Welfarism 26: John Mangun on Economic Decline of the West

There are a few Philippine-based foreigners that I admire, especially those who are free market-leaning thinkers. Like good friend and fellow Rotarian, Bruce Hall, based in Iloilo City; Peter Wallace, and John Mangun.

John is an American stock market investor and analyst at the Philippine Stock Exchange, and does business consulting, writing columns, on the side. He has been living in this country for more than three decades now. His kids were born here. John’s articles are archived in his website, http://www.mangunonmarkets.com/.

I am posting below three of his recent articles, about the slow economic decline of the West and the US in particular, almost in tandem with these economies’ piecemeal departure from free market policies and respect for economic mobility of individuals. Five pages for these three articles below, enjoy.

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(1) The Economic Death of the West?

Posted by John Mangun on June 3, 2013  

THERE are many reasons why for 100 years, the United States was the global center of economic power and innovation.

The US was isolated from military invasion. The land was rich with mineral wealth and, more important, vast farmlands capable of producing an abundance of food and agricultural raw materials. While the European nations all had colonies in every corner of the world providing both natural resources and markets for their goods, the US had to rely on creating its own wealth.

The Industrial Revolution began and was in full swing in Europe long before the US entered its darkest period, the civil war, which tore the country apart. But it was the US that took the advancements brought about by the Industrial Revolution and made the country the most prosperous in history.

The one defining characteristic of the US that separated it from every other nation on earth was economic mobility, the freedom and ability for virtually everyone to move up the economic ladder. The social and economic structure of every other country severely limited a person’s opportunity to become wealthier. The social and economic-class structure was fixed. A peasant would always be a peasant. One who was born into a family of shopkeepers would never become part of the ruling elite class. And by the same token, a member of the aristocracy could never understand what starting from the ground up would mean.

The Industrial Revolution slightly opened the door of economic mobility but it was the very rare exception of a man who started at the bottom and could work his way to the top of any private or public organization.

The US was the exact opposite. Each man had the chance to excel and achieve, based on merit and effort, not the status and station into which he was born. Of course, there were many rich families that savagely protected their own interests; oligarchs we call them today. But the system was designed to reward initiative and smart work.

Some of the most successful men in US history made the move up the economic food chain. John D. Rockefeller, in his time the wealthiest man in the world, was the son of a traveling salesman.

Rockefeller’s first job at 16 was as an assistant bookkeeper. Railroad and shipping magnate Cornelius Vanderbilt quit school at 11 and at 16 ran a small sailboat ferry in New York City. The founder of US Steel Corp., Andrew Carnegie, came with his family as poor immigrants from Scotland, borrowing money to make the voyage. Henry Ford started as an apprentice machinist and owned a small sawmill to pay the bills while he studied engineering and bookkeeping. Wall Street icon Jesse Livermore ran away from home at 14 because he did not want to work on the family farm. Another stock-market name, James Fisk, ran away from home and worked at a circus. Fourteen years later he became a stockbroker.

The US was a nation where a person could start by cleaning tables at a fast-food restaurant with the idea that someday he/she could own their own restaurant. That is economic mobility.

Expats View 2: On Personal Responsibility

Among the few foreign expats working and living here in the Philippines that I admire is John Mangun, an American stock market investor and trader, also a columnist in BusinessMirror. Like Peter Wallace, an Australian expat, John has lived in this country for several decades now and has a Filipina wife too.

Below, John is talking about more personal responsibility, among the key advocacies of Minimal Government Thinkers.
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http://www.mangunonmarkets.com/on-taking-personal-responsibility/

On taking personal responsibility

Posted by John Mangun on December 22, 2011   |  No Comments

In the aftermath of the Sendong flooding, literally millions of people have opened their hearts and wallets to those affected by this massacre of life and property.

However, the finger-pointing to non-existent climate change, Pagasa’s inability to adequately perform its mandate, and the government’s lack of “disaster preparedness” points to a truth no one is willing to admit. The government cannot protect the people.

In 2008 I wrote a column, titled “Who is responsible for our lives?” about the maritime tragedy when bad weather sank a ship, killing hundreds.

Then also, the blame game dominated the discussion. The ship was allowed to leave port by the Coast Guard, Pagasa underestimated the severity of the weather, and the captain perhaps put schedule before safety. But the blame was put on the “government” rather than the passengers taking responsibility for getting on a ship in very bad weather.

Certainly, Sendong is a completely different set of circumstances, with people dying in their beds from the rains. But still, we tend to look to an outside authority for our protection, even when experience tells us time and time again, that protection is weak at best and non-existent at the worst.

Albert Einstein said, “Man must cease attributing his problems to his environment, and learn again to exercise his will, his power, his personal responsibility.”

The New Year is right around the corner. What is your financial plan? Or are you relying on the government to protect and prosper you?

Let me tell you a secret. The government, even when staffed and led by the most wonderful, loving, honest public servants, does not care about you. The government, like every other institution, lives only for its own survival.

You, even the good person that you are, would not sacrifice your family for mine any more than I would forfeit my family to save yours.

We must take responsibility for our own lives because no one, no institution is going to protect or prosper us.

Are you making financial plans based on what the government says that it is going to do for the economy in 2012? Are you really that foolish?

The common socialist thinking is that no one can prosper himself/herself unless the government helps. The other side of that is one person cannot become wealthier because the already wealthy keeps the lower economic groups down. When that kind of thinking takes hold, personal responsibility is gone and we become dependent as Einstein says on our “environment,” whether that environment is the government or others.

If you want to be wealthier, you must do it yourself.... 

