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Jun 19

Squeezing the turnip

Today is the birth anniversary of Jose Rizal. See Filipiniana Blogosphere‘s tribute.

On to the present.

The President’s challenge: form a latter-day KBL. See Arroyo rallies allies behind her successor. As pols are always a suspicious lot, surely some will be mulling over whether this is a strategy to identify and then neutralize those with aspirations for the presidency (or conversely, to have them start lining up to reassure Madam she’ll be safe).

Speaking of allies… Ex-senator Mercado named RP envoy to China. How’s that for a blast from the past! Too bad Jun Urbano didn’t get the job.

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Speaking of allies… my column for today is Salceda in drag. It makes reference to two previous (2007) columns, Paying the piper and Unable to pass the buck.

My column took a cue from two blog entries. One from stuart-santiago, and the other in [email protected] who compares our situation to the story of the Emperor has no Clothes -except the kid who speaks the truth is sent to a re-education camp:

Sure, everyone knows our problems, and some people take pleasure in pointing out these problems. Some people take pleasure in pointing out that these people can only point out problems and never propose solutions. There is nothing wrong in pointing out that the emperor has no clothes, and there’s no solution to the problem of the emperor’s delusion that he is wearing the best clothes in the empire. Well, there is, but it is most unpalatable to those people who take pleasure in calling the child a fool. Their solution would be to play along.

And that’s my beef.

It has become our pastime to point out the problems; it has become our pastime to point out that it has become our pastime to point out the problems without offering solutions; it has become our pastime to point out that it has become our pastime to point out the problems without offering solutions and yet offer solutions that really do not address the problems. Yes, it is tiring to read that past sentence, because it is a tiring cycle…

…For example, most people are looking forward to 2010, and are planning ahead assuming that there will be elections in 2010, totally discounting the possibility that the current problem could derail the 2010 elections.

And forward planning assumes that the TRUE problem is known. The problem is that we can be so blind to the problem. So we think that a child who claims that the emperor is naked is the problem, not the emperor. So we deal with the education system, since it is producing people who see the emperor as naked. The solution stares us in the face, but we refuse to see.

The best way to move forward is to look at short-and long-term problems, and address them accordingly. Look at the real problems, and deal with them.

PS: The solution to the problem of the naked emperor is simple. Depose him, since he’s insane. But that would lead to instability, so the people would play along.

Thought-provoking or simply interesting articles on leadership, past and present, both in the West and closer to home.

Blogger Scriptorium suggests Rethinking Pinochet (and Franco) because of the troubling contrast between countries that went through fascist dictatorships, such as Chile and Spain, and how they’ve become not only economically progressive but also, healthy democracies, and the wastelands produced by Communist regimes in Europe:

A government that seeks to effect radical change, either forward to a progressive utopia (e.g., Communism) or backward to a lost golden age (e.g., Nazism), will be driven to use comprehensive coercion against all sectors that oppose the change. Where the change is sought by a small, Bolshevik-type cadre, the process will entail a struggle between the pro-change minority and a majority composed of groups that either oppose the proposed change or desire different changes. The minority must endeavor to force these social groups to toe the line, thereby creating a society that is more or less totall;y controlled by a single social faction. Hence totalitarianism.

On the other hand, a government that seeks to stop change, or to have limited or gradual change, will only need to use limited coercion. For unless most of society is united in desiring change justified by a widespread social myth (e.g., in 1789 France), the various social groups with their several objectives would easily reach equilibrium with a non- or limited-change government that, because it seeks no all-or-nothing agenda, can compromise with most sectors. So this government will generally let the sectors alone, reserving its ire for those with irreconcilable agendas. Hence authoritarianism.

It’s obvious, then, why the latter would more easily transition to democracy, whose very essence lies in subsidiarity, the idea that individuals and groups should be allowed to make their own choices. Subsidiarity would directly conflict with the radical-totalitarian program, for it would allow groups to opt out of the State-mandated change; and it’s inconsistent with the total social control demanded by radicalism. However, gradual-authoritarian governments would tend to preserve the relative autonomy of social groups, the continuance of which is often a part of the vague conservative/moderate stance of rightist dictators. And it is these groups that tend to lead the fight for democratic structures.

Moreover, it is usually during the gradual-authoritarian phase and because of it that groups become acclimatized to democratic power politics, because they are forced to temper other objects or their means to achieve the authoritarian equilibrium; and this enforced willingness to compromise is the vital requisite of democracy.

(The ongoing, posthumous rehabilitation of Ferdinand Marcos is a case in point, with no corresponding rehabilitation of the National Democrats taking place; indeed, even as Marcos’ once tarnished reputation is quietly being re-shined, the government of the day has effectively used anti-Communism as a justification for many of its actions).

The exception to Communism spreading misery and not much else, the People’s Republic of China, may be less due to actual Socialism but older, more durable, traditions in that country. This review of a BBC TV show, The Biggest Chinese Restaurant In The World, puts it best:

5,000 covers in all, located in a kind of Imperial Disneyland situated in the Hunanese town of Changsha. There were 300 cooks, wok burners like blast furnaces and a small army of waiters and waitresses, all identified by their separate regimental uniforms and drilled by Mrs Qin with martial songs. “Solidarity equals strength, strength is iron, strength is steel,” they sang, somewhat listlessly, while Mrs Qin enthusiastically led from the front, zealously promulgating her own version of socialism with Chinese characteristics. In a lovely image, you saw her counting the proceeds of another capacity night at the West Lake, the portraits of Mao on the banknotes flicking through her fingers at dazzling speed. Mrs Qin, naturally, was a member of good standing in the local Communist Party, along with most of Hunan’s other self-made millionaires. Eat your hearts out, Halliburton and Blackwater: when it comes to the profitable manipulation of government power, the Communist Party of China is the biggest cartel in the world, and Storyville’s fascinating film gave you a glimpse of just what it can be capable of when it gets going.

