I was casting about thinking over several things I might write about this morning when my friend Bob kind of made my decision for me. Bob wrote a post about the advantages of free market versus government managed economy and some of the comments he received absolutely blew me away.
I’m a bit older rhan most around here … I can clearly remember sitting with my mom and a map and the radio listening to the news from Korea every night. I particularly remember one night when the news came over the air that Joseph Stalin had died. I cheered and my mom scolded me for being un-Christian and rejoicing in the death of a fellow human.
One of the reasons I felt that Stalin’s death was something to be glad about was my already well formed impression of how evil and oppressive the Socialistic form of government was and I thought that perhaps Stalin’s departure from the scene might herald a positive change.
Well, it took longer than I thought but most of the former USSR countries are doing well with free market economies. It amazes me quite a bit today how my own US has changed over the past 50 years or so. The Federal Government is now deeply entrenched in areas where, in my opinion (and in the opinion of the authors of our Constitution) they have no business being. One comment I saw to Bob’s post particularly caught my eye. Someone asked, “Why is the government allowing all the prices to climb while our salaries stay the same”?
I have news along those lines … it is not the responsibility of a free government to control either prices or salaries. “That government is best which governs least”.
OK, so I have shown my colors, but don’t get me wrong, I’m not going to start a revolution or even run for office (heaven forfend). In general I would win no points from Thomas Jefferson or from Thoreau (whos quote that is above). I’m a former government employee with a pension, actually, and I don’t advocate violent change.
But if you feel at all strongly about those sorts of issues, you have yet another reason to think twice about moving to the Philippines, long term. This is the land of “government at any cost” from what I have seen. And it is nowhere more apparent than in the interaction between government and the economy.
Bob’s post that I mentioned earlier had to do with the elaborate inflexible process of regulating “PUV” fares (Public Utility Vehicles) the common Filipino term for taxis and jeepnies. Buses, both ocal and long-haul are also technically PUV’s but their fares are set by another completely separate and just as convoluted process.
I suppose there is some valid argument in saying that there is justice in the government regulating jeepney fares because, after all, the fares might otherwise climb so high that poor people couldn’t use jeepnies to get to work. But if you have even the most rudimentary understanding of business and logic you can see the fallacy in that common argument. If fares climb so high that common folk can’t afford them, then those folk won’t ride jeepnies and drivers will have to reduce their fares until they are making a profit. It is amazing how many people never learned this kind of simple object lesson in ll their long education.
It is completely unnecessary for the government to intervene in this process, and in point of fact such government intervention insures that everyone, rich an poor pays more than the real value of a jeepney ride, because even if a driver wants to ‘hold a sale’ and carry people for less in order to fill his seats, the government takes away his right to do so … and someone has to pay all the bureaucrat’s salary as well
While researching some writing that I am doing on alternative energy ieas on my PhilFAQS.com site I found a company in Manila who already has a commercially viable all-electric jeepney on the road that not only runs almost 100% on solar energy, but will have zero polution. They claim they can sell it for less than a new conventional diesel smoker jeepney.
Will this work long-term? Is it economically viable? Danged if I know, and danged if we’ll ever find out. Why? Because for nearly two years now they are still waiting for the Land Transportation and Franchising Regulatory Board (LTFRB), the government ‘protector’ of all Jeepney drivers and riders, to give them permission to place it in revenue service. Why should they even have to ask any government permission?
Couldn’t be because the major oil companies and the government are in cahoots to insure the demand for diesel fuel doesn’t drop, could it? Naw, that can’t be, I promised no conspiracy theories.
Closer to home, three years ago a cousin by marriage, electrical engineering graduate and a pretty sharp young man, now in his 30’s, bought a franchise from a Chinese company to sell electric scooters and mini-motorcycles in the Subic Bay Economic Zone and surrounding cities. Cute little scooters, mass produced, well engineered, simple as a stone … charge them overnight like a cell phone, they run all day an 40 kph (way more than you can drive in the city traffic) and are a great source of transportation for the common man. Again, no direct fuel costs and absolutely zero pollution.
