A solution must first of all be socially just

THE whole problem with the debate on the fiscal crisis is not so much, as the UP economics students say in their rebuttal of the Bello-Nakpil-Nemenzo paper, the lack of "sound economic reasoning." The problem is the lack of plain common sense in the analysis and remedies of the Arroyo administration, the 11 UP economics professors, Bello-Nakpil-Nemenzo, and the UP economics students themselves.

First, common sense dictates that before you offer solutions, you must first diagnose the problem. The bigger and more chronic the problem, the deeper one must study and identify the causes and the more radical the solutions. "Band aid" remedies may cover up and alleviate the condition temporarily, but these will only aggravate the problem in the long run.

Second, all the analyses and "solutions" offered so far have not squarely addressed the social and political dimensions of the crisis. They conveniently overlook and are silent on the question of social justice, suggesting that the



only way to tide over the crisis is by increasing the burden on those who have borne the brunt of hardship and sacrifice.

The Bagong Alyansang Makabayan (Bayan) takes the position that the current fiscal crisis and the impending repeat of a deeper and more devastating financial crisis than the one that hit the country in 1997, is but part of the chronic crisis of the agrarian and pre-industrial economy resulting in a continuing pattern of unequal colonial trade despite the so-called grant of independence in 1946. Further, Bayan asserts that no economic measure can solve the problem without first of all being socially just.

Chronic deficit

A fundamental feature of the Philippine economy is its inherent inability to earn enough from its exports in order to pay for its imports, especially from the US, Japan and the rest of the developed capitalist world.

We export raw materials and semi-processed or low value-added goods and import oil, machinery and a wide range of durable and non-durable manufactured goods such as cars, computers, electronic gadgets, food and clothes. This has resulted in chronic balance of trade and current account deficits because earnings from exports could not catch up with expenditures on imports.

That is why, since the Marcos dictatorship there has been growing dependence on some eight million overseas Filipinos who remit into the country more than $7 billion.

With the onset of "globalization' and the neo-liberal policy prescriptions of trade and investment liberalization, deregulation and privatization, whatever local industries could survive in the stunted economy were further subjected to unfair competition, dumping, cut-price tactics, and government exactions and restrictions until many more folded up.

Even the agriculture sector has been ravaged by the removal of protective tariffs and subsidies, with vastly cheaper agricultural imports flooding the market and driving tens of thousands of farmers to bankruptcy.

Because the economy cannot earn enough foreign exchange with this institutionalized unequal trade, the government has resorted to foreign and domestic borrowing.

Attracting foreign investments have become the be-all and end-all especially when cheap foreign loans dried up in the 80s. The belief was, this would set up the factories, create the jobs and generate the social wealth and capital needed to move the entire country forward.

But decades of reliance on foreign investments, loans and official development aid have caused further de-industrialization. The only "industries" existing today are those in extractive activities such as mining and those in semi-processing that produce low value-added commodities, more than 90 percent of which are made up of imported raw materials.

Sea of poverty

On top of all this, instead of helping develop the country, these foreign monopoly capitalists have siphoned off whatever domestic capital there is by sourcing their capital requirements locally instead of bringing in their much-touted investments and by repatriating billions of dollars of profit abroad.

The logical outcome is a vast sea of poverty and misery encompassing the entire country and people. According to census data, 75 percent or 58 million people are forced to live on P82 a day while 90 percent eke out a living on P137 or lower daily. A recent Asian Development Bank report said 12 percent of Filipinos were in "extreme poverty" and were forced to subsist on $1 (P57) or lower a day.

Fundamentally unsound

What has been papered over by government, the UP economists as well as Bello and company is the fact that the country's economic fundamentals are not sound.

The UP study draws attention to the economy's heightened vulnerability to "any large external shock" such as a sudden increase in global interest rates, a sustained increase in world oil prices, a sharp decline in overseas workers' remittances or anything that could cause the import bill to rise, including, ironically, attempts to revive an import-dependent, export-oriented economy.

Most damning of all is what the UP economists aptly described as the "deepening crisis" of the deficit and public debt. The deficit and debt are merely the exposed portions of the huge and festering problems of the economy: its basic incapacity to produce adequately for the people's needs because of feudal ownership of land and the absence of industrialization; its debt addiction and ensuing enslavement to international usury; and its lack of sovereign protection in the face of policy dictates of the International Monetary Fund and World Bank, and the importunings of monopoly capital as a whole.

To utilize a commonsensical analogy, how can the patient be fundamentally healthy if what is diagnosed by the experts as a simple case of cold turns out to be a deadly pneumonia.

Finally, where does social justice enter the picture in all the fine discourse about the current fiscal crisis and how to ride it out?

Sadly, the various "solutions" being pushed by government, academics, clerics, civic leaders and what not reflect this utter callousness and insensitivity to the people's demand for social justice.

The UP economists' paper warns against solutions that not only have little chance of succeeding, but would likely stir social unrest. But it falls short of requiring that a "solution" must first of all be socially just.

Philippine Daily Inquirer
Sept. 19, 2004