RALEIGH – Politicians and activists of a certain mindset look across the ocean to Europe for examples of what’s wrong with America and what to do about it. Those of a certain other mindset cast the same gaze but see answers to different questions: what’s right with America and what not to do about it.

I am decidedly in the latter camp, offering only a couple of major exceptions in the areas of school choice and tax policy. The latest foolishness from the continent makes me particularly worried because it sounds so strikingly like policies endorsed by some North Carolina lawmakers and education officials: efforts to combat soft-drink marketing aimed at schoolchildren.

While some critics of soda machines and cola ads mouth a broadly anti-capitalist critique, the usual justification for banning them is childhood obesity. In Europe, soft-drink companies themselves decided that the prospect of regulators blaming them for kiddie flab was so dire that they needed to announce last week a “voluntary” ban on advertising to children under 12. They also said they would eliminate soda machines in primary schools while increasing the availability of non-carbonated drinks in secondary schools.

There are two reasons to resent the policy outcome in Europe and to fear its emulation in North Carolina. One involves pragmatism, the other principle.

The pragmatic objection to such regulation (or self-regulation by threat of force) is that it consumes scarce resources on the wrong goal. I won’t deny that too many children are drinking too many soft drinks, but let’s put it in some perspective. This isn’t the major cause of childhood obesity. Lack of exercise is. If children spent more time outside playing, rather than inside watching TV or manipulating their video controllers, it wouldn’t matter as much whether they had a few more sodas than they should. They would burn off the extra calories. Fixating on the availability of soft drinks and fast food, rather than on a lack of assertive parenting and strenuous physical education, isn’t just unwise. It’s counterproductive.

The other objection here is one of principle. While one might make the argument that marketing products within government schools is an appropriate area for public legislation or regulation, an attack on advertising in that case serves as a blow to the bulwarks that protect the right to commercial communication everywhere. In the European case, the initial thrust of activism may have been limited to controlling what is said or sold at the schoolhouse, but the new policy isn’t limited to its confines. If regulators can force soft-drink makers to ban an entire category of ads, the precedent will likely lead to more-sweeping regulatory proposals in the future which, if enacted, will whittle away still more at our personal freedom.

Advertising to children is not a villainous act. Indeed, there are some authors who even argue that such advertising helps more than it hurts families by reducing the price and improving the quality of the products they consume, while ensuring that children actually like the clothes and enjoy the toys they are given.

As Forest Gump might say, Europe is as Europe does. Let’s be smart enough not to commit the same mistakes in the land of the free.

John Hood is president of the John Locke Foundation.

This editorial is intended to provoke thought, discussion and an examination of issues. It does not reflect official policy of the Grassroot Institute of Hawaii. See the GRIH Web site at: http://www.grassrootinstitute.org/

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Offshoots

HANDCUFFS ON "ALIENS"

Daily Policy Digest

REGULATORY ISSUES

In order to more effectively meet future catastrophes, we should remove the protectionist constraints that are handcuffing global reinsurance companies, says Peter Levene, chairman of Lloyd's.

Reinsurers provide backup for insurance companies, covering, for example, potential liabilities from enormous natural catastrophes they cannot reasonably afford to cover on their own. The world's top 10 reinsurers -- Lloyd's ranks sixth -- account for about 60 percent of this $200-billion industry.

While reinsurance is global, regulation is local, explains Levene. And, unfortunately, ill-conceived legal regulations in the United States are undermining the ability of Lloyd's and other foreign reinsurers to respond when disaster strikes. The laws, called "credit for reinsurance," are arcane, he says:

They require "alien" reinsurers -- those based outside the United States -- to post collateral equal to 100 percent of their gross liabilities. The collateral must be posted regardless of the reinsurer's financial strength. U.S. reinsurers, on the other hand, are not required to secure their liabilities with collateral -- even if they are financially weak. These regulations help drive up costs and restrict the ability of reinsurers to respond to crisis, exactly at the time when the response is needed most. This is bad public policy, and unnecessary. The blunt fact is that the largest insurance markets, including London, Bermuda, Zurich, Munich and Tokyo, operate smoothly without collateral requirements, explains Levene.

The White House, congressional leaders and state regulators have long recognized the need for a level playing field. State regulators will have an opportunity to embrace reform once and for all in a series of meetings beginning this month. The proposed changes would rate all U.S. and foreign reinsurers by financial solvency. The move would improve creditworthiness, increase underwriting capacity, bring down rates and smooth U.S.-European trade relations, says Levene.

Source: Peter Levene, "Handcuffs on 'Aliens,' " Wall Street Journal, February 6, 2006.

For text (subscription required):

http://online.wsj.com/article/SB113918478186565531.html

For more on Regulatory Issues:

http://www.ncpa.org/pd/regulat/reg.html

Sprout of the Day

"He who in his own house is virtuous will also be just in civic affairs."

— Sophocles

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