Not-So-Enterprising Zones Great Britain's once-promising experiment with enterprise zones is a flop. No, the idea itself—creating areas free of taxes and regulations to allow unfettered private enterprise to do its stuff in depressed areas—has not failed. It's just that British politicians and bureaucrats have been too cowardly to put it into action.
To be sure, six areas have in fact been so designated. But by the time the plan wended its way through the bureaucracy, all that remained of the deregulation was a minor reduction in some local zoning requirements and some tax reductions, for up to 10 years. No exemption from minimum wage laws, from labor legislation, from health and safety regs, etc. Concludes Madsen Pirie of the Adam Smith Institute, "After much labor, the mountain brought forth its mouse" (National Review, Jan. 23, 1981).
Unfortunately, the outlook for enterprise zones in this country may not be much better. The bill on which most attention is focused (Kemp-Garcia) would cut only taxes, leaving regulations untouched (see Trends, Oct. 1980). As Pirie points out, however, simply offering limited tax concessions is nothing new; it's been going on in England, Ireland, and the United States for decades, with mixed results. It is certainly no test of the power of laissez-faire to revitalize areas that have been turned into economic wastelands by overgrown government.
Economic Freedom For Poland Factories should be judged on the basis of profitability; those unable to make a profit should be reorganized or "even simply closed down." The price structure should be "rationalized" by ending government subsidies and pricing resources at levels determined by world markets. Workers' councils, not central bureaucrats, should make the basic economic decisions for their enterprises about production, prices, and wages.
Those are the core recommendations of the Polish government's 85-member economic reform commission, released in January. Set up last summer to recommend basic changes in the economy, the commission was expanded last fall to include numerous nonparty economists. And it is their views—calling for the end of a centrally planned economy—that have shaped the commission's report.
Asked about the radical nature of its contents, one of the report's authors told the New York Times, "Nothing we could recommend would be more heretical than the idea of allowing an independent trade union." Skeptics point out that the workers' council idea was tried once before, after the labor unrest of 1956, but was soon emasculated as the Communist Party regained control. The skeptics see the proposals as a way for the government to pacify the populace while still retaining at least political control.
Be that as it may, assuming no Soviet invasion, the recommendations are scheduled for parliamentary debate, and probable approval, this spring.
Dump Antitrust "The time has come to recognize that the antitrust approach has been a failure. The costs it imposes far exceed any benefits it brings." Ludwig von Mises? Milton Friedman? No, those forthright words are from liberal-left economist Lester Thurow in his recent book The Zero-Sum Society. Like a growing number of economists of all stripes, Thurow has come to realize that the fear of "monopoly" has been oversold, and the model of "perfect competition" is an abstraction bearing little relationship to the real world.
One of the first public turnabouts on antitrust came from Frederic M. Scherer of Northwestern. As chief economist for the Federal Trade Commission in 1971, Scherer had made a widely quoted estimate that the gross national product would be up to six percent greater were it not for the effects of monopoly. Last year, however, Scherer publicly recanted. "I wouldn't place any credence on dead-weight-loss numbers," he says, "including my own." One of the problems is that economists have failed to factor in the benefits to consumers from economies of scale in certain industries where size is needed for efficiency.
In his book Thurow lists five arguments against antitrust. First, he says, competition today exists on an international basis, and it simply makes no sense to define, say, the US auto market as an oligopoly because there are only three major US producers. Toyota, Nissan, Volkswagen, etc., provide the true competitive edge. Rather than use antitrust to ensure competition, "the appropriate policy should be to reduce barriers to free trade."
A second problem is that antitrust enforcers have to define a "relevant market" in order to estimate monopolization. But in today's affluent society, most goods and services are luxuries, not necessities, and therefore most goods are substitutes for others as uses for discretionary income. The person who buys a swimming pool may forgo a trip to Europe or a sports car. But this sort of substitutability makes "relevant market" monopolization irrelevant. Even in basic goods like breakfast cereals, says Thurow, so what if four firms have most of the market with heavily promoted brand-name products? There are plenty of substitutes—store brands, bacon and eggs, or not eating breakfast. People may make silly decisions, "but it is hardly the appropriate role of government…to stop people from making silly decisions that do not affect anyone but themselves."
