Why Government Fails
April 19, 2012
David Theroux, President of Independent Institute
Good evening, ladies and gentlemen. My name is David Theroux, and Im the President of the Independent Institute. I am delighted to welcome you all to our program this wonderful Thursday evening. We regularly host events like this in the Independent Policy Forum that feature excellent speakers in the form of lecturers and debates and seminars and so forth. And our program tonight is certainly a topical one. Its called Why Government FailsBut Free Individuals Succeed, with the esteemed journalist John Stossel, author of the new book No They Cant. No, they cant what? I guess hell tell us. Its No They Cant: Why Government FailsBut Individuals Succeed.
For of those of you new to the Independent Institute, we hope that you got a packet when you registered; youll find information about our program. The Institute, in a nutshell, is a non-profit public-policy research organization: we sponsor studies of major economic and social issues. Our ambition is to advance the ideas that can advance peaceful, prosperous, and free societies. We produce many books, this is our quarterly journal, The Independent Review, which youre probably all subscribing to already, Im sure, but youre welcome to subscribe. One of the books I wanted to point out thats listed in a sheet in your packet called Books on Liberty is a book coming out soon called Priceless. Its by the economist John Goodman, and the subtitle of the book is Curing the Healthcare Crisis. John is an old friend, and this is certainly a very important issue that our speaker tonight is very well aware of. And of course that book and all of our books make exceptional material for documentaries each and every Thursday night on the Fox Business Channel. I also want to point out, in the packet youll find a sheet about the summer seminars that we organize each summer for high school and college students. Theyre called the Challenge of Liberty Seminars; theyre one-week programs which provide really an exceptional education for students on the ideas of liberty and to sort of see through the fog of spin in public debate and public policy.
We certainly live in strange times: government spending and power, I think we would generally agree, have reached new heights in almost every aspect of lives. And as governments become ever more insolvent and predatory we hear the clamor for even more spending and power as solutions to the government failures of the past. Its laughable, and yet its truly disturbing. Trillions and trillions and trillions of dollars, wars and more wars, mandates, controlsand corruption and untold other follies are just being heaped one on another. For example, on March 16and based on President Trumans executive order, the Defense Production Act of 1950President Obama issued his executive order National Defenses Resources Preparedness. Some of you may not have heard about this. What this executive order does is it sets forth his claimed authority in the name of National Defense to unilaterally take control of all aspects of the economy including transportation, food production, energy, healthcare, labor, water resources, construction and all other material services and facilities.
Meanwhileand in contrastwe have our speaker tonight. Our speaker is one of the jewels, in my opinion, of popular culture, of understanding public policy and certainly journalism. He has won many Emmy Awards; hes a Peabody Award winner. His new book No They Cant, as I mentioned, in it he wants Americans to wake up and look at the facts, discard the idea of government mothering, and live as free people. Were hence delighted to have John back with us againwe had him here a number of years agoand hes here to discuss a few of the challenges that were facing. John.
John Stossel, TV Journalist Fox Business Network
Thanks for coming. The title No They Cant is obviously a response to that frenzy of yes we can from the last election, and my concern that people turn to politics for thatthat people want to just follow somebody. And it was pretty heavy with Obama; McCain had a lot of it too. I interviewed people where McCain was going to fix the world. Obama was over the top: he even himself at one point said, Elect me, it will bring us to the moment when the rise of the oceans begins to slow and our planet begins to heal. And that arrogance is out there.
David talked about the fog and the spin that is out there; its also in the theme of this book. Its instinctI think its instinctthat people say when theres a problem, There ought to be a law. Now normal people do. Maybe youre differentyoure the minority here who get libertybut for normal people and I myself (because it took me many years of cheering for regulation; thats when I won those Emmy Awards David mentioned, I wont win them now), its instinct to say, There ought to be a law.
One example: After 9/11 we were scared. I was probably more scared than you, because I live in Manhattan. And when the government said weve got to take over airline security, nobody batted an eye. You may remember at the time it was done by private contractors supervised by government, but they were minimum wage; they werent great. So we got the TSA. I mean, Tom Daschle said you cant professionalize if you dont federalize. You grunt at that, but the Senate voted 100 to 0 then to create the TSA. So hows that working out for us? You know we dont know if theyve made it safer, the underwear bomber, the shoe bomber were not caught by the TSA, they were caught by the passengers. The TSA now spends 10 times what the previous private screeners spent. And in one city there are private contractors, the law allows an airport, a city to say we want to opt out of the TSA, we want to go to private contractors. And San Francisco didyour city of all placeswell, almost. So I dont know what your experience is there, but our producer who went there said he found people who said things like, Wow these screeners are friendlier, and the line moves more quickly. Yes? No? Good. And also theyre better at their jobs in terms of safetybecause the TSA did its own undercover experiment: they tried to sneak in fake contraband, fake pipe bomb or something, and the screeners in San Francisco were much more likely to find it than screeners in Los Angeles, than the government screeners.
