Unhealthful News 62 – CNBC’s unintentionally brilliant presentation about tobacco and policy (part 1)

Yesterday, CNBC broadcast an hour-long feature, “Cigarette Wars”, that took a randomly wandering look at U.S. tobacco growing, activism surrounding smoking, and related topics.  It was really quite interesting because it was not the usual cookie-cutter piece on the topic, reporting the usual erroneous and simplistic litany.  The errors it did present were much more insightful, as were the other bits. 

Well, the first error was pretty pedestrian, with the reporter, Brian A. Shactman, leading off with “leading cause of preventable death” an absurd mantra I have commented on before.  The hook for the story was the plight of the hard-working American (“real” Americans, these guys) tobacco growers, personified by men from two Kentucky families, one of which had farming tobacco there for eight generations.  The story is that the decline of smoking, or perhaps the power of anti-smoking, is bringing their method of livelihood to an end.  This is a remarkably naive view for a business news network, but more on that tomorrow (I decided that what I had to say about this was too long for one day’s post, so it will continue tomorrow).

Note:  Many of my readers are familiar with the tobacco front in the War on Drugs, and so will know a lot of background about this topic that I cannot provide without making this even longer.  If you are not one of them and this is difficult to follow, I apologize – I may be too immersed in this subject to know what needs explaining.  Requests for clarification are welcome.

Shactman brought the show’s theme, in the form of a “the growers! won’t somebody think of the growers?”-style concern, to New York mayor Michael Bloomberg, one of the three anti-heroes of the story (the one who has the second largest gap between what he thinks he knows about public health science and the limited amount he really knows).  Bloomberg responded with the usual “won’t somebody think of the children?”, and it sounded like he was claiming that there are a lot more children dying of cancer due to smoking than there are tobacco growers.  While there are certainly not a huge number of growers, I think they outnumber the approximately zero childhood cancers that are caused by smoking. 

Bloomberg likened smoking and his policies of creeping prohibition to the response to asbestos in buildings, pointing out that policies call for taking asbestos out immediately because it kills people.  What makes that funny is that almost all asbestos in buildings is contained and stable, and thus poses approximately zero health hazard – that is, until you aerosolize it by tearing it out.  What makes it unworthy of a high public official, however, is not that ignorance about the technical details of health risk (the CEO does not have to know how to fix the coffee machine, after all) but the fact that he sees no difference between dictating how people deal with a simple physical hazard that no one would choose to be exposed to, all else equal, and dictating about a highly popular behavioral choice.  The childhood cancer point was just the usual nonsense that sometimes passes for news, but Shactman drawing out Bloomberg into admitting that he saw no difference between asbestos and smoking was a remarkable bit journalistic probing, though it is not clear Shactman realized this.

Further insight came from getting someone from the Bureau of Alcohol, Tobacco, Firearms, and Explosives (called ATF because the “explosives” bit is new), the U.S. agency in charge of dealing with cigarette smuggling, to comment on the record.  He pointed out that he and his colleagues are starting to see the creeping prohibition of cigarettes in places like New York City as creating Prohibition Era style problems.  The claim was the profits from gray market smuggling (to evade the taxes that are the majority of the purchase price) is more profitable than smuggling illegal drugs, and benefits organized criminals and terrorists.  He specifically identified the profits that Hezbollah made smuggling cigarettes into New York and spend on weapons (or so the claim goes).  It has an interesting relevance to those of us heading for the International Harm Reduction Association meetings next month in Lebanon, an island of stability in the region thanks to the current Hezbollah government.  More disturbing was the on-camera ATF arrest of a convenience store owner who was selling not-properly-taxed (but otherwise legal) cigarettes.  Yes, I know that activities as simple as payroll turn private citizens into involuntary tax-law enforcers, with potential criminal penalties for doing it wrong.  But there is something about having to treat a shopkeeper as a drug smuggler that seems very wrong, especially since the justification was nothing more high-minded than the fact that there was a lot of money at stake.

Compared to Bloomberg and the ATF, the second anti-hero of the saga, the dominant anti-tobacco organization American Legacy Foundation, as personified by Cheryl Healton, came off as rather measured and respectful of people and social norms.  (Readers familiar with the Tobacco Wars will realize how very strange that sentence would be if you omitted all the words through “saga”.)  The producers found a rather insightful observation to highlight in the broadcast, her comment that Legacy’s approach is “not a ‘don’t smoke’ message” because saying that just tempts kids to try it.  What is left unsaid (perhaps intentionally – I could believe that they were counting on sophisticated viewers to fill in the blanks without being spoon-fed) is that this means that their policy is to not honestly present their actual message.  Instead Legacy tries to manipulate the kids into believing they are being manipulated by merchants (the second “manipulate” was Healton’s, the first was me filling in the blanks).  Not that discouraging kids from smoking is a bad thing, obviously, but it was interesting to see a report hint at the shady side of those efforts.

Healton stated “our goal is to disrupt their business model”, referring to the American tobacco companies, suggesting that their goal is to recruit new young smokers because otherwise they will run out of customers in the future.  Following that, there was a scene change with Shactman responding, it is working, and so to keep profits up, U.S. companies are going overseas. 

Wow, that is a lot of economic naivety.  I am not sure whether it is more disturbing coming from the head of a multi-billion-dollar activist organization or from the writers and producers at a financial news network.  It is a popular mantra that cigarette companies want to recruit young customers because they are the only ones who might still be customers in 30, 40, or 50 years.  But people running companies do not care at all about what happens that far out.  We are lucky (as a society that depends on their – all big companies, not cigarettes specifically – role as engines of our economy) if they think five years in advance.  No company would spend a dollar to try to recruit customers for several decades in the future; they would be much better off, in terms of return on investment, just putting the cash into treasury bonds and ceasing operation.  What companies want is customers now.  Of course, middle-aged non-users are not promising customers for those in the nicotine business, so there is truth to the claims about wanting to sell to young people (young adults according to the companies, children according to the activists, a debate that is beyond the present scope), but it has nothing to do with the silly repeated mantra about needing new customers to replace those who die in the long run. 

But since when do companies avoid promising new markets unless their old core market is shrinking?  Seriously, Shactman and CNBC, do you really think that in a parallel universe where the Mad Men survived another half century, American cigarette companies are saying “well, we could pick up extra profits by expanding overseas, but we are doing so well domestically, so let’s not bother”?  Even better, the examples provided were China (with a near monopoly of the government as cigarette merchant) and images of Marlboros in eastern Europe, which come from the Swiss company, Philip Morris International.  Why is it that analyses of the corporate behavior of tobacco companies always seem to lack a basic understanding of both the market structure and of first-semester economics?  Those are both really pretty simple.

[…continued tomorrow…]

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