BWorld 144, Individual liberty vs state coercion and taxation

* This is my article in BusinessWorld on July 18, 2017.

“I hope we once again have reminded people that man is not free unless government is limited. There’s a clear cause and effect here that is as neat and predictable as a law of physics: as government expands, liberty contracts.”

-- Ronald Reagan, former US President

Perhaps the first intellectual in China and the world who championed individual liberty was Lao Tzu (600 BC). He was born more than 2,000 years before Adam Smith wrote and called for a “simple system of natural liberty.” Here, Lao Tzu wrote referring to government:

The more restrictions and limitations there are, the more impoverished men will be...

The more rules and precepts are enforced, the more bandits and crooks will be produced. Hence, we have the words of the wise (the sage or ruler):

Through my non-action, men are spontaneously transformed.

Through my quiescence, men spontaneously become tranquil.

Through my noninterference, men spontaneously increase their wealth.

The “restrictions and limitations” that Lao Tzu mentioned are now what we call regulations, permits, licenses and taxes. The “bandits and crooks” that he mentioned are now the various officials and bureaucrats in government, elected or appointed. While the “noninterference” that he mentioned refers to a minimal and limited government that intervenes and taxes the least.

And talking about taxes, especially Dutertenomics’ TRAIN, the numbers below should be a good reminder that it is largely a train for more government coercion and interventions.

A short definition of these concepts: (a) Total taxes (TT) are the sum of corporate income tax + labor taxes + other taxes; (b) Total tax rate (TTR) = TT/private enterprises’ net and taxable income, in percent (see table).

Total tax rates in East Asia, % of commercial profits

Source: Price Waterhouse Coopers (PWC), Paying Taxes  annual reports 2009, 2012, 2015, 2017.

Based on these numbers, we both have good and bad news.

The good news is that the Philippines has a declining TTR, from almost 51% in the 2009 PWC report to nearly 43% in the 2017 report. Other economies with declining TTR are Brunei, Singapore, Laos, Indonesia, Myanmar, Taiwan and Japan. Only Malaysia has a deteriorating or rising TTR.

The bad news is that the Philippines has the highest TTR in the 10-country ASEAN, higher than socialist Vietnam, also higher than developed Hong Kong, South Korea, and Taiwan. Only welfarist Japan and socialist China have TTRs higher than the Philippines.

These are the more controversial aspects of Dutertenomics’ TRAIN -- (a) hike in excise tax for oil products and new cars, (b) introduction of additional tax on sugar-sweetened beverages, and (c) expansion of VAT coverage to more sectors including business process outsourcing (BPO).

To help dispel the ugly label of “Philippines having the highest TTR in the ASEAN and other East Asian economies,” tax proposals (a) and (b) should have been abandoned, and 12% VAT (highest in the ASEAN) should be reduced to only 6%, probably even 8% and cover more sectors including BPO. The main reason why many sectors lobbied for exemption from VAT is because 12% is high.

To help fund Dutertenomics’ build-build-build plan without those new taxes and tax hikes, the government should cut spending on some agencies and bureaucracies whose welfarist goals and mandates overlap with other agencies. Then rechannel the savings to more infrastructure spending. But this is now wishful thinking as the TRAIN is on a fast track of legislative wreckage.

The issue of more state coercion and taxation will be tackled in the inaugural “Philippine Students for Liberty Conference” this coming July 21-22, 2017 at the Hive Hotel in Quezon City. The event sponsor is the Students for Liberty Philippines (SFL-PH) and the theme will be “live freely, live fully.”

SFL-PH President Joseph T. Bautista has invited me to be one of the speakers on Day 2 of the event and I gladly accepted the honor. SFL CEO Wolf von Laer will give the keynote address. Other speakers will be Thomas Laughlin, CEO of Amagi; Luis Sia, president of UpStart; Shahab Shabibi, CEO of World by Machine Ventures; Mahar Mangahas, president of Social Weather Stations (SWS); Imantaka Nugraha of SFL-Indonesia, and Markus Löning of Friedrich Naumann Foundation for Freedom (FNF).

I will talk about state coercion and legislations in the energy sector, infrastructure, and fiscal policies during the SFL conference.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a SEANET Fellow. Both are members of Economic Freedom Network (EFN) Asia.

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See also:
BWorld 141, Reducing system loss, Part 2, June 30, 2017 
BWorld 142, PPP vs ODA, Part 3, August 08, 2017 
BWorld 143, Coal power and economic development, August 09, 2017

Pol. Ideology 65, Liberals and liberty, positive and negative freedom

Reposting  here a good article by a friend, published yesterday in a paper in Kuala Lumpur. Good discussion about liberal vs. illiberal, liberty vs. coercion, positive vs. negative  freedom.
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http://www.thestar.com.my/opinion/columnists/thinking-liberally/2016/01/05/how-liberals-become-illiberal/

Negative freedom is the true way to respect choice, while positive freedom brings you closer to an illiberal coercive environment.

IT is heartening to see more liberals speaking up these days. Every time an illiberal idea is put to the public, you can almost rest assured that someone will fight back to defend their freedom and liberty to seek happiness in their own ways.

Liberty is the principle that founded this nation.

In fact, our Bapa Malaysia Tunku Abdul Rahman announced proudly in the Pro­clamation of Independence and Procla­mation of Malaysia that this nation shall “be forever a sovereign democratic and independent State founded upon the principles of liberty and justice and ever seeking the welfare and happiness of its people”.

Liberalism is indeed about liberty and freedom. But when we at Ideas hosted “The Liberalism 2015 Conference” back in September, the confusion about what libera­lism actually means was obvious.

We intentionally designed the conference to be a platform for stakeholders to discuss with each other what they thought about the philosophy.

