I have never run a marathon (42.2 kms.) in my life. I twice participated in a 5-k race, but I didn’t dare try the 10-k race. At my current physical condition, maybe I can finish a 42-k run-walk in maybe 8 hours or more. That is why I consider those winners of international marathons among the “supermen” in this planet because they can run 42-k in something like 2 hours and 10 minutes only, or an average speed of around 20 kph!
One of my good Filipino friends, Ramon “Monchit” Arellano, now an American citizen and residing in Bay Area, California, joined the San Francisco Marathon last July 29, 2007. I used to live in Monchit’s house here in Manila, along with other male friends, for a few months in the late 80s. That’s how I befriended him.
Monchit has been supporting the Books for the Barrios (BftB, www.booksforthebarrios.com) program in Bay Area for a few years. This is a voluntary organization with one important goal: to bring excess books of school children in the US (particularly in California) to less-privileged students in the Philippines, especially those living in rural areas. BftB started in 1981, and for the past two and a half decades, has helped tens of thousands of students, many of whom should have finished college already.
Words got into Monchit that “Due to dwindling financial support in the wake of many natural disasters (Katrina, tsunami, etc.), BftB may be forced to close its operations this summer if it does not generate enough funds… after more than 25 years of providing quality education materials to remote schools in the Philippines.”
So what he did, he registered for the SF Marathon, opened up a website, First Giving (www.firstgiving.com/SaveBftB) with just a single purpose: he will run to raise awareness among his friends and other people, get donations for BftB program so that it will continue its mission and operations. Monchit targeted a modest goal of raising $3,833. So far, he has received $3,525, and the names, amount given, plus their comments, are all posted in his website.
Today, I got an email from him saying that he finished the SF Marathon in a time of 5 hours and 3 minutes. That shows that he’s more physically fit than me J. His story was published by the Philippine Consulate General Office in San Francisco (www.philippineconsulate-sf.org/news07_107.htm). ABS-CBN was also at the finish line to interview him and the news was aired at Balitang America!
I write this to salute my friend not so much for his stamina, but for his kind heart and his innovativeness in raising money for a very legitimate and specific cause – to help poorer children in the Philippines have access to free books that would otherwise end up in landfills. I write this to showcase another example of volunteerism – by BftB, by Monchit, by their donors, and other people who help in such kind of endeavor, that support for less privileged people can be done by private individuals, that ultimately we do not need big government that confiscates big money from our pockets to do welfare and charity function to poorer people through big bureaucracy.
One issue that can be raised when tens of thousands of those used but free books from the US will land in Philippine soil, is that will this not displace, even on a small scale, the local publishers, the local bookstores, and the people employed by them? Possible, yes. But local publishers and local bookstores have to grapple with higher prices of their books (which turn off some potential buyers, especially poorer ones) because of the various taxes that government imposes on them and the books that they print and sell.
And we go back to the subject of volunteerism. Many citizens distrust their governments, that is why their “contribution” to society have to be done by force and coercion, through taxation. While the same citizens trust their friends, or friend of their friends, and they can give on their free will, without coercion and force. In addition, they can choose which kind of charity they will support. Some guys support students from poorer countries and communities, some guys support poorer athletes from poorer countries and communities, and so on. And this is the essence of civil society – voluntary support for fellowmen, self-reliance, and no coercion to attain certain social objectives.
Monday, August 13, 2007
Wednesday, August 08, 2007
Foreign Aid 8: Abolish the IMF
Prof. Christopher Lingle of Center for Civil Society India, published an article in the Financial Express in India entitled "Shut down the IMF"
http://www.financia lexpress. com/news/ Shut-down- the-IMF/208206/.
He wrote,
Yes, I also believe the IMF should be abolished. Last week or 2 weeks ago, IMF Managing Director (and former Spanish Finance Minister) Rodrigo de Rato came here in the Philippines. He talked mainly, as expected, "more government revenues, fix your fiscal deficit, improve tax collection,..."
Well, what else can you expect from international bureaucrats who live off on taxes? Without high taxes, those international bureaucracies like IMF, UN, WB, ADB, OECD, will have little or zero resources to sustain them.
In fairness to Mr. de Rato, he did not push for "new or higher taxes" for the Philippines. He only urged "better tax administration", meaning improved collection from existing tax laws and tax rates. Of course he's aware that the Philippines has among the most number of business taxes in the whole of Asia, in the whole world. He knows the existence of WB-IFC joint annual study, "Doing Business".
Last week, or perhaps weeks before, the Office of the President, through the Bureau of Internal Revenue (BIR) and possibly, along with the Dept. of Transportation and Communication (DOTC), publicized their plans to hike the "common carriers' tax" for public transportation by something like 2,600%(!). I do not know if this was related to Mr. de Rato's visit, or to plug in additional revenues from the never-say-die budget deficit of the country. Naturally the public transport sector players raised howl, and immediately filed a petition for fare increase for commuters of public transportation (jeepneys and buses, taxis). Seems that public opposition was stronger than the national bureaucrats' thirst for more blood and sweat from the citizens, the proposal was tentatively shelved. Until the vigilance recedes later perhaps, and the government will just suddenly ram up those new tax hikes.
International bureaucracies like the IMF, along with annual and bi-annual meetings of clubs of governments, like ASEAN + 6 summit, ASEAN ministerial meetings, APEC summit, etc., are very costly to taxpayers. That is why the Office of the President and the Department of Foreign Affairs (DFA) do not reveal to the public how much those meetings where the country hosted, cost us taxpayers.
The lesser we have of those international bureaucracies and summit, the better for us. Until governments will just create new clubs and regular meetings among themselves. Ewwww!
--------
See also:
Foreign Aid 4: Easterly vs. Sachs, May 01, 2006
Foreign Aid 5: Failure in East Timor, May 31, 2006
Foreign Aid 6: IMF is Engineerable and Abolishable, September 05, 2006
Foreign Aid 7: Wolfowitzoellickation of the WB, May 30, 2007
http://www.financia lexpress. com/news/ Shut-down- the-IMF/208206/.
He wrote,
By claiming that the International Monetary Fund (IMF) promotes free enterprise capitalism, Left-wing commentators are on record for closing it down. Considering the IMF's record, though, one has to be hooked on hallucinogenic drugs to believe it holds a corporate view in support of economic fundamentalism. As it is, governments seeking financial support from the IMF with large budget deficits are instructed to increase the tax burden to reduce shortfalls in public revenues. It defies logic to suppose that giving the government more control over the economy, thus, promotes free markets. But then, Leftist critics are not always responsive to facts.
"Having said that, there are good reasons to shut down the IMF. On the basis of current circumstances and its ongoing operations, global financial flows would almost certainly be no worse off if the IMF were abolished. Indeed, it is more likely that global markets would work better without it. Founded in 1945, the IMF was charged with fostering economic stability by providing emergency loans to members having trouble financing their balance of payments. But the financial system it was designed for began vanishing in 1971 when the gold standard ceased to exist....
Yes, I also believe the IMF should be abolished. Last week or 2 weeks ago, IMF Managing Director (and former Spanish Finance Minister) Rodrigo de Rato came here in the Philippines. He talked mainly, as expected, "more government revenues, fix your fiscal deficit, improve tax collection,..."
Well, what else can you expect from international bureaucrats who live off on taxes? Without high taxes, those international bureaucracies like IMF, UN, WB, ADB, OECD, will have little or zero resources to sustain them.
In fairness to Mr. de Rato, he did not push for "new or higher taxes" for the Philippines. He only urged "better tax administration", meaning improved collection from existing tax laws and tax rates. Of course he's aware that the Philippines has among the most number of business taxes in the whole of Asia, in the whole world. He knows the existence of WB-IFC joint annual study, "Doing Business".
Last week, or perhaps weeks before, the Office of the President, through the Bureau of Internal Revenue (BIR) and possibly, along with the Dept. of Transportation and Communication (DOTC), publicized their plans to hike the "common carriers' tax" for public transportation by something like 2,600%(!). I do not know if this was related to Mr. de Rato's visit, or to plug in additional revenues from the never-say-die budget deficit of the country. Naturally the public transport sector players raised howl, and immediately filed a petition for fare increase for commuters of public transportation (jeepneys and buses, taxis). Seems that public opposition was stronger than the national bureaucrats' thirst for more blood and sweat from the citizens, the proposal was tentatively shelved. Until the vigilance recedes later perhaps, and the government will just suddenly ram up those new tax hikes.
International bureaucracies like the IMF, along with annual and bi-annual meetings of clubs of governments, like ASEAN + 6 summit, ASEAN ministerial meetings, APEC summit, etc., are very costly to taxpayers. That is why the Office of the President and the Department of Foreign Affairs (DFA) do not reveal to the public how much those meetings where the country hosted, cost us taxpayers.
The lesser we have of those international bureaucracies and summit, the better for us. Until governments will just create new clubs and regular meetings among themselves. Ewwww!
