Thursday, October 28, 2010

What Bastiat Can Teach Us About Typhoon Juan

The Philippine Government has patted itself in the back for their ‘good’ performance in handling typhoon Juan. It is as if the government help is gratuitous and does not or did not incur any cost to the public when in fact paying taxes is an enormous cost to the public. The government also makes everyone less prepared and less responsible by promising security and stability. The standards by which they judge their own performance must also be questioned since the government is such a big and powerful organization. So before concluding ad hoc that the government ‘did well’ in managing typhoon Juan, it is helpful to consider the unseen effects of government interventionism.

Taxes on private capital – As illustrated in the Haiti earthquake, wealthier and more civilized societies are better able to defend against natural disasters than poorer societies because of better infrastructure, sturdier housing, higher quality medical care and technical expertise. All of these come from capital accumulation, therefore taxes on private capital remove individuals’ ability to defend against natural disasters.

Government mandated monopolization of electricity and water – Water and electricity companies that are not pressured by competition in the market are inefficient. In the event of a strong typhoon, having water and electricity could be a matter of life and death.

Building codes – To quote economist Robert Murphy,

“It’s more expensive to construct a building that can withstand an intense earthquake. Imposing US building codes in Haiti wouldn’t have saved hundreds of thousands of people; it would simply have made them homeless all these years.”

Same applies to Typhoon Juan

Relocation of informal settlers – The Philippine government relocates informal settlers near riverbanks and waterways and sites affected by government. These relocation programs are limited to land acquisition for the informal settler and do not account for the long term hence resulting in disaster. It is estimated that 700,000 of the 5 million informal settlers within Metro Manila live in danger zones. The poor who would rather live near where they go to work are forced to live in far off areas. One security guard and his family were relocated far from city where the security guard works and his children go to school. To make ends meet, the security guard now lives in a worker’s barracks to be close to work and only meets his family only twice a month. Most of the times, the relocation sites make the poor worse off because of the lack of jobs in the vicinity.

Zoning laws raise the cost of living, create sprawl, inhibit community building, and restrict small businesses - With zoning laws in place, the government mandates how plots of land are to be developed, not the individual. It creates inefficiency and attracts corruption. Land that might be better used for commercial purposes are classified as residential land hence making the price of commercial real estate higher than what it would have been. Local community-building is hampered since commercial interactions between neighbors are less likely to occur. If there were no zoning laws, then one probably wouldn’t need to drive downtown to go to a coffee shop or grocery store, there would be small coffee shops and grocery stores in the neighborhood. Zoning laws can be viewed as another barrier to entry in starting a business since one is limited in planning a good location. It is no doubt that zoning laws have negative effects on the poor. More on zoning here.

NFA uselessness – The National Food Authority is a totally useless organization that has wasted a huge amount of food stocks. Some facts gathered here:

- NFA has incurred a debt of Php 171.6 billion
- It costs them P5 for to give P1 of subsidy according the the Finance Secretary Purisima
- World Bank study estimates that only 27 percent of the poor have been fed by the NFA. Most of the subsidies have gone to people who did not need it or allegedly the wallets of enterprising NFA employees.
- In 2004, for instance, NFA bought 900,000 metric tons of rice as against the need of only 117,000 metric tons. Three years later, NFA again imported 1.827 million metric tons of rice against the need of just 589,000 metric tons.

Government, as Frederick Bastiat noted, is an institution which takes from us. Unfortunately, this idea is lost on most people who believe government is there to give free education, free health care, etc. The cost side of the equation must always be considered.


  1. Having fun while reading this article, pare. Catchy title too, Bastiat and typhoon Juan, hahaha. Keep writing.

  2. Thanks :) I'm glad the article entertained you.