EFN Asia 13: Welfare Populism and Poverty

* This is my article yesterday in the online magazine,
http://thelobbyist.biz/index.php/perspectives/less-government/item/122-welfare-populism-and-poverty
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State-mandated welfare populism or universal welfare, is creating more dependency and mendicancy rather than independence and self reliance. It is encouraging more corruption rather than curing it, expanding the spend-tax-borrow policy, bloating the public debt and the economic uncertainty that comes with it. Therefore, politicians and the public should avoid welfarism trap and steer government to focus on promulgating the rule of law, protecting property rights, making social and economic rules apply equally to all and not making favoritism and cronyism.

This is the main message in the two-days Economic Freedom Network (EFN) Asia 2012 conference last November 6-7, 2012, here at Crowne Plaza East Kowloon, Hong Kong. The event that attracted more than a hundred international and local participants was sponsored by the Friedrich Naumann Foundation for Freedom (FNF) and co-sponsored by the Lion Rock Institute (LRI), Hong Kong’s first and only free market institute. 

Among the speakers in the two-days conference were Wolf Dieter Zumpfort, Deputy Chairman of the FNF Board of Directors in Germany;  Abhisit Vejjajiva, former Thai Prime Minister, Rainer Adam, Regional Director of the FNF Southeast and East Asia, Bill Stacey, Chairman of LRI, and John Tsang, Finance Secretary of Hong Kong.

The various speakers have reiterated the importance of setting markets free – rich and poor, men and women, young and old, to have access to various employers and consumers of their skills and talent, products and services, in a competitive and non-monopolistic or non-oligopolistic environment. The role of government is to protect the property rights of the people, that the fruits of their hard work and efficiency, are protected and not forcibly taken away from them by bullies and cheats. This necessitates upholding the rule of law, that regulatons apply to all, exempts no one and no one can grant exemption from the limitations made by the law.

Thus, the law against killing, stealing, kidnapping, land grabbing, extortion and other criminal activities should apply and be strictly implemented. This equality before the law will act as the main incentive for people to become more industrious, responsible and self reliant.

Forcing equality in society via populist and welfarist policies – like high food subsidy, fuel subsidy, housing subsidy, healthcare subsidy, cash transfers – would tend to encourage dependency and mendicancy. Forcing equality of social outcome among the people regardless of their work and efficiency or lack of them, will distort markets, wreak havoc on the fiscal condition of governments, as what is happening now in many welfare states in Europe like Greece, Spain, Portugal and Italy.

Even in Hong Kong, according to local speakers, the government is treading slowly on more welfarist policies that were absent when this free trade economy was developing and has attained a highly developed economic status.

The European speakers in the conference also recognized that Hong Kong's generally free market and globalized economy coupled with the rule of law, is mainly responsible for its economic prosperity while Germany and many European economies are struggling with welfarism trap, massive unemployment, and the need to cut the expensive, huge debt generator welfare programs to help stabilize their economy.

Welfarism is being introduced more liberally in many Asian governments and economies recently. In Thailand for instance, they have rice subsidy, free computer tablets for first graders, and subsidy for first time car buyers. The latter alone cost the government $1 billion and the traffic has worsened further.
In Indonesia, fuel subsidy has further bloated the public debt. In China, there are calls for school free lunch, free school bus.

In S. Korea, there are free child care and universal school meal policy. If these and other new welfare programs are adopted, public spending will rise by around $520 billion more, which will need either new taxes and/or more borrowings. Existing welfare programs alone is projected to contribute to government spending of 45 percent of GDP and the public debt is projected to reach 216 percent of GDP.

In the Philippines, there are various welfare programs supposedly to help “fight poverty”. These include education and books for the poor, healthcare and medicines for the poor, housing and relocation for the poor, credit and tractors for the poor, and many of these do not seem to work as high poverty still persists, so they invented new welfare programs like cash transfer for the poor, and soon, pills and condoms for the poor.

In his keynote address, HK’s Finance Secretary John Tsang said that they are conscious of observing fiscal prudence for three reasons: it is in their constitution, they are aware of the huge public debt problem of many welfare economies, and it is part of their value system of not spending more than one’s income.

Wall Street Journal editor for Asia business, Joseph Sternberg, observed that Mr. Tsang has several new taxes on residential real estate transactions, like a 15 percent tax on foreigners real estate buyers, an increase in “special stamp duty”, and the possibility of the HK government imposing a capital gains tax on property soon.

All new taxes or hike in the rates of existing taxes are meant to expand government revenue to finance in part new welfare spending or expand coverage of existing welfare programs. Politicians, legislators and other policymakers cannot bind themselves and their successors. The itch to intervene, to subsidize and over-spend, is there, resulting in distortion in many sectors of the economy, high public indebtedness that results in high interest payment and siphons resources away from otherwise productive spending.