--------
See also:
Foreign Aid 4: Easterly vs. Sachs, May 01, 2006
Foreign Aid 5: Failure in East Timor, May 31, 2006
Foreign Aid 6: IMF is Engineerable and Abolishable, September 05, 2006
Foreign Aid 7: Wolfowitzoellickation of the WB, May 30, 2007
Monday, August 06, 2007
Many "public goods" are now privately-produced
Almost all so-called "public goods" can now be done or provided by the private sector. Why?
Consider many of those gated, private villages. So-called public goods like streetlight traffic, garbage collection, road & drainage construction/maintenance, street lighting, peace and order, school, church, primary health care, fire fighting equipment, multipurpose hall, basketball court, open garden, children's playground, etc., are produced by the private sector. Residents and homeowners pay an annual association dues (based on per sq.m. lot area), plus many other fees (car sticker, IDs for househelpers and drivers, rental of village clubhouse, basketball court, etc.), which are essentially like taxes. The only difference is that the residents pay this "tax" to the homeowner association, their "local government" for the village. That is why, LGUs' collection of real property tax (RPT) for residents of those gated villages for zero service within the village can be considered as plain extortion.
Ok, how about services outside the gates of those villages? The Ayalas in the Philippines built underground passes for people; or elevated walkways for people in makati's CBD, at zero cost to people, whether in taxes or "pay upon entry" like tollroads. The Ayalas make money to compensate for the expenses of those "positive externalities" to people including the "free riders" by earning revenues from ads posted on those elevated walkways or underground passes/tunnels for people.
Or SM Malls (other malls) build free pedestrian overpasses for people to cross the streets up to their malls. They'd also deputize their private security guards to conduct traffic -- at zero cost to taxpayers -- in public roads near their malls.
Other examples often cited that should remain in government hands -- broadcasting TV, street lights, peace and order, etc. Privately-owned TV networks are more efficient, more informative, to people than government-owned TV stations. The former costs zero from taxpayers, the latter cost them a lot from endless subsidies and contracts.
What about enforcement of contracts and fulfilment of promises between/among people? All referees in basketball and soccer, also baseball umpires, the guys who impose the rules of the game, are private individuals. They are not employees of the city hall or of the national government's sports commission or olympic committee. Conflct among neighbors in a village are first resolved by the village association. Like when a neighbor complains about loud parties or barking of dogs by his neighbor.
It is only when people will not respect those private referees, private settlers of dispute, that people elevate their case/s to government justice bodies like the courts, the barangay, etc. In which case, judicial courts can remain in government.
I have argued earlier why education should be "parental responsibility", not "government responsibility". Poverty alleviation should also be "personal responsibility", not "government responsibility." For instance, after working for 5 years straight abroad and bringin home P3M or more in cash, one can be expected to be well-off already. But personal irresponsibility can easily turn that money into ashes and nothing with mindless spending and getting into trouble.
Drink and party everyday, have mistresses left and right, go into casinos, buy expensive appliances, harm or shoot someone when he got drunk. All those money can evaporate in a short while, while leading oneself into prison, all for acts of personal irresponsibility.
So, what's left for government's "public goods"? Very little in fact. And so, government's confiscation of money and savings have very little justification, if at all. But many guys who are "poverty fighters" like government personnel and foreign aid institutions, will never fail to remind us how lousy a society can be if we leave people to be responsible for themselves. That is why we have to fork out money from our pockets to pay them and their travels and they will fight poverty "in our behalf".
Consider many of those gated, private villages. So-called public goods like streetlight traffic, garbage collection, road & drainage construction/maintenance, street lighting, peace and order, school, church, primary health care, fire fighting equipment, multipurpose hall, basketball court, open garden, children's playground, etc., are produced by the private sector. Residents and homeowners pay an annual association dues (based on per sq.m. lot area), plus many other fees (car sticker, IDs for househelpers and drivers, rental of village clubhouse, basketball court, etc.), which are essentially like taxes. The only difference is that the residents pay this "tax" to the homeowner association, their "local government" for the village. That is why, LGUs' collection of real property tax (RPT) for residents of those gated villages for zero service within the village can be considered as plain extortion.
Ok, how about services outside the gates of those villages? The Ayalas in the Philippines built underground passes for people; or elevated walkways for people in makati's CBD, at zero cost to people, whether in taxes or "pay upon entry" like tollroads. The Ayalas make money to compensate for the expenses of those "positive externalities" to people including the "free riders" by earning revenues from ads posted on those elevated walkways or underground passes/tunnels for people.
Or SM Malls (other malls) build free pedestrian overpasses for people to cross the streets up to their malls. They'd also deputize their private security guards to conduct traffic -- at zero cost to taxpayers -- in public roads near their malls.
Other examples often cited that should remain in government hands -- broadcasting TV, street lights, peace and order, etc. Privately-owned TV networks are more efficient, more informative, to people than government-owned TV stations. The former costs zero from taxpayers, the latter cost them a lot from endless subsidies and contracts.
What about enforcement of contracts and fulfilment of promises between/among people? All referees in basketball and soccer, also baseball umpires, the guys who impose the rules of the game, are private individuals. They are not employees of the city hall or of the national government's sports commission or olympic committee. Conflct among neighbors in a village are first resolved by the village association. Like when a neighbor complains about loud parties or barking of dogs by his neighbor.
It is only when people will not respect those private referees, private settlers of dispute, that people elevate their case/s to government justice bodies like the courts, the barangay, etc. In which case, judicial courts can remain in government.
I have argued earlier why education should be "parental responsibility", not "government responsibility". Poverty alleviation should also be "personal responsibility", not "government responsibility." For instance, after working for 5 years straight abroad and bringin home P3M or more in cash, one can be expected to be well-off already. But personal irresponsibility can easily turn that money into ashes and nothing with mindless spending and getting into trouble.
Drink and party everyday, have mistresses left and right, go into casinos, buy expensive appliances, harm or shoot someone when he got drunk. All those money can evaporate in a short while, while leading oneself into prison, all for acts of personal irresponsibility.
So, what's left for government's "public goods"? Very little in fact. And so, government's confiscation of money and savings have very little justification, if at all. But many guys who are "poverty fighters" like government personnel and foreign aid institutions, will never fail to remind us how lousy a society can be if we leave people to be responsible for themselves. That is why we have to fork out money from our pockets to pay them and their travels and they will fight poverty "in our behalf".
Wednesday, July 25, 2007
Decentralization 1: It's Still More Government
I am no fan of so-called "decentralization" or "devolution" from national to local government units (LGUs). Both in principle and practice. Whether centralization or decentralization, it's the same bottom lineof MORE government and bureaucracies. The only difference is that in centralization, it's the national politicians and bureaucrats who make and implement the rules, while in decentralization, it's the local politicians and bureaucrats who do.
Below is from a friend, also from UP. He was a 3-termer councilor in a town in Pampanga, now a municipal administrator. He's got lots of insights on local govt. administration, governance, taxation, etc. For instance, he noted the wastage of our taxes on barangay leaders. The barangay chairman in pangasinan where our farm is located also narrated to me that many of his fellow brgy chairmen really enjoy being treated to red-lights entertainment (DOM style) when they go out for seminars in the cities:
Another friend, Bruce, made this reaction to Jun's comments:
Below is a personal testimony by an American of his experience in just renewing his car's registration in Fairfax, Virginia, can beastounding for some guys in poorer countries who thought that American bureaucracy is among the most efficient and least interventionist inthe world.
Car registration in the Philippines is not decentralized or devolved to LGUs. It's done by a national bureaucracy called the Land Transportation Office (LTO). The process is not as bureaucratic as the one in Virginia as narrated by the author, Mr. Daniel Mitchell. One difference here is that there's a regulation that amounts to a new tax. All vehicles, before they can be registered annually, have to go through a "smoke emission test" and show that it "passes". The fee for this is P300 (US$6.7 at P45/$ exchange rate). Even if your car is newly-purchased, you still have to go through this test and pay the fee. "Failure" rate in this test is very very small, but the government is still doing it anyway.
The fangs of LGU bureaucracy in the Philippines can be felt inbusiness registration, not in car registration. Read this testimony here, http://www.cato.%20org/pub_display.%20php?pub_id=,
and understand why the author considers himself alibertarian.
Below is a portion of his personal testimony
------------
Great Moments in Local Government
by Daniel J. Mitchell
I became a libertarian in high school and college thanks to Ronald Reagan's eloquent commentary against big government. I remain a libertarian because of Virginia's Department of Motor Vehicles.
... I went online to find out about renewing the registration, and was horrified to discover that I had to make a visit to DMV because my registration had lapsed... I woke up early so that I could avoid a three-hour line at the DMV office and managed to see someone after a wait of just 15 minutes. But when I attempted to register, I was told that Fairfax County had placed a hold on my registration because of unpaid taxes. I would like to claim that I was being a principled tax protester, but I meekly pay my car taxes...at leastwhen I'm aware that a bill is due. I don't know whether to blame the Post Office or the vehicle bureaucracy, but there are no letters from Fairfax County in my inbox.
... there is no coordination between Fairfax County and the state government. So I had to surrender my spot at the counter and go look at a sign with numbers for various local tax offices. I called Fairfax County's automated system, filled with naive thoughts about making an automated payment and then taking care of my registration.
