What would happen if . . . we raised highway speed limits?

Posted on March 21, 1998 by urbanrenaissanceinst

Frank Navin and Michael Cain
The Next City
March 21, 1998

 

We asked Frank Navin, professor of civil engineering, and Michael Cain, director of research at Saftey by Education (Not Speed Enforcement),to comment

We would be flouting science. It doesn’t take a rocket scientist to realize the faster you hit a solid object the more severe your injuries. It does, however, take a high level of science to measure the effects of increased highway speeds on our safety. Most modern vehicles are built to allow a belted occupant to survive, with little injury, a 50 km/h head-on impact into a solid object. Although expressways are usually driven at 100 km/h or more, depending on the posted speed limit and the level of police enforcement, engineered roadside objects have protective outer barriers that can be hit at the highway’s designed speed — usually within 10 km/h of the posted speed. But the faster a driver is travelling before crashing, the worse the impact. While a 50 km/h impact is equivalent to dropping a car from the top of a two-storey building, a 100 km/h impact is equivalent to dropping 11 storeys, and a 150 km/h crash to almost 30 storeys.

The number and severity of crashes would increase. Canadian studies show that increased speed increases the chance of crashing, and a Finnish study observed that for every one km/h speed increase, the number of injuries increased by three per cent and the injury costs doubled. These negative effects come about because of the shorter time for the driver’s observation, decision making, and action, made worse by the shortened distance available for braking and steering.

Actually, we need increased enforcement and reduced speeds. The combination of reasonable speed limits and vigorous police enforcement effectively reduces the number and severity of injuries and fatalities on our highways. Electronic police enforcement by photo radar cameras can be one useful tool. For example, Victoria, Australia, claims that photo radar has reduced its road fatalities by about 11 per cent.

We’d be recognizing the speed at which most motorists already drive. Decades of research around the world proves that the upper end of average traffic speeds are safest for our highways and major roads. This reduces variations in speed among vehicles, which has long been identified as a far greater cause of accidents than absolute speed.

There wouldn’t be more accidents. Contrary to aggregated statistics produced by governments, mere speed is rarely the sole contributing factor in a crash; in fact, research shows that two-thirds of speed-related fatalities involve either drugs, alcohol, or both. Of the remainder, about two-thirds occur below the speed limit and are related to road conditions. In late 1995, the U.S. Congress allowed states to set their own maximum speed limits. The safety lobby predicted that fatalities would increase by 6,400 or about 15 per cent. Results now confirm that fatalities were within a statistically insignificant 0.2 per cent.

Government and insurance companies would stop gouging us. These bodies may appear safety conscious when they push for lower speed limits, but the desire for revenue underlies their motives. Since motorists frequently face 50 per cent increases in basic insurance for just two speeding tickets, it’s not surprising that the Insurance Institute for Highway Safety is the largest group lobbying against raising American speed limits. In fact, insurance companies frequently supply speed enforcement equipment for police departments.

Police could concentrate on important issues rather than on revenue and photo radar. Citizens suffer as police focus more on activities that return revenue (speed enforcement) and less on traffic activities that, while time intensive to enforce, reduce both accidents and driver frustration (red light running, failing to yield, and impaired driving).

Michael Cain

Frank Navin

Posted in Automobile, Transportation | Leave a comment

Planners from hell – Food not politics

Posted on March 21, 1998 by urbanrenaissanceinst

The Next City
March 21, 1998

Food not politics

IN 1988, A GROUP OF CIVIC-MINDED San Franciscans cooked up a plan to address the city’s hunger problem. They convinced supermarkets and bakeries to donate surplus food destined for the trash, stirred up a storm, and served vegetarian fare for free in public parks and plazas. Since then, over a 100 — and sometimes 200 — homeless people join the daily picnic. And unlike other aid groups, Food Not Bombs requires no government cash.

Some cities might offer a commendation, a word of thanks from the mayor, or some other pat on the back. But in San Francisco, the city obtained a court injunction in 1989 prohibiting the group’s volunteers from serving food without the appropriate permits. After a protracted battle, officials issued health and parks permits to Food Not Bombs. In an about-face, the parks commission then abolished all permits for free food distribution in parks. In turn, the health department refused to issue a permit — standard procedure, they said — unless the parks department granted the group permission to operate. The result was a catch-22 that required unobtainable permits. Similar permit problems have plagued some of the other 100-odd chapters worldwide of Food Not Bombs, which was born in 1980 in Boston by anti-war poverty activists.

San Francisco police, sometimes clad in riot gear, made over 700 arrests over the years for distributing bagels, stew, and oatmeal. They imprisoned members of the group for up to three days — for felony conspiracy, assaulting an officer, or resisting arrest — before dropping or dismissing charges and repeatedly confiscating their delivery vehicles, food, and cooking pots.

In reality, Food Not Bombs was caught in the cross fire of the city’s attempt to control the homeless population, estimated at 6,000 to 10,000. Under Mayor Frank Jordan’s controversial Matrix program, police enforced “quality of life” or “nuisance” misdemeanors like sitting, lying, or sleeping on the ground in public, panhandling, and public drunkenness. Special squads roamed the city, issued thousands of citations, bulldozed shanties in Golden Gate Park and disposed of the squatters’ possessions. Military helicopters with heat-sensing equipment to seek out squatters were planned, but nixed after press reports of outrageous costs. Over 40,000 citations and arrest warrants issued under the program were dismissed last year by a municipal court judge. Against this backdrop, it’s unsurprising that Food Not Bombs ran into trouble. Its public picnics — part potluck and part political action — serve up healthy portions of criticism of government social policy. It rejected the city’s offers of a permanent, indoor space, fearing that reliance on institutional support would muzzle its politics and reduce media attention on homelessness.

Whether the government was trying to sanitize the city or curb the group’s criticism, Amnesty International called the arrests a campaign of “selective harassment” and a violation of the group’s right to free speech and assembly under the U.S. constitution and the United Nations’ Universal Declaration of Human Rights. It dubbed one group member, sentenced to 28 days in prison for violating the court injunction, a “Prisoner of Conscience.”

The city’s new administration, elected in 1996, said homelessness was not a crime and dismantled many of the Jordan policies. Food Not Bombs’ picnics are now virtually trouble-free.

Paul Hainsworth

Traffic chaos at New York City tolls

TRAFFIC JAMS AT U.S. TOLL BOOTHS are a familiar sight, but even hardened New York City drivers were outraged at the toll system at Throgs Neck Bridge linking the Bronx to Queens. Last summer, on their way to a family reunion, William Bowlby, his wife, their two increasingly cranky children, and his 80-year-old mother were stuck in a toll plaza for hours with no food or washroom facilities. But no traffic accident, breakdown, or construction caused the mammoth delay.

