A FREE MARKET IN KIDNEYS?
by: Walter Block, The Fraser Institute
According to recent reports, the black market value of a kidney
which can be transplanted is some $13,000 -- which translates to roughly
seven times its weight in gold.
Such an occurrence may occasion all sorts of references to King
Midas -- who was supposed to have been turned into a statue of sold
gold, but behind this rather dramatic way of characterizing the value of
human organs lies in a story of untold and tragic human suffering.
There are hundreds and even thousands of Canadians whose lives
could be vastly improved could they but have the use of a healthy kidney.
Paradoxically, there are other thousands of people who die each year,
taking perfectly healthy kidneys to the grave with them, who have no
financialincentive at all to bequeath these organs to those in need. Why,
it may well be asked, cannot potential donors presently be given a
pecuniary reward for doing the right thing? That is, what precludes a
businessman from purchasing the future rights to a kidney from
potential donors, and then selling these items to those suffering from
kidney disease?
The problem is, it is illegal to harness marketplace incentives in
order to encourage kidney donors. Anyone who set up a business of this
sort would be summarily imprisoned.
Instead, our society must resort to all sort of inefficient
stratagems toward this end. Famous personages have exhorted us, in the
event that we suffer untimely death, to make a posthumous gift of these
organs. Medical schools coach their students on the best techniques for
approaching next-of-kin; the difficulty is that they must ask permission at
the precise time when they are least likely to be given it -- upon the
sudden demise of a loved one.
As a result, all of this has been to little avail. While potential
recipients languish on painful kidney dialysis machines waiting
ghoulishly for a traffic fatality which may spell life for them, the public
has refused to sign cards in sufficient
numbers giving permission for automatic posthumous donor status.
Things have even come to such a pass that there are grotesque and
fascistic plans now being bruited about which would allow the
government to seize the kidneys of accident victims unless they have
signed cards denying such permission.
The free enterprise system, were it allowed to be operated in this
instance, might well be a God-send to the unfortunates who suffer from
diseased kidneys. A legalized marketplace could encourage thousands of
donors. Would you sign a card donating your kidney after death for
13,000 big ones, right now, in cold hard cash? There are very few people
who would turn up their noses at such an offer. And if sufficient supplies
were still not forthcoming at this level, prices would rise even further
until all demand was satisfied. Given free enterprise incentives, pardon
the pun, we would be up to our armpits in kidneys. Nor is there any
danger that prices would rise so high as to out of the reach of those in
need. For one thing, transplantable organs are now very difficult to attain
for sufferers. For another, any incipient price rise would be met by an
increase in the amount supplied, and this would tend to moderate the
upward movement.
This is the tried and true process we rely on to bring us all the
other necessities of life: food, clothing and shelter. After all, we do not
depend for the provision of these goods and services on voluntary
donations. We know this to be a relatively unreliable system -notwithstanding the fact that it is flogged by numerous opinion leaders
in the case of organ transplants.
There is no doubt whatsoever that those presently responsible for
preventing a free market in kidneys take these actions with the noblest of
motives. To them, legalizing the purchase and sale of human organs
would be the ultimate in degradation. Far better, from their viewpoint,
that people donate their bodily parts for free so that thousands of kidney
disease sufferers may live normal lives. However, no matter how
benevolent the intentions of the prohibitionists, it cannot be denied that
the effect of their ill-conceived actions is to
render it less likely that those in need shall be served.
It is time, it is long past time, for our society to put aside its
archaic and prejudicial opposition to the marketplace, so that we can
relieve the suffering, and in many cases, lift the death sentence we have
inadvertently placed on as hopeless and hapless a group of citizens as
ever existed.
- 30 THE FRASER INSTITUTE
626 Bute Street, Vancouver, B.C. Canada V6E 3M1   
(604)688-0221
HAVING IT ALL BY HELEN GURLEY BROWN
An Editorial by Walter BlockSenior Economist, The Fraser Institute
I recently read a book, Having It All by Helen Gurley Brown. I
thought it
was just filled to the brim with wise and witty advice. I enjoyed it
immensely.
However, there was one jarring sentence which detracted from, as far as
I am
concerned, an otherwise marvelous book. I refer to financial advice given
to young women. "On the other hand, owning an apartment or house can
protect you from greedy, rent-raising landlords if the rental market is
tight" (page 349, pocketbook edition).
As I see things, this is a very unsavory way of looking at the world,
very much
akin, I fear, to racism: "greedy profiteering Jews," "vI Ibus" conniving,
price-raising Scottish businessmen," "price-gouging Orientals" come all
too readily to mind. This sort of prejudice, it seems to me, has no place in
an otherwise magnificent book.
Moreover, this advice is inconsistent and hypocritical. Helen
Gurley Brown
recommends a whole host of financial strategies (and source materials)
which aim to maximize interest returns on savings. But she advocates
that her readers put their hard-earned savings into savings banks, stocks,
bonds, etc., which offer the highest possible returns. Using the "logic"
behind her "greedy, rent-raising landlords" remark, however, could not
those who follow this financial advice be open to the charge "greedy,
interest-maximizing investors?" But matters are even worse. For what if
a reader buys a "property in a good neighbourhood," as advocated by
Brown, such as a condominium, and then sublets it, for some reason
-2or other. Should this person accept the lowest rent offered? Hardly. But if
the highest rent offered is taken, such a person is guilty of being the very
"greedy, rent-raising landlord" which Brown condemns. Whatever else
can it be supposed that "greedy rent-raising landlords" do, apart from
seeking out offers, and accepting the best one made them? And the same
analysis applies to the reader who seeks a raise, as Brown advises,
elsewhere in the book. For surely, such a person is no better than a
"greedy, wage-raising employee."
This view of landlords is akin to bigotry, and mars an otherwise
very enjoyable book-- Having It All by Helen Gurley Brown.
-30 Alberta Economic Policyby Walter Block
Alberta Premier Peter Lougheed held a press conference the other
day, to announce broad changes in his government's economic policy.
Unfortunately for the people in that western province, the new
policy is aimed in the direction of increased public sector intervention
into the economy.
To this end, the new plan calls for more government ownership of
resource and development projects, a new provincial personal tax
collection system, a greater
government involvement in transportation and cargo container ventures,
expansion of Provincial Treasury Branches (an Alberta
government-owned bank), an industrial strategy of supporting
high-technology winners and ignoring the weaker sisters, and a
protectionistic "buy Alberta" policy for government construction
projects.
The main reason this will harm the economic prospects of
Albertans, by extension, all Canadians, is that government is simply less
capable a manager of commercial enterprise than is the private sector.
And the explanation for this state of affairs is simple. In the
marketplace,
entrepreneurs are continually tested by profits and losses. If they make
correct entrepreneurial decisions, they can prosper and expand the
scope of their operations. If they fail to provide the goods and services
most desired by consumers, and in the cheapest manner possible, they
are forced to change the error of their ways. Failing that, they must lose
money, and eventually go bankrupt. In the civil service, in contrast, there
are no profit and loss incentives. Worse, rewards are sometimes given
for inefficiency, for example for spending an entire year's budget, or for
amassing more employees.
Peter Lougheed would do well to reconsider his flirtation with
misguided and discredited centralized economic planning. He could do
worse than to begin by reading a new Fraser Institute publication called
Focus on Alberta's Industrial and Science Strategy Proposals.
-30B.C. Lions
by: Walter Block, The Fraser Institute, Vancouver, B.C.
The British Columbia Social Credit government is at it again.
Talking up the market system out of one side of its mouth, while violating
its most basic premises on the other.
One instance of this politically schizophrenic behaviour was its recent
decision to raise the adult minimum wade from $3.65 to $4.00 per hour
-- after publicly musing that they might eliminate it entirely, which would
have been the only position compatible with the full free enterprise
philosophy.
And now comes news that the Socreds are going to bat for the
financially troubled B.C. Lions football team. "We have made a
commitment to assist. We want to see the sport and the league kept
alive" said a prominent spokesman. This person considers the Lions a
"worthwhile investment" and waxed eloquent about the importance of
Grey Cup, which brings some $20 million to the economy of Vancouver.
But if the Lions are such a worthwhile investment, why are they
wallowing in a sea of red ink? Further, why don't some of the B.C.
Ministers put some of their own money where their mouths are? Why are
they threatening to force all the taxpayers, in effect, to underwrite their
own personal entrepreneurial instincts? There is, after all, no guarantee
that the B.C. Lions or the entire CFL for that matter is a viable economic
enterprise. Such information is not given to us from on high, engraven on
stone tablets. This business decision is necessarily a risky one, like all
others.
And even if this assessment is correct, there is still nojustification
for government intervention. The free enterprise system is incompatible
with public sector investment in~an commercial business concern,
profitable or not. If the Social Credit government wishes to live up to its
self-styled adherence to market principles, the sooner it leaves off this
soviet-style central economic planning and control, the better.
As for that pie-in-the-sky $20 million in "spill-over benefits,"
maybe they will come true and maybe they won't. In either case,
however, the citizens and taxpayers of B.C. are likely to be losers. For
what this calculation ignores is alternatives foregone. Suppose, for
argument's sake, that without the B.C. bailout the Grey Cup would
evaporate, and that with it an additional $20 million would indeed accrue
to local Vancouver coffers.
It does not follow, however, that this would be a good investment.
For suppose that instead of subsidizing the B.C. Lions, the taxpayers were
allowed to keep their own monies. Then, perhaps, they would spend
them on toasters and lawn-mowers and VCRs and canoes and 1001 other
such consumer items. Although it might be harder to trace, there would
be reverberations, throughout the economy, of these expenditures. In
total, they may even amount to more than the Grey Cup's million.
In any case we know from the fact that consumers voluntarily
spend their hard earned money on this array of consumer goods, that
they value them even more highly than saving the B.C. Lions. Otherwise it
would not have been necessary to forcibly divert the funds from the one
use to the other.
If the Socreds really want to promote the public good, they can
best do so by leaving commercial decisions of this sort to the voluntary
choices of the citizenry; and by acting on free enterprise principles, not
merely giving them lip service. As well, one of the reasons for the decline
of the CFL is the government-imposed limitation on the number of
foreign players allowed on a team. If government wanted to help the
sport, it could do so -- legitimately -- by ending this protectionist
restriction.
- 30 -
A break for Big Apple beggars-Part II
The lower-court Judge Sand ruled it would indeed be an abuse of the free-speech rights of these
sometimes violent beggars to prohibit them from "doing their thing." Happily for the longsuffering mass-transit riders, Judge Altimari of the appeals
court reversed him; holding that the rights of passengers to be safe must be "balanced" against the right
of people to beg. According -to this balancing doctrine, safety considerations must sometimes be
curtailed in favour of free speech. But without any balancing, there is danger that this doctrine will be
reduced to arbitrariness.
In our analysis, there cannot be a real conflict between rights. It only appears as if there is because of a
lack of private-property rights. We argue that if the New York subway system were privatized, the
conflict would disappear. Consider the following: A cleanshaven man dressed in a three-piece suit with
five $100 bills in his wallet (which the Transit Authority cashier refuses to change) but coins
amounting to 10 cents less than the required exact subway fare asks passersby to give him a dime. Or, a
well-dressed elderly woman whose purse has just been stolen begs people for subway fare. According
to Altimari's Second Circuit ruling, both of these people should be penalized. No matter how welldressed and benign they appear, they are still begging.
Nonsense. If this determination is not a violation of their free-speech rights, nothing is. But if we are to
be consistent, the same principle should apply to dishevelled smelly people whose panhandling takes
on a threatening manner. They too have free-speech rights. Forbidding people to speak in public
thoroughfares such as subway stations is a denial of their free-speech rights, plain and simple.
If, however, the subway system were private property-as private as a bedroom-then the solution would
follow simply and directly. The owner 'would have the right to determine the behaviour of his
customers, while they are on or about his property . Just as restaurateurs now have the'right to expel
unruly or inebriated patrons or people who refuse to wear shoes or a shirt (or in the finer eating
establishments, business attire), so would the private subway firm have a right to exclude unkempt
beggars. Free-speech rights would not even enter the picture, as people can have such rights only on
their own property, not on premises belonging to others.
Imagine if you will, a competitive subway industry consisting of several firms. It may be difficult to
do, since people are accustomed to state-owned mass-transit monopolies. As it happens, the New York
subway was built by private enterprise; the Brooklyn-Manhattan Transit Co. (BMT) and the
Interborough Rapid Transit Co. (IRT) were taken over by the city only after severe governmental price
controls made it impossible for them to operate. Under privatization, these firms would compete not
only on price, service, cleanliness, safety, reliability and speed, but also on the basis of their antisolicitation rules. Some might welcome beggars with open arms. Others might forbid panhandling
entirely. Still others might set up special facilities to deal with the problem of the well-dressed man or
the victimized woman. There might even be "begging zones" on some premises similar to smoking
areas in restaurants.
Then, the people would speak, their voices clearly articulated through the intermediation of the profitand-loss market system. The presumption is that firms that strictly proscribe begging would prevail. If
so, the commonsensical results desired by Altimari, and haughtily deprecated by Sand, will have been
achieved. But this will be accomplished without the irrational fiction that basic rights conflict with each
other.
Why is it of practical importance that the subway be privatized, whether in New York or anywhere
else? Apart from improved safety and operation,there are important legal precedents at stake. A similar
analysis may be applied to leafletting in private malls, begging in restaurants, and the imposition of
dress codes. In all cases, it is possible that authorities will try to "balance" rights, one against the other.
If they do, we will substitute socialism for private-property rights. Judges will become central planners.
The way to resolve the conflicts between free-speech and other rights is to determine where the
confrontation takes place. If it is public property. privatize it.
This is the second of a two-part series devoted to analyzing a lawsuit that has arisen concerning the freespeecb rights of panhandlers in the New York City subway system.
Dr. Block is an economist with the Fraser Institute.
BRITISH COLUMBtA REPORT, FEBRUARY 11, 1991 21
Begging in the Big Apple: Part II by Walter
Block, The Fraser Institute
This is the second in a two part series devoted to analysing a law suit which
has arisen in New York concerning the free speech rights of panhandlers in
that city's subway system.
The lower court Judge Sand had ruled that it would indeed be an abuse of
these of times violent beggar's free speech rights to prohibit them from doing
their thing. Happily for the long suffering mass transit riders, Judge Altimari
of the Appeals Courts reversed him, holding that the rights of passengers to
be safe must be "balanced" against the right of people to beg. According to
this balancing doctrine, sometimes safety considerations should be curtailed
in favour of free speech, and sometimes the reverse should obtain. But
without any balancing criterion, there is danger that this doctrine will reduce
to arbitrariness.
In our analysis, there cannot be a real conflict between rights. It only appears
as if there is, because of a lack of private property rights. We are arguing that
if the New York City subway system were privatized, the seeming conflict
would disappear.
Consider the following case. A clean shaven man dressed in a three piece suit
with five one hundred dollar bills in his wallet (which the Transit Authority
cashier refuses to change) and coins amounting to ten cents less than the
required subway fare, asks passersby to give him a dime. Or better yet, a well
dressed elderly woman whose purse has just been stolen begs people to give
her the fare needed for entry into the subway. According to Altimari's Second
Circuit ruling, both of these people should be penalized by law. No matter
how well dressed and non threatening, they are still engaged in begging.
What arrant nonsense. If this determination is not a violation of their free
speech rights, then nothing is.
Still others might set up special facilities to deal with the problem of the well
dressed man, or the victimized woman. There might even be ''begging zones"
set up on some premises, similar to "smoking zones" now established in
many restaurants.
Then, the people would speak, their voices clearly articulated through the
intermediation of the profit and loss market system. The presumption is that
firms which strictly proscribe begging would prevail in the competitive
struggle. If so, the common sensical results desired by Altimari, and
haughtily deprecated by Sand, will have been achieved. But this will be
accomplished without the irrational fiction that basic rights can conflict with
one another.
Why is it of practical importance that the subway be privatized, whether in
New York City or anywhere else? Apart from the increased safety and well
functioning of the system, there are important legal precedents at issue. For a
similar analyis may be applied to leafletting in private malls, begging in
restaurants, and the private imposition of dress codes. In all of these cases, it
is possible that the authorities will try to "balance" rights, one against the
other. If they do, we will substitute the socialist system that brought down the
Soviet Union for the private property rights one responsible for the success of
our own. Judges will become the central planners.
The way to resolve all seeming conflicts between free speech and other rights
is to determine on whose property is the confrontation taking place. If it is
public property, privatize it.
- 30-
BILLBOARD DEFACING
by Walter Block
There is a band of urban guerillas now active in Australia. No, they
don't set fires, nor bomb innocent bystanders. They are even admired by
respectable elements of society and treated with kid gloves by
government authorities.
What they do is spray-paint anti-smoking graffiti messages on
billboard
advertising. Everyone, it seems, who is anyone, is doing it. For example,
consider Dr. Arthur Chesterfield-Evans, a 33-year-old surgeon with a
practice in Sydney. He defaced a billboard slogan advertising a higher
quality cigarette. Before his "surgery," the billboard read, "Darling, let's
move up and save money." After the ministrations of the good doctor, it
said, "Darling, let's give up smoking and save money!" At his trial, our
man of medicine testified that his sloganeering would save more lives
than any surgery he could perform on victims of tobacco. And, to add
insult to injury, one Simon Chapman, a New South Wales state health
department official, testified, in defending Dr. Graffiti, that such billboard
advertising encourages children to smoke. As a result, Dr.
Chesterfield-Evans was let off with a nominal fine. Why, they have even
got an organization behind this effort. Not only is our medical friend a
member of the Non-Smokers Movement of Australia, he is also an activist
in BUGA-UP (I kid you not!) which stands for Billboard Utilizing
Graffitists Against Unhealthy Promotion. Amazing what they do down
under.
Now hold on, just one cotton-picking minute! What is at stake
here is
no less than the sanctity of private property. And I say that, knowing
full-well the howls of derision that are likely to emanate from some
quarters as a response to such a statement. At issue is the right of
consenting adults to be. informed, through billboard advertising, about a
desired product.
If anti-smoking vigilantes are allowed to deface property, shall we
next have groups of vegetarians pillaging butcher shops? Of health
fanatics ransacking candy stores and bakeries?
Such violence, once unleashed, knows no political barriers. Also
vulnerable are groups and organizations beloved of the trendy marxists.
What about the spectre of enraged right-wingers attacking co-op food
store advertising or intefering with day-care centres or gay bars?
No. Let's not open that particular Pandora's box. Let's respect all
private property rights, especially of those with whom we disagree.
As for BUGA-UP, let them rent their own billboards and place antismoking messages on them. In a free society, with the sanctity of private
property, they have a right to do just that.
- 30 THE FRASER INSTITUTE
626 Bute Street, Vancouver, B.C. Canada V6E 3M1   
(604)688-0221
BLOOD SHORTAGE
An Editorial by Walter BlockSenior Economist, The Fraser Institute
This may not bother most people reading this article but there is a
recurring blood shortage in western Canada. Of course the vampires in
the community are apt to be upset, and the Transylvanians can't be too
happy either. But for most people, as I say, this is no big deal.
Well, if that's your reaction, you are sadly mistaken. I fear you are
seriously
underestimating the importance of this problem. The Red Cross blood
transfusion service thinks enough of this crisis to schedule emergency
blood donor clinics. According to Dr. Terry Stout, medical director of the
Red Cross, these clinics are needed to deal with the worst shortage of
type 0-positive blood in 25 years. Responsible for this problem, in the
view of Rick O'Brien, another Red Cross spokesman, is a combination of
too few type-O donors at blood clinics, and heavy orders from hospitals.
What is going on here? Has the marketplace failed? According to
basic
economic theory, if there is a shortage of something, then the price ought
to rise, as unsatisfied demanders bid more and more, in an attempt to
gain some of the limited amount for themselves. And, at the higher price,
more care is supposed to be taken to preserve the stocks on hand, and
suppliers are presumably encouraged to provide more of the good in
question. And if there still is not enough supplied, then price is supposed
to rise to such heights so that enough of the item will be supplied.
So why isn't this process working? How can we have a serious
blood shortage, with the much-vaunted price system working in our
behalf?
The answer, of course, is that we have outlawed the market
system for things like blood transfusions. It has been thought that
matters such a this are far too important to leave to the marketplace.
That no one should profit on the misery of others. That it is somehow
dirty, or even obscene, to charge those who need blood, and to pay a
market price to people who voluntarily donate their life's fluids. And, as a
result, we have been burdened by shortages of this vital item.
But what is so wrong with the price system? Don't we rely upon it
to provide
us with food? Do not farmers profit because of rthe misery of those who
are hungry? Is not the market system relied upon to produce shelter?
What is so
obscene about a process of voluntary trade, even in blood, of all things?
Nor should we be deterred by the objection that were blood
transfusions to be organized on a commercial basis, that suppliers with
hepatitis or other such ailments would spread their illnesses and destroy
the system. The same exact procedures which guard against such
eventualities now, would still be employed were transfusions put on a
rational economic footing.
-30Building Codes and Roof Collapses
by Walter Block, The Fraser Institute, Vancouver, B.C.
In recent months, the roofs of some commercial establishments
have been caving
in.
First, it was the rooftop parking lot of Save-On Foods in British
Columbia. This collapse, fortunately, injured only four people, who had to
be hospitalized.
But it could have been far, far worse. There were about one
thousand shoppers and employees in the store right before the accident.
Luckily, there was advance warning. Some of the ceiling beams began to
buckle, and an announcement on the store's public address system was
quickly made, urging people to leave, but not to panic. This, undoubtedly,
saved many lives.
The second occurrence was in Brownsville, Texas. Here, real
tragedy struck. Eight people were killed outright, and almost 46 were
hospitalized with serious injuries.
The proximate cause of the Canadian devastation is still unknown.
The Texas case has been described as a "freak disaster," since it was
preceded by a heavy thunderstorm. But commercial dwellings, and all
edifices for that matter, are built to withstand storms, heavy ones as well
as light ones.
Who is to blame for these calamities, and how can they be avoided
in future?
As can be expected, the spotlight has focussed on the architects,
engineers, contractors and developers responsible for erecting the two
buildings. It is widely presumed that the responsibility will be allocated
fairly amongst them.
This is all well and good. When the culprits are assigned their
proper share of the blame, the market will see to it that they are less able,
or better yet, completely unable, to ply their trades in future. The usual
profit and loss incentives can be counted upon to penalize the guilty
parties, as those who would otherwise have been their customers seek
alternative sources of supply.
There is, however, one fly in the ointment. In none of the accounts
of these catastrophes has the role of government been even mentioned,
let alone analyzed. And yet the state in the modern era has taken on a
great responsibility for underwriting the safety of construction. In
virtually all civilized jurisdictions, the public sector has enacted building
code legislation. In such codes, there can usually be found requirements
for building materials, safety margins, construction techniques, etc. As
well, there are numerous civil servant inspectors who have been
unleashed on the construction industry, and are charged with the
responsibility of ascertaining code
compliance.
Under such conditions, the lion's share of the blame should
logically be placed on the government. If it intervenes in the building
process, it should be held accountable when this process unravels, as at
present.
This alone will not suffice, however. For even if the present
analysis were widely supported, and the building code bureaucrats were
seen by all as ultimately responsible for the tragedies, little good would
come of it. This is because, unlike private enterprise, government
bureaus are not funded by paying customers. Instead, their revenues are
derived courtesy of the tax authorities. This means that no matter what
loss of public confidence takes place, there will not be any necessary
diminution of their powers.
What is needed, then, is a complete rethinking of the theory under
which building codes were created in the first place. We must begin to
rely on the free enterprise system not only for architects, engineers,
contractors and developers, but for the mechanism which certifies the
quality of all their actions as well.
We are talking, here, about privatizing the task of certifying the
standards of the construction industry. How would this work in practice?
Instead of placing all our eggs in one basket, and expecting a monopoly
government bureaucracy to discharge this responsibility, society would
rely on the private sector. An industry composed of competing firms or
professional associations or committees would set the standards, and
inspect the construction site from the ground up to make sure it was up
to snuff. Only then would they place their imprimatur on it.
The benefit of this system is that if a private certification firm
made a mistake, unlike the present bureaucrats, it would quickly enough
be forced out of business. In contrast, the people who approved of the
Vancouver and Brownsville buildings are still doing business at the same
old lemonade stands.
- 30 August 3, 1988
THE BURNING BED
by: Walter Block, The Fraser Institute
The T.V. movie "The Burning Bed" had everything going for
it. It featured a first rate actress, Farah Fawcett-Majors in
perhaps her most theatrical role. It boasted a dramatic plot-an abused wife doused her husband with gasoline while he slept,
tossed a match on him and burned him to death. With this
combination, the performance attracted wide interest from the
television audience, and much attention from pundits and critics.
In fact, there was only one thing wrong with this
presentation: it led to a copy-cat murder in real life, only this
time the genders were reversed. In a tragedy of life mimicking
art, a Milwaukee man doused his estranged wife with gasoline, and
set her afire right after watching "The Burning Bed" on T.V. She
died a horrible death after lingering in hospital for a week, and
he was sentenced to a 19 year prison term for perpetrating this
truly evil act.
This episode presents us with a bit of a dilemma. The movie
"The Burning Bed" was produced by feminists, to illustrate the
problem of wife-beating. Yet these very people have vociferously
protested against pornography, on the ground that it leads to
violence perpetrated on women. Were these feminists to be
consistent with their anti-pornographic stand, they would have to
eschew their own exhibition of "The Burning Bed", since it, like
pornography, presumably promotes violence against women. If they
refuse to do any such thing, then logic would compel them to drop
their opposition to pornography, at least on this one ground--
which forms the major element in their case against this
practice.
No matter how they twist and turn, the feminists cannot have
it both ways. Talk of painting yourself into a corner.
- 30 300 words
California Gunplay
by Walter Block, The Fraser Institute, Vancouver, B.C.
Suppose you place a half dozen scorpions in a bottle, and shake
vigorously. What
would be the result? One need not be a sophisticated biologist to know
that each of
the creatures, feeling crowded, frightened and put upon, would lash out
at all the
others.
Something of this sort seems to have occurred in California in
recent weeks,
where motorists have been taking pistol shots at one another along the
freeways.
Although these are people, not scorpions, and they are on a highway, not
in a bottle,
the parallels in the two situations are ominous.
Consider the following:




The L.A. Standard Metropolitan Statistical Area has 730
miles of freeway, but a population of over eleven million
Every day, 4.3 million people are carried on 8.3 million
automobile trips, by 2.5 million motor vehicles
In the morning rush hour alone, 757,000 cars carry
850,000 persons on 1.7 million trips
Compared with 1970, fully three times as many vehicle
hours are now forced to undergo mind-numbing stop and
go traffic
Further, most large communities supplement their roadways with
a system of mass
transit; Los Angeles does not, making it a unique commuting city,
dependent upon the
automobile in a way that others are not.
As a result of these factors, each driver comes under greater and
greater
psychological pressure. Heightening the distress is the summer heat in
southern
California, with its fraying of tempers and resultant highway
breakdowns. Because of
the pressure of people and cars on limited road capacity, the "rush hour"
has been
extended until it now includes virtually every hour from 7:00 A.M. until
long past midnight. There is also the ever present threat of gridlock,
where no one moves at all. When you add up all these factors, we have all
the ingredients for the tragedies that have already occurred: four dead
and 11 seriously injured in some three dozen highway shootings.
What solutions are in the offing? Unfortunately, it would appear,
only more of the same is in store. According to the California Department
of Transportation, an additional 90 to 100 miles of new highways will
come on stream in each year from now through 1992. As well, bids shall
soon be taken for double-decking five miles of the Harbor Freeway in the
downtown core, which are particularly congested, even by L.A.
standards. There is also some talk of setting up a mass transit system, but
if that ever occurs, it will not be for decades.
It is important to do better, if only because of the present crisis in
southern California. But the problem of highway congestion is hardly
confined to that part of the world. Los Angeles, in this as in so many other
things, is a "leading indicator." It serves notice as to what is likely to
happen to the rest of us, and traffic jams--if not this particular "California
solution" -- are a feature of all city life.
Fortunately, there is another option. It is called "peak load
pricing," and is predicated on the idea that traffic congestion is merely an
instance of excess demand. As is well known to all students of economics,
there is only one way for the market to resolve a situation where the
amount demanded exceeds the amount supplied: the price of the good or
service in question must rise.
How would this work in the present instance? First of all, the
citizenry would have to get used to the idea of paying an explicit price for
road usage. It might be thought, initially, that this would be difficult; after
all, people look upon their freeways almost as a natural or God given
right. But the truth of the matter is that highways are not free, even now.
Their initial construction is paid for through taxes,
and so could be more accurately called "taxways" than "freeways." Nor
are they even free at present. All who use them must pay, in terms of
time, while sitting in bumper to bumper traffic. The choice, thus, is not
between paying and not paying; it is between paying in terms of money,
or, as at present, in terms of time wasted, nerves and tempers frayed,
and, in the extreme, bullets exchanged.
Secondly, a system of pricing would have to be set up which
would take account
of the fact that the demands for "taxway" usage are not uniform
throughout the day or week. Thus, at certain times on weekdays, say
between the hours of 7:00 and 9:00 A.M., or 4:00 and 6:00 P.M., and at
certain places, such as the Harbor Freeway, a premium charge would
have to be exacted. The determination of the level of the fee would best
be made through experimentation; it would be continued to be elevated
until traffic could move relatively smoothly.
This solution to congestion has been tried with great success in
Singapore, where
people buy different colored monthly tickets for display on their
windshields, which allow them access to different parts of the city, at
different times of day. (Severe fines are imposed on motorists who defy
the rules). If traffic jams in large Canadian are to be avoided in future, we
shall have to give a good hard look at such peak load pricing policies.
Canadian Conference of Catholic Bishops Attacks Free Trade
by Walter Block, The Fraser Institute, Vancouver, B.C.
According to Bishop Remi de Roo of Victoria, the free trade deal now in the
process of being hammered out between Canada and the U.S. will harm this
nation. In his view, the negotiations are likely to severely limit Canada's
economic and political autonomy.
These perspectives are presented in a discussion booklet entitled "Free Trade:
At What Cost?" released last week at a highly touted press conference. In it,
the bishops question not only the economics of free trade, but the ethics of it
as well. They maintain that an end to trade barriers could hurt the poor, and
create unemployment.
While this viewpoint bespeaks a profound concern for Canada and its people,
the bishops, unfortunately, may have been mislead by their economic
advisors. It has been a basic premise of economic analysis, since the days of
Adam Smith and even before, that voluntary trade across international
boundaries helps both participants.
Consider the trite but illuminating case of trade of a tropical for a temperate
product, e.g., bananas for maple syrup. It is of course possible for a country
such as Canada to grow both items. While our climate is hardly receptive to
it, we could nurture banana trees - but only in large and very expensive hot
houses. Similarly, a country such as Costa Rica could, if it very much wished
to, cultivate maple trees. It would have to build gigantic refrigerators,
hundreds of feet high, at the cost of a good deal of that nation's entire G.D.P.
Promoting capitalism
in Eastern Europe
Under such an unlikely scenario, each country could attain "self sufficiency"
in both commodities. Of course the poor, and everyone else for that matter,
would suffer greatly. Maple syrup would be frightfully expensive in Costa
Rica, as would bananas in Canada.
Suppose, now, that under such conditions there began a movement toward
free trade between the two countries. Without tariff barriers, Canada would
end up specializing in maple products, while the production of bananas would
tend to be concentrated in Costa Rica, to the enrichment of consumers in both
places. However, it would be vociferously objected that "Canadian jobs
would be lost in the banana industry." Similarly, the Costa Ricans — at least
those engaged in the production of maple syrup - would bitterly complain
about the rising tide of unemployment in their country.
From the perspective of the economist, we can see that both grievances
would be true. But contrary to the contention of bishop de Roo and his
colleagues, this would be a reason for rejoicing, not for the wailing and
gnashing of teeth. For if we want to economize on God's blessings, we do
well to encourage unemployment in the misbegotten Canadian banana, and
Costa Rican maple syrup industries.
Further, perhaps the greatest benediction an industrialized country like
Canada can confer on an economically backward nation such as Costa Rica is
to offer to integrate its economy with our own. In "Ethical Reflections on the
Economic Crises" the Conference of Canadian Bishops urges the
"Preferential Option for the Poor." According to this doctrine, public policy
should focus on the plight of the impoverished, and seek to improve their lot
in life. Since the world's poor are clustered in the underdeveloped nations,
this is an argument for open borders with the entire family of nations, not just
with the U.S.
But the Catholic bishops of Canada may not welcome advice from the
economics profession. (In recent surveys, only 3.8% of Canadian economists,
and 2.8% of their counterparts in the U.S. failed to support the view that
"Tariffs and import quotas reduce general economic welfare.") Perhaps, then,
they can borrow a leaf from their co-religionists south of the border. While
the U.S. bishops are hardly flaming advocates of an Adam Smithian policy of
full free trade, their text, "Catholic Social Teaching and the U.S. Economy" is
greatly at variance with the views expressed by Bishops de Roo, Proulx and
O'Byrne. In it they refer to "the flaws in the traditional notion of national
boundaries," and perceptively state, "...within a frame of reference
characterized by the 'preferential option for the poor,' we lean toward an open
trading
system."
1.
Dr. Block is an economist with the Fraser Institute.
rime Minister Brian Mulroney announced, with great fanfare, that Canada would grant
$42 million in foreign aid to Poland and Hungary in order to promote capitalism. That he
could do this indicates, as much as anything, that he does not
have even the most basic and elementary understanding of the free enterprise philosophy. That
the nation's journalists and editorial writers, ever ready to pounce upon the Progressive
Conservatives for just about anything under the sun, could let him get away with such a travesty
speaks volumes about the sorry state of their economic understanding as well.
Let it be said then, that capitalism is a system based upon private property, free markets, and
the lure of profits. It is a total contradiction to this system that government should subsidize
anything, let alone another government.
This foreign aid is actually an attack on capitalism in several senses. For one thing, it
undermines our free enterprise institutions here at home. The more aggrandized is Ottawa, the
less economic power remains with "the people," in the form of individual initiative. That grant
of $42 million will not come out of thin air. On the contrary, it will be exhorted out of the
pockets of the long-suffering Canadian taxpayer. Given the rakeoff that inevitably goes to the
bureaucrats, moreover, for our government to actually disburse $42 million means that taxes
will be higher than they otherwise would have been by a multiple of that amount.
For another, it has the exact opposite of its intended effect in the recipient countries of
Eastern Europe. The ostensible purpose of this income transfer is to promote capitalism in
Poland and Hungary. Ultimately, of course, the goal is to help the citizens of these beleaguered
countries lead a better life, but the underlying theory is that since central planning is responsible
for their present plight, what is needed now is a healthy dose of individual initiative. But if
aggrandizement of the public sector at the expense of the private fosters socialism, not free
enterprise, in Canada, it has the same effect in formerly communist countries as well.
Giving money to the Polish and Hungarian bureaucrats---even though their ministerial bosses
are now democratically elected-will do no more good for their respective economies than it did
in the past when they were appointed by a Communist party. Democratic socialism is still
socialism. As far as the potential Eastern European entrepre. neur is concerned, it matters little
whether he pays exorbitant taxes to the central planner who emerges from the ballot box or from
the the totalitarian system of the bayonet. Nor
does it matter whether the regulation that drives him out of business arises from one system or
the other. The only economic benefit derived from a free vote is that the excesses of socialism
can only be pushed so far before they can peacefully exchanged for an alternative. This option
does not exist under totalitarianism.
Transferring money from one government to another sets up perverse incentives in the
recipient country. Instead of concentrating on consumer needs-people in these countries are
faced with shortages of toilet paper, soap, bread, meat and countless other items we take for
granted in the West-the best and brightest of the Poles and Hungarians will be sorely tempted to
focus their attention on the government in order to obtain that 542 million for themselves. This
is why it is extremely pejorative to refer to this money as foreign "aid." With all of these
boomerang effects, it would be more accurate to call it foreign "harm."
If we really wanted to help the people of Eastern Europe, the encouragement of Canadian
private investment in these countries would be a far better plan. Unfortunately, because of
Mulroney's unfortunate decision, there is now $42 million less forthis purpose. Let us at least
resolve that no more money should be wasted in this manner in the future. Further, let us extend
the Free Trade Agreement recently concluded with the U.S. to Poland, Hungary, other former
Iron Curtain countries, and even to the entire world.
But even more than investment, knowledge and understanding of how free enterprise really
works is crucially needed by the people behind the former Iron Curtain. Such research is often
dismissed by Canadian socialists as "ideological" and "Neanderthal." but it is the very life blood
of those struggling to throw off the shackles created by the seven-decade-long experiment with
publicsector economic planning.
P
32 BRITISH COLUMBIA REPORT, AUGUST 27, 1990
Promoting Capitalism in Eastern Europe
by Walter Block, The Fraser Institute, Vancouver, B.C.
Prime Minister Brian Mulroney announced, with great fanfare, that Canada would be
granting $42 million in foreign aid to Poland and Hungary, in order to promote capitalism.
That he could do this indicates, if anything can, that he does not have even the most basic
and elementary understanding of the free enterprise philosophy. That the nation's journalists
and editorial writers, ever ready to pounce upon the Progressive Conservatives for just
about anything under the sun, could let him get away with such a travesty, bespeaks
volumes about the sorry state of their economic understanding as well.
Let it be said, then, that capitalism is a system based upon private property, free
markets, and the lure of profits. It is a total contradiction to this system that government
should subsidize anything, let alone another government.
This foreign aid is actually an attack on capitalism in several senses. For one thing, it
undermines our free enterprise institutions here at home. The more aggrandized is Ottawa,
the less economic power remains with "the people," in the form of individual initiative. That
grant of $42 million will not come out of the thin air. On the contrary, it will be exhorted
out of the pockets of the long suffering Canadian taxpayer. Given the rakeoff that inevitably
goes to the bureaucrats, moreover, for our government to actually disburse $42 million
means that taxes will be higher than they otherwise would have been by a multiple of that
amount.
For another, it has the exact opposite to its intended effect in the recipient countries of
Eastern Europe. The ostensible purpose of this income transfer is to promote capitalism in
Poland and Hungary. Ultimately, of course, the goal is to help the citizens of these
beleaguered countries to lead a better life, but the underlying theory is that since central
planning is responsible for their present plight, what is needed now is a healthy dose of
individual initiative. But if aggrandizement of the public sector at the expense of the private
fosters socialism not free enterprise in Canada, it has the same effect in formerly communist
countries as well.
Giving money to the Polish and Hungarian bureaucrats -- even though they are now
democratically elected -- will do no more good for their respective economies than it did in
the past when they were appointed by a Communist Party. Democratic socialism is still
socialism. As far as the potential eastern European entrepreneur is concerned, it matters
little whether he pays exorbitant taxes to the central planner who emerges from the ballot
box or from the the totalitarian system of the bayonet.
Nor does it matter whether the regulation which drives him out of business arises from one
system or the other. The only economic benefit derived from a free vote of the polity is that
the excesses of socialism can only be pushed so far before they can peacefully exchanged
for an alternative. This option does not exist under totali tarianism.
Transferring money from one government to another sets up perverse incentives in the
recipient country. Instead of concentrating on consumer needs -- people in these countries
are faced with shortages of toilet paper, soap, bread, meat and countless other items we take
for granted in the west -- the best and brightest of the Poles and Hungarians will be sorely
tempted to focus their attention on the government, in order to obtain that $42 million for
themselves. But this is the initial problem which created the felt need on the part of the
Canadian government to grant the funds in the first place: too much economic emphasis on
the public sector, too little on the private. This is why it is extremely pejorative to refer to
this $42 million as foreign "aid." With all of these boomerang effects, it would be more
accurate to call it foreign "harm."
This amount of funding may not be any great shakes in the capitalist west, but it is an
inordinate amount of money in the capital-starved east -- especially since it will not go to
help the people there, but rather to divert the more entrepreneurial inclined away from
needed private commercial endeavors.
If we really wanted to help the people of Eastern Europe, the encouragement of
Canadian private investment in these countries would be a far better plan. Unfortunately,
because of Mulroney's unfortunate decision, there is now $42 million less available for this
purpose. Let us at least resolve that no more money should be wasted in this manner in the
future. Further, let us extend the Free Trade Agreement recently concluded with the U.S. to
Poland, Hungary, other former Iron Curtain countries, and even to the entire world.
But even more than investment, knowledge and understanding of how free enterprise
really works is crucially needed by the people behind the former Iron Curtain. Such research
is often dismissed by Canadian socialists as "ideological," and "neanderthal," but it is the
very life blood of those who are struggling to throw off the shakles created by the seven
decades long experiment with public sector economic planning.
- 30-
Promoting Capitalism in Eastern Europe
by Walter Block, The Fraser Institute, Vancouver, B.C.
Prime Minister Brian Mulroney announced, with great fanfare, that Canada would be
granting $42 million in foreign aid to Poland and Hungary, in order to promote capitalism.
That he could do this indicates, if anything can, that he does not have even the most basic and
elementary understanding of the free enterprise philosophy. That the nation's journalists and
editorial writers, ever ready to pounce upon the Progressive Conservatives for just about
anything under the sun, could let him get away with such a travesty, bespeaks volumes about
the sorry state of their economic understanding as well.
Let it be said, then, that capitalism is a system based upon private property, free markets,
and the lure of profits. It is a total contradiction to this system that government should
subsidize anything, let alone another government.
This foreign aid is actually an attack on capitalism in several senses. For one thing, it
undermines our free enterprise institutions here at home. The more aggrandized is Ottawa, the
less economic power remains with "the people," in the form of individual initiative. That grant
of $42 million will not come out of the thin air. On the contrary, it will be exhorted out of the
pockets of the long suffering Canadian taxpayer. Given the rake off that inevitably goes to the
bureaucrats, moreover, for our government to actually disburse $42 million means that taxes
will be higher than they otherwise would have been by a multiple of that amount.
For another, it has the exact opposite to its intended effect in the recipient countries of
Eastern Europe. The ostensible purpose of this income transfer is to promote capitalism in
Poland and Hungary. Ultimately, of course, the goal is to help the citizens of these beleaguered
countries to lead a better life, but the underlying theory is that since central planning is
responsible for their present plight, what is needed now is a healthy dose of individual
initiative. But if aggrandizement of the public sector at the expense of the private fosters
socialism not free enterprise in Canada, it has the same effect in formerly communist countries
as well.
Giving money to the Polish and Hungarian bureaucrats -- even though they are now
democratically elected -- will do no more good for their respective economies than it did in the
past when they were appointed by a Communist Party. Democratic socialism is still socialism.
As far as the potential eastern European entrepreneur is concerned, it matters little whether he
pays exorbitant taxes to the paper pusher who results from the ballot box or from the bayonet.
Nor does it matter whether the regulation which drives him out of business arises from one
system or the other. The
only economic benefit derived from a free vote of the polity is that the excesses of socialism
can only be pushed so far before they can peacefully exchanged for an alternative. This option
does not exist under totalitarianism.
Transferring money from one government to another sets up perverse incentives in the
recipient country. Instead of concentrating on consumer needs -- people in these countries are
faced with shortages of toilet paper, soap, bread, meat and countless other items we take for
granted in the west -- the best and brightest of the Poles and Hungarians will be sorely tempted
to focus their attention on the government, in order to obtain that $42 million for themselves.
But this is the initial problem which created the felt need on the part of the Canadian
government to grant the funds in the first place: too much economic emphasis on the public
sector, too little on the private. This is why it is extremely pejorative to refer to this $42 million
as foreign "aid." With all of these boomerang effects, it would be more accurate to call it
foreign "harm."
If we really wanted to help the people of Eastern Europe, the encouragement of Canadian
private investment in these countries would be a far better plan. Unfortunately, because of
Mulroney's unfortunate decision, there is now an excess of $42 million less available now for
this purpose. Let us at least resolve that no more money should be wasted in this manner in the
future. Further, let us extend the Free Trade Agreement recently concluded with the U.S. to
Poland, Hungary, other former Iron Curtain countries, and even to the entire world.
- 30-
\
\."
(
Promoting Capitalism in Eastern Europe
by Walter Block, The Fraser Institute, Vancouver, B.C.
,,!V.
I\
\..-
'1
,J
\
Prime Minister Brian Mulroney announced, with great fanfare, that Canada would .:'--// f.~~
~
3.
2.
be granting $42 million in foreign aid to Poland and Hungary, in order to promote capitalism.
That he could do this indicates, if anything can, that he does not have
~ even the most basic and elementary understanding of the free enterprise philosophy. That the
nation's journalists and editorial writers, ever ready to pounce upon the Progressive
Conservatives for just about anything under the sun, could let him get away with such a
travesty, bespeaks volumes about the sorry state of their economic understanding as well.
Let it be said, then, that capitalism is a system based upon private, property, free markets, and
the lure of profits. It is totally inconsistent for
government to subsidize anything, let alone another government.
1.'71r'-
This foreign aid is actually attack on capitalism in several senses. For one thing,
1"
it undermines our free enterprise institutions here at home. The more aggrandized is
Ottawa, the less economic power remains with "the people," in the form of individual
initiative. That grant of $42 million will not come out of the thin air. On the contrary, it will be
exhorted out of the pockets of the long suffering Canadian taxpayer. Given the rakeoff that
inevitably goes to the bureaucrats, moreover, for our government to actually disburse $42
million means that taxes will be higher than they otherwise would have been by a multiple of
that amount.
For another, it has the exact opposite to its intended effect in the recipient countries of
'Eastern Europe. The ostensible purpose of this income transfer is to promote capitalism in
Poland and Hungary. Ultimately, of course, the goal is to help the citizens of these beleaguered
countries to lead a better life, but the underlying theory is that since central planning is
responsible for their present plight, what is needed now is a healthy dose of individual
initiative. But if aggrandizement of the
__ ,"
1,,,/
public sector at the expense of the private sector favors socialism not free enterprise in
Canada, it has the same effect in formerly communist countries as well.
j
Giving money to the Polish and Hungarian bureaucrats -- even though they are now
democratically elected -- will do no more good for their respective economies than it did in the
past when they were appointed by a Communist Party. Democratic socialism is still socialism.
As far as the potential eastern European entrepreneur is concerned, it matters little whether he
pays exorbitant taxes to the paper pusher who
j
results from the ballot box or from the bayonet. I, Nor does it matter
'~,.,~.~-~
whether the regulation which drives him out of business arises from one system or
the other. The only economic benefit derived from a free vote of the polity is that the excesses
of socialism can only be pushed so far before they can peacefully exchanged for an alternative.
This option does not exist under totalitarianism.
Transferring money from one government to another sets up perverse incentives in the
recipient country. Instead of concentrating on consumer needs -- people in these countries are
faced with shortages of toilet paper, soap, bread, meat and countless other items we take for
granted in the west -- the best and brightest of the Poles and Hungarians will be sorely tempted
to focus their attention on the government, in order to obtain that $42 million for themselves.
But this is the initial problem which created the felt need on the part of the Canadian
government to grant the funds in the first place: too much economic emphasis on the public
sector, too little on the private. This is why it is extremely pejorative to refer to this $42 million
as foreign "aid." With all of these boomerang effects, it would be more
accurate to call it foreign "harm."
If we really wanted to help the people of Eastern Europe, the encouragement of Canadian
private investment in these countries would be a far better plan. Unfortunately, because of
Mulroney's unfortunate decision, there is now an excess of $42 million less available now for
this purpose. Let us at least resolve that no more
money should be wasted in this manner in the future. Further, let us extend the Free Trad
Agreement recently concluded with the U.S. to Poland, Hungary, other former Iron Curta
countries, and even to the entire world.
Capitalism, Old and New by Walter Block,
The Fraser Institute
- 30-
Critics of the free market have recently taken to distinguishing and old
and a new version of capitalism. In their view, the capitalist pigs of
yesteryear weren't really so awful after all, at least compared to the
businessmen of today. The old timers may have abused our economy,
but at least the robber barons of the 19th century left us a legacy of
railroads, steel mills, automobile assembly plants, oil refineries, mines,
steamships, and much, much more. They created meaningful goods,
services and jobs on a massive scale.
But what do the modern paper-pushing junk-bonding yuppie take-over
December 27, 1989
artists leave in their wake? Nothing. Unlike their forebears, this new
breed of capitalist adds no wealth to our nation.
This attack on contemporary capitalism appears well taken, but only on
the surface. First of all, not all capitalists in years gone by were actually
involved in the production of physical goods or tangible services.
Then, as now, market participants provided such "intangibles" as
insurance, accounting, banking, intermediation, arbitration, etc.
Second, one has only to mention recent consumer breakthroughs to
realize that we have benefitted from a whole host of new-fangled
products in the present era:
computers, VCRs, bigger and better televisions, electronic games, air
travel, more and more sophisticated telephones and other
communication devices, etc. And the future, with robotics, genetic
engineering, new medical discoveries, bodes well to provide us with
even more of the same.
In order to see the fallacy of this challenge, we must realize that the
capitalist is, at bottom, an entrepreneur. All entrepreneurs have in
common an ability to predict future demand, and to mobilize land,
labour and capital to best meet consumer needs, especially those that
have not yet become apparent.
In order to do this, the entrepreneur engages in two sorts of speculations:
through time and through space. In the latter case, he perceives that the
market price of an item in two different areas deviates by more than
transportation costs alone could account for. He purchases in the
cheaper market, and sells in the dearer, thus transferring material from
those who value it less to those who value it more. In the process, he of
course enriches both, otherwise neither would have cooperated with
him. In the former, the entrepreneur thinks he notices a discrepancy
between factor and final goods prices, in this case to an extent greater
than that which could be accounted for by the rate of interest. In other
words, land, labour and capital (and this includes new ideas) are now
trading in some markets below the prices that the ultimate goods shall be
able to be sold for, when finally produced. So the entrepreneur takes a
risk. He purchases these items, and ofttimes mobilizes them for entirely
different and better purposes.
But he never physically creates material goods, even in
the "good old days" of capitalism. He merely takes
factors of production that otherwise would have ended
up, say, in the horse and buggy industry, and diverts
them to other alternatives.
Although this new critique of the market has a veneer of
freshness, it is actually as old as the hills. Can't you just
picture one cave man telling another that although
exploitative, at least the old hunting system produced
real red meat; in contrast, the present "gathering stage"
of grubbing for roots and berries does not add anything
substantial to the economy. Or a Luddite complaining
that only farming is a legitimate economic activity; in
comparison, the machinery of the "robber barons" is
superfluous and superficial. (Actually, this is very
similar to the message of the ^•1)
physiocrats, an
early school of economics.)
In recent history, we have passed through the
agricultural to the manufacturing stages. We have now
arrived at the informational revolution. Sometime in the
future, perhaps, we will move toward an economy based
on something altogether different, perhaps space
exploration. And then, the interventionist of the day will
muse that the informational stage at least provided
computers; space exploration will be just a waste of
time, in his opinion, adding nothing to the well being of
those still on earth.
THE FRASER INSTITUTE
626 Bute Street, Vancouver, B.C. Canada V6E 3M1   
(604)688-0221
CHEAPER GOODS IN U.S.
An Editorial by Walter BlockSenior Economist, The Fraser Institute
Many Canadians live within a day's drive of U.S. cities.
Starting in the West
and working East, Vancouver is near Bellingham and Seattle;
Lethbridge is close to Great Falls, Montana; Regina is not too far
from Minot, North Dakota; Winnipeg is within 300 miles of Grand
Forks, North Dakota; Toronto and Buffalo are practically
inseparable; Thunder Bay is only 200 miles from Duluth, Minnesota;
Rochester, New York is a 2h hour drive from Ottawa; and Montreal
and Burlington, Vermont are not too distant neighbours.
Many Canadians, therefore, have had first-hand experience
with prices in the
U.S. We northerners go down there and purchase meals, gasoline,
electronic
equipment, books, records, tapes, toys and hundreds of other goods
and services.
There is one thing unique about all of these purchases. It's
not quality.
Goods and services available in Canada are indistinguishable from
those in the U.S.
as far as quality is concerned. Nor is it even variety. Although a
much smaller
country, with some few exceptions, everything available there is
available here.
No. The amazing, startling, truly gigantic difference is price.
Virtually everything
in the U.S. may be had at a much lower price, ofttimes substantially
cheaper.
Meals, beer, toiletries, textile goods are all available at
substantially reduced
prices--even when the differential values of the U.S. and Canadian
dollars are
taken into account. If not for the steep tariffs, merchandise limits,
quotas and
other barriers to trade, almost all Canadians would rather buy in the
U.S.
-2What accounts for these sharp and dramatic differences? In
the view of many people, this is the price of independence. Were we
to lower the trade barriers, on this hypothesis, the maple leaf will
vanish, trampled under foot by millions of Canadians on a
bargain-hunt.
What nonsense! Canada has higher prices than the U.S.
because we have more government intervention which stultifies
productivity. We have greater unionization, more inclusive welfare
programs, socialized medicine, more vociferous protectionism,
more highly developed marketing boards, government industrial
strategies, central planning, Crown corporations (which are
unknown in the U.S.), to say nothing of our interferences with
intra-national trade.
To this must be added that we are a much smaller country
than our neighbours to the south. Even apart from our lesser
reliance on free markets, this alone would lead to higher prices in
real terms. But not if we eliminated our tariff barriers. Then, with an
economy integrated with that of the U.S., although not a polity, we
could enjoy their lower prices.
-30Combines Investigation Act
by Walter Block
Consumer and Corporate Affairs Minister Andre Ouellet has
prepared a most
interesting document in order to elicit response to his intended
amendments for the
Combines Investigation Act.
He is to be congratulated for this effort, and on several counts. The
document, "A Framework for Discussion", sets forth, in a
straighforward and even eloquent manner, the case for further
government intervention into the
marketplace.
It is welcome, then, as a clear statement of this position. The
public,
moreoever, is invited to respond to these proposals before the
introduction of an amending bill. This is in the finest traditions of
the Canadian democratic process and of great importance, since
legislation in this field is likely to have profound effects upon our
economy well into the next century. And the announced purpose of
this effort is to increase the competitiveness of the Canadian
economy -- a goal which cannot but be shared by all men of good
will in this country.
Nevertheless, there are deep and abiding flaws in the
"Framework for Discussion". The main difficulty is that the
document (and presumably the amending bill which will follow as
well) is based on an untenable and outmoded
economic theory that economic concentration and competition are
inconsistent. This theme runs throughout the manuscript, and can
be expected to be found as the basis of any subsequent legislation
which emerges as a result of the Ouellet proposals.
But the truth is almost the exact opposite. Competition and
concentration of
achievement go hand in hand in the most human endeavours. This is
the rule, not
the exception. Given that talents and abilities are unequally spread
round among the population, and given that full and rigorous
competition takes place, it should occasion no surprise that there
should be only a few "winners", "survivors", or eminent persons
associated with each activity. This is true in all areas of human
endeavour, sports, politics, the arts -- and business as well. But it is
only regarding business where unequal results are seen as evidence
of non-competitiveness. Far from an indication of lack of
competition, inequality of retrospective results is perfectly
compatible with rivalrous struggle.
Consider the following examples. In classical music, Mozrt,
Bach, Vivaldi, Beethoven, Chopin, and Handle tower above other
composers; in art, such a list would include Rembrandt, Picasso, Van
Gogh; in Canadian art, it is the group of (only) seven; in literature
Tolstoy, Dostovesky and Dickens. Top playrights include
Shakespeare, Chekov, Shaw and Ibsen; all-time great sports figures
are limited to such as Jim Thorpe, Babe Ruth, Mohammad Ali, Joe
Louis, Gor.die Howe; chess immortals include Capablanca, Alekhin,
Spassky, Fisher and Karpov. Although very vigorously competitive,
these widely diverse fields were each dominated by but a very few
people.
The winners in the highly competitive and democratic
Canadian political arena are also highly concentrated. The social
Credit Party of Alberta enjoyed an uninterrupted reign of 36 years,
from 1935 to 1971; the United Farmers of Alberta party held sway
from 1921 to 1935; and the Progressive Conservative Party has
completely dominated provincial politics since 1971.
From 1949 to 1966, the Liberal Party's proportion of
Newfoundland Provincial Seats was so high, that it would have been
considered a monopoly — had such dominance been attained by a
businessman. The Liberal Party of Nova Scotia controlled the
provincial legislature from 1881 to 1920 by overwhelming
proportions, reaching no less than 94.7% of this "political market"
in 1901. Ontario has been ruled by one party, the Progressive
Conservatives, for 38 years in a row -longer than Poland or Bulgaria,
where no competition between political parties is
allowed to take place. And the national Liberals have been all but
frozen out of
the four western provinces in the past decade, while managing a
virtual "monopoly"
over the national Progressive Conservative and New Democratic
parties in Quebec.
As we can see, the attack on business concentration comes
with particular
ill-grace from the political sphere -- which is as highly concentrated
as any institution in society.
In focusing its attention on the red herring of concentration
and their
statistical manifestations, the "Framework for Discussion", is
actually if
unknowingly ignoring the real threat to the competitiveness of the
Canadian
playing into the hands of those who would reduce competition in
the Canadian
economy.
It is literally impossible to overestimate the importance to
the free operation
of the marketplace that entry not be barred by the government.
There is all the difference in the world between a company
that attains a (temporary) monopoly position through service to the
consumer (new product, lower price, better service, etc.) and one
that attains a permanent monopoly position
through the coercive power of the state. The pre-eminent example
in the latter category is the Post Office. It owes its monopoly not to
its superior competitive activity, but the law of the land which
threatens those who would deliver mail privately with stiff fines and
even jail sentences.
The K.C. Irving case is a good illustrative example. The
"Framework for
Discussion" waxes apopletic over the fact that the Supreme Court
failed to bring in
a guilty verdict, even though the "Irving interests bought up all the
English language daily newspapers in the Province of New
Brunswick".
Yet this Irving "monopoly" was not without competition.
There were other language newspapers, non-daily English
newspapers, comic books, magazines, journals, books, stock market
and other specialized reports, radio and t.v. all in direct competition
with the five Irving newspapers. There is also the Globe and Mail,
Canada's national newspaper - all from the communications
industry. There were hundreds and even thousands of alternative
claimants for the New Brunswickers dollars from other industries"
from things such as ice creams, shoeshines, tennis raquets and
pencils.
The crucial point, however, is that there were no legal
barriers to entry. Anyone was free to set up his own English
language daily newspaper in New Brunswick -- subject, of course, to
the requirement that he have sufficient funds for newsprint, office
space, salaries, etc., and that he be willing to contend with the
professional standards maintained by the Irving chain.
The CIA amendment proposals focus on unimportant
inessentials and ignore the very crux of the problem. Industrial
concentration is as much related to competition as fish to bicycles.
Legal barriers to entry are the absolutely essential key to
understanding how competition is undermined. Yet the
"Framework for Discussion" focuses on the former, and completely
ignores the latter.
Let us make good this deficit, and explore some of the myriad
areas in which the government is itself guilty of discouraging
competition, by artificially protecting incumbent firms, and setting
up legal barriers for new entrants,
Industries where government reduces competition in this
regard include: professional occupations, railroads, trucking,
taxicabs, airlines and agricultural products. In each of these cases,
governments — at federal, provincial, and local levels — have
reduced economic competition by setting up barriers protecting
incumbent firms and practitioners, at the expense of new entrants -and the public. Whether it be marketing boards, licensing
arrangements, special permissions or franchises, by setting up
manifold legal barriers to entry, government has been a major force
disruptive of competition. If government truly had the interests of
the public at heart, and wanted to promote competition, then
instead of pressing the
spurious connection between concentration and competition
underlying the CIA, it
could instead rescind this complex welter of regulations which
discourages new
entry.
Perhaps the strongest and most significant manner in which
government
forecloses competition by preventing entry is in the area of trade
protectionism. A tariff is a tax which must be paid by foreign, not
domestic, producers. A quota is an outright prohibition of some or
all of the goods and services which would be exported by other
countries for sale in Canada. Both prevent or lessen the competition
in the domestic economy that would otherwise be provided by
foreign business firms.
Labour unions. The "Framework for Discussion" is curiously
silent about the
monopolistic practices of labour unions. Not only does organized
labour have a high concentratioin ratio in many industries, but ever
so much more important, it engages in entry restrictions, and even
prevention of job opportunity, to non-unionized workers.
Imagine the hue and cry were business firms to engage in
such practices. If
corporations followed the example of organized labour not only
would they "fail to supply" but they would physically prevent their
customers from patronizing other establishments (this is exactly
what a union of employees does when it goes out on strike).
True, labour organizations have traditionally been exempt
from anti-trust legislation in the U.S., and from anti-combines edicts
in this country. But there is simply no justification for making such
an exception. Labour unions, especially unions of public employees,
have a power to distrupt an entire economy in a way incomparably
greater than business, even "monopoly" business.
If there is no case for including labour unions under the
restrictions imposed by an amended CIA, there is even less case for
including business enterprise.
Conflicts of Interest
by Walter Block, The Fraser Institute
The newspapers have been recently filled to the brim with
stories about conflicts of interest suffered by politicians.
As a result, there has been widespread and renewed interest
in patching up conflict-of-interest policy. According to a typical
proposal, ministers and senior mandarins should be forced to either
put their assets in a blind trust, or to make a "full and complete
disclosure" of their investments.
There are, however, numerous drawbacks to such a scenario.
Openly acknowledging one's investment portfolio is no guarantee
that the elected official or civil servant will not be able to use his
public position for private gain. It may make things more difficult,
but a person who is so minded may still be able to mix his public
and private life in this manner. Nor is a blind trust even a necessary
impediment to such activity. The public figure may rely on the fact
that portfolios need not be changed, even when in blind trust and
may act so as to increase the value of his holdings on the day they
were given over to the administrator.
Such a policy may not maximize his private wealth, but,
especially if the portfolio has not been radically altered, it may well
enhance the value of his property. In any case, the fact that this is a
possibility may divert those in public office from discharging their
duties as they would had they no potential conflict of interest to
contend with.
But this is only the tip of the ice berg. There is also the siren
song of nepotism to deflect our public servants from their steely
determination to "act in the public interest."
This problem is easier to point to than it is to solve. First of
all, if the activities of the wife of a government official must be
scrutinized lest they cast doubt on the propriety of his own position,
what about his children or his parents? What about his uncles,
aunts, cousins, in-laws, grandchildren, etc. The difficulty is that
there is no nonarbitrary way to draw the line. No matter where it is drawn, there
will always be some (perhaps distant) relative whose business
relations may cast aspersions on the legitimacy of the politician in
question.
Secondly, what about the rights of the relatives of politicians
or leading civil servants? Must they be prohibited by law from
engaging in commercial transactions? If they are, this is a clear
breach of their own rights. If not, there is always the possibility that
someone may treat them advantageously, in the hopes of currying
favour with the principal (this would appear to be the allegation in
the Stevens case.)
These difficulties are basic, not superficial. They transcend
political affiliation, jurisdiction, even national boundaries, and apply
to all office holders and government officials. (They do not apply,
however, to private enterprise. For if a corporate officer, for
example, engages in a bit of nest feathering, it is in the interests of
the firm to ferret out this behaviour. Business concerns may best be
understood as competing not only with regard to providing their
primary product, but also as regards their ability to stop employees
from acting against their interests.) Conflicts of interest plague the
public sector at present, and are likely to do so for the foreseeable
future, or for at least as long as human nature remains the way it
now is.
What, then, may be done about this ubiquitous problem? The
answer is simple. If there is no airtight way to avoid conflicts of
interest amongst public servants, let us at least resolve to reduce
their numbers as much as possible! Thus the best way to eliminate
virtually all conflicts of interests amongst civil servants and public
officials is to decrease the number of these positions to an
irreducible minimum. There are many other good and sufficient
reasons for cutting back on the public sector, but extirpating
conflicts of interest is certainly one of them.
CROWN CORPORATION SALARIES
by Walter Block, Senior Economist, The Fraser Institute
In the past few weeks, the Canadian public has been stunned
by the
Mulroney government's announcement of the level of salaries paid
to Crown
Corporation executives. Although the long-suffering taxpayer in this
country is really the employer of these denizens of the boardroom,
such information was deemed too vulgar for his delicate ears by the
former Trudeau government. Even the Progressive Conservatives
will only give compensation ranges, not exact figures, as is done for
Canadian companies whose securities are traded on U.S. stock
exchanges.
-
And indeed the facts do portray a picture of public servants
living high off
the hog. When we consider the high pay scales--along with the
accompanying
fees, charges, per diems, bonuses, side payments, considerations,
rewards,
perks, favours, options, increments--it does appear rather unseemly.
Consider the following: Petro Canada, cordially despised all
throughout
the western part of the nation, pays its top two executives nearly
$900,000 in annual compensation. Chairman Wilbert Hopper pulls
down in the neighourhood of $435,000 a year, while his sidekick,
President Edward Lakusta nets a cool $414,260, or so. But this is
only the tip of the iceberg. Other Crown Corporate fat cats include
Air Canada's President Pierre Jeanniot, and Chairman Claude Taylor,
both in the $135.000 - $210,000 range; Canada Post's President
Michael Warren who earns between $160,000 and $185,000, and
Chairman Judge Rene Marin, in the range between $97,090 and
$114,260. Then there is Dr. J.H. LeClair, President, Canadian
National Railways, who weighs in at the $210,000 -$240,000 range,
plus a director's fee of $5,000 per annum and $250 per diem for
attending meetings.
Naturally, the release of this information by Prime Minister
Brian.
Mulroney has unleashed a storm of controversy and criticism. Mr.
Mulroney himself has been only mildly critical, allowing that "these
are pretty handsome numbers for anyone running a corporation
that doesn't have to declare a profit". But the reaction of Regional
Industrial Expansion Minister, Sinclair Stevens ("most excessive")
has been more typical of the outrage that has scandalized the
average Canadian income earner.
There has been, however, a defense of sorts made in behalf of
these astronomical public sector pay scales: the salaries of top
management in the private sector are comparable, and in some
cases even exceed, the compensation of crown corporation
executives.
But this is an improper comparison. Private executives must
earn profits, public sector bureaucrats need not. A more apt
comparison would be with top-earning civil servants and
politicians. And the highest paid Crown Corporation leaders earn
more than three times the salary and fringe benefits package paid to
our nation's leader, the Prime Minister, and more than six times the
amount paid to the ordinary Member of Parliament. These wages
are way out of line.
What has been the reaction of the Mulroney government? So
far, it has been limited, reasonably, to focussing public attention on
the phenomenon, and hinting that such pay scales in future will be
lowered. As well, it has fired one of the top income earners, Joel Bell
of the money losing Canadian Development Investment
Corporation, ($1.67 billion in its first year of operation) who had
earned a hefty $235,000 - $260,000 while still in the driver's seat.
Thirdly, it is now ready to seriously consider some even
more basic measures. Government has begun to rethink our entire
commitment to the idea of government running businesses—
usually on a money losing basis--through Crown Corporations.
The short-lived minority Progressive Conservative
government of Joe
Clark may not have been able to privatize Crown Corporations such
as Petro
Canada, but such restrictions do not apply today.
Crown Corporations were first created because national
policy called for
certain programs (e.g., the development of the north) that private
enterprise -in the absence of strong consumer support -- was unwilling to
undertake. Even then, it might have been preferable to subsidize the
private sector to these
ends, rather than create an entire additional level of bureaucracy.
But nowadays, with the existence of over 300 Crown Corporations,
many
of which lose money every year on a vast scale, this argument is
especiallly
unconvincing.
We must now realize that private companies tend to be far
more efficient
than Crown enterprises, if for no other reason than that they must
pass the market test of profit and loss every day.
Crown Corporations thus tend to become a drain on the
federal budget.
They are responsible, to no small degree, for the size of our present
national
debt.
But if they were sold off to private investors, they could
become the
means of helping to solve the very deficit they helped to create. With
Crown Corporation privatization, at one fell swoop we could plug a
drain on the body economic, and reduce a national debt which now
takes up one tax dollar of every three, and continually threatens to
raise interest rates and retard economic recovery.
November/84
CUTTING BACK THE CANADIAN LEVIATHAN
by Walter Block, Senior Economist, The Fraser Institute
an article for the Financial Post
Governments in Canada, at the federal, provincial and local
levels, now
spend about 45% of GNP in constant 1971 dollars. (This figure was
26.5% in 1950, 32.6% in 1960, 36.9% in 1970 and 40.7% in 1980).
Roughly half of this amount is utilized at present for transfer
payments, and the remainder is used to provide government
services.
But even this level of expenditure underestimates the true
magnitude of
government involvement in the economy. In addition to transferring
income and providing services, government intervenes with a
myriad of economic regulations, Crown Corporations, massive land
ownership, tariffs, bailouts, loans, guarantees and subsidies to
favoured business interests.
Unlike the U.S., where the growth of the government sector
has been
subject to widespread public debate, this pattern has taken hold in
Canada more by inadvertence than as the result of careful dialogue,
widespread agreement and purposeful activity. This, of course, is
not to deny that making Canada a government-centered society has
been the goal of some people; it is to assert that the Canadian public
as a whole has never explicitly accepted such a program. Consider
just one indication. According to a 1982 Gallup poll which asked
"which do you think will be the biggest threat to Canada in years to
come?", 46% answered 'big government", 29% said big labour, and
13% replied "big business".
This widespread dissatisfaction with a large and growing
Leviathan
Canada is certainly understandable in the light of a number of its
shortcomings. According to Probing Leviathan: An Investigation of
Government in the Economy, a book just published by the Fraser
Institute, the following deficiencies now exist:
o Despite a tripling in the real per capita welfare expenditutes
over recent decades, the distribution of incomes remains virtually
unchanged. (Fraser Institute calculations under conservative
assumptions show that if these transfer payments were given
directly to the poor, instead of being filtered through the welfare
system, every Canadian household currently below the poverty level
could be given an annual subsidy of $17,203.00.)
o
As tax rates increase, the "invisible" economy, based on
'barter and cash transactions that go unreported, flourishes. It is
estimated that just under 10 per cent of GNP in Canada is
unreported income.
o
In the light of a rapidly changing pattern of world demand,
government induced rigidity serves to reduce economic well being.
Paradoxically, immobility of economic resources is a frequent
rationale for interventionist government policies.
o Windfall profits and losses are the engine that drives the
market economy's adaptation to changes. To eliminate unforeseen
fluctuations in profits and losses, by bailing out losers and taxing
winners, cancels out the market economy's driving force and
effectively destroys it.
o When special privileges for particular groups are put up for
grabs in the political "market-place," the evidence suggests that the
groups with the most power and votes will come away with the
lion's share.
In view of the foregoing, the question naturally arises, What can
be done? A full answer would include reducing the level of
government on all fronts. But one specific proposal, especially
relevent to our present budgetary problems, would be to sell off a
number of Crown Corporations. In addition to lowering the
presence of the Leviathan government in the Canadian economy,
such a move could make a downpayment on our $30 billion plus
annual deficit, and on our national debt of some $200 billion. It is
difficult to know what such a sale could fetch on the open market,
but as of March 1983, the assets of Crown and other government
corporations were estimated at $71.7 billion by the Auditor General
of Canada. Taking 12% of this amount as an upper bound, their sale
could reduce our deficit by $8.6.billion, annually.
Fortunately, the new Progressive Conservative government has
begun to
rethink our entire commitment to the idea of public sector-run
businesses. Mr. Mulroney has announced the intent to privatize
CDIC, and the investigation of Petro Canada's takeover of Petro Fina
may portend the selling off of that Crown Corporation. But there are
over 300 other Crown Corporations, which could be returned to the
private sector.
Crown corporations were first created because national
policy called for
certain programs (e.g., the development of the north) that private
enterprise -- in the absence of strong consumer support -- was
unwilling to undertake. Even then, however unwise, it might have
been preferable to subsidize the private sector to these ends, rather
than create an entire additional level of bureaucracy. But nowadays,
with the existence of 300 Crown Corporations, many of which lose
money every year on a vast scale, this argument is especially
unconvincing.
We must now realize that private companies tend to be far
more efficient
than Crown enterprises, if for no other reason than that they must
pass the market test of profit and loss every day. Ridding the public
sector of financial albatrosses will thus tend to increase economic
efficiency as well as improve our deficit situation.
THE DEALER IN SPARE BODY PARTS I
by Walter Block, Senior Economist, The Fraser Institute
Baby Fae with a transplanted baboon heart; Dr. Barney dark, with a
transplanted artificial heart; hundreds of heart transplants, starting with
those
performed by the famed Dr. Christian Barnard of South Africa; these are
amongst the episodes that have seized the headlines, and captured the
imaginations of millions of people.
But behind the headlines, there are numerous other medical procedures
which have substituted diseased organs with healthy ones on an
interpersonal
basis. For example, liver, bone marrow, blood, cornea, eyes, and kidney.
The
Organ Donor Association of the U.S., however, reports that only X
people have
signed the donor card, which gives permission for the various body parts
to be
taken and used in medical procedures upon the sudden demise of the
grantor. In
Canada, the figure is Y. The Red Cross, moveover, reports a blank
shortage of
blood supplies, especially (Walter, the insert for page 2 that goes here
does not
make sense.) The reason Baby Fae had to make do with a baboon heart,
and Dr.
Barney dark with an artificial one, was that there was not a sufficiency
of
human hearts available for transplant.
The problem with present institutional arrangements is that the free
enterprise system is not fully allowed to operate. To be sure voluntary
organizations — such as Z Associations — are allowed to do their good
works
and these, along with all other non-governmental initiatives must be
considered
part of the marketplace. But commercial concerns, buying up spare body
parts
and reselling them at a profit, are prohibited in most places in the world,
and
where they are not prohibited outright, their blank is severely limited.
And with good reason, in the view of many people. The very idea
conjures
up visions of ghoulishness, Frankenstein experiments, grave robbing.
Count
Dracula gone beserk, Robin Cook plots, and other unsavory scenarios.
Imagine.
Allowing the evil merchants of profit to get their grubby hands on such
an
enterprise! By its very nature, these people contend, bodily transplants
must be
left to the voluntary private sector, or perhaps made a responsibility of
government.
But there are problems with this view. The voluntary organizations, as
we
have seen, have not produced the &quotgoods", at least in sufficient
quantities. And
there is always the danger that the government, the embodiment of force
in
society, will use compulsion to attain the goal the voluntary sector could
not
accomplish. The spectre of the state compelling people to sign these
donor
cards, despite their religious or ethical beliefs to the contrary, is one that
we
can do without, thank you kindly.
How would a marketplace in used body parts function? It is impossible
to
ever fully anticipate the actions of 100's of profiteering entrepreneurs,
each
reading for an end (a sufficient quantity of raw material for transplants)
beyond
their intention (profit). However, a few general principles become clear
upon
consideration. One possibility, for example, would be to continue the
present
policy of signing donor cards, only now these commercial firms could
offer
money to those who signed.
This could not help increase the numbers of donors. And if it did not do
so
sufficiently to supply all those in need of organs, the firms would have
to raise
prices paid until it did. In the case of blood, the Red Cross does, of
course, pay
for its supply. But its prices are too low, as shown by the fact that only
insufficient quantities are brought forth. As well, it has failed to adopt a
policy of differential prices, to reflect the relative shortages of the
various types of
blood. And there is no reason to believe that these private companies
would not
be able to increase the supply of organs in accord with demand.
Entreprenuers in every other field of endeavour known to man — some
mundane,
some exotic — have been able to accomplish this task with no fuss or
fanfare.
But this would mean, would it not, that organ recipients would have to
pay for
these items. And isn't that unconscionable? Shouldn't people have the
right to
receive these vital items, necessary for life itself in many cases, free of
charge.
To make this claim is to laugh. Why should people receive bodily parts
for
free? These items have value. To mandate that recipients have them at
no
cost is to prohibit the donors, and the middleman - facilitaters, from
being paid.
After all, we do not prohibit the farmer, or the miller, baker, retailer,
from
earning money from the sole of bread, even though bread (and other
food) is
also necessary for life. If we did, we would find bread to be in short
supply, just
hike human organs.
Under the present system of prohibited or controlled payments, many
potential organ recipients thus cannot receive them. Surely they would
be
better off having them, even for a fee, than being forced to do without,
with
the dubious privilege of not being required to pay for what they cannot
in any
case have.
Suppose that under these conditions, some intrepid entreprenuer were
willing to start up a black market service in this field. That is, he would
offer
large sums of money to those willing to sign organ donor agreements
with him,
and would charge even larger amounts to doctors in need of these items
for
purposes of transplant. (We assume away the insuperable legal
difficulties that would confront our organ businessmen at both ends of
the transaction).
The question is, would such as underground badily parts company be a
benefit or a detriment? One argument for the latter view is that the firm,
if
successful, would tend to undermine respect for law and order. It would
be
thumbing its nose at the duly constituted authoriteis, who have so far
remained
adamant in declaring such 'ghoulish" sales and purchases illegal. As
against
that, it could be argued that any legal code which in effect if not by
intention
consigns innocent individuals to death (heart failure, for example) or to
lives of
misery (kidney dialysis machines) richly deserves to be ignored.
But one point is clear. Our black market will benefit organ
donors, by offering them financial renumeration, as well as the
satisfaction of
knowing that the organs they may donate upon their devise will enable
others to
live. By doing so, it will, as we have seen, increase the number of organs
made
available, and this will be of inestimable benefit to those who might
otherwise
have been forced to go without.
Now let us consider a case that really does have ghoulish attributes. Let
us suppose that a marketplace in used body parts could not only work
with donor
cards, where the organ transfer takes place after the death of the donor.
Let's
assume that there would also be a market where live donors give up
parts of
their body — and then go on living. A heart transplant would be out of
the
question, but people could give up one (or even two) eyes(s), or one
kidney, etc.
Naturally, the price for a bodily part on this basis would tend to be
higher
than for that supplied only upon the death of the donor. But still, both
parties to
the transaction would benefit.
True, the donor would give up a precious part of his body, at great
inconvenience and rist, but the price he receives would more than
compensate him for this onerous renunciation, otherwise he would not
agree to do so. And of
course the recipient would not agree to pay the outrageous expense
unless the
recipient of the organ was worth even more to him.
But what about the case where the recipient was a old ne'er-do-well,
lazy,
shiftless millionaire heir, and the donor a young, healthy, brilliant, hard
working
person who had the misforturn to be born desperately poor, and needs
large
amounts of money for food to keep his family alive. Wouldn't an organ
transplant from the latter to the former be exploitative? Anti thetical to
public policy and the general good? The very idea seems replusive to
most
people.
Part of the unsavoriness, however, arises from the nagging suspicion
that
it is unfair that the ne'er do well is fabulously wealthy, while the hard
worker is
desperately poor. Let us banish this from consideration, though. It is
extrinsic
to the case in point. Given the justice of their initial endowments of
wealth, it
is easy to see that both parties gain from the exchange, in that neither
would
enter into this commercial venture in the absence of such an expectation.
And the experience of the Ethiopian famine of 198^ should underscore
this
point. If one of these unfortunates had been willing to give up a bodily
part, so
that he and his fellow sufferers could live, then any law enjoining such a
possibility would not only be a grave injustice, but would consign these
people
to death.
DEVIL MUSIC
by: Walter Block, The Fraser Institute
A California teenager short himself in the head while lying in a bed he
had just made -- an action urged in a suicide song by Ozzy Osbourne, a
heavy-metal British rock star, brought to us courtesy of CBS Records. A
part of the lyrics states: "... made your bed, rest your head, but you lie
there and moan, where to hide, suicide is the only way out."
As a result, the father of the young man, Mr. Jack McCollum, is suing
CBS Records, the distributor. Jet Records, the recording company, Ozzy
Osbourne the singer, plus two songwriters. He is seeking compensatory
and punitive damages which could amount to millions of dollars. He is
doing so, according to lawyer for the plaintiff Thomas Anderson a bornagain Christian, because under California law it is a felony to encourage
anyone to commit suicide, "and this is exactly what these records do."
In addition to the gory details, the case is buttressed by a finding in the
coroner's report that the young McCollum committed suicide "while
listening to devil music."
There are several logical difficulties with the suit, despite this official
report. First of all, it is a free speech issue, Mr. Anderson's views to the
contrary notwithstanding. Impressionable people might be "driven" to
suicide by all sorts of artistic offerings, besides the lyrics of rock music.
If plaintiff wins his suit, there will be a chilling effect on novels and
plays as well. Will any author dare include a scene in which one of the
characters commits suicide? Further, there will be the risk that serious
discussions of the phenomenon, even such as the present one, will some
day be held liable for leading to untimely self-afflicted death.
Secondly, there are grave philosophical problems with the proposition
that one person can cause another to commit suicide, whether directly
through exhortation, or indirectly, via movies, plays, or in our case,
songs. This view flies in the face of the doctrine of free will, upon which
our entire criminal code is predicated. If people are not responsible for
their own acts, how can it be just to punish them? And if they are, how
can we hold one person guilty for the suicide of another?
The plaintiff's argument in this case deserves to be rejected. Further, he
should be made to pay the defendant's expenses, and charged for
bringing a frivolous and harassing suit.
- 30 -
410 words
THE FRASER INSTITUTE
626 Bute Street, Vancouver, B.C. Canada V6E 3M1    (604)
688-0221
Do Landlords Hate Pets?
by Dr. Walter Block
Based on a recent pet-related tenant eviction, it would
appear that the evil
landlords are "at- it again." They are exploiting tenants who wish to
give a home
to some of our furry or feathered friends. "Pet-hating landlords" is
the way this
phenomena was described by a leading Canadian newspaper.
Nothing could be further from the truth, however. Actually,
except for a
miniscule number of cases, the landlord couldn't possibly care less
which pets
inhabit his dwelling units. Dogs, cats, parakeets -- or lions, elephants
and
alligators (on the assumption that no extra costs are thereby
imposed on the
landlord) -- it's all the same to him. The landlord, like all other
businesspersons, is usually interested only in maximizing profits.
And since the best way to increase profits is by satisfying renters,
"the customer is always right" is the typical motto of the landlord.
Why is it, then, that virtually all leases prohibit pets if the
landlord's selfInterest lies in pleasing customers?
First of all, while all standard written tenant agreements prohibit
pets, they
also provide for landlord waivers. And rental accommodation
owners commonly
grant exceptions for goldfish, parakeets in cages, and other such
pets.
More important, we must reject the view that all landlords
are pet-hating,
misbegotten misanthropes. In actual point of fact, most landlords do
not care at
all whether tenants maintain pets, as long as this practice (1) does
not impose any
additional (maintenance and repair) costs on them, and (2) does not
annoy other tenants. The landlord typically brings no views of his
own to this matter; he attempts to act as an agent for his tenants.
Most important of all, we cannot accept the view that all
tenants are filled with the milk of human kindness for our furry and
feathered friends. The plain fact is that not every tenant likes pets! If
so, then landlords can best please their
customers not by indiscriminately allowing pets the run of their
buildings, but by tailoring leases to the desires of their tenants.
In a reasonably well ordered world, tenants who like pets
would be segregated from those who dislike them, in much the same
way that smokers and non-smokers are kept apart in restaurants
and airplanes. For pets, just like tobacco smoke, are what the
economist calls an "external diseconomy" or "neighbourhood
effect:" they impose costs on third parties. Encouraging people with
such divergent tastes to live in close proximity with each other
reduces welfare all around: non-pet owners object to pets, and pet
owners are unhappy with this opposition.
Under a proper economic system, some landlords would
simply announce that they welcome all sorts of pets, and charge
more for this privilege. Others would staunchly refuse. Tenants
could then sort themselves out according to which mode of living
they preferred, and the proportion of rental buildings with pets
would then tend to resemble the relative desire to own pets in the
general tenant population.
The difficulty is that our institutional arrangements do not
make it easy for the landlord to collect additional rent to defray the
increased costs of tenants with pets. This is why rental property
owners are exceedingly reluctant to invite dogs and cats into their
buildings -- not because of any innate hatred for animals. But unless
landlords can, without any red tape or legal burdens, be fairly
compensated for these additional costs, they will have no incentive
whatsoever to set up entire
buildings devoted to pet-owning tenants. Under these conditions,
the segregation
of tenants by pet status will be an unreachable ideal.
Rent control is a particular problem in this regard. In the
newer and luxury
buildings to which controls do not apply, tenant wishes and desires
can be met to some degree. But in units subject to rent control, there
is not the slightest likelihood of the landlord collecting additional
rent for allowing pets. Should it really be a surprise, then, that the
rental property owner would be completely unresponsive to tenant
wishes?
There is one pressure vent open to the tenant in these
circumstances:
condominium, or better yet, single family home ownership. In
condomiuniums, strata title, or cooperative housing, the
"neighbourthood effects" problem still prevails. A majority of
owners may vote to preclude pets. (And the high proportion of these
groups which actually prohibit pets is further evidence that most
people, tenants included, oppose this practice.)
It is only by owning a home, with a backyard and a fence, that
the pet owner
need seek permission from no one. The problem, of course, is that
many pet lovers cannot afford to buy a home of their own. All the
more reason, then, to end rent controls, and to enact legislation
which makes it easier for landlords to collection additional rents to
defray the increased costs of renting to pet owners.
In this way we can separate tenants based on their desire for
pets. We can
thus help remove a minor but important irritant to living together in
a congested,
complex, modern civilization.
-30Drugs and the Olympics by Walter Block,
Fraser Institute
Canada's Ben Johnson was stripped of his gold medal for the 100 metre
dash in the 1988 Seoul Olympics. According to his coach Charlie
Francis, this instance of drug taking is only the tip of the ice-berg.
Numerous other Canadian athletes have been implicated in the use of
anabolic steroids, and world class athletes from several other countries
have been implicated.
The main reaction on the part of the leading sports authorities is a call
for a "war" on muscle building medications.
There are several shortcomings with this approach, however. For one
thing, there is a matter of arbitrariness. Why is it that anabolic steroids
are banned while other performance enhancing drugs, such as cortisone
and Xylocaine, are allowed? Even aspirin, for that matter, is a
performance-enhancing drug.
For another, who gives the Olympic and sports authorities the right to
ban anabolic steroids? They are widely used in Canada for patients
suffering from rheumatoid arthritis and other debilitating diseases, and
are available upon prescription.
Ben Johnson's doctor, after all,
prescribed them for him, at least according to present testimony.
The case of Eleanor Holm, a U.S. swimmer entered in the 1936
Olympics is a case in point. Avery Brundage, President of the 1.0.C. at
that time, banned her from competition because she had imbibed a glass
of champagne at a ship's party on the trip across the Atlantic to Berlin.
There are many who would question his right to have done so.
A further difficulty is that the war against these particular-performance
enhancing drugs seems almost as futile as the war against addictive
drugs such as cocaine and heroin. Keeping pace with the development of
newer and better body building pharmaceuticals, and often outstripping
it, is the technology necessary to disguise their use.
Whatever the shortcomings, there is a clear need to establish some sort
of rules that everyone must follow. "A level playing field" is a much
abused notion when applied to free trade, but when it comes to sports, it
is vital. If there is no commonality to which sports participants must be
held, the whole point of athletic competition vanishes. We might as well
assign some people to the starting line, and others either 10 yards
behind, or in front.
The big question is, What must be equalized? In high schools and
colleges, the amount of training is subjected to egalitarian
considerations: team practices are limited to a specified number of
weeks. This is not done in professional endeavors. In swimming there is
virtually no difference in the type of equipment used. In sailboating and
car racing, there are gigantic disparities. Here, the competition is as
much between men as between gear. Bicycle racing could equalize the
apparatus, by random assignments, but has chosen not to do so.
The point is, some sort of equalization must be imposed, but its
dimensions are not given to us from on high.
The present scandal stems from the fact that commonality cannot now
be achieved. We can impose stricter and more frequent controls, but we
can only hope that the testing mechanisms will be able to overcome
those which mask drug usage.
A more radical solution to the present drug scandal is the suggestion that
the rules be relaxed completely: allow everyone to take the muscle
building drug of his choice. The problem with this is that we will no
longer know of what the human body - unaided by drugs -- is capable;
we will only see the result of the combination of such artificial
stimulants plus training. (Yes, these materials may be harmful. But we're
talking about adults here, and they have the right to weigh the pros and
cons and decide such issues for themselves.)
A compromise is to urge the creation of two completely different
sections of the Olympic games (and all other related professional sports
activities). One would be an "open" division, where medications of all
kinds and varieties would be allowed. The other would be a "closed"
division, open only to the drug free. Every subsequent world record
would have an asterisk, or not, depending upon drug usage.
This is no panacea; no compromise known to man ever is. We would
still face the difficulty of drug users posing as drug free athletes. But this
compromise would go a long way toward resolving a most perplexing
difficulty, since with two divisions, there would be less incentive to
cheat.
- 30 -
The Economics of the Parole System by: Walter Block, The Fraser
Institute, Vancouver, B.C.
In 1971 Allan George Foster brutally raped and murdered
his 18 year-old sister-in-law. He was caught, sentenced and
served 10 years of his jail term.
He was released in 1981 on full parole, having been
"rehabilitated," at least in the opinion of the so-called
expert psychiatrists responsible for rendering this decision.
The parole officers were unequivocal in their positive
assessment of Foster. Said Vasha Starrie, his case
management officer at Agasiz Mountain Prison: "I thought
he had dealt with the (1971) offence and had developed
character features that made him open and reliable."
Further "He is one of the sanest people I have ever met ... a
highly sensitive and intelligent person." According to
psychologist Clifford Ratzlaff, who subjected Foster to an
intensive battery of tests, "He appears to have overcome the
life stress that caused him to flip out (in 1971) and take the
life of another person."
Late last yenr. however, this sane well-adjusted person
struck again. This time the victims were his common-law
wife Joan Pilling, 34, her daughter Linda Brewer, 12, and
Brewer's school friend Megan Sue McCleary, also 12.
Luckily for society, he committed suicide after this
outbreak, because this second series of ghastly crimes
would have allowed him yet another parole after 25 yearsprovided he could have convinced another set of dogooding experts of his intrinsic goodness.
What does this gory tale have to do with economics?
The murderer's own assessment of his situation was
apropos to this point. Said Foster: "There is only one thing
crazier than me and this is the society that let's me do what
I do."
But it is possible to pinpoint more exactly the precise locale
of the craziness in 49
society. First and foremost it is a
system which severs the connection between action and
responsibility. The psychological experts, and the parole
board members who rely on them make decisions that
affect the rest of us in crucial ways. Yet, they are neither
rewarded when they correctly assess these prisoners, nor,
more important, are they penalized in any way when they
are tragically wrong. Adam Smith stated so eloquently that
it is not from benevolence but from self interest that the
butcher and the baker provide their wares for us. But if
these entrepreneurs had as little selfish interest as do the
parole boards, we would all starve.
Secondly, we must note that the Foster case is symptomatic
of government failure. The state bureaucracy necessarily
lacks the magic of the marketplace, and the supurb
incentive system imposed by the lure of profits and the fear
of losses. Incarceration of prisoners and parole are now
responsibilities of the public sector. Given this state of
affairs we must look toward privatization of these roles as a
means of improving matters.
Government is clearly
derelict in its duty; and intrinsically so. It is thus difficult to
see how private enterprise could do anything: but bring us a
more socially responsible parole system.
ECONOMICS AND THE CATHOLIC BISHOPS
by Walter Block
The Canadian Conference of Catholic Bishops (Episcopal
Commission for Social
Affairs) is to be congratulated for its recent report, Ethical
Reflections on the
Economic Crisis.
If there were any doubt about it before, there can be none
now: our double
digit unemployment rate is evidence not only of an economic crisis,
but, as the bishops say, of a "basic moral disorder." When 1.5 million
people out of a labour force of slightly less than 12 million cannot
find a job, in large part because of the economic policies pursued by
government, this is not only an economic problem, but a moral
problem as well.
It took the moral authority of the Canadian Bishops to point
this out in a
way that cannot be overlooked, and to focus our concern on the
plight of the
downtrodden. Their statement is dramatic, compassionate and
deeply ethical in
its concern for our economy and its people.
There is a second reason for welcoming this report: concern
for a
pluralistic society. In our epoch, there is a distinct danger that the
growth of a
centralizing, self-aggrandizing, interventionist government will
succeed in
gradually sweeping aside all other alternative institutions.
This is why it is so important for the good of society that the
churches speak out on economics, and on public policy issues
(whether or not it is appropriate from a religious point of view is
something each church must decide for itself). That a significant
church group has dared to speak out against an establishment
government cannot but help engender a more healthy pluralistic
society in Canada.
The report of the Canadian Conference of Catholic Bishops is
grounded on, and begins with, a "fundamental gospel principle"
called the preferential option for the poor, the afflicted and the
oppressed. This means that in our analysis of political economy, the
downtrodden should occupy centre stage in our minds and hearts.
We must be especially vigilant in our concern for those who are the
victims of injustice.
It is indeed rare in the annals of political economy that such a
concern should even be mentioned, let alone used as a foundation
for the entire analysis. The bishops are therefore to be
congratulated for this expression.
However, it is one thing to identify with the oppressed
emotionally; it is quite a different matter to fashion programs which
will actually help them. The road to hell, after all, is paved with good
intentions. One of the major shortcomings of the bishops' statement
is that despite its avowed concern for those at the bottom of the
economic pyramid, it urges policies which will have the diametric
opposite effect of the results sought and expected.
For example, the bishops claim that unemployment rather
than inflation should be recognized as the number one problem, and
recommend additional government spending for jobs creation and
welfare. These, however, would fuel inflation. And inflation, apart
from its other bad effects, is itself a major cause of unemployment.
The bishops advocate an industrial strategy of low
technology and high labour intensity. Motivated by the best
intentions, they nevertheless fall victim to the hoary "lump of
labour" fallacy. According to this specious argument, there is only so
much work to be done, and if machines do more of it, less will
remain for people to do.
On these grounds, the logical conclusion would be to end
modern
technology. The entire earth's population, to say nothing of a mere
1.5 million Canadians, could be employed merely in carrying by
hand (in 100 pound parcels) all freight now transported between,
say, Vancouver and Halifax. But this Luddite vision would consign
most of the world's peoples to death by starvation, and to those few
who remained living a life of poverty known last in the Stone Age.
The Episcopal Commission for Social Affairs sees a greater
role for wage and price controls--of a more balanced and equitable
variety, aimed more at the rich--as a way of stemming the rate of
inflation.
But a more radical vision would have seen wage and price
controls--of any
type--as a snare and a delusion. Wage and price controls do not cure
inflation any more than pressing down on the water in a bathtub
will lower its level. Inflation is caused by excessive money creation
on the part of the government central banking authorities, and thus
only a change in monetary policy can put an end to inflation.
According to the authoritative Fraser Institute study, The Illusion of
Wage Price Controls, moreover, this policy brings with it a host of
other social and economic ills: black markets, shortages, queues,
rationing, and a general disrespect for the law.
The bishops call for greater emphasis on financial support
for the poor and the unemployed. On humanitarian grounds,
emergency economic aid of this sort can surely be justified. But once
past a certain threshhold point, it can threaten to promote
continued unemployment. If this aid is contrived in such a manner
as to financially penalize those who accept jobs, this will retard reemployment, not enhance it. In Canada, a family of four with one
breadwinner can actually receive more money from welfare
payments, than in the form of after-tax income from low wage
employment. In British Columbia, for example, the minimum wage
level is $3.65 per hour. At 40 hours per week, this translates into a
monthly after-tax, take-home pay of $562.52. But the same family
can be entitled to $415 in support allowances, plus anywhere from
$0 to $455 in the form of shelter allowances, adding up to a
relatively hefty $870 per month, at maximum. True, such a family
could apply to the B.C. Ministry of Human Resources to make up the
difference between actual earnings and welfare entitlements, so it
would not actually lose out by engaging in paid labour. But under
such a system, it should occasion little surprise that few labourers
indeed, voluntarily venture out into the cold winds of employment.
For it is the rare individual who would willingly give up his full-time
leisure for the dubious prospects of low wage employment. Such a
system is truly generous--but generous to a fault. It should be
curtailed--and in the interests of employment.
Next, the bishops single out labour unions to play a more
decisive role in curing unemployment. But this is like asking the fox
to guard the chicken coop. The raison d'etre of the union movement
is to raise wages for its own membership--whether or not justified
by productivity increases--and the major cause of unemployment is
wage rates artificially boosted beyond productivity levels. According
to Lady Barbara Wootton, a Labour Party Peer in the U.K. House of
Lords, "(It is) the business of a union to be anti-social; the members
would have a just grievance if their officials and committees ceased
to put sectional interests first."
The view of unions held by most Canadians is that of a
long-suffering underdog, struggling valiantly against overwhelming
odds, to improve the wages and working conditions of all
employees. Because of this image, most Canadians have been
extremely sympathetic to the aims of the unions; our labour
legislation is indicative of the warm support accorded by the
citizenry. It is perhaps for this reason that our media have not
subjected the unionized sector to the scrutiny it visits upon all other
Canadian economic institutions.
But the statement of Lady Barbara Wootton paints an
entirely different
picture. To be sure, in this view unions can still be counted upon to
improve the employment package--but only for their own
membership. But we must realize that the poor, the afflicted, the
oppressed, those at the very bottom of the economic pyramid, are
not found on union rolls in any great numbers. As well, unions have
strongly supported legislation which impacts heavily, and
negatively, on those at the bottom of the economic pyramid. Textile
tariffs, the minimum wage law and opposition to prison labour all
come to mind. Our first principle thus gives us pause before
entrusting the welfare of the economically downtrodden to the
tender mercies of organized labour.
The reason this "first principle" is so important is that in the
modern
economy, it is the rich who so often in effect steal from the poor.
They do it, unfortunately for the poor, not by stealth and in the dark
of night (where they could be apprehended by the forces of law),
but legally, out in the open, and in the light of day (where it is well
nigh impossible to stop them).
Bailouts for large corporations, subsidies to the arts, to sport,
protective tariffs which make it impossible to import cheap
products from abroad, marketing boards which artificially raise the
prices of items such as eggs and milk, subsidies to export companies
to allow them to sell more cheaply in foreign markets, foreign aid
(which goes mainly to wealthy leaders of impoverished countries),
these and more are all ways in which monies are forcibly
transferred ("stolen from") the poor and given to the rich. One looks
in vain to the bishops for any condemnation of practices such as
these.
The bishops themselves, and the pundits as well, have
interpreted the statement as a critique of capitalism. Indeed, one
newspaper went so far as to headline its coverage: "Bishops' attack
on capitalism stirs up storm." But one thing must be made clear:
whatever it is, the bishops' report is not, and cannot be, a critique of
laissez-faire capitalism. For it deals with the Canadian economy of
1982-1983, an economy which has many facets of public ownership
and involvement. Therefore, in objecting to the unemployment
which characterizes the Canadian economy, the bishops can and
must be interpreted as objecting to the operation of our modern
mixed economy! This is an economy in which government
production of goods and services and government regulation and
taxation account for nearly 50 per cent of all economic activity. Had
the bishops concentrated on this needless, inefficient and counterproductive government intervention, and on a swollen, burgeoning
public sector, they would have much more nearly focused attention
on the real cause of poverty in Canada--and in the rest of the world
as well.
Equal Pay Legislation
by: Walter Block, The Fraser Institute, Vancouver, B.C.
The advocates of equal pay for work of equal value castigate
the market for its inherent unfairness. Instead of the "anarchy" of
free enterprise, they propose that all wages be set on the basis of
skill, effort, responsibility and working conditions. These would be
determined by boards of "experts," and tribunals of bureaucrats and
civil servants, who substitute their "objective" assessments for the
chaotic judgement of a system of competitive labour markets.
There are many and serious objections which can be levelled
against this scheme. Perhaps most important, the entire proposal is
predicated upon a male-female wage "gap" resulting from employer
discrimination. But as Fraser Institute research has shown, no such
phenomenon actually exists.
As well, contrary to the self-styled feminists, there is nothing
intrinsic to a job
that makes it worthy of compensation. Crucial in any determination
of wage rates is the demand on the part of consumers for the service
supplied. Right now, for example, the skill, effort, responsibility and
working conditions of dentists are such that they receive high
compensation. But were a cure for tooth decay to be uncovered
tomorrow, their wages would plummet without any diminution
whatsoever in these objective measurements on the part of the
practitioners of this profession.
Further, any proposal which artificially raises the salaries of
a given calling
beyond its productivity level threatens it with unemployment. But
equal pay enactments are always couched in terms of raising female
incomes, never reducing those of males. As such, they threaten to
price women out of the market, in a manner similar to what has
already happened to young people, who have been rendered less
employable by minimum wage laws.
There is also the embarrassment that when boards or
tribunals in the different
jurisdictions have attempted to "objectively" set the value of a job,
the results have varied widely. When entrepreneurs poorly estimate
the worth of a job, they are automatically penalized. If they set
wages too high, they risk bankruptcy; too low and they are likely to
suffer severe quit rates. Unfortunately, no such automatic reward
and penalty device can operate in the public sector.
Equal pay legislation is a form of wage - price control. As
such, wages are frozen in place, despite changing market conditions.
For example, if there is a sudden need for more nurses, and fewer
fire fighters, an inflexible wage system will be unable to encourage
the former, and discourage the latter. A decade ago Canada rashly
experimented with wage - price controls. It was a disaster, in the
view of all people of good will. That we are seriously flirting with
this unsavory idea so soon after underscores the point that those
who are ignorant of history are doomed to repeat the mistakes of
the past.
- 30 -
2
EXPO
Walter Block The Fraser Institute
Expo has gone out a blaze of glory, with a gigantic fireworks display
accompanied by a Provincial-wide orgy of mutual
self congratulation. In the afterglow of this splendid
occurrence, critics can scarcely expect tci be heralded. However,
certain aspects of the World's F'air need to be examined so that
we do not draw the wrong public policy conclusions from it.
That there were successes, no one can doubt. The original
plans called for some 13 million visitors; in the event, over 20
million showed up, courtesy of good weather -- and heightened
terrorist activities in Europe. In addition, EXPO was expected
to lose a cool $310 million although the final and definitive
iJigures are not yet in, it looks as if the shortfall will be
significantly below that figure. In fact, the triumph was so
great that the Social Credit party was able to rely heavily on
this factor for its recent electoria1 win at the po11ing booths.
But there were neqative aspects as well, and when these are balanced
against positives, it is unclear that the people of British Colurctbia really
turned out to be beneficiaries.
Expense
Let us first consider the large loss of money involved.
This was an expenditure of huge proportions. While ordinary
private businesses do ofttimes indeed suffer financial setbacks,
they are never undertaken on purpose, nor contemplated with
equanimity in advance, as was done in this case. And the reason
is simple. People don't usually intend to lose their own hardearned cash. Those who do so, usually end up with little or
nothing to show for their efforts. Had Jimmy Pattison treated
revenues earmarked for EXPO s his own, for example, it is
unlikely in the extreme that he would have spent them in this
way.
There is a social .justification for this phenomenon as well.
Business losses imply that the revenues spent on the product by
the entrepreneur were not valued as greatly by the paying
customers. If EXPO ends up losing $300 million, we can deduce
from that fact alone that the public valued the resources spent
on this World's Fair precisely this much more than the benefits
derived therefrom. This means that consumer welfare would have
been $300 million higher had these monies been allowed to stay in
the hands of their original owners, instead of being taken from
them in the form of taxes. Had these dollars not been allotted
to the public sector, they could have been spent in the ordinary
way-- on toasters and skateboards, radios and cabbages, videos
c-ind furniture -- and the people of the province would have been
better off to the tune of some $300 million.
A Party
One argument in behalf of EXPO, intended to defend it against the
charge of losing money, is that this event "was one vast party in behalf
of all of British Columbia, and like it or not, parties cost money."
True, all too true. Festivities are indeed indeed expensive, and the
bigger and more lavish they are, the more they cost. But gala events are
usually put on, and paid for, by the party giver. The invited quests may
bring a present (although this is never mandatory) , but they are not
forced to pay an admission price at the gate, nor to make up any
shortfalls through increased taxes which would otherwise not have had
to have been collected. If the leading politicians of B.C. had really
wanted to give a party, and to do so in the manner in which most people
engage in this activity, they could have invited anyone they had wanted
to, but paid for it with their own money!
Tourism
A more serious attempt to defend the vast EXPO losses is to claim that
they were really an investment in tourism for the province. But this, too,
is problematic. If promoting future visits from out of towners were the
goal, why build EXPO? Why not just subsidise their travel costs to
Vancouver? After al1, it was recognised by everyone that EXPO would
not last forever. The fair was seen only as the bait through which hordes
of foreigners could be induced to see the many natural beauties of our
province. But surely we could have enticed many more people to the
lower mainland by paying their way here, than by setting up a world's
fair, and charging them for the privilege of viewing it.
Even this criticism does not go deeply enough. It accepts as given the
desirability of subsidizing the tourist sector, and argues only that EXPO
was an inefficient means toward that end, But we can ca1l into question
the premise that it makes good public policy sense for government to
artificially promote tourism.
Once the issue is posed in this manner, it is not clear that there is a case
for taking the revenues of the populace as a whole and diverting them
into any one industry. First of all, why tourism? Why not forestry, or
mining, or real estate, or farming, or frisbee production, for that matter?
All of these employ thousands of people (or perhaps could, with a heavy
enough subsidy), and are fine upstanding industries in their own right.
Why is their claim to government largesse any the less than that of
tourism?
Secondly, if the EXPO ploy succeeds and the tourist sector does indeed
receive a shot in the arm, the owners of the individual hotels, motels,
trailesr camps, restaurants, gift shops, etc, are the ones who will mainly
benefit. Why should they be allowed to recoup, based on the investment
funds derived from the entire populace? Is it fair to ask all British
Columbians, many of whom are far poorer than the businessmen in the
tourist sector to finance investment aimed to help the latter? Such
perverse income redistribution is hardly in the public interest.
Further, in the free enterprise system, it is the consumer, not the
producer, who is presumably sovereign. Money is not funneled into
firms or industries at the behest of businessmen anxious to enhance
their revenues, by government bureaucrats, who desire to control other
people's property. On the contrary, disbursements are based solely on
the desires of the paying customer. Given this system, there is no
warrant to take money from all the people, and simply give it to the
tourist industry (in the form of EXPO), since had consumers wished for
this occurrence, they were perfectly free to re-order their priorities on
their own accounts.
Every penny spent on EXPO, it must be remembered, was a penny that
could not be utilized for other goods and services. And in the view of
the consumer, welfare was enhanced by spending it his own way, not in
the manner designed by the well-intentioned government in Victoria,
for a World's Fair.
Lottery
Had EXPO been financed through tax revenues, the case against it
would have been simple, complete, and airtight. People would have
been forced to pay through taxes for an item they could have supported
through the stock market, but their funds were never solicited in this
manner.
However, the losses from this event have been funded not through the
Finance Ministry, but out of the revenues of the B.C. lottery system.
This completes the analysis, since it can no longer unambiguously be
contended that the citizenry was forced to yield up revenues against its
will, as would be true for the tax system.
Despite this complication, there is still a case to be made against the
financing of EXPO. For one thing, there is a curtailment of full free
choice involved here: while the public can indeed choose whether or not
to buy a lottery ticket, options have been circumscribed by the fact that
only the government may legally offer to provide such a service.
Apart from this, the monies raised from the lottery could have been used
to defray the provincial deficit, or to 1ower other taxes. This would have
benefitted the public, given that the people are able to spend their money
in a way that can better promote their interests than can governement
expenditures. As a result, even if no taxes at all are used to pay for the
EXPO losses, taxes will be higher than they otherwise would have been
but for this event.
The world's fair thus cannot be justified as a gigantic provincial party,
nor as an "investment" in tourism, or excused on the basis that it was not
supported by tax revenues. If anything, EXPO most resembles the bread
and circuses given to the populace by the Roman emperors two
millennia ago. And it certainly cannot he defended on these grounds, at
least not in the modern era.
Flag Burning by Walter
Block
In the libertarian philosophy, free speech rights are interpreted
as but an aspect of the more basic rights to private property.
For example, if someone breaks into my house at 3:00 A.M.,
and starts reading in a loud voice the sonnets of Shakespeare,
he may not properly object if I toss him bodily out onto the
street that I have violated his rights of free speech. He has no
rights of free speech -- on my property. He has such rights
only on his own property, or on that (a hall, auditorium,
newspaper advertisement, etc.) which he has rented from
someone else.
- 30
December 27,1989
1
UREA FORMALDEHYDE FOAM INSULATION AND THE PROBLEM OF
GOVERNMENT PRODUCT SAFETY CERTIFICATION
By Walter Block
June Financial Post Column
The Canadian government's creation of the Urea
Formaldehyde Foam Insulation (UFFI) crisis has brought into
serious question the entire case for public sector involvement in the
consumer product safety certification industry.
What is the UFFI crisis?
UFFI was made eligible in September, 1977 for a $500.00 grant
under the Canadian Home Insulation Program by the Canada
Mortgage and Housing Corporation (CWHC), in an attempt on the
part of the government to encourage the reinsulation of older
housing accommodation. Although the program may well have been
conceived with the best of intentions, its actual operation has
proved to be nothing less than a disaster.
According to experts commissioned by Ottawa, the foam
tends to break down chemically after installation in wall cavities,
and to release formaldehyde vapors which are injurious to human
health. Complaints frequently cited include nausea, eye and nose
irritation, dry throat and nose, coughing, nose bleeds, headaches,
insomnia, dizziness, allergy, skin irritation, vomiting, shortness of
breath, diarrhea in infants, and even some
types of cancer. So dangerous are these symptons that UFFI was
temporarily banned by the Federal government in Decembr, 1980
under the Hazardous Products Act.
The problem is widespread, moreover, and costly to solve.
Accordingly to the best estimates, 100,000 homes, and an
undetermined (but suspected large) number of office buildings,
factories and schools have been treated with UFFI. And the only way
to make . the interior environment safe is to completely remove the
offending UFFI (rhymes with "yuckie") from the premises. Removal
charges alone are independently estimated at $20,000 for the
average size home, but to this must be added costs for structural
deterioration of houses, mildew damage, blistering paint,
miscellaneous home repairs, psychic harm and inconvenience, and
temporary relocation costs for people who suffer from respiratory
problems. When all of these are added up, the total may come to the
$75,000 damages claimed in an UFFI class action suit now before
the Quebec Superior Court. As well, there are the costs of testing for
UFFI damages (walls must be dismantled) even in cases where no
harm is subsequently found.
What has been the government's reaction?
In a word, they have "stonewalled". On April 23, 1981, Health
Minister Monique Begin continued indefinitely a temporary ban on
UFFI begun in December of last year, but has said the government is
not prepared to compensate those who used the insulation. Officials
who granted subsidies for UFFI, who advertised and otherwise
promoted it, said Begiry, in justification of her stance, "...were the
victims, as much as the people were, of lack of knowledge of new
chemicals".
The difficulty with this response, of course, is that
government has taken upon itself the certification role for consumer
product safety, in this and in other areas as well. By advertising,
recommending, promoting, and even offering subsidies for UFFI,
Begin, the Health Ministry, the CMHC and other government
agencies responsible for this fiasco were acting as experts,
approving and thus in effect certifying the safety and other qualities
of UFFI. True, they did so despite an alleged National Research
Council warning that UFFI standards "were inadequate", and in the
face of evidence from other countries such as Sweden and the U.S.,
suggesting that this material was hazardous. But this attests only to
the irresponsible manner in which Canadian officials carried out
their self-assumed Cmandate. It does not place them in the category
of "innocent victims", as claimed by Begin. If there are any "innocent
victims", they are the people who had their ordinary caution as
purchasers removed -- by the government subsidy for UFFI.
Then, too, there were a stream of official but contradictory
excuses and suggestions for the alleviations of the problem. UFFI is
really of "no danger"; a "study of the subject will be undertaken,
perhaps, within the next two or three months"; the difficulties are
really due to "faulty and inferior installation", and not to the
chemical itself; the solution therefore resides in "sealing walls" and
"increasing ventilation to push the air outdoors". "Opening the
window", however, will probably sound to UFFI sufferers like urging
ancient Romans to "fiddle faster" in an attempt to save their city
from burning. It is also rather inconsistent to tell people to open up
their windows to air out a house -- when it was insultated in the
first place in order to save heating costs.
What has been the response from the opposition parties?
According to MPs Margaret Mitchell (NDP - Vancouver East),
Health Critic James McGrath (PC - St. John's East) and Consumer
Critic Geoffrey Scott (PC -Hamilton Wentworth), the government is
responsible for UFFI and should pay the costs of its removal. The
difficulty with this suggestion, however well-intentioned, is that
government, by its very nature, cannot pay for these costs, or indeed
for any other such costs. Rather, if called upon to do so, it will simply
shift the burden to the taxpayers. The Mitchell-McGrath-Scott
suggestion, then, translates into a demand that one group of
innocent people, taxpayers in general, subsidze another innocent
group, those whom have been victimized by the
govermental UFFI policy. If these MPs had really wanted those
responsible for UFFI to bear the costs of compensation, they would
have urged that those individuals who inaugurated and carried
through the program pay for it out of their own pockets.
Mitchell also called for CMHC to make available to the
stricken homeowners "information and advice" on how to handle
the UFFI problem. But this is like asking the fox to guard the chicken
coop, and must be rejected out of hand on that basis. For, as we have
seen, it was the very same CMHC which approved the UFFI program
in the first place.
Why, for goodness sake, did the government become
involved in UFFI subsidies?
Government acted in this way as part of its energy
self-sufficiency policy. Insulation cuts down on fuel bills, but the
private marketplace was deemed to be underinvesting in such
conservation initiatives.
The difficulty, here, is that if private insultion demand were
indeed underoptimal, it was due to yet another government policy -the "made-in-Canada" oil price which was artifically kept below
world (market) levels. Had Canadians been forced to bear the full
costs of their fuel requirements, they would have doubtless installed
insulation in their homes and undertaken other conservation
measures on a voluntary self-interested basis. Instead, economic
reality was kept hidden. The artifically low oil prices subsidized (at
taxpayer expense) overoptimal useage of home heating fuel, and
discouraged insulation and other conservation.
Here we have yet another instance of unwise government
policy ## 1 leading to predictable but inefficient market reactions,
and then unwise government policy #2 attempting to alleviate
conditions brought about by #1, but instead creating still further
problems. When will they ever learn?
Speaking of which, what can we learn from this sorry mess?
A good lesson in how not to conduct public policy could be
obtained by considering UFFI, federal responsiblity, compensation,
and errors made in this particular occurrence. On a more basic level,
one might enquire as to the relative merits of the public vs. private
sectors in certifying the quality (safety, reliability, durability, finess,
weight, measure, etc.) of all consumer products.
In the eyes of most people, this is clearly a government
responsiblity.
For does not the greedy capitalist have an incentive to sell the public
dangerous, unreliable, easily broken, low quality and short weight
merchandise? How then can this self-same private sector rise above
such temptations, and be entrusted with the even more important
task of certifying the quality of products? Won't manufacturers be
able to bribe and subvert any private certification companies?
Although such arguments have convinced many people, they
are too facile by a half. First of all, there are many private companies
and individuals long in existence who evaluate consumer products
for a fee and/or who place their "stamp of approval" on goods which
pass their own self-created "tests." Among the former are such
prestigious and well respected organizations as the Consumers
Association of Canada, Canadian Consumer magazine, Consumer
Union, Consumer Reports magazine, "Consumer Research" test
reports, various Auto Association magazines, Renters Associations
and other consumer associations, and independent testing
laboratories such as Dataquest and Buyers Laboratory. In the latter
category are such highly trusted and world-renowned private
certification agencies as the Good Housekeeping Seal of Approval
and the institution of Kosher foods. As well, brand names as Heinz,
Kellogg's, General Foods, Coca Cola and Campbells are trustworthy
indications of quality, and retailers and department stores such as
Eaton's stand behind each item sold.
These firms could not have remained in existence, nor have
been subject to bribes, inefficiency or just plain ignorance had they
not been providing valuable certification service. Where is
Vichyssiose Soup today? Can you imagine what would have
happened to CMHC, the Health Ministry, Monique Begin, were they
private corporations, or individuals whose
paychecks were dependent on voluntary consumer payments?
It is no accident moreover, that we expect better results in
product certification from private sources. In the market system,
such firms compete with each other. When they do a poor job, they
lose profits and disappear from the scene. Automatically. Suppose
you were trying to teach rats to run a maze. With one group of rats
you automatically reward success with food, and punish failure with
an electric shock. Call them the businessmen rats. In the other
group, success is not materially rewarded, nor failure punished. Call
these the bureaucrat rats. Is there any doubt as to which rats would
perform better, even if talents and abilities were randomly
distributed at first?
No one can rationally claim that business is not given to
error, greed, and subversion. The point, though, is that civil
servants, subject to the same human failings, do not have their
actions reined in by a market test of profit and loss, while
businessmen do.
The Financial Post
Opinion
March 28, 1981 19
Column by Walter Block
There is
evidence foreign
aid can often be
counterproductive
The prime minister's recent whirlwind globetrotting trip on behalf of a closer NorthSouth dialogue makes it a good time to review Canadian foreign aid policy.
At first blush, aid to underdeveloped countries seems noble, humanitarian, and
serendipitously, in our own national interest as well. After all, Canadian aid to the less
fortunate nations surely must save people from starvation, encourage the development
of primitive economies, increase our exports and enhance freedom by forestalling the
spread of communism.
There is much evidence, however, showing aid programs to be questionable means
toward these worthy ends. Further, there are indications that private trade and
investment, currently shackled and hampered by tariff and import barriers in the
Western industrial countries, may be more efficacious than intergovernmental
transfers.
Economic development
Food grants arc a major part of foreign aid, and Canada is the world leader here,
meeting about 30% of its bilateral commitments in this form. (Canada funnels 70% of
its total donations bilaterally; 30% is given through multilateral channels such as the
Organization for Economic Co-operation & Development.)
Foodstuffs are obviously basic, because the malnutrition which unfortunately prevails
in many less developed countries is one of the blocks to economic betterment. But
compelling humanitarian requirements in cases of actual famine aside, even this sort of
aid is fraught with danger: massive gifts can take the profit incentive out of local
agriculture; with fewer farmers and less land under cultivation, this can paradoxically
worsen, not improve, the long-term prospects of food production and hence safety
from future starvation.
Capital grants are likewise destructive to long-term productivity. Although the ancient
Egyptian pyramids were an extraordinary instance of capital accumulation, they
resulted in no economic gain in the basic sense of contributing to the well-being of the
great masses of people.
Even more wasteful are the modem equivalents of such monument-building made
possible by foreign aid: the steel mills in Egypt, the modem chemical plants in India,
the tractors given to aboriginal peoples who cannot operate them, the automobile
assembly plants scattered widely throughout the Third World (which are the result of
protective tariffs on automobile imports as well).
These are wasteful because the products fabricated in this highly technological manner
actually cost the underdeveloped countries more to manufacture themselves than they
could have paid by importing the finished product from more developed countries.
Many people deduce from the fact that the rich countries have much capital and the
poor ones little that what is required is vast capital infusions. But this wet-sidewalkscause-rain reasoning points to almost the exact opposite of what is really needed.
Capital, in and of itself, does not create wealth. It is rather the result of a process of
economic development that also includes, as complementary factors, such things as
the willingness to work, the skill and education of the labor force, and relatively free
and private markets protected by a stable code of laws.
One indication of the importance of these other phenomena is the fact that a large
proportion of the very limited capital generated in the poor countries is actually
invested in the more advanced nations, where private property rights are far more
secure.
Then there is foreign aid in the form of technological and other education. Canada
ranks third among the donor nations in this category, behind only France and New
Zealand, meeting just over 15% of its bilateral commitments to the underdeveloped
world in this form. But the difficulty is that in the absence
•of such facilities as fully equipped laboratories, libraries, computer centres, and
without the mutual support of thousands of other similarly educated scientists and
technologists, such aid cannot be efficiently utilized. And the proof can be seen in the
immigration patterns of the educated classes in the Third World a "reverse brain
drain," toward the more advanced countries.
Foreign aid of whatever variety — food, capital, technology or outright. cash grants —
moreover sets up a welfare-like dependency status on the recipient country. In much
the same manner as domestic welfare programs sap the economic ambition, vitality
and progress of their local clients, so do programs on international levels have similar
effects.
Canadian self-interest
If foreign aid is unlikely to help the recipient, can it at least help the donor? (Note: the
focus here is on economic, not military aid, which must be justified on entirely
different grounds.)
Pragmatic considerations would seem to support this view. For one thing, the
Canadian International Development Agency requires that about 80% of its bilateral
disbursements be spent on Canadian goods and services.
But behind the bookkeeping legerdemain, this amounts only to a free gift of goods and
services from Canada to other countries, with no offsetting returns. No one is foolish
enough to
•suppose that West German reparations to Israel actually benefited the economic selfinterest of West Germany — even though much of it took the form of exporting
domestic items. Nor does the defendant in a civil case rejoice in his
new-found wealth when he is forced by a court decision to compensate the plaintiff—
even in the form of goods Ie himself produces.
Will Canadian aid to other countries at least make it more likely that they will choose
the path of democracy and market institutions rather than fall into the communist and
collectivist ambit?
Unfortunately, not only will Western foreign aid not attain this end — it is likely to
undermine it, and instead to encourage socialism and totalitarianism :in the Third
World.
First of all, Canadian aid is traditionally in the form of govcmmcnt-to-gov-emment
grants. This strengthens the role of the public vs the private sector in the
underdeveloped countries. But political freedom is a delicate and precious flower, it
cannot live where the bulk of economic activity is carried on in the public sector.
Second, Canadian foreign aid has been given to countries that have made explicitly
socialist avowals in their centralized economic plans — and our largesse has in no
small degree shielded them from the repercussions of such policies and allowed them
to continue unchecked down this path. For example, we find in the five-year plan of
India, a country which continues to receive strong Canadian support, the view that
"planning should take place with a view to the establishment of a socialistic pattern of
society where the principal means of production are under social ownership or
control."
The alternative
Of far greater benefit to the nations of both North and South is a policy of free trade
and unregulated international flows of capital. This will greatly benefit the Canadian
standard of living, as we can purchase many goods such as clothing from the* less
developed world for far less than it costs to make them ourselves. But of far greater
importance, such policies will truly lead to Third-World economic development —
and to tighter integration with our own economy.
How, then, to account for the hypocrisy of a nation whose leaders loudly proclaim
their interest in economic development for the poor countries and yet remain steadfast
in their determination to maintain protective tariffs, quotas and other impediments to
economic intercourse with the Third World?
walter BLOCKis senior economist at the Eraser Institute, Vancouver.
FREE ENTERPRISE ZONES IN CHINA
An Editorial Commentary Prepared by Walter Block
You'll never believe the latest from Red China - Are you ready
for this?
Right. now,, there are four free enterprise zones deep within
the bowels of this
gigantic Communist country. Here, capitalism, not communism, is
practiced.
Enterprise is not stifled, the economic rules are few, taxes are low
and private
investment is encouraged.
The leader of mainland China, Deng Xiaoping, recently visited
one of these
four Special Economic Zones as they are termed, the one called
Shenzhen, which is just north of now embattled Hong Kong. As a
result of his approving visit, the communist government has
announced that 14 new Free Enterprise Zones would soon be
established.
But all is not sweetness and light in China. Laissez-faire is not
the order of
the day there — not quite yet. The forces of darkness are still alive
and kicking, thank you kindly. According to the People's Daily, there
are traditionalists who feel that "it is unavoidable that some of the
filth and mire of capitalism will be brought in" by such adventurism.
Especially fearful, to these old time Communists, is the spectre of
allowing foreigners to open factories on holy Chinese soil, employ
Chinese workers and, gulp, export the profits.
Nevertheless, in addition to comrade Deng Xiaoping, Premier
Zhao Ziyang
and party secretary Hu Yaobang are behind the new effort to
expand free enterprise zones. It appears they were bowled over by
the Shenzhen experience. There,_in a poor fishing village, the people
had been permitted to sell their catch on the open market, at prices
far higher than those prevailing in state-run shops.
-2
As a result their standard of living catapulted up into the 20th
century, and their huts were crammed full of new electronic
gadgets.
This is but the tip of the iceberg for free market zones,
according to a study by the same name recently published by the
Fraser Institute. Written by Simon
Fraser University economics professor Herbert Grubel, the book
makes the case for economic freedom everywhere. In China, yes. In
the third world, yes. And even in
relatively advanced nations such as Canada, which are always in
danger of slipping back into the filth and mire of Marxist Socialism,
unless new infusions of free
market competitive principles are continually brought into play. For
further information on this fascinating study: Free Market Zones by
Herbert Grubel, you
can write to the Fraser Institute.
- 30 A FREE MARKET IN KIDNEYS?
by: Walter Block, The Fraser Institute
According to recent reports, the black market value of a
kidney which can be transplanted is some $13,000 -- which
translates to roughly seven times its weight in gold.
Such an occurrence may occasion all sorts of references to
King Midas -- who was supposed to have been turned into a statue
of sold gold, but behind this rather dramatic way of
characterizing the value of human organs lies in a story of
untold and tragic human suffering.
There are hundreds and even thousands of Canadians whose
lives could be vastly improved could they but have the use of a
healthy kidney. Paradoxically, there are other thousands of
people who die each year, taking perfectly healthy kidneys to the
grave with them, who have no financial incentive at all to
bequeath these organs to those in need. Why, it may well be
asked, cannot potential donors presently be given a pecuniary
reward for doing the right thing? That is, what precludes a
businessman from purchasing the future rights to a kidney from
potential donors, and then selling these items to those suffering
from kidney disease?
The problem is, it is illegal to harness marketplace
incentives in order to encourage kidney donors. Anyone who set
up a business of this sort would be summarily imprisoned.
Instead, our society must resort to all sort of inefficient
stratagems toward this end. Famous personages have exhorted us,
in the event that we suffer untimely death, to make a posthumous
gift of these organs. Medical schools coach their students on
the best techniques for approaching next-of-kin; the difficulty
is that they must ask permission at the precise time when they
are least likely to be given it -- upon the sudden demise of a
loved one.
As a result, all of this has been to little avail. While
potential recipients languish on painful kidney dialysis machines
waiting ghoulishly for a traffic fatality which may spell life for them, the
public has refused to sign cards in sufficient
numbers giving permission for automatic posthumous donor status.
Things have even come to such a pass that there are grotesque and
fascistic plans now being bruited about which would allow the
government to seize the kidneys of accident victims unless they
have signed cards denying such permission.
The free enterprise system, were it allowed to be operated
in this instance, might well be a God-send to the unfortunates
who suffer from diseased kidneys. A legalized marketplace could
encourage thousands of donors. Would you sign a card donating
your kidney after death for 13,000 big ones, right now, in cold
hard cash? There are very few people who would turn up their
noses at such an offer. And if sufficient supplies were still
not forthcoming at this level, prices would rise even further
until all demand was satisfied. Given free enterprise
incentives, pardon the pun, we would be up to our armpits in
kidneys.
This is the tried and true process we rely on to bring us
all the other necessities of life: food, clothing and shelter.
After all, we do not depend for the provision of these goods and
services on voluntary donations. We know this to be a relatively
unreliable system -- notwithstanding the fact that it is flogged
by numerous opinion leaders in the case of organ transplants.
There is no doubt whatsoever that those presently
responsible for preventing a free market in kidneys take these
actions with the noblest of motives. To them, legalizing the
purchase and sale of human organs would be the ultimate in
degradation. Far better, from their viewpoint, that people
donate their bodily parts for free so that thousands of kidney
disease sufferers may live normal lives. However, no matter how
benevolent the intentions of the prohibitionists, it cannot be
denied that the effect of their ill-conceived actions is to
render it less likely that those in need shall be served.
It is time, it is long past time, for our society to put
aside its archaic and prejudicial opposition to the marketplace,
so that we can relieve the suffering, and in many cases, lift the death sentence
we have inadvertently placed on as hopeless and
hapless a group of citizens as ever existed.
30
October 28, 1986
The Free Trade Agreement and Job Creation
By Walter Block
Nowhere in the debate over the Free Trade Agreement
has more economic confusion been allowed to run rampant than with
regard to the question of job creation.
According to the Economic Council of Canada, 250,000 net
new jobs - that is, the total number created minus the total
number lost - are likely to come into being as a result of the
FTA. Brian Mulroney, perhaps the nation's number one
cheerleader for the deal, hasten quoting this figure at the
drop of a hat. Other pro free trade forces have not been
slow on the uptake to parrot these figures.
The opposition has been claiming that net job creation will
be lower or even negative - more will be lost than
generated -- or contenting themselves with the claim that
such employment opportunities which arise will be of the
hamburger flipping variety.
The truth of the matter is that no permanent job creation
whatsoever will occur as a result of free trade. Nor is this a
/controversial matter within the profession of economics.
The puzzle is that a group of reputable economists, such as
presumably form the staff of the Economic Council of
Canada, could have committed such a basic and elementary
fallacy.
Not that this is all to the bad: anything that promotes free
trade will improve the lot of the average Canadian, and
sometimes even falsehoods, as in this case, can prove
beneficial. But there is a higher calling than mere economic
prosperity for Canadians, and that is the pursuit of the truth,
where ever it leads us. It is in view of this latter, more
important goal that it behooves us to pierce the veil of
ignorance surrounding the Council's claim, and to set the
record straight.
Why is it that the FTA will not create jobs, not a single one of them?
The reason for this is simple. Free trade has nothing at all to do with
employment. Its only effect will be on the kind of jobs available, not
with their number.
In order to see this quite clearly, we have to go back to fundamentals;
we must reflect on what jobs are, why people want them, what are their
economic purposes. Please excuse this voyage down memory lane, back
to the introductory economics studied a decade or more ago, but with a
fallacy as basic as this one that is our only option.
A job is defined as something we would not do for its own sake. Those
of us who earn a salary doing something we would be happy to do
without compensation are really engaging in "play." The rest of us
working slobs do so but because of the wages we are given in return.
Why work at all, even for pay? We do so because we live in an
environment of scarcity; that is, there are goods and services we cannot
have unless we create them, and working is the way in which we
produce things. If all sorts of manna continually rained down on us
(food, clothing, shelter, VCRs, medical cures, sportscars), and no one
wanted anything that was not in this way given to us, then no one would
work. We would all play. Some of the "play" might be interesting and
important-research, exploration, the arts - but it would still not be work
in the technical economic sense.
Why do employers hire people to work for them? Because of the
productivity given to them by their employees. If a worker could not add
to the value of the product created by the firm, he would be
unemployable. And the wage he is paid in the market tends to reflect the
value of his contribution.
Given the importance of work in the real world, why do we have
unemployment?
There are all sorts of reasons, but most of them amount to government
insisting that workers be paid more than their productivity levels. On the
micro level, enactments such as minimum wages, fair labour standards,
union legislation in effect price potential suppliers of labour out of the
market. As well, unemployment insurance and generous welfare
payments create joblessness by subsidizing it. On the macro level,
government interference with the money supply, interest rates, stock
markets and business decisions can render the economy unstable, and
lead to recessions and depressions. Joblessness, however, can also
occur in the free unfettered market. Frictional unemployment ensues
when people are searching for situations; they are in between jobs, or
are looking for a first job, or are rejecting present offers in the hope of
better ones in future.
How many jobs are there in an economy at any given time? As many as
there are people willing to work. That is, as many as there are people
who want more material goods than they have, and value these items
more than the leisure they must forego when they become employed.
New jobs are not something vouchsafed by governments upon a grateful
citizenry, although ofttimes governments like to take credit for this
process ("We created 4.2 million jobs over the last decade.") The fact
that most new jobs are created by small businesses is irrelevant; if there
were no small businesses, the jobs would emerge in large businesses or
in self employment. Ra,ther, new employment slots occur automatically
in the market, whenever people want them.
When millions of new immigrants came to the U.S. at the turn of the
century, no one had to create the millions of new jobs for them. They
were created because these newcomers wanted to purchase goods and
services, and were willing to trade their labour power in order to do so.
And the same applies to the demobilization of millions of soldiers at the
end of the war, and to the rise in labour force participation of women in
the past few decades, or any other sudden onset of a need for more jobs.
These people, too, achieved employment status, not through
government, but through the magic of the marketplace.
If jobs are limited only be people's desire to work, how then can a free
trade agreement increase employment? The answer, it should now be
clear, is that an end to tariffs and other such barriers cannot raise the
number of a nation's jobs. The only thing that can increase employment
slots is an additional number of people seeking work.
All free trade can do is multiply the efficiency with which individuals
labour. That is, instead of producing rice ourselves, directly, we can
trade for rice produced in Texas or Louisiana with, say, maple syrup.
Since Canadians are poor rice producers, but wise in the ways of all
things having to do with the maple tree, we can, paradoxically, have
more rice for the same amount of effort expended not by producing it
ourselves, but by first gathering the syrup, and then trading it for rice. In
similar manner, the carpenter can get more piano lessons, and the piano
teacher more kitchen cabinets, not by doing the work of the other, but by
sticking to one's own specialty, and then exchanging for the expertise of
the other.
Even were it possible, it is not advisable to raise the number of jobs that
need to be done. We could, for example, increase employment
opportunities merely by prohibiting railroads, and demanding that the
cargo they used to haul be transported, instead, by people carrying 50
pound sacks on their backs. This could create work for literally trillions
of people! But the important point to realize here is that we would not
thereby necessarily expand the number of jobs available. Remember,
people are already working to their desired extent (except for
governmentally created unemployment - and there is no reason to expect
that this rate will change as we embrace free trade); if we abolish
railroads, the same number of people will still be working. Only now
more of them, many, many more of them, will be needed to transport
goods; consequently, fewer will be available to do other more important
work. Society would suffer, poverty would increase, but joblessness
need not change by one iota.
The Gap between Science and Public Policy by Walter Block
Our scientists and engineers are able to create automobiles capable of
safely doing 150 miles per hour, at least on the straightaways. In the
event, however, these cars do 10 m.p.h. in bumper to bumper rush hour
traffic, courtesy of a public policy mired in the horse and buggy days.
Our doctors are now capable of transplanting organs from one person to
another. This is an art which would have been inconceivable just a few
short years ago. Indeed, even today it still seems magical. But do not
rejoice too quickly. Thanks to legislative ineptitude, there is a shortage
of available kidneys, eyes, livers, hearts and lungs.
Because of technology, we now have airplanes at our disposal that can
cross the continent, a distance of some 3500 miles, in a matter of six
hours or so. And yet all too often, before we even start out, there is a
delay of several hours; and when we arrive, we are all too likely to find
ourselves stacked up in a parade of airplanes waiting to touch down.
Because of breakthroughs in building construction, it is now possible to
create sufficient low cost housing for all Canadians. And yet in Ontario,
presently the most prosperous of all the provinces, there are long queues
of people futilely searching for rental suites.
Why is it that physical scientists are able to supply society with such
miraculous accomplishments on a seemingly endless basis, while our
public policy, the domain of economists, is in such disarray that we are
often precluded from the full enjoyment of what might otherwise be
available to us?
The short and simple answer to this question is that the findings of
economics,
are all too often completely ignored in public policy making.
Take the four problems mentioned at the outset. They are all cases
where public policy has failed to come to grips with the concept of
supply and demand. According to this elementary bit of economic
analysis, if a price minimum or price floor is placed on a good or
service, there will be an excessive demand; more will be desired by the
public than can be offered.
With rent control, landlords are limited in the rents they may charge.
Hence, new investors avoid this market like the plague. Tenants not only
find it difficult to obtain housing, but paradoxically must even
sometimes pay more for it than if incentives to build rental suites were
not cut off at the knees.
Present law prohibits the sale of human organs for transplant purposes.
This, effectively, sets a zero price on such transactions. As a result,
potential donors have less incentive than they would otherwise have to
sign pledge cards, and many recipients are consigned to inferior medical
techniques (e.g., kidney dialysis machines) and even to death, the
ultimate degradation.
Road and airport congestion are examples of the peak load problem. The
demand for such services rises at certain times of
the day. But unless there is a flexible pricing system in place which
reflects the demand alterations, excessive demand, or crowding, are the
inevitable result.
. So the economic answers to all these problems are obvious and easy to
operationalize: repeal rent control to end the housing shortage; allow
commercial transactions in human organs, and alleviate the suffering of
recipients who must now do without; and inaugurate a peak load pricing
system to cure highway and airport congestion.
"Easier said than done," is one possible response to these modest
proposals. "Forget it," is the more likely assessment of those in charge
of public policy planning. Which leads us to ask why the advice of
economists is often ignored, while that of physical scientists is almost
always implemented.
There appear to be two main reasons. For one thing, self interest.
Powerful people have much at stake with regard to economic
arrangements; very rarely do special interests have anything to gain or
lose in a dispute over theories in physics or chemistry. For another, very
few non economists have much humility when it comes to questions of
economics. People will often say, "I'm not an economist, but..." and then
proceed to rhapsodize about their theories of economics. But no one
says "I'm not a physicist, but..." and then articulates his views on this
arcane science.
The importance of German
private property
- 30
1.
3
Dr. Block is an economist with the F raser Insfifllt~_
uring and after the Second World War thousands of Germans fled their homes. They
migrated to the four comers of the earth: Australia, South America, Western Europe, the
U.S. In our own country, they formed the backbone of what is now
the German-Canadian community, one known for its work ethic, its strong family orientation, its
stick-to-itiveness and its intellectual brilliance.
Now that East Germany has united with its western counterpart. its government has decided,
quite appropriately, to take on the trappings of capitalism. Foremost amongst these is the institution
of private property rights. In this regard it has embarked on a program of returning land. farms,
homes and factories to their rightful owners. a policy for which it should be heartily congratulated.
And it is one that should be emulated by all of the countries that formerly suffered behind the Iron
Curtain.
This visionary and courageous program, however, has run into several difficulties. First of all,
the government has decided to exempt from the plan all property seized between May 8, 1945, and
October 6, 1949, prior to the founding of the late-but-not-lamented German Democratic Republic.
This is intolerable.
Just because people emigrated does not mean it is legitimate to seize their property.
There is simply no legitimate statute of limitations on justice. As long as the property owners have
proof of titJe-photographs, letters, records. etc.-it should not matter whether their homes and farms
were expropriated before. during or after the aegis of any particular government.
There is a second problem as well: the irresolution of the government. Stated Petra Speyrer,
vice-consul for Germany in Vancouver: "It will take years and years. I am sure. to resolve (the land
ownership issue). First of all, you have to find out whether to give property back or compensate
with money. If money, then how much? How do you find out the value of the land? I am sure there
will be a lot of lawsuits because people will wan! their land back and not JUS! money. It is very
complicated:'
With all due respect, the issue is not complicated at all. On the contrary, it is exceedingly simple.
Of course it is the land and physical property that should be returned-nothing else. If the rightful
owners want money instead, they are free to sell their holdings for whatever the market dictates.
"How much" should be no business at all of a state run under the principles of free enterprise. (It is
only in the case of property destruction-which does not in any case apply to land, certainly not to
its site value-that such thorny problems could conceivably arise. But this is a small part of the
privatization effort.)
There is another reason besides pure justice for returning property to its rightful owners:
pragmatism. In most advanced economies, labour accounts for some 75C;C of the Gross Domestic
Product. The rest-rent, interest, profit, etc.-is created by the other factors of production. The entire
land of a nation, according to most responsible estimates, is responsible for less than 10%. The
property in question in what was formerly East Germany is a tiny fraction of even this amount. So
in returning it all to the foreign nationals of German extraction who are its rightful owners,
Germans will lose very little indeed.
But they will gain immeasurably. For what these economies lack at present more than anything
else in the world is the entrepreneurial spirit. And there could be no better demonstration of the fact
that not only is entrepreneurship welcomed in these countries. it is treasured, than to give back the
land-all of it, without any strings attached-to irs rightful owners.
The countries of Eastern Europe are crying out for investment. What do you think will occur if
they make a clean break with the past and return this stolen property? The likelihood is that the
new owners will return for at least part of the year--bringing with them millions of dollars of
investment funds, and, far more important, their skills and talents. Down that path leads Germany
and Eastern Europe to industrial peace, material prosperity and a true market economy.
If these countries persist in their stinginess in the return of stolen property, they may keep for
themselves a few additional thousands of acres of land, but these holdings will never become very
valuable, because without a free and vibrant economy none of the factors of production amount to
very much.
D
BRITISH COLUMBIA REPORT, MARCH 11, 1991 i3
Private German Property
by Walter Block, Senior Research Fellow, The Fraser Institute, Vancouver, B.c.
Thousands of Germans fled their property during and after World War II, from what
was then East Germany. They migrated to all four corners of the earth: to Australia, to
South America, to Western Europe, to the U.S. In our own country, they formed the
backbone of what is now the German-Canadian community, one known for its work ethic,
its strong family orientation, its stick-to-itiveness and its intellectual brilliance.
N ow that East Germany is on its way to a life of freedom, forming once again a united
country with its western counterpart, its government has decided, quite appropriately, to
take on the trappings of capitalism. Foremost amongst these is of course the institution of
private property rights. In this regard they have embarked upon a program of returning
land, farms, homes and factories to their rightful owners, a policy for which they should be
heartily congratulated. It is one which should be emulated by all of the countries which
formerly suffered behind the Iron Curtain.
This visionary and courageous program, however, has run into several difficulties.
First of all, the government has decided to exempt from this plan all property seized
between May 8, 1945 and October 6, 1949 prior to the founding of the late but not
lamented and so called German Democratic Republic.
But this is intolerable. Just because people emigrated, does not mean it is legitimate to
seize their property -- and this applies regardless of the official auspices under which such
acts were undertaken. There is simply no legitimate statute of limitations on justice. As
long as the property owners have proof of title -- pictures, letters, records, etc. -- it should
not matter whether their homes and farms were expropriated before, during or after the
aegis of any particular government.
There is a second problem as well: the irresolution of the government. Stated Petra
Speyrer, vice-consul for Germany in Vancouver: "It will take years and years, I am sure, to
resolve (the land ownership issue). First of all, you have to find out whether to give
property back or compensate with money. If money, then how much? How do you find out
the value of the land? I am sure there will be a lot of lawsuits because people will want
their land back and not just money. It is very complicated."
With all due respect, the issue is not complicated at all. On the contrary, it is
exceedingly simple. Of course it is the land and physical property which should be returned
-- and not anything else. If the rightful owners want money instead, they are free to sell
their holdings for whatever the market dictates. "How much?" should
be no business at all of a state run under the principles of free enterprise. (It is only in the
case of property destruction -- which does not in any case apply to land, certainly not to its
site value -- that such thorny problems could conceivably arise. But this is a small part of
the privatization effort).
There is another reason besides pure justice for returning property to its rightful
owners -- all of it, not merely that seized at any particular epoch: pragmatism. It most
advanced economics, labour accounts for over 75% of the G.D.P. The rest-rent, interest,
profit, etc. -- are created by the other factors of production. The entire land of a nation,
according to most responsible estimates, is responsible for less than 10% of G.D.P. The
property in question in what was formerly East Germany accounts for a tiny fraction of
even this amount. So in returning it all to the foreign nationals of German extraction who
are its rightful owners, Germany lose very little indeed.
But they will gain immeasurably. For what these economies lack at present more than
anything else in the world is the entrepreneurial spirit. And there could be not better
demonstration of the fact that not only is entrepreneurship welcomed in these countries, it
is treasured, than to give back the land, all of it, without any strings attached, to its rightful
owners.
The countries of eastern Europe are crying out for investment. What do you think will
occur if they make a clean breast of the past and return this stolen property? The likelihood
is that its owners will come back to stay for at least part of the year -- bringing with them
millions of dollars of investment funds, and, far more important, their entrepreneurial skills
and talents. Down that path leads Germany and Eastern Europe to industrial peace, material
prosperity and a true market economy.
If these countries persist in their miggardliness in the return of stolen property, they
may keep for themselves a few additional thousands of acres of land, but these holdings
will never become very valuable, because without a free and vibrant economy, none of its
factors of production amount to very much.
So the choice is clear. The peoples of Eastern Europe have nothing to fear. from the
market system and everything to gain from it. But free markets can only be predicated on
just titles to property. Return the property. All of it. And as soon as possible.
- 30-
Private German Property
by Walter Block, Senior Research Fellow, The Fraser Institute, Vancouver, B.c.
Thousands of Germans fled their property during and after World War II, from what
was then East Germany. They migrated to all four corners of the earth: to Australia, to
South America, to Western Europe, to the U.S. In our own country, they formed the
backbone of what is now the German-Canadian community, one known for its work ethic,
its strong family orientation, its stick-to-itiveness and its intellectual brilliance.
N ow that East Germany is on its way to a life of freedom, forming once again a united
country with its western counterpart, its government has decided, quite appropriately, to
take on the trappings of capitalism. Foremost amongst these is of course the institution of
private property rights. In this regard they have embarked upon a program of returning land,
farms, homes and factories to their rightful owners, a policy for which they should be
heartily congratulated. It is one which should be emulated by all of the countries which
formerly suffered behind the Iron Curtain.
This visionary and courageous program, however, has run into several difficulties.
First of all, the government has decided to exempt from this plan all property seized
between May 8, 1945 and October 6, 1949 prior to the founding of the late but not lamented
and so called German Democratic Republic.
But this is intolerable. Just because people emigrated, does not mean it is a legitimate
act to seize their property -- and this applies regardless of the official auspices under which
such acts were undertaken. There is simply no legitimate statute of limitations on justice. As
long as the property owners have proof of title
-- pictures, letters, records, etc
it should not matter whether their homes and
farms were expropriated before, during or after the aegis of any particular
government.
There is a second problem as well: the irresolution of the government. Stated Petra
Speyrer, vice-consul for Germany in Vancouver: "It will take years and years, I am sure, to
resolve (the land ownership issue). First of all, you have to find out whether to give property
back or compensate with money. If money, then how much? How do you find out the value
of the land? I am sure there will be a lot of lawsuits because people will want their land
back and not just money. It is very complicated."
With all due respect, the issue is not complicated at all. On the contrary, it is
exceedingly simple. Of course it is the land and physical property which should be returned
and not anything else. If the rightful owners want money instead, they are free to sell their
holdings for whatever the market dictates. "How much?" should be no business at all of a
state run under the principles of free enterprise. (It is only in the case of property destruction
-- which does not in any case apply to land, certainly not to its site value -- that thorny
problems arise. But this is a small part of the privatization efforts).
There is another reason besides pure justice for returning property to its rightful owners
-- all of it, not merely that seized at any particular epoch: pragmatism. It most advanced
economics, labour accounts for over 75% of the G.D.P. The rest-rent, interest, profit, etc. -are created by the other factors of production. The entire land of a nation, according to most
responsible estimates, is responsible for less than 10% of G.D.P. The property in question in
what was formerly East Germany accounts for a tiny fraction of even this amount. So in
returning it all to the foreign nationals of German extraction who are its rightful owners,
Germany lose very little indeed.
But they will gain immeasurably. For what these economies lack at present more than
anything else in the world is the entrepreneurial spirit. And there could be not better
demonstration of the fact that not only is entrepreneurship welcomed in these countries, it is
treasured, than to give back the land, all of it, without any strings
attached, to its rightful owners.
The countries of eastern Europe are crying out for investment. What do you think will
occur if they make a clean breast of the past and return this stolen property? The likelihood
is that its owners will come back to stay for at least part of the year -- bringing with them
millions of dollars of investment funds, and, far more important, their entrepreneurial skills
and talents. Down that path leads Germany and Eastern Europe to industrial peace, material
prosperity and a true market economy.
If these countries persist in their miggardliness in the return of stolen property, they
may keep for themselves a few additional thousands of acres of land, but these holdings will
never become very valuable, because without a free and vibrant economy, none of its
factors of production amount to very much.
So the choice is clear. The peoples of Eastern Europe have nothing to fear from the
market system and everything to gain from it. But free markets can only be predicated on
just titles to property.
GOVERNMENT RESTRAINT
an article for Financial Post
by Walter Block, Senior Economist, The Fraser Institute
Government restraint has a bad press. The highly publicized B.
- 30C. restraint program of Bill Bennett and his Social Credit government
has been heavily criticized. In the land to the South of us, Ronald
Reagan has been stymied by farmers, "welfare-rights" groups,
businessmen (of the "corporatewelfare-bum" variety) and other
organized pressure groups in his efforts to down-size government.
And in Ottawa, our federal government seems unwilling to engage in
any serious government cut-backs at all, despite a swollen and
pendulous budget deficit. This is no doubt due, at least in part, to a
healthy respect for the special interest groups who depend on
government largesse.
Given these occurrences, it is incumbent upon us to review the
case for a smaller, tighter and leaner public sector. Why, then, should
we prefer that as much economic activity as possible be assigned to
the market, and as little as possible to government?