I was surprised to learn that Fairfax County thinks I have four cars. Unfortunately, the system does not tell you the cars you ostensibly own, or which car has the unpaid tax bill. But the amount was not very large, so I was willing to pay it - even if it was for a car I didn't own. Like any sensible person, my top goal was to avoid having to make a repeat visit to the DMV.... I opted out of the automated system and eventually got to speak to live bureaucrat. For reasons that I will never understand, though,the bureaucrats can only process payments if you have a Discover card.
... I will now have to visit the Fairfax County tax office and then make a secondvisit to the DMV. And if that is all that I have to do, I willconsider myself lucky. But there is a silver lining to this dark cloud. I now am fullyre-energized in my disdain for government....
--------
A friend asked me why I don't agree with decentralization, and If I believe there is still a need to elect local government officials. I have clearly stated from the paper above, devolution or decentralization just retains big government. There was also nothing that I mentionioned there that I am in favor of a monolithic central or national government.
I still believe there is a role for LGUs, particularly in maintaining peace and order. I believe that there should be more barangay tanods and less policemen. I've seen the effectivity of barangay tanods in maintaining peace and order in many barangays. The tanods know most if not all residents in their barangay. The policemen, their central command coming from the national government, are often lazy, busy mostly in "anti-terrorism" campaigns and in defending the President from street demonstrators.
There should still be provincial governors, city/municipal mayors, and barangay chairmen, and their respective coteries of councilors. But the powers of these LGUs should be limited, particularly on imposing many regulations and restrictions in business and entrepreneurship. Just observe how the city government of Makati behaves for instance.
You want to rent a space in a building for your office. Before you can start anything, get barangay clearance, location clearance, MACEA clearance, then various permits in city hall (fire dept. permit, electrical permit, mechanical permit, sanitary permit, pay real property tax, etc.) before the mayor's business permit can be granted.
Once you have the business permit, you need "renovation permit" before you touch anything on the space on that building, and I heard another MACEA permit. And before you bring your office furnitures and supplies, you need a "permit to occupy" again from city hall. I am not a contractor or building/interior designer, so I don't have the details of various permits and regulations required by the local government bureaucracies.
Is this a desirable set up of "decentralized government"?
No way man. My concept of "decentralized" government is minimal government.
Very little if not zero government role in business regulation.
Regulate criminals and robbers and rapists, Yes.
But regulate, even over-regulate, entrepreneurs, No.
And if we think changing this bureaucratic procedures in local governments is easy, think twice. Or think a hundred times. Once LGUs or any other government entity have tasted power, especially the power to regulate other people's lives, the hunger for more power can only increase, not decrease. The power to tinker with even minute details of our lives, like how much we can keep from our monthly income, how much one can renovate his house and how soon he can start it, makes bureaucrats desire for more power.
Below is from a friend, also from UP. He was a 3-termer councilor in a town in Pampanga, now a municipal administrator. He's got lots of insights on local govt. administration, governance, taxation, etc. For instance, he noted the wastage of our taxes on barangay leaders. The barangay chairman in pangasinan where our farm is located also narrated to me that many of his fellow brgy chairmen really enjoy being treated to red-lights entertainment (DOM style) when they go out for seminars in the cities:
Nonoy, I've been reading the essays you've been sending me. Kaya lang I don't have the time to comment on them dahil I'm loaded with a lot of work and I'm usually preoccupied with meetings, trainings and workshops.
I feel mas marami akong trabaho ngayon compared to when I was in the legislature. As municipal administrator, I'm the one who practically runs our LGU. Oh boy, it's a stressful job.
And I've been the object of relentless attacks by people who're getting hurt by the reforms and changes that I've been introducing. I have received numerous hate mails through SMS and the regular postal service. Nasty notes have been pasted on to my windshield and other stuffs lke that. It's the price I continue to pay because I got rid of excess fat and overlapping of functions,because I said "Enough of patronage hiring!" Can you blame me then if I move around with my favorite hand gun?
It is seldom noticed, Nonoy, na malaki ang waste of taxpayers' money sa mga local governments. Halimbawa, taun-taon na lang ang daming seminars and workshops ang nilulunsad ng DILG sa buong kapuluan. Ang funding ng mga iyan ay nanggagaling sa general fund ng mga municipio. Yet magtataka ka na sa kabila ng mga paulit-ulit na trainings ay di pa rin marunong bumalangkas ng badyet ang mga barangay, maging ang mga bayan. Eh paano sa halip na mag-aral ang mga delegado, they find it more convenient to visit a red light district, a local casino or some other places of amusement. Pag-usapan na lang natin ito when we get to sip a bottle of wine- - pag medyo maluwag-luwag ang sked natin.
Jun
Another friend, Bruce, made this reaction to Jun's comments:
What more proof do you need that you are doing something? Those politicians and bureaucrats that are HATED are the ones that are doing something. Those that are loved by everyone, or at least those that do not generate strong feelings, are not doing squat.
Enough of this talk of "unity" or trying to get along. Politics is about getting things done. Winners and losers. Pissing off the criminals and the corrupt officials and making great enemies. If you are a politician without great enemies, you are a politician who has done nothing of note.
Reagan, Thatcher, Bush 43 are all hated because they all had tremendous impact upon people and the world. People don't hate Pres. Jerry Ford because he did little (and for good reason - Watergate).
Will GMA be hated or will she be inconsequential?
By the way, only with strong enemies will you have strong supporters. Again, witness Reagan and Thatcher. By his enemies, you can judge him. I don't trust anyone who is not hated by the Marcoses and the Estradas.
Below is a personal testimony by an American of his experience in just renewing his car's registration in Fairfax, Virginia, can beastounding for some guys in poorer countries who thought that American bureaucracy is among the most efficient and least interventionist inthe world.
Car registration in the Philippines is not decentralized or devolved to LGUs. It's done by a national bureaucracy called the Land Transportation Office (LTO). The process is not as bureaucratic as the one in Virginia as narrated by the author, Mr. Daniel Mitchell. One difference here is that there's a regulation that amounts to a new tax. All vehicles, before they can be registered annually, have to go through a "smoke emission test" and show that it "passes". The fee for this is P300 (US$6.7 at P45/$ exchange rate). Even if your car is newly-purchased, you still have to go through this test and pay the fee. "Failure" rate in this test is very very small, but the government is still doing it anyway.
The fangs of LGU bureaucracy in the Philippines can be felt inbusiness registration, not in car registration. Read this testimony here, http://www.cato.%20org/pub_display.%20php?pub_id=,
and understand why the author considers himself alibertarian.
Below is a portion of his personal testimony
------------
Great Moments in Local Government
by Daniel J. Mitchell
I became a libertarian in high school and college thanks to Ronald Reagan's eloquent commentary against big government. I remain a libertarian because of Virginia's Department of Motor Vehicles.
... I went online to find out about renewing the registration, and was horrified to discover that I had to make a visit to DMV because my registration had lapsed... I woke up early so that I could avoid a three-hour line at the DMV office and managed to see someone after a wait of just 15 minutes. But when I attempted to register, I was told that Fairfax County had placed a hold on my registration because of unpaid taxes. I would like to claim that I was being a principled tax protester, but I meekly pay my car taxes...at leastwhen I'm aware that a bill is due. I don't know whether to blame the Post Office or the vehicle bureaucracy, but there are no letters from Fairfax County in my inbox.
... there is no coordination between Fairfax County and the state government. So I had to surrender my spot at the counter and go look at a sign with numbers for various local tax offices. I called Fairfax County's automated system, filled with naive thoughts about making an automated payment and then taking care of my registration.
I was surprised to learn that Fairfax County thinks I have four cars. Unfortunately, the system does not tell you the cars you ostensibly own, or which car has the unpaid tax bill. But the amount was not very large, so I was willing to pay it - even if it was for a car I didn't own. Like any sensible person, my top goal was to avoid having to make a repeat visit to the DMV.... I opted out of the automated system and eventually got to speak to live bureaucrat. For reasons that I will never understand, though,the bureaucrats can only process payments if you have a Discover card.
... I will now have to visit the Fairfax County tax office and then make a secondvisit to the DMV. And if that is all that I have to do, I willconsider myself lucky. But there is a silver lining to this dark cloud. I now am fullyre-energized in my disdain for government....
--------
A friend asked me why I don't agree with decentralization, and If I believe there is still a need to elect local government officials. I have clearly stated from the paper above, devolution or decentralization just retains big government. There was also nothing that I mentionioned there that I am in favor of a monolithic central or national government.
I still believe there is a role for LGUs, particularly in maintaining peace and order. I believe that there should be more barangay tanods and less policemen. I've seen the effectivity of barangay tanods in maintaining peace and order in many barangays. The tanods know most if not all residents in their barangay. The policemen, their central command coming from the national government, are often lazy, busy mostly in "anti-terrorism" campaigns and in defending the President from street demonstrators.
There should still be provincial governors, city/municipal mayors, and barangay chairmen, and their respective coteries of councilors. But the powers of these LGUs should be limited, particularly on imposing many regulations and restrictions in business and entrepreneurship. Just observe how the city government of Makati behaves for instance.
