Activist Artists

". . . if we accept the social structures of capitalism, we are indeed left with the limited choices that undermine meaningful human agency. . ." 

"The central Marxist critique of capitalism is located on the terrain of human capacities. Capitalism is unjust and undemocratic not because of this or that imperfection in relation to ideal conceptions of equality or freedom. We reject capitalism because at its core it involves the control by some of the time, creativity, and potential of others. And the narrowness of the market discipline capitalism imposes as part of that drive to constant accumulation frustrates humanity’s capacity for social liberation." 

". . . have confirmed that the soul-destroying world that capitalism more and more offers us is a fundamental barrier to human development. . ."

- Sam Gindin, Art in the Age of Fatalism 

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Sam Gindin thinks that assimilating leftist activist ideas in art can break the pervasive fatalism that characterizes our era to achieve social change. He describes this idea as "radical art," and this can be done in two ways. First, "artists have to step beyond their studios and workplaces to act in the world as directly political people." Second, artists "must assimilate a critique of capitalism's impact on human possibilities," which to my mind, means the failures and excesses of capitalism. 

By fatalism, he is careful to distinguish it from passivity. Alternative vision is articulated and actions are taken, but there is a pervasive belief that the way to achieve the goal can never be found. He observed this fatalism represented in social democracy disempowered by the logic of capitalism and remains satisfied with its anemic neo-liberalism. Another brand of this fatalism is coming from a new generation whose vision is contrary to social democracy, but characterized with acceptance of the existing system. 

For sure, the writer likes the vision of progress found in capitalism, but rejects it as a method. He sees both imperialism and capitalism as working together. He laments that despite of obvious evidence of the failure of capitalism, its power did not diminish, but strengthened instead. 

So in his vision of seeing the emergence of activist artists, he wants that the energy and talents of this new breed of artists will focus in destroying capitalism. He shares conviction with Brecht that to allow the continuation of capitalism is to "undermine meaningful human agency." He agrees with Marxism that "capitalism is unjust and undemocratic," a barrier to social liberation, "soul-destroying," and manipulative of "time, creativity, and potential of others."

Critique

It is obvious that the above proposal springs from a Marxist's analysis of an "imperialist-capitalist" system, which Sam Gindin describes as the ruling ideology. Contrary to Gidin's idea, I see his article as a typical example of mainstream analysis, and by mainstream, I mean socialism, which is the very climate that we are in at present.

From the point of view of Austrian economics, capitalism is not the ruling system these days; it is actually, socialism. The writer fails to distinguish free market capitalism from corporatism or crony capitalism. If he is attacking the latter, I think he is accurate. 

In Planned Chaos, Ludwig von Mises distinguished between two types of socialism. These are the Russian or the communist version (which Gindin advocates) and the German version during Hitler's time, which is more appropriate to describe as interventionism. So instead of seeing Marxism as the champion to dismantle capitalism, what Gindin actually describes is a conflict between two forms of socialism using capitalism as a disguise. Government interventionism is the reigning political and economic policy these days that Gindin wrongly described as capitalism. It is this German kind of socialism that he wants to be replaced with the Russian kind of socialism in its progressive form.

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

Instant Utopia

"In the last generation politicians and governments have been promising the voters that they could not only bring perpetual full employment, prosperity, and 'economic growth,' but solve the age-old problem of poverty overnight. And the end result is not merely that accomplishment has fallen far short of promises, but that the attempt to fulfill the promises has brought an enormous increase in government spending, an enormous increase in the burden of taxes, chronic deficits, chronic inflation, and a constant loss in the buying power of the people's earnings and savings. . . Another result of the promise of instant utopia has been a gigantic growth of governmental power—of interference in the details of everybody's business and everybody's life. As this power has increased, it has also become concentrated in fewer and fewer hands. . . One mark of the welfare state everywhere has been the gathering of power into the hands of one man. This is no mere unfortunate coincidence; it has been inevitable." - Henry Hazlitt, Man vs. The Welfare State, 1969, pp.1-2

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Is there truth in the above quotation from Henry Hazlitt? Try to assess the governments of the world today on the basis of the idea in this quotation and then judge for yourself whether Hazlitt's analysis is accurate or not.

In the Philippines, if my memory still serves me right, I think all the presidents in my lifetime so far had given their promise to fight poverty. However, from Marcos, Cory, Ramos, Erap, Arroyo, and now Pnoy, none of them have succeeded in alleviating the condition of the poor, but instead, again, if my common sense is right, I think Filipinos now are poorer than ever. I accept that there are people who do not share this common sense, and could easily come up with the latest data to contradict this personal observation. But as far as myself is concerned, I think Hazlitt's analysis describes if not most, I think all of the governments today including our own.

So the government's fight against poverty is not bringing the results that we all desired. Instead, what we see are failed promises and greater poverty. One question that bothers me is about the sincerity of those in office. Are they really sincere in their goal or is it just a political slogan? Let us grant that they are sincere, and then another question must be asked: Why are they failing to produce the desired results despite their sincerity? Is it not because they are mistaken in their basic understanding of the nature and function of the government?

Instead of alleviating the condition of the poor, Hazlitt identifies seven inevitable outcomes of government's fight against poverty. And these outcomes are actually addictive for those in power and leading to economic trap and disaster. What are these outcomes? They are as follows:

• Increase in government spending

• Increase in taxes

• Chronic deficits

• Chronic inflation

• Constant loss in the buying power of the people's earnings and savings

• Gigantic growth of governmental power or interference in the details of everybody's business and everybody's life

• Concentration of power in fewer hands that will finally end in dictatorship. 

All these outcomes or results are obvious now in the US. Here in the Philippines? I think it is still not so obvious, but our instincts feel it.

Interventionism and Neo-Malthusian Solution to Overpopulation

For the past several days, I was sidetracked by numerous readings, but I accomplished almost nothing in terms of writing a review. So among numerous ebooks I have on economics, I choose Henry Hazlitt's "The Conquest of Poverty" for review. But it has twenty chapters. It's too big for me in view of the fact that I also have many teaching responsibilities. So I decided to digest the book two chapters at a time. 

In reading the first two chapters, I selected three quotations, which I consider best capture the idea of the chapter. In chapter 1, the "Problem of Poverty", my chosen quotation is about the impact of government intervention on the economy of Argentina and Russia. Here is the quote:

"Foolish governmental interference led the Argentine, once the world's principal producer and exporter of beef, to forbid in 1971 even domestic consumption of beef on alternate weeks. Soviet Russia, one of whose chief economic problems before it was communized was to find an export market for its huge surplus of grains, has been forced to import grains from the capitalist countries. One could go on to cite scores of other examples, with ruinous consequences, all brought on by short-sighted governmental policies." (p. 19)

This quote from Hazlitt speaks about the economic destruction resulting from government intervention in the affairs of the free market. Hazlitt can identify additional examples, but he limits himself only in the experiences of Argentina and Russia.

Photo Credit 

In chapter 2, "Poverty and Population", the name of Thomas Robert Malthus plays a significant role. This is because he wrote a book that is considered a landmark in the discussion about the correlation between poverty and overpopulation. 

The two quotations I selected talk about the contrast between Malthus and neo-Malthusians' solutions to the problem of overpopulation and poverty. Malthus as an individualist and libertarian, the solution he proposed to overpopulation was both voluntary and simple. For him, the role of an individual particularly individual responsibility is primary. A responsible individual will not bring a child into this world without first finding the necessary livelihood to support him. 

However, the neo-Malthusians didn't follow the footstep of Malthus. Since the neo-Malthusians are collectivist in ideology, they came up with a different solution. Their remedy to overpopulation resorted to government coercion, propaganda, sterilization of men and women, and even abortion. To my mind, this shows their determination to stop populationg growth at any cost. Moreover, they justified their action by claiming that since it is the community's responsibility to keep an individual alive, it is also the community's prerogative to decide whether to procreate or not. 

Photo Credit

Here are the two quotes from chapter 2: 

"What, then, is the solution? Most of the neo-Malthusians, unfortunately, are collectivist in their thinking; they want to solve the problem in the aggregate, and by government coercion. They not only want governments to flood their countries with propaganda for The Pill, The Loop, and other methods of contraception, encouraging even abortion; they want to sterilize men and women. They demand 'Zero Population Growth Now.' A professor of 'human ecology' at the University of California declares that the community cannot 'watch children starve.' Therefore: 'If the community has the responsibility of keeping children alive it must also have the power to decide when they may be procreated. Only so can we save ourselves from the degradation of runaway population growth.' " (p. 29).

"Malthus was an individualist and a libertarian. His own proposed remedy for overpopulation was both voluntary and simple: 'I see no harm in drawing the picture of a society in which each individual is supposed strictly to fulfill his duties The happiness of the whole is to be the result of the happiness of individuals, and to begin first with them. No co-operation is required. Every step tells. He who performs his duty faithfully will reap the full fruits of it, whatever be the number of others who fail. This duty is intelligible to the humblest capacity. It is merely that he is not to bring beings into the world for whom he cannot find the means of support.' If each of us adhered to this principle, no overpopulation problem would exist." (p. 30).

