Trends

BABY BOOMERS TAKE TO LIBERTY

For years, observers as diverse as Nobel laureate economist Milton Friedman and New Left theoretician Carl Oglesby have pointed out that conventional political labels of "conservative" and "liberal" are misleading and actually tell little. The point seems to be particularly true of the baby-boom generation that is now coming of political age, with encouraging signs for individual liberty.

No less a minion of the political establishment than Lee Atwater, deputy director of the Reagan-Bush '84 Committee, recently estimated that a staggering 40 percent of the electorate doesn't fit within the conservative-liberal taxonomy. These, he said, fall instead into two groups: populists who are economically liberal and socially conservative, and libertarians who are economically conservative and socially liberal.

Atwater's analysis is consistent with that of several political scientists, William S. Maddox and Stuart A. Lilie of the University of Central Florida, reported on in Trends several years ago ("Rethinking the Categories," March 1981). Maddox and Lilie identified four ideological belief systems (liberal, conservative, libertarian, and populist) representing the four combinations of sympathy or hostility to government economic intervention and to individual liberties.

Atwater figures the baby-boom generation is heavily libertarian. He describes their politics as "anti-elite, anti-establishment, anti-big government, anti-big institution and anti-big labor."

Atwater has no illusions that either major party has captured the hearts of libertarian-oriented baby-boomers. With baby-boomers carrying increasingly greater weight in the voting booth, he predicts that a combination of conservatives and libertarians will be a deciding factor this year and in years to come. (In contrast, he says Ronald Reagan won by putting together a coalition of conservatives and populists in 1980.)

Atwater is perhaps too sanguine about his candidate's appeal to voters of the baby-boom generation, but his calculation of their views is probably well taken. The old liberal-conservative labels are becoming obsolete. Despite the conventional political dogma, large numbers of voters evidently sense the symmetry between government power in the economic and social spheres, and they're becoming more skeptical of both. Politicians who ignore that insight may be doing so at their own peril.

HEALTHFUL NEWS FOR HEALTH CARE COSTS

One of the most important medical breakthroughs in the 1980s may turn out to be a development that has nothing to do with treating patients in the traditional sense. It's a healthy dose of market competition, and it's leaving patients a lot better off.

For years, the conventional wisdom has been that even if competition might benefit consumers in some areas of the economy, it has no place in the healthcare industry. There, the argument has gone, suppliers are in a unique position to keep prices high because their product is so essential. So competition among doctors or hospitals will not lead them to reduce prices to attract customers; instead, they will raise prices in order to maintain revenues as a given number of patients is spread among more doctors and hospitals. Hence competition in the medical industry has long been deemed unhealthy.

Medical costs have seemed to bear out this conventional wisdom, persistently rising at a faster pace than consumer prices as a whole over the last two decades. Of course, there wasn't much competition to speak of, because of a combination of licensing laws, which hold down the supply of medical practitioners, and regulatory control of hospitals and other providers. But that's beginning to change, and data showing the results are rolling in.

Take health maintenance organizations (HMOs), organized as group practices and offering health-care services for a flat monthly fee instead of charging for each service. The American Medical Association has long fought the upstart HMOs, but they've continued to grow in number. Enrollment boomed by 18 percent last year, to 13.8 million people in the United States.

Some 40 studies over the years have found that HMOs offer less-expensive care than the traditional fee-for-service arrangement. Yet these studies were criticized, because as the Los Angeles Times noted, "all of them left open the possibility that the type of person who selects a prepaid program is healthier and therefore has fewer expenses." Comparing HMO patients and fee-for-service patients was probably a comparison of apples and oranges, said skeptics.

Now, the Rand Corporation, a West Coast think tank, has published a study that made sure that apples were being compared with apples. The Rand study randomly assigned 2,362 Seattle residents to traditional fee-for-service health care (they could choose their own physicians) or to an HMO. The result: although the two groups were statistically comparable, the difference in their health costs was dramatic. Health care for the HMO patients cost 25 percent less altogether; a large part of the explanation is that they spent 40 percent fewer days in the hospital.