You want to rent a space in a building for your office. Before you can start anything, get barangay clearance, location clearance, MACEA clearance, then various permits in city hall (fire dept. permit, electrical permit, mechanical permit, sanitary permit, pay real property tax, etc.) before the mayor's business permit can be granted.
Once you have the business permit, you need "renovation permit" before you touch anything on the space on that building, and I heard another MACEA permit. And before you bring your office furnitures and supplies, you need a "permit to occupy" again from city hall. I am not a contractor or building/interior designer, so I don't have the details of various permits and regulations required by the local government bureaucracies.
Is this a desirable set up of "decentralized government"?
No way man. My concept of "decentralized" government is minimal government.
Very little if not zero government role in business regulation.
Regulate criminals and robbers and rapists, Yes.
But regulate, even over-regulate, entrepreneurs, No.
And if we think changing this bureaucratic procedures in local governments is easy, think twice. Or think a hundred times. Once LGUs or any other government entity have tasted power, especially the power to regulate other people's lives, the hunger for more power can only increase, not decrease. The power to tinker with even minute details of our lives, like how much we can keep from our monthly income, how much one can renovate his house and how soon he can start it, makes bureaucrats desire for more power.
Tuesday, July 17, 2007
Free Trade 5: Business, Rock Music and Cycling Globalization
In a news report today in the Financial Times, two very big business lobby groups in the US and Europe, voiced out their impatience at various regulatory barriers by their respective governments that hinder business and entrepreneurship. The report below:
http://www.ft.com/cms/s/10d4f960-33f0-11dc-9887-0000779fd2ac.html
Business lobby groups move to reduce barriers
By Jeremy Grant in Washington
Published: July 17 2007 03:48
I do not know how far these 2 big business lobby groups of the US and Europe will go in demanding reduction in business and trade barriers, at least of their respective governments. But I will not be surprised if someday they will go for drastic income tax cut and import tax cut advocacies. Taxes always distort prices upwards, whether domestic or imported prices.
Of course, businessmen, like ordinary producers and consumers, want double-standards. They want their products and services be protected by government barriers from more competition, but they also want their various consumption goods, their production raw materials and capital goods, to be liberalized so that they can bring down their production costs. But if you ask them if they have to drop one sentiment, which will they favor -- liberalization or protectionism -- it's clear in their consumption pattern that majority favor the former. At the end of the day, even the most protectionist farmers will want to have access to cheaper toys and shoes for their kids, cheaper clothes and jewelries for their wives or girlfriends, and cheaper tractors and spare parts for their farms. And only free trade can give them this opportunity, not protectionism, not so-called "fair trade".
---------
A related paper I wrote last April 11, 2007:
From Led Zep to Lance Armstrong: Street Globalization
The British rock band of the 60s to 70s, the Led Zeppelin, is considered among the pioneers of metal rock music with class. Among their famous songs, "stairway to heaven", "rock n roll", "black dog", these are still being played in Philippine radio from time to time; performed by a few Pinoy rockers, their DVDs of live concerts can be found in Quiapo and elsewhere. The band's "Led Zeppelin: BBC Sessions" live songs are in my Ipod too.
The American cycling hero, Lance Armstrong, is the greatest road racer of all time. He won the Tour de France for 7 years (1999-2005) consecutive! He was also considered "dead man winning" because he wasa survivor of testicular cancer. His feat is known not only in Europe and the US and other developed countries in the world, but also in thePhilippines. You will not meet a single serious racer cyclist in this country, even among recreational cyclists, who do not know Lance. His previous teams' (Motorola, USPS, Discovery) jerseys are worn by localc yclists, and so on.
These 2 guys/group are among the famous symbols of globalization –along with Michael Jordan, Tiger Woods, Mike Schumacher, Bryan Adams, Bruce Springsteen, Eminem, Coca Cola, Nike, Samsung, Ericsson, and so on. Their presence are felt and seen in the streets.
With the globalization of rock music (and jazz, classical, rap, othertypes), comes along the hardwares and paraphernalias that accompany such music: stereos, tv, CD/DVD players, computers, Ipod, MP3, sound systems, home theaters, etc. These goods – imported from the US, Taiwan, Europe, China, Japan, Korea, India, and many other countries –enable the people, the ordinary Filipinos especially, to enjoy such famous music and musicians. In the process, world-class Filipino rockbands were inspired and born, bands like Eraserheads, Bamboo, 6 cycleminds, Cueshe, etc.
With the globalization of cycling (and soccer, F1, beach volleyball, basketball, golf, etc.), cycling shoes, jerseys, bicycles, bike parts and tires, speedometer, heart monitors, and the goods and services provided by commercial teams competing in big international races like the Tour de France, are made available in our malls, shops and streets. And a lot of world-class Filipino racers were inspired and born – guys like Victor Espiritu, Ryan Tanguilig, Lloyd Reynante, Warren Davadilla, etc.
Seems that the only guys who do not like the full enjoyment of more and more people of those international music, sports, adventure, technology, and the competitive spirit that go with these, are the politicians, government bureaucrats, and vested, anti-free trade sectors and producers in the local market. For the latter, all sorts of excuses and alibis are recited when all they want are (a) more taxes to feed a growing bureaucracy and pork barrels, (b) more monopolization of local markets and slam-dunk local consumers with higher prices and often low-quality goods and services.
The competitive-minded among local producers love free trade. Not onlythat free trade will give them an opportunity to penetrate other foreign markets, but they will also be able to find cheaper raw materials and intermediate goods, cheaper technologies, already available abroad, to make them more efficient in their productionp rocesses.
So one important thing that globalization offers, is that it helps expose the pretentious and lazy among us, the "more taxes for more subsidies and bureaucracies please" people among us.
Ultimately,
GLOBALIZATION = MOBILITY = FREEDOM.
-----------
See also:
Free Trade 1: Estonia's Free Market, Globalization, May 09, 2006
Free Trade 2: Unilateral Trade Liberalization, May 17, 2006
Free Trade 3: Protectionism Perpetuate Poverty, September 05, 2006
Free Trade 4: FTA in APEC, July 09, 2007
http://www.ft.com/cms/s/10d4f960-33f0-11dc-9887-0000779fd2ac.html
Business lobby groups move to reduce barriers
By Jeremy Grant in Washington
Published: July 17 2007 03:48
The world’s two largest business lobby groups, the US Chamber of Commerce and Business Europe, will announce on July 17 a “strategic partnership” aimed at reducing regulatory barriers amid frustration at what they say is slow progress by governments on the issue...
Tuesday’s initiative, known as the Global Regulatory Co-operation Project, is a sign that business believes that government efforts should be “held to account” and progress measured by the businesses to be affected, according to Stanton Anderson, special counsel to the US president and the project’s chairman.
“There are increasingly around the world regulatory barriers being established and trade negotiations are becoming increasingly problematic both at the bilateral and multilateral level and we think this regulatory co-operation effort is a way around that problem, and that progress could be made in eliminating these barriers with regulator talking to regulator.”Mr. Anderson's (the project chairman) adjective is "increasing" regulatory barriers around the world. The continuing failure in the Doha trade liberalization negotiations is actually one proof of this increasing market barriers posted by most governments around the world, whether rich country or poor country governments. Each failure in trade liberalization talks is an opportunity of one camp to blame the other.
I do not know how far these 2 big business lobby groups of the US and Europe will go in demanding reduction in business and trade barriers, at least of their respective governments. But I will not be surprised if someday they will go for drastic income tax cut and import tax cut advocacies. Taxes always distort prices upwards, whether domestic or imported prices.
Of course, businessmen, like ordinary producers and consumers, want double-standards. They want their products and services be protected by government barriers from more competition, but they also want their various consumption goods, their production raw materials and capital goods, to be liberalized so that they can bring down their production costs. But if you ask them if they have to drop one sentiment, which will they favor -- liberalization or protectionism -- it's clear in their consumption pattern that majority favor the former. At the end of the day, even the most protectionist farmers will want to have access to cheaper toys and shoes for their kids, cheaper clothes and jewelries for their wives or girlfriends, and cheaper tractors and spare parts for their farms. And only free trade can give them this opportunity, not protectionism, not so-called "fair trade".
---------
A related paper I wrote last April 11, 2007:
From Led Zep to Lance Armstrong: Street Globalization
The British rock band of the 60s to 70s, the Led Zeppelin, is considered among the pioneers of metal rock music with class. Among their famous songs, "stairway to heaven", "rock n roll", "black dog", these are still being played in Philippine radio from time to time; performed by a few Pinoy rockers, their DVDs of live concerts can be found in Quiapo and elsewhere. The band's "Led Zeppelin: BBC Sessions" live songs are in my Ipod too.
The American cycling hero, Lance Armstrong, is the greatest road racer of all time. He won the Tour de France for 7 years (1999-2005) consecutive! He was also considered "dead man winning" because he wasa survivor of testicular cancer. His feat is known not only in Europe and the US and other developed countries in the world, but also in thePhilippines. You will not meet a single serious racer cyclist in this country, even among recreational cyclists, who do not know Lance. His previous teams' (Motorola, USPS, Discovery) jerseys are worn by localc yclists, and so on.
