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While similar energy crises loom across the country

'Free-market' energy deregulation
brings disaster to California

by Mark, Detroit
(from Communist Voice #27, September 2001)


California before deregulation
Soaring prices and blackouts
The "deregulation is great if done correctly" myth
Deregulated energy elsewhere
* In the northeastern United States:
* Michigan
* Idaho utility idles farmers to sell electricity elsewhere
* Deregulation in other countries
No energy resources or artificial shortages?
Fighting deregulation
State ownership and regulation doesn't end the class struggle
The bourgeoisie, energy and the environment
The class response to neo-liberalism


. In 1996, legislation deregulating the California electrical power generation system was drawn up by a Democratic state senator with a representative of a giant power utility as the ghostwriter. It swept through the state legislature, with overwhelming support from Republicans and Democrats alike. Deregulation was hailed as the wonder cure for the problems in California's energy system. The mass media too bubbled over with enthusiasm about the great improvements deregulation would bring. The bourgeois establishment promised the new system would bring competition, and with it, plentiful, cheap electricity. Collectively chanting the neo-liberal mantra that the free-market will solve any problem, the powers-that-be hacked away at the old government-regulated system.

. What was the result? Energy prices soaring out of sight, blackouts, bankruptcy of a major utility, a state budget crisis, and general chaos. The free-market genie released capitalism from any encumbrances. And what marvels it has brought. Shortage, while ample energy supplies exist. Billions in profits for a handful, while the majority of the population suffers. Free-markets and competition resulting in private monopoly. The bourgeoisie says deregulation didn't fail, California just made some mistakes. But everywhere deregulation occurs the same shortages and high prices follow. The lead characters differ, but the story line remains the same.

. The bourgeoisie could care less, though, and insists that deregulation go ahead. Understanding the real causes behind the California crisis helps orient the struggle against deregulation. Showing that this crisis was not due to some mistaken details, but is characteristic of energy deregulation wherever it occurs, helps orient the struggle against deregulation. It demonstrates that the most powerful sections of the bourgeoisie as a whole are behind deregulation. Naturally the greedy energy companies profited immensely from the California crisis. But other sections of capitalist industry pushed, and still are pushing, for deregulation. Even while there are whimpers from other sections of the capitalists about disruptions to their businesses due to blackouts, the bourgeoisie overall remains spellbound by neo-liberalism which offers them unrestrained opportunities for profit-grabbing. Examining the California crisis also blows up the bourgeois propaganda that environmental regulations caused the crisis. Rather it was the dismantling of any sort of planning or regulations that in the past had ensured adequate energy reserves.

. Since neo-liberalism is capitalism in its raw form, the California crisis shows that it's this system of exploitation that ultimately lies behind the string of neo-liberal disasters that are accumulating around the world. It shows that the anarchy of capitalist production insures one shock-wave after another rips through the economy, that environmental issues are, at best, dealt with only after disaster strikes, and that the masses bear the burden of the economic and environmental mess created by the bourgeoisie. Furthermore, the California crisis verifies the Marxist theory that free competition gives rise to monopoly and even more exploitation. Thus, understanding the California crisis helps call into question capitalism itself.

California before deregulation

. Prior to deregulation, California had a system where the electrical power for vast parts of the state was supplied by privately-owned utility monopolies including Pacific Gas and Electric (PGE), Southern California Edison (SCE) and San Diego Gas and Electric (SDG&E). In return for a guaranteed sizable profit, these utilities submitted to state regulation of their operations. The regulated private utilities were not the only electric power system in the state as there were some city-owned power utilities, such as in Los Angeles and Sacramento. The deregulation bill didn't apply to the municipally-owned systems, but it did away with the regulated utilities' legal monopoly control of power-generating facilities and the retail sale of electric power. These areas were to be opened to unregulated private energy corporations. The utilities sold off many of their generating plants to other companies, although a part of the utilities' power generation facilities were in fact simply reorganized as unregulated "independent" subsidiaries of the utilities' parent companies.

. The old system was rotten in many ways as it, too, was tailored to various capitalists interests. But at least the system of state regulation meant there was a certain planning. The utilities were required to keep adequate supplies of raw materials used for energy, enough power plants on line to provide for a decent reserve for peak use times, etc. The utilities under the old system were a lucrative and very safe source of profit for their investors, but there were certain limits on profits in contrast to the private unregulated companies.

