Trends

A Bridge to Better Solutions

When the citizens of Oceanside, California, recently celebrated the opening of the Murray Road Bridge, which spans 660 feet across the flood-prone San Luis Rey River, the occasion marked the first time in California history that a local agency had built a toll bridge. It was also one of the infrequent instances of a community having figured out a user-pays solution to a problem that usually gets solved by going to the state or federal government for money.

Constrained by the property-tax limit set down by the 1978 Proposition 13 and by voters' refusal (in 1980) to approve a $4.2-million bond issue to build a bridge, Oceanside officials had to resort to "creative financing" for the project. They set up a nonprofit corporation, which sold $5.2 million in mortgage revenue bonds, to be repaid by the Murray Road Bridge's 50-cent roundtrip toll, collected via automatic toll equipment.

Oceanside residents first balked at the idea of a toll—there are hardly any toll roads or bridges in all of California—but the bridge did get built.

An added advantage of the dedicated revenue from the bridge's tolls is that it assures funds for maintaining the bridge: bridges that are either privately owned (as is the Ambassador Bridge linking Detroit and Windsor, Canada) or operated by a corporate-like government entity (as is New York City's Triborough Bridge) almost never have maintenance problems, while many other of the nation's bridges are literally falling down.

America's Amazing Employment Story

With the seemingly persistent high rate of unemployment, many Americans are wondering what's happened to jobs. "But for the U.S.," wrote management expert Peter Drucker recently in the Wall Street Journal, "another question is at least as important—perhaps much more so—and yet it is never asked: Where have all the jobs come from?"

The number of US jobs increased 45 percent between 1965 and 1984, Drucker noted. At the same time, as the post–World War II baby-boom generation reached maturity, America's working-age population increased 38 percent. That jobs increased at an even faster clip is a remarkable accomplishment for the US economy, especially considering the "energy crisis," two recessions, and a severe shrinking of the "smokestack" industries (such as steel and autos) that rocked that period. By contrast, over the last decade Japan's jobs increased by only about 10 percent (half the US rate during the same period), and in Western Europe the number of jobs has actually declined since 1974. In a recent issue of Policy Review, US Chamber of Commerce officer Grover Norquist noted that in 1983 alone the US economy produced 4 million new jobs, more than the Canadians since 1965 and four times as many as the British created from 1952 to 1982.

What is most fascinating and instructive about this phenomenal job growth is that big business and government—the major source of new jobs during a 40-year period that extended through the '60s—contributed hardly at all to the recent employment explosion. Indeed, Drucker observed, "Government stopped expanding its employment in the early '70s and has barely maintained it since. Big business has been losing jobs since the early '70s."

Rather, small and medium-sized businesses have generated nearly all these new jobs. And contrary to what many might assume, most of these high-growth businesses are not high-tech firms (which account "for no more than 10% of the jobs created in the past 10 years") but what Drucker calls "low-tech" or "no-tech" enterprises (such as clothing makers and restaurant chains). What all these fast-growing businesses have in common "is that they are organized for systematic entrepreneurship and innovation."

The dynamic growth in American jobs, Drucker contended, disproves an increasingly discussed theory, developed by the late Russian economist Nikolai Kondratieff, that every 50 years or so a developed economy enters a 20-year period of unavoidable stagnation. While smokestack industries appear to conform to the "Kondratieff wave," Drucker maintained, "the job-creation by entrepreneurial and innovative businesses in the U.S. simply isn't compatible with Kondratieff."

Reasons for optimism about the US economy come from elsewhere, as well. Business Week, in a recent cover story, predicted that with various technological and labor innovations, the economy "is poised for a strong, sustained surge in worker efficiency."

A number of experts' projections for productivity gains, quoted by Business Week, range from 2.7 percent to 3 percent a year until at least 1990. This compares to a rate of less than 2 percent from 1970 to 1978 and zero from 1978 through 1982. Assuming productivity increases of slightly more than 3 percent a year for the period 1983–86, Data Resources, Inc., forecasts economic prospects for those years that, Business Week quipped, "outshine even the Reagan Administration's controversial budget projections," which are widely dismissed as self-servingly optimistic.

