Terms of Endearment
First-time director James Brooks said of Terms of Endearment, "People are always trying to think of shortcuts on making the kinds of films people want to see. But that doesn't work. The only answer I know is to do the film you really want to do and just try to be good at it." He did, and he has succeeded well enough to create one of the most original and curiously touching films of the year.
This movie doesn't fit any preset categories. It begins as a comedy, with numerous crazily unpredictable comic touches; it ends as a tragedy, with the daughter dying of cancer and the burden of what to do with the children. Yet the transition from the one to the other—along with several subsidiary transitions in between—is never felt as awkward or straining credibility. The film flows, like life itself, with the interruption of one causal series of events by another, united into a whole by the well-drawn and memorable characterizations.
Central to the drama is the mother (Shirley MacLaine), whose pointed remarks set the tone of the film. "You aren't special enough to overcome a bad marriage," she tells her daughter. And when the mother refuses to attend the daughter's wedding, the daughter (Debra Winger) says, "It sure would be nice to have a mother somebody likes." The relation between mother and son-in-law (Jeff Daniels) is strained: when he takes a job in Des Moines, MacLaine says, "You can't even fail locally."
Yet this is not primarily a comedy of bitchery. The comedy is, as in all good films, a by-product of a characterization that has other goals in mind. There is pathos in the film, along with sadness, tension, frustration, and, most of all, a moving and abiding love between mother and daughter (who are more like sisters) that sustains themselves as well as the picture. No one else really counts, not even the next-door ex-astronaut-suitor (beautifully played by Jack Nicholson) or the frustrated banker who beds the daughter (a marvelous bit performance by John Lithgow).
What is most remarkable about this film is its freshness of insight into human relations. One moves with its unexpected rhythms, empathizing totally at each juncture. "There is never," writes the director, "a moment in the picture that takes you to the next moment or the next place. You just arrive and it seems inevitable—I hope." It does—or even if it doesn't, the viewer is so caught up in the lives of the interacting characters, each vividly etched in deft strokes of characterization so as to leave an abiding impression, that things like inevitability or even careful plot structure don't seem to matter anymore.
Compared with director Brian De Palma's previous ventures in suspense, there is no suspense at all in Scarface—its outcome is predictable from the start. Yet every film he does, De Palma has recently told the press, is "highly moral." This one could indeed be construed as a kind of morality play: a man with a strong penchant toward evil succumbs to it, rises in the world of crime, and is brought down. But most of the film consists of monotonously repeated violence—shooting, blood, gore, severed limbs, and endlessly repeated four-letter words. It lasts for almost three hours, and most of it is a bore. It ends only when practically everybody is dead.
Al Pacino is very good as Scarface, presented here as a Cuban exported from Castro's prisons, but certainly no better than was Paul Muni in the original version of this film, directed many years ago by Howard Hawks. At least Hawks gave the protagonist some interesting character traits; Pacino is evil practically from the beginning to the end, and thus the main characteristic by which we identify with characters, sympathy, is lacking. Since the earlier Scarface is frequently presented on television, it's worth seeing at home and saving the price of a ticket to the new one—except, that is, by those viewers who prefer a hundred murders to a dozen.
Director Sam Fuller, the master of violence (along with the other Sam, Peckinpah), has turned his talents to the depiction of animal violence, specifically, to a white dog—that is, a dog that has been trained in puppyhood to attack only black people. The film has been denied general circulation because of its supposed racist theme; this is unfortunate, for there has never been a less racist film.
A girl who lives alone finds a stray dog in her yard, to whom she develops a strong attachment, particularly after the dog saves her from an attacking rapist. But when the dog attacks an innocent person, she learns through a trainer that it is a "white dog," and the only thing to do is shoot it.
She refuses this option and exhausts every possible alternative in an attempt to retrain (uncondition) the dog. The black trainer is infinitely patient and takes great risks; the development of this aspect of the story is intense and dramatic. The outcome of any attempt at unconditioning is, however, chancy: should the dog be saved even at the subsequent risk of human life?
The scene in which the girl confronts the man who trained the dog as a puppy to be a "white dog" is emotionally involving enough by itself to be worth the price of admission. The rest of the film is a further bonus.
John Hospers is the author of Understanding the Arts. He teaches philosophy at the University of Southern California and is the editor of the Monist.
