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  America's Civil Justice System Enhances Competitiveness

 

 

Critics working to dismantle the civil justice system argue that liability litigation hurts the American economy and its ability to compete in the global marketplace. Not a single fact supports such a claim. Many facts contradict it.

  • According to the data compiled by the Council on Competitiveness, in every year between 1986 and 1999, the last year for which complete figures are available, American scientists and engineers earned over one-half of all patents issued worldwide. Patents are clear indication of entrepreneurial robustness. Real private investment in plant and equipment took a major upturn in 1995, averaging 4 percent a year, a full percentage point higher than the previous decade-another indicator of robustness.
  • Among the numerous potential vulnerabilities for future U.S. competitiveness listed by the Council are increasing income inequality, doubling of the trade deficit, and a decline in the rate of personal savings. The civil justice system is not mentioned-because it is not a threat. It is an asset.
  • The U. S. pharmaceutical industry, contrary to its claim that the civil justice system is stifling experimentation, reported an estimated outlay for research and development in 2002 of $32 billion.
  • In the annual competitiveness ranking of the World Economic Forum, a global group of business and government leaders from all continents, the United States has ranked number one for many years. In 2003, it dropped-all the way to second, behind Finland. Blamed for our "fall" were the budget deficit, the cost of the war in Iraq and domestic security, wasteful agricultural subsidies and lagging investment in infrastructure an education. The jury system is not mentioned as a factor.
  • Commenting on that report, White House economic advisor Greg Mankiw said that almost all manufacturing jobs lost recently were lost because of gains in productivity, the temporary plunge in corporate investment (related to the stock market sell-off of the previous year), or the long-term shift of low-skilled jobs to developing countries. He did not say a word about the civil justice system.
  • For all the claims about lost jobs caused by the civil justice system, no one has ever presented a single fact to buttress the claim-and for good reason. There is no such fact. The simple truth is that for over 200 years, through good times and bad, the American economy has produced good jobs at a rate unparalleled in the history of the world.
  • Over the past centuries, American innovation has brought us the most useful, productive, and profitable developments in transportation, science, information technology, aerospace, and engineering. Far from being a drag on the economy, the civil justice system has historically played an important role in the growth of that economy, by prodding businesses to produce and sell the best possible products. Professor Mark Hager of American University writes, "…because of their superior reputation for safety, due in part to the efforts of product liability…[our products] have a superior reputation in the international marketplace. It would be a grave risk to our international competitiveness to toy with the tort system that helps bring about that competitive advantage."
  • The idea that our civil justice system exacts a "tort tax" that undermines the economy first gained prominence in polemicist Peter Huber's book Liability: The Legal Revolution and Its Consequences. That study has since been joined by others, all funded by corporate interests, all discredited by reputable scholars as misleading, shaky, and riddled with errors. These analyses attribute to the tort system the overhead costs of the entire insurance industry. They claim that liability premiums are a cost to society, but they do not account for the profits the companies make from investing those premiums-the bulk of the industry's profits. "Tort tax" numbers are ludicrous, but they live because they are a powerful rhetorical tool in the arsenal of the tort "reformers."
  • The well-publicized annual report from the actuarial firm Tillinghast-Towers Perrin, paid for by tort "reform" interest groups and insurance companies, is now the most highly publicized of the "tort tax" numbers. Robert Sturgis, the lead author of the report, acknowledged that "we have settled upon a definition of gross cost without regard for the social and economic benefits that may be derived from the system."
  • The idea of the "tort tax" ignores what is really at work in the civil justice system. According to Richard Abel, professor of law at the University of California, Los Angeles,
    "successful tort claims do not create liability costs, they merely shift [the costs] from victims to tort-feasors [negligent parties]. It is the tort-feasors who create liability costs by injuring victims. . . . If liability costs are high, it is because injuries are frequent and serious."
  • Conservative law and economics scholar and Seventh Circuit U.S. Court of Appeals Judge Richard Posner has noted that "although there has been little systematic study of the deterrent effects of tort law, what empirical evidence there is indicates that tort law…deters."
  • The fact that the U.S. has the world's strongest economy demonstrates, in and of itself, that the tort system's substantial benefits outweigh the relatively small costs that may legitimately be charged to it. The civil justice system still provides the best-if not the only-opportunity for an average person to achieve redress of injuries against wrongdoers, regardless of wealth or rank. As The Economist has observed: "So much fury is leveled at litigation in America that the merits of its civil justice system are often forgotten. Unlike in Britain, almost anyone can uphold his rights in the courts. That means redress for consumers against unscrupulous firms and protection for voters against unaccountable public officials. Neither should be sacrificed lightly."

 

Reprinted with the permission of the Association of Trial Lawyers of America.  Lawyers of America website.