Saturday, October 01, 2011

Pilipinas Forum 13: On Zero or Minimal Government

These are the exchanges in pilipinasforum yahoogroups in the middle of October 2001 or 10 years ago. Enjoy the 11-pages long exchanges and debates. The pictures and cartoons, I just added them here. Cheers.

May I ask this question: "What the origin of zero government?"

"State of nature", according to social contract theoreticians Hobbes, Locke and Rousseau.

"Primitive communal" mode of production, according to Karl Marx.

"Invisible hand/perfectly competitive market", according to classical economists like Adam Smith.

"Invisible nature", according to Nonoy Oplas. he he he.

-- Nonoy Oplas

Noy, am interested on zero government. Sat down a few weeks ago with some friends on a single issue: getting rid of government and replacing it with the "market" as a mechanism to provide the social services which many governments, particularly in developing countries, have been remiss with.

One fellow argued eloquently how everything can be privatized: armed forces and defense, education, health, foreign affairs, infrastructure . . .

He argued that in the case of the Philippines, he does not agree with the passage of the 1987 constitution but he it is imposed upon him anyway. He queries if one did not vote, his dissent is ignored. and the budget deficit of the government is imposed upon him.

Inflation, which he describes as the worst kind of taxation is the fault of government. in the private sector, if you make wrong business decisions and the business collapse, you pay for it. but the government despite all its horrible acts does not pay for its mistakes.

I must admit i agree with him. but i argued that because of the political economy we have, the "market" is the first thing we have to establish, while contending with the powerful political forces and interests. unless we recognize the dynamics of forces present, we will get trampled by them. I added that his idea will only work if:

1. there is a limited universe of participants to the market bounded by some common parameters, e.g. all bettors in a cockpit locked inside

2. the market is more or less homogenous, e.g. again all of them sabungeros (cockfight gamblers).

3. penalties are stiff, e.g. you don't want to not pay your bet in the cockpit arena

then we will all have to be sabungeros.

who took the cookie from the cookie jar,

-- Harlequin

I have just survived two days in the pig pen we call the House of Representatives and listened to Congressmen heckle us while they look here, there in the budget for where they can find their swill (CDF). Talk about black holes and nothingness. Looking at them strut and preem reminds of the need for a big bang to shake these pools of primordial soup into some higher life form. They shall pay for making me miss Ally Mcbeal and ER and Survivor 3! Fortunately, I am home in time for Star Trek Voyager on the Hallmark Channel.

I find it amusing that these sanctimonious cretins (are they eligible to be called life forms?) talk about issues like the world depression and the deficit and all they want to know is where is their money??

What is the rationale for these posts? You want to find the origin of zero - of nothingness? Look no farther than there in the House of Representatives. Unfortunately, these black holes are supposed to be the representation of the sovereign will and wisdom(????) of the people.

-- Ricky Sunico

Zero government is rightist bullshit. (There is also leftist bullshit, and that's the classless society.)

Unfortunately, rather than provide social services in greater quantity to the poor, zero government would provide zero social services to the poor.

The market will never provide certain goods and services adequately, that have externalities." One major class of externality are goods and services that are public goods, where the benefits are consumed/enjoyed by a larger number of people than have paid for it. A pure market will only provide these goods and services up to the quantities dictated by the price mechanism - i.e. that quantity where market demand (demand backed by ability/ willingness to pay, which is in most cases much less than actual demand) is equal to market supply.

One example is fire fighting. Putting fire fighting into the market mechanism means that fire departments would make market transactions to fight fires, but not have an obligation or duty to fight a fire occurring in a residence or office building that did not pay for the service. If a fire were occurring in 61 Salcedo Street, which had not prepaid for the service, and if 63 Salcedo Street had paid for the service, then the only market-driven responsibility of the fire department would be to wet down 63 Salcedo Street and prevent the fire spreading to it, but allow 61 Salcedo Street to burn to the ground and its occupants to die. Alternatively, they could first negotiate with the owner of 61 Salcedo Street while his house was burning as to the appropriate price for the fire fighting, and perhaps require upfront deposits or a credit card, before commencing to fight the fire. Neat!

