EGALITARIAN| Economic System and Federalism

AS THE federalism train starts chugging, it is wise to think about the economic setup whichmay be implemented to arrest the state of hunger and chronic poverty of the country.

            We know of the two basic economic types: the capitalism and communism. The first one allows the market to determine its own course, thus the “laissez faire” doctrine, while the second refers to the strong control of the central authority on what to produce, how and how much. These two are extreme opposites. Market economy is ruled by price mechanism; sellers will produce goods when the price is high while consumers buy if goods are cheap. With dynamic engagement they will agree on a particular price, which we call as prevailing market price. Here, the government takes a backseat role. The government does not intervene, it is limited to provide safety measures for the market not to overheat or fall below critical situations. Government becomes reactive.

           In a central planning, the government is so strong that market activities are never indicative of the true value of the goods. The government creates its own market as both seller and buyer. If this happens, there won’t be innovations to improve standards of living.

            A capitalist market encourages competition, thus people innovate. When they innovate, and given strong property rights, they enjoy the benefit of their innovations, their capital stock improves. Their wealth increases. While they continue to be wealthy, other members of the society who do not have capital or talent to begin with cannot participate in the market. In effect, they are left out in the corners of underdevelopment while few accelerated their control of the resources.

            Given the frailties of central planning and capitalism, a new economic model emerges: social market economy. This economic model is a mixture of the strong features of the two systems with a different market inspiration. The social market economy, with its better features, aims to safeguard human dignity in the dynamics of market exchange. Hence, if the aim of capitalism is to accumulate wealth, central planning to distribute wealth equally, the social market economy aims to enhance the economic situation of every individual without limiting the potentials of those who possess wealth and talents. This means that people who are at the lowest echelon will be pulled up without affecting the conditions of the rest.

The dismal state of affairs of the country for 3 decades of hunger and poverty can be addressed in a social market economy. The social market economy as a market system tames monopoly and oligopoly in order to serve the greater good of the public. Untamed monopoly power distorts the market, concentrates power in the hands of the few, and pushes down the greater number of consumers in order to install the revenue at the expense of welfare. In social market, the government flexes muscles to ensure that the marginalized participate in the market.

On the onset, social market economy opposes monopoly except in few situations where monopoly is natural to meet the economies of scale of production of goods. However in the instance that there is monopoly, the monopolist is limited by a framework to ensure the sanctity of human dignity. The framework is hugely legal and political in nature; market framework collapses in the face of monopoly or oligopoly powers.

The legal framework in the social market economy includes a federal political order to limit abuse of government powers. The powers of the government will be limited to the implementation of the welfare policies, maintenance of stable money supply and ensuring property rights. The welfare policies are generally structural in nature to allow tax breaks, as well as strategic support to Micro, Small and Medium Enterprises (MSMEs).

The MSMEs are necessary components in instituting social market within the framework of welfare. The usual format for support is the increase of credit sources to small businesses which are friendly to their capacities to pay. If MSMEs grow, the effect will be the achievement of a healthy balance of town and country life. Ordinary individual shall be encouraged to form small businesses instead of migrating and congregating in the metropolis.

            Social market is a compatible economic model for the country. With the central theme of human dignity, Filipinos can readily return to that very old value of pakikipagkapwa-tao. Social market emphasizes human relationships by sharing the inner self in a prescriptive & moral imperative of human interactions. The macroeconomic framework in both fiscal engagements and in strategic investments will be towards achievement of the second Pareto welfare criterion. The criterion requires that those who were made worse off must receive just compensation from those whose were made better off. In simple terms, the target of growth spending is the poor who were left off for more than 30 years.

            Mindanao will hugely benefit from social market economy. Mindanao problem can be described in five major sections: historical injustice, animosities between and among ethnic groups, cultural and religious bigotry and prejudice, land grabbing and dispossessions, and the inconsistency and insincerity of the national government. The history of the island is a picture of relative deprivation. Social market addresses this because it can only thrive on conditions of a decentralized government. In a decentralized government, government is near the people to ensure widespread property ownership, secure anti-monopoly policy, and the effective address of welfare needs of the people. In social market, corrective measures are instituted immediately to rectify income inequality while allowing competition in the market in the permissive presence of the gifted and wealthy we call as oligarch.

Posted in Opinion