Privatization

"We're heading toward socialism, and nothing and no one can prevent it"

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That's Venezuela's Hugo Chavez, crowing in a Washington Times story. Some snippets:

 The nationalization appeared likely to affect Electricidad de Caracas, owned by Arlington-based AES Corp., and C.A. Nacional Telefonos de Venezuela, known as CANTV, the country's largest publicly traded company.

"All of that which was privatized, let it be nationalized," Mr. Chavez said, referring to "all of those sectors in an area so important and strategic for all of us as is electricity."

"The nation should recover its ownership of strategic sectors," he said.

Chavez gets sworn in tomorrow for a third term as president, which will take him through 2013. More here.

NEXT: L'etat, c'est Hannity

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  1. “We’re heading toward socialism, and nothing and no one can prevent it”

    Join the club. Unfortunately, join the f-ing club.

  2. Mr. Wrist, meet Mr. Razorblade.

  3. What a shame. What an idiot. Anyone who has anything to good to say about this clown ought never to be taken seriously about anything again.

  4. You know, when I read that headline I thought it was a quote from Arnold Schwartzenegger, who announced yesterday that California will now have mandatory (socialized) health insurance for everyone.

  5. Venezuela’s slouch towards socialism might not, in the end, be a bad thing for liberty. There has been a huge electoral backlash in Latin America against what is perceived to be U.S.-driven “neoliberalism”, with leftist candidates promising that only more statist policies will alleviate poverty.

    After Chavez’s push to socialism further impoverishes the country, however, the sheen will be off, and Chavez-like figures elsewhere will become less popular. Then, the left in Latin America will hopefully turn again to people like Lula, who tries to address the huge inequalities in Brazil without populist, counter-productive “reforms”.

  6. First the oil industry, then the utlities, can the d’Anconia Copper mines be far behind?

  7. Well who can blame Chavez for his enthusiasm when one-party commie states have worked out so well in Cuba, North Korea, the Soviet Union and all over that expanse of freedom and prosperity, Africa?

  8. “Well who can blame Chavez for his enthusiasm when one-party commie states have worked out so well in Cuba, North Korea, the Soviet Union and all over that expanse of freedom and prosperity, Africa?”

    Hey, those places are fabulous as long as you are the guy in charge.

  9. >>Anyone who has anything to good to say about this clown ought never to be taken seriously about anything again.

    I’m sure someone will say something along the lines of “If he provides free healthcare to everyone like Castro has done, then maybe he isn’t such a bad guy”.

  10. Keep in mind the Venezuelan government nationalized (confiscated) the U.S.-Venezuelan oil companies 30 years ago. It just took awhile to get around to the other “strategic sectors.”

  11. I bet if you did a survey of Americans and asked, “Should the government of the United States of America take control of the energy industry to ensure energy security in the face of increasing threats abroad?”, you’d get at least 40% of Americans to say, “Yes.”

    Unfortunately, Chavez and Venezuela will provide another case study of how socialism devastates a country’s economy and impoverishes its citizens. This will be good for supporters of liberty to use in arguments, but is obviously horrible for the citizens of Venezuela. Of course, the lesson will be lost on many (most?) Americans, who no doubt will, after Venezuela crashes and burns, still support the above survey question.

    Now would be a good time for Venezuelan citizens to flee the country and come to America or Canada.

  12. >>>>>”Venezuela’s slouch towards socialism might not, in the end, be a bad thing for liberty. There has been a huge electoral backlash in Latin America against what is perceived to be U.S.-driven “neoliberalism”, with leftist candidates promising that only more statist policies will alleviate poverty.”

    The problem with this is he’ll fall or be overthrown and some crony-capitalist clown or oligarchy will take over and be just as bad but use ignorable mainstream rhetoric in their speeches and libertarians and most others will go back to ignoring Venezuela like they did before Chavez took over.

  13. The funny thing about this is that Chavez is such a clown that he is basically destroying the Venezuelan oil industry. Like Mexico and Iran, Venezuela has ran off all the competetent engineers in the oil sector and caused all of the forgeign capital to flee the country. All three of those countries are literally facing the prospect of no longer being able to pump their oil out of the ground becuase they have abused their oil industries for so long.

