Pol Ideology 73, On BIG powerful government

I am reposting another good article by a friend, Eric Jurado. Enjoy.

Do you believe in a powerful government?

One of the most important differences between the Left and the Right is how each regards the role and the size of the government.

The Left believes that the state should be the most powerful force in society. Among many other things, the government should be in control of educating every child; should provide all health care; and should regulate often to the minutest detail how businesses conduct their business. In Germany, for instance, the government legislates the time of day stores have to close. In short, there should ideally be no power that competes with Government. Not parents, not businesses, not private schools, not religious institutions—not even the individual human conscience.

Conservatives, on the other hand, believe the government’s role in society should be limited to absolute necessities such as national defense and to being the resource of last resort to help citizens who cannot be helped by family, by community, or by religious and secular charities.

Conservatives understand that as governments grow in size and power, the following will inevitably happen:

1. There will be ever-increasing amounts of corruption. Power and money breed corruption. People in government will sell government influence for personal and political gain. And people outside government will seek to buy influence and favors. In Africa, Latin America, and the Philippines, government corruption has been the single biggest factor holding nations back from progressing.

2. Individual liberty will decline. With a few exceptions, such as an unrestricted right to abortion in America, individual liberty is less important to the Left than to the Right. This is neither an opinion nor a criticism. It is simple logic. The more control the government has over people’s lives, the less liberty people have.

3. Countries with ever expanding governments will either reduce the size of their government or eventually collapse economically. Every welfare state ultimately becomes a Ponzi Scheme, relying on new payers to pay previous payers; and when it runs out of the new payers, the scheme collapses. All the welfare states of the world, including wealthy European countries, are already experiencing this problem to varying degrees.

4. In order to pay for an ever-expanding government, taxes are constantly increased. But at a given level of taxation, the society’s wealth producers will either stop working, work less, hire fewer people, or move their business out of the country.

5. Big government produces big deficits and ever increasing—and ultimately unsustainable—debt. This, too, is only logical. The more money the state hands out, the more money people will demand from the state. No recipient of free money has ever said, “Thank you. I have enough.”

Unless big governments get smaller, they will all eventually collapse under their own weight—with terrible consequences socially as well as economically.

6. The bigger the government, the greater the opportunities for doing great evil. The twentieth century was the most murderous century in recorded history. And who did all this killing? Big governments. Evil individuals without power can do only so much harm. But when evil individuals take control of a big government, the amount of harm they can do is essentially unlimited. The Right fears Big Government. The Left fears Big Business. But Coca-Cola or SM can’t break into your house or confiscate your wealth—only Big Government can do that. As irresponsible as any Big Business has ever been at times, it is only Big Government that can build concentration camps and commit genocide.

7. Big government eats away at the moral character of a nation. People no longer take care of other people. After all, they know the government will do that. That’s why citizens of freer countries like America give far more of their money and volunteer far more of their time to charity than do Europeans at the same economic level.

Without the belief in an ever-expanding government, there is no left. Without a belief in limited government, there is no right.

Eric Jurado covers economic and political issues with liberty as his guiding star.

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See also:

Pol. Ideology 70, Socialism and the politics of envy, April 08, 2017 

Pol. Ideology 71, Georgism and the geolibertarians, June 22, 2017 

Pol Ideology 72, You love capitalism, January 14, 2018

Pol Ideology 72, You love capitalism

I am reposting this good article in Manila Standard by a friend, Eric.
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You love capitalism

posted January 05, 2018 at 12:01 am

By Eric Jurado

You love capitalism.  Really, you do.

And you can’t stand big government. Really, you can’t

Don’t believe me? Then I’ll just have to prove it to you.

Do you use an iPhone? Android?  Macbook?  PC?

Read on a Kindle?

Watch TV and movies on Netflix? Videos on YouTube?

Shop on Amazon? Zalora?

Listen to Spotify?

Search on Google?

Send money on GCash? Coins?

Grab a ride with Uber?

Drive with Waze?

Book a room with Airbnb?

Are you on Facebook? Or Instagram? Or Snapchat?

You probably use many, if not all, of these things, and, if you’re like me, you love them. In today’s world, they’re practically necessities.

Where do you think they came from?

From entrepreneurs with great ideas and the freedom to test them in the marketplace. That is what is known as . . . capitalism.

Now consider some other things you probably do:

Have you been to the LTO?

Gone through security at Naia?

Mailed a package at the Post Office?

Called the BIR customer service line?

Or called any government office, for that matter?

What’s the difference?

Why is going to Uniqlo so fun but going to the LTO so painful? Because one has nothing to do with government, and the other is the government. One needs to satisfy its customers to survive and grow. The other doesn’t.

The purpose of government is not to create products. And we don’t expect it to. But if you thought about it for a few moments, you’d realize you don’t want the government involved in just about anything private business can do.  That’s because profit-motivated individuals have to work hard to please their customers—you. Government agencies don’t have to please anyone.

Call that BIR service line or any government service line, if you doubt me.

Can you imagine if Steve Jobs had to seek government approval for every new design of the iPhone? We’d have been lucky to get to iPhone 3G.

Look at Uber. Just a few years ago, summoning a private car and driver in a few minutes that would take you where you wanted to go was truly a service available only to the wealthiest people. But now, thanks to capitalism, private rides are an affordable option for ordinary people all over the world.  Until Uber came around, if it started to rain in Manila and you wanted to grab a cab, good luck. Too many rain-drenched people and too few cabs available. Uber had a better idea. Rain falls. Demand for rides spikes. Raise prices to give more Uber drivers an incentive to hit the road. Ride-in-the-rain problem solved.

