Without a hairs’ breadth in between, the world lurched from a global pandemic into a cost of living crisis and the worst energy crisis since the 1970s.
But let us be precise. We are not in an energy crisis or indeed a cost of living crisis. We are in yet another crisis in capitalism. For decades, capitalism has taken us from one calamity to another, as well perpetual wars, hunger and poverty. We are just over two decades into the 21st Century and already we have had at least thirteen region-specific crises, and multiple global crises including the 2000 dot com bubble, the 2008 financial crash (which plunged us into austerity and triggered a host of national crises and a Great Recession that is ongoing today), the 2020 Coronavirus crisis, and now, the energy and cost of living crises. And all of these in addition to the gravest crisis: the climate crisis.
Many reasons are given for the energy crisis. Early on in the Covid lockdown, reduced demand for energy (and a reduced demand for the production of many products) brought about a global decline in energy consumption. In response, some gas companies slowed down their production. Around the same time, energy prices were dropping due to a price war between Russia and Saudi Arabia. Both factors meant that oil and gas companies experienced losses. As the global economy reopened and Covid restrictions relaxed, and as maintenance work that was delayed by the pandemic resumed, demand for energy increased. Gas companies, who had slowed production, did not have the necessary supply to meet demand and this led to increases in wholesale gas prices throughout 2021 and 2022. As an aside, it is worth pointing out that lockdown opened up an opportunity to maintain those lower levels of energy consumption and to begin the transition away from fossil fuels in earnest. Unfortunately, the hysterical cries for economies to return to normal, and with a vengeance, meant demand for energy rose to pre-Covid levels.
Outbreak of war in Ukraine exacerbated this budding energy crisis. Russia is one of the world’s top producers of gas and it supplies almost a quarter of Europe’s gas imports. Europe invested billions of Euros in infrastructure that brings gas to Europe from Russia. In doing so, Europe short-sightedly locked itself into Russian gas. During and even before the war, Russia has been withholding gas supplies from Europe, disrupting supply chains and causing Europe to seek gas elsewhere, specifically liquefied natural gas (LNG) supplied by Australia, the US and Qatar. The extra demand from Europe for LNG drove up LNG prices, causing a knock-on effect for the regular LNG customers in Asia and resulting in disrupted gas supply chains for them too. Since gas is often used to set the price electricity is sold at, and since more and more gas is used to generate electricity, electricity prices rose in tandem with gas prices. Not only that, but extreme weather conditions witnessed in 2022, a direct result of global warming, have also been blamed for disrupting supply.
Mainstream economists predict that the excessively high energy prices we are currently experiencing will ease as markets rebalance, but there is no certainty about if or when that might happen and meanwhile ordinary people continue to suffer.
Once again, as with Covid, this energy crisis has created another opportunity to reduce energy consumption and promote the generation of renewable energy to begin the transition away from fossil fuels and address global warming. But the evidence shows that the potential for transition is being squandered and the crisis is bringing about greater production of fossil fuel, not less, with the US President, for example, putting pressure on oil and gas companies to produce more.
However, none of the above reasons gets to the heart of what is really wrong. For what is really wrong, what is always at the back of any crisis, is capitalism and its private ownership of the means of production, the free market and the pursuit of profit.
The perverse nature of the free market, motivated by competition, profit and greed, acts in a way that is contrary to what people need. In the market, when a product is scarce, its price goes up (although scarcity usually means that a product is difficult to acquire and not that the world is running out of it). So, when energy supply is disrupted and reduced, making it scarce, the rules of the market legitimately enable those who own the means of production, those who have the greatest bargaining power, to force prices upwards. It does not matter if increased prices cause want and misery. It matters only that the rules of the market are followed for the sake of corporate profit.
Oil and gas companies such as ExxonMobil, BP and Saudi Aramco have been making unprecedented profits since the energy crisis began. In the last quarter alone, ExxonMobil made $20bn profit, BP made $8bn and Saudi Aramco made $42bn. And if that was not enough, many of these companies are engaging in a practice called stock buybacks. Once illegal, a stock buyback is where a company buys back its own stock on the open market as a way to make even more profit for its shareholders. It seems that oil and gas companies intend to make up for any losses they may have experienced during lockdown.
It is also a fact that the oil and gas industry is heavily subsidised by governments across the globe. Capitalists abhor government intervention and espouse small government but do not seem to mind government interference when it works in their favour. Fossil fuel exploration, extraction, production and consumption are subsidised to the tune of $500 billion per year, subsidies which artificially lower the price of these fuels and translate into profits for the industry. Subsidies for renewable energy do not even get a third of this amount.
