Thursday, September 30, 2010

Getting the free market ideas out

(Note: this is my panel talk at the 4th Pacific Rim Policy Exchange, Sheraton on the Park, Sydney, Australia, September 29, 2010. The powerpoint presentation of this will be uploaded at

Introduction about the Philippines.

• Current population 94 million, 12th biggest in the world
• Population growth 1.8 million/year. Creating an equiv. of one Singapore (4.5M) every 2 years and 6 mos.
• Land area 30 million hectares, archipelago of 7,100 islands and islets
• Only Asian country colonized by Spain (about 370 years) and the US (about 43 years), then Japan during WW2.
• Only predominantly Catholic country in Asia.
• North is Hong Kong capitalism, just 1:45 hrs by plane. South is Singapore capitalism, just 3:20 by plane.
• But the Philippine government is learning more statism from the UN and foreign aid bodies than these 2 dynamic economies.

Advancing the free market ideas and the philosophy of individual freedom is a tough act to do these days. Many people enjoy the freedom of voluntary exchange, the many free online networking like facebook, google, youtube, blogger and twitter, that enhance individual expression and individual freedom, all of which are products of competition under capitalism. And yet people lambast capitalism and glorify its “death” with the recent global financial turmoil. And so they justify if not advocate, for greater government intervention, regulation and taxation, to “correct market failures” and save the poor.

But how blind can they be with various government failures? Government corruption, wastes and robbery is a never-ending issue in many countries, especially in poorer ones like the Philippines. We’ve had “People Power revolution” in 1986 to kick out a dictator and its corrupt government, we’ve had several administrations after that and until today, corruption remains a topic of conversation and frustration by many people, including those who benefit from it.

The attitude of many people about capitalism and the free market is similar to their attitude and belief in “man-made warming”. When it’s hot, dry and there is prolonged drought, it is due to man-made global warming and climate change. When it’s cold, wet and there is prolonged rains and bitter winter, still it is due to man-made global warming and climate change. Whatever climate a country or continent has, it is due to man-made warming. It is religion, it is based on faith and belief, not on hard data and endless scientific discoveries. So believers of such man-made warming religion support governments to institute more environmental regulations, more energy taxation, more climate bureaucracies, more expensive global climate talks. Their appetite for global ecological central planning is endless.

And so because many people attack the free market even if they benefit from it, they casually cite market failure as if market solutions do not exist, and they are blind or silent to endless government failures and they advocate even more government intervention to solve previous government failures, our task as advocates of more individual freedom, of free market and free trade, just gets bigger and bigger.

It is important to explain to the public the irony of their attitude, and the dangers of heavy state intervention and coercion in our lives.

On our part in the Philippines, these are some of the things we do, me in particular.

1. Our website,, updated weekly, featuring free market writers and bloggers in the Philippines and some from Asia. We give some of their latest articles with direct links to their sites or blogs.

2. I regularly update my blog,, with new articles everyday on average. I just posted two papers about this conference and Sydney yesterday and this morning.

3.I write a weekly column in an online magazine,, my column there is entitled "Back to Personal Responsibility" to highlight the need for people

4. Writing another weekly column in a weekend tabloid, People's Brigada News, circulated in two southern cities of Metro Manila. It has a weekly circulation of 5,000 copies.

5. Posting my articles or linking important free market articles in my facebook status (I have nearly 950 fb friends) and engage some guys to a discussion or brief debate. If no one engages me in a debate and I'm in a mood to look for one, I check the status of some friends and duel them in their facebook status if they post some statist and anti-market remarks. In most cases, I have "terrorized" some of my friends that they do not post topics in their fb status that they think I will come and debate them anytime. This helps reduce the noise and propaganda of some statists.

6. Commenting on others' postings on twitter. I am new to twitter and have few followers there, so I just watch for other people's tweets and engage them in brief counter-arguments if necessary. I have frontally challenged Greenpeace and World Wildlife Fund - Philippines about warmin g, and none of them will engage me.

7. Challenging friends or other members of my variious discussion yahoogroups (I belong to about 6) on different topics. Many of the short papers in my blog are lifted and expanded versions of my discussions and debates from my various yahoogroups.

8. Becoming a guest speaker in some talks and lectures in Manila. Last year, I gave about 15 talks as main speaker, mostly on the subject of climate alarmism.

9. Attending some seminars and conferences and challenge in the open forum some speakers who talked statist arguments and remarks.

10. Sending occasional oped papers in some newspapers in Manila on certain topics.

Lesson: Keep exposing the evils of statism and socialism.

Advancing free market ideas

(Note: this is my article today in thelobbyist)

Sydney, Australia – People are enjoying the benefits of voluntary exchange and increasing competition among many goods and service providers, yet many do not realize the value of free market. They instead call for more government intervention, regulation and taxation of private enterprises, moves which limit and restrict competition among players, which reduce the options and choices available for consumers.

This is the gist of my talk in one of the six panels in the on-going 4th Pacific Rim Policy Exchange, September 29-30, 2010, held at Sheraton on the Park, Sydney. The two days conference is jointly sponsored by the Americans for Tax Reforms, Property Rights Alliance, Heartland Institute, and Institute for Public Affairs. The first 3 are US-based and the last is based in Australia.

On Day 1 of the conference, I sat on the panel, “Getting the free market message out”. The two other speakers in the panel were Khalil Ahmad from Alternate Solutions Institute in Lahore, Pakistan, and David Farrar of Kiwi blog.

Below is a portion of my presentation.

Advancing the free market ideas and the philosophy of individual freedom is a tough act to do these days. Many people enjoy the freedom of voluntary exchange, the many free online networking like facebook, google, youtube, blogger and twitter, that enhance individual expression and individual freedom, all of which are products of competition under capitalism. And yet people lambast capitalism and glorify its “death” with the recent global financial turmoil. And so they justify if not advocate, for greater government intervention, regulation and taxation, to “correct market failures” and save the poor.

But how blind can they be with various government failures? Government corruption, wastes and robbery is a never-ending issue in many countries, especially in poorer ones like the Philippines. We’ve had “People Power revolution” in 1986 to kick out a dictator and its corrupt government, we’ve had several administrations after that and until today, corruption remains a topic of conversation and frustration by many people, including those who benefit from it.

The attitude of many people about capitalism and the free market is similar to their attitude and belief in “man-made warming”. When it’s hot, dry and there is prolonged drought, it is due to man-made global warming and climate change. When it’s cold, wet and there is prolonged rains and bitter winter, still it is due to man-made global warming and climate change. Whatever climate a country or continent has, it is due to man-made warming. It is religion, it is based on faith and belief, not on hard data and endless scientific discoveries. So believers of such man-made warming religion support governments to institute more environmental regulations, more energy taxation, more climate bureaucracies, more expensive global climate talks. Their appetite for global ecological central planning is endless.

