Trickle-Down Economics: UP Libertad’s Flawed Ideology

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Trickle-Down Economics has been the most destructive economic theory since the Great Depression which led to the collapse of the housing market in 2008. Adherents like Reagan, Thatcher, Ramos, conservatives and libertarians borrow their ideas from the Austrian and Chicago Schools which advocate for limited government.

They believe that regulation hampers economic growth, that taxes prevent businesses from growing, and that the government’s actions intrude into their personal freedoms. These leaders have made tax cuts for the rich, deregulation for the powerful, and wage suppression central aspects of their administrations’ economic policies.

And it shouldn’t surprise anyone that these have dug an even deeper hole for those who are already struggling to get out of poverty. This combination of the most naive, selfish, and cold-hearted policies is favored by many oligarchs and I think that’s a sufficient reason to take a deeper look into their pronouncements and ask any free market advocate about the implications of unregulated capitalism.

 

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LABOR POLICIES

Trickle down advocates say that when wages go up, employment goes down. Trickle down advocates say that when wages go up, employment goes down. In fact, at the heart of free market libertarianism is the belief that the minimum wage should be phased out so that employment would rise.

It sounds like legit economics. Although, in reality it’s an intimidation tactic masquerading as sound economic theory. It’s the oldest trick in the businessman’s job suppression handbook.

Nevertheless, as an advocate of absolute free speech, I admire UP Libertad for speaking up about their principles. The best way to prevent an ideology from reaching the President’s desk is by actively talking about them and I hope that future debates between the far-right and the far-left will give rise to a labor party that believes in the moderate principles of post-Keynesian economics.

Libertarianism has a bizarre populist appeal. Anyone who has no knowledge of the competing economic philosophies would find it hard to object to the basic tenets of libertarianism. On the minimum wage alone, however, there are already a handful of questions that can put libertarians on the defensive.

Do lower taxes for companies really favor minimum-wage earners? What incentive will there be for executives to raise the wages of people working in factories when they can pay you with the lowest wage possible and not be threatened with government lawsuits? Why should they pay workers first when giving their profit in the form of dividends to shareholders will attract more investors, and raise their stock’s price in the long run? Do you honestly believe that unregulated executives will think of the welfare of its employees first?

One good example is SM. Since 2005, their stock price has grown from Php 198 to Php 960. That’s 385%! Did the salary of minimum wage employees of SM also increase by 385% or anywhere near that rate? Of course not!

Another example is the US economy. Since the Great Depression, the US middle class has grown massively because of welfare programs of Roosevelt, Kennedy, and Johnson. When Reagan came in, much of the economic growth was concentrated in the upper class because of assaults on labor unions, the minimum wage, and on welfare programs.

I agree that the government has spent so much in terms of welfare–welfare for the rich, that is. Because of a series of flawed labor policies and lax tax rates on giant corporations, the government has been forced to pay more in terms of health care, free education, etc, which should not have happened if companies weren’t paying their employees with death wages.

Principally, what libertarianism is about is making acceptable the employer’s morally callous practices of abandoning its employees for the sake of profits. It prioritizes the interests of the wealthy to realize its flawed notion of freedom. Its stance on many labor issues is based on so many false assumptions that the Left should do everything to expose the ideas of UP Libertad for what they really are before we end up with policymakers who would replicate the terrible ideas of Milton Friedman and Ludwig von Mises.

Some of the false assumptions of libertarians are:

  1. That for every company that pays the lowest wages, the free market can provide another company which would pay higher wages and force the first one to increase its own.
  1. That allowing foreign companies to run businesses here will prevent mergers.

Some companies already have monopolistic control in some markets. Mergers have made them more powerful. They can lower the prices of their products anytime to kill medium-sized businesses, and then raise it when no competitor is left. Allowing foreign companies to compete would be great if we want to foster competition. But libertarians want to disband the government. Without the power to regulate, we’re faced with the possibility of giant local corporations teaming up against foreign corporations making it even harder for small businesses to get ahead or even enter the market.