Public Education Theology
Samuel L. Blumenfeld
Managers of Virtue: Public School Leadership in America, 1820–1980, by David Tyack and Elisabeth Hansot, New York: Basic Books, 1983, 312 pp., $17.95.
It was easier for the Harvard Unitarians to give up believing in the divinity of Christ than it is for Profs. David Tyack and Elisabeth Hansot to give up believing in public education. Maybe it's because, as they say in their new book, Managers of Virtue, "The public-school system is probably the closest Americans have come toward creating an established church." As cardinals in that church, Tyack, professor of education and history at Stanford, and Hansot, professor of political science at the University of Nevada, are at pains to defend an institution that appears to be in an irreversible state of decline.
There are not too many believers in the church of public education these days outside of the colleges of education, the state bureaucracies, and the National Education Association. Its "theology" has a hollow, spiritless ring. Most of the worshippers go through the motions so long as a paycheck greets them at the communion rail; but once the money stops, so will the genuflecting.
Managers of Virtue is a half-hearted attempt to fan the dying embers of the public-education creed. But it has a tough time demonstrating why the church, which has led a long, prosperous, but checkered life, should not be permitted to die out.
"It is easy to imagine a future," the authors write, "in which community of commitment to public education atrophies, competition for scarce resources increases, and public schools endure a slow death, especially in those communities where the poor and minorities predominate." And yet, when you stop and think about it, it is the poor and minorities who would benefit most from the demise of government-run education, because it is they who most need contact with the affirmative value systems that only private schools seem to provide.
To the authors, rebuilding a "community of commitment" is of utmost importance if public education is to survive. But what is a community of commitment if not a body of true believers who have "faith" in what they believe?
"Many politicians," complain the authors, "now seem convinced that Americans need MX missiles more than school lunches and Title I. Advocates of vouchers and tuition tax credits for private schooling suggest that family choice should reign supreme and that education is more a consumer good than a public good. And if people who have a choice believe that public education is a mess—as the media insistently say—why should sensible people send their children to public school at all?"
The authors chide parents for considering education a consumer good more than a public good. As if a public—or government-owned—institution can do only good! If by public good, the authors mean "what's good for the public," then it could easily be proven that the private sector does more good for the public than does the public sector.
Nor do parents "believe" that public education is a mess—they know it's a mess. Nor is it merely the media who say so. There are plenty of professors, teachers, students, and researchers who say so. The media merely report what they are told, and what they are told is only a fraction of the story.
"The best case for public education," Tyack and Hansot write, "has always been that it is a common good: that everyone, ultimately, has a stake in education." But that perhaps is why parents are in fact deserting the public schools, because they indeed have a stake in education and are finding that they cannot get it in the government-run system. What really underlies the authors' faith in public education is not their dedication to the "public good" but a commitment to the liberal agenda of "educational equity"—the newest manifestation of egalitarianism—which, of course, cannot be carried out without massive federal intervention.
Actually, the authors hoped that they could inspire renewed faith in public education by reviewing the careers of some of its better-known leaders. But all they really do is confirm what revisionist historians have been saying: that the purpose of public education, from the very beginning, has not been to teach but to indoctrinate. Tyack and Hansot note that "the consensus behind the creation of public education in the nineteenth century was based in large part on a belief system that John Higham has called a Protestant-republican ideology, a source of unity in a highly decentralized nation."
Why was that pan-Protestant unity so urgently needed at that time? Because of the massive influx of Catholic immigrants who, in the eyes of many Protestants, threatened to change the original cultural and religious character of the United States. Not a few of the common-school crusaders saw themselves as defenders of the Reformation. "Ministers in Oregon," state the authors, "feared that settlers would fall prey to Roman Catholics who were rapidly building schools and churches. Through their correspondence runs a common note of anti-Catholic hysteria, which was also a staple item in the fundraising literature of the missionary societies."
Perhaps the best part of this book is that covering the years 1890–1954, during which the process of consolidation and centralization was accelerated by a new breed of professionals. These were men like Ellwood Cubberly, George Strayer, and Charles Judd who, as deans of the most influential colleges of education, became "placement barons," weaving networks of influence and control throughout the system. They were known as the "education trust" and learned how to milk the sacred cow of public education with an expertise that makes Tammany politicians look like amateurs.
