Book Reviews

For a Fabian "planner" to take part in advocating the creation of miniature Hong Kongs and Singapores in British cities that are more or less dominated by interventionist trade unions may seem passing strange. The British Trades Union Congress doesn't like Professor Hall's defection at all-it has predicted that "rogue employers" would capitalize on special tax concessions in Glas gow, Liverpool, Manchester and the Isle of Dogs docking area in London to reproduce Hong Kong's "horrors." But Hall is willing to take a calcu lated risk: "unorthodox ideas," he says, are sometimes called for. As for Sir Geoffrey Howe, the Conser vative, he doesn't regard the Enter prise Zone idea as any risk at all. Stuart Butler, while he remains fearful that the British will mess up a good idea, thinks the Enterprise Zone is just the thing for America. He has a thorough grasp of what has ENTERPRISE ZONES 63 happened to change demographic patterns in this country. Our north eastern and Great Lakes cities have suffered as industries and people have moved to the Sun Belt. Skilled and educated people, in search of more pleasant life styles, have emi grated to the suburbs. Port areas and railheads, while still important, cannot compete with interstate highways as a locale for new busi nesses.Fate has singled out special cities for special blows-Buffalo was by-passed by the opening of the St.

Lawrence Seaway, and Detroit is suffering from being a one-industry town that has lost much of its auto mobile market to the Japanese. Urban Blight Our political efforts to halt urban decay have been markedly unsuc cessful. The zoning that eliminates small shops from public housing areas has deprived city blocks of the variety needed to keep them alive. As Jane Jacobs has pointed out, crime ·doesn't flourish in mixed neighborhoods, where there are al ways watchful people on the streets and porches. But when "planning" segregates shopping and residential areas, the mugger and the rapist flourish. And when rent control is piled on top of everything, the whole housing picture deteriorates. Land lords can't afford to improve slum properties, and new builders are dis couraged. To end the blig~t, Mr. Butler sug gests that municilPal, state and fed eral governments'get together to al low islands of free competition to grow in such places as New York City's South Bronx. A general pack age of federal t~x and regulatory concessions (suspension of the mini mum wage, modifications of Social Security and thel,like) would be of fered provided tne city agreed on matching concessi9ns of its own. The tax concessions would combine with the plentiful existence of old build ings to lure smaUenterprises to semi abandoned areas.: There would be employment for l()~al people, and the welfare rolls would shrink.

On paper, the I, Enterprise Zone theory sounds good. In England, bigger companies have shown· more interest in it than small innovative firms. The dangeIt is that a big es tablished company would b~ inter ested in shifting: its location to an Enterprise Zone •. just to get away from taxes it has been paying else where. This would not result in any net increase in. employment. Mr. Butler doesn't think this sort ofthing would necessarily.happen in Amer ica, where there are plenty of inex pensive "make-do" iold buildings still standing in slums',where new ideas could be hatched' without raising capital for construction costs. New businesses need old edifices, says Mr. Butler. Tax incentives could be geared to favor new small compa64 THE FREEMAN nies over mature companies that would merely be trying to relocate. Jack Kemp Espouses Congressman Jack Kemp was quick to catch on to the Enterprise Zone idea. Significantly, he comes, from the Buffalo region of New York State, which has lost its importance as a grain terminal now that ships sail past it to the Atlantic by way of the St. Lawrence Seaway. Kemp is a Republican, but he found no diffi culty in getting a Democrat, Con gressman Robert Garcia ofthe Bronx, to join him in introducing an Enter prise Zone bill that has. had the fa vorable attention ofthe White House.

The Kemp support of the Enter prise Zone concept is attended with a bit of irony. For Kemp, more than anyone else in Congress, is commit ted to the idea that the whole United States should be one large Enter prise Zone. Kemp has thought of the 5-10-10 Kemp-Roth tax cuts as a mere beginning. If the annual in come tax of thousands of business men could be made sufficiently low to leave them with something tan gible to put into expanding their companies, the Enterprise Zone would not be able to compete with the rest of the country in job-mak ing. It could be, of course, that Jack Kemp, as an old professional quarterback, knows the value of having alternative game plans. His advo cacy of a return to the gold standard indicates that he doesn't believe tax cuts in themselves will solve our problems. The Enterprise Zone, with Kemp, could be a stop-gap proposi tion. The trouble. is that it is the sort of idea that Congress, with more pressing problems on its mind (not to mention the imminence of coming elections), can find very little time to debate. The big picture seemingly calls for an eternity spent on fight ing over budget cuts and the need for displaying "compassion." The talk is always of orphans and indigent old ladies who might suffer' if a tax rate is changed and an "entitle ment" cut. There is no attempt to look at things in dynamic terms. If Congress could hurry up and enact the legislation needed to create an Enterprise Zone in the South Bronx, Newark or Detroit, the need to worry about "safety nets" and "entitle· ments" could diminish.

Maybe the Enterprise Zone idea would come to little anyway. But i1 would be good to test the virtue~ which Stuart Butler claims for it. I: it were to succeed even in one littlE area, it would stand as an examplE for the whole country. The wholE nation would be that much closer tc becoming one big Hong Kong. @ t1le Freeman VOL. 32, NO.2.. FEBRUARY1982 Jobs-And How Not to Increase Them P.Oean Russell 67 The self-interest of employers affords a well-paying: job to anyone who produces and thus merits such a wage. The Moral Issue of "Honest Money" The case for a money redeemable in gold. Gary North 76 Bureaucracy, Productivity, and Inflation Mark D. Isaacs 88 Sound monetary policy determines the effectiveness of economic calculation and productivity. Reasoning on the Nature of Things ClarenCe B. Carson 94 How natural rights derive from basic concepts conoerning the nature of things. Freedom for Less Developed Countries Dennis Bechara 104 Why freedom is the best policy toward other countries.