There are two things that the average person is not supposed to be competent about: the human body and money/economics.
For example, acupuncture may have been used since 3,000 BC and not just in China. A mummified body found in Europe has groups of tattoos that correspond to points on the body where modern acupuncturists place their needles. You can find a huge number of people that swear by acupuncture as a pain reliever.
Medical scientists dismiss this as unprovable and they are correct. But provable is the medical “placebo effect”, where a substance or treatment with no active therapeutic effect relieves pain because people think they are taking an active drug. Research suggests that for psychological reasons, some placebos are more effective than others. Large pills seem to work better than small pills, colored pills work better than white pills.
But which makes more money: companies selling paracetamol or companies selling acupuncture needles? And governments get their piece of the action on both.
We are told that economics is far too complicated for the average person to understand. Further, for a nation’s economy to work, it must be under at least partial control of the government. Logical extension says that if partial control is good, then total control should be great. Except every example of total government economic control has been a total failure.
There are four strong legs necessary for a nation’s economic table.
The government’s regulatory role in an economy is important and everyone complains about it in the Philippines. But the reality is that all nations suffer from over-regulation. When you are paying a group of bureaucrats and politicians to make rules, they will. Our problem is not over-regulation. It is the layers upon layers of bureaucracy like a school of sharks. From the local barangay to the national government, all have to be fed with paperwork. Yes, a federal system might help.
Government is the largest single financial entity in a nation and therefore must be financially sound. It took until the middle of President Gloria Macapagal-Arroyo’s second term to finally put the government’s finances in order. A government that does not have its own fiscal house in order sucks money from the economy and it holds the private sector back from creating national wealth.
However, the greater issue may be how much should the government spend as a percentage of the total economic output? The Philippine government is spending 2.3 percent of the GDP in 2017. Some studies show that the optimum amount is 3 percent to cover all services and other expenses. But does this require a 30-percent tax rate, which is basically saying that the government needs to take 30 percent of your income?
Part of the problem is the government does not always earn what it takes to provide services that are not social welfare and assistance. Agencies that provide services, like the Land Transportation Office, should not receive any funds from the national budget. These should be pay-as-you-go operations. Every agency that collects revenue from the public should not spend more than it collects. Maybe there should also be “Congressional Ukay-Ukay Stores” to fund the legislature.
Most important, a prosperous economy must provide for individual upward economic mobility and that comes from the other three. An individual must have the opportunity to easily and as cheaply as possible do business or work for a salary. The government cannot take too much of individual wealth because of inefficiency through a tax system that leaves too little in private hand. Government spending must be designed to grow the economy.
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E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.