“The Arab oil embargo was not the cause of the energy crisis in this country: it was merely the straw that showed the camel’s back was broken.” (1)
“There is no ‘natural’ geological crisis; there is an enormous political one.” (2)
– Ayn Rand, “The Energy Crisis,” November 5, 1973.
The highly regulated society depicted by Atlas Shrugged includes many things energy. Her 1957 novel and now movie (Part I out; Part II and Part III to come) has had relevance for U.S. energy policy ever since.
Atlas Shrugged describes oil shortages (342–44, 475), gasoline shortages (pp. 272–73), and electricity blackouts (pp. 669, 671). When the 1970s energy crisis hit, Rand commented:
Many readers have been asking whether I intended to write about the energy crisis. I would be tempted to answer: “I already have” – but they anticipate me by adding that things are “just as in Atlas Shrugged.” Well so they are. (3)
Rand was right on: President Nixon’s wage and price control order, extended into phases of price ceilings, caused petroleum shortages before the the Arab OPEC embargo. (4) Rand had earlier lambasted Nixon for his action, this being a president who was elected “on the implicit promise to save the country from a statist trend” who instead “helped and accelerated the march to statism.” (5)
Having seen the march of domestic regulation during World War II and during the Korean Conflict, Rand turned fact into fiction with consequent intervention, much of it stemming from federal price controls (effective ceiling prices).
Atlas Shrugged has energy rationing (pp. 349–50), conservation edicts (pp. 339, 343) and the Industrial Efficiency Award (pp. 44–45). The Bureau of Economic Planning and Natural Resources, in fact, was created in part to combat “a shortage of oil in the city” (p. 273).
There is fair profit legislation (p. 507), anti-profit law (pp. 997, 1074), and public utility regulation (p. 195). There is common carrier regulation (p. 677).
Regulations are gamed by the regulated (p. 217), and trade associations work to limit competition (pp. 46–47, 274). And there is the dynamics of government intervention as one regulation spawns another (pp. 130, 273, 413).
Fiction from Fact
Rand did not invent her scenarios out of whole cloth. She saw government price and allocation controls in action. She also became familiar with free market economics to understand the cause-and-effect of government intervention in the economy.
World War II energy planning from 1941 until 1946 was a litany of intervention, including wellhead-to-pump subsidies and controls with petroleum.
It began with a May 1941 price agreement between 22 oil companies and the Office of Price Administration and Civilian Supply. Behind the “voluntary” measure was OPA Price Division head John Kenneth Galbraith, a hard-line planner who cared little about what the industry had to say. (6)
This planning agency would become the Petroleum Administration for War (PAW) in 1942, and PAW’s maximum-price edicts predictably caused shortages. But rather than decontrol, bureaucrats implemented more regulation on the supply side (what I call productionism) and the demand side (conservationism). (7)
For example, the Reconstruction Finance Corporation allocated subsidies to stripper wells (oil wells producing less than 10 barrels per day) that were not economic under maximum price regulation. (8) There was a government synthetic fuels program to spur supply that was otherwise on strike from legislated maximum prices. (9)
On the demand side, there were allocation orders for industry and coupon ration tickets for motorists. Service stations were ordered closed during certain times, and “pleasure driving” was banned. All the while, charges of “profiteering” were heard at every level of the industry. (10)
Rand’s “Energy Crisis” Essay
The following excerpt is from Rand’s “The Energy Crisis,” published in The Ayn Rand Letter of November 5, 1973 (pp. 257–60):
The oil industry is being destroyed by a bombardment of paper — of governmental rules, regulations, directives, edicts, commands — any one of which is as intelligible and exciting as the small print in an insurance policy. You would not be able to read it or integrate it — no one can. But that bombardment is more effective than other kinds of air raids: it blasts your power stations, extinguishes your lights, freezes your homes, stops your motors, locks your factories, wipes out your jobs, and leaves a barren land on which nothing will grow again for generations….
There is always a scapegoat: the industrialist, who may be sent to jail by one government agency for obeying the orders of another. Integration — of plans, activities, knowledge, thought — is forbidden by the nature of the politicians’ game. Their deliberately cultivated, evasive, concrete-bound, range-of-the-moment level of perception would make a retarded five-year-old look like a genius of abstract thinking. And, on the basis of such perception, they issue orders to an industry that functions in terms of decades and deals with the entire globe….
The result of our present economic system is that the men who do the work — in this case, the oil industry — know the state of their production at a given moment, but do not know what edict will shatter them next month or next year. The government officials do not know the state of the industry they are controlling — nor what edict they will feel like issuing next week. The Arab oil embargo was not the cause of the energy crisis in this country: it was merely the straw that showed that the camel’s back was broken….
There is no “natural” or geological crisis; there is an enormous political one. It is in the nature of a mixed economy that its policies are rationally inexplicable, that there are no identifiable causes, no accountable initiators, no ascertainable villains — and that you are losing your jobs, giving up your automobiles, catching pneumonia in unheated bedrooms, not because some giant evildoers are plotting your destruction, but because some seedy hack wanted an unearned salary, and some crummy professor wanted an undeserved prestige, and some measly shyster wanted a chance to fish in muddy laws, and none of them cared to or could watch the state of the country’s economy, and the sum of such termite aspirations has eaten through the pillars of the structure so that one kick from a sheik was sufficient to make it crumble.
For historians of government intervention in the energy industry, Rand has gone from fact to fiction to fact. (11)
Atlas Shrugged remains relevant today.
(1) Ayn Rand, “The Energy Crisis: Part I” (November 5, 1973). Reprinted in The Ayn Rand Letter: Volumes I–IV (1971–1976). Palo Alto, CA: Palo Alto Book Service, 1979, p. 258.
(2 Ibid., p. 260.
(3) Ibid., p. 257.
(4) See Robert Bradley, Capitalism at Work: Business, Government, and Energy. Salem, MA: Scrivener Publishing, 2009, pp. 242–44.
(5) Ayn Rand, “The Moratorium on Brains” (October 25, 1971). Reprinted in The Ayn Rand Letter, op cit., p. 5.
(6) See Robert Bradley, Oil, Gas, and Government: The U.S. Experience (Lanham, MD: Rowman & Littlefield, 1996), Vol. 2: pp. 1396–97.
(7) Bradley, Capitalism at Work. [conservationism: pp. 187, 218, 242, 245, 254, 267, 284; productionism: pp. 254, 267].
(8) Robert Bradley, Oil, Gas, and Government: The U.S. Experience, Vol. 1: pp. 238–39.
(9) Ibid., p. 239.
(10) Ibid., Vol 2: chapter 24.
(11) Rand was effectively retired when the Carter-era energy crisis hit in 1979, so she might not have revisited the energy crisis issue.
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This series at MasterResource on Rand, Objectivism, and Atlas Shrugged has five parts:
Part II: The Book (Atlas Shrugged)
Part III: The Philosophy (Objectivism)
Part IV: The Moral Responsibility of Businessmen (Political Capitalists)
Part V: The Energy Crisis
“Termite aspirations.” With this wonderful phrase, Rand extended the boll weevil metaphor, which described both the pest responsible for destroying the cotton crop and southern Democrats who sided with Republicans on issues such as tax cuts and deregulation, to include the pestilence of government bureaucrats preying upon–and damaging–a healthy marketplace.
Termite aspirations could also well describe the behavior of the likes of Jeff Immelt and GE as they feed upon the low hanging fruit of the federal treasury–made possible by their “friends” in Congress and the White House.
I liked that too Jon. She could really skewer.
This commentary on Atlas Shrugged is also interesting: http://www.foxnews.com/opinion/2011/04/25/radicalness-ayn-rands-atlas-shrugged/
Rob, thanks for the information. There was nothink defensable about Nixon’s economic policies and Rand’s comments as posted are all relevant and on target in this regard.
I however, have only one memory of Rand, and it is why I have never much cared for her extreme positions. The only time I ever heard her, she was on Phil Donahue (who was reasonably respectful to all his guests back then). She made, in my mind, an incredible argument, that the OPEC Countries had absolutely zero right to any revenue from the oil produced in those countries because they had done nothing to develop the technology to produce or use the oil.
I tend to also disagree with people who argue that private ownership of mineral rights is the only viable model. There can be a strong argument for either private or public ownership. Access is the real issue. The fact that “The Crown” owns mineral rights in Canada hardly impedes access. Same with much (but certainly no all) of the public lands in the US. The real problem with the US model is 1) giving too much voice to environmentalists – something the Canadians temper much more; and 2) the tendency to allow “split estates”… (Granted, Canada is one huge “split estate”). In the US, IMO, a disproportionate amount of opposition by local land owners occurs in my opinion when they do not have mineral rights (which are superior to surface rights in most states) and hence the ability to get lease bonus payments and royalties; as well as having no say. I found out historically that many Texans did not have mineral rights if they bought their land from the state, but many decades ago, the State granted a percentage of the royalties received to the land owners (I think a co-worker has a 5% revenue interest). Personally, I don’t like that (they didn’t pay for the mineral rights when they bought the land, and mineral rights are very difficult to value, and will tend to be way undervalued unless it is known there are minerals, oil, gas, etc. below – and even then, they can be way undervalued).
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