Thursday, December 02, 2010

On Government business regulations

I posted my paper, "Spanish problem: the Euro or the State?" to the facebook wall of my Filipino friend working in Spain, Eddie Vega, to get his comments. His comments below are purely his personal opinions, nothing to do with his official work there. Ed wrote,

AS far as what I am reading here, no one is blaming the "euro" for their problems. So this is where you won't find a Spanish economist siding with your rival Paul Krugman, so that should be good for you. It was because Spanish construction and real estate experienced a boom which in great part was also speculative money. Then in one moment, a lot of Spaniards suddenly became poorer as their properties suddenly devalued.

I'm glad to know this. As I posted in that blog article, I'm no fan of Paul Krugman, and it seems that most Spaniards don't believe him either, at least on his analysis of blaming the Euro for Spain's economic problems.

Then Ed asked if I really advocate zero government intervention in our lives. As I posted a few times in this blog, I do not advocate absolute zero govt intervention. Most libertarians and free market advocates don't advocate it also. If a capitalist will not pay his workers their salaries, government should come in to penalize the former. Because it constitutes robbery, the capitalist is depriving the workers of what is rightfully their dues.

My advocacy for zero government intervention applies only to basic business matters like the supply and demand of various goods and services. And when people would like to put up a shop, a business, to create jobs, there should be zero or minimal government intervention there.

Ed also asked, "About your theory on government intervention, are there a lot of those advocating that government should intervene in these business decisions?"

Yes, there are tens of thousands of them who support heavy intervention in business -- them from the BIR, DOF, DTI, SEC, and various other departments depending on what sector an entrepreneur is venturing. Like FDA and DOH if one is putting up a drugstore, LTO/LTFRB if one is going to public land transportation (bus, jeepney, taxi), DENR if one is going to forestry, mining, operating a zoo, and so on.

Then there are tens of thousands more in local government units, people who demand that you can not start a business unless you get a barangay (village) clearance, municipal or city fire department clearance, health and sanitation permit, building permit, electrical permit, Mayor's permit, etc.

Then there are people outside of government -- the militant NGOs, media, academics, who support more government regulation and taxation of business.

Ed added, "Wait, there is a point to having regulations too. If it is completely unfettered, you never know what kind of scam some unscrupulous people would be trying to pull on the public. What is needed is fair and honest application of these rules, of course."

Well, let them put up a scam, so long as they know the hard consequences if they do so. It's fear of the consequences, fear of the law, that will act as a self-regulating mechanism. No need for prior investigations and regulations, or keep those prior investigations to the barest minimum.

My banker friend told me a few years ago that in Hong Kong, if you register a business, the government there will say, "Submit these papers completely today, and start your busness tomorrow!" No inspections. But if someone complains about your business and it is proven that you violated certain laws, that's where your headaches will start. The government will come hard on you. And it puts fear on would-be scammers.

I don't know if this practice or policy is still being pursued up to now. But it makes a lot of sense. It encourages entrepreneurship and job creation.

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