The Foundation for Economic Freedom, a group of distinguished economists and businessmen, warns the government of embracing the “populist view” of requiring oil companies to sell their products according to cost of acquisition.
Given that this group claims to promote “free market policies in the Philippines,” and that the above statement made by them is quite accurate, it might be too easy to conclude that they mean what they say. In my opinion, their advocacy falls short, and this can be seen in the exposition of their views.
I guess the fact that the FEF consists of former socioeconomic planning secretaries and other former Cabinet members, as well as supporters of the reproductive health (RH) bill, should be telling enough. But I’d like to avoid ad hominem reasoning, and will thus explain why I could only support this group’s ‘free-market’ advocacy in “broad strokes,” very broad ones.
Besides, even if they don’t remember it, I’ve had a chance to talk to some of the members, and they’d been very accommodating and enthusiastic in sharing their ideas, for which I’m grateful.
UPHOLDING THE VAT IS NOT FREE-MARKET
Sure the FEF speaks out against price control, but they also speak against a removal of VAT on oil products. Apparently, they consider the government as a corporation for which it would be folly to allow deficit spending. If the FEF were truly pro-market, they would have not only called for an abolition of VAT on oil products, but on VAT altogether, and a corresponding cutting of government spending.
COMPULSORY EXPLAINING OF PRICES IS NOT FREE-MARKET
Moreover, the FEF is supportive of Department of Energy measures for ‘the big three’ and other oil companies to explain their pricing system, including the initiatives to:
Require oil companies to explain when their price adjustments are higher than the DOE computation to prevent anti-competitive behavior
Conduct dialogues with consumer and transport groups for a more open discussion of the oil price movements and other concerns
How are these measures free-market by any stretch? This fear of “anti-competitive behavior” shows a lack of an understanding that the market, in as much as it is allowed to function, will bring about an optimum price corresponding to supply and demand (having nothing to do with “replacement cost.” See my earlier article on the matter of pricing).
In a free environment, consumer sentiment is best reflected at the pump, not through public relation gimmicks like ‘dialogues with consumer groups.’
‘TARGETED SUBSIDIES’ ARE NOT FREE-MARKET
Can you really consider the FEF a free-market group when they support subsidies “in favor of vulnerable groups”? First off, such subsidies are funded by expropriation of private property. Second, subsidy programs may benefit certain needy groups, but always at the expense of other needy groups. Third, and I won’t be surprised if some FEF folk agree on this, subsidies are always short-term quick fixes, of which the siphoning of resources makes for net losses.
CONCLUSION; AVOID MISREPRESENTATION PLEASE
People should be more careful about brandishing the term ‘free market’ when what is actually meant is merely a different form of government planning. This just gives the free market a worse name, and makes spreading the message of freedom even harder.
Even though one may be cognizant of the market’s self-adjusting nature, it would be a mistake to entertain the thought that the market can be coupled alongside government regulation and subsidies, without a negative result. As I have said before, the only good a government does, is a not doing.
To get a real free-market perspective on the recent oil price increases, do read my earlier articles: