Democracy and equal opportunity

>> Saturday, December 24, 2016

Ike Señeres

Unlike in communist countries wherein the political systems and the economic systems are combined, these two systems are separated in the democratic countries. As a matter of fact, it goes without saying that a country with a democratic system would always have a capitalist system too. For whatever it is worth, there appears to be more accountability in communist countries because the same party that is running the government is also the same party that is running the state corporations.
Some would say that communism is a failed experiment both on the economic side and the political side, but that is still subject to a lot of debate. On the other hand, some would also say that capitalism is also a failed experiment, either by itself or together with democracy, actually its alter ego.
Although it would be very difficult to prove it, it could be said to some extent that either directly or indirectly, the same people who are running the democratic governments may also be the same people who own the big businesses in their own countries, although other people may be running it for them.
In a democracy however, it is presumed that everyone would have the freedom to go into business on their own, assuming that they would have the resources to do so. While that may be good in theory, it is actually easier said than done, because of real issues pertaining to access to capital and access to markets, among others.
Although democracy would usually pertain to the political side of governance, there is actually nothing that prevents democracy from being applied also to the economic side. To a large extent, it could be said that monopoly in the market is the equivalent of dictatorship in politics.
While that may seem improbable, that actually happens in many countries wherein both the economy and the governance are controlled by the elite, or a few families that belong to the elite. In this sense, it could be said that the masses would not have access to capital, and would not have access to markets. In such a situation, it is possible to have the appearances of democracy on the political side, but there is actually a de facto dictatorship on the economic side.
Democracy in the marketplace could be expressed in many ways. Generally speaking however, that would mean creating a legal framework that would not lock out small businesses from participation in business opportunities. To be more specific, that should not only mean preventing monopolies from lording over the marketplace, which should also mean providing incentives to small businesses so that they could compete in a leveled marketplace with the big business players. In this context, it could be said that right now, there are many laws that would tend to favor the elite, in effect locking out the small businessmen among the poor.
Correct me if I am wrong, but it seems that the Philippines is the only country in the world where there are no anti-usury laws and there are no anti-trust laws. At the outset, it may not be obvious how this absence of laws could bring about the lack of economic democracy.
Upon closer observation however, it would become very clear that without anti-usury laws, the interest rates would become too high, so much so that only the big business players could borrow without eating their profits. Add to that the pawnshop mentality of the banks that further locks out the small borrowers.
Left with no other choices, the small businesses are forced to borrow from the loan sharks at extremely high interests, leaving them practically nothing but a small margin.
 Without anti-trust laws, it would not be too difficult to understand why many financial transactions with conflicts of interest would happen, leaving out the smaller players in the overall equation. This anomaly in society could happen all the time, because the bigger businesses that control the economy could just trade sweet deals with each other without going to jail.
We do have rules that regulate the actions of directors, officers, stockholders and their related interests (DOSRI), but it seems that even these rules could easily be twisted in favor of the elite. According to these rules, dealings of a bank with DOSRI links to them should not be disadvantageous to the bank. As I see it, it would just be better to say that those with DOSRI links should not lend to their own relatives, period.
Thanks to the microfinance industry, many small businessmen now have access to capital. That is because that industry has become a stable institution, and they could now be found all over the country. With the problem of having access to capital partially solved, one remaining challenge now is access to markets.
Again, the solutions to this problem might be easier said than done, but there is a bright light at the end of the tunnel because of the promise of electronic commerce. Of course, access to markets could be achieved even without computers, but it has also been proven many times over that websites offering electronic commerce services could boost product sales to greater heights.
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