As for the Great Helmsman himself, zenpundit takes a look at his reputation for being an innovator in military doctrine and says he was most effective as a propagandist:

Mao, whose actual positive leadership contribution to Communist victory in the civil war was primarily political and strategic rather than operational and tactical ( his military command decisions were often the cause of disaster, retreat and defeat for Communist armies) had a perfect genius – I think that word would be an accurate description here – for operating at the mental and moral levels of warfare. Partly this was skillful playing of a weak hand on Mao’s part; the Communists were not a match on the battlefield for the better Nationalist divisions until the last year or so of the long civil war but Mao regularly outclassed Chiang Kai-shek in propaganda and diplomacy – turning military defeats at Chiang’s hands into moral victories and portraying Communist inaction in the face of Japanese invasion as revolutionary heroism. Yenan might have be a weird, totalitarian, nightmare fiefdom but Mao made certain that foreign journalists, emissaries and intelligence liasons reported fairy tales to the rest of the world.

Back in the West, there’s Hillary Clinton’s 5 mistakes, a sobering look at the former first lady whose presidential plans have been foiled:

Hubris was the campaign’s fatal flaw, from which the others, both strategic and tactical, derived.

And there’s The Comeback Id, an engrossing look at how Bill Clinton’s had to cope with being out of power.

Moving closer to home, the Economist takes a look at Yudhoyono’s courage and cowardice. Noteworthy here is how the Americans seem enthralled by the President of Indonesia, to whom they admiringly refer to as “SBY.” They speak of him the sort of glowing terms a previous generation of Americans must have used when talking about Magsaysay. I experienced this in a conference in Washington and it made me think how far away the Philippines has receded from the consciousness of Americans interested in our region.

But if Americans are enthralled by SBY, Filipino politicos are enthralled by Malaysia.

The history of modern Malaysia to my mind shows what would have happened to the Philippines had World War II not intervened: a Communist insurgency crushed, and two generations of one-party rule (conversely, I’ve always believed the Philippines, which had a head start, shows where Malaysia is headed once its population explodes). Certainly the instincts of Malaysia’s and Indonesia’s political classes are the same as ours, and that instinct is for a cozy one-party arrangement where factions can compete but not upset the boat. The urge among many in the political class, to neutralize the monster known as a national public opinion, and reduce things to a more manageable, local, problem for individual kingpins, helps explain why the Malaysian system is so attractive to them (parliamentarism combined with federalism: it represents a hankering, for those old enough to remember, for the political security of the prewar Nacionalista Party and for those younger, for the coziness of the New Society and the KBL).

Which is why the unraveling of UNMO’s grip on power in Malaysia must be galling and horrifying for these people. As Malaysia’s Badawi Faces More Pressure, you can see many of the “let’s emulate our neighbors” argument going down the drain:

Badawi has offered to step aside “in good time” to allow his deputy, Najib Tun Razak, to take over. But the chances of the perennial challenger Tenku Razaleigh Hamzah may well have been strengthened by the current turmoil and concerns about Najib’s viability in the wake of a series of scandals. Nonetheless, the SAPP statement is regarded as an ultimatum before the party potentially defects to the People’s Alliance, or Pakatan Rakyat, the coalition led by onetime Finance Minister and Deputy Prime Minister Anwar Ibrahim.

In recent weeks, the SAPP’s criticism of the Barisan has become louder and more frequent. Before, given the Barisan’s previous power, such a move would likely have led to expulsion from the coalition. But since March 8 national elections in which the Barisan lost its two-thirds majority in the parliament for the first time in the country’s history, disgruntled and previously sidelined politicians are discovering their potential marketability both to the Barisan and the opposition.

To wrest federal power from the Barisan, Pakatan needs another 30 lawmakers. Now, it has 80 against Barisan’s 142. With SAPP’s two joining its fray, the number required is down to 28. In Sabah, Barisan holds 24 out of the 25 federal seats. Over the past few months, speculation has been rife that lawmakers from this state would be among the first to defect. But Tengku Razaleigh, the 70-year-old perpetual prime minister-wannabe, told reporters that the state would back him in his challenge to be prime minister.

Moreover in recent weeks, Pakatan has suggested that even those in the United Malays National Organisation (UMNO) - the largest ethnic party, which leads the Barisan — and the Malaysian Chinese Association (MCA), the second largest ethnic party in the coalition, might be induced to cross party lines. Both parties have vehemently denied the possibility.

Certainly, Badawi has been assiduous in attempting to shore up his Sabahan base. He visited the state earlier this month to distribute more goodies including abolishment of the Sabah Federal Development Department, which oversees federal funds allocated for development. To control illegal immigration from Indonesia an the Philippines, a decades-old irritation for both Sabah and Sarawak, he has established a high-powered Cabinet committee under Deputy Prime Minister Najib.

But the assault on the Barisan has been relentless. On Wednesday the Election Court nullified the victory of a state lawmaker in the state of Perlis, possibly encouraging more to dispute election results. Opposition parties have perennially charged that the electoral process is fraudulent, often pointing to the dead who are still on the Election Commission’s registry of voters and accusing the Barisan of buying votes with cash.

This all seems like Malaysia’s version of our 1953, the year Magsaysay came to power. (Incidentally, see Mahathir’s blog.)

This story, How Much is That Steel Mill in the Window? , looks at prestige-driven big business acquisitions:

The paper finds that “Everything else remaining the same, the premium associated with national pride bids is almost twice that of the premium associated with non-national pride bids.” Using the authors’ conclusion one could put the cost of national pride to Tata shareholders at at least US$3 billion and that to Hindalco ones at around $1 billion.

The paper however notes that there may be offsetting gains. Governments may appreciate the nationalistic spirit and grant the acquirer favors such as tax advantages, or contract preferences. In many cases, in developing countries there are also links between bidders and politicians. There are also gains in goodwill among national audiences, and lower capital costs in international markets if larger size leads to better foreign recognition. There may be gains in acquisition of technology which would otherwise be unavailable. National prestige is thought to have its own rewards.

