Squaring the Culture

"...and I will make justice the plumb line, and righteousness the level;
then hail will sweep away the refuge of lies,
and the waters will overflow the secret place."
Isaiah 28:17

02/10/2010 (7:19 am)

Miss Me Yet?


By way of PowerLine Blog:

This is not a photoshopped image; the sign appears beside I-35 in Wyoming, MN. It’s existence has been confirmed by eyewitnesses. A reporter from Minnesota Public Radio called the billboard company, which confirms that the ad was purchased by some local businessmen who wish to remain anonymous. These businessmen have apparently noticed that the Obama administration’s policies are routinely anti-small-business, favoring large, well-established businesses against smaller ones. Hilarious.

I was no great fan of big-government conservatism, which is really just progressivism on the installment plan, but I do miss him.

What these small businessmen have noticed is something that’s changed in my own thinking over the past year. I used to think that neo-Marxism was anti-business. I still do, but it has become apparent that President Obama’s form of progressivism actually favors the largest, best-established businesses against their competitors, and favors those who employ union members against those who don’t. There’s a place for big corporations in Obama’s America: anyone who pours money into Obama’s coffers gets to survive. He’s running a very large protection racket. Too bad the President is immune from RICO prosecution.

Jonah Goldberg’s book Liberal Fascism confirms that this has been characteristic of every government run by progressives in the 20th century, including FDR’s and Woodrow Wilson’s. They use strong anti-corporatist rhetoric, but in practice what they oppose is competition; government intrusion favors whoever happens to control the market at the time regulation begins, and progressive policies always favor those businesses who support progressive candidates.

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February 10, 2010 @ 8:01 am #

Good point, but I’d add that the relationship between big government and big corporations is symbiotic .

The major integrated oil companies, for example, are some of the biggest contributors to the ‘environmental movement’, which lobbies the government for tighter controls on oil production. They do this not because they care about the environment, but to raise the entry fee for any possible competition.

They oil companies themselves want to make absolutely sure that no new petroleum refineries are built in the U.S.

February 10, 2010 @ 10:48 am #

They oil companies themselves want to make absolutely sure that no new petroleum refineries are built in the U.S.

Are you saying that they want no competitors to build refineries, or that they want too few refineries, period? Either way, preventing ALL new refineries strikes me as economically daft behavior. Petroleum products are undifferentiated commodities, for the most part (e.g. we don’t perceive much of a difference between one manufacturer’s gallon of kerosene and another’s,) so the oil companies benefit from producing as many gallons as the market will bear. This is really the first day of Econ 101, and even the Keynesians agree with it; the most economically rewarding point for both producers and consumers is the point where supply exactly equals demand. So, the notion that the oil companies might deliberately be resisting building more refineries is not believable.

It is true, however, that the profit margins on refining are being squeezed down to near zero, and that might explain why new refineries are not being built. That, and siting issues; nobody wants a refinery in their backyard, for obvious reasons. But I can’t see anybody who knows economics buying the notion that the oil companies actually benefit economically from an artificial shortage.

Oil companies are certainly playing politics to obtain competitive advantage over smaller, newer entrants into the market, but they’re not deliberately trying to prevent themselves from producing profitable product.

February 10, 2010 @ 8:44 am #

I like the photoshopped version in Michelle Malkin’s blog better.


February 10, 2010 @ 11:44 am #

If you want to get business (lobbyists) out of the government, get the government out of business.

February 11, 2010 @ 8:46 am #


What I originally meant was that the oil companies don’t want any competition, but the point you brought up about the low profit margins applies as well. What better way to drive up profit margins than to have a monopoly on a scarce resource?

I don’t think blocking all new refineries is “economically daft” for the oil companies (although it is for the U.S. consumer). The oil companies now have a de facto monopoly. One would expect them to charge whatever the market will bear, but that hasn’t seemed to be the case (yet). Perhaps that’s because the government is hovering over them waiting to slap a “windfall profits” tax or “price gouging tax” on them (See: Hurricane Katrina).

Or maybe it’s because imported gasoline is keeping domestic prices down?

Ninety percent of the gasoline used in the USA is refined here. The other ten percent comes from:

1. United Kingdom 25.147 million barrels (total for the year)
2. U.S. Virgin Islands 23.590
3. France 11.209
4. Canada 10.605
5. Netherlands 10.518
6. Norway 8.406
7. Germany 8.351
8. Russia 7.387
9. Italy 7.239
10. OPEC Countries 5.516

Source: Oil Drum

If you have another explanation for why Exxon-Mobil supports the Cap ‘n Tax bill, I’d like to hear it.

February 11, 2010 @ 10:55 am #

Exxon-Mobil supports cap-and-trade because 1) cooperation with the Obama administration is the only way major corporations can survive, as the Obamanites have shown very clearly that any corporation that does not cooperate, gets hamstrung in the market, whereas those who do cooperate get favors; and 2) heavy government intervention prevents new entrants into the market, and thus protects the largest participants. Cooperating with big government is anti-competitive behavior.

But this has nothing to do with the building of new refineries. There does not exist a single entity called “the oil companies.” There exist four or five separate entities that exist in competition with each other. Unless you can prove collusion between the companies, you have no basis for insisting that they operate in concert with one another; there’s no monopoly without illegal collusion.

Plus, I don’t think you really addressed my argument, which was that market pricing maximizes profits. Yes, withholding product drives the price up, but profit is a function of price AND VOLUME OF SALES. Driving the price up loses sales, and the amount lost in sales volume exceeds the amount gained in per-gallon price. It’s taken as a given in standard economics — and proves to be so in the marketplace as well — that the best combination of price AND VOLUME occurs at the point where supply meets demand. This, by the way, is true even if there’s a monopoly, so long as demand is price-elastic (that is, if demand drops normally whenever prices rise.)

There’s been a lot of talk over the years that oil companies are jacking the consumer, but I have yet to see even a small amount of evidence to support that claim. I don’t think Exxon-Mobil is run by a bunch of choir boys, but I don’t think it’s run by slavering demons, either. They behave in standard, cost-competitive fashion. They’ll stamp out competition where they can, and they’ll maximize profit, but they’re human beings with ordinary behavioral restraints, and so far as we can tell, they obey the law as well as anybody else.

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