So why is the private screening company better? Well, you know, because his own moneys on the line: if he does a bad job, he can get fired. Nobody ever fires the government; they dont fire themselves. Also, he can get rich if he gets a good reputation: other cities may hire him. So what does he do? He does things like run contestsMarch Madness contests for his screeners, he calls it. You can make up to $2,000 if youre better at unpacking and packing luggage and better at being nice to people and better at identifying people on a test. And these screeners, theyre proud: they get a kick out of their job, unlike the sort of going-through-the-motions government workers; they have an excitement to their job, so theyre better. So now other cities have noticed this, and more than a dozen have asked the TSA if they can opt out, because the law requires them to ask permission.
One is the airport manager at the airport outside Glacier National Park in Montana, where of course in summertime there are many more people there, and in winter its kind of dead because who wants to go to Montana in the winter? And the TSA, being a government agency, one size fits all, has the staffing levels the same the whole time. So in the summer there are long lines, and in the winter TSA stands for its initials: Thousands Standing Around. She and all these other airport managers ask to opt out. What does the TSA do? It simply doesnt respond for a year. And then a couple months ago it finally says, We reject all these applications. Whats the reason? One sentence explanation: We do not think this is advantageous to the federal government. Wouldnt McDonalds like to say that to Burger King? Not why wont they do it, why wont they say, Gee these guys are better of course? Because theyre now a bureaucratic empire, and to let others compete would be to give up power, and nobody much likes to do that, but in government you get to enforce that and so they do.
Central planning appeals to people; this is another thing we fight about. As I say, its not just fog and spin; I think its instinct. Theres some sense that lifes complex and, you know, I cant get my brain around how you design a sewage treatment plant myself; so we want the smartest guy in the roomhere you go, the one who went to Harvardto direct the economy; this makes sense to people. Where does this come from? Well I think it comes from our history, our parents: when we were little kids mommy and daddy ran our lives; that made us feel safe. And evolution: For thousands and thousands of years our ancestors lived in little tribes, clans50, 100, 200 people at the mostand you had to follow the clan leader. If you didnt, if you harvested the fruit at the wrong time when he said you shouldnt or something, you might have died and not given birth to you. So were programmed to follow the clan leader, and now hes our clan leader and it makes sense to people.
Were not wired to see that these impersonal market forces could solve problems; the invisible hand is just not intuitive to people. I like the way Hayek put it: the spontaneous order. The way I like to make people think about that is to say, Imagine a skating rink if you have never heard of a skating rink. Youre the regulators, and Im a greedy businessman. I want to introduce here in Oakland a new form of recreation: ice on the ground, and people are going to strap sharp blades to their feet and zip around, and old and young are going to go in every. No way, youd say. You got to have the skating police or stoplights or something. And yet we know it basically works: its a spontaneous order. But if you hadnt seen it, you might have rejected it. People say government has toyou know, even the people who acknowledge that maybe free markets are okay for the simple stuff (movies, music, computers, cell phones), when it comes to the complicated stuff and where our lives are at stake, youve got to have this brilliant central plannereducation, healthcare. The New Yorker had an article about healthcare, and the doctors were talking: These free-market people on the way to the hospital, when youre having a heart attack, youre going to start doing research on which hospital or doctors are better at treating a heart attack and whos cheaper? What a joke: who thinks up this stuff? Well Adam Smith for one, but they dont understand that. Education? The parents dont understand what the curriculum should be or whos a good teacher. We need people with education PhD degrees to plan this for people. And this makes sense, this intuitively makes sense. My way of answering it is to say, no, that you dont have to be an expert for the market to work its magic; it always is better.
As an example, take cars. Do you understand why one is better than another, why its safer, better engineering? I assume most of you are not automotive engineers. I sure dont. But compare the worst you can buy here in California with the best the planned economies could produce, the expert central planners, the best they could do was this: Some of you younger people may not know, this was the pride of the Soviet bloc, this was the East German car the Trabant. And there were others: the Yugo. They were all bad, but this was made by the East Germans. They were rocket scientists, and yet this car was awful: you had to put the oil and gas in separately and shake the car to mix them together. And when the Berlin wall went down, the Trabant disappeared. So why could their best not compete against our mediocre stuff? Because not everybody has to be an expert for the free markets to work: you just need a few car buffs or a few people who read the car magazines, and through word of mouth and an open society, the good news and the bad news spread, the good companies grow, the bad ones atrophy.
The free market will protect everybody, even the ignorant, but its not intuitive; and so government grows. And they have lots of evidence they can point to: Look how weve made your life better. The head of OSHA under President Clinton was fond of showing this chart. Now OSHA is the Occupational Safety and Health Administration, and they created it after people were getting killed in factories. So they said this is unacceptable, we have to have standards. Now they have a rule book this thick. Nobody really understands whats in it: the lawyer is going to argue about it for years; but it clearly makes life safer. Look how many lives theyve saved. This doesnt even account for how many injuries theyve prevented (thank God for government). Except a researcher checked out what happened before OSHA was created, and that reveals more.
Government is like somebody who gets in front of a parade and pretends he is leading the parade. Things were getting better on their own. Now why does this happen? This happens because in a free society things get better, people get smarter. When someone gets injured, you take a corrective step so they dont get injured next time. As we get wealthier we care more about safety; wealthier is healthier. And even the selfish company, the greedy company that killed its worker, is reluctant to keep killing workers because it costs money to retrain the new staff. Free market makes it better, too. Government isnt needed.