These 2 guys/group are among the famous symbols of globalization –along with Michael Jordan, Tiger Woods, Mike Schumacher, Bryan Adams, Bruce Springsteen, Eminem, Coca Cola, Nike, Samsung, Ericsson, and so on. Their presence are felt and seen in the streets.
With the globalization of rock music (and jazz, classical, rap, othertypes), comes along the hardwares and paraphernalias that accompany such music: stereos, tv, CD/DVD players, computers, Ipod, MP3, sound systems, home theaters, etc. These goods – imported from the US, Taiwan, Europe, China, Japan, Korea, India, and many other countries –enable the people, the ordinary Filipinos especially, to enjoy such famous music and musicians. In the process, world-class Filipino rockbands were inspired and born, bands like Eraserheads, Bamboo, 6 cycleminds, Cueshe, etc.
With the globalization of cycling (and soccer, F1, beach volleyball, basketball, golf, etc.), cycling shoes, jerseys, bicycles, bike parts and tires, speedometer, heart monitors, and the goods and services provided by commercial teams competing in big international races like the Tour de France, are made available in our malls, shops and streets. And a lot of world-class Filipino racers were inspired and born – guys like Victor Espiritu, Ryan Tanguilig, Lloyd Reynante, Warren Davadilla, etc.
Seems that the only guys who do not like the full enjoyment of more and more people of those international music, sports, adventure, technology, and the competitive spirit that go with these, are the politicians, government bureaucrats, and vested, anti-free trade sectors and producers in the local market. For the latter, all sorts of excuses and alibis are recited when all they want are (a) more taxes to feed a growing bureaucracy and pork barrels, (b) more monopolization of local markets and slam-dunk local consumers with higher prices and often low-quality goods and services.
The competitive-minded among local producers love free trade. Not onlythat free trade will give them an opportunity to penetrate other foreign markets, but they will also be able to find cheaper raw materials and intermediate goods, cheaper technologies, already available abroad, to make them more efficient in their productionp rocesses.
So one important thing that globalization offers, is that it helps expose the pretentious and lazy among us, the "more taxes for more subsidies and bureaucracies please" people among us.
Ultimately,
GLOBALIZATION = MOBILITY = FREEDOM.
-----------
See also:
Free Trade 1: Estonia's Free Market, Globalization, May 09, 2006
Free Trade 2: Unilateral Trade Liberalization, May 17, 2006
Free Trade 3: Protectionism Perpetuate Poverty, September 05, 2006
Free Trade 4: FTA in APEC, July 09, 2007
Monday, July 09, 2007
Free Trade 4: FTA in APEC
The coming Asia-Pacific Economic Cooperation (APEC) summit in Sydney, Australia this coming September, is looking to produce one good result: a possible free trade area (FTA) among the 21 member-countries. Of course, like most if not all FTA visions around the world, an FTA will become a reality in 10 or 20 years from date of signing, if not longer. Nonetheless, it's better than not putting that vision at all.
This is expected to be the "fallback" position after the failed talks on reviving the Doha talks between the big and representative countries of the poor world and the rich world, and should other efforts to revive it will fail again.
Usually, agreements and communique like this among member-countries of any alliance or grouping of countries, will be full of "provided that" and other conditions, before any real free trade area can become a reality.
If countries, or better yet, trade negotiators and politicians of those countries, are serious in having free trade, no agreement with other countries is necessary. They can always declare a unilateral trade liberalization, and that's it. Hong Kong has done it; Dubai, Chile, Singapore, other smaller economies are doing it.
This means that trade "activists" who are leaning towards free market should not play along with those groups and individuals who declare, "free trade yes, on condition that...." We better address ourselves to the general public the "net gains" and benefit from free trade.
Last year, I wrote this:
Pan-Asia free trade area
September 05, 2006
A news from http://euobserver.com/9/22250/?rk=1 has this story,
This is a good development. Better than no regional or continental free trade area at all. Of course, there will be free trade among countries as early astomorrow if governments will not hinder trade.
Almost all people around the world want bargains, they want more choices. And only free trade, of big supply of various goods and commoditiesfrom everywhere, can do that. The job of trade protectionism, sometimes called "fair trade", is to restrict trade, to limit supply of various goods and services available to consumers, to limit choices.
What the governments of Japan and other countries do in the above plan is phasing out trade protectionism little by little, and any form of trade liberalization should be done with their consent first. Hence, if theywant full free trade to be realized in 20 years, or 30 years, or 50years, that's what will happen. If governments are out of the picture of regulating trade, then free trade can happen anytime. Government's main job should be to regulate and control criminals and robbers, terrorists and killers. Regulating trade that makes life easier for people, especially the poor and jobless, by giving them access to cheaper food, cheaper clothes, cheaper farm inputs, and so on, is bad and wrong "role" of government.
About the Doha round, me thinks US' Trade Rep. Susan Schwab should better talk to Prof. Jagdish Bhagwati, a famous academic economist (Indian-American, i think) in the US, than moving around talking to the trade reps of China and other countries. Dr. Bhagwati argued in some recentpapers for a unilateral trade liberalization for the US and estimated the benefits for the US economy in terms of economic growth and job creation. Hence, Mr. Bhagwati has no problem with EU's high export subsidies, high agri subsidies, and so on. But Ms. Susan Schwab has lots of angsts on such export subsidies, the same with her counterparts in the EU and Australia and Japan and many other countries.
On another note, When globalization hits home...
Globalization will definitely hit homes, wherever they may be. A city can experience job losses when a big company packs up and puts up its office or manufacturing plant in another country, the same way that the same city created new jobs when that firm that left came a few years ago, or a new firm comes in.
Many governments in developing countries are allergic to the idea of de-bureaucratizing business regulations, so many of their people are working abroad if not migrating outright to pursue their ambition and entrepreneurial spirit.
And many governments of rich countries are also allergic to the idea of reducing business taxes and of leaving wage-setting to the employers and the market. So many of their companies are leaving and putting up manufacturing plants and offices in developing countries.
These plus many other aspects of capital and labor mobility are all part of globalization. There are losers, definitely, but there are also gainers. Overall, there is net gain, or the number of gainers are plentier than the losers. But if the initial losers will learn to adjust and be flexible, they become gainers later.
One reader asked, “how much longer should the losers wait?”
It depends. A chicken farmer who has been raising chicken all his adult life and suddenly shifts to producing other livestock or crops that experience price hikes while chicken prices are going down can benefit from globalization and make money quick.
While those losers who just wait for new or additional subsidies from the state, and continue producing goods and services that experience price declines due to competition from other producers abroad, can remain losers for the rest of their lives.
------
See also:
Free Trade 1: Estonia's Free Market, Globalization, May 09, 2006
Free Trade 2: Unilateral Trade Liberalization, May 17, 2006
Free Trade 3: Protectionism Perpetuate Poverty, September 05, 2006
This is expected to be the "fallback" position after the failed talks on reviving the Doha talks between the big and representative countries of the poor world and the rich world, and should other efforts to revive it will fail again.
Usually, agreements and communique like this among member-countries of any alliance or grouping of countries, will be full of "provided that" and other conditions, before any real free trade area can become a reality.
If countries, or better yet, trade negotiators and politicians of those countries, are serious in having free trade, no agreement with other countries is necessary. They can always declare a unilateral trade liberalization, and that's it. Hong Kong has done it; Dubai, Chile, Singapore, other smaller economies are doing it.
This means that trade "activists" who are leaning towards free market should not play along with those groups and individuals who declare, "free trade yes, on condition that...." We better address ourselves to the general public the "net gains" and benefit from free trade.
Last year, I wrote this:
Pan-Asia free trade area
September 05, 2006
A news from http://euobserver.com/9/22250/?rk=1 has this story,
Japan set to kick-start pan-Asian free trade area" by Lisbeth Kirk
21.08.2006 - 09:57
Japan minister of economy Toshihiro Nikai is set to unveil plans for a pan-Asian free trade area of 3.1 billion people, half the world'spopulation, Malaysian news agency Bernama has reported ahead of the 38thASEAN Economic Ministers meeting starting today in Kuala Lumpur.
The free trade area would include ASEAN-countries Australia, China, SouthKorea, India, Japan and New Zealand and would be promoted by a Japanese fundof 100 million US dollars....
The 39-year-old ASEAN bloc agreed already in October 2003 to set up a singlemarket by 2020, modelled on the EU. But ministers meeting this week hope to speed up the plans and get it ready by 2015. "We need to muster political will to create the AEC [Asean EconomicCommunity] by 2015, instead of 2020," ASEAN secretary-general Ong Keng Yongsaid, according to AP.
China and ASEAN have already agreed to create no-tariff zone by 2010 intheir combined market of 2 billion people.... ASEAN is the America's fourth largest trading partner. ASEAN was established on 8 August 1967 in Bangkok by Indonesia, Malaysia,Philippines, Singapore and Thailand. Brunei, Vietnam, Laos, Burma andCambodia have joined later....
This is a good development. Better than no regional or continental free trade area at all. Of course, there will be free trade among countries as early astomorrow if governments will not hinder trade.
