The Los Angeles Times from Los Angeles, California • 50

'SOLUTIONS' DO MORE HARM THAN GOOD Economy Rarely Helped by Politics Coa Atiflrtee (Stone Oct 2, 1979-Pirt IV 3 AMERICAN EXPRESS PRESIDENT, KEY FIGURE IN MCGRAW OFFER, RESIGNS BY NANCY YOSHIHARA TbnM Stiff Writ 1 BY MURRAY WEIDENBAUM mm mm American Express Co. said Monday its president, Roger H. Morley, is resigning effective Dec. 31. to pursue other business interests.

Morley, 48, had been a controversial figure in New York-based American Express' unsuccessful $830 million takeover bid for McGraw-Hill Inc. earlier this year. He did not resign as a director of McGraw-Hill until two days after American Express made its offer, thus simultaneously serving as a McGraw-Hill director while participating in plans to acquire it Asked if his decision to resign had anything to do with the McGraw-Hill incident, Morley said, "There's bound to be speculation, but absolutely not." He added in a telephone interview that he had been discussing plans to leave American Express with Chairman and Chief Executive James D. Robinson III, 43, for at least a year and a half. "The timing was a function of whether I found something else or we could attract someone to take over the chief financial, as well as other duties.

Ramon Greenwood, senior vice president at American Express, said the appropriate time came in August when "all our businesses were running smoothly," and Alva O. Way, 50, was wooed away from his current position as senior vice president at General Electric Co. Way will become vice chairman of American Express, Nov. 1, thus becoming the No. 2 man after Robinson.

Please Turn to Page 7, Col. 1 The problem with political solutions to economic problems is that politics, for quite understandable reasons, inflates consumer expectations while economics does the opposite. This is an oversimplified analysis, but it serves to illustrate why political "solutions" habitually aggravate the economic conditions they purport to address. Example: A gasoline shortage produces upward pressure on prices. Government responds to consumer resentment with allocations and price controls, which result in more serious shortages.

Example: Rising demand for apartment space produces upward pressure on prices that is, higher rents. Government responds to consumer resentment with rent controls, which drives capital out of residential building into more productive uses and results in still less apartment space. Example: Domestic industry is hurt by foreign competition, leading to declining employment in the affected industries. Government responds with trade restrictions, which produce still greater but conveniently scattered-unemployment. Politics in the economic sphere is a response to pressure from a group which perceives its special interests as threatened and demands government protection from market forces.

Economics, by contrast, plays no favorites. Economic laws tend to be inexorable and impersonal. When politics does not interfere, economic laws operate to allocate scarce resources to their most productive use through Roger H. Morley SEC PROBES POSSIBLE S. AFRICAN FUNDING Publisher Seeks to Quash Subpoenas Times Board jmeanfy of Economists prominent economists.

lion in dumping duties have been assessed. Simultaneously, several American manufacturers and a coalition of labor groups brought pressure to bear on the Carter Administration to limit Japanese exports of television sets to the United States. This is a familiar plea, and similar restrictions against foreign competition nave been sought by the steel, textile and shoe industries. In the case of television sets, an "Orderly Marketing Agreement" between Japan and the United States was negotiated in 1977 limiting the number of Japanese TV sets that could be exported to the United States. The resultt higher prices for the American consumer.

The U.S. Council on Wage Price Stability calculates the cost to the American consumer of the Orderly Marketing Agreement at $317 million annually. Ironically, few, if any, obs were saved in the domestic TV industry. Employment las continued to decline, from 24,976 production workers 1977 to 21,823 production workers during the first quarter of 1979. It is entirely possible that trade restrictions have, in fact, protected some American jobs in the TV industry, or in shoes or textiles or steel, but invariably at a cost to consumers that exceeds the benefits conferred on workers.

The inflationary cost of trade restrictions runs to billions of dollars a year. A Brookings Institution economist estimated the cost to consumers of the various trade restrictions at $10 billion to $15 billion annually. The controversy over Japanese television sets sold in the United States is not unique. It is one more manifestation of a continuing protectionist sentiment in the United States-indeed, in the world at large. Yet, despite unimpeachable evidence that trade barriers tend to create far more harm than benefits, political responsiveness to concentrated pressures from well-organized groups results in a proliferation of restrictions on free trade.

Left unchecked, the present trend may evoke memories of the ruinous trade barriers erected among most industrial nations during the Great Depression. This mentality in the United States was expressed through the Smoot-Hawley tariff bill of 1930, which pushed duties higher even than they were under the so-called "Tariff of Abominations" in 1828. Murray L. Weidenbaum is a resident scholar at the American Enterprise Institute, on leave from Washington University in St. Louis.

