"Don't Be Fuelish"
OCTOBER 01, 1977 by ROBERT G. ANDERSON
Mr. anderson is Executive Secretary and Director of Seminars, The Foundation for Economic Education.
The American consumer finds it hard to believe the commercial: "Please don’t use my product." Buy small, drive less, lower the thermostat, recycle, stop wasting energy—the latest culprit in the energy debate has become the "piggish" consumer.
Millions in advertising are now expended to reprimand the consumer for consuming. Public utilities as well as the petroleum industry urge consumers to use less of their products. Even the automobile industry has joined in the plea—promoting smaller cars, car pooling, and less travel.
Such strange behavior is not the way of the market. Providing the consumer with more for less—creating better products—has been the traditional role of the producer.
Producers in competition with one another have turned to advertising as a means of promoting, rather than curtailing, the use of their products.
That suppliers of energy should call upon consumers to curtail energy consumption would seem to be an act of irrationality in a free, competitive market place. But such behavior by producers today is not so much a mark of their insanity as it is a measure of the extent to which market forces have been blocked or abandoned in the energy business. An unfettered market for energy simply does not exist.
Price, in a free market, reflects changes in supply and demand. Assuming a steady demand, prices tend to fall when supply becomes abundant, and prices rise when things are scarce. High prices are a signal to consumers to conserve; and to producers, high prices are a spur to increased productivity. But the free movement of price is now restricted by government.
This political interference has hampered the use of price as a means of allocating energy resources. Higher prices, a signal to increase energy supplies and decrease energy consumption, are prevented by government edict. Such government controls on price, as well as regulations hampering production, have discouraged any significant increase in the total supply of energy.
These political barriers to higher prices, and restrictions on production, have generated a widening gap between available supplies of energy and consumer demand. Producers—unable to respond to this disequilibrium through upward price adjustments or increased production—are forced into an advertising program to discourage consumption of their own products and services.
This strange turn in advertising is one of the inevitable consequences of earlier political intervention. Nevertheless, many people blame the market for this new development. Only when it is realized that such behavior is a product of government interference with market forces can any remedy be found.
The extent of government ownership of energy resources and energy-generating facilities is a primary source of the problem. Government legal ownership and government control in the energy field is awesome. Unlike private owners, government owners of resources need not respond to the demands of consumers. The motivating force of gain, which activates the employment of private resources, is absent when the resources are owned by government. Government employs its resources according to political determinations rather than market decisions.
Throughout the world, huge energy-rich land and sea areas are either directly owned or controlled by governments today. Access to these properties by private energy producers, if permitted at all, is at the total discretion of government. In many cases, the government reserves to itself all rights to exploit these resources.
The presence of government is even more universal in the delivery of electricity and natural gas. Much of the utility industry is legally owned by government. That which remains nominally in private hands is under the direct control of government, and decisions regarding prices, production, and distribution are under government jurisdiction. As a result, the entire industry is dominated by political concerns.
The tragedy of our age is that political decisions are so heavily motivated by envy and guilt. Political redistribution of wealth and deprivation of consumers has been the logical consequence of these attitudes. The law has been used to reallocate property and direct the activities of the citizenry; and the government-owned resources are employed in a similar manner. Convinced that the "social justice" of collectivism demands both a reordering and a redistribution of economic resources, government responds by using all of its resources toward that end.
Obviously, what the political planners seek is radically different from what individual consumers want. A private owner of resources is forced to respond to the will of consumers if he wishes to prosper, but the resources of government are responsive to political rather than market pressures. The political will of a collectivist society is never the same as the individual consumer’s choice in the use of his own purchasing power.
Today’s political will decrees that low prices, resource preservation for posterity, the reduction of private profit, and reduced consumption are desirable goals in the energy field. To implement these goals, the government enacts various restrictive laws and withholds its resources from production.
