Trends

AXING TAXING

For most politicians, a taxpayers' revolt is like the fateful bullet in Russian roulette—they have no idea when it will turn up, they don't really know how to deflect it, and they'd certainly prefer not to deal with it at all.

For the rest of us, though, taxpayer revolts are welcome occurrences. According to supply-sider Arthur Laffer, there is currently a tax repeal movement that "portends to overshadow even the Puerto Rico, California, and Massachusetts mega-events." It is in Ohio, where a statewide group called Stop Excessive Taxation (SET) has gathered more than 500,000 signatures on petitions to place two initiatives on the November ballot. One would repeal all state taxes passed this year. The other would provide that future tax increases be approved by three-fifths majorities of the legislature, rather than the simple majority now required.

SET'S successful petition drive (they reportedly chalked up a state record for the number of petition signatures) is a response to enormous tax increases engineered by Gov. Richard Celeste, who took office this year. Complaining that he had inherited a $500-million deficit from outgoing Gov. James Rhodes, Celeste pushed through the legislature a 90 percent increase in the personal income tax as well as increases in the top corporate tax rate and the sales tax. These would all be repealed if SET's initiatives pass.

A Wall Street Journal editorial called "The Blue Collar Tax Revolt" has pointed out that SET's political base is not what one might expect. One of the group's county leaders, for example, is Jim Butler, a hood latch assembler in a Chrysler plant who is active in his United Auto Workers local.

Butler told the Journal that at a UAW gathering after the tax increase, "One guy raised his hand and said a lot of people were out of work already and these taxes were going to force companies to leave Ohio. He made a motion from the floor to get the taxes repealed, and everybody said, 'Yes.'" So rank-and-file members of one of the most liberal unions in the country are spontaneously making the linkage between high taxes and economic decline that "conservative" supply-side economists have been hammering home.

SET may well be a harbinger of revolt in other states. There is certainly ample provocation: as the National Conference of State Legislatures reported in September, taxes were increased in 1983 in 36 states—by a record $7.1 billion. In addition, various states extended "temporary" tax increases, to the tune of another $2 billion.

So it is not surprising that Ohio is not the only state with a current tax-reduction campaign. David D. Schmidt, editor of the Washington-based newsletter Initiative News Report, told REASON that Michiganders continue to gather signatures for a 1984 tax-cut referendum; Floridians have enough signatures for their initiative to be placed on the ballot next year (see "Milestones," Oct.); and an effort in Oregon for a tax-cut initiative is under way.

The only serious problem plaguing these efforts has cropped up in Florida, where tax-cut opponents are challenging the initiative in the courts. They claim that it is unconstitutional because it embraces more than one subject (it deals not only with taxes but all other types of state revenues as well).

But on the whole, big taxers and their political brethren, big spenders, are probably leading lives full of unpleasant surprises these days. Things clearly aren't going their way.

TELLING TRADE SECRETS

Would Americans support protection of US industries from foreign competition if they knew the cost of protectionism? They may be paying $70 billion this year in higher prices for consumer goods. And in some cases, eight American workers may be put out of work for every one job saved by protectionist measures. These are the findings of two recent studies that have estimated the stiff price that free-market economists have always known must be paid for government intrusion in international markets via tariffs, import quotas, and "Buy American" requirements.

Michael C. Munger, an economist at Washington University's Center for the Study of American Business, recently completed a study called The Costs of Protectionism: Estimates of the Hidden Tax of Trade Restraint. Munger calculated that the direct costs alone for American consumers in 1980 were about $58.4 billion—an average of "at least $255 per person." And this does not include the long-run dynamic costs—forgone opportunities, misallocated resources, and so on.

Munger's $58.4-billion estimate is for the Carter administration's last year. But as the economist pointed out in a recent New York Times article, since Ronald Reagan took office the United States has entered into or extended many "voluntary restraint agreements" that have served to raise the prices of cars, ball bearings, batteries, dairy products, mushrooms, alloy tool steel, televisions, textiles, and tin. So three years into an administration afloat in its own free-market rhetoric, the total cost of protectionism, according to Munger, "may exceed $70 billion this year."