Third, Thurow notes that the rise of conglomerates (brought about, in part, by antitrust laws) means that there are many firms waiting in the wings with sufficient resources to take on a firm that shows signs of earning monopoly profits. (Look at Exxon starting up a line of office products to compete with IBM.) Fourth, when government succeeds in breaking up a large firm, "it is not obvious that anything of value is accomplished." Four mini-IBMs would still be a concentrated industry; the most likely winner would be foreign computer makers. Finally, antitrust's focus on price competition is unrealistic. Many people value service, quality, and various subjective satisfactions more than they do low prices. Why shouldn't we accept those preferences as valid?
Other critics cite additional problems. Harvard's Hendrik Houthakker notes that, because of fear of antitrust, industry leaders tend to avoid price-cutting, thereby protecting highly inefficient firms in their industry. New School for Social Research's David Schwartzman points out that, by fostering conglomerate mergers, antitrust has directed companies into fields in which they have little expertise.
For all these reasons, more and more economists think antitrust should be scrapped. Doing away with the Justice Department's Antitrust Division would save about $47 million in federal spending; axing the FTC's antitrust arm would save another $33 million. But the big savings would occur in the private sector's legal fees. IBM is estimated to have spent $1 billion fighting the Justice Department suit; AT&T, between $350 and $500 million. Those are costs consumers could readily do without.
British Spruce Up with Privatization The local council of Southend-on-Sea, Essex, England, made local government history in December, our London correspondent Eben Wilson informs us. Southend's council decided to contract out what the English term "cleansing" services, that is, street cleaning, refuse collection, and public lavatory maintenance. The move will save local taxpayers about £400,000 a year.
The decision was made over the protests of the affected union, the Transport and General Workers Union, TGWU now claims that, if it had known such alternatives were being seriously considered, it could very well have increased its proposed savings by about £200,000.
David Evans, chairman of Brengreen (Holdings) Ltd.—whose subsidiary, Exclusive Cleaning Group, won the five-year contract—assures union members that Exclusive Cleaning will hire at least 200 of the affected 250 workers to continue with the cleaning. Furthermore, Evans notes, "If necessary we are prepared to commit the entire resources of our organization in ensuring its success." Evans is well aware that some 40 other councils are watching the Southend experiment closely. If his company does a good job, there may be more privatization ahead.
Radio Regs Cut Should the government or the marketplace determine how many minutes per hour a radio station devotes to commercials, or how much of its time goes to news and public affairs, or whether it must keep a detailed log of everything broadcast? Well, on January 14 the Federal Communications Commission decided it was about time to let the marketplace do that, as it has always done for newspapers. And considering the fact that most cities have vastly more radio stations than newspapers (Los Angeles, for example, has 70 stations), it seems reasonable to suppose that competition will be an effective regulator, FCC chairman Charles Ferris pointed out that, just in the 18 months the proposal had been under study, 287 new radio stations had gone on the air, making a total of 8,900 across the nation.
Also influencing the commission's decision was a two-year study of 2,000 stations, conducted by the National Association of Broadcasters. Whereas the FCC regulation had imposed a maximum of 18 minutes of commercials per hour, AM stations averaged only 12 minutes and FM stations 7 minutes. Competition, in other words, has already been hard at work.
Outraged by the decision were the National Citizens Committee for Broadcasting (a Ralph Nader group) and the United Church of Christ Office of Communication, which filed suit appealing the ruling. Why? That's simple, according to George Green, vice-president and general manager of KABC. "What this ruling does is remove [such groups] from their comfort zone. They knew their programs would get on the air because they knew the stations were required to broadcast them." Now, however, if "public affairs" spots don't meet the test of the marketplace, they won't be broadcast.