Never sold a one in two years. Went bust and is now working for someone else. Why didn’t he sell any? It wasn’t becuase they didn’t work … they are proven technology and actually work great.
They could not be registered to drive on public roads … because the Land Transportation Office license plate people will happily sell even a decrepit, smoke belching motorcycle a license plate as long as the owner has a title which states the vehicle’s engine displacement. An electric motor has no ‘displacement’, thus, no license plate. Appeal after appeal has been filed but after three years, no decision. Eventually the LTO will render a decision, but the business is gone … how can investors wait years with no return on thier investment.
And it’s clearly the job of the “government” to protect us all from unproven new technology like electric-powered non-polluting vehicles (which have been the road since the early 1900’s) isn’t it?
If you are into free markets and a free society, the Philippines might not be a happy place for you to live, believe me. If you like waiting and hoping and wishing for ‘the government’ to cradle you in their arms, come on over. You know ablogging freind of mine once was advocating a new government agency to regulate shopping malls charging parking fees in their own parking lots … “Free parking to be Mandated by the Government”. Wonder why I stopped reading that blog? ;-)
Dave… Excellent article.we tend to think alike on this issue. One thing I find interesting is that in one respect, Marx was correct… The communist governments would become more and more free and the democracies would become more authoritarian and eventually, the two sides would become alike. Look at what has happened in the States and in China — plenty of corroborating evidence to test his hypothesis.
I was actually, at one time, offered a slot in the international econ PHD program at U of Chicago (I didn't attend)… I had many spirited arguments with Dr. Bausch at Marquette regarding Friedman Ayn Rand, etc (it is fun to leave a copy of "The Fountainhead" on a Jesuit priest's desk!)… I am as free market as anyone.
Regarding the RP, there is another factor that is historic… Essentially, the same few dozen families that controlled the wealth and power in the country when the Spanish were in power still control the wealth to this day. Under the American administration, it was expedient to leave those families in power. If the RP were to move suddenly free market, utter chaos would ensue and, I feel, the poor would get the shaft once again. Those with wealth will always try their utmost to keep that wealth. The States is noi different… Just different entities pulling the strings. That legacy of colonialism will be difficult to break.
Dave,
I have followed this site for a while and have gotten the impression from your various comments that you're an entrepreneur and that you favor free markets.
Now you have retired to the Philippines (and pursuing some business interests there as far as I can tell.)
Thus your statement in this post,
"If you are into free markets and a free society, the Philippines might not be a happy place for you to live, believe me."
leaves me wondering whether I'm just imagining a disconnect between/amongst some of your statements.
So are you truly happy there? Does the Philippines live up to your expectations for a happy place to retire to and conduct business in?
I don't mean to ignite a cyberwar or anything. I'm really trying to get a handle of your overall impression of the Philippines for retirement purposes while still being able to do business during early post-retirement years.
(I'm sure many now are forced into retirement probably because of age "guidelines" for corporate employment and pension plans vesting and what not… but actually still very active and productive and thus would want to pursue some kind of business while enjoying their early "retirement"…)
Regards,
Filipina reader looking at future life options
@John Miele: Very interesting comments, John, thanks. You certainly have hit thenail on the head in two of your points.
I've been to mainland China many times for government business, pleasure and even business. During one of the business trips I thought I was very close to a very nice business deal. The propective client was the Chinese joint venture partner of an old-line US business. We were probably less than two more meetings away from "inking" the deal (which invokned saning the Chnese company several millions of dollars per year in charges they were currently paying for telecom services … The deal was 100% leagl and above board and at that point was 100% ehtical as well, no bribes or dirty dealings at all. I stood to get a large cut so I was very excited, for sure. Then the deal "went South".
Why? The US venture partner (who was wasting similar amounts of money in the US side of their business) sent the Chinese partner a recommendation for the US leagal department that they "not take any chance of "upsetting" the telephone company".