And so because many people attack the free market even if they benefit from it, they casually cite market failure as if market solutions do not exist, and they are blind or silent to endless government failures and they advocate even more government intervention to solve previous government failures, our task as advocates of more individual freedom, of free market and free trade, just gets bigger and bigger.

It is important to explain to the public the irony of their attitude, and the dangers of heavy state intervention and coercion in our lives.

Food subsidy or bureaucrat subsidy

(Note: this is my article for People's Brigada News last weekend)

For many urban consumers like those living in Metro Manila, cheaper rice and other food is being demanded from the government. And government gives in to the populist clamor through food subsidy, via the National Food Authority (NFA) and other government agencies.

The NFA is among the most notorious perennial losers and subsidy-dependent government corporations. Last year for instance, its income statement showed a loss of P30.4 billion. This year, the projected losses will be P33.3 billion.

For every peso that the NFA loses purportedly because of its “buy high, sell low” mandate, is one peso less on improving rural infrastructures, which can improve the productivity of farmers around the country, which by itself is already a poverty-reducing policy move.

And in one World Bank study, it concluded that for every P5 of subsidy, only P1 has social impact, the rest is simply wasted if not stolen.

Other government corporations that regularly lose huge amount of money are the National Power Corp. (NPC) and the Light Railway Transit Authority (LRTA).

The LRT subsidy is actually not wise. Taxpayers who work and live outside Metro Manila, like those in the Visayas and Mindanao, contribute to the subsidy but do not enjoy the service.

LRT and MRT should be able to make money without subsidy if certain government restrictions and bureaucracies would only step back. Train operators get revenues from (a) passenger fare, (b) advertising income from those who place ads in the trains, train stations and rail posts, (c) lease income from shops located on the stations, and so on.

The best form of government service and subsidy is to improve the peace and order situation in the country, to run after various criminals and to harass potential criminals. When people have peace of mind, they can be productive and can earn money for themselves and their households.

Then they will demand less food, transport and other subsidies from the government. And we will have less politics and less political clutter in our lives.

Wednesday, September 29, 2010

4th PRPX, Sydney

The 4th Pacific Rim Policy Exchange (PCPX (hey, it’s only me who coined the acronym PCPX, the organizers didn’t) officially started last night. The welcome reception was hosted by the Institute for Public Affairs (IPA-Melbourne, Australia).

A number of participants and old friends from Asia showed up last night. Among them:

• Khalil Ahmad, from Alternate Solutions Insitutite, Lahore, Pakistan. It is Pakistan’s first and only free market think tank.
• Chung-ho Kim, Center for Free Enterprise, Seoul, S. Korea. Should also be Korea’s first and only free market think tank.
• Mr. You, Masaru Uchiyama, Japanese for Tax Reforms, Tokyo. Japan’s first and only low-taxes and free market advobacy group.
• Peter Wong, Lion Rock Institute, Hong Kong’s only free market institute to help remind the HK government to retain the free market philosophy and policies.
• Raymond Ho, Momentum 107, HK’s pressure group to remind the HK government to stick to balance budget policy and not fall to the temptation of endless borrowings.
• Xingyuan Feng, Cathay Institute for Public Analysis, Beijing. One of China’s two free market think tanks.
• Parth Shah, Center for Civil Society, Delhi. One of India’s free market think tanks, focusing on school choice campaigns.
• Jargal Dambadarjaa, Mongolians for Fair Taxes and Wise Spending. Self-explanatory advocacy group based in Ulaan Baatar.
• Wan Saiful Wan Jan, Institute for Democracy and Economic Analysis, Kuala Lumpur. Malaysia’s only free market think tank.
• Fengiang Liu, Beijing Taxpayers Alliance, the leading advocacy group for low taxes in China.

From left: Xingyuan, Peter Holle of FCCP-Canada, and Mr. You. There should be more who will show up later today. Among old friends outside Asia who showed up last night were of course, the guys from the main sponsor, the Americans for Tax Reforms (ATR) led by its President, Grover Norquist, Jane Frazer, John Kartch, and Kelsey Zahourek of the Property Rights Alliance. There were a number of participants from other countries – Canada, Argentina, New Zealand, Australia.

The ATR is a persistent big sponsor of this annual event whose main objective is to gather the major free market thinkers and leaders from the Pacific region and neighboring countries, for an exchange of ideas, experiences and activities on how to advance individual liberty and voluntary exchange in a free enterprise system. How to minimize heavy state coercion and over-regulation of our lives and our pockets.

The state is a penniless but monster institution who got super-super rich via endless confiscation of a growing portion of our income, savings and investment. Many states and governments, local and national, have become very powerful and intrusive that they can dictate how expensive the goods and services that we buy and sell can be, via various taxes and fees, and the cost of compliance with their various regulations, restrictions, certifications and authorizations. No wonder so many people want to become politicians and bureaucrats because of the tremendous power they can wield over our lives, with the bleeding heart goal of protecting the poor without admitting that their endless intervention and taxation creates poverty and personal irresponsibility.

And speaking of governments, we should not forget the supra-national institutions and international bureaucracies. Like the UN, the WB, IMF, ADB, WTO, OECD, USAID, and many other foreign aid bodies. They are the great allies of many national governments in instituting various forms of sectoral central planning.

Ok, time to prepare my presentation for today’s conference.

Friday, September 24, 2010

Philhealth Watch 2: Contributions vs. service

A friend noted in his facebook blog the following about the Philippine Health Insurance Corp. or PhilHealth:
According to the National Demographic and Health Survey (2007) only 53% of Filipinos have coverage under PhilHealth or the National Health Insurance Program (NIHP). IPD research shows that of these, only half are able to use their PhilHealth card and get the benefits. Only 34% of their hospitalization expenses are being covered by PhilHealth. Therefore, only 7.7% of hospitalization/medical expenses of Filipinos is being covered by PhilHealth.

...PhilHealth does not yet cover mid-way care for chronic diseases and other illnesses that are potentially fatal without mid-way care, such as hypertension, diabetes, HIV, colon cancer, asthma, and stroke. PhilHealth benefits package should cover these. Maintenance drugs for hypertension, monitoring for diabetes, anti-retroviral drugs for HIV, and physical therapy for stroke victims should also be included. Home visits for the aged, pregnants for pre- and neonatal care and birth planning, and undernourished children are among the items that should further be included under a more inclusive health insurance program for all Filipinos.

