Pol Ideology 72, You love capitalism

I am reposting this good article in Manila Standard by a friend, Eric.
---------

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.

---------------

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

Pol. Ideology 70, Socialism and the politics of envy

Why socialists are wrong :-) 

Many people yearn for equality, forced equality in society. If this is so, then anyone can demand that his/her monthly pay be at least 10% of what Mark Zuckerberg is getting even if they work only 4 hours and complain about work for the next 4 hours each day. And since tens or hundreds of millions will demand the same, then it will mean that Zuckerberg's average monthly income will shrink and continue shrinking because the politics of envy will assault his income and wealth, endlessly via government taxation.

Free people are not equal and equal people are not free. I did not invent that quote of course, but it rings correctly until now.

Now, this quote from Chomsky was circulated by some friends in fb last week. Lousy idea of course. 

Compare friendster and facebook capitalism: costs and rewards, bankruptcy and expansion are privatized while the benefits -- to us users of these social media, past and present -- are socialized. Friendster went bankrupt while facebook prospered. And many of us enjoy facebook (and youtube, twitter, google,...) capitalism, no tears though to friendster capitalism that sank. 

Another quote from Churchill. Yes, socialism promises equality... everyone equally poor except the top officials, military generals and business cronies of the communist party or dictatorship.

There is room and role for government in a free enterprise and free market economy of course. Societies need the rule of law function of government if they want to be stable and prosperous. The poor can work double jobs and come home late night if they need to without worrying that their houses and little investments are ransacked by thieves or land grabbers. Or their extra income is eaten by more taxes and mandatory fees.

From the Iron Lady. Yes, governments have no money of their own except what they take from the people in the form of taxes, regulatory fees, mandatory contributions, fines and penalties to their numerous regulations and prohibitions. These government revenues are split between the state bureaucracies and politicians, and the welfare beneficiaries/dependents.

Inequality is good, otherwise the lazy who work only 2 hours a day and the hard-working who toil 12-14 hours a day will have the same size of house in the same village. The lazy is subsidized with free or near-free housing while the hard working is penalized with lots of taxes and fees.

There are many examples showing that many people respect inequality. When they watch a big concert, some pay $2,000, others pay $1,000, $500,... $50. But those in the $50 tickets do not call for a social revolution to have forced equality, they just enjoy the show at a low price. For those who cannot afford even the $50 ticket, they can watch the show later on tv, youtube, facebook, and so on. 

Many big capitalists enjoy big money so they can give away/donate that big money someday. Examples are numerous personal and corporate foundations whose main function is to finance many good community or research projects that will uplift the lives of poor and needy people. Civil society in action, Meanwhile, these rich and highly entrepreneurial people create more companies, build more structures and new services, create more jobs in the process.

"Government... favoring some capitalists" and "state bail out of big banks, corporations" are cronyism and statism or state worship as the state picks winners and losers. The state has no business picking winners and losers, picking who should expand or go bankrupt; it's the job of market competition.

Free enterprise capitalism allows bankruptcy and expansion happening at the same time to many players. But we don't see any free capitalism society in the planet yet. Hong Kong would approximate this society somehow but China communism ultimately dictates and limits the pace of HK capitalism, not because the commies have the intellectual and entrepreneurial superiority but simply because they have the guns, bombs and huge army of soldiers and policemen who are ready-to-harass-people if they question the powers of the communist state.

Money is not the source of evil. People will need money, cash or fiat money or credit cards or alternative currencies (bitcoin, etc.) so they can feed themselves and their family better, bring them to Boracay or Bohol or HK, etc for vacation. In the process they create jobs in Boracay or Bohol or HK as they spend money there.

Money "hoarding" is bad... No. What's hoarding for some is actually savings accumulation for others. One cannot convert his small variety/"sari-sari" store into a nice, air-con convenience store unless he/she has sufficient savings accumulation plus loans from friends/family members or banks. 

The so-called "late stage capitalism" is characterized more by bigger, stronger governments who dictate prices (wage control, fare control, rent control, price control or price caps/ceilings), dictate competition or absence of it (monopolies created by Congressional franchise or agency franchise), dictate who should get subsidies and who should not (like wind and solar power firms get plenty of subsidies).

-----------

See also:

Pol. Ideology 67, Socialism and Venezuela, June 08, 2016 

Pol. Ideology 68, On factions and diversity in society, thoughts of James Madison, October 10, 2016 

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

Lion Rock 19, Not enough capitalism in Hong Kong

A good article by Bill Stacey, former Chairman of Lion Rock Institute (LRI) in Hong Kong. Reposting here.

Not enough capitalism!