Source: Hazlitt, H. 1996. The Conquest of Poverty. New York: The Foundation for Economic Education, Inc. 

CLUELESS

I taught the subject, Rizal for two semesters in the Presbyterian Theological Seminary located at Dasmarinas, Cavite. I forgot the exact year. After surveying the available textbooks in our library, I decided to use Constantino and Abaya. I don't like Agoncillo and Zaide. My goal that time was not to give too much attention to Rizal, but to challenge the students to think, and somehow to arouse their spirits towards nationalism or patriotism. I was clueless about the difference between these two terms. 

Reading just now, "The Last Betrayal of Dr. Jose Rizal" from Vincenton, the blogger mentions about the difference between the terms. He wrote that "Rizal was a PATRIOT, not a 'nationalist'." For him, nationalism is a recent invention and those who fail the distinction between these two words are "politically and philosophically CLUELESS." That describes me. 

The Vinceton article is well-thought and written. I stumbled with four new additional insights. They include the evil results of ignorance of our rights, an important distinction in relation to human rights and happiness, a libertarian way to see Rizal's political book, and correcting altruism. 

The evil results of man's ignorance of his rights are taken from an important line contained in France's Declaration of the Rights of Man: ". . . the ignorance, neglect, or contempt of the rights of man are the sole cause of public calamities and of the corruption of governments . . ." This statement is old (1789), but its message is most relevant in a day where the growing power of the State is causing "public calamities" and "corruption". 

Another insightful distinction is made by the blogger. This time it is between "the right to happiness" and "the right to pursue happiness". I thought they're the same. 

The writer claims that Rizal does not believe that man has basic right to happiness simply because he exists. Instead, what man has is the right "to pusue" happiness. This distinction is so important particularly in understanding socio-political issues today. 

Concerning Rizal's political book, Noli Me Tangere, here's what the owner of Vinceton has to say:

"There must be some more profound reason why he titled his first novel 'Noli Me Tangere' (Touch Me Not). It sounds almost the same– or it almost has the same import– as the French’s 'Laissez-nous faire' (Let us be or Leave us alone). This reveals Rizal’s not fully articulated understanding that government is force, a political idea first expressed by America’s founding fathers, particularly George Washington, who wrote that 'Government is not reason. It is not eloquence. It is force. Like fire, it is a dangerous servant and a fearful master.' ”

"Rizal’s Noli was his political protest against the Spanish theocratic BIG GOVERNMENT. In France, the term 'Laissez-faire' was French businessman M. Le Gendre’s protestation against his economically restrictive/intrusive French BIG GOVERNMENT."

And finally about altruism:

"Rizal was NO altruist. While he treated the indigent for free, he charged his wealthy patients, both locals and foreigners, for his medical services. His wealthy patients paid handsomely for his excellent services. In other words, he could afford to help the poor, and this is NON-SELF SACRIFICIAL. Take note that ALTRUISM means self-sacrifice or putting the welfare/interest of others above your own."

Source: http://vincenton.wordpress.com/2013/11/30/the-last-betrayal-of-dr-jose-rizal/

Note: In the Introduction of Omnipotent Government, Ludwig von Mises clarified the distinction between nationalism and patriotism. 

Blame Shifting

IMF warns that any US default on its debt obligations would imperil global economy. - Marjorie Olster

Reading Marjorie Olster's article, U.S. default would shake global economy?, three things caught my attention. The first one is the statement from Jose Vinals, IMF's financial counselor. Olster quoted him saying, " 'So let's hope that we never get there.' " He was referring to the negative impact of possible US default on global economy. In his mind, the global economy is already recovering and that unless the Republicans would listen to President Obama to stop the government shutdown, the end result would be a debt default that could terminate the ongoing recovery and revert the global economy to a far more serious crisis. That's how I understand Vinal's statement.

However, there are writers who don't believe that the global economy has already recovered from 2008 crisis. The owner of Monty Pelerin's World is just one of them. 

The second thing that caught my attention is the addition of the word "partial" to describe US government shutdown. During the first few days that I have been reading mainstream articles about US shutdown, I did not encounter such description. In fact, the impact of the news was too strong during its first appearance. I actually suspect, it was intentionally exaggerated to create an atmosphere of fear and anger. But it's now changing. It's more moderate now. What's the reason for the change? Is it not because they were not able to achieve their desired end?