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See also:
Expats View 1: Some Drastic Government Moves, August 06, 2010
Abolish Income Tax 7: Rene Azurin, Peter Wallace, John Mangun, August 19, 2011

Abolish Income Tax 7: Rene Azurin, Peter Wallace, John Mangun

A friend who writes a weekly column in BusinessWorld, Prof. Rene Azurin, wrote yesterday a straightforward article, Just scrap income taxes. He argued,

...For many years now, I have been proposing that our present system for taxing income (basically patterned after the US tax system) should be replaced with a system for taxing consumption. Over time, I have argued in several public forums (as well as in this space) that consumption taxes are intrinsically fairer than income taxes. After all, what is fair about penalizing (via taxes) someone whose only "crime" is to be successful at running a business efficiently enough to be profitable? Isn’t it inherently fairer to penalize (via taxes) someone because he consumes resources and therefore adds to the total burden of both the society and the environment?

An economic rationale for this notion is that taxes on income reduce the incentives for businessmen and entrepreneurs to make money through the production of goods and services. In this way, they act as a drag on the impetus for business expansion and output growth. Income taxes are thus inconsistent with the compelling goal of creating jobs for the many millions of our unemployed and underemployed citizens. In contrast, taxes on consumption logically make those who consume more of society’s resources assume a greater share in the cost of managing the society. The more one consumes, the more taxes one pays.

It should not, moreover, be overlooked that taxes on income -- because they prescribe permissible deductions -- are more complicated, more subject to the revenue collector’s discretion, and therefore more susceptible to corruption. In that respect, the current proposal for a gross taxation scheme -- because it limits the deductions to "direct costs" (though I am not clear yet on what this term includes) -- is an improvement. The tax simplification bill -- now being finalized in the House of Representatives’s Committee on Ways and Means -- proposes to tax corporations at a rate of 18% of their gross income (net of said "direct costs") and is being pushed mainly by committee chairman Hermilando Mandanas. Given the avowed objectives, Representative Mandanas should consider simply eliminating income taxes altogether and replacing these entirely with consumption taxes. Taxes on consumption -- in the form of sales or excise or value-added taxes -- are more straightforward, less subject to discretion, and less susceptible to corruption....

Again, I say AMEN to Rene's arguments.

Last August 25, 2009, I also wrote this:

3 Columnists pushing for zero income tax

I know of at least 3 newspaper columnists who are advocating the abolition of income taxes. One is John Mangun of Business Mirror where he writes in that paper every Monday, Wednesday and Friday. John is an American businessman who has been living here in the Philippines for nearly 3 decades now. He also married a Filipina.

The other two newspaper columnists who have argued and written at least once in their opinion-columns, for the abolition of income taxes, both personal and corporate income, are Peter Wallace of Manila Standard (he writes there every Friday I think), and Rene Azurin of BusinessWorld (he writes there every Wednesday). Peter is an Australian businessman who has been living in the Philippines for more than 3 decades now. He also has a Filipina wife. Rene is also a businessman and an academic at the University of the Philippines (UP) College of Business Administration.

With at least 3 columnists in 3 national newspapers advocating zero income tax, there is a fair chance for this issue to be pushed in the national agenda of the various political parties in the coming May 2010 Presidential and local elections.

Below is a portion of John Mangun’s article today.
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http://businessmirror.com.ph/home/opinion/15059-new-ideas-not-just-new-faces.html

New ideas, not just new faces

Written by John Mangun / Outside the Box
MONDAY, 24 AUGUST 2009 21:16
BUSINESS MIRROR, AUGUST 25, 2009

… Traditionally, all candidates have called for stronger enforcement and harsher penalties for corruption. Perhaps then, the ultimate solution is to torture and then burn at the stake anyone involved with income-tax fraud, both in the private sector and with the Bureau of Internal Revenue (BIR). That might get people to respect the rules. Or maybe people are never going to fully obey income-tax rules and maybe there will always be corrupt government tax officials.

Perhaps a more creative and effective solution would be to abolish income taxes completely.

Income taxes are not pro-poor, anti-rich or any of that nonsense. Income taxes are anti-hard working people of all income brackets. The company president and the company messenger both pay income taxes. The drug dealer does not. The working person is penalized for following the rules. The drug dealer is not. Some 2,500 years ago Plato said, “When there is an income tax, the just man will pay more and the unjust less on the same amount of income.”

The same applies to corporations and corporate taxes. If your company employs 100 people and you make a profit, your tax rate is 30 percent or more. But if you run a nice and tidy gambling operation with a 100 people employed, your profit is taxed at zero percent. Now tell me the progressive income tax is fair. To whom?

The creative approach would be to abolish all income taxes. No more tax cheats that do not follow the rules. No more government corruption at the BIR. Everyone, rich and poor, are then treated equally.

The government can easily make up the revenue shortfall with an increase in the sales or VAT tax. Sales tax is the fairest of all taxes. As long as food, medicine, clothing and other essentials are exempted, there is no penalty on the lower-income earners and lower economic groups. The “rich” man and the “poor” man both pay the same amount of tax on their newly purchased washing machine.

Do not say that an increase in the VAT will reduce consumer spending. With the abolition of income taxes, the consumer will have more money to spend. The difference is that the consumer will choose how to spend the money, not the government.

The point of my rant is simply that we need creative solutions to the problems and it does not seem that the politicians have the boldness, the courage to propose something out of the ordinary.

When will come a candidate who offers new ideas and not just the offer of a new face to battle the economic and social problems of the Philippines?
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See also Part 6, Income tax and VAT trade-off, February 08, 2010
Part 5: Consumption taxes, other government fees, November 25, 2009