Changing Beliefs About Markets: The Role Of Property Rights

by Daniel K. Benjamin

CAN BELIEFS ABOUT FUNDAMENTAL SOCIAL INSTITUTIONS, such as the market system, change? If so, what can cause such changes?

Even if one replies “yes” to the first question, discerning an answer to the second has been an elusive goal for social scientists. Recent research by Rafael Di Tella, Sebastian Galiani, and Ernesto Schargrodsky presents compelling evidence that the creation of secure property rights within a society actually changes people’s beliefs—to make them much more favorably disposed to the workings of a free market.

Di Tella et al. study the formation of beliefs in a squatter settlement on the outskirts of Buenos Aires. More than 20 years ago, hundreds of families occupied an area of wasteland that they thought was owned by the state. In fact, the area was composed of several tracts of land belonging to 13 private owners. Eventually, the state allowed the squatters to stay on the land, offering monetary compensation to the original owners. Many of the owners accepted the offer. The lucky squatters who happened to occupy these tracts received secure, legally defined, and protected property rights to the parcels on which they resided. But more than a third of the owners contested the terms of the monetary settlement, and even today the Argentine courts have not resolved this issue. The unlucky squatters on these parcels have never received secure rights to the land they occupy and, thus, have lived in legal limbo.

As the authors show, the age, education, sex, and other characteristics of the lucky squatters are the same as those of the unlucky squatters. Moreover, the size and physical properties of the lands occupied by each group of squatters are essentially the same. In effect, then, the authors have happened upon a natural experiment in which different property rights structures were imposed on two otherwise identical groups of individuals. In this study, Di Tella et al. have chosen to answer this question: Does the presence of secure property rights affect the beliefs that individuals hold about the world? The authors find that the answer is unequivocally “yes.” Lucky squatters who received secure property rights to their land report much more positive beliefs about the operation of the market system than do those unlucky squatters whose rights remain insecure.

To reach their conclusion, the authors randomly selected about 40 percent of the 1,100 squatter families and then evaluated their answers to several key survey questions. For example, squatters were asked whether they thought that individual (as opposed to group) action can yield success in life; whether material success is important in determining individual well-being; whether hard work is likely to be rewarded; and whether one can trust other people. Compared to the unlucky squatters, the lucky ones who received secure property rights concluded in the affirmative in each case; they believe individual actions can yield positive outcomes, that material success is important to personal well-being, that hard work is rewarded, and that other people can be trusted.

Di Tella et al. then aggregated the answers to these questions into an index of “market beliefs,” which enabled them to compare the overall attitudes of the two groups of squatters toward the market system. The squatters who received secure property rights are 20 percent more positive toward the market system than are the unlucky squatters. Indeed, the attitudes of the squatters with secure property rights are just as positive toward the market system as the attitudes of much more affluent Argentinians who are much better educated and have much higher incomes.

There is considerable evidence from other research that secure property rights yield improved environmental quality, more efficient resource allocation, and higher wealth. Despite this, many people around the world remain suspicious of market systems and the private property rights essential to their functioning. Such attitudes arguably block the spread of markets, leaving millions of individuals mired in abject poverty. The present study implies that the beliefs held by market skeptics may in fact be subject to change—if the advantages of secure property rights and the operation of free markets can be demonstrated close enough to home.

The importance of this study is that it suggests that changes in attitudes are no accident, and that it may be possible, on a broader scale, to overcome the widespread hostility toward market systems. The aphorism that “seeing is believing” is rarely more applicable, for it appears that the creation of private property rights has the potential to change fundamentally how people perceive the world, and thus, perhaps, the institutions and policies they are willing to adopt. For those who believe that environmental quality, individual choice, and personal freedom are important, this is good news indeed.

Reference

Rafael Di Tella, Sebastian Galiani, and Ernesto Schargrodsky, “The Formation of Beliefs: Evidence from the Allocation of Land Titles to Squatters,” Quarterly Journal of Economics, Vol. 122, No. 1 (February 2007), pp. 209-241.


Mr. Benjamin is a senior fellow at the Property and Environment Research Center and Alumni Distinguished Professor at Clemson University. This article is reprinted, with permission, from PERC Reports, Summer 2007.

Why Mobility Matters to Personal Life

by Ted Balaker

AMERICANS RIGHTLY CELEBRATE freedom of opportunity, but how far would it take us if our movement were severely restricted? How might the lack of mobility affect the kind of jobs we hold, the places we explore, or even the people we marry? The freedom of mobility helps make other freedoms more meaningful. The more mobility we enjoy, the more choices we have. Mobility gives us more of what’s important in life.

Imagine that you are in the center of a circle. Call it your opportunity circle.

The space within the circle represents the amount of ground you can get to in a reasonable amount of time, say, one hour. The dots represent all the possible jobs you can apply for. The bigger your opportunity circle, the more jobs you can get to, and the better chance you have of landing the job that is right for you. If your mobility improves, the circle grows and you have more opportunities. If mobility degrades, the circle shrinks and you have fewer opportunities. And the dots need not represent just job opportunities. If you are an employer the dots could represent potential customers or your available labor pool. The dots could actually represent just about anything, from dining opportunities (area restaurants) to opportunities for love (available singles).

When we enjoy efficient mobility, we can fill our personal lives with rich and varied activities, thanks to what Reason magazine’s Nick Gillespie calls a “culture boom,” that is, “a massive and prolonged increase in art, music, literature, video, and other forms of creative expression.”

