The Failure of the Cult of Free Markets
Last week’s winter blast really enervated me – I just want to sleep. Since I’m still trying to get my energy back up, this post will be short.
Boy, that Texas cold weather fiasco is still resonating today whether it is about Ted Cruz fleeing to Cancun, the price gouging by the energy producers, the politics of the New Green Deal, Texas’ status as a failed state, climate change and the future of the US looking like Texas, and on and on and on.
My latest understanding of the deaths so far is that 80 in total died with 30 being in Texas. People had been without power, heating and/or water for days, and the future recovery looks dreadful for the lower income. Grocery stores had been short of food supplies for a while. Initially, it sounded like Texas politicians were not that inclined to help their constituents if one were to go by Lieutenant Governor Dan Patrick’s sentiments (he mentioned on Fox News that some residents were to blame for the higher prices because they had not read their contracts and “people need to read the fine print”). Nothing in that statement about price gouging which is what these high bills represent. After a hurricane, stores cannot charge higher prices for water or for construction materials when people are in desperate need for such supplies because that would be price gouging. Same analogy for these power prices – during a time of life and death, jacking up the price of electricity is price gouging. But upon reading deeper into the stories, Texas politicians say they will be looking into the price spikes. Hopefully those investigations will lead to some kind of aid for their constituents. Time will tell.
Quite a few articles tied what happened in Texas to the future of the US due to feared climate change. Other articles delved into the failure of capitalism or free markets. And still others addressed the continuing denials of Republicans into the reality of climate change and the steadfast adherence to small government and free market principles when clearly free markets failed in Texas.
So, here’s a listing of a couple of articles that I found interesting or disturbing:
Politico: “Look What You Did to US”
‘Look What You Did to Us’: The Big Chill of Texas Politics – POLITICO
The trust between constituents and elected officials may be severely breached.
“The hardest breach to repair, however, might be between Texans and their elected officials. Over the course of the cascading humanitarian crisis high-ranking Texas politicians didn’t exactly cover themselves in glory.
First, Austin falsely blamed renewable energy, even assailing a policy proposal that hadn’t even become law yet. One GOP member of Congress sent a letter to constituents with a link to warming centers before closing with a warning that “radical ideologies have politicized energy policy at the state and federal level in recent years.” Then they went after the utility industry that was once the state’s pride…
“The Electric Reliability Council of Texas has been anything but reliable over the past 48 hours,” said Gov. Greg Abbott, rebuking the independent entity that controls power generation across almost the entire state. Officials managed to skip past their pledge from a decade ago, after the last catastrophic freeze, to winterize their power plants. Then, instead of chipping in, as former Rep. Beto O’Rourke did, several of the state’s most prominent Republican elected officials headed out for warmer locales, or at least ones where the power was still on. ”“Look What You Did to Us: The Big Chill of Texas Politics”, Politico, Richard Parker, February 26, 2021.
“In the face of a monstrous storm Abbott’s response was tepid, at best. He didn’t deploy the National Guard in any sizable numbers before, during or after the storm. There are no state aid facilities handing out water or food. In his Feb. 13 letter to Biden, Abbott asked for direct financial assistance and help with emergency services. Normally, governors, including Abbott, request military help, money for local governments and hazard mitigation to make sure properties are habitable, and even social services. But not not this time. His request was comparatively minuscule. ”
“Look What You Did to Us: The Big Chill of Texas Politics”, Politico, Richard Parker, February 26, 2021.
New York Times: “Texas is a Rich State in a Rich Country, and Look What Happened”
Opinion | Texas Is a Rich State in a Rich Country, and Look What Happened – The New York Times (nytimes.com)
The fragility of our infrastructure, the whole US – not just Texas, in the face of climate change. Climate change may induce violence and misery as our infrastructure fails.
“The world’s economic systems teeter atop “backward-looking risk assessment models that merely extrapolate historical trends.” But the future will not be like the past. Our models are degrading by the day, and we don’t understand — we don’t want to understand — how much in society could topple when they fail, and how much suffering that could bring. One place to start is by recognizing how fragile the basic infrastructure of civilization is even now, in this climate, in rich countries.”
“Texas is a Rich State in a Rich Country, and Look What Happened”, New York Times, Ezra Klein, February 25, 2021.
New York Times: “Can You Believe This is Happening in America?”
Opinion | Can You Believe This Is Happening in America? – The New York Times (nytimes.com)
Turning everything into politics – think wearing masks or the reality of Covid-19 – is killing us.
“In the last six months I’ve heard one phrase more often than I had in my previous 66 years: “Can you believe this is happening in America?”