Trade restraints cost consumers, but at least they save jobs, it is often argued. But "they don't save jobs cheaply and they don't save jobs for long," noted Munger. "Voluntary agreements negotiated by the United States on steel imports cost consumers more than $85,000 per year to save one job paying $25,000; estimates of the cost of using restrictions on TV, footwear and car imports to 'save' jobs reveal similar bargains." And ultimately, he argued, such job saving, by reducing the incentive to innovate, reduces the future competitiveness of domestic industries.

Another study indicates that even in the short run, jobs may not be saved by protectionist measures. "Domestic-content" bills sponsored by Rep. Richard Ottinger (D–N.Y.) and Sen. Donald Riegle (D–Mich.) would require, by 1988, up to 90 percent American-made content of autos sold in the United States. The United Auto Workers, which supports such legislation, alleges that it would save a million jobs by 1990.

But a study by Wharton Econometric Forecasting Associates, done for the Japan Automobile Manufacturers Association, found that the Ottinger-Riegle proposal could actually eliminate more jobs than it would create. Import-related businesses such as auto dealers and ports would have to lay off workers; and if the Japanese retaliated with an equal-value restriction of US imports, the net loss of American jobs could reach 390,000 by 1990. If that were the case, the report projected, each auto job added by Detroit would result in eight jobs lost in other sectors.

As Michael Munger concluded in the New York Times, "Instead of a quick new fix, it is high time American industry kicked the protectionist habit altogether."

ACID COMMENTS

Even as politicians push ahead with proposed remedies for acid-rain pollution, doubts continue to be raised about the true nature of the problem. Perhaps most devastating to the common understanding of acid rain was a recent article in Science by soil scientists Edward C. Krug and Charles R. Frink.

Acid rain is considered a serious environmental problem, they noted, because it "is thought to be acidifying lakes and streams, as well as mobilizing aluminum and other metals toxic to fish and plants." But in the climate prevailing where acid rain is said to be a major problem—New England, southeastern Canada, and southern Scandinavia—natural soil formation is itself an acidifying process. Thus, the scientists wrote, "the results of natural soil formation are those attributed to acid rain: leaching of nutrients, release of aluminum, and acidification of soil and water." Moreover, they argued, soil formation "is often more important than acid rain in determining the acidity of lakes and streams."

Krug and Frink cited numerous bits of evidence for their conclusions. For example, several Scandinavian scientists have noted that the amounts of acid in soils are enormous relative to that in rain, so runoff from acid soils will be acid regardless of the acidity of rain. And in discussing the alleged link between acid rain and the presence of soluble aluminum in soil and water, the Science authors noted that a finding of less aluminum in "pristine" sites in New Mexico and Washington than in "polluted" sites in New Hampshire isn't surprising, "since the soils in New Mexico and Washington are naturally less acid than those in New Hampshire." The supposed aluminum-acid rain link also ignores the geochemistry of soil formation, they said.

Krug and Frink also discussed why the soil in the areas in question is more acid than elsewhere. Until the early 20th century, many European and American forests were burned, grazed, and cut. But these practices have been discontinued, and the forests are recovering. In New England, for example, the volume of standing wood increased by about 70 percent between 1952 and 1976. And they explained, recovery of landscapes can result in increasingly acid surface soil as well as thickening and acidification of forest floors. "Accordingly, water moving through such soil should also become more acid."

What all this means is that government policies aimed at reducing acid rain might not make all that much difference for the acidity of soil, lakes, and streams. "Natural processes of acidification must be more carefully considered in assessing benefits expected from proposed reductions in emission of oxides of sulfur and nitrogen," the scientists concluded. Yet, in contrast to many Science articles supporting environmentalist calls for government controls of industry and technology, the Krug and Frink findings have not been picked up by other media.

