Wednesday, October 26, 2005

Foreign Aid 1: MDG Goals = More Debt Addiction

July this year, leaders of G8 countries promised debt forgiveness or debt write off for some of the world’s highly-indebted countries, mostly in Africa, during the G8 summit in Scotland. September this year, many world leaders gathered in New York for the UN World Summit, and one of the talking points was debt reduction for other indebted poor countries. Some proposals that received considerable support by other leaders of developing countries were “debt for equity” and “debt for Millenium Development Goals (MDG)”. The Philippine’s Speaker of the House of Representatives was among the key campaigners of such proposals.

Such new schemes are similar to debt write-off for highly-indebted poor countries. Other indebted poor countries will also not pay a big portion of their foreign debt to both multilateral/bilateral foreign aid institutions, and private bondholders. Instead, the money to be allocated for some foreign debt service (principal amortization plus interest payment) will be used for lender countries’ institutions, corporations and banks’ investment in some earning assets in poor countries ("debt for equity" scheme). Or use the money to expand the budget for social services to help meet the UN’s MDGs of cutting world poverty in 2015 by half compared to their 1990 levels.

While the goal of such new schemes -- poverty alleviation around the world – is laudable, the means are not. Debt forgiveness and reduction can inspire dictators and corrupt leaders to further rape their countries’ economy since the poorer a country is, the bigger is its chance for debt write off, or debt reduction at least. Hence, a “race to the bottom” can happen and it will condemn poor people of those countries into perpetual poverty and dependence on government for dole-outs.

Past loans for public education, public health care, infrastructure, environmental protection, and other social and economic services in poorer countries should have improved the skills, productivity and health of the people of recipient governments. In turn, these people should have become more productive and entrepreneurial, and they pay various taxes and fees to their governments, and the latter can pay back those loans contracted in the past.

Since many poor countries keep on borrowing purportedly for the same social and economic services, this means that the money from past loans were wasted and/or stolen. If this is so, then the solution to high public debt is not large-scale debt forgiveness or more foreign borrowings to be administered by the same sets of institutions and bureaucracies. Instead, poor countries should engage in large-scale privatization of state enterprises and remove some agencies and bureaucracies to save on annual expenditures. Proceeds from privatization and savings from agency consolidation should be used to retire a big portion of the public debt, and to finance continuing social and economic services to the public.

The Philippines and many other poorer economies have plenty of government corporations, banks and financial institutions, including their respective subsidiaries, that more often than not, distort the business environment since they operate as government monopolies, or siphon off public resources for their capitalization or for their bail out as they keep on losing money. Many if not all of these state enterprises can be privatized, not once but piecemeal. While it is true that privatization proceeds are one-time and non-recurring, savings from interest payment of the retired debt or from further contracting new debts, are recurring.

There are no “market failures” being addressed by these state enterprises as many private enterprises can and do provide the services which the former provide. For instance, in the Philippines, there is no justification why government is into real estate, like Clark Economic Zone, Subic Bay, and National Development Company’s subsidiaries (Batangas Land Co., First Cavite Industrial Estate, Kamayan Realty Corp., and so on). Or why government is into trucking and shipping, like NDC subsidiaries National Trucking and Forwarding Corp., Tacoma Bay Shipping Corp.

Non-payment of debts is a bad practice that encourages "moral hazards" problem of being irresponsible borrowers and being addicted to more debts. If poor country politicians, top bureaucrats and consultants can waste or steal their own people's tax money, how much more with rich Japanese or European or American taxpayers’ money. Non-payment of past loans for whatever social goals will only prolong the malady of debt addiction and the economic distortions of government enterprises that need to be disposed to help correct past mistakes and fund mismanagement.

Tuesday, October 25, 2005

Pol. Ideology 2: Evolution of Market and State

At the beginning of human civilization, in primitive hunting societies when resources were generally unlimited for a small population, there was no need for skills “specialization”. And so people were food hunters, home builders, warriors and self-administrators, all rolled into one. As population and human wants began to expand, some degree of skills specialization developed and so men learned to trade with each other. The animal and fish hunters traded their excess catch with craftsmen for the latter’s carpentry, hunting weapons, musical instruments and other artistic services. They traded with farmers who practiced the early technologies of agriculture.