  1. 1. That for every company that pays the lowest wages, the free market can provide another company which would pay higher wages and force the first one to increase its own.
  2. That allowing foreign companies to run businesses here will prevent mergers.Some companies already have monopolistic control in some markets. Mergers have made them more powerful. They can lower the prices of their products anytime to kill medium-sized businesses, and then raise it when no competitor is left. Allowing foreign companies to compete would be great if we want to foster competition. But libertarians want to disband the government. Without the power to regulate, we’re faced with the possibility of giant local corporations teaming up against foreign corporations making it even harder for small businesses to get ahead or even enter the market.
  3. Corporations will do everything to save the environment even if it meant lower (or even zero) profits.
  4. Raising the workers’ wages is a burden for employers.
  5. That having private prisons running our criminal justice system won’t lead to mass incarceration.
  6. That those running small and medium businesses are angels who will do everything to protect worker rights.
  7. That the free market can provide an ethical company for every unethical company there is.
  8. That the corruption in the justice system is better handled by the free market.
  9. That foreign investors operate here to raise our wages.
And of course,
10. That every public institution can be treated as a business and can give profits for everyone.

One can get an even greater idea about the ideology of free market libertarians by looking at UP Libertad’s ask.fm account:

Question: “How can a transition to libertarianism deal with the Philippines’ major monopolies?”

UP Libertad: “In the first place, the major monopolies in the Philippines only exist and keep existing because of anti-market government economic policy. Protectionist policies, such as the “60-40 rule” in the Constitution regulating foreign investment, only serve to protect the businesses of local oligarchs from competition.

Excessive labor regulations can be absorbed easily by big businesses, but make it hard for small businesses to hire and fire. Policies like these perpetuate the monopolies by hindering competition. In a transition to libertarianism, the major monopolies will actually have to compete by offering good products at good prices, lest they lose to their competition.”

How can the problem of the hegemony of local oligarchs be addressed by allowing other oligarchs to run our country? Doesn’t that make it more difficult for small businesses to compete? This is where the weakest assumption of libertarianism becomes apparent. Its vision of private corporations is that they’re run by angels who do what’s right even without the government telling them to. Thousands of lawsuits can prove that’s not the case. Corporations exist to make profit. Period. Anything it does is intended to generate more money. Allowing foreign corporations to get in would force local oligarchs to make merger deals because they wouldn’t want a foreign company taking away their share of the market. Although I agree that too much protectionism hurts the economy, I think the opposite would be equally catastrophic.

Question: “Mula sa pagkakaintindi ko, ina-advocate niyo ang free market kung saan hindi nireregula ng gobyerno ang mga negosyo. Ngunit sino ang magpo-police sa mga practices nila? Self-regulation lang talaga? Tingin niyo hindi sila aabuso? Ngayon ngang nireregulate ang businesses andaming abusadong kapitalista”

UP Libertad: “Una, ang ibig-sabihin ng “free market” ay hindi nakikialam ang gobyerno sa supply, demand, at kalidad ng mga produkto at serbisyo. Ang mga abuso na lumalabag sa karapatan ng mga tao at empleyado, tulad ng pagdaraya, ay bawal pa rin.

Ang mga negosyo sa isang free market ay mananagot sa kanilang mga customer, empleyado, at kalaban sa negosyo. Kompetisyon sa negosyo ay ang paraan ng pananagutan/accountability sa mga negosyo. Hindi dadayain o aabusuhin ng mga negosyo ang kanilang mga customer at empleyado kung maaari silang lumipat sa kalabang negosyo.

May mga abusadong negosyo kahit na may regulasyon dahil ang mga malalaking negosyo ay ginagamit ang regulasyon para tumakas sa kompetisyon. Sino ba ang enforcer ng regulasyon? Ang gobyerno, na puno ng mga crony ng malalaking negosyo. Dahil dito, ginagamit ang regulasyon para patayin ang kompetisyon: ang mga small and medium businesses. Para sa amin, ang kapantayan at katarungan ay makakamit sa pamamagitan ng pagtanggal ng kapangyarihan ng gobyerno na makialam.”

It’s best to analyze these responses one-by-one.