Another example is the national defense. National defense in the Philippines at this time obligates underpaid Army troopers fighting in an underfunded Army to go in harm's way in Basilan to defeat the Abu Sayyaf, for generally intangible purposes benefiting a large number of physically unaffected people in Luzon. To put national defense into the market mechanism means essentially that there should be no national defense and no publicly funded armed forces, only mercenary private armies whose loyalty is subject only to the price mechanism. Therefore, since the Abu Sayyaf have a lot more money, they should be able to outbid all else for the services of all armed forces in the vicinity. (And some say they already did in Lamitan.)

The list goes on of these externalities and public goods and services. Parks and wildlife preserves (only the rich may enjoy them; entrance fees must be charged; the poor may not enjoy them unless able and willing to pay). Public education (the poor's children should only be able to go to school if they are able and willing to pay). Etc Etc.

Did you really mean ZERO government? Or did you mean 50% government? Or 25%? Or 65%? Or 90% in certain areas and only 5% in some, and 0% in some others? Now that's a different story and a continuing debate.

-- Noel Lim

Agree with Noel. Personally I'm in favor of a "small government, tax cut". How small, something like 15%, at most 20%, of the GDP (i.e., govt. consumption & investments/GDP ratio). At the moment, the Philippines' G/GDP ratio is about 22%, and so much wastage/inefficiency and corruption, no need to elaborate.

Corruption (revenue and expenditure sides) is so ingrained in this country that moves to make rules more transparent, strengthen anti-corruption institutions, etc. will only be able to achieve so much. Why not limit the scope and roles played by the government? For example:

1. Reduce functions of the DPWH: most of port developments, highways and bridges can be done by the private sector through BOT and tollways. In areas where there will not be enough vehicle traffic to compensate for the entire cost of the tollway, LGUs should hike real estate taxes of properties near the newly-opened highway (since property values have increased bec. of such roads), pay a fix amount for x years to the highway developers. Excess employees of the DPWH's 45,000 or so employees can be absorbed by the private road developers. People can benefit through:

(a) tax cut - they can use the money to pay the toll fee whenever they use the road.

(b) user-fee principle - only those who regularly use that road will bear the burden, and not all taxpayers, many of whom have not even seen a tollgate.

(c) ease in identifying those accountable - if roads are lousy, people can complain or sue the private developers; currently, you sue DPWH, it says Malacanang or congress or LGUs also to blame for this and that reason (or the above institutions can protect erring agency personnel).

2. Reduce functions of the DOH: privatize specialize hospitals, give coupons or vouchers to really poor patients who will avail of services of these hospitals. At the moment, even the rich patients who go to these hospitals also avail of the subsidy, some of these rich people are even tax evaders.

3. Reduce the number of state universities and colleges (SUCs) from the curent 110 to between 15-20 (the rest may have to be privatized or closed down). From the current P17 billion budget/year, if this can be lowered to say P7 billion, the P10 billion will go to the public in the form of:

(a) tax cut - more money in their pocket so they can enroll their children in private universities;
(b) additional money to public elem. and high school;
(c) wider scholarship opportunities for really poor but academically-inclined students;
(d) expanded study-now-pay-later plan scheme;
(e) a combination of some or all of the above.

4. DENR's reforestation programs can be privatized or relegated to upland communities or LGUs. So long as the goal is "tree growing" and not just "tree planting", then long-term accountability and property rights can be defined.

So many areas and functions currently done (or mandated but not done) by the govt. can be given to the private sector. Government will just focus on clearly identified public goods: administration of justice (well-paid judges and justices), peace and order (well-paid and well-trained police), national defense, public elementary and high school, a few others.

The rest, give people a break: tax cut (a flat 15% tax for instance). Give them back their money and they will think of businesses and projects that will employ more people.

-- Nonoy Oplas

Hi Nonoy, I agree with you about our need for reduction in the size of government and the placement of some of the services and activities into the hands of the private sector. The only part that concerns me is the reduction of public Universities.

While I am certain that the points made about political patronage and corruption are valid, if we inadvertently cut the chance of many deserving students to receive a University education then we will have done the nation a long term disservice. Your point about cutting taxes which will make money available for families to send their children to school appears good, but in practice would it be true. First, the question arises as to whether any savings realized would really be passed on to the taxpayer. Secondly, the poorer families in the Philippines don't pay taxes since they have little of no income upon which to base them. No savings would be realized.

