Career in Free Market Think Tanks

Yesterday, I was of four UP ETC alumni-speakers in the student organization's "Career Workshop". The purpose of the forum was to give the members who are undergrad students, additional ideas how alumni found jobs or change jobs after they graduated from  UP. I spoke about my current professional engagements.

ETC gave about eight guide questions  for the alumni talk or presentation. I answered them but first I gave some definition of terms with these two background info.

The free market think tanks are more prominent in the US, Canada, UK and other developed economies. A few exist in Asia but there are  some Asian countries where not a single market-oriented research institute  exists yet.

Then I answered the guide questions, like "What is your current career and occupation?" I included the logo of the organizations that I am currently engaged, both full- and part-time.

And the two books that I have written so far. A 3rd book should be published by SEANET within the year, and I must submit the manuscript to them very soon as I already exceeded the deadline.

The three other speakers yesterday, all are fellow ETC alumni, were (1) Ms. Clarissa Laysa, Head Technical Assistant to the Administrator of the Metropolitan Waterworks and Sewerage System (MWSS), a PH government corporation, (2) Justin Muyco of the Presidential Management Staff (PMS), Office of the President (OP), and (3) George, forgot his family name, and  he works at WB Philippine office. All are good speakers; Clarissa in particular speaks lively and wittily.

The other guide questions and my response to them:

3. How did you search this career?

* Maybe it’s the reverse: the career discovered me J

Consistent belief in individual freedom, personal and civil society Responsibility, free market competition and spontaneous non-state regulation.

* There are other free market-leaning institutes and groups in the PH, but either they are (a) informal, unregistered with SEC, or (b) formal but less consistent with free market, limited government advocacy.

* MGT remains a small, under-funded think tank. Consistent advocacy for less or minimal government intervention in various sectors, posted online, makes it relatively visible.

4. Challenges in current path, how to overcome them?

* Mainly funding, limited entrepreneurial capacity to mobilize more private donations.

* Approaching some local NGOs, industry groups, sympathetic individual for support, in cash and in kind.

,

* Zero overhead cost, no office rentals, electricity, water, internet, telephone, etc. Courtesy of sibling assistance, MGT holding office at her big  medium size company.

* Moving towards regional perspectives in analyzing national issues and advocacies: Trade and investments, energy and agriculture, territory and security, taxation and borrowings, and so on.

* Organize public events, conduct classroom lectures, book writing on other issues in the coming months.

5. Lessons learned as  ETCer (and UPSE) alumni?

* Extra-curricular activities, good human relations, professional networking, are as important as academic performance.

* Article, “Why do many intellectuals oppose capitalism?” by Robert Nozick.

* About 20 years from now, only about 15% of Econ graduates will be doing directly Econ research and teaching (academe, NEDA, PIDS, WB, ADB, private bank economists,…). Most will go to private business, become lawyers, IT and other professions.

* Econ concepts and tools are applied unconsciously..

Ex. MR = MC. Profit is optimized when the Marginal Revenue is equal to the Marginal Cost.

Employers who have 10 employees – why not 8 or 9 or 11? Because with only 9 or less employees, MR > MC while with 11 or more employees, MR < MC.

6. Benefits or difficulties to expect if we enter the institution you’re in?

* Compensation, career development -- if you are entrepreneurial, good pay and travels. Unlike most academic papers that are purported to produce “objective” studies, free market think tanks have clear advocacies and are often contradictory to policies of governments (local and national) and the foreign aid/multilateral institutions. Governments want endless expansion like amoeba, they can produce endless justifications and alibi for such endless expansion.

 * Difficulties – some funding as it is not advisable to accept or solicit government money. Keep institute independence at all times.

Maybe 40+ members and officers of UP ETC came. This is a dynamic student organization. The current Chairman of the University Student Council (USC) of UP Diliman, RJay Mercado, is from ETC; about 1 or 2 USC Councilors is/are also from ETC. To succeed them next school year, the newly-elected USC Vice-Chairman, AJ Montesa, along with USC Councilor Baba Foronda, SE Student Council (SESC) rep to the USC, etc. are all from ETC.

During the open forum, among the questions asked of the speakers was "Who was/were your mentor/s" in deciding your career path, related questions. I answered that when I was still a student Marxist (3 decades ago), UPSE faculty members Dr. Gon Jurado and Dr. Dick Ferrer were among those that I followed. Dr. Jurado for instance wrote a paper estimating the "rate of exploitation" in the Philippine manufacturing sector and sub-sectors in the late 70s or early 80s. This "rate of exploitation" of labor is a Marxist concept showing the quotient of surplus value (s) over variable capital (v) and constant capital (c).

But when I turned around and abandoned Marxism and socialism, among my mentors were other UPSE Professors like Dr. Raul Fabella and Dr. Noel de Dios. I learned and relearned from Sir Raul the beauty of David Ricardo's theory of comparative advantage and free trade, Hecksher-Ohlin theorem, etc. And once I asked Sir Noel if he is open to the idea of privatizing (not abolishing) all state universities including UP. And he said Yes, just give UP a one-time endowment of xx billion pesos plus full control of its land property rights, and it will allow UP to continue giving high quality education without raising school fees too high.

Thanks again ETC officers, particularly Wenny Canoy, the VP for Alumni Liaison, for that opportunity to share my ideas and experience with the  resident members of ETC.

See the 10-slides presentation in slideshare.
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See also: 
EFN Asia 44: Day 2 of Conference 2014, November 10, 2014
ALF 3: Photos with Friends, Kathmandu Conference, January 20, 2015
The 1st PRPX, May 2007 in Hawaii, Photos, May 04, 2015

Pol. Ideology 53: Zero Government, Zero Taxes, Then What?

Zero government, zero taxes, then what?

This is a question posed by a physician friend, DiVa, in one facebook group, the “University of the Philippines Libertarians”. There was no direct reply from the person being asked.  I responded with the following.

Hi Divs, I'm a minarchist and never a fan of anarchy or zero government. Your questions are straightforward -- zero govt, zero tax, now what will you do if you are the person that the community looks up to? 

Coercion and taxation is inevitable. You abolish any form of government today, you create one tomorrow. Why?

I support the citizens' right to bear and own guns, for their own protection, for a hobby,  other reasons. Getting a gun is ok, allowed, with only one condition – a person must belongs to a gun club. There may be many gun clubs in the area, so there is choice where and whom to join. The purpose of requiring people to join a gun club is to instill discipline and accountability.

A shoots B because he got drunk, or B's videoke is too loud too often, or B has been spreading rumor about A’s wife and so on. Then A flees. Who will haunt him? Not a government police or army, but his gun club mates, the people who know him well, know where he lives, works, takes vacation, know his other friends, etc. The prospect of his own gun cub mates haunting him if he does something stupid will instill discipline among gun owners. 

Now a gun club, a voluntary organization, must have some by-laws, system of reward and punishment within, like kicking out members who do not pay their annual dues, or who spread rumors and cause disunity among members, etc. So there are (a) elected officials with term limits, (b) support staff doing full time work for big gun clubs, call them appointed bureaucrats as club officers are busy with their work or business, and (c) mandatory, forcible collection of dues and other fees. Non-payment of which will merit some penalties like being kicked out of the club.

See the pattern? The minimum characteristics of a government, points (a) to (c) are already there. A gun club is a “micro government”.

Now suppose person A from gun club 1 (A1) shoots and seriously wounds or kills person X from gun club 2 (X2). From the investigations, club 1 says A1 is correct in his action as a form of “self defense” while club 2 says X2 is innocent as he did not provoke a fight and A1 should be prosecuted. Gun clubs 1 and 2 are ready to shoot each other to defend and protect A1 and X2 respectively. Wild west type of shooting? No way.

Hundreds of gun clubs will put up a federation of clubs, say average of 100 clubs per federaton, and clubs 1 and 2 belong to Federation Y. Officers of Y will be the judges or referees in this dispute between 2 gun clubs and settle the dispute peacefully so that they don’t shoot each other in endless vengeance of “ubusan ng lahi”.

Now each federation again will have (a) elected officials with term limits from among the officials of different gun clubs, (b) appointed staff or bureaucrats who will provide full time admin and secretariat work for the elected officers , and (c) require annual dues on top of club dues that must be paid by force and coercion to sustain (b) and logistical support and even modest honorarium for (a) as they go around each club to sustain camaraderie and harmony.

Again, the three minimum components of government, points (a) to (c) are present, and we might call it “small size government”, a federation of micro-governments.

Pork Barrel 7: Presentation at Adamson University

This afternoon, I spoke at Adamson University on a big college conference, held at the university's theater, probably about 200-300 students in the audience. I am thankful to Ms. Pauline Brillantes, a young faculty member at the Department of Social Sciences, for inviting me to their big college event.

Since the audience are university students, I could introduce some basic conceptual framework and they would be able to follow. My presentation was 21 slides long, showing 16 of them here. The full presentation is at slideshare, here.

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See also:

Pork Barrel 4: Ten Q&A on the Pork Scandal, August 18, 2013

Pork Barrel 5: Abolish Pork Fund, or Shrink Government?, August 21, 2013 

Fat Free Econ 46: On Pork Barrel Aboition, August 25, 2013 

Pork Barrel 6: Spontaneity and Friedrich Hayek, August 29, 2013

Pol. Ideology 46: Misunderstanding Adam Smith

Last Monday, July 08, I posted Pol. Ideology 45: Left Intellectualism Means Abandonment of Socialism in my facebook wall. It attracted another round of long discourse. Thanks to fellow UP ETCer (younger batch) Mel, Mike, Shakaru, for that long exchange from July 08-10, 2013.

While the debate still focuses on whether we should have a BIG or small/limited government, one source of confusion is a misunderstanding of some quotes from  Adam Smith’s book, The Wealth of Nations.

This is 12 pages long, 6,100+ words, so grab a can of your favorite drinks and enjoy.

Mel Lorenzo Accad Interesting sir! I'm reading it

 cc: Sir Gerry, May I know your comment on this? 

Sir Nonoy, how sure are you that you have defined socialism accurately? as pointed out by sir Gerry in one of my previous posts. What are your sources po para naman maiwasan natin ang strawman arguments. 

Nonoy Oplas It's there. "Things should be socialized always -- education, healthcare, housing, pension, transpo, agri, etc. Including your own pockets, savings, they should be socialized. Diversity and inequality, spontaneity and innovation, should be restricted if not controlled whenever possible. Things should be harmonized, standardized, uniformized, monotonized, in order to prevent inequality, massive and scary inequality."

Mel Lorenzo Accad Sir Nonoy, here are my comments (I also posted them in the main blog):

"Let me be clear with my assumptions:
1. Every political rule is a "dictatorship" in one way or another.
-Example, democracy is dictatorship of the majority over the minority, capitalism is dictatorship of those who are economically-abled over those who are not economically-abled, socialism is the dictatorship of the "people" over all (I really hope that I defined them very well so as to avoid strawman arguments. I hate strawman arguments, BTW)

2. So if we say that socialism is machine that creates dictatorship, what then can we call capitalism?

3. I believe that capitalism and socialism have advantages and disadvantages (we should only be aware of their SIDE EFFECTS and how do we minimize them).

4. Capitalism has created so wide inequality to the extent that everyone has differing in their competitiveness, hence there's a long run possibility of rise of monopolies (even those that are not natural monopoly due to technological advantages).

5. Final question, what then are these side effects of every political rules that we should be aware of? How should we minimize them? WHAT IS OUR COMMON GOAL AT THE END OF THE DAY?

6. I don't have the monopoly of truth. There are grave consequences of assuming that we have monopoly of truth.

(COOL HEADS, WARM HEARTS)"

Nonoy Oplas Thanks Mel. First of all, I think you should start blogging. Just copy-paste those that you already posted in fb, they are long blog articles already.

To your points:
1. Yes, All forms of pol rule is dictatorship and coercion. The free market philosophy, the minarchy libertarin especially does not rule out lhaving coercion in our lives, hence the advocacy for "limited government" vs the "zero government" position of libertarian anarchy.

2. Free market capitalism is based on voluntary exchange. I sell you tomatoes at this price. If you like them, you pay and go home. If you don't like them, you just walk away and find another seller. Then I go to another buyer and offer my tomatoes. Zero coercion in a voluntary exchange set up.

3. Yes they do. It depends on what you wish to achieve. If you want to respect diversity and spontaneity, free market capitalism is the way because under capitalism, diversity is not allowed. YOu cannot be very efficient then be very rich, the state will confiscate your extra income, your extra cash, your extra car, extra land.

4. Free people are not equal, and equal people are not free. There is no limit to what the super-efficient, super-hard working, super-ambitious people can achieve. Meanwhile, some people have zero ambition, just have a party as often as possible, get subsidies from siblings or from the state. As time passes by, the inequality between these two extremes widen. Some in the middle class join the super rich later. Inequality is necessary if you want a free society.

5. Common goal at the end of the day is -- individual liberty. Individual responsibility. One's stupidity and irresponsibility should not be blamed to anyone else. One's efficiency and fruits of hard work should not be confiscated to be given to everyone else.

6. The only absolute truth in this life are change, death and government/taxes.

Pol. Ideology 32: On Shrinking Government

Posting a feature article in BusinessWorld nearly six years ago, I just found in one of my computer folders. Part of this four-pages long article is an interview of me by the author. The quotes below, I just added them.  Enjoy reading.

Minimal government intervention

July 07, 2006 | Manila, Philippines
BY ERNESTO B. CALUCAG, Senior Researcher
http://www.bworldonline.com/Research/populareconomics.php?id=0011

It has been widely documented in literatures that the Philippines’ economic development continues to be hampered by its weak government, in any form it takes-entrenched government corruption, bloated bureaucracy, ballooning budget deficit, inconsistent regulations, extensive government ownership of business, etc. Yet there seems to be a void in calling out for a reduced or limited government clout in the country as a means towards achieving a better economy for the Filipinos.

"Small government and small taxes is still a losing proposition at the moment, advocated by only a few souls which are politically weak compared to the voices of statists who endlessly call for more subsidies, more government positions and offices, more foreign aid," said economist Bienvenido "Nonoy" Oplas, Jr., head of the group called Minimal Government Movement (MGM) in the Philippines, advancing the concepts of small and limited government, small and few taxes, free market and free trade, and more individual freedom and responsibility.

