Friday, January 27, 2006

Why booty capitalism thrives

Mel Ditangco tells about his father's experience in running a business in the Philippines:

My dad has been operating his business in the province of Tarlac for some decades now. I would say that he has achieved some degree of success. So much so he decided to expand his base of operations in the neighboring province of Pangasinan in Urdaneta city. However, he seems to be encountering institutional harassment from the police force over there. According to these law enforcers, my dad’s operations have violated certain laws as such will be shut down. As such, my dad would perform the necessary upgrades to his plant in Urdaneta.

However, recently the powers at be have run out of excuses for his plant to get cited for anything as my dad have spent millions of pesos in complying with all existing regulations. In the last raid by the authorities, they had no reason to find exception, but did so anyway and shut down the plant.

Competitors are controlling the NBI and local police force. It’s sad but it is reality. Is this the free market economy we enjoy today? Where a powerful family or company can shoot down its competition through influence. It is not the best companies that survive the Philippine market, rather the most treacherous survive, no matter how poor their services or products are.

Anecdotal, yes, but it drives home an obvious point: the more rules, the greater the cost of doing business, the wider the opportunity for vested interests to restrict competition. With limited competition, goods and services tend to be shoddier, and prices higher. The public at large is shafted; ironically because of the rules ostensibly imposed for the "public good". The reverse is true: the fewer rules, the more competitive the market; in general quality improves and prices are lower.

Is it really that simple? I do need to qualify that with ifs and buts. But booty capitalism in the country is so bad, such oversimplification is good.

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