- by David Matthews 2
"Whoever claims that economic competition represents 'survival of the fittest' in the sense of the law of the jungle, provides the clearest possible evidence of his lack of knowledge of economics." - George Reisman
There’s a very deceptive trick that some people play call the "bait-and-switch." Let’s say, for instance, you see an ad for a computer system that seems too good to pass up. You bring the newspaper circular with you to the store and you ask the salesman for this particular model. He smiles and says that the model that was advertised was all sold out, but he’ll be more than happy to sell you the next best thing.. it’ll just cost you a whole lot more than the advertised special.
That is the bait-and-switch. Odds are, that particular model was never in the store to begin with. The whole ad was just a lure to get you to buy a more expensive model than you would not have otherwise wanted to purchase. It’s deceptive, and in many instances downright fraudulent.
But what if, instead of a store, we were talking about a government program? And what if the item being fraudulently marketed was something that we absolutely could not live without?
Ever since their creation, the words "public utility" has always meant a government-endorsed monopoly. Electricity, natural gas, telephones, water, septic systems, cable television, airports, garbage collection, mail delivery.. all have been at one point or another either run by the government, or run as a government-endorsed monopoly. There would be no competition.. they were the only folks who provided that particular service. And if the service is lousy, or the prices too high, well, you were told to simply suck it up and deal with it.
Of course, we don’t like having to simply "deal with it." We’re used to having alternatives to turn to instead of having to deal with bad or overpriced service. If a store has bad service, we go to another store. If a restaurant has rude waiters and bad cooks, we find another restaurant. Why, then, can’t we do the same with so-called "public utilities"?
That’s been the basic argument behind the trend to deregulate these services. The quality sucks, prices are too high because these services are operating as a monopoly. Open the market, and the prices will go down and the quality will improve.
Unfortunately, it’s not as simple as just "opening the market". Those who have gotten used to a monopoly, who have wielded that power, are not willing to let that power go without a fight.
Let’s say, for instance, that you owned a garbage company, and it was the only garbage company allowed to pick up trash in the town. Having a government-endorsed monopoly means you can set whatever rates you think are appropriate. Your men can pick up the trash as noisily as possible, blocking driveways and side streets if they have to. They can show up at 2pm, 10am, 6am, or even 4am if they want to! And if the people complain? Well, too bad. As long as you make nice with the town council and make sure your contract gets renewed, you don’t have to care what the people think!
Now suppose you’re told that from now on, you’ll have to share your market with three other companies. That’s not good, because that means you’ll have to earn the trust of the customers you once didn’t have to give two squats about. You’ll have to share your territory with three other companies who will be trying to take away your customers. And you’ll have to charge prices much lower than before so the people will be willing to stick with you and not go with the competition. Boy, it would suck to be in that situation, wouldn’t it?
But what if you could change things so that the people would be willing to go back to those old days of a controlled monopoly?
Let’s say, for instance, that you used your influence in the town council to write how the supposed "deregulation" was going to happen. You make sure that the three companies have to use your landfill to dump the trash. And you’ll be charging those companies for use of your landfill. They, of course, will have to pass that cost to their customers, which means you can keep your costs lower than theirs.
Now you add to those rules with some new ones. Like having the landfill closed to the public. That means they can’t bring their garbage to the dump themselves.. they HAVE to pick a company to do that for them. Charge extra for things like picking up old furniture, Christmas trees, or junked computer equipment.
Oh, and while you’re at it, you strike a deal with three other towns to have their trash deposited in your landfill as well. Pretty soon that landfill will be getting full, and you’ll have a "trash crisis" on your hands. This will mean more money to pay for the creation of a new landfill. Guess who gets to pay for that? That’s right! All of that gets foisted on the public through higher trash fees.
The end result is, of course, making more money than ever before, having more power over the public than before, and creating your own "crisis" to make the people regret ever wanting competition in the first place.
The punchline comes when the local press keeps on referring to it as "trash deregulation." You would know it is far from the kind of deregulation that you were afraid was going to happen.
Now let’s get brutally honest here.. a lot of what we call "deregulation" is nothing of the sort. Sure there are some instances where there is genuine competition, but in many instances what is going on is not deregulation as much as it is re-regulation.
You don’t have to look any further than California’s attempt at deregulating electricity to see where the bait-and-switch is happening. I know a lot of people were expecting their electrical bills to go down when that utility service was "deregulated", but just the extreme opposite happened. The bills went through the roof and now there are staged blackouts.
Well, let’s take a closer look at this so-called "deregulation." (I know some people would rather we NOT take a closer look, but how else are we going to explain how and why this stuff is happening?)