Unchanged by the January ruling are the FCC's "most dramatic intrusions" on broadcasters' First Amendment rights, notes former commissioner Dean Burch: the Fairness Doctrine and the equal-time provision for political candidates. But, Burch told a broadcasters' convention in January, further deregulation moves in these areas are likely during the Reagan administration. Added former FCC chairman Richard Wiley, "There's a healthy new breeze blowing at the commission."
What Price Securities Regulation? Few people question the value of government regulation of securities firms and stock exchanges. Yet, just as with other regulatory agencies, researchers have found that the Securities and Exchange Commission imposes heavy costs while promising far more than it actually delivers. George Benston of the University of Rochester, for example, has challenged the idea that SEC disclosure requirements prevent fraud; comparing data for the years since the SEC was created (1934) and the pre-SEC period, he found no evidence that fraud has decreased. His research also indicates that SEC regulations fail to prevent "insiders" from having an advantage over others due to better access to information. But talk to any small entrepreneur trying to bring his company public, and you'll get an earful about the cost of complying with SEC regulations.
Against this sort of empirical background, the Reagan transition team report on the SEC is quite understandable. That report calls for cutting the agency's budget and staff in half by 1983, converting its market regulation division into a "think tank for regulatory reforms which might deregulate the securities industry," and shifting the thrust of SEC policy toward removing barriers to raising money. As part of the reorientation, the SEC should stop trying to force into being a national stock market system and allow the securities markets' own evolution to take place.
By the time you read this, a new SEC chairman will most likely have been appointed. If it's transition team member (and report author) Daniel Piliero, the odds of these recommendations being carried out will be relatively high.
Orbital Slots: Creating New Property In contrast with the situation in the deep seabed, de facto property rights are being established in orbit. While diplomats continue their efforts to define seabed minerals as the "common heritage" of everyone, subject to UN control, private firms go about their business "homesteading" slots in the geosynchronous orbit for communications satellites.
The basic mechanism is first-come, first-served—just as in staking out mining claims. Companies or governments with the means and desire to put up a satellite apply to the International Telecommunications Union's Frequency Registration Board to register their claim. At present the geosynchronous orbit covering North and South America is divided into four-degree (of arc) slots, each capable of accommodating one satellite without signal interference with adjacent ones. Pending before the FCC as of last winter were applications from 12 firms to add 26 more satellites to the nine already occupying slots in orbit. When the FCC approved 20 of those applications in January, the number of unclaimed slots was reduced to three.
Not to worry, though. The capacity crunch has been anticipated. While a few Third World governments have been calling for collectivization of the slots along seabed lines (and the Colombian government managed to get the 75° W. Long. slot registered, even though it has no satellite), technology has come to the rescue. The next generation of communications satellites, including the 20 recently approved, will be able to operate from slots only three degrees wide, rather than four. Most of the existing satellites will need replacement between 1982 and 1983, allowing a general repositioning to the new spacing.
And when the three-degree slots are all filled? No problem. Aerospace sources assured REASON that technology is moving so rapidly that two- and one-degree spacing isn't that far off.
Workplace and Cancer: A False Alarm? What percentage of all cancers in this country are the result of workplace exposures to hazardous substances? If you answered "at least 20 percent" you'd be in agreement with former Health, Education and Welfare secretary Joseph Califano, who announced that figure before an AFL-CIO conference in September 1978. You'd also be wrong.
Califano's figure came from a draft government report, "Estimates of the Fraction of Cancer in the United States Related to Occupational Factors." Although all 10 of those listed as "contributors" to it are eminent scientists, the report has never been subjected to the usual scientific review process associated with publication; it has not appeared in any scientific journal.
That led scientists at the American Council on Science and Health to wonder. So they telephoned all 10 contributors. Of the 8 they could reach, only one defended Califano's figure, while the other 7 said they believe it could be incorrect. (Many cancer experts estimate that five percent or less of all cancers are related to occupational factors such as asbestos and vinyl chloride.)
ACSH executive director Elizabeth Whelan says the report "has been widely criticized in the scientific community for its flawed methods and erroneous conclusions." She hopes people will develop "a healthy skepticism for government pronouncements of impending disaster" when the hard data are not there to back them up.