The paper does not however address the issue of the macroeconomic consequences of expensive acquisitions. As noted in an earlier article (Asiansentinel February 7,, 2007) India is a capital-short nation with a steel output one ninth that of China. Should it have paid over-the-odds for a company based in low-growth Europe when India’s own record of investment both in manufacturing and steel-using infrastructure was so weak? The record of 100-year-old Tata which was expanding by costly acquisition was a contrast to Korea’s Posco, which was less than half its age and had become the world’s number three producer and a technology leader, without having to make huge and costly bids. Indian media seem to have totally missed this apt comparison.

And it makes me wonder how the foreign expansion of Filipino big business overseas compares, in terms of prudence. San Miguel, established in Hong Kong since the 1940s, has expanded into China while its expansion in Australia follows the lead of the personal investments of Eduardo Cojuangco. Lucio Tan, John Gokongwei have expanded into China and I understand Henry Sy has been looking at setting up malls in India.

Incidentally, conspiracy theorists who are convinced Uncle Sam wants to set up bases in Mindanao, will find Fortress Guam Gets More Crowded grist for their convictions. But one thing’s sure: Filipinos will be lining up to fill the jobs the planned expansion of military facilities in that island will provide.

And then

44 comments

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  1. UP n student

    mlq3’s comment : … in a conference in Washington and it made me think how far away the Philippines has receded from the consciousness of Americans interested in our region.

    I think it is true, and it is probably because the US has seen enough evidence by now the latent responsiveness of the Pinoys to proddings or incentives from the outside. Besides, the NPA have been relegated to thugs (and a tinge of terrorism) as opposed to the cachet of war-of-the-worlds dichotomy of years ago.

  2. cvj

    Scriptorium writes as if:

    1. Fascist dictatorships did not exist in the rest of Latin America; and…
    2. …it’s still 1988. Back then, Jeanne Kirkpatrick’s distinction looked plausible until the Communist regimes in Eastern Europe fell one after the other the following year. After that, how can you still stand by Kirkpatrick’s doctrine?

    Regarding Chile, its first attempt at an ‘economic miracle’ under Pinochet via a mix of free market, tight fiscal and liberalized monetarist policies (similar to the Washington Consensus template) was marked with periodic instability and finally crashed and burned with an economic crisis in 1982.

    In its second attempt, Chile revised its economic strategy to include more regulation, taxes on incoming capital, research and development and government/private sector collaboration [aka Industrial Policy]. It was after this that its economy took off. Its second largest export, salmon, is a result R&D of the government’s noprofit research arm, the Chile foundation.

    http://www.reclaimdemocracy.org/articles_2004/chile_prospers.html

    Therefore, to link Chile’s economic growth to a fascist dictatorship instead of a set of economic policies is to commit an attribution error.

    Your proposition that China is an ‘exception to Communism spreading misery and not much else’ will be news in Vietnam.

    Also, the Chinese singing “Solidarity equals strength, strength is iron, strength is steel,” did not seem to help the millions who perished during the famine resulting from Mao’s ill-advised Great Leap Forward, so the proposition that its prosperity is because of its “older, more durable, traditions” does not hold. In fact, you can actually identify the exact year in which China’s march to prosperity began, i.e. 1978 when Deng instituted his reforms which include:

    1. household responsibility system,
    2. dual-track pricing,
    3. township-and-village enterprises,
    4. and special economic zones.

    The above can by no means be called ‘old, durable traditions’.

  3. supremo

    The US needs a remote island to build a base. Think Diego Garcia. It’s too remote to attract protesters. An island in Indonesia is therefore more attractive than mainland Mindanao.

  4. cvj

    The list of Deng’s reforms above is from here:

    http://www.rodrik.typepad.com/dani_rodriks_weblog/2008/05/re-uniting-development-economics.html

  5. Scriptorium

    To mlq3: Thanks for the pingback, it’s much appreciated. Just to clarify, though, I’m not in any way supporting the Administration’s attempt to use anti-communism as a raison d’etre, but merely to stress the need to distinguish the different kinds of coercive governance.

    To cvj: You raised a valid point, and I apologize for failing to clarify that my specific intent was to comment on the relation of ideology to political change and not to economic transformation. I’ve amended the post to take your comments into account. Also, I agree with your analysis of Chile, and its 1982 collapse was indeed the result of undue reliance of neoliberal measures that exposed its economy to currency and credit fluctuation. (For the record, btw, I’m distributist rather than pro-capitalist.)

    As to the Kirkpatrick thesis: I’m not sure the 1989 changes in Eastern Europe really refute its point. For one, 1989 was the result of top-down actions (initiated by CPSU chairman Gorbachev) rather than bottom-up changes initiated by civil society; and our point is that the latter precisely is more likely under a Rightist dictatorship that seeks to conserve, and consequently maintain residual freedom for, subsidiary social groups. Once can hardly imagine these changes under Brezhnev or Andropov even if Solidarity-type organizations formed in the USSR to seek democracy, and even with the same economic pressure. Rather, Brezhnev could well have used economic failure to force the West to grant concessions that would preserve the regime like selling low-price grain, as precisely happened before Gorbachev.

    In any case, the Kirkpatrick thesis was one of the major justifications for the Reagan confrontationalism that helped speed up the Soviet economic collapse, and which also shows the partly exogenous nature of the 1989 changes. I’m therefore reluctant to concede that the thesis is disproven by one of its results without stressing the quasi-Heisenberg uncertainty of such a conclusion. Of course, if I’m wrong on this score, I would welcome due correction.

    Thanks, and God bless you.

  6. cvj

    Thanks Scriptorium for clarifying that your blog entry’s focus is on the ideological and not the economic transformation aspect. Thanks as well for introducing the economic philosophy of Distributism. I just checked the corresponding wikipedia entry and i do agree with its key tenet that…

    the ownership of the means of production should be spread as widely as possible among the general populace, rather than being centralized under the control of a few state bureaucrats (some forms of socialism) or wealthy private individuals (capitalism).

    …is good economics, as it is able to rescue Capitalism from the Capitalists. The above principle is also what has been behind my insistence on the need to address the problem of inequality in Philippine Society. For that,i ‘m often mistaken for a Communist.