A major cause of the productivity boom, Business Week reported, is increasing computerization within both the manufacturing and service industries, as well as labor concessions allowing the more efficient use of workers. The installation of automated teller machines, for example, enabled a California bank to cut its 8,000-person work force by 700 and to close 30 of its 400 locations. And in one Cadillac plant, workers agreed to changes allowing flexible work assignments that reduce the amount of manpower needed to produce engines.

Drucker's observations about entrepreneurship and job creation, along with the emerging productivity increases achieved through innovation, are in interesting juxtaposition to the current debate over "national industrial policy"; for it seems ever more clear that the truly wise national policy is simply to leave the market free so that individuals may follow their own creative forces.

Opening the Door to Immigration Debate

The proposed Simpson-Mazzoli immigration reform bill—which would, among other things, punish businesses for hiring illegal aliens, grant amnesty to many illegals already residing in the United States, and theoretically try to make it more difficult for more aliens to come into the States—has a lot of conservative backers. As REASON contributing editor Tom Bethell noted in a recent Wall Street Journal op-ed article, conservatives like the anti-immigration bill because it seeks to enforce control of American borders. Many, too, support the bill because they think that immigrants create even greater demand on a welfare state that is already out of control.

But a growing debate over immigration policy appears to have emerged within conservative ranks, with Simpson-Mazzoli taking a lot of heat. Bethell, in his Journal article, chastised conservatives for giving no further thought to the proposed legislation "beyond interjecting occasional quotes from Edmund Burke on sovereignty." But the actual "perverse outcome" of the legislation, Bethell predicted, would be "additional millions of undocumented aliens pouring into America," lured here by the prospect of being granted amnesty and, thus legitimized, drawing on various welfare services. In essence, then, Bethell observed, Simpson-Mazzoli turns out to be "a proposal to add a new layer of regulation to business, and to expand the potential reach of the welfare state."

And in a recent issue of the conservative forum Human Events, attorney Frank Bubb made the case for a policy of open immigration. Bubb enumerated how "economic immigrants"—those who come to America to seek economic well-being—actually contribute benefits to native-born Americans. For example, "economic immigrants tend to shore up our two most expensive welfare programs—Social Security and Medicare," Bubb claimed, because "young immigrants increase the ratio of taxpayers to dependents paying into these programs for decades before they receive benefits." Moreover, Bubb noted, immigrants reduce the per-person burden of government spending that does not fluctuate with population size and of the national debt and interest on the debt.

Bubb also pointed out a little-noticed benefit of open immigration, one that Mancur Olson articulated in his recent book, The Rise and Decline of Nations: "Like free trade," Bubb wrote, open immigration "has the effect of unclogging an economy's arteries by undercutting the monopoly power accumulated by special interest groups, such as labor unions."

And Heritage Foundation senior fellow Julian Simon recently debunked, in both a Heritage study and a Newsweek "My Turn" column, various "myths" about the effects of immigrants on the US economy. Contrary to the popular belief that Mexican illegals are flooding the United States, Simon wrote, "the total number of illegals is almost certainly below 6 million, and may be only 3.5 to 5 million"; but even this figure "overstates the number of Mexicans who intend to remain permanently, leaving perhaps 1.3 million Mexican illegals—certainly not a large number by any economic test."

Moreover, Simon pointed out, numerous studies show that only "small proportions of illegals use government services: free medical [care], 5 percent; unemployment insurance, 4; food stamps, 1; welfare payments, 1; child schooling, 4." And while "practically none receive social security, the costliest service of all," Simon noted, "77 percent pay social-security taxes, and 73 percent have federal taxes withheld."

Simon also explained that Americans' major fear of open immigration—immigrants taking native Americans' jobs—is based on a view of the economy that "overlooks the dynamic that immigrants create jobs as well as take them." Not only do their purchases create additional demand for goods (and thus for labor), but immigrants, as a group, are more likely than natives to set up their own businesses, thus creating additional jobs.

While Simon made a powerful pragmatic case for open immigration, it was Bubb, in his Human Events article, who argued most explicitly the moral aspect of such a policy. "Immigration is above all a moral issue, an issue of human rights," he wrote. "If a person born in Guadalajara or Port-au-Prince buys an airline ticket to Philadelphia, rents an apartment and finds a job, whose rights has he violated?"

Unmasking the U.N.

There was a day when the United Nations enjoyed the political sanctity of bipartisan commissions and "The Star-Spangled Banner." Anyone challenging the UN was quickly dismissed as a mere tassel on the lunatic fringe. But things are changing.

