Bu-lat-lat (boo-lat-lat) verb: to search, probe, investigate, inquire; to unearth facts

Volume 2, Number 22              July 7 - 13,  2002                   Quezon City, Philippines







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A Reaction to Sonny Africa’s Article: ‘Philippines 2002: Beaten, Broken and Busted’

Bulatlat.com, which normally publishes letters to the editor and reactions on its “Feedback” section, posts a reaction by a reader, Gary Santos, as a separate item. The reaction to “Philippines 2002: Beaten, Broken and Busted,” an economic situationer posted two weeks ago and written by Sonny Africa, Bulatlat.com contributing editor, is published below unedited. In an accompanying letter, Mr. Santos apologizes for coming out strong but otherwise hints that that’s his style. We requested Sonny for a rejoinder which follows this reaction. – The Editor

By GARY SANTOS

I have pondered for years, as many of us have, why the Philippines has had much less economic development and political stability than other countries in the region. And while in this pondering, I come across the commentary of Sonny Africa that starts off citing statistics using a period that, purposely or inanely, covers the Asian Financial Crisis. In fact, he stops in the year 2000 where GDP growth had bottomed and did not bother citing the positive effects of growth up to Q1 2002 even if the statistics are available. Worse, he takes advantage of a statistical distribution (share of income by class) whose computation he probably doesn't understand as it merely is supposed to show what percent of families earn more relative to other families.

The key word here is "relative". It doesn't show whether the income of the top or bottom or the middle class increased or decreased. In fact, income in real terms increased across all classes if one goes survey by survey throughout the period cited. Using the same Income and Expenditure Surveys, the average family income adjusted for inflation increased by 30% over ten years or 3% per year adjusted for inflation.

"The rich have it good even in bad times!", he says. Sonny, everyone in this country was hit by the financial and political crisis. And, if you wait a little longer, you might find that poverty incidence in the Japan and the U.S. will soon increase just as dramatically as anywhere in the world should the macroeconomic forces at play go against them. Interest payments on Japan 's debt are now about 15% of its government's expenses. And, that's at interest rates of 2-3%! Should the rating agencies further downgrade Japan's debt which stands at 130% of GDP (ours is about 70%) and interest rates rise to 5% or more imagine what that will do their debt repayment capabilities. Also, Japan is in debt-deflation.

What this means is: prices are dropping which makes companies less profitable which increases the amount of debt going bad, making less money available to banks for new lending which further depresses asset prices (which hit the rich more than anyone else) which reinforces more deflation. This, by the way, Sonny, is what we experienced in less magnitude during the period you cited and it had nothing to do with internal policies or politicians. It had to do with world economic and political events. Sonny would have been better off with a thesis involving the effects of globalization on our country and the unpreparedness of the international monetary system to control capital flow.

But, let's examine the things said in the article: He belittles the 3.5% growth we experienced in 2001 and 2002. He belittles the growth of agriculture which covers 60% of our citizenry. Obviously, Sonny, you have no farmer roots as you would appreciate more irrigation and funding no matter how meager it has been. He doesn't think the return of foreign investor confidence is necessary probably because he thinks the country has enough capital for development. Forget the Malampaya natural gas project which will bring down to 25% our dependence on imported oil? Etc. etc. he says and ends with "All these supposedly [sarcastically said] show that the economy is reaping the benefits of structural reform measures." Sonny, all this was said for local consumption to boost confidence so that things won't get worse. It's an economic school of thought that even if macroeconomic conditions are fine, if there is no consumer confidence, things will not come together. Ay, Sonny, pakibasa ang basic economics mo uli. Swerte ka na hindi na-under kay Monsod sa U.P. Balita ko terror siya.

Second, the country needs foreign capital because we don't have enough capital for investment and job creation. Our savings rate is too low because we were capital challenged in the first place and made more so by the events during the Marcos regime and while things were going gung ho prior to 1997, the Asian financial crisis hit. What do you want, Sonny, the Banko Sentral to free reserves, buy back bonds, print money? Baka umiyak ka kapag tumaas ang mga halaga ng bilihin. Or, worse, write another piece and blame it on someone else.

