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The High Cost of Ignoring FREEDOM!

January 26, 2010

Is there any connection between the degree of a country’s freedom and the security and happiness of its people? Is there any possible correlation between a country’s degree and appreciation of liberty and rights and the outcome of natural calamities and man-made devastation? Do we have to look at the functions (e.g. controls and regulations) of the government if protecting the rights and happiness of every individual is our main goal? My answer is Yes, Yes, Yes!

This can be avoided...

This can be avoided...

Most of us sympathize with the fate of people in Haiti. On January 12, a 7.0-magnitude earthquake shook the nation and killed about 150,000 people, according to Associated Press. But several reports and unofficial estimates put the death toll at about or even more than 200,000. The question now is: Is Haiti’s death toll avoidable?

Let me share with you the views of Economist Walter E. Williams who believes that there’s inevitable connection between the degree of a country’s freedom and the outcome of natural calamities. In his article entitled Haiti’s Avoidable Death Toll, Williams stressed:

“As tragic as the Haitian calamity is, it is merely symptomatic of a far deeper tragedy that’s completely ignored, namely self-inflicted poverty. The reason why natural disasters take fewer lives in our country is because we have greater wealth.

“It’s our wealth that permits us to build stronger homes and office buildings. When a natural disaster hits us, our wealth provides the emergency personnel, heavy machinery and medical services to reduce the death toll and suffering. Haitians cannot afford the life-saving tools that we Americans take for granted.”

Now what’s the degree of freedom in Haiti and who is to blame for the tragic death toll? According to the Heritage Foundation’s 2010 Index of Economic Freedom, Haiti, which is the poorest country in the Western Hemisphere and one of the world’s least developed nations, scored 50.8 in terms of economic freedom, making its economy the 141st freest in this year’s index. Economic regulation is rampant in Haiti that starting a business takes an average of 195 days, compared to the world average of 35 days. Securing a business license also takes about five times longer than the world average of 218 days.

Corruption is also rampant in Haiti as it ranks 177th out of 169 countries in the 2007 Transparency International’s Corruption Perception Index. Foreign investors are afraid to do business in Haiti because of its reputation as the world’s most corrupt countries.

The Philippines was recently devastated by a number of typhoons last year. The ruthless typhoon “Ondoy,” which was not even a super typhoon, left more than 200 casualties as of last week of September 2009. “Ondoy” submerged some areas in Central Luzon and Calabarzon in mud water. Super typhoon “Pepeng”, which hit most parts of Luzon, also claimed hundreds of lives. According to reports, the two weather disturbances resulted in the death of more than 600 people, and damage to agriculture and infrastructure was estimated at close to P30 billion.



Pundits and even common people said that the death toll and economic loss caused by the two deadly typhoons were avoidable. The Disaster Coordinating Council (NDCC) is one government agency that was being blamed for its failure to react promptly to the emergency triggered by Ondoy. Most observers also noted that had the government acquired modern weather detection technology and radar system like Doppler radar equipment, the death toll and the extent of the damage of the two weather disturbances would have been avoided. Others also blame people’s improper waste disposal that aggravated flooding in the metropolis.

Doppler radar only costs $300,000 to $1 million, or roughly P15 million to P50,000. This is cheese cake compared to the pork barrel of a single congressman, which is P70 million. Filipino Economist compared the cost of a single Doppler to cost of the Presidential foreign trip of Gloria Macapagal-Arroyo. The daily cost of the President’s trips in 2007 was estimated at about $255,000 from $46,000 a day in 2002. Monsod concluded that by 2000, the presidential trips averaged about $300,000 per day. Just recently, Mrs. Arroyo and her convoy had a $20,000 (P1 million) dinner at Le Cirque in New York.

I cannot imagine if a 7.0-magnitude earthquake hit the country. The outcome would have been horrible if this natural calamity happened, considering that the Philippines is an earthquake-prone country. But as I said in one of my previous blogs, the result of every natural calamity can be mitigated and avoided.

“The typhoon Ondoy that submerged entire Metro Manila was clearly a natural phenomenon, but logic tells us that its effects could have been prevented had the government known how to deal with the forces of nature. A natural phenomenon is the metaphysically given, meaning that which is part of nature and beyond the power of man to control. The typhoon Ondoy that put the entire metropolis under water is the metaphysically given. We cannot— since we don’t have any powerful climate-altering technology yet— control natural calamities like typhoon, earthquake, and tsunami, but we can control or minimize their effects. Flooding, which is the effect of continuous rainfall, is not the metaphysically given, thus it can be controlled or manipulated by man.”

