Ireland’s economic liberalization recently came under criticism by a pork barrel loving member of Congress- Walden Bello, the economic guru of the Philippine left. Coming from the island republic of Philippine dodos, Walden’s article “Celtic Tiger Joins Asian Tigers to Extinction” opines
The financial collapse of Ireland, coming as the latest in a string of disasters, hardly shocks global public opinion. To people who have been engaged in the development debate, however, it is resonant with meaning.
This may appear like a no-brainer but the statement is fraught with an underlying political position that can make the situation worse, specially if the writer is an a position to legislate flawed protectionist economic policy.
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Areas of Consideration
I agree with the two-phase model as described by Bello.
First Phase of Growth – Open up the taps, Generate revenue and capital, Economic liberalization
Like Korea and the Southeast Asian tiger economies, the Irish economy passed through two phases. In the first phase, that of export-oriented growth, there was real growth, especially in manufacturing and services. The growth was foreign investment driven, particularly in high tech.
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By the turn of the century, the boom in the real economy had brought down the country’s chronically high unemployment rate to five per cent and the poverty rate to the same figure as well
Discussion
Fact: Foreign investments brought down unemployment and reduced the poverty rate.
Question: Why does the Philippines, Walden Bello and the other dodos in Congress stick to the SERIOUSLY FLAWED 60/40 restrictions on foreign investments?
Answer:
- “Economic nationalism” – pandering to the base’ thrown in the the word “nationalism” even if it means protecting PLDT, MERALCO, FPIC, Lopez, Pangilinan, Aboitiz, Ayala, Tan – at the expense of Philippine consumers and taxpayers.
Current Perception: Economic nationalism means protecting Filipino businesses.
New Perception: Economic nationalism means more choices for Filipino customers, a level and free playing field for job creators – local and foreign, more job choices for Filipino job seekers.
The boom and bust cycles have been demonized by the left as the weakness of the market system. On the contrary – the bust cycle is a strength of the market system because it unleashes change and innovation. Efficient and forward looking companies thrive – and companies that shouldn’t have been in business in the first place, are sent packing.
At the turn of the 21st century, China has provided the last nail on the coffin against the advocates of centralized planned economies After a disastrous 1950s experiment in centrally planned economic development, China reversed course and transformed itself to become a global economic engine – a market economy beats a centrally planned economy hands down.
Second Phase – Market Efficiency and Operational Efficiencies
This is what I call the “Now that you have the money and a environment conducive to generating wealth sustainably – what exactly do you do with it?” phase.
This is where the line is drawn between winners and losers.
At that fateful conjuncture in the early part of this decade, writes O’Toole, the Irish “had an opportunity that was unique in Irish history. They had the resources to invest in the creation of a decent society, one that would be economically, socially, and environmentally sustainable. They had a population that was optimistic, self-confident, and ready for a challenge. They had incredibly favorable global conditions.”
There are only two core paths to take after the 1st phase. The 2nd phase can be more dicey.
A – The first path is to maintain a free market. – no regulation that favors special interests. Banks that screw up – get eaten up in the market correction shuffle. End of story.
B – Market intervention by the state. Interventionist government/populist politics/vested interests is a volatile cocktail.
How, instead, the Celtic Tiger followed in the footsteps of the Asian tigers is summed up cogently by the New York Times: “Before Ireland joined the euro, its banks tended to do business the old-fashioned way, financing their lending through the deposits they took in. Once in the euro zone, banks were suddenly able to borrow huge sums of money inexpensively on international markets with nearly no exchange rate risk, an activity that was barely regulated by policy makers. With easy access to these funds, banks like Anglo Irish lent huge amounts to prominent Irish developers, leading to a frenzy of overdevelopment.”
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In the five years from 2003 to 2008, analyst David Smith points out, the net foreign borrowing of Irish banks increased from 10 per cent to 60 per cent of GDP. Lending standards were driven down to entice prospective homeowners, many with low or no credit history, much like the subprime phenomenon in the United States. And as in the US, regulators stood on the sidelines unwilling to take away the punch bowl, probably because so many of the top figures of the ruling party Fianna Fail were tied to the bankers and developers.