Tyack and Hansot find much to admire in these leaders; but, woefully, they miss the entire point of their own research. Centralization of power took place not because America had been taken over by a dictator but because a lot of little emperors had found a very congenial place where they could build their own personal empires completely protected from public view. This is what happens when a free country adopts state monopoly education. The careerists create networks of control that strangle dissent and ensure conformity.
The truth of the matter is that government-controlled education is incompatible with the values of a free society. It is a tool for despots, and the reason why it works so poorly in this country is that there exists among Americans a deep suspicion of and resistance to state power. Behind the seemingly benign concepts of "educational equity" and "community of commitment" are the not-so-benign realities of compulsion and monopoly.
Besides, the public schools don't teach. So why struggle to save what ought not to be saved? The end of public education will mean the end of a sham. But it will also mean the dawn of a new and tremendously exciting era in American learning—one of freedom, diversity, enterprise, competition, and achievement.
Contributing Editor Samuel Blumenfeld is the author of numerous books and articles on education.
The Third-Party Trap
Stuart A. Lilie
The Other Candidates: Third Parties in Presidential Elections, by Frank Smallwood, Hanover, N.H.: University Press of New England, 1983, 289 pp., $20.00.
As its title suggests, The Other Candidates, by Frank Smallwood, focuses on candidates from minor political parties in US presidential elections. This focus is a useful corrective to the overwhelming public, media, and scholarly concentration on the two major political parties in this country. Since the success of the Republicans as a "third" party in 1860, more than 200 independent or minor-party candidates have entered presidential races. Smallwood interviewed the 11 such candidates who ran for the presidency in 1980: John Anderson, Ed Clark (Libertarian Party), Barry Commoner (Citizens'), Ellen McCormack (Right to Life), Percy Greaves (American), John Rarick (American Independent), Deirdre Griswold (Workers World), Andrew Pulley (Socialist Workers), Simon Gerson (Communist), David McReynolds (Socialist) and Benjamin Bubar (Prohibition).
These candidate interviews, reproduced verbatim with a short introductory note for each, constitute the heart of the book. Four additional chapters attempt to interpret the history, impact, and future of third parties in a political system that for 200 years has been dominated by two and only two political parties.
The value of the book is in the interviews. These interviews make clear the extent to which the American political system is biased against third parties. Even the method by which we decide who has won an election—the single-member-district, plurality system—mitigates against growth of third parties. State law buttresses the electoral monopoly of the Democrats and Republicans by guaranteeing ballot space to the candidates of these two parties while requiring petitions, signatures, and fees before any candidate who is not a Democrat or Republican can be placed on the ballot. Further, requirements for ballot access differ in each state. Independent and minor-party candidates thus must spend large percentages of their resources just to get on the ballot; few pass this hurdle in more than a handful of states. In addition, the government financing created by amendments to the Federal Elections Campaign Act of 1971 clearly works to the disadvantage of minor-party candidates. While the candidates say that they are able to obtain coverage from local newspapers and television stations, little or no national network coverage is available to them. The Other Candidates makes clear the subtle interactions and cumulative impact of these legal and institutional barriers, which trap minor-party candidates in a self-fulfilling cycle of near invisibility that is perpetuated by few resources and little media attention.
In the face of these kinds of barriers, why do third-party candidates persist? Candidates have two motivations: to achieve public exposure for party ideology or issue positions, and to increase party membership. It is also clear from the interviews that of the groups running candidates in the 1980 presidential election, only the Libertarian Party has made progress toward becoming a truly organized, mass-based political party. The Libertarian Party has created state and local organizations throughout the country and runs candidates for offices other than the presidency (presumably the Citizens' Party is now also attempting such organization). John Anderson's candidacy, like that of most "independent" candidates, built no organization that would persist after the election was over.
Smallwood also very nicely sorts out the electorally active, ideological parties of left and right in the United States. Since these parties tend to form, split, and reform with great regularity, this succinct summary of their development, ideologies, and disagreements is very useful. This is particularly true for the parties of the left, since neither scholars nor the media have given much attention to the Socialist, Communist, Socialist Workers, or Workers World parties in the United States.