Airbnb is another example. Only a few years ago, if you were going on vacation with your friends or family, hotels were just about your only option. But hotels are expensive and often don’t provide all that much in terms of space, amenities or interesting neighborhoods.

If you wanted to find out if individual homeowners were making their homes or condos available for a few nights, you’d have to scour internet postings.

But then Airbnb came along, giving anyone with a computer or smartphone access to over two million homes in 190 countries. You can find places with hot tubs and pools; or, if you’re on a tighter budget, you can rent a room, or even just a couch.

Government never could have done this. What motivation would it have? How would it even know we wanted services like Uber or Airbnb?  We didn’t know it, until risk-taking entrepreneurs made it possible. Thanks to capitalism. And no thanks to government which, more often than not, just gets in the way.

Why?

Because the government’s knee-jerk reaction is to regulate and control everything it can regulate and control. Otherwise, what would be the purpose of many government agencies and all those bureaucrats?

Cities across the globe are putting up barriers to slow down or shut down services like Uber and Airbnb. Making rules may be the only area where the government shows creativity. Economic growth has the best chance of happening in the absence of that rulemaking.

According to economist Adam Thierer, the internet, to use just one important example, was able to develop in a regulatory climate that embraced what he calls “permissionless innovation.” This approach to regulating allows entrepreneurs to meet their customers’ needs without first seeking government approval.

In sum, almost everything you enjoy using is a product of capitalism; almost everything you can’t stand is a product of big government.

So, do you love capitalism? Of course you do. You practice it every day. It’s time to preach it.

Eric Jurado is an independent investment banker and economist.

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See also:

Pol Ideology 69, Math can show that small or minimal government is optimal, March 01, 2017 

Pol. Ideology 70, Socialism and the politics of envy, April 08, 2017 

Pol. Ideology 71, Georgism and the geolibertarians, June 22, 2017

Tax-tax-tax, Free-free-free

All government agencies, departments and bureaus, officials and their consultants, are tax-hungry. Health and housing sectors say "we need more money." Infra and agri sectors say "we need more money." LGUs and Police say "we need more money." Military and defense say "we need more money." Basic and tertiary education (DepEd, CHED, SUCs) say "we need more money" and "Free tuition for all students in public schools and universities."

Almost all of them are silent or explicit campaigners of tax-tax-tax pa more. There are dozens of alibi to justify tax greediness.

Among the 122 state universities and colleges (SUCs) in the Philippines that will give "free tuition" to all of their students, rich and poor alike:

Those who argue "Rechannel ______ (agency) budget to education" are daydreaming. All agencies have their own justifications and alibi that they need more money, so there is no way to significantly cut their budget and rechannel the money to free tuition for all SUCs.

Many NGOs have become government-funded orgs (GFOs). You see them among the campaigners, silent or vocal, of tax-tax-tax pa more.

This is a losing proposition now but I will say it nonetheless: NO to new or higher taxes, there are lots of existing ones already. NO to new expensive subsidies like this free tuition for all students (currently part-subsidies depending on family income of students) in SUCs. If one sees the cars in UP and many other SUCs, one will wonder why these students are getting subsidies. DBM's Sec. Diokno said this welfarist program alone will cost P100B/year.

Among the big casualties of free-free-free, or subsidize-subsidize-subsidize philosophy is the corruption of people's values. Less personal and parental responsibility, more state responsibility. So more parents will be doing pa-inom-inom, pa sugal-sugal, etc. Their children's education from elementary to university is no longer parental responsibility, state responsibility na. Healthcare, state responsibility too.

The number of free riders, irresponsible people and tax-hungry bureaucrats and consultants will increase. For any problem, their "solution" is more government. Then people complain of massive wastes, inefficiencies, robbery and plunder in government. As government expands, stupidity and irrationality expands.

"A government that's big enough to give you everything you want is also big enough to take everything you've got."

Arms exports and BIG governments

BIG governments almost always means big defense and military spending. There are other big governments which do not spend heavily on armaments and armies but they are a few.

Here are the recent data of arms exports (SIPRI trend indicator values) as reposted by the WB.

"Arms transfers cover the supply of military weapons through sales, aid, gifts, and those made through manufacturing licenses. Data cover major conventional weapons such as aircraft, armored vehicles, artillery, radar systems, missiles, and ships designed for military use. Excluded are transfers of other military equipment such as small arms and light weapons, trucks, small artillery, ammunition, support equipment, technology transfers, and other services."

Source: Stockholm International Peace Research Institute (SIPRI), Arms Transfers Programme (http://portal.sipri.org/publications/pages/transfer/splash).

Reposted in WB, Arms exports (SIPRI trend indicator values)

http://data.worldbank.org/indicator/MS.MIL.XPRT.KD

Meanwhile, I wrote this on March 25, 2011:

Government is coercion. It's the single biggest characteristic of any government anywhere around the world. They only differ in the extent of coercion that they impose upon their citizens.

Absolute monarchies for instance are absolute dictatorships. Zero election, zero transfer of political power outside of the clan, zero to minimal political dissent and opposition. There are dozens of control measures to ensure such absolute dictatorship.