Economist Tyler Cowen, in his book In Praise of Commercial Culture, chronicles cultural proliferation: “From 1965 to 1990 America grew from having 58 symphony orchestras to having nearly 300, from 27 opera companies to more than 150, and from 22 non-profit regional theaters to 500.”

Since 1990 our culture has continued to boom. Consider, for example, that the American Symphony Orchestra League currently boasts nearly 1,000 member orchestras. And countless other cultural offerings—from restaurants, to health clubs, sports complexes, and art galleries—have also grown more plentiful. The more mobility we enjoy, the more we’re able to take advantage of our cultural bounty.

But our ancestors had to make do with smaller opportunity circles and fewer choices. Long ago they had only their feet to rely upon. But new modes of travel—wheeled carts, animal-powered carriages, trains, cars, and planes—have allowed us to cover more ground faster.

What’s the Best Way to Get There?

The average person can walk about four miles per hour, but cars can easily travel on arterial streets at 30 miles per hour. It’s a substantial increase in speed, but the impact may be even greater than it seems. A person who walks for an hour has access to 50 square miles, but someone who drives at 30 miles per hour for 60 minutes has access to 2,827 square miles. In other words, the driver’s opportunity circle is more than 56 times as large as the walker’s. And when conditions permit, motorists may drive much faster on highways, thus expanding opportunity circles even more.

In many cases public transit offers greater mobility than walking and, in some cases, it can also beat driving. But auto travel is generally much faster than taking transit.

Other factors, from transfers from one bus or train to another to time spent walking to the transit stop, make a slow transit trip even slower. Even though transit commutes typically cover shorter distances, Department of Transportation data show that it takes the average American transit user about twice as long to get to work as the average car commuter. This holds true in some unexpected places. For many New Yorkers transit offers the fastest way to get to work, but, on average, transit commutes take much longer than auto commutes even in the New York metro area. Indeed, New York’s transit commuters endure the longest commutes in the nation (52 minutes each way vs. 28 minutes for solo driving). Transit commuting takes much longer than driving in many other areas with celebrated transit systems (see table).

Motorists enjoy additional advantages that push many people toward cars and away from transit. Travelers can reach relatively few destinations directly by transit, but motorists can go from (almost) anywhere to (almost) anywhere. Transit service frequency varies according to schedules, but motorists can travel whenever they like. Their travels are not as restrained by fatigue as are those of walkers and transit users who trek to and from transit stops. Simple conveniences, like trunk-space, make it easier to carry things and additional seating makes it easier to transport small children, the elderly, and the handicapped. The enclosed space of a car can also spare travelers from the rain, snow, heat, and humidity. And although driving brings its own risks, many people feel safer traveling at night or through unfamiliar areas within the confines of a car.

Yet, as they have always done, Americans will trade in their cars once a superior form of transportation comes along. Telecommuters already outnumber transit commuters in 27 of the top 50 metro areas, and telecommuting has already partially replaced cars for millions of American workers. And why not? Even with no traffic congestion and nothing but green lights, driving to work will never be as fast as the zero-minute commute that telecommuters enjoy. New technology has given us a new kind of mobility. Armed with cell phones, laptops, and PDAs we can “be” almost anywhere without crawling into a car, train, or plane. But that should not diminish the importance of “old-fashioned” mobility—moving people, parts, and products across physical space.

Although a growing number of people can work remotely, countless occupations—from hair stylist to dentist to construction worker—remain location-specific. The telecom explosion allows more business to get done over the phone or via e-mail. The falling cost of communication has generated more communication—even across continents—and these interactions routinely result in new plans that require traditional mobility.

Physical proximity might matter even more for personal life than it does for business. Even with the growing popularity of online games and shopping, many still find relaxation or stimulation by experiencing a new location. They look forward to trying a new restaurant across town, taking their kids to the park, or taking dance lessons. So when it comes to enriching our personal lives, traditional mobility does indeed matter. And, for now at least, the car usually offers the best way to stretch our circles as wide as they can be.

Progress Gets Stuck in Traffic

When mobility improves, our opportunity circles expand and we have access to more of what’s available not only in our neighborhoods but also in nearby regions. Yet how much a city offers is quite different from how much any individual denizen can access. We have come so far, but in so many places mobility is no longer improving. Mounting traffic congestion chips away at the progress we have made.

Today congestion smothers well established areas (up 183 percent in Washington, D.C., since 1982, according to the Travel Time Index) as well as upstart ones (up 475 percent in Atlanta). Not only has congestion gotten much worse in areas where we expect it to be bad, but it’s also making life increasingly sluggish across the nation, from Portland to Austin to Charlotte.

The average urban American now spends 47 hours a year stuck in traffic—more than an entire work week—and it’s much worse in our big cities. In Los Angeles, the average driver spends 93 hours sitting in traffic jams on the roads. In 1983, only one urbanized area, Los Angeles, had enough congestion to cause the average driver to spend more than 40 hours per year stuck in traffic. Just 20 years later, 25 areas reached this threshold.

The future looks bleaker still. Congestion in Los Angeles is legendary, but if officials continue to respond to the mobility crisis with a shrug, many more areas will succumb to LA-style gridlock. David Hartgen and M. Gregory Fields estimate that by 2030, 11 additional urban areas (Chicago; Washington, D.C.; San Francisco; Atlanta; Miami; Denver; Seattle; Las Vegas; Minneapolis–St. Paul; Baltimore; and Portland) will suffer through traffic conditions as bad as or worse than present-day Los Angeles. (See Hartgen and Fields’s paper “Building Roads to Reduce Traffic Congestion in America’s Cities: How Much and What Cost?” Policy Study No. 346, published by the Reason Foundation.) Eighteen other areas, from Phoenix to Orlando, will endure a level of congestion only slightly less severe.

