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A fresh look at the free market

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SWIMMING AGINST THE CURRENT

By JESUS ESTANISLAO

Dr. Jesus P. Estanislao

Dr. Jesus P. Estanislao

Paul Dumol, in his contribution to strategic priorities that we need to consider in building Dream Philippines, brought us back to Jose Rizal, who gave a lot of stress on education, matched by hard work, and the practice of civic virtue. We now have Francis Estrada, who takes us on a brief intellectual tour on the global economy and the challenges this presents. He reminds us that we cannot consider Dream Philippines without reference to the wider global context within which we need to build it; and whether we like it or not, the dynamic forces in the broader global context can only have a profound impact on what we are able to do for our nation and our people.

Francis Estrada in effect asks us to reflect on global developments in the past few decades. He then invites us to take a much closer look at the free market, which undoubtedly has delivered significant positive outcomes. These outcomes, however, have been delivered with at least a few undesirable consequences. This is what he says:

“It has been 72 years since the end of the last global war.  The Cold War, which followed the end of World War II, by around 1947 had led to the emergence of competing Eastern (Warsaw Pact) and Western (NATO) military blocs.  It is deemed to have ended symbolically in 1989, with the breaking down of the Berlin Wall, and more substantively on New Year’s eve of 1991, with the collapse of the Soviet Union.”

“One would have thought that the painful memories of the devastation wrought by all too many wars and conflicts, as well as the collective wisdom of millennia and plain common sense, would have led human society to learn its lesson and develop ways of resolving differences in a rational and peaceful manner.”

“Sadly, due to either a tragic flaw in the human condition, destiny or some other reason, we have not learned, despite the compelling evidence that history presents.

“As human society and organization has evolved (from hunter-gatherers to cultivators, to feudal, agricultural (rural), industrial (urban) and post-industrial regimes, “growing pains,” often intense, were experienced.  These were manifested in conflicts between the status quo and those who wished to change it; moreover, there were eventual winners and losers.”

“Nonetheless, modern capitalism has led to the largest creation of aggregate economic value in history.  It was predicated on the critical importance of a free market, and it holds that:

“All individuals are sensible, measured economic beings.

“Accordingly, the sum total of the efforts of all individuals, rationally pursuing their individual economic interests, would result in maximizing the economic interest of all the individual members of society.

“Man is best motivated by economic incentive and competition.

“A free and unfettered market was the ‘most efficient allocator of resources’ in an economy, i.e. providing capital to the members of the economy that would ‘maximize its use.”

“Government intervention/regulation was an impediment to the growth of an economy.”

It is at this point that Francis Estrada asks all of us to step back and take a much broader view of the accomplishments and failures of the free market.

 

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