An older article wrote years ago that I published here since I believe the concept is still relevant.
Over the summer I was reading an article on an automotive website entitled ‘City Unlocks Incredibly Cheap Gas Prices HYPERLINK “http://jalopnik.com/city-unlocks-incredibly-cheap-gas-prices-through-power-1608882245″Through HYPERLINK “http://jalopnik.com/city-unlocks-incredibly-cheap-gas-prices-through-power-1608882245” Power Of ‘Socialism’’. I saved it to my reading list, and discovered it again while switching to a new iPhone. As someone who works on cost, quality, efficiency, and inventory all day, I was filled with questions as to why any town would want to do this. As someone who passionately believes in freedom and free markets, I was floored that something would take place here in the USA, I’d expect that in Iran or Venezuela.
The very first paragraph describes how the local government moved undercut the business owners in the area by over .20/gal. The author tries repeatedly to explain how this is in no way anything close to socialism, and then moves to mock others who disagree with the president’s economic policies. It was this viewpoint that led to me not visiting that site anymore. What is also odd is that when loading up this website, their motto is drive free or die. I guess in their mind you’re free to drive as long as you drive what they want while you fuel your vehicle at their direction.
What is most humorous is when the author states “It’s not really socialism”; basically admitting that there are socialistic elements to it. The comments section as also filled with people who are calling it municipalism, which isn’t even a word. I can understand that to many who are not educated in economics, that this seems like a great idea. I do want to warn however that this sets a really bad precedent and could go down a really bad road. Below I will mention how this is bad for business, consumers, and the free market in general.
The crowding out effect: This occurs when the government ‘crowds out’ the free market by supporting one business over others, or by offering a specific good or service itself. It is clear that this specific town had set its sights on using the lure of cheaper gas to put this specific effect into action. What is more astonishing is that the current owners of gas stations in the area are paying business and individual taxes on the money they make for selling gas; and that the town is directly using the tax dollars they collect against the people who pay the taxes. To say that the existence of private gas stations in the town makes this ok is ludicrous. The average consumer buys gas, and only gas at a gas station. If there were 4 stations at an intersection, and 3 were priced at 3.59/gal, and one was 3.36/gal; it’s obvious which would have lines around the block.
Quality: Private entities want return customers. They do all they can to provide a quality experience. The quality of government services (the VA, Medicare, Medicaid, Social Security) always lacks behind that of private entities because, while government is required to legally provide those services, they are not required to have an ever-increasing quality standard since there is no free market option. When the free market is crowded out, quality always drops. Private gas stations are also required to undergo government safety inspections to make sure that their patrons are safe while fueling. It is unrealistic to assume that government gas will inspect itself; look at this summer’s VA scandal, the government did a poor job of enforcing its own standards there, this being less important and with less of a microscope only makes it less likely that safety standards will be held to.
The OPPOSITE of the FREE MARKET: A free market is free for all citizens of a country to participate in, without government involvement. Businesses have bottom lines to meet or go bankrupt; a government can run infinite deficits and print its own money. How anyone can expect a private business to compete against that boggles my mind. Truly free markets are not racist or sexist, if you bring an in demand good or service to the market you will be rewarded, this goes for commodities like gasoline too. People on the political left hate Wal-Mart and say that it crowds out the little guy, their hypocrisy is exposed when they are in favor of the government doing it. They were never for the little guy, those people were always anti all business and pro-government, and were only using Wal-Mart as their scapegoat to win the votes of small business owners.
Everyone wants a bargain on gasoline, as a driver of a car with 400 Horsepower and a 6.0 litre V8 engine, this means me too; but not to the extent that private entities have to be crowded out or eliminated. The government crowding out businesses to provide cheaper goods, to win votes and popularity goes down a dangerous road. I would encourage readers that disagree to look at countries that don’t allow for free people and free markets, and check the average wealth and quality of life of those residents.