Our elected officials have been slow to address the problem, and for many years few people seemed to care. Traffic congestion was long regarded as little more than a minor annoyance. But times have changed. Former U.S. Secretary of Transportation Norman Mineta recently called gridlock “one of the single largest threats to our economic prosperity.” Public opinion has also changed. Silicon Valley CEOs rate traffic congestion as their second most pressing concern, as do business owners in downtown Portland, Oregon. In its aptly titled new study “Growth or Gridlock?” the Partnership for New York City estimates that traffic congestion saps the regional economy of as many as 52,000 jobs each year. According to recent surveys, congestion is among residents’ top concerns in places as different as Denver and Washington, D.C. Residents have placed congestion atop their list of concerns in Austin, Atlanta, Houston, Portland, Los Angeles, Minneapolis–St. Paul, Sacramento, San Diego, and San Francisco. The longer public officials put off dealing with it, the more traffic congestion will transform from a minor annoyance into a force that threatens economies and quality of life, dampening our enjoyment of so many of the things that make life fun, varied, exciting, and fulfilling.

The Cost of Congestion

Often officials and planners tout a supposed urban renaissance in which everyone, from singles to empty-nesters, is moving to downtown centers. Although this may be true in some cases, it obscures the bigger picture and real trend: Cities are losing influence.

Since 1950, suburbia has accounted for more than 90 percent of the growth in our metropolitan areas. Cities like Baltimore, Detroit, St. Louis, and Philadelphia continue to lose population, and even foreign immigration cannot keep some of our most celebrated urban centers growing. In the first half of the 2000s, Chicago, San Francisco, and Boston lost population.

The situation would be less dire if demographic trends simply reflected the preference of Americans to live and work in suburban environments. Indeed the lure of suburbia has much to do with Americans’ preference for distinctly suburban features such as affordable single-family homes and backyards. And although it’s true that suburbia grows more cosmopolitan all the time, cities still offer a greater concentration of cultural offerings, be they restaurants, art galleries, museums, theaters, playhouses, or most anything else.

Businesses think it wise to follow all these potential workers to the suburbs, even though a suburban environment is not inherently superior for many of them. Many businesses, families, and singles would love to stay in the city and draw on all the energy offered by agglomeration economies, but they are forced out by a variety of urban headaches, including degraded mobility. Too many elected leaders find comfort in misleading tales of urban renaissance and too many assume that our great cities can thrive even as mobility degrades. But improving mobility is essential to ensuring our urban centers’ long-term survival, and if we ignore the mobility crisis our cities will wither.

Not only are talented and energetic people increasingly choosing suburbia over city life, but also sluggish urban life is draining some of the talent and energy that remain. As travel becomes more difficult, fewer interactions take place. Vibrant competition has traditionally ensured that city dwellers enjoy the best of the best, but when mobility degrades, a city functions less like a grand urban space and more like a collection of isolated communities. Instead of traversing several neighborhoods to patronize the best establishments, denizens are more apt to resign themselves to whatever’s nearby. First-rate establishments find it more difficult to attract customers, and second-rate operations realize that, with less competition, they face less pressure to improve. Residents are often stuck with fewer choices, higher prices, and inferior service.

Downtown cultural institutions fret about traffic-weary would-be patrons steering clear of music, dance, and theater events. And often it’s the offbeat establishments, the very spots that give cities their character, that are particularly vulnerable to congestion. In Commuting in America III, Alan Pisarski suggests that policies that suppress freewheeling travel “are destroying part of what makes a big region a great region.”

Although researchers have done their best to explain and quantify how it restrains our lives, a complete assessment of congestion’s costs is hard to come by. The U.S. Department of Transportation estimates that each year traffic congestion costs the American economy about $168 billion. It’s a huge amount—more than the combined value of Yahoo!, Office Depot, Ford, Charles Schwab, and Walt Disney Co.—yet it still does not include all of congestion’s ill effects. The figure isn’t just incomplete; it’s impersonal.

Others have attempted to provide a more complete and personal assessment of congestion’s costs. Researchers at the Texas Transportation Institute figure that congestion costs each big-city resident $1,000 each year. The figure is personal but incomplete, for it only accounts for the loss of wasted gas and time. Congestion also robs us of opportunities in more subtle ways. For example, it decreases our job opportunities. Instead of landing a more distant but higher-paying and more fulfilling job, those living in the midst of gridlock are more likely to stick with the jobs they already have. Researchers have begun to account for how restricted mobility limits our employment opportunities, and one analysis considers how cutting congestion back might enrich workers by matching them with better-paying jobs. According to Alan Pisarksi and Wendell Cox, a 90 percent reduction in congestion in the Atlanta area would put an extra $2,900 into the pocket of each area resident. An analysis of metro New York estimates that—because it limits how many trips they can make—congestion costs taxi drivers $6,000 per year and repairmen $7,000 per year.

The cost of congestion moves beyond dollars and cents when the issue turns to emergency response. A prompt response time saves a life; a sluggish one costs a life. Consider just one type of emergency—sudden cardiac arrest. Each year this emergency claims roughly 67,000 American lives. In most of our nation’s big cities only about 6 percent to 10 percent of those stricken are saved. These deaths are particularly tragic because this type of emergency is particularly treatable—that is, if medical care arrives quickly.

