Trends

Regulations That Kill

When someone dies because of a hazardous product, its maker may face huge liability claims. But government regulations can be hazardous to your health, too. The Competitive Enterprise Institute (CEI), a free-market public-interest group, is taking aim at some life-threatening government regulations with its Death by Regulation program.

The program is trying to change the bias of the political debate by identifying victims of government regulations, says Tom Miller, a senior policy analyst at the Washington, D.C.–based group. While the usual regulatory process focuses on victims of privately produced hazards, he says, CEI plans to turn "the normal bleeding-heart emotions" against big government. CEI will also bring lawsuits on the victims' behalf.

It's easier, of course, to point to people who have died because of hazardous drugs, for example, than people who have died because the drugs that might have saved them were kept off the market by the FDA. But CEI estimates that the FDA's refusal to approve the heart-attack drug TPA—to take a single instance—is killing between 20 and 30 people a day.

The recent attention given to delays in approving AIDS drugs promises to put further pressure on the FDA to reduce death by regulation. In a paper written for the Heritage Foundation, CEI attorney Sam Kazman notes that AIDS patients are the first victims of the "drug lag" who are an organized political constituency. "If that can be translated into a real reform movement on FDA…we could get some real changes."

Another target of the Death by Regulation program is the Corporate Average Fuel Economy (CAFE) regulation, which requires automakers to meet a minimum standard for fuel economy. In effect, Kazman told REASON, the government is mandating that automakers build smaller, less safe cars in order to improve fuel efficiency.

"CAFE is being administered by the National Highway Traffic Safety Administration…so here you've got a safety agency administering a program which does the exact opposite of what it's supposed to be doing," he says. He cites a study that found a 27.5-mpg CAFE standard would result in 10,000 to 20,000 additional deaths over a 10-year period.

CEI has sued NHTSA, accusing the agency of "deliberately concealing" the safety issue and asking that it be forced to take safety into account in determining the standard. "Until they have express authorization to kill people in the name of improving fuel economy," Kazman says, "they ought not be doing that."

Kazman says CEl's goal is to "try and get government painted in the same light that you usually find corporate America painted in.…When corporate America is responsible for a death in the marketplace…they can be taken to court. That is rarely the case in government."

Pot for Patients

In the shadow of the War on Drugs, another drug war is being waged: the battle to ease government restrictions on the use of marijuana for medicinal purposes. If Federal Administrative Law Judge Francis Young, Jr., rules in their favor, thousands of patients may have better access to the drug for a variety of conditions ranging from glaucoma to chemotherapy-induced nausea.

The Drug Enforcement Agency (DEA) classifies marijuana as a Schedule 1 drug, meaning it has "no currently accepted medical use as a treatment in the United States" and is not considered safe even under medical supervision. But the Alliance for Cannabis Therapeutics and the National Organization for the Reform of Marijuana Laws (NORML), both based in Washington, D.C., have challenged pot's Schedule 1 status in court as one more move in a decade-long fight to rehabilitate a drug whose medicinal benefits have been known for thousands of years.

They argue that marijuana should have at least a Schedule 2 classification, which wouldn't legalize the drug but would ease restrictions on research into its medical uses. "Proponents of reform," reports Science News, "say a schedule change would speed the recognition, acceptance and availability of marijuana as medicine."

Researchers in the United States have been most interested in marijuana's helpfulness in combating chemotherapy-induced nausea. In 1985 the Food and Drug Administration (FDA) approved a pill form of THC, the active ingredient in pot, but several studies have demonstrated the advantages of marijuana over THC pills. "Never mind the absurdity of giving an oral medicine to someone who is throwing up all the time," adds one observer.

Pot can also be useful for treating such ailments as glaucoma, multiple sclerosis, Parkinson's disease, paraplegia, muscle spasticity, asthma, anxiety, eating disorders, and, in the words of Science News, "for improving the quality of life in terminally ill patients."