  14. I’m sure Huguito will do the same wonderful job with public utilities and communication industries that he’s done with maintaining Venezuela’s highways and law enforcement.

    100,000 murders in eight years! Top THAT, Fidel!

  15. After Chavez’s push to socialism further impoverishes the country, however, the sheen will be off, and Chavez-like figures elsewhere will become less popular.

    If Castro didn’t take the sheen off socialism, why would Chavez?

    Should the government of the United States of America take control of the energy industry to ensure energy security in the face of increasing threats abroad?”, you’d get at least 40% of Americans to say, “Yes.”

    Pretty much the same folks who will vote for any candidate with a (D) after their name, would be my bet.

  16. R C Dean

    “If Castro didn’t take the sheen off socialism, why would Chavez?”

    Exactly so. The left will make excuses why the misery caused is all the fault of the US.

    “Pretty much the same folks who will vote for any candidate with a (D) after their name, would be my bet.”

    I disagree. At least with the implication that only the left is opposed to foreign ownership of US businesses. The lumpen-nationalists on the right (e.g. Pat Buchanan), would prefer the US government to just about any foreigner. There are already considerable restrictions on foreign ownership of shipping, airline, rail, banking, and other industries in the US.

  17. RC:

    I would say that many American voters are well trained monkey lever-pullers, but that would be insulting to the apes.

    Slightly off-topic, but has anyone outside the DC area see those Joe Kennedy “cheap oil for the poor” commercials. Kennedy apparently is a front for Chavez, who is dumping cheap oil in this country to the “poor” soley to make us capitalists look bad. That’s just peachy. This pot-belly pig is selling oil at a lost abroad purely to make a political point. And it’s not like there are countless truly impoverished folks in his own country who he needs to take care of first.

    Seriously, any able-bodied welfare recipient here who receives discounted oil from Citgo should automatically be deducted dollar-for-dollar in their benefits. If Chavez truly is interested in taking care of our “poor” than more power to him.

  18. I’m no libertarian, so nationalized power industry doesn’t bug me too much–I understand the argument against private natural monopolies, and sometimes agree with it.

    But by any measure, a nationalized phone system in this day and age is just plain stupid.

  19. MNG,

    Joe Kennedy has been heading up People’s Energy for about fifteen years now – about a decade longer than Chavez has been in power – and the group predates him by years.

    It is not a “front group,” it is a longstanding charitable organization that provides reduced-cost heating oil for poor people. This would be easy enough to look up, for someone without your astounding psychic abilities.

    Not that conservatives are hostile to poor, or throw around accusations of socialism against anyone who tries to help them. Or anything.

  20. Joe, surely you see the problem (at least from a Venezuelan perspective) with Chavez selling oil at under market prices to US citizens.
    I don’t know anything about this Kennedy but it doesn’t speak very well of him to be a party to this reverse Robin Hood stunt.

  21. joe:

    So you’re arguing that Kennedy is not a tool?

    Have you ever seen the commercial I’m talking about? In it, you see a WHITE “poor” family suffering from the extreme cold we are experiencing here on the East Coast. Then Super Joe shows up like Santa Claus promising cheap oil from “our friends in Venezuela”.

    Tell me this isn’t propaganda. Tell me it ain’t so, joe.

    And one other thing… is it proper that Chavez dump cheap oil in this country (purely to score political points) when these resources could be dedicated to help the poor IN HIS OWN COUNTRY?!

  22. Joe,

    What if the Iraqi government started selling oil to poor people in the U.S. as a thank you for liberating the country and also in hopes of manipulating the U.S. political process in their favor? Please tell me that you would be appalled by that. I can’t see any difference between that and what Chavez is doing. He is stealing oil from his own people to buy political influence here.

  23. Someone suggest to Chavez that his regime should control access to the Internet. You know, for “strategic” reasons.

  24. The lumpen-nationalists on the right (e.g. Pat Buchanan), would prefer the US government to just about any foreigner.

