Myths, lies and half-truths (Part I)

There are just a few major lines of argument we keep hearing as to why it is supposedly wrong, bad for the country, and/or irresponsible to call for the resignation -- worse still -- the ouster, of de facto president Gloria Arroyo. Let's try to answer them one by one.

Argument 1: The economy has never been so good. A change of government at this time -- whether through constitutional means, resignation or impeachment, or forcible removal by extra constitutional means ("People Power" and a combination of withdrawal of support by the military and civilian bureaucracy) -- would not be good for the economy because of the climate of instability and uncertainty it would create as well as the mismanagement that could ensue should a less competent chief executive take over.

One is tempted to simply retort that whatever economic growth there is, it is not being felt by the vast majority of the Filipino people. Latest official poverty statistics from the National Statistical Coordination Board (NSCB) for 2004-2006 show that 4.7 million families, equivalent to 26.9% of the total, were poor in 2006, an increase from 4 million or 24.4% in 2003. "Poor" means not being able to provide, in a sustained manner, for minimum basic needs -- food, clothing, shelter, education and health. This, despite the average 5.4 per cent economic growth experienced for the same period.

Independent think-tank, IBON Foundation, for its part disputes government data on employment. Joblessness eased not because the economy created more jobs but by sheer statistical manipulation. The definition of unemployment was recently revised to exclude discouraged job hunters from the labor force count. The effect of this new methodology in 2007 was to dramatically reduce the labor force participation rate (the percentage of population 15 years and above who are in the labor force) to 64% from the 66.5% under the NSO's traditional unemployment definition.

The result: more than a million jobless were erased from the books. In 2007, there was an annual average of 2.7 million unemployed Filipinos, a steep drop from figures recorded in recent years, placing the average unemployment rate for 2007 at just 7.3 percent. Still, the average unemployment rate of 11.3% over the 2001-2007 period shows the economy is suffering record joblessness despite government's attempts to obscure the figures.

There is no truth to the government claims of a healthy and growing economy. Government statistics are deceiving if not outright false. GDP/GNP growth are unsustainable and bloated reflecting the heavy reliance on OFW remittances; government expenditures underwritten by a policy of debt-dependence including loans for corruption-laden official development aid (ODA) projects; a persistent contraction of the productive sectors of the economy, specifically manufacturing and agriculture, with the manufacturing sector smaller than it was in the 1950s and agriculture, the smallest ever in the country's history.

The appearance of growth and improved fiscal position is also the result of the imposition of a hiked 12% VAT and other indirect taxes rather than an improvement in tax collection especially customs tariffs and income taxes of big corporations and wealthy individuals (including high-rolling government officials). The expanded VAT on oil and power, air and water transportation, non-food agricultural products, medical and legal services, etc. contributed significantly to higher prices of goods and services that caused even greater poverty. NEDA Director-General Augusto Santos candidly acknowledged that the higher prices of commodities resulted from the government's need to improve its revenue collection.

Ironically, revenue collections are not keeping pace with the increase in economic activity as reflected in "the highest ever quarterly GDP rates" that the Arroyo administration likes to crow about. The likely explanation why government is not collecting enough is either gross inefficiency or corruption or both.

The auction of government assets prettifies the fiscal picture but it is a short-sighted policy. More ominously, the more than P90 billion revenue created by asset sales last year is equivalent to the sum of all those earned through privatization in three previous administrations. It signifies an unprecedented selling frenzy. This cover-up for revenue shortfalls has not gone unnoticed by credit rating agencies and multilateral financial agencies such as the IMF who have expressed concern about the sustainability of efforts to cut the budget deficit and are already coaxing government to impose new taxes.

On the other hand, the strong showing of the peso is primarily the result of the weakening of the US dollar, a phenomenon that is buoying up currencies across the globe whether of the developed capitalist countries or the backward, mal-developed countries like the Philippines. For the Arroyo regime to claim credit is plain hogwash.

It is actually the record foreign exchange remittances of more than eight million overseas Filipinos that constitute the second biggest factor in the healthy state of the gross international reserves and the appreciating peso. Unfortunately, due to the import-dependent, export-oriented character of the economy, the overvalued peso is not necessarily a boon to the economy. The shrinking buying power of OFW families tied to a fixed dollar income sent by their relatives abroad and the shrinking market for more expensive Philippine exports attest to this fact.

Hot money seeking the best country to park in and earn interest from the speculative markets is finding the Philippines a safe haven so far, especially with a sure influx of foreign exchange from OFWs. It is contributing to the peso appreciation no doubt, but how long it will stay and what long-term impact such portfolio investments have on the economy is the more important concern.

The income disparity and social inequality has been going on since the birth of this republic. The situation worsened during the Marcos dictatorship and even under the regimes that followed, and the reason for this is not divinely ordained or in the nature of things but because of the conscious and active effort of the socio-economic elite and the governments they control to keep things that way. The social wealth in this country doesn’t trickle down because it’s not supposed to – despite the propaganda.

What the Arroyo administration has been doing is more of the same and worse. It pretends to give back, in terms of dole-outs, what it takes in by the billions of pesos through indirect taxes such as VAT and onerous foreign loans, such as the Chinese-funded projects, that the people will eventually pay back. These are then squandered on mind-boggling graft and corruption (NBN-ZTE and other scams, electoral fraud, bribery and patronage politics to buy the loyalty of congressmen and local officials) and wasteful as well as wrongful priorities (the servicing of onerous debt, bloated military and police budgets, unaudited “intelligence funds” and Mrs. Arroyo’s foreign junkets).

*Published in Business World
8-9 March 2008