The bigger the extent of coercion, the bigger the political dissent by the citizens, even if kept in private. Dictators and government leaders know this. In addition, there are also conflict among BIG governments themselves like territorial disputes. Thus, they need to keep huge police forces, army, navy, air force and armed units. And they give them lots of guns, bombs, tanks, battle ships, fighter jets and choppers, radars and communication equipment, and other hardwares.

Below is a nice chart by The Economist, Present Arms, March 23rd 2011 issue. Their primary source of data is the Stockholm International Peace Research Institute (SIPRI).

The US, Russia and Germany supplied 64 percent of all arms importation by all countries around the world from 2006-2010. Manufacturing and selling guns, ammunitions and bombs is one huge business. It is a highly sustainable business.

All dictators, monarchs, kings, emirs, sultans, prime ministers and presidents always want to show their huge stockpile of arms, bombs, missiles, tanks and other war paraphernalia during national day or independence day parades. A wide phalanx of police and military generals, colonels, admirals and other officers are clapping and smiling at the huge amount of weapons of death and destruction, carried and operated by the men and women trained to kill and destroy, under their commands.

When wars erupt between countries or within a country (ie, a civil war), the immediate target for destruction and demolition by their respective soldiers are the military targets of the enemy. Whoever wins, or if a stalemate results, each warring country will need to re-arm again and prepare for another round of war, actual or imagined. And that's how the arms exporting countries and their businesses make tons of money.

Huge arms expenditures and BIG governments, they go hand in hand. Always.

Business Bureaucracy 10, WB's Doing Business 2016 Report

The World Bank (WB) recently released its Doing Business (DB) 2016 Report. Before discussing it, here are two previous DB 2010 and 2015 Reports.

In DB 2009 Report, the Philippines ranked 141st out of 183 countries covered. In the DB 2010 Report, below, the country ranked 144th/183. The main bottlenecks are in (a) starting a business, and (b) closing a business. Relatively good rank in (a) trading across borders, and (b) registering property.

Last year's DB 2015 Report, the Philippines ranked 95th out of 189 countries with an overall distance to frontier (DTF) score of 62.08. Bottlenecks in (a) starting a business, and (b) protecting minority investors; good ranks in (a) getting electricity, and (b) trading across borders.

This year, DB 2016 Report, the PH slipped 8 positions and went down to global rank of 103rd out of the same 189 countries.

Ok, the 2016 Report shows that business bureaucracies in the Philippines have worsened compared to the previous year. But compared to the previous administration, based on DB 2009 and  2010 Reports (PH global rank of 141st and 144th, respectively), current ranking is better. Fine, but it is something that we cannot really be proud of. Why would PH bureaucrats, local and national, continue to impose lots of permits, taxes and fees, to people who create jobs, who expand the production of goods and services in the country?

Entrepreneurship and job creation is not a crime. Heavy bureaucratism is, because it contributes to higher unemployment, higher corruption, and higher prices of goods and services. Which tend to affect the poor more than  the  rich and middle class. BIG Government, its size, bureaucracies and taxes, must shrink.
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See also:

Business Bureaucracy 6: Presentation at Rotary Club of Manila Bay, February 01, 2013 

Business Bureaucracy 7: Penalizing Small Businesses, February 01, 2013 

Business Bureaucracy 8: Exchanges at Imperium et Populi (Philippines), June 12, 2013 

Business Bureaucracy 9, Land title registration, July 29, 2015 

Pilipinas Forum 9: Corruption's Deep Root, September 16, 2011

Business 360-24: Reducing Construction and Electricity Permits, April 18, 2015

Election 15, On Inclusive, Principled, Competent and Humble Presidentiables

My former Prof. in undergrad Political Science subject in UP Diliman in the 80s, Dr. Segundo "Doy" Romero, asked yesterday in his fb wall, "Is Mar Roxas inclusive, principled, competent, and humble as appropriate to the Philippine Presidency?"

He then defined those four concepts.

1. “Inclusive” means you, the candidate, is committed to the quality of life of, by, and for the whole Filipino people. Inclusive development means enabling the poor, the vulnerable, the marginalized, and the disadvantaged to develop faster than the rest of society.

2. “Principled” comes from a consistent code of behavior (“sa isip, sa salita, at sa gawa”) that, faced with a series of dilemmas, enables you to choose the higher interest of nation over sectarian or narrow interests.

3. “Competent” comes from doing the right things right – good technical and administrative results being consistently produced to match good intentions. This includes extending your reach beyond your grasp through teamwork and technology.

4. “Humility” is when self-praise is unnecessary; it comes from public acknowledgment that you are inclusive, principled, and competent.

I commented and gave a direct answer, No.

But in fairness to Mar Roxas, other Presidentiables like VP Jojjo Binay, former President Erap Estrada, Sen. Alan Cayetano, Sen. Bongbong Marcos, other presidentiables, will also have a NO answer, at least for me.

Sen. Grace Poe may have humility; and competence, am not sure. 

With the current system of personality-oriented, not philosophy or ideology-oriented politics in the PH, no candidate can be really principled. Where the populist and welfarist idea prevails, Presidentiables and other politicians will be swayed by populism too. If majority of voters want more subsidies, more welfare, more entitlement programs, never mind that taxes are high and public debt is rising yearly because of annual deficit, with or without a crisis, most or all Presidentiables will be swayed towards populism.

Being a free marketer and believer of classical liberalism (not US liberalism or other variants), the closest political party in this ideology in the PH is the Liberal Party. The LP is also affiliated with Liberal International (LI), based in Europe. European liberalism is closer to classical liberalism.

