Monday, October 26, 2020

Pol. Ideology 78, Milton Friedman and China

A good article here, I repost portions of it in italics below. Then my short commentary. This photo of Friedman I got from the web.
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The Visionary Milton Friedman and China
October 25, 2020
by Rainer Zitelmann
https://nationalinterest.org/feature/visionary-milton-friedman-and-china-171156

 In 1980, the situation was still very unclear. Friedman was surprised when he discovered during his stay in China that the works of Friedrich August von Hayek had been translated into Chinese and were quite popular. There were articles about Hayek in Chinese economics journals and Friedman was pleased to discover that some Chinese economists already owned the recently published Japanese edition of his book Free to Choose. He was also delighted by the fact that a Chinese translation of his book was also being prepared….

Friedman visited China for a second time in 1988 at the same time as the libertarian Cato Institute organized a conference in Shanghai—a remarkable event in and of itself. Friedman gave a speech at the conference and did not hide the fact that the transition from a planned economy to a market economy would also involve considerable costs. But, he added: “It is a tribute to the current leaders of China that they are engaged in a serious effort to make the transition…”

Friedman’s optimistic stance was encouraged by a conversation he had with the then-general secretary of the Communist Party, Zhao Ziyang, whom he described as having a “real understanding of what it means to free the market.” In his autobiography, Friedman writes that his two-hour conversation with Zhao Ziyang made a very positive impression: “He displayed a sophisticated understanding of the economic situation and of how a market operated….

During our conversation, Zhang Weiying repeatedly stressed that “China’s economic rise is not because of the state, but in spite of the state.” Friedman would certainly have agreed. The brilliant economist was one of the first to accurately predict China’s future….

…In keeping with Friedman’s teachings, the Chinese economic miracle confirms that greater prosperity for the people can only be achieved by expanding private property rights and promoting the free market.
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Good article. Among the statements that Milton (RIP) made was his restatement of Adam Smith's "invisible hand" (people pursue their individual interests and led by an invisible hand to provide public interest which is not part of their original intention). Milton restated it as:

"People who intend only to serve public interest are led by an invisible hand to private interest which was no part of their original intention."

In this article, the author, Mr. Zitelmann, did not mention the local NGO or institute that facilitated the Cato conference in 1988. Very likely it's the Unirule Institute of Economics in Beijing, headed by Dr. Mao Yushi, a highly respected economist who's free market leaning. I have met Prof. Mao during the Economic Freedom Network (EFN) Asia Conf in Oct. 2004 in HK, mainly sponsored by the Friedrich Naumann Foundation for Freedom (FNF). The conf was supposed to be held in Shanghai but the China commie leaders became suspicious and did not grant a permit to Unirule to host an intl free market conf, so a sudden change in venue about 2-3 months before the event. 

In that conf I have also met Jimmy Lai, the most prominent free marketer businessman in HK, that CN commie govt has sent to jail a few times recently via the HK govt. He's rich he could post bail for his release.
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See also: 
Pol. Ideology 75, Green New Deal and ecological socialism, February 10, 2019 
Pol. Ideology 76, A Nation Of Free Men Or Free Things, July 06, 2019 
Pol Ideology 77, On monopolies, M&A's and virtual government, Nov. 27, 2019.

BWorld 456, Flattening the rule of law

 * My column in BusinessWorld, October 8, 2020.

I just checked the World Justice Project (WJP) Rule of Law Index (RoLI) 2020 Report. I like this annual report because of the subject it covers. I subscribe to Friedrich Hayek and other classical liberals’ definition — rule of law means the law applies equally to unequal people, the law applies to governors and the governed, administrators and the administered. No one is exempted and no one can grant an exemption. Granting exemptions leads to the rule of men.

The WJP did not make this kind of definition. Instead, it developed eight factors and 44 sub-factors particularly related to governance and the justice system. Then it scores and ranks countries based on their performance. The 2020 Report involved more than 130,000 household surveys and 4,000 legal practitioner and expert surveys worldwide from 128 countries and jurisdictions.

I am surprised at the deterioration in Philippines ranking from 51st out of 102 countries in the RoLI 2015 Report, to 91st out of 128 in the RoLI 2020 Report. Our rank is lower than socialist countries China and Vietnam, and military-ruled Thailand. The main factors that pulled the country down were in No. 4 Fundamental Rights and No. 8 Criminal Justice (see Table 1).

