Bill Totten's Weblog

Monday, July 14, 2008

The Cure for High Gas and Food Prices

Vital Businesses Need Nationalization

by Ted Rall (June 26 2008)

The gas station attendant came outside. Wow, I thought, full serve! Ignoring me, she flung a magnetic price decal on top of the price per gallon. Regular unleaded had gone up twenty cents in the time it took me to drive from the curb to the pump.

"You're kidding me", I moaned.

"It's three o'clock", she shrugged. "Just got the new price".

There has to be a better way, I thought.

And there is.

It isn't drilling in the Alaskan wilderness. It sure isn't John McCain's plan to offer $300 million to the first person to come up with a longer-lasting car battery

Gas prices could hit $7 a gallon before long, Wall Street analysts say, but Americans - always optimists! - take a little comfort in the fact that Europeans have paid more than that for years. But a lot of foreigners are laughing at us even harder than we're laughing at the Euros.

Did you know that Venezuelans pay a mere nineteen cents per gallon? It's 38 cents in Nigeria. Turkmenistanis might not have electoral democracy, but they only shell out $4.50 to fill a fifteen-gallon tank. Before we replaced Saddam Hussein with ... with whatever they have in Iraq now, Iraqis paid less than a dime for a gallon of gas.

One of the things that these countries have in common, of course, is that they're oil-producing states. Countries that export oil and gas have trouble explaining to their citizens why they should pay for their own natural resources - and most are smart enough not to try. Iran, Saudi Arabia, Egypt, Burma, Malaysia, Kuwait, China and South Korea are just a few of the countries that keep fuel prices low in order to stimulate economic growth.

But they also share something else: common sense. Strange it might sound to Americans used to reading about big oil windfalls, they consider cheap gas more of an economic necessity than lining the pockets of energy company CEOs. So they don't consider energy a profit center. To the contrary; government subsidies (Venezuela spends $2 billion a year on fuel subsidies) and nationalized oil companies keep gas prices low.

Unlike corporations, governments don't care about turning a profit. They care about remaining in power. Their reliance on political support (or, if you're cynical, pandering) allows them to do things our much-vaunted free market system can't, such as make sure that people can afford to eat and buy enough gas to get to work.

Like the rest of the world, Venezuelan consumers have been squeezed by rising prices, and even shortages, of groceries. In 2007 Venezuela's socialist-leaning government decided to do something about it. First they imposed price controls on staple items. When suppliers began to hoard supplies to drive up prices, President Hugo Chavez threatened to nationalize them. "If they remain committed to violating the interests of the people, the constitution, the laws, I'm going to take the food storage units, corner stores, supermarkets and nationalize them", he said. Food profiteers grumbled. Then they straightened up.

Not even international corporations are immune from Chavez's determination to put the needs of ordinary Venezuelans ahead of the for-profit food industry. Faced with severe shortages of milk earlier this year, Chavez threatened Nestle and Parmalat's Venezuelan operations with nationalization unless they opened the spigot. "This government needs to tighten the screws", he said in February 2008, promising to "intervene and nationalize the plants" belonging to the two transnational corporations.

Miraculously, milk is turning up on the shelves.

When it works, nothing is better at creating an endless variety of reality TV shows than free market capitalism. But when it doesn't, it isn't just that extra brand of clear dishwashing liquid that goes away. Businesses fold. Banks foreclose. People starve. And no one can stop it.

The G8 nations met in Osaka last week to try to address soaring food and energy prices - a double threat that could plunge the global economy into a ruinous depression. But the summit ended in failure. "Any hope that the G8 meeting would result in coordinated monetary action - or concerted intervention in foreign exchange markets - to counter rises, principally in commodity prices, was dispelled by their failure to agree on the phenomenon's underlying causes", reported Forbes.

So the G8 ministers punted. "Due to the lack of consensus, they have stated the need for further study", wrote the magazine.

The problem isn't the weak dollar or the non-existent housing market. It's capitalism. A sane government doesn't leave essential goods and services - food, fuel, housing, healthcare, transportation, education - to the vicissitudes of "magic" markets. Non-discretionary economic sectors should be strictly controlled by - indeed, owned by - the government.

Consider, on the one hand, snail mail and public education. The Postal Service and public schools both have their flaws. But what if they were privatized? It would cost a lot more than 42 cents to mail a letter from Tampa to Maui. And poor children wouldn't get an education.

Privatization, particularly of essential services, has always proven disastrous. From California's Enron-driven rotating blackouts to for-profit healthcare that has left 47 million Americans uninsured to predatory lenders pimping the housing bubble to Blackwater's atrocities in Iraq, market-based corporations' fiduciary obligation to maximize profits that is inherently incompatible with a stable economy whose goal is to provide people with a decent quality of life.

Postscriipt: If you're reading this in Caracas, please mail me some gas.

Ted Rall is the author of the book Silk Road to Ruin: Is Central Asia the New Middle East? (2006), an in-depth prose and graphic novel analysis of America's next big foreign policy challenge.)

Copyright 2008 Ted Rall

Bill Totten


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