    Point to aresen.

    It is not a “front group,” it is a longstanding charitable organization that provides reduced-cost heating oil for poor people.

    Because we all know that charitable organizations can never be misled, coopted, or otherwise serve as a front.

  25. Mr. Nice Guy and joe,

    Any links to this Joe Kennedy video, or a print ad or reportage on “People’s Energy?”

  26. Mitch:

    hier

    “Citizens Energy Corporation exists to help make life’s basic needs more accessible and affordable. Beginning in 1979 with oil-trading ventures in Latin America and Africa, Citizens has used revenues from commercial enterprises to channel millions of dollars into charitable programs in the U.S. and abroad. Whether heating the homes of the elderly and the poor, lowering the cost of prescription drugs for millions of Americans, or starting solar heating projects in Jamaica and Venezuela, Citizens creates social ventures as innovative as the businesses that finance them. At the same time, Citizens Energy seeks to use market opportunities to help the poor and needy.”

    Below is

    are you the same Mitch who teamed up with Chris Knight to get even with Dr. Hathaway as a moral imperative?

  27. What if the US government started giving money to people in foreign countries in hopes of manipulating the their political process in America’s favor?

    Would that be stealing from Americans or just a prudent foreign policy?

    Jes’ astin’ is all.

  28. Apostate Jew,

    We are filthy rich and can afford to throw money away. The Venezeualans are not. Hey, if Japan or France want to start giving Americans money, I am all for it. Petty tryrants who run third world kleptocracies, not so much.

  29. grrrr.

    Preview. Friend:

    Below is a pic of Joe holding a gigantic hose with satisfied-looking people gathered behind him.
    Hier the pic

    THIS should have been the question to mitch

    Apsotate: You mean since the Marshall plan? (tee hee)

  30. [I’m sure Huguito will do the same wonderful job with public utilities and communication industries that he’s done with maintaining Venezuela’s highways and law enforcement.]

    Huguito??! What! He’s just a big sweet Huggy Bear?! 🙂

  31. Oops, Citizens Energy. My bad.

    MNG,

    “joe:

    So you’re arguing that Kennedy is not a tool?”

    Oh, not at all. I was merely arguing that Citizen’s Energy is not a front. They’re a legit charitable grouop that has been doing the Lord’s work for a couple of decades.

    Sure, it’s propaganda from the Venezuelans. A very smart strategy, I’d say. Out of curiosity, how many people would you have freeze so that Venezuela doesn’t receive a shout-out on American TV? 500? 10,000? What is the value, in human lives, of maximizing the number of Americans who hate Venezuela?

    mac,

    That occured to me, too. Although as foreign relations/defense spending goes, buying the goodwill of the Yanquis like that is probably going to get them a lot more bang for the buck than, say, AA guns.

    John,

    If our government had spent money buying the goodwiill of the British public between 1809 and 1812, and avoided the British invasion by doing so, I’d call that money well spent.

  32. “Petty tryrants who run third world kleptocracies, not so much.”

    why?

    how much worse is this pr campaign going to really make things in venezuela?

    i dunno dude, i have full confidence in chavez’s ability to fuck things up himself. none of this enemy of my enemy rah rah rah bullshit required.

  33. My point – perhaps too oblique – was that Chavez is not stealing or throwing money away but conducting foreign policy.

    Some people, their dander up because Chavez mocks certain political figures in the US or because they’re scared that their United Fruit stock will be worthless, fail to see this and resort to thought-killing rhetoric like “petty tyrant” and “kleptocracy.” (We’ll have plenty of time to mobilize before Chavez completes his invasion fleet.)

    As a non-filthy rich member of the polity (I can’t seem to get in on the international conspiracy) I would prefer that people not be so profligate – “We are filthy rich and can afford to throw money away.” – with my tax dollars.

    Sorry about the orange. I don’t know what I did to the comment above.

  34. “John,

    If our government had spent money buying the goodwiill of the British public between 1809 and 1812, and avoided the British invasion by doing so, I’d call that money well spent.”