There is no doubt that consolidation of some of the Universities would result in economies of scale which could help to improve and reduce the cost of our Universities. On the other hand, there is undoubtedly a benefit to having Universities widely scattered around the country so that more students can live at home while they attend. Closing many smaller schools in the provinces may appear an easy and painless means of making savings to residents of Manila where there are numerous educational options available, but in the provinces there are not many opportunities available. If many families do not have a University within an easy Jeepney ride to send their sons and daughters to, they would most likely have to forego sending them for a higher education at all.

A possibility that comes to mind that would help to solve some of the problems would be to close down ALL universities and colleges within 50 kilometers of Manila and other large city areas, and to expand those in the provinces. This would force the families in the cities (many of whom have better incomes to pay for the education) to send their sons and daughters out to the provinces to receive their education. There would be many benefits:

1. It would benefit the students by giving them a better insight into the areas of the Philippines outside of the larger cities (other than Boracay or resort locations).

2. General costs are lower in the provinces and would provide huge savings to the Department of Education.

3. The expanded universities in the provinces would help to distribute wealth to the provinces, provide additional jobs, provide housing development, etc.

4. The sale of these enormously expensive campus properties in the urban areas would result in a huge financial windfall for the Government which could be passed on to the taxpayers.

5. These badly needed properties would also benefit the economy by increasing business opportunities.

6. Lower property costs in the provinces would provide a savings when we need to expand the Universities.

7. Having our sons and daughters live in the less polluted provinces while attending University would make them healthier adults.

8. This would decrease congestion in the urban areas, especially that which happens when classes are in session.

9. The beautiful provincial environment would provide a more relaxed atmosphere for the students and may help to them appreciate their own latent artistic abilities.

10. The lower availability of distractions in the provinces would help students concentrate on their studies.

Hmmm, the more I think of it, the more benefits I see. We may have to give up our emotional ties to the Universities that we went to which would be closed, but the benefits to our children and to the country overall far outweigh this loss.

-- Cynthia Diaz

The discussions on "zero government" or downsizing the public sector is somewhat akin to defining the boundaries of the firm. Excluding activities which are clearly public goods such as national defense and foreign affairs, the benefits of using the market for production of important services such as garbage collection, postal services, and so on include benefits from economies of scale, greater organisational capabilities and market discipline of private parties.

On the other hand, the costs of contracting out or privatisation include transaction and agency costs (which require well-written contracts vs. opportunism), coordination, monitoring/governance costs, information leakage, etc.

The transfer or outsourcing of production helps improve technical or operational efficiency but may lead to agency inefficiency; similarly, keeping the production in-house (by government itself) may address agency inefficiency but may involve large technical inefficiencies. The economics will involve minimising the sum of technical and agency inefficiencies in the design of production structure. In the private sector, this is done via collaborative networks, strategic alliances and joint ventures rather than full merger and acquisition.

The main economic rationale for privatisation is to address the inefficiencies of government acting as producer since many private firms can very well provide the service more efficiently and effectively. Thus, privatisation or contracting out is implemented by transferring production to private companies and Government is supposed to focus exclusively to
specifying (i.e., regulating or monitoring) the actual production performance by the private contractor.

Government can either specify the process (e.g., frequency of classes by private instructor), the output (e.g., number of students attending the school) or the outcome (e.g., general improvement in certain skills). Thus, government will continue to PROVIDE these services but these would now be PRODUCED by other parties. Of course, this would be preceded by defining what activities should continue to be provided by the government in the first place.

-- Ronald Villanueva

Hello Ronald,

From that piece you wrote, can we conclude then that the decision on whether a particular service is best provided by the private or public sector should be determined by whomever can provide said service at the least total cost. Total cost defined as the sum total of all the costs you mentioned, technical, agency, transaction, increase in inefficiencies and so on. That of course begs the question whether most of these costs can be estimated in the first place. Can they? While maybe for technical matters, but how about agency costs. (I must admit I only have a vague understanding of the concept). How would this be applied in practice? Let us take the case of garbage collection. Who should handle this? Public or Private? While I suppose many technical costs can be determined, how about the agency ones?

-- Victor Limlingan Jr.

