Wednesday, July 25, 2007

Decentralization 1: It's Still More Government

I am no fan of so-called "decentralization" or "devolution" from national to local government units (LGUs). Both in principle and practice. Whether centralization or decentralization, it's the same bottom lineof MORE government and bureaucracies. The only difference is that in centralization, it's the national politicians and bureaucrats who make and implement the rules, while in decentralization, it's the local politicians and bureaucrats who do.

Below is from a friend, also from UP. He was a 3-termer councilor in a town in Pampanga, now a municipal administrator. He's got lots of insights on local govt. administration, governance, taxation, etc. For instance, he noted the wastage of our taxes on barangay leaders. The barangay chairman in pangasinan where our farm is located also narrated to me that many of his fellow brgy chairmen really enjoy being treated to red-lights entertainment (DOM style) when they go out for seminars in the cities:
Nonoy, I've been reading the essays you've been sending me. Kaya lang I don't have the time to comment on them dahil I'm loaded with a lot of work and I'm usually preoccupied with meetings, trainings and workshops.

I feel mas marami akong trabaho ngayon compared to when I was in the legislature. As municipal administrator, I'm the one who practically runs our LGU. Oh boy, it's a stressful job.

And I've been the object of relentless attacks by people who're getting hurt by the reforms and changes that I've been introducing. I have received numerous hate mails through SMS and the regular postal service. Nasty notes have been pasted on to my windshield and other stuffs lke that. It's the price I continue to pay because I got rid of excess fat and overlapping of functions,because I said "Enough of patronage hiring!" Can you blame me then if I move around with my favorite hand gun?

It is seldom noticed, Nonoy, na malaki ang waste of taxpayers' money sa mga local governments. Halimbawa, taun-taon na lang ang daming seminars and workshops ang nilulunsad ng DILG sa buong kapuluan. Ang funding ng mga iyan ay nanggagaling sa general fund ng mga municipio. Yet magtataka ka na sa kabila ng mga paulit-ulit na trainings ay di pa rin marunong bumalangkas ng badyet ang mga barangay, maging ang mga bayan. Eh paano sa halip na mag-aral ang mga delegado, they find it more convenient to visit a red light district, a local casino or some other places of amusement. Pag-usapan na lang natin ito when we get to sip a bottle of wine- - pag medyo maluwag-luwag ang sked natin.


Another friend, Bruce, made this reaction to Jun's comments:
What more proof do you need that you are doing something? Those politicians and bureaucrats that are HATED are the ones that are doing something. Those that are loved by everyone, or at least those that do not generate strong feelings, are not doing squat.

Enough of this talk of "unity" or trying to get along. Politics is about getting things done. Winners and losers. Pissing off the criminals and the corrupt officials and making great enemies. If you are a politician without great enemies, you are a politician who has done nothing of note.

Reagan, Thatcher, Bush 43 are all hated because they all had tremendous impact upon people and the world. People don't hate Pres. Jerry Ford because he did little (and for good reason - Watergate).

Will GMA be hated or will she be inconsequential?

By the way, only with strong enemies will you have strong supporters. Again, witness Reagan and Thatcher. By his enemies, you can judge him. I don't trust anyone who is not hated by the Marcoses and the Estradas.

Below is a personal testimony by an American of his experience in just renewing his car's registration in Fairfax, Virginia, can beastounding for some guys in poorer countries who thought that American bureaucracy is among the most efficient and least interventionist inthe world.

Car registration in the Philippines is not decentralized or devolved to LGUs. It's done by a national bureaucracy called the Land Transportation Office (LTO). The process is not as bureaucratic as the one in Virginia as narrated by the author, Mr. Daniel Mitchell. One difference here is that there's a regulation that amounts to a new tax. All vehicles, before they can be registered annually, have to go through a "smoke emission test" and show that it "passes". The fee for this is P300 (US$6.7 at P45/$ exchange rate). Even if your car is newly-purchased, you still have to go through this test and pay the fee. "Failure" rate in this test is very very small, but the government is still doing it anyway.

