San Francisco -- It's remarkable how much of America's economic and political dialogue -- and results -- can be understood by asking: "Who's inside? Who's not?"
More than ideology, more than party, more even than profit, insiderness trumps all. In particular, if you are an insider, and events make your factories, power plants, equipment, or other capital assets less valuable, government will bail you out. And if you are an outsider, your stranded assets are, well, just stranded, and you're out of luck, another victim of Joseph Schumpeter's capitalist "engine of creative destruction."
Look at the conversation about a new energy economy. In the world of energy policy, carbon is on the inside. Oil is the real inner circle; coal clusters around and can make life miserable for anyone but oil; but natural gas is the Rodney Dangerfield of fossil fuels -- it gets no respect. Energy productivity, and anything that doesn't use carbon, is a wallflower. Tax credits for wind and solar are routinely allowed to expire or are only extended for a year or two -- treatment that would cause oil and coal to go ballistic.
In the world of food and fiber, row crops are king -- and the less nutritious they are, the higher their status. Sugar and tobacco rule the roost; cotton is next; with corn, wheat, and soybeans clustered behind. Rice has its niche. Fruits and vegetables get a hearing but rarely much real help. And fisheries, which represent the traditional blue-collar, hard-work, family-enterprise segment of the world of food, are the first to get thrown under the bus.
This hierarchy was on spectacular display this month. We learned that however important Americans say it is that the U.S. kick its addiction to oil, the oil companies are having none of it. Big Oil is abandoning its head fake toward renewables. BP (Remember "Beyond Petroleum"?) has been dumping its renewable lines of business. Shell has frozen its research into wind and solar. ExxonMobil's Rex Tillerson summed it up by saying, "In my view, nothing has really changed." And they clearly don't fear that the government will take away the rich flow of subsidies and other special breaks that make their business so lucrative -- after all, they can still muster 40 votes in the U.S. Senate to stop most anything they fear.
In Missouri, utilities claimed to be stunned at the idea that the cheap rates for electricity that come with burning dirty coal in old power plants might be phased out. Coal-reliant public utility executives in other states, like AEP's Mike Morris and Duke's Jim Rogers, vigorously assert that their customers are entitled to have their old investments protected, but that no one else is. No one is going to strand their assets by stopping them from dumping their mercury, coal ash, and carbon dioxide into their neighbors' yards, waters, and airsheds!
Barack Obama's efforts to cut subsidy payments to the biggest row-crop farmers were chopped down in the U.S. Senate. These annual payments to row-crop agribusiness have, in effect, become an entitlement.
But when, as a result of climate change and the mismanagement (largely at Big Agriculture's behest) of California's rivers, federal officials had to cancel the salmon season for the second year in a row, no one suggested that the struggling commercial fishermen should somehow be bailed out. After two years without a season, the boats, nets, and other assets of these fishermen are, effectively, valueless -- stranded assets.
What distinguishes salmon boats from coal-fired power plants, when changed environmental circumstances challenge their historic economics? It's certainly not the market that decides -- and it's not the work ethic or public benefit. Otherwise, fisheries would trump power plants. No, the hard fact is that some industries are on the inside, and others are not.
This may help to explain one of the most stunning poll results of recent years. Asked to choose between capitalism and socialism, Americans did come down for capitalism -- but by a stunningly narrow 53 percent to 47 percent margin. Now I wouldn't take this finding too literally. Many respondents probably meant the kind of "socialism" that the reactionary right is claiming the Obama administration represents -- not even European social democracy. But when only 53 percent of Americans have anything good to say about capitalism, it's pretty clear that cronyism and insider favors have created a new political reality in this country. Americans will forgive the markets for a lot -- if they think those markets are fair. But the fact they are rigged is being shoved in our faces every day. And we don't like it.