Thursday, November 18, 2010

IBON criticizes debt addiction

IBON Foundation is a left-leaning, anti free market think tank, in the Philippines. A number of their publications openly criticizes capitalism, free trade and the free market system. I used to read their publications a lot in the mid-80s, when I was still a socialist then.

There are few instances that I support IBON, like this report where they criticized the proposed public-private partnerships (PPP) because of the threat of ever more public debt due to the built-in guarantees by the government. See the news report here.

More debt today means more payment (principal + interest) tomorrow. More interest payment today and tomorrow will mean less budget for productive services like public healthcare and peace and order maintenance. Or more taxes to pay more debt.

That's why the foreign aid bodies (ADB, WB, OECF, etc.) are among the ugly institutions because of their habit of being debt pushers, not much different from drug pushers, to poor country governments.

I'm in favor of removing the PP (Public Partnership) there, just retain Private funding, zero government guarantees (and hence, zero contingent liabilities). In return, there should be zero or minimal politics and political extortion when private engineering companies and private banks will build new MRTs, new skyways, new expressways, new power plants, new dams, new airports and seaports, etc. It is heavy government meddling at the Investment Coordinating Council (ICC) and NEDA board levels, plus Congressional meddling, that delays and delays and delays, which results in larger and larger project costs.

Ibon also "warned against the creation of the Philippine Infrastructure Development Fund (PIDF)" to be initially funded the RP government, then resources to be beefed up by the debt pushers.

Debt addiction is idiotic. Both at the personal and government levels. People should live within their means. If income is small, then spending should be kept small. If projected spending is big, then people should work more, to increase income. Debts should be limited to cases of emergencies (like one family member has a serious illness) or really promising investments with good returns in the future. Debts should not be a daily or yearly habit.

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