When Smallwood turns to the larger, more theoretical questions of the role, function, history, and future of third-party movements in the United States, he is less successful. In the early chapters, the issues are posed with a "gee whiz" kind of naiveté that gets in the way of treating these as complex questions. The first two chapters are a very short recounting of the history of some third parties, along with a listing of the chief scholarly interpretations of reasons for and implications of two-party dominance. For the reader who has never approached these topics before, this might be a useful beginning, although the listing of interpretations is sometimes simplistic and muddled. For example, Smallwood says that Frederick Jackson Turner's famous argument that the frontier fundamentally shaped American political culture somehow helps explain the dominance of two parties in the United States, but he does not say how or why frontier individualism helped create or support a two-party system. Smallwood also ignores important theoretical writing that would have helped him organize and explicate the more complex elements of third parties. For example, concepts developed by James Sundquist or Walter Dean Burnham would have added depth and clarity to Smallwood's theoretical and historical chapters. Smallwood also uses some terminology in confusing ways; his use of the term ideological in the early chapters is especially confusing.
Those interested in alternatives to the present Democrats and Republicans will find several of them well presented here. Those interested in more theoretical aspects of the party system will find the book less useful. Most observers now agree that political parties (along with other political institutions) are in a crisis of serious proportions, involving mass apathy and cynicism as well as inability to address issues and resolve critical problems. Whether the party system faces realignment or de-alignment remains in question. In past periods of crisis (the 1850s and 1890s, for example), third parties have been important instruments for pointing the way out of crisis. Since then, the major parties have secured their positions with various pieces of legislation. Whether third parties can play their old role in the 1980s remains an important question.
Stuart Lilie is a political science professor at the University of Central Florida.
Rekindling the Case for Freedom
David M. Brown
How You Can Find Happiness during the Collapse of Western Civilization, by Robert J. Ringer, New York: QED/Harper & Row, 1983, 261 pp., $14.95.
I have a vested interest in the continued literary and financial success of Robert J. Ringer. Not only do I enjoy his books enormously, but it was also Robert J. Ringer, after all, whose writing first excited me about radical individualist ideas. And although I have subsequently become even more entranced and fascinated by the work of novelist-philosopher Ayn Rand, Ringer has always had my gratitude for initially exposing me to the case for egoism and its political consequence, liberty.
Not everyone applauds Ringer as I do, though—for many individualists, he has always posed something of a dilemma. Won't nasty-sounding titles like Winning Through Intimidation and Looking Out for #1, such faint-hearted folks cry, merely incur the hostility and incomprehension of sympathizers with today's left-leaning Establishment, ultimately hurting rather than helping the cause of liberty?
I disagree. Actually, any contemporary book forcefully supporting individualism, and attacking collectivism, is likely to be scorned by those who mistrust freedom and rational self-interest. The point is that by means of his popularly written, breezy bestsellers, Ringer has enlightened many who might never have picked up the works of more careful but less widely read thinkers. Surely the honest reader will look past a provocative title to discover the nature of the material it stands for.
Ringer's latest bestseller, How You Can Find Happiness during the Collapse of Western Civilization, is as delightful as his others. His much-beleaguered alter ego, the Tortoise, here returns to the stage in full color as Collapse's main persona, so that the Western world's deterioration, and how it should be dealt with, might be slickly explained via humorous cartoon and chummy anecdote. All in all, the book deserves to be labeled an outstanding success.
This does not mean, however, that it is without flaws. These derive mainly from Ringer's characteristic philosophical sloppiness. (The worst example is his announcement, in the first chapter of Restoring the American Dream, that the foundation of every philosophy is "just an opinion"—thus calling into question his whole argument on behalf of liberty.)
In Collapse, the main error emerges in Ringer's discussion of the supposed causes of Western civilization's ongoing collapse, the significance of which provides the connective tissue stitching the book together. Ringer apparently holds that morality is a philosophical primary, which leads him to make statements like: "In a very literal sense, the moral standards of a civilization constitute its foundation." This is sheer nonsense. While the influence of morality cannot be ignored, it depends always upon a groundwork of metaphysics and epistemology; what is right conduct for human beings depends on the nature of reality and of knowledge, but Ringer fails to make clear the connection. In the case of Western civilization, and specifically America, it is the epistemology of reason that led to the morality of achievement that Ringer extols. The inverted, reward-losers-and-punish-winners ethic that he finds so repulsive was made possible only by the disintegration of that indispensable base.
There are a host of other slipshod formulations (such as fuzziness on the distinction between pragmatism and practicality, and the blatantly false assertion that "there is…no such thing as an absolute need"), which I will leave for the reader to dissect.
