Government as a Monopoly?

The Hidden History of Monopolies: How Big Business Destroyed the American Dream

How Big Business conquered America. Over the next few months the entire book will be here, new chapters posted every Sunday, for subscribers to read at no cost. If you want to get a physical book to mark up or share with others, just click on the picture above, visit your local bookstore, or check your favorite online seller.

Government as a Monopoly?

The core argument of the “government is bad” crowd is that government is, itself, a monopoly. Since everybody knows that monopolies are bad things, so, too, government must be an intolerable affront that reduces the quality of life for its citizens. This meme has been incredibly destructive to America’s working people, who’ve become hostile to government while losing their wariness of corporate monopoly.

There’s one type of monopoly that’s actually good, with a single caveat. That’s called a “natural monopoly,” and for it to work properly, it generally requires government. Consider your home. While you can buy a new stove or sofa or rug from many different companies, you’ll be hard-pressed to buy your water, electric, or septic from more than one single vendor. There’s only one power line, water line, and sewer line attached to your home. Thus, power, water, and septic are generally referred to as “natural monopolies.”

To provide the best and most reliable service at the lowest price, communities across America have opted to have public (government) ownership of these utilities. Publicly owned electric companies, for example, provide power for about 15% less than privately owned for-profit power corporations, and they do so with an average of 59 minutes of service loss per year compared with 133 minutes of lost power from for-profit companies.44

While public power systems saw a huge growth spurt through the 1930s (with the help of New Deal programs building huge dams and starting the Tennessee Valley Authority), ’40s, ’50s, and ’60s, the tide turned as a neoliberal (deregulated or laissez-faire capitalism) privatization craze crept across the American landscape in a big way following the election of Reagan in 1980.

Today, only one in seven households gets its power from publicly owned companies; the rest of us are paying the extra 15% for corporate profits and shareholder dividends, and living with more outages because for-profit companies are paying dividends instead of maintaining their equipment.

This turned deadly in 2018 when wildfires erupted across California, a significant number of which were started by poorly maintained Pacific Gas & Electric power lines. Their quest for ever-increasing profits literally killed people.

As the July 10, 2019, headline and subhead in the Wall Street Journal noted: “PG&E Knew for Years Its Lines Could Spark Wildfires, and Didn’t Fix Them: Documents obtained by the Wall Street Journal show that the utility has long been aware that parts of its 18,500-mile transmission system were dangerously outdated.”45

PG&E took money devoted to updating their systems and instead passed it along to their shareholders and executives. Judge William Alsup, supervising PG&E’s probation for killing eight people in a 2010 gas pipeline explosion, noted that “PG&E pumped out $4.5 billion in dividends and let the tree [trimming] budget wither.” The result was a series of deadly wildfires caused by downed power lines, like the Camp Fire of 2018 that destroyed 14,000 homes and killed 85 people.46

Just after that 2010 explosion, it was revealed that PG&E had taken roughly $100 million that was earmarked for safety upgrades and instead distributed it, in part, to its senior executives.47

With the economic power derived from control of a natural monopoly, private power companies started flexing their political muscles. The legislature of Hawaii, for example, the only state to get its electricity entirely from private power companies, allows those companies to heavily penalize their customers who try to put solar on their homes or businesses.

The Hawaiian utility began rigorously enforcing their ability to punish solar-installing customers during the George W. Bush administration, and Scientific American magazine noted, “Since the Oahu rule went into effect three months ago, it has hurt business and ‘deflated the movement,’ [Charles] Wang [owner of a small Hawaiian solar-installation company] said. The rule led to a 50 percent drop in business in this quarter at many solar installers, according to interviews with many in Hawaii’s solar industry.”48

The article added that in 2007 there were more than 300 solar installation companies in the state, but by 2013 the number was down to “just a few dozen.” Nichola Groom, the article’s author, noted, “R&R Solar Supply, a 25-year-old distributor of solar panels to installers statewide, recently rented nine 40-foot containers to store panels meant to go on Hawaiian rooftops in the fourth quarter—typically the industry’s busiest time of year. Its Honolulu warehouse is ‘packed to the gills,’ said Chief Executive Officer Rolf Christ, adding his panel business is down 50 percent.”49

Natural monopolies in the hands of corporate hustlers are so ripe for exploitation that most states regulate the private utilities just to keep their citizens from getting repeatedly taken advantage of. And so citizens end up paying for our government to maintain a separate regulatory apparatus just to protect its citizens from rapacious private utility executives, plus paying those executives millions a year, plus a large slice of the action going to stockholders. One wonders why any community in America would go for these kinds of companies, particularly when Europe is running pell-mell toward ditching its private utilities for state-owned enterprises.

Germany is at the forefront of the movement toward remunicipalization, with the Transnational Institute highlighting, in 2018, 347 of the 835 Europe-wide examples of utilities being clawed back from private and into public hands happening in that country. Two hundred and eighty-four of them were in the energy sector.50

The thing preventing America’s recovery from the international experiment with privatization during the period from 1980 to 2010 has largely been the US Supreme Court, starting with its Buckley v. Valeo and First National Bank of Boston v. Bellotti rulings in 1976 and 1978, respectively (see The Hidden History of the Supreme Court), and most recently Citizens United v. FEC, that for-profit companies and the billionaires they produce can pour unlimited amounts of money into the campaigns of the politicians that we, uniquely among developed nations, allow them to own.

Now, the same people who trust their government to correctly execute criminals, deliver their mail, and route their airline’s flight safely home, as the result of Reagan’s rhetoric and decades of “think tank” spokespeople appearing daily on TV and radio news shows, no longer trust government when it comes to regulating the oil and gas industry or protecting coal miners. They trust their government to get them their Social Security or tax refund check but don’t think state or local governments can successfully run natural monopolies.