Thus, the MARKET for the exchange of goods and services spontaneously arose, naturally invented. There were not too many varieties of each goods and services and hence, there was general homogeneity in product types and qualities. Hence, the presence of money as mode of voluntary exchange was not necessary; barter – goods for goods or services – was possible. The aggregate social surplus was small and communities could not afford, nor was there a need for it, to have a government made up of full-time administrators and enforcers of rules, whether collectively-agreed upon, or imposed from the top.

Later, as population and economic activities expanded, various forms of MARKET IMPERFECTIONS arose, like monopolies and oligopolies. This is natural because under unrestricted market exchange, consumers reward the efficient producers with continued patronage, assuring the latter’s business growth and expansion. Consumers also punish the inefficient producers, those who sell bad quality commodities and services at bad prices, with non-patronage resulting in the latter’s business stagnancy if not bankruptcy. Other sources of market imperfections are “negative externalities” associated with production such as pollution and noise, as well as “positive externalities” wherein potential producers of “public goods” like traffic lights in busy intersections, and peace and order in communities, are not inclined to produce the services because there will be many “free-riders” who will only enjoy the benefits but will not pay or contribute to shoulder the full cost of such “public goods”.

So men invented GOVERNMENT, and hired administrators, regulators and policy-makers to correct many of those market imperfections. The latter of course invented TAXES and various fees to finance the effort of dealing with these complications. Initially it went well. Many disputes among the citizens were peacefully settled; some monopolies were regulated from further inflicting non-competitive behavior. The “externalities”, both negative and positive, were addressed.

Later, governments introduced GOVERNMENT FAILURES and inefficiencies – bureaucratic red tape, corruption, exorbitant tax rates, multiple taxes and fees, excessive trade barriers, state-sponsored monopolies, and so on. The state was used by certain factions of capitalists and businessmen to protect themselves from other factions or batches of capitalists and entrepreneurs, both local and foreign, both existing and emerging. Among such barriers to entry of new competitors are government-legislated franchises and monopolies.

Government also institutionalized PROTECTIONISM of many local businessmen and producers in the form of high import tariffs, import quantitative restrictions, other forms of trade barriers to protect themselves from foreign capitalists and producers. Local businessmen erected barriers (either mandated in the Constitution or through Parliament-enacted laws) against entry of too many foreign inventors that will compete with their monopolistic and oligopolistic market structure. Or government bureaucrats, either by themselves or upon the prodding of the protected businessmen, create a maze of regulatory restrictions that effectively discourage the emergence of too many entrepreneurs, especially from ordinary employees, farmers, or managers. The existence of (a) high unemployment and underemployment rates, (b) high informal or underground economy, are among the major proofs of the success of bureaucratic nightmare.

So men invented non-profit organizations – more commonly referred to as non-government organizations (NGOs), people’s organizations (POs) and other civil society organizations (CSOs) – to reform government and state failures. Initially, it dampened state bureaucrats’ and policy makers’ appetite for more corruption and inefficiencies. But since many non-profit organizations are themselves “allergic” of the market and hate the concept of profit, much less huge profits, they can only demand governance reforms but not governance exit in many areas and sectors that government has already intervened. A “small and limited government” is not within their political horizon because they themselves are advocates of big government (aka “statists”), they themselves want to run the state and its interventionist agencies and corporations someday.

Thus, it became evident that “reforming government” by statist reformers, or by non-competitive capitalists, had become an oxymoron. Bureaucracies and interventions, once created, seldom decline, let alone die. And governments later invented habitual BUDGET DEFICITS (ie, revenues lower than expenditures). Many politicians run for government positions not to rein in government intervention, but to maintain, if not expand and worsen, those state failures.

Early in the last century, some groups went extreme and invented communist parties and socialist parties to turn an already super-imposing state into a “Big Brother” interventionist socialist state, supposedly to “centrally plan” the basic needs of its people. Later, many socialist states could not even plan and produce how many tons of rice and bread, how many million liters of premium gasoline and diesel, how many pairs of jeans and shoes, what varieties of oranges and bananas, will be needed by their people in a month, in a year. Scarcity led to political instability, which later led to the collapse of many socialist governments, from the Soviet Union to Eastern Europe. The remaining socialist states (China, Vietnam, Cambodia, etc.) survive because they have allowed the market system to exist in the economic sphere while maintaining political monopoly.

So now, many former socialist states are back to allowing private and voluntary exchange of goods and services by their citizens. Once the central-planning, chief-allocating, all-encompassing state shrinks, the market and the price system would know where, when, how much, and for whom goods and services will be allocated.

