The United States has traditionally been viewed as a bastion of free-market capitalism, but this image is fading. Decades of regulatory capture and government handouts to companies have left many people questioning the current relationship between government and the economy. If the way government interacts with business doesn’t change, it’s challenging to imagine America remaining a shining example of free enterprise.
One of the latest examples of government becoming too affable with industry is the energy sector. Natural gas has become the dominant energy source in America, where hydraulic fracturing has increased supply and lowered prices. While this benefits consumers, it is challenging for companies making significant investments in more costly coal and nuclear power to compete.
As a result, many companies are planning to shut down their older, less competent – and in the case of coal-fired, dirtier – power plants, but they are not going to go down quietly.
For example, FirstEnergy had he hoped natural gas prices will rise, making coal and nuclear power plants competitive again. But when that didn’t happen, he started asking questions state lawmakers in Ohio for subsidies that will restore the profitability of its nuclear power plants. Reports also show that the FirstEnergy Political Action Committee gave money to several Ohio politicians who supported their request for grants.
Fortunately, the Ohio Legislature has not yet approved any grants, but that could change. Without subsidies, FirstEnergy subsidiaries were forced to do so file Chapter 11 bankruptcy to get rid of debts and return to profits. But recently secured an arrangement with creditors aimed at exiting bankruptcy as an operating entity. While it’s unclear whether the company has reached out to lawmakers about providing government aid, this sudden turnaround, coupled with the company’s continued appeal for legislative support, is troubling to those who dislike government aid programs.
State governments aren’t the only ones considering subsidies for coal and nuclear plants. To prevent plant closures, the Trump administration has discussed subsidizing coal and nuclear power plants as national security care. He argues that coal and nuclear plants are safer than natural gas because the fuel is on site. However, this claim is there largely unfounded and the administration’s idea has not yet come into force.
Government intervention in the energy sector is nothing up-to-date and is bipartisan. Solyndra solar company famously lost over $500 million in taxpayer dollars when it filed for bankruptcy after receiving a guaranteed loan from President Obama’s Department of Energy. The players change, but the game remains the same.
But there are signs that all these handouts are doing real damage to capitalism’s image. The rise of Bernie Sanders and, more recently, Rep. Alexandria Ocasio-Cortez (D-NY), a self-identified Democratic Socialist, has reignited the debate about the role government should play in the economy.
Sanders and Ocasio-Cortez do not support true socialism, in which the government owns the means of production. Instead, they want higher taxes, more government spending, and more government regulation to prevent the kind of behavior we see in the energy industry. While they are right that there is a problem, the solutions they propose will not solve it. More economic freedom is the solutionnot more government.
Unfortunately, measured economic freedom does in America it is withering since 2000. As economic freedom declines in the country, the view of capitalism deteriorates, especially among people aged 18–29. In this age group, the percentage of people with positive view capitalism dropped from 68% in 2010 to 45% in 2018. Among Democrats as a whole, the share of people with positive attitudes toward capitalism dropped from 53% to 47% over the same period.
A majority of GOP supporters still have a favorable view of capitalism (71% in 2018), but that doesn’t stop Republicans from supporting government subsidies when it suits them. Recent Survey found that 61% of Republicans support the idea of providing government aid to both nuclear and coal plants, compared to just 33% and 21% of Democrats, respectively.
Too often, free market capitalism is undermined by people who support it in theory but reject it in practice. The current debate about the merits of coal and nuclear subsidies is illustrative of this broader problem.
America needs less crony capitalism— where political and business elites tilt the rules in their favor — and greater economic freedom that enables people to thrive on the value they create, not on celebrated public officials. If Democrats and especially Republicans – the party most associated with free enterprise – do not stop using government to advance their business interests, socialism’s newfound popularity may be lasting.
