Pol. Ideology 52: What is the Main Purpose of Government?

* This is my article today in thelobbyist.biz. Quotes below are not part of the original article, I just added them here.
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There are several theories and opinions on the role of government in society and the citizens. This column takes the classic liberal philosophy that the main function of government, its raison d'etre or reason for existence, is to promulgate the rule of law. The law against murder and aggression, the law against stealing and destruction of property, the law protecting individual liberty and freedom of expression.

When people get more private security to protect themselves, their houses and offices, schools and shops, from aggressors and killers, thieves and vandals, then there is clear and widespread government failure. This article discusses that more people now in the Philippines are hiring private security guards in their homes.

Securing peace and order in society is supposedly a government function and responsibility, especially in dealing with organized and armed criminals, or sophisticated ponzi schemes that rob hundreds or thousands of people big time. That is why there is a huge phalanx of armed policemen, investigators and  soldiers. But how come that peace and order is mainly implemented by private security agencies? That peace and order has been implicitly privatized when the budget and personnel of those armed agencies keep rising?

The bigger the number of private security agencies, the bigger is the distrust of the people in government to ensure law and order in society. The bigger the government failure.

If there is widespread government failure in maintaining peace and order, in protecting lives and private properties, why has government expanded into many non-core, non-essential functions? Like running banks and casinos, universities and specialty hospitals, monopolizing pension and social security, extending forever, no timetable welfare and subsidies.

Government failure in its core function should not be exacerbated by another government failure in its non-core functions. The corruption and plunder scandals in various agencies from various administrations are additional proof to this government failure in its non-core functions.

If people spend more on hiring private security agencies, then they are over-taxed. They pay various taxes and fees that sustain the huge bureaucracies at DILG-PNP, DND-AFP, DOJ-NBI, LGUs-barangay tanods. Then they pay extra to hire private security agencies as these guards are not cheap.

The government should be terribly ashamed of this situation, especially when people have to hire private guards to protect their homes, on top of having private guards protecting the village gates. By extension, the NGOs and civil society leaders, media people, foreign aid, etc. who demand ever-expanding government bureaucracies, subsidies and taxes when there is clear and explicit government failure in promulgating the rule of law, should  rethink their advocacies.

Of what value to the poor that they get endless, forever, no timetable subsidies in healthcare, education, agriculture credit and seeds, condoms, etc., but their kids can be abducted and even raped easily, their small investments like a cow or tractor or tricycle can be stolen somewhere, their small plot of land can be land grabbed by some politically influential people?

Where there is peace and order, where the government is truly doing its work in protecting the citizens' right to life, right to private property, right to liberty, enforcing contracts, people will become productive. They can work from morning till midnight if they want, knowing that their family and house are secure. Where people are hard working and have peace of mind that their business contracts, big or small, are respected and enforced, plus civil society support, they can get out of poverty on their own.

A friend, Steve Cutler, suggested that since private guards and drivers and so on are dirt cheap in the Philippines for many rich people, the affluent acquire them as a way of ensuring people know how important and rich they are. There may well be some kind of "threat" but it can also be a fashion accessory.

That angle is highly possible. But having private guards in many shops, schools, cash collections by gas stations, convenience stores, etc. transported by armed vans, speaks of something, that there is grave government failure in tracking and going after the real criminals in society, if not suspicion that some members of government armed forces themselves are actively involved in criminality, like protecting drug lords and organized hold uppers.

If people recognize this big government failure in fulfilling its core function, they should also recognize that government functions and intervention in other sectors should shrink or be discontinued as such government failure will only be replicated elsewhere. The pork barrel scandal is testament to such massive wastes and cheating in government.

Another friend posted this quote from Benjamin Constant (1767-1830), Swiss-born French politician and writer who argued that liberty was essential to moral development.

"Every time the government attempts to handle our affairs, it costs more and the results are worse than if we had handled them ourselves."

