Day 1 of Conference 2016

The Economic Freedom Network (EFN) Asia conference 2016 at Dusit Thani Hotel in Makati ended last Wednesday. Thanks again FNF and EFN for another wonderful conference.

Here are some tweets from #efnasia2016 and my own thoughts about the event.

Protection of human rights is part and parcel of EU policy – Walter van Hattum, EU Delegation to the Philippines.

It’s a responsibilty of businesses to respect human rights… It is state duty to protect and defend human rights in its territory.

Nobody can seriously suggest that businesses can opt in and out of respecting human rights as they wish… There is legal obligation for businesses to respect HR.

Businesses should be as transparent as possible so they will be less likely to be attacked by false news. Business leaders are often uncomfortable explaining to the public how they work. It’s understandable but unwise. — Markus Leöning, former Himan Rights Commissioner in Germany.

Increasingly populist goverments a threat to human rights and economic freedom. The pendulum has swung as globalization has failed in its promises to those who have lost out in its benefits. Food for thought. — Frank Largo

For me, among the important human rights of the people is freedom to choose in the market place, freedom to sell or not sell, freedom to buy or not buy. Political human rights like the right or freedom from theft (especially organized criminals), murders, prosecution and harassment, that is where the state should come in.

A minimal government focused on enforcing the rule of law, enforcing contracts between and among people, is consistent with economic freedom and human rights protection. That minimal govt should have no business creating and expanding lots of endless welfarist programs. Prosperity is not an entitlement or privilege. Lazy and irresponsible have no right to a prosperous life, they deserve poverty. Politically incorrect statement, as usual.

Rule of law means the law applies equally to unequal people. So the law should apply to both rich and poor people, to big/giant and small firms. A law or contract can be written, verbal, done by govt or private entities. Basic human rights then means that people have access to such equality before the law.

Below, Rainer Heufers moderating, with Wan Saiful Wan Jan, Peter Kompalla, Rishi Sher Singh, Dr. Manzoor Ahmad in the new panel.

People’s definitions of human rights vary. What may be HR violations to some can also be another’s sole income source… Definitions of human rights vary. What may be HR violations to some can be another’s sole income source. — Wan Saiful Wan Jan

Good point. Some westerners may consider temporary child labor as HR violation already but for some households, it is ok and necessary. If a sole family breadwinner is gone for instance, the young need to work to help sustain the family. Harsh but necessary.

Stakeholder values, not just shareholder values. — Rishi Sher Singh

Barun Mitra tweets:

Business of business is indeed business! Inclusive of profitability for investors, benefit to consumers, add values to society.

Better protection of human rights, improved environmental quality, higher sense of justice, necessary social value additions.

Value added products, economic and social, become affordable with prosperity, and necessity in a free competitive market.

Implentating Rule of law carries cost, level of effective enforcement has to be affordable, economically socially politically. #EFNAsia2016

I think corporate branding will help global firms stay the course in HR and econ freedom protection, respecting #ruleOfLaw. Firms would dislike to be associated with bad products, bad services, bad corporate image. So they will try to be as transparent as possible, to be accountable to their products and practices. Transparency is good protection vs negative image/attacks.

Session 2 Panel speakers: H.E. Franz Jessen of EU, Dr. Lee Taekyu of KERI, and Atty. Arpee Santiago of Ateneo Human rights Center.

Govt and countries don’t trade, individuals and businesses do. Govt negotiating trade treaties leading to anti-trade backlash.

Free trade is voluntary, so win win. Govt negotiations may liberalise trade, but legitimises govt in trade n economy, corruption.

Environment, labour or human rights standards in national trade treaties, focus on outcomes, give advantage to large, richer cos!

Society / govt benefit most if they adopt unilateral free trade. All politics is local, a local decision will minimise backlash.

Govt negotiating trade, inevitably adopt export is good, import is bad outlook. Free trade is beneficial when govt has no role.

Access to internet can’t be a “Right”. Political rights are negative rights. Any +ive right paid for by others can’t be a RIGHT.

TPP may be good agreement, but has lost legitimacy because govts. no longer carry credibility among large sections of people. –– Barun Mitra

As usual, I agree with Barun’s ideas and observations: unilateral trade liberalization; countries and governments do not trade with each other, people do; so governments, national and multilateral, should step back from trade negotiations as much as possible. Let companies and people organizations negotiate with their suppliers and consumers abroad and keep prices low via low or zero tariff, minimal non-tariff barriers

Program of Conference 2016 in Manila

The Economic Freedom Network (EFN) Asia conference 2016 will start in two days, November 22-23, 2016 at Dusit Thani Hotel, Makati. It is organised by EFN Asia and Friedrich Naumann Foundation for Freedom (FNF), with support from four organizations: the Philippine Economic Society (PES), EU Delegation to the Philippines, Ateneo Human Rights Center, and Bloomberg TV Philippines.

The program is here, http://efnasia.org/wp-content/uploads/2015/10/EFN-Asia-Conf-2016-Full-program-as-of-17.11.pdf. Below, I just copy-pasted the program minus the time and some space.

MC for Day 1 will be Minnie Salao, Program Manager, FNF – Philippines, and Pett Jarupaiboon, Regional Program Manager (Economic Freedom and Human Rights), FNF Southeast and East Asia (based in Bangkok).

Good line up of speakers from many countries on Day 1.

I think President Duterte’s admin might raise their eyebrows on the subject of “human rights”. But the conference will talk less, if ever, of murders and large deaths in the on-going “drugs war” of the government, more on the conduct of business in the age of expanding trade and business globalization.

Day 2 of EFN conferences are always devoted to the launching and discussion of the annual EFW reports by Fraser Institute, based in Vancouver, Canada. Fraser is almost always represented by Fred McMahon for several years now.

Session 9 will be a more political discourse of human rights but not necessarily mentioning the Philippines. This is because the three speakers — Tom (US), Razeen (Sri Lanka) and Barun (India) — are long-time fighters of individual freedom, dating back to 3 decades ago or more.

Economic freedom, not economic central planning. Rule of law, not rule of men and dictators. Looking to another exciting conference next week.

Economic freedom and human rights

* This is my article in BusinessWorld last October 18, 2016.

Economic freedom is the ability and privilege of people to engage in various social and economic activities without unnecessary restrictions and prohibitions. Such freedom is guided by voluntary exchange, open markets, personal choice and accountability, and clearly defined private property rights.

