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Apr 24

The “Great Fear”

As chronicled by John Markoff in one essay in “The Rise and Fall of the French Revolution (Studies in European History from the Journal of Modern History)” (University of Chicago Press Journals) “ the Great Fear was paranoia in the rural areas, as a political crisis engulfed France in 1789. Rumors began to spread that the King, bandits, merchants, what have you, were going to swoop down on farmers to take their grain. The farmers formed militias; urban residents panicked. The government panicked.

We are experiencing our version of the Great Fear. A vicious cycle involving dramatic moves by the government, magnified by a media out of any really big stories (NBN-ZTE, Spratleys, etc. all fizzled out by Holy Week) and the combination of the two brought out panic combined with opportunism on the part of the public. Its early glimmerings were reported by Bong Austero in his March 24 column, Averting the impending rice shortage.

Yesterday, the Inquirer editorial, Hoarding, pointed to the Great Fear among local governments (For background, see: Davao will hoard rice, and Bumper rice harvest expected in Mindanao and Govs of provinces in Panay say rice enough for Visayas and Panay has enough rice to feed entire Visayas and

My Arab News column for the week is Fixing the Rice Problem Leaving Others Unattended. Since the modern presidency began, presidents have obsessed about rice: and cultivating rice, literally, has been an image eagerly cultivated by our presidents. See The Presidency as Image, in the PCIJ.

In my Arab News column, I pointed to inflation as one of the unattended problems, and to get a better view of that problem, and other related ones, see this analysis in Global Property Guide: Gloomy days ahead for Asia’s housing markets. Two charts from that analysis are particularly relevant:

oil-n-rice.gif inflation.jpg

The in-house economist of Global Property Guide, Prince Christian Cruz, was the guest on my show and he had some interesting things to say. The rising price of oil last year already put pressure on income, but was offset by the appreciation of the Peso. However, with the rise in rice prices, Filipino families have been subjected to a double whammy and thus, rising inflation. See also Gov’t to cut growth target for 2008 Rising food prices to curb GDP expansion.

Government data says the top three expenses of Filipinos are food, transport, and rent (more or less in that order, but food always being at the top, and ranging from 40% to more than 50% of income expenses), so a rise in oil and rice prices bloats the three, and from his perspective (focused on the property market) this will mean families have to consider moving to cheaper accommodations or defaulting on their housing loans; and that’s only from the point of view of the domestic economy. Add to this a downturn, economically, overseas, and the problems increase, as Filipinos overseas have to set aside purchasing homes (which fuels the construction industry) as their families at home have to spend more for food, transport, and rent…

The other week, I asked a worker how prices had been affected since Holy Week. A serving of vegetable viand went from Php15 to Php25, for meat dishes, Php30 to Php40, a cup of rice from Php7 to Php14.

People have had to adjust their grocery budgets, which up to now had been fairly stable for a few years. See Opinionated Banana:

If UN has an emergency food summit, well our Household also had our own emergency food summit. My mother, who’s in charge of the hardcore accounting and shopping shared that before a sack of sinandomeng rice would just cost at around 1,400-1500 pesos, but as soon as the crisis hit the fan, she ended up paying for 2,000++ pesos for a sack. With just a couple of male species and one diabetic in our household, we’re really not dependent on rice. But still, it calls for attention. We would experiment now on mixing food viands with mashed or baked potatoes, which I’m looking forward to, or develop our skills with cooking pasta. Yes, we’d still cook rice, but in smaller quantities now. It may result to healthy and positive effects, just as long as rice is still an option and not a form of deprivation. We’re all willing to adjust.

This leaves less money for the various service-oriented businesses that rely on people having disposable income. So the immediate problem, for now, is it’s not that there’s no rice to be had, but that purchasing rice is more expensive and won’t be going down in costs significantly in the long term. And we aren’t creating the kinds of stable jobs we need.

A backgrounder on where we were, prior to the Rice Problem hogging the headlines.

From Cielito Habito, PDI Talk.ppt and Michael Alba, economic briefing.ppt (see also philippine economic growth revised.pdf” I’ve snipped some slides. The white ones are from Alba, the colored ones, from Habito.

In 2006-2007, both were looking at the growth taking place in the country (being proclaimed as a new Golden Age by the administration, if you remember) and pointed to where it was really taking place, and where it wasn’t:

alba1.jpg habito1.jpg

alba2.jpg habito4.jpg

alba4.jpgalba5.jpg

habito2.jpghabito3.jpg

Alba had been pointing out that productive land was being lost to the booming property market, and what was worse was government wasn’t even properly keeping track of the development. Both he and Habito were also pointing to the dangers of lopsided growth, since the sectors growing weren’t labor-intensive (Habito pointed to the collapse in manufacturing-related jobs) and a fall in domestic investments, which would be magnified by a fall in foreign investments.

