Reason Magazine - Staff

2007: The Year in Videos

Tue, 01 Jan 2008 12:06:00 EST

It's the first day of 2008, and outside of Iowa and Pakistan there's not much news and not much to worry about. Kick back and click the "play" button as reason editors and friends of the magazine remember the most striking, funny, historic, stupid, or impactful videos of 2007.

Update on January 2: Due to an editing error, some video picks were not included in the original posting of the article. Submitted for your viewing pleasure are three new selections:

Radley Balko
reason senior editor

I'm nominating the lot of police brutality and taser videos. The most popular this year were probably the "Don't Tase Me, Bro" video from a John Kerry event in Florida (see below) and a Missouri teenager's recording of an abusive police officer who had pulled him over. The genre as a whole is the result of the mass democratization of technology, and represents an important shift toward transparency and accountability in law enforcement. More than a few abusive police officers have lost their jobs after a video went viral, which likely wouldn't have happened were we still in the pre-Internet age. Mass watching of the watchers is a good thing, and we ought to be encouraging more of it, both to weed out bad cops and to protect the good ones from frivolous claims of abuse.

Ronald Bailey
reason science correspondent

Venezuelan President Hugo Chavez' weekly television talk show, Alo Presidente, infamously runs on for hours. In September, 2007 viewers were treated to more than eight hours of presidential bloviation. Chavez' hero, the notoriously long-winded Fidel Castro, has never even gotten close to that record.

In November at the Ibero-American Summit, Spain's King Juan Carlos told Chavez, "Why don't you just shut up!" Juan Carlos' words have been turned into a popular ring tone. I nominate it as the "best" video of 2007 because it was way past time that someone told Chavez to just zip it.

Nick Gillespie
reason editor-in-chief

I continue to laugh every time I watch the meeting of minds between singer-songwriter John Mayer and Justin Long (the Apple Computer guy) outside an L.A. nightclub. Mayer--drunk on booze or maybe just strict construction of the Constitution?--goes on a pro-Ron Paul rant that is magical not just for its intensity and heartfeltness but for its very existence in the first place. Years ago in reason, we excerpted Tyler Cowen's What Price Fame?, a study in how contemporary celebrities are impotent puppets we pay astronomical amounts to entertain us (Cowen's piece is not, alas, online). This is true, even when we agree with them. It's a great world where this sort of footage is widely available.

Katherine Mangu-Ward
reason associate editor

This mashup of the classic Apple 1984 ad and Hillary campaign footage ends with Obama's website address but wasn't approved by his campaign. When the maker's identity was feretted out by the Huffington Post, he said: "This ad was not the first citizen ad, and it will not be the last. The game has changed." Ne'er were truer words spoken in 2007.

Jeff Taylor
reason online columnist

A perfect creation of ad hoc media -- found it via Fark.com, builds on a previous YouTube upload of Hubble telescope images set to the Tool song Lateralus -- and adds immense value, meaning, and insight, all because some guy -- philriehl -- decided to do it. The 9:24 vid -- that number is important -- illustrates and explains a Fibonacci number sequence clearly enough for everyone to feel their inner gnostic stir. Beautiful, powerful, and inspiring.

Jesse Walker
reason managing editor

Who is the YouTube candidate? It might be Ron Paul, thanks to his ability to inspire hundreds of homemade videos, some of them gloriously weird. But Mike Gravel is the guy who makes weird videos, or at least sends them out with his stamp of approval. My favorite is this Lennonist rap featuring psychedelic animation and clips from Duck and Cover.

Matt Welch
incoming editor-in-chief of reason

I can never tell whether this surrealist attack on/celebration of John "Walnuts" McCain was based on any particular knowledge or point of view, or whether it was just a one-time burst of inspired guesswork, but I do know that it only gets better -- and creepier -- on the 200th viewing. "I want to help people... in their lives" may yet go down as one of the most chilling predictions of the 2008 presidential campaign.

Tyler Cowen
author of Discover Your Inner Economist

The best video clip I saw this year was John McLaughlin playing "Cherokee."

David Harsanyi
author of Nanny State

My favorite video of the year:

Markos Moulitsas
netroots paterfamilias

The Huckabee parody ad. Nothing captured better the absurdity of the GOP's entire field.

Brendan O'Neill
editor of Spiked Online

Mia Farrow in Second Life talking about Darfur: It's not my favourite video of the year. But in capturing the naked narcissism of celebrity activism, it's one of the most startling. Mia Farrow's young-looking, sexy avatar addresses a virtual audience of students, activists and lizards in Second Life. Like most Save Darfur activists Farrow says precisely nothing about the politics driving the conflict in Sudan; instead she describes horrific occurrences and shows photos of distressed Darfurians. As Mahmood Mamdani wrote in the London Review of Books (Essay of the Year), activists like Farrow "obscure the politics of the violence and position [themselves] as a virtuous, not just a concerned observer." It's fitting that Farrow's speech takes place in the cartoon world of Second Life, since the aim of Darfur activists is not to get to grips with the reality on the ground in Sudan but to create a virtual plane of moral superiority that they can occupy. Darfur is a "defining moment for the human family," says Farrow. She's so vain she thinks somebody else's war is about her. Watch this vid to glimpse Kipling's colonialism updated: the Web Surfer's Burden.

The Death of Social Security

info@reason.com (James K. Glassman) info@reason.com (Tyler Cowen) — Fri, 01 Apr 2005 00:00:00 EST

As George W. Bush's second term begins, no item on his agenda is more controversial than Social Security privatization--that is, allowing Americans to divert at least some of their payroll taxes into personal accounts that they can invest in mutual funds or similar instruments. So far, Bush's own plan has been maddeningly vague, but it has opened up a serious debate about transforming a government program that was once so sacrosanct that it was called "the third rail of American politics."

Is privatization necessary? Preferable? Politically viable? In January, with Bush's second inaugural in the offing, Reason invited James K. Glassman, a fellow at the American Enterprise Institute and host of TechCentralStation.com, to discuss and debate the ins and outs of Social Security reform with Tyler Cowen, the Holbert C. Harris professor of economics and director of the Mercatus Center at George Mason University.