The cause of the problem — the E-ZPass electronic toll collection system — should have been the cure to the area’s traffic woes. Instead, its botched implementation at Throgs Neck Bridge in 1996 by the Metro Transportation Authority worsened traffic congestion and pollution from idling vehicles. Bowlby, a transportation and air quality consultant, calls it “the most incredible mismanagement of intelligent transportation system technology that I have ever seen, experienced, or heard of.” New York City veteran helicopter traffic reporter Tom Kaminski calls it a case of “monumental delays and total chaos.”

Just weeks before the toll system’s debut, the authority announced an impending toll hike from $3 to $3.50, prompting motorists to hoard toll tokens and delay signing up for the E-ZPass system. Then, soon after the system’s introduction and before many drivers became E-ZPass subscribers, the MTA converted several cash and token lanes into E-ZPass-only lanes. In another miscalculation, MTA planners didn’t account for the perennially heavy springtime weekend traffic on Throgs Neck when locals and tourists flock to nearby beaches.

Other planning mistakes contributed to the chaos. Confusing signs were difficult for motorists to follow, and the MTA moved E-ZPass lanes around, from the left lanes on Friday, to the right lanes on Monday morning. All this forced drivers to jostle around — some needed to cross up to eight lanes to reach to the right booth. Once through, they’d often have to quickly cross back over the same eight lanes to make their exit ramps. The result was traffic gridlock, every day, for weeks.

Throgs Neck had been such a disaster that, when the MTA announced E-ZPass’s next implementation at the Queens Midtown Tunnel, media reports of impending mayhem had motorists “gritting their teeth in anticipation.” On opening day, reporters and camera crews, local and national, swarmed the area to cover the expected mess. “It was like Vietnam,” says MTA Bridges and Tunnels spokesperson Frank Pascual, referring to the half-dozen traffic helicopters buzzing the area.

Of course, E-ZPass is supposed to — and generally does — work much better than this. E-ZPass lanes can process up to a 1,000 vehicles an hour, four times as many as cash lanes. Instead of stopping to pay a toll, an electronic device reads a credit-card sized transponder attached to a vehicle’s windshield, automatically billing a subscriber’s account or credit card as the car cruises through at between 30 to 50 km/h. E-ZPass is part of a plan among the region’s authorities to let drivers pass through several tolling jurisdictions and receive one toll bill.

After the ill-planned and ill-timed implementation at Throgs Neck, the MTA introduced E-ZPass more slowly — and in trouble-free fashion — at its eight other locations. Now, with 1.1 million E-ZPass customers — 55 per cent of the MTA’s total users — MTA Bridges and Tunnels toll plazas are less congested than they ever were.

P.H.

Dutch art on the dole

IN 1949, THE DUTCH GOVERNMENT DECIDED to buy art from young, up-and-coming artists, freeing them from more mundane work to focus on their talent. The government would then hang the work in government offices, lend it to public spaces, or sell it to private galleries. A simple idea, but with one hitch: No one wanted to buy the works the government purchased. By the time the government cut the program in 1987, most of its 220,000 pieces of art were gathering dust in a massive warehouse, unsalable and never before viewed. Municipal storerooms held an additional 200,000 works.

One problem lay in the program’s implementation. To receive funding, artists didn’t need qualifications, such as prior sales, exhibitions, or other forms of recognition. If a review panel thought the artist showed promise, it agreed to buy a number of pieces, the price based not on the value of the work, but on the needs of the artist — marital status, number of dependents, rent, and cost of materials. It paid the artist monthly, up to $16,000 annually. If the artist didn’t deliver the goods, the cheques would keep rolling in nevertheless.

But to the arts community’s consternation, rather than creating a market for art, the program effectively took art off the market. Under the $34-million program, called Beeldende Kunstenaars Regeling (BKR, or Visual Artists Arrangement), art disappeared into the warehouses of the ministry of culture. Worse, artists blamed BKR for supporting mostly tried and true, conservative painting and sculpture, and turning out few innovative or critically acclaimed artists. The hot art schools denounced BKR for sucking budding artists into a black hole, sapping their motivation, and dulling their craft. By the 1980s, getting by without BKR became a mark of respect in serious art circles.

After an election in 1982, the most conservative Dutch government in decades attached strings to the patronage by withholding grants to artists who didn’t sell $1,500 worth of work a year privately; in 1987, it raised the requirement to $4,000. That effectively culled the list of qualifying artists from its high of 3,600 to 2,300. When bureaucrats finally terminated BKR in 1987, they were at a loss over what to do with nearly a half-million works — only 13,000 could be sold or placed in public museums. Almost all the art was given away or junked. Most of the artists refused to take their art back.

P.H.

New York jolts automakers

AUTOMAKERS MUST SELL THOUSANDS of electric cars in New York state to avoid a ban of new-car sales or a $10,000 daily fine, according to a state clean air statute that requires two per cent of total sales to be electric. To meet this quota, which came into effect in January, General Motors and Ford would have to sell almost 2,000 1998-model electric cars each, with five other manufacturers bringing the total to 8,000.

While politicians expect sales of zero-emission electric vehicles to cut their state’s pollution, their constituents aren’t cooperating. According to the American Automobile Manufacturers Association (AAMA), electric vehicle sales have been shockingly low. One Big Three manufacturer, who wishes to remain anonymous, has had only four electric vehicle orders this year. The price of electric vehicles is one roadblock — Ford’s 1998 Ranger EV pickup sells for $32,795, nearly $21,000 more than the gasoline-powered Ranger. New York’s cold weather also stalls demand for electric vehicles by draining their batteries and limiting their range. The shortage of recharging stations — only five, with a total of 15 electrical outlets — in a state where residents often park on the street or in driveways without easy access to electrical outlets, further increases customers’ reluctance.

A court battle only adds to the confusion. New York passed its mandate in 1992, after a federal Clean Air Act amendment allowed states to adopt either federal standards or more stringent California pollution regulations that involve the 1998 electric vehicle quota. When California, recognizing the virtually non-existent market for electric vehicles, delayed its mandate until 2003, the AAMA took New York to court to obtain a similar delay. The AAMA president argued that states have to “mimic to a tee the environmental standards they chose — either the federal or California standards. We believe that if California has postponed its mandate, New York must also.” The industry lost in a U.S. District Court in fall 1997, but hopes to win on appeal this spring.

In the meantime, regulators and environmentalists insist automakers can comply with the electric vehicle regulations, just as they have with seat-belt and air-bag requirements, fuel-economy rules, and emissions limits. “We have often heard that things can’t be done in the auto industry, and they have a way of getting done,” says a spokesman for New York’s Department of Environmental Conservation. An energy expert with Environmental Advocates in Albany asserts, “If the automakers put the same time and energy into marketing zero-emission vehicles that they do in marketing and selling sport-utilities, there’s no question in my mind they could sell electric cars to meet the mandate.” On the other hand, New York car dealers almost unanimously oppose the environmental statute. “We can’t mandate the marketplace and force people to buy these cars,” says the executive vice-president of the New York Automobile Dealers Association.