Another lower-cost health-care alternative recently won a competitive victory in Virginia. In many states, health-care providers have been protected from competition by "certificate of need" regulations. Before a provider can start operating in these areas, it must prove—often to a board made up of existing providers!—that there is a need for its services.

This is the situation that confronted a for-profit home nursing service that wanted to offer care in Virginia at a rate between $5 and $45 an hour cheaper than existing (nonprofit) services. When the state denied certification to the new service, saying that it would cause competition, the Pacific Legal Foundation took their case and won a reversal of the decision.

On another front, freestanding emergency centers are giving hospitals across the country a case of competition in treating minor injuries and ailments. "Studies indicate that 80 percent of all patient visits to hospital emergency rooms could be better served elsewhere," claims James Roberts of the National Association of Freestanding Emergency Centers. Around the country, 1,200 centers are now attracting much of that business with rates as much as 40 to 80 percent lower than hospitals'. Following the success of independent emergency centers, freestanding surgical centers have also started springing up.

Although in some locales doctors and hospitals have responded to the new competition by lobbying friendly politicians to prohibit it, others see the writing on the wall. "All the rules have changed," an official of a Hayward, California, hospital told the Los Angeles Times. "Hospitals are much more competitive."

Hospitals that in the recent past would have considered themselves too genteel for price competition are now cutting prices. Iowa Methodist Medical Center responded to competition—a new Medical Care International surgical center—by slashing prices on 41 common surgical procedures and instituting a flat-rate payment system. The charge for a vasectomy without complications, for example, which had averaged $374, was lowered to a flat $294.

Hospitals are also discovering advertising. In one Los Angeles case, a newspaper ad depicted "Magic" Johnson, power forward of the Los Angeles Lakers, on a gurney. "We helped Magic rebound," the ad boasted.

And hospitals are being spurred to trim costs. John Bedrosian, cofounder of a chain of investor-owned hospitals, notes that until recently hospitals were known for "a woeful lack of management systems, management procedures, management disciplines,…management structures—management period." But now, about a third of the nation's nonprofit hospitals are following the lead of the relatively new investor-owned chains and joining a "hospital system" so that they can share services and spread costs.

One such system is SamCor Health Resource Network, a $400-million operation in Phoenix that runs nine nonprofit community hospitals in Arizona. Two years ago SamCor set up a profit-making subsidiary called DynaCor to offer hospitals such services as data processing, bill collection, and equipment leasing. Now the former head of SamCor, Stephen M. Morris, is recommending that the entire nonprofit operation be sold to one of the for-profit hospital chains. Says Morris, "It has become my conviction that our nation's health-care system will either go the way of government control or be placed in the hands of private industry." Morris's own conclusion is that "private industry is best-equipped to do the job."

Occasionally myths die hard. Facts, however, are stubborn things, and the facts are indicating that competition is as healthy for health care as it is in other sectors of the economy.

WHY FIGHT A LOSING BATTLE?

For $60, you can buy from a street dealer a gram of cocaine that is several times purer than what you would have paid $100 for last year. Moreover, the domestic production of marijuana is reported to have soared within the last year, with the 1983 harvest estimated to be worth $14 billion. Such is the availability of dope these days—what one drug-enforcement official recently called "a tremendous glut"—despite President Reagan's much-publicized war on drugs.

Indeed, federal drug-enforcement agencies have enjoyed generously expanded budgets and staffs since Reagan entered the White House. And the federal agents have largely focused their efforts on cocaine, spending 38 percent of their time in pursuit of coke smugglers and dealers. Yet of an estimated 18,000 aircraft trips to smuggle coke from South America into the United States last year, the authorities suppose that they've intercepted little more than one percent. And a recent General Accounting Office study estimates that altogether the federal drug agencies seize less than one-fifth of all marijuana and not even one-tenth of all cocaine, heroin, and other "hard drugs" in the United States.