My beef or complain about the LP is that it is not acting liberal enough. Many of Its policies adopted and implemented is far from being liberal but closer to the populist and welfarist philosophy. Notice how socialists like Walden Bello. Joel Rocamora, Ronald Llamas and other officers of BISIG-Akbayan found it easy to be in partnership with the LP. Either the latter group are confused socialists or the LP are confused liberals.

Sir Doy asked, "Is it possible to assess the utility of political parties in terms of the outcomes they envision and actually achieve for the people and nation over a period of time...?"

Maybe Yes. One problem is that all political parties here say the same thing -- "good governance", "anti-corruption," or "the current administration is corrupt, we can clean government", etc. And personality-based political parties are born. PROMDI party by Lito Osmena, REPORMA party by Rene de Villa, Aksyon Democratiko by Raul Roco, PRP by Miriam, PMP by Erap, Lakas by FVR and JDV, etc. When those leaders are gone or lie low, the party is gone or become less visible too.

We cannot expect much differences among political parties and leading candidates. The visible difference perhaps is that one candidate is more vulgar in its plunder and robbery (like Jojo Binay, based on various pending and filed cases against him and his family) while the others are less vulgar.

Very often, the mentality of the politicians is a reflection of the mentality and behavior of the voters, the public, mainstream media and NGOs. From some politicians that I talked to, they often say, "so many people clamor for it", referring to the entitlement and welfarism mentality. Many voters  feel they are entitled to be given free healthcare, free education, free housing, free or highly subsidized credit, tractors, burial, etc.

The people's values, in short, are corrupt. Many people will not admit it of course that they have corrupt minds and entitlement values. It is always easy to blame the politicians. And somehow true, the politicians take advantage of populism and entitlement mentality. How else can one justify that the government confiscates almost 1/3 of people's monthly income, and from the take home pay, government further collects many other taxes and fees (VAT on consumer items, vehicle registration tax for their cars, real property tax for their house and lot and farm, franchise tax for their business, etc.).

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See also:

Market Reforms in the 2016 Elections, May 25, 2015

Election 11, Dr. Doy Romero on Binay, Roxas and Grace Poe, June 01, 2015 

Election 12, JV Bautista and Toilet Politics, June 05, 2015 

Election 13, Bernard Ong's Analysis, June 21, 2015 

Election 14, The Middle Earth of PH Politics, by Doy Romero, June 24, 2015

Election 14, The Middle Earth of PH Politics, by Doy Romero

The Presidential and local elections in the Philippines are just 10 1/2 months away. Generally it will be a battle between which side of Big Government advocates will prevail. Nonetheless, we can delineate or distinguish them which side will advance Big Government + Big Private Monopolies and Oligopolies, vs. Big Government + Competitive Economy.

I think the old and traditional politicians like VP Binay belong to the former while newbies like Sen. Grace Poe may belong to the later, am not sure.

What about good governance? For me, Big Government = bad governance There is little or no justification why bureaucracies, regulations, permits, taxes, fees, fines, mandatory contributions, etc. should be as many as possible.

In the absence of a political party in this country that advocates limited and small government, free marketers like me can only compromise with candidates or political parties that somehow advocate more economic freedom and less monopolies, oligopolies, which are always created by government via Constitutional restrictions and franchising system.

This article by my former Prof. in a Political Science subject in UP Diliman in the 80s, Dr. Segundo "Doy" Romero, is another sharp analysis and can help guide voters who among the different political parties and factions can advance more economic freedom and who can oppose it. Sir Doy posted this in his fb wall, reposting with his permission.

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The Battle for "Middle Earth" Begins

 Dr. Segundo Romero

June 24, 2015

The resignation of Jejomar Binay from the Cabinet of President Aquino is a declaration of war. Now the campaign for the Presidency in 2016 is unofficially open. The battle lines are drawn. Consolidation of forces begin.

The Binay declaration of war is timed to prevent other opposition contenders from prematurely declaring and committing themselves to the fight for the Presidency. If they do, it will take time and a lot of resources before they and their core supporters can be cajoled to give up their presidential ambitions and agree to put themselves behind Binay. That would waste at least six months of preparation for and conduct of war.

Now that Binay is the default leading opposition contender, he can now begin to consolidate the fragmented opposition. He is hopeful despite the polls showing he is steadily losing the people's favor, for he finds himself in fertile opposition ground. PNoy has so changed the political landscape that he has created powerful enemies among the traditional elite and political families. These families, while themselves competitors and rivals for slices of political and economic power, are willing to set that aside at this time, just to bring back the old rules of the game of politics where they perform exceedingly well..

Jejomar Binay is the man for this nostalgic return to the status quo ante, the return to the good old days. There is no doubt He is open to negotiation. He is an astute cobbler of win-win situations with political factions and other parochial tribes. So, he will be busy building the forces of the future Binay empire, selling shares of stock to the following, who must now be eagerly waiting to make deals with him:

Class A: The Core Ex-Presidential families

1. The Macapagal-Arroyo family and loyalists

2. The Estrada family and loyalists

3. The Marcos family and loyalists

Class B: The "Penumbra" Dynasties, such as

4. The Enrile family and loyalists

5. The Bong Revilla family and loyalists

Class C: The Issue advocates, such as

6. The "progressive" groups who have been calling on PNoy to resign

7. The various opponents of the Tuwid na Daan in the government

8. The various opponents of the Tuwid na Daan in the private business sector

9. The passionate advocates or opponents of very specific policies (FOI, BBL, CCT, K-12) who are disaffected

Class D: The Spurned Supporters

10. The various enthusiasts of the Tuwid na Daan who have been variously slighted, rejected, abandoned, and now decry what they claim to be the Baluktot na Daan

Class E Middle Earth

At this early point, there is also a big chunk of the electorate who are unattentive, just observers or hecklers of the passing political scene, who are yet uncommitted, perhaps as much as 60 percent of the electorate. The polls show they are the voters who are lower in socio-economic status and farther from Manila. They are in the middle between the Binay camp and the Poe camp. They are the Middle Earth.