Yes, right now, PhilHealth does not cover (a) outpatient services, (b) dental services, what else. Philhealth is very strict in collecting contributions, one should have paid at least 9 months straight, etc. Before one can possibly file for any claims. But when one claims for reimbursement, he will wait for at least 60 working days, or almost 3 months including weekends and holidays, even if the proposed claim is as low as P1,000.

My physician friend says that he gets paid about 4 months delayed. The hospital where he works may be filing their fees rather late, but the bulk of the delay lies on PhilHealth. He also observed that during election period, physicians are paid even much later.

Doctor Alberto Romualdez, former DOH Secretary, observed that of the top 10 hospitals in terms of volume of claims from PhilHealth, 9 are private hospitals, only 1 is government hospital. One way to look at this is that PhilHealth in effect is paying more to the rich and middle class patients, not to the poor.

Well, government hospitals do not provide drugs. Patients (or their caretakers) have to buy their drugs outside the hospital. Private hospitals have their own pharmacies, and patients' total bill include the cost of drugs, where PhilHealth will make reimbursements.

Right now, there are other sectors that provide outpatient health insurance: local governments, cooperative or community health insurance, private health maintenance organizations (HMOs). Instead of PhilHealth covering outpatient and other expanded services then slapping us members with even higher mandatory monthly contributions, we better allow the other healthcare providers more leeway.

The last time I was hospitalized was about 27 yrs ago, when I was still in the university. Since I graduated and have work, I've been paying for Medicare, then PhilHealth, zero benefit for me. I have a private health insurance card in our office, that one is very useful. I use it every year -- for annual general check up (not covered in Philhealth), for outpatient consultations and diagnostic tests like if I have a bad cough or bad fever. I see the value of my money in the privae health card.

I surrender to the fact that I have to part with my money every month for the mandatory PhilHealth contribution, but they should not make such contributions even bigger. Remember, from our monthly paychecks, there are plenty of mandatory deducations already -- personal income tax, Pag-IBIG fund (housing contribution), SSS fund (pension and other services contribution), PhilHealth, what else. For every increase in any of those mandatory deductions, our monthly take home pay becomes smaller and smaller. And to think that when we spend such take home pay, the government still collects another round of taxes like VAT.

There are many PhilHealth inefficiencies despite limjited coverage. Expanding the coverage will most likely expand the inefficiencies. PhilHealth -- like DPWH, DND, DepEd, DENR, etc. -- is a monster national bureaucracy. Monsters have a tendency to exist for themselves. That is why I don't trust them.

Related note, here's my article for "People's Brigada News", June 18, 2010:

Health Insurance Monopoly

To get sick is among the most difficult things to happen in a family. Depending on the seriousness of the disease, a household which has no health insurance coverage for family members will encounter mental and financial anguish. This is why having a health insurance is an important consideration for many households.

There is an interesting news report in the New York Times this week, about “A Dirt-Poor Nation, With a Health Plan”,

It is about the case of Rwanda, a very poor nation of 10 million people in Central Africa. People pay an equivalent of $2 per person per year health insurance premium, and 92 percent of the population is covered. It is a “no frills” health insurance system by the government that covers the basic diseases by ordinary patients, like diarrhea, pneumonia, malaria, malnutrition and infected cuts. The article added,

“Local health centers usually have all the medicines on the World Health Organization’s list of essential drugs (nearly all are generic copies of name-brand drugs) and have laboratories that can do routine blood and urine analyses, along with tuberculosis and malaria tests.”

The $2/person/year is definitely not enough. Two foreign aid programs, the Partners in Health (a health charity based in Boston), and The Global Fund, provide the bulk of health subsidies. The former said its own costs ran $28 per person per year in areas it serves, and it estimated that the government’s no-frills care costs $10 to $20.

The problem with this scheme, however, is that price differentiation and market segmentation is not practiced. A millionaire and a jobless man both pay only $2/person/year. Such ridiculous pricing is one reason why government should step back a bit in healthcare.

Those who are rich should be encouraged to get out of socialized healthcare system by allowing a healthy competition among private and cooperative health medical organizations. Since there is a long line for patients going to government health centers, the rich will voluntarily opt out and go to their private health insurance for quick treatment.

The really poor should get the bulk of subsidy. And those who are irresponsible about their body, rich and poor alike, should get a second and supplementary private health insurance.

The huge cost of treating someone with lung cancer due to over-smoking, or someone with liver cancer due to over-drinking, or someone with diabetis or hypertension due to over-eating fatty foods and having sedentary lifestyle, should not be borne by everyone. Let those patients, their families and friends, pay for the extra costs of not taking care of one’s body.

This is one way of making people be more conscious and be more responsible about their body. And this is one way of reducing corruption in government too, as there will be less tax money that will be available for sometimes arbitrary spending.

Health insurance indeed, should not be a monopoly of government, either by the national (through PhilHealth) or local governments. For countries with weak promulgation of the rule of law, where there is monopoly, there is huge waste and robbery.

The incoming administration should prioritize further deregulating the private and cooperative type of health insurance sector. Where there are plenty of competitors, each player will be forced to provide better quality services at lower or competitive cost to the public.

Of course, there will be opportunist and unethical providers among those competitors. And this is where the government will come in more effectively: to enforce the rule of law, that private players and enterprises should stick to their avowed goal of providing services to the public without compromising on quality and ensuring the safety of the patients.

Healthcare Competition 5: Thailand

Last week, there was a "National Summit on Transparency and Governance in Universal Healthcare" was held, September 16-17, 2010, at the Asian Institute of Management (AIM) in Makati. The event was sponsored by MeTA Philippines. I attended it.

One of the topics in the forum was "Universal coverage experience of Thailand", and the speaker was Ms. Netnapis Suchonwanich, the Asst. Secretary-General of Thailand's National Health Security Office (NHSO). She's an articulate and intelligent lady.

In her presentation, Thailand has an impressive experience: as of this year, 99.5 percent of all Thais have healthcare coverage!

Among the important data from her presentation:

* 845 government hospitals with almost 77,000 beds
* 10,848 government health centers with no hospital bed
* 322 private hospitals with 33,600+ beds
* 346 private clinics, no hospital bed, and
* 17,017 drugstores

Those private hospitals and clinics take away some social and economic pressure by the public from public hospitals and clinics.

Thailand's total health expenditures up to 2005 was arouond 3.5 percent of GDP. About 1/3 of such spending came from the private sector, the bulk came from the government.

According to the Economist Intelligence Unit (EIU) report on healthcare in Thailand, posted by Asia Healthspace blog,

Despite a rise in funding, hospitals and other providers complain that the universal healthcare system is underfunded....