    I agree that Gorbachev provided the necessary top-down opening via glasnost which eventually led to Eastern Europe’s people power revolutions, but the same can be said of Pinochet who called for the refendum that ultimately ended his dictatorship. In both cases, we have the Dictator (one Totalitarian, one Authoritarian) allowing an opening, and the subsidiary social groups seizing the opportunity provided by such an opening.

    On Kirkpatrick’s estimates of likelihoods, the events of 1989 reveal the difficulty of assigning likelihoods to what may be matters of historical contingency.

  7. UP n student

    Sciptorium: “Distribution” makes sense where it says the ownership of the means of production should be spread as widely as possible among the general populace, rather than being centralized under the control of a few state bureaucrats (some forms of socialism) or wealthy private individuals (capitalism).. There should be understanding, though, the the concept of “spreading as widely as possible” is actually a challenge to the general population for them, on their own, to earn wealth or to create wealth-generating platforms.

  8. UP n student

    The State can only be depended on to do so much, and for wealth-generation, the most obvious is (as dictated by its budget and its ability to borrow money or to obtain charity-aid from other countries) that the state provides its citizenry with the primary- and secondary-education that assures good citizenship and an economic foundation. That, plus a promise of “property rights” against thugs in whatever attire.

  9. leytenian

    “The State can only be depended on to do so much, and for wealth-generation, the most obvious is (as dictated by its budget and its ability to borrow money or to obtain charity-aid from other countries”

    agree very much…
    models for economic growth are only good for reference unless a new leader is equipped with skills, experience and understanding datam( educational background) .
    the determinants of economic growth are always:
    employment, interest rates and population (higher education).. the rest will follow.

  10. KG

    flashback 2005:

    “hvrds Says:

    December 21st, 2005 at 5:48 am
    Karl

    Unwittingly government is the proximate cause of smuggling. It would take too long to explain why! Trade operates on information arbitrage. Economic policies differ amongst nation states and this results in differing developmental stages amongst ourselves and our neighbors. Case in point is the Peoples Republic of China and other countries run on the same model. Rice costs Php 6 / kg in Vietnam while here it costs almost Php 18 /kg China and Vietnam are semi-command economies. Strategic Industries are owned by the nation state. Foreign exchange rates and capital costs are state managed. In command economies depreciation costs do not exist. There are no capitalists to pay back cost of their investment. It is collectively owned. The State simply creates jobs that produce the value. Labor value becomes the primary cost. Here one must understand Adam Smith and Karl Marx and their theories on the labor value of everything and property rights that flow from it. Money becomes simply an idea of value. No country can compete with that because the state determines price and wages to sustain domestic development. All indsustrial economies did this to devlop. Till today the State subsidizes mortgage rates in the United States to make cheap housing available to all.

    Here in Philippine Islands these are still concepts that have not been developed unlike in our neighbor’s economies. Our policy makers believe for their own benefit that the market solely determines the prices. The deep and mature division of labor has not occured in the Philippine setting. Industrial capitalism is still a dream. The Philippine Islands remain to be hundreds of little bayans in the countryside, towns and cities. There is still no collective unitary BAYAN in the Philippine consciousness. That is why our bananas and mangoes and our women are better than our neighbors until they figure out a way to grow them in their countries. That is why we always run out of dollars because we have in reality a trade deficit in merchandise that runs to close to $10B a year. In spite of all the dollars we aearn in exports and remittances we still have a foreign debt of $60 billion. The BSP often boasts that we have $15 billion + in official reserves and another $ 15B + private bank accounts. Do the math. If we earn close over $15 billion in dollars every year why are we in debt to ther world? That means we are simply consuming more than we produce. Thank God we have gorgeous women to staisfy the men in Japan. Otherwise no Toyotas, Sony’s etc.

  11. leytenian

    KG
    those remittances do not directly goes to the government. most of the remittances are still being circulated around businesses and taxation.
    there’s a demand for retail… small business in our country. the rich are taking out savings and spending outside of our country. maybe we should discuss inflows and outflows of money…

  12. leytenian

    Inflow and outflow of Money…
    Hot Money Leaving the Philippines…
    From Cut and Paste…
    The Bangko Sentral ng Pilipinas (BSP) reported over the weekend that portfolio investments, also known as hot money, showed a net outflow of $189.9 million as of the third week of May, marking a steady departure of foreign funds from the capital market.

    In contrast, data from 2007 covering the same period showed a whopping $1.587 billion inflow, with investors getting increasingly optimistic about their prospects in the market. Hot money refers to investments in the stock market and the money market that are relatively easier to take in or out of a country.

    here’s full link…http://ipezone.blogspot.com/2008/06/asian-crisis-redux-hot-money-leaving.html

    see if we can share solution… and who do you think is responsible for not watching the market. I don’t think it’s the people..

  13. KG

    Leytenian regarding retail I had one for you on the previous thread:

    http://www.quezon.ph/1825/money-for-nothing-and-your-checks-for-free/#comment-834409

    of course the remittances are not entirely captured by the government
    who says they directly go to the government, that why money is circulated.

    capital flight is in deed an issue and of course you about the marcos money being hunted down by pcgg for the past two decades, and there are rumours that marcos money is coming in little by little.

    of course some members of the philippine stock exchange also trade in wall street like san miguel .

    when bonds are issued either by the government or any private corporation, it is a debt instrument where capital from outside the country can come in as well.

    your turn.

  14. leytenian

    KG,

    yeah i got that one…( retail) more on inflow and outflow..

    “when bonds are issued either by the government or any private corporation, it is a debt instrument where capital from outside the country can come in as well.”
    agree but what would be the result of issuing bonds uncontrolled because of other standard corruption charge… INFLATION…. it’s now 9.5 %.. wow.
    so… what would be the solution for the people? will there be incentives for them to start a small business when initial investment is higher and ROI remains ?????.

    we go back to our taxation…. the incentives of lowering a little bit our taxes. very little kasi… baka madapa pa tayo lalo… bwisit talaga itong utang natin… pati siguro ang ating reserve nababawasan na due to the IMF and world bank’s policy to pay…

    now interest on banks.. when interest rates on borrowing is lowered , it will attract inflow of money….

    back to my 3 determinants of economic growth… employment , interest rates and population…
    siguro sumakit ang ulo ni Gloria ngayon kung paano i- balance… o sumakit kasi konti na lang ang makurakot… this is not her area of expertise.