Private Efforts to the Rescue Casco Bay, Maine, fishermen have had to rely heavily on their own efforts, with minor help from the Coast Guard, for search and rescue operations at sea. Finally, frustrated over the needless deaths due to lack of organization and equipment, lobstermen Martin Wyman and Bernard Johnson decided to set up a volunteer rescue team last year; classes and drills on proper search patterns and on first aid were both heavily attended. While most Maine fishermen have viewed the coalition as an interim effort until the government can provide the needed service, one resident offers a better alternative: private rescue.
Michael Badham, a retired Royal Navy commander, writes in the National Fisherman that England has had a purely voluntary, privately funded Royal National Lifeboat Institution patrolling its coast and that of Ireland for the last 157 years. The RNLI maintains over 134 lifeboats, 120 smaller inshore rescue craft, and 200 lifeboat stations over 7,000 miles of coastline. Some $26 million is raised each year through 2,000 voluntary branches and through women's clubs, which organize raffles, dances, and sales to raise the necessary funds. Lifeboats are often named after substantial donors.
RNLI was founded in 1824 by Sir William Hillary, who instituted the continuing view that government aid would be unnecessary and undesirable in this matter. In recent years, as a matter of fact, the RNLI has said that it receives more funds from private support than it would in taxes as a nationalized service. According to Badham, similar volunteer rescue systems operate in the Netherlands, New Zealand, South Africa, Spain, Sweden, and West Germany.
OSHA Lacks Safety Savvy It seems that human factors research is lacking not only in the Nuclear Regulatory Commission (see "Who Caused Three Mile Island?" REASON, Aug. 1980) but in the Occupational Safety and Health Administration, as well. According to the US Chamber of Commerce's analysis of the latest (1979) Bureau of Labor Statistics data, worker health and safety have not improved since OSHA was unleashed upon the business world. And the reason it has not done good, some say, is its misdirected concentration on mechanical safety and equipment rather than on what causes most accidents: human error. The number of work-related fatalities edged upward from 0.82 per 10,000 workers in 1978 to 0.86 in 1979 despite OSHA's direct expenditure of $1.5 billion in tax money and the additional $25 billion corporations were forced to spend to kowtow to OSHA regulations.
The Chamber further criticized OSHA's adversarial, rather than cooperative, approach to business. Gary Lovestead, occupational safety and health specialist at Deere & Co., of Moline, Illinois, described in an interview with the New York Times how switching over to OSHA's program drove Deere's injury rate up 42 percent between 1972 and 1974. It was only by returning to internal safety standards that Deere managed to gradually decrease its injury rate for the last six years. Lovestead says that most of Deere's injuries are from inattention and human error, not from equipment that is unsafe.
Perhaps President Reagan will see fit to put out of its misery the agency everybody loves to hate. But one doubts it, alas.
Bus Deregulation: Overcoming State Laws Should the Interstate Commerce Commission preempt state laws that hamper or prohibit its efforts at deregulation of bus transportation? The question arises because the deregulation-minded ICC wants to ease up on restrictions that keep new firms from entering into bus service and keeps existing firms from changing their routes to accommodate changes in demand. The ICC, however, does not have the authority to override state laws that impose such restrictions. So the agency submitted legislation to the former chairman of the Senate Commerce Committee, Sen. Howard Cannon (D-Nev.), of airline deregulation fame, that would allow those changes to be imposed regardless of state laws. Basically, bus lines would be allowed to enter routes now closed to them and to drop unprofitable routes after notifying state regulatory bodies and affected communities, and they would be allowed to raise and lower fares within a specified price range.
Perhaps emboldened by the success of Florida's trucking and bus deregulation (Trends, Mar.) and the subsequent glaring lack of chaos, Arizona voters approved in November a referendum canceling all economic regulation of trucks, buses, and taxis. According to Arizona Department of Transportation economist John Semmens, the last few remaining requirements are that vehicles be registered, liability insurance be posted, and the vehicles be periodically inspected. The law takes effect in July 1982.
