Freeman

ARTICLE

The Government IS in Business

SEPTEMBER 01, 1963 by PAUL L. POIROT

If you, as a property owner, have occasion to negotiate with an elec­tric company concerning a right-of-way across your lands for its transmission lines, you may want to take some lessons in bargaining from the nation’s largest landlord, the federal government.

For many years, the government has exercised considerable control over the activities and operations of the privately-owned electric companies. And out of its interest in flood control, conservation, na­tional defense, and miscellaneous matters, it has developed an enormous power-generating and distribution network in various parts, if not quite all, of the United States. Obviously, any pro­posed extension of lines or serv­ices by any privately-owned elec­tric company might turn out to be "in conflict with the power mar­keting program of the United States." So, that is one of the dangers guarded against in new regulations issued March 23, 1963, by the Departments of Interior and Agriculture relative to rights­-of-way for power transmission lines across federally-owned lands: No right-of-way is to be granted for electric facilities which the Secretaries of Interior and Agriculture may deem to be in conflict with the power market­ing program of the United States.

Furthermore, applicants for rights-of-way for electric lines across public lands must agree to allow the federal government to use any of what the government decides may be "excess" capacity of the line. And the government would have the right, at its ex­pense, to increase the line’s ca­pacity and to use such increase for its own purposes, thus jeop­ardizing any reserve for future expansion that the line’s owner might have intended.

Naturally, the privately-owned electric companies are perturbed about the stringency of these new regulations. Even the most casual witness of the extension of the "TVA Yardstick" since the first inch was granted in 1933 must realize by now that the "power marketing program of the United States" has no natural limits, that it is designed to encompass every square foot and every citizen of the country, and that those in charge must deem to be in con­flict with their program any and every privately-owned electric gen­erating and distributing facility in the land. The federal govern­ment already has pulled tight the noose of its monopoly over the electric power industry in the TVA territory. When and where its next foreclosure will come is debatable, but the definite trend of the times and mood of the elec­torate is in that direction. The timing is strictly a matter of poli­tical expediency.

REA in Practice

Slightly more than a quarter of a century ago, when the Rural Electrification Administration was under debate in Congress, Repre­sentative Sam Rayburn of Texas sought to reassure the nations’ private electric power industry: "May 1 say to the gentlemen that we are not in this Bill intending to compete with anybody. By this Bill we hope to bring electricity to the people who do not now have it. This Bill was not written on the theory that we were going to pun­ish somebody or parallel their lines or enter into competition with them."

Contrary to Mr. Rayburn’s solemn and sincere assurances of 1936, the growing REA giant is reaching out to serve not only rural customers but industrial and suburban markets as well. Five out of six new REA co-op cus­tomers, in fact, are now commer­cial, industrial, or nonfarm con­sumers. And tax funds are being loaned through REA at less than cost to finance lumber plants, housing projects, and, in one case, snow-machines for a ski resort.

The recent regulations govern­ing rights-of-way across federal lands mark perhaps the most extreme, abusive, and arrogant grab for power yet attempted in a major movement toward socializa­tion of the electric power industry of the United States. This latest step cannot be described as a new break in the principles of private ownership, voluntary exchange, or limited government—those prin­ciples were long since fractured and abandoned in this particular struggle; what we witness now is more like a final lunge or death blow to competitive private enter­prise.

How Limit Government When Principles Are Abandoned?

One of the proper functions of a government of limited powers is to protect the rights of citizens to life and property—as long as each lives and uses his property peace­fully and without injury to others—and to constrain those who might attempt such injury. But when the government itself acquires the ownership of land or any other property, who then is to constrain the government in its injurious use of such property? The prin­ciple of limited government is thus abandoned whenever the gov­ernment claims title to land. It is abandoned whenever the govern­ment takes the first step toward building a hydroelectric dam or power-generating plant or trans­mission line. Indeed, it is aban­doned whenever the government undertakes to set the rates and otherwise regulate the operations of privately-owned electric com­panies. So, there are no funda­mental libertarian principles left upon which one can then make a firm stand when the federal power agency takes its next logical step—such as posing impossible condi­tions for rights-of-way across fed­eral lands. Why should anyone be particularly concerned at that late stage?

This is no gross exaggeration or wild prediction of something that might possibly happen in the United States many years hence. The monopolization of the electric power industry under government ownership and control already has happened, in our time, before our very eyes, just as it has happened before in other lines of business activity, and as it will continue to happen if citizens of the United States are willing to abandon the basic principles of private owner­ship and control of property, vol­untary exchange, personal respon­sibility, and limited government.

