SYNOPSIS: Tony Blair holds firm against the enemies of the market.
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.
Originally published in The New York Times, 9.17.00