Rule of law is undermined when government mixes with businesses. Cronyism and nepotism is not far off when government becomes the regulator and industry player at the same time, even in the guise of protecting the poor from “market manipulation by private enterprises” demagoguery.

There were many other important points discussed during the conference. As the Philippine elections is coming closer, just six months away, reminding both the politicians and the voters that welfare populism is a costly policy that can create more dependency rather than independence, is an important task for concerned individuals and civil society leaders.

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Meanwhile, here are  more photos during the conference.
Below, the two guys whom I would consider as the "pillars" of the EFN Asia conference, Dr. Rainer Adam (left) and Dr. Wolf Dieter Zumpfort (right). Without their commitment to hold an annual EFN Asia conference, the network could have been more loose and have no regular regional and international networking.

Then my two photos from Xingyuan Feng's camera. Xingyuan has been a friend since 2004 and I see him every year in various regional and international conferences. Another friend in the picture is Shoulong Mao, another Chinese academic and free marketer, President of the Cathay Institute for Public Affairs (CIPA).

EFN Asia 12: Day 1 of Conference 2012

Day 1 yesterday of the 2012 Economic Freedom Network (EFN) Asia conference here at Crowne Plaza East Kowloon. It is sponsored by the Friedrich Naumann Foundation for Freedom (FNF) and co-sponsored by the Lion Rock Institute (LRI), Hong Kong’s first and only free market institute. 

There were 100+ participants, mostly international (Asia, US, Canada, Germany, Spain...). Many locals too, mostly friends of LRI.

Key speakers yesterday morning, from left: Wolf Zumpfort, Deputy Chairman, FNF Board of Directors, Germany;  Abhisit Vejjajiva, former Thai Prime Minister, Rainer Adam, Regional Director, FNF Southeast and East Asia, and Andrew Work, LRI co-founder. He took the place of  Bill Stacey, Chairman of LRI, who came late by a few minutes.

In his opening message, Bill reiterated the importance of free market, rule of law and property rights, in countering the mass appeal of populism which has long term negative impact on the economy. He said that the HK government is treading slowly on more welfarism.

Wolf cited HK's generally free market and globalized economy for its economic prosperity while Germany and many European economies are struggling with welfarism trap, massive unemployment, and the need to cut the expensive, huge debt generator welfare programs to help stabilize their economy.

Rainer reiterated a number of points made by Bill, and praised former Thai PM Abhisit for not bowing to heavy populism in Thailand during his term, that he cut certain subsidies and instill fiscal restraint and responsibility, only to be reversed by the succeeding populist administration in Thailand.

Abhisit discussed many points in his keynote speech. Among them:
* Populism has made the poor become even more dependent on the government.
* Populism breeds high opportunity for corruption, like the rice subsidy corruption.
* It can lead to more social conflict as a result of those continuing corruption.
* Decline of democracy as populism very often leads to authoritarianism and totalitarianism.
* Foreign intervention becomes inevitable later, like the heavily indebted welfarist economies who must be bailed out by other countries and the multilaterals.
* Decline in competitiveness and possible collapse of the economy as free market competition is often shelved.
* But free market has problem with social and economic distribution, thus the need for government to provide some safety nets to those highly vulnerable sectors and households.
* Politicians should be responsible, balance populism with proper education of the voters, avoid quick fixes and welfarism trap.

3. Keynote Address, former Thailand PM , “How Welfare Populism Destroys Prosperity”

The next round of speakers were Sec. Neric Acosta, the Presidential Adviser for Environmental Protection, Philippines, and Sec.Gen. of the Council of Asian Liberals and Democrats (CALD), and Bibek Debroy from India. Bibek was the sudden replacement of Parth Shah, President of the Center for Civil Society (CCS), India, who failed to come due to  problem with his flight from Delhi. Below is part of Neric's presentation.

Neric emphasized the importance of the rule of law, avoid populism despite its temptation to politicians. Bibek said that contrary to many people's belief, politicians in general are not myopic as they balance populist demand by the voters and managing public expenditures.

Climate Tricks 5: CO2, Clouds and Positive Feedback

One of the key themes of anthropogenic global warming (AGW) or "man-made warming" or later revised to "man-made climate change", is that more human emission of carbon dioxide (CO2) via fossil fuel burning, more coal power plants, etc., results in more warming. suggesting a high climate sensitivity. Such sensitivity is reflected in the cloud formation in the atmosphere, saying that more CO2 results in less clouds and hence, more solar energy penetration on the planet's air, land and sea surfaces.