Not all Market Failures Need Government Intervention

Not all “market failures”, like the absence of exchange by people who supply and demand a particular good or service, or the presence of negative externalities such as resource depletion, will need government intervention. There will always be “market failure” in all sub-sectors or sub-industries given the changing preferences of people who demand ever newer products and services. Or such “market failure” can occur when demand temporarily does not respond to a sudden availability of a new product or service as result of technological innovation, weather and natural events, other factors.

Case 1. Market Failure due to Absence of Supply

Some beautiful waterfalls in a country which have big potential for eco-tourism are not developed. Market failure here springs because while there is big demand by visitors to see beautiful waterfalls, there is no entity that will build the roads to make the place accessible, construct hand rails in dangerous areas, develop picnic grounds and cottages, and so on. Some politicians and anti-market groups can declare this as “market failure” and will move to establish a new government agency called “Waterfalls Development Authority (or Corporation)”, hire personnel, consultants, and politicians-appointed administrators. To do so, government will have to find financing through new tax measures, or raise existing taxes and fees.

There will be many groups of entrepreneurs who will be interested to develop the area, pour their own private resources, to earn money someday. But certain problems exist, like bad peace and order situation due to the presence of rebels and extortionists; problem with neighboring private landowners that will affect the access road to the area. It is also possible that intimidation and extortion is done by the local politicians and police themselves, or by the government's environment ministry or agency in the form of a maze of rules, regulations, and fees to pay, so that the cost of complying with these regulations alone would already cost a big amount of money.

If these problems (especially bureaucracy-created ones) are minimized if not removed, then private entities will compete to develop the area using their own resources, and no burdensome tax hikes or new tax measures will be needed. Applying user-fee principle removes the negative externalities of taxation, where even people who will not get to see those waterfalls are taxed.

There are millions of cases where supply is absent despite existence of demand by other people. There is absence of supply of a mango variety that produces 10 metric tons per tree per year, that is resistant to 95% of all known anthracnose and other mango pests in the world. Demand for this kind of mango variety will be very, very high, so there is another market failure there. But this does not mean that government should come in and put up a Mango Research and Development Authority, pouring vast amounts of money to be taken from the pockets of taxpayers. Time and market dynamics between suppliers and consumers will determine when, where, how and how much such commodity or service will be made available.

Case 2. Market Failure due to Absence of Demand

There are thousands, even millions, of scientific and technical papers languishing in academic libraries around the world, many of which have great engineering, health, agricultural, and other economic applications and potentials. But there are not enough takers from businessmen and entrepreneurs at the moment. Government need not put up a research and development institute, extend huge amounts of credit, set up a government corporation, or other forms of intervention to each and every promising research proposal. For every intervention that government can think and implement, there is corresponding expropriation from taxpayers’ pockets and income; there is corresponding new batch of bureaucracy created that need to be maintained; there is corresponding new batch of rules and regulations that will complicate otherwise simple situations.

During the rainy season, there is absence of enough supply of tomatoes, so that average price in the Philippines can jump from off-season price of P2/kilo to P40 to P50/kilo. D during summer, with bumper harvest, there is absence of enough demand so that average price can slump to P2-P5/kilo. Some tomatoes are unsold and left to rot by farmers because the cost of harvesting and transporting them to public markets are higher than both wholesale and retail prices. In this situation, government need not create a Tomato Regulatory Authority or Tomato Development Corporation to stabilize prices and protect tomato farmers during summer, and protect consumers during rainy season. Such will entail additional taxes and fees, bureaucracies, and political intervention in price-setting.

Case 3. Market Failure due to Negative Externalities

Land clearing and conversion, from forest use to agricultural use, creates negative externalities (or side-effects). Soil erosion is exacerbated, streams and rivers are covered with eroded soil and rocks, and marine life is affected. But such land conversion is a natural reaction of people based on emerging prices of agricultural vs. forest products. As population expands, demand for more food production increases, so will the price of agricultural crops, from grains to vegetables and fruits. If people, especially those living in the affected area, do not value highly the forests, then more land conversion will happen, until it reaches a point that people’s valuation of forest vegetation is deemed higher than more ricefields, banana and mango plantation, sugarcane and coconut plantation.

But the usual reaction of statist individuals -- those who believe in more government intervention, subsidies and taxation -- is for more government regulation, retain state ownership of vast public forest land. This thinking prevents the emergence and establishment of clear property rights to citizens as individuals, cooperatives, people’s organizations, or corporate entities. They gloss over the natural tendency of people that those resources that belong to no one or everyone tend to fall in disrepair, while resources that belong to you, you tend to take care of.

