Monday, February 14, 2011

Inequality 3: Freedom, Free Market and Inequality

(Note: this is my article today in

Many researchers of social and economic literatures take freedom for granted. They focus more on social inequality – in income, healthcare, education, housing, gender, and so on. Thus, they do not notice the erosion of personal freedom, like freedom to keep more of people’s earnings, freedom to drive their cars any day they need, freedom to quickly start a business, etc.

A free marketer friend in the US, Larry Reed, posted this quote in his facebook status:
"Freedom is essentially a condition of inequality, not equality. It recognizes as a fact of nature the structural differences inherent in man–in temperament, character, and capacity–and it respects those differences. We are not alike and no law can make us so" – Frank Chodorov.
This is true. Freedom allows people to become responsible or irresponsible, to become industrious or lazy, to work hard or bum around, to become efficient or inefficient, to be ambitious or be complacent.

Assume that the richest Filipinos Henry Sy, John Gokongwei, Lucio Tan, the Ayalas, George Ty and Manny Pangilinan will donate a total XX Billion Pesos for direct distribution to the poor at an equal rate of P100,000 per poor household in order to drastically improve their lot and to have equality, at least among them.

Be assured that the next day, poverty and inequality among them will remain. Some households will start a business (a variety or sari-sari store, a barber shop, buy a tricycle or jeepney, etc.), some will improve their house, some will buy new appliances, some will have a huge party, some will go to a casino, and so on.

A week or a month after, some households will become even poorer than before. After spending huge money on several nights of partying and gambling, the money is gone, one family was stabbed or has stabbed somebody while drunk, and is either in the hospital or in the prison bar.

About a decade ago, Larry Reed also wrote his famous paper, Seven Principles of Sound Public Policy. Two of those principles are: (a) Free people are not equal, and equal people are not free, and (b) Gvernment has nothing to give anybody except what it first takes from somebody, and a government that's big enough to give you everything you want is big enough to take away everything you've got.

The best places to see social equality perhaps will be North Korea, Zimbabwe, Myanmar and Congo. People there are generally equal. Equally poor, except the top officials of the Communist Party or any ruling party, their families and friends.

Government is a penniless institution that has become big and wealthy by appropriating money from the productive and hard-working people, turn around to pay salaries and perks to the millions of government personnel and politicians, and the rest will be given to the poor and some non-poor with high political connections, purportedly to reduce social inequity.

The famous conditional cash transfer (CCT) of the past and present Philippine governments is a perfect example and admission that previous programs to cure inequality are failures. We have had education for the poor, housing for the poor, healthcare for the poor, agrarian reform for the poor, credit for the poor, irrigation for the poor, etc. They are all failures, that is why there is a new program called cash transfer for the poor.

Inequality can never be solved by government and more taxation, more borrowings. Inequality is a fact and it should be respected. People themselves do not want equality. If most people are riding a bicycle, some guys would aspire to ride a motorcycle. When many people are riding motorcycles, some guys will aspire to drive a car, and so on.

Where there is freedom, there is inequality. People who say they want to solve or reduce inequality are implicitly saying that they want to curtail personal freedom.

A related note, I wrote this last October 15, 2010.

Paranoia on Free Market and Inequality

My co-debater in one of yahoogroups discussion network, subject on "Statist paranoia", called me "stupid, pseudo-economist, pseudo-intellectual, you pretend to be an intellectual." Wow, what a way to self-destruct. I adviced him not to be onion-skinned because he is a politician. He lost in the last Congressional May 2010 elections in the province.

I only cited various examples why his earlier statement "free market does not exist" is wrong, and that his rabid criticsm of free market betrays his statist paranoia. And he lost his temper.

Another friend in the same discussion list made a friendly comment. She said,
"No such thing as "free market" at its strictest sense. Even our use of facebook, yahoo, etc. When we operate our cafe business in cafeworld, and even when we just say hi or hello using our wall (there are) indirect costs -- energy, time."

Free market does not mean free services, free goods. Who will pay for the farmers and the restaurant owners and their employees if food is free? There is a price for many things.

Free market simply means freedom of choice. To get a car, one can choose a toyota or honda or bmw or kia or ford or hyundai, etc. And within Toyota for instance, one can choose a vios or corolla or camry or innova or fortuner, and so on. There is a wide range of choices, but one has to pay for it.

In the absence of free market or free choice, there is only 1 or 2 cars allowed by the state. My hungarian friend told me that when Hungary was still under communism, there was only 1 car allowed by the state to be sold. And one has to order the car 2 years in advance to get it. Once it's delivered, if you ordered a blue color car but they give you black, you either take it or leave it, because the car dealer says it's the only color available at the moment. Zero choice. That's statism and communism.

He added that almost all houses there were the same -- same size, design, color, floor area, etc. No inequality, fine. Everyone was equal, equally poor, except the state bureaucrats and party officials who were always above the rest. That is why statism and its extreme case, one-party communism, state ownership of the means of production, forced equality, is evil.

Sure, yahoo and yahoogroups, google and gmail, facebook and youtube, linkedin and twitter, they give away free online networking services to millions of happy users around the world. And the owners of those networking sites make money somewhere. It's a win-win situation. If anyone feels he/she is a loser, then no problem, he/she can unsubscribe anytime -- no web-based emails, no facebook, no twitter, fine. Freedom of choice is still there. The choice to subscribe and the choice to unsubscribe. Zero taxes, zero registration fee, zero unsubscription fee, zero coercion.

Compare that with statism -- even if you don't bring your kids to a public school, you still pay for the maintenance of state's public education. Even if you don't go to any government hospital, you still pay for them. Even if you think your president or congressman or mayor is the most corrupt politician in the land, you still pay for his pay and pork barrel. Zero choice. It's all coercion.

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