Applying this to the current pandemic, the main problems are: One, lockdown policies have been very strict (like no regular public transportation until now, all schools and churches are still closed) and long — it has been seven months now since the March 16 declaration of ECQ (the strictest quarantine level). Two, lots of exemptions have been made by government, like police officials who have held parties, which are banned, without consequences; quarantines that do not apply to many government officials and personnel as they can travel to many provinces anytime while ordinary civilians must present travel passes that require many permits before a pass is granted.

So in a sense, the Philippine government has succeeded in flattening the rule of law, not the level of virus infections. The government has also flattened the economy, not the deaths from the virus.

The Concerned Doctors and Citizens of the Philippines (CDC PH) has consistently been advocating to “Flatten the Fear” and not the economy. Lift or relax the lockdown, protect the oldies and those with underlying conditions, focus on prevention and those with symptoms, give early treatment and stay home and avoid hospitalization whenever possible. Practical, non-expensive advice from doctors and medical professionals who do not agree with the overall narrative of indefinite, no timetable lockdown “while cases remain high.”

I also saw the update on death numbers from the Philippine Statistics Authority (PSA) released on Oct. 2 and, surprisingly, there are fewer deaths this year than in the last two years. Deaths from road accidents and crimes must have significantly gone down due to the lockdown and evening curfew, and the closed bars (see Table 2).

 

This is not to argue that the lockdowns are justified because the economic damage, the job losses, have been wide and extensive and the health and mortality impact will be felt in the coming months and years.

When people are more hungry, more economically and psychologically depressed, they become more susceptible not only to the virus but also to other diseases.

Enough of indefinite lockdown, enough of double standards in implementing strict lockdown policies.

The government must open up the economy by November, whether cases remain high or not.
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See also:
BWorld 453, Coal, growth and carbon tax, September 25, 2020 
BWorld 454, Flatten the fear and hysteria, not the economy, September 28, 2020 
BWorld 455, No climate emergency, October 05, 2020.

Saturday, October 17, 2020

UPSEAA Lecture 7, Dr. Butch Arroyo

Two weeks ago, my intelligent and kind friend, batchmate from UPSE in 1984, Dr. Cristino "Butch" Arroyo gave a lecture at the UPSEAA. Butch is among the big minds of batch 1984, he graduated Magna Cum Laude along with Dr Aleli dela Paz (Prof, UPSE) and Noet Ravalo, when Popo Suanes was Summa Cum Laude, the first Summa of UPSE.

It was my first encounter with the term “Great Cessation”, so what is it?

According to Butch it's a contrast with Great Depression (1930s), Great Recession (2008-09), Great Cessation now, a term used by John Cammack (March 2020), former executive at T. Rowe Price Group.  And “Great Cessation” is shutting down of non-essential shops, restaurants, bars, theaters, having masks, from Todd Buchholz (May 2020).

Butch is an Econometrics, Finance, and Monetary Economics guy, not my field so his lecture was very technical for me. I got lost in a number of his terms and concepts but I also learned new things from his talk.

These two charts among the many he showed. From 1980 this is the 4th recession (at least two quarters consecutive GDP contraction) and this is the deepest. See the big jump in unemployment rate (red line) and big dip in GDP quarter on quarter. 


And this table from the IMF Consultation Report August 2020. Look at the fiscal or budget balance, from -4.6% of GDP in 2019 to -18% this year, huuuge borrowings.
Butch concluded his lecture not with recommendations but with navigating two unknowns: (1) the "Known Unknowns" like When will the vaccine come, Where is the new stimulus, and Whither the unemployment rate. And (2) the "Unknown Unknowns" like the highly contested US Presidential elections, and geo-political economy of a fractured "geo".

Kudos, Butch. You gave me a little headache that afternoon with your technical lecture, hehe.

Butch is very nice to me. I went to Washington DC 3x to attend conferences (2004, 2009, 2019) and 3x I asked him if he could host me for few days in his house after my conf, and 3x he said Yes. Below, July 2019 after I attended the Heartland Institute's 13th Int'l. Conf. on Climate Change (ICCC-13). I stayed in his house in Alexandria, Virginia for two nights. Here at the Old Town Alexandria.


Aerospace Museum, Smithsonian.


That afternoon he brought me to the Amtrak Union station as I would travel to visit another friend in Forest, Virginia. Thanks again, Butch.
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Monday, October 05, 2020

BWorld 455, No climate emergency

 * My article in BusinessWorld, October 01, 2020.

Among the big headlines this week is the report that President Rodrigo Duterte is considering the environmentalists’ lobby to declare a “climate emergency.” Greenpeace in particular lobbies to phase out or kill coal and other fossil fuel power, mining. They want to plunge the country in blackout-friendly intermittent, variable renewable energies (VREs) like wind, solar and biomass.

