A friend in one of my discussion yahoogroups keep criticizing or attacking my what he calls as "free market extremism", but he has not answered clearly the other points I raised earlier. Here is my rebuttal to him.
1. Government bail-outs of failing corporations, why would you support it? Or why can't you attack it? As I argued earlier, corporate expansion and corporate bankruptcy are 101 percent part of capitalism. Why do people, from politicians to state bureaucrats to statist individuals, cry and wonder that there are large corporate failures? Why use taxpayers' money to bail out corporate irresponsibility?
2. Endless govt borrowings and rising public debt, why can't you attack it? You even justify or urge the government to create new taxes just to cover up its fiscal irresponsibility?
Ang taong sumusweldo ng P50k/month pero gumagastos ng P55k or higher per month on average even without emergencies ay tinatawag na maluho, mayabang gastador, ulol, gago, pala-utang. Why can't the same be said of governments who always live beyond their means? To have budget deficit for 1 or 3 or 5 years would be understandable. But not for 10 or 20 or more years consistently.
3. Withrawal of govt subsidy for MRT/LRT, it's a good move, why did you attack it? If you have to be a consistent statist, then you should demand that govt should also subsidize the commuters in Cebu, Iloilo, Davao, CDO, Bacolod, Baguio, Dagupan, Naga, Legaspi, etc. etc. Why subsidize only commuters in Metro Manila but not the commuters in the rest of the country?
4. Taxing hot money, a private contract between the publicly listed corporations and its investors abroad, why should govt meddle? Cebu Pacific for instance wants to start an IPO, I read that they need about P25B quick, to buy new airplanes, etc. because of its expanding domestic and international routes. Some investors abroad believe in that company, they bring in their money. If many of them decide to pull out their money, say after a few weeks, after the airline co. has already placed orders for new airplanes, meaning hot money wants to exit at the time the local company already compromised with new expenditures, what's wrong with that? It's Mr. Gokongwei's problem where to get money for the exiting hot money, or the price per share of the company will significantly fall. Is it your problem? DOF or Malacanang problem? Not a bit. You're not part of it, unless you are also an investor in that IPO. Why bring in the state to introduce price distortion?
5. Extending the argument, if some rich friends here in the yahoogroups would also decide to dream big and start an IPO for their respective companies because they find borrowing money via the stockmarket as cheaper than borrowing from banks. And there are people from abroad who believe in their corporate vision and corporate strategies to expand, they bring in their savings and buy into the stocks of the local company. But the foreign portfolio investors later decide to pull out after a week or a month, what's wrong with that? Maybe the issuing local company got involved in some financial scandal or what have you. Is it your problem when the owners of those local companies would scratch their heads where to get money to return the money of those from abroad who earlier have faith in them? Why bring in the state to introduce price distortion?
6. Not only former NEDA chief Ciel Habito, but also Prof. Ben Diokno of UPSE, they propose the imposition of a "Tobin tax". Diokno defined Tobin tax as a tax on "socially useless activities" like hot money that he thinks are even dangerous to the macroecon stability of any country once there is large fluctuations involving huge amount of money, affecting the exchange rate, the forex reserves of private banks and the central bank, etc. Thus, he proposed something like 4% Tobin tax on hot money, on top of existing taxes on hot money already.
If hot money and portfolio investment is such a "socially useless" activity, why only 4% tax? Why not 100% tax? or 200%? Why the hypocrisy of calling something as useless then slapping just a small tax? Kill it, discourage it, it's useless and dangerous anyway.
This is not to attack Prof Diokno who is a friend and my teacher twice, in Econ 151 (undergrad) and DE 251 (PDE, graduate). I'm attacking his proposal to impose a Tobin tax on hot money.
The source of disappointment of many people in this country is always the government, the state, and its many politicians and central planners. If the private sector is their problem, say they think that Mr. Sy is a fat a__ capitalist exploiter, then easy. All they do is to stop patronizing any SM mall, any BDO, any other companies with the Sy signatures. There are options, they can go to an Ayala or Gokongwei mall, or a George Ty or Yuchengco bank, etc. The public have choices and options when it comes to the private sector. But the public has ZERO choice when government comes in. Why keep giving more role and more intervention to an institution that is the cause of disappointment of many people?