Not to be compared with extremes such as total anarchy and communism, proponents of minimalist government argue that government, while a necessary institution for maintaining social order, should be focused on few, limited functions, "such as the enforcement of property rights and contracts among citizens, foreign affairs and national defense, currency and monetary regulation, among others."

CSOs and State 15: Old Debate on Competition and Markets

Many civil society organizations (CSOs) leaders remain unfriendly to the idea of moving society from more government to less government via more CSOs and voluntary groups. Below is one of the debates I've had with some friends more than eight years ago. I think a number of arguments remain relevant, hence posting them here. A bit long, get your popcorn. :-) 

Exchanges on Competition and the Market

June-July 2004

Hey Vince, folks, If GMA will do or support this -- fewer bureaucrats and higher pay for those who will be retained -- I say halleluiah for her! Enough of "more taxes" moves. I say "less tax rates" and there will be larger tax base.

Expenditures cut through merger, corporatization, if not outright abolition, of some govt. agencies, will inspire taxpayers that the money they surrender to govt. (nay, govt. automatically expropriates) is wasted less and less. Will the group possibly support these developments, or it will keep its focus on tax admin reforms?

-- Nonoy

Noy, I would dare say that the group effort will stay focused on tax administration reform. But I do agree with you, enough of the "more taxes" approach, it merely masks the problems in tax administration.

-- Vince

P.S. Why am I not surprised at your response to this article?

ha ha ha, right Vince -- you know my advocacies are very clear: small government, small bureaucracy, small taxes; more and freer markets and trade. so my reaction to news reports like these are highly predictable.

I have a new org. Vince, folks -- Minimal Government. Among our major advocacies are (a) flat 10% individual income tax (vs. the current 6-tiers, from 10% to 32%), and (b) a lower, 16% of net corporate income (vs. the current 32%). These smaller taxes will be compensated by fewer line departments, bureaus, and state universities and colleges, smaller bureaucracy.

So, somewhere we shall complement each other's advocacies. The group on tax admin reforms, us and other orgs. and individuals on tax rates and policy reforms. Pero mahirap magbago ng utak pre, when people's minds are "statist" -- that the state should intervene, regulate, subsidize, etc. in almost all aspects of our lives.

-- Nonoy

Folks: Today, I speak purely as a taxpayer and not as a reform BIR advocate.

I am tired of new taxes (or at least proposals for new taxes). I think the government should not be able to impose new taxes unless it can show: 1) that it can improve collection of existing taxes; 2) that it can plug leakages on the collection side; 3) that it can plug leakages on the expenditure side; and 4) that the first three are not enough to narrow the budget gap to manageable levels. Otherwise, any time there is a revenue shortfall, the government will resort to new taxes. If the figures coming out of the office of the Ombudsman or the World Bank are accurate, anywhere from P240-P400 billion is lost EVERY YEAR through "leakages" in the BIR. As far as I know, these leakages are still rampant and SOP. I am aware of several firms that are at the moment being extorted for money by BIR examiners. Despite vigorous, and largely successful efforts, by Parayno to clamp down on tax loopholes, extortion by BIR officials seems to go on unabated. Another P20 billion or so is lost in the procurement process. One can only guess how much is lost through inefficient government service or substandard delivery of goods and services.

Imposition of new taxes increases the burden on the taxpayer, while relieving pressure on the corrupt BIR official and pork barrel-gorging politician. New taxes are a means to subsidize the corrupt lifestyles of the tax collectors and politicians.

And that's plain and simple, WRONG!

-- Vince

Welfarism 15: Abolishing Pork Barrel

The main justification -- or alibi and excuse -- for the pork barrel by the President, legislators and even local government executives, is that these elected officials can directly identify projects that provide welfare to their people and political supporters.

In September 2004, Minimal Government Movement (we wanted to start a political free market movement, not just a free market think tank then) issued this statement ( 5 1/2 pages long) and distributed to our friends and network. This is a result of internal discussions and revisions among MG supporters then via the MG yahoogroups. Lots of ideas then that remain valid until today, and the next elections are just 15 months away.
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Why Legislators' and the President’s Pork Barrel Should be Abolished

 The Role of Government.

The job of government is to improve the citizens' and taxpayers' well being, not the politicians and bureaucrats' well-being. Government should help its citizens with lower taxes and efficient and corruption-free services. Burdening its citizens with inefficient and corruption-tainted services should not be accepted nor tolerated.

Thus, government can help the citizens in two important ways: First, by optimizing the services that it delivers to the people, by making the citizens satisfied and not suspicious, happy and not hesitant and revolting, in paying their taxes. Second, by cutting the taxes that it collects from the citizens in exchange for reduction of corruption-tainted services that it delivers.

When there is widespread suspicion by citizens of the quality of services that they receive in return for the various taxes that is collected from them, government leaders, assuming they have the decency and intelligence to recognize this, should go for the second option.

The Role of Legislators.

Legislators are called as such because their main task is to legislate and  formulate laws. Laws that are designed to improve the quality of life – physical, mental, moral, cultural – of our people, without greatly restricting individual freedom.  It is not their duty to execute and implement local projects because that is the task of the Executive branch, both the national government agencies and the local government units (LGUs).

Their task is to discuss and debate how to cut expenditures when these are no longer supported by projected revenues for the year and the coming years. When such expenditures will encourage dole-out and subsidy-dependence and hence, will further bloat future expenditures,  maintenance of which can only mean more and higher taxes from the citizens whom they are supposed to serve. 

Pilipinas Forum 24: Minimal Government Manifesto

I posted the Manifesto in PF yahoogroups in late March 2004, it attracted several comments until mid-April 2004 from friends and supporters. Here are the major comments. As usual with other PF series, get your fave drinks and snacks, this is 14 pages long.

The Minimal Government Manifesto

Minimal Government = Minimal Bureaucracy = Minimal Taxes.

Smaller government appropriation from our hard-earned income = Greater individual freedom where to spend or save their hard-earned money.

Smaller government restrictions in movement of goods, services and people = Greater individual freedom where they will work, invest, trade, travel, rest and retire.
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In the beginning of human civilization, at primitive hunting societies, men learned to trade with each other. The animal hunters traded their excess animal catch with fish hunters for the latter's excess fish catch. Or traded with craftsmen for the latter's carpentry, musical instruments and other artistic services. Or traded with early farmers who practiced the early technologies of agriculture. Thus, men invented the MARKET for the exchange of goods and services, and it went well. There was no government then made up by full-time administrators and enforcers of mutually-agreed rules.

Later as population and economic activities expanded, market failures arose - monopolies, oligopolies, externalities associated with production like pollution, dealing with criminals and other deviants that disrupt social order and threaten property rights, dealing with external aggressors, etc. So men invented GOVERNMENT. And government invented TAXES and various fees. Initially it went well.

Later, governments introduced government failures and inefficiencies - bureaucratic red tapes, corruption, excessive tax rates, excessive trade barriers, state-sponsored monopolies, etc. So men invented non-profit organizations, more commonly referred to as non-government organizations (NGOs) and civil society organizations (CSOs). Initially it went well in attempting to reform government and state failures.

Later, it became evident that "reforming government" has become an oxymoron. Bureaucracies, once created, seldom decline, let alone die. In fact, governments later invented habitual BUDGET DEFICIT Many politicians run for government positions not to reform government but to maintain, if not worsen, those state failures.

Some groups went extreme and invented communist parties and socialist parties, to make an already super-imposing state become a "Big Brother" interventionist socialist state, supposedly to "centrally plan" the basic needs of its people. Later, many socialist states could not even plan and produce how many tons of bread and rice, how many million liters of gasoline, how many pairs of jeans and shoes, will be needed by their people. Scarcity led to political instability which later led to collapse of many socialist governments, from the Soviet Union to Eastern Europe. The remaining socialist states (China, Vietnam, Cambodia, etc.) survive because they have allowed the market system to exist in the economic sphere while maintaining political monopoly.

Why reform government when markets can do the delivery of some public goods and services more efficiently?

Why reform government when some government functions can be privatized?

Why keep high and complicated taxes when many citizens are privately paying for services that should have been done by government, but failed to deliver because of government failures?

Why let government bureaucrats and politicians decide how much they should appropriate from our hard-earned income and wages, and where they should spend our hard-earned money, including how much to pay for themselves, their travels and their parties?

Pilipinas Forum 13: On Zero or Minimal Government

These are the exchanges in pilipinasforum yahoogroups in the middle of October 2001 or 10 years ago. Enjoy the 11-pages long exchanges and debates. The pictures and cartoons, I just added them here. Cheers.
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May I ask this question: "What the origin of zero government?"

"State of nature", according to social contract theoreticians Hobbes, Locke and Rousseau.

"Primitive communal" mode of production, according to Karl Marx.

"Invisible hand/perfectly competitive market", according to classical economists like Adam Smith.

"Invisible nature", according to Nonoy Oplas. he he he.

-- Nonoy Oplas

Noy, am interested on zero government. Sat down a few weeks ago with some friends on a single issue: getting rid of government and replacing it with the "market" as a mechanism to provide the social services which many governments, particularly in developing countries, have been remiss with.

One fellow argued eloquently how everything can be privatized: armed forces and defense, education, health, foreign affairs, infrastructure . . .

He argued that in the case of the Philippines, he does not agree with the passage of the 1987 constitution but he it is imposed upon him anyway. He queries if one did not vote, his dissent is ignored. and the budget deficit of the government is imposed upon him.

Inflation, which he describes as the worst kind of taxation is the fault of government. in the private sector, if you make wrong business decisions and the business collapse, you pay for it. but the government despite all its horrible acts does not pay for its mistakes.

I must admit i agree with him. but i argued that because of the political economy we have, the "market" is the first thing we have to establish, while contending with the powerful political forces and interests. unless we recognize the dynamics of forces present, we will get trampled by them. I added that his idea will only work if:

1. there is a limited universe of participants to the market bounded by some common parameters, e.g. all bettors in a cockpit locked inside

2. the market is more or less homogenous, e.g. again all of them sabungeros (cockfight gamblers).

3. penalties are stiff, e.g. you don't want to not pay your bet in the cockpit arena

then we will all have to be sabungeros.

who took the cookie from the cookie jar,

-- Harlequin

I have just survived two days in the pig pen we call the House of Representatives and listened to Congressmen heckle us while they look here, there in the budget for where they can find their swill (CDF). Talk about black holes and nothingness. Looking at them strut and preem reminds of the need for a big bang to shake these pools of primordial soup into some higher life form. They shall pay for making me miss Ally Mcbeal and ER and Survivor 3! Fortunately, I am home in time for Star Trek Voyager on the Hallmark Channel.

I find it amusing that these sanctimonious cretins (are they eligible to be called life forms?) talk about issues like the world depression and the deficit and all they want to know is where is their money??

What is the rationale for these posts? You want to find the origin of zero - of nothingness? Look no farther than there in the House of Representatives. Unfortunately, these black holes are supposed to be the representation of the sovereign will and wisdom(????) of the people.

-- Ricky Sunico

Spontaneous Market 6: Removing Pork Barrel

More than three years ago, we were discussing in MG yahoogroups the crafting of a statement about removing pork barrel. Here are our raw exchanges then. This is 8 pages long.
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Removing Pork Barrel

September 2004

Guys, see the draft that I made below:

Why Legislators' Pork Barrel Should be Cut, Eliminated over the Long-Term

The job of governments is to improve their citizens' and taxpayers' well-being, not the politicians and bureaucrats' well-being. If governments can help the citizens with efficient delivery of social and economic services through efficient taxation, so be it. If governments can help the citizens with lower taxes because of inefficient and corruption-tainted services, so be it.

Philippine legislators and politicians, including presidents, past and present, are largely to blame for those perennial budget deficits and ballooning of the public debt. Even when taxpayers were unwilling to part with their hard-earned money because of perceived malfeasance in governance, politicians' spending spree continued. Even when tax collectors were diverting many collections into their pockets and padrinos, politicians' unsustainable subsidy policies continued. Even when interest rates were going up because of the expanding public debt, politicians' penchant for endless borrowing continued.

Thus, legislators should not call the proposed cuts in their pork barrel as "sacrifice". It simply is the right thing to do. Legislators are called as such because their main task is to legislate and craft laws, not to execute and implement local projects. Their task is to talk and debate how to cut expenditures when these are no longer supported by projected revenues for the year, not to further bloat expenditures with their pork barrel and justify irresponsible borrowing spree by the President and the DOF.

The real "sacrifice" that legislators can proudly boast to the citizens is when they will enact legislations giving relief to taxpayers, like cutting income tax so salaried and fixed income earners will have more take-home pay to bring to their families. The real "sacrifice" that legislators can give to taxpayers is when they slash agencies and programs that abet inefficiency and corruption in government, not expand budget for corruption-tainted
agencies and programs.

Those moves are considered "sacrifices" because many of their peers in the Legislative branch will frown upon them when they would seriously push for those reforms. Sacrifices because the President and his/her Cabinet officials will be deprived of further extending political "pogi points" at the expense of taxpayers. Sacrifices because some citizens who prefer to beg for political favors and rely on dole-outs by politicians and state bureaucrats than working hard will begin to oppose them.

In addition, if it is true that legislators can identify the needs of their constituencies better than those agencies of the Executive branch, then we better shrink those agencies by demoting them from line departments to bureau-level offices, just implementing the wishes of the legislators and the President. Us taxpayers can save money with the abolition of many
Secretaries, Undersecretaries, Assistant Secretaries, planning and related departments of those agencies.

- Nonoy


"SCRAP THE PROK BARREL UNCONDITIONALLY"

Legislators are supposed to formulate laws; laws that are designed to improve the quality of life -- physical, mental, moral, cultural -- of our people.

For so long, this has not been the case. A vast majority of our national legislators (and in many respects even local ones) aspire for office because of the political and financial benefits that are available as booty when one is a member of the house of congress or the senate.

The single most indecent reality of philippine politics is the fact that candidates spend millions of pesos in campaigning for a seat that pays officially less than a million pesos a year in salaries.

That by itself is the single betraying fact of the hunting-gathering instincts of legislators. And the embodiment of that booty mentality is the so-called "pork barrel".

To heap injury upon insult upon injury, the proposal to cut and/or abolish the countrywide development fund (cdf) is being labelled as a "sacrifice".

We believe that it is about time our country's political leaders show some semblance of decency by scrapping the "pork barrel" altogether, and across the board. "pork barrel", intelligence funds, and discretionary funds are all the same -- they have no accountability. And when a government has no
accountability, it has no business collecting taxes, much more increasing them.

Scrap the "pork barrel"!
No to increase in tax rates!
Yes to stopping corruption in the revenue agencies (bir and boc)!
Yes to minimal government!

- Citizen Kori


Dear Sir Kori, Noy,

Although I don't really like what Sen. Pimentel and Sen. Joker Arroyo stand for these days, I think their points are valid when they dissented the scrapping of the pork because then the President will have the sole discretion and therefore the sole privelege to corrupt and neknok certain percentages of the funds. It will be like transferring the loot from Congress to OP. In a sense, you're making the OP responsible for a bigger portion of the expenditure pie.

There is reason to doubt the accountability and credibility of Pres. Arroyo to manage the funds. It is going to be a frenzy of finger-pointing and mudslinging unless we qualify our position. Make the Executive Department accountable by alligning the scrapped pork solely for interest payments and retirement of the principal.

Dapat hindi mapunta sa infra or social ekek kasi siguradong neneknokin. I mean we know exactly how much our debts are (unless may porsyentohan din sa bayaran ng utang?). We can easily predict when exactly we'll be able to pay off our debts because these are exact amounts.

When were we're able to pay off our debts and the economy stabilizes, let's begin the dismantling of unnecessary government agencies. Now the supposed-to-be pork barrel should be used to fund early retirement claims. Dapat hindi na utangin ang early retirement kasi babalik na naman tayo sa pagbabayad ng utang.

If the President wants to increase her social and development expenditure, kunin nya sa PAGCOR or similar entities.

Eventually, the size of the expenditure pie should shrink. No pork barrel, no utang, ergo, no need for too much tax.

I think, and I've been meaning to post this, the minimal government position should be tempered by the sensitivity for macro-economic stability. The UP Professors are speaking with wisdom when they said that phasing is very important if we're serious about averting a fiscal crisis and moving the economy forward. For instance, we can't possibly retire government employees now because early retirement claims will further widen the deficit; we can't fire them either and scare away investments with social unrest.

Let's pepper the minimal government position with the appropriate number crunching.

- Ellen


Hi Noy,

I agree with the principle you laid down about the pork barrel-- that the legislator's primary purpose is to establish the laws/policies for their constituents. It would be nice if someone can trace the history of the largesse. Has it always been around, or did it evolve due to some failure by the executive branch at one time or another.

Strictly speaking, legislators only "earn" from the pork barrel if contractors who bag the project will give them a %. If procurement in this regard is made more transparent and less discretionary, maybe it won't be a source of leakage.

Remember also that congressmen have to hire political officers and not just technical people. Why? To handle all those requests for assistance in funerals, hospitalizations and other "calamities" from their constituents. Joker Arroyo can afford not to accommodate those requests when he was still congressman of Makati because the local government is affluent. But what about the poorer municipalities in regions, where the congressman is the only source of grasya. It is patronage pure and simple, but it is the reality there. The congressman then becomes the last resort for situations where SSS, Philhealth, DSWD and even the church and civil society fail. Maybe that is part of the reason why they are hesitant to part with pork. Of course, that is a big MAYBE. But think, only the congressman has the incentive to really help because he can expect loyalty in the next election.

- Chichi B.


Hi chi,

Chicken and egg story yang "pork barrel to finance personal requests by constituents to buy their loyalty to get reelected to get more pork barrel to finance requests by constituents..."

A break from this cycle is impossible in the short-term, even in the medium-term.
long-term engagement talaga. kaya nga sa MG philosophy, highlighted ang

greater individual freedom,
greater individual responsibility,
lesser individual dependence from the state and the politicians,
lesser power by the state and politicians to raid our pockets.

As i discussed in my powerpoint presentation, The range is between the "collective/state" on the left, and the "individual" on the right. The extreme left is socialism (practically everything owned by the collective through the state). The extreme right is ultra-libertarianism, zero government (practically the state is unnecessary). The MG advocacies are in-between the current govt's programs and interventions, and the zero govt. philosophy.

the pork barrel politics is pulling the public, the citizens, to embrace the statist, forced collectivism, philosophy. citizens to depend on the politicians in exchange for the politicians' right to raid the citizens' pockets and political beliefs.

so i think, the call remains valid: cut pork barrel in the short-term, abolish it in the long-term.

- Nonoy


Hi Nonoy,
For the administration/executive, legislative, and judicial branches of government, I suggest that the group create a list of two types of areas of concern: (A) areas that the particular branch should be primarily responsible for; and (B) areas that it should stay out of. For example, the judiciary should render constitutional and legal judgments but should do its best to stay out of technical/engineering/accounting/financial/commercial issues that are best handled by the executive branch and also out of certain primarily political topics that have no juridical or legislative significance.

I know that this will be quite difficult and take a long-time to finish but if someone can start working on a basic framework or table for the various topics listed in the MinGovt position paper, the rest of us can just download it, work on it at his/her convenience, and then upload it to a volunteer compiler. This work in progress can then be posted in our website for others to look over and give comments on. Once the framework is done, we can designate sub-areas that we all fully agree on (e.g., that legislators should stick to law-making 90% of the time) versus more controversial sub-areas (e.g., that legislators should minimize or avoid showboat-style exposes “in aid of legislation” which don’t really accomplish much except put their names in the newspapers).

I guess such a checklist should look like the following, more or less:

BRANCH        REGULAR FUNCTION/S                             UNDESIRED ACTIVITIES

Executive:     Administer and execute policies                     Creating unbudgeted projects or institutions

Negotiate international treaties                       Discontinuing successful projects of   predecessor/s

Collect and disburse funds                             Executing projects willy-nilly and without transparency

Legislative:      Debate proposed policies                              Prioritizing and assigning

                                                                                                expenditures in/of LGUs

Create and amend laws                                  Initiating investigations without resolving them

Judiciary        Determine constitutionality of laws                 Issuance of unnecessary TROs

                        Render legal judgments                                  Intrusion into technical or political

                                                                                                decision-making

The purpose of this exercise is to develop an easy-to-read checklist for each of the three major branches of government so everyone can see whether it is fulfilling its responsibilities or straying away from its main mission (as defined by the constitution and by agreement of the majority). Later on, we can add more specific branches of government such as the police forces, the armed forces, the local government units, the presidency, the different government bureaus, the constitutional bodies, etc. With a fully evolved checklist (it could take weeks to over a year to finish), it will become easier to delineate whether or not a particular agency or branch of government is doing its job or usurping another agency’s function. With a job-function checklist in hand, we can point to individual legislators or courts or agencies that are wasting people’s time and money by not doing their job and also doing some other agency’s job (and messing it up), or preventing another branch of government from doing its job.

The country’s political scientists and lawyers would be the major participants and contributors (if they are interested) but I also see a place for specialists in operations research, knowledge engineering, and other professionals to provide their expertise.

Can some others please help flesh out the list and trim/edit it nicely? I’m sure there are a lot more that can be added to the initial framework.

- Selwyn A.


Pareng Noy, Just want to share what i know on this issue. on your question on the history of the pork barrel, i believe it has been in existence for quite a while now, although the amount of the allotment for each legislators have ballooned by so many folds (largely by their own effort and to their sole benefits) and the ways and means by which it can be disbursed have been short-cutted.

pork barrel came from the counrty wide development funds. during pre martial law, each congressman has different percentages of allotment based on the economic status of their district and province. these funds were meant for infrastructure as well as other social projects given to legislators on the assumption that they have a better understanding of their constituents' and districts' needs.

they are, however, obliged to file a bill for a particular project with the corresponding amount to fund the bill. this will be subjected to the natural process in congress wherein fellow legislators will debate on the merit of the bill and the funds requested for it's purposes until seconded and referred to the proper committee. kung local di na to aakyat sa senate.

at present, this is another reason why alot laws passed are useless or do not have enabling laws due to lack the funds for their enactment. Ngayon kasi wala ng bills-bills pa. identify mo na lang ng ghost project bigyan ng pondo 50% and kick back.

- Raymond A.


Noy, Mayroon lang akong kaunting additions on abolishing pork barrel. According to some US papers, pork barrel is coming from the national budget and therefore is to fund national priorities. since we already have the IRA for the local governments, there is no longer any need for the pork barrel. on this note, cutting the IRA must not be across the board and should be prorated by type of municipality.

since most of our apprehension on pork barrel is that it is a major source of corruption, the best way to disprove it, is to have each representative list the details of his/her pork barrel representative and how the money is spent. similarly, other funds that are "discretionary" in nature can be allowed as long as there is regular reporting of how it was used.

abolishing the pork and their similar natured funds will break a lot of the chains that have enslaved philippine society for decades. studied thoroughly and operated carefully, the cutting of these funds will release ultimately efficiency.

- Alvin


Dear Nonoy,

You may want to rephrase the last sentence of the first paragraph under the "Role of Government" section. The point should be made that the government should help its citizens with lower taxes and efficient and corruption-free services. Helping its citizens with inefficient and corruption-tainted services should not be accepted nor tolerated.

I suggest to rephrase the first paragraph under the "Abolishing the Pork Barrel" section like the following:

Thus, Legislators should focus their time and energy on finding ways to prevent the slippage of the economy to a possible debt-default crisis. This may require cutting the Executive Branch's excess fat and expeditures, raising power rates to control the financial bleeding of NAPOCOR, scrapping the President's and legislators' pork barrel, and reducing the LGU's Internal Revenue Allotment(IRA) for at least two years.

- Prof. Patalinghug


Kori, Ellen,

How about these compromised formula:

(1) Phase out pork barrel in 3 years time, zero on the 4th year, instead of outright abolition now.
Say 75% in 2005, 50% in 2006, 25% in 2007, zero in 2008 onwards. So, legislators running for the 2007 elections would know that they'll have zero pork barrel starting 2008 should they win.

(2)Phase out also the President's pork barrel at the same rate as phasing out of legislators' pork barrel; ie, 75%-50%-25%-zero in 4 years time. The president to take her social fund and "neknok" funds from Pagcor.

(3) Use the scrapped pork funds of legislators and the President to retire some local debts.
For every P10 billion of domestic debt retired at 8.5% interest rates (upper range of the 91-day T-bills), that's P850 million savings from interest payment per year, a big amount already.

(4) On shrinking government, a 1 paragraph statement in this pork-barrel position paper would go something like this:

"We need to make the government bureaucracy do more for less costs. Currently, about 70% of total budget net of IRA and debt service payment goes to salaries/personnel services alone. Early retirement for redundant personnel should be started soon, starting from agencies with functions that can better be left to the markets. It will be painful for some affected personnel, but maintaining said bureaucracy is even more painful for the taxpayers because of wastes and perceived uselessness of those agencies and/or personnel."

(5) On privatization of govt. corporations, the process takes about 4-6 years/corporation to be completed.
the process should be started this year or next year. So that by 2011, we'll be rid of many of those losing corporations, in particular: Napocor, NFA, PNOC, LRTA, NEA, NHMFC.

- Nonoy


(1) Phase out pork barrel in 3 years time, zero on the 4th year, instead of outright abolition now.

Say 75% in 2005, 50% in 2006, 25% in 2007, zero in 2008 onwards.

So, legislators running for the 2007 elections would know that they'll have zero pork barrel starting 2008 should they win.

Are government programs ever phased out? It seems to me that if you leave anything left then the politicians will just increase funding when the pressure is off.

Two examples from my own experience in the US -- taxes and farm subsidies.

1) In Massachusetts, the raised the state income tax from 5% to 5.95% during a "fiscal crisis". The outrage over the increase was extensive so they promised to make it "temporary": when the crisis passed and budget deficits disappeared, the tax would be lowered. Lo and behold, the crisis passed, surpluses returned, and the money was spent. The tax was not lowered. Eventually, through an initiative petition for a ballot question the tax was returned to the original level, but it took years and the politicians put up a fight all along the way.

2) When the Republicans took over Congress following the 1994 elections, they moved to severely cut if not eliminate farm subsidies, called the Freedom to Farm Act. Unfortunately they did not, in fact, end them. When the farm market soured, Bush promised in the farm state of Iowa, while running for president in 2000, that he would boost funding, and that is what he did. It would have been better to have killed the entire program and dismantle the bureaucracy. Instead, a program was left for Bush to increase.

When given a chance, end a program entirely. Shut down its offices and sell its furniture. Kill it, completely, without mercy, at its roots. It is much harder then for politicians to come back, when no one is looking, and refund the program. They need to start all over again, rebuilding the program, passing enabling legislation. They cannot just quietly add more money to an existing program, a la farm subsidies.

We better end this "pork barrel" now. If any of it survives, it will come back stronger and healthier and it will be much, much harder to kill off.

- Bruce H.
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See also:
Spontaneous Market 1: Profit, Trade and Personal Responsibility, May 22, 2006
Spontaneous Market 2: Market Failure vs. Government Failure, June 07, 2006
Spontaneous Market 3: No Nurses' Brain Drain, June 21, 2006
Spontaneous Market 4: Entrepreneurship, Community and Property Rights, October 23, 2007
Spontaneous Market 5: Limits to Free Market? November 16, 2007

Pol. Ideology 4: Comments to Minimal Government Manifesto

(I posted this in the MG yahoogroups in August 2004)

A friend who teaches Economics at Ateneo de Manila U, Cielo Magno, showed her class a copy of Minimal Government Manifesto and the Addendum to the Manifesto. Cielo is teaching Public Economics to undergrad Econ. majors. Cielo sent me a compilation of her students' comments. Man, 21 pages long, single space, from 23 students. (Cielo, thanks a million for this compilation; the comments are both amusing and educational)

Her students agreed that I post their comments, unedited. I am posting here 3 of those 23 comments. The first, from TJ Lumauig, is almost 100% supportive of MG philosophy. The 2nd, from Ferdinand Nokom, is almost 100% critical. the 3rd, from Stephanie Tiu, is somehow neutral.

After these 3 papers, a friend Chi-chi B. gave additional points.
----------------

(1) TJ Lumauig

I have always believed that the biggest and most severe problem of the Philippine economy, though virtually impossible to measure accurately, is corruption. This obviously points to the government. It is no secret that a lot of corruption takes place within the government. How often do we hear of one person embezzling millions from here, and someone else extorting millions from there? It is a disturbing thought to think that a big chunk of tax payers’ money meant for the good of the country is merely going to pockets of government officials. Not only from the elected officials does corruption take place, but even from their family members who should not even have any hold on administrative duties. So in much agreement with the Minimal Government Movement I ask the question, does the country really benefit from the government?

First and foremost, I believe that our government is way too big. A country like the Philippines does not need a government of our size. For example, if the roughly 19 million citizens of the state of New York can be represented by only 2 senators – like every other state in the US – why does the 8 million citizens of the Philippines – less than half the size of NY – need 24 senators? Common sense would tell us that a group of 100 would be easier to lead than a group of 1000. But then why is a small country like the Philippines in such turmoil? The government is just too big. Each added member of the government results into an added salary for citizens to pay for plus the hanging threat of another possible corrupt official. This implies that citizens pay even more taxes that probably will not even be used for the country. And for what? To have someone act like they’re doing something despite having many other officials with almost the same exact duty assigned to them? In this sense, our excessively large government with its overlapping duties does more harm than good for the Filipino people.

I strongly agree with the principles of the Minimal Government Movement. The Philippine government should be minimized to a certain number of specific duties. This way, people would not be held back too much, and would be able to work to their potentials. Also, corporations would be of better quality in the hands of the private sector since they would naturally compete to earn revenues. Another aspect of minimizing the government is that it could better focus on its more important duties rather than spreading itself too thinly, barely implementing its rules and policies. This way, the government would become more efficient instead of adding problems.

In a small country like the Philippines, a large complex government is not needed. What the country needs in order to develop is the proper use of its capabilities that are often held back by the government. By giving markets more freedom, reducing unnecessary taxes on citizens and most importantly reducing the number of possibly corrupt officials, the Philippines can better develop as a country.

(2) Ferdinand C. Nokom Jr.

I think that the Manifesto of Minimal Government has good ideas in mind yet some of the proposals they have in mind are rather questionable. It is good that indeed, the government should cut down on its size, for a large chunk of the government budget is allotted for salaries of inefficient government employees. Bureaus and other government agencies should be merged or shut down, in line that their function often overlaps with other agencies and maintaining them is a waste of manpower and taxpayer’s money. Federalism is also a good idea for the LGU’s as it promotes independence and efficiency for there is no waste of time trying to beg for higher officieals to address the needs of the local governments. But on the other hand, this power for the LGU’s has the threat of corruption in it, for it gives more power to these officials and traces of nepotism can be seen in the long run with this system.

Streamlining the tasks of the government, along with the agencies of National Defense, the Senate and Congress, and decentralizing the power and more importantly the money (as seen with the pork barrel) of the Senate is good, as all the point brought up by the Manifesto in support to their statement of decreasing the size of government is good, for this rids the government of scrupulous elements in office, or those running for office to get a shot at stealing the taxpayer’s money, and promotes capable men into the position for there is less gain for them financially, with the reduction of size in the government and more focus on performance. But, The premise of eliminating income tax and corporate tax is quite questionable. As of now, income tax is the biggest contributor to government revenue. Although setting a flat rate of 10% income tax is promising, would that be enough to fund the nation? What would be good maybe, is to set the 10% flat rate to the low to moderate income families and set harder taxes on those on the higher income bracket of society. I think they should not remove corporate tax, and also the premise of imposing consumption tax is good so that there would be somewhat of “equality” in taxation. Another questionable premise is complete trade liberalization. How can we ensure that our goods can compete in equal footing with imported goods? Would we not run the risk of being flooded with imports and the killing of the local industries with that move? All in all, the premise of a minimal government intervention is quite promising, yet it still has its questionable premises that may not be of good to the country.

(3) Stephanie Rinna Lim Tiu

The concept of the Minimal Government as a whole seems like a very good way to improve the efficiency of the government and, at the same time, reduce the costs incurred by the government. I agree with the Manifesto that the government should only be limited to a few functions and leave the provision of goods and services to the market. I also agree with the government that there should be a streamlining of the tax structure and a curtailing of the intervening and regulating of the government.

However, there are also some points which I do not agree with like the emphasis on greater individual responsibility and making social services like education and health care a parental responsibility, not a state responsibility. I would like to point out that the income distribution in our nation is already very skewed in favor of the citizens who belong to the A and B class. These citizens do not send their children to public schools or public hospitals because of the quality of service that they receive there. These moneyed citizens can afford to pay more in order to get better medical or educational services for them and their families. But from the perspective of the masses (most of who live below minimum wage), what they are earning is barely enough to provide for the survival of their family, how can they even consider sending their children to private schools or go to private hospitals when they are sick? What the government should focus on is improving basic social services such as education and health and view it as an investment for the nation’s future.

The current situation in the Philippine educational and health system is such that there are not enough schools or hospitals to provide for the needs of the Filipinos, what more if we decide to leave the provision of healthcare and education to the individuals instead of the government? It would mean more uneducated citizens because only a minority can afford to pay for the education of their children. It would also mean more deaths and diseases because the masses cannot afford the vaccines and medication that are required when someone is sick. There is a reason why education and health care are considered “public goods”, privatizing these social services would encourage private corporations to find a way to profit from these basic services. Some might argue that the voucher system would be a good replacement for the public elementary and high schools but, realistically speaking, most private schools are also already filled to capacity and using the voucher system would mean compromising the quality of education because of the added demand and limited supply. Privatizing state universities and colleges (SUCs) would indeed raise revenue for the government to help them retire many of their maturing public debts but it will be at the expense of its people because they are the ones who have to suffer the repercussions and find ways to finance their education.

One very good point of the Minimal Government Manifesto is the simplification of the tax structure by adapting a minimum of 10% flat tax for individual income and shifting revenue collection from income tax to consumption tax. The continual increase and introduction of new taxes over the years has eaten up a lot of our disposable income and has had a very negative effect on the economy. The government seems to see raising and introducing taxes as a solution to helping service our national debt. However, they do not seem to see that it just increases the opportunity for corruption in tax collection. It is not the taxes that are the problem, it is the tax collection. While we do need taxes to help finance the projects and programs of the government, it should not be seen as a way to milk the people for revenue to help fund more projects and debt servicing.

What is called for here is a massive shift in the structure of the government and the mindset of the people about the government. The government has its flaws and weaknesses in trying to fulfill its duty: to ensure the welfare of its people. We, as a nation, have constantly had a very negative view of our government and this results in our apathy on anything concerning the government. If we are to be successful in implementing the Minimal Government, it requires the support and faith of the Filipino people in its government. The cooperation of the Filipino people will be a crucial part of the success of the Minimal Government. There is still a long way to go for the implementation of the Minimal Government: reviews and studies of the principles that are advocated, coming up with programs that will test the efficiency and improvement of the new system and improving on errors, and last, but not least, gaining the support of the Filipino people. But I believe in the potential of the Minimal Government because I can see how it can, in the long run, improve the situation of the Filipino people. It might not be smooth sailing, especially when it is first introduced, but I have faith that, given time, the Filipino people will see how it has improved their lives and they will find it easier to adapt to a new system of government.
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Additional comments here from Chichi, she's got good arguments. My addendum after her comments. Posted in the MG yahoogroups in August 2004

Hi Noy,

Here are possibly additional ammunition you may consider to address the issues raised by the Ateneo Econ Class to the Minimal Government Manifesto.

1. Unregulated markets tend to become monopolies/oligopolies, thus, government has to step in to prevent that.

As a "diplomatic" strategy (don't know if you agree though), it may be correct to concede a bit since the theory does support the existence of natural mono/oligopolies in some but not all industries. Thus, government involvement may be required but only in terms of enhancing existing and future contestability of these few markets, instead of direct participation in that market (either through production or trading). For the rest of the "healthy" markets, no "cure" is necessary.

However, government sometimes chooses to create "super" markets by politicizing ("these markets must never, ever be allowed to fail") certain industries like oil and rice that can otherwise be considered healthy. I feel government is also justified in wanting peace of mind in this regard, but again, the appropriate response is just to ensure free entry and exit for private sector players who will work for market equilibrium. We are seeing this in oil.

Sadly, this is not happening in medicines because of imperfections in the distribution side. Thus, instead of actually setting up more public drugstores to correct this, government should probably just have a more vigilant enforcement of the generics law and help in educating sick people of generic options.

2. Profits are bad.

Only permanently, abnormally high profits are bad since they are the fruits of unhampered monopolies/ oligopolies. Government should try to weaken these profits only if the great majority of Filipino consumers (and not necessarily Filipino producers) feel the pinch, and again, not by offering direct competition but by allowing others to offer the competition. Smart and Globe have had a spectacular run with profits, enough to attract Sun Cellular to join the fray, but there's no need for government to lift a finger yet since the intense competition among the three have yielded better services for cellphone users.

3. Abandoning education and health care to parents will worsen inequality.

I agree that the existing wording seems "heartless." If I remember correctly, the public welfare argument that an initial equilibrium assumes equal endowments (or is my memory just too rusty?), and in the absence of that utopia, we can settle for equal opportunities provided by universal education. Why should we penalize future productive citizens for having lazy parents? Pardon if this bias runs contrary to minimal government, but perhaps shrinking the public education sector can just become a long-term goal, to be achieved only once income inquality is reduced to an "acceptable" rate.

Healthcare is a different matter though. There is somehow a moral hazard problem here since there are diseases that can be avoided, lung and liver problems from smoking and drinking, heart problems from having the wrong diet, etc. Perhaps, government can do its part in just stressing disease prevention and health management in schools, and coordinate/help the donor, socio-civic and corporate communities in their healthcare activities. National government could probably just get involved in times of epidemics or disasters. Personally though, this is a tough call for me. Lands have been sold and children sent to Japan for the sake of expensive healthcare for loved ones, despite the existence of public hospitals and Philhealth. I personally believe this sector needs a second look.

4. Further trade lib will gobble up many small and medium industries.

From the other side of the coin, only trade protectionism allowed these industries to thrive in the first place. Government decided to play God by choosing the winners who are assured of the mark-ups in the amount of the tariff protection. These winners are not necessarily small since they have the resources to convince government to pick them - cement, steel, sugar. Livestock and poultry producers have the numbers to make politicians listen, but the majority of these producers do not have the scale to benefit commercially from high tariffs.

In the meantime, what happens to the equally small, if not smaller, banana-que, barbecue and lechon manok vendors who would continue to feel the profit squeeze? What prospective use of these protected products would otherwise have sprouted if their prices had been more affordable? Maybe if these products had been more affordable, many of our fellow Filipinos would not resort to eating instant noodles or plain sauces as ulam and scrimp on nutrition.

Sometimes, we forget the main reason why we want to support certain sectors -- we want to encourage supply so consumers would always have access to these important things in life. But with trade protection, the world is giving us access but we just don't trust them enough to supply us regularly, in the end, making consumers make do with relatively inexpensive goods, a premium for "a more assured" supply. Such assurance is not actually credible since virtually all products can suffer from supply shocks, e.g., pest on our onions, FMD on our pork, etc.

5. On minimal government not being suitable to Philippine conditions.

We have to admit MG principles are ambitious, but our government's complexity warrants a long period of implementation. MG approach should be likened to weaning rather than cold turkey, and such weaning should start now. Otherwise, it will continue to grow and become more complex.

In the meantime, other Filipinos will continue to do their work to improve the economy, produce better prepared graduates, rear future citizens with precious values, etc., a never-ending process. However, MG has chosen this advocacy because of a perceived vacuum in the marketplace of ideas for reduced government intervention. MG principles will hopefully be adopted if the time is right for such principles. But it would never be considered if the issues are not raised, forced or flagged.

Chichi

Hi Chi,

On your points in #1, you're right on natural monopolies. I failed to take note of that phenomenon in my answer. Yes, there is government role there -- to make entry and exit of new players/producers easier and less cumbersome, often through many regulations by the Executive branch, and franchising laws by the Legislative branch.

On the distribution problem in medicines, I think a more effective way to solve this is to allow more drugstores to enter the market, including foreign-owned drugstores and pharmacies. I am not sure if drugstores are among the "no to foreigners" sectors in the Constitution. If so, constitutional change to remove these restrictions in medicines/drugstores and other sectors or industries will be the long-term solution.

On #2, yes, monopoly/oligopoly profits are bad since these are attained through "rent-seeking" activities, sponsored and maintained by the state. I wrote this in my answer to the students' comments: "Many market imperfections (monopolies, oligopolies, cartels, other variants) are actually state-sponsored, state-created and maintained: single or limited franchises through legislation, trade protectionism, cabotage law, bureaucratic red tapes to prevent competition, etc."

On #3, yes, it should be pointed out clearly that leaving basic education and health care to parental responsibility, not state responsibility, is a long-term goal and should not be adopted in the short- and medium-term (ie, not in the next 5-10 years, even longer). On health care, one solution I could think of is to further deregulate medical education. Some schools which offer BS Medicine on 6 years total (vs. the current 8 years, 4 pre-med, 4 proper medicine) should be allowed. Supply of medical students and graduates is rather low because of the expensive and long training period. More physicians, more private clinics and hospitals, more competition among health care professionals, more affordable health care.

Re. disasters and calamities, I observe that private sector initiative in giving aid on these situations is high and widespread. Civic clubs (rotary, jaycees, lions, kiwanis, Knights of Columbus, etc.), the church, village or homeowners associations, media, etc. are often seen in these projects. My sister's rotary club (she's president of one sosyal RC in makati) for instance, will construct 3 elem. school buildings in a remote barangay (no electricity) somewhere in Batangas province within her 1 year term. My brother-in-law's RC also in makati has various livelihood programs and scholarships for several college students for Aeta people in Zambales.

On #4, I don't think foreign traders and investors will be interested to produce banana-que, barbeque, litson manok, etc. These products are better sold in small production and marketing units like a street corner and small stalls.

Finally on #5, yes, MG's philosophies and goals are ambitious. When I consulted with Dr. Noel de Dios around 2 months ago about the MG Manifesto, he encouraged me to pursue it because it's an ideological and philosophical paper. We just have to engage our folks, other people, on the role and limits of government; and hence, government's limits in taxing our income, consumption, savings, investments, etc. No organization in this country has ever attempted to consistently take this challenge. Tayo pa lang. With the current fiscal and debt problems of the country where the government is scrambling where to further tax us, there is great need to challenge the politicians, media, other statist-oriented people, to shrinking government as an alternative to more taxes.

regards.

Nonoy
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See also:

Pol. Ideology 1: Minimal Government Manifesto, October 18, 2005

Pol. Ideology 2: Evolution of Market and State, October 25, 2005

Pol. Ideology 3: Liberal vs. Libertarian, November 06, 2005