This is a source of hope for Binay. The Binay touch had shown wonders here in the 2010 elections, using local government officials and leaders to transact electoral support the way cobradors of jueteng fan out to the countryside.

Binay's assets are frozen and, under the watchful eye of the public, cannot be renewed or augmented through public coffers as in the past. He needs the subscription of various investors and stakeholders to his campaign.

His promises will be weighty, because Grace Poe, will not be willing to enter into these sweetheart deals, using the Presidential prerogatives as a futures commodity to be traded.

The reason Grace Poe has edged Binay from the presidential preference polls is that she has served as the consolidation point for all those who advocate for continued good governance and rejection of corruption.

The Binay declaration of war simply creates a parallel, symmetric consolidation around two opposite poles -- the experienced but tainted, the inexperienced but principled.

For the first time since the Ferdinand Marcos-Cory Aquino face-off in 1986, we will have another face-off between just two major opponents -- Binay and Grace Poe. .Any other candidate will serve to be a muddler -- serving only to draw votes from any of these two primary contending forces. Mar Roxas and Duterte are in this category.

SWS and Pulse Asia, working independently but validating each other's reading of the people's political pulse, will ensure that no politicians will be blinded with illusory hopes of personal grandeur.

With social media as the new powerful channel of information between candidate and voter, the 2016 elections will be the neatest, sharpest reflection of the people's will in a long, long, time.

It will tell us whether the Filipino people essentially judge on the basis of the "aliwalas ng mukha" factor, or the "lalim ng bulsa" factor.

For the first time since Cory Aquino, the Philippines is poised to have a majority president in 2016. The question is, Binay or Poe? I already have my answer, and it makes me smile.

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See also:

Election 10: Comelec Critics and Commissioner Luie Guia, December 26, 2015 

Market Reforms in the 2016 Elections, May 25, 2015

Election 11, Dr. Doy Romero on Binay, Roxas and Grace Poe, June 01, 2015 

Election 12, JV Bautista and Toilet Politics, June 05, 2015 

Election 13, Bernard Ong's Analysis, June 21, 2015

Pol. Ideology 64, Big World Government or Smaller Countries and Governments?

I am reposting portions of a great piece written by a friend, Jayant Bhandari. Jayant is a Canada-based Indian consultant who constantly travels the world looking for investment opportunities, particularly in the natural resource sector, and advises institutional investors about his finds. I met him about three years ago  when he came to Manila. Jayant also runs a yearly seminar in Vancouver entitled "Capitalism & Morality."

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World Government, or Smaller Countries?

Some believe that we are rapidly moving towards a world government. The European Union was one of the most visible expressions of this motion. NAFTA, ASEAN, and other trading blocks were seen as small moves in the same direction. The UN was the dream of the mushy-headed, those living on intellectual welfare with no real-life experience of how wealth is created.

A world government would be unsustainable if it ever came to pass, for the kind of people who work in governments always take pride at backstabbing one another, as well as their competitors in other governments. People’s lives have changed tremendously, given easy travel and high technology, but the structure of governments has not changed.

The world is becoming increasingly complex, but the institution of the state has remained mostly unchanged, making large governments very brittle….

So far from world government being likely to happen, the future belongs to smaller states. But this will happen after a lot of turmoil.

Most banks comply with US bullying, although the cost of compliance is horrendous for financial institutions around the world. One day a breaking point will come and they will stop. Perhaps an alternative international currency will trigger this….

The bigger states will break

Before the world starts ignoring the diktats of the United States, America will become increasingly heavy-handed. Anything it doesn’t like will be considered "terrorism." For Americans, privacy will cease to exist. This is not based on prophecy, but on the history of how human civilizations have evolved and gone out of existence. The Roman Empire disappeared. So did the English and the French empires.

In other large countries — India, Brazil, France, the UK, etc. — the institution of government will come under huge amounts of stress, as heightened expectations of a populations hugely influenced by the modern-day welfare system can no longer be met. The world is becoming increasingly complex, with new technologies and cheap traveling, but the institution of the state has remained mostly unchanged, making large governments very brittle.

While all conventional religions are tribal in nature, they at least have elements of compassion, honesty, and other virtues. But statism thrives on hatred for other people.

To me the “Arab Spring” was the first visible sign of this. So was the democratic movement in Hong Kong. Behind the facade of higher vision and increased nationalism is indoctrination of a populace that is incapable of critical thinking, the kind of populace that in earlier generations would have stayed out of having an opinion on public policy. They have come to see democracy as a magic wand that delivers whatever one aspires for, merely through the vote. Nationalism is the emotional crutch for their failure to be self-dependent and their lack of self-confidence. None of these fake, irrational values can keep big nation-states glued together when the crunch time comes.

The result will be the possible breakup of many of the larger states. Would the US also break up? The irrational tribal slogan — “we are the biggest and the best” — can keep the US together for only so long. So far from world government being likely to happen, the future belongs to smaller states. But this will happen after a lot of turmoil, ironically made worse by the fact that in general, today’s populace is likely more statist and patriotic than the previous generations.

