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Power and markets

Letter from Ray Schoch

Energy – December 2008 – Colorado Central Magazine

Dear Ed and Martha:

Correspondence with George Sibley and the theme of this year’s Headwaters Conference [electricity and power] reminds me that my former Front Range community of Loveland has some of the lowest electric utility rates in the state, in large part because Loveland has its own unobtrusive hydroelectric plant on the Big Thompson River, several miles upstream from the city itself.

Originally built in the 1920s, the plant was rebuilt by the city after it was destroyed by the Big Thompson flood of 1976. Even though Loveland has grown from a farm town of 20,000 or so to a genuine small city of 60,000+ in the past generation, that hydroelectric plant still manages to provide a significant portion of the electricity for the community, and at low cost, because it needn’t provide a “healthy return on investment” to investors. It merely provides a public service for the common good of Loveland’s citizens.

I’m sorry I missed the performance of “Power” at Headwaters, because I’d like to see how the question posed by the play, “Is electricity a commodity to be sold for a profit to those who can afford it, or a public good to which everyone should have access?” is answered, though I have my suspicions. Now that I’ve moved to metro Denver, I’m a prisoner of Xcel, as are many other Coloradans.

In the meantime, I should mention that I’ve been pleased by the artwork adorning the past several covers of the magazine. “Well done” to you as editors for using it, and the artists themselves for producing those colorful and evocative images.

Proofreading continues to be a problem from time to time, better in some issues, worse in others, but in part I notice that because I graded papers for 30 years, and am accustomed to catching obscure typographical, spelling and other sorts of nit-picky errors. I always enjoy your blanket excuses, regardless.

I share Ed’s dismay over the longest ballot the state has seen in nearly a century, though we’re not entirely in agreement on how we’d vote on the choices we have in common. To the relief of both of us, no doubt, by the time the next Colorado Central is in mailboxes, the election will be over and the ghastly political ads will have ceased, at least temporarily.

I fully understand the civic benefits of rubbing elbows with one’s fellow citizens of all classes and beliefs to cast a ballot, but I’ve nonetheless opted out of standing in line at the polling place. Like many thousands of my fellow Coloradans, I got an absentee ballot, filled it out at home — took me nearly half an hour — and delivered it in person to the County Clerk’s office.

More than a week before the official election day, I’ve already checked with the Jefferson County Clerk’s website, and I know the ballot was received and tallied. I may never go to a polling place to vote again.

THERE ARE A FEW POINTS in Carol Hill’s letter with which I agree — largely centering on “punishment” for executives of financial firms that have sold their shareholders, not to mention the general public and the republic itself, a fraudulent bill of goods from which our grandchildren will still be trying to recover. That said, however, it nonetheless seems to me that she’s a victim of wishful thinking.

Ranting about the lack of a “free market” is pointless. There hasn’t been a free market since the days of Hammurabi, by which I mean the formation of the first government that we 21st century Americans would recognize as being larger and more sophisticated than that of a simple tribe of related individuals in a hunting band. Adam Smith wasn’t writing about “the invisible hand” as if it actually existed.

It has never existed, and isn’t likely to. The financial wizards and their libertarian cronies (of which Henry Hazlitt, cited by Ms. Hill, was an early member) in finance-related businesses know this as well as they know that phrase, “return on investment.” Any government worth mentioning always affects and influences the marketplace, by deciding to favor one method of making a living over another, one industry over another, enact tariffs (or not), print more money (or not), and/or adopt policies and laws that steer the economy in one direction or another. The Homestead Act of 1862 is but one of many fairly obvious examples relevant to Colorado. So is the Land Ordinance of 1785, and the Sherman Silver Purchase Act of 1893.

The operative question is not “Does government influence the economy?” or even “How does government influence the economy?” The important question is “To what end does government influence the economy?” I would argue that, if the manipulation of the marketplace by the government benefits the bulk of the population, then it not only can be tolerated, it’s often good for the society as a whole.

If the manipulation of the marketplace benefits only a very small group — as has been the case throughout both Bush administrations and, in fact, since the ascendancy of Ronald Reagan, including the Clinton years — then the society as a whole is not benefiting from it, and it should not be tolerated. Placing the good of the community at large on a plane at least equal to that of the individual is not a definition of “socialism” that would be accepted as legitimate anywhere except in an Ayn Rand novel, or the sorts of libertarian circles that produced Henry Hazlitt and Grover Norquist.

FDR and his New Deal allies understood all of this very well, which is why the Glass-Steagall Act to regulate banks and financial institutions was created and passed in 1933.

We are lately seeing the result of dismantling, piece by piece — by Republicans, mostly, but with Democratic help from time to time — the safety net put into place during the New Deal to protect us as a society from precisely the kind of fraud and greed that’s now so evident when the rock of the financial industry has been turned over to expose what’s living underneath.

Capitalism is better than any other system yet devised by human societies for creating wealth, but it does so while incurring substantial social and economic costs that we’re inclined to deny or ignore. Perhaps it’s time we engaged as a society in a renewed round of debate — over kitchen tables as well as legislative desks and, I hasten to add, in corporate board rooms — over exactly what constitutes a good life, whether equity should be part of any nation’s social contract with its population, whether equality of opportunity is fiction, and whether democracy and great wealth are, to some degree, mutually exclusive.

Lord Acton wrote that “Power corrupts, and absolute power corrupts absolutely.” I’m inclined to think that there’s a corollary principle to the effect that, with individual exceptions, wealth corrupts in rough proportion to the degree that individuals possess it. But that’s another topic, for another time.

Ray Schoch