If treatment arrives within one minute, 90 percent of patients survive. At 5 minutes, survival probability drops to about 35 percent. At 10 minutes, it’s zero. Even relatively modest increases in response time yield substantial benefits. An analysis of Austin emergency medical services estimates that if response times improved by just 30 seconds, 41 lives would be saved each year.

Of course, quick response is not just a matter of ambulances arriving quickly. Often friends and loved ones rush patients to emergency rooms in their own cars. And speed is crucial not just for this particular medical emergency—many emergencies, medical and nonmedical alike, are time sensitive.

It’s especially difficult to put a dollar figure on the many other ways congestion interferes with our lives. Consider the toll it takes on our personal lives—how it keeps parents away from their kids, stymies would-be love connections, and sours us on exploring our surroundings. There’s also the psychological toll: How much is each gridlock-induced gray hair worth?


Mr. Balaker is the Jacobs Fellow at the Reason Foundation and editor of Privatization Watch. This article is excerpted, with permission, from his longer paper “Why Mobility Matters to Personal Life,” Reason Foundation Policy Brief 62, July 2007.

Publishing to Influence: Regnery and the Role of Books

by Marji Ross

DO BOOKS REFLECT a zeitgeist—or create one?

People certainly like to talk about books. And authors, naturally, love to talk about books—mostly their own. (Publishers, too, I must admit.) In fact, there is an entire cable station devoted to books (C-Span’s Book-TV), where you can listen to people talking about books 24 hours a day. And all across America, hundreds of thousands of people meet each month (or so) in reading groups to talk about books.

But does all this talk really mean anything? Yes, it probably (but not always) reflects strong sales. It often leads authors to write, and publishers to publish, more books in the same vein. But how much effect do books actually have on public policy?

The simple answer is: more than you might think.

Take, for instance, the most recent Regnery book to hit #1 on the New York Times list: Unfit for Command: Swift Boat Veterans Speak Out Against John Kerry. That book, and the resulting media tidal wave, dominated the public debate during the final three months of the 2004 presidential election campaign. John Kerry had nowhere to turn without facing the questions and criticisms raised by this book. Matt Drudge blazed the accusations across the Internet. Conservative talk radio reverberated with the Swift Boat Vets’ stories about John Kerry’s service in Vietnam and his actions when he returned home. Mainstream media vilified the Swift Boat Vets, Regnery, John O’Neill, and anyone else they could think of who might sully John Kerry’s reputation.

And everyone was talking about the book.

Correction: Everyone was talking about what was in the book. And this is an important distinction, I believe, for publishers who wish to influence the debate. At Regnery, we have a rule: Our publicity campaigns focus on the news in the book, not the news of the book.

Clearly, Unfit for Command influenced the public debate. Many people believe it influenced the outcome of the election. In fact, the best thing that the New York Times has probably ever said about Regnery Publishing was in their belated (reluctant, I assume) review of Unfit for Command: “If John Kerry loses the presidential election, Unfit for Command, by John O’Neill and Jerome Corsi, will go down as a chief reason.”

Seminal books like this become embedded in popular culture. Today, you hear the media talk about a politician being “swift-boated.” Similarly, people have adopted Malcolm Gladwell’s paradigm-shifting concept when they refer to the “tipping point” in an issue or a movement. And how many of us have seen the bumper stickers calling for a presidential ticket of “Cheney-Voldemort”?

Most books, we must acknowledge, suffer the fate of the proverbial tree falling in the forest. Good, bad, or indifferent, most books are never heard of, because it’s not enough just to write a good book. It’s not enough, usually, even to write a great book. The publisher must also understand how to turn a book into a megaphone through which the author’s ideas are shouted and broadcast and spread throughout the land.

This is not so easy, for a variety of reasons. First, there are more than 175,000 new books published every year. Sadly, as the number of titles increases, the number of book buyers seems to decrease. According to the most recent Census Bureau statistics, bookstore sales have fallen every month this year and were down 4.3 percent for the first third of 2007. You’d probably be surprised to discover how small the book industry actually is, as a business. The total sum of all book sales in 2006 was about $20 billion. Well, as they say, “a billion here, a billion there, pretty soon we’re talking about real money.” But when you consider that in a single quarter of the last fiscal year, GE sales were $40 billion, you realize that book sales are a drop in the GDP ocean.

And yet, the power of a book can be enormous. As we have seen, a book can change the course of a presidential election. It can change the course of history. In 1987, Regnery published a book called Red Horizons, written by Romania’s former head of foreign intelligence, Ion Mihai Pacepa. The book exposed the shocking truth about Communist Romania—and, when it was picked up and broadcast into Romania on Radio Free Europe, was credited with inspiring the popular counterrevolution that brought down the regime.

Best-selling books can also push a debate onto the national stage. Take Bernard Goldberg’s category-killer book, Bias, which finally forced the issue of liberal bias within the media into the national spotlight. Or Charles Murray’s The Bell Curve, which ignited a nationwide debate on the role of race in academic achievement.

So, how can publishers orchestrate certain books, in this industry with too few buyers and far too many products to sell, so that they actually influence the public debate?

Our motto at Regnery has always been to publish “books that challenge the status quo.” So we are looking specifically and deliberately for books that provoke, books that will stir controversy, books that people will not just want to talk about but will want to fight about.

And yet, I should rush to point out, Regnery is not the Jerry Springer of the book publishing business. (I think that title was held by Judith Reagan, until she died by that particular sword, at least professionally.) Regnery is both a for-profit business and a mission-based company. We are publicly and personally dedicated to furthering the principles of democracy, freedom, limited government, and respect for the rights of the individual upon which our country was founded and which our soldiers today serve to protect.

