Welfarism need not mean government-sponsored welfare and dole-outs; it can also mean private-funded subsidies, like parents or siblings or relatives to prop up lazy and irresponsible people.
When I posted Migration and Freedom 16: Mobility and the Heckscher-Ohlin Theorem in one of my discussion yahoogroups, a friend Floro commented and here are our brief exchanges. Another friend, Jules, also briefly joined. Then another exchange on universal healthcare. This is long, 9 pages including the photos.
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Floro: Thanks Noy! Paano naman yung mga masisipag kong kamag anak na magsasaka sa probinya? Hindi sila tamad pero low skilled sila kasi di nakapag- aral? Nahahati ng nahahati mga lupa nila bawat henersayon! Pababayaan na lang ba natin silang mamatay? Gusto rin nila mag migrate kahit sa dirty, dangerous and difficult jobs pero maski pamasahe para kumuha ng birth certificate e wala sila. Ano gagawinnatin sa mga taong tulad nila? Paano sila sa mundo ng walang welfare system? Paano sila kung wala ring kwenta ang gobierno ma may Department of Social Welfare?
Nonoy: Thanks Floro.
My quickie reply to your questions ha.
1. Hindi sila tamad pero low skilled sila kasi di nakapag- aral?
--> May mga alam akong HS or elementary graduate lang, rice farmers din. but they don't spend 100% of their days and time in rice farming. They are also into cattle or pig farming, part-time carpenters, tricycle drivers, during dry season they plant tomato, onions, sitaw (stringbeans), other vegetables. These skills do not require a college degree or even a 2-years voc-tech training.
2. Nahahati ng nahahati mga lupa nila bawat henersayon! Pababayaan na lang ba natin silang mamatay?
--> It's expected that their land holding per capita will decline because they have kids. A two hectares land owned by a farmer with five kids is 0.33 hectare per person. When the 5 kids marry and have kids too, the two hectares can be divided by say, 20 people or 0.1 hectare per person.
--> Before we can say, "pabayaan ba natin silang mamatay", I think the prior question will be "pabayaan ba nilang mamatay sarili at pamilya nila?" There are many things to do aside from rice farming. In fact, I have NOT seen any rice farmer who only knows rice farming as his sole skill. They are generally mult-skilled people, like the ones I mentioned above.
3. Gusto rin nila mag migrate kahit sa dirty, dangerous and difficult jobs pero maski pamasahe para kumuha ng birth certificate e wala sila. Ano gagawin natin sa mga taong tulad nila?
--> No one is stopping anyone from voluntarily helping other people. There are hundreds of charity and voluntary organizations, foundations, NGOs, etc. that are willing to help if the proper information between those who really need help is transmitted to them.
--> the NSO and the LCR offices of municipal/city governments should therefore bring down the fee to get a birth certificate. Btway, do you know that in many cities, there are cradle-to-grave fees to pay? Birth certificate fee, residence certificate fee (annual), marriage certificate fee, death certificate fee, burial fee.
4. Paano sila sa mundo ng walang welfare system? Paano sila kung wala ring kwenta ang gobierno ma may Department of Social Welfare?
--> Welfare system is mainly given by the households and family/clan. Even lazy and irresponsible people (drink and party as often as they can even if they have no or unstable job) are supported, fully or partially, by some of their family members.
--> Government welfare system essentially encouraged irresponsibility. A public education system is supposed to help citizens to become productive and skilled. Thus, it should be one time only, as the adults and parents are supposed to be productive already and should be able to take care of themselves and their households. But this does not happen.
Jules: It seems that a welfare state, cradle to grave welfare, works only when only a few people are "on welfare." If they are trainable(willing to learn new skills), imbued with high sense of personally accountability and responsibility, I dont see any reason why they wont find a job.
Overated yang college diploma na yan, basta marunong magbasa, magsulat, mag add/subtract/divide/multiply. College graduate nga, hindi naman maasasan at makapgkakatiwalan, panis din!
Showing posts with label welfare state. Show all posts
Showing posts with label welfare state. Show all posts
Monday, February 27, 2012
Tuesday, January 17, 2012
Welfarism 12: Denmark's Shrinking Entitlements
I am posting two old news reports -- in December 2007 and August 2010 -- about Denmark's labor and welfare system, then make short discussions about them.
(1) http://www.nytimes.com/2007/12/05/business/worldbusiness/05iht-labor.4.8603880.html
COPENHAGEN — As a self-employed software engineer, Thomas Sorensen broadcasts his qualifications to potential employers across Europe and the Middle East. But to the ones in his native Denmark, he is simply unavailable.
(1) http://www.nytimes.com/2007/12/05/business/worldbusiness/05iht-labor.4.8603880.html
High income taxes in Denmark worsen a labor shortage
By Carter Dougherty
Published: Wednesday, December 5, 2007
COPENHAGEN — As a self-employed software engineer, Thomas Sorensen broadcasts his qualifications to potential employers across Europe and the Middle East. But to the ones in his native Denmark, he is simply unavailable.
Settled in Frankfurt, where he handles computer security for a major Swiss corporation, Sorensen, 34, has no plans to return to the days of paying sky-high Danish taxes. Still, an unknowing headhunter does occasionally pass his name to Danish companies.
"When I get an e-mail from them, I either respond negatively but politely," Sorensen said. "Or I don't respond at all."
Born and trained at Denmark's expense, but working - and paying lower taxes - elsewhere in Europe, Sorensen is the stuff of nightmares for Danish companies and politicians searching for solutions to an increasingly desperate labor shortage....
Young Danes, often schooled abroad and inevitably fluent in English, are primed to quit Denmark for greener pastures. One reason is the income tax rate, which can reach 63 percent....
Monday, July 25, 2011
Migration and Freedom 10: Multiculturalism and the Norway massacre
From the various reports that I have read, Breivik was described as a “right wing extremist/fundamentalist”, or a “far right Christian” or “ultra-right anti-Muslim”. He is said to hate the growing presence of many migrants, Muslims especially, to Norway and other rich economies of Europe, and that he and his fellow extremists who do not like multiculturalism, were planning some attacks against the government which allows, if not encourage, multiculturalism and the high presence of foreign refugees, asylum seekers and migrants who may be after the expensive welfare system.
Thus, the target of attack was a government building in Oslo, then the young leaders where many are children of members and officials of the government Labor Party in Norway. An attack on a government structure and then the future leaders of Norway who will most likely continue the policies of the ruling administration that is deemed too friendly to the migrants.
The welfare system, especially those in Norway, Sweden, Finland and Denmark, is very expensive to maintain as it practically provides free or highly-subsidized services “from cradle to grave.”
And it is this expensiveness and too welcoming to migrants of the welfare system which attract both the welfare-seeking immigrants and the envy of the locals. A section of the locals are jealous or envious that the system that is supposed to benefit them only is being extended to, and being enjoyed by, many immigrants.
I am not a fan of a BIG state that provides big and expensive welfare to the people, mainly because it substitutes personal and household responsibility with big government responsibility big time, there is big coercion involved, especially in taxation and plentiful regulations. But I also do not support any form of violence, especially massacre and bombing, to criticize and attack that system. There are always peaceful and transparent way to convey their message and opposition to certain policies on migrants and their entitlement or non-entitlement to certain subsidies that are enjoyed by the locals.
Thus, the state should not use violence and coercion, explicit or implicit, too often to implement whatever new regulations and restrictions that it has invented.
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See also:
Part 3, Remittances and Guest workers, March 25, 2008
Part 4, Filipino entrepreneur in Germany, June 04, 2009
Migration and Freedom 5: Conferences on Liberty and Migration, October 19, 2010
Migration and Freedom 6: Passport and People Mobility, November 30, 2010
Migration and Freedom 7: Restrictions to OFWs , April 13, 2011
Migration and Freedom 8: Denmark's immigration policy, May 17, 2011
Migration and Freedom 9: Immigration bureaucracy, July 19, 2011
Thursday, June 30, 2011
Twitter notes, June 2011 (a)
I've been tweeting more often this month. Here they are, first half of the month:
@gpph Renewable energy racket/robbery, http://bit.ly/lpGkq3 and http://bit.ly/kCJFx6. They want to steal P9 B/yr from us next 20 years
@Karen_DaviLa Govt is creating more and more prohibitions. More restrictions means more revenues for the state, more extortion opportunities
You will never do anything in this world without courage. It is the greatest quality of the mind next to honor. - Aristotle
@gpph The RE racket will steal from us energy consumers P9 bill/year for 20 yrs, http://bit.ly/lpGkq3. Warming scam, more legalized robbery
From Cicero: Laws are silent in time of war... No one has the right to be sorry for himself for a misfortune that strikes everyone.
People acting in their own enlightened & rational self-interest strikes bureaucrats, politicians and social workers as dangerous. - WG Hill
Bureaucracy defends the status quo long past the time when the quo has lost its status.- Laurence J. Peter
"A welfare state is frightened of every poor person who tries to get in and every rich person who tries to get out" -- Harry Browne
philo_quotes Philosophers quotes by Noysky
Every man has a property in his own person. This nobody has a right to, but himself. ~ John Locke
Happy bday, Adam Smith (June 5, 1723). Good article by Larry Reed in 2006 about the man, http://www.mackinac.org/article.aspx?ID=7765
@NewAsianist High and increasing RP exports of services is just one result of our high population and continued economic globalization.
From Plato: The measure of a man is what he does with power... There is no harm in repeating a good thing.
@wansaiful The welfare state is a good subject to write on. Politicians are well, taxpayers pay the fare :-)
@Jimparedes Fishkill is caused by insufficient dissolved oxygen in the lake, or by volcanic gases from Taal volcano, http://bit.ly/iicopk
Democracy is a form of govt where you can vote for a living instead of working for one & say what you think even if you don't think - L Reed
@Karen_DaviLa Why does the ABS-CBN network seem to cover, or amplify, the fishkill story in Taal lake compared to other network?
WhoIsMikeGordon Mike Gordon by Noysky
People who say it cannot be done should not interrupt those who are doing it. Unknown
Fr. Aristotle: Men are swayed more by fear than by reverence... Hope is the dream of a waking man... Change in all things is sweet.
From Seneca: We become wiser by adversity... In war there is no prize for runner-up.
@taxreformer Forced removal of a company's trademark & logo will not only violate IPR laws but remove distinction bet real & fake producers.
@acopatunru @east_asia_forum Not only gender timebomb of too few women, but China's popn itself will be declining, to only 700+M by 2050
@Jimparedes Next 20 yrs, China will face declining population, India's will keep rising. So India will be biggest English speaking nation
@cesdrilon Educ & health for d poor, housing & transpo for d poor, credit, irrig. & AR for d poor, CCT for d poor, soon condoms for d poor
"The spirit is willing but the flesh is weak.' Translated to russian, back to english became, 'the wine is agreeable but the meat is stale'.
@harryinitiative Cebu Pacific is getting more expensive, more crowded, longer time to check in, more flight delays. I take zest air lately.
Fr Mymathcloud: Natural numbers are better for your health…. Geometry is the science of correct reasoning on incorrect figures- George Polya
Fr mymathcloud: Old mathematicians never die; they just pass into another field….The larger d denominator, the smaller the fraction- Tolstoy
EventsCloud My Events Cloud by Noysky
@HerreraVeronica Kindness is the language which the deaf can hear and the blind can see.
MyMathCloud My Mathematics Cloud by Noysky
God does not care about our mathematical difficulties - he integrates empirically. Albert Einstein
Fr. Montberte: Good girls are bad girls that arent caught… Never make anything simple and efficient when it can be complex and wonderful.
From Mymathcloud: Old mathematicians never die; they just tend to zero… A mathematician is a device for turning coffee into theorems.
Montberte Steve Cushing by Noysky
Planes are so fast nowadays that we can go around the world in two hours, including one hour to get to the airport.
@levenezu Yes, rule of law, not rule of men, will advance the country. The laws vs killing, stealing, rape, etc. shd be upheld, no exception
@Jimparedes Favorite Stevie W song ko ay "massacre". I just called to say I love you, I just called to say how massacre :-)
Jimparedes Jim by Noysky
If you hear a voice within you say you cannot paint, then by all means paint, and that voice will be silenced. ~ Van Gogh
@karadavid that means the drainage is fully clogged. With rainy season until October or even December, it will remain flooded then.
Define apathy? I don't know and I don't care... Work delegation is good bec when things turn sour, it allows you to blame somebody else :-)
Management is like a tree full of monkeys. Those on the top see monkeys below them, those below see a__holes above them :-)
Fr mathcloud: 3 out of every two people are bad at working with fractions… The shortest distance between two points is under construction.
MyMathCloud My Mathematics Cloud by Noysky
No amount of experimentation can ever prove me right, but a single experiment might prove me wrong. Albert Einstein
MyMathCloud My Mathematics Cloud by Noysky
Not everything that counts can be counted. Not everything that can be counted counts. Albert Einstein
MyMathCloud My Mathematics Cloud by Noysky
There are three kinds of people in the world; those who can count and those who can't.
From Plato: When the mind is thinking it is talking to itself.... If particulars are to have meaning, there must be universals.
@kikopangilinan Pwede rin "renewable marriage". Every 3, 4 or 5 yrs, a marriage is automatically annulled. Couples will renew their vows.
@HarvardResearch I saw in wiki abt 200 types of cancer. What used to be seen as non-C are now confirmed as C. Thus, d rise in C cases.
Montberte Steve Cushing by Noysky
God must like stupid people; he makes so many of them. #stevec
MyMathCloud My Mathematics Cloud by Noysky
A statistician can have his head in an oven and his feet in ice, and he will say that on the average he feels fine.
-------
See also Twitter Notes April-May 2011, January-March 2011.
Last year: December 2010, November 2010, and October 2010.
@Karen_DaviLa Govt is creating more and more prohibitions. More restrictions means more revenues for the state, more extortion opportunities
You will never do anything in this world without courage. It is the greatest quality of the mind next to honor. - Aristotle
@gpph The RE racket will steal from us energy consumers P9 bill/year for 20 yrs, http://bit.ly/lpGkq3. Warming scam, more legalized robbery
From Cicero: Laws are silent in time of war... No one has the right to be sorry for himself for a misfortune that strikes everyone.
People acting in their own enlightened & rational self-interest strikes bureaucrats, politicians and social workers as dangerous. - WG Hill
Bureaucracy defends the status quo long past the time when the quo has lost its status.- Laurence J. Peter
"A welfare state is frightened of every poor person who tries to get in and every rich person who tries to get out" -- Harry Browne
philo_quotes Philosophers quotes by Noysky
Every man has a property in his own person. This nobody has a right to, but himself. ~ John Locke
Happy bday, Adam Smith (June 5, 1723). Good article by Larry Reed in 2006 about the man, http://www.mackinac.org/article.aspx?ID=7765
@NewAsianist High and increasing RP exports of services is just one result of our high population and continued economic globalization.
From Plato: The measure of a man is what he does with power... There is no harm in repeating a good thing.
@wansaiful The welfare state is a good subject to write on. Politicians are well, taxpayers pay the fare :-)
@Jimparedes Fishkill is caused by insufficient dissolved oxygen in the lake, or by volcanic gases from Taal volcano, http://bit.ly/iicopk
Democracy is a form of govt where you can vote for a living instead of working for one & say what you think even if you don't think - L Reed
@Karen_DaviLa Why does the ABS-CBN network seem to cover, or amplify, the fishkill story in Taal lake compared to other network?
WhoIsMikeGordon Mike Gordon by Noysky
People who say it cannot be done should not interrupt those who are doing it. Unknown
Fr. Aristotle: Men are swayed more by fear than by reverence... Hope is the dream of a waking man... Change in all things is sweet.
From Seneca: We become wiser by adversity... In war there is no prize for runner-up.
@taxreformer Forced removal of a company's trademark & logo will not only violate IPR laws but remove distinction bet real & fake producers.
@acopatunru @east_asia_forum Not only gender timebomb of too few women, but China's popn itself will be declining, to only 700+M by 2050
@Jimparedes Next 20 yrs, China will face declining population, India's will keep rising. So India will be biggest English speaking nation
@cesdrilon Educ & health for d poor, housing & transpo for d poor, credit, irrig. & AR for d poor, CCT for d poor, soon condoms for d poor
"The spirit is willing but the flesh is weak.' Translated to russian, back to english became, 'the wine is agreeable but the meat is stale'.
@harryinitiative Cebu Pacific is getting more expensive, more crowded, longer time to check in, more flight delays. I take zest air lately.
Fr Mymathcloud: Natural numbers are better for your health…. Geometry is the science of correct reasoning on incorrect figures- George Polya
Fr mymathcloud: Old mathematicians never die; they just pass into another field….The larger d denominator, the smaller the fraction- Tolstoy
EventsCloud My Events Cloud by Noysky
@HerreraVeronica Kindness is the language which the deaf can hear and the blind can see.
MyMathCloud My Mathematics Cloud by Noysky
God does not care about our mathematical difficulties - he integrates empirically. Albert Einstein
Fr. Montberte: Good girls are bad girls that arent caught… Never make anything simple and efficient when it can be complex and wonderful.
From Mymathcloud: Old mathematicians never die; they just tend to zero… A mathematician is a device for turning coffee into theorems.
Montberte Steve Cushing by Noysky
Planes are so fast nowadays that we can go around the world in two hours, including one hour to get to the airport.
@levenezu Yes, rule of law, not rule of men, will advance the country. The laws vs killing, stealing, rape, etc. shd be upheld, no exception
@Jimparedes Favorite Stevie W song ko ay "massacre". I just called to say I love you, I just called to say how massacre :-)
Jimparedes Jim by Noysky
If you hear a voice within you say you cannot paint, then by all means paint, and that voice will be silenced. ~ Van Gogh
@karadavid that means the drainage is fully clogged. With rainy season until October or even December, it will remain flooded then.
Define apathy? I don't know and I don't care... Work delegation is good bec when things turn sour, it allows you to blame somebody else :-)
Management is like a tree full of monkeys. Those on the top see monkeys below them, those below see a__holes above them :-)
Fr mathcloud: 3 out of every two people are bad at working with fractions… The shortest distance between two points is under construction.
MyMathCloud My Mathematics Cloud by Noysky
No amount of experimentation can ever prove me right, but a single experiment might prove me wrong. Albert Einstein
MyMathCloud My Mathematics Cloud by Noysky
Not everything that counts can be counted. Not everything that can be counted counts. Albert Einstein
MyMathCloud My Mathematics Cloud by Noysky
There are three kinds of people in the world; those who can count and those who can't.
From Plato: When the mind is thinking it is talking to itself.... If particulars are to have meaning, there must be universals.
@kikopangilinan Pwede rin "renewable marriage". Every 3, 4 or 5 yrs, a marriage is automatically annulled. Couples will renew their vows.
@HarvardResearch I saw in wiki abt 200 types of cancer. What used to be seen as non-C are now confirmed as C. Thus, d rise in C cases.
Montberte Steve Cushing by Noysky
God must like stupid people; he makes so many of them. #stevec
MyMathCloud My Mathematics Cloud by Noysky
A statistician can have his head in an oven and his feet in ice, and he will say that on the average he feels fine.
-------
See also Twitter Notes April-May 2011, January-March 2011.
Last year: December 2010, November 2010, and October 2010.
Sunday, June 19, 2011
Inequality 7: Roger Federer, Manny Pacquiao and Free Market
Sports Illustrated recently released its "Fortunate 50" richest athletes around the world. Here is their 20 highest-earning international athletes. The Philippines' most famous person and athlete, Manny Pacquiao, is no. 2!
The amount stated is for salary/ winnings + endorsements. In the Top 20 richest international atheletes outside the US), Paquiao is the only boxer. He earns bigger than the heavyweight or super-heavyweight champions. Two are tennis superstars (Roger Federer and Rafael Nadal), three are F1 drivers (Fernando Alonso, Lewis Hamilton and Michael Schumacher, yey, Schumi!).
Soccer has the most number of rich superstars, there are 8 of them in the top 20: (Lionel Messi, Cristiano Ronaldo, Wayne Rooney, Kaka, David Beckham, Ronaldinho, Carlos Tevez, Frank Lampard).
NBA superstars are 3 (Yao Ming, Dirk Nowitzki, Pau Gasol), baseball has 2 (Ichiro Suzuki, Miguel Cabrera), and motorcycle racing has 1 (Valentino Rossi).
Meanwhile, here is SI's 50 highest-earning American athletes this year.
Money in golf does not come much from winnings, but from endorsements.
A friend in facebook, a self-confessed Marxist-socialist, posted the earlier link in his wall. I commented that it just shows one beauty of capitalism (hehe, alam ko dami galit sa mga friends ni bonn just to mention the "virtue of capitalism"). Those who really excel in their field are super-compensated. And here's another virtue of capitalism: those "super-compensated" are also super-solicited by so many charities, foundations, friends, relatives, clans, etc. And that diffuses the wealth of the super-compensated. Bill Gates for instance did not spend all his money for himself, he put up a super-huge foundation that grants money sometimes bigger than the grants by USAID or WB. Warren Buffet also gives several billion $ of his own money to the Gates Foundation.
He commented that capitalism "is the system that is causing suffering, impoverishment, and misery of billions and billions of people in the world", but that "there is a way to organise capitalism - its production and distribution - to improve the lot of billions of people in the world." And finally added, "we have an experience of modifying capitalism just like the Keynesian welfare state which is far more acceptable to my values than the Hayekian-Friedmanian life of misery and selfish individualism."
Imagine that statement, "billions and billions of people", including the billion plus in China, another billion plus under near-socialist India. I reminded him that facebook is also a product of capitalism, does fb also causes lots of capitalist exploitation?
And the reference to "Keynesian welfare state", like Denmark where he currently works that he's beginning to criticize more ofen now. That welfare state of 4 or 5 million people which does not want to open its border to people victimized by socialism or other statist capitalism somewhere. A welfare Keynesian state will always be allergic, even paranoid, to open its economy to "billions of people" that socialists and welfare statists wish to help.
Another friend commented about small or micro capitalism. I also like "people's capitalism" or micro capitalism. If being an employee forever sucks, then employees who are ambitious and hard-working enough should start becoming an entrepreneur, to become job creator themselves. But look at how the governments of the Philippines and other countries treat entrepreneurship with lots of bureaucracies and taxes to pay even before one can start a business. Statism and envy of entrepreneurship are the cousins of socialism.
Global capitalism, or nation-based capitalism, or even micro-capitalism aka people's capitalism, will always result in inequality. Even among siblings raised in the same house by the same parents and went to the same school, etc., will have inequality in performance someday -- academically, financially, economically. And this leads us to individual freedom, individual ambition and responsibility, vs. its other side, individual irresponsibility, dependence and lack of high personal ambition. And that explains why some guys are super-rich while others are super-poor.
If you is too focused on equality, then good examples will be N. Korea, Myanmar, Congo, Zimbabwe, etc. People there are generally equal, equally poor, except the leaders of their socialist or near-socialist state.
If one will focus on greater wealth creation, then one must accept inequality as one inevitable result. Give three people one hecare of land each, contiguous to each other. One may develop an organic farm (no tractor, no factory, environment preserved, yeah). One may develop it as housing for the squatters. One will develop it into a compound of high-rise condo buildings. See the huuuuge inequality later.
By writing the inevitable result of inequality in a free society, I was mistaken for advocating or valuing inequality per se. Wrong. I value individual freedom or liberty, period. The individual's freedom to ambition soooo high, freedom to work so hard to realize that ambition, and that individual will soon become a super-rich entrepreneur or capitalist. The freedom to move across islands, across countries and continents, is part of that individual freedom.
(These pictures of airplanes I took while inside various international airports in some my recent foreign trips). Incidentally, it is those global multinational capitalist enterprises that allow such international mobility -- the multinational airlines, hotels, and those huge capitalist enterprises like facebook, google, youtube, yahoo, facilitate information gathering by people before and during their international mobility. Inequality is an outcome, not advocacy, of individual freedom. Government coercion like socialism and big statism is the main enemy of individual freedom.
--------
See also:
Inequality 1: Rich Getting Richer is Good, August 29, 2009
Inequality 2: To Each According to his Needs... September 01, 2010
Inequality 3: Freedom, Free Market and Inequality, February 14, 2011
Inequality 4: Why Inequality is Good, May 10, 2011
Inequality 5: Comments to Why Inequality is Good, May 11, 2011
Inequality 6: On Social and Class Dominance, May 13, 2011
Hayek 3: Inequality and Progress, May 19, 2009
Soccer has the most number of rich superstars, there are 8 of them in the top 20: (Lionel Messi, Cristiano Ronaldo, Wayne Rooney, Kaka, David Beckham, Ronaldinho, Carlos Tevez, Frank Lampard).
NBA superstars are 3 (Yao Ming, Dirk Nowitzki, Pau Gasol), baseball has 2 (Ichiro Suzuki, Miguel Cabrera), and motorcycle racing has 1 (Valentino Rossi).
Money in golf does not come much from winnings, but from endorsements.
A friend in facebook, a self-confessed Marxist-socialist, posted the earlier link in his wall. I commented that it just shows one beauty of capitalism (hehe, alam ko dami galit sa mga friends ni bonn just to mention the "virtue of capitalism"). Those who really excel in their field are super-compensated. And here's another virtue of capitalism: those "super-compensated" are also super-solicited by so many charities, foundations, friends, relatives, clans, etc. And that diffuses the wealth of the super-compensated. Bill Gates for instance did not spend all his money for himself, he put up a super-huge foundation that grants money sometimes bigger than the grants by USAID or WB. Warren Buffet also gives several billion $ of his own money to the Gates Foundation.
He commented that capitalism "is the system that is causing suffering, impoverishment, and misery of billions and billions of people in the world", but that "there is a way to organise capitalism - its production and distribution - to improve the lot of billions of people in the world." And finally added, "we have an experience of modifying capitalism just like the Keynesian welfare state which is far more acceptable to my values than the Hayekian-Friedmanian life of misery and selfish individualism."
Imagine that statement, "billions and billions of people", including the billion plus in China, another billion plus under near-socialist India. I reminded him that facebook is also a product of capitalism, does fb also causes lots of capitalist exploitation?
And the reference to "Keynesian welfare state", like Denmark where he currently works that he's beginning to criticize more ofen now. That welfare state of 4 or 5 million people which does not want to open its border to people victimized by socialism or other statist capitalism somewhere. A welfare Keynesian state will always be allergic, even paranoid, to open its economy to "billions of people" that socialists and welfare statists wish to help.
Global capitalism, or nation-based capitalism, or even micro-capitalism aka people's capitalism, will always result in inequality. Even among siblings raised in the same house by the same parents and went to the same school, etc., will have inequality in performance someday -- academically, financially, economically. And this leads us to individual freedom, individual ambition and responsibility, vs. its other side, individual irresponsibility, dependence and lack of high personal ambition. And that explains why some guys are super-rich while others are super-poor.
If you is too focused on equality, then good examples will be N. Korea, Myanmar, Congo, Zimbabwe, etc. People there are generally equal, equally poor, except the leaders of their socialist or near-socialist state.
If one will focus on greater wealth creation, then one must accept inequality as one inevitable result. Give three people one hecare of land each, contiguous to each other. One may develop an organic farm (no tractor, no factory, environment preserved, yeah). One may develop it as housing for the squatters. One will develop it into a compound of high-rise condo buildings. See the huuuuge inequality later.
By writing the inevitable result of inequality in a free society, I was mistaken for advocating or valuing inequality per se. Wrong. I value individual freedom or liberty, period. The individual's freedom to ambition soooo high, freedom to work so hard to realize that ambition, and that individual will soon become a super-rich entrepreneur or capitalist. The freedom to move across islands, across countries and continents, is part of that individual freedom.
--------
See also:
Inequality 1: Rich Getting Richer is Good, August 29, 2009
Inequality 2: To Each According to his Needs... September 01, 2010
Inequality 3: Freedom, Free Market and Inequality, February 14, 2011
Inequality 4: Why Inequality is Good, May 10, 2011
Inequality 5: Comments to Why Inequality is Good, May 11, 2011
Inequality 6: On Social and Class Dominance, May 13, 2011
Hayek 3: Inequality and Progress, May 19, 2009
Tuesday, April 12, 2011
Welfarism 11: Bureaucratizing Entrepreneurs
The main problem with government-sponsored population control measures like the proposed RH bill is that it starts from the premise of a nanny or welfare state: education is government responsibility, healthcare is government responsibility, housing is government responsibility, credit, public works, justice, traffic, cash transfer, etc. are all government responsibility. So the bigger the population, the bigger the public spending for social and economic services. So to reduce public spending and the high public debt in the future, controlling fast population growth is also government responsibility.
Theoretically, it is possible to have 3 or more kids and be an irresponsible parent. Why? government has feeding program, it has free education from elementary to high school, and cheap/highly subsidized uninversity education, even free if one is a government scholar; there are lots of mass/social housing, there are free medicines, free healthcare for the poor, cash transfer for the poor, agrarian reform for the poor, and so on.
One adverse effect of all these nannyism is the corruption of parental values. Why assume more parental responsibility when there are lots of government responsibility that are already in the laws and are regularly budget every year? So drink and party as often as possible, smoke as many cigarettes as much as possible. If their internal organs get dilapidated, they can run to the state because "health is a right".
Most problems related to high unemployment, high poverty, are caused by government through bureaucratism, high taxation, lots of prohibitions and regulations. Corruption is just an icing on the cake.
Take this report, Doing Business 2011: Philippines produced annually by the WB and IFC. For average companies in the Phlippines: To start a business, it will take 15 procedures (with various government agencies) in 38 working days, costing nearly 30 percent of the per capita income. Take note that the assumption here is zero corruption. If certain bureaucracies will insist on getting bribes, otherwise the waiting period will not just be 38 working days but 2x or 3x that period.
Paying taxes for an average corporation, 47 different taxes and fees per year(!) that will require 196 hours (or 24.5 working days or more than 1 month). Profit tax is 21.3 percent, but when various mandatory or obligatory labor and social security contributions are included, the total tax rate would rise to 45.8 percent of a corporation's profit.
So government creates lots of direct taxation, mandatory contributions (which are indirect taxation) and other forms of regulations and prohibitions (one is prohibited by law to conduct any business unless those regulations are obeyed and followed). When these restrictions and prohibitions are enforced, many people and entrepreneurs will be forced to kneel and bow before certain government officials, pay bribes or what just to hasten a supposedly non-criminal, non-prohibitive action like putting up a small business, or hiring new workers.
(I took this picture of various government permits in a water purifying/distilling shop near our place in Makati). If the poor and the lower middle class want to stand on their own and not depend on government welfare, they put up a vulcanizing shop or barber shop or carinderia or fishball/barbeque stall, the government officially says NO. Unless the trying-hard entrepreneur will first get barangay permit, sanitation permit, garbage collection permit, fire department permit, mayor's business permit, DTI permit, SSS permit, BIR permit, Pag-IBIG permit, etc. Most of the "underground or informal" economy that we see are tolerated by some national government agencies but not by the local govt and local police. That is why "arkabala" and bribes to certain city hall or police officers are practiced.
After succeeding to create lots of poverty and high unemployment, government and its multilateral patrons (the UN, WB, EC, ADB, etc.) would blame high population growth.
Government would rather see the poor begging for more welfare, more subsidies, because the endless welfare programs -- education for the poor, healthcare for the poor, housing for the poor, credit for the poor, cash transfer for the poor, condoms and ligation for the poor, etc. -- will be continued and all the hundreds of billions of pesos of annual budget and new loans (and ever-rising interest payment) to the foreign aid banks will continue.
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See also:
Welfarism 9: Conditional Cash Transfer (CCT), November 12, 2010
Welfarism 10: Spanish Problem, the Euro or the State?, December 01, 2010
Theoretically, it is possible to have 3 or more kids and be an irresponsible parent. Why? government has feeding program, it has free education from elementary to high school, and cheap/highly subsidized uninversity education, even free if one is a government scholar; there are lots of mass/social housing, there are free medicines, free healthcare for the poor, cash transfer for the poor, agrarian reform for the poor, and so on.
One adverse effect of all these nannyism is the corruption of parental values. Why assume more parental responsibility when there are lots of government responsibility that are already in the laws and are regularly budget every year? So drink and party as often as possible, smoke as many cigarettes as much as possible. If their internal organs get dilapidated, they can run to the state because "health is a right".
Most problems related to high unemployment, high poverty, are caused by government through bureaucratism, high taxation, lots of prohibitions and regulations. Corruption is just an icing on the cake.
Take this report, Doing Business 2011: Philippines produced annually by the WB and IFC. For average companies in the Phlippines: To start a business, it will take 15 procedures (with various government agencies) in 38 working days, costing nearly 30 percent of the per capita income. Take note that the assumption here is zero corruption. If certain bureaucracies will insist on getting bribes, otherwise the waiting period will not just be 38 working days but 2x or 3x that period.
Paying taxes for an average corporation, 47 different taxes and fees per year(!) that will require 196 hours (or 24.5 working days or more than 1 month). Profit tax is 21.3 percent, but when various mandatory or obligatory labor and social security contributions are included, the total tax rate would rise to 45.8 percent of a corporation's profit.
So government creates lots of direct taxation, mandatory contributions (which are indirect taxation) and other forms of regulations and prohibitions (one is prohibited by law to conduct any business unless those regulations are obeyed and followed). When these restrictions and prohibitions are enforced, many people and entrepreneurs will be forced to kneel and bow before certain government officials, pay bribes or what just to hasten a supposedly non-criminal, non-prohibitive action like putting up a small business, or hiring new workers.
After succeeding to create lots of poverty and high unemployment, government and its multilateral patrons (the UN, WB, EC, ADB, etc.) would blame high population growth.
Government would rather see the poor begging for more welfare, more subsidies, because the endless welfare programs -- education for the poor, healthcare for the poor, housing for the poor, credit for the poor, cash transfer for the poor, condoms and ligation for the poor, etc. -- will be continued and all the hundreds of billions of pesos of annual budget and new loans (and ever-rising interest payment) to the foreign aid banks will continue.
-------
See also:
Welfarism 9: Conditional Cash Transfer (CCT), November 12, 2010
Welfarism 10: Spanish Problem, the Euro or the State?, December 01, 2010
Tuesday, September 21, 2010
Welfarism 8: Send All Monthly Salary to UK Govt First
Some government bureaucrats are really fantastic in cooking up ideas how to confiscate more money from the citizens. They have various alibi for doing so, like "to prevent tax evasion", "to have more money for public welfare", and so on. Of course they will not say or admit that part of their goal is "to have more money for politicians and ourselves."
Here's one proposal by the UK tax collection agency, as reported in CNBC yesterday.
This is like Philippine-based employers, local and foreigners alike, will send all monthly salaries to the Bureau of Internal Revenue (BIR) first and all personnel in the formal sector, ordinary employees and managers alike, will wait for several days or weeks before the BIR will give us back our "rebates" by bank transfer.
High and multiple taxes are government's indirect way of saying, "Give us your money. We can spend it for you better than you yourself." What a hypocrisy.
--------
Last June 08, 2010, I wrote this:
Greece, UK and Welfare Problems
New British PM David Cameron has candidly admitted the obvious -- UK's nanny state might go the Greek way of fiscal (and personal) irresponsibility and hence, deep economic hardship for one of the richest economies in the world. The report today in NYT says, "Cameron warns Britons of "decades of austerity", http://www.nytimes.com/2010/06/08/world/europe/08britain.html?ref=global-home
Mr. Cameron said that Britain's "financial situation was “even worse than we thought” and that the country would have to make savage spending cuts to bring its swelling deficit under control.... that at more than 11 percent (of GDP) Britain’s budget deficit was the largest ever faced by the country in peacetime. But he warned that the structural deficit was more worrisome. Britain currently owes a total of more than $1.12 trillion , he said, and in five years will owe nearly double that if nothing is done now. The country already spends more on interest payments on its debt than it does running its schools."
While the PM was blaming the Labor government of Tony Blair et al before his term, the deeper problem lies in UK diverging from the liberal, free market, more personal responsibility society that Ms. Thatcher and other liberal leaders have tried. Instead, an expensive nanny state became bigger and bigger, which resulted in public debt becoming bigger and bigger, which acquired a life of its own and soon overtook actual welfare spending.
As of 2009, UK's general government gross debt as % of GDP was 68.2 percent, a bit "small" compared to Japan's 218 percent and Italy's 116 percent.
The statists and socialists can argue that UK and other rich countries have lots of fiscal "responsibilities to poorer countries" through more foreign aid, including paying huge transfer of tax money to politians and governments of poorer economies because of their "climate debt". Thus, deep tax cuts cannot be an option for UK and other similarly-situated governments.
Yesterday, a number of Asian stockmarkets suffered serious declines as a result of negative fiscal news from Hungary. Yes, a non-EU member Hungary sending out signals of more fiscal bleeding is enough to worsen the already bad financial and fiscal conditions in Europe. Just when people were expecting that Spain and Portugal would follow Greece's fiscal bleeding, it was Hungary that came in next.
So, Greece-Portugal-Spain-Hungary-UK-who else?
Some are already queuing based on certain macro and micro indicators, like France and Italy.
The classical-liberal agenda of free market, individual freedom, more personal responsibility, and lean/limited state is calling out loud. The hard-working people should not be over-taxed and over-regulated; the lazy and irresponsible people should not be over-subsidized; the less-productive government bureaucracies should not be over-blown and expanded.
--------
See also:
Welfarism 5: Germany's Tax Hikes, June 28, 2006
Welfarism 6: Obama and US Entitlement, November 11, 2008
Welfarism 7: Squatters in the Univ. of the Philippines (UP), February 23, 2009
Here's one proposal by the UK tax collection agency, as reported in CNBC yesterday.UK Proposes All Paychecks Go to the State First
Published: Monday, 20 Sep 2010
By: Robin Knight
The UK's tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer.
The proposal by Her Majesty's Revenue and Customs (HMRC) stresses the need for employers to provide real-time information to the government so that it can monitor all payments and make a better assessment of whether the correct tax is being paid....
This is like Philippine-based employers, local and foreigners alike, will send all monthly salaries to the Bureau of Internal Revenue (BIR) first and all personnel in the formal sector, ordinary employees and managers alike, will wait for several days or weeks before the BIR will give us back our "rebates" by bank transfer.
High and multiple taxes are government's indirect way of saying, "Give us your money. We can spend it for you better than you yourself." What a hypocrisy.
--------
Last June 08, 2010, I wrote this:
Greece, UK and Welfare Problems
New British PM David Cameron has candidly admitted the obvious -- UK's nanny state might go the Greek way of fiscal (and personal) irresponsibility and hence, deep economic hardship for one of the richest economies in the world. The report today in NYT says, "Cameron warns Britons of "decades of austerity", http://www.nytimes.com/2010/06/08/world/europe/08britain.html?ref=global-home
Mr. Cameron said that Britain's "financial situation was “even worse than we thought” and that the country would have to make savage spending cuts to bring its swelling deficit under control.... that at more than 11 percent (of GDP) Britain’s budget deficit was the largest ever faced by the country in peacetime. But he warned that the structural deficit was more worrisome. Britain currently owes a total of more than $1.12 trillion , he said, and in five years will owe nearly double that if nothing is done now. The country already spends more on interest payments on its debt than it does running its schools."
While the PM was blaming the Labor government of Tony Blair et al before his term, the deeper problem lies in UK diverging from the liberal, free market, more personal responsibility society that Ms. Thatcher and other liberal leaders have tried. Instead, an expensive nanny state became bigger and bigger, which resulted in public debt becoming bigger and bigger, which acquired a life of its own and soon overtook actual welfare spending.
As of 2009, UK's general government gross debt as % of GDP was 68.2 percent, a bit "small" compared to Japan's 218 percent and Italy's 116 percent.
The statists and socialists can argue that UK and other rich countries have lots of fiscal "responsibilities to poorer countries" through more foreign aid, including paying huge transfer of tax money to politians and governments of poorer economies because of their "climate debt". Thus, deep tax cuts cannot be an option for UK and other similarly-situated governments.
Yesterday, a number of Asian stockmarkets suffered serious declines as a result of negative fiscal news from Hungary. Yes, a non-EU member Hungary sending out signals of more fiscal bleeding is enough to worsen the already bad financial and fiscal conditions in Europe. Just when people were expecting that Spain and Portugal would follow Greece's fiscal bleeding, it was Hungary that came in next.
So, Greece-Portugal-Spain-Hungary-UK-who else?
Some are already queuing based on certain macro and micro indicators, like France and Italy.
The classical-liberal agenda of free market, individual freedom, more personal responsibility, and lean/limited state is calling out loud. The hard-working people should not be over-taxed and over-regulated; the lazy and irresponsible people should not be over-subsidized; the less-productive government bureaucracies should not be over-blown and expanded.
--------
See also:
Welfarism 5: Germany's Tax Hikes, June 28, 2006
Welfarism 6: Obama and US Entitlement, November 11, 2008
Welfarism 7: Squatters in the Univ. of the Philippines (UP), February 23, 2009
Monday, May 29, 2006
Welfarism 4: Italy's Fiscal Woes, Kid Glove to Criminals
Like Germany, France and Spain, Europe's big but highly indebted economies, Italy is in a serious fiscal bind. The EU stability pact says that member-countries' budget deficit should be no more than 3 percent of their GDP. For the past few years, habitual violators include Italy, France and Germany.
This year, Italy'y deputy finance minister, Vincenzo Visco, was reported* to have said that the country's deficit could be more than 4.5 percent of GDP, much bigger than earlier forecasts.
Like many of its neighbors, the expensive cost of generous welfare system makes the expenditures bloat to sizes.
The cycle of (1) high and multiple taxes (2) to finance generous welfare system, sometimes (3) make many productive citizens and entrepreneurs reduce working if not leave the country, (4) resulting in huge budget deficit and government borrowings, (5) resulting in higher debt payments, further bloating of the expenditures, and you need (1) high and multiple taxes...
You reduce personal responsibility and assume more "collective" and government responsibility, you encourage the emergence of more subsidy- and welfare-dependent people, while discouraging more self-driven and ambitious people.
* See: "Italy warns of growing budget deficit", May 23 2006
http://news.ft.com/cms/s/fbf1c528-ea7b-11da-9566-0000779e2340.html
Light Fines in a Welfare State
A teenager with no criminal record just went on a stabbing rampage in Berlin, Germany, May 26 evening. He stabbed 35 people randomly, 6 of whom needed emergency surgery. The police caught him and charged with 24 counts of attempted murder, and could face a youth sentence of up to five years in prison, according to a report in the Financial Times today, http://news.ft.com/cms/s/71bce60c-ee64-11da-820a-0000779e2340.html.
This man from a poorer economy asks, "5 years imprisonment only?" I can't believe that after attempting to harm and kill as many people as he can, he'd get only 5 years in prison? If that thing happened here in the Philippines, that guy when caught by the public would be a mutilated body if not a dead meat before the police could get him. Stabbing and attempting to kill people randomly is the mind of a sick and deranged person; he does not deserve to live another day.
Sure, Philippine laws will also give some consideration and protection to teenage criminals. I do not know how many years imprisonment a Filipino teenage criminal would get if he did the same act as that Berlin teenager. But chances are, the public will get the boy first even the police could find him, and public anger is more spontaneous and more fierce than government laws would impose.
If I am a family member of one of those 35 people randomly stabbed, I would ask the Parliament why the fines are so light and non-intimidating to other potential criminals. Sure Germany is a welfare state, but the welfare and protection should not be extended to deranged people with clear and explicit plans of harming and killing other people.
* See also: Welfarism 3: Spiraling Costs and Rent-Seeking, April 24, 2006
This year, Italy'y deputy finance minister, Vincenzo Visco, was reported* to have said that the country's deficit could be more than 4.5 percent of GDP, much bigger than earlier forecasts.
Like many of its neighbors, the expensive cost of generous welfare system makes the expenditures bloat to sizes.
The cycle of (1) high and multiple taxes (2) to finance generous welfare system, sometimes (3) make many productive citizens and entrepreneurs reduce working if not leave the country, (4) resulting in huge budget deficit and government borrowings, (5) resulting in higher debt payments, further bloating of the expenditures, and you need (1) high and multiple taxes...
You reduce personal responsibility and assume more "collective" and government responsibility, you encourage the emergence of more subsidy- and welfare-dependent people, while discouraging more self-driven and ambitious people.
* See: "Italy warns of growing budget deficit", May 23 2006
http://news.ft.com/cms/s/fbf1c528-ea7b-11da-9566-0000779e2340.html
Light Fines in a Welfare State
A teenager with no criminal record just went on a stabbing rampage in Berlin, Germany, May 26 evening. He stabbed 35 people randomly, 6 of whom needed emergency surgery. The police caught him and charged with 24 counts of attempted murder, and could face a youth sentence of up to five years in prison, according to a report in the Financial Times today, http://news.ft.com/cms/s/71bce60c-ee64-11da-820a-0000779e2340.html.
This man from a poorer economy asks, "5 years imprisonment only?" I can't believe that after attempting to harm and kill as many people as he can, he'd get only 5 years in prison? If that thing happened here in the Philippines, that guy when caught by the public would be a mutilated body if not a dead meat before the police could get him. Stabbing and attempting to kill people randomly is the mind of a sick and deranged person; he does not deserve to live another day.
Sure, Philippine laws will also give some consideration and protection to teenage criminals. I do not know how many years imprisonment a Filipino teenage criminal would get if he did the same act as that Berlin teenager. But chances are, the public will get the boy first even the police could find him, and public anger is more spontaneous and more fierce than government laws would impose.
If I am a family member of one of those 35 people randomly stabbed, I would ask the Parliament why the fines are so light and non-intimidating to other potential criminals. Sure Germany is a welfare state, but the welfare and protection should not be extended to deranged people with clear and explicit plans of harming and killing other people.
* See also: Welfarism 3: Spiraling Costs and Rent-Seeking, April 24, 2006
Friday, April 21, 2006
Welfarism 3: Spiraling Costs and Rent-Seeking
A story today from the Financial Times reported, "Welfare costs threaten Merkel reform agenda". The related numbers from the same report are as follows:
* Spiralling welfare costs could add €4bn to Germany’s 2006 budget deficit and undermine Chancellor Angela Merkel’s efforts to bring her country’s finances under control
* faster-than-expected rise in the number of households claiming long-term unemployment benefits could bring this year’s deficit from a planned €38.3bn to well above €40bn ($49bn, £27.7bn).
* the number of households claiming “unemployment benefit II”, the most basic form of welfare support, comparable to the UK’s income support, has risen from 2.9m to 3.9m since its introduction 15 months ago.
* According to a labour ministry document obtained by the FT, the actual number is even higher. The document shows the agency’s monthly reports, based on samples, had underestimated the number of claimants by 200,000 a month throughout last year, suggesting today’s figure was around 4.2m.
* estimates total payments in 2006 could reach €28bn, well above the €24.4bn provided for in the budget.
* loopholes appeared in the system that have led to a flood of claims. Young jobseekers, for instance, have moved out of their parents’ homes and into their own flats in order to claim generous rent subsidies.
* news that her fiscal consolidation plan may be in jeopardy could be a blessing for Ms Merkel. It should make it easier to justify a hefty, three-point increase in value-added tax planned for next January.
Never fails. People respond to incentives and shy away from disincentives. If you put a lot of incentives and subsidies on something (unemployment claims, house rental subsidies, etc.), then you'll have more claimants than what you expect. If you tax people more, like the planned 3 point increase in VAT, you'll discourage more investments and job creation that will solve your high unemployment, high unemployment claims spending. Many businessmen will still invest, of course, but not in home country where taxes are high and piling on each other. Many of them will do business elsewhere where taxes are lower, labor and environmental laws are more liberal, then send some income and profit back home.
Many left-leaning, welfarist, socialist and statist groups in the Philippines and other developing countries dream of following the welfare system of Germany, France and many European coutries. They want to force social equality by over-taxing and over-regulating the productive and hard-working people, give the money to guys who are encouraged by generous welfare, with the huge, thick and expensive layers of government bureaucracy and politicians as intermediaries.
Subsidizing personal irresponsibility and penalizing hard work is one formula for social equality and mediocrity. And this is the folly of socialism. As Larry Reed of Mackinac Center pointed out, "equal people are not free and free people are not equal". Not that Germany and other rich countries of Europe are largy socialist, they are still predominantly capitalist but the bureaucratic, high state welfare system and high taxes discourage certain individual initiatives and entrepreneurship of their citizens. European countries are just lucky that they have put up good and less corruptible institutions. Government personnel are less corruptible because of their high pay and generous allowances and pensions someday. But what was corrupted is the system of incentives and disincentives in society.
I guess this is one reason why a number of Asian countries are growing much faster than the rest of the world. Aside from certain philosophical and cultural ethics that drive their people to high ambitions, they are not burdened by strict government-mandated welfare standards and the energy-sapping bureaucratic regulations and taxes. For instance, people work 10 to 14 hours a day, 6 days a week (equivalent to 60 to 84 hours/week), and any government labor laws that limit people's work to only 35 or 40 hours/week are not strictly followed.
Rent-seeking and Government
In the book Government Failure: A Primer in Public Choice written by Tullock, Seldon and Brady (2002, published by Cato Institute, Washington DC), chapter 4 was entitled "The cost of rent-seeking", written by Prof. Gordon Tullock. Dr. Tullock defined the words "rent seeking" as "the use of resources for the purpose of obtaining rents for people where the rents themselves come from some activity that has negative social value."
Examples of rent-seeking are (a) trade protectionism, where the protected local industry benefits but the local consumers are worse off; (b) private monopolies, and (c) direct income transfers by government where A is taxed and B receives the money. The real cost of rent seeking, according to Tullock, comes from the distortion of the voting process. People vote for politicians and legislators who promise them special local projects, barely realizing that the cost of high taxes from many other taxpayers elsewhere, and the high taxes that they themselves pay to finance the special local projects elsewhere, is high.
But the indirect damage of rent-seeking, he says, is even worse than direct damage. Example of indirect damage is drawing a big number of intelligent and energetic people into an activity that has no social product, or may have a negative social product (example, political lobbying for special privileges and protections).
I would say that around 95 percent of all forms of government restrictions, from bureaucratic procedures in starting a business, to erecting rigid labor laws like setting up high minimum wages mandated by Congress, to welfarism financed by high and complicated taxes, are rent-seeking in nature. They are tying productive people's hands, siphoning off if not outrightly confiscating, their income and savings, and transferred to people often driven by envy and too lazy to accept personal responsibilities on things that ought to be their private domain. The huge government bureaucracy and long layers of politicians that stand in-between the people whose incomes are confiscated and the beneficiaries who wait for such wealth transfer, also eat up precious social resources.
* See also: Welfarism 2: France Riots, Taxes in Welfare States, November 17, 2005
* Spiralling welfare costs could add €4bn to Germany’s 2006 budget deficit and undermine Chancellor Angela Merkel’s efforts to bring her country’s finances under control
* faster-than-expected rise in the number of households claiming long-term unemployment benefits could bring this year’s deficit from a planned €38.3bn to well above €40bn ($49bn, £27.7bn).
* the number of households claiming “unemployment benefit II”, the most basic form of welfare support, comparable to the UK’s income support, has risen from 2.9m to 3.9m since its introduction 15 months ago.
* According to a labour ministry document obtained by the FT, the actual number is even higher. The document shows the agency’s monthly reports, based on samples, had underestimated the number of claimants by 200,000 a month throughout last year, suggesting today’s figure was around 4.2m.
* estimates total payments in 2006 could reach €28bn, well above the €24.4bn provided for in the budget.
* loopholes appeared in the system that have led to a flood of claims. Young jobseekers, for instance, have moved out of their parents’ homes and into their own flats in order to claim generous rent subsidies.
* news that her fiscal consolidation plan may be in jeopardy could be a blessing for Ms Merkel. It should make it easier to justify a hefty, three-point increase in value-added tax planned for next January.
Never fails. People respond to incentives and shy away from disincentives. If you put a lot of incentives and subsidies on something (unemployment claims, house rental subsidies, etc.), then you'll have more claimants than what you expect. If you tax people more, like the planned 3 point increase in VAT, you'll discourage more investments and job creation that will solve your high unemployment, high unemployment claims spending. Many businessmen will still invest, of course, but not in home country where taxes are high and piling on each other. Many of them will do business elsewhere where taxes are lower, labor and environmental laws are more liberal, then send some income and profit back home.
Many left-leaning, welfarist, socialist and statist groups in the Philippines and other developing countries dream of following the welfare system of Germany, France and many European coutries. They want to force social equality by over-taxing and over-regulating the productive and hard-working people, give the money to guys who are encouraged by generous welfare, with the huge, thick and expensive layers of government bureaucracy and politicians as intermediaries.
Subsidizing personal irresponsibility and penalizing hard work is one formula for social equality and mediocrity. And this is the folly of socialism. As Larry Reed of Mackinac Center pointed out, "equal people are not free and free people are not equal". Not that Germany and other rich countries of Europe are largy socialist, they are still predominantly capitalist but the bureaucratic, high state welfare system and high taxes discourage certain individual initiatives and entrepreneurship of their citizens. European countries are just lucky that they have put up good and less corruptible institutions. Government personnel are less corruptible because of their high pay and generous allowances and pensions someday. But what was corrupted is the system of incentives and disincentives in society.
I guess this is one reason why a number of Asian countries are growing much faster than the rest of the world. Aside from certain philosophical and cultural ethics that drive their people to high ambitions, they are not burdened by strict government-mandated welfare standards and the energy-sapping bureaucratic regulations and taxes. For instance, people work 10 to 14 hours a day, 6 days a week (equivalent to 60 to 84 hours/week), and any government labor laws that limit people's work to only 35 or 40 hours/week are not strictly followed.
Rent-seeking and Government
In the book Government Failure: A Primer in Public Choice written by Tullock, Seldon and Brady (2002, published by Cato Institute, Washington DC), chapter 4 was entitled "The cost of rent-seeking", written by Prof. Gordon Tullock. Dr. Tullock defined the words "rent seeking" as "the use of resources for the purpose of obtaining rents for people where the rents themselves come from some activity that has negative social value."
Examples of rent-seeking are (a) trade protectionism, where the protected local industry benefits but the local consumers are worse off; (b) private monopolies, and (c) direct income transfers by government where A is taxed and B receives the money. The real cost of rent seeking, according to Tullock, comes from the distortion of the voting process. People vote for politicians and legislators who promise them special local projects, barely realizing that the cost of high taxes from many other taxpayers elsewhere, and the high taxes that they themselves pay to finance the special local projects elsewhere, is high.
But the indirect damage of rent-seeking, he says, is even worse than direct damage. Example of indirect damage is drawing a big number of intelligent and energetic people into an activity that has no social product, or may have a negative social product (example, political lobbying for special privileges and protections).
I would say that around 95 percent of all forms of government restrictions, from bureaucratic procedures in starting a business, to erecting rigid labor laws like setting up high minimum wages mandated by Congress, to welfarism financed by high and complicated taxes, are rent-seeking in nature. They are tying productive people's hands, siphoning off if not outrightly confiscating, their income and savings, and transferred to people often driven by envy and too lazy to accept personal responsibilities on things that ought to be their private domain. The huge government bureaucracy and long layers of politicians that stand in-between the people whose incomes are confiscated and the beneficiaries who wait for such wealth transfer, also eat up precious social resources.
* See also: Welfarism 2: France Riots, Taxes in Welfare States, November 17, 2005
Thursday, November 17, 2005
Welfarism 2: France Riots, Taxes in Welfare States
From my readings of the 3-weeks riots in France, the usually-mentioned culprit for the anger by the rioters are: (a) the police's racism, arrogance and brutality to immigrants of African and Arab/North African origin; (b) high unemployment among immigrants, up to 40% or 4x the national average of 10% (and France has this 10% average unemployment rate for the last 30 years or more!), and (c) bad social conditions (housing, discrimination in work if ever employed, and so on).
The problem with the French police is an issue that can be addressed by Interior Minister Sarkozy and the police chiefs. The problem on unemployment and social discrimination I think, can be rooted to a "crisis of welfarism", of high expectations of welfare, and continuing disappointment of high taxes and over-regulation of business to maintain welfarism. This is a problem that has finally caught up with France, could spread to other European welfare states. Though France's situation is more unique and pronounce by virtue of its being a strong colonial power in the past.
France colonized dozens of countries in Africa; it even had colonies in Asia before -- Vietnam, Laos, Cambodia. When colonization officially ended, tens, hundreds of thousands from each of its former colonies went to France (especially the fallen rulers?). The migrants settled in France, produced offsprings who are France-born, expecting that they be entitled to the same welfare benefits as the "real" French, them white people with blue eyes, unlike them darker skin with black eyes and kinky hair.
But France's welfarism is already overstretched. Its budget deficit always exceeds 3% of GDP every year, a problem it shares with Germany and Italy and which angers many smaller countries in the EU who struggle hard to keep their budget deficit below 3% of GDP. France's public debt comprises 66% (or 2/3) of its GDP as of 2004 (data from IMF, World Economic Outlook 2005). And the unfunded liabilities of the social security system is estimated to be around 200 percent of GDP. The expenditures for public welfare, farm subsidies and other services always exceed tax collections and other revenues. And rightly so since France's taxes are among the highest in the world. Top marginal income tax rate is 48 percent, add in payroll taxes and productive citizens pay as much as 65 percent of their income in taxes. Who's happy surrendering 2/3 of his/her monthly income to the government? The top corporate tax rate is 34 percent and value-added tax (VAT) is around 20 percent.
A Frenchman friend told me that while many productive French people are leaving France, went to UK, US, Eastern Europe, other smaller-taxes economies (well, at least compared to those in continental European countries), the population of its welfare-dependent citizens and migrants continue.
Another problem of welfarism is over-regulation of labor laws, business and entrepreneurship. To hire employees means: (a) lots of additional fees to pay (workers' health insurance, unemployment insurance, etc.); (b) workweek is only 35 hours; (c) mandatory paid vacation leave is 5 weeks; (d) family and maternity leave is 36 weeks; and (e) it's very difficult and bureaucratic to lay off or fire employees. If you are an entrepreneur and faced with such rigid labor laws, while business and personal taxes are high, why hire more people? Better do it yourself, or move your shop or factory to Eastern Europe or Asia or the US where taxes are smaller and labor laws are less rigid. This largely explains for the high unemployment in France, Germany, Belgium, Spain, Italy, other European countries.
So, the cycle of high expectations of welfare and disappointment with high and multiple taxes and rigid labor laws is a trap that sustains discrimination and high unemployment. Now, if my hypothesis (ie, being a hypothesis, subject to test by facts and counter hypothesis and theories) that this is a "crisis of welfarism", then the current riots is one slam-dunk proof against socialism-inspired policies of the French government. The free-market system of less government intervention, less bureaucracy, less taxes, more entrepreneurship and more individual responsibility, is an old idea that continues to elude the political leadership of France and many welfarist countries.
The upcoming WTO Ministerial meeting in Hong Kong could be one opportunity for the high welfare, high agricultural protectionism countries, to slowly go back to the free market system. Simply slashing high farm subsidies, and slashing the high taxes that finance such huge farm subsidies, would provide justice not only to the over-taxed citizens of rich countries, but also to the farmers and agri-business enterprises in poorer countries.
From someone in a poorer country (the Philippines) writing about these things, some people in rich countries might train the gun back and say, "now, look who's talking!" But precisely the main reason why our country is poor, is because of the same high government interventionism, high and multiple taxation, over-regulation of labor laws and entrepreneurship, that many of our people are poor and unemployed.
Taxes in Welfare States
Many people, ordinary citizens and government leaders alike, in the poorer countries, envy the "free education, free hospitalization, long paid vacations, generous unemployment benefits,..." of many welfare states of Europe and other rich economies. I don't know if they also realize that maintaining a welfare state is very expensive for the taxpayers. After all, government has nothing to give to people except what it takes from other people.
Below are some data I got from the IMF's Government Finance Statistics (GFS) Yearbook 2004. Revenue = taxes + social contributions + other revenues (fees, charges) and grants. The taxes (various forms of income and consumption taxes) comprise between 1/2 to 2/3 of government revenues. Many of these fees and charges are not called as taxes because they are only created by administrative orders, not by the legislature or the Parliament. Nevertheless, whether they are called taxes or non-taxes fees and charges, they have one thing in common: they are mandatory and compulsory payment to the government.
General Government Revenue as % of Gross Domestic Product (GDP), 2003 (unless specified):
1. Denmark, 59.3% (of which taxes, 47.1%)
2. Sweden, 58% (taxes 35.2%)
3. Norway, 57.3%
4. Finland, 52.9%
5. Austria, 50.8% (2002)
6. Belgium, 50.5%
7. France, 50.4%
8. Luxembourg, 46.6%
9. Italy, 46.1% (2000)
10. Netherlands, 45.7%
11. Germany, 45.0%
12. Iceland, 44.8% (2002)
13. Portugal, 41.7% (2001)
14. Canada, 40.8%
15. United Kingdom, 40.1%
16. Spain, 39.9% (2002)
17. Switzerland, 37.5% (2001)
18, Australia, 36.8%
19. United States, 31.8% (taxes 18.7%)
Some Asian economies:
1. Hong Kong, 15.3% (2002)
2. Thailand, 20.9%
3. Malaysia, 26.3%
Note from the above numbers that the US' welfare system is less taxing than those in Europe. In fact, the US' government revenues as % of GDP is nearly 1/2 of those in Denmark, Sweden and Norway. This partly explains why the US attracts more entrepreneurial people from many parts of the world, than Europe. But many Asian and Eastern European countries with smaller taxes and lesser government regulations are attracting more and more professionals and investors from both North America and Western Europe.
* See also: Welfarism 1: Dependence vs. Individual Responsibility, October 17, 2005
The problem with the French police is an issue that can be addressed by Interior Minister Sarkozy and the police chiefs. The problem on unemployment and social discrimination I think, can be rooted to a "crisis of welfarism", of high expectations of welfare, and continuing disappointment of high taxes and over-regulation of business to maintain welfarism. This is a problem that has finally caught up with France, could spread to other European welfare states. Though France's situation is more unique and pronounce by virtue of its being a strong colonial power in the past.
France colonized dozens of countries in Africa; it even had colonies in Asia before -- Vietnam, Laos, Cambodia. When colonization officially ended, tens, hundreds of thousands from each of its former colonies went to France (especially the fallen rulers?). The migrants settled in France, produced offsprings who are France-born, expecting that they be entitled to the same welfare benefits as the "real" French, them white people with blue eyes, unlike them darker skin with black eyes and kinky hair.
But France's welfarism is already overstretched. Its budget deficit always exceeds 3% of GDP every year, a problem it shares with Germany and Italy and which angers many smaller countries in the EU who struggle hard to keep their budget deficit below 3% of GDP. France's public debt comprises 66% (or 2/3) of its GDP as of 2004 (data from IMF, World Economic Outlook 2005). And the unfunded liabilities of the social security system is estimated to be around 200 percent of GDP. The expenditures for public welfare, farm subsidies and other services always exceed tax collections and other revenues. And rightly so since France's taxes are among the highest in the world. Top marginal income tax rate is 48 percent, add in payroll taxes and productive citizens pay as much as 65 percent of their income in taxes. Who's happy surrendering 2/3 of his/her monthly income to the government? The top corporate tax rate is 34 percent and value-added tax (VAT) is around 20 percent.
A Frenchman friend told me that while many productive French people are leaving France, went to UK, US, Eastern Europe, other smaller-taxes economies (well, at least compared to those in continental European countries), the population of its welfare-dependent citizens and migrants continue.
Another problem of welfarism is over-regulation of labor laws, business and entrepreneurship. To hire employees means: (a) lots of additional fees to pay (workers' health insurance, unemployment insurance, etc.); (b) workweek is only 35 hours; (c) mandatory paid vacation leave is 5 weeks; (d) family and maternity leave is 36 weeks; and (e) it's very difficult and bureaucratic to lay off or fire employees. If you are an entrepreneur and faced with such rigid labor laws, while business and personal taxes are high, why hire more people? Better do it yourself, or move your shop or factory to Eastern Europe or Asia or the US where taxes are smaller and labor laws are less rigid. This largely explains for the high unemployment in France, Germany, Belgium, Spain, Italy, other European countries.
So, the cycle of high expectations of welfare and disappointment with high and multiple taxes and rigid labor laws is a trap that sustains discrimination and high unemployment. Now, if my hypothesis (ie, being a hypothesis, subject to test by facts and counter hypothesis and theories) that this is a "crisis of welfarism", then the current riots is one slam-dunk proof against socialism-inspired policies of the French government. The free-market system of less government intervention, less bureaucracy, less taxes, more entrepreneurship and more individual responsibility, is an old idea that continues to elude the political leadership of France and many welfarist countries.
The upcoming WTO Ministerial meeting in Hong Kong could be one opportunity for the high welfare, high agricultural protectionism countries, to slowly go back to the free market system. Simply slashing high farm subsidies, and slashing the high taxes that finance such huge farm subsidies, would provide justice not only to the over-taxed citizens of rich countries, but also to the farmers and agri-business enterprises in poorer countries.
From someone in a poorer country (the Philippines) writing about these things, some people in rich countries might train the gun back and say, "now, look who's talking!" But precisely the main reason why our country is poor, is because of the same high government interventionism, high and multiple taxation, over-regulation of labor laws and entrepreneurship, that many of our people are poor and unemployed.
Taxes in Welfare States
Many people, ordinary citizens and government leaders alike, in the poorer countries, envy the "free education, free hospitalization, long paid vacations, generous unemployment benefits,..." of many welfare states of Europe and other rich economies. I don't know if they also realize that maintaining a welfare state is very expensive for the taxpayers. After all, government has nothing to give to people except what it takes from other people.
Below are some data I got from the IMF's Government Finance Statistics (GFS) Yearbook 2004. Revenue = taxes + social contributions + other revenues (fees, charges) and grants. The taxes (various forms of income and consumption taxes) comprise between 1/2 to 2/3 of government revenues. Many of these fees and charges are not called as taxes because they are only created by administrative orders, not by the legislature or the Parliament. Nevertheless, whether they are called taxes or non-taxes fees and charges, they have one thing in common: they are mandatory and compulsory payment to the government.
General Government Revenue as % of Gross Domestic Product (GDP), 2003 (unless specified):
1. Denmark, 59.3% (of which taxes, 47.1%)
2. Sweden, 58% (taxes 35.2%)
3. Norway, 57.3%
4. Finland, 52.9%
5. Austria, 50.8% (2002)
6. Belgium, 50.5%
7. France, 50.4%
8. Luxembourg, 46.6%
9. Italy, 46.1% (2000)
10. Netherlands, 45.7%
11. Germany, 45.0%
12. Iceland, 44.8% (2002)
13. Portugal, 41.7% (2001)
14. Canada, 40.8%
15. United Kingdom, 40.1%
16. Spain, 39.9% (2002)
17. Switzerland, 37.5% (2001)
18, Australia, 36.8%
19. United States, 31.8% (taxes 18.7%)
Some Asian economies:
1. Hong Kong, 15.3% (2002)
2. Thailand, 20.9%
3. Malaysia, 26.3%
Note from the above numbers that the US' welfare system is less taxing than those in Europe. In fact, the US' government revenues as % of GDP is nearly 1/2 of those in Denmark, Sweden and Norway. This partly explains why the US attracts more entrepreneurial people from many parts of the world, than Europe. But many Asian and Eastern European countries with smaller taxes and lesser government regulations are attracting more and more professionals and investors from both North America and Western Europe.
* See also: Welfarism 1: Dependence vs. Individual Responsibility, October 17, 2005
Monday, October 17, 2005
Welfarism 1: Dependence vs. Individual Responsibility
Almost all rich countries in the world have extensive welfare system for their citizens. Even poor countries in the world also have welfarist aspirations in their constitutions and social legislations. The only difference is that rich countries have the means to implement generous welfare programs while poor countries have little resources to implement extensive welfare programs, only laws and constitutional provisions mentioning those state welfarism plans.
But as in any other social programs, big welfare also means big and multiple taxes; extensive welfare also means extensive bureaucracies and government regulations. And this creates its own contradiction, its own self-limiting constraints that makes continuing generous welfare more and more unsustainable in the future. I am inclined to believe that this contradiction has already reached a crisis proportion in many rich countries, so that said economies must either remove and abolish certain welfare programs and cut taxes and regulations, or continue said programs and bear the costs of ever-expanding government indebtedness.
A crisis of welfarism consists of (a) encouraging dependence on the state and even laziness, (b) discouraging hard work and industriousness in some people because of the "progressive taxes" system, and corollarily, (c) discouraging entrepreneurial start up and expansion because of rigid labor, social, environmental regulations, not to mention the complicated bureaucracy.
Extensive state welfarism is forced collectivism and forced equality. The rich and hard working guys are over-taxed and the money is spent to hire millions of government personnel, for distribution to the poor through free or highly-subsidized social services, and for important infrastructure programs around the country. The problem with forced collectivism and forced equality by the state is that individual responsibility is not given due importance.
People respond to incentives and shy away from disincentives. When being jobless can be rewarded with generous unemployment allowance and public housing, while working hard can be rewarded with high taxes, why work? Or atleast, why work hard? When hiring additional workers means paying lots of employment-related salaries and insurance (high minimujm wages, unemployment insurance, health insurance, social security and pension insurance), and you cannot easily fire workers even if they do stupid and dangerous things, why expand hiring? Better to move out of your country, look for more business-friendly countries and expand your business and employment there.
That is why in many welfare states, persistent high unemployment rate (often double-digits) is common, like in Germany, France, Spain, Italy, and Belgium. Also, in countries with very strict and rigid labor laws, many people would rather become "employee forever" than become start up entrepreneurs someday. To be an employer, there are many taxes and permits to pay, many regulations to follow, many papers to fill up, many bureaucracies to visit. To be an employee, there are many protections and safety nets, so why aspire to be an employer?
It is confusing to think sometimes that while economies become richer and more industrialized, the citizens are expected to be more dependent on the government when they are mature enough to take care of themselves, their families and their communities. There is need to re-assert personal freedom and responsibility in taking care of one's education, health care, housing, pension, credit, and other social and economic services. To do this, citizens should be taxed less, regulated less, ruled less, by their governments.
Poverty and Government Misrule
The same way that not all market failures need government intervention, not all forms of poverty need government subsidies, welfare programs, and other forms of intervention. There are several reasons for the poverty of a certain household or community: natural disaster, personal disaster, other people-imposed disaster, and government-imposed disaster. Let us tackle them one by one.
Natural disaster. A productive and wealthy household or community can be rendered penniless by some acts of nature: strong volcanic eruption and lahat or mudflows afterwards, strong earthquakes and tsunamis, strong typhoons, hurricanes or tornadoes, widespread forest fire and drought, and so on.
Personal disaster. Many years of savings can be wiped out by a single act or series of acts of personal irresponsibility, like losing all the wealth in one long night of gambling, losing all savings in medication as a result of too much, too long drinking, smoking and drug abuse, losing all savings in luxurious spendings, womanizing, and other expensive vices. Poor parents having plenty of children while engaged in alcoholism, gambling and other vices is one formula of perpetuating the future generations of poor households.
Other people-imposed disaster. Some people can wipe out other people’s fortune and savings by various acts of bullying and robbery: colonization and slavery, extortion and landgrabbing, arson and bombings, carnapping and kidnapping, and so on. Such acts strike into the heart of coercion and deprive men and women of their right to lives and properties.
Government-imposed disaster. While government’s main function is to control and stop other people from bullying and robbing other people of their right to life and property, government’s extended function (from state banks and corporations to business regulation, from public education to pension,…) enable it to confiscate people’s income and savings through various taxes, fees, and regulations that they must comply with. By stiffling entrepreneurship and job creation, many people become poor and jobless, irresponsible and miserable, so government provides various welfare programs, which further justifies continuing its confiscatory acts and practices.
Given such forms of disasters, natural and man-made, internally- and externally-imposed, what are some options to fight poverty?
For natural disasters, some form of accident insurance and lots of savings will enable the households to rebuild their houses, other personal properties, and livelihood after sometime, somewhere.
For personal disasters, since the villain is oneself, the self-inflictor should be allowed to rest if that is what he/she desires. Educating and re-training the children to escape the fate of their less responsible parents can be taken cared of by other people through their individual initiatives or voluntary organizations that provide charities to the self-driven individuals.
For other people-imposed disasters, government in its core function of protecting the right to life and property of productive citizens, should take of these bullies through the justice system. Although private security agencies and village-level security groups prove to be more efficient in neutralizing and fighting criminals and robbers than the police and other state armed personnel.
For government-imposed disasters, citizens should assert their right to the fruits of their hard work by demanding cut in taxes (especially personal and corporate income taxes), in the size and powers of the bureaucracy and politicians, and to assert the virtue of emphasizing personal freedom and responsibility, of voluntary acts of welfare, charity and collectivism. Government extending its functions to hundreds of otherwise private spheres is misrule and promotes more personal disasters.
The “government” being pointed out here refers not only to national and local government units. It extends to other governments-created bodies like foreign aid institutions.
But as in any other social programs, big welfare also means big and multiple taxes; extensive welfare also means extensive bureaucracies and government regulations. And this creates its own contradiction, its own self-limiting constraints that makes continuing generous welfare more and more unsustainable in the future. I am inclined to believe that this contradiction has already reached a crisis proportion in many rich countries, so that said economies must either remove and abolish certain welfare programs and cut taxes and regulations, or continue said programs and bear the costs of ever-expanding government indebtedness.
A crisis of welfarism consists of (a) encouraging dependence on the state and even laziness, (b) discouraging hard work and industriousness in some people because of the "progressive taxes" system, and corollarily, (c) discouraging entrepreneurial start up and expansion because of rigid labor, social, environmental regulations, not to mention the complicated bureaucracy.
Extensive state welfarism is forced collectivism and forced equality. The rich and hard working guys are over-taxed and the money is spent to hire millions of government personnel, for distribution to the poor through free or highly-subsidized social services, and for important infrastructure programs around the country. The problem with forced collectivism and forced equality by the state is that individual responsibility is not given due importance.
People respond to incentives and shy away from disincentives. When being jobless can be rewarded with generous unemployment allowance and public housing, while working hard can be rewarded with high taxes, why work? Or atleast, why work hard? When hiring additional workers means paying lots of employment-related salaries and insurance (high minimujm wages, unemployment insurance, health insurance, social security and pension insurance), and you cannot easily fire workers even if they do stupid and dangerous things, why expand hiring? Better to move out of your country, look for more business-friendly countries and expand your business and employment there.
That is why in many welfare states, persistent high unemployment rate (often double-digits) is common, like in Germany, France, Spain, Italy, and Belgium. Also, in countries with very strict and rigid labor laws, many people would rather become "employee forever" than become start up entrepreneurs someday. To be an employer, there are many taxes and permits to pay, many regulations to follow, many papers to fill up, many bureaucracies to visit. To be an employee, there are many protections and safety nets, so why aspire to be an employer?
It is confusing to think sometimes that while economies become richer and more industrialized, the citizens are expected to be more dependent on the government when they are mature enough to take care of themselves, their families and their communities. There is need to re-assert personal freedom and responsibility in taking care of one's education, health care, housing, pension, credit, and other social and economic services. To do this, citizens should be taxed less, regulated less, ruled less, by their governments.
Poverty and Government Misrule
The same way that not all market failures need government intervention, not all forms of poverty need government subsidies, welfare programs, and other forms of intervention. There are several reasons for the poverty of a certain household or community: natural disaster, personal disaster, other people-imposed disaster, and government-imposed disaster. Let us tackle them one by one.
Natural disaster. A productive and wealthy household or community can be rendered penniless by some acts of nature: strong volcanic eruption and lahat or mudflows afterwards, strong earthquakes and tsunamis, strong typhoons, hurricanes or tornadoes, widespread forest fire and drought, and so on.
Personal disaster. Many years of savings can be wiped out by a single act or series of acts of personal irresponsibility, like losing all the wealth in one long night of gambling, losing all savings in medication as a result of too much, too long drinking, smoking and drug abuse, losing all savings in luxurious spendings, womanizing, and other expensive vices. Poor parents having plenty of children while engaged in alcoholism, gambling and other vices is one formula of perpetuating the future generations of poor households.
Other people-imposed disaster. Some people can wipe out other people’s fortune and savings by various acts of bullying and robbery: colonization and slavery, extortion and landgrabbing, arson and bombings, carnapping and kidnapping, and so on. Such acts strike into the heart of coercion and deprive men and women of their right to lives and properties.
Government-imposed disaster. While government’s main function is to control and stop other people from bullying and robbing other people of their right to life and property, government’s extended function (from state banks and corporations to business regulation, from public education to pension,…) enable it to confiscate people’s income and savings through various taxes, fees, and regulations that they must comply with. By stiffling entrepreneurship and job creation, many people become poor and jobless, irresponsible and miserable, so government provides various welfare programs, which further justifies continuing its confiscatory acts and practices.
Given such forms of disasters, natural and man-made, internally- and externally-imposed, what are some options to fight poverty?
For natural disasters, some form of accident insurance and lots of savings will enable the households to rebuild their houses, other personal properties, and livelihood after sometime, somewhere.
For personal disasters, since the villain is oneself, the self-inflictor should be allowed to rest if that is what he/she desires. Educating and re-training the children to escape the fate of their less responsible parents can be taken cared of by other people through their individual initiatives or voluntary organizations that provide charities to the self-driven individuals.
For other people-imposed disasters, government in its core function of protecting the right to life and property of productive citizens, should take of these bullies through the justice system. Although private security agencies and village-level security groups prove to be more efficient in neutralizing and fighting criminals and robbers than the police and other state armed personnel.
For government-imposed disasters, citizens should assert their right to the fruits of their hard work by demanding cut in taxes (especially personal and corporate income taxes), in the size and powers of the bureaucracy and politicians, and to assert the virtue of emphasizing personal freedom and responsibility, of voluntary acts of welfare, charity and collectivism. Government extending its functions to hundreds of otherwise private spheres is misrule and promotes more personal disasters.
The “government” being pointed out here refers not only to national and local government units. It extends to other governments-created bodies like foreign aid institutions.
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