Amid the confusion and litigation, a compromise may be available. General Motors recently announced that it can equip some of its 1999 gasoline-powered cars with advanced catalytic converters and electronic engine control systems, making them 99 per cent free of hydrocarbons and nitrous oxide. To detour other states from taking the California route, GM proposed a national emissions standard.

The federal Environmental Protection Agency jumped at the compromise, saying national standards would limit the flow of dirty air from state to state and from interstate travel and would better reduce smog in any individual northeastern state than a spotty adoption of California standards. The National Low Emission Vehicle Program would allow just 0.075 grams of hydrocarbon emissions per mile by the year 2001 in place of electric vehicle quotas. California’s mandate allows 0.062 grams a mile, while the current national standard is 0.25 grams.

New York rejected the deal in late January, but the Big Three have opted in, even without the agreement of all 49 states. If New York decides electric vehicles aren’t the answer to its pollution problems, it can change its mind.

Amy Buskirk

Hamilton blocks hubcap business’s road to success

WHEN KHADER SHAHEIN MOVED HIS USED HUBCAP BUSINESS to an empty lot he purchased in 1997, he thought his business would hit the road running, but Hamilton’s building department blocked his way with zoning regulations. Six months later, K & E Hub Caps no longer sells used hubcaps, and its profits are halved.

Shahein started his Hamilton business in 1992 after moving from Calgary with a busload of used hubcaps. Over the next five years, he established a group of suppliers who kept Hamilton’s roads and highways clean of hubcaps. His clientele appreciated the wide selection and low prices in his rented Main Street storefront — rather than paying close to $200 for a new hubcap from a car dealer, drivers could pick up a used hubcap for $1 to $25.

With business booming, Shahein decided to move from his rented premises and buy the vacant lot a few doors away for $45,000. After paying $185 for a new business licence (the city wouldn’t let him transfer his old licence) and confirming with the building department that he didn’t need a building permit, Shahein began moving his 2,500 used hubcaps to a shed he built on the new location. In late October, the building department sent him an Order to Comply, giving him seven days to get a permit for his shed — a three-sided structure, with no heat or hydro.

While applying for the building permit, the clerk delved into the city’s regulations and found that for the past five years, Shahein’s business had been breaking a zoning bylaw prohibiting the sale of “scrap metal, waste paper, rags, bones, bottles, bicycle and motor vehicle parts” along Main Street East. Shahein was flabbergasted — his business hadn’t changed in five years, and each year the city had granted him a second-hand business licence. K & E Hub Caps seemed to fit right in with the other second-hand stores selling clothes, jewelry, clocks, and furniture along the street.

“The city waited for five years, after I have four kids to support, to discover their mistake,” laments a frustrated Shahein. The building department suggested he apply to its committee of adjustment, whose mandate includes sanctioning minor variances to zoning bylaws. An application to the committee costs $400 and takes 7 to 9 weeks to process. He and his wife decided they’d rather give away all their used hubcaps than pay the fee or leave their fate to the adjustment committee. Shahein now sells only new hubcaps and brings in extra money by leasing some of his lot to a used car salesman, whose product is allowed under the zoning bylaw.

A.B

No cocker spaniels, please. This is Singapore

DUE TO A TIGHT GOVERNMENTAL LEASH on pet ownership, Singapore residents have to think twice before asking, “How much is that doggy in the window?”

Regulations in government-subsidized apartment complexes, where almost 80 per cent of Singapore’s three million people live, allow only one pooch per flat from a list of approved small breeds, including chihuahuas, dachshunds, toy poodles, and five breeds of spaniel (but not the cocker). Although the one-small-dog rule doesn’t fence in the few people who live in private homes — the government watchdogs over animal licensing and control allow them to own up to three dogs of any breed — that doesn’t mean wealthy dog owners can have their bone and eat it too.

Those who adopt an akita and mastiff, which fall in the government’s Category A, must sterilize and microchip their dogs, take out a $100,000 insurance policy against damage to people or property, and put up a $5,000 cash bond that will be returned upon the dog’s death, but forfeited if the dog appears in public without a leash and muzzle. Category B dogs, including bull terriers, Dobermann pinschers, and German shepherds, escape sterilization and insurance, but, like their Category A cousins, must wear a leash and muzzle in public. If a dog of any size commits an “act of nuisance” — barking too much, defecating in public, harassing passers-by, chasing a car, or rummaging through a garbage bin — the government may revoke its licence. Owners of unlicensed dogs face fines of several hundred dollars. These regulations have kept Singaporean dog ownership to a minimum: According to official statistics, only four per cent of households have dogs.

Singapore regulations also leave cat lovers hissing. Housing officials forbid cat ownership because the pets can escape through the open windows of kitchens and storage rooms. But the ban hasn’t kept the cat species completely down — stubby-tailed strays still live on the streets even though the law prohibits feeding them.

Singapore’s dogged pet regulations reflect a highly organized society that also bans littering, graffiti, chewing gum, jaywalking, spitting on the sidewalk, and failing to flush public toilets. Officials say the pet laws keep flats quiet and streets clean.

Posted in Housing, Public transit, Regulation, Toll roads | Leave a comment

Local Heroes

Posted on March 21, 1998 by urbanrenaissanceinst

Julie Barlow
The Next City
March 21, 1998

“DO YOU HAVE A PLACE TO SLEEP TONIGHT?” asked Father Emmett Johns. The man Montreal’s street kids call Pops and the founder of the Bon Dieu dans la rue waited for an answer he knew would not come easily. The young man Johns was talking to — a solemn youth in a leather jacket and tall black boots, a squeegee poking out of his knapsack — had been staring at the floor, expressionless, for the last half hour.

“What’s your name?” Pops asked.

“Alex.”

“Where are you from, Alex?”

“Khanawake.”

“Oh really! I know some folks from that area. Do you know the Smith family?” The young man looked up and nodded affirmation. But he still hedged on the question of his sleeping arrangements. Johns understood. It was 2:30 a.m. and minus 10 outside on that February night last winter. He slipped a cellular phone out of his pocket and made a few calls. When he found a free bed at the Refuge des jeunes, he slipped a volunteer a $20 bill and asked him to take Alex to the shelter by taxi.

When things settled down, I — the pretend volunteer — took the priest aside. Just how did he know that among the hundred or so young people who visited the Winnebago that night, it was Alex that had nowhere to sleep?

It was no mystery, Johns told me. “His buddy got off at the last stop. Kids who wash car windshields at street corners always work in pairs. When one leaves without the other, it’s a sign there’s a problem.”