The endless lobby to demonize fossil fuels, mining, conventional vehicles running on oil, related measures are based on a very opportunistic, corrupt, even brain-dead “analysis” that these commodities cause less rain and more rain, less flood and more flood, less storms and more storms, less cold and more cold. Whatever weather and climate, people should be scared and worried so that the VRE lobby should continue to get rich, so that governments can continue to slap carbon tax, oil tax, carbon cap and trade, create and expand climate bureaucracies.

Climate change is true, global warming and global cooling are true. They have happened since planet Earth was born some 4.6 billion years ago, warming-cooling in natural, endless cycle. Take the current La Niña – the sea surface temperature (SST) anomaly or deviation from the mean temperature is -0.5 C or lower in the Pacific Ocean Niño region 3.4. This region is the widest and center-most part of the Pacific Ocean. Australia’s Bureau of Meteorology (BOM) weekly monitoring reported on Sept. 6 that Niño region 3.4 has dipped to -0.52 C or La Niña territory already. The latest update on Sept. 27 showed -0.80 C.

I checked El Niño-La Niña cycle, 70 years data from 1950 to early 2020, data from the US National Climatic Data Center (NCDC) under the National Oceanic and Atmospheric Administration (NOAA). Then I added the chart of NOAA forecast, the 40+ models predict a big and deep La Niña from September 2020 to April 2021, the SST anomaly will see a deep -1.5 C in Nov. 2020 to January 2021 (see Figure 1).

This means that in the coming weeks and months we expect more rains and floods, more landslides, more flood/water-related killer diseases like leptospirosis and dengue. And the climate lobby will say that these are proof of “man-made warming/CC,” never proof of transition to natural global cooling.

So if the planet undergoes warming-cooling in natural cycles, like day-night cycle, winter-spring-

summer-fall cycle, El Niño-La Niña cycle, water evaporation-condensation cycle, carbon cycle in plants-animals/humans, where is the “climate emergency”?

The Philippine government has been spending hundreds of billions of pesos yearly on climate adaptation and climate mitigation programs. From 2018 to 2021 budget, the government would have spent some P878 billion or an average of P219 billion/year. This is equivalent to 7.8% of the total budget excluding appropriation for interest payment and allocation to local government units (ALGUs). While the Department of Public World and Highways, Department of Agriculture and Department of a and Natural Resources are the lead departments, other agencies also have substantial climate projects and budgets, like the National Dairy Authority, Philippine Crop Insurance Corp., Philippine Fisheries Development Authority, Philippine Rice Research Institute, and National Irrigation Administration (see Figure 2).

Note also that the budgets by LGUs, from provincial to barangay, for various climate offices, programs and meetings are not included there. Plus the various huge climate loans from the Asian Development Bank, World Bank, Asian Infrastructure Investment Bank, other multilaterals.

The President should not heed the opportunistic and corrupt lobby to declare a “climate emergency” because there is none. The President should not impose new carbon tax, higher oil tax, coal tax and vehicle tax, create a carbon cap and trade, kill mining, and so on.

To hasten economic recovery from this pandemic and indefinite lockdowns, we should have cheaper energy and more jobs creation including jobs from the mining sector.
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See also:
BWorld 452, Declining jobs, rising debts, September 19, 2020 
BWorld 453, Coal, growth and carbon tax, September 25, 2020 
BWorld 454, Flatten the fear and hysteria, not the economy, September 28, 2020.

ATR's International Coalition Meetings

The Americans for Tax Reforms (ATR, Washington DC) holds a monthly International Coalition Meeting (ICM) for decades now. ATR was formed in 1985 and headed by the ever-energetic Grover Norquist. The monthly ICM is hosted by my good friend Lorenzo Montanari of ATR (also the Exec. Director of the Property Rights Alliance PRA) and Mr. Alex Chafuen, President of Acton Institute and former President of the Atlas Network.

I have met Alex in 2004 when I Atlas gave me an International Fellowship and travel to the US for a  training and meet free market think tanks in the US and other countries. I also met Grover, Chris Butler of ATR that year.

Last Thursday Oct. 1, I attended the meeting for October. There were a number of high profile speakers like the brave lady leader of the opposition in Venezuela, and a conservative MP of Spain. An official of USAID who is free market leaning also spoke.

Lorenzo was kind enough to include me in the list of speakers that day. I spoke last and I prepared a 3-slides ppt because I would speak only for 2-3 minutes due to time constraints. I spoke about the campaign of the Concerned Doctors and Citizens of the Philippines (CDC PH) to life the strict, long, indefinite lockdown in the country coupled with basic medical protocols.


