Friday, September 17, 2010

Jueteng, Rural Banks, Politics

The topic of the inquirer article in the link is about jueteng money being transacted by rural banks. According to Vicente Mendoza, Rural Bankers Association of the Philippines(RBAP) executive director,

“Rural banks are at the forefront of countryside development and it is not our desire to be used in jueteng activities. Rural Banks strictly comply with BSP [Bangko Sentral ng Pilipinas], PDIC [Philippine Deposit Insurance Corp.], and AMLA [Anti-Money Laundering Council] regulations,”

The first issue here is the ability of rural banks to help poor people in the countryside. Rural banks are mandated to offer financial services to those whom are not served by larger banks. Given this, it would make no sense to restrict the rural banks from having a larger pool of loanable funds. By not allowing jueteng money to be deposited in rural banks through the ‘anti-money laundering’ laws, development in the countryside is forestalled.

Secondly, there is really no rational basis for such ‘anti-money laundering’ laws to exist. Even taking the assumption that government has the right to stop gambling activities of its choosing, such laws will not help to stop jueteng operations. It will only create uncertainty for the subscribers of jueteng, mostly poor people, and might even empower the black market by creating a demand in it for the handling of such winnings. Then there’s the moral problem, for ‘anti-money laundering’ laws are a heinous attack on privacy. Giving the government the power to monitor commercial transactions means giving it the power to investigate your work and even your home. Such a loose framework for the state to work on opens so many opportunities for the predatory state to abuse its power.

Lastly, jueteng as a gambling activity is in no way fundamentally different from all other gambling activities, and its voluntary status makes it immoral for the government to control or abolish it. Regardless of personal reservations upon the matter, jueteng is beneficial to those who have voluntarily subscribed to it. To quote the great one Ludwig von Mises,

“Since nobody is in a position to substitute his own value judgments for those of the acting individual, it is vain to pass judgment on other people's aims and volitions. No man is qualified to declare what would make another man happier or less discontented.”

There are also unintended consequences in criminalizing jueteng. Like all other commodities or activities with high demand, a government ban on such activity would create a black market where violence is included in the medium of transaction. Barbarism is introduced and norms of practices of civil commerce like contracts, arbitration and knowledge sharing are removed. Government prohibitionism is a war against man’s ability to choose and since it undermines economic freedom, it is also a war against prosperity.

But then there’s the political dimension to all of this. The reason why jueteng will not be legalized, at least in the near future, is because the Philippine police and politically-connected rascals and mafia lords will not be able cartelize the profitable game. They get so much in bribes and in payoffs in keeping this game illegal and hence will fight to keep it illegal. It is no surprise that Noynoy is lenient on discussing the topic. This issue is just another reminder of the sad reality of politics and why nothing ever changes in government except when it is in the government’s interest.

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