Judge Young is expected to make a recommendation about pot's schedule status to the DEA by the end of the year. The DEA, unfortunately, can ignore the judge's recommendation. But at least a lot of suffering patients may get a chance at relief.

Retiring Souls Abroad

Every politician and his brother knows what a mess Social Security is these days, though few speak out against it and even fewer suggest changing it. But politicians can't forever ignore the possibilities for reform—especially since the rest of the world is living proof that things can be different: a number of countries have avoided or at least reduced the painful effects of social security by encouraging innovative alternatives.

Almost every public social security system operates on a pay-as-you-go basis: Today's recipients get money from today's taxpayers, not from their own savings. Today's workers pay taxes in return for promised benefits tomorrow—which they'll receive only if tomorrow's workers pay up. Over time, the number of taxpayers relative to the number of retirees often shrinks, so each generation receives a smaller "return" on social security than the last generation. The result is financial chaos.

But as a recent report by the Dallas-based National Center for Policy Analysis (NCPA) details, many nations have devised strategies to combat their social security blues:

• At least 21 countries require certain categories of workers, usually those in large urban companies, to participate in provident funds, which invest contributions in assets. Though governments often control the funds, employees have property rights to their shares and are often allowed to withdraw money in cases of hospitalization, permanent disability, unemployment, purchasing a house, or even financing a marriage or funeral.

• Some countries with pay-as-you-go systems supplement them with mandatory private pensions or exempt workers who have private pensions. Chileans, for example, can opt for the equivalent of an IRA instead of social security. Ninety percent have chosen the private funds, which have been earning an average real rate of return of 10 percent.

• Many countries exempt workers in agriculture and small business, low-income workers, and self-employed people from participating in social security. "A large percentage of workers in less-developed countries…rely instead on traditional devices—private savings, support from other family members, and in a few cases welfare benefits from government," say report authors John C. Goodman and Peter J. Ferrara.

• Countries such as South Africa avoid altogether the problems of pay-as-you-go systems by simply offering elderly poor people welfare payments, derived from general revenue, rather than social security payments, derived from payroll taxes. Hong Kong, Australia, and New Zealand have mixed systems—part entitlement, part welfare.

• Finally, social security is voluntary in many less developed countries, and nonexistent in 10.

Squeezing the Sherman Act

Liberal economists no doubt suspect that antitrust experts within the Justice Department have spent the Reagan years doing crossword puzzles and playing waste-can basketball with wadded pages torn from office copies of the Sherman Act. Very few antitrust cases have been initiated by the government since Ronald Reagan took office. But many economists claim (and Reaganites within the Justice Department seem to agree) that advances in economic theory and research during the 98 years since the act was passed make much of its rationale obsolete.

The Supreme Court recently confirmed the decline of the Sherman Act by condoning activity previously thought prohibited by the law: a manufacturer's refusal to supply goods to a retailer who sells at discount prices. Sharp Electronics Corp., maker of business calculators, dropped Business Electronics Corp. as a distributor after another distributor in the same area complained. BEC was selling Sharp's products at lower prices by not providing full service to customers.

BEC sued on the grounds that Sharp's action was an illegal attempt to set retail prices. In a 1911 case interpreting the Sherman Act, the Supreme Court had held that any agreement between a manufacturer and a distributor to set retail prices was illegal.

In the Sharp case, however, Justice Antonin Scalia wrote that Sharp's decision to drop BEC was not itself sufficient evidence of an agreement between Sharp and the other distributor to fix prices. Scalia, a former professor at the University of Chicago's law school, which is known for its heavy emphasis on economic theory, held that there may have been other reasons for Sharp's decision to drop BEC such as to ensure "better service."

For example, many consumers visit showrooms of retailers who take the trouble to hire and train knowledgeable salespeople. These "free rider" consumers pump informed salespeople for information about the products and take advantage of their showroom facilities such as audio listening rooms and elaborate product displays. But when they are ready to buy, they go to a discount retailer who offers no such special service.

After the Sharp decision, manufacturers can drop discounters, preventing them from draining business away from full-service dealers. (Of course, this won't happen in every case, since discounters often provide valuable high-volume markets.)