That was the financial side of the equation – lending money to people who can’t afford to pay back the loan. It looked great on the front end – after all there is growth when the people you lent money to start spending the money you lent them. Such a short-sided view of growth does not consider the repercussions of what happens after the credit line is maxed out and it is time to collect. When the line is reached – growth slows down to a trickle and plummets. Then lenders become jittery – bloody idiots – it just floors me.
Why lend money to people who can’t pay it back? Why lend to this demographic in the first place?
The answer lies in politics – populist politics. The need to “serve the masses”. This was the political imperative in order to keep the base happy – that unfortunately included houses for people who can’t afford to keep one. Government intervenes in the market by legislating policy to ease ownership of houses – including easier access to credit.
http://www.cato-at-liberty.org/housing-bailouts-lessons-not-learned/
Housing Bailouts: Lessons Not Learned
Posted by Jeffrey A. Miron
The housing boom and bust that occurred earlier in this decade resulted from efforts by Fannie Mae and Freddie Mac — the government sponsored enterprises with implicit backing from taxpayers — to extend mortgage credit to high-risk borrowers. This lending did not impose appropriate conditions on borrower income and assets, and it included loans with minimal down payments. We know how that turned out.
Did U.S. policymakers learn their lessons from this debacle and stop subsidizing mortgage lending to risky borrowers? NO. Instead, the Federal Housing Authority lept into the breach:
The FHA insures private lenders against defaults on certain home mortgages, an inducement to make such loans. Insurance from the New Deal-era agency has enabled lending to buyers who can’t make a big down payment or who want to refinance but have little equity. Most private lenders have sharply curtailed credit to those borrowers.
In the past two years, the number of loans insured by the FHA has soared and its market share reached 23% in the second quarter, up from 2.7% in 2006, according to Inside Mortgage Finance. FHA-backed loans outstanding totaled $429 billion in fiscal 2008, a number projected to hit $627 billion this year.
And what is the result of this surge in FHA insurance?
The Federal Housing Administration, hit by increasing mortgage-related losses, is in danger of seeing its reserves fall below the level demanded by Congress, according to government officials, in a development that could raise concerns about whether the agency needs a taxpayer bailout.
This is madness. Repeat after me: TANSTAAFL (There ain’t no such thing as a free lunch).
***
http://www.cato-at-liberty.org/banks-bailouts-and-political-pressure/
Banks, Bailouts, and Political Pressure
Posted by David Boaz
The Washington Post reports:
Sen. Daniel K. Inouye’s staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth.
The bank, Central Pacific Financial, was an unlikely candidate for a program designed by the Treasury Department to bolster healthy banks. The firm’s losses were depleting its capital reserves. Its primary regulator, the Federal Deposit Insurance Corp., already had decided that it didn’t meet the criteria for receiving a favorable recommendation and had forwarded the application to a council that reviewed marginal cases, according to agency documents.
Two weeks after the inquiry from Inouye’s office, Central Pacific announced that the Treasury would inject $135 million.
As we’ve said here many times, going back to 1983, when government is in the business of making economic decisions, you inevitably get more lobbying, more campaign spending, and more political influence on economic decision-makers.
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Stop the Bailouts
http://www.cato.org/pub_display.php?pub_id=10018
Government spending can’t lead the way to sustained recovery, because its stimulating effect will be offset by anticipated higher taxes and the need to finance the deficit.
Instead of more bailouts, we need a clear and consistent path to fundamental reform of our financial system.
***
Bailouts, Debt Magnify Risk of Future Economic Troubles
http://www.cato.org/pub_display.php?pub_id=10571
The talk now is about “green shoots” and a “light at the end of the tunnel.” Markets have rallied, housing prices have stopped falling, banks are profitable again, and it seems like we have been able to save several industrial giants that were on the ropes, like General Motors.
But we must never forget that the light at the end of the tunnel can be an approaching train.
