The small town of Somerset, Kentucky had a problem. It was a potentially popular tourist destination because of its proximity to Lake Cumberland but local businesses and residents struggled with high petrol prices. Petrol stations would drive up prices during the summer months and at the weekends. Good for profits but not for the tourist trade; and certainly not for the residents. In Somerset, the median income was $27,000 per year compared to a state-wide average of $41,000. So what did the good folk of Somerset do about the problem?
Instead of hectoring the local capitalists to lower their prices (‘won’t somebody think of the children’) or bring in price controls which can be problematic, never mind being bureaucratic and complex for a small town, they did something much simpler, more common-sensical, and even revolutionary.
They opened up a publicly-owned petrol station.
The goal was not to compete for profits. The goal was to provide petrol at cost and, through ‘competition’ force the private petrol stations to lower their prices (if they didn’t, they would lose business to the new municipal station). It would be an incentive for tourists to stop in Somerset for petrol and spend some money in the local restaurants, shops and other small businesses. It would benefit the low-income residents.
You can imagine the reaction from the private petrol-station owners and right-wing ideologues: outrage. This was an interference with the ‘free market’, an unwarranted intervention in the ‘private sector’; this was nothing short of ‘socialism’. Where is Donald Trump when you need him the most?
Of course, this is not socialism as such. But it is a public intervention in the market process to maximise public benefit – in this instance, directly providing a market good to benefit individuals from lower petrol prices, and local businesses from the increased tourism numbers. One can use a range of instruments to achieve this goal – regulation, taxation, etc. Or one can be more direct – provide the good or service through public ownership.
(NOTE for all you who fret over the fiscal rules – such an initiative here wouldn’t impact on the ‘fiscal space’ as it is categorised as an investment off-the-books. I’m sure that comes as a great relief).
And the real kicker in all this is that the primary mover was a Republican Mayor. What did he have to say?
‘If government doesn't do it (set up a cost-based petrol station) to protect the public, then who does it? It's the role of government to protect us from big business.’
A Republican mayor standing in the tradition of the New Deal – protecting Main Street from Wall Street; supported by a unanimous vote of the City Council.
Public ownership, public enterprise, public businesses - in many cases, these are presented as an ideological alternative to private ownership of capital. Yes, it is that. But it can also be presented and rolled out as a pragmatic response to an unsatisfactory situation. In this way, people will support it – as the residents in Somerset seem to have done.
‘I’m glad somebody finally got some sense and lowered the prices.'
‘As long as I can get gas cheaper, that’s really what I care about.'
'I’m tickled to death that they’re trying to do something. I’m glad they made the investment.'
And when we think of public ownership we think about the ‘big things’: energy, telecommunications, the water system. Yes, there is that. But there are also smaller things. The US has a rich tradition of local government and municipal enterprises in a range of activities, from hotels and grocery stores, to newspapers and sports teams. It's not just sewers and parking lots.
When public ownership is presented as pragmatic and beneficial (and competent), when it’s impact is felt in everyday life, when it is used to direct the private sector into more productive habits, it’s not people who have ideological hang-ups.
The last word goes to that Republican mayor.
‘We are one community that decided we’ve got backbone and we’re not going to allow the oil companies to dictate to us what we can and cannot do. We’re going to start out small. Where it goes from here we really don’t know.’
Oh, I can think of a lot of places, comrade. Lots and lots of places.
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Postscript: a year later what has happened to the experiment? Somerset has the lowest petrol prices in Kentucky. The proof is in the (public) petrol pump.