THE last decade has taught the world a clear and unmistakable truth. Governments have the power to artificially push markets and economies in any direction that the politicians wish these to go.
Europe, with Spain being the particular case, and the US wanted to create a roaring construction and housing industry. Through low mortgage rates, tax incentives for both developers and buyers and government guarantees for banks, a housing boom was created. The policy was sold to the public as a way to economic growth.
But artificial “booms” must come to an end as market forces eventually take over. Spain’s unemployment rate is 23 percent and the US homeownership rate is at a 20-year low.
Germany and, once again, the US, assured the public that not only would the environment be “saved” but the economic benefits would be enormous. After billions of dollars of incentives to “green” energy producers and buyers, government subsidies and government guarantees, the US is littered with failed “green” companies and the German people are discovering that, even with government subsidies, electricity prices are the highest in the region.
The goals of government intervention are never fully achieved by manipulating the economy. The German government, in part, justifies its renewable energy push by saying how great it has been for the environment, in spite of the lack of significant economic benefits to ordinary people. But it was also these economic benefits that were promised.
The US housing push was justified in that more and more people from even economic classes that actually could not afford to buy a house would become homeowners. But what the people were not told is that, if anything ever went wrong with the government-created housing “bubble,” subsequent housing rental costs would skyrocket as demand increased, which has happened in the last few years.
The potential unintended consequences of government economic intervention are never considered and often ignored.
A bill has been filed in the House of Representatives to regulate commercial-space rentals for small and medium businesses. A small enterprise is one with assets less than P5 million, and a medium enterprise is less than P50 million.
The bill creates a commission that will have exclusive jurisdiction to adopt, formulate and implement policies, guidelines and rules regulating the imposition of commercial rentals. No one knows what the “commission’ will decide to “avoid instances of charging exorbitant rental amounts by commercial establishments.”
So, if the commission lowers rates to “small” businesses, all a company has to do is break up the 10-branch store corporate structure into ten separate business entities to get lower rates. Commercial space operators could simply create rented spaces that are so large, that even the “controlled” square-meter rent would be out of possibility for a small tenant.
Further, who would be willing to build a small commercial building catering to small enterprises, if they did not know how much rent they could charge in the future?
The problem with government intervention in the marketplace is that the failures are only recognized after the damage is done.