All of these presumably positive signs could also be interpreted as problems. They might contribute to a slower rebound than expected, and possibly to a new crisis further down the road.
It is counterintuitive, but the fundamental economic problem was not the “bust”— it was the “boom,” under which too much wealth was put to inefficient use.
The recession is the period when we wind down investments and put capital and labor to use in more competitive and sustainable businesses. If this redeployment of resources is not allowed to proceed because of bailouts and stimulus programs, old mistakes will survive and drag us down in the future as well.
A famous Austrian economist, Joseph Schumpeter, warned that recovery is sound only if it comes of itself. A government stimulus “adds, to an undigested remnant of maladjustment, new maladjustment of its own which has to be liquidated in turn, thus threatening business with another crisis ahead.”
That is where we are right now. The financial crisis is the result of too much cheap credit, too much indebtedness and too many bad investments. So it is ironic that governments are trying to meet the crisis with . . . even cheaper credit, even more indebtedness, and attempts to subsidize and protect bad investments and overproduction — in the housing sector, the car industry, and everything in between.
The zero percent interest rate, new liquidity facilities, and bailout loans were supposed to unblock the credit market. But they also can result in new investment mistakes, as companies and households base their behavior on interest rates that are unsustainable.
The more investment depends on today’s rates, the more reluctant central banks will be to increase them, and even more misguided investments will be made. We have been here before.
Governments have worsened the situation by bailing out some of the most insolvent and uncompetitive businesses.
By saving car companies, we are guaranteeing a continued overproduction of cars. The very idea of the massive stimulus is to subsidize projects that would not survive the market’s cost-benefit analyses.
It seems like politicians want to keep failed investments on artificial life support until economic growth makes it possible for them to survive on their own. But since that means resources are locked into the least productive sectors, this strategy will result in a delayed return to healthy economic growth.
The bailouts also distort future incentives. Goldman Sachs’ record second-quarter profits took attention away from the fact that its value-at-risk was at an all-time high.
So just half a year after the U.S. government saved insurer AIG because its collapse would have destroyed Goldman Sachs — and after the investment bank had been injected with $10 billion of taxpayer money (later repaid) — the bank has taken on enormous risk.
It seems like a paradox, but in another way it is perfectly logical. Banks have ample evidence that the government has provided them with a multidimensional safety net, so why not take risks for short-term gains if you can send potential losses to the taxpayers?
The problem with all of these policies is not only what they buy, but also what they cost. The debts that are now building will burden countries for a very long time, especially since we already have growing unfunded liabilities in our social security systems to worry about.
The risk is growing that governments will further inflate those debts with monetary policy, which, according to Schumpeter’s prophecy, “would, in the end, lead to a collapse worse than the one it was called in to remedy.”
It is somewhat understandable why the risk of a 1930s-style depression has led some to call for unprecedented action. One central policymaker has even said the economy has to be saved in the short-term by a monetary stimulus, even if we thereby “foster a bubble, an inflationary boom of some sort, which we would subsequently have to address.”
But let’s keep in mind that argument came from then-Fed Chairman Alan Greenspan when he introduced 1 percent interest rates in 2003. That “inflationary boom” ended up in real estate; we are now in the “subsequently,” and we have to address it.
As Mark Twain pointed out, history does not repeat itself, but sometimes it rhymes.
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Bailed-Out Banks Slip Toward Failure
http://online.wsj.com/article/SB10001424052970203568004576044014219791114.html?mod=googlenews_wsj
Nearly 100 U.S. banks that got bailout funds from the federal government show signs they are in jeopardy of failing.
The total, based on an analysis of third-quarter financial results by The Wall Street Journal, is up from 86 in the second quarter, reflecting eroding capital levels, a pileup of bad loans and warnings from regulators. The 98 banks in shaky condition got more than $4.2 billion in infusions from the Treasury Department under the Troubled Asset Relief Program.