Social Security's Fortuitous Crisis

James K. Glassman

This August marks the 70th anniversary of Social Security. If it ever had a reason to exist, it doesn't any more.

Social Security has three big problems, all of which can be solved by allowing Americans to invest--on their own --part of what they are now forced to send to Washington in payroll taxes.

First, Social Security is a blight on liberty. It extracts a big chunk of the pay of working people to benefit the retired. The vast majority of Americans are perfectly able to handle their own retirement savings, just as they buy their own food, clothes, and shelter. Even if we concede that government needs to force all Americans to save today so that taxpayers won't have to chip in to prevent the profligate from starving in their old age, why do we all have to buy the same annuity with the same terms from the same provider--that is, the government itself?

Second, Social Security creates a vast moral hazard. Since its implicit message is "Don't worry--Uncle Sam will protect you in your old age," it's a huge encouragement to spend rather than to save for your own or your family's needs.

Third, Social Security is a terrible retirement system, a Ponzi scheme that was inevitably going to collapse of its own weight. Instead of a conventional retirement account, with real assets accumulated over time, it was constructed as a pay-as-you-go plan: Current workers pay the bills of current retirees. (There's a small amount left over for a so-called trust fund, which predictably has become a piggy bank for the rest of the government.)

The first retirees in the system were big winners. For example, the very first recipient, Ida May Fuller, paid in $44 and collected benefits of $20,934. Times were different then. In the 1930s, 11 workers supported each retiree. The ratio is now 3.3 to 1. Soon it will be 2 to 1 and stay there. In 1929 life expectancy was 57; today it is nearly 80. Americans receive benefits far longer than they did before, and they can start earlier. Meanwhile, work force growth is slowing, and benefits are rising faster than inflation, since they are geared to wages, not prices.

As a result, by 2018, according to current predictions, retiree benefits will exceed workers' taxes paid into the system. Social Security will then present its IOUs to the Treasury for payment. The only way to get the cash will be to raise taxes, cut other government programs (fat chance), or borrow like crazy.

The system has been saved from insolvency in the past mainly by higher taxes. As a result, the actual returns that workers will receive from their contributions are minuscule: an estimated 1.5 percent annually after inflation for a typical person born in the last 30 years. Compare that with the average yearly return since 1926 from an account invested half in a stock index fund and half in Treasury bonds: 5 percent after inflation.

It's not surprising that young people especially have little taste for Social Security and little faith it will survive. The good news is that the impending disaster offers an opportunity to fix Social Security once and for all. The solution should:

� Guarantee the benefits of everyone now getting them, as well as others on the brink (say, those 55 and older).

� Gradually index future benefits to inflation, rather than wages, and increase the retirement age (currently 65 for those born before 1960, 67 for those born afterwards) by another year or two.

� Allow those under 55 to opt out of the current system by investing up to half of the retirement part of their payroll taxes (which totals roughly 10 percent of pay, including both the employee and employer contributions, for middle-income Americans) in an account with mandatory provisions that would restrict investment choices and require phased withdrawals starting perhaps at age 60 or when sufficient funds are acquired. Otherwise, ownership of the account would be unfettered and would belong to the worker and his heirs. It could be used to buy an annuity or simply provide needed income.

� Reduce, accordingly, the Social Security benefits of those opting out.

As the new system proves successful, gradually allow all former Social Security retirement deductions to go to personal investment accounts and broaden choices for those accounts.

Just before the last election, Investors Action, a new advocacy group that I chair, commissioned Public Opinion Strategies to poll likely voters on their willingness to switch to a system like the one I've described above. Among all voters under age 65, a slight plurality wanted to switch, 49 percent to 46 percent. But among those aged 35 to 44, the margin favoring switchers was significant: 61 percent to 33 percent. Among those under 35, some 64 percent wanted to switch.

Despite Social Security's reputation as the "third rail" of politics, intelligent discussion of the issue has been possible. Such congressional advocates as Rep. Jim Kolbe (R-Ariz.) have called for personal accounts repeatedly and have been elected repeatedly. President Bush said during the last campaign that he backed reform, implying that he supported some form of privatization, although he didn't spell out the details (and still hasn't as of this writing).

Bush evidently understands that Social Security reform could transform politics more broadly. Public Opinion Strategies, in another poll we commissioned after the election, found that investors (defined as people owning stocks or bonds, individually or through mutual funds) voted for Bush over Kerry, 52 percent to 46 percent, while noninvestors voted for Kerry over Bush, 54 percent to 45 percent.

What was striking was that the investor-Bush link remained strong at all income and demographic levels. For example, among those making less than $40,000 a year, a Democratic stronghold, investors were almost evenly split, with 47 percent voting Kerry and 46 percent Bush. But noninvestors voted for Kerry massively, 57 percent to 36 percent.

There's a good case to be made that becoming an investor increases a person's stake in free markets. Reforming Social Security using personal accounts would probably increase the proportion of Americans who are investors from about 50 percent today to about 80 percent in a few years.

Can Americans handle this much freedom? More than two-thirds of Americans (and 83 percent of married Americans) have bought a house--a far more difficult and risky investment than funding, over 40 years, a long-term account split roughly evenly, as I would advise, between stocks and bonds. Social Security treats Americans as children, keeping them in a kind of bondage, beholden to government for no good reason. The opportunity has come, at long last, to break the chains.

Cut the Benefits, Hold the Accounts

Tyler Cowen

We can improve Social Security, but let us opt for a sound transition. Unfortunately, some proposals would restrict liberty and responsibility rather than enhancing them.

I agree with James Glassman's first and second suggestions, namely that we should guarantee benefits for the current elderly and gradually index future benefits to inflation. The latter proposal would cause benefits to rise at a slower rate than otherwise, since current benefits are indexed to wages rather than to prices. It also would suffice to bring the system into future fiscal balance.

But here we begin to differ. Glassman proposes new private but government-regulated accounts. My alternative proposal is simple: Keep the limits on benefits but do not create the new system of accounts.

