miércoles, enero 14, 2009

IOUs Perverse Communism

For free society to face "perhaps the most serious series of crises in the republic’s existence, and for our" power industry, we need to introduce as soon as possible the creative destruction of the divine dispensation of IOUs perverse communism.

IOUs Perverse Communism

By José Antonio Vanderhorst-Silverio, Ph.D.
Systemic Consultant: Electricity

First posted in the GMH Blog, on January 14th, 2009.

Copyright © 2009 José Antonio Vanderhorst-Silverio. All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from José Antonio Vanderhorst-Silverio. This article is an unedited, an uncorrected, draft material of The EWPC Textbook. Please write to javs@ieee.org to contact the author for any kind of engagement.

In the EWPC article Dr. Chu backed away slightly, I quote Dr. Chu saying "The answer is efficiency, using less so that even if the price rises, the bill does not.” I conclude that "To be succesful, the administration needs to actually break open the electricity markets, leaving physical distribution under state regulation."

Taking a stand to keep parts of the electricity markets closed, in the article Chu trying to appear less ‘scary’, Warren Causey wrote that “Right now, facing perhaps the most serious series of crises in the republic’s existence, and for our industry, we don’t need far-left ideologues in power.” The assumption of what seems as a far-left ideologue needs to be questioned in light of the perverse communism that has now become a divine dispensation for the investor owned utilities (IOUs) regulated price control business model.

The power industry needs to replace that obsolete model, with free society business model innovations, to get out of “perhaps the most serious series of crises in the republic’s existence.” I will show that what is needed is the creative destruction of the IOUs paradigm by the technology neutral electricity without price controls (EWPC) market architecture and design. To confirm the EWPC is neutral, see the article EWPC Can’t Be a Market Winner, whose summary says:

2GRs [Second Generation Retailers] want to compete to develop market business model innovations for global retail market segments. On a given market segment, the market winner of the market vs. market competition can only be enabled after the EWPC EPAct [Energy Policy Act] is enacted. The EWPC EPAct should forbid state regulators from letting utilities win rate cases that involve Intelligent Utility Enterprise and Smart Grid investments, because of the high risks of failure involved.”

Instead of far-left radical ideas, in the EWPC article Divine Dispensation of Electric Markets is Gone, I quoted Megatrends explaining the way capitalism works in the “Law of the Situation: the railroads did not understand,” (see my post of 9.11.07 above – the reference comes from the EnergyPulse article An Analysis of the Carbon Emissions Impact of the Senate Energy Bill, by Chris Neil, Energy Economist) that applies to IOUs, from which I extract,

Some people [IOUs for example] still believe there’s a divine dispensation that their markets are theirs - and no one else’s - now and forevermore. It is an old dream that dies hard, yet no businessman in a free society can control a market when the customers decide to go somewhere else [under EWPC for example]. All the king’s horses and all the king’s man are helpless in the face of a better product. Our commercial history is filled with examples of companies that failed to change in a changing world, and became tombstones in the corporate graveyard.”

Making transparent his beliefs, Warren Causey had also written just before the interesting article, We'll see who was right, Keynes or Adam Smith & Milton Friedman, which questions the Keynesian economics “counter-cyclical” debt spending being followed by the US government and concludes: “

Imagine what's going to happen when the bourgeois realizes that the proletariat-controlled elite (Washington) not only is soaking them for everything, but also driving the whole kit 'n kaboodle over a cliff. From a historic perspective what you usually get out of that kind of mess is a revolution and a nasty dictatorship. The old saw that “you can’t spend your way out of debt” never seemed more true.

As a historian, the beliefs behind Mr. Causey’s conclusion are obviously similar to those of Karl Marx as we will see using the reference “Smith, Marx, Kondratieff and Keynes,” that I found on the Internet, a key to the understanding of what is really happening. Using an arbitrary “sequence”, the story could start like this: “

Keynes knew that capitalism could build more capacity than it could absorb. However he believed that these imbalances could be resolved through 'counter-cyclical' deficit speeding by the federal government. For Keynes, the weak point of capitalism lay within investment, and serious depressions made further private investment difficult, opening the door to direct federal intervention through the 'counter-cyclical' deficit spending. This type of intervention has become known as fiscal and monetary policy.

The reference goes on to show that the US has kept using Keynesian economics "successfully" in two other downturns. I am in agreement with Mr. Causey in that this time around will be an excessive gamble. Then “sequence” actually follows Smith as:

Marx later showed the consequences of how the labor theory would function within a larger capitalist system, leading to excess production and a serious economic downturn, followed by a political collapse.

That seems to be the end of the story in accordance to Mr. Causey’s understanding which wants to avoid communism, by keeping capitalism. But the story does not end there as “

Kondratieff felt that there was an internal restabilizing factor within capitalism, which reasserted itself during serious depressions, with each major down turn holding within itself the seeds for the next upturn.

That restabilizing factor has to do with the new Law of the Situation: the IOUs did not understand. The story continuous with creative destruction, like this:

Later during the 1930s, Joseph A. Schumpeter revised Kondratieff's theory and claimed that the capitalist entrepreneur was responsible for particular labor-based innovations, which then precipitated the long waves. The version of long wave theory presented here is a conflation of Kondratieff and Schumpeter. This version suggests that periodic severe depressions in capitalism have been relieved by new labor-based innovations, less than through the wringing out of bad debt through debt-deflation as claimed by conventional economics. 6 The long wave collapses have occurred in the way that Marx described. However, so long as new labor-based innovations have developed, capitalism has rebuilt itself each time from each collapse.

IOUs managed to stop progress back in the 1990s, as I explain in the EWPC article Slicing the Last of the Regulated Monopolies, which is summarized as:

The sense of urgency has arrived to introduce competition in the power industry, with a paradigm shift to EWPC. The shift will sliced the last of the regulated monopolies. Enough insights are now available to introduce EWPC and to understand the BIG California LIE, which for more than a decade has led to large worldwide scams.

The incredible value destruction of this erroneous path might make Karl Marx right, unless radical action is taken to return to the philosophy of the free society that the forefathers told. As Warren said “Interesting times we live in, especially for a historian.”