One of Rappler’s regular thought leader has once again showcased his ignorance and his irrelevant liberal leaning market philosophy. In his most recent Rappler thought piece, JC Punongbayan accuses the Duterte administration of practicing unsound government intervention in the market by threats, harassments and extortions. He claims that the administrations current approach in market regulation is just a symptom of Duterte’s authoritarian tendency and is not sound government policy for the long term benefit of the Filipino people.
Let us look at what some of JC Punongbayan’s thoughts in this Rappler Thought Leaders piece.
JC claims that the Duterte administration is using threats, harassment and extortion to control the private sector. He cites a few examples: Sec. Pinol’s threat to take the rice business out of private hands and give it to government, the governments arm twisting of PAL to pay Php 6 billion in unpaid fees to the government, the LTFRB imposing sanctions on Grab and Uber, the SEC revoking Rappler’s SEC accreditation, and the governments proposal to open the Telecom industry to another major player. Reading the entire piece sounds like JC is averse to any form of government regulation and believes in the infinite wisdom of the market. His main complaint is this:
“But a lot of Duterte’s market interventions so far seem to stem not from a well-informed or genuine desire to correct so-called “market failures,” but from an urge to brandish the awesome powers of the state whichever way possible – even if it means constantly threatening, harassing, or extorting the private sector.”
What he is saying to us is that all the instances he cited early in his piece about government intervention were not done in response to existing market failures but were examples of the Duterte administration being authoritarian. Let us look at some of the examples he cited of the Duterte administration using threats, harassment and extortion and look at the truth behind the reason for the intervention.
 |
| The face of libertarian economic thinking in the Philippines. |
When Sec. Pinol said he wants to take the rice business from the private sector, was he just flexing the government’s muscle and not responding to any market inefficiency? JC argues that yes, the threat made by Pinol was unreasonable and he argues that one of the main problems in the Philippine rice industry is too much government regulation. He said the government could use more rice imports in order to lower the cost of rice in the Philippines. JC seems to not have read the article he cited about Sec Pinol making this statement (see link here). If you read what Sec Pinol said, the problem is not the supply of rice in the market, in fact the Philippines does not have any shortage in rice. The market inefficiency that Sec Pinol complained about and wanted to correct was the way price is controlled by the traders and importers. These traders and importers control the price of rice in the Philippines and is never to the benefit of the consumers or the farmers. The price of rice in the Philippine market is not dictated by market forces but by greedy traders and importers. JC missed this whole point and what he wanted instead was to allow more imports to come in to the Philippine market giving the importers who are usually in collusion with the traders more power. This also drives rice prices down which hurts the farmers. JC Punongbayan obviously does not care about the Filipino farmer – they are dirty and not sophisticated to understand his libertarian economic philosophy.
When the government forced PAL to pay a shit load of money to the government, JC also accuses the government of arm twisting and not fixing a market failure. He makes it sound like the government just called on PAL one day asking for Php 6 Billion pesos for no reason but because they can. What this Rappler thought leader neglects to say is the fact that PAL owed the government that money and only this administration had the political will, balls and muscle to get PAL to pay up. The market failure here was a private company getting away with not paying its obligation to the government because they had so much political power in the past that they could get away with anything. JC may have forgotten this concept in economics- its called regulatory capture. This was the market failure that existed before the Duterte administration stepped in and which the government corrected. To call this arm twisting and not a win for public policy is beyond me. Then again, JC is a clear example of a libertarian economist – the market is always right and the private sector will always self regulate. I think what JC wanted the Duterte administration to do with PAL was to just hope and pray that one day PAL will be kind enough to pay its dues. As for Alvarez’ threats to Cebu Pacific, JC again neglects or refuses to see the market failure that is Cebu Pacific. This airline is infamous for how it mistreats its customers and Cebu Pacific airplanes have been involved in a few mishaps in the runway recently. If the way Cebu Pacific is conducting its business and mistreating its customers is not a market failure then I do not know what qualifies as a market failure for JC. JC also forgets that congress is the one who issues the franchise to Cebu Pacific so congress can impose whatever requirement or corrective measure it wants to impose on them. Is this market inefficiency? This is called regulation in my book.