CDC PH has generated plenty of media engagements because it was speaking a different tune, a contrarian voice to the dominant DOH-WHO-IATF-etc narrative that the strict, indefinite lockdown should continue.


I showed my column the other week, also one of my two radio/fb livestream interviews. Also the DILG/Police backlash against CDC PH.


I hope that other center-right groups and think tanks in the world who watched what I shared would be inspired of the pushback that CDC PH has initiated. Lots of respected and vocal, brave doctors in the group who are not afraid to speak against the official narrative re indefinite lockdown. 

ICM is an off the record, no recording meeting so I show here only what I presented. 
Thanks again, Lorenzo.

* See also: Interview at PSVR, hosted by Cathy Cruz (Sept. 28, 2020)
 

Monday, September 28, 2020

BWorld 454, Flatten the fear and hysteria, not the economy

* My column in BusinessWorld, September 24, 2020.

As more comparative economic data come in, the more they confirm that the Philippines’ hard, strict, and draconian lockdown policies did more harm than good. We can summarize them as follows:

One, the Philippines has second worst performing gross domestic product (GDP) in Asia next to India, the economic contraction is similar or worse than countries with five times to 15 times as many COVID-19 deaths per million population (CDPMP) than us, like the US, Brazil, Canada, Mexico, UK, France, Italy and Spain. Hong Kong has a deeper contraction but it is partly due to their Basic Law having been amended so that some China laws will apply to Hong Kong.

Two, Philippines unemployment rate of 10% last July is again second highest in Asia next to India, and worse than those in the UK, France, and Italy which have very high CDPMP.

Three, Philippines has the steepest decline and contraction from last year probably in the whole world. From 6% in 2019 to -8.6% in the first half (H1, January-June) 2020, or a dive of -14.6% points.

Four, the Philippines should not have had such a steep contraction considering that we have a small GDP of only $377 billion in 2019, just slightly higher than our neighbors with small populations like Hong Kong, Singapore and Malaysia (see Table 1).  

Among the questions that I often encounter from non-economists is “What do those GDP growth or contraction mean to our daily lives?”

It is a valid and practical question so we have to quantify in pesos, not just percentages, the changes in GDP. We better use current or nominal prices as they reflect current spending and income. The deep contraction means that some P680 billion in national income was lost in H1 2020 compared to H1 2019. It also means that our GDP size in H1 2020 was even lower than H1 2018 or two years ago, despite the increase in population of nearly 3 million over the past two years.

GDP by expenditure, the biggest contraction was in private investment or gross capital formation, a P919 billion decline. GDP by industry, the biggest contraction was in the industrial and manufacturing sector (see Table 2).

The hypothesis “more lockdown = more virus control” has been proven to be wrong. Otherwise we should not have a high number of COVID-19 cases and deaths now considering the very strict lockdowns from March to May.

President Rodrigo Duterte’s policy of indefinite lockdown until a safe and effective vaccine is available is wrong. It will prolong the economic agony without reducing COVID-19 cases. Instead, the President and the Inter Agency Task Force (IATF) should open up the economy by Oct. 1, lift the generalized lockdown for all, and limit the quarantine only to small areas where serious cases are reported, and retain the restriction on mobility those 70 years and above and immuno-compromised people.

The doctors in the Flatten the Fear Philippines coalition suggested many cheap immune-boosting measures that people themselves can take without waiting for the vaccine like taking more Vitamins C and D, the use of known prophylaxis (hydroxychloroquine, zinc, etc.) vs other infectious diseases like malaria.

Yes, there are existing and cheap measures to flatten the fear and hysteria. The economy must rise again, the high government spending and borrowings that will require high taxes and regulatory fees must be controlled and flattened.
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See also:
BWorld 451, Electricity subsidies, Meralco, and the wind-solar lobby, September 06, 2020 
BWorld 452, Declining jobs, rising debts, September 19, 2020 
BWorld 453, Coal, growth and carbon tax, September 25, 2020.

Interview at PSVR, hosted by Cathy Cruz

Last week, Sept. 23, I have a live interview via Zoom at Radyo Bandera Bacolod 103.9 FM, hosted by Jean Paul Generoso.  It was also streamed live in their FB page. My co-guest then was Dr. Homer Lim, a young and articulate doctor specializing in Integrative Medicine. Doc Homer is an active doctor-member of the Concerned Doctors and Citizens of the Philippines (CDC PH) in the Flatten the Fear coalition. I talked about the economics of lockdown, Doc Homer talked about Covid control and treatment. 

The next day, Sept. 24, I have another interview at Pinoy Stream Versatile Radio (PSVR) hosted by Ms. Cathy Cruz.