See also The Grand Deception by Perry Diaz. He calls the Palace to task for trumpeting its economic record, and how it brushed aside questions concerning the statistics and where the growth was taking place. He also zeroes in on smuggling as one issue that has hounded the administration -and which, I think, explains why public skepticism has hounded its every move in attending to the Rice Problem. In Thads Bentulan’s PPT, there’s a footnote (see the notation with the asterisk, below) where he raises the question of smuggling, because there’s a gap in the official statistics:

bentulanasterisk.jpg

This actually came up during the Senate hearings before Holy Week, but the vacation prevented people from focusing on it. The discrepancy was between what the Philippines claimed was the value of its trade with China, and the values China itself declared. The Philippines claimed something like 8 billion dollars in trade while China said the value was 30 billion dollars. Immediately, during the hearing, some senators began asking if the discrepancy wasn’t a sign of smuggling. Although one senator later explained the discrepancy could be a case of arguing apples and oranges: the Philippine figure may be trade with the People’s Republic of China only, while the China figure may be “Greater China” including the PRC, Hong Kong, and Taiwan (and even the Binondo traders) but also revelatory of “technical smuggling.”

As it is, the rise in rice prices has led to demands for salaries to be raised, see Hefty wage hikes to spell economic troubles for RP–bank. Even the Inquirer editorial warned of the consequences of government allowing itself to be stampeded into raising wages: see Immediate need.

Which brings us to my column for today, which is Rice per minute. It discusses Thads Bentulan’s provocative An Analysis of Rice Prices in Three Countries: Hong Kong, Singapore, and the Philippines (as of April 20, 2008) . You can also download his Hyperwage Theory book.

People in business immediately dismissed Bentulan’s proposal: if it were adopted, one person texted me, “jobs will simply disappear.”

Bentulan says the minimum wage for a domestic helper in Hong Kong comes out to 18,637 Pesos per month. Ask yourself what work or position would pay a similar salary in the Philippines. Many people I encounter who are business owners complain that there are lots of jobs available -only, there are no Filipinos qualified to fill those jobs- but you have to wonder, the jobs remaining unfilled (mid-level managers, bookkeepers, etc.) are at salaries that makes it a competitive choice for a qualified person to seek employment overseas.

Moving on to the politics of it.

There is a novel by Carmen Guerrero Nakpil, which appeared in 1990 but has a strangely contemporary ring to its title: “The rice conspiracy: A novel”. What is interesting to me is how students from the UP School of Economics on my show last Tuesday asked if we really had a rice crisis or if it was a politically-manufactured scenario. They are not alone in being suspicious, see The Multiplication Table of The Jester-in-Exile from April 10:

My suspicion is this: the “rice crisis” is a fabrication, a scare tactic to draw attention away from the assaults on the squatter in Malacanang. With the public focused on this apparent rice crisis, the media will spend very little airtime on the motion for reconsideration that the Senate has filed with regard to Neri vs. Senate, on Jun Lozada and his plummetting visibility, on Atty. Harry Roque and the Quedancor issue, and the Magdalo officers’ conviction for coup d’etat, among other things.

Heck, I’m fairly certain that this rice crisis issue will be milked for what it’s worth, and then the public gets blindsided by yet another impeachment complaint decide to shield GMA.

This was tackled by Mon Casiple in Rice politics and governance:

Of course, it has been a policy of the government for sometime to import rice directly as the sole importer. In theory, it is supposed to sell the imported rice to small retailers directly. In practice, it is the cartels — with connivance from corrupt government officials — who divert these into their own control. A variation on this tactic is to substitute imported high-quality rice with local inferior rice.

The connivance — if not the direct hand — of government officials in rice smuggling from NFA warehouses is underscored by the dearth of direct rice smuggling from abroad. Somebody or somebody’s group is making a killing on the supposed “rice crisis” and the expected panic which drives prices still higher.

In the medium- and long-term, there really will be a rice crisis, as well as a general food crisis globally. At the same time, global rice prices will continue to rise as rice-producing countries increasingly curtail and secure the need of their own population. A lot of factors also contribute to this, such as high population growth, slow scientific breakthroughs, climate change, and higher per capita consumption.

However, in the Philippine case, a major factor is the short-sighted government policy definition of food security as consumer-oriented securing “food on the table. This policy contradicts the common-sense notion of securing your staple food through sustainable production. The illogical policy of tolerating population growth when it outstrips resources complements this disastrous rice trader-friendly policy. Failure to complete the land reform program and prevent land conversion schemes of prime agricultural lands also contributed their share to the government’s failure in achieving real food security.

P43 billion is a drop in the bucket and a palliative when seen against the backdrop of governance failure by successive administrations in the rice and food sector. The GMA administration shares some eight years of it.

