Monthly Archives: July 2013

Commentary

The economics of poverty

 

By 

1:04 am | Saturday, July 20th, 2013

 3 30 9

While the cost of gasoline and other oil products is rising because of the depreciation of the peso, Socioeconomic Planning Secretary Arsenio Balicasan was reported as saying: “I wouldn’t want to see the peso appreciate to 37 or 38 [to the dollar], or simply the 30s territory. That would hurt our industries.” (Inquirer, 7/9/13)

Not being an economist, I am always puzzled by this statement by finance officials and establishment economists that a weak peso is good for our economy. Our currency has been depreciating since 1962, when then President Diosdado Macapagal devalued it by 100 percent from the exchange rate of P2 to $1 to P4 to $1. Later placed on a floating rate by President Ferdinand Marcos’ finance secretary Cesar Virata, the peso has been steadily losing value until it is now P43 to $1.

If our economists are right, then our economy should now be many times stronger than it was in 1962, instead of being the laggard of Asia. In the 1950s, when our peso was fixed at P2 to $1—and our government under Presidents Ramon Magsaysay and Carlos Garcia adopted the policy of import substitution through import and exchange controls—the Philippines was considered next to Japan in economic development in Asia.

David G. Timberman, a specialist in Southeast Asia with degrees from Tufts and Columbia Universities, wrote that from 1949 to 1957 (at P2:$1), “the industrial sector in the Philippines grew more than 8 percent a year,” while “per capita income also grew at an average of 3.6 percent a year during the 1950s, a rate that rivaled that of most other countries in the region.” (“A Changeless Land,” 1991, published by the Singapore Institute of Southeast Asian Studies)

Renato and Letizia Constantino, in their book “The Continuing Past,” also wrote: “More than 5,000 new industrial enterprises were established during the first four years of controls [from 1949]. By 1960, the economy could boast of a modest industrial base with its food, wood, pharmaceutical, cement, flour, textile, paint, pulp, paper, glass, chemical, fertilizer, telecommunication, appliances, electronics, intermediate steel, shipbuilding, motor vehicle, machine parts, engineering and other industries.”

Because of the increase in industrial jobs during this period of import controls and fixed exchange rate of P2:$1, wages rose above the 100 index. But from 1962 to 1986—the period of continued devaluation and floating rate—the wages of skilled workers fell from 100 to 27.8 index points, and those of agricultural workers, from 100 to 70.7.

Indeed, according to the OECD study conducted by Massachusetts University economics professor James K. Boyce (“The Political Economy of Growth and Impoverishment in the Marcos Era”), “Both agricultural and urban real wages fell, but the latter fell even more sharply …” Thus, the living conditions of the working class, especially industrial workers, plunged precipitously under peso devaluation and market-directed floating currency rates.

Stressing further the benefits of import and exchange controls, Renato and Letizia Constantino stated: “The transformation of the economy was reflected in the higher percentage share of manufacturing in the total national income. From a mere 3 percent in 1949 (the year economic controls were imposed), it rose to more than 14 percent in 1956, and almost 18 percent in 1960.

“More significant were the figures in the participation of domestic capital in the economy. In 1959, Filipino capital constituted only 55 percent of the investments in new enterprises in the country. By 1961, this had risen to 88 percent. And from 1949 to 1961, Filipinos invested a total of P1,400 million in new enterprises; the Chinese, P425 million; and the Americans, only P31 million.” No wonder the foreign business interests were against import and exchange controls.

Thus, it can be seen that it was during the era of a fixed exchange rate, when our currency was strongest, that our country experienced the highest economic growth rate in Asia, especially in the industrial sector. This factual experience is directly contrary to what our economists in the government, academic and private sectors have been theorizing ad nauseam.

“The devaluation of 1962 struck hardest at the growing Filipino industries,” the Constantinos asserted. “Debts initially contracted at P2 to $1 for the importation of capital goods and machinery now had to be paid at P3.90 to $1.”  Since we use dollars for our imports and debt payments, our government had to borrow heavily. Foreign debt soared from $600 million at the start of Marcos’ administration in 1965 to $26 billion by the time he left in 1986. It was $60.3 billion as of June 2013, comprising nearly 25 percent or one-fourth of our total production of goods and services (GDP).