Businesses Fill the Education Gap When a business needs skilled workers and government schools are turning out graduates who can hardly read, spell, or divide, what is the next likely step? Why, the business promptly steps in and attempts to educate potential employees to the level of competency it requires. And that is exactly what some American corporations are being forced to do in the United States and in South Africa.
Part of the reason for the gap is that the transition to word processors, robots, and other technological machines is eliminating the need for lower-skilled workers to perform drudgery tasks, but it is also creating the need for better-equipped workers who can do more than imitate. The dictating machine, for instance, requires that the person who types the words onto paper know proper spelling and punctuation. At a New York insurance company, some 70 percent of company correspondence must be retyped because of mistakes in such areas.
While some companies turn to professional remedial firms to upgrade worker skills, others offer in-house instruction. Clerical workers at Continental Illinois Bank & Trust Co., reports the Walt Street Journal, may spend two hours a day twice a week learning the basic rules of grammar in 25 weeks. A participant in another 12-week typing and English course more than doubled her speed to 50 words per minute (!) in that time despite years of typing classes at school. The declining quality of graduates (who seem otherwise competent) is blamed on the current emphasis on minimum competence standards and the concept of egalitarian education, which brings class levels down to the lowest possible common denominator.
The problem is much more straightforward in South Africa: blacks simply don't have access to the same quality of education as whites do. South Africa's booming economy is making the need for educated black workers painfully necessary, and once again, American business is attempting to fill the gap left by government. Several US companies are behind a $6 million project to build the first black private commercial high school in Soweto, due to open in June. The school, called Pace, will enroll 600 students in a five-year program and will be administered by the former headmaster of one of South Africa's most prestigious private schools, assisted by the country's leading black poet, Oswald Mtshali.
Aside from Pace, the Shell Oil Company, for instance, provides local and foreign scholarships to black students and provides grants for math and science teachers, as well as money to technical schools. Not to be left behind by the competition, local companies strapped for skilled workers are also being forced to mend their apartheid ways. Rand Mines Ltd. is planning to spend $3 million over the next five years to improve the primary schools it maintains for children of black employees.
Countering Condo Phobia Condominiums have long been an avenue for first-time home ownership for people who can not yet afford a conventional single-family home. With today's soaring house prices and mortgage rates, more and more people find they are priced out of the conventional housing market. Consequently, builders are racing to construct condos, and apartment house owners over the past decade converted 366,000 apartment units to condominiums.
You might expect advocates of the interests of low-to-moderate income people to applaud these trends. Guess again. Self-styled progressives (see cover story, p. 22) have instead been urging city governments to ban or severely restrict condo conversions, on the grounds that conversions decrease the supply of rental units and harm displaced tenants.
How valid are these concerns? Last winter the Department of Housing and Urban Development released a report on the subject (The Conversion of Rental Housing to Condominiums: A National Study of Scope, Causes, and Impacts). The results not only undercut the critics' case; they show that condo conversions actually benefit many of the groups the progressives claim to be concerned about.
What happens when a rental unit is converted to a condo unit? Well, the supply of rentals drops by one unit (unless the new owner rents out the unit)—but in most cases, so does the demand for rentals. If the purchaser is the unit's former tenant, that's easy to see. But the most likely alternative is that some other former renter moves up to home ownership by buying the unit—in the process, vacating a rental unit. Thus, while that conversion "displaces" one tenant, it also frees up one rental unit, HUD found that these types of transactions predominate, to the point that "nationally, for every 100 rental units converted, there is a net increase of 5 units for sale to owners and a net decrease of 5 available rental units. In other words…the effect on the rental market is considerably less than the total of all units converted." Yes—95 percent less, to be precise!
What kind of people buy the converted units? Some 61 percent have household incomes below $30,000. About half are 35 or younger, and 10 percent of them are black (while only 7 percent of all owner-occupants in the nation are black). And 57 percent are single (36 percent women, 21 percent men) compared with only 14 percent of owner-occupants nationwide.