Resource allocation. When consumers want more of a product,
they buy
it; this raises profits, and encourages entreprenuers to shift
resources away from items in lesser demand, and toward
those more urgently needed. Similarly, losses induce
businesses to contract the manufacture of goods no longer
sought by customers. This is why the transition from the horse
and buggy to the automobile was achieved so easily. Had there
been large scale government ready to bail out the losers ("in
order to save jobs", to "promote equity", etc.) resources could
never have been allocated so smoothly.

Incentives. When you own it, you take care of it; when you
don't, you "let George do it." In the Soviet Union, 97% of the
arable land is owned by government in the form of collective
farms; it produces 75% of the crops. In contrast, 3% of
agricultural land is under the private control of individuals.
These backyard plots receive care and attention -- since the
owners benefit directly -- and on this land are grown 25% of
Soviet farm staples.

Efficiency. The usual rule of thumb is two or three to one.
When governments contract out to the private sector -whether for fire protection, or sanitation services, or health
care -- the typical statistical finding is that the job can be
completed at a fraction of the cost.

Risk. When a private firm blunders, it does so with its own
money, and on a relatively small scale. When government errs,
it does so with our money, and in huge proportions. Moreover,
these mistakes (e.g., Mirabel, De Haviland, National Energy
Program) can be repeated again and again, since the
bureaucrats and politicians responsible cannot be forced into
bankruptcy. Why put our money into one basket? The fewer
the government enterprises, the less risk for the economy.

Consumer Sovereignty. When government runs the economy,
we the people can control them through the ballot box. But
this occurs only every four or five years, and is very costly. As
well, we must vote for a package deal, which includes foreign
policy, unemployment, defence, mail delivery, inflation,
welfare programs, tariffs, etc., etc. In contrast, when most
economic activity is organized on market principles, we can
vote with our dollars every day. The price system gives vital
information, and is cheap to run. Moreover, we can focus our
vote, registering our satisfaction not with the entire society,
nor even with whole industries. We can focus on individual
enterprises -- which makes them very responsive to our
desires indeed.
To be sure, there is a major scope for government even in the
classical liberal philosophy. Courts, police, armies, prisons, roads and
highways, setting
a floor under incomes, are some of the dozens of tasks advocated by
those with a limited - government viewpoint. But when government
exceeds its proper, and vitally important mandate, two tragedies
occur. One, as we have seen, it
does a poor job, wasting precious resources. And two, it leaves
undone those tasks to which it is uniquely suited. We have crime in
the streets, while government spends its energies regulating the
minutia of agriculture, with dozens of marketing boards.
How far in excess of its limited mandate has the Canadian
government strayed? In a landmark Fraser Institute publication
Probing Leviathan: An Investigation of Government in the Economy,
the sad story is told. Rolf Mirus of the University of Alberta, William
Stanbury of UBC, John Howard of MacMillan Bloedel and Herbert
Grubel of Simon Fraser measure various aspects of the Canadian
Leviathan, and the results are truly gargantuan. Some 45% of GNP is
absorbed by government, and at least partially as a result, the black
market economy may comprise as much as 10% of GNP. There are
over 600 Crown Corporations, but they are still growing. After an
exhaustive search, the authors conclude that "Nobody knows
precisely how many there are". Things have come to the point where
Richard G. Lipsey of Queens University, entitles his contribution to
the book "Can the Market Economy Survive?"
It is time,it is long past time, to engage in a serious policy of
government restraint, until the public sector is whittled down to
more manageable proportions.
THE GROSVENOR
Editorial Commentary Prepared by
Walter Block for C30R Radio
Radio Station C30R has made Its home in the basement of the
Grosvenor Hotel .for 52 years, but now this grande dame of
Vancouver hostelries is scheduled for the wrecker's ball.
The upper floors have been closed off, the furnishings have been
sold, and all is in readiness for the demolition team.
The other day as I approached the front door of the hotel in order to
do my regular broadcast for C30R, I was met by an elderly lady.
With tears in her eyes, she said "How could they do this? How
could they knock down such an elegant building, filled with
memories of a bygone era?"
Many people empathize with these feelings. It is sad that yet
another bit of Vancouver's history will vanish in a cloud of dust and
rubble.
But such is progress. If we are to grow and expand, to succeed and
prosper, to take our places as one of the foremost cities in the world,
build we must. Uneconomic structures, which occupy expensive
downtown real estate, must be allowed to make way for even more
valuable buildings. It is only in this and other similar ways thai our
economic prospects may be enlarged, our standards of living
improved, and the scourge of poverty wrestled to the ground.
But there is a small but highly organized and influential group of
people who are trying to force their views on aesthetics down the
throats of the rest of us— whether we like it or not.
I refer to those vociferous busy bodies who try to impose historical
landmark status on old and decaying buildings in the central city.
These people are usually highly educated, sophisticated and
cultured. They want to indulge their own upper class tastes, and
protect the older buildings that people such as they particularly
enjoy. But this is at the expense of the tens of thousands of people
who might benefit from the jobs and homes that could be created if
modern office towers or large apartment blocks were erected on
those sites instead.
If these people want to save the buildings, well and good. Let them
buy these heritage structures themselves—like they do in the case of
their antiques and vintage cars. But it is entirely unfair to force other
people, many of them poorer, to pay for this particular enjoyment.
THE FRASER INSTITUTE
626 Bute Street, Vancouver, B.C. Canada V6E 3M1   
(604)688-0221
HARLEQUIN
by Walter Block
Harlequin Enterprises Ltd. is the major publisher of romance
fiction. In recent
years, some of their best selling titles have included Castles of Sand,
Madrona
Island, and Call Back Yesterday.
But now, the Harlequin company is in trouble. It has just laid
off 35 of its
Canadian employees, in an attempt to stem a plunge in profit levels.
Competition in the romance fiction industry, it would appear,
is fierce.
While at one time Harlequin was the undisputed leader in the field,
and even
considered a monopolist by some, it must now compete with four or
five large scale
North American companies, which have lately entered the field.
Although prosaic by business standards, this is a typical
example of the
workings of the free enterprise system. Its trailblazing efforts in
romance fiction gained Harlequin huge profits. But these profits
served as a magnet, drawing imitators into this lucrative field. As a
result, the second quarter profits for Torstar, the owner of Harlequin,
have fallen from $17.8 million last year to $5.2 million this year -- this
is a decline of $12.6 million.
Isn't it marvelous that Harlequin is a private enterprise, and
not a recipient
of Canada Council grants? For as a marketplace entity, consumers can
vote with their dollars against Harlequin, and for its competitors, as
they have done. In this way, the consumer is in control, and Harlequin
has to mend its ways and make its heroines a little more romantic, or
whatever it takes for success in this literary genre, otherwise it will
face automatic bankruptcy.
2
But if Harlequin were a Crown Corporation, or a recipient of
Canada Council grants (Don't laugh; our government gives billions of
dollars toward programs which satisfy consumers far less than does
Harlequin) this would not apply. For then, the consumers could not
directly vote against Harlequin in any meaningful way. There would
be no way to register consumer dissatisfaction. Rather, in this case, a
band of bureaucrats would protect Harlequin from consumer wrath.
True, citizens could use the political vote against a
government which did this. But they would have to wait until the next
election, which might not come for years. In any case, they could not
fine tune their vote to focus on Harlequin. Rather, they would have to
vote for a package deal, where book subsidies play a very small role.
So, dear reader, when you go out and buy your next romance novel,
just remember that you owe the quality of the product you buy to the
gloiious free enterprise system.
- 30 Historical Monuments
/
Judging from the quantity, quality, and high prices fetched for antiques,
Canadians are a people who relish their history. Paradoxically, economics has a
part to play in this enjoyment of the past: the price system tends to promote
optimal preservation of past relics.
If too few relics from the past had been saved, the price system could be
counted upon to remedy this situation. Extremely high prices would encourage
people to forage around in hopes of uncovering more marketable antiques,
hence meeting the great demand. The movement would be toward discovery
and increased supply. This is readily understood.
But it is no less true that an oversupply of artifacts would also create problems. If
our homes were too burdened with antiques, then there would be less room tor
the modern conveniences we also enjoy. If such a situation were somehow to
arise, many antiques would lose value and would be summarily thrown out.
Neither of these scenarios is remotely likely. Indeed, the proof that the price
system is working well is that both are ludicrous: there is no antique "problem."
Things are entirely different, however, with regard to historical monuments and
buildings. The market has all but been banished and zoning has instead held
sway. Consequently, there are serious problems.
Were a price system in effect for time-honoured buildings, some of them, those
worth more in situ than demolished, would be preserved. But without a market
the costs of maintaining such structures in pristine condition are ignored. There
is no way of telling which are worth more as is, and which are more valuable for
the space they release for new construction.
A Price System
How would it work? Why would the owner of an antique building preserve it,
when he could sell it for millions to a developer? Given that this particular edifice
is one that deserves preservation, consumers must value it more for its historical
character than for the space it could cede to a skyscraper, (we assume away the
possibility of moving the entire building to a cheaper site as too costly). If so,
then the revenues the owner could extract via admission charges, plus his own
psychic enjoyment, should more than offset alternative revenues.
Why are so few historical buildings preserved, on the market? For one thing,
cost" are relevent to present economic decisionmaking: this explains why small
relics from the past have a greater chance of being preserved, other things
equal, than larger ones. Old stamps and coins, jewelry and children's toys can
be preserved at less cost than can automobiles, locomotives, sailing ships and
buildings. Consequently, unless the larger artifacts are more valuable in
proportion to the cubic space they occupy (abstracting from additional
maintenance costs) fewer of them will be saved for posterity.
Externalities
But there is another difficulty posed for a market solution to the historic
building question: externalities. There may not be any feasible way for
consumers .to see the inside of the building without paying for the privilege, but
the main attraction may be the facade, and all passersby can enjoy this without
charge. How could the entrepreneur internalize this externality, and convert the
outside of the building into a paying proposition.
The problem arises because not ati elements are part of the competitive
market. The streets are government controlled. If they were privately owned, one
aspect of thu externality problem would disappear. The owners of the historic
building and of the surrounding streets and sidewalks would presumably come
to some agreement concerning the sharing of the revenues collected from the
passersby. Possibly one would buy the other out
There would remain the question of the surrounding skyscrapers. Their owners
might well charge admission to their windows or roof - for the purpose of viewing
the neighboring attraction. This, of course, could severely hamper the monument
owner's efforts to maintain it as a paying proposition.
Large Fences
But there are several counter measures he could adopt. He could erect (or so
threaten) a large fence around the building to cut off a view from the lower floors;
or a large shield above the roof so that noone from the upper storeys could
enjoy the vista. Given these possibilities the surrounding skyscraper owners
might be willing to negotiate a payment for the viewing rights. Alternatively, the
historic and the surrounding structures might come under the same ownership:
from one landlord selling to the other, or both to a third party. In any of these
eventualities, the externalities would be no more; they would be internalized.
The facade of the building, as well as the inside would be brought into the
economic nexus.
Both could be charged for thus allowing people to register the importance they
placed upon it. The antique monument would thus remain so, as long as market
value is more than any alternative.
It is important to realize that not all external benefits need be
internalized. Many, if not most viable commercial establishments release
external benefits for which they are unable to collect. People benefit from the
knowledge alone of certain amenities in their city, such as the Canadian
symphony orchestra even if they never patronize them. The owners of these
establishments cannot of course send a bill to a1"l those who merely appreciate
their existence, but they can still earn enough profit to stay in business despite
this "failure." It is not necessary to ensure that each and every person who
enjoys a historic monument pay for it. All that is necessary for its continued
existence is that more $ be collectable from it than from alternative uses.
Advertising
There is always the possibility, if there are anough "free riders" anxious to see
the monument, but not to pay for such a privilege, to use it for advertizing
advantage. The most obvious way would be to erect bill boards on and about the
edifice. But this might well detract from its beauty, or historic character.
Alternatively, the commercial message could be delivered far away from the
structure: on radio, T.V. or in print.
Landmark Preservation Under Zoning
Under zoning when property felt to be of historical interest is declared a
landmark, it may not be altered, improved or demolished. Although it is (or was)
private property, the owner has been relieved of valuable rights.
Costs, or the alternative uses of the space occupied by the building, are not
considered. Sufficient antiquarianism is the only criterion. Unlike antiques on the
market, such monuments need not be more valuable as relics than put to other
uses; they need only have some worth from a historical perspective in order to
be saved.
Thus there is little likelihood that consumer welfare will be increased by
landmark zoning. Instead, a small group of antiquarian elitists can ignore the
desires of the rest of the population, and impose the preservation of an
excessive number of historical buildings.
Perhaps one reason Canadians accept such policy is that it is difficult to discern
the "what-might-have beens." The historic landmark is physically there: people
see it, enjoy it, photograph it, touch it. It is more difficult to appreciate the factory
that might have taken its place; to envision the extra employment its construction
would have meant; or the lower-priced consumer goods it could have produced.
These possibilities are no less important despite the present difficulty of
recognizing this.
JOB RETRAINING
By Walter Block
Are you ready for the latest wrinkle in the job retraining scam?
According to the
provisions of the National Training Act (NTA), proclaimed just last
year, 82 specific skills have been designated as a national priority.
Examples include electro-mechanical drafting, millwright, aircraft
mechanics, electrical engineering technicians and chemical process
operators.
This new policy is very trendy. Instead of placing emphasis on
the average out-ofwork Canadian with the more traditional skills, such as truck driving
or secretarial
training, the NTA focusses attention on the "glamour" industries:
computers, electronics, hi-tech, microchips, etc. Says Ian Morrison,
executive director of the Canadian Association for Adult Education,
"The new act makes official a move from trying to improve the basic
skill level of the general population, to investing in a smaller, more
elite group".
Although this new direction will leave the lesser educated
Canadians out in the cold,
and discriminate against women (who are proportionately
under-represented in these elite areas) it was undertaken for an
important reason. Previously, training programs had been out of
synch with the needs of industry. There was very little match
between the skills taught by the old programs and the ones needed to
attain employment. So much so, that graduates has great difficulties
in finding jobs.
But the worm is still in the apple. The record of the graduates
of a course given in
St. Lawrence College, Brockville, Ontario, is a case in point. The
students were given a
one year accelerated course in electro-mechanical drafting -- one of
the 82 skills. But six months after completion, 80% of them are still
without jobs -- any jobs. The excuse given is that the new departure
came just at the worst of the recession. But the real reason is quite
different.
The problem with retraining, of course, is that it takes time.
Usually a year or two, and for the more complex skills, even three or
four. And the needs of industry have an infuriating way of changing -and changing drastically -- between the time of initial enrolment and
graduation. In other words, there is a serious forecasting problem.
Our all loving government is not without a response to this challenge.
In order to mesh training with future skills' demands, the federales
are working on a formula for long range forecasting called the
Canadian Occupational Projection System.
But accurate forecasting is easier said than done. And the
government's record in this regard is far from impressive -- not to put
too fine a point on it. For one thing, as we have seen, graduates of
these "new wave" courses are unable to find employment. For
another, the government has only added to, not deleted from, its
inventory of "priority" skills. The Critical Trade Skills Training
program started with six skills four years ago, and now has 82. At this
rate, we'll be up to our ears in retraining programs by the next
century. Things have come to such a pass that according to the head
of the Canadian Advanced Technology Association, most of the
high-tech jobs the government is currently pushing on its unfortunate
clients are almost obsolete.
Clearly, the answer is to eliminate the heavy hand of
government, root and branch, from this most crucial of endeavours.
Instead, we must rely upon the far better record of private enterprise
in this regard.
In the marketplace, a school that retrained graduates for jobs
no longer in existence would soon enough go bankrupt. Only those
which successfully predict the future course of industrial events can
grow and prosper.
But this safety net, or safety valve, is unavailable to
government enterprise.
Whoever heard of a government ministry allowed to go bankrupt
because of innumerable
failures?
That is why the sooner the funds being frittered away on
retraining by the Ministry
of Labour are returned to the private marketplace, the better the
prospects for the
unemployed of Canada.
- 30 KENT COMMISSION FLUNKS BASIC ECONOMICS
by Walter Block
Among the criticisms of the Canadian newspaper business
made by the Kent Commission (KC) is the abysmal lack of training of
many journalists. For prime evidence of this contention, we can refer
to the KC Report itself: it is blissfully innocent of even some of the
most basic tenets of economics. This is particularly unfortunate, since
the KC tries to deal with the economics of newspaper publishing and
may well have an important impact on the entire industry.
The most crucial error, the one from which most of all others
follow, is the view that since private newspapers are profit seeking
concerns, they cannot, to that extent, serve the public.
According to
the KC, for example, the blame for the deterioration of the Canadian
newspaper industry should be placed on "owners who put profits
above all else".
Praise for the few bright spots is reserved for
those who invest large sums in journalist training, editorial and
reportorial coverage, and feature more content and less advertising
pages than strict concern for the bottom line would indicate. Southam
is singled out in this regard -- with the exception of its Ottawa Citizen
-- and praised for its "journalistic conscience", and an "inherited
sense of noblesse oblige". But certainly not for its profit seeking
behaviour.
This is a complete and utter misunderstanding of how a
market system actually functions. In the real world, not the ivory
tower occupied by the KC, profit is the very measure, and the only
measure, by which success And in serving the public can be judged.
the only way profits can be earned, in a competitive market economy,
is through consumer satisfaction. For example, Raymond Burr, Lorne
Green, Genevieve Bujold, Donald Sutherland, Anne Murray, Gordon
Lightfoot, Canadian Pacific, Alcan, Noranda, Thompson, Southam and
MacLean Hunter, all earn substantial profits and are widely
celebrated for providing goods and services that are in great demand
by the Canadian public; on the other hand, Chrysler,
Massey-Ferguson, the "Edsel", the entire horse and buggy industry,
and thousands of other firms have been unable to provide desired
goods and services, or provide
them at below-cost prices, and have thus been consigned to the dustbins of history. Their sin? Inability to earn profits, and to satisfy
the public. The two go hand-in-hand.
Contrary to the KC, newspaper firms are just like all other
firms in this regard. They sink or swim according to their ability to
earn profit, and they can earn profits only by satisfying their
customers. It is of course true that newspapers have a "responsibility
to the public" to provide a high quality product. But it is an insult to
every other Canadian
industry to single out newspapers in this regard. For every industry
in this country has the same responsibility.
The difficulty with the anti-profit KC proposals for a Canada
Newspaper
Act is that they will result in less consumer satisfaction, not more, for
the
following reasons:

The proposal to increase editorial and reportorial
coverage and decrease
advertising content, is wide of the mark. Some people enjoy the
advertising columns and pages, and rely upon them for important
information. But noteveryone likes advertising. It has long been a
great whipping boy for some people. Unlike radio or TV, however,
newspaper advertising, if desired, can be easily ignored merely by
flipping pages.
And there is no doubt that the present
proportion of advertising to other copy serves an important function:
it makes newspapers cheaper than otherwise, thus further satisfying
consumers. Owners have always been free to follow the KC
suggestion.
That they have not done so, and have nevertheless
survived and prospered, is ample evidence that the present
proportion better serves the public interest.
The KC advocates that governments make up for these
advertising revenues given up
which will have to be / by offering subsidies to publishers (the 1970
Davey Senate Committee on the Media sought direct government
funds, the KC urges tax incentives). But governments can, in the final
analysis, only derive funds from the public -- whether in the form of
higher prices or increased taxes. And the public, as we have seen,
prefers more
advertising pages and a cheaper newspaper than the KC wishes to
impose.
Government funding, moreover, means government control.
KC proposals are merely the entering wedge. This initiave is entirely
keeping with the New World Information Order, a blatant UNESCO
resoultion which is aimed at complete and outright governmental
control and liscensing of the newspaper business. We must,
therefore, applaud the satand taken by the Canadian Press, stating
that "CP would never accept a grant or subsidy from an outside
source".

We must likewise reject the view that concentration,
whether associated with non-newspaper investments or not, is
harmful to the public interest. As long as entry is unprohibited -- and
anyone with money for ink, newsprint and journalists' salaries can
set up shop -- high concentration is evidence of success, not failure, in
communicating with the public. A large market share is certainly no
indication of control, as attested to by the failure of such past giants
as the New York Herald-Tribune, the Montreal Star, the Ottawa
Journal, the Winnipeg Tribune and the Washington Star.
Ironically, one of the KC's own recommendations will restrict
entry, thus setting the stage for the "control" it presumably opposes.
Requiringthat two-months' notice be given, and approved, before a
newspaper can shut down, will only serve as a barrier to entry.
Should this be approved,an additional penalty will have been
imposed, in the-case of failure. A new firm will have to "think twice"
before starting up a newspaper business.

To shield editorial independence from the "meddling"
of owners, the KC proposes a Press Rights Panel which would oversee
a required contract between editor-in-chief and publisher.
This will result in effects which are diametrically opposed to
those intended.
In the market system, the owner is the residual
income claimant.That is, he collects whatever residual remains after
all expenses are paid. Thus, he has an incentive to keep this
differential as high as possible. Since the only way he can do this is by
satisfying customers, consumer sovereignty is in the driver's seat
when the owner is in control.
In contrast, the editors (and other staff) are paid fixed salaries.
Their remuneration does not vary with newspaper revenues (except
in extreme cases of bankruptcy). The editor is thus once removed
from the desires of
the public. Within rather wide limits, he is free to indulge his
"journalistic conscience", his "integrity", his "muse", or any other
whim that strikes him.
In other words, he is free, to a much
greater degree than the owner, to ignore the paying customer.
Elevating the editorial staff, and denigrating the role of the
"meddlesome" owner will therefore result in less responsibility to the
public, not more.
If there is any villain in the piece, any group that wields wide
power with no commensurate responsibility, it is not the newspaper
industry. It is the KC itself, which used $3.1 million of taxpayers'
dollars -- without their direct permission. Permission, that is, that the
public grants the newspaper industry every day, through voluntary
purchases.
Labour Code Revision by
Walter Block
The present Labour Code of British Columbia has is its
objective the protection of wage rates for the working men and
women of the province. Its basic philosophy is based on the
view that there exists an unequal bargaining power between
employer and employee -- vastly to the advantage of the
former. The methodology of the B.C. Labour Code is one of
promoting collective bargaining - in order to balance the scales
of power in favour of the latter.
While well-motivated and based on the best of intentions, the
Labour Code has had widespread negative unintended
consequences.
Under its rule, the union movement has
obtained great powers, but, paradoxically, this has not
benefited many working people, nor the population of the
province as a whole. Thousands of person-hours have been lost
as a result of strike activity. Bitterness and acrimony have
afflicted labour relations; all the EXPOs in the world will not
convince foreigners to bring their persons (tourism) or property
(investments) to this province, into an atmosphere of strife and
conflict.
Worse for the labour force, unemployment has risen. Let us
take Canada as a whole (this is a reasonable procedure, since
the labour codes of the other province are much like those of
B.C.), and compare it with the United States in this regard. [n
1961, the unionization rates in both countries were very
similar, at 30 per cent of the labour force. By 1985, the rate in
Canada had risen to 40 percent (45 percent in British
Columbia), but fallen to below 20 per cent in the U.S. As a
result, real wages n this country rose by 35 percent between
1965 and 1985, while they fell by 5 3ercent south of the border.
LABOUR CODE REVISION
by Walter Block
- 30-
In the next few months, several provinces will be re-examining
their labour codes with a view to revising them. In the past, such
attempts have been superficial; they have placed bubble gum, band
aid, and scotch tape solutions on a corpus in need of major surgery.
Our legislative representatives must go to the heart of the matter this
time out, for the health of the Canadian economy depends upon it.
This analysis will entirely concern itself with the ideal labour code,
with how things should be. This is crucial, for as Yogi Berra put it "If
you don't know where you're going, you probably won't get there."
In the field of labour relations, the most important issue is the
strike.
Actually, this is a misnomer, as it refers not to one act, but to two. A
strike is, first, a withdrawal of labour in unison from an employer, on
the part of the relevent organized employees. To this, there can be no
objection. If a single individual has a right to withdraw labour
services, or to quit a job, he does not lose it merely because others
choose to exercize their rights, simultaneously.
There is a second aspect of the strike, however. And this
element is pernicious, insidious and entirely improper. I refer here to
the union practice of making it impossible for the struck employer to
deal with alternative sources of labour, who are anxious to compete
for the jobs the strikers have just vacated.
This entry restriction can be accomplished in several ways. In
the days of yore, organized labour would first brand their
competitors as "scabs," or "strike breakers" and then use threatened
or actual physical intimidation (mass picketing, trespass, sit down
strikes, violence, arson) to make it impossible for the employer to
hire replacement workers. Anyone who thinks that mass picketing is
merely an exercize of free speech rights is confusing de jure with de
facto. In theory, union picketing is an information generating exercise
in free speech. In fact, it is an active threat of physical intimidation; it
is harrassment, pure and simple.
In the modern era, unions have added to this tactic a plethora
of legislation which also effectively drives a compulsory wedge
between employer and "scab." The businessman must convince the
Labour Relations Board that he is "bargaining fairly" with those who
have left his employ (even though what he most desires is to ignore
them, and to deal with others instead); he must give special
considerations to those who have left him in the lurch by striking.
One argument of organized labour is that its present powers -or something like them -- are responsible for past wage increases,
and are needed if wages are to continue to rise in the future. But this
is fantasy. On the contrary, gains in labour productivity -- because of
better skills, improved capital equipment and industrial peace -- are
the causes of gains in take home pay. This is proven by relatively
declining wages in the heavily unionized "smokestack" industries,
compared to increased salaries in the far less unionized computer,
microchip and other information and service industries. As well,
there is the fact that real wages have been rising for centuries, while
the earliest unions appeared only in the late 19th century. So-called
"unequal bargaining power" thus has nothing to do with the matter.
Another argument for the status quo is that the "scab" is
stealing the job of the striker. But this is also the sheerest of
nonsense. A job is an embodiment of an agreement between two
consenting parties - employee and employer. It cannot be the
possession of only one of them. A worker no more owns "his" job
than does a husband own "his" wife. A striking union which forcibly
prevents the employer from hiring a replacement is like a husband
who divorces his wife -- and then threatens to beat her up, and any
prospective new suitor as well -- if she tries to remarry. Just as one
spouse may now divorce the other for any reason or for none at all,
the employer should be able to fire an employee without being
compelled to show "cause." Our laws do not force the worker to
justify a decision to quit his job, and the employee-employer
relationship should be an entirely symmetric one.
A properly revised labour code, then, would allow strikes in
the sense of mass refusals to work, or quits in unison. It would
entrench this behavior, as a basic element of the rights of free men.
But it would limit union activity to this one option. It would thus
prohibit, to the full extent of the law, any and all interferences with
the rights of alternative employees ("scabs") to compete for jobs held
by union members. It would end, forevermore, all picketing, and
other such forms of threatened or actual violence.
Although many people think that pickets are aimed at the
struck employer, they are actually an attack on competing workers
("scabs"). And just as our laws should not allow business firms to
picket the premises of suppliers, competitors or customers, no group
of workers should be able, by picketing, to forcibly prohibit another
group of workers -- almost always poorer -- from bidding for jobs. A
proper labour code would thus define a "legitimate union" as one
which strictly limited its actions to organizing mass resignations. A
"legitimate union" would eschew picketing, violence, and all other
special advantages --- legislative or otherwise ---vis-a-vis its non
unionized competitors. This would end, once and for all, the legal
fiction that workers who have left their jobs can yet retain any right
to employment status in those positions.
Were this one basic change in labour relations to be made,
then society would
have to re-think a whole host of unjust and unwise elements now
embodied in
present labour legislation.
o
Right to work provisions. These would be an
infringement upon the
rights of employers and legitimate unions to sign mutually beneficial
and
consensual agreements. Under the ideal labour code, there would be
no "right to
work."
o
Wage restraints should be ended. These would be an
unconscionable
interference with the rights of legitimate unions to engage in
collective bargaining.
o
Boycotts of whatever type are simply a refusal to deal
with certain
people. But everyone has the moral right to choose his friends and
business
associates. Any attempt to stop such behavior would be a severe
violation of our
human rights. And this goes for the secondary boycott as well.
o
Applying anti combines legislation to unions. A favorite
of union
bashers, this too would be inapplicable for legitimate unions.
o
Imposing "democracy" on unions. It would be no more
justified to
subject legitimate unions to "democracy", than it would be to impose
the secret ballot, government supervision of voting procedures, or
limited political activism on any other voluntary organization such as
the corporation, the faculty club, or the Roman Catholic College of
Cardinals.
o
Back to, work orders. This would be an infringement
upon the right of
free men to withdraw their labour services. Fines, jail sentences for
labour
organizers, imposed loss of check off privileges would be a
completely unwarranted
interference with the only tactic at the disposal of legitimate
unionism.
LABOUR CODE REVISION
by Walter Block
In the next few months, several provinces will be re-examining their
labour codes
with a view to revising them. In the past, such attempts have been
superficial;
they have placed bubble gum, band aid, and scotch tape solutions on a
corpus in
need of major surgery. Our legislative representatives must go to the heart
of the
matter this time out, for the health of the Canadian economy depends
upon it.
This analysis will entirely concern itself with the ideal labour code, with
how things
should be. This is crucial, for as Yogi Berra put it &quotIf you don't know
where you're
going, you probably won't get there."
In the field of labour relations, the most important issue is the strike.
Actually, this is a misnomer, as it refers not to one act, but to two. A
strike is,
first, a withdrawal of labour in unison from an employer, on the part of
the
relevent organized employees. To this, there can be no objection. If a
single
individual has a right to withdraw labour services, or to quit a job, he does
not lose
it merely because others choose to exercize their rights, simultaneously.
There is a second aspect of the strike, however. And this element is
pernicious, insidious and entirely improper. I refer here to the union
practice of
making it impossible for the struck employer to deal with alternative
sources of
labour, who are anxious to compete for the jobs the strikers have just
vacated.
This entry restriction can be accomplished in several ways. In the days of
yore, organized labour would first brand their competitors as
&quotscabs," or &quotstrike
breakers" and then use threatened or actual physical intimidation (mass
picketing, trespass, sit down strikes, violence, arson) to make it
impossible for the employer
to hire replacement workers. Anyone who thinks that mass picketing is
merely an
exercize of free speech rights is confusing de jure with de facto. In theory,
union
picketing is an information generating exercise in free speech. In fact, it is
an
active threat of physical intimidation; it is harrassment, pure and simple.
In the modern era, unions have added to this tactic a plethora of
legislation
which also effectively drives a compulsory wedge between employer and
&quotscab."
The businessman must convince the Labour Relations Board that he is
&quotbargaining
fairly" with those who have left his employ (even though what he most
desires is to
ignore them, and to deal with others instead); he must give special
considerations
to those who have left him in the lurch by striking.
One argument of organized labour is that its present powers — or
something
like them -- are responsible for past wage increases, and are needed if
wages are to
continue to rise in the future. But this is fantasy. On the contrary, gains in
labour
productivity — because of better skills, improved capital equipment and
industrial
peace — are the causes of gains in take home pay. This is proven by
relatively
declining wages in the heavily unionized "smokestack" industries,
compared to
increased salaries in the far less unionized computer, microchip and other
information and service industries. As well, there is the fact that real
wages have
been rising for centuries, while the earliest unions appeared only in the
late 19th
century. So-called &quotunequal bargaining power" thus has nothing to
do with the
matter.
Another argument for the status quo is that the &quotscab" is stealing the
job of
the striker. But this is also the sheerest of nonsense. A job is an
embodiment of an
agreement between two consenting parties - employee and employer. It
cannot be
the possession of only one of them. A worker no more owns &quothis"
job than does a husband own &quothis" wife. A striking union which
forcibly prevents the employer
from hiring a replacement is like a husband who divorces his wife — and
then
threatens to beat her up, and any prospective new suitor as well — if she
tries to
remarry. Just as one spouse may now divorce the other for any reason or
for none
at all, the employer should be able to fire an employee without being
compelled to
show &quotcause." Our laws do not force the worker to justify a decision
to quit his job,
and the employee-employer relationship should be an entirely symmetric
one.
A properly revised labour code, then, would allow strikes in the sense of
mass
refusals to work, or quits in unison. It would entrench this behavior, as a
basic
element of the rights of free men. But it would limit union activity to this
one
option. It would thus prohibit, to the full extent of the law, any and all
interferences with the rights of alternative employees (&quotscabs") to
compete for jobs
held by union members. It would end, forevermore, all picketing, and
other such
forms of threatened or actual violence.
Although many people think that pickets are aimed at the struck
employer,
they are actually an attack on competing workers (&quotscabs"). And just
as our laws
should not allow business firms to picket the premises of suppliers,
competitors or
customers, no group of workers should be able, by picketing, to forcibly
prohibit
another group of workers — almost always poorer — from bidding for
jobs. A
proper labour code would thus define a &quotlegitimate union" as one
which strictly
limited its actions to organizing mass resignations. A &quotlegitimate
union" would
eschew picketing, violence, and all other special advantages — legislative
or
otherwise —vis-a-vis its non unionized competitors. This would end,
once and for
all, the legal fiction that workers who have left their jobs can yet retain
any right
to employment status in those positions.
Were this one basic change in labour relations to be made, then society
would
have to re-think a whole host of unjust and unwise elements now
embodied in
present labour legislation.
o Right to work provisions. These would be an infringement upon the
rights of employers and legitimate unions to sign mutually beneficial and
consensual agreements. Under the ideal labour code, there would be no
&quotright to
work."
o Wage restraints should be ended. These would be an unconscionable
interference with the rights of legitimate unions to engage in collective
bargaining.
o Boycotts of whatever type are simply a refusal to deal with certain
people. But everyone has the moral right to choose his friends and
business
associates. Any attempt to stop such behavior would be a severe violation
of our
human rights. And this goes for the secondary boycott as well.
o Applying anti combines legislation to unions. A favorite of union
bashers, this too would be inapplicable for legitimate unions.
o Imposing &quotdemocracy" on unions. It would be no more justified to
subject legitimate unions to &quotdemocracy", than it would be to
impose the secret
ballot, government supervision of voting procedures, or limited political
activism
on any other voluntary organization such as the corporation, the faculty
club, or
the Roman Catholic College of Cardinals.
o Back to work orders. This would be an infringement upon the right of
free men to withdraw their labour services. Fines, jail sentences for labour
organizers, imposed loss of check off privileges would be a completely
unwarranted
interference with the only tactic at the disposal of legitimate unionism.
-30LABOUR CODE REVISIONS
By Walter Block, Senior Economist
The Fraser Institute
For The Financial Post
Things are not going well for organized labour, as these incidents from
around the
world will attest:
. In New Zealand, Prime Minister Robert Muldoon has just amended his
nation's
labour code, banning closed shops. Despite the fact that nearly half the
countries' labour force is unionized, leaders of the Labour Party
opposition
see this as an election ploy!
. In England, the birthplace of industrial unions, the barons of organized
labour
have been forced to call off a threatened shipyard strike. This was to have
been in protest against employer demands to stremline work methodsimposed by some 17 different unions, to the virtual ruination of British
shipbuilding. This industry, once the envy of the world, and responsible
for
building 80 per cent of all merchant shipping, is now a shadow of its
former
self, only half as efficient as its main European rivals.
As well, a widely publicized "national day of protest" came to nought.
This was the response to the Conservative Government's plan to ban
unions at
Communication Headquarters (in charge of national security intelligence
gathering) in Cheltenham.
. In the United States, the Supreme Court has just ruled union succession
rights
to be unconstitutional. Now, when a company becomes bankrupt, or
undergoes reorganization through other transformation, the prior union
contract no longer prevails.
And what, pray tell, of the labour relations scene in Canada? In lotus-land
by-the-sea, the labour movement is shooting itself in the foot. It shows
signs of
breaking up through internal dissension, while plunging the province of
British
Columbia into chaos.
The situation is this. The International Woodworkers of America (IWA)
had
recently signed a three-year labour contract after much dissension with
management. Because of this, and also due to recession-created economic
hardships, they
were only now beginning to draw full paycheques on a steady basis. At
this point
the 7,600-member Pulp, Paper and Woodworkers of Canada (PPWC), and
the 9,000member Canadian Paperworkers Union (CPU), rejected a contract similar
to the
one signed by the IWA, and were locked out by their employers on
February 2,
1984. Whereupon the PPWC and the CPU set up secondary pickets at
IWA
workplaces—which were crossed, despite Labour Relations Board
approval, in
violation of the most sacred taboo of the labour movement, by members
of the
latter union.
Now the fur realty began to fly. Fist fights, and worse, broke out between
the various bands of unionists. Townspeople and non-union truck loggers
entered
the fray. Due to the violence and chaos, the RCMP was unable to protect
the
locked-out workers, and the picket lines had to be abandoned. As a result
of all
this. Art Gruntman of CPU and Jim Sloan of PPWC have called for the
resignation
from the B.C. Federation of Labour of IWA president Jack Munro, who
had publicly
supported his members' actions.
B.C. Labour Minister Bob McLelland had long been reputed to be
considering
changes in the province's Labour Code, widely regarded as among the
most
favourable to unionism in all of Canada. If so, he has been handed, on a
silver
platter, ample reason for doing just that. Specifically, secondary
picketing, with its interference in plants where there are no present labour
grievances, would
appear to be highly unpopular with the long-suffering B.C. citizenry. If
this one
practice could be prohibited, or at least made more difficult, then one burr
under
the saddle of labour-management, relations will have been removed.
But while we are talking about secondary picketing, we might reconsider
the
role of primary picke. ig as well. In theory, and as a matter of law, this
type of
picketing serves only informational purposes. It advises all and sundry
that the
organized employees are at variance with their employer. But the facts are
often
far different. Instead of merely notifying the public about a labour
dispute,
picketing serves as a threat to all those who might be interested in
competing for
the jobs and salary spurned by the union. Since all Canadians have, or at
least
should have, a right to compete for any given employment opportunity,
such a
practice is a de facto, although not de jure violation of liberty.
A more accurate interpretation of picketing (whether primary or
secondary)
is as a nuisance or harassment. This is precisely how it would be regarded
were it
to take place in any other commercial or personal arena.
Suppose, that is, that a person vacates the premises of landlord A, and
patronizes landlord B instead. Surely the courts would cast a baleful eye
on A, if
he, together with his family, cronies, and business associates, began to
picket the
tenant for being &quotunfair." Or take another case. Suppose that a man
divorces his
spouse, and then along with all his friends "pickets" the home of his exwife,
warning off possible suitors. Would this be considered an informational
exercise in
free speech rights? Hardly. On the contrary, it would be clearly seen for
the
harassment it is, and be summarily prohibited by any court in the land.
Can we as a nation afford any less rigorous a definition of justice in
labourmanagement relations?
-30March 9, 1984
LABOUR CODE REVISIONS
By Walter Block, Senior EconomistThe Fraser InstituteFor The
Financial Post
Things are not going well for organized labour, as these incidents
from around the world will attest:
• In New Zealand, Prime Minister Robert Muldoon has just
amended his nation's labour code, banning closed shops. Despite the
fact that nearly half the countries' labour force is unionized, leaders
of the Labour Party opposition see this as an election ploy!
• In England, the birthplace of industrial unions, the barons of
organized labour have been forced to call off a threatened shipyard
strike. This was to have been in protest against employer demands to
stremline work methods--imposed by some 17 different unions, to
the virtual ruination of British shipbuilding. This industry, once the
envy of the world, and responsible for building 80 per cent of all
merchant shipping, is now a shadow of its former self, only half as
efficient as its main European rivals.
As well, a widely publicized "national day of protest" came to
nought.
This was the response to the Conservative Government's plan to ban
unions at Communication Headquarters (in charge of national
security intelligence gathering) in Cheltenham.
• In the United States, the Supreme Court has just ruled union
succession rights to be unconstitutional. Now, when a company
becomes bankrupt, or undergoes reorganization through other
transformation, the prior union contract no longer prevails.
And what, pray tell, of the labour relations scene in Canada? In
lotus-land by-the-sea, the labour movement is shooting itself in the
foot. It shows signs of breaking up through internal dissension, while
plunging the province of British Columbia into chaos.
The situation is this. The International Woodworkers of
America (IWA) had recently signed a three-year labour contract after
much dissension with management. Because of this, and also due to
recession-created economic hardships, they were only now beginning
to draw full paycheques on a steady basis. At this point the
7,600-member Pulp, Paper and Woodworkers of Canada (PPWC), and
the 9,000-member Canadian Paperworkers Union (CPU), rejected a
contract similar to the one signed by the IWA, and were locked out by
their employers on February 2, 1984. Whereupon the PPWC and the
CPU set up secondary pickets at IWA workplaces--which were
crossed, despite Labour Relations Board approval, in violation of the
most sacred taboo of the labour movement, by members of the latter
union.
Now the fur really began to fly. Fist fights, and worse, broke
out between the various bands of unionists. Townspeople and
non-union truck loggers entered the fray. Due to the violence and
chaos, the RCMP was unable to protect the locked-out workers, and
the picket lines had to be abandoned. As a result of all this, Art
Gruntman of CPU and Jim Sloan of PPWC have called for the
resignation from the B.C. Federation of Labour of IWA president Jack
Munro, who had publicly supported his members' actions.
B.C. Labour Minister Bob McLelland had long been reputed to
be considering changes in the province's Labour Code, widely
regarded as among the most favourable to unionism in all of Canada.
If so, he has been handed, on a silver platter, ample reason for doing
just that. Specifically, secondary picketing, with its interference in
plants where there are no present labour grievances, would appear to
be highly unpopular with the long-suffering B.C. citizenry. If this one
practice could be prohibited, or at least made more difficult, then one
burr under the saddle of labour-management relations will have been
removed.
But while we are talking about secondary picketing, we might
reconsider the
role of primary picketing as well. In theory, and as a matter of law,
this type of picketing serves only informational purposes. It advises
all and sundry that the organized employees are at variance with
their employer. But the facts are often far different. Instead of merely
notifying the public about a labour dispute, picketing serves as a
threat to all those who might be interested in competing for the jobs
and salary spurned by the union. Since all Canadians have, or at least
should have, a right to compete for any given employment
opportunity, such a practice is a de facto, although not de jure
violation of liberty.
A more accurate interpretation of picketing (whether primary
or secondary) is as a nuisance or harassment. This is precisely how it
would be regarded were it to take place in any other commercial or
personal arena.
Suppose, that is, that a person vacates the premises of
landlord A, and
patronizes landlord B instead. Surely the courts would cast a baleful
eye on A, if he, together with his family, cronies, and business
associates, began to picket the tenant for being "unfair." Or take
another case. Suppose that a man divorces his spouse, and then along
with all his friends "pickets" the home of his ex-wife, warning off
possible suitors. Would this be considered an informational exercise
in free speech rights? Hardly. On the contrary, it would be clearly
seen for the harassment it is, and be summarily prohibited by any
court in the land.
Can we as a nation afford any less rigorous a definition of
justice in labour-management relations?
March 9, 1984
Gabriel Bruce: The Liver Transplant Boy
by: Walter Block, The Fraser Institute
According to recent reports, the black market value of a
kidney which can be transplanted is some $13,000 -- which
translates to roughly seven times its weight in gold.
Such an occurrence may occasion all sorts of references to
King Midas -- who was supposed to have been turned into a statue
of sold gold, but behind this rather dramatic way of
characterizing the value of human organs lies in a story of
untold and tragic human suffering.
The leaders of our medical establishment are ideologically
opposed to the use of the market system. So implacable and
fervent is their hatred of free enterprise that they will gladly
countenance the deaths of hundreds of their patients -- thousands
if need be -- as long as no spectre of prices and profits
infringes into their little world.
We make this rather hysterical-sounding charge because the
medical establishment in this country is largely responsible for
arranging matters in such a way that it is illegal to harness
marketplace incentives in order to encourage kidney donors.
Instead, our society must resort to all sort of inefficient
stratagems toward this end. Famous personages have exhorted us,
in the event that we suffer untimely death, to make a posthumous
gift of these organs; medical schools coach their students on the
best techniques for approaching next-of-kin -- and asking
permission of them at the precise time when they are least likely
to give it -- upon the sudden demise of a loved one. But all of
this has been to little avail. While potential recipients
languish on painful kidney dialysis machines waiting ghoulishly
for a traffic fatality which may spell life for them, the public
has refused to sign cards giving permission for automatic
posthumous donor status. Things have even come to such a pass
that there are grotesque and fascistic plans now being bruited
about which would allow the government to seize the kidneys of
accident victims unless they have signed cards denying such permission.
The free enterprise system could be a God-send to the
unfortunates who suffer from diseased kidneys. A legalized
marketplace would encourage thousands of donors. Would you sign
a card donating your kidney after death for 13,000 big ones,
right now, in cold hard cash? There are very few people who
would turn up their noses at such an offer. And if sufficient
supplies were still not forthcoming at this level, prices would
rise even further until all demand was satisfied. Given free
enterprise incentives, pardon the pun, we would be up to our
armpits in kidneys.
This is the tried and true process we rely on to bring us
all the other necessities of life: food, clothing and shelter.
After all, we do not depend for the provision of these goods and
services on voluntary donations. We know this to be an
unreliable system -- however much it is flogged by opinion
leaders in the case of organ transplants.
No one is contending that those responsible for preventing a
free market in kidneys are purposefully murdering thousands of
kidney disease sufferers. But no matter how benevolent their
intentions, it cannot be denied that this is the effect of their
ill-conceived actions.
It is time, it is long past time, for our society to put
aside its archaic and prejudicial opposition to the marketplace,
so that we can lift a death sentence we have inadvertently placed
on as hopeless and hapless a group of citizens that ever existed.
30
585 words
THE LORD'S PRAYER
by Walter Block
Chris Tait is a seventeen-year-old high school student who is
now sitting -- on a matter of principle. He refuses to stand up while
his classmates in the rural southwestern Manitoba town of McGregor
recite the Lord's Prayer. Young Mr. Tait is an atheist, and contends
that such an act would be incompatible with his fervently held beliefs.
But the authorities are having none of this. "It is simply
a case of defiance," stated school superintendent Joe Mudry, who has
suspended Tait from class twice so far, and threatens him with
permanent expulsion if the lad persists in the error of his ways, and
refuses to repent.
In the view of Mr. Mudry, "The issue here has simply to dowith
compliance with the school regulations and the (Manitoba)Public
Schools Act," which makes one wonder at the intelligenceof those
who have been placed in charge of the nation's children.
Chris Tate, for his part, claims it is a matter of religious
freedom and human rights. "Under section two (of the Charter of
Rights and Freedoms)," he says, "we're guaranteed freedom of
religion and conscience, and under section 15 all citizens are
guaranteed equal protection and benefit under the law." If he
knuckled under and stood up on his feet during the Lord's Prayer "it
would be a tribute to the Lord God," said Tait, and thus a violation of
his freedom.
We must award this young student at least a "B" for effort, and
must certainly salute the moral courage it took for a person of such
tender years to so publicly swim against the tide of accepted opinion.
As well, his behaviour should be upheld in a court of law. However,
Mr. Tait's reasoning leaves something to be desired.
There cannot be any exceptionless "human right to
self-expression," Charter or no Charter. For surely Mr. Tait would
have no right to go into a church and disrupt their services with such
atheistic behaviour. Nor would he be blameless if he came into Mr.
Mudry's living room, for example, and violated the wishes of that
worthy gentleman in this regard, while refusing to depart. No, the
question of right and wrong in this matter turns crucially on the
matter of who is the owner of the rights of private property in the
place where Mr. Tait is resisting the blandishments of theology.
If MacGregor High School were a private institution, that
would be the end of the case. Its owners would have the right to set
the rules for appropriate behaviour, and all those who objected
would be free to pick themselves up and go elsewhere. (The only
constraint on such private entrepreneurs is that if they act arbitrarily
and capriciously, they will lose customers to their competitors. They
certainly have the right to insist, for instance, that their students wear
beanies to class, and propellors on their noses, but if they do so, they
are likely to lose customers to competing institutions.)
But that seat of higher learning known as MacGregor High
School is a public institution, not a private one. As such, its managers
have no more right to require people to stand for the recitation of the
Lord's Prayer there, than they would to impose such a condition on
the people using the public streets. Namely, they have no right at all
to do this.
So Chris Tait, even if he is unaware of the proper defense open
to him, is certainly acting in the right. And Mr. Mudry, the heavy of the
piece, would be well advised to cease and desist, lest he worsen an
already unfortuate situation.
THE FRASER INSTITUTE
626 Bute Street, Vancouver, B.C. Canada V6E 3M1    (604)
688-0221
LUMBER AND BUNS
by Walter Block
There is an economic schizophrenia operating in Canada.
On the one hand, some people are positively frothing at the mouth at
the prospect of McDonalds Restaurants purchasing hamburger buns
from a Seattle bakery. They are horrified to realize that the former
supplier, McGavins Foods Ltd., had to lay off 70 workers, swelling the
Canadian unemployment figures. Some Canadian trade unions have
gone so far as to plan for a boycott of Ronald McDonald.
On the other hand, however, several small lumber companies
in the U.S.
Pacific Northwest have banded together to try to impose heavy duties
on
southbound wood and wood products. If successful, they could deal
the
already moribund B.C. forest industry a death blow.
What is the reasoning behind the new initiative? U.S.
producers,
suffering from the American recession, have seen the demise of much
of their own industry, and the accompanying disappearance of many
forestry jobs. They are incensed at what they consider "dumping": the
advantages they say are given to B.C. firms through the stumpage
system, where the provincial government sets prices for Crown land
timber.
As usual, the economic nationalists are barking up the wrong
tree--in
both countries.
True, Canada lost some bakery jobs. But as a result, McDonalds
will be able to buy cheaper buns. Competition with Burger King,
Wendy's, White Spot, Denny's and hundreds of other food purveyors
will force McDonald's to pass these savings onto their Canadian
customers in the form of lower prices. And what will these consumers
do with their extra money? They will spend it on other things (what
things, it is impossible to tell) creating new jobs in the relevant
industries. Or they will save it, and drive down interest rates, creating
more jobs in capital intensive industries such as housing.
As a result, without any loss in employment, Canada will
benefit from purchasing something that can be produced more
cheaply in Seattle. This will increase the purchasing power of our
dollar and enhance our sorely declining standards of living. (We pass
lightly over the role of the Canadian Wheat Board in raising flour
prices faced by domestic bakeries. That is a story for another day.)
And let us assume for the sake of argument that the American
charges of Canadian lumber "dumping" are absolutely true. In that
case, such dumping would help the U.S. economy, not hurt it. In order
to see this, we may ask what would be the effect on their economy if
instead of "dumping" lumber, we gave it to them completely gratis.
This would be "dumping" with a vengeance. But free gifts can hardly
hurt a mature, sophisticated economy of the sort that operates below
our border.
The important point to realize is that the lumber and bun
cases are the opposite sides of the same coin. How can we oppose the
purchase of cheap buns in the U.S., and object when U.S. interests try
to stop the importing of cheap Canadian lumber in to their country?
We cannot have it both ways.
This economic nationalist world view is hypocritical. It will be
seen as such and it will backfire on us.
Luxury Hotel Debacle
by Walter Block
Vancouver's most luxurious hotel, the Mandarin, cost $42
million to build in 1984. Early in 1987, it was sold for $6 million, a
loss of over three quarters of its initial value. Behind this financial
tragedy lay a stupendous failure to anticipate the desires of the
public.
The Mandarin featured 24-karat gold leaf in its thickly covered
lobby. There
were genuine marble floors in each of its bathrooms. Instead of the
standard hotel drinking glass, the Mandarin offered crystal wine
goblets. Each palatial room had at least two television sets; many had
three. When you add in the extravagantly costly silverware, the
complimentary wine and cheese, the free umbrellas, double the usual
complement of doormen, and the type of towels, bathrobes and linen
that cannot be found in the usual run of the mill luxury hotel, the
result was a truly lavish package.
And the room rates were set to match. They ranged from a
"poor boy special" of $175, on up to an astounding $750. And we're
talking about the price for one evening, here.
The only problem was that there were simply not enough
millionaires regularly
visiting Vancouver to make this a paying proposition. The ordinary
tourist might have the courage to march, in to the opulent lobby, right
up to the front desk, and might even have had the temerity to ask to
inspect one of the rooms. But as for actually booking in, forget it.
Further, even when the demand for this sort of service was ebullient,
as during the EXPO period, the 197 rooms, woefully inadequate by
modern standards, was insufficient to carry the hotel during slack
periods.
The result, as we have seen, was bankruptcy. Under the
reorganization, the new owners will have no choice but to scale down
the level of service, until it approaches
that which the traveller can afford.
The reaction from some quarters was that this was a terrible
waste of "society's resources," and that the capitalist system, under
which this gigantic investment was made, has therefore shown itself
once again to be inadequate.
Nothing, however, could be further from the truth. First of all,
there was no loss whatsoever of "society's resources." There were
specific people, the owners, that is, who bore the entire setback. And
this tends to have a salutary effect on the market. Not only will
Vancouver Mandarin Hotel Limited Partnership be less likely to make
such a colossal blunder in future -- certainly the loss of a cool $36
million will put somewhat of a crimp in their plans -- but all other
investors will have been served notice not to misanticipate the
desires of the paying customer in this way.
Secondly, although it may sound a bit paradoxical, this
experience is a strength of the market system, not a weakness . For
suppose the same miscalculation was made not by a businessman, on
his own account, but by the bureaucratic head of a Crown
Corporation in charge of owning and managing hotels. Under such
circumstances, it is likely that instead of being forced to withdraw
from the operation, this manager would have been able to draw on
tax revenues to finance the deficit, much in the manner of Canada
Post. To add insult to injury, there would have been no automatic
penalty imposed, such as occurs through the loss of funds in the
private market. The enthusiasm for white elephant hotels might have
continued unabated, until dozens more were built.
No, in the marketplace, only the stockholders bear the burdens
of risk from unwise investments. When the activity is organized in the
public sector, all taxpayers are forced to bear the risk. This is yet
another reason for pursuing the privatization option, with all due
deliberate speed.
THE MACDONALD ROYAL COMMISSION
by Walter Block
The hearings of the Royal Commission on the Economic Union
and Development Prospects for Canada are now in the news. And the
average Canadian must have a strong feeling of deja vu. For if these
hearings continue on the path they have taken so far, he will be just
as familiar with the Commission findings as he is with the palm of his
own hand.
As of this date, it's the same old stuff. Organized labour doesn't
much like
management, and management cordially reciprocates this sentiment.
Some business and academic leaders are anxious to increase their
government subsidies -- all in the public interest, of course. Others
take a more free market stance, and argue against an ever-expanding
government role in the economy. The Canadian Manufacturers
Association argues for more flexibility in the face of technological
change. The senate should be reformed, says another. The export
industry favours lower tariffs, and the importers advocate higher
tariffs. Business concentration is the enemy of all that is good, says a
third.
There have, to be sure, been some high points. As for example,
when one Mr.
Bill W. Weaver of British Columbia treated the Commission on
Canada's future to a long and much needed quote from Friedrich A.
Hayek's The Road to Serfdom. Surely, everyone would benefit from
reading this book. But it was published in 1944. People of a mind to,
have thus already had a bit of time to acquaint themselves with its
brilliant insights.
Even the commissioners have been around the track once or
twice already. (Some, even three times.) First, there is of course
Donald MacDonald, Chief Poobah of the entire gathering. For those of
us who were born yesterday, Mr. MacDonald is a former finance
minister of the Liberal Government -- one that has in no small
measure been responsible for the economic malaise now plaguing
Canada. Thus, Mr. MacDonald occupies a rather tenuous position. As
head of the Royal Commission on the Economic Union &
Development Prospects for Canada, he may well be subjected to
criticisms for actions taken when he was finance minister.
Many of the other commissioners are also leading players on
the stage of Canadian economics, politics, and public policy. Thus they
may also find themselves in anomolous situations regarding the
economic situation in which Canada now finds herself. There is
William Hamilton, former Post Master in the Diefenbaker
government; John Messer, former Saskatchewan Minister of
Agriculture, Industry and Commerce; Thomas Shoyama, former
deputy finance minister; Gerard Docquier, Vice President of the
Canadian Labour Congress; Clarence Barber, former president of the
Canadian Economics Association, and Commissioner of Welfare in
Manitoba; Albert Breton and Laurent Pickard, prestigious economists
from the University of Toronto and McGill, respectively, who have
long had an influential voice in national councils; Jean Wadds, former
High Commissioner to Great Britain.
There is also the fact that the MacDonald Commission is a
creature of cabinet. It was created by, of and for the cabinet,
presumably to help this august body make up its mind about public
policy issues.
What, then, are cabinet members doing testifying to the
MacDonald Commission? Why is Senator Jack Austin underutilizing
his and taxpayers' time and money by suggesting that the senate be
reformed? Can he not tell the cabinet this directly? There is surely a
logical difficulty here, when a cabinet creates a commission to advise
it, and then goes out and advises the commission on what advice it
ought to give the cabinet. If anything, it gives the appearance of a dog
chasing its tail.
Then, there is the issue of cost. The MacDonald Royal
Commission will set us back an estimated $10 to $15 million. Was it
really necessary to arrange for a three year belly flop into the public
trough? Would a commission of one year not have gained for
government all it needs from a Royal Commission? And why allow
thirteen commissioners (and their numerous retinues) to batten
down at our expense? Would not eleven, nine, seven, five, or even
three commissioners have sufficed? And, in the supposed age of
government restraint and cutbacks, at a time where millions of
Canadians are unemployed, how can we justify an $800 per day fee
for Mr. MacDonald, and a payment of $350 per diem to his associates?
If asked, how many Canadian taxpayers would have agreed that their
hard-earned dollars be used for such a purpose? True, these eminent
public leaders can earn far in excess of their commission salaries in
the private sector. That is not the point. The question concerns more
the message given by the government to the Canadian people. And
that is likely to be interpreted as "cutbacks apply to the average
person, but not to the public sector."
It is time that we consider a radical departure from
business-as-usual. Let us, in future, privatize all Royal Commissions.
After all, our tax monies already support a swollen senior civil
service, whose function is presumably to do just this very type of
research. The efforts of the mandarins are supposed to be at least on
a par with that which can be accomplished by our Royal
Commissions. As well, government funds already support several
economic and public policy research think tanks.
How would privatization work? If, in future, a felt need for
another Royal
Commission suddenly overcomes government, let it make an
announcement to this effect. Then, private enterprise (that is,
cooperating individuals) can carry through, if there is enough support
for such an idea. People could spend their own money, and organize it
themselves on an entrepreneurial basis. For example, the recent
panel hearings on ethics and the economy, sponsored by the Roman
Catholic Archdiocese of Toronto, under the leadership of Cardinal
Carter, was such an event. (The church is not usually seen as an
example of free enterprise, but it is, it is. Every penny it spends comes
to it on a voluntary basis. No part of this comes from general tax
revenues.) Alternatively, private enterprisers might choose to
organize hearings for admission, and by selling the final report as a
book.
Who knows? Something good may yet come out of a Royal
Commission. But
if they were privatized in this manner, then their expenditures will be
based on voluntary payments. No one would be forced to financially
support such an endeavour, as is the practice at present. And then no
one could object on moral grounds, if they plowed over old ground.
The main objection to the MacDonald Royal Commission, then,
is one of finance. Let it be privatized, and take its chances along with
all other competitors for the consumer dollar. Then, we could only
wish it well.
-30-
Marian Regional High School Closing
by Walter Block, The Fraser Institute,
Vancouver, B.C.
Now that the closing of the Marian Regional High School in
Vancouver has receded from the front pages, it might he
appropriate to more carefully consider the implications of this
occurence from a public policy perspective.
The decision to suspend the operations of this Catholic school for
girls has been widely condemned. The schoolgirls themselves have
engaged in a highly publicized protest at this action. The Catholic
Secondary School Teachers' Association has asked the Industrial
Relations Council to call a halt to this plan. According to a high
profile leader of organized labour, the man responsible for this
determination, Archbishop James Carney, is guilty of "the basest
form of union busting."
A local Vancouver newspaper columnist has gone so far as to
characterize Catholics who support their church in this regard as
unthinking sheep who blindly follow orders. "The church has
long taught good Catholics their place. Good Catholics belong on
their knees," were the c\;irt words. It doesn't seem to have occurred
to many people that such a description could easily be interpreted
as purposefully spreading hatred against an identifiable group,
behaviour condemned by the anti hate-mongering Section 281.2 of
the Criminal Code under which several now well known bigots
were charged.
Criminal or not, such a characterization, were it uttered against a
group such as Sikhs. Jews, natives, blacks or any other minority,
would be instantly condemned by all people of good will. Judging
from the absence of protest about these intemperate words, it
would appear to be open season on Catholics. For shame.
Why was this exceedingly unpopular decision made? According
to an announcement made by Archbishop Carney, the school was
closed because the church had lost confidence in the teachers'
ability to provide a Catholic education.
/ But there would appear to be more to this than meets the eye. After all,
when / one loses confidence in one's housekeeper, one does not
commonly close down one's / domicile; one merely fires the unrelkihle
housekeeper, and hires another. When a ( person loses confidence in his
attorney, it would be ludicrous to think that his only - \ option consists of
giving up the lawsuit. Obviously, the more rational alternative is v ^-to
dismiss that lawyer, and retain a replacement.
Why then did not the Archbishop, having lost confidence in the
seventeen Marian High School faculty members, simply fire the
lot of them, and hire a replacement crew?
The reason is not hard to discern: the B.C. Labour Code hung like
a sword of Damocles above his head. The law compels him to
"bargain fairly" with a group of people he wished to have nothing
further to do with. In a word, it would have been deemed an
"unfair labour practice" for him to replace the seventeen teachers
with people he could trust to set a good example for the students,
on a 24 hour per day basis.
The ordinary businessman who loses confidence in his work force
rarely closes up shop. Instead, he grits his teeth and carries on.
Perhaps this is what the Archbishop might have done had the work
force in question consisted of painters, electricians, plumbers or
custodians. But when it came to the molders of young minds (these
children, remember, were ultimately his responsibility), he could
not tailor his beliefs to conform to the niceties of the labour code.
Archbishop Carney was unwilling to compromise or "bargain." He
has, at least from his own perspective, no less than a sacred
mission, which leaves no room for negotiation. So. instead, he
chose the only honorable course open to him, which was to close
down the school.
There are many who are quite understandably unhappy with this
situation. But they should seek the root cause of the Archbishop's
decision in an unwise, rigid and inflexible legal code, not as an
cii'hiti';iry whim of the rricin himself.
By in effect closing down a Catholic school which otherwise
would have remained open, union legislation contravenes religions
freedom. By forcing employers to deal with workers who no
longer have their trust, the British Columbia labour code also
violates the law of free association. True. rarely in our society does
this denial of basic human rights result in such an altercation. But
then, rarely do we find in public life a man of strong principle such
as Archbishop Carney.
30
Market Failure by Walter Block, The Fraser Institute,
Vancouver, B.C.
Many professional economists subscribe to what might be called the
argument from market failure. In this perspective, the market is imperfect,
and therefore the government is justified in intervening in commercial
activities, in order to improve matters.
But this view has not gone unchallenged.
First of all, any attempt to "justify" government regulation of business on
this ground violates a distinction which is axiomatic in economics, that
between the normative and the positive. Justification is by its very nature
a normative, i.e., value-laden procedure; but economics is a value free
subject. The point is, there is nothing in the value free corpus of economic
science that could possibly justify anyone doing anything. Economics as
sncli is limited to describing, explaining, understanding and perhaps
predicting: the justification of action is entirely outside its realm.
Second, even if there were any such thing as "market failure," and even if
economics could somehow justify acting so as to obviate such a
phenomenon, it by no means follows that its mere existence would justify
state activity. For there is such a thing as "government failure" (the
inability of state bureaucrats to act efficiently, due to a lack of the proper
profit and loss incentives) and in any given case the latter might outweigh
the former. That is, in ordinary parlance, the cure might be worse than the
disease.
Third, there has been no definitive demonstration that there exists any real
world example of market failure. The major candidates put forth by the
proponents of this doctrine include monopoly and pollution. Let us briefly
consider each.
.Trusts, or combines, or monopolies are said to misallocate resources,
when they attain too great a degree of control over a given industry. But
economists cannot even unambiguously define an industry. There may be
only one widget producer in a given city, but if the whole province,
country or the entire world is defined as the relevant market the
concentration ratio (the proportion of sales, employment or profits
accounted for by the top few firms) can be made to appear very low.
Similarly, the more all inclusive the definition of the good in question, the
less "control" there can be. That is. one is far more likely to find
"monopoly" in the industry limited to colas, then in the one which
includes all beverages, and yet there is no unambiguous way to define the
industry.
As well, the misallocative or dead weight losses described by some
economists are solely a product of their narrowly constricted
"blackboard" economics. Firms depicted in these models are timeless and
static, while those which earn a living in the real world are forced to act in
The market manipulator,
Part I
a dynamic setting. Nor is there an independent criteria (the perfectly
competitive result, beloved of the blackboard economist) against which to
measure the actual operation of a business concern which might run afoul
of combines legislation. Rather, the proponent of such legislation must
claim the contrary to fact conditional that were such an industry to exist,
it would have arrived at a different pricing and quantity decision than the
defendant accused of restraining trade. But here the firm finds itself in a
"Catch 22" no-win situation. For if it charges more than its competitors,
it can be found guilty of monopolizing or profiteering; if its prices are
lower, it can be fined for "cutthroat or predatory competition." It cannot
escape even if it proves it did neither: for then it stands condemned of
engaging in collusive behaviour.
Pollution is claimed as another
instance of "market failure." The charge, here, is that the business firm
need only calculate the costs of its inputs -- land, labour and capital - and
can safely ignore the costs of smoke, wastes and pollution, since these are
imposed on others. It is for this reason, claim the critics, that the capitalist
system is earmarked by excessively dirty air and water and by noise
inundations.
There is of course a failure of some sort that must be used to explain these
unfortunate circumstances. But it is not "market failure." On the contrary
it is "government failure," in this case the neglect of the courts to
carefully define and assiduously protect the property rights of those
victimized by polluters. Were the state to have awarded injunctions to the
plaintiffs in the early 19th century pollution or nuisance cases (as they
were called then), our entire experience with smoke prevention devices
and technology would have taken a far different turn than it has, and our
environment would have been far more adequately protected. (For a
Fraser Institute perspective that challenges the view that market failure is
responsible for our poor ecological conditions, see The Environmentalists
versus the Economy.)
There may well indeed be market failure in the sense that commerce is
conducted by flesh and blood creatures who are of course imperfect, and
hence given to error. But no one has shown the existence of any "market
failure" in the real world, apart from the fallibility of human beings.
1.
30 -
he public is frightened and highly suspicious of those who profit through stock
market manipulations. And their fears are often reflected by legislation. For
example. according to the securities commissions that govern the stock markets
in Canada, the U.S. and virtually every other advanced industrial country, it is illegal to
intentionally sell shares in order to lower their pri •. .e, and then to profit by buying
them back at those cut-rate prices.
The law regards the market manipulator as having engaged in a fraudulent act. It is a
false assumption. Take the case of the merchant who sells a sack labelled potatoes but
which actually turns out to contain a bunch of wonhless rocks. This is a theft of the sale
price, and is therefore properly held to be illegal. No such thing occurs in the case of
stock manipulation. The purchases and sales are in bona fide tokens of ownership. so the
charge of fraud is fallacious.
Nevertheless. even though it cannot be fraudulem, buying and selling shares of stock
in such a pattern raises several important questions: Ought such sales be prohibited on
the grounds of being inimical to the public interest? What are the economic ramifications? What role do such transactions play in the economy?
In order to answer these questions, let us consider stock manipulation in some detail.
Suppose that the price of a share in a given finn, call it XYZ Corp., was trading at S 100
before the arrival of the manipulator, Mr. M. and suppose that it would have continued
at this level for the foreseeable future if not for his intervention.
At the outset of this process, at least according to traditional theory, the manipulator
engages in massive sales, which drive down the price to say $50. At this point he begins
repurchasing shares at these rock-bottom levels. catapulting the stock back up to its
former price of 5100. In doing this, he earns a fortune for himself, and imposes great
losses on the other XYZ stockholders.
But there are grave flaws in this analysis. First of all, how did our manipulator obtain
the massive position in XYZ in the first place that allowed him to sell off enough stock
to drive down the price? If we assume that his sole interest in the corporation was to
manipulate its stock. and that he first had to buy his shares in order to sell them later.
then the economic picrure looks very different. All was going along swimmingly at the
5100 level, until Mr. \1 purchased enough shares for his operation. which caused the
share price to climb. Suppose that his purchases raise XYZ's shares to $150. Then, when
our boy M sells them off, he succeeds in lowering the price back down to the $100 level.
But he has not yet earned any profits. On the contrary, he has suffered losses. showing
nothing to offset the costs of his time, interest forgone or brokerage fees.
So far we have been assuming that M's doings have no effect on the expectations of
the other market participants. It is now time to retire that assumption. For in the real
world, expectations play an important role in decisions in the marketplace, and they are
altered by the actions of others. As well, for argument's sake we ignore the point that M
must first purchase the shares of any stock he wishes to manipulate.
In this scenario, when Mr. M begins his selloff he does so on such a massive scale
that the bottom drops out of the market for XYZ. Others panic. selling their shares for
whatever pittance they will fetch. As a result, the price drops farther arid faster than one
would expect, based upon the unloading of the M's holdings alone. Then, when the price
hits rock bottom. the clever M starts buying surreptitiously in bits and pieces, through
frontmen. In this way he makes money both going and coming: the price goes down
faster than his own sales could account for, and slower than might be expected. This
way he can buy up all or at nearly all of the artificially undervalued shares (we assume
that XYZ Corp. is as sound as a bell) before other people realize what a great bargain
they are and begin placing purchase orders on their own accounts.
T
To he continued.
Dr. Block is an economist with the Fraser Institute.
BRITISH COLUMBIA REPORT. MARCH 25, 1997 15
STOCK MARKET MANIPUlATOR: Part I
I
by: Walter Block, The Fraser Institute i
,
I
The public is greatly frightened and highly suspicious of the stock market
manipulator. This fear is commonly reflected in legislation forbidding such practices. For
example, according to the securities and exchange regulations which govern stock markets
in Canada, the U.S., and virtually all other advanced industrial countries, it is a fraudulent
act to intentionally sell shares in order to lower their prices, and then
i
to buy them back when they hit bottom, in order to make a profit.
This, however, is ill-conceived law. It is predicated on the false assumption that
the stock market manipulator engages in a fraudulent act, and nothing could be
further from the truth. The paradigm case of fraud is the sale of a good such as potatoes,
when, what actually turn out to be in the sack is a bunch of worthless
I
;
I
rocks. This is i equivalent to a theft of the sale price, and is therefore properly held
to be illegal.. No such thing is even alleged to occur in the case of stock
manipulation -j the purchases and sales are in bone fide tokens of ownership -- so
the charge of fraud is entirely fallacious.
Nevertheless, even though it cannot be fraudulent, buying and selling shares of
I
I
stock in such a pattern, and with such a motive, raises several important questions.
Ought it to be prohibited on other grounds, such as being inimical to the public
,
interest? Is there any justification for this behaviour? What are its economic
I
functions? What role does it play in the economy?
In order to answer such questions, let us consider stock manipulation in some
detail. Suppose that the price of a share in a given firm, call it XYZ corporation,
was trading at $100 before the advent of the manipulator, and that it would have continued
at this level for the foreseeable future but for his activity. We now have a market bench
mark against which these transactions can be contrasted.
At the outset of this process, at least according to the traditional theory we are
I
i
considering, the manipulator engages in massive sales, which drive down the price to,
say, $50. Whereupon he begins his repurchasing operations at these rock bottom levels
catapulting the price back up to its former level of $100. By doing this he earns a fortune
for himself, and imposes great losses on his hapless fellow investors
inXYZ.
i
But there, are grave flaws in this analysis. First of all, how did our manipulator obtain
the massive position in XYZ in the first place, which allowed him to sell off enough stock
~o so appreciably lower the price? If we assume that his sole interest
!
in the corporation is to manipulate its stock, and that he first had to buy shares (in order
sell them at high prices so that he could later repurchase them) then the economic pictu
looks very different. Here, all was going along swimmingly at the $100 level, until Mr.
(the manipulator) purchased enough shares for his operation. But this, as can been see
sharply increases prices compared to what they would have been, other things equal, ha
he not so acted. Suppose that these purchases raise the shares to $150. Then, when our bo
M sells them off, he only succeeds in lowering the price back down to the $100 level, b
which time no profits have yet been earned for him. Indeed, on the contrary, he h
suffered losses, having no gains to offset the costs of the time involved in the operatio
the interest foregone, and the brokerage fees.
So far we have been implicitly assuming that M's doings have no effect on th
expectations of the other market participants. It is now time to relax this assumption. W
do this in order to make our analysis more realistic. For in the real world, expectation
play an important role in market decision making, and they are altered by the commerci
actions of others. As well, for argument's sake, we now ignore the point that th
manipulator must first purchase the shares of any stock he wishes to manipulate.
In this scenario, when Mr. M begins his sell off, he does so on such a massive sca
that, seemingly, the bottom drops out of the market for XYZ. Other market participan
panic, throwing away their shares for whatever pittance they will fetch. As a result, th
price drops farther and faster than one would expect based upon the unloading of th
manipulator's holdings alone. Then, when the price hits the rock bottom, our clever Mr. M
starts buying surreptitiously in bits and pieces, through numerous fronts. In this way h
makes money both going and coming: the price goes down faster than his own sales cou
account for, and slower than that which might be expected to result from his purchases.
this way he can buy up all or at least most of the artificially undervalued shares (we a
still assuming that XYZ Inc is as sound as a bell, apart from all the finagling) before oth
people realize what a great bargain they are, and begin placing purchase orders on the
own accounts.
(This is part I of a two part series on the stock market manipulator, which will be
concluded in my next column.)
MEDICAL LICENSING IN CANADA by Walter Block,
Senior Economist, The Fraser Institute
an article for Financial Post
According to U. S. Representative Claude Pepper (Democrat, Florida) over
10,000 "doctors" are now practicing in that country without benefit of
proper medical licensing. These are not people with questionable
credentials, or graduates from diploma mills, or physician's assistants or
nurses practicing beyond their qualifications. We're talking about outright
impostors here, individuals who have no official qualifications at all.
Apart from this, fully 10% of the 450,000 duly licensed physicians
practicing south of our border are incompetent. This, at least, is the opinion
of Dr. Robert Derbyshire, past president of the Federation of State Medical
Boards, and is seconded by Dr. David Axelrod, New York's Health
Commissioner.
What is the situation in Canada? There are no official estimates of fake
doctors in this country, but according to the College of Physicians and
Surgeons of Ontario, a random sample of doctors from that province showed
that 13% either practiced medicine in a way that caused "serious concern" or
kept poor records. This crisis applied mainly to family doctors, not
specialists, and to ciderly doctors. An astounding 49% of physicians aged 70
and above caused "concern". Thus the situation here might even be worse
than in the U. S. However, even if the usual ten-to-one rule of thumb
applies, this would mean that about 1,000 practicing doctors in this country
are outright frauds, and another 4,500 are unskilled — despite their
legitimate credentials.
How could this possibly be true? Are not this nation's doctors subjected to a
complete and up-to-date medical school education, an exhaustive system of
initial pre-diploma testing, and airtight procedures which ensure competence
throughout their careers?
This, at least, is the theory.
But the practice, according to University of Alberta History Professor
Ronald Hamowy, is far different. According to Hamowy, the author of
Canadian Medicine: A Study in Restricted Entry, a book recently published
by The Fraser Institute, the function of medical licensing in this country is
not so much to insure physician quality, as it is to limit entry into the field,
so as to increase the income, power and prestige of those doctors already in
practice.
According to the evidence amassed in this book, the Canadian medical
establishment at one point or another in its history has:








