Petrol protests are "anti-market", not "anti-tax"

[Louis Proyect <lnp3@xxxxxxxxxxxxx>]

[Paul Krugman is a top ideologist for 'neoliberalism'.]

NY Times, Sept. 17, 2000

RECKONINGS

Britain's Stormy Petrol

By PAUL KRUGMAN

Tony Blair showed real backbone last week. Faced with a stunningly
effective blockade by truckers protesting high fuel prices, the British
prime minister flatly refused to give in to demands for tax cuts. The
initial result was extensive disruption ? not just closed gas stations but
shortages of bread and milk in supermarkets, delays in medical procedures
and in general a state of chaos all too reminiscent of the U.S. gasoline
shortage of 1979. By the end of the week, however, the protests seemed to
be subsiding in Britain (though similar protests were still growing
elsewhere in Europe). So for the time being Mr. Blair has won ? though no
good deed goes unpunished, and he is likely to pay a heavy political cost
for his stand on principle.

But Britain's fuel crisis ? and even more important, the public reaction ?
may have implications that reach far beyond the political prospects for Mr.
Blair and his party.

There is little question that Mr. Blair was right to be so intransigent.
It's true that because of the high taxes the British government levies on
petroleum products, gasoline and diesel fuel are very expensive, even
compared with prices in other European countries. (Gasoline currently costs
about $4.25 per gallon.) But the overall tax take of the British
government, while high by U.S. standards, is actually low by European
standards. Basically, high taxes on fuel are more than offset by lower
general sales taxes and income taxes ? and any reduction in fuel taxes
would eventually have to be matched by increases in other taxes.

And there are good reasons why fuel should be singled out for high
taxation. Among other things, traffic congestion is, believe it or not, a
much worse problem in Britain than in the United States. A tax that
discourages motorists from getting on the road and hence getting in the way
of other motorists serves a social purpose over and above the revenue it
raises.

Even if Britain should eventually decide to tax fuel less and other things
more, there's a question of timing: reducing fuel taxes in the face of a
world oil shortage would be a terrible idea. There's the question of
precedent: if Mr. Blair had given in to the protest on fuel prices, he
would in effect have signaled every other interest group with a plausible
grievance that disruptive protests were an effective political tool.

Also, cutting taxes on oil when oil prices rise gives exactly the wrong
signal to the oil cartel. It tells the Organization of Petroleum Exporting
Countries not to worry ? higher oil prices won't reduce sales because
importing nations will make sure that those higher prices aren't passed on
to consumers.

So Mr. Blair has the theory of the case on his side. Yet according to polls
the vast majority of Britons sided with the protesters. And the same is
apparently true in the rest of Europe.

Why do fuel-price protests command such wide support? American
conservatives ? and Britain's hapless Conservative opposition ? would like
to think of this as an anti- tax movement. After all, don't truckers want a
cut in fuel taxes? But while the letter of the protesters' demands may
involve tax cuts, the spirit of the protest is quite different. This isn't
a rebellion against taxes per se: it's a rebellion against markets. In
effect, European truckers have been saying that it isn't right that they
should suffer just because the world price of the fuel they need has gone up.

It is a telling detail that the wave of European fuel-price protests began
in France, the Western nation that has been most reluctant to let market
forces rip. Of course the government of France, true to form, quickly caved
in to the protesters' demands ? to the fury of other European governments
that are trying to make a stand on principle. But it turns out that the
French are not that exceptional ? even in post-Thatcherite Britain most
people support the truckers.

What this says is that what seems to be the defining feature of Western
political economy at the turn of the millennium ? the triumph of
free-market ideology ? is far less complete than some would imagine.
Ordinary people, when push comes to shove, feel that sometimes the market
just isn't fair ? and have sympathy for those who protest that unfairness,
even if those protests adversely affect the population at large.


Louis Proyect
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