People are economically free if they can choose to buy or not buy certain goods and services from various sellers, when they are not forced and coerced to buy something expensive and/or poor quality. Freedom is not absolute though and free people have no freedom to harm other people nor destroy, burn or steal their private properties.

Human rights include the right to life, right to private property, and right to liberty and security of person. Thus, even a person who has committed a wrong act should be given due process to defend him/herself from false or exaggerated accusations. Murders of individuals based on flimsy or unsubstantiated accusations like what is happening in a number of instances in the on-going war on drugs are deprivations of those people’s human rights.

Combining these two concepts is very important for people to live with freedom and dignity.

And these two concepts will be tackled in a big international conference by the Economic Freedom Network (EFN) Asia on the theme, “Economic freedom and human rights in business” this coming Nov. 22-23 at Dusit Thani Manila Hotel, Makati City. The conference is jointly organized by EFN Asia Economic Freedom Network Asia (EFN Asia) and the Friedrich Naumann Foundation for Freedom (FNF), supported by four local organizations, the Philippine Commission on Human Rights (CHR), Philippine Economic Society (PES), Ateneo Human Rights Center (AHRC), and Bloomberg TV Philippines.

Among the key speakers and major resource persons in this event will be Siegfried Herzog, head of Regional Office, FNF South East and East Asia; Ms. Rosemarie Edillon, president of PES; Markus Loening, former German Federal Government Commissioner for Human Rights Policy and Humanitarian Aid, and Vice-President Leni Robredo.

Other speakers will be Wan Saiful Wan Jan, CEO of the Institute for Democracy and Economic Affairs (IDEAS), Malaysia; Chito Gascon, chairperson of CHR; Franz Jessen, ambassador and head of Delegation of the European Union to the Philippines; Nicholas Sallnow-Smith, chairman of the Lion Rock Institute, Hong Kong; and Peter Perfecto, executive director of the Makati Business Club (MBC).

So, how economically free are the people of the Philippines and big nations of the ASEAN? How free or unfree are they from heavy regulations that tend to restrict entry into markets and interfere with the freedom to engage in voluntary exchange?

The Economic Freedom of the World (EFW) 2016 report give scores to countries (0 most unfree, 10 most free) based on five criteria and areas: (1) Size of government, (2) Legal system and property rights, (3) Sound money, (4) Freedom to trade internationally, and (5) Regulations. Then they are ranked from the most free to the least free economies.

For this short paper, only the performance in Area 5 will be tackled and in particular, sub-areas on labor regulations and business regulations.

The Philippines has a modest score in both labor and business regulations, meaning not yet choked by those multiple bureaucracies and permits. In particular, the country has a good score in labor hiring regulations and enforcement of the minimum wage, but it has a low score in hiring and firing of employees.

From some existing policy debates in the Philippines today, we can apply the principles of economic freedom and human rights on these issues.

(1) On labor contracting including endo, being hired for short-term labor contracting is a privilege, a human right for new job entrants and the unskilled. It is much better than being rejected and not hired by employers because of the high cost of hiring new additional workers and the threat of government harassment for firing the un- or less-experienced, less skilled people.

(2) On a nationwide minimum wage and abolition of regional wage disparities, this one-size-fits-all policy will make hiring people in the provinces become more expensive, and, as a result, there will be fewer hiring of lesser-skilled, lesser-experienced people. There are now more machines and robots available that can slowly replace more laborers.

(3) On entrepreneurship, it is a privilege and human right for the more hard-working, more ambitious people and they should not be deprived or discouraged to try that route because of heavy government regulations, bureaucratism, and taxation.

Increased market dynamism and fewer government regulations and taxation are the keys to ensuring economic freedom and protection of human rights.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a SEANET Fellow. Both organizations are members of EFN Asia.

EFN’s panel on TPP at Jeju Forum 2016

* This is my article in BusinessWorld last June 13, 2016.

Free trade means free individuals and a free society.

People who cannot find certain goods and services at specific quality from local producers given their limited personal or household budget may be able to find those from foreign producers. And people who cannot sell their products or services to local buyers may find those buyers abroad.

And this highlights the beauty of free trade: No trade will occur unless both parties, the buyer and seller, will benefit. There are losers and gainers in free trade of course, the same way that there are losers and gainers in no trade (autarky) or restricted trade. Overall, there are “net gains” in free trade where the advantages outnumber the disadvantages.

Global free trade is supposed to be facilitated by the World Trade Organization (WTO) when it was created in 1995. But 21 years later, this is far from happening.

Regional trade agreements (RTAs) and even trans-continental agreements were invented such as the ASEAN Free Trade Area (AFTA), Regional Comprehensive Economic Partnership (RCEP), and the Trans-Pacific Partnership (TPP).

This topic was discussed during the recently concluded big annual international conference, “Jeju Forum for Peace and Prosperity 2016,” held in Jeju, South Korea. The forum also had a panel that had the theme, “Trans-Pacific Partnership: an Assessment of its Political Economy” sponsored by the Friedrich Naumann Foundation for Freedom (FNF) and the Economic Freedom Network Asia (EFN Asia) last May 26, 2016.

The discussion moderator was Dr. John Delury, Associate Professor at the Graduate School of International Studies, Yonsei University, Seoul, South Korea. The discussants were Dr. Sethaput Suthiwart-Narueput, Executive Chairman of the Thailand Future Foundation (TFF), Kwon Tae-shin, President of the Korea Economic Research Institute (KERI) in Seoul, and Dr. Keisuke Iida, Professor at the University of Tokyo Graduate Schools for Law and Politics, Japan. The opening remarks was given by Dr. Lars-Andre Richter, Resident Representative of FNF Korea Office.

Panel Rapporteur was Pett Jarupaiboon, who is also the also the Program Manager of EFN Asia, based in Bangkok, Thailand. Pett shared his notes with me.

The three discussants are all liberal economists and are pro-free trade, pro-WTO, but they disagree and debate on the role of the TPP.

In particular, Mr. Kwon and Dr. Iida were critical of the WTO because of the lack of progress in global free trade. Dr. Sethaput argued that RTAs like TPP would undermine the progress of the WTO.

Here are the main arguments of the discussants.