Rice, rice everywhere — but not enough to eat, says a news article. Ricky Carandang, in Why Rice is So Expensive, says an overlooked factor is manipulation of the Futures Market in foodstuffs:

As all this hot money goes out of the US, fund managers are looking for other places to put their money. And they’re going into commodities. They’ve seen how oil and precious metals have gone up and continue to go up. But with oil and gold hitting record highs, there’s a sense that the upside may be limited so they’ve focused on commodities that they believe could have a greater short term upside. And that means corn, wheat, soy, and rice.

Yes, there are real supply and demand factors driving up rice prices, but one must concede that a big chunk of the increases in the prices of oil, gold, and rice, are due to speculation on the international commodities markets.

As it is, in Cebu, at least, Rice prices start dropping. The decrease in prices being due to decisions by the traders, it seems, and not because of government’s intervention!

Frisco Malabanan, director of the Ginintuang Masaganang Ani (Golden Bountiful Harvest) Rice program, said that as of Tuesday, farm gate prices of wet palay in Nueva Ecija have been monitored at around P14 to P14.50 a kilo.

He said that commercially, this farmgate price should translate o about P30 a kilo of milled rice, lower than the current prices, which have been hovering around P32 to P34 a kilo.

Malabanan attributed the low farmgate prices of palay to the decision of traders to stop buying in the meantime.

“This may be a strategy for them to bring down prices of palay,” he said.

inquirerricechart.jpg

Some things on the chart above taken from The Rice Problem site: the wide disparity between the farmers’ price (light green) and what the wholesalers’ sell it for (orange); and the relatively small margins of the retailers (light blue).

The wholesalers, though, also need that wide margin because it represents the inefficient costs of distribution in our infrastructure-challenged country. But it also shows the opportunities for maximizing profits, for example, when NFA Rice is then mixed with commercial rice or repackaged entirely by wholesalers and retailers.

Back in April 9, Philippines Without Borders warned that since government, by its nature, is slow to act, by the time its policies actually start having an effect, it could screw up what should at least be a bonanza for our farmers:

Now, based on Business Mirror reports, its seems Malacanang is simply telling the private sector to import what is allowed under the minimum access volume (MAV)…. Crazy!

The fact is that the MAVs have been there all along and no one dared importing much lately simply because tariff is high (50%). Who would be encouraged to import rice that are already expensive in the world market and pay 50% on top of it, thus making the landed ones so expensive? If I’m the importer, I’ll wait for local prices to really move up the heavens before I even thought about availing of the MAVs. That’s what is happening now.

So the supposed policy pronouncement about “allowing the private sector to import rice” was a bogus one – a deception. Or probably it was real, only that government, as usual, simply backtracked, nay backslided. My goodness! Now, the private sector is saying they will only import rice at zero tariff, and given the government’s very slow decision making process, we might end up having those imported rice landing our shores when the farmers are already harvesting their palay. Some of them has actually started harvesting now. That will be tragedy.

Another matter.

We shouldn’t discount, too, as the effects of people being able to game the system, as smoke points out in Malthus got this one right:

You see, some well-off families have been gaming the system. When you reach a certain income bracket, people eat more often at restaurants than at home. For these people, the rice they buy is mostly for the house-help and the pets. Ironically, in the circles I know, these are also the largest purchasers of cheap rice. With most of these upper-income families employing at least two – up to six – house-help, they are able to buy more at those street side selling points.

First thing they do is they go quite a distance from where they actually live. When they find a selling point, the helpers line up with everyone else, only they are spaced about two-three people apart. Most of the time, they’re not noticed as strangers. But when they are, they just say they’re from so-and-so depressed community and that that place ran out of rice. They then give the sob story about having had to walk or travel far just to find rice. It’s clever, really. This story reinforces the notion that there is a shortage, and sets people a-twitter. In short order, they forget that their are strangers among them.

Once they get their quota of cheap rice, these helpers walk walk walk. Eventually, they all meet up, get in the re-conditioned van they use for going to the market and drive on home.

People would go to localities where NFA rice was being sold, even if they’re not from the area and not necessarily the target market of rice relief -the idea being a habit as old as the Japanese Occupation, which is to hoard when things are cheap and simply pull one over the authorities.

Roving rice-buyers aren’t just agents of the well-off. This is where having many family members -and idle ones- comes in handy: you can line up, anywhere, even far from home; and when supplies are limited per person, multiply the number of persons and you multiply the family’s total share. And the strategy is validated by events: even mentioning that the NFA may be forced to raise prices increases the determination of people to hoard now.

Politically, whether manufactured or not, the Rice Problem affords as many opportunities as it presents risks. See Manila’s Arroyo treads risky path with rice campaign. Amando Doronila takes a dim view, saying that Low credibility bodes ill for Arroyo riding out crisis. I’m not convinced the public mood will sour the way he thinks it will, or could. Definitely, as Mon Casiple says, in Malacañang 2010 hopes, the Palace will be sniffing around for opportunities -or trying to create them, as RG Cruz amplifies in an entry. Or, simply try to move fast to take advantage of any that may arise; more so, if it can claim credit for heading of an emergency. House to call Yap on P250-B plan setting the stage?