According to 2010 Index of Economic Freedom, the Philippines has an economic freedom score of 56.3, making its economy the 109th freest in the 2010 Index. Our country ranks 20th out of 41 countries in the Asia–Pacific region, and its overall score is slightly below the world and regional averages.

Heritage Foundation states:

“The Philippines is weak in business freedom, investment freedom, property rights, and freedom from corruption. The government imposes formal and non-formal barriers to foreign investment. Reflecting a lack of domestic economic dynamism, the Philippines still relies heavily on remittances from abroad. The judicial system remains weak and vulnerable to political influence.”

How free are we?

How free are we?

Here’s where the Philippines stands in terms of the following criteria:

Business Freedom. Score: 48.1:

The overall freedom to start, operate, and close a business is limited under the Philippines’ regulatory environment. Starting a business takes an average of 52 days, compared to the world average of 35 days. Obtaining a business license takes less than the world average of 218 days. Closing a business can be a difficult and lengthy process.

Trade Freedom. Score: 77.8:

The Philippines’ weighted average tariff rate was 3.6 percent in 2007. Some high tariffs, import and export restrictions, quotas and tariff rate quotas, services market access barriers, import and export taxes, import licensing requirements, restrictive and non-transparent standards, labeling and other regulations, domestic bias in government procurement, inconsistent and non-transparent customs valuation and administration, export subsidies, widespread corruption, and weak protection of intellectual property rights add to the cost of trade. Fifteen points were deducted from the Philippines’ trade freedom score to account for non-tariff barriers.

Fiscal Freedom. Score: 78.8:

The Philippines has relatively high tax rates. The top income tax rate is 32 percent. The top corporate tax rate is 30 percent, down from 35 percent as of January 1, 2009. Other taxes include a value-added tax (VAT), a real property tax, and an inheritance tax. In the most recent year, overall tax revenue as a percentage of GDP was 14.0 percent. Despite domestic political pressure, authorities did not repeal the VAT on petroleum products during the financial crisis.

Government Spending. Score: 91.2:

Total government expenditures, including consumption and transfer payments, are low. In the most recent year, government spending equaled 17.1 percent of GDP. Privatization of the power sector continues, with two more generating plants privatized in the past year.

Monetary Freedom. Score: 72.7:

Inflation has been moderately high, averaging 7.4 percent between 2006 and 2008. The government influences prices through state-owned enterprises and utilities and controls the prices of electricity distribution, water, telecommunications, and most transportation services. Price ceilings are usually imposed on basic commodities only in emergencies, and presidential authority to impose controls to check inflation or ease social tension is rarely exercised. Ten points were deducted from the Philippines’ monetary freedom score to account for policies that distort domestic prices.

Investment Freedom. Score: 40.0:

Foreign investment is restricted in a number of sectors. All foreign investments are screened and must be registered with the government. Regulatory inconsistency and lack of transparency, corruption, and inadequate infrastructure hinder investment. Dispute resolution can be cumbersome and complex, and the enforcement of contracts is weak. Residents and non-residents may hold foreign exchange accounts. Payments, capital transactions, and transfers are subject to some restrictions, controls, quantitative limits, and authorizations. Foreign investors may lease but not own land.

Financial Freedom. Score: 50.0:

Banking dominates the growing financial sector, handling more than 90 percent of financial activity. In general, the financial system welcomes foreign competition, and capital standards and oversight have improved. Consolidation has progressed, and non-performing loans have gradually declined to less than 5 percent of total loans. The banking sector has 38 commercial banks, five of which dominate the sector. Two large state-owned banks account for about 15 percent of total assets.

Property Rights. Score: 30.0:

The judicial system is weak. Judges are nominally independent, but some are corrupt or have been appointed strictly for political reasons. Organized crime is a serious problem. Despite some progress, enforcement of intellectual property rights remains problematic.

Freedom from Corruption. Score: 23.0:

Corruption is perceived as pervasive. The Philippines ranks 141st out of 179 countries in Transparency International’s Corruption Perceptions Index for 2008, a decline from 2007. A culture of corruption is long-standing, and enforcement of anti-corruption laws is inconsistent.

Labor Freedom. Score: 51.9:

Labor regulations in the Philippines are inflexible. The non-salary cost of employing a worker is low, but dismissing an employee is difficult.

7 Comments leave one →
  1. July 28, 2011 3:38

    businesses might over the air a person’s principles to get a price as little as 1p

  2. January 5, 2012 3:38

    I was looking on the web for some info since yesterday night and I at last found what i was looking for! This is a good site by the way, however it seems to be a slight hard to read from my android phone.


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