Central America: case studies on small countries

I have been very impressed with how well Hong Kong and Singapore are organized. In fact, I have become enamored with small countries.

I recently spent two months travelling in Central America, trying to understand its economy and people….

These small states recognize the economic importance of expatriates and mostly let them get on with their lives. Protecting property rights is their core competence. Nicaragua, for example, has become an attractive place for property investment, offering the cheapest options for those who can navigate this emerging country. In terms of expense, Panama is in between Costa Rica and Nicaragua.

Panama offers quality at a reasonable price. It also uses the US dollar, which is not the best way to run a monetary policy, for it is still dependent on a fiat currency, but this ensures that Panamanians cannot run their own printing press. Of course, they have no central bank of their own, and hence no cartel that comes with it.

Why is a place such as this, relatively conflict-free and wth enormous natural resources, not very rich?

Not only Americans and Canadians but also those from Ecuador, Venezuela, and other countries are finding safety in Panama. As a rule of thumb, small countries offer asset protection that big counties don't, for if these small countries stop respecting property rights, expatriates will fly away with their money.

Neither Costa Rica nor Panama has a military. This not only saves what would have been about 5% of the GDP in wastage but it sets a certain way of thinking among the citizenry. War is the health of the state, and statism is the worst religion. While all conventional religions are tribal in nature, they at least have elements of compassion, honesty, and other virtues. But statism thrives on hatred for other people. When you have the military solely for defence, narrowly defined (as is the case with Singapore and Switzerland) or have no military at all (as in Panama and Costa Rica), the social mindset is not about hatred for people who are different.

The repercussions are far-reaching. Less hatred also means fewer social conflicts within such societies, and hence a lack of civil wars within these countries. One must still be cautious about isolated crimes….

When traveling around in Costa Rica and Panama one must wonder — as I did — why a place that has been relatively conflict-free and has enormous natural resources is not a very rich place. Businesses tend to hire expatriates as much as they can. Locals are not known for their work ethic. Why this is the case, I am not sure. But that is why I travel, for it forces me to think about issues that would otherwise not occur to me. It hones my understanding of cultures, politics, and economics. Again, as an individualist, what I care about most is what affects me; and I doubt that the realm of One World Government would stimulate me much.

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See also: 

Pol. Ideology 60: Lecture in Nepal on Liberalism, Rule of Law, Civil Society, January 13, 2015 

Pol. Ideology 61: Raison d 'Etre of Government, January 30, 2015 

Pol. Ideology 62, Marx and Hayek on Property Rights, May 19, 2015 

Pol. Ideology 63, Alternative Economic System, May 25, 2015

PNoy Resignation Call -- Lousy Movement

Politics and government is about power. Lust for power. That is why governments must shrink because the people who are most attracted to politics and government are most likely the ego-trippers, corrupt and extortionists. Not all of them of course, but most of them.

In the current political drama in the Philippines, some sectors, politicians professioals, NGO and media leaders call for President Noynoy (PNoy) Aquino to resign, mainly because of the Mamasapano incident last January 25 where 44 cops,18 MILF fighters and 5 civilians were killed.

The President indeed made a number of lousy, un-Presidential acts. Like trusting a suspended bureaucrat, former PNP Chief Alan Purisima, to call the shots in the PNP-SAF attack on terrorist Marwan. Disobeying the chain of command in his own government is very un-Presidential, true. The President should apologize for that act.

But to call for the resignation of the President -- and Vice President Jojo Binay should take over, according to the hierarchy of leadership in the Constitution -- is lousy. The President of the country has governance mandate in various sectors -- agriculture environment, energy, education, healthcare, public works and ports, transportation and telecom, tourism, finance, trade, investments, foreign affairs, etc. Police and security matters is only one aspect of his/her mandate. So a call for PNoy resignation is simply an emotional call, or naked power grab. 

And this group who call themselves "People's Council... for transition government", it is simply deception. I and my family, my friends, neighbors, etc. are also people of the PH, I seldom hear from this group calling for the resignation of the President. Dissatisfied, disappointed, yes, many of them, me included, but not to the point of calling for his resignation. So this "People's Council", sila lang yon. A more appropriate term for their group should be "Sectoral Council" because they involve only a few and small sectors of the PH population.

In a friend's fb wall, I made the above points. One pro-resign person asked me,

 "dissatisfied and disappointed...but still want to keep PNoy? Why?"

My answer to her, quoting other people who earlier responded to her:

(1) "the creation of a People's Council is not a constitutional move. And besides, how would you choose which persons will make up this council?" -- Nolet

(2) "Ousting Pnoy will create chaos. We don't want a puppet government." -- Tony

(3) "give Aquino the rest of his term if only to give him his LAST chance to redeem himself+ -- Reynaldo

(4) I am disappointed with PNoy, yes, but I am more disappointed with the leaders of this "People's Council". Kung si PNoy kapit sa pwesto, sila pro-resign leaders, gutom sa pwesto. They cannot respect the Constitution and follow the hierarchy of leadership. PNoy resigns, Binay in, no ifs, no buts. But the pro-resignation guys want themselves. Gutom nga, -- Nonoy Oplas

Then she asked again, 

"what made you say na those who want PNoy's resignation ay gutom sa pwesto?"