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The Real Reason That the Bailouts May Not Work
http://www.huffingtonpost.com/mark-blyth/the-real-reason-that-the-_b_802370.html
Perhaps the answer lies in the continuing campaign played so deftly by the banks and their allies to turn the largest ever private sector failure into a public sector failure, thereby getting themselves off the hook for the mess that they made. To take just two examples, the minority report of the Financial Crisis Commission blamed Fannie and Freddie for the crisis, despite the fact that the crisis hit over 20 countries and yet only one of them has Fannie and Freddie. Similarly, the global banking crisis has been turned into a crisis of profligate sovereigns, sidestepping the fact that the debt bloating states’ balance sheets are bailout costs and lost revenues, not runaway social programs. Mere facts, it seems, can’t compete with a good ideology. However, the WSJ may be more right than they know. The bailouts may not ultimately work, but for an entirely different set of reasons.
To see why it’s worth having a look at two pieces, one by John Cassidy in the New Yorker Magazine and one by Andy Haldane at the Bank of England. Taken together, they suggest that all may not be well going forward, despite the billions of dollars thrown at the banks: on a fundamental level, their business model may have run out of juice.
Cassidy’s November New Yorker piece asks, “What Good is Wall Street?” If it significantly adds to capital formation, then the argument for compensation orders of magnitude beyond other sectors is somewhat justified. The problem lies in showing this, since doing so rests upon a series of counterfactuals that are hard to prove. For example, the existence of a $400 billion swaps market doesn’t mean that its absence would result in lower GDP growth. It does however mean lots of fees for those who arrange the swaps.
Looking at the link between what banks do and capital formation, Cassidy notes that the part of Morgan Stanley that does link borrowers to savers and raise capital, traditional investment banking, delivered a mere 15 percent of 2009 revenues. For Citibank “about eighty cents of every dollar in revenues came from buying and selling securities, while just 14 cents on every dollar came from raising capital for companies.” As such, the claim that these institutions are doing “God’s work,” AKA capital formation, seems to skate on rather thin ice.
Andy Haldane, executive director of Financial Stability at the Bank of England, similarly set out to measure the contribution of the financial sector to growth. Is it a productivity miracle or a statistical mirage? Haldane concludes that it’s a mirage, but what is of most interest is how he dissects the underlying business model of investment banking, which enables us to see Cassidy’s numbers in a different light.
- First of all, you give up on customers and develop counterparties. That is, you fatten your trading book, and to do that you need lots of different products to trade, hence the growth of complex and opaque securities.
- Second, you use said securities and the firm’s balance sheet to develop massive amounts of leverage so that even if the margins on each trade are thin, with enough volume you can earn a lot of cash.
- Finally, you ‘cover’ all this by writing deep out of the money options that give you a near risk free income stream: until it doesn’t.
This is how banks actually make their money, until 2007, when it all went wrong. This raises two problems going forward. First of all, the revenues generated by this model are contingent upon some raw material going into the system as an input that one can profit from as the asset increases in value. Over the past twenty years those raw materials were equities and then real estate and then (briefly) commodities. The latter markets were too small and fragmented to pump this system, hence the 2006-7 boom and bust, and the former two and now either held up by massive amounts of free liquidity (equities) or are underwater (real estate). As such, it’s not clear that these engines of profitability can be effectively restarted.
This is a worry since the bailouts were based upon two complimentary definitions of what this was a crisis of. For the Americans this was a crisis of liquidity. That is, the engine was sound; it’s just run out of oil (credit crunch) and with enough liquidity it will spontaneously restart (limited stimulus etc.) For the British, the engine blew a cylinder and it had to be rebuilt (12.5 percent of GDP as bank recapitalization), and with enough oil (liquidity) it will restart.
But what if the raw material to feed these engines is no longer available? Then the business model as a whole may be in much more trouble than we think. Add to this the impending foreclosure mess really coming home in 2011-12 and the revenues may simply not be there anymore.
TARP and associated programs worked. They saved the global payments system. That is what they were supposed to do. They were not supposed to save small-cap banks from their own investment decisions. They were also not designed to save a business model that may have run its evolutionary course.
Implications for the Philippines
1. The Philippines “Phase 1″ is flawed due to severe constitutional restrictions on foreign investments – see Sec 10 and 11, Article 12 – 60/40.
