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Category — Free-market capitalism/Principled Entrepreneurship™

Energy Subsidies vs. Energy Sense: What Have We Learned in the Past 3 Years?

The U.S. Department of Energy publishes periodic reports (see the latest) on federal government subsidies to energy production in the U.S.  These reports total up the costs of direct financial support for various energy technologies, tax incentives, research related to marketing and implementation and price support.

Federal support for energy in FY 2010 alone includes the following activities:

Direct Expenditures to Producers or Consumers – $14.3 billion. Federal programs involving direct cash outlays that provide a financial benefit to producers or consumers of energy.

Tax Expenditures – $16.3 billion. Provisions in the federal tax code that reduce the tax liability of firms or individuals who take specified actions that affect energy production, consumption, or conservation.

Research and Development (R&D) – $4.4 billion. Federal expenditures aimed at a variety of goals, such as increasing U.S. energy supplies or improving the efficiency of various energy consumption, production, transformation, and end-use technologies.

Loans and Loan Guarantees – $1.6 billion. Federal financial support for certain energy technologies.  .  .  [in particular] innovative clean energy technologies. 1

Electricity programs serving targeted categories of electricity consumers in several geographic regions of the country – $0.6 billion. Theses are primarily activities of the Tennessee Valley Authority (TVA) and the Power Marketing Administrations (PMAs), which include the Bonneville Power Administration (BPA) and three smaller PMAs.

Of this total of over $37 billion, about $21 billion went to energy production, the remaining $16 billion was spent on electricity transmission & distribution, conservation and efficiency and automobile programs.  This paper focuses on federal subsidies to energy production. [Read more →]

November 18, 2011   16 Comments

U.S. Chamber of Commerce: Free Market Recommendations for Congress & Obama (oil and gas prominent in potential job bonanza)

Previous posts at MasterResource have been critical of the energy-related positions of the U.S. Chamber of Commerce, such as The U.S. Chamber’s Energy Security Index: Where’s the Definition? by Robert Michaels and Dear U.S. Chamber of Commerce: Why Attempt to Resuscitate a Brain Dead Climate Bill? by yours truly.

The Chamber, in fact, was waxed and waned for and against the free-and-neutral market for virtually its whole existence. Such is life in political capitalism where special government favor is sought and received by business.

John T. Flynn’s 1928 essay, “Business and the Government”   (Harper’s Monthly Magazine), criticized the Chamber motto More Business in Government and Less Government in Business as ”sloganeering.”

Flynn noted that new laws were coming far less from the imaginations of legislators as from “the legislative program committees of trade associations or from the special counsel of trade groups … backed often by resolutions from trade conventions and chambers of commerce.”

The Chamber, complained Flynn, was falsely selling a view of business “as a huge giant, gagged and shackled like a moving-picture galley slave to his oar,” to which Flynn forwarded his own ideal for the Chamber: Less business interference in government and more statesmanship in business. (Quoted in Bradley, Capitalism at Work, chapter 6, pp. 172–74.)

Flynn, early on, captured the essence of free-market capitalism and Principled Entrepreneurship™.

The September 5th Letter

The September 5th letter from the Chamber of Commerce to the U.S. Congress and President Obama, reprinted below, is noteworthy for its free market flavor. With government running on empty, and the public mood against Big Government in most areas, the Chamber has come a long way from its disappointing cap-and-trade position on carbon dioxide (CO2) emissions and its watered down energy White Paper.

The six point jobs plan was singed by Thomas Donohue, president and CEO of the Chamber. [Read more →]

September 8, 2011   5 Comments

Standard Oil: A Centennial Evaluation (Part IV: A free market, not political company)

[Ed. note: This post is taken from Robert Bradley's conclusion in chapter 18 of Oil, Gas and Government: The U.S. Experience. In this series, Part I summarized the manifold contributions of John D. Rockefeller to a fledgling, powerhouse industry; Part II critically interpreted rebates and other 'unfair' practices of Rockefeller's Trust; and Part III critically reviewed other complaints about unfair practices against Standard Oil.]

The Standard Oil Trust of John D. Rockefeller qualifies as a free market company, not a political one. The major mistake of Standard Oil in its distinguished history was not a failing of economic performance. It was underestimating the need to present information to explain to the public and critics the virtues of integration and scale economies, particularly in petroleum. (This was an intellectual problem of critics too–see the Appendix below.)

By following an explicit policy of secrecy until the late 1880s, Standard allowed opponents to get the upper hand in a public debate that for Standard would worsen at almost every turn, culminating in the 1911 Supreme Court dissolution decree.

Successful consumer service was considered by the company as its best strategy; it was not understood that competitors would be dissatisfied by the very fact that the public was so well served by Standard Oil. Given the precedent of intervention at all government levels, offense would have been the best defense.

Prior to the onslaught of state antitrust activity, political action by Standard was occasional and defensive. Eminent-domain rights, tailored to the needs of Standard’s pipeline competitors, and rate regulation of company pipeline and storage facilities, prompted Standard’s entrance into state politics in the 1880s in Pennsylvania, Ohio, Maryland, and elsewhere to financially support friendly politicians. In the late 1890s, federal politics became important to Standard, and company pesident John Archbold made large contributions to favored candidates until a 1907 law prohibited corporate political contributions.

By this time, Standard regularly spoke for the public record, but it was too late. Numerically powerful producer interests, who blamed their cyclical difficulties on Standard, joined by hard-pressed independent refiners and marketers, inspired muckraking journalism that nudged the public to the “little man’s” side.

Ida Tarbell’s standard of goodness was not superior consumer service but “the right to do an independent business” and “free and equal transportation” for all. The idea that consumers decide the structure and form of business and that in a free market less efficient firms – which she realized existed in the independent sector – must conform or perish had no part in her ethics, understanding or sympathy. [Read more →]

May 20, 2011   No Comments

What’s a Business to Do? (In search of heroic capitalism)

[Editor note: This article first appeared in the October 2010 issue of Discovery, the quarterly newsletter of Koch Companies, Inc. This company's values include an adherence to free-market capitalism, in opposition to political capitalism or rent-seeking, currently the fashion at a number of major U.S. corporations. (Also see "The Future of  Economic Freedom"). ]

We live in an era when many people–including policymakers and media celebrities–view businesses and corporations with disdain or intense suspicion. Their way of thinking begs a simple question: What is the primary role of business?

Is it to create jobs and provide benefits?  Help advance a social agenda?  Or just to make as much money as possible, by exploiting customers and employees?

As a matter of principle, Koch companies believe there is only one reason for any business to exist: creating value.

“Value creation,” says Charles Koch, “involves making people’s lives better.

“It means contributing to prosperity in society.  If a company’s not doing that – enhancing the well-being of society – then it needs to go out of business.

“We all tend to pursue our own interests, but in a true market economy we can only prosper long-term by providing others with what they value.”

History and sound theory have both shown that the only way to consistently create value for society is to faithfully follow a set of reality-based principles.

For Koch companies, those are the 10 MBM® Guiding Principles, which include integrity, compliance, value creation, humility and respect. [Read more →]

January 17, 2011   8 Comments

Who is Charles Koch? (A builder of business and critic of political capitalism)

[Editor note: Robert L. Bradley Jr.'s book review of Charles Koch's The Science of Success (New York: John Wiley & Sons, 2007) appeared in the August/September 2008 issue of The New Individualist (Atlas Society). It is reprinted below to better publicize the worldview of the individual who has been behind a number of free-society initiatives across the country for several decades--and is now a target of Al Gore and the anti-free-market Left).

In 1859, the first treatise on “best practices” appeared: Self-Help, With Illustrations of Character, Conduct, and Perseverance, by Samuel Smiles. Motivational self-improvement books were not new, but Smiles’s 400-page opus was persuasive. Profusely illustrated with stories of men-made-good in industry, engineering, the arts, and music, Self-Help combined age-tested wisdom with knowledge of the industrial present.

From Self-Help to Organizational Success

Nearly 150 years later, the most recent addition to the self-help literature is The Science of Success by Charles G. Koch: businessman, philanthropist, and applied intellectual. Koch’s book has all the earmarks of a classic, but not because it is a tome (the 166-page main text is quite brief for the material covered) or because it is the last word on the subject (it is really just the beginning, despite two monographs published by Koch disciples a decade or more ago). The book’s seminal potential is that it presents what could be the most logical, systematic framework for organizational success articulated to date.

Applying primarily to business but also to nonprofits and government, the book offers the outlines of a tested framework for organizational success. Koch draws upon his forty years of experience in building what Forbes calls America’s largest privately held business (80,000 employees, $90 billion in annual revenue), studying and applying what is called “The Science of Liberty,” and founding and nurturing dozens of libertarian-related nonprofits.

Charles Koch deserves an audience. The family company he took over in the 1960s that had an enterprise value of perhaps tens of millions of dollars (inflation-adjusted) is worth, again according to Forbes, tens of billions. Koch Industries has never suffered a yearly loss. And in relative terms, a dollar invested in Koch in 1967 (the year Charles took over from his father) would be worth $2,000 today, outdistancing the same investment in the S&P 500 index ($500 today) or Warren Buffett’s Berkshire Hathaway ($1,400). [Read more →]

December 2, 2010   4 Comments

An Energy Obituary

A death announcement last week in the Houston Chronicle caught my eye. I never met the late Stephen Simon, but what I read made me realize that the quiet heroes and heroines of free-market capitalism need to be saluted now and then. For they are the wealth creators and real philanthropists versus the political system’s wealth redistributionists and wealth destroyers.

Here is the essence of this man. An engineer. More than 40 years with a major energy company in a variety of advancing positions at home and abroad. Successful. Private sector philanthropist with his time and money.

And through it all, a ”heroic capitalist” in the Smith-Smiles-Rand tradition (see Part I of my Capitalism at Work). A practitioner of Principled Entrepreneurship ™.

Think of what Julian Simon would have said about Stephen Simon (no relation): He created more than he consumed to leave us resource richer. And he used that wealth to create still more wealth and advance civil society.

Finally, think of Mr. Simon and his company when you think about the names that made the news at the once rival of ExxonMobil, the late Enron. (Enron’s Ken Lay, in fact, joined Exxon two years before Simon as a corporate economist before going to Washington for various assignments and never really getting politics out of his blood.)

The obituary follows: [Read more →]

July 18, 2009   No Comments