In January, Harper's magazine, not known for right-wing extremism, published a scathing denunciation of the UN, "Yanqui, Si! UN, No!" Author Richard Grenier reviewed the UN's original billing, which was "to save succeeding generations from the scourge of war," and how that mission has abjectly failed. Since the UN was founded, he noted, "the world has seen more than one hundred armed conflicts, including some forty major wars, which have killed over ten million people. Even an imbecile can see the place isn't working."

Grenier pointed out the hypocrisy of the UN's rhetoric in no uncertain terms. "Most of the 100-odd members of this 'parliament of man' represent countries that, back home, are naked autocracies," he observed. "In other words, we have here an organization devoted to peace between neighbors whose members routinely make war on their citizens. What kind of peace-loving governments are these?"

Grenier also mentioned the "odd concentration of UN activity around the organization's two pariah states, South Africa and Israel [he might also have mentioned Chile], as if they were the only trouble spots on the globe." While the UN funds and has granted permanent-observer status to the Palestine Liberation Organization (PLO) and the South West Africa People's Organization (SWAPO), anti-Soviet liberation movements get short shrift. "I have no idea why the Afghans struggling desperately to free their country from Soviet occupation do not qualify as a national liberation movement, but I have never heard them mentioned once in the corridors of the U.N., except by the United States," Grenier sardonically observed. "And again, except from the U.S., I have never heard a whisper about such obvious non-nations as Poland, Czechoslovakia, Hungary, Estonia, Latvia, Lithuania, Moldavia, Uzbekistan, Kirghizia…but you know the list."

Grenier even contemplated the once-heretical notion that the United States, whose taxpayers support 25 to 33 percent of the UN's budget, simply up and leave. He sympathetically quoted the view of one American official that our presence "gives the organization one of the principal claims to legitimacy it now possesses, and that without us it would stand revealed as the third-world Soviet lynch mob it has become, diplomatically useless." If the United States withdrew, the official suggests that other nations would very likely follow, "and the United Nations would soon collapse."

From the time it was founded, the UN caught the political imagination of many decent and well-intentioned individuals—but as Grenier said, "no one explained to the American people that the United Nations itself was based on preposterous assumptions about the world, even about the nature of man, and that it might someday fall into the hands of bad-type people." Now is evidently the season for shedding illusions.

Who Needs an Industrial Policy?

One of the current curiosities of American politics is the notion that "industrial policy" is a bold and innovative idea that's been tried in Japan and been a spectacular success. In fact, there are increasing doubts about whether Japan has tried any such thing. Meanwhile, industrial policies have been tried extensively in other countries, including several in Western Europe, and their track record deserves careful study.

Recently, the Heritage Foundation published a report on the British experience, written by John Burton of the Institute of Economic Affairs in London. Burton noted that many of the "buzzwords of industrial policy—adjustment assistance to 'sunset' industries, financial assistance to promote new 'sunrise' industries and technologies, the establishment of tripartite (business, union, and government) councils to improve cooperation and many others—have been heard and enacted in Britain over the past 30 years."

In 1945, when the Labour government of Clement Atlee was elected, industries such as coal, electricity, gas, railways, and civil aviation, as well as the Bank of England were nationalized, to be followed by iron and steel six years later. This proved, noted Burton, "an unmitigated and expensive disaster for the British taxpayer." From 1945 to 1979, subsidies to nationalized industries mounted to $45 billion in 1979 dollars.

National economic planning has not been any less catastrophic than out-and-out nationalization. The Conservative government in 1962 established a National Economic Development Council to catalyze a coordinated planning effort by government, business, and labor. The council targeted a 4 percent increase in output through 1966—but output actually rose only 2.9 percent. A new Labour government in 1964 added its own version, which produced a new National Plan. It was abandoned completely in 1966.

Meanwhile, Labour had come up with the idea of government sponsorship of a "white-hot technological revolution." A number of measures flowed from this goal in the late '60s and '70s.

An Industrial Reorganization Corporation was to use tax monies to fund business mergers that would increase efficiency. One of the notorious results is, as Burton described it, "the sorry history" of British Leyland, formed in an IRC merger between the firms BMC and Leyland Motors in 1968. The IRC lasted only four years, but British Leyland and all but one of the other 69 matches made in IRC heaven were launched on their way to bankruptcy.