The fangs of LGU bureaucracy in the Philippines can be felt inbusiness registration, not in car registration. Read this testimony here, http://www.cato.%20org/pub_display.%20php?pub_id=,
and understand why the author considers himself alibertarian.

Below is a portion of his personal testimony

Great Moments in Local Government
by Daniel J. Mitchell

I became a libertarian in high school and college thanks to Ronald Reagan's eloquent commentary against big government. I remain a libertarian because of Virginia's Department of Motor Vehicles.

... I went online to find out about renewing the registration, and was horrified to discover that I had to make a visit to DMV because my registration had lapsed... I woke up early so that I could avoid a three-hour line at the DMV office and managed to see someone after a wait of just 15 minutes. But when I attempted to register, I was told that Fairfax County had placed a hold on my registration because of unpaid taxes. I would like to claim that I was being a principled tax protester, but I meekly pay my car leastwhen I'm aware that a bill is due. I don't know whether to blame the Post Office or the vehicle bureaucracy, but there are no letters from Fairfax County in my inbox.

... there is no coordination between Fairfax County and the state government. So I had to surrender my spot at the counter and go look at a sign with numbers for various local tax offices. I called Fairfax County's automated system, filled with naive thoughts about making an automated payment and then taking care of my registration.

I was surprised to learn that Fairfax County thinks I have four cars. Unfortunately, the system does not tell you the cars you ostensibly own, or which car has the unpaid tax bill. But the amount was not very large, so I was willing to pay it - even if it was for a car I didn't own. Like any sensible person, my top goal was to avoid having to make a repeat visit to the DMV.... I opted out of the automated system and eventually got to speak to live bureaucrat. For reasons that I will never understand, though,the bureaucrats can only process payments if you have a Discover card.

... I will now have to visit the Fairfax County tax office and then make a secondvisit to the DMV. And if that is all that I have to do, I willconsider myself lucky. But there is a silver lining to this dark cloud. I now am fullyre-energized in my disdain for government....


A friend asked me why I don't agree with decentralization, and If I believe there is still a need to elect local government officials. I have clearly stated from the paper above, devolution or decentralization just retains big government. There was also nothing that I mentionioned there that I am in favor of a monolithic central or national government.

I still believe there is a role for LGUs, particularly in maintaining peace and order. I believe that there should be more barangay tanods and less policemen. I've seen the effectivity of barangay tanods in maintaining peace and order in many barangays. The tanods know most if not all residents in their barangay. The policemen, their central command coming from the national government, are often lazy, busy mostly in "anti-terrorism" campaigns and in defending the President from street demonstrators.

There should still be provincial governors, city/municipal mayors, and barangay chairmen, and their respective coteries of councilors. But the powers of these LGUs should be limited, particularly on imposing many regulations and restrictions in business and entrepreneurship. Just observe how the city government of Makati behaves for instance.

You want to rent a space in a building for your office. Before you can start anything, get barangay clearance, location clearance, MACEA clearance, then various permits in city hall (fire dept. permit, electrical permit, mechanical permit, sanitary permit, pay real property tax, etc.) before the mayor's business permit can be granted.

Once you have the business permit, you need "renovation permit" before you touch anything on the space on that building, and I heard another MACEA permit. And before you bring your office furnitures and supplies, you need a "permit to occupy" again from city hall. I am not a contractor or building/interior designer, so I don't have the details of various permits and regulations required by the local government bureaucracies.

Is this a desirable set up of "decentralized government"?
No way man. My concept of "decentralized" government is minimal government.
Very little if not zero government role in business regulation.
Regulate criminals and robbers and rapists, Yes.
But regulate, even over-regulate, entrepreneurs, No.

