Friday, December 6, 2013

Evangelii Gaudium, Free Market, and Interventionism

Pope Francis' "Evangelii Gaudium" triggered a series of responses coming from both anti-capitalists and defenders of the free market. After reading several responses particularly from the free market side, I got curious yesterday to take a look at the content of the apostolic exhortation itself. After skimming, I noticed that the media has only focused on the "tree" and missed the "forest". Out of 288 sections, only 24 sections speak about economics. That is less than 10% of the overall content. To my mind, the sections that contain economic materials are 52 to 60 and 202 to 216, and even in sections 202 to 216, only two sections directly speak about economics. So all in all, it's only 11 sections that deal with economic issues.

I think the reason why the Pope's exhortation related to economics received sharp criticism is because it touches an existing sensitive issue that divides people today. One typical example of that is a thread forum in Facebook.

Someone posted last November 27 a news from RT with a heading "Not to share wealth with poor is to steal": Pope slams capitalism as "new tyranny" in a Facebook group. After few exchanges from several members, a series of questions were addressed to me. I found them helpful in gathering my thoughts. However, I thought it's better to ask first the opinion of other Filipino free market thinkers before giving my reply. To my mind, the questions touched at least six important issues: the existence of a market that is 100% free from state interference, poor's welfare, basic nature and function of the government, deregulation, checking on TNC's books, and "partnership" between producers and consumers. I decided to limit myself only on the first four. 

These are the series of questions:

I am not an economist but at least partly involved in this intricate life of the market as having inculcate and willingly embraced the market's cultural ideology of consumerism - i consume therefore i am. but i have some qualms on seeming dearth of options and left us totally between an economy mediated by corrupt government and complex bureaucracy and of the one which is totally free from state intervention. Could you confidently say that once the market able to create totally an extraterritorial space where in they would run the whole system on their own free from the restriction of nation-state, they would take care of the situation of the poor? - there would equity on distribution of goods and profits better that what the state has given as part of its mediation work?l Could you confidently say that deregulated industries now in the Philippines such as the 3 giant gas conglomerate, Meralco, the two water distributors, among others are actually heading now into a more humane and fair costing of services they offered now that the government's hands are tied to monitor their pricing? Could we as part of this transnational system of market go directly their offices and peek on their books to see the whole transaction even without the state authority backing us up? Are we really partners in this market system...or we are partners as mere consumers of the transnational corporation who just want to maximize their income by pushing aside their partner in crime - the government?
And this is my response: 
I am also not an economist. I simply realized that to study the subject is part of my civic duty as a citizen. Concerning the questions that were raised, I just want to limit myself in four of them - existence of the market 100% free from state interventionism, poor's welfare, basic nature of the state, and deregulation. 
I acknowledge that the free market has its own defects, but I think it is far better to bear with them than the one we have right now. Historically, the closest example of a free market I have in mind is the economic system during the later part of 18th up to the middle of 19th century. Unfortunately, after that period, the history of economics saw a comeback of mercantilism under the banner of neo-mercantilism. Austrian economists describe this economic system in diverse names such as corporatism, crony capitalism, and interventionism, which is wrongly described by mainstream as capitalism. I think that's why some free market thinkers are considering of dropping the name and using "free market" instead because "capitalism" is loaded with negative meanings. As for me, I think, interventionism is more appropriate to describe the current system. 
At present, we also have few examples of free market. Though I don't share the vision of a stateless society by Anarcho-capitalism, I think that's their primary goal. Seasteading and the free state project like the one in New Hampshire are the concrete examples of this. 
Concerning poor's welfare, I think we need to distinguish between the state's legal action and the moral and personal decision on the part of individuals. Henry Hazlitt in his book, "Man vs. The Welfare State" has clearly demonstrated that instead of alleviating the condition of the poor, the inevitable outcomes of government's interference are actually leading to an economic trap and disaster. Some of these outcomes are "increase in government spending, increase in taxes, chronic deficits, chronic inflation, constant loss in the buying power of the people's earnings and savings, expansion of governmental power in the details of everybody's business and everybody's life, and concentration of power in fewer hands" (pp.1-2) that will finally end in dictatorship. In short, these are the results we are witnessing right now that cause poverty to increase all the more. And besides, the essence of "free market is all about freedom, responsibility, and equality before the law, not equality of condition. So citizens have the freedom to be industrious or be lazy, freedom to be responsible or irresponsible. So equality of condition is not guaranteed under the free market. Otherwise, people will become lazy and demand that their condition be near or at par as the most hard working people in society" (Nonoy Oplas). And that is exactly why state welfare program fails for it penalizes the industrious and encourages government dependence and laziness. 
Turning to the basic nature or functions of the State, Austrian economists and libertarians are divided. Even among those who advocate for limited government, there is disagreement. Some would consider that the government has only two indispensable functions: to protect the people from foreign aggression and to safeguard the people from criminal elements in the society. Others would include additional functions such as provision of public utility, health care, basic education, construction and maintenance of streets and roads, and provision of a trustworthy monetary system. But even in these additional functions, the precise limits are still under question. Concerning economic affairs, the proper role of the government is confined in making sure that the market functions freely, which is the exact opposite of what the government is doing. I think I have to repeat here what Dr. John V. C. Nye said in his lecture in 2011 about the primary problem of the country: 
"Philippines' major problems have less to do with macroeconomic or fiscal stability but with a badly distorted micro-economic price situation, poor and unreliable property rights and contracting, a stiflingly legalistic bureaucracy, a slew of policies and institutional constraints that are anti-investment and anti-competitive, and a political economy that favors the worst mix of populism, elite rent-seeking, and high-minded but unproductive nationalism."
Finally, about deregulation. Personally, I consider deregulation a "joke" or perhaps a "myth" and a "doublespeak". If there is real deregulation, why are there only three "giant gas conglomerate"? And concerning power and water, are they under operation of the free market or are they under crony companies? (Paul C. How)
At this point, we need to distinguish between two kinds of monopolies. Under the free market, monopolies also exist, but they are not capable to exploit the consumers. This is because under free market, a monopolist is always facing the threat of potential competitors if he charges prices that are too high or provides poor service. Competitors have incentives to enter into the monopolized industries and take market share from the monopolist by offering lower prices or better service. 
The scenario changes under government-created monopolies. When government interferes by erecting barriers through legislation, it blocks competition and restricts consumers' choice. I think the words of Adams Summers concerning deregulation also applies in Philippine economy: 
"Politicians and regulators forced a sham of a 'deregulation' scheme, and then blamed the free market when it inevitably failed! The problem was not too much free-market competition; it was too much regulation (despite the 'deregulation doublespeak)." 
I would like to conclude this response with the analysis of Mont Pelerin Society about the biggest threats that the world is facing right now. For MPS, the biggest threats to both personal and economic liberty are the expansion of government's power, welfare state, trade unions, business monopoly, and inflation. All of these are interrelated and government intervention is the common thread among them.
Related Articles:


Pope Francis’ Tragic Vision of Capitalism


Pope Francis is No Economist