Petroleum and Anti-Capitalism

Introduction: The Common Enemy

From politicians and pundits to working men and women, one thing on which all Americans can agree is that oil companies are to blame for most, if not all, of the troubles facing modern civilization. Rather than a rational concern, this near universal contempt for profit-seeking oil conglomerates is based in a social theory that in nearly any other context is recognized as a malignant and problematic philosophy. At the core of the anti-corporate hysteria that plagues contemporary political discussion is an antiquated anti-capitalist ideology that is more likely rooted in outdated political philosophy than in reason and truth.

The argument is as follows: oil companies are making an "unnecessary" and "excessive" profit, and so this profit should be taxed and the oil industry regulated to ensure a greater degree of social justice. Implicit in this argument are the following premises, without which the entire argument falls flat:

1. Social justice is dependent on economic equality.
2. Profits are "earned" only at the expense of everyday consumers.
3. Possession of wealth beyond a certain limit is immoral.
4. Socially irresponsible agents should be corrected through force.

Through examination, all of these premises are questionable at best and plainly false at worst. At the root of their failures are the rotted remnants of 19th century political philosophers that have been forced to fit modern society. At the heart of contemporary anti-capitalism are Marxist and populist outcroppings of a flawed social contract theory. The historical roots of this destructive philosophy are early 20th century socialism and an ongoing popular ignorance of basic economic theory.

1. Social justice is dependent on economic equality.

This idea stems from the camp that conceives of justice as fairness, and fairness as equality. This seems intuitive enough -- justice is certainly fair. However, in order for oil companies to be considered incontrovertibly unjust, one must prove that social justice exists only where economic equality exists. This conjures images of the Soviet world and leads one to wonder the consequences of such a philosophy consistently followed. For this theory to be falsified, one need only think of a world in which one agent justly possesses or otherwise has available more resources than another agent. Even assuming social contract theory and its consequent social obligations on an individual, an individual can accumulate greater wealth than another individual without exploiting or harming anyone. So long as the society permits the individual some sort of disposable wealth, this can happen (Note that wealth in this case is not limited to a salary but could include something as simple as labor or free time that is not restricted by any social obligation). The individual could make an investment, sacrificing current disposable wealth in the hope for increased future wealth. This could be as complicated as stock or bond trading or as simple as planting seeds to grow a beautiful and functional garden or styling one's hair to add aesthetic value to oneself. In any society that permits personal property (and the most successful ones do), one can offset the balance of wealth with prudent decision-making and a willingness to make short-term sacrifices to make long-term gains. A society devoid of property rights is befitting only of a small tribe and not of a burgeoning civilization.

2. Profits are "earned" only at the expense of everyday consumers.

Technically, this is true. Profit, and indeed all revenue, is gained only through consumers exchanging a portion of their own wealth for a product or service they value greater than the wealth they give up. However, in the voluntary exchanges that occur within a capitalist economy, no agent (neither the producer nor the consumer) is harmed in the transaction. A producer offers a product or service to the market, perhaps even advertising its existence to consumers, who then seek out these products and services and exchange their abstract (currency) or concrete (bartered goods) wealth for the concrete wealth they desire. This is an exchange of value for value, and there is no coercion in the exchange. Consumers may become dependent on certain goods to achieve their standard of living, but they are not threatened or abused into purchasing the products. The anti-capitalist idea is that consumers are being exploited in some way by this exchange, and that the profits are too high and a) prices should be lowered to benefit consumers or b) profits should be more evenly distributed among those involved in production and who do not normally share in the profits (e.g. wage "slaves"). Accusations often center around the difference between a product's price and its cost of production or difference between a manager's salary and the lowest worker's wage. Both of these disparities can be put into perspective through a proper economic analysis.

A product's price is not a function of the cost of production but of the relationship between a producer's supply and the consumers' demand for that product. The cost of production does not determine a product's price but merely the quantity produced. If the consumers had it their way, all products would have an infinitely high supply and an infinitely low price. However, in a world with limited resources, this is impossible. Producers aim to supply exactly the amount that consumers demand but are bound by their own costs of production. The cost per unit of production increases with quantity while the price decreases; in the same way that consumers seek to maximize utility, producers seek to maximize profit and will not produce more than a certain amount if that increase in production will bring a loss in profit. It is no less just for a producer to maximize profit by ceasing production than it is for a consumer to maximize utility by shopping around for the best price.

Workers, the true producers and owners of production according to Marxists, seek to maximize income. It is not surprising that they would like a larger share in the profits of their employers. However, is it really unjust for an employer to take a greater share of the company's profits than the employee? Does the wage worker have any just claim to the profits earned through the sale of the products of their labor? The answer to both of these, I think, is plainly "no." Unless a person is the owner of the company (sole proprietor, partner, or shareholder), one is an employee of that company. Employees do not own any of the resources in the company except for their own labor, which they contract out to the employer in exchange for material wealth. When viewed this way, it is plain that employees have no claim on the company's profits, which is the wealth received from the exchange of company property. They are paid only for their labor, which has a certain value to the company. The price of labor depends on the type of labor, so it is no surprise that some employees enjoy higher salaries than others. Workers often complain that they are paid just enough for them to not quit, but it is precisely that amount of money that their labor is worth.