The third thing that caught my attention is about US health care plan. For the Democrats, it was already a "settled law" and so the Republicans are waging an "undemocratic" strategy by connecting it to budget approval. I do not know why the Republicans resorted to such "tactic". Maybe they think that's the only way to protect the American people from financial danger caused by President Obama's health care program. 

So those are the three things that caught my attention. Concerning the article's title, though it is in question form, to me, it is a subtle way of implying big things in a smooth way. Instead of asking about the possibility of the negative impact of US default on global economy, I would rather ask, why US in the first place came to such point of default? I think looking for an answer to this question will get us nearer to what's really going on.

By sticking to the possibility of US default resulting from the Republicans "irrationality" would divert the attention of the public from the real issue. Instead of seeing that the existing situation was brought about by the action of the Federal Reserve, the blame is shifted to the Republicans, to the Tea Party movement, to Ron Paul himself, to Austrio-libertarian way of thinking, and then finally, to Mises, Hayek, and Rothbard.

US "Shutdown"

I am not sure about my feeling concerning what's happening right now in the US related to government "shutdown". Others said, "Why care? It's none of your business. It has nothing to do with PH affair. We have our own issues to pay attention to". That's how many people think. 

Let us not forget that the USD is still the world reserve currency and remains the biggest in world economy. I guess that if this existing tension in the white house get worse, other countries cannot avoid its ripple effect.

As expected, both political parties have their own explanation about the current issue. The dominant camp said that it was the Tea Party dominated Republicans that caused this crisis. The other party responded that actually it was not a shutdown, but a temporary suspension of selected government services such as museums and parks. Then why exaggerate? What is the intention in painting such a dark description? Is it not to frighten the public and place the blame on the Republicans?

Just today, two additional accusations are thrown to the Republicans - bully and tantrum . Robert Reich wrote that the Republicans have been bullying the US president since 2011. I thought those who are capable to bully others are "bigger" and "stronger". Is it really convincing that a weaker party could bully a dominant party? 

Regarding the second accusation, Robert Parry  claimed that the current crisis was the result of the tantrum of white and Tea Party dominated Republicans. And he added a racist color to the debate. The other camp retorted, "No! It was Obama's tantrum!"

As far as my personal opinion is concerned, the outcome of this current debate aiming to shape public opinion will have a great political and economic repercussion not only in the U.S. but in many countries including the PH in the coming days. I wish, I'm wrong.


The Intellectuals Are Divided: 

Peter G. Klein

Daisy Luther

Michael Snyder

Mark Thornton

Peter G. Klein again

Jim Wallis

Gary North

John Boehner


Bill O'Reilly


Bill Moyers


Paul Krugman


Noam Chomsky

Nothing to Fear

Companies and banks are also financially healthier...All signs so far - from manufacturing to consumer spending - are pointing to a firmer rebound, not just in the US but also in other recently stagnant developed economies like Europe and Japan...So while Asia may be in for a rocky ride as the US eases out of QE, most economies are in a good position to manage the adjustment without giving in to fears of a new crisis. - The Korea Herald 

Fiona Chan wrote the "Fears of Asian financial crisis may be overblown" at The Korea Herald dated August 29, 2013. Her article attracted my attention for it is about the economic situation of Asia and contains materials related to the Philippines. She thinks that Asia has nothing to fear for it has strong economic fundamentals and actually have experienced "boom for the last three years". Countries, which she identified as strong include Taiwan, Philippines and South Korea. In fact, she also thinks that the US, EU and Japan were already out of recession pit and on their way to recovery. 

My reading of Austrian analysis about Asian economy leads me to a different conclusion from Chan. If she thinks that those who see a repetition of the Asian financial crisis in the coming years are misguided, Austrians think that a far greater crisis is actually approaching. We just do not know when. It depends on several factors particularly in relation to the political and economic move of the US. But either way, we cannot escape a far serious economic bust. 

Even reading Chan's article, you will see a hint about the kind of monetary system that we have right now. She said that "if the authorities tighten monetary policy to stabilize currencies or reduce inflation, that risks sapping economic vitality." This is an admission that existing monetary system is unstable. Any attempt to stabilize it will make the situation worse. So the tune that we are playing now is to allow lose monetary policy and let inflation has its way.