(1) Mr. Kwon, KERI, South Korea. TPP members will enjoy an increase in exports and income from an enlarged market size, and they will also enjoy more consumer welfare due to a decrease in import prices and intensive competition. According to a recent study by the Peterson Institute for International Economics, if TPP takes effect in 2017, the GDP of TPP member countries is likely to increase by 0.5%-8.1% in 2030, compared to the GDP forecast in an event of non-adoption of TPP.

(2) Dr. Iida, Univ. of Tokyo, Japan. TPP has a rule-making function, and these rules as provided in international relations as well as who wrote them are important issues. For the US, joining TPP is part of a larger strategy of “pivoting” to Asia or rebalancing to Asia. The US was preoccupied with the wars in Afghanistan and Iraq and was not paying enough attention to Asia. Therefore, TPP was part of the toolkit to achieve this new policy for the Obama Administration. For Japan, which has to rely on the US for security, TPP meant mending the fences with the US following a series of recent frictions including the planned relocation of one of the most important marine bases in Okinawa to outside Okinawa.

He added that TPP is seen to benefit Japan, projected at 2.6% of GDP (accordingly to the Cabinet Office), a significant number considering that its potential growth rate minus TPP membership is mere 0.5%.

(3) Dr. Sethaput, TFF, Thailand. A multilateral system with non-preferential treatment covering many countries like the WTO is better than mega-regional trade regimes like TPP and RCEP. Why?

(a) TPP is subject to the usual problems of trade diversion: increased trade among members, lesser trade with non-members.

(b) TPP is not just about trade, it also includes other issues like investor and intellectual property protection, labor and environmental standards, etc.

(c) The investor-state dispute settlement (ISDS) mechanism provides international arbitration that benefits US corporates. The US Trade Representative notes on its Web site that “the United States has never lost an ISDS case.”

(d) RCEP is a better alternative, has less non-trade baggage, uses the best elements of the multilateral system, like WTO dispute settlement, TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights).

(e) Ultimate goal should be the Free Trade Area of the Asia-Pacific, which includes all the existing members of APEC including China and Russia. This can be achieved through either expanding the TPP or merging TPP and RCEP.

Personally, I believe that the best trade policy is unilateral trade liberalization. Be friends to all countries and economies who can bring in the best products and services at best qualities and at the best or most competitive prices into our shores and shops. This will bring down the cost for all local manufacturers in need of cheaper capital goods, cheaper raw materials, and intermediate products, which will result in cheaper production processes. Local consumers will also benefit for obvious reasons. And those countries will likely return the favor with zero or very low tariff for Philippine exports too.

Since this is far from happening, the second best policy is multilateral and global free trade. This is not happening too. So the third best policy is joining mega-RTAs like the TPP and RCEP. The worst policy of course is autarky or no trade, or even very restricted trade.

The Philippines and all ASEAN members are already RCEP members. The Philippines should proceed applying for TPP membership. The dreaded provision ISDS is actually important and useful. It simply protects foreign investors who come to other TPP member-countries based on TPP rules, when other member-countries will suddenly change the rules midway. The ISDS in effect will help prevent members from arbitrarily changing rules on trade, investments, IPR, competition and other policies.

Bienvenido S. Oplas, Jr. is a Fellow of SEANET, President of Minimal Government Thinkers, which is a member of EFN Asia.
minimalgovernment@gmail.com

Nick Smith as new Chairman of Lion Rock Institute

The Lion Rock Institute (LRI), Hong Kong’s first and only independent free market think tank, has a new Chairman, Mr. Nick Sallnow-Smith. For 10 years, 2004-2014, LRI Chairman was Bill Stacey. Then in 2015, he changed job I think and he needed more time there, so LRI Exec. Dir. Peter Wong acted as interim Chairman in 2015 until March 2016.

Below is Nick’s letter as posted in the LRI website.
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1 April 2016

A Message From Our New Chairman

Dear Lionrockers,

Despite the date, this is not an April fool’s message! Rather it is my means of expressing my pleasure today in saying a formal hello to all involved in the Institute.  I had the honour (with a ‘u’  for all you North Americans!)  of being asked, in our own “small circle” election, to take over today from Peter Wong as the Chairman of LRI.

It is a role I am happy to take up. The “Lion Rock spirit” in Hong Kong has been one of the key factors attracting me to stay in this city for the rest of my life. But it is a spirit which is at risk of damaging erosion.  For all of its modern history, our city has been an international role model for free enterprise and open markets. Hong Kong’s success has demonstrated to the world the value that these freedoms create for the whole community. That they could be questioned here of all places is astonishing, and is a challenge which we should not shirk.

We have a duty to speak up for the spirit of individual freedom and accountability that the Lion rock represents, so that new generations of Hong Kongers understand what made this city such a success, and realise that its loss could irreparably damage it.

For over 150 years politics were effectively “outsourced” to London. Free markets here were an economic issue. Today, they are also critical for personal freedom. The two cannot be separated. Without freedom to exchange, there can be no genuine personal freedom, and without the personal freedom to benefit from it, free trade means nothing.

I look forward to joining you in our own “free enterprise” collaboration at LRI aimed at standing up for these freedoms and explaining their fundamental value. This stand is increasingly important, as we face a growing global wave of collectivist fervour, which urges the denial of individual freedoms because they prevent those who would “socially engineer” our lives from doing so.

I hope to meet more of you over the coming months to share ideas on how we can be more effective in this mission.

Best wishes,

Nick Sallnow-Smith
Chairman
The Lion Rock Institute
————

I have met Nick 3x in HK, during the LRI’s Reading Club Salon 2012, 2013 and 2014. I attended those 3 events of small-group reading-discussion sessions, courtesy of LRI travel scholarship, along with Barun Mitra, Feng Xingyuan and Mao Shoulong. Our group photos on those 3 events in 2012, 2013 and 2014, respectively.

In the last photo, Nick is 2nd from left standing, Peter Wong is 4th from right standing, and Bill is in the center, seated.

Nick is British, been living and doing business in HK for decades. Soft-spoken guy, I can’t imagine how he gets angry because he seems to be smiling often.

LRI is a great partner of EFN Asia. It has co-sponsored EFN Conferences in 2004, 2012 and 2014. Congrats LRI for having Nick on the board.