  15. leytenian

    but in fairness to our beloved woman president… i can relate to her. i do admire her courage to sit still. she is however open for advice. she is being fair. too bad enrile like winston garcia… pareho lang… pogi points. takot baka anong mangyari…. oh well… if they cannot open their minds to understand both sides , this will affect Gloria’s decision making… hay naku. parang… kakampi nga talaga sila. puro puti walang itim… it’s like my way or the highway… hahaha

  16. KG

    “back to my 3 determinants of economic growth… employment , interest rates and population…
    siguro sumakit ang ulo ni Gloria ngayon kung paano i- balance… o sumakit kasi konti na lang ang makurakot… this is not her area of expertise.”

    she is supposed to be a phd,that is the beef of many

    tax cuts really depends if how people use their disposable income and what the government does next.

    meaning reduce a tax and find a way to compensate,that is how the dice rolls .

    as for the people :do they save or do they spend.
    if you spend it is good for the economy,if you save it is also good.

    so it really depends.

    incentives have not been lacking. we have export processing zones, some incentives to attract new players,etc.

    but is that fair, again it depends on how you look at it.

    for small or even micro businesses many have been setting up micro lending facilities but it also depends on how the borrowers make of their borrowed money .

    as they say: life is what you make of it.

  17. KG

    like you leytenian i don’t edit. I think we need an editor.

  18. leytenian

    KG,
    I wish I can write like Manolo and CVG. That’s why I can’t create my own blog. Editor? sure I need it too. i just type and click submit without reviewing.. now i’m looking at my own mistakes… it’s ok KG.. i think most of us here are mature enough not to bully.

  19. leytenian

    oh i see… CVJ pala.. kaya pala KG is always correcting me. my apology.

  20. cvj

    No worries Leytenian 🙂

  21. cvj

    The State can only be depended on to do so much, and for wealth-generation, the most obvious is (as dictated by its budget and its ability to borrow money or to obtain charity-aid from other countries) – UPn Student

    agree very much…the determinants of economic growth are always: employment, interest rates and population (higher education).. the rest will follow – Leytenian

    I think both of you subscribe to the neoliberal world view in which the state has a passive role in actual economic activities. As hvrds has been constantly hammering (courtesy of Karl’s repost at at 8:28 am above), the State can also do much in terms of helping create ‘Strategic Industries’. Even that neoliberal posterboy Chile, that Scriptorium and i discussed above, had its leading economic sectors nurtured by the State.

    I know it’s kinda heard to accept that we need the active participation of the State in business activities because our government sucks, but that’s how it is. Sourgraping the role of government away and imagining that the private sector can do it alone is wishful thinking.

  22. cvj

    sorry, ‘heard’ = ‘hard’

  23. hvrds

    Talk about porous borders….

    “The trade records provided by the Philippine Trade Statistics, compared with those of the IMF, yield a seeming disparity in the volume and value of goods exported by the country’s trading partners and goods actually entering the country.”
    “Total importation from 2002 to 2007, as per IMF records, amounted to $284.70 billion while the Bureau of Customs (BOC) recorded only $195.01 billion, or a discrepancy of $89.69 billion, or an annual trade disparity of $14.95 billion or P747.50 billion (using US$1=P50),” Enrile said in his resolution.
    “If 12 percent value-added tax and an average duty of seven percent were to be paid on the goods covered by the above-cited trade disparity, the government would have collected an additional P89.70 billion and P52.33 billion, respectively, or a total of P142.03 billion in revenues annually for the same period,” he added.”
    “International Monetary Fund (IMF) records showed there was a “difference” or losses of some P150 billion when the volume and quality of products coming from other countries to the Philippines and the documents from different agencies related to imports were compared.” Philippine Star June 19, 2008

    I guess now that the Senate has accepted the figures from the IMF of the average unofficial imports of the country for the period 2002-2007 at $14.5 billion, the dark hole that is smuggling will be finging the liught of day. That is a extremly large figure when imports for re-export are deducted from official figures.

    It is utterly amazing how a large leakage of tax revenues is simply ignored.
    It is utterly amazing how a large amount of foreign exchange outflow is totally ignored. Since it is in the informal sector (smuggling), it does not exist.

    Then we have an economic adviser say that the social economy is in deep shit.

    What the hell is the social economy?

    Can’t he simply say to his lady boss that the economy is in deep shit because we proudly announced to one and all that we were piggy backing our way to economic development on the neo-liberal global movement and that markets alone would do the job of sustaining growth and development and governments should simply get out of the way.

    Now we have the BSP complaining about the IMF for insuating that interest rates have to move higher in a quicker fashion while we have the Finance Secretary saying that interest rates will have to move higher.

    Moneatry policy is supposed to be BSP’s job. Forex policy is the problem of the Treasury. (Finance) A leakage of forex in the amount of $14 Billion over the last five years is no joke. The tax leakages is another serious matter.

    The year 2007 saw an abundance of liquidity coming in but that is no more. (Hot money and privatization)

  24. cvj

    Re: hvrds comment (at 1:25 pm) above, aside from its impact on VAT collections, the understatement of imports between 2002 and 2007 as revealed by the IMF records and accepted by the Senate is validation of the hypothesis that GDP has been overstated during this time period.

    http://www.quezon.ph/1711/sent-back-to-the-supremes/#comment-759703

    Further proof that ‘ramdam na ramdam’ is smoke and mirrors.

  25. hvrds

    It would be too much to expect for government most especially this one to reform itself overnite. The BIR and the BOC have long been source of government patronage.

    It would take too long and the culture of import dependency is to embedded in the Pinoy pyshe.