In this way we are unique in the publishing business. We target the best-seller list as most of our New York competitors do (though we hit that list at a far higher rate than they do), but we target the list for its megaphone effect as much as its monetary effect.

Sometimes we take on a book even when we know that the media attention will far outpace the sales potential. There are some books and some topics (and even some authors) who will attract hundreds of radio and television interviews—and still not drive people to the bookstores. Book sales are virtually impossible to predict in the best of circumstances. When you know a book won’t sell, why publish it? At Regnery, our answer is simple: We want to get people talking. And if the issue is truly important, perhaps the achievement of driving the debate, even without the accompanying sales, is reward enough.

At this point, I hear my boss sighing, worried about the flood of proposals for “important” books I have just encouraged. So let me add this one last point: Regnery has built its reputation for the past 60 years on publishing the nation’s most important and influential books in current affairs and public policy, from a conservative point of view. Over the past 10 years, we have also developed a reputation for selling more copies, per title, of our current affairs and public policy books than any other publisher in the country.

Our books, in the end, are both the causes and the echoes of the political and social thunderclaps reverberating throughout the country. With the proper megaphone, a great book can and should be both.


Ms. Ross is President and Publisher of Regnery Publishing, Inc.

Defending Free Enterprise from Agenda-Driven Attacks

by Eric Dezenhall

SINCE THE COLLAPSE of Enron and Worldcom, not to mention the broader avalanche of corporate scandals, it’s open season on free enterprise. Inevitably disguised as crusades for the public good, attacks on businesses and free market think tanks are, in fact, highly orchestrated programs by a well-funded “crisis creation” industry including a loose affiliation of trial lawyers, non-governmental organizations, and select media. One of the tactics du jour is to expose the funding sources of public policy think tanks, the rationale being that corporate support equals malfeasance. The immense wealth of trial attorneys and NGOs is, of course, glossed over in favor of the hardscrabble—and fundamentally false—positioning of the common man’s David to industry’s Goliath. Don’t be fooled—the crisis creation industry is just that: a strategic business juggernaut looking for growth and self-perpetuation.

One of the challenges that businesses and public policy groups face is a naïve and outdated approach to managing crises and attacks on their survival. A brutally realistic look at the new rules of engagement is the first step in effective crisis management.

The modern public relations industry’s philosophy of crisis management is anchored in the canard that if Richard Nixon had just “fessed up” to the Watergate break-in and cover-up from the get-go, he would never have had to resign in disgrace. Nonsense. He would have been removed from office in a nanosecond. Why? Setting aside the grave legal and moral violations, Watergate was not a “communications problem” lending itself to spin-driven solutions. It was a fundamental conflict aggravated by hostile parties who didn’t have the remotest interest in hearing Nixon out.

Modern crises are not communications problems as much as they are conflicts that are conceived, financed, and prosecuted by motivated adversaries interested in the destruction of their targets. These attackers aren’t seeking to make the world a better place; they are seeking power, money, and the perpetuation of their enterprises. Whether it’s the war on terror or chronic attacks on corporations by plaintiffs’ lawyers, these are not misunderstandings that will be corrected by thoughtful dialogue. Rather, the attacks won’t stop until the attackers perceive that they are at some risk for engaging in concerted efforts to discredit their targets.

The height of fashion at the moment is the investigation of PR firms, lobbyists, and think tanks, to which a handful of media have devoted enormous resources. Perhaps the most humorous headline I came across (I wish I had clipped it) announced that Microsoft was hiring a PR firm to influence the media. Well, yeah, that’s what PR firms do.

Harper’s Magazine recently ran an expose of the APCO PR firm’s plans to promote the government of Turkmenistan by teaming with Washington think tanks. The twist was that the pitch was set up by a Harper’s reporter posing as an agent of Turkmenistan. Whether or not the nation deserves representation is beside the point. What’s noteworthy is that the exposure of advocates and their techniques is now a bona fide reportorial beat. The same holds true of coverage of how enterprises are mismanaging their affairs.

During last February’s JetBlue debacle, in which thousands of passengers were stranded during a blizzard, I was interviewed on a cable television show. The interviewer asked me why JetBlue was “getting such bad PR.” I answered: “Because you keep inviting guests on your show to ask them why JetBlue is getting such bad PR.” In other words, the media have an active investment in making certain that embattled targets remain embattled. Why? Because otherwise there is no story.

This is not a conspiracy as much as it is symbiosis. A loose affiliation of like-minded plaintiffs’ lawyers, issue-specific activists, NGOs, and journalists collaborate to expose the misdeeds of free enterprise.

Fair enough. However, there is comparatively little coverage of the crisis creation industry. My firm, which primarily represents businesses under media attack, routinely finds itself battling well-funded “independent” studies by NGOs that inevitably conclude that our clients’ products are endangering the public welfare. These studies are almost universally treated as being credible by the mainstream news media despite the suspicious role that trial lawyers often play in fanning the flames. However, when we retain, say, a toxicologist—for a fraction of the cost of the study—to help refute damaging allegations, our efforts often find themselves on the receiving end of an expose by powerful media seeking to link our advocacy with malfeasance of some kind.

What to do? It’s hard to combat the narrative locomotive equating free enterprise with dirty deeds. It’s especially challenging given the rise of what’s being called “corporate social responsibility,” campaigns whereby corporations demonstrate their commitment to making the world a better place. These are noble efforts in theory, but in practice they often amount to apologies for capitalism, which can backfire.