Conference 2014 in Hong Kong, part 5

Continuation of notes made by Karthik Chandra during Conference 2014.
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Day 2: November 7, 2014
Session 7: CALD – EFN Asia Joint Session
MC: Andrew Work

Jules Maaten
Head of FNF Philippines and former Member of European Union Parliament

• Introduced the Council of Asian Liberals and Democrats (CALD, politicians) and EFN (network of think tanks and liberal activists/individuals)

Dr. Chee Soon Juan
Secretary General, Singapore Democratic Party & Former Chairperson, CALD

• The state of democracy in Singapore (SG) and HK is of great interest to the entire world itself. SG and HK both have very high inequalities. SG reportedly has the highest number of per capita millionaires; at the same time nearly 5% of the population draws less than US$5,000 per capita.

• SG has a broken pension savings scheme and an entire generation is at a threat of no security/income. According to the ILO, SG’ workers work the highest number of hours in Asia; are the most stressed out in Asia.

• Still, no protests and opposition in SG. The only reason why SG does not witness protests (such as those currently taking place in the HK) is that SG crackdowns heavily on gatherings and political opposition.

• There is a need to understand the difference between extractive societies (where a tiny minority extracts the resources) and inclusive societies (creative destruction is inherent to inclusive capitalist societies). Despite prosperity and high wealth SG’s economy does not see innovation: nothing like the SG version of the Apple or Google. SG depends heavily on immigrants amd the finance sector – no atmosphere and culture of innovation, democracy, creative destruction and etc. Staid, one party rule is mostly to blame – no mention of political freedoms – till recently human rights itself was a taboo word in SG.

• SG signed a free trade agreement in the USA. This has improved trade and wealth overall, but apparently has not increased freedom, prosperity and health for its poorest of the poor and poor workers. Interests of SG corporations are visibly protected – but the interests and concerns of the workers are not protected.

• SG’s FTA with EU: EU and USA are seen as exploiting the workers of SG through the FTA. Liberals should have the foresight, courage, compassion and commitment to fight for the freedoms and rights of the workers. Because, without protecting the rights of the workers, there is no true liberty and freedom.

• HK and SG both face unique opportunities in the form of the current challenges. Liberals and Democrats have to deeply introspect and decide on the role they should play.

Bill Stacey
Chairman, Lion Rock Institute, HK

• Gordon Tullock (who passed away only last week) is the father of public choice theory which is about the importance of decentralization of power, the need for constitutional checks on power, etc.

• HK has achieved a lot in terms of freedoms for the people and there is a need to cherish, preserve and promote these freedoms.

Hon. Markus Loning
Fmr Federal Govt. Commissioner for Human Rights Policy and Humanitarian Aid, Germany
Former MP, Free Democratic Party (FDP)

• There is a need to inject the concept/underlying philosophy of human rights in the discourse on economic growth and progress.

• We all are supporters of growth; but, we should go beyond the narrow definition of growth as in terms of economic incomes and wealth. The definition of growth should also include the human rights and humanitarian aspects of growth.

• Typically, the debate about inequality (esp. in Germany and the rest of Europe) is centered on the approach to bring everybody to the same mean/level. Usually such discussions are dominated by socialists and social democrats. Liberals are generally seen as supporters of inequality (because that is the driver of capitalism, market forces, etc.)

• Differences between people will always be there and there is nothing wrong with that – but we liberals have to strive for removing inequality esp. in opportunities to grow and prosper (by improving access to quality education, employment, social security, etc.). In that sense, we liberals have to be concerned about elimination of inequality – of opportunities.

• Strengthening human rights and political freedoms should be seen as integral to reducing/removing such inequalities.

Olaf Kellerhoff

Head of Asia & Human Rights Department, FNF Head Office, Germany

• The search for a remedy to inequalities leads to a tendency to look too far into the past…where we find several models that have failed and proven to be wrong. But let us not be fearful of past failures and be too bound by them. Let us boldly go forward and am confident that this conference would certainly help chart new courses.

Hon. Emily Lau, MP

Legislative Councillor, Hong Kong

Chairperson, Democratic Party of Hong Kong

• Described the precursors to the HK’s Occupy Square/Umbrella movement, the initial stages, her role, and the key events on how they unfolded. How the police used force and arrests to control the key opposition political leaders and legislators.

• All these wonderful pro-democracy events are taking place only because the citizens esp. the youth and opposition leaders of HK are demanding greater freedoms – which were promised to them by China.

Conference 2014 in Hong Kong, part 4

Continuation of notes made by Karthik Chandra during Conference 2014. The full 25-pages notes are posted in http://efnasia.org/wp-content/uploads/2015/10/EFN-Asia-2014-Conference-Report.pdf
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Day 2: November 7, 2014

Session 5: ‘The most radical form of egalitarianism is equality before the law’
Dr. Tom Palmer
Executive Vice-President for International Programmes
Atlas Economic Research Foundation, USA

• Introduction about the Occupy Wall Street – background and the demands behind this movement – started by a group of disgruntled students mostly from privileged backgrounds and having incoherent demands and philosophy. In particular, their demands were based on the concept of ‘99% and the 1%’, which proved to be a very popular meme and this entire Occupy Wall Street movement quickly caught popular imagination.

• Focus on the meme ‘99% vs. 1%’ – originally started by the students who were essentially anti-globalization. The irony of it is that it quickly became popular across the globe as the rallying cry of the Occupy Wall Street.

• The global inequality has consistently reduced over the past 20 years and is still falling. But, within countries, the inequality is increasing/at elevated levels.

• Impact of immigration on inequality within countries should be carefully understood and decoded: for instance, the US allows lot of immigrants (from poor Latin American countries and especially those with poor education and hailing from very poor economic backgrounds) and therefore the income inequality within USA is much higher (i.e. Gini coefficient is much higher for USA). In contrast, the European countries (eg. France, Germany, etc.) have much lower immigrations (due to comparatively more restrictive immigration policies vis-à-vis the USA) and also have lower inequality i.e. lower Gini coefficients. The lesson from this is that we can have (a lower equilibrium) equality by making others lives worse.

• But, the current debate on inequality (Eg: Thomas Piketty’s Capital) never focuses on global inequality but mostly on inequality within countries. Tom Palmer pointed out the conceptual faults and defects in his book’s thesis.

• Made a strong case of why people like Piketty are less egalitarian than someone like himself who is a ‘hardcore capitalist’. In essence, the question is why does inequality in possessions still amount to more egalitarianism?