According to the public health ministry, in 2006 around 48% of the population was covered under the universal health programme, 19% enjoyed civil service benefits and 13% were members of the social security scheme. The remaining 20% opted for private healthcare, either because they were not covered by any of the public healthcare schemes or because they chose not to be covered.
It is important to allow and encourage the presence of private healthcare providers so that those who are not happy with the quality of services in the public sector will have another option for local treatment and not travel abroad to seek treatment, or endure whatever service the public sector will give.

See also:
Healthcare competition 1: Switzerland, August 28, 2010
Healthcare competition 2: Singapore, August 29, 2010
Healthcare competition 3: Hong Kong, September 02, 2010
Healthcare Competition 4: Solving Info Assymetry, September 08, 2010

Thursday, September 23, 2010

Improving traffic of the blog

Two months ago, July 22, 2010, I checked the global ranking of this blog via It was at a far 7.88+ million in rank. Well, not really that far since other blogs and website I know have ranks 20+ million or "no data available".

I just kept writing and updating this blog. Then a young friend who is also a fellow believer of more individual freedom in society, Harry Santos, volunteered to improve the design of this blog. That was about a month ago. I am focused on writing and less inclined to discover certain tools on the technical or lay-out aspect of my blog. So such help by Harry, I really appreciated.

Today, I checked again this blog's ranking at I am very happy to see a big improvement: it's now at 5.80+ million in rank. Or in two months, this blog has overtaken in rank (and popularity?) more than 2 million other blogs and websites around the world!

No specific target in global rank, but I will keep writing from a free market, more individual freedom, anti-statist and anti-socialist perspective.

One of my IT professional friends informed me that's ranking is not really that reliable because alexa requires other websites and blogs to put something from its product so that alexa can properly monitor its statistics. He suggested to use google analytics.

Being a non-techie person, I believe him. But as I do not know how to get google analytics, I have to rely on alexa for the meantime. Whatever its ranking means, I believe there is some truth to it. Why -- well, unlike in previous months and years, I put in more hours these days writing new blog entries, packing in with necessary data, graphs and pictures whenever possible to add more visuals to the sometimes long discussions. Such effort plus announcements in my facebook status, in my discussion yahoogroups, helped bring in more traffic to this blog. And the rise in global rank captures such development.

On another note, the website of our think tank,, has also greatly improved too. Again, based on's global ranking, the site was ranked 13.51+ million as of July 22, 2010.

Today,'s ranking has moved up to 6.57+ million. Or it has jumped and overtaken in ranking almost 7 million other blogs and websites around the world in just two months.

To my mind, this is one indicator that many people are becoming more receptive to the ideas of free market and the need to advance individual freedom. Or conversely, many people realize the evils of heavy government intervention, regulation and taxation; that more people appreciate the virtue of voluntary exchange arrangement under free markets, compared to the stiff forced exchange scheme under big governments situation.

Of course, not all readers of free market-oriented blogs and websites are believers of the philosophy. There should be fans and believers of "restrict, over-regulate and over-tax markets" who follow such sites like this blog. Why -- well, they have to study how free marketers analyze certain issues, philosophies and public policies. So that they can device new tools and arguments to further fool the public to accept continued heavy statism, if not even more restrictive statism.

The debates and discussions will go on, of course. For the next few years, decades, and even centuries.

But guess who will prevail, the free market or heavy state philosophy?

The answer can be gleaned from the present: the creators of blogger and google, of facebook and youtube, of yahoo and wordpress, of wiki and twitter, and many other free online networking and search engines -- are all private entrepreneurs and capitalists. NOT any government, not the UN, not any socialist party or NGO or activist environmentalists.

In short, the free market philosophy is winning. Most people just do not realize it. That is why the statists are becoming more clever. National level coercions are not enough, they have expanded their power to the global level. Witness the growth of the UN and the FCCC (and man-made warming religion), for instance. Also the WB, IMF, WTO, ADB, etc.


Wednesday, September 22, 2010

Socialized Healthcare 3: Free Market and Better Health

Free market means free individuals. Markets are composed of individuals – sellers and buyers, producers and consumers, rich and poor, young and old, foreigners and locals. When individuals are free to produce and/or sell something with the minimum or zero institutional restrictions like high government taxes and bureaucracies, they become more productive and soon, they become wealthier.

When people have more economic resources, they can buy more food, more healthcare, more spacious house, more and better education. The end result is healthier people in general.

This is the main message of the paper, “Free Trade for Better Health” by Philip Stevens. The paper is one of the 11 chapters in a book, Towards a Healthy Future? Indian and Global Experiences published last year by Bookwell and Liberty Institute, both based in New Delhi, India.

Philip’s article discussed the following: (a) the role of economic growth in improving health outcomes of the people, (b) the role of free trade in economic growth, and (c) the role of international trade in health promotion across countries and continents. One graph that was shown is about life expectancy and income: the higher the income, the longer the life expectancy.

Philip is 3rd from the left in this picture. To his left were Dr. Epictetus Patalinghug, Prof. at the Univ. of the Philippines, College of Business Administration (UP CBA) and Prof. Bibek Debroy from Delhi, India. This was taken in September 2007 during the IPN-MG "Symposium on Intellectual Property, Innovation and Health" held at Manila Hotel. Bibek and Philip were the speakers and Dr. Patalinghug was the forum moderator.

There is one table that summarizes the Modes of trade and the corresponding Health services.

1. Cross border trade --> telemedicine service.
2. Consumption abroad --> medical tourism, or patients seeking treatment abroad.
3. Commercial presence --> foreign commercial presence in the hospital or insurance sectors, and
4. Presence of natural persons --> movement of health professionals to provide services abroad, like the Filipino nurses and doctors who work abroad.

Telemedicine is a fantastic development. Decreasing costs of communication allow doctors to examine x-rays or even perform telesurgery on a patient in an entirely different country. Health professionals in rural areas can consult specialists in urban centers, reducing the need for costly referrals.

Medical tourism is another fascinating development. The Philippines can retain its highly skilled physicians, nurses, therapists and other health professionals, create allied jobs through modern hospitals and clinics that attract thousands of patients from abroad seeking special medical treatment and/or cosmetic surgery.

Commercial presence is allowing foreign hospitals, clinics, health insurance companies, to bring in capital, new medical technologies and processes, into another country. The Philippines is slow or not adopting this yet due to certain constitutional restrictions on foreign investments and the practice of health professions by foreigners in the country.

Movement of Filipino health professionals abroad to render their services there is often seen as “negative” because of the perceived brain drain problem. This is a wrong attitude for at least two reasons.

One, there is limited economic and professional development in the country due to certain restrictions made by the Constitution, certain laws and government bureaucracies. And two, many doctors and nurses who work abroad come home after several years, not as doctors and nurses, but as health entrepreneurs who put up new clinics or stockholders in some hospitals or health insurance firms. The savings they made and the new medical technologies and processes they learned abroad they can bring it here.