You can detect another indication that we are not in a healthy condition when she quoted one economist saying " 'Asian economies have been on a steamroller boom for the last three years, and the fact is that many Asian economies are fundamentally on a much firmer economic footing this time around. '... they do not 'appear to be in danger of falling into an outright currency crisis.' " From Austrian point of view, this is exactly the one to fear - the boom she is referring to for it is caused not by sound business practices, but by credit expansion. After this, bust follows depending on the length of the impact of the easy money injected to the economy in the first place. So I assume that if we could interview an Austrian, he would say "It's actually the reverse: Asian economies are on a more serious and shaky economic footing right now." 

If Chan saw that the world economy has already escaped the 2008 crisis, for an Austrian, the crisis has never been solved. It was actually expanded...

The 15 Zero Magic

It all depends on how long investors are willing to suspend their disbelief over the facts in Japan: an impossibly large debt load, an aging population and a propensity for political paralysis. Were that moment of clarity to arrive, the global economy would be shaken by the worst debt crisis in history. Forget Greece -- Japan’s debt burden is larger than that of Germany, France and the U.K. combined. - Bloomberg

The governor of Japanese Central Bank, Haruhiko Kuroda has done something magical, says William Pesek. This miracle refers to the act of "creating the biggest bubble in history", the act of printing money that caused Japan now to reach its 1 quadrillion yen debt.

Ben Bernanke, said Pesek, wanted to know Kuroda's secret. The secret has two forms - "transfering money via monetary policy from citizens to the government" and "monetization of public debt". Kuroda learned this secret from Japan's finance minister during the Great Depression, Korekiyo Takahashi.

It is critical that this secret must be kept hidden for once known, will arouse public anger. The longer the secret is hidden from the public, the better Shinzo Abe can apply his own magic "of deregulating the economy." 

Pesek claims that as long as investors trust Japan, everything will be fine. But once reality starts to sink in, world economy will be in big trouble. It "would be shaken by the worst debt crisis in history." So the magic must continue for it " ' is the last chance for Japan's economy.' " 

Pesek was amazed how Kuroda's magic silenced those "mysterious cast of characters", "the bond vigilantes", "the skeptics". Perhaps, they were hypnotized staring that instead of reducing debt, Kuroda doubled it. For the governor, this is the way to secure the nation's finance, by redistributing wealth from the people to the government. 

Personal Response:

There are several things that I find difficult to accept in reading this Bloomberg  article. I find it hard to understand why Pesek keeps on describing both "financial repression" and "monetization of debt" as magic to be kept in secret and yet such information was accessible to the public. Is it because the Japanese public are incapable of comprehending the intricacies of this type of monetary policy?

Pesek also said that once this secret is known to the public, anger would be the natural response. If Robert Reich mentioned about American's anger and confusion as to the real cause of their economic trouble, Japan on the other hand remains calm due to lack of public awareness. Moreover, Robert Reich also specifies that in order to pacify American's dissatisfaction and anger, politicians must look for scapegoats. Capitalists are one. And I think Japan is another. Here, it's difficult to go beyond the mere appearances of current events. It is as if the original magician in the person of Bernanke appears to be innocent and has nothing to do with the present condition of global economy; it also appears as if in case that global economy will crash this time, the Federal Reserve has found a scapegoat in the Bank of Japan; and it is also as if the global economy is not in present trouble and it would be Kuroda's fault once the economy would be "shaken again". 

Finally, William Pesek clearly identified the real nature of the popular web message about "redistribution of wealth". It has something to do with the transfer of wealth "from creditors (the people) to debtors" (government). There are Christians today who think that this redistribution of wealth particularly pertains to the trasfer of wealth from the "wicked" into the hands of the "righteous" originally taken from the Bible, specifically the book of Exodus. There we read that Egyptians gave articles of gold and silver to the Jews. So they are expecting this to happen soon and mistakenly thought that they will benefit from it. They have no idea that the biblical reference has nothing to do with the impending collapse of existing monetary system. It's sad to see Christians fall in such a low state of mind. 

Angry at what?

Summary:

Robert Reich claims that the Americans are so angry right now and "more contemptuous of almost every major institution - government, business, the media." He identifies several factors that contribute to the spread of this negative emotion. He mentioned first the impact of irresponsible online remarks using social media. Net surfers too enjoy watching gladiatorial fights. And add to it the absence of public figures to convincingly explain what's going on. And then he finally specified that the source of anger is economic in nature. Reich described this economic cause:

"Meanwhile, income, wealth and power have become more concentrated at the top than they’ve been in 90 years ... As a result, many have come to believe that the deck is stacked against them. Importantly, both the Tea Party and the Occupier movements began with the bailouts of Wall Street ― when both groups concluded that big government and big finance had plotted against the rest of us. The former blamed government; the latter blamed Wall Street."

