PHILIPPINE POLITICS AND THE ECONOMY

Lately, if one were studious in monitoring the news from the Philippines, one would notice the very noisy political squabbling going around among the ruling elites. The core issue of the squabble is about the political legitimacy of the Arroyo presidency, which the opposition argued and proven rather convincingly to be a sham since the president cheated on the last election. However, the real trigger point that further deteriorates the political climate was the stratospheric oil price couple with the implementation of E-VAT, which put pressure on the cost of living of the majority of the Filipinos. Though the oil price increases were not the president’s fault neither was the near bankrupt fiscal situation, Filipinos nevertheless “blame” a perceived corrupt and “illegitimate” president for their misery. As a result, rallies and protests became a daily staple in this country and it is beginning to affect the economic situation in the country by projecting an image of instability that could easily descend into anarchy. As a result, businesses shun making investments until some semblance of stability and predictability is in place. This brings me to everyone’s question in mind, when will this all end? Well, setting aside the question of legitimacy of the sitting president, the current political turmoil can be attributed to the present’s ruling class own doing when they started EDSA 2 some 4 years ago. Again, setting aside the judgment on the previous president’s case, EDSA 2 enabled the disenfranchised faction of the ruling elite to ignore elections and instead opt for people power revolutions as a means of regime change and enthroning themselves in the position of power instead of waiting for the next election. Their justification is contained in the oft quoted phrase, “ 6 years is too short for a good president while it is too long for a bad one.” As a result, it has become a fanatical obsession of opposition politicians to hunt for a “smoking gun” of corruption or wrong doing of the incumbent president, using this as a basis for impeaching a president and if all else fail, launch a people’s power to topple it. It used to be that the Philippine economic boom – bust cycle closely follows the electoral cycle itself. Economic activity is recovering and improving quickly at the start of a president’s term culminating a peak during the mid terms and went on a steady decline until the next elections as investors adopted a wait and see attitude on the emerging economic policy of the next administration. However, with the prospect of having EDSA’s every now and then, that pattern of certainty, that cycle is ominously broken. Why would businesses hesitate with every regime change? Regime changes occur rather frequently in a democracy, so why the cautious attitude? Well, the answer lies in the political realities of the post – Marcos era. Politics has sunk to the level of vindictiveness and umasked greed with the faction in power threatening the economic interest of the deposed factions in the form of legal harassments and threat of seizure. It is no wonder that the disenfranchised faction would always seek to protect their interest by overthrowing antagonistic regimes. Furthermore, policy invariably changes with each regime changes causing serious losses among investors hence the caution. The proposed remedy floated by the politicians to solve the perennial politicking is to shift to a parliamentary form of government, which according to them would give the country stability that it hoped for by giving power to the person that could wield the most votes in parliament. As justification, they again use the phrase as well as pointing to the fact that it’s rather wealthy ASEAN neighbors are all parliamentary government with the exception of Indonesia. The proposal suffers serious flaws. First of all, none of the country’s neighbors could be considered as democratic in its truest sense. There is a limited democracy. The success of the Malaysia, Thailand, Taiwan, and Singapore could be attributed to the iron – clad rule of their political leaders. Oppositions are muted if not allowed little expressions but they were able to impose order and galvanize the populace towards economic growth. Clearly, its not the parliamentary system that makes it work rather it is the leadership and the iron clad policy on dissent that keep disruptive politicking in check. Second, politicking is not the problem per se that stagnate economic growth rather it is the consistency of policy implementation and the respect for rule of law and private property that is stifling growth. European countries are all parliamentary governments and they are as noisy as the Philippines could be (just look at Italy and France) but these countries were able to grow nonetheless simply because the economy is divorced from politicking. Certainty and predictability as well as legal protection make such divorce possible. Third, political allegiances are fickle and party loyalty is inexistent in Philippine politics. Destabilizing regime changes would become more frequent and “legitimate” under the new set – up, i.e., one doesn’t need people power to affect change but simple gather enough numbers. Fourth, parliamentary politics is about the number’s game. What assurances do we have against having a “bad egg” in the helm? In the present system, we could be assured that the “bad egg” only stays for 6 years. In a parliamentary system, the “bad egg” stays indefinitely as long as the numbers. It is not about the system, it’s the leadership and the culture of the ruling elite that is the plaque of the Philippines. To reestablish stability, it is imperative that the ruling elites “respect” basic property rights as well as contractual obligations, good or bad and not change them when another comes to power. In this way, the economy would become independent of politics. Lastly, though it may sound distasteful to me since I don’t support the present regime, let’s wait the next election to affect a change and not trying to circumvent it.