• The reason he says is that those who advocate equality usually are advocates of unequal political power. “egalitarian societies” (socialist/communist) survive on unequal political power (eg: communist Soviet Union’s ‘blat system’ or communist China ’guanxi’ system) : putative equal allocation of resources in such systems is not through free market pricing but through exercise of unequal political power. Paradoxically, this results in final unequal allocation of resources and all consequential harmful outcomes. This is true of all totalitarian systems whether they are rightwing or leftwing.

• Usually, the state’s interventionist policies in the name of egalitarianism (Eg: subsidies to special interest groups) serve to transfer wealth from the unorganized majority to the organized minority. This is nothing but predatory and rent-seeking behavior by the organized minority. That is why capturing political power assumes so much importance, especially in heterogeneous societies; the powerful few control the levers of redistribution to favored groups.

• On the other hand, and paradoxically, the so called unequal/capitalist societies actually give a greater opportunity to achieve equality/egalitarianism in outcomes by allowing a freer, more open allocation of resources based on market prices.

• At the heart of creating a more just and egalitarian society is the concept of equality before the law – where we have ‘rule of law’ and not ‘rule of men’. Only such a system would allow the less privileged to get a chance to move ahead in life.

• Therefore, aspirational claims to equality would be realized only with market-based provisioning of equality of opportunities. Eg: The rise of Dalit entrepreneurs in India. Prior to 1991, they had notional, paper based equality rooted in Indian Constitution and the law. But only after free markets expanded are they having a real shot at prosperity.

• Equality of opportunity, equality to access, equality to power, equality before law…this is the real equality that we should aspire for and not mere notional equality that attempts not just redistribution/reallocation of resources: ostensibly, from rich to the poor, but actually by tearing down the rich – and not lifting the poor.

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Session 6: Special Session
‘The ASEAN Economic Community (AEC): Opportunities and Challenges for SMEs’
Organized by SEANET (Southeast Asia Network for Development)

‘Why SEANET is needed?’
MC: Wan Saiful Wan Jan

• The AEC is coming up in 2015. But, there are growing calls for protectionism and also not much demand for pro-market policies and concerted effort by forces. Most pro-trade  organizations are focused on local and national issues. But anti trade organizations are well organized. SEANET hopes to fill this gap and meet this requirement.

Yam Tunku Zain Al Abidin ibni Tuanku Muhriz
President, IDEAS, Malaysia

• IDEAS organisation is committed to promoting free market policies and pro growth approaches in the ASEAN region.
• Overview of the history and background of the ASEAN group.
• Among these countries, fears among SMEs and labour group exist that big corporations would dominate the AEC region. However, they actually would greatly benefit from greater opening of the markets in various countries. Eg. SMEs would benefit from greater access to institutional finance, greater ease of doing business and accessing larger markets thanks to lesser regulations and hurdles and better property rights.

Dr. Kriengsak Chaeronwongsak
President, Institute of Future Studies for Development, Thailand,
Senior Fellow, Harvard University

• The benefits of AEC are multiple and spread across various sectors: (1) unified, single, huge market and production base, (2) coherent and integrated external policy.

• The benefits of AEC for entrepreneurs are clear. The most to gain from AEC are the large, established businesses. However, SMEs too would need to be ensured better opportunities; for this, several steps must be taken (none of which are protectionist and anti-markets and therefore lack fidelity to principles of liberalism and free market economics). It is important that the potential benefits to SMEs are articulated effectively.

• In general, among the SMEs, after the AEC is formed, the small and the large enterprises would survive; but it is difficult to foresee how medium enterprises would survive in this new, changed world. Small-scale enterprises can leverage their competitive advantage of mobility, nimbleness and flexibility (i.e. lack of inertia) in this new system and then be better prepared than medium enterprises to face the changed market.

• On the opposite spectrum, large companies would have deeper pockets and greater access to capital. But the medium enterprises are neither fast-and-nimble nor have access to huge capital. Hence the threat to medium enterprises in the new AEC dispensation: they should either scale up or scale down to survive.

• At the same time, there should be a concerted effort to ensure that SMEs and small players do not “lose out” in the new, liberalized market dispensation. They justifiably need hand-holding and capacity building so that they are prepared for the new, upcoming market scenario.

• One key aspect is access to institutional finance by the SMEs: we need to ensure that banks are free from political interference and nepotism/favouritism so that they are not forced to end up with the burden of non-performing loans after lending to undeserving candidates.

Conference 2014 in Hong Kong, part 3

Continuation of notes made by Karthik Chandra during Conference 2014. The full 25-pages notes are posted in http://efnasia.org/wp-content/uploads/2015/10/EFN-Asia-2014-Conference-Report.pdf
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Day 1, November 6, 2014

(Photo, from left: Ken Scho0land, moderator; Andrew Work, Barun Mitra, Thitinan Pongsudhirak)

Case Study of Hong Kong in IPRI
Michael Wong & Andrew Work
Lion Rock Institute (LRI)

• Hong Kong enjoys a special status and unique advantages. HK has legacy property rights regime rooted in the British colonial system and adds to it the economic dynamism from the Chinese.

• HK was a member of the British Commonwealth till 1997 and many HK laws are rooted in British laws. HK copyright law is one of the first in the world. After becoming the SAR under China, HK has a new IPR regime.

• HK has a mini-Constitution, which mandates that HK has to separately protect property rights in HK. This regime means that property rights recognized in HK are not automatically protected in mainland China.

• HK is also a signatory to various (international?) regimes/understandings. A comparison of HK with other countries in the IPRI rankings (and its individual subcomponents’ ranking) shows that HK is favourably ranked against several other countries like Singapore.

• One of the few countries HK is not exporting IP to is mainland China. This is because of the unfavourable IPR regime. Current developments related to new laws, etc. to PR laws – “secondary creations” issue? Issue of property rights protection versus right to freedom of speech. If done well, these IPR regime reforms can help bring in more foreign investments into HK, in the field of intellectual property.

• We also have to take note of the current developments, the “Occupy HK” Movement. This is taking place in the backdrop of certain inherent advantages and opportunities in HK. There are also definite and large threats and risks for HK – if China is not happy with the HK Movement’s demands they might deny easy access to Chinese markets.

China & Property Rights
Prof. Michael Feng, Institute for Public Affairs, China

• The Chinese Property Rights issue:

* There are certain misconceptions about the ‘Chinese Miracle’ especially that it is based on no human rights or poor human rights (for workers/labourers). But this is simply not true: the Chinese growth story includes in itself a major improvement in working conditions for the workers/labourers themselves.

