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Wednesday, March 11, 2015

Charter Change: Not about reliance on FDI – It’s about FREEDOM to Choose


Charter Change: Not about reliance on FDI – It’s about FREEDOM to Choose

For the life of me – I can’t fathom how someone could come to a conclusion that charter change is about relying on foreign capital – alone (though there are millions of pinoys who have the same FLAWED mindset that charter change is exclusive of all other efforts to improve the overall well-being of the different individuals who live in a geographical area called the Philippines).

At the Macrolevel

Removing the 60/40 does not imply relying on FDI alone – it means having the freedom to opt for FDI when needed.
At the moment the Philippines has only two primary sources of foreign capital – the Philippine Stock Exchange and foreign loans.
By removing the 60/40 we add FDI on top of portfolio investments and foreign loans.
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Another question is raised whether removing the 60/40 will attract investors in droves.
The answer to that is another question – has retaining the 60/40 attracted investors in droves?
A follow up question would be – is there a difference in the quality of life between countries with open economies and those with closed economies?
economicfreedom
For all the talk about call center operators – they earn more than the Pinoy schmoe employed by the protected Filipino businesses.

At the Microlevel

Another issue was that it’s useless to open the economy because most Filipinos don’t know how to use their money anyways?
The Philippine economy has producers and suppliers – and they are all Filipinos.
The producers (currently the oligarchy) are making a killing with a captive market – does their capture of the market mean the Filipino producers don’t know how to use their money? Well, maybe – because they need to be protected before they can make money.
Most Filipino buyers/consumers on the other hand – don’t have enough money for their basic needs, don’t expect them to become investors overnight – that’s so unreal – for real . However, when there is surplus money people will tend to: a) consume some more; b) invest the money; c) save the money – in varying ways.
Clearly, these group of buyers will not receive massive capital infusions – which wasn’t the objective anyways. The objective was to have jobs so they can afford to pay for their needs instead of freeloading on tax money.
Moreover, just because they “don’t know how” to invest money still does not justify imposing economic restrictions. That’s akin to restricting toddlers from going to school because they don’t know how to read and write.
How does an open market teach you how to manage money? You make a lousy decision and you lose money. You make a good decision and you make money. If you don’t even have money, much less have a market where you can hone your economic decision-making skills – how exactly are you going to learn the rudiments of investing – by listening to a college professor who can’t wing it in the competitive markets? Ain’t that rich?? If every Steve Jobs and Bill Gates listened to the conventional wisdom – they both will be just as conventional as any other schmoe off the streets.

What if I want to be the boss of me?

By all means be self-employed, be your own boss.
However, just because you wanna be self-employed does that mean that the economy should be restricted.
Why should the choices of people to be employed with a foreign owned firm have to be restricted just because you wanna be self-employed? It’s a nonsequitur.
Consider the following – if your business tanks, you have more choices of employers.
On the business side, with the entry of more foreign businesses, you have a potentially larger client base instead of having the oligopsony (this is a market in which there are only a few large buyers for a product or service; this allows the buyers to exert a great deal of control over the sellers and can effectively drive down prices) of the usual trapos and oligarch firms – in other words, diversification of sales channels.

Developing what? Protecting what?

By exposing the Pinoy to competition and making him face the repercussions of his decisions he learns to become more accountable. Believe you me, if you lose your money on a bad investment – you learn to manage your money better the next time around. Or at least, learn to mitigate the risks.
In putting up with the 60/40 we wind up protecting Pinoy mediocrity.
While it is true that culture will affect the economic outcomes in the sense that if you live beyond your means you will have a deficit. The thing is before you get to make the spending decision – you have to get something to spend first. How can you decide on what to spend – when you have nothing to spend. It becomes a moot and academic exercise.
And that’s where economics comes in. On one day, it might make sense to spend on something – on another day it might not make sense to spend too. It depends on your conditions and your unique individual economic needs. When restrictions are imposed (freedom is removed) then your options become limited.
Moving forward, the economic policy solutioneering, is a direct challenge to the conventional assumption that the roots of Filipino poverty lie in “culture” because econ lib says – it has nothing to do with culture per se – but the restrictive economic policies.

The Culture “Wars”

What others seems to be saying is that:
1. Free markets work for individualist cultures.
2. Filipino culture is collectivist
3. Free markets will not work for Filipino collectivist culture

Free markets are anathema to collectivists because free markets cater to individual preferences whereas collectivists prefer a one size fits all commodity or service approach which they impose on everyone else.
Here’s the thing – does the solution lie in:
a) Finding collectivist protectionist economic policies that work (if there were such a thing), – a case of “get the house in order before opening up”, or;
b) Changing the collectivist culture towards a more individualistic one – “open the house now, then everyone is forced to get the house in order”
The implications of the answer to these questions strikes at the heart of the “cultural wars” thesis.
Recall that China of the 1950s had a collectivist culture, a closed economy – and massive poverty. Fast forward a few decades – the same collectivist culture, a relatively more open economy – and a rise in prosperity.
At which point, it will be good to highlight North Korea and South Korea – the same Confucian culture of hard work – but having different outcomes due to differing economic policies.
Of course along the way, the NoKor culture has been remoulded by the socialist state inasmuch as the SoKor culture has been remoulded by the capitalist state – ala Gangnam style :D

http://antipinoy.com/charter-change-not-about-reliance-on-fdi-its-about-freedom-to-choose/

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