By stakeholders I mean anyone with an interest in the topic, regardless of whether or not you agree with it.

We saw a beautiful interaction between the proponents and opponents of liberal ideas and, of course, we also saw how confused some people were about the topic.

One of the speakers made a succinct point about the confusion. Khalid Jaafar, a member of the Ideas Council, said that it was apparent some speakers were talking about anarchism, despite using the label liberalism.

They thought liberalism meant not having any laws, when that is actually anarchism. On the contrary, liberalism is about upholding the rule of law.

One way to understand the meaning of freedom in its classical sense is by using philosopher Isaiah Berlin’s description of positive and negative freedom.

It is impossible to give a full description of these two types of liberties in this short article. But to simplify, positive freedom is “freedom to” while negative freedom is “freedom from”.

If you take, for example, the fact that I cannot afford to send all my children to quality private schools, a government that believes in positive freedom will want to ensure I have the freedom to send my child to that school.

The government may tax everybody else and pass the money to me so that I can pay the fees. Or the government could put a cap on the school fees, coercing the school to reduce their fees for me.

On the other hand, if a government that believes in negative freedom wants to ensure I can afford that school, it will do so by removing the hurdles preventing me from being able to pay.

The fees might be expensive because the number of private schools is small and setting up more is too bureaucratic.

So the government will remove the bureaucracy and give more licences to create competition, which will in turn reduce the cost.

It gives me the freedom to choose that school by removing the barriers that prevent me from going there, not by coercing others to help me.

These two concepts are important to understand when talking about liberty because they can be competing ideas that are incompatible with one another.

Positive freedom coerces people into doing something they don’t want. You are coerced to pay tax to help me even though you might need the money more than me.

Negative freedom frees up the supply and avoids coercion, for example by giving more licences and reducing bureaucracy so that you are free from the limitations that held you back.

Those who believe in liberty in its classical sense believe in negative freedom and not positive freedom. Negative freedom is the true way to respect choice while positive freedom brings you closer to an illiberal coercive environment.

If we apply this to the hot issues that exist today, we will actually come to some very interesting policy challenges.

Take the desire to practise one’s religion. Let us take the desire by some Muslims to have hudud.

This is a challenging situation and I myself am still researching for the most acceptable policy solution.

But a liberal would respect the right of a person to practise his religion, including to have hudud imposed on him.

The challenge, however, is how to ensure the person can fulfil his religious obligations while at the same time ensure there is no coercion on others.

In this case, while I understand the concerns of those who oppose hudud, I also fear that the opponents may have become illibe­rals themselves by denying the right to have hudud.

Similarly, there is an increasing number of people these days who jump when they see signs of an “Islamised” society.

A liberal would respect and indeed defend the choices made by those who want to live life in what they deem as “Islamic”. Islamophobia is not at all liberal.

The policy problem, however, is when government coercive powers are used to impose a set of values on those who prefer not to live their lives according to those values.

How to decouple personal beliefs from illiberal government coercion in a country like Malaysia is one thing that I am still trying to figure out because it has to be done delicately.

But one thing I do know is that liberals respect choices. To paraphrase a popular saying, I may not agree with your belief but I will defend to death your right to believe in them.

If we are liberals, we should look for ways to accommodate the different beliefs and choices made by individuals for themselves.

We should not become illiberals ourselves by stopping others from living their lives the way they choose.

Wan Saiful Wan Jan is chief executive of the Institute for Democracy and Economic Affairs (www.ideas.org.my). The views expressed here are entirely the writer’s own.

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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

Pol. Ideology 64, Big World Government or Smaller Countries and Governments? June 03, 2015

Global belief in free market

I originally posted this on April 11, 2011. Updates below it.

There is one interesting chart from The Economist daily chart, April 6th 2011. There is a disconnect, however, between the title, "Market troubles" and the chart, below.

Of the 16 countries showed above, 13 have more than 50 percent of their people who believe in the free market system. Only 3 countries, Japan, France and Turkey, have less than 50 percent of their people who do not agree with the free market system. Meaning they believe in more government intervention.

So it does not appear to be "market troubles" but rather "market belief".

Now here is the original chart from the Globescan, also dated April 6, 2011. It was drawn from 12,884 interviews across 25 countries, people were asked, "The free market system and free market economy is the best system on which to base the future of the world." People choose whether "Strongly Agree", "Somewhat Agree", "Somewhat Disagree", and "Strongly Disagree". Click on the chart to get a larger image.

A. Above 50 percent Agree: (19)
1. US, 59%
2. Canada, 59%
3. Brazil, 77%
4. Colombia, 57%
5. Mexico, 57%
6. Germany, 68%
7. Italy, 61%
8. UK, 55%
9. Russia, 52%
10. Spain, 52%
11. Kenya, 61%
12. Nigeria, 58%
13. Ghana, 57%
14. China, 67%
15. Philippines, 65%
16. India, 59%
17. Indonesia, 55%
18. Australia, 54%
19. Pakistan, 51%

B. 50 percent or below Agree (6)
Ecuador, Peru, Chile; France, Turkey; Japan

I am glad that the Philippines has a high percentage of respondents who have belief in economic freedom, in the free market and free enterprise, and have little belief in more government intervention, regulation and high taxation. Well, seeing the huge volume of government failure and government corruption in many sectors in the Philippine economy, it is not hard for Filipinos to choose economic freedom over government coercion.
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Update:
In a Spring 2015 Global Attitudes Survey by Pew Research Center, released last July 22, 2015, among the results is this chart. Optimism for the kids' future is highest in socialist and/or big population countries like Vietnam, China, Nigeria and India. The trajectory of many emerging and developing countries is generally towards more market-oriented reforms while those in developed countries is generally towards more bureaucratism,  more government regulations. This sends signals to the parents and current workers.