Nor is "the power marketing program of the United States" by any means limited to an interest in the production and transmis­sion of electrical energy. Federal and state taxation, regulation, and control of the production, impor­tation, pricing, transmission, and marketing of oil and gas is a bur­densome fact familiar to all. And few persons have even bothered to doubt the propriety of what amounts to a government monop­oly of the budding business in atomic energy. There are indeed many facets to "the power mar­keting program of the United States"; and there are numerous examples in other fields to show the nature of the trend.

Communications and Transport

Everyone knows that it is now illegal to undertake any operation in conflict with "the communica­tions program of the United States." The government monop­oly of the postal service is com­plete. Government control of the airwaves is absolute; there is no opportunity for a strictly private and independent system of radio or television communication. The so-called private telephone com­panies are franchised, regulated, and controlled. Most magazines could be put out of business to­morrow at the whim of the Post­master General. And even the newspapers can be shut down whenever the government chooses to look the other way as union leaders flaunt the special privi­leges inherent in labor legislation.

A similar pattern toward gov­ernment monopoly is emerging in "the transportation program of the United States." It has been a long series of steps from the first post roads as provided in the Con­stitution to the expanding, feder­ally subsidized and controlled sys­tem of interstate highways. And federal interest in mass urban transportation is the latest major development. Meanwhile, we have a heavily subsidized merchant ma­rine for overseas transportation, as well as a government program for rivers and harbors and canals and other inland water transport. The railroads have paid dearly and still pay for those early land grants along their rights-of-way through the underdeveloped gov­ernment lands of a struggling young nation. Passenger and freight rates are strictly regu­lated; proposed mergers or aban­donment of lines carefully scrutin­ized and often forbidden; railroad properties and services mercilessly taxed by every unit of government from the federal on down to the level of the local school district; wages and hours and working rules featherbedded under a blanket of governmental sanction—all of which comes very close to the same thing as absolute owner­ship and control by government. As for air transport, the only part of the business not directly oper­ated or heavily subsidized by gov­ernment is strictly regulated as to routes, rates, records, reports, romance, and routine. Little won­der that Americans find it so diffi­cult to imagine a transportation service to the moon unless the gov­ernment provides it!

Another clear example of gov­ernment monopoly is in "the monetary and credit program of the United States." The Constitu­tional authorization "to coin money" and "regulate the value thereof" has been twisted through central banking, fractional re­serves, and deficit financing into an engine of inflation that per­sistently grinds away the value of private savings, builds minor cy­clical business fluctuations into major disastrous depressions, and threatens to destroy the credit of the United States among the na­tions of the world. Money and credit, instead of serving as a lubricant to facilitate trade, have been monopolized by the govern­ment into a combination brake-accelerator that regulates and con­trols and frustrates the will of consumers and the activities of businessmen who would try to serve them.

Agriculture and Labor

Less clear, perhaps, in its mon­opoly characteristics but at an ad­vanced stage, nonetheless, is "the agricultural production and mar­keting program of the United States." Individuals are no longer free to produce and sell such crops as tobacco, cotton, peanuts, or wheat in competition with the government program. Many wheat growers are to be commended for their courageous stand in the re­cent wheat referendum. But, there is no way to reconcile the prin­ciples of freedom with a political process whereby the past pro­ducers of a given commodity, and no others among the taxpayers of a nation, are privileged to vote whether to accept heavier subsi­dies and more stringent control or smaller subsidies and less control. Freedom in agriculture means no subsidy and no government con­trol of agricultural production and marketing, no matter how many persons vote otherwise.

"The labor marketing program of the United States" is not yet a tight monopoly; some persons are still free to work for anyone offering a job opportunity at a wage rate mutually acceptable. But in this area, too, the trend is unmistakable. Under government legislated and sanctioned compul­sory unionism, one job classifica­tion after another is withdrawn from the free market, held for union members only, withheld from other individuals qualified to perform the work satisfactorily. And more and more of the types of employment still open to non­union workers are being covered by minimum wage laws which block out those least productive workers incapable of earning the legal minimum wage. Government unemployment compensation and social security programs and tax policies make idleness more at­tractive, often more remunerative, than creative effort. And all of these government subsidized and enforced fringe benefit items cut from the wage, leaving less and less of the total open to free bar­gaining between employer and employee.