Hi Victor,

Thanks for your comments. I will try to expound further on these points in greater detail hopefully within this week, although I am quite busy preparing for a trip overseas next week. I must admit that quantifying many of these costs is quite difficult, but the concept should be useful in understanding and framing the discussions on the "boundaries" of the government. In the private sector, these issues are commonly discussed under headings such as horizontal and vertical integration, economies of scale/scope, core competencies, learning curve, etc.

-- Ronald V.


My interest in zero government is a pejorative search for pemoline -- to treat the depression that experience with government has bittered my everyday tea. It has not made me bitter -- that is a different subject altogether that a failed love affair is usually prone to cause, especially among the passionate ones among us. But that too, Mister Selwyn, my apologies, is a generalization.

For me, the reasons why it cannot be done is cheap, I'd say they come a dime a dozen. And a free night to consort with an intellectual prostitute of one's choice.

The reasons why nice guys like me even consider it is perhaps because we subsist on the nourishment of possibilities. As a Castillian would perhaps interject, 'por se a caso', just in case.

Perhaps, one may wish to consider my case.

I did not vote for this government (in the Philippines). Neither for any other previous ones since I was old enough to vote. I was merely noting down the excitement that was Edsa. I only pay taxes because I need the documents.

I believe government in the Philippines is the cause of poverty in the country. By this, I do not only refer to the current administration, but even to its predecessors all the way back to Miguel Lopez de Legazpi (no I did not have the pleasure of meeting him). I agree with my friend that inflation is indirect taxation.

I believe the Filipinos pay too much for too corrupt, too inefficient a government. Of course I only refer to those Filipinos paying their taxes. (I will refer to those who don't pay taxes in another commentary). That does not mean that I consider those who don't pay taxes as not Filipinos. My use of the word "Filipino" is more in reference to those who are considered citizens of the Philippines -- nothing positive nor negative about it.

We, they could have paid much less in Laos or Cambodia. But then again they would have probably paid for it by their lives. Again nothing derogatory towards either country (my apologies, in my effort to be politically sensitive, I am afraid I am making miserable progress in it and in saying something sensible).

I have read, heard, observed and experienced corruption, inefficiency, failure and default of government in the Philippines -- sufficient to consider that perhaps it would be better to have zero government.

Consider the following:

* Police -- where their mission is to serve and protect, they rob, kidnap, salvage, rape, extort, dupe, and hire spin doctors to convince the public they should be called 'honorable senator'?

* Armed Forces -- the big bosses steal from the man on the field, putting him in extremely prejudicial risk because corruption has eaten on his boots, helmet, weapons, supplies and morale?

* Education -- "graduates" of the public school system hardly able to read and write decently?

* Foreign Affairs -- political "has-beens" appointed to represent the country to the Court of St. James, the German Chancellor?

* Public Works -- the entire world seem to know that about 30% of each road, bridge, port, etc. project in the country is skimmed-off for the booty? Except "government".

* Elections -- vote-buying and duress staring one right in the face, and calling it "democratic" exercise?

If you ask me, only fools would want to have government. Or economists maybe. That's what I see from the wobbly stool where I stand to see the circus from a maddening crowd.

And what does it make the fellow who said that zero government is a rightists' bullshit?

Is 90%, 80%, 70% 5%, 1%, or 0.0000000000000000001% government better? Even buffoons would perhaps stampede if we tell them they are going to live the rest of their miserable lives under "government".

Holy cow, and they even go to school to learn about government? Deliver me merciful Apollo. Perhaps I should join some "freedom fighters" to establish a place to live without government. We could perhaps agree each one will be a sovereign and citizen at once.

Oh yes, we will surely keep on fighting each other for food, shelter, clothing, mates, water supply, fuel, fishing grounds, etc. But isn't that the world we have, with all sorts of governments around.

who took the cookie from the cookie jar . . .

-- Harlequin

Along F.B. Harrison in Pasay City a signpost caught my eye: "Jeepney Stop", then under it "A project of Hon. Mayor Trinidad". The signpost is new and has not yet been vandalized. It wasn't being observed as jeepneys stop anywhere along that street. But what struck me was the word "project". I have seen other billboards proclaiming eradication of graft and corruption as a project of President Joseph Estrada, installing traffic lights as a project of Manila City Mayor, having clean and green city as a project of all mayors, re-asphalting as a project of DPWH, etc.

