Business needs rules, just like the rest of us

Posted by By at 30 June, at 12 : 45 PM Print

A friend with whom I often debate such esoteric subjects as whether capitalism needs rules suggested I read “I, Pencil,” an essay published in 1958 by economist Leonard E. Read (1898-1983). It describes the multitude of jobs involved in creating a pencil, beginning with the harvest of a cedar tree in Northern California or Oregon.

“The logs are shipped to a mill in San Leandro, California. Can you imagine the individuals who make flat cars and rails and railroad engines and who construct and install the communication systems incidental thereto?” the pencil reports.

Add graphite from Sri Lanka, clay from Mississippi, and material from Dutch East Indies that is used in the eraser. Final assembly is in a factory comprising “$4,000,000 in machinery and building, all capital accumulated by thrifty and saving parents of (the finished pencil).”

“(Being) aware of the miraculousness which I symbolize,” Pencil says, “you can help save the freedom mankind is too unhappily losing.”

A half-century later, business is still singing the same chorus: Get the government out of the way or business is out of business, employees out of work, and government out of money. Regulation drives up costs and prevents innovation, beats the resounding refrain; a market free of government interference can take care of itself.

In Pennsylvania, the energy industry has found a way to drill more than a mile below the surface of the Commonwealth to extract profits in the form of natural gas. The gas will be sold to residences and industries primarily on the East Coast. Regulations and taxes not required.

The industry points to job creation at the drilling sites, and benefits to vehicles and homes on the East Coast from cleaner burning natural gas.

Former Pennsylvania Governor Tom Ridge, a self-declared paid consultant for the Marcellus industry, insists the gas extraction process, called fracking, is safe. Ridge told Steven Colbert in a June 9 broadcast, “they pump mostly water and sand, and some chemicals to it, it goes down a mile, and … it releases the gas.”

When Colbert listed some of the chemicals and asked whether he could feed them to his toddler, Ridge replied, “Well, you’d be abusing your kids if you did, so let’s just put it that-a-way.”

To the question of flammable gas appearing in residential water supplies, Ridge replied, “But there has not been a single proven instance where it’s been related to hydraulic fracking.”

It seems a bit specious to claim there has been no proof when in fact there has been no, or little, testing. An EPA study was announced in March that finally will look at the natural gas fracking fields in five states, including Pennsylvania, to determine whether the process is safe over the long term.

On the other hand, there have been several instances in which the Pennsylvania Department of Environmental Protection has determined that inferior well casings have allowed chemicals and gas to escape into the water table, polluting wells in the surrounding area. At least two drilling companies – Cabot Oil & Gas Corp. and Chesapeake Energy – have been fined and required to truck in bottle drinking water to residents for an as yet undetermined period.

There is a moratorium on drilling in approximately 700,000 acres of state forest land. Gov. Ed Rendell signed the order in October 2010, and numerous people are trying to keep it in effect. The industry thinks the land has huge potential, but foresters and environmentalists fear the land will be segmented into near oblivion by the well pads and the roads and pipelines that will service them.

State Rep. Steve Santarsiero, D-Bucks County, told Terry Madonna Sunday on “Pennsylvania’s Newsmakers” he wants to maintain the moratorium. He said he favors a severance tax or impact fee to be imposed on the drillers.

“It has to be one that will fund environmental protection in the state as well as remediate problems,” the lawmaker said.

Gov. Tom Corbett steadfastly objects to taxing the industry, citing its record of job creation – fewer than 6,000 new jobs in the past three years, according to Department of Labor and Industry statistics.

For decades as a daily news reporter I wrote about developers rushing to have their plans accepted for housing subdivisions everyone knew would not be built for many years – well before the 2008 “bubble-burst.” But once the plan was accepted by the local government, any changes in zoning laws would not apply.

Developers know residents can, at least initially, be courted with promises of new jobs and a larger tax base. Eventually, they discover the jobs have not materialized and the tax base has been consumed by problems created by the development. They push to put in place ordinances and regulations to protect the citizens and the environment, usually well after the damage is done.

Industry’s job – whether building houses or drilling for gas – is to establish itself before the problems are discovered. It’s a time-proven ploy, and we should learn from it.

In most cases, market freedom is a good thing – as long as the only people affected are the players. But when the health and welfare of the fans (employees, residents or environment) is affected, we have a responsibility to establish rules to protect both the playing field and the people and area surrounding it.

If there really is a demand for the product – whether new homes, natural gas or pencils – business will find a way to profit, even with the regulations it spends so much treasure trying to prevent.

Photo by Tom Owad


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This post was written by:
- who has written 169 posts for Rock The Capital
John Messeder is an award winning journalist with more than 35 years experience writing about education, environment and local government issues. He has lived in Maine, Florida, California and Alaska, and, by temporary turns, numerous places in between. John also is an accomplished photographer, and avid hiker, conservationist, oral history buff, and author of several books he has not yet got 'round to writing. He lives in Adams County, Pa., just over a hill from Gettysburg, with his wife and Golden Retriever. He may be contacted at - Email jmesseder

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