Case 4: Market Failure due to Positive Externalities

Among the so-called “public goods”, or commodities and services that benefit the majority if not everyone, are traffic lights, peace and order, justice administration, and clean air. When these services are provided, "free-riders" or people who enjoy the benefits of certain services but are not willing to voluntarily contribute for the maintenance of such services. Hesitance of private enterprises to provide such services stems from the fact that once provided and supplied, it is difficult to collect revenues from the free-riders, and it is almost impossible to exclude other people who benefit from the services but are not willing to pay the costs of such services.

But it is shown by many private residential villages that many of those considered “public goods” can be privately-provided, and they are able to discourage or eliminate the free-riders. In private villages, subdivisions and residential buildings, the homeowners’ associations act as small government. They administer the provision of basic infrastructure and social services functions that are thought to be the “turf” or domain of government – road and drainage construction and maintenance, garbage collection, street lighting, security and protection of lives and properties, and even occasional immunization and other health care services. They are clear examples that provision of many so-called public goods can be privatized. And the private enterprises are able to collect sufficient revenues to make the service provision sustainable and continuing.

Bottomline: Not all market failures are worth solving, curing, or intervening by government. Buyers and sellers adjust themselves through time given changing patterns in supply and demand conditions. Government “cures” in non-core functions, whether waterfalls development or tomato regulation or tertiary education, often do more harm than good. There is wisdom in this quote, “if market imperfections arise, government can help by doing nothing.” This is because government interventions very often (a) are financed too far and widespread (raising taxes, reducing citizens’ take-home pay), and (b) are done too long (the agency and the bureaucracy stays on even after private players have adjusted to changes in supply-demand situations).

Tuesday, October 18, 2005

Pol. Ideology 1: Minimal Government Manifesto

(This is the Manifesto we issued when we formed MG in March 2004:)

The Minimal Government Manifesto

Minimal Government = Minimal Bureaucracy = Minimal Taxes.

Smaller government appropriation from our hard-earned income = Greater individual freedom where to spend or save their hard-earned money.

Smaller government restrictions in movement of goods, services and people = Greater individual freedom where they will work, invest, trade, travel, rest and retire.

In the beginning of human civilization, at primitive hunting societies, men learned to trade with each other. The animal hunters traded their excess animal catch with fish hunters for the latter's excess fish catch. Or traded with craftsmen for the latter's carpentry, musical instruments and other artistic services. Or traded with early farmers who practiced the early technologies of agriculture. Thus, men invented the MARKET for the exchange of goods and services, and it went well. There was no government then made up by full-time administrators and enforcers of mutually-agreed rules.

Later as population and economic activities expanded, market failures arose - monopolies, oligopolies, externalities associated with production like pollution, dealing with criminals and other deviants that disrupt social order and threaten property rights, dealing with external aggressors, etc. So men invented GOVERNMENT. And government invented TAXES and various fees. Initially it went well.

Later, governments introduced government failures and inefficiencies - bureaucratic red tapes, corruption, excessive tax rates, excessive trade barriers, state-sponsored monopolies, etc. So men invented non-profit organizations, more commonly referred to as non-government organizations (NGOs) and civil society organizations (CSOs). Initially it went well in attempting to reform government and state failures.

Later, it became evident that "reforming government" has become an oxymoron. Bureaucracies, once created, seldom decline, let alone die. In fact, governments later invented habitual BUDGET DEFICIT Many politicians run for government positions not to reform government but to maintain, if not worsen, those state failures.

Some groups went extreme and invented communist parties and socialist parties, to make an already super-imposing state become a "Big Brother" interventionist socialist state, supposedly to "centrally plan" the basic needs of its people. Later, many socialist states could not even plan and produce how many tons of bread and rice, how many million liters of gasoline, how many pairs of jeans and shoes, will be needed by their people. Scarcity led to political instability which later led to collapse of many socialist governments, from the Soviet Union to Eastern Europe. The remaining socialist states (China, Vietnam, Cambodia, etc.) survive because they have allowed the market system to exist in the economic sphere while maintaining political monopoly.

Why reform government when markets can do the delivery of some public goods and services more efficiently?

Why reform government when some government functions can be privatized?

