Monday, February 16, 2009

Rationalization and stimulation

Rationalization is the process of correcting the irrational. The irrational can easily be spotted because they normally contradict or attempt to contradict, certain laws of nature. Like disobeying the law of gravity and trying to stay on high places when the structures or tools that support them up there are not stable and easily collapsible. In economics and politics, irrational policies or personnel remain where they are because of the various coercion and coercive mechanisms employed to continue propping them up.

Stimulation is the process of using various stimuli to an object, to living things like animals, plants and people, to make them perked up, alive and active. And in the current global economic condition, the stimuli being used by many governments to perk up their respective economies, are the various taxes and fees, to finance ever larger “fiscal stimulus”.

One of the irrational things happening in many governments around the world, is the explosion of their bureaucracies. Here, governments collect so many taxes and fees from the people, and governments hire so many personnel to supposedly serve the people. In many rich countries like France for instance, about one out of four or five employed people is working for the government. Whether the public, the net taxpayers in the private sector in particular, feel that the government personnel are really helpful in their lives or not, is not certain. What is certain is that the public will pay for the salaries, bonuses, training, travels and pension of those government personnel, whether they are useful or burdensome.

So, if the big number of government personnel is burdensome and irrational, why are they not reduced to a certain level that is deemed to be less burdensome? Because the money used to create those government offices and pay for those personnel, come not from sources via voluntary exchange, but from forcibly and coercively collected revenues – taxes and various regulatory fees.

Here in the Philippines, the issue of “bloated bureaucracies” has been with us for many decades now. Each incoming administration, both at the national and local government levels, being its own army of new personnel, usually from among its pool of ardent and loyal political supporters in the last elections. And once inside the government, many “temporary” and “contractual” employees manage to make their position “permanent”, so that when a new administration comes in, they are already protected by civil service laws and tenure. The result is an ever-growing number of government personnel, both at the national and local levels.

Moves to “rationalize” government bureaucracy has also been with us for many decades now, but their chance of success was often low. One such attempt, the most recent one, was Executive Order (EO) 366, signed in October 2004. Recently, the Rationalization Plan has identified about 10,000 “redundant and outdated” positions in various national government agencies, and the Plan has suggested the abolition of these positions.

The affected personnel naturally objected. Among those who are complaining for instance, are “telex operators” in the age of nobody using telex machines. Or porters in the age of forklift and mechanized cargo materials.
But there is a “global economic crisis”, there are lay-offs by tens of thousands in many companies, both here and abroad. Some governments even invented multi-billion dollars “fiscal stimulus”, partly to hire those laid off and the previously unemployed. Such fiscal stimulus will later on result in ever-bigger government bureaucracies.

Thus, there are suggestions and moves from the Executive branch, from some labor groups and other quarters of society, to “postpone” the Rationalization Plan because it will send a “wrong signal”, that while government is embarking in some fiscal stimulus of its own and hiring more people, it is at the same time laying off people.
This writer is with the opinion that government should proceed with the plan, abolish certain positions hat have been identified as redundant and outdated, government can keep the savings and “give it back” to the people in the form of tax cut, to allow the people in the private sector to employ themselves or expand modest expansion through micro- and small-scale entrepreneurship, because this will help perk up the economy and expand job creation.

A reduction in some government bureaucracies coupled with some tax cuts, is a practical move to help the economy get out of the current situation.

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