Of course we already have private accounts, which anyone can, if they wish, hold at Merrill Lynch, Bank of America, or Fidelity. Individuals can save in (relatively) unregulated fashion, and in some cases in tax-free or tax-reduced form (e.g., IRAs and 401(k) plans). It runs counter to both liberty and responsibility to set up a new system of "private" accounts with regulated contributions, investments, and withdrawals. We would end up adding to government involvement in the market economy, not diminishing it.

Whether we like it or not, government would come to be seen as offering an implicit guarantee for these accounts. If the stock market were to stay low for 10 or 15 years, retirees would demand that government supplement their returns. Government would feel pressure to cough up additional revenue exactly when the budget would be in the tightest squeeze. The result would be higher taxes in times of recession, exactly the opposite of what is appropriate. (It is true that government does not end up guaranteeing current IRAs, but that is only because we already have Social Security as a backstop.)

The private accounts would function as a kind of forced saving, as Glassman admits. But how much can government really force people to save through this kind of mechanism?

You can make people lock up funds in an account, but they can respond by borrowing more on their credit cards, taking out a bigger mortgage, and in general investing less in their future. The net increase in savings will be much less than the mandated increase. So the government will control more of our lives but without making our old age much safer. In essence we would see substitution from privately initiated saving to government-controlled saving. Is this really a step in the direction of liberty and responsibility?

And what will happen to the efficiency of private capital markets? Glassman already has admitted that investment choices will be "restricted." By whom? According to what standards? Will the government use these regulations to punish unpopular companies? How about companies that (supposedly) break the law? How about companies that supported the other political party? The proposal invites a politicization of investment decisions.

The Glassman proposal also would raise your taxes. Keep in mind that Social Security, whether we like it or not, is structured as a pay-as-you-go system. That means current taxpayers fund current retirees. If we allow current taxpayers to divert funds into private accounts, how do we fund the (constant) benefits to current retirees? It has to be either taxes or borrowing, and the latter means future taxes. Depending on how many people wish to switch to the private accounts, the size of this tax increase could run to the trillions.

In fairness to Glassman's proposal, it can be argued that these taxes would have been coming anyway. When subsequent generations of the elderly retire, we must pay taxes to fund their benefits. So arguably the Glassman reform is simply taking an implicit future liability and making it explicit in the present.

Unfortunately, the reality is grimmer than such logic would suggest. In theory it would work if government raised our taxes today, and then cut our taxes tomorrow as future retirees relied more on their personal accounts. But is that how governments operate? How often do they cut taxes just out of generosity? More likely they would keep the higher levels of taxation (and/or borrowing) in place. The plan would lead to a permanently larger role for government.

Whatever the problems with Glassman's idea, you might object, isn't the current system even worse? The correct comparison is not with the status quo but rather with caps on benefit increases. Those caps would bring fiscal stability to the system without requiring tax increases. Over time Social Security taxes could be cut. Individual saving would be encouraged. We could reap the higher returns available on private investment. At the same time we would not be breaking promises to current or near-term retirees. Even long-term retirees would receive a level of benefits at least as high as today.

And consider how benefit caps would operate in the long term. As benefits are held constant in real terms and the economy grows, the relative size of the Social Security program will shrink. Over time Social Security will become very small, in real terms, relative to the economy as a whole. This requires some patience, but it is the best recipe for privatization we have available. And it does not require additional regulation of savings or investment.

Glassman asks, "Can Americans handle this much freedom?" I think they are ready to handle more liberty than he is proposing.

Proceed With Caution

James K. Glassman

Tyler Cowen would reform Social Security by capping benefits, thus forcing people to save more on their own through existing private mechanisms, including IRAs, 401(k)s and taxable mutual funds, stocks, and bonds.

I am not sure what Cowen means by "caps." The implication is that he would stop increasing benefits, period. If inflation runs 3 percent annually, that would mean that in 24 years retirees would have half the purchasing power from their Social Security payments as retirees today.

Slowing the rise in benefits is part of my own proposal as well. I want to boost payouts to retirees each year according to the consumer price index, not according to the annual rise in wages.

Cowen's notion is only one step removed from the plan Milton Friedman outlined in Free to Choose and earlier writings: repeal payroll taxes immediately, keep doling out benefits to people currently in the system, pay all younger participants off (either in an annuity or in government bonds) for the value of what they have contributed, and let everyone fund his own retirement. Friedman would fund the reform by issuing new federal debt.

"This transition," he writes, "does not add in any way to the true debt of the U.S. government. On the contrary, it reduces that debt by ending promises to future beneficiaries. It simply brings into the open obligations that are now hidden. It funds what is now unfunded."

Let me be clear: I love the Friedman strategy, but it has two drawbacks. First, it is wildly impractical. There is zero chance that Congress will either shut down Social Security or, in the Cowen version, bleed it to death. Reformers need to be more subtle. Slowing the increase in benefits would, in a less brutal and more gradual way, force Americans to save more and rely on Social Security less.

The second problem is that in the United States we don't let people starve. Some people simply will not save for their own retirement--especially after 70 years of relying on the government. Even Hayek agreed that some form of forced savings is necessary to keep taxpayers from having ultimately to foot the bill for those who don't provide for their own future.

For this reason, and to meet political practicalities, mandatory elements are necessary in any reform plan--at least as a start. As I said in my first piece, these strictures can be phased out later as it becomes clear the plan is a success and as people get used to doing it themselves.

This is a good time to lay out the specific mandatory elements.

People who opt out of Social Security with, say, four percentage points (including the employer's contribution) of the 10 points that now go to the retirement part of payroll taxes must put that money into a personal retirement account (let's call it a PRA). The PRA would be privately managed and administered, but the investment choices would be limited--say, to six funds: two U.S. stock index funds (an S&P 500 fund and a broader, total-market fund), a corporate bond fund, a Treasury bond fund, a money market fund, an international stock fund, and a fund whose assets are split roughly 50-50 between stocks and bonds. A further requirement might be that persons over 50 would have to put all of their new PRA contributions into the last type of fund, to dampen volatility just before retirement. (A portfolio split 50-50 in this way has never lost money in any 10-year period since 1926.)