* At the same time we have to take note of the other side of this story. For instance, the former World Bank Vice-President who happens to be from China had said that there is no need for property rights in China. The justification being that ownership is separate from management and good or successful companies now have different owners and managers. But this is a false argument as it does not realize that even in the example given (i.e. about well-run successful companies), the ownership is completely clear and well defined. Hence the benefits to owners too are well defined.

• The current Prime Minister Le Keqiang is an economist and has taken a six-fronted

approach to economics:

* No stimulus (later modified to micro stimulus)

* No bail out, Structural reforms

* Opening up, Development economics

* (…sixth approach??)

• But, there are several challenges and dark clouds on the horizon/in the Chinese sky. The biggest being corruption which is at massive levels, blatant and especially at the top levels. The reason being that the Chinese economy is heavily state-regulated, with scope for huge rent-seeking by bureaucrats.

• We should understand that poverty alleviation through governmental intervention only supplements the poverty alleviation happening through market forces.

• On a different note: to get a better picture of the role of government in the market, we should look not only at the govt. income as a fraction of GDP (i.e. tax/GDP ratio) but the govt. spending to the GDP. Typically, the tax –GDP ratio would be much smaller than the spending-GDP ratio (because the latter would include the social-security, etc.).

Equality before the Law: Right to Property, Political Empowerment  Road to Prosperity
Barun Mitra, Director, Liberty Institute, India

• Given the background and experience of this audience, there is not much to talk about the need for property rights. The real issue is how to achieve them. It is less about ideas and ideals and more about implementation.

• The need for property rights for poor people arises from their inability to capitalize on property rights at low transaction costs.

• Example/Case Study from India: in relation to the forest property rights issue the ‘Right to Forest Produce’ legislation was passed in 2006, the state authorities did not have the resources or the incentives to make this paper right into a reality. Hence there was poor implementation. Liberty Institute intervened at the field level and leveraged technology available (esp. GPS), with the land data being collected by the citizens themselves.

• Liberty Institute trained the citizens to use the hand-held GPS instruments and mark the property boundaries subject to a no-objection from their property neighbours. Then they made a formal application with the governmental authorities for recognition of this property right. Then LI issues a letter to the land authority as to why the application shall be accepted or not rejected. Usually the state authorities accept such applications resulting in land titles.

• Activist, creative interventions themselves by knowledgeable persons hold the key…not mere academic studies and ideas.

Property Rights & Thailand
Dr. Thitinan Pongsudhirak
Director, Institute of Security and International Studies

• Freedom has different dimensions and aspects.

• Thailand is relatively a freer economy than many comparable countries, but after the latest military coup, its political freedoms have faced curbs. The Thai economic growth & its democracy had increased incomes for large sections of its society. This caused the growth of the middle class, which in turn, has catalyzed greater demand for political freedoms. However after the latest coup, regression is seen in these freedoms.

• The real solution to protect and promote freedoms is therefore to have sound institutions. In such an institutional framework, the rules and regulations, agencies and bureaucracies should function not to serve special/narrow interest groups but the universal principles of freedom and liberty.

• Politics usually is the fountainhead of every other freedom; everything else follows politics, governments and governance. Economic freedoms follow political freedoms. Most of the demands and movements are less about narrow economic rights and more about broader political rights and freedoms.

Q&A with Audience

Andrew Work

• Some key challenges in the area of property rights are:

* Civil Forfeiture in the USA (& Canada?)- law enforcement agencies could directly seize private property and use it directly (e.g. guns seized by police at a home could be used or sold by the police. There is no need to charge the owner with a crime. So, even without filing a charge sheet, property could be seized and confiscated by the authorities and used while the affected owner has to fight it out in courts for several years. Barun interjected with the comment that this seems to be even worse than eminent domain concept in British common law countries.

* Law enforcement authorities can charge not only people but also ‘things’ or ‘objects’ with offences. (presumably used/to be used : “People vs. 5200 dollars” case)

• Razeen Sally: on HK’s land market & the land cartel problem.

Mr. Work answered: the state owns all the land in HK just as in China (except a small parcel of land owned by the Anglican Church). Therefore, you cannot buy a property but only lease the land (typically, for 99 years as in most contracts). Occasionally, the government auctions land (for lease?) but we don’t see lots of potential buyers coming from across the world because of the post-sale transaction regulatory requirements (resulting in attendant costs; eg: post purchase development fees, mandatory greening regulations, etc.) are often tortuous, opaque and therefore their costs are not fully and accurately known to the buyer at the time of purchase. Hence the final cost would become severely inflated due to these costs.

• HK downtown demonstrations are closely related to the above issue also: HK is currently governed by a mini-Constitution (‘basic law’) negotiated by the Chinese and British governments at the time of transfer from the latter to the former. This is valid for a period of 50 years i.e. from July 2, 1997 to July 1, 2047; what happens after that is unclear: would HK be fully absorbed into the Chinese system? Meaning would Chinese concept of eminent domain and state dominance come into HK? Would all the land leases evaporate or be preserved after this date also? Or would China itself become more democratic and liberal by then? The mini-Constitution/Basic Law essentially preserves the status quo of private property ownership for the present. But nobody knows what would happen when this situation ends. Hence the fear of HK people and property owners about their property rights.

• [General discussion of Mr. Work with Karthik following the session: It seems that we could view the HK protests as having mobilized diverse sections of the HK society who are driven by multiple, group-centric but overlapping concerns:

Students Concerns: want a genuine political democracy – fears of mainland domination- growing economic inequality – lack of opportunities

Poor Concerns: growing economic inequality – lack of opportunities

Middle class/Opinon makers Concerns: greater political freedom- growing assertion of China over the selection of Chief Executive of HK

Property owners/elites Concerns: the uncertainty/confusion over the property rights following expiry of mini-Constitution on July 2, 2047. They understand that unless they get the next system locked in right now (at least before the next elections to the Chief Executive due in 2017), they cannot be guaranteed anything.

Specific professional groups also are supporting these protests: Lawyers (who got upset over the ‘White Paper’ from mainland China that issued a directive to HK judges to support the state rather than the law) and the Media/Journalists who are upset over the reduced political freedoms, etc.

Barun Mitra: Property rights (esp. physical property rights) are at the root of other forms of rights. The Gini Coefficient to measure economic inequality, even though started by liberals and with a good intent, is doing a disservice because it focuses on economic outcomes and not economic opportunities.