Freedom in Jeopardy

While the foregoing examples by no means exhaust the list of goods and services that have been brought partially or wholly under government monopoly in the United States, they should suffice to illustrate to anyone concerned that economic freedom is seriously threatened; that one advance toward the welfare state leads in­exorably to the next step; that the proponents of government regula­tion and control of creative activi­ties are in deadly earnest; and that once allowed in principle, there is no logical stopping of compulsory intervention until the government owns and controls not only all the property in a given industry but also all the people dependent on that industry as in­vestors, employees, and consumers.

Go Back to Basic Principles

Let us return now to the imme­diate problem of the private elec­tric companies concerning rights-of-way across government-owned lands. The companies may con­tend, of course, that the govern­ment ought to be a kind and benev­olent landlord, willing to grant rights-of-way with no strings or conditions attached.

But suppose an electric company were seeking a right-of-way for a power line across the lands of one of its competitors in the elec­tric business—as the builders of coal pipelines are now seeking rights-of-way across properties owned by the railroads, which also want to transport coal. Under such conditions, is the property owner expected to grant right-of-way to a competitor strictly on the lat­ter’s own terms? This, of course, is not a reasonable expectation.

As electric power companies well know, property owners along a proposed right-of-way can be most demanding in their terms and conditions. And occasionally, such opposition may be confronted with governmental power of emi­nent domain to force acceptance of "fair and reasonable" terms. However, the government’s power of eminent domain is of no avail when that self-same government is the demanding owner of the property at issue. So it is that the electric companies, licensed, chartered, regulated, and con­trolled by the government, are strictly at the mercy of the gov­ernment when seeking right-of-way across government-owned land.

To argue their case logically be­fore the court of public opinion the electric companies and other businessmen similarly threatened by governmental encroachment will be obliged to hark back to the fundamentals and basic principles of personal freedom of choice and full responsibility for the conse­quences; private ownership and control of property; voluntary ex­change of all goods and services in open competition; and govern­ment limited in scope and power to the defense and protection of the life and property of every citizen equally against unprovoked acts of violence, fraud, predation, with a system of courts to decide matters in dispute and armed forces powerful enough to enforce all such decisions and to collect taxes sufficient to maintain the government in its proper func­tions.

By these basic principles, it is possible to explain logically why neither power companies nor any other creative activities should be chartered or licensed by the gov­ernment in the first place, but left instead to competitive private en­terprise; why the government has no business whatever in the gen­eration or transmission of elec­tricity or as producer or provider of any other goods or services that have a market price, leaving all this to competitive private enter­prise; why the government should neither own nor control any parcel of land or any other scarce goods and resources beyond the neces­sary tools and instruments of war, leaving such ownership instead to the highest bidder and thus to the most capable management that can be found by the true and tested methods of open competi­tion; why the government should grant neither favor nor exemp­tion to any individual group.’ Then and only then can life and property be reasonably secure in the possession of those who have earned and paid for their rights-­of-way.

Footnotes

1 For further explanation of these limitations, see Government: An Ideal Concept by Leonard E. Read, Founda­tion for Economic Education, Irvington-­on-Hudson, New York (1954). 149 pages. $1.50 paper, $2.00 cloth.

ASSOCIATED ISSUE

September 1963

ABOUT

PAUL L. POIROT

Paul L. Poirot was a long-time member of the staff of the Foundation for Economic Education and editor of its journal, The Freeman, from 1956 to 1987.

comments powered by Disqus

EMAIL UPDATES

* indicates required
Sign me up for...

CURRENT ISSUE

July/August 2014

The United States' corporate tax burden is the highest in the world, but innovators will always find a way to duck away from Uncle Sam's reach. Doug Bandow explains how those with the means are renouncing their citizenship in increasing numbers, while J. Dayne Girard describes the innovative use of freeports to shield wealth from the myriad taxes and duties imposed on it as it moves around the world. Of course the politicians brand all of these people unpatriotic, hoping you won't think too hard about the difference between the usual crony-capitalist suspects and the global creative elite that have done so much to improve our lives. In a special tech section, Joseph Diedrich, Thomas Bogle, and Matthew McCaffrey look at various ways these innovators add value to our lives--even in ways they probably never expected.
Download Free PDF

PAST ISSUES

SUBSCRIBE

RENEW YOUR SUBSCRIPTION