banned price and other advertising for licensed doctors;
set minimum price schedules;
acted to prevent "overcrowding," or an oversupply of physicians by
setting up a whole host of irrelevant criteria for licensing - examples
include a knowledge of grammar, mathematics, Latin, history,
philosophy, and other academic studies, language requirements,
citizenship, etc.;
outlawed the uncontrolled study of medicine, even for those who do
not intend to practice;
placed roadblocks against foreign doctors practicing in Canada,
where they would compete with domestic physicians;
been content with imposing entry examinations only. If the
certification of quality were the true goal of these exams, they would
more likely be required of practicing physicians at least every
decade or so. For, says Hamowy, there is little guarantee - certainly
not on the basis of testing -that a doctor of seventy years of age is
still qualified, merely for having successfully sat an examination
forty years earlier;
fought against pre-payment contract practice, opposed doctors
testifying for plaintiffs in malpractice suits, and discouraged charity
work as undermining minimum fee schedules and professional
prestige;
raised medical student lees in order to increase the costs of entry into
the profession;

succeeded, from time to time, in raising physicians' income levels
beyond that of other, equally skilled, professions in Canada.
If the present licensing system has failed, what, then, can be done about the
epidemic of doctors who are either incompetent and/or sheer frauds?
The public policy recommendation which follows from Hamowy's analysis
would be to install a system of competitive certification, in place of the
present system of monopoly licensing.
Under licensing, if the applicant fails the test, he cannot practice (as in the
motor vehicle licence); under certification, a rejected applicant can still
practice (a non chartered accountant may legally help people fill out tax
forms), but he cannot pass himself off as certified. The problem with
monopoly
licencing (as with all other coercive monopolies) is that if the institution in
charge does a poor job, consumers have no alternative. Under competition,
there is an incentive system for all competitors to try to outdistance each
other in terms of quality control, innovativeness, cost-cutting, etc. The
weakest producers are forced to the sidelines, the strongest can expand the
scope of their operations, to the ultimate and on-going improvement of the
industry.
Although provision of knowledge to health care consumers about the skill,
qualifications, experience, and general trustworthiness of doctors may not
appear at first blush to be an "industry," the effects of competition would
operate here as well.
How might competition work in the medical profession?
Were
government so minded, it could announce that at some time hence (say, ten
years) it would call a halt to the present monopoly system of licensing
doctors. This would usher in a competitive certification system to begin at
present, to co-exist with licensing for the next decade, and to be launched
out on its own at that point.
What kind of firms might undertake such an endeavor? One likely scenario
would have various certification agencies - the Canadian Medical
Association itself, the Royal College of Physicians and Surgeons of the
provinces, the McGill University Medical Faculty, major insurance
companies, for example - all competing with each other as to which might
best be able to ensure the quality of physicians to the general public. Under
such a system, the quality of medicine and the extent of monitoring medical
practice would improve, to the great benefit of the health care of the
Canadian populace.
MEDICAL LICENSING IN CANADA by Walter
Block, Senior Economist, Fraser Institute, an article for
Financial Post
According to U.S. Representative Claud? Pepper {Democrat,
Florida) over 10,000 "doctors" are now practicing in that country
without benefit of proper medical licensing. These are not people with
questionable credentials or graduates from diploma mills, or
physicians assistants or nurses practicing beyond their qualifications.
We're talking about outright impostors here, individuals who have no
official qualifications at all.
Apart from this, fully 10% of the 10000 duly licensed
physicians practicing south of our border are incompetent. This, at
least, is the opinion of Dr. Robert Derbyshire, past president of the
Federation of State Medical Boards, and is seconded by Dr. David
Axelrod, New York's Health Commissioner.
What Is the situation in Canada? There are no official
estimates of fake doctors in this country, but according to the College
of Physicians and Surgeons of Ontario, a random sample of doctors
from that province showed that 13% either practiced medicine In a
way that caused "serious concern" or kept poor records. This crisis
applied mainly to [family doctors, not specialists, and to elderly
doctors. An astounding 49% of physicians aged 70 and above caused
"concern." Thus the situation here might even be worse than in the
U.S. However, even if the usual ten-to-one rule of thumb applies, this
would mean that about 1,000 practicing doctors In this country are
outright frauds, and another 4,500 are unskilled —despite their
legitimate credentials.
How could this possibly be true? Are not this nation's doctors
subjected to a complete and up-ro-date medical school education, an
exhaustive system of initial pre-diploma testing, and airtight
procedures which ensure competence throughout their careers?
This, at least, is the theory.
But the practice, according to University of Alberta
History Professor Ronald Hamowy, is far different. According to
Hamowy, the author of Canadian Medicine: A Study in Restricted
Entry, a book recently published by The Fraser Institute, the function
of medical licensing in this country is not so much to insure physician
quality, as it is to limit entry into every field, so as to increase the
income, power, and prestige of those doctors already in practice.
According to the evidence amassed in this book, the Canadian
medical establishment at one point or another n its history has:

banned price and other advertising for licensed
doctors:


set minimum price schedules;
acted to prevent "overcrowding," or an oversupply of
physicians by setting up a whole host of irrelevant criteria for
licensing- examples include a knowledge of grammar, mathematics,
Latin, history, philosophy, and other academic studies, language
requirements, citizenship, etc;

Outlawed the uncontrolled study of medicine, even for
those who do not intend to practice;

placed roadblocks against foreign doctors practicing in
Canada, where they would compete with domestic physicians;

been content with imposing entry examinations only. If
The certification of quality were the true goal of these exams, they
would more likely be required of practicing physicians at least every
decade or so. For, says Hamowy, there is little guarantee - certainly
not on the basis of testing -that a doctor of seventy years of age is still
qualified, merely for having successfully sat an examination forty
years earlier;

fought against pre-payment contract practice, opposed
doctors testifying for plaintiffs in malpractice suits, and discouraged
charity work as undermining minimum fee schedules and professional
prestige;

raised medical student fees in order to increase the
cost of entry Into the profession;

Succeeded, from time to time, in raising physicians'
income levels beyond that of other, equally skilled, professions in
Canada.
These claims, and much of the data Professor Hamowy has
unearthed, are a part of the Canadian historical record with which
most people, even doctors, may not be familiar. The evidence he
cites will thus come as a distinct and uncomfortable surprise to most
Canadians. And for good reason. This is because the typical doctor in
this country is not at all involved in limiting entry into the field as a
means of feathering his own nest. On the contrary the average
physician works long hard hours (Winston Churchill's oft-quoted
remark about "blood, sweat, and tears" is a particularly apt description
of medical practice), and has as his main concern the practice of his
profession, not the financial exploitation of his patients.
Thus the truth or falsity of Hamowy's claims cannot be based
on the experience of individual physicians who do not perceive
themselves to be engaged in restricting their competitors. On the
other hand, as Hamowy's research shows, the leadership of the
medical profession in conjuncture with well-meaning, though
paternalist, bureaucrats have been doing just that for a century.
If the present licensing system has failed, what, then, can be
done about the epidemic of doctors who are either incompetent
and/or sheer frauds?
The public policy recommendation which follows from
Hamowy's analysis would be to install a system of competitive
certification, in place of the present system of monopoly licensing,
Under licensing, if the applicant fails the test, he cannot
practice (as in the motor vehicle license); under certification, a
rejected applicant can still practice (a non chartered accountant ma»
legally help people fill out tax forms), but he cannot pass himself off
as certified. The problem with monopoly licensing (as with all other
coercive monopolies) is that If the institution in charge does a poor
job, consumers have no alternative. Under competition, there is an
incentive system for all competitors to try to outdistance each other in
terms of quality control, innovativeness, cost-cutting, etc. The
weakest producers are forced to the sidelines, the strongest can
expand the scope of their operations, to the ultimate and on-going
improvement of the industry.
Although provision of knowledge to health care consumers
about the skill, qualifications, experience, and general trustworthiness
of doctors may not appear at first blush to be an "industry," the effects
of competition would operate here as well.
How might competition work in the medical profession? Were
government so minded, it could announce that at some time hence
(say, ten years) it would call a halt to the present monopoly system of
licensing doctors. This would usher In a competitive certification
system to begin at present, to co-exist with licensing for the next
decade, and to be launched out on its own at that point.
What kind of firms might undertake such an endeavor? One
likely scenario would have various certification agencies- the
Canadian Medical Association itself, the Royal College of Physicians
and Surgeons of the provinces, the McGill University Medical Faculty,
major insurance companies, for example - all competing with each
other as to which might best be able to ensure the quality of
physicians to the general public. Under such a system, the quality of
medicine and the extent of monitoring medical practice would improve
to the great benefit of the health care of the Canadian populace.
1
MEDICAL LICENSING IN CANADA
by Walter Block, Senior Economist, The Fraser Institute
an article for Financial Post
According to U. S. Representative Claude Pepper
(Democrat, Florida) over 10,000 "doctors" are now practicing in
that country without benefit of proper medical licensing. These
are not people with questionable credentials, or graduates from
diploma mills, or physician's assistants or nurses practicing
beyond their qualifications. We're talking about outright
imposters here, individuals who have no official qualifications at
all.
Apart from this, fully 10% of the 450,000 duly licensed
physicians
practicing south of our border are incompetent. This, at least, is
the opinion of Dr. Robert Derbyshire, past president of the
Federation of State Medical Boards, and is seconded by Dr. David
Axelrod, New York's Health Commissioner.
What is the situation in Canada? There are no official
estimates of fake doctors in this country, but according to the
College of Physicians and Surgeons of Ontario, a random sample of
doctors from that province showed that 13% either practiced
medicine in a way that caused "serious concern" or kept poor
records. This crisis applied mainly to family doctors, not
specialists, and to elderly doctors. An astounding 49% of
physicians aged 70 and above caused "concern". Thus the
situation here might even be worse than in the U. S. However,
even if the usual ten-to-one rule of thumb applies, this would
mean that about 1,000 practicing doctors in this country are
outright frauds, and another 4,500 are unskilled -- despite their
legitimate credentials.
How could this possibly be true? Are not this nation's
doctors subjected to a complete and up-to-date medical school
education, an exhaustive system of initial pre-diploma testing, and
airtight procedures which ensure competence throughout their
careers?
This, at least, is the theory.
But the practice, according to University of Alberta History
Professor Ronald Hamowy, is far different. According to Hamowy,
the author of Canadian Medicine: A Study in Restricted Entry, a
book recently published by
The Fraser Institute, the function of medical licensing in this
country is not so much to insure physician quality, as it is to limit
entry into the field, so as to increase the income, power and
prestige of those doctors already in practice.
According to the evidence amassed in this book, the
Canadian medical establishment at one point or another in its
history has:

banned price and other advertising for licensed doctors;

set minimum price schedules;

acted to prevent "overcrowding," or an oversupply of
physicians by setting up a whole host of irrelevant criteria
for licensing - examples include a knowledge of grammar,
mathematics, Latin, history, philosophy, and other
academic studies, language requirements, citizenship, etc.;

outlawed the uncontrolled study of medicine, even for
those who do not intend to practice;

placed roadblocks against foreign doctors practicing in
Canada, where they would compete with domestic
physicians;

been content with imposing entry examinations only. If the
certification of quality were the true goal of these exams,
they would more likely be required of practicing physicians
at least every decade or so. For, says Hamowy, there is little
guarantee - certainly not on the basis of testing - that a
doctor of seventy years of age is still qualified, merely for
having successfully sat an examination forty years earlier;

fought against pre-payment contract practice, opposed
doctors testifying for plaintiffs in malpractice suits, and
discouraged charity work as undermining minimum fee
schedules and professional prestige;

raised medical student fees in order to increase the costs of
entry into the profession;

succeeded, from time to time, in raising physicians' income
levels beyond that of other, equally skilled, professions in
Canada.
If the present licensing system has failed, what, then, can be
done about
the epidemic of doctors who are either incompetent and/or sheer
frauds?
The public policy recommendation which follows from
Hamowy's analysis
would be to install a system of competitive certification, in place of
the
present system of monopoly licensing.
Under licensing, if the applicant fails the test, he cannot
practice (as in the motor vehicle licence); under certification, a
rejected applicant can still practice (a non chartered accountant
may legally help people fill out tax forms), but he cannot pass
himself off as certified. The problem with monopoly licencing (as
with all other coercive monopolies) is that if the institution in
charge does a poor job, consumers have no alternative. Under
competition, there is an incentive system for all competitors to try
to outdistance each other in terms of quality control,
innovativeness, cost-cutting, etc. The weakest producers are
forced to the sidelines, the strongest can expand the scope of their
operations, to the ultimate and on-going improvement of the
industry.
Although provision of knowledge to health care consumers
about the skill, qualifications, experience, and general
trustworthiness of doctors may not appear at first blush to be an
"industry," the effects of competition would operate here as well.
How might competition work in the medical profession?
Were government so minded, it could announce that at some time
hence (say, ten years) it would call a halt to the present monopoly
system of licensing doctors. This would usher in a competitive
certification system to begin at present, to co-exist with licensing
for the next decade, and to be launched out on its own at that
point.
What kind of firms might undertake such an endeavor? One
likely scenario would have various certification agencies - the
Canadian Medical Association itself, the Royal College of
Physicians and Surgeons of the provinces, the McGill University
Medical Faculty, major insurance companies, for example - all
competing with each other as to which might best be able to
ensure the quality of physicians to the general public. Under such
a system, the quality of medicine and the extent of monitoring
medical practice would improve, to the great benefit of the health
care of the Canadian populace.
MILTON FRIEDMAN, POLITICAL DISHONESTY & JOURNALISTIC
INTEGRITY
by Walter Block
The latest book written by Milton (and his wife Rose)
Friedman seems to be
making quite a stir here in Canada. Entitled Tyranny of the Status
Quo, this book is quite simply a brilliant tour de force of what has
come to be known as the Friedmanite Philosophy. Once again the
Friedmans demonstrate that our burgeoning public sector, with
its regulations, wealth transfers, price supports, government
enterprises, trade protectionism, subsidies for big business, etc.,
does not benefit but rather harms the well-being and economic
freedom of the average person. In this volume, the authors closely
analyze the "Iron Triangle", the direct recipients of government
largesse, the bureaucrats who administer the welter of regulations
and red tape, and the politicians who carry on, and continually
expand, the mixed-economy system.
All of this of course has direct relevance for Canadians.
Despite all the
rhetoric of helping the poor in this nation, and in the
underdeveloped countries of the third world, Canada remains
dedicated to trade protectionism. Its ubiquitous Crown
Corporations misallocate resources, lose money by the bushelful
and yet inexorably take on more and more tasks. In addition to
such uniquely "made-in Canada" policies such as F.I.R.A., N.E.P.,
Canada Health Act, Agricultural Land Reserves and Marketing
Boards, we undermine free markets with rent controls, minimum
wage laws, zoning, union restrictions, excessive taxation, and in
literally hundreds of other ways. For this reason alone, Tyranny of
the Status Quo ought to be read by all Canadians concerned with
public policy issues.
But there is another reason as well. For in this book, for the
first time in all
their writings, the Friedmans specifically mention political events
which have
taken place in Canada. To wit, the recent election of British
Columbia premier William R. Bennett to a third term, and his
sweeping program to reduce the civil service by 25%, to phase out
and/or abolish a number of politically sensitive commissions, and
to cut expenditures over a wide range of other programs -- all to
the great dismay of the Iron Triangle of direct beneficiaries,
bureaucrats, and socialist politicians. (Dr. Friedman's familiarity
with this event came about because of his meeting with Mr.
Bennett at the luncheon meeting of the Mont Pelerin Society in
Vancouver, organized by the Fraser Institute.)
But why wait to spell out the details of restraint until after
the election? Why not announce them during the campaign? In
attempting to explain and understand this occurence, the
Friedmans utilize the concept of political concentration. The
typical government intervention into the economy costs large
amounts of money, taxed from the citizenry as a whole. Due to
inherent inefficiencies, it will distribute goods and services worth
far less. Yet because the taxes are spread out over millions of
people, and the benefits confined to only a relatively few
recipients, civil-service administrators and politicians, the former
hardly notice their loss, while practically the entire economic well
being of the latter is dependent on these transfers. If all 23 million
Canadians pay an extra 10
each per year, and of the resulting $23 million, $1.0 million is
wasted, and "deserving citizens" XYZ receive the remaining $1.3
million, then the populace will hardly notice their loss, while the X
YZs will fight tooth and claw to retain their privileges. For
example, they will hire the best minds available to convince the
public that the program is really in the national interest, or the
pillar of motherhood, or some such, and that any and all restraint
threatens the very foundations of western civilization.
This is why analysts observe politicians acting as they do.
Had Premier Bill Bennett announced the curtailment or
eradication of the XYZ program during the election, he would have
had to contend with an aroused opposition from a small minority,
and garnered only lukewarm support, at best, from the "silent"
majority. There would have been the great risk that the minority,
willing to pull out all stops in defense of its place in the public
trough, would have been able to beguile the majority, at least in
the short run. If he wants to succeed, according to this theory, the
politician cannot run this risk. Rather, he must give the majority
sufficient time for a careful weighing of the pros and cons, so as to
be free to place the strident calls of the XYZs in a more rational
context.
Notice that this analysis, strictly speaking, is an attempt to
describe, and
explain a bit of political-economic reality. It seeks to study the
behaviour of politicians as the chemist studies molecular activity.
That is, this theory attempts to understand political reality, not to
cheer it on from the sidelines. As such, it falls squarely within the
realm of what is called "positive economics". By contrast,
"normative economics" attempts not to comprehend, analyze and
perhaps predict, but to justify.
And yet this rather straightforward distinction seems to
have been lost sight
of in Canadian journalistic circles. According to a recent column
appearing in a widely-circulated and highly respected Canadian
newspaper, Milton Friedman is interpreted as stating that
"Premier William Bennett did the right thing by not revealing his
plans to reduce government services before the last election".
Headlined "Bennett right to hide plan, book states", the article
goes on, in effect, to charge Bennett with outright dishonesty, and
Friedman with favouring such a policy.
Politics may be a dirty business, but it behooves those who
wish to make it intelligible to pay diligent attention to the
Friedman theory of political concentration and diffusion, and to
correctly interpret it.
THE MINIMUM WAGE LAW DISCRIMINATES AGAINST YOUNG
WORKERS
prepared for the "Financial Post"
by Walter Block, Fraser Institute, Vancouver, B. C.
B.C. Labour Minister Terry Segarty has a problem, and is
resolved to do
something about it in the fall.
The Province of British Columbia has the lowest minimum wage
rate in the nation -- $3.65 per hour -- and tremendous pressure
has been placed upon him to raise it at least to $4.00 per hour, the
average level obtaining in the other nine provinces.
At first blush, this would seem like a good idea, even one
that is long overdue. If, as its name implies, the minimum wage
law can boost wages up to whatever level is prescribed, that is to
say set a floor under incomes for the poor, then why not? Surely
the presently wobbling economy in Lotus Land could use a shot in
the arm of that sort.
But a moment's reflection will show that this is a mirage.
For example, if prohibiting compensation below some arbitrarily
determined level can really enhance salaries, why stop at the
paltry, mean and niggardly $4.00 level? Why not go for, say,
$40.00 per hour, or even better yet, really reach for the stars and
demand that no employee be paid less than $400 per hour?
The answer is obvious. To mandate that a skilled craftsman
with a productivity level of $25.00 be paid $400.00 is to invite
disaster. Any employer who complied would rack up $375.00 per
hour in red ink. Even at the more modest $40.00 per hour, any
such firm would still lost $15 per hour -- and thus be forced into
eventual bankruptcy.
No, the reason wages are as high as they are has nothing
whatever to do with legal compulsion. It is because productivity is
relatively great in this country, and because salaries tend to be
equal productivity levels, that we enjoy our relative prosperity.
True, a minimum wage level of $4.00 would not threaten
the livelihood of the person who can produce $25.00 worth of
goods and services per hour, but it certainly can put at risk the
jobs of people with lesser skills. For example, the employment of
an individual who can only create goods valued by the market at
$3.25 per hour, would sure to be obliterated by a minimum wage
level of $4.00 per hour.
How can we test the economic principle that high
minimum wage levels lead to relatively increased unemployment
rates for unskilled workers? One way is to calculate the
unemployment rates of youthful Canadians as a percentage of
those of the more highly productive adult employees in this
nation, and then compare this figure with the minimum wage
levels which apply in each of the provinces. (We choose workers
between 20 and 24 as our control because this is the youngest
group subject to the "adult" minimum wage law).
Unemployment Rate
for 20-24 year olds
Provincial
relative to employees Minimum Wage
aged 25+
Level
Newfoundland
204%
$4.00
Nova Scotia
213%
$4.00
New Brunswick
237%
$3.80
Quebec
206%
$4.00
Ontario
251%
$4.00
Manitoba
289%
$4.30
Saskatchewan
257%
$4.25
Alberta
182%
$3.80
British Columbia
190%
$3.65
Prince Edward Island n.a.
$3.75
Source: Statistics Canada, Labour Department, May 1985
The results are painfully obvious. Manitoba, with the
highest minimum wage level ($4.30) has the largest
unemployment rate for its young workers, relative to the general
population (289%). Saskatchewan, with the next greatest level
($4.25), weighs in with the second biggest relative unemployment
rate for youth (257%). And at the bottom of the pack in terms of
the disenfranchisement of their young people, come B.C. and
Alberta with two of the country's lowest minimum wage levels.
Are you listening, Mr. Segarty?
July 15, 1985
MOVIE REVIEW LIBEL
by: Walter Block, The Fraser Institute
Attention all novelists, poets, artists, playwrights, actors, musicians,
dancers, athletes, composers, and writ-era. You say you don't like the
reviews you've been receiving lately? Who the hell do those critics
think they are, right? Have you ever felt, "Let them get out on stage
and perform, we'll see how they do," eh?
Well, as the old aphorism goes, "Don't get mad, get even." Have I got
an idea for you: sue theml
This, at least, was the response taken by Cineplex Odeon Corp. to a
negative review which appeared in the Toronto Star. Not that the
nation's largest movie distributor didn't try to block publication of the
offending column in the first place. They indeed made this attempt,
and succeeded in obtaining an injunction, but when this was later set
aside, Cineplex launched a libel suit against Toronto's afternoon
newspaper.
The newspaper column in question is entitled "On Your Behalf," and
appeared on the front page of the entertainment section. Written by
Toronto Star editor Douglas Marshall, the piece objected not to the
movie exhibited by Cineplex, but to its practice of showing a 30second advertisement for an athletic shoe company right before the
feature film.
In the humble opinion of the present writer, Marshall's attack on the
ancient and honorable practice was as snarly, low-down and worthless
a piece of journalism as has ever graced the pages of a major
newspaper. Further, it was hypocritical in the extreme, in that
Marshall's employer, the Toronto Star, depends for a large part of its
revenues upon this self-same practice of advertising.
Cineplex Odeon could have contented itself with a back of the hand
slap at Marshall along the lines of pots calling kettles black. Better
yet, it might have launched an ad campaign of its own, publicly
defending its decision to help make consumers :iware of products
being made available to them under our marvelous system of free
enterprise (commercial advertising of this sort is virtually unknown
behind the Iron,Curtain.) Had they done any of these things, they
would have been completely in the right.
In the event, however, the movie distributor chose to deny Douglas
Marshall his right to express his ludicrous opinions and the Star to
print them. (I realize I am opening myself up to a possible libel suit,
this time from Mr. Marshall or the Toronto Star; all I can say is,
someone has to defend free speech, somewhere along the line,
otherwise there will be no advertising and ultimately, no newspapers
either). Odeon did so on the ground that "On Your Behalf" was "false,
scurrilous and malicious," and would damage its reputation in the eyes
of the cinema-going public.
Unfortunately, our libel laws are based on the premise that reputations
are the legitimate possessions of those to whom they refer. That is to
say, I own my reputation, you own yours, Marshall, the Star and
Cineplex Odeon own theirs. But nothing could be further from the
truth. As a matter of fact, the reputation of each of us consists of the
thoughts of everyone else except its purported owner. In other words,
my reputation consists of the thoughts that everyone else may have
about me. My own thoughts about myself do not form part of my
reputation. Similarly, the reputation claimed by Cineplex consists of
the thoughts of all other persons, except for this movie distributor.
Since no one can properly claim to own the thoughts of other people,
they cannot legitimately own their "own" reputations.
As if this were not paradox enough, our reputations would
undoubtedly be safer (even though they cannot be owned by
ourselves) in the complete absence of all libel prohibitions. Right now,
if we are "victimized" by a scurrilous attack, it may easily succeed in
loss of good will and other economic setbacks. People reason that
were the story not true, the victim would sue for libel. The problem
with this is that libel suits are expensive, and only rich individuals or
corporations can undertake them. (When was the last bisr.e you heard
of Joe lunch-bucket suing for libel). As well, were libel legislation
completely rescinded, attacks on reputation would come so thick and
fast that they would lose all power to injure. Under a regime of full
free speech, mere allegation would no longer be able to damage a
reputation; the facts would have to be ascertained.
- 30
742 words
.-^
-\^!S JC-'C"' Newfoundland Labour Strike
jV^U
by Walter Block, Fraser Institute, Vancouver, B.C.
The labour scene in Newfoundland is heating up once again.
This time it is the Newfoundland Association of Public Employees
(N.A.P.E.) which finds itself on the barricades. This 1,700 member
union is engaged in a struggle with the Newfoundland Transportation
and Public Works Department over a demand that their $6 to $8 an
hour wages be lifted to match those which prevail in other provincial
ministries. The organized workers are also campaigning against Bill
59, a law which declares essential (and therefore prohibits from
striking) a proportion of all public sector bargaining units.
The altercation over these issues has turned bitter. The strike has been
declared illegal, and several N.A.P.E. officials have already been
jailed for persisting in it. The likelihood is that more imprisonments
will follow. John Fryer, president of the 250,000-strong National
Union of Provincial Government Employees, vows that his group will
fully support the local union. A member of the Canadian delegation to
the International Labour Organization, Mr. Fryer has characterized
Bill 59's strike limitation provisions as a "threat to the rights of free
people in a free society," and intends to raise this issue with the I.L.O.
Tempers are short, and all that is needed for a "made-in-Canada"
version of the Arthur Scargill led British miners strike, is a spark
hitting the dry tinder.
This Newfoundland labour fracas raises an important question which
has application far beyond its provincial borders. If we sit back and
look at the issue with a some historical perspective, we can see that
this episode does not really fit the classical economic model wherein
business and labour meet in head-on confrontation. In that scenario,
the capitalist was presumed to be a profit maximizer, and therefore
unwilling and even unable to deal fairly with his employees. The
government was thus brought into the picture, in order to play an
unbiased and intermediary role.
But in the present Newfoundland controversy, business has no part at
all. We rather find the forces of unionism in confrontation with
government, the institution presumed by the classical theory to be
above the labour-management struggle. It is almost as if one hockey
team were now trying to overcome not its opponent, but rather the
referee, and the latter, instead of insisting that its role be respected, has
entered the fray with alacrity. In such a case, who can act as the nonpartisan umpire? The answer is. No one! (The courts and judges in
this country are correctly seen as part and parcel of the government
which pays their salary, and through whose good offices they are
appointed.) This is why labour strikes against government are so
threatening to the very social fabric upon which civilization rests, in a
way that business-union quarrels are not, and can never be.
What can be done about this? We must first recognize that the
classical theory was predicated upon the state truly being above the
fray, apart from the hurley burley world of commerce. But once the
modern government entered the realm of business, with its panoply of
crown corporations and product-oriented ministries, a fatal
contradiction arose. It was as if the hockey referee picked up the stick,
and tried to knock the puck into one (or both) of the goals, all the
while insisting that he be allowed to keep the whistle between his lips,
and that the two teams respect his position as umpire. The point is, the
two roles are simply incompatible. Government can be the referee
(the classical-liberal definition of this institution), or government can
be a player, but it cannot (successfully) be both. One or the other
must go.
When put into these terms, it is painfully obvious which way our
society must move. There is only one choice if we are to avoid the
chaos involved in having either no referee at all, or what is almost
worse, a referee who is not respected because correctly perceived as
party to the altercation. And that of course is a move toward
privitization: government must be encouraged to sell off crown
corporations in a wholesale manner not yet even contemplated by the
present administration; the public sector must divest itself on a
massive scale of its lands, businesses, commercial undertakings, and
those ministries involved in competing with the private sector; the
apparatus of the state must cease and desist from attempting to provide
goods and services whose manufacture could be organized through the
marketplace.
Then, secure in the knowledge that it can at last play a truly judiciary
role in labour management relations, government can in good
conscience ban public sector unions. (This i^ould not mean that
individual civil servants could not quit, nor even that they could not
quit, or threaten to do so, en masse; it would only mean that society
would no longer grant to these institutions special privileges to picket
-- privileges denied all other citizens.) First of all, there would no
longer be much of a public sector left for unions to organize. And
what of those functions which would still remain even after a
wholesale privitization (police, fire, army, courts, welfare, etc.)? Here,
we could at last approach the classical model where government could
be sharply distinguished from business enterprise: the latter might be
seen by some as having interests diametrically opposed to organized
labour, but this would no longer apply to the former.
In this way respect for the refereeing process in Canada could be
resurrected. In this way, and only in this way, can our nation be spared
some of the agonized labour strife suffered by many of our neighbors.
- 30 -
Olympic Standings: What do they mean?
by Walter Block, Fraser Institute, Vancouver, B.C.
Many people in the west have been emotionally cast down
by the results of the Seoul Olympics. Apart from the Ben Johnson
incident, which is still notfully resolved as of this writing, they see
the final standings as an indication of political economic success,
and they do not like the implication that the communist regimes of
the U.S.S.R. and Eastern Europe seem to be more viable than those
of North America and Western Europe.
It was bad enough that the Soviets trounced the U.S. team.
Even worse was the fact that the relatively small country, East
Germany, also nosed out the Americans. To add insult to injury,
the Bulgarians, Chinese and Romanians outperformed the British,
French, Australians and Canadians, and others who are part of the
western ambit.
One way to confront this wailing and gnashing of teeth is to
realize that the Olympic Games are just that: games. As such, they
do not at all amount to an objective assessment of the
accomplishments of a nation, and the desirability of living there. If
proof be needed of this obvious point, one need do no more than
compare the results of the two Germanys. The East Germans,
although far fewer in numbers, garnered 102 medals compared to
the 40 earned by their counterparts in the West. Yet any
comparison of the two societies, on the basis of living standards,
freedom, G.D.P. etc., will show West Germany to be vastly
preferable to East Germany. It was not the Federal Republic
(west) which built the Berlin Wall to keep their people locked up
inside, after all; on the contrary, this "honor" belongs to the so
called Democratic Republic of Germany (east). There are no
people who flee from West Berlin to East Berlin at great risk of life
and limb; no, the one way traffic is all the other way.
The poorer showing of the western industrialized
democracies
may also be explained by the hypocritical "amateur" rules which,
although on the way out, and good riddance to them, still continue
to bedevil the Olympic Games. According to the popular
mythology, there are no Soviet athletes who are professional, and
thereby excluded from the games. But the same does not apply in
the U.S. Is there any doubt that were such top flight American
professional athletes as Mike Tyson, Sugar Ray Leonard, Michael
Jordan, Larry Bird, Magic Johnson, Reynaldo Nehemiah allowed to
compete, that the American totals would have been higher, and
those of the Soviets and East Germans correspondingly lower?
As well, there is a great bias in the choice of sports
represented at the Olympics. The U.S. and Canada are preeminent
the world over in football and baseball, and yet these activities
were not officially represented in Seoul at all. The worst team in
the N.B.A. would blow the representative of any other country off
the court, and yet this sport accounts for only one set of medals. In
contrast, there are many minor sports with virtually no adherents
in North America, which offer literally dozens of medals.
There is yet another sense in which medal standings are a
poor indication of the athletic prowess to be found in the nations
of the world; they have not been controlled for population. This is
absolutely crucial to any appreciation of the true accomplishments
of a nation in this regard. For little credit should be given to a
large country which piles up many victories -- but only through
sheer force of numbers.
In the accompanying table, the medal harvest of each
country has been divided by its population. The number of medals
per population is given in column 2, and the ranking thereby
derived in column 3. Columns 4 and 5 show the actual number of
medals won, and the rankings obtained from these figures.
Column 6 shows the number of ranks higher (+) or lower (-) a
country moves as a result of comparing the adjusted to the
unadjusted medal count.
A perusal of this table yields some surprising results. East
Germany still retains its rank as the second most prolific athletic
country in the world, but the Virgin Islands, not the Soviet Union,
has captured the top spot. Other small countries vaulting into the
top ten include the Netherlands Antilles, Djibouti, Surinam and
Norway.
The U.S.S.R. still outshines the U.S., but both of them appear
in the middle of the pack, in 25th and 28th places, respectively. So
much for the vaunted athletic positions of both these two super
powers. Games, it would appear, have very little indeed to do with
the armed might of a nation.
Besides these two, other major losers in terms of ranking
are the relatively large countries China, Japan, Brazil, Poland, U.K.,
Italy, Belgium, Turkey, Mexico, and Spain. All have lost at least 10
ranking places as a result of comparing the new system with the
old.
Adjusting the medal count is also in keeping with the
common sense notion that people from similar and neighboring
countries tend to have comparable sports prowess. In the adjusted
ranking scheme, the South American countries of Chile, Argentina,
Peru, Brazil, Colombia and Mexico are all grouped in the 40th to
46th ranks. Similarly, the Scandinavian nations of Sweden,
Norway, Finland and Denmark are all to be found within the 9th to
16th positions. The Iberian countries Spain and Portugal occupy
similar ground (37th and 39th positions) and are closely joined by
other European southern Mediterraneans such as Greece (38th),
France (30th) and Italy (31st). Likewise, we can see that the
inferiority complex that Canadians have long held with regard to
the U.S. is entirely unjustified. These countries are alike as two
peas in a pod, holding down positions 28th and 29th. The medal
differences are virtually insignificant.
The implications that follow from this analysis are sharp
and dramatic. There is simply no reason for either superpower to
invest millions of dollars in a quest for athletic excellence -- at
least if their goal is a demonstration of the superiority of their
respective systems. They are the leading two countries of the
world in terms of armaments, and one of them has an economic
system the other is now in the flattering process of copying. But as
far as athletics are concerned, both are at best mediocre.
Nor is there any justification for countries of moderate size,
such as our own, to pour millions of tax dollars into a quest to
appear larger than life on the world's stage. This may gratify some
nationalist chauvanists, but the average Canadian would prefer to
make his own choice on the matter. Let us, then, privatize the
Olympic movement, and cut it off from all further government
funding.
- 30 October 6, 1988
Country Medals/Population Per Capita Rank Actual Medals Rank +
/Vigin Islands
1030.9
1
1
45
East Germany
610.5
2
102
2
N. Antilles
431.0
3
1
42
New Zealand
409.3
4
13
16
Bulgaria
401.0
5
35
5
Djibouti
384.6
6
1
47
Surinam
284.0
7
1
37
Hungary
214.7
8
23
10
Sweden
132.2
9
11
18
Norway
122.2
10
5
24
Romania
111.3
11
24
8
Australia
96.0
12
14
15
Jamaica
95.4
13
2
31
South Korea
88.1
14
33
6
Finland
83.5
15
4
26
Denmark
78.0
16
4
25
Netherlands
68.9
17
9
20
West Germany
65.9
18
40
4
Switzerland
62.8
19
4
28
Mongolia
62.6
20
1
49
Kenya
58.7
21
9
20
Yugoslavia
53.5
22
12
17
Costa Rica
53.4
23
1
39
Czechoslovakia
52.3
24
8
22
U.S.S.R.
50.2
25
132
1
Poland
45.6
26
16
12
U.K.
42.9
27
24
9
U.S.
41.2
28
94
3
Canada
41.0
29
10
19
France
29.4
30
16
11
Italy
24.7
31
14
13
Belgium
20.3
32
2
33
Senegal
19.7
33
1
44
Morocco
14.7
34
3
29
Austria
13.2
35
1
35
Japan
11.9
36
14
14
Spain
10.6
37
4
27
Greece
10.2
38
1
48
Portugal
10.1
39
1
36
Chile
8.8
40
1
38
Argentina
7.1
41
2
32
Peru
5.8
42
1
43
Brazil
5.0
43
6
23
+ 44
+ 39
+ 12
+41
+ 30
+2
+9
+ 14
-3
+3
+ 18
-8
+ 11
+9
-3
-14
+ 11
+ 29
-1
-5
+ 16
-2
-24
-14
-18
-25
-10
-19
-18
+1
+ 11
-5
-22
-10
+ 10
-3
-2
-9
+1
-20
Colombia
Turkey
Mexico
Iran
China
Thailand
Philippines
Pakistan
Indonesia
4.7
4.4
2.9
2.9
2.7
2.2
2.0
1.1
.6
44
45
46
47
48
49
50
51
52
1
2
2
1
28
1
1
1
1
46
30
34
41
7
52
51
50
40
Pay Equity-by Walter Block, The Fraser Institute, Vancouver,
B.C.
Canada is now in the process of implementing a spate of legislation in
order to promote "equality in employment", as called for most notably
by Judge Rosalie Abella. The main finding of the Abella Royal
Commission is that the female-male wage ratio of 63.9 percent in
1982 is largely due to sexual discrimination on the part of the nation's
employers, both public and private. Its chief recommendation is that a
new affirmative action policy of "employment equity" be
implemented, which would require business and Crown corporations
to change their hiring and promotion practices, until balanced job
representation and equal pay have been much more nearly attained.
However, this is the wrong solution to a non-existent problem. The
major finding of the Fraser Institute study is that the income gap
between genders is not due to employer discrimination, but rather to
differences in productivity. There is no determination that these
differences are inherent, or based on genetics. Rather, one major factor
is the asymmetrical effect of marriage on earnings. It raises the
earnings of the husband, and reduces those of the wife. This, in turn, is
because of unequal child care and house management responsibilities,
different psychic, attachments to the labour force vs. home and hearth.
The proof? Women who have never been touched by the institution of
marriage, and who thus can be presumed to have productivity levels
similar to those of men, do not suffer from lower incomes.
The statistics are revealing. In 1981, the last year for which such data
is available, the female-male ratio for Canadians who have never been
married was 83.1 percent. But even this is an underestimate of the
true relationship, because the statistics have not been corrected for
labour force experience, age, education, unionization, etc. When just
one of these corrections is made, for example, and we compare female
to male incomes ratios for never-marrieds with a university degree, the
figure rises to 91.3 percent. (For 1971. such university educated nevermarried females actually earned 9.8 percent more than their equally
accomplished male counterparts!). In other words, when we consider
only males and females who have never been touched by the
productivity-differentiating institution of marriage, that is, compare
men and women who are likely to have similar market productivities,
we find no statistically significant differences in their earnings.
The Perils of Nuclear Energy?
by Dr. Waiter Block
+2
-15
-12
-6
-41
+3
+1
-1
-12
The recent death of 84 men with the sinking of the oil drilling rig
Ocean Ranger off Newfoundland was a great tragedy. All the more
reason, then to re-examine the widely publicized misgivings about
nuclear energy foisted upon us by the "ecology" movement.
The Ocean Ranger tragedy was not, unfortunately, the first energyrelated accident to claim numerous lives. Ralher, the non-nuclear
energy field has been plagued with a series of similar mishaps.
Other recent offshore oil drilling rig mass fatalities include:



the capsizing of the 10,000 ton Alexander Kielland
accommodation rig off Norway in the North Sea in March
1980, with the catastrophic loss of 123 lives.
A November 1979 oil rig collapse during a storm in the Bohai
Gulf of northeast China, which killed 72 workmen.
A blow out in October 1980 of the U.S.-owned rig Tappmeyer
off Saudi Arabia in which 18 people perished.
Coal mining, too, has been marred by numerous large-scale
accidents, the world over:



In Canada, the Nova Scotia coal mine "Springhill" was the site
of a disaster which claimed 39 lives in 1956, and another 74 in
1958.
In the US roughly 300 coal miners die In the line of duty every
year.
In addition to cave-ins, coal miners have long been subject to
the dreaded "black-lung" disease which has crippled many,
and directly or indirectly killed many others.
If this past record looks bleak, the future bodes ill as well. Despite
ever-improving technologies, as the quest for offshore oil continues
apace, into evermore inhospitable environments, the only rational
expectation is for more of the same, only more so.
The same holds true for coal mining. If energy prices continue their
recently interrupted upward path, one source of additional coal
supplies may be to dig deeper — into increasingly more dangerous
terrain. Strip-mining of coal nearer to the surface brings in its wake
the risk of water run offs, and slides, and other hazards —
vociferously pointed out to us by the self-styled "ecologists". And
other alternative energy supplies come with dangers of their own.
The recent hydro-electric dam eruption which drowned thousands of
people in India is a chilling case in point.
What of nuclear power? Despite the widespread media-led wailing
and gnashing of teeth which accompanied the meltdown at Three
Mile Island in Pennsylvania, the plain fact is that not a single solitary
radiation-related death has occurred in the quarter century of
commercial nuclear power generation.
And yet the litany goes on. Protestors at nuclear power station
continually attempt to halt operations — and are accorded a
respectful-to-fawning hearing by the nation's press. Although
trespassers on private property, the protesters are given credit for
"morality" and "concern".
Based on the well-attended movie "China Syndrome" starring trendy
lefties Jane Fonda and Jack Lemmon, the impartial observer would
A policy that needs
some improvements
be led to think that oil, gas, coal, and hydroelectric power were cheap
and safe energy sources, while nuclear was a mass killer.
Can anyone imagine how the media would have reacted had the
victims of the Ocean Ranger instead perished In a nuclear accident?
There is little doubt that the nuclear industry would have been
brought to its knees. A sea of front page news coverage would have
made the publicity accompanying the repatriation of the Canadian
Constitution seem pale by comparison.
It is time, it is long past time to redress this imbalanced analysis
which has been perpetrated upon society. This does not mean, of
course, that we must bring the same unreasoning passion to bear on
the traditional energy industries, as the left wing "ecologists" have
long aimed at nuclear power. This would mean a serious curtailment
of all energy supplies — and the death of millions of consumers who
are dependent upon energy for their very lives.
On the contrary, a more sober and measured evaluation would
appear to be in order. One which looks carefully at the evidence
before launching into public policy recommendations.
And when this is done, the conclusion is inescapable that nuclear
must be allowed to compete fairly with all other energy industries
without fear or favor on either side.
May,
1982 Sterling Newspapers.
1.
ew Democratic Party housing critic Robin Blencoe (MLA, Victoria) released a
position paper which proposes to provide adequate shelter at affordable prices for
all British Columbians. Unfortunately, this missive is part ofthe problem, not part
of the solution. It advocates precisely the policies which have brought us to our present
sorry housing mess. If acted upon, the document will worsen our situation, not improve it.
It is tempting to dismiss this initiative as the blatherings of an unreconstructed socialist,
and to let it go at that. Unfortunately, however, we cannot do this. Mr. Blencoe is more
than likely to become the minister of housing in any future NDP government, and that
scenario is fully within the realm of possibility. So his proposal, if for no other reason,
deserves our serious consideration.
Let us consider the elements of the program:
• A tax on speculative housing flippers. Although the continual move of housing prices
toward the stratosphere has been somewhat curtailed of late, prices are still far too high for
many first-time homebuyers and young families. But prices can rise whether or not
speculators enter the market. Successful speculators sell when prices are high and buy
when they are low. By doing so, they iron out price fluctuations, lowering the pinnacles,
and raising the troughs. Taxing such public beneficiaries will only increase the violability
of this sector of the economy, something no one wants, even NDP housing ministers.
• Re-institute the Rentalsman. Rent control or rent review reduces the supply of rental
accommodation. Other things equal, investors will be less likely to place their hard-earned
money in this sector with these programs in effect. With fewer units available, vacancy
rates cannot rise. Office towers have ~ever been subject to controls of this sort; their supply
is continually increasing, and vacancy rates are relatively high.
• Allow municipalities to charge developers for added burdens on roads, sewers,
schools, etc. This excrescence from the slow-growth philosophy will have precisely the
opposite results from those intended. Its purpose is presumably to promote house-building,
so as to combat the shortage now afflicting the citizenry. How will placing rates and
greater burdens on builders encourage them to create more housing?
• Develop a comprehensive government program for affordable rental to home ownership. If we have learned anything from the disarray of the Soviet and Eastern European
economies, it is that central planning doesn't work. That decades-long experiment should
have convinced all of us that what is needed for a sound economy, and a healthy vibrant
housing sector, is greater reliance on decentralized markets, not on provincial economic
czars.
. • Land banking, a ban on public land sales, and a retention of the Agricultural Land
Reserve. These programs, too, are part of the problem, not part of the solution. The last
thing we need to solve the housing crisis is for land to be artificially kept off the market.
Building lots are a major part of the costs of new housing. The greater their supply, the
lower their price, and the lower their price, the more housing that can be inexpensively
created.
In B.c., great gobs of land, perfectly suited for development, are being held off the
market, courtesy of the Agricultural Land Reserve, a policy created by the 1972-75 NDP
government. If Mr. Blencoe really wants to lower housing prices, he would urge wiping
this element of Soviet-style central planning off the books, something the supposedly freeenterprise Social Credit government has so far-in its 15 years in power-been unable or
unwilling to do.
This housing agenda shows that the NDP has not yet changed its socialist spots. At a
time when the momentum is toward economic freedom, their stance takes on all the
attributes of an ostrich with its head in the sand. And that is really too bad, especially given
the New Zealand experience. There, under the inspired leadership of Roger Douglas, a
social democratic labour -based party was able to modernize and rationalize the economy,
in a decentralized direction.
When will our home-grown socialists learn to borrow a leaf from their New Zealand
counterparts?
N
Dr. Block is an economist with the Fraser Institute.
BRITISH COLUMBIA REPORT, JUL Y 16, 1990 19
NDP Housing Policy
by Walter Block, Senior Research Fellow, The Fraser Institute, Vancouver, B.c.
New Democratic Party Housing Critic Robin Blencoe (MIA, Victoria) released a position
paper which attempts to help provide adequate shelter at affordable prices for all British
Columbians. Unfortunately, this missive is part of the problem, not part of the solution. It
advocates precisely the policies which have brought us to our present sorry housing mess. If
acted upon, the document will worsen our situation, not improve it.
It is tempting to dismiss this initiative as the blatherings of an unreconstructed socialist,
and to let it go at that. Unfortunately, however, we cannot do this. Blencoe is more than likely
to become the Minister of Housing in any future NDP government, and that scenario is fully
within the realm of possibility. So his proposal, if for no other reason, deserves our serious
consideration.
Let us consider the elements of the program:
· A tax on speculative housing flippers. Although the continual move of housing prices
toward the stratosphere has been somewhat curtailed of late, they are still far too expensive for
many first time home buyers and young families. But prices can rise whether or not
speculators enter the market. Successful speculators sell when prices are high and buy when
they are low. By doing so, they iron out price fluctuations, lowering the pinnacles, and raising
the troughs. Taxing such public beneficiaries will only increase the violability of this sector of
the economy, something that no one wants, even potential NDP housing ministers.
· Re-institute the Rentalsman. Rent control or rent review reduces the supply of rental
accommodation. Other things equal, investors will be less likely to place their hard earned
money in this sector with these programs in effect. With fewer units available, vacancy rates
cannot rise. Office towers have never been subject to controls of this sort; their supply is
continually increasing, and vacancy rates are relatively high. Instead of the rentalsman, we
should move in the opposite direction and constitutionally guarantee that government rent
monitoring will never again occur. Then residential renters will be placed in the enviable
position how enjoyed by their commercial counterparts.
· Allow municipalities to charge developers for added burdens on roads, sewers, schools,
etc. This excrescence from the slow growth philosophy will have precisely the opposite results
from those intended. Its purpose is presumably to promote house building, so as to combat the
shortage now afflicting the citizenry. How will placing
rates and greater burdens on builders encourage them to create more housing?
Why, in any case, impose the costs of infrastructure on developers? Is that not the
very purpose for which taxes are collected in the first place? Nor is it any accident that
economic development is seen as a ''burden'' on such facilities. They are now,
unfortunately, provided to us by government. Were they to be privatized, as they should
be, development would no more be seen as a burden on infrastructure than infrastructure
is now seen as a burden on housing.
. Develop a comprehensive government program for affordable rental to home
ownership. If there is anything that we have learned from the disarray of the Soviet and
Eastern European economies, it is that central planning doesn't work. That decades long
experiment should have convinced all of us that what is needed for a sound economy, and
a healthy vibrant housing sector, is greater reliance on decentralized markets, not on
provincial economic czars.
. Land banking, a ban on public land sales, and a retention of the Agricultural Land
Reserve. These programs, too, are part of the problem, not part of the solution. The last
thing we need to solve the housing crisis is for land to be artificially kept off the market.
Building lots are a major part of the costs of new housing. The greater their supply, the
lower their price; and the lower their price, the more housing that can be inexpensively
created.
In B.C., great gobs of land, perfectly suited for development, are being held off the
market, courtesy of the Agricultural Land Reserve, a policy created by the 197275 NDP
government. If Blencoe really wants to lower housing prices, he would urge wiping this
element of Soviet-style central planning off the books, something the supposedly free
enterprise Social Credit government has so far -- in its 15 years in power -- been unable or
unwilling to do.
This housing agenda shows that the NDP has not yet changed its socialist spots.
At a time when the momentum is toward economic freedom, their stance takes on all the
attributes of an ostrich with its head in the sand. And that is really too bad, especially
given the New Zealand experience. There, under the inspired leadership of Roger
Douglas, a social democratic labour-based party was able to modernize and rationalize the
economy, in a decentralized direction.
When will our home-grown socialists learn to borrow a leaf from their New Zealand
counterparts?
- 30-
NDP Housing Policy
by Walter Block, Senior Research Fellow, The Fraser Institute, Vancouver, B.C.
NDP Housing Critic Robin Blencoe (MLA, Victoria) has just released a position paper
which attempts to solve problems in that field. Unfortunately, it is part of the problem, not part
of the solution. It advocates precisely the policies which have brought us to our present sorry
housing mess. If acted upon, it will worsen our situation, not improve it.
Let us consider the elements of the program:
· A tax on speculative housing flippers. House prices are escalating toward the
stratosphere because demand is vastly outstripping supply. Prices rise whether or not
speculators enter the market. Successful speculators sell when prices are high and buy when
they are low. By doing so, they iron out prices, lowering the pinnacles, and raising the troughs.
Taxing such public beneficiaries will only increase the violability of this sector of the
economy, something that no one wants, even potential NDP housing ministers.
· Re-institute the Rentalsman. Rent control or rent review reduces the supply of rental
accommodation. Other things equal, investors will be less likely to place their hard earned
money in this sector with these programs in effect. With fewer units available, vacancy rates
cannot rise. Office towers have never been subject to controls of this sort; their supply is
continually increasing, and vacancy rates are relatively high. Instead of the rentalsman, we
should move in the opposite direction and constitutionally guarantee that government rent
monitoring will never again occur. Then residential renters will be placed in the enviable
position how enjoyed by their commercial counterparts.
· Allow municipalities to charge developers for added burdens on roads, sewers, schools,
etc. This excrescence from the slow growth philosophy will have precisely the opposite results
from those intended. The purpose of this proposal is presumably to promote house building, so
as to combat the shortage now afflicting the citizenry. How will placing rates and greater
burdens on builders encourage them to create more housing?
Why, in any case, impose the costs of infrastructure on developers? Is that not the very
purpose for which taxes are collected in the first place? Nor is it any accident that economic
development is seen as a "burden" on such facilities. They are now, unfortunately, provided to
us by government. Were they to be privatized, as
1
they should be, development would no more be a burden on infrastructure than infrastructure is
now a burden on housing.
. Develop a comprehensive government program for affordable rental to home ownership.
If there is anything that we have learned from the disarray of the Soviet and Eastern European
economies, it is that central planning doesn't work. That decades long experiment should have
convinced all of us that what is needed for a sound economy, and a healthy vibrant housing
sector, is greater reliance on decentralized markets, not on provincial economic czars.
. Land banking, a ban on public land sales, a retention of the Agricultural Land Reserve.
These programs, too, are part of the problem, not part of the solution. The last thing we need to
solve the housing crisis is for land to be artificially kept off the market. Building lots are a
major part of the costs of new housing. The greater their supply, the lower their price; and the
lower their price, the more housing that can be inexpensively created.
This housing agenda shows that the NDP has not yet changed its socialist spots.
At a time when the momentum is toward economic freedom, their stance takes on all the
attributes of an ostrich with its head in the sand. And that is really too bad, especially given the
New Zealand experience. There, under the inspired leadership of Roger Douglas, a social
democratic labour-based party was able to modernize and rationalize the economy, in a
decentralized direction.
When will our home-grown socialists learn to borrow a leaf from their New Zealand
counterparts?
- 30-
2
A policy that needs
some improvements
2.
ew Democratic Party housing critic Robin Blencoe (MLA, Victoria) released a
position paper which proposes to provide adequate shelter at affordable prices for
all British Columbians. Unfortunately, this missive is part ofthe problem, not part
of the solution. It advocates precisely the policies which have brought us to our present
sorry housing mess. If acted upon, the document will worsen our situation, not improve it.
It is tempting to dismiss this initiative as the blatherings of an unreconstructed socialist,
and to let it go at that. Unfortunately, however, we cannot do this. Mr. Blencoe is more
than likely to become the minister of housing in any future NDP government, and that
scenario is fully within the realm of possibility. So his proposal, if for no other reason,
deserves our serious consideration.
Let us consider the elements of the program:
• A tax on speculative housing flippers. Although the continual move of housing prices
toward the stratosphere has been somewhat curtailed of late, prices are still far too high for
many first-time homebuyers and young families. But prices can rise whether or not
speculators enter the market. Successful speculators sell when prices are high and buy
when they are low. By doing so, they iron out price fluctuations, lowering the pinnacles,
and raising the troughs. Taxing such public beneficiaries will only increase the violability
of this sector of the economy, something no one wants, even NDP housing ministers.
• Re-institute the Rentalsman. Rent control or rent review reduces the supply of rental
accommodation. Other things equal, investors will be less likely to place their hard-earned
money in this sector with these programs in effect. With fewer units available, vacancy
rates cannot rise. Office towers have ~ever been subject to controls of this sort; their supply
is continually increasing, and vacancy rates are relatively high.
• Allow municipalities to charge developers for added burdens on roads, sewers,
schools, etc. This excrescence from the slow-growth philosophy will have precisely the
opposite results from those intended. Its purpose is presumably to promote house-building,
so as to combat the shortage now afflicting the citizenry. How will placing rates and
greater burdens on builders encourage them to create more housing?
• Develop a comprehensive government program for affordable rental to home ownership. If we have learned anything from the disarray of the Soviet and Eastern European
economies, it is that central planning doesn't work. That decades-long experiment should
have convinced all of us that what is needed for a sound economy, and a healthy vibrant
housing sector, is greater reliance on decentralized markets, not on provincial economic
czars.
. • Land banking, a ban on public land sales, and a retention of the Agricultural Land
Reserve. These programs, too, are part of the problem, not part of the solution. The last
thing we need to solve the housing crisis is for land to be artificially kept off the market.
Building lots are a major part of the costs of new housing. The greater their supply, the
lower their price, and the lower their price, the more housing that can be inexpensively
created.
In B.c., great gobs of land, perfectly suited for development, are being held off the
market, courtesy of the Agricultural Land Reserve, a policy created by the 1972-75 NDP
government. If Mr. Blencoe really wants to lower housing prices, he would urge wiping
this element of Soviet-style central planning off the books, something the supposedly freeenterprise Social Credit government has so far-in its 15 years in power-been unable or
unwilling to do.
This housing agenda shows that the NDP has not yet changed its socialist spots. At a
time when the momentum is toward economic freedom, their stance takes on all the
attributes of an ostrich with its head in the sand. And that is really too bad, especially given
the New Zealand experience. There, under the inspired leadership of Roger Douglas, a
social democratic labour -based party was able to modernize and rationalize the economy,
in a decentralized direction.
When will our home-grown socialists learn to borrow a leaf from their New Zealand
counterparts?
N
Dr. Block is an economist with the Fraser Institute.
BRITISH COLUMBIA REPORT, JUL Y 16, 1990 19
NDP Housing Policy
by Walter Block, Senior Research Fellow, The Fraser Institute, Vancouver, B.c.
New Democratic Party Housing Critic Robin Blencoe (MIA, Victoria) released a position
paper which attempts to help provide adequate shelter at affordable prices for all British
Columbians. Unfortunately, this missive is part of the problem, not part of the solution. It
advocates precisely the policies which have brought us to our present sorry housing mess. If
acted upon, the document will worsen our situation, not improve it.
It is tempting to dismiss this initiative as the blatherings of an unreconstructed socialist,
and to let it go at that. Unfortunately, however, we cannot do this. Blencoe is more than likely
to become the Minister of Housing in any future NDP government, and that scenario is fully
within the realm of possibility. So his proposal, if for no other reason, deserves our serious
consideration.
Let us consider the elements of the program:
· A tax on speculative housing flippers. Although the continual move of housing prices
toward the stratosphere has been somewhat curtailed of late, they are still far too expensive for
many first time home buyers and young families. But prices can rise whether or not
speculators enter the market. Successful speculators sell when prices are high and buy when
they are low. By doing so, they iron out price fluctuations, lowering the pinnacles, and raising
the troughs. Taxing such public beneficiaries will only increase the violability of this sector of
the economy, something that no one wants, even potential NDP housing ministers.
· Re-institute the Rentalsman. Rent control or rent review reduces the supply of rental
accommodation. Other things equal, investors will be less likely to place their hard earned
money in this sector with these programs in effect. With fewer units available, vacancy rates
cannot rise. Office towers have never been subject to controls of this sort; their supply is
continually increasing, and vacancy rates are relatively high. Instead of the rentalsman, we
should move in the opposite direction and constitutionally guarantee that government rent
monitoring will never again occur. Then residential renters will be placed in the enviable
position how enjoyed by their commercial counterparts.
· Allow municipalities to charge developers for added burdens on roads, sewers, schools,
etc. This excrescence from the slow growth philosophy will have precisely the opposite results
from those intended. Its purpose is presumably to promote house building, so as to combat the
shortage now afflicting the citizenry. How will placing
rates and greater burdens on builders encourage them to create more housing?
Why, in any case, impose the costs of infrastructure on developers? Is that not the
very purpose for which taxes are collected in the first place? Nor is it any accident that
economic development is seen as a ''burden'' on such facilities. They are now,
unfortunately, provided to us by government. Were they to be privatized, as they should
be, development would no more be seen as a burden on infrastructure than infrastructure
is now seen as a burden on housing.
. Develop a comprehensive government program for affordable rental to home
ownership. If there is anything that we have learned from the disarray of the Soviet and
Eastern European economies, it is that central planning doesn't work. That decades long
experiment should have convinced all of us that what is needed for a sound economy, and
a healthy vibrant housing sector, is greater reliance on decentralized markets, not on
provincial economic czars.
. Land banking, a ban on public land sales, and a retention of the Agricultural Land
Reserve. These programs, too, are part of the problem, not part of the solution. The last
thing we need to solve the housing crisis is for land to be artificially kept off the market.
Building lots are a major part of the costs of new housing. The greater their supply, the
lower their price; and the lower their price, the more housing that can be inexpensively
created.
In B.C., great gobs of land, perfectly suited for development, are being held off the
market, courtesy of the Agricultural Land Reserve, a policy created by the 197275 NDP
government. If Blencoe really wants to lower housing prices, he would urge wiping this
element of Soviet-style central planning off the books, something the supposedly free
enterprise Social Credit government has so far -- in its 15 years in power -- been unable or
unwilling to do.
This housing agenda shows that the NDP has not yet changed its socialist spots.
At a time when the momentum is toward economic freedom, their stance takes on all the
attributes of an ostrich with its head in the sand. And that is really too bad, especially
given the New Zealand experience. There, under the inspired leadership of Roger
Douglas, a social democratic labour-based party was able to modernize and rationalize the
economy, in a decentralized direction.
When will our home-grown socialists learn to borrow a leaf from their New Zealand
counterparts?
- 30-
NDP Housing Policy
by Walter Block, Senior Research Fellow, The Fraser Institute, Vancouver, B.C.
NDP Housing Critic Robin Blencoe (MLA, Victoria) has just released a position paper
which attempts to solve problems in that field. Unfortunately, it is part of the problem, not part
of the solution. It advocates precisely the policies which have brought us to our present sorry
housing mess. If acted upon, it will worsen our situation, not improve it.
Let us consider the elements of the program:
· A tax on speculative housing flippers. House prices are escalating toward the
stratosphere because demand is vastly outstripping supply. Prices rise whether or not
speculators enter the market. Successful speculators sell when prices are high and buy when
they are low. By doing so, they iron out prices, lowering the pinnacles, and raising the troughs.
Taxing such public beneficiaries will only increase the violability of this sector of the
economy, something that no one wants, even potential NDP housing ministers.
· Re-institute the Rentalsman. Rent control or rent review reduces the supply of rental
accommodation. Other things equal, investors will be less likely to place their hard earned
money in this sector with these programs in effect. With fewer units available, vacancy rates
cannot rise. Office towers have never been subject to controls of this sort; their supply is
continually increasing, and vacancy rates are relatively high. Instead of the rentalsman, we
should move in the opposite direction and constitutionally guarantee that government rent
monitoring will never again occur. Then residential renters will be placed in the enviable
position how enjoyed by their commercial counterparts.
· Allow municipalities to charge developers for added burdens on roads, sewers, schools,
etc. This excrescence from the slow growth philosophy will have precisely the opposite results
from those intended. The purpose of this proposal is presumably to promote house building, so
as to combat the shortage now afflicting the citizenry. How will placing rates and greater
burdens on builders encourage them to create more housing?
Why, in any case, impose the costs of infrastructure on developers? Is that not the very
purpose for which taxes are collected in the first place? Nor is it any accident that economic
development is seen as a "burden" on such facilities. They are now, unfortunately, provided to
us by government. Were they to be privatized, as
1
they should be, development would no more be a burden on infrastructure than infrastructure is
now a burden on housing.
. Develop a comprehensive government program for affordable rental to home ownership.
If there is anything that we have learned from the disarray of the Soviet and Eastern European
economies, it is that central planning doesn't work. That decades long experiment should have
convinced all of us that what is needed for a sound economy, and a healthy vibrant housing
sector, is greater reliance on decentralized markets, not on provincial economic czars.
. Land banking, a ban on public land sales, a retention of the Agricultural Land Reserve.
These programs, too, are part of the problem, not part of the solution. The last thing we need to
solve the housing crisis is for land to be artificially kept off the market. Building lots are a
major part of the costs of new housing. The greater their supply, the lower their price; and the
lower their price, the more housing that can be inexpensively created.
This housing agenda shows that the NDP has not yet changed its socialist spots.
At a time when the momentum is toward economic freedom, their stance takes on all the
attributes of an ostrich with its head in the sand. And that is really too bad, especially given the
New Zealand experience. There, under the inspired leadership of Roger Douglas, a social
democratic labour-based party was able to modernize and rationalize the economy, in a
decentralized direction.
When will our home-grown socialists learn to borrow a leaf from their New Zealand
counterparts?
- 30-
2
IN PRAISE OF UNIONISM by Walter
Block
There are two possible types of unions: compulsory and
voluntary. The sole difference between a legitimate and an
illegitimate union is that in case of a strike, the latter will threaten
to interfere with the bosses' and "scabs'" persons or property, or
ask that the government do so on its behalf, while the former will
refrain from these coercive activities. (A "scab" is the term of
denigration applied by some, to people who are willing to accept
employment conditions rejected by strikers. In a truly free
society, such employment contracts would be considered as valid
as any other; in a truly just society, no tinge of impropriety or
immorality would attach to such workers.)
A union which forcibly prevents the factory owner from hiring a
strikebreaker is like a husband who divorces his wife — and then
threatens to beat her up, and any prospective suitor as well — if
she tries to remarry. But a union that will not threaten or initiate
the use of force (except, of course, in self defense against
physical abuse) is entirely legitimate. It has as much right as any
other respected institution in society. It can provide great benefits
to its members, and to the general public as well.
As the great economist Henry Hazlitt said: "The central function
unions can serve is to improve local working conditions and to
assure that all of their members get the true market value of their
services."
For the competition of workers for jobs, and of employers for
workers, does not work perfectly. Neither individual workers nor
individual employers are likely to be fully informed concerning the
conditions of the labor market. An individual worker may not
know the true market value of his services to an employer. And
he may be in a weak bargaining position. Mistakes of judgement
are far more costly to him that to an employer. If an employer
mistakenly refuses to hire a man from whose services he might
have profited, he merely loses the net profit he might have made
from employing that one man; and he may employ a hundred or
a thousand men.
But if a worker mistakenly refuses a job in the belief that he can
easily get another that will pay him more, the error may cost him
dear. His whole means of livelihood is involved. Not only may he
fail promptly to find another job offering more; he may fail for a
time to find another job offering remotely as much. And time
may be the essence of his problem, because he and his family
must eat. So he may be tempted to take a wage that he
believes to be below his "real worth" rather than face these
risks. When an employer's workers deal with him as a body,
however, and set a known "standard wage" for a given class of
work, they may help to equalize bargaining power and the risks
involved in mistakes."
With regard to such legitimate unions, I have nothing but praise.
They are an integral part of society, and should be protected to
the fullest extent of the law.
To this end, prohibitions against the closed shops (based on the
fallacious "right to work" doctrine) should be repealed. A union
and an employer can come to a voluntary agreement whereby
all workers must be . members of the labor organization as a
precondition of employment. This is a contract between
consenting adults, and must be upheld in the same manner as
all other commercial agreements. Outside workers have no
more "right to work" for an employer who has signed such a
contract than does the "other woman" have a "right to marry" an
already married man.
Nor should such legitimate unions be precluded from engaging
in boycotts, whether primary, secondary or even tertiary. Part of
the system of consumer sovereignty, of which we are so justly
proud in the Western democracies, is the right not to buy. If a
person may properly refuse to
purchase an item for whatever reason, so may others, even if
they act in concert. We must never forget that union members
are citizens too, and do not give up their rights as consumers
when they join a labor organization. Jews and Hindus boycott
pork; vegetarians refuse all meat; Greenpeace members do not
buy fur coats; athiests reject religious implements; reformed
alcoholics do not purchase booze. Where is the justice in
singling out unions, and requiring that they alone not be allowed
to boycott?
And in like manner, compulsory labor arbitration is an affront to
organized working men and women. To force people to work for
wages and under conditions they find unacceptable is a step
down the road toward slavery. Compulsory labor arbitration and
the involuntary servitude it breeds must be opposed by all men
of good will.
However, and this is a giant caveat, this analysis does not apply
to unions which either use physical violence against "scabs," or
urge that the government do so in its behalf. (The Wagner and
NLRB Acts make it an "unfair labor practice" and hence illegal,
to hire (permanent) replacements for striking employees.) Such
unions, unfortunately the overwhelming majority nowadays, are
coercive, involuntary and hence illegitimate. Any good effects
they might conceivably have on society such as outlined above
are as nothing, compared to . the monumental evil of initiating
physical aggression against those who have not first engaged in
physical aggression: the employer who is trying to "divorce" his
union, and the "other woman," or workers who are willing to
accept the terms rejected by the striking workers.
But what of the claim that "unions raise wages?" Is this not a
great benefit brought about by unionism, whether legitimately or
not?
Price Gouging
It is easy to see why prices of many goods and services would rise in
cities holding sports or civic spectaculars, such as the Olympics or
Expo. With tens and even hundreds of thousands of tourists suddenly
descending upon a city, the demand for goods and services severely
outpaces the supply. Especially affected are items
normally utilized by out-of-towners: hotel rooms, taxi cabs, rental
automobiles, parking, bed and breakfast emporiums, and restaurants.
Such increases in prices usually offend local politicians, who object on
two grounds. First, they feel that price rises are somehow unfair and
improper. This sentiment is quite understandable. No one likes to be
taken advantage of, and price gouging during a time of great demand
would appear to be quite underhanded.
Nevertheless, price rises have a role to play in a market economy. They
signal an abrupt increase in the importance placed upon a good or
service. If prices spurt upwards in Vancouver during a world exposition,
this is a signal to all entrepreneurs. It is akin to a cry for help. It
provides the knowledge that there is a sudden need for more goods and
services there, at the same time it also provides, through the prospect of
greater profits, the incentive to satisfy that need. To the extent that
increased supply is thus called for, the original price increase will be
tamped down. If local politicians forbid price gouging, they cut off this
vital information and sever the incentive to "rescue" the beleaguered
visitors.
If politicians are really concerned with the plight of consumers, instead
of worrying about price gouging they would do better by eliminating
some of the laws they themselves have enacted which have the effect of
reducing the supply of goods and services that can be offered to the
market. For example, they could relax the laws which retard the
operation of the bed and breakfast industry, which interfere with street
peddlers of food, which prohibit alternative taxi services, and which
prohibit the location of recreational vehicles and campers in certain
areas of the city.
But there is a second objection to price gouging. It is felt that such
behavior
reflects badly upon a city, and that although tourists may put up with it
while they visit for the special event, a bad taste will be left in their
mouths which will make a return visit unlikely. However, as we have
seen, if markets are free and if the gouging calls forth additional
supplies, price rises will be moderated. As well, if prices cannot ration
limited supplies to an excessive number of would-be buyers, other
institutions favouritism, graft, first come first served^— will have to do
so, and these have drawbacks of their own.
Even worse, these
alternative arrangements do not encourage a solution of the problem
through increased supply. W.B.
RED INK AT BCRIC
by Walter Block
Senior Economist, The Fraser Institute
British Columbia Resources Investment Corporation is
swimming feebly in a
sea of red ink. It has lost a whopping $5.7 million in the first six
months of 1984. This was equivalent to 9c per share, and compares
unfavourably with earnings of an identical $5.7 million for the same
time period in 1983. Part of these losses were due to a shortfall of
$1.7 million by Westar Timber, BCRIC's forest products subsidy, in
the second quarter of this year.
According to the President of the corporation, Bruce Howe,
the cause of this
financial setback is high interest rates and falling lumber prices.
Says Mr. Howe, "We expect improved results for the last half of
1984, despite higher interest rates. Westar Mining's increased
marketing efforts, particularly in Europe, will bring higher revenues
in the second half."
But for the moment, the BCRIC empire rests on a shaky
foundation. And as
far as I'm concerned, that's just great. Not that I am not filled with as
much of the milk of human kindness as is the next economist. I am
just as concerned with the plight of BCRIC shareholders as I am with
the problems of the private owners of any other investment in
Canada.
But that is just the point. B.C. Resources shares are now
owned privately.
All those who now hold a position in BCRIC have done so
voluntarily. No one has
been forced, willy-nilly, to bear any of the risk associated with the
rise and fall of
the value of this enterprise.
In the bad old days of Crown corporation status, in contrast,
the economic
fate of all of us was helplessly enmeshed with that of BCRIC.
Whether we liked it
or not, when BCRIC was mismanaged, or suffered from high interest
rates or low
resource prices, we all lost out. Now, only voluntary entrepreneurs
bear the risk.
And this is exactly as it should be. When BCRIC does well, as
may happen once again, only its stockholders will benefit. Now that
it is in the doldrums, only these owners will register losses.
As a beneficial sidelight, the trials and tribulations of BCRIC
are no longer hot political issues. Politicians no longer wax eloquent
about BCRIC losses, apoplectically calling for expensive white
papers, enquiries, and public hearings at every snafu. The recent
losses, for example, were reported deep within the bowels of the
business section of most newspapers, themselves discreetly and
properly hidden on page 39, somewhere. Formerly, BCRIC's
slightest hiccup was red banner front page news.
How do you spell relief? A privatized BCRIC.
August 22/84 - 30 ^ii ^(e-3!
Rent Control: A tale of two Canadian cities by Walter Block
The rental housing experiences of Vancouver and Toronto serve almost
as a laboratory test of the effects of rent control legislation.
Consider their histories. British Columbia enacted province-wide rent
controls in 1972, under the N.D.P. government of then Premier Dave
Barrett; the phasing out process began on July 1, 1983, and ended on
July 1, 1984 at the behest of then Premier Bill Bennett and the Social
Credit Party. Ontario began its experiment with government central
housing planning in 1975 under the supposedly Progressive
Conservatives of Bill Davis, and still retains them to this day with
David Peterson and the Liberals at the helm.
What occurred in the two rental housing markets as a result? There are
many possible ways to trace the effects: rent levels, units of new
construction, housing maintenance or deterioration, homelessness, etc.
But the easiest and best variable is that of vacancy rates. These are
objective, easily calculated, and interact with all the others. E.g., the
lower the vacancy rate, other things equal, the higher die rents, the
greater the homelessness, etc. They are published twice annually, in
April and October (in June and December up until 1974), so reasonable
coverage for each year is provided.
Let us first consider the vacancy experience of the two cities from
October 1984 to October 1988, the time during which Vancouver no
longer had rent controls, but Toronto did. As the accompanying chart
makes clear, for each and every one of the nine observations during this
epoch, Toronto had a lower vacancy rate than Vancouver. This indicates
a tighter market in Ontario, with higher rent levels, more difficulty in
finding an apartment suite to rent, less new rental construction, etc.
Nor are the differences only marginal. Over this short '84 to '88 time
period as a whole, the average Toronto vacancy rate was a minuscule
0.34%. The comparable figure for Vancouver was a relatively healthy
1.53%, fully 350% higher.
Nor can it be objected that Vancouver "traditionally" has a higher
vacancy rate than Toronto, or has always had one. A perusal of the
earlier years shows ;i mixed record, with the vacancy rate sometimes
higher in one city, and sometimes in the other. Over all, for the period
June 1972 to April 1984, Toronto actually had a slightly higher vacancy
rate at 1.18%, than Vancouver at 0.90%.
A wealth of evidence showing the dismal effect of controls on rental
housing was presented in the Fraser Institute's best selling 1983 book,
Rent Control: Myths and Realities. But as this study makes abundantly
clear, rent controls are a subtle andinvidious piece of legislation. For not
only will the law itself lead to rental housing disarray, even the threat of
it will tend to do the same, as would-be landlords seek greener, freer,
less controlled options for their investment dollar. It is no accident, for
example, that Vancouver's vacancy rate for October 1988, at 0.4%, was
the lowest it had ever reached since controls were repealed. Given the
inevitable time lags in such matters, this coincided with the fall from
grace in the public opinion polls of Premier Bill Vander Zaim and his
Social Credit government.
Why should this matter? Because those with money to invest in rental
housing reasoned that if the Socred government falls in the next
election, the overwhelming probability is that Mike Harcourt and the
N.D.P. will sweep in, bringing rent controls in their wake as they did in
1972. And who wants to put his hard-earned money up for ransom under
such conditions?
This somewhat convoluted scenario may appear to some people as
unlikely in the extreme. But consider the fact that we have just
witnessed an ominous parallel on the federal scene. Every time John
Turner and the Liberals rose in popularity, the Canadian dollar plunged.
And when the Mulroney forces improved in the public opinion polls, the
value of our dollar increased. This was attributable not to some sort of
disembodied Capitalist System speaking out in favour of free trade, but
rather to the trust, or lack of it, placed in the Canadian economy on the
part of millions ol investors from all around the world.
Investors in Canadian rental housing can also read the lips of the various
political leaders.
Self Dealing
by Walter Block
for the Financial Post
Ottawa has recently allowed the takeover of Genstar Corp.
(the owner of Canada Trust, the nation's seventh largest financial
institution), by Imasco Ltd., the Montreal-based tobacco and
retailing conglomerate. But it did so only after imposing severe
restrictions on the merger.
According to Minister of State for Finance Barbara
McDougall,
self dealing shall be prohibited, the management and boards of
directors of Canada Trust and Imasco will remain forever separate,
and Imasco will not be able to acquire other financial institutions. As
if this were not a sufficient protection of the public interest, the
junior finance minister reserved the Government's right to partially
or fully reverse the takeover, or to force Imasco to divest all or part
of its holdings in Canada Trust, in possible subsequent legislation.
The reason for this latest large scale government
intervention into the economy would appear to be the fear of an
alliance of a financial institution and a non-financial business
corporation, and the self dealing thereby made possible. Self dealing
has been defined, variously, as a process where a conglomerate uses
its trust company to unfairly benefit related firms even though this
unduly risks its depositor's money, or where a parent company uses
capital from its subsidiary to finance its own dealings regardless of
the best interests of the subsidiary's depositors.
Based on the opposition to the merger vociferously made by
both opposition parties, and even by numerous Progressive
Conservative backbenchers, there would appear to be something
particularly objectionable about a merger between a financial and a
non financial corporation.
But there are several difficulties with such a contention. First
of all, the concern is too general and overstated. Any merger may
conceivably result in one party misusing the assets of another.
There is thus no reason for the state to limit its misgivings to just
those corporate purchases which combine financial and non
financial holdings. Of course, if two nonfinancial corporations form
one larger one, no depositor's funds are put at risk; but there is as
much of a public interest in protecting the property of shareholders
as there is in protecting the property of depositors.
Secondly, the concern is biased. Mrs. MacDougall and the
other critics of the Imasco purchase were visibly troubled by the
prospect of the conglomerate pillaging the depositor's property. But
the reverse, which they ignore, is equally plausible. The history of
economics is littered with sorrowful tales of bank failures. Who is to
say that in order to ward off such an occurrence in future no
financial institution would engage in a raid on the non financial
membership of its conglomerate?
Thirdly, the property of depositors may be ravaged not only
by the take-over of a non-financial conglomerate, but by one
shareholder in the trust company or bank who attains a measure of
control. For example, a 60% owner could arrange to lend $100,
based on dubious collateral, to his grandmother. When the loan goes
bad, he benefits by the full amount (his grandmother turns over to
him the entire $100); true, his company loses all this money, but as
a 60% owner he is out of pocket by only $60. Thus he gains a profit
on the deal of $40 -- at the expense of the other members of the
financial institution.
In order to obviate just such a scenario, government has
enacted legislation limiting control over banks to 10%, and has
enmeshed trust companies in a welter of restrictions which limit the
ability of owners to engage in this sort of fraudulent "sweetheart"
deal.
However, the government has also organized a scheme of
mandatory deposit insurance (de jure, this is limited to a coverage
of only $60,000, but de facto there has been no such limit in recent
times). This sharply diminishes the creditor's incentive to insist
upon the writing of efficient contracts to preclude such fraudulent
behaviour. As a result, market institutions to accomplish this task
have atrophied, or never came into existence at all. In the absence of
deposit insurance and other government activities which retard
marketplace incentives, if the investment community felt that a
merger between financial and non financial corporations would
unacceptably increase the risk of self dealing, the depositors would
desert any such trust company or bank in droves. This would make
it unfeasible to engage in such a merger in the first place.
Were markets allowed to work, there would be no need for
any
special government vigilance in behalf of the depositors against a
merger with a non financial business concern. One solution is to
recognize that legislation which presently protects the depositor
from other would-be predators within the financial corporation will
presumably serve as well against any threat from a non-financial
source. More radically, public policy should contemplate the
removal of the first unwise government regulation, subsidized
deposit insurance, which deludes marketplace participants into
thinking they are safer than they actually are.
Since we have seen that there is nothing unique about a
financial - non financial corporate merger, the brou-ha-ha about self
dealing which emerged in the Imasco-Genstar purchase may thus be
interpreted as a general criticism of the propriety of mergers in the
private sector. The Fraser Institute has recently published a book,
Reaction: The New Combines Investigation Act, which subjects to
intense scrutiny Bill C - 91, Federal Consumer and Corporate Affairs
Minister Michel Cote's recently tabled
attempt to amend Canada's present competition law. In the analysis
of the fourteen eminent contributors to this study (half economists,
half legal scholars), the visible hand of the Canadian government is
far less able to protect the public against harmful and untoward
mergers than is the invisible hand of the free marketplace.
May 12, 1986
Selling False Creek Condos in Hong Kong
by Walter Block
Victor Li has recently arranged to sell 216 condominium
units he is building in
the False Creek neighborhood of Vancouver directly to a group of
Hong Kong
residents.
No big deal, you say? Nothing to get all excited about?
Certainly not
newsworthy?
Think again. This issue has hit Lotus Land by the Sea like a
ton of bricks.
Every pundit, politician and general busy body for miles around has
been waxing
indignant about this sell out of holy Canadian soil.
The problem? Mr. Li has had the effrontery to sell these
properties directly to
Hong Kong buyers, without first offering this deal to the local
citizenry.
How dare he? seems to be the response of numerous
apoplectic journalists.
Foremost amongst these, at least in terms of bitterness decibels, is
North Shore News
columnist Doug Collins, who is calling for B.C. politicians to "raise
public hell about
people being shut out of their own city by Hong Kongers."
This response, however, leaves much to be desired.
Whatever can it mean, for example, to say that people are
being shut out of
"their own" city? For surely it is Mr. Li himself, not the people
purportedly being "shut out," who is the real, rightful and legitimate
owner of the property in question. Vancouverites do not at all "own"
Vancouver; they own only those bits of it whose deeds bear their
names.
Suppose that Mr. Li had indeed made his offering to all and
sundry, and not just
to inhabitants of Hong Kong. And suppose further that he sold to the
highest
bidders, presumably the richest people, and that they just
happened' to be Canadians
of Chinese extraction. Would this scenario have satisfied the racists
who fear the
"Yellow Menace"?
Further, the wailing and gnashing of teeth at the False Creek
sale is now being undertaken by ostensible proponents of the free
enterprise system. Mr. Collins himself is seen by many as an
advocate of free markets, private property, and limited government.
But surely a basic element of any system deserving of the honorific
"free enterprise" is that property owners are allowed to sell their
resources to whomsoever they please, at any mutually agreeable
terms. This wrath, then, comes with particular ill grace from free
market advocates. Indeed, there is an element of hypocracy.
Collins, as well, poses as a critic of affirmative action. He has
publicly and properly taken offense at all number of governmentally
imposed reverse discrimination programs which favour women, the
handicapped, native persons and visible minorities. But opposition
against condo sales to Hong Kongers is merely a disguised call for
affirmative action, or quotas, this time in behalf of Canadians. Thus
it would appear that Collins does not oppose quotas in principle; it
all depends upon whose ox is being gored.
Think for a minute of what the economy would look like if
our opposition to "closed" sales were generalized. That is, what kind
of life would we lead if a law were passed that prohibited the sale or
purchase of anything to anyone without first making this offer to all
other people. People could no longer just call up a specific
baby-sitter, plumber, carpenter; they would have to make such an
offer publicly, and take formal bids. Ontario magazines could no
longer target their advertising at residents of Ontario; they would
have to make their pitch all over the world. I could no longer offer
the present column the newspaper in which it now appears; I would
first have to make this offer to all possible publishers. Small
neighborhood groceries, bakeries, butcher shops would be illegal:
they sell to a far too narrow clientele.
Mr. Li sold directly to the people of Hong Kong in an attempt
to obtain the
highest prices for his property there, with the lowest selling costs.
Like all
businessmen, he was trying to maximize his profits.
The alarums of the racists notwithstanding, we would do
well to ignore Mr. Li
and his condominium sales, and tend to our own businesses. As we
learn from Adam
Smith's The Wealth of Nations, the best way to promote Canada's
prosperity is to
allow merchants such as Li to commercially interact with whomever
they wish.
SPARE BODY PARTS
Editorial Commentary
Prepared by Walter Block
for The Financial Post
In the days of yore, there was no &quotcrisis" in spare body parts.
Organ transplants
were an utter impossibility, the stuff of science fiction. Only Dr.
Frankenstein and
his literary ilk had any need for live organs.
But nowadays, thanks to the magnificent discoveries and new
techniques of
modern medicine, these possibilities are upon us. At present, it is now
possible to
transplant hearts, kidneys, blood and corneas. People who would have
been
consigned to death, or lingering, tenuous and painful lives only a few
short years
ago, can now avail themselves of these medical miracles and lead
healthy, happy,
productive lives.
All is not well, however, on the organ transplant front. Instead of being
the
occasion for unrelieved rejoicing, these new breakthroughs have brought
in their
train a whole host of problems.
First of all, there is a shortage of body organs suitable for transplant. It is
claimed that some are diseased, and that others would be rejected by the
recipient
because of incompatible blood types.
This had led to a set of problems which have strained what passes for
medical
ethics in this country to the breaking point. For, given the limited supply
of donororgans, our doctors have had to pick and choose — on no criteria
whatever other
than their own arbitrary whim — which of the many needy recipients
shall have this
life-giving aid, and which of them shall be denied.
The difficulty here, is that our legal-economic system has not kept up
with
advancing medical technology. The law has prohibited people from
using the
property rights we each have in our own persons and bodily parts.
Specifically, it
has banned trade, or a marketplace in live spare body parts.
We shall claim that deregulation of this market is the solution to the
transplant problem. But before we explain how free enterprise would
work in this
connection, let us lay a few fears to rest. '
Yes, it is gory, disgusting and very uncomfortable to discuss allowing
profit
incentives to work in this field. The very idea involves images of grave
robbers,
Frankenstein monsters, and gangs of &quotorgan thieves" stealing
people's hearts, livers
and kidneys in the manner described by several novels of Robin Cook. It
seems
cruel and unfeeling to discuss the market for used body parts in much
the same
manner as we might describe the used car market. But this is only
because in our
present society, while we can appreciate the miracles of modern
medicine without
necessarily comprehending them, we have such a poor understanding of
the
miracles of the marketplace, and cannot even begin to appreciate them
without
this knowledge. So let us sit back, and relax, and calmly and
dispassionately
consider this idea on its own merits, all pre-conceptions and biases to
one side. Let
our only criteria be not our prejudice, but our assessment of whether this
idea will
really increase the number of donors, save lives, and free doctors from
the onerous
decision of picking which needy people shall be saved, and which
consigned to a
lingering and painful death.
Having said this, let us now consider the economics of the situation.
As any first year student in economics can tell you, whenever a good is
in. short supply, its price is too low. And the case of spare body parts is
no exception.
On the contrary, it is a paradigm case of this phenomenon. For our laws
on this question, in prohibiting a marketplace in human organs, have
effectively imposed a
zero price on these items.
But at a zero price, it should not occasion any surprise that the demand
for
human organs would vastly outstrip the supply. This, after all, is one of
the most
basic laws in all of economics. If the price were allowed to rise to its
market
clearing level, there might not be too great a change in the number of
used body
parts demanded. This is called by economists "inelastic demand". All it
means is
that if you need an organ transplant at all, price, no matter how high,
within limits
of course, is not likely to deter you. No. The main effect of a free market
in used
bodily parts will be on the amount supplied.
How would a marketplace in human organs actually work?
While it is never possible to fully anticipate -the functioning of an
industry
now prohibited by government edict, the following scenario will do as
well as any
other in describing one possible option.
We know that the major source of preferred organ donations will come
from
young healthy people who are cut down in the prime of life. This can
occur in the
case of traffic fatalities, murder victims, perhaps, soldiers who die in
war, people
who die quickly of a disease such as a heart attack, which leaves their
other organs
intact.
Were the industry to be legalized, new firms would spring up. Or
perhaps
insurance companies, or hospitals would expand their bases of
operation. These
companies would offer thousands of dollars to people (who met the
appropriate
medical criteria) who would agree that, upon their demise, their bodily
organs
would be owned by the firm in question. Then this company would turn
around and
sell these organs, for a profit, to people in need of an organ transplant. In
addition
these new firms would operate, as at present, to try to obtain consent
from the -4relatives of newly diseased persons, for use of their organs. Only now,
under
economic freedom, these firms would be in a position to offer cash
incentives — as
well as the chance to save another human life.
The main effect of such a program would be to vastly increase the
supply of
donor organs. Certainly, many people in Canada and in the third world
as well
would be happy to take advantage of this opportunity. No one who
objected on
religious grounds, for example, would have to cooperate with the
venture. As a
result, no longer would potential recipients have to make do without
transplants.
We need not even fear that those who engaged in this practice would
earn
&quotexhorbitant" profits. For any such tendency would call forth new
entrants who
would act so as to increase supply even further and reduce profits to
levels which
could be earned elsewhere.
Let us allow free enterprise to work in this field, and save us a lot of
pain,
sorrow, suffering and tragedy.
-303anuary 20, 1984
Replacing Ray Spaxman as Vancouver City's Planning Director/ by
Walter Block
Ray Spaxman handed in his resignation as Vancouver City's Director of
Planning after a 15 year stint on the job, citing his inability to get along
with the city council as chief among his reasons for departure.
The commentary on this event emanating from the local pundits,
politicians and public policy analysts has so far centered on the
qualifications needed by his replacement.
For example, Alderman Libby Davies has called for a tough minded
planner who can see the big picture. In her own words, "the city ...
need(s) an iron-fisted planner who can visualize Vancouver's skyline in
20 years rather than swaying with the comings and goings of elected
councils."
In contrast, Mayor Gordon Campbell said he was searching for a person
who would serve as a resource to city council. "I think we want
someone who is independent and aggressive and yet knows how to
provide council with the information it needs to make the right
decisions."
Should the vision of the new planner be elevated beyond that of the
elected city council? Surely this is an anti democratic perspective; why
go through the expensive process of voting in the ballot box if the
decisions of our political representatives are to be subordinated to civil
servants and bureaucrats. On the other hand, the presumption is that the
planner, whoever he or she turns out to be, will bring some measure of
professional expertise to bear on the questions of zoning and other land
use problems. Why accord the primary role in such decision making to a
committee of ex-used car salesmen, merchants, teachers, lawyers,
unionists, etc?
The problem with this entire debate is that it could easily be taking place
in the pre-Gorbachev Soviet Union. For that is pre-eminently the
country which engages in long and bitter controversies (sometimes fatal
ones) over how best to centrally plan the economy. But even the
Russians have learned, through bitter experience, that central planning
leads to economic chaos. It is the signal contribution of Mikhail
Gorbachev that the decentralized marketplace may actually be a better
method of organizing economic activity than bureaucratic control. His
proposal of perestroika is nothing if not a plan to free up the economy
from the controls that have long been exercised by a Ray Spaxman, and
would be undertaken by any replacement.
Adam Smith, of course, said much the same thing. It is a sad reflection
of the intellectual tradition now reigning in Canada that a Soviet
dictator is now a more credible authority than a Scottish philosopher in
some circles. But given this reality, and given the importance of placing
greater reliance on markets, not public managers, we could do worse
than apply perestroika to Vancouver city planning; that is, allow this job
to go unfilled.
But there are those who take the view that city planning is different.
They claim that while central planning cannot rationally be applied to
agriculture, or mining, or steel making or forestry, it is necessary in
order to determine where housing, commerce and industry shall be
located. After all, we don't want high rises all over the place; we don't
want cement works in the business district; we don't want pickle
factories in residential areas; we don't want filling stations located in
cul-de-sacs.
But there is a fundamental mistake made by these people. They think
that if society is to be rationally planned in this manner, there must be
an actual person— a Ray Spaxman clone - to do the planning. They fail
to reckon with the "invisible hand" of Adam Smith. They do not
understand that downtown real estate values are simply too expensive to
allow for cement works; that a pickle factory would bankrupt itself
trying to buy into Shaughnessy; that placing a gas station in a cul-de-sac
is an invitation to economic ruin.
Yes, it is hard to visualize how a city the size of Vancouver could grow
and develop without anyone at the helm. Fortunately for those lacking in
this type of imagination, there is a real world example of a similarly
sized city which functions quite nicely thank you without any zoning or
central planning: Houston, Texas. Its. story, and the general case against
zoning and land use controls, may be found in the;
Fraser Institute publication Zoning: Its Costs and Relevance.
Stop the Drug Profiteers??? by: Walter Block, The
Eraser Institute, Vancouver, B.C.
Once upon a time, in a land far, far away, there was a golden goose. It
would lay golden eggs - one per day. But this was the source of the
problem: the owner wanted to get rich quick, so he killed the golden
goose and we all know what happened after that.
Or do we?
This is highly questionable that we have learned our lesson, at least in
view of some of the problems recently encountered by BurroughsWellcome Co., the producers of the AIDS drug AZT, and the modern
day equivalent of the golden goose.
Last month several AIDS activists chained themselves to the visitors
gallery at the New York Stock Exchange, in protest against a pricing
policy for AZT, which translates into an annual cost of $8,000 per year
per patient.
But this is only the tip of the ice-berg. For years self-styled moralists,
clergymen, pundits and editorialists have charged that it is unethical to
profit from the plight of sick people. Since AIDS sufferers are as
desperate as can be imagined, the incessant complaints of these and
other know-nothing busybodies have began to be applied to AZT. In
this vein, U.S. Senator David Pryor has held hearings, examining the
pricing policies of Burroughs-Wellcome. Congressman Henry Waxman,
a long-standing critic of drug industry pricing, maintains that "Congress
has the responsibility to ensure that this life saving drug is available to
everyone ... and through a reasonable price to all."
Possibly as a result of all this brou-ha-ha, AZT prices have been reduced
from the $8,000 per year level to $6,000.
But this makes as much sense - from the point of view of finding a cure
for AIDS - as killing the proverbial golden goose. What kind of signal is
this sending out to all potential discoverers of an antidote for this
dreadful disease? Will it encourage them to keep the laboratory lights
burning all night? Will it lead them to invest more money to this end?
Will it push the next generation of scientists and medical researchers
into this field, or dissuade them from it?
Far from trying to reduce profits in this industry. AIDS victims and their
supporters should urge the very opposite course (if action. They should
hold ticker-tape parades for Burroughs-Wellcome executives and
employees. They should carry them on their shoulders around town. as
we do for winning spirts figures. Instead of attacking its bottom line,
they should be donating money to this heroic company.
Profit controls are like regulations limiting the decibels with which
campers lost in the woods can cry out for rescue. If we are to wrestle the
deadly AIDS virus to its knees, and are for socialist ideological reasons
intent upon using price and profit controls, it would be much better to
interfere in this way with every other industry under the sun except for
pharmaceuticals. In that way, funds would flow from other sectors into
drug research. Pryor, Waxman and the gay community have their
priorities exactly backwards.
There is one way, however, that AZT prices can be sharply reduced without endangering the quest for an AIDS solution. The average cost of
developing a new drug and getting it past Food and Drug Administration
hurdles is about $70 million. Eliminating Phase-3 tests alone would
reduce this by some 30%. Better yet, disbanding the PDA entirely
would reduce drug prices even more.
If the crucially important task of certifying the safety of drugs were
privatized, sick and dying people would be able at long last to exercise
their rights of free choice. Information about drug reliability would be
supplied more cheaply and accurately by private enterprise, organized
into a competitive industry in order to accomplish that task. Remember,
the FDA is the institution responsible for keeping AZT off the market
while many AIDS sufferers had to go without, and for giving its
imprimatur to thalidomide. Surely a competitive private drug testing
industry could do far better than that.
Taxi Medallions
by Walter Block
- 30-
New York City has done it again. Always the biggest, and
sometimes the best, the Big Apple has just set another sort of
record. For the first time in its history, a taxi medallion has been
sold for a cool $100,000.00. This is in U.S. currency, of course, which
is worth over $135,000.00 in Canadian dollars. (The situation in this
country is serious but not as critical -- the value of medallions in our
cities is still far less -- so perhaps there is still some time to learn
from the mistakes committed south of our border.)
The reason for this startling event in Gotham is not too
difficult to explain. The number of medallions, or licences to drive a
cab in New York City, has remained frozen at 11,787--ever since
1937! But in the last 50 years Gotham has grown quite a bit; with
increased affluence, the taxi-riding public has increased by even
more. As a result, the value of a legal permit to pick up and deliver
passengers on the streets of New York has skyrocketed, and has
now reached its present six-figure height.
This situation is highly problematic, and for several
reasons. First of all, the consumer -- especially when it rains, or
during the late evening and early morning hours -- is oft-time forced
to go without this service. This phenomenon, no doubt, is in large
part responsible for the jokes New Yorkers tell about the difficulty
of finding a cab when you want one. (But it is not much of a joke for
the city's minority group members, who are
often discriminated against by cab drivers, of all races and
nationalities.)
Secondly, there is the plight of the would-be new entrant to
the taxi business. Imagine the, barrier he faces. Not only must he be
able to purchase an automobile, and keep its gas tank full, he must
somehow come up with an even $100,000! This, of course, all but
rules out any immigrant, young person, or minority group member.
At best such people can get jobs in the industry, driving the cabs
owned by others, but ownership of their own taxi business is simply
beyond the means of all but the very rich.
New York's feisty Mayor Ed Koch has come up with a plan to
increase the number of medallions by 1,200, or some 10 percent of
the total. But the taxi interests, and the major banks which hold the
mortgages on these permits, have howled in anguish and outrage,
and it is not hard to see why. If we assume that all taxi licences could
sell at this new price, then the total book value of the 11,787
medallions is $1,178,700,000, or almost $1.2 billion dollars. Any
large scale increase in the number of cabs permitted on the streets
would eat into these values, and create vast losses for many in the
industry.
What, then should be done? The status quo defends the
property values of the medallion owners, but it violates the public
interest, inconveniences the consumer, freezes out new entrants,
and enhances discrimination against minority group members. No
matter what decision is finally arrived at, the interests of at least
some people will thus be harmed.
The same, of course, could be said for the ending of
slavery. Certainly, the slave-owners were out of pocket on that great
and glorious day when all the slaves were freed. And this points us
in the direction of what must be done today, for the taxi industry.
Increasing the medallions by 10 per cent, or by any other amount,
might slightly alleviate some of the symptoms of the problem, and
so is on that ground a reasonable compromise. But it would only
perpetuate a patently unjust system. The only just solution is to end
the system of entry barriers to taxi driving, and in one fell swoop.
This could be done by announcing that henceforth, no
medallions are necessary for taxi ownership. Anyone can own and
drive a cab, provided only that safety and insurance requirements
are met. This would ensure that customers were supplied with cabs,
and that all those wishing to own and drive cabs would at last have
this opportunity.
But wouldn't this be unjust to all those who in "good faith"
purchased the now worthless taxi medallions? Not a bit of it. It
would be no more unfair to the present cab owners than was it
unjust to free the slaves, without compensating the slaveholders.
The slaveowners, too, bought their slaves in "good faith," but are not
thereby entitled to any special consideration. Legislative sittings
have been called "futures markets in stolen property." The point is,
anyone who makes a purchase in this "futures market," such as the
owner of a taxi medallion or of a slave, deserves to lose his entire
investment when the scheme is finally exposed as the theft it is, and
is repealed.
Another common objection to a completely free market in
taxi
cabs is that there will be too many such vehicles on the road
under such a system. If anyone is free to enter, goes the argument,
why then everyone will. But this objection misunderstands a basic
premise of economics. Profit tends to equalize across all industries.
If so many cabs entered the field such that none of them could move,
much less make a living, then many would be forced to leave. This
would occur until the remuneration that could be earned behind the
wheel tended to equal that which could be earned elsewhere, with
due consideration given to the skills needed, the working
conditions, etc. Thus we see that the market has its own system of
checks and balances. Government is hardly needed to ensure that
there are not too many participants in any one industry and too few
in another.
Teen Suicide
by: Walter Block, The Fraser Institute
According to two recent studies reported on in the prestigious New
England Journal of Medicine, television news stories and dramas about
suicide have been responsible for an increase in the suicide rate amongst
teenagers. Paradoxically, this unfortunate effect has resulted even from
programs which were ostensibly designed to increase public awareness
of the problem -- in the hopes of reducing it. According to the
psychiatrists who undertook the research, the young people in question
ignored the message being broadcast to them, and instead engaged in
"imitative suicidal behaviour".
The television networks which were involved in these episodes issued
immediate challenges to the findings. One spokesperson sharply denied
that any causal relationship had been established between the T.V.
shows and an upsurge in teen suicides. However, the scientists had
studied 38 such shows which were broadcast between 1973 and 1979,
and found an average increase of 2.91 suicides in the following eight
day period -- a result which could not be explained through normal
statistical variance.
Let us not argue over the facts of the case. Instead, let us assume for the
sake of argument that the finding of a causal relationship between these
programs and subsequent suicides is correct. What follows, if anything,
from such a stipulation?
In the view of some public policy analysts, there would then be a clear
case for banning all television treatments of suicide. (This, at least,
would be the reasoning of those who urge that pornography be
prohibited on the ground that it leads to rape).
The difficulty with this stance is that it can interfere with not only the
free speech rights of the media, but also with scientific research. Take
the studies reported in the New England Journal of Medicine themselves
as an example. It is more than likely, given the intellectual
precociousness of the younger generation, that many teenagers read this
material. Given the assuming, the probability is that at least some of
these young scholars have committed suicide as a result.
But the situation is even worse than that. If the mere mention of suicide
can bad impressionable youngsters to indulge in this behaviour, and if
pornography can induce rape, then we may easily suppose that the
depiction of detective stories will cause crime, that the study of history
will encourage war, and that courses in chemistry and physics will result
in the widespread creation of thermonuclear devices.
More to the point there is an element of truth in each of these
allegations. There is an element of risk involved in all of knowledge,
including threats. However, if all such activities were therefore
prohibited, it would man a virtual end to culture as it has developed over
the course of the last few dozen centuries. Paradoxically, if art, culture
and science have had a civilizing effects on the human animal, then
banning it in the name of saving lives may actually result in more death,
not less.
The moral of the story should be clear. People have a right to do
whatever they wish, as long as it does not involve the invitation of force
against others. We cannot stop the onward and upward march of
knowledge and culture just because some impressionable young people
may be adversely affected.
- 30 550 words
The Franchiser
by: Walter Block, The Fraser Institute, Vancouver, B.C.
The complaints against the franchiser are many and varied.
Such companies as McDonald's, Burger King, and Wendy's are
accused of presiding over a form of industrial organization which