While the Science article questioned the link between acid rain and acid runoff, others have been noting problems with the concept of acid rain. Reporter Alan Bock pointed out in a recent series in the Santa Ana (Calif.) Register that scientists have not yet been able to agree even on the "normal" acidity of rain. Bock noted that presidential science adviser George Keyworth has admitted that 10 or 20 more years of research are needed to answer the many unknowns about acid rain.

Some of the unanswered questions were raised recently by Petr Beckmann in the newsletter Access to Energy: "If coal is the culprit, how come there were no complaints in the 1950s when roughly the same amount of coal was burned in North America as now? Where does coal-free California get its acid rain from? And, yes, rain is often acid now, but how much more than 10, 20, 50, 300 years ago?"

Similar questions were raised in the New York Times by Richard Funkhouser, a former EPA official. Taxpayers, he concluded, "can't be expected to spend the enormous sums that have been proposed" when the facts about acid rain are so much in doubt.

Yet the politicians push ahead. Reps. Henry Waxman (D–Calif.) and Gerry Sikorski (D–Minn.) have proposed an annual tax of $2.2 billion on utility customers nationally for a "superfund" that would finance pollution controls on the nation's 50 biggest and dirtiest coal-fired generating plants. Customers of 21 western utilities would pay $412.5 million a year, despite the fact that all the offending plants are in the eastern half of the country and many electricity users in western states already pay high utility bills for less-polluting fuel sources.

The EPA, too, is expected to respond to environmentalist pressure soon with some acid-rain control measure. But perhaps the things most in need of control at this point are rhetoric unbacked by facts and hasty political solutions to an extremely unclear problem.

FRIENDS OF FOREIGN WARRIORS

For the Veterans of Foreign Wars, charity will begin at home and end abroad, specifically, in Nicaragua. In August, at the VFW's annual convention in New Orleans, the 17,000 delegates unanimously passed a resolution that the organization help raise money to supply Nicaragua's anti-Sandinista rebels, known as "Contras," with medical supplies, food, and clothing.

The American Security Council, a private organization based in Virginia, will actually be administering the aid program through its Humanitarian/Truth Fund. The VFW is affiliated with the council through the Coalition for Peace through Strength, a group of 125 various national and state organizations. According to VFW spokesman Wade Ladue, the VFW will run a story concerning the anti-Sandinista rebels in the November issue of its national magazine, based on VFW National Commander Bob Curreio's travels through Central America in July. Accompanying the article will be an announcement of the aid program inviting contributions.

Ladue told REASON that the veterans' group had never before in its 84-year history been involved in a program providing aid to foreign combatants. And Phil Cox, executive assistant to the president of the American Security Council, reported that ASC, too, had never before sponsored such a program.

The 1.9-million-member VFW—second in size among veterans' organizations only to the 2.7-million-member American Legion—hopes to raise several million dollars for aid to the Contras. Such aid would not violate federal neutrality laws, the VFW says, so long as it is directed to humanitarian rather than military ends. Thus far, neither the Justice Department nor the White House has objected to the program.

For other ways in which private individuals and groups might aid foreign peoples in their struggles against oppressive regimes, see Jack Wheeler's article in this issue.

TAX CREDITS NOT FOR WHITES ONLY

Opponents of proposed tuition tax credits for the parents of private-school students often claim that the main beneficiaries of such a program would be middle-class whites. But a new study, conducted by the National Institute of Education at the request of Congress, indicates that Latino and black parents in big cities and low-income parents would benefit most.

In a nationwide telephone survey of public-school parents, the NIE found that about 20 percent of Latino parents and 18 percent of black parents said they would "very likely" move their children to private schools if offered a $250 tuition tax credit. And among those with incomes between $7,500 and $15,000 a year, 18 percent said they would do so. In contrast, only 6 percent of white respondents and only 2.9 percent of respondents with incomes of more than $25,000 said they would enroll their children in private schools if the credit were available.