Third, maybe you will just agree, Sonny, that we have too many opinionated kids that only seek to criticize and destroy but have no concrete, positive things to suggest. I suggest you sit down, study some more before you publish something for public consumption. Why eBalita decided to print such high school level drivel escapes me. Two decades of imperialist globalization? Foreign capital is bad, huh, Sonny? What if we have one of those structural changes that you belittle like allowing Filipino Americans to own land and they do buy despite people like you blabbing away, you don't think that is good? Tali ang pera nila dito, pare ko. What if we have another structural reform like dual citizenship and more come back with their savings? 1,000,000 Filipinos with $100,000 savings each is $100,000,000,000. That's $100 billion! Enough to pay off all of our foreign debt and more to boost. It will probably result in inflated asset prices flowing into general inflation if done in one year. But, if done over time as is likely to happen, the economy will be able to absorb it to the benefit to all. That's ALL

Filipinos including the poor your article did no help for as it just sought to kick anything it saw in front of it. This kind of foreign capital won't be the same as foreign funds buying into our stock market then selling and repatriating the money back. It will be like equity money being invested in a company. One of the reasons why the US dollar has been strong is because they allow foreigners to buy land. Capital just flowed into the US over the past two decades of imperialist globalization into their stock market, bond market and real property market and all of that boosted consumer spending with the wealth that capital flow created. Kasi, Sonny, when capital flows into a currency it has to go into a financial asset or a real asset. When they buy a financial asset like a bond, the price of the bond goes up and interest levels go down. When they buy land, the Filipino who is the seller gets a return on his capital since price has gone up and land as an investment becomes liquid again. Understand? Artificially-boosted growth spurt impossible? O, papayag ka pala.

Make up your mind, do you want foreign capital or not? If they do come back, it will be no thanks to you, Sonny. But, why use the qualifier "artificial"? You did not explain what artificial meant. Was it in the sense of fake? As far as I know, real pesos was paid to me when I sold stock market shares bought by those "imperialist foreigners". It made me feel richer and I bought a new air conditioner from a company that employed a Filipino and which sourced its inputs from Filipino made steel and motors. The likelihood of international upheavals? So, what does have to do with kawawa naman ang Pilipino? Kawawa ang mundo, 'ka mo. Besides, did you consider that we were once in the top ten gold producing countries in the world? Did you consider that if the price of gold goes up closed down mines may resume production and new mines may spring up creating employment in depressed areas, boosting spending as gold is sold to the Bank Sentral in exchange for pesos? Maliit pa na bagay na ito, sa ngayon. But, look at Q1 2002 Manufacturing output and get a clue of what is happening. Admittedly, things in the international front are not going our way. Our markets abroad are weak (Japan) or are weakening (the US) and it will be harder to attract capital - artificial or otherwise.

But, what good did your article do? Why didn't Sonny just stick to criticizing the corruption that permeates society? In fact, I wonder, since Sonny's article just served to demoralize, maybe he was paid to write the propaganda? No genuine land reform? How old are you Sonny? I was demonstrating in Plaza Miranda while you were probably just a probability. I've seen genuine land reform implemented. Look at the general Calamba area. Ask around. Go to the DAR. (Have you done this simple thing?) Go to Laguna, Cavite, Batangas and Rizal and find out how many millionaire farmers were created. Kulang ang reporma sa lupa? What about property rights, Sonny? And, how are you going to fund these purchases? Do you want to just grab land? Say so because you just say "no genuine land reform" without telling us how to implement your brand of land reform and continue to mouth the Marxist-Leninist-Mao line. Kapitalista na si Mao, hindi mo pa ba alam? How would you feel if I just grabbed that PC in front of you so that you can't write anything anymore? I promise to keep it for someone who can write something constructive.

You say: "Despite decades of rhetoric asset- and wealth-distributing agrarian reform has yet to take place. Agricultural development has dispossessed rather than liberated the peasant majority. Nor is there a long-term strategic plan for developing the domestically-grounded industry needed to create jobs and to accumulate capital. Health services, education and housing have always been sorely lacking." So sigue nga, how now brown cow? And while you are at it contact Gemma of KASAMA in Sta. Maria, Laguna and introduce yourself to her telling her how you got her name. Tell her of your thesis that there was no true land reform. Sigue nga. I challenge you to take the time out before you open your mouth again. Perhaps, Sonny ought to drop his class division rhetoric and consider that the truth may lie elsewhere. Perhaps, Sonny, you ought to consider that what we are experiencing is the natural effects of a political/power vacuum resulting from the fall of the Marcos 1966 to 1986 regime and that it takes time for a society so handicapped to recover.