Dr. Roy Spencer (www.drroyspencer.com) made a good illustration about this in his presentation during the 2nd International Conference on Climate Change (2nd ICCC) in NYC in March 2009 that I was able to attend.  This is how the feedback theory works.

Now, here is the data summarized in a chart/illustration, still part of Dr. Spencer's presentation. Should be mind-boggling for those who believe that only human factors, not natural factors, can influence the planet's climate.

Get that? More low-level clouds, more cooling. Less clouds, more warming. In his concluding slide, Dr. Spencer said,

The Bottom Line...

The IPCC Has IGNORED Natural Variations in Clouds …which has led to…

The ILLUSION of Positive Feedback (aka a “sensitive” climate system)

The CLAIM that only CO2 can Explain Global Warming

The FAITH that Earth’s cloud cover never changes, decade after decade, century after century.

Ouch, that hurts! At least to believers of "only human activities cause global warming".

Now, there is this interesting article about this subject in WUWT:

http://wattsupwiththat.com/2012/02/09/declining-global-average-cloud-height-a-significant-measure-of-negative-feedback-to-global-warming/

Declining global average cloud height: “A significant measure of negative feedback to global warming”

Posted on February 9, 2012 by Anthony Watts

Guest post by Dr. Pat Michaels – reposted (with permission) from World Climate Report

A new paper just published in Geophysical Research Letters by Roger Davies and Mathew Molloy of the University of Auckland finds that over the past decade the global average effective cloud height has declined and that “If sustained, such a decrease would indicate a significant measure of negative cloud feedback to global warming.”

Davies and Molloy are quick to point out that part of the decline from 2000 to 2010 in cloud height is due to the timing and variability of El Niño/La Niña events over the same period, however, there still seems to be evidence that at least part of the decline may remain even when El Niño/La Niña variability is accounted for.

Figure 1 (below) shows the history of the effective cloud height, as determined by Davies and Molloy from satellite observations, from March 2000 through February 2010.

Figure 1. Deseasonalized anomalies of global effective cloud-top height from the 10-year mean. Solid line: 12-month running mean of 10-day anomalies. Dotted line: linear regression. Gray error bars indicate the sampling error (±8 m) in the annual average (source: Davies and Molloy, 2012).

Is Asian democracy in crisis?

This afternoon, I attended the forum, Saving Asian Democracy: Can the Philippines Lead the Way?, at DLSU Manila main campus. The event was sponsored by the Friedrich Naumann Foundation for Liberty (FNF) and the Council of Asian Liberals and Democrats (CALD).

Just pondering on the title of the symposium, I asked myself, "Why, is Asian democracy in crisis that it needs to be saved?" Since I do not have a clear answer to my own question, and the three speakers are really experts on the subject -- Dr. Rainer Adam, the Regional Director of FNF for SE Asia and East Asia; Dr. Neric Acosta, a former Congressman and political science academic; and Maria Ressa, a noted journalist, I decided to attend the symposium.

Rainer talked about the result of Freedom Barometer Asia 2010 Report. Why measure the freedom barometer in East Asia, What are the variables considered, Where are the data sources coming from, What are the country results, etc.

The Freedom Barometer is a simple yet useful measurement of freedom in the countries covered. It considers 3 important factors: rule of law, political freedom, and economic freedom. In most Economic Freedom Index or Economic Competitiveness Index and related annual surveys, Hong Kong and Singapore are among the runaway topnotchers every year, both in Asia and worldwide. But are the rich Singaporeans really that free? Can they open any website or blog which has some political content without threat of being closed down by their government? Can they openly criticize abuses and/or wastes by their government? The quick answer is NO. Thus, such political realities are factored in by this freedom barometer.

So, how did Singapore, and the Philippines, rank in this study? Singapore was 4th after the top 3, Japan, Taiwan and South Korea. 5th to 10th place, in order, were Mongolia, Indonesia, Malaysia, Philippines, Thailand, Vietnam.

The low-ranking countries, ranked 11th to 16th, in order, were China, Cambodia, Brunei, Myanmar, Laos and North Korea.

Neric talked about democracy, freedom and individual dignity. He noted how the practice (or non-practice) of democracy in Asia has a very wide range. Myanmar and North Korea at one extreme, Singapore, Vietnam and China near this side, and the Philippines on the other extreme.

Neric narrated how in one forum they have in a university in Singapore, government spies later surrounded them. And followed them wherever they go -- to restaurants, malls and shops, their hotel. They were literally harassed by the Singapore government spies, even if their forum was in an academic environment. Emails can be monitored by the government if they target you.