After nine years of endless nights helping Montreal’s homeless youth, Father Emmett Johns can spot an urgent case in a second. At 70 years of age, the small white-bearded priest is a legend among the 5,000 youngsters who wander Montreal’s streets. Homeless youth know and trust Johns like a grandfather. In 1996, 30,000 visited his Winnebago — known as the Van, and his 20-bed downtown hostel — the Bunker — provided beds to 6,000.

Emmett Johns is an unconventional priest, one who charmed everyone around him during his 30 years of service in Montreal parishes and hospitals, but who never quite felt fulfilled in the role of parish priest. “Emmett is a charismatic. He doesn’t fit the institutional mold,” says Johns’s old friend and confidant, Bishop Neil Willard, treasurer of the Montreal Catholic diocese. As a young man, Johns dreamed of being a missionary in China. The dream expired in 1972 when his application was rejected, but the missionary drive never left him.

So in 1988, when Johns was at an age when many priests consider cutting back their duties — or retiring — he decided to heed his second calling, helping homeless youth. Johns had worked with young people during his years as a parish priest, and seeing kids living on the street had always troubled him. “What are these kids supposed to do if nobody helps them?” he asks. “A lot come from broken families, and because there are no jobs for them, they never manage to establish normal lives. The world for them is a place full of rules and regulations and people wanting to blame them for all society’s problems. But these kids are powerless.”

Johns had heard about a man in Toronto who drove through the streets handing out food to homeless kids and decided to follow the example in Montreal. He borrowed $10,000, bought an old Winnebago, equipped it with a microwave oven, took out the beds and added seats. With no particular plan in mind, he and two volunteers simply headed out onto the streets to offer hot dogs and a temporary roof to homeless youngsters.

From day one, Pops made the philosophy of the Van clear to all, including volunteers and staff. His number one rule would be respect for all. “We don’t set out to change kids,” he says. “We just want to feed them.” On the Van, Johns keeps an eye out for emergencies, but he never pushes kids to talk about their problems. He just listens to them, supporting them in whatever problems they’re facing — whether it be going back to school, going back home, working out problems with friends, or finding a vet to take care of a sick pet.

“The important thing is to give these kids a place of their own, a place where they can just hang out and eat and chat,” says Johns. The Van is much more of a travelling café than, say, a crisis centre. It is an informal, relaxed place where there aren’t many rules. Volunteers distribute hot dogs and cheese dogs, Tylenol, underwear, socks, clothing, cigarettes, and condoms. Johns roams about with a spoon and a bottle of cough syrup, discreetly handing out bus tickets and money to those who seem in need. The teenagers, many of whom looked menacing in the street, are transformed inside the Van. They say “please” and “thank you,” and rarely complain, argue, or so much as raise their voices.

From its humble beginnings — when Johns ran the show himself with several volunteers — Dans la rue has grown into an organization with 21 employees, over 60 volunteers, and a budget of $1.3 million, all of which is raised through private donations. Private funding has been a key element of Dans la rue’s philosophy from the start. “The very first week we were on the street, we saw a demonstration of non-governmental organizations protesting delays in their governments grants. We didn’t want to fall into that,” says Johns. “We thought we would be better off if we could avoid the bureaucracy altogether.” Johns says government funding comes at a price he’s not willing to pay. “The government could change our orientation if they wanted, tell us who to hire, or decide that Dans la rue would make a nice service for seniors. If we were dependent on them for funding, we would be powerless against that.”

Luckily, Johns has a gift for winning others to his cause. When he is not visiting his kids, he zigzags the city, giving speeches at luncheons, conferences, and in schools, doing his part for Dans la rue’s fund-raising campaign. At a Kiwanis Club luncheon at the Montreal Athletic Club last winter, Johns described the misery of homelessness to a group of well-heeled business people, using frank, even graphic, terms. “One night, a young woman came on board the Van and all she wanted was clean underwear,” Johns tells them, pausing. “She had just been raped at gunpoint. . . .”

Honesty and frankness seem to work. Johns provokes a kind of generosity that has made Dans la rue the envy of Montreal charities. Last January, an Asian business man — whose parents had thrown him out of the house at 18 — wrote Dans la rue a cheque for $200,000. The Montreal-based navigation company Fednav International lets him use their accountant and one of their rooms for board meetings. The financial consulting firm McKinsey made him a business plan free of charge.

“We have the money we need,” says Johns. “Sometimes I even tell donors to give to other organizations in the city that we depend on, instead.”

Johns and his staff spent last year raising money for a long held dream of his, a day centre where homeless youth would have access to services and resources to help them get off the street. They had so much success that the original objective of $1.5 million was raised to $2.3 million. By the end of the campaign, they had raised $2.5 million. Dans la rue purchased a former two-floor warehouse in Montreal’s East End, which has since been converted into a day centre.

The centre, Chez Pops, opened this November. On the first floor, where there is a large cafeteria, teenagers — and their pets — gather, chatting, smoking, and hanging out. There is a medical office with a full-time nurse on staff, laundry facilities, showers, and an art studio visible through bay windows from the street.

“If the kids want to get off the street,” says Johns, “we point them upstairs.” The second floor has a computer room, a reference centre with information on housing, employment, and social services, a “quiet” room, offices to meet with youth workers, and two spacious rooms Johns is particularly proud of: the classrooms. Here Francine, the day centre’s full-time teacher, works daily with between 6 and 18 students, many of whom are trying to complete their high school diplomas in order to work or do further studies. “The kids have to learn some very basic stuff, like how to study, how to memorize, how to behave in a group,” says Anne Maisonneuve, who is in charge of press relations at Dans la rue.

For Johns, the day centre is the culmination of nine years of work, winning the trust of Montreal’s homeless youth, and building the only kind of organization that makes sense to them: one that addresses their needs on their terms, in a way they understand. But he is loath to take credit for the centre himself, and with reason. “This place is being run by a lot of volunteers who have been on the street themselves. They’ve sort of worked up through the system.” Johns’s system, that is.

Johns is confident that the day centre will be a success. And he’s not alone. “Social services agencies from the government are actually starting to call us up now for help,” says Anne Maisonneuve. “They want to model their programs on ours!”

Posted in Housing | Leave a comment

Firemen, Inc.

Posted on March 21, 1998 by urbanrenaissanceinst

Adrian Moore
The Next City
March 21, 1998

 

Public fire fighting hoses down the public

CONTRACTING OUT GARBAGE COLLECTION. Tolling roads. Privatizing public transit. Charging user fees at libraries. With provincial governments downloading responsibilities to local levels, municipalities are weighing their options, hoping to douse the need for tax hikes by finding savings in local government that don’t fray the social safety net.

But in their deliberations, they’re overlooking one of the very oldest of municipal services, the one that provides an actual safety net — fire fighting. Canadian municipalities need to smoke out their fire stations: Public fire fighters deliver this vital service at one of the highest costs in the Western world.

