Friday, January 27, 2006

THE ROLE OF GOVERNMENT (part two)

Just because something is the law doesn’t make that something right. People of a country who get together to write a constitution need an objective standard with which to judge the righteousness of laws. No one believes that slavery is moral or that an African American is worth only three-fifths of a full person just because the US Constitution said so in 1787.

That objective standard is individual rights. You own your life and I own mine. What you make is yours and what I make is mine. What you do with your life and your property is your business. I should have the liberty to do the same.

Thus, rights come out of self-ownership. Self-ownership comes from God’s decision to give all of us free will.

God knows no one is as perfect as he is. We can be greedy or charitable, self-centered or selfless; he left that quest up to us as individuals, and he will judge us one by one.

Yet despite the fact that God gave us our “free agency”, many incline not to trust anyone – but themselves - with it.

Freedom is not anarchy. Freedom is the protection of individual rights from government, from foreign invaders and from each other.

Corruption in corporations is no different from corruption in government, but at least the corruption in a corporation is limited to that corporation. Enron played accounting tricks, stockholders found out, and the company folded. Their employees lost their pensions and rightfully sued the executives and other fiduciaries for breach in contract.

The government, on the other hand, plays accounting tricks with our Social Security (locally, with the public employees’ retirement fund), we find out, and there’s still no reform. Instead of reform, government uses its taxing, borrowing and money-printing powers to hold out its Ponzi scheme. Government continues to run fiscal deficits dragging the entire nation’s pension plan into financial insecurity. And when it all comes tumbling down, we can’t sue the government for all the Social Security taxes we paid because the Supreme Court said so in 1960 in Flemming vs. Nestor.

We, as individuals, give up power to the government in order for it to protect our individual rights with an objective standard. Having government use power for anything other than the protection of our rights to life, liberty and property makes for corrupt government.

Friday, January 20, 2006

LEAVE YOUR STORES OPEN OR WE'LL SHOOT YOU

The underlying reasoning behind price-gouging measures is the blissful ignorance of how prices are set in the marketplace. In a very Marxist fashion, popular thinking suggests that costs and costs alone should determine “fair” prices for particular goods. If only this were true, then ignorance would truly be bliss.

Even if costs were to remain unchanged for all businesses during an emergency, storeowners still have to deal with the following surge in demand. A hurricane is coming, everyone gets warning from the news, and understandably, everyone goes to the store to prepare for the worst. How are businesses to distribute their goods?

Should they base distribution on a first-come-first-serve basis or on need? If based on the former, are they to implement quotas and create long lines and waiting times? If based on the latter, are businesses to look into a person’s background to determine if that individual is in more need than the next guy in line to get the last piece of hardware?

Could businesses allocate to consumers on basis of family connections or friendships? If high prices are evil, shouldn’t we consider these criteria evil as well?

Do businesses even have the right to consider whatever criterion they want when selling their products? I believe they do because it’s their property; they should have the exclusive right to its disposition. They may sell their goods based on price, intentions of charity, family connection or friendships. It’s up to them.

Since price-gouging measures seek to make the price option less attractive, more weight will be given to the other qualifications when businesses decide how sell their goods. Are we willing to exchange the qualification of being able to pay for the unlikely qualification of being a family member, a friend or the first in line?

A businessperson may engage in the “sharp business practice” of charging as much as possible, but open competition and the profit motive will ensure that such a practice is short lived. On the other hand, price-gouging laws will exacerbate and prolong the real underlying reason behind high prices: shortages.

There’s no better way to discourage suppliers from supplying than having government dictation of prices and a possibility of retaliation in the courts. Price-gouging measures would do both very well. The government practically puts a noose in the hand of every consumer and government official with which they can hang storeowners. Stores would be at the mercy of the mob and government mobsters.

Storeowners are better off shutting down and closing their doors before the storm even reaches our shores. They risk incurring big losses because they would lack the ability to raise prices arbitrarily in anticipation of rising costs and smaller profit margins because price-gouging laws would criminalize them for doing so. People need the flexibility to change prices to reflect any assumed changes in the market as quickly as possible in order to survive.

I’m afraid if businesses were to protect themselves by shutting down, the ASG would go so far as to consider a “Leave Your Stores Open or We’ll Shoot You” bill.

Should the Governor’s proposal or any form of it become law, then an explicit “loser pays” provision is necessary to curb frivolous lawsuits. If citizens and government make claims in attempts to extort and manipulate businesses, then the ASG should force irresponsible parties to pay for the defendant’s legal costs and any resulting damages.

Moreover, if price-gouging laws were fair, then proponents should write their legislation to also apply to employees since we always seek to gouge the highest wage (the price for our labor) possible out of our employers.