(Next Magazine, 2016/5/5, A002, Second Opinion, Bill Stacey)

Hong Kong has many contentious public issues, but the underlying source of our discontent is fifteen years of stagnant real wages. For many in Hong Kong we are simply not progressing and the upward mobility from a dynamic economy seems absent. After decades of some of the strongest growth in the world, why has this stagnation happened？

It is all too easy to blame China and the emergence of labor competition, but this would be wrong. Low cost wages were a factor in China well before our stagnation. Wages have been rising rapidly in China recently. China has enhanced our productivity and allowed our higher value added industries to take root. It would be fashionable, but equally wrong, to blame inequality.The real cause of stagnant wages is insufficient capitalism. Capital is the life blood of the economy. When entrepreneurs figure out new products and better ways of delivering goods and services that customers want, they must invest in machinery, equipment, and intellectual property development. Those investments allow workers to be more productive. In the jargon of economists, as the “marginal productivity of labor” increases, the wages that can be paid go up.

Highly productive labor can strike a better bargain with better terms and conditions. Very valuable labor negotiates better pensions and working hours or more money as they wish. It is important to understand that it is not just the skills and education of working people that determine their productivity; it is the interaction between their efforts and the capital that their efforts command. If capital is inadequate, business models archaic, or entrepreneurial innovation insufficient, the talents and education of the population will not be enough to deliver rising incomes.Let us take for granted that our people are at least as talented, skilled, and well educated today as they were 30 years ago. What hampered wage growth is our capitalism that is increasingly tied in regulatory knots as compared to the past. Last year our private capital investment shrank by 8%, whilst public capital investment grew by 7%.As the accompanying chart shows, periods of wage growth were preceded by periods when our private capital investment was much higher than our public capital investment. It can take years for private investments to lead to the advanced businesses that allow wages to rise. Our wealth today is built on the entrepreneurial investment of the past. However, when public capital investment is high compared to private investment, then wages tend to stagnate.

This is the opposite of the story that we are told by officials. They will say that when the private sector is weak, the public sector needs to step in to make up for the slack so as to keep the economy on track. Many will even argue that massive public investment in infrastructure is a vital precondition for the private sector to grow.The trouble is that public investment does not deliver on its promise. It needs to be funded by taxes, so higher public investment leads to higher expected future taxes and less private investment. Public investment is more wasteful as it crowds out cost-effective private sector investment. Public projects are prioritized by political decisions, not markets, so they are often chosen to gain votes rather than profits. More importantly, periods of high public investment are often times when there is enthusiasm for more regulation and government interventions, which are inimical to entrepreneurial investment.Why is private capital investment so weak that it is not supporting the same productivity and wages growth that we generated in the past? Regulation is part of the picture. Long term investments require you to know the rules of the game. Stable rule of law is a precondition for strong private investment. Incentives are vital. If bidding for a government privilege or subsidy is more profitable than investing in better capital, investments will not be made. Too many of our entrepreneurs are on an Ayn Randesque strike, so wages will not rise and our discontent will not pass until we rebuild our capitalist foundations.

------------

See also: 
Lion Rock 16: 10th Anniversary of LRI, November 07, 2014 
Lion Rock 17: Photos and Discussions in Reading Club Salon 2014, November 25, 2014 
Lion Rock 18, Nick Smith as new Chairman of LRI, April 05, 2016

Globalization and capitalist disruption

Many people who endlessly campaign for more labor protection, more capital regulations and restrictions, assume that big businesses will be there forever, that they have the "security of tenure" in business for the next 20, 50, 100+ years. So it is immoral for those big companies not to give their workers security of tenure in their work.

Some nice data on twitter here from Vala Afshar ‏@ValaAfshar. The numbers show  that the above assessment is wrong. Many companies, big and small, do not have such "security in business" for the next 10, 20, 50+ users. Some or many of these companies may be gone within a decade .

1995: Top 15 Internet companies worth $17 billion.

2015: Top 15 Internet companies worth $2.4 trillion.

Then 60% of top 12 S&P 500 companies in 2000 are not there in 2015; other 40% have dropped rankings.

The global digital: 2016 Billion $ companies that didn't exist in 2005

Uber, Airbnb

Twitter, Snapchat

Instagram, Fitbit

Spotify, Dropbox

WhatsApp, Slack

Tumblr, Pinterest

—3.4 billion access the Internet

—3.7 billion mobile users 📱

—2.3 billion on social media

And Google was the 21st search engine to enter the market in 1998.

Some "common" words we didn't use just 10 years ago:

1 social media

2 smartphone

3 tablet

4 app

5 selfie

6 youtube

7 GPS

8 twitter

9 uber

10 airbnb

More words of wisdom from Vala. I like this guy and his  ideas.

Very often, it is government-protected businesses (via franchising, guaranteed prices and subsidies, etc.) in developing countries that tend to stay "forever."

Lesson: globalization and capitalist innovation and competition do not provide forever "security" of business tenure. Governments do.

EFN Asia 57, Conference 2014 in Hong Kong, part 2

Continuation of notes made by Karthik Chandra during Conference 2014. The full 25-pages notes are posted in http://efnasia.org/wp-content/uploads/2015/10/EFN-Asia-2014-Conference-Report.pdf

----------

Day 1, November 6, 2014

Opening Key Note Address: “Economic Growth and Income Inequality”

Dr. Razeen Sally

The National University of Singapore (NUS)

• As liberals, we always face this rather fundamental issue of why at all should we bother to address the issue of income inequality.

• Such inequality has two facets: inequality of outcomes (a “collectivist approach” of typical socialists, communists, or do-gooders) and the inequality of procedures/treatment (eg. rule of law, equality, etc.). We need to clearly distinguish between the two.

• There is also a need to go back to the basics (abstract approach) of Schumpeterian capitalism:

 * Capitalism is always dynamic. Schumpeter said that ‘capitalism is a perennial gale of creative destruction’. Enormous progress takes place due to this creative destruction. This is not just an economic cycle but the story of our civilization itself.

 * At the heart of this powerful engine of capitalism is the entrepreneur, who is not necessarily a rational, objective person. Several impulses and incentives guide him. This engine thrives on inequality.

• Capitalism and Asia & the Global Financial Crisis (GFC):

 * Originally, economic freedom and capitalism was primarily a European idea. Subsequently, it became an Atlantic idea. Later, Asia too has witnessed greater economic freedom and increase in prosperity.

 * However, after the GFC, we saw assaults on economic freedoms and increase in restrictions. Capitalism is currently under assault and therefore pessimism is back. GFC saw a shift in policies and approaches: now there is much greater state intervention in both macroeconomic policy (debt, interest rates, deficits, etc.) and microeconomic policies (in the form of governments intervening in the smaller

details of markets like car standards, energy, pollution, etc).

 * Note: we need to understand the contrasting takes of Schumpeter and Keynes on capitalism.

 * More importantly, what unites such macroeconomic and microeconomic anti-capitalist intervention is the ‘social engineering’ mindset among a small group of high-minded, smart people who think that they can intervene in the micro- and macro-economic and the institutions.

 * But such interventions are inevitably counterproductive and harmful because the assumption that these individuals are fully knowledgeable is incorrect because 100% of information is never at their fingertips (much of the real information is tacit and non-formal).

* Rarely are the individuals themselves disinterested in the outcomes. Such interventions (even if beneficial) are deeply offensive to the very concept of freedoms and individuals.

• Given the above, the classical liberal take on inequality runs somewhat like this:

 * Globalization has improved incomes but also has driven inequality upwards. Yes, there is currently greater income inequality.

 * New technologies (3D printing, automated data storage, management and analysis systems, etc.) are destroying jobs – not just the blue collar ones - but also middle class white collar jobs (accountants, analysts, etc.)

 * And, what about the solutions to inequality? The classic interventionists (typically, social democrats) talk about greater taxation, etc. to “fix this problem of greater inequality”

• However, we need to look at the issue of inequality from a different perspective:

 * Usually, when we talk about inequality, we usually talk about income inequality within a country and not between countries. While economic liberalization has increased inequality within a country (E.g.: China, city states like HK, Singapore, etc.) it has actually reduced global income inequality (see Surjit Bhalla’s article saying that global inequality is at its lowest since 1850) i.e. between countries.

 * Increase in consumption, arising from greater liberalization of economies, has depressed incomes in some areas/countries but has greatly reduced overall inequality both within a country and between countries.

 * Education (see S. Bhalla’s article/ppt) actually is a great improver of averages.

 * However, a major challenge is the lack of big innovation. Yes, innovation is taking place at a big level but in narrow sectors and benefitting a narrower group of people. The IT sector serves as a good example where companies are getting easy money from globalized markets, and are getting great profits, and therefore are not seeing incentives to invest in innovation in other sectors. For instance,

Apple spends more on lawyers than on innovation of new products. At the same time, even though some people say that innovation results in job destruction, in the long run, innovation actually creates new and better jobs.

• In summary, the current state of affairs, post GFC is as follows:

 * at a macroeconomic policy level:

 Greater state intervention

 Redistributive approach (taxes)

 Debt/deficit financing with the threat of inflation always hanging over the head

 Central banks interfering in fiscal policies

 * Similar state of affairs at a micro-economic policy level also.

 * But, such interventionist approach is wrong on a more fundamental, constitutional basis and is based on several false assumptions, etc.

• Therefore, the unfinished business and important pending items to be done to liberalize product and factor markets: Making systems inclusive. (See reformulation by Daren Acemoglu and team on inclusive vs. exclusive systems.) In exclusive systems, esp. in Asian countries, the political and economic freedoms are closely intertwined. One cannot happen without other. Even the city states of HK and Singapore are lacking in innovations. This is because their systems are still bureaucrat-dominated.