    Oh come Joe. That is rediculous. First do you really think the US is going to invade? Second, if you are a Venezualuan and really worried about that, how about telling your jackass President to shut the hell up for a while and stop inviting Hamas and Iran over to show their brotherhood? That sounds like a lot better plan than stealing our oil and sending it to Americans. The sad fact is that one of these days Chavez may really do something stupid like provide safe passage to terrorists who attack the U.S. and their will be hell to pay for his people, I don’t care how much money he has stolen from them to win over douchbags like Joe Kennedy.

  35. Jew,

    The fact is wasting your tax dollars is not quite the crime of wasting the tax dollars of people who really are poor. Ultimately, you are right, no matter how big of a petty tyrant Chavez is, that government can waste all the money it wants giving foreign aide to the U.S.

  36. John,

    R.I.D.I.C.U.L.O.U.S.

    “First do you really think the US is going to invade?” We backed a coup three years ago (which received the enthusiastic support of you “democracy spreaders,”) and have backed hundreds throughout the region. What would be ridiculous would be for the Venezuelan government to assume that it doesn’t face a security threat from the U.S.

    “Second, if you are a Venezualuan and really worried about that, how about telling your jackass President…” You mean, APPEASEMENT OF THE COUNTRIES THAT THREATED THEM? Gee, what right-thinking person wouldn’t endorse that as their country’s national security strategy?

    “That sounds like a lot better plan than stealing our oil and sending it to Americans.” Actually, sendin Venezuelan oil to the United States to curry favor, as a foreign policy strategy, is what the oligarchs before Chavez did for decades, and it worked pretty well for them.

  37. John thinks this is a waste of tax dollars for the simple reason that it is likely to work.

    Were Chavez to spend the same amount of money on defenses we could easily overcome, John wouldn’t be saying a word.

  38. If Hugo Chavez is so hostile towards the United States, don’t we WANT him to adopt socialism? If anyone has ever travel to a socialist, or post-socialist country, it is pretty clear that socialism is far more destructive to the economy and the society than any sort of military action we could take!

    The United States has to start worrying when a potential enemy starts developing a free market economy (like China). Not when some tinpot dictator wants to destroy his own economy to score a few cheap political points.

    If the U.S. and the C.I.A. were looking for a way to neutralize potentially hostile countries, promoting a socialist economy would be the way to do it. (In some circles, there is even speculation that Chavez is working for the C.I.A… kind of like a new school Omar Torrijos who was also an anti-American leftist accused of working for the CIA).

  39. Chavez will have to go a long way down the socialist road to spend as much tax-payer money on his little projects as our benighted government has thrown away on Iraq. We’re all “socialists” of a sort. It’s just a question of priorities.

  40. “John thinks this is a waste of tax dollars for the simple reason that it is likely to work.”

    Joe you have really gone around the bend on this one. Likely to work how? If Chavez ever does any real harm to this country, he is in a lot trouble, no amount of oil give away is going to save him. Ultimately Rino is right, if he wants to turn the country into a socialist hell hole that is his problem. That doesn’t make any less sad to see it happen or to see people like you cheer him on.

  41. John, I think Chavez is too clever a politico to do anything overt to hurt the US. Even Castro isn’t stupid enough to provide terrorists with a base.

    I think the best US strategy is to ‘smile politely and ingore’. Chavez would lose even more ground if the US were to simply ignoring his taunts. My read on Chavez is that ignoring him would be the most infuriating thing the US could do to him.

    With respect to the nationalizations, I would leave it to the corporations and individuals affected to negotiate whatever compensation they can. In international finance, Chavez and his ilk are classed as “foreign risk”, for which a suitable premium on the return should be required by a prudent investor.

    If the US government were to comment on the nationalizations at all, it should be something like: “We think this is unwise and will have a negative impact on the welfare of the people of Venezuela, but it is a policy decision that Venezuela must make for itself.”

  42. Rhino: Now, while I would hate to be that bleeding heart “think of the people” guy, IMO the main reason to not allow Chavez to destroy the country with socialism would be to prevent the destruction of the lives of the Venzualan people.