British Petroleum, for example, spent roughly a quarter of a billion dollars to promote the company as being an alternative energy outfit, operating with the motto “Beyond Petroleum.” (BP, get it?) The problem is that BP is, almost exclusively, a petrochemical company. Environmentalists rightly saw through the charade, Greenpeace giving BP a tongue-in-cheek award for “best impression of an environmentalist.” Moreover, its socially responsible pose didn’t do BP much good when crisis after crisis hit the company in 2006 and 2007.

Companies and think tanks under attack must first reject the notion that it is somehow immoral to defend one’s self. The whiff of apology that belies modern damage control buys you nothing when professional attackers are at work. After all, when Plato issued his “Apologia” for Socrates, he was engaging in a spirited defense, not saying he was sorry for anything.

Enterprises must learn to push back against their critics by taking a page from Ronald Reagan and “wrap every argument in a principle.” No one sympathizes with the plight of an attack target per se; people demand to know what principle supports your self-defense. Are you opposed to hypocrisy? Are you championing jobs? Are you demanding that your critics receive the same scrutiny that you are? Key audiences want to know the broader reason why they should care about an issue and should not be expected to appreciate the self interests of those under fire.

Finally, there’s something to be said for preaching to the choir. Because of the success of the public relations industry’s fundamentally wrong (but appealing) sales pitch that anyone can be spun, attack targets have a strong desire to be liked by their adversaries. This is especially true of large corporations, which contribute fortunes to their adversaries in the hope that they will learn to like them. These crisis creators enjoy the funds, but almost never shift their core positions. Nevertheless, such techniques often make companies feel as if they are doing something constructive, which supplants what’s really called for—a vigorous self-defense.

The truth is that image overhauls fail far more often than they work. Sometimes one has enemies who can’t be written off in a frenzy of denial as “stakeholders.” When it’s time to engage one’s adversaries, it’s better to have committed allies than wavering “target audiences.” A sober—and disquieting—understanding of how the marketplace of ideas, with all of its prejudices and inequalities, really operates is the first step in defusing attacks.


Mr. Dezenhall is CEO of Dezenhall Resources, a crisis communications firm, and co-author of Damage Control: Why Everything You Know About Crisis Management Is Wrong.

Uncovering the Culture of Corruption: How Investigative Journalism Complements the Work of a Think Tank

by John Hood

IT ALL STARTED IN THE SUPERMARKET checkout line. It was the day after Christmas, 1996, and the place was packed. I knew I’d have quite a wait, so I picked up a copy of a community newspaper. To my surprise, I was greeted with a glowing story about two local politicians, elected to the state senate the previous month, who had given out $100,000 in “discretionary funds” to several nonprofits in minority neighborhoods. “That’s my Merry Christmas present,” said one of the senators-elect. “[We] are already having a positive effect.”

The notion of passing out taxpayer money like Christmas candy was bad enough. But then I started to wonder how someone who had not yet taken office could get his hands on “discretionary funds.” I decided to ask one of my writers at Carolina Journal, the John Locke Foundation’s then-policy magazine, to look into the matter. After a great deal of digging, the writer, Don Carrington, discovered that the money had come from a $21 million slush fund known only to legislative leaders and the governor. The more Carrington asked questions and obtained documents, the more revolting the story became. Legislative insiders and their political consultants doled out the funds with abandon. Several grants were timed to help embattled incumbents cut ribbons a few weeks before an election. In other cases, the money appeared to be payback for favors done by rank-and-file lawmakers or wealthy contributors.

The grants were hard to justify on policy grounds. Wealthy Pinehurst, home to some of the world’s ritziest golf resorts, got money for a new fire truck. Several senators and representatives steered money to local nonprofits where they served as board members. One state senator attached a state check to a football and threw it across the room to a recipient during a benefit roast. It seems that dispensing taxpayer money had become a game.

Founded in 1989, the John Locke Foundation began operations in early 1990 as a typical state-based think tank. We were small, opinionated, and cerebral. We published studies, hosted conferences, distributed newsletters and op-eds, and placed our staffers and affiliated scholars on radio and television. Because I was trained as a journalist and had worked at local newspapers and The New Republic in Washington, D.C., before coming to John Locke, I argued for a regular journalistic product as one of the organization’s main offerings. I envisioned a state version of TNR or National Review, a journal of opinion devoted to North Carolina politics and issues. I didn’t expect to get into the investigative journalism business. But not everything goes according to plan (a lesson that, alas, too many government policymakers have yet to learn).

Carolina Journal’s 1997 expose of the slush fund scandal in the North Carolina General Assembly turned into a series. The more we wrote, the more knowledgeable sources came to us with stories of malfeasance, misappropriation, petty graft, featherbedding, and violations of ethics and campaign finance rules. Another 1997 scoop involved a controversial $100,000 settlement to a former Division of Motor Vehicles employee who had alleged employment discrimination. We obtained an exclusive interview with him and discovered that the real story involved illegal pressure on DMV employees to make political contributions to state politicians. After we published a blockbuster cover package on the scandal, we received additional leads on corruption within the Department of Transportation—politicians leaning on engineers to move low-priority road projects into the queue, DOT board members scratching the backs of their business partners, etc. By this time, other news organizations had gotten into the act, and eventually DOT officials were forced to resign and stripped of their professional licenses. The secretary of transportation ended up in prison on separate corruption charges.