• Finally, there is good news and bad news:

 * Compared to the past century (1914 to 2014), we have a more prosperous world: we are enjoying greater incomes, better health and better lifestyle overall. While today’s interest groups are still a problem they certainly are not as big a problem as interventionists of World War I.

 * But in the short run, post GFC, the pendulum has swung in the wrong direction i.e. towards greater state intervention. However, we should have greater liberalism and lesser state interventions in both micro and macroeconomic policies.

Government bail outs and prohibitions

Some people think that the US financial turmoil in 2008-2009 was caused by free market or less government policies, that none of the major players responsible were arrested, and that the US taxpayers bailed out the fraudulent corporate system.

Hmmm, the fraud or criminals don't arrest themselves. The one who collects tons of money from the public is the government; the one who decides to use that tax money for private use like corporate bailout is the government.

Recall that in the literatures of the free marketers, almost all of them said one thing -- zero bail out, let those erring big banks and firms go bankrupt. Capitalism without failure and bankruptcy is like religion without sin. This chart below, I got from the web.

Business should be kept in the private sector as much possible and government should only lay down fair  and  transparent rules that apply to all players, and stay away from being businessman itself. In real capitalism, there is competition, almost anywhere, almost anytime. Then there will be success and failures; expansion and bankruptcy.

In cronyism type of business, bad companies get bailed out. Or a better term perhaps is that bad companies are protected from competition by good and efficient companies. There are so many government-created monopolies, area-specific monopolies like electricity distributors (Meralco + 120 other electric cooperatives), all water companies, etc. Some industries are duopoly like telecom.

The potentially good company/ies is/are prohibited, banned, disallowed by the government to compete and teach a bad local company a lesson. Via the Constitution (restrictions on foreign equity investments), via Congressional franchise, via Executive franchise (CAB, MARINA, LTFRB, NTC,...), via LGU franchise or business permit.

At least two schools of thought on government dealing with big players experiencing serious corporate crisis.  (1) bail them out, postpone the day of reckoning, and (2) let them fail, let the economy sort it out. Trying to balance both would exacerbate the situation.

Option (2) is always the optimal one. Capitalism without bankruptcy and failure is like religion without sin. So corporate expansion and bankruptcy are 100% part of the DNA of capitalism. When a government plays God and decides who should stay and who should go bankrupt, that economy is moving towards statism, even socialism.

Besides, when a corporation goes bankrupt, someone else will buy it, cheap of course, use or rehabilitate the useful assets, even assume the debts and liabilities, rehabilitate and turn it around, and manage or sell it for a profit. Bailing out a corp., public or private, using taxpayers' money is always wrong.

On government prohibition culture

Monopoly greed also occurs at the poorer/poorest sectors of the economy. Like a jeepney route monopoly (given by LTFRB) -- air-con vans, buses are prohibited from plying their route and get passengers. Or tricycle route monopoly (given by LGUs) -- jeepneys, air-con vans, mini-buses are prohibited from plying their route. Passengers have only two options, take a cab or Uber, or drive their own cars.

I entered UP, graduated in the mid-80s or more than 3 decades ago. The jeepneys monopolized the Philcoa-UP or Quezon Ave-UP route. Ok lang noon, no internet, no fb, etc. Now with all the modernity, those routes are still jeepney monopoly? Students and staff have no other choice but take the cab/Grab/Uber, drive their own cars? Air-con vans, buses still prohibited in UP?

That's the anti-development, anti-innovation governmentt prohibition culture. Never mind the majority, just pamper a few noisy but organized guys.

-------------

See also:
Joe Stiglitz and the Market, December 16, 2008
Rule of Law 3: AIG Bonuses, Government Bail-outs, March 18, 2009
NINJA loans, October 12, 2010
On the recent US housing bubble, January 05, 2011
Fiscal irresponsibility 12: More on US debt default, July 28, 2011

BWorld 16, Growth, capitalism and inequality

* This is my article yesterday in BusinessWorld Weekender.
---------

Growth, capitalism and inequality

“Improving the position of the poorest by giving them what we took from the wealthy, would temporarily quicken the closing-up of the ranks, it would, before long, slow down the movement of the whole and in the long-run hold back those in the rear. All obstacles to the rise of some are, in the long run, obstacles to the rise of all… To prevent progress at the top would soon prevent it all the way down.”

-- Friedrich Hayek, The Constitution of Liberty (1960), Chap. 3, “The Common Sense of Progress”

Many people have mixed feelings and attitude towards economic freedom and inequality. They want to be freed from too many regulations, prohibitions and  taxes that tend to stifle individual creativity and entrepreneurship, yet they also want more regulations to  control inequality that result from more individual freedom.

A forum on “Poverty, Inequality and Inclusive Growth” was held last August 12, 2015 by the Albert Del Rosario (ADR) Institute at the Tower Club in Makati. It was convened by Dr. Epictetus Patalinghug, a Professor at the UP College of Business Administration. He also gave a lecture and discussed five topics, (1) macroeconomic policy and poverty alleviation, (2) poverty-growth linkage, (3) inequality in the past and present, (4) employment impact of growth, and (5) how growth can be more inclusive.