2. The Philippines is embarking on massive stimulus spending financed by loans. This will increase the deficit – and along with it, taxes needed to cover the increased government spending.
The triad of populist politics, protectionist economics, and a predatory rent-seeking oligarchy needs to be faced head on by a counterargument – rule of law, free markets, constitutional reform.
New Philippines for the New Year.. I dunno about that – it reminds me about the propensity of armed anti-government groups calling themselves as “New” – the idea is “old”.
About the Author
BongV has written 203 stories on this site.
BongV is a supply chain analyst and designer, IT micro-preneur (for now), advocate of globalization and education, and who volunteers his free time raising funds to support poor schools in the Philippines. He is a formerly Division Chief of the Investment Generation and Projects Development Division of the "Invest in Davao"/Davao Investment Promotion Center in 1994-97.
This article is timely with the release of Rigoberto Tiglao’s Rizal Day article in Inquirer where he says that the power of the masses is a myth and is actually inert. Populism and catering to the masses leads to disaster. And contrary to what many people believe, catering to the masses is not democracy.
[Reply]
The Lazzo Reply:
December 30th, 2010 at 10:29 pm
HOMG IT’S ALL A MASONIC CONSPIRACY!
In a surprising historical twist, however, Julio Nakpil was my Great Grandfather. We still refer to the street in front of the Nakpil-Bautista house where he lived after the war in its old Spanish name “Calle Barbosa” instead of Bautista (after the other family that lived there).
Still, I find that a good article because it probably explains the “brain drain” in this country better. It’s not simply that there aren’t any jobs for those in more intellectual trades, it’s that intellectualism is not appreciated. Hell, all the corruption up in the oligarchy means that intellectualism is subtly vilified because that’s the perception of how intellectuals end up.
[Reply]
ChinoF Reply:
December 31st, 2010 at 9:37 am
Indeed, the hatred of intellectualism is a tragic feature of our society. Yet it can be traced to both economic as well as the cultural poverty of our society. And efforts to “restore” intellectualism meets dead ends thanks to the pummeling of false messages through media and education. Those who are true intellectuals are most likely self-taught to be so.
[Reply]
The Lazzo Reply:
December 31st, 2010 at 1:07 pm
And the best method of self-teaching is cynicism. :3
anonymous Reply:
January 1st, 2011 at 9:34 am
“This article is timely with the release of Rigoberto Tiglao’s Rizal Day article in Inquirer where he says that the power of the masses is a myth and is actually inert”
That’s the point Chino, representative (mote: representative) democracy IS supposed to cater to the masses’ whims.
http://en.wikipedia.org/wiki/Representative_democracy
Representative Democracy - a form of government founded on the principle of ELECTED INDIVIDUALS REPRESENTING the people, as opposed to autocracy and direct democracy.
http://morrischia.com/david/portfolio/boozy/research/representative_20democracy.html
Representative democracy comprises a form of democracy and theory of civics wherein voters choose (in free, secret, multi-party elections) representatives TO ACT IN THEIR INTERESTS, but not as their proxies.
Someone obviously didn’t understand their political science courses.
[Reply]
anonymous Reply:
January 1st, 2011 at 9:51 am
By the way, until you stamp out the falsehoods and the twisting of facts like these to support your whining (I wouldn’t even call this site anything other than it), people who aren’t easily fooled will brand antipinoy as nothing more than joke.
For instance:
“Like Korea and the Southeast Asian tiger economies, the Irish economy passed through two phases. In the first phase, that of export-oriented growth, there was real growth, especially in manufacturing and services. The growth was foreign investment driven, particularly in high tech”
Nothing could be further from the truth:
http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Korea-South-OVERVIEW-OF-ECONOMY.html
The South Korean government has helped the industrialization of its country VIA PROTECTIONIST measures (the imposition of import quotas and tariffs aimed at limiting foreign competition in South Korea) as well as generous government financing for emerging industries and subsidization to make their products competitive in international markets.