  43. If Chavez ever does any real harm to this country, he is in a lot trouble, no amount of oil give away is going to save him.

    The PR campaign, not an invasion

  44. err….

    The PR Campaign might succeed, not an invasion

    Preview is my friend
    Preview is my friend
    Preview is my friend

  45. Why do you guys continue to feed joe? He’s just a slightly more polished version of Dan T. who comes here for no other reason than to be a contrarian troll. Dan T. maybe a tool, but at least he’s not an obnoxious little prick.

  46. “I think the best US strategy is to ‘smile politely and ignore’.”

    Agreed. This needs to be our policy in more cases than not. If we really walked the walk of that mythical Sleeping Giant, I think we would find the world a very different place indeed.

    Part of the reason that Chavez’ rhetoric finds so much traction in Venezuela and the rest of South America is our best-intentions busy-bodying in the 1980’s.

    At the risk of basing policy on a Simpson’s quote: The best way for us to help is to set a good example. Just stand around and don’t steal anything.

  47. Eric

    It’s a little late for the “just stand around and don’y steal anything” policy. We’re living on stolen land.

  48. Venezuela is going to be in deep crap in a decade or so and here is why-

    Oil is the largest part of there economy. Chaves is pushing for even an even greater state monopoly in the oil sector. National oil companies fail to produce in the long run because the incentive of the “share holders” (political leaders) is generally short sighted. They take the operating profits and use them to fund social programs, wars, ect. A multinational corporation like Chevron gives peanuts back to it’s shareholders in dividends. The real value they provide the shareholders is increased value per share by reinvesting revenue to grow the company. On the other hand a political leader in a popularly elected system has no long view on the total value of the state company; there only concern is on what the company can provide to buy voters for the next election.

  49. My point – perhaps too oblique – was that Chavez is not stealing or throwing money away but conducting foreign policy.

    Those are not exactly mutually exclusive, you know.

  50. “Eric

    It’s a little late for the “just stand around and don’t steal anything” policy. We’re living on stolen land.”

    uhhh …else?

  51. John accused me “cheering on” a development that is bad for Bush’s foreign policy, because I noticed it.

    Color me surprises. Never heard that one before.

  52. I agree with Arensen and Eric. We should say it’s too bad, and shake our head sadly. Make our case, and say we’re confident that Venezuela will come to see the mistake it’s making.

    This is the part where the rubber hits the road for the self-proclaimed crusaders for democracy. They haven’t exactly covered themselves in principled glory in their stance towards Venezuela to date.

  53. Well, Eric, our state like every other state was founded on theft and plunder. We continue to steal and plunder, notably in Iraq. Did you think we were helping the Iraqis build democracy? We’re after to oil and strategic military bases, man.

  54. Actually, Edward, our reasons for being in Iraq are more complicated than energy and empire. I believe President Bush when he says that he wants to spread democracy in the Middle East, but it’s certainly not his only motivation, nor is it a good policy nor even a laudable goal.

    Besides, if you go back far enough, no nation, state, tribe or individual is morally clean. But that doesn’t mean that we can’t start acting morally in the present and future. The mistakes of the past give us reason to change our behavior in the future.

  55. This is somewhat off topic but….

    Does anyone know of a place where most or all utilities are provided in anything closely resmbling a free market? And how does that work exactly? (Not being cynical, really asking).

    So for example, if electricity is provided in a relatively free market, how does one go about establishing a competing electricity retail company? And is grid access automatic? And how do households and businesses go about switching electricity providers?

    Similiar questions for water supply.

    I may or may not be going somewhere with this.

  56. Eric

    Who gets to decide what’s moral?

  57. Do let us rememeber that Mr. Chavez was just re-elected with a far larger percentage of the vote than any recent US presidential candidate has obtained. I think the appropriate reference here is Mencken:

    “Democracy is the theory that the common people know what they want and deserve to get it good and hard.”

    And so they shall.

    Jeff

  58. Edward,

    The white, monied land-owning gentry gets to decide, obviously. And we should be damned proud to bow to their superior, divinely-inspired wisdom.