The "white-hot technological revolution" also was to be incited by subsidies to high-risk research and development efforts. Under this policy, a British computer firm was cobbled together in 1968, an aluminum smelting industry launched, and large loans and loan guarantees extended to such ventures as the Concorde supersonic jetliner.

The fate of the Concorde illustrates the problems that ensued. The plane's cost per seat-mile is three times that of the Boeing 747, and even British Airways refused to purchase any Concordes until the government promised to compensate it for the financial losses the airline was sure it would incur.

In 1971, under the Conservative Heath government, the IRC was abolished, only to be reincarnated the next year as an Industrial Development Unit charged with using subsidies to create new jobs and modernize flagging industries. The return of Labour in the mid-'70s brought new twists on by-now familiar policies. Yet from 1974 to 1978, productivity in Britain grew, on average, by a mere 0.8 percent a year.

And subsidies continued to mount. In 1975, on the brink of folding, British Leyland was resuscitated with a plan calling for $1.5 billion of taxpayers' money through 1982. In fact, British Leyland swallowed up all that money by 1980, and the Thatcher government poured in an additional $2 billion. "The financial return to the taxpayer has been zero," noted Burton. "Nor is there much sign that the corporation will ever get back into the black."

While the Thatcher administration promised to disengage government from industry, "the sums of public expenditure allocated to industry remain just as high in real terms as under Mrs. Thatcher's predecessor," Burton revealed. And about two-thirds continues to be funneled into "sunset" industries.

Burton suggested several lessons to be digested by US citizens bombarded with pleas for devising an industrial policy: "picking winners" has not led to an improved overall economy in Britain; "the supposed 'winners' have had an alarming tendency to turn into costly 'losers' for the taxpayer"; and it is extremely difficult to withdraw industrial subsidies once begun.

With a wonderful policy like this, who needs government boondoggles?

One Small Step for Minority Teens

For years, free-market economists have pointed out the racist consequences of minimum-wage laws—but ironically, most civil rights activists and organizations who have shown any interest in the issue continue to support the minimum wage. Thus, it is noteworthy that the influential National Conference of Black Mayors has endorsed a proposal to reduce the scope of the minimum wage, at least on an experimental basis.

The logic against the minimum wage has always been strong. In a 1978 REASON article, "The New Jim Crow Laws," economist Walter Williams asked: "If a wage of $2.65 per hour [the minimum wage at the time] must be paid no matter who is hired, what kind of worker does it pay to hire?…Clearly the answer, in terms of economic efficiency, is to hire workers whose productivity is the closest to $2.65 per hour. If such workers are available, it clearly does not pay the firm to hire those workers whose output is worth, say, $1.50 per hour."

He continued, "For a host of socioeconomic reasons, white youths, more often than black youths, have better educational backgrounds and training. Therefore, the legislation of a minimum wage law can, as reflected in unemployment statistics, be expected to impose a greater burden on black youths than on white youths."

Despite this, the political clout behind the minimum wage—especially from trade unions who fear that their workers will be elbowed out by low-cost labor—is sufficiently strong that there is no chance of abolishing the minimum wage anytime soon. The situation is hardly helped by the fact that the NAACP, the Congressional Black Caucus, the Urban League, and other influential civil rights organizations are strongly opposed to any relaxation or lowering of the minimum wage.

However, the Reagan administration has proposed an experiment in which the current $3.35-per-hour minimum wage would be lowered to $2.40 for workers under 22 who are hired from May through September (in an early version of the proposal, the $3.35 figure would apply for workers retained in their jobs after September 30). It is this proposal that the National Conference of Black Mayors—with 251 members and an estimated total constituency of 20 million— has endorsed.

"We wish we could have full employment in this country at least at the minimum wage level," deputy executive director Sam Tucker told REASON. "But we don't now. We think this experiment is a step in the right direction."

At this writing, it is too early to know the prospects for the administration proposal this year. But with the overall teenage unemployment rate at 25.6 percent last June, and the unemployment rate for black teenagers at a staggering 56.2 percent the same month, any reduction in the minimum wage that would expand job opportunities for young people is long overdue. The black mayors evidently recognize this.