But Collapse is worth reading, notwithstanding its shallowness. As far as it goes, it is usually accurate and on the mark, and many of its enunciations are very well taken indeed.
For example, Ringer stresses the need of humans continually to strive, to pursue rational goals; and the bulk of his volume is devoted to setting forth principles that will help bring success to those striving in a world where the conditions that would best enhance it are progressively deteriorating. It can be argued, in fact, that much of the book's achievement is due to the author's ability smoothly to intertwine competent advice to the reader with a plausible description of the economic-social decline that makes the advice necessary. The combination is irresistible.
Ringer wants his readers to "get to the crux of the matter," and he often manages to do that himself. His recapped personal experiences make his self-help points crystal-clear, and he exposes governmental shenanigans with ease and wit. Although, to be sure, few if any of Ringer's ideas are really new, it must be admitted that he rehashes brilliantly.
In my favorite section of the book, modern "liberals" are divided into their five component types: uninformed liberals, ignorant liberals, confused liberals, phony liberals, and malevolent liberals. As Ringer glibly demonstrates, each of these is inherently wrong-minded. About them all he writes:
In reality, the fact that a person may call himself a liberal is irrelevant. He might just as well call himself a "socialist" or "communist because, in the final analysis, all three of these banners advertise a belief in compulsory compassion, which necessitates a belief in the morality of sacrificing the rights of some individuals to the so-called good of others.
A more appropriate name to describe all three—liberals, socialists, and communists alike—would be "theftists" because all three share a deep-seated belief in the morality of theft. Underneath all their benevolent propaganda, they tenaciously adhere to the perversity of this position.
Despite its shortcomings, How You Can Find Happiness during the Collapse of Western Civilization makes fine reading, especially for those unfamiliar with its basic ideas. For people who haven't yet tasted the delights of individualist literature, it is a nice place to start.
David Brown is a student at Cornell University. He was a 1983 REASON summer intern.
The Only Villains in the DeLorean Drama
Dream Maker: The Rise and Fall of John Z. DeLorean, by Ivan Fallon and James Strodes, New York: G.P. Putnam's Sons, 1983, 484 pp., $20.00.
John Zachary DeLorean is a Detroit autoworker's son who worked his way through both engineering school and business school, then rose dramatically through the management ranks at General Motors, only to resign just a step or two away from the presidency of the company. DeLorean had been widely credited with almost single-handedly rehabilitating, reorganizing, and reinvigorating GM's sagging Pontiac Division back in the 1960s. He was said to have been the creative spark behind the Tempest, the GTO, the LeMans, the Firebird—the cars that transformed Pontiac into the automotive success story of the decade. There had seemed to be no limit to what John DeLorean could achieve at General Motors.
But now he was leaving—and talking about starting his own firm, the DeLorean Motor Company (DMC), which would manufacture an ultra-safe, technologically advanced, high-performance luxury sports car packaged in a sleek, stainless steel body with gull-wing doors. DeLorean needed tens of millions of dollars to get DMC off the ground; he had less than a million dollars himself. And he quickly found that he was unable to raise the rest by tapping private sources of venture capital.
Venture capitalists, you see, seldom risk their own money on a project they have not studied carefully. And from the beginning, everyone who studied DeLorean's DMC proposal carefully called it too risky to justify investment. One Wall Street auto analyst, David Healey, told the Wall Street Journal in January 1979, "When people ask my advice about investing in Mr. DeLorean's venture, I tell them to put the money into wine, women and song. They'll get the same return and have more fun."
So DeLorean began looking to governments for his capital—governments like those in Puerto Rico and Ireland, which were eager to do what, under the name of "industrial policy," some now propose that the US government do: use tax proceeds to invest in heavy industry to "create jobs" and "stimulate economic growth." Governments, however, have little incentive to study investment opportunities carefully. If they lose money on an investment, it doesn't really matter. It isn't their money anyway, and there's plenty more—an endless supply, in fact—in the taxpayers' pockets where it came from.
Thus it was that the governments of Puerto Rico and the two Irelands actually rushed in where private investors with their own money to lose had feared to tread. Thus it was that the three governments actually bid against each other competitively for the privilege of investing in DeLorean's new venture money they had expropriated from their citizens.