has had no productivity growth whatsoever for the
last two decades
employs a nonunion workforce composed mainly of
teenagers who are forced to perform repetitive tasks
at high speed for low wages
creates visual eyesores which is a blot on our
civilization.
Further, these fast food chains are only the tip of the ice-berg.
Competitors include Kentucky Fried Chicken, White Spot, Denny's,
Mr. Mike's, Dairy Queen, Carvel, Dunkin Donuts, Pizza Hut, Arby's,
Taco Time and a whole host of others of that generally nefarious ilk.
Nor has this peril been confined to the "plastic" food
industry. Nowadays the disease has spread to automobile repair
(Midas Muffler, Aamco Transmissions, Speedy Muffler), hotels
(Holiday Inn, Best Western, Motel 6), and even to such hitherto staid
occupations as financial consulting (H&R Block), real estate
(Century 21), and medical and dental operations (the new denizens
of the almost equally objectionable shopping malls.) Altogether, this
relatively new type of business enterprise has sounded the death
knell for individualism. Our towns and cities have become
homogenized; mom and pop stores of great variety have been
consigned to the dust bin of commerce.
Happily from the point of view of those who yearn to turn
back the clock to an earlier, simpler more pastoral time, a strong
reaction has set in. There are numerous cases on record of local
community zoning boards refusing to grant permission for a new
McDonalds to be opened. As well, dirigisme professors, academics
and intellectuals are girding themselves up to combat this menace.
This, at least, is the case against the franchiser made by his
numerous and vociferous detractors. In point of fact, however, the
objections are of no moment. Franchising is as honorable and
beneficial a form of enterprise as any other. In view of the many
complaints against it, we do well to consider its defence.
First of all, franchising represents a voluntary commercial act
between consenting adults. There is agreement on all sides:
between customer and retailer, retailer and franchiser and
customer and franchiser. The reason this mode of operation has
become so popular is because in the opinion of millions of people,
their lives have been rendered richer and happier by the advent of
this mode of operation. They scarcely would have patronized these
outlets in the vast numbers they have, had this not been so.
Secondly, they have done so in order to promote their own
safety and security. Say what you will about heterogeneity, but in
the previous epoch unscrupulous fly-by-night frauds had been able
to inculcate themselves in amongst the legitimate mom and pop
firms. In patronizing the franchisees, the public may well have lost
some variety, but they have gained the assurance that quality
standards are being maintained. And in their view, the trade was
worthwhile.
Thirdly, the franchise represents not so much a radical
departure from past business practices as a continuation of the
market's long standing efforts to continually upgrade the quality of
the offer made to the customer. Earlier milestones along this road
were the development of department stores, and before that, brand
names.
As for there being no productivity improvements in
industries covered by franchising for the past 20 years, this is
patently false. Were there a scintilla of truth in this claim it would be
impossible to account for their success. The fast food concerns do
indeed employ young people for unchallenging tasks at low wages,
but better this than consigning them to many years of forced
unemployment. Teenagers have to start somewhere, and in any case
are deliriously happy to have these jobs, as shown by the alacrity
with which they apply for them.
And last but not least, beauty is in the eye of the beholder.
Yes, there may be those with tender and heightened artistic
sensibilities who are aesthetically outraged by neon signs, and they
are free to withhold their patronage from these businesses. But in a
free society, they are not at liberty to prevent the rest of us from
making choices for ourselves.
- 30 July 4, 1988
THE TOOTH FAIRY
by Walter Block, Fraser Institute, Vancouver, B.C.
Like death and taxes, tooth decay was part of the human
condition--somethingwe suffered from and could not avoid.
Happily, however, this may be part of our past. There has
been no movement on the death and taxes front of late but there are
indictions that we are about to turn the corner on tooth decay.
Evidence for this contention abounds. According to the
Canadian Dental
Association there has been a 45 percent decrease in cavities in the
last 10 years; fully one-third of the U.S. population under 17 years of
age is completely cavity free; and those who still suffer from this
affliction have 50 percent fewer cavities than a decade ago.
What is responsible for this dental liberation? There are
those who credit the tooth fairy but our more pedestrian scientists
point to fluoridated drinking water, better commercial toothpastes
and improved dental technology. Whatever the cause,. this medical
miracle has had several serious sociological implications.
For one thing, there have been serious repercussions upon
the profession of
dentistry. Not to put too fine a point on it, with fewer cavities and
the long-term prospects for none at all, there has been a falling off in
the demand for practitioners. As a result, Canadian centres of higher
learning such as the University of British Columbia, the University of
Toronto, and the University of Western Ontario have had to cut back
heavily in their first-term enrolments in dentistry school.
Not being able to enter the field is a disappointment to many
would be dentists but it is a personal, professional and economic
tragedy to those in their fifties who
2
have devoted their whole lives to the care of teeth and now find that
their services are no longer needed.
Should public funds be used for their retraining? Not a bit of
it. In the market, investors in capital, whether human or physical,
pay their money and take their chances. If they succeed, they reap
the rewards. (When was the last time a prosperous dentist offered
to share some of his income with you?) But if they fail, as in this
case, it is they who must bear the burden.
This phenomenon also sheds some light on a doctrine
recently popularized by the advocates of equal pay legislation. In
their view, the worth of a job depends upon such objectively
quantifiable characteristics as training, job responsibility, and
working conditions. Well, all of these things have remained constant
in the last little while yet the pay received by dentists on the market
has been plummeting.
So much for the view that jobs have intrinsic values.
- 30 November 1985
THE TUBE MADE ME DO IT
by Walter Block, Senior Economist, The Fraser Institute
This fall NBC presented a made-for-T.V. movie "The Burning
Bed".
Starring Farrah Fawcett, it told the story of Francine Hughes, a
woman who
had been beaten by her husband for 13 years. Finally, the battered
wife soaked
her husband's bed with gasoline, and while he was asleep, burned
him to death.
Right after the broadcast of this movie, violence occurred in
three
separate cities in the U.S. In Milwaukee, 39 year old Joseph Brandt
waited for his estranged 37 year old wife Sharon in her driveway.
When she pulled up, he doused her with gasoline and threw a
lighted match at her. In Quincy, Massachusetts, a husband became
enraged by the show and beat his wife to a bloody pulp. According
to the director of the shelter that took her in, the husband told her
he wanted to get her before she got him. And in Chicago, as if to feed
the fears of this Quincy husband, a battered wife watched "The
Burning Bed", and shot her husband with a pistol.
Nor was this the only case of life imitating art. In Portsmouth,
Virginia, a
man watched the movie "Revenge of the Ninja", a story about a
Japanese assassin. Depressed over his families' eviction from their
home, Gregory Eley, 24, donned oriental garb and battle stars,
armed himself with a submachine gun, two crossbows and a hand
gun, and murdered a woman who had sued him over a business
deal.
A question not unnaturally arises. Should society ban movies
which
feature themes of death and destruction, which may lead people to
emulate
them?
It is easy to advocate censorship, for had these two movies
not been
shown, several people who were killed might today still be alive.
2
But a moment's reflection casts doubt on such a public policy
decision. If we banned movies, we would have to ban books, stories,
paintings, plays, operas, etc. Even children's fairy tales -- Jack and
the Bean Stalk, Little Red Riding Hood, Chicken Little, Hansel and
Gretel -- are replete with mayhem and murder. Down this path lies
the end of culture and art as we know it.
But there is an even more basic objection to censorship and
prior restraint. The human being is a creature of free will. People,
whether they like it or not, are responsible for their own acts. "The
Burning Bed", and all other artistic endeavours which depict
violence, are not to blame for the acts of those who chose to emulate
them. Only the criminals themselves are to blame.
The Travails of Mervyn Levigne
by Walter Block
Mervyn Levigne, with the support of the National Citizen's Coalition,
has just won a
signal victory in the Ontario Supreme Court.
Mr. Levigne teaches at a college which is covered by an agreement
negotiated through
the Ontario Public Service Employees Union. He isn't a member, but
pays dues under the
Rand formula, on the ground that since he benefits from the labour
organization, he should
pay for its collective bargaining activities.
But the court drew the line at forcing Levigne to underwrite the union's
political
program: support for such things as the N.D.P. and abortion. It held that
this violated the
college teacher's rights of association under the Charter of Rights.
At a superficial level, this finding would appear to be a blow for
freedom and human
rights. But by looking beneath surface appearances, we can see several
disquieting aspects of
this court opinion.
. The chief stock in trade of unions is their ability to restrict the entry
into the labour
market of would be competitors. They do so by initiating not only
threats, but actual force
against strikebreakers, and others who oppose them. They are virtually
the only ones in
society who can with legal impunity initiate violence against other
citizens. It is thus
problematic that the court in the Levigne ease failed to make this more
basic criticism of
organized labour.
. It is by no means clear that unions really benefit the work force. The
best available
evidence indicates that organized workers earn some 15% more than
they would have otherwise
in the absence of their union, but this is accomplished by exacerbating
unemployment on the
part of non union members. (Nor would it help if al^ employees were
unionized. For the way
these organizations raise wages is by restricting entry. In order for the
process to work,
someone has to be frozen out.) As well, in many cases, unions become
so greedy that they choke off the lives of the firms they live off, in the
manner of parasites unaware of their
^' best interests. If on net balance unions are not of benefit to employees,
then the Rand
formula, approved by the court, can hardly be justified.
. But even if it were true that unions benefit workers in general, it still
does not
follow that they should be allowed to charge those employees who are
unwilling to join up for
this privilege. For many groups in our society benefit non-contracting
third parties, without
being able to bill them for their gains. For example, my lot in life is
vastly improved if you
wash your car, or mow your lawn, or bathe regularly, or smile at me as
we pass by each
other on the sidewalk. Yet what would we think of a government that
allowed you to charge
me for these undoubted advantages, against my will. But this is
precisely what the Rand
formula allows to unions. It should be struck down if for no other reason
than this.
- 30 THE TUBE MADE ME DO IT
by Walter Block, Senior Economist, The Fraser Institute
This fall NBC presented a made-for-T.V. movie &quotThe Burning
Bed".
Starring Farrah Fawcett, it told the story of Francine Hughes, a woman
who
had been beaten by her husband for 13 years. Finally, the battered wife
soaked
her husband's bed with gasoline, and while he was asleep, burned him to
death.
Right after the broadcast of this movie, violence occurred in three
separate cities in the U.S. In Milwaukee, 39 year old Joseph Brandt
waited for
his estranged 37 year old wife Sharon in her driveway. When she pulled
up, he
doused her with gasoline and threw a lighted match at her. In Quincy,
Massachusetts, a husband became enraged by the show and beat his wife
to a
bloody pulp. According to the director of the shelter that took her in, the
husband told her he wanted to get her before she got him. And in
Chicago, as if
to feed the fears of this Quincy husband, a battered wife watched
&quotThe Burning
Bed", and shot her husband with a pistol.
Nor was this the only case of life imitating art. In Portsmouth, Virginia,
a
man watched the movie &quotRevenge of the Ninja", a story about a
Japanese assassin. Depressed over his families' eviction from their
home, Gregory Eley,
2^, donned oriental garb and battle stars, armed himself with a
submachine gun,
two crossbows and a hand gun, and murdered a woman who had sued
him over a
business deal.
A question not unnaturally arises. Should society ban movies which
feature themes of death and destruction, which may lead people to
emulate
them?
It is easy to advocate censorship, for had these two movies not been
shown, several people who were killed might today still be alive.
But a moment's reflection casts doubt on such a public policy decision.
If
we banned movies, we would have to ban books, stories, paintings,
plays, operas,
etc. Even children's fairy tales -- 3ack and the Bean Stalk, Little Red
Riding
Hood, Chicken Little, Hansel and Gretel -- are replete with mayhem and
murder. Down this path lies the end of culture and art as we know it.
But there is ^an even more basic objection to censorship and prior
restraint. The human being is a creature of free will. People, whether
they
like it or not, are responsible for their own acts. &quotThe Burning
Bed", and all
other artistic endeavours which depict violence, are not to blame for the
acts
of those who chose to emulate them. Only the criminals themselves are
to
blame.
UBC: Second to noneby
Walter Block, The Fraser Institute, Vancouver, B.C.
The University of British Columbia has recently published its
"mission" statement. Entitled "Second to None," the document is a
blueprint showing how U.B.C. could accomplish its goal of achieving
excellence as a centre of higher learning.
And how will this premier university proceed? By
concentrating on graduate, not undergraduate programs, and by
limiting its student intake to only the very best of the applicants. In
the words of one spokesman, "Choosing the students most likely to
succeed results in more efficient use of the very special resource
this province has in its flagship university."
But what of the students who would otherwise be accepted
for admission, under a less elitist procedure? UBC accepts the notion
that under this plan 10,000 to 15,000 students will be left high and
dry, but has embarked on a course of specialization and division of
labour: this institution will take on only the best and brightest
students, leaving the others to the tender mercies of the provincial
post secondary system.
The bottom line is that openings must be rationed on some
basis or other. This is true whenever demand is greater than supply,
and that certainly holds in this case. Given this necessity, there are
very few people who would fault UBC for employing a criterion of
intelligence, or ability to withstand the rigours of its purposefully
distinguished course of study. According to its academic vice
president and provost, "When places in an academic program must
be rationed, it would be quite wrong to ration them on any other
basis."
But the ethics of the matter are by no means so clear and
straightforward. On the contrary, there are grave moral pitfalls in
such a stance. In order to see them, we must reflect carefully upon
the financing of the University of British Columbia.
In point of fact, the funds necessary for the running of this great
university do not all come from the best and the brightest, the
people with the highest I.Q.s, or the most distinguished academic
accomplishments. On the contrary, they are derived from the entire
citizenry, through compulsory taxes.
What kind of morality is it then which requires all people to
financially support an institution, and yet restricts the benefits to
those (i.e., the most intelligent) who can profit from it the most, to
be sure, but who are likely to need it the least?
The problem, here, is that most of the people forced to pay for the
academic standards to which the professorate and students at UBC
would like to become accustomed could never in a million years
pass the entry requirements.
There is of course no problem with attempting to become a
world class institution
of higher learning -- on a private basis. People are presumably free
to do as they wish with their own funds, and if they desire this goal,
and are willing to pay for it, no one should stand in their way. But
once a university enters into the morally disputatious area of the
public sector, and thereby obtains access to the public trough, it is
highly unethical to discriminate against some taxpayers and in
favour of others.
What mode of rationing, then, would be morally appropriate
for a public university to adopt? One thing is clear at the outset: any
entrance requirement based on intelligence, or ability to do the
scholarly work, let alone UBC's extremely rigourous standard, is
clearly unjustified. For they all preclude from entrance those who
have paid for the service.
It would appear that the only legitimate criterion would be
taxpayer status. Let he who pays the piper call the tune. Given a
shortage of space, perhaps the fairest admission policy would be
one of a lottery. Let all those taxpayers who wish to apply be given a
lottery number, with the winners to be drawn in some random way.
Then, the university could tailor itself to suit its constituents: high
level classes for those able to do the work at one end of the
spectrum, as at present, remedial reading or writing for those at the
other end of the spectrum, and courses of intermediate difficulty
and challenge for those in the middle.
Many will regard this "modest proposal" as ridiculous. The
absurdity emerges, however, not from the idea itself, but from a
system which forces people to contribute to the institutions of
higher learning they cannot reasonably hope to attend.
- 30 August 3, 1988
Unilateral Free Trade -- or a Negotiated Settlement
by Walter Block, The Fraser Institute
A unilateral declaration of free trade on the part of Canada is
hardly on the top of the agenda of the Mulroney Government, but it
may be of interest to examine this public policy alternative in any
case. If the "fast track" negotiations continue to splutter along at
their present furious clip, or, more to the point, never get underway
at all, lost in a tragic escalating tariff war, this country shall be faced
with a dilemma down the road a piece: an end to trade barriers may
be in our national interest, but will be out of reach no matter how
desirable.
A unilateral end to all tariffs, quotas and other such
interferences has at least the advantage that it could be attained
without the cooperation of the inward looking Americans. (To say
that it will be difficult to convince Canadians of the merits of such a
move, however, would be the understatement of the century).
Moreover, it would undoubtedly bring great benefits to this country.
Under a regime of this sort, Canadian consumers would be able to
avail themselves of goods at hitherto unimaginably low prices. This
alone would be a magnificent spur to our standard of living, and
would probably do more for the well being of the poor in this nation
than all the welfare programs on the books put together.
Further, this boon to consumers would likely spill over to our
export sector. For the additional funds spent in the U.S. would
eventually return to this country, in the form of domestic purchases.
And this could not help but spur additional employment
opportunities in Canada.
In fact, a unilaterally declared end to trade barriers is such a
good idea that it might make sense to adopt this policy right now,
and forget all about the negotiation route. This holds true except for
one small point: better even than a unilateral declaration would be a
mutual agreement between our two countries (or better yet,
between Canada and the rest of the world) to fully open our
common borders to commerce.
We can in effect gain a smaller amount right now, for sure,
under unilateralism (if we could but agree amongst ourselves to
take this step), or wait it out, and possibly attain a greater amount
later on, if the negotiations succeed, through mutual agreement.
Given this situation, two questions present themselves for
analysis.
First is the question of whether a "bird in the hand" is worth
more than "two in the bush." Economic theory alone, unfortunately,
cannot answer this, because we do not know the size of the
immediate (unilateral) payoff, the larger size of the later
(negotiated) gain, nor the rate of discount through which one may
be meaningfully compared with the other.
Secondly, we must ask whether seizing the "bird in the hand"
shall increase or decrease the likelihood of our ever capturing the
second which is still lurking "in the bush." That is, will a unilateral
declaration of free trade enhance or retard the chances of the U.S.
agreeing to end their own trade restrictions?
According to one theory, if we go it alone, we can shame
them into following suit. If we blaze the path toward free enterprise,
we can expose their otherwise hypocritical allegiance to the
marketplace, and thus force them into a golden era of mutual free
trade.
According to another theory, they are unembarassable.
Commercial relations between countries are a matter of pure brute
bargaining power, in this view. If we throw away our chips (their
access to our markets), they will just laugh at our hope or
expectation that they will throw away their chips (our access to
their markets).
Unfortunately, again, there is nothing in the realm of
economics that can provide a definitive answer to this puzzle.
Nevertheless, the "dismal science" may be of some use regardless.
For one thing, it clearly exposes and categorizes our ignorance. This
helps us to know where and how we must seek additional
information. For another, it indicates that there may well come a
time when the certain but smaller benefits of unilateralism will start
to outweigh the larger but ever receding gains of waiting for a
negotiated settlement.
This, it must readily be admitted, seems rather
counterintuitive. It amounts to saying that were we ever fully
convinced that the Americans would not under any conceivable
circumstances negotiate a free trade agreement with us, we should
then declare our borders open to their commercial incursions. It
appears uncomfortably close to advocating that we turn the other
cheek, trade-wise.
Yet, for all of the superficial implausibility of the idea, it is
sound public policy. Canadian industry would benefit from stepped
up exports, from the ability to increase specialization, to join in an
international division of labour, and from the added economies of
scale that this would make possible. The domestic consumer, too, as
we have seen, would gain from a unilateral dismemberment of trade
barriers.
It may seem unlikely, but it is comforting to know that our
economic lives are not fully in the hands of the Americans. It would
be vastly preferable to be able to negotiate free trade with the
colossus to the south. But should things ever come down to such a
pass, this country would benefit from a unilateral declaration of
economically open borders even if the U.S. failed to follow our
inspired lead.
UNIONISM
by Walter Block, The Fraser Institute, Vancouver B.C.
A strange adventure recently befell Patrick McDermott, the
27 year old son of Canadian Labor Congress president Dennis
McDermott. Young Patrick was innocently riding a bus in suburban
North York when he witnessed a beating in the street. A woman,
Dianne McIntyre, aged 42, was being assaulted by a man -whereupon our hero jumped off the bus, came to the rescue of the
damsel in distress, and for his pains was wrestled to the ground by
four other men, colleagues of the hoodlum battering Mrs. McIntyre,
and was kicked and punched while he was down.
"No big deal" you say? "Happens every day?" Well, yes,
unfortunately; street violence seems to be part and parcel of
modern day life, not only in the U.S., but increasingly in this country
as well.
But this case was exceptional. For the victimized woman was
crossing a picket line at the main Visa credit card centre for the
Imperial Bank of Commerce, and the five bully boys were bank
workers, engaged in a labor strike against this financial institution.
What a position to be in for Patrick McDemott, a staunch union
supporter in his own right, and son of the outgoing president of the
CLC!
But Mr. McDermott the younger tried to remain loyal to his
principles. That is, to both of them: chivalry and unionism. Although
suffering from an arm injury, bruised ribs and a split lip in his
confrontation with the minions of organized labour, he stated that
he still believes "in the strike and the cause, but when it comes to
goons hitting defenceless women, it's got to stop. That guy should be
thrown out of the union."
This, however, is too facile, by half. Unionism as practiced in
Canada is intrinsically a violent, confrontative and physically
aggressive institution, and young Mr. McDermott cannot have it
both ways. He must either renounce the "cause," or give up on his
principle that goons should not be able to beat innocent persons.
Why is this? How can it be that a widely respected institution, organized labour, necessarily initiates violence against
non-agressing people?
The reason is straightforward. Actual union practice, and the
labour codes of the land which underly it, are predicated on the
assumption that competition, no matter how well it works
elsewhere in the economy, is simply inappropriate for the labour
market. But not only inappropriate. Deserving of legal penalties as
well!
Labour enactments in Canada mandate that the employer
"bargain fairly" with a union, when what he may want to do most of
all is ignore his striking employees entirely, and hire competing
workers (i.e., "scabs") in their place. Some provinces (i.e., Quebec)
prevent management from hiring temporary replacements for the
duration of the labour dispute; others allow this, but insist that the
firm not deal more favourably with these labourers than with its
unionized work force. If the employer declines to be bound by these
restrictions, he is liable to fines or even jail sentences -- which is
certainly equivalent to visiting violence against a person, the
employer, for doing no more than encouraging competition in the
labour market.
It is perhaps for this reason that the police and courts
turn a blind eye -- or even a sympathetic one -- to situations where
union violence is directed against the employer, or, in the case of
Mrs. McIntyre, against those who support scab workers by crossing
picket lines. "If the government will physically prohibit labour
market competition anyway, why penalize organized labour for
doing the same thing?" seems to be the prevailing opinion.
A moment's reflection will convince us that this practice -union violence or government violence practiced against employers
and/or scabs -- is completely unjustified. The non-employed
competing workers (scabs) have every bit as much right as the
striking unionists to compete for jobs offered by the employer. Any
other conclusion would set up two classes of people -- unionists,
scabs -- with different types of rights. But all Canadians have the
same human rights to compete for employment, without being
victimized by physical violence, whether from unionists or
policemen.
As for the assault and battery perpetrated on Patrick
McDermott and Dianne McIntyre, a union spokesman termed the
incident "minor," and said there were no plans for disciplinary
action against the pickets who injured them. And of course the
police did nothing to quell this violence in our streets, even though
they, and all Canadians would have been outraged had this situation
occurred in any context other than that of a labour strike.
- 30 UNIONISM
by Walter Block, The Eraser Institute, Vancouver B.C.
A strange adventure recently befell Patrick McDermott, the
27 year old son of Canadian Labor Congress president Dennis
McDermott. Young Patrick was innocently riding a bus in suburban
North York when he witnessed a beating in the street. A woman,
Dianne Mclntyre, aged 42, was being assaulted by a man -whereupon our hero jumped off the bus, came to the rescue of the
damsel in distress, and for his pains was wrestled to the ground
by four other men, colleagues of the hoodlum battering
Mrs. Mclntyre, and was kicked and punched while he was down.
"No big deal" you say? "Happens every day?" Well, yes,
unfortunately; street violence seems to be part and parcel of
modern day life, not only in the U.S., but increasingly in this
country as well.
But this case was exceptional. For the victimized woman was
crossing a picket line at the main Visa credit card centre for
the Imperial Bank of Commerce, and the five bully boys were bank
workers, engaged in a labor strike against this financial
institution. What a position to be in for Patrick McDemott, a
staunch union supporter in his own right, and son of the outgoing
president of the CLC1
But Mr. McDermott the younger tried to remain loyal to his
principles. That is, to both of them: chivalry and unionism.
Although suffering from an arm injury, bruised ribs and a split lip in his
confrontation with the minions of organized labour, he
stated that he still believes "in the strike and the cause, but
when it comes to goons hitting defenceless women, it's got to
stop. That guy should be thrown out of the union."
This, however, is too facile, by half. Unionism as
practiced in Canada is intrinsically a violent, confrontative and
physically aggressive institution, and young Mr. McDermott cannot
have it both ways. He must either renounce the "cause," or give
up on his principle that goons should not be able to beat
innocent persons•
Why is this? How can it be that a widely respected institution, organized labour, necessarily initiates violence against
non-agressing people?
The reason is straightforward. Actual union practice/ and
the labour codes of the land which underly it, are predicated on
the assumption that competition, no matter how well it works
elsewhere in the economy, is simply inappropriate for the labour
market. But not only inappropriate. Deserving of legal
penalties as well!
Labour enactments in Canada mandate that the employer
"bargain fairly" with a union, when what he may want to do most
of all is ignore his striking employees entirely, and hire
competing workers (i.e., "scabs") in their place. Some provinces
(i.e., Quebec) prevent management from hiring temporary
replacements for the duration of the labour dispute; others allow
this, but insist that the firm not deal more favourably with
these labourers than with its unionized work force. If the employer declines to
be bound by these restrictions, he is liable
to fines or even jail sentences -- which is certainly equivalent
to visiting violence against a person, the employer, for doing no
more than encouraging competition in the labour market.
It is perhaps for this reason that the police and courts
turn a blind eye -- or even a sympathetic one -- to situations
where union violence is directed against the employer, or, in the
case of Mrs. Mclntyre, against those who support scab workers by
crossing picket lines. "If the government will physically
prohibit labour market competition anyway, why penalize organized
labour for doing the same thing?" seems to be the prevailing
opinion.
A moment's reflection will convince us that this practice -union violence or government violence practiced against employers
and/or scabs -- is completely unjustified. The non-employed
competing workers (scabs) have every bit as much right as the
striking unionists to compete for jobs offered by the employer.
Any other conclusion would set up two classes of people -- unionists, scabs — with different types of rights. But all Canadians
have the same human rights to compete for employment, without
being victimized by physical violence, whether from unionists or
policemen.
As for the assault and battery perpetrated on Patrick
McDermott and Dianne Mclntyre, a union spokesman termed the
incident "minor," and said there were no plans for disciplinary
action against the pickets who injured them. And of course the
police did nothing to quell this violence in our streets, even though they, and all
Canadians would have been outraged had this
situation occurred in any context other than that of a labour strike.
30 -
UNIONS - I
An Editorial Commentary
Prepared by Walter Block
for C30R Radio
There have been labour difficulties between union and non-union firms
at the
Pennyfarthing construction site in False Creek. And there may be more
in the
offing regarding Expo 86, where unions are refusing to work alongside
contractors
employing non-union labour. The construction unions are determined to
maintain
the $26 per hour union pay scales, as against the $17 paid by Kerkhoff
Construction
Co., the non-union firm now working in False Creek.
The argument used by unionists is that all attempts to undermine their
organization with non-union labour should be resisted. Otherwise,
according to this
view, the working people will soon find themselves back in a nonunionized sweat
shop type of economy, where wages would fall to barely supportable
levels.
How would this work? Well, if non-union firms paying $17 per hour are
allowed into Expo 86, and other large scale operations, they will be able
to
outcompete the union shops. With the alternative of unemployment
staring them in
the face, the unions would have to take wage cuts down to the $17 level,
thus
allowing their firms to contend with the non-union builders.
But the process wouldn't stop here. With a defanged labour movement,
according to this argument, there is simply no reason why Kerkhoff and
his
colleagues should continue to pay $17. No, with unionism on the retreat,
non-union
construction firms might now offer as little as $10 per hour. K they did
so, they
would again be able to underbid union firms for construction jobs. And
this would
push union scales down once more, in an attempt to compete. Where the
process
would end, no one knows — somewhere in the dark ages of sweat shop
employment, according to this view.
What a horrifying scenario! But it is entirely false, and based on
mistaken
assumptions. Wages dont rise because unions pull them up. Real wages
were rising
for centuries before unions first came into being in the late 1800s; they
continue to
rise nowadays in countries with little or no organized labour, and in the
non-union
sectors of nations with a labour movement.
Why, then, do wages in the marketplace rise? It is not because of the
benevolence of non-union firms like Kerkhoff that his employees
receive $17 per
hour. It is because of their productivity. If Kerkhoff didn't pay them
what they
were worth, say, if he paid them only $10 per hour, some other firm
would snap
them up at $12, earning a cool $5 profit per man-hour. But Kerkhoff,
facing a loss
of his workforce, would have to up the ante. That's why he pays $17.
Productivity.
And competition in the labour market. And this would remain the same
in the
absence of featherbedding unions, which have priced themselves out of
the market
at $26 per hour. The sooner the unions come to their senses, the better
off they,
and all the rest of us, will be.
This is Walter Block for Vancouver AM. Time: 3:25
Script #5 April 12/84
UNIONS - m
An Editorial Commentary
Prepared by Walter Block
for C30R Radio
In the past two days, we were discussing the increasingly bitter
animosity of
the construction unions toward firms which employ non-union labour.
We stated
that this animosity — which has taken the form of violence, egg and
rock throwing,
tire slashing — has no moral justification, and no economic justification
either.
The unions feared that if non-union firms such as Kerkhoff Construction
Co. were
able to under bid for contracts, that not only would their own puffed up
inflated
wage scales of $26 per hour be put at risk, but even the more realistic
$17 paid in
the non-union sector would be threatened. We showed that Kerkhoff
pays $17
because of the productivity of his non featherbedded workers, that the
main danger
to the unions was the $26 per hour with which they had prices
themselves out of
the market. We indicated that unrealistically high unionized construction
pay
scales were a source of unemployment, and that fears of a return to
sweat shop
conditions were only a red herring.
Today we consider another topic on the labour front: the recent
Vancouver
city council 7-U- vote to hire a union contractor to build a sewage
pumping station - instead of a non-union firm which was the lowest bidder. Interland
Contractors
Ltd., the unionized company, put in a bid for $1^9,963 to build the
station, and this
was accepted, even though Phased Construction Ltd., a non-union
concern, put in a
bid for $14^55 - $5,508 less.
Now an extra $5,000 or so won't break the city budget. Although $5,000
here
and $5,000 there can add up. As well, the next time city council takes a
higher
unionized bid, it might amount to more than $5,000 or so. But money
isn't the only concern. There is also a little matter of principle. There is
simply no moral
justification for the duly elected government of the City of Vancouver to
discriminate in favor of some of its citizens, and against others. It was
elected by
all voters, some of whom are in unions, others not. There is no
difference in
principle between such discrimination in favor of unions and
discrimination in
favour of white people, or men, or the non-handicapped. This decision is
an affront
to fair play, to equal treatment, and to the human rights of individuals
who do not
happen to belong to labour unions.
It should not happen, never ever again.
This is Walter Block for Vancouver AM. Time: 2:54
Script #7 April 12/84
UNIONS - II
An Editorial Commentary
Prepared by Walter Block
for C30R Radio
This is the second in a series of commentaries concerned with the labour
difficulties now plaguing the B.C. construction industry. Last time out,
we
discussed the Pennyfarthing Development Corporation's Harbour Cove
condominium project on False Creek in Vancouver. Over bitter union
opposition,
the non-union 3.C. Kerkhoff & Sons Ltd is now engaged in building on
that site.
Incidentally, at a top salary paid of $17 per hour, this non-union shop
has been able
to save the owners a cool $3.5 million, in contrast to union firms forced
to pay
wage scales of $26 per hour.
We suggested that the construction unions come down to reality, and
stop
creating their own unemployment by pricing themselves out of the
market.
Organized labour in B.C. would do well to borrow a leaf from the
construction unions in the U.S. In Washington, D.C. for example, the
unionized
share of the $3 billion per year construction business fell from 75% to
10% of the
total in the last few years. As a result, a majority of the unions in the
Washington
Building and Construction Trades Council have agreed to wage cuts
which will
allow a 20% reduction in labour costs. In addition to less take home pay,
they have
agreed to wage freezes, use of lower-paid helpers, streamlined work
rules, straight
pay on Saturday make-up days to cover rainouts, and even shorter coffee
breaks.
This pattern, moreover, is based on one set by AFL-CIO affiliates in
Little Rock,
Milwauke, Knoxville and Cincinati.
But British Columbia construction unions are instead digging in their
heels,
and demanding that the status quo on wages and benefits be maintained.
They are
opposed to working alongside non-union firms, like Kerkhoff, on the
construction of
Expo 86. They insist, as a precondition to any such coopeation, that
instead of
lowering their own pay scales of $26 per hour, the non-union workers be
brought up
to this unrealistic level from their present $17 per hour.
But this would worsen matters, not improve them. Instead of creating
more
jobs for union workers — it would destroy them in the non-unionized
sector. This
idea, moreover, has been put forth on moral grounds. But what is so
ethical about
threatening the imposition of wage scales that would put at risk the
entire project?
How can it be considered moral for the unions to attempt to dictate non
union pay
scales — especially ones which would create havoc in the non union
sector, as they
have already done for organized labour.
This is Walter Block for Vancouver AM. Time: 3:10
Script //6 April 12/84
U.S. TRADE PROTECTIONISM & COMMUNIST CHINA
by Walter Block
Senior Economist, The Fraser Institute
The United States, the land of the free and the home of the
brave, is supposed to be the bastion of free enterprise. Especially
under President Ronald Reagan, who croons about the "magic of the
marketplace" in solving economic problems and bringing prosperity
to all, the U.S. in theory is a living embodiment of the principles of
Adam Smith.
The People's Republic of China, in contrast, is presumably
anything but a country which supports economic freedom. Its
official ideological position is some variant of Marxism or other, and
it is thus not expected to be open to the arguments for free markets
and free trade.
So much for the theory. In the real world things can be far
different.
A case in point is the recent trade dispute over textiles that
has erupted
between the Communist Chinese and the capitalist Americans.
Peking is threatening to retaliate against Washington over U.S.
protectionism interferences with textile trade. According to the
official Chinese news agency Xinhua, Chinese Ambassador Zhang
Wenjin is unhappy with the new U.S. "country of origin" rules. This
measure means that U.S. customs agents will reject clothing
manufactured in Hong Kong, based on materials and
semi-completed garments originating in mainland China. Mr. Zhang
is protesting against this rule, which he says will threaten $2.2
billion worth of textile exports to the U.S. He said that "hundreds of
factories and about 60,000 jobs would be harmed in (his country's)
southern provinces alone, and that this would be a grievous blow to
China's industry, employment, trade and economic development."
2-
In point of fact, as opposed to theory, the U.S. is a rather
protectionist country. In recent months it has clamped down
increased tariffs, or set up quotas on goods and products such as
motorcycles, steel, autos, and now Chinese textiles. As well, for a
while it was threatening to deal more harshly with Canadian
forestry products, but did not carry through.
Lip service to the ideals of free markets is not enough.
Actions speak louder than words. If the Reagan administration
wishes to benefit its own citizens, and those in the rest of the world,
it should begin dismantling the tariff walls it has been erecting
around itself -- and with all due deliberate speed.
For trade barriers needlessly diminish economic welfare. If
the peoples of the earth cannot join with one another in friendly
trade, they will all miss out on the benefits of specialization and the
division of labour. Why not produce those things we are good at,
and then trade for the products of other nations which can produce
them more efficiently than ourselves?
Adam Smith must be spinning in his grave. Imagine, a
country devoted to the principles of capitalism and free markets
erecting barriers to trade and the Communists protesting.
August 23/84 - 30 VINCENT CHIN
An Editorial CommentaryPrepared by Walter Blockfor The Financial
Post
The story is a pretty sick one.
Vincent Chin, a Chinese-American living in Detroit, was about
to be married. The 27-year-old draftsman was at his bachelor party
when he was attacked with baseball bats (how all-American can you
get?) by a Chrysler foreman named Ronald Ebens, and his stepson,
Michael Nitz. They blamed Japanese automakers for Chrysler's
problems, and beat Vincent Chin to death. It didn't matter that their
victim was of Chinese, not Japanese ancestry. Presumably all
Orientals are alike, to people of this sort. They screamed, "It's
because of you we're out of work," and they beat him to death with a
baseball bat.
Sound horrible? There is worse to come, if you believe in
justice. Wayne
County Circuit Court Judge Charles Kaufman sentenced these
cold-blooded murderers to three years of probation and fine of
$3,780 each. At the trial, mockery that it was, he said of these men,
who had no prior criminal records, "(They are) not the kind of
people you send to prison."
Well, if these killers are not the kind of people you send to
prison in Detroit, who is it that really deserves incarceration? I
shudder to think. Perhaps this is why they call Detroit the murder
capital of the United States.
Fortunately, however, cooler heads prevailed, ultimately. The
federal authorities moved in, and Ebens and Nitz were indicted on
charges carrying maximum sentences of life imprisonment.
You say this can't happen in Canada? Well, maybe not. But
this kind of sentiment against the Japanese, and by extension, all
Orientals, is alive and well in Canada as well, unfortunately. When
and if a murder of this type takes place here, it will be done with a
hockey stick, not a baseball bat, but come it must, if such
anti-Oriental prejudice is continually whipped up in Canada.
Our much vaunted federal authorities, who are supposed to
be humane, fair-minded, and concerned with human rights are now
busily negotiating with the Japanese about cutting down their
exports of cars to this country. This cannot possibly but exacerbate
anti-Japanese feeling in this country.
In point of fact, however, the unimpeded import of Japanese
cars is of great benefit to Canadians. Tariffs can only harm us. How
can we maintain this when as a result, there will be the loss of
thousands of jobs in the automobile industry in Canada?
First of all, it is by no means a foregone conclusion that
absent tariffs, the Japanese will always be able to out-compete us.
Where there is the will there may be a way; as long as free
competition is allowed, western auto producers may one day be
able to assert their previous preeminance.
But lets suppose they do not. Let us stipulate, that is, that
were tariffs removed, the Japanese auto manufacturers are much
more efficient than Canadians. So much so that under these
conditions, Japanese cars, selling at a fraction of the price of our
own, would sweep all before them.
Even under such a scenario, all is not yet lost. The Japanese
may open up and run factories of their own here, employing
Canadian workers, in order to cut costs even further by economizing
on transportation expenses. Alternatively, Canadian firms may
prosper and even grow, working as suppliers of spare parts, or
accessories, for a greatly expanded Japanese operation.
But again, let us suppose that even this does not come to
pass. That the Japanese, under a regime of complete free trade,
would organize auto production entirely on a domestic basis--not
using Canadian manufacturers even as suppliers. Then, and only
then, would our own auto industry vanish without a trace, at the
cost of tens of thousands of jobs. Even so, such a state of affairs
would still be in the best interest of Canadians.
Why? Suppose that the Japanese are so efficient that
Canadians can now
purchase an automobile of given quality of $5,000, one which cost
$15,000 when produced domestically under the old regime of
tariffs. Well, then, the first indisputable effect will be that Canadians,
all those who purchase cars, will have an extra $10,000 worth of
loose change jingling around in their pockets. What, pray tell, will
they do with all this suddenly new-found wealth?
This is hard to answer. Some of it will go for increased
domestic consumer
purchases, revitalizing those industries, whichever they are, and
creating additional employment there. Some of it will be saved,
lowering interest rates, making it easier to start new concerns and
to expand old ones--creating employment throughout the economy.
And if some of this is merely socked away into mattresses, under
pillows, and in tin cans buried in the front yard, this will have
similar effect--prices will be lowered, making it easier to expand
present businesses and to start new ones, and helping other
consumers to make purchases.
And what about the $5,000 purchase price of the
automobile? This, of
course, goes to Japan, ultimately, in payment for the car. What will
the Japanese do with this money? Why, turn around and spend it on
items which we produce more effectively than they, such as wheat
or barley, or coal, or lumber, or oil, or natural gas, or maple syrup or
any of dozens of other products produced on farm, forest, or mine.
This, needless to say, will again create more employment all
throughout the economy. And not just any old kind of employment.
Rather, jobs that are highly productive. After all, the path to wealth,
and the way to fight poverty, is by allocating labour to its most
productive uses. And there are few better ways of accomplishing
this than by specializing in what we do best, allowing the Japanese
to do the same, and then exchanging our best efforts for theirs.
But suppose the Japanese refuse to spend this $5,000 here.
Will the Canadian economy be somehow cheated of the jobs that
could have been created thereby? Not a bit of it. First of all, it is
exceedingly unlikely that the Japanese would do any such thing.
They didn't achieve their preeminent position in matters commercial by exporting goods, and refusing to accept imports in return.
But suppose that they, ostrich-like, just refuse to spend this
money, anyway. Far from hurting us, this will be of great benefit to
our economy! If the Japanese send us cars, and refuse to use the
money we pay them to buy our goods, it is as if they are giving the
cars away to us for free. And no economy in the history of the world
was ever hurt by gifts of this kind.
So far we have been assuming that Japan has an advantage in
the production of cars, Canada can out-produce it when it comes to
products of forest, farm and mine. It is now time to relax this
assumption. Let us assume, then, that not only is Japan a better
producer of automobiles, but can out-do us with regard to every
other product under the sun as well. It still does not follow that
Canada would be better off with protective tariffs. (I hate to sound
like a broken record on this, but the truth is the truth.)
The point is, Japan may be able to undercut Canada in all
product lines, but in some of them she is far more efficient than we,
while in others, she may barely be able to beat us out. Suppose, for
example, that with given resources, she can produce 10 times as
many cars as us, but only twice as much wheat. Well, then, when she
sells us the first batch of cars, and we pay her, our Oriental trading
partners will purchase wheat, not cars, for even though Japan has an
absolute advantage over us in all products, we have a comparative
advantage in wheat.
This may sound outrageous, but it is the merest of common
sense. Consider an attorney who is the best lawyer in town, and also
the best typist. Now if attorneys make $200 per hour, and typists
earn $10 per hour, does it pay for the lawyer to hire a typist, or to do
both jobs himself? Of course he is better off sticking to his
comparative advantage, and specializing in the practice of law.
In just the same way, even if the Japanese can produce more
cars and wheat than Canada, unlikely as this is, they will still find it
in their own interest to specialize, and trade with us.
Mr. Lumley, let not Vincent Chin's death have been
completely in vain. Stop this senseless negotiation of "voluntary"
trade barriers with Japan, if only in the name of human rights, if not
for the economic reasons we have presented above.
January 20, 1984
WHERE'S THE BEEF?
An Editorial Commentary Prepared by Walter Block
Everyonce in a great while, an ad or slogan or jingle comes
along that is a
milestone in advertising's Hall of Fame. For example, who can ever
forget Avis' "We're 1e2; we try harder". Or American Express'
"Don't leave home without it". Or Coca -Cola's "It's the real thing". Or
"Nothing spells relief like Rolaids".. Or "Try it, you'll like it". Or "It's
Miller Time". Or "This Bud's for you". Or "You have a friend at the
Chase Manhattan Bank".
But now, along comes an ad campaign, or rather just a single
ad, which
threatens to shove many of these golden oldies down the memory
hole. It's for Wendy's Hamburgers, and it features three old ladies
staring balefully at a gigantic hamburger bun, with a tiny meat patty.
"Where's the beef?" rasps out one of them, and in the space of a few
short weeks, this woman, Clara Peller, has become something of a
cult figure. "Where's the beef?" products now include dolls, games,
hats, records, cards, t-shirts, a record album, baseball hats, cups,
wastebaskets, and, it would appear, anything and everything else
produced by man upon which such a slogan can be written. Indeed,
a veritable mini industry has sprung up around "Where's the beef?"
Clara Peller has already made appearances at all the top
entertainment shows, and even has a fan club. Wendy's is still
number three behind McDonalds and Burger King, but is closing in
fast with a 15% spurt in sales in January 1984 alone.
Why am I going on and on about this advertising
phenomena? What does
"Where's the beef?" have to do with economics? Well, in addition to
creating a new
industry out of the very thin air, "Where's the beef?" shows the
advertising industry
for the vibrant, productive, creative, economic endeavor that it is.
For too long
2
we have been under the intellectual sway of those who see
advertising as basically parasitical, as creating nothing of value.
In a static unchanging economy, there is perhaps less need of
advertising.
With everything the way it was in grandfather's time, who needs a
catchy jingle to introduce a new product or new way of doing
things? But as economist Joseph
Schumpeter has demonstrated, we live in a dynamic, progressive
economy, one in a continual flux. Here, advertising serves a vital
role. If we are to adopt new techniques, new options, new items, we
must sometimes be informed and perhaps cajoled and enticed. And
what more pleasant a way than advertising?
Advertising is a multi billion dollar industry. It creates goods
and services and it creates happiness, it oils the wheels of our
splendidly developing economy.
Let's hear no more nonsense about how unproductive is advertising.
- 30 MEDICAL CARE FINANCE AND THE LICENSING OF PHYSICIANS
by Arnold Aberman, MD. and Walter Block, Ph.D.
When individuals pay directly for medical care, an increase in the supply of
physicians is always to the benefit of the public, since it maintains downward
pressure on medical fees. However, although the individual fees will be lower
when competition is permitted, the total amount of money spent on medical
care may rise. This will happen if the increased number of services performed
add more to costs than do the lower fees decrease costs. (In technical economic
parlance, this applies if the elasticity of demand for medical services is greater
than unity). But that is of no concern whatsoever to the individual as long as
the price he pays for a given amount of medical services decreases.
Price per unit of medical service may decrease because advertising, for
instance, allows more efficient delivery of services. -More generally,
economics teaches us that the greater the supply of good or service, the lower
will be its price, other things equal. But this does not necessarily mean that
doctors will earn less, since each one may perform more services. But the
individual consumer of health care will save money at the lower price. He will
also gain if the amount of services performed increases. This must be a benefit
since consumers would not be forced to change their buying patterns. So, as
usual, the market, if allowed to operate, benefits both consumers and
producers. Of course, it is true that the physicians who cannot satisfy consumer
preferences will lose out. This fear of failure may have led physicians
organizations to try to limit entry into the health care field. They have done so
in two ways: by trying to limit the scope of alternative practioners, such as
acupuncturists, chiropracters, etc., and by attemping to reduce the numbers of
medical students, and immigrant doctors to this country. (Canadian Medicine:
A Study in Restricted Entry, a new book published by the Fraser Institute, and
written by Professor Ronaid Hamowy of the University of Alberta, documents
this sorry aspect of Canadian history).
However, nowadays the government pays doctors, and this situation brings
about several complexities. For one thing, when government pays the entire
bill it has little interest in price per service. It is mainly concerned with the total
cost of medical care. If the patient paid directly for medical care, one way to
diminish total cost might be to increase the price per service and thus reduce
the number of services performed. But since the government pays for the entire
price of medical care and provides it to patients for "free", it cannot decrease
the number of medical services by raising price.
A second way to cut total cost would be to radically reduce the fees paid to
doctors. Since patients are already receiving care for "free", this would not
lead to increased utilization. But the government could not slash fees without
greatly angering the doctors and possibly leading to serious repercussions.
So the only way to decrease number of services and thus total costs is by
restricting the number of licensed physicians. Thus regulations are enacted that
retard free movement of physicians between provinces, immigration of doctors
to Canada is discouraged, and licenses are granted to newly graduated doctors
only with added difficulties. And, of course, since not increasing the number of
physicians is in the economic interest of licensed physicians, the government
have a natural ally in currently practicing doctors.
This is where the Hamowy book comes in. Professor Hamowy has shown
persuasively that the actions of the various medical regulatory bodies, made on
the basis (pretext!) of protecting the public interest, has had the opposite effect.
Whether purposely or otherwise, medical licensing has protected the financial
interests of licensed physicians by restricting supply, limiting competition, and
reducing the spread of market information by outlawing advertising. It is
interesting to read the arguments of spokesmen for physicians made in the 19th
and early 20th century amassed by Hamowy. They are very similar to the
arguments used today -not only by physicians, but taxi drivers, trucking
companies, lawyers as well. Such positions by various professional
associations are common. After all, why should doctors not act to protect their
financial interest (as they see it)? The real problem is that governments have
the power to bow to the selfish demands of the doctors (and other such
groups). Today government regulatory bodies, for example agricultural
marketing boards, openly and without any evasion, act to restrict production
and set prices.
If a group of doctors wanted to decrease their fee schedule and advertised that
fact, (in order to increase total income), the government (acting through the
College of Physicians and Surgeons) would not allow them to do so. Of course,
in a market situation, the physicians could lower fees, patients would pay less,
more services would be consumed (a reflection of consumer preference), and
the doctors would make more money, to the benefit of all concerned.
The notion that the total amount of money spent on medical care must not be
allowed to increase is nonsense. For example, let's consider computers.
Everyone knows that the price of computers has decreased markedly over the
past five years. But the amount of money spent on computers has gone up.
Now suppose that government had to pay for the entire cost of computers. If
so, it would want the price of computers to stay high if this would decrease the
total cost of computers. But it is even more complicated than that. To make the
analogy complete, we must assume that the government gives computers away
for "free". In that case the only way the government can reduce the total cost of
computers is to limit the number of computer manufacturers (like decreasing
the number of doctors). Aren't we lucky that governments do not pay for
computers? If they did, we would be reading in the newspapers how the cost of
computers has gone up in the past few years, that this is a danger to the public
weal, and that something must be done (a government restraint program?).
In the interests of patients, our medical care financing ought to be re-oriented
in the direction of individual responsibility. People ought to pay directly for
health services (with the exception, perhaps, of catastrophic medical insurance)
and not indirectly through taxes, "for free", which only encourages overoptimal utilization. As well, as shown by Canadian Medicine A Study in
Restricted Entry, our laws ought to be revised so as to lower the barriers to
entry into the medical profession.
Air Canada Wants to Stay Young
According to the Federal Court of Appeal, a finding by the. Canadian
Human
Rights Commission against Air Canada was justified. The airline
refused to hire pilots over the age of 27, and this practice was rejected
under the Canadian Human Rights Act as discriminatory.
Air Canada had nothing against the ages of the five complainants -ranging from 32 to 41 in 1983, the time of the tribunal hearing. Many of
its active pilots are in their thirties and early forties. It objected only to
initial hiring at this age, since it operates a policy of mandatory
retirement for pilots as they reach their 60th birthday.
The court, however, ordered the crown-owned airline to base its safety
policies on the flying capabilities of its pilots as individuals, rather than
as a member of a class, or age category.
Such a policy, of course, is designed to make distinctions between
pilots. It would not, therefore, be unfair to a particularly robust and
capable pilot in his 60s -- or even older. While very few type I errors
might be made (firing elderly employees who are still capable), there is
now the added risk of comm itting some type II errors (failing to ferret
out elderly incompetents who somehow manage to pass the test). The
strategy imposed by the court on the airline thus increases the risks of
flight hazards.
Ramon Sanz, one of the five rejected would-be Air Canada pilots whose
application for employment was given a sharp boost by the Federal
Court of Appeal, ~\ reacted thusly: "We won; that's good news." This
decision was welcomed by Sanz, but there may be, in the coming years,
air passengers and their families who will rue this judicial decision.
Nor is it merely a matter of human rights having to take a back seat to
air traffic safety when there is a conflict. (Although it would be
eminently common sensical to make an exception in cases of this sort).
There is also the point that the testing of pilots on an individual basis
adds to the costs of the enterprise. And these costs must be passed on
somewhere. Were Air Canada a private profit- making venture, extra
costs could only be visited upon the paying customer. But given Air
Canada's crown corporation status, the long suffering taxpayer will be
called upon to shoulder the extra costs. Some, of course, may be able to
do so, but there are likely to be many others for whom this will be a
heavy burden.
Black Students
by: Walter Block, The Fraser Institute, Vancouver, B.C
Do you think that societal discrimination against black students is
responsible for their poor showing at school? If you do, think again.
According to a study p-eleased by Professor Signithia Fordham, a major
cause of the gap between white and black students is a fear on the part
of the latter that they will be taunted for success in school. In fact,
achievement in class, and accomplishment on standardized tests is
widely derided in this community as "acting white." Strong peer
pressure is directed against those who study hard and succeed.
In many ghetto high school graduations, the honors ceremonies have to
be held separately; only those special students, and their parents, are
invited. This is because when these rituals were held before the entire
school, anti scholarship riots broke out.
The anthropologist from the University of the District of Columbia
intensively interviewed 33 students from an unnamed high school in
Washington D.C. with an enrollment which is 99% black.
According to one pupil, who fears being called a "brainiac," smart
students who know an answer in class will sit back and refuse to answer.
Another, a football player who early on earned a series of As and Bs,
began purposefully failing tests when his friends called him "Mr.
Advanced Placement."
With an environment that is not only unscholarly, but so strongly antischolarly,it is clear that black education is in for hard times. Throwing
more and more money at the problem -- the liberal's entire stock in trade
-- will only promote a poisonous atmosphere in more plush
surroundings. What is needed is a moral and spiritual reawakening, and
a sense of responsibility.
It was not always this way in the black community. For most of this
century, until only a decade or so ago, academic pursuits were highly
admired, as they are by most people. Parents would slave away, often at
very menial tasks. taking on extra jobs, in order to put their children
through school, to earn advance degrees. There was for many years the
common expectation that the top ten percent in terms of abilty and
accomplishments would lead the black underclass into the middle class.
Why is it, then, that this intellectual ennui has overtaken young black
students? Part of the reason is undoubtedly the fact that the path of
higher eduction is no longer so alluring. Yes, doctors, lawyers, engineers
and businessmen still earn very comfortable salaries. But these pursuits
in most cases take years of intensive study, and to many ghetto youth
there appears to be a far more easier and softer way-involvement in the
drug trade. Here, the payoffs are far more substantial, and what may be
even more important, immediate.
Why be a sissy or a momma's boy and go to school for many years,
when one can enter the crack, smack cocaine or heroin trade, and in a
matter of months attain the life's earnings open to the more traditional
professions? Anyone who does so is a fool, and deserves no respect, it is
widely thought, in this subculture.
One indirect solution to the problem of black anti-intellectualism would
thus be the legalization of drugs. Such a step would, at one swell foop,
eliminate the astronomical profits to be earned in these endeavors. And
in doing so, it would invest scholarly, business and professional
activities with the esteem they once unquestionably held.
Fortunately, there are several black leaders able to provide inspirational
examples to such tragically deprived youth; for instance, scholars such
as Stanford's Thomas Sowell, and George Mason's Walter Williams.
They have labored long and hard through their scholarly work to show
that blacks are as able as anyone else to make their mark in the
intellectual world. They have been in the forefront of the movement to
show that many well intended government programs, such as welfare,
minimum wages, affirmative action -- and drug prohibitions -- have
boomeranged, and harmed the very groups they were supposed to help.
Unfortunately, since these scholars are all champions of free markets,
and opponents of an enlarged welfare state, they are all but ignored in
the nation's media. It is a tragedy that journalists are open only to blacks
who favour increased welfarism and dependency, the very programs
which have brought us to our present precarious state.
- 30August 10, 1988
G
I
Real Canadian Superstore
by Walter Block, The Fraser Institute
There has been much wailing and gnashing of teeth in British Columbia
labour circles in recent weeks.
Real Canadian Superstore (RCS) has contracted with a new local of the
United Food and Commercial Workers for a wage and benefit package
that many pundits and editorialists are calling a "sweetheart" deal.
Traditional labour leaders are apoplectic. Hopping with rage are B.C.
Federation of Labour president Ken Georgetti, Confederation of
Canadian Unions president Jess Succamore and IWA-Canada president
Jack Munro. They feel betrayed because the new bargain significantly
undercuts union scales previously negotiated with RCS competitors
Overwaitea, Save-an-Foods and Safeway.
And these companies, instead of cheering on the interloper local #777,
or, even more in keeping with their traditional and expected role, calling
for an outright end to unionism in their stores, have joined in an unholy
alliance with Georgetti, Succamore and Munro in condemning the
newcomers.
What is going on here? Is this just some sort of springtime eccentricity
perpetrated by Lotus Land on the rest of the country, or is there
something of real economic significance now taking place in British
Columbia?
In order to understand this phenomenon, we must delve into some of the
more arcane mysteries of the dismal science. One of the most
fundamental and basic axioms in all of economics is that wages tend to
equal the productivity levels of the workers. If 'compensation is lower
than the contribution made by the employee, he will likely quit, and seek
greener pastures elsewhere. Alternatively, if the wage and benefit
package surpasses on the job productivity, the employer will tend to lose
customers, market share and profits to competitors who can lower pay
scales toward actual productivity levels in the industry .
.. But the entry of new competitors is the key. If excessive earnings are
to be pared down to conform to productivity, new firms must be able to
enter the market, bid less for employees, and pass along the savings to
the consumers. How else can they attract customers from existing
businesses?
This is what the B.C. grocery dispute is all about. RCS, for example,
pays cashiers a starting salary of $7.50 per hour. Other major stores, in
comparison, offer $11.02 on an hourly basis. When health coverage,
holiday, and other fringe benefits are factored into the picture, the RCS
package comes to about $10.00. This is estimated to be 30% to 50% less
than the full compensation offered by Overwaitea, Save-On-Foods and
Safeway.
RCS, in other words, is betting that the wage package paid by the
established firms is generous to a fault; that by succumbing to union
pressure, these grocers have actually shortchanged their less well
organized customers.
In a fully free market, RCS would not have to work through a labour
organization which has the legal power to disrupt its commercial
activities. In the real world, it felt it had to. This is why, presumably, it
dealt with a union, but insisted upon a four year no strike clause. As
well, RCS offers a buyout payment in the form of a Registered
Retirement Savings plan worth up to $2,500, which encourages workers
to quit before reaching top salary scales, and thus attaining seniority
status. This, too, can be interpreted as an attempt to head off the labour
disruptions all too often concomitant with unionism.
Critics, however, have complained that the contract between RCS and
Local 777 amounts to an unfair "tilt." But why should we assume that
the playing field is already level? According to our analysis, it is the
present system of labour contracts that is inequitable; because of past
union pressure, established supermarket employees are overpaid,
compared to other wages and to the contribution they make to the
consumer. On the contrary the new contract is a movement toward
equity and economic rationality.
Another complaint is that of "predatory pricing." It is alleged that as
soon as RCS drives it competitors out of business, it will raise its prices
to astronomical levels. A more likely scenario, however, is that the new
competition will force down all supermarket prices. Certainly
experience with RCS in other cities gives no support for this critical
contention.
Last, how can we account for the opposition of the entrenched large
scale grocers to the new development. This is only a paradox for those
who believe that businessmen always and ever favour free markets, or
who do not distinguish between what is best for a particular firm, and
what is good for the economy as a whole. Businesses often attempt to
fix prices, but competing firms can always be counted upon to bring
these schemes to nought -- unless of course new entry is limited by
government.
- 302
CARDINAL CARTER &: THE TORONTO BUS STRIKE I by Walter
Block
Senior Economist, The Fraser Institute Gerald Emmett Cardinal
Carter, head of the Toronto Diocese, has a problem. Pope John Paul
is scheduled to visit suburban Downsview on his visit to Canada,
and over 300,000 people are expected to trek out from Toronto to
attend the mass he will give there. However, and this is a big
however, the unionized employees of Toronto's public transit
system are poised, ready to go out on strike for better pay.
Cardinal Carter, archbishop of Toronto, fears an internationally
embarrassing situation should this strike occur during the papal
visit. He has offered to mediate the labour dispute, and spoke out as
follows: "It would be an embarrassment seen in full living colour
throughout the world, an embarrassment not only to the church, not
only to the municipality and the province, but also to Canada at
large. To say that I am concerned about this possibility is an
understatement. In fact, I am most distressed. "
And well might he be distressed with the prospect of a transit strike
during the papal visit. Should it occur, it would bring great misery
and confusion to the people of Toronto.
But is this not also the case in every city-wide transit strike? True,
the papal visit will add complications in this one instance, but every
such occurence interferes with the lives of the poor, the elderly,
commuters, and millions of ordinary citizens. We should not, then,
limit our concern to a Toronto transit strike during the papal visit,
but generalize to all such cases.
And tomorrow we shall do just that.
August 23/84
- 30 CARDINh2 CARTER &: THE TORONTO BUS STRIKE II by Walter
Block
Senior Economist, The Fraser Institute
Yesterday, we were considering the plight of Torontonians desiring
to travel to meet the Pope on his upcoming visit. Due to a threatened
transit strike this task might become very difficult indeed.
But we said that every city wide transit strike brings great
inconvenience in its wake, and are now ready to analyze the general
case.
Strikes in the urban transportation industry create havoc for two
reasons. First, in the modern era, practically all transit systems are
run by government, and on a monopoly basis. That is, there is only
onerapid transit system, and if it goes on the fritz, there is no real
viable alternative for the masses of commuters.
The answer to that is easy. Transit systems -- buses, trolleys,
subways, rail lines -- should all be privatized, as most were, when
first built, and private business concerns should be allowed to
compete with one another for the commuter dollar. Then, in the
case of a labour dispute, alternative means will be available to
Secondly, our labour codes must be radically amended. For a strike
actually implies two things: a) that the unionized workers will am
leave the job site enmasse,and b) that they will forceably prevent
others from taking these jobs. Now the first is completely justified.
Compulsory labour is simply incompatible with a free society.
But the second is entirely unjust. By what right do organized
workers forceably prevent others from accepting pay scales and
working conditions spurned by the union?
If Cardinal Carter were interested in preventing transit disturbances
over the long haul, and not in just this one instance, he would
champion competition in the labour market, as a replacement for
our present Collective bargaining arrangements.
August 23/84
- 30 I
CIDA and "Foreign Aid"
by: Walter Block
The Canadian International Development Agency has spent
hundreds of millions of dollars on massive water delivery systems
in the Third World. Huge dams and gigantic irrigation systems,
intended to help farmers in the undeveloped countries have
boomeranged, and caused great damage instead. For example, a
group called Save the Soil Campaign recently protested against
damage to their land created by the massive Tawa Dam, located in
Madhya Pradesh in India.
Part of the reason for the debacles is that the typical western
engineer is more interested in replicating the Grand Coulee Dam in
Africa or Asia, even though smaller more modest systems, tailored
to the local scale, have actually done some good.
But this bias is only the tip of the iceberg. Of more importance in
that there is little accountability in government to government
transfers of funds. (We reject the more common appellation
"Foreign Aid" because it is pejorative; this term assumes that the
money will succeed in helping the unfortunates in the
underdeveloped world -- the very point in question). If it succeeds,
those responsible are not automatically given more funds with
which to operate; if it fails, as it most often does, those in charge are
not penalized, and made to reduce the scope of their operation, as
they would be in the private sector.
Now that CIDA has spent hundreds of millions of dollars creating
these white elephant projects, it intends to spend hundreds of
millions of dollars more to restore land that has been damaged by
flooding and salt deposits, which resulted from the first binge of dogooding. According to Gaston Grenier, chief of CIDA's agricultural
sector, this second round will cost far less than the previous one.
The problem with this statement, however, is that it is exceedingly
difficult to determine the expenditure level of this organization,
since Parliament does not demand financial statements. "No one has
accounted for the spending on an (itemi.zed) basis since CIDA has
existed," said Mr. Grenier.
But even correctly engineered water projects, properly tailored to
the physical environment in the LDCs is no guarantee of success, for
oft-times economic variables are perverse. Irrigation schemes, even
after installation, are a great financial drain on the recipient
countries, since user fees pay only a small proportion of the costs.
For example, in Bangladesh, this accounts for only 1% of the costs;
in Thailand, 3%, in Nepal 4%, and in Indonesia 7%. As well, farmers
are charged not for their actual water usage, but according to the
size of their land holdings. As a result, favored agriculturalists have
no incentive to economize on the scarce water, and sometimes
drown their fields with two or three times as much as is necessary,
leaving others with practically nothing.
In addition, due to communal ownership of the pumping and
storage machinery, there is little incentive to maintain it, and much
to overuse it. As a result, there is great wastage of the precious
water. This comes about because of the "tragedy of the commons,"
which shows that when property is owned by all, in common,
individuals have an incentive to abuse it. This analysis was first
applied by Garrett Hardin to a small town which had a field (the
"commons") which would provide forage for just 1 00 cows, one
each owned by 1 00 different farmers. If farmer A placed one extra
cow on the field, all the cows would suffer, albeit very slightly, but
he himself would benefit immensely, since he could virtually double
his wealth. However, this same idea occurs to all 100 farmers. But
when the field has 200 cows, they all die. In contrast, if the farmers
owned the land individually, each would keep one cow on his own
small plot, and all would prosper.
This litany only begins to detail the trauma imposed on the
underdeveloped world by well intended but unwise CIDA policy.
According to a study undertaken by the World Resources Institute
in Washington D.C., this agency has been responsible for the spread
of disease, the displacement of whole communities, and the (J
flooding and salinization of land. When improperly managed,
reservoirs, canals and drainage ditches can be turned into large
pools of stagnant water the home of disease spreading mosquitos.
When improperly managed, dams can destroy the fish stock and
river hydrology. This leads to land erosion, waterlogging and
siltation. Instead of flourishing, the crops, with their oxygen cut off,
tend to rot.
Nor are these concerns of theoretical interest only. In India, over 20
million acres of land have been waterlogged, and over 50 million
salinated. In Pakistan 25 million acres have been threatened by
waterlogging, and over 10 million by excessive build up of mineral
salts in the soil.
Let it not be thought that the answer to all these problems is better
bureaucrats, and more finely tuned programming. Government to
government transfers of funds are intrinsically.injurious to the
economic development of third world countries.
First of all, it must not be thought that when people enter the civil
service, they automatically become uniquely determined to do good
for others. On the contrary, they are still the same imperfect human
beings they have always been, filled with a desire to help others, for
sure, but also with an interest in doing well for themselves. Any
public policy that calls for saints as administrators is sure to fail.
Secondly, we must realize that while "foreign aid" takes up a
relatively small part of the GNP of western democracies, in most
cases less than 1%, these funds represent a gigantic proportion of
the earnings of the third world. It is only human nature for these
people to attempt to compete for these monies. They do so by
forsaking the world of commerce (the means by which the "first
world" clawed its own way out of "third world" status) and
embracing the public sector, the immediate source of all the
largesse. The best and the brightest of the young people of these
countries, then, instead of producing, trading and creating wealth in
the private sector, go to government, cap in hand, and attempt to
cash in on "foreign aid." In this way the entire society can become
needlessly politicized. We must realize, further, that these monies
do notgo to the starving children we see in those heart-wrenching
pleas for money. They typically go to the third world despot, and,
especially when there are different tribes in a country, this leads to
warfare and bloodshed, surely the greatest enemies of economic
development.
Thirdly, a great portion of the funding goes toward the "Three MIs":
Monuments, Mercedes, and Machine Guns. This enables the leaders
of these countries -- who are largely responsible for their economic
plight in the first place -- to further strengthen their strangle-hold
over the people. Sometimes the monuments are merely to
themselves: statues for personal aggrandizement. This is relatively
harmless; the material is concrete, and after it is done, the expenses
are over. Of far greater damage are the economic monuments -- the
steel mills, oil refineries, automobile plants -- which cost far more to
build, and then lose money every year of their existence.
And not only do these funds enhance the power of the third world
dictators, they also enable them to pursue the unwise domestic
policies which have been so ruinous for their countries. Chief
amongst these are the massive and forced collectivized farms (e.g.,
Tanzania) and the marketing boards and pricing policies which
make agriculture an unprofitable business (e.g., Ethiopia).
If government to government transfers of money are not the
solution to third world economic disarray, what then is the answer?
The policy that simply cries out to the heavens is one of free trade. If
we could integrate the economies of the third world with our own,
we would do more for their material well being than thousands of
foreign aid programs. Yet the hypocracy of the Canadian
government is such that while we pose as the friend of these
peoples, we cut their exports off at the knees, and refuse them free
access to our markets. For shame!
Of course, there is a political reason for this stance. The greatest
number of votes are to be found in Ontario and Quebec, the
provinces with most of the inefficient industries which would tend
to disappear under a regime of free trade with the nations of the
third world. - And yet, most of the people in central Canada do not
gain from "protectionism." On the contrary, most lose. Consider the
words of Ludwig von Mises on this issue:
"Granted that only those Canadians engaged in tanning hides are
immediately interested in the preservation of the tariff on leather.
But every Canadian belongs to one of the many branches of
production. If each domestic product is protected by the tariff, the
transition to free trade hurts the interests of each industry and
thereby those of all specialised groups of capital and labor the sum
of which is the whole nation. It follows that repealing the tariff
would in the short run be prejudicial to all citizens. And it is shortrun interests only that count.
This argument involves a threefold error. First, it is not true that all
branches of industry would be hurt by the transition to free trade.
On the contrary. Those branches in which the comparative costs of
production are lowest will expand under free trade. Their short-run
interests would be favored by the abolition of the tariff. The tariff on
those products they themselves turn out is of no advantage for
them, as they could not only survive, but expand under free trade.
The tariff on those products for which the comparative cost of
production is higher in Canada than abroad hurts them by directing
capital and labor, which otherwise would have fertilized them, into
those other branches.
Second, the short-run principle is entirely fallacious.
In the short run every change in the market data hurts those who
did not anticipate it in time. A consistent champion of the short-run
principle must advocate perfect ridigity and immutability of all data
and oppose any change, including any therapeutical and
technological improvement.' If in acting people were always to
prefer the avoidance of an evil in the nearer future to the avoidance
of an evil in the remoter future, they would come down to the
animal level. It is the very essence of human action as distinct from
animal behaviour that it consciously renounces some temporarily
nearer satisfaction in order to reap some greater but temporarily
remoter satisfaction.
Finally, if the problem of the abolition of Canada's comprehensive
tariff system is under discussion, one must not forget the fact that
the short-run interests of those engaged in tanning are hurt only by
the abolition of one of the items of the tariff while they are favored
by the abolition of the other items concerning the products of the
industries in which comparative cost is high. It is true that wage
rates of the~~~nnery workers will drop for some time as against
those in other branches and that some time will elapse until the
appropriate long-run proportion between wage rates in the various
branches of Canadian production will Be established. But
concomitantly with the merely temporary drop in their earnings,
these workers will experience a drop in the prices of many articles
they are buying. And this tendency toward an improvement in their
conditions is not a phenomenon only of the period of transition. It is
the consummation of the lasting blessings of free trade which, in
shifting every branch of industry to the location in which
comparative cost is lowest, increases the productivity of labor and
the total quantity of goods produced. It is the lasting long-run boon
which free trade secures to every member of the market society.
The opposition to the abolition of tariff protection would be
reasonable from the personal point of view of those engaged in the
leather industry if the tariff on leather were the only tariff. Then one
could explain their attitude as dictated by status interests, the
interests of a caste which would be temporarily hurt by the
abolition of a privilege although its mere preservation no longer
confers any benefit on them. But in this hypothetical case the
opposition of the tanners would be hopeless. The majority of the
nation would overrule it. What strengthens the ranks of the
protectionists is the fact that the tariff on leather is no exception,
that many branches of industry are in a similar position and are
fighting the abolition of tariff items concerning their own branch.
This is, of course, not an alliance based on each group's special
group interests. If everybody is protected to the same extent,
everybody not only loses as consumer as much as he gains as
producer. Everybody, moreover, is harmed by the general drop in
the productivity of labor which the shifting of industries from more
favorable to less favorable locations brings about. Conversely the
abolition of all tariff items would benefit everybody in the long run,
while the short-run harm which the abolition of some special tariff
item brings .t;o the special interests of the group concerned is
already in the short run at least partly compensated by the
consequences of the abolition of the tariff on the products the
members of this group are buying and consuming."
Human Action,pp. 750-752. (Mises speaks of the mythical country
"Ruritania." "Canada" has been inserted instead by the present
author).
\
Comedy and Canadian Culture
by Walter Block, The Fraser Institute, Vancouver, B.C.
The "Golden Age" of Canadian comedians is upon us. It is truly a
worldwide event. Laugh masters from the frozen northland have
taken by storm the stages of the U.S. in particular, and many other
countries as well. One can no longer tune in a television program
devoted to comedy, nor attend this type of movie theatre
presentation, nor for that matter peruse the front covers of national
and international weekly newsmagazines, without being confronted
with the hordes of Canadians who have taken part in this bit of
cultural imperialism.
This is not the first time that Canadian born and bred performers
have tickled the world's funny bones. Top comedic actors in the past
certainly include Mack Sennett and his Keystone Kops, and the
"Shakespeareans" Johnny Wayne and Frank Shuster of Ed Sullivan
Show fame. But this past trickle has now turned into a veritable
flood. Merely to list the people who have recently vied for the title of
"King of Comedy," and the organizations with which they have been
associated, is to see the sheer enormity of the present day
occurrence.
Let us, in any case, endeavour to do just that. Any list of Canadian
comedians
would have to include at least the following:
Howie Mandel (St. Elsewhere),Robert Boyd, Ivan Reitman, Dan
Aykroyd, Mark Breslin, Rich Little, Jim Carrey, Andre-Philippe
Gagnon, Lome Michaels, Hart Pomerantz, Rosie Shuster, Bob
Dolman, Michael Short, Jenny Jones, Leslie Nielsen, Joe Medjuck,
Daniel Goldberg, and David Steinberg.
But there are even more. One of the most famous comedic television
shows produced in Canada has been the Emmy award winning
SCTV.(The Los Angeles Timescalled it the "best comedy show on TV
- maybe the best one in TV history.")The characters of that show
have taken on a life of their own, and thus might reasonably be
included in any roll call of honour of Canadian comedy: "Edith
Prickley" (Andrea Martin), "Earl Camembert" (Eugene Levy), "Floyd
Robertson" and "Count Floyd" (Joe Flaherty), "Lola Heatherton"
(Catharine O'Hara), "Johnny LaRue" (John Candy), and "Ed Grimley"
(Martin Short). Perhaps most famous of all are The Great White
North'sMcKenzie ("Hoser") Brothers, played by Dave Thomas and
Rick Moranis.
But that is only the tip of the iceberg. Other shows, programs,
movies,
organizations which have prominently included Canadians are:
Splash, Ghostbusters, Legal Eagles, Spies Like Us, Saturday Night
Live, Second City(Toronto), Yuk, Yuk's, Armed and Dangerous,
Heartburn, Three Amigos, The Hart and Lome Terrific Hour,
Airplane, The Canadian Conspiracy, The National Lampoon Show,
Animal House,
Stripes, Meatballs, Brewster's Millions, Summer Rental, The Blues
Brothers, Strange Brew, After Hours,and A Fine Mess.
But why are we talking about this subject at all? What does it have
to do with economics, or public policy analysis? (I pass over the
obvious retort that economics, and economists, are one big joke.)
The connection between the success of Canadian funnymen abroad
and public policy has to do with economic nationalism. Suppose the
present situation were reversed. Suppose, that is, that instead of
Canadian actors making inroads in the U.S., there was a raft of
Americans taking this country by storm.
Can you imagine the howls of dismay and outrage that would
emanate from the Canadian nationalist "culture vulture" set? There
is little doubt that after the obligatory spate of editorials,
conferences, perhaps even picketing, an attempt would be made to
enact legislation making it more difficult for foreigners to impose
their "alien" culture on us.
C But none of this, fortunately, is now occurring in the U.S., even
while undergoing
its present orgy of protectionism. This indicates two things. First,
the Americans are more confident in the value of their culture than
are we. So much so, that they are willing to import the best that
other countries have to offer, with no embarrassing demands for
"U.S. content." Secondly, their culture is a true mosaic, strengthened
not only by domestic input, but by foreign as well. If we want to
improve the quality of Canadian culture, we could do worse than to
drop the entire nationalist agenda, and emulate the openness of
American cultural institutions.
- 302
The New Computer Age: threat to mankind or golden opportunity?
by Walter Block
It's called many things "Artificial Intelligence", "the micro-dot
electronic revolution", "The Age of Robotics".
Whatever the name, it can perform numerous and amazing tasks.
Modern computers, coupled with silicon chip-based integrated
circuits, can now diagnose lung diseases, locate mineral deposits,
play chess at almost a grandmaster level,cut logs, assemble autos,
and do other industrial tasks far more efficiently than human beings
•.. This new breed of robot serves as the basis of the ubiquitous
scanning devices n.ow. found at supermarket check-out counters,
and of amechanized "arrn't .. which .aids paraplegics. Modern R2D2s
can sheer sheep – in tandem with a robot-colleague which
immobilizes the animals -- and human-voiced commands. The new
computers can communicate with others of their ilk, repair their
mechanical relatives, and even help create new units from scratch.
These electronic servants, moreover, work full-time: 21+ hours a
day, 7 days a week, 52 weeks a year, with no time off for coffee
breaks, holidays or gossip. They never call in sick, talk back to the
boss (unless programmed to do so), nor file a grievance.
Wondrous and marvellous as are these accomplishments, there is,
according to some, quite a large worm in the apple. Consider the
following:
• A robot has replaced six steelworkers at an International
Harvester plant in the north east
• According to the feminists, 15 million mostly female clerical, sales
and service workers -- in banking, insurance, and general business
offices --will lose their jobs to automatic word processors and
related office automatons. The National Action Committee on the
Status of Women also warned that the micro-electronic revolution
would impact women more heavily than men
• General Motors plans to spend $1 billion, worldwide, to install
14,000 new robots; the Japanese will invest $450 million, over the
next decade, for such fifth generation, artificially intelligent
machines. IBM and Bell Telephone Laboratories, Inc., have
announced similar ambitious plans
• The introduction of artificial intelligence is by no means limited to
the western hemisphere.
According to the European-based Federation of Commercial,
Clerical and Technical Employees, office employment in that
continent could fall by an estimated 25 per cent by 1990
• There have been widespread claims that the new automatons have
increased the degree of "anomie" suffered by the human beings who
work alongside them. Complaints include faUing morale, and
depersonalization and alienation from the workplace.
Based on these and other "horror" stories, a reaction to the new
generation of computers has set in. Opponents are determined to
allow the introduction of artificial Intelligence -- but only
grudgingly, gradually, and accompanied by a series of "safeguards".
A Task Force Report on Micro- electronics, for example, called for
full re-training of workers who fall "victim" to the "chip" revolution.
New national training programs are being proposed. Among other
things, this would encourage women to take "educational leaves of
absence, partially on the basis of being supplanted by new computer
technology". As well, a recent union report called for "preventative
collective action" and increased unionization, in order to ameliorate
the economic havoc the new machines are feared likely to cause.
Other unions want strengthened collective agreements "to ensure
protection against rapid technological change". The United Steel
Workers Union is aiming for cash payments equal to 10 per cent of
the companies' investment in the new technology, the right to
reopen collective agreements whenever such changes are made,
mandatory retraining, and a two year job guarantee - - or a cash
payment in lieu --for all computer-related firings. A critique of the
"unilateral approach" (the failure of management to consult
organized labour before introducing the new technologies) has been
widely circulated which cites "distrust" and "damaged labour
relations" as the unfortunate results of the new machines.
And if these "reasonable" and "moderate" requests are not met,
there are more extreme measures waiting in the wings, ready to
erupt. In addition to growth restrictions, there is a threatened
technological moratorium in the offing. Worse, a new generation of
Luddites (these are the people in the 18th Century who burned
recently introduced kni tting looms out of fear for their jobs) stands
ready to fight the artifically intelligent computers – with sabotage.
magazine bombings" .
Given this spectre, a more measured response would appear to be
indicated. It will thus be helpful to put this automation-createsunemployment argument into some perspective, by considering the
economics of employment in some detail.
First of all, employment is a means, not an end. In the best of all In
this vein, a usually sedate and always responsible business warns of
"anarchy, complete with hit-and-run rioting and possible worlds,
mankind would be able to attain the kinds of goods and services
most Americans now enjoy -- by merely pushing a button-- not as
the result of working full out. If things worked this way, if robots did
most of the work now being done by people, and other robots built
and serviced these "worker" robots, then human beings could be
freed up to try to turn their wildest dreams into realities. We could
all become artists, musicians, poets, scientists, or whatever; not in
order to safeguard our present standards of living, but to use this as
a basis from which to build up to as yet unimagined heights. How
else can we conquer cancer, explore the solar system, expand all our
horizons?
What is really desirable is thus not work, but productivity.
In order to see this, we can ask the following: which would make
society better off, a quantum leap in the amount of work we were
required to do, coupled with a compensating decrease in
productivity (so that we were no better off in terms of real wealth)?
Or a great increase in productivity, together with an appropriate
decline in the amount of work needed to accomplish this (again with
an unchanged wealth position)?
The answer is obvious. The first option would consign us to the
economy of several hundreds of years ago, when the entire human
race had to work like dogs just to stay alive; when men were forced
to work 120 hours a week or more; when women worked like slaves
their entire existence; when even small children were assigned to
back-breaking tasks in factory, farm or mine. Truly was such a life
"nasty, brutish and short".
The second option, however, was the path our economy actually
took, thank goodness. Instead of being forced to work by a paltry
and niggardly Mother Nature, men nowadays usually work a
40.hour week or less, and there is even talk of a 4-day week;
women, in many cases, no longer need add full time jobs to their
already full time jobs at home; and children need not work at all.
Instead, they are free to go to school. (Compulsory school
attendence laws have tried to take credit for this shift, but does
anyone really doubt that such legislation would have been
completely ineffective a scant 150 years ago, when productivity
levels could not support such a luxury?)
Now, the unemployed person might be forgiven for not seeing the
point that work is only a means, not an end. (As far as he is
concerned, a job will not only put food on his family's table, but will
also earn back some modicum of psychological well-being.)
The crucial question, however, is to which tasks shall he be assigned
when re-employed? To those which can be accomplished by mere
machines, or to those which tax his uniquely human abilities?
What of the fear that the new jobs will not arise? As long as there
are unmet needs, and people willing to work to attain these ends,
there will be new positions created. From the vantage point of our
agricultural economy of 200 years ago, it would have been
impossible to predict precisely what kind of jobs would come into
existence today. In like manner, we cannot now predict which
occupations will arise to take the place of those shown to be
unnecessary by the new computer revolution.
However, we know that they will be created, and we know why. If a
robot, at both minimal outlay and subsequent maintenance cost, is
real1y able to replace 1000 workers (to take the "worst" possible
case) then some truly monumental results wil1 ensure, and each of
them will create new employment opportunities.
In the first instance, immense profits will be earned by such
companies. Their shareholders (and/or private owners) will either
spend or save their new-found wealth. In the former case, this will
encourage the industries which receive the new stream of
expenditures; in the latter case, interest rates will be driven down,
creating new loan opportunities and new employment, throughout
the entire economy.
But such profit levels cannot long endure. In a reasonably free
market system, new entrants will swarm in, to take advantage of the
high profits. By purchasing additional robotic factors of production,
and hence raising their prices, and by se11ing more such products
at lower prices, profit levels will be soon dissipated. The former will
encourage more employment in robot production, and the latter will
enable consumers to purchase yet even more with a given dol1ar,
thus again raising their standards of living. This will lead to stiH
more employment in those areas where the new purchasing power
is spent.
It was through a procedure such as this that large employment
shifts have taken place in the past. There is no doubt that it will
work again. It was once feared that automatic spinning mills would
permanently unemploy the entire hand weaving industry. Instead,
the results were cheaper clothing and more jobs in cloth making.
First generation computers were supposed to create a permanent
"army of the unemployed" amongst office workers. Instead,
companies like IBM have created literally millions of jobs
throughout the economy, with lower prices and higher standards of
living to boot.
No less will be true of the new artificial intelligence revolution. The
worm in the apple will not be a cold faceless computer-robot, taking
the bread away from the workers table. Instead it will be modern
Luddites, who once again threaten progress.
Let's Have a Little Perspective, Here
or
Conflicts of Interest
by Walter Block, The Fraser Institute In the last few weeks, the
newspapers have been filled with
stories about conflicts of interest suffered by politicians.
Several British Columbian Social Credit MLAs have figured
prominently in this coverage. Forests Minister Tom Waterland was
forced to resign amidst conflict-of-interest charges resulting from
his $20,000 investment in Western Pulp Partnership, Ltd. This is a
company which owns cutting rights in the South Moresby, including
the politically disputed Lyell Island, over which Mr. Waterland had
been rendering judgement.
Then, Energy Minister Stephen Rogers came under fire for his stake
of $100,000 in WPP. Mr. Rogers does not deal directly with this
forestry firm, but he is the minister responsible for B.C.Hydro, which
offered discount rates on electric power to sawmills such as
Western.
As a result of all this brou-ha-ha, Premier Bennett inaugurated a
new conflict-of-interest policy. All ministers in the Socred cabinet,
plus dozens of senior mandarins, will now be forced to either put
their assets in a blind trust, or to make a "full and complete
disclosure" of their investments. And if the C; momentum from
these political shenanigans continues apace, the day is not far off
when allM.L.A.s, whether in power or not, and senior bureaucrats
with executive responsibility, will have make similar disclosures.
There are, however, numerous drawbacks in such a scenario.
Openly acknowledging one's investment portfolio is no guarantee
that the elected official or civil servant will not be able to use his
public position for private gain. It may make things more difficult,
but a person who is so minded may still be able to mix his public
and private life in this manner. Nor is a blind trust a necessary
impediment to such activity. The public figure may rely on the fact
that portfolios need not be changed, even when in blind trust and
may act so as to increase the value of his holdings on the day they
were given over to the administrator.
Such a policy may not maximize his private wealth, but, especially if
the portfolio has not been radically altered, it may well enhance the
value of his property. In any case, the fact that this is a possibility
may divert those in public office from discharging their duties as
they would had they no potential conflict of interest to contend
with.
But this is only the tip of the ice berg. There is also the siren song of
nepotism to deflect our public servants from their steely
determination to "act in the public interest." Progressive
Conservative MP Sinclair Stevens recently had to resign from his
Ministerial responsibilities under a cloud, not because of any
charges made against him personally, but because of loans on very
favorable terms made to his wife.
This problem is easier to point to than it is to solve.
First of all, if the activities of the wife of a government official must
be scrutinized lest they cast doubt on the propriety of his own
position, what about his children or his parents? What about his
uncles, aunts, cousins, in-laws, grandchildren, etc. The difficulty is
that there is no nonarbitrary way to draw the line. No matter where
it is drawn, there will always be some (perhaps distant) relative
whose business relations may cast aspersions on the legitimacy of
the politician in question.
Secondly, what about the rights of the relatives of politicians or
leading civil servants? Must they be prohibited by law from
engaging in commercial transactions? If they are, this is a clear
breach of their own rights. If not, there is always the possibility that
someone may treat them advantageously, in the hopes of currying
favour with the principal (this seems to be the charge in the Stevens
case.)
Nor have we even yet completely catalogued the difficulties of conf
licts of interest for public functionaries. So far, we have
concentrated solely on monetary gains. But this does not go far
enough, by half. For all attempts to come to grips with potential
conflict-of-interest problems have so far been limited to dilemmas
about money. But money, as we all know, is only one of the many
things sought by human beings. In fact, this insight is so well
entrenched in the social sciences that economists have even
developed jargon to express it. We commonly distinguish between
money income, on the one hand, and psychic income on the other,
where the latter term denotes all non-pecuniary benefits, such as
the gratification of sex, power, notoriety, fame, or the satisfaction of
seeing one's fervently held ideology implemented.
This concentration on money income in attempted resolutions of
conflicts-of-interest actually discriminates against those who wish
to benefit themselves financially. But what about those who wish to
benefit in these other ways? We can hardly attempt to make people
place their psychic sources of income in a blind trust, or force them
to make "full disclosure" in this regard.
These difficulties are basic, not superficial. They transcend political
affiliation, jurisdiction, even national boundaries, and apply to
alloffice holders and government officials. (They do not apply,
however, to private enterprise. For if a corporate officer, for
example, engages in a bit of nest feathering, it is in the interests of
the firm to ferret out this behaviour. Business concerns may best be
understood as competing not only with regard to providing their
primary product, but also as regards their ability to stop employees
from acting against their interests.) Conflicts of interest plague the
public sector at present, and are likely to do so for the foreseeable
future, or for at least as long as human nature remains the way it
now is.
What, then, may be done about this ubiquitous problem? The
answer is simple. If there is no airtight way to avoid conflicts of
interest amongst public servants, let us at least resolve to reduce
their numbers as much as possible. Thus the best way to eliminate
virtually all conflicts of interests amongst civil servants and public
officials is to decrease the number of these positions to an
irreducible minimum. There are many other good and sufficient
reasons for cutting back on the public sector, but extirpating
conflicts of interest is certainly one of them.
- 30 Consumers Association of Canada
by Walter Block, Fraser Institute, Vancouver, B.C.
The newspaper headline leapt off the page at me in bold black type:
Consumer group backs higher price for wheat.
What is this, I say to myself. Surely, the editorialist has got the
headline wrong. Shouldn't it be, instead, Consumer group backs
lowerprice for wheat?
Intrigued, I delve into the business page story. Much to my
amazement, I find that the headline writer has indeed got it right!
According to Consumers Association President Sally Hall, the
Canadian consumer should be willing to pay a few cents more for a
loaf of bread to help out the western grain farmers who are now
facing the lowest wheat prices in seven years.
If that don't beat alII What will they think of next?
Government bureaucrats demanding a tax cut? Taxpayers urging a
tax increase? Union leaders calling for a decrease in pay? Oil sheiks
advocating that O.P.E.C. be ended? Students asking for lower
grades? Bishops counselling atheism? Marxists justifying a move
toward the laissez faire capitalist system?
Now, none of these other miraculous events have (yet) come to
pass, but the C.A.C. is indeed supporting higher wheat prices,
provided that the additional money reaches farmers, and does not
get stuck in the pockets of middlemen. Nor is this a case of outright
traitors to the consumer cause -- or farm interests-having taken
over the organization. Instead, there actually appears to be method
in what might otherwise be considered the madness in this view of
the consumers association.
States Ms. Hall, "Canadian consumers have to be willing to subsidize
and Agriculture is the No. 1 industry farmers. in Canada." Reading in
between the lines, and generously interpreting the sentiment which
may be behind these remarks, one can arrive at a position that
makes a sort of wierd sense.
This is the view that if the consumer lets down the farmer in his
hour of need, by refusing to subsidize him, this will result in
increased agricultural bankruptcy. If so, then with fewer producers,
wheat prices will eventually rise. From this perspective, it may not
be in the consumer's short run interest to promote high farm prices,
but such a policy may, paradoxically, yield good results in the long
run. Although this view now has the ring almost of plausibility, there
are grave errors in it. First of all, the argument could be used not
only by consumers of wheat, but by purchasers of all sorts of goods.
If generally adopted, no longer would any buyer look for a bargain.
He or she would "reason" that successful bargaining would only
result in producer bankruptcies, fewer suppliers, and eventual
higher prices. Instead, the purchaser would seek out the most
expensive supplier, acting, presumably, to keep prices down.
But how can prices be kept down by bidding them up? We must
realize that this argument applies not only now, when farm prices
are down, but at all times. It is alwaystrue, even when agricultural
prices are high, that if consumers bid them still higher, more
farmers will survive and prosper; and this, according to the
argument, is all to the long run benefit of the consumer.
According to this "logic," the consumer must always subsidize the
farmer, out of self interest.
There is a second criticism as well. While the demand side of the
market does indeed benefit from an increase in the number of
suppliers (and lose from a decrease), this only holds if all other
things are equal. If the buyer must spend his own money to assure
this outcome, then other things are patently notequal. For the whole
point of encouraging more supply is to thereby obtain lower prices.
But if lower prices are renounced as a sort of short run greed which
always can be said to backfire, the consumer never gains.
Thirdly, this argument fails to appreciate the fact that in the
marketplace, profits tend to equalize in all lines of endeavor, given
that due consideration is given to risk. That is to say, a situation
cannot long endure where profits in industry A are 50%, profits in
Bare 10%, and profits in Care -5%. Under such circumstances,
everyone and his uncle will want to enter industry A, and people
will desert C as rats from a sinking ship. But this reallocation of
resources will reduce the revenues derivable in A, and increase the
desirability of C. We may never arrive through this process at a
situation where exactly the same returns are earned in each
industry, but there will always be this tendency at work which
keeps to a minimum the differences in profits between one industry
and another. It is similar to the process which keeps the queues
roughly equal at a bank, supermarket or Post Office. If any line gets
too long, those at the back of it leave, and join shorter ones. Also,
whenever a very short line emerges (perhaps one teller or clerk is
more efficient, or has been able to serve several customers quickly),
newcomers gravitate to that queue. The wait at all wickets may
never be exactly equal, but neither can the time spent on one line be
too far different than that spent on another.
The point of this long winded exegesis of the economics of profit is
this. Suppose that the advice given by the Consumers Association of
Canada somehow succeeds. This would mean that housewive's
present willingness to spend a few cents more on a loaf of bread
results in an increase in the number of farmers who can survive,
which in turn leads to lower wheat prices. Even if this unlikely
series of events somehow came to pass. it would still not reduce the
price of bread, as hoped and expected by the C.A.C., because when
that glorious day finally emerges, and the price of wheat finally falls,
this will only lead to an exodus of farmers from agriculture, in
response to the falling rate of profit. If you are still with me, gentle
reader, this means that the C.A.C. plan cannot succeed because of the
tendency of profits to equalize in all industries.
The present argument is similar to a fallacy which makes the rounds
every few years in the realm of international finance. In that view, a
country can benefit by giving foreign aid to other nations, if the
latter must use this money to make purchases in the donor nation.
To be sure, such tied aid often does benefit some segments of the
donor's economy (indeed, this is why such arguments often find
popular support), but it can hardly improve the wellbeing of the
entire country. For giving people money, and then forcing them to
use it to purchase goods you produce, is exactly equivalent to
granting them the items outright; and no one ever became rich by
giving away his stock in trade for free.
In like manner, the consumers of Canada cannot enrich themselves
by subsidizing the nation's farmers. If they follow the advice of the
Consumers Association of Canada, they will only succeed in
impoverishing themselves, as common sense would indicate. A far
better policy would be to take advantage of the present (perhaps
temporarily) low prices, and then when prices go up, grin and bear
it.
Or will some farmer's association dare to argue that when
agricultural prices go up, the nation's food growers should subsidize
the consumers with artificially lower prices, in order to promote
their numbers, so that eventually farm goods will sell more dearly.
Don't hold your breath. The canadian farmer, if not the consumer, is
far too smart to fall for sophistries of this sort.
May 7, 1986
Disband the Critical Industries Commission
BY Walter Block, The Fraser Institute, Vancouver B.C.
Art Phillips is B.C.'s first commissioner of critical industries. His
mission? To bring management, labour, banks and government
together, and negotiate with them in order to rescue firms in the
mining and forestry industry that would otherwise go belly-up. The
bottom line of course, are the jobs that are thereby saved.
Mr. Phillips is credited with reviewing the Bell Copper Mine in
Granisle (250 jobs); Brenda Mines in Peachland (400 jobs); Lamford
Forest Products in Sooke (200 jobs); Victoria Plywood (ZOO jobs);
Stege Logging in New Hazelton (65 jobs); and Clearwater Timber
Industries in Valemont (400 jobs).
One of the most attractive aspects of this Social Credit program is its
low cost. In this era of large scale bailouts and horrendous
government deficits, the Commission has spent only one half of its
$600,000 budget. Since it has kept over 1,500 people off the
unemployment insurance rolls, this works out to something less
than $200 per job saved. (True, tax concessions have played a role
in the rescue packages negotiated by Phillips. But you can't get
blood out of a stone: bankrupt companies are obviously bad tax
payers, so the government did not have to forego much in the way of
revenue due to these activities).
These accomplishments have earned the commissioner kudos from
virtually all reaches of the political economic spectrum. This is
surely an anomaly of major proportions in the highly polarized rain
forest. The Socreds, of course, are ecstatic. Mr. Phillips, after all, is
their own appointee, and they can quite properly bask in the
reflected glow of his success. But the distaff side is no less
complementary. In the view of New Democrat Alex Macdonald, this
policy was the Premier's best idea in all of 1985. According to a
Globe and Mailreport, the International Woodworkers' Terry Smith
has "nothing but a really high regard for Art Phillips". And the
journalists have been combing their thesauroses in order to come
up with new and better superlatives with which to describe this
program.
However, before we run away with ourselves from enthusiasm, we
do well to reflect on a basic aphorism in social science. When just
about everybody in politics and journalism has agreed upon an
economic issue, it is usually a safe bet that they are all wrong.
Unfortunately, the Critical Industries Commission is no exceptiun to
this general rule.
What, then, is the case against Commissioner Phillips? At first blush,
criticizing him would appear perilously close to attacking Santa
Claus. Is not Vancouver's ex-Mayor responsible for handing out a lot
of low-cost goodies to over 1,500 otherwise unemployed British
Co1umbians? But a moment's reflection will show the flaws in this
program.
Bankruptcies, in our modern mixed economy, are the result of one
of two factors. First, of course, is unwise government intervention.
Under this rubric we must include labour codes which allow, nay,
encourage, unions to price their members at uneconomic rates;
punitive taxes which penalize marginal firms and discourage risk
taking; impositions of paper work, which discriminate against small
business; crown corporations which compete unfairly against
private enterprises, since their revenues are guaranteed through
taxation; and a panoply business regulations, which sap the
incentive, initiative and competitiveness of an entire economy.
What can a Critical Industries Commission accomplish against these
inroads of government intervention? Nothing. First of all, its
mandate is now limited to forestry and mining. Due to budgetlimitations, it can only deal with less than half of the firms which
apply to it; in its 10 month existence, the corporate lives it has
touched upon number in only the dozens.
This is truly only the tip of the iceberg.
Yet the problem of business-depleting government intervention is
monumental, and province-wide. If Mr. Phillips wanted to save tens
of thousands of jobs, not merely hundreds, he would take his entire
budget and with it bite the hand that feeds him; that is, he would
turn upon his employer, the provincial government, and lobby
Victoria to decrease its voluminous interference with the. market
system. It is arbitrary, and discriminatory, to save only some few of
the thousands of jobs lost due to unwise government economic
intervention. So on this score the Commission is a failure.
But there is a second source of bankruptcy. Even in the absence of
unwise public policy, this would still exist. I refer, of course, to
changes in consumer taste, new resource discoveries, or depletions,
and new technology and innovations here and abroad which make
some firms obsolescent. All of these have effects that reverberate
through the economy in complex and often unknown ways.
Business failures which result from such basic economic factors are,
paradoxically, a healthyphenomenon. If the horse and buggy
industry cannot be decently buried, if the family farm is not allowed
to go the way of all flesh, if the textile industry in Canada does not
make way for foreign imports, then we as a country are doomed to
slide into economic decay. To be sure, jobs in these twilight
industries can be "saved", but only at the cost of mis-allocating
labour away from the automobiles, services, computers and spaceage technology that would otherwise undergird economic
expansion.
Yes, "jobs are lost" in the sometimes bewildering unveiling of a free
market. But if they are artificially saved, by a well-meaning but
blundering Critical Industries Commission, this only imparts a
measure of arteriosclerosis to our economy.
Lost jobs are like dead cells in. our body. If we prevent them from
dying, no place remains for new life. Superficially, and in the short
run, policy of saving the "dead cells" of the economy makes sense.
But give the Art Phillips of world their way, and the ultimate result
will be decay and economic strangulation •
..
CROWN CORPORATIONS
Editorial Commentary Prepared by Walter Block for The Financial Post
Crown corporations play a great role in the Canadian economy, so it is
important that their raison d'etrebe analyzed. Some economists, even
those otherwise receptive to the case for the competitive system, have
accepted the argument that government enterprise ought to be allowed to
compete in the marketplace.
In this view, there are no "natural limits" to direct government
involvement in the economy whatever. It is only a historical accident
that government has never entered the business of running mom and pop
grocery stores, newspaper and shoeshine stands, boutiques, babysitting
agencies, restaurants, massage parlours, flower shops, etc. Should
government one day decide to take on these tasks in addition to its
already multitudinous functions, there is no economic principle at all
which could be adduced in opposition.
To be sure, these economists insist that the competition be "fair". That
is, the public enterprise - whether at local, provincial or federal level,
government department or bureau -- should not enjoy any special
privileges denied to private enterprise. No grants of monopoly privilege
can be conferred, as presently enjoyed by the Canadian Post Office. (It
is now illegal in Canada for private citizens to offer to deliver mail for a
fee in competition with Canada Post.) No automatic underwriting. of
extra budget expenditures can be undertaken, based on general
government revenues. No exceptions from tax obligations can be given.
All firms, Private as well as public, must pay taxes; and the tax rates
should be invarient regarding the two sectors of the economy.
This principle would be consistently applied even up .to, and including,
bankruptcy. According to the view we are considering, if the costs of a
government run Crown Corporation were not offset by earned revenues,
it would be allowed to be dissolved under bankruptcy procedures, just as
in the case of the failure of a private firm.
Naturally, this regime could not feasibly be applied to "natural money
losers," such as welfare, and to programs which are thinly disguised
income transfer schemes such as health care, unemployment insurance,
etc. But advocates of this philosophy are anxious to apply it to most
''traditional'' government run business enterprises which produce real
goods or services, such as Crown Corporatlons.: There is no doubt that
such a scheme would be a vast improvement over
present institutional arrangements -- at least as far as already existing
corpora- tions are concerned. No longer would they have an automatic
free ride. No longer would their very existence be guaranteed, regardless
of whether they pulled their weight or not. This plan, moreover, would
allow for a certain flexibility and hence efficiency: if a public
corporation were allowed to go bankrupt, private concerns could
purchase the resources, capital goods and equipment, and manage them
competitively.
The drawbacks in the scheme do not concern present public enterprise.
Instead, they arise in regard to the possible spread of government to
fields still reserved for the private sector.
One difficulty is that if government were allowed to enter anyindustry,
public enterprise would be unleashed upon so many different, small and
petty tasks. Even the communist regimes allow scope for some private
initiative. Nor is it even possible to reply that government business
would eventually fail in these new endeavours, thus paving the way for
the re-entry of private firms. For with enough initial capitalization, they
could be immune for long periods of time from the vicissitudes of the
marketplace.
Which brings us to the crucial point: initial capitalization. In the free
enterprise system, the start-up investment for new firms must alsobe
strictly voluntary. It may be based on individual contributions, stock
flotations or bond purchases, since each of these methods involves funds
invested through free choice. If putting "government enterprise on a
business footing" meant raising the initial capitalization in such a
voluntary way (plus an adherence to all other "fair competition provisos
we have discussed), then government could truly take its rightful place
alongside all other private enterprises.
But in what way would they be a public institution at all? It would be
indistinguishable in all respects form a private firm, and could not
properly be identified with the public sector.
And if public enterprise contrived to raise its initial funding not from
voluntary payments but out of tax revenues, it would still retain a
crucially important unfair advantage over private concerns, thus denying
the "government as competitor" thesis.
- 30 January 20, 1984
n
Cruelty to animals by Walter Block
Ecologist Dr. David Suzuki relates his own hunting experiences, as a
young boy.
He offers such a dramatic diatribe against the killing of animals that it is
worth quoting at length:
"One year I saw an ad in a comic book for a metal slingshot. I ordered it,
and when it arrived I practiced for weeks shooting marbles at a target. I
got pretty good, and decided to go after something alive.
"Off I went to the woods and soon spotted a squirrel. I gave chase and
began peppering marbles at it until finally it jumped into a tree, ran to
the top and found itself trapped. I blasted away, and grazed it a couple of
times, so it was only a matter of time before I would knock it down.
"Suddenly the squirrel began to cry - a piercing shriek of terror and
anguish.
That animal's wail shook me to the core, and I was overwhelmed with
horror and shame at what I was doing - solely to prove my prowess with
a slingshot, I was going to killanother being. I threw away the slingshot
and my guns and never hunted again."
It is for reasons and emotions such as this that animal rights groups have
held such strong sway in Canada. Groups such as Lynx, the Society for
the Prevention of Cruelty to Animals and the League Against Cruel
Sports may have limited power, but they have been able to seize the
moral high ground in opposition to the killing of fur bearing animals. It
is time, then, to subject their case to careful analysis.
It is easy enough to oppose the brutal, sadistic and vicious killing of
creatures such as that which sometimes occurs in leg-hold trapping, or in
Suzuki's amateurish attempts to kill a squirrel. But the protestors take a
much more radical and comprehensive approach. In their view,
anykilling of fur bearing mammals is wrong; even those which are
farmed, and killed humanely. This accounts for their antagonistic
response to the wearing of allanimal skins.
One objection to this stance is the charge of hypocrisy. That is to say,
the argument can only be consistently maintained by vegetarians. It
would ill behoove a meat eater to cavil at other methods of utilizing the
cadaver of the once living creature.
But mere vegetarianism is hardly sufficient. To be consistent, the animal
rights advocate would also have to adopt the principles said to be
employed by Mahatma Ghandi. He would have to refrain from killing
any member of the animal kingdom, including such things as flies, rats,
mosquitos, germs, etc. After all, if every life is precious, whether human
or not, it does not do to make invidious comparisons
between species.
The logical implication of this, however, is that it would have been
immoral for
people to kill rats during the bubonic plague. It is likewise improper to
eliminate the Anopheles mosquito in order to prevent yellow fever.
What, then, of the rights of animals? Do they have any? If they are to be
able to claim any rights of the sort to which human beings enjoy, they
must do one of two things in order to establish some sort of cross
species linkage. One possibility is that they must be able to petition for
their rights, in some manner or other. There are those who claim that
chimpanzees and porpoises, among others, will be able in the future to
do so, or to be taught to do so. On that day, humans will be honour
bound to consider their declarations.
Alternatively, if animals are to have rights, they must at least. show that
they respect the equal rights of their fellow creatures. That is, if the lion
claims the right not to be hunted by us, then when the lion and the lamb
lay down together, they must bothget up, unharmed. Why should we do
more for the lion (or the bear, or others beloved by the animal "rights"
organizations) than it is willing to do for the lamb? Why should we treat
the porpoise any better than he treats the fish?
These protestors may be vociferous, they may be numerous, they may
be cantankerous, but we must deny to them the moral high ground they
so desperately,
and unjustifiably, claim.
- 30-
October 31,1988
2
Drugs and the Olympics
by Walter Block, Fraser Institute
Canada's Ben Johnson was stripped of his gold medal for the 100
metre dash in the 1988 Seoul Olympics. According to his coach
Charlie Francis, this instance of drug taking is only the tip of the iceberg. Numerous other Canadian athletes have been implicated in the
use of anabolic steroids, and world class athletes from several
other countries have been implicated.
The main reaction on the part of the leading sports authorities is a
call for a
"war" on muscle building medications.
There are several shortcomings with this approach, however. For
one thing, there
is a matter of arbitrariness. Why is it that anabolic steroids are
banned while other performance enhancing drugs, such as cortisone
and Xylocaine, are allowed? Even aspirin, for that matter, is a
performance-enhancing drug.
For another, who gives the Olympic and sports authorities the right
to ban
anabolic steroids? They are widely used in Canada for patients
suffering from rheumatoid arthritis and other debilitating diseases,
and are available upon prescription. Ben Johnson's doctor, after all,
prescribed them for him, at least
according to present testimony.
The case of Eleanor Holm, a U.S. swimmer entered in the 1936
Olympics is a case
in point. Avery Brundage, President of the LO.C. at that time, banned
her from competition because she had imbibed a glass of
champagne at a ship's party on the trip across the Atlantic to Berlin.
There are many who would question his right to
have done so.
A further difficulty is that the war against these particularperformance
enhancing drugs seems almost as futile as the war against addictive
drugs such as cocaine and heroin. Keeping pace with the
development of newer and better body building pharmaceuticals,
and often outstripping it, is the technology necessary to
disguise their use.
Whatever the shortcomings, there is a clear need to establish some
sort of rules
that everyone must follow. "A level playing field" is a much abused
notion when applied to free trade, but when it comes to sports, it is
vital. If there is no commonality to which sports participants must
be held, the whole point of athletic competition vanishes. We might
as well assign some people to the starting line, and
others either 10 ya~behind, or in front.
1
The big question is, What must be equalized? In high schools and
colleges, the amount of training is subjected to egalitarian
considerations: team practices are limited to a specified number of
weeks. This is not done in professional endeavors. In swimming
there is virtually no difference in the type of equipment used. In
sailboating and car racing, there are gigantic disparities. Here, the
competition is as
much between men as between gear. Bicycle racing could equalize
the apparatus, by random assignments, but has chosen not to do so.
The point is, some sort of equalization must be imposed, but its
dimensions are not given to us from on high.
The present scandal stems from the fact that commonality cannot
now be achieved. We can impose stricter and more frequent
controls, but we can only hope that the testing mechanisms will be
able to overcome those which mask drug usage.
A more radical solution to the present drug scandal is the suggestion
that the rules be relaxed completely: allow everyone to take the
muscle building drug of his choice. The problem with this is that we
will no longer know of what the human body -- unaided by drugs -is capable; we will only see the result of the combination of such
artificial stimulants plus training. (Yes, these materials may be
harmful. But
• we're talking about adults here, and they have the right to weigh
the pros and cons and decide such issues for themselves.)
A compromise is to urge the creation of twocompletely different
sections of the Olympic games (and all other related professional
sports activities). One would be an "open" division, where
medications of all kinds and varieties would be allowed. The other
would be a "closed" division, open only to the drug free. Every
subsequent world record would have an asterisk, or not, depending
upon drug usage.
This is no panacea; no compromise known to man ever is. We would
still face the difficulty of drug users posing as drug free athletes. But
this compromise would go a long way toward resolving a most
perplexing difficulty, since with two divisions, there would be less
incentive to cheat.
- 302
Equal Pay Legislation
by: Walter Block, 'the Fraser Institute, Vancouver, B.C.
The advocates of equal pay for work of equal value castigate the market
for its inherent unfairness. Instead of the "anarchy" of free enterprise,
they propose that all wages be set on the basis of skill, effort,
responsibility and working conditions. These would be determined by
boards of "experts," and tribunals of bureaucrats and civil servants, who
substitute their "objective" assessments for the chaotic judgement of a
system of competitive labour markets.
There are many and serious objections which can be levelled against this
scheme.
Perhaps most important, the entire proposal is predicated upon a malefemale wage "gap" resulting from employer discrimination.
Unfortunately for their case, no such
phenomenon actually exists.
To be sure, if the wages of all full-time, full-year employees are
compared, the
ratio is roughly .65. But the ensuing pay gap of 35% is more of a myth
than a reality. It hides the fact that this "gap" is virtually entirely the
product of
differential marital status .
. " Why should this make a difference? Simple. Marriage has
asymmetrical effects
on male and female incomes, raising those of the former, and lowering
those of the latter. Fraser Institute researchers have segregated the
Canadian sample on this basis, and have unearthed some startling
results. Based on data generated (although not published) by Statistics
Canada we have found that women who have never been married earned
fully 99.2% of the incomes of their male counterparts. And a Fraser
Institute book, "Focus on Employment Equity: A Critique of the Abella
Royal Commission Report,"reports that the wage ratio for the nevermarrieds with a university degree was an astounding 109.8%. Indicating
that females in this category actually earned 9.8% more than equivalent
males.
The reason for this is not hard to discern. Married males do far less of
the
housecleaning, shopping, diapering, child care and other household
tasks than do their spouses, and this holds true even when both are
employed full time. There are even cases on record of married women
refusing salary boosts and job promotions on the ground that this would
put at risk their primary relationship.
Contrary to the self-styled feminists, there is nothing intrinsic to a job
that makes it worthy of compensation. Crucial in any determination of
wage rates is the
\. demand on the part of consumers for the service supplied. Right now,
for example, the skill, effort, responsibility and working conditions of
dentists are such that they receive high compensation. But were a cure
for tooth decay to be uncovered tomorrow, their wages would plummet
without any diminution whatsoever in these objective measurements on
the part of the practitioners of this profession.
Further, any proposal which artificially raises the salaries of a given
calling beyond its productivity level threatens it with unemployment.
Equal pay enactments are always couched in terms of raising female
incomes, never reducing those of males. As such, they threaten to price
women out of the market, in a manner similar to what has already
happened to young people, who have been rendered less employable by
minimum wage laws.
There is also the embarrassment that when boards or tribunals in the
different jurisdictions have attempted to "objectively" set the value of a
job, the results have varied widely. When entrepreneurs poorly estimate
the worth of a job, they are automatically penalized. If they set wages
too high, they risk bankruptcy; too low and they are likely to suffer
severe quit rates. Unfortunately, no such automatic reward and penalty
device can operate in the public sector.
Equal pay legislation is a form of wage - price control. As such, wages
are frozen in place, despite changing market conditions. For example, if
there is a sudden need for more nurses, and fewer fire fighters, an
inflexible wage system will be unable to encourage the former, and
discourage the latter. Over a decade ago Canada rashly experimented
with wage - price controls. It was a disaster, in the view of all people of
good will. That we are seriously flirting with this unsavory idea so soon
after underscores the point that those who are ignorant of history are
doomed to repeat the mistakes of the past.
- 302
THE FARMERS PLIGHT: BANKRUPTCY AND TEARS by Dr.
Walter Block
Senior Economist
Fraser Institute
According to the old euphemism "early to bed, early to rise, maketh a
man healthy, wealthy and wise." This might hold true, in some times in
some places, but certainly not for the small modern family farmer.
Although he gets up at the crack of dawn, labours all the day long, sinks
exhausted into his bed, and may be healthy and wise as a result -- he
certainly is not becoming wealthy. On the contrary, his reward, in many
cases, is only insolvency, bankruptcy, and tears.
An incident occurred recently on the Eastern seaboard, a bank
foreclosed on the farm and prize-winning pure-bred Charolais cattle of a
48 year old farmer. In response, and in an attempt to publicize his quest
to save his farm, he dumped three dead cows in front of the Toronto
offices of the foreclosing bank. He did this on the ground that the bank's
refusal to carry his debt was really responsible for the death of his
livestock, since without further financial support he did not have enough
money with which to feed his herd. A local newspaper headlined its
front page coverage of this event: "Bank seizes cattle, land of tearful
farmer." (One wonders what the Society for the Prevention of Cruelty to
Animals had to say about thisl)
In the event, the farm was seized because of a default on a loan of
$935,000 plus $123,976 in accrued interest charges. More generally,
farmers are having difficult times, mainly because of high interest rates,
but also because of tightening margins between feed, fertilizer and other
farm costs on the one hand, and farm output prices on the other hand.
What public policy ought to be followed to deal with the crisis in the
small family-owned farm? Not unnaturally, the response of some people
might be that "the government should do something about the plight of
the farmer." Suggestions range from farm subsidies to price supports,
from impeding banks from foreclosing on farms to setting up marketing
boards to help the farmer. But each of these policies has serious flaws.
Farm subsidies cannot be created out of the thin air. They must come
from somewhere, at a cost to at least some people. If the government
merely prints up additional money and presents it to impoverished
farmers, the inflationary fires are stoked up. If it does the same with
borrowed money, other bond sellers are crowded out of the loan market,
and high interest rates -- the issue that started us off on this quest in the
first place, and a problem for many other businesses as well -- are
increased even the more. And if government diverts tax money to
farmers, it must either increase taxes, which the public opposes, or
reduce other programs.
Price supports for farm produce likewise have serious defects. They
have a habit of raising food prices, a particularly vicious result, in that
the poor spend a far higher per centage of their household budgets on
food than do the rich. Then, too, by interfering with the free play of the
price mechanism, supports also reduce the accuracy of the information
conveyed by the price system, and make it harder for the numerous
economic actors in the marketplace to coordinate their activities with
one another.
Legislation which violates the right of lenders to foreclose on the
property of loan defaulters will also have unforeseen and disturbing
consequences. Banks are a popular target of demagogues because they
usually have lots of money. But if financial institutions cannot collect
the collateral put up for debts that turn bad, they will be less willing to
make loans in the first place. This will reduce the incomes of savers,
many of whom are people with little means. It will also increase the
costs of future loans -- the interest rates charged -- and this will harm all
future and potential borrowers.
Nor is there any justification, at least from the consumer's point of view,
for setting up agricultural marketing boards. As the best available
evidence shows, marketing boards set up and/or strengthen incipient
tendencies of farmers
to cartelize; they raise prices to consumers for agricultural products; and
they artifically and needlessly reduce the quantity of foodstuffs supplied
to the market.
Of course, it is unlikely that the small farmer will long endure, at least in
his present state, without government aid. And this, without a doubt,
will be a tragedy "- - for thousands of people, who will be forced to
enter other, now more productive fields. It is important to realize,
however, that such a policy will be of great benefitto the remainder of
the citizens. The present spate of bankruptcies are part of the long term
reduction of the proportion of the workforce on the farm.
In early colonial times, the proportion of the population on the farm was
well over 90 per cent. This fell regularly and precipitiously over the 18th
and 19th centuries, reaching a level of 44 per cent in 1880, 35 per cent
in 1910, 25 per cent
in 1930, 15 per cent in 1950, and five per cent in 1970. This pattern was
welcome, as it arose from great increases in farm productivity, coupled
with a far less than proportionate increase in the number of mouths to
feed. To compare 1880 and 1970, for example, this trend freed up fully
39 per cent of the labour force for other, and now more important work.
Imagine if, somehow, just these people had to go back to the farm in
order that we may still be able to feed ourselves. This would be a
disaster, as we would have to do without the truly huge number of goods
and services now provided by these people. So the long term trend from
farm to city is to be applauded, not denigrated and artifically halted.
Moreover, there is not a shred of evidence to support the much-vaunted
claim that psychological, moral and spiritual benefits spill over from the
small family- owned farm to the remainder of society. Supposedly, the
farm is the creator of
honesty, independence, thriftiness, trustworthiness, and a whole host of
other boy scout-type characteristics. Now, there is no doubt at all that
many people raised on farms exhibit these qualities. But this is hardly a
rural monopoly. City folk, too, number amongst their offspring children
with high moral qualities. So if there are any geographical moral spill
overs, and this has never been scientifically shown, they are likely to be
in bothdirections, not just one.
We must conclude that the case for government initiatives to help the
farmer is extremely weak. Based on the evidence, they are likely to add
to the general rate of inflation, or to raise food prices, or to ruin loan
markets or to increase farm cartelization. And if these efforts are
successfulin stemming the tide from farm to city, they will reduce the
rate of increase in our standard of living.
- 30-
\
FEDERAL BUSINESS DEVELOPMENT BANK I by Walter Block
The Federal Business Development Bank, like many other financial
institutions, has been hard hit by the recent recession.
In fact, it has lost money for the last five years. But unlike other money
losing firms, this bank has somehow managed to avoid bankruptcy. And
not only that; its management is optimistic for the future, and is now
exhibiting an upbeat image.
For example, B.e. &: Yukon regional manager Doug Kerley is excited
about FBDB's new directions. The bank will playa new match-making
role, bringing together entrepreneurs and investors for a seventy-five
dollar registration fee.
But how did FBDB rack up so much red ink? Says Kerley, "We, like a
whole lot of people, got caught up in the growth syndrome before the
recession hit and, as lenders, we took our eye off the ball and made
unwise credit decisions." FBDB lost
f fL(. 3lii'i 3 -iy
Sixty-foUl poInt ttlt'e9million dollars in fiscal n-ineteen eighty-tRree,
eigt::lty fQyr, (TJ $J..'fq·8
bringing its deficit to two-."'luI"l6I"ed and ferty nine
PQittst:~million.But ?;{.i? "good news" since the loss in the previous
year was eightY-o~million, sixte8Rpoint se~million greater.
Says Mr. Kerley, "We're headed in the right direction and we want to get
there (that is, earn a profit) as soon as possible."
Let's hold on a minute. Here is a bank which has registered losses
totalling a quarter of a billiondollars in the last five years. They "took
their eye off the ball", and made "unwise credit decisions" according to
their own admissions. What are they doing now, still in existence,
prattling about a rosy future? Something strange is going on.
You may have guessed it by now. The Federal Business Development
Bank is not a private business, but rather a Crown Corporation. Because
of this privileged status, it is not subject to the laws of supply and
demand, profit and loss, like all other businesses. Next time we'll see
why such an arrangement is not in the interests of the Canadian public.
July 30/84
- 30 FEDERAL BUSINESS DEVELOPMENT BANK I by Walter Block
Last time we were discussing the economic situation of the Federal
business Development Bank. We saw that the FBDB had lost a
whopping quarter of a billion dollars in its last five years, due to ''unwise
credit decisions" in the words of bank spokesperson Doug Kerley. And
yet it continues to exist, because of its special privileged Crown
Corporation status.
Is this in the best interests of the Canadian public? Hardly.
The purpose of a banking system is to serve as an intermediary between
those who wish to earn a return on their savings and those who wish to
invest funds in productive enterprise. The bank must pay a reasonable
rate of interest to those who entrust their savings with it, and charge
investors enough to make this possible, as well as enough to maintain
itself in business with a profit for its owners. Above all, a banking
concern must only lend to those who are likely to repay their loans --
with interest. Otherwise national resources will be misallocated and the
savers will lose their hard earned money.
It is obvious that such responsibilities can best be accomplished by the
free enterprise system. For here, competition prevails. Banks which
squander the funds entrusted to them on dubious projects will soon
suffer losses of patronage from savers. Unless they mend their ways,
bankruptcy will ensue.
But with banking under Crown Corporation status, this process is shortcircuited. A Crown Corporation bank such as the FBDB is able to call
upon tax revenues to make good its unwise decisions. In such a case,
there is no natural, automatic, and reliable way -- similar to the profit
and loss system of private t-" enterprise -- to stem the financial
haem~#,ge. The Federal Business Development Bank should be
privatized at once, before it can waste and misallocate yet another dime
of precious Canadian resources.
July 30/84
- 30 FREE TRADE & ECONOMIC & CULTURAL NATIONALISM
by Walter Block, The Fraser Institute, Vancouver B.C.
There is a lot of talk, nowadays, about free trade. But the very
concept of free trade drives Canadian political leaders into such a
tizzy of fear that they substitute the phrase of "freer trade" or
"enhanced trade" or some such other circumlocution so that the
dread name never has to pass their lips in its pure form.
We the people, however, need not labour under this apprehension.
Instead, we do well to understand the theory of free trade, in all its
pristine glory, and realize that it is in the best interests of the great
masses of Canadians, especially farmers, and those who work in
agricultural-related industries.
One concern of those who fear an elimination of allgovernmentimposed barriers to trade is that such a policy will lead to