Reich saw that such economic inequality described above is very dangerous. However, Americans due to emotional response failed to identify the real cause for their misery. In a way, Reich implies that politicians have been successful so far in using anger to divert the mind of the people from real issues. 

Personal Response:

Robert Reich failed to mention precisely the object of Americans' anger. I suspect that though he did not mention, by implication, the capitalists are to blame. He simply emphasized the evil and danger of economic inequality, but failed to point out the real source of such inequality. And also I can't understand why he is lamenting the absence of "trusted arbiters of truth" to convince the American people. He is either not listening to Ron Paul's analysis or finds the message of the retired libertarian Congressman not really convincing. Maybe, he is looking for a "trusted" voice coming from the establishment. 

Detroitification

Jack McHugh coined the term "Detroitification" in 2007 referring "to the destruction of a city, state or nation through draining money from hardworking individuals to pay for the cushy compensation and retirement of unproductive public 'servants.' " Robert Morley used this term to describe the bankruptcy of Detroit city. 

Last July 30, Morley wrote an article about Detroit bankruptcy. He described Detroit as "one of the most prosperous cities in the world" in the past and turned into "one of the world’s poorest", and "a post-Apocalyptic ghost town, a post-industrial ruin, the city of flames, the city where the sirens never stop, America’s first Third World city, Murder Town, Hell on Wheels." What is the primary cause for such a radical change? In his article, Morley did not hesitate to contradict a popular opinion propagated by a Nobel Prize Winner, Paul Krugman. 

For Krugman, Detroit was a victim of the free market. Even though he recognized the contribution of bad governance, but to his mind, the primary cause of Detroit's downfall originated from the free market. And such idea is widely accepted these days. 

But Morley has a different mind about Detroit. The key to understand the situation of Detroit is to grasp first the reason for its previous prosperity. Morley accepts the importance of the dynamics inherent in free market economy, but they don't provide the complete explanation. For him, the role of God and the keeping of his commandments serve as the basic foundations for Detroit's prosperity. And since God's commandments are being broken, the inescapable consequences are the removal of external blessings. I understand this breaking of God's commandments in terms of tax increases on businesses and productive individuals and the act of redistributing wealth. Many called it theft and the growth of the politics of envy. The final result of such violation was to drive businesses away and unemployment. And according to Morley, such economic philosophy is now being nationalized all over America. In his mind, Detroit should serve as a warning for all Americans for he sees similar pattern in many cities, which he describes as "Detroitification". Notice his description of the direction of many US cities:

"And now the same thing is happening to many American cities. Despite America’s unparalleled agricultural, mineral, scientific and geographic resources, cities across the country are in various stages of Detroitification. Chicago, Baltimore, New York, Los Angeles, Oakland, San Diego, Portland, Providence and Houston are all going the same way. And it doesn’t stop with municipalities either. California, Illinois and Kentucky—many states are headed for bankruptcy too." 

Related Links:

http://www.lewrockwell.com/2010/03/gary-north/the-city-of-detroit-is-dead/

http://thenewamerican.com/usnews/politics/item/16242-first-detroit-now-chicago

http://mises.org/daily/6489/

http://detroitrusttoriches.blogspot.kr/

http://thestateweekly.com/with-detroits-bankruptcy-anarchists-have-begun-project-free-detroit-starting-a-community-2/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+SpreadLibertyNews+%28Spread+Liberty+News%29

http://mic.com/articles/94398/the-government-in-detroit-is-doing-something-the-un-called-a-violation-of-human-rights

Is this your SONA?

At last, I am finished reading the 4th SONA of H.E. President Benigno Aquino III. It's my first time to really pay attention to SONA. It's a difficult reading for me up to page 25. Allow me to introduce my thoughts first based on the content itself. Then it will be followed by a personal remark and some responses from advocates of free market. 

