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Nov 02

Four points for discussion

I was in a somber mood last night as I had a discussion with friends inspired by a very unsatisfactory dinner at Dencio’s Eastwood. The staff were pleasant enough, but obviously in a rush to go home and so tried to discourage prospective diners by telling them the last order would be at 7:30 (we arrived at around 6:30). After we were seated, other potential diners were turned away outright. While I can understand the reluctance of the wait staff to prolong their work on a holiday, considering other restaurants were deserted, I’d have thought they’d welcome business when they can get it. But the main takeoff point for discussion was the smallness of the portions and the noticeable deterioration of the taste and quality of the food. This is something I’ve been noticing in many restaurants lately (at least moderately-priced ones). The reason, obviously, is that restaurants have been hit hard by the increase in VAT, which raises their costs even as it discourages people to eat out. Something has to give and it’s the size of portions and the ingredients that are the first to suffer from cost-cutting.

A few months ago, Jollibee reported fewer people were eating out and even as the other under-reported (to my mind) creeping horror is the incidence of people who have to look for food in the garbage bins of restaurants, the reality may be that outright starvation still doesn’t haunt our land but hunger is affecting a growing proportion in a manner the statistics can’t cover up: that is, based on their own experiences more people say they go hungry if not always, then more often. And for those starving outright -2.9 million according to the survey- that’s only slightly less than the entire population of Bulacan Province. Imagine if nine out of every ten people you encountered in Bulacan -traveling from Malolos, to Baliuag, to Hagonoy, was starving, and only then can you come to grips with the scale of misery.

The misery for the portion of the public that has a voice -the middle and upper class- has not been so drastic, or so devoid of options, or so sudden, that it leaves no choice but to fight or flee (and fleeing for self-preservation is easier than ever). Therefore, those with the strongest representation in government are in the position of the frog put in a pot of water and slowly boiled to death. And for those in such miserable conditions that there is no hope of flight, and whom you’d expect to be the first to fight -they won’t, don’t, or can’t. After all, the armed forces and the government is careful not to shoot down Civil Society or politicians even when they protest, at least not in the metropolis. But it does not hesitate to mow down and abduct those in the periphery, the provinces or institutions cut off from the culture and aspirations of the middle class (so even if you have Ateneo or La Salle students protesting, too, it’s UP students abducted and who vanish). And when those from the upper and middle class raise their voices in indignation, they are check-mated by authority appealing to “the law,” that is, it’s letter, never mind its spirit. Indignation then becomes stuck in agonizing over the form, never mind the substance, of dissent.

Add to this other harsh realities, such as the nation-wide lack of toilet facilities, the (anecdotal, to be sure, simply because I haven’t found data on it, on the growing incidence of young people dropping out of school even as other parents abandon private education for public schooling, not because it’s better, but because they have no choice, financially), the refusal of government in general to address the cost of medicines, and outrage is the only thing to feel over officials being so consumed by going hell-for-leather for things like constitutional change that they would postpone meeting basic needs in order to devote their cash and political will to essentially cosmetic, and not substantive, improvements. Much as One Voice, for example, has been maligned by both the administration and some opposition groups, one of its basic points -which attracted me to the effort, in the first place- is precisely the need to do so much, now, which can be achieved within the existing constitutional parameters and other legislation. You do not need a new constitution to stop starvation and provide basic sanitation. Officials need to be questioned -and fought- if they insist otherwise.

Last week I attended a symposium sponsored by the UN at the Department of Foreign Affairs where I got to interact with people from groups as diverse as Anakbayan, the Land Bank, the DFA, business, etc. One person at a group discussion I was tasked with facilitating explained how a decades-long plan to build a circumferential railroad in Mindanao finally got off the ground. It had been stalled by opposition from Muslim rebel groups who’d refused to allow construction in areas they controlled. The official said he went to Muslim leaders and asked, “so even if you want independence, when could you possibly achieve it? A year, ten, fifty years? And if you do, would you rather achieve independence with a railroad, or have to start building one after you win your war?” The Muslim rebels withdrew their objection, and Mindanao, both Christian and Muslim areas, can start embarking on building a much-needed railroad.

The scorched-earth governance we have now is precisely one of the big problems and it’s what makes me impatient in the face of those who insist “the economy is improving!” (for some) and “the best is yet to come!” (for whom?) and “let’s move on.” No, and no. It is improving in some respects as even critics like Tony Abaya point out -and yes, everyone knows there are improvements. But the larger mission of government to focus on the basics -and meaningful ones for a citizenry that doesn’t have the middle and upper class options of tightening their belts- is being held hostage to the political survival of the administration. There is no incentive for anyone, on more than a patchwork, small-scale level, to improve anything.

Which brings us to my column for today, which is Four points for discussion. If neither administration nor opposition have the capacity to lead, much less inspire, then a slow rebuilding is all that’s left -but is that rebuilding, which has already begun, dooming itself to failure by refusing to even think of the big picture?

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  1. manuelbuencamino

    jm.

    check and balance is vital. When I proposed replacing district representatives with governors I didn’t mean yo undermine check and balance. I was thinking about getting rid of a redundancy in the system. Your idea of a provincial or localcheck and balance is necessary.

  2. DJB

    Ho Ho Ho! I’ve detected an interesting lil pattern in the data of the SWS on Self-Rated Hunger between 1998 and the present. Seems like the incidence of HUNGER as determined by the respondents almost always PEAKS during the December survey!

    Ho ho ho! I wonder why?

  3. DJB

    This latest survey on HUNGER is an interesting case of a survey question containing ambiguous terms like hunger and poverty and asking people to rate themselves along the range of such hazy notions. What usually happens is that the trendline of the statistic is erratic and uninformative, or even misleading, on short time scales. For example, according to the SWS data, in Sep 2003, overall hunger was 5.3% In August 2004 it was 23%; In May 2005 it was again 5.3%; In Sept 2006 it is again 23%;

    This is not REAL “hunger”. There is clearly a CYCLIC component to the data that depends on the SEASON of the year. The SWS does not bother to quantitatively detect this periodic variation in their own data and correct it out to get the real trend in the data.

