Posts Tagged ‘political economy’


Overview of IPE II

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Lucio Tan

It could be said that the merger of Lucio Tan’s Fortune Tobacco and the Philip Morris Philippine subsidiary (the Philip Morris Fortune Tobacco Corp., Inc) in 2010  is the equal of a marriage between Jollibee and McDonalds.  The result is control of the market. The Fortune-Philip Morris merger reportedly controls over 90% of the market.

While Fortune and Philip Morris consumated their marriage, a union between Jolibee and McDo was not, to my knowledge, even thought of by both parties.

The Senate is discussing several versions of the sin tax bill after the House of Representatives passed its version.

It is clear that the bill is not only about taxes; it is also about fair market competition.

British American Tobacco (BAT), the outsider protesting the Lucio Tan monopoly in the cigarette inIn other markets outside the Philippines, is supporting the sin tax bill for obvious reasons.  And that is, to find a place in a market dominated by another firm because of, among others, tax advantages.   In a sense, BAT is batting (pun intended) for a more competitive market in the Philippines.

However, BAT is not necessary a consistent champion for fair market competition.  In some markets outside the Philippines, BAT is dominant.  In Papua New Guinea, BAT is the only cigarette maker and distributor.  This drives home the truth that all firms with substantial investments will want to monopolize markets to ensure better profitability and lesser risks.  This insight is not the original contribution of a neoclassical economist.  The much-maligned Karl Marx made it first; more precisely, he observed that competition among capitalists and the workings of the modern financial system lead to market concentration and centralization.

This topic will be the subject of my next blog posts together with the items below:

Newly named Supreme Court Chief Justice Maria Lourdes Sereno beams before her oath-taking rites August 25, 2012

1. Ante the Supreme Court, Prof. Meilu Sereno, my UP Hardin ng Rosas neighbor and Christmas potlatch dinners

2. A logical analysis, based on open sources, of the political struggle over Secretary Jesse Robredo’s confirmation

3. Continuation of posts (about 4 more) on the property rights of the poor in the Philippines

4. Good politics, bad politics: Can we unite for the national interest while respecting our differences?

Dear reader, you are free to suggest topics that I should write on. Thanks and best wishes.