This belief is widespread among liberty-oriented people especially the anarchists. Minarchists give government some favor by recognizing certain role for it, ike enforcing the rule of law and contracts between and among people through the justice system, the police and a few other agencies. When government becomes inefficient and wasteful in almost anything it dips its hands on, government credibility as an institution to protect law and order keeps dipping.

Steve Cutler made another comment, that “the guards that work in the vast majority of establishments give a false sense of security, which is an unrecognized issue. They are there only to open doors, clean tables, and so on. Or to raise a bar to allow vehicles to pass through. But they will not really protect people. You're on your own if shots start to fly. Protecting you is not part of the contract. They are there only/only to protect the property of the contracting party...the guy who pays the contract. Unless that's you, don't expect any help from a guard.”

The private guards function somehow as deterrent to petty criminals like shoplifters who may have guns to use when cornered. Such deterrence function helps reduce the possibility of shots flying inside malls. The guards with long firearms in vans are deterrent to organized criminals.

These criminals, petty or organized, can be tracked down at the barangay or street levels, if the LGUs and the police are doing their work seriously, and if government is not distracted from providing so many non-core functions.

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See also: 

Pol. Ideology 48: Hobbes, Locke, Rousseau and Social Contract Theory, September 09, 2013 

Pol. Ideology 49: Machiavelli, The Prince, Liberality and Meanness, September 11, 2013 

Pol. Ideology 50: Plato, The Republic and Pork Barrel, September 14, 2013 

Pol. Ideology 51: Liberalism is Not Welfarism, September 17, 2013

Business 360 12: Optimum Size of Government, October 13, 2013 

IDEAS 5: Who is a Liberal? What is Limited Government?, October 15, 2013 

Inequality 16: Inclusive Growth and Central Planning, October 21, 2013

Free Trade 30: Hypocrisy of Opposition to Free Market

A friend, Priscilla Tacujan, wrote a good article published today in the Philippine Star, about economic nationalism in the Philippine Constitution. I shared it in my facebook wall and it attracted a good exchange between me and Stephen P. Cutler, an American security analyst based here in Manila. Posting our exchange with his permission, thanks a lot Steve.

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Stephen P. Cutler Nonoy Oplas, thanks for posting. I've heard another, possibly even more damaging effect of the protectionist clauses. The prohibition against foreigners obtaining licenses for professions reduces the growth and skills development brought about by healthy competition. Architects, engineers, lawyers, and the medical profession know that they can be comfortable and complacent in competing only against local talent. They don't have an economic incentive to be among the best in the world. Some strive for that, but the market doesn't reward their efforts since they are too few. Many of the great powers in the world actively seek the honing and sharpening that comes from competitions. That virtually forces improvement among practitioners.

Nonoy Oplas Correct Steve. Lots of hypocrisy in this country, even among the professionals. Filipino doctors and nurses can practice in the US, UK, Canada, Australia, etc. so long as they pass qualifying exams or they get direct hiring, but doctors and nurses there cannot practice here. The same goes for almost all other professions (engineers, dentists, lawyers,...).

On another note, our session in the recently concluded international conference, "Jeju Forum for Peace and Prosperity" in S. Korea, dealt with economic nationalism and why it is wrong, 

Report from our session in Jeju Forum: Economic Prosperity in Asia: Dealing with Economic...

www.efnasia.org

Stephen P. Cutler I recall the loud clamor when a member of the District of Columbia City Council, equivalent to a Kagawad, tried to get more funding for training of people in his district for nursing jobs. He noted that the local hospital wasn't hiring locals, but had to hire a lot of Filipino nurses for the job openings. He was condemned by the Philippine Ambassador and many many others as racist against the Filipinos. If the Councilman had been smart, he'd have asked for an nurse exchange program with the Philippines. That's impossible of course since U.S. people can't be licensed nurses here. That said, the professionals CAN work here, under the guidance and oversight of a locally licensed professional. Thus, the local gets a slice of the fees, and do no real work at all.