The Reagan administration has proposed a bill, passed by the Senate Finance Committee, which would allow parents a tax credit for half the tuition paid to private elementary and secondary schools, up to a maximum of $100 in the first year, rising to $300 in the third year. According to the NIE study, the average tuition for church-affiliated elementary schools is $420 a year and for independent private elementary schools is $1,494 a year. (In comparison, the average cost of educating a student in the government schools in 1979–80 was $2,494, according to the National Journal). Currently, about 11 percent of children attend private schools; nearly two-thirds of these are in Catholic schools.

Poor parents stand to gain the most from a tax credit, suggested Joel Sherman of the NIE, because they cannot afford to move to areas with better public schools, as the more affluent can. Sherman reported that far more minority parents than white parents expressed dissatisfaction with the public schools.

If a tuition tax credit were made available not only to parents but to any taxpayer who paid a private-school student's tuition, the potential benefits to the poor would likely be even greater than suggested by the NIE results. Such a broader tax-credit plan is supported by the National Taxpayers Legal Fund.

Tax relief for private-education expenses moved a giant step closer to reality this summer. In June, the Supreme Court ruled in Mueller v. Allen that a Minnesota income-tax deduction provided to parents for their children's educational expenses is constitutional. Other states can now enact similar plans with "minimal risk of their being declared unconstitutional," according to the Education Voucher Institute News.

MAKING SPACE FOR ENTREPRENEURS

A group of private entrepreneurs may be the first to build and place in orbit a manned space station. Maxime Faget, a former director of the Johnson Space Center and a renowned designer of manned spacecraft, now heads the Houston-based Space Industries, Inc., which, along with several other investors, is interested in developing a space station.

Such a facility—which industry spokesmen view as critical to further commercial space activity—would be leased to firms for research and for various sorts of manufacturing that would benefit from the weightlessness of space (special alloys and drugs, for example). NASA is considering government development of a space station but is not yet firmly committed to the project.

But before Faget's group goes ahead with the space-station plan, it—and other entrepreneurs itching to pioneer the final frontier—want to know what can be expected by way of government regulation and subsidized competition. President Reagan may have assuaged some of the entrepreneurs' anxieties when he met with a group of them (including Faget) in August to discuss the government's role in the commercialization of space.

At the August meeting, Reagan assured the space-industry representatives that his administration is fully behind space commercialization. Already, a number of government space activities are being moved to the private sector: NASA has requested bids to operate some of its launchers; the postflight overhaul of space shuttles has just been contracted out; a plan for the private-sector takeover of the government's weather satellites and remote-sensing system is being devised in spite of heavy opposition; and proposals to move the entire space-shuttle operation to private firms are gaining momentum.

The signs indicate the growing government willingness to clear the way for private space ventures. Given the unlimited nature of the resource, the benefits—for all of us—could be astronomic.

HAPPY TRAILS FROM BUS DEREGULATION

Last November, Congress gave intercity bus lines the not-very-welcome tonic that it had earlier administered to airlines and trucking. Buses were thus, noted Business Week, "the last major segment of the U.S. transportation network to gain a large measure of freedom to go where it wants at the prices it wants." The magazine recently surveyed the effects of the change, and by and large, they're quite encouraging for travelers and entrepreneurs.

Certainly one of the best results from the passengers' standpoint is that there are now far more routes being served, with far more choices of carriers. For example, Greyhound—the largest carrier in the country—has applied to the Interstate Commerce Commission to acquire 2,200 miles of new routes in 44 states and to add new stops along some of its current routes. Trailways (Greyhound's largest competitor) and its 45 affiliated carriers are filing for more than 5,281 miles of new routes, more than twice as much as Greyhound is requesting. They're expected to get favorable decisions from the ICC on most if not all of their requests.

