November 24, 1998
Opening U.S. Skies Would Lower Costs and Yield Greater Choice of Carriers
Current aviation policy denies American travelers benefits at home and abroad
"To achieve the full benefits of an open aviation market, Congress should grant foreign-owned carriers the right to provide domestic air service in the United States," according to a new study from the Cato Institute's Center for Trade Policy Studies. "Foreign competition and investment would provide the ultimate, free-market check on 'predatory pricing' and domestic price collusion and would negate any arguments for imposing federal regulations and antitrust sanctions."
In "Opening U.S. Skies to Global Airline Competition," Kenneth J. Button, professor of public policy at George Mason University and former head of aviation policy at the Organization for Economic Cooperation and Development in Paris, highlights the inconsistency between the theory and the practice of America's "Open Skies" policy. Moreover, he reasons that opening the domestic U.S. market to foreign competition and investment would prevent predatory pricing and collusion among the major U.S. carriers. He argues that all restrictions on foreign ownership and competition should be dropped.
The study also highlights the hypocrisy of the U.S. government's call for more international air transport liberalization. "The U.S. government preaches the blessings of open markets and competition abroad," Button writes, "while maintaining the largest protected domestic market in the world." The U.S. lags behind the European Union in international airway liberalization. Any E.U. airline can now fly between member states and between cities within member states without restriction, and ownership of E.U. carriers within member states is permitted.
Although the international airline market remains largely restricted, Button argues that "it makes no sense for the United States to deny itself the benefits of more competition in its domestic market just because other nations with much smaller markets have denied themselves the same benefits."
"For American air travelers," the author concludes, "opening U.S. skies would yield a greater choice of carriers and lower fares, both at home and around the world."
November 19, 1998
Government access to encryption keys is a "grave danger to privacy," study says
Export controls and key recovery won't keep strong encryption from criminals
Encryption technology is essential "to protect consumers and businesses against spies, fraud, and theft over the computer networks used in electronic commerce." But government policy that seeks to restrict U.S. exports of strong encryption technology is "doomed," and "government-prescribed key recovery and export controls are a grave danger to the privacy of law-abiding citizens and businesses, not only in the United States but around the world," according to a new study from the Cato Institute.
In "Encryption Policy for the 21st Century: A Future without Government-Prescribed Key Recovery," Solveig Singleton notes that "understanding the debate about whether to regulate encryption has become vital to discussions of international trade, domestic economic policy, computer network security, privacy, and the future of the limits on government power set by the U.S. Constitution."
Public key encryption, developed in the mid-1970s, is now considered "important to the successful growth of Internet commerce." But some U.S. law enforcement officials want to require that all private keys be placed in "escrow," where police could get them for use in criminal investigations.
Singleton, an attorney and director of information studies at Cato, notes that "for encryption regulations to work at all, they must be enacted by every country," thereby giving the keys to tyrants, and thus "disabling one of the most potent weapons against oppression ever devised." More than 7,500 human rights groups all around the world "combat torture, mysterious disappearances, and government massacres by disseminating information such as reports of witnesses of government brutality." Government access to encryption keys would place all such activity in serious jeopardy.
Singleton also points out that attempts by the United States to prohibit the export of encryption using more than 56 characters are doomed to failure. Such keys are no longer considered secure, and much stronger software is readily available on the Internet, demonstrating that "over today's instantaneous networks, regulation of encryption can be evaded almost without effort." Singleton argues for a world in which "strong encryption is freely available, inexpensive, and exportable," because the alternative "is a system of universal or almost universal controls," which "oppressive regimes anxious to control dissident activity would embrace enthusiastically."
November 12, 1998
Restrictions on export of U.S. encryption products are futile at best, study says
Commerce Dept. assertion that non-U.S. products are inferior "defies common sense"
"People living outside the United States find it amusing and perplexing that U.S. law regulates the distribution of strong encryption," a new study from the Cato Institute observes. Despite export controls, "anyone outside the United States can easily obtain" high-quality encryption software needed to encipher electronic messages so that only the intended recipients may read them.