Simple. If people who want PNoy to resign are willing to respect the Consti and accept Binay as the next President, no ifs no buts, then they are not gutom sa pwesto. But since they want unconstitutional succession and want themselves -- unelected, self-styled -- as the new President, new Cabinet Secretaries and Under Secretaries, new heads of government corporations, etc., eh di gutom nga sa pwesto. Hayok pa, :-) Disappointingly distasteful salivating power hungry leaders.

A better option is to call for an impeachment of the President, it is along the Constitutional change of government. But it will take time, will take more resources, public and private. 

Better wait for the next Presidential elections. Only 14 months away, including three months official campaign period, or  12 months (or more) unofficial campaigns.

As for me, I remain political but non-partisan. I only believe in less or small government, not "BIG but good government" as it is an oxymoron.

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See also: 
Fat Free Econ 55: The President's 5th SONA and Market-Oriented Reforms, August 01, 2014
Citizen Watch 3: Political and Economic Reforms After SONA 2014, September 06, 2014

Assessing the Performance of an Administration, February 20, 2015 

MILF, Fallen 44 and Napenas, Part 5, February 21, 2015

Fiscal Irresponsibility 28: Greece's Public Debt and Populism

The most indebted, most fiscally irresponsible government in Europe, Greece has been hugging international news recently because of its huge public debt, and the huge bail out money given by many governments to  it. This useful chart was sent by a friend, Luz. I think she got this from The Economist, am not sure.

Three years ago, Greece's debt/GDP ratio was already above 150 percent. No sensible economy would dare touch that zone unless the bulk of such debt are domestic, like Japan's.

source: Intl. Business Times,February 25, 2014

Regional economic community (EC) and blocs like the ASEAN EC (AEC) can learn lessons from the case of Greece and the European EC (EEC) so that such mistakes should not be imitated and repeated. Subsidizing a spend-spend-spend, borrow-borrow-borrow economy to protect the regional currency and stability of the whole bloc creates huge moral hazards (dependency, entitlement mentality, related) problems.

source: http://www.bloomberg.com/news/articles/2015-02-02/greece-seeks-third-debt-restructuring-who-s-on-the-hook

(Note: I copied that link and chart this morning. When I checked it tonight, it says "404.Page not found", so Bloomberg took  it down, for some reason/s)

Why is Greece in this deep trouble"

An article from BBC has a good explanation:

Greece was living beyond its means even before it joined the euro. After it adopted the single currency, public spending soared. Public sector wages, for example, rose 50% between 1999 and 2007 - far faster than in most other eurozone countries. The government also ran up big debts paying for the 2004 Athens Olympics.

And while money flowed out of the government's coffers, its income was hit by widespread tax evasion. So, after years of overspending, its budget deficit - the difference between spending and income - spiralled out of control.

source: BBC, Eurozone crisis explained, November 27, 2012

A populist, anti-austerity, socialist-leaning government won last month led by new PM Alexis Tsipras. He talked tough, suggesting that he would call for huge discounts in paying the public debt. But the Finance Ministers of Germany, France, other huge EU lenders countered, "Greece must pay."

With some twist, PM Tsipras agrees to honoring its debt and some spending cuts like "trimming ministerial benefits like cars and selling one of the prime minister's aircraft." Good move then, 

The main problem here and in many other countries is government over-spending, living beyond its means, over-subsidies, over-welfarism and populism. For decades. 

Huge debt is nothing but accumulated wastes and profligacy. If previous spending financed by debt was productive, then the economy should be able to have a balance if not fiscal surplus, and pay back old debt.  

The big question of how to pay that mountain of debt is not so  much addressed to the  new Greek leadership, but the Greek people themselves. Is it too much to ask for huge public spending cuts, especially in  subsidies and  pension, if their government does not have the resources to sustain funding them? If they say Yes, then are they prepared to pay more taxes, more regulatory fees, more mandatory contributions, more fines and penalties?

Most likely people will  say No, or "Yes but tax only the super rich". But the very rich have many ways to adopt. Like negotiating  their way out as they have access to the  best law firms, accounting and  PR firms. Or they can  simply leave the country with their wealth. This already happened in France, when PM  Hollande imposed the 75 percent income tax on people who earn 1 million  Euro a year or more. Many super rich French businessmen surrendered their French passports and  acquired new  ones in Switzerland, Belgium, UK, Russia, etc.

A highly welfarist and  populist government invites lots of corruption. First, in corrupting the people's values, the culture of state dependency and entitlement thinking. Second. in corrupting politicians, legislators and the bureaucracy's values, that over-taxing other people  is ok, it  is  fine,  in  the name of fighting inequality and pampering the culture of envy.

Governments should shrink, spending, taxation and bureaucracies. The public must reclaim their bigger role in  running their own  lives, and the finances to sustain their own lives, their households and communities.
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See also: 
Fiscal irresponsibility 12: More on US debt default, July 28, 2011

Fiscal irresponsibility 17: Cut Spending and Borrowing, September 19, 2011 

Fiscal Irresponsibility 26: On the $1 B Philippine Loan to the IMF, June 27, 2011 

Fiscal Irresponsibility 27: PH's P2.6 Trillion 2015 Budget, June 10, 2014

Pork Barrel 10: Bloated Budget, Wasteful Government, June 02, 2014

Pork Barrel 12: Why DAP is Wrong, July 29, 2014

Pol. Ideology 61: Raison d 'Etre of Government

Last Wednesday night, I was a guest lecturer at a friend's graduate class in Ateneo on public finance. I presented 3 unrelated topics but all related to public finance. The first is about the reason for existence of government, why government was invented and what are the scope and functions of government, based on one's political belief. The second paper was about climate money and the corrupted science behind it, and third was about public and private healthcare spending.