Almost all people around the world want bargains, they want more choices. And only free trade, of big supply of various goods and commoditiesfrom everywhere, can do that. The job of trade protectionism, sometimes called "fair trade", is to restrict trade, to limit supply of various goods and services available to consumers, to limit choices.
What the governments of Japan and other countries do in the above plan is phasing out trade protectionism little by little, and any form of trade liberalization should be done with their consent first. Hence, if theywant full free trade to be realized in 20 years, or 30 years, or 50years, that's what will happen. If governments are out of the picture of regulating trade, then free trade can happen anytime. Government's main job should be to regulate and control criminals and robbers, terrorists and killers. Regulating trade that makes life easier for people, especially the poor and jobless, by giving them access to cheaper food, cheaper clothes, cheaper farm inputs, and so on, is bad and wrong "role" of government.
About the Doha round, me thinks US' Trade Rep. Susan Schwab should better talk to Prof. Jagdish Bhagwati, a famous academic economist (Indian-American, i think) in the US, than moving around talking to the trade reps of China and other countries. Dr. Bhagwati argued in some recentpapers for a unilateral trade liberalization for the US and estimated the benefits for the US economy in terms of economic growth and job creation. Hence, Mr. Bhagwati has no problem with EU's high export subsidies, high agri subsidies, and so on. But Ms. Susan Schwab has lots of angsts on such export subsidies, the same with her counterparts in the EU and Australia and Japan and many other countries.
On another note, When globalization hits home...
Globalization will definitely hit homes, wherever they may be. A city can experience job losses when a big company packs up and puts up its office or manufacturing plant in another country, the same way that the same city created new jobs when that firm that left came a few years ago, or a new firm comes in.
Many governments in developing countries are allergic to the idea of de-bureaucratizing business regulations, so many of their people are working abroad if not migrating outright to pursue their ambition and entrepreneurial spirit.
And many governments of rich countries are also allergic to the idea of reducing business taxes and of leaving wage-setting to the employers and the market. So many of their companies are leaving and putting up manufacturing plants and offices in developing countries.
These plus many other aspects of capital and labor mobility are all part of globalization. There are losers, definitely, but there are also gainers. Overall, there is net gain, or the number of gainers are plentier than the losers. But if the initial losers will learn to adjust and be flexible, they become gainers later.
One reader asked, “how much longer should the losers wait?”
It depends. A chicken farmer who has been raising chicken all his adult life and suddenly shifts to producing other livestock or crops that experience price hikes while chicken prices are going down can benefit from globalization and make money quick.
While those losers who just wait for new or additional subsidies from the state, and continue producing goods and services that experience price declines due to competition from other producers abroad, can remain losers for the rest of their lives.
------
See also:
Free Trade 1: Estonia's Free Market, Globalization, May 09, 2006
Free Trade 2: Unilateral Trade Liberalization, May 17, 2006
Free Trade 3: Protectionism Perpetuate Poverty, September 05, 2006
Monday, June 25, 2007
FIGs and Ratings Technocrats
Guys who used to prod fiscally-irresponsible governments (FIGs) to either create new taxes, or hike existing ones, were used to be IMF bureaucrats and consultants, aka “IMF review team”. By the way, is this term “FIGs” been used elsewhere in the past? I don’t know. In case not yet, then I can console myself of being among the first to define that term J. And for that, I call FIGs to refer to those governments, especially of poorer countries, whose concept of “public service” is “tax and tax, spend and spend; those they can’t finance by taxation, borrow and borrow.”
So, during those times, the “IMF review team”, would look and tinker with various fiscal, monetary and macro-economic data, then scare those FIGs whose debts have grown to rather unmanageable levels, that if they want “macro-economic stability”, they should either enact new taxes, or raise existing ones, and at least, never ever entertain proposals for tax cuts. These days, FIGs borrow less from the IMF, WB, and other rich governments institutions. FIGs borrow more from private lenders – bondholders, private commercial and investment banks, and so on.
When FIGs do this, the “review team” that private lenders look up to, are no longer IMF bureaucrats, but private credit ratings companies, also called “global debt watchers”. So, guys from Standard & Poor’s (S&P), Fitch, and there’s a 3rd big company on their league. So when FIGs are in a rut, the ratings technocrats make it big in national and international media by releasing their assessment of the “creditworthiness” of various FIGs. The bigger the fiscal irresponsibility of a government, the lower the creditworthiness and hence, the higher the debt premium (ie, interest rates) that private lenders will charge.
One of those FIGs in this planet is my country, the Philippines. With nearly 1/3 of annual budget of the national government devoted to paying interest payment alone for its domestic and foreign debts, the Philippines is among the “big leagues” in terms of fiscal irresponsibility. There are just too many past debts to pay; too many government personnel and bureaucrats (from national to local governments) to pay salaries; too many pork barrel (from the President to military generals to Senators, Congressmen) to set aside money for, and so on.
Now, the ratings guys are not happy with privatizing government assets, especially shares of stocks or equities, in private firms (see BWorld story for instance, “Deficit cure not in government asset sales”, http://www.bworldonline.com/BW062507/content.php?id=001). I am one of the very few souls in this country who advocate large-scale privatization as the single most important revenue source to drastically retire and reduce those huge public debts, so that some taxes will eventually have to be either slashed, if not abolished. You will note therefore, my dislike for those guys – whether government bureaucrats and politicians, or academics and media people, or technocrats of those international ratings companies – who can utter a deafening silence on FIGs’ tax and tax, spend and borrow attitude, but very vocal in opposing large-scale privatization.
FIGs really distort the incentives system in society. Many of the bright minds in society have been successfully pulled away from entrepreneurship and primary job creators, and diverted to the business of being bureaucrats and politicians, and their international cousins and counterparts – bureaucrats of multilateral institutions and technocrats of ratings agencies.
So, during those times, the “IMF review team”, would look and tinker with various fiscal, monetary and macro-economic data, then scare those FIGs whose debts have grown to rather unmanageable levels, that if they want “macro-economic stability”, they should either enact new taxes, or raise existing ones, and at least, never ever entertain proposals for tax cuts. These days, FIGs borrow less from the IMF, WB, and other rich governments institutions. FIGs borrow more from private lenders – bondholders, private commercial and investment banks, and so on.
When FIGs do this, the “review team” that private lenders look up to, are no longer IMF bureaucrats, but private credit ratings companies, also called “global debt watchers”. So, guys from Standard & Poor’s (S&P), Fitch, and there’s a 3rd big company on their league. So when FIGs are in a rut, the ratings technocrats make it big in national and international media by releasing their assessment of the “creditworthiness” of various FIGs. The bigger the fiscal irresponsibility of a government, the lower the creditworthiness and hence, the higher the debt premium (ie, interest rates) that private lenders will charge.
One of those FIGs in this planet is my country, the Philippines. With nearly 1/3 of annual budget of the national government devoted to paying interest payment alone for its domestic and foreign debts, the Philippines is among the “big leagues” in terms of fiscal irresponsibility. There are just too many past debts to pay; too many government personnel and bureaucrats (from national to local governments) to pay salaries; too many pork barrel (from the President to military generals to Senators, Congressmen) to set aside money for, and so on.
Now, the ratings guys are not happy with privatizing government assets, especially shares of stocks or equities, in private firms (see BWorld story for instance, “Deficit cure not in government asset sales”, http://www.bworldonline.com/BW062507/content.php?id=001). I am one of the very few souls in this country who advocate large-scale privatization as the single most important revenue source to drastically retire and reduce those huge public debts, so that some taxes will eventually have to be either slashed, if not abolished. You will note therefore, my dislike for those guys – whether government bureaucrats and politicians, or academics and media people, or technocrats of those international ratings companies – who can utter a deafening silence on FIGs’ tax and tax, spend and borrow attitude, but very vocal in opposing large-scale privatization.
FIGs really distort the incentives system in society. Many of the bright minds in society have been successfully pulled away from entrepreneurship and primary job creators, and diverted to the business of being bureaucrats and politicians, and their international cousins and counterparts – bureaucrats of multilateral institutions and technocrats of ratings agencies.
Tuesday, June 12, 2007
Tax Cut 5: Tax Imperialism, Privatization (PRPX 2007 Hawaii)
There was a "Pacific Rim Conference" held in Sheraton Waikiki, Honolulu, Hawaii, last May 23-24. The event was jointly sponsored by the State Policy Network (SPN), Americans for Tax Reforms (ATR), International Policy Network (IPN), Asian Forum Japan (AFJ), Lion Rock Institute (LRI), and Grassroot Institute Hawaii. I attended that forum and presented a paper too.
A friend from HK, Andrew Work, Executive Director of Lion RockInstitute, HK (www.lionrockinstitute.org) also presented a paper there on Tax Imperialism. He was attacking the EU, US and Canadian governments who tax, or want to tax, their citizens who are working and living abroad, earn income and have savings there. He says that the "secret" of HK's economic dynamism is its low and simple taxes. Meanwhile, 3 countries in the world are taxing their people abroad -- the US, North Korea and Eritrea!