According to our distinguished economists, the policy of cheap currency will make our experts more “competitive,” thus making us sell more abroad, and generating more income for our country.

But according to the National Statistical Coordinating Board, the Philippines had a foreign trade deficit for 20 of the past 22 years. We are selling less and buying more in the world market. We enjoyed a surplus in our foreign trade (value of exports over imports) in only two years—1999 and 2000.

The highest trade deficit was $12 billion in 2011 (up from $3.4 billion in 2010), equivalent to the total amount of remittances we received from our sacrificing, hard-pressed overseas Filipino workers. We have to pay for this deficit from our income from internal taxes and external credits, including OFW earnings, foreign grants and aids, and foreign borrowings.

We also pay for these foreign loans from our taxes as our law mandates that payment for the public debt shall be automatic and shall have priority over local needs. Thus the onerous value-added tax, and—despite the promise of President Aquino not to raise taxes—additional imposts on cigarettes and liquor, among the few comforts of the hard-working poor.

Every time our peso depreciates, the amount of pesos required to pay our foreign debt increases proportionately. Hence our widening annual budget deficit that prevents our government from spending on infrastructures, education and health, which are the primary needs of our people.  Bayad muna utang bago kain(Pay debt first before eating).

So why do our so-called economic technocrats in the government, business and the academe continue preaching a doctrine that is so obviously ruinous to national wellbeing?  Is this not the economics of poverty?

Manuel F. Almario (mfalmario@yahoo.com) is a veteran journalist, semiretired, who is also spokesperson of the Movement for Truth in History (Rizal’s MOTH).

 

Follow Us

Read more: http://opinion.inquirer.net/56919/the-economics-of-poverty#ixzz2ZZsFNYh0 
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook

Advertisements

Leave a comment

July 20, 2013 · 9:50 am

PORK BARREL, PHILIPPINE STYLE

Commentary

Politics as Business

By MANUEL F. ALMARIO
Philippine Daily Inquirer

12:55 am | Monday, February 11th, 2013

 0 5 3

One of the biggest drawbacks to our economic development is the way our Congress allocates and distributes the “pork barrel,” now known as the Priority Development Assistance Fund (PDAF).

 

Contrary to the general perception, our pork barrel system is unique in the world. It amounts to an “entitlement” to all members of Congress for them to determine individually how the national funds are to be spent in their particular districts or constituencies.

 

The pork barrel is widely supposed to have originated in the US Congress. But the way it is practiced there is different from ours. In the US Congress, what passes for the pork barrel is called the “earmark.” It is an item for public works or special projects in the budget which is approved by the entire Congress. Both the House and the Senate have to approve the “earmark.” It eventually goes to the president for his approval as a part of the National Appropriations Act. Most other parliaments in the world do the same.

 

Thus, if a US representative or senator wishes the government to fund a special project in his district or state from the federal budget, he lobbies the entire House or the entire Senate for the inclusion of the project in the federal budget. He must convince his colleagues that such a project is good for the country and not just for his locality. After all, the money comes from the national revenue contributed by all taxpayers, and not just by the representative’s or senator’s constituencies.

 

Under the PDAF, each senator is allocated a definite sum of P200 million and each representative P70 million. While it is true that formally their participation is only to determine the project on which the funds shall be spent, and the implementation and spending shall be done by the Department of Public Works and Highways or a government agency, in practice the individual representative or senator designates the contractor for the project. Here is the opportunity for kickback.

But because of the relatively small sums involved for each district or for each senator, the PDAF is usually spent for minor or insignificant projects like barangay halls, waiting sheds, basketball courts, sports gymnasiums, scholarships for a few, dirt roads and small bridges “leading to nowhere.” Such projects are usually uneconomical and unproductive. So we often see unused waiting sheds, unkempt barangay halls sometimes used for drinking parties, easily eroded roads, broken bridges, and gyms with no equipment.

 

In totality, the PDAF represents a huge part of the national budget. If concentrated on big infrastructure projects like hydroelectric dams, farm-to-market roads, highways, railways, airports, seaports, power plants, educational facilities and well-equipped modern hospitals, it can contribute more substantially to regional and national development, and create employment on a large scale. What happens, however, is that the national funds are dissipated in small projects, resulting in a massive waste of government money.

