Atlas is Shrugging in California

by | Feb 9, 2001

“The plane was above the peaks of the skyscrapers when suddenly, with the abruptness of a shudder, as if the ground had parted to engulf it, the city disappeared from the face of the earth. It took them a moment to realize that the panic had reached the power stations-and that the lights of New […]

“The plane was above the peaks of the skyscrapers when suddenly, with the abruptness of a shudder, as if the ground had parted to engulf it, the city disappeared from the face of the earth. It took them a moment to realize that the panic had reached the power stations-and that the lights of New York had gone out.”

Thus climaxed Ayn Rand’s 1957 novel, Atlas Shrugged (soon to be a TV mini-series) showing what would happen to society if the creative, intelligent, productive people-the originators and innovators in every line of work-went on strike. The heroes and heroines in the book refused to continue serving a political system in which men of ability are condemned as greedy and selfish, yet expected to provide all the necessities of life to those supposedly incapable of providing for themselves. Deprived of its prime movers, government imposed more and more controls, systematically destroying industry after industry, dramatically illustrating that men will not discover, innovate, and produce at the point of a gun. While California has not yet reached the final, horrific state of collapse envisioned by Rand, the “rolling blackouts” which began in January 2001 are surely warning signs to “Stop, Look, Listen.”

Governor Gray Davis blames California’s shortage of electrical power on the “greed” of out-of-state producers. Citing the failure of the state’s 1996 “deregulation” scheme, the Governor proclaimed, “We will regain control over the power that’s generated in California and commit it to the public good. Never again can we allow out-of-state profiteers to hold California hostage.”

Far from deregulating power generation, California’s 1996 legislation imposed extensive new regulations on producers. It required the state’s private utilities to sell off many of their generating plants; banned them from entering into long-term contracts with suppliers; and capped the price they could charge to consumers. When winter demand drove wholesale prices above the retail caps, local distributors were driven to the brink of bankruptcy. This regulatory ineptitude was not mere bureaucratic oversight; rather, it represents the best laid plans of the finest minds in government, passed unanimously by both Democrats and Republicans.

Davis’ answer to bad regulation is more regulation, even if that means the bureaucrats themselves owning and running the power plants. Following a decade in which not a single new generating plant was allowed to break ground in the Golden State, Davis scrambles to approve blueprints held up for years by anti-development land use regulations. In the mean time, he would impose criminal penalties on “domestic” producers for refusing to sell power in the state and ban them from selling power out of state. Davis plans to extort “stock options” from the struggling power companies in return for “bailouts” for corporate debt caused by the state’s own price controls. Democrat legislators prefer confiscating the power transmission lines instead. The governor threatens “more drastic measures that I am prepared to take, if I have to,” meaning outright seizure of the state’s entire electrical power industry using the despotic power of eminent domain.

In Atlas Shrugged, John Galt, the leader of the strike, states, “I have done by plan and intention what had been done throughout history by silent default.” In other words, men of intelligence will not work for long under compulsion and without reward. Before Californians allow central economic planning, we should remember its effect on the former Soviet Union. What the Soviets could extract from hermetically sealed colonies of privileged rocket scientists could not prevent the inevitable collapse of a social system based upon the sacrifice of individual happiness to collective need.

It is a plain, historical fact that when individuals are free to profit and prosper, they work diligently and the market works efficiently. When they are not, they go on strike psychologically, refusing to innovate and produce without recognition or reward. Our nation was founded on the inalienable right to the pursuit of happiness, not the ant heap mentality of government controls. History is full of examples. The Roman Emperor Diocletian learned in 301 AD the inevitable consequences of price controls, export restrictions, and government regulation: shortages, riots, and economic collapse.

California’s “rolling blackouts” are the result of the failure of government controls, not capitalism. A free market economy, one in which all human relations are voluntary, unleashes the enormous intellectual and creative potential of mankind. The “strikers” in Atlas Shrugged withdrew from a system in which people cannot be trusted to run their lives and businesses without government regulation, yet are deemed competent to vote politicians into positions of total power over gigantic industries about which they know little or nothing.

What is needed is real deregulation of the power industry: elimination of price controls; removal of restrictions on mergers and acquisitions; lifting of counterproductive land use regulations; and fast track approval of dozens of new power plants. This would free the true heroes of our society-the inventors and builders-to rise up and continue the economic marvel of the Industrial Revolution, which was nothing more than free people being allowed to live and prosper for their own sakes.

King Louis XIV’s chief economic advisor once asked French businessmen what the government could do to help the economy; one replied, “Leave us alone!” California’s politicians will avert disaster if they heed that advice.

Mike Giorgino retired as a Commander from the U. S. Navy in 1997, graduated from the University of San Diego School of Law in December 1999, and was admitted to the California Bar in June 2000.

Publisher’s Note: The power distributors are not run by Hank Reardans or John Galts. In fact, they lobbied for much of the government regulation that was masked as “deregulation”. The Atlases are those industrialists who refuse to enter the power industry–especially in California–due to the lack of freedom to make a profit in this market.–Editor

Mike Giorgino is a retired Navy Commander and a Gulf War veteran. He was the Republican candidate for the State Senate, 40th District in 2002. He graduated from the University of San Diego in 2000 (where he studied Constitutional Law under Professor Siegan). He practices law in San Diego and may be contacted via e-mail at [email protected].

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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