Trends
Nurses Begin Calling Their Own Shots
Nurses who are sick of being number two in the medical profession are beginning to do what disgruntled employees in other professions have long done: they're going into business for themselves. It's one more sign of increasing competition in the medical marketplace.
The combination of great responsibility with little autonomy or recognition has prompted some nurses to quit their profession entirely. But the Wall Street Journal recently reported on some of the nurses who've stayed and set up independent practices and nurse-managed clinics—without doctors.
The services these nurses are offering differ from, and complement, traditional doctors' services. Leaving aside the treatment of sick or injured people who need immediate attention, nurses can watch over peoples' long-term health. They can perform routine, preventive examinations and monitor diseases and other medical conditions.
Because they work for themselves, independent nurses have the control often lacking in a traditional doctor-nurse medical practice. They work their own hours, set their own fees, and develop continuing relationships with their own patients.
Jean Sweeney-Dunn and Edith Reidy run an independent nursing practice in Elmira, New York. They make house calls on elderly patients who would otherwise use hospital emergency rooms for nonemergency care. Sweeney-Dunn and Reidy aren't allowed, by state medical-licensing laws, to prescribe medicine; but they can perform routine exams and tests, treat medication problems such as bad side effects, counsel patients in self-care, and make referrals. For a standard house call they charge $25.
Nurse-controlled nursing isn't limited to nurses with their own private practices; it's also found in various nurse-managed clinics and centers. For example, nurses are in charge at the Bronx Perinatal Consortium, a health center for women in Orange County, New York. Nurse-managed nursing is also prevalent in midwifery clinics, such as the Childbearing Center in New York City. Cathryne Welch, executive director of the Foundation of the New York State Nurses Association, says that "there's far more activity like this going on in this country than anyone has a handle on."
And what do doctors have to say about nurses managing themselves? Many are predictably nervous about the competition that independent nursing poses to their state- backed monopoly on medical care. But some doctors like the idea of nurses taking more control. As the Wall Street Journal put it, "Their practices are busy with crises, and they don't have time to make house calls." Perhaps independent nursing is just what the doctor ordered.
Nonbank Banks Best Nonsense Bank
It couldn't happen to a nicer bunch of guys. By an 8-0 margin, the US Supreme Court has dealt a serious blow to the Federal Reserve Board's campaign to limit the expansion of "nonbank banks" and thus competition in the banking markets. The Fed is furious, the banks elated, and the ultimate beneficiaries of the court's wisdom will be consumers.
"Nonbank banking," or limited-service banking, is a 1980s innovation, devised to take advantage of a loophole in federal banking regulation. Federal law defines a bank as an institution that both takes checking deposits and makes commercial loans; limited-service banks offer just one of these services. Thus they avoid federal bans on interstate banking (by banks) and the mixing of banking and commercial activities (by commercial enterprises).
More than 100 firms, most notably Sears, Roebuck & Co., have entered the nascent limited-service banking business. Sears has done so with great gusto; using the flexibility provided by its nonbank status, the Sears Financial Network has issued a new credit card, Discover. Discover holders can get cash at over 6,000 locations, maintain a savings deposit account, and even contribute to an IRA.
The specter of competition and alternative means of banking breaking out all over was too much for the Federal Reserve Board, which in 1983 sought to bring limited-service banks under its jurisdiction. Dimension Financial Corp., of Denver fought back, setting the stage for the High Court's recent decision, in which the court admonished the Fed to confine its regulation to that explicitly authorized in federal banking laws.
Reaction from the Fed and its allies to the court's unanimous ruling was immediate. Predicted Fed Vice-Chairman Preston Martin: "We'll have to cope with a wave of openings of non-bank banks that will be hard to reach by regulation." House Banking Committee member Jim Cooper (D–Tenn.) was also metaphorically wet: "The Fed had its finger in the dike for a long time. Now that it's been told it can't, the flood of non-bank banks is coming."
Smaller banks, which have been protected from competition with the Citicorps of the world by the interstate-banking prohibition, were just as downcast. Lamented small-bank lobbyist Kenneth A. Guenther to Business Week, "McDonald's hamburger chain [can now] buy a state-chartered bank, convert it to a nonbank bank, and open a deposit-taking facility in every store." If it happened, it would be tough luck for a few bankers—but good news for millions of consumers interest in convenience.
The 535 Solomons in Congress may yet scotch the nonbank bank explosion. House Banking Committee Chairman Fernand J. St. Germain (D.–R.I.), though reeling politically from a Wall Street Journal article questioning his probity and unexplained wealth, wants to close the nonbank-banks loophole. So does Senate Banking Committee Chairman Jake Garn (R–Utah). They'll likely have the active support of Federal Reserve Chairman Paul Volcker as well as numerous small banks that fear competition. Arrayed against them are consumers and enterprising capitalists offering innovative services. Bank on a raucous battle ahead.
