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Editorials

State versus private ownership of tobacco companies

BMJ 2019; 365 doi: https://doi.org/10.1136/bmj.l4056 (Published 20 June 2019) Cite this as: BMJ 2019;365:l4056

Linked feature

Smoking cessation: state owned tobacco companies in China and Japan are at odds with their countries’ commitments

  1. Joanna E Cohen, Bloomberg professor of disease prevention1,
  2. Kelley Lee, tier 1 Canada research chair2
  1. 1Institute for Global Tobacco Control, Department of Health, Behavior and Society, Johns Hopkins Bloomberg School of Public Health, Baltimore, MD, USA
  2. 2Faculty of Health Sciences, Simon Fraser University, Burnaby, BC, Canada
  1. Correspondence to: J E Cohen: jcohen{at}jhu.edu

Strict regulation that prioritises public health is essential either way

Murphy and Crossley’s feature article highlights the economic, political, and cultural challenges that China and Japan face in reducing the immense toll of disease and death caused by tobacco (doi:10.1136/bmj.l2328).1 They argue that one of the biggest challenges is that the China National Tobacco Corporation (CNTC) is a fully state owned entity, while the Japanese Finance Ministry retains a minimum one third stake in Japan Tobacco. This results in a clear trade-off between economic and public health interests on the part of the state.

Although these governments benefit immensely from the vast sales and tax revenues pouring in from the sale of cigarettes, they must eventually contend with the even greater economic and social costs when substantial proportions of their citizens get sick and die prematurely from this state sanctioned addiction. Shifting the balance between these two divergent sets of interests towards public health is not simple. But full privatisation of these state owned companies is not necessarily the answer.

China and Japan are far from being the only countries grappling with state ownership of tobacco companies. In 2015, 15 other countries had state owned tobacco companies as their principal cigarette manufacturer.2 There used to be many more. According to the World Health Organization, “about 7000 medium to large state owned [tobacco] enterprises were privatised in the 1980s and a further 60 000 in the 1990s after the collapse of the former Soviet Union.”3 There was further privatisation in the late 1990s (eg, Republic of Korea, Republic of Moldova, Turkey) when the International Monetary Fund insisted that this would be a condition for receiving loans. As of 2011, 40% of global cigarette production was by manufacturers owned by the state.4

The right motivation

The debate between state and private ownership in national economies is a seminal one among political economy theorists. In centrally planned economies, state owned enterprises produce goods and services. In China, the Communist Party’s nationalisation of the tobacco industry in 1949 was about the consolidation of political power and central control of an economic cash cow.5 In market economies, state (also known as public or government) ownership is reserved for those goods and services deemed essential to national interests (energy, transportation, communications, etc).

Private ownership, where incentives to innovate and contain costs are strong, is generally preferred to public ownership, and this has partly driven the shrinking of state ownership in market economies amid globalisation since the 1980s.6 Japan Tobacco began as the Japan Tobacco and Salt Company, formed as a state owned monopoly in 1898 to control two products considered necessities in a country with limited food production capacity. The shrinking over time of the proportion of Japan Tobacco owned by the state reflects shifting attitudes towards both state ownership and tobacco.

However political economy debates are resolved, a key assumption is that the commodity in question is desirable for society. Tobacco is an anomaly. Science has taught us that tobacco products are not, as previously believed, a necessity or essential commodity but the world’s deadliest consumer product. As such, the rationale for state ownership must change.

The previous goal of ensuring a plentiful supply for the masses is, as Murphy and Crossley describe, contrary to public interests. But so is privatisation, which invites competition and innovation to reign. Public health is hardly served by market forces seeking to produce a deadly product with greater efficiency, competitively sold through lower prices, product innovation, or attractive packaging and widely accessible through worldwide distribution networks.

This is indeed what has transpired where state owned tobacco companies were privatised in the 1980s and 1990s.4 As Gilmore and colleagues argue, “Further tobacco industry privatisation is likely to increase smoking and … instead of transferring assets from state to private ownership, alternative models of supply should be explored.”4 One alternative, suggested by Callard and colleagues, is the renationalisation of tobacco companies, alongside strict regulation to control supply.7 This, along with efforts to require tobacco companies to reduce use of their products, eventually leading to the obsolescence of these companies,2,8 should be explored as a potential endgame strategy.9

Whether tobacco companies are state or privately owned is thus the wrong question. The real challenge is how best to strictly control the production and consumption of a highly addictive and deadly product. The answer is comprehensive regulation that makes public health and not economic interests the top priority—something that many countries, regardless of ownership, have yet to do.

Footnotes

  • Competing interests: We have read and understood BMJ policy on declaration of interests and have no interests to declare.

  • Provenance and peer review: Commissioned; not externally peer reviewed.

References

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