Forcing health “equality” via numerous government restrictions and taxation in global trade and global movement of people tend to boomerang in the form of slower economic growth and poorer health. Freeing markets, freeing individual initiatives and entrepreneurship, will create inequality but better economic and health outcomes for the people.

I wrote this last January 23, 2010

Healthcare, Rights and Responsibilities

The best form of healthcare is preventive, not curative. Among the preventive measures: people should not over-drink, over-smoke, over-eat, over-fight, over-sit in sedentary lifestyle. People should also clean their houses and surroundings and not live in dirty places. Taking vaccines is also one form of preventive healthcare.

Curative healthcare becomes important in cases of old age, accidents, pediatric diseases, not taking care of one’s body, and so on. The best way to do it is through more choices for the public: more private health insurance, more private clinics and hospitals, more pharmaceutical companies, more drugstores, more physicians and health professions – in a competitive environment that compel all of them to improve their services and products continuously. In short, the best way to curative healthcare is through the market. Government role in healthcare should be limited to a few functions like in cases of disease outbreak, and patients with special health needs like those with physical and mental incapacity.

This is not the case in many parts of the world, unfortunately. The dominant thinking which is contained in various public policies, is that “health is a right.” Thus, government should provide this service at a low cost or zero cost, to the public. And such policy should not make any distinction between people who got sick because they are old and weak, or have in-born physical or mental defect, and those who got sick because their internal organs were mutilated by over-smoking and over-drinking, or their heart and blood vessels were choked by heavy fat in their bodies. The government should provide healthcare for all. And since the government has no money of its own, the government should over-tax the public, especially those who take care of their body well, are productive and are earning high.

That is not the only disadvantage of forced collectivized and socialized healthcare, or health socialism for short. The other disadvantage is that such policy can create “moral hazards” problem or complacency. For instance, instead of smoking one pack a day, two packs should be fine, since government will provide subsidized, if not free, treatment for all.

This is the main topic of a newly-released paper, “Health as a human right: the wrong prescription”, The author is Jacob Mchangama, head of legal affairs of a free market think tank in Denmark, CEPOS. Mr. Mchangama wrote,

“The right to health is highly problematic when construed as an enforceable right, with the state legally bound to enforce it in a particular and ideologically skewed manner. It would be better interpreted as a human aspiration whose implementation should be left to the democratic process and be decided upon the basis of the political convictions of the electorate.”

Meanwhile, on January 26-27 next week, there will be a big health forum, the 3rd MeTA Forum, sponsored by the Medicines Transparency Alliance (MeTA) Philippines, The theme of the forum is “Medicines Transparency: a basic human rights issue.”

Among the topics to be explored are medicine procurement in the public sector, PhilHealth coverage for essential medicines, the current drug price control policy, and drugs bioequivalence.

I attended the 2nd MeTA Forum last year, and my brief account about the event is here,

On a positive note, there was a good news early this week, “Filipino discovers new vaccine vs. malaria”,

The Filipino scientist, Rhoel Dinglasan, is an entomologist and biologist from Johns Hopkins University in the US. Dr. Dinglasan’s invention will prevent mosquitoes from spreading malaria if they bite someone who’s been inoculated with the vaccine.

The next questions after this great vaccine invention, are the following:

1. When will this be available for commercial production and distribution?

2. If this will be finally distributed, will the price be affordable and accessible, especially to the poor in poor countries?

3. If it is not deemed "affordable", will this new vaccine be slapped with government policies to make it "affordable", like compulsory licensing (CL) and price control?

While the vaccine is still undergoing further clinical trials and not available to the public yet, humanity will be stuck with old or existing vaccines and treatment against malaria, some of whom may not be very effective. Or the more effective ones are just waiting for some governments' intervention like CL and price control, which makes the inventors and manufacturers of those more effective drugs and vaccines, wary of bringing and selling those products to countries that are likely to be slapped with such government interventions like the Philippines.

In food, there are no government restaurants, no government carinderia, no government supermarket, but people are eating. Product differentiation and market segmentation, not forced uniformity, allows the market to develop in all socio-economic classes. The same principle should apply in healthcare. Preventive measures, more personal and parental responsibility and choices in healthcare, more than entitlement from the government and distortionary government policies like drug price control, are the better mechanisms to ensure access to proper healthcare for all.

See also:
Socialized Healthcare 1: More Government = Less Health Care, March 29, 2006
Socialized Healthcare 2: Discussions in Facebook, September 04, 2009

Tuesday, September 21, 2010

Foreign Aid 11: People Mobility and Aid Hypocrisy

Mobility = Freedom. A person living in an unfree society or culture can free himself by leaving that place or cultural village and move to another place where unnecessary restrictions and prohibitions are absent or at a minimum.

International mobility of people, their goods and services, is an attempt by people to find personal and economic freedom. If they find a good job or education and training abroad that makes them more productive, then both their origin and destination countries will benefit.

Remittances from migrants to their folks back home is growing fast every year. It is estimated that in 2009 alone, they sent $319 billion. That's several times bigger than official development aid (ODA) or foreign to developing countries, and bigger than foreign direct investments (FDI) inflow into those countries.

The Philippine peso also has been appreciating (aka "getting stronger") recently. One important factor is the huge inflow of foreign remittances by Filipinos working abroad. Last year, total remittance via the financial institutions was about $16.3 billion. This year, it should hit between $18 to $19 billion.

With international and local migration of people, the mutual beneficiaries are people to people.

With more foreign aid like MDGs, WB and ADB loans, mutual beneficiaries are government to government, and indirectly, bureaucrats to bureaucrats.

A sick or aged person in the US or Europe -- if there are no qualified locals, or there are qualified locals but not interested to do the work or asking too high salaries -- will remain sick if foreign health workers and professionals are not allowed to come in. Thus, it's people to people mutual beneficiaries.

Foreign aid is government to government. Politicians of rich countries tax-tax-tax their citizens, a portion of which will be given to politicians and bureaucrats of poorer countries through foreign aid. If one or both parties is/are corrupt and/or wasteful, foreign aid is immediately wasted. And there is a tendency on the part of politicians and bureaucrats of poorer countries to become more complacent and wasteful with foreign aid money. If they can be wasteful with their own citizens' tax money, why not be more wasteful with tax money of rich countries?

Implication: free market groups should demand less or no foreign aid, and more international mobility of people, their goods and services, with the least restrictions possible.

Meanwhile, one Filipino bureaucrat from the ADB who is also a member of one of my discussion ygroups irritatingly asked,
"Nonoy why are you so upset (putting it mildly) with ADB, WB, USAID etc. employees & consultants? Like everyone else we work our asses off to deserve our salaries, fees."
The lady was wrong. I was not upset with ADB, WB, USAID, UN employees and consultants. Neither am I upset with Globe, Smart, Google, Jollibee, Victory, PAL, Cebu Pac, Chinabank, Teotico arts and gallery, Dome coffee, etc. employees and consultants.