 

This egregious practice is further compounded by the Internal Revenue Allocation (or IRA) to provinces, cities and municipalities. The IRA is their share from national funds allocated according to size of population and territory of provinces, cities and municipalities. It also includes their share from excise, mineral and other taxes collected by the national government in their localities. It is estimated that local governments base about 90 percent of their budget on the IRA.

 

Amounting to billions of pesos, the IRA is the pork barrel of the local officials. How it is spent is largely left to the discretion of the governors and city and municipal mayors, with the approval of their different boards. That is how the Ampatuans in Maguindanao became so rich after many terms in power, especially as they were able to intimidate their provincial boards and councils, as well as representatives of the Commission on Audit, to see nothing while they pocketed the funds.

 

The pork barrel, national and local, has attracted local and national economic oligarchs to public positions. Whereas before, the wealthy disdained the idea of running for Congress or for local positions, considering it a waste of their time which would be better used to making money, as they can pull the strings through political contributions, now they themselves enter politics, because politics is now business. There is now a proliferation of business oligarchs in the House of Representatives.

The PDAF is Filipino-style pork barrel in its most naked guise. Each member of Congress, including the President, can dip his/her fingers in the national revenue trough to fill his/her own pockets and those of his/her cronies and political supporters.

 

This was not the case before, as what was practiced was similar to the US “earmark”—until in 1990, under Cory Aquino’s administration, the Eighth Congress adopted the present practice by instituting the Countryside Development Fund.

 

Manuel F. Almario is the spokesperson of the Movement for Truth in History. E-mail: mfalmario@yahoo.com

1 Comment

Filed under Uncategorized

Why PH Industrialization Failed

Yes, certainly there was a start in industrialization in our country.  Rizal wrote about this in his essay, “The [allleged] Indolence of the Filipino people.”  Citing historians – to refute the colonial lie that Filipinos were poor because they were lazy – Rizal described the economy of the pre-Spanish Filipinos before they were colonized by the Spaniards as follows:

“At that time, that [Philippine] sea, where float these islands like a handful emeralds on a crystal sea, sailed in all directions,junks, paraus, balangays, vintas – craft light as shuttles and so large that they can hold 100 rowers on one side (Morga); that sea bore everywhere commerce, industry, and agriculture by the force of oars moving to the tune of war songs, ancestral songs and songs about the prowess of Filipino deities (Colin, book I, Chapter XV). xxx

“All the histories of those first years, in short, abound in long accounts of the industry and agriculture of the people – mines, gold placers, looms, cultivated farms, barter (trade), shipbuilding, poultry and stock-raising, silk and cotton-weaving, distilleries, manufacture of arms, pearl fisheries, the civet industry, horn and leather industry, etc.  All these prove … that [in these Islands] there was life, there was activity, there was movement.”

So when did this movement of commerce and industry stall?  When the Spaniards colonized our country and converted its inhabitants into colonial slaves who worked without compensation and their lands were taken from them and appropriated by the Spanish king and his soldiers, officials and Spanish citizens for 350 years.  Then the Americans supplanted the Spaniards and converted into our country into a source of raw materials, cheap labor, and a monopoly market for their industrial products. Only by overthrowing this colonial legacy can we move on to genuine industrialization, full employment and general prosperity.

 

Leave a comment

Filed under Uncategorized

THE U.S. PIVOT TO PACIFIC

The objective of the US pivot to the Pacific is to threaten China into accepting a subordinate role in world affairs.  The US wants to maintain its world domination despite its declining economic power.  It won’t be able to do so.  All China would do is to avoid war and maintain the peace, until such time as it would be the No. 1 economic power.  When that happens, then the US will have to abandon its obsession to militarily dominate the world.  The US will have to accept China as an equal, and perhaps also accept the equality of all other nations and respect their sovereignty,  not just in principle as enunciated by the United Nations charter but in practice.  

Leave a comment

Filed under Uncategorized

RE SCAM: PORK BARREL, PHILIPPINE-STYLE

 

As I pointed out in a recent commentary in PDI, the pork barrel system, as practiced in the Philippines (Priority Assistance Development Program), is unique in the world.  In the United States, where it supposedly originated, the “pork barrel” is obtained by a member of Congress with the consent of all the members of the Senate or House of Representatives as part of the federal or state budget.  