The net profit for a company's owners, then, is the resulting wealth from the sale (exchange for currency) of their property, minus the cost of production. It is no less just than the resulting wealth you gain from selling or bartering your own property at a bake sale. Profits, then, are exactly where they should be in any well-managed business. If profits are more or less than they should be, the market responds to correct the situation. When profits are high, more firms enter the industry, increasing the supply and lowering prices and profits. When profits are low, firms leave the industry, decreasing the supply and increasing the prices and profits. Profits are all about equilibrium and not exploitation.

3. Possession of wealth beyond a certain limit is immoral.

This proposition holds that it is unjust for one person to own more than is necessary to provide for oneself and one's dependents. Under this view, it is a travesty that some members of society are bloated millionaires while others are homeless and hungry. This third premise can be seen as an extension of the first premise, which has been shown to be as groundless as it is impossible. However, in modern society, there is a peculiar situation -- the most wealthy members of society are not the most politically powerful. This, combined with democratic forms of governance, leads to a situation in which politicians can rally political support from the more common and less wealthy voter by committing theft and other injustices against the less common and wealthier members of society without fear of retribution. The result is the proliferation of progressive tax systems that steal more and more money from an individual as he or she generates more and more wealth. The basis for such action is discussed along with the fourth faulty premise.

4. Socially irresponsible agents should be corrected through force.

This premise suggests that all members of society have a responsibility to act in such a way as to benefit society as a whole. This is the consequence of a social contract theory, and it is the justification for the tribal equalization measures taken by politicians, discussed above. This is problematic for at least three reasons:

First, social contract theories, which is the typical justification for this premise, are problematic in their own right. The theoretical formation and regulation of social contracts does not match up with the actual history of the modern nation-state, which is riddled with violence and coercion and not intellectual discussions and skilled societal planning. Even when taken as a metaphor for how one should view the relationship between citizen and state, the social contract falls short, as we shall see.

Second, the premise assumes the existence of a singular and definite public will that can be harmed or helped by certain actions. In practice, all political decisions have winners and losers. Are the losers not members of society? In democracies, a plurality of political participants (voters) is often taken as defining the public will. However, no sane person honestly argues that a plurality of participants is what defines justice; most people believe in some kind of objective ideal of justice, but this is utterly incompatible with plurality decision-making. In reality, society does not exist; it is merely a linguistic expression that refers to a group of individuals who are organized in a certain way. Beneficiaries of policy decisions exist in networks within this aggregate of individuals amidst the [often more common] losers. A more efficient society would not assume a monolithic public will but would cater to the various needs and interests of competing groups within a society. In practice, government attempts to do this (and fails more often than not). Social contract theory cannot explain this phenomenon, and the reality of the situation makes nonsense of premise 4.

Third, in the absence of a social contract (a dubitable theory), the use of coercion becomes unjustified. If there exist no obligations for the individual to act to benefit the singular social will, then forcing that individual to act for that non-existent will's benefit becomes criminally abusive. Without a social contract, the individual is bound only by consensual agreements with other individuals. In a just world, socially irresponsible agents would not be forced into compliance with a singular will, but would be influenced by a conglomerate of competing wills to act a certain way. This conception of society may be more chaotic, but it is closer to reality.

Conclusion

The popular criticism of oil giants is unjustified and socially dangerous. There is no sound justification for the systematic bullying of successful businesses. The anti-capitalist rantings of today are merely ventings of a common frustration with the economy and government of modern America, and they represent a resurfacing of the populist resentments that so marked the early 20th century. If sensible Americans are not careful, this neosocialist sentiment could result in a full-fledged political movement that will cripple the nation for decades to come.

The high profits enjoyed by oil companies are necessary for the further development of fuel technology. ExxonMobil and other businesses will begin drilling in higher capacity and in more places. Considering alternative energy sources are not yet economically viable -- many are still in technological infancy -- the short term solution to the explosion in crude oil prices will be to let the market work its magic. Political measures like a "windfall profits" tax on "excessive" profits will do nothing but harm the oil industry and result in supply shortages for the American public. Regulation of the oil industry is the cause and not the solution for the high gasoline prices of today; environmental concerns for years have barred fuel conglomerates from drilling for more oil or building more refineries. However, it is this increase in supply that could alleviate ever-increasing fuel prices.

Although the new breed of populism is today centered on the oil industry, it is not the only area affected. Universal health care programs are a popular idea among most Americans, and citizens are increasingly reliant on their government for jobs, income, and services. Such a centralized system is inefficient, unreliable, and fundamentally unjust. A new philosophy is needed to counteract the socialist specters within the political and intellectual landscape, one that is based in science, reality, and truth and not in the impassioned anger of ill-informed voters.