Friday, January 7, 2011

Prices, Fares, Toll Fees and Statism

The Central Lesson Here: Government is Bad

Food prices – Government prevents the supply of food from abroad by its imposition of tariffs on commodities such as rice, wheat and sugar. The logic of the state is that without the high prices created by the imposition of tariffs, local producers would go unemployed. Yet Noynoy Aquino is going to sign an executive order removing the tariff on wheat in order to reduce flour prices by P20.00 per bag. It seems that the government is very arbitrary as to its trade policies, not wanting to put too much of a shock on the consuming public.

The uncertainty created by land reform affect the prices of food as landowners become hesitant to invest funds to make their operations more efficient. Land reform thrusts the peasant farmer into an entrepreneurial position where he may not be suited for. There are many reports of the distributed land being sold back to the landowner because of bad debt-management and necessary technical know-how. The point is that land reform lowers output and contributes to high food prices.

Lastly, there is the nefarious National Food Authority, which, under the same logic of protectionism, buys commodities from the agricultural sector only to be brought to waste because of corruption and incompetence.

Transportation (tolls, fares) – Higher fuel prices are the cause. What’s the cause of higher fuel prices? Yes, government. Military interventionism in the Middle East and a global oil cartel OPEC results in the underproduction of oil, or manipulates oil supply making it nearly impossible for entrepreneurs to anticipate.

Abolish Regulations on Public Vehicles – there should be no regulations, coerced standardization, and licensing of public vehicles. Without regulations, price competition will ensue and different services catering to different needs will emerge in the market. Some individuals may choose lower quality or older vehicles because of the lower fare charged. Some may want the safest ride they can get no matter how high the fare. Under a free market, both the consumer and the servicemen choose the ‘right’ fare with proper consideration to the scarcity of the factors of production. If the problem is that fares are too high, then servicemen will be encouraged to innovate in cost-cutting in order to satisfy the need for lower fares. Government can only be detrimental to this entrepreneurial process. Legalize free choice in transport.

Privatize the Roads and Mass Transit – No more Build-Operate-Transfer Projects. No more public-private partnerships. Separate all transportation infrastructure development from government. The majority of the population does not make use of the road system as much as large statist corporations. Government roads shift the cost of transport from corporations to the taxpayer. Government mass transit had to be created in order to allay the dissatisfied majority. Privatization and denationalization of all transportation infrastructures would radically change it into something more suitable to the average consumer, with much less sprawl and congestion. This would require abolishing agencies such as the Metropolitan Manila Development Authority (MMDA), Land Transportation Franchising and Regulatory Board (LTFRB), and Department of Public Works and Highways (DPWH).

Money Supply – The main cause of rising prices for almost everything is the central bank which preposterously makes the claim of controlling inflation. The central bank, which holds a legal monopoly in money printing, is the root of the problem.

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