Saturday, January 14, 2006

THE ROLE OF GOVERNMENT

Corruption in government will never go away until we clearly define its role in our lives. Transparency and accountability are not enough. Unless we understand and define the proper role of government, we will always be met with disappointment, frustration and hopelessness.

Government’s only function is to protect an individual’s rights to life, liberty and property regardless of race, religion, national origin, sex or socioeconomic status (whether you’re rich or poor).

Rights come out of the fact that you own your own life. You have the right to live. No majority vote should take your life away from you without due process of law. The product of your own life and efforts is your property. No majority vote should take your property away from you without due process of law. To own your life and your property is your liberty. No majority vote should take your liberty from you without due process of law.

Anything that requires the infringement on any of these rights is not a right but a wrong. Therefore, no one can claim such rights as rights to healthcare or education or a home or a meal, because they come at the expense of someone else’s rights to their own life, liberty and property. Nothing in the world is free; there is no such thing as a free lunch; someone is always going to have to pick up the tab.

Law and morality do not bind government when government can say to anyone that some good intention, like the need to end poverty or to educate the youth, trumps their individual rights. In using desired ends to justify the means, government can kill and not be accused of murder (trumping the right to life), can enslave and not be accused of slavery (trumping the right to liberty), and can steal and not be accused of thievery (trumping the right to property). All government would need is a good intention to justify its actions.

With power like this, it’s no wonder why people want to become politicians. With power like this, it’s no wonder why politicians try to get “in” as much family and friends as possible. With power like this, it’s no wonder why people are willing to bribe and pay favors to get a piece of the pie.

For government not to uphold individual rights above any action demanded of it by the majority creates an environment for hypocrisy. Because it will not be their rights politicians will vote to restrict in order to achieve their “well-intended” purposes. Instead, they will vote to sacrifice the rights of those who cannot organize, who do not have enough votes and representation, who do not have much money, power or influence, or who do not just speak up.

The societal arrangement that is most compatible with individual rights is the free market (capitalism). We have enough historical data and economic models to prove that free market incentives address all of our concerns, from the environment to poverty to education, more effectively and compassionately than government can ever begin to comprehend.

For the people to oppose such government involvement in healthcare (LBJ), air transportation (Sega’ula), ocean transportation (MV Sili), broadcasting (KVZK-TV), telecommunication (ASTCA), utilities (ASPA), lending (DBAS) and education (DOE) does not mean opposition to the services and purposes these institutions are meant to provide. Instead, it means protecting freedom, liberty and individual rights. In addition to standing up for these values, we also stand to gain even better services in the above areas because of the free market incentives that would follow.

We finally live in an era suspicious of politicians’ intentions and tired of government failure, corruption and intervention. We need to stop romancing with the idealism that government can be all things for all people, and relegate government back to its sole role as a protector of individual rights.

When power tends to corrupt and absolute power corrupts absolutely then the role of government should be one of very limited power.

Tuesday, January 10, 2006

Africa's War on Poverty Begins at Home by Marian L. Tupy

Marian Tupy is assistant director of the project on global economic liberty at the Cato Institute. He is the author of a new Cato Institute study: Trade Liberalization and Poverty Reduction in Sub-Saharan Africa.

As the Year of Africa draws to a close, it is right and proper to reflect on the advances that the cause of African development has made in 2005. It is also important to debunk some of the myths that have arisen as a result of the media's continued focus on protectionism in rich countries and its negative effect on economic growth in Africa.

It is true that rich countries' protectionism harms some producers in the developing world but trade liberalization in rich countries as a cure for African poverty is often over-emphasized. The main causes of African impoverishment are internal. Africa lacks political stability and economic freedom. Its tariffs are high and private property rights weak. It is hypocritical for African leaders to call for greater access to global markets while avoiding policy reforms, including trade openness, at home.

In a recent paper, the World Bank estimated the value of Africa's income growth resulting from full liberalization of global merchandise trade. Taking 2001 as the base year, the authors estimated that by 2015 annual income growth in Africa would be $4.8 billion greater than it would have been had no trade liberalization taken place. Trade liberalization in high-income countries would only account for $1.92 billion of those gains. The rest would come out of trade liberalization in the developing world -- including Africa itself.

Africa continues to be one of the most protectionist regions in the world. While high-income nations of the Organization for Economic Co-operation and Development reduced their average applied tariffs by 84 percent between 1983 and 2003 (to 3.9 percent), African countries only reduced theirs by 20 percent (to 17.7 percent). According to the most recent data, non-tariff protection in the poorest African countries is four times greater than it is in rich countries. Strikingly, some of the highest tariffs on African exports are levied by other African countries. Accordingly, the World Bank found that income gains from regional trade liberalization in Africa would account for $1.75 billion by 2015, or more than 36 per cent of all the gains that Africa stands to receive from full liberalization of global merchandise trade.