Resourceful Analyses

Over the last several years, there have been numerous dire predictions that the earth's nonrenewable resources are being depleted. According to this line of thinking, often used as a rationale for no-growth policies, crisis is virtually around the corner unless industrial societies radically change.

But in the February issue of Science, H.E. Goeller and A. Zucker of the Oak Ridge National Laboratory presented a case for the conclusion that "with a few exceptions, the world contains plentiful retrievable resources that can supply mankind with the necessary materials for the very long term, and…these resources can probably be extracted and converted to useful forms indefinitely with acceptable environmental consequences and within the boundaries of foreseeable economic restraints."

They concluded this after considering current demand and estimated demand in 2100 for each of the 65 currently useful chemical elements. They note that a dozen elements are already "economically in infinite supply with installed and proven technology"; technology is "already partially or fully developed, but not yet economic to make an additional seven elements virtually unlimited"; and another 14 elements are likely to achieve near-infinite supply status given a century for research and development. Also, it "seems highly likely that with sufficient R&D," about 33 more elements may be in unlimited supply by 2100, and many of the remaining elements can be "significantly extended beyond our present projections."

These figures, incidentally, are not based on predictions of prosperity in industrialized countries while stagnation and decline prevail in the Third World. On the contrary, Goeller and Zucker calculate that while the average per capita demand for resources in the Third World is currently only about 6 percent of that in developed countries, that 6 percent could grow to 50 percent by 2100, putting the less developed countries on a level equivalent to that in Greece today—and still there would be no crisis of resources.

What do Goeller and Zucker see that so many other resource analysts have missed, leading to doomsday predictions? They recognize that "nonrenewable resources are useful because of their physical and chemical properties and are not an end in themselves." In other words, if and when a resource can be replaced with something else (as with fiber optics replacing copper-wire cables), the need for that resource may well be obviated. Moreover, as a resource becomes scarcer and its price rises, there is a powerful incentive to develop and market alternatives to it. Cobalt is an example.

Goeller and Zucker recall that when the cobalt mines of Zaire (where half the world's cobalt supply is produced) were disrupted in 1978 by political problems, cobalt prices rose from $11 to $25 per kilogram. In some industries, the demand for cobalt remained steady despite the price rise. But in other industries, substitutes for cobalt proliferated. Ceramic (ferrite) magnets have "rapidly replaced" cobalt alloy magnets, according to Goeller and Zucker. Manganese and lead have replaced cobalt in salts and driers for paints. And "the cobalt crisis has also led to intensive development of substitutes for the longer term," including new nickel-iron-aluminum alloys.

Other marketplace dynamics mitigate against resource crises. The authors point out that "as the quality of raw materials declines, a slow rise in prices places more emphasis on conservation, recycling, miniaturization, and durability of products."

Indeed, in a marketplace setting, even projections such as theirs can play a valuable role in alleviating the very shortages that are being predicted, as shrewd investors see opportunities for profits in conservation and stockpiling. As Joseph Martino observed in REASON ("Inheriting the Earth," Nov. 1982), "If a particular resource will be more valuable in the future than it is today, it is in the interest of the owner to conserve that resource so that he can sell it at a higher price in the future." Goeller and Zucker explicitly suggest that "recovery and stockpiling may be a prudent option" for four by-products of zinc ores that may never be mined in their own right.

Doomsday predictions tend to ignore these dynamics—as well as the fact that the economy's uses for natural resources are constantly changing. For example, the use of lead in paints and in vehicular antiknock fuels has been decreasing, and the use of platinum metals as catalysts in antipollution devices has been increasing.

On the whole, Goeller and Zucker make a persuasive case that with a marketplace regulating the price and use of resources, there is little reason to be concerned. Somehow, though, the newspapers that headlined the Club of Rome's doom reports in the '70s missed this one.

A Sober Proposal

Pennsylvania consumers' spirits may be lifted if Republican Gov. Richard Thornburgh's push to dismantle the state's liquor-control system succeeds. Thornburgh wants to get the state out of the business of running its 725 "state stores," the only places that are allowed to sell wine and hard liquor. Thornburgh's proposed legislation, which has Democratic backing, calls for abolishing the Liquor Control Board and selling off the LCB-operated stores. The bill would also permit grocery stores to sell wine.

Consumers would benefit by the change, the governor maintains. Unlike the present operations, private liquor stores would be allowed to price their merchandise competitively, have sales, advertise their products, offer contests, and accept credit cards and checks.