I know it has been 17 years since EDSA, a long time but part of my pondering, Sonny, had to do with the Filipino psyche, it had to do with people like you. And, people like me who are incensed enough to react to put a stop to it. But, I do so with a purpose. Think about it. Lastly, I think it is about time that internet publications like eBalita and like Bulatlat.com take some journalistic responsibility. It is easy to write when there is anonymity. Harder when your real names and places of publication are there for everyone to see. Is this the character of journalists that will take over? If so, maybe Sonny you are right and I am dead, dead wrong. Gary Santos Cc: eBalita c/o Mr. Or Ms. "m"


Sonny’ Africa’s Rejoinder

This is a reply to the reaction sent by one of Bulatlat.com's accidental readers, Gary Santos, to the article "Philippines 2002: Beaten, Broken and Busted" which came out two weeks ago.

On statistics

The first issue raised concerns the choice of time and alleged selectivity. Actually the growth and employment data do include the latest available data (i.e. first quarter 2002 growth and April 2002 employment). And it would've been very misleading to leave the years of the Asian financial crisis out because how the country is affected by such events precisely depends on the government's economic policies. "World economic and political events" may be largely beyond any single country's control in the short-term but how any particular country is affected depends entirely on the "internal policies and politicians" in place. Consider for instance how China was least affected and how Malaysia was able to temper the worst effects.

Also, Gary may not be aware that different official data are updated at different times and with different frequency. For instance, the Family Income and Expenditure Survey comes out only every three years - i.e. 1985, 1988, 1991, 1994, 1997, 2000, 2003... - and this is the standard source for household poverty and income data. The article cites the latest 2000 data. Growth data is quarterly and employment every Jan-April-July-Oct (the most recent data was also cited). In other cases, such as with regional comparisons, the data for other countries is hard to come by so adjustments were made according to what's available.

In any case I wonder what "positive effects of growth up to Q1 2002" he means because unemployment was at record highs last year and, most recently, in April this year (data for which were provided). Besides, the country's economic problems are long-standing and dropping a year here or there doesn't really change the basic analysis much.

It's also worth affirming that what Gary calls "income share per class" (actually it's by decile, more accurately) really does measure the share in total income and not the "what percent of families earn more relative to other families" he claims. Total income is divided according to what each decile or tenth of the population earns. In any case, the relevant section actually just asserts that the changes in income shares show how inequity worsened which is a result that is very much supported by the data. There is no claim as Gary seems to think on whether "the income of the top or bottom or the middle class increased or decreased." The fact of gross and worsening inequity is also significant because it qualifies any claims of increasing average incomes - averages conceal how the richest disproportionately benefit.

A little knowledge is a dangerous thing

For the rest of the critique, the basic limitation is a tendency to over-interpret particular details where they are, either: 1) simplistically extrapolated to become overarching phenomenon; or 2) seen one-sidedly out of the context of their total impact. Erroneous reasoning like this has elsewhere resulted in such silly thinking like the "end of history" or the info tech-driven "New Economy".

Take agrarian reform. It's very easy to pick out pockets of agrarian reform where land was distributed and support services given and farmers made better off. But if these are just pockets then it can't be claimed that "genuine" agrarian reform has taken place. After some three decades of land reform (since PD 27), less than 5 million hectares has been distributed (or some 60% of CARP's 8 million ha. target). Yet even that is an inflated figure.

The DAR pathologically records land as "distributed" even if they still haven't been registered in the name of the farmer beneficiaries in the registry of deeds. There is also double-counting of accomplishments, for example when collective ("mother") CLOAs distributed in one year are counted and again re-counted when re-distributed the following year as individual CLOAs. There are also mounting reports of CLOAs sold or revoked from farmer beneficiaries - with land subsequently reconcentrated in landlords or usurers - or converted even during the 10-year prescriptive period under Sec. 27 of RA 6657. There is already much evidence that a statistically random walk in the countryside will yield a bigger number of poor landless peasants than "millionaire farmers" - i.e. there is no true agrarian reform.

The question of foreign capital is an example of the second error. How to look at foreign investment? Between 1961 and 1998, for instance, there was US$8.4 billion in foreign direct investment. But there were also US$9.5 billion remitted as profits, earnings, dividends, commissions, fees and royalties, for a net outward flow of US$1.1 billion. There also hasn't been any substantial technology transfer, the simple proof of which is that virtually all of the country's manufactured inputs, machinery and equipment (including aircon parts) are still imported - as it has been for decades. Yes there was access to export markets but, as the article asks, what was gained by the domestic economy?