Maria Ressa gave a fantastic presentation too, entitled Media for Social Change. It did not directly answer the forum question, but it did point to one important aspect of democracy: individual responsibility to protect freedom.

She showed how social media and modern technology in ICT is affecting the way people think and interact with each other. These days, people, especially the young, do not rely on listening to candidates in political rallies. read, watch, listen to the mainstream media (newspapers, tv and radio). Social networking media and blogs are among the effective and credible sources of information because they rely on citizen journalism, on plurality and diversity of opinions, perspectives and private information.

So, after hearing the 3 speakers, my answer to my own question, "Is Asian democracy in crisis?" was NO. Democracy and political freedom in Asia is undergoing gradual changes but they are not exactly in a "crisis" situation of moving towards authoritarianism. There is a wide range of level of democratization in many Asian countries, from the currently authoritarian states like North Korea, Myanmar and China, to the rather rambunctious democratic states like the Philippines.

Somehow, a "tipping point" towards a more mature type of democracy will be reached in the future, but it will not be a simultaneous event. It will be a piecemeal development. Thanks to endless development and innovation in social networking and the web. They do help catalyze this gradual evolution of democratization in Asia and other parts of the world.
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See related paper, Facebook and the subversiveness of capitalism

Forum on HR, free trade and Asian democracy, Manila

There are two good fora this week and next week here in Manila, sponsored by the Friedrich Naumann Foundation for Liberty, FNF Manila Office and Liberal International.

On Thursday this week, forum on human rights (HR) and free trade, and on June 1 Tuesday, forum on Asian democracy. I particularly like the May 26 forum. Though it seems that of the 4 speakers that afternoon, 3 would be coming from the Human Rights aspect and only 1, Dr. Medalla, coming from the free trade aspect.

Now, if I will be asked to answer this question, "Did the Philippines Sacrifice Human Rights in the Altar of Free Trade?", my quick answer would be NO. We are not a free trade country. The notoriety and corruption of the Bureau of Customs is one quick proof to that. Another would be the high difference between Philippine prices and foreign prices of certain products and services (computers, iPad, certain brands of cellphones, tv, rice, etc.). For me, the Philippines sacrifice human rights in the altar of bureaucracy and BIG government. It has nothing to do with free trade and free market.

On the June 1 forum, I like it because of the speakers, especially Rainer Adam. Rainer is the head of FNF South East Asia, and FNF is active in the human rights campaign in the region. Talk about human rights in front of the Myanmar and Laos generals, for instance, and one will see the difficulty of pushing the subject. Another good speaker there is Neric Acosta, former Congressman and incoming DENR Secretary.

These two events are free, no need to pre-register. Just show up at the venue and register right there.

DENR, Neric Acosta, and property rights

The Department of Environment and Natural Resources (DENR) is among the corrupt agencies in the Philippine government, though in my observation, not as corrupt as the armed units like the DND-AFP and the police (PNP), and the revenue agencies like the BIR, BOC and LTO.

Dr. Nereus "Neric" Acosta is set to be appointed as the new DENR Secretary next month, when the one-year ban from the last (May 2010) elections will end. Neric is a fellow UP alumni, he finished AB Political Science there, several years younger batch than me. He finished his PhD also in Political Science from the University of Hawaii. During his 9-years term as Congressman of the 1st District of Bukidnon province, I think he was the only legislator with a PhD.

Last May 11, Neric issued this statement:

TODAY, A WELL-FINANCED SMEAR CAMPAIGN WAS LAUNCHED AGAINST ME BECAUSE I AM BEING CONSIDERED BY PRESIDENT AQUINO FOR THE PORTFOLIO OF SECRETARY OF THE DEPARTMENT OF ENVIRONMENT & NATURAL RESOURCES (DENR).

VIA FULL-PAGE ADS AND OTHER MEDIA, THEY PUBLICIZED AN OLD WORN-OUT CHARGE FILED AGAINST ME 10 YEARS AGO BY MY POLITICAL RIVALS WHEN I WAS A CONGRESSMAN OF BUKIDNON.

WELL, MANY PUBLIC OFFICIALS HAVE PENDING CASES BEFORE VARIOUS COURTS, BUT A PENDING CASE IS NOT AN INDICATION OF GUILT.

I PROMISED PRESIDENT NOYNOY I WOULD CLEAN UP THE WELL-PLACED MAFIA GROUPS THAT ARE IMBEDDED IN THE DEPARTMENT OF ENVIRONMENT & NATURAL RESOURCES (DENR) – FROM THE ISSUANCE OF FAKE LAND PATENTS RESULTING TO BIG LAND SCAMS TO THE QUESTIONABLE GRANTS OF MINING AND LOGGING PERMITS.