E-VAT LAW AND THE PHILIPPINE SOCIETY: A HISTORIAN’S VIEW OF A CRISIS IN THE MAKING

I never like writing about politics in my blog because politics are messy and I skip reading them in the newspaper for about 2 – 3 years already. This is because the stories are the same with little imaginative variation. It usually revolves around the “pie” and their relative share of it. You see politicians are just like spoiled brats that never grew up. They always complain that they never got enough share of the pie, i.e., that their share of the pie is small and insufficient for their gluttonous appetite even though it is big enough to feed a hungry family. And the one who wields the knife, i.e., the one in power always manages to get the largest slice. Expectedly, the ones who got the “small” slice complain about inequity and they go on ranting about it even to the extent of throwing tantrums. After some time and several barb trading, the knife welder would “give in” by providing the supposedly “injured” party with an “extra” slice of the pie though the combined slice isn’t as big as their slice just to stuff their mouth full and mute their complaint. But here is the catch; the extra slice didn’t come from the knife welder’s share. Rather, it came from the share of someone they knew would be angry but wouldn’t complain at all, the general populace. And after several partitions, the people eventually end up with crumbs! To add insult to injury, the politicians expect us to thank them for the crunchy and yummy crumbs! It is for this reason that I always deemed politics not only a waste of my valuable time since it doesn’t add to my knowledge but also a waste of my valuable computer memory because hard disks space is more valuable than writing about their trash talks. In addition to that, blogging about politics require me to spend extra sum of money to soothe my boiling indignation as well, e.g., I had to treat myself to a festive meal or watch a feel good movie. However, sometimes, it’s hard to ignore politics especially when it concerns both business and the economy. Take today’s headline for example. I woke up to discover that the high court has just lifted the restraining order on the implementation of the controversial E-VAT law and the government plans to implement them this November 1. Among the salient provisions of the E-VAT law was the removal of exemptions from a number of previously exempted transactions like electric power, gasoline, some processed foods, healthcare services, and other services. The income tax would also be increased from the present 32% to 35%. Furthermore, the law empowered the President to increase the rate by 2% next year in order to “improve” the fiscal situation, which all the more add burden to an over burdened populace. The intent of the law is to remedy the fiscal deficit of the government through increasing the revenue it could collect. Analysts especially foreign analysts from such institutions like the IMF, World Bank, Morgan Stanley, Citibank, and others would always painfully pointed out the “dismal” tax effort of the government, which stood at around 16% of GDP. It should be higher considering the fact that the tax rate is 32% plus VAT equivalent of 2% and other taxes. The conclusion, government should improve its tax collection effort and it still has some elbowroom to increase its tax rate. Really, who they think they’re kidding? It’s easy for them to say that because they’re not actually living here and hence, they’re not paying for their stupid advice! Besides, they stand to gain from the increase revenues because they would get paid for the loans they extended to the government. Don’t get me wrong; I’m not advocating that we renege on our debt obligation rather I deplore their prescription on solving the fiscal crisis. It’s not the inadequate tax take that is the problem but the system, the system of dependence on government “doling” as a means of enrichment and livelihood. Corruption is just one of the obvious form of that dependence on government to make money. Other forms include an entrenched, bloated and inefficient bureaucracy, unnecessary subsidies to buy political support from certain sectors of the society, wasteful spending like pork barrel funds, huge budget funding for “studies” and consultancy and the likes. On top of that, throw in economic mismanagement to the equation and there you have it, a ballooning budget deficit. Declining tax take is not the cause of the problem but the “symptom” of a failed system that is collapsing under its own weight and pressure from the environment. If I may allude to a historical precedent to prove my point here, one of the causes of the fall of the mighty Roman Empire is in its heavy exaction on the general population in the form of high taxes and often unscrupulous and “inventive” methods in the collection of taxes. The Roman Empire came to this situation because of its burdensome bureaucracy and military, its wasteful spending, and its ruinous economic policy, which were aggravated by endemic corruption. The effects of this abusive exaction was to trigger peasant revolts all throughout the empire but as the coercive power of the state were bought to bear against the dissidents, the Romans simply “evaded” paying taxes. Townspeople, barely surviving on their meager subsistent agriculture chose to give up their lands and freedom and offer themselves to the protection of a powerful magnate, which are usually government officials and senators since the latter’s households are exempted from paying taxes. These “colonus” or people of a “colonia” (Roman town) would work in the “Latifunda” (the equivalent of the modern day Hacienda) of these elites for a share of the crops. They are actually better off this way because they don’t have to pay the ruinous taxes at all but still they only earn subsistent wages, i.e., enough only to feed themselves. These colonus become the forerunner of the serfs in the European Middle Ages and the Latifunda become the precursor of the fiefs in the Feudal Age. As a result, monetary economy collapses, as less people were able to buy goods. Barter trading was revived. Economic inequalities became more pronounced and poverty becomes widespread. Taxes again fall short of expectation and chronic budget deficit appears. And what the Roman government did? They impose more taxes and inflict heavier penalty for failure to pay taxes, which all the more drive away the small remaining free farmers into the fold of the elites. Then, the barbarians came, and Rome couldn’t do anything about it because it is short of men and money. There are instances wherein the people actually welcome the invaders as long as these conquerors forgive their debt and lift their burden. The result, Rome fell and the Dark Ages sets in. Sounds familiar? Of course, history is repeating itself except that the Philippines is no Rome. It never was. Increasing government exactions only drives the economy underground further crippling the government’s tax effort, which invariably force government to raise more taxes and the cycle goes on until it couldn’t continue anymore and something happens. On the microscopic scale, both employers and laborers would seek means to “survive” and if the present labor situation is a gauge, things are set to get worse. Again, these are symptoms not the disease. Of all the economic classes affected by this latest crisis, the middle is the unhappiest of the lot. For unlike the poor (the ones living below the poverty line) who couldn’t pay anything at all even in better times, the crisis wouldn’t drastically change their status. Furthermore, the poor are the “pampered” class because of their number, which the politicians wasted no time in courting their votes by offering them subsidies and other forms of “bread and circus” as the Romans would call it when they surrendered their freedom in exchange for the imperial yoke. Rich, on the other hand, though affected would always manage to “get away with it”. The middle class however, is the ones over burdened with taxes and inept leadership. They are being pauperized and they stood to lose their status become noveau poor. The reaction? They immigrated not only to seek better opportunities but to escape hunger much like the Irish did when they leave their famine struck British ruled homeland in the 19th century and going to America or like what the Sicilians did in order to escape poverty and went to American or like what the Chinese did during the first half of the 20th century, escaping from the civil war. Again, this is a symptom of a decaying system and not the cause. Clearly, something has to be done to arrest the decline but RAISING TAXES is not one of them! Failure to address the systemic failure would lead to a situation where John Locke would describe as a man driven up to the wall and being denied of all his right, has no recourse but to exercise his one and only undeniable right, the right to rebellion. I hope that we don’t have to reach that point.

