JIM COOMBS. The neo-liberal failure on energy

JIM COOMBS: The source of our current “economic imperatives” and crises, especially in the fields of energy, is that we can’t see beyond the “neoliberal” (does it have a meaning?) insistence that only a “market solution” answers economic problems. Surely, “economics” is better than that.

Can we get back to basics, because they don’t. The “Economic Question” remains: What is the optimum allocation of resources, given that these are by definition limited, to competing ends, the desired results. To assume, just because, in a market situation, supply always equals demand, i.e. Says Law (a trivial truth), that that is the only way for the allocation of resources, or even the best, is an act of blind faith, and no more. It is obvious, except to the ideologically purblind, that there are other criteria which can determine the optimum allocation of resources. The case of Public Goods, about which I have written regularly before, is a case in point: where “market” considerations are irrelevant and questions of equal access and removal of absurd and unnecessary wasteful “competitive activity” are clearly closer to the optimum.

Now look at the present “crisis” over energy supply. Everyone who knows says that we have abundant sources of energy, coal (which is dirty and bad for our environment, and for global warming, the survival of humanity’s planet), gas (still carbon emitting) and renewable: nuclear, based upon an unsustainable fuel cycle, expensive and slow to construct, hydro, dependant on other power to pump water uphill, wind, solar and thermal, the last three, needing some back-up, though the man from Tesla says he can do it with battery storage. The adoption of PV roof-top solar has far exceeded government expectations by a considerable margin, and is getting cheaper virtually by the minute. So there’s plenty of energy out there for the taking.

So where’s the crisis ? We should reject any further coal-fired power generation as firstly bad for our environment, and for climate change, not to mention costly and long-winded to install (even the generators say it won’t happen). Gas still produces carbon, so it should only be for back-up. Hello ! Renewables, solar, wind and thermal, all constant resources, step forward. Will a “market” provide the best allocation of resources to provide energy from these sources ? There is presently a “market” offering these solutions. In terms of a distribution system, it is silly to duplicate the mechanism, which is what the “market” has given us in energy, but also telecommunications, merely to protect the profits of the duplicated providers – so much for competition !. As to power generators into that distribution system, there may be some competitive pressure, although the “markets” for telecommunications, petroleum and groceries should be a warning. The big generators are already looking at solar farms, wind energy, and underground thermal heat power. They can see where the future (and their profits) lies.

So, back to basics: in a modern (post industrial) society, a reliable energy supply seems to be needed. Short of giving in to “the market” to benefit the rich and the powerful, power should be a Public Good, available to all. Unless a genuine benefit from multiple providers is shown, a government (controlled) monopoly makes sense.

All this can be done by government if it has the will (as used to be the case a century ago).

So isn’t all this talk about energy “markets” nonsense ? And the “crisis“,non-existent ?

JIM COOMBS is a retired magistrate and sometime economist

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Peter Lynch

Australia is not alone in having gone down the path pf privatising the provision of electricity. Lots of US states, Canada and many other developed nations have gone down the same path and are all now going through major contortions to try and make it work. When I look at the their attempts to manipulate their artificial energy markets, I have a vision of a petulant child trying to bash a square peg into a round hole with a hammer. But having reached this stage, we must admit that we can’t get the market out of energy provision in the… Read more »

michael lacey

Privatisation the great neoliberal con on the Australian public! Another neoliberal disaster! The purpose of government funded public infrastructure is not to make profits but to lower the cost of doing business, sometimes called the socialisation of the means of production. Countries that are able to fund public education, roads, energy grids, water and sewerage and communications will outperform those that do not because businesses operating in such an environment will have lower costs. Operating this and other major infrastructures for profit (with high-interest credit) will vastly increase the cost of the economy, without increasing wages or the ability to… Read more »

paul frijters

Jim,

totally agreed. The problem is a lack of political loyalty towards the public good. The political culture needs to change, across the board. Easily said, but not easily done. Renewal of that political culture will be bitterly resisted.

Dog's breakfast

Indeed Jim, real sense, and an underlying philosophy going back to the basic question, “what is the optimal way to allocate resources” will see us approach the problem according to the situation. Energy, telecommunications, education and health (including pharmaceuticals) are basic rights in our democracy, and given the very unique geography of our country, certainly the first two are best served by a government owned monopoly, run as a business, where delivery of service at cheapest price is the goal. The duplication of services, the outsized profits, all lead to vastly inferior outcomes on a social level, and given that… Read more »

Don Macrae

Well, Jim, whether refer to it as a crisis or not there is definitely a problem, inasmuch as forecasts indicate a risk that supply will fall short of demand. Incidentally, I think Say’s Law says that ‘supply creates its own demand’, not that they’re always equal. As to whether the best solution to the problem involves markets or not, that’s a very good question. When I read about large private investments in new technology generation I think that’s excellent, that’s what we want. When I read about established generators gaming the government created price auction model I want to kick… Read more »