Northern Ireland "won" this competition, with the result that during the years 1980, 1981, and 1982 the British government poured nearly $100 million of the British taxpayers' money into the DeLorean Motor Company of Belfast and New York. The British had studied DeLorean's project and knew it to be a high-risk venture. And, as Ivan Fallon and James Strodes document in detail in the Dream Maker, they chose to take that high risk anyway—for political reasons.
In the short term, they judged, the DeLorean project would create jobs and serve as a highly visible symbol of hope and new good fortune for Ulster. Politicians, of course, generally think only in the short term, typically no farther ahead than the next election. But even in the short run, DMC never proved to be much of a boon to Belfast. Some workers received wages for building an auto factory, true. But scarcely a year after the DMC-12 sports car actually began rolling off the Northern Ireland assembly line, the factory was in receivership and only weeks away from closing its doors permanently.
Why did DMC go under? Fallon and Strodes accuse DeLorean of running the firm into the ground, both by gross mismanagement and by diverting millions of dollars of badly needed company funds into his own insatiable pocket. They assert further that the public proved reluctant to buy many DMC-12s at upwards of $25,000 apiece, because it was a mediocre and undistinguished car. DeLorean, they assert, had never been concerned enough about the matter to do what needed to be done to ensure that the DMC-12 would be an excellent car. He had been too busy, they say, living his flamboyant and extravagant lifestyle and shamelessly manipulating the media, whose representatives never seemed to catch on to the fact that DeLorean was only promoting himself, tooting his own horn, hogging the show.
Finally, they say, out of money, with little or no income and little or no credit, and with that very expensive lifestyle to keep up, DeLorean did what anyone familiar with his life-long history of shady and unethical business dealings might have guessed he'd do sooner or later: he descended to the level of a common criminal. He involved himself for profit in a criminal conspiracy to smuggle a large quantity of a dangerous, mind-altering, habit-forming, proscribed drug into the United States.
Or so, at any rate, it has been asserted by the US government. Fallon and Strodes write at times as though DeLorean had already been tried and convicted on these charges—just as they write at times as though the mere fact of a lawsuit's having somewhere been filed against DeLorean constitutes evidence that he did in fact commit the unsavory deed(s) attributed to him by the lawsuit. They seem oddly eager to prove that DeLorean had never had a decent bone in his body, that he's been nothing but a fraud from the very beginning, and that he's never really accomplished anything worthwhile—unless you figure it's worthwhile publicly to claim credit for other men's ideas and achievements.
They even go to the absurd length of trying to make out some kind of pseudo metaphysical case for the proposition that DeLorean was a maker of dreams, that "we" (meaning I'm not sure who) somehow or other entrusted to DeLorean the task of embodying our dreams in automobiles and that he violated this sacred trust. But I don't know anybody who ever entrusted his dreams to John DeLorean.
Fallon, who is the financial editor of Britain's Sunday Telegraph, and Strodes, a free-lance economics and business writer based in Washington, assemble a reasonably persuasive case against DeLorean as an unscrupulous and sybaritic wheeler-dealer who has always put his own limitless personal ambition ahead of everything else. But so what? If you don't like people of that kind, you don't have to do business with them, do you? You're free to take your business elsewhere, aren't you?
Well, not always. The people of England weren't. They were forced to put their money into DeLorean's auto business by a handful of politicians and bureaucrats who thought that the short-term creation of jobs and the hopeful symbolism of it all would be useful to the cause of their party's victory in the next election. And these politicians and bureaucrats are the only real villains in the piece. Businessmen, no matter how ambitious and unscrupulous, cannot force anyone to deal with them. Governments, on the other hand, can and do.
Contributing Editor Jeff Riggenbach is a nationally syndicated columnist and radio commentator.