We saw this for the War on Poverty. Lyndon Johnson said the Great Society is going to end poverty; and they created the welfare, and the poverty rate went down for the first five years. And then, as you know, it stopped. Its been going up and down ever since, partly because we taught people to be dependent and we taught women: Dont get married, get the guy out of the house, your check will be smaller or you wont get a check. But they can at least say, Hey the poverty rate dropped sharply those first five years. Think how many lives we improved. Except here, too, somebody went to before welfare was created, and the slope of the line was already dropping. People were lifting themselves out of poverty. Government stopped the progress.
Government constantly stops progress, and yet it grows. Thomas Jefferson said its the natural progress of things for government to grow and liberty to yield, and thats sure whats happened. Heres the graph of spending since the beginning of the republic; the big blips are for the World Wars. Here it is averaged over 10 years; so you smooth that out. But for the first 150 years of America, government was less than a few percent of GDP. And we grew fastest then, the most progress was made then. Then came the Great Society and it starts to go up; and Bush and Obama made it much worse and now, as you know, were on this unsustainable course, mostly because of Medicare and because of my generation: Im a baby boomer, I rudely refuse to die.
When FDR started Social Security most people didnt even live to age 65; now we live on average to 78. And I dont know whats going to happenprobably ramped up inflation because theyre not going to stiff us because we vote. (You young people are screwed because you dont vote as much.) You know, David would know more about whats likely to happen when this blows up. But they scream at any cut, any proposal for a cut: Paul Ryans timid cuts are Social Darwinism.
Why is America doing pretty well? I have a charityand some of you have seen these videos. Teachers would write me and say, We taped your show on free markets, and kids have never heard of such things. I played it in the classroom, and we had a great discussion. Or, I wish I taped it. Can I buy it from ABC? And they wouldnt sell it, so I started a charity where we give it to teachers free. And one of the more popular ones is one where I ask the kids, Why is America prosperous? Ask high school students, and they have no clue. But eventually somebody says, Oh, its because Americas a democracy, and were a relatively new country, and we have natural resources. And I say, Indias a democracy, India has natural resources, but their poor. They say Indias overpopulated. I can answer: well, actually the population density of India is the same as that of New Jersey; New Jerseys doing okay. (Were not depending on your perspective here in California.) And what about Hong Kong?
This is Milton Friedmans insight, that Hong Kong has no natural resources: its just a rock, and no democracy. It had the British rulers and now the communist Chinese. And yet Hong Kong went from poverty to wealth in just 50 years. Third World to First World. Why? Because they had the ingredients that make a country prosperous: economic freedom and rule of law. Now you know rule of law is important: that means that your personal property, your personal self is protected. The worst places to live are the places that dont have rule of law, they have a corrupt judiciary and nobody wants to build a factory because the dictator may take the whole factory, or your neighbor may just steal whatever you make. So you need rule of law, and Hong Kong had that, the British rulers enforced that, they kept people from robbing each other or taking each others stuff, and then they sat around and drank tea. Denying neglect, thats the road to prosperity. Hong Kong: Free people then made themselves rich. So we know what works. We could have it for the world, and yet 7 billion people on Earth, 2 billion live on a buck or two a day, only less than 1 million live anywhere near to our level of wealth because they dont understand this process of capitalism. And yet capitalism is vilified in every university I visited and every newsroom Ive been in.
People just dont like business. So whats that about? I mean somebody came up to me on the street in New York and said, Are you John Stossel? Yes. I hope you die soon. And Im trying to figure out why theyre so angry at me. And at first I thought its because they consider me a conservative, because Im the different one and where I live thats like being a child molester. But Im not a conservative, Im a libertarian. I think homosexuality is just fine, I think drugs should be legal, I think sex or prostitution should be legal, I think adults should be able to do anything thats peaceful. Im a libertarian and yet they hate me. I would think the liberals would be okay with that, but they still hate me because Im a consumer reporter defending business and they hate business. So why do they hate business? Im thinking, well, maybe its because they go to schools where their university professors were furious that theyre slightly stupider roommates went into business and now make more than they do and their envious.
The wealth disparity in America is big, and that makes people uncomfortable. Its a by-product of freedom: if youre free, some people will be much richer than others; but that makes some people envious, some people hate. So I thought that was the reason people hate business, but then I thought about old Europe and the kings and queens. They were a million times richer than the average person, yet they werent hated, they were revered. But people hated the bourgeoisie, gave them that nasty name. They hated the very people they needed to sell them stuff to make their lives better, whats that about. And Ive come to think it goes back to this intuition.
Heres what intuition tells you, heres what reality has taught me. Intuition says that business is a zero-sum game, that if Bill Gates makes 50 billion, we have 50 billion less. And its like its this pie: he takes this big piecewe always hear about whats your share of the piewell he got a big piece, we must have less. But business doesnt work that way because business is voluntary. Theres only two ways to do things in life, right? Voluntary or force. Most of life is voluntary, the best of life, but government is force, legal force, and we need some government, as I said. But the best of life is the voluntary part and that includes business, so that mean its not like theres this pie and Gates takes a big hunk. He had to bake thousands of new pies to get rich. The way you get rich in a free market is to serve your customers well.
You see it in every transaction: the transaction doesnt happen unless you both think you win. You see it in the weird double thank-you moment when you buy a cup of coffee. I mean you give her the buck, she gives you the coffee; you say thank you, thank you. Why do you both say thank you? Because you both win, I wanted the coffee more than I wanted the buck; she wanted the buck more than she wanted the coffee, otherwise it wouldnt have gone down. Thats why free markets create wealth: we all have to win or it doesnt happen. Its not a perfect system: there will always be cheating, there will be Enrons and Bernie Madoffs. But in a 15 to 16 trillion dollar economy, its pretty impressive how rare that it. Its rare because you win by serving your customers well. But people dont get that. Economic freedom creates prosperity. Now economists focus on the prosperous part of that statement, but the freedom part is just as important.
My objections to bloated government are not just because it makes us poor, its a moral objection. When government takes away our choices, takes away our control over our own lives, it makes us less. Government crowds out good things, it cuts the tendrils of civil society, sucks the life out of people. Thats why when politicians say, yes we can, I want people to go to state capitals and hold up this sign. Thats my dream: the new Tea Party will be doing that.
Now Friedrich Hayek said that a curious task of economics is to teach men how little they know about what they imagine they can design. Im still looking forward to saying that to Bill OReilly. My job here is to teach you how little you know about what you imagine you can design. I will do that someday. Still, saying that government cant solve problems is not saying we cant. We as individuals and groups of individuals accomplish all kinds of miracles, yet we dont really pay attention to it, but clubs, community groups, groups like this like the Independent Institute, families working towards common goals do wonderful things, greedy profit-seeking businesses do it, too. I mean theyve given us Lipitor, robotic limbs, hip replacements, computers, iPhones, flush toilets, air conditioning. We dont even think about it, we just use it, we dont think where we got it. Poor people now have access to food, entertainment, shelter, travel, information, life spans that exceed what kings had a century ago, but we dont think about where it came from. We just go to the supermarket and take it for granted that they have 30,000 on average products on the shelves, and theyre unbelievable cheap, and theyre open all the time, and the aisles are nice and well lit and pleasant, and they rarely poison us.
At the beginning of the Obamacare discussion the Detroit Medical Center proudly announced, Were going to use barcodes to keep track of patient records, were the first big medical center in the country, yeah arent we great. And it was good that they did, but supermarkets did it for Coke and candy 30 years ago. Why so late for healthcare? Because governments poisoned healthcare with tax deductions for employer-paid health insurance and stuff like that.
We take it for granted that we can go to a foreign country, stick a piece of plastic in the wall and cash will come out, and then we can give the same piece of plastic to a total stranger and hell rent you a car for a week, and when you get home to California theyll have the accounting (Visa or MasterCard) correct to the penny, and if they dont, you get mad and complain. Government cant even count the votes accurately, and yet they want government to run healthcare. Government fails, but individuals succeed. Thank you for fighting for that freedom that made America possible. Thanks very much.
Thank you, John. And we have time for questions. Do you just want to field the questions yourself?
Questions or criticisms or pushback or suggestions? Yes maam, and why dont you say who you are so your neighbors can get to know you.
My name is Getie, and I live in Nevada. I would like to ask you if you would change your Libertarian status to Republican and run with Romney, Mitt Romney, as Vice President?
My name is Larry. Im from Danville, and I just brought my wife home from getting a hip replacement today, and you reminded me of what happened to us. We asked a lot of people, wheres the best hip surgeon in the world? And they said in Fremont. We went there and had a fabulous experience. On the way out we saw that a national survey had given this orthopedic surgeon number one status for three years in a row. So people find the best on their own.
People figure it out, yeah you wouldnt have to do it on the way to the hospital, just reputation determines that. Why dont you just give the mike to whoever you want to give the mike to who has a hand up, theres a guy in the back there.
Im Joel from San Francisco. John, a personal question if I might? A member of my family is a speech pathologist and they wanted me to ask you how you overcame your stuttering.
I am a stutterer. Obviously Ive largely overcome it. I still have trouble sometimes. After failed attempts, I found a place called the Provision Fluency Shaping [Program] in Hollins, Virginia. Its really boring: you have to be really motivated to do it. Over three weeks they slow us down and re-teach us how to make each sound, so they slow us down to two seconds per syllable. That was a half second per syllable; two seconds is really long. But I was motivated because I was on television, and I was going to give up my job because I was blocking and scared every morning. So I was very thankful that I found help there. This really worked for me, I was going to put this on TV and tell all the stutterers youre being ripped off if you do something else. And I did refer lots of people to this place, and some were not helped; so were all different. Now David just gave me some printed questions, what theyre streaming? How does this work?
The streaming questions come in.
How do they come in?
Theyre watching on TV.
Theyre watching on TV, and they type, and they send this, and you print it. Wow, isnt that cool? Jenna of Manhattan. Oh, theyre in Manhattan, too, I guess they have TV there. What tools can we use in order to officially promote the message of liberty? I think theres one thing thats now the best way to do that, of all the things I can think of, and thats to buy everyone you know a copy of No They Cant. And if we get it in the bestseller list with Rachel Maddows book, they discounted more people than will hear the ideas.