    Perhaps they have to figure out how to report this data like the economists handle season-sensitive statistics.

    That is the moral of this survey: So called hunger appears to have cyclical, periodic components.

  4. UP student

    DJB… you should advice GMA to conduct a hunger-survey next March and to claim “the administration has made progress”.

    Moving-averages and exponential smoothing are the more common techniques used to handle time-series data.
    This link provides a glossary of terms:
    http://www.stats.gla.ac.uk/steps/glossary/time_series.html
    This link provides computational concepts:
    http://www.statsoft.com/textbook/sttimser.html

  5. The Ca t

    jm,
    the City council serves as check and balance to the mayor. If they do not want the project of a mayor, they can easily reject the resolution in the council. That’s the reason why the mayors bring in their relatives in the council. Binay’s son, Atienza’ son are councilors in their dad’s domain.

    So you have that Tarlac before, the mayor, the governor, the congressman and the President are all from Cojuangco clan.

    We have it also during Marcos era.

    We have it during Erap’s administration. Ow up to now. Latest is the LOI versus JV for senator capms.

    Of course GMA has a dynasty too.

    So the reason why the country’s economy is moving in a snail-phase is because the people leading the nation as well as the local governments come from the same gene pool. Only the faces and names change.

  6. UP student

    Folks finding themselves eating less portions at TGIF or other restaurants, remember the following words:
    “Aside from direct genetic manipulation, calorie restriction is the only strategy known to extend life consistently in a variety of animal species.

    A steady stream of studies indicating that the rate of aging is plastic, not fixed, and that it can be manipulated.

    In the last year, calorie-restricted diets have been shown in various animals to affect molecular pathways likely to be involved in the progression of Alzheimer’s disease, diabetes, heart disease, Parkinson’s disease and cancer. Earlier this year, researchers studying dietary effects on humans went so far as to claim that calorie restriction may be more effective than exercise at preventing age-related diseases.”
    Source : http://www.nytimes.com/2006/10/31/health/nutrition/31agin.html?ex=1163134800&en=129357e368f88d37&ei=5070&emc=eta1

  7. Tony

    The two world-leaders that UP-student talked about are the ones that can serve the Philippines well:
    FDR(delanoRoosevelt) is correct. What the Filipinos need are JOBS, JOBS, JOBS, along with SECURITY in their own homes (plus property rights that what they have worked for will not get confiscated — neither by the State nor the well-meaning church-goers).
    Deng “Incentive compatibility” provides the way — crate an environment for commerce and wealth-building where every one has a chance, every one to include trapos and bureaucrats, NGO-folks and students who have ideas to build their sari-store or internet-business or hair-cutting salon. The magic of Deng is when he initiated and implemented reform programs in such a way that the majority of the population, including those who seemed to be potential losers, benefited from and were therefore supportive of the reform.
    You can stare at a new millionaire and count his fancy cars and frequent vacations to Europe, or you can count the number of workers that this new millionaire’s business employs.
    If, when GMA leaves Malacanang, the number of businesses in the Philippines has tripled and the number of dollar-millionaires have doubled, then she leaves a good legacy.

  8. jemy

    The simple fact remains, no closed or protected economy came even close to being as successful as those countries with open economies. It is only those countries that opened up trade that saw their economies, standards of living, employment, etc. improving. Yes, it is still necessary that internal measures on infrastructure, stability, governance, etc. are in place or is in the process of being made. To believe that trade would be – or to hold trade to the standard of – a panacea for a nation’s ills is simply naive. However, trade does play a big and necessary part in jumpstarting and sustaining development. Another comment made is that some of the countries touted as “successful” were selective in opening up or opened up gradually. That is all beside the point. What is important is they opened up. China, India, South Korea may be doing fine as they were but it was only when they opened up that their economic growth reached substantial proportions. To anybody visiting Beijing and Shanghai before China joined the WTO and after it joined would see firsthand the power of trade liberalization. People who visited Shanghai five years ago and then visited recently couldn’t believe the tremendous change in the city. China became a WTO member in 2001. Successful countries will undoubtedly have their own peculiar formulas, some may have opened reluctantly, others selectively, perhaps gradually. But what must be kept in mind is they opened up.

    To those interested in numbers and statistics, I refer all to Martin Wolf’s Why Globalization Works. As well as Tim Harford’s Undercover Economist. Both can be found, last time I looked, at Ink and Stone (in Podium). I respectfully suggest that the data and interpretations these two economists present be read with a reasonable and open mind.

    In any event, one undeniable statistic is that even the so-called nationalistic countries are lining up to be members of the WTO (Vietnam will be the newest – 150th – member). That is why in the WTO “China is a member. Iraq wants to be a member, so does Russia, Vietnam, Iran, Afghanistan, and Lebanon. Mahathir’s Malaysia is a Member. Hugo Chavez’s Venezuela is an original WTO Member. Chavez – the hero of the anti-trade lot – may mouth anti-trade slogans but he sure does not reject the benefits of oil trade and other such trade to keep his people happy and him continuing in power.” The only country that seems to have no plans of joining the WTO, that has no seeming plans of opening its economy, is North Korea. Anti-trade people have curious role models.

    It’s interesting that discussions on trade policy is still focused on the narrrow and simplistic free trade vs. protectionist paradigm.

  9. The Ca t

    “Positive regionalism” will not happen unless Congress (especially the Lower House) learns to respect, by allocating funds, to local/regional development priorities emanating bottom-up.

    Have you tried looking at the Committees and the bills referred to them for action.

    1. Majority of them were referred to the committees way back 2004. No, I check for the latest update of the webpage, it is updated alright because on or two bills were dated Sept. 2006.

    2. Some committees have no bills to deliberate on. That means no bills were submitted by the congressmen.

    3. most of the bills submitted by the congressmen are for the nationalization of schools, separation of a branch o a school from …blah blah… pinakamadali bang sulating bill ito?
    No need to use they gray cells?