Why the Pols Like to Set up Businesses
James T. Bennett
Uncle Sam's Private, Profitseeking Corporations, by Lloyd Musolf, Lexington, Mass.: Lexington Books, 1982, 126 pp., $18.95
The federal government has always been actively involved in every aspect of private-sector activities, including the chartering of private, public, and quasi-public corporations. Between 1791 and 1944, some 288 corporations were chartered by acts of Congress (whereas most corporations are chartered by individual states), starting with the first Bank of the United States and including purely private concerns such as the Union Pacific Railroad and the quasi-public Federal Reserve. In Uncle Sam's Private, Profitseeking Corporations, Musolf considers four corporations that were chartered by Congress and became "private," profit-seeking entities in the past two decades: the Federal National Mortgage Association (Fannie Mae), the Consolidated Rail Corporation (Conrail), the Communications Satellite Corporation (Comsat), and the National Railroad Passenger Corporation (Amtrak). As a political scientist and director of the Institute of Governmental Affairs at the University of California at David, Musolf attempts to discern the intent of policymakers when privateness and profit seeking are stressed in a quasi-governmental context. Musolf's primarily historical approach emphasizes the legislative histories of the origins and development of the organizations under study.
The "plausible explanation" that the author gives for the invention of these "mixed enterprises" is that "policymakers, finding government action unavoidable in sensitive segments of the economy, sought a compromise that had the appeal of freshness and incorporated unreproachable societal values." This pithy statement deserves close examination. The policymakers referred to are politicians; it is plausible that their major concern is enhancing their power and remaining in office. And what segments of the economy are "sensitive"? Notice how often they are the ones that have political clout and can deliver votes and campaign contributions at election time—for example labor unions in the housing industry, construction firms, and home purchasers. So it is not too surprising that action is deemed "unavoidable" when the outcomes produced by the market are not desirable from a political perspective; that is, government action can be used to reward special interests that, in turn, have a high probability of benefiting the politicians.
Historically, though, the principal reason that markets were not producing desirable outcomes was that government regulation and intervention in these sectors of the economy restricted output, increased costs, and lowered productivity. For example, Conrail was formed to rescue the railroads in the Northeast from bankruptcy, a condition that can largely be attributed to Interstate Commerce Commission regulations that prevented the companies from abandoning service on unprofitable routes and to labor regulations that fostered featherbedding and excessive labor costs. It is by no means clear that government action was "unavoidable."
Even in the case of Comsat, set up to get communications satellites into orbit, it should be kept in mind that international communication links by undersea cable, a massive undertaking at the time, had been accomplished solely by private firms without taxpayers anteing up a cent. What, in effect, was called for was less government involvement in these sensitive sectors, rather than more.
Federal chartering of "private," profit-seeking companies to undertake public policy has the "freshness" attributed by Musolf only in the sense that it represents a departure from the more-usual practice of creating government bureaucracies to subsidize or regulate in favor of special-interest groups. The phrase "irreproachable societal values" apparently refers to the notion that a government-created corporation that, although theoretically private, receives taxpayer subsidy is socially more appealing than outright nationalization.
As Musolf correctly observes, one of the most critical reasons for creating these corporations is that their activities are removed from the federal budget. Fannie Mae's mortgage purchases, for example, would have further swelled a large and growing federal budget. Any thought that profits are made by these "profit-seeking" entities must be taken with a massive grain of salt. Amtrak's and Conrail's financial problems are legend—Congress appropriated more than $11 billion for the railroads in one five-year period alone. Comsat receives implicit subsidies from the government, because it undoubtedly does not bear the full cost of either research and development or the operation of satellite-launch facilities. Fannie Mae enjoys a privileged position in the financial markets: it has no real competitors, may borrow from the federal government, and is exempt from state taxes; and firms that do business with it are required to purchase its stock. One would be hard-pressed to argue that the corporations created by the federal government compete on an equal basis with or are subject to the same market forces as truly private firms.
One issue that the author does not address is why some federal activities have not been spun off to the private sector. For example, the Tennessee Valley Authority is the nation's largest electric utility (and one of the largest in the world) and is the largest producer of fertilizer. There is no valid economic rationale for federal generation of electricity or production of fertilizer. The TVA, however, has already been placed off the federal budget, and it provides a useful political mechanism for politicians to have taxpayers in other parts of the nation subsidize residents of the Southeast.
In effect, Congress has created "private" corporations that theoretically seek profits as a way for politicians to cater to special-interest groups. Such "off-budget" entities are even more prevalent at the state and local levels of government. There is a great need for taxpayers to become informed about the machinations of politicians in moving government off the books. This work represents a good start but only scratches the surface of an issue that certainly will grow in importance as the state expands.
James T. Bennett is a professor of political economy at George Mason University in Fairfax, Virginia, and the coauthor, with Thomas DiLorenzo, of Underground Government: The Off-Budget Public Sector.