Mall Owners Go Shopping for Freedom
Does a shopping-mall owner have the right to prohibit political leafleting on his land? Yes, says the New York State Court of Appeals in a major ruling upholding property rights. New York thus becomes the third state in a row—following Michigan and Connecticut—to affirm the rights of mall owners.
Since the Supreme Court tossed the issue into the laps of the states in 1980, only California has ruled that mall policies prohibiting leafleting and politicking violate state free-speech guarantees. (In addition, high courts in Washington and Massachusetts have ruled that malls may not forbid certain narrowly defined activities.)
The mall owners' position, says Edward Sach, general counsel of the International Council of Shopping Centers, is simple: "Each center should be free to adopt its own policy" on what people may do on its property. The New York State Court of Appeals, in the Smith Haven case, concurred.
The management of Smith Haven Mall on New York's Long Island strictly forbids any and all types of political activity on its premises. They've even gone so far as to boot then-Sen. James Buckley off the grounds when he tried to invade shoppers' peace and quiet back in 1976.
In 1980, individuals attempting to pass out leaflets against nuclear power were similarly ejected. They protested and took their case to the courts, arguing that the mall's policy violates the New York State constitution's guarantee of freedom of speech.
On appeal, the state's highest court, in a 5-2 decision, affirmed Smith Haven's right to exclude the leafleters. The state's constitution, wrote Justice J. Titone for the majority, provides "a check on governmental, not private, conduct. Smith Haven Mall is not the functional equivalent of a government, and its conduct is not the equivalent of governmental conduct." Therefore the mall's actions, unlike similar action by an arm of the state, do not violate the leafleters' rights to free speech.
Titone went on: "While the drafters of [New York's] free speech clause may not have envisioned shopping malls, there can be no question that they intended the State Constitution to govern the rights of citizens with respect to their government and not the rights of private individuals against private individuals." Chalk one up for the right of free association.
In fact, the court denied that "free speech" is the issue involved in the Smith Haven case. Titone noted that "the free speech provision [may not] be read as imposing an affirmative limitation on private conduct." In other words, my right to free speech does not include the right to use your property, against your wishes, to speechify.
Syndicated columnist Stephen Chapman, applauding the Smith Haven decision, observed that a system of property rights actually protects free-speech rights. "Free expression," wrote Chapman, "is indeed an attribute of property, which includes the individual's right to use his mind, voice, labor, and capital to propagate whatever views he holds. If the state can dictate the uses of those forms of property, it does not enhance freedom."
Federal Regulators Open the Lines for Local Phone Competition
In an effort to "let the discipline of competition replace the squeaks and roars of regulators," Federal Communications Commission Chairman Mark Fowler recently called for an end to local telephone monopolies. With rapid changes in the telecommunications industry, said Fowler, public-utility regulators should allow competition in local telephone markets.
Deregulators have already done their thing to long-distance telephone service, paving the way for the recent influx of long-distance companies now scurrying for customers' business. But the perception is still wide-spread, especially among state-utility regulators, that local telephone service is a "natural monopoly," requiring regulation of service and rates. Fowler disagrees. He argues that this outdated approach has discouraged price competition, inhibited private experimentation with new technologies, and cost "billions of dollars and countless lost opportunities."
In his remarks at a conference of communications executives, Fowler suggested a three-year experiment with less control by state regulators. With the "once-sacrosanct local telephone market" already affected by the introduction of new technologies such as cellular radio and "smart buildings," he predicted that the future will bring competition anyway. "As consumers replace the government as regulator, local telephone companies will inevitably lose their monopoly. Consumers will have a choice. And these local companies must now also have the choice of entering and operating in entirely new markets."
In anticipation of this trend toward a competitive telephone industry, legislators in several states have taken a first baby step, proposing to deregulate all categories of telephone service within their states in exchange for "price-stability programs" for basic rates. Idaho, Illinois, and Vermont have considered such proposals, according to MIS Week magazine.
Meanwhile, the FCC has also abolished all federal and state regulations controlling the installation and maintenance of telephone wires. Currently, only local phone companies can install and repair wires in homes and small businesses. Starting next year, however, residential and small-business users will be able to do it themselves or hire someone else. The FCC's unanimous vote is an attempt to encourage competition as well as remove the costs of wiring services from phone companies' rates.
Fowler is optimistic about the future of the telephone industry: "Unless we in government…retard or kill its potential, telecommunications should become an almost completely competitive marketplace."