And if we think changing this bureaucratic procedures in local governments is easy, think twice. Or think a hundred times. Once LGUs or any other government entity have tasted power, especially the power to regulate other people's lives, the hunger for more power can only increase, not decrease. The power to tinker with even minute details of our lives, like how much we can keep from our monthly income, how much one can renovate his house and how soon he can start it, makes bureaucrats desire for more power.

Tuesday, July 17, 2007

Free Trade 5: Business, Rock Music and Cycling Globalization

In a news report today in the Financial Times, two very big business lobby groups in the US and Europe, voiced out their impatience at various regulatory barriers by their respective governments that hinder business and entrepreneurship. The report below:

Business lobby groups move to reduce barriers
By Jeremy Grant in Washington
Published: July 17 2007 03:48
The world’s two largest business lobby groups, the US Chamber of Commerce and Business Europe, will announce on July 17 a “strategic partnership” aimed at reducing regulatory barriers amid frustration at what they say is slow progress by governments on the issue...
Tuesday’s initiative, known as the Global Regulatory Co-operation Project, is a sign that business believes that government efforts should be “held to account” and progress measured by the businesses to be affected, according to Stanton Anderson, special counsel to the US president and the project’s chairman.
“There are increasingly around the world regulatory barriers being established and trade negotiations are becoming increasingly problematic both at the bilateral and multilateral level and we think this regulatory co-operation effort is a way around that problem, and that progress could be made in eliminating these barriers with regulator talking to regulator.”
Mr. Anderson's (the project chairman) adjective is "increasing" regulatory barriers around the world. The continuing failure in the Doha trade liberalization negotiations is actually one proof of this increasing market barriers posted by most governments around the world, whether rich country or poor country governments. Each failure in trade liberalization talks is an opportunity of one camp to blame the other.

I do not know how far these 2 big business lobby groups of the US and Europe will go in demanding reduction in business and trade barriers, at least of their respective governments. But I will not be surprised if someday they will go for drastic income tax cut and import tax cut advocacies. Taxes always distort prices upwards, whether domestic or imported prices.

Of course, businessmen, like ordinary producers and consumers, want double-standards. They want their products and services be protected by government barriers from more competition, but they also want their various consumption goods, their production raw materials and capital goods, to be liberalized so that they can bring down their production costs. But if you ask them if they have to drop one sentiment, which will they favor -- liberalization or protectionism -- it's clear in their consumption pattern that majority favor the former. At the end of the day, even the most protectionist farmers will want to have access to cheaper toys and shoes for their kids, cheaper clothes and jewelries for their wives or girlfriends, and cheaper tractors and spare parts for their farms. And only free trade can give them this opportunity, not protectionism, not so-called "fair trade".

A related paper I wrote last April 11, 2007:

From Led Zep to Lance Armstrong: Street Globalization

The British rock band of the 60s to 70s, the Led Zeppelin, is considered among the pioneers of metal rock music with class. Among their famous songs, "stairway to heaven", "rock n roll", "black dog", these are still being played in Philippine radio from time to time; performed by a few Pinoy rockers, their DVDs of live concerts can be found in Quiapo and elsewhere. The band's "Led Zeppelin: BBC Sessions" live songs are in my Ipod too.

The American cycling hero, Lance Armstrong, is the greatest road racer of all time. He won the Tour de France for 7 years (1999-2005) consecutive! He was also considered "dead man winning" because he wasa survivor of testicular cancer. His feat is known not only in Europe and the US and other developed countries in the world, but also in thePhilippines. You will not meet a single serious racer cyclist in this country, even among recreational cyclists, who do not know Lance. His previous teams' (Motorola, USPS, Discovery) jerseys are worn by localc yclists, and so on.

These 2 guys/group are among the famous symbols of globalization –along with Michael Jordan, Tiger Woods, Mike Schumacher, Bryan Adams, Bruce Springsteen, Eminem, Coca Cola, Nike, Samsung, Ericsson, and so on. Their presence are felt and seen in the streets.