There would be restrictions on withdrawals from PRAs as well. We could say that, at age 60 (or at the time of the accumulation of at least $1 million in assets), a participant could either purchase an annuity or begin withdrawing 10 percent of the account each year.

I am not happy about this sort of engineering, but I think it is necessary to passing some kind of reform. Also, I agree with Cowen that these protections are not foolproof. Some people might borrow away all their savings.

The counterargument to this compromise plan is that Democrats, who understand that a nation of investors is the death knell for New Dealism (and thus the end of their party as we know it), will oppose Social Security reform in any form, so why not the best? Perhaps, but my strong impression is that many Republicans are squeamish about major changes in a popular system that dates back to FDR. Proceeding cautiously, putting a firm foot in the door, is a better approach.

I'm Not Milton Friedman

Tyler Cowen

We can and should reform Social Security without the mandatory elements postulated by James Glassman. Still, Glassman and I are in more agreement than he has noticed. He writes: "I am not sure what Cowen means by 'caps.' The implication is that he would stop increasing benefits, period." But I did note that "I agree with James Glassman...that we should guarantee benefits for the current elderly and gradually index future benefits to inflation."

So my plan would not create any new problem with starvation. Furthermore, rising real incomes over time will supplement these benefits, so each generation of the elderly will still be better off than the last, even without the government-managed private accounts Glassman calls for.

Glassman compares my ideas to Milton Friedman's plan, but the differences are significant. Most of Glassman's response thus really concerns Friedman, not my own notions of what we should do with Social Security. Some differences I have with Friedman: I don't think we can abolish the payroll tax, or that we can "buy people out" from the system.

To the benefit caps that we really agree on, Glassman wants to add government-regulated personal accounts. The economics here are straightforward, once unbundled from benefit caps. Our government would raise taxes (or borrow) to finance further private investment in equity markets. Furthermore those investments are to be regulated by the government. I expect that Reason readers, once they hear the plan described in these terms, will be suspicious.

Glassman makes two arguments about my proposal. First, he says it is too radical. But his points refer to Friedman's views, not mine. My own plan actually deviates from the status quo less than Glassman's does. We both agree on benefit caps. He wants to add an additional change--regulated personal accounts. I want to leave this choice in private hands. Of course, the mere fact that my plan is less radical does not mean it will be adopted. But a) it is a viable contender, and b) we should first put forward what is best to do.

Glassman's second argument is that my plan would lead to starvation. Again, this is confusing my plan (cap real benefit growth gradually over time) with Friedman's idea to shut down Social Security altogether. Furthermore, this emphasis on "starvation" is further reason to believe that if Glassman's regulated private accounts underperformed, government would step in to fill the gaps. We would end up with the worst of both worlds.

I maintain my suspicion that Glassman's proposed transition will lead to a long-run increase in taxes and the size of government. Yes, we are just trading in implicit for explicit liabilities. But as I argued, taxes and borrowing will go up in the short run under Glassman's plan. I worry about this outcome. I do not trust government to lower future taxes simply because it will not need the money to pay future Social Security benefits.

The First-Best Approach

James K. Glassman

Now that Tyler Cowen has clarified his position, he makes a good argument for a second- or third-best approach to Social Security reform: Slowly squeeze recipients through lower benefits, pressuring them to save more--but do nothing to set up special tax-advantaged retirement accounts. I worry, however, that, rather than promoting more personal responsibility for retirement saving, the Cowen plan would create a powerful constituency for reinstating the current benefit levels and even raising them.

We need to get Americans out of the habit of expecting government will provide them with most of their retirement income (the role Social Security plays for two-thirds of the nation) and instead demonstrate clearly that there is an alternative. My plan, which is probably close to what the Bush administration will propose, also calls for reducing benefits, by indexing them to inflation rather than to wages. But I believe that America's workers should have the choice of putting, to start, up to half of the retirement portion of their payroll taxes (about 5 percent of a middle-income salary) into a personal retirement account. That account, of political and social necessity, would have some restrictions on investment choices and on the timing and amount of payouts. Cowen makes meritorious libertarian arguments against such restrictions, but I am convinced a Social Security reform consisting simply of benefit cuts has no chance of passage--nor does the more sweeping Friedmanesque reform I described.

I reject Cowen's contentions that government would "step in to fill the gaps" if private accounts underperform, and that a scheme like mine will "lead to a long-run increase in taxes." First, government has never stepped in to make shareholders whole in the case of other "regulated" (as Cowen calls them) retirement accounts such as IRAs, 401(k)s, and the Thrift Savings Plan for federal workers, and the chances that such accounts will perform worse than Social Security itself over time are essentially nil, if we judge from history. Second, Cowen's own plan is just as likely to lead to tax increases. Almost certainly, as in the rescue in the 1980s, the formula for keeping the leaky Social Security system afloat will be a combination of higher taxes and lower benefits.

Finally, the establishment of private retirement accounts--even with restrictions--will be a blessing for tens of millions of low- and middle-income Americans who have little or no savings. As we've seen in Chile, when people are introduced to investing in stocks and bonds, they like the experience and want more. The problem today is that payroll taxes are so high that young people especially don't have the cash to save and invest. Reforming Social Security would change that.

Reform also should have a profound effect on the political system, which is why the left so fiercely opposes personal accounts. (The New York Times is almost hysterical on its editorial page.) In the last election, investors across the board preferred Bush over Kerry compared with non-investors. About half of American families hold stocks and bonds, and that ownership appears to change their perspective on capitalism and markets for the better. Imagine if 80 percent of U.S. families owned stocks and bonds. That's what Social Security reform would do.

Yes, Let's Choose the First Best

Tyler Cowen

I've already discussed most of the substantive points Glassman offers. I would like to note two points of terminology:

1) It is unusual to write, "Now that Tyler Cowen has clarified his position..." when I simply repeated what I had already said in my first contribution to this exchange.

2) Second, Glassman still misrepresents my opinion. He writes that my idea would: "slowly squeeze recipients through lower benefits, pressuring them to save more."