JC obviously takes Uber from point A to point B everytime he can because he hates the government for wanting to regulate Uber and Grab. He considers this unnecessary government regulation that is stifling the growth of an emerging business that is providing a beneficial service to the public. In this case, again JC forgets or refuses to identify the market failure. Uber and Grab drivers are competing in a regulated space for taxis. Taxis have to go through a lot of government regulation in order for them to operate as taxis picking up passengers for a fare. Then here comes Uber and Grab competing directly with Taxis. If they want to compete in the same space as taxis, should they not be regulated the same way taxis do? This is all the LTFRB is doing – ensuring that everyone who competes in a regulated space are subjected to the same regulation and restrictions. What Uber and Grab wants is to compete with taxis without the same regulation and restrictions as taxis. What Uber and Grab wants is a market failure. If JC wants to argue that the current LTFRB regulatory frame-work is not efficient then he should argue that. Instead what he wants the government to do is to just abandon regulation altogether. Let the LTFRB regulate taxis the way they do now and leave Uber and Grab alone like they are some sacred cows. What JC does not tell us is that this kind of regulatory approach will kill the livelihood of taxi drivers who are relatively worse off (wealth wise) compared to Uber and Grab drivers. Most taxis drivers do not own the taxi they are driving while most Uber and Grab drivers own the car that they use. This alone is a huge economic inequality and all JC wants to do is to make it even wider so that he and his friends can Uber home.
JC writes for Rappler so he obviously does not agree with the SEC ruling to cancel Rappler’s SEC registration. He then throws a rant about how a free press is vital to a democracy. Here again JC refuses to identify the market failure. There are regulatory frame-works for media companies to operate in the Philippines. In fact this regulatory frame-work is enshrined in our constitution – a complete ban on foreign ownership of media companies. The SEC found Rappler violating this rule so they cancelled their registration as a media company. What JC also refuses to tell us is the fact that Rappler Inc. is an entity competing in a market. One of the most important element for a market to properly function is the existence of clear and strong regulations. Rappler violated a market regulation which caused market inefficiency because now Rappler is able to do things its competitors are not doing so this gives them a slight advantage over the others. The previous administration did not do anything about this market inefficiency which turns that inefficiency into a market failure. This is the market failure the SEC ruling sought to correct. This has nothing to do with press freedom – don’t believe that bullshit Rappler and JC is spreading.
JC also complained about how Duterte plans to bring in a third Telecom company in the Philippines to break-up the existing duopoly. He takes issue with how the government is doing this by warning the courts not to interfere and why the government is in a hurry. Imagine that, JC acknowledges there is an existing market failure – the existence of a duopoly, plus the knows full well how inefficient the service is from the existing players yet JC still does not feel the need to rush things. JC also has a concern about national security if the company is from China without elaborating why a Chinese company would necessarily pose a national security threat. He also asks, what special interests are at play? Although this question is reasonable, it is not applicable only to a Chinese company but to any possible entrant to the market. I also do not see the point of JC’s questions when seen from the perspective of an existing duopoly charging consumers a lot of money for a service that is not reliable in a time where internet connectivity is vital to everyday life. These questions can be asked about any possible entrant to the market to break-up the existing duopoly so in reality he not really against the idea of introducing another player in the market but more against the idea of it being possibly from China. So JC is ok with the government intervening in this space as long as the company is not from China? JC should have explained why is he so apprehensive about China? Does China not have a good telecom industry? Does China not have some of the biggest tech companies in the world made possible by a solid foundation of telecom providers?
So in summary, JC failed or refused to identify the clear market failures that have existed under the previous administration and all the Duterte administration is doing is correcting these failures. To JC, these government actions in the private space is inefficient. Since JC refused to acknowledge the existence of market failures or dismissed it out right (telecom duopoly), he forgot to talk about how he wanted the government to fix them. Or did he? I don’t think he did. What I think is that he knew exactly what market failures the government tried to fix but instead wanted the government to let the private sector fix its own shit. JC is a full blue libertarian economist who believe in the ultimate power and infinite wisdom of the market. To JC, market failures are fixed by market forces and any sort of government intervention that forces the market in a certain direction is always bad. The market has to make its own corrections and the government should just be there to support it. JC believes the government should not protect the farmers and the taxi drivers by complaining about how government regulation hurts Uber drivers, rice traders and importers. This is a very common philosophy for libertarian economists – let those with market power control the market at the expense of those without market power. JC does not care if the farmer remains poor as long as the rice traders and importers retain their market position. JC does not care if the taxi driver loses business and is not able to meet his minimum fare to pay for the rental fee of his taxi as long as he can get a Uber anytime he wants.
0 Comments