In the conservative movement, we’ve all read our Acton. We know intellectually that government funding and regulations distort market decisions and invite rent-seeking, that bright ethical lines and constitutional checks and balances are necessary to constrain political power, and that, human nature being what it is, public office will always tempt politicians with the tantalizing prospect of getting their hands on other people’s money. Policy organizations can and should continue to explain the economics and political science of government corruption, decry wasteful spending in federal and state budgets, and spread the freedom message through opinion pieces and media appearances. But they should consider adding another arrow to the quiver—investigative journalism. I’m all for persuading misguided politicians to adopt better public policy. There’s something to be said, however, for simply exposing the crooked ones through solid, well-researched investigations and letting them be shamed, removed, or incarcerated as appropriate.

Over the years, I’ve beefed up my Carolina Journal reporting team substantially, hiring another full-time reporter, Paul Chesser, and two editors with more than a half-century of combined newspaper experience, Richard Wagner and Jon Ham. CJ itself went from a bimonthly magazine with a few thousand readers to a monthly tabloid distributed directly and as a Parade-like newspaper insert to some 160,000 readers statewide. We’ve broken many big stories and made a substantial contribution, unapologetically, to the prison-overcrowding problem:

● CJ exposed the financial shenanigans of a former North Carolina congressman, Frank Ballance, who as a state senator had steered millions of tax dollars into a foundation he controlled and from which he paid himself, his son, his mother, and donors to his political campaigns. He is currently completing his sentence in a federal correctional facility.

● After a comprehensive CJ series on a dubious project to start state ferry service across the Pamlico Sound—a service that would have few riders but benefit a politically connected business—one of our sources, a former Ferry Division employee, was found asphyxiated in his home with a bag over his head and his hands tied behind his back. Local authorities claimed it was a suicide. Eventually, federal and state agencies raided the division and its former director was prosecuted for violating environmental-protection laws. The mysterious death remains controversial.

● Thanks to tips from appalled parents, CJ described radical propaganda being conveyed to participants of a state-run summer program for academically gifted students.

● One of our investigations of how North Carolina had misspent the state’s share of the national tobacco settlement revealed that some of the funds had gone to subsidize a tobacco warehouse.

● Economic development boondoggles have been particularly juicy targets. We have documented every embarrassing twist and turn in the saga of the Global TransPark, an air cargo facility in Eastern North Carolina that soaked up tens of millions of state and federal tax dollars. Originally sold as an investment in just-in-time manufacturing to create 50,000 jobs by 1998, the TransPark has created no net new jobs as of 2007 and has resorted to pitching its largely unused airstrip as a movie set or anti-terrorism training site.

● In 2004, politicians used misleading ballot language to persuade voters to amend the constitution to allow North Carolina localities to use a special kind of economic-development bond that doesn’t require a referendum. The first municipality to use the new authority got state approval to issue $21 million in bonds to build a theater named after Dolly Parton’s ever-so-slightly-less-famous brother Randy. His $1.5 million annual “artist fee” will in part be financed with the debt.

● Corporate welfare packages are journalistic gold mines. We’ve followed up on numerous job announcements from politicians only to discover that the jobs never materialized or that promises of state assistance came after the company had made its relocation decision. In one case, we disproved the claim that government had induced a wireless firm to a North Carolina city by going to the site and snapping a picture of one of those workplace safety signs touting that it had been an “accident-free construction site” since a date long before the state’s involvement began. We also delved deeply into a state-funded economic development group whose leader was demanding equity stakes from the private firms he was simultaneously paid tax dollars to recruit. This same man had set up the aforementioned deal with Randy Parton, for which the two had formed a company called—I kid you not—Moonlight Bandit.

● Most recently, CJ had a hand in exposing a wide-ranging conspiracy of bribery, misappropriation, and conflicts of interest led by former Speaker Jim Black—once of the state house, soon to be in the Big House. While dogged reporters at the mainstream dailies deserve a lot of credit for uncovering Black’s crimes—including a bribe to a conservative Republican lawmaker to switch parties to keep Black’s then-minority Democrats in power—CJ got one of the early scoops. We discovered, while investigating another state-funded nonprofit, that one of the contractors was also Black’s closest political aide and appeared to be doing her campaign and lobbying work out of his state office.

Staking out possible crime scenes, cultivating sources among government employees and law enforcement agencies, and obtaining secret documents containing evidence of ethical or legal transgressions may not be common activities at the average think tank, but we believe that investigative journalism is an essential element of the John Locke Foundation’s effectiveness. We seek to expand the scope of freedom in North Carolina, and to curb the abuse of government power and limit its fiscal and moral costs. We do lots of traditional policy research. We convene dozens of events a year. We make our case in all the standard ways. But we also ferret out corruption and name names. It works for us.


Mr. Hood is Chairman and President of the John Locke Foundation, a public policy think tank in Raleigh, N.C.

Vindicating Freedom in State Courts

by Clint Bolick

OVER THE PAST SEVERAL DECADES, a significant pro-freedom public interest law movement has emerged, encompassing such organizations as the Pacific Legal Foundation and the Institute for Justice as well as dozens of other regional or issue-focused entities. Most of their litigation has been waged in federal courts. Together, the litigation groups have scored some impressive victories in such areas as racial preferences, private property rights, freedom of speech, mandatory unionism, economic liberty, federalism, freedom of commerce, religious liberty, and school choice.

The freedom movement’s emphasis on federal litigation is understandable. Federal court decisions, particularly in the U.S. Supreme Court, have far greater precedential effects than those of state constitutional decisions. Given finite resources, federal court litigation offers the prospect of achieving much greater “bang for the buck.” That is especially true when the federal courts are populated by judges who are receptive to arguments grounded in original constitutional intent.