With the globalization of rock music (and jazz, classical, rap, othertypes), comes along the hardwares and paraphernalias that accompany such music: stereos, tv, CD/DVD players, computers, Ipod, MP3, sound systems, home theaters, etc. These goods – imported from the US, Taiwan, Europe, China, Japan, Korea, India, and many other countries –enable the people, the ordinary Filipinos especially, to enjoy such famous music and musicians. In the process, world-class Filipino rockbands were inspired and born, bands like Eraserheads, Bamboo, 6 cycleminds, Cueshe, etc.

With the globalization of cycling (and soccer, F1, beach volleyball, basketball, golf, etc.), cycling shoes, jerseys, bicycles, bike parts and tires, speedometer, heart monitors, and the goods and services provided by commercial teams competing in big international races like the Tour de France, are made available in our malls, shops and streets. And a lot of world-class Filipino racers were inspired and born – guys like Victor Espiritu, Ryan Tanguilig, Lloyd Reynante, Warren Davadilla, etc.

Seems that the only guys who do not like the full enjoyment of more and more people of those international music, sports, adventure, technology, and the competitive spirit that go with these, are the politicians, government bureaucrats, and vested, anti-free trade sectors and producers in the local market. For the latter, all sorts of excuses and alibis are recited when all they want are (a) more taxes to feed a growing bureaucracy and pork barrels, (b) more monopolization of local markets and slam-dunk local consumers with higher prices and often low-quality goods and services.

The competitive-minded among local producers love free trade. Not onlythat free trade will give them an opportunity to penetrate other foreign markets, but they will also be able to find cheaper raw materials and intermediate goods, cheaper technologies, already available abroad, to make them more efficient in their productionp rocesses.

So one important thing that globalization offers, is that it helps expose the pretentious and lazy among us, the "more taxes for more subsidies and bureaucracies please" people among us.



See also:
Free Trade 1: Estonia's Free Market, Globalization, May 09, 2006
Free Trade 2: Unilateral Trade Liberalization, May 17, 2006
Free Trade 3: Protectionism Perpetuate Poverty, September 05, 2006
Free Trade 4: FTA in APEC, July 09, 2007

Monday, July 09, 2007

Free Trade 4: FTA in APEC

The coming Asia-Pacific Economic Cooperation (APEC) summit in Sydney, Australia this coming September, is looking to produce one good result: a possible free trade area (FTA) among the 21 member-countries. Of course, like most if not all FTA visions around the world, an FTA will become a reality in 10 or 20 years from date of signing, if not longer. Nonetheless, it's better than not putting that vision at all.

This is expected to be the "fallback" position after the failed talks on reviving the Doha talks between the big and representative countries of the poor world and the rich world, and should other efforts to revive it will fail again.

Usually, agreements and communique like this among member-countries of any alliance or grouping of countries, will be full of "provided that" and other conditions, before any real free trade area can become a reality.

If countries, or better yet, trade negotiators and politicians of those countries, are serious in having free trade, no agreement with other countries is necessary. They can always declare a unilateral trade liberalization, and that's it. Hong Kong has done it; Dubai, Chile, Singapore, other smaller economies are doing it.

This means that trade "activists" who are leaning towards free market should not play along with those groups and individuals who declare, "free trade yes, on condition that...." We better address ourselves to the general public the "net gains" and benefit from free trade.

Last year, I wrote this:

Pan-Asia free trade area

September 05, 2006

A news from has this story,

Japan set to kick-start pan-Asian free trade area" by Lisbeth Kirk
21.08.2006 - 09:57

Japan minister of economy Toshihiro Nikai is set to unveil plans for a pan-Asian free trade area of 3.1 billion people, half the world'spopulation, Malaysian news agency Bernama has reported ahead of the 38thASEAN Economic Ministers meeting starting today in Kuala Lumpur.

