The Fundamental Theorems of Welfare Economics state that a private property, perfectly competitive free market will maximize private and social welfare, and will result in an efficient allocation of resources through competition. Furthermore, if government decides to intervene in the market where no imperfections exist, deadweight losses will arise and will make government vulnerable to capture and corruption. These serve as the theoretical underpinnings of what has come to be known as the Washington Consensus – privatize, liberalize, deregulate.
The intentions of current rice price policies in the Philippines are
eminently laudable. But there is a vast gulf between policy intentions
and actual effects. For the past 30 years, the National Food Authority (NFA) has implemented the country’s rice price strategy – one often described as: “Buy high, store long, sell low.” Per Presidential Decree 4 (1972), only NFA may import or export rice. Given this monopoly, the NFA builds up rice stocks by importing milled rice or procuring paddy (unhusked rice or palay) from local farmers.
Recently, University of South Carolina professor Donald Weatherbee
delivered a lecture at De La Salle University regarding US-Southeast
Asian relations in the post 9-11 security environment. During the open forum that commenced, a Philippine foreign ministry official asked about the visitor’s views on the roots of terrorism after emphasizing that the current administration recognizes the link between the war on terrorism and the war on poverty. From the ensuing discussion, I gathered that many of our distinguished colleagues and professors share a similar view about poverty and terrorism.
For most economists, the idea of increasing the minimum wage is taboo. Raise the idea and one instantly gets tagged for being a leftist. Mention the thought and everybody jumps on one for defying the law of supply and demand. Tinker with it and one supposedly endangers the
health of the economy by increasing the rate of unemployment.
The cost of producing rice in the Philippines is uncompetitive. Why?
Because rice is very expensive in the Philippines. Filipino consumers
suffer rice prices that are double to triple those borne by Thai or
As most developing countries and economies in transition legislate
their competition laws, it becomes fashionable to talk about competition policy. What exactly is competition policy and why does a country need it? Isn’t trade liberalization enough to ensure competition? Wouldn’t competition lead to cutthroat rivalry that would eventually result in the death of domestic firms and domination by large firms as feared by some sectors in society?