. Under deregulation, the unregulated power generators had no obligation to sell to the California market and virtually no limits on what they could charge. Their only obligation was that what energy they chose to sell in the California market had to go through the intermediary of a newly-created Power Exchange (PX). Here they offered up wholesale prices for their product on an hour-by-hour basis for the next day's electricity requirements needed by the utilities, who then sold to the retail market of households, businesses, etc. Any shortfalls in energy supply were to be made up by "spot market" purchases by another new entity, the Independent System Operator (ISO). The utilities had temporary price caps placed on their retail sales, but the caps were at high prices which, at the time, were well above what they paid for electricity. In return for accepting the temporary price caps, the utilities were allowed to pass on to consumers so-called "stranded costs" of $28 billion. These were debts the utilities incurred largely because of building expensive nuclear plants which they claimed they might not be able to pay off in the deregulated environment. While the market itself was supposed to reduce prices to the consumer, deregulation laws sought to convince the doubters by touting an alleged immediate 10% reduction in electricity bills and an additional 10% in 1998 which would be in effect until retail price caps were lifted in 2002. So while utility rates were temporarily frozen at a high rate, this would apparently be partially mitigated by the mandated rate cuts.

Soaring prices and blackouts

. Of course, by now everyone knows that dreams of cheap energy via the market have become a nightmare. To begin with, the promised total of 20% in rate reductions turned out to be a hoax as in return for the cuts, the utilities were compensated with a) the proceeds of a state bond issue paid off by homeowners' property taxes, and b) the utilities creating a new surcharge tacked on to utility bills to pay off revenue bonds they sold themselves. Then in the spring of 2000 the first glimpses of the havoc to come for utility customers under deregulation became apparent. The unregulated generating companies were raising prices at an astronomical rate. By the end of the year wholesale electricity prices had risen ten times from the previous year and sometimes as high as 20 times. San Diego Gas and Electric, having been freed from price caps because its customers had already finished paying off its "stranded costs", began passing on rising wholesale energy costs. An average SDG&E customer who had been paying $55/month in January 2000, saw their monthly bill soar to $124/month by August. Meanwhile, the other utilities claimed the debts they incurred to energy generating wholesalers made it impossible to pay their bills despite the state agreeing to allow them to raise rates by 9%.

. In January, the utilities began to default on bills owed the generators and demanded that the state bail them out. Immediately after, rolling blackouts began, with 675,000 homes and businesses affected on January 17. California's Democratic Governor Gray Davis then declared a state of emergency and designated over $4 billion from the state finances to buy electricity on the wholesale market. Many more billions would eventually be committed by the state to pay for electricity purchases. A couple of months later, the state allowed the utilities to raise rates another 47% for most ordinary customers. But Pacific Gas and Electric declared bankruptcy anyway. Southern California Edison has said they won't declare bankruptcy, but the state has to give them a multi-billion dollar bailout plan to be paid for by the masses. Blackouts remain a constant threat.

. As if this was not bad enough, environmental regulations are being waived under the excuse that this will expedite bringing on-line new energy producing plants. Mass layoffs of utility workers have begun and the bankruptcy of PG&E has threatened the pension funds of their workers which were invested in plummeting PG&E stock. The state has "solved" the problem of paying high electricity prices on the "spot market" by locking the state into contracts as long as 20 years at rates several times the price before the massive wholesale price hikes. In recent weeks, wholesale prices have plunged from their peak, but with no effect on retail prices paid by the masses. And the masses are now saddled with the burden of years of paying off the very high-priced long-term energy contracts negotiated by the state government.

. Thus, free-market energy has delivered the exact opposite of what it promised. It has bled the masses, jeopardized the state budget, collapsed a major utility, and forced periodic shutdowns of businesses.

. The Bush administration and their energy capitalist buddies are happy, though. Despite a certain pro-regulatory verbal backlash and a few timid measures against the energy profiteers by some of the capitalist authorities, the bourgeois politicians of both parties are generally seeking to preserve deregulation too, not get rid of it. That's what Democratic California Governor Gray Davis is up to despite his rhetoric against the profiteers. After all, it was designed by state utilities who have handsomely bankrolled Davis over the years. Moreover, the capitalists as a whole, and their bipartisan political lackeys, are generally so enamored of neo-liberal efforts to end any restrictions on profiteering that they continue to insist that deregulation can work.