About 13 or 14 students came, fine. Alvin was out of the country that day.

If A and E are the extremes, zero and all-government, then where should be the level of involvement of a sensible government?

Adam Smith in his earlier book already cautioned people of not allowing their governments to go to point D or E.

And in his second, more popular book, he reiterated that position.

“Every individual...generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it…. he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

 –TWN (1776), Book IV Chapter II

The father of "Austrian economics", Mises, elaborated the value of a free market economy. The customer is "king" even if there are no politics involved.

Also among the classical thinkers of "why was government invented", these three philosophers stood out.

Uhh ohh, Plato himself has cautioned against the danger of (big) government and its governors/administrators/rulers.

After WWII, Britain went almost socialist. Meaning almost everything is socialized, including people's pockets and bank savings. Reagan in the US and Thatcher in UK, the pair re-introduced classical liberal philosophy in their governments.

Populism and socialism are deceptive. They promise heaven on earth for the people, especially the poor and/or gullible. Now almost anywhere in the planet, the main complaint of the people are their respective governments. Lots of coercion and prohibitions (yes, things are prohibited unless people get the permits and signatures of regulators first).

There is a need to shrink government. Local, national, multilateral agencies. They have been expanding like amoeba and are devouring lots of resources from the private sector like amoeba.

Takeaway reminders:

Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master. – George Washington

The more numerous the laws, the more corrupt the society. - Tacitus

A government big enough to  give you everything you want is a government big enough to take from you everything you have. -- Gerald Ford. 

The full 15-slides presentation is posted in slideshare.

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See also: 
Pol. Ideology 55: Jules Maaten's Lecture on Liberalism, May 11, 2014

Pol. Ideology 58: Democracy, Coercion and Civil Society, November 29, 2014 

Pol. Ideology 59: On PostModern Politics, December 14, 2014 

Pol. Ideology 60: Lecture in Nepal on Liberalism, Rule of Law, Civil Society, January 13, 2015

Welfarism 30: Big Government and Corruption of People's Values

Last Thursday, I went to De La Salle University (DLSU) main campus in  Manila to speak at a class on Development Studies, handled by my wife.

I put here the IPN logo because looking back, IPN  has greatly helped our think tank in guiding us to some policy discussions and advocacies, plus giving us some modest donations. Recognizing their support to us.

Welfarism in my presentation is defined as the political and social belief that individual and parental responsibility should be subsumed or substituted by more government responsibility in improving people’s welfare. So, from education to healthcare, from unemployment allowance to  food stamps, from housing to train fare, from seeds to agri credit, an endless program of subsidies, all financed via high taxes/fees/fines/penalties and endless borrowings.

Welfarism therefore, is giving more powers to governments and their  officials,  elected and appointed. Giving them more spending power and taxation power. Below, an illustration.

Some data, taken from the IMF, World Economic Outlook (September 2014) Database.

Some data on the Philippine government's public debt was also shown. Another illustration below.

Shrinking government -- huge spending on welfarism, taxation, bureauccratism, etc. -- can actually lead to more citizens welfare.

The full 17-slides presentation is available in slideshare. My concluding notes, plus some photos taken by Lee, one of the students who introduced me to the class. Thanks Lee.

1. Welfarism and populism is wrong. Individual and parental/ guardian responsibility should not be subsumed by more government responsibility.

2. Welfarism results in corruption of the people’s values, creates more state dependency and sense of entitlement. The income and investments of hard working people are not entirely theirs, other people are “entitled” to  get a big portion  of it.

3. Governments around the world remain big, or keep expanding. Local, national and international/multilateral government agencies. This means their appetite for more taxes, fees, fines and penalties keep expanding.

4. Existing taxes, fees, fines are no longer sufficient to sustain huge spending by governments. Endless borrowing is  the norm.

5. Almost all governments around the world are indebted, they vary only in the extent of indebtedness. The more welfarist and populist the government, the more  indebted it is.

6. Being indebted is not bad per se. In  cases of  emergencies  and natural  calamities (ex. Big earthquake in 1990, Mt. Pinatubo eruption in 1991), borrow.

7. But  when there are no clear emergencies, governments should have balance budget at least, fiscal surplus if possible and pay back some debt. This is not happening, in most governments worldwide.

8. Fiscal responsibility, governments should learn to live within their means, do not engage in endless borrowings, do not mortgage the future of the next generations.

9. But we must not renege those debt payment, pay them all. The hugeness of the debt and its interest payment is a constant reminder to the current and future administrations that endless borrowing is wrong.

10. Reduce taxes especially personal and corporate income tax, leading to zero income tax. Governments have many other taxes and fees to collect, have many assets to privatize.

11. The promise and hypothesis of “expanding government leads to expanded  welfare” is hardly happening. In most cases, the opposite happens, backward-bending case of diswelfare as government  size keeps expanding.

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See also:

Welfarism 26: John Mangun on Economic Decline of the West, July 31, 2013

Welfarism 27: On Support for Single Mothers and HIV Patients, November 29, 2013

Welfarism 28: Nanny State Cares Too Much for its Citizens, UK Style, May 27, 2014 

Welfarism 29: Is Poverty Government Corruption-Created or Self-Inflicted?, October 05, 2014