Russia, Taiwan Learn All the Wrong Lessons from U.S. Protectionism

For the past several months,
U.S. steel companies and their political allies have been complaining
that Japan, Russia and other countries have been unfairly “dumping” steel
in U.S. markets. The United States threatened to increase tariffs against
such nations unless the “dumping” stopped, and recently U.S. Trade Representative
Charlene Barshefsky bragged that through her tireless efforts Japan and
Russia had both lowered their shipment of steel to this country.

“We think we have undertaken
actions that have brought steel import volumes way down, back to pre-[Asia
economic] crisis levels in many instances,” Barshefsky said. And in the
process sent the message to the rest of the world that the United States
is hypocritical in its support of free markets.

It is a lesson that those living
in Cherepovets, Russia, are learning well. Cherepovets’ economy is almost
entirely dependent on the Severstal steel factory which was Russia’s largest
steel producer in 1998. The story of Severstal’s success is a case study
in what was supposed to happen after the collapse of Communism.

After Russian steel production collapsed
following the 1991 breakup of the Soviet Union, Severstal’s Western-trained
managers abandoned the inefficient practices of the Communist era. They
worked hard to boost the profitability of the plant by seeking foreign
investment and by increasing the amount of steel they exported so as to
bring in much needed hard currency. In a country where many factories
still pay their workers in goods rather than cash, Severstal made 60 percent
of its revenue from exports, with a third of that coming from the United
States.

The Russian economic crisis
severely hurt the Severstal plant, and the Russian government’s agreement
with Washington to cut steel exports by 70 percent put the final nail
in the coffin of its success story. The factory managers are trying to
avoid laying off people by paying wages out of the funds they had set
aside for capital improvements, but that tactic will only be viable for
a few months and in any event will further delay much needed modernization
of the plant.

Mikhail Noskov, Severstal’s
financial director, understands the source of his company’s problems —
U.S. protectionist policies. “Such protectionism in favor of American
businesses is a violation of the ideals of a country like the United States
— ideals that they have tried to teach us,” Noskov said.

Is this why the United States
fought the Cold War? So some latter day American apparatchik trade representative
could put Russian steel workers out of business for daring to freely trade
with the United States? American politicians use to deride the Soviet
Union for refusing to embrace capitalism, while today American politicians
sabotage the efforts of Russian capitalists.

Meanwhile, Taiwan is threatening
to turn the “dumping” tables on the United States. After U.S. officials
spent much of the 1980s accusing Japan, South Korea and Taiwan of dumping
computer chips in the U.S. market, Taiwan is now threatening to fine American
companies for dumping computer chips in Taiwan’s market.

The problem is rather straightforward
— at precisely the time when the cost of producing memory chips for computers
was declining, Taiwanese companies invested billions building factories
to produce memory chips. Like the American computer industry who made
similar mistakes in the 1980s, however, Taiwanese companies prefer to
blame anyone but themselves. “Micron [an American subsidiary of South
Korea’s LG and Samsung] is trying to destroy our DRAM industry,” said
Genda Hu, president of Taiwan’s semiconductor association. “It is trying
to destroy our home market.”

As in the American version
of the chip trade wars, the Taiwanese firms haven’t been able to produce
any evidence that they were actually harmed by the alleged dumping, much
less prove that any dumping took place. But as in the United States, political
expediency counts more than actual evidence. If the dumping charge is
successful, Taiwan’s Finance Ministry could impose tariffs of as much
as 67 percent on U.S. computer chip makers.

The tariff game is one that
South Korea learned well, and it’s a competition which the United States
should begin to make a strategic withdrawal from by renouncing protectionist
economics once and for all.

Organs For Sale: Pennsylvania Experiments In Compensating Organ Donors

In 1985 the federal government
explicitly nationalized all organs available for donation. Claiming such
organs belong to the public as a whole, the National Organ Transplant
Act made it a crime for individuals to buy or sell organs intended for
transplant. Instead of allowing any sort of market in organs to develop,
NOTA set up an organization called the United Network for Organ Sharing
to determine how scarce organs should be allocated to the many patients
in need of transplants.