The point is that foreign investments should only be allowed to come in if there are clear and lasting benefits for the country, sooner if not later. And the extent to which the country will benefit from foreign investments depends on government policies. Ensuring unrestricted outward capital flows, not requiring substantial technology transfer or local content, overly generous fiscal incentives and subsidized infrastructure, etc. all just drive potential gains to rock bottom.

Inaccuracies

It's also inaccurate to say things like the Malampaya natural gas project will "bring down our dependence" on imported energy. Energy giants Chevron-Texaco of the United States and Royal Dutch/Shell evenly split 90% ownership of the US$ 4.5 billion project. The 10% balance is taken up by state-owned Philippine National Oil Corporation (PNOC) which, however, is already planning to sell this to undisclosed foreign buyers. This will lead to the bizarre result that the country will be buying its own natural gas - the 2.6 trillion cubic feet of natural gas reserves in Malampaya off Palawan - from foreigners. It's the foreign investor-friendly Mining Act of 1995 that's probably to blame for this.

It's important to realize that being geographically in the Philippines does not a Philippine enterprise make. Likewise, Intel and Texas Instruments being in the country doesn't really make us a high-tech electronics exporter - these U.S. firms just happen to be here in export enclaves. This is why the job creation, imported inputs and industrial development figures cited in the article are important. Non-enclave industries are more integrated in the jobs and production chain of the domestic economy, not unduly reliant on imports.

Similarly with the development meaninglessness of the (true) statement that the country has been among the world's top gold producers. But the real question is: all that mining for whom? Mountains were leveled, forests cut down, rivers polluted and farmlands poisoned. Whole villages were displaced, families made sick, livelihoods lost, and opposition brutalized and killed. Yet after all that, mining communities remain among the poorest in the country. There isn't any development because the mining industry is captured by foreign mining corporations and local elites. In the end a handful of companies profit enormously while those who work hardest remain stuck in harsh, arduous and tedious toil and live in toxic-contaminated communities.

Also, capital has been flowing into the United States for a very large number of reasons. So many reasons, in fact, that to say that allowing foreigners to buy land is one of the reasons for strong dollar is really just a hard-sell pitch for allowing foreigners to buy land in the Philippines. Basically though, it's meaningless to take such specific economic policies (as on land ownership) out of the incredibly different economic contexts (like the United States and the Philippines) they're going to be implemented in.

To take just one factor inapplicable to the Philippines, the dollar is the dominant currency because its value in terms of other currencies is expected on the whole not to fall even when its economy is functioning at full capacity. Why? Well because it's the United States with all its attendant imperialist economic, political and military might.

Finally, it's also important to have a more than partial understanding of the nature and damaging effect of financial bubbles. Business press-like lamentations about the uncontrollability of capital flows are going to be little more than lip service if there remains an undue admiration of equity and bond markets. It's common these days for people to uncritically admire how financial wealth is "created" outside of an appreciation of how the volatile nature of today's unrestrained financial markets cause major dislocations in the real economy of jobs, production and investment.

Doesn't follow

There are also non-sequiturs. There's nothing stopping Filipinos - nor, indeed, foreigners - from bringing their $100,000 savings into the country (and if the argument is just on a flimsy ground like that, dual citizenship is reduced to foreigners wanting to have their cake and eat it too). Belittling government's glowing accounts of agricultural growth isn't belittling agriculture on which some 70% of Filipinos directly and indirectly depend on - it's belittling government's half-hearted efforts at developing agriculture, including insufficient irrigation.

As well as false premises. Why would someone seeking to profit from US$100,000 in savings invest in a company in the Philippines when it's more profitable to play financial markets (which is exactly what most moneyed people are doing now... like Gary and his stock market shares)? What "economic school of thought" is built around the explanatory variable "consumer confidence"? And so on.

Sometimes it's unpleasant to be confronted with facts that you're unaccustomed to. But facts are facts. Gary also railed about how the article had "no concrete, positive things to suggest." Anyone more open to the facts would perhaps also see that simply stopping with everything wrong being done now is the first and most important "concrete, positive" thing to do. Only when that's done can we begin to move forward. Bulatlat.com


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