The House Select Committee on Narcotics Abuse and Control reported in June a similar failure of international drug-enforcement efforts to reduce the production of illegal drugs in Asia and Latin America. The report noted the one-third drop in the street price of cocaine in the United States and largely attributed the greater availability of drugs to a vast and worldwide surge in the production of coca plants (from which cocaine is derived), opium poppies (the source of heroin), and marijuana—despite increased efforts to curtail such production.

In a number of recent press reports on the failing drug war, the comments of various drug warriors add up to a message that perhaps even some of the agents themselves are coming to see, albeit reluctantly: that drug prohibition can never succeed. Said one officer to the Miami Herald: "We are not winning." "It's all over the place," remarked another. And, speaking to the New York Times, Francis Mullen, Jr., head of the federal Drug Enforcement Agency, conceded, "When you have 12 million people using [cocaine], and you have continuing ready availability of the drug, then we are losing."

So it may be that John LeMoult, an attorney with 20 years of trial experience, reflected the view of a growing number of Americans when he urged in a recent New York Times op-ed piece that we "examine the benefits of legalization." LeMoult pointed out that legalizing drugs would bring down their price drastically, thus dealing crime "a shattering blow": "With addicts no longer desperate for money to buy drugs, mugging and robbery in our major cities would be more than cut in half. The streets would be safer." And without their black-market profits, "huge crime rings would go out of business."

Moreover, noted LeMoult, "the cost of law enforcement, courts, judges, jails and convict rehabilitation would be cut in half. The savings in taxes would be more than $50 billion a year."

Which is to say nothing of the restoration of individual rights should the fruitless war on drugs be called to a halt.

MAKING TEACHERS THEIR OWN EMPLOYERS

Recommendations for improving public education are currently a dime a dozen. But some fundamental problems with public schools are rarely addressed. For example, excellent teachers—unlike excellent entrepreneurs and professionals in the marketplace—have very little incentive to do well in the public school system. "An entire range of entrepreneurial opportunities is completely cut off to teachers who remain within the system, which denies itself the benefits of their ambitious goals," according to Jessica Shaten of Math Unlimited Minnesota and privatization expert Ted Kolderie of the Hubert H. Humphrey Institute of Public Affairs.

To remedy the situation, they suggest introducing the benefits of the marketplace into public education. In a pamphlet published by the Sequoia Institute ("Contracting with Teacher Partnerships"), they propose that school systems contract out the education of youngsters to entrepreneurial teacher partnerships. Within the partnerships (or cooperatives or corporations, depending on state law), groups of teachers would be free to choose their own colleagues and decide among themselves the most efficient ways of allocating salaries, teachers' work loads, curriculum development, and which paraprofessionals to hire. School districts could then invite competing bids by partnerships and reimburse them according to the number of students they attracted. This, predict Shaten and Kolderie, would "kindle a competitive spirit in which teacher partnerships [would] seek to distinguish themselves as they vie for potential contracts and skills."

The relationship between contractors and clients is substantially different from an employer-employee relationship. For example, seniority and collective bargaining, both of which are established features of the public-school status quo, would hardly be suitable in a contracting relationship. "It should be made clear…that individuals who are affiliated with the partnership…are not considered to be public employees," Shaten and Kolderie observe.

Although the teacher partnership idea is new, Shaten and Kolderie point out that there are already numerous instances of school boards contracting out various aspects of education. For example, near Chicago, a former teacher has contracted with 40 public-school districts to provide computer-assisted instruction for students who have dropped out of school. And many school districts around the country contract with social-service agencies to provide special education for handicapped students.

Shaten and Kolderie told REASON that they have discussed the partnership idea with several individual teachers, and the response has been enthusiastic. "The good teachers have perceived that as things are structured now, their only opportunity for professional growth if they want more money and responsibility is to leave the classroom," they point out. Kolderie noted that Scott Campbell, chairman of the education task force of the prestigious Committee for Economic Development, is interested in the idea and has solicited more information about the mechanics of partnerships.