The world’s largest private fire-protection company is in Denmark, where Falck Redningskorps provides outstanding fire protection and other emergency services to over half the residents — nearly three million people. Originally a family-owned business, Falck is now owned by Denmark’s largest insurance companies.

That a private firm could grow from one station serving one community 70 years ago to 132 fire stations serving hundreds of communities today astonishes many people who view fire fighting as an inherently governmental function. But Falck’s growth was no fluke, explains Professor Ole Kristensen of the University of Denmark in describing how competition works in that Scandinavian country. Municipal fire departments themselves want to expand, as do other firms eyeing the fire-protection business, leading to competition among public and private fire fighters that has kept Denmark’s fire-fighting costs the lowest in the Western world, at 0.09 per cent of GDP, one-third that of the most expensive nations, the United Kingdom and the United States, and 40 per cent of Canada’s. Denmark’s property losses to fire, meanwhile, is exactly the median for industrial nations — 0.24 per cent of GDP — while the likelihood of dying in a fire in Denmark is 1.64 per 100,000 persons, close to Canada’s 1.52 and well below the industrial nations’ median of 1.92.

ORIGINALLY FIRE FIGHTERS IN CANADA, like in most western countries, worked on call for private fire companies or volunteer brigades, responding to fire alarms from their work or homes — the manpower that hand-pump technology required made a full-time, paid fire-fighting staff unaffordable. Volunteer fire companies raised funds for new equipment from insurance companies or wealthy businessmen and from fund-raising campaigns.

A fire in the mid-19th century combined danger with theatre. The first fire company to arrive would take charge, the chief signalling his firemen with a brass trumpet and sometimes dragooning burly bystanders. Fire companies that arrived later often formed chains to more distant hydrants, pumping water into other pumper engines, which then pumped it to the fire.

As cities became larger and more anonymous, the quality of men in the volunteer brigades, which had depended upon comradery, slipped a rung or two. Increasingly, fire companies depended on monetary rewards from rescued building owners, with the highest rewards — equivalent to two to three per cent of the building’s insurance premium — going to the first arrivals.

Since most cities, and even mid-sized towns, had several fire companies, competition could be fierce — and not just in arriving first. At one fire in Ottawa, the first fire fighters on the scene found cans placed over the hydrants, with hired goons guarding them for a competitor! When other companies arrived, a brawl broke out that lasted until the charred building collapsed, scattering the mob.

Because fire companies were obliged to respond to all fires — building materials were highly flammable and fires spread rapidly — many property owners skipped insurance, knowing they would still get fire protection. So the insurance companies, whose coffers bore the largest share of the fire-fighting burden, came to back government-funded municipal fire stations to deliver universal protection. The economics of fire fighting in cities also swung to favor a full-time professional force: New steam technology required a few skilled mechanics, rather than brute manpower to get equipment to the fire. The tradition-bound volunteer companies, whose teams were based on the old hand pumps, resisted using new steam engines, even if they were gifts, sealing their fate in urban areas.

FIRE-FIGHTING EVOLVED SIMILARLY IN OTHER western countries. But in Denmark and the

U. S., private fire companies have survived, primarily by offering cost savings and innovations that help prevent fires or put them out faster: Falck was first to regionalize control centres to improve coordination and achieve scale economies, to provide specialized external fire fighting and rescue training, and to introduce new types of chemical foams. Public fire companies imitated these innovations — sometimes only after rulings by Denmark’s state fire inspectorate, which governs public and private fire services — long after Falck instituted them nationwide.

Rural/Metro, the U.S.’s largest private fire company, has served Scottsdale, Arizona, a city of over 150,000 for over 25 years. Present and past mayors vouch for its long-standing popularity with residents, and for good reason. Rural/Metro’s record of public safety, along with other U.S. private fire companies, surpasses even Denmark’s. A 1989 University City Science Center study that compared private fire service in Scottsdale with public fire services in eight similar cities in Arizona, California, and Texas found that Scottsdale had the lowest per capita fire-service costs, the fewest fires, and the least fire damage. Scottsdale had, on average, half the structure fires for similar-sized cities served by public fire services, nationwide, and less than one-third the average per capita fire loss. Since even one bad incident can cost a contract, private fire companies have held their employees to such high standards that only a handful of cities have gone back to public services.

As in Denmark, success flows from innovation. When a U.S. study found lime green far more visible in bad weather and at night than traditional red, Rural/Metro quickly repainted all its equipment, immediately reducing its accident rate. Many public fire companies switched later, many have yet to do so. Rural/Metro also pioneered the use of “attack trucks,” or mini-pumpers — smaller and quicker pumper trucks that can get to a fire before it grows. The attack trucks, with just two firemen, can extinguish small fires by themselves, letting larger trucks answer other calls.

Because fewer fires are good business, private fire companies work at fire prevention. When not fighting fires, private fire fighters build and refurbish fire apparatus, train industrial fire brigades and volunteer fire fighters, operate alarm monitoring and installation services, and sponsor fire-prevention campaigns and other educational activities. They actively patrol the sites of industrial and commercial customers, and lobby against petty bureaucrats and penny-pinching developers that don’t want to install home sprinkler systems.

In Scottsdale (and nowhere else), residential sprinklers are commonplace. Following a 1985 ordinance, 40 per cent of residences have them, saving eight lives in the last 10 years and sparing much property damage — the average loss per sprinklered fire is $1,945 versus $17,067 for non-sprinklered fires. Thanks to this activism in public safety, the sprinkler market has expanded, justifying improvements in design and technology that reduced installation costs by nearly half. Because sprinklers also drop fire-insurance costs — by about 75 per cent — sprinkler systems may spread throughout the continent.

The fire-smarts that private fire companies bring to Denmark and the U.S. save money to boot. Attack trucks handle small fires with fewer firemen than larger pumpers. Better hoses let private fire companies spray more water on a fire in a shorter time. In Denmark, Professor Kristensen found that Falck charges residents 20 per cent less than public fire companies in rural areas, and one-third as much in large cities. In the

U. S., a 1993 Reason Foundation survey found that communities typically saved from 10 to 50 per cent by contracting with a private firm for fire protection, with most saving 15 to 25 per cent. The per capita cost of contract fire-protection services ranged as low as $10 compared with a national average of $79.

Private fire companies achieve lower costs through better training, superior equipment, and motivated employees. At Rural/Metro, employees have also owned the firm since 1978. As both owners and fire fighters, they have every incentive to make sure they and the fire fighter alongside them have the talent and tools to do the job safely, and no incentive to deny management the flexibility it needs to intelligently use company resources.