Dr. Feng: supported Barun’s points and emphasized Hayek’s book (The Road to Serfdom) which says that economic freedom and rights are at the basis of every other civil rights and freedoms.

Dr. Thitinan Pongsudhirak: The concept of property rights transcends national boundaries; it is not regional or national.

Conference 2014 in Hong Kong, part 2

 

Continuation of notes made by Karthik Chandra during Conference 2014. The full 25-pages notes are posted in http://efnasia.org/wp-content/uploads/2015/10/EFN-Asia-2014-Conference-Report.pdf
———-

Day 1, November 6, 2014
Opening Key Note Address: “Economic Growth and Income Inequality”
Dr. Razeen Sally
The National University of Singapore (NUS)

• As liberals, we always face this rather fundamental issue of why at all should we bother to address the issue of income inequality.

• Such inequality has two facets: inequality of outcomes (a “collectivist approach” of typical socialists, communists, or do-gooders) and the inequality of procedures/treatment (eg. rule of law, equality, etc.). We need to clearly distinguish between the two.

• There is also a need to go back to the basics (abstract approach) of Schumpeterian capitalism:

* Capitalism is always dynamic. Schumpeter said that ‘capitalism is a perennial gale of creative destruction’. Enormous progress takes place due to this creative destruction. This is not just an economic cycle but the story of our civilization itself.

* At the heart of this powerful engine of capitalism is the entrepreneur, who is not necessarily a rational, objective person. Several impulses and incentives guide him. This engine thrives on inequality.

 

• Capitalism and Asia & the Global Financial Crisis (GFC):

* Originally, economic freedom and capitalism was primarily a European idea. Subsequently, it became an Atlantic idea. Later, Asia too has witnessed greater economic freedom and increase in prosperity.

* However, after the GFC, we saw assaults on economic freedoms and increase in restrictions. Capitalism is currently under assault and therefore pessimism is back. GFC saw a shift in policies and approaches: now there is much greater state intervention in both macroeconomic policy (debt, interest rates, deficits, etc.) and microeconomic policies (in the form of governments intervening in the smaller details of markets like car standards, energy, pollution, etc).

* Note: we need to understand the contrasting takes of Schumpeter and Keynes on capitalism.

* More importantly, what unites such macroeconomic and microeconomic anti-capitalist intervention is the ‘social engineering’ mindset among a small group of high-minded, smart people who think that they can intervene in the micro- and macro-economic and the institutions.

* But such interventions are inevitably counterproductive and harmful because the assumption that these individuals are fully knowledgeable is incorrect because 100% of information is never at their fingertips (much of the real information is tacit and non-formal).

* Rarely are the individuals themselves disinterested in the outcomes. Such interventions (even if beneficial) are deeply offensive to the very concept of freedoms and individuals.

• Given the above, the classical liberal take on inequality runs somewhat like this:

* Globalization has improved incomes but also has driven inequality upwards. Yes, there is currently greater income inequality.

* New technologies (3D printing, automated data storage, management and analysis systems, etc.) are destroying jobs – not just the blue collar ones – but also middle class white collar jobs (accountants, analysts, etc.)

* And, what about the solutions to inequality? The classic interventionists (typically, social democrats) talk about greater taxation, etc. to “fix this problem of greater inequality”

• However, we need to look at the issue of inequality from a different perspective:

* Usually, when we talk about inequality, we usually talk about income inequality within a country and not between countries. While economic liberalization has increased inequality within a country (E.g.: China, city states like HK, Singapore, etc.) it has actually reduced global income inequality (see Surjit Bhalla’s article saying that global inequality is at its lowest since 1850) i.e. between countries.

* Increase in consumption, arising from greater liberalization of economies, has depressed incomes in some areas/countries but has greatly reduced overall inequality both within a country and between countries.

* Education (see S. Bhalla’s article/ppt) actually is a great improver of averages.

* However, a major challenge is the lack of big innovation. Yes, innovation is taking place at a big level but in narrow sectors and benefitting a narrower group of people. The IT sector serves as a good example where companies are getting easy money from globalized markets, and are getting great profits, and therefore are not seeing incentives to invest in innovation in other sectors. For instance,

Apple spends more on lawyers than on innovation of new products. At the same time, even though some people say that innovation results in job destruction, in the long run, innovation actually creates new and better jobs.

• In summary, the current state of affairs, post GFC is as follows:

* at a macroeconomic policy level:
Greater state intervention
Redistributive approach (taxes)
Debt/deficit financing with the threat of inflation always hanging over the head
Central banks interfering in fiscal policies

* Similar state of affairs at a micro-economic policy level also.

* But, such interventionist approach is wrong on a more fundamental, constitutional basis and is based on several false assumptions, etc.

• Therefore, the unfinished business and important pending items to be done to liberalize product and factor markets: Making systems inclusive. (See reformulation by Daren Acemoglu and team on inclusive vs. exclusive systems.) In exclusive systems, esp. in Asian countries, the political and economic freedoms are closely intertwined. One cannot happen without other. Even the city states of HK and Singapore are lacking in innovations. This is because their systems are still bureaucrat-dominated.

• Finally, there is good news and bad news:

* Compared to the past century (1914 to 2014), we have a more prosperous world: we are enjoying greater incomes, better health and better lifestyle overall. While today’s interest groups are still a problem they certainly are not as big a problem as interventionists of World War I.

* But in the short run, post GFC, the pendulum has swung in the wrong direction i.e. towards greater state intervention. However, we should have greater liberalism and lesser state interventions in both micro and macroeconomic policies.

(Photo, from left: Parth, Bill, Choi)

Insights from the Keynote Address
Moderator: Bill Stacey, LRI

Dr. Parth Shah
President, Center for Civil Society, India

Five points on the Keynote Address:

• It is important to focus on how money is made vs. how much money is made.

• What matters much is not income inequality itself but the consumption inequality. One way to understand this consumption inequality is to compare the food habits/items of the first family of a country vs. the average family of that country.

• While we do understand the importance of education and healthcare in promoting economic growth, we should not make them out as predetermining factors to economic growth. What really matters is economic freedom.

• For example, the 1991-2001 period in India: the actual governmental spending on education came down (due to the economic reforms; till 1997 – after 1997 it again increased afterwards) but the literacy levels improved by 13% (largest ever increase in literacy; in 1991 it was 50%) – despite reduction in state sponsored education spending.