Why keep high and complicated taxes when many citizens are privately paying for services that should have been done by government, but failed to deliver because of government failures?

Why let government bureaucrats and politicians decide how much they should appropriate from our hard-earned income and wages, and where they should spend our hard-earned money, including how much to pay for themselves, their travels and their parties?

In the case of the Philippines, why should the productive sectors be heavily taxed, even harassed by tax administrators -- the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC), etc. - when the former seldom or do not send their children to public schools, do not go to public hospitals when they get sick, spend a big sum to live in gated villages for their personal protection, pay for the maintenance of their villages' street lighting and garbage collection? These services are long-held and believed to be "public goods" and hence, should be provided by the state. But many of these services are now provided by the private sector.

We, members and supporters of Minimal Government movement, believe in the following philosophies and principles:

a. Shrink the size of government and this will reduce corruption in government. If there is less to steal, less stealing will happen. If there is less power to wield unjustly, less power will be wielded unjustly.

b. Reduce tax rates and this will reduce corruption in tax collection. If there is less taxes to pay, less tax evasion will happen.

c.. Lessen "free riding" in benefits that other people have paid for. People should pay for services that they enjoy and benefit, whether publicly or privately provided.

d.. Should government be involved in delivery of social services, the task should be given to local government units (LGUs) and less to national government agencies.

e.. Optimize individual freedom to choose, to trade, to travel, to be happy. The privilege of selling to whomever wants to buy and to buy from whoever want to sell is basic human right and human freedom. To restrict who can sell to whom and who can buy from whom is a violation of such human rights.

To achieve these ends, we seek to advocate and campaign for the following basic measures:

1.. Merge line departments when their functions tend to overlap or occasionally conflict. Out of current 21 Departments, we believe these can be reduced to only 13 or 14. (See a discussion paper on "Merging Some Line Departments for Expenditure Reduction and Making the Philippine Bureaucracy More Efficient"). Corollarily, some bureaus and attached agencies under those
departments can be merged, if not privatized.

2.. Corporatize, if not privatize, up to 90 percent of the current 120 state universities and colleges (SUCs). Government should re channel revenues and savings from this move to improve public elementary and secondary education, and to expand scholarship opportunities to poor but intelligent tertiary education students. After all, the really poor students do not reach college. They drop
out even before they finish elementary or high school.

3.. A flat individual income tax rate of only 10 percent, versus the current 6 tiers, from 10 to 34 percent. A lower corporate income tax of 16 percent of net income, versus the current 32 percent. Theoretically, we believe that income taxes can be abolished, and government can shift to consumption tax. You buy a car or house, you pay tax. You buy gasoline or hamburger, you pay tax. You buy clothes or shoes, you pay tax. But in consideration of the swelling public debt and perennial budget deficit, we settle for a 10 percent income tax flat rate.

4.. Encourage the poor and those in the informal sectors to pay taxes. It is them who mainly benefit from public education, from public health care, from public safety. Many poor people have money to bet in jueteng, cockfighting and other forms of gambling, have money to buy beer and cigarettes, gin and local alcoholic drinks. Hence, they should pay taxes where they themselves will benefit from basic public services.

5.. Privatize a big portion of current public forest land. The government has terribly failed in protecting public forest land, currently constituting 50 percent of the country's total land area of 30 million hectares. Sell some of those public forest land, tax the new private landowners, while holding them accountable against activities that cause heavy environmental damage – rapid soil erosion, forest fires, uncontrolled mining tailings, etc.

6.. Corporatize or privatize other idle and underutilized resources - including police or military reservation areas. If these are military areas for instance, proceeds from such revenues should be devoted only to modernize the Armed Forces and to retire some maturing domestic debts. Savings from interest payment can be used to increase the pay of uniformed personnel.

7.. Liberalize further international trade. Trade protectionism benefits a few local producers and their workers but penalize the majority of the population. Savings by consumers from cheaper and/or better quality imported goods and services create additional demand on other goods and services, which create new business and employment opportunities which can more than offset business and employment displacement in the affected sectors.

8.. Liberalize further foreign investments into the country. It is better to bring foreign investors and businessmen into the country, than sending Filipino workers to foreign lands. Because of fast population growth and not so good educational system, labor supply always outstrips labor demand annually in the country.

9.. Deregulate sectors where monopolies and oligopolies thrive, where tentacles of government regulations kill entreneurship. The local shipping industry should be deregulated and liberalized to allow competition by foreign shippers, to give justice to local producers who complain of high rates imposed by local shipping monopolies and oligopolies, not to mention government red tapes.

