Cheapening free-market capitalism

Cheapening free-market capitalism

Could two state governments’ forced taxpayer “investment” in the shale gas-fueled petrochemical industry go bust?

It is neither an unreasonable nor facetious postulation given depressed coronavirus market conditions that could go on for some time and social pushes to drastically decrease the use of fracked natural gas and the plastics it can be processed into because of environmental concerns.

But the shockwaves going through the industry right now – on the raw material supply side and the finished product demand side — should not be taken lightly.

And it should force government types all too ready and willing to conscript tax dollars to underwrite private ventures to reconsider such actions. After all, taxpayers have no business underwriting such things under any circumstances to begin with.

Simply put, as The Wall Street Journal notes, “The industry has expanded faster than global demand for plastics.” Put another way, there’s a glut of plastics in the marketplace.

And while natural gas prices are up year over year, producers are wary of opening the production valves to the extent that created a long stretch of glutted markets and depressed prices.

Particularly hard hit has been petrochemical “cracker” plant development along the Gulf Coast. But the nearing-completion cracker plant in Beaver County and a similar but now stalled project in Ohio, just south of Wheeling, W.Va., are not immune from such market and environmental forces.

The former, a Royal Dutch Shell facility along the Ohio River in Potter Township, received tax breaks and other incentives valued in excess of $1.65 billion over 25 years. Indeed, many of those incentives are performance-based. But ancillary public millions have been expended in infrastructure already.

The latter, a PTT Global Chemical America facility, also along the Ohio River in Belmont County, Ohio, has received in excess of $50 million in outright state grants. And there have been and will be plenty of tax breaks to come.

Both projects were sold to the respective state governments as nothing less than perpetual money machines that would spawn ancillary industries, restore their respective industrial valleys to glory and, who knows, straighten the teeth and keep clear the skin of every adolescent.

And, perhaps, they will give those two long-depressed areas and their economies the boost they need. For analysts do project demand will rise. Eventually. Maybe in a few years. But who really knows?

So, why did these petrochemical conglomerates “need,” and why were they given or promised, all that taxpayer money? Because they wanted to limit their risk, an action rationalized by government almsgivers as being acceptable given the expected monumental returns.

But that’s an irrational circular argument. For the umpteenth time, if these cracker plants are the be-all and end-all for the Ohio River Valley’s redemption, why do these respective companies require the backstop of public dollars?

The fact of the matter is, the public “returns” would be far greater without all those billions in public subsidies, correct? If the sales pitch is correct, that is. Maybe it hasn’t been.

Make no mistake, we have been ardent supporters of the shale gas industry. And we are among the chief critics of government attempts to retard with onerous regulations and taxes the very industry they have rushed to “incentivize” with public dollars. Neither have we fallen short in taking on the wild-eyed attempts of eco-crats to shut down the shale gas industry.

But there are limits.

As Jake Haulk, president-emeritus of the Allegheny Institute, reminds in general, such subsidies have a “hideous impact … on businesses that have begun to expect them to be offered,” not to mention giving the pols who do offer them cover to tsk-tsk detractors by claiming “it’s  how business is done.”

But such machinations have “cheapened the whole notion of free-market capitalism,” Haulk says. Which is a manifest threat to your pocketbook, your economic liberty and sound public policy.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).