    Tariff rates have already been lowered but the VAT of 12% on top has made it more profitable to import based on the decreasing productivity of the domestic sector. Plus all our neighbors susbdize their productive inputs while we subsidize consumption.

    It is not sustainable. There will always be a mismatch.

    Government is bound by a budget where expenditures for capital accounts at 10-15% of total and debt payments, salaries, maintenance and supplies and allotments for LGU’s make up the rest.

    The place to cut obviously are the debt payments and making government smaller.

    We have to temporarily kill the beast that is the present state (too much central government) and rebuild.

    Why keep on beating a dead horse.

    Why not simply remove the VAT and allow imports to temporarily bring down prices. When we run out of dollars do not use the credit card issued by the IMF.

    Just declare bankruptcy and work out a discount of all our foreign debts both private and public and start again.

    Reforming the bureaucracy that has long been polticized cannot be done by changing Presidents. We are guaranteed more of the same by thinking that reforms can be done through the electoral process.

    The fundamentals have been badly formed and will give way at some time in the future.

    Like Condi Rice had said – the birth pangs are always painfull.

    The Monetary Borad which is supposed to be the central command of any modern economy is a dumping ground of poltical hacks and mercenaries.

    The BSP simply follows the Fed’s lead. Now that will not do.

    Now which is true?

    Our fundamentals are good or the social economy is in deep shit?

    Today the smugglers are keeping prices low. What a country…

  26. PSimeon

    “…accept that we need the active participation of the State in business activities…” – cvj

    A little bit dangerous, if emphasis is on ‘active’. Who would decide/arbitrate when the GOP should intervene? And at what criteria?

  27. Scriptorium

    To cvj: You’re quite right, the democratization of many Right and Left dictatorships has indeed been top-down in character. In Rightist ones, though, the change is partly the result of strong social pressure from subsisting subsidiary organizations like faith-groups and universities; as, for instance, the liberalization of religion policies in Franco Spain (whether or not one agrees with it) was backed by bishops returning from Vatican II.

    A further factor that, I think, is more telling in Right than in Left is the problem of succession. Rightist dictators usually come to power through military revolt and not through ideological revolution, and their rule is therefore bereft of the institutional continuity furnished by a defined party cadre. Hence the fact that even unremovable leaders like Pinochet created transition regimes that were absent from the Eastern Europe and are not likely to be set up in North Korea or Cuba.

    BTW, I’m glad to meet, if only online, a fellow distributist:) If I may, I also recommend E.F. Schumacher’s “Small is Beautiful” as a brief exposition of its economics.

    To CVJ, UP n student, and Leytenian: For what it’s worth, I think the question of economic change is subject to too many factors to be answered with a single policy formula. However, I tend to agree both that State action cannot be excluded as at least a precondition for or a spur to activity, but also that economic “growth” is largely a function of private initiative.

    I suppose it’s something to examine on a case-to-case basis, depending on the stability of the market (including the credit environment), the level of productivity and consumption, etc. Assuming that the objective is increased production, whether State action should be in the minimum or maximum would depend on the need for it; as for instance, the collapse of investment confidence in the 1930’s was only reversed by State action culminating in the war production boom of the 40’s, and the East Asian miracle was helped by a good deal of State-business cooperation.

    God bless us all.

  28. Jeg

    Here’s where we’re at:

    cvj: “I know it’s kinda heard to accept that we need the active participation of the State in business activities because our government sucks, but that’s how it is. Sourgraping the role of government away and imagining that the private sector can do it alone is wishful thinking.”

    hvrds: “It would be too much to expect for government most especially this one to reform itself overnite… Reforming the bureaucracy that has long been polticized cannot be done by changing Presidents. We are guaranteed more of the same by thinking that reforms can be done through the electoral process.”

    Imagining the private sector can do it alone is wishful thinking.

    Imagining that reforms to the State can be done through electoral process is wishful thinking.

    That’s where we’re at. Welcome to the enchanted kingdom.

  29. nash

    @supremo

    Diego Garcia needs to be returned to its rightful owners! It’s a big blog in the UK’s history, the forcible eviction of the Chagossians…

    If someone suddenly told me to leave my home to make a military base, I would join the insurgents too! Call me a terrorist…but there, that’s one root cause…

  30. nash

    @supremo

    Diego Garcia needs to be returned to its rightful owners! It’s a big blot in the UK’s history, the forcible eviction of the Chagossians…

    If someone suddenly told me to leave my home to make a military base, I would join the insurgents too! Call me a terrorist…but there, that’s one root cause…

  31. kg

    http://www.quezon.ph/1825/money-for-nothing-and-your-checks-for-free/#comment-834021

    ……”punta tayo boc dahil dati batang pier tayo comnputer operator who handles ifm or inward foreign manifests, has seen too much with my virgin eyes how things happen. you noitice why our import data to country of origin their export data to us does not match,because boc does not share with other departments other than the nso and this is prone to technical smuggling.”

    I am looking for someone with authority to have observed the things mentioned above, and I found:

    http://business.inquirer.net/money/features/view/20080613-142406/Slow-governance-is-no-governance

    “Slow governance is no governance

    By Ernesto Ordoñez
    Philippine Daily Inquirer

    Good governance is not just about coming up with reforms, but also about seeing them through.

    If it takes too much time before recommendations are translated into concrete action, we have what is sometimes called “slow governance.” Others even say that this is no governance at all.

    Below is a table that shows an example of “slow governance” in the anti-smuggling campaign. The period starts in August 2004, when a recommendation was made for the Bureau of Customs (BoC) to give the Department of Agriculture (DA) and the Department of Trade and Industry (DTI) access to Inward Foreign Manifests (IFMs). The period ended on June 10, 2008—three years and 10 months later.

    Recent events

    The IFM lists the products imported, the ship used and the date of arrival. The BoC, an attached agency of the Department of Finance, receives this information two or more days before the ship arrives.

    If only the BoC and the smugglers know this information, they can engage in outright or technical smuggling, which includes misdeclaration and undervaluation.