“Cities traditionally support the huge overheads of fire departments where men are sitting around all day waiting for a fire to happen,” Frank Aleshire, a Scottsdale city manager once told the press. “We don’t. We still produce the same number of men at the fire, but only half our force is actually sitting at the fire house, waiting.”

In Denmark, Falck employs other techniques to minimize downtime: It complements fire protection with a variety of services, including ambulance service, fire salvage, and roadside assistance for drivers whose cars break down. In rural areas, Falck cross-trains fire fighters to work on tow trucks, non-emergency transport ambulances, and other services that allow them to drop what they are doing to respond to a fire. When a fireman calls in sick, someone assigned to drive a tow truck works a fire truck instead. In dense urban areas, Falck provides full-time, dedicated fire fighters, just like the public fire companies.

The size of the private fire companies helps them save money as well. Falck and Rural/Metro are far larger than municipal fire departments, letting them buy equipment in bulk. Rural/Metro has manufactured much of its own equipment, with considerable cost savings.

In the United States, private fire fighters now protect over one million people across 16 states, with hundreds of small companies serving rural areas and small communities. Here, private fire companies that provide so-called “subscription” fire service charge residents an annual fee of about $100. Although fees are voluntary, most area residents — 75 to 90 per cent — tend to sign up since insurance companies typically charge subscribers about $400 less on home property insurance. While they aren’t required to, many subscription fire companies respond to all fires in their service area, and then hope for the best in billing non-subscribers whose homes catch fire. This policy can be good business, even when the fire companies don’t collect. For one thing, it generates goodwill in the community; for another, because fires are relatively rare, real ones provide excellent training opportunities.

Although no such subscription services are available in Canada, over 70,000 volunteer fire fighters, sometimes working with a small career cadre, still protect homes and businesses in rural areas and large and small towns. Composite forces (volunteers or on-call fire fighters working with a small career force) serve many towns with populations over 100,000 and protect highrise buildings, shopping malls, and industrial sites.

PRIVATE FIRE COMPANIES TEND TO IGNORE CANADA, mostly because labor laws prohibit them from operating efficiently. To increase flexibility, last year the province of Ontario changed its rules to let municipalities increase fire fighter’s workshifts from 42 to 48 hours and allow the use of part-time, on-call, contract, or volunteer fire fighters. But these are only half measures. In the U.S., unionized public fire fighters typically work 56-hour shifts, and private fire fighters 66-hour shifts. Longer shifts allow the same response capability with up to one-fifth less staff. During these long stints, fire fighters live in the fire station and maintain equipment when not answering fire alarms.

Canadian fire fighters have unusually comfortable working conditions: In the

U. S., public fire fighters often work only 10 to 14 days a month, and many take second jobs. For the unions themselves, shorter shifts and more employees mean more members and more bargaining power. Predictably, the Ontario changes drew fire from unions who fear the new rules may persuade municipalities to privatize fire-fighting services, a power they already hold.

In Alberta, a Banff search-and-rescue business did offer to provide fire-protection services for the city’s 10,000 residents. In spite of provincial cuts in funds to municipalities, when city employees opposed the proposal — which offered a saving of almost 50 per cent — city leaders turned it down.

But fiscal pressure makes a compelling case for contracting out. With citizens around the country seeing social services and other municipal government functions getting the ax, sooner or later some communities will question the wisdom of paying sky-high fire fighting costs for mediocre public fire-fighting services. Once a few switch to more efficient private services, the trend may catch like wildfire.

Posted in Regulation | Leave a comment

Editorial – Communism’s continuing successes

Posted on March 21, 1998 by urbanrenaissanceinst

Lawrence Solomon
The Next City
March 21, 1998

And why leveraged buyouts will be its undoing

Discussion

THIS FEBRUARY MARKED THE 150TH ANNIVERSARY of the Communist Manifesto, and the Marx Memorial Library, housed in historic east London, reports that business is brisk: “Ten years ago there were days when not a soul came in through the door. That was one of the low points, but in the last three or four years it has picked up an awful lot,” enthuses its librarian.

In Paris, the French Communist party daily, L’Humanité, published the Manifesto‘s full text, saying the tract is finding new favor among readers baffled by the uncertainties of the global economy. On university campuses throughout the Western world, conferences are celebrating the ideas of arguably the most influential man of the previous two centuries, beseeching all to judge communism by Karl Marx’s original writings — and not by the aberrations of the Soviet Union or Red China. Books underway deliver the same message, and for good reason. Though the Communist Manifesto was written in a long-past era, when kings and queens ruled most of the world, it reads like a contemporary document that is perfectly in step with current concerns. The Communist Manifesto, in fact, continues to define much of today’s political debates, even providing much of the language used by today’s social activists.

In the Communist Manifesto we find Marx’s analysis of globalization, a process then already underway. “Modern industry has established the world market” whose exploitation will destroy “all old-established national industries,” he accurately perceived, explaining that the upshot would be “new wants, requiring for their satisfaction the products of distant lands,” a loss of sovereignty, and “universal interdependence of nations.” The Communist Manifesto described Third World exploitation, the “clearing of whole continents for cultivation” to obtain “the cheap prices of its commodities.” Marx foresaw an era of unfettered competition, of epidemics of overproduction, leading to periodic commercial crises that destroy productive enterprises. He saw that laborers had become “a commodity, like every other article of commerce, and are consequently exposed to all the necessities of competition, to all the fluctuations of the market.” The Communist Manifesto offers up today’s images and today’s clichés: “the concentration of capital and land in few hands,” the exploitation of many by the few, the rich getting richer and the poor poorer, “the crying inequalities in the distribution of wealth.”

In this book and Marx’s other works, we see the fervor and analysis that infuse today’s radicals, but we also see much of today’s status quo. The following table, reproduced verbatim from the Communist Manifesto, shows that 5 of the Manifesto‘s 10 interim goals have become entrenched features of Western society — virtually all of the West’s major political parties are Marxist in wanting his progressive income tax system, a monopoly central bank, state ownership in various industrial sectors, a state role in agricultural policy, lower density cities, free public school education, and an end to child labor. Another 4 of the 10 Marxist goals have partly come to pass, and only 1 — the abolition of property in land — remains far-off (although many would argue, with justification, that the state has made great inroads here, as well).

Contrary to popular belief, Marxism did not fall with the Berlin Wall. Even the heart of Marx’s analysis — that capitalism, left to its own devices, tends to monopoly — is accepted by almost everyone, from our prime ministers and presidents on down. Marx described how increasing economies of scale and unbridled cutthroat competition necessarily lead to larger and larger capitalist enterprises that not only exploit workers but also devour all smaller competitors. Monstrous capitalist monopolies result, hugely exploitative and, ultimately, hugely inefficient.