What about those who move out, rather than buying a converted unit (or renting it from the new owner)? Slightly more than half (58 percent) move out, and of these, about half had "some difficulty" finding new housing. But only 18 percent of those who moved had to accept either similar-quality housing at higher cost or lower-quality at the same cost. Moreover, 90 percent of the former residents indicate that they are satisfied with their new housing—the same degree of satisfaction reported by those replacing them in the converted building.
In short, controls on condo conversion are anti-black, anti-single-women, and anti-expanded-home-ownership opportunities for people of modest means. Enacting such controls in the name of helping people is a cruel hoax.
Teething Pains and Prices Two developments in the world of dentistry promise good things to the consumer: more convenience and lower costs. One is the opening up of dental centers in retail stores, and the other is a hygienist's battle to be allowed to practice independently.
The first innovation is the direct outgrowth of the US Supreme Court's decisions striking down bans against advertising by professionals. They seem to have cleared the atmosphere and allowed professionals to see themselves also as business traders. Such store chains as Sears, Montgomery Ward, and other regional outlets now have dentistry departments, with such benefits as handy price lists and no-appointment service. Dental World Center, riding on the crest of the wave, may franchise its entire concept—including a children's playroom, a movie room, and TV sets suspended from the ceiling in treatment areas.
One company that already offers franchises, Dentalworks, gives advice on site selection, purchase of equipment, and operating procedures. Dentists have the choice, often, of working on a salary or commission basis, depending, one would expect, on their temperament. And the lower costs, retailers say, come from the economies of scale inherent in bulk buying and self-manufacture and in treating large numbers of patients.
Another person who wants to bring consumers more choice in dental care is dental hygienist Susan Edwards. Although state laws currently require all hygienists to work only under the supervision of dentists, Edwards has opened her own teeth-cleaning business in Kingston, Pennsylvania. Edwards is frustrated over the fact that hygienists only make about $12,000 to $15,000 a year, while the middleman (the dentist) "makes out like a bandit." She is sure she can generate as much as $120,000 a year, partly because her lower fees would attract more patients. A fringe benefit for consumers is that the added competition would lower dental prices across the board, some believe.
Edwards has the support of a group called Hygienists' Anonymous, which is working to advance hygienists' rights to clean teeth, to give fluoride treatments, and to offer diet advice without a dentist being present. The establishment American Dental Hygienist Association and the American Dental Association are critical of Edwards, noting that, for one, she is breaking the law. One dentist, however, has stood up to the wrath of his colleagues to back her case. "It's pure and simple restraint of trade," Dr. Paul Cummings of North Carolina contends.
Tug-of-War over Taxpayers' Purse Fact A: tax indexing does protect incomes by keeping governments from earning windfall inflation tax profits. Fact B: tax indexing forces politicians to scrutinize budgets and limits their ability to raise or lower taxes at whim. Conclusion: despite its successes, the battle to implement indexing will be fought tooth and nail by the bureaucracy—and that goes, as well, for any tax cuts at all.
Take, for instance, California. Gov. Jerry Brown has been whimpering over the "workload" (no new programs) budget forced upon him by an alleged fiscal crisis supposedly rooted in 1978's Proposition 13 (which lowered property taxes dramatically). The anti-Proposition 13 forces (an amalgam of trendy media types, well-paid and numerous government employees, and the misguided many) have pounced upon the governor's warnings as vindication of the evils of Proposition 13. One only wishes they would look farther than the tips of their noses.
For example, on the bad side: from October 1978 to October 1980, state and local government employment in California grew by three percent, whereas total US civilian employment growth was 1.9 percent. Furthermore, Brown's new fiscal year 1982 budget is one and three-quarters times as large as the state budget just prior to the vote on Proposition 13, the Wall Street Journal points out. Assessed property values were up 17.8 percent in the current fiscal year—despite Proposition 13—which will give California's cities and counties $700 million more to play with.
Now, on the good side: California's unemployment rate used to be one to two points above the national average; since 1978, it has steadily decreased and is now almost one percent below the national rate. Not too bad for an "evil plot" for the "rich," huh?