In "The Myth of Superiority of American Encryption Products," Henry B. Wolfe, who has been teaching computer security at the graduate level at the University of Otago in New Zealand for the past 15 years, notes that in order to produce high-quality encryption software, "a good cryptographer needs an in-depth understanding of higher level mathematics, some basic analytical talent, and exposure to the fundamentals of cryptographic history and current techniques. Anyone with an interest in that body of knowledge can have access to it. No geographic attribute significantly influences the qualities necessary to be a cryptographer or gives citizens of one nation any advantage over those of another."
Despite export controls, "strong encryption technology developed within the United States or outside it readily spreads to other countries," Wolfe says. For example, Netscape released a new version of its Internet browser earlier this year. The browsers sold in the United States incorporate strong encryption, a "crippled" version is licensed for export. Within 15 hours of its release on March 31, 1998, a group of software developers in Australia and the United Kingdom had a version of the new product using strong 128-bit encryption routines available to anyone who wanted it on the Internet. "That is an excellent example of how export controls can be superseded," Wolfe declares. "Export controls do not and cannot work."
Supporters of efforts to control encryption "portray key escrow and export controls as essential to save us from terrorists, drug dealers, child pornographers, and others. In reality, 'bad guys' are unlikely to use anything less than the strongest encryption for their communication and data storage. Conspirators involved in planning capital crimes will not be worried about violating anti-cryptography laws," he says.
"The cryptographic genie cannot be put back into the bottle," Wolfe observes. But trying to do so leaves us with "export control laws that demand an intolerable sacrifice of freedom and privacy for a token, ineffectual commitment to security. Encryption software and hardware simply enable one to speak in a language unknown to the government. The Constitution gives the government no power to demand that we provide a translation," he concludes.
Briefing Paper No. 42
The most comprehensive index of economic freedom finds that Hong Kong continued to be the most economically free country in the world in 1997, followed in order by Singapore, New Zealand and the United States. The Economic Freedom of the World: 1998/1999 Interim Report was released today in Manila, Philippines, at a meeting attended by representatives of independent institutes in 54 countries that co-published the study. The Cato Institute is the participating organization in the United States.
The index ranks 119 countries using 25 separate indicators of economic
freedom that fall into seven major categories ranging from the size of
government to monetary policy and security of private ownership. This year’
s report added updated data and eight new variables that further refine the
measurement.
The index was originally devised more than a decade ago, and benefited from
the active participation of 61 leading economists, including Nobel laureates
Milton Friedman, Gary Becker and Douglass North. Co-authors James Gwartney
and Robert Lawson note that “the summary indexes of economic freedom
presented here are more comprehensive, and they are based on more complete
data and the use of statistical procedures more value-free than any prior
measure.”
The index shows some movement among top-ranked countries since 1990, with
New Zealand’s weighted summary rating jumping from 8.3 that year to 9.2 in
1997. Japan’s rating slipped slightly, from 8.4 to 8.3. A number of Latin
American countries have achieved dramatic increases during the 1990s, with
Argentina (jumping from 4.8 to 8.7), El Salvador (4.5 to 8.2) and Peru (3.6
to 7.6) among the leaders.
The study clearly demonstrates a strong relationship between economic
freedom and prosperity. Countries scoring in the top quintile of the most
economically free countries had an average per capita gross domestic product
of $18,142 and an average growth rate of 1.84 percent. As freedom declined,
so did the average per capita GDP and the average growth rate. The 20
percent of countries at the bottom of the ladder in terms of economic
freedom had an average per capita GDP of only $1,538 and an average growth
rate of -2.10 percent.
The least free economies in 1997 were Myanmar (Burma), Democratic Republic
of Congo (formerly Zaire), Guinea-Bissau, Rwanda, Albania, Sierra Leone,
Malawi, Ukraine, Algeria, Central African Republic, Madagascar and Romania.
The complete text of Economic Freedom of the World: 1998/1999 Interim Report is available by calling Patricia Mohr at 202-789-5293. It can also be found
on the Internet at http://www.fraserinstitute.ca/books/econ_free98/contents.html.
November 5, 1998
United States has fourth freest economy in the world, survey shows
Economic freedom index adds eight new variables to produce most accurate measure
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© 1998 The Cato Institute