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Title: Democracy and Regulation: How the Public Can Govern Essential Services by Greg Palast, Jerrold Oppenheim, Theo Macgregor ISBN: 0-7453-1942-4 Publisher: Pluto Press Pub. Date: 24 January, 2003 Format: Paperback Volumes: 1 List Price(USD): $16.95

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Average Customer Rating: 5 (1 review)

Rating: 5
Summary: Excellent Overview Of The Best Utility System In The World
Comment: I first heard of Democracy and Regulation: How the Public Can Govern Essential Services when one of the books co-authors, Greg Palast, best known for his investigate journalism with the London Guardian and the BBC, plus his best selling book The Democracy Money Can Buy, mentioned it in an interview on KPFA's Flashpoints radio program the day after the August 14 East Coast electricity black out. Palast sarcastically refers to Democracy and Regulation as his "worst selling book," as indeed it is because it is published in the U.K. In his latest book Palast teams up with fellow utility experts Jerrold Oppenheim and Theo MacGregor in a work originally commissioned by the United Nations International Labour Office.

It's a little known secret among most Americans that the U.S. has one of the lowest cost electricity, telephone and water systems in the world. It also has one of the most highly regulated and transparent utility systems in the world. Regulation was the deal private utility companies made with the public to stay in business in the late 19th and early 20th century. Popular organizing demanding public ownership and control at the time was so strong the utility industry had to subject its businesses to the democratic transparency demanded by regulation. What was born out of the struggle for public power in the Populist and New Deal eras was arguably the most democratic system for governing essential services in the entire world.

Most utility systems in the U.S are privately owned, but there is virtually nothing a private utility company can do without opening their books to the public and being the subject of open and democratic debate. Any individual, business, government agency or union affected by the services of a utility company has a say in its day-to-day operations and can examine all company records on demand. Public comment and review of a simple price increase can run up to 100,000 pages. The regulatory process is cumbersome, but it is ultimately what protects the public from getting fleeced by the providers of essential services.

Meanwhile, in most of the rest of the world the governance of essential services is conducted in secret. The authors document case after case where decisions regarding essential services made in secret end up costing the public hundreds of millions of dollars, and the public gets poor service for the excessive costs they pay these services. Rather than following the example of the U.S. regulatory model, most of the rest of the world is ahead of the U.S. in the deregulation of essential services. The prime impetus for pushing neo-liberal deregulation schemes has been the coercive influence of international lending institutions, like the International Monetary Fund and the World Bank. It has become a cornerstone of international lending policies to force governments, especially in the developing world, to deregulate and privatize essential services as a condition for loan guarantees.

The authors take on the neo-liberal consensus in favor of deregulation and market based pricing schemes. While the U.S. system of transparent utility regulation has provided low price, high quality essential services for decades, it's almost impossible to find any scholarly analysis in favor of this system. In fact, most economists, pundits and politicians favor deregulatory and market based schemes that invariably lead to less democratic transparency and higher prices. Internationally most U.S. utility experts are foisting deregulation and privatization schemes on the unwilling populations of the developing world. It's a sign of the intellectual lock jaw the neo-liberal consensus has on the intellectual and political culture of this nation.

The deregulation of wholesale electricity prices in the current neo-liberal era was originally spawned in Britain in the '70s, and was imported to the U.S. in the '90s. This system of secretive market based electricity pricing replaced the highly regulated and transparent cost-based electricity pricing system in 1992. After 1992, states could create market based pricing strategies where energy prices would be determined on a day-to-day basis, and out of public view, in a manner similar to the way commodity and stock prices are determined. Gone was the democratic transparency of regulation that made it almost impossible for utilities to gouge consumers in the 23 states that have deregulated the wholesale prices of their utility industries. In came energy trading companies led by now bankrupt Enron and the disaster in California from 1999 - 2001 and beyond that followed.

The authors demonstrate the failure of market based strategies to reduce prices in the U.S. and abroad. The problem with market based pricing is that everybody needs essential services like electricity and water. The market based pricing logic that leads to a bottle of Coke costing $1 at the local convenience store just doesn't apply to essential services. If the price of a $1 bottle of coke is raised to $50, nobody will buy it. Not surprisingly, consumers slapped with tripled utility bills in California from 1999 - 2001 could not lower their consumption enough to make up for the price increases.

What also invariably follows market based pricing schemes is the end of social pricing policies, like public assistance for low-income consumers of electricity. Progressive pricing polices are replaced by volume discount pricing that primarily benefits big business customers and wealthy individuals. Finally, deregulation has led to the gutting of spending on maintenance and lay offs of tens of thousands of mostly unionized utility workers, mostly in maintenance, the world over. The end result is what we saw back on August 14 on the East Coast. For example, the utility that spread the August 14 black out to most of New York state was Niagara Mohawk. Under deregulation Niagara Mohawk was bought by British based National Grid (Foreign ownership of a utility was banned prior to deregulation). National Grid wasted no time in laying off 800 workers at Niagara Mohawk, slashing overall spending on grid maintenance and pocketed tens of millions of dollars for the company's shareholders. Not surprisingly, Niagara Mohawk was completely unprepared to deal with the black out after it originated in Ohio. As co-author Palast pointed out on KPFA the day after the black out, "If you don't change the oil in your car after 50,000 miles, it might break down."

Democracy and Regulation is an excellent survey of the democratic nature of the governance of essential services in the U.S. and the failure of deregulation and market based pricing schemes worldwide. The authors have written a highly readable book that is accessible to the average person, who might not know a thing about the subject. This book should be widely read and its message that the democratic governance of essential services works should drive the debate about this subject now and in the future. The authors conclude that democratic regulation of essential services is an important value to be cherished in a democratic and open society. I highly recommend this book.

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