Point 1: “Ang mga abuso na lumalabag sa karapatan ng mga tao at empleyado, tulad ng pagdaraya, ay bawal pa rin.”

Point 2: “Kompetisyon sa negosyo ay ang paraan ng pananagutan/accountability sa mga negosyo.”

Point 3: “Dahil ang mga malalaking negosyo ay ginagamit ang regulasyon para tumakas sa kompetisyon.”

Point 4: “Ang gobyerno, na puno ng mga crony ng malalaking negosyo. Dahil dito, ginagamit ang regulasyon para patayin ang kompetisyon: ang mga small and medium businesses. Para sa amin, ang kapantayan at katarungan ay makakamit sa pamamagitan ng pagtanggal ng kapangyarihan ng gobyerno na makialam.”

Response to Point 1: In what way is it not allowed? Morally? Yes. Legally? Certainly not!

If the government no longer has the responsibility to regulate product quality, how can consumers hold abusive corporations accountable? How can they file lawsuits against the company’s executives if there is no legal basis for their complaints? Wala kang standards set by a central institution, so the only way you can seek justice is by telling other people not to buy from them. Move on nalang. Been using lead-contaminated products for months? Buy from another company. That’s the libertarian response. Move on and hope that their building burns down.

Response to Point 2: They admit my previous point. It is competition that will bring down an abusive corporation, not the government. What does that mean for consumers? It means that they will release defective and substandard products into the markets first and make huge sums of money before the people find out and simply start buying from other companies. And it means that the double-dead meat of company X that you’ve been eating will continue to be sold until someone speaks up.

Response to Point 3: True. I think the solution is to reform the government and set-up institutions that will prevent corrupt regulators instead of removing the government altogether. For Filipino libertarians to conclude that the government can never function properly, they must have seen government go through all kinds of reforms first. We’ve never done that. There’s so much that needs to be done, from political party reform to campaign finance reform. Despite the many flaws of government, it has helped poor people to some degree. And so, to simply assume that the problem stems from the mere presence of government and not from the way it is organized is logically untrue.

Response to Point 4: Puno daw ang mga crony ang government? What’s the best solution according to he libertarians? Let them roam free by removing the government’s ability to regulate? Who would put them in jail? Private prisons? Any kind of private prison? Pano pag nakatakas? Just hope that Adam Smith’s invisible hand magically creates a more secure prison cell for them.

UP Libertad: “Contractualization occurs because government regulations and mandates make it too expensive to regularize workers. “Banning contractualization is not a solution. Doing so will only throw people out of work, make it even harder for the unemployed to find jobs, and raise prices on goods and services.”

No, contractualization occurs because corporations can save more money through it. Lowering taxes and limiting the government’s ability to regulate will not remove contractualization. It will just strengthen it. Digong is right for appointing Joel Maglungsod, vice-char of KMU, as head of DOLE. While the Communists are just as objectionable as the free market capitalists, I think SM and other oligarchs deserve a dose of radical Communism so they’ll start treating workers more fairly. We need to revitalize our labor unions, erstwhile defenders of employees’ rights for better working conditions.

Contractualization is the Filipino version of right-to-work laws in the US, and companies should be banned from practicing it if we want to see our workers become more productive.

FREE EDUCATION

“We believe in less government, not more, and that also applies to educational institutions. Institutions of higher education are hampered by excess regulation and dependence on the state. Therefore, we believe that universities must have fiscal, administrative, and operational autonomy in order to be free from government influence. If subsidy is necessary, then it should be the students who are subsidized directly, not the institutions.” – UP Libertad

This is probably the craziest idea of the libertarians. To defund the Department of Education/CHED, and eventually privatize our entire education system would make Filipino education completely inaccessible to minorities and the poorer class. It would blow up student debt and enrich the lending companies at the expense of poor students.

Laboratories and classrooms will improve but the biggest trade-off would be higher tuition rates. Further, letting private institutions run our universities would drastically change the curriculum in favor of business-friendly courses. Who cares about physics and calculus when you can replace them with marketing and sales courses?