The three reactors were Dr. Vic Paqueo of the Philippine Institute for Development Studies (PIDS), Mr. Ferdie Diaz of the Employers Confederation of the Philippines (ECOP) Co-Chair on TWG on Labor and Social Policy Issues, and yours truly as head of Minimal Government Thinkers.

I argued the “politically incorrect” position that inequality is necessary and overall, is good for human progress. Consider for instance how previously heavily-repressed people in the ASEAN – Cambodia, Laos, Myanmar, Vietnam (CLMVV) – have managed to improve their average per capita income over the past two decades. They experienced a doubling (2x) of per capita GDP in just one decade, from 2004-2014.

As other people’s income expand very fast, their income gap with their poorer countrymen also expands.

Is rising inequality a bigger problem than rising income for people in Asia? From a global survey conducted by PEW Research Center in the US in April to May 2014, the answer is No.

The PEW survey was based on telephone and face-to-face interviews conducted under the direction of Princeton Survey Research Associates International. The average sample size per country was 1,000 adults, 18 years old  and above.

One question was, "Are people better off in a free-market economy given the wide disparities in wealth that might result?" Agree or Disagree (See Table 2).

Respondents in socialist Vietnam and China have high support for free market capitalism despite the rise in inequality, than people who are against it. High support also of people in Malaysia and the Philippines.

Overall result covering 44 countries, majority of the people around the world were willing to accept inequality to have a free market system. About two-third (2/3) of the survey respondents said they are better off under capitalism despite the inequality.

Another interesting question in the PEW survey was, “What would do more to reduce the gap between the rich and the poor in our country?”

http://www.pewglobal.org/2014/10/09/emerging-and-developing-economies-much-more-optimistic-than-rich-countries-about-the-future/#free-market-seen-as-best-despite-inequality

Majority of respondents in Asia, especially in Vietnam, Philippines and Thailand, favored low taxes, not high taxes, to reduce inequality. Meaning they are driven less by envy (“tax the rich more”) but by a desire to become rich and middle class themselves, and they do not want high taxes to negate whatever expansion in income that they will attain in the future. Low taxes on corporations also encourage more investments, more jobs for the poor, and economic growth.

Perhaps the best indicator that the world, the people in the planet today are better off compared to their ancestors despite rising wealth inequality, is the rising life expectancy. Even the super-rich more than a century would be lucky if they live up to 60 years old as average life expectancy in the world at the start of the 19^th century was only 48 years old. Now, even the poor can expect to live up to 80+, 90+ years.

In the Philippines, the average life expectancy in 2010 was 69 years (67 for males, 71 for females). By now, it should be almost 70 years.

Infant mortality is declining too, even children from poor families are dying less than before.

To summarize the points in this paper,

1. Equal people are not free and free people are not equal.  Income and wealth inequality per se is not the problem, high poverty is. To force equality among the people, massive political repression will happen.

2. The United Nations, the various multilaterals and foreign aid, various national governments are stirring the politics of envy in their continuous call to fight inequality and forcing equality. A government that’s big enough to give everything you want is also big enough to take everything you have.

3. Inequality due to individual freedom will lead to innovation and substantial poverty alleviation. In the words of Friedrich Hayek again in his book, The Constitution of Liberty,

“The rapid economic advance that we have come to expect seems in a large measure to be the result of this inequality and to be impossible without it. Progress at such a fast rate cannot proceed on a uniform front but must take place in echelon fashion, with some far ahead of the rest…. The over-all speed of advance will be increased by those who move fastest. Even if many fall behind at first, the cumulative effect of the preparation of the path will, before long, sufficiently facilitate their advance that they will be able to keep their place in the march.”

4.  Income taxes, personal and corporate, should go down drastically. Efficiency and hard work is not a crime to be penalized by high taxes. And if government should create new welfare programs, it should abolish or shrink old programs that do not work.

Bienvenido S. Oplas, Jr. heads a free-market think tank, Minimal Government Thinkers, Inc., and is a fellow of the South East Asia Network for Development (SEANET). 

-------------

See also: 

BWorld 12, Investments, APEC and economic liberalization, July 25, 2015 

BWorld 13, SONA's liberalism, five years after, July 28, 2015 

BWorld 14, OFWs, MERS-CoV and the DFA, August 08, 2015 

BWorld 15, The PH electricity market, August 15, 2015 

Inequality 25: On High CEOs Pay and Legislated Minimum Wages, April 30, 2015 

Inequality 26, Pew survey result on support for free market, July 27, 2015 

Inequality 27, ADR Institute forum on poverty and growth, August 18, 2015

Inequality 26, Pew survey result on support for free market

There is an interesting report in vox.com, covering the recent result of Pew Research survey on Support of the free market system. 