I prepared five slides which I showed in her program.

Interview here, starting at around 13:00 mark,
https://www.facebook.com/MissCathyCruz/videos/10158965506899343


The other two slides I took from my column that day, https://www.bworldonline.com/flatten-the-fear-and-hysteria-not-the-economy/.

Thank you again for the opportunity to discuss these economic issues, Cathy.
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See also:
Interview at BusinessWorld Live, One News, August 07, 2020 
Interview at DZBB and Agila TV, August 15, 2020 
Interview at Turbo Time by Mike Potenciano and Raymond Tribdino, August 16, 2020 
Agenda One News, Part 6, August 31, 2020.

Friday, September 25, 2020

BWorld 453, Coal, growth and carbon tax

 * My article in BusinessWorld, September 17, 2020.

Among the major economic challenges for governments worldwide in dealing with this pandemic is where to raise new revenues as their expenditures and borrowings have greatly increased while their regular revenues have decreased.

In the Philippines, among the groups to mention and lobby again for a carbon tax are the Asian Development Bank (ADB) and some NGOs. See related stories in BusinessWorld recently: “ADB backs digital economy, carbon taxes to aid recovery” (Sept. 3), “Microgrids touted as priority area for funding by Asian Dev’t Bank” (Sept. 14), “Rising missionary charges called ‘misguided’ after Congress queries DoE” (Sept. 14).

The first story is self-explanatory, the second is about solar lobbying by an environmental NGO that opposes not only coal but also big hydro and geothermal, and the third story is about a correct observation by Laban Konsyumer, Inc. (LKI) that the universal charge for missionary electrification (UC-ME) in our monthly electricity bill should not rise. I will add that this charge should stop and be abolished someday, the isolated island-provinces should run on cheaper coal or small modular gas or nuclear plants, instead of big gensets running on diesel and the higher cost is passed on to all consumers nationwide via UC-ME.

The endless lobby to impose a carbon tax to penalize fossil fuels, especially coal plants, is misguided and based on emotion, not reason and hard data. If we go back to recent economic history of countries, the rich ones have developed faster partly or largely due to cheap energy like coal that powered their industrial, agribusiness and service sectors 24/7.

In the accompanying table, I show the coal consumption and gross domestic product (GDP) of different countries in 15 year gaps starting from 1965 (earliest comparative energy data available) until 2019. Data is from the WB World Development Indicators (WDI) database, and BP Statistical Review of World Energy (BP SRWE).

The high coal-consuming countries in the 1970s and earlier decades, like the US, Germany, UK and Japan, were also the high GDP size countries. Starting from the early 1990s when environmental activism and anti-fossil fuel movements became stronger, they have either slowed down or marginally increased their coal consumption. Unit use is Exajoule (EJ) and 1 EJ is equal to 23.88 million tons oil equivalent (MTOE). Lower expansion in coal use in 2019 over 1995 levels by the rich countries led to lower expansion in GDP size over the same period. In contrast, higher expansion in coal use by developing and emerging economies like the Philippines also led to higher expansion in GDP size (see the table).

In addition, the Philippines also has a very small coal consumption (only 0.73 EJ or 17.42 MTOE in 2019) compared to its neighbors like Malaysia, Vietnam, and Indonesia, and yet the Philippines is endlessly bombarded by a high-noise, heavy-emotion, low-data lobby that we should discontinue new coal plants and kill or close existing coal plants.

To recover faster from the lockdown-crippled economies, countries must have cheaper and stable electricity especially now that most work is done at home. Attending work meetings and seminars and online classes requires stable electricity and internet, not fluctuating power from intermittent sources like solar-wind.

What about the planet?

Planet Earth has experienced natural and cyclical climate change (endless warming-cooling cycles) since it was born some 4.6 billion years ago. Nature-made not “unprecedented, man-made” warming.

The multilaterals like the UN and ADB, IMF, WB, and OECD, must recognize climate realism and not alarmism, and advance cheaper, reliable, no subsidy, and no mandatory dispatch electricity. Fossil fuel energy has given us modern and convenient life, air conditioners in hot days and months, heating in cold days and months, huge and tall buildings with 24/7 elevators and aircon, etc.

We should now prioritize faster economic recovery via cheaper and stable energy, and wider economic opening. We should throw away useless and costly proposals like carbon taxes whose goal is to make cheaper energy become expensive energy.
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See also:
BWorld 450, Tax competition, not exemption, August 30, 2020 
BWorld 451, Electricity subsidies, Meralco, and the wind-solar lobby, September 06, 2020 
BWorld 452, Declining jobs, rising debts, September 19, 2020.