-Caveat Lector-
Crude Confusion
By Robert Wright
Robert Wright is the author of The Moral Animal and the new book Nonzero:
The Logic of Human Destiny. Posted Tuesday, Sept. 26, 2000, at 12:30 p.m. PT
The Strategic Petroleum Reserve, according to Wall Street Journal columnist
Paul Gigot, "was set up to deal with supply problems, not to deal with
fluctuations in price." The Clinton administration, in Gigot's view, is
guilty of using the reserve for the latter purpose. Energy Secretary Bill
Richardson denies the charge; the administration's decision to dip into the
reserve was "about disruption of supply. � We are not trying to manipulate
prices."
Stop! You're both wrong! Unless the fabric of the universe has changed since
I took Econ 101, the supply of oil and the price of oil are more closely
related than either Gigot or Richardson implies. The reason we've seen the
"fluctuations in price" that Gigot considers insufficient grounds for
intervention is that there have been "supply problems," which he deems
sufficient grounds. And, as for Richardson: Even if we accept his contention
that the administration is focusing on the supply problem, there's no doubt
that its solution will in some sense "manipulate prices." That is inherent
in any significant use of the oil reserve.
Am I just being pedantic? Hey, it's a living. Besides, I truly do think the
current debate over when to use the oil reserve gets muddied by two
misleading dichotomies. First is this supply-price dichotomy: the idea that,
in deciding when to intervene, there's a fundamental difference between
using price as your criterion and using available supply. Second is the idea
that there's a clear, bright line between ample supplies (or acceptable
prices) on the one hand and a supply crisis (intolerable prices) on the
other. In truth, of course, there's a continuum of prices, a continuum of
supplies�and deciding when the situation is bleak enough to warrant
intervention is the kind of judgment call presidents are supposed to make.
Consider the Bush administration's 1991 use of the oil reserve, which
Republicans are now hailing as a paragon of good government. There was no
epic supply crisis then. Even amid the panicked buying induced by the onset
of the Persian Gulf war, oil prices were lower than they were this month
before the Clinton administration intervened. And the fact that we were at
war in 1991 doesn't turn unpleasantly high oil prices into a "national
security" problem. Our fighter pilots in Iraq weren't being told to fly at
55 mph to conserve fuel; and, in any event, Iraqi troops weren't exactly at
our doorstep.
The fact is that the Bush administration, like the Clinton administration,
was responding to what Paul Gigot dismissively refers to as "fluctuations in
prices." On the day President Bush authorized the release�1.1 million
barrels a day for a month, roughly the same as the Clinton administration's
release�the White House said its goal was "to promote stability in world
markets." Price stability? Supply stability? Yes.
I suppose it goes without saying that, of all the melodramatic uses of the
phrase "manipulate prices" over the last week, Dick Cheney's ("Al Gore is
for releasing oil � in order to manipulate prices") wins the chutzpah award.
As has been widely noted, Cheney, back in his oil tycoon days, applauded
OPEC's upward manipulation of prices. And OPEC deserves the "manipulator"
label more richly than the Clinton administration does. After all, the
Clinton administration's "manipulation" will move prices closer to their
natural market level�the level they would be at if OPEC hadn't artificially
constricted supply in the first place. (Republicans, I had always thought,
liked prices to be at the free-market level.)
Granted, Al Gore has a bit of explaining to do: As various people have
noted, given his concerns about global warming, you'd think he'd like high
oil prices as a way to discipline the use of fossil fuels; in fact, he has
(commendably) championed a fossil fuels tax in the past. On the other hand,
he's not now championing a net reduction in oil prices: The administration's
plan is to replenish the petroleum reserve after the winter, thus
"manipulating" prices upward just as much as it is now "manipulating" them
downward. So the entire maneuver is actually environment-neutral (though
not, of course, election-neutral).
I-told-you-so department: An excellent piece by Roger Cohen in this week's
New York Times "Week in Review" section charts the recent transformation of
anti-globalization crusaders from scruffy Seattle savages to dignified
activists. We are seeing "an increasingly sophisticated, intellectually
robust protest movement, mixing idealism with pragmatism, that is fast
playing catch-up with the forces of multinational capital." Cohen cites an
activist who, having observed the frequent inability of national authorities
to govern globalization, is working at the supranational policymaking
level�trying, for example, to use "international law to compel the World
Bank to avoid loans to any projects that might compromise human rights."
As regular readers might guess, the Earthling is as happy as a clam about
this trend toward world governance. In fact, in a piece of mine that
appeared in the New Republic in January, I contended that it is in the
interest of radicals and capitalists alike for radicals to get civilized in
exactly the fashion Cohen describes. I wrote:
One way or another, people who feel threatened by globalization will make
their influence felt. Either they'll modulate globalization by linking up
with like-minded groups abroad to help shape international rules or they'll
take the economic-nationalist route and lobby for the sort of trade barriers
that, in addition to starting trade wars, often involve xenophobia and
nativism. The way to keep these people from being sheer protectionists�and,
in some cases, from morphing into full-fledged Buchananites�is to turn them
into WTO lobbyists, which means making the WTO a body worth lobbying [e.g.,
making it a place where environmental and labor issues are addressed]. Put
suits on those scraggly rabble-rousers and send them to Geneva!
(This week, of course, they're in Prague at the World Bank and IMF meetings,
and many of them aren't yet wearing suits. But even the scruffier ones are
actually protesting for something�debt relief, according to this morning's
news.)
Cohen closes his piece by noting that "the evolution is natural enough:
world politics, however cumbersome, for a global economy." Precisely! In
fact, I'd go so far as to say that world governance is the natural
culmination of human cultural evolution to date. Remember where you heard it
first.
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