10.. Support the move towards strengthening the LGUs through federalism.

We are NOT advocating a "Zero Government", though. Economic and political theories, as well as practicalities of daily lives, prove that there is role for government. Thus, we believe that there is room for government regulation and intervention in these areas, among others:

1.. Administration of justice, of upholding basic human rights against threats to life and property. This include functions by the Department of Justice (DOJ), the police (PNP), the Judiciary (Supreme Court and lower courts).

2.. National defense against potential external aggression. The Armed Forces of the Philippines (AFP) can be reoriented to focus on air and naval defense. Fighting the communist insurgents, smugglers of prohibited goods (bombs, illegal drugs, etc.) and Muslim extremists is better handled by the PNP and local government units (LGUs).

3.. Basic education (elementary and secondary) and health care for the poor. But these should better be done more by the LGUs and less by the national government.

4.. Infrastructure development where there is little or no private sector interest. This includes power development, public works, transportation and communication facilities.

This is a tall order and a big challenge for us all. We expect public support, especially the middle class and salaried employees, for these reform measures. Reforms not only in governance, but also in our philosophy and concept of the role of governments, in the limits to their intervention, in our lives.

March 2004

Monday, October 17, 2005

Welfarism 1: Dependence vs. Individual Responsibility

Almost all rich countries in the world have extensive welfare system for their citizens. Even poor countries in the world also have welfarist aspirations in their constitutions and social legislations. The only difference is that rich countries have the means to implement generous welfare programs while poor countries have little resources to implement extensive welfare programs, only laws and constitutional provisions mentioning those state welfarism plans.

But as in any other social programs, big welfare also means big and multiple taxes; extensive welfare also means extensive bureaucracies and government regulations. And this creates its own contradiction, its own self-limiting constraints that makes continuing generous welfare more and more unsustainable in the future. I am inclined to believe that this contradiction has already reached a crisis proportion in many rich countries, so that said economies must either remove and abolish certain welfare programs and cut taxes and regulations, or continue said programs and bear the costs of ever-expanding government indebtedness.

A crisis of welfarism consists of (a) encouraging dependence on the state and even laziness, (b) discouraging hard work and industriousness in some people because of the "progressive taxes" system, and corollarily, (c) discouraging entrepreneurial start up and expansion because of rigid labor, social, environmental regulations, not to mention the complicated bureaucracy.

Extensive state welfarism is forced collectivism and forced equality. The rich and hard working guys are over-taxed and the money is spent to hire millions of government personnel, for distribution to the poor through free or highly-subsidized social services, and for important infrastructure programs around the country. The problem with forced collectivism and forced equality by the state is that individual responsibility is not given due importance.

People respond to incentives and shy away from disincentives. When being jobless can be rewarded with generous unemployment allowance and public housing, while working hard can be rewarded with high taxes, why work? Or atleast, why work hard? When hiring additional workers means paying lots of employment-related salaries and insurance (high minimujm wages, unemployment insurance, health insurance, social security and pension insurance), and you cannot easily fire workers even if they do stupid and dangerous things, why expand hiring? Better to move out of your country, look for more business-friendly countries and expand your business and employment there.

That is why in many welfare states, persistent high unemployment rate (often double-digits) is common, like in Germany, France, Spain, Italy, and Belgium. Also, in countries with very strict and rigid labor laws, many people would rather become "employee forever" than become start up entrepreneurs someday. To be an employer, there are many taxes and permits to pay, many regulations to follow, many papers to fill up, many bureaucracies to visit. To be an employee, there are many protections and safety nets, so why aspire to be an employer?

It is confusing to think sometimes that while economies become richer and more industrialized, the citizens are expected to be more dependent on the government when they are mature enough to take care of themselves, their families and their communities. There is need to re-assert personal freedom and responsibility in taking care of one's education, health care, housing, pension, credit, and other social and economic services. To do this, citizens should be taxed less, regulated less, ruled less, by their governments.

Poverty and Government Misrule

The same way that not all market failures need government intervention, not all forms of poverty need government subsidies, welfare programs, and other forms of intervention. There are several reasons for the poverty of a certain household or community: natural disaster, personal disaster, other people-imposed disaster, and government-imposed disaster. Let us tackle them one by one.