    This is one of the main reasons why there is a yearly difference of about $10 billion between the value of goods countries state they export to us and what the BoC declares we import from them.

    Who is telling the truth?

    If it is the exporting countries, then unabated smuggling is causing job losses and at least P80 billion in forgone government revenues that we badly need for our food and critical requirements. This problem can largely be solved if we have a check and balance system where the two departments responsible for agriculture (DA) and industry (DTI) also have access to the IFMs.

    There used to be such a system in place.

    In March 2004, the Cabinet Oversight Committee on Anti-Smuggling (COCAS) was established. With the participation of three private sector representatives from Alyansa Agrikutura [Agricultural Alliance], the Federation of Philippine Industries, and the Fair Trade Alliance, COCAS broke the monopoly of BoC on IFM information and gave DA and DTI access to it.

    But when COCAS was abolished four months later, the BoC monopoly over the IFMs was resumed. Was it just coincidence that unabated smuggling likewise resumed?

    Swift action

    Three years and eight months after COCAS was abolished, another multi-sector body was finally formed, the Ports Transparency Alliance (Portals), which had its first meeting last April 18. On that day, the Alyansa Agrikultura, a Portals member, volunteered to provide more information about the IFM.

    At its second meeting last June 5, Portals again discussed the IFM issue. What followed was an example of swift governance.

    The very next day, on instructions of Finance Secretary Margarito Teves, Finance Undersecretary Stella Sales chaired a meeting at which the BoC proposed a plan to provide IFM access to both DA and DTI.

    To the credit of Customs Commissioner Napoleon Morales and Associate Commissioner Alexander Arevalo, the plan was made effective the following working day, June 10.

    Thanks to the swift action of Teves and certain finance department and BoC officials, what took almost four years to implement was accomplished in three working days.

    Next steps

    The DA and DTI personnel are making good use of their newly acquired access to the IFMs. For example, DA’s Simeon Amurao reports that simply comparing the IFM list of importers with DA’s list of those with import permits immediately reveals who the smugglers are. This was not possible without IFM access.

    Two other recommendations now await implementation. BoC has acquired expensive x-ray machines to view imported containers for identification of misdeclared goods. But like in the previous IFM practice, only the BoC has access to this.

    The Alyansa has requested that DA and DTI personnel, as well as accredited farmer and industry groups, also be given access to these x-ray machines. This way, cover-ups are minimized.

    The second recommendation is that Alyansa Agrikultura representatives, endorsed in a DA official letter to BoC signed last Feb. 29, be allowed to observe the inspection of containers of imported agricultural products for transparency and check and balance purposes. This was done in 2003, when the smuggling rate of container vans containing imported agricultural products in Metro Manila dropped from 40 percent to less than 1 percent.

    In these two and other critical anti-smuggling areas, will we see slow or swift governance? We have suffered long enough from the smuggling scourge.”

  32. cvj

    PSimeon, that’s fair warning. ‘Active’ in the context of industrial policy means a relationship of embedded autonomy between government and business [aka Scriptorium’s state-business cooperation]. Here’s Rodrik’s description…

    …the right way of thinking of industrial policy is as a discovery process—one where firms and the government learn about underlying costs and opportunities and engage in strategic coordination.

    The traditional arguments against industrial policy lose much of their force when we view industrial policy in these terms. For example, the typical riposte about governments’ inability to pick winners becomes irrelevant. Yes, the government has imperfect information, but as I shall argue, so does the private sector. It is the information externalities generated by ignorance in the private sector that creates a useful public role—even when the public sector has worse information than the private sector.

    Similarly, the idea that governments need to keep private firms at arms’ length to minimize corruption and rent-seeking gets turned on its head. Yes, the government needs to maintain its autonomy from private interests. But it can elicit useful information from the private sector only when it is engaged in an ongoing relationship with it—a situation that has been termed “embedded autonomy” by the sociologist Peter Evans – Dani Rodrik, Industrial Policy for the Twenty-First Century

    http://ksghome.harvard.edu/~drodrik/UNIDOSep.pdf

    Poorly implemented, the government-private sector relationship degenerates into crony capitalism. However, believing that we can attain first-world status without such strategic coordination between the business sector and government is to ignore the experiences of our more successful neighbors.

  33. cvj

    Scriptorium, i’m glad to meet you as well although i’m not sure if i can fully qualify as a ‘distributist’. I read through the wikipedia article and there is a lot i agree with, in particular – the theory on private property, guilds (instead of labor unions) and abolition of the private banking system.

    OTOH, i’m ambivalent to having the family as the economic unit. While i agree on the principle of Subsidiarity, i have a hunch we will have some disagreement (as i do with Jeg) on “which can be performed by a smaller unit”. One manifestation of this disagreement is my belief (contra-Distributists) in Social Security.

    Unlike Distributists, i’m also not agnostic on the question of which political order (e.g. democracy vs. dictatorship) to adopt although i agree in the need for context.

    I bought a copy of E.F. Schumacher’s book sometime back but haven’t started reading it in depth. On your recommendation, i’ll move it up my reading list.

    Seeing that you sensibly favor a case to case approach to economic development, I think you’ll be pleased by the recent pragmatic turn of Development Economics as described in the link i provided above (at June 19th, 2008, 11:10 pm)

    Lastly, you’d be interested to know that the Vietnamese peasants, through their everday actions, was able to reverse their Communist government’s policy of large-scale collectivization in favor of going back to household/family farms. I think that qualifies as a bottom-up success story for the Distributists (and fellow travelers like me).

  34. leytenian

    CVJ,
    “I think both of you subscribe to the neoliberal world view in which the state has a passive role in actual economic activities.”

    i did not suggest that. my comment on:
    http://www.quezon.ph/1821/the-return-of-the-sugar-bloc/#comment-829036
    “The government will enhance and promote an independent agency to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy.”