As in: “I spent the whole day hunting online for a drugstore to get a Covid vaccination. Can you believe this is happening in America?”
“Fellow Americans ransacked our Capitol and tried to overturn an election. Can you believe this is happening in America?”
“People in Texas are burning their furniture for heat, boiling water to drink and melting snow to flush their toilets. Can you believe this is happening in America?”
…What’s going on? Well, in the case of Texas and Mars, the basic answers are simple. Texas is the poster child for what happens when you turn everything into politics — including science, Mother Nature and energy — and try to maximize short-term profits over long-term resilience in an era of extreme weather. The Mars landing is the poster child for letting science guide us and inspire audacious goals and the long-term investments to achieve them. ”“Can You Believe This is Happening in America?”, New York Times, Thomas Friedman, February 23, 2021.
“Abbott’s move was the latest iteration of a really unhealthy trend in America: We turn everything into politics — masks, vaccines, the weather, your racial identity and even energy electrons. Donald Trump last year referred to oil, gas and coal as “our kind of energy.” When energy electrons become politics, the end is near. You can’t think straight about anything. ”
“Can You Believe This is Happening in America?”, New York Times, Thomas Friedman, February 23, 2021.
New York Times: “Et Tu, Ted? Why Deregulation Failed”
Opinion | Et Tu, Ted? Why Deregulation Failed – The New York Times (nytimes.com)
Unbridled free markets do not work, and this article explains why.
“The theory was that no such regulation was necessary, because the magic of the market would take care of everything. After all, a surge in demand or a disruption of supply — both of which happened in the deep freeze — will lead to high prices, and hence to big profits for any power supplier that manages to keep operating. So there should be incentives to invest in robust systems, precisely to take advantage of events like those Texas just experienced.
Texas energy policy was based on the idea that you can treat electricity like avocados. Do people remember the great avocado shortage of 2019? Surging demand and a bad crop in California led to spiking prices; but nobody called for a special inquest and new regulations on avocado producers.
In fact, some people see nothing wrong with what happened in Texas in the past week. William Hogan, the Harvard professor widely considered the architect of the Texas system, asserted that drastic price increases, while “not convenient,” were how the system was supposed to work.”“Et Tu, Ted? Why Deregulation Failed”, New York Times, Paul Krugman, February 22, 2021.
“The senator, not known for self-awareness, may not realize what he did there. But if even Ted Cruz — Ted Cruz! — believes that regulators should prevent power companies from reaping windfall profits in a disaster, that eliminates any private-sector financial incentive to prepare for such a disaster. And that, in turn, destroys the entire premise behind radical deregulation.”
“Et Tu, Ted? Why Deregulation Failed”, New York Times, Paul Krugman, February 22, 2021.
Wall Street Journal: “Texas Electric Bills were 28 Billion Higher Under Deregulation”
Texas Electric Bills Were $28 Billion Higher Under Deregulation – WSJ
Even the bastion of capitalism says that the electric deregulation did not work as intended. This is pretty damning.
“Texas’s deregulated electricity market, which was supposed to provide reliable power at a lower price, left millions in the dark last week. For two decades, its customers have paid more for electricity than state residents who are served by traditional utilities, a Wall Street Journal analysis has found.”
“Texas Electric Bills Were 28 Billion Higher Under Deregulation”, Wall Street Journal, Tom McGinty and Scott Patterson, February 24, 2021.
The Atlantic: “What Went Wrong in Texas”
What Went Wrong in Texas? – The Atlantic
This article provides a good explanation of the history of deregulation and what went down went the polar vortex came to visit.
“The power grid is modern society’s life-support system. Everything on which daily survival now depends—clean water, refrigeration, medical care, reliable communication, access to cash and banking—requires, to some degree, electricity. Every day, in a marvel of engineering and statecraft, a national network of wire delivers 10 billion kilowatt-hours of electricity to Americans. Rome once united its territory by paving the Via Appia down Italy’s spine; the U.S. raises power lines.
This week, a Vietnam veteran died in his truck with his last tank of oxygen because he had no power. He deserved better. The power grid is a very large and important machine, but it is also an ennobling tool, a guarantor of solidarity and dignity. The grid grants a certain kind of freedom—freedom from darkness, freedom from cold or heat, even freedom from boredom. There is a freedom in knowing that anything you plug into the wall will turn on; there is a freedom, too, in knowing that your house will stay inhabitable and your pipes will not burst. Texas’s system is built on the idea that the liberty of companies to buy and sell electrons—and the freedom of consumers to pay a $2,500 power bill—is greater and more dear than any freedom wrought by consistent power service. ”“What Went Wrong in Texas”, The Atlantic, Robinson Meyer, February 21, 2021.
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