First of all, there was no true deregulation of the utilities. That would require the stringing of more power lines, the construction of new towers, and more infrastructure than there is right now. That did not happen. Instead, the same current was being sent along the same lines into the same homes and businesses as before.
The number of actual providers of electricity - the plants that crank out the wattage - did not increase.. they actually decreased! The rules were changed concerning electrical plants. Investor-owned power plants were forced to sell their services off and become part of a centralized provider called the Power Exchange. As a matter of fact, just about every former provider became a glorified middleman for the Power Exchange. All they had to do was maintain the lines and maintain the bills. They no longer generate the power, they just get to listen to the complaints.
Actual providers - the ones making electricity - decreased, but not the demand. It kept on growing. All through the growth of the Internet, when Silicon Valley would become Server Valley because of all of the Dot-Com businesses and Internet service providers out there, and the introduction of hybrid electrical-and-gasoline cars, and all of the homes that got wired to the Internet, the demand in California skyrocketed!
Now, when the demand grows beyond your capacity, what would a real deregulated business do? It would have to grow and expand to meet the need. When the demand for electricity grew beyond the capacity of the Power Exchange, were new plants built? No. Because hidden in those rules were even more rules that hindered such expansion. In fact, there hadn’t been a single additional power plant built in California since the early 1990’s! Why? Because those rules were inserted at the behest of the environmentalists. Save the whales, save the seals, save the coastline, save the trees, save the slugs and the snails, save the "pristine" look of the environment.. but when it comes to keeping up with the demands for electricity, environmentalists would rather have you save your breath.
Without those additional power plants, the providers could not meet the demands of the people. Blackouts were ordered, and people were urged to conserve.
Prices have gone through the roof in some places, not because of competition, but because the rates were restructured through this common provider model. So cities like San Diego were allowed to transfer their costs to the public, while the rest of the state gets locked-in-rates that are much lower than the cost the companies had to pay, which were driving those companies bankrupt. Their choice was to either hit the consumers with a huge rate increase, or go belly-up.
And through it all, the politicians and the members of the media call THIS deregulation! Folks, this is not deregulation. This isn’t even CLOSE to deregulation! This is the prelude to socialized utilities. And the only solution being offered by the government is to take it even further.. and completely socialize the electrical services!
One might even suggest that the state government WANTED this to happen. That they intentionally set this bait-and-switch up so that it would fail, so the people would be clamoring for relief.. which they would offer with their socialized program.
Now that would be fraudulent, wouldn’t it? Oh.. wait a minute.. we’re talking about the government.. they who supposedly can do no wrong.
Well, the same thing is happening in Atlanta as well, only this time with the natural gas companies. People wanted deregulation, and the local government supposedly "gave" it to them. Truth is, they did nothing of the sort. All they did was create a whole new level of marketers who didn’t provide the natural gas; they only served as middlemen to the actual providers. And then people wondered why their gas prices went up.
Do you want to know what actual deregulation is like? Look at the local phone companies! They’re tearing up roads.. and sometimes cable, water, power, and sewer lines in the process.. to put in new lines. THAT is what competition does. It’s not perfect, and it doesn’t happen overnight, but it DOES happen.
Can the electrical utilities be deregulated successfully? Yes. Look at Pennsylvania for proof!
The problem comes when politicians engage in this fraudulent game of "bait-and-switch", and then have the utter audacity to call it "deregulation" and not have anyone call them on it. Where are the talking heads on this? Here’s an instance of actual fraud and deceptive advertising going on by our elected leaders, and NOBODY is calling them on it!
I’m waiting for someone in California with the courage to get in front of the cameras and say "Governor Gray Davis, when will you stop lying to the people? This is not deregulation, and you damn well know it! So stop calling it such! You people wouldn’t know what deregulation was if it came up and slapped you in the face!"
But unfortunately you won’t hear that from the talking heads, or from the members of the alphabet soup media. They will continue to play the accomplice to this blatant act of deception because the members of the media are not fond of competition any more than members of the government.
Look, folks, the problems we have with deregulation are not because of the marketplace. Rather, it’s because we have government bodies that absolutely do not want deregulation in its truest form, and are engaging in this fraudulent con game to get people to hate the very idea of market competition in these areas.
As it stands right now, though, things are not going to get any easier for the people in California, Atlanta, or anyplace else where this bait-and-switch game is being played out. Things are going to get worse for them. But what they need to understand is that the fault lies not with competition, but with the people who do not like to give up the power that they have for so very long coveted.