Saturday, April 21, 2007

FAILURE OF AIRLINE CONTROL

The US Federal Government tried and failed at economic regulation of the airline industry. In 1938, the Civil Aeronautic Authority was established for the exact purpose of determining fares, routes and schedules. If there was ever a chance for liberals to demonstrate how government can run the airline industry better than the free market, this was their opportunity in 1938. Moreover, they had up to 40 years to “make government work” until the people finally demanded that the US Congress abolish the Civil Aeronautic Board (CAB) in 1978.

So what were the results of deregulation? According to the Cato Institute, “average airfares fell some 53 percent” from 1977 to 2003. The drop in prices led to an increase in load factors “from 49 percent in 1976 to 75 percent in the first half of 2004”. Inefficient airlines went bankrupt while the competent ones stayed in business, and new competitors arrived on the scene.

While many have said that our higher prices subsidize the major routes, in truth, it’s the other way around. The profitability of the major routes makes additional service to smaller communities such as our own less risky and worth pursuing. If the airlines are not making good money on the major routes, do you think they’re gonna come rushing to the Pago route to make up for the millions in losses across the continental United States ? No, and it’s that greater risk of un-profitability of smaller routes that Congress included the Essential Air Services (EAS) to provide a sort of a safety net.

Then again, the free market has also one-up the elite on that political football with HAL demonstrating that business is not only possible but profitable as well in a small route like Pago. So what was the EAS for again? I don’t get it.

Could we use more competition? You bet we can, and Togiola and the Fono’s temperament would have been put to better use huffing and puffing to blow that political brick wall down to allow foreign competitors into our airline market. The governor may not get his public-private charter airplane with his image engraved on the tail by doing so, but he’ll at the very least get the thanks of our people for more freedom in the airline market.

That’s worth more than all the butt kissing in the world, and best of all, it doesn’t cost anyone anything. I hope he and our people consider that especially in light of the proven failure of airline control.

Wednesday, April 11, 2007

CHAMBER OF SPECIAL INTERESTS

I usually support the Chamber of Commerce (CoC) because they promote the notion of free enterprise. Free enterprise, however, is not a philosophy of what’s good for business, but rather what’s good for the freedom of our people to do business. CoC President David Robinson's support for the ASG $20 million loan runs contradictory to free enterprise and does a great disservice to the Chamber’s members and its supporters.

Here in Hawaii , the Honolulu CoC supported an increase in Oahu ’s General Excise Tax to help guarantee federal funding for a city and county rail system. CoC’s are not natural allies of tax advocates, but behind its support this time were the usual justifications: increase in construction jobs, increase employment in supporting industries, and the promised benefits of a rail system. It seemed that the Honolulu CoC was more concerned with what its members stood to gain than with the heavier burden being levied upon Hawaiian families.

No one is against an expansion of the construction industry or the planned improvements in our infrastructure, but have we not paid enough taxes and lent the ASG enough loans? Are not US taxpayers already sending millions in federal grants?

What we are against is our leaders’ failure or outright refusal to account for and prioritize local and federal monies before attempting to reach deeper into our pockets and for some of us, our retirement accounts. Do we need to list the numerous atrocities of reckless spending perpetrated by this administration and the Fono?

Meanwhile, the ASG says that members will benefit from the possibility of gaining more interest for their money because of the loan. While that may true, all loans carry the risk of non-repayment, and that’s a risk members should never be forced to take.

The risk of non-repayment is something none of our politicians or the loan’s beneficiaries will have to carry. Yet, the Fono has passed this legislation without having to lose a night's worth of sleep that they or their immediate families will be held financially responsible if the retirement fund goes bankrupt.

This is not free enterprise. Free enterprise is about enjoying the fruits of your labor on your own terms. ASG retirees have done their time and have earned the right to their former employer’s promise to a sound retirement in exchange for their service. Free enterprise is not about taking from Peter to pay Paul, whether Paul is the CoC, construction companies or some other special interest group.

Sunday, April 01, 2007

My Change of Heart

Stuart K. Hayashi


Dear Tali,

I have some news. I don't know if there is even an appropriate way for me to break this to you. Trust me -- it's not easy.

It's just that, . . . well, . . .

. . . I don't have full confidence in the free market anymore.

Laissez faire is not sufficient when it comes to addressing many of the inadequacies of living in society today. You need government to build a dam to protect everybody from flooding; a free market is not enough for this, what with the "free rider" problem and all. And to pay for a lighthouse's upkeep through having the private dock owners own the lighthouse and pay for its maintenance through docking fees, only works if the private dock owner has a monopoly on any port that the lighthouse can possibly guilde any ships to.

I can't explain this all in a single blog post, so I've given a more detailed explanation of why I no longer have full confidence in the free market.

To read my more detailed explanation, go to this website.

GREASING OF THE PALMS

American businesses, or any foreign venture for that matter, have to grease some palms just to do business in any new country. Local government officials demand payment to approve licenses, win contracts or avoid harassment from local regulatory and taxing government entities. Sound familiar? We have our own looters in the ASG whom we have to pay tribute.

Often times, we blame the "greasing" on the foreigner. The real crime, however, is not that foreigners pay under the table to get access to our markets, but that they even have to resort to such corruption in the first place. The standard is not who provides the cheapest price or the best service possible, but whom one can pay off to get that contract or favorable treatment.

Greasing of the palms is not only unfair to foreigners, but also unfair to local entrepreneurs. Locals see this practice as putting them at an unfair advantage, because they can't afford to outbid the bribes made to their very own countrymen. How unfortunate.

Call me crazy, but one day I hope the ASG has an online site where all competitors can submit their offers for a contract. This site would award points for different criteria like price, quality of product or service and history of reliability. No humans would be involved in the awarding of contracts, just the site's computation of points that one's bid would hypothetically justify.

There would also be a ranking system so that if the winner couldn't meet the demand for some unexpected reason, the second runner up would qualify to provide his services, and so on and so forth.

While the greasing of palms is something we often despise, in a way, we should be thankful that politicians can be bought off. What great strains our foreign businesses have had to go through just to provide us with more choices essential to our standard of living. Hopefully, one day, we'll have a government no one has to pay tribute to just so that we could live our lives and pursue our dreams.