Drawing The Line Against Misconduct: Theodore "Teddy" Roosevelt (1858-1919) twenty-sixth President of the USA and champion of the progressive regulation of America's over-mighty corporations and their "robber baron" proprietors. The Labour-Green plan for regulating the New Zealand energy market falls squarely within the Rooseveltian tradition.
IN ITS BROADEST SENSE, socialism is about putting society’s needs ahead of the market’s choices. Indeed, socialism comes into being only when it makes more sense to be a voter than a customer: a citizen than a consumer. In this sense, at least, the Chief Executive of Mighty River Power, Doug Heffernan, is right: the Labour-Green policy package, Energising New Zealand, is “a socialist consumer model”.
But, the economic commentator, Bernard Hickey, is also right when he says:
“In the world of corporate and government relations there’s a vague concept referred to as a ‘licence to operate’. It means that large companies or departments know there’s only so far you can push the public and politicians before they react by, in effect, removing that licence to operate and regulating profits lower.”
That point has been reached many times before in history, and the result has always been the same: the large companies and departments lose.
The period of American history spanning 1890 to 1910 was known as the “Gilded Age”. The fruits of America’s break-neck industrialisation had been captured by an infinitesimally small percentage of the population. These “robber barons”, as they came to be called, flaunted their unprecedented wealth by constructing mansions and castles modelled on those of the European aristocracy. Names like Vanderbilt, Rockefeller, Morgan and Carnegie became synonymous not only with great fortunes, but with great power.
Too much power.
Curbing the power of the robber barons of the Gilded Age was the mission of the US political movement known as “Progressivism”. It’s most effective advocate was President Theodore Roosevelt. His summation of the Progressive Movement’s attitude to the great American corporations provides a useful, and eloquent, definition of the licence of operate:
“Our aim is not to do away with corporations; on the contrary, these big aggregations are an inevitable development of modern industrialism, and the effort to destroy them would be futile unless accomplished in ways that would work the utmost mischief to the entire body politic. We can do nothing of good in the way of regulating and supervising these corporations until we fix clearly in our minds that we are not attacking the corporations, but endeavouring to do away with any evil in them. We are not hostile to them; we are merely determined that they shall be so handled as to subserve the public good. We draw the line against misconduct, not against wealth.”
“[S]o handled as to subserve the public good.” It’s a line Labour and the Greens would do well to borrow and develop. Because the opposite of “subserve” is “subvert” – and to demonstrate the meaning of subversion in relation to electricity pricing, they need only describe what happened in California when its energy needs were left to the tender mercies of an over-mighty US corporation called Enron.
Enron was revealed to be a corporation in which “misconduct” bordering on “evil” was the surest route to promotion and profit. Inevitably, the people of the United States (and of California especially) “drew the line” and Enron’s licence to operate was withdrawn.
The system of electricity pricing operating in California today is strikingly similar to the system being proposed by Labour and the Greens.
There’s a very good reason for emulating the Californians. Our energy companies may not be as red in tooth and claw as Enron, but the quantum of “super-profits” which they have extracted from the long-suffering New Zealand consumer is truly staggering.
Research undertaken for the NZ Commerce Commission by American energy expert, Professor Frank Wolak, and published in 2009, concluded that “over a period of some six and a half years the generators have exercised their substantial market power to earn market rents estimated conservatively to be $4.3 billion.”
As trade union leader, Matt McCarten, put it: “That’s $1000 profit for every man, woman and child.”
Clearly, New Zealanders have lost themselves a great deal of money by submitting docilely to the roles of consumer and customer. Voices crying in the wilderness – most particularly those belonging to long-time energy campaigners Molly Mellish and Geoff Bertram – have been telling us for years to wake up and realise how much it’s been costing us to smell the coffee.
To the undoubted relief of Molly and Geoff, Labour and Green policy-makers have finally begun to listen and now we, the consumers and customers of wildly over-priced electricity, are being invited to put aside those passive identities and become, instead, active citizens and voters.
In 2014 the Opposition parties have invited the New Zealand electorate to revoke Mighty River Power’s, Genesis Energy’s, Meridian Energy’s and Contact Energy’s licence to operate as unfettered super-profiteers. As citizens and voters we’ll finally be empowered to follow Teddy Roosevelt’s advice: drawing a line against our energy generators’ social misconduct and subserving them to the public good.
This essay was originally published in The Press of Tuesday, 23 April 2013.