In recent days, the province witnessed the local sugar industry, along with local leaders, take a stand against Coca-Cola over their use of high fructose corn syrup (HFCS). Labor groups and their allies rallied outside the bottling plant of the beverage maker and burned an effigy in the image of Department of Agriculture Secretary Emmanuel Piñol. Everybody from Negros Occidental Governor Alfredo Marañon, Jr. to Vice Governor Eugenio Jose Lacson to Senator Juan Miguel Zubiri declared their support for the rally.
Even after Coca-Cola cited a study by the University of the Philippines, which was acknowledged by the Sugar Regulatory Administration (SRA), that showed the company’s use of 40 percent of sugar production in the Philippines is a “main driver” of the local industry, labor groups were unmoved.
In a statement responding to the protest, the cola producer said the call for a boycott would be only be detrimental to the local community, hitting sugar farmers, sari-sari store owners, and local businesses.
“The call to boycott our products, anchored on unfounded allegations made regarding the use of high fructose corn syrup (HFCS), affects many more workers and consumers along the economic value chain than some of our partners in the sugar industry realize,” the statement read.
Even after Coca-Cola agreed to purchase more local sugar, saying six months would be necessary in order to purchase “clarification equipment” in order to process more raw sugar into syrup, local labor groups still held a press conference to declare Piñol persona non-grata, or unwelcome, in Negros Occidental.
In the end, seeing how labor groups and those in the sugar industry have refused to accept the concessions provided by the beverage manufacturer, it all boils down to attaining power; trying to force a company to its knees, and using politicians to give them leverage.
In a Harvard University study by Andrei Shleifer and Robert W. Vishy entitled “The Politics of Market Socialism,” they look at the ways in which politicians pursue their objectives through the control of business.
While the Philippines purports to be a free market economy, with the high tax system; massive government entitlements; price controls; and, as the HFCS debacle has shown, the influence labor has on entire industries, their actions would say attitudes towards the economy lean further left.
In a section under the subtitle “Democracy and Economic Efficiency,” they look at how governments treat businesses, particularly public industries, under a socialist government. The report notes, in an effort to carry out the “will of the public,” one model explains how interest groups pressure government to pursue policies to benefit the said group at the expense of the rest of the population.
“The interest groups that do form and lobby the government are generally small groups with concentrated benefits,” they wrote. “The organized minorities tend to gang up on the disorganized majority, creating an inefficient resource allocation.”
As the Coca-Cola release indicated, with these interest groups targeting a specific company and calling for a boycott, that creates a chilling effect, impacting each member of the economic chain; and, even if the sugar industry were to drive the company out of the market – along with HFCS – that would only lead to a spike in unemployment for those who used to work for the firm and a, likely, hike in prices for the products that now must be imported, which would lead to lower sales for local shops.
What rings so clearly is the method in which scattered groups are able to win over the sympathies of public officials. With public officials mostly concerned with winning their next election, and with a “disorganized majority” being old hat for Philippine politics, being able to divide and conquer is easy for labor groups.
The study also states, “Under socialism, the government is much richer relative to the wealth of the economy than under capitalism,” it continues, “As a result, the government can afford many more politically motivated inefficient projects that lose money than it could in a capitalist economy.”
The public sees project after project implemented by the government that has cost millions and billions of pesos but have turned out to be nothing more than superficial tokens of their administration, and they do it because the government allows for it. Looking at the case with Coca-Cola, even if an imbalance of costs results from increased overhead expenses, perhaps resulting in layoffs, it’s a loss the government is willing to back, as long as they have interest groups in their ear.
The attainment of government wealth and control, not only continues to hint at the country truly being more socialist than it likes to admit, but their embrace of practices like price controls only enhances the credibility of the study’s sentiment regarding “many more politically motivated inefficient projects that lose money.”
Professor Winnie Monsod penned an editorial for GMA News in 2009 discussing the ultimate failure of price controls.
“Suppose that the demand and supply for a basic commodity, say rice, are balanced at the current price, and that the government then fixes a lower maximum price,” she explained. “The quantity of rice supply will decrease because the producers – whose costs are higher than the maximum price – cannot, of course, be forced to sell their products at a loss.”
After noting the resulting increase in demand, she asked, “How are you going to allocate the limited supply to those who want to buy?”
The professor points out, some manufacturers would move to create a black market for goods, while others would try to evade such controls, noting, “One of the simplest forms of evasion is quality deterioration.”
Meanwhile, Fiona M. Scott Morton wrote an article for the Cato Intitute in 2011 where she looked at the issue of price controls on prescription drugs.
“When prices are held below natural levels, resources such as talent and investor capital leave an industry to seek a better return elsewhere,” she wrote. “This means that there will be less discovery and innovation.”
“When government adopts a price control, it defines the market price of a product and forces all, or a large percentage, of transactions to take place at that price instead of the equilibrium price set through the interaction between supply and demand,” Morton explained. “Since supply and demand shift constantly in response to tastes and costs, but the government price will change only after a lengthy political process, the government price will effectively never be an equilibrium price.”
“This means that the government price will be either too high or too low,” she added.
The free market system of supply and demand is not allowed to function, which should be the basis for a capitalist system – if the Philippines truly were one.
Laborers even threw around the word “capitalist” as a slur during their demonstration, but with the way the country manages its economy, it’s difficult to point out any actual capitalists – capitalists do not lean on the government to make determinations on the free market.
With the government on the one side controlling prices, while lobbyists are in their ear pushing for specific interest groups, resulting in pressuring companies and industries, as much as the country wants to be a capitalist country – simply by putting up malls and calling it “consumerism” – their actions show it’s still primarily about government control and the hands of the very few pulling the strings./WDJ