Then there's Wisconsin, where Gov. Lee Dreyfus has encouraged and passed efforts to expand tax brackets, decrease the top rate, and implement tax indexing. He isn't worried, either, about a $240 million deficit due to a decline in corporate tax revenues, calling it an opportunity to practice "fiscal brinksmanship." The shortfall will help him to persuade the state legislature to control spending, he believes. So far, Wisconsin's unemployment rate has dropped to 7.1 percent, below the national average, and private capital spending in the state in 1979 was the highest in 10 years.
Thus far, nine states have indexing in some form, according to Robert Lucke of the Advisory Commission on Intergovernmental Relations. These are: Arizona, California, Colorado, Iowa, Minnesota, Montana, Oregon, South Carolina, and Wisconsin. Delaware has limited fiscal year appropriations to 98 percent of estimated general revenue funds, while Idaho has limited general fund expenditures to 5.33 percent of total state personal income.
Solving Brazil's Population Problem Between 1960 and 1970, Brazil's population growth of 2.8 percent/year was nearly three times that of the United States and of parts of Europe. It seemed to those who believed in the population bomb that the large Latin American country was doomed to poverty and overcrowding.
What they forgot to take into account, it seems, is the effect of social change on statistics. Brazil's population growth rate has, in the last decade, dropped by 18 percent. The reason for this, Brazil Census Bureau President Jesse Montello told the Associated Press, is that women simply had fewer babies. They had few babies because, in the move from backlands to developed areas, they learned how not to get pregnant. And because of increased job-entry opportunities, more Brazilian women choose not to become pregnant.
The growth rate is now down to 2.3 percent, and Montello expects it to slow down even further by the end of the century. If anything holds population control back, however, it will probably be the influential Roman Catholic Church (Brazil has the world's largest Catholic population). During his 1980 12-day visit to Brazil, Pope John Paul II exhorted his flock not to use artificial birth control.
Gold Standard Prospects Will the US government return to a gold standard? To answer yes to that question would have seemed fanciful even a few years ago. It doesn't any more. Trial balloons and straws in the wind have been filling the sky for the past few months. Consider just a few of the portents:
• It has been widely reported that the supply-side economists generally favor such a move. Arthur Laffer's proposal to reestablish a gold standard forms the basis for a bill in Congress (see Trends, Jan.). Laffer colleague Robert Mundell has expounded on this subject twice in Business Week (Nov. 17 and Dec. 22, 1980). Supply-siders Norman Ture and Paul Craig Roberts have received top Treasury Department jobs, and David Stockman, another supply-sider, is now director of the Office of Management and Budget.
• Articles in leading magazines of ideas have been promoting the gold standard. Among them are a piece in Harper's last August by supply-sider Lewis Lehrman (who was considered for Treasury secretary) and simultaneous articles in the February issues of Atlantic and Harper's by James K. Glassman and Tom Bethell, respectively. Both use the New Orleans conference of the National Committee for Monetary Reform as a backdrop to discuss the case for a gold standard, in persuasive and sympathetic terms.
• The January issue of Nation's Business, the US Chamber of Commerce magazine, reported that its November reader poll showed four-to-one support for reinstating a gold standard.
• Overseas, gold has already been remonetized. According to the Wall Street Journal (Dec. 24, 1980), "Despite exhortations by the US Treasury, central banks have been buying and hoarding gold in the past three years. They now hold more gold than South Africa will mine in 40 years." Republic National Bank executive Frederic Bogart says that government gold buying means that gold "is creeping back into the world monetary system."
Are there historical precedents for reintroducing gold? Glad you asked. The German hyperinflation after World War I was cured by introducing the Rentenmark, a gold-backed currency. It erased inflationary expectations and restored confidence in short order. The US government went off the gold standard in 1861 during the Civil War; at that time the consumer price index (CPI) stood at 27 (1967=100). In just three years of greenback issuance, it had soared to 47 and remained between 36 and 46 after the war—until the Resumption Act, restoring gold backing, was passed. By 1879, when the act took effect, the CPI stabilized at 28. Over the following three decades the index remained between 25 and 29. That is the kind of price stability a gold standard can produce.
