Will Econ-Cha Cha Benefit Corrupt Filipino Politicians Instead of the Filipino People?

Manuel L. Quezon III"s Twitter Account

Foolish people on Facebook say the dumbest things. I looked into the Freedom for Economic Foundation Facebook page. I keep finding idiotic comments written by mostly baby boomers (1946-1964). It's really that stupid that some people never learned even during the COVID-19 pandemic that protectionism doesn't work! As always, I wouldn't give them clout. Instead, I will give an idea how the comments were written. 

Somebody said something like this, "It's best to think about how to stop the thieves in the government. Not that economic charter change that's in favor of the thieves in the government." I'm not going to shame the person here to avoid getting personal. Where do these people who say such get their source? Would it be from the Catholic Bishops Conference in the Philippines (CBCP) which is ironically part of a multinational organization? Would it be from people in Bayan Muna like Atty. Neri Colmenares and Atty. Teodoro A. Casiño? Would it be from the IBON Foundation from the likes of Enrique "Sonny" Africa and Rosario Guzman? There's still the possibility of appealing the logical fallacy called Trust Me Bro or (insert insult) if they couldn't name the source. 

I wrote an article demanding proof that economic charter change will only benefit the oligarchs. I targeted Kabataan Partylist representative Rep. Raoul Abellar Manuel's statement. Now, I'll write this article to try and drive in some common sense. It's a problem some people get a master's degree (or even a doctorate degree) but lack common sense! Why is that? It's because the education system has been too focused on grades and too little on learning! That's why some people who got scammed are even MBA students, me included! 

We might want to look at the Marcos Years for a start

I'd like to point back at the Marcos Years again. People who lie that the Marcos Years were neoliberal need to do research again (read here). I would like to point out that the UP School of Economics' very own Emmanuel S. De Dios spells this out:

That argument might hold some plausibility if the economic record was brilliant to begin with. But it was not. And here one needs to underscore the importance of assessing the entire period of authoritarian rule, from late 1972 to early 1986.

Take gross domestic product (GDP) for instance: the average GDP growth rate from 1972 to 1985 (Marcos’s last full year) was all of 3.4% per annum. Per-capita GDP grew annually at less than 1% average over the period — more precisely 0.82%. Hardly a roaring-tiger performance. At that rate it would have taken 85 years for per capita income just to double.

For comparison, the average GDP growth from 2003 to 2014 — even under a bumbling and quarrelsome democracy — has been 5.4% per annum — with a rising trend. On a per capita basis, GDP today is rising 3.5% annually, more than four times the growth rate under the dictatorship.

The reason for the dismal performance under martial law is well understood. The economy suffered its worst post-war recession under the Marcos regime because of the huge debt hole it had dug, from which it could not get out. In fact, all of the “good times” the admirers of the regime fondly remember were built on a flimsy sand-mountain of debt that began to erode from around 1982, collapsing completely in 1984-1985 when the country could no longer pay its obligations, precipitating a debt crisis, loss of livelihood, extreme poverty, and ushering in two lost decades of development.

The economy’s record under Marcos is identical to that of a person who lives it up on credit briefly, becomes bankrupt, and then descends into extreme hardship indefinitely. It would then be foolish to say that person managed his affairs marvelously, citing as evidence the opulent lifestyle he enjoyed before the bankruptcy. But that is exactly what admirers of the Marcos regime are wont to do.

It is instructive that neither Thailand, Indonesia, Malaysia, nor any major Asian country catastrophically experienced negative growth in the early 1980s. The Philippines was the exception, following instead the example of protectionist and over-borrowed Latin American countries. This suggests that there was nothing unavoidable about the crisis the Philippines suffered, and that it was the result instead of failed policies. In 1977 the Philippines’ total debt was all of $8.2 billion. Only five years later, in 1982, this had risen to $24.4 billion. Thailand’s debt in 1982 was still only half that amount. Thailand and other countries of the region thus avoided a debt crisis and ultimately went on to attract foreign direct investments in export-oriented industries in the now-familiar East Asian pattern. But no such thing happened under Ferdinand E. Marcos, notwithstanding the arguments and exhortations of people like Gerardo P. Sicat (who would cease to be active in the regime by 1980). By the early 1980s, the pattern would be set where foreign direct investments in neighboring countries regularly outstripped those in the Philippines. (The intermittent coups d’etat post-Marcos did us no favors either.)

All this should correct the common misconception that the country’s troubles stemmed entirely from conjunctural “political factors,” notably that it was caused by ex-Senator Benigno “Ninoy” S. Aquino, Jr.’s assassination. One might not even entirely blame the mere fact of authoritarianism itself — after all Thailand, Indonesia, and Malaysia at the time were also ruled by despots of some sort or other, yet suffered no crisis. Rather the Philippine debacle was linked to the misguided policies that were structurally linked and specific to Marcos-style authoritarianism. For all its technocratic rhetoric and rationale, the Marcos regime never took economic reform, liberalization, and export-oriented industrialization seriously; it remained a heavily protectionist and preferential regime (think the cronies and the failed major industrial projects). The availability of easy loans was well suited to the priorities of a regime that thought it could stoke growth without deep reform and slake the greed of Marcos and his cronies at the same time. In the end a corrupt regime fell victim to its own hubris. 

Did Marcos even open up the economy or was he a protectionist? The first Marcos Administration was a protectionist regime. Hopefully, his son Ferdinand "Bongbong" Marcos Jr. will not repeat the same mistakes. No, foreign investments don't involve getting a loan from another country for the nth time! This study reveals that the late Ferdinand E. Marcos Sr. was a heavily protectionist and preferential regime. If Marcos was truly a neoliberal, why in the world was inflation out of control?