With the passage of time, history vindicated the thrust of Marx’s analysis. Industry concentrated mightily before the turn of the last century, until government stepped in to bust the huge industrial trusts that had emerged — Canada passed its first federal antitrust act in 1889, to be followed the next year in the United States by the Sherman Anti-Trust Act. Even with antitrust legislation in place, corporate concentration seemed unstoppable. In the 1960s and 1970s, corporate conglomerates controlling everything from soap to submarines dominated industry, despite being so inefficient that many were worth much less than the sum of their parts. Shareholders — in theory the ones in ultimate control— in practice were powerless: Because shareholders were too disparate to discipline top management, top management became self-perpetuating and accountable to no one, and the conglomerates became juggernauts bent on amassing greater and greater empires. A 1969 report of the Federal Trade Commission warned that the trends toward industrial centralization “pose a serious threat to America’s democratic and social institutions by creating a degree of centralized private decision making that is incompatible with a free enterprise system, a system relying upon market forces to discipline private economic power.”

With this evidence of capitalism run amok, governments beefed up their anticompetition staff; all but a few ideologues saw the need to control industry’s cancerous growth, which Marx so clearly foresaw in the previous century.

BUT MARX DID NOT FORESEE — and political scientists and government regulators still do not appreciate — the slam dunk disproof of his theory that landed upon the financial world in the 1980s: the leveraged buyout. Thanks to LBOs, in just one three-year period, from 1985 to 1988, more than 500 underperforming companies, including Hertz, R.H. Macy, Levi Strauss, and Safeway, disappeared from U.S. stock markets — buyout artists had taken them over to be restructured in private. In particularly inefficient industries such as textiles and grocery chains, hardly any big publicly traded companies remained. Through the device of the LBO, the era of the bloated corporate bureaucracy was gone: More profoundly, the giant killers weren’t still bigger giants, as Marx had predicted, but relatively little guys: savvy outside entrepreneurs, the companies’ own managers, even the companies’ workers.

The takeover of tobacco and food giant RJR Nabisco Inc., the biggest ever LBO, illustrates how pin-striped Davids — in this case Kohlberg Kravis Roberts & Co., a buyout firm formed by three financiers and backed by pension funds — can slay Goliaths weilding nothing more than a credible business plan. In 1988, RJR stock traded under $50 a share but was thought to be worth as much as $100. The buyout firm — with little cash of its own — convinced lenders to join it in putting up $20 billion, the lenders getting RJR itself as collateral. The business plan: The conglomerate would shed many of its food businesses, along with much of top management, and retain the core cigarette business. With this financing up its sleeve, it offered RJR shareholders about $90 a share and, after a bidding war, paid $109 a share — more than double RJR’s pre-takeover value.

Many leveraged buyouts are called management buyouts because a subsidiary’s own management — realizing it can do better without directives from head office — leads the takeover. Employees, too, can spot value. When the 635 union members at Omak Wood Products Inc. in the economically battered town of Omak, Washington, realized in 1988 that its multinational owner, Crown Zellerbach Corp., planned to sell the sawmill, it bid for and won the concern, using the company’s assets as its collateral. “We don’t have two nickels to rub together, but we’re going into debt of $40 million,” the business agent for the local Lumber and Sawmill Workers Union explained at the time. Despite its enormous debt and a severe downturn in the wood products industry, the employees managed the buyout well, making painful but necessary decisions. To reduce its debt, the workers sold off 45,000 acres in land holdings and cut its staff by one-quarter, to 470. It also invested in new equipment to increase productivity and soon was getting 3.5 times as much end product out of its logs.

AT THE HEIGHT OF LBO TAKEOVERS in the late 1980s, socialists despised LBOs, seeing in them a mechanism that accelerates the pace of takeovers, leading to the dismemberment of (in Marx’s words) productive forces. In fact, LBOs are the greatest corporate leveller of all time, one that deconglomerates by paring operations down to core businesses, typically by turning managers of smaller corporate units within the conglomerate into independent owners of the businesses they once managed for others.

LBOs didn’t just break up companies directly involved in takeovers: Indirectly, LBOs convinced all corporate giants to justify their size or trim down, leading the entire corporate sector to downsize, decentralize, rationalize, and otherwise restructure their operations on their own, knowing that if they didn’t, some pip-squeak might do it for them. Because of the LBOs’ brutal efficiency, hugely undervalued publicly traded corporations have become rarities, dampening the need for LBOs. In the current wave of corporate mergers — merger mania, as the press often refers to it — the takeovers occur through more traditional purchase arrangements. But whenever mergers go wrong, and the merged companies’ own managements don’t take the steps necessary to return value to shareholders, the LBO will resurrect itself to cut any corporate colossus down to size.

UNTIL THE SIGNIFICANCE OF THE LBO HITS HOME, Marxists will continue to believe history is on their side, and many social reformers will remain stuck in their time warp, importing a 150-year-old mind-set, complete with jargon, into today’s economy. Once society universally understands that corporate concentration is naturally self-regulating, and not an evil in itself, reformers can attack true evils — racism, environmental destruction, weapons of mass destruction — not only with good hearts but also with clear minds.

black line

Discussion

Evan Morris, Regina, responds: May 19, 1998

You state that almost everyone believes “that capitalism, left to its own devices, tends to monopoly.” The remainder of your article explains how leveraged buyouts are a mechanism that prevents conglomerates from getting too large and that corporate concentration is naturally self-regulating due to the existence of leveraged buyouts. My knowledge of leveraged buyouts is limited to the information in your article, and there are a few things I would like clarified.

According to your examples, the leveraged buyout breaks conglomerates into smaller units. Aren’t conglomerates different from monopolies? My understanding of a monopoly is that it is the sole supplier of a specific good or service, while conglomerates are diverse business operations under one ownership, each of which may or may not be a monopoly. Do leveraged buyouts break up monopolies? Are there fewer monopolies in existence now than before the introduction of leveraged buyouts?

You state that many conglomerates have disappeared from U.S. stock markets and that buyout artists had taken them over and restructured them in private. If such companies are now held privately, does this not mean that they are immune from leveraged buyouts? If leveraged buyouts increase the proportion of corporations in private hands, will this not reduce the effectiveness of leveraged buyouts as a self-regulating mechanism for breaking up conglomerates?

Another issue that comes up in your editorial is that of corporate concentration. Your article deals primarily with corporations owning other corporations. One can also ask if corporate wealth in individual hands is becoming more concentrated. According to an article in the Lett Business Observer, there was little change in the concentration of wealth during the 1980s but a large increase in concentration during the 1990s. The report states that wealth is becoming more concentrated among the wealthiest 1 per cent of the U.S. population at the expense of the other 99 per cent.

Finally, I have a question regarding the last sentence of your editorial, where you say that since corporate concentration is naturally self-regulating, reformers should attack other social issues with a clear mind. You seem to imply that the marketplace has little need for reform. In other editorials you have been critical of monopolies, in particular government-run monopolies. What is your position on privately owned monopolies? Should reformers do anything to increase competition in situations where most of the market is controlled by one or a few corporations? If so, what do you suggest?

