Fighting bad policies

“It is the greatest happiness of the greatest number that is the measure of right and wrong,” wrote 18th-century British philosopher Jeremy Bentham. With further elaboration by John Stuart Mill, Bentham’s principle later turned into the goal of seeking the greatest total happiness (greatest good), period. That became known as Utilitarianism, a theory in normative ethics holding that the measure of correct action is the maximization of utility or total benefit. Many of us would be uncomfortable defining that as a societal goal, implying that maximized economic growth is the end-all of economic policy. To be truer to Bentham’s original wording, that aim is now widely qualified to consider, just as importantly, the incidence and distribution of that growth, captured in the now commonly used phrase “inclusive growth.”

Imagine a hypothetical country of 100 million citizens. Suppose a lawmaker sponsors a bill that would have government collect P100 from each citizen every year, and the P10 billion raised will go to 100 specific individuals who are free to use it as they wish. Outrageous? (Or sound familiar?) American economist Mancur Olson, in his book “The Logic of Collective Action: Public Goods and the Theory of Groups” argued that such a law, unfair as it may seem, is likely to pass.

The reasoning would go this way: First, the 100 favored individuals will find it so much easier to organize themselves to fight for the law than for the other 99,999,900 to organize to resist it. Second, the overwhelming majority who stand to lose only P100 each have little incentive to move, compared to the 100 who stand to gain P100 million each. That is the tragedy with people acting only in their own self-interest. And third, the lucky 100 would gladly spend large sums of money to lobby legislators and get the media to support the bill. With an annual windfall of P10 billion (or P100 million each) to look forward to, they wouldn’t hesitate to spend a fraction of this amount to get the law enacted, while the silent majority sinks into apathy and default. There may be a handful of idealistic citizens who would mount a resistance, but they would be no match against the millions in lobby money mobilized by the lucky 100. And so, in Olson’s prediction, the patently unfair proposal manages to become part of the law of the land.

Olson’s theory helps explain why we see so many clearly bad policies around, and not just in our own country. The award of high-tariff protection to certain favored industries or firms is a traditional example. So are government-condoned monopolies that are clearly inimical to the common good. The long-running debate on open skies over protectionist arguments of domestic interests could be another case in point. The list can go on and on. Elsewhere, massive subsidies by rich governments to their relatively small farm sectors favor only a few, and have time and again been shown to hurt the majority of their citizens (along with small farmers in developing countries like ours). And yet, those governments have stubbornly held on to these subsidies through the years, making it the single biggest snag in World Trade Organization negotiations. Every country has its share of such perverse policies, or those that demonstrably go against the welfare of the majority in favor of a few, even in the most democratic societies.

Not a few believe that it was Olson’s principle at work that led to the mangling of the Ramos administration’s original proposed configuration for the Comprehensive Tax Reform Program by the time it passed Congress in 1997. Among other things, the law as passed then omitted the provision for automatic inflation adjustment (indexation) of the “sin taxes.” Subsequent efforts to revisit the sin taxes attempted to correct, with varying levels of success, this major flaw that led to the large erosion in the real revenues from the tax over the years. In its last version passed in 2012, the Sin Tax Law finally provided that excise tax rates will increase by 4 percent every year—but strong forces still managed to get Congress to make this take effect only in 2016 for distilled spirits, and in 2018 for cigarettes and beer. Not surprisingly, there are new efforts to reopen the law at this time.

Years ago, a reformist neophyte legislator told me of her first brush with political reality, as she fought the strong lobby to water down the excise tax bill on the sin products. Unsuccessful in her plea to party mates not to give in, she reluctantly relented and told them: “Ok, I will vote with you now, but I hope this will not happen again.” The flippant response she got from her more seasoned colleagues was: “On the contrary, it will happen again, and again, and again.” Was Olson right? Are long languishing but long-needed legislation like the fair competition act, national land use act, and freedom of information act naturally doomed to failure?

Actually, Olson’s thesis has not gone unchallenged. It has been argued that Olson neglected the power of ideological motivation, not just money and concentration, to spur activism. Also, contrary to Olson’s characterization, weak and diffuse groups could possess a paradoxical political advantage: precisely because they are weak and diffuse, the wider public may see them as less self-interested and thus more credible. A more recent and compelling reason to question Olson’s conclusion is the rise of the digital age and social media, which now makes it so much easier for people to find each other and organize to publicly advance their shared interests. So there must be hope, after all.

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