Widespread Transformation and Inclusive Growth

Now I think, to some extent I got the context of what our President meant by "widespread transformation" and "inclusive growth". Taking the report at face value, this "transformation" and "growth" include the following:  

1. 8,581 sitios have been electrified

2. 28,398 families who are informal settlers now finally have or will soon have decent homes

3. From 503,521 TESDA graduates, 6 out 10 have found jobs

4. PPPP beneficiaries increased from 700,000 in 2010 to 4 million households in 3 years

5. Education - quality education, sufficient quantity of books, chairs, and classrooms, K12, price of textbook reduced from 58.00 down to 30.00

6. Agriculture - a. Rice Importation - In 2010, imported 2 million metric tons of rice; in 2011, 855,000 metric tons; in 2012, 500,000 metric tons; in 2013, 350,000 metric tons b. Coconut industry - intercropping as the solution to increase farmers' income i. If only coconuts, farmers' income would reach only 20,000 a year per hectare; add coffee, 172,400.00 per year; add bananas, 102,325.00 per year; add cacao, 89,000.00 per year. ii. In 2012, 5,500 hectares of land alloted for intercropping in 90 different locations iii. This covered 10,000 farmers iv. Target for 2013, additional 434 sites

7. Fisheries - contributed 193.65 billion to economy in 2012, storage facility in Bataraza in Palawan, and new piers, roads, and bridges

8. Hacienda Luisita - in February 2013, DAR has completed the list of qualified beneficiaries for land, turn over of lots will begin on September 2013

9. Health - 81% of Filipinos were enrolled in PhilHealth, expanded Z Benefit Package (poorest of the poor can now get free medical care, included illnesses are breast cancer, prostate cancer, acute leukemia, coronary bypass, and corrective surgery for holes and defective blood vessels in the heart), and fund for infrastructure - 33 billion to improve 4,518 hospitals, rural health units, and barangay health stations.

10. Disaster Preparedness - a. Geohazard Mapping and Assessment Program, identified 28 most vulnerable locations, completion of Geohazard maps for 496 cities and municipalities, remaining 1,138 covering every last corner of the country will be finished before the end of 2015. b. Project NOAH of the DOST, total of 525 automated water level monitoring stations and automated rain gauges have been installed in 18 major river basins throughout the country. c. Flooding in NCR - relocating informal settlers, filing cases against those who have obstructed waterways, and 6.2 billion to construct Blumentrit Interceptor Catchment area to be completed next year

11. Housing - 9,377 houses for victims of Sendong; 4,374 house more to be built; turning over a total of 53,106 houses to victims of Pablo

12. People in uniform - 47,850 houses, several thousand hectares of land in three military camps assigned for livelihood, additional income for the military and they can now participate in improving the economy, investment in national police (74,879 firearms, helps reduce election related crimes)

13. Peace - Bangsamoro Basic law, to pass it before the end of 2014

14. Legislation - among 5 (Sin Tax Law, Responsible Parenthood Law, Cabotage Law, Fiscal Incentives Rationalization Bill, Land Administrative Reform Bill), I look into Cabotage Law and I find it commendable. 

15. Proposed budget for 2014 is 2.268 trillion

16. Modernization of Armed Forces - Interesting equation (1 fighter jet = 6,580 house for soldiers and police force =2,000 classrooms), the govt. prefers to prioritize enlisted personnel's welfare than purchasing 24 fighter jets

17. MRT/LRT Fare - govt. subsidizes 25.00 per passenger in LRT and 45.00 in MRT. 

18. Traffic - 2.4 billion loses per day, Integrated Transport System, Metro Manila Highway, revisit PD 1113 and 1894

19. DPWH - there is now open competition for contractors, saved 18.4 billion

20. PPP - airports and Daang Hari

21. Tourism - created 3.8 million jobs

22. GOCC - a. PRA, 1996 to 2009 earned 76.02 million, in 2012, earned 1 billion, b. LWUA, in 2011, net loss of 950 million, in 2012, gross income of 870 million; c. MWSS, 2010, loss 34 million, 2011 earned 333 million, 2012, earned 2 billion 

23. Others - completion of roads and bridges left unfinished in previous administration, growth in semi-conductor industry, economic development in Iloilo, building of more power plants to adddress blackouts in Mindanao and the need for more energy as the economy grows, the case of NAIA 3, the end of transactionalism, reforms in aviation industry, and the benefits of CCT

Challenges to Overcome

But there are challenges to overcome in order to sustain the above widespread transformation and inclusive growth. And these challenges include: 

1. Need to increase the number of policemen and soldiers from 250,000, but the primary trouble is fund for pensions. a. No contributions have been made, but there are payments to make. b Funds from the national budget are being used for pensions. In 2012, 54.48 billion pesos were spent on pensions. This year, that figure will rise to 61.29 billion. By 2016, it will be at 80.64 billion. c. GSIS assistance is needed, using reclaimed lands to generate funds, d. Review of PD 1638 and RA 8551 

2. SSS pensions - SSS has accumulated an estimated 1.1 trillion pesos in unfunded liability, amendment of SSS Pension Scheme 

3. The anomalies involving Mr. Syjuco, PAGCOR, PNP, Bureau of Immigration, NIA, and Customs

Personal Response

As a student of free market, it is not easy to write a response to SONA. There is a tension between the ideal and the actual. How can you describe your ideal economic system if the existing system is too far from it? Despite of this reality, I just want to express the transformation/growth I like, the transformation/growth I don't like, and some questions in my mind. 