South Korea was highly closed and protectionist from the 1960′s up to the late 1990′s which is what drove Korea’s industrialization programs. Anyone with half a brain who can think for himself and not recycle spewed out trash from free-market liberals will readily see this is not the case. If you want to be taken seriously, state facts and not hogwash to support your claims.
[Reply]
BongV Reply:
January 1st, 2011 at 10:20 am
anyone with half a brain will see that Korea had to get out of the protectionist mold – or be stuck like the Philippines.
this becomes more glaring today as South Korea warns against protectionism
Mr. You, 53, is chief economic adviser to Kim Dae Jung, South Korea’s President-elect, and his presence in Mr. Kim’s inner circle has been enormously reassuring to foreign bankers and Western officials. A fervent evangelist for free markets and foreign investment, Mr. You insists that South Korea must open itself up to the world not just because the International Monetary Fund says so, but because that is the only way for the nation to thrive.
”Toward the end of the 19th century, our ancestors tried to isolate ourselves, and the consequences were ruinous,” he said, referring to Korea’s refusal to open up, enabling a modernizing Japan to force itself on Korea and colonize it.
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http://www.hurriyetdailynews.com/n.php?n=s.-korea-says-protectionism-threatens-global-recovery-2010-10-11
- Get your facts straight – RIP VAN WINKLE
anonymous Reply:
January 1st, 2011 at 10:42 am
“anyone with half a brain will see that Korea had to get out of the protectionist mold – or be stuck like the Philippines.”
Oh, let me guess, you made some predictions without backing it up with any scientific model to base on and then posted some remark made by a Korean economist regarding history which had nothing to do with economics.
*LAUGHS*
What a comic relief! But keep going BongV, you sure make non-sequitur arguments every chance you get.
BongV Reply:
January 1st, 2011 at 12:02 pm
Anonymous – you are giving BongV comic relief.
scientific model?
hello? countries that retained the the protectionist economy have been eating dust – it’s not rocket science.
BongV Reply:
January 1st, 2011 at 1:17 pm
Try a more credible source – Bloomberg and Business Review
http://www.businessweek.com/blogs/europeinsight/archives/2010/06/entrepreneurship_goes_global.html
“In other countries, the weakening of traditional business structures, such as Korean chaebol, have created opportunities for smaller players. Tax and regulatory reform, the lowering of protectionist barriers, technological advances and the rise of the Internet, all have made it easier — though certainly not easy – to create and build a business.”
Protectionism is a DINOSAUR. and countries that continue to follow the protectionist path are beset by: high prices, high income inequality, concentration of wealth in the hands of Ayala, Lucio Tan, Gokongwei, Cojuangco. Tough luck for the Philippine labor movement – their wages will stay at starvation rates – thanks to Walden Bello’s protectionism – Lucio Tan and Ayala are laughing all the way to the Forbes 500.
The Lazzo Reply:
January 1st, 2011 at 10:33 pm
Here’s a simple question.
How come you only saw Korean companies become globally competitive in the late 1990s, you know, after they dropped protectionism?
You remember when “Korean Car” brought up images of the rinky-dinky Kia Pride and Hyundai Excel. Now they make the Genesis sports coupe. Even Samsung now thumbs its face at Apple with competing Google Android tablets. Yeah, this is all due to protectionism and isolation from a global competing environment.
BongV Reply:
January 2nd, 2011 at 3:01 am
Of the many success stories of post-WWII industrialization, the creation of the South Korean (hereafter the Korean) automotive industry is perhaps the most remarkable. It is all the more so when one considers that the industry was created from almost nothing. However, contrary to popular belief in Korea, foreign auto firms and access to foreign markets played key roles in establishing the industry and, today, continue to maintain an ever-increasing role in ensuring its survival.
This study examines the history and growth of the Korean automotive industry. More importantly, it examines the extensive partnerships in Korea that have been forged between the domestic and foreign automotive industries. These collaborations have helped maintain Korea’s success, and have been paramount to the development of its automotive sector.
here’s the detailed study – http://www.econstrat.org/index.php?option=com_content&task=view&id=218&Itemid=47
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The Korean automobile industry was started in 1955, when Choi Mu-seong, along with his three brothers, set up an engine in a modified US Jeep and came up with the first Korean car, called the “Sibal”, which means new start.