Are these not supposed to be their jobs, the things voters and taxpayers expect them to do in the first place? Streets are supposed to have signposts and traffic lights and repaired when damaged. Why consider these as "extra works" or projects by public servants?

Others could be very creative or suggestive like "A project of the Filipino People, through the efforts of Congressman Juan". Pathetic!

All these talk about zero government is really about quantity. The structures, the authorities, the laws, and the services are necessary. How much inefficiency can we allow to just shrug off? How much inadequacies can we bear or accept? From the standpoint of the citizenry, zero government can be a perception, a wish, or a virtual state of do-nothing. For some public servants, it is their personal Marshall Plan.

-- Lardy Caparas

Hi Lardy,

We should let these clumsy administrators-cum-politicos that such self-serving advertisements at the expense of the public is in EXTREME bad taste. Let's point out their foibles to a less-discerning public at every instance so their constituents can laugh them out of office. Maybe their successors will learn the lesson, but if not, let's still have our fun.

Unless somebody tells them what they're doing wrong, they'll continue to keep doing it. Each of us can have our own little contribution to removing the scum in government, but we should each be willing to be a bit inconvenienced if that's what it takes.

-- Selwyn Alojipan


This morning, a Lancer kissed my left rear bumper producing a footlong black line. I felt no dent over the spot. The driver apologized profusely and even before I could hurl harsh words, he suggested I could apply stain-removing car wax. (A traffic policeman asked if I own the van and I said yes, although I wondered why he asked that.) The driver offered nothing. I asked none. In about two minutes, the whole thing was over. I know that some place else a similar thing would proceed differently.

I guess if the inanimate bumper could speak, sasabihin nya, "kaya nga bumper, eh!"

Should I expect a similar "kaya nga Pasay City, eh" if I see a hundred tricycles and pedicabs on Edsa? Should I expect to hear "kaya nga SSS, eh" if my co-workers' social security loan applications are turned down? Should I just accept if one reasons "kaya nga gobierno, eh" if inconveniences are the norms?

No, I am not willing to be inconvenienced like I should expect them. There are just so many things that should not have prevailed or lingered too long. If the government must use the most expensive white elephant known to Filipinos to turn it into the most expensive dumpsite, then it should not wait. Does simple asphalt work pass through channels or audits?

I am just benign, and my government loves it.

-- Lardy C.

This thing called Zero Government, a delightful proposal if you ask me but am wondering why somebody named Noel Lim refers to this as nothing more than how did he say it, "rightist bullshit"?

You see Noel, government to me is nothing more than one big, pure & unadulterated MALIGNANCY.

It is better heard than seen or experienced. It simply sucks. It is in more ways than one, a festering, sweltering and smoldering cauldron of everything despicable, deplorable & detestable in society. The less of government the better and the least of it, the best.

Take Noel's example of fire fighting. I have news for you Noel, THERE IS an existing fire fighting market mechanism and equivalent market transaction. It's been around since I was 9 years old, and oh that's about 36 years ago. Why do you think the Chinatown Volunteers Fire Fighting Brigade was born? It was simply insurance or a most welcome alternative for overly "entrepreneurial" fire fighters.

These market transactions are more pronounced in business & industrial districts. A dear friend in Valenzuela partially lost his slippers-making factory to fire because the 1st fire truck that arrived at the scene was paid by the next-door woodworking factory a price the "entrepreneurial" firemen could not refuse to protect their establishment that was not even on fire. The 1st fire truck would train its hoses & water cannons on the walls & roof of the woodworking factory & NOT on the burning slippers-making factory.

Rightist bullshit? Hmmmm.

Fortunately, TWO responding Chinatown volunteer trucks arrived from far-away Binondo and were able to partially save the slippers-making enterprise in Valenzuela. I thank God for people with monosyllabic surnames that all if not most of us derisively refer to as Tsinoys, Chinoys, Behos or just plain Intsiks.

While on the subject of Tsinoys, let's move to another of Noel's so-called "externalities". How about public safety, crime prevention and simple law enforcement?