The Ceremony

There are certain moments in every person’s life when a point is reached when one could clearly see a break between the past and the future. Those are the moments when time stood still and everything that happened in the past flashes in front of you in a matter of seconds while at the same time, the future is shown before you like a premonition. However, those moments come at an inauspicious times replete of the honor and the dignity that should have accompany such rare and splendid occasions. It is in this sense of inadequacy of honoring the memory of that fateful moment that we humans created ceremonies in which not only we celebrate such moments but also to render it both solemn and dramatic, imbibed with the due importance that such moment deserve and consecrate it to our collective memory in the form of photo albums. As these ceremonies are repeated over the years and in each time with different actors, it has become a ritual and carry the force of tradition to the extent that it has become more important than the moment that it serve to commemorate; To the extent that the ceremonies supplanted the moment as the point of change; To the extent that the ceremonies has become the goal of the entire journey rather than the hard journey towards that moment or the moment itself. Humans, they are such succors for rituals and illusions. The truth of the matter is. The clear break happened way before the ceremony when one decided to reach the point of no return and cross it. The ceremony is just an imprimatur or a recognition of such successful crossing; an investiture of your new found status of a being different from the past; an announcement to the whole world that you are now ready to face a different challenge; a pronouncement to the entire assembly of human race that here is humanity’s newest hope, a hope that is consistently renewed every time the ceremony is performed. Last April, I not only closed a chapter in my life but also ended a phase as well and stared a new phase and begun writing a new chapter in my life and last October 1, I’ve formally obtained an imprimatur of my successful passing, a recognition of rights, and an investiture of my new status. Last October 1, I’d graduated from MBA.

TO MY LOVE, HAPPY BIRTHDAY

I started the day as usual and didn’t realize what the date is until I was filling out the date on a document that I was signing. Today is that time of the year when I would email you a two worded message saying, HAPPY BIRTHDAY!!! I’ve been doing this every year since we broke up and most of the times, you only replied, “thank you” until recently when you ventured to inquire my state of my life. And then, we would exchange one or two emails concerning each other's status and then, I had to wait till following year to start the entire process again. I didn’t simply email you to wish you a happy birthday. For beneath those simple words, I also wish you the best and also, I want to know how are you doing and if you are happy. I want to know this because I still care about you and I still love you after all this years even though the possibility of us being together was nil. I could have just included those questions in my emails but somehow I couldn’t. I felt awkward to ask especially now that you’re already married. I felt that I had no right to know what is happening to you in detail because we’re no longer together. Besides, what is there to talk about? Everything is in the past. No use to bring it up. At any rate, I just wish you a “Happy Birthday” and that “may you live a happy life”. And maybe, if I could, I like to say this, “I’m sorry for everything in the past and those unfulfilled promises and thanks for the memories however bittersweet and I would always love you”.