Pennsylvania is proposing
to take a bold departure from this regimen next year when it will begin
offering $300 worth of assistance in the form of payment of funeral expenses
to those who donate organs. Whether or not the payment of funeral expenses
of organ donors violates the ban on selling organs is yet to be decided.
Under NOTA the state does usually pick up the donors’ surgical expenses,
and some medical ethicists argue that a $300 payment for funeral expenses,
which will be made directly to the funeral home rather than the family
of the donor, is similar to the current payment of surgical expenses.

It is good to see at least
one state finally moving in this direction, but it would be better for
all concerned if the U.S. Congress would simply overturn NOTA, revoke
UNOS’ monopoly on organ allocation and allow private institutions to handle
organ donation from beginning to end.

UNOS itself often seems to
be an obstacle to increasing organ donation. Although semi-independent,
UNOS regularly bends with the shifting political winds. A few years ago
it was revealed that blacks tended to receive far fewer organ transplants
than whites, largely because blacks donate far fewer organs than whites,
and tiny genetic differences are extremely important in determining the
likelihood of the rejection of an organ. UNOS promptly promised to incorporate
race as a factor in allocating organs, although that promise doesnÂ’t seen
to have done much to affect the rate of organ donation by African Americans.

Similarly, when it was recently
revealed that adults were more likely to receive organs donated from children
than were children in need of a transplant, UNOS promised to revises its
system to do away with this disparity. It arrived at this decision even
though this seeming disparity results from a rather sensible policy —
if a donated liver from a child becomes available in New York, UNOS will
give priority to recipients in New York rather than Los Angeles, even
if the New York recipient is an adults and the Los Angeles recipient is
a child. Since there are far more adults on the transplant waiting list
than children, adults end up receiving most of the organs donated by children.

UNOS is constantly changing
its allocation formulas to decide just how much an adult’s life is wroth
compare to a child’s or a black person’s life compared to a white person’s
or a person living in New Orleans Compared to someone living in New England.
As with all bureaucracy’s, UNOS’ performance is less than inspiring.

But could a private market
in organs really work? The objection most often raised to proposals to
privatize organ allocations is that it will disproportionately benefit
the rich. News flash: the rich already are disproportionately favored
by UNOS’ system and will be inevitably favored by any conceivable organ
donation system that doesn’t explicitly discriminate against them. Today,
for example, the wealthy are more likely to have their illnesses detected
earlier which makes them better candidates for organ transplants; the
wealthy can afford to fly to different regional organ transplant centers,
thereby increasing their odds of obtaining an organ; and, of course, the
wealthy are more likely to be able to afford the transplant operation
and the expensive cycle of drugs and post-operative medical treatment.

Not to mention the fact that
by world standards even those of modest incomes in the United States who
receive organ transplants are among the richest people in the world. A
critique that insists that justice is not served if the poor do not have
equal access to organs must answer why the truly destitute of Latin and
South America are regularly excluded from receiving organs donated from
the United States, even though there is no strictly medical reason they
could not be included in the pool of potential organ recipients. I suspect,
though, that most Americans regardless of financial means which recoil
at this idea.

The real issue is whether
or not the poor would be at more of a disadvantage under a market system
than they are under the current UNOS system or compared to what could
be expected from some realistic alternative to UNOS and the answer is
probably not. All potential organ recipients, rich or poor, are at a severe
disadvantage today in that the number of available organs is miniscule
compared tot he number of people needing transplants. There were about
64,000 people in need of transplants in the United States last year, but
less than 6,000 organ donors. UNOS has been given ample opportunity to
find ways to increase that level of organ donors over the past few decades
and proven quite incapable at the task.

Would a market system have
any better luck? Nobody really knows. Some ethicists argue that allowing
organs to be bought and sold would discourage people from making organs
available, but there is little evidence for this. Other parts of the body,
from women’s eggs to blood and even entire bodies are regularly, bought,
sold and rent for periods of time (in the case of people who earn money
for participating in pharmaceutical drug studies) without adversely affecting
their supply. Contrary to the claim by some ethicists, the stigma attached
to buying and selling of organs appears to be one artificially created
by the ban on such transactions by NOTA.

Many of the imagined horror
stories of the rich harvesting organs from the poor are unlikely to materialize
because it is unlikely that organs would command the sort of prices envisioned
by some ethicists. Although many people assume that organs would sell
for tens or even hundreds of thousands of dollars, the experience with
countries that have legalized organ sales such as India’s experiment with
the practice confirms that the price people are willing to pay for organs
is relatively low — in the few thousands of dollars. One of the dirty
little secrets that both opponents and supporters of organ transplant
sales rarely mention is that there are so many obstacles facing organ
donation from a purely medical point of view that it is questionable whether
purely economic transactions between organ buyers and sellers would add
more than marginally to the available supply of organs.