Of course, government-run schooling shows no signs of evaporating any time soon. But contracting education out to teaching partnerships would at least introduce the benefits of private entrepreneurialism. No longer regarding themselves as public employees, teachers would be less wed to the link between government and education. Contracting out thus might serve as a first step toward privatization of a government service with which there is a near-universal dissatisfaction.

TOWARD A PRIVATE OPTION TO FEDERAL FARM AID

Agricultural options, the latest innovation in the commodities markets, are slated to go on sale October 1, and commodities brokers are eagerly seeking agrarian takers. Outlawed in 1936 because of concerns about corruption in the market, the options are being given another chance, with a three-year test run.

For a farmer, an option (on a forward contract) offers a form of insurance: In buying an option, the farmer buys a right to receive at some future time an agreed-upon price for his product. If the going rate of his product is higher at that future date than the price named in the option, the farmer may decline to exercise the option and instead sell his product at the higher market rate. But if the market price is lower at the time, the farmer can sell at the higher option price.

Either way, the farmer reduces the risk he faces in the fluctuation of prices between the time of his initial investment—planting a crop, say, or acquiring young cattle to feed and raise—and the time he takes his end product to market. And the cost of this assurance is only the price of an options contract.

In addition to options, the commodities market offers a number of other mechanisms farmers can use as insurance. In a futures contract, for instance, the farmer contracts to sell a product on a specific future date, with the price of the contract left to fluctuate with the market. Whether the commodity's price rises or falls, the farmer can avoid an overall loss by buying back his own contract before the delivery date. Another mechanism is a forward contract, wherein the farmer agrees—and is obligated—to sell his product at a set price at some future date. If at the time of delivery the market price is higher than the contract price, the farmer doesn't do as well as he would have by relying on fluctuations of the market. Conversely, if the market rate is lower than the contract price, the farmer fares well.

Options, then, along with the other devices of the commodities markets, provide a private, commercial system that can act to stabilize the agricultural market and reduce the risks of farming as a business. That point holds great significance, because the primary rationale for massive federal farm-assistance programs—which cost taxpayers $20.6 billion last year, not counting the payment-in-kind program, off-budget spending, and indirect subsidies—is that such programs are necessary to stabilize the agricultural industry and insure farmers against the unavoidable risks of farming.

In a recent Wall Street Journal article, reporter Jeffrey Zaslow noted that brokers are running up against a lot of skepticism about the new options among farmers, many of whom are simply puzzled by the complexities of commodities trading. To overcome that resistance, Zaslow reported, commodities markets and brokers are spending considerable sums promoting the options to farmers and grain dealers. This year, the Chicago Board of Trade, for example, is spending $1.8 million promoting its soybean and corn options, and the Chicago Mercantile Exchange's promotion of its cattle and hog options will cost more than $700,000.

It will take some time for the options to take hold among farmers. But as one Kansas farmer told the Journal's Zaslow, "These options are the coming thing.…The farmers who want to stay in business are going to have to accept it." And that could spell good news for the taxpayers.

RINGING IN MORE COMPETITION

When AT&T started charging 50 cents for long-distance directory assistance in May, MCI Communications Corp. soon started offering the service for 45 cents. And like AT&T, MCI—the nation's second-largest long-distance company, after AT&T—allows two free information calls per month to users of its long-distance service. Moreover, the firm dropped its monthly service charge and revised its long-distance rates to remain competitive with AT&T, which lowered its rates by 6.1 percent in May.

That episode is one of the latest efforts by both entrepreneurs and deregulation-minded authorities to extend the reach of telephone competition. Another step in that direction came with the Federal Communications Commission's decision to open pay-phone service to competition. By a unanimous vote, the FCC allowed the operation of interstate pay-phone service by individuals and businesses, in competition with the pay phones of local telephone monopolies. Under the FCC rules, pay-phone operators are allowed to charge whatever they want for interstate calls.