Even researchers would be at the mercy of this ideology, because it would subject their research to the whims of rich donors. Since no one would find the Higgs Boson profitable, no businessman would ever fund it. In fact, only those researchers who are working on industry-relevant studies would get private funding.

ENVIRONMENT

The US Libertarian Party wants to defund the Environmental Protection Agency (EPA) and the Department of Education–two of our best hopes to save the environment from further corporate assaults. Imagine privatizing our education system and having Exxon Mobil offer free education for students. The top promoter of climate change denial would fund our education and is free to change its curriculum according to what suits its business model.

This kind of practice is not unique to the oil industry, it is true for every other company that wants to deny the truth about its products. And if that’s not outrageous enough, listen to what Dr. Mary Ruwart has to say:

“Obviously, owners make better environmental guardians than renters. If the government sold its acreage to private ranchers, the new owners would make sure that they grazed the land sustainably to maximize profit and yield.Indeed, ownership of wildlife can literally save endangered species from extinction.

Between 1979 and 1989, Kenya banned elephant hunting, yet the number of these noble beasts dropped from 65,000 to 19,000. In Zimbabwe during the same time period, however, elephants could be legally owned and sold. The number of elephants increased from 30,000 to 43,000 as their owners became fiercely protective of their ‘property.’ Poachers didn’t have a chance!

Similarly, commercialization of the buffalo saved it from extinction. We never worry about cattle becoming extinct, because their status as valuable property encourages their propagation. The second step libertarians would take to protect the environment and save endangered species would be to encourage private ownership of both land and animals.”

Another insidious idea from the libertarians. And it’s not just stupid, it’s outrageous! Sometimes I wonder why the logo of free-market libertarians is not a huge dollar sign. Greed is at the heart of the libertarian movement’s policies. Everything they advocate must be profitable for giant corporations, cause who cares about the oxygen you breathe when your bank account is full of cash? Take the buffalo’s case. Dr. Ruwart wants to legalize owning of elephants as well as defund the EPA. In other words, let them have different owners. Don’t worry about abusive owners. Expect Adam Smith’s invisible hand to punch them in the face if they ever subject the animals to harsh conditions. And I love how she’s so implicit about treating endangered animals as livestock!

Additionally, keep in mind that it’s not just a portion of our country that would be under private control. Every single island would be owned privately. It’s not enough that businesses are already a huge gamble for libertarians as well as our education system, they want to gamble the environment too! Under a free market system, our best hope for saving our forests and oceans is if a kind billionaire offered to buy them and did not touch any of the trees and animals. But if some evil billionaire like Charles Koch happens to buy them, let the free market run its course and expect Adam Smith’s invisible hand to bring back to life the dead animals.

This is one tactic of the libertarians that shows that their entire ideology is based on one giant Ponzi scheme and an irrational fear of a non-existent threat: point out cases of corruption of the government and use it to prove that it can never do anything right. Indeed, the number of elephants in Kenya declined because of a corrupt government. But what about the countries with efficient governments like those in Europe? Should they defund their environmental agencies too? A case of corruption in Kenya is not a general statement about the nature of governments.

In summary, the Libertarian movement is about individual freedom over anything else. As UP Libertad says,

“In a libertarian society, individuals are responsible for themselves.”

Really, that is the crux of the libertarian movement–the belief that poor people should be left to die in the street because they’re “free.” As Bill Maher puts it, free market libertarians give libertarianism a bad name by being such selfish pricks. From religious nuts to greedy businessmen, there’s a common theme that unifies all Conservatives, which is the general lack of an empathy gene–the inability to make the complicated jump from seeing people suffer to asking oneself “I wonder if that hurts?”

Still, it’s fair to point out that libertarianism spans the entire political compass, left to right. There are socialist and centrist libertarians. What I’m wary of are the free market libertarians who want unregulated capitalism. This is one of the most dangerous ideologies because it wants to deregulate the economy to maximize profits for the wealthy.

Oh, and don’t worry about people who are born poor. Their ‘freedom’ would take care of that.

 

Credits to justsomeidea.com and radiofreethinker.files.wordpress.com for the photo.

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