People in socialist Vietnam and China have high support for free market capitalism and its inequality than people against it. Also high support of people in Nigeria, Turkey, Malaysia, Philippines. 

Pew's survey question was, "Are people better off in a free-market economy given the wide disparities in wealth that might result?" Agree or Disagree.

And another interesting chart from that report -- optimism of people who say that children will be better off financially than their parents, socialist Vietnam and China are again outliers. People in Chile, Brazil, Bangladesh and India are catching up to the optimism.

In a related thread on inequality and "inclusive growth", I argued that inequality is good. Up to what level of inequality, like gini ratio?

There should be NO ceiling on the degree of inequality. There is no way to stop some people from being too intelligent or too efficient and too hard-working + some luck. Almost all the things that we so enjoy -- facebook, youtube, google, laptops, cars, airplanes -- were created by very intelligent, very hard-working and efficient people, and they have become super rich. And we benefit from them and their invention. So why put a "cap" on their wealth?

More inequality, the better for society and humanity. Notice also that the richer they become, the more that they give away their wealth. From Bill Gates to Warren Buffet to Zuckerberg, they all have foundations or donate to foundations whose main business is to give away their wealth via charities.

I think the endless call for forced equality is simply driven by envy.

The role of government should be limited only to setting fair rules for everyone, ensuring the rule of law. To have equality before the law, equality in opportunity for everyone, but NOT equality of outcome, like those endless calls for forced equality via endless subsidies and welfare programs and endless taxation of the rich.

On the other hand, there are people who have zero ambition in life except to eat and drink/party, 5-7 days a week. Even if government will give them $2,000 a month in various subsidies, they will remain poor as they will simply spend $2,100 a month or more and be in debt, the money is spent on interest payment and other wastes, forever.

An anarchist commented in my wall, 

“there must be a LIMIT as to the wealth you can generate." 

Huhh? An anarchist advocating zero government now advocates "LIMIT to wealth"?  The one that will enforce that limit is government, via endless taxation, fees, penalties, mandatory contributions, etc. And guns and prison if they evade those endless taxation.

-------------

See also:

Inequality 22: Ten Men Eating Equally but Paying Unequally, February 27, 2015 

Inequality 23: On Poverty, Agriculture and Motorcycles, March 10, 2015 

Inequality 24: Inheritance, Poverty and Envy, April 17, 2015
Inequality 25: On High CEOs Pay and Legislated Minimum Wages, April 30, 2015

Fresh Market Capitalism

Fresh food is among the foundations of good health of the people. The more fresh the food, the more nutritious it is. But fresh food should also be affordable to more people. That way, good economics (stable, affordable prices) meets good health (fresh, nutritious food that help strengthen our immune system).

Last week, on our last day (November 08) in Hong Kong after attending the Economic Freedom Network (EFN) Asia Conference, November 6-7, 2014, a friend Simon Lee, organized a "fresh market tour" for interested EFN conference participants. It was a short, 1 1/2 hour tour as some of us have to catch our flight back to our respective countries in the afternoon or evening.

Simon and his two staff, Lisa and Paul, brought us to Lok Fu fresh market in Kowloon.

It was not a supermarket inside a big mall. Rather, just an open space on the ground floor of a ahigh-rise HK government housing. As these two pictures show, the vegetables are fresh, they did not look like they came from a freezer, unsold items the previous day/s.

Upon arriving at the site, Simon turned over the briefing to  Myron, a sharp, articulate, bright man who is an officer of The Link, the owner and administrator of the Luk Fo fresh market.

Below, our team. Simon Lee standing on left most, Myron is 3rd from right, with a portable microphone. More should have joined but our departure from the hotel was delayed by almost one hour because the bus that would pick us from our hotel somehow went to another location.

Myron quickly started the briefing. His English is good and fluent. He must have studied in UK or the US. Anyway, the place is very clean. No foul smell whatsoever, something that is familiar in public markets, non-mall supermarkets in the Philippines

This shop of dried food is cool. Neat and clean and only one person manages the  whole  store.

The fresh seafood  section. The floor is not wet, no mud or scattered fish body parts.

Crabs, seashells, other crustaceans. Some of those sea creatures I don't see in Philippine seafood markets. I would assume that some of these products are grown via aquaculture and not caught in the open sea.

Wow, those huge sea cucumber-looking creatures, I don't know their name. Although I am from a coastal city of Negros island in the Philippines and fishing is the main industry there, I don't see these products, nor in Manila's seafood markets.

Karthik Chandra from India, a fellow conference participant, was also amazed at the sights of fresh seafood that greeted us that day.

Another friend, Lorenzo Montanari from the Americans for Tax Reforms (ATR) in Washington DC seemed awed by the variety of these live sea creatures sold at affordable prices.