John, there are many things that all of us would like to see, but many of those things cant be done or wont be done. If you add to list your top few things youd like to see happen that could happen or would happen soon, what would you recommend?
Eliminate a bunch of cabinet agencies like the ones that the Texas Governor couldnt remember. I mean he said the EPA; I think we need a limited EPA. But Commerce? Commerce happens without a department. Interiorwe dont need that. Laborpeople work without a Labor Department. Educationthats a local responsibility, and so on. Legalize drugs and stop adding new rules. Just stop all regulation, or before you pass a new one you have to repeal ten old ones. Those would be my first steps.
Mr. Stossel, I like your example of the car. We all have perfect information; we can buy the right car based on the information. But dont we need government to make sure that people are accurately reporting their information, like the FCC, to make sure that people routinely and uniformly produce the right financial statements so we know who to invest in Whos going to incentivize people to do that?
The market. The FCC, I would argue, makes it worse because the FCC gives you the illusion of protection. You think youre safe, and then some people give all their money to Bernie Madoff. Remember, after Enron we got Sarbanes-Oxleythat was going to make us all safe. And now we have Dodd-Frank, and thats supposed to make us all safe. But all it does is enrich lawyers, and now all these companies have compliance departments. Ive never heard this word until the last few years compliancethats just disgusting. That means theyre not creating anything, theyre just trying to game the system or understand the system. The free market would take care of that. And we should assume there will be cheaters, and you protect yourself. Or if you werent relying on government, there would be private groups who issue stock advisories, and we would trust this one or not that one, far better than just assuming the government protects us.
While the mike goes to someone Ill do another from the magic of the Internet. I dont like that one. To understand the argument one must understand the opponent. This is from Chris of Belmont, West Virginia: Why are we living in a society that believes that government is the answer? Well, I mean Im waiting for a counterargument, but I think for normal people, not youthis is just intuitive, people have lives, they dont pay attention, they want a mommy leader to guide them and they really thought they had one here. Some still think they have one there. Whoever has the mike?
A few minutes ago earlier in your talk you spoke about how young people dont seem to vote, and of course from my take a lot of young people seem to be turning on to the ideas of liberty through Ron Paul. Ive seen numbers at his rallies that dont even seem to come close to what the Republican frontrunner is running, and yet it doesnt seem to translate into poll numbers. So I think like theres an opening there for an investigative journalist like yourself to maybe get some more answers, because Im not honestly figuring it out and just saying that they dont vote, theres some disconnect here that Im just not understanding, and I was wondering if you could explore that a little more just briefly.
Well I love it that Ron Paul is getting 12 percent in the polls and in the vote, and hes really introducing people to the idea of liberty. And hes had, he told me 7,000 people showing up here in California at some rally I think at UCLA. But maybe theyre intensely passionate, but the majority of people are voting for somebody else. And when I say young people dont vote, Im just looking at the statistics of lower percentage of young people vote. More older people vote, and frankly Im okay with that because most young people are clueless and dont know anything, I dont want them to vote. Im just pointing out that we Medicare recipients are taking all your money.
John, I know that your brother is a physician and hes been worked under Medicare since the beginning, when it first came out, through now. And Im sure youve had discussions with him about government-run healthcare. What does he think the best way to do and what does he thinks going to happen if Obamacare is overturned?
My brother is a physician. Hes my smarter older brother. Hes actually more of a scientist. He didnt get interested in politics until recently. I think I radicalized him a bit. Its funny: his son is a lefty and the editor of The Atlantic, Scott Stossel. But Tom Stossel, my brother, is now reading Adam Smithin the bathroom. Hes newly radicalized. But being a Harvard scientist he is so narrowly focused. Hes not a retail physicianhe barely knows what Obamacare is. Hes obsessed with all the rules now that say researchers are not supposed to cooperate with industry, and he alone among scientists is the one pushing back all these conflict-of-interest rules. And he talks about it to the point that even I, the libertarian, get sick of hearing him complain about these things. But it is a real problem. Hes looking for allies in this. Hes started an institute to fight all the compliance nonsense thats slowing progress in research. So if you want to help him, contact him. Tom Stossel.
Heres a question from next door.
A question from next door? Oh, the overflow room. You jokingly said supermarkets rarely poison us. But seriously most of the cheap foods out there are loaded with toxic pesticides and GMOs (genetically modified organisms). Most people are unaware of this, and the free market does not seem to be doing anything. How many millions have to die first?
Well, Im glad youre in the other room. Lets break down these points one by one. All right, most of the cheap foods out there are loaded with pesticides and GMOs. GMOs first. Thats genetically modified organisms. What do you think cross-breeding is, except a slower version of genetic modification. Do you think a French poodle is natural? Pesticides, he says, toxic pesticides. Well, theyre toxic to the pests and lots of chemicals are toxic to people. At these small doses they are utterly harmless. Farmers are exposed to a million times more of them than we are, and farmers live longer than average. And weve been eating many more of these toxic pesticides and GMOs and chemicals in the past 10 years, and whats the result? Were living longer than ever. Most people are unaware of this, how? Hysterics like you, this is unsigned, are telling everybody, and the idiot media is constantly screaming about phony threats like this. The free market does not seem to be doing anything about this? Good.