unemployment. They cite prospective job loss in such callings as
shoe manufacture, textiles, autos, electronics, etc., where foreigners
can produce the goods at a fraction of the Canadian costs. And this is
indeed realistic. An end to laws which protect such industries from
foreign competition will mean a wholesale cutback -- or perhaps
even an entire elimination -of jobs in these sectors.
But this is all to the good. For why should precious Canadian labour
be expended on jobs which produce less than they might? The
farmer who works at tasks that could be done as well by animal or
mechanical means (plowing, hauling, lifting) will have less to show
for his efforts than if he concentrated on doing things that he could
do far better (running a mechanical plow, hauling by tractor, using a
fork-lift). In just the same manner, and for the same reasons, Canada
would be far better off if people now employed in producing shoes
on an inefficient basis, shifted themselves into job slots where they
could be more productive.
For "any old employment" cannot and should not be our goal.
Millions of farm jobs in Canada, billions of them for that matter,
could be created if people used tea-spoons, or their finger nails, to
dig up our rich earth. What we want, what we needas a country if
we are to successfully negotiate our economic way into the 21st
century, are jobs where people are freed up to do more productive
things.
This was the free trade message of Adam Smith, who inveighed
against the mercantilists, the economic "na tionali sts" of hi s day. He
saw dearly that the "wealth of nations" was dependent on
productive labour, that is labour directed to its most efficient
employments. And as a necessary corollarary, he demonstrated that
this could only take place under a regime of full free trade, where
goverment placed no obstacles whatever in the way of international
cooperation, specialization, and a world-wide division of labour.
We all see this cearly in the case of maple syrup and bananas. Sure,
we could produce bananas in this country. All we would need are
gigantic and stupendously costly hothouses. And just as certainly,
the tropical countries could produce maple syrup. They could do
this by erecting large scale refrigerators in which to place the maple
trees. (We're talking bigrefregerators, here).
The very idea is ludicrous. We all see the fallacy. Far better for us to
produce the maple syrup, for them to grow the bananas, and then
each to trade for the item the other specializes in. To mutual
advantage. Very few people, however, see that the same principle
applies to textiles, shoes, autos and electronic goods like television
sets. But it does, it does.
Here are the views of Ludwig von Mises on the question of free
trade:
Third revi sed edi tion, Henry Regnery, Chicago, 1966, (Human
Action, pp 752-55)
But there is one further bogey-man offered up by those who favour
"protectionism" (tariffs and quotas only protect the capitalists with
investments in textiles, autos, etc., and their highly unionized work
forces; for the rest of us, "destructionism" is a more appropriate
description of what it does to our economic prospects). And this is
the spectre of loss of cultural identity, or even worse, political
sovereignty.
But these claims are without foundation. Consider the case for
assuming that free trade will mean an end to Canada as a national
entitiy. The European Economic Community (E.E.C.) was actually
proposed by some of its adherents to this end. That is, they actually
welcomed a single country consisting of the European nations, and
saw the creation of the E.E.C. as a means toward this end. But after
decades of experience with free trade, and end to individual
national sovereignty is no closer than it was then at the inception of
E.E.C. And the same is true of the Scandanavian countries. After
generations of free trade (YJ}Q between th\em, Norway, Denmark,
Sweden, Finland and Iceland and still individual going concerns,
thank you. If political amalgamation has not followed economic
rationalization in these cases, where the one was welcomed as a
means to the other, how can this occur in Canada, where most
citizens vociferously reject any loss of political soverignty?
What about loss of cultural identity? This too is a bogus fear. Is
Canadian culture really so precarious and fragile a plant that it
needs protection from the inroads of "Dallas" and other U.S.
television programs? Or Newsweekand TimeMagazine? Or from the
unregulated competition from U.S. book publishers? If it really is so
weak, then it would be far better to let it go, and enjoy the cultural
products of America and indeed, the rest of the world.
But this is nonsense. Canadians have our own cultural traditions.
They serve us, and they serve us well. Let us consider in this regard
an example very close to horne: the publication of Grainnewsitself.
It is extremely unlikely that Grainnewswould cease to exist without
government regulations impeding the importation of competing
periodicals from the U.S. Certainly, this newspaper articulates the
concerns of western farmers better than any emanating from
thousands of miles away. But if Grainnewsone day failed in its
mission, and if a periodical devoted to agriculture published in say
South Dakota satisfied the needs of its present subscribers to a
greater degree, then Grainnewswould deserve to go bankrupt.
And the same applies to another employer of mine, the Fraser
Institute. That organization creates and disseminates a wealth of
public policy research and analysis dealing with economic problems
which impact Canadians. Yet it does not call upon government to
protect us from the competition which might develop under free
trade with the U.S. Were it to do so, then it would not deserve to be
considered a legitimate part of Canadian intelectual and cultural life.
But what of all those artistic, musical and literary organizations
which are positively frothing at the mouth at the prospect of
competition from abroad? To the degree that they fear a loss of
business attendent upon the lowering of cultural trade barriers -and to the degree that these fears are realistic -- to that extent they
are not really part of Canadian artistic life, but rather welfare
recipients posing as artists.
- 30 Government Aid
The big economic news in the western provinces is Ottowa’s
announcement of a $1.2 billion aid package. According to Prime
Minister Brian Mulroney, these funds will be spent on a western
diversification program in B.c., Alberta, Manitoba, Saskatchewan. The
money will not be spent on a per capita basis, but rather on the merits of
each proposal, in the view of Bruce Rawson, deputy minister of the
Western Diversification Office, to be housed in Edmonton, Alberta.
All four of the western provinces have welcomed the new initiative, and
spokesperson for business and labour have expressed cautious optimism.
There have been some criticisms expressed, but these have nothing to do
with the idea of government subsidies to business. Rather, they focus
concern on the amount of money allocated for this purpose. For
example, Richard Allen, chief economist of the B.c. Central Credit
Union has questioned whether the money will in whole or part merely
replace reduced department of regional industrial expansion (DRIE)
funds, or whether they will be a net addition to western spending.
According to his analysis, it all depends on the bottom line: the more
expenditure, the better; the less, the worse.
However, there are some more basic criticisms to be levelled at such
government aid programs. First, and most basic, is the fact that this
expenditure is not government money at all. Instead, it belongs to the
hapless taxpayers, who were forced to cede these funds to the state.
Government, in and of itself, has no money whatsoever; all its wealth
must come, directly or indirectly, from the people. So, far from Ottawa
"giving" anything to the people in the western provinces, it is merely
returning to them their own money.
Secondly, there is the issue of diversification. True, many graduate
schools of business have been for years urging this policy on all and
sundry, but this is by no means always optimal. The person who bought
IBM stock at the right time -- and only IBM stock -- did not diversify at
all. All yet he is laughing, all the way to the bank. On the other hand,
diversification does, undoubtedly, reduce risk. The question is not
whether to diversify, but to what degree should this be done. And there
is no reason to believe that the bureaucrat is in a better position to
determine this than the taxpayer. Further, if real diversification is
desired, surely it will be more effectively achieved by allowing each
taxpayer to make his own investment decisions, than by giving it all to
the bureaucrats and inviting them to parcel out the money in no more
than $20 million bits, as they have planned to do.
Thirdly, who is in a better position to determine the "merits" of any
given proposal? The bureaucrat who has not earned the money in the
first place, and who will not suffer its loss if he miscalculates, or the
average citizen, who earned it with the sweat of his brow and will suffer
its loss from unwise investment?
Surely, the answer is obvious. And so is the public policy
recommendation which follows: give the money back to the taxpayer,
and let him decide how to spend it. Or better yet, don't take these funds,
which are not needed for the proper running of government, away from
him in the first place.
Charity: Hansen - Vander Zalm
By: Walter Block, The Fraser Institute
British Columbia's newest Premier has promised to donate at least
$15,000 of government funds the amount pledged by Nova Scotia, to
Rick Hansen's Man-in-Motion wheelchair tour. Further, with an air of
righteousness, avidly aided and abetted by the Province's media, Mr.
Vander Zalm has challenged the other eight Premiers to contribute
generously toward the wheelchair athlete's goal of raising $10 million
for spiral cord research, and demanded that the federal government
match the entire package.
On the face of it, the B.C. Premier cannot be faulted for supporting this
medical research. He comes to office under a cloud of being a "wildman" rabid free enterpriser. There would appear to be no better way to
live down this reputation than by getting behind the Hansen world tour,
and thus establishing his credentials as a warm caring person and a
humanitarian.
But there is a better way, one which has the added advantage of not
contradicting his supposed free enterprise principles. Mr. Vander Zalm
could, as a very high profile private citizen, make a very well publicized
personalcontribution to Rick Hansen's efforts. Instead of challenging his
fellow Premiers, and the Prime Minister, to follow suit, he could ask this
of the entire Canadian citizenry.
Why rely on the government to bail us out of all our problems? The
State, as is well known by all free market advocates, is inefficient,
cumbersome, irresponsible and unresponsive. Excessive government
intervention into the affairs of a free people is not the solution -- it is the
problem. Rick Hansen's world tour is itself an exercise of private, not
public initiative.
The problem with making charitable contributions out of public coffers,
even to worthy causes, is that not all taxpayers will agree to this
expenditure of their money. As the Merv Lavigne case has recently
established, it is improper to force people to support causes against their
will.
So let us call upon Mr. Vander Zalm to remain true to his free enterprise
views, to retract his offer of financial support to Rick Hansen on behalf
of the entire Province; and instead to lead a privateinitiative toward this
very worthy end.
367 words
- 30 James M. Buchanan wins the Nobel Prize in Economics by: Walter
Block, The Fraser Institute
"Hello, I'm a government bureaucrat, and I'm here to help
you."
This statement has become a classic one liner, a joke which ranks
right up there with other entries in this genre such as "The check is
in the mail ," and "Yes, I'll respect you in the morning." Anyone who
takes these statements at face value will believe anything.
Yet, while most members of the general public clearly see the
bureaucrat for the pest he is, there is one academic discipline,
economics, which for many years had as a basic premise the view
that the government, for all intents and purposes, was basically to
be seen as a benevolent institution.
How did economists, who are otherwise highly intelligent people,
paint themselves into such a tight corner? Simple. They were
enthralled to a theory called "market imperfections." In this view,
the marketplace, if left to its own devices, was "imperfect."
Economists were quite clever in dreaming up all sorts of bizarre
examples to show this: externalities, the dependence effect, unequal
bargaining power, neighborhood effects, social cost,
monopolization, "imperfect competition," the list goes on and on.
Given, then, that the market was imperfect, it seemed to follow, for
these benighted economists, that government action would improve
matters.
Now to anyone with an I.Q. above his age level, this would appear as
the obvious non-sequitur that it is. Even were it true that the market
were imperfect, it by no means follows that bureaucratic
involvement would correct the situation. Indeed, it might well
worsen it -- the usual occurrence in the experience of people who do
not wear ideological blinders.
Into this morass enter Dr. James Buchanan, southern farm boy,
graduate of Middle Tennessee State University -- and winner of the
1986 Nobel Prize in economics. Like the child in the fairy tale who
kept insisting that "the Emperor wears no clothes," this George
Mason University professor developed a Public Choice School of
Economics which insisted upon telling the truth about these
matters, notwithstanding the great popularity of the contrary view
within academia. The common sensical core of this theory is that
people do not somehow magically transform themselves when they
leave the private sector for jobs in government. They are not
converted from selfish profit maximizers, questing after the unholy
buck, into selfless moralizers, intent only upon promoting the
"public interest." On the contrary, people are people are people.
They have roughly the same motives whether in the public or the
private sector: and this includes the desire to get ahead, to improve
their own situations, to make gains in their own salaries, prestige
and living standards.
"No big deal," you say? "Anyone could have arrived at this insight?
It's just a matter of common sense and logic?" Maybe so. But in point
of fact, before Buchanan, no economist had systematically applied
the logic of profit maximizing behaviour to the political, legal, and
juridical realms. Using the tools of modern economic analysis
hitherto limited to business and markets, Buchanan was able to
shed new light on voting patterns, constitutions, legislatures,
pressure groups, and much much more that had formerly been the
province of sociologists and political scientists. Along with his
colleague, friend and co-author Gordon Tullock, the most recent
Nobel Prize winner has inspired a whole generation of gifted
younger economists to look at our political institutions in a
jaundiced, but far more realistic manner. Thanks to Buchanan, it is
no longer credible for an economist to point to "market failure" as
evidence for state aggrandizement; the modern retort is that
"government failure" is at least as serious, and probably more so.
Because of these efforts, the choice of Jim Buchanan by the Swedish
Nobel selection committee has been roundly and shrilly condemned.
For example, left leaning economist Robert Lekachman has
deplored the award for what he describes as "Mr. Buchanan's rather
modest achievements." Liberal commentator Michael Kinsley called
him "an obscure right-wing eccentric." The influential Washington
Postcastigated him as "extreme, and his adherents as a fringe
element." Columnist Coleman McCarthy expressed "shock and
surprise" that Buchanan's views should be dignif ied wi th a Nobe 1
Prize. And these quotes are only the very tip of a veritable iceberg.
This outpouring of abuse and vilification is not easy to understand.
Part of it, a major part, undoubtedly arises because the Public
Choice School has been influential in Washington D.C. under
President Reagan, in providing a justification for cutting back on
excessive government operation. But this phenomenon cannot be
entirely explained by reference to the pro free market implications
of Jim Buchanan's work. For Friedrich Hayek, Milton Friedman and
George Stigler are also outspoken defenders of economic freedom,
and also highly influential in public policy decision making. Yet their
awards of Nobel Prizes were not met with such tumultuous criticism
and such howls of outrage from the liberal community.
This can only be conjectural, but one explanation might be that
while Hayek, Friedman and Stigler all made it part of their life's
work to show how the invisible hand of the marketplace works to
the betterment of society, Jim Buchanan's role is commonly seen as
basically negative. True, he also supports free enterprise, but the
quintessential element of his research is that the institution of
government, beloved of socialists above all else, is fatally flawed.
Although the Nobel Committee did not mention Buchanan's
appreciation of Ludwig von Mises in its deliberations, I should like
to close this review on just that point. (Please don't get me started
on the question of why Mises never won the Nobel Prize, or the
popularity and adulation meted out to other economists. That is the
story for another day.) In hi s 1969 book Cost and Choice: an Inquiry
in Economic Theory,James Buchanan singled out Mises, and his
main disciple, Hayek, for special praise for their work on
opportunity or subjective costs. Buchanan quite rightly saw Mises'
insights in this regard as an integral part of the critique of socialist
planning models. The point is that costs are not objective, and thus
able to be calculated by the outsider, the bureaucrat, or the socialist
central planner. Rather, they represent the next best opportunity
foregone when a decision, any decision is made.
For example, the true cost of reading this article is not the money
paid for a subscription to Grainews.It includes that, to be sure, but it
also includes the cost of foregoing the next best alternative that you
could have engaged in, but did not, because you are busy reading
this testimonial to James Buchanan. What is this? Well, it1s
exceedingly hard for me, or for anyone else, to say. It could be the
pleasure of watching a soap opera, or plowing the lower 40, or
teaching your children, or repairing the tractor, or eating lunch.
How can anyone else know how you would have spent your time,
were you not now engaged in reading? The answer is, they cannot.
And thus Jim Buchanan, along the lines set out by Mises in the
1940's, hammers in yet another nail in the coffin of intrusive
government.
- 30 4
THE FINANCIAL POST December 3, 1983
Commented/by Walter Block
Labor Laws unfairly restrict employers’ rights
'The stnke is an attack on competing workers'
IN THE NEXT few months, several provinces will be re-examining
their labor codes with a view to revising them. In the past, such
attempts have been superficial. Our legislative representatives must
go to the heart of the matter this time out, for the health of the
Canadian economy depends upon it. This analysis will entirely
concern itself with the ideal labor code, with how things should be.
In the field of labor relations, the most important issue is the strike.
Actually, this is a misnomer, as it refers not to one act, but to two. A
strike is, first, a withdrawal of labor in unison from an employer, on
the part of the relevant organized employees. To this, there can be
no objection. If a single individual has a right to withdraw labor
services, or to quit a job, he does not lose it merely because others
choose to exercise their rights simultaneously.
There is a second aspect of the strike, however. And this element is
pernicious, insidious and entirely improper. I refer here to the union
practice of making it impossible for the struck employer to deal with
alternative sources of labor.
The businessman must convince the Labor Relations Board that he
is "bargaining fairly" with those who have left his employ (even
though what he most desires is to ignore them, and to deal with
others instead); he must give special considerations to those who
have left him in the lurch by striking.
Fantasy
One argument of organized labor is that its present powers - or
something like them - are responsible for past wage increases, and
are needed if wages are to continue to rise in the future. But this is
fantasy. Gains in labor productivity - because of better skills,
improved capital equipment and industrial peace - are the causes of
gains in take-home pay. This is proven by relatively declining wages
in the heavily unionized "smokestack" industries, compared with
increased salaries in the far less unionized computer, microchip and
other information and service industries.
As well, there is the fact that real wages have been rising for
centuries, while the earliest unions appeared only in the late 19th
century. So-called "unequal bargaining power" thus has nothing to
do with the matter.
Another argument for the status quo is that the "scab" is stealingthe job of the striker. But this is also the sheerest nonsense. A job is
an embodiment of an agreement between two
consenting parties - employee and employer. It cannot be the
possession of only one of them.
A properly revised labor code, then, would allow strikes in the sense
of mass refusals to work, or quits in unison. It would entrench this
behavior as a basic element of the rights of free men. But it would
limit union activity to this one option. It would thus prohibit all
interferences with the rights of alternative employees ("scabs") to
compete for jobs held by union members. It would end picketing,
and other such forms of threatened or actual violence.
Although many people think pickets are aimed at the struck
employer, they are actually an attack on competing workers
("scabs"). And just as our laws should not allow business firms to
picket the premises of suppliers, competitors or customers, no
group of workers should be able, by picketing, to forcibly prohibit
another group of workers - almost always poorer - from bidding for
jobs. A proper labor code would thus define a "legitimate union" as
one which strictly limited its actions to organizing mass
resignations.
Were this one basic change in labor relations to be made, then
society would have to rethink a whole host of unjust and unwise
elements now embodied in present labor legislation.
• Right to work provisions: These would be an infringement upon
the rights of employers and legitimate unions to sign mutually
beneficial and consensual agreements. Under the ideal labor code,
there would be no "right to work."
• Wage restraints: Should be ended. These would be an
unconscionable interference with the rights of legitimate unions to
engage in collective bargaining.
• Boycotts: Of whatever type, they are simply a refusal to deal with
certain people. But everyone has the moral right to choose his
friends and business associates. Any attempt to stop such behavior
would be a severe violation of our human rights. And this goes for
the secondary boycott as well.
• Applying anticombines legislation to unions: A favorite of union
bashers, this, too, would be inapplicable for legitimate unions.
• Imposing "democracy" on unions: It would be no more justified to
subject legitimate unions to "democracy" than it would be to impose
the secret ballot, government supervision of voting procedures, or
limited political activism on any other voluntary organization such
as the corporation, the faculty club, or the Roman Catholic College of
Cardinals.
• Back to work orders: This would be an infringement upon the
right of free men to withdraw their labor services. Fines, jail
sentences for labor organizers, imposed loss of check-off privileges
would be a completely unwarranted interference with the only
tactic at the disposal of legitimate unionism.
(WALTER BLOCK is senior economist at the Fraser Institute,
Vancouver.)
Mandatory Retirement
It may sound overly dramatic to say so, but mandatory retirement is
the mirror image of slavery. Under the slave system, its victims were
compelled to work, against their will; with compulsory retirement,
elderly people are prohibited from working, whether they wish to
continue or not.
The Canadian system of forcing a segment of our population to quite
the work force is now under attack, thank goodness. Ten doctors
and one teacher, in two separate suits, have launched cases in our
courts against being turfed out of their jobs. This policy would
appear to be a blatant legislated discrimination against people
above 65 years of age, and thus in violation of the equality section of
the Charter of Rights.
There are two arguments put forth in defense of this despicable
practice. One has been made in an editorial of a major Canadian
daily newspaper, which states, "In a broad sense compulsory
retirement is a socially useful practice: it provides relief from a
lifetime of toil for elderly workers." This is easily disposed of,
however, for if our senior citizens were really seeking a respite from
their labours, all they need do is take advantage of the
voluntaryretirement provisions in their contracts. Forced
retirement is hardly needed.
But there is a second response: coerced retirement clears the decks,
and provides job openings for younger workers. This is far more
insidious, because even though it is as fallacious as the other ~he
mistake is harder to see.
The error lies in the implicit premise that there is only so much
work in the world to be done. If the old folks hog some of it up, in
this view, why then there will only be that much less left for
everyone else.
But this is the philosophy of an economic crack pot. The blatant fact
of the matter is that the world's work is never done, and is limited
only by the visions and aspirations of mankind, which are endless.
As long as people want more economic goods and services than are
now available to them, and are willing to work for them -- and this
includes 99 and 44/ 1 OOs percent of all people who have ever lived
-- then there will be jobs to fulfill, more than enough to keep us all
fully occupied at least for the next few thousands of years.
Why, then, do we now have so much unemployment, especially for
teenagers and other young people? This is because government has
seen fit, for a variety of
!"C reasons, to pass legislation which has the effect of pricing
unskilled persons out of the job market. There is union legislation,
"fair wage" enactments, the minimum wage law, all of which
stipulate that people must be paid at levels which are often beyond
the productive capacity of young people. Hence, unemployment.
Marian Regional High School Closing
by Walter Block, The Fraser Institute, Vancouver, a.c
Now that the closing of the Marian Regional High School in Vancouver
has receded from the front pages, it might be appropriate to more
carefully consider the implications of this occurence from a public
policy perspective.
The decision to suspend the operations of this Catholic school for girls
has been widely condemned. The schoolgirls themselves have engaged
in a highly publicized protest at this action. The Catholic Secondary
School Teachers' Association has asked the Industrial Relations Council
to call a halt to this plan. According to a high profile leader of organized
labour, the man responsible for this determination, Archbishop James
Carney, is guilty of "the basest form of union busting."
A locail Vancouver newspaper columnist has gone so far as to
characterize Catholics who support their church in this regard as
unthinking sheep who blindly follow orders. "The church has long
taught good Catholics their place. Good Catholics belong on their
knees," were the exact words. It doesn't seem to have occurred to many
people that such a description could easily be interpreted as purposefully
spreading hatred against an identifiable group, behaviour condemned by
the anti hate-mongering Section 281.2 of the Criminal Code under
which several now well known bigots were charged.
Criminal or not, such a characterization, were it uttered against a group
such as Sikhs, Jews, natives, blacks or any other minority, would be
instantly condemned by all people of good will. Judging from the
absence of protest about these intemperate words, it would appear to be
open season on Catholics. For shame.
Why was this exceedingly unpopular decision made? According to an
announcement made by Archbishop Carney, the school was closed
because the church had lost confidence in the teachers' ability to provide
a Catholic education.
But there would appear to be more to this than meets the eye. After all,
when one loses confidence in one's employee, one does not commonly
close down one's domicile or place of business; one merely fires the
unreliable or unsuitable person, and hires another. When a someone
loses confidence in his attorney, it would be ludicrous to think that his
only option consists of giving up the lawsuit. Obviously, the more
rational alternative is to dismiss that lawyer, and retain a replacement.
Why then did not the Archbishop, having lost confidence in the
seventeen Marian High School faculty members, simply fire the lot of
them, and hire a replacement crew?
The reason is not hard to discern: the B.c. Labour Code hung like a
sword of Damocles above his head. The law compels him to "bargain
fairly" with a group of people he wished to have nothing further to do
with. In a word, it would have been deemed an "unfair labour practice"
for him to replace the seventeen teachers with people he could trust to
set a good example for the students, on a 24 hour per day basis.
The ordinary businessman who loses confidence in his work force rarely
closes up shop. Instead, he grits his teeth and carries on. Perhaps this is
what the Archbishop might have done had the work force in question
consisted of painters, electricians, plumbers or custodians. But when it
came to the molders of young minds (these children, remember, were
ultimately his responsibility), he could not tailor his beliefs to conform
to the niceties of the labour code.
Archbishop Carney was unwilling to compromise or "bargain." He has,
at least from his own perspective, no less than a sacred mission, which
leaves no room for negotiation. So, instead, he chose the only honorable
course open to him, which was to close down the school.
There are many who are quite understandably unhappy with this
situation. But they should seek the root cause of the Archbishop's
decision in an unwise, rigid and inflexible legal code, not as an arbitrary
whim of the man himself.
By in effect closing down a Catholic school which otherwise would
have remained open, union legislation contravenes religious freedom.
By forcing employers to deal with workers who no longer have their
trust, the British Columbia labour code also violates the law of free
association. True, rarely in our society does this denial of basic human
rights result in such an altercation. But then, rarely do we find in public
life a man of strong principle such as Archbishop Carney.
- 30Market Failure
by Walter Block, The Fraser Institute, Vancouver, B.c.
Many professional economists subscribe to what might be called the
argument from market failure. In this perspective, the market is
imperfect, and therefore the government is justified in intervening in
commercial activities, in order to improve matters.
But this view has not gone unchallenged.
First of all, any attempt to "justify" government regulation of business
on this ground violates a distinction which is axiomatic in economics,
that between the normative and the positive. Justification is by its very
nature a normative, i.e., value-laden procedure; but economics is a value
free subject. The point is, there is nothing in the value free corpus of
economic science that could possibly justify anyone doing anything.
Economics as such is limited to describing, explaining, understanding
and perhaps predicting; the justification of action is entirely outside its
realm.
Second, even if there were any such thing as "market failure," and even
if economics could somehow justify acting so as to obviate such a
phenomenon, it by no means follows that its mere existence would
justify state activity. For there is such a thing as "government failure"
(the inability of state bureaucrats to act efficiently, due to a lack of the
proper profit and loss incentives) and in. any given case the latter might
outweigh the former. That is, in ordinary parlance, the cure might be
worse than the disease.
Third, there has been no definitive demonstration that there exists any
real world example of market failure. The major candidates put forth by
the proponents of this doctrine include monopoly and pollution. Let us
briefly consider each.
Trusts, or combines, or monopolies are said to misallocate resources,
when they attain too great a degree of control over a given industry. But
economists cannot even unambiguously define an industry. There may
be only one widget producer in a given city, but if the whole province,
country or the entire world is defined as the relevant market the
concentration ratio (the proportion of sales, employment or profits
accounted for by the top few firms) can be made to appear very low.
Similarly, the more all inclusive the definition of the good in question,
the less "control" there can be. That is, one is far more likely to find
"monopoly" in the industry limited to colas, then in the ~ne which
includes all beverages, and yet there is no unambiguous way to define
the industry.
As well, the misallocative or dead weight losses described by some
economists are solely a product of their narrowly constricted
"blackboard" economics. Firms depicted in these models are timeless
and static, while those which earn a living in the real world are forced to
act in a dynamic setting. Nor is there an independent criteria (the
perfectly competitive result, beloved of the blackboard economist)
against which to measure the actual operation of a business concern
which might run afoul of combines legislation. Rather, the proponent of
such legislation must claim the contrary to fact conditional that were
such an industry to exist, it would have arrived at a different pricing and
quantity decision than the defendant accused of restraining trade. But
here the firm finds itself in a "Catch 22" no-win situation. For if it
charges more than its competitors, it can be found guilty of
monopolizing or profiteering; if its prices are lower, it can be fined for
"cutthroat or predatory competition." It cannot escape even if it proves it
did neither: for then it stands condemned of engaging in collusive
behaviour. Pollution is claimed as another instance of "market failure."
The charge, here, is that the business firm need only calculate the costs
of its inputs -- land, labour and capital -- and can safely ignore the costs
of smoke, wastes and pollution, since these are imposed on others. It is
for this reason, claim the critics, that the capitalist system is earmarked
by excessively dirty air and water and by noise inundations.
There is of course a failure of some sort that must be used to explain
these unfortunate circumstances. But it is not "market failure." On the
contrary it is "government failure," in this case the neglect of the courts
to carefully define and assiduously protect the property rights of those
victimized by polluters. Were the state to have awarded injunctions to
the plaintiffs in the early 19th century pollution or nuisance cases (as
they were called then), our entire experience with smoke prevention
devices and technology would have taken a far different turn than it has,
and our environment would have been far more adequately protected.
(For a Fraser Institute perspective that challenges the view that market
failure is responsible for our poor ecological conditions, see The
Environmentalists versus the Economy.)
There may well indeed be market failure in the sense that commerce is
conducted by flesh and blood creatures who are of course imperfect, and
hence given to error. But no one has shown the existence of any "market
failure" in the real world, apart from the fallibility of human beings.
- 30MARXIST PRIESTS I
by Walter Block
Senior Economist, The Fraser Institute
As Canada prepares itself for the visit of Pope John Paul later this
month, it might be appropriate to reflect on the relationship
between the Roman Catholic Church and a philosophy called
Liberation Theology.
What is Liberation Theology?
Liberation Theology is a view, held by some Catholic priests and
other clergy, that the poor may best be helped by combining the
teachings of Jesus Christ and, are you ready for this, Karl Marx?
Strange bedfellows indeed, but not to these ecclesiastics. Marxist
dogma such as immiseration and exploitation theory is used by
Liberation Theology to show how capitalists must of necessity take
advantage of their workers, rape the land and its resources, and
impoverish the poor.
But Liberation Theologians do more than merely weave theoretical
apologetics for Marxist-oriented revolutionary groups in the third
world. In addition to this intellectual aiding and abetting, they have
gone so far as to use their moral stature to support the active use of
arms.
However, it looks as if the days of the Liberation Theologians are
strictly numbered. A report has recently been issued by Joseph
Cardinal Ratzinger, Pope John Paul's chief heresy fighter. It
contained so blistering a condemnation of Liberation Theology that
one newspaper headlined its account: "Vatican blasts Marxist
priests".
Tomorrow, we shall reflect closely on this report.
This is Walter Block.
September 4, 1984
- 30 MARXIST PRIESTS II
by Walter Block
Senior Economist, The Fraser Institute
Last time we were discussing Liberation Theology, the view of some
Marxist- oriented priests that socialism, not capitalism, is in the best
interests of the poor people of the world. On the eve of John Paul's
visit to Canada we were reflecting on a condemnation of Liberation
Theology written by Joseph Cardinal Ratzinger, the Pope's chief
heresy fighter.
According to the report itself, it was written to "draw the attention
of pastors, theologians, and all the faithful to the deviations, and
risks of deviation…. that are brought about by certain forms of
Liberation Theology which use, in an insufficient manner, concepts
borrowed from various currents of Marxist thought."
This may come as something of a surprise to Liberation Theologians
right here in Canada. They have been loudly maintaining that the
Roman Catholic Church has been tilting to the left in recent years.
The Ratzinger reports continued "Let us recall that atheism and the
denial of the human person, his liberty and his rights, are at the core
of the Marxist theory".
The Church is of course still on the side of the poor, and in this
publication underlined the importance of becoming involved "in the
struggle for justice freedom and human dignity". It warned that
ideological deviation, such as Liberation Theology, tends inevitably
to betray the cause of the poor.
And it is so important that this message be heard by all concerned
with poverty in the third world. For as research by Fraser Institute
author Professor Peter Bauer of the London School of Economics
has shown, free enterprise, not socialist central planning, is the last
best hope against the starvation and human degradation now taking
place in the third world.
This is Walter Block
September 4, 1984
- 30 Medical Economics
by Walter Block, The Fraser Institute
A late breaking medical story is of great relevance to economics. It has
to do with strategies to defeat the AIDS virus, and it teaches us an
important lesson in economics.
Based on a conference of researchers held at Tamarron, Colorado, there
are two
approaches in the war against AIDS. The first is called random testing.
Already existing drugs, whether they have failed at, or succeeded in,
overcoming the diseases for which they were originally designed, are
pulled off the shelves and tested randomly for traits that could destroy
the AIDS virus. AZT, for example, is a drug which was initially
intended to cure cancer. It failed at that task, but after languishing for 20
years, it was reintroduced, and is now credited with extending the lives
of about 50% of AIDS'
victims.
The second technique is the creation of new drugs. This is often through
gene
splicing, in an attempt to attack the weak link in the life of a microbe. A
hot topic at the convention in Colorado was CD4, a hybrid that
combines human protein with an antibody, in order to better protect
itself against the ability of the AIDS virus to overcome either element on
its own.
What is the relevance to economics of all of this chemical and
pharmaceutical mumbo-jumbo? It is this. There is a widely held doctrine
amongst the dismal scientists called externalities. In this view, private
enterprise is unable to function, or is able to do so only very imperfectly,
if firms find themselves in a situation where they cannot charge fully for
benefits conferred on others. Then, according to a variant of this
doctrine called external economics, businesses are supposed to refrain
from producing these goods or services in the first place, or to do so in
insufficient quantities. This being the case, governments are justified in
taking up the slack with interventionistic policies, in order to make good
on this failure of free enterprise.
Telling the world at large of one's AIDS' research, however, certainly
confers benefits on others; mainly, in the present case, on one's
competitors. According to this received economic "wisdom," then,
conferences of this sort are not supposed to take place at all.
But they certainly do, and on a massive scale. At the conference in
Colorado, for example, Genetech Inc. presented a slide show on CD4,
for the intellectual edification of such competitors as SmithKline
Beckman Corp., Biogen Inc., Ortho Pharmaceutical Corp., and
GeneLabs Inc. Nor are these others backward in presenting the results of
their own research at this and many other such conferences.
How, then, can we explain this orgy of altruistic behaviour on the part of
some of the largest, richest and most profitable corporations in the
world?
Have the profit-seeking moguls of the pharmaceutical industry been
converted en masse to altruism by the likes of Mother Mary Teresa? Not
at all. As Adam Smith saw so clearly, even if many of his would-be
intellectual descendants do not, one can best promote the general good
by seeking one's own selfish interest.
How then does the drug industry, and its allies in the university
community,
benefit by pooling information on AIDS' research? These people gain in
a myriad of ways. Publicity for one. Genetech share prices, goodwill,
product acceptance etc., all undoubtedly rose with the announcement of
its important new CD4 findings. This cannot help but impact that firm's
bottom line in a positive manner. Further, even if this firm
C. is not the ultimate discoverer of the cure, its public announcement
may help it obtain a share of the patent.
Nor is it difficult to see self-seeking at work with regard to academic
researchers, who depend on the publish or perish syndrome for tenure
promotions, academic credibility and even Nobel prizes.
If ever there were a refutation of the operation of the externalities
doctrine, this
is it.
- 30 2
The New York Timeson Minimum Wages by WalterBlock
When -nived in New York City, I was an avid and faithful reader of the
NewYork Times.Sitting down with this newspaper was a daily ritual for
me. More, it was a central part of my intellectual life. Like a sort of
Rock of Gibraltar in reverse, I could always count on the New York
Timesto take a stand, from my perspective, on exactly the wrong side of
all economic issues. Whenever there was a question of government
intervention into the economy, there was the Times,urging greater and
greater centralized control.
Nowadays, as a resident of Vancouver, I only peruse this periodical in
fits and starts. Imagine my surprise and amazement then, when the
following editorial headline jumped out and hit me right between the
eyes: "The Minimum-Wage Illusion." Not only had these editorialists
finally, at long last, come out on the correct side of an economic issue,
but their analysis was both rigorous and professional. So much so, that it
is worth quoting at length:
"It's small wonder that politicians like the idea of raising the minimum
wage: improving the lot of the lowest-paid workers seems virtuous, at
no apparent cost to the public. But the rationale is half-true at best, and
the free price tag is false ....
"Without question (the minimum wage level of) $3.35 an hour is not a
living wage for a family.... A person working full time at the $3.35 rate
in 1986 would have earned $4,600 less than the poverty level for a
family of four. The question is whether legislating a higher minimum
would improve life for the working poor.
"It definitely would -- for those who still had work. But by raising the
cost of labor, a higher minimum would cost other working poor people
their jobs. The (U.S.) Department of Labor estimates that each 10
percent increase means that 100,000 to 200,000 jobs would be
eliminated or not created."
Here, the New York Timesputs its finger directly on the Achilles Heel
of the minimum wage argument: it creates unemployment amongst the
very people who are, ostensibly, its main beneficiaries. This law is
notlike an elevator floor which rises, pulling all along with it, on an
upward wage path. If we need a physical analogy, minimum wage
legislation is more akin to cutting off the bottom rungs of the
employment ladder; it consigns those whose productivity happens to fall
below the level mandated by law to an life of unnecessary idleness.
A moment's focus on the logic of this enactment can dramatically
illustrate the point. If an increase to $4.65 (the level now being
contemplated by the U.S. House Education & Labor Subcommittee) will
help the poor, why not go full out and raise it to $46.50? Everyone
knows full well that such a step would not only create havoc amongst
the present working poor, it would disemploy most skilled tradesmen as
well. Take the case of the middle class employee with a productivity
level of $30.00 per hour. Under our imaginary law, any employer
foolish enough to hire him would suffer an hourly loss of $16.50, the
difference between the minimum wage and the
worker's productivity.
But if this is true, it applies as well to the present wage minimum of
$3.65 per
hour. Although relatively modest, this level, too, restricts from
employment all those unfortunates (teenagers, school drop outs, the
physically and mentally handicapped, etc.) whose productivity
attainments fall short of $3.65 per hour. Thus, the Times,if it wanted to
be even more correct, would not content itself with merely opposing an
increasein the minimum wage level; it would call for the repeal of this
pernicious
legislation, root and branch.
But if the New York Timesdid so, there are many of us who might have
a heart
attack. As it is, it is almost too much to bear. Imagine, the Timestaking a
perfectly reasonable and responsible (if somewhat moderate) view on
matters
economic.
Is nothing sacred any more? If we can't rely on the New York Timesto
print all
the economic error that is fit to print, upon what can we rely?
- 302
The Financial Post
The Economy
August 17, 1985
Minimum Wage law no help to the unskilled
By Walter Block
VANCOUVER
TERRY SEGARTY, British Columbia's minister oflabor, has a
problem, and is resolved to do something about it in the fall.
British Columbia has the lowest minimum wage rate in the country $3.65 per hour _ and tremendous pressure has been placed upon
him to raise it at least to $4 per hour, the average level obtaining in
the other nine provinces.
At first blush, this would seem like a good idea, even one that is long
overdue. If, as its name implies, the minimum wage law can boost
wages up to whatever level is prescribed, that is to say set a floor
under incomes for the poor, then why not?
But a moment's reflection will show that this is a mirage. For
example, if prohibiting
Compensation below some arbitrarily determined level can really
enhance salaries, why stop at the paltry, mean and niggardly level?
Why not go for, say, $40 per hour, or even better yet, really reach for
the stars and demand that no employee be paid less than $400 per
hour?
The answer is obvious. To mandate that a skilled craftsman with a
productivity level of $25 be paid $400 is to invite disaster. Any
employer who complied would rack up $375 per hour in red ink.
Even at the more modest $40 per hour, any such firm would still
lose $ 15 per hour and thus be forced into eventual bankruptcy.
No, the reason wages are as high as they are has nothing whatever
to do with legal compulsion. It is because productivity is relatively
great in this country and because salaries tend to be equal to
productivity levels, that we enjoy our relative prosperity.
True, a minimum wage level of$4 would not threaten the livelihood
of the person who can produce $25worth of goods and services per
hour, but it certainly can put at risk the jobs of people with lesser
skills. For example, the employment of a person who can only create
goods valued by the market at $3.25 per hour would be obliterated
by a minimum wage level of $4 per hour.
How can we test the economic principle that high minimum wage
levels lead to relatively increased unemployment rates for unskilled
workers?
/-J
Manitoba .
Saskatchewan .
Ontario .
New Brunswick .
Nova Scotia .
Quebec .
Newfoundland .
British Columbia
Alberta .
Prince Edward Island
Unemployment rate for 20 - 24 year olds as % of rate for those
25and over
% 289 257 251 237 213 206 204 190 182
N.A
Minimum Wage
$ 4.30 4.25 4.00 3.80 4.00 4.00 4.00 3.65 3.80
3.75
One way is to calculate the unemployment rates of youthful
Canadians as a percentage of those of the more highly productive
adult employees, and compare them with the minimum wage levels
in each of the provinces. (For our table, we choose workers between
20 and 24 as our control because this is the youngest group subject
to the "adult" minimum wage law,)
The results afL\painfully obvious. Manitoba, with the highest
minimum wage level ($4.30) has an unemployment rate for its
young workers that is 1.9 times as high as that for the rest of the
population. Saskatchewan, with the next greatest level ($4.25),
weighs in with the second biggest relative unemployment rate for
youth - I .6 times as high as the rest of the population. And at the
bottom of the pick in terms of the disenfranchisement of their young
people, come British Columbia and Alberta with two of the country's
lowest minimum wage levels.
Are you listening Mr. Segarty?
WALTER BLOCK is Senior Economist/or the Fraser Institute,
Vancouver .
..
SATURDAY, JANUARY 111986
It hurts those it would help
MINIMUM WAGE PRICES THE YOUNG OUT OF JOBS
WALTER BLOCK
... senior economist with the Fraser Institute, a Vancouver economic
think tank.
Economists well know that such laws exacerbate unemployment for
teenagers. A recent survey by the prestigious American Economic
Review showed that members of the profession agreed, by an 87.7
per~nt to 12.3 per~t margin'L with the
proposition that "a minimum wage increases unemployment among
young and unskilled workers." \
_---------~~~-~ :t)f . , '5
This finding has ~olated very w..®into the economic mainstream ~
within ~ univers~ the business world, and the thinktank
community. Even introailcf6iytextbooks, no matter what the
"'political bias of their authors, typically include a diagram showing
that when wages are set by law at a level above equilibrium,
unemployment for the less skilled will ensue.
But the knowledge of the deletrious effects of mandated minimum
wages has not yet seeped into the consciousness of the public.
Ministers, high school teachers, journalists, social workers,
editorialists, and other well-meaning folk have been appalled at the
fact that the minimum wage level is so low. In Canada, it ranges
from $3.65 in B.C. to $4.50 in Saskatchewan, and the reaction of
many people is: 'How can anyone live on such low pay?"
If we probe a bit more deeply, however, the case against this
legislative enactment becomes easier to see.
Por the minimum wage law does not compel an employer to hire a
worker at any given wage rate. Rather, it only stipulates that an
e"mployee cannot be put on the payroll unless he is paid at least a
certain specified hourly wage.
The loophole is wide enough to drive a truck through: if the law
commands that a low-skilled person be paid, say, $4 per hour, and
his productivity level is only $3 per hour, all the firm need do is take
on several highly skilled employees (and some sophisticated
machinery) instead, and avoidfloilc(! tin FIA~'Wthe unskilled
workers it would otherwise have hired.
How can the economists' contention about the effect of minimum
wage laws be tested in Canada?
One way would be to compare the unemployment rates in each
province with the\minilTlu~ ;-vage levels in force. This is done in . ."
columns (2) and (3) of the accompanying table. M·,"fl/ACtc.:
Mc;,\.\\,-l!,V \. h \,-v,}-.\r<...
But it is very difficult to comprehend the concern of the eco£omists
110m this data.For example, Saskatchewan and Manitoba, vJV\.'v
-with the highest minimum wage levels in the country ($4.50 and-
;$4.$0 per hour), have the lowest rates of unemployment (both-Jl:t
5.7 per cent), whi~British Columbia and New Brunswick, with the
nation's lowest minimum wages ($3.65 and $3.80 per hour) register
some of the highest rates of unemployment (13.3 per cent and 13.9
per cent in October
1985).
There is a grave problem with this test, however. The
unemployment effects of minimum wage legislation is visited
almost entirely on the unskilled.l~~t, young people. The victims are
teenagers, especially males, people in their early twenties, school
drop-outs, those with little formal education, and those lacking the
years of on-the-job experience that alone can make up for this
deficiency.
In contrast, the unemployment that attacks an entire province is the
result of a complex welter of phenomena: export markets,
government spending patterns, seasonality (given present
unemployment insurance institutional arrangements), regional
imbalances, and so on.
If the minimum wage levelis doubled from $4 an hour to $8 an hour,
this will have very little effect indeed on a person earning
$22 an hour. Wit, shoald-it?1.
Ct0l'
But think ofwhaiijiil do toa relatively unskilled laborer who can
produce at the rate of only $5 an hour. If the firm is forced to pay $8
an hour, it will lose $3 for every hour the worker is on the payroll. .----.c~ L.
This is therefore the equivalent to a sort of black death for th~t
prospects of very young people.
Attempting to discern the effects of minimum wage levels based on
the overall unemployment rate in a province is thus like trying to
gauge the effect of smoking on the health of the total populace.
The problem is that just as the evils of tobacco usage are limited to
those who suffer from cancer, emphysema, and other disorders of
the lungs, ~ have .lillIe or nothing to do with QlllilF iRQl:lIgenee in
ttthietie eSHtests, QF aging, gr mgtgF vehicle .acOoi'Olelllii, QF etHer
SWQA Q?Jlfi@S ef~othe unemployment effects of minimum wages
are all but confined to young people, and have virtually nothing to
do with the joblessness of their elders.
How can we fashion a test of the Canadian data that takes
cognizance of the fact that young people, not the entire population,
are victimized by a minimum wage, enactment?
This is done in, columns (3) and (4) of the table. In column (4) we
calculate the proportion of unemployment suffered by males aged
20-24 - the youngest age group subject to the adult minimum wage
level listed in column (3) _ relative to those 25 years and older.
And here the results of minimum wage legislation is clear for all to
see. Those provinces that mandate the highest wage levels ($4 and
above) impose the greatest unemployment burdens on their young
people, while those with the lowest legislatively enacted wage levels
(Alberta, New Brunswick, and British Columbia) have the three
lowest unemployment rates for those in their early twenties.
Source: Statistics Canada, Labor Department, October 1986
Throwing out the moneylenders
Almost 2,000 years ago, when the moneylenders were thrown out of the
temple, it was done bodily, according to published reports of the time.
Nowadays, when religious leaders plan to emulate the deed, physical
force will not be utilized; rather an attempt will be made to outcompete
and undersell them.
The modern equivalent of the moneylender is the tax discounter, who
gives the citizen the tax refund due him -- on demand. With this service,
no waiting for the slothful Revenue Canada is necessary, but the
discounter charges a fee of 15%.
It is this payment which sticks in the craw of Rev. John Cash ore,
minister at First United Church in Vancouver. According to this spiritual
leader, churches and charitable organizations should band together to
provide tax discounting services, and do it for free! With the help of
volunteer accountants and other office workers, the Cashore plan would
offer the poverty-stricken taxpayer half ~ refunds immediately, and the
other half after the revenooers get through picking the bones of the tax
return.
There are two flaws in Reverenj Cashore's attempt to undercut the
moneylending tax discounters. First, why offer only 50% of the refund
immediately? Why not match the 100% given by commercial
enterprises? This drawback makes the church initiative less attractive to
the poor than it need be. (Of course, it protects the viability of the plan,
as it requires on;:go% of the funding.)
But the second difficulty is far more basic. On what logical grounds can
tax discounting be distinguished from all other goods and services
provided on the marketplace? That is to say, why toss only
moneylenders out of the temple? Consistency requires that church
leaders who share Reverend Cashore's ideology oppose allcommerce.
For example, if it is objectionable to "take advantage of the poor" by
giving them only 85% of what they would in any case receive in due
course, is it not also "exploitative" for the middlemen to mark up prices?
For the retailer -- especially in a poor neighborhood -- to raise prices to
the consumer far above those he must pay to the wholesaler? For the
landlord to charge rents to those who cannot really afford them?
This being the case, will the First United Church go into competition
with middlemen, retailers and landlords? Perhaps with real estate agents,
stock market speculators and commercial advertisers. For make no
mistake about it: Reverend 'I
Cashore's mission, it you scratch its surface, is really an attack on the
free enterprise system -- the one responsible for a standard of living and
welfare despera tely desired by the rest of the world.
Newfoundland Labour Strike
by Walter Block
The labour scene in Newfoundland is heating up once again.
This time it is the Newfoundland Association of Public Employees
(N.A.P.E.) which finds itself on the barricades.
This 1,700 member union is engaged in a struggle with the
Newfoundland Transportation and Public Works Department over a
demand that their $6 to $8 an hour wages be lifted to match those which
prevail in other provincial ministries. The organized workers are also
campaigning against Bill 59, a law which declares essential (and
therefore prohibits from striking) a proportion of all public sector
bargaining units.
The altercation over these issues has turned bitter. The strike has been
declared illegal, and several N.A.P.E. officials have already been jailed
for persisting in it. The likelihood is that more imprisonments will
follow. John Fryer, president of the 250,OOO-strong National Union of
Provincial Government Employees, vows that his group will fully
support the local union. A member of the Canadian delegation to the
International Labour Organization, Mr. Fryer has characterized Bill 59's
strike limitation provisions as a "threat to the rights of free people in a
free society," and intends to raise this issue with the LL.O. Tempers are
short, and all that is needed for a "made-in-Canada" version of the
Arthur Scargill led British miners strike, is a spark hitting the dry tinder.
This Newfoundland labour fracas raises an important question which
has application far beyond its provincial borders. If we sit back and look
at the issue with a some historical perspective, we can see that this
episode does not really fit the classical economic model wherein
business and labour meet in head-on confrontation. In that scenario, the
capitalist was presumed to be a profit maximizer, and therefore
unwilling and his employees. The government was thus brought play an
unbiased and intermediary role.
But in the present Newfoundland controversy, business has no part at
all. We rather find the forces of unionism in confrontation with
government, the institution presumed by the classical theory to be above
the labour-management struggle. It is almost as if one hockey team were
now trying to overcome not its opponent, but rather the referee, and the
latter, instead of insisting that its role be respected, has entered the fray
with alacrity. In such a case, who can act as the non-partisan umpire?
The answer is, No one! (The courts and even unable to deal fairly with
into the picture, in order to judges in this country are correctly seen as
part and parcel of the government which pays their salary, and through
whose good offices they are appointed.) This is why labour strikes
against government are so threatening to the very social fabric upon
which civilization rests, in a way that business-union quarrels are not,
and can never be.
What can be done about this? We must first recognize that the classical
theory was predicated upon the state truly being above the fray, apart
from the hurley burley world of commerce. But once the modern
government entered the realm of business, with its panoply of crown
corporations and product-oriented ministries, a fatal contradiction arose.
It was as if the hockey referee picked up the stick, and tried to knock the
puck into one (or both) of the goals, all the while insisting that he be
allowed to keep the whistle between his lips, and that the two teams
respect his position as umpire. The point is, the two roles are simply
incompatible. Government can be the referee (the classical-liberal
definition of this institution), or government can be a player, but it
cannot (successfully) be both. One or the other must go.
When put into these terms, it is painfully obvious which way our society
must move. There is only one choice if we are to avoid the chaos
involved in having either no referee at all, or what is almost worse, a
referee who 'is not respected because correctly perceived as party to the
altercation. And that of course is a move toward privitization:
government must be encouraged to sell off crown corporations in a
wholesale manner not yet even contemplated ~he ~sent
admjnistr~±on;the public sector must divest itself on a massive scale of
its lands, businesses, commercial undertakings, and those ministries
involved in competing with the private sector; the apparatus of the state
must cease and desist from attempting to provide goods and services
whose manufacture could be organized through the marketplace.
Then, secure in the knowledge that it can at last play a truly judiciary
role in labour management relations, government can in good
conscience ban public sector unions. (This would not mean that
individual c~vil servants could not quit, or even that they could not quit,
or threaten to do so, en masse; it would only mean that society would no
longer grant to these institutions special privileges to picket privileges
denied all other citizens.) First of all, there would no longer be much of
a public sector left for unions to organize. And what of those functions
which would still remain even after a wholesale privitization (police,
fire, army, courts, welfare, etc.)? Here, we could at last approach the
classical model where government, could be sharply distinguished from
business enterprise: the latter might be seen by some as having interests
diametrically opposed to organized labour, but this would no longer
apply to the former.
In this way respect for the refereeing process in Canada could be
resurrected. In this way, and only in this way, can our nation be spared
some of the agonized labour Strife suffered by many of our neighbors.
- 30 North Van Chickens
The district council of North Vancouver, a bedroom community for
B.C.'s largest city, has just dealt a low blow to 16 year old student,
MartIn Wouters.
This young man, a budding farmer now, and perhaps a world-A
agriculturalist in the future, has been raising chickens in his home as
pets. So far, his "flock" amounts to a grand total of eleven birds.
But young Mr. Wouters has reckoned without the district council, which
has ordered him to get rid of his burgeoning enterprise. The young
criminal, it would appear, has had the effrontery to run "a fowl" of North
Vancouver's far-sighted and well-conceived zoning by-laws whitf'l
prohibit, among many other things, the raising of farm animals.
Well, actually, the law under which this juvenile delinquent was first
prosecuted was ruled by a provincial court as "too ambiguouS!...(i So
council had to get back to its drawing board and come up with a
legislative enactment aimed specifically at this youthful malefactor,
Martin Wouters. And, by 5-2 vote they did that, ensuring that no
chickens can be kept anywhere.
(These politicians, in a sort of Keystone Kops fiasco, may have gone too
far. For according to Mayor Marilyn Bake, a supporter of Martin's
endeavours, the law as it now stands would prohibit the municipality's
own Maplewood Childrens' Farm - a district enterprise which, horrors!,
features cows, goats, rabbits, and numerous - including the always
dangerous aforementioned chickens.)
What's behind all this barnyard furor? Would North Vancouver, an elite
community where an undistinguished bungalow on a teeny lot
commonly sells for well in excess of $IOO,OO~be overrun with farm
animals but for this zoning bylaw? Is district council like the boy with
his finger in the dike, preventing North Vancouver from vanishing
below thousands of tons of animal excrement?
In a word, No. indeed, the very idea is ludicrous. The marketplace
imposes a sort of zoning of its own, making the contrived political
variety unnecessary. As shown by the Fraser Institute study, Zoning: Its
Cost and Relevance,low valued uses can never bid away land from
highly valued ones. It is the very intensive land uses, for housing, which
always push around the extensive ones, like farming. It is never the
other way around.
When Martin Wouters grows up into a full fledged chicken rancher
(assuming that his run-in with Big Brother hasn't soured him forever) he
would be daft to even try to locate in North Vancouver. The land costs
would simply be too expensive. He would do far better to locate in the
less well populated ares of the province __ where all the other farmers
can be found.
That is, of course, if he can afford to purchase not only the birds and
coops, etc., but the necessary government permits. But this is another
story, entirely. (One that has been covered in, The Egg Marketing
Board!,-;;;.blishedby the Fraser Institute.
Olympic Standings: What do they mean?
by Walter Block, Fraser Institute
Many people in the west have been emotionally cast down by the
results of the Seoul Olympics. They see the final standings as an
indication of the success of the political economic systems of the
various countries which were represented, and they do not like the
implication that the communist regimes of the U.S.S.R. and Eastern
Europe seem to be more viable than those of North America and
Western Europe.
It was bad enough that the Soviets trounced the U.S. team. Even
worse was the fact that the relatively small country, East Germany,
also nosed out the Americans. To add insult to injury, The
Bulgarians, Chinese and Romanians outperformed the British,
French, Australians and Canadians, and others who are part of the
western ambit.
One way to confront this wailing and gnashing of teeth is to realize
that the Olympics Games are just that: games. As such, they do not at
all amount to an objective assessment of the accomplishments of a
nation, and the desirability of living there. If proof be needed of this
obvious point, one need do no more than compare the results of the
two Germanys. The East Germans, although far fewer in numbers,
garnered 102 medals compared to the 40 earned by their
counterparts in the West. Yet any comparison of the two societys, on
the basis of living standards, freedom, G.D.P. etc., will show the West
to be vastly preferrable to the East. It was not the Federal Republic
which built the Berlin Wall to keep their people locked up inside,
after all; on the contrary, this "honor" belongs to the so called
Democratic Republic of Germany. There are no people who flee
from West to East at great risk of life and limb; no, the one way
traffic is all the other way.
The poorer showing of the western industrialized democracies
may also be explained by the hypocritical "amateur" rules which,
although on the way out, and good riddence to them, still continue
to bedevil the Olympic games. According to the popular mythology,
there are no Soviet athletes who are professional, and thereby
excluded from the games. But the same does not obtain in the U.S. Is
there any doubt that were such top flight American professional
athletes as Mike Tyson, Sugar Ray Leonard, Michael Jordan, Larry
Bird, Magic Johnson, Reynaldo Nehemiah allowed to compete, that
the American totals would have been higher, and those of the
Soviets and East Germans correspondingly lower?
As well, there is a great bias in the choice of sports represented at
the Olympics.
The U.S. is preeminent the world over in football and baseball, and
yet these activities were not represented in Seoul at all. The worst
team in the N.B.A. would blow the representative of any other
country off the court, and yet this sport accounts for only one set of
medals. In contrast, there are many minor sports with virtually no
adherents in the U.S., which offer literally dozens of medals.
There is yet another sense in which medal standings are a poor
indication of the athletic prowess to be found in the nations of the
world; they have not been controlled for population. This is
absolutely crucial to any appreciation of the true accomplishments
of a nation in this regard. For little credit should be given to a large
country which piles up many victories -- but only through sheer
force of numbers.
In the accompanying table, the medal harvest of each country has
been divided by its population. The number of medals per
population is given in column 2, and the new ranking in column 3.
Columns 4 and 5 show the actual number of medals won, and the
ran kings derived from these figures. Column 6 shows the number of
ranks higher ( +) or lower (-) a country moves as a result of
comparing the adjusted to the unadjusted medal count.
A perusal of this table yields some surprising results. East Germany
still retains its rank as the second most prolific athletic country in
the world, but the Virgin
o Islands, not the Soviet Union, has captured the to}? spot. Other
small countries vaulting into the top ten include
Netherlands Antilles, Djibouti, Surinam and Norway.
The U.S.S.R. still outshines the U.S., but both of them appear in the
middle of the pack, in 25th and 28th places, respectively. So much
for the vaunted athletic positions of both these two super powers.
Games, it would appear, have very little mdeed to do with the armed
might of a nation.
Besides these two, other major losers in terms of ranking are the
relatively large countries China, Japan, Brazil, Poland, U.K., Italy,
Belgium, Turkey, Mexico, Spain and Canada. All have lost at least 10
ranking places from the new system.
Adjusting the medal count is also in keeping with the common sense
notion that people from similar and neighboring countries tend to
have comparable sports prowess. In the adjusted ranking scheme,
the South American countries of Chile, Argentina, Peru, Brazil,
Colombia and Mexico are all grouped in the 40th to 46th ranks.
Similarly, the Scandinavian nations of Sweden, Norway, Finland and
Denmark are all to be found within the 9th to 16th positions. The
Iberian countries Spain and Portugal occupy similar ground (37th
and 39th positions) and are closely Joined by other European
souther Meditaranians such as Greece (38th), France (30th) and
Italy (31st). Likewise, we can see that the inferiority complex that
Canadians have long held with regard to the U.S. is entirely
unjustified. These countries are alike as two peas in a pod, holding
down positions 28th and 29th.
The Implications that follow from this analysis are sharp and
dramatic. There is simply no reason for either superpower to invest
millions of dollars in a quest for athletic excellence -- at least if their
goal is a demonstration of the superiority of
their respective systems. They are the leading two countries of the
world in terms of armaments, and one of them has an economic
system the other is now in the flattering process of copying. But as
far as athletics are concerned, both are at best
mediocre.
'.
Medals Po Per Ca ita Actual
e
Rank .±.L
ulation
Rank
Medal
Country
Vigin
1030.9
Islands
East
German 610.5
y
N.
431.0
Antilles
New
409.3
Zealand
Bulgari
401.0
a
Djibouti 384.6
Surina
284.0
m
Hungar
214.7
y
Sweden 132.2
Norway 122.2
Romani
111.3
a
Australi
96.0
a
Jamaica 95.4
South
88.1
Korea
Finland 83.5
Denmar
78.0
k
Netherl
68.9
ands
West
German 65.9
y
Switzer
62.8
land
Mongoli
62.6
a
Kenya 58.7
1 1
45
+44
2 102
2
3 1
42
+39
4 13
16
+12
5 35
5
6 1
47
+41
7 1
37
+30
8 23
10
+2
9 11
10 5
18
24
+9
+14
11 24
8
-3
12 14
15
+3
13 2
31
+18
14 33
6
-8
15 4
26
+11
16 4
25
+9
17 9
20
-3
18 40
4
-14
19 4
28
+11
20 1
49
+29
21 9
20
-1
Yugosla
53.5
via
Costa
53.4
Rica
Czechos
52.3
lovakia
U.S.S.R. 50.2
Poland 45.6
U.K.
42.9
U.S.
41.2
Canada 41.0
France 29.4
Italy 24.7
Belgiu
20.3
m
Senega
19.7
l
Morocc
14.7
o
Austria 13.2
Japan 11.9
~ain 10.6
reece
10.2
Portug
10.1
al
Chile 8.8
Argenti
7.1
na
Peru 5.8
Brazil 5.0
Colom
4.7
bia
Turkey 4.4
Mexico 2.9
Iran
2.9
China 2.7
Thailan
2.2
d
Philip
2.0
pines
Pakist
1.1
an
Indone
.6
sia
36
37
38
22 12
17
-5
23 1
39
+16
24 8
22
-2
25 132
26 16
27 24
28 94
29 10
30 16
31 14
1
12
9
3
19
11
13
-24
-14
-18
-25
-10
-19
-18
32 2
33
+1
33 1
44
+11
34 3
29
-5
35 1
14
4
1
35
14
27
48
-22
-10
+10
-3
39
1
36
40
1
38
-2
41
2
32
-9
42
43
1
6
43
23
+1
-20
44
1
46
+2
45
46
47
48
2
2
1
30
34
41
7
49
1
52
+3
50
1
51
+1
51
1
50
-1
52
1
40
28
POETIC JUSTICE?
February 18. 1986
Dr. Milton Avol, 61 years old, was forced to live in one of his own Los
Angeles tenement buildings. He was ordered to take up 30 day residence
in a slum dwelling by L.A. municipal Judge Veronica McBeth -- as
-15
-12
-6
-41
-12
punishment for repeatedly failing to clear up building and safety
violations on his property.
Hundreds of landlords have been "punished with fines and by jail
sentences for similar acti vi ties. But the plight of this California
neurosurgeon was deemed newsworthy because the penalty had the
appearance of imposing poetic justice on the perpetrator. What could be
more fitting than to force a slumlord to live in one of his own rodentinfested buildings, amidst the peeling plaster, leaky plumbing, broken
glass, and other accoutrements of substandard housing?
Actually, Judge McBeth had offered Dr. Avol his choice of "house
arrest" for a month, or 30 days in jail. When he hesitated, the judge
chided him, and asked if his rented units were really worse than the
penitentiary.
Although it may appear to many that the slumlord received his just
deserts in this case, that conclusion is far from obvious.
First of all, would we really be willing to generalize from this example?
That is, does society really wish to similarly penalize the purveyors of
other second-hand, shoddy and shabby goods and services? Examples
which immediately spring to mind are used cars, old clothing, secondhand books. Even people who administer food banks are guilty of
dealing in low quality merchandise. The answer is obvious. It is
ludicrous to even suggest that any of these other dealers in second-hand
goods be subjected to legal harassment. .•. Yet by singling out
.slumlords, we discriminate against the seller of only one kind of
service.
Secondly, the result of this law, and of quality control legislation in
general, is to reduce the supply of the item in question. If fines ~nd jail
sentences are imposed on second-hand clothes dealers, or if they were
forced to wear there own products, it is easy to see that they would have
every incentive to leave the business.
In this regard we may ask, is the slumlord, on net balance, a benefit or a
detriment to his tenants? Clearly, he is a benefactor. People are willing
to patronize the establishment of a Dr. Avol only when this represents
their best opportunity, given their resources. If these tenements, and
their landlords with them, somehow vanished in a puff of smoke, the
tenants would certainly be worseoff. Under such an assumption, they
would have to settle for those opportunities previously rejected in favour
of the slum dwelling they had originally settled for. They may have to
deal with landlords of the ilk of Dr. Avol because of their straightened
circumstances. But the owner of slum property is hardly responsible for
their poverty.
And last but not least, the rental agreement between Dr. Avol and his
tenants represents a "capitalist act between consenting adults". It is a
form of paternalism, deeply offensive to the personhood of bothparties,
to set this contract asunder through quality control legislation.
We do not have so little substandard housing in the western
industralized democracies because of such enactments. All the laws in
the world -- in the 18th century -- could not have achieved modern
housing conditions. We are now so well-housed because our system of
economic freedom allows for growing income and wealth. This is why
most of us can afford spacious, well-built and maintained dwelling
space. Not because of legislation under which Dr. Avol was subjected to
"house arrest". \
Pravda, Canadian Style
Did you ever hear the expression "Don't toot your own horn?" All it
means is that one should not brag about one's own efforts, but
rather leave the telling of the glad tidings to others, who may be a
bit more objective.
This particular truism hits home with a vengeance in British
Columbia, where )\" s the Social Credit government/\ engaged in an
unseemly bout of self-congratulation, by publishing the back-patting
"B.C. Government News". This newspaper is chock filled with such
critical and probing articles as "A Budget for Renewals," "Major
Highway Projects," "Excitement Building for Expo," and "Good News
for Forestry."
According to Provincial Secretary Jim Chabot, this venture into
journalism was necessary because Vancouver newspapers have
failed to present the "true facts" about government in B.C. to the
people. In Chabot's view, the people have the "right to know" how
marvelous their government is. Since the local newspapers have not
yet quite seen fit to present the situation in quite this light,
government must intervene into the newspaper market. Case
closed.
But this arrant nonsense was exposed by MLA Gordon Hanson
(Victoria), the New Democratic Party's provincial secretary critic,
who for once in his life opposed a government foray into the private
sector. Said Hanson, "In a democracy, we do not want an official
organ like Pravda."
Precisely. The media performs a watchdog role in a free society. A
government newspaper may not be a contradiction in terms, but it
is surely in violation of the principle that one not be one's own
judge. ~
But this logic can be carried on much further. If the ~~. Government
N r. ([t) ". ". f . h h h (S d' ) bi d
ews IS an exer cise In presenting In ormation t roug t e ocre s own
lase
r•.... ----------------------------_._._--_ ..
2
political filter," to use Mr. Hanson's very wise words, then how
much more true is this of the Canadian Broadcasting Company:
CBC, too, is a government owned, managed and controlled media
institution. As such, it too is an abomination in a democracy.
If we oppose the "B.C. Government News" in Lotus Land, and Pravda
in the Soviet Union, and we should, we should, then we must as well
express our dismay at CBC as the official voice of the Canadian
Government.
The sooner CBC is disbanded, root and branch, and salt sowed
where it once stood, the sooner can Canada once again enter the
family of democratic nations.
"Primum non nocere"
by Walter Block, The Fraser Institute, Vancouver, B.c.
The basic premise of all modern medical practice is the latin expression
"Primum
non nocere." It means "First do no harm." This is an astoundingly
important maxim,
and it is indelibly etched onto the thought processes of all medical
students. It urges doctors and all health professionals to be prudent and
conservative with the patients in their care. Physicians must of course
take risks. And being only human, they must of necessity fail from time
to time in their efforts. But the principle of
"Primum non nocere" still stands like a moral beacon, imposing a level
of behaviour
on doctors that would otherwise simply not be there.
The same, unhappily, cannot be said for politicians, civil servants,
judges, bureaucrats and regulators. They, too, are often capable of
achieving great benefits for the public. After all, without government,
life would be "nasty, brutish and short," in the words of Thomas
Hobbes. There would be a war of all against all, and the weak, and even
many of the strong, would perish.
But the state can also impose great harm on society. There are hundreds
of instances where government acts in diametric opposition to the basic
laws of economics -- or perhaps even worse, as if they did not exist. For
example, it is a
basic staple of economic analysis that the setting of price maxima leads
to a shortfall in supply, and to excess demand. This insight has even
percolated down into the introductory textbooks on the subject, where
rent control is often used to exemplify
the evil.
The point is, when rents of residential dwelling units are precluded from
reaching their market levels, business firms will tend to divert their
investments elsewhere: to commercial or industrial real estate, to home
ownership units, to shopping centres, or to fields even further removed.
As a result, shortages, low vacancy rates and even homelessness occurs,
coupled with excess store and office capacity, where rent controls do not
apply.
Sometimes a rent control provision exempts new construction, but this
posture too is fraught with difficulties. First of all, already existing
buildings (which comprise the overwhelming majority of units at any
given time) deteriorate as the landlord's incentives to make repairs
diminishes. This process can take decades to ruin a city's housing stock
(i.e., the South Bronx) but once it is put into motion it is exceedingly
difficult to stop. Secondly, if rent control is such a good idea, how can
its proponents advocate its limitation? If they really believed in this
legislation, they would urge expansion, not contraction. And thirdly,
investors are usually too canny to be taken in by a city's protestations
that controls will not apply to new stock. They have been burned in too
many places, on too many different occasions, for this provision to
appear credible.
Notwithstanding the above considerations, numerous provinces in
Canada (e.g Ontario, Manitoba) still maintain their antiquated system of
rent controls.
Another violation of the "Primum non nocere" rule is minimum wage
legislation.
Here, a price floor, not a ceiling, is set. Several provinces have set $4.00
per hour as the minimum allowable pay scale; others have gone higher.
At first blush, this would appear to be a beneficial legislative enactment.
Many people think it will actually raise the wages of ill-paid workers.
However, as elementary price theory suggests, the effects are
deleterious.
For the law does not mandate that anyone must be hired at a wage of
$4.00 per hour. On the contrary, it only requires that an employer will be
subject to fines and/or a jail sentence if he pays an employee less than
this hourly rate. Consider the plight of a worker whose productivity
level is $3.00 per hour. It is extremely unlikely that such a person will
be hired, or be able to maintain his job slot -- for the employer will lose
$1.00 for every hour he is on the shop floor. Rather than
_ raise this person to the $4.00 level, the minimum wage law will likely
preclude him from employment in the first place.
If this is hard to see, imagine the effects of a minimum wage law
requiring an hourly payment of $40.00, not $4.00. (This might be
"justified" on the ground that if by mere dint of legislative pen, salaries
can be pushed up to $4.00, why not continue to the process to $40.00, or
even beyond?) It is clear, however, that any province enacting such a
law would soon suffer almost total and complete 100% unemployment.
Virtually all employers would leave, and one the ones who remained
would be forced into bankruptcy.
But this is no less true for lesser skilled workers. As elementary
economics makes clear, setting a price above market value will only
succeed in creating a surplus. This is called unemployment, and it is
largely for this reason that teenage joblessness is twice as high as the
adult average.
Were economic planners to be bound by the rule of "Primum non
nocere," our society would not now be burdened with by rent controls
and minimum wages laws.
- 30Privatize Social Security
by: Walter Block, The Fraser Institute, Vancouver, B.c.
Several important anniversaries have occurred during 1989. This
year is the bicentenary of the French Revolution and the
demicentenary of the start of World War II. With all the public
attention focused on these two dates, another important event has
slipped by virtually unnoticed. It was in 1889 -- 100 years ago -- that
a public sector pension plan was first implemented.
In the spring of that year Prince Otto von Bismarck, the Iron
Chancellor of the
old German Reich, introduced a compulsory insurance pension
scheme to the Bundestag, or parliament. It was enacted in the
summer, and a reign of paternalism was borne, one from which the
world has not yet recovered.
There are several important differences between governmental
social security plans and the private variety. For one thing, the latter
is voluntary, but not the former. In the one case, people are treated
as adults, able to make decisions for themselves, to learn from them,
and to take on themselves the responsibility for their actions. In the
other case they are treated as children -- to be ordered about, for
their own good.
In some sense, it may be no accident that this scheme was first
introduced in Germany. For it is entirely incompatible with the
traditions of democracy and liberty upon which western civilization
is predicated. If people cannot be trusted to make pension
arrangements with private insurance firms, or to save for their own
old age, how can they be relied upon to act as mature citizens? It is
entirely illogical to claim, on the one hand, that people are too
morally and intellectually feeble to take care of themselves, but able,
somehow, to elect leaders who will make up for these manifest
deficiencies.
Another drawback is that governmental social security amounts to
no more than a vast Ponzi scheme. Pension payments nowadays are
made not with money derived from the contributions of the
recipients when they were young, wisely invested and hence
augmented as in the case of market plans; rather, they are based on
funds mulcted from new workers. If these new entrants somehow
were able to refuse to join the plan, there would be no money with
which to pay the retirees. Then. the fraudulent nature of the plan
would be exposed for all the world to see.
When Ponzi schemes are run through private channels, the
government brands the perpetrators as criminals, and summarily
claps them into jail. Is not sauce for the goose sauce for the gander?
To encarcerate private citizens for acts allowed to government
bureacrats is surely to bring about disrespect for law and order in
general.
As well, dependency on the state is engendered by public social
security, and the breakup of the extended family encouraged. In the
good old days before the statist Bismarck began his sorry career,
parents gave to their children in the well founded expectation that
their progeny would care for them in their twilight years. This
pattern of support was the bulwark of the extended family. But
when the state thrust this ill-conceived plan upon society, incentives
became all turned around. Why support our elderly parents when
the all-loving government will do it, with our own tax money?
Anyone who persevered in this tradition would pay twice: once for
his own relatives, through voluntary contributions, and another
time for the parents of other people, through taxes.
In contrast, private social old age retirement insurance has none of
these problems. People are not artificially encouraged to join them,
at the point of a gun. Nor are they "for free," that is, financed from
compulsory tax payments. It is only when the benefits of these plans
outweigh their out-of-pocket costs that people will join.
So let us "turn back the clock" to a more just age and repeal this
pernicious system. At the very least, let us resolve to follow Barry
Goldwater's advice and make the system voluntary. Then and only
then will adult citizens of the realm be treated like the responsible
people we would like them to be.
- 302
Recycling
. by: Walter Block
The packaging industry has come under fire from outraged ecologists.
Their complaint? While the purveyors of bags, boxes, bins and other
wrappings have created products which serve the retail market
adequately, these materials are an environmental disaster when it comes
to disposing of them.
Styrofoam, for example, is cheap and convenient, but it is not easily biodegradable. And the same goes in spades for plastics of all varieties,
sizes,
dimensions, and manners of construction.
How to deal with the problems of solid waste disposal?
There are two schools of thought on the matter. According to the first,
the problem is caused by greedy capitalists, who maximize their profits
in sublime indifference to the well being of society. They produce the
styrofoam, bottles, cans and wrappers, which subsequently litter our
landscape. Since the manufacturers are concerned only with producing
the packaging, and thereby drumming up more retail sales, and not with
the ultimate destination of this material, they are unconcerned with the
ecological problems they leave in their wake.
The answer, from this perspective, is more Government Regulation and
Control.
Compulsory deposit legislation and outright prohibitions of plastics,
styrofoam and other non "ecologically friendly" materials are included
in the panoply of responses from this quarter. As well, there is as always
the old standby, "throwing money at the problem." To this end, plans are
being bandied about to require a "voluntary" payment of some $100
million, to be made by the packaging industry. These funds would be
used by the government for researching ways to combat the rising tide
of solid waste.
The basic objection to this throwing of massive amounts of money at the
problem is that it is totally misdirected. In the view of the second school
of thought on the issue, the reason for the problem has nothing at all to
do with greedy capitalists. On the contrary, it is a result of the fact that
garbage disposal has been organized through the public sector.
Government waste disposal is the very factor which accounts for the
seeming
irresponsibility of the packagers. It is the phenomenon responsible for
the fact that packagers now choose materials with no consideration for
the difficulties of their ultimate disposal.
How would a fully private garbage pick up industry function so as to
solve the present impasse? While it is always a difficult task to
anticipate the market, we now have enough experience with
privatization (See: Privatization: Tactics and Techniques, Fraser
Institute, 1988) so as to be able to predict, at least in broad brush stroke
outlines, how such an industry might conduct its business.
To begin with, there would be a complete separation of solid waste
sanitation and state. People would make arrangements for garbage
removal with profit seeking business firms on their own behalf. This
task would be as private as any other paradigm case of market operation,
for example as that of the provision of restaurant food, toys or
newspapers.
It is likely that sanitation firms would set up a sliding scale, charging
more for
unsorted waste material than for sorted. As well, there would likely be a
sliding scale for refuse in terms of its "ecological friendliness." So much
for easily recyclable material; more, proportionately, for plastics or
styrofoam, or for orange juice "tins" which contain several different
types of material which are more
expensive to separate.
This will have a profound effect on the packaging industry. For
consumers,
knowing that they will later have to pay higher sanitation fees for
harder-to-disposeof materials, will tend to shun them. Or they will only
purchase them if their prices are low enough to defray the additional
removal costs.
For the first time, the system will be rationalized. Packagers will no
longer be
able to impose costs on the (public) sanitation service. Whenever a
packager contemplated adding a new line of very attractive but non biodegradable material to his offerings, he would now be faced with
customers who would look askance at it. They would ask something like
the following of themselves: "This looks good, but how much will it
cost me to get rid of it?" With a consumer in that mind set, the
ecological problem of solid waste management would soon tend to
evaporate.
- 30Recycling
by: Walter Block
The packaging industry has come under fire from outraged ecologists.
Their complaint? While the purveyors of bags, boxes, bins and other
wrappings have created products which serve the retail market
adequately, these materials are an environmental disaster when it comes
to disposing of them.
Styrofoam, for example, is cheap and convenient, but it is not easily biodegradable. And the same goes in spades for plastics of all varieties,
sizes,
dimensions, and manners of construction.
How to deal with the problems of solid waste disposal?
There are two schools of thought on the matter. According to the first,
the problem is caused by greedy capitalists, who maximize their profits
in sublime indifference to the well being of society. They produce the
styrofoam, bottles.scans and wrappers, which subsequently litter our
landscape. Since the manufacturers are concerned only with producing
the packaging, and thereby drumming up more retail sales, and not with
the ultimate destination of this material, they are unconcerned with the
ecological problems they leave in their wake.
The answer, from this perspective, is more Government Regulation and
Control.
Compulsory deposit legislation and outright prohibitions of plastics,
styrofoam and other non "ecologically friendly" materials are included
in the panoply of responses from this quarter. As well, there is as always
the old standby, "throwing money at the problem." To this end, plans are
being bandied about to require a "voluntary" payment of some $100
million, to be made by the packaging industry. These funds would be
used by the government for researching ways to combat the rising tide
of solid waste.
The basic objection to this throwing of massive amounts of money at the
problem is that it is totally misdirected. In the view of the second school
of thought on the issue, the reason for the problem has nothing at all to
do with greedy capitalists. On the contrary, it is a result of the fact that
garbage disposal has been organized through the public sector.
Government waste disposal is the very factor which accounts for the
seeming irresponsibility of the packagers. It is the phenomenon
responsible for the fact that packagers now choose materials with no
consideration for the difficulties of their ultimate disposal.
(
1
••
How would a fully private garbage pick up industry function so as to
solve the present impasse? While it is always a difficult task to
anticipate the market, we now have enough experience with
privatization (See: Privatization: Tactics and Technigues, Fraser
Institute, 1988) so as to be able to predict, at least in broad brushstroke
outlines, how such an industry might conduct its business.
To begin with, there would be a complete separation of solid waste
sanitation and state. People would make arrangements for garbage
removal with profit seeking business firms on their own behalf. This
task would be as private as any other paradigm case of market operation,
for example as that of the provision of restaurant food, toys or
newspapers.
It is likely that sanitation firms would set up a sliding scale, charging
more for unsorted waste material than for sorted. As well, there would
likely be a sliding scale for refuse in terms of its "ecological
friendliness." So much for easily recyclable material; more,
proportionately, for plastics or styrofoam, or for orange juice "tins"
which contain several different types of material which are more
expensive to separate.
This will have a profound effect on the packaging industry. For
consumers, knowing that they will later have to pay higher sanitation
fees for harder-to-disposeof materials, will tend to shun them. Or they
will only purchase them if their prices are low enough to defray the
additional removal costs.
For the first time, the system will be rationalized. Packagers will no
longer be able to impose costs on the (public) sanitation service.
Whenever a packager contemplated adding a new line of very attractive
but non bio-degradable material to his offerings, he would now be faced
with customers who would look askance at it. They would ask
something like the following of themselves: "This looks good, but how
much will it cost me to get rid of it?" With a consumer in that mind set,
the ecological problem of solid waste management would soon tend to
evaporate.
- 30October 31,1988
2
I
Recycling
by: Walter Block
The packaging industry has come under fire from outraged ecologists.
Their complaint? While the purveyors of bags, boxes, bins and other
wrappings have created products which serve the retail market
adequately, these materials are an environmental disaster when it comes
to disposing of them.
Styrofoam, for example, is cheap and convenient, but it is not easily biodegradable. And the same goes in spades for plastics of all varieties,
sizes,
dimensions, and manners of construction.
,)
How to deal with the problems of solid waste disposal?
There are two schools of thought on the matter. According to the first,
the problem is caused by greedy capitalists, who maximize their profits
in sublime indifference to the well being of society. They produce the
styrofoam, bottles, cans and wrappers, which subsequently litter our
landscape. Since the manufacturers are concerned only with producing
the packaging, and thereby drumming up more retail sales, and not with
the ultimate destination of this material, they are unconcerned with the
ecological problems they leave in their wake.
The answer, from this perspective, is more Government Regulation and
Control.
Compulsory deposit legislation and outright prohibitions of plastics,
styrofoam and
<.~
other non "ecologically friendly" materials are included in the panoply
of response -2)
from this quarter. As well, there is as always the old standby, "throwing
money at
bolflclkc:1
the problem." To this end, plans are being b~. about to require a
"voluntary"
payment of some $100 million, to be made by the packaging industry.
These funds would be used by the government for researching ways to
combat the rising tide of solid waste.
The basic objection to this throwing of massive amounts of money at the
problem
1
ire is that it is totally misdirected. In the view of the second school of
thought on the issue, the reason for the problem has nothing at all to do
with greedy capitalists. On the contrary, it is a result of the fact that
garbage disposal has been organized through the public sector.
Government waste disposal is the very factor which accounts for the
seeming irresponsibility of the packagers. It is the phenomenon
responsible for the fact that packagers now choose materials with no
consideration for the difficulties of their ultimate disposal.
How would a fully private garbage pick up industry function so as to
solve the b
present impasse? While it always a difficult task to anticipate the
market, we now
""
have enough experience with privatization (See: Privatization: Tactics
and Techniques,
,~
,
-, .. /
!~
Fraser Institute, 1988) so as to be able to predict, at least in broad
brushstroke outlines, how such an industry might conduct its business.
To begin with, there would be a complete separation of solid waste
sanitation and state. People would make arrangements for garbage
removal with profit seeking business firms on their own behalf. This
task would be as private as any other paradigm case of market operation,
for example as that of the provision of restaurant food, toys or
newspapers.
It is likely that sanitation firms would set up a sliding scale, charging
more for unsorted waste material than for sorted. As well, there would
likely be a sliding scale for refuse in terms of its "ecological
friendliness." So much for easily recyclable material; more,
proportionately, for plastics or styrofoam, or for orange juice "tins"
which contain several different types of material which are more
expensive to separate.
This will have a profound effect on the packaging industry. For
consumers, knowing that they will later have to pay higher sanitation
fees for harder-to-dispose2
of materials, will tend to shun them. Or they will only purchase them if
their prices are low enough to defray the additional removal costs.
For the first time, the system will be rationalized. Packagers will no
longer be able to impose costs on the (public) sanitation service.
Whenever a packager
'( contemplated adding a new line of very attractive but non
bi~egradable material to his offerings, he would now be faced with
customers who would look askance at it.
They would ask something like the following of themselves: "This looks
good, but how much will it cost me to get rid of it?" With a consumer in
that mind set, the ecological problem of solid waste management would
soon tend to evaporate.
- 30October 31, 1988
3
, ',-"
Rent Control Reconsidered
by Walter Block
Recently, a new twist has been added to the argument in defense of
rent control
legislation. According to this perspective, it is far too "simplistic" to
assert, in a
straightforward manner, that rent control leads inexorably to
various types of housing dissarray. (The traditional economic
analysis concludes that rent control causes low vacancy rates,
retards repairs and upkeep, and decreases the building rate of new
rental units.)
No, we are now told, reality is far more "complex" than that. In the
real world, we
are given to understand, it is impossible to generalize about rent
control at all! This is because different types of controls will lead not
to the same conclusion, but to very different results, depending
upon which specific types of controls are
implemented. In the words of one of these "new" critics, "different
regimes of rent
control will quite clearly differ in their effects,"
We must, however, reject the point that it is not possible to
generalize about rent controls at all. Even those who make this
claim cannot consistently uphold it. By the mere fact of calling all
schemes to limit the amount of money tenants must pay "rent
controls," these critics themselves have generalized about them.
Their claim is thus rendered self-contradictory.
But this view does more than affront logic and common sense. It is
in violation of numerous empirical studies of the effects of rent
control. Certainly, all instances of these legislative enactments have
something more in common than a mere name -- it is for that reason
they are all given a common nomenclature.
What, then, do all cases of rent control legislation have in common?
They all mandate that rents be legally forced below the level which
would otherwise have been obtained in the absence of such an
enactment. What common effects will all such
laws have? They will all make investment in residential rental units
a less attractive proposition than otherwise. This, in turn, will retard
new building, promote housing deterioration, reduce vacancy rates,
encourage racial and other discrimination, decrease labour mobility
-- the traditional arguments against rent control. (The evidence for
these assertions may be found in a Fraser Institute book entitled
Rent Control: Myths & Realities, which studies the experiences of
eight different countries with this legislation over the past halfcentury.)
True, the strengthof these effects will vary with the strictness of the
control in question, but from this fact it does not at all follow that
rent controls -- all instances of them -- have nothing in common.
Taking this "new" position is like saying that since being punched in
the mouth by my eight year old son is very different in effect from
being punched in the mouth by Shawn O'Sullivan, it is therefore
impossible to generalize about being punched in the mouth. Surely a
dubious proposition.
There is little doubt that imposing rent control on a city is very
much akin to "punching in the mouth" its stock of residential
housing units. The only question that remains is one of determining
how strong a blow has been struck in any given case.
New York City's early form of rent control, for example, was a real
knock out punch. It did not provide for any rental increases
whatsoever, nor even for vacancy decontrol. True, it has moderated
in recent years, and rent "review" has come to take the place of rent
"control" for many thousands of housing units, but the Big Apple's
45-year experiment with rent limitations, by whatever name, has
spelled the death knell for hundreds of thousands of people's
homes.
Toronto, too, has unwisely passed rent control legislation. It is not
as strict as New York's used to be, and it has only been in effect for
about a decade -- too short a time to provoke a South Bronx-style
response. Recently, changes in this law have been made.
Unfortunately, however, in the wrong direction. In a new enactment
brought down by the Liberals, the permissable rent increase was
reduced from 6% to 4%. This is akin to punching out the housing
stock of Hogtown at a significanly higher rate.
But this is all beside the main point. It deals only with the degreeto
which
different regimes of rent control will attack the rental unit stock. On
the fact that this will be so, these can be no question. Even eminent
socialists, economists who have called for government intervention
on numerous other occasions, have pulled back in the case of rent
control.
For example, states Nobel Prize Winner Gunnar Myrdal, an
important architect of the Swedish Labour party's welfare state:
"Rent control has in certain Western countries constituted, maybe,
the worst example of poor planning by governments lacking
courage and vision." And in the view of socialist economist Assar
Lindbeck: "In many cases rent control appears to be the most
efficient technique presently known to destroy a city -- except for
bombing." In fact, the proposition that "a ceiling on rents reduces
the quantity and quality of housing available" was supported by an
overwhelming 98.1% of economists polled in a recent survey
reported by the prestigious American Economic Review.Of the 27
public policy issues probed in that analysis, the one on the effect of
rent controls met with the least disagreement.
Let's face facts. Rent control is an assault on the rental housing
stock, and the sooner this elementary postulate of economics is
recognized, the better the future housing conditions for Ontario
tenants.
- 30December 30, 1988
1
Seat Belt Refuser
Seat Belt Legislation -- and Socialized Medicine
by: Walter Block, The Fraser Institute, Vancouver, n.c.
Many people regard seat belt legislation as a personal affront, as an
interference with their rights as citizens, and as adults, to conduct
their affairs exactly as they wish.
One argument on behalf of such restrictions is that in the advent of
socialized medicine, people don't really bear the ultimate
responsibility for their own actions. That is, if someone fails to
employ a seat belt, and thereby suffers an injury, it will not be he
who will have to pay the ensuing doctor bills. Rather, this will come
out of general tax revenues. Under such a system, it is argued, we
are all our brother's keepers; we have a right to insist that other
people take good care of themselves.
Carried to its logical conclusion, this philosophy could also justify
laws mandating compulsory teeth brushing, the ingestion of leafy
vegetables (ugh!), and the avoidance of beer, wine, sugar, alcoholic
beverages, tobacco, stock car racing and skiing. Yet, hypocritically,
the government is actually engaged in the production for sale of
some of these latter items, and taxes them all, heavily.
In any case, why is it that seat belts are mandatory only in
privatemotor vehicles?
Why not carry through consistently, and require their use in
publicconveyances such as buses, trains, trolley cars and subways?
Could it be that, in the judgement of politicians and bureaucrats, this
would be too great an inconvenience and too costly? If so, why not
enact a law compelling only dignitaries active in government to
wear seat belts? After all, they are our most precious human
resource, aren't they?
No. The answer is not to do away with our remaining freedoms, but
to call into question the pernicious system of socialized medicine
which puts them all at risk.
Even now, Great Britain, which has travelled down the garden path
toward socialized medicine for many more years than we, is an
example of how the system can unravel. In that country, there are
long waits for doctor's service, and people who must avail
themselves of the most modern medical techniques are forced to go
elsewhere (sound familiar?) Things have come to such a pass that a
private for profit hospital industry has sprung up along side the
"free" one -- which is not, of course, free at all, but rather paid for
through taxes. And, to add insult to injury, unions have lately been
actively negotiating for inclusion in this private system.
Nor are the reasons for this debacle hard to understand. It is only
human nature (economists call this "moral hazard") to demand
more of a service, to use it rather carelessly, when it is "free." But
this puts great demands on the system, which then has a harder and
harder time responding to non frivolous needs.
- 30 SEX IN ADVERTISING
An Editorial Commentary Prepared by Walter Block for The Financial
Post
There is a storm of opposition a-brewing over the use of women as sex
objects in advertising. Magazines as disparate as Maclean's, Vogue,and
City Womanhave been accused by two media watchdogs of using
pictures of sexy women to enhance their advertised products.
The first committee is headed up by Lynn McDonald, New Democratic
Party MP for the Broadview-Greenwood riding in Toronto. According
to this spokesper-son, women are increasingly used as sex objects in
print and electronic advertising. And unless broadcasters and advertisers
do something to turn this situation around, this committee shall lobby
the Canadian Radio-television and Telecommunications Commission to
impose new government regulations.
The second committee has been struck by the advertising industry itself.
Called the Advertising Advisory Board, its mission is to act as a sex-role
educational watchdog, trying to induce the industry as a whole to make
changes on a voluntary basis. The A.A.B. has called for a more realistic
portrayal of women, as well as men, in commercial advertisements.
Specifically, it has asked advertisers not to exploit sexuality purely for
attention-getting purposes. Rather, their presence should be relevant to
the advertised product. For example, the Advertising Advisory Board is
trying to stop the use of sexy women in irrelevant situations, such as
draped over the hood of a tractor, in a commercial for farm equipment.
As admirable as these efforts may appear to some, they are fraught with
difficulties. First of all, there is a little matter of the rights of free speech
and free association. If the advertiser can pay the female model an
acceptable wage, and likewise induce the voluntary cooperation of
photographers, copywriters, artists and all other necessary personnel,
then to prohibit this ad campaign is an interference with all their rights
of free speech and association.
Secondly, the A.A.B. puts it finger on the essence of advertising:
grabbing the attention of the consumer. People, nowadays, are subjected
to a bewildering array of conflicting and competitive messages. The
advertiser who can grab the attention of the consumer is a step ahead of
the competition.
There is a joke about mule training. There was a particularly intractible
animal, the bane of his trainers. An expert was called in, and promptly
hit the <; mule a resounding clunk on the head with a sledgehammer.
When asked to explain this rather bizarre behaviour by the amateur mule
trainers, the expert explained, "Well, I had to get his attention first."
Precisely.
This is why advertisers have to be so clever. And, students of human
nature, they have learned that nothing grabs the attention of the jaded
Canadian consumer as the inclusion of a half undraped attractive model.
Of course these contrivances are not merely humdrum descriptions of
the product. Only amateur advertisers limit themselves to telling of
price, quality, product specifications, directions, operations, etc. The
professionals, like the expert mule trainer, grab the consumer's attention
first. Strictly speaking, much of good advertising can most-C9~l:Iredl be
interpreted in this manner: testimonials from actors and athletes, catchy
musical jingles, headlines and eye-catching layout in the print medium.
And there is a third effect as well. If the essential ingredient of
advertising is removed, this de-fanged industry will no longer be in a
Position to contribute to the consumer welfare.
Now many people have swallowed whole the view of the critics such as
John Kenneth Galbraith, Vance Packard and Ralph Nader. For them, the
advertising industry makes no contribution to the common weal anyway,
and thus de-fanging it will be a loss to no one - except possibly to a
bunch of thieving, dollar-chasing, exploiting advertisers and capitalists and they deserve whatever is done to them anyway.
But there are grave problems with this view. If advertising were limited
to the cold-hearted creation and dissemination of information -- price,
warrantees, product specification and the like - it would, paradoxically,
impart far less information than it does at present. For the brute fact is
that most people tune out such boring messages.
When I used to teach economics at university, many moons ago, one of
the most important lessons I learned for instructing my freshman classes
was to keep the students awake. If they weren't awake - actively
listening, not just staring at me, zombie-like, with their eyes glued wide
open -- if they weren't awake, I say, then nothing I said, no matter how
brilliant, would ever get through.
In like manner, the dissemination of commercial information is wellnigh impossible unless one has first captured the attention of the
consumer. A defanged advertising industry cannot possibly accomplish
this crucial task. And without the smooth and easy flow of information,
our economy would lose much of its vitality.
So the advertiser, derided, excordated and put down though he may be,
plays an essential role in our economy. In contrast, consider these
busybody do-gooders who would handcuff his efforts with a welter of
prohibitory legislation. If they succeed, they will reduce our economic
well-being, by attacking our economy in a vulnerable spot -- our
information flow. Opponents of such advertising, of course, have the
right, in our free enterprise system, to promulgate their own views. They
may do this by creating competitive messages, and by engaging in
boycotts.
To borrow a leaf from a well-known commerical advertisement: How do
you spell ''relief''? Notwith the Advertising Advisory Board, or with MP
McDonalds'C committee on advertising, the other media advertising
watchdog group.
- 30Sexist Advertising and the Feminists
by: Walter Block, the Fraser Institute, Vancouver, B.C.
The war between the sexes is still raging.
The city council of Kamloops, British Columbia placed an ad in its
tourism
brochure featuring an attractive bikini-clad woman kneeling at the feet
of a businessman who was reclining in a beach chair. Accompanying the
ad is the message "WHERE BUSINESS AND PLEASURE COME
TOGETHER .... IN SUPER, NATURAL
HIGH COUNTRY. KAMLOOPS, B.C."
According to the local woman's resource centre, the ad clearly implies
that the
barely dressed female represents the sexual pleasure, while the almost
fully dressed male is mixing a little business with his pleasure.
But Kamloops Mayor John Dormer is having none of that. "To me, it's a
non
issue and I don't think members of the general public would be offended
either. It's tastefully done, and the complaints about it are ridiculous. II
And a majority of the aldermen are hanging tough, too. They like the ad
because it is "eye-catching," although a minority, including the lone
female member of council find it II offensive. II
It is of great interest to contrast this case with a superficially similar one
which took place in Vancouver only a scant few years ago. At that time
Eaton's department store had placed an exhibit in its sidewalk window
that was also deemed sexist by spokespersons for the local feminist
movement. (It featured a male doctor manikin holding a probe aimed at
the crotch of a female patient manikin.)
But in the aftermath of the protest, all similarity between the two cases
dramatically disappears. Eatons' management, instead of stonewalling,
and insisting upon maintaining its vision of propriety, caved in with
alacrity. Within a matter, literally, of hours, the offensive exhibit was
withdrawn, to the accompaniment of
profuse apologies.
How can we explain the two very divergent reactions? At first glance
this would
appear to be exceedingly difficult, since both protests were undertaken
by much the same people, feminists, and in each case they were
objecting to essentially identical occurrences.
The difference lies not in the offense, nor in the identity of the
protestors, but in the people against whom the complaint was made. In
the Kamloops case the perpetrators of the transgression are part of the
public sector, in Vancouver, they were a private business. As such, they
are confronted with very different incentives: the Kamloops Mayor and
City Council do not have to face any voters in the polling booth for
another few years; Eaton's, in sharp contrast, had to face its "dollar"
voters the very next day, and every day thereafter.
. on that far off day when the politicians shall finally be called upon to
defend
their actions, they will be judged not only by how well they acquitted
themselves in this one case, but by how well they collected the garbage,
filled the pot-holes, ran the recreation centres, distributed patronage,
conducted library services" etc. In addition, if they are telegenic, or
particularly well spoken, they will effortlessly be able to explain away
their acts.
. in sharp contrast, the shoppers could easily focus their entire
dissatisfaction on the businessmen they held responsible. Nor could they
squirm out. All the protesters needed to do was to patronize a
competitor. This potential threat was more than enough to quickly bring
to heel the capitalists who owned Eaton's.
The point of this little civics lesson is that we as consumers are able to
exercise a far greater degree of control over private businesses even
though we do not own them, then we can exert over politicians, despite
the fact that we are theoretically their employers, and they ostensibly act
in our behalf. Paradoxically to some people, the marketplace is far more
responsive to our needs and desires than is the
( cumbersome and inefficient political system. (And at least the
politicians are eventually accountable to the citizenry; imagine if this
decision had been made by bureaucrats!)
We can easily see from these two cases that if feminists truly had the
interests of their constituency at heart they would urge a greater role for
the private sector. Instead, their biases run toward more government
intervention. This is highly unfortunate from the perspective of those of
us who favour the goals of the women's movement, if not their means.
- 30THE SKY TRAIN VANDALS
by Walter Block
In recent weeks there has been a spate of destruction, hooliganism
and vandalism aimed at the Sky Train, a.k.a. Automated Light Rapid
Transit. ALRT wiring has been tampered with, cars have been
defaced, and garbage has been thrown on to the road bed. This last
technique succeeded on one occasion in laying waste to several
hundred yards worth of tracks, as the computers have not yet been
programmed to deal with this sort of hazard.
What philosophy could possibly justify these deeds of destruction
launched against the Vancouver Sky Train? It could not be the free
enterprise perspective, which might well object to unwarranted
government intervention in the transportation industry. But if that
were the case, w would have seen similar attacks on buses, Via Rail,
ferries, the sea bus, Air Canada, C.N.R., B.C. Rail, to say nothing of
Expo '86. Nor could these acts be based on socialism -- protesting
against the supposed capitalist acts of Bill Bennett's administration
of the province. First of all, there are precious few of these;
secondly, if this were so, these acts of hooliganism would have taken
place several years ago, during the so-called restraint period, not
now when Socred spending is back to normal, and certainly not
against a government enterprise such as SkyTrain.
Although this can only be a guess, one possibility is that there are
some misgivings with the first letter of ALRT, with the"A", which
stands for "automated". Had there been a human conductor of the
train on board and in charge when some extraneous material was
thrown in its path, he could easily have stopped it; in this case, a
flesh-and-blood person behind the controls would have prevented
almost a quarter mile of track from being chewed up. As a result of
this vandalism, a guard has been put on duty; this may not have
been a total victory for the view which opposes machinery "taking
jobs" away from people (presumably a conductor, not a guard, was
wanted), but it must be considered at least a partial triumph.
The philosophy which hates and fears new technology on the
ground that it creates unemployment is called Luddism. It is named
after one Ned Lud, who went on a rampage in England in the last
century, burning knitting looms because one person, with this new
equipment, could do the work of 20.
Ned Lud was clearly well-intentioned. Who, after all, wants to see 19
people unemployed, even if the 20th can thereby increase his
productivity? This would be no less than a tragedy economically,
morally, spiritually and socially.
In like manner, the philosophy underlying the Sky Train vandalism
may well be benevolent in origin, even if its goals leave something to
be desired. It, too, may fear that unemployment rates have risen, at
least compared to the situation where each ALRT train had a human
driver. In this view, these machines have supplanted several
hundred job slots, the number of train conductors who might
otherwise have been used.
But a moment's reflection will convince us that an automated Sky
Train system has not lost us these jobs, nor, indeed, any at all. First
of all, additional employees, skilled at computer technology, were
needed to construct the equipment at the outset. Secondly, there are
the salaries for human motormen that will not be paid. These
monies can be used instead for other purposes: for creating still
more "robots," in order to accomplish new and additional tasks
which would have been otherwise impossible to finance, or for extra
consumption of already existing goods. Whichever of these options
is chosen, it will mean increased employment in these other fields.
But the core fallacy here is the assumption that there is only so
much work to be done in the world. Sometimes called the "lump of
labor" fallacy, this economic view holds that the peoples of the
world only require a limited amount of labor in their behalf. When
this amount is surpassed, there will be no more work to be done,
and hence, there will be no more jobs for the workers. In this
perspective, making sure that automatic equipment is not employed
is of over-riding importance. For if these machines do too much,
they will ruin things for everyone. By "hogging up" the limited
amount of work which exists, they leave too little for human beings.
It is as if the amount of work that can be done resembles a pie of a
fixed size. If robots are allowed to seize some of it, we homo sapiens
will have to make do with less.
If this economic view of the world were correct, there might indeed
be something to be said for the philosophy of vandalism. At least,
there would be some justification for insisting that machines like
ALRT not be put into operation.
However, there is as much work to be done as there are unfulfilled
desires. Since human desires are, for all practical purposes, limitless,
the amount of work to be done is also unlimited. Therefore, no
matter how much work the robot completes, it cannot possibly
exhaust or even make an appreciable dent in the amount of work to
be done.
If it does not "take work away from people" (because there is a
limitless amount of work to be done), what effect does ALRT
computer technology have? Its effect is to increase production.
Because of the efforts of the Sky Train robots, the size of the pie
increases -- the pie that will then be shared among all those human
beings who took part in its production or who benefited from its
use.
Consider in this regard the plight of a family shipwrecked in the
tropics. When the Swiss Family Robinson sought refuge on an
island, their store of belongings consisted only of what was salvaged
from the ship. The meager supply of capital goods, plus their own
laboring ability, will determine whether or not they survive. The
Swiss Family Robinson faces an unending list of desires, while the
means at their disposal for the satisfaction of these desires is
extremely limited.
If we suppose that all the members of the family set to work with
the material resources at their disposal, we would find that they can
satisfy only some of their desires.
What would be the effect of having a robot at their disposal in such a
situation? Suppose that with the aid of technology the family
becomes able to produce twice as much per day as before. Will this
be the ruination of the family, "take work away" from the other
family members, and wreak havoc upon the mini-society they have
created?
It is obvious that this is not so. On the contrary, the machinery will
be seen as the benefit it is, since there is no danger that the
increased productivity it brings about would cause the family to run
out of work to do.
If the new technology can produce ten extra units of transportation
services, it may become possible for other members of the family to
be relieved of such chores. New jobs will be assigned to them.
Clearly, the end result will be greater satisfaction for the family. In
like manner, because of robotics, society as a whole will move
towards greater and greater satisfaction and prosperity.
Thus, the reasoning underlying the philosphy of vandalism is
flawed. There are indeed problems with a government initiative
such as ALRT, but the lack of human motormen is not one of them •
•.
SkyLink
by Walter Block
Federal Transport Minister Don Mazankowski has just turned down
an application by Skylink Airlines to operate a new commuter air
service. Had this bid been approved, it would have allowed regularly
scheduled service between Skylink's home airport of Boundary Bay,
in the city of Delta on the lower mainland of British Columbia, and
Seattle's Seatac Airport.
This decision is a disaster, from several perspectives.
First of all, it is a further repudiation, not that any was needed, of
any claim this Progressive Conservative Government may have once
had to the mantle of the free enterprise system. The Mulroney-ites
may have been swept into power while offering fundamental change
to our economic system, but in the event, the long train of similar
abuses and usurpations.
Secondly, it is a violation of the new Charter. For surely it is now a
human right to engage, with other consenting adults, in commercial
ventures for purposes of mutual gain. And yet, by his decision not to
overturn a Canadian Transport Commission denying Skylink this
new route, Don (Free Enterprise) Maszankowski has undermined
the right of the people in this firm to earn an honest living.
Thirdly, this ruling is really an attack on the consumer. As the airline
deregulation movement in the U.S. has shown, it is the air traveller
who has gained the most, in the form of reduced price air tickets,
from allowing a measure of competition into this industry. If Canada
does not follow the pattern establised by our neighbour to the
south, it will only further reduce the living standards in our nation.
This decision, moreover, comes at a particularly unfortunate time
and place, given the opening of EXPO in Vancouver. Travellers from
Seattle need more options if they are to be able to attend this event.
But it is not merely a matter of a public authority having made a
determination which is so obviously and blatantly contrary to the
public interest. The question arises, Why should there even be a
Canadian Transport Commission, or for that matter, a Federal
Ministry of Transport? Cannot the free enterprise system, together
with the laws of the land, as administered by the judiciary, suffice in
this regard? Something to think about.
-30-
SPARE BODY PARTS
Editorial Commentary Prepared by Walter Block for The Financial Post
In the days of yore, there was no "crisis" in spare body parts. Organ
transplants were an utter impossibility, the stuff of science fiction. Only
Dr. Frankenstein and his literary ilk had any need for live organs.
But nowadays, thanks to the magnificent discoveries and new
techniques of modern medicine, these possibilities are upon us. At
present, it is now possible to transplant hearts, kidneys, blood and
corneas. People who would have been consigned to death, or lingering,
tenuous and painful lives only a few short years ago, can now avail
themselves of these medical miracles and lead healthy,. happy,
productive lives.
All is not well, however, on the organ transplant front. Instead of being
the occasion for unrelieved rejoicing, these new breakthroughs have
brought in their train a whole host of problems. First of all, there is a
shortage of body organs suitable for transplant. It is claimed that some
are diseased, and that others would be rejected by the recipient because
of incompatible blood types.
This had led to a set of problems which have strained what passes for
medical ethics in this country to the breaking point. For, given the
limited supply of donor- organs, our doctors have had to pick and
choose -- on no criteria whatever other than their own arbitrary whim -which of the many needy recipients shall have this lite-givlng aid, and
which of them shall be denied.
The difficulty here, is that our legal-economic system has not kept up
with advancing medical technology. The law has prohibited people from
using the property rights we each have in our own persons and bodily
parts. Specifically, it has banned trade, or a marketplace in live spare
body parts.
We shall claim that deregulation of this market is the solution to the
transplant problem. But before we explain how free enterprise would
work in this connection, let us lay a few fears to rest.
Yes, it is gory, disgusting and very uncomfortable to discuss allowing
profit incentives to work in this field. The very idea involves images of
grave robbers, Frankenstein monsters, and gangs of "organ thieves"
stealing people's hearts, livers and kidneys in the manner described by
several novels of Robin Cook. It seems cruel' and unfeeling to discuss
the market for used body parts in much the same manner as we might
describe the used car market. But this is only because in our present
society, while we can appreciate the miracles of modern medicine
without necessarily comprehending them, we have such a poor
understanding of the miracles of the marketplace, and cannot even begin
to appreciate them without this knowledge. So let us sit back, and relax,
and calmly and dispassionately consider this idea on its own merits, all
pre-conceptions and biases to one side. Let our only criteria be not our
prejudice, but our assessment of whether this idea will really increase
the number of donors, save lives, and free doctors from the onerous
decision of picking which needy people shall be saved, and which
consigned to a lingering and painful death.
Having said this, let us now consider the economics of the situation.
As any first year student in economics can tell you, whenever a good is
in short supply, its price is too low. And the case of spare body parts is
no exception. On the contrary, it is a paradigm case of this phenomenon.
For our laws on this question, in prohibiting a marketplace in human
organs, have effectively imposed a zero price on these items.
But at a zero price, it should not occasion any surprise that the demand
for human organs would vastly outstrip the supply. This, after all, is one
of the most basic laws in all of economics. If the price were allowed to
rise to its market clearing level, there might not be too great a change in
the number of used body parts demanded. This is called by economists
"inelastic demand". All it means is that if you need an organ transplant
at all, price, no matter how high, within limits of course, is not likely to
deter you. No. The main effect of a free market in used bodily parts will
be on the amount supplied.
How would a marketplace in human organs actually work?
While it is never possible to fully anticipate the functioning of an
industry now prohibited by government edict, the following scenario
will do as well as any other in describing one possible option.
We know that the major source of preferred organ donations will come
from young healthy people who are cut down in the prime of life. This
can occur in the case of traffic fatalities, murder victims, perhaps,
soldiers who die in war, people who die quickly of a disease such as a
heart attack, which leaves their other organs intact.
Were the industry to be legalized, new firms would spring up. Or
perhaps insurance companies, or hospitals would expand their bases of
operation. These companies would offer thousands of dollars to people
(who met the appropriate medical criteria) who would agree that, upon
their demise, their bodily organs would be owned by the firm in
question. Then this company would turn around and sell these organs,
for a profit, to people in need of an organ transplant. In addition these
new firms would operate, as at present, to try to obtain consent from the
relatives of newly diseased persons, for use of their organs. Only now,
under economic freedom, these firms would be in a position to offer
cash incentives -- as well as the chance to save another human life.
The main effect of such a program would be to vastly increase the
supply of donor organs. Certainly, many people in Canada and in the
third world as well would be happy to take advantage of this
opportunity. No one who objected on religious grounds, for example,
would have to cooperate with the venture. As a result, no longer would
potential recipients have to make do without transplants. We need not
even fear that those who engaged in this practice would earn
"exhorbitant" profits. For any such tendency would call forth new
entrants who would act so as to increase supply even further and reduce
profits to levels which could, be earned elsewhere. Let us allow free
enterprise to work in this field, and save us a lot of pain, sorrow,
suffering and tragedy.
- 30January 20, 1984
•
Species Extinction by Walter Block
Dr. David Suzuki, perhaps Canada's best known self-styled
environmentalist, waxes eloquent about the needless extinction of
species. He states: "Today, 40 million years of evolution embodied in
the rhinoceros is being snuffed out in decades for no other reason than
profit and human vanity (rhinos are slaughtered for their horns to make
Arabian dagger handles or aphrodisiacs for Chinese men.) Our inability
to stop before the species extinction is appalling. It is horrifying to
reflect on the impoverished work that our children will inherit compared
to the one we knew in our youth."
This, indeed, is a vexing problem; and for pointing this out so
dramatically, we are all in debt to Dr. Suzuki and his like-minded
colleagues. However, his understanding of the causes of the problem are
virtually 180 degrees away fr0I!1 the truth, and his public policy
recommendations, if followed, would worsen the problem,
not improve it.
In Suzuki's view, the villains of the piece are "profit," "development,"
and "a
limitless demand for an increase in consumer goods." His solution? Cut
down on excessive and frivolous consumption, and end our reliance on
the private property and
profit systems.
In actual point of fact, however, the reason that many species are
brought almost
to the edge of extinction, and some, unfortunately, past this point, is for
the very opposite of reasons. It is not for too great a reliance on property
rights, but for a
lackof private property rights.
Consider the buffalo and the cow in this regard. Biologically, these are
very
similar animals. And yet it is only fortuitous that the buffalo, which for
many years was allowed to run free, unowned by man, was saved from
extinction. In sharp contrast, the cow has been domesticated for
millennia; it has been owned,and thus cared for, by farmers and
herdsmen from biblical times and even before.
Why the unequal treatment of "equals"? Economists call what (almost)
happened
to the buffalo the "tragedy of the commons." If no one is allowed private
property rights over the buffalo, then it does not pay anyone to let any of
these animals that one could capture run free. Things came to such a
pass that hunters would often kill
a buffalo -- to eat only its tongue.
When a buffalo died -- in the non private property days of "home, home
on the
range," and "don't fence me in" -- no one lost any money, thereby. As
can be expected, no one acted so as to prevent such occurrences. Hence,
the virtual elimination of the buffalo.
The case of the cow furnishes a sharp contrast. When a cow dies, its
owner
suffers, in the pocketbook. He has an incentive to stay up all night with a
sick or pregnant cow, and to call in the services of a veterinarian, if need
be. It is the understatement of the century to assert that the cow never
even came close to
extinction.
It is the same with the rhinoceros. The reason they are being driven to
the
vanishing point is not because of "greed." It is because the countries of
the world in which the rhino can flourish have made it all but impossible
for farmers to domesticate this animal, and raise it in large herds for
purposes of profit. (Similarly, the Canadian government has placed legal
impediments in the way of those who wish to domesticate and raise such
"wild" animals as elk and reindeer.)
The fact that the rhino can be used for dagger handles or aphrodisiacs is
an explanation for its perishing, but only under institutional
arrangements whereby herdsmen cannot domesticate the animal. If no
legal barriers were' placed in their way, these factors would make this
beast more valuable.People would have even more of a profit incentive
to care for the rhino, to make sure that it was fed,
watered, sheltered, etc.
Dr. Suzuki, then, has it exactly backwards. If he really wishes to see the
rhinoceros population prosper and grow, he would be a staunch
advocate of private property, profits and markets. Since he opposes
these things, he is really on the side of extinction of these animals, his
protestations to the contrary notwithstanding.
- 30October 31,1988
2
;,"-=--",
, ...:...I
J
Species Extinction by Walter Block
'y;\\\\J
Dr'1'-~~zuki, perhaps Canada's best known
eloquent about the needless extinction of species.
self-styled environmentalist, waxes He states: "Today, 40 million years
of evolution embodied in the rhinoceros is being snuffed out in decades
for no other reason than profit and human vanity (rhinos are slaughtered
for their horns to make Arabian dagger handles or aphrodisiacs for
Chinese men.) Our inability to stop before the species extinction is
appalling. It is horrifying to reflect on the impoverished work that our
children will inherit compared to the one we knew in our youth."
This, indeed, is a vexing problem; and for pointing this out so
dramatically, we are all in debt to Dr. Suzuki and his like-minded
colleagues. However, his understanding of the causes of the problem are
virtually 180 degrees away from the truth, and his public policy
recommendations, if followed, would worsen the problem,
not improve it.
In Suzuki's view, the villains of the piece are "profit," "development,"
and "a
limitless demand for an increase in consumer goods." His solution? Cut
down on excessive and frivolous consumption, and end our reliance on
the private property and
profit systems.
In actual point of fact, however, the reason that many species are
brought almost
to the edge of extinction, and some, unfortunately, past this point, is for
the very opposite of reasons. It is not for too great a reliance on property
rights, but for a
lackof private property rights.
Consider the buffalo and the cow in this regard. Biologically, these are
very
similar animals. And yet it is only fortuitous that the buffalo, which for
many years was allowed to run free, unowned by man, was saved from
extinction. In sharp contrast, the cow has been domesticated for
millennia; it has been owned,and thus cared for, by farmers and
herdsmen from biblical times and even before.
Why the unequal treatment of "equals"? Economists call what (almost)
happened to the buffalo the "tragedy of the commons." If no one is
allowed private property rights over the buffalo, then it does not pay
anyone to let any of these animals that one could capture run free.
Things came to such a pass that hunters would often kill
a buffalo -- to eat only its tongue.
When a buffalo died -- in the non private property days of "home, home
on the
range," and "don't fence me in" -- no one lost any money, thereby. As
can be expected, no one acted so as to prevent such occurrences. Hence,
the virtual
elimination of the buffalo.
The case of the cow furnishes a sharp contrast. When a cow dies, its
owner
suffers, in the pocketbook. He has an incentive to stay up all night with a
sick or pregnant cow, and to call in the services of a veterinarian, if need
be. It is the understatement of the century to assert that the cow never
even came close to
extinction.
It is the same with the rhinoceros. The reason they are being driven to
the
vanishing point is not because of "greed." It is because the countries of
the world in which the rhino can flourish have made it all but impossible
for farmers to domesticate this animal, and raise it in large herds for
purposes of profit. (Similarly, the Canadian government has placed legal
impediments in the way of those who wish to domesticate and raise such
"wild" animals as elk and reindeer.)
The fact that the rhino can be used for dagger handles or aphrodisiacs is
an explanation for its perishing, but only under institutional
arrangements whereby herdsmen cannot domesticate the animal. If no
legal barriers were placed in their way, these factors would make this
beast more valuable.People would have even more of a profit incentive
to care for the rhino, to make sure that it was fed, watered, sheltered, etc.
Dr. Suzuki, then, has it exactly backwards. If he really wishes to see the
rhinoceros population prosper and grow, he would be a staunch
advocate of private property, profits and markets. Since he opposes
these things, he is really on the side of extinction of these animals, his
protestations to the contrary notwithstanding.
- 30October 31, 1988
(j
,
Strange Bedfellows?
Walter Block, The Fraser Institute, Vancouver, B.C.
Whoever said that politics makes strange bedfellows must have
been thinking of Doug Collins and Harry Rankin.
On the one hand, we have a man with impeccable left-wing
credentials. An ex
Committee of Progressive Electors Vancouver alderman, a stalwart
supporter of the N.D.P., a card carrying member of the B.C. Civil
Liberties Association, lawyer Harry Rankin yields to no one in his
devotion to left-wing causes; radical environmentalism, feminism,
government controls over the economy, peace marches, economic
nationalism, he has fought for them all.
On the other hand, there is a man with equally impeccable rightwing credentials.
Doug Collins is a long time west coast columnist, now writing for the
North Shore News. A rejected candidate for the newly-formed
Reform Party (by leader Preston Manning after the local
constituency had nominated him), Collins has been highly visible as
a witness for Mr. Zundel, at their hate literature court trials.
Drawing his ire are feminists, multi-culturalists, the immigration
law and radical environmentalists.
What on earth could these two very different political animals have
in common-apart from the fact that they happen to reside in B.c.?
Both have recently criticized the purchase of Vancouver real estate
by foreign investors from Hong Kong. In the words of Mr. Rankin,
"When money floods in from individuals buying four or five houses
for investment purposes instead of for living in,
you heat up and inflate the economy.
"We have to check the source of the inflation -- the foreign
speculators -- by
not allowing anyone other than Canadians and landed immigrants
to purchase
residential property."
In chillingly similar language, Mr. Collins strongly objects to the
practice of the
Block Bros. real estate firm in "taking out whole-page ads in the
Hong Kong press inviting Hong Kongers to buy homes on the North
Shore.
"Recently," he stated, "a woman in Woodcroft was offered a fancy
price for her apartment by an Asiatic. When she asked him why he
wanted her place, he told her he had already bought every other
apartment on that floor.
"Regulations to prevent the mass selling of residential real estate to
foreigners would not be unusual. The Australians have already put
the clamps on such sales. So have some other jurisdictions, including
P.E.I. and Hawaii."
1
These statements are very objectionable, even frightening. They
harken back to the discredited and discreditable era of the "yellow
menace" and "yellow peril." One would have hoped that never again
would a presumably civilized society such as ours have been
subjected to such carryings on, but it appears that we are not to be
spared.
Adding insult to injury, there is a small matter of hypocrisy. Collins
is himself
an immigrant to Canada from the U.K., while Rankin's forbears hail
from Europe. It comes with particular ill grace, then, for these two
gentlemen to engage in blatant foreigner bashing.
Further, it is simply untrue, as both imply, that Hong Kong
investments in Canada will harm the inhabitants of this country.
When a person of Chinese descent (or any other, for that matter)
purchases a home in B.C. he offers considerations which, in the eye
of the seller, are worth morethan the property in question. For
example, if a British Columbian sells a domicile to a resident of Hong
Kong for $300,000, it must be true that the vendor values the money
he receives more highly than the residence he gives up. Otherwise,
he would scarcely agree to the sale!
Collins and Rankin go wrong in that they liken the foreign
investment to a takeover of real estate. As a moment's reflection will
convince us, the Hong Kong Chinese are not seizing property; they
are trading for it.
As for the similarity of belief way out on the fringes of the left-right
spectrum, this is only paradoxical to those who do not realize that
both extremes, not just one or the other, fail to comprehend the
subtleties of voluntary social arrangements. Both, unfortunately, are
all too willing to call for the coercive power of government to do
their bidding, to impose their will on the rest of society.
- 302
Student Free Enterprises?
Sound the trumpets! Toot the horns! Free enterprise is alive and
well in Canada, courtesy of several provincial governments!
Pioneered by Ontario, and now a policy of the B.C. government as
well, the new student venture capital program grants an interestfree loan of up to $2,000 for the purpose of launching these young
people into the world of entrepreneurship.
And the newspaper accounts of this journey into capitalism are
uniformly glowing. They wax eloquent about all the newly coined
gardening firms, tee shirt emporiums, and yogurt shops which have
been set up with the money. Woop-de-do.
There is only one fly in the ointment. The program is an
abomination, a travesty of free enterprise, and will do more to
undermine the philosophy of Adam Smith than it will support it.
For the essence of the capitalist system is that people save up their
~ hard-earned dollars, invest them, and then bear the risk of their
decisions. If government gives the WOUld-be businessman the
wherewithal to start up the process, or lends it 'to him interest-free,
it undermines the whole enterprise.
Government can no more make a young person a capitalist through
such a procedure than it can award a chess grand mastership to a
neophyte player and expect this action to make even the smallest
iota of difference.
For free enterprise is predicated on the willing cooperation of all
market participants. This holds true at the consumer level, in the
labour and raw materials stage, and throughout the series of trades
which comprise the structure of production. This voluntarism most
assuredly includes the start up process as well, where capital is
attracted to a new venture by the promise of profits and interest
payments.
The problem with the government program is that the initial start
up funds come not from willing investors, but courtesy of the tax
system. And, say what you will about taxes, their inescapable
characteristic is that they are anything but voluntary. On the
contrary, they are coercive, as is readily known to all those who
have refused to pay.
This government student venture capital program is thus
destructive of capitalism. It undermines the ethic of free enterprise.
Worse, if possible, it misleads students, and is thus a violation of the
canons of education as well. This program should be ended with all
due deliberate speed; that is, forthwith •
..
Government subsidies for scientists? by Walter Block
Dr. David Suzuki is a well known environmentalist, and opponent of the
free enterprise system. In his weekly column in a major Canadian
newspaper, he often engages in special pleading in behalf of one of his
favoured special interest groups: scientists. Let us consider the case he
makes.
In the market place, claimants for our hard earned assets can only obtain
a portion of them with our consent. This can be done directly, as in the
purchase of a consumption item. It can also take place through the
intermediation of an entrepreneur, who risks his own money on the
supposition that he can thereby earn profits (i.e., create something which
consumers will value more highly than the production costs.) That is to
say, businessmen engage in research and development funding in the
hope that its eventual fruits will more than repay them.
But Dr. Suzuki is no fan of the free market system. Not for him the
nicety of asking people for their money on a voluntary basis, of
convincing them that their earnings are well spent on scientific
endeavours. He wishes to short circuit this system, and take by force,
through taxes, the funds the people would not have given by their own
free will for this purpose.