Congress could move to return antitrust law to its earlier interpretation, but at least some judges appear to be pushing antitrust law in the same direction much economic literature has moved in recent years: in favor of a freer market. So even if President Reagan's successor calls the Justice Department's antitrust team into active duty, the courts may not be as receptive as they once were to claims under the Sherman Act.

GLOBAL TRENDS

Hope up North?

Bruce Evoy

TORONTO—Prime Minister Brian Mulroney's 1984 preelection promise to sell off many government-owned enterprises has proven somewhat farcical: notoriously leftist Canadian Broadcasting Corporation (CBC) and Petro-Canada, the state-owned nationwide gas station chain, are both still in the hands of government. And Mulroney has personally vetoed the privatization of Air Canada, even though both management and employees favor turning the debt-ridden national airline over to the private sector.

However, there has been some activity in the provincial arena—notably in British Columbia, where the government has come up with a list of $10 billion (Canadian) in assets that might be privatized. Eleven government services and two Crown corporations, valued at $3 billion and employing almost 7,500 civil servants, are scheduled to be sold off in 1988–89. A planned second phase of privatization will turn over 110 government-run liquor stores to the private community.

B.C. Premier William Vander Zalm has also introduced a series of radical labor law reforms designed "to tell the world there is a place where free enterprise is being given real meaning." After the provincial government announced that it would contract out its road and bridge maintenance in 28 separate contracts to the private sector, the angered Government Employees Union said it would bid for all 28.

The government parried by stating that a bidder may win more than one contract but must bid separately for each. In response, the union dispatched a letter to all its members stating that "privatization, contracting out, and deunionization is an agenda that cannot be accepted by you, or any other working person."

Another western province, Saskatchewan, has set up a Ministry of Public Participation—meaning privatization—to promote the sale of Crown corporations and parts of government ministries.

Meanwhile, the results of earlier privatizing are beginning to manifest themselves. For example, last year the joint governments of Canada and Newfoundland sold off a seafood business (FPI Ltd.) as a stock venture. After years of government mismanagement, the company is finally showing a profit and is now seeking not only to expand but also to diversify. Its employees have just been rewarded with a special $1-million profit-sharing payment.

So in a land seemingly dedicated to socialism, there are some, albeit very few, attempts being made to very gradually loosen trade restrictions and return enterprise and industry to the only market that works effectively—the free one.

Ne Win Abandons No Win

Probir Kumar Sarkar

DELHI, India—More than any other nation in Southeast Asia, Burma is a country time has forgotten. It has languished under socialism and military rule for almost three decades. Public discontent with the government is widespread, and the economy has virtually collapsed. Now, President Ne Win has been forced to reconsider state-controlled economic management.

Burma's personal income has quadrupled since the socialist government came to power in a military coup in 1962, but consumer prices are 12 times what they were then. At one time wealth was more or less evenly distributed, but today there is a wide gap between the privileged rich and the poor.

Ne Win's government is at a crossroads. It has already legalized rice trading and some small-scale entrepreneurship and has announced the privatization of some state-owned enterprises. But it must further liberalize if the economy is to revive. Burma is reportedly suffering from a continuous slump in exports, decline in industrial production, inflation, and deterioration in infrastructure.

In a significant departure from its policy of maintaining only limited diplomatic and commercial links with the outside world, the government has recently decided to import a variety of products from India. The present level of bilateral trade between India and Burma is about $28 million, but India's exports account for only a tiny fraction of that amount. At present India exports only a small quantity of light engineering items to Burma while importing timber, beans, and minerals.

In recent years, black markets in Burma have flourished by providing daily necessities that are hard to get in state stores. Thanks to a modest flow of tourists and extensive smuggling, the handicraft industry is booming. The value of Burma's illegal trade is estimated to be at least as large as the value of legal retail commerce.

Systematic repression over the past decades has not silenced the people—they are more vociferous than ever. Hope springs eternal and the beat goes on.