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PROPAGANDA, MONOPOLY, SUPPLY AND DEMAND AND THE INVISIBLE HAND

February 3, 2015

PROPAGANDA, MONOPOLY, SUPPLY AND DEMAND, AND THE INVISIBLE HAND

Per Webster’s New American Dictionary, Third Edition: “Capitalism n. the economic system in which the ownership and exploitation of wealth are left largely in private hands.”

We are told daily if not hourly by those who advocate capitalism of the wonders of our self-correcting market via supply and demand and other classical economic rules which remove the necessity or even advisability of regulation by government. Capitalism as a system is said to be inherently self-correcting and the best framework available with which to build an economic structure and none others need apply, even though the Constitution is silent on our choice of economic systems and the word “corporation” is unmentioned in our Constitution as well.

Success is said to be guaranteed by aficionados of capitalism if only the government would leave such public spirited capitalists alone and let the market magic of Adam Smith’s invisible hand of self-interest weave its beneficent effects for the good of all. The law of supply and demand and its “natural” dictates of pricing in a free market is said to correct all man-made mistakes in production and consumption of goods and services. Just leave the market alone to work its magic. It’s the best and fairest system imaginable and equitably distributes its fruits to those involved in fair and just fashion in proportion to what they contribute to the process – if only government would leave the process alone!

The foregoing is myth, of course. There is nothing “natural” about any economic system. All are man-made here on earth and all are subject to change in pragmatic fashion depending upon what appears to be necessary for solution of evolving problems as they come to the fore; they are not composed of some ethereal manna that falls from heaven – far from it! Adam Smith’s “invisible hand” never existed beyond its theoretical stage; the pursuit of self-interest does not guarantee systemic success and capitalists/ monopolists of today do not follow the rules they have so piously set themselves, as we shall see.

Let’s take as an example the argument-ending principle of the law of supply and demand as modified by scarcity but played out in a monopoly rather than a (fictional) “free market.”  First, scarcity is important. Thus if diamonds were as plentiful as gravel, for instance, their pricing in the market would be next to nothing. Oil is not scarce, yet the price until recently was out of sight due not to any free market ideology as Big Oil propaganda endlessly claims. It was scarce and thus pricey because its producers, transporters and refiners enjoy monopoly status in a market devoid of the supply and demand of a free market and could and did restrain production in order to maintain price. In other words, Big Oil was engaged in spreading the propaganda of supply and demand in the marketplace when they were simultaneously and deliberately manipulating supply in a monopoly situation in order to keep prices up for consumers like you and me. As we used to say, what they say and what they do are two different things. We also used to say that such hypocrisy was lying, but I understand that’s out of vogue now.

In a truly free market situation with true and not pretended competition, the producers would produce more oil and let the price gravitate per the iron law of supply and demand either up or down. That would accord with competition and free market ideology which Big Oil apologists falsely claim is happening in their fossil fuel industry, an important source of energy, but guess what? The phony claims of Big Oil as victims of economic laws they can do nothing about have been invalidated because, just recently, there is (if only for the moment) over-production of oil along with honest pricing ACTUALLY BASED UPON SUPPLY AND DEMAND and not monopolistic back room manipulation. The result is that you and I are paying much less for gas in an honest supply and demand market the monopolists thought they had so carefully rigged for the ages (and their bottom lines).

So how did this economic setback (if only temporary) for Big Oil come to be? What is the fly in their ointment? Is it the success of American fracking which upset the supply side of the equation, more Saudi oil to market, or sudden under-consumption of petroleum products world-wide? It is none of the above. The bottom dropped out of their monopolistic pricing when the Saudis refused (and still refuse) to reduce their pumping output on the grounds that they might lose customers.

But wait! Doesn’t Big Oil believe in the law of supply and demand, the same argument they have used in years of pretense and propaganda as an excuse to prop up the price for gas to us consumers? Why not let the REAL AND UNSKEWED law of supply and demand work its market magic they have hammered us with daily with their propaganda and pretense and see what happens to gas prices and bottom lines?

The (corporate-owned) financial press laments the loss of new exploration and jobs in the oilfields of America as well as declining profits for Big Oil. Why? Do they want to talk jobs? Then where was and is that press when mergers and acquisitions among banks and other industries when hundreds of thousands of jobs were and are lost to layoffs (quaintly called “reductions in force”), not to mention the millions of jobs lost to slave shops in the Orient in order to fatten corporate bottom lines? Why is Big Oil a privileged industry? Capitalism is built on the idea of extracting the greatest profit possible at the lowest possible cost (which includes the cheapest labor costs they can get by with, reductions in force, denial of overtime and sharing of marginal productivity of the workforce etc.). My take – Big Oil’s concern is about profits, not jobs. Their workers are treated like widgets to accommodate bottom lines.

It is now a laughable situation to see Big Oil, that stalwart defender of capitalism, allied with oil-producing and socialist Venezuela in begging the Saudis on bended knee to stop or slow their pumping (and thus reinstate monopoly in pricing and four bucks a gallon for gas for you and me), all of which strongly suggests to me that “isms” of any stripe will yield to the overriding compulsion to make a buck on the backs of consumers world-wide, including you and me. The terms greed, monopoly, price manipulation, oblivious conduct (and some unprintable ones) come to mind.

My advice to readers: Enjoy this temporary relief from monopolistic pricing of petroleum products (including but not limited to gasoline) in a free market setting of supply and demand Big Oil monopolists trumpet but do not follow. If the Saudis cave (and they will), supply and demand will have been successfully manipulated on the supply side to guarantee market equilibrium in pricing and the end of chaos in the oil futures market. This monopolistic re-manipulation of supply and demand by Big Oil will also guarantee that you and I will again be paying big bucks for gas – so have fun while you can.  GERALD   E

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