The "deregulation is great if done correctly" myth

. After all, according to the common bourgeois wisdom of today it's not deregulation and unrestrained capitalism that's the problem, but that California allegedly didn't carry out deregulation correctly. Every time deregulation is discredited by events, the bourgeoisie repeats this same lie, hoping that if repeated often enough, the masses will believe it. When deregulation and privatization ravaged Russia after the collapse of the state-capitalist pseudo-socialist order, that was blamed on the incompetence of the Russian officials who didn't know how the capitalist market should properly work. But why didn't it work in California amidst a powerful developed capitalist economy and where everyone involved was experienced (indeed, all too experienced!) in the ways of the market? Why is it that in the 23 other U. S. states that have begun energy deregulation, utility bills are up as much as 40-50% and the threat of power outages and other ills found in California are beginning to manifest themselves? Why has deregulation of energy caused super-high energy prices in Alberta, Canada, a region rich in energy resources? Meanwhile, in the Dominican Republic this June, militant protests and strikes broke out against the constant blackouts and rate hikes since the country's 1998 deregulation took effect. Likewise mass protests have begun in Brazil where deregulation has resulted in major electricity shortages. Evidently the explanation for the ills being suffered in California lies elsewhere than in "bad" deregulation.

. The truth is that deregulation was never intended to supply the masses with cheap energy. Rather it was purposely designed to sacrifice the needs of the masses to the needs of the energy industry. It was also pushed by other big capitalists who were willing to dismantle the whole system of regulation in an effort to get cheaper energy through special deals with the new unregulated energy producers at the expense of the needs and pocketbooks of the masses. The private energy companies (Enron, Dynergy, Reliant, AES, etc. ) push deregulation for one reason: it offers them a vast new field of profit-gouging. What's going on in California is not an accident or bad planning, but part of a concerted effort of capitalism on a world scale to destroy previously regulated or public sectors of the economy in order to open up new vistas for plunder. An important part of the work of international capitalist organizations like the WTO, as well as the attempt to establish the FTAA (Free Trade Area of the Americas), are to coordinate such efforts. Everything that was considered a necessary public service is to be sacrificed on the alter of unrestrained profiteering, from water supplies to education to national health systems.

Deregulated energy elsewhere

. Nevertheless, the defenders of deregulation insist that in other places you don't see the type of problems that California has been experiencing. No doubt there were a lot of outrageous things done as part of California's deregulation. But a closer look at how deregulation has fared elsewhere shows that its not merely some particular screw-ups in California that are the problem, but that deregulation brings the same general problems with it everywhere. Everywhere deregulation allows the laws of the capitalist market to more fully play themselves out, whereas in at least some of the more reasonable government-regulated or state-capitalist energy systems, with all their problems, some of the worst results of the market may be mitigated. If California-level disasters have not yet been seen in the other states, this is largely because deregulation has only begun to be implemented there. Meanwhile, in some other countries the problems related to deregulated electricity are already quite grave. What follows is not a comprehensive view of deregulation outside California, but a quick glance at some typical examples which illustrate the universally bad results of deregulation.

In the northeastern United States:

. Some northeastern states are said to be examples of successful deregulation. But largely they have been successful only in increasing monopolization. Pennsylvania is one of the states pointed to. But it only has the most limited deregulation at this point. Retail prices will be regulated for nine years, meaning wild retail price increases have yet to arrive. Nevertheless, each Pennsylvania investor-owned utility has been allowed to pass on the cost of their own individual "stranded costs". Nor have the utilities sold off many of their plants. The difficulties in competing against the regulated utility plants have caused many energy suppliers to give up. Meanwhile, deregulation has led to a wave of mergers among the utilities. So in Pennsylvania deregulation "works" to the extent that it doesn't exist.

. In Massachusetts, Rhode Island and New Jersey, competition has also proved to be a myth and customers are being dumped back to the old utilities. Rhode Island and Massachusetts have already seen 50% rate hikes, and the Massachusetts utilities are now getting another 9-11% hike. According to The Nation of February 12, 2001, Massachusetts rates are now the second highest in the nation, thanks in part to "stranded costs" rate hikes to pay for nuclear reactors. Indeed, across the country, in 11 states where deregulation has begun, already about $112 billion has been collected or demanded in "stranded cost" bailouts.