Rather the exciting possibility
from allowing a free market in organs is not that a few wealthy people
will buy organs from the poor, but that alternative institutions for obtaining
and allocating organs will emerge that find ways to increase the donor
pool. Maybe the $300 in funeral expenses Pennsylvania is offering won’t
be enough to encourage organ donation, but maybe $1,000 might tip the
scales. Maybe a private foundation made up of physicians and ethicists
might hit upon the right combination of incentives that increases donations
whole reassuring people about the sanctity of human life.

Part of the problem, however,
will be that the sort of polices that encourage organ donation may not
be the ones that are politically tolerable. As noted earlier, for a variety
of reasons African Americans are generally less likely to be organ donors
and transplant recipients. As numerous studies have shown, blacks are
also far more likely than whites to distrust the medical establishment
— often with good reason given incidents such as the Tuskeegee Syphilis
Experiment in which treatment for syphilis was intentionally withheld
from black men as part of a government-funded study. One can imagine a
private organ foundation dramatically increasing organ donation rates
among African Americans by pledging to give blacks first priority as organ
recipients. Such a system would certainly draw enormous criticism and
controversy.

There is no doubt that a transition
to a market system for organ donation wold create numerous ethical problems,
but they seem small compared to the current quandary — close to 100,000
people a year who die or receive substandard medical treatments because
of a lack of organs available for donation. The UNOS experiment has failed.
It’s time to look at the alternatives.

Short Takes – July 1999

Short Takes


Can the government make up its mind about global warming?

       Last week the Associated
Press reported the Clinton administration will propose $4 billion in spending
and tax breaks to fight global warming. You know the routine — we’ve
all got to stop pumping CO2 into the atmosphere or the temperature ill
keep rising and the world will be reduced to a desert wasteland.

        But the same week the Clinton
administration requested new funding to stop the desertification of the
world, the Bruce Babbitt’s Interior Department took possession of 10,000
acres of California desert promising to protect it from evil developers
who (gasp) wanted to build houses, hotels and maybe even a road or two
thorough the desert.

        So which is it? Are deserts
national treasures to be protected from greedy capitalists or are they
an apocalypse worth spending $4 billion to prevent?


Institute for Justice sues to overturn CFTS censorship

       Browsing through the Institute
for Justice web site the other day I realized I’ve been committing a series
of ongoing felonies over the past several years simply by publishing a
web site. You see I run a site called Overpopulation.Com which debunks
claims by environmental extremists that the world is overpopulated. A
lot of the information I put on the site has to do with past, present
and likely future prices of commodities (for example, I’ve predicted numerous
times that oil futures will likely remain low and are a bad investment).

        By doings so it turns out
I am committing a felony punishable by five year sin prison and a $500,000
fine courtesy of the Commodity Futures Trading Commission. The Institute
for Justice is suing to overturn a CFTC ruling that requires anyone who
even links to web sites that contain information about commodities to
register with the CFTC (and undergo the requisite finger pointing, background
check, financial audit and large fee for the pleasure of doing business
with the CFTC).

       Do I also need a license to tell
the CFTC to go to hell?


Medical Research News

– Protein wards off organ rejection in monkeys

     In research published in Nature
Medicine, scientists at the Naval Medical Research Center reported monkeys
given injections of a protein after receiving kidney transplants effectively
avoided any organ rejection for the first year of the ongoing study.

    Of nine monkeys in the experiment,
eight are alive and well with no sign of organ rejection after one year.
The ninth monkey died of unrelated causes. The protein, called hu5C8,
differs from standard treatments to prevent organ rejection in that it
does not suppress the immune system, which has the unfortunate side effect
of leaving patients vulnerable to infections. Rather, the protein works
by inhibiting blood cells from alerting the immune system about the transplanted
tissue.

-Suppressing protein found to prevent diabetes in mice

    Researchers reported in Science
a few weeks ago that blocking a single protein in mice effectively prevented
the onset of type I diabetes. The mice were specifically bred to have
diabetes, but suppressing a protein called glutamic acid decarboxylase
(GAD) prevented almost all of the mice from developing the disease.