    Everyone gets to decide for himself what is moral. Gads what a boring question.

  59. joe:

    “Out of curiosity, how many people would you have freeze so that Venezuela doesn’t receive a shout-out on American TV?”

    Typical. The Left in this country lives in this fantasy world where the “poor” dwell in dirt huts, with no running water, and are so hungry that they have to eat their babies (like our Irish ancestors did years ago). Meanwhile, cynics like me see far too many examples of the “poor” driving around in nice cars, wear expensive (albeit garish) clothing, have cable/satellite hooked-up plasma TVs (with the mandatory game system). We spend BILLIONS on the “poor” in this country, ON TOP OF the numerous private charities, yet it is never, never enough. “What else you got?” is the common refrain.

    I’m willing to admit, somewhere between your position and my position probably lies the truth.

    But the bottom line is, that there is plenty of public and private assistance in this country. A “poor” person should not have to resort to help from an outside pisspot dictator who is stealing from his own people. Even in my most generous concession I can’t see a person so desperate that Joe Kennedy is the only person they can turn to. What seems much more likely to me is that this is bribe money to inflame the underclass even more against capitalism.

  60. BG:

    Good question, and I’d like to kick around an amateurish answer. If someone out there knows the real reason, please throw it into the mix!

    There are some markets that aren’t really competitive due to structures that prevent competition, thereby making the market mechanisms of “the free market” impotent (for example, barriers to entry and exit, no close substitutes, relative power of supplier, relative power of consumer – to paraphrase Porter’s Five Forces).

    Electricity markets oftentimes have huge barriers to entry (so the threat of competition is reduced).

    Other features that make a competitive market for electricity difficult to achieve is that the service provided is price inelastic: it is essential, but an extensive infrastructure/power grid/ physical network (what have you) must be in place before the demand is there. This constitutes a huge barrier to entry.

    Another feature that has historically been noted is that the benefits and costs of the externalities aren’t realized by those directly involved – this can prevent a competitive market situation from finding an optimal level.

    (for example: pollution from the creation of electricity is a direct byproduct; or phone companies don’t realize the benefits of deals made by other agents who happen to use their phone system).

    You know the term “natural monopoly”, often mentioned as a list of “regulated local monopolies: public utilities”.

    “A firm that is the sole producer of a good that has few close substitutes and that the has average and marginal cost curves that decline continuously throughout the range of demand” (therefore it’s relative to the market)

    The costs of entry and exit are prohibitively high: most costs are fixed rather than variable, and the short run is a long time horizon.

    Appealing to economies of scale is always noted in books as being a misleading reason as why these natural monopolies form, instead pointing out that “indivisible fixed inputs” might be a better way of describing it. I remember someone blathering about “non-fungible input assets”, but we’ll drop the curtain of charity on that phrase.

    Your point about how to share the grid and how to induce consumers to switch your BG Brand Electricity (patent pending) is a difficult one that is sometimes labeled “customer inertia” (or something like that), and that is also considered to be a structural barrier to entry.

    Maybe, if private solar panels or other private forms of creating and storing energy become cheaper and more prevalent, there will be changes in how the markets work.

    You might have some local competition in areas with certain conditions (say, water, geothermal, wind, and solar all abundant), but there would still be the issue of how to get the power to the consumer. A shared grid? Separate grids? Separate grids might be possible, if this is a small area, so the initial costs aren’t too great. Even now, supply comes from different sources, but distribution is still through the, um, usual channels.

    Even if one can get by the structural barriers, the above-mentioned scenario might face other, legal barriers to entry…..

    I guess it is possible to come up with a stylized scenario where you have a competitive market, but we’ll need an expert to see whether those markets are limited in size and scope.

    One thing that’s important to remember, and that we in Libertopia have to consider when thinking about the world is that there are plenty of segments of the economy that, for a variety of reasons, have structural features that retard or even prevent competitive market forces from coming into play.

  61. Eric

    Had I known you were so dim, I would never have begun the discussion in the first place. Sorry.