. In New York City, where deregulation has created more of a free market for electricity, the Consolidated Edison utility has been allowed to pass on all its costs to consumers. When wholesale prices jumped, Con Ed bill rose 43% for residential and 49% for commercial users. Deregulation "competition" has led to dozens of mergers and buyouts of other companies taking place. Service is also declining. Can blackouts be far behind? After all, it's been reported that in the summer of 2000, the entire Atlantic seaboard was on power alerts. Meanwhile, in order to bolster power supplies utilities have been forced to resort to purchasing more energy at super high "spot-market" prices.


. In Michigan, deregulation legislation was passed in June of 2000. The two big utilities, DTE and Consumers Energy, with the help of Republican Governor John Engler, got the right to pass on "stranded costs" to consumers and receive compensation for any customers they lose in the deregulated environment. Like in California and elsewhere, retail competition is likely to be a myth except for some big industrial or commercial consumers who can make special deals with private electricity suppliers.

. The Michigan Public Services Commission claims it will avoid California's problems. They boast that there's less environmental regulations in Michigan so more plants will be built. Great argument! California politicians waited too long to slash environmental regulations! Meanwhile it's fiction that California environmental regulations prevented plants from being built. The California utilities squashed plant proposals and refused to invest. And there actually were a host of plants already underway before regulations were gutted.

. Another reason Michigan is supposed to do well is that there will be a Regional Transfer Organization (RTO), which will supposedly coordinate power supplies between states, something California lacked. RTOs were part of a plan pushed by the pro-deregulation forces dominating FERC (Federal Energy Regulatory Commission) in recent years to encourage utilities to divest their transmission facilities. The premise of having the states relinquish control of transmission lines in favor of the RTOs is that the states will be relying on the unregulated national energy companies to supply them from out of state. But these national energy producers are who robbed California blind. Meanwhile, it's not clear that the RTOs have either the authority or the will to do anything to prevent this. Keep in mind that the salespeople for RTOs, the FERC, was mandated to control prices in California, yet sat on its hands. Yet the RTOs are supposed to be superior to the old system of regulation by states which at least insured adequate power supplies. No wonder even the president's brother, Governor Jeb Bush of Florida, rejected this when it was attempted in his state.

. Another thing that's suppose to save Michigan is that utilities won't have to sell their generating facilities. Evidently there's nothing that would prevent them from selling them either, however. Of course, if there's no energy facilities sold, then there's not even much pretense of the vaunted competition either. To the extent that facilities are sold off, they will go to the unregulated national energy power titans who are adept at using their cartel power to raise prices. Or possibly they will be sold off as unregulated subsidiaries to the utilities' parent companies so the parent company can benefit from higher market prices.

. Finally, it's argued that Michigan could negate the cartel's power to jack up prices by having no restrictions on long-term contracts. That's an "iffy" proposition, however, as the utilities will have to guess right about the wild swings in the price of the wholesale energy they purchase. If it appears the price of wholesale energy will be decreasing, the utilities may forgo long-term contracts only to see the private wholesale energy cartel suddenly make prices soar. This happened in California, where contrary to what is often said, the utilities were not forbidden from entering long-term contracts. If the Michigan utilities sign long-term contracts because market prices are soaring, they may find themselves locked into relatively high prices when market prices plunge. This recently also happened in California where the state itself entered long-term contracts with private energy generators at high prices at a time when day-to-day prices were surpassing even the high long-term contract prices. Then after the state was locked into high long-term prices, market prices plunged way below the long-term rates. So it seems that merely having the right to enter long-term contracts does not mean the utilities can outfox the private energy cartel.

Idaho utility idles farmers to sell electricity elsewhere

. In Idaho, market economics has led the Idaho Power Company to actually pay operators of large farms to be idle. The director of the Potato Growers of Idaho thinks "many acres are never going to return to production. " How did this happen? Idaho Power began buying some of its power on the deregulated wholesale market. This expensive power pushed rates for electricity for irrigation up 31% This extra expense is helping drive a number of farmers to ruin. So Idaho Power offered a deal. They will pay farmers 15 cents per kilowatt hour not to use power. This applies to all electricity they would have used over 100,000 kilowatt-hours, which means only big farms qualify. This will add up to $79 million. Idaho Power is impelled to do this because purchasing the equivalent of the saved electricity on the wholesale market would have costs twice as much as what they're paying farmers to idle their farms. Thus, indirectly, the wholesale energy producers may "black out" Idaho potato farms.