John A. Gayder, St. Catharines, Ontario, responds: July 1, 1998

In your table “Much of the Communist Manifesto‘s Interim Agenda Has Been Accomplished” you claim “Abolition of property in land and application of all rents of land to public purposes” has not been done. I beg to differ.

My mother owns a house in the country for which she pays close to $5,000 per year in taxes. She has no streetlights, sidewalks, city water, or sewer. All other connections (power and phone) are billed separately.

The tax money she pays is used for “public purposes.”

If she does not continue to pay this money, she will be thrown out of her house.

Sounds like rent to me.

Lawrence Solomon replies

Mr. Morris’s understanding of monopolies and conglomerates is broadly correct — conglomerates are not usually monopolies. But the reverse is not the case; monopolies are usually conglomerates. Microsoft, for example, owns or controls numerous companies and businesses and combines their activities in attempts to dominate many areas of the economy. Electric utilities, until recently considered natural monopolies, are in fact conglomerates of related businesses — generation, distribution, transmission among them — so arranged as to shut out competitors.

Since the introduction of leveraged buyouts in the 1980s, monopolies have become endangered corporate species. In many jurisdictions, major industrial sectors such as gas utilities, power utilities, public transit, communications, airlines, and railways have lost their government-granted monopoly privileges, and because demonopolization has tended to please consumers, other jurisdictions are following suit. The few monopoly sectors that remain intact, for now, include roads, airports, and national currencies. Leveraged buyouts are not solely responsible for this decentralization of industrial power, but without them, the likelihood of corporate reconcentration would often have made demonopolization politically impossible.

Privately held companies (those with a limited number of shareholders) are not immune from leveraged buyouts, except where a company is wholly owned by one individual. To settle disputes among shareholders, shareholders’ agreements generally provide for one party buying out others.

While LBOs may well increase the proportion of corporations in private hands (i.e., companies not publicly traded), such an event would not diminish the role of LBOs as self-regulating mechanisms for breaking up conglomerates. A world of such companies would be deconcentrated because very few privately held companies are large.

Privately held companies that wish to expand are often forced to go public to raise capital. One of the world’s most extreme examples of corporate concentration involves Sweden’s legendary Wallenberg family, whose companies (ABB Asea Brown Boveri, Saab, Scania, STORA, Electrolux among them) account for 43 per cent of the worth of the companies on the Swedish stock exchange. Yet the Wallenbergs’ control is tenuous because their capital in these companies is often a small fraction — less then 10 per cent — of the companies’ worth. Nobody, not the Rockefellers at the turn of the last century nor the Wallenberg’s at the turn of the this century, can control enough capital as the sole owner of an enterprise to perceptively influence an economy. Even Bill Gates, the world’s richest human at about $50 billion, owns only 22 per cent of Microsoft and controls a negligible share of the U.S. economy.

That wealth did not concentrate for the wealthiest 1 per cent in the 1980s (an era dominated by Reagan, Thatcher, and LBOs) as it did in the 1990s (when the ardor for free markets waned under Clinton and Major) is neither surprising nor troubling. The top 1 per cent is not a privileged aristocracy that shuts out the mass of the citizenry but an ever changing group that today includes computer multibillionaires, athletes, and entertainers, many of whom had modest beginnings. Our era is one of immense mobility — both upward and, as seen by the likes of the Reichmanns and Campeaus, downward. The top 1 per cent 10 years from now will look very different from the top 1 per cent today.

But why worry about the top 1 per cent? The same source that Lett Business Observer uses — the Survey of Consumer Finances — shows shrinking disparities in wealth among broader categories. Fewer families were worth less than $10,000 or more than $100,000 (or even more than $250,000) in 1995 compared with 1989. In that same 1989 to 1995 period, more families entered the $10,000 to 24,999, $25,000 to 49,999 and $50,000 to $99,999 categories.

Finally, Mr. Morris asks about my position on privately owned monopolies. If the private monopoly is a natural one, it should be regulated by government; if it is unnatural, as most are, it should be broken up by removing its monopoly privileges. These privileges are invariably disguised as measures to protect consumers — typically the monopolist pledges to ensure a reliable supply of some important good (as if the competitive market refuses to supply consumers) or to provide moderate prices (as if monopolies haven’t raised rates at a far faster clip than have companies subject to competition). In my work over the last 20 years at Energy Probe Research Foundation, my colleagues and I have employed these principles to see to the breakup of public monopolies such as Ontario Hydro and private ones such as Consumers’ Gas.

An economy left to its own devices, we have found, tends not to monopoly but to competition. Reformers who understand that monopolists need to involve government in their business should be leery of asking the government to do so; instead of being concerned with the number of players in the marketplace at any one time, reformers should work to change unfair rules that shut out competitors. Many players in a cartel do not help consumers, while a single provider, fearing the entry of competitors, does. Even state-owned monopolies that fear privatization and competition often become superb at improving service and holding the line on prices.

Paul Geddes, Coquitlam, British Colombia, responds: January 5, 1999

It was good to see Mr. Solomon enter the current Microsoft debate about the definition of a monopoly. Many confuse the concept of monopoly with large size and try to use government power to break up large companies to make markets “more ive.” What a paradox! If a company serves its customers well and starts to grow, the government will punish it and force customers to buy inferior products from inferior competitors, all in the name of protecting competition. This sounds too much like those unfun, uncompetitive games public school teachers fob off on students, than a prescription for running a prosperous economy.

Microsoft is a powerful, successful company, but I have great difficulty calling it a “monopoly” since I can’t find evidence of government laws which favor it over competing companies. On the other hand, both Yellow Cabs of Vancouver or Farmer Joe’s chicken farm down the road may be small and not spectacularly profitable, but both should be labeled monopolies because government licences and privileges prevent newcomers with new ideas from competing with these companies. As a result, the owners of these smallish companies are earning monopoly rents and causing waste in our economy.

I don’t see the purpose of Mr. Solomon’s attempt to distinguish between private monopolies (the example he uses is Consumers’ Gas) and public monopolies (Ontario Hydro). The more important distinction to make is about the source of the monopoly. Did the private Consumers’ Gas become large by serving customers well, or did it become large by manipulating politicians and laws to give it privileged access to customers? If the former, leave it alone. If the later, attack the privileges.

If political entrepreneurs (like Energy Probe) want to help us, rather than agitating about the size of companies, one would hope they would spend their time attacking government privileges directly (zoning laws, labor laws, marketing boards, government mandated professional licencing bodies, and so on). These privileges are harming us by protecting inefficient, bloated companies from entrepreneurs with new ideas.

Posted in Nation states | Leave a comment