The activity is hardly confined to the giants. The ICC already has applications from 950 aspiring entrants into the industry, many of which hope to serve small regional markets. And many carriers are using innovative marketing techniques to attract customers. Jefferson Lines in Minneapolis has installed Pac-Man video games on four of its buses to attract teenage passengers. Meanwhile, Funbus Systems is beginning operation on the West Coast of what Business Week calls "the nation's most luxurious bus ride," featuring movies, hostesses, card tables, airline-style seats, complimentary wine, and hot meals.

Naturally, not everyone is happy with deregulation. There have been dire warnings of service evaporating in rural areas, because several companies hope to abandon routes that lose money. But industry analysts predict that small firms will jump into this niche, just as small commuter carriers sprang up in the wake of airline deregulation.

Also, small companies in business prior to deregulation are miffed that their earlier monopolies on routes are evaporating and they now have to deal with serious new competition, in some cases from giants like Greyhound and Trailways. But Greyhound President Frank Nageotte suggests that the fears of the small bus companies are actually unfounded. "There's more opportunity for small carriers than for Greyhound in deregulation," he told Business Week. Small companies had complained in the past that Greyhound had a monopoly on several routes. "Well, now," Nageotte says, "they [the small companies] can get on them." The 950 new applicants to start in business would very likely agree.

One obstacle to full deregulation of intercity buses is the existence of state regulatory agencies, most of which have no compunction about intervening in the business wherever they can. Fortunately, the deregulation-minded ICC has authority to preempt the state regulators on questions of fare structure, route abandonment, and establishment of new routes. The ICC has overturned more than a dozen state regulatory decisions involving fares and several on route changes, and a batch of cases is under review. Potential gains in efficiency are clear: California regulators had annually denied a Trailways request to take San Francisco–Sacramento passengers on the first leg of its San Francisco–Sacramento–New York runs. Recently the ICC gave the go-ahead.

THE CITY HALL ANTITRUST BUST

Though our nation's legal system grants state governments and agencies immunity from federal antitrust laws, various court decisions over the last several years (most notably, Community Communications Co. v. City of Boulder, Colorado, 1982) have made it clear that local governments and agencies have such immunity only in special cases. And that has meant a lot of headaches for municipal authorities bent on protective regulation that ends up curtailing competition. In 70 or more lawsuits nationwide, citizens and firms are suing local governments for alleged antitrust violations, seeking in some cases the triple-damage awards allowed by the antitrust laws.

In a recent case, for example, two private garbage haulers sued the government of Chula Vista, California (near San Diego), seeking damages of more than $300,000, alleging that the city violated antitrust laws by contracting with another garbage company without having put the contract up for competitive bidding. The city claimed antitrust immunity, citing a 1980 California law ostensibly granting local governments the authority to contract out their garbage collection without competitive bidding. A federal district court judge disagreed.

Thus far, however, most such suits have been summarily dismissed by the courts on the grounds that, at least in those instances, the municipalities have "state-action" immunity—that is, because their contested actions were deemed appropriately sanctioned by the state, municipalities were judged to share the state's recognized antitrust immunity.

But even where cities are likely to win in court, defending themselves against antitrust suits can be costly. The city of Richmond, Virginia, for example, recently paid a hotel developer $2.5 million in an out-of-court settlement after it had already spent $900,000 on legal expenses and anticipated $2 million more if the case continued. The hotel developer had sued the city because it was denied a construction permit after another hotel company had been granted one.

Disturbed by the potentially disruptive consequences that antitrust liability may have for local governments' regulatory and law-making powers—such as limiting taxicab licenses, prohibiting jitneys, and monopolizing garbage collection and other services—various municipal officers' organizations are pushing for federal legislation to limit local governments' antitrust liability. They have found allies in Sen. Strom Thurmond (R–S.C.) and Reps. Don Edwards (D–Calif.), Hamilton Fish, Jr. (R–N.Y.), and Henry Hyde (R–Ill.). All four congressmen have introduced bills into Congress to limit municipalities' antitrust liability. Whereas Hyde's and Fish's bills would give localities the same antitrust immunity states have, Thurmond's and Edwards's bills are more moderate.

