Saturday, November 07, 2009

Rising walls of forced collectivism

Walls can protect, but they can also restrict. When people voluntarily put up a wall to protect themselves from unfriendly forces – like the Great Wall of China -- then it is to preserve their freedom. But when people are caged by a wall to prevent them from freely moving to another place, then that is coercion and dictatorship. Think of the Berlin Wall then.

Three days from now, the collapse of the Berlin Wall will be commemorated in an international conference to be sponsored by the Atlas Economic Research Foundation, the “2009 Freedom Dinner and Conference” on November 9-10, 2009, to be held at the Mayflower Hotel, Washington DC. The conference’s theme is on “Tearing down the wall” with the Berlin Wall’s collapse as starting point.

Many governments around the world have erected various walls and restrictions that limit individual freedom. Unlike the Berlin Wall, such new walls are mostly non-physical, less -tangible. They are the multitudes of regulations and prohibitions that declare for instance, that entrepreneurship and job creation is a crime, unless the would-be entrepreneurs will secure first dozens of signatures, permits, accreditations and authorizations, and pay various taxes, fees and fines, from various government agencies, both local and national.

I will be one of the foreign speakers on the 2nd day of the conference. As I was preparing my powerpoint presentation, I was pondering the various walls that the Philippine governments – Executive branch, Legislative branch, autonomous units like the central bank, and local governments – have erected and expanded so far. There are just too many. For instance, just to put up a medium-size company, entrepreneurs have to secure 15 different procedures and wait for 2 months (at least) and spend a handsome amount of money in various regulatory fees and taxes, excluding getting the services of other companies or individuals who will facilitate those procedures. That is, they wait only 2 months, instead of 3 months or longer for people will little or no experience in opening a business.

And once the company or enterprise is set up, entrepreneurs will have to grapple with 47 different taxes and fees every single year, spend about 4 weeks total just to comply with those different payment, and surrender up to almost 50 percent of a corporation’s profit in different taxes and mandatory contributions. Those regulations are definitely confiscatory and are driven by envy, nothing else. Those business regulations and tax laws are effectively saying, “It is wrong, it is bad, to be earning big when so many people are poor and jobless. So the State will confiscate as much as possible from those earnings to be distributed to the poor.”

And furthermore, even if one has complied with each and every regulation in starting a business and in operating a business, there are policy reversals which again, are driven by envy. These regulations include price control and mandatory subsidies by private enterprises of the public.

There are two recent and graphic examples for this: the pharmaceutical and petroleum industries. July this year, many foreign pharmaceutical companies were ordered by the President, through the Department of Health (DOH), to slash the prices of their most saleable products by 50 percent. There are a number of heavy penalties if they will disobey the State. Some or many of those companies were therefore, coerced by the State to sell at a loss.

Recently, price control was imposed on the petroleum industry. All oil companies, from the “Big 3” to the “medium/small many”, were ordered by the President, through the Department of Energy (DOE) and the Department of Justice (DOJ), to sell at their prevailing price as of October 15 in Luzon. While world oil prices were creeping upwards, local prices are stuck. Oil companies that do not want to sell at a loss will be declared “economic criminals” and be imposed heavy penalties by the DOE and DOJ.

And even worse, there are now moves to re-regulate the industry. Meaning the politicians and energy bureaucrats will set the price of oil products. Pricing of oil products will be a function of pleasing the politicians and bowing to the demands of the militant transport groups and activist media. It will no longer be a function of world oil prices – not of the Peso-Dollar exchange rate; not of the level of competition among many oil companies; not the costs of energy, labor, and taxes – but by politics. I wrote a position on this entitled, “Consumers’ welfare through deregulation, not politicized pricing” (A position paper on new moves to re-regulate the oil industry).

As of today, there is no timetable of when the government will lift the price control order for both industries. Almost all of the business groups in the country – joint foreign chamber of commerce, Philippine chamber of commerce, and other local business associations, have spoken and issued that price control is wrong. The short-term gain is very small compared to the long-term loss of business confidence in the country.

There are many other walls applied in the business and personal lives of the people living in the Philippines and living abroad. Those walls and prohibitions would have been more tolerable and acceptable to the public if those administering the walls and prohibitions are themselves subjected to their own prohibitions. But in many developing countries, there is lack of promulgation of the rule of law. There are always two sets of rules – one for the public, one for the State administrators and politicians, and their friends and family members. A simple traffic law of “No left turn”, for instance, always has double meaning. It’s No-no for ordinary motorists, but allowed for government and police vehicles or private vehicles whose drivers can name-drop some high-ranking government officials.

The “good of the collective” has always been a convenient excuse to rein in individual freedom. The supremacy of the forced collective over individuals or voluntary collectives has always been the dominant justification for erecting new walls, and expanding or raising existing walls. And because they are mere alibi, the reality sets in: society is falling into dictatorship, little by little, sector by sector.

Let us rise to tear down our respective walls. One at a time.

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