To use Marcos as an example to show why open FDI doesn't work, doesn't work! It's because his policies were heavily protectionist. Marcos was too focused on borrowing money, instead of inviting investors. The late Lee Kuan Yew cited in his book From Third World to First that he knew he would never see the money again. 

Instead, let's discuss how economic charter change may be something corrupt Filipino politicians, wouldn't want

Let's use some common sense now, shall we? Why do you think Marcos chose the approach of Latin countries' overborrowing approach? One may think about why Venezuelan politics is protectionist. Do you remember when President Nicolas Maduro caused an outrage by eating at Salt Bae's restaurant? The same establishment also caused outrage when General Secretary To Lam ate there. As I look into Venezuela, why do you think people like the late Hugo Chavez and Maduro continue to promote their defective policies? Why do you think these defective policies that keep Venezuelans poor is still being done? Why do you think North Korea's President Kim Jong Un (who acts more like a king than a president) and the Kims keep up with their poor policies? Why do you think the late Fidel Castro kept Cuba poor and protectionist? Who do you think Mao Zedong kept China poor? It's all about maintaining power.

As I look into the biographies of tyrants, keeping the people poor is a common tactic to stay in power. I remember that part was even mentioned in the Netflix documentary How to Become a Tyrant. A population that's poor and hungry is easy to manipulate. Why is crime heavier in areas where people can't afford their basic necessities? It's easy to manipulate people who have too little money to even have a roof on top of them and eat three meals a day. I was reminded of why it's often said, "Communism is good, but only if you're the one in power." The same goes for other forms of dictatorship. Kim Jong Un and his predecessors enjoy life at the expense of North Koreans. Mao was obese while the rest of China starved. Maduro is overweight while Venezuelans can't even afford meat. A common denominator among many corrupt politicians is protectionism. Keep people unemployed, and poor, which in turn, makes it easier to manipulate them. Marcos was able to rule from 1973-1986 nearly unchallenged because it was a fake parliamentary system (where the president, as Benigno "Ninoy" Aquino Jr. would describe as "all-powerful") and a protectionist regime. The OFW program was also under the Marcos regime. Why are we still maintaining policies that perpetuate the OFW program when it's just a short-term boost?

Sure, 60-40 doesn't necessarily prohibit foreign investors but it's still discouraging them (read here). Economic charter change would soon make it possible for FDIs to invest in the Philippines, even without a local partner. Sure, investing in Vietnam has a few industries with ownership limits. However, Vietnam allows a few industries to have up to 70% share ownership on the side of the FDI. for MNCs investing there (read here). If more FDIs were investing in the Philippines then there would be more job opportunities So what if the business was owned by a foreigner and not by a Filipino? What's important is that the business obeys the laws, provides employment, and pays taxes properly. Would you prefer to work for an abusive Filipino businessman and use substandard Filipino products, all in the name of nationalism?

I don't see how more job opportunities will benefit corrupt Filipino politicians. Instead, econ cha cha will provide badly needed jobs. If there were more jobs then salaries are bound to increase. The Corporate Finance Institute also writes this:

Supply and Demand in the Job Market

Similar to the markets of goods and services, job markets also follow the supply-demand mechanism. When the quantity of workers demanded is equal to the labor force available (the quantity of supply), the job market reaches its equilibrium point, and wages can be determined.

The wage level rises when the demand is greater than the supply and lowers when the supply exceeds the demand for workers. However,wages cannot always move freely. There is often a floor determined by the government, which is known as the minimum wage.

When the equilibrium wage is above the minimum wage level, introducing a minimum wage will not lead to a major impact on the job market. When a minimum wage is established at a level higher than the equilibrium wage, the quantity of demand will fall as businesses will instead try to control their labor costs by reducing the number of employees.

The quantity of supply increases as there are more active job seekers motivated by the higher wage level. It forms a gap between supply and demand and thus, leads to unemployment. Despite this drawback, the minimum wage policy can provide both economic and social benefits. By increasing the wages of low-income workers, the government can reduce its spending on social programs to support these individuals and relieve the economic inequality at the same time.

In short, raising salaries when there's too little demand for labor, is bad economics. Economics isn't magic and profits aren't necessarily unpaid wages. I find the idea baffling that people think profits are always unpaid wages, never mind that companies need profits to survive! Back to topic, we need to think that when there's more job availability--these companies will be bidding for labor. It would mean that if a company can pay a higher wage and better working conditions--more people would want to work there. Sure, prices will go higher because the cost of production will go higher. They may go lower during economies of scale. However, people who can afford to pay higher will definitely pay higher if the offer is reasonable. 

Why would corrupt Filipino politicians want econ cha cha if it gives Filipinos more work? If more Filipinos get work then the harder it becomes to bribe people. Sure, some wealthy people accept bribes but only if the bribe is super high. However, people who are starving and unable to find work are much easier to bribe than government officials. Which is easier to bribe? A high-ranking official who would want millions if not billions of pesos or a poor person who can't think clearly due to hunger and financial problems? The answer would be the second. I heard some people can be bribed to vote for as low as PHP 50.00 or PHP 100.00. If I were a corrupt politician, I would bribe poor people with PHP 1,000.00 each and I may be able to secure my vote. However, if more people could at least make both ends meet, bribing them would become more difficult. I might need to add more zeroes, which in turn will not be feasible enough for me, if I was a corrupt politician!

Again, let's have some economic common sense! Why are people equating econ cha cha to even term extension or even benefiting only the corrupt? If Filipino First Policy was so good then why didn't Carlos P. Garcia even win a second term? Why didn't other nations better than the Philippines praise Garcia's model? It was also Filipino First Policy that caused corruption to rise up, because more Filipinos can be easily manipulated if it's hard to find a good paying job!