Legal authorities, however, disagree on how such legislation will hold up in court, noting that many higher-court decisions have stressed the primacy of antitrust considerations where municipalities' actions have anticompetitive consequences.

LOOSER STATE STRINGS ON LONG-DISTANCE

While deregulation of interstate long-distance telephone service has been proceeding swiftly of late, for long-distance service within states the pace of deregulation has been more modest. But there have been significant developments.

Most recently, both Florida and South Carolina have allowed competitors in intrastate long-distance phone service. California now allows competition in the long-distance intrastate transmission of data (rather than voice) communications. And both New York and Texas do not restrict the resale of intrastate long-distance phone service. (Resellers lease lines from other carriers and then sell the use of these lines to customers who could not afford to lease lines individually.)

Last year, Telecommunications Systems, Inc., successfully petitioned South Carolina's Public Service Commission for a license to operate a microwave communications system within the state. A number of businesses and organizations testified in behalf of TSI, claiming that the new provider would enhance communications statewide. (Opposing the license, predictably, were representatives of established phone companies, including Southern Bell.)

And in Florida last year, Microtel, Inc., was granted a license to operate a microwave system throughout the state. While the South Carolina Public Service Commission's review of TSI's license request reads like a conventional regulatory-agency document—based on deeply entrenched notions of utility regulation in the "public interest"—Florida's Public Service Commission, in its review of Microtel's license request, showed some thinking rather uncharacteristic among regulators.

"Competition," wrote the regulators, "is superior to regulation in bringing the benefits of economic enterprise to the public." Moreover, the commission acknowledged, "technological progress in the transmission of long distance (interexchange) telecommunications has rendered the natural monopoly concept obsolete for this segment of the telephone business."

REASON readers, of course, will ask whether the natural monopoly concept applies anywhere in telecommunications these days. As Peter Samuel suggested in our last issue ("Hanging Up on Your Phone Company"), public utility commissions would serve consumers well by throwing local telephone service open to vigorous competition, as well.

EXPANDING CONTRACTING

More and more government officials, it appears, are accepting and acting upon the well-documented proposition that private firms are more efficient than government bureaucracies in providing "public" services (garbage collection, mass transit, fire protection, and so on). A recent example is the Chicago Board of Education's experimental contracting out of breakfast and lunch programs at 35 Chicago schools.

In its successful bid for the contract, ARA Services told the board that after paying the firm its $5.3 million contract fee, the board would see a $400,000 surplus. (Most of the savings would be enjoyed by federal taxpayers, because the school board's federal subsidy would decline; but some would redound to the schools.)

James Williams, the board's contract liaison with ARA, told REASON that ARA's performance will be compared against noncontracted food services at 35 similar schools. If the pilot program is successful, the board will consider contracting out meal programs at all of its 610 schools. (The Reason Foundation's Local Government Center reported in its Fiscal Watchdog newsletter in June that at a number of school districts throughout the country where food services are contracted out, meal programs are self-supporting, and contracting often reduces the district's administrative burden, as well.)

Contracting out has experienced major developments in the corrections field, as well. Most notable is the start-up late last year of Corrections Corp. of America, a Nashville firm whose investors include backers of Hospital Corp. of America, the nation's largest hospital-management company. CCA is seeking contracts with governments in several states to operate minimum-security and eventually maximum-security facilities, much as private firms now manage large numbers of hospitals and nursing homes.

Thus far, contracting out of correctional institutions has been limited mainly to halfway houses, work-furlough centers, juvenile "camps," and a handful of federal lock-up facilities. Most contractors are small, social-service agencies, though there are some moderate-size for-profit firms in the field. CCA has not yet announced any contracts, but the firm is reported to be anticipating revenues of $12–$15 million—in a market estimated at more than $1 billion—in its first year of operation.