  62. Thought the name of the mag that provided this forum is “Reason”. After reading the (ho-hum) the submissions here, it all comes to light why people fly planes into buildings in America. Of course the biggest crime that Chavez has committed is by thumbing his nose to America instead of falling in line, which in turn will spark the economic warfare upon his country that will be the ultimate CAUSE of suffering for the Venezuelan people. Then the apologists for American imperialism will use their televised venues of propaganda dispensing to tell all of you that it’s the right thing to do. Does anyone actually think beyond their television PROGRAMMING? Reading your words here today tells me one thing: cause we have the bombs and we have the money, we should be telling every other nation what to do, OR ELSE! You should be ashamed of your incessant double-talking about liberty, freedom, and democracy when you haven’t the slightest notion of what those things mean.

  63. MNG is tired of hearing about poor people’s problems.

    Therefore, nobody really needs fuel assistance in the Northeast.

    Yup, libertarian board.

  64. VM

    Interesting points.

    I admit I’m somewhat uninformed about exactly how the electricity grid works. If I switch electric companies, does someone have to detatch the old company’s power line from my house and attatch a new one? Or do the keep the same line in and just record the change somewhere for grid operators and/or whoever else to do the math about how much power each company’s customers used? Or is it something else that I haven’t even thought of?

    The economic barriers to entry that VM mentions are one issue. For some industries, new start up firms require alot more startup capital than a restraunt or gas station; and the firm may experience losses for a longer period of time.

    But the issue I tend to focus on are physical barriers to entry, which may prevent new entrants no matter how much money or startup capital you have.

    One example is with water supply. It seems a new entrant would either have ot get access to the existing pipe structure or create their own. But it seems that either one of those (and especially the 2nd) would require substantial construction work, including digging up public streets. Also the original pipe structure probably required the use of eminent domain. So I’m not sure how you could have a free maket in water supply, with the government take a general stance of non-interference.

  65. Basically the same issues as the electricity – how you create it (source), how you get it from A to B.

    All of those issues are barriers, both in terms of physical plant and in terms of capital expense. (Actually, the physical barriers you mention can be quantified, and I was actually thinking of them as a “barrier” and included it, at least internally – and that’s the whole point that the barriers are prohibitive, not just difficult to overcome)

    You also have mentioned how public utilities make use of parallel structures – gas, water, electricity, and roads follow a path – so, yes that is exactly the problem in establishing a competitive market situation.

    It is an interesting case where the barriers hinder a competitive market situation. It does happen, it doesn’t discredit market-based solutions, it just frames it. (Not a black and white world)

    Water is even more cut-and-dry, as it were, because, what we’re going to have the choice between source A and B? If there were such a way of doing it (competing reservoir services??), you are exactly right with the piping issues.

    That is a great example of the legal and physical barriers that also hinder a competitive market situation with the water piping (you list it as physical, but it is essentially an E.D. issue, so it’s legal)

    The economic barriers to entry are much larger than how you portray them, in this case – they are prohibitive. It goes beyond experiencing losses, especially if there already is a utility that is providing service.

    As for your final point, “So I’m not sure how you could have a free maket in water supply, with the government take a general stance of non-interference.”

    I don’t quite understand what you’re driving at? What you perceive to be an internal inconsistency? You asked about public utilities and free markets – I sketched out some stuff that does apply to water, too. I focused on electricity, as that was the point of the lecture on it.

  66. VM

    As for your final point, “So I’m not sure how you could have a free maket in water supply, with the government take a general stance of non-interference.”

    I don’t quite understand what you’re driving at? What you perceive to be an internal inconsistency? You asked about public utilities and free markets – I sketched out some stuff that does apply to water, too. I focused on electricity, as that was the point of the lecture on it.

    I wasn’t disagreeing with you. Or at least I don’t think I was.

    My point was that, in certain utilities, I am not even sure what government policies would constitute a “free market”.

  67. The thing with utilities is that there are so many barriers, even removal of legal ones still would not result in a competitive market situation.

    Apologize if that wasn’t clear.

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