  10. cvj

    Without Mao’s revolution, Deng’s reforms would not have been possible. If we are to compare ourselves with China, it should be with the warlord infested China before 1949, not the China of 1978 when Deng launched his reforms (or even its 1959 version when he first tried them as per Ca T). We cannot emulate Deng’s ‘reforms’ if we do not have the same set of starting conditions which were provided by Mao. The question we should answer if we want to emulate China is how can we get these starting conditions without, as UP Student says above, ‘being too glib’?

  11. Tony

    To get the Philippines to be in a state of affairs similar to what left before Deng’s economic push, GMA can push a “free speech” in a Philippine version of Mao’s “Hundred Flowers Campaign”.
    –In 1957 Mao responded to the tensions in the Party, by promoting free speech and criticism under the Hundred Flowers Campaign. In retrospect this proved to be a ploy to allow critics of the regime, primarily intellectuals but also low ranking members of the party critical of the agricultural policies to identify themselves. Once they had done so, at least half a million were purged under the Anti-Rightist campaign organised by Deng Xiaoping, which effectively silenced any opposition from within the Party or from agricultural experts to the changes which would be implemented under the Great Leap Forward.

    Mao (and his hordes of followers) had a prescience to anticipate this phenomenon called “Overseas Foreign Workers”. Mao’s leadership encouraged small-business owners, many students and even university professors to practice the jetliner position

  12. Bencard

    jemy, your report is an eye-opener, thank you. It seems the Filipinos have been brainwashed through the years, since “independence” from the americans, that their well-being rested in strictly protective “nationalism”. To be sure, most of the advocates of this doctrine were well-meaning patriots whose sincere intentions were to protect and preserve the patrimony of the nation and limit its use to its citizens. But then, quite a few members of our ruling class then and now(most of which belong to the 2% or so of the population) had ulterior motives that were less than altruistic – that is, to monopolize its exploitation, free from foreign competition and ensuring their stranglehold on the nation’s economy. Except for mere pittance to the working class, the benefits of this protective nationalism hardly filter down to the bulk of the population who,as a group, does not have the werewithal to own, or invest in the development of, the country’s resources. The result? Stunted economy that is always at the mercy of reluctant foreign investors – frustrated by artificial trade barriers erected in the name of “nationalizm”
    (where even the media industry has to be protected from foreign ownership).

    In the new world order wherein protective nationalism has little or no relevance, a thorough and immediate overhaul of our economic-oriented policies has to be made. Antiquated and counter-productive “isms” should be discarded.

  13. Tony

    Bencard… Many Filipinos are not bothered… one may even say that many Filipinos welcome the “New World Order” and capitulation/submission to the rules and regulations written by foreigners (especially white Europeans). Welcome how a lot of folks applaud (with the exception of DJB) that Senator Madrigal has appeared before the People’s Permanent Tribunal in the Hague regarding GMA.
    In contrast, a number of Americans are paranoid of some World-Order (in other words, a super-United Nations) that will impose unAmerican principles onto American soil.

  14. DJB

    Ho ho ho. Right your are UP Student. They haven’t applied the techniques you mention that are standard for time series. They also ignored the cyclic component as I said.

    Guess what: the period of that cycle (FFT analysis) indicates that hunger correlates with the frequency of elections, lagging by a few quarters. Unfortunately, the SWS data has only 34 data points, insufficient to definitively establish what now seems to me an obvious point:

    Election spending forces the hunger number up and down as the corrupt officials “recycle” the proceeds of graft and incumbency.

    Like the water cycle, with wet and dry seasons, hunger, like rainfall, experience booms and busts, driven by the processes of corruption (evaporation) and precipitation (pork barrel).

  15. UP student

    More than 12% of the population, or 38 million Americans hungry, including nearly 14 million children.
    Hunger in American households has risen by 43 percent over the last five years, according to an analysis of US Department of Agriculture (USDA) data. (USDA/ERS, Household Food Security in the United States: 2004)
    .. As one would expect, poverty and hunger are correlated.
    The number of people below the poverty threshold is 37 million in 2005, a rate of 12.6% of all Americans. (U.S. Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2005)
    http://www.medicalnewstoday.com/medicalnews.php?newsid=32800

  16. Tony

    Opportunity-alert: a number of ex-PMA officers are beginning to start up hauling and construction companies. Reason : the World Bank is encouraging GMA to put more funds into roads and other infrastructure projects. [The Philippines is putting only 3% of GDP into infrastructure while Thailand and others are spending 5% or higher). Everybody wins (though some more than others) — GMA gets to push showcase projects similar to what helped his dad in his political careeer; the ex-PMA and other businessmen make money from the contracts; and Philippine economy is improved with lower transportation costs to move farm products and other goods from place to place.
    Expect a big fanfare (and funds being released) by June 2007.

  17. cvj

    Tony@4:31am, but wasn’t the Great Leap Forward a disaster that costed millions of lives? Why would we want to imitate that?

  18. Tony

    cvj… Click here for a view of how Mao shaped China:
    http://chinaview.wordpress.com/2006/09/26/ccps-second-inherited-trait-deceit%e2%80%94evil-has-to-cheat-to-pretend-to-be-righteous/

    This site has more numbers and history:
    http://www.hawaii.edu/powerkills/CHINA.CHAP1.HTM
    An excerpt states:
    the Japanese terror-bombed Chinese cities and towns killing civilians at random (that this was done by the Anglo-American Allies during World War II hardly excuses it–official American protests to Japan at the time condemned such barbarism). And they widely employed germ warfare. Over some major cities, for example, the Japanese released flies infected with deadly plague germs, causing epidemics.

    Overall and quite aside from those killed in battle, the Japanese probably murdered 3,949,000 Chinese during the war; even possibly as many as 6,325,000. Some readers who were prisoners of the Japanese during the war or remember the Tokyo War Crimes Tribunal revelations after the war will hardly be surprised by these numbers. What is shocking is that the Nationalist likely murdered some 2,000,000 more during the war, and that this toll, or something like it, is virtually unknown. Apparently the Nationalists got away with murder; responsible Japanese were tried as war criminals.

