BACKBENCHER
Rod Kapunan
7/2-3/2011
One reason deregulation was least resisted by our people was the fact that the new generation of capitalists succeeded injecting a new meaning to our understanding of investment to justify their goal of marginalizing the role of government in business. Accordingly, it is only where the private sector is free to do anything that could bring about full economic development, employment and prosperity.
It is from that seemingly innocuous economic supposition where the much-vaunted policies of privatization, deregulation, and globalization came to bloom. The new economic ideology attributed in part its success to the collapse of the socialist bloc led by the implosion of the Soviet Union, and to the metamorphic transformation of China from regimented Maoist socialism to one the West would call “guided” or “controlled capitalism.”
Notably, to invest or capitalize pertains to that act of using one’s money to put up a business or to add more to an existing one for purposes of increasing production and income. The money set aside for that venture either comes from the investor’s own savings (pure capital), profit generated from his existing business, or from other investors wanting to put in their capital contribution. If still nobody wants to invest, he may borrow, but is obligated to pay it from the profit generated by that business, and whatever is left now forms part of his net profit.
From the Marxist point of view, investment is the use by the capitalists of the surplus value produced by labor. Since capitalism has legalized the appropriation of surplus value, or the net after deducting the cost of wage, as private property, that now partakes of an added capital they can rightfully invest, and the profit forms part of their property. The capitalists then could continue the cycle of investing to earn a much bigger surplus value in a system that allows the workers to produce commodities beyond their needs, which excess is now pointed to as the exploitation of the workers.
The birth of the first communist state in 1917 and the Great Depression in the 1920s somehow brought to terms the reality that structural changes were needed in the capitalist system. Part of that was the need to impose a degree of regulation for it to work, not otherwise as the classicists and today’s neo-liberals would tend to believe. The reformists believe that capitalism was an imperfect system, but its imperfections were much less than that of socialism to allow it to wither away.
One of the radical innovations introduced was the redefinition of investment. The reformist have to come out with a definition to differ it from other economic terms that generate income like lease, rent, wage, taxation, etc. Part of that was to compel investors to come out with their own capital. That has to be adopted to prevent the circumvention of the laws that could put the consumers at a disadvantage, like letting them pay for the cost of goods and services beyond what is fair, just and conscionable.
Such was necessary to protect the ordinary consumers whose income was mainly derived from their wage, which was either pegged by their employers or by the State through the system of minimum wage. It was on this basis why numerous agencies were created to regulate and supervise public utility industries like electricity, water, fuel energy, transportation, privatized highways, telecommunication, etc. It was these regulatory agencies that came out with a formula on what constitutes a justifiable rate of investment (ROI) later modified to return of rate base (RORB), and modified again to performance rate base (PRB).
Regulatory agencies then became strict in allowing increases in rate, fee, fare, toll charge, etc., except under extreme cases where losses were patently attributed to the low cost of their goods and services caused by the fact of being regulated. Other than profitability, public utilities at times were allowed to increase due to unforeseen external factors such as the high cost of imported raw materials, fuel energy cost, devaluation of the peso, etc.
The underlying reason for this is to prevent them from using their privilege status as monopoly or oligopoly to augment their investment by unduly exacting from their consumers. This formula clarified the nature of investment much that customers often have no choice, notwithstanding that they are not entitled to a dividend, they not being investors. Regulatory agencies see to it that consumers pay only the right amount for the goods and services they purchase, and to charge them beyond that is overpricing.
Hence, when our regulatory agencies accepted as valid the stupid argument of privatized public utility operators to increase their rates, fares, toll charges, fees on the basis that they wanted to purchase new equipment, machineries, build additional facilities or factories, or to expand their operations, that simply legalized their demand to extort from their captive consumers, and appropriate them now as their investment. That in effect allowed wily investors to expand their business with practically only their saliva as capital.
The nasty thing is that the regulatory agencies then proceeded to allow public utility operators to pass on their franchise tax to their customers which, as a privilege, were originally chargeable from them. Deregulation then erased the distinction between the costs for investment, which is essentially understood as seed capital, from the net profit generated by their business.
For a while public utility operators were even anomalously exempted from the payment of income tax until after the Supreme Court rebuked them for that. In fact, the system of passing on the franchise tax to the consumers came ahead of the value added tax, thereby reducing greatly the tax collected from these behemoth corporations.
In the end, it created a serious economic disequilibrium much that it uncontrollably pushed upward the prices of goods and services rendered by public utility operators, while leaving behind the income of the workers who mainly have to rely on their wages which remained strictly regulated. In that one could see that public utility operators practically pay nothing, and now have the gall to demand from consumers added capital for their investment. Ganon ka stupido tayo!
(rodkap@yahoo.com.ph)