Everyone left the table with handshakes and the usual business pleasantries, I went and got drunk, and so far as I know the Chinese company is still wasting millions per year, just to make sure no one in the phone company gets mad.
This sort of deal breaking is common, in my experience, in the US as well … the hardest thing in business is not to find a better way, or even to sell the better way, the toughest job is breaking the status quo
We seem to talk a lot about freedom but we often don't seem capable of acting it out.
@ecstasy: Hi X. Don't worry, you aren't starting any cyberwars with me. I appareciate you coming by and reading and your insightful comment.
You already know I tend to 'write long' (they don't call me the North Wind for no reason, you know 😉
So I think I am going to answer this with it's own blog post so I can take the space an adequate answer needs and also so that more readers will see it (many folks don't always wade through comment threads).
The post will be up soon, and thanks again for visiitng.
I do think the government should have minimal control over that jeepney. Note, however, the use of the word "minimal." Once upon a time I lived in Seoul and, let's just say, I want someone between me and the corporate world (in that context). Granted what I have seen of corporate America, I wouldn't mind that minimal control as well. 🙂
However, by minimal, I mean exactly that. Prove that it won't explode. I don't think that's unreasonable. 😎 That should take a day. After that, let's move it along and get it out on the street.
Hi Dave,
I am a firm believer that governments and free enterprise can work well together if allowed as in many ways they need each other to suceed. Just as much unions and business can work together for the success of both business and it workers.
When government and free enterprice work well together everybody benefits. Governments are able to provide better services for its people, goverments can help free enterprice through its government agencies in other countries. Japan is a classic case where both business and government worked together.
Steven
@Steven: Sorry, we'll have to agree to disagree n this one. The proper role of government towards business is to get out of the way. I am sick at heart at how the government of my own country has grown into a huge juggernaut that stifles competition and, coincidentally, drives up prices for the consumer just over my life time.
if the framer's of the US Constitution were to come back to life today and see what has been made of their bold initiative I think they'd have thoughts of suicide.
Sorry, your opinion is as valid as mine but you'll never convert me, been there, done that, got the t-shirt.
BTW, the focus of this post was on the Philippine government arbitraily setting Jeepney fares. Take a look at say US air fares in the 1960's when a 'helpful' government 'partnered' with the airlines setting fares for the 'good of the citizens' and take a look at the same fares today after airline deregulation. If you convert everything into 2008 dollars you'll see how much better we, as citizens are, _not_ to have government intervention in pricing … or so the dollars and cents would seem to indicate.
@Tom N: Interesting points, Tom. However, that is exactly the form of government control or support that is _not_ happening. From a safety, or a pollution, or even a basic transportation business case standpoint, jeepneys are horrible. The LTFRB and other government agencies don't care abut these issues.
But when it comes to political grandstanding by making a show of telling drivers what they should charge and what the riding public should pay … the part where govenment _has_ no justifiable role … then they step in and make a big show.
I'm not saying there is no role for government. What I am saying though (and this as the same point Bob made in his article that sparked this discussion), since the Jeepney drivers make all the investment (there are no government-assisted loan programs to buy Jeepneys, etc.), since they do all the work, and since they bear all the risk (including being forced to buy expensive government-provided 3rd party liability insurance instead of being allowed to by insurance on a free market), then how does the government the right to tell the owners what they can charge? It's mind boggling, at least to me.
It's also dumb and a huge waste of resources becuase a generic product like a ride on a Jeepney is an example of avery efficient market model. The riding public will very rapidly adjust the fare to the proper market rate .. they will vote with their feet … or in this case, with their 'seat'.
Hello Dave,
I agree with you about the government is run in the Philippines as I have a few little run ins with them myself. The government is not a good advertisement for living in the Philippines.
The filipinos I know here and in the Philippines have a very low opinion of there government and it's services. They are the most uncoopative of people and a bunch of sad sacks to boot. My friends say that the government services to do not attract the highly educated and the pay is rather poor. Not a good combination for good government.