The free trade area would include ASEAN-countries Australia, China, SouthKorea, India, Japan and New Zealand and would be promoted by a Japanese fundof 100 million US dollars....

The 39-year-old ASEAN bloc agreed already in October 2003 to set up a singlemarket by 2020, modelled on the EU. But ministers meeting this week hope to speed up the plans and get it ready by 2015. "We need to muster political will to create the AEC [Asean EconomicCommunity] by 2015, instead of 2020," ASEAN secretary-general Ong Keng Yongsaid, according to AP.

China and ASEAN have already agreed to create no-tariff zone by 2010 intheir combined market of 2 billion people.... ASEAN is the America's fourth largest trading partner. ASEAN was established on 8 August 1967 in Bangkok by Indonesia, Malaysia,Philippines, Singapore and Thailand. Brunei, Vietnam, Laos, Burma andCambodia have joined later....

This is a good development. Better than no regional or continental free trade area at all. Of course, there will be free trade among countries as early astomorrow if governments will not hinder trade.

Almost all people around the world want bargains, they want more choices. And only free trade, of big supply of various goods and commoditiesfrom everywhere, can do that. The job of trade protectionism, sometimes called "fair trade", is to restrict trade, to limit supply of various goods and services available to consumers, to limit choices.

What the governments of Japan and other countries do in the above plan is phasing out trade protectionism little by little, and any form of trade liberalization should be done with their consent first. Hence, if theywant full free trade to be realized in 20 years, or 30 years, or 50years, that's what will happen. If governments are out of the picture of regulating trade, then free trade can happen anytime. Government's main job should be to regulate and control criminals and robbers, terrorists and killers. Regulating trade that makes life easier for people, especially the poor and jobless, by giving them access to cheaper food, cheaper clothes, cheaper farm inputs, and so on, is bad and wrong "role" of government.

About the Doha round, me thinks US' Trade Rep. Susan Schwab should better talk to Prof. Jagdish Bhagwati, a famous academic economist (Indian-American, i think) in the US, than moving around talking to the trade reps of China and other countries. Dr. Bhagwati argued in some recentpapers for a unilateral trade liberalization for the US and estimated the benefits for the US economy in terms of economic growth and job creation. Hence, Mr. Bhagwati has no problem with EU's high export subsidies, high agri subsidies, and so on. But Ms. Susan Schwab has lots of angsts on such export subsidies, the same with her counterparts in the EU and Australia and Japan and many other countries.

On another note, When globalization hits home...

Globalization will definitely hit homes, wherever they may be. A city can experience job losses when a big company packs up and puts up its office or manufacturing plant in another country, the same way that the same city created new jobs when that firm that left came a few years ago, or a new firm comes in.

Many governments in developing countries are allergic to the idea of de-bureaucratizing business regulations, so many of their people are working abroad if not migrating outright to pursue their ambition and entrepreneurial spirit.

And many governments of rich countries are also allergic to the idea of reducing business taxes and of leaving wage-setting to the employers and the market. So many of their companies are leaving and putting up manufacturing plants and offices in developing countries.

These plus many other aspects of capital and labor mobility are all part of globalization. There are losers, definitely, but there are also gainers. Overall, there is net gain, or the number of gainers are plentier than the losers. But if the initial losers will learn to adjust and be flexible, they become gainers later.

One reader asked, “how much longer should the losers wait?”

It depends. A chicken farmer who has been raising chicken all his adult life and suddenly shifts to producing other livestock or crops that experience price hikes while chicken prices are going down can benefit from globalization and make money quick.

While those losers who just wait for new or additional subsidies from the state, and continue producing goods and services that experience price declines due to competition from other producers abroad, can remain losers for the rest of their lives.

See also:
Free Trade 1: Estonia's Free Market, Globalization, May 09, 2006
Free Trade 2: Unilateral Trade Liberalization, May 17, 2006
Free Trade 3: Protectionism Perpetuate Poverty, September 05, 2006