State utility commissions, however, have authority in deciding about local and intrastate pay-phone competition. Thus far, only Minnesota has followed the FCC lead, and California's utility commission is studying the issue. (But optimism about a favorable ruling for pay-phone competition in California is hardly warranted: the state's public utility commission recently rejected exposing local phone monopolies to competition for toll calls within their service areas.)

Another area where things are buzzing is the computer data transmission business. Several of the 22 local Bell companies spun off from AT&T after its break-up at the beginning of this year have announced plans to enter into local data transmission. Unlike regulated basic phone (voice-transmission) service, data transmission is open to competition. But the Bell companies' move is complicated by the resistance of non-phone company providers of local data-transmission service, who legitimately fear that the Bell companies may subsidize their data-transmission operations with phone-monopoly profits.

It is likely that, in this instance, regulators will take the conventional route and try to enforce complex, cumbersome—and ultimately arbitrary—rules to prevent the cross subsidization that the non-phone companies fear. Competition, however, would best be served by ending the Bell companies' local monopolies and opening all telecommunications services to anyone who wants to provide them.

A further step paving the road to greater phone competition was a June federal appeals court ruling affirming the legality of the FCC's order imposing "access charges" on telephone users. Since May, businesses have been charged a monthly fee of as much as $6 for access to telephone lines. The court's decision also upholds the validity of a similar fee for residential users. (The FCC has exempted the latter from the access charge temporarily, but the commission will reconsider such a charge next year.) The ruling affirms the deregulatory move to base local phone service charges on actual costs instead of subsidizing local service through artificially high toll-call charges (and other monopoly advantages). As local phone companies shift to cost-based pricing, the ground is evened for local competition—if the political barriers are removed.

DEREGULATION'S MOVING EFFECTS

Since the Carter administration deregulated the trucking industry, many of the major news media have closely monitored deregulation's effects on interstate trucking. But less media attention has been focused on an important segment of the industry—interstate moving. Recently, however, the New York Times published an interesting feature on the current state of the moving industry. It indicates that while the industry's experience with deregulation differs in important ways from other truckers', the changes for the moving industry have on the whole been very positive.

Customers have certainly had a better deal because of more-vigorous competition among movers. Before deregulation, noted the Times, the moving industry was characterized by virtually no price competition. That has now changed dramatically. The major movers are waging vigorous price wars, with discounts as high as 25 percent for individual customers. The Times reported that in January Allied Van Lines, one of the industry's six giants, instituted a 9 percent rate reduction across the board, and its competitors have followed suit.

Another big change for customers has been in the quality of service. Horror stories about incompetent movers were commonplace in the past. The Times notes that in prederegulation days, "service was fairly uniform—and was often criticized by consumers, who chronically complained of inaccurate estimates, late deliveries, damaged furniture and overcharging."

But these days, Allied sends a representative to visit a customer two days after the move to make sure there weren't any problems. Bekins Van Lines pays its customers $100 for every day it's late with a shipment. And for a small premium, United Van Lines provides a kind of insurance that replaces any damaged goods at full market value. One Bekins executive didn't mince words. "Compared to three years before deregulation, there is a tremendous improvement in the quality of service that customers are getting," Bekins vice-president Jack Harms told the Times.

In addition to deregulation, the recession provided movers with another powerful incentive to mend their ways—they were competing for a smaller market of moving households. Moreover, the industry is especially vulnerable to increases in interest rates, which mean fewer home sales and hence fewer moves. Yet the major movers' stayed afloat during the last recession, largely because they could cut prices and offer discounts. That's the kind of flexibility that came with deregulation.

Deregulation has meant yet another important change for the industry. Old restrictions on moving companies carrying general-commodities freight have fallen by the wayside. Progressive companies have taken advantage of the new opportunity. A moving company in Manhattan, for example, now moves not only household goods but computers and other delicate equipment for businesses. The recession provided additional impetus to diversify. "When it hit," the owner of the Manhattan firm told the Times, "it was either diversify or go out of business." Moving companies are also gearing up to diversify in other ways with services to customers such as insurance, handling car registration in a new state, and even pet care.

