“Let’s Try a Free Market in Energy” by Charles Koch (Part II: Planning, Politics, and Power)

“The majority of businessmen prefer power and government-guaranteed profits to philosophical consistency; they are more than willing to trade off market principles for a system that promises less competition and more security….  Almost every major piece of interventionist legislation since 1887 has had important business support, and certainly regulation in the oil and gas industry is no exception.”

“Economic planning by its very nature is people planning. It is part of a misguided policy that would return us to the dark ages of political economy where the State controlled the entire economy and society in its own political interests. To return to that system is to finally abandon the American experiment and the American dream.”

- – Charles G. Koch (1977)

I would now like to turn to the more subtle historical and political implications of Thornton Bradshaw’s call for planning in oil. Bradshaw would have us believe that his stance on government planning is an unorthodox, even radical political position for a prominent business leader to take, and a sharp break with tradition. This is a totally misleading impression, however. Important and influential business leaders have always been anxious to convince the public and the Congress that the free market cannot work efficiently (in their industry), and that some governmental planning and regulation would be more rational and in the public interest. They have told us repeatedly that the free market cannot work, that it is often “irrational”, and that it is incapable of planning and investing long-range.

Therefore, Bradshaw’s plea for planning, far from economic heresy, is entirely consistent with a classical business philosophy that would replace the “chaos” of the market with the security and certainty of government planning, guaranteed loans, and contracts for development. Now it is perfectly true that we do not normally associate such views with the business community. Indeed, the general public has been entirely misled into believing that the most important support for free-enterprise capitalism is to be found in the ranks of business. With a few important exceptions, however, such is not the case.

The majority of businessmen prefer power and government-guaranteed profits to philosophical consistency; they are more than willing to trade off market principles for a system that promises less competition and more security. Indeed, much of the institutional change that we have seen in the system to date has come at the insistence of business. Almost every major piece of interventionist legislation since 1887 has had important business support, and certainly regulation in the oil and gas industry is no exception. And while some might describe such legislative activity as “public spirited’ most of us now realize that the public interest rhetoric serves only as a smokescreen for restrictionist legislation aimed at creating or preserving positions of wealth and power in the industrial system for those pushing for more and more government “action”. To an important extent the present crisis is but the inevitable consequence of business plutocracy–that is, of the segment of the business community that prefers to gain its profits from government favors, rather than competitive enterprise.

Another misleading impression created in the Bradshaw article is that government can in fact plan. Surely it is no longer novel to point out that governments do not plan anything, that only individuals plan. The alternatives are not planning, or the absence of planning, but, Who shall do the planning? The interesting question is who does Bradshaw have in mind to plan our energy outputs and prices in the name of government? The word “government” is nothing but a facade hiding a jungle of powerful, behind-the-scenes private interests. It is naive and wrong to assume that any legitimate public interest could even be defined, let alone served, by such an institution in the energy area.

More realistically, perhaps, Bradshaw does not really intend that government planning serve any public interest in the conventional sense. After all, the public could best pursue its own particular interests through free exchange in free competitive markets. Bradshaw’ planning involves government output determination, government price setting, and government taxes, regulations and subsidies to “adjust” market demand to supply. Thus, clearly, it is not the public interest that planning is meant to serve. It is existing governmental policies, particularly foreign policy, that mandates further economic planning. As Bradshaw notes, correctly, our foreign policy “has been thrown into confusion” by recent developments in oil.

And so it has. Bradshaw is right to see that a free market in oil conflicts with existing American foreign policy. But he is wrong to suggest that we abandon still more of our free enterprise in order to preserve such policies. Why should we abandon freedom in the domestic economy for still additional foreign adventurism and interventionism? If we intend to be a free society–if that is what America is truly about–then we must adopt domestic and foreign policies consistent with that end and not–as Bradshaw suggests–reshape our social system domestically to fit and serve existing governmental policies. I would hold, instead, that it is existing interventionist institutions and policies that need dismantling and not our freedom to buy and sell oil. What is the ultimate purpose of all these lofty policies and plans if we must lose our freedom to preserve them? Bradshaw’s eulogy to the “efficiency” of the World War II American economy is entirely fitting–and revealing. But if the American economy is to run as in wartime permanently, to what end are all the sacrifices? What do we “win” in this “war” if we must permanently abandon freedom and free enterprise in oil and submit to massive “disincentives” in our style of life?

The answer, of course, is that we cannot win anything. In this deadly social process of abandoning free market processes and strengthening political ones only increasing governmental power can emerge victorious. Statism is the recipient of the sacrifices and the reason, ultimately, for planning and controls. Thus, our precious heritage is to be sold to further preserve and strengthen the power of the state and the private interests that make use of it.

Such pleas for planning and increased governmental power must be resisted with all our will. Statism is not only inefficient, it is thoroughly immoral as well. Economic planning by its very nature is people planning. It is part of a misguided policy that would return us to the dark ages of political economy where the State controlled the entire economy and society in its own political interests. To return to that system is to finally abandon the American experiment and the American dream.

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