Deregulation in other countries

. Russia has generally been ravaged by the neo-liberal agenda. The formerly state-capitalist industry masquerading as "socialist" in the former Soviet Union has now been parceled out as private property to the former bigwigs in the bureaucracy and any scoundrel, foreign or domestic, with a large bankroll. The results have been disastrous as Russian economy became a shell of its former self. But that hasn't stopped Putin and the Russian capitalists from continuing further down the same path. Now the electrical system is to be deregulated. The economic ministry admits that removing price controls will lead to prices doubling, and this is considered a conservative estimate. Privatization plans are presently being held up by a round of bickering among Russia's ruling class over who gets to buy up the privatized electrical facilities.

. In Brazil on June 28th, 30,000 people marched against energy rationing and corruption. Police fired teargas at the demonstrators and charged them on horseback. At least eight protesters were injured. This June, the government imposed a 20% reduction in electricity use and those who don't comply are being threatened with a total power cut. Brazilian president Cardoso blames drought for power shortages as Brazil relies mainly on hydro-electric power. But as the demonstration and public opinion poles show, the masses blame Cardoso. The masses are right.

. It's true that water reserves are down. But normally a drought of a couple of years duration is not a problem because reservoirs hold four to five years supply. The real problem is that new capacity hasn't been added to the system though everyone knew demand was growing. So water reserved for next year is being used up now, and the reservoirs are getting low. There's no shortage of hydro power potential in Brazil. So why hasn't the government built new facilities? Is it the case that bumbling government bureaucrats can't get the job done like the private sector?

. Actually, the neo-liberals in Brazil like Cardoso and the big imperialist international agencies have barred the government from undertaking these projects. Cardoso has agreed to debt restructuring that prohibits the government from building the needed capacity and leaves it in the hands of the private sector. The same notorious private energy companies that pillaged California, like AES, Enron and Mirant, have made a lot of noise about building thermal energy plants in Brazil. Well, the market is now free, so where's the construction? AES and Mirant have even already gotten full government permission to build. But they decided against it due to the allegedly bad "business climate. " It seems that the U. S. energy sharks are demanding the Brazilian legislature first meet a list of demands including guarantees on exchange rates, profit rates and other items. Until they get what they want, no construction. No construction equals electricity rationing. Electricity rationing equals extortion.

. The above facts were taken from information put out by economist Eugene Coyle who debated this matter in the Brazilian congress against a neo-liberal economist from Cambridge Energy Research Associates. The Cambridge Energy economist, Coyle notes, argued that the legislature needed to guarantee high profits in order to attract investment because a lot of countries are competing for this capital. So much for deregulation leading to lower prices. And so much for free-market formulas whereby profit is supposed to be the reward for risk. The energy capitalists want huge profits, but no risks. And they'll turn the lights out in Brazil until they get it.

No energy resources or artificial shortages?

. While in Brazil the private energy companies refused to build plants in an attempt to extort superprofits, in California they used a slightly different form of extortion. The energy-producing capitalists and their apologists claim that they had nothing to do with causing the crisis that hit California. Rather it was simply a case of demand increasing so fast that they had no ability to keep up with it. That's what caused the blackouts and incredible price hikes they assert. Well, it's true that the market for energy became very tight and that this enabled the energy-producers to command super-high prices. But this wasn't because there weren't enough raw materials or generating plants. Nor had the demand for electricity exceeded the capacity of the California system. Rather, the shortages were artificially induced by the energy companies taking their plants off-line. Anti-deregulation activists have been exposing this for some time. Now California state officials are documenting this with the help of some employees who worked in the energy plants, and even some of the mainstream bourgeois media has now managed to figure this out.

. Moreover, if lack of plants is the problem, that has something to do with the fact that the California utility companies, with the help of FERC, have blocked plans for a number of new plants using alternative energy sources because the utilities worried that this would eat into their profits. But the Republican Bush administration and the Democratic governor of California, Gray Davis, prefer to scapegoat environmental regulations for preventing plant construction.

Fighting deregulation

. Deregulation in one form or other is the current agenda of the bourgeoisie. It's the workers and poor who are paying the price and who must resist the neo-liberal onslaught. The fight against energy deregulation is another skirmish in the struggle against the bourgeois class offensive. Unfortunately, the workers are presently disorganized. But each bourgeois outrage, such as the energy crisis, can play a role in helping to overcome this. Undoubtedly the masses are already upset by the arrogant energy capitalists, and we must use the exposure of their responsibility for the crisis to help encourage these feelings of class antagonism. We must show how the California crisis is not merely some mistake or random occurrence, but part of the overall class conflict going on.