Already, Pennsylvanians cross state lines to shop in the private liquor stores of neighboring New Jersey, New York, and Maryland—to the tune of some $28 million a year (compared to $748 million spent in Pennsylvania's state stores last year). (The state of Pennsylvania's average revenue from a gallon of distilled spirits is $10.20, while New Jersey's is $4.73.) In addition to marking up their merchandise by a flat 25 percent, Pennsylvania state stores add two handling charges and an 18 percent "emergency" tax enacted to clean up a 1936 flood.

Opposing the idea of free-enterprise liquor sales are a number of groups with vested interests in the present system, including the National Alcoholic Beverage Control Association (a state-alcohol-controllers organization), the United Food and Commercial Workers (a union that organized the civil-service, state-store employees), and the Independent State Store Union (a state-store-managers association). Though the governor's proposal includes an offer to guarantee loans for state-store employees wishing to buy their own liquor stores, the unions remain unmollified.

Milestones

• Simon says: Buy gold. Former Treasury secretary William E. Simon, long a foe of gold bugs, has now become convinced that the threat of inflation (due to runaway government spending) is so severe that he thinks gold is "a good investment…from a long-term insurance point of view."

• Flaming justice. Model-railroad enthusiasts disenchanted with tax collectors can now purchase a heart-warming model-railroad accessory made in West Germany—Das Brennende Finanzamt, or for us, "The Burning IRS." The building includes a smoke unit and blinking bulbs to create a flame effect.

• One to go? California may become the 33rd state to call for a constitutional convention to pass a balanced-budget amendment. By February, 605,000 signatures—about 200,000 more than necessary—had been collected to put the initiative on the state's November ballot. If Californians vote yes on the initiative, only one more state would be needed to force Congress to call a constitutional convention on the balanced-budget issue.

• Tip tax contested. A group representing restaurant and hotel owners is suing the federal government over a tax law requiring these owners to designate 8 percent of their food and beverage revenues as employees' tips for tax-figuring purposes. The regulation, the plaintiffs hold, would overstate employees' tips; hence the IRS would claim larger taxes on those employees' earnings than actually due.

• Shoring up property rights. A California county superior court judge ruled in December that the state's Coastal Commission has acted unlawfully by taking "private property without justification." The ruling came in regard to the commission's practice of demanding land for public access to beaches from coastal property owners in exchange for permission to build protective sea walls.

Global Trends

Break-Even Transit

JAPAN—Anyone looking for evidence that privately owned urban mass transit systems can work will find that evidence in Japan. According to a recent report by Toru Akiyama, chairman of the Japan Transport Consultants Association, of the 30 large Japanese municipal bus systems, 27 are privately operated and only three (in Tokyo, Kawasaki, and Yokohama) are run by municipal governments. Japan also has 15 private railways, eight of them major lines in metropolitan areas.

The fares on both government and privately owned transit systems are tightly regulated by the government, but there is a big difference between fare regulation in Japan and the United States. In the latter, average farebox revenues cover only around 40 percent of operating costs, with the remainder collected from taxpayers' pockets. But in Japan, the Transportation Ministry believes in riders paying their own way. Fares on privately owned lines there are structured to cover not only operating costs but also the cost of capital assets, depreciation, and debt service. The ministry authorizes a fare formula that allows a "fair return" of 8 percent for the owners of the private systems.

The government-owned subway systems have comparable fare structures. Fares cover operating expenses, depreciation, and interest on nonsubsidized capital costs (about 60 percent of the systems' construction costs are government-subsidized). But riders on the city-owned Toei subway line in Tokyo are paying about 75 percent of the total cost of the system, considerably more than the minimal share paid for by American riders.

One of the weakest parts of Japan's transportation system is the government-owned Japan National Railways. Its long-term indebtedness has reached the equivalent of $75 billion; accumulated losses have risen to $37.5 billion; and declines in freight revenue are accelerating. Recently, a government-appointed panel has been investigating JNR's woes and has recommended a sensible reform to ease the situation—terminating service on 73 local lines that lose money and transferring or selling 102 local lines to private operators or joint ventures of local governments and private companies.

Launching an Independent Defense?

