Weighing Tobacco Control Alternatives, Their Illusions and Realities

by Donald C. Smart

President Clinton has rejected the settlement negotiated between the tobacco companies and several of the states' attorneys general, but by early indications, the program the president would put in its place is likely to be at least equally faulty. In fact, the most obvious objection to the negotiated settlement applies equally to the president's plan: It too would leave the tobacco companies free to continue violating the public health peddling cigarettes. With smoking estimated to cause 450,000 deaths per year, neither the attorneys general nor the president has bothered to explain exactly why the tobacco companies should be allowed such license to kill.

The president's plan pretends to provide greater protections to children against the industry's efforts to seduce them to smoke, but in fact, the president's plan, like the negotiated settlement, sets the stage for a prosperous black market in tobacco products, and children are always the easiest target for victimization by black marketeers.

A black market in tobacco products is a fearsome thing to contemplate. The black market in illicit drugs has defeated the seventy-some year old drug control effort. So successful has been the black market in drugs, that it has caused an enormous increase in the number of addicts. In consequence, despite the huge growth of the general population during those same seventy-some years, addicts are now estimated to constitute about the same fraction of the population as before national drug control laws were first adopted.

If we allow our policy makers to blunder into a black market in tobacco, and if the resulting black market follows the usual course of development, we will find ourselves a few years hence with approximately equal numbers of children smoking, but: newly developed cigarettes will have become more potent, more destructive of health and more powerfully addictive; the tobacco commerce will be underground and completely beyond the regulatory reach of the Food and Drug Administration; the job of tobacco control will have been handed over to police authority; youthful gangsters will be warring for control of an insanely profitable tobacco commerce; the courts of our land will be clogged and our jails filled with alienated young tobacco pushers.

We are already in the early stages. A New York Times article carried in the San Francisco Chronicle of August 25, 1997, reports that a "huge" international black market in tobacco products has already developed. To quote just three details from that article: "The largest tobacco companies are selling billions of dollars of cigarettes each year to traders and dealers who funnel them into black markets in many countries..." and "...researchers say one-fourth of the cigarettes sold overseas pass through smuggling rings set up to evade foreign taxes and sell major brands at discount." and finally, "Two sales managers for Brown & Williamson Tobacco Corp. have pleaded guilty to aiding smugglers."

In recent years, cigarette prices have risen as new taxes have been added. In the same period, smoking has increased among the young. Yet, under the simplistic theory that increased price will deter youthful smokers, the president proposes further to increase taxes on tobacco. The settlement proposed by the attorneys general also would have resulted in higher prices: It would add $368.5 billion to the cost of cigarettes sold legally on the U.S. market. In either case, criminals would be motivated to smuggle and sell black market cigarettes manufactured and distributed without the overburden of taxes, the settlement cost, or both. To be more specific, criminals would make fat profits by smuggling back into this country untaxed cigarettes nominally manufactured for foreign consumption or by importing untaxed cigarettes of foreign manufacture. Given expanded profit-making opportunity, black marketeers could offer free smokes to every child to bring in a new customer, and with children seducing children, the tobacco industry could increase sales while foregoing traditional advertising. That is how the drug lords do it in their black market.

One Alternative Proposal: Let Civil Penalties Solve the Problem
Some critics of the negotiated settlement have argued that we would be better off if the settlement were defeated and the victims of tobacco injury were left free to pursue the tobacco companies in court.

Perhaps the cost of legal damages might put the tobacco companies out of business, as the advocates of this strategy evidently hope, but it is more likely that the cost of damages would become just another of the many costs of doing business in the tobacco industry--a cost the manufacturers would have to recover in a higher price for cigarettes. If that is the case, then, before we buy this "civil penalties" solution, its proponents should be called upon to demonstrate how their solution can be modified to avoid the black market danger. They need to show how criminals could be prevented from selling black market cigarettes manufactured outside (or free of) the added burden of civil damages. That is a tall order for the proponents of this solution.

The Better Alternative
Actually, there is an effective strategy to protect the public health from the depredations of the tobacco industry--and to do so without creating opportunity for black-marketeering. Unfortunately, this strategy has been overlooked in earlier public discussion. Before we go through the details of how this strategy would work, let us first review some key elements of the social dynamics of the tobacco problem, so as not to miss the fit between the problem and its optimal solution.

The Mutual Stimulation of Supply and Demand
Under present market conditions, consumer demand for tobacco products creates the opportunity for the tobacco industry to profit by manufacturing and selling tobacco products. That is, consumer demand stimulates the industry to supply. The tobacco industry responds to the stimulus of profit-making opportunity both by supplying the existing demand and (to increase profitable sales) by stimulating more demand.

In general, then, the mutual stimulation of supply and demand is cyclical and reiterative, and the engine that drives this mutual stimulation is profit. It follows that the way to control the public health menace of tobacco is to interrupt the mutual stimulation between supply and demand by eliminating opportunity to profit in tobacco. How this can be done is spelled out below, but first, an historic perspective.