    Type-I diabetes afflicts about
14 million people worldwide and occurs when the immune system mistakenly
attacks and destroys the cells that produce insulin. People with Type-I
diabetes required daily insulin injections to survive. Blocking the GAD
protein in mice stopped them from producing the T-cells that normally
attack the insulin-producing cells.

    Although it’s a huge step from
mice specifically bred to develop diabetes to stopping the disease in
human beings, the research does provide important clues to developing
future treatments for Type-I diabetes in human beings.

Sources:

Organ rejection shows promise in monkey studies. Malcolm Ritter, Associated Press, May 31, 1999.

Diabetes Mystery Solved? Reuters, May 14, 1999.

The Makah Get Their Whale, Endure Invective from Activists

The long-running controversy
over the Makah‘s efforts to restore tribal traditions by Hunting a whale
ended recently when the tribe finally managed to get its whale. The Makah
had voluntarily abandoned whale hunting earlier this century, but reserved
the right to resume the practice under provisions of a treaty with the
United States.

The fascinating thing about
the controversy was how quickly environmentalist and animal rights activists
devolved to threats and racist slurs against the Makah. Usually environmentalists
extol the virtues of indigenous cultures, contrasting them with the evil
patterns of consumption and exploitation supposedly unique to Western
culture. But once the Makah deviated from this New Age fantasy, they were
shown little mercy from activists.

There were the death threats
against individuals as well as bomb threats called in to the Makah reservation
school. T-shirts were sold with the slogan “Save a whale, kill a Makah.”
At protests against the hunt, activists were heard calling the Makah “savages.”

The Seattle Times published
a lengthy story printing about a dozen of the more-racist anti-hunting
letters it received. One letter concluded, “these people want to rekindle
their traditional way of life by killing an animals that has probably
twice the mental capacity they have.” Another suggested that, “we should
also be able to take their land if they can take our whales.” Or consider
this gem of a letter that complained, “Natives were often referred to as
‘savages,’ and it seems little has changed.”

As Alexandra Harmon, an assistant
professor at the University of Washington American Indian Studies Center
put it, “Again and again in American history, non-Indian Americans have
demanded that Indians act or live in some way other than Indians have
chosen. The current Makah story is a lesson about how had it is to recognize
and resist that same ethnocentric impulse today.”

Source:

E-mails, phone messages full of threats, invective. Alex Tizon, Seattle Times, May 23, 1999.

Animal Rights Awareness Week and Attitudes Toward Animal Experiments

In Defense of Animals has declared
June 21-26 Animal Rights Awareness Week, urging activists to “educat[e]
… the public about the way in which businesses that sell animals, particularly
‘pet stores,’ perpetuate a vicious cycle of cruelty, suffering and death.”

An Animal Rights Awareness Week
is a great idea — the more accurate information people have about the
animal rights movement and about the use of animals, the better. This
point was highlighted in a recent survey commissioned by the New Scientist
to gauge people’s attitudes toward animal experimentation.

The poll of British citizens
found 64 percent of respondents disagreed with the view that scientists
should be allowed to conduct any experiment on animals, while only 24 percent
agreed. When told that such experiments might lead to the development
of important medical treatments, however, 45 percent of respondents agreed
that scientists could perform any experiment in animals, while only 41
percent were opposed.

The most amazing result of the
study, however, was the widespread ignorance of the role of animal testing
in drug development. Of those people who themselves had taken or had a
close family member who had taken a prescription drug for a serious illness
in the previous two years, only 1 in 6 realized such drugs had been tested
on animals.

Although surveys of Americans
generally find a lot more support for animal research than in Great Britain
(where animal rights activists have much more support), I wouldn’t be
surprised if the general level of ignorance about animal testing wasn’t
similar in the United States.

The clear message of the survey
is that government, industry and others need to do more to educate the
public about the continuing need for animal experimentation to further
development of important medical technologies. Animal rights activists
have become rather adept at exploiting people’s general ignorance of science
and their specific ignorance of the role animals play in medical research.
Educating the public and correcting the myths and lies spread by animal
rights activists should be a top priority.

Sources:

Explanations shift attitudes to animal experiments. Richard Woodman, British Medical Journal 1999;381:1438 (29 May).

Animal Rights Awareness Week June 21-26, 1999. In Defense of Animals press release, May 19, 1999.