The other point is, I joked about people being poisoned. People think its government that keeps us from being poisoned by food, and government has a huge, expensive FDA and Department of Agriculture safety regulation for food, and it probably helps a little, but it is primitive. Like all government agencies, it doesnt change, it doesnt innovate over time. So at every chicken plant a union inspector looks at every bird as it goes down on the line, looking for visible signs of too much fecal matter. In an age of microbiological testing, this is what they still do. But fortunately, much more important than food regulation, safety regulation, is the reputation of the company. In a free market they all know if they poison people they are toast. If McDonalds has a bad outbreak they lose zillions of dollars. So every food company puts much more effort into maintaining the safety of its food. I mean if they find a tiny bit of bacteria, they shut the whole thing down, they clean it with steaming water, they have all these specialized. I have a chapter in the book about that. They do much more than government because of reputation, and companies selfishly worry about their reputation. This protects us better than the central planners ever will.
Mr. Stossel, back here a question. Typically a countrys environmental response is predicated on the amount of disposable income available for such things, and as weve seen over the last several decades, ever since the first Earth Day the government has allocated more and more to the environmental movement. What impact do you think that movement has had on the free market and why?
It crimps the free market, of course, every time somebody has to focus on an environmental rule rather than producing more of their project or charging less for it; were a little poorer. But I say, thank God for the EPA. When I was young you couldnt open your window in New York City because soot would come in. Theyve gotten rid of. Look, a lot of us libertarians say the Constitution is all we need. I would go further than that because the Constitution said black people were 3/5 of a person; we amended that. The Constitution has nothing about these pollution rules and Hayek said a small safety net is a reasonable thing for government to do. But Im really glad we have an EPA. Pure libertarians say the tort system could handle it, its your private property, your air, your water. But given our slow judicial system I think that would be impractical. So good for the EPA for getting rid of a particulate matter in the air, good for the EPA for requiring sewage treatment plants so I can swim in the Hudson River as I do. But enough, already. Lets stick a fork in it and say its done. All right, thats a joke; its not done, but its largely done. Now you get to diminishing returns.
They did all the big progress, and they keep getting bigger and doing more. Theyre going to make the air so pristine that were brokeand thats what the bureaucrats do. If theyre a bureaucrat at the EPA they feel theyre not doing their job unless theyre passing more rules. Plus the kind of people who want to be an EPA bureaucrat tend to be environmental zealots. So they were wonderful, and now theyre a threat to freedom and prosperity.
David handed me from Rob, whoever he is: How did you land your gig at Fox Business. Did they reach out to you? Sadly, no. I was at ABC for 28 years, and people would say, Why dont you go to Fox? Theyd be a more sympathetic audience, youll be more comfortable. And I would always answer, I dont want to preach to the converted, I want to talk to people who havent heard these ideas before, who dont know about free markets. And I had a big audience at ABC. My first specials were watched by 15 million people. These are American Idol numbers. That was largely because our silly government had limited the number of channels. We didnt have a lot of choices. But finally that broke and we had many more choices. And now 20/20 reaches 5 million people, and Bill OReilly with repeats reaches 5 million people. And always my career at ABCthese stories were a fight: people would say, You really should soften that. This cant behow can you say rent control hurts poor people? Because these lawyers and liberal producers just had no clue about these ideas, and I fought them for 28 years, and then finally I had enough.
It also got worse at the end. I had done a show on healthcaregovernment healthcareafter Michael Moore came out with his movie Sicko, where he said Cuba was great. And we went to Canada and found some great healthcare: places that had cutting-edge medicine, you got treated right away, you had to meow or bark to get that kind of treatment, because healthcare was still private. But it was a good show, and then Obamacare happened and I said, Lets update this show. Obamacare is the issue of the day. Oh no, were not interested. Youre predictable. Your libertarian stuff is predictable.
Likewise, I did a show called Stupid in America about education choice. I was worried that it wouldnt get good ratings because kids sitting in a classroom isnt sexy, like what they cover, but it got great ratings. So five years later now there was an education-choice movement, there were charter schools, stuff was happening, even Al Gores producer made that moviewhats it called? Waiting for Supermanwhich really said pretty much the same thing I said. So I said lets update this, cover this. Nah, you know, Michael Jackson died, we have to cover that. We have to interview his sister this week. How about this week? No, Michael Jacksons still dead; we have to report of it. So I went to Fox and begged them to hire me, and fortunately they did. And at Fox Business Network half of you dont even get the network, so its a smaller audience. But this charity, Stossel in the Classroom, now is in enough classrooms that more people watch me in high schools than watch 20/20. So the heck with 20/20. 20/20 just covers crime and kidnappings of pretty blonde people. Yes?
Hi, John. I mentioned before, Im a high school teacher who has enjoyed using Stupid in America in my classroom for about 10 years, and I get a kick out of showing it. I wish I had time in my curriculum to show more of your DVDs. I show about two. But when you look at your old programsIm thinking about Chavez and Oakland Unified or that Governor of South Carolinaare there any guests that in hindsight make you wince say, Oh, I wish I hadnt used this support or I wish I hadnt use this expert in my program?
I dont get the point, what did Chavez do that I should know about?
