Wall Street International Magazine
During the California fires of 2019, Silicon Valley social media and tech giants experienced rolling electricity blackouts, sometimes for days. This shock led to a dawning of the reality: their visions of global digital domination relied totally on electricity, still largely produced by fossil fuels causing the global climate crises.
Their dreams of continuing their digital takeovers of ever more industrial sectors: from Main Street brick-and-mortar retailing to local newspapers, manufacturing, law, medicine, entertainment and even shaping political activities and democracy itself, were now threatened by their lack of control of energy systems. Pull the plug and their dreams went up in smoke.
I explored this rude awakening as fires blazed in California in my Silicon Valley Karma and how the northern half of the state was reliant on one electricity and gas provider, Pacific Gas and Electric Company, while the south was similarly controlled by Southern California Edison. It turned out that both these private, for-profit regulated electric utilities were inadequately prepared for these fires and other climate crises, let alone those looming in 2020 and beyond. The California infrastructure of transmission lines was aging and the utilities’ vital electricity was delivered to customers on thousands of tree trunk poles, vulnerable to fierce winds in the state and fire risks from these very exposed wires! Such self-inflicted hazards had already been blamed for several deadly fires.
Regulators and Public Utilities Commissions charged with oversight of the power companies had failed to look ahead. They had also overlooked the dangers of their aging nuclear plants, some unfortunately sited on known earthquake faults. Their natural gas pipelines to homes and businesses were also in need of upgrading and had caused leaks and explosions in some neighborhoods. Now it was becoming clear, California’s vaunted reputation for innovation and its Silicon Valley technology titans, their libertarian venture capitalists and storied universities and think tanks had fallen short.
How does this kind of short-sightedness happen? Especially as now revealed in the USA, a preeminent, innovative market-based democracy. And why does it continue, as we saw recently in the debacle of failure of public services, gas, electricity and water in Texas? All these shortcomings of foresight, while endemic in human nature, often are exacerbated by over-reliance on markets and prices. This is the growing category termed market-failures. The greatest is climate change, and these market failures are now seen in the inability of financial markets to provide stable services or distribute food supplies. Similarly, in the current global pandemic, the failure to get adequate testing in the USA, and in spite of huge government subsidies to pharmaceutical companies which created vaccines, there were no wider plans other than to rely on the market to immunize actual people.
Markets, money, and prices are all useful tools and mechanisms and have been used by humans in local communities for centuries, in face-to-face village squares. These employed all kinds of money tokens, from shells, beads and wampum to tally sticks, cattle, cigarettes and today’s cryptocurrencies. Yet we must be aware of when these tools are useful and when they cause damage to others, the environment and become market failures. The over-reliance on markets and their use in inappropriate situations are evident in the blackouts in California and Texas.
Reliance on prices fails to signal requirements for maintenance and the need for longer-term investments in future safety, performance, and resilience. Prices are always a function of human awareness, understanding of wider situations and future needs. Forecasters and futurists, like me, have usually been ignored as alarmists, or bringers of unwelcome news in our scenarios of “what-ifs”. This happened to the US Office of Technology Assessment (OTA), set up in Washington, D.C. in 1974 on which I served as an advisor until 1980. OTA was shut down in 1996 because our many reports angered vested interests and incumbent market companies. Politicians used the argument that the market decides what technologies are developed.
Today’s worldwide scale of markets and financialization in its global casino are all operated on prices and money-based indicators. Prices are based on history, denial or ignorance of future trends and overlooking the need for maintenance, repair and regeneration of human societies and their infrastructures. So many markets continue to fail. Thus, costs of upgrading and repairing damage are skyrocketing. For example, hardening California’s miles of transmission lines and placing them safely underground, as in most European countries, would cost trillions of dollars.
So blackouts are likely to continue in California’s future, a wake-up call for Silicon Valley’s market-based libertarians and their ambitions for global domination. Some US billionaires now see their escape in hideaways in New Zealand, buying islands (forgetting about sea-level rise) or continuing their huge bets on space travel, satellites and “terraforming” Mars! We hope that Texas pursues more rational future goals!
As I explored in Fixing the Money Meme, it’s high time to re-examine markets, prices and money-creation, all important innovations and widely-useful tools for organizing human activities productively. We now also see the importance of using these ancient tools more appropriately in steering human and social development. For example, the money-measure GDP indicator still used widely is steering societies over the cliff. At last, it is being replaced by the United Nations Sustainable Development Goals, approved by 193 countries in 2015, see our webinars Steering Societies from GDP to the SDGs.
Lessons are clear, whether in California, Texas, or the larger market failures of climate change-driven fires, floods, hurricanes, as well as in pandemics. The latest lesson is the misdirection of internet-based social media platforms focused on profit and market penetration. Yet these new monopolies freely use taxpayer-funded research, platforms of the internet, satellites, fiber-optic undersea cables, and the network effects they provide.
Now governments are beginning to restrain these overgrown advertising-based giants, Facebook, Google, Amazon, Twitter and others which also use their surveillance algorithms to influence and predict our behavior so as to sell this information, as described by Prof. Shoshana Zuboff in The Age of Surveillance Capitalism (2019). The USA and the European Union are now addressing these massive market over-reaches, as I reported in Steering Social Media Toward Sanity.
We at Ethical Markets advocate grounding the ownership of all personal information with citizens, by basing this ownership in English common law from Magna Carta, in the year 1215, which created the writ of habeas corpus, which assures that we humans own our own bodies. We update this with our “information habeas corpus “which adds that we also own our own brains and all the information they produce.
Back to news from Texas and its market-failures. Their politicians bought into the ideology of “market fundamentalism” purveyed by libertarian US-based oligarchs and their economists in think tanks, including the Cato and Heritage foundations and university courses, such as the University of Chicago. In a nutshell, they taught for decades that markets are good and government is bad and inept. Texas politicians followed these dictates, echoed by Steve Bannon, advisor to Donald Trump, that government must be cut back, starved of tax revenues and that “the deep state “must be dismantled. Much of this has hollowed out federal agencies, with thousands of qualified civil servants fired or resigning. The US FBI now cites these anti-government groups and white nationalists, the leading internal terrorist threats.
Back in Texas, politicians who despised government were elected and predictably refused to govern! The cold weather, similar to an earlier freeze a decade ago, froze up Texas electricity and water systems, as well as natural gas pipelines and a nuclear plant all supplying 75% of electricity. The un-weatherized wind turbines froze because they were designed for the Caribbean instead of those used in northern states and Europe. Their lack of foresight was soon outed as they tried to blame the Green New Deal!
Will the Texas market failure provide the needed lessons on when and when not to rely on markets and prices? Now Texas consumers are receiving sky-high electricity bills in the thousands of dollars, permitted by the Lone Star state’s market-based independent grid. Any scarcity will cause prices to spike. Former Texas governor Rick Perry claimed that Texas consumers would rather endure electricity blackouts than submit to federal government regulation as all other states in the USA. Their senator Ted Cruz left his freezing home for a weekend in Cancun, the Mexican resort, reinforcing the prevailing market view that consumers are on their own. A former Republican advisor, Oren Cass in his “Freeing the Right from Free-Market Orthodoxy”, Foreign Affairs, March-April, 2021, opines that conservative US politicians must get over their “market-fundamentalism” and learn when markets work and when they do not and cause great harm. We agree!