But the ardor of the federal judicial counterrevolution seems to have cooled. Toward the end of the Rehnquist era, the U.S. Supreme Court began to retrench, delivering disappointing decisions in many of the areas in which it previously had produced important gains for freedom, including private property rights, racial preferences, and school choice. Whether the Roberts Court will resume its predecessor’s earlier direction remains to be seen.

Moreover, it is a bit ironic that a movement that professes fealty to federalism has focused so intensively on federal court litigation, largely ignoring state constitutions. The U.S. Constitution’s framers intended that state constitutions, rather than the federal Constitution, would provide the first line of defense for individual liberties. Indeed, the Bill of Rights was patterned after preexisting rights in state constitutions, and the federal protections were not even held applicable to the states until after the 14th Amendment was ratified in the late 19th century. As The Federalist No. 51 explains, a “compound republic” consisting of a federal government and state governments, each with their own protections of individual liberties, provides a “double security” for the “rights of the people.”

Although principles of federalism have been greatly eroded over the years, one rule remains sacrosanct: State courts are not bound to interpret their own constitutions in lockstep with the U.S. Supreme Court, even if the language of the provisions is identical. The sweetest fruit of the federalist system is that the U.S. Constitution provides only the floor beneath which the protection of liberty may not descend. But state courts are free to go beyond federal constitutional protections (or, more to the point, beyond protections recognized by federal courts) in construing their own state constitutions.

As is so often the case, the trails of expansive state constitutional interpretation were blazed by groups I will loosely refer to as pro-government. The patron saint of that movement was U.S. Supreme Court Justice William Brennan, who perceived during the 1970s that the activist revolution of the Warren era was beginning to wane. In a pair of seminal law review articles, Brennan extolled the virtue of state courts reading guarantees of state constitutions more broadly than the national Constitution. Although his articles were a clarion call to pro-government activists, his message ought to resonate just as strongly—if not more so—among pro-freedom organizations. As Brennan proclaimed:

[T]he point I want to stress here is that state courts cannot rest when they have afforded their citizens the full protections of the federal Constitution. State constitutions, too, are a font of individual liberties, their protections often extending beyond those required by the Supreme Court’s interpretation of federal law. The legal revolution which has brought federal law to the fore must not be allowed to inhibit the independent protective force of state law—for without it, the full realization of our liberties cannot be guaranteed.

Brennan noted that Madison had cautioned that state governments, not the federal government, could pose the greatest threat to liberty and, in fact, had proposed explicit constraints on state power within the Bill of Rights. But his suggestion was defeated because, as Brennan recounted, “it was believed that personal freedom could be secured more accurately by decentralization than by express command … . In other words, the states were perceived as protectors of, rather than threats to, the civil and political rights of individuals.” Though Madison’s views ultimately prevailed through the adoption of the 14th Amendment, state courts retain the power to interpret state constitutional rights more broadly than federal constitutional rights.

“As is well known,” Brennan explained, “federal preservation of civil liberties is a minimum, which the states may surpass so long as there is no clash with federal law.” In light of the perceived retrenchment in the interpretation of federal constitutional rights in the 1970s, Brennan called upon state courts to be the primary defenders of individual rights, and they did exactly that. Indeed, by 1984, Brennan counted “over 250 published opinions holding that constitutional minimums set by the United States Supreme Court were insufficient to satisfy the more stringent requirements of state constitutional law.”

Justice Brennan’s call to state court activism was taken up by pro-government groups across the nation with enormous success in such areas as tort liability, family law, criminal law, and education. The paradigm example is the case of educational equity. In 1973, the U.S. Supreme Court ruled in San Antonio Independent School District v. Rodriguez that the federal Constitution does not provide a right to education, and it rebuffed efforts to hold school funding inequities unconstitutional. Whereupon, liberal activists convinced a number of state courts, beginning in California and New Jersey, to interpret their own constitutions to confer a fundamental right to education and to strike down funding systems that were found to produce educational inequity. Three decades later, funding-equity lawsuits in numerous states have wrested billions of additional tax dollars for public schools.

The trend of a more vigorous interpretation of state constitutions is one that the freedom movement should welcome. As Justice Brennan remarked, “Every believer in our concept of federalism, and I am a devout believer, must salute this development in our state courts.” He argued that “those who regard judicial review as inconsistent with our democratic system—a view I do not share—should find constitutional interpretation by the state judiciary less objectionable than activist intervention by their federal counterparts.” In addition to the framers’ intention that the state constitutions protect liberties, Brennan noted that many state judges themselves are subject to democratic processes through popular election and that state constitutions typically are more easily amended than the federal Constitution.

“This rebirth of interest in state constitutional law should be greeted with equal enthusiasm by all those who support our federal system, liberals and conservatives alike,” Brennan observed, though he quipped tellingly that “[a]s state courts assume a leadership role in the protection of individual rights and liberties, the true colors of purported federalists will be revealed.” Pro-freedom organizations may not like the outcomes of some state court cases, but it is difficult to forestall them when only one side is engaged in the battle. As my Alliance for School Choice colleague Scott Jensen often reminds me, a bedrock rule of contests is that you have to be present to win.


Mr. Bolick is director of the Goldwater Institute’s Center for Constitutional Litigation. This article is excerpted from his longer paper “The First Line of Defense: A Blueprint for State Constitutional Litigation to Expand Freedom,” published by the Goldwater Institute, April 2007.

 
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