image: Wikimedia commons (link and link). Due to unconscionable neglect of critical infrastructure by those who are being paid to provide and maintain that infrastructure, the men and women and children of the state of Texas are presently experiencing the largest ever deliberate denial of electrical service in history (to my knowledge), during harsh and in some cases deadly winter weather conditions.
If you listen to our dishonest national media you would be forgiven for coming to the understanding that this disaster has something to do with "unprecedented and extreme conditions," probably having something to do with "climate change."
For example,
here is an exchange which aired on National Public Radio this morning in which someone introduced as an expert in the field of energy infrastructure (into whose expertise the host of the segment wants to "lean") who declares that the primary problem here is that "a lot of grids are susceptible to really, really major failures when they are this far outside of design conditions."
The host of the show then asks whether or not electrical power grids are built to handle extreme weather, "given how important they are to people's day-to-day existence," to which the expert replies: "Yeah, so they are. But they're generally built to handle extreme weather that people expect." To this, the accommodating host says, "Oh, OK."
The expert then goes on to mention climate change in the next sentence, leaving us with the impression that Texas never sees snow or ice and that freakish conditions caused by "climate change" brought about a situation which could never have been expected.
This explanation fails to get to the heart of the issue and leaves the listener with the impression that the crux of the whole matter has to do with climate change.
Having lived in Texas (commanding two different companies of infantry at Fort Hood, and later graduating from Texas A&M with a masters degree in literature) I have experienced ice storms and extreme weather in Texas (as well as the 1997 tornado outbreak which wiped out the town of Jarrell, just a few miles south of Fort Hood) and it is completely disingenuous for anyone to speak as though extreme weather is unknown in that state.
An article from the
Washington Post entitled "
The Texas grid got crushed because its operators didn't see the need to prepare for cold weather" gets a little closer to the heart of the matter, pointing out that building and maintaining power generation facilities is not unknown technology ("Operators in Alaska, Canada, Maine, Norway and Siberia do it all the time," it observes), and cites a University of Houston fellow who compares the disinvestment in energy infrastructure to "the last years of the Soviet Union" (a very apt comparison).
That article hints that the real question is "whether its participants are willing to pay for the sort of winterization measures that are common farther north, even for a once-in-a-decade spell of weather."
That same University of Houston energy fellow then raises another important consideration: Texas shares with California an unwillingness to compensate generation companies for maintenance, Hirs said, unlike most of the rest of the country. He said that what happened to California in the heat last summer has now been reflected in Texas's winter.
"Both Texas and California have failed spectacularly this year," he said. "There's a tremendous human cost. People died in California. People died in Texas."
So, here we are getting to existence of a deliberate policy decision having to do with paying for maintenance and for winterization -- presumably in order to help reduce costs (but at the expense of not having the extra capacity to handle "once-in-a-decade" weather events).
Buried amongst a jumble of other assertions in that article, we find one paragraph which explains that:
Texas lacks the long-term planning processes that other parts of the country employ. In the east, grid operators run capacity markets that act like insurance policies. Generators are paid to guarantee that their supplies will be available on the most extreme hot and cold days. If they don't show up, they face stiff penalties. Texas has instead left it up to prevailing prices and industry.
There, we learn that "capacity markets aim to ensure grid reliability by paying participants to commit generation for delivery years into the future," in contrast to so-called "energy-only markets" which "pay generators only when they provide power on a day-to-day basis," trusting that any situations in which demand exceeds supply will trigger a market response in which power generators ramp up production (and trusting that the possibility of earning the much higher prices during those periods of excess demand will incentivize power generators to build and maintain the necessary capacity to be ready to deliver when supply is tight). The article explains that this mechanism is referred to as "scarcity pricing," and Texas is highlighted as a primary example of an energy-only market using scarcity pricing to regulate supply.