The Warrior Lawyer has a trilogy of entries, starting with The Politics of Rice then Rice Crisis Relegates the ZTE Broadband Scandal to the Background and On Corporate Rice Farming and Other Notes on the Rice Crisis . Which brings us to issues raised and some readings.

I. Government agricultural policy

Rice: a policy blind spot says Randy David. On the National Food Authority, see Soaring World Food Prices Exacerbate Challenges Across Asia… Especially in the Philippines in the Asia Foundation blog. See also The Bottom Seed: Notes on the Philippine Rice Crisis by Martin Perez.

See Bohol rice farmers ‘forced to eat camote’:

Catarata said that in planting rice, farmers need to spend for one hectare at least P18,745: P900 for the rice seeds, P6,000 for 14-14-14 fertilizer, P4,900 for urea, P30 for the transport of fertilizer and P500 for chemicals against pests, and P6,415 for labor.

Catarata said that if the P1,080 for thresher and blower and P1,800 for irrigation fee is added, the total rice production cost of P21,625 will be shouldered by the farmer, who is able to harvest only 60 sacks of palay worth P28,800.

Because the farmer has to share one-fourth of his harvest, equivalent to P7,200, to the landlord, he stands to get only P21,600 as gross income. After deducting the production cost, she said, farmers end up with a loss of P25.

But this situation can only be compounded by what Ellen Tordesillas says is a Looming fertilizer shortage.

See also P5M full subsidy for rice farmers and Herrera proposes full subsidy of rice seeds.

II. The World food situation

Earlier, Food crisis grows by Paul Krugman and then from Time.com: No Grain, Big Pain. From the Asia Sentinel, recently, Will Rice Depart from Asia’s Tables? The region’s most important food staple may be going into permanent decline.

See RP may not be able to secure more rice from East Asia.

See Wal-Mart’s Sam’s Club limits rice purchases.

III. Biofuels

See Let Them Eat Bio-fuels by Tony Abaya, and Biofuel not to blame for loss of rice lands — senator. He’s right, I think -but there’s the question of corn (and inefficiencies: it’s cheaper for hog raisers in Luzon to import corn from Thailand than to ship it in from Mindanao), which is being allocated for biofuel production.

The Arab News editorial, International Problem, says European farm subsidies have been very successful and advocates some sort of international body to manage subsidies for agriculture on a global scale:

Biofuels are not the root cause of the price hikes; they and the high price of oil are simply the straw that broke the camel’s back. The real villain is the phasing out of subsidies in so many parts of the world at the behest of the IMF and the World Bank. More land has been taken out of food production as a result than any shift to biofuels. It has hit poorer countries particularly hard because they are the ones that have most needed IMF and World Bank support. Without subsidies, farmers in countries such as Ghana or Gabon – West Africa has been particularly affected – could not compete against cheap imports from the big producers, and gave up. But no one realized a crisis was brewing because cheap food imports continued to arrive. It is only now, with prices rocketing, that poorer countries find they do not have enough local producers to fall back on.

Then again, we can focus on growing meat without having to grow animals -see Tastes Like Chicken in Slate.

IV. Population

See Juan Mercado’s look at population from a regional perspective in 2010 dividend. And Manuel Buencamino’s Earth Day blues. Blogger smoke is also in Malthusian mode in C-rice-is.

And finally, a brief survey of the blogosphere:

April 9: see: The Left Click, Arbet Loggins @ Multiply, Life As I Know It and The Unlawyer. A particularly interesting look back at previous rice problems in A Simple Life:

In the slums of Iloilo City, circa middle of 1970s, back when the NFA (National Food Authority) was still known as the NGA (National Grains Authority), “NGA” was synonymous to an inferior variety of rice — dark-grained, 50% broken, and had a chemical-like smell.

Therefore, I am surprised that unscrupulous traders nowadays can repack NFA rice, which retails at P18.25 per kilo, and pass it off as commercial rice, now selling at up to P34 per kilo as of posting time.

As a child, I remember Nanay occasionally taking home with her a brown paper bag containing a ganta (about two and a half kilos) of NGA rice. Those were hard times. Those were the times when Ferdinand Marcos rationed rice to just a few kilos per family.

A few months into the oil-rice crisis of the 1970s, the NGA resorted to rationing rice mixed with corn grits. Although the yellow corn grits-white rice grain mixture looked good, either cooked or uncooked, swallowing it is another matter. The discriminating Ilonggo palate just does not have the tolerance for corn as the staple. We may eat corn during snacks — on the cob, steamed or broiled, or as popcorn, but not when cooked as rice.