COLUMBIA COMPLETES SALE OF ARISTA RECORDS UNIT Frem Tlmti Wirt Strvicn NEW YORK Columbia Pictures Industries Inc. said Monday it completed the sale of its Arista Records operations to Bertelsmann AG, the West German company, for more than $50 million in cash. Arista, which features such popular recording artists as Barry Manilow and Dionne Warwick, accounted for more than 12 of Columbia's total sales of $574.6 million in 1978. As a result of the sale, Columbia said it will record a profit gain of about $4 million, or 41 cents a share, down from the previously estimated gain of $7 million, or 72 cents a share. The company said the difference was due to the terms contained in the final sale agreement.

Arista, along with other U.S. record companies, has suffered lower profits for the past year as a result of declining record sales and higher costs. Columbia said it will use the major portion of the proceeds to reduce outstanding bank debt. holders and from the SEC. A South African commission that investigated a scandal in that country's Department of Information determined on June 3 that McGoff had been provided more than $10 million from a secret South African propaganda fund to purchase the Washington Star.

When the Star deal fell through, the commission said, McGoff used more than $5 million of the money to finance purchase of the Union. McGoff has acknowledged that he once was South Africa's "No. 1 friend in the U.S." but said he was never a foreign agent. In an "open letter" published by his newspaper chain last July, he denied that South Africa had any "ownership interest" in the Union. However, McGoff did not deny findings by the South African commission that the nation financed his purchase of the Union.

Please Turn to Page 13, Col. 2 Avco Financial Services Subsidiary Leads Company to Record Profits BY ROBERT JACKSON ThnM Stiff Writer WASHINGTON Publisher John P. McGoff is fighting federal subpoenas aimed at determining if South African government funds were used in his purchase of the Sacramento Union in 1974. Details of the subpoenas, and Mc-Goffs opposition to them, are contained in documents which Securities Exchange Commission lawyers have filed in federal court here. The SEC is asking that a federal judge enforce the agency's subpoenas by ordering McGoff to surrender business records dating back to 1971, including those of Panax Global Communications Corp.

and Sacramento Publishing Co. On Monday, a hearing was set for Oct. 24 before U.S. Dist Judge John Lewis Smith Jr. According to letters made public by the SEC, McGoff contended that the subpoenas infringe on his First Amendment rights as a newspaper publisher and are "overbroad and unduly burdensome" in the volume of documents they demand.

The SEC's court papers represent the first public discussion of the agency's effort to learn if foreign government funds were used illegally by McGoff's publishing empire, which includes 40 newspapers in half a dozen states. The SEC said that McGoff may have violated securities laws by concealing the use of foreign funds in a publicly held company from its stock BY STEVEN SEILER TimM Staff Writer the price mechanism. When politics interferes, the operation of economic laws is disrupted, to the advantage of those in whose behalf the government had interfered, and to the disadvantage of all others. (However, interfering with economic laws can be compared with squeezing a balloon. If the laws don't operate in one way, they will find a new avenue.

Thus, the appearance of black market trade in goods with controlled prices.) A vivid illustration of the consequences of misguided political interference with the market is offered by the American television industry, which sought government protection against what the industry regarded as unfair competition from Japan. There was little doubt that Japanese competition was hurting the U.S. television industry. The number of American TV manufacturers has shrunk from 27 in 1960 to seven today, plus four which are subsidiaries of foreign companies. Some American industry spokesmen charge that Japan bought its market share by "dumping" its television sets in the United States.

"Dumping" is defined by law as selling a product in a foreign market at a price below the price charged in the domestic market Whether the Japanese are guilty of "dumping" television sets is a fact extraordinarily difficult to establish. If it were true, whether it should be prohibited by law is a philosophical question that merits debate, as suggested by Warren Schwartz in an excellent piece in a recent issue of Regulation magazine. "The question of why such a (dumping) duty should be imposed and consumers denied an opportunity to purchase goods at prices freely offered by foreign suppliers has not been addressed by the Congress for a long, long time. I believe, moreover, that it is a question with no good answer," Schwartz argues. Such a law is on the books, and proceedings were begun against American importers of Japanese TV sets; $46 mil Avco Corp.

said Monday that record results from its Avco Financial Services subsidiary and improved earnings by its 86 -owned Avco Community Developers helped boost its income in the third quarter and nine months. The Greenwich, company posted profits of $34.5 million, or $2.29 per share ($1.39 diluted), for the third quarter ended Aug. 31. For the like 1978 period, Avco reported net income of $32.1 million, or $2.33 per share ($1.31 diluted), on fewer shares. Revenues for the three months rose 8 to $474.2 million from $437.1 million a year earlier.

Earnings for the first three quar ters were $101 million, or $6.87 per share ($4.10 diluted), compared with 1978's nine-month earnings of $95 million, or $7.09 per share on fewer shares. Revenues for the nine months were $1.41 billion, up 12 from the $1.26 billion posted a year earlier. The company's Avco Financial Services subsidiary, based in Newport Beach, reported record operating and net income and record receivable volume during the first nine months. Earnings and premiums from its insurance subsidiaries were also records for the nine months, and helped to offset the "squeezing of margins" by Please Turn to Page 13, Col. 1 -You're aNational priority.

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