Federalism – Another Useless Advocacy

A family friend dropped by yesterday, Sunday morning, with a copy of the Federalism proposal. In a nutshell, the proposal called for just five regions in the Philippines.Their experts claimed that it would make governance more efficient and responsive.

She asked me what I thought about the notion. Without batting an eyelash, I told her the proposal was useless. The crux of my position boils down to this – You cannot solve an economic problem with a political solution.

Reorganizing a unitary tyranny into a decentralized tyranny does not remove the tyranny

Having five mega-tyrants instead of one uber tyrant does not imply efficiency. All it does is delegate the tyranny. Obviously a megatyrant does not have the capacity to run the economy. History is replete with cases of failed economies that were micromanaged by tyrants and their central planners – whether Stalin, Mao, Chavez, Kim Jong Il, the US, and the Roman Empire. It didn’t work for them, nor will it work for the Philippines.

The fundamental flaw or blind spot in all these is the mindless religious fervor ascribed by minions to an all powerful, all seeing state. Tough luck, the state’s interest in thriving economies is driven by how much income can be extorted and coerced from its citizens. And that’s where the contradiction lies – how can an economy thrive when every output it gets is taken away by a state and redistributed to its parasite cronies and government officials?

Note that the reason for having the sin tax is to discourage consumption of “sin products”. Extend that argument to the income tax. In plain terms, income tax discourages the accumulation of income. Expand the argument to the notion of taxation and you’ll come to the conclusion that taxation inhibits economic activity.

A five region federal state with all the taxes, regulations, and bureaucracies is no different from a unitary state with its boatload of taxes, regulations, and bureaucracies. It’s all an illusion folks.

Economic challenges warrant an economic solution

The fundamental problem of the Philippine economy isn’t about how the state is organized. The core issue is the constant intervention of the state in the economy – its futile attempts to regulate the law of supply and demand whether its the drug war, energy, health, education, mass media or infrastructure.

Let’s take the telecom industry for example. Three decades after EDSA and six presidents later, all Filipinos have are two firms – a duopoly tightly regulated by Congress and constitutionally protected from the entry of foreign competition. The Philippine telecom services have the highest rates in the region – and the worst services. Heck, its 2017 and Philippine prepaid mobile phones don’t even have voicemail features. That’s not really a surprise.

Any economist worth the salt will point out that Philippine regulations have restricted the supply in the face of huge demand. Service providers are protected by non-fiscal barriers from new entrants, therefore the supply is limited because there is a limited number of suppliers – PLDT and Globe. Sun and Smart are just subsidiaries of these two players, a branding strategy where these players come up with new corporations with a different name but still owned by Globe and PLDT. That’s not competition, that’s a con game.

My friend said that it’s gonna change because Congress will introduce penalties. I countered that it’s not gonna change. The duopoly will simply pay off the penalties and slap on the costs to consumers. The sane alternative is for customers to have choice. By choice I mean the ability of the customer to take their money elsewhere other than Globe or PLDT.

Without choice, there is no freedom. And where there is no freedom, there is tyranny.

Will federalism lead to more choices other than Globe or PLDT?

Will a five region federal state lead to more choices other than Globe or PLDT?

Will a five region federal state lead to faster and cheaper Internet and mobile phone services?

NO it will not.

So what’s the fuss about federalism when we can’t even get decent and highly affordable telecom services?

 

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