So I am not surprised that somebody wanting to set up a business in the Philippines would think twice about doing so.
It would not be fair to compare the Philippines and Australia, because each country is very different.
The thing I have noticed with Filipinos in regards to their country they do not seem to want change in anyway.
When you have a vast majority of people are poor, you will never get the government that is going to pro free enterprise.
I think with free enterprise given a chance in the Philippines it would be a much more prosperous country as long as the business had long term goals, not just exploit the people for cheap labour, the countries other resources and then bugger off and leave a right mess for the government to clean up.
Steven
@Steven: Hi Steven, thanks for the further comment. I won't say much about the Philippine government that you haven't already said 😉
However, I also can't necessarily agree that it a Filipino trait to lack enthusiasm for change. I spent years in a role in a US government agency where a primary job was to 'sell' new technical ideas to senior management .. ideas which made things better and saved money as well. I can tell you that even 'good ideas' that make a profit and cost nothing to implement are a tough sell. resistance to change is a pretty endemic malady, I would opine.
But I will say there's plenty room for improvement, that's for sure.
Hello Dave,
Boy do I know that this is late comment. Live in the US ( California ) until August, and laid off so have time to read old articles. But on the fare control on Jeepneys and Taxi's. Government in the US is like you say. So many laws on the books to control how average person lives. But I would only like to say one thing about the controls of fare prices in the Phil's. My wife to be family all use jeepney's to get to work. They are on very tight budget. At least as is they know when they board exactly how much to get to work. If no controls one might be less but know way to know until you climb on board. Here 1 or 2 or 3 peso's might not make a difference but there It might mean lunch. As it is now you know when you get on how much to ride taxi as I do or jeepney which I love. I like the Air Con cabs. When I was there when you wrote this there was a extra charge because gas was so high. This time there was not. In the Philippines, Jeepney's can actually be considered public transportation, which is controled here. I just think if as you say it should be free interprise for jeepney owners to charge as they like, then they should have to advertise price on outside of Jeepney, so no ends up working for long hours for little pay and no lunch. For you and me it would just mean maybe one day getting a deal and next not. For the majority of Jeepney users it could mean hungry or eating well. I know when I was there I would just ask Josey how much, she would tell me and hand to driver. I know he would count quickly to make sure enough, but did not distract him from the great taffic in asking him questions.
Hi Andy, thanks for reading and for your comment. We don't take off points for late papers here at LiP, your words are always welcome.
Yes I understand fully about tight budgets. And of course Jeepneys are mass transit here. They are very tightly controlled on fares, operating routes (it often costs more than the Jeepney itself to by a franchise for a route you want to ply with that Jeepney).
But the argument that the government should set prices to protect the poor riders is a weak one. In a free market economy do you think the jeeps would set a price so high that they didn't fill up? Of course not, many operators are "one man bands" themselevs and barely eke out as much living as their passengers do.
But when the government sets a price, "bang!" everyone immediately moves to that price. If by chance the price is too low for the operators to make ends meet, many will move to somnething else until conditions are more favorable .. and people have a hard time finding a Jeep going where they need to go. If the government price is generous to the operators, then all the pax have to pay that extra Peso or whatever, city-wide. It's just not a good way to manage an economy.
It's also the reason the pollution and traffic are so bad … it totally stifles innovation. I've written here before about th eJeepney program, now somewhat world famous. Know one big reason the streets aren't flooded with e jeeps (which cost about 1/10 the price of a conventional jeep to operate)? Simple, since the price is fixed by government bureaucrats who drive to work in BMW's, (and wouldn't know which end of a Jeepney you get on, let alone what goes into operating one), a prospective eJeepney entrepreneur can't attract traffic bty charging less … and if all Jeeps cost the same, by law, why would a waiting passenger give a care about which Jeep s/he gets on?
Anyway, that's my opinion, and just like armpits, everyone has a couple, so yours is more than welcome too. 😉