Monday, October 21, 2013

Inequality 16: Inclusive Growth and Central Planning

Two months ago, a friend and fellow UPSE alumni asked me to respond to his ideas, below.

Indeed, the economic  buzzwords  these  days is  how  to  achieve  "inclusive  growth". I'm just  wondering why  we  always  get  fixated  with the decades-old mantra towards “FREER  MARKET"  or   the need to break  down further  "Institutions" to achieve  freer  markets.

While it  is  true  that  there  are  still  institutional  bottlenecks  and  bureaucratic  inefficiencies (i.e., red tapes,  corruption, etc.)  that  need  to  be  scrapped,  I  think  we  are losing sight of what true economics should  mainly  be  all  about----Production and not  fixation with  freer  markets  and consumption.

If  I  am  not  mistaken,  almost  80 percent  of  the  total  economy   is  consumption driven. In short, we are producing much  less  through the years  as  a  percentage  of  total GDP.

If less  and less people  are  creating  physical wealth, there is indeed  some basis  to the analysis  that the economy is  mainly being bailed out  by the OFW  money  that is  circulating around and helping boost consumer and service  industries  like  the malls  and food chains.

Many people indeed have that "uncontrolled itch to control others".

Consider here: A taxi driver or jeepney driver would wish to have the freedom, the choice, where he can eat lunch cheaply and with parking at the same time. But those with "uncontrolled itch to control" would wish that such freedom should be curtailed. If some of those carinderias that give cheap lunch do not pay taxes and city hall business permit, sanitation permit, etc., then they better be closed down. Control people's freedom of choice. Attack free market, onwards with the command and control thinking.

His fixation with "Economics = Production" is lousy. Remember Econ 11 again, Economics is about WHAT to produce, WHEN and WHERE to produce, HOW to produce it and for WHOM. Economics is about production and consumption and non-consumption (savings, investments). What's so hard to understand here?

It is impossible for micro units (individuals, households, micro and big firms) to answer all the "what, when, where, how and for whom" if there is no free market. Can central planners, whether products of UPSE or Ateneo or Harvard or Timbuktu University,  foresee how many rubber shoes, what color, design and sizes, would be needed in village or municipality A, and in other areas and cities? What if there was an over-production of color blue, size small rubber shoes but under production of color pink, size medium and large rubber shoes? How fast can central planners respond to such consumer demand who will be in shoe stores today or tomorrow?

Only the free market -- producers who are free to produce what/when/where/how/for whom, consumers who are free to buy what/when/where/how/from whom -- can have the flexibility and foresight to see those things.

About "inclusive growth", new terminologies, and perhaps new rackets. Notice that it has already evolved into "inclusive development", "inclusive democracy", "inclusive business", "inclusive politics", what else.

The framers and inventors of such "inclusive _____" are careful that the people will not see them as ultimately gunning for "inclusive pockets" and "inclusive savings". That is, your money in your pocket or savings account is not yours and yours alone. It belongs to the collective, other people have a "claim" and "entitlement" to it already. These "other people" include the poor (regardless of the causes of their poverty), the politicians, the bureaucrats and the various poverty fighters.

See also::
Inequality 12: Billionaires and the UN Politics of Envy, July 11, 2012

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