    Finally, there is that democide committed by the communists. From the very first, the Chinese communists used the same kind of repression and terror employed by the Nationalists. They executed so called counterrevolutionaries, Nationalist sympathizers, and other political opponents. The Communist Party itself and their army were systematically purged and rectified several times, one purge alone involving 10,000 executions.7 But unlike the warlords and Nationalists, the communists also murdered as part of, or a spill over from, trying to “reform” or radically change the countryside and its power structure. This was ideologically driven.

    Landlords, rich peasants, the gentry, and the bourgeoisie were the enemies, to be exterminated or won over; but in any case, their land and riches were to be distributed among the poor peasants. In the beginning the emphasis was largely on rent reduction and some power redistribution; but during the Sino-Japanese War and especially the Civil War, radical land reform–the seizure of all “excess” land and its redistribution, the rough equalization of wealth, and the punishment, often execution, of “bad” landlords, “bullies” and former officials became general operating procedure. In this the communists developed and honed the procedures they would apply throughout the whole country once they were victorious.

    Up to October 1, 1949, when Mao Tse-tung officially proclaimed the Peoples Republic of China, the communists killed from 1,838,000 to 11,692,000 people, most likely some 3,466,000. This is about one-third the democide of the Nationalists. The communists usually controlled a much smaller population. But also, they treated their soldiers much better…”

    —I think that is one lesson not to forget — to treat your soldiers better.

    Also click here:

  19. hvrds

    The Maoist revolution was a revolution that destroyed feudalism overnite. The problem starts after you destroy a societal format.
    In China the Nat Dems were composed of the Nationalists and the Communists. China was still not an industrial capitalist society.
    So eventually Mao tried to leapfrog by command.

    Stalin did it because he imported the technolgy of the time. His was forced industrialization. He had to do it fast for he knew that war was coming either from the West or from Germany.

    Why did the Chinese welcome American rapproachment in the early 70’s. They were almost totally reliant on the Soviet Union for their trade and military technology.. Remember their clash with the Americans during the Korean War was the last set piece battle of that period. The Chinese saw that the idea of rapproachment with the West was possible after the Cuban Missle Crisis. JFK in his last speech at the American University called for it together with Kruschev. They both stepped back from the brink.

    By 1972 America was in deep finaical crisis. They had more debts in gold than they had gold to pay out. They moved the world out of the gold exchange standard and defaulted. The Bretton Woods Agreement died.

    The Great Leap Forward where they tried to induce steel production in backyards as part of the command economy did not work. That was the 18th century technology of doing things. Prior to the industrial revolution both the countries of China and Indostan were way ahead of Europe. The invention of the steam engine and the bessemer process (mass production of steel) of steel manufacturing, brought the West into that revolution. Stalin simply imported that know how from the Americans for Russia. His steel mills came from Indiana. Russia bought the first prototype of the Rolls Royce engine from England and produced the MIG. He never shared it with the Chinese. The Chinese knew they had to initiate a forced industrialization but they were isolated from the world unlike Stalin who was able to trade with the U.S. after their revolution. Remember lend lease during the war even the B-29 was copied by the Soviets. After the fall of Germany the race between the U.S., England and the Russians was for German scientists. That is where Stalin got the bomb and rocket technology. Sackarov came later.

    I have been doing business with China since the seventies and I saw the remarkable change. Like the Japanese before them the Chinese brought in the old technologies and improved on them. In the early days similar to Vietnam they allowed outsiders simply to use cheap labor but the technology meaning the machines stayed. The Chinese similar to the Taiwanese and Japanese before them copied the technologies through a process of reverse engineering. To say that they lost a generation of intellectuals is totally wrong. In point of fact they started sending out their young just like the Japanese Meiji emperor did in the 19th century to learn advanced science and technologies in Europe and the U.S. That is what the opening was all about. Sceince and engineering in the West had advanced to a degree that if China did not leran they would be destroyed.

    China is a nation that is hungry for technology. And now they are learning financial technology.

    The Philippines is still not a capitalist country. It first has to industrialize to become one.

    Till today India, China and the U.S. are amongst the most closed economies of the world. All of Europe as one, Japan, the U.S. their international trade is no more than 20-25% of their GDP.

    Chinas trade domestically is essentially closed to the outside world. (Most of the value added remains in China.) Their external trade for counsumption is also highly pretected in their favor. What you hear or see most is the carrying trade in the export processing zones where goods are made with imported parts for re-export. China runs a deficit with most of Asia but a sruplus with the developed economies of the world. As for their financial markets it is closed as far as capital accounts is concerned.

    Till today you want to do business in China or you want to sell anything you share your technology with them. Even the servers of Cisco were copied. What taiwan did in the erarly fifties and sixties China did on a massive scale. So eefectively after their agricultural revolution they took off like a rocket in 30 years.

    China for the most part did not have to reinvent the wheel. Japan, S. Korea, Taiwan, and now China all used state led policies to develop very fast. But the most important basis was the agricultural revolution. India will not be able to grow as fast as China as they have a serious problem in the rural areas. Their pace is slower. However Nehru a nat dem establsihed engineering schools and the government directed industry to establish what is called the license raj. India created their own industrial elite with government licensing. They did not create the same kind of agricultural revolution in the countryside but instead created a bureaucratic social welfare system that first resolved their food security problems and created food surplus.

    Two largest countries that are both archipelagic – Philippines and Indonesia are in the same boat. Indonesia at least have a sense of who they are. They will move forward faster than us and are better placed than us.

    The Philippines is still a work in progress state. We are lost.

  20. hvrds

    For those that like to use terms like open or closed economies, The IMF has a simple formula. Add nominal dollar values of import and export figures and what is the total as a percentage of GDP. Using that that formula the Philippines total import and export is 80% of formal GDP. Meanwhile Japan, U.S. and the Eurozone are all within 20-25% of their GDP’s. Which economy is more open theirs or ours.

    On FDR. Effectively in 1934 he imposed capital controls in the U.S. and banned the personal holdings of gold bulluion in the U.S. He took the U.S. of the gold standard and declared the banking system bankrupt and let the federal government fund recapitalize the banking system with fiat currency. He in effect monetized the credit system of the U.S.

    Does anyone know the significance of that action? He later raised the top level of the income tax to 90% bringing the U.S. to a point where the national government commanded the allocation of resources.

    Command economies can work only in states of crisis. The entire period after the Second World War the U.S. govenment has been endeavoring to remove those policy prescriptions of the New Deal.However they embedded a Full Employment Act in their laws.

    The crisis of 1972 finally brought into the world, the era of fiat money. That era is now breaking down. That means you have to have faith in the issuing authority. How can you have faith in GMA, JDV and the rest of the gang. We are operating in the era of faith based national currencies. How many people in the Philippines have faith in their governments. How many Filipinos have faith in their currency. The BSP governor proudly announced that this year it will only loose 6-7% of its face value. He gets paid Php 2M for telling us that.

    “the rulers of the exchange of mankind’s goods,” the unscrupulous money changers” who, “through their own stubborness and their own incompetence, have admitted their failure, and have abdicated” Having thus driven the money changers” from their high seats in the temple of our civilization.”

    Roosvelt promised to request Congress to grant him “broad executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.”

    Two days later, on March 6, 1933, w/o waiting for Congress, the president issued an Executive order closing every bank in the U.S. and prohibiting the export of gold.

    “The relatively decent society we had a generation ago was largely the creation of a brief, crucial period in American history: the presidency of Franklin Roosevelt, during the New Deal and especially during the war. That created what economic historian Claudia Goldin called the Great Compression — an era in which a powerful government, reinforced by and in turn reinforcing a newly powerful labor movement, drastically narrowed the gap in income levels through taxes, benefits, minimum wages, and collective bargaining. In effect, Roosevelt created a new, middle-class America, which lasted for more than a generation. We have lost that America, and it will take another Roosevelt, and perhaps the moral equivalent of another war, to get it back.” Paul Krugman, from The Spiral of Inequality.

    An open economy is one where the trade in goods and services are unrestricted, labor flows are unrestricted and financial flows are unrestricted. The Philippines is reality is that kind of economy.

  21. jemy

    perhaps. but just to throw out some more ideas, the philippines, with its combination of trade facilitation lack, technical barriers, sps measures, and other forms of red tape, the citizenship requirements in certain industries, plus (more importantly) the instability with regard to contractual rights, the belief by some sectors regarding the reliability of our judicial system, the relative fragility of our institutions, all point to the conclusion that our economy is not that open or as open as we want it to be. just because tariff levels are down does not point to openness of the economy.

    now to digress a bit, that is why i argue that just because japan, for example, offered lower tariffs in the jpepa does not mean our exports will automatically increase their market share in japan. japan has an array of technical, sanitary, customs measures that potentially could mitigate any supposed benefits jpepa may have to offer the philippines.

    also, let me say that like a number of people in the field, we are of the belief that financial markets need to be carefully regulated as its nature is far different from that of trade in goods or or other services.

    going back, i’d like to point out that a strong government is not in conflict with the idea of greater trade liberalization. nor is the idea of a broad middle class or the idea of a strong welfare society. note that the recent rankings of most open economies (e.g., sweden) have strong welfare institutions. what is also interesting is that when you get the listing of the top ten open economies and compare it with the listing of the 10 least corrupt countries, the list would almost be exactly similar.

    finally, a strong nationalistic policy is not and should not be in conflict with the idea of trade liberalization. i am always of the idea that states with strong sovereignty concepts and institutions would always be for the better of the multilateral trading system. as senator tanada would say: good fences make good neighbors.

    a philippines, whereby its citizens, leaders, its government, are very aware of its rights and confident of its rightful place in the world, would be far better placed to take advantage of the benefits offered by the world’s economy.

  22. cvj

    Tony, i’m more or less aware of the brutality of Mao and the Chinese Communist Party. However, since many have praised Deng’s reforms as being worthy of emulation, we also have to be aware of how it was possible for him to undertake those reforms in the first place. Before Deng, Chiang Kai-Shek and the old order had to be dealt with by way of Mao. As hvrds mentioned (at 1:13pm) “The Maoist revolution was a revolution that destroyed feudalism overnite. The problem starts after you destroy a societal format.”

    So my questions still remain. How could Deng’s reforms be possible in our case if we haven’t driven our own warlords away to their very own “Taiwan”? And once we have succeeded in doing that, how do we avoid repeating the mistakes that were made on the way (i.e. ‘Great Leap Forward’, ‘Cultural Revolution’) to those reforms? If we cannot answer these questions, then the example of Deng is mostly irrelevant and his reforms cannot be used as a model.

    hvrds, that China has a billion people may be one factor that allows them to trade within themselves. we are a nation of 80 million so the domestic market is much smaller. i would tend to agree with jemy on the need to treat differently trade in goods and services (which must be liberalized) and the movement of capital (which must be regulated). Stiglitz has written something similar.

  23. The Ca t

    “Till today India, China and the U.S. are amongst the most closed economies of the world. All of Europe as one, Japan, the U.S. their international trade is no more than 20-25% of their GDP”.

    These three countries have open economies. It was only during the time of Mao Tse Tung when China can be considered closed economy. Closed economy is when the country does not have international trade.

    Tariffs and quotas are mere trade restrictions imposed for the protection of their local industries but do not indicate closing of economy.

    US now has been posting trade deficit which means, its imports are more than the exports. How can it be considered closed economy.

    Latest news is that, Europe is convincing China to open more its economy.

    If it is closed economy, US markets would not have been flooded with cheap Made- in -China products.
    Please explain.

  24. Karl

    Thanks for that reminder about Japanese sentiment in China,Just last year.A Madrigal was killed in China for appearing to be like a Jap,if that is the case ..the Toyota in China might just be like that an Example.

    Re: Income tax

    I remeber a long view article by MLQ3, about how income tax start witholding a portion for of income automatically…

    In our country with so many rich not paying taxes,using the company choppers,company planes,stockholders money,etc

    Even with the combined labor force’s withholding tax…That is just chicken feed,compared to the opportunity lost if taxes from those executives.

    About the opportunity alert re: construction…it is an opportunity,but just a pipe dream.

    Even the top constuction companies form a consortium to bid for a project.
    Where will the ex generals get their money?from AFSLAI and the othe SLAIS and RSBS,from the suppliers/dealers,from….????????

    I boil when generals are accused of making lots of money for personal reasons…(buti pa sila)

  25. Tony

    Karl, One raises money for 2 or 3 trucks (for a construction company) as one raises money to buy a brand-new car. A current police or marine-captain can do this just as a high-school principal can do it — with judicious use of capital and with a good credit rating.
    cvj…. leadership is finding the proper goal and finding the set of incentives to offer one’s constituency (and even the idiots who are in the way). What you are wishing for — to send the politicians you don’t like to their graves or to exile — is Mao’s. What Deng did — to focus on economic growth (more businesses, more consumer-based economic activity) while allow these politicians (and the dregs of Mao’s collectivism) to also share in the pie of economic growth — makes more sense.

  26. Tony

    TRhe reason to set Mao aside is he demands too high a price — millions dead to pursue his “collectivism-for-China”. The madness in the method is highly-visible in the results atained. Millions dead to pursue his collectivism-for-China.

  27. UP student

    Tony… I don’t think cvj is wishing that a leader in the Mao-mold rises and takes charge in the Philippines.
    ..
    cvj… Deng had his own set of warlords to deal with. They happen to be tra-pos of China — local politicians and military higher-ups who were beneficiaries of the inefficiencies of the Mao-collectivism. Deng did not kill them off nor exile them to Tibet. Deng initiated and implemented reform programs — commerce — aimed for the majority of the population but which also allowed those who seemed to be potential losers to benefit and therefore to support the Deng reforms. The major losers in any reforms that aim to create a market economic system are the incumbent bureaucrats (the counterpart for Philippine situation will be oligarchs and the trapos). While Deng allowed (some, or a lot of) corruption to remain, wealth-building by students and small-enterprises, teachers and small-time bureaucrats flourished.

  28. Bencard

    hrvds, how do you think Filipinos would react should GMA does a Roosevelt? The “nattering nabobs of negativsm” would pounce on her screaming that she didn’t have the mandate that FDR had because she was a “fake president”.

    In the kind of politics we have today, no president can ever win a clear mandate as FDR did. Not even the actor Estrada got a clear majority of all the Filipinos eligible to vote. GMA’s hope of winning such a mandate was wishful thinking in the face of competing with at least four other viable candidates. This is the root of her political problems today. The same divided opposition, still divided but relatively strong, coalescing with communist ideologues and out-of-power trapos, is hell-bent on ousting her. Meanwhile, for these forces, its “let the nation be damned”.

  29. UP student

    An answer to Ca t’s plaint about the existence for too long of the Marcos- and Magsaysay- and other dynasties is to let “fresh blood” bubble to the top. One can follow the Putin-model — rise to the top via the military chain. You can follow the Chiang Kai Shek, Mao or Castro model — revolution. You can have the Jon Corzine (of New Jersey) model. University of Chicago Business School, MBA 1973; served in U.S. marine corps reserve 1969-1975; businessman; co-chair and co-CEO, Goldman, Sachs & Co… created his multi-million dollar wealth before entering politics. Or the Barack Obama model — a regular middle-class (vs Corzine’s extreme wealth). Obama is from Harvard, but instead of corporate law, he worked for the civil rights law firm Miner, Barnhill and Galland, and taught constitutional law at the University of Chicago Law School before becoming an Illinois State Senate.

  30. jm

    The Ca t,
    You hope for “allocating funds, to local/regional development priorities emanating bottom-up.”
    While MLQIII hopes that, “the positive and creative force is the regional approach which brings the national to terms with the local”

    Will ‘regionalizing’ the pork barrel bring improvement, better regional development?

    As I have suggested above:
    The Legislative Branch
    The Upper House: 24 nationally elected senators.
    The Lower House: 15 Regional Representatives, Sectoral Representatives, Representatives of provincial councils,

    – Regional Representatives are regionally elected to be the regional representatives in the lower house, regional congressional representatives. (Not more than 24 seats)
    – Sectoral Representatives are nationally elected as party list representatives. One seat per sector: disabled, youth, senior citizens, farmers, fishermen, urban poor, indigenous people, ecology conservation advocate, consumer welfare advocate, health care advocate.( Not more than 12 seats)
    – City/Provincial Legislative Council Representatives- Councilmen with the highest vote or elected by city/provincial councilmen from among themselves. (Not more than 150 seats)

    All members are convened at the opening and closing of session, periodically and as needed to deliberate and vote on bills. Regional and sectoral representatives shall be permanently convened while Congress is in session and shall serve as the hub of the lower house. City/Provincial Council Representatives shall be in regular attendance at the local legislative councils unless otherwise called to Congress by the Speaker of the House pursuant to a resolution voted upon by a majority of the members of the regional and sectoral representatives. The Speaker of the House shall be elected from among the Regional representatives by all members of the lower house.

    The need for regional representation in the legislative branch, imho, is best served in this model than having Senators elected by region. A core group of representatives with national and regional mandates in a dynamically convened lower house is needed while Congress is in session to function as a hub representing the house that is in session but whose local representatives are devolved or locally in session.

  31. The Ca t

    Cvs wrote: So my questions still remain. How could Deng’s reforms be possible in our case if we haven’t driven our own warlords away to their very own “Taiwan”? And once we have succeeded in doing that, how do we avoid repeating the mistakes that were made on the way (i.e. ‘Great Leap Forward”
    ——————————————–
    Reforms made by Deng were merely corrections of the mistakes of Mao’s economic philosophies.

    It was a mistake to purge the intellectuals and the businessmen in his attempt to “industrialize” China using the peasantry as labor and management inputs.

    They were not equipped to run even a backyard steel production. The outputs were merely recycled farm implements that these peasants melt in order to avoid punishment that go with the lack of production. My former office mate, a Chinese immigrant intimated to me that they had to bring in their farm implements for melting to the commune leader every time there was the so-called inspection by Mao.

    She said, her family ate spoiled rice rationed by the government. The good variety were reserved to the Red Guards which they had to bribe in order to get some favors. (So actually, corruption was not eradicated).

    It was not the cultural revolution of Mao Tse Tung which destroyed the feudalism. It was the civil war with the help of the Soviet Communists which toppled down the nationalist’s government and drove them to Formosa(Taiwan).

    Cultural revolution was meant to protect Mao from his enemies within the Communist party and to establish his cult of personality by rallying the youth and giving them power over the military.

    So back to your question which implied that Deng’s reforms could not become successful had Mao did not destroy the Old China.

    Deng merely brought old China back because he realized that Mao’s principles did not improve the economy of China. Corruptions were also brought back but according to Edgar Snow, the author of a book about China, during Mao’s regime, Mao and his communist party were also “partying” as they enjoy the comforts in the mansions of the driven rich feudal lords. Mao and his wife even ate the best food such as imported steak. So whoever said that they have really closed economy at that time is wrong.Madame Mao lived in a separate mansion with her own ladies-in-waiting while Mao enjoyed young ladies every night brought by his pimps. Whoever said that they have driven the privileged few is also wrong, because the privilege only shifted from the feudal lords to the oppressive
    Communist elites.

    So why do we have to emulate China?

  32. cvj

    UP Student, thanks for that, although i wouldn’t necessarily put the local communist officials on the same level as the pre-communist warlords. The power relationships with respect to the Central government are different as the latter had their own armies.

    Ca T, if you read my previous comments, i did not attribute the elimination of feudal landlords to the Cultural Revolution. My understanding of China’s history is in agreement with yours as far as i can tell. So with regards to an assessment of Mao, i’m with you and Tony. Just to clarify what i’m trying to drive at, let me refer to this passage from Robert Cosbey’s ‘Watching China Change’ (which i first quoted during an earlier discussion with hvrds a few months back). Cosbey describes Deng’s major reform in 1978.

    …The big change was eliminating the commune as a political, social and economic structure. Ownership of the land reverted to the government, meaning, practically, local government. The use of the land was contracted out to individuals or families or small groups. For example, one farmer might contract to grow rice in a certain field, guaranteeing to give the village ten per cent more rice than it had been getting, and keeping any surplus as his own, to sell to the government on the open market…

    …The rural contract system that supplanted the communes made it possible for millions of peasants to decide individually for themselves what kind of work they would do, what hours they would keep, what they would do with their money, where they would go to sell their products or to look for work. In the cities more and more people set up their own small business…

    Can you imagine a local version of Deng being able to implement similar reforms over here? He would first have to get the land from the oligarchs (and the Church). That’s where Mao’s previous contribution comes in. So in a sense, we need some sort of Mao to act as an equalizer which sets the stage for a China-style economic takeoff.

  33. The Ca t

    but we did have that we did have land reform programs which when implemented without exemptions, land ownership would be limited to 7 hectares only. As you may have read Hacienda Luisita was exempted. During the Marcos administration, Presidential Decree 27
    which aimed to remove the ownership of agricultural lands from 15 big landowners with the implementation of leasehold tenancy, land transfer, consolidation and settlements.

    The distributions were limited only to rice and corn and excluded the sugar and coconumt plantations.

    Only four percent of the landowners were compensated for the lands acquired by the government.

    So there is no need for civil war to distribute land to the landless. Only a strong will to implement the agrarian and land reforms.

    That answers te question why we have a lot of political dynasties.

  34. The Ca t

    More than 12% of the population, or 38 million Americans hungry, including nearly 14 million children.
    Hunger in American households has risen by 43 percent over the last five years.
    ================================
    I wonder if the respondents who claimed that they were hungry were the people without food security.

    The reason why there is a small percentage of people getting hungry in the US is because of the food stamps and welfare programs for those living below the poverty level.

    So queationnaires are formulated to categorize the respondents to hungry-without food security, hungry with food securiy and hungry.

    Lately, even the non-profits which have feeding programs stopped their operation for lack of donors especially when Warren Buffett who used to be a big donor for the programs decided to give the billions to Bill gates charities.

    One such non-profit was a Catholic parish in San Francisco which
    gave out three meals a day for the homeless and destitutes of the prime city.

  35. UP student

    cvj… that’s a good point about Deng being able to offer market-economy type incentives to agriculture because ownership was in the hands of the state.
    Note that workers are leaving the Agriculture sector (and moving into the cities). Agriculture-workers in 2003 was 45% of the labor-force; 35% in 2005. Unleashing market-economy reforms will probably achieve better success when focused on manufacturing and the service sector.
    For discussion purposes, the Phil labor-force participation (July 2006 statistics) is:
    31.3% agriculture
    4.3% fishing
    9.2% manufacturing
    5.1% construction
    19.2% wholesale & retail trade, repair of motorcycles & motor vehicles, household appliances
    2.6% hotels & restaurants
    4.6% public admin & defense\
    3.0% education

    Agriculture is also low-productivity — 35% of work-force generating 14% of GDP.

  36. Karl

    I wonder what our statistics would look like if and when we capture underground economy statistics and how they actually contribute to our GDP….

    I wonder how the productivity of barker dispatchers in contribution to GDPB would be measured…..

    The mere axample of the pirated dv industry in the tiangge’s,although publicly condemmed is also publicly tolerated by the mayors and barangay captains…their contribution to gdp are all guesstimates….add to that money form illegal gambling,smuggling etc…

    we might have been underestimating the country’s growth all along afterall…

    and I Thank smuggling and the underground economy for lowering our inflation rate…without them pirated dvds and the tiangges, we could have been experiencing double digit inflation.

    as too too smuggling’s killing our agri sector..that is another story.

  37. cvj

    Ca T, as Shaman mentioned in his comment above (Nov 2 at 4:57pm), our land reform program is a ‘joke’. i remember Manolo blogging recently about how the big landowners are the ones who have been exempted from land reform. Solita Monsod in her Sept 2 column in the PDI also mentioned that there is an ‘NPA-landlords’ alliance that is preventing distribution of land to the farmers in the Bondoc Peninsula.

    In the case of China, civil war (with its millions of dead) did precede economic takeoff. I state that as fact, not advocacy. Personally, i prefer looking more into the Indian model which appears more sustainable and more compatible with the Filipino temperament. (We still need to complete land reform though.)

    Can you clarify what you meant by ‘That answers the question why we have a lot of political dynasties.’? I did not understand this part of your comment.

  38. The Ca t

    cvj,
    political dynasties protect the interest of the families and relatives.

    If the Cojuangcos did not push Cory to run, do you think, they could have been exempted from CARP?

    So these people see to it that the (not only Cojuangco)there is one relative in the Senate; one in Congress and another one in the region.

    The sugar industry was spared because of the control of the sugar production during Marcos era when sugar was traded in the future’s market.

  39. The Ca t

    Karl,
    Right you are. The GDP is understated so is the GNP.

    1. The survey of business establishments by NSO gathered estimated output/revenues only. Most of the companies answer the questions merely for compliance.

    2. Most of the sales in the retail establishments are unreceipted.

    3. The sales of the millions of hawkers in the cities are unreported.

    4. The backyard industries’ and home businesses income are not reported.
    5. In the importation, values are undervalued when declared to avoid high tariffs and custom duties.
    6.Some big companies are guilty of technical smuggling.

  40. Karl

    Thanks for the reinforcing points,Cath Cath…

    I often wonder if growth is enough,China and India has still a number of poor people(+- 80 million each) who earn less than a dollar.
    In India,Those who are lucky enough to have an office job,want to get promoted in insstant,then eventually resign if un satisfied,and we still can see in the news,the poorest of the poor still roam arond the streets,some leaving their fate to Karma….In China, as you have pointed out Cath,many farmers are still poor,and development has not reached them,and yes Cath,many are thrown awy from their homes because of the Beijing Olympics.So,why do have to emulate China……we don’t.

  41. cvj

    Karl, in India (with an estimated total population of 1 billion), today there are 260 million who live on less than one dollar a day (the benchmark for ‘extreme poverty’). Its GDP has been growing at an average of 7% since 1994 which has reduced poverty level by about 10%.

    China (with an estimated total population of 1.3Billion) has 16% of its population living on less than 1 dollar a day (around 200 million). According to the UNDP, this is half of the figure in 1990. It’s GDP has been growing at an average of 8.2% from 1975 to 2003.

    Vietnam (with a population of 84 Million) has been growing at 7.2% GDP per year for the past ten years, and has reduced the percentage of people living on 1 USD a day from 51% of the population (in 1990) to 8% today. (Kudos to their Natdem rulers.)

    By contrast, the percentage of Filipinos living on less than 1 dollar a day (as of year 2000) is 15.5% or 12 million people. Our GDP has been expanding at an average of 1.2% from 1990 to 2003 or 0.3% from 1975 to 2003.

    [Sources: World Bank, CIA Factbook, UNDP Human Development Index 2005]

  42. cvj

    Here’s one link that provides a nice summary of year to year changes in extreme poverty (less than 1 dollar a day) and poverty (2 dollar a day):

    http://devdata.worldbank.org/wdi2005/Table2_5.htm

  43. Tony

    $1.00-a-day is insane!! I checked the devdata-worldbank table and it shows Thailand, Vietnam, S. Korea, Malaysia (and Taiwan, Singapore, Japan) all with less than 1/2% of their population at $1.00-per-day. This is a stinging rebuke against Marcos, Dado Macapagal, Garcia, FVR, Cory and GMA, especially since the Philippines was more prosperious than all the nations mentioned (except Japan) in the late 40’s. Now, while these presidents became residents of and then left Malacanang, the following remained in place — the Roman Catholic Church, US-of-A influence, Filipinos, God all-powerful, the weather, and the communist-movement. Who should we blame?

  44. The Ca t

    cvj,
    data are for years 1994 and 1997, exchange rates were below 40:1

    I do not rely so much on the data based on expenditure and income.
    Nobody in the country reports the real income, rich or poor, employed or unemployed, men or women.

    GDP and GNP are also understated so even if we divide them by the total population we will not get the real per capita.

  45. cvj

    Ca T, did you mean 1974 and 1997? In this case, the writer’s projection of the equivalent value of the US Dollar is out of whack:

    In 1997, $23.00 from 1974 is worth:

    $74.83 using the Consumer Price Index
    $63.19 using the GDP deflator
    $70.32 using the unskilled wage
    $99.64 using the nominal GDP per capita
    $127.33 using the relative share of GDP

    [Source: measuringworth.com]

    For the above, i think the relevant comparison is dollar to dollar (for different years). The Peso to dollar exchange rate does not come into the picture.

    You’re right about GDP/GNP being understated because of the underground economy, but i believe that’s not a problem unique to us and it does not render the official data useless. We just have to be aware that there is an unknown element. Estimating the size of the underground economy is a challenge for our economists. Bringing the underground economy above ground is the challenge for our politicians.

  46. cvj

    Tony, poverty as measured by income needed to meet nutritional requirements increased significantly during the Marcos years.

    Percentage
    of Population
    Year in Poverty*
    1965 41.0
    1971 43.8
    1975 51.5
    1985 58.9

    (*Note: The measure of poverty in this case is *not* the $1 per day, hence the higher percentages)

    [Source: The Role of Foreign Aid In Development: South Korea and the Philippines, United States Congressional Budget Office, September 1997]

    As far as poverty trends are concerned, here’s a piece of positive news from the Asian Development Bank…

    “Poverty measured using the international poverty line of $1 per day has been falling steadily. In 1990 the proportion of the Philippine population living on less than $1 per day purchasing power parity (PPP) was 18.3%. By 2003 this headcount had fallen to 11.1%.”

    …followed with a some not so good news:

    The proportion of the population living on less than $2 per day was a great deal higher, at 44.1% in 2003.

    [Source: Poverty in the Philippines: Income, Assets, and Access, Karin Schelzig, Asian Development Bank, January 2005]

  47. cvj

    Ca T, here’s an article discussing the underground economy in the United States which is estimated to be worth US$500 Billion.

    http://www.boston.com/news/globe/ideas/articles/2006/11/05/field_notes_from_the_underground/?page=1

    (via Boingboing.net)

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  1. Jordan Group

    Jordan Group…

    I Googled for something completely different, but found your page…and have to say thanks. nice read….

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