MILESTONES

Listing legal. The Multiple Listing Service, which enables real estate brokers to share information on listed properties with fellow brokers and to cooperate with them in finding buyers, has survived a court challenge on antitrust grounds. A California court said the MLS is a competitive and valuable organization and does not have to share its listing book with nonmembers.

Oregon not trailing. A petition drive is currently under way in Oregon for a state constitutional amendment that would require state and local governments to contract for any service that is available from private companies. The "Enterprise Petition" would also require that all construction, maintenance, and repairs be performed by the private sector.

Free association. The powerful Atlanta law firm of King & Spalding, challenged by one of its former associate lawyers in a sex-discrimination suit, is arguing before the Supreme Court that law firms' hiring and promotion policies are private internal matters protected by the First Amendment right to freedom of association. And if a law firm's, why not a university's and an airline's and a steel mill's and…?

Cloudy crystal balls. In a 10-year period, presidential forecasts of following-year federal-deficit changes were wrong by an average 529 percent, according to a recent Cato Institute Policy Analysis. Analyst Randolph Boehm examined presidents' records on other economic forecasts, as well, and found them chronically—and grossly—inaccurate for 1971–82: GNP forecasts off by 24 percent; consumer price index predictions off 63 percent; and forecasts of federal-receipt changes off by 87 percent.

Mexican reforms. In August, Mexico adopted a new criminal code that no longer treats adultery as a crime, lessens the penalties for abortion and drug use, and toughens the penalties for violent crimes.

GLOBAL TRENDS

THE ECONOMISTS WHO CAME IN FROM THE COLD

USSR—A recent, highly critical report on the failing Soviet economy fingered central planning as the culprit. The report's authors? Top Soviet economists at a highly regarded Siberian think tank in Novosibirsk. In the report, the economists called for radical reforms, including the elimination of various bureaucracies and allowing more autonomy for individual enterprises and workers.

Though there has been much talk of economic reform since President Yuri Andropov took power last November, following Leonid Brezhnev's death, little in fact has been done. Andropov has focused most of the blame for the economy's dismal state—a growth rate of only 2–3 percent last year—on workers' poor attitudes and behavior. Consequently, "reform" has taken the shape of two new sets of labor laws, the latest laid down in August, aimed at disciplining workers for absenteeism, alcohol abuse, and sub-quota output.

But the Novosibirsk economists dismiss worker problems as the major cause of Soviet economic woes. In their view, worker troubles are merely one symptom of an ailing economic system characterized by "a very high degree of centralization," "the inhibition of market forces," "a discrepancy between the prices of consumer goods and production costs," and "restrictions on all forms of unregulated economic activity."

The report, an unpublished classified document circulated among top Soviet officials and leaked to Western journalists, went on to suggest less central planning and "disbanding" many layers of bureaucracy. (Shortly following circulation of the report—and perhaps as a coincidence—a Soviet newspaper proposed that citizens be allowed to use their cars as private taxis, currently a widespread, but illegal, practice.)

Displaying a sociological acuity, the Novosibirsk economists pointed out that many bureaucrats, with vested interests in the continuation of their jobs, would strongly oppose moves toward decentralization. And right they were. Though Soviet authorities, in response to rising calls for economic reform—including, presumably, the Novosibirsk report—announced an experimental program to loosen controls in a few industries, government officials made it clear that such experiments would proceed cautiously and would in no way change the central-planning system.

The Soviet leadership—a group of elderly, conservative party higher-ups strongly resistant to any tamperings with central planning—may respond to the economists' report, as they have to such reform proposals' before, with an "inquiry" into the think tank's ideology. Nonetheless, debate over market-oriented reforms, it seems, is alive and kicking behind the Iron Curtain.

AVOIDING SUICIDE

LAOS—Marxism appears not to have found an entirely welcome home in Laos. In control since 1975, the Pathet Lao Communists nearly crushed the nation's economy—by nationalizing the country's few industries and prohibiting private trade—before they started instituting capitalist reforms in 1979.