Consumers and Producers Must Agree—Keep On Deregulatin'
When industries are deregulated, a great hue and cry issues forth from the heretofore protected firms. Competition, they warn, will throw thousands out of work and inconvenience and possibly even endanger consumers. And all for the sake of abstract free-market theories understood only by the most erudite economists!
In fact, deregulation has very concrete and beneficial results, as the Wall Street Journal recently reported in the case of transportation in the United States. Five years after the rail and trucking industries were substantially deregulated, noted the Journal, freight-haulers have adopted efficiencies that saved shippers more than $25 billion over the last four years. And according to Ohio State transportation professor Bernard La Londe, up to $10 billion of that savings to shippers is reflected in lower retail prices to consumers.
With shippers able to bargain for better rates and service, just as with other commodities, the results for price and availability of consumer products, and increased productivity for firms, can be found throughout the economy, noted the Journal.
• The Adolph Coors Co., taking advantage of rail deregulation to secure a 25 percent reduction in rates, has expanded distribution of its beer into New England. "Now I don't have to visit my brother in Wyoming to drink Coors," exults one Yankee.
• Houston Lighting & Power, distressed by Burlington Northern Railroad's coal-hauling rates on the Wyoming-to-Texas line, threatened to bypass the giant railroad by building its own 12-mile line to connect with Burlington's rival, Union Pacific. Burlington relented, cut its rates by 26 percent, and the utility is saving $60 million a year.
• Oldsmobiles rolling off the assembly line at General Motors' Lansing, Michigan, plant used to be driven to a parking lot half a mile away to sit, sometimes for days, until being shipped. In the heady air of a deregulated transportation market, GM convinced the local railroad to spend $2 million to relocate its tracks. A new loading center was built, enabling the car-maker to send its cars directly from the assembly line to rail cars. GM now gets its cars to dealers one day earlier and saves $900,000 annually in inventory carrying costs.
• Some GM plants, taking advantage of more flexible transportation, have adopted the Japanese system of "just-in-time" delivery. Automobile parts arrive at the plant, via rail or truck, just in time to be used, thus obviating the need for large and costly inventories. "We're pounding in discipline that the transportation system never had before," one GM manager related to the Journal—and proving, contrary to the claims of proregulation forces, that deregulation can help American firms compete in the domestic and world market.
The efficiencies and benefits of the free market are not idle theory. Tentative efforts to scale back the regulatory state in the 1980s are making life a bit better for companies and consumers, from General Motors to Boston beer-drinkers. Professor La Londe observes, "If you listed all the ways in which consumers are better off today than in 1980, transportation would be high on the list."
Milestones
• Hicks' horse sense. Nine out of 10 rural Minnesotans object to paying higher taxes in order to bail out troubled farmers, according to a Minneapolis Star and Tribune survey. But the poll found Twin Cities-slickers are a softer touch; one in four Minneapolis-St. Paul residents is willing to render more unto Caesar and his clients in the Green Acres crowd.
• Lotsa Luck Dept. The irrepressible National Taxpayers Union has turned the tables on liberals and filed what may be the largest class-action lawsuit ever. On behalf of the nation's 60 million children and generations yet unborn, the NTU is asking the court to prohibit the federal government from issuing new bonds except during national emergency and unless there is a clear plan for repaying the national debt.
• Long live the happy hour! A California Senate committee recently corked a bill that would have restricted happy hours. The bill, intended to discourage drinking and driving, would also have prohibited bars from sating customers' thirst with free drinks, two-for-one drink specials, and other alcoholic-beverage promotions. The California Restaurant Association called the bill a "real can of worms."
Global Trends
Some Freedom Comes to the Strange, Strange Middle East
Jerusalem—In an area of the world packed with oppressive, military, and undemocratic regimes, it seems that nothing will ever change for the better. But some things in the Middle East are improving.
Until recently, Iran and Saudi Arabia were the main sources of foreign aid to Syria and Jordan, respectively. But the rapid drop in oil prices and the resulting oil glut have hindered the ability of oil states to continue giving aid. The common financial constraint that this has put on Syria and Jordan has brought these two formerly unfriendly states closer together. To limit the damage, the two are improving their commercial relations.
In both states, the otherwise authoritarian regimes are deregulating businesses and encouraging the private sector. Economic reality has forced King Hussein and President Hafez Assad to life restrictions on trade and domestic commercial activities. Last September, Jordan enacted a new supply law abolishing import restrictions, which has freed trade with Syria and improved domestic business. The government has also relaxed price freezes that had been strictly enforced by the military court.
Syria, for its part, has allowed its businesses to freely exchange goods with Jordan for the first time. The breakup of Lebanon's economy because of the war there has discouraged Syria from relying on Lebanon and further encourages it to pursue commercial relations with Jordan. Necessity is the mother of these changes.
