Asians’ march to liberty and progress

* This is my article in BusinessWorld last January 30, 2017.

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“Progress by its very nature cannot be planned. It is knowing what we have not known before that makes us wiser men… Progress is movement for progress’ sake, for it is in the process of learning, and in the effects of having learned something new, that man enjoys the gift of his intelligence.”

— Friedrich Hayek, Chapter 3,
“The Common Sense of Progress,”
The Constitution of Liberty (1960)

Many Asian societies have experienced economic and social upheavals and ups and downs in growth and political stability for more than the past two decades. These have been expected because people aspire for improvement and, as a result, they demand change.

After going through these upheavals, societies emerge somehow stronger, better, and more dynamic.

There are many indicators of growth and development and among them is the ability of the people in developing Asian economies to (a) travel by plane, (b) buy new models of mobile phones for communication and information, and (c) have access to the Web and the Internet.

Below are the numbers for selected Asian economies, grouped into three: (1) developing north and south Asia, (2) developing South East Asia, and (c) developed Asia plus Australia. For purposes of brevity, countries with small populations, those three million and below — Bhutan, Brunei, Maldives, Mongolia — are excluded from this list (see table).

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The above numbers show the following:

(1) The pace of expansion in mobile phone subscriptions and Internet use in developing economies has been very fast over the past decade and a half, especially for India, Bangladesh and Nepal; Cambodia, Laos, Myanmar and Vietnam (CLMV). As a result, people now can learn new and more skills, or simply be regularly connected with their families, clans, and friends.

(2) The same pattern can be seen in air travel, as indicated by the number of airline passengers in the region. Indonesia and the Philippines experienced fast rate of growth in this area, along with China, India, and CLMV.

(3) Expansion in developed Asia + Australia is muted and modest compared to their developing neighbors.

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Therefore, Hayek is correct in his observation about human progress. It is the less-planned and less socially-engineered economies that are experiencing faster improvement at least in these three indicators. This is partly because the developed economies are dealing with plenty and rising government regulations that tend to restrict faster growth.

The subject of human and social progress in Asia will again be discussed in the forthcoming “Asia Liberty Forum” (ALF) in Mumbai, India, Feb. 9-11. This big international conference will be jointly sponsored by the Center for Civil Society (India), Atlas Economic Research Foundation (USA) and the Friedrich Naumann Foundation for Freedom (FNF, Germany).

Among the important topics to be discussed will be (a) overview of what’s happening in the freedom/liberal movement around the world and Asia, (b) State, private sector and liberty in a digital world, (c) Regulations for a prosperous and innovative market economy, (d) Property rights as a human right, and (e) Education of choice for all: the role of budget private schools.

The Economic Freedom Network (EFN) Asia is also participating by sending some of its regular and long-time partners in the region to the ALF. Aside from holding its own annual EFN Asia Conference, EFN is also participating in the annual ALF and the Jeju Forum for Peace and Prosperity in South Korea.

Through continuing involvement in these three important regional and global annual meetings and conferences, EFN Asia is doing its share in securing a more prosperous, more developed Asia through the path of less government planning and more market competition, deregulation, and innovation.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET. Both institutes are members of EFN Asia.

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China’s debt, central planning and central crashes

* This is my article in BusinessWorld yesterday.

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“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” — Friedrich Hayek.

One of the characteristics of centrally planned economies like China is that officials and planners centralize many resources, which creates centralized expectations from the people, and since planners’ egos cannot really plan and control all factors, this often results in centralized economic dislocation, disappointment, and anger.

Take the case of China’s debt.

Officially, China has a gross public debt/gross domestic product (GDP) ratio of only 41% in 2014, manageable and just slightly higher than the debt/GDP ratio of Taiwan and South Korea (38% and 36%, respectively). But China has more debt that what it will officially admit.

A report by McKinsey Global Institute (MGI) said that China total borrowings (individuals + companies + local and central governments + state enterprises) was 282% of GDP in 2014, higher than the debt ratio of the US, Germany, Canada, and other big economies. (See Graph 1)

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High debt, private and public, will always create financial turmoil, today or tomorrow. Especially in a dictatorship that abhors political competition and yet wants to mimic economies that allow market and political competition.

This was discussed in “The Chinese Financial Crises and their Impact on Asia,” one of the panel discussions during the recently-concluded “Asia Liberty Forum” in Kuala Lumpur, Malaysia from Feb. 18-20. The session was chaired by Prof. Christopher Lingle of the Universidad Francisco Marroquin in Guatemala. The speakers were Dr. Carmelo Ferlito, IDEAS Senior Fellow, Malaysia and Adjunct Faculty Member at INTI International College Subang, Malaysia, Andrew Shuen of Lion Rock Institute, Hong Kong, and Dr. Mao Shoulong, Renmin University, also of Unirule Institute, China. These three independent think tanks — IDEAS, Lion Rock, and Unirule are all members of the Economic Freedom Network (EFN) Asia. (See Graph 2)

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In his presentation, Carmelo Ferlito noted that from 2003-2008, China’s total debt was stable to declining at 170% of GDP, then by 2009, it exploded and kept rising. He further noted that “a lot of this debt is sitting in local governments or state-owned enterprises. There is assumption that government can let its “zombie” entities stumble on as debt-paying vehicles or maybe occasionally let a couple default without any systemic contagion.

But now the Chinese government again began buying stocks to prop up its plummeting stock market, that is unsustainable.”

LESSONS FOR SOUTHEAST ASIA

With the continuing financial turmoil in China that started last year, there are lessons to be explored for emerging economies in the region like the Philippines.

  1. Fiscal and household irresponsibility will snap. As public and private debts become bigger, economic uncertainty will also rise as those debts should be repaid. People will never know who can pay back and when, and who will default.
  1. Moral hazards. A central planning government tends to attract less-studied behavior by the public. As a result, people with low financial literacy may be encouraged to gamble their savings at the stock market, thinking that the government will bail out anyway.
  1. Central planning leads to central disappointment. Central planning cannot and will not cure and control everything, including stock prices, booms and busts, debt spirals, and inflation. Central planning can only postpone small busts until these become bigger and burst. Authoritarianism can never be compatible with free markets.

The great Nobel prize economist and political philosopher, Friedrich Hayek, has some words to say about central planners. It is important that economists and planners outside communist China should heed them.

“No man or group of men possesses the capacity to determine conclusively the potentialities of other human beings and that we should certainly never trust anyone invariably to exercise such a capacity.” — The Constitution of Liberty (1960), Chapter 6, “Equality, Value and Merit.”

Bienvenido S. Oplas, Jr. is the President of Minimal Government Thinkers, a member of the Economic Freedom Network (EFN) Asia, and a fellow of South East Asia Network for Development (SEANET).  minimalgovernment@gmail.com