Meanwhile the Philippines is still stuck with protecting the jeepney.
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ChinoF Reply:
January 2nd, 2011 at 4:26 am
“That’s the point Chino, representative (mote: representative) democracy IS supposed to cater to the masses’ whims.”
Huh? Cater to people’s whims? That’s direct democracy, and catering to whims is disastrous.
Representative democracy: the people go to the representative, the representative decides which are the important issues, filtering out the foolish ones, then acts on them. My dear anonymous, you mixed up representative and direct democracy.
So if the whim of the people is to kill the Jews, the government should give in to these whims? You are imposing your own interpretation of democracy on the reader.
[Reply]
ChinoF Reply:
January 2nd, 2011 at 5:02 am
Also, from the Wikipedia article:
“The representatives form an independent ruling body (for an election period) charged with the responsibility of acting in the people’s interest, but not as their proxy representatives not necessarily always according to their wishes…”
Catering to whims? Pero bakit “not necessarily always according to their wishes?” Doesn’t match, dude.
[Reply]
The problem is this:
Too many morons believe this statement:
Vox populi, vox dei (/ˈvɒks ˈpɒpjəlaɪ ˈvɒks ˈdeɪ.aɪ/), “The voice of the people [is] the voice of God”
The ACTUAL and CORRECT statement is THIS:
Often quoted as, Vox populi, vox dei (/ˈvɒks ˈpɒpjəlaɪ ˈvɒks ˈdeɪ.aɪ/), “The voice of the people [is] the voice of God”, is an old proverb often erroneously attributed to William of Malmesbury in the twelfth century.
Another early reference to the expression is in a letter from Alcuin to Charlemagne in 798, although it is believed to have been in earlier use.The full quotation from Alcuin reads:
Nec audiendi qui solent dicere, Vox populi, vox Dei, quum tumultuositas vulgi semper insaniae proxima sit.
English translation:And those people should not be listened to who keep saying the voice of the people is the voice of God, since the riotousness of the crowd is always very close to madness.
The usage indicates that the phrase had long since become an aphorism of common political wisdom by Alcuin and Charlemagne’s time.
Also, it is a common knowledge (ok maybe in Psychology) about what is called Mob Mentality. Also, there is a saying that the crowd is ONLY as smart as its’ dumbest person in it.
[Reply]
Sally Shine Reply:
December 31st, 2010 at 12:03 am
Mob mentality? Dang, I should’ve known, as I likened the Philippines to the Village of Foul Devotees from “A Series of Unfortunate Events”, who just mindlessly follow majority decisions without any rational consideration.
[Reply]
daaaang!… bongv naman naman namannn…. flipland never reached or enjoyed the “asian tiger” status… flipland has no heavy industry to produce a product worhty of export to accumulate needed capital reserve… flipland’s premier export, the OFWs, is cheap to produce; a bowl of rice to fuel gung gong flips for a putok… guaranteed NO RECALL… flipland’s remittance economy was not affected by the financial collapsed… even ‘merka was jealous of santa doktora ate glo phd’s fiscal responsibility… bernanke and his fed reserve board were embarrased to ask her… no good on their resume’…
[Reply]
The current problem with China’s market system is that very often it still ignores the rights of the regular worker, just as their Maoist policies did prior to the reform period (see Foxconn suicides). This makes it cheaper for companies to outsource there and produce en masse. Countries like Vietnam and Indonesia, which rank around the Philippines at the bottom of the corruption scale are able to compete because they are also cheap, not just because they are open.
And unlike the United States in the early 1900s, we’re not really seeing the kind of movements toward better labor rights because the current “vanguard” are still more focused on getting skilled wages for semi-skilled work or just raw wage increases altogether rather than combating bad labor conditions.
I am also still unsure exactly how the Philippines will be able to cope with the “Chinese flood” should we try to open up. And what (to name specific proposed provisions) would stop the money from going entirely back to China with none left here?
