Understanding the New Era of Corporate Socialism
by Robert Roy Pool
No one expected it. No one wanted it. And when a socialist revolution finally occurred in the United States, no one understood what had happened until several years had passed.
It was unlike anything before in history, and therefore wildly misperceived. The socialist revolution was not fomented by workers and students marching in the streets carrying banners and shouting slogans. Instead, it was stumbled into accidently by a small cabal of powerful bankers in a room at the Federal Reserve Building in New York City on the weekend of September 13th and 14th, 2008, as they desperately sought ways to prevent the entire Western banking system from imploding. 
I have just finished reading On the Brink by Henry Paulson, who served as Secretary of the Treasury at that time and played a central role in those meetings. Neither Paulson nor any of the other bankers in those rooms at the New York Fed believed in socialism. None of them foresaw the consequences of their actions. Few of them realize even now they had inadvertently invented a new form of social organization. In one of history’s greatest ironies, the new era of corporate socialism was ushered in under a Republican Administration that advocated free-market capitalism as ardently as any in history.
History… and Myth
The American people believe in free market capitalism almost as fervently as they believe in the democratic self-government and the genius of their Founding Fathers. It would be natural to assume that Americans have long practiced free-market capitalism. But this assertion turns out to be myth.
Protecting the Price of Oil
In reality the United States has consistently and effectively invented ways of manipulating free markets, invariably to soften the market’s often brutal oscillations for the benefit of producers. In the 1930s Texas adapted the Texas Railroad Commission – originally set up to regulate the tariffs charged by railroads in the state – and tasked the agency with regulating the pumping of crude oil from all the wells in Texas. Since Texas produced the lion’s share of the oil consumed in the United States at that time, the Texas Railroad Commission successfully manipulated the market, supporting the price of oil until the Second World War erupted and made such activity unnecessary.
During the war the U.S. produced as much oil as it possibly could. The tank columns that freed Europe from the Nazis and the aircraft carrier battle groups that demolished the Japanese Empire all consumed prodigious quantities of gasoline. Oil producers therefore made effortless profits. In fact, consumer use of gasoline had to be severely rationed. Allowing the free market to work during World War Two would have resulted in too much gasoline going to civilians at a time when the U.S. military needed every drop to crush its enemies. For more than four years, the free market was swept away completely and most of the gasoline was allocated to the Armed Forces at controlled prices.
After the war the global oil supply expanded enormously. The largest new reserves were found in the Middle East, Nigeria, and Venezuela. OPEC, the Organization of Petroleum Exporting Countries, by 1970 had assumed the role the Texas Railroad Commission. OPEC regulated the production of oil – limited production – and thereby increased global oil prices.
OPEC’s power reached its zenith between 1973 and 1982. As long as OPEC controlled most of the world’s spare productive capacity, OPEC could effectively restrict oil production and raise prices. Once new supplies were brought to market by Anglo-American companies in the North Sea and on the North Slope, however, OPEC lost its ability to control enough of the world’s production and could no longer support – manipulate – the price of oil. From 1986 until 2005, OPEC was powerless. No organization could effectively limit oil production, and the price of oil reached record lows in real dollar terms.
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