Milestones • Salt Assaulted. A Food and Drug Administration review of 415 natural and artificial additives targeted only one "potentially" harmful substance for possible regulation: salt. It may increase hypertension. "It would be extraordinarily difficult to ban salt or to establish appropriate levels for each individual product," acknowledges FDA Bureau of Foods Director Sanford Miller, "but we will if there is no voluntary effort."
• Another One Bites the Dust. The Fund for the Republic, the legal parent organization of the left-wing Center for the Study of Democratic Institutions (Feb. 1980), has dissolved. A scaled-down Center, however, continues on under the protective wings of the University of California at Santa Barbara as the Robert M. Hutchins Center for the Study of Democratic Institutions.
• Taiwan-China Trade. Despite the official Taiwanese ban on exports to mainland China, the flow of Taiwan goods to China via Hong Kong for 1980 outpaced 1979's figure by over 1,200 percent ($12.5 million in the first 10 months of 1979; $164.9 million in the same 1980 period). China, of course, considers Taiwan one of its provinces and therefore imposes no tariffs on Taiwan products.
• Rent Control Controlled. Encouraging news all around on this front: first the voters of Mountain View, California, defeated by a two-to-one margin a measure that would impose rent control in that city. Second, the New York Times recently ran an editorial recommending that rent control be phased out (gradually) and urging that people give up the illusion that "good housing can be provided without an honest reckoning of the costs of building and maintaining it." Next they'll be telling us that zoning is exclusionary!
• Freer Trade. Business leaders and academics of the United States-Japan Joint Economic Relations Group say that both countries should support "freer flows of trade, capital, technology, human resources and cultural and social influences." The group's report notes that US-Japan trade relations have been hampered by such misconceptions as the belief that Japan does not trade fairly or that the United States is still the dominant partner in an unequal relationship.
• An Early Knock-out. Even before being formally presented to the California legislature for consideration, the Brown administration's "youth services" revamp plan has been withdrawn because of political pressures. The plan, which would have reformed the school system by decentralizing to neighborhood levels, setting up a state voucher system, and ending compulsory schooling at age 14 (Trends, Feb.), was attacked by both bureaucrats and certain parent groups (the PTA, for example) and will be rewritten to examine only youth social services and not education.
• Radical Solutions Urged. Even the chief economist of the liberal institution Fund for Peace has come up with a federal hit list. Economist James J. Treires suggested abolishing the Arms Control and Disarmament Agency, the Economic Development Administration, the Council on Wage and Price Stability, the Congressional Budget Office, the Small Business Administration, and the Office of Comprehensive Employment Development (best-known for CETA). The rationale for these choices, Treires says, is that although their goals are noteworthy, the bureaucracies just cannot seem to achieve them. Abolishing the agencies outright, Treires suggests, would shock people into seeking alternatives.
• Free-Market Fusion. The government says it expects to deliver a working fusion reactor by the year 2000. But a private firm, International Nuclear Energy Systems, plans to build—without government subsidy—five fusion devices costing about $1 million each by 1984. The fusion device, called a Riggatron, is disposable and can survive the fusion reaction for about a month before it needs to be replaced. The power it generates in that month is claimed to be enough to justify its brief life span.
• In One Ear, Out the Other. Now that Massachusetts voters successfully voted to limit local property taxes to 2½ percent of fair market value, the state government is hoping to recuperate from the $600 million slice in its revenues by either raising the sales tax or income tax. Thus, a proposed constitutional amendment limiting the growth of state and local taxes to a growth in personal income is now gaining momentum.
• Former Defense Secretary on Waste. Outgoing Secretary of Defense Harold Brown told reporters at a December press briefing that although he had reduced Pentagon expenses by $1 to $2 billion, another $5 billion could be eliminated annually. The cuts aren't made, he says, because of political pressures—low priority items proposed by members of Congress to benefit their own districts. Brown suggested also that Japan build up an adequate naval force to defend its oil supply routes.
• More on the Pill. The federal Center for Disease Control has issued a report stating that the birth control pill may help prevent certain types of cancer, as well as protect healthy users from arthritis, pelvic inflammatory disease, and anemia.