    There is no such thing as a passive role of government unless policies are working in our favor. Policies are EXECUTED actively from all departments. Obviously, nag tulog tulugan nga sila.. The process of implementation to achieve with postive results do not exist… ( hvrds). Meaning… weak executives, weak banking system… ( going back to transparency issue)

    talking about active participation of BSP to our small business: the bank may allow authorization and expand its outreach to help more small businesses sell their goods and services overseas. A BILL of Code .. policy should be in place- Like Small Business Regulatory Act.

    The bank ( BSP) has an active role to guide decision maker if interest rates should be adjusted lower or higher. Now , the executives role is to EXECUTE… No such thing as passive…

    furthermore: Members of the World Trade Organization (WTO) are required under the Agreement on Technical Barriers to Trade (TBT Agreement) to report to the WTO any proposed technical regulations that may affect trade with other WTO Members. I think we are member already.

    In terms of active role:again going back to 3 economic determinants for growth:
    1. employment…a policy to promote small businesses.
    2. interest rates– BSP
    3. Population: export of labor.

    These must be actively addressed and executed all the time together with active management on inflow and outflow. Risk can be prevented if transparency of reporting is being practiced.

  35. leytenian

    if i receive data from IMF that do not match with my domestic reporting. as president… what can I do… this mismatch of information has been there already the first day Gloria sit in office. If I am given the job… I am obligated to turn these things around with a time frame. Or else I will be fired. Project management must always look on finance, the rest can be executed easily if money is abundant.
    No wonder the IMF are very hesistant to lower our debts interest and provide cushion in our favor. Debt Coalition said, it is very hard to mitigate and negotiate our terms because we don’t have the credibility ( reputation) to practice according to the rules of Law. It does not exist. The brain of these leaders are only good for a sari sari store.

  36. leytenian

    Scriptorium Says:

    “I suppose it’s something to examine on a case-to-case basis, depending on the stability of the market (including the credit environment), the level of productivity and consumption, etc”

    agree but that’s a slow process to look at it. case by case is the job of an office according to market forces.. But looking at the whole Philippines, case by case will take us years to solve its case. Are you kidding me?

  37. UP n student

    to cvj: whether one wants it or not, the State participates in business activities and has a heavy hand in shaping the nation’s economy. All that one has to do now is back to Marcos/Disini pursuing the nuclear-option for electricity generation as well as FVR signing many Build-Operate-Transfer contracts during the days of rolling blackout. You in Singapore as OCW is also direct result from active participation of the state — a willful public policy, still continuing with the issue of the “English-as-a-medium-of-instruction”. All that one has to do is think of VAT of today — oppressive and regressive, you have noted —- and think of it side-by-side with a willful decision to forego another source of taxes where current Pinas tax policy gifts the OCW population — OCW’s (including those earning more than a million pesos a year) have no obligation to pay income tax to Pinas.

  38. cvj

    Leytenian, ok i stand corrected, what you described above is indeed not passive government. However, it still falls short of a relationship characterized by embedded autonomy between business and government needed to develop Industrial Policy. An example of the kind of involvement needed from government comes from a New York Times article back in August 24, 2004:

    Taiwan has traditionally grown and exported sugar, an industry that has recently fallen into hard times due to low international prices and other reasons. What should now be grown in the fields to replace the sugarcane that is the source of income for many farmers? In many countries, the result would have been a depressed rural sector, increasingly indebted farm households, and a drag on the economy.

    In Taiwan, the response has been a $65 million government investment program to develop a world-class orchid industry. The government pays for a genetics laboratory, quarantine site, shipping and packing areas, new roads, water and electrical hookups for privately-owned greenhouses, and an exposition hall—in fact everything except for the cost of the greenhouses. It also provides low-interest credit to farmers to help them build the greenhouses. – as quoted in Rodrik, Industrial Policy for the 21st Century

    The government must keep on doing the above even without a crisis because as another economist Robert Lucas wrote:

    A growth miracle sustained for a period of decades..must involve the continual introduction of new goods, not merely continued learning on a fixed set of goods – Robert Lucas, Making a Miracle in Lectures on Economic Growth

    UPn, your latest comment (at 8:57 pm) is more in sync with my view unlike the previous more limited role for government that you described in your earlier comment (at 7:02 am).

    Anyway, what distinguishes Marcos style crony capitalism with Korea Inc. is a relationship based on the actual performance of the business firm. This is what economist Alice Amsden calls a reciprocal control mechanism which i blogged about in the link below.

    http://www.cvjugo.blogspot.com/2007/04/amsdens-reciprocal-control-mechanism.html

  39. d0d0ng

    UP n student on, ” OCW’s (including those earning more than a million pesos a year) have no obligation to pay income tax to Pinas.”

    It is just fair to pay income tax to the country which provide the earnings. OCW did not earn, including a million or more, from the Philippines. Hence, there is no sense of Philippines of imposing tax on earnings it did not provide.

    Second, the OCW/OFWs have keep this country afloat with foreign remittances with very strong contributions in the economy:
    1. Local investment (houses, apartments, small businesses, schools, etc) and local spending stimulate jobs and domestic production.
    2. Increase country’s reserves and its ability to buy foreign oil.

  40. leytenian

    CVJ,

    yes i agree with you. with or without crisis, a back up plan must be there all the time. the new york time article was a good example.

  41. leytenian

    CVJ,

    here are market forces affecting small businesses to grow
    1. rising energy prices
    2. natural disaster
    3. access to capital
    whether it is for agriculture or retail…
    1 and 3 requires the active role of our government
    2 requires savings and alert preparation.

  42. KG

    Who says commenters /bloggers are not offering solutions, look again.

    It is like giving the emperor a robe to cover his naked body.

  43. UP n student

    to d0d0ng: GMA and the cabal inside Congress agree with you in demonstrating the famed Filipino bayanihan spirit —- that OCW-Filipinos who earn more than a million pesos a year should pay zero Pinas taxes while their fellow Pinoys working as a nurse or a teacher or a department-store clerk and earning half or even less (than the OCW) should pay taxes to Pinas.

  44. UP n student

    Interesting.. the blog-thread title is squeezing the turnip. If one does not want to feel the squeeze, one should leave the country.

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