Nonoy Oplas Economic protectionism -- against foreign goods and services (professionals) -- is exposed more in our daily lives. Many Filipinos oppose free trade, they want "fair trade" aka protectionism. But many Filipinos benefit from unilateral free trade policy of HK -- no trade negotiations, no hiring of hundreds of trade bureaucrats and trade consultants with hundreds of junkets all over the world (and cost lots of taxpayers money). In HK, all goods are welcome, zero tariff, only local taxes apply. The only goods that are regulated if not prohibited, are those that can harm lives like bombs, guns, poisonous substances, fake medicines, contaminated food and drinks. PH-HK-PH flights could be as high as 30 a day to include flights from NAIA (terminals 1-3), Clark, Cebu, Davao, Iloilo, Kalibo, etc.. The beauty of unilateral free trade yet people lambast free trade.

Stephen P. Cutler Many folks here have such a low opinion of themselves and other Filipinos that they believe we can't compete on the world stage, except for domestic helpers. That's a sad statement, because the underlying foundation is false. Many OFW's in Taiwan and the U.S. and elsewhere are professionals in computers and data management, engineering and so on, and are highly sought after. Free trade will lead to an even more vibrant labor sector. Our people are competent for the world stage. Open it up and let them compete, without having to leave home.

Nonoy Oplas Yes, the enemy within. People who love competition in sports and politics and politicians, yet hate competition in the economy. People who lambast free trade and free market yet hug the free market (if you don't like the price, leave and look for another seller) and bargain prices of Divisoria, Baclaran and tiangge0tiangge. People who lambast capitalism and yet use facebook, twitter and youtube -- ALL are products of capitalism -- for their anti-capitalism paranoia. People who lambast mining and yet do not want to live in caves, who want to enjoy electricity, cell phones, laptops, cars, buses, buildings, etc., ALL of which, zero exception, are products of mining.

That is why I never believe central planning and the central planners. Them in high authority and with PhDs who over-estimate themselves and think they can know and plan things for everybody else. Societies progress because of diversity and spontaneity, innovation and products revolution, never of monotony and central planning.

Meanwhile, here's from our Indian free market friend, Barun Mitra, who was among the discussants in our panel on "Dealing with Economic Nationalism" at the Jeju Forum:

"People trade, companies trade, governments don’t, but governments negotiate trade, and negotiations take many years.

India is not known for manufacturing, more for IT. Perhaps the only country manufacturing automobiles in the 40s after Japan, yet how many Indian car brands do we hear now. Today local car manufacturers survive only because of government support. The infant industry argument only resulted in cronyism.

IT not protected or subsidized, even completely neglected, and they prospered. About 80 percent of our IT products are for exports. Free trade is fair trade. Two sides agree, a win win situation, benefits both buyers and sellers. Economic nationalism is used by politicians to secure themselves. Losers are the people."

Stephen P. Cutler Mitra has some good insights. Tata is a huge company, but doesn't have to go outside India. Tata likely cannot compete with its current product line,which is built for standards that are for the Indian masses, and thus low standard. It doesn't have to be that way.

Go ahead and quote. No problem. Thanks

Nonoy Oplas Thanks Steve. Despite economic protectionism of the PH Constitution, there are some good policies that were innovated, like the FTAA scheme in mining that allows up to 100 percent foreign ownership of mining companies. But the case of Tampakan-SMI shows that while the Consti can be "tweaked", local politicians and bureaucracy, politics of envy, can be a bigger enemy. A company that has passed all the requirements by MGB-DENR, SEC, DTI, BIR, etc., can be stopped from operation by a provincial government.

Also, despite continued consti protectionism, some sectors in the economy simply are not giving up, they grow despite bureaucratism and the politics of envy, PH 1st quarter 2013 growth now the highest among emerging economies and the industrialized world, http://www.interaksyon.com/business/63079/fat-free-economics--economic-growth-and-population-growth

Meanwhile, I am curious -- what is NET inflows of those FDIs? If country A has FDI inflow of $20 B a year but outflow and capital withrawal is $19B, net inflow of only $1B. Compare it with country B with FDI inflow of only $3 B a year but outflow is only $1B or net inflow of $2B. Which is better?