PARIS—French President François Mitterrand, urging the importance of a Europe able to defend itself, recently proposed that European nations cooperate in developing a space-based military reconnaissance capability. Such an effort might eventually lead to the development of a West European-controlled manned military space station. "The Atlantic Alliance [NATO] is not about to be supplanted by a European Alliance," Mitterrand was quoted in the British daily the Guardian; but his remarks indicate his seriousness about developing a European defense independent of the United States.

Indeed, as a further indication of that seriousness, the French also have proposed abolishing current restrictions on the range of missiles and bomber aircraft built in West Germany. The restrictions on West German armaments—part of post-World War II constraints on Germany's military activities—limit to 43 miles the flight distance of German-built missiles and prohibit the West Germans from building strategic bombers.

The French are also pushing to beef up the Standing Armaments Committee of the West European Union (WEU)—whose members are Belgium, France, Italy, Luxembourg, the Netherlands, the United Kingdom, and West Germany—to create more cooperation in the production of weapons (hence the proposal to end limits on German-built weapons). France is working to develop the WEU into a viable defense entity.

South American Sea Change

ARGENTINA—With the return of democracy after years of military dictatorship, things are looking up for Argentina.

The revival of civil liberties with the accession of the Raúl Alfonsín government has been well documented. The new government has courtmartialed three former presidents and six other top military leaders who presided over what Amnesty International has called a "consistent pattern of gross and reliably attested violations of human rights," including disappearance, torture, and murder of thousands. Those practices have of course ended. But what is less well known is that the Alfonsín government is also making an effort to put the Argentine economy in order, partly by introducing free-market reforms.

The task is certainly large. Alfonsín inherited from the generals one of the world's highest inflation rates (430 percent in 1983). Their legacy also included a foreign debt of $43 billion, much of it owed to US banks, and enormous government budget deficits. According to Business Week, some $15–20 billion was borrowed by the military rulers for "prestige projects," but many Argentines "are convinced that a large portion of the debt ended up in private pockets."

Alfonsín's government is planning to shrink the country's bloated public sector as the solution to the budget deficit and resulting inflation. For example, state-owned companies now account for about 50 percent of the country's gross domestic product, and among the most important of Alfonsín's goals is divesting the government of many of the money-losing enterprises. Economy Minister Bernardo Grinspun told the Wall Street Journal that from now through 1985, the government will rid itself of "hundreds" of such companies. "There's a commission looking into selling off these state-owned enterprises," he said. "If we can't sell them, we'll shut them down.…The savings will be small in 1984 and bigger thereafter."

Meanwhile, the end of military rule is having significant positive effect on Argentina's cultural life, as well. A nation that was one of the most tolerant and cosmopolitan in Latin America 50 years ago is becoming more like its old self. "The repression was so strong that I couldn't create," sculptress Marta Minujin told the Los Angeles Times. "I could only work if I could fool them [the censors], if they couldn't understand it." Ms. Minujin celebrated the advent of civil liberties by building in downtown Buenos Aires a replica of the Parthenon made of 25,000 books. After it was built, she allowed the public to take the books away.

The spirit of the country is very different from the recent past. Exiled writers are returning. Films such as The Patagonian Rebel, an international hit made in Argentina, and Missing, Costa-Gavras's film about the disappearance and death of an American during the 1973 military coup in Chile, were banned in Argentina before but are being shown now.

Even the military rulers' enforced puritanism is falling by the wayside. Pornography that was not permitted under the old regime is flourishing (a Los Angeles Times reporter counted 22 magazines with "covers of women in various stages of undress" and two theatres offering striptease shows on a street in Buenos Aires).

When Minujin built her Parthenon of books, she told why she did. "I gave the books away." she said, "so people would know they don't have to be afraid anymore."

Global Round-Up

• Language outlaws. An unusual underground is operating in Montreal in Canada's predominantly French-speaking Quebec province: illegal English schools and classes. A 1977 Quebec law banned, with few exceptions, English in Quebec's schoolrooms. But many are offering instruction in English in defiance of the law. According to a recent Associated Press report, about 1,100 Montreal students are enrolled in classes in which teachers conduct the courses in English.

• Abortion legalized. Portugal's parliament has approved a proposal backed by the ruling Socialist Party that permits abortions in cases involving rape, abnormal fetuses, and risk to the life or health of a woman. This leaves Ireland and Belgium as the only Western European countries still forbidding all abortions.