I like the electrification of sitios, the relocation of informal settlers, the construction of storage facility, the addition of intercropping, PhilHealth, the construction of Blumentrit Interceptor Catchment area, housing for typhoon victims, the contribution to economy of enlisted personnel through development of livehood program, the lifting of Cabotage Law, the "open competition" for contractors and the saving of 18.4 billion in DPWH, the development of airports, the priority given to enlisted personnels' welfare over fighter jets, the performance of GOCC, the development of Iloilo economy, and the end of transactionalism. 

The things I don't like include the increase of PPPP beneficiaries from 700k to 4M families. I see it as welfarism that is now causing great headaches among developed countries. I also disliked the increase of national budget. In 2012, the national budget was 1.816 trillion and 2.006 trillion in 2013. I am asking myself, why the national budget keeps on increasing in the passing of years?

Some questions in mind that need further clarification include Bangsamoro Basic Law, revisitation of laws, education, employment, MRT/LRT, and the pension of enlisted personnel who are retirees and will be retiring. 

Concerning Bangsamoro Basic Law, I just want to know its basic content.

Concerning laws proposed by our President to be revisited are PD 1113, 1894, 1638 and RA 8551. I think the first two have something to do with the construction of superhighway in NCR and the last two were related to retirees' pension. I still need to verify if my initial understanding is accurate. 

About education, I really don't know now the meaning of quality. Is it measured by length of years or by the quality of teachers and books' content? Yes, I consider the reduction of price of textbooks and increase in number of facilities as commendable, but as to quality, I don't know. This is because not a few critics have already voiced out that something is seriously wrong with existing educational system. 

Regarding employment, I just wonder about the accuracy of the report. Imagine 6 out of 10 from a total of 503, 521 TESDA graduates have found jobs plus 3.8 million jobs created by tourism. If this is true, in what way does it make an impact on the number of Filipinos going abroad searching for jobs? 

How about the government subsidy for MRT/LRT fares? I think the logic is true. All Filipinos including those who do not use MRT/LRT are actually paying for that subsidy. If this is true, then does it follow that more MRT/LRT passengers would mean more subsidy? Isn't this a misuse of public fund? I think, the inclusion of this in SONA implies an increase in MRT/LRT fares in the coming days. 

Another thing that disturbs me concerns SSS and the pensions of enlisted personnels. Similar problem is approaching the US though in our case, the government anticipates that the suffering of the next generation will occur 28 years from now.

In ending this personal response, I just wonder why almost nothing has been mentioned about our "modern day heroes", the OFWs. I am also puzzled why there is a complete silence regarding global economic crisis and freedom of information bill. I just could not avoid thinking that perhaps these issues are not that important.

Responses from Advocates of Free Market

One advocate of free market thinks that the picture below is a more accurate description of the economy:

In order to understand why free market thinkers' assessment is different from the mainstream, one needs to grasp first the content of Frederic Bastiat's "The Law" and Henry Hazlitt's "Economics in One Lesson".  

And I would like to conclude with remarks coming from other advocates of limited government, liberty, and free market taken from a Facebook Group. I asked them about their response to SONA and here are their answers:

FB - "Didn't bother. It was a nice day today so I went to the park."

ED - "Government will always be obsessed with GDP, GNP, whatever. True growth can be seen at the grassroots." 

PB - "No comment, I have my Fairy Tale book to keep me occupied hehehe" 

JA - "Recycled rhetoric." 

DA - "The usual statist bullshit. That pretty much sums all of 'em up."

One blogger wrote:

Colorful Rag - "I just no longer see a point in analyzing pabango speeches. You have to be either stupid or in denial to believe that this or any administration is the bringer of social progress in any positive sense. This year, there’s sure to be a flaunting of GDP growth, which doesn’t deal with economic productivity as much as it does price increases. I’m done with that."

Reference: http://www.president.gov.ph/wp-content/uploads/2013/07/SONA-2013.pdf

Others' Voices: 

The Anti-Pinoy

Colorful Rag

Business Mirror