On human greed

‘Balance’ is an Oscar-awardee short animation film. It’s theme touches on human greed. I’ve had it for several years but it’s only recently that I watched it again.

My thoughts watching it is that greed is part and parcel of being human, it’s in fact a spectrum and the challenge is not to eliminate greed at all, because to an extent greed is necessary for human survival and continuity, but rather, as this brilliant animation shows, it’s striking a balance between “good” and “bad” greed. Extricating greed from the human system is impossible without causing irreversible harm to the human psyche. The less harmful way is to make dormant the “bad”. Or, better yet, to work out for a yin-yang situation.

“Good” greed is what pushes us to want to know about things in our environment, discover treasures, recognize the contribution (well, also the deceit) of others and allow them with us on the playing field, and so forth. 

Greed that veers toward the extreme end is one which sees the world as a place where there is only ‘me’ or ‘I’. In such a scenario, as what the film suggests, who’s going to help ‘me’ haul in the treasure chest? figure out how to open it? sell them if need be? Nobody. ‘Me’ ends up essentially with nothing. Greed of this degree completely contradicts the creation story of ‘us’ and ‘we’ hence is tauted as one of The Seven Deadly Sins.

The success of democracy (and free markets) rests on the framework of balance. Too much (eg. unregulated free market systems in which greed is given absolute rein) or too little (eg. communism wherein greed is altogether repressed in the service of community) causes a situation of imbalance which in turn implies the constant work of re-balancing.

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On the state of affairs at Camp John Hay Part III: Special Economic Zones

Property rights and management and development of estates were the topics in Part II of this series.  The argument is continued here

  • Special Economic Zone.  Presidential Proclamation 420 series 1994, in the time of former President Fidel V Ramos, designated 288.1 hectares in Camp John Hay as a special economic zone.  Free trade zones were introduced in developing countries by way of free market and export oriented growth policies of the IMF and the World Bank with the aim of jumpstarting economic growth to level up with international and global markets.  SEZs, according to the WB, are established with the aim of achieving one or more of the following four policy objectives
    • To attract foreign direct investment (FDI)
    • To serve as “pressure valves” to alleviate large-scale unemployment
    • In support of a wider economic reform strategy
    • As experimental laboratories for the application of new policies and approaches (before applying these to the rest of the economy)

Further

Economic zone programs that are successful in contributing to long-term development go beyond the static benefits of attracting investment and generating employment. They leverage these static benefits for the creation of dynamic economic benefits. Ultimately, this means contributing to structural transformation of the economy, including diversification, upgrades, and increased openness.

JHSEZ falls under the large scale SEZ model that combines residential and multi-use commercial and industrial activity. The main export good of JHSEZ is tourism.

Achievement of the above policy objectives in general has had a mixed record of success according to the WB, although interestingly,

A number of examples…also illustrate the catalytic role zones play in processes of economic growth and adjustment processes. For example, many of the zones established in the 1970s and 1980s in East Asia’s “tiger economies” (e.g. Singapore) were critical in facilitating their industrial development and upgrading processes. Similarly, the later adoption of the model by China (e.g. Shenzhen), which launched SEZs on a scale not seen previously, provided a platform for attracting FDI and not only supported the development of China’s export oriented manufacturing sector, but also served as a catalyst for sweeping economic reforms that later were extended throughout the country.

What this says is

It is not the existence of an SEZ regime, of a master plan, or even of a fully built-out infrastructure that will make the difference in attracting investment, creating jobs, and generating spillovers to the local economy. Rather, it is the relevance of the SEZ programs in the specific context in which they are introduced, and the effectiveness with which they are designed, implemented, and managed on an ongoing basis, that will determine success or failure.

another observation about SEZs—that is, their incubation period. Even the biggest SEZ success stories like China and Malaysia started slowly and took at least 5 to 10 years before they began to build momentum. From a policy perspective, this means that governments need to be patient and to provide consistent support to zone programs over long time periods, a particular challenge in countries whose political cycles are rather shorter.

Translating this lesson into a management strategy for SEZs begs the address of the following concerns

How to ensure that economic zones are sustainable from an institutional, social, and environmental perspective

How to ensure that zones are economically sustainable and deliver positive externalities, including facilitating upgrading and structural transformation and catalyzing economic reforms

How to make economic zones successful in attracting firms that create jobs

Establishment of an enabling environment in other words.

JHSEZ, seen against this framework, has since after the US Government turned over the property to the Philippine Government (through the agency of BCDA), failed to attain it’s full potential as an instrument of growth in Baguio City and the region (Cordilleras) as well as, along with Poro Point, in North Luzon (originally of the North Luzon Growth Quadrangle). JHSEZ remains quagmired in the politics of whoever chairs the BCDA. And many years since after the Camp’s turn over, the Cordilleras remain in the top five poorest regions in the country.  Otherwise the zone should now have been a showcase of world class tourism.

Like the fate of laws and policies of the land, the zone suffered from inconsistent implementation and follow through (i.e. monitoring and evaluation). Laws and policies were implemented according to the mood and interpretation of politicians and public officers.  This has put a brake on the Camp becoming a hub for innovation and competitiveness, defeating the purpose of SEZs.

On the proposal to roll back public transportation fares

The lawmaker who successfully petitioned the Land Transportation Franchising and Regulatory Board (LTFRB) to roll back fares for jeepneys has asked the agency for another rollback for taxis and buses.

Negros Oriental Representative Manuel Iway, who calls himself a “commuter,” filed two petitions with the LTFRB on Wednesday asking for a reduction in fares for buses and cabs due to lower fuel prices in the market.

In the first petition, he asked the agency to reduce the minimum flag-down rate for taxis from P40 to P30, and to slash by P1 the P3.50 charged for every waiting time of two minutes and for every succeeding 300 meters.

The Philippine Inquirer

This is exactly the kind of move that economists frown upon:  government messing around with the market. Well-meaning as Representative Iway’s intention is, his proposal has the opposite effect.  Free market, remember, in Econ 101?

Dictating an artificial price takes away market players’ freedom to compete and innovate.  Letting the market be on the other hand would lead to entrance of more players which leads to more intense competition and innovation that leads to more and better choices that leads to cheaper prices over time.  A particular market however can be freer relative to another.  The market for electronic and computer gadgets is a good example of a freer market as businesses are relatively left alone to compete according to how accurately they read needs and wants and the speed at which each innovates accordingly.

What government should get it’s hands on therefore is policies to improve doing business in the country although what this country needs more of is action on favorable policies already existing.

In the transport sector particularly public transportation government should ensure adherence to quality standards such as in fuel and vehicle specifications as an integral component of it’s policy favoring public transportation as outlined in the National Urban Development and Housing Framework (NUDHF). The jeepneys for example are in serious need of overhaul and their poor quality has prompted an influx of new competitors, the vans (which are also increasingly neglected by franchise holders thanks to lack of monitoring).  But when jeepneys are revamped (and their number limited via market based instruments), it’s expected that more passengers would avail of the ride because then they’re assured of a more comfortable hence pleasant commute.  Such is where government particularly local governments should dabble on, in fact, it’s their duty to do so.

Price, as can be gleaned from the above, also reflects opportunity costs.  “High prices” of public transport in the country mirror the high costs of insecurity and discomfort consumers put up with riding in dilapidated vehicles on dirty fuel.  Fine tune these vehicles and the service along with it, open up the field to competition and innovation, and the market will fix the price accordingly. Ceteris paribus.