. Attention must be paid to the fight for relief from the immediate ills caused by deregulation, while emphasizing the class conflict underlying it. It is the capitalists who made this energy crisis and they should be the one's who pay for it. The outrageous energy prices must be slashed and the energy and/or other capitalists must bear the cost of supplying energy to anyone who cannot afford it. The multi-billion dollar bailouts of the investor-owned utilities must be opposed. Efforts to further weaken environmental laws must be fought and stronger measures against the corporate polluters taken.

. It's also important to bring to the masses the perspective that their fight against energy deregulation is part of the general international movement against privatization of public services and deregulation being carried out by the world bourgeoisie. Powerful protests have rung out from Seattle to Genoa against the savaging of the masses and the environment in country after country carried out with the help of such groups as the WTO, the IMF and World Bank, the Summit of the Americas, and the G-8 meetings. The recent gunning down of a young protester in Genoa and the shameless support for this murder by the G-8 countries shows that for the "civilized" and "democratic" bourgeoisie, the masses and their opinions are just an obstacle to be crushed underfoot for the greater glory of the god of profit. The energy crisis here should be used to encourage international class solidarity against the vicious program of international capital.

State ownership and regulation doesn't end the class struggle

. A variety of demands are being made against the neo-liberal bourgeoisie and their world agencies. There are demands in support of workers' movement and for the extension of workers' rights. There are outcries against the wave of privatizations of health care, water, energy and other public services. Such demands inevitably involve the issue of state regulation and even state ownership. Such is also the case with the demands of activists who are fighting energy deregulation. But here too there is a class struggle over what type of regulation. Will the regulation be a mere fig leaf tailored to preserve the profits of the rich or will it really be an aid to the workers and poor? These days it is also common to see the regulatory agencies dominated by neo-liberals of both parties, not to mention Bush's reactionary appointees whose main credentials are staunch opposition to regulating the fields they are supposed to be regulating. Look at the scandal around the Federal Energy Regulatory Commission's (FERC) handling of the California energy crisis. It's official mandate is to maintain reasonable energy prices, but in practice it let the energy capitalists do whatever they wanted.

. While the idea of state regulation naturally comes up from activists who want to curb the corporations, the need for class vigilance in this matter can also be seen from the fact that the bourgeoisie itself has historically gone through periods of regulation and deregulation. While today the bourgeoisie is still in love with deregulation, after enough major disasters threaten their own interests they are likely to swing back to more state intervention. Inevitably, when the bourgeoisie turns to state intervention, they will try to tailor it to suit a variety of capitalist interests. Thus, right from the start it's important that when activists campaign for state control or ownership, these campaigns are conducted in the spirit of defending the class interests of the workers and poor. It's important to recognize that state intervention in the energy field by no means ends the domination of bourgeois interests there. Rather it's another terrain on which the class struggle must be waged.

. The class issues come up even with regards to one of the more radical of the popular demands currently being put forward, namely, the demand for publically-owned power which, in California, has usually taken the form of calls for more municipal utility districts, MUDs for short. Such calls for public power are just as they would eliminate some of the profiteering connected with both the deregulated system and the old system of regulated but privately-owned utilities. Where they already exist, California's city-owned power companies have also produced cheaper and more reliable energy. But MUDs are not panaceas. They may have elected boards, but elected local governments also serve bourgeois interests. They may be tailored to local interests, but there are different class interests locally, too and the wealth and connections of the bourgeoisie provide them with clout over the MUD administrations. There are no private owners, but the conflict between the power workers and their administration remains. While the form of public ownership can provide a more rational system than deregulation, a lot depends on how they are run. They can be run more like a public service, or they can employ a good deal of "free-market" principles depending on the political trends in charge of them, and this has already been taking place among the MUDs in California. This is why it's important that the masses are mobilized not only against deregulation, but also to keep the heat on the public power agencies. Unfortunately, the edge needed for such a fight is undermined by the various reformist trends which give a quite exaggerated picture of what to expect from public ownership. (See accompanying article "The energy crisis and the capitalist political parties. ")

