Philippines Notes, Part 3: Free Markets

Those of us with a libertarian bent are at times susceptible to the theoretical ideal of “free markets,” the utopian concept of economics unburdened by interfering governments or regulations. Expressed purely (and absurdly) as the perfect crossroads of Supply and Demand, free markets are supposed to produce the best product at the best price, letting the pragmatic reality of buying and selling decide the cost of things, thereby excluding the fickle hand of bureaucrats, do-gooders, and administrative thieves.

One need not travel far to see how untenable the idea is when applied to real-world practices. Here in the United States, our agriculture industries, notably dairy, wheat, and sugar, would collapse without enormous “price supports” (read: handouts to ever-larger food conglomerates, like Archer-Daniels Midland). So would steel, textiles, and most professional sports franchises, which depend on giveaways in the form of tax breaks and construction grants to flourish. Hardcore capitalists opposed to anything that smacks of socialism hate “interventionist” policies, particularly when these policies, like mandated minimum wages, help the working poor. But without them, markets run amok tend to eat their young.

Some of the most painful problems of capitalism are presently on view in the Philippines, where paying what the market will bear is a way of life. This is capitalism distilled to its most heartless. Unabashed non-interventionist cheerleaders should view the way markets work there as a cautionary parable: The Tale of How a Nice Idea on Paper Really Works in the Modern World.

The minimum wage varies from state to state and sector to sector in the Philippines. Industrial jobs pay more than agricultural ones; companies with smaller capitalization may pay less than big corporations; high-density regions pay more; etc. The official rates range between around 200-300 pesos a day. That’s about $4-$6.

Paltry as that sum seems to Americans, many employers, taking advantage of lax enforcement and complacent labor grateful for a job, don’t pay the minimum. I met one woman, a mother of two, who told me she had worked for a cake factory in her small borough outside of Manila for several years, cleaning baking equipment. Her wage is the same as when she started: 180 pesos per day, or slightly more than $3. To supplement her income, she administers therapeutic massage to wealthy locals and tourists, who pay her 100 pesos ($2) for an hour-long rubdown. She and the other bakery employees being short-changed are too frightened of being replaced by other desperate job-seekers to complain. Meanwhile, the factory owner tools around town in a chauffeured SUV and increases his land holdings whenever a plot of rice field comes up for sale.

Some apologists for capitalism would say this is exactly how the system is supposed to work. Let the marketplace determine wages and play on! Seduced by the great storytelling of authors like Ayn Rand and the scholarly essays of theorists like Fred Hayek, the grand ideal of unfettered free markets seems swell. In the real world, where earnest mothers and fathers struggle to feed families and build hope on a few dollars a day, the picture isn’t so pretty.

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