63 on the waiting list. There’s no chance.”
I was standing on a train platform in Delhi with some members of my family, trying to get on board. The porter, a smug-looking man in his 40s or 50s, was adamant. For a moment, we considered buying our way up the list, but my brother-in-law, a Philadelphia lawyer, decided it wasn’t worth the risk.
A few minutes later, the train pulled away from the platform, leaving us standing there. Later, our Indian hosts confirmed the obvious: the porter had been looking for a bribe.
Every society has costs of doing business. In some countries, that cost can be called a bribe. In India, this cost represents the difference between the stated value and the real value of a scarce asset: a house or apartment; a government job; access to electricity, a water supply, or a public official; a train ticket. In China, the price of energy is kept way below where it would be if it were left to fluctuate in accordance with supply and demand. The difference is made up by bribes, blackouts, and bailouts.
In the U.S., there is also a difference between the price of energy and its actual cost. Part of the cost is paid by consumers at the pump or in their homes or businesses. The rest is paid by society as a whole, in the form of resource depletion, pollution, and other forms of environmental degradation.
It is this society-wide cost which is now the focus of much of the debate over U.S. energy policy. The debate concerns the extent to which consumers and/or producers should bear the cost of energy, including control and disposal of its waste products — and let’s say in this case, carbon dioxide. To what extent should those costs, instead, be passed onto society as a whole, in the form of pollution, resource deletion, and environmental degradation?
Which of these two routes is chosen will determine whether we follow a free-market or a socialist approach to one of our most critical issues — the management of our energy challenges in America. But think twice before deciding which is which. A free-market economy allocates resources in accordance with the law of supply and demand. Therefore, prices which reflect the full costs of energy production and consumption allow resources to be allocated efficiently.
A socialist economy, on the other hand, allocates resources in accordance with a preconceived ideal of income redistribution. Therefore, if prices are set to reflect this ideal — rather than the full cost of allocating the resources — the resulting market distortion benefits those who do not pay. In this case, those who do not pay are the corporate energy producers who pay only the costs of producing the resource itself, but not the costs of disposing of its waste products or of the collateral depletion of resources. The rest it made up by everybody else, and that is you and me. If this outcome is tolerated or, in some instances, encouraged by government policy, it represents a form of reverse income redistribution — namely, corporate socialism.
The easiest way to convince the public at large to pick up this tab is to trivialize it. We’ve all heard these rationalizations before. There is no such thing as human-induced climate change. Fracking poses no risks to the water table. Oil spills can be averted simply by following all the right protocols. The bigger the hydropower project, the greater the net conservation of resources through economies of scale. Coal will always be the preferred source of power because of its lower price. And so on.
These myths lull us into the notion that we are not passing the costs of energy production and consumption onto future generations. But trivializing the collateral costs of energy production is a way of foisting these costs onto society — of bribing the public at large to subsidize these costs for the benefit of those who refuse to pay them.
Is this to place all the blame on the corporations? Not at all: to the extent we accept the bribe, we are all to blame. All of us, consumers and producers alike, must face up to the reality that there is no form of energy production that is free of collateral costs. One way or another, we will pay for these costs.
We are all on this train together. Bribes have no place. The best way to pay the price of energy is to come clean that the buck stops with us, and to face up to the need to factor the full cost of energy production and consumption into our energy prices.
David Wendt is president of the Jackson Hole Center for Global Affairs.