The moving industry hasn't fully recovered from the recession, and its stocks are not doing as well as they might because of fears of increases in interest rates. But at least the industry is still viable and is regaining its health, and its customers are receiving improved service at lesser prices. Both sides have deregulation to thank.

MAKING IT IN THE MAIL MARKET

Given the United States Postal Service's record of efficiency (or more precisely, inefficiency), it should have come as no surprise that its electronic mail service (E-COM) flopped. The USPS board of governors in June voted to terminate the service by March of next year, ordering the Postal Service to seek bids for the sale or lease of the $40-million system. (One arrangement being investigated is the sale or lease of the system to a private company that may in turn hire the Postal Service to operate the system on a contractual basis. The private firm would set its own rates.) In 2½ years of operation, E-COM never even came close to achieving its projected volume of use and racked up some $50 million in losses.

The termination order came as welcome news to private electronic mail services, which have to compete with the Postal Service's heavily subsidized operation. (The 26-cent charge to send a one-page message via E-COM is nearly a dollar less than the Postal Service's actual costs.) But the private services have continued to grow nonetheless, their careful balancing of marketing and expansion of the relatively new and unfamiliar service standing in sharp contrast to the USPS's approach of first developing a giant, flawed system, then trying to sell people on it. MCI Mail, for example, recently made a deal with American Express, in which the credit-card company is to market MCI Mail's services to its card holders. In addition to putting MCI Mail charges on card holders' monthly bills, American Express will also be offering the computer equipment required to use the electronic mail service.

If extinction is the eventual way of inefficient electronic mail services, then we should be prepared to also say goodbye soon to Intelpost, the Postal Service's international facsimile service (the electronic transmission of documents between countries via satellite). A recent House committee report found that while the government spent nearly $2 million on the Intelpost network in fiscal year 1984, the service grossed only $33,255. The report cited "the inability of the Postal Service to demonstrate competence in a competitive and unregulated environment" as the system's "most serious failure." So what else is new?

MORE MOVES TOWARD EUROPEAN SELF-DEFENSE

Until recently, US taxpayers' "contribution" of some $100 billion a year toward Western Europe's defense had been a gift horse into whose mouth most European leaders had not peered too closely. But the Europeans are now taking a more critical, though guarded, look at the wisdom of relying on the US government to defend them—and they're not liking all that they see.

French president Francois Mitterrand especially is uncomfortable with that dependence and has increased his efforts to revive the Western European Union (WEU), a defense organization founded in 1954 but soon left dormant in NATO's shadow. (The North Atlantic Treaty Organization had been established in 1949.) Representatives of the seven member nations of the WEU—Belgium, Britain, France, Italy, Luxembourg, the Netherlands, and West Germany—recently agreed to attempt a rebuilding of the union (though, at present, the Europeans refer to their efforts as a strengthening of the European contribution to NATO, rather than as an independent alliance).

A revived WEU, the French seem to hope, may help to develop a lucrative European high-tech arms industry to compete with the dominant US defense contractors. Already, the French and Germans are jointly developing a combat helicopter, and there are discussions among various WEU members about the joint manufacture of antitank missiles and a fighter plane.

In addition to the economic motivations for seeking greater responsibility for their defense, the Europeans have real concerns about the political and strategic sense of depending on the United States. Such dependence, some worry, is draining Europe of the will to defend itself. Moreover, there is growing criticism of the supposedly deterrent strategy of putting Europe under the US nuclear umbrella.