We are always fed with inflows of FDI but we are not fed with outflows. From Priscilla's article, Singapore has inflow of around $60 B a year for 2011-12, India has $30 B a year for 2011-2012. At such FDI inflow, which I think includes portfolio or short, stock market investments, not just long term foreign investments, Singapore should be growing at 6% or more per year. But its growth in 1st Qtr 2013 for instance is only 0.2%. What happened?
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See also:
Free Trade 27: Proposed EU-PH FTA and TRIPS Plus, September 24, 2012 
EMHN 7: Free Trade Improves Public Health, February 26, 2013 
Free Trade 28: Exports and Prosperity, March 11, 2013 
Free Trade 29: The Asian Century, May 28, 2013

Transport Econ 9: MMDA Bureaucratism

The Metropolitan Manila Development Authority (MMDA) is among the huge bureaucracies in the country. It is supposed to solve problems related to heavy traffic congestion, street flooding, dirty streets, undisciplined motorists, and other functions to develop Metro Manila and its component cities and municipalities.

Today, a friend, JB Baylon, posted in his facebook wall about the MMDA. He wrote,

The MMDA has, over the years, tried so many schemes to bring sanity to our traffic: bus lanes, color coding, motorsiklo lanes, yellow lanes and yellow boxes, designated bus stops, even timers at bus stops (!!!) etc. But the MMDA has never been consistent and persistent in implementing these schemes, so, except for the color coding, everything else eventually is forgotten/fails. Not the Gates of Hell, perhaps, but definitely a metropolis of indiscipline, of "regulations-as-recommendations", of anything goes! Traffic - it's more fun in Metro Manila, the Philippines!

I replied that MMDA and many LGUs specialize on so many prohibitions. Driving your own car is not allowed on this day and hours, prohibited to drive on yellow lane, prohibited to make a left turn or U turn there, prohibited to drive your diesel engine car or van unless you pass their smoke test. More prohibitions, more regulations, more penalties, they make lots of money from those plenty of prohibitions.

Another friend, Stephen Cutler, replied,

I suggest, Nonoy, its because they don't have the right goals in mind: 1) traffic safety 2) traffic ease. Most of these guys don't drive, so they don't have to feel the pain of drivers. Most policy makers have drivers who take the strain, and the enforcers use public transportation. Neither are behind the steering wheel. Poor quality and non-standard signage is one example of this fact. The US, Australia, Europe and other nations have adopted a Uniform Signage code so that signs are at a uniform style/type, height, location and so on. Privately owned roads, such as the majority of the roads in Makati, but which are open to the public must conform.

I told Steve that these guys have clear and explicit goals in mind -- they are the central planners who will influence everyone else's behavior as motorists or commuters. More prohibition means (a) more revenues for MMDA and LGUs due to lots of acts that are prohibited, and/or (b) more extortion as many innocent motorists who are less informed of certain traffic rules will be forced to negotiate with them to spare further hassle and trouble.

Traffic congestion is very often an engineering problem with engineering solutions. If bureaucratic solutions are adopted, more problems are created than solved.

Someone suggested that “laws that make traffic violations be made a criminal offense, and said laws enforced, make the driver spend 30 days in jail when he makes an illegal U-turn, or 45 days when he fails to stop at a red light. Hopefully spending time in jail would make drivers think twice about breaking traffic rules. And don't improve the conditions of the penitentiaries. Let the driver suffer.”

Most likely this person does not drive here in Metro Manila, or does not drive often. In this country, all  traffic prohibitions apply only to ordinary motorists. Red plate vehicles, police vehicles, low-numbered plates (6, 7,... 16 or 4 - 5 digits, etc.), armored vans, or ordinary civilan cars but with political VIPs inside, are all exempted from those prohibitions. The government is the worst violator of the rule of law, and it  wants to impose more prohibitions, more restrictions.