The problem with the image of socialism – or rather social democracy – is that it’s been marred by populism (Venezuela, Cuba et al.) and a lack of enforcement of regulation (as in developed countries, where the government is more willing to take payoffs from the oligarchy). They have not been able to step in firm enough and regulate those big banks that went crazy, thus resulting in the current recession. As such, it’s the social services (failing and non-existent here) that suffer first.
[Reply]
It is still a Fine Line for governments, on the issue of providing Liberalized Credits to people. They restrict it: they will slow-up developments. Liberalize it: Wall Street Crooks and corrupt people/opportunists come in…
The Auto Industry in Michigan, U.S.A..,was built on liberalized credit; and, World War II. Detroit companies produced war materials, that won the war…The Big Three Auto Corporations survived again by the infusion of new credit/capital from the U.S. government, recently. Chrysler Corporation was saved, in the sixties, by the U.S. government, ; at the request of the then Chairman: Lee Iacoca. The Auto manufacturing industry in Detroit produced the sizeable Middle Class in the State of Michigan…this is really a question of:”to be or not to be” on governments, regarding providing liberalized credits…
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The Lazzo Reply:
January 1st, 2011 at 5:35 am
The auto industry should probably take an example from Ford. Instead of Government-run GM or Union-run Chrysler, Ford seems to have struck a better management model under Alan Mullaly. This way they only ended up taking a loan instead of declaring bankruptcy.
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BongV Reply:
January 1st, 2011 at 8:09 am
Exactly. Ford re-invented itself instead of availing of TARP.
In the article Built to Last: The strategy behind Ford’s manufacturing success: Bennie Fowler of Ford Motor Company discusses the company’s forward facing plans and lean manufacturing.
Excerpts:
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The Lazzo Reply:
January 1st, 2011 at 12:37 pm
Mind, this is a corporation that takes the initiative (however late it came) to keep itself fresh. The ideal business not only innovates/creates good products but also does so while keeping the people responsible for actually making them properly taken care of.
Unfortunately, the big three is one success and two failures, and that is probably due to the complacency of the ‘free market’.
Mind, I’m not so much a fan of the free market as you are. Assange might be an egomaniac but he did get it right that “free markets should be forced to remain free.” The reason free markets do fail is because there isn’t a strong central government to step in and say NO! and/or maintain preventative measures to keep these things from spirallng out of control.
This isn’t the classic authoritarian ‘strong central government’. As I posted above (and recommend you reply to), this is one that intervenes where it has to, when it has to. And when it does, it does so with a big stick as Theodore Roosevelt did when he broke up the trusts in the early 1900s.
BongV Reply:
January 3rd, 2011 at 8:39 am
The Lazzo – I agree that government needs to step in to force the market to remain free. In the context of the housing bubble – government stepped in not to free the market but skewed it by allowing legislation in favor of vested interests.
Going further, Nouriel Rubini’s take on the “myths” of free markets points out that the critical question to ask for every piece of regulation – whether to impose or remove a restriction is WHO benefits – http://www.roubini.com/emergingmarkets-monitor/254995/free_market_myth –
At the end of the day, the million dollar question is whether the restrictions will bring prices down or not AND who benefits from the restrictions.
Hyden Toro Reply:
January 1st, 2011 at 1:01 pm
Ford Motor Corporation was just lucky to have substantial cash in its disposal…it is not that they have superior financial management ability. General Motors Corporation is much larger than Ford Motor Corporation. They own also large Defense Aerospace industries…these are vital industries in America’s defense; and research and development projects. So, the U.S. government cannot afford to lose them. Bailout is Corporate Welfare…as should be the right term…
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Hyden Toro Reply:
January 1st, 2011 at 1:07 pm
For your information: the Gross National Products Revenue of the whole Philippines is just equivalent to the yearly earnings of Ford Motor Corporation. General Motors Corporation is much richer than the Republic of the Philippines. The GM CEO is earning about U.S. $500 million a year, with a lot of perks…
BongