European sales of Al Gore’s book Earth in the Balance must be high, and politicians the main readers. With gas taxes as high as 70 and 80+ percent of the retail price, and the refusal to lower them even in the face of mass strikes, the political class seems to be working toward Al’s goal of a “coordinated global program to accomplish the strategic goal of completely eliminating the internal combustion engine” (p. 326). Tax fuel to the point that it is unaffordable and you accomplish that goal through a different means.
The Clinton administration and Energy Secretary Bill Richardson, however, aren’t that sanguine about the prospect of life without internal combustion. Richardson says that oil prices are “dangerously high” and he wouldn’t hesitate to use “all options” to fight them, according to a wire service report. This is an ominous indication that the miseries of Europe may be visited upon the US before the election. In that case, it becomes crucially important to place blame on the parties responsible.
The political class can’t claim that high gas prices are an accident of history. To achieve high prices has been the social-democratic political program for more than two decades. The influence of environmentalists, who regard the car as a moral blight on the world second only to the cow, has led to high taxes in the name of conservation. The higher the price, the less people drive, and people like Gore regard driving as morally suspect. Governments are glad to cooperate with green agitators because they never pass up an opportunity to collect more revenue.
During most of this period we’ve been blessed with reasonable oil prices, so the policy of taxing fuel has led to terrible inefficiencies but no broad-based crisis. Until now. With prices soaring to ten-year highs and consumption higher than ever, protests against high taxes began in the US with a truckers’ and farmers’ protest, and spread to the UK, Belgium, Italy, the Netherlands, Germany, Spain, and even Japan.
What are the consequences? European nations all but shut down last week. People couldn’t get to work. Kids couldn’t get to school. Sick folks couldn’t get to the hospitals. Stores couldn’t receive deliveries of food. If this had continued too much longer, barbarism would be the order of the day. This would be our future in a world without the internal combustion engine. The air might be squeaky clean (absent any natural volcanos) but our living standards would be pre-industrial. How, again, is it possible that a man who called for this may be our next president?
Instead of celebrating the shutdown, however, European governments flew into panic. Tony Blair of Britain briefly contemplated sending in the military to force striking truckers to deliver the goods. That’s not because he was so anxious for the people to begin their conspicuous consumption of petrol again. It’s because the tax revolt was giving his policies a well-deserved black eye. And not only his but also his political cohorts around the world who use technology as a means of filling the coffers of the central state.
In response to the crisis, Blair formed a cartel against cutting taxes with other government leaders in Europe. His refusal to “give in” to the demands of the mob was heralded by the press as an act of political courage. No doubt an imposition of price controls and the brutalizing of all protestors would have garnered even more hosannas. Tanks in Tiananmen are considered evil, but the same tactics to keep the Labor Party in power would be just fine.
As Murray Rothbard wrote in another context, “It used to be thought that heroism and ‘courage’ meant being willing to go out into the lists, candidly and unafraid, to battle the mighty and despotic powers-that-be.” But when a politician is willing to defend the outrageous and parasitic plunder of the public through the worst form of tax gouging? ” We can think of many names for this sort of activity,” writes Rothbard, “but ‘courage’ is surely not one of them.”
The conventional wisdom is that governments should tax goods with high demand and few substitutes, like gas and cigarettes and income, because they provide a stable source of funding. But one of many downsides is that such taxes limit price flexibility on the upside. Even if the price of oil had fallen to zero, the price at the pump would be intolerably high by American standards. Hence, it is popular to blame Opec for the new round of price increases, but without the grasping of governments around the world, Opec wouldn’t be much of a bother.
Everyone these days says that Opec has the world over a barrel, gouging developed nations so that Arab sheiks can build palaces for themselves. All the old hate campaigns from the 1970s-against the oil companies, Arabs, over-consumption generally-are back.
For years Opec has cooperated with the governments of countries buying its oil to keep the prices from falling too drastically. All the while those governments have raised taxes to absurd levels in order to drive prices even higher. And then the crisis hits, and these governments blame Opec? Stepping up production and noting the failure of prices to fall, Opec has had just about enough of this. It has recently gone on the offensive to blame governments for overtaxing oil-and in this, Opec is exactly right.
The protests are a reminder of something else as well. It may appear that the global political consensus in favor of social democratic economic policies is stable, that we’ve reached a happy medium between the extremes of laissez-faire and socialism. In fact, this is an illusion. Mixed economies are governed by central plans that are as inflexible as anything put out by the Politburo. They do not adapt to changing market conditions. Because of the mixed economy, the modern economy is replete with opportunities for intervention that could lead to tanks on the streets.
The tax strikes didn’t achieve the goal of getting the governments to reduce the tax. But they weren’t in vain. They shocked the daylights out of the British political class who have long seen oil and gas as an easy source of revenue. Further consequences of the failure to reduce taxes when faced with a crisis will be felt down the line.
Economists are forever telling us that the public has an “inelastic demand” for gas, meaning that folks will pay any price for the stuff because they need it so much. Just once, it was a pleasure to see the elasticity snap back on the political class in the form of mass outrage. It reminded them that even democratic socialists can’t entirely blunt the power of average people rising up against their masters.