To put it differently, Africa stands to gain almost as much from regional trade liberalization as from greater access to rich countries' markets. Yet some non-governmental organizations, Oxfam included, argue against trade liberalization in Africa. Africans, the argument goes, ought to protect their producers from foreign competition. That is nonsense. After decades of domestic protectionism and preferential treatment overseas, Africa's share of the world's exports declined from 2.5 percent in 1980 to 0.9 percent in 1999.

The causes of Africa's falling share of world trade are not lack of access to overseas markets and inadequate protection at home but, as UK prime minister Tony Blair's Commission for Africa found, "low productivity and poor competitiveness." That is why Africa's income gains from global trade liberalization are likely to be quite small. In contrast to Africa's gain of $4.8 billion, Latin America and the Caribbean stand to gain as much as $29 billion.

The potential benefits of increased access for African goods to overseas markets will go unfulfilled unless it is accompanied by far-reaching economic and political changes on the African continent. In addition to greater trade openness, those changes should include dealing with government corruption, dishonest judiciaries, inefficient bureaucracies and over-regulation that stifles private sector growth.

Clearly, free trade is a necessary, but not a sufficient, condition for economic growth in Africa. But trade can play a role in promoting prosperity by increasing domestic competition and changing the dynamic of the political economy that keeps privileged groups protected. Many reforms are needed but a good place to start is with freeing trade at home. African countries should do so regardless of what the rich countries do. India, China, Hong Kong, Singapore, South Korea, Taiwan, Chile, Estonia and many other developing countries undertook unilateral trade liberalization in the past and reaped the benefits.

The steps that are necessary in order for Africa to prosper rest in the hands of African governments. Yet conventional wisdom continues to hold that the continent is destined to remain poor unless the rich countries change their economic policies. African leaders are only too happy to play their part in that charade. Blaming poverty on forces beyond the control of Africa's political elites takes the spotlight away from decades of failed economic policies, wholesale looting of the continent's wealth and loss of countless lives to political repression and ethnic conflicts. If African political elites are serious about improving the lot of the African people, they must first look to their own actions and stop blaming others for the poverty on the continent. The war on African poverty must begin at home. (bold mine)

This article appeared in the Financial Times, December 20, 2005.

Saturday, January 07, 2006

BLUE SKY: THE SACRIFICIAL LAMB

I admit that my last letter (BYE BYE BLUE SKY) was overtly sarcastic, but everyone concerned should rest assured that the target of my sarcasm was not Blue Sky Corporation but the ASG. Thanks to Nancy (MISSED THE POINT) for helping to clarify, but I think it’s necessary to state more directly the essence of my last letter.

The $10 million LBJ loan puts Blue Sky at precarious odds with public sentiment. Public employees’ retirement checks are at stake. In the minds of many people, Blue Sky is not only an “enemy” of ASTCA, but also of LBJ and retirees. And all Blue Sky wants to do is make an honest buck servicing telecommunication consumers.

Government intervention, elaborate schemes and their plotters have gone too far this time around.

ASTCA has to beat $10 million plus 8% interest out of Blue Sky. ASTCA can do so in one of two ways: the moral way or the immoral way.

First, the moral way: Through its own efforts, ingenuity, creativity, productivity, efficiency and reliability lower its own costs and provide superior customer service, cooler products and lower prices.

The immoral way: Whine for federal and local funds and taxes to pay for their costs, borrow tax money from other government programs, use tax money to advertise, and/or lobby the ASG to do something about Blue Sky Corporation.

And the ASG has options: price controls, quotas, and meaningless regulations and licensing requirements. I wouldn’t be surprised if they’re sharpening their pens right this moment. I’m afraid ASTCA will settle for immorality.

My sincere hope is that Blue Sky Corporation continues to do what it does best. I hope they feel no qualms about lowering their prices or providing cooler cell phones or better customer service than ASTCA. I hope they maximize profits so that others would want to compete as well.

My sincere hope is that this whole redistribution scheme blows up in the government’s face. The ASG could have found money for LBJ by selling its government-owned boat (MV Sili for $4 million), selling the Governor’s airplane (Sega’ula for $500,000), not donating our $200,000 for Katrina relief efforts, selling its shares in the Rainmaker Hotel, recalling all its questionable DBAS loans, selling the jungle of a golf course, privatizing all public parks, and resisting increases in Fono allowances.

Instead of making its own sacrifices, the ASG decided to sacrifice Blue Sky.