Story Stream
recent articles

Imagine a world defined by largely autarkic cities, states and countries. In such a world, wildly primitive living conditions and immense poverty would be the sad norm.

That it would be is no revelation. The simple truth is that that the more hands and machines working together in the production of goods and services, the exponentially more goods and services available at prices that decline day after day, and year after year. Put more plainly, living standards would be a tiny fraction of their abundant present absent a globalized division of labor.

It all speaks to the crucial role of oil in the global economy. Not only does it power the transportation of globally-produced inputs that bind the world together economically, it also frequently powers the machines that, by virtue of them freeing humans from the most mundane of work tasks, enable enormous productivity leaps for humans freed to specialize by those machines.

This is an important jumping off point for an opinion piece about what’s unfortunately happening in Texas right now. Legislators in a state arguably most known for its prominence in the oil sector, in concert with a broadly laissez faire approach to economics, are sadly turning away from the latter. Senate bills 13 and 19 are presently working their way through the 87th Session of the Texas Legislature, and they would bar Texas municipalities from contracting with financial institutions thought to be restricting funding to oil & gas companies, among other allegedly “out-of-favor” business sectors.

About the legislation, it has California written all over it, along with other states run by legislators known to be hostile to business. Think about it. And in thinking about it, readers might ask themselves if they’d be surprised if legislators in the Golden State were to ban municipalities out west from contracting with banks known for not funding the creation of renewable energy, and/or plant-based foods. It’s easy to see California legislators floating such a bill, and that’s the point. It’s in other states that legislators use the power of the state to force businesses operating within to do what they would like them to. Not in Texas.

One rather apparent factor in the myriad relocations of businesses to the Lone Star state, not to mention its #1 ranking among states where Fortune 500 companies are headquartered, is that lawmakers in Texas have a history of not harassing the businesses operating inside the state. How unfortunate if, in concert with the arrival of scores of Californians each day, Texas lawmakers begin to legislate in ways that caused more than a few of those arrivals from California to leave the state in the first place.

After which, there’s just no need for the Bills 13 and 19. As opposed to legislation meant to help oil & gas companies, the bills are merely political theater that will harm Texas twice. For one, reduced competition among financial institutions in the municipal finance space will raise the tax burden on citizens of the municipalities no longer able to avail themselves of the best financing options. Second, a government that can lean on businesses in the way some theoretically might like, will in the process acquire powers to lean on businesses in ways citizens of Texas will not like.

Furthermore, the legislation is in no way necessary for the health of the oil & gas sector in Texas, or anywhere else. To see why, see the introductory paragraphs to this piece. Precisely because oil is such an instrumental factor when it comes to economic advance, the entities around the world lined up to fund its extraction are too numerous for words. While certain banks and financial institutions don’t serve the needs of oil & gas companies for all sorts of reasons unrelated to the theory that oil consumption is harmful, decisions made by financial sources to not finance energy extraction in no way limit the latter. In other words, what’s profitable and essential for economic advance in no way lacks for funding.

In which case, the Texas bills 13 and 19 only succeed insofar as they harm Texas. Not only will the citizenry suffer higher local tax bills as a consequence of the legislation, they’ll suffer in much bigger and longer-term ways the expansion of government power that will exist as a barrier to economic progress within the state, but also as a deterrent for future arrivals to the state who see fewer and fewer differences between Texas, and the legislatures in the states they’re thinking about leaving for Texas.

John Tamny is editor of RealClearMarkets, President of the Parkview Institute, a senior fellow at the Market Institute, and a senior economic adviser to Applied Finance Advisors (www.appliedfinance.com). His latest book, set for release in April of 2024 and co-authored with Jack Ryan, is Bringing Adam Smith Into the American Home: A Case Against Homeownership

Show comments Hide Comments