EFN Asia 43: Day 1 of Conference 2014

The Economic Freedom Network (EFN) Asia 2014 Conference started today at the Harbour Grand Hong Kong. Nice venue, great forum with great speakers, and many participants from Asian countries, from the US, Canada and Germany. The event is jointly sponsored by the Lion Rock Institute (LRI) in HK, EFN Asia in Bangkok, and the Friedrich Naumann Foundation for Freedom (FNF) in Berlin Potsdam, Germany.

Opening and Welcome Addresses were given by Bill Stacey, Chairman of LRI, and Siegfried "Siggi" Herzog, the new FNF Regional Director for East and Southeast Asia. Below, Siggi giving the welcome message.

The MC for the day was Wan Saiful Wan Jan of IDEAS Malaysia. From the Philippines, there are five of us here -- Dr. Vic Abola of  the Philippine Economic Society (PES), Tony Abad and Rhea Lyn Dealca of the Foundation  for Economic Freedom (FEF), Narwin Espiritu of FNF Manila, and me. FNF Philippines Country Director Jules Maaten arrived late today as there are a number of FNF activities in Manila until yesterday.

Dr. Razeen Sally delivered the Keynote Address, "Capitalism in Asia: Economic Growth and Inequality". Very articulate and clear defense of capitalism or market economy, innovation, competition, mass production and rising standard of living of the people in many parts of the planet. He concluded his speech with good and bad news.

The good news is that the world and its people today are much wealthier, healthier, higher economic freedom, mature institutions, compared to the people a century or many decades ago. The bad news is that governments almost anywhere are getting more interventionist and bureaucratic, often with no distinction between macro and micro, meaning even micro (community, firm, household and individual) levels are being monitored and regulated (micro-management).

Two distinguished reactors followed. Parth Shah of the Center for Civil Society (India) and Choi Byung-il of Ewha Woman's University (S. Korea) gave their thoughts on the subject of growth and inequality, while LRI Chairman Bill Stacey (middle in this photo) was the moderator.

I met a number of old friends whom I met last time about four or five years ago. Like Neena Moorjani, now with the Asian Trade Center in Singapore, andArpita Nepal of Samriddhi-Prosperity Foundation  in Kathmandu. Below, a group photo of participants from South Asia (India, Pakistan, Bangladesh, Sri Lanka,...)

The next round was the "Asian Cafe". Participants moved around in 5 groups representing 5 Asian economies and a resource speaker from each country gives a brief discussion about their country and the state of growth and inequality there. Here, Peter Wong (right, facing the audience), Exec. Director of LRI, spoke about HK. Many of the questions were about the protests by the "Umbrella Movement" or "Occupy Central" movement.

The last panel in the afternoon was about "Property Rights and Equality". Below, Lorenzo Montanari of the Property Rights Alliance (PRA) and Americans for Tax Reforms (ATR) in Washington DC, briefly discussed about the result of the International Property Rights Index (IPRI) 2014 Report.

The panel moderator and speakers in that session were, from left: Ken Schooland of Hawaii Pacific University, Andrew Work, co-founder of LRI and currendly editor-in-chief of the Harbour Times, Barun Mitra of Liberty Institute in  India, Michael Feng of CASS/Unirule Insitute in China, and Thitinan Prongsudhirak of the Institute of Security and International Studies in Thailand.

Many insightful ideas from the four speakers. We adjourned about 4pm, and we go back at 6pm for the cocktails and later, dinner program. Fred McMahon of Fraser Institute (Canada) will discuss the result of the Economic Freedom  of the World (EFW) 2014 Report. Then HK's Finance Secretary John Tsang will give a Keynote Address during dinner.

An after dinner program will be held in  honor of LRI's 10th Anniversary.
Photo credits -- from Jadranko Brkic, FNF S and SE Asia, Olaf Kellerhoff, Lorenzo. Thanks.

To be continued later...
-------------

See also: 

EFN Asia 39: Rainer Adam's Farewell Letter, June 17, 2014

EFN Asia 40: Liberalism, Growth and Reducing Inequality, August 19, 2014

EFN 41: Program of Conference 2014, Hong Kong, September 30, 2014

EFN 42: Other Speakers in Conference 2014, November 04, 2014

Weekend Fun 57: Cow Capitalism

Two friends tagged me in fb with this funny definitions of capitalism.

I added these:

Philippine capitalism: You have two cows. One looks like a carabao, the other looks like an ostrich. You sell the former and buy a tricycle while you keep the latter and join a 5 cock derby/contest. 5 bladed cocks vs your unbladed ostrich-looking cow. The cow mows them all, but the referee declares a passer-by duck as the winner.

A congressional inquiry was conducted (a) how an ostrich can join a derby, and (b) how a duck can win a derby. The committee hearing was quickly ended because the Comm. Chairman owns the duck.