Industries that traditionally have served the consumer well in the energy field rapidly are losing their freedom to do so. Government insists that energy resources must be preserved for future generations and that today’s consumer is guilty of massive waste. Political concern for the poor prevents energy price rises, and political bias against industrial profits discourages increased production.
The pursuit of these political goals is as effective a program of economic sabotage as anyone could devise. The conflict generated by a collectivist philosophy of envy and guilt assures ultimate chaos in our society. Meanwhile, producers of energy respond as best they can with the freedom they still retain.
The utility industry, forbidden by government to raise rates and hampered in developing additional capacity, is the classic victim of this political philosophy. Government, believing that low rates are best, that consumers are wasteful, and that resources must be preserved for future generations, thus restrains the utility industry. The industry, in desperation, resorts to a campaign urging consumer conservation, a program costly to consumer and producer alike.
The petroleum industry also is the victim of these political beliefs. Legislation holding oil prices below market rates restricts profit margins and destroys incentive to produce. Legal barriers against private producers remove government-owned oil lands as a source of additional supply. International government cartels limit world supplies of oil. Adverse tax laws and production quotas further limit the output. With production thus restrained, the petroleum industry responds, as do the utilities, to advocate reduced consumption. Limiting the gap between existing supplies and growing demand becomes the primary concern of both industries.
The withholding of government-owned energy resources and the political bias against private production has left energy producers with but one option—to advertise for lower consumption of their products. Unable to expand productive capacity, they are attempting to forestall the political alternative: bureaucratic rationing of resources thus rendered scarce.
An advertising campaign to discourage consumption may allow frozen prices to continue to serve temporarily as the means of allocating resources. However, the limitation of production steadily raises costs and applies pressure for price increases. The hampering of new production ultimately will be borne by the consumer in a lower standard of living as energy resources are either not available in quantities desired, or available only at significantly higher prices. The fundamental problem still remains.
Pleasing the Government
"Conservation" advertising also is being done by some of the energy-related industries. Automobile manufacturers, for example, have been urging a reduction in the use of their energy-using products. Unlike the petroleum and utility industries, these producers still retain their freedom to expand production and sell their products at market-determined prices. Still, they engage in aggressive promotion of small cars, urge less driving, and encourage owners to trade less often, keep the old car longer.
The frightening aspect of this advertising is that it is undertaken to "please" government rather than to serve the consumer. The automobile industry clearly is intimidated after a decade of continual harassment by government regulations and production standards. More and more, the type of vehicle produced is ordained by government rather than by the consumer. The automobile industry is well aware of its dependence on a satisfied government.
In a free market the consumer is sovereign. The producer responds by diverting his resources and directing his advertising toward the desires of the consumer. Today, the regulatory power of government is gaining ascendance over the sovereign consumer. To survive, the producer must be ever conscious of government’s will as well as the consumer’s choice.
Whether consumers want smaller cars, less driving, more car pooling, or more aged cars is irrelevant. It’s what the government says is best! The automobile companies recognize this fact and respond to these political goals through their advertising programs. Just as they have been forced to meet government-imposed standards of construction, they likewise structure their advertising to government orders. Hypocrisy in advertising becomes a condition for business survival.
These pleas by the private producers of energy and of energy-using products for reduced use of their wares are not of their own making. Just as the well-being of the consumer suffers from a decline in total production, so too does the well-being of the producer. The fault must be placed on government, and its counter-productive political philosophy of envy and guilt. As long as our society is governed by this collectivist mentality, our economic well-being must suffer.
Yet, the market continues to respond. When hampered by radical government intervention, market forces turn to the areas remaining free. The options of energy producers have declined to the extent that they must now resort to advertising against the interests of themselves as well as of consumers.
In the pursuit of political goals in the energy industry, government has hampered production, taxed away profits, frozen prices below the market, and frustrated consumer choice. The result is a decline of our standard of living, and even our remaining freedom to be "fuelish" may soon be denied.
Isn’t that foolish?