I did not remember exactly how long the corn-rice blend lasted in Iloilo, but I can still recall that the Ilonggos did not enthusiastically receive it. We survived and outlasted the rice crisis by subsisting on “binlod” (Tagalog: binlid) — 90 to 100% broken rice grains. Normally, binlod should be chicken feed, but undoubtedly, it fells better on the palate than corn-rice. Binlod is best eaten as “lugaw” or porridge. Sometimes, Nanay would be lucky to obtain some “laon”, which was only slightly better than NGA rice, and we would feel blessed.

Yes, we survived the rice crisis then and we can survive it now.

April 10: see Every man is guilty of the good he did not do…Voltaire, Poolah, Daily Musings, mackybaka! , www.CCLozano.com and Prospect Avenue:

My mom’s having a hard time ordering rice right now. She said the price of rice has risen twice over the week. She’s called all her friends and our relatives. One is selling a sack for 1,500 pesos, our aunt (who owns a stall in a public market) is selling hers for 1,800 pesos. Rumor says that a sack would cost 3,000 pesos in a few week’s time.

I don’t think there is a rice shortage at the moment. People are just getting greedy and hoarding the sacks out of greed and paranoia. It’s mass psychology at work. The rice crisis is a self-fulfilling prophecy that is slowly coming true.

Mom’s thinking of sending our workers out to buy NFA rice. It’s cheaper (18 pesos per kilo versus 35 pesos selling in the market). But you have to line up pretty early in the morning (around 5am) to buy the rice (shop closes at 10am). Each buyer can only buy up to two kilos of rice. There are cops (or soldiers) standing guard, making sure that everyone gets a fair share of the NFA rice.

April 11: see Splice and Dice:

That is the part where a morally bankrupt regime purports to be the moral buttress of the nation. That is the part where a Garcified leadership pretends to wrestle with the liars, cheaters and thieves in this nation when that leadership has nobody else to wrestle other than themselves. That, too, is the part where a gloriafied regime sees everything else as investments, owing largely for its economic eye, while failing to understand the basic difference between what is legal and what is just.

I’ve always believed that what is legal does not necessarily equate with what is just. While we may have laws, and we do have laws, there remains the sweeping thought and feeling that we lack justice. Invoking an executive privilege may be legal, but does it bequeath us any justice? Well beyond all that there is to be truly disappointed about, sanctifying that executive privilege, one which has truly become a privilege in the strictest sense of the word, by the prostitutes of the law corrodes the fists of justice. It’s a case where a distorted defense of a privilege which the constitution does not even explicitly provide tramples upon the written forces of truth and transparency, the gravity of which pins us back to a crisis worse than one plaguing our rice supplies.

279 comments

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  1. leytenian

    UP n student:

    wow…no wonder. skills, experience and educations must fit the job descriptions. uuwi pa naman ako. baka i will just apply as a teacher. lol. thanks

  2. jude

    “Aside from the tight monetary policies of IMF,masagana 99 failed because of arrearage(even before the entry of IMF sa picture).
    Those arrears happen to be from collateral free loans,it was good in paper ;collaterral free loans with support and supervison from the creditors but still it went haywire and many farmers still defaulted on their loans.” – KG

    True. That’s why it takes tremendous effort and political will to help farmers. I believe only government has the financial and coercive power to do that.

    That’s also why, under our system, I cannot blame banks, specially privately-owned ones, for having a pawnshop mentality. Why risk money lending to poor farmers when Treasury Bills give better and less risky returns?

    Government has the responsibility to make agriculture viable. But government should construe programs that are not just based on giveaways. Support, monitoring and supervision should be closely conducted. That’s why I must keep repeating that it isn’t easy. But, if there were more effort, better planning and more determination, it could be done. Even if, I must admit, it is difficult under our freewheeling political system where programs are only geared toward making a favorable impact for the next election.

    *******************************************************

    “jude, actually bicol’s an interesting case of how dynasties refresh themselves. the big shot was luis villafuerte who hasn’t been getting along with his son, among other reasons, because by all accounts the son is more dyanamic and forward-thinking. if i’m not mistaken they were actually openly at loggerheads for a while.” – mlq3

    While it may be true that some of our political dynasties have found ways to reinvent themselves to make themselves more palatable to the media and the public, it is just another way to retain their predatory hold on power.

    Just as the mafia sees their underworld activities as a family enterprise, the ruling classes see politics as a family business. And, as is the case in family businesses, some are more creative and innovative than others. There are Michael Corleones who come out of Mafia families.

    But despite the smooth facade and deodorized image, it doesn’t change the fact that dynasties use their place in society to entrench themselves and to enrich themselves further. The devil, after all, can wear Prada. But would that make him less of a devil?

