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First off, agricultural efficiency: Market economies exceed planned economies in both land productivity and labor productivity. The United States, for instance, outperforms the Soviet Union in the latter category by 20 to 1. "Only one-third of the difference....is due to the greater resource endowment of the United States," asserts Chandler, who attributes the preponderance of the U.S. advantage to the incentives of a market pricing system. Productivity would be even higher, asserts Chandler, were it not for government interference. "In the West, resource efficiency....is frequently undermined by heavy farm production subsidies, both with trade barriers and direct budgetary expenditures."
The most efficient farm economy in the communist world is in Hungary, which has introduced decentralized market mechanisms into its agricultural sector. And China, which is lurching from its Maoist past down a market path, has increased output and efficiency such that rural incomes have grown as much over the last 8 years as they had the previous 30.
Chandler finds that the West is also far more energy-efficient. (Energy, the report notes, "not only reduces drudgery and makes inhospitable climates habitable, it substitutes for scarce resources.") Of the 16 nations surveyed, the eight market-oriented economies made the top 8 in energy efficiency. Instructively, Hungary, so efficient in its agricultural sector, is dead last in energy efficiency. Not coincidentally, its industrial sector is heavily planned.
Nations that depend on markets rather than managers have also coped better with the pollution threat. Chandler attributes part of the progress to Western regulatory mechanisms, but he acknowledges the role of prices in discouraging waste: "Markets. . .offer a self-administering check on resource waste: The resource user pays for inefficiency. Nonmarket systems lack this internal correction."
Chandler also notes that citizens of market-oriented nations enjoy higher life expectancies and lower infant-mortality rates than their brothers and sisters operating within controlled economies. And contrary to myth, income differences between rich and poor are no wider in the West than in the people's republics of the Soviet bloc.
"The century-long trend toward greater government control [of the economy] has ended," concludes Chandler, who refers favorably to deregulatory advances around the globe. Contrary to past environmentalist hostility to the market, he thinks this news ought to cheer friends of the environment, for "greater productive efficiency in market nations has reduced environmental pressures while inefficiency in centrally planned countries has increased them."
It's what some of us have been arguing for a long time.
Competition: A Boon in the Boondocks, Too
If you live in Viola, Wisconsin, or French Lick, Indiana, chances are pretty good that MCI hasn't been begging you to try its long-distance service. In fact, if all the naysayers about telephone deregulation are to be believed, you're lucky you even have long-distance service.
When skeptics predicted that deregulation and divestiture would leave rural phone customers with lousy and expensive service, they didn't count on the profit motive. It is driving nonBell phone companies to find ways to give rural customers access to the same long-distance companies as their city cousins.
Take Indiana Switch, a joint venture of U.S. Switch, of Longwood, Florida, and 27 independent Indiana phone companies. Over AT&T's objections, it has gotten regulatory approval to start offering customers a choice as soon as it can get its network up and running-as early as this summer, a spokesman told Reason. The network will route calls from rural areas into so-called
secondary cities such as South Bend and then through a central hub in Indianapolis. Indiana Switch will sell intrastate long distance service over its own network; calls going out of state will meet up with national networks like MCl's through Indianapolis.
U.S. Switch, founded two-and-a-half years ago with this business plan in mind, has formed a similar joint venture with 22 Illinois independents and is "very close" in North Carolina, the spokesman told Reason; such ventures look feasible in at least a dozen more states.
Independent phone companies in Wisconsin have formed their own group to provide rural customers with a choice of long distance companies. The Wall Street Journal reports that Wisconsin Independent Telecommunications System Inc., or WITS, wants to build a fiber-optic network to carry calls to four central switches, where the calls would be transferred to national long-distance carriers. Unlike U.S. Switch, however, wits isn't proposing to sell intrastate long distance services.
Long-distance companies would pay both WITS and U.S. Switch's ventures for access to customers. Isn't it amazing how the prospect of profit encourages creativity?