But I wrote: "I agree with James Glassman's first and second suggestions, namely that we should guarantee benefits for the current elderly and gradually index future benefits to inflation. The latter proposal would cause benefits to rise at a slower rate than otherwise."

More generally, I'll repeat my core characterization of the Glassman (Bush?) proposal. It suggests that the government should tax/borrow more money so that some American citizens can invest more in stocks. I'll vote no on this idea and hope that something better comes along.

French Kiss-Off

info@reason.com (Tyler Cowen) — Wed, 01 Jul 1998 00:00:00 EDT

American movies account for 80 percent of European box office receipts, although European movies have won only 5 percent of the American market. Of the 100 highest-grossing movies in the world last year, 88 were American, and seven more were co-productions involving American producers. After aircraft production, the entertainment industry is America's largest source of trade surplus.

Most European nations, having concluded that their native producers face an uphill struggle, now subsidize filmmaking, and many, like France and Spain, place quotas on the importation of foreign films. Such Latin American nations as Brazil and Mexico mix subsidies and import quotas to hold off American market dominance.

But it is France, where American movies hold nearly 60 percent of the market, that provides the most revealing case of cultural protectionism. France has not only built a bureaucratic barrier against American culture, it has constructed a notorious intellectual case against it as well. The French spend hundreds of millions of dollars subsidizing film production, extend interest-free loans to designated filmmakers, and have placed quotas not only on imports but on television time.

The European Community requires all TV channels to carry at least 50 percent European programming. France has upped this total to 60 percent for European programs, with at least 40 percent of the total devoted by law to native French programs. The French government even enforces a separate quota for prime-time shows to ensure that French programs are not shunted into the least favorable hours.

France's commitment to film protectionism became an international issue in the spring of 1994, during the General Agreement on Tariffs and Trade (GATT) talks. The world's leading trading nations negotiated widespread tariff reductions on goods and services, usually on a quid-pro-quo basis. American negotiators promised to remove many trade barriers against European goods, but they asked in return that the Europeans--especially the French--extend impartial treatment to American movies and remove the special taxes and quotas.

The French refused. Indeed, keeping out American films became one of the most important French national policies. The well-known director Claude Berri (Jean de Florette) reflected a popular attitude when he warned that "if the GATT deal goes through as proposed, European culture is finished." The French government even promised to veto any GATT agreement that did not preserve its protectionist policies toward film. French officials condemned Steven Spielberg's Jurassic Park as a "threat to [French] national identity." Despite the protestations of Hollywood, the Americans backed down and acceded to the wishes of the French government. After the French won the GATT battle, French director Jean Jacques claimed, "We removed the threat that European culture would be completely eliminated."

The "low" quality of many American films, and of much American popular culture, induces many art lovers to support cultural protectionism. Few people wish to see the cultural diversity of the world disappear under a wave of American market dominance. When the French try to protect their native productions, even cultured Americans are tempted to applaud.

But contrary to popular opinion, cultural protectionism does not further cultural diversity. Protected artifacts often lose their artistic and competitive vitality. Protection actually decreases an industry's chance of competing successfully in world markets.

Real cultural diversity results from the interchange of ideas, products, and influences, not from the insular development of a single national style. The years since the GATT treaty was concluded have been no exception in the case of French films, which may be less competitive today than they were before GATT. France's exports to the United States increasingly feature period costume dramas such as La Reine Margot, Ridicule, and Beaumarchais the Scoundrel--films that, because they require a knowledge of French culture and history to be appreciated, are seen by an increasingly specialized audience. Such films reflect one aspect of the nationalistic cultural insularity that results from market protectionism.

France's great cinematic tradition notwithstanding, the French audience for films had been shrinking before GATT. In the decade preceding the agreement, yearly movie attendance fell from 183 million to 120 million. Although as recently as 1986 French films outperformed American films in the French market, the American share of that market has continued to grow despite intense protective measures.

Eric Rohmer, the French director of such popular art house comedies as My Night at Maud's and Claire's Knee, believes the French should fight back with high-quality movies. Rohmer perceives Hollywood as a danger, but he is not a cultural protectionist. As he told The New York Times, "I say to people, `I am a commercial film maker'....I am not supported by the state; I am for free competition."

But Rohmer's is a lonely voice. French movie subsidies are financed with a tax on movie tickets and videocassettes. Encouraging moviegoing is obviously not on the agenda of the protectionists. The real debate over cinematic protectionism revolves around who will determine which movies are financed: moviegoers or the state. Unfortunately for French culture, the state has been winning.

Flashback

Film protectionists frequently claim that French moviemakers cannot compete with Hollywood, even in their home market. While it is true that the French-speaking market is smaller than the English-speaking market, the historical fact is that French filmmakers have competed quite successfully with their English-speaking counterparts. Indeed, France contributed more to the early history of cinema than any other nation.

Louis and Auguste Lumière, the first men to project films for a paying audience, pioneered the early development of the movie industry in the 1890s and enjoyed global success with their appealing documentary footage. Their contemporary Georges Méliès was the world's most popular maker of short imaginative films, inventing an array of special effects and establishing a worldwide following.

From 1906 to 1913, the French dominated world cinema as no single country has since. Pathé, France's leading production company, controlled one-third of the world film business in 1908. Some estimates credit the French with 90 percent of the world's early film business, a dominance achieved without governmental assistance. At that time, it was the American filmmakers who responded with charges of cultural imperialism and calls for government protection.

The world's leading screen star, Frenchman Max Linder, dominated the development of comedy. In fact, film comedy and slapstick were almost exclusively French inventions. Benefiting from such French "cultural imperialism," Charlie Chaplin drew extensively on Linder's films in shaping his own film style and character. The French dominated most cinematic forms and even experimented with the Western before Americans had established it.

France's film domination ended with World War I. Not only were production resources diverted to the war effort, but French filmmakers made a strategic mistake. The French Pathé empire of the 1910s began making films to suit Parisian tastes, limiting their attraction for the growing international audience. Hollywood producers took advantage of this opportunity and began replacing the French as filmmaking leaders. By 1919, the French share of the world market had fallen to 15 percent.