In July, Time correspondent David DeVoss reported that Laos is consequently doing better than its more strictly communist Southeast Asian counterparts. Since the Laotian regime, under President Kaysone Phomvihane, removed the private-trade ban, "called for a more efficient price structure," and encouraged private consumer and service markets, the nearly obliterated Samensthai commercial strip in Vientane, the capital city, has been dramatically revitalized.

"It is inappropriate, indeed stupid," DeVoss quoted Kaysone as having said, "for any party to implement a policy forbidding the people to exchange goods or carry out trading. Such policy is suicidal"—particularly in Laos, where, as DeVoss put it, "the national psyche does not lend itself to strict regimentation." And it is indeed to exert some considerable pressure on that reluctant psyche that Vietnam and the USSR have 40,000 soldiers and 5,000 advisers, respectively, on Laotian soil.

A NEW NUMBER FOR JAPANESE TELEPHONES

JAPAN—While the breakup of AT&T has made headlines in the United States, an equally dramatic breakup of the Nippon Telegraph and Telephone (NTT) monopoly in Japan is quietly moving ahead. But according to Britain's Economist, there's a big difference between the two: while AT&T deployed armies of lawyers to maintain its monopoly, NTT chairman Hisashi Shinto actually looks forward to giving up his government-owned company's monopoly status and becoming more independent of the Japanese government.

Japan's ruling Liberal Democratic Party is in favor of ending the NTT monopoly. Officials recognize that the current arrangement has held up the convergence of computers and telecommunications. (NTT's three laboratories, according to the Economist, are the source of much of the country's leading electronics research.)

In the past year, the government had already licensed cable television companies to build new networks capable of carrying other services besides television programs and to send messages in both directions. Now, the government plans to send to parliament a bill that would divide NTT into a central telecommunications company and as many as five regional companies—all essentially privately owned.

For NTT, deregulation also means that it can reduce long-distance telephone rates without parliamentary approval, expand into data communications services (this is reportedly necessary for the company's health, since ordinary telephone service has already expanded about as much as it can), and devote more of its resources to modernizing its old network and keeping ahead of new competitors, including IBM Japan. And NTT has made much of its plans for wiring all of Japan, via fiber-optic cables, into an "information network system" offering two-way transmission of every form of communication.

Hisashi Shinto and NTT, by actually pushing for an end to their government-protected monopoly, are a refreshing contrast to their American counterparts. It's probably a sign that as the freer market becomes imminent, they will do quite well.

PRIVATE TV, ITALIAN STYLE

ITALY—It may or may not be baffling that TV viewers in Rome and Milan spend their evenings watching shows like Dallas and Dynasty. But in rising numbers they do—thanks to Italy's fledgling but growing private TV industry. And this is upsetting authorities of the state-run network, RAI.

Over the last few years—and in the face of RAI's legal threats—Italy's private TV industry has experienced remarkable growth, much of it fueled by the popularity of American shows broadcast by the private networks. Indeed, so popular is the independent channel 5—whose fare has included General Hospital, the Mary Tyler Moore Show, and a live broadcast of last January's Super Bowl—that it has surpassed one of RAI's two channels in prime-time viewership. Moreover, between 1979 and 1982, channel 5's advertising revenue increased from $1 million to $159 million.

Together, the independents have so surged in popularity that RAI's share of TV viewers has dropped from 97 percent in 1976 to 60 percent today. The hot competition has pressed RAI to start airing its own American imports, including Trapper John, M.D. and Hill Street Blues.

Private TV's ultimate coup may come when the independent channel 5 begins broadcasting its own news program this year. Thus far, news and information programming has been the state's turf. Channel 5, however, may be limited to local, rather than national, news broadcasting: Italy's courts have upheld the state's monopoly on live broadcasting nationwide.

Some observers of the nation's TV-viewing habits have decried the imported fare as undeserving of Italians' attention. But apparently the observers' compatriots don't agree—they just can't wait to see what dastardly deed J.R. pulls off next.