Dissatisfied that a Congressman Committee Chairman can quickly kill a Congressional investigation, a Senator initiated a Senate investigation about those two weird issues. And the Senate Comm. investigation was also quickly ended. Why, because the owner of both the 5 cocks and the ostrich-looking cow are among the political enemies of the Senate Comm. Chairman. :-)

----------

See also:
Weekend fun 15: Political jokes, March 12, 2011
Weekend Fun 36: The Karl Marx Mastercard, July 06, 2012
Weekend Fun 37: On Fighting Poverty, July 12, 2012
Weekend Fun 40: Bank Robbery and Management, May 18, 2013
Weekend Fun 44: Cow Economics, June 22, 2013
Weekend Fun 49: Lefties Songs, October 12, 2013

Weekend Fun 54: World Map of Country Images, January 11, 2014

Weekend Fun 56: Some Photos at Sic O'clock News, July 05, 2014

Telecom Modernization and the Developing World

Related to the never-say-die hypothesis that with more globalization and global capitalism, "the poor are getting poorer". This table says that hypothesis is, once again, wrong. Even the poor in poor countries like Bangladesh, Mexico, Nigeria, Philippines, India, Indonesia, China, etc. can afford to buy mobile phones. Many of them are even buying 3G and 4G phones.

 source: http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats/a#subscribers, May 2014

I like their title, "The 100 million club". The Philippines is one of the 14 countries in that club worldwide. The reported noted that "Iran and Egypt are knocking at the door" of the club. It further noted that 

• The top 14 countries account for more than 61 percent of the world’s total mobile subscriptions. 

• 29 percent of the world’s mobile users live in India and China. Subscriber numbers in either country dwarf the number of subscribers in third place USA.

And here is the overall global picture. Some 90 percent or 5.4 billion people in the developing world, have mobile phone subscriptions. Until about two to three decades ago, many middle class could not even afford to buy a mobile phone. Now even taxi drivers, bus drivers, ambulant vendors, have smart phones.

The report also noted the following:

• Portio Research – in the excellent free Mobile Factbook 2013 predicts that mobile subscribers worldwide will reach 7.5 billion by the end of 2014 and 8.5 billion by the end of 2016. 

• More than half of the world’s mobile subscribers are in Asia Pacific. With 3.6 billion subscriptions, according to the ITU, Asia Pacific accounts for 52.1 percent of the global number. This share is expected to rise – Portio estimates that Asia Pacific’s share of the mobile subscribers will be 54.3 percent in 2016. Portio also predicts that by 2016 Africa and Middle East will overtake Europe as the second largest region for mobile subscribers.

There. The anti-capitalism, anti-globalization logic is proven to be wrong again. Global capitalism works for the poor. The fierce competition among mobile phone manufacturers, among global telecom companies and related sectors or industries have forced the various players to keep churning out more products and models that cater to all segments of consumers including the poor, both in the developed and developing world. One can have a brand new smart phone now for only $50, just get the lesser known brands like Cherry or MyPhone.

On inequality, the poor before ride cows, carabaos, horses or bicycles while the rich ride a Toyota corolla, etc. Now the poor ride motorcycles while the rich ride SUVs, if not a Benz, BMW, Audi or Ferrari. Is this bad for the poor? Some may say Yes but most poor people would say No.

Some people suggest a "smartphone vs food or education" in their household budget. I think it is not a "vs" but rather "and". Let me cite the example of our part time caretaker in our farm in Bugallon, Pangasinan. He is a tricycle driver, rice farmer, part time worker in the farm, helps his wife manage a small sari sari store, while taking care of their 2 young kids. Some of his friends or neighbors will text him and ask him to drive them to Lingayen or Dagupan or San Carlos, etc. This raises his income, thanks to texting and his mobile phone. Then he can ask by text how much are prices of dried fish in Labrador, about 20 kms away, if the price is low, he would drive there and buy various dried fishes and retail them in the barrio and that again raises his income.

That is why access to telecom and mobile phones is largely an income-enhancing experience and investment of the poor. It is a more effective poverty-fighting event than some government welfare and dole out programs.

A German friend cited the example of watching tv in the UK after tv was introduced more than a century ago. One might say watching a comedy on tv is a waste of time. but perhaps the person is sitting on a sofa watching a comedy together with wife and not going to a pub instead. He is saving money, he can spend it on other things. In addition. after tv was introduced, about two-thirds of Britain's pubs had to close, there was more in the average household kitty (usually administered by women) and drink-related violence (stabbings, etc) decreased.

Less government interventionism and regulation, more competition among players and capitalists, they are led by an "invisible hand" to serve the interests of the poor which may not be their original intention.
--------------

See also:
Telecom oligopoly 1: Smart takeover of Sun, April 02, 2011
Telecom oligopoly 2: Slow internet in the Philippines, April 13, 2011
Steve Jobs and innovation, October 07, 2011
Fierce Competition is Fair Competition, January 22, 2013
Globalization, Mobility and Inequality, February 18, 2014