Thursday, September 30, 2010

Food subsidy or bureaucrat subsidy

(Note: this is my article for People's Brigada News last weekend)

For many urban consumers like those living in Metro Manila, cheaper rice and other food is being demanded from the government. And government gives in to the populist clamor through food subsidy, via the National Food Authority (NFA) and other government agencies.

The NFA is among the most notorious perennial losers and subsidy-dependent government corporations. Last year for instance, its income statement showed a loss of P30.4 billion. This year, the projected losses will be P33.3 billion.

For every peso that the NFA loses purportedly because of its “buy high, sell low” mandate, is one peso less on improving rural infrastructures, which can improve the productivity of farmers around the country, which by itself is already a poverty-reducing policy move.

And in one World Bank study, it concluded that for every P5 of subsidy, only P1 has social impact, the rest is simply wasted if not stolen.

Other government corporations that regularly lose huge amount of money are the National Power Corp. (NPC) and the Light Railway Transit Authority (LRTA).

The LRT subsidy is actually not wise. Taxpayers who work and live outside Metro Manila, like those in the Visayas and Mindanao, contribute to the subsidy but do not enjoy the service.

LRT and MRT should be able to make money without subsidy if certain government restrictions and bureaucracies would only step back. Train operators get revenues from (a) passenger fare, (b) advertising income from those who place ads in the trains, train stations and rail posts, (c) lease income from shops located on the stations, and so on.

The best form of government service and subsidy is to improve the peace and order situation in the country, to run after various criminals and to harass potential criminals. When people have peace of mind, they can be productive and can earn money for themselves and their households.

Then they will demand less food, transport and other subsidies from the government. And we will have less politics and less political clutter in our lives.

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