What I was criticizing was the exemption from mandatory, obligatory, withholding personal income tax system for employees and consultants of foreign aid bodies. Aren't the UN, ADB, WB, USAID, IMF, etc. living off on tax money, both for their operations and the salaries and perks of their staff and officials?

Contrast it with us, workers in the private sector -- we live off on clients' money. No clients, no money, we go hungry. Yet we are subjected to mandatory witholding personal income tax.

Rule of law means no exception. The law applies to all, governors and governed; administrators and the administered. But for the foreign aid establishment, the law on mandatory personal withholding income tax does not apply to them. They are not ordinary mortals, they are above us.

Such hypocrisy of public policy. If we want the rule of law, then we should abolish personal income tax. Fair is fair. Whether one works in tax-hungry foreign aid bodies or not, no one should be forced and coerced to surrender up to 1/3 (or 4 months out of 12 months work) of his/her monthly income to the state.

A friend Paul H. commented:

From these debates you not only see the differences between statists and the anti-statists, but the diversity among anti-statists as well, in that they would counter the statists' arguments in a variety of ways.

For instance, you mention that you cite everyday examples to make your point, while others will go the other way and discuss matters in a strictly theoretical manner. It's all good!

Yes, the free market movement and philosophy rests on spontaneity and diversity, never on uniformity, monotony and central planning.

See also:
Foreign Aid 6: IMF is Engineerable and Abolishable, September 05, 2006
Foreign Aid 7: Wolfowitzoellickation of the WB, May 30, 2007
Foreign Aid 8: Abolish the IMF, August 08, 2007
Foreign Aid 9: WB Wants Hike in Gasoline Excise Tax, July 10, 2009
Foreign Aid 10: Why We Don't Need It, February 15, 2010

Global Capital 6: Asian Capitalism Inching Up

A London-based financial think tank, Z/Yen Group, released its Global Financial Centers Index (GFCI) 8 recently. The top 10 financial centers and their ranking are below. Numbers in parenthesis represent their rating as of September 2010:
1. London (772)
2. New York (770)
3. Hong Kong (760)
4. Singapore (728)
5. Tokyo (697)
6. Shanghai (693)
7. Chicago (678)
8. Zurich (669)
9. Geneva (661)
10. Sydney (660)

In the GFCI7 released last March 2010 or just six months ago, Hong Kong's rating was only 739 while London and New York's ratings were tied at 775.

If current trend will continue, Hong Kong will overtake both London and New York by March 2011 in the GFCI 9.

Nonetheless, it's worth noting how 4 of the top 10 global financial centers are Asians. Shenzen and Seoul should not be far behind. Also New Delhi maybe.

The Philippines should learn from Hong Kong and Singapore capitalism. The important factor for these two dynamic economies is the low bureaucracies being imposed by their respective governments in businesses locating in their soil. Well, at least relative to the business bureaucracies imposed in other countries.

Filipino politicians and government bureaucrats should understand and appreciate that it is entrepreneurship and capitalism that creates jobs, that produce various goods and services in society -- from google and facebook to laptops and restaurants. It's not the state nor the bureaucracy.

Two related papers I wrote:

(1) World's Biggest Banks 2009

July 02, 2010

Despite the recent global financial turmoil, American banks are still the biggest in the world. Here's the chart from The Economist, July 1st 2010:

Some sectors may argue that this was made possible by US government bail-out of some of those biggest banks, implying that US capitalism was saved by the US government.

Not correct. Not all banks in this list wobbled recently and for those that wobbled, not all of them got huge bail-out money from the US government -- or from their respective governments.

Corporate and banking expansion and bankruptcies are 100 percent part of capitalism. Government bail-outs will only encourage some irresponsible behavior from some of those big banks. Their warranty is that they are "too big to fail." Government bail-outs, therefore, is wrong and must not be used again.

(2) Market Market, Free Market

September 02, 2010

A Filipino friend, Tos A., posted "Fun snaps around the world" and among the photos there was this one from Toronto, Canada, during the last G20 meeting about 2 months ago. Tos called it "Solutions to market failure?" And I replied, "Wrong title Tos, it should be "Solutions to government failure." And perhaps a more appropriate title will be "Beerhouse solution to government failure."

Here's another picture that Tos showed, from Quito. Right on! I like the name of that shop!! :-) In a free market, there is zero coercion. Sellers and buyers meet each other. If they do not agree to the price, the seller keeps his goods and services, the buyer keeps his money. One simply walks away until he/she finds the right seller or buyer and a transaction is made.

Here in Manila, we have a big mall with a similar name -- Market! Market! It's in Fort Bonifacio Global City, in Taguig City.

Market-market is just the English term for the Filipino variety shops called "Tiangge-tiangge". Deep bargain seekers flock to tiangge-tiangge shops as there are lots of choices, from clothes to jeans to shoes to electronic gadgets to food and drinks, and so on.

Sellers meet buyers. Producers meet consumers. Bargain hunters meet bargain traders. Zero coercion, zero forced collectivism, and there is order in society. There is a market for everyone, from the rich to the poor.

That's the beauty of free market capitalism.

See also:

Global Capital 1: Why Market Turbulence are Necessary, November 19, 2007
Global Capital 2: ICT, Capitalism and Government, December 18, 2008
Global Capital 3: Service Charges and Capitalism, October 25, 2009
Global Capital 4: Facebook, Capitalism and Liberty, February 09, 2010
Global Capital 5: Cars, Mobility and Capitalism, May 29, 2010

Welfarism 8: Send All Monthly Salary to UK Govt First

Some government bureaucrats are really fantastic in cooking up ideas how to confiscate more money from the citizens. They have various alibi for doing so, like "to prevent tax evasion", "to have more money for public welfare", and so on. Of course they will not say or admit that part of their goal is "to have more money for politicians and ourselves."

Here's one proposal by the UK tax collection agency, as reported in CNBC yesterday.

UK Proposes All Paychecks Go to the State First
Published: Monday, 20 Sep 2010
By: Robin Knight

The UK's tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer.

The proposal by Her Majesty's Revenue and Customs (HMRC) stresses the need for employers to provide real-time information to the government so that it can monitor all payments and make a better assessment of whether the correct tax is being paid....

This is like Philippine-based employers, local and foreigners alike, will send all monthly salaries to the Bureau of Internal Revenue (BIR) first and all personnel in the formal sector, ordinary employees and managers alike, will wait for several days or weeks before the BIR will give us back our "rebates" by bank transfer.