So, how will the EU, US and Canadian governments tax their citizensabroad? By getting lots of data from them, and those data to be provided by the governments of those countries where their citizens currently live and work. So, imagine the tax spying that will happen around the world!
But the worst part of said Tax Imperialism, is trying to force those countries that have low, simple taxes, to raise those taxes and make the tax compliance more complicated through data mining about theb usinesses and other economic activities of citizens.
Andrew concluded his paper with this call:
People are not static. You cut taxes, you don't expect the volume of economic transactions to remain at the same rate as before. There should be bigger, faster economic activities when people have more money in their pockets or bank accounts due to bigger take-home pay or bigger savings.
-----
Below is a portion of the paper that I presented on the panel on Privatization.
From Privatization to Tax Cut: Some Theoretical Considerations and the Philippine Experience
I. Introduction
II. Theoretical Framework
There are two major schools of thought on the existence of government enterprises. First, that which justifies SOEs’ presence, and second, that suggests no justification for the continued existence of SOEs. The former is the dominant thought advocated not only by politicians, appointed bureaucrats, as well as cronies that benefit from SOEs, but even by many academics and consultants.
A. Theory and rationale why SOEs are created
The main reason given by many governments around the world why they create government corporations and banks or SOEs, is to “further push development”. This position is also supported by many intellectuals, consultants and academics. In a paper, “Raison d’Etre of Public Enterprises, Comparative Review (by ASOSAI, 1985), among the reasons given by the governments of the following countries are:
Bangladesh: Promotion of social policy.
India: Promotion of self-reliance in strategic sectors in the economy.
Indonesia: Participate in business vital and firmly connected with the needs of the people.
Malaysia: Growth and expansion.
Pakistan: Self-reliance, deal with strategic sectors of the national economy.
Sri Lanka: Make investments where there is absence of significant private sector.
Australia: Government control, prestige; specialization for economy and effectiveness.
Japan: Strengthen nation’s power; build-up modern industry.
Korea: Promote public services, generate (additional) state revenues.
In the Philippines, one important framework justifying public enterprises is provided by the Constitution itself. In the 1987 Constitution (Article XII, National Economy and Patrimony), it says:
“Sec. 16… Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability.”
B. Why creation and maintenance of SOEs is not justified
Not everyone is convinced with the above-stated philosophies, of course. Among those who offered some strict criteria by which government enterprises may be allowed is Friedrich Hayek. In his book “The Constitution of Liberty”, he wrote the following in chapter 15, “Economic Policy and the Rule of Law”:
“But though government may at any moment be best qualified to take the lead in such fields (“public goods, public works”), this provides no justification for assuming that this will always be so and therefore for giving it exclusive responsibility…
“So long as government uses any of its coercive powers, and particularly its power of taxation, in order to assist its enterprises, it can always turn their position into one of actual monopoly. To prevent this, it would be necessary that any special advantages, including subsidies, which government gives to its own enterprises in any field, should also be made available to competing private agencies.”
The second statement implies zero justification for state enterprises., because one important characteristic of public enterprises is their exemption from certain taxes and regulations imposed by the state to private enterprises. This immediately invalidates any claim for “fair play” or “level competition” by government enterprises with private enterprises.
To generalize, when SOEs exist because of any of the following conditions below, the justification for their creation, no matter how noble and developmentalist, evaporates. These conditions are:
(a) SOEs are perennial losers and just live off on annual subsidy and continued cronyism for their existence.
(b) They are “doing well” and churn out positive financial statements (ie, have regular net incomes) because: (i) They have instant big capitalization or equity infusion from taxpayers’ money and hence, need not borrow from anyone. (ii) They enjoy certain privileges like tax-exemptions, hassle-free renewal of business licenses or franchise, or freedom from extortion by national and local politicians. (iii) Their big debts and unpayable liabilities in the past were taken off their backs and passed on to the national government (NG), which the NG passed on to the taxpayers. And lastly, (iv) they are plain monopolies.
Thus, when any or all of these conditions is/are evident, the “promises” depicted in Graph 1 may not materialize at all and SOEs instead could produce opposite results. That is, instead of stabilizing or declining costs while benefits expand, you can have increasing costs while benefits decline.
Aside from the above Hayekian criteria, another theory that can disprove the necessity or justification of SOEs to deliver welfare to society, is the concept of contestable market. A market is “perfectly contestable” if entry and exit of firms is absolutely free (Nicholson, 1995). Governments’ various regulations and business-related taxes and fees already impede entry and exit of players. Introducing state enterprises and their built-in exemption from some of those business regulations, taxation, and even extortion by government bureaucrats and politicians further makes entry and exit of firms costly and risky. And with fewer sellers and producers, a society is courting an oligopolistic, even monopolistic market structure, and people can say “goodbye to choice”.
The free entry and exit of firms produce growth through time. And in the observation of one economist, “Government is the enemy of free entry and exit” (Kling, 2007).
C. Don’t Privatize All, Retain Some
There are some proposals that government corporations should only be created and maintained for (i) large, long-term projects that are beyond the reach of the market, and for (ii) activities with distant payoffs, or with great externalities, either negative or positive, that cannot be brought into the enterprise.
Though such proposal appears “neutral” between the current proliferation of SOEs and zero-SOEs argument, the argument is weak.
On activities with distant pay-offs, the state is "justified" to put up a government enterprise. Suppose there is a project to develop a rice variety that contains anti-malaria, anti-AIDS, anti-polio, anti-hepatitis, anti-tuberculoses resistance to people who eat that rice. That is a very "distant pay-off" project. So governments will put up a super-large rice research corporation, and extract super-large taxes from the citizens, to finance that super-large corporation and bureaucracy? That project is too good to be true, and if ever it will materialize, say 100 years from now, then people will be more than willing to save and buy that rice, and will not wait for any government subsidy to give that rice to them at low or zero cost.
On activities with great externalities, government is "justified" to put up a public enterprise. Farming anywhere around the world (rice farming, wheat farming, livestock farming, chicken farming, vegetable farming, fruits farming, etc.) has great externalities, positive and negative. The negative externality is the large-scale conversion of forest land into agricultural land, hundreds of millions of hectares of them. Another negative externality is regular or frequent plowing of the land, which loosens the soil, which aids soil erosion. But farming productivity for some crops will be very low if you do not plow the land and soften the compacted soil.
With such great externality of farming, will governments all over the world be justified to put up super-large farming corporations, or “nationalize” many private farms, to "internalize" those externalities that private farms cannot take in? And again, extract super-large taxes from the citizens, hire super-large bureaucracies, to supervise that super-large corporation?
The proposal therefore, is faulty, or shaky at least. And yet it can be a clever logic to justify statist thinking and intervention into the economy, into our lives, into our pockets....
Conclusions
Large-scale privatization of SOEs (GOCCs and GFIs in the Philippines), preferably all of them (ie, no SOEs left) is in the best interest of taxpayers. Not only that some taxes can be cut, personal income tax can possibly be abolished. When the endless subsidies to ever-losing government corporations and banks, the endless servicing of big public debt, and expansion of the bureaucracy in general has declined, a room for tax cut should be opened.
Some of those government enterprises may have to be sold at a big bargain to expedite their privatization. Proceeds from privatization of SOEs should be used mainly to retire public debts, both foreign and domestic loans, since a big portion of those accumulated public debts were due to the losses, wastes and underperformance of SOEs, both disposed and still existing.
Few or zero SOEs should also reduce cronyism and corruption in the government. This is because appointment to those government enterprises are often used as “rewards” to many supporters of those in the administration, especially those who cannot be given juicy positions in big departments and other agencies. That is why many retired military and police generals become instant presidents or administrators of government enterprises. Likewise, appointment in SOEs is also used to bribe some critics of the administration, including some media people and academics. At least they become silent, better if they become ardent supporters and apologists of the incumbent political leadership.
Privatization is not the end-goal; it is to have a more competitive economy that can harness the entrepreneurial energy and innovative culture of the people. Thus, liberalization and deregulation, if not de-bureaucratization, of the sectors where GOCCs operate should be done before and after privatization. This way, fears and concerns of some people that privatization will only transfer hands from government monopoly to private monopoly, will not happen.
Government should regulate and run after rapists, hold-uppers, drug pushers, carnappers, kidnappers, murderers, land-grabbers, extortionists, arsonists, other forms or variants of thieves and killers. There are so many criminals to regulate and "control" that the state should be very busy running after them. If the state should also busy itself with putting up so many corporations and bureaucracies, then there is a danger that the state can become a robber itself -- robbing the legitimate incomes and savings of the citizens for endless taxes and fees to finance those endless corporations and bureaucracies.
A friend from HK, Andrew Work, Executive Director of Lion RockInstitute, HK (www.lionrockinstitute.org) also presented a paper there on Tax Imperialism. He was attacking the EU, US and Canadian governments who tax, or want to tax, their citizens who are working and living abroad, earn income and have savings there. He says that the "secret" of HK's economic dynamism is its low and simple taxes. Meanwhile, 3 countries in the world are taxing their people abroad -- the US, North Korea and Eritrea!