Substance control measures that fail to eliminate profit opportunity have never worked. The alcohol prohibition of the 1920's did not eliminate profit opportunity, and it did not work. In fact, prohibition increased profit-making opportunity in the manufacture and sale of alcoholic beverages, and the resulting black-market commerce in bootlegged alcohol gave rise to our country's first great epidemic of gangsterism and gang violence, as criminal syndicates warred for control of the lucrative illegal commerce. Over the last seventy-some years, similar measures of prohibition have failed similarly to control the illegal drugs, and for the same social- dynamic cause: Prohibition does not eliminate profit, it magnifies it.

An Effective Program
What public intervention could control the mutual stimulation of supply and demand? The only way it has ever been possible to do this is by creating a non-profit way to serve existing demand. Interventions that effectively serve existing demand also effectively eliminate the profit opportunity that motivates private enterprise. Therefore, an effective program to eliminate profit-making opportunity and interrupt the mutual stimulation of supply and demand would start with the following two core elements:

1) Make private enterprise in the manufacture, distribution and sale of tobacco products illegal, and

2) Create a public health agency authorized to supply the existing demand for tobacco products.

Many people mistakenly imagine that simply making cigarettes illegal would automatically make them an item of black market commerce. True, if the first element were implemented without the second, unsatisfied market demand would result. Scarcity would then cause tobacco prices to rise, and higher prices would inflate profits. As a result, black marketeers would have a magnified profit incentive to increase sales by seducing still more youngsters into smoking. Competition for the super-profits of the black market would then add still more fuel to the present- day high levels of gangsterism and gang violence.

But that is not what would happen under the program here proposed because the second of the above core elements would satisfy existing demand and foreclose profit opportunity.

The above core program could be made an even more potent tool for protection of the public health by adding a third element as follows:

3) To discourage tobacco consumption, require the public health agency to price its products at the highest price consistent with the objective of preventing a black market.

A consequence of this measure is that the public health agency would earn substantial net income. Hence, a fourth program element:

4) Empower the public health agency to expend its net income from tobacco sales to implement smoking prevention and remedial measures, such as:

  • Smoker education for harm reduction; that is, teaching smokers how to reduce health detriments of smoking, to reduce consumption, to reduce harm to others, and to quit,
  • Anti-tobacco education for smoking prevention; and
  • Negative advertising against tobacco products.

The above-outlined public health program can be self-funding. It can also be self- regulating, in that the resources available for expenditure on prevention and remedial measures would automatically decline along with the declining size of the smoking population.

The following are a few additional elements that may not be necessary to the workability of the above program, but which seem to make good moral and political sense:

5) End the cooptation of government by the tobacco industry by eliminating all general-fund taxes on tobacco products.
So-called "sin taxes" do not eliminate or constrain sin; they only put government in league with the sin industry.

6) End the federal subsidy to tobacco farming.

7) End the federal subsidy to foreign sales of U.S. tobacco products.

8) Consistent with existing international agreements regarding international trafficking in dangerous and addictive substances, prohibit U.S. manufacture of tobacco products for sale abroad.

It should not be overlooked that the above-suggested program avoids the criminalization of smokers. It treats smokers as the innocent victims of commercial seduction by the tobacco industry. It helps them to overcome tobacco addiction and evade serious health consequences.

Further Comments on This Workable Program
Of all available strategies, the first four points above constitute the only one that would completely eliminate the advertising and peddling of tobacco products to the young. It does this by eliminating the profit motive for the manufacture, distribution and sale of tobacco products to everyone.

This strategy eliminates the profit motive for all traditional modes of advertising tobacco products. It also eliminates the profit motive for under-the-table payments to movie and TV producers for glamorizing smoking in their respective media. This program entails no impairment of free speech: We would all be free to advocate tobacco use, but who would do so without a commercial purpose? This program does not require the seduction of future smokers to pay damages for past smoking injuries, as all alternative proposals would.

Finally, with this program in place, there would be no reason why individuals, as well as states, should not also be allowed to sue the tobacco companies (or their residuals) for damages.

Light at the End of the Tunnel? If the above-outlined strategy is the right solution to the tobacco control problem, and if the right solution remains unknown to the public, and if the public remains misinformed as to the likely effects of the known alternatives, then some messy political consequences follow. Obviously, no politician would dare to champion the right solution (if he knew it) in the face of massive public support for a wrong solution. Furthermore, so long as the misinformation persists, properly positioned politicians are enabled to score points simultaneously with both of the contending camps--that is, earning anti-tobacco votes with mere anti-tobacco rhetoric, while earning campaign contributions from the protected industry--and the black marketeers.

Seemingly our government must persist in pro black market policies until the messy political condition changes. Seemingly the messy political condition must persist until experts in the relevant disciplines are emboldened to step forward and share with their fellow citizens their knowledge of the relevant causes and effects.