• We need to understand the differences between the ‘old rich’ vs. ‘new rich’. The old rich were focused on lifestyle, etc. But new rich is a different class of people.

The next fights against inequality have to be for: more free and open markets (eg. sugarcane farmers in India), access to justice, accountability of the political system (contrast the lack of accountability in the political system with the accountability in the private sector).

Dr. Choy Byung-il
Professor, Ewha Women’s University, Korea

• I agree with most of the points made in the Keynote Address. In particular, I liked the big picture. But, I disagree with Razeen’s point that innovation by companies is not taking place and that companies prefer to sit on hordes of cash. We have to understand the factors that influence such decisions by companies.

• In several Asian countries, there is currently a great political sentiment against further opening up of domestic markets esp. against deeper integration of domestic markets. (Market liberalization/ integration is of two types: shallow and deep).

• In 1997, the East Asian financial crises witnessed the US and OECD countries advising countries like

Korea, Malaysia and Taiwan to reduce the public debt, ‘slim down’, not bail out failed companies, etc. But when it came to the GFC in 2008, they themselves are doing exactly the same! An illustrative example is the bank bailouts. This is nothing but protectionism in another way. So there understandably a great hostility to western advice, western advances and western companies in Asian economies.

• Newer innovations either are not creating new jobs or are actively destroying existing jobs (drones vs. personal courier delivery; drivers vs. Google driverless cars to take same extreme example). Hence, there is greater hostility among the public to such innovations.

• Many Asian countries are also witnessing rising life expectancy (i.e. aging societies) coupled with stagnant or regressing real incomes/wealth. So, old persons are equated to poor people.

• (following Moderator’s question/intervention related to the role of education): Koreans are taught that their country has nothing but human capital. Therefore, it is not surprising that Korea has the highest percentage of college graduates among population – 70%. But, Korea has more cram based education.

Fred McMahon’s intervention and points:

• We should not dismiss the issue of inequality as “civil society claptrap”. This is a serious and a real issue. In a liberal sense, equality is equality of opportunity rather than equality of outcomes. But, achieving 100% equality of opportunity may not be achievable. But is certainly desirable.

• But, there is evidence to indicate that income mobility is decreasing i.e. opportunities are decreasing. Eg. USA is now less income mobile than even Europe.

• The state interventionist approach is distorting this further by gaming the system; the central banks’ interventions and monetary policies are helping rich corporations at the expense of genuine entrepreneurs and smaller scale capitalists.

• The issue of elites and nepotism and favouritism becomes even more relevant in this context. Maybe it is time to examine even radical approaches to ensure real competence and ability is given the opportunity for growth/mobility even within corporations… it is interesting to note that the institution of celibacy in the Catholic Church started not for religious purposes but to explicitly prevent nepotism and favouritism.

Conference 2014 in Hong Kong, part 1

The following are minutes and proceedings during the Economic Freedom Network (EFN) Asia Conference 2014, Hong Kong, on the theme, “Liberalism: Promoting Growth, Reducing Inequality”, November 2014. Major sponsors were the Friedrich Naumann Foundation for Freedom (FNF), a liberal political foundation based in Germany, and the Lion Rock Institute (LRI), a free market think tank in Hong  Kong.

These notes were made by Karthik Chandra of the Foundation for Democratic Reforms, INDIA. The 25-pages notes are posted in
http://efnasia.org/wp-content/uploads/2015/10/EFN-Asia-2014-Conference-Report.pdf

I am reposting them by major segments and  installments, plus my brief personal notes on each segment. Here’s the 1^st installment.
———–

Day 1: November 6, 2014
Introduction to the EFN 2014 Conference by MC, Wan Saiful Wan Jan
Chief Executive, Institute for Democracy and Economic Affairs (IDEAS), Malaysia

Welcoming Remarks
Bill Stacey, Chairman, LRI

• Welcome to Hong Kong! Given the recent developments (citizens’ demands and mobilization) in Hong Kong (HK) serving as the backdrop, this certainly is a good and clearly an interesting time for all the participants to assemble in Hong Kong, especially to discuss about inequality, liberty and freedom.

• There is an image of HK in some quarters of the media that capitalism here is of the crony variety and that there is no true economic freedom or liberty for its citizens. But the reality is that for a city of 7 million population, there is a lot of economic freedom and enterprise.

• At the heart of the current political developments seems to be a vigorous debate about two freedoms – economic and political. But, there is no conflict between the two. Those institutions that ensure economic freedoms in the form of greater equality, growth, prosperity and overall economic freedom also underpin the political freedoms. A few such institutions are free flow of information and rule of law.

• ‘Liberalism’ as understood in the traditional sense should not be viewed as an end in itself. There is a difference between treating people equally and keeping/ensuring that they remain equal.

Siegfried Herzog
Regional Director, FNF, Southeast and East Asia

• Welcome to Hong Kong EFN Conference. EFN Asia Conference has become a long established tradition, this event being the sixteenth one; this is my first one as a Regional Director. Thanks to the LRI and the Frasier Institute for being our partners. LRI is also celebrating its 10th anniversary; congratulations to them.

• Events such as the EFN 2014 greatly help institutionalize the ideas, research, debates and international experiences help them become a part of the political and academic discourse on economic freedoms.

• This event is being held in the background of the furious debate over political and economic freedoms of HK vis-a-vis China. HK has long served as the global leader of economic freedom. Now, the debate is about its political freedoms; about ensuring the rule of law and independence from political interference in HK.

• Currently, there is also a great debate on economic inequality. The idea of ‘economic equality’ retains a lot of appeal despite the fact that communism and socialism have repeatedly failed to ensure the same, based on our experiences in several countries.

• At the same time, this debate also touches upon the issue of social mobility and how crony capitalists and well-connected gamers have managed to subvert economic institutions and thereby gain undue benefits.

• This conference therefore is a valuable contribution towards helping settle the above debate because it provides a platform for sharing of knowledge and bringing new ideas into an area that has been traditionally dominated by left-leaning thinkers or misguided activists.
  ———

Me: Right, the (classical) liberal definition of equality is equality before the law, equal  application of the law to unequal people, equality in access to opportunities with no exception or people giving exemptions. And inequality of outcome, of income and assets ownership, is the natural result because people have different attitudes in life.