So, how will the EU, US and Canadian governments tax their citizensabroad? By getting lots of data from them, and those data to be provided by the governments of those countries where their citizens currently live and work. So, imagine the tax spying that will happen around the world!
But the worst part of said Tax Imperialism, is trying to force those countries that have low, simple taxes, to raise those taxes and make the tax compliance more complicated through data mining about theb usinesses and other economic activities of citizens.
Andrew concluded his paper with this call:
"Continue to encourage your local government to engage in tax competition by simplifying and lowering taxes and resist tax imperialism wherever it rears its ugly head. The global network of business and the great experiment of humanity depend on our success in keeping the world free."I say "Amen" to that. In the Philippines, there is realization even by Department of Finance (DOF) people that the country's taxes are among the highest (not to mention among the plentiest) in Asia. But they are in quandary where to get additional revenues if they cut down existing tax rates since there are lots of public debts to pay, millions of government employees to pay, and so on.
People are not static. You cut taxes, you don't expect the volume of economic transactions to remain at the same rate as before. There should be bigger, faster economic activities when people have more money in their pockets or bank accounts due to bigger take-home pay or bigger savings.
-----
Below is a portion of the paper that I presented on the panel on Privatization.
From Privatization to Tax Cut: Some Theoretical Considerations and the Philippine Experience
I. Introduction
II. Theoretical Framework
There are two major schools of thought on the existence of government enterprises. First, that which justifies SOEs’ presence, and second, that suggests no justification for the continued existence of SOEs. The former is the dominant thought advocated not only by politicians, appointed bureaucrats, as well as cronies that benefit from SOEs, but even by many academics and consultants.
A. Theory and rationale why SOEs are created
The main reason given by many governments around the world why they create government corporations and banks or SOEs, is to “further push development”. This position is also supported by many intellectuals, consultants and academics. In a paper, “Raison d’Etre of Public Enterprises, Comparative Review (by ASOSAI, 1985), among the reasons given by the governments of the following countries are:
Bangladesh: Promotion of social policy.
India: Promotion of self-reliance in strategic sectors in the economy.
Indonesia: Participate in business vital and firmly connected with the needs of the people.
Malaysia: Growth and expansion.
Pakistan: Self-reliance, deal with strategic sectors of the national economy.
Sri Lanka: Make investments where there is absence of significant private sector.
Australia: Government control, prestige; specialization for economy and effectiveness.
Japan: Strengthen nation’s power; build-up modern industry.
Korea: Promote public services, generate (additional) state revenues.
In the Philippines, one important framework justifying public enterprises is provided by the Constitution itself. In the 1987 Constitution (Article XII, National Economy and Patrimony), it says:
“Sec. 16… Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability.”
B. Why creation and maintenance of SOEs is not justified
Not everyone is convinced with the above-stated philosophies, of course. Among those who offered some strict criteria by which government enterprises may be allowed is Friedrich Hayek. In his book “The Constitution of Liberty”, he wrote the following in chapter 15, “Economic Policy and the Rule of Law”:
“But though government may at any moment be best qualified to take the lead in such fields (“public goods, public works”), this provides no justification for assuming that this will always be so and therefore for giving it exclusive responsibility…
“So long as government uses any of its coercive powers, and particularly its power of taxation, in order to assist its enterprises, it can always turn their position into one of actual monopoly. To prevent this, it would be necessary that any special advantages, including subsidies, which government gives to its own enterprises in any field, should also be made available to competing private agencies.”
The second statement implies zero justification for state enterprises., because one important characteristic of public enterprises is their exemption from certain taxes and regulations imposed by the state to private enterprises. This immediately invalidates any claim for “fair play” or “level competition” by government enterprises with private enterprises.
To generalize, when SOEs exist because of any of the following conditions below, the justification for their creation, no matter how noble and developmentalist, evaporates. These conditions are:
(a) SOEs are perennial losers and just live off on annual subsidy and continued cronyism for their existence.
(b) They are “doing well” and churn out positive financial statements (ie, have regular net incomes) because: (i) They have instant big capitalization or equity infusion from taxpayers’ money and hence, need not borrow from anyone. (ii) They enjoy certain privileges like tax-exemptions, hassle-free renewal of business licenses or franchise, or freedom from extortion by national and local politicians. (iii) Their big debts and unpayable liabilities in the past were taken off their backs and passed on to the national government (NG), which the NG passed on to the taxpayers. And lastly, (iv) they are plain monopolies.
Thus, when any or all of these conditions is/are evident, the “promises” depicted in Graph 1 may not materialize at all and SOEs instead could produce opposite results. That is, instead of stabilizing or declining costs while benefits expand, you can have increasing costs while benefits decline.
Aside from the above Hayekian criteria, another theory that can disprove the necessity or justification of SOEs to deliver welfare to society, is the concept of contestable market. A market is “perfectly contestable” if entry and exit of firms is absolutely free (Nicholson, 1995). Governments’ various regulations and business-related taxes and fees already impede entry and exit of players. Introducing state enterprises and their built-in exemption from some of those business regulations, taxation, and even extortion by government bureaucrats and politicians further makes entry and exit of firms costly and risky. And with fewer sellers and producers, a society is courting an oligopolistic, even monopolistic market structure, and people can say “goodbye to choice”.
The free entry and exit of firms produce growth through time. And in the observation of one economist, “Government is the enemy of free entry and exit” (Kling, 2007).
C. Don’t Privatize All, Retain Some
There are some proposals that government corporations should only be created and maintained for (i) large, long-term projects that are beyond the reach of the market, and for (ii) activities with distant payoffs, or with great externalities, either negative or positive, that cannot be brought into the enterprise.
Though such proposal appears “neutral” between the current proliferation of SOEs and zero-SOEs argument, the argument is weak.
On activities with distant pay-offs, the state is "justified" to put up a government enterprise. Suppose there is a project to develop a rice variety that contains anti-malaria, anti-AIDS, anti-polio, anti-hepatitis, anti-tuberculoses resistance to people who eat that rice. That is a very "distant pay-off" project. So governments will put up a super-large rice research corporation, and extract super-large taxes from the citizens, to finance that super-large corporation and bureaucracy? That project is too good to be true, and if ever it will materialize, say 100 years from now, then people will be more than willing to save and buy that rice, and will not wait for any government subsidy to give that rice to them at low or zero cost.
On activities with great externalities, government is "justified" to put up a public enterprise. Farming anywhere around the world (rice farming, wheat farming, livestock farming, chicken farming, vegetable farming, fruits farming, etc.) has great externalities, positive and negative. The negative externality is the large-scale conversion of forest land into agricultural land, hundreds of millions of hectares of them. Another negative externality is regular or frequent plowing of the land, which loosens the soil, which aids soil erosion. But farming productivity for some crops will be very low if you do not plow the land and soften the compacted soil.
With such great externality of farming, will governments all over the world be justified to put up super-large farming corporations, or “nationalize” many private farms, to "internalize" those externalities that private farms cannot take in? And again, extract super-large taxes from the citizens, hire super-large bureaucracies, to supervise that super-large corporation?
The proposal therefore, is faulty, or shaky at least. And yet it can be a clever logic to justify statist thinking and intervention into the economy, into our lives, into our pockets....
Conclusions
Large-scale privatization of SOEs (GOCCs and GFIs in the Philippines), preferably all of them (ie, no SOEs left) is in the best interest of taxpayers. Not only that some taxes can be cut, personal income tax can possibly be abolished. When the endless subsidies to ever-losing government corporations and banks, the endless servicing of big public debt, and expansion of the bureaucracy in general has declined, a room for tax cut should be opened.
Some of those government enterprises may have to be sold at a big bargain to expedite their privatization. Proceeds from privatization of SOEs should be used mainly to retire public debts, both foreign and domestic loans, since a big portion of those accumulated public debts were due to the losses, wastes and underperformance of SOEs, both disposed and still existing.
Few or zero SOEs should also reduce cronyism and corruption in the government. This is because appointment to those government enterprises are often used as “rewards” to many supporters of those in the administration, especially those who cannot be given juicy positions in big departments and other agencies. That is why many retired military and police generals become instant presidents or administrators of government enterprises. Likewise, appointment in SOEs is also used to bribe some critics of the administration, including some media people and academics. At least they become silent, better if they become ardent supporters and apologists of the incumbent political leadership.
Privatization is not the end-goal; it is to have a more competitive economy that can harness the entrepreneurial energy and innovative culture of the people. Thus, liberalization and deregulation, if not de-bureaucratization, of the sectors where GOCCs operate should be done before and after privatization. This way, fears and concerns of some people that privatization will only transfer hands from government monopoly to private monopoly, will not happen.
Government should regulate and run after rapists, hold-uppers, drug pushers, carnappers, kidnappers, murderers, land-grabbers, extortionists, arsonists, other forms or variants of thieves and killers. There are so many criminals to regulate and "control" that the state should be very busy running after them. If the state should also busy itself with putting up so many corporations and bureaucracies, then there is a danger that the state can become a robber itself -- robbing the legitimate incomes and savings of the citizens for endless taxes and fees to finance those endless corporations and bureaucracies.
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