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A Destructive Obsession with Ayuda (Cash Handouts)

IBON Foundation

Yesterday, I decided to write about how Pinoy Pride won't help pay that enormous PHP 13.42 Trillion debt. I thought I'd probably take a bit of a break to do some more research. However, I feel the need to write this post today since one of IBON Foundation's articles says that there's a destructive fetish for foreign investment. Then, another of IBON Foundation's articles says that there's money for Ayuda. I really feel insulted reading these since I'm a Masters Degree graduate in the School of Business and Economics. This really shows the destructive obsession with ayuda (cash handouts) and protectionism.

IBON Foundation

Above is one of IBON Foundation's charts. Some people on Facebook have gone as far as to call them Birdbrain Foundation. So what if there's money for ayuda or cash handouts? The problem here is that "think tanks" like IBON Foundation want to make it look like ayuda is more important. If asked to account for the funding--I wonder if they do have a source for the funding. If they're saying that we need to print more money--it's going to backfire severely. People in Venezuela have money but the only ones who enjoys are is those on top. The money in Venezuela is so depreciated all the while President Nicolas Maduro is overweight, enjoys fine steaks, and lives luxuriously. Mao Zedong enjoyed having a luxurious life while China starved under his regime. The Kims in North Korea rule their own monarchy and Kim Jung Un feels like he should be called a king or emperor instead. 

The cry has always been "Raise up wages, lower the prices of commodities, and give everyone cash handouts." I wrote an article on those three demands and why they're very self-defeating. It's very self-defeating because salaries are part of the cost of production, lowering the prices of goods with high salaries means forcing businesses to sell at a loss and giving everyone cash handouts means increased government spending. It's laughable that those who want more cash handouts are also complaining about the rising debt. Yet, it seems that these groups want you to believe that cash handouts will pay the debt. I find that all to be rather absurd because cash handouts equal government spending. You don't pay the debt by printing more money (which devalues the money) nor do you pay it by giving handouts to the poor either. 

IBON Foundation

Going back to funding--I find their sources of funding anything but feasible. The chart above tells us that to raise money for cash handouts--their funds are from taxing the rich. Don't tell me that the rich aren't taxed such as the corporate tax, income tax, value-added tax, or any taxes applicable. Apparently, the group thinks that the rich should be taxed for simply being rich. This reminds me of some people I met saying that it's the fault of the rich that they're poor. I met some people in college who also carry out the mentality that the rich should be punished for being rich. They have their sour-grape moments and demand that the rich should pay more taxes. Sometimes, we need to lower taxes or raise taxes when need be. It seems that their solution for raising funds is to tax the rich for their achievements. I find this to be a very short-term solution. I want to compare it to Adolf Hitler when he confiscated Jewish businesses and their wealth. Hitler ran out of resources eventually which probably fueled his invasion campaign.

Overly high taxes can discourage people from earning more money and can encourage tax evasion. I think one reason it's a problem where some report a wrong figure is because of the tax burden. If taxes weren't so high then I think more people will be honest in paying their taxes. Though, economists must find the right percentage to make sure that the taxes aren't too low or too high. In business, we want to make sure that the price is just right. In rentals, nobody wants to rent a space if it's too expensive, and leasing a space too cheap can be detrimental to the landowner. That's why there's always that increase in rentals. That's why we seldom increase tax rates. Right now, I think I need certain taxes need to be increased to a certain extent. However, making taxes way too high is really bad for economics. Sure, people may be compelled but I think revenues will be rather short-term. It's like selling milk tea for PHP 1,000.00 per serving in contrast to the justifiable sales of selling milk tea at PHP 100.00 and above depending on the flavor. It's always the rule that the price is right and what makes the right revenue. A good entrepreneur would sell at a higher price if the quality is higher. Any good entrepreneur would sell higher for reasons such as increasing salaries and improving facilities. I would sell at a lower price only when I could afford it. Otherwise, selling at a higher cost (within a justified range) is really needed but making sure it's not too high as to lose the advantage. 

What's even worse in the midst of having this destructive obsession with cash handouts is the love for protectionism. Protectionism has been one of the characteristics of Benito Mussolini's Fascist Italy, Hitler's Nazi Germany, several dictatorships, and several Communist regimes such as how Mao did it. I heard that Mao was giving people handouts. People got paid whether they worked or not. Mao's empire in China was also isolated from the rest of the world. If people received money whether they worked or not then nobody will want to work. All a person needs to do is do nothing and get paid. They still say economic protectionism has done wonders. Yet, reading the late Lee Kuan Yew's book From Third World to First says otherwise. These protectionist groups still haven't provided any real evidence either. That's why I don't take them seriously but people need to know the right information. 

They really need to give a real study from first world countries that cash handouts, not free markets, is the solution. I read through From Third World to First and Lee never mentioned that he made Singapore rich through handouts. Instead, the solution was all about free markets. Deng Xiaoping is termed a great man by Lee for his great reforms. Deng abolished the welfare state and promoted free markets. Do Muoi opened up Vietnam to foreigners and brought it to prosperity. A generation of government handouts has only made people lazy than grateful. No wonder Deng had a huge mess to clean up. China was so full of people who weren't business savvy since Mao punished diligence and rewarded laziness. Deng had to fix that mentality even by inviting foreign investments. None of the first-world countries progressed through cash handouts and economic nationalism. Get the facts from first-world countries or people like Lee--not from protectionists who only write empty words but show no real results. 

References

Books 

"From Third World to First--The Singapore Story: 1965-2000) by Lee Kuan Yew
Harpers Collins Publishers 

Websites

"Economic Conditions That Helped Cause World War II" by Matthew Johnston, reviewed by Robert C. Kelly, fact-checked by Pete Ratburn

"Hitler's Economics"
https://mises.org/library/hitlers-economics

"Readers Question: Can Central Banks devalue currency by printing money? by Tejvan Pettinger (September 29, 2011)

"There is Money for Ayuda" by IBON Foundation (April 29, 2021)

"Venezuela's inflation hit 686.4% in 2021 - central bank" by Mayela Armas

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