  3. anthony scalia

    mlq3,

    i firmly believe he himself did not order any cheating, and did not put any plans in place to cheat…

    ****gulp**** i may have to agree

    when i say ‘FPJ cheated’ i meant ‘FPJ’s camp cheated’

    as for the people around him who certainly have their fair share of knowing how to commit fraud, they lacked the means or the coordination to do so except perhaps in their individual bailiwicks

    thats the key phrase – “their individual bailiwicks”

    by the time they realized it would be close race, they couldn’t mobilize cheating even if they wanted -and the place was far ahead in that game.

    you’re speculating

    though i think they may even have been conceited enough to think they’d swamp aside those problems in the manner that estrada’s victory was massive enough to make cheating impossible in 1998

    for sure that did them in. my goodness walang sinabi si FPJ kay Erap since Erap is much more experienced: Mayor, Senator, Vice-President.

  4. homegirl

    Wala akong sinabing agree ako sa hyperwage … walang kasama ang hyperwage sa mga discussions ko.. simple common sense lang..

    1. CVJ said if we raise the wages of maids from P2T to P20T (x10) the automatically, the exchange rate will become x10 (from 1:40 will become 1:400).

    Sa column ni Manolo, ang bigas sa Pinas P36/kg, ang bigas sa Hong Kong P37/kg, paano nangyari yan? Ang cost of labor doon (P28T daw ang janitor) is very high ilang thousand lang sa Pinas.. if we follow CVJ logic, dapat same multiplier and cost of rice doon.. imported pa naman lahat… !!!!

    Sabi ko di yata common sense yan.. and so I gave an example of wealth distribution from a billionaire to non-billionaire para klaro kay CVJ.

    I am very very happy that CVJ admitted he is wrong and has acccepted that x10 increase in wages (or purchasing power) hindi pala automatic x10 ang exchange rate or inflation..
    (read his agreement above)

    Salamat CVJ for accepting correction to you false statement.

    2. Challenge naman ni CVJ to find such a person. Sabi to set theory gamitin mo.. okay na naman sya..

    3. Ngayon, what is the mechanism of re-distribution of wealth from rich companies to poor workers? Alam nyo ba ang Globe Telecom yata has 80% gross margin?.. Nabasa ko yan sa inquirer..

    Sabi ng iba, taxation is the mechanism.. so far naman, it has been proven ineffective.. for the last 25 to 30 years.. ang gap ng rich at poor grabe.. (we have 29 million poor compared to 26 million 23 years ago?)

    Sabi naman ni Bentulan, wage increase is the mechanism. at saka tax deductible naman lahat ng wages di ba?

    4. Whatever is the mechanism di ko problema yan..

    5. At puede ba CVj mag-research ka na lang. tanong ng tanong ka sa akin.. hi ako puede mag spoon feed sa yo.

    Basahim muna yong libro.. binasa ko pero di ko maintindihan ..

    but, common sense lang ginamit ko ..

    tapos ako ha..

    doon ka na mag-reklama sa author ng idea na yan…

    …………..>>>>>>>>>>
    homegirl, even within the same approach, the outcome is dependent on the inputs, specifically, (1) the income of those giving the salary, (2) the amount to be given to the hyperwage recipients, (3) the number of givers (i.e. employers) and (4) the number of recipients (i.e. maids). I’m asking if you can give something more reflective of our actual situation than your 1 billionaire giving 1 million to another person? Also, in your proposal, is it necessary for the maid to be paid by the employer or can the salary for the maid come from someone else (i.e. the government or another rich billionaire)?

  5. cvj

    Sige homegirl, salamat sa mga paliwanag mo. As far as distribution of wealth from rich to poor, pareho tayo ng panig. Hindi lang tayo siguro magkasundo sa paraan.

  6. The Ca t

    In order to hire the right staff, the manager must also understand it. How could he manage if he doesn’t have a degree in management…It is still part of his duty.

    So the Senate and the COngress should be abolished because most of them are lawyers and do not have management degree.

    Your opinion reveals that of a rank and file mentality.

  7. The Ca t

    The dollar price remains the same. (I am assuming that the laptop is imported.)

    In coming up with a theory, even the assumptions should be realistic. Yours’ is so far out that no one would take you seriously.

  8. The Ca t

    laptop issue: google search price elasticity of demand, new product innovations and competitions.

    Don’t venture on principles that you do not know very well. Sometimes, it is best to keep quiet.

  9. cvj

    Ca t, going by your line of reasoning, laptops bought in the Philippines are usually imported, so it is realistic to make such an assumption.

  10. The Ca t

    Ca t, going by your line of reasoning, laptops bought in the Philippines are usually imported, so it is realistic to make such an assumption.

    By adding as many zeros to the price of the laptop as you the same zeros to the wages.

    Even my abacus would not add that up. mwehehe

  11. leytenian

    another benigno here? i so love my own people.

  12. The Ca t

    another benigno here? i so love my own people.

    Read the archives, you’re getting funny and ridiculous.

  13. cvj

    Ca t, i don’t think the abacus is the problem.

  14. Bencard

    if fpj’s alleged plan was that good and brilliant, why was it not adopted, nor advocated, by anyone who wants to ‘shine’ politically. did he have a copyright on it or something that nobody is talking about it after his demise, except of course cvj?