Another suggested that MMDA should be abolished. I support his proposal but one problem there is that once a bureaucracy is abolished or shrunk, LGUs themselves will put up a new inter-LGUs body with a bureaucracy similar to MMDA. So one bad reality we have to live with is that bureaucracies just sprout like amoeba, they are everywhere, expanding or perpetuating themselves. The least we can expect from them is to limit their powers to create and expand the list of prohibited acts as if we ordinary motorists and commuters are their slaves.

More observations and ranting.

1. MMDA and LGUs want people to take public transpo, to car pool and reduce traffic in MM. Fine. But they make commuting hard and very inconvenient. For instance, you ride a bus from Ayala or Edsa, going to LRT taft to go to Monumento or nearby. MMDA forces commuters to get off about 300 meters away from the LRT station, they have to walk under the sun, or under the rain and flood, or avoid possible pick pockets along that distance. Fine if one is not carrying anything heavy or feeling well. But if one is sick, or carrying heavy things, such a huge discomfort to commute.

2. In Buendia, Makati city govt created a long line of "No jaywalking" along the island, sometimes as far as 200 meters. So to go to the other side, one walks 200 meters east or west, cross the street, then walk another 200 meters to one's destination. Again, if one is carrying heavy things, or valuables, or not feeling well, the discomfort of commuting -- and govt says people should commute more and not drive their cars.

On IPR Abolition 18: Patent, Copyright and Jeffrey Tucker

Reposting below the exchange I had this morning in facebook. With permission from Mike Perez, Stephen Cutler and Dong Abay. A bit long, more than 2,300 words, 5 pages, enjoy.
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"If patents for inventions were part of the free market, to make and sustain them would not require legislation, constitutions, bureaucracies, filings, armies of attorneys, and years of litigation." -- Jeffrey Tucker, https://www.fee.org/the_freeman/arena/intellectual-property-rights

Intellectual Property Rights : The Freeman : Foundation for Economic Education

www.fee.org

Nonoy Oplas This is simplistic thinking. One, physical assets like cars, houses, shoes, laptops, etc. are part of the free market, and they require legislation, constitution, bureaucracies.. And so IPRs are also part of the free market, they are property rights that need respect and enforcement.

Two, private property rights can be enforced by the private sector or civil society, with or without govt penalties. If thieves and shoplifters are caught inside a mall, they are apprehended by private security guards, they can be photographed and their faces plastered in the mall in a wall of shame, other schemes. That is private punishment against violation of private property rights.

The same way, thieves of IPRs like patent, trademark and copyright can be penalized by an industry association, a civil society org. If someone sells burgers wrapped with fake McDo or Burger King wrappers and trademark, and the consumers get good poisoning, who will they sue -- (a) the orig McDo/BK, (b) the IPR thieves like those sellers, or (c) IPR abolitionists like Jeff Tucker? Obviously (a) and (c) will not accept responsibility so (b) must be prosecuted for misleading the public and consumers. If people get food poisoning after consuming food from the orig McDo/BK store, then they can be held accountable. But these companies take care of their trademark so carefully, they can assure the public of 0.00% possibility of food poisoning as they know the consequences of damaged brand and trademark.

IPR abolitionists like Tucker are just simplistic minded.

Joshua Gallardo Roa Woww you had stipulated it clearly....thank you for this info Nonoy Oplas

Nonoy Oplas There was a case of a local burger shop named “Mang Donalds” with logo somehow similar to MacDonald. The latter did not like this, so it sued the former over trademark issue, the former later closed shop, resurfaced as another food shop with a more unique name and encountered no legal issues, prospered. IPR forces people to be more unique, more innovative and creative. IPR abolition favors the lazy, un-imaginative and plain copycatters, http://funwithgovernment.blogspot.com/2011/09/on-intellectual-property-abolition-part_20.html

Stephen P. Cutler Nice work, Nonoy. These kinds of discussions keep us, as a nation, stronger. So many of us are intellectually lazy and just accept the ideas of others without question. Or we make personal attacks against the proponent of the idea,and fail to point out the weakness of that idea. THAT should be the focus. Thanks, again.