One of the Europeans' looming fears about their reliance on the United States—their doubts about the degree of US commitment to European defense—was highlighted by the US Senate's recent consideration of the withdrawal of 90,000 US troops from Europe unless NATO's European members agreed to boost their defense spending. The proposed measure was sponsored by Sens. Sam Nunn (D–Ga.) and William Roth, Jr. (R–Del.), who are considered among the Senate's "hawks"—an indication of Americans' growing resistance to subsidizing Europe's defense. The Senate rejected the measure but subsequently voted to freeze the ceiling of American troops in Europe, at 326,000, unless the European allies increase their defense spending. The Nunn-Roth proposal represented the first serious effort in nearly a decade to pull back US troops. The narrow defeat of the measure—55 to 41—may serve to further concentrate the minds of European leaders on getting their defense act together.

MILESTONES

• Veto power to the prez. Are local pols beginning to see the light about federal largesse? The US Conference of Mayors recently urged Congress to pass an amendment giving the president single-item veto power over federal appropriations, so that spending items can be blocked without vetoing entire bills. Proponents of the line-item veto contend that it would help presidents to squelch Congress's pork-barrel spending.

• Semisurprising proposal. The Semiconductor Industry Association, a US trade group, has called for an end to the 4.2 percent tariff on imported semiconductors. Although imports compete with domestic semiconductors, many of the group's firms import semiconductors made in their own plants abroad, where wages are lower. The money that now goes to paying tariffs ($60 million in 1982) could be spent instead, the trade group says, on research and development and plant automation in this country. The AFL-CIO and other union groups want to retain the tariffs.

• Tipsy law toppled. A New York appellate court struck down a state law requiring liquor vendors to mark up their wares by at least 12 percent above wholesale costs. The law was designed to protect specialized liquor stores from competition from discounters.

GLOBAL TRENDS

SWISS GUARDS PRESERVE FREEDOM

SWITZERLAND—On May 20, Swiss voters rejected by a 3-to-1 margin a Socialist proposal that would have required banks to give information about customers' accounts to Swiss or foreign authorities investigating tax evasion or currency offenses. They also rejected—but with only a 51 percent majority—a proposal that would have stopped altogether the sale of real estate to nonresident foreigners.

Behind this seemingly straightforward news item lies a story as typical of Switzerland as the cragged mountains dividing the Swiss landscape. The vote on each proposal had come about as a result of an initiative, in accordance with a provision of the Swiss constitution that dates back to 1891. The constitution states that if at least 100,000 citizens petition for a piece of proposed legislation to be submitted to the voters, it will gain ballot status. As in several states in the United States, the initiative serves as a safety valve when voters believe they are inadequately represented in parliament or are unable to influence effectively the legislative process. This is especially important in a country like Switzerland. On the one hand, it is marked by cultural, linguistic, and religious divisions, yet on the federal level it practices a "democracy of consensus" in which the four major parties rotate power among themselves from one legislative session to the next.

Both of the May 20 initiatives were firmly opposed by the government as well as parliament. The chorus of voices opposing the Socialist proposal to curb Swiss banking secrecy laws was particularly impressive, including TV appearances by members of the government and bank-sponsored advertisements. The petition had been drawn up in 1977 following a scandal involving the Chiasso branch of the Swiss Credit Bank (the bank reportedly lost over $600 million as a result of schemes that had eluded even the bank's head offices in Zurich).

In the last analysis, the banking proposal was bound to fail. Swiss voters have traditionally voted down measures that tend to strengthen federal powers. In fact, of the 130 initiatives submitted to the electorate since 1891, only eight have been approved. Thus, the vote against providing greater federal control over the banks was not merely a result of the massive propaganda against the measure sponsored by the government, the non-Socialist parties, and other pressure groups. It was also an expression of distrust of excessive power by the central government.

The petition to end what the right-wing National Action Party called the "sellout of our homeland" suffered a narrower defeat. Like an initiative in the early 1970s to expel the foreign population from Switzerland, it tapped a deep reservoir of Swiss xenophobia. Tourism has become Switzerland's third-largest industry, and supporters of the measure contended that development of tourist regions was getting out of control because of property purchases by foreigners over the last 30 years worth more than $8 billion. But it is interesting that the measure garnered most of its support in the highly industrialized cantons and was most strongly opposed in the mainly rural cantons, whose economies are heavily dependent on tourism. It is the latter—the peripheral cantons far removed from the country's decision-making centers—that would have been economically penalized if the petition had passed.