  15. cvj

    Bencard, you’re giving the mainstream politicians too much credit in terms of their ability to discern ‘brilliant’ ideas, while ignoring the voices in the wilderness who have been sounding the alarm for years. Perhaps those who wanted to ‘shine’ politically did not have the foresight to anticipate events unlike the Anakpawis Party-list and related advocates for food security (and food soverignty).

  16. Bencard

    cvj, isn’t the reason why those little “voices in the wilderness” were largely ignored was that they were too simplistic and primitive? almusal, tanghalian at hapunan are not the end-all and be-all of filipino life – not even of the masa. this aboriginal objective had long been gone from the average pinoy thinking. the proverbial ‘house and lot’, a ‘fridge’, electricity, running water, sometimes a workable jeep or car, radio or t.v., an occasional movie or trip to the city, ‘malling, among other things, have long become part of the pinoy’s basic needs, apart from the need for food.

    fpj and his believers have simple solutions to complex problems. the masa may be poor but they are not stupid, nor with stone-age mentality.

  17. leytenian

    bencard:the masa may be poor but they are not stupid, nor with stone-age mentality.

    true , therefore our leaders lack the knowledge and the masa are educated not stupid. no wonder it’s hard for them to manage because the people are smart enough to disagree nowadays. It could also mean that our current leaders are not aware of its own human resources. who do you think has the stone-age mentality?

  18. Bencard

    leytenean, perhaps i should modify my statement. the masa were not stupid to buy into fpj’s simplistic “almusal, tanghalian at hapunan” brand of economics. i cannot say the same thing for their choice of erap in 1998, or for electing trillianes, jamby, jinggoy, revilla or lapid as senators.

  19. jude

    About “voices in the wilderness” and their “alarms”, it’s a broken record that has been playing for ever since I can remember. Maybe even way before I was even born. The alarmist tale that the Philippines is a social volcano that may soon explode was often mouthed by my sociology teachers and several priests, ever since I was in grade school and all the way to college. I had the highest respect for these people and, at that time, I believed them.

    Looking back, these mentors must either have overestimated the capacity of our countrymen to strive for change and a better life or they must have underestimated the capacity of our countrymen to endure endless insults by our politicians to their intelligence and dignity. Matagal na tugtugin yan, ‘la namang nangyayari kundi puro daldal, tulad ni cvj.

  20. Shalim

    According to the discussions of homegirl and CVJ, i can see that hyperwage theory’s proposition or hypothesis is correct pala: There is no 1:1 correspondence between wages and prices of goods. therefore, increasing wages sa DH from P2,000 to P20,000 (which is `10x) does not result into the same 10x increase in prices nor does it result into 10x depreciation in currency (1:400 exchange rate). There is some truth to Hyperwage, in this case, because there is a positive net effect in favor of the maids. Tama nga naman, based on our actual knowledge of reality.

    ‘Cat’ is right, some assumptions have to be based on reality. The 1:400 scenario of CVJ was not based on reality.

    I heard that GOCC’s pay their janitors or similar positions more than P20,000 already (like GSIS). Is this true?

  21. cvj

    Shalim, what i told homegirl above (at April 28th, 2008, 3:12 pm) is that given her specific example of a billionaire giving one million to another person, the exchange rate will not necessary deteriorate to 400:1. However, her scenario does not reflect the actual case in the Philippines. You have to plug in and model the effects of a 10x wage increase with more realistic inputs as i mentioned (at April 28th, 2008 at 6:30 pm) above.

    It is a well known principle in economics that if you hold productivity constant, and if there is no excess production capacity, there is a positive correspondence between wages and the prices of goods. This is because demand outstrips the capacity to produce and you have more money chasing after fewer products.

    What the author of Hyperwage is contending is that the ratio is closer to 10:1 (ratio of wage increase to price increase) rather than 1:1 because he believes there is a limit to hyperinflation for third world countries. Our experience during the last days of the Japanese occupation does not bear this out.

  22. cvj

    ‘Cat’ is right, some assumptions have to be based on reality. The 1:400 scenario of CVJ was not based on reality. – Shalim

    There seems to be a confusion on what constitutes an assumption. In the above, the 400:1 exchange rate is not the assumption, it’s the result given certain assumptions. In this case, the assumption (which reflects reality btw) from where the result derives is this – laptops are imported [aka dollars are needed to import laptops into the Philippines].

  23. leytenian

    bencard: i agree.. we should just move on and find solutions for our future. the past was traumatic enough. i can’t look back. sorry it’s just my personality.

  24. shalim

    Ha ha ha ha… very funny… It’s no use arguing with you CVJ. Apparently, you don’t know the word ‘induction.’ You’ve been caught in the act frothing in the mouth with a 1:400 scenario that you yourself have agreed to as not possible, in one case, and certainly not possible in other cases. You have been given an example by homegirl about big businesses giving more purchasing power to the workers using increase of wages as the mechanism for such. You still don’t understand and you respond with incoherent statements of inappropriate economic principles.