In contrast, the capacity market arrangement guarantees a certain rate for the excess capacity from the operators -- but the article explains that critics of this arrangement "call the model wasteful, since the grid operator pays out the capacity costs for load events [that] may not materialize [for] years down the line." The extra costs of having that guaranteed reserve capacity are passed on to consumers of electricity -- which is why (the 2017 article explains) Texas has enjoyed the lowest energy costs "on record" (and has also built the largest wind-generation capacity, as operators take advantage of federal "production tax credits," enabling them to essentially produce power at negative costs and thus sell that power more cheaply into the grid).
So, perhaps the real issue has to do with whether the "capacity market" model is better than the "energy-only market" model, and Texas is just getting their comeuppance for embracing the "energy-only" model -- is that the conclusion we should draw?
Perhaps.
But there is an even deeper issue at work here, and its existence is probably the reason that the mainstream media mouthpieces, which function as the propaganda arm of the neoliberal austerity which is being imposed upon the men and women of the so-called western nations (including the United States, and not just the state of Texas), don't lay out the issues with any kind of clarity whatsoever (nothing even approaching the clarity that I am attempting to offer here, for example).
Anyone reading the above articles will easily perceive that the issue has to do with the production of enough supply (in this case, supply of electrical energy) to meet the demand (in this case, heightened demand brought on by extreme weather -- but not extreme weather that Texas has never experienced before, or that planners whose entire job has to do with the provisioning of energy and the maintenance of the power grid could not have been expected to anticipate).
The real heart of the matter has to do with incentivizing the production of enough energy -- and if you read the above articles very closely, you will discover that those companies who generate the power and sell it into the Texas grid will produce less when prices are low (as might be expected in any business in which there are costs which must be covered by the revenues generated by selling your product). The capacity-market model overcomes this reluctance to generate by guaranteeing a higher price for a certain amount of product, while the energy-only model hopes to stimulate production of electricity by the promise of higher prices during tight supply conditions ("scarcity pricing").
Thus, each model relies on market forces to guarantee supply -- and this fact seems so obvious and so natural that perhaps it doesn't even merit a mention in any of the stories purporting to examine the ongoing disaster in Texas. One model might generate lower prices during normal times, but at the expense of excess capacity, while the other model might pass on higher prices all the time, but with a much greater likelihood of having the excess reserve capacity when extreme conditions arise.
But no one seems to ask the question of whether allowing market forces to govern the critical infrastructure of the energy grid, and the availability and pricing of something as essential to modern existence as electricity, is a good idea to begin with.
While this question might seem heretical in the current hyper-capitalistic (and heavily propagandized) landscape that has prevailed particularly since the end of the 1970s, it is in fact a question which economists in the United States answered completely differently for most of its early existence -- including during its years of greatest growth and industrialization (as opposed to the de-industrialization which has been taking place in earnest over the past several decades, and which is now accelerating at an alarming rate).
Professor Michael Hudson has lamented the fact that the "history of economic thought" has been completely eliminated from most economic curricula, and he explains the reason for this elimination is to obscure the absolute revolution in economic policy which is impoverishing the west and leading to the diminishing standards of living which are becoming all too apparent to anyone who is paying attention. The inability of the state of Texas to provide electricity during a winter storm is just the latest example -- although it is a particularly shocking one.
In one of his clearest explications yet, a must-read article entitled "
The rentier resurgence and takeover: Finance Capitalism vs. Industrial Capitalism," Professor Hudson describes the sweep of modern economic history and the battle between those who were trying (particularly during the eighteenth and nineteenth centuries, and into the first decades of the twentieth) to eliminate the vestiges of European feudalism, and the forces of reaction which sought to turn back that revolution (and impose a kind of neo-feudalism upon the majority of the people, while privatizing the chokepoints of the economy in order to be able to charge their own "private taxes," otherwise known as "economic rents").