Of course there is no such thing as truly free market economy as even Hong Kong suffers from rising state regulations imposed from Beijing. But monopolies and oligopolies are becoming less and less tenable as the consumers become more informed, more articulate and more demanding for more options, more consumer freedom. And only market-oriented reforms can satisfy this rising consumer activism as more players, more producers can adjust more quickly to changing and rising consumer demand, both in prices and product/service quality.
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See also:

Inequality 24: Inheritance, Poverty and Envy, April 17, 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

BWorld 16, Growth, capitalism and inequality, August 22, 2015

Pol. Ideology 58: Democracy, Coercion and Civil Society

Democracy has many definitions and people can reveal their philosophical and ideological leaning based on how they define the word. The most common or even generic definition of democracy perhaps is “power by the people, for the people.” This connotes or implies that  the people have similar if not monolithic interests and goals in society, which very often is not the case.

Another common definition is that democracy is  “rule and will of the majority/people” in society and such majority rule should prevail over the minority. Critics of this definition call this as “mob rule” where the mob act in behalf of the majority, whether real or imaginary majority.

And still another definition is that democracy means “equal participation” by the people either through direct involvement or elected/representative democracy.

A lesser-known definition is that democracy means “respect and tolerance of minority opinions” so that such minority opinion can be heard and discussed without feat of persecution and harassment by the State or other armed groups.

One indicator if people hate democracy is that they want all things to be legislated and forcibly enforced nationwide. Or if a local legislation, those things should be forcibly enforced province-wide or city-wide. Choice is zero as things have been legislated already, with fines, penalties and even imprisonment for violation.

Most legislations and coercion are done to favor one sector and deny the same favor to other sectors as if they are not citizens or taxpayers of the same country. For example, if a new state college or university is created in one province, only students and faculty, officials of that new university will get taxpayers' subsidy while students, faculty, officials of private universities in the same province or big city do not get the same subsidy, as if they and their parents are non-taxpayers of the country.

Or when a legislation or Executive Order was made to subsidize MRT/LRT passengers in Metro Manila, passengers in Ilocos, Cagayan Valley, Bicol, Visayas, Mindanao are not given the same fare subsidy as if they are not taxpayers of the country. That is why legislation that favor one sector but exclude other sectors should be avoided whenever possible. Such practices are actually undemocratic as a big portion of the country's population are excluded from certain favoritism by the state.

Most majority decisions are done outside of government and legislation. For instance, if people want cheaper clothes, cheaper shoes, toys, food, etc., they do not go to the streets to rally and demand that government through DTI or LGUs or Congress should impose price control on clothes, shoes, toys, food, etc. of SM, Robinsons, Rustans, Ayala malls, etc. Instead, many people go to Divisoria, Baclaran, tiangge-tiangge, etc. where cheap goods and services are available with zero politics and government horse-trading involved.

My good Indian friend, Barun Mitra, is correct in saying that for government "democracy has to be minimal, so that it does not offend or alienate too many people."

This implies that the more vibrant the democracy is, the smaller the government should be, where smaller social actors (the smallest actor is the individual, not a clan or trade union, etc.) are supposed to be empowered at the expense of the government. 

Civil society or self-government can be considered as democratic governance. When a Rotary club or Lions club or Jaycees etc. conduct medical and dental mission and give away free healthcare, free medicines even for one day, it already has high impact on the people of a community that received such civil society action. More self-government means less institutional, taxpayers-funded government. They are all part of real democracy.

Barun wrote correctly, 

"Democracy is not about majority rule, but about recognition of and respect for minority opinions. So that the minority view of today, may enjoy the freedom to peacefully persuade others, and could become a majority opinion of tomorrow."

A friend asked, “Can a state be truly democratic? Or democracy exists as its tenacious opposition?”

I suggested that unhampered democracy can lead to socialism and totalitarianism. If the majority will decide that they should eat, have free or subsidized housing, etc. even if they donot work or work very little, then a law will be passed to reflect the will of the majority. Socialism and forced equality is the ultimate result, and since the middle class and upper class will resist, then totalitarianism and strong arm dictatorship will evolve.

The limit to democracy is rule of law. The law applies equally to unequal people. If people want to eat even if they do not work, then all other people should be allowed to not work also, the socialist government can collapse. It can stay afloat by endless borrowing, and/or selling its land and other resources so it will have money to feed people who do not want to work. That is one proof why socialism will never be successful, but many intellectuals and masa want socialism. They want to be the new dictators.

An unfettered or limitless democracy will ultimately result in socialism and totalitarianism and hence, a negation of democracy. Democracy tempered by rule of law -- the law against stealing and destruction of property, law against murder and harming other people, law against abduction and repression of individual liberty -- is ideal. Socialism and totalitarianism can never prosper in that condition.

Can unfettered democracy be the button of self-destruction to all types of states, or the button for further/endless expansion of states and governments? 

Notice that almost all democratic governments around the world, from N. America to Europe to Asia have an expanding public sector, not only at the national or federal level but also at the local (state, province, city, village/barangay) levels. Before, a lazy or irresponsible person will have no money, now he can get cash monthly from the government on top of free education for the kids, free healthcare. Before, it is relatively easy to put up a shop; now one needs to get dozens of permits and pay lots of taxes and fees to officially start a business.

To conclude, unlimited or unchecked democracy can lead to populism, welfarism and socialism. From books and education for the poor, medicines and healthcare for the poor, housing and relocation for the poor, tractors and credit for the poor, electric tricycles and MRT fare subsidy for the poor, cash transfer and condoms for the poor, all of which are existing and implemented, an iPad for the poor, 2nd-hand cars for the poor will not be far behind in the near future. All in the name of democracy, unfettered, populism and welfarism will expand.

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See also:

Pol. Ideology 54: On the Multiple "Death" of Capitalism, March 11, 2014

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

Pol. Ideology 56: Democracy and the Devils, June 11, 2014

Pol. Ideology 57: Radicalism, Islamic Militance and Terrorism, October 03, 2014

Blog Stats, On Reaching 500,000 Pageviews

Today, around 4pm Manila time, this blog has reached the half million pageviews mark. Not a fantastic achievement, just a modest one, but something to celebrate somehow.

Since the counter started in July 01, 2010, it took 2 1/2 years to reach the half-million mark. If this trend continues, then the 1 million pageviews mark will be reached in mid-2015.

Since about two months ago, there was a significant decline in viewership, from about 800+ pageviews a day on weekdays and some 500+ a day on weekends, viewership recently has gone down to only 300-400 a day on weekdays and less than 300 a day on weekends. I do not know the reason why, perhaps some of the regular blog readers have quit visiting the site, or some search engines have stopped referring the site, or other reasons.

Nonetheless, it is the freedom of expression that gives me happiness to keep writing. One cannot write sensibly if he has not read or watched or discussed sensibly the subject, as writing is a mental challenge to the writer to integrate many of the things that he/she has learned and discovered.  So the process of reading, comprehending, summarizing, integrating and later writing of ideas, gives me a natural "high".

Thanks readers.
 

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I posted this last July 01, 2012:

Blog Stats, On Reaching 400,000 Pageviews

The blog stats counter started only in July 2010 or exactly two years ago, although I started blogging in October 2005. Anyway, it feels good that this blog has reached the 400,000 pageviews mark after 24 months, as of 1:40 am, July 01, 2012 Manila time, or 5:40 pm, June 30, 2012, GMT.

Coincidence? Somehow yes. But here's a disclosure: Five days ago, sensing that the stats might not reach the 400k mark, probably only 399,000+, I asked a few friends if they can help by visiting this site daily for the next 4-5 days even if they did not do so before. I told them there's nothing really special, I just wanted to see the 400k mark by end-June 2012 or exactly 24 months after the blog counter started ticking, a shallow concern and request. Thank you guys, you know who you are.

Pol. Ideology 25: On Governance and Rule of Law

A lawyer-friend way back in UP in the 80s, now a friend in facebook too, posted in his wall,

Activism means the coming together of a few or even many people for the purpose of changing things in their contexts.... Now, you have a completely new generation of student activists who respond to various issues plaguing this society - which are basically the same from the '70s up to now but with new factors to contend with.

I commented on his wall and here are our exchanges today:

Nonoy: Activism is demanding social changes either for the good or for the worse. My activism now is a complete opposite of my activism in my/our younger days. I now call for less government and more personal responsibility in running our own lives. Too much government, too much politics, too much irresponsibility.

Him: Hi! Thank you for your contribution in the discussion here. I know that you are one of the more intellectual among people I know back in UP days, so your ideas are very welcome indeed! I don't know why you had a complete reversal (as you said) in your view of activism. Is it because of the experiences of socialist countries that did not work? When I look back, I remember you being so passionate in the past about your views. Whatever it is that made you change your views, I agree with your point here that personal responsibility is an important factor in developing a nation - as can be proven by developed or fast developing countries. Discipline, for instance, cannot be absent in any form of development. People without dreams cannot develop as a group. And yes, too much government is inefficient in most respects. Although, let it be said that this all assumes responsible leadership.

Nonoy: Thanks. Just look around: people who don't want to work, or work little and complain a lot; people who work 5-6 days and drink/party 6-7 nights a week, little or zero savings. After over-smoking, over-drinking, over-eating, over-sitting, they become sickly, they demand quality healthcare from the govt, cheaper or free medicines, etc. because "health is a right". For them, "health is not a responsibility", only a right. You don't need to study any political philosophy to see that this is wrong. And big/more government, is precisely fanning this kind of irresponsibility so that govt will tax-tax-tax more, regulate-regulate-regulate more.

Fiscal irresponsibility 17: Cut Spending and Borrowing

(This is my article this morning in thelobbyist. biz, with original title, Cut Spending, Borrowing and Irresponsib-ility. It seems to be my most popular article in the magazine as it is getting about a dozen hits per hour today :-))

When someone is irresponsible – a person, a corporation, an NGO, a government, etc. – there is tendency to live beyond one’s means. To splurge in over-spending, saying that such extra spending are “necessary and inevitable”, and resort to endless borrowing.

The irresponsible can partially correct its bloated ego and not be stuck in forever indebtedness if it will (a) cut its spending relative to its income or revenues and slowly pay the debt, and/or (b) sell some of its assets and properties, pay the debts, and slowly mend its ways to live within its means.

The incorrigible irresponsible though, would never do the above two measures. In the case of governments, what they do is (i) create new tax measures, or raise existing taxes and fees, or (ii) simply declare a default and ask for debt write off for some, or restructuring and postpone payment to even longer period. Let the future administrations worry about the wastes and excess of the past and current administrations.

There is a good chart from  The Economist last September 15, 2011, “Splurge or Slash?”

Citizens of highly indebted countries like Portugal, Spain, US, France and Germany, simply want their governments to cut spending, not increase spending via Keynesian stimulus hallucination. Ordinary citizens, especially those in the private sector, are net taxpayers. The politicians and those in various government bureaucracies – local, national, and multilateral or foreign aid government bodies – plus the welfare dependents, are net tax receivers. Thus, there is a big gap in perception on how to solve the perennial public debt problem. The net tax payers do not want additional taxes to pay for those increasing debts. The net tax receivers want ever bigger governments to be financed by ever-higher taxes from the rich, the industrious and responsible people. 

Here in the Philippines, the ever-rising public debt is also financed by endless borrowings – from foreign aid (WB, ADB, JICA, etc.) and from private lenders (individuals, banks, corporations). Below is a table of how scandalous the interest payment that we taxpayers in this country have to pay in order to bail out the continued wastes and irresponsibility of our political and bureaucratic leaders. These debts have high interest rates and other charges, from 4 to 10.6 percent p.a. or several times larger than the London Inter Bank Offered Rate (LIBOR) of around 1 percent. Table is lifted from Alas, Oplas CPAs blog, Interest payment on foreign debt securities, Philippines.

source: DBM, BESF 2012, Table B.22

* Notes:

1.    These foreign debts were meant purely for budgetary support, ie, to finance the budget deficit.
2.    Only loans with more than $50 M in interest payment in 2010 (1stblock) and in 2012 (2nd block) are included here.
3.    The Loan Account name indicates (a) amount loan, (b) interest rate and other charges, and (c) year of loan maturity.

Check that one RP loan until 2030 at 9.5% p.a. (vs LIBOR around 1% pa) and we pay $142 M per year on interest payment alone. Another loan until 2031 at 7.75% pa and we pay $116 M/year. More foreign loans just to finance the annual budget deficit.

If a debtor has some sense of responsibility and sanity, it will take the high interest rate as a signal  and say, "Hoops, they are charging me high cost of borrowings, I might as well reduce, if not stop borrowing even temporarily."

An economist friend suggested, “BSP's foreign currency reserves (not counting gold and other forms of reserve assets) are already $59B. These are earning, what, 2% p.a. or less? In principle, forex reserves are assets owned by the Philippine Government. The latter can take half of the stockpile of forex reserves (or even less), and pay down the entire amount of USD denominated debt on your spreadsheet above.”

I am not aware of the technical or legal issues why such measure cannot be done by the government through the central bank (BSP). But if those issues are not too serious, the government should pursue such measure. The important thing is that the high public debt, especially those from high interest rate foreign debt securities, should be retired as soon as possible.

Greece is falling closer and closer to a debt default, which is option (ii) that we discussed above. Governments do not collapse even if they default on their debt obligations. Maybe the administration in power can collapse but government as an institution does not. The guys and entities who lent to the irresponsible government are also the other group who might collapse.

Government is force and coercion. That is why it often attracts the most horrible and irresponsible people in the planet masquerading as saviors of the poor and masses.

That is why we need less government. Less force, less coercion, less corruption and less irresponsibility.
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See also:
Part 14: Debt crisis and government failure, August 08, 2011
Part 15, Philippine government budget 2012, August 08, 2011, and
Part 16: On government bail-outs, September 11, 2011

When coercion and arms rule: Libyan war

War is ruthless. Whichever way you look at it, war means destruction, shooting and killing. That is why we should aim for a peaceful society, a society based not on coercion but on voluntary exchange among people.

While the bulk of humanity's progress and modernization is on the positive side, meaning the construction of many structures to allow people to live and work in peace, a sizable amount of human invention and modernization is used to develop weapons of destruction and death. All these are currently happening in Libya.

All pictures here are taken from the New York Times photo gallery. And most of the armed men here are rebels. Foreign journalists are not at liberty to take any pictures they wish to take as they are being monitored by the Libyan government in the capital.

Being in power for 42 years now, Muammar Gadhafi (or Qaddafy or Gaddafi or Khadafy...) has stockpiled enough armaments and bombs to kill potential rebels who will challenge his reign of power. Even if the Allied aerial bombardment has decimated his choppers and fighter jets, lots of weaponry are on the ground -- tanks, missiles, rifles, bombs and ammunitions.

The rebels, mostly civilians who took instant training in actual combat, are generally less skilled in the art of shooting and killing. But they are fighting for a cause, the desire to be free from Gadhafi dictatorship.

It's eerie to see all those fighting. The greed and hatred that had been planted in the hearts and mind of people under many decades of political dictatorship are now getting actual outlet. People bearing guns and bombs.

The Gadhafi forces are more fierce in their defense of the status quo. They have tasted power and large-scale coercion for many years now. It is something that they do not want to be taken away from them, especially with the prospect of rebel victory. The greed for continued power and coercion over other people is what drives them to become brutal killers of those who challenge them and their leader.

The practice of political coercion and stockpile of heavy armaments is not unique to Libya of course. Almost all BIG governments have big stockpile of such weapons of death and destruction. Because BIG governments rely on large-scale coercion and deception in order to keep the people docile or kept ignorant.

Why would people tolerate a situation where they work hard, only to see that a big portion of their earnings go to the government, a big portion of which will be used to procure armaments and to train tens or hundreds of thousands of able-bodied men on the art of killing and destruction.

Woe unto the people who do not like such kind of arrangement, but nonetheless have to go through the same path of taking up violence in order to control or stop mainstream violence by the state.

Rockets, like fighter jets, are weapons of long-distance killing and destruction. The pictures of rockets here are again, from the rebel side. The accuracy of those rockets to really hit their targets, usually armored trucks, tanks and bunkers, is not 100 percent, especially if in the hands of new recruits from the civilians who have no formal military training. So those rockets and missiles are capable of hitting civilian structures and houses.

I understand that the UN has certain "rules of conduct" during war. But who pays attention to such UN regulation? The best rules of conduct during war is no war. Dictators, both in government and among ordinary civilians, often hate peaceful debate. They are allergic to debates, they want a short cut to settle debates through the use of arms, violence and coercion.

We will have to look at the role of the weapons manufacturing companies, mostly in the US, Russia, Germany, UK, France, China and Israel. But being private enterprises, they generally respond to incentives. When there is big demand for missiles, rockets, bombs, tanks, fighter jets and related products by many governments, they produce more to cash in and earn huge profits.

And here are the ordinary Libyan civilians. Torn between armed government troops and armed rebels firing missiles and guns against each other everyday, the civilians, especially the weak, the sick, the old and the young, are the worst affected.

I wish to see the end of violence in Libya and elsewhere. I believe that Gadhafi must go, but the new government, from among the various groups in the rebel forces, must assure the civilians that the old system of political and economic repressions should not be repeated. Otherwise, the current destruction and killing will just be repeated in the future.

Coercion is evil. The use of arms and violence to advance whatever political or philosophical agenda is evil. BIG governments thrive on coercion and the stockpile of weapons of violence and destruction, to harass if not kill, those who will seriously challenge the coercion and deception that the BIG state has inflicted on the citizens.

Let us keep this mind always.

Responsible Parenthood cannot be legislated

Question: If you are a parent, has one or more kids, do you need the government to tell you that you should be a responsible parent?

Think quick. Yes or No?

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If you answer Yes, then I believe there is something wrong with your personal values. If you answer No, then I congratulate you. You know your role as an individual and as a parent.

But now, we in the Philippines are faced with a congressional proposal with an ugly title called "Responsible Parenthood" bill. Parental responsibility is a non-issue. It's a given. If you are a parent, you HAVE responsibilities to your kids, to your family, no alibis.

So how come that a supposedly non-issue has become a big national issue?

I think the quick and simple answer is: Government. The government wants to impose another round of coercion and mandatory actions. And there are penalties and fines for non-obedience to such new round of coercion.

This highly controversial, highly divisive, highly emotional congressional bill, will require long discussions. Section by section if necessary.

For now, I will limit this article to only one thing: HUGE budgetary requirements to implement this proposal if it becomes a law. I will reserve additional discussions in the continuation of this new discussion series.

The authors, sponsors and advocates of this bill seem to think that this problem does not exist -- high public debt as a result of endless annual budget deficit, a result of endless borrowings to plug those deficit. High debt will require high repayment, both in principal and interest payment.

And thus, they thought of these programs with still undetermined, high, and new expenditures on top of existing expenditures:

Sec. 5. Midwives for Skilled Attendants.

The Local Government Units (LGUs) with the assistance of the Department of Health (DOH), shall employ an adequate number of midwives to achieve a minimum ratio of one (1) fulltimeskilled birth attendant for every one hundred fifty (150) deliveries per year...

Sec. 6. Emergency Obstetric Care.

Each province and city, with the assistance of the DOH, shall establish or upgrade hospitals with adequate and qualified personnel, equipment and supplies to be able to provideemergency obstetric care. For every 500,000 population, there shall be at least one (1)hospital with comprehensive emergency obstetric care and four (4) hospitals or other health facilities with basic emergency obstetric care...

Sec. 7. Access to Family Planning.

All accredited health facilities shall provide a full range of modern family planning methods,except in specialty hospitals which may render such services on optional basis. For poorpatients, such services shall be fully covered by PhilHealth Insurance and/or governmentfinancial assistance on a no balance billing...

Sec. 9. Maternal Death Review

All Local Government Units (LGUs), national and local government hospitals, and other publichealth units shall conduct annual maternal death review in accordance with the guidelines setby the DOH.

Sec. 10. Family Planning Supplies as Essential Medicines

Products and supplies for modern family planning methods shall be part of the National DrugFormulary and the same shall be included in the regular purchase of essential medicines andsupplies of all national and local hospitals and other government health units.

Sec. 11. Procurement and Distribution of Family Planning Supplies

The DOH shall spearhead the efficient procurement, distribution to Local Government Units (LGUs) and usage-monitoring of family planning supplies for the whole country.

Sec. 13. Roles of Local Government in Family Planning Programs

The LGUs shall ensure that poor families receive preferential access to services, commodities and programs for family planning. The role of Population Officers at municipal, city and barangay levels in the family planning effort shall be strengthened. The Barangay Health Workers and Volunteers shall be capacitated to give priority to family planning work.

Sec. 14. Benefits for Serious and Life-Threatening Reproductive Health Conditions

All serious and life threatening reproductive health conditions such as HIV and AIDS, breast and reproductive tract cancers, obstetric complications, menopausal and post-menopausal related conditions shall be given the maximum benefits as provided by PhilHealth programs.

SEC. 15. Mobile Health Care Service

Each Congressional District shall be provided with at least one Mobile Health Care Service(MHCS) in the form of a van or other means of transportation appropriate to coastal ormountainous areas.

SEC. 16. Mandatory Age-Appropriate Reproductive Health and Sexuality Education

Age-appropriate Reproductive Health and Sexuality Education shall be taught by adequately trained teachers in formal and non-formal educational system starting from Grade Five up to Fourth Year High School using life-skills and other approaches.... The Department of Education (DepEd), the Commission on Higher Education (CHED), the Technical Education and Skills Development Authority (TESDA), the Department of Social Welfare and Development (DSWD), and the Department of Health (DOH) shall formulate the Reproductive Health and Sexuality Education curriculum. Such curriculum shall be common to both public and private schools, out of school youth...

SEC. 19. Capability Building of Barangay Health Workers

Barangay Health Workers and other community-based health workers shall undergo training on the promotion of reproductive health and shall receive at least 10% increase in honoraria, upon successful completion of training. The amount necessary for the increase in honoraria shall be charged against the Maintenance and Other Operating Expenses (MOOE) componentof the Conditional Cash Transfer (CCT) program of the DSWD. In the event the CCT is phased out, the funding sources shall be charged against the Gender and Development(GAD) budget or the development fund component of the Internal Revenue Allotment (IRA).

SEC. 24. Right to Reproductive Health Care Information

...The DOH and the Philippine Information Agency (PIA) shall initiate and sustain a heightened nationwide multi-media campaign to raise the level of public awareness of the protection and promotion of reproductive health and rights...

Twelve sections leading to still undetermined amount, several billions of pesos per year of new spending to control high population growth. Determining the size of family is now government responsibility, not parental responsibility. Then taking care of the kids -- their education, healthcare, nutrition, other needs -- is also implied to be largely government responsibility, not parental responsibility.

Since when have the values of parents been corrupted this way?

Additional discussions to follow in the coming days and weeks.
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Related articles here are Increasing population, no problem

Population policy: Big Govt or Big Church?

Higher taxes next year?

(Note: this is my article for thelobyist.biz today)

Taxes are indirect way of government saying to the people, “Give me your money, I can spend it better for you than you yourself.” So the higher the tax rates and the plentier the number of taxes, the higher is the level of distrust of government to the personal discretion of the people to do what they think is good for themselves.

The painting on the wall is becoming louder and louder with each passing day. The Philippine government needs more money to finance the following: (1) More money to chieve the Millennium Development Goals (MDGs), especially on MDG 2, basic education for all. (b) More money for the conditional cash transfer (CCT), especially paying the new loans from the WB and ADB for this program alone. (c) More money for universal healthcare (UHC). (d) More money for housing for the poor. (e) More money for AFP and PNP modernization. (f) More money to fight man-made warming and climate change. (g) More money to control high population growth via the proposed RH bill.

All sorts of justifications and alibi are flying left and right with one central message: the government wants more money to be confiscated from the citizens, so that the government can spend more for the citizens. Say that again?

Sometime last February this year, former NEDA Director General and former UPSE Dean Philip Medalla, presented a paper at the Bangko Sentral ng Pilipinas (BSP) on fiscal policy and mentioned that we may have to accept the reality of more taxes in the near future. I questioned him on that during the open forum, see Cut income tax movement, part 1.

And sometime in January or February this year, the government economic think tank, Philippine Institute for Development Studies (PIDS) also produced a paper that in order to attain the MDGs, there is a need to hike taxes. I criticized that PIDS paper in MDGs, taxes and PIDS.

Today, there is a news in BWorld, Government working on new tax measures. The report was referring to the DOF plan to work on the proposal by former DBM Secretary and UPSE faculty member, Benjamin Diokno, to raise taxes on 3 areas: (a) raise the excise tax on cigarettes and liquor; (b) raise VAT from 12% to 15% in exchange for a cut in income tax; and (c) raise the real property tax (RPT).

Personally, I favor the first two proposals of Dr. Diokno who was my former professor two times (undergrad and graduate) at the UPSE. Raising taxes on tobacco and alcohol products I think, is long overdue. Since the government thinks – which I disagree – that healthcare is not much personal responsibility but government responsibility, then people can over-drink, over-smoke, over-eat, over-fight, etc. and when their lungs, liver, heart and other internal organs are dilapidated, they can run to the government to demand that “health is a right.” So government should raise lots of money from tobacco and alcohol products to finance its massive healthcare spending.

On raising VAT and cutting income tax, my favorite formula is a rise in VAT from 12 to 15 percent, in exchange for an income tax rate, both corporate and personal, between zero to 10 percent flat. This need not be attained within the next five years or so. A transition period of declining income tax rate from an initial flat 18 percent (again, both corporate and personal income tax) down to flat 15 percent after say five years, down to flat 10 percent after another five to ten years, ultimately to zero, or the abolition of income tax.

I have discussed the merits and advantages of raising consumption-based taxes like VAT, excise tax and entertainment tax, in exchange for drastic cut and ultimate abolition of income tax, in the above article on Cut income tax movement, part 1.

The increase in RPT is something that I think is not wise. Government should not tax, or slap only low tax, on productive land and areas. It should instead tax idle and unproductive land. An area that is full of buildings, malls, offices and houses means thousands of jobs are created there. When people have jobs, they are not likely to run to government to ask for welfare and subsidy. Developed areas also tend to be self-reliant. Malls, commercial business districts (CBDs) and residential villages usually have their own street lighting, garbage collection, road construction and maintenance, private security, so that their demand from local government for those services is minimal if not zero.

Taxing idle lands and areas is a clear message to the owners of those lands that “Your area is not creating jobs, better pay up taxes or sell your land to other people who can make it productive and create more jobs.”

Government is coercion and is financed only by coercion, taxes and other mandatory fees and contributions. Let the coercion be kept to the minimum.

Rule of Law 9: Laws, Prohibitions and Corruption

(Note: this is my article for "People's Brigada News", submitted June 25, 2010)

Laws are enacted by the legislators of any country in order to restrain what they consider as bad and anti-social behavior. Laws by nature are prohibitions and restrictions.



Such prohibitions are either direct (do not do this) or indirect, aka mandatory (do that, or the State will penalize you if you don't do that). There are some laws that look "innocent", like mandatory 20% discount to senior citizens and persons with disabilities (PWDs). It looks very welfarist, and all drugstores, all restaurants, all moviehouses, all public transpo (plane, ship, bus, jeepney, etc.) are mini-criminals if they will not give the mandatory discount. Then the State can run after them.

Since all laws are prohibitions, then more laws = more prohibitions. It should be a formula to restrict individual freedom. I will be more than happy if everyone, no exception, will follow the prohibition against killing, against stealing, kidnapping, etc. But if new laws will tell us, "You cannot improve or expand your own house or your own office unless you get a 'Permit to Renovate' from the city hall", then another law that says, "You cannot re-occupy your own renovated house or office unless you get a 'Permit to Re-occupy' from the city hall", man that's something really restrictive.

I know a friend here in Metro Manila whose office has no electricity for at least one month because their "permit to renovate" was not yet signed by the city hall. I adviced her, "It only means one thing: those city hall building permit division bureaucrats want a bribe."

And we go to a discussion of a free and unfree society. In a free society, the dominant rule is: "Everything is allowed unless explicitly prohibited." And those expressly prohibited are just few, like no killing, no stealing, no kidnapping, no raping, etc. Everything else is allowed, like putting up your own vulcanizing shop with zero or just two signatures needed, from the city hall and from the national government, say the BIR.

In an unfree society though, the rule is a complete reversal : "Everything is prohibited unless explicitly allowed." So, putting up a business and creating job for the jobless is not allowed, unless one goes through a maze of bureaucracies. Putting up your own house, or renovating an old one, is not allowed, unless one gets certain permits from the local and/or national government agency.


The "rule of law” therefore, means the rule of prohibitions. Rule of law means no exception, no one is exempted from the law, and no one can grant exemption from the law. The law applies equally to unequal people.

Where there is full promulgation of the rule of law, the natural size of government will be small. Why? Because all laws and prohibitions that apply to ordinary people will also apply to all government officials, from the President or Prime Minister, to the lowest-ranking bureaucrat. This means that even the President and his/her military and police security aides should stop on red lights, should not counter-flow one-way streets, should not park on “No Parking” areas.

Since most politicians and bureaucrats do not like too many restrictions themselves, then they are obliged not to create new restrictions that will equally apply to them, to their friends and family. And they will be obliged to reverse or abrogate previous unnecessary restrictions. When there are few restrictions in society, then there will be few agencies and bureaucrats who will monitor and implement those restrictions and prohibitions. Overall result: small government.

Governments become big and expansive only because politicians and bureaucrats know that certain rules apply only to ordinary mortals but not to them, they know that they are exempted from such restrictions as they themselves granted the exceptions. This is wrong.
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On a related note, I wrote this last April 12, 2010:

Coercion and Corruption

Coercion and corruption are two aspects of the same body, whether government or private. They are not exactly the same but there is some causality between the two. Corruption is greatly facilitated when there is some coercion involved. And in many countries where there is weak promulgation of the rule of law, coercion is instituted and retained mainly to create the best opportunity for corruption.

Consider the coercion of outlawing certain drugs and other addictive chemicals. There are strict, if not deadly. penalties in producing and distributing prohibited drugs. But up to now, drug pushing and addiction remains a big issue in many countries, from poorer ones with weak promulgation of the rule of law like the Philippines, to richer countries with stronger implementation of the rule of law like the US. Corruption by certain law enforcers is the main explanation why the coercion against prohibited drugs is not and can not be fully implemented.

In many public discourses, even in electoral campaigns, the focus of discussion by almost all political parties, groups and individuals is on corruption. There is in fact general acceptance, if not consensus, that widespread corruption is happening in the country, and that the next administration should radically move to curtail and control it.

Coercion though, is never publicly discussed. The implication is that the various coercions instituted and enacted by the State and its various agencies, both national and local, are correct and acceptable. What government administrators and law enforcers need to do, in this philosophy, is simply implement those coercive laws and regulations without fear or favor.

This kind of thinking was hijacked by various vested interests in society who do not want to assume more personal responsibility about their own lives, their own households, their own communities. Thus, various lobbyists succeeded in having coercive laws that give them entitlement to certain subsidies and welfare. More subsidies, more personnel and bureaucrats to implement those subsidies, more taxes and fees to pay for the thick army of government personnel and another thick army of people expecting the subsidies.

Government is power, force and coercion. Government is never about voluntary exchange, it is all about coercive exchange. Government says, "I take your money (taxes and fees), I give you this policeman, this public works engineer, this taxation assessor, this school teacher... whether you like them or not, they are your public officials."

All the public noise about "bad governance" mainly refers to the government – from the Executive, Legislative, Judiciary, down to the local governments. It is not much with the private sector. If people find the richest man in the country as a labor exploiter, a shrewd businessman, or whatever complaint, the people have the option to boycott that man’s businesses like malls and banks. They can patronize the malls, supermarkets, banks, and other business interests of the competing businessmen, or simply not visit any mall at all. There is choice.

In government, choice is almost zero. Especially if you one is a fixed income earner. Thus, since government is an imposition, a coercion in body and spirit, then such coercion should not be big. Let there be big coercion and over-regulation of criminals, rapists, killers, kidnappers, thieves, land-grabbers, extortionists, etc. But there should be little or zero coercion in entrepreneurship and job creation.

Take the case of the Finance Department or Ministry of many countries. It is usually in an ugly position. It is a powerful agency but ordinary citizens hate it because their mandate is mainly to tax and penalize those who work, those who create jobs, those who produce various goods and services in society.

Is your job stealing, bank hold-ups or kidnapping children? The Finance Department will not deal with you.

Is your job to manufacture food, sell medicines and clothing, distribute housing and construction materials, operate a barber shop or an internet shop? The Finance Department will deal with you. If there are only two to four taxes to pay each year, at low rates, people would gladly comply and not hate that Department. But since there are one dozen to four dozen taxes and fees to pay, including those imposed by other agencies and local government units who also want a slice of the sweat and blood of the job creators and workers, then people begin to dislike, if not hate, the taxes and fees collectors. Thus, it is not surprising that the Finance Department is among the most corrupt agencies in the Executive branch.

Where there is more coercion, where there is more prohibition, there is more corruption.
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See also Rule of Law 8: Purpose and Supremacy of the Law, June 15, 2010