Yet France's cinematic successes were by no means over. The French were to challenge Hollywood for film leadership in the 1930s, a period usually cited by film historians as the Golden Age of French cinema. Many of the films they produced in that era remain classics, among them Jean Vigo's L'Atalante, Marcel Carne's Daybreak, René Clair's A Nous La Liberté, Jean Renoir's Grand Illusion, and the same director's Rules of the Game.

At the end of the 1920s, the French film industry ranked fifth in the world. By the end of the 1930s, however, French production had doubled, and the French industry ranked behind only the United States. During this period, French cinema received no government subsidies. The restrictions on imported films were trifling and did not keep American movies off French screens.

The films of France's Golden Age were so good that French audiences preferred them to the American product. In 1936, for example, the six most popular films in France were all native French productions. Of the 75 most popular films, 56 were French; only 15 were American. In 1935, 70 percent of all film receipts in France went to French-produced movies.

The French Golden Age was renowned for the artistic and commercial freedom that directors enjoyed. Unlike most major film producing countries, France did not have a rigid studio system. Hundreds of independent producers made up the bulk of the market. Directors--whose will reigned supreme--often shopped their proposed projects around until they found a producer in accord with their fundamental vision. In addition, French censorship was weak, especially compared to the restrictive Hays Code of the United States.

French filmmakers faced a turbulent market in the 1930s. Pathé and other early giants had frittered away their dominance, and many of the small filmmakers were in perpetual financial trouble; each year dozens of them went bankrupt, with new producers taking their place. As is frequently the case in cultural history, however, financial pressure did not prevent artistic achievement.

A Laissez-Faire Mise en Scène

The laissez-faire environment of the French Golden Age allowed the influence of foreign films to fertilize French creativity. Director Jean Renoir claimed to love only Hollywood movies and to scorn French films. Renoir often went to see American movies three times a day, seven days a week, seeking inspiration from Hollywood. Historically, French directors have been among the most insightful fans of American cinema, and such American directors as Howard Hawks (His Girl Friday, The Big Sleep) enjoyed critical reputations in France before they did in America.

The famous French New Wave directors of the 1950s and '60s were to draw on American inspiration as well. Jean-Luc Godard began his career with Breathless, a work filled with references to Humphrey Bogart. François Truffaut was inspired by Alfred Hitchcock's Hollywood films. Such American directors as Orson Welles and Stanley Kubrick were seminal for an entire generation of French filmmakers, who nonetheless made movies that were undeniably French, movies that were embraced by a native French audience no more "corrupted" by American work than were the directors.

Moreover, French cinema has never been a culturally pure, Gallic product. Foreigners not only influenced many of the best-known "French" films, they also directed them. Beginning in the silent era and continuing until the present, many of France's leading directors have come from all over Europe, including Denmark (Carl Dreyer), Russia (Yakov Protazanov), Spain (Luis Bunuel), Germany (Max Ophuls), and Poland (Krzysztof Kieslowski). The films of just these directors include some of France's finest work, from The Passion of Joan of Arc, to L'Age d'Or, to The Earrings of Madame D., to Kieslowski's recent trilogy, Blue, White, and Red. French filmmaking has been so diverse throughout its history that fascist Vichy propaganda during World War II attacked it for being too cosmopolitan and insufficiently "French."

From Fascism to Protectionism

Cinematic protectionists often portray quotas and subsidies as culturally enlightened. In fact, cinematic regulation and subsidization came to France at the hands of the fascist regimes of World War II. Contemporary French film policies are a direct extension of France's wartime heritage.

The laissez-faire environment of 1930s cinema was unpopular with many French filmmakers, who wanted the state to protect their interests. Protectionism was debated but, largely because of pressure from the Americans, never passed. Such policies were enacted only after France had lost her national independence. The collaborationist Vichy government developed quotas and subsidies as part of its program to restructure the French economy. French economic and cultural activities were now to serve the interests of the government, not the interests of consumers or artists.

In 1940, the Vichy government created the forerunner organizations to the modern French film bureaucracy. The primary organization, the COIC (Comité d'Organisation de l'Industrie Cinematographique), "rationalized" the French film industry and attempted to reverse the decline in profitability caused by the war. The COIC established yearly quotas limiting the number of French films produced, and it required that all film financing be approved by the Vichy government. The quotas, combined with guaranteed financing for approved projects, virtually assured the profitability of French movies. The French government was allowed to finance up to 65 percent of cinematic projects that were deemed worthy by the COIC, usually at very low interest rates. At the same time, the Vichy government banned American movies. French movies suddenly held 85 percent of the local market, a level they were never to attain again.

The Vichy program of cinematic control was based explicitly on the model then used in Germany. State rationalization of industry was a centerpiece of Nazi ideology and economic policy.

While Vichy policies assured profitability, quality suffered. With financial support came censorship and restrictions. Filmmakers lost their autonomy, as they produced bland and predictable films to assure access to studios and financing. Vichy films were moralistic, conservative, and propagandistic; many dramatized such themes as respect for authority, the sanctity of the family, the corruption of city life, and the need to return to the country. Few of these productions have achieved any subsequent recognition. (The Vichy government also began a campaign against the cinematic masterpieces of the laissez-faire Golden Age, portraying them as effete and decadent. The supposed depravity of Golden Age films was sometimes even blamed for France's fall to the Germans.)

Vichy's regulations were justified on both ideological and economic grounds. The earlier practice of cinematic laissez faire was portrayed as financially unstable and irresponsible. At last, French filmmakers would have their chance to operate in an economically rational environment, without subjecting their fortunes to the unpredictable whims of the marketplace.

Occupied Screens

French cinema did produce masterpieces during the war, but not under the Vichy regime. Rather, the best works were produced in Nazi-occupied France. For reasons of their own, the Nazis allowed French filmmakers more artistic freedom than the Vichy government did. French film creativity blossomed despite the state, not because of it.

The Nazis' early cinematic policy flooded occupied France with German films dubbed into French. Even Vichy films were kept out, and many prewar French films were confiscated or destroyed. But French audiences did not enjoy most Nazi movies. Despite high initial attendance for these films, moviegoing petered out. Concerned about creating a discontented occupied populace, German authorities switched course. Nazi policy began to encourage French-produced films as both entertainment and pacification.