Thus, on May 20 the Swiss reaffirmed their tradition of rejecting federal regulatory intervention. Such intervention is fundamentally alien to the Confederation, which survives because of its diversity and the shared interest in preserving it. While other countries belabor ways to dismantle government's regulatory intrusions, Switzerland tends to head them off at the pass.

—THEO E. BRENNER

FREE FROM THE DEADLY EMBRACE

BRUSSELS—Upon his return from a trip to London, the president of a major Flemish political party declared that he had found a half-billion dollars there. Some Belgian newspapers duly recorded this news as a headline for a story on privatization in England. The real news, however, was the change in the thinking among Flemish Liberals. Instead of trying to make government efficient, as they had attempted to do since 1981 when they came into power as a junior partner of the present government, they are now seeking to make a lot of government superfluous.

Led by the dynamic Guy Verhofstadt (see REASON's Spotlight, Aug. 1983), the Flemish Liberals recently formed a committee to propose ways to sell off state-owned companies. The national airline Sabena is one of the Liberals' early targets, but the less-conspicuous, nationalized banks also are on their privatization hit list. (For decades, Belgian Marxists have pushed for state control of all credit, and they have been more successful than many Belgian anti-Marxists are prepared to acknowledge.)

Among the more-popular issues stands the privatization of garbage collection, an area in which Belgium has a reputation as one of Europe's most inefficient countries, with prices increasing, service decreasing, and garbage collectors striking to get paid on time (the debt-ridden municipalities are notoriously bad at this). Private garbage collectors have calculated that in many cities they could save taxpayers 50 percent on collection costs. In the city of Liège, a major socialist stronghold, it could even be as much as 75 percent. But none of the municipal governments are ready to part with their garbage-collection fiefs, which are ideal havens for employing party members and getting private cars repaired for "free."

The Flemish Liberals realize that a transfer of state- and municipal-owned assets to the private sector will take some skill; hence their fact-finding trip to London. There, the Belgians found at least 28 different techniques used by the Thatcher government to set government-owned activities free from the deadly embrace of civil servants.

The 1981 parliamentary elections here were fought—and won—with the slogan, "Not you, but the government is living beyond its means." Unfortunately, the growth of government spending has hardly decreased since that year, although the present coalition has tried to reduce expenditures and slash taxes. The corporate tax rate, for instance, was 59 percent in 1981. Today it stands at 48 percent, and it was further reduced for all new investments. And within the Belgian Enterprise Zones—six of which are now under way for a 10-year trial period—there is no corporate tax.

The Flemish Liberal Party, under the pressure of its more radical members, is starting to recognize that it is useless to keep a lid on a political volcano if one doesn't first extinguish the fires beneath it. Demonopolization and privatization of government services are now seen as having such a fire-fighting function. The 1985 parliamentary elections may well be fought with the slogan, "Not the state, but you should do the job of government!"

—MICHAEL VAN NOTTEN

GLOBAL ROUND-UP

• Competing signals. The Luxembourg government has okayed a private television broadcast satellite system. The move has French authorities and those of other European states that operate government-owned TV satellites worried about competition.

• French left out? Recent opinion surveys in France indicate that a majority of French people favor a market economy, free enterprise, deregulation, personal initiative, private television, private schools and universities, and fewer corporate taxes, authors Jean-Francois Revel and Branko Lazitch report in a recent Wall Street Journal article. Moreover, conservative books have been bestsellers and books by Socialist leaders have all been "monumental flops."

• Nationalization derailed. South Korea plans to lease several lines of the state-owned railroad to private companies, who will take over management of the lines. Other of the 29 state lines—only two of which made money last year—will be shut down. Accompanying the rail-privatization move are plans to shut down a nursing junior college and a high school controlled by the railroad authority and to transfer the Seoul Railroad Hospital to private ownership.