High and multiple taxes are government's indirect way of saying, "Give us your money. We can spend it for you better than you yourself." What a hypocrisy.

Last June 08, 2010, I wrote this:

Greece, UK and Welfare Problems

New British PM David Cameron has candidly admitted the obvious -- UK's nanny state might go the Greek way of fiscal (and personal) irresponsibility and hence, deep economic hardship for one of the richest economies in the world. The report today in NYT says, "Cameron warns Britons of "decades of austerity"

Mr. Cameron said that Britain's "financial situation was “even worse than we thought” and that the country would have to make savage spending cuts to bring its swelling deficit under control.... that at more than 11 percent (of GDP) Britain’s budget deficit was the largest ever faced by the country in peacetime. But he warned that the structural deficit was more worrisome. Britain currently owes a total of more than $1.12 trillion , he said, and in five years will owe nearly double that if nothing is done now. The country already spends more on interest payments on its debt than it does running its schools."

While the PM was blaming the Labor government of Tony Blair et al before his term, the deeper problem lies in UK diverging from the liberal, free market, more personal responsibility society that Ms. Thatcher and other liberal leaders have tried. Instead, an expensive nanny state became bigger and bigger, which resulted in public debt becoming bigger and bigger, which acquired a life of its own and soon overtook actual welfare spending.

As of 2009, UK's general government gross debt as % of GDP was 68.2 percent, a bit "small" compared to Japan's 218 percent and Italy's 116 percent.

The statists and socialists can argue that UK and other rich countries have lots of fiscal "responsibilities to poorer countries" through more foreign aid, including paying huge transfer of tax money to politians and governments of poorer economies because of their "climate debt". Thus, deep tax cuts cannot be an option for UK and other similarly-situated governments.

Yesterday, a number of Asian stockmarkets suffered serious declines as a result of negative fiscal news from Hungary. Yes, a non-EU member Hungary sending out signals of more fiscal bleeding is enough to worsen the already bad financial and fiscal conditions in Europe. Just when people were expecting that Spain and Portugal would follow Greece's fiscal bleeding, it was Hungary that came in next.

So, Greece-Portugal-Spain-Hungary-UK-who else?
Some are already queuing based on certain macro and micro indicators, like France and Italy.

The classical-liberal agenda of free market, individual freedom, more personal responsibility, and lean/limited state is calling out loud. The hard-working people should not be over-taxed and over-regulated; the lazy and irresponsible people should not be over-subsidized; the less-productive government bureaucracies should not be over-blown and expanded.

See also:
Welfarism 5: Germany's Tax Hikes, June 28, 2006
Welfarism 6: Obama and US Entitlement, November 11, 2008
Welfarism 7: Squatters in the Univ. of the Philippines (UP), February 23, 2009

Monday, September 20, 2010

EFN Asia 2: Hayek in Asia

Around late September 2005, the Atlas Economic Research Foundation, in partnership with the Friedrich Naumann Foundation (FNF) sponsored the historic "The Constitution of Liberty in Asia" roundtable discussion (RTD) in Phuket, Thailand. For one day, around 20 of us, free market leaders and individuals from Asia, discussed half of a thick book -- Friedrich Hayek's "The Constitution of Liberty". The event was held one day before the Economic Freedom Network (EFN) Asia conference in the same hotel in Phuket.

I say "historic" because of the many conferences that I attended, that one really deepened my perspective and understanding about liberty and the rule of law.

The discussion was facilitated by Atlas VP, Prof. Leonard Liggio, who is himself a scholar on classical liberal philosophy. Good friend Colleen Dyble, with Atlas at that time, provided the technical and administrative support to Leonard. Below was our group picture.

From left to right, standing: Leonard, Toni (Malaysia), Hiroshi Yoshida (Japan), Minh (Vietnam), Charu Rizal (Nepal), Shankaran Nambiar (Malaysia), (forgot the man in blue shirt), Kang Chandararot (Cambodia), Wink Ho (China) and Chung-ho Kim (S. Korea).

Sitting, from left to right: me, Mr. You (Japan), Paata (Georgia), Cuong Nguyen (Vietnam), Khalil Ahmad (Pakistan), Colleen Dyble, Trupti Mehta (India) and Ellen Cain (Philippines).

Some of us there were working in not-exactly free market-oriented think tank, like the Malaysian Institute for Economic Research (MIER) where Nambiar is affiliated, is not exactly a free market think tank, it's a Malaysian government-owned think tank. But I know that Nambiar is a big Hayek fan.

Likewise, the Cambodian Institute for Development Studies (CIDS) is not exactly a free market think tank, but its head, Kang Chandararot, deeply appreciates the value of advancing individual freedom in the course of public policy research work.

The event was 5 years ago now and some of us have worked in various institutes, Including some Atlas staff who already resigned and pursued new careers in other think tanks in the US. The Asian scholars who went there still have a lot of Hayek molecules in their body. Junning was once called the "Hayek of China", Nambiar and Wan Saiful Wan Jan of IDEAS may also be considered the "Hayek of Malaysia."

I missed, or we all missed, Jo Kwong there, VP for Institute Relations of Atlas. Although she put a lot of hours and effort in helping organize that forum from her office in the US, she was not able to join us. It's good that her very friendly and also hard-working deputy, Colleen, was able to join us.

After the Phuket RTD on Hayek, I formed the ARBM2Phuket yahoogroups. Initially we were about 20 there, then it expanded to its current list of 90+ liberty-oriented people we included more like-minded thinkers from Asia and other friends in Europe and the US.

Last nght, IDEAS organized a discussion about Hayek's thoughts on political economy, and it was led by Nambiar. IDEAS is doing that event every third Monday of the month. More details at their website, the Bukit Tunku Society.

Hayek was a great thinker. His ideas permeated into the minds of people who push the ideals of individual freedom and liberty. Among the words that the man wrote, I like this one:

"Freedom and responsibility are two sides of the same coin. People who are afraid of responsibility are afraid of freedom itself."

See also:
EFN Asia 1: From HK to Phuket to KL, September 16, 2006
Jo Kwong rocks, February 09, 2010

Decentralization 6: Local Fees and LGUs' Independence from NG

Posting two related articles that were published in the weekend tabloid, People's Brigada News on different dates....

(1) Local Fees and Decentralization

March 11, 2010

Political decentralization does not automatically mean less government in the lives of the average citizens. Rather, it could mean less central or national government but more local government taxes, fees and regulations in the lives of ordinary citizens.