I have had SIX (6) friends, two surnamed Lim (are you related to them Noel?) who have been kidnapped just this October 2001. Yes, SIX friends in THREE WEEKS. Fortunately, all of them had cash (plenty of it) and were released by the kidnappers unharmed. Did they go to the police or the military? HELL NO!!! After their release, the tightly knit Tsinoy community informed the victims that the perpetrators were the police & the military.

These SIX friends belong to SIX different but prominent clans with various businesses that altogether amount to roughly P200 Million in sales/annum or on average about P33.3 million/clan. Guess what? THREE families (as in 15 individuals on average per family) moved to Canada a hora mismo, ONE to Australia, ONE to New Zealand and the other to Xiamen, China. Imagine the effect on the economy of the country called the Ripablik of the Pilipins with the departure of just SIX families with monosyllabic surnames. All because those entrusted to enforce the law are themselves the crime enforcers and market manipulators.

Rightist Bullshit? Hmmmm.

We can move on to other "externalities" if you wish but these jaundiced & bloodshot eyes have seen the metastasizing malignancy that is government slowly envelop us all.

I have yet to see in my lifetime of existence a government office or bureau that subscribes to "by the people, of the people and for the people". There is none.

That my dear Noel is THE bullshit.

Maybe Zero Government is the key. The market might just go for it. What else do we have to lose?

-- Sam Aherrera

Dear Nonoy, Noel, Harlequin & Abu Samy,

My perspective on zero govt is from an anthropological one, even if i only pretend to know a little about the field. because humans are not "equal" in many respects however we pay lip service to our equalness, some would always overpower another -- be it for food or territory, or be it for parking space or be it for the girl next door.

So i do not think zero govt is at all possible because:

1. since we are not all kind enough to give way to one another, someone has to police. sabi nga ng kanta ni Ka Freddie, "maari ba, maari ba, umusug ng konti . . ." on a larger scale communities, nations tend to behave in the same way that individuals do.

2. as a result of this unequalness, some members of a community or a nation will have less access to survival much more to pursuit of human potential. in this respect, humanity has crafted govt to equalize on behalf of the marginalized.

what you see around you is a phenomenon i'd like to call as a return of "hunting-gathering" societies. more powerful, perhaps more desperate, nations prey upon those less able to defend themselves. these predatory nature is reflected in the capital markets, global trade, human migration, and of course military conflict.

the very nature of an efficient market is predatory, the mechanism hunts the weak and the slow. why it's even naturalselectionist. if perhaps man does not have the faculty of choice, reason and aspiration, the market is the perfect mechanism as one would see among lesser mammals.

but the institutions that man has built indicate he is far removed from the world of animals, even if he does exhibit some of the instincts and tendencies. but then again, criticisms on govt may use metaphors similar to feature stories in the National Geographic channel.

Abu Samy, that govt has been failing, albeit others seem to be succeeding elsewhere, does not negate the reality that government is necessary. I agree with you Nonoy that perhaps the issue is how much or how less of govt do we want.

but what we want we do not always get. what is necessary does not always turn out as we expect. it's pretty much like getting married. one learns to live with what is available. but the beauty, value, importance of what is available is up to us. one can look at what is available as used clothing, or as vintage wine. our perspective determines to a large extent
the happiness or contentment that we get.

my dear Harlequin, you are perhaps trying to live an escapist life because wherever you go there will be govt. exiling yourself in an isolated Pacific isle may get you what you want, but how many of us can find the isolated isle devoid of govt? we're fast running out of isolated isles anyway, so sooner or later you will have to encounter govt. besides what will you live for? how will you live? with whom will you inter-act. with Wilson the ball like Tom Hanks in "Castaway"? no i do not think you would want to be in his shoes (what ever he was wearing anyway).

no we are not fools Harlequin. we are merely trying to carve our little space under the shadows of govt. some of us with better means push the circle further, many of us have to struggle within the little confines. But the alternative is the life of a "freedom fighter" as you aptly put it. If you decide to join them, would you please remember not to take part in a
suicide mission. you would not live to tell us the story. but then again, maybe that is your story written in ashes spread over a mourning world.

mabuhay po kayo,

-- citizen kori

See also:
1. Pilipinas Forum 12: The Origin of Zero, Nothingness, Big Bang, September 25, 2011, and
2. What is the Role of Government?, March 08, 2011.

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