The Nazis even set up a new cinematic company, Continental Films. Its funds came ultimately from Joseph Goebbels's Ministry of Propaganda, but most Continental films were not explicitly political. As long as the company's productions did not directly threaten the Nazi ideology, it could operate unhindered. Unlike in Vichy France, Continental filmmakers were not required to adopt a patronizing, moralistic tone in their pictures.

These productions proved to be surprisingly popular and sophisticated. Joseph Goebbels himself was disturbed after viewing two Continental films; he feared that the new company might prove to be a powerful competitor to German films in overseas markets. The Germans nonetheless continued to tolerate and encourage French cinema. The Nazi "tolerance," however, was in no way benevolent but was based upon the Nazis' quest for cultural protectionism and imperialism.

The Germans saw the American film industry as a cultural threat to their quest for ultimate international hegemony. Nazi strategists decided to cultivate the French film industry as a counterweight to the growing American presence in world film markets. French movies were "fun" and "frothy," qualities that Nazi films lacked. The French had the most prestigious and most popular film productions in Europe, and the Nazis did not want to squander their newly captured asset.

Continental, as a German company, was not subject to Vichy controls or COIC regulations and quotas. French filmmakers preferred the artistic atmosphere of occupied France to that of Vichy, and by 1942 few French filmmakers were left in Vichy except for paid propagandists.

The occupation years became an amazingly fruitful era for French filmmaking. Directors Robert Bresson and Henri-Georges Clouzot started their careers during this period. Theatrical talents such as Jean Giraudoux and Jean Anouilh, and poet Jean Cocteau, turned their efforts to the cinema as well, often with notable success. The team of Marcel Carne and Jacques Prevert actually attempted to subvert the Nazi regime with such extraordinary allegorical period films as Les Visiteurs du Soir and the famous Children of Paradise, widely considered to be one of the greatest films ever made. "[F]ew, if any, periods of French film history," writes film expert Alan Williams, "have produced so many acknowledged masterpieces and near-masterpieces in so little time." That achievement is a tribute to French filmmakers who overcame the state authorities attempting to exploit them.

Normalizing Bureaucracy

After the Liberation, the French government decided to keep the cinematic institutions, and the system of regulation and subsidization, that had been set up by the Vichy government, with changes in emphasis only. The film institutions and regulations created by the Pétain regime were maintained intact. The COIC was converted into the CNC (Centre National de la Cinematographie) and given a new task. Rather than limiting the number of French films, the CNC was to help the French film industry battle Hollywood by limiting foreign films.

Moviemakers who had left France during the war were struck by the changed atmosphere they encountered upon their return. René Clair, one of France's leading prewar directors, was especially disillusioned. He contrasted "the atmosphere one breathes in our country with the freer air of America....For someone who has not seen France for five years, there can be no doubt that Nazism has left its mark on it. Yes, a country cannot live through fascist rule for so long without suffering in some way. For instance, I'm struck by the artificial barriers placed in the way of any activity. I can't accept that someone wanting to make a film should have to submit requests to so many authorities, who will refuse if he can't prove he's conformed to various arbitrary regulations."

French regulators maintained or extended many of the entry restrictions for French cinema. Legal rights of exclusion were granted to many unions. The technicians' union, for instance, was able to demand that no one could direct a film unless he had worked as assistant director on at least three previous features. Postwar French cinema was virtually closed to new entrants.

The postwar French government negotiated a quota agreement with the United States in an attempt to protect French filmmakers. The French government required cinemas to show 16 weeks of French movies a year. The Americans, who had feared more stringent restrictions, waived some of France's wartime debts in return for a quota that was perceived as lenient. The French have made these quotas progressively stricter.

Protection from the Protectionists

Protectionist governments are themselves responsible for many of the problems faced by their domestic moviemaking industry. Consider just a few of the burdens that the French government places upon its moviemakers.

Cinema taxes have been a staple throughout the history of French filmmaking, but lawmakers looked to such taxes with new interest after World War II. In the late 1950s, this tax reached as high as 48 percent of gross theatrical receipts. Cinema taxes were lowered in the 1970s with the introduction of the value added tax, but the tax still ranges from 17 percent to 19 percent, on top of the normal VAT rate of 14.5 percent, with an extra 4 percent for X-rated movies.

The French government imposes stringent import quotas on Japanese VCRs. These machines are especially expensive in France, and less common than in America or many other comparable European countries. Unlike their American counterparts, French filmmakers find it difficult to tap into the lucrative home viewing market.

Restrictions on television have hurt French filmmakers even more. As in most countries, French TV funds cinema through the purchase of transmission rights; about 40 percent of French movie funding comes from TV. In 1980, the TV audience for movies exceeded the theatrical audience by a factor of nearly 24.

Despite the importance of TV, the French government has forced the cable TV market to grow slowly. Canal Plus, the French equivalent of HBO, is required to pay 18.5 percent of its pretax revenue to subsidize the movie industry. In return, the channel receives the right to carry French films, but filmmakers receive the money from Canal regardless of whether their films attract viewers.

New technologies are presenting protectionists with a major challenge. European governments have thus far succeeded in regulating the content of network programming and in ensuring that 50 percent is of European origin. But satellite and cable systems, with 100 or more choices, will break down the effectiveness of quotas. Either the quotas or the new technologies will have to go.

Cable systems will bring in even more American television. Even if 51 of 100 channels are of European origin, the other 49 might command most of the viewing attention. National content restrictions can steer viewing habits only when the menu of choice is extremely limited. The French government, well aware of this fact, has prevented many services (including the Cartoon Network) from being carried over French cable. Satellite systems will have an even more subversive effect on national origin quotas: Dish antennas allow viewers to capture television signals from anywhere in the world.

Cultural protectionists are thus faced with a dilemma. If the new technologies are allowed, national origin quotas will rapidly become ineffective and eventually become irrelevant altogether. If the new technologies are kept out, television and movie markets in the regulated country will become even more insulated and even less competitive in world markets. The scope of required protection will increase, and viewers will receive an even weaker product.