Compare this bonanza for the oil and gas industry to what the rest of us are experiencing. At the same time the free market regulates itself to ensure profits go to those who own the means of production, it fails to do anything to protect people who cannot afford to buy food or heat their homes. Because of this current contrived crisis, millions of people are struggling to pay their basic energy needs and are being plunged into fuel poverty. And because energy is used in the production of just about everything, the prices of goods and services too have soared, often beyond what low and middle incomes can afford, thus creating a cost of living crisis. The crises have reached surreal levels. For instance, in Britain (where the crises have hit harder than in most other Western countries), a daytime magazine show featured a game called Spin to Win where viewers rang up for a chance to spin a wheel for prizes of £1,000 and four months’ worth of paid energy bills. Listening to the conversation between the show hosts and the callers brings a new meaning to the words cringe and condescending and many viewers were (rightly) disgusted.
Long before these crises, ordinary people were already struggling, having endured over four decades of a downward push on incomes, all in the name of lowering corporate costs and increasing profits. What that has served to do is decimate the financial resilience of large swathes of the general population. Forced to live from pay cheque to pay cheque with little or no savings, it is next to impossible to withstand any kind of emergency situation or crisis. With wages at an all-time low, the income gap is unparalleled. Top executives in the big corporations earn salaries that are on average over 300 times that of their lowest paid employees. Like the energy crisis, this is not an accident. It has been a deliberate policy of capitalism.
Ironically, one of the great benefits touted about the free market is the freedom of choice; the freedom to buy what you like. However, the free market cannot deliver even that. As consumers, we do not buy what we like. We buy what is available. Many of us would want the option of securing our energy from renewable sources but the wonderful free market provides a greatly limited set of renewable energy choices and for many of us, our only choice is fossil fuels. And given the way our electoral system works, where big industries like oil and gas lobby government and make huge donations to ensure government works in their favour, we again see the deliberate rigging of the system to guarantee limited choices.
As usual, when capitalism runs amok and throws us into a crisis, governments have to step in to save the day by giving citizens and the economy financial help. Governments in many countries are stepping in to ease some of the pain of the energy crisis, just as they did for the 2008 financial crash and for Covid. For example, many governments in Europe have capped energy prices or given households cost of living payments. In China there have been enforced power cuts. Local governments in many Indian states are asking people to limit electricity use and are deploying power cuts to reduce consumption, while power companies have been asked to boost supply to Delhi to avoid a potential power crisis. The US has not provided any scheme to help citizens but instead has called on oil-producing countries to increase their output, the exact opposite of what we need in a climate emergency. The US may have to resort to using its emergency oil reserves to prevent prices from becoming excessively high.
Under capitalism, an essential commodity such as energy is handed over to private ownership of the means of production, and made subject to free market competition and profiteering. Ridiculous and harmful outcomes ensue, such as those discussed already, and the notion of providing a service, of meeting needs, is never considered. When you think about it, the idea that a profit-focused free market with private ownership is the best way to control energy is a kind of madness. All our activities and endeavours need energy but we have given over ownership and control to a small group of people and institutions.
Commodities like energy are too fundamental, too vital, to be at the mercy of something so capricious as the free market or private control. And yet, we behave as though it cannot be any other way, as though the free market and private control are laws of physics that simply cannot be overcome. And so, we have no better alternative other than to endure the consequences.
Of course, this is nonsense. The free market and private ownership are not like gravity. They are entirely human-made and they can be entirely unmade. The free market and private ownership can be dispensed with and alternatives put in their place.
So what are the alternatives? How can we ensure that decisions about producing and utilising essential commodities are made based on what is right for all of society, not on what is going to make the most profit for shareholders? How can we ensure that essential commodities are democratically owned and not in the hands of a small minority? How can we ensure that adequate incomes are provided and prices controlled so that people do not go without?
One obvious alternative might be to nationalise energy and bring it under public control. The National Health Service (NHS) in Britain is a good example, and indeed, at one time, electricity, oil, gas and coal mines were all nationalised commodities Britain. Nationalisation is certainly a viable option although it is open to abuse and can be too easily rolled back. To continue with the British example, the NHS is under constant attack and is being slowly eroded by successive right wing governments and private interests. And during her time as Prime Minister, Margaret Thatcher privatised all of Britain’s publically-owned energy interests.
While nationalisation could be a good first step in creating an alternative, this article offers a radically different approach that goes beyond what can be achieved by nationalisation alone. The alternative proposed is Participatory Economics or Parecon. Created by Michael Albert and Robin Hahnel, Parecon is boiled down to its most basic in an article by Albert as having a set of values: self-management, equity, solidarity, diversity, internationalism, and sustainability; and a set of features deemed necessary to advance those values: non-ownership or the collective ownership of the means of production (i.e. a productive commons, not private ownership); participatory planning that takes account of the personal, social, and environmental implications of production and consumption (i.e. democratic allocation, not a profit-seeking free market); workers and consumers self-managing councils and federations of councils; balanced job complexes that give every worker a comparable mix of empowering and rote tasks; and equitable remuneration awarded for duration, intensity and onerousness of the conditions under which we work, and not awarded for bargaining power, personal output or ownership of productive property.