Well, Chavez has kind of had a checkered past since then. Now maybe this is because of Oakland Unified more than Chavez, but he was asked to leave. And now theres a big ethics thing about how money was spent in Ben Chavezs schools and hes had to appear in court about that. Heads are going to roll about the money and him writing checks to himself and his own companies. So its that type of case, maybe its more of a local story than I thought. Hes down I think in Arizona now.
Hes down in Arizona, but hes had to come back and testify and what not.
Well they persecuted him because he was successful. Maybe they persecuted him because he exposed the blob, the education establishment, for the horrible people they were who were hurting children, and maybe this is just a witch-hunt, I dont know. But thank you for pointing this out, I will investigate that. And you know the fact that Mark Sanford claimed he was on the Appalachian Trail and he was having an affair in Argentina, that doesnt discredit his school choice idea. We always worry when were interviewing people that this is something who were relying onthis personand for this part of the story is something going to come out, we try to check them out. But I cant think of anybody Ive regretted. And by and large the ideas that stand for themselves. And the results of Ben Chavezs schoolsthey went from the worst schools with the most so called underprivileged kids to the highest performing in California, so regardless of what hes accused of doing with checks, he got results and hes a great talker on TV.
Hello my name Steven, and I was thinking about things I would like to ask you if I had a chance to talk to you personally. Since I didnt I thought I would raise my hand for the mike. And after one hundred thank-yous, I wanted to ask the question: would you consider doing something like Milton Friedman did for PBS with his Freedom of Choice?
Free to Choose.
Free to Choose. If he was able to get to PBS, which I kind of find surprising, and youd be considered sort of exotic, I would think, in that environment, and they would probably be happy to entertain. And I dont mean that in a negative since, no I mean they really would listen. I heard from him, what, 30 years ago now, and now I hear from you, and I mean that with all due respect.
I think Davids derisive laughter is the better answer of that. I would, too, think that they would welcome these ideas and want to argue with me perhaps, but they are close-mindedI mean, NPR radio. Im an author nowIve had two bestselling books and this one, which I hope will be a bestsellerand all of us authors most want to get on those NPR shows because they dont scream, they have a reasonable discussion, they go on longer, they sell books. They interview every wacko left-wing author all the time, so youd think theyd put me on; they never have. I got on the local one in Utah and she even attacked me. She said, John Stossel, an unabashed libertarian who blah blah blah. I mean she talked about the stuttering, a nice long interview and she finally said, So do you really consider yourself a reporter? Isnt it wrong that you have a point of view? And I said, Well I think you have a point of view. No I dont. Well you called me an unabashed libertarian; I bet you would never call anyone an unabashed democrat. Oh I would use the same... Ill bet you money that you would never... and then the interview turned bad a little bit after that. But these national NPR shows: All Things Considered and the woman whoTerry Grosswe ask to get on and youd think theyd want to argue with me or just, if its a bestseller, at least, say here are these ideas. They wont have me on. So Bob Chitester got Free to Choose on PBS. He ran a PBS station before that, and maybe thats why, and maybe they didnt realize how threatening Milton Friedman was, I dont know. It was great that he got to do that. I would love to get on NPR and PBS, but I cant.
John. Denise, Walnut Creek. You talk about the EPA being sort of good. You mentioned other departments. Why arent you saying privatize? Im looking at the FDA versus Underwriters Laboratory, which actually makes us safer but which we dont think about day to day.
Well, the EPAI dont see how you can effectively privatize pollution control for the whole country. The FDA, I absolutely agree with you. I mean people rely on the FDA. Their mandate is make sure the drugs are safe and effective, and if theres any death then somebodys head is going to roll. So this means that theyre very scared about approving new things. Their first big success was Thalidomide, it was this drug that some woman took during pregnancy. They gave birth to kids with no arms and no legs. And it wasnt that they were so cleaver that they detected the problem with Thalidomide; they were just so slow that by the time it was nearing the end of the approval process, the bad effects were being seen in Europe and Australia. So they saved us from Thalidomidehurray and Im glad they didbut is it worth it? Now I have to say no. I agree with you, because since then they grew like all bureaucracies.
Now to get a new drug approved it takes 10 years and costs about a billion dollars. So a few years back they said they were approving a new beta blocker. This new heart drug, they announced at the press conference, this new heart drug will save 14,000 American lives a year. And that was great, except nobody at the press conference stood up to say, hey great, but didnt that also mean you killed 14,000 people last year and the year before and the year before? No reporter asked that because reporters dont think that way. But it did mean that. Think about it, a 10-year-approval process. Right now in this 10-year pipeline there are fat substitutes that would let you eat all the chocolate cake you want and not get fat. We want to make sure, intuitivelylets make sure theres no carcinogen in there, lets make sure that its safe and effective and thats our instinct. Except thousands of Americans die because theyre too fat. They would be saved now, dont they count? No not really, not in the bureaucrats eyes, because if you approve something that saves somebodys life, nobody knows. If he approves something that hurts somebody, hes in trouble. The media makes it worse because we can take a picture of the Thalidomide baby. We did we put him on the cover of Life magazine, Time magazine. But I dont know; I cant take a picture of whos life might be saved by the new drugs. I dont know who it is. It could be somebody here. So the bias is against approving things. Now most people, unlike you and your wisdom, say, well no FDA, its just the snake-oil sellers who would poison us. But thats not true, because the private sector would step in and do the job better, faster, more cheaply, groups like Underwriters Laboratories or Consumer Reports, or who?
a private drug-testing laboratory.
Or a private drug-testing laboratory that I never heard of. But there would be all kinds of things that would appear and would do the job better. But above all, in a free societyI mean, I think its pretty amazing that in America we are not allowed to put in ourif youre dying, youre not allowed to try something, its forbidden. It ought to be our choice. And those of us who are cautious might only take those FDA approved drugs, but if you were terminal you could experiment without having to break Americas laws and import something illegally from Europe or sneak into Mexico, and wed learn from that experimentation. But above all it ought to be about freedom. And Patrick Henry didnt say, Give me absolute safety or give me death. Its about freedom, and weve become very wimpy about that.
One from the streamer.
From the streamer, okay. Marcus of Temecula, California, via YouTube. Man this is cool. Being here from California we obviously find an abundance of philosophical opposition. What? Youre saying that people are stupid in California, Marcus? Whats your opinion of the best argument on behalf of private institutions versus public institutions when discussing it with our peers? Hmm. Private versus public. Well its true people like public. Public is nice and for everybody, and private is selfish. But think about schools and supermarkets. Public schoolsI think we should call them government schools: whats public about them? Can you go into your kids school anytime you want? No, they might arrest you. But the private supermarket is open all the time. Im on the Board of Central Park. Its a public park, but now its a private charity that maintains it. It was awful, now its good. You think public is good? Think public toilets. Does that convey a good image? Those are my best arguments.
Hi. I come from a little country called Israel. And in Israel we did change the system, the economic system from a union-run country to a much more capitalistic one, and the Israel economy is doing really well. And my question to you: do you think the size of the country has anything to do with it? Hong Kong is doing well, but its a very small place, unlike the United States.
No, I think its one of those areas where size doesnt matter. Once you get past 300 people I think you have either a free society or not. And if youre a big country or a small country, in terms of economic growth it doesnt matter. I mean, I dont really agree with you about Israel. Israel has a big boom in tech because tech wasnt regulated to death, but the whole attitude of Israel is sort of socialistic. Theres an economist there whose name is eluding me, whos really fighting against this, and nobody will pay any attention to him. I mean they have all kinds of cartels in Israel and rules and welfare states; and Israels a mess, but its got educated Jews so they overcome it, but its still got lots of socialism there.
It used to be worse there.
It used to be worse, okay.
John, Hi. Im George Zimmer, and Im a capitalist and I have enjoyed listening to your talk but--
Are you a radio host? Listen to that voice.
So my question concerns. By the way I applaud your support of the EPA, but heres the question. Im trying to ask, in a capitalist society how do we make sure that companies, in this case Im going to talk about fracking for oil. How do we know that oil companies in order to make larger profits are not endangering us with this process? And it ties back to that pipeline that has been discussed.
Well thats two different [issues]: the pipeline and fracking. Fracking is hydraulic fracturing, which is why we dont have an energy crisis in America, because by doing this they discovered vast new fields of oil and natural gas, and thats wonderful for us. It is a chemical-laden process. It involves exploding the rock and its creepy. And theres this movie Gasland, which shows somebody lighting his faucet. That gets your attention. Now it turns out that the government investigated that guys faucet, and it was natural leakage in his well. Theres lots of methane, and if you got a poorly sealed well, that stuff happens. Fracking could cause it, and thats a reason there should be some environmental rules about this. But weve had lots of fracking. The fracking is done below the water table. I think most of its safe. But theres now a public outcry. This is the good political balance. Some people will scream. The government will get involved, and I hope theres a reasonable balance that allows fracking to continue. And it is important that they do it properly and that they seal the pipe that they put down.
The other point you mentioned was the pipeline. I mean this one is ridiculous. The news programs show this pipeline going through pristine Nebraska; it might leak and poison everything. But why dont they put up that other picture, which shows how there are already a million pipelines going through Nebraska and thank God because thats how we get our fuel? And this would just be one more, but its the new political hysteria over this Keystone Pipeline that prevents us from getting oil and natural gas from Canada. Now theyre going to ship it to China, and well pay more.
One more question, last person who wants the microphone. What is your position on completely open immigration? says Jackson. Im for completely open immigration, but as Milton Friedman says you cant have open immigration and a welfare state, because then people will come here to freeload. I would add now as something since he said that: you cant have open immigration when there are religious fanatics that want to murder us. So we ought to have work permits to let people in so they dont sneak in; and more open borders. And people who want to hire peoplethere shouldnt be limits on these visas: we should let more people in; immigrants built America. But we do need more controls and limits. Please, you know Fathers Day, Mothers Day coming up. Get me on the list so we can discount this book. Thank you very much.
There is one heck of a lot that this book covers. Its everything from topics like immigration to food safety to war to you name it. So I really hope you get a copy. Its a great read, its witty, its a great book. I want to thank John Stossel for coming and joining with us and for his work. And I want to thank all of you for coming and making our event this evening so successful. For those of you who have not gotten a copy of his book, there are copies right next door and he would be delighted to autograph copies. Please join with us in the future, our website is Independent.org and thank you and good night.