 

Let’s say a US congressman or senator wants an allocation for a military base in his district or state, he lobbies with the entire chamber to include the allocation in the budget.  The money is appropriated in the budget solely for the project stated therein.  The project is implemented by the government agency identified in the budget.



In the Philippines, the pork barrel or PDAP is automatically allocated for the congressman or senator in a fixed sum in the national budget without determining the project to be funded.  It is the congressman or senator who would himself identify the project.  Thus there is a built-in incentive for collusion, since it is the individual solon who will identify the project and the implementor, giving him the power to receive a “cut” from the allocation.  

 

Marcos initiated the system as a bribe to the legislators because the budget department, upon instruction of the President, may or may not release the allocation, depending on whether or not the particular legislator obeys the President’s whim.  

 

Thus the legislators are converted into paid agents of the President, weakening the independence of the Congress as a second branch of government.  It is a tragedy that President Cory Aquino and all subsequent Presidents continued this system which undermines our form of government which is composed of three co-equal branches – the Congress, the Presidency and the Judiciary.   Perhaps they did so because it strengthens the Presidency at the expense of the Congress and eventually of the Judiciary.



Leave a comment

Filed under Uncategorized

Should We Believe Marcos?

Should We Believe Marcos?.

Leave a comment

Filed under Uncategorized

Should We Believe Marcos?

BELIEVING MARCOS

From the post of Conrad Vicente Novales (by email) , Doy Laurel is said to have made the following statement regarding Marcos’s wealth: “I can attest to that. Weak and already on his deathbed when I visited him in Hawaii on February 3, 1989, Marcos personally asked me to convey to Cory Aquino his offer to give up 90% of his earthly possessions to the Filipino people, through a Foundation which he had set up, but Cory only would allow him to die in his own country and be buried beside his mother. I related this incident in a book Neither Trumpets Nor Drums, published in 1992 right after I ended my term as Vice President of the Philippines.”

The flaw in this narrative of Doy is that it takes Marcos’s declaration “on his deathbed” as prima facie true. I say, the man was incapable of telling the truth. He has been lying to the Filipino people ever since he denied assassinating Nalundasan, up to his alleged guerrilla exploits during the Japanese Occupation, which had been exposed as fake, which was the basis of his 30 medals; to his lying affidavits about his cattle in Bukidnon in claiming for war damage after the war; his claim that he discovered the Yamashita Treasure to justify his illegal wealth; to his justification of martial law, supposedly to suppress rebellion, but which he used to set up a personal and conjugal dictatorship, etc.

In the issue of the Philippine Graphic of June 29, 1992, I wrote an article entitled, “Marcos Gold:Hoax Or Reality”. The story was about the attempt by Marcos in 1988 while on exile in Hawaii to raise money to fund his return to the Philippines, a plot that was taped by two undercover CIA agents whom Marcos tried to enlist to lead the invasion of the Philippines. The tape was played by Rep. Solarz before a US House committee. One of the persons from whom Marcos appealed to lend him money was Enrique Zobel. In an affidavit, Zobel said Marcos asked to borrow $250 million from him, offering his “gold certificates” from various, which he valued at $35 billion, as collateral. In a written statement, distributed to reporters, Zobel said:

“I wondered to myself whether Marcos was still bullshitting me, but given his state of health I was more inclined to believe that he was already at a point where he knew that death was not far away …” Bu after he examined the gold certificates, he told Marcos, “These are fake, Mr. President.” He did not make the loan. In short, Zobel admitted that Marcos, his “good friend”, had always been bullshitting him. Neither did a Saudi Arabian prince whose conversation with Marcos was taped by the two US undercover agents. Marcos, up to his death, talked of a foundation in which he allegedly donated his wealth to the Filipino people. Imelda used it to cajole thousands of gullible Filipino “loyalists” to support her. So where is the foundation deed now? Is the money deposited in an offshore account by a Marcos daughter part of the Marcos money?

To believe Marcos in the face of a lifetime of mendacity is to be extremely naive.

Manny

Leave a comment

July 14, 2013 · 6:44 am