Maybe one of the strongest beliefs we have been conditioned to hold about capitalism is that the market is irreplaceable and cannot be done without. Parecon invites us to think differently by proposing participatory planning in place of the free market as a means of carrying out the function of allocation. An annual participatory planning process would replace competition with cooperation to allow the creation of a production and consumption plan where scarce productive resources are used to meet needs and develop potentials without wasting what is valued. This would be achieved through an iterative planning procedure in which worker councils, neighbourhood consumer councils, and federations of councils request the goods and services they want to consume and produce in response to ever more accurate estimates of the full social and ecological costs of producing and the full social and ecological benefits of consuming different goods and services. Participatory planning arrives at indicative prices that are a function of the true costs and benefits of products. Because participatory planning forces workers and consumers to consider the full personal, social and ecological costs of producing goods and services, “externalities” that are currently ignored in market prices are thus incorporated. Further, through the participatory planning process, an average social income emerges as the social product per citizen. Workers then earn that average income for an average working week, although they can earn more or less if they alter the duration, intensity and onerousness of their socially-valued work.
Based on this summary, what might energy production and consumption look like under participatory planning?
Participatory planning removes the profit motive. There are no owners, thus no one earns based on revenues minus costs. Rather all who work would earn based on the duration, intensity, and onerousness of their socially valued work. Energy prices would be agreed by consumers and producers through the cooperative planning procedure and not set by individual companies serving their own interests. Unreasonable, inefficient consumption or production would be renegotiated in favour of socially valued, efficient energy consumption and production. Excessive consumption would be curbed not just because people would have to earn the extra money to fund their extra consumption (unlike in capitalism where income can be accumulated through ownership) but also because the extra consumption would have to be approved through the planning process and if the costs were deemed too high, the extra consumption would have to be revised. The same goes for excessive production, although excessive production is typically driven by competition and the need to accumulate so as to compete. Give that both are absent in Parecon, no one would be capable of enhancing their income by way of such actions.
In particular, because Parecon replaces private ownership of the means of production with the productive commons, the production and allocation of energy would reflect worker and consumer control, not shareholders demanding higher profits. Energy prices would not be set by energy companies taking advantage of global situations or scarcity to deliberately hike up prices and increase profits. Instead, energy companies would be part of the productive commons, and their workers would have to negotiate prices as part of the iterative planning procedure to reflect the true social and ecological costs and benefits of energy.
Participatory planning would make corporate lobbying futile because that is only done to gain a competitive edge and greater control in the market, both of which would be meaningless in Parecon. Government subsidies might still be provided, if circumstances deemed them necessary for the greater good. But the decision to provide them would be a collective and transparent one made by all during the iterative planning procedure.
In Parecon, no one would struggle to pay their energy bills, or adequately heat or power their homes. Not only would prices be set by participatory planning and lack the profit motive and therefore the incentive to raise prices endlessly, but the average social income would eliminate low wages and poor financial resilience. The greater levels of income equity afforded by Parecon would vastly reduce the income gap and redistribute wealth. Because energy consumption and energy prices are decided through participatory planning, and because energy prices cannot be increased to exorbitant levels to pursue profits, everybody would be able to assess their energy needs and no one would go without because of lack of affordability.
There is also a geopolitical element to energy production in our current economy. Because the bulk of our energy is fossil-fuel based, we are dependent on oil-, gas- and coal-producing countries for most of our energy needs. In our existing world of countries threatening and warring with each other to gain global hegemony, fossil fuels are used to gain political advantage. The Parecon value of internationalism strives to promote good international relations so it would be hoped that more cooperative and collaborative pan-national relationships would develop.
All of that said, it is likely that long ago a society with Parecon would have decided to diversify energy generation for ecological and practical reasons. That we are almost entirely dependent on fossil fuels for our energy when we know the damage they are doing to our planet and when we know they are finite, is beyond insanity. Our dependency on fossil fuels has been maintained by corporate greed, coupled with the complete lack of control ordinary people have in any decision-making about energy generation. Parecon delivers to everyone decision-making influence in proportion as they are affected in all matters, therefore in particular when it comes to the production, allocation and consumption of goods and services. The Parecon value of ecological sustainability is achieved through participatory planning which balances the social and ecological costs and benefits of products and services. It is reasonable to assume that, decades ago, when the facts about fossil fuels came to light, a society that had Parecon rather than a capitalist economy would have made decisions about energy generation based on full consideration of the ecological costs. The high environmental costs of extracting, producing and burning fossil fuels would have meant phasing out fossil fuels and transitioning to renewable sources of energy. Society would likely also have accepted the need for reduced energy consumption and greater energy efficiency and conversation measures.
The imaginings in this article of what energy provision could look like under Parecon have not been exhaustive or even watertight in many ways, and ultimately, no one in the present can envision much less prescribe exactly how future generations might apply the basic values and features of Parecon for energy provision or anything else. But what this article attempts to do is demonstrate that capitalism is not the only option available to us and that there is at least one better alternative. That in itself should give us cause for hope and if nothing else, remind us that a commodity like energy is simply too fundamental to everything we do to be left to the uncaring and selfish free market.