The reason is that quotas, like subsidies, often harm filmmaking. Quota arrangements, whenever they have been in place, have encouraged the hasty production of low-quality films to meet the quota. Such "quota quickies" have been produced in Canada, Great Britain, France, and Brazil, whenever those countries embraced film protectionism. Quota quickies employ formulaic, low-budget treatments of sex and violence, and encourage the domestic industry to adopt the worst tendencies of American moviemaking. Ironically, the profits from quota quickies are often reaped by the American financiers who put up the money, sometimes through French subsidiaries.

The criteria for awarding subsidies have harmed film quality. Prior to 1953, French governmental subsidies were based upon receipts from a producer's previous films. This system cemented the position of insiders at the expense of new industry entrants. The growing mediocrity of movies was recognized, which led to reform.

The French now claim to subsidize movies on the grounds of artistic merit, rather than attempting to pick the money-making ventures. In 1953, legislation dictated that the French government could subsidize films based only on quality. While the tremendously successful New Wave movement was probably encouraged by subsidies, the program appears to have resulted in decades of diminishing returns.

The interest-free loans offered by the government also damaged cinematic quality. The loans must be repaid only if and when the project turns a suitable profit. This policy lowers the incentives for making a successful film.

Furthermore, European film subsidies frequently end up in the pockets of American moviemakers, who set up joint production ventures with European companies. A given film may be nominally European, but much of the capital comes from the American company, which captures much of the subsidy's value. Even the "European" company is often a foreign subsidiary of an American one. One such classic "foreign" film, Last Tango in Paris, was made by United Artists in combination with a French subsidiary and an Italian company. Through suitably complex international arrangements, American producers can collect subsidies from as many as three European governments; these subsidies may cover up to 80 percent of a film's cost. The result is that European taxpayers end up underwriting poorly scripted films they don't want to see, with American companies reaping most of the financial benefits, and all in the name of European culture.

What Quota? Which Art?

The French government does not stipulate that symphony performances represent a certain percentage of native-born composers. In nearly every country in the world, native composers are underrepresented at the expense of the Germans and the Austrians. Yet who complains that cultural diversity is threatened by Germanic specialization and excellence? Cultural or national quotas for symphonies would do little to produce a French equivalent of Beethoven.

Yet the French government requires radio stations for popular music to play at least 40 percent French music. "How could anyone find the idea that two songs out of five should be French excessive?" asked one French official. "Without such measures our culture will be homogenized." To protect diversity, the French even established an official cultural office for native rock 'n' roll, although the project was subsequently abandoned.

Cultural protectionists concentrate on "popular culture," precisely the area where American artists have enjoyed phenomenal successes and where European producers are in greatest need of exposure. French consumers are pointing out an underlying inadequacy in contemporary French culture. The protectionists resent this inadequacy, just as many Americans resent the high culture and supposed snobbishness of the Parisians. In both cases envy and insecurity are at work.

Advocates of cultural protectionism often portray consumer sovereignty as a myth. According to this view, oligopolistic American distributors create demand for their movies through advertising. The sheepish public, in turn, responds passively to whatever is offered.

If this view were correct, supporting European cinema would be easy. The government need not subsidize filmmaking, or even place limits on American film imports. All the government need do is subsidize advertising for native films, or perhaps restrict advertising for American movies. But such policies obviously would not work. It is the European movies that fail to draw customers, not the European advertising campaigns.

When European audiences do not like the content of American products, they have proven remarkably resistant to them, no matter how heavy the marketing. Few American exports to Europe have been supported by as much hype and advance publicity as EuroDisney. One fearful critic called the park "a terrifying step towards world homogenization." Yet when EuroDisney opened, the French didn't like it. French culture has so far survived.

The Other Side of Protectionism

If the United States had embraced cultural protectionism, Hollywood would never have achieved its artistic richness and commercial strength. Just as French filmmakers have borrowed from America, so have the Americans drawn much from Europe. Jean Renoir, for example, made some of his best movies in Hollywood. Last year, Renoir's countryman Luc Besson (La Femme Nikita) followed in his footsteps to direct The Fifth Element. Alfred Hitchcock, Fritz Lang, Billy Wilder, and Ernst Lubitsch are among many European emigrés who brought enriching ideas and techniques to the United States.

American film technique owes much to French filmmaking. The visual presentation of Schindler's List, for example, would have been inconceivable without Spielberg's knowledge of European cinematography. The best American directors, like their European counterparts, are avid students of film as a cosmopolitan art that transcends national boundaries.

The Americans have drawn more than ideas from the French film market. Hollywood even drew some of its early capital from French products. In 1912, Adolph Zukor paid $35,000 for the rights to the French movie La Reine Elizabeth, an astonishing sum of money at that time. The movie was a huge hit in America, and Zukor used his profits to start Paramount Pictures.

Film finance has become increasingly global. Many so-called Hollywood products are financed from abroad. The Last Emperor and Dances With Wolves, for instance, both relied on British capital. French films are not uncompetitive because they lack the financial resources of Hollywood; rather, they lack financial resources because they are uncompetitive. During the Golden Age of the 1930s, German, English, and American capital flowed into French films.

Today, the European and French markets help support diversity in Hollywood. Some of the most interesting and creative American filmmakers--Woody Allen, for example--rarely produce domestic blockbusters. Their films are financially viable because they receive fan appreciation and critical recognition abroad. By supporting these directors, Europe helps improve Hollywood, benefiting both American and European audiences.

Quotas on American movies hurt independent filmmakers far more than they hurt big commercial directors; if European cinemas can show only a limited number of foreign films, they will cut a new film by Woody Allen or Jim Jarmusch before they cut Titanic. Thus, European quotas make it harder for independents to finance their films. Quotas in even a single country decrease diversity in film markets around the world.

No government can legislate artistic success. Film culture, like all culture, is dynamic. It isn't protection that it needs; it is stimulation. Without it, the form atrophies. If Europeans treat their films as weak, those films will become permanently weak.