Last weekend, I went to Cebu City to speak in a forum organized by the Economics Department of the University of San Carlos (USC). Among the things that I noticed in Cebu were the high prices of fuel products. As of March 7, 2010, the price of diesel there was P37.81/liter, unleaded gas was P48.20/liter. That same day when I went back to Manila, the price of diesel was P33.80 a liter, unleaded gas was P44.20 a liter. In short, fuel prices in Cebu City were P4.00 more expensive compared to Manila prices. Why is this so?

Fuel prices in provinces north of Metro Manila are usually P0.50 to P1.00/liter more expensive, for both diesel and gasoline. In Bacolod and Iloilo cities, prices are usually P1.00/liter more expensive than Manila prices. Such price differential is usually due to transportation cost of bringing the fuel products to the provinces.

But why is the price differential in Cebu up to P4 a liter? This is grossly unfair for the Cebuano motorists and passengers.

My hypothesis is that the Cebu provincial and/or City governments imposed a separate fuel tax or fuel surcharge on top of existing import tax + excise tax + VAT by the national government.

Another thing that I noticed in Cebu, was the multiple fees that the local government imposed on passengers who enter the Cebu south bus terminal. I went there on my way to visit my relatives in Barili, a town south of Cebu City. Here are the fees that I observed:

a) taxi/car entrance fee P10,
b) passenger terminal fee P5,
c) toilet fee if one will pee P2,
d) buses parking fee, I do not know how much it is now, but more than a year ago, it was around P80/bus.

Of course the terminal operator -- the provincial or city government -- also collects from the rental of many stalls and food shops inside the terminal. The local government, therefore, collects lots of money from the bus terminal alone. In fairness, the terminal is relatively clean, not air-con but with electric fan, with tv in some sections. But the collections seem to be many, I think.

A friend from Cebu told me that the various fees are also being collected at the provincial Capitol. Like parking fee for cars, and blood pressure fee inside the Capitol clinic, P10/person, if the person is not an employee of the Capitol, for people undergoing some medical check up.

If one will check Cebu's city and provincial revenue codes, one might be surprised at the long list of government services with fees. Like marriage fee, marriage certificate fee, annulment fee, birth certificate fee, baptism fee, death certificate fee, burial fee, and so on. From womb to tomb, there is a fee!

Of course the local governments there will counter that they also provide free services to the poor, like free hospitalization or free coffin to the really poor. And the practice of collecting local taxes and fees from womb to tomb is also being done by other big cities and provinces in the country.

But it is baffling to think how come that so many “government services” are now not free, that average citizens have to pay many local taxes and fees, on top of national taxes and fees. Isn’t collecting just a few taxes and fees a form of public service already, so that average citizens will be able to keep more of their earnings for themselves and their family.

I am not really a fan of political decentralization or devolution, although I am not a fan either of centralization of powers by the national government. Bus terminals can be operated by private enterprises at a lot more passenger-friendly way with zero additional cost to passengers, compared to government operators. Look at those malls. People can enter and exit those malls anyday anywhere, zero entrance fee and zero toilet fee. And still the mall operators make money.

But then some local governments are not after better services to the public, but to collect more revenues from the public. A number of bureaucracies just exist for themselves.

(2) LGUs' Independence from National Government

September 18, 2010

In many political discussions and public administration literatures, decentralization and the relative independence of local governments from the central or national government is hailed as a virtue. It implies that the politicians and administrators of local governments can act more independently from politicians and administrators of the national government, especially the Office of the President.

The share of local governments from Internal Revenue Allotment (IRA) as percentage of their total receipts and revenues is a good indicator of how independent or dependent a local government is. Below are some relevant figures.

Projected revenues of selected big cities for 2010, in P million (except %)

City: Share from IRA / Local receipts / IRA dependence in %

Makati: 731 / 6,592 / 11.1%
Pasig: 748 / 4,202 / 17.8%
Pasay: 506 / 2,323 / 21.8%
Muntinlupa: 573 / 2,236 / 25.6%
Taguig: 723 / 2,325 / 31.1%
Paranaque: 670 / 2,129 / 31.5%
Manila: 1,747 / 5,122 / 34.1%
Quezon: 2,738 / 6,661 / 41.1%

Cebu: 1,041 / 2,120 / 49.1%
Cagayan de Oro: 841 / 1,039 / 80.9%
Iloilo: 548 / 625 / 87.7%
Antipolo: 855 / 678 / 126.1%
Davao: 2,566 / 1,701 / 150.9%

Source: DBM, BESF 2011, Table F.15,

Among the big cities in the country, Makati, Pasig and Pasay are the least dependent from IRA transfers from the national government. In contrast, the cities of Antipolo and Davao are among those cities that are generally dependent on such transfers.

But while “less dependence” from national government’s transfers may be a virtue, it may also mean that the local government is becoming too harsh on some businesses that are located in their territory by imposing too many business taxes and fees.

Local governments should attract more businesses to locate in their territory because such businesses will create more jobs. When people have jobs, they become less dependent on both national and local governments for welfare.

See also: Decentralization 5: Privatization and Civil Society, February 22, 2010

Saturday, September 18, 2010

Tax Cut 11: US Tax Cuts, Retain Them

The size and weight of a government (Expenses) is directly proportional to the taxes and fees (T&F) to be paid by the citizens to sustain a particular government plus borrowings (New Debt) if the fiscal gap is unsolved. Or put simply,

      Expenses = T&F + New Debt.

If the economy has matured and its economic managers have realized the ugliness of endless borrowings and endless fiscal irresponsibility, public debt will slowly decline. That is,

      Expenses = T&F - Debt payment.

In the US, Mr. Bush Junior's certain tax cut legislations will expire this year and the next. So legislators there discuss whether to extend the tax cut or not. This is the projected picure of US' fiscal situation under certain scenarios. Graph from The Economist, Seotember 16, 2010 issue.

The main issue here, at least for me, is why (federal) spending will keep increasing -- up to 24 percent of GDP by 2020 -- even if tax revenues will decline. The immediate result is of course more borrowings to keep up with ever-rising spending. And more borrowings mean more debt payment in the future, both for the principal and interests.

A tax cut coupled with some spending cut, is tbe most appropriate policy measure to encourage private households and corporations' additional spending. Someone's spending is somebody else' income. And this will have a positive spiral effect on the economy. If a government will keep punching a hole in the citizens' pockets, there will be less spending that the citizens can do, unless they also borrow their government's attitude of living beyond one's means. Which will worsen the situation, dragging the economy into bigger fiscal and personal debts. The bigger the debts as a share of income, the bigger the risk of debt default in the future.

I think the US government has lots of assets to dispose and privatize to help reduce the public debt stock. This will have dual positive impact of reducing the debt while keeping the tax cut. But I think this option is still not in the minds of many policy makers there, even among the public.

This policy measure should apply to many other economies, rich and poor, like the Philippines.

See also: