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Markets and subsidies: Exposing the delusions of urbanists - Pacific Research Institute

Markets and subsidies: Exposing the delusions of urbanists

girl pumping gas

Whatever environmental benefits a society might experience by not burning or refining oil and natural gas would be swallowed up by the inability of people to do even the simplest things they had taken for granted when oil and gas were part of the equation. Within a short time, we would see social collapse that would mirror the century after Rome fell, when trade routes that sustained towns and cities simply disappeared.

To understand the “rules” regarding the role of the internal combustion engine powered by fossil fuels, Calvinball comes to mind, created in the comic strip, “Calvin and Hobbes.” Calvinball players make up the rules as they go along, and other players cannot make sense of what is happening.

To hear New Urbanists and their allies tell it, gasoline and diesel-powered vehicles are destroying Planet Earth. Furthermore, the only reason people use these fuels is because they are heavily subsidized. Thus, they are artificial entities that enrich rapacious capitalists at the expense of everyone else.

The International Monetary Fund recently sponsored a “study” that claims fossil fuels are subsidized by about $7 trillion annually. The IMF declared:

As the world struggles to restrict global warming to 1.5 degrees Celsius and parts of Asia, Europe and the United States swelter in extreme heat, subsidies for oil, coal and natural gas are costing the equivalent of 7.1 percent of global gross domestic product.

A generous interpretation of this document is that fossil fuels have no economic or social benefits, which on its face is ridiculous. They assume fossil fuels and the machinery they power are a pure social cost.

Read William Anderson’s Free Cities Center article debunking urbanists’ definition of externalities.

Read Free Cities Center Director Steven Greenhut’s article about urbanists’ focus on density rather than freedom.

If one breaks down the IMF’s analysis, the extent of these “subsidies” to petroleum and natural gas becomes murky and subjective. Of the $7 trillion in alleged subsidies, the IMF claims that $1.3 trillion consist of “explicit” subsidies, and the other $5.7 trillion are “implicit” subsidies – or “undercharging for environmental costs and forgone consumption taxes.” The report says:

Our analysis shows that consumers did not pay for over $5 trillion of environmental costs last year. This number would be almost double if damage to the climate was valued at levels found in a recent study published in the scientific journal Nature instead of our baseline assumption that global warming costs are equal to the emissions price needed to meet Paris Agreement temperature goals.

These are Calvinball numbers which assume every storm, flood or wildfire is due solely to climate change. Furthermore, even the “explicit” subsidies in the IMF report are suspect, as they include common tax breaks (and not just direct subsidies) that apply to myriad industries.

In other words, they have stretched the meaning of “subsidies” to a point where they are no longer recognizable. This contrasts to the enormous tax break and outright cash awards and grants that prop up the renewable energy industries. Yet, none of that matters because we are dealing less with real threats to our climate and more of the worldview of political, economic and educational elites who believe most people should have less freedom to drive their own cars or even live where they would like.

Writes National Review’s John Fund:

In a new poll, commissioned by the Committee to Unleash Prosperity, Scott Rasmussen has just surveyed 1,000 members of what he calls “the elite 1 percent” of Americans, namely those who have a postgraduate degree, live in dense urban areas, and earn more than $150,000 a year. In short, they are the people who frequently wield disproportionate influence over ideas and public policy.

Their views on personal freedom and mass consumer choices are frightening. An astonishing 72 percent want to ban gas-powered cars, and 58 percent want to block sales of SUVs. Among all Americans, between 70 percent and 83 percent oppose both such bans.

In this worldview, most people don’t know what is good for them, so the New Urbanists must impose new rules, using their peculiar system of accounting to determine a “subsidy” for fossil-fuel use. The methodological flaw is they overstate the subsidies, assume that fossil fuels have no social value and then ignore subsidies for renewable energy. If one could state their overall goal simply, it would be to repeal the Industrial Revolution.

To get a better sense of these points, assume the climate activists get their way and beginning right now, all uses of fossil fuels are banned. This means no natural gas to heat one’s home, no transportation of goods to stores, no powering of electric generators except for those powered by hydropower. (Windmills and solar panels use fossil-fuel products from polymers to lubricants, so they cannot exist, either. For that matter, most of the “performance clothing” worn by environmentalists comes from petroleum, so they would have to find new wardrobes.)

The picture is one of total social breakdown. Whatever environmental benefits a society might experience by not burning or refining oil and natural gas would be swallowed up by the inability of people to do even the simplest things they had taken for granted when oil and gas were part of the equation. Within a short time, we would see social collapse that would mirror the century after Rome fell, when trade routes that sustained towns and cities simply disappeared.

A simple tour of any store, be it a grocery store or Walmart, will tell you how complex our economy has become, and how it depends upon lines of trade stretching thousands of miles. It would be impossible to sustain the current population – or even a much smaller one – if the environmental activists were to have their way.

As noted before, the apparent goal of these groups is to return life to how it was in the mid-1700s, an age in which most people lived in dire poverty. In a 1980 Reason magazine article, Donald Feder quoted Ralph Nader, whose description of his ideal society dovetails neatly with the New Urbanist dream today:

They can grow their own gardens, they can listen to the birds, they can feel the wind across their cheek [sic], they can watch the sun come up. And within a five or six block perimeter, they find they have their stores, their schools. They have their parks, they have their libraries … compared to a big city where all of these things are far away.

Feder adds: “To call Nader a socialist is an oversimplification. He’s really a feudalist at heart. His goal is to abolish the Industrial Revolution and drag humanity back to a simpler time.”

Unfortunately, the stakes are enormous. The environmental goals such as banning fuel-powered cars, trucks and trains are so unrealistic that if they ever are enforced, the results will bring chaos and poverty. One hopes that reason can prevail, but elite policy makers these days seem to be anything but reasonable. In the meantime, the rest of us should at least call them out on their improper and rules-shifting use of the word “subsidy.”

William L. Anderson is an editor with the Mises Institute and Emeritus Professor of Economics at Frostburg State University, Frostburg, Md. He lives in California.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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