Across the Jordan River, meanwhile, a free economy has been a fact of life for 19 years in the Israeli-occupied West Bank and Gaza territories. The political volatility there has made it nearly impossible to tax the Arab inhabitants or to regulate their businesses. The result is an enclave of free trade, which Israel and Jordan both need in order to do business with each other.
Israel's surplus goods from ready markets in the West Bank and Gaza; all commodities traded between Israel and its Arab enemies go through middleman companies in these territories. Cash transfers and other financial transactions are freer there than anywhere else in the neighborhood. The unregulated economy of the West Bank and Gaza attracts money-exchange dealers, retailers, wholesale traders, investors, and real-estate agents. It's paradoxical that a 19-year military occupation has created what's now known as the "Hong Kong of the Middle East."
—Oden Yinon
The "Ambulantes" Strike Back
Lima, Peru—Lima has 100,000 street vendors and one Communist mayor. Sooner or later, this combination had to explode.
The crisis began when the municipality, inspired by the Marxist mayor, approved an ordinance regulating the street vendors, know as ambulantes. The merchants' response was immediate: marches, protests, riots, and civil disobedience. And now Lima lives, as it has before, in an ambulantes' war.
Since the days of the Spanish colonizers, Lima has had street vendors. But the nature of street vending changed during the period of mass migration from Peru's rural areas into Lima (1940–80), when the city's population increased sevenfold. The vendors stopped moving around and settled into the streets, creating a sort of common law that regulated their activities. (Statutory law has traditionally prevailed in Peru.)
The ambulantes developed a well-organized street market. They became a dominant force in the retail industry, especially in food, clothing, and shoes, and it providing minor services. In spite of legal barriers, 31,000 ambulantes spent an estimated $50 million in the last decade to build 240 shopping markets. In the same period the municipality constructed only two markets, investing less than $500,000.
Throughout Lima's history, politicians have hated street vendors. During the Spanish colonization, the government approved 25 ordinances prohibiting or constraining them. Official repression continues. Over the past two centuries, the government has tried at least 12 times to prohibit or control the ambulantes—and has failed every time.
It's interesting to note the nature of the "revolutionary" administration in this Marxist municipality. The Institute for Liberty and Democracy, a Peruvian "think tank" that studies the underground economy, found that five of every six laws were designed to benefit the government. A curious revolution! The street vendors are mobilizing themselves to resist what they see as an effort to reduce them to proletarian status. Will this be the end of communism in Lima?
—Enrique Ghersi
Workers of the World Stifle Yawns
It's no fun being a Marxist in Europe these days. Socialist parties across the continent are experimenting with a measure of freedom to invigorate their economies and discovering that it works like no amount of central planning can ever do. Europe's Communist parties, however, are less willing to give up the ghost—and are paying for their obduracy with plummeting popularity.
The decline of European Communists is most evident in France and Spain. The French party (PCF), which used to command the support of a fifth of French voters, is lucky to pull 10 percent of the vote in elections these days. Some of the fault for this erosion lies with the French party's leader, Georges Marchais, a dull, grey Stalinist (is there any other kind?) who eagerly toes Moscow's line.
But the party's ills owe more to the increasing regard Europeans are showing for liberty than to Marchais's personality. The revival of market-oriented beliefs (see "What Mitterrand Hath Wrought, the Right May Rend," Trends, Nov. 1985), spurred by the failures of five years of rule by Socialist Francois Mitterrand, have created an infertile climate for communist messianism. And the situation appears desperate. Although others disagree, Jean Ellenstein, a former PCF thinker, told the New York Times that "it is an irreversible regression. There can be remission, but this is a fatal cancer."
Spain's Communist Party, too, is in dire straits. Strongman leader Santiago Carrillo has lost control of the party, which has split into three feeble sects. The Times speculates that the Communists, who were prominent in the struggle against the Franco dictatorship for 40 years, will be lucky to win two seats in the parliamentary elections expected to be held this year.
Other European Communist parties, from Belgium to Portugal, have seen vote totals fall precipitously. The sole exception is the Italian party, which under the late Enrico Berlinguer assumed a social-democratic mien and boasted a foreign policy openly critical of the Soviet Union. But now the Italian Communists are a bit chary of the "Eurocommunist" label they adopted in the '70s—many advocate a new communist-socialist alliance grouped under a "Euroleft" banner.
And even the healthy Italian Communists are not without their problems. The Times notes that the party has "an aging membership, and it is having trouble drawing young people and intellectuals to its ranks."
The Communist parties of Europe have always been more an irritant than a threat. The promised dictatorship of the proletariat never arrived, and their chief mischief was in pushing socialist and social-democratic parties toward more-statist economic policies. Not that they needed much pushing, but at least that pressure is off for now.