Natural disaster. A productive and wealthy household or community can be rendered penniless by some acts of nature: strong volcanic eruption and lahat or mudflows afterwards, strong earthquakes and tsunamis, strong typhoons, hurricanes or tornadoes, widespread forest fire and drought, and so on.

Personal disaster. Many years of savings can be wiped out by a single act or series of acts of personal irresponsibility, like losing all the wealth in one long night of gambling, losing all savings in medication as a result of too much, too long drinking, smoking and drug abuse, losing all savings in luxurious spendings, womanizing, and other expensive vices. Poor parents having plenty of children while engaged in alcoholism, gambling and other vices is one formula of perpetuating the future generations of poor households.

Other people-imposed disaster. Some people can wipe out other people’s fortune and savings by various acts of bullying and robbery: colonization and slavery, extortion and landgrabbing, arson and bombings, carnapping and kidnapping, and so on. Such acts strike into the heart of coercion and deprive men and women of their right to lives and properties.

Government-imposed disaster. While government’s main function is to control and stop other people from bullying and robbing other people of their right to life and property, government’s extended function (from state banks and corporations to business regulation, from public education to pension,…) enable it to confiscate people’s income and savings through various taxes, fees, and regulations that they must comply with. By stiffling entrepreneurship and job creation, many people become poor and jobless, irresponsible and miserable, so government provides various welfare programs, which further justifies continuing its confiscatory acts and practices.

Given such forms of disasters, natural and man-made, internally- and externally-imposed, what are some options to fight poverty?

For natural disasters, some form of accident insurance and lots of savings will enable the households to rebuild their houses, other personal properties, and livelihood after sometime, somewhere.

For personal disasters, since the villain is oneself, the self-inflictor should be allowed to rest if that is what he/she desires. Educating and re-training the children to escape the fate of their less responsible parents can be taken cared of by other people through their individual initiatives or voluntary organizations that provide charities to the self-driven individuals.

For other people-imposed disasters, government in its core function of protecting the right to life and property of productive citizens, should take of these bullies through the justice system. Although private security agencies and village-level security groups prove to be more efficient in neutralizing and fighting criminals and robbers than the police and other state armed personnel.

For government-imposed disasters, citizens should assert their right to the fruits of their hard work by demanding cut in taxes (especially personal and corporate income taxes), in the size and powers of the bureaucracy and politicians, and to assert the virtue of emphasizing personal freedom and responsibility, of voluntary acts of welfare, charity and collectivism. Government extending its functions to hundreds of otherwise private spheres is misrule and promotes more personal disasters.

The “government” being pointed out here refers not only to national and local government units. It extends to other governments-created bodies like foreign aid institutions.

Friday, October 14, 2005

Fun with Big Government

Government -- to govern, to referee.
Also, to collect fees, to regulate, to intervene.
Yeah, we can attach various definitions and connotations about government.
But there are 3 things which are 100% present in all governments: politicians, bureaucrats, and taxes. Politicians are elected; bureaucrats are appointed and hired; and taxes feed them both.

So the bigger the government, ie, the plentier the politicians and bureaucrats, the bigger and plentier the taxes and fees to support them, and their offices, and their travels, and so on.
A number of government services are indeed necessary, like the policemen who caught the guys who mugged you, or stole your bike or car, or raped your sister or daughter. And the judges who sentenced the bad guys to either the prison cell or the electric chair.

But many government services are unnecessary and hence, the taxes and fees taken from the people's pockets are unjustified. Or, another way of saying this is, better leave those services to the private individuals and enterprises, to voluntary organizations and charities. These guys will get their revenues and income in the form of sales of their wares and services, and in contribution from other guys.

What happens when government becomes big?
Oh well, if you're an employee or a manager, government will first make your pay a bit smaller compared to its potential because of taxes levied on the company (for instance, corporate income tax). Then, government will take a portion of your personal income. Then from your take-home pay, your consumption goods and services will become more expensive because of add-on taxes incorporated there, like import tax, sales tax or value added tax, excise tax on your beer and cigarette.

Oh, and don't forget. Government can also tell you you can't buy sugar or cigar from a country that your government finds distasteful. Or you can't sell your wares much to a country because of the high import tariffs and taxes that the government of your consuming country has imposed.

Well, it's not fun talking about burdens and restrictions.
But we can make fun of the politicians and bureaucrats who made our lives a bit difficult.
For instance, a politician told a group of people attending a political rally.
"These are my principles! But if you don't like them, I have others."