- NOTE: I first posted this article on my Facebook site.
Apparently, it appears that the Philippine’s protectionist chickens are coming home to roost.
Like I said in the past, a crony’s or oligarch’s support of PROTECTIONISM is or can be suicidal.
The Manila Times, a crony media entity during the reign of former president and now embattled congresswoman Gloria Arroyo, and apparatchik-turned-columnist Rigoberto Tiglao urged the public to be “very angry” at Meralco’s electricity rate increase.
Tiglao wrote: “Very angry in fact—the steep electricity cost is sheer highway robbery of Meralco’s more than five million customers, most of them poor. Its audacity is shameless, executed during the Christmas season and while the nation’s attention had been nailed to super typhoon Yolanda’s horror.”
Indeed, the statists’ solution is more government control and intervention. However, we’re not that naive to defend Meralco’s economic interests against creeping Statism or Statist solutions (as proposed by Tiglao and others).
I must reiterate that Capitalism or Free Market System is NOT about business or corporate interest; it is about economic freedom and individual rights!
Although many Filipinos know that the Lopez family controls Meralco, only a few people are aware that the country’s largest power distributor is a product of our PROTECTIONISM, which is strongly supported by both the leftists and the centrists.
Only a few enlightened Filipinos know that the Lopez family strongly advocated and fought for PROTECTIONISM in the past. It is one of the biggest economic beneficiaries of the country’s protectionist policies.
In the end, the Lopezes got what they wanted– a system that protects Filipino oligarchs against foreign competition. The Power Sector is one of the most PROTECTED industries in the country.
Yet the Lopezes and some of the country’s cronies and oligarchs have to pay the price of their protected economic interests.
Both the Philippine government and the Lopez family are in pari delicto (in equal fault), since both parties are determined to maintain our protectionism and Oligarchic economic system. The PH government seeks to protect Filipino oligarchs and cronies from outside competition; the Lopez family benefits from the system.
I stated in a previous blog:
We all know that protectionism is what is now hurting our local economy and impoverishing our own people. Because of protectionism, there is artificially limited trade in this country that caused/causes joblessness, less investment, high prices of commodities, lack of business opportunities, poor services (electricity, products, water utilities, etc.), monopoly, graft and corruption, etc. But how will it hurt our own local investors and businessmen?
Protectionism is government or state power. If the system is already there, then the government would have more reason and leeway to impose more protectionist policies and regulations. Thus, the following are the direct, logical consequences of protectionism that could hurt or even destroy local businessmen, including the oligarchs who supported the system:
- Cronyism. When we speak of cronyism, we also speak of favoritism, and this favoritism is temporary. It depends upon who makes the law or who wields the political power. As deposed president Joseph Estrada once said, “weather, weather lang yan”. Some cronies largely benefited under Estrada’s short-lived term, yet a number of these protected cronies were purged or ignored during the long term of Gloria M. Arroyo. In fact, the Lopez family that strongly supported, or still supports, our protectionism, was economically hurt by Arroyo’s political wrath. This means that there is no balance or consistency in the country’s economic arena. If you support protectionism, you’re in effect turning the government into a battlefield of political largesse and support. If you’re not part of the country’s economic elite, the tendency is, you’d not succeed, especially when your economic success largely depends on political connection.
- Favoritism. I explained this in #1. If you’re not part of the country’s economic elite, you wouldn’t get more government support, subsidy or protection.
- More taxes. Ever heard of the Text Tax issue? I tackled this issue here. The politicians said, because our telcoms are now so successful, they must contribute more to the government. Of course, since our oligarchs benefit from our system, they must support the giver of protection, which is the government. The logic here is: since our protectionist system limits trade and foreign businesses, there are only few businesses that pay taxes to the government. And since the government has been spending more than it collects, naturally it has to levy more taxes, and because it cannot tax the people, it has to tax big businesses.
- More regulations. One proposed regulation: Antitrust law.
- More arbitrary government powers. One proposed law: RH bill.
- Statism or dictatorship.
In other words, protectionism does not serve the self-interest of our local entrepreneurs. Instead, it expands government’s arbitrary political power and ups our degree of statism or dictatorship. This is the reason why every rational businessman must oppose, reject protectionism.
This Inquirer article suggests that “protected” power cronies might be guilty of collusion in rate increase. Really!
I can almost hear some brain-dead leftists blaming non-existent capitalism for this seemingly manufactured, well-known issue designed to divert people’s attention from the current regime’s pork barrel and political scandals.
To set the record straight: RP’s power cronies are PROTECTED by law from competition. Pinoy power cronies enjoy ABSOLUTE MONOPOLY. Thus, we have a semi-socialist or FASCISTIC power sector.
Here’s why any scheming, potential leftist tyrant (ala Hugo Chavez of Venezuela) can easily establish socialist dictatorship in the Philippines.
- Any potential tyrant and his leftist minions can easily blame power rate increases on non-existent capitalism.
- Offer socialism or nationalization of the power industry as the only solution.
- The result: The replacement of the semi-socialist or FASCISTIC/CRONY power sector with an ABSOLUTE STATE-OWNERSHIP system.
Meanwhile, the Rappler video below shows an incomplete, very crude explanation of the country’s power crisis. Our electricity, including Internet services, is expensive because it is a government-protected MONOPOLY. The Philippines’ power CRONIES are protected by our laws from market competition.
By contrast, Singapore’s electricity is one of the cheapest in Asia and in the world because of the country’s key regulative goals:
- a level playing field
- transparent and consistent application of rules
- open access
- low entry and exit barriers.
Singapore’s power industry champions MARKET COMPETITION.
Its key principles are as follows:
- Free market competition and encouragement of market outcomes.
- Market to drive investments, allow entry or exit of new competitors/products into the market.
- Market to incentivise most cost efficient behavior.
- Market sets electricity price. (Unlike RP’s subsidized and government-controlled power sector).
- NO DISTORTION FROM SUBSIDIES, causer-pays principle.
According to this SG report: “One outcome of competition is to cause companies to adopt the most cost efficient technology- Combined Cycle Gas Turbines.”
The outcomes of Singapore’s Market Liberalization in the Power Sector are as follows:
- Reduced costs (sourcing for cheaper fuel)
- Lower costs of risks (hedge against volatility in fuel oil price)
- Adopt the most competitive technology (switch from steam plants to CCGTs)
- Develop market demand and improve efficiency (adopting combined heat and power plants, e.g., co-gen and tri-gen)
On the whole, market reforms have increased competition among industry players and benefited consumers.
ADDITIONAL BRIEF COMMENTARY:
This Rappler op-ed is what I call too “academic”. The power hike/crisis is not another school project! The people need to know the truth about our failing power sector!
Honestly, this article made me more confused… Everything the articles says merely confirms the fact that RP’s power sector is the most regulated and protected, thus it lacks competition. And lack of competition means lack of incentive to improve or to innovate.
From the article:
5. The ERC is mandated by section 43 of the EPIRA to ensure competitive behavior of all industry players. Section 43 (c) requires the ERC to enforce the rules and regulations governing the operations of the WESM (Wholesale Electricity Spot Market). Section 43 (k) requires the ERC to monitor and take measures to penalize abuse of market power, cartelization, anti-competitive or discriminatory behavior by any electric power industry participant. Section 43 (r) mandates the ERC, in the exercise of its investigative and quasi-judicial powers, to act against any participant or player for violation of competition rules and regulations. Section 43 (s) authorizes the ERC to use its quasi-judicial powers to inspect the premises, books of account, or records of any person or entity at any time, to determine the existence of anti-competitive behavior or abuse of market power. Without doing any of this, the ERC approved the excessive rate hike of Meralco after a closed-door meeting on 9 December 2013.
The idea that the government mandates or guarantees competition is a fallacy. The government only needs to back off! Plus, how can there be “competitive behavior of all industry players” if the industry players themselves are protected from competition because of RP’s protectionist policies? This is supposed to be very basic economics 101, I believe.
We don’t need more Dr. Pritchetts in RP’s academic sector!