Category: economy

The economy grew—so what?

By Mahar Mangahas

A week ago (8/27/2014), Socioeconomic Planning Secretary Arsenio Balisacan was pleased to report that economic growth had accelerated to 6.4 percent/year, adjusted for inflation, in the second quarter of 2014. He touted the Philippines as the second fastest growing economy among major Asian countries, with its growth rate equaling Malaysia’s and topping Indonesia’s 5.1 percent and Thailand’s 0.3 percent.

Some technicalities. How well does economic growth signify betterment of the people’s economic wellbeing? The cited number of 6.4 is specifically the growth rate of the Gross Domestic Product (GDP). It is the aggregate of production and also of income—since value-added in production is also value-earned as income—within Philippine domestic territory, including that of foreign entities based in it.

Read on…

For my yaya and all our OFWs

By Nicole del Rosario CuUnjieng

… Ana is but one of the now overseas Filipino workers (OFWs) whom our country has failed. Our political-economic system has not provided adequate resources and support to make upward mobility possible, so those without opportunity have voted with their feet and left our country. Invest Philippines writes: “Remittances from the nearly 10 million Filipinos abroad are the biggest change of the past decade in the Philippine economy…Remittances from Filipinos working abroad have become the economy’s second largest source of foreign capital…They have created an underlying floor for the economy that some economists believe accounts for about 4% annual economic growth and shielded the conservative Philippine elite from pressure to reform the status quo.”

Given the continuing and egregious inequality in our country, we likely would have already had a revolution had employment abroad not created a valve to release such social and economic pressure. Yet, even as the sweat of our overseas workers—who endure predatory exploitation and sacrifice their lives—provides crucial ballast to our economy, inclusive economic growth eludes us. The government hails the OFWs as the “bayani” of our country, and they truly are, yet such heroization of and support for the massive exportation of our people does not absolve our government and society from their duties to provide opportunity for Filipinos in their own country.

A friend in Hong Kong calculated for me what her maid earns working 4-5 days a week for her there. After subtracting the cost of her Hong Kong rent, she has approximately P42,000 a month. A public school teacher in the Philippines teaching two shifts of kindergarten students for 12 hours a day may make as little as 6,000 pesos a month. No wonder our country’s teachers, nurses, and even doctors continue to prefer to live as second-class citizens in Hong Kong, Qatar, and still more distant shores. They live their whole lives away, in the borrowed quarters of somebody else’s life, with somebody else’s family, taking care of another’s baby, while their own children grow up not knowing their mothers. We cannot continue to allow them to prop up our country while domestic corruption and indifference to the plight of our impoverished both at home and abroad squander their sacrifice.

The elite get off easily in this. The poor just want to get by, and so the rich feel no true pressure from them to implement socially progressive reforms or to create the conditions for others to share in their good fortune. Some anomalous examples of wealthy, self-made professionals exist, but largely what we have seen over the last half century in terms of change and of true wealth creation are merely the up-and-down movements of those who already had some kind of foot in the game. The idea of doing well for oneself here–of becoming wealthy in a legal and plausible way–does not exist for the vast majority of our people. While I understand that the reasons our economic growth has largely been jobless growth are myriad and complex, and that a deepening manufacturing sector portends more inclusive growth in the coming future, our measure of success as our economy grows must be our ability to lift people out of poverty and to create opportunity and possibility here at home. This is particularly owed given the painful source of much of the economic growth enjoyed over the last decade, and the lives that were sacrificed for it along the way.

Why the Philippines Failed?

… In Why Nations Fail, economists Acemoglu and Robinson provide a brilliant explanation on how progress and development is largely a function of ‘inclusive’ — as opposed to extractive — governance. Using their dichotomy, the Philippines clearly falls within the extractive category, whereby the core-elite have blocked appropriate policies, which would have made the country a true democracy, anchored by a large middle class, an entrepreneurial sector, and strong institutions spurring growth and innovation. Therefore, in many ways, the developmental failure of the Philippines has something to do with its weak and divided state, which seldom had the right ‘policy space’ to make optimal economic decisions. Throughout the post-War period, the Philippine state has either been at the mercy of entrenched elites, pushing for particularistic interests and blocking policies/legislations aimed at national development, or international financial institutions (IFIs), which have prescribed counterproductive policies, notably ‘Structural Adjustment Programs’ (SAPs), causing tremendous poverty, social dislocation, agricultural decline and ‘de-industrialization’ across the developing world. Sometimes, the Philippines was at the mercy of both...

~ Richard Javad Heydarian

Paths to change

By Calixto V. Chikiamco

OUR CURRENT situation seems hopeless. Our economic oligarchy is powerful, rich beyond imagination. It controls conglomerates that reach into almost every aspect of Filipinos’ lives, its unassailable position protected by law or other barriers to entry. More importantly, its rent-seeking power provides self-reinforcing means for enrichment and impregnable authority: it can penetrate, influence, and manipulate the weak state and its institutions almost at will. In other words, it can buy off or influence politicians, judges, bureaucrats, and media organizations to thwart change, prevent competition, and extract more economic favors or rent through the weak state.

The state of our politics also provides reasons for hopelessness. Whereas the political class is supposed to be distinct from the economic oligarchy in that the former must at least answer to the people through democratic elections, that has not been so. Cheating, vote buying, and voter intimidation through private armies have undermined the true expression of the people’s will. Also, an almost non-existent party system with politicians changing parties and positions at the drop of a hat undermines democratic accountability.

Moreover, with the amount of money needed now to run for elections, running for office is a rich man’s (or woman’s) game or a corrupt man’s game. Therefore, either the politician must be rich himself and is part of the economic oligarchy or has sold himself to vested interests. Politics has also become a family business. Dynasties rule our political landscape. The interests of the state are subsumed to the interests of the family.

Much hope had been placed that President Aquino’s Daang Matuwid will bring about change. While his moral style has been a marked contrast to the blatant corruption under former President Arroyo, President Aquino has proven himself to be a reactionary, unable and unwilling to make changes to the system of which he’s a product. He was, after all, a congressman then a senator, before becoming president. Political reforms are absent from his agenda. There’s no talk of campaign finance reform, dismantling private armies, eradicating jueteng, banning party turncoatism, or reducing the role of political dynasties.

Forget about revolution. The Left already missed its opportunity with its disastrous boycott of the 1986 elections. Furthermore, the Philippine Left has proven to be a tool of the Right, equating nationalism to keeping out foreign competition and promoting laws like CARP that only enrich the rent seekers in the government.

So, how will change happen then? Is the Philippines doomed to a thousand-year rule by an irresponsible political and economic oligarchy which will resist any reform of its privileges and rent-seeking power?

Change can still happen, although very slowly. Change can happen under the following scenarios.

The threat to the state. This is the circumstance by which almost all countries in Asia got its act together and started their remarkable rise. External and internal threats often spur the state to positive change: South Korea with the threat of invasion from the North, Taiwan from the threat of invasion by communist China, Singapore vulnerable as a tiny nation surrounded by big countries and formerly threatened internally by Communist subversion (read Lee Kwan Yew’s biography), Indonesia threatened by the Communist coup de e’tat in 1965 and where a million people died in the aftermath. Japan, as a thousand year old civilization, embarked on the Meiji Restoration, a revolution that modernized Japan after its feudal backwardness and vulnerability was exposed by US Commodore Perry’s black ships in 1853.

Therefore, the threat of China bullying the country may similarly spur changes internally as well. Narrow vested interests may have to be subsumed as the state tries to strengthen itself in a possible confrontation. For example, the country may be forced to finally amend the Constitution to lift the restrictions on foreign ownership if it’s to join the US-sponsored Transpacific Partnership (TPP). Joining the TPP and moving closer to the US may be needed to get the US as counterweight to China. Japan is already doing so, and has indicated its willingness to sacrifice its powerful rice farmers and automotive lobby in order to join the US-sponsored TPP.

Tail wagging the dog. This is the Shenzhen scenario. Deng, faced with powerful opposition from conservative interests in Beijing, created a capitalist experiment in Shenzhen, then a tiny, undeveloped fishing outpost in the far south. The experiment proved so successful that the rest of the country had no choice but to follow, and opposition melted away.

Can the country have its own Shenzhen? That was supposed to have been Subic with its free port status, but Subic and other free port zones just became havens for smuggling. The ARMM with its economic and political autonomy, could have been a Shenzhen but it failed because Misuari built it on the same corrupt political patronage system as the rest of the country. Will the new Bangsamoro Region be our Shenzhen or will it be another failed experiment? It remains to be seen whether the MILF leadership can use its autonomy to build a region with a political and economic model different from the rest of the country.

A change in political economy. The political economy may change if the local oligarchy or at least parts of it, is forced to become more outward-looking. Why? Because the need to compete in the world market would temper its abuses and the elite would see the need to have a strong bureaucracy, efficient infrastructure, and vibrant domestic industries to compete in the global markets.

For the economic oligarchy to become more outward-looking, it would have to find exporting more profitable than extracting rent from regulated, non-tradable industries (power, telecommunications, ports, shipping, banking, etc.). The key to this is to undervalue the exchange rate, as it had been in other countries like Taiwan, China, and South Korea and to open up protected service sectors to foreign competition.

Change from below. It’s still possible to defeat powerful vested interests in a democracy. Coalition-building, voting, organizing, and protesting through social media or in the streets, legal challenges, and other forms of democratic collective action, given the right historical moment, can force positive change even if these are opposed by powerful vested interests.

Social security, the Sherman Anti-Trust Act, civil rights legislation, the Glass-Steagal Act and other progressive legislation got passed in the United States despite opposition from powerful vested interests. Recently, the sin tax got passed because a broad coalition pushed for it and won despite the power of the tobacco monopolist. Therefore, the way forward is not, as some suggest, to revert to a dictatorship, but to strengthen democracy. Change in the Philippines will be forced from below and not initiated by an enlightened leadership.

Will change happen? If we don’t hope, we die.