In that long piece, Professor Hudson introduces the economic philosophy and insights of Simon Patten (1852 - 1922), "the first professor of economics at America's first business school, the Wharton School at the University of Pennsylvania." Professor Patten, he explains, argued that public infrastructure should not be privatized, because private companies need to run at a profit (their revenues must exceed their expenses, or else they will go out of business).
Running at a profit is a good thing for most businesses, but for critical infrastructure, it is actually in society's interest to have government provide that critical infrastructure below cost, in order to provide it as inexpensively and abundantly as possible. Why would we want that? In order to reduce the costs at those critical chokepoints of the economy, instead of driving up costs and thus depressing business formation and standards of living!
Professor Hudson explains:
Simon Patten [. . .] defined public infrastructure as a "fourth factor of production," in addition to labor, capital and land. But unlike capital, Patten explained, its aim was not to make a profit. It was to minimize the cost of living and doing business by providing low-price basic services to make the private sector more competitive.
[. . .]
The advantage of this public investment is to lower costs instead of letting privatizers impose monopoly rents in the form of access charges to basic infrastructure. Governments can price the services of these natural monopolies (including credit creation, as we are seeing today) at cost or offer them freely, helping labor and its employers undersell industrialists in countries lacking public enterprise.
So, here we have America's first economics professor at its first-ever business school (one whose name is still highly respected today) advocating for the provision of below-market costs for critical infrastructure, in order to increase standards of living and decrease overall cost of doing business!
What are some examples of public infrastructure which Professor Patten would recommend be provided by government as inexpensively as possible (either at cost, or even below cost)?
Professor Hudson is quoted many times in
a section of a book on Simon Patten written by Trey Popp and published in 2017 -- the entire section is worth reading -- and in that article, Patten himself explains his concept: "If the courts, post office, parks, gas and water works, street, river and harbor improvements, and other public works do not increase the prosperity of society they should not be conducted by the State." However, these chokepoints in the economy "improve the health and intelligence of all classes of producers and thus enable them to produce more cheaply, and to compete more successfully in other markets."
Obviously, the production of electricity must be included alongside the "gas and water works" that constituted the critical utility infrastructure during nineteenth century when Patten was writing and teaching. Also, under this exact same principle, public universities were established in the United States, including the University of California at Berkeley in 1868 -- whose founding charter declares in section 14 that it is the intention of the state that "admission and tuition shall be free to all residents of the State."
In that same section of the book by Trey Popp, Professor Hudson is quoted as saying that another essay he wrote on Simon Patten, Professor Hudson explains that:
The whole fight of classical economics was a fight by the industrial forces against landlords, the remnants of feudalism. In America, Patten said: Well, we have not only the landlords getting a free-lunch rent, but [other] monopolists are getting this rent, and also the banks are getting this rent. And if we want to avoid this kind of rent, then we're going to have to either tax it away, as Henry George said, or nationalize the land and utilities and the railroads, and the government will provide natural monopolies.
The electric grid is clearly one such "natural monopoly," and an absolutely critical one at that. There is absolutely no reason why a sovereign government cannot pay energy producers to produce a certain amount of energy at whatever cost the government chooses to pay, in order to insure an adequate supply of energy to meet all contingencies. As we have already seen in an early quotation, the government has provided credits for the construction of wind-generation capacity -- and it could do the same for gleaming new power plants generating electricity by other methods as well, including natural gas or hydro power or geothermal.
The part that is missed in all of the articles cited above, including even the one discussing capacity markets versus energy-only arrangements, is the fact that the utility grid does not need to pass those same production costs on to the consumers of energy! The government could easily pay producers a rate which incentivizes the required production capacity, while charging consumers of that energy less than the cost of production -- or even nothing at all. That is the entire point that Professor Hudson, citing the earlier work of Simon Patten, is laboring to explain.
Many "free market" proponents will reflexively interject at this point that "charging too little" for energy will only make people want to use more of it -- and the answer to that objection is: so what? Why are we trying to make people use less energy? That is the goal of the proponents of neoliberal austerity, who want to deny men and women access to the gifts of nature, which the gods have provided for the benefit of men and women.
As Professor Hudson explains numerous times in the articles linked above, neoliberalism is nothing more than a virulent and oppressive form of neo-feudalism -- and I myself would point out that feudalism and its attendant oppression and austerity was imposed upon Europe immediately following the destruction (by the proponents of literalist Christianity) of the ancient wisdom given in the myths in their original traditions.
The ancient myths teach very clearly that the gifts of nature -- including the riches of the soil, and of the sea, and of the forests, and the rivers and the sunshine and the riches beneath the earth -- belong to the gods and are given by the gods to men and women. For example, Dionysus was the god of the vine and of the wine which is produced from the fruit of the vine. The goddess Demeter is the giver of grain and all the production of the crops. The riches under the earth were explicitly stated to belong to the god of the Underworld, whose name was usually not mentioned, but who was often referred to as "The Wealthy One."
We might add that the electromagnetic spectrum -- and thus the generation of electricity as well -- would undoubtedly be seen to belong to the domain of Zeus, god of thunder and lightning and of the air and sky. And we can easily perceive that the generation of electricity is directly derived from the riches found under the earth (such as the burning of coal or of oil or of natural gas), as well as from the rushing of the rivers, and also more recently from the rays of the sun and the movement of the wind -- all of which of course would be directly understood to be gifts from the divine realm by any of the ancient sacred traditions of the people of the earth.
Along these same lines, the economists who stood opposed to the rent-seeking structures which gripped Europe during the centuries of feudalism sought to do away with those rents. In
a different article on Simon Patten's work, Professor Hudson writes:
While extending economic analysis along lines that later would be called institutional, Patten retained the classical definition of rent as unearned income -- the excess of market price over intrinsic cost. Economic rent taken by landlords, monopolists, and financial institutions has no counterpart in the technological requirements of production, but stems from legal and historical privileges that privatize the free gifts of nature or permit monopolistic power to charge access fees over cost for the use of basic infrastructure. Patten believed that economies should minimize the cost of living and doing business by becoming as rent-free as possible, socializing monopolies outright, or at least taxing land, mining, and other natural resources, and regulating prices to minimize unnecessary rentier charges.
I have previously published a
video which explains why policies of austerity (in which public services are neglected and starved of funding) are favored by those who are well-connected enough to be able to bid for the privatization of those services -- through which they can make enormous sums of money, since gaining private control of public services basically enables individuals and corporations to charge what amounts to a "private tax" on everyone else.
And that is probably the real reason why you won't hear a straightforward discussion of these issues in the media channels that are breathlessly discussing the catastrophe unfolding in Texas right now.
It is causing misery around the globe and inflicting economic insecurity on billions.
It can only be combatted if we understand how it works, and how to dismantle it.
The articles linked above, particularly those written by Professor Michael Hudson, are extremely systematic and helpful towards that end.
The long-running blog by Professor Bill Mitchell of University of Newcastle (NSW, Australia) is also extremely helpful in that regard. See for example
this post from 2017, in which Professor Mitchell explains that:
Overall, austerity-obsessed politicians typically cut public infrastructure spending first because it is less obvious to people. Cutting a pension cheque, or some school support, has fairly immediate impacts, and as such invokes negative consequences almost from the outset. But cutting maintenance spending on bridges or failing to continue developing public transport systems is more easy to hide. The decay occurs by stealth as the infrastructure ages, or the population steadily grows to swamp the existing infrastructure.
That paragraph provides a perfect description of the situation in Texas, where the infrastructure was not maintained in such a way as to keep up with the growing population and the growing demand for energy.
And yet NPR (and the rest of the complicit media) wants to tell you that this situation all came about because of a winter storm that no one could have expected -- that, and "climate change," the phrase they use in order to convince you to embrace austerity and like it (and ask for more), while the self-styled elites privatize the gifts of the gods which are given for the benefit of all men and women.
