnote: Today is the second anniversary of the Kelo decision, in which the U.S. Supreme Court ruled that states could take private property for the benefit of other private owners such as developers. In a stinging dissent, Justice Sandra Day O’Connor wrote:

The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory. …Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random. The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms. As for the victims, the government now has license to transfer property from those with fewer resources to those with more. The Founders cannot have intended this perverse result.

The United States is not Russia. But O’Connor’s warning that “the beneficiaries [of forced takings] are likely to be those citizens with disproportionate influence and power in the political process, including large corporations and development firms” is certainly borne out — not just by a new Institute for Justice report on eminent domain in action — but by the actions in Putin’s Russia.

The often sensible business columnist at the Washington Post, Steven Pearlstein, has a really bad idea today: “Put the government into the oil business.” He wants to create a federal oil company that would be required to “operate at only a modest profit, while doing everything in its power to expand supply, smooth prices and expose collusive behavior.”

I can only wonder if the maid cleaned his desk and accidentally left a 1970s folder on top. Back in the 70s Democrats kept talking about creating a national oil company to “use as a yardstick” to measure the performance of the oil companies. One wag noted at the time that Gulf Oil was going to buy Ringling Brothers and Barnum & Bailey Circus to use as a yardstick by which to measure the federal government.

Gas prices go up and down, as Jerry Taylor and Peter Van Doren have discussed. If prices are being held above market levels by some sort of collusion, then you wouldn’t need a tax-funded government company to offer lower prices; profit-seeking entrepreneurs could do it. Let’s leave the 70s be, and watch for high prices to stimulate conservation, exploration, and alternative sources of energy.

“I’m for free enterprise, but –” You can hear it coming. “I’m against all these government giveaway programs, but –” It’s a common and frustrating experience for a libertarian, hearing a ringing declaration of principle followed by a qualification that the speaker doesn’t have any intention of giving up his own subsidy, regulation, tariff, or pet project.

Years ago, when I was raising money for a free-market business group, I remember one of those letters: “I agree with everything you say. Government is too big. Subsidies and regulation are impeding the operation of our free enterprise system. But the Hawaiian sugar industry is unique.” A friend told me once that he’d persuaded his father, a dentist, to become a consistent libertarian–except on licensing for dentists. What about licensing for brain surgeons I asked. No, my friend said, I think he’s OK with letting the free market work there.

And now NPR has brought us the latest example. On the way home, my mind wandered as “All Things Considered” reported on a biodiesel refinery in Washington state. And then I heard a familiar opening line from the tech millionaire who is now the CEO of Imperium Renewables, which built the refinery.

I’m a pretty conservative guy, generally. I’ve voted Republican my whole entire life. And I’m very skeptical of the government’s role in any kind of market.

Wait for it, wait for it — you just know there’s a “but” coming.

But, in this case, there’s no other way to do it but with government support and mandates.

Turns out biodiesel is profitable with a federal tax subsidy of up to a dollar a gallon, and with the anticipation of restrictions on greenhouse gases. So a guy who’s normally “very skeptical of the government’s role” supports subsidies in this case because there’s “no other way to do it.” But that’s the whole point of markets and prices–to tell us what economic endeavors make sense. If Hawaiian sugar, or South Carolina textiles, or biodiesel fuel isn’t economically viable without subsidies, then that means it’s not the best use of our limited resources.

One of the values of a political philosophy–sometimes dismissed as “ideology” or “dogma”–is that it gives us a rule, a set of principles, for deciding such questions. We don’t have the time to look at all the data and decide what we think about every issue, and we’re certainly all subject to personal biases on the issues that touch us. There are lots of speakers I’d personally like to shut up, but if I remember that I do believe in the First Amendment, I realize I have to allow even offensive speech. I may want Amtrak to run fast trains between Washington and New York, or I may want to keep my own factory in business. But if I remember that the free-market economy produces the best results for all of us, then I will accept the outcomes of the market process.

People should think about the benefits of the whole libertarian system–free markets, free speech, freedom of religion, constitutional limits on government–whenever they’re tempted to say “I’m for freedom, but–”.