The bourgeoisie, energy and the environment

. The energy crisis also raises environmental issues from the greenhouse effect to the poisoning or complete destruction of various habitats. The old bourgeois planning agencies sinned against the environment, and now the bourgeoisie wants no agencies at all. The neo-liberal bourgeoisie preaches the market will take care of everything, but the California crisis shows they are incapable of even consistently insuring adequate energy supplies. As for environmental issues, the main response of the bourgeoisie to the California crisis has been bipartisan gutting of environmental regulations. This, along with bleeding the masses with high energy prices, is the market solution to supply and demand problems. High prices force the masses to cut their demand while, supposedly at least, attracting investment capital that will provide additional energy capacity. If the masses are bled and the environment sacrificed in the process, the neo-liberal bourgeoisie doesn't care.

. Many environmental problems simply get worse, being subject only to hot air from the politicians. There is a crying need for developing environmentally-sound energy resources, increasing the energy efficiency of products and in the process of production, considering how to overcome the living and environmental problems associated with overcongested cities and suburban sprawl, a reasonable system of mass transit, etc. The only way to seriously deal with these things is through societal planning. Presently the neo-liberal bourgeoisie can barely bring itself to pay lip service to these matters. They are concerned with making money as quickly as possible and leaving the ruins for someone else to deal with. In general, the capitalists only deal with these matters on a token basis or only when a particular crisis gets so bad their own profit-system is in danger. Even when the capitalists decide they must institute some partial plan, it is done at the expense of the masses. Thus, whether in periods of deregulation or more state intervention, the masses need to mobilize on behalf of their class interests.

. The bourgeoisie just lurches from crisis to crisis. The inherent anarchy of capitalist production makes it impossible for them to have consistent and comprehensive societal planning. In short, the capitalist rulers are no more fit to solve the major environmental problems than they are able to overcome class exploitation. Only when the workers are able to organize themselves to become the ruling power of society and the masses become the masters over the production process, can society as a whole systematically plan and devote the resources to properly deal with restructuring the economic infrastructure with an eye to solving environmental dilemmas. This society is socialism.

The class response to neo-liberalism

. The California energy crisis has caused many hardships for the masses. But in upsetting millions of people, it has provided activists with an excellent opportunity to destroy the myth of neo-liberalism among the masses. The bourgeois claims that if only government regulators stopped interfering with capitalist businesses everyone's life would improve look absurd when California is brought to its knees just so the profit margins of a relative handful of corporate leeches can reach astronomical proportions. The direct experience the masses have gained in the crisis lays a basis for raising how the general neo-liberal agenda of deregulation, privatization and destruction of public services is creating havoc for the working people around the country and around the world. Thus, it has potential for taking a step forward toward more class consciousness and solidarity.

. The crisis has not only aroused anger over blackouts and soaring electric bills, but has raised various environmental issues. The bourgeoisie's efforts to use the crisis to wipe out environmental regulations also creates further grounds for opposing the neo-liberal agenda. Here and there, local fights have broken out against polluting plants in California. And activists have been expressing outrage with Bush's plans to drill for oil in the Arctic wildlife preserve. These particular struggles may not become huge class battles. But they are signs of how this crisis and others created by the capitalists can, in the long run, lead to more mass concern with environmental issues.

. The weakness of the direct response of the working class should come as no surprise considering the present lack of class organization. Today the workers are without any organization or under the thumb of the labor traitors heading the AFL-CIO unions. The mass movements are dominated by reformist trends usually connected to the capitalist Democratic Party. Indeed in California, both the leaders of the AFL-CIO and the establishment-oriented environmental groups helped pave the way for deregulation.

. The workers need their own class trend, but this will not come without long and patient work. There are no magic maneuvers that will quickly bring about a big powerful mass movement. But activists can utilize every scandal, every outrage, every exposure of the bourgeoisie to inculcate a class stand. This means not only opposing neo-liberalism, but drawing out the distinction between the class differences between regulation and planning of different types, and between capitalist planning and socialist planning.

. Reestablishing class organization among the workers and oppressed masses is a difficult and protracted task, but it is the only way to insure that the masses can really stand up to the neo-liberal onslaught. This will also enable the masses to keep the initiative during periods when the capitalists find it expedient to adopt more regulations over the capitalists or even public ownership. And the knowledge and experience in struggle gained in these skirmishes prepares the workers for the bigger class battles of the future and the final overthrow of the exploiters and their bankrupt capitalist system. <>

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Last changed on October 4, 2001.