    You want more examples? Every Dec, the entire labor payroll costs of the companies are doubled!!!!! Does that result in “doubling” of prices of goods and services?????????

    1:1 ba ang correspondence?

    Think beyond the tip of your nose. That’s why I said, homegirl has driven home a point.

    But let’s move on. It’s no use arguing with a person who does not understand the rules of deduction and induction.

  25. cvj

    Shalim, during December, the prices don’t double because the retailers have already stocked up for the expected increase in consumer demand (due to the Christmas bonus). This is a different scenario from the tenfold increase in salaries without a corresponding increase in production capacity.

    Perhaps i owe you (and Ca t, and homegirl) a further clarification on the 400:1 (among other things) so i’ll line that up for a future blog entry (in my own blog) one of these days when time permits. I’ll let you know when that’s done.

  26. anthony scalia

    to all ‘Hyperwage’ discussants:

    baka lang you might be interested in a discussion of hyperwage by a hyperwage proponent:

    http://streetstrategist.weblogs.us/hyperwage-theory/

    (napakahaba lang nga – up to part 33!)

    baka makatulong lang sa discussion nyo

  27. shalim

    CVJ I think your reasoning is wrong. You rely too much on supply and demand as basis for prices.

    That is not so. The prices don’t double during Xmas because the laptops would then be P60T (from P30T, 2x).

    This would be a ridiculous double than the world market price for that model is worth only P30T in Singapore or Taiwan or USA.

    Which is the basis of all your debate with homegirl and cat above.

    Your analysis of what is happening during Xmas double wage is wrong. That’s why Homegirl and Cat couldn’t imagine a P300T laptop.

    As you can see CVJ, your blind faith in supply and demand can kill you (that if you double the purchasing power, you will double the demand, therefore your double the selling prices.)

    This is a wrong logic.

    Have you heard of shifting of curves? You assume that the prices move along the same curve. You are not aware that in many cases the curves themselves changes.

    You cannot just rely on your two semesters of economics to explain the real world of economics.

    Read Manolo’s column again. Since HKG wages for janitor is say 8x than Filipino janitor, then since our rice is P32, the price of rice in HKG shuld be 32×8 = i dont know how much that is… (P256/kg i think)

    yet the price of rice in HKG is just P37 to P40 per kilo… not P256/kg.

    Pagisipan mo yan CVJ.

    Regarding your point that ten-fold is untenable. You are out of touch with the background of the Hyperwage which, as I understand it to be, is to increase the purchasing power of the workers. The ten-fold is simply one reference figure that illustrates the principle.

    If ten-fold, is not for you. Puede na doubleee lang muna? 100% increase (2x)?

    quote from CVJ:
    “Shalim, during December, the prices don’t double because the retailers have already stocked up for the expected increase in consumer demand (due to the Christmas bonus). This is a different scenario from the tenfold increase in salaries without a corresponding increase in production capacity.”

  28. cvj

    anthony, thanks for the link.

    shalim, rather than simply mentioning the ‘shifting of curves‘, you would have to explain how that would help your point.

    You are out of touch with the background of the Hyperwage which, as I understand it to be, is to increase the purchasing power of the workers. – Shalim

    I agree with the goal of increasing the purchasing power of workers but the basis has to be solid and not on some cranky idea. We already have traditional neoclassical economic theory as well as some competing heterodox economic theories that can be used to justify the increase in the purchasing power of workers. These have the benefit of standing on more solid ground than Hyperwage.

    The ten-fold is simply one reference figure that illustrates the principle.. – Shalim

    As in medicine, the dosage matters. Taking ten tablets can have a different effect to two. That’s why we cannot simply take any reference figure and assume the effects will be the same. At the very least, we have to run it through a model (or at the very least thought experiments based on clearly stated economic principles and assumptions).

    If ten-fold, is not for you. Puede na doubleee lang muna? 100% increase (2x)? – Shalim

    Again, we have to run that through economic models to determine the possible effects.

  29. leytenian

    The cat,

    “that the government bonds are safer in terms of risk because the government guarantees the payment”

    true, that’s why our government are in debts because it guarantee payments to bond holders even if the projects did not result to positive outcome,revenue,profit,or excess. we have a budget deficit. when revenue cannot service the debts payable ( due or maturing) then the government can issue more bonds ( debt financing) to cover payments. When bonds are sold , it is added as cash to Cash flow statement but will become liability in our balance sheet. When liabilities exceeds assets, you know what’s going to happen.

    when our government keeps issuing more bonds or in layman’s term ( print more money) , this will increase the money supply and will result to Inflation.

    If we can print no more money due to risk of inflation, the government will have a tendendy to borrow using assets as collateral. Spratley deal may be relevant to why we borrowed money from China.

    That’s why a push for financial transparency is very crucial or else ,we filipinos will be burried in debts.

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