Despite Suzuki's elitism, there is not much of a case that can be made on
economic grounds for this dubious public policy.
For one thing, government subsidies to research may be objected to on
the ground that they encourage the undertaking of wasteful projects;
with public sector involvement, the political agenda tends to supplant
the purely scientific one. As well, it skews research procedures
compared to the optimal allocation which would occur on the market.
If there is any case for governmental interference with the market, it is
in regard to basic, not applied research, because the investor may not be
able to capture the full benefits of his labors. The so called
"unenlightened" short-changing of Canadian scientists, has been
criticized by some economists on this ground. As against that,
government, too, can "fail," and thus market imperfections do not in and
of themselves justify public sector activity.
However, even this case for government intervention is questionable,
since many of these spill overs can actually be captured by the pure
research scientist, in the form of Nobel prizes, prestige, tenure, the
respect of their peers, etc. Since it is impossible to know or measure the
value to society of different R&D strategies, it is unwarranted to
maintain that there would be in the absence of government intervention
an underallocation of funding to basic scientific research. There is, thus,
no economic evidence which indicates that, in the absence of public
subsidies for the activity, it would be too small.
Dr. Suzuki is especially irate at the fact that the U.S., Japan, and several
western European countries spend some 2.5-2.8 per cent of their G.N.P
on scientific research, while their Canadian counterparts have lavished
on them funding at only approximately one half of this rate. This penury
has led to a brain drain: "That's why so many world-class scientists have
left Canada to work in other countries."
But where is it engraved in stone that Canada must have a world class
scientific community, especially given that this is contrary to the wishes
of its citizenry? It is simply illogical to expect so small a country as ours
to be well represented in all areas of human accomplishment. In the
U.S., for example, the scientific community is geographically
segregated. Scientists are huddled in small areas of the country, such as
those surrounding Boston and "Silicon Valley" in California. But this
leaves truly vast stretches of the country - far larger than all of Canada without any scientific community at all. If places like New York, or
Indiana, Ohio and Pennsylvania have little or no scientific
establishment, why should Canada bankrupt itself to keep up with the
Joneses? This would be especially unwise, given the fact that scientific
papers written south of the border appear in English, and are highly
accessible to Canadians at little or no cost. Why not be free riders on
U.S. investment?
- 30October 31,1988
'---- '
2
Government subsidies for scientists? by Walter Block
Dr. David Suzuki is a well known environmentalist, and opponent of the
free enterprise system. In his weekly column in a major Canadian
newspaper, he often engages in special pleading in behalf of one of his
favoured special interest groups: scientists. Let us consider the case he
makes.
In the market place, claimants for our hard earned assets can only obtain
a portion of them with our consent. This can be done directly, as in the
purchase of a consumption item. It can also take place through the
intermediation of an s
entrepreneur, who risk his own money on the supposition that he can
thereby earn
"profits (i.e., create something which consumers will value more highly
than the
production costs.) That is to say, businessmen engage in research and
development funding in the hope that its eventual fruits will more than
repay them.
But Dr. Suzuki is no fan of the free market system. Not for him the
nicety of asking people for their money on a voluntary basis, of
convincing them that their earnings are well spent on scientific
endeavours. He wishes to short circuit this system, and take by force,
through taxes, the funds the people would not have given by their own
free will for this purpose.
Despite Suzuki's elitism, there is not much of a case that can be made on
economic grounds for this dubious public policy.
For one thing, government subsidies to research may be objected to on
the ground that they encourage the undertaking of wasteful projects;
with public sector involvement, the political agenda tends to supplant
the purely scientific one. As well, it skews research procedures
compared to the optimal allocation which would occur on the market.
If there is any case for governmental interference with the market, it is
in regard to basic, not applied research, because the investor may not be
able to capture the full benefits of his labors. The so called
"unenlightened" short-changing of Canadian scientists, has been
criticized by some economists on this ground. As against that,
government, too, can "fail," and thus market imperfections do not in and
of themselves justify public sector activity.
However, even this case for government intervention is questionable,
since many
of these spill overs can actually be captured by the pure research
scientist, in the form of Nobel prizes, prestige, tenure, the respect of
their peers, etc. Since it is impossible to know or measure the value to
society of different R&D strategies, it is unwarranted to maintain that
there would be in the absence of government intervention an
underallocation of funding to basic scientific research. There is, thus, no
economic evidence which indicates that, in the absence of public
subsidies for the activity, it would be too small.
/3)~Suzuki is especially irate at the fact that the U.S., Japan, and several
western European countries spend some 2.5-2.8 per cent of their G.N.P
on scientific research, while their Canadian counterparts have lavished
on them funding at only approximately one half of this rate. This penury
has led to a brain drain: "That's why so many world-class scientists have
left Canada to work in other countries."
,
But where is it engraved ¢n stone that Canada must have a world class
scientific
community, especially given that this is contrary to the wishes of its
citizenry? It is simply illogical to expect so small a country as ours to be
well represented in all
) areas of human accomplishment. In the U.S,for example, the scientific
community is geographically segregated. Scientists are huddled in small
areas of the country, such
as those surrounding Boston and "Silicon Valley" in California. But this
leaves truly vast stretches of the country - far larger than all of Canada without any scientific community at all. If places like New York, or
Indiana, Ohio and Pennsylvania have little or no scientific
establishment, why should Canada bankrupt itself to keep up with the
Joneses? This would be especially unwise, given the fact that scientific
papers written south of the border appear in English, and are highly
accessible to Canadians at little or no cost. Why not be free riders on
U.S. investment?
- 30L
October 31, 1988
3
TAX SUBSIDIES - PART I
BY Walter Block, Senior Economist, The Fraser Institute
Does the government subsidize the people of the country by
neglecting to tax them on all their earnings?
That, in a nutshell, is the essence of the dispute over tax deductions,
tax credits, tax concessions, tax expenditures, loopholes,
preferences, and tax shelters. There are two schools of thought on
this issue. According to one viewpoint, whenever government fails
to collect a tax that would otherwise be due (under an alternative
law) it is equivalent to a subsidy. For this oversight reduces its
revenues -- its tax take falls by this amount -- and this is the same, in
effect, as if the government had first taxed the money away from us,
and then given it back in the form of a subsidy.
Take the exemption for charitable donations, for example. Mr. A
contributes $100 to the XYZ Foundation, and, because of his tax
bracket, he can save $25 from his total tax bill. What is that,
according to the line of thought, but a government grant of $25 to
Mr. A (and indirectly to XYZ)? Had government not allowed the
exemption, it would have cost Mr. A roughly $125 to donate the
same $100 to XYZ. The difference? A subsidy from all the taxpayers,
ultimately to XYZ. It is just as if government had given away $25 of
its revenues.
Nor are we talking peanuts here. According to the Finance
Department which publishes an annual accounting of such tax
expenditures, the cost of loopholes in the personal income tax alone
was $23.4 billion, for 1980. And the following statistics are reported
by W. T. Stanbury and John L Howard in Probing
Leviathan(Vancouver: The Fraser Institute, 1984): Corporate tax
concessions were 67% of all such taxes collected in 1973, 75% in
1974, and 69% in 1975. Based on these findings, Stanbury and
Howard estimate that had cash subsidies been used instead of
foregone tax revenues, the federal budget would have been almost
50% larger than it was in 1979.
But there is a second school of thought on the question of tax
expenditures, and we shall consider it next time.
February/85
TUNAGATE AND BUFFALOGATE
by Walter Block
The Canadian reputation for probity and reliability in matters
commercial has recently been dealt a double death blow.
In the tuna industry, a million cans of this product had to be recalled
in September after New Brunswick Premier Richard Hatfield and
the then Federal Fisheries Minister John Fraser (Vancouver South)
overruled government evaluaters, and insisted , that rancid fish be
put on the market despite its failure to pass the appropriate tests. In
December, another 32,600 tins of tuna had to be taken off the
supermarket shelf, because several dozen were found to contain
"slimy," "off-odour," and "decomposing" fish. This was a small
amount compared to the gigantic fiasco of September, but coming
hard on the heels of that event it all but destroyed what was left of
the reputation of the company involved, Star-Kist, an affiliate of H.J.
Heinz of Pittsburgh, Pa.
In the beef industry, a similar occurrence took place in late 1 985.
Meat from diseased buffalo that could not under present treaties
have been either exported from or imported into this country, was
nevertheless approved by federal inspectors for domestic human
consumption. So-called experts from the Department of Agriculture
-- which had passed on the slaughter of the tubercular animals -said that there was "basically no danger" to consumers, but the
whole event, pardon the pun, left a bad taste in the mouth of most
people.
What have we learned from this unfortunate concatenation of
events? Many pundits have concluded that government must pull
itself up by its bootstraps , so to speak, and endeavour to do a better
job in its certification quality of food we eat. Indeed, the present
Fisheries Minister Tom Siddon (Richmond-South Delta) intends to
review and tighten the inspection procedures of his department.
But the problems run far deeper than that. If a little bit of ministerial
belt-tightening were all that was needed to rectify the situation, this
presumably would have been done in the past and we would not
now be faced with our present crisis of confidence.
Nor is the problem even that of front line people engaging in
mistaken assessments, nor yet that of their superiors rejecting
correct evaluations made from below, as is alleged to have occurred
in Tunagate I. No.
All of these errors are unfortunately the lot of humankind, and will
presumably plague us, and continue to do so, as long as we still
occupy real estate on the wrong side of the Garden of Eden.
The real difficulty is that whenever incorrect behaviour occurs in
the public sector, there is no automatic response which tends to be
self-correcting. In the private sector, in contrast, errors tend to be
dampened down, because those who indulge too frequently are
penalized by losses of profits, and by eventual bankruptcy.
How might the benefits of the free enterprise system be brought to
bear on the problem of assessing the quality of (tuna) fish or
(buffalo) meat or other such foodstuffs? Were the marketplace, not
government, given this vital responsibility, there would presumably
be numerous firms which would enter the industry of quality
certification. Each would undertake to weigh, measure, test, and in
other manners certify the quality of products for their clients. If ever
it were later learned that an error in judgment had been made, the
very life of these independent testing laboratories would become
forfeit. THeir eOreputations, their life expectancy would depend on
minimization or even complete elimination of error. Perhaps even
more important, the prsonal fortunes of the owner of these firms
would hang in the balance.
Compare, if you will, the internal mental states of a federal fisheries
minister, with the owner of a private certification laboratory, which
specializes in a clientele mainly composed of fish processors. The
minister, to be sure, will be determined to do a good job. His
prospects for advancement in government may depend upon it. But
if he or one of his underlings succumbs to less than perfect
behaviour, his losses are relatively minimal. He can still remain as
an MP. His own income is thus secure. Nor is his personal fortune at
risk. He may even rise to cabinet again, although likely in another
ministry.
His counterpart in private industry will suffer far more grievously,
however. There are numerous competing firms, ready, willing and
able to pounce down on him in an attempt to win away his clients.
As we have seen, his entire commercial life is dependent upon the
success of his firm.
Where a fisheries ministry may check and check once again, the
owner of an independent testing laboratory may install far more
elaborate fail-safe mechanisms. He is likely to test larger samples
aof the given universe, the better to minimize error. And in all
likelihood this better process will be given to the consumer at a
lower cost than the taxes which now go to support such ministries.
This is because free enterprise traditionally accomplishes tasks at
one-third to one-half the cost endemic to government. Again, the
explanation for this is the profit and loss system: it rewards and
penalizes entrepreneurs to the extent they can produce a service at
a minimal cost.
Some well meaning people may recoil from this proposal. ~ They
may be aghast at the spectre of the marketplace being asked not
only to produce our foodstuffs, but to certify their quality as well.
They will splutter, "This is too important a task to be left to private
individuals." On the contrary, this is too vital a role to be entrusted
to the well-meaning but blundering hand of government. Would you
really trust the folks who mismanage our post office to the allimportant job of maintaining quality standards of food? If you
would, have you ever heard of Tunagate, or Buffalogate?
Then there is the objection that private testing laboratories would
be subject to bribery. This is a very serious charge, since if such
activity occurs, it will completely undermine the case for a private
sector initiative in this regard. Might it be likely that a guarantor of
the quality of tunafish might accept a large bribe to certify as
acceptable a flawed shipment of this product?
We cannot say this is impossible. stranger and more heinous things
have happened in the history of mankind. But remember: we need
not prove that private enterprise is "perfect". No institution
composed of real live human beings can ever be so. The case for the
market is not that it is without flaw, only that it is likely to commit
fewererrors than the public sector. For bribery is not unknown in
government. (Understatement of the century). In some countries the
practice of bribery is so widespread it has reached epidemic
proportions. It is a way of life. Even in our own country it is not
unknown for "public servants" to be diverted from their duty with
the promise of filthy lucre.
The question is, under which system of certification, public or
private, is bribery more likely to take place? And the available
evidence seems to support the view that bureaucrats are more
likely to be ? than the employees of private firms. Again, we return
to our comparison of the Fisheries Minister and the owner of the
independent testing laboratory. Each has reasons and incentives to
resist the bribery of his employees. But which one will lose more
from a successful penetration of his enterprise by bribers? As we
have seen, it is the private owner, not the minister, who has more at
risk and thus a greaterincentive to combat the blandishments of
bribery.
We must thus conclude this analysis with a call for greater private
sector involvement. No, future tunagates and buffalogates will not
thereby be completely eliminated. But all indications point to the
more modest conclusion that such fiascos will be reducedin future
in this manner.
B.C. construction picketers prove harassment is the key -k N b
VANCOUVER
ARE YOU READY for the latest carfuflie on the B.C. labor front?
Ironworkers' Union local 712 recently rejected _ by a small 86 to 79
vote - an offer from Dominion Bridge. It was to employ 750 workers at
a new steel fabrication plant to be built near Nanaimo. If successful, this
project could have been the entering wedge to an industry aimed at
supplying steel products for the burgeoning oil refinery business in
Alaska.
Yes, the wages offered by Dominon Bridge were somewhat below those
called for in the overblown and unrealistic contracts negotiated by the
Ironworkers union in past better days. But unemployment is a fact of life
in British Columbia
today, and people are far better ofT employed at the $12.85 per hour
offered than not at all.
L
When he heard about this latest instance of the union movement
shooting the labor force in the foot, Industry Minister Don Phillips
responded by creating special union-free economic zones in the
province.
A union-free economic zone is only one variant of an idea that is now
sweeping the world. In the general case, a freeenterprise zone is a
special geographical area in a country within which the usual
prohibitions, red tape, regulations, intervention and bureaucracy do not
apply. Government involvement is limited to providing for the public
safety _ protecting the persons and property ofthe inhabitants.
As well, there are Iimited-free-enterprise I zones, where only one or a
few industries are freed of government interference. For example, there
are free banking zones, free insurance zones, free gambling zones, free
trade zones, where tariffs do not apply, and union-free zones, the type
advocated by Phillips, where unions are not allowed.
What are the advantages of union-free economic zones? Simply this.
They will help create
••
additional employment.
The major economic cause of unemployment is government-mandated
wage rates in excess of productivity levels. If the union demands $17
. per hour, but the worker can only produce goods and services worth
$13 per hour, something has to give. Either the employer will refuse to
comply in the first place, as in the case of Dominion Bridge, or will
eventually be driven bankrupt. But this is perhaps the entire raison d'etre
of labor unions. To drive wages up and up, in strict disregard for
productivity levels - where wages would otherwise be set.
The people of British Columbia, and of the rest of Canada as well, thus
owe Don Phillips a debt of gratitude. If he can succeed in creating
union.free zones, he will have taken a great step toward the reduction of
unemployment. .
Our union legislation was enacted in the first place because many people
thought that without unions, wages would be set at levels dictated by
employers. In point of fact this is untrue. Wages are determined by
employee productivity, and competition between employers, not at the
whim
ofthe boss.
We know this, because we cannot otherwise account for rising wages in
times before the advent of unions in the late 19th century, in industries
untouched by organized labor _ such as domestic service, legal
secretaries, computer programmers - and in places such as Hong Kong, the Phillipines and the southern and southwestern states in the U.S.,
where unions are weak or nonexistent.
September 29, 1984 * • * Hardy souls
Were union-free economic zones instituted, those who favored unions
would merely stay away. Outside these zones, they would still be able
to avail themselves of the benefits they percieve are afforded by unions.
In contrast, only those hardy souls who were willing to take their
chances in a geographical area where present labor codes did not apply
would enter the union-free zones.
But B.C. Federation of Labor President Art Kube claims -free trade or
free enterprise zones exist only in the Third
World, in "countries which have dictatorships or something close to it,
and which suffer from extreme poverty."
In fact, this claim is at complete variance with the facts. Free enterprise
zones of one variety or another are by no means limited to the
impoverished nations of the Third World. On the contrary, there are
hundreds located in Europe, the U.S. and the- Far East. According to a
study on this subject published by the Fraser Institute entitled Free
Market Zones, as of 1980 there were roughly 90 st-ch zones in Europe,
80 in Latin America, 60 in the U.S., 50 in Africa, 35 in the Far East -nd
20 in the Middle East.
And this was only as of 1980. Since then the numbers have grown ever
more. For example, the People's Republic of China had four zones in
1980, and has just announced the creation of 14 more. --Canada is practically alone in not having even one free-enterprise zone.
This is particularly regrettable, given their success elsewhere in the
world.
WALTER BLOCK is senior economist at the Fraser Institute.
Vancouver.
Canada's National Journal of Business, Investment and Public Affairs
C tlb ~ It BI k
Union-free zones could relieve unemployment
,~~ ThE MINIMUM WAGE LAW DISCRIMINATES AGAINST
YOUNG WORKERS
prepared for the "Financial Post"
by Walter Block, Fraser Institute, Vancouver, B. C.
B.C. Labour Minister Terry Segarty has a problem, and is resolved to do
something about it in
the fall.
The Province of British Columbia has the lowest minimum wage rate in
the nation -$3.65 per hour - and tremendous pressure has been placed
upon him to raise it at least to $4.00 per hour, the average level
obtaining in the other nine provinces.
At first blush, this would seem like a good idea, even one that is long
overdue. If, as its name implies, the minimum wage law can boost
wages up to whatever level is prescribed, that is to say set a floor under
incomes for the poor, then why not? Surely the presently wobbling
economy in Lotus Land could use a shot in the arm of that sort.
But a moment's reflection will show that this is a mirage. For example,
if prohibiting compensation below some arbitrarily determined level can
really enhance salaries, why stop at the paltry, mean and niggardly $4.00
level? Why not go for, say, $40.00 per hour, or even better yet, really
reach for the stars and demand that no employee be paid less than $400
per hour?
The answer is obvious. To mandate that a skilled craftsman with a
productivity level of $25.00 be paid $400.00 is to invite disaster. Any
employer who complied would rack up $375.00 per hour in red ink.
Even at the more modest $40.00 per hour, any such firm would still lost
$15 per hour .and thus be forced into eventual bankruptcy.
No, the reason wages are as high as they are has nothing whatever to do
with legal compulsion. It is because productivity is relatively great in
this
country, and because salaries tend to be equal productivity levels, that
we enjoy our relative
prosperity.
True, a minimum wage level of $4.00 would not threaten the livelihood
of the person who can produce $25.00 worth of goods and services per
hour, but it certainly can put at risk the jobs of people with lesser skills.
For example, the employment of an individual who can only create
goods valued by the market at $3.25 per hour, would sure to be
obliterated by a minimum wage level of $4.00
per hour.
How can we test the economic principle that high minimum wage levels
lead to relatively increased unemployment rates for unskilled workers?
One way is to calculate the unemployment rates of youthful Canadians
as a percentage of those of the more highly productive adult employees
in this nation, and then compare this figure with the minimum wage
levels which apply in each of the provinces. (We choose workers
between 20 and 24 as our control because this is the youngest group
subject to the "adult" minimum wage law).
Unemployment Rate
for 20-24 year olds Provincial
relative to employees Minimum Wage
aged 25-i. Level
204% $4.00
213% $4.00
237% $3.80
206% $4.00
251% $4.00
289% $4.30
257% $4.25
182% $3.80
190% $3.65
n.a. $3.75
Newfoundland Nova Scotia New Brunswick Quebec
Ontario Manitoba Saskatchewan Alberta
British Columbia Prince Edward Island
Source: Statistics Canada, Labour Department, May 1985
The results are painfully obvious. Manitoba, with the highest minimum
wage level ($4.30) has the largest unemployment rate for its young
workers,
relative to the general population (289%). Saskatchewan, with the next
greatest level ($4.25), weighs in with the second biggest relative
unemployment rate for youth (257%). And at the bottom of the pack in
terms of the disenfranchisement of their young people, come B.C. and
Alberta with two of the country's lowest minimum wage levels.
Are you listening, Mr. Segarty?
Water
by Walter Block, The Fraser Institute, Vancouver, B.C.
"Water, water, everywhere, but not a drop to trade." That, except
perhaps for water in containers, seems to be the Canadian policy on
the matter.
Says International Trade Minister John Crosbie, "We're not going to
let the Americans have any of our water. That's our policy." And
according to Flora MacDonald, "We have introduced a water policy
with regard to diversion of water in this country - prohibiting it."
Nor is this strategy a partisan one. On the contrary, to the extent
that
Canadians are unified on anything, this would seem to apply to this
one issue. Liberal Leader John Turner has been peppering the Tories
for assurances that large scale diversions of fresh water not be
allowed, and NDP trade critic Steven Langdon has gone so far as to
call for emergency legislation on this matter.
As can be expected, this sentiment is highly popular, too, in the
environmentalist community. Mel Clark of the Rawson Academy of
Aquatic Science has demanded that the U.S.-Canada free trade
agreement be amended specifically to exclude water. And
Waterwatch Canada has released a Gallup poll which indicates that
seven out of ten Canadians don't want water, snow or ice exported
to the U.S., and would be less likely to support a political party that
allowed such occurrences. Water was named as our most essential
natural resource in this survey, followed, distantly, by farmland and
forests.
Virtual unanimity of opinion, however, hardly guarantees common
sense. It may
only indicate that people tend to think in the same tired ruts. And
this,
unfortunately, applies to the present case.
Among the disquieting elements in the present discussion is that it
doesn't seem to have occurred to anyone to determine the price we
might be offered in return for our precious but renewable, water
resources. All participants act almost as if the question were one of
giving this fluid away, for free. But trade is precisely that. It is not
the unilateral making of a gift; it is, rather, an exchange of
commodities. And under voluntary exchange, the presumption is
that both parties gain; if they did not, there would hardly be mutual
agreement to engage in it.
Suppose, then, that our neighbors to the south were to offer us
$10.00 per quart for this "vital bodily fluid." (This is how the
commodity was referred to in the movie "Dr. Strangelove.") Is there
any Canadian who would not be deliriously happy to sell water to
the U.S. on these conditions? Why, by sending them a few trillion
gallons under these conditions -- a mere pittance in terms of the
astronomical availabilities- we could all be rich beyond our wildest
dreams.
Naturally, no one would rationally offer such an exalted price under
today's conditions. Perhaps on the moon, or Mars, one day far in the
future, not here and now. But the point still holds: crucial to a
determination of whether it is in the interest of Canadians to sell
water is what we would be offered in return. Without knowing that,
we are not in a position to accept or decline such an offer.
What if the price offered were more reasonable? Say, one penny per
barrel?
Then, the advantages and disadvantages might be more evenly
balanced. Perhaps the best result under these stipulated conditions
would be to meet part of the demand, in an attempt to obtain still
more advantageous terms of trade.
There is a great difficulty, however, in any such scenario. Water,
unlike other natural resources, is not privately owned. Rather, it is
possessed on much the same basis as are commodities in the preperestroika Soviet Union. That is, the government owns them.
Under the inspired leadership of Chairman Gorbachev the Russians
are battling
valiantly to overthrow almost a century long dependence on central
economic planning. Unfortunately, at the very time the Communists
seem to be embracing the teachings of Adam Smith, politicians,
pundits and professors in the west are urging a move in the very
opposite direction. (The reactions against free trade, privatization
and deregulation are cases in point.)
It will not be easy to privatize water resources. Indeed, the very idea
will appear ludicrous to many. But if we are to put water exports on
a business basis, if we are to become international "drawers of
water" at a time of drought, no less must
be undertaken.
- 302
The Exploitation of Women's Fashions
According to American podiatrist William Rossi, writing in the Journal
of the American Podiatry Association ("High Heels - the Agony and the
Ecstasy"), women should not give up their high heeled shoes because
they are sexy as all get out. Even though they're uncomfortable, and
sometimes hurt like hell, "the high heel may well be the most potent
aphrodisiac ever invented" said the good doctor. "When worn by
women, the high heel sensuously alters the whole anotomy -- foot, leg,
thigh, hip, pelvis, buttocks, breasts, etc."
Strange sounds, indeed, emanating from the respected journal of the
American Podiatry Association, usually devoted to more medicinal
concerns. One would be temped to dismiss this article as the personal
musings of a single disturbed foot fetishist -- were it not for the howls of
outrage and dismay sent out by the anti-capitalist, radical feminist
chorus.
Based on this reaction, it would appear that the purpose of high heels is
not at all to make women more sexually attractive to men. No, they have
a far more insidious function -- to solidify business control over ladies
fashions, the better to raise profits.
According to this viewpoint, firms in the fashion business can
manipulate ladies clothing styles, hem lengths, materials, colours,
shoulder styles, frills, and certainly heel heights. They make sure that
each season requires changes in one or more of these features, so that
clothes bought last year are no longer in style, and new ones must
continually be purchased. This is the way in which the outburst by Dr.
Rossi can be explained, according to the radicals: the warehouses must
be overflowing with boxes of high heeled shoes, and the podiatrists of
the nation have been sent out to flog this unsold surplus.
There are several flaws in this analysis, however. If the barons of
clothing and footwear really exercise such control over women's
purchasing habits, how is it that warehouses full of unsold goods ever
develop? Why do bankruptcies ever occur in the fashion industry? Why
does such manipulation occur only in women's styles, not men's? (Here,
except for slight changes in lapel or tie widths, it is extremely difficult to
tell if a suit is out of fashion.) Is it because the clothing and shoe moguls
are sexists? How then to account for the fact that many of the leaders
and innovators in women's clothing design are females? And why, pray
tell, is there such fast, ferocious and furious competition in designer
jeans, perfume, jewelry, and between the department stores which sell
ladies fashions?
Moreover, how can such monopoly-like control be wielded by so many
tiny firms, who are far too numerous to even consider colluding? Some
of the lowest industrial concentrations are found amongst the shoe and
leather glove factories, hosiery and knitting mills, and in the fur goods
industry. Women's clothing factorie~ and women's clothing contractors
have the lowest, and the next to lowest four-firm concentration ratios,
6.3 per cent and 7.1 per cent, respectively, of all the almost two hundred
different industries covered in this regard. (A four-firm concentration
ratio is the proportion of the industry's sales, profits, capitalization, or in
this case, value of shipments, accounted for by the largest four firrns.)
No. it is impossible to sustain the thesis of a malevolent capitalist plot
whose sole aim is to profiteer by making women physically
uncomfortable in their clothing and shoes.
An alternative explanation might run along the following lines: each
year, the fashion designers hold their regular seasonal showings, where
they exhibit their new lines -- and then advertise like mad in order to
gain public acceptability. But the department shoe buyers -- the
intermediaries, or agents, for the women who will make the actual final
purchases -- exercise a thumbs up or thumbs down approval or
disapproval role.
If women accept uncomfortable shoes, or clothing -- whether motivated
by a desire to appear attractive to the opposite sex, or as a result of
custom, or for whatever other reason -- it is a result of their own free
will. They always have the option of wearing non-fashionable styles,
and paying whatever psychic cost this entails. Most men, too, might
prefer to wear jeans, loafers, sports shirts and other leisurewear to
business and formal occasions rather than neck-constricting ties, dress
shirts and suits. They often take the uncomfortable path, just like
women, not because they are puppets pulled on strings wielded by
vicious sexist capitalists, but for a myriad of cultural, social and
psychological reasons.
- 303
I^A^ l^
Capitalism, Old and New by Walter Block,
The Fraser Institute
Critics of the free market have recently taken to distinguishing and old
and a new version of capitalism. In their view, the capitalist pigs of
yesteryear weren't really so awful after all, at least compared to the
businessmen of today. The old timers may have abused our economy,
but at least the robber barons of the 19th century left us a legacy of
railroads, steel mills, automobile assembly plants, oil refineries, mines,
steamships, and much, much more. They created meaningful goods,
services and jobs on a massive scale.
But what do the modern paper-pushing junk-bonding yuppie take-over
artists leave in their wake? Nothing. Unlike their forebears, this new
breed of capitalist adds no wealth to our nation.
This attack on contemporary capitalism appears well taken, but only on
the surface. First of all, not all capitalists in years gone by were actually
involved in the production of physical goods or tangible services.
Then, as now, market participants provided such "intangibles" as
insurance, accounting, banking, intermediation, arbitration, etc.
Second, one has only to mention recent consumer breakthroughs to
realize that we have benefitted from a whole host of new-fangled
products in the present era:
computers, VCRs, bigger and better televisions, electronic games, air
travel, more and more sophisticated telephones and other
communication devices, etc. And the future, with robotics, genetic
engineering, new medical discoveries, bodes well to provide us with
even more of the same.
In order to see the fallacy of this challenge, we must realize that the
capitalist is, at bottom, an entrepreneur. All entrepreneurs have in
common an ability to predict future demand, and to mobilize land,
labour and capital to best meet consumer needs, especially those that
have not yet become apparent.
In order to do this, the entrepreneur engages in two sorts of speculations:
through time and through space. In the latter case, he perceives that the
market price of an item in two different areas deviates by more than
transportation costs alone could account for. He purchases in the
cheaper market, and sells in the dearer, thus transferring material from
those who value it less to those who value it more. In the process, he of
course enriches both, otherwise neither would have cooperated with
him. In the former, the entrepreneur thinks he notices a discrepancy
between factor and final goods prices, in this case to an extent greater
than that which could be accounted for by the rate of interest. In other
words, land, labour and capital (and this includes new ideas) are now
trading in some markets below the prices that the ultimate goods shall be
able to be sold for, when finally produced. So the entrepreneur takes a
risk. He purchases these items, and ofttimes mobilizes them for entirely
different and better purposes.
But he never physically creates material goods, even in
the "good old days" of capitalism. He merely takes
factors of production that otherwise would have ended
up, say, in the horse and buggy industry, and diverts
them to other alternatives.
Although this new critique of the market has a veneer of
freshness, it is actually as old as the hills. Can't you just
picture one cave man telling another that although
exploitative, at least the old hunting system produced
real red meat; in contrast, the present "gathering stage"
of grubbing for roots and berries does not add anything
substantial to the economy. Or a Luddite complaining
that only farming is a legitimate economic activity; in
comparison, the machinery of the "robber barons" is
superfluous and superficial. (Actually, this is very
similar to the message of the ^•1)
physiocrats, an
early school of economics.)
In recent history, we have passed through the
agricultural to the manufacturing stages. We have now
arrived at the informational revolution. Sometime in the
future, perhaps, we will move toward an economy based
on something altogether different, perhaps space
exploration. And then, the interventionist of the day will
muse that the informational stage at least provided
computers; space exploration will be just a waste of
time, in his opinion, adding nothing to the well being of
those still on earth.
THE DEALER IN SPARE BODY PARTS I
by Walter Block, Senior Economist, The Fraser Institute
Baby Fae with a transplanted baboon heart; Dr. Barney dark, with a
transplanted artificial heart; hundreds of heart transplants, starting with
those
performed by the famed Dr. Christian Barnard of South Africa; these are
amongst the episodes that have seized the headlines, and captured the
imaginations of millions of people.
But behind the headlines, there are numerous other medical procedures
which have substituted diseased organs with healthy ones on an
interpersonal
basis. For example, liver, bone marrow, blood, cornea, eyes, and kidney.
The
Organ Donor Association of the U.S., however, reports that only X
people have
signed the donor card, which gives permission for the various body parts
to be
taken and used in medical procedures upon the sudden demise of the
grantor. In
Canada, the figure is Y. The Red Cross, moveover, reports a blank
shortage of
blood supplies, especially (Walter, the insert for page 2 that goes here
does not
make sense.) The reason Baby Fae had to make do with a baboon heart,
and Dr.
Barney dark with an artificial one, was that there was not a sufficiency
of
human hearts available for transplant.
The problem with present institutional arrangements is that the free
enterprise system is not fully allowed to operate. To be sure voluntary
organizations — such as Z Associations — are allowed to do their good
works
and these, along with all other non-governmental initiatives must be
considered
part of the marketplace. But commercial concerns, buying up spare body
parts
and reselling them at a profit, are prohibited in most places in the world,
and
where they are not prohibited outright, their blank is severely limited.
And with good reason, in the view of many people. The very idea
conjures
up visions of ghoulishness, Frankenstein experiments, grave robbing.
Count
Dracula gone beserk, Robin Cook plots, and other unsavory scenarios.
Imagine.
Allowing the evil merchants of profit to get their grubby hands on such
an
enterprise! By its very nature, these people contend, bodily transplants
must be
left to the voluntary private sector, or perhaps made a responsibility of
government.
But there are problems with this view. The voluntary organizations, as
we
have seen, have not produced the &quotgoods", at least in sufficient
quantities. And
there is always the danger that the government, the embodiment of force
in
society, will use compulsion to attain the goal the voluntary sector could
not
accomplish. The spectre of the state compelling people to sign these
donor
cards, despite their religious or ethical beliefs to the contrary, is one that
we
can do without, thank you kindly.
How would a marketplace in used body parts function? It is impossible
to
ever fully anticipate the actions of 100's of profiteering entrepreneurs,
each
reading for an end (a sufficient quantity of raw material for transplants)
beyond
their intention (profit). However, a few general principles become clear
upon
consideration. One possibility, for example, would be to continue the
present
policy of signing donor cards, only now these commercial firms could
offer
money to those who signed.
This could not help increase the numbers of donors. And if it did not do
so
sufficiently to supply all those in need of organs, the firms would have
to raise
prices paid until it did. In the case of blood, the Red Cross does, of
course, pay
for its supply. But its prices are too low, as shown by the fact that only
insufficient quantities are brought forth. As well, it has failed to adopt a
policyof differential prices, to reflect the relative shortages of the
various types of
blood. And there is no reason to believe that these private companies
would not
be able to increase the supply of this &quotfactor: in accord with
demand.
Entreprenuers in every other field of endeavour known to man — some
mundane,
some exotic — have been able to accomplish this task with no fuss or
fanfare.
But this would mean, would it not, that organ receipents would have to
pay for
these items. And isn't that unconscionable? Shouldn't people have the
right to
receive these vital items, necessary for life itself in many cases, free of
charge.
To make this claim is to laugh. Why should people receive bodily parts
for
free? These items have value. To mandate that recipients have them at
no
cost is to prohibit the donors, and the middleman - facilitaters, from
being paid.
After all, we do not prohibit the farmer, or the miller, baker, retailer,
from
earning money from the sole of bread, even though bread (and other
food) is
also necessary for life. If we did, we would find bread to be in short
supply, just
hike human organs.
Under the present system of prohibited or controlled payments, many
potential organ recipients thus cannot receive them. Surely they would
be
better off having them, even for a fee, than being forced to do without,
with
the dubious privilege of not being required to pay for what they cannot
in any
case have.
Suppose that under these conditions, some intrepid entreprenuer were
willing to start up a black market service in this field. That is, he would
offer
large sums of money to those willing to sign organ donor agreements
with him,
and would charge even larger amounts to doctors in need of these items
for
purposes of transplant. (We assume away the insuperable legal
difficulties that would confront our organ businessmen at both ends of
the transaction).
The question is, would such as underground badily parts company be a
benefit or a detriment? One argument for the latter view is that the firm,
if
successful, would tend to undermine respect for law and order. It would
be
thumbing its nose at the duly constituted authoriteis, who have so far
remained
adamant in declaring such 'ghoulish" sales and purchases illegal. As
against
that, it could be argued that any legal code which in effect if not by
intention
consigns innocent individuals to death (heart failure, for example) or to
lives of
misery (kidney dialysis machines) richly deserves to be ignored.
But one point is clear. Our black market &quotghoul" will benefit organ
donors, by offering them financial renumeration, as well as the
satisfaction of
knowing that the organs they may donate upon their devise will enable
others to
live. By doing so, it will, as we have seen, increase the number of organs
made
available, and this will be of inestimable benefit to those who might
otherwise
have been forced to go without.
Now let us consider a case that really does have ghoulish attributes. Let
us suppose that a marketplace in used body parts could not only work
with donor
cards, where the organ transfer takes place after the death of the donor.
Let's
assume that there would also be a market where live donors give up
parts of
their body — and then go on living. A heart transplant would be out of
the
question, but people could give up one (or even two) eyes(s), or one
kidney, etc.
Naturally, the price for a bodily part on this basis would tend to be
higher
than for that supplied only upon the death of the donor. But still, both
parties to
the transaction would benefit.
True, the donor would give up a precious part of his body, at great
inconvenience and rist, but the price he receives would more than
compensate him for this onerous renunciation, otherwise he would not
agree to do so. And of
course the recipient would not agree to pay the outrageous expense
unless the
recipient of the organ was worth even more to him.
But what about the case where the recipient was a old ne'er-do-well,
lazy,
shiftless millionaire heir, and the donor a young, healthy, brilliant, hard
working
person who had the misforturn to be born desperately poor, and needs
large
amounts of money for food to keep his family alive. Wouldn't an organ
transplant from the latter to the former be exploitative? Anti thetical to
public policy and the general good? The very idea seems replusive to
most
people.
Part of the unsavoriness, however, arises from the nagging suspicion
that
it is unfair that the ne'er do well is fabulously wealthy, while the hard
worker is
desperately poor. Let us banish this from consideration, though. It is
extrinsic
to the case in point. Given the justice of their initial endowments of
wealth, it
is easy to see that both parties gain from the exchange, in that neither
would
enter into this commercial venture in the absence of such an expectation.
And the experience of the Ethiopian famine of 198^ should underscore
this
point. If one of these unfortunates had been willing to give up a bodily
part, so
that he and his fellow sufferers could live, then any law enjoining such a
possibility would not only be a grave injustice, but would consign these
people
to death.
DEVIL MUSIC
by: Walter Block, The Fraser Institute
A California teenager short himself in the head while lying in a bed he
had just made -- an action urged in a suicide song by Ozzy Osbourne, a
heavy-metal British rock star, brought to us courtesy of CBS Records. A
part of the lyrics states: "... made your bed, rest your head, but you lie
there and moan, where to hide, suicide is the only way out."
As a result, the father of the young man, Mr. Jack McCollum, is suing
CBS Records, the distributor. Jet Records, the recording company, Ozzy
Osbourne the singer, plus two songwriters. He is seeking compensatory
and punitive damages which could amount to millions of dollars. He is
doing so, according to lawyer for the plaintiff Thomas Anderson a bornagain Christian, because under California law it is a felony to encourage
anyone to commit suicide, "and this is exactly what these records do."
In addition to the gory details, the case is buttressed by a finding in the
coroner's report that the young McCollum committed suicide "while
listening to devil music."
There are several logical difficulties with the suit, despite this official
report. First of all, it is a free speech issue, Mr. Anderson's views to the
contrary notwithstanding. Impressionable people might be "driven" to
suicide by all sorts of artistic offerings, besides the lyrics of rock music.
If plaintiff wins his suit, there will be a chilling effect on novels and
plays as well. Will any author dare include a scene in which one of the
characters commits suicide? Further, there will be the risk that serious
discussions of the phenomenon, even such as the present one, will some
day be held liable for leading to untimely self-afflicted death.
Secondly, there are grave philosophical problems with the proposition
that one person can cause another to commit suicide, whether directly
through exhortation, or indirectly, via movies, plays, or in our case,
songs. This view flies in the face of the doctrine of free will, upon which
our entire criminal code is predicated. If people are not responsible for
their own acts, how can it be just to punish them? And if they are, how
can we hold one person guilty for the suicide of another?
The plaintiff's argument in this case deserves to be rejected. Further, he
should be made to pay the defendant's expenses, and charged for
bringing a frivolous and harassing suit.
- 30 -
410 words
Drugs and the Olympics by Walter Block,
Fraser Institute
Canada's Ben Johnson was stripped of his gold medal for the 100 metre
dash in the 1988 Seoul Olympics. According to his coach Charlie
Francis, this instance of drug taking is only the tip of the ice-berg.
Numerous other Canadian athletes have been implicated in the use of
anabolic steroids, and world class athletes from several other countries
have been implicated.
The main reaction on the part of the leading sports authorities is a call
for a "war" on muscle building medications.
There are several shortcomings with this approach, however. For one
thing, there is a matter of arbitrariness. Why is it that anabolic steroids
are banned while other performance enhancing drugs, such as cortisone
and Xylocaine, are allowed? Even aspirin, for that matter, is a
performance-enhancing drug.
For another, who gives the Olympic and sports authorities the right to
ban anabolic steroids? They are widely used in Canada for patients
suffering from rheumatoid arthritis and other debilitating diseases, and
are available upon prescription.
Ben Johnson's doctor, after all,
prescribed them for him, at least according to present testimony.
The case of Eleanor Holm, a U.S. swimmer entered in the 1936
Olympics is a case in point. Avery Brundage, President of the 1.0.C. at
that time, banned her from competition because she had imbibed a glass
of champagne at a ship's party on the trip across the Atlantic to Berlin.
There are many who would question his right to have done so.
A further difficulty is that the war against these particular-performance
enhancing drugs seems almost as futile as the war against addictive
drugs such as cocaine and heroin. Keeping pace with the development of
newer and better body building pharmaceuticals, and often outstripping
it, is the technology necessary to disguise their use.
Whatever the shortcomings, there is a clear need to establish some sort
of rules that everyone must follow. "A level playing field" is a much
abused notion when applied to free trade, but when it comes to sports, it
is vital. If there is no commonality to which sports participants must be
held, the whole point of athletic competition vanishes. We might as well
assign some people to the starting line, and others either 10 yards
behind, or in front.
The big question is, What must be equalized? In high schools and
colleges, the amount of training is subjected to egalitarian
considerations: team practices are limited to a specified number of
weeks. This is not done in professional endeavors. In swimming there is
virtually no difference in the type of equipment used. In sailboating and
car racing, there are gigantic disparities. Here, the competition is as
much between men as between gear. Bicycle racing could equalize the
apparatus, by random assignments, but has chosen not to do so.
The point is, some sort of equalization must be imposed, but its
dimensions are not given to us from on high.
The present scandal stems from the fact that commonality cannot now
be achieved. We can impose stricter and more frequent controls, but we
can only hope that the testing mechanisms will be able to overcome
those which mask drug usage.
A more radical solution to the present drug scandal is the suggestion that
the rules be relaxed completely: allow everyone to take the muscle
building drug of his choice. The problem with this is that we will no
longer know of what the human body - unaided by drugs -- is capable;
we will only see the result of the combination of such artificial
stimulants plus training. (Yes, these materials may be harmful. But we're
talking about adults here, and they have the right to weigh the pros and
cons and decide such issues for themselves.)
A compromise is to urge the creation of two completely different
sections of the Olympic games (and all other related professional sports
activities). One would be an "open" division, where medications of all
kinds and varieties would be allowed. The other would be a "closed"
division, open only to the drug free. Every subsequent world record
would have an asterisk, or not, depending upon drug usage.
This is no panacea; no compromise known to man ever is. We would
still face the difficulty of drug users posing as drug free athletes. But this
compromise would go a long way toward resolving a most perplexing
difficulty, since with two divisions, there would be less incentive to
cheat.
- 30 -
The Economics of the Parole System by: Walter Block, The Fraser
Institute, Vancouver, B.C.
In 1971 Allan George Foster brutally raped and murdered
his 18 year-old sister-in-law. He was caught, sentenced and
served 10 years of his jail term.
He was released in 1981 on full parole, having been
"rehabilitated," at least in the opinion of the so-called
expert psychiatrists responsible for rendering this decision.
The parole officers were unequivocal in their positive
assessment of Foster. Said Vasha Starrie, his case
management officer at Agasiz Mountain Prison: "I thought
he had dealt with the (1971) offence and had developed
character features that made him open and reliable."
Further "He is one of the sanest people I have ever met ... a
highly sensitive and intelligent person." According to
psychologist Clifford Ratzlaff, who subjected Foster to an
intensive battery of tests, "He appears to have overcome the
life stress that caused him to flip out (in 1971) and take the
life of another person."
Late last yenr. however, this sane well-adjusted person
struck again. This time the victims were his common-law
wife Joan Pilling, 34, her daughter Linda Brewer, 12, and
Brewer's school friend Megan Sue McCleary, also 12.
Luckily for society, he committed suicide after this
outbreak, because this second series of ghastly crimes
would have allowed him yet another parole after 25 yearsprovided he could have convinced another set of dogooding experts of his intrinsic goodness.
What does this gory tale have to do with economics?
The murderer's own assessment of his situation was
apropos to this point. Said Foster: "There is only one thing
crazier than me and this is the society that let's me do what
I do."
But it is possible to pinpoint more exactly the precise locale
of the craziness in 49
society. First and foremost it is a
system which severs the connection between action and
responsibility. The psychological experts, and the parole
board members who rely on them make decisions that
affect the rest of us in crucial ways. Yet, they are neither
rewarded when they correctly assess these prisoners, nor,
more important, are they penalized in any way when they
are tragically wrong. Adam Smith stated so eloquently that
it is not from benevolence but from self interest that the
butcher and the baker provide their wares for us. But if
these entrepreneurs had as little selfish interest as do the
parole boards, we would all starve.
Secondly, we must note that the Foster case is symptomatic
of government failure. The state bureaucracy necessarily
lacks the magic of the marketplace, and the supurb
incentive system imposed by the lure of profits and the fear
of losses. Incarceration of prisoners and parole are now
responsibilities of the public sector. Given this state of
affairs we must look toward privatization of these roles as a
means of improving matters.
Government is clearly
derelict in its duty; and intrinsically so. It is thus difficult to
see how private enterprise could do anything: but bring us a
more socially responsible parole system.
EXPO
Walter Block The Fraser Institute
Expo has gone out a blaze of glory, with a gigantic fireworks display
accompanied by a Provincial-wide orgy of mutual
self congratulation. In the afterglow of this splendid
occurrence, critics can scarcely expect tci be heralded. However,
certain aspects of the World's F'air need to be examined so that
we do not draw the wrong public policy conclusions from it.
That there were successes, no one can doubt. The original
plans called for some 13 million visitors; in the event, over 20
million showed up, courtesy of good weather -- and heightened
terrorist activities in Europe. In addition, EXPO was expected
to lose a cool $310 million although the final and definitive
iJigures are not yet in, it looks as if the shortfall will be
significantly below that figure. In fact, the triumph was so
great that the Social Credit party was able to rely heavily on
this factor for its recent electoria1 win at the po11ing booths.
But there were neqative aspects as well, and when these are balanced
against positives, it is unclear that the people of British Colurctbia really
turned out to be beneficiaries.
Expense
Let us first consider the large loss of money involved.
This was an expenditure of huge proportions. While ordinary
private businesses do ofttimes indeed suffer financial setbacks,
they are never undertaken on purpose, nor contemplated with
equanimity in advance, as was done in this case. And the reason
is simple. People don't usually intend to lose their own hardearned cash. Those who do so, usually end up with little or
nothing to show for their efforts. Had Jimmy Pattison treated
revenues earmarked for EXPO s his own, for example, it is
unlikely in the extreme that he would have spent them in this
way.
There is a social .justification for this phenomenon as well.
Business losses imply that the revenues spent on the product by
the entrepreneur were not valued as greatly by the paying
customers. If EXPO ends up losing $300 million, we can deduce
from that fact alone that the public valued the resources spent
on this World's Fair precisely this much more than the benefits
derived therefrom. This means that consumer welfare would have
been $300 million higher had these monies been allowed to stay in
the hands of their original owners, instead of being taken from
them in the form of taxes. Had these dollars not been allotted
to the public sector, they could have been spent in the ordinary
way-- on toasters and skateboards, radios and cabbages, videos
c-ind furniture -- and the people of the province would have been
better off to the tune of some $300 million.
A Party
One argument in behalf of EXPO, intended to defend it against the
charge of losing money, is that this event "was one vast party in behalf
of all of British Columbia, and like it or not, parties cost money."
True, all too true. Festivities are indeed indeed expensive, and the
bigger and more lavish they are, the more they cost. But gala events are
usually put on, and paid for, by the party giver. The invited quests may
bring a present (although this is never mandatory) , but they are not
forced to pay an admission price at the gate, nor to make up any
shortfalls through increased taxes which would otherwise not have had
to have been collected. If the leading politicians of B.C. had really
wanted to give a party, and to do so in the manner in which most people
engage in this activity, they could have invited anyone they had wanted
to, but paid for it with their own money!
Tourism
A more serious attempt to defend the vast EXPO losses is to claim that
they were really an investment in tourism for the province. But this, too,
is problematic. If promoting future visits from out of towners were the
goal, why build EXPO? Why not just subsidise their travel costs to
Vancouver? After al1, it was recognised by everyone that EXPO would
not last forever. The fair was seen only as the bait through which hordes
of foreigners could be induced to see the many natural beauties of our
province. But surely we could have enticed many more people to the
lower mainland by paying their way here, than by setting up a world's
fair, and charging them for the privilege of viewing it.
Even this criticism does not go deeply enough. It accepts as given the
desirability of subsidizing the tourist sector, and argues only that EXPO
was an inefficient means toward that end, But we can ca1l into question
the premise that it makes good public policy sense for government to
artificially promote tourism.
Once the issue is posed in this manner, it is not clear that there is a case
for taking the revenues of the populace as a whole and diverting them
into any one industry. First of all, why tourism? Why not forestry, or
mining, or real estate, or farming, or frisbee production, for that matter?
All of these employ thousands of people (or perhaps could, with a heavy
enough subsidy), and are fine upstanding industries in their own right.
Why is their claim to government largesse any the less than that of
tourism?
Secondly, if the EXPO ploy succeeds and the tourist sector does indeed
receive a shot in the arm, the owners of the individual hotels, motels,
trailesr camps, restaurants, gift shops, etc, are the ones who will mainly
benefit. Why should they be allowed to recoup, based on the investment
funds derived from the entire populace? Is it fair to ask all British
Columbians, many of whom are far poorer than the businessmen in the
tourist sector to finance investment aimed to help the latter? Such
perverse income redistribution is hardly in the public interest.
Further, in the free enterprise system, it is the consumer, not the
producer, who is presumably sovereign. Money is not funneled into
firms or industries at the behest of businessmen anxious to enhance
their revenues, by government bureaucrats, who desire to control other
people's property. On the contrary, disbursements are based solely on
the desires of the paying customer. Given this system, there is no
warrant to take money from all the people, and simply give it to the
tourist industry (in the form of EXPO), since had consumers wished for
this occurrence, they were perfectly free to re-order their priorities on
their own accounts.
Every penny spent on EXPO, it must be remembered, was a penny that
could not be utilized for other goods and services. And in the view of
the consumer, welfare was enhanced by spending it his own way, not in
the manner designed by the well-intentioned government in Victoria,
for a World's Fair.
Lottery
Had EXPO been financed through tax revenues, the case against it
would have been simple, complete, and airtight. People would have
been forced to pay through taxes for an item they could have supported
through the stock market, but their funds were never solicited in this
manner.
However, the losses from this event have been funded not through the
Finance Ministry, but out of the revenues of the B.C. lottery system.
This completes the analysis, since it can no longer unambiguously be
contended that the citizenry was forced to yield up revenues against its
will, as would be true for the tax system.
Despite this complication, there is still a case to be made against the
financing of EXPO. For one thing, there is a curtailment of full free
choice involved here: while the public can indeed choose whether or not
to buy a lottery ticket, options have been circumscribed by the fact that
only the government may legally offer to provide such a service.
Apart from this, the monies raised from the lottery could have been used
to defray the provincial deficit, or to 1ower other taxes. This would have
benefitted the public, given that the people are able to spend their money
in a way that can better promote their interests than can governement
expenditures. As a result, even if no taxes at all are used to pay for the
EXPO losses, taxes will be higher than they otherwise would have been
but for this event.
The world's fair thus cannot be justified as a gigantic provincial party,
nor as an "investment" in tourism, or excused on the basis that it was not
supported by tax revenues. If anything, EXPO most resembles the bread
and circuses given to the populace by the Roman emperors two
millennia ago. And it certainly cannot he defended on these grounds, at
least not in the modern era.
Flag Burning by Walter
Block
In the libertarian philosophy, free speech rights are interpreted
as but an aspect of the more basic rights to private property.
For example, if someone breaks into my house at 3:00 A.M.,
and starts reading in a loud voice the sonnets of Shakespeare,
he may not properly object if I toss him bodily out onto the
street that I have violated his rights of free speech. He has no
rights of free speech -- on my property. He has such rights
only on his own property, or on that (a hall, auditorium,
newspaper advertisement, etc.) which he has rented from
someone else.
- 30
December 27,1989
The Financial Post
Opinion
March 28, 1981 19
Column by Walter Block
There is
evidence foreign
aid can often be
counterproductive
The prime minister's recent whirlwind globetrotting trip on behalf of a closer NorthSouth dialogue makes it a good time to review Canadian foreign aid policy.
At first blush, aid to underdeveloped countries seems noble, humanitarian, and
serendipitously, in our own national interest as well. After all, Canadian aid to the less
fortunate nations surely must save people from starvation, encourage the development
of primitive economies, increase our exports and enhance freedom by forestalling the
spread of communism.
There is much evidence, however, showing aid programs to be questionable means
toward these worthy ends. Further, there are indications that private trade and
investment, currently shackled and hampered by tariff and import barriers in the
Western industrial countries, may be more efficacious than intergovernmental
transfers.
Economic development
Food grants arc a major part of foreign aid, and Canada is the world leader here,
meeting about 30% of its bilateral commitments in this form. (Canada funnels 70% of
its total donations bilaterally; 30% is given through multilateral channels such as the
Organization for Economic Co-operation & Development.)
Foodstuffs are obviously basic, because the malnutrition which unfortunately prevails
in many less developed countries is one of the blocks to economic betterment. But
compelling humanitarian requirements in cases of actual famine aside, even this sort of
aid is fraught with danger: massive gifts can take the profit incentive out of local
agriculture; with fewer farmers and less land under cultivation, this can paradoxically
worsen, not improve, the long-term prospects of food production and hence safety
from future starvation.
Capital grants are likewise destructive to long-term productivity. Although the ancient
Egyptian pyramids were an extraordinary instance of capital accumulation, they
resulted in no economic gain in the basic sense of contributing to the well-being of the
great masses of people.
Even more wasteful are the modem equivalents of such monument-building made
possible by foreign aid: the steel mills in Egypt, the modem chemical plants in India,
the tractors given to aboriginal peoples who cannot operate them, the automobile
assembly plants scattered widely throughout the Third World (which are the result of
protective tariffs on automobile imports as well).
These are wasteful because the products fabricated in this highly technological manner
actually cost the underdeveloped countries more to manufacture themselves than they
could have paid by importing the finished product from more developed countries.
Many people deduce from the fact that the rich countries have much capital and the
poor ones little that what is required is vast capital infusions. But this wet-sidewalkscause-rain reasoning points to almost the exact opposite of what is really needed.
Capital, in and of itself, does not create wealth. It is rather the result of a process of
economic development that also includes, as complementary factors, such things as
the willingness to work, the skill and education of the labor force, and relatively free
and private markets protected by a stable code of laws.
One indication of the importance of these other phenomena is the fact that a large
proportion of the very limited capital generated in the poor countries is actually
invested in the more advanced nations, where private property rights are far more
secure.
Then there is foreign aid in the form of technological and other education. Canada
ranks third among the donor nations in this category, behind only France and New
Zealand, meeting just over 15% of its bilateral commitments to the underdeveloped
world in this form. But the difficulty is that in the absence
•of such facilities as fully equipped laboratories, libraries, computer centres, and
without the mutual support of thousands of other similarly educated scientists and
technologists, such aid cannot be efficiently utilized. And the proof can be seen in the
immigration patterns of the educated classes in the Third World a "reverse brain
drain," toward the more advanced countries.
Foreign aid of whatever variety — food, capital, technology or outright. cash grants —
moreover sets up a welfare-like dependency status on the recipient country. In much
the same manner as domestic welfare programs sap the economic ambition, vitality
and progress of their local clients, so do programs on international levels have similar
effects.
Canadian self-interest
If foreign aid is unlikely to help the recipient, can it at least help the donor? (Note: the
focus here is on economic, not military aid, which must be justified on entirely
different grounds.)
Pragmatic considerations would seem to support this view. For one thing, the
Canadian International Development Agency requires that about 80% of its bilateral
disbursements be spent on Canadian goods and services.
But behind the bookkeeping legerdemain, this amounts only to a free gift of goods and
services from Canada to other countries, with no offsetting returns. No one is foolish
enough to
•suppose that West German reparations to Israel actually benefited the economic selfinterest of West Germany — even though much of it took the form of exporting
domestic items. Nor does the defendant in a civil case rejoice in his
new-found wealth when he is forced by a court decision to compensate the plaintiff—
even in the form of goods Ie himself produces.
Will Canadian aid to other countries at least make it more likely that they will choose
the path of democracy and market institutions rather than fall into the communist and
collectivist ambit?
Unfortunately, not only will Western foreign aid not attain this end — it is likely to
undermine it, and instead to encourage socialism and totalitarianism :in the Third
World.
First of all, Canadian aid is traditionally in the form of govcmmcnt-to-gov-emment
grants. This strengthens the role of the public vs the private sector in the
underdeveloped countries. But political freedom is a delicate and precious flower, it
cannot live where the bulk of economic activity is carried on in the public sector.
Second, Canadian foreign aid has been given to countries that have made explicitly
socialist avowals in their centralized economic plans — and our largesse has in no
small degree shielded them from the repercussions of such policies and allowed them
to continue unchecked down this path. For example, we find in the five-year plan of
India, a country which continues to receive strong Canadian support, the view that
"planning should take place with a view to the establishment of a socialistic pattern of
society where the principal means of production are under social ownership or
control."
The alternative
Of far greater benefit to the nations of both North and South is a policy of free trade
and unregulated international flows of capital. This will greatly benefit the Canadian
standard of living, as we can purchase many goods such as clothing from the* less
developed world for far less than it costs to make them ourselves. But of far greater
importance, such policies will truly lead to Third-World economic development —
and to tighter integration with our own economy.
How, then, to account for the hypocrisy of a nation whose leaders loudly proclaim
their interest in economic development for the poor countries and yet remain steadfast
in their determination to maintain protective tariffs, quotas and other impediments to
economic intercourse with the Third World?
walter BLOCKis senior economist at the Eraser Institute, Vancouver.
A FREE MARKET IN KIDNEYS?
by: Walter Block, The Fraser Institute
According to recent reports, the black market value of a
kidney which can be transplanted is some $13,000 -- which
translates to roughly seven times its weight in gold.
Such an occurrence may occasion all sorts of references to
King Midas -- who was supposed to have been turned into a statue
of sold gold, but behind this rather dramatic way of
characterizing the value of human organs lies in a story of
untold and tragic human suffering.
There are hundreds and even thousands of Canadians whose
lives could be vastly improved could they but have the use of a
healthy kidney. Paradoxically, there are other thousands of
people who die each year, taking perfectly healthy kidneys to the
grave with them, who have no financial incentive at all to
bequeath these organs to those in need. Why, it may well be
asked, cannot potential donors presently be given a pecuniary
reward for doing the right thing? That is, what precludes a
businessman from purchasing the future rights to a kidney from
potential donors, and then selling these items to those suffering
from kidney disease?
The problem is, it is illegal to harness marketplace
incentives in order to encourage kidney donors. Anyone who set
up a business of this sort would be summarily imprisoned.
Instead, our society must resort to all sort of inefficient
stratagems toward this end. Famous personages have exhorted us,
in the event that we suffer untimely death, to make a posthumous
gift of these organs. Medical schools coach their students on
the best techniques for approaching next-of-kin; the difficulty
is that they must ask permission at the precise time when they
are least likely to be given it -- upon the sudden demise of a
loved one.
As a result, all of this has been to little avail. While
potential recipients languish on painful kidney dialysis machines
waiting ghoulishly for a traffic fatality which may spell life for them, the
public has refused to sign cards in sufficient
numbers giving permission for automatic posthumous donor status.
Things have even come to such a pass that there are grotesque and
fascistic plans now being bruited about which would allow the
government to seize the kidneys of accident victims unless they
have signed cards denying such permission.
The free enterprise system, were it allowed to be operated
in this instance, might well be a God-send to the unfortunates
who suffer from diseased kidneys. A legalized marketplace could
encourage thousands of donors. Would you sign a card donating
your kidney after death for 13,000 big ones, right now, in cold
hard cash? There are very few people who would turn up their
noses at such an offer. And if sufficient supplies were still
not forthcoming at this level, prices would rise even further
until all demand was satisfied. Given free enterprise
incentives, pardon the pun, we would be up to our armpits in
kidneys.
This is the tried and true process we rely on to bring us
all the other necessities of life: food, clothing and shelter.
After all, we do not depend for the provision of these goods and
services on voluntary donations. We know this to be a relatively
unreliable system -- notwithstanding the fact that it is flogged
by numerous opinion leaders in the case of organ transplants.
There is no doubt whatsoever that those presently
responsible for preventing a free market in kidneys take these
actions with the noblest of motives. To them, legalizing the
purchase and sale of human organs would be the ultimate in
degradation. Far better, from their viewpoint, that people
donate their bodily parts for free so that thousands of kidney
disease sufferers may live normal lives. However, no matter how
benevolent the intentions of the prohibitionists, it cannot be
denied that the effect of their ill-conceived actions is to
render it less likely that those in need shall be served.
It is time, it is long past time, for our society to put
aside its archaic and prejudicial opposition to the marketplace,
so that we can relieve the suffering, and in many cases, lift the death sentence
we have inadvertently placed on as hopeless and
hapless a group of citizens as ever existed.
30
October 28, 1986
The Free Trade Agreement and Job Creation
By Walter Block
Nowhere in the debate over the Free Trade Agreement
has more economic confusion been allowed to run rampant than with
regard to the question of job creation.
According to the Economic Council of Canada, 250,000 net
new jobs - that is, the total number created minus the total
number lost - are likely to come into being as a result of the
FTA. Brian Mulroney, perhaps the nation's number one
cheerleader for the deal, hasten quoting this figure at the
drop of a hat. Other pro free trade forces have not been
slow on the uptake to parrot these figures.
The opposition has been claiming that net job creation will
be lower or even negative - more will be lost than
generated -- or contenting themselves with the claim that
such employment opportunities which arise will be of the
hamburger flipping variety.
The truth of the matter is that no permanent job creation
whatsoever will occur as a result of free trade. Nor is this a
/controversial matter within the profession of economics.
The puzzle is that a group of reputable economists, such as
presumably form the staff of the Economic Council of
Canada, could have committed such a basic and elementary
fallacy.
Not that this is all to the bad: anything that promotes free
trade will improve the lot of the average Canadian, and
sometimes even falsehoods, as in this case, can prove
beneficial. But there is a higher calling than mere economic
prosperity for Canadians, and that is the pursuit of the truth,
where ever it leads us. It is in view of this latter, more
important goal that it behooves us to pierce the veil of
ignorance surrounding the Council's claim, and to set the
record straight.
Why is it that the FTA will not create jobs, not a single one of them?
The reason for this is simple. Free trade has nothing at all to do with
employment. Its only effect will be on the kind of jobs available, not
with their number.
In order to see this quite clearly, we have to go back to fundamentals;
we must reflect on what jobs are, why people want them, what are their
economic purposes. Please excuse this voyage down memory lane, back
to the introductory economics studied a decade or more ago, but with a
fallacy as basic as this one that is our only option.
A job is defined as something we would not do for its own sake. Those
of us who earn a salary doing something we would be happy to do
without compensation are really engaging in "play." The rest of us
working slobs do so but because of the wages we are given in return.
Why work at all, even for pay? We do so because we live in an
environment of scarcity; that is, there are goods and services we cannot
have unless we create them, and working is the way in which we
produce things. If all sorts of manna continually rained down on us
(food, clothing, shelter, VCRs, medical cures, sportscars), and no one
wanted anything that was not in this way given to us, then no one would
work. We would all play. Some of the "play" might be interesting and
important-research, exploration, the arts - but it would still not be work
in the technical economic sense.
Why do employers hire people to work for them? Because of the
productivity given to them by their employees. If a worker could not add
to the value of the product created by the firm, he would be
unemployable. And the wage he is paid in the market tends to reflect the
value of his contribution.
Given the importance of work in the real world, why do we have
unemployment?
There are all sorts of reasons, but most of them amount to government
insisting that workers be paid more than their productivity levels. On the
micro level, enactments such as minimum wages, fair labour standards,
union legislation in effect price potential suppliers of labour out of the
market. As well, unemployment insurance and generous welfare
payments create joblessness by subsidizing it. On the macro level,
government interference with the money supply, interest rates, stock
markets and business decisions can render the economy unstable, and
lead to recessions and depressions. Joblessness, however, can also
occur in the free unfettered market. Frictional unemployment ensues
when people are searching for situations; they are in between jobs, or
are looking for a first job, or are rejecting present offers in the hope of
better ones in future.
How many jobs are there in an economy at any given time? As many as
there are people willing to work. That is, as many as there are people
who want more material goods than they have, and value these items
more than the leisure they must forego when they become employed.
New jobs are not something vouchsafed by governments upon a grateful
citizenry, although ofttimes governments like to take credit for this
process ("We created 4.2 million jobs over the last decade.") The fact
that most new jobs are created by small businesses is irrelevant; if there
were no small businesses, the jobs would emerge in large businesses or
in self employment. Ra,ther, new employment slots occur automatically
in the market, whenever people want them.
When millions of new immigrants came to the U.S. at the turn of the
century, no one had to create the millions of new jobs for them. They
were created because these newcomers wanted to purchase goods and
services, and were willing to trade their labour power in order to do so.
And the same applies to the demobilization of millions of soldiers at the
end of the war, and to the rise in labour force participation of women in
the past few decades, or any other sudden onset of a need for more jobs.
These people, too, achieved employment status, not through
government, but through the magic of the marketplace.
If jobs are limited only be people's desire to work, how then can a free
trade agreement increase employment? The answer, it should now be
clear, is that an end to tariffs and other such barriers cannot raise the
number of a nation's jobs. The only thing that can increase employment
slots is an additional number of people seeking work.
All free trade can do is multiply the efficiency with which individuals
labour. That is, instead of producing rice ourselves, directly, we can
trade for rice produced in Texas or Louisiana with, say, maple syrup.
Since Canadians are poor rice producers, but wise in the ways of all
things having to do with the maple tree, we can, paradoxically, have
more rice for the same amount of effort expended not by producing it
ourselves, but by first gathering the syrup, and then trading it for rice. In
similar manner, the carpenter can get more piano lessons, and the piano
teacher more kitchen cabinets, not by doing the work of the other, but by
sticking to one's own specialty, and then exchanging for the expertise of
the other.
Even were it possible, it is not advisable to raise the number of jobs that
need to be done. We could, for example, increase employment
opportunities merely by prohibiting railroads, and demanding that the
cargo they used to haul be transported, instead, by people carrying 50
pound sacks on their backs. This could create work for literally trillions
of people! But the important point to realize here is that we would not
thereby necessarily expand the number of jobs available. Remember,
people are already working to their desired extent (except for
governmentally created unemployment - and there is no reason to expect
that this rate will change as we embrace free trade); if we abolish
railroads, the same number of people will still be working. Only now
more of them, many, many more of them, will be needed to transport
goods; consequently, fewer will be available to do other more important
work. Society would suffer, poverty would increase, but joblessness
need not change by one iota.
The Gap between Science and Public Policy by Walter Block
Our scientists and engineers are able to create automobiles capable of
safely doing 150 miles per hour, at least on the straightaways. In the
event, however, these cars do 10 m.p.h. in bumper to bumper rush hour
traffic, courtesy of a public policy mired in the horse and buggy days.
Our doctors are now capable of transplanting organs from one person to
another. This is an art which would have been inconceivable just a few
short years ago. Indeed, even today it still seems magical. But do not
rejoice too quickly. Thanks to legislative ineptitude, there is a shortage
of available kidneys, eyes, livers, hearts and lungs.
Because of technology, we now have airplanes at our disposal that can
cross the continent, a distance of some 3500 miles, in a matter of six
hours or so. And yet all too often, before we even start out, there is a
delay of several hours; and when we arrive, we are all too likely to find
ourselves stacked up in a parade of airplanes waiting to touch down.
Because of breakthroughs in building construction, it is now possible to
create sufficient low cost housing for all Canadians. And yet in Ontario,
presently the most prosperous of all the provinces, there are long queues
of people futilely searching for rental suites.
Why is it that physical scientists are able to supply society with such
miraculous accomplishments on a seemingly endless basis, while our
public policy, the domain of economists, is in such disarray that we are
often precluded from the full enjoyment of what might otherwise be
available to us?
The short and simple answer to this question is that the findings of
economics,
are all too often completely ignored in public policy making.
Take the four problems mentioned at the outset. They are all cases
where public policy has failed to come to grips with the concept of
supply and demand. According to this elementary bit of economic
analysis, if a price minimum or price floor is placed on a good or
service, there will be an excessive demand; more will be desired by the
public than can be offered.
With rent control, landlords are limited in the rents they may charge.
Hence, new investors avoid this market like the plague. Tenants not only
find it difficult to obtain housing, but paradoxically must even
sometimes pay more for it than if incentives to build rental suites were
not cut off at the knees.
Present law prohibits the sale of human organs for transplant purposes.
This, effectively, sets a zero price on such transactions. As a result,
potential donors have less incentive than they would otherwise have to
sign pledge cards, and many recipients are consigned to inferior medical
techniques (e.g., kidney dialysis machines) and even to death, the
ultimate degradation.
Road and airport congestion are examples of the peak load problem. The
demand for such services rises at certain times of
the day. But unless there is a flexible pricing system in place which
reflects the demand alterations, excessive demand, or crowding, are the
inevitable result.
. So the economic answers to all these problems are obvious and easy to
operationalize: repeal rent control to end the housing shortage; allow
commercial transactions in human organs, and alleviate the suffering of
recipients who must now do without; and inaugurate a peak load pricing
system to cure highway and airport congestion.
"Easier said than done," is one possible response to these modest
proposals. "Forget it," is the more likely assessment of those in charge
of public policy planning. Which leads us to ask why the advice of
economists is often ignored, while that of physical scientists is almost
always implemented.
There appear to be two main reasons. For one thing, self interest.
Powerful people have much at stake with regard to economic
arrangements; very rarely do special interests have anything to gain or
lose in a dispute over theories in physics or chemistry. For another, very
few non economists have much humility when it comes to questions of
economics. People will often say, "I'm not an economist, but..." and then
proceed to rhapsodize about their theories of economics. But no one
says "I'm not a physicist, but..." and then articulates his views on this
arcane science.
The importance of German
private property
- 30
1.
3
Dr. Block is an economist with the F raser Insfifllt~_
uring and after the Second World War thousands of Germans fled their homes. They
migrated to the four comers of the earth: Australia, South America, Western Europe, the
U.S. In our own country, they formed the backbone of what is now
the German-Canadian community, one known for its work ethic, its strong family orientation, its
stick-to-itiveness and its intellectual brilliance.
Now that East Germany has united with its western counterpart. its government has decided,
quite appropriately, to take on the trappings of capitalism. Foremost amongst these is the institution
of private property rights. In this regard it has embarked on a program of returning land. farms,
homes and factories to their rightful owners. a policy for which it should be heartily congratulated.
And it is one that should be emulated by all of the countries that formerly suffered behind the Iron
Curtain.
This visionary and courageous program, however, has run into several difficulties. First of all,
the government has decided to exempt from the plan all property seized between May 8, 1945, and
October 6, 1949, prior to the founding of the late-but-not-lamented German Democratic Republic.
This is intolerable.
Just because people emigrated does not mean it is legitimate to seize their property.
There is simply no legitimate statute of limitations on justice. As long as the property owners have
proof of titJe-photographs, letters, records. etc.-it should not matter whether their homes and farms
were expropriated before. during or after the aegis of any particular government.
There is a second problem as well: the irresolution of the government. Stated Petra Speyrer,
vice-consul for Germany in Vancouver: "It will take years and years. I am sure. to resolve (the land
ownership issue). First of all, you have to find out whether to give property back or compensate
with money. If money, then how much? How do you find out the value of the land? I am sure there
will be a lot of lawsuits because people will wan! their land back and not JUS! money. It is very
complicated:'
With all due respect, the issue is not complicated at all. On the contrary, it is exceedingly simple.
Of course it is the land and physical property that should be returned-nothing else. If the rightful
owners want money instead, they are free to sell their holdings for whatever the market dictates.
"How much" should be no business at all of a state run under the principles of free enterprise. (It is
only in the case of property destruction-which does not in any case apply to land, certainly not to
its site value-that such thorny problems could conceivably arise. But this is a small part of the
privatization effort.)
There is another reason besides pure justice for returning property to its rightful owners:
pragmatism. In most advanced economies, labour accounts for some 75C;C of the Gross Domestic
Product. The rest-rent, interest, profit, etc.-is created by the other factors of production. The entire
land of a nation, according to most responsible estimates, is responsible for less than 10%. The
property in question in what was formerly East Germany is a tiny fraction of even this amount. So
in returning it all to the foreign nationals of German extraction who are its rightful owners,
Germans will lose very little indeed.
But they will gain immeasurably. For what these economies lack at present more than anything
else in the world is the entrepreneurial spirit. And there could be no better demonstration of the fact
that not only is entrepreneurship welcomed in these countries. it is treasured, than to give back the
land-all of it, without any strings attached-to irs rightful owners.
The countries of Eastern Europe are crying out for investment. What do you think will occur if
they make a clean break with the past and return this stolen property? The likelihood is that the
new owners will return for at least part of the year--bringing with them millions of dollars of
investment funds, and, far more important, their skills and talents. Down that path leads Germany
and Eastern Europe to industrial peace, material prosperity and a true market economy.
If these countries persist in their stinginess in the return of stolen property, they may keep for
themselves a few additional thousands of acres of land, but these holdings will never become very
valuable, because without a free and vibrant economy none of the factors of production amount to
very much.
D
BRITISH COLUMBIA REPORT, MARCH 11, 1991 i3
Private German Property
by Walter Block, Senior Research Fellow, The Fraser Institute, Vancouver, B.c.
Thousands of Germans fled their property during and after World War II, from what
was then East Germany. They migrated to all four corners of the earth: to Australia, to
South America, to Western Europe, to the U.S. In our own country, they formed the
backbone of what is now the German-Canadian community, one known for its work ethic,
its strong family orientation, its stick-to-itiveness and its intellectual brilliance.
N ow that East Germany is on its way to a life of freedom, forming once again a united
country with its western counterpart, its government has decided, quite appropriately, to
take on the trappings of capitalism. Foremost amongst these is of course the institution of
private property rights. In this regard they have embarked upon a program of returning
land, farms, homes and factories to their rightful owners, a policy for which they should be
heartily congratulated. It is one which should be emulated by all of the countries which
formerly suffered behind the Iron Curtain.
This visionary and courageous program, however, has run into several difficulties.
First of all, the government has decided to exempt from this plan all property seized
between May 8, 1945 and October 6, 1949 prior to the founding of the late but not
lamented and so called German Democratic Republic.
But this is intolerable. Just because people emigrated, does not mean it is legitimate to
seize their property -- and this applies regardless of the official auspices under which such
acts were undertaken. There is simply no legitimate statute of limitations on justice. As
long as the property owners have proof of title -- pictures, letters, records, etc. -- it should
not matter whether their homes and farms were expropriated before, during or after the
aegis of any particular government.
There is a second problem as well: the irresolution of the government. Stated Petra
Speyrer, vice-consul for Germany in Vancouver: "It will take years and years, I am sure, to
resolve (the land ownership issue). First of all, you have to find out whether to give
property back or compensate with money. If money, then how much? How do you find out
the value of the land? I am sure there will be a lot of lawsuits because people will want
their land back and not just money. It is very complicated."
With all due respect, the issue is not complicated at all. On the contrary, it is
exceedingly simple. Of course it is the land and physical property which should be returned
-- and not anything else. If the rightful owners want money instead, they are free to sell
their holdings for whatever the market dictates. "How much?" should
be no business at all of a state run under the principles of free enterprise. (It is only in the
case of property destruction -- which does not in any case apply to land, certainly not to its
site value -- that such thorny problems could conceivably arise. But this is a small part of
the privatization effort).
There is another reason besides pure justice for returning property to its rightful
owners -- all of it, not merely that seized at any particular epoch: pragmatism. It most
advanced economics, labour accounts for over 75% of the G.D.P. The rest-rent, interest,
profit, etc. -- are created by the other factors of production. The entire land of a nation,
according to most responsible estimates, is responsible for less than 10% of G.D.P. The
property in question in what was formerly East Germany accounts for a tiny fraction of
even this amount. So in returning it all to the foreign nationals of German extraction who
are its rightful owners, Germany lose very little indeed.
But they will gain immeasurably. For what these economies lack at present more than
anything else in the world is the entrepreneurial spirit. And there could be not better
demonstration of the fact that not only is entrepreneurship welcomed in these countries, it
is treasured, than to give back the land, all of it, without any strings attached, to its rightful
owners.
The countries of eastern Europe are crying out for investment. What do you think will
occur if they make a clean breast of the past and return this stolen property? The likelihood
is that its owners will come back to stay for at least part of the year -- bringing with them
millions of dollars of investment funds, and, far more important, their entrepreneurial skills
and talents. Down that path leads Germany and Eastern Europe to industrial peace, material
prosperity and a true market economy.
If these countries persist in their miggardliness in the return of stolen property, they
may keep for themselves a few additional thousands of acres of land, but these holdings
will never become very valuable, because without a free and vibrant economy, none of its
factors of production amount to very much.
So the choice is clear. The peoples of Eastern Europe have nothing to fear. from the
market system and everything to gain from it. But free markets can only be predicated on
just titles to property. Return the property. All of it. And as soon as possible.
- 30-
Private German Property
by Walter Block, Senior Research Fellow, The Fraser Institute, Vancouver, B.c.
Thousands of Germans fled their property during and after World War II, from what
was then East Germany. They migrated to all four corners of the earth: to Australia, to
South America, to Western Europe, to the U.S. In our own country, they formed the
backbone of what is now the German-Canadian community, one known for its work ethic,
its strong family orientation, its stick-to-itiveness and its intellectual brilliance.
N ow that East Germany is on its way to a life of freedom, forming once again a united
country with its western counterpart, its government has decided, quite appropriately, to
take on the trappings of capitalism. Foremost amongst these is of course the institution of
private property rights. In this regard they have embarked upon a program of returning land,
farms, homes and factories to their rightful owners, a policy for which they should be
heartily congratulated. It is one which should be emulated by all of the countries which
formerly suffered behind the Iron Curtain.
This visionary and courageous program, however, has run into several difficulties.
First of all, the government has decided to exempt from this plan all property seized
between May 8, 1945 and October 6, 1949 prior to the founding of the late but not lamented
and so called German Democratic Republic.
But this is intolerable. Just because people emigrated, does not mean it is a legitimate
act to seize their property -- and this applies regardless of the official auspices under which
such acts were undertaken. There is simply no legitimate statute of limitations on justice. As
long as the property owners have proof of title
-- pictures, letters, records, etc
it should not matter whether their homes and
farms were expropriated before, during or after the aegis of any particular
government.
There is a second problem as well: the irresolution of the government. Stated Petra
Speyrer, vice-consul for Germany in Vancouver: "It will take years and years, I am sure, to
resolve (the land ownership issue). First of all, you have to find out whether to give property
back or compensate with money. If money, then how much? How do you find out the value
of the land? I am sure there will be a lot of lawsuits because people will want their land
back and not just money. It is very complicated."
With all due respect, the issue is not complicated at all. On the contrary, it is
exceedingly simple. Of course it is the land and physical property which should be returned
and not anything else. If the rightful owners want money instead, they are free to sell their
holdings for whatever the market dictates. "How much?" should be no business at all of a
state run under the principles of free enterprise. (It is only in the case of property destruction
-- which does not in any case apply to land, certainly not to its site value -- that thorny
problems arise. But this is a small part of the privatization efforts).
There is another reason besides pure justice for returning property to its rightful owners
-- all of it, not merely that seized at any particular epoch: pragmatism. It most advanced
economics, labour accounts for over 75% of the G.D.P. The rest-rent, interest, profit, etc. -are created by the other factors of production. The entire land of a nation, according to most
responsible estimates, is responsible for less than 10% of G.D.P. The property in question in
what was formerly East Germany accounts for a tiny fraction of even this amount. So in
returning it all to the foreign nationals of German extraction who are its rightful owners,
Germany lose very little indeed.
But they will gain immeasurably. For what these economies lack at present more than
anything else in the world is the entrepreneurial spirit. And there could be not better
demonstration of the fact that not only is entrepreneurship welcomed in these countries, it is
treasured, than to give back the land, all of it, without any strings
attached, to its rightful owners.
The countries of eastern Europe are crying out for investment. What do you think will
occur if they make a clean breast of the past and return this stolen property? The likelihood
is that its owners will come back to stay for at least part of the year -- bringing with them
millions of dollars of investment funds, and, far more important, their entrepreneurial skills
and talents. Down that path leads Germany and Eastern Europe to industrial peace, material
prosperity and a true market economy.
If these countries persist in their miggardliness in the return of stolen property, they
may keep for themselves a few additional thousands of acres of land, but these holdings will
never become very valuable, because without a free and vibrant economy, none of its
factors of production amount to very much.
So the choice is clear. The peoples of Eastern Europe have nothing to fear from the
market system and everything to gain from it. But free markets can only be predicated on
just titles to property.
THE GROSVENOR
Editorial Commentary Prepared by
Walter Block for C30R Radio
- 30-
Radio Station C30R has made Its home in the basement of the
Grosvenor Hotel .for 52 years, but now this grande dame of
Vancouver hostelries is scheduled for the wrecker's ball.
The upper floors have been closed off, the furnishings have been
sold, and all is in readiness for the demolition team.
The other day as I approached the front door of the hotel in order to
do my regular broadcast for C30R, I was met by an elderly lady.
With tears in her eyes, she said "How could they do this? How
could they knock down such an elegant building, filled with
memories of a bygone era?"
Many people empathize with these feelings. It is sad that yet
another bit of Vancouver's history will vanish in a cloud of dust and
rubble.
But such is progress. If we are to grow and expand, to succeed and
prosper, to take our places as one of the foremost cities in the world,
build we must. Uneconomic structures, which occupy expensive
downtown real estate, must be allowed to make way for even more
valuable buildings. It is only in this and other similar ways thai our
economic prospects may be enlarged, our standards of living
improved, and the scourge of poverty wrestled to the ground.
But there is a small but highly organized and influential group of
people who are trying to force their views on aesthetics down the
throats of the rest of us— whether we like it or not.
I refer to those vociferous busy bodies who try to impose historical
landmark status on old and decaying buildings in the central city.
These people are usually highly educated, sophisticated and
cultured. They want to indulge their own upper class tastes, and
protect the older buildings that people such as they particularly
enjoy. But this is at the expense of the tens of thousands of people
who might benefit from the jobs and homes that could be created if
modern office towers or large apartment blocks were erected on
those sites instead.
If these people want to save the buildings, well and good. Let them
buy these heritage structures themselves—like they do in the case of
their antiques and vintage cars. But it is entirely unfair to force other
people, many of them poorer, to pay for this particular enjoyment.
Historical Monuments
/
Judging from the quantity, quality, and high prices fetched for antiques,
Canadians are a people who relish their history. Paradoxically, economics has a
part to play in this enjoyment of the past: the price system tends to promote
optimal preservation of past relics.
If too few relics from the past had been saved, the price system could be
counted upon to remedy this situation. Extremely high prices would encourage
people to forage around in hopes of uncovering more marketable antiques,
hence meeting the great demand. The movement would be toward discovery
and increased supply. This is readily understood.
But it is no less true that an oversupply of artifacts would also create problems. If
our homes were too burdened with antiques, then there would be less room tor
the modern conveniences we also enjoy. If such a situation were somehow to
arise, many antiques would lose value and would be summarily thrown out.
Neither of these scenarios is remotely likely. Indeed, the proof that the price
system is working well is that both are ludicrous: there is no antique "problem."
Things are entirely different, however, with regard to historical monuments and
buildings. The market has all but been banished and zoning has instead held
sway. Consequently, there are serious problems.
Were a price system in effect for time-honoured buildings, some of them, those
worth more in situ than demolished, would be preserved. But without a market
the costs of maintaining such structures in pristine condition are ignored. There
is no way of telling which are worth more as is, and which are more valuable for
the space they release for new construction.
A Price System
How would it work? Why would the owner of an antique building preserve it,
when he could sell it for millions to a developer? Given that this particular edifice
is one that deserves preservation, consumers must value it more for its historical
character than for the space it could cede to a skyscraper, (we assume away the
possibility of moving the entire building to a cheaper site as too costly). If so,
then the revenues the owner could extract via admission charges, plus his own
psychic enjoyment, should more than offset alternative revenues.
Why are so few historical buildings preserved, on the market? For one thing,
cost" are relevent to present economic decisionmaking: this explains why small
relics from the past have a greater chance of being preserved, other things
equal, than larger ones. Old stamps and coins, jewelry and children's toys can
be preserved at less cost than can automobiles, locomotives, sailing ships and
buildings. Consequently, unless the larger artifacts are more valuable in
proportion to the cubic space they occupy (abstracting from additional
maintenance costs) fewer of them will be saved for posterity.
Externalities
But there is another difficulty posed for a market solution to the historic
building question: externalities. There may not be any feasible way for
consumers .to see the inside of the building without paying for the privilege, but
the main attraction may be the facade, and all passersby can enjoy this without
charge. How could the entrepreneur internalize this externality, and convert the
outside of the building into a paying proposition.
The problem arises because not ati elements are part of the competitive
market. The streets are government controlled. If they were privately owned, one
aspect of thu externality problem would disappear. The owners of the historic
building and of the surrounding streets and sidewalks would presumably come
to some agreement concerning the sharing of the revenues collected from the
passersby. Possibly one would buy the other out
There would remain the question of the surrounding skyscrapers. Their owners
might well charge admission to their windows or roof - for the purpose of viewing
the neighboring attraction. This, of course, could severely hamper the monument
owner's efforts to maintain it as a paying proposition.
Large Fences
But there are several counter measures he could adopt. He could erect (or so
threaten) a large fence around the building to cut off a view from the lower floors;
or a large shield above the roof so that noone from the upper storeys could
enjoy the vista. Given these possibilities the surrounding skyscraper owners
might be willing to negotiate a payment for the viewing rights. Alternatively, the
historic and the surrounding structures might come under the same ownership:
from one landlord selling to the other, or both to a third party. In any of these
eventualities, the externalities would be no more; they would be internalized.
The facade of the building, as well as the inside would be brought into the
economic nexus.
Both could be charged for thus allowing people to register the importance they
placed upon it. The antique monument would thus remain so, as long as market
value is more than any alternative.
It is important to realize that not all external benefits need be
internalized. Many, if not most viable commercial establishments release
external benefits for which they are unable to collect. People benefit from the
knowledge alone of certain amenities in their city, such as the Canadian
symphony orchestra even if they never patronize them. The owners of these
establishments cannot of course send a bill to a1"l those who merely appreciate
their existence, but they can still earn enough profit to stay in business despite
this "failure." It is not necessary to ensure that each and every person who
enjoys a historic monument pay for it. All that is necessary for its continued
existence is that more $ be collectable from it than from alternative uses.
Advertising
There is always the possibility, if there are anough "free riders" anxious to see
the monument, but not to pay for such a privilege, to use it for advertizing
advantage. The most obvious way would be to erect bill boards on and about the
edifice. But this might well detract from its beauty, or historic character.
Alternatively, the commercial message could be delivered far away from the
structure: on radio, T.V. or in print.
Landmark Preservation Under Zoning
Under zoning when property felt to be of historical interest is declared a
landmark, it may not be altered, improved or demolished. Although it is (or was)
private property, the owner has been relieved of valuable rights.
Costs, or the alternative uses of the space occupied by the building, are not
considered. Sufficient antiquarianism is the only criterion. Unlike antiques on the
market, such monuments need not be more valuable as relics than put to other
uses; they need only have some worth from a historical perspective in order to
be saved.
Thus there is little likelihood that consumer welfare will be increased by
landmark zoning. Instead, a small group of antiquarian elitists can ignore the
desires of the rest of the population, and impose the preservation of an
excessive number of historical buildings.
Perhaps one reason Canadians accept such policy is that it is difficult to discern
the "what-might-have beens." The historic landmark is physically there: people
see it, enjoy it, photograph it, touch it. It is more difficult to appreciate the factory
that might have taken its place; to envision the extra employment its construction
would have meant; or the lower-priced consumer goods it could have produced.
These possibilities are no less important despite the present difficulty of
recognizing this.
Labour Code Revision by
Walter Block
The present Labour Code of British Columbia has is its
objective the protection of wage rates for the working men and
women of the province. Its basic philosophy is based on the
view that there exists an unequal bargaining power between
employer and employee -- vastly to the advantage of the
former. The methodology of the B.C. Labour Code is one of
promoting collective bargaining - in order to balance the scales
of power in favour of the latter.
While well-motivated and based on the best of intentions, the
Labour Code has had widespread negative unintended
consequences.
Under its rule, the union movement has
obtained great powers, but, paradoxically, this has not
benefited many working people, nor the population of the
province as a whole. Thousands of person-hours have been lost
as a result of strike activity. Bitterness and acrimony have
afflicted labour relations; all the EXPOs in the world will not
convince foreigners to bring their persons (tourism) or property
(investments) to this province, into an atmosphere of strife and
conflict.
Worse for the labour force, unemployment has risen. Let us
take Canada as a whole (this is a reasonable procedure, since
the labour codes of the other province are much like those of
B.C.), and compare it with the United States in this regard. [n
1961, the unionization rates in both countries were very
similar, at 30 per cent of the labour force. By 1985, the rate in
Canada had risen to 40 percent (45 percent in British
Columbia), but fallen to below 20 per cent in the U.S. As a
result, real wages n this country rose by 35 percent between
1965 and 1985, while they fell by 5 3ercent south of the border.
- 30-
LABOUR CODE REVISION
by Walter Block
In the next few months, several provinces will be re-examining their
labour codes
with a view to revising them. In the past, such attempts have been
superficial;
they have placed bubble gum, band aid, and scotch tape solutions on a
corpus in
need of major surgery. Our legislative representatives must go to the heart
of the
matter this time out, for the health of the Canadian economy depends
upon it.
This analysis will entirely concern itself with the ideal labour code, with
how things
should be. This is crucial, for as Yogi Berra put it &quotIf you don't know
where you're
going, you probably won't get there."
In the field of labour relations, the most important issue is the strike.
Actually, this is a misnomer, as it refers not to one act, but to two. A
strike is,
first, a withdrawal of labour in unison from an employer, on the part of
the
relevent organized employees. To this, there can be no objection. If a
single
individual has a right to withdraw labour services, or to quit a job, he does
not lose
it merely because others choose to exercize their rights, simultaneously.
There is a second aspect of the strike, however. And this element is
pernicious, insidious and entirely improper. I refer here to the union
practice of
making it impossible for the struck employer to deal with alternative
sources of
labour, who are anxious to compete for the jobs the strikers have just
vacated.
This entry restriction can be accomplished in several ways. In the days of
yore, organized labour would first brand their competitors as
&quotscabs," or &quotstrike
breakers" and then use threatened or actual physical intimidation (mass
picketing, trespass, sit down strikes, violence, arson) to make it
impossible for the employer
to hire replacement workers. Anyone who thinks that mass picketing is
merely an
exercize of free speech rights is confusing de jure with de facto. In theory,
union
picketing is an information generating exercise in free speech. In fact, it is
an
active threat of physical intimidation; it is harrassment, pure and simple.
In the modern era, unions have added to this tactic a plethora of
legislation
which also effectively drives a compulsory wedge between employer and
&quotscab."
The businessman must convince the Labour Relations Board that he is
&quotbargaining
fairly" with those who have left his employ (even though what he most
desires is to
ignore them, and to deal with others instead); he must give special
considerations
to those who have left him in the lurch by striking.
One argument of organized labour is that its present powers — or
something
like them -- are responsible for past wage increases, and are needed if
wages are to
continue to rise in the future. But this is fantasy. On the contrary, gains in
labour
productivity — because of better skills, improved capital equipment and
industrial
peace — are the causes of gains in take home pay. This is proven by
relatively
declining wages in the heavily unionized "smokestack" industries,
compared to
increased salaries in the far less unionized computer, microchip and other
information and service industries. As well, there is the fact that real
wages have
been rising for centuries, while the earliest unions appeared only in the
late 19th
century. So-called &quotunequal bargaining power" thus has nothing to
do with the
matter.
Another argument for the status quo is that the &quotscab" is stealing the
job of
the striker. But this is also the sheerest of nonsense. A job is an
embodiment of an
agreement between two consenting parties - employee and employer. It
cannot be
the possession of only one of them. A worker no more owns &quothis"
job than does a husband own &quothis" wife. A striking union which
forcibly prevents the employer
from hiring a replacement is like a husband who divorces his wife — and
then
threatens to beat her up, and any prospective new suitor as well — if she
tries to
remarry. Just as one spouse may now divorce the other for any reason or
for none
at all, the employer should be able to fire an employee without being
compelled to
show &quotcause." Our laws do not force the worker to justify a decision
to quit his job,
and the employee-employer relationship should be an entirely symmetric
one.
A properly revised labour code, then, would allow strikes in the sense of
mass
refusals to work, or quits in unison. It would entrench this behavior, as a
basic
element of the rights of free men. But it would limit union activity to this
one
option. It would thus prohibit, to the full extent of the law, any and all
interferences with the rights of alternative employees (&quotscabs") to
compete for jobs
held by union members. It would end, forevermore, all picketing, and
other such
forms of threatened or actual violence.
Although many people think that pickets are aimed at the struck
employer,
they are actually an attack on competing workers (&quotscabs"). And just
as our laws
should not allow business firms to picket the premises of suppliers,
competitors or
customers, no group of workers should be able, by picketing, to forcibly
prohibit
another group of workers — almost always poorer — from bidding for
jobs. A
proper labour code would thus define a &quotlegitimate union" as one
which strictly
limited its actions to organizing mass resignations. A &quotlegitimate
union" would
eschew picketing, violence, and all other special advantages — legislative
or
otherwise —vis-a-vis its non unionized competitors. This would end,
once and for
all, the legal fiction that workers who have left their jobs can yet retain
any right
to employment status in those positions.
Were this one basic change in labour relations to be made, then society
would
have to re-think a whole host of unjust and unwise elements now
embodied in
present labour legislation.
o Right to work provisions. These would be an infringement upon the
rights of employers and legitimate unions to sign mutually beneficial and
consensual agreements. Under the ideal labour code, there would be no
&quotright to
work."
o Wage restraints should be ended. These would be an unconscionable
interference with the rights of legitimate unions to engage in collective
bargaining.
o Boycotts of whatever type are simply a refusal to deal with certain
people. But everyone has the moral right to choose his friends and
business
associates. Any attempt to stop such behavior would be a severe violation
of our
human rights. And this goes for the secondary boycott as well.
o Applying anti combines legislation to unions. A favorite of union
bashers, this too would be inapplicable for legitimate unions.
o Imposing &quotdemocracy" on unions. It would be no more justified to
subject legitimate unions to &quotdemocracy", than it would be to
impose the secret
ballot, government supervision of voting procedures, or limited political
activism
on any other voluntary organization such as the corporation, the faculty
club, or
the Roman Catholic College of Cardinals.
o Back to work orders. This would be an infringement upon the right of
free men to withdraw their labour services. Fines, jail sentences for labour
organizers, imposed loss of check off privileges would be a completely
unwarranted
interference with the only tactic at the disposal of legitimate unionism.
-30LABOUR CODE REVISIONS
By Walter Block, Senior Economist
The Fraser Institute
For The Financial Post
Things are not going well for organized labour, as these incidents from
around the
world will attest:
. In New Zealand, Prime Minister Robert Muldoon has just amended his
nation's
labour code, banning closed shops. Despite the fact that nearly half the
countries' labour force is unionized, leaders of the Labour Party
opposition
see this as an election ploy!
. In England, the birthplace of industrial unions, the barons of organized
labour
have been forced to call off a threatened shipyard strike. This was to have
been in protest against employer demands to stremline work methodsimposed by some 17 different unions, to the virtual ruination of British
shipbuilding. This industry, once the envy of the world, and responsible
for
building 80 per cent of all merchant shipping, is now a shadow of its
former
self, only half as efficient as its main European rivals.
As well, a widely publicized "national day of protest" came to nought.
This was the response to the Conservative Government's plan to ban
unions at
Communication Headquarters (in charge of national security intelligence
gathering) in Cheltenham.
. In the United States, the Supreme Court has just ruled union succession
rights
to be unconstitutional. Now, when a company becomes bankrupt, or
undergoes reorganization through other transformation, the prior union
contract no longer prevails.
And what, pray tell, of the labour relations scene in Canada? In lotus-land
by-the-sea, the labour movement is shooting itself in the foot. It shows
signs of
breaking up through internal dissension, while plunging the province of
British
Columbia into chaos.
The situation is this. The International Woodworkers of America (IWA)
had
recently signed a three-year labour contract after much dissension with
management. Because of this, and also due to recession-created economic
hardships, they
were only now beginning to draw full paycheques on a steady basis. At
this point
the 7,600-member Pulp, Paper and Woodworkers of Canada (PPWC), and
the 9,000member Canadian Paperworkers Union (CPU), rejected a contract similar
to the
one signed by the IWA, and were locked out by their employers on
February 2,
1984. Whereupon the PPWC and the CPU set up secondary pickets at
IWA
workplaces—which were crossed, despite Labour Relations Board
approval, in
violation of the most sacred taboo of the labour movement, by members
of the
latter union.
Now the fur realty began to fly. Fist fights, and worse, broke out between
the various bands of unionists. Townspeople and non-union truck loggers
entered
the fray. Due to the violence and chaos, the RCMP was unable to protect
the
locked-out workers, and the picket lines had to be abandoned. As a result
of all
this. Art Gruntman of CPU and Jim Sloan of PPWC have called for the
resignation
from the B.C. Federation of Labour of IWA president Jack Munro, who
had publicly
supported his members' actions.
B.C. Labour Minister Bob McLelland had long been reputed to be
considering
changes in the province's Labour Code, widely regarded as among the
most
favourable to unionism in all of Canada. If so, he has been handed, on a
silver
platter, ample reason for doing just that. Specifically, secondary
picketing, with its interference in plants where there are no present labour
grievances, would
appear to be highly unpopular with the long-suffering B.C. citizenry. If
this one
practice could be prohibited, or at least made more difficult, then one burr
under
the saddle of labour-management, relations will have been removed.
But while we are talking about secondary picketing, we might reconsider
the
role of primary picke. ig as well. In theory, and as a matter of law, this
type of
picketing serves only informational purposes. It advises all and sundry
that the
organized employees are at variance with their employer. But the facts are
often
far different. Instead of merely notifying the public about a labour
dispute,
picketing serves as a threat to all those who might be interested in
competing for
the jobs and salary spurned by the union. Since all Canadians have, or at
least
should have, a right to compete for any given employment opportunity,
such a
practice is a de facto, although not de jure violation of liberty.
A more accurate interpretation of picketing (whether primary or
secondary)
is as a nuisance or harassment. This is precisely how it would be regarded
were it
to take place in any other commercial or personal arena.
Suppose, that is, that a person vacates the premises of landlord A, and
patronizes landlord B instead. Surely the courts would cast a baleful eye
on A, if
he, together with his family, cronies, and business associates, began to
picket the
tenant for being &quotunfair." Or take another case. Suppose that a man
divorces his
spouse, and then along with all his friends "pickets" the home of his exwife,
warning off possible suitors. Would this be considered an informational
exercise in
free speech rights? Hardly. On the contrary, it would be clearly seen for
the
harassment it is, and be summarily prohibited by any court in the land.
Can we as a nation afford any less rigorous a definition of justice in
labourmanagement relations?
-30March 9, 1984
Gabriel Bruce: The Liver Transplant Boy
by: Walter Block, The Fraser Institute
According to recent reports, the black market value of a
kidney which can be transplanted is some $13,000 -- which
translates to roughly seven times its weight in gold.
Such an occurrence may occasion all sorts of references to
King Midas -- who was supposed to have been turned into a statue
of sold gold, but behind this rather dramatic way of
characterizing the value of human organs lies in a story of
untold and tragic human suffering.
The leaders of our medical establishment are ideologically
opposed to the use of the market system. So implacable and
fervent is their hatred of free enterprise that they will gladly
countenance the deaths of hundreds of their patients -- thousands
if need be -- as long as no spectre of prices and profits
infringes into their little world.
We make this rather hysterical-sounding charge because the
medical establishment in this country is largely responsible for
arranging matters in such a way that it is illegal to harness
marketplace incentives in order to encourage kidney donors.
Instead, our society must resort to all sort of inefficient
stratagems toward this end. Famous personages have exhorted us,
in the event that we suffer untimely death, to make a posthumous
gift of these organs; medical schools coach their students on the
best techniques for approaching next-of-kin -- and asking
permission of them at the precise time when they are least likely
to give it -- upon the sudden demise of a loved one. But all of
this has been to little avail. While potential recipients
languish on painful kidney dialysis machines waiting ghoulishly
for a traffic fatality which may spell life for them, the public
has refused to sign cards giving permission for automatic
posthumous donor status. Things have even come to such a pass
that there are grotesque and fascistic plans now being bruited
about which would allow the government to seize the kidneys of
accident victims unless they have signed cards denying such permission.
The free enterprise system could be a God-send to the
unfortunates who suffer from diseased kidneys. A legalized
marketplace would encourage thousands of donors. Would you sign
a card donating your kidney after death for 13,000 big ones,
right now, in cold hard cash? There are very few people who
would turn up their noses at such an offer. And if sufficient
supplies were still not forthcoming at this level, prices would
rise even further until all demand was satisfied. Given free
enterprise incentives, pardon the pun, we would be up to our
armpits in kidneys.
This is the tried and true process we rely on to bring us
all the other necessities of life: food, clothing and shelter.
After all, we do not depend for the provision of these goods and
services on voluntary donations. We know this to be an
unreliable system -- however much it is flogged by opinion
leaders in the case of organ transplants.
No one is contending that those responsible for preventing a
free market in kidneys are purposefully murdering thousands of
kidney disease sufferers. But no matter how benevolent their
intentions, it cannot be denied that this is the effect of their
ill-conceived actions.
It is time, it is long past time, for our society to put
aside its archaic and prejudicial opposition to the marketplace,
so that we can lift a death sentence we have inadvertently placed
on as hopeless and hapless a group of citizens that ever existed.
30
585 words
Marian Regional High School Closing
by Walter Block, The Fraser Institute,
Vancouver, B.C.
Now that the closing of the Marian Regional High School in
Vancouver has receded from the front pages, it might he
appropriate to more carefully consider the implications of this
occurence from a public policy perspective.
The decision to suspend the operations of this Catholic school for
girls has been widely condemned. The schoolgirls themselves have
engaged in a highly publicized protest at this action. The Catholic
Secondary School Teachers' Association has asked the Industrial
Relations Council to call a halt to this plan. According to a high
profile leader of organized labour, the man responsible for this
determination, Archbishop James Carney, is guilty of "the basest
form of union busting."
A local Vancouver newspaper columnist has gone so far as to
characterize Catholics who support their church in this regard as
unthinking sheep who blindly follow orders. "The church has
long taught good Catholics their place. Good Catholics belong on
their knees," were the c\;irt words. It doesn't seem to have occurred
to many people that such a description could easily be interpreted
as purposefully spreading hatred against an identifiable group,
behaviour condemned by the anti hate-mongering Section 281.2 of
the Criminal Code under which several now well known bigots
were charged.
Criminal or not, such a characterization, were it uttered against a
group such as Sikhs. Jews, natives, blacks or any other minority,
would be instantly condemned by all people of good will. Judging
from the absence of protest about these intemperate words, it
would appear to be open season on Catholics. For shame.
Why was this exceedingly unpopular decision made? According
to an announcement made by Archbishop Carney, the school was
closed because the church had lost confidence in the teachers'
ability to provide a Catholic education.
/ But there would appear to be more to this than meets the eye. After all,
when / one loses confidence in one's housekeeper, one does not
commonly close down one's / domicile; one merely fires the unrelkihle
housekeeper, and hires another. When a ( person loses confidence in his
attorney, it would be ludicrous to think that his only - \ option consists of
giving up the lawsuit. Obviously, the more rational alternative is v ^-to
dismiss that lawyer, and retain a replacement.
Why then did not the Archbishop, having lost confidence in the
seventeen Marian High School faculty members, simply fire the
lot of them, and hire a replacement crew?
The reason is not hard to discern: the B.C. Labour Code hung like
a sword of Damocles above his head. The law compels him to
"bargain fairly" with a group of people he wished to have nothing
further to do with. In a word, it would have been deemed an
"unfair labour practice" for him to replace the seventeen teachers
with people he could trust to set a good example for the students,
on a 24 hour per day basis.
The ordinary businessman who loses confidence in his work force
rarely closes up shop. Instead, he grits his teeth and carries on.
Perhaps this is what the Archbishop might have done had the work
force in question consisted of painters, electricians, plumbers or
custodians. But when it came to the molders of young minds (these
children, remember, were ultimately his responsibility), he could
not tailor his beliefs to conform to the niceties of the labour code.
Archbishop Carney was unwilling to compromise or "bargain." He
has, at least from his own perspective, no less than a sacred
mission, which leaves no room for negotiation. So. instead, he
chose the only honorable course open to him, which was to close
down the school.
There are many who are quite understandably unhappy with this
situation. But they should seek the root cause of the Archbishop's
decision in an unwise, rigid and inflexible legal code, not as an
cii'hiti';iry whim of the rricin himself.
By in effect closing down a Catholic school which otherwise
would have remained open, union legislation contravenes religions
freedom. By forcing employers to deal with workers who no
longer have their trust, the British Columbia labour code also
violates the law of free association. True. rarely in our society does
this denial of basic human rights result in such an altercation. But
then, rarely do we find in public life a man of strong principle such
as Archbishop Carney.
30
Market Failure by Walter Block, The Fraser Institute,
Vancouver, B.C.
Many professional economists subscribe to what might be called the
argument from market failure. In this perspective, the market is imperfect,
and therefore the government is justified in intervening in commercial
activities, in order to improve matters.
But this view has not gone unchallenged.
First of all, any attempt to "justify" government regulation of business on
this ground violates a distinction which is axiomatic in economics, that
between the normative and the positive. Justification is by its very nature
a normative, i.e., value-laden procedure; but economics is a value free
subject. The point is, there is nothing in the value free corpus of economic
science that could possibly justify anyone doing anything. Economics as
sncli is limited to describing, explaining, understanding and perhaps
predicting: the justification of action is entirely outside its realm.
Second, even if there were any such thing as "market failure," and even if
economics could somehow justify acting so as to obviate such a
phenomenon, it by no means follows that its mere existence would justify
state activity. For there is such a thing as "government failure" (the
inability of state bureaucrats to act efficiently, due to a lack of the proper
profit and loss incentives) and in any given case the latter might outweigh
the former. That is, in ordinary parlance, the cure might be worse than the
disease.
Third, there has been no definitive demonstration that there exists any real
world example of market failure. The major candidates put forth by the
proponents of this doctrine include monopoly and pollution. Let us briefly
consider each.
.Trusts, or combines, or monopolies are said to misallocate resources,
when they attain too great a degree of control over a given industry. But
economists cannot even unambiguously define an industry. There may be
only one widget producer in a given city, but if the whole province,
country or the entire world is defined as the relevant market the
concentration ratio (the proportion of sales, employment or profits
accounted for by the top few firms) can be made to appear very low.
Similarly, the more all inclusive the definition of the good in question, the
less "control" there can be. That is. one is far more likely to find
"monopoly" in the industry limited to colas, then in the one which
includes all beverages, and yet there is no unambiguous way to define the
industry.
As well, the misallocative or dead weight losses described by some
economists are solely a product of their narrowly constricted
"blackboard" economics. Firms depicted in these models are timeless and
static, while those which earn a living in the real world are forced to act in
a dynamic setting. Nor is there an independent criteria (the perfectly
The market manipulator,
Part I
competitive result, beloved of the blackboard economist) against which to
measure the actual operation of a business concern which might run afoul
of combines legislation. Rather, the proponent of such legislation must
claim the contrary to fact conditional that were such an industry to exist,
it would have arrived at a different pricing and quantity decision than the
defendant accused of restraining trade. But here the firm finds itself in a
"Catch 22" no-win situation. For if it charges more than its competitors,
it can be found guilty of monopolizing or profiteering; if its prices are
lower, it can be fined for "cutthroat or predatory competition." It cannot
escape even if it proves it did neither: for then it stands condemned of
engaging in collusive behaviour.
Pollution is claimed as another
instance of "market failure." The charge, here, is that the business firm
need only calculate the costs of its inputs -- land, labour and capital - and
can safely ignore the costs of smoke, wastes and pollution, since these are
imposed on others. It is for this reason, claim the critics, that the capitalist
system is earmarked by excessively dirty air and water and by noise
inundations.
There is of course a failure of some sort that must be used to explain these
unfortunate circumstances. But it is not "market failure." On the contrary
it is "government failure," in this case the neglect of the courts to
carefully define and assiduously protect the property rights of those
victimized by polluters. Were the state to have awarded injunctions to the
plaintiffs in the early 19th century pollution or nuisance cases (as they
were called then), our entire experience with smoke prevention devices
and technology would have taken a far different turn than it has, and our
environment would have been far more adequately protected. (For a
Fraser Institute perspective that challenges the view that market failure is
responsible for our poor ecological conditions, see The Environmentalists
versus the Economy.)
There may well indeed be market failure in the sense that commerce is
conducted by flesh and blood creatures who are of course imperfect, and
hence given to error. But no one has shown the existence of any "market
failure" in the real world, apart from the fallibility of human beings.
1.
30 -
he public is frightened and highly suspicious of those who profit through stock
market manipulations. And their fears are often reflected by legislation. For
example. according to the securities commissions that govern the stock markets
in Canada, the U.S. and virtually every other advanced industrial country, it is illegal to
intentionally sell shares in order to lower their pri •. .e, and then to profit by buying
them back at those cut-rate prices.
The law regards the market manipulator as having engaged in a fraudulent act. It is a
false assumption. Take the case of the merchant who sells a sack labelled potatoes but
which actually turns out to contain a bunch of wonhless rocks. This is a theft of the sale
price, and is therefore properly held to be illegal. No such thing occurs in the case of
stock manipulation. The purchases and sales are in bona fide tokens of ownership. so the
charge of fraud is fallacious.
Nevertheless. even though it cannot be fraudulem, buying and selling shares of stock
in such a pattern raises several important questions: Ought such sales be prohibited on
the grounds of being inimical to the public interest? What are the economic ramifications? What role do such transactions play in the economy?
In order to answer these questions, let us consider stock manipulation in some detail.
Suppose that the price of a share in a given finn, call it XYZ Corp., was trading at S 100
before the arrival of the manipulator, Mr. M. and suppose that it would have continued
at this level for the foreseeable future if not for his intervention.
At the outset of this process, at least according to traditional theory, the manipulator
engages in massive sales, which drive down the price to say $50. At this point he begins
repurchasing shares at these rock-bottom levels. catapulting the stock back up to its
former price of 5100. In doing this, he earns a fortune for himself, and imposes great
losses on the other XYZ stockholders.
But there are grave flaws in this analysis. First of all, how did our manipulator obtain
the massive position in XYZ in the first place that allowed him to sell off enough stock
to drive down the price? If we assume that his sole interest in the corporation was to
manipulate its stock. and that he first had to buy his shares in order to sell them later.
then the economic picrure looks very different. All was going along swimmingly at the
5100 level, until Mr. \1 purchased enough shares for his operation. which caused the
share price to climb. Suppose that his purchases raise XYZ's shares to $150. Then, when
our boy M sells them off, he succeeds in lowering the price back down to the $100 level.
But he has not yet earned any profits. On the contrary, he has suffered losses. showing
nothing to offset the costs of his time, interest forgone or brokerage fees.
So far we have been assuming that M's doings have no effect on the expectations of
the other market participants. It is now time to retire that assumption. For in the real
world, expectations play an important role in decisions in the marketplace, and they are
altered by the actions of others. As well, for argument's sake we ignore the point that M
must first purchase the shares of any stock he wishes to manipulate.
In this scenario, when Mr. M begins his selloff he does so on such a massive scale
that the bottom drops out of the market for XYZ. Others panic. selling their shares for
whatever pittance they will fetch. As a result, the price drops farther arid faster than one
would expect, based upon the unloading of the M's holdings alone. Then, when the price
hits rock bottom. the clever M starts buying surreptitiously in bits and pieces, through
frontmen. In this way he makes money both going and coming: the price goes down
faster than his own sales could account for, and slower than might be expected. This
way he can buy up all or at nearly all of the artificially undervalued shares (we assume
that XYZ Corp. is as sound as a bell) before other people realize what a great bargain
they are and begin placing purchase orders on their own accounts.
T
To he continued.
Dr. Block is an economist with the Fraser Institute.
BRITISH COLUMBIA REPORT. MARCH 25, 1997 15
STOCK MARKET MANIPUlATOR: Part I
I
by: Walter Block, The Fraser Institute i
,
I
The public is greatly frightened and highly suspicious of the stock market
manipulator. This fear is commonly reflected in legislation forbidding such practices. For
example, according to the securities and exchange regulations which govern stock markets
in Canada, the U.S., and virtually all other advanced industrial countries, it is a fraudulent
act to intentionally sell shares in order to lower their prices, and then
i
to buy them back when they hit bottom, in order to make a profit.
This, however, is ill-conceived law. It is predicated on the false assumption that
the stock market manipulator engages in a fraudulent act, and nothing could be
further from the truth. The paradigm case of fraud is the sale of a good such as potatoes,
when, what actually turn out to be in the sack is a bunch of worthless
I
;
I
rocks. This is i equivalent to a theft of the sale price, and is therefore properly held
to be illegal.. No such thing is even alleged to occur in the case of stock
manipulation -j the purchases and sales are in bone fide tokens of ownership -- so
the charge of fraud is entirely fallacious.
Nevertheless, even though it cannot be fraudulent, buying and selling shares of
I
I
stock in such a pattern, and with such a motive, raises several important questions.
Ought it to be prohibited on other grounds, such as being inimical to the public
,
interest? Is there any justification for this behaviour? What are its economic
I
functions? What role does it play in the economy?
In order to answer such questions, let us consider stock manipulation in some
detail. Suppose that the price of a share in a given firm, call it XYZ corporation,
was trading at $100 before the advent of the manipulator, and that it would have continued
at this level for the foreseeable future but for his activity. We now have a market bench
mark against which these transactions can be contrasted.
At the outset of this process, at least according to the traditional theory we are
I
i
considering, the manipulator engages in massive sales, which drive down the price to,
say, $50. Whereupon he begins his repurchasing operations at these rock bottom levels
catapulting the price back up to its former level of $100. By doing this he earns a fortune
for himself, and imposes great losses on his hapless fellow investors
inXYZ.
i
But there, are grave flaws in this analysis. First of all, how did our manipulator obtain
the massive position in XYZ in the first place, which allowed him to sell off enough stock
~o so appreciably lower the price? If we assume that his sole interest
!
in the corporation is to manipulate its stock, and that he first had to buy shares (in order
sell them at high prices so that he could later repurchase them) then the economic pictu
looks very different. Here, all was going along swimmingly at the $100 level, until Mr.
(the manipulator) purchased enough shares for his operation. But this, as can been see
sharply increases prices compared to what they would have been, other things equal, ha
he not so acted. Suppose that these purchases raise the shares to $150. Then, when our bo
M sells them off, he only succeeds in lowering the price back down to the $100 level, b
which time no profits have yet been earned for him. Indeed, on the contrary, he h
suffered losses, having no gains to offset the costs of the time involved in the operatio
the interest foregone, and the brokerage fees.
So far we have been implicitly assuming that M's doings have no effect on th
expectations of the other market participants. It is now time to relax this assumption. W
do this in order to make our analysis more realistic. For in the real world, expectation
play an important role in market decision making, and they are altered by the commerci
actions of others. As well, for argument's sake, we now ignore the point that th
manipulator must first purchase the shares of any stock he wishes to manipulate.
In this scenario, when Mr. M begins his sell off, he does so on such a massive sca
that, seemingly, the bottom drops out of the market for XYZ. Other market participan
panic, throwing away their shares for whatever pittance they will fetch. As a result, th
price drops farther and faster than one would expect based upon the unloading of th
manipulator's holdings alone. Then, when the price hits the rock bottom, our clever Mr.
starts buying surreptitiously in bits and pieces, through numerous fronts. In this way h
makes money both going and coming: the price goes down faster than his own sales cou
account for, and slower than that which might be expected to result from his purchases.
this way he can buy up all or at least most of the artificially undervalued shares (we a
still assuming that XYZ Inc is as sound as a bell, apart from all the finagling) before oth
people realize what a great bargain they are, and begin placing purchase orders on the
own accounts.
(This is part I of a two part series on the stock market manipulator, which will be
concluded in my next column.)
MEDICAL LICENSING IN CANADA by Walter Block,
Senior Economist, The Fraser Institute
an article for Financial Post
According to U. S. Representative Claude Pepper (Democrat, Florida) over
10,000 "doctors" are now practicing in that country without benefit of
proper medical licensing. These are not people with questionable
credentials, or graduates from diploma mills, or physician's assistants or
nurses practicing beyond their qualifications. We're talking about outright
impostors here, individuals who have no official qualifications at all.
Apart from this, fully 10% of the 450,000 duly licensed physicians
practicing south of our border are incompetent. This, at least, is the opinion
of Dr. Robert Derbyshire, past president of the Federation of State Medical
Boards, and is seconded by Dr. David Axelrod, New York's Health
Commissioner.
What is the situation in Canada? There are no official estimates of fake
doctors in this country, but according to the College of Physicians and
Surgeons of Ontario, a random sample of doctors from that province showed
that 13% either practiced medicine in a way that caused "serious concern" or
kept poor records. This crisis applied mainly to family doctors, not
specialists, and to ciderly doctors. An astounding 49% of physicians aged 70
and above caused "concern". Thus the situation here might even be worse
than in the U. S. However, even if the usual ten-to-one rule of thumb
applies, this would mean that about 1,000 practicing doctors in this country
are outright frauds, and another 4,500 are unskilled — despite their
legitimate credentials.
How could this possibly be true? Are not this nation's doctors subjected to a
complete and up-to-date medical school education, an exhaustive system of
initial pre-diploma testing, and airtight procedures which ensure competence
throughout their careers?
This, at least, is the theory.
But the practice, according to University of Alberta History Professor
Ronald Hamowy, is far different. According to Hamowy, the author of
Canadian Medicine: A Study in Restricted Entry, a book recently published
by The Fraser Institute, the function of medical licensing in this country is
not so much to insure physician quality, as it is to limit entry into the field,
so as to increase the income, power and prestige of those doctors already in
practice.
According to the evidence amassed in this book, the Canadian medical
establishment at one point or another in its history has:








banned price and other advertising for licensed doctors;
set minimum price schedules;
acted to prevent "overcrowding," or an oversupply of physicians by
setting up a whole host of irrelevant criteria for licensing - examples
include a knowledge of grammar, mathematics, Latin, history,
philosophy, and other academic studies, language requirements,
citizenship, etc.;
outlawed the uncontrolled study of medicine, even for those who do
not intend to practice;
placed roadblocks against foreign doctors practicing in Canada,
where they would compete with domestic physicians;
been content with imposing entry examinations only. If the
certification of quality were the true goal of these exams, they would
more likely be required of practicing physicians at least every
decade or so. For, says Hamowy, there is little guarantee - certainly
not on the basis of testing -that a doctor of seventy years of age is
still qualified, merely for having successfully sat an examination
forty years earlier;
fought against pre-payment contract practice, opposed doctors
testifying for plaintiffs in malpractice suits, and discouraged charity
work as undermining minimum fee schedules and professional
prestige;
raised medical student lees in order to increase the costs of entry into
the profession;

succeeded, from time to time, in raising physicians' income levels
beyond that of other, equally skilled, professions in Canada.
If the present licensing system has failed, what, then, can be done about the
epidemic of doctors who are either incompetent and/or sheer frauds?
The public policy recommendation which follows from Hamowy's analysis
would be to install a system of competitive certification, in place of the
present system of monopoly licensing.
Under licensing, if the applicant fails the test, he cannot practice (as in the
motor vehicle licence); under certification, a rejected applicant can still
practice (a non chartered accountant may legally help people fill out tax
forms), but he cannot pass himself off as certified. The problem with
monopoly
licencing (as with all other coercive monopolies) is that if the institution in
charge does a poor job, consumers have no alternative. Under competition,
there is an incentive system for all competitors to try to outdistance each
other in terms of quality control, innovativeness, cost-cutting, etc. The
weakest producers are forced to the sidelines, the strongest can expand the
scope of their operations, to the ultimate and on-going improvement of the
industry.
Although provision of knowledge to health care consumers about the skill,
qualifications, experience, and general trustworthiness of doctors may not
appear at first blush to be an "industry," the effects of competition would
operate here as well.
How might competition work in the medical profession?
Were
government so minded, it could announce that at some time hence (say, ten
years) it would call a halt to the present monopoly system of licensing
doctors. This would usher in a competitive certification system to begin at
present, to co-exist with licensing for the next decade, and to be launched
out on its own at that point.
What kind of firms might undertake such an endeavor? One likely scenario
would have various certification agencies - the Canadian Medical
Association itself, the Royal College of Physicians and Surgeons of the
provinces, the McGill University Medical Faculty, major insurance
companies, for example - all competing with each other as to which might
best be able to ensure the quality of physicians to the general public. Under
such a system, the quality of medicine and the extent of monitoring medical
practice would improve, to the great benefit of the health care of the
Canadian populace.
MEDICAL LICENSING IN CANADA by Walter
Block, Senior Economist, Fraser Institute, an article for
Financial Post
According to U.S. Representative Claud? Pepper {Democrat,
Florida) over 10,000 "doctors" are now practicing in that country
without benefit of proper medical licensing. These are not people with
questionable credentials or graduates from diploma mills, or
physicians assistants or nurses practicing beyond their qualifications.
We're talking about outright impostors here, individuals who have no
official qualifications at all.
Apart from this, fully 10% of the 10000 duly licensed
physicians practicing south of our border are incompetent. This, at
least, is the opinion of Dr. Robert Derbyshire, past president of the
Federation of State Medical Boards, and is seconded by Dr. David
Axelrod, New York's Health Commissioner.
What Is the situation in Canada? There are no official
estimates of fake doctors in this country, but according to the College
of Physicians and Surgeons of Ontario, a random sample of doctors
from that province showed that 13% either practiced medicine In a
way that caused "serious concern" or kept poor records. This crisis
applied mainly to [family doctors, not specialists, and to elderly
doctors. An astounding 49% of physicians aged 70 and above caused
"concern." Thus the situation here might even be worse than in the
U.S. However, even if the usual ten-to-one rule of thumb applies, this
would mean that about 1,000 practicing doctors In this country are
outright frauds, and another 4,500 are unskilled —despite their
legitimate credentials.
How could this possibly be true? Are not this nation's doctors
subjected to a complete and up-ro-date medical school education, an
exhaustive system of initial pre-diploma testing, and airtight
procedures which ensure competence throughout their careers?
This, at least, is the theory.
But the practice, according to University of Alberta
History Professor Ronald Hamowy, is far different. According to
Hamowy, the author of Canadian Medicine: A Study in Restricted
Entry, a book recently published by The Fraser Institute, the function
of medical licensing in this country is not so much to insure physician
quality, as it is to limit entry into every field, so as to increase the
income, power, and prestige of those doctors already in practice.
According to the evidence amassed in this book, the Canadian
medical establishment at one point or another n its history has:

banned price and other advertising for licensed
doctors:


set minimum price schedules;
acted to prevent "overcrowding," or an oversupply of
physicians by setting up a whole host of irrelevant criteria for
licensing- examples include a knowledge of grammar, mathematics,
Latin, history, philosophy, and other academic studies, language
requirements, citizenship, etc;

Outlawed the uncontrolled study of medicine, even for
those who do not intend to practice;

placed roadblocks against foreign doctors practicing in
Canada, where they would compete with domestic physicians;

been content with imposing entry examinations only. If
The certification of quality were the true goal of these exams, they
would more likely be required of practicing physicians at least every
decade or so. For, says Hamowy, there is little guarantee - certainly
not on the basis of testing -that a doctor of seventy years of age is still
qualified, merely for having successfully sat an examination forty
years earlier;

fought against pre-payment contract practice, opposed
doctors testifying for plaintiffs in malpractice suits, and discouraged
charity work as undermining minimum fee schedules and professional
prestige;

raised medical student fees in order to increase the
cost of entry Into the profession;

Succeeded, from time to time, in raising physicians'
income levels beyond that of other, equally skilled, professions in
Canada.
These claims, and much of the data Professor Hamowy has
unearthed, are a part of the Canadian historical record with which
most people, even doctors, may not be familiar. The evidence he
cites will thus come as a distinct and uncomfortable surprise to most
Canadians. And for good reason. This is because the typical doctor in
this country is not at all involved in limiting entry into the field as a
means of feathering his own nest. On the contrary the average
physician works long hard hours (Winston Churchill's oft-quoted
remark about "blood, sweat, and tears" is a particularly apt description
of medical practice), and has as his main concern the practice of his
profession, not the financial exploitation of his patients.
Thus the truth or falsity of Hamowy's claims cannot be based
on the experience of individual physicians who do not perceive
themselves to be engaged in restricting their competitors. On the
other hand, as Hamowy's research shows, the leadership of the
medical profession in conjuncture with well-meaning, though
paternalist, bureaucrats have been doing just that for a century.
If the present licensing system has failed, what, then, can be
done about the epidemic of doctors who are either incompetent
and/or sheer frauds?
The public policy recommendation which follows from
Hamowy's analysis would be to install a system of competitive
certification, in place of the present system of monopoly licensing,
Under licensing, if the applicant fails the test, he cannot
practice (as in the motor vehicle license); under certification, a
rejected applicant can still practice (a non chartered accountant ma»
legally help people fill out tax forms), but he cannot pass himself off
as certified. The problem with monopoly licensing (as with all other
coercive monopolies) is that If the institution in charge does a poor
job, consumers have no alternative. Under competition, there is an
incentive system for all competitors to try to outdistance each other in
terms of quality control, innovativeness, cost-cutting, etc. The
weakest producers are forced to the sidelines, the strongest can
expand the scope of their operations, to the ultimate and on-going
improvement of the industry.
Although provision of knowledge to health care consumers
about the skill, qualifications, experience, and general trustworthiness
of doctors may not appear at first blush to be an "industry," the effects
of competition would operate here as well.
How might competition work in the medical profession? Were
government so minded, it could announce that at some time hence
(say, ten years) it would call a halt to the present monopoly system of
licensing doctors. This would usher In a competitive certification
system to begin at present, to co-exist with licensing for the next
decade, and to be launched out on its own at that point.
What kind of firms might undertake such an endeavor? One
likely scenario would have various certification agencies- the
Canadian Medical Association itself, the Royal College of Physicians
and Surgeons of the provinces, the McGill University Medical Faculty,
major insurance companies, for example - all competing with each
other as to which might best be able to ensure the quality of
physicians to the general public. Under such a system, the quality of
medicine and the extent of monitoring medical practice would improve
to the great benefit of the health care of the Canadian populace.
MOVIE REVIEW LIBEL
by: Walter Block, The Fraser Institute
Attention all novelists, poets, artists, playwrights, actors, musicians,
dancers, athletes, composers, and writ-era. You say you don't like the
reviews you've been receiving lately? Who the hell do those critics
think they are, right? Have you ever felt, "Let them get out on stage
and perform, we'll see how they do," eh?
Well, as the old aphorism goes, "Don't get mad, get even." Have I got
an idea for you: sue theml
This, at least, was the response taken by Cineplex Odeon Corp. to a
negative review which appeared in the Toronto Star. Not that the
nation's largest movie distributor didn't try to block publication of the
offending column in the first place. They indeed made this attempt,
and succeeded in obtaining an injunction, but when this was later set
aside, Cineplex launched a libel suit against Toronto's afternoon
newspaper.
The newspaper column in question is entitled "On Your Behalf," and
appeared on the front page of the entertainment section. Written by
Toronto Star editor Douglas Marshall, the piece objected not to the
movie exhibited by Cineplex, but to its practice of showing a 30second advertisement for an athletic shoe company right before the
feature film.
In the humble opinion of the present writer, Marshall's attack on the
ancient and honorable practice was as snarly, low-down and worthless
a piece of journalism as has ever graced the pages of a major
newspaper. Further, it was hypocritical in the extreme, in that
Marshall's employer, the Toronto Star, depends for a large part of its
revenues upon this self-same practice of advertising.
Cineplex Odeon could have contented itself with a back of the hand
slap at Marshall along the lines of pots calling kettles black. Better
yet, it might have launched an ad campaign of its own, publicly
defending its decision to help make consumers :iware of products
being made available to them under our marvelous system of free
enterprise (commercial advertising of this sort is virtually unknown
behind the Iron,Curtain.) Had they done any of these things, they
would have been completely in the right.
In the event, however, the movie distributor chose to deny Douglas
Marshall his right to express his ludicrous opinions and the Star to
print them. (I realize I am opening myself up to a possible libel suit,
this time from Mr. Marshall or the Toronto Star; all I can say is,
someone has to defend free speech, somewhere along the line,
otherwise there will be no advertising and ultimately, no newspapers
either). Odeon did so on the ground that "On Your Behalf" was "false,
scurrilous and malicious," and would damage its reputation in the eyes
of the cinema-going public.
Unfortunately, our libel laws are based on the premise that reputations
are the legitimate possessions of those to whom they refer. That is to
say, I own my reputation, you own yours, Marshall, the Star and
Cineplex Odeon own theirs. But nothing could be further from the
truth. As a matter of fact, the reputation of each of us consists of the
thoughts of everyone else except its purported owner. In other words,
my reputation consists of the thoughts that everyone else may have
about me. My own thoughts about myself do not form part of my
reputation. Similarly, the reputation claimed by Cineplex consists of
the thoughts of all other persons, except for this movie distributor.
Since no one can properly claim to own the thoughts of other people,
they cannot legitimately own their "own" reputations.
As if this were not paradox enough, our reputations would
undoubtedly be safer (even though they cannot be owned by
ourselves) in the complete absence of all libel prohibitions. Right now,
if we are "victimized" by a scurrilous attack, it may easily succeed in
loss of good will and other economic setbacks. People reason that
were the story not true, the victim would sue for libel. The problem
with this is that libel suits are expensive, and only rich individuals or
corporations can undertake them. (When was the last bisr.e you heard
of Joe lunch-bucket suing for libel). As well, were libel legislation
completely rescinded, attacks on reputation would come so thick and
fast that they would lose all power to injure. Under a regime of full
free speech, mere allegation would no longer be able to damage a
reputation; the facts would have to be ascertained.
- 30
742 words
.-^
-\^!S JC-'C"' Newfoundland Labour Strike
jV^U
by Walter Block, Fraser Institute, Vancouver, B.C.
The labour scene in Newfoundland is heating up once again.
This time it is the Newfoundland Association of Public Employees
(N.A.P.E.) which finds itself on the barricades. This 1,700 member
union is engaged in a struggle with the Newfoundland Transportation
and Public Works Department over a demand that their $6 to $8 an
hour wages be lifted to match those which prevail in other provincial
ministries. The organized workers are also campaigning against Bill
59, a law which declares essential (and therefore prohibits from
striking) a proportion of all public sector bargaining units.
The altercation over these issues has turned bitter. The strike has been
declared illegal, and several N.A.P.E. officials have already been
jailed for persisting in it. The likelihood is that more imprisonments
will follow. John Fryer, president of the 250,000-strong National
Union of Provincial Government Employees, vows that his group will
fully support the local union. A member of the Canadian delegation to
the International Labour Organization, Mr. Fryer has characterized
Bill 59's strike limitation provisions as a "threat to the rights of free
people in a free society," and intends to raise this issue with the I.L.O.
Tempers are short, and all that is needed for a "made-in-Canada"
version of the Arthur Scargill led British miners strike, is a spark
hitting the dry tinder.
This Newfoundland labour fracas raises an important question which
has application far beyond its provincial borders. If we sit back and
look at the issue with a some historical perspective, we can see that
this episode does not really fit the classical economic model wherein
business and labour meet in head-on confrontation. In that scenario,
the capitalist was presumed to be a profit maximizer, and therefore
unwilling and even unable to deal fairly with his employees. The
government was thus brought into the picture, in order to play an
unbiased and intermediary role.
But in the present Newfoundland controversy, business has no part at
all. We rather find the forces of unionism in confrontation with
government, the institution presumed by the classical theory to be
above the labour-management struggle. It is almost as if one hockey
team were now trying to overcome not its opponent, but rather the
referee, and the latter, instead of insisting that its role be respected, has
entered the fray with alacrity. In such a case, who can act as the nonpartisan umpire? The answer is. No one! (The courts and judges in
this country are correctly seen as part and parcel of the government
which pays their salary, and through whose good offices they are
appointed.) This is why labour strikes against government are so
threatening to the very social fabric upon which civilization rests, in a
way that business-union quarrels are not, and can never be.
What can be done about this? We must first recognize that the
classical theory was predicated upon the state truly being above the
fray, apart from the hurley burley world of commerce. But once the
modern government entered the realm of business, with its panoply of
crown corporations and product-oriented ministries, a fatal
contradiction arose. It was as if the hockey referee picked up the stick,
and tried to knock the puck into one (or both) of the goals, all the
while insisting that he be allowed to keep the whistle between his lips,
and that the two teams respect his position as umpire. The point is, the
two roles are simply incompatible. Government can be the referee
(the classical-liberal definition of this institution), or government can
be a player, but it cannot (successfully) be both. One or the other
must go.
When put into these terms, it is painfully obvious which way our
society must move. There is only one choice if we are to avoid the
chaos involved in having either no referee at all, or what is almost
worse, a referee who is not respected because correctly perceived as
party to the altercation. And that of course is a move toward
privitization: government must be encouraged to sell off crown
corporations in a wholesale manner not yet even contemplated by the
present administration; the public sector must divest itself on a
massive scale of its lands, businesses, commercial undertakings, and
those ministries involved in competing with the private sector; the
apparatus of the state must cease and desist from attempting to provide
goods and services whose manufacture could be organized through the
marketplace.
Then, secure in the knowledge that it can at last play a truly judiciary
role in labour management relations, government can in good
conscience ban public sector unions. (This i^ould not mean that
individual civil servants could not quit, nor even that they could not
quit, or threaten to do so, en masse; it would only mean that society
would no longer grant to these institutions special privileges to picket
-- privileges denied all other citizens.) First of all, there would no
longer be much of a public sector left for unions to organize. And
what of those functions which would still remain even after a
wholesale privitization (police, fire, army, courts, welfare, etc.)? Here,
we could at last approach the classical model where government could
be sharply distinguished from business enterprise: the latter might be
seen by some as having interests diametrically opposed to organized
labour, but this would no longer apply to the former.
In this way respect for the refereeing process in Canada could be
resurrected. In this way, and only in this way, can our nation be spared
some of the agonized labour strife suffered by many of our neighbors.
- 30 -
Pay Equity-by Walter Block, The Fraser Institute, Vancouver,
B.C.
Canada is now in the process of implementing a spate of legislation in
order to promote "equality in employment", as called for most notably
by Judge Rosalie Abella. The main finding of the Abella Royal
Commission is that the female-male wage ratio of 63.9 percent in
1982 is largely due to sexual discrimination on the part of the nation's
employers, both public and private. Its chief recommendation is that a
new affirmative action policy of "employment equity" be
implemented, which would require business and Crown corporations
to change their hiring and promotion practices, until balanced job
representation and equal pay have been much more nearly attained.
However, this is the wrong solution to a non-existent problem. The
major finding of the Fraser Institute study is that the income gap
between genders is not due to employer discrimination, but rather to
differences in productivity. There is no determination that these
differences are inherent, or based on genetics. Rather, one major factor
is the asymmetrical effect of marriage on earnings. It raises the
earnings of the husband, and reduces those of the wife. This, in turn, is
because of unequal child care and house management responsibilities,
different psychic, attachments to the labour force vs. home and hearth.
The proof? Women who have never been touched by the institution of
marriage, and who thus can be presumed to have productivity levels
similar to those of men, do not suffer from lower incomes.
The statistics are revealing. In 1981, the last year for which such data
is available, the female-male ratio for Canadians who have never been
married was 83.1 percent. But even this is an underestimate of the
true relationship, because the statistics have not been corrected for
labour force experience, age, education, unionization, etc. When just
one of these corrections is made, for example, and we compare female
to male incomes ratios for never-marrieds with a university degree, the
figure rises to 91.3 percent. (For 1971. such university educated nevermarried females actually earned 9.8 percent more than their equally
accomplished male counterparts!). In other words, when we consider
only males and females who have never been touched by the
productivity-differentiating institution of marriage, that is, compare
men and women who are likely to have similar market productivities,
we find no statistically significant differences in their earnings.
The Perils of Nuclear Energy?
by Dr. Waiter Block
The recent death of 84 men with the sinking of the oil drilling rig
Ocean Ranger off Newfoundland was a great tragedy. All the more
reason, then to re-examine the widely publicized misgivings about
nuclear energy foisted upon us by the "ecology" movement.
The Ocean Ranger tragedy was not, unfortunately, the first energyrelated accident to claim numerous lives. Ralher, the non-nuclear
energy field has been plagued with a series of similar mishaps.
Other recent offshore oil drilling rig mass fatalities include:



the capsizing of the 10,000 ton Alexander Kielland
accommodation rig off Norway in the North Sea in March
1980, with the catastrophic loss of 123 lives.
A November 1979 oil rig collapse during a storm in the Bohai
Gulf of northeast China, which killed 72 workmen.
A blow out in October 1980 of the U.S.-owned rig Tappmeyer
off Saudi Arabia in which 18 people perished.
Coal mining, too, has been marred by numerous large-scale
accidents, the world over:



In Canada, the Nova Scotia coal mine "Springhill" was the site
of a disaster which claimed 39 lives in 1956, and another 74 in
1958.
In the US roughly 300 coal miners die In the line of duty every
year.
In addition to cave-ins, coal miners have long been subject to
the dreaded "black-lung" disease which has crippled many,
and directly or indirectly killed many others.
If this past record looks bleak, the future bodes ill as well. Despite
ever-improving technologies, as the quest for offshore oil continues
apace, into evermore inhospitable environments, the only rational
expectation is for more of the same, only more so.
The same holds true for coal mining. If energy prices continue their
recently interrupted upward path, one source of additional coal
supplies may be to dig deeper — into increasingly more dangerous
terrain. Strip-mining of coal nearer to the surface brings in its wake
the risk of water run offs, and slides, and other hazards —
vociferously pointed out to us by the self-styled "ecologists". And
other alternative energy supplies come with dangers of their own.
The recent hydro-electric dam eruption which drowned thousands of
people in India is a chilling case in point.
What of nuclear power? Despite the widespread media-led wailing
and gnashing of teeth which accompanied the meltdown at Three
Mile Island in Pennsylvania, the plain fact is that not a single solitary
radiation-related death has occurred in the quarter century of
commercial nuclear power generation.
And yet the litany goes on. Protestors at nuclear power station
continually attempt to halt operations — and are accorded a
respectful-to-fawning hearing by the nation's press. Although
trespassers on private property, the protesters are given credit for
"morality" and "concern".
Based on the well-attended movie "China Syndrome" starring trendy
lefties Jane Fonda and Jack Lemmon, the impartial observer would
be led to think that oil, gas, coal, and hydroelectric power were cheap
and safe energy sources, while nuclear was a mass killer.
Can anyone imagine how the media would have reacted had the
victims of the Ocean Ranger instead perished In a nuclear accident?
There is little doubt that the nuclear industry would have been
brought to its knees. A sea of front page news coverage would have
made the publicity accompanying the repatriation of the Canadian
Constitution seem pale by comparison.
It is time, it is long past time to redress this imbalanced analysis
which has been perpetrated upon society. This does not mean, of
course, that we must bring the same unreasoning passion to bear on
the traditional energy industries, as the left wing "ecologists" have
long aimed at nuclear power. This would mean a serious curtailment
of all energy supplies — and the death of millions of consumers who
are dependent upon energy for their very lives.
On the contrary, a more sober and measured evaluation would
appear to be in order. One which looks carefully at the evidence
before launching into public policy recommendations.
And when this is done, the conclusion is inescapable that nuclear
must be allowed to compete fairly with all other energy industries
without fear or favor on either side.
May, 1982 Sterling Newspapers.
A policy that needs
some improvements
3.
ew Democratic Party housing critic Robin Blencoe (MLA, Victoria) released a
position paper which proposes to provide adequate shelter at affordable prices for
all British Columbians. Unfortunately, this missive is part ofthe problem, not part
of the solution. It advocates precisely the policies which have brought us to our present
sorry housing mess. If acted upon, the document will worsen our situation, not improve it.
It is tempting to dismiss this initiative as the blatherings of an unreconstructed socialist,
and to let it go at that. Unfortunately, however, we cannot do this. Mr. Blencoe is more
than likely to become the minister of housing in any future NDP government, and that
scenario is fully within the realm of possibility. So his proposal, if for no other reason,
deserves our serious consideration.
Let us consider the elements of the program:
• A tax on speculative housing flippers. Although the continual move of housing prices
toward the stratosphere has been somewhat curtailed of late, prices are still far too high for
many first-time homebuyers and young families. But prices can rise whether or not
speculators enter the market. Successful speculators sell when prices are high and buy
when they are low. By doing so, they iron out price fluctuations, lowering the pinnacles,
and raising the troughs. Taxing such public beneficiaries will only increase the violability
of this sector of the economy, something no one wants, even NDP housing ministers.
• Re-institute the Rentalsman. Rent control or rent review reduces the supply of rental
accommodation. Other things equal, investors will be less likely to place their hard-earned
money in this sector with these programs in effect. With fewer units available, vacancy
rates cannot rise. Office towers have ~ever been subject to controls of this sort; their supply
is continually increasing, and vacancy rates are relatively high.
• Allow municipalities to charge developers for added burdens on roads, sewers,
schools, etc. This excrescence from the slow-growth philosophy will have precisely the
opposite results from those intended. Its purpose is presumably to promote house-building,
so as to combat the shortage now afflicting the citizenry. How will placing rates and
greater burdens on builders encourage them to create more housing?
• Develop a comprehensive government program for affordable rental to home ownership. If we have learned anything from the disarray of the Soviet and Eastern European
economies, it is that central planning doesn't work. That decades-long experiment should
have convinced all of us that what is needed for a sound economy, and a healthy vibrant
housing sector, is greater reliance on decentralized markets, not on provincial economic
czars.
. • Land banking, a ban on public land sales, and a retention of the Agricultural Land
Reserve. These programs, too, are part of the problem, not part of the solution. The last
thing we need to solve the housing crisis is for land to be artificially kept off the market.
Building lots are a major part of the costs of new housing. The greater their supply, the
lower their price, and the lower their price, the more housing that can be inexpensively
created.
In B.c., great gobs of land, perfectly suited for development, are being held off the
market, courtesy of the Agricultural Land Reserve, a policy created by the 1972-75 NDP
government. If Mr. Blencoe really wants to lower housing prices, he would urge wiping
this element of Soviet-style central planning off the books, something the supposedly freeenterprise Social Credit government has so far-in its 15 years in power-been unable or
unwilling to do.
This housing agenda shows that the NDP has not yet changed its socialist spots. At a
time when the momentum is toward economic freedom, their stance takes on all the
attributes of an ostrich with its head in the sand. And that is really too bad, especially given
the New Zealand experience. There, under the inspired leadership of Roger Douglas, a
social democratic labour -based party was able to modernize and rationalize the economy,
in a decentralized direction.
When will our home-grown socialists learn to borrow a leaf from their New Zealand
counterparts?
N
Dr. Block is an economist with the Fraser Institute.
BRITISH COLUMBIA REPORT, JUL Y 16, 1990 19
NDP Housing Policy
by Walter Block, Senior Research Fellow, The Fraser Institute, Vancouver, B.c.
New Democratic Party Housing Critic Robin Blencoe (MIA, Victoria) released a position
paper which attempts to help provide adequate shelter at affordable prices for all British
Columbians. Unfortunately, this missive is part of the problem, not part of the solution. It
advocates precisely the policies which have brought us to our present sorry housing mess. If
acted upon, the document will worsen our situation, not improve it.
It is tempting to dismiss this initiative as the blatherings of an unreconstructed socialist,
and to let it go at that. Unfortunately, however, we cannot do this. Blencoe is more than likely
to become the Minister of Housing in any future NDP government, and that scenario is fully
within the realm of possibility. So his proposal, if for no other reason, deserves our serious
consideration.
Let us consider the elements of the program:
· A tax on speculative housing flippers. Although the continual move of housing prices
toward the stratosphere has been somewhat curtailed of late, they are still far too expensive for
many first time home buyers and young families. But prices can rise whether or not
speculators enter the market. Successful speculators sell when prices are high and buy when
they are low. By doing so, they iron out price fluctuations, lowering the pinnacles, and raising
the troughs. Taxing such public beneficiaries will only increase the violability of this sector of
the economy, something that no one wants, even potential NDP housing ministers.
· Re-institute the Rentalsman. Rent control or rent review reduces the supply of rental
accommodation. Other things equal, investors will be less likely to place their hard earned
money in this sector with these programs in effect. With fewer units available, vacancy rates
cannot rise. Office towers have never been subject to controls of this sort; their supply is
continually increasing, and vacancy rates are relatively high. Instead of the rentalsman, we
should move in the opposite direction and constitutionally guarantee that government rent
monitoring will never again occur. Then residential renters will be placed in the enviable
position how enjoyed by their commercial counterparts.
· Allow municipalities to charge developers for added burdens on roads, sewers, schools,
etc. This excrescence from the slow growth philosophy will have precisely the opposite results
from those intended. Its purpose is presumably to promote house building, so as to combat the
shortage now afflicting the citizenry. How will placing
rates and greater burdens on builders encourage them to create more housing?
Why, in any case, impose the costs of infrastructure on developers? Is that not the
very purpose for which taxes are collected in the first place? Nor is it any accident that
economic development is seen as a ''burden'' on such facilities. They are now,
unfortunately, provided to us by government. Were they to be privatized, as they should
be, development would no more be seen as a burden on infrastructure than infrastructure
is now seen as a burden on housing.
. Develop a comprehensive government program for affordable rental to home
ownership. If there is anything that we have learned from the disarray of the Soviet and
Eastern European economies, it is that central planning doesn't work. That decades long
experiment should have convinced all of us that what is needed for a sound economy, and
a healthy vibrant housing sector, is greater reliance on decentralized markets, not on
provincial economic czars.
. Land banking, a ban on public land sales, and a retention of the Agricultural Land
Reserve. These programs, too, are part of the problem, not part of the solution. The last
thing we need to solve the housing crisis is for land to be artificially kept off the market.
Building lots are a major part of the costs of new housing. The greater their supply, the
lower their price; and the lower their price, the more housing that can be inexpensively
created.
In B.C., great gobs of land, perfectly suited for development, are being held off the
market, courtesy of the Agricultural Land Reserve, a policy created by the 197275 NDP
government. If Blencoe really wants to lower housing prices, he would urge wiping this
element of Soviet-style central planning off the books, something the supposedly free
enterprise Social Credit government has so far -- in its 15 years in power -- been unable or
unwilling to do.
This housing agenda shows that the NDP has not yet changed its socialist spots.
At a time when the momentum is toward economic freedom, their stance takes on all the
attributes of an ostrich with its head in the sand. And that is really too bad, especially
given the New Zealand experience. There, under the inspired leadership of Roger
Douglas, a social democratic labour-based party was able to modernize and rationalize the
economy, in a decentralized direction.
When will our home-grown socialists learn to borrow a leaf from their New Zealand
counterparts?
- 30-
NDP Housing Policy
by Walter Block, Senior Research Fellow, The Fraser Institute, Vancouver, B.C.
NDP Housing Critic Robin Blencoe (MLA, Victoria) has just released a position paper
which attempts to solve problems in that field. Unfortunately, it is part of the problem, not part
of the solution. It advocates precisely the policies which have brought us to our present sorry
housing mess. If acted upon, it will worsen our situation, not improve it.
Let us consider the elements of the program:
· A tax on speculative housing flippers. House prices are escalating toward the
stratosphere because demand is vastly outstripping supply. Prices rise whether or not
speculators enter the market. Successful speculators sell when prices are high and buy when
they are low. By doing so, they iron out prices, lowering the pinnacles, and raising the troughs.
Taxing such public beneficiaries will only increase the violability of this sector of the
economy, something that no one wants, even potential NDP housing ministers.
· Re-institute the Rentalsman. Rent control or rent review reduces the supply of rental
accommodation. Other things equal, investors will be less likely to place their hard earned
money in this sector with these programs in effect. With fewer units available, vacancy rates
cannot rise. Office towers have never been subject to controls of this sort; their supply is
continually increasing, and vacancy rates are relatively high. Instead of the rentalsman, we
should move in the opposite direction and constitutionally guarantee that government rent
monitoring will never again occur. Then residential renters will be placed in the enviable
position how enjoyed by their commercial counterparts.
· Allow municipalities to charge developers for added burdens on roads, sewers, schools,
etc. This excrescence from the slow growth philosophy will have precisely the opposite results
from those intended. The purpose of this proposal is presumably to promote house building, so
as to combat the shortage now afflicting the citizenry. How will placing rates and greater
burdens on builders encourage them to create more housing?
Why, in any case, impose the costs of infrastructure on developers? Is that not the very
purpose for which taxes are collected in the first place? Nor is it any accident that economic
development is seen as a "burden" on such facilities. They are now, unfortunately, provided to
us by government. Were they to be privatized, as
1
they should be, development would no more be a burden on infrastructure than infrastructure is
now a burden on housing.
. Develop a comprehensive government program for affordable rental to home ownership.
If there is anything that we have learned from the disarray of the Soviet and Eastern European
economies, it is that central planning doesn't work. That decades long experiment should have
convinced all of us that what is needed for a sound economy, and a healthy vibrant housing
sector, is greater reliance on decentralized markets, not on provincial economic czars.
. Land banking, a ban on public land sales, a retention of the Agricultural Land Reserve.
These programs, too, are part of the problem, not part of the solution. The last thing we need to
solve the housing crisis is for land to be artificially kept off the market. Building lots are a
major part of the costs of new housing. The greater their supply, the lower their price; and the
lower their price, the more housing that can be inexpensively created.
This housing agenda shows that the NDP has not yet changed its socialist spots.
At a time when the momentum is toward economic freedom, their stance takes on all the
attributes of an ostrich with its head in the sand. And that is really too bad, especially given the
New Zealand experience. There, under the inspired leadership of Roger Douglas, a social
democratic labour-based party was able to modernize and rationalize the economy, in a
decentralized direction.
When will our home-grown socialists learn to borrow a leaf from their New Zealand
counterparts?
- 30-
2
IN PRAISE OF UNIONISM by Walter Block
There are two possible types of unions: compulsory and voluntary.
The sole difference between a legitimate and an illegitimate union is
that in case of a strike, the latter will threaten to interfere with the
bosses' and "scabs'" persons or property, or ask that the government
do so on its behalf, while the former will refrain from these coercive
activities. (A "scab" is the term of denigration applied by some, to
people who are willing to accept employment conditions rejected by
strikers. In a truly free society, such employment contracts would be
considered as valid as any other; in a truly just society, no tinge of
impropriety or immorality would attach to such workers.)
A union which forcibly prevents the factory owner from hiring a
strikebreaker is like a husband who divorces his wife — and then
threatens to beat her up, and any prospective suitor as well — if she
tries to remarry. But a union that will not threaten or initiate the use of
force (except, of course, in self defense against physical abuse) is
entirely legitimate. It has as much right as any other respected
institution in society. It can provide great benefits to its members, and
to the general public as well.
As the great economist Henry Hazlitt said: "The central function
unions can serve is to improve local working conditions and to assure
that all of their members get the true market value of their services."
For the competition of workers for jobs, and of employers for workers,
does not work perfectly. Neither individual workers nor individual
employers are likely to be fully informed concerning the conditions of
the labor market. An individual worker may not know the true market
value of his services to an employer. And he may be in a weak
bargaining position. Mistakes of judgement are far more costly to him
that to an employer. If an employer mistakenly refuses to hire a man
from whose services he might have profited, he merely loses the net
profit he might have made from employing that one man; and he may
employ a hundred or a thousand men.
But if a worker mistakenly refuses a job in the belief that he can
easily get another that will pay him more, the error may cost him
dear. His whole means of livelihood is involved. Not only may he fail
promptly to find another job offering more; he may fail for a time to
find another job offering remotely as much. And time may be the
essence of his problem, because he and his family must eat. So he
may be tempted to take a wage that he believes to be below his "real
worth" rather than face these risks. When an employer's workers
deal with him as a body, however, and set a known "standard wage"
for a given class of work, they may help to equalize bargaining power
and the risks involved in mistakes."
With regard to such legitimate unions, I have nothing but praise.
They are an integral part of society, and should be protected to the
fullest extent of the law.
To this end, prohibitions against the closed shops (based on the
fallacious "right to work" doctrine) should be repealed. A union and
an employer can come to a voluntary agreement whereby all workers
must be . members of the labor organization as a precondition of
employment. This is a contract between consenting adults, and must
be upheld in the same manner as all other commercial agreements.
Outside workers have no more "right to work" for an employer who
has signed such a contract than does the "other woman" have a
"right to marry" an already married man.
Nor should such legitimate unions be precluded from engaging in
boycotts, whether primary, secondary or even tertiary. Part of the
system of consumer sovereignty, of which we are so justly proud in
the Western democracies, is the right not to buy. If a person may
properly refuse to
purchase an item for whatever reason, so may others, even if they act
in concert. We must never forget that union members are citizens too,
and do not give up their rights as consumers when they join a labor
organization. Jews and Hindus boycott pork; vegetarians refuse all
meat; Greenpeace members do not buy fur coats; athiests reject
religious implements; reformed alcoholics do not purchase booze.
Where is the justice in singling out unions, and requiring that they
alone not be allowed to boycott?
And in like manner, compulsory labor arbitration is an affront to
organized working men and women. To force people to work for
wages and under conditions they find unacceptable is a step down
the road toward slavery. Compulsory labor arbitration and the
involuntary servitude it breeds must be opposed by all men of good
will.
However, and this is a giant caveat, this analysis does not apply to
unions which either use physical violence against "scabs," or urge
that the government do so in its behalf. (The Wagner and NLRB Acts
make it an "unfair labor practice" and hence illegal, to hire
(permanent) replacements for striking employees.) Such unions,
unfortunately the overwhelming majority nowadays, are coercive,
involuntary and hence illegitimate. Any good effects they might
conceivably have on society such as outlined above are as nothing,
compared to . the monumental evil of initiating physical aggression
against those who have not first engaged in physical aggression: the
employer who is trying to "divorce" his union, and the "other woman,"
or workers who are willing to accept the terms rejected by the striking
workers.
But what of the claim that "unions raise wages?" Is this not a great
benefit brought about by unionism, whether legitimately or not?
Price Gouging
It is easy to see why prices of many goods and services would rise in cities
holding sports or civic spectaculars, such as the Olympics or Expo. With tens
and even hundreds of thousands of tourists suddenly descending upon a city,
the demand for goods and services severely outpaces the supply. Especially
affected are items
normally utilized by out-of-towners:
hotel rooms, taxi cabs, rental
automobiles, parking, bed and breakfast emporiums, and restaurants.
Such increases in prices usually offend local politicians, who object on two
grounds. First, they feel that price rises are somehow unfair and improper.
This sentiment is quite understandable. No one likes to be taken advantage of,
and price gouging during a time of great demand would appear to be quite
underhanded.
Nevertheless, price rises have a role to play in a market economy. They
signal an abrupt increase in the importance placed upon a good or service. If
prices spurt upwards in Vancouver during a world exposition, this is a signal
to all entrepreneurs. It is akin to a cry for help. It provides the knowledge that
there is a sudden need for more goods and services there, at the same time it
also provides, through the prospect of greater profits, the incentive to satisfy
that need. To the extent that increased supply is thus called for, the original
price increase will be tamped down. If local politicians forbid price gouging,
they cut off this vital information and sever the incentive to "rescue" the
beleaguered visitors.
If politicians are really concerned with the plight of consumers, instead of
worrying about price gouging they would do better by eliminating some of
the laws they themselves have enacted which have the effect of reducing the
supply of goods and services that can be offered to the market. For example,
they could relax the laws which retard the operation of the bed and breakfast
industry, which interfere with street peddlers of food, which prohibit
alternative taxi services, and which prohibit the location of recreational
vehicles and campers in certain areas of the city.
But there is a second objection to price gouging. It is felt that such behavior
reflects badly upon a city, and that although tourists may put up with it while
they visit for the special event, a bad taste will be left in their mouths which
will make a return visit unlikely. However, as we have seen, if markets are
free and if the gouging calls forth additional supplies, price rises will be
moderated. As well, if prices cannot ration limited supplies to an excessive
number of would-be buyers, other institutions favouritism, graft, first come
first served^— will have to do so, and these have drawbacks of their own.
Even worse, these alternative arrangements do not encourage a solution of the
problem through increased supply. W.B.
^ii ^(e-3!
Rent Control: A tale of two Canadian cities by Walter Block
The rental housing experiences of Vancouver and Toronto serve almost as a
laboratory test of the effects of rent control legislation.
Consider their histories. British Columbia enacted province-wide rent
controls in 1972, under the N.D.P. government of then Premier Dave Barrett;
the phasing out process began on July 1, 1983, and ended on July 1, 1984 at
the behest of then Premier Bill Bennett and the Social Credit Party. Ontario
began its experiment with government central housing planning in 1975
under the supposedly Progressive Conservatives of Bill Davis, and still
retains them to this day with David Peterson and the Liberals at the helm.
What occurred in the two rental housing markets as a result? There are many
possible ways to trace the effects: rent levels, units of new construction,
housing maintenance or deterioration, homelessness, etc. But the easiest and
best variable is that of vacancy rates. These are objective, easily calculated,
and interact with all the others. E.g., the lower the vacancy rate, other things
equal, the higher die rents, the greater the homelessness, etc. They are
published twice annually, in April and October (in June and December up
until 1974), so reasonable coverage for each year is provided.
Let us first consider the vacancy experience of the two cities from October
1984 to October 1988, the time during which Vancouver no longer had rent
controls, but Toronto did. As the accompanying chart makes clear, for each
and every one of the nine observations during this epoch, Toronto had a
lower vacancy rate than Vancouver. This indicates a tighter market in
Ontario, with higher rent levels, more difficulty in finding an apartment suite
to rent, less new rental construction, etc.
Nor are the differences only marginal. Over this short '84 to '88 time period as
a whole, the average Toronto vacancy rate was a minuscule 0.34%. The
comparable figure for Vancouver was a relatively healthy 1.53%, fully 350%
higher.
Nor can it be objected that Vancouver "traditionally" has a higher vacancy
rate than Toronto, or has always had one. A perusal of the earlier years shows
;i mixed record, with the vacancy rate sometimes higher in one city, and
sometimes in the other. Over all, for the period June 1972 to April 1984,
Toronto actually had a slightly higher vacancy rate at 1.18%, than Vancouver
at 0.90%.
A wealth of evidence showing the dismal effect of controls on rental housing
was presented in the Fraser Institute's best selling 1983 book, Rent Control:
Myths and Realities. But as this study makes abundantly clear, rent controls
are a subtle andinvidious piece of legislation. For not only will the law itself
lead to rental housing disarray, even the threat of it will tend to do the same,
as would-be landlords seek greener, freer, less controlled options for their
investment dollar. It is no accident, for example, that Vancouver's vacancy
rate for October 1988, at 0.4%, was the lowest it had ever reached since
controls were repealed. Given the inevitable time lags in such matters, this
coincided with the fall from grace in the public opinion polls of Premier Bill
Vander Zaim and his Social Credit government.
Why should this matter? Because those with money to invest in rental
housing reasoned that if the Socred government falls in the next election, the
overwhelming probability is that Mike Harcourt and the N.D.P. will sweep in,
bringing rent controls in their wake as they did in 1972. And who wants to
put his hard-earned money up for ransom under such conditions?
This somewhat convoluted scenario may appear to some people as unlikely in
the extreme. But consider the fact that we have just witnessed an ominous
parallel on the federal scene. Every time John Turner and the Liberals rose in
popularity, the Canadian dollar plunged. And when the Mulroney forces
improved in the public opinion polls, the value of our dollar increased. This
was attributable not to some sort of disembodied Capitalist System speaking
out in favour of free trade, but rather to the trust, or lack of it, placed in the
Canadian economy on the part of millions ol investors from all around the
world.
Investors in Canadian rental housing can also read the lips of the various
political leaders.
SPARE BODY PARTS
Editorial Commentary
Prepared by Walter Block
for The Financial Post
In the days of yore, there was no &quotcrisis" in spare body parts. Organ
transplants
were an utter impossibility, the stuff of science fiction. Only Dr. Frankenstein
and
his literary ilk had any need for live organs.
But nowadays, thanks to the magnificent discoveries and new techniques of
modern medicine, these possibilities are upon us. At present, it is now
possible to
transplant hearts, kidneys, blood and corneas. People who would have been
consigned to death, or lingering, tenuous and painful lives only a few short
years
ago, can now avail themselves of these medical miracles and lead healthy,
happy,
productive lives.
All is not well, however, on the organ transplant front. Instead of being the
occasion for unrelieved rejoicing, these new breakthroughs have brought in
their
train a whole host of problems.
First of all, there is a shortage of body organs suitable for transplant. It is
claimed that some are diseased, and that others would be rejected by the
recipient
because of incompatible blood types.
This had led to a set of problems which have strained what passes for medical
ethics in this country to the breaking point. For, given the limited supply of
donororgans, our doctors have had to pick and choose — on no criteria whatever
other
than their own arbitrary whim — which of the many needy recipients shall
have this
life-giving aid, and which of them shall be denied.
The difficulty here, is that our legal-economic system has not kept up with
advancing medical technology. The law has prohibited people from using the
property rights we each have in our own persons and bodily parts.
Specifically, it
has banned trade, or a marketplace in live spare body parts.
We shall claim that deregulation of this market is the solution to the
transplant problem. But before we explain how free enterprise would work in
this
connection, let us lay a few fears to rest. '
Yes, it is gory, disgusting and very uncomfortable to discuss allowing profit
incentives to work in this field. The very idea involves images of grave
robbers,
Frankenstein monsters, and gangs of &quotorgan thieves" stealing people's
hearts, livers
and kidneys in the manner described by several novels of Robin Cook. It
seems
cruel and unfeeling to discuss the market for used body parts in much the
same
manner as we might describe the used car market. But this is only because in
our
present society, while we can appreciate the miracles of modern medicine
without
necessarily comprehending them, we have such a poor understanding of the
miracles of the marketplace, and cannot even begin to appreciate them
without
this knowledge. So let us sit back, and relax, and calmly and dispassionately
consider this idea on its own merits, all pre-conceptions and biases to one
side. Let
our only criteria be not our prejudice, but our assessment of whether this idea
will
really increase the number of donors, save lives, and free doctors from the
onerous
decision of picking which needy people shall be saved, and which consigned
to a
lingering and painful death.
Having said this, let us now consider the economics of the situation.
As any first year student in economics can tell you, whenever a good is in.
short supply, its price is too low. And the case of spare body parts is no
exception.
On the contrary, it is a paradigm case of this phenomenon. For our laws on
this question, in prohibiting a marketplace in human organs, have effectively
imposed a
zero price on these items.
But at a zero price, it should not occasion any surprise that the demand for
human organs would vastly outstrip the supply. This, after all, is one of the
most
basic laws in all of economics. If the price were allowed to rise to its market
clearing level, there might not be too great a change in the number of used
body
parts demanded. This is called by economists "inelastic demand". All it
means is
that if you need an organ transplant at all, price, no matter how high, within
limits
of course, is not likely to deter you. No. The main effect of a free market in
used
bodily parts will be on the amount supplied.
How would a marketplace in human organs actually work?
While it is never possible to fully anticipate -the functioning of an industry
now prohibited by government edict, the following scenario will do as well as
any
other in describing one possible option.
We know that the major source of preferred organ donations will come from
young healthy people who are cut down in the prime of life. This can occur in
the
case of traffic fatalities, murder victims, perhaps, soldiers who die in war,
people
who die quickly of a disease such as a heart attack, which leaves their other
organs
intact.
Were the industry to be legalized, new firms would spring up. Or perhaps
insurance companies, or hospitals would expand their bases of operation.
These
companies would offer thousands of dollars to people (who met the
appropriate
medical criteria) who would agree that, upon their demise, their bodily organs
would be owned by the firm in question. Then this company would turn
around and
sell these organs, for a profit, to people in need of an organ transplant. In
addition
these new firms would operate, as at present, to try to obtain consent from the
-4-
relatives of newly diseased persons, for use of their organs. Only now, under
economic freedom, these firms would be in a position to offer cash incentives
— as
well as the chance to save another human life.
The main effect of such a program would be to vastly increase the supply of
donor organs. Certainly, many people in Canada and in the third world as
well
would be happy to take advantage of this opportunity. No one who objected
on
religious grounds, for example, would have to cooperate with the venture. As
a
result, no longer would potential recipients have to make do without
transplants.
We need not even fear that those who engaged in this practice would earn
&quotexhorbitant" profits. For any such tendency would call forth new
entrants who
would act so as to increase supply even further and reduce profits to levels
which
could be earned elsewhere.
Let us allow free enterprise to work in this field, and save us a lot of pain,
sorrow, suffering and tragedy.
-303anuary 20, 1984
Replacing Ray Spaxman as Vancouver City's Planning Director/ by Walter
Block
Ray Spaxman handed in his resignation as Vancouver City's Director of
Planning after a 15 year stint on the job, citing his inability to get along with
the city council as chief among his reasons for departure.
The commentary on this event emanating from the local pundits, politicians
and public policy analysts has so far centered on the qualifications needed by
his replacement.
For example, Alderman Libby Davies has called for a tough minded planner
who can see the big picture. In her own words, "the city ... need(s) an ironfisted planner who can visualize Vancouver's skyline in 20 years rather than
swaying with the comings and goings of elected councils."
In contrast, Mayor Gordon Campbell said he was searching for a person who
would serve as a resource to city council. "I think we want someone who is
independent and aggressive and yet knows how to provide council with the
information it needs to make the right decisions."
Should the vision of the new planner be elevated beyond that of the elected
city council? Surely this is an anti democratic perspective; why go through
the expensive process of voting in the ballot box if the decisions of our
political representatives are to be subordinated to civil servants and
bureaucrats. On the other hand, the presumption is that the planner, whoever
he or she turns out to be, will bring some measure of professional expertise to
bear on the questions of zoning and other land use problems. Why accord the
primary role in such decision making to a committee of ex-used car salesmen,
merchants, teachers, lawyers, unionists, etc?
The problem with this entire debate is that it could easily be taking place in
the pre-Gorbachev Soviet Union. For that is pre-eminently the country which
engages in long and bitter controversies (sometimes fatal ones) over how best
to centrally plan the economy. But even the Russians have learned, through
bitter experience, that central planning leads to economic chaos. It is the
signal contribution of Mikhail Gorbachev that the decentralized marketplace
may actually be a better method of organizing economic activity than
bureaucratic control. His proposal of perestroika is nothing if not a plan to
free up the economy from the controls that have long been exercised by a Ray
Spaxman, and would be undertaken by any replacement.
Adam Smith, of course, said much the same thing. It is a sad reflection of the
intellectual tradition now reigning in Canada that a Soviet dictator is now a
more credible authority than a Scottish philosopher in some circles. But
given this reality, and given the importance of placing greater reliance on
markets, not public managers, we could do worse than apply perestroika to
Vancouver city planning; that is, allow this job to go unfilled.
But there are those who take the view that city planning is different. They
claim that while central planning cannot rationally be applied to agriculture,
or mining, or steel making or forestry, it is necessary in order to determine
where housing, commerce and industry shall be located. After all, we don't
want high rises all over the place; we don't want cement works in the
business district; we don't want pickle factories in residential areas; we don't
want filling stations located in cul-de-sacs.
But there is a fundamental mistake made by these people. They think that if
society is to be rationally planned in this manner, there must be an actual
person— a Ray Spaxman clone - to do the planning. They fail to reckon with
the "invisible hand" of Adam Smith. They do not understand that downtown
real estate values are simply too expensive to allow for cement works; that a
pickle factory would bankrupt itself trying to buy into Shaughnessy; that
placing a gas station in a cul-de-sac is an invitation to economic ruin.
Yes, it is hard to visualize how a city the size of Vancouver could grow and
develop without anyone at the helm. Fortunately for those lacking in this type
of imagination, there is a real world example of a similarly sized city which
functions quite nicely thank you without any zoning or central planning:
Houston, Texas. Its. story, and the general case against zoning and land use
controls, may be found in the;
Fraser Institute publication Zoning: Its Costs and Relevance.
Stop the Drug Profiteers??? by: Walter Block, The Eraser
Institute, Vancouver, B.C.
Once upon a time, in a land far, far away, there was a golden goose. It would
lay golden eggs - one per day. But this was the source of the problem: the
owner wanted to get rich quick, so he killed the golden goose and we all
know what happened after that.
Or do we?
This is highly questionable that we have learned our lesson, at least in view of
some of the problems recently encountered by Burroughs-Wellcome Co., the
producers of the AIDS drug AZT, and the modern day equivalent of the
golden goose.
Last month several AIDS activists chained themselves to the visitors gallery
at the New York Stock Exchange, in protest against a pricing policy for AZT,
which translates into an annual cost of $8,000 per year per patient.
But this is only the tip of the ice-berg. For years self-styled moralists,
clergymen, pundits and editorialists have charged that it is unethical to profit
from the plight of sick people. Since AIDS sufferers are as desperate as can
be imagined, the incessant complaints of these and other know-nothing
busybodies have began to be applied to AZT. In this vein, U.S. Senator
David Pryor has held hearings, examining the pricing policies of BurroughsWellcome. Congressman Henry Waxman, a long-standing critic of drug
industry pricing, maintains that "Congress has the responsibility to ensure that
this life saving drug is available to everyone ... and through a reasonable price
to all."
Possibly as a result of all this brou-ha-ha, AZT prices have been reduced from
the $8,000 per year level to $6,000.
But this makes as much sense - from the point of view of finding a cure for
AIDS - as killing the proverbial golden goose. What kind of signal is this
sending out to all potential discoverers of an antidote for this dreadful
disease? Will it encourage them to keep the laboratory lights burning all
night? Will it lead them to invest more money to this end? Will it push the
next generation of scientists and medical researchers into this field, or
dissuade them from it?
Far from trying to reduce profits in this industry. AIDS victims and their
supporters should urge the very opposite course (if action. They should hold
ticker-tape parades for Burroughs-Wellcome executives and employees. They
should carry them on their shoulders around town. as we do for winning spirts
figures. Instead of attacking its bottom line, they should be donating money to
this heroic company.
Profit controls are like regulations limiting the decibels with which campers
lost in the woods can cry out for rescue. If we are to wrestle the deadly AIDS
virus to its knees, and are for socialist ideological reasons intent upon using
price and profit controls, it would be much better to interfere in this way with
every other industry under the sun except for pharmaceuticals. In that way,
funds would flow from other sectors into drug research. Pryor, Waxman and
the gay community have their priorities exactly backwards.
There is one way, however, that AZT prices can be sharply reduced - without
endangering the quest for an AIDS solution. The average cost of developing a
new drug and getting it past Food and Drug Administration hurdles is about
$70 million. Eliminating Phase-3 tests alone would reduce this by some 30%.
Better yet, disbanding the PDA entirely would reduce drug prices even more.
If the crucially important task of certifying the safety of drugs were
privatized, sick and dying people would be able at long last to exercise their
rights of free choice. Information about drug reliability would be supplied
more cheaply and accurately by private enterprise, organized into a
competitive industry in order to accomplish that task. Remember, the FDA is
the institution responsible for keeping AZT off the market while many AIDS
sufferers had to go without, and for giving its imprimatur to thalidomide.
Surely a competitive private drug testing industry could do far better than
that.
- 30Teen Suicide
by: Walter Block, The Fraser Institute
According to two recent studies reported on in the prestigious New England
Journal of Medicine, television news stories and dramas about suicide have
been responsible for an increase in the suicide rate amongst teenagers.
Paradoxically, this unfortunate effect has resulted even from programs which
were ostensibly designed to increase public awareness of the problem -- in the
hopes of reducing it. According to the psychiatrists who undertook the
research, the young people in question ignored the message being broadcast
to them, and instead engaged in "imitative suicidal behaviour".
The television networks which were involved in these episodes issued
immediate challenges to the findings. One spokesperson sharply denied that
any causal relationship had been established between the T.V. shows and an
upsurge in teen suicides. However, the scientists had studied 38 such shows
which were broadcast between 1973 and 1979, and found an average increase
of 2.91 suicides in the following eight day period -- a result which could not
be explained through normal statistical variance.
Let us not argue over the facts of the case. Instead, let us assume for the sake
of argument that the finding of a causal relationship between these programs
and subsequent suicides is correct. What follows, if anything, from such a
stipulation?
In the view of some public policy analysts, there would then be a clear case
for banning all television treatments of suicide. (This, at least, would be the
reasoning of those who urge that pornography be prohibited on the ground
that it leads to rape).
The difficulty with this stance is that it can interfere with not only the free
speech rights of the media, but also with scientific research. Take the studies
reported in the New England Journal of Medicine themselves as an example.
It is more than likely, given the intellectual precociousness of the younger
generation, that many teenagers read this material. Given the assuming, the
probability is that at least some of these young scholars have committed
suicide as a result.
But the situation is even worse than that. If the mere mention of suicide can
bad impressionable youngsters to indulge in this behaviour, and if
pornography can induce rape, then we may easily suppose that the depiction
of detective stories will cause crime, that the study of history will encourage
war, and that courses in chemistry and physics will result in the widespread
creation of thermonuclear devices.
More to the point there is an element of truth in each of these allegations.
There is an element of risk involved in all of knowledge, including threats.
However, if all such activities were therefore prohibited, it would man a
virtual end to culture as it has developed over the course of the last few dozen
centuries. Paradoxically, if art, culture and science have had a civilizing
effects on the human animal, then banning it in the name of saving lives may
actually result in more death, not less.
The moral of the story should be clear. People have a right to do whatever
they wish, as long as it does not involve the invitation of force against others.
We cannot stop the onward and upward march of knowledge and culture just
because some impressionable young people may be adversely affected.
- 30 550 words
The Travails of Mervyn Levigne
by Walter Block
Mervyn Levigne, with the support of the National Citizen's Coalition, has just
won a
signal victory in the Ontario Supreme Court.
Mr. Levigne teaches at a college which is covered by an agreement
negotiated through
the Ontario Public Service Employees Union. He isn't a member, but pays
dues under the
Rand formula, on the ground that since he benefits from the labour
organization, he should
pay for its collective bargaining activities.
But the court drew the line at forcing Levigne to underwrite the union's
political
program: support for such things as the N.D.P. and abortion. It held that this
violated the
college teacher's rights of association under the Charter of Rights.
At a superficial level, this finding would appear to be a blow for freedom and
human
rights. But by looking beneath surface appearances, we can see several
disquieting aspects of
this court opinion.
. The chief stock in trade of unions is their ability to restrict the entry into the
labour
market of would be competitors. They do so by initiating not only threats, but
actual force
against strikebreakers, and others who oppose them. They are virtually the
only ones in
society who can with legal impunity initiate violence against other citizens. It
is thus
problematic that the court in the Levigne ease failed to make this more basic
criticism of
organized labour.
. It is by no means clear that unions really benefit the work force. The best
available
evidence indicates that organized workers earn some 15% more than they
would have otherwise
in the absence of their union, but this is accomplished by exacerbating
unemployment on the
part of non union members. (Nor would it help if al^ employees were
unionized. For the way
these organizations raise wages is by restricting entry. In order for the process
to work,
someone has to be frozen out.) As well, in many cases, unions become so
greedy that they choke off the lives of the firms they live off, in the manner of
parasites unaware of their
^' best interests. If on net balance unions are not of benefit to employees, then
the Rand
formula, approved by the court, can hardly be justified.
. But even if it were true that unions benefit workers in general, it still does
not
follow that they should be allowed to charge those employees who are
unwilling to join up for
this privilege. For many groups in our society benefit non-contracting third
parties, without
being able to bill them for their gains. For example, my lot in life is vastly
improved if you
wash your car, or mow your lawn, or bathe regularly, or smile at me as we
pass by each
other on the sidewalk. Yet what would we think of a government that allowed
you to charge
me for these undoubted advantages, against my will. But this is precisely
what the Rand
formula allows to unions. It should be struck down if for no other reason than
this.
- 30 THE TUBE MADE ME DO IT
by Walter Block, Senior Economist, The Fraser Institute
This fall NBC presented a made-for-T.V. movie &quotThe Burning Bed".
Starring Farrah Fawcett, it told the story of Francine Hughes, a woman who
had been beaten by her husband for 13 years. Finally, the battered wife
soaked
her husband's bed with gasoline, and while he was asleep, burned him to
death.
Right after the broadcast of this movie, violence occurred in three
separate cities in the U.S. In Milwaukee, 39 year old Joseph Brandt waited for
his estranged 37 year old wife Sharon in her driveway. When she pulled up,
he
doused her with gasoline and threw a lighted match at her. In Quincy,
Massachusetts, a husband became enraged by the show and beat his wife to a
bloody pulp. According to the director of the shelter that took her in, the
husband told her he wanted to get her before she got him. And in Chicago, as
if
to feed the fears of this Quincy husband, a battered wife watched &quotThe
Burning
Bed", and shot her husband with a pistol.
Nor was this the only case of life imitating art. In Portsmouth, Virginia, a
man watched the movie &quotRevenge of the Ninja", a story about a
Japanese assassin. Depressed over his families' eviction from their home,
Gregory Eley,
2^, donned oriental garb and battle stars, armed himself with a submachine
gun,
two crossbows and a hand gun, and murdered a woman who had sued him
over a
business deal.
A question not unnaturally arises. Should society ban movies which
feature themes of death and destruction, which may lead people to emulate
them?
It is easy to advocate censorship, for had these two movies not been
shown, several people who were killed might today still be alive.
But a moment's reflection casts doubt on such a public policy decision. If
we banned movies, we would have to ban books, stories, paintings, plays,
operas,
etc. Even children's fairy tales -- 3ack and the Bean Stalk, Little Red Riding
Hood, Chicken Little, Hansel and Gretel -- are replete with mayhem and
murder. Down this path lies the end of culture and art as we know it.
But there is ^an even more basic objection to censorship and prior
restraint. The human being is a creature of free will. People, whether they
like it or not, are responsible for their own acts. &quotThe Burning Bed", and
all
other artistic endeavours which depict violence, are not to blame for the acts
of those who chose to emulate them. Only the criminals themselves are to
blame.
UNIONISM
by Walter Block, The Eraser Institute, Vancouver B.C.
A strange adventure recently befell Patrick McDermott, the
27 year old son of Canadian Labor Congress president Dennis
McDermott. Young Patrick was innocently riding a bus in suburban
North York when he witnessed a beating in the street. A woman,
Dianne Mclntyre, aged 42, was being assaulted by a man -whereupon our hero jumped off the bus, came to the rescue of the
damsel in distress, and for his pains was wrestled to the ground
by four other men, colleagues of the hoodlum battering
Mrs. Mclntyre, and was kicked and punched while he was down.
"No big deal" you say? "Happens every day?" Well, yes,
unfortunately; street violence seems to be part and parcel of
modern day life, not only in the U.S., but increasingly in this
country as well.
But this case was exceptional. For the victimized woman was
crossing a picket line at the main Visa credit card centre for
the Imperial Bank of Commerce, and the five bully boys were bank
workers, engaged in a labor strike against this financial
institution. What a position to be in for Patrick McDemott, a
staunch union supporter in his own right, and son of the outgoing
president of the CLC1
But Mr. McDermott the younger tried to remain loyal to his
principles. That is, to both of them: chivalry and unionism.
Although suffering from an arm injury, bruised ribs and a split lip in his confrontation
with the minions of organized labour, he
stated that he still believes "in the strike and the cause, but
when it comes to goons hitting defenceless women, it's got to
stop. That guy should be thrown out of the union."
This, however, is too facile, by half. Unionism as
practiced in Canada is intrinsically a violent, confrontative and
physically aggressive institution, and young Mr. McDermott cannot
have it both ways. He must either renounce the "cause," or give
up on his principle that goons should not be able to beat
innocent persons•
Why is this? How can it be that a widely respected institution, organized labour, necessarily initiates violence against
non-agressing people?
The reason is straightforward. Actual union practice/ and
the labour codes of the land which underly it, are predicated on
the assumption that competition, no matter how well it works
elsewhere in the economy, is simply inappropriate for the labour
market. But not only inappropriate. Deserving of legal
penalties as well!
Labour enactments in Canada mandate that the employer
"bargain fairly" with a union, when what he may want to do most
of all is ignore his striking employees entirely, and hire
competing workers (i.e., "scabs") in their place. Some provinces
(i.e., Quebec) prevent management from hiring temporary
replacements for the duration of the labour dispute; others allow
this, but insist that the firm not deal more favourably with
these labourers than with its unionized work force. If the employer declines to be
bound by these restrictions, he is liable
to fines or even jail sentences -- which is certainly equivalent
to visiting violence against a person, the employer, for doing no
more than encouraging competition in the labour market.
It is perhaps for this reason that the police and courts
turn a blind eye -- or even a sympathetic one -- to situations
where union violence is directed against the employer, or, in the
case of Mrs. Mclntyre, against those who support scab workers by
crossing picket lines. "If the government will physically
prohibit labour market competition anyway, why penalize organized
labour for doing the same thing?" seems to be the prevailing
opinion.
A moment's reflection will convince us that this practice -union violence or government violence practiced against employers
and/or scabs -- is completely unjustified. The non-employed
competing workers (scabs) have every bit as much right as the
striking unionists to compete for jobs offered by the employer.
Any other conclusion would set up two classes of people -- unionists, scabs — with different types of rights. But all Canadians
have the same human rights to compete for employment, without
being victimized by physical violence, whether from unionists or
policemen.
As for the assault and battery perpetrated on Patrick
McDermott and Dianne Mclntyre, a union spokesman termed the
incident "minor," and said there were no plans for disciplinary
action against the pickets who injured them. And of course the
police did nothing to quell this violence in our streets, even though they, and all
Canadians would have been outraged had this
situation occurred in any context other than that of a labour strike.
30 -
UNIONS - I
An Editorial Commentary
Prepared by Walter Block
for C30R Radio
There have been labour difficulties between union and non-union firms at the
Pennyfarthing construction site in False Creek. And there may be more in the
offing regarding Expo 86, where unions are refusing to work alongside
contractors
employing non-union labour. The construction unions are determined to
maintain
the $26 per hour union pay scales, as against the $17 paid by Kerkhoff
Construction
Co., the non-union firm now working in False Creek.
The argument used by unionists is that all attempts to undermine their
organization with non-union labour should be resisted. Otherwise, according
to this
view, the working people will soon find themselves back in a non-unionized
sweat
shop type of economy, where wages would fall to barely supportable levels.
How would this work? Well, if non-union firms paying $17 per hour are
allowed into Expo 86, and other large scale operations, they will be able to
outcompete the union shops. With the alternative of unemployment staring
them in
the face, the unions would have to take wage cuts down to the $17 level, thus
allowing their firms to contend with the non-union builders.
But the process wouldn't stop here. With a defanged labour movement,
according to this argument, there is simply no reason why Kerkhoff and his
colleagues should continue to pay $17. No, with unionism on the retreat, nonunion
construction firms might now offer as little as $10 per hour. K they did so,
they
would again be able to underbid union firms for construction jobs. And this
would
push union scales down once more, in an attempt to compete. Where the
process
would end, no one knows — somewhere in the dark ages of sweat shop
employment, according to this view.
What a horrifying scenario! But it is entirely false, and based on mistaken
assumptions. Wages dont rise because unions pull them up. Real wages were
rising
for centuries before unions first came into being in the late 1800s; they
continue to
rise nowadays in countries with little or no organized labour, and in the nonunion
sectors of nations with a labour movement.
Why, then, do wages in the marketplace rise? It is not because of the
benevolence of non-union firms like Kerkhoff that his employees receive $17
per
hour. It is because of their productivity. If Kerkhoff didn't pay them what they
were worth, say, if he paid them only $10 per hour, some other firm would
snap
them up at $12, earning a cool $5 profit per man-hour. But Kerkhoff, facing a
loss
of his workforce, would have to up the ante. That's why he pays $17.
Productivity.
And competition in the labour market. And this would remain the same in the
absence of featherbedding unions, which have priced themselves out of the
market
at $26 per hour. The sooner the unions come to their senses, the better off
they,
and all the rest of us, will be.
This is Walter Block for Vancouver AM. Time: 3:25
Script #5 April 12/84
UNIONS - m
An Editorial Commentary
Prepared by Walter Block
for C30R Radio
In the past two days, we were discussing the increasingly bitter animosity of
the construction unions toward firms which employ non-union labour. We
stated
that this animosity — which has taken the form of violence, egg and rock
throwing,
tire slashing — has no moral justification, and no economic justification
either.
The unions feared that if non-union firms such as Kerkhoff Construction Co.
were
able to under bid for contracts, that not only would their own puffed up
inflated
wage scales of $26 per hour be put at risk, but even the more realistic $17
paid in
the non-union sector would be threatened. We showed that Kerkhoff pays $17
because of the productivity of his non featherbedded workers, that the main
danger
to the unions was the $26 per hour with which they had prices themselves out
of
the market. We indicated that unrealistically high unionized construction pay
scales were a source of unemployment, and that fears of a return to sweat
shop
conditions were only a red herring.
Today we consider another topic on the labour front: the recent Vancouver
city council 7-U- vote to hire a union contractor to build a sewage pumping
station - instead of a non-union firm which was the lowest bidder. Interland
Contractors
Ltd., the unionized company, put in a bid for $1^9,963 to build the station,
and this
was accepted, even though Phased Construction Ltd., a non-union concern,
put in a
bid for $14^55 - $5,508 less.
Now an extra $5,000 or so won't break the city budget. Although $5,000 here
and $5,000 there can add up. As well, the next time city council takes a
higher
unionized bid, it might amount to more than $5,000 or so. But money isn't the
only concern. There is also a little matter of principle. There is simply no
moral
justification for the duly elected government of the City of Vancouver to
discriminate in favor of some of its citizens, and against others. It was elected
by
all voters, some of whom are in unions, others not. There is no difference in
principle between such discrimination in favor of unions and discrimination
in
favour of white people, or men, or the non-handicapped. This decision is an
affront
to fair play, to equal treatment, and to the human rights of individuals who do
not
happen to belong to labour unions.
It should not happen, never ever again.
This is Walter Block for Vancouver AM. Time: 2:54
Script #7 April 12/84
UNIONS - II
An Editorial Commentary
Prepared by Walter Block
for C30R Radio
This is the second in a series of commentaries concerned with the labour
difficulties now plaguing the B.C. construction industry. Last time out, we
discussed the Pennyfarthing Development Corporation's Harbour Cove
condominium project on False Creek in Vancouver. Over bitter union
opposition,
the non-union 3.C. Kerkhoff & Sons Ltd is now engaged in building on that
site.
Incidentally, at a top salary paid of $17 per hour, this non-union shop has
been able
to save the owners a cool $3.5 million, in contrast to union firms forced to
pay
wage scales of $26 per hour.
We suggested that the construction unions come down to reality, and stop
creating their own unemployment by pricing themselves out of the market.
Organized labour in B.C. would do well to borrow a leaf from the
construction unions in the U.S. In Washington, D.C. for example, the
unionized
share of the $3 billion per year construction business fell from 75% to 10% of
the
total in the last few years. As a result, a majority of the unions in the
Washington
Building and Construction Trades Council have agreed to wage cuts which
will
allow a 20% reduction in labour costs. In addition to less take home pay, they
have
agreed to wage freezes, use of lower-paid helpers, streamlined work rules,
straight
pay on Saturday make-up days to cover rainouts, and even shorter coffee
breaks.
This pattern, moreover, is based on one set by AFL-CIO affiliates in Little
Rock,
Milwauke, Knoxville and Cincinati.
But British Columbia construction unions are instead digging in their heels,
and demanding that the status quo on wages and benefits be maintained. They
are
opposed to working alongside non-union firms, like Kerkhoff, on the
construction of
Expo 86. They insist, as a precondition to any such coopeation, that instead of
lowering their own pay scales of $26 per hour, the non-union workers be
brought up
to this unrealistic level from their present $17 per hour.
But this would worsen matters, not improve them. Instead of creating more
jobs for union workers — it would destroy them in the non-unionized sector.
This
idea, moreover, has been put forth on moral grounds. But what is so ethical
about
threatening the imposition of wage scales that would put at risk the entire
project?
How can it be considered moral for the unions to attempt to dictate non union
pay
scales — especially ones which would create havoc in the non union sector,
as they
have already done for organized labour.
This is Walter Block for Vancouver AM. Time: 3:10
Script //6 April 12/84
MEDICAL CARE FINANCE AND THE LICENSING OF PHYSICIANS
by Arnold Aberman, MD. and Walter Block, Ph.D.
When individuals pay directly for medical care, an increase in the supply of
physicians is always to the benefit of the public, since it maintains downward
pressure on medical fees. However, although the individual fees will be lower when
competition is permitted, the total amount of money spent on medical care may rise.
This will happen if the increased number of services performed add more to costs
than do the lower fees decrease costs. (In technical economic parlance, this applies if
the elasticity of demand for medical services is greater than unity). But that is of no
concern whatsoever to the individual as long as the price he pays for a given amount
of medical services decreases.
Price per unit of medical service may decrease because advertising, for instance,
allows more efficient delivery of services. -More generally, economics teaches us
that the greater the supply of good or service, the lower will be its price, other things
equal. But this does not necessarily mean that doctors will earn less, since each one
may perform more services. But the individual consumer of health care will save
money at the lower price. He will also gain if the amount of services performed
increases. This must be a benefit since consumers would not be forced to change
their buying patterns. So, as usual, the market, if allowed to operate, benefits both
consumers and producers. Of course, it is true that the physicians who cannot satisfy
consumer preferences will lose out. This fear of failure may have led physicians
organizations to try to limit entry into the health care field. They have done so in two
ways: by trying to limit the scope of alternative practioners, such as acupuncturists,
chiropracters, etc., and by attemping to reduce the numbers of medical students, and
immigrant doctors to this country. (Canadian Medicine: A Study in Restricted Entry,
a new book published by the Fraser Institute, and written by Professor Ronaid
Hamowy of the University of Alberta, documents this sorry aspect of Canadian
history).
However, nowadays the government pays doctors, and this situation brings about
several complexities. For one thing, when government pays the entire bill it has little
interest in price per service. It is mainly concerned with the total cost of medical
care. If the patient paid directly for medical care, one way to diminish total cost
might be to increase the price per service and thus reduce the number of services
performed. But since the government pays for the entire price of medical care and
provides it to patients for "free", it cannot decrease the number of medical services
by raising price.
A second way to cut total cost would be to radically reduce the fees paid to doctors.
Since patients are already receiving care for "free", this would not lead to increased
utilization. But the government could not slash fees without greatly angering the
doctors and possibly leading to serious repercussions.
So the only way to decrease number of services and thus total costs is by restricting
the number of licensed physicians. Thus regulations are enacted that retard free
movement of physicians between provinces, immigration of doctors to Canada is
discouraged, and licenses are granted to newly graduated doctors only with added
difficulties. And, of course, since not increasing the number of physicians is in the
economic interest of licensed physicians, the government have a natural ally in
currently practicing doctors.
This is where the Hamowy book comes in.
Professor Hamowy has shown
persuasively that the actions of the various medical regulatory bodies, made on the
basis (pretext!) of protecting the public interest, has had the opposite effect. Whether
purposely or otherwise, medical licensing has protected the financial interests of
licensed physicians by restricting supply, limiting competition, and reducing the
spread of market information by outlawing advertising. It is interesting to read the
arguments of spokesmen for physicians made in the 19th and early 20th century
amassed by Hamowy. They are very similar to the arguments used today -not only
by physicians, but taxi drivers, trucking companies, lawyers as well. Such positions
by various professional associations are common. After all, why should doctors not
act to protect their financial interest (as they see it)? The real problem is that
governments have the power to bow to the selfish demands of the doctors (and other
such groups). Today government regulatory bodies, for example agricultural
marketing boards, openly and without any evasion, act to restrict production and set
prices.
If a group of doctors wanted to decrease their fee schedule and advertised that fact,
(in order to increase total income), the government (acting through the College of
Physicians and Surgeons) would not allow them to do so. Of course, in a market
situation, the physicians could lower fees, patients would pay less, more services
would be consumed (a reflection of consumer preference), and the doctors would
make more money, to the benefit of all concerned.
The notion that the total amount of money spent on medical care must not be
allowed to increase is nonsense. For example, let's consider computers. Everyone
knows that the price of computers has decreased markedly over the past five years.
But the amount of money spent on computers has gone up. Now suppose that
government had to pay for the entire cost of computers. If so, it would want the price
of computers to stay high if this would decrease the total cost of computers. But it is
even more complicated than that. To make the analogy complete, we must assume
that the government gives computers away for "free". In that case the only way the
government can reduce the total cost of computers is to limit the number of
computer manufacturers (like decreasing the number of doctors). Aren't we lucky
that governments do not pay for computers? If they did, we would be reading in the
newspapers how the cost of computers has gone up in the past few years, that this is
a danger to the public weal, and that something must be done (a government restraint
program?).
In the interests of patients, our medical care financing ought to be re-oriented in the
direction of individual responsibility. People ought to pay directly for health services
(with the exception, perhaps, of catastrophic medical insurance) and not indirectly
through taxes, "for free", which only encourages over-optimal utilization. As well, as
shown by Canadian Medicine A Study in Restricted Entry, our laws ought to be
revised so as to lower the barriers to entry into the medical profession.
A break for Big Apple beggars-Part II
he lower-court Judge Sand ruled it would indeed be an abuse of the free-speech rights of these
sometimes violent beggars to prohibit them from "doing their thing." Happily for the longsuffering mass-transit riders, Judge Altimari of the appeals
court reversed him; holding that the rights of passengers to be safe must be "balanced" against the right
of people to beg. According -to this balancing doctrine, safety considerations must sometimes be
curtailed in favour of free speech. But without any balancing, there is danger that this doctrine will be
reduced to arbitrariness.
In our analysis, there cannot be a real conflict between rights. It only appears as if there is because of a
lack of private-property rights. We argue that if the New York subway system were privatized, the
conflict would disappear. Consider the following: A cleanshaven man dressed in a three-piece suit with
five $100 bills in his wallet (which the Transit Authority cashier refuses to change) but coins
amounting to 10 cents less than the required exact subway fare asks passersby to give him a dime. Or, a
well-dressed elderly woman whose purse has just been stolen begs people for subway fare. According
to Altimari's Second Circuit ruling, both of these people should be penalized. No matter how welldressed and benign they appear, they are still begging.
Nonsense. If this determination is not a violation of their free-speech rights, nothing is. But if we are to
be consistent, the same principle should apply to dishevelled smelly people whose panhandling takes
on a threatening manner. They too have free-speech rights. Forbidding people to speak in public
thoroughfares such as subway stations is a denial of their free-speech rights, plain and simple.
If, however, the subway system were private property-as private as a bedroom-then the solution would
follow simply and directly. The owner 'would have the right to determine the behaviour of his
customers, while they are on or about his property . Just as restaurateurs now have the'right to expel
unruly or inebriated patrons or people who refuse to wear shoes or a shirt (or in the finer eating
establishments, business attire), so would the private subway firm have a right to exclude unkempt
beggars. Free-speech rights would not even enter the picture, as people can have such rights only on
their own property, not on premises belonging to others.
Imagine if you will, a competitive subway industry consisting of several firms. It may be difficult to
do, since people are accustomed to state-owned mass-transit monopolies. As it happens, the New York
subway was built by private enterprise; the Brooklyn-Manhattan Transit Co. (BMT) and the
Interborough Rapid Transit Co. (IRT) were taken over by the city only after severe governmental price
controls made it impossible for them to operate. Under privatization, these firms would compete not
only on price, service, cleanliness, safety, reliability and speed, but also on the basis of their antisolicitation rules. Some might welcome beggars with open arms. Others might forbid panhandling
entirely. Still others might set up special facilities to deal with the problem of the well-dressed man or
the victimized woman. There might even be "begging zones" on some premises similar to smoking
areas in restaurants.
Then, the people would speak, their voices clearly articulated through the intermediation of the profitand-loss market system. The presumption is that firms that strictly proscribe begging would prevail. If
so, the commonsensical results desired by Altimari, and haughtily deprecated by Sand, will have been
achieved. But this will be accomplished without the irrational fiction that basic rights conflict with each
other.
Why is it of practical importance that the subway be privatized, whether in New York or anywhere
else? Apart from improved safety and operation,there are important legal precedents at stake. A similar
analysis may be applied to leafletting in private malls, begging in restaurants, and the imposition of
dress codes. In all cases, it is possible that authorities will try to "balance" rights, one against the other.
If they do, we will substitute socialism for private-property rights. Judges will become central planners.
The way to resolve the conflicts between free-speech and other rights is to determine where the
confrontation takes place. If it is public property. privatize it.
This is the second of a two-part series devoted to analyzing a lawsuit that has arisen concerning the freespeecb rights of panhandlers in the New York City subway system.
Dr. Block is an economist with the Fraser Institute.
BRITISH COLUMBtA REPORT, FEBRUARY 11, 1991 21
T
Begging in the Big Apple: Part II by Walter
Block, The Fraser Institute
This is the second in a two part series devoted to analysing a law suit which
has arisen in New York concerning the free speech rights of panhandlers in
that city's subway system.
The lower court Judge Sand had ruled that it would indeed be an abuse of
these of times violent beggar's free speech rights to prohibit them from doing
their thing. Happily for the long suffering mass transit riders, Judge Altimari
of the Appeals Courts reversed him, holding that the rights of passengers to
be safe must be "balanced" against the right of people to beg. According to
this balancing doctrine, sometimes safety considerations should be curtailed
in favour of free speech, and sometimes the reverse should obtain. But
without any balancing criterion, there is danger that this doctrine will reduce
to arbitrariness.
In our analysis, there cannot be a real conflict between rights. It only appears
as if there is, because of a lack of private property rights. We are arguing that
if the New York City subway system were privatized, the seeming conflict
would disappear.
Consider the following case. A clean shaven man dressed in a three piece suit
with five one hundred dollar bills in his wallet (which the Transit Authority
cashier refuses to change) and coins amounting to ten cents less than the
required subway fare, asks passersby to give him a dime. Or better yet, a well
dressed elderly woman whose purse has just been stolen begs people to give
her the fare needed for entry into the subway. According to Altimari's Second
Circuit ruling, both of these people should be penalized by law. No matter
how well dressed and non threatening, they are still engaged in begging.
What arrant nonsense. If this determination is not a violation of their free
speech rights, then nothing is.
Still others might set up special facilities to deal with the problem of the well
dressed man, or the victimized woman. There might even be ''begging zones"
set up on some premises, similar to "smoking zones" now established in
many restaurants.
Then, the people would speak, their voices clearly articulated through the
intermediation of the profit and loss market system. The presumption is that
firms which strictly proscribe begging would prevail in the competitive
struggle. If so, the common sensical results desired by Altimari, and
haughtily deprecated by Sand, will have been achieved. But this will be
accomplished without the irrational fiction that basic rights can conflict with
one another.
Why is it of practical importance that the subway be privatized, whether in
New York City or anywhere else? Apart from the increased safety and well
functioning of the system, there are important legal precedents at issue. For a
similar analyis may be applied to leafletting in private malls, begging in
restaurants, and the private imposition of dress codes. In all of these cases, it
is possible that the authorities will try to "balance" rights, one against the
other. If they do, we will substitute the socialist system that brought down the
Soviet Union for the private property rights one responsible for the success of
our own. Judges will become the central planners.
The way to resolve all seeming conflicts between free speech and other rights
is to determine on whose property is the confrontation taking place. If it is
public property, privatize it.
- 30THE BURNING BED
by: Walter Block, The Fraser Institute
The T.V. movie "The Burning Bed" had everything going for
it. It featured a first rate actress, Farah Fawcett-Majors in
perhaps her most theatrical role. It boasted a dramatic plot-an abused wife doused her husband with gasoline while he slept,
tossed a match on him and burned him to death. With this
combination, the performance attracted wide interest from the
television audience, and much attention from pundits and critics.
In fact, there was only one thing wrong with this
presentation: it led to a copy-cat murder in real life, only this
time the genders were reversed. In a tragedy of life mimicking
art, a Milwaukee man doused his estranged wife with gasoline, and
set her afire right after watching "The Burning Bed" on T.V. She
died a horrible death after lingering in hospital for a week, and
he was sentenced to a 19 year prison term for perpetrating this
truly evil act.
This episode presents us with a bit of a dilemma. The movie
"The Burning Bed" was produced by feminists, to illustrate the
problem of wife-beating. Yet these very people have vociferously
protested against pornography, on the ground that it leads to
violence perpetrated on women. Were these feminists to be
consistent with their anti-pornographic stand, they would have to
eschew their own exhibition of "The Burning Bed", since it, like
pornography, presumably promotes violence against women. If they
refuse to do any such thing, then logic would compel them to drop
their opposition to pornography, at least on this one ground-which forms the major element in their case against this
practice.
No matter how they twist and turn, the feminists cannot have
it both ways. Talk of painting yourself into a corner.
- 30 300 words
Canadian Conference of Catholic Bishops Attacks Free Trade
by Walter Block, The Fraser Institute, Vancouver, B.C.
According to Bishop Remi de Roo of Victoria, the free trade deal now in the
process of being hammered out between Canada and the U.S. will harm this
nation. In his view, the negotiations are likely to severely limit Canada's
economic and political autonomy.
These perspectives are presented in a discussion booklet entitled "Free Trade:
At What Cost?" released last week at a highly touted press conference. In it,
the bishops question not only the economics of free trade, but the ethics of it
as well. They maintain that an end to trade barriers could hurt the poor, and
create unemployment.
While this viewpoint bespeaks a profound concern for Canada and its people,
the bishops, unfortunately, may have been mislead by their economic
advisors. It has been a basic premise of economic analysis, since the days of
Adam Smith and even before, that voluntary trade across international
boundaries helps both participants.
Consider the trite but illuminating case of trade of a tropical for a temperate
product, e.g., bananas for maple syrup. It is of course possible for a country
such as Canada to grow both items. While our climate is hardly receptive to
it, we could nurture banana trees - but only in large and very expensive hot
houses. Similarly, a country such as Costa Rica could, if it very much wished
to, cultivate maple trees. It would have to build gigantic refrigerators,
hundreds of feet high, at the cost of a good deal of that nation's entire G.D.P.
Under such an unlikely scenario, each country could attain "self sufficiency"
in both commodities. Of course the poor, and everyone else for that matter,
would suffer greatly. Maple syrup would be frightfully expensive in Costa
Rica, as would bananas in Canada.
Suppose, now, that under such conditions there began a movement toward
free trade between the two countries. Without tariff barriers, Canada would
end up specializing in maple products, while the production of bananas would
tend to be concentrated in Costa Rica, to the enrichment of consumers in both
places. However, it would be vociferously objected that "Canadian jobs
Promoting capitalism
in Eastern Europe
would be lost in the banana industry." Similarly, the Costa Ricans — at least
those engaged in the production of maple syrup - would bitterly complain
about the rising tide of unemployment in their country.
From the perspective of the economist, we can see that both grievances
would be true. But contrary to the contention of bishop de Roo and his
colleagues, this would be a reason for rejoicing, not for the wailing and
gnashing of teeth. For if we want to economize on God's blessings, we do
well to encourage unemployment in the misbegotten Canadian banana, and
Costa Rican maple syrup industries.
Further, perhaps the greatest benediction an industrialized country like
Canada can confer on an economically backward nation such as Costa Rica is
to offer to integrate its economy with our own. In "Ethical Reflections on the
Economic Crises" the Conference of Canadian Bishops urges the
"Preferential Option for the Poor." According to this doctrine, public policy
should focus on the plight of the impoverished, and seek to improve their lot
in life. Since the world's poor are clustered in the underdeveloped nations,
this is an argument for open borders with the entire family of nations, not just
with the U.S.
But the Catholic bishops of Canada may not welcome advice from the
economics profession. (In recent surveys, only 3.8% of Canadian economists,
and 2.8% of their counterparts in the U.S. failed to support the view that
"Tariffs and import quotas reduce general economic welfare.") Perhaps, then,
they can borrow a leaf from their co-religionists south of the border. While
the U.S. bishops are hardly flaming advocates of an Adam Smithian policy of
full free trade, their text, "Catholic Social Teaching and the U.S. Economy" is
greatly at variance with the views expressed by Bishops de Roo, Proulx and
O'Byrne. In it they refer to "the flaws in the traditional notion of national
boundaries," and perceptively state, "...within a frame of reference
characterized by the 'preferential option for the poor,' we lean toward an open
trading
system."
1.
Dr. Block is an economist with the Fraser Institute.
rime Minister Brian Mulroney announced, with great fanfare, that Canada would grant
$42 million in foreign aid to Poland and Hungary in order to promote capitalism. That he
could do this indicates, as much as anything, that he does not
have even the most basic and elementary understanding of the free enterprise philosophy. That
the nation's journalists and editorial writers, ever ready to pounce upon the Progressive
Conservatives for just about anything under the sun, could let him get away with such a travesty
speaks volumes about the sorry state of their economic understanding as well.
Let it be said then, that capitalism is a system based upon private property, free markets, and
the lure of profits. It is a total contradiction to this system that government should subsidize
anything, let alone another government.
This foreign aid is actually an attack on capitalism in several senses. For one thing, it
undermines our free enterprise institutions here at home. The more aggrandized is Ottawa, the
less economic power remains with "the people," in the form of individual initiative. That grant
of $42 million will not come out of thin air. On the contrary, it will be exhorted out of the
pockets of the long-suffering Canadian taxpayer. Given the rakeoff that inevitably goes to the
bureaucrats, moreover, for our government to actually disburse $42 million means that taxes
will be higher than they otherwise would have been by a multiple of that amount.
For another, it has the exact opposite of its intended effect in the recipient countries of
Eastern Europe. The ostensible purpose of this income transfer is to promote capitalism in
Poland and Hungary. Ultimately, of course, the goal is to help the citizens of these beleaguered
countries lead a better life, but the underlying theory is that since central planning is responsible
for their present plight, what is needed now is a healthy dose of individual initiative. But if
aggrandizement of the public sector at the expense of the private fosters socialism, not free
enterprise, in Canada, it has the same effect in formerly communist countries as well.
Giving money to the Polish and Hungarian bureaucrats---even though their ministerial bosses
are now democratically elected-will do no more good for their respective economies than it did
in the past when they were appointed by a Communist party. Democratic socialism is still
socialism. As far as the potential Eastern European entrepre. neur is concerned, it matters little
whether he pays exorbitant taxes to the central planner who emerges from the ballot box or from
the the totalitarian system of the bayonet. Nor
does it matter whether the regulation that drives him out of business arises from one system or
the other. The only economic benefit derived from a free vote is that the excesses of socialism
can only be pushed so far before they can peacefully exchanged for an alternative. This option
does not exist under totalitarianism.
Transferring money from one government to another sets up perverse incentives in the
recipient country. Instead of concentrating on consumer needs-people in these countries are
faced with shortages of toilet paper, soap, bread, meat and countless other items we take for
granted in the West-the best and brightest of the Poles and Hungarians will be sorely tempted to
focus their attention on the government in order to obtain that 542 million for themselves. This
is why it is extremely pejorative to refer to this money as foreign "aid." With all of these
boomerang effects, it would be more accurate to call it foreign "harm."
If we really wanted to help the people of Eastern Europe, the encouragement of Canadian
private investment in these countries would be a far better plan. Unfortunately, because of
Mulroney's unfortunate decision, there is now $42 million less forthis purpose. Let us at least
resolve that no more money should be wasted in this manner in the future. Further, let us extend
the Free Trade Agreement recently concluded with the U.S. to Poland, Hungary, other former
Iron Curtain countries, and even to the entire world.
But even more than investment, knowledge and understanding of how free enterprise really
works is crucially needed by the people behind the former Iron Curtain. Such research is often
dismissed by Canadian socialists as "ideological" and "Neanderthal." but it is the very life blood
of those struggling to throw off the shackles created by the seven-decade-long experiment with
publicsector economic planning.
P
32 BRITISH COLUMBIA REPORT, AUGUST 27, 1990
Promoting Capitalism in Eastern Europe
by Walter Block, The Fraser Institute, Vancouver, B.C.
Prime Minister Brian Mulroney announced, with great fanfare, that Canada would be
granting $42 million in foreign aid to Poland and Hungary, in order to promote capitalism.
That he could do this indicates, if anything can, that he does not have even the most basic
and elementary understanding of the free enterprise philosophy. That the nation's journalists
and editorial writers, ever ready to pounce upon the Progressive Conservatives for just
about anything under the sun, could let him get away with such a travesty, bespeaks
volumes about the sorry state of their economic understanding as well.
Let it be said, then, that capitalism is a system based upon private property, free
markets, and the lure of profits. It is a total contradiction to this system that government
should subsidize anything, let alone another government.
This foreign aid is actually an attack on capitalism in several senses. For one thing, it
undermines our free enterprise institutions here at home. The more aggrandized is Ottawa,
the less economic power remains with "the people," in the form of individual initiative. That
grant of $42 million will not come out of the thin air. On the contrary, it will be exhorted
out of the pockets of the long suffering Canadian taxpayer. Given the rakeoff that inevitably
goes to the bureaucrats, moreover, for our government to actually disburse $42 million
means that taxes will be higher than they otherwise would have been by a multiple of that
amount.
For another, it has the exact opposite to its intended effect in the recipient countries of
Eastern Europe. The ostensible purpose of this income transfer is to promote capitalism in
Poland and Hungary. Ultimately, of course, the goal is to help the citizens of these
beleaguered countries to lead a better life, but the underlying theory is that since central
planning is responsible for their present plight, what is needed now is a healthy dose of
individual initiative. But if aggrandizement of the public sector at the expense of the private
fosters socialism not free enterprise in Canada, it has the same effect in formerly communist
countries as well.
Giving money to the Polish and Hungarian bureaucrats -- even though they are now
democratically elected -- will do no more good for their respective economies than it did in
the past when they were appointed by a Communist Party. Democratic socialism is still
socialism. As far as the potential eastern European entrepreneur is concerned, it matters
little whether he pays exorbitant taxes to the central planner who emerges from the ballot
box or from the the totalitarian system of the bayonet.
Nor does it matter whether the regulation which drives him out of business arises from one
system or the other. The only economic benefit derived from a free vote of the polity is that
the excesses of socialism can only be pushed so far before they can peacefully exchanged
for an alternative. This option does not exist under totali tarianism.
Transferring money from one government to another sets up perverse incentives in the
recipient country. Instead of concentrating on consumer needs -- people in these countries
are faced with shortages of toilet paper, soap, bread, meat and countless other items we take
for granted in the west -- the best and brightest of the Poles and Hungarians will be sorely
tempted to focus their attention on the government, in order to obtain that $42 million for
themselves. But this is the initial problem which created the felt need on the part of the
Canadian government to grant the funds in the first place: too much economic emphasis on
the public sector, too little on the private. This is why it is extremely pejorative to refer to
this $42 million as foreign "aid." With all of these boomerang effects, it would be more
accurate to call it foreign "harm."
This amount of funding may not be any great shakes in the capitalist west, but it is an
inordinate amount of money in the capital-starved east -- especially since it will not go to
help the people there, but rather to divert the more entrepreneurial inclined away from
needed private commercial endeavors.
If we really wanted to help the people of Eastern Europe, the encouragement of
Canadian private investment in these countries would be a far better plan. Unfortunately,
because of Mulroney's unfortunate decision, there is now $42 million less available for this
purpose. Let us at least resolve that no more money should be wasted in this manner in the
future. Further, let us extend the Free Trade Agreement recently concluded with the U.S. to
Poland, Hungary, other former Iron Curtain countries, and even to the entire world.
But even more than investment, knowledge and understanding of how free enterprise
really works is crucially needed by the people behind the former Iron Curtain. Such research
is often dismissed by Canadian socialists as "ideological," and "neanderthal," but it is the
very life blood of those who are struggling to throw off the shakles created by the seven
decades long experiment with public sector economic planning.
- 30-
Promoting Capitalism in Eastern Europe
by Walter Block, The Fraser Institute, Vancouver, B.C.
Prime Minister Brian Mulroney announced, with great fanfare, that Canada would be
granting $42 million in foreign aid to Poland and Hungary, in order to promote capitalism.
That he could do this indicates, if anything can, that he does not have even the most basic and
elementary understanding of the free enterprise philosophy. That the nation's journalists and
editorial writers, ever ready to pounce upon the Progressive Conservatives for just about
anything under the sun, could let him get away with such a travesty, bespeaks volumes about
the sorry state of their economic understanding as well.
Let it be said, then, that capitalism is a system based upon private property, free markets,
and the lure of profits. It is a total contradiction to this system that government should
subsidize anything, let alone another government.
This foreign aid is actually an attack on capitalism in several senses. For one thing, it
undermines our free enterprise institutions here at home. The more aggrandized is Ottawa, the
less economic power remains with "the people," in the form of individual initiative. That grant
of $42 million will not come out of the thin air. On the contrary, it will be exhorted out of the
pockets of the long suffering Canadian taxpayer. Given the rake off that inevitably goes to the
bureaucrats, moreover, for our government to actually disburse $42 million means that taxes
will be higher than they otherwise would have been by a multiple of that amount.
For another, it has the exact opposite to its intended effect in the recipient countries of
Eastern Europe. The ostensible purpose of this income transfer is to promote capitalism in
Poland and Hungary. Ultimately, of course, the goal is to help the citizens of these beleaguered
countries to lead a better life, but the underlying theory is that since central planning is
responsible for their present plight, what is needed now is a healthy dose of individual
initiative. But if aggrandizement of the public sector at the expense of the private fosters
socialism not free enterprise in Canada, it has the same effect in formerly communist countries
as well.
Giving money to the Polish and Hungarian bureaucrats -- even though they are now
democratically elected -- will do no more good for their respective economies than it did in the
past when they were appointed by a Communist Party. Democratic socialism is still socialism.
As far as the potential eastern European entrepreneur is concerned, it matters little whether he
pays exorbitant taxes to the paper pusher who results from the ballot box or from the bayonet.
Nor does it matter whether the regulation which drives him out of business arises from one
system or the other. The
only economic benefit derived from a free vote of the polity is that the excesses of socialism
can only be pushed so far before they can peacefully exchanged for an alternative. This option
does not exist under totalitarianism.
Transferring money from one government to another sets up perverse incentives in the
recipient country. Instead of concentrating on consumer needs -- people in these countries are
faced with shortages of toilet paper, soap, bread, meat and countless other items we take for
granted in the west -- the best and brightest of the Poles and Hungarians will be sorely tempted
to focus their attention on the government, in order to obtain that $42 million for themselves.
But this is the initial problem which created the felt need on the part of the Canadian
government to grant the funds in the first place: too much economic emphasis on the public
sector, too little on the private. This is why it is extremely pejorative to refer to this $42 million
as foreign "aid." With all of these boomerang effects, it would be more accurate to call it
foreign "harm."
If we really wanted to help the people of Eastern Europe, the encouragement of Canadian
private investment in these countries would be a far better plan. Unfortunately, because of
Mulroney's unfortunate decision, there is now an excess of $42 million less available now for
this purpose. Let us at least resolve that no more money should be wasted in this manner in the
future. Further, let us extend the Free Trade Agreement recently concluded with the U.S. to
Poland, Hungary, other former Iron Curtain countries, and even to the entire world.
- 30-
Promoting Capitalism in Eastern Europe
by Walter Block, The Fraser Institute, Vancouver, B.C.
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be granting $42 million in foreign aid to Poland and Hungary, in order to promote capitalism.
'<'>
Prime Minister Brian Mulroney announced, with great fanfare, that Canada would .:'--// f.~~
That he could do this indicates, if anything can, that he does not have
~
~ even the most basic and elementary understanding of the free enterprise philosophy. That the
nation's journalists and editorial writers, ever ready to pounce upon the Progressive
Conservatives for just about anything under the sun, could let him get away with such a
travesty, bespeaks volumes about the sorry state of their economic understanding as well.
Let it be said, then, that capitalism is a system based upon pr,i~ate_ property, free
o..
,(\C~~lf
markets, aIJ. d tp;{ lure of profits. It is totalJbi aIUl~~h' .~~ ;lY,,)( .
government te subsidize anything, let alone another government.
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1.'71r'-
This foreign aid is actually attack on capitalism in several senses. For one thing,
1"
it undermines our free enterprise institutions here at home. The more aggrandized is
Ottawa, the less economic power remains with "the people," in the form of individual
initiative. That grant of $42 million will not come out of the thin air. On the contrary, it will be
exhorted out of the pockets of the long suffering Canadian taxpayer. Given the rakeoff that
inevitably goes to the bureaucrats, moreover, for our government to actually disburse $42
million means that taxes will be higher than they otherwise would have been by a multiple of
that amount.
For another, it has the exact opposite to its intended effect in the recipient countries of
'Eastern Europe. The ostensible purpose of this income transfer is to promote capitalism in
Poland and Hungary. Ultimately, of course, the goal is to help the citizens of these beleaguered
countries to lead a better life, but the underlying theory is that since central planning is
responsible for their present plight, what is needed now is a healthy dose of individual
initiative. But if aggrandizement of the
2.
3.
__ ,"
.
1,,,/
public sector at the expense of the private,,/osters socialism not free enterprise in
Canada, it has the same effect in formerly communist countries as well.
j
Giving money to the Polish and Hungarian bureaucrats -- even though they are now
democratically elected -- will do no more good for their respective economies than it did in the
past when they were appointed by a Communist Party. Democratic socialism is still socialism.
As far as the potential eastern European entrepreneur is concerned, it matters little whether he
pays exorbitant taxes to the paper pusher who
j
results from the ballot box or from the(~~~ bayonet~it I, Nor does it matter
'~,.,~.~-~
whether the regulation which drives him out of business arises from one system or
the other. The only economic benefit derived from a free vote of the polity is that the excesses
of socialism can only be pushed so far before they can peacefully exchanged for an alternative.
This option does not exist under totalitarianism.
Transferring money from one government to another sets up perverse incentives in the
recipient country. Instead of concentrating on consumer needs -- people in these countries are
faced with shortages of toilet paper, soap, bread, meat and countless other items we take for
granted in the west -- the best and brightest of the Poles and Hungarians will be sorely tempted
to focus their attention on the government, in order to obtain that $42 million for themselves.
But this is the initial problem which created the felt need on the part of the Canadian
government to grant the funds in the first place: too much economic emphasis on the public
sector, too little on the private. This is why it is extremely pejorative to refer to this $42 million
as foreign "aid." With all of these boomerang effects, it would be more
accurate to call it foreign "harm."
If we really wanted to help the people of Eastern Europe, the encouragement of Canadian
private investment in these countries would be a far better plan. Unfortunately, because of
MUlroney's unfortunate decision, there is now an excess of $42 million less available now for
this purpose. Let us at least resolve that no more
money should be wasted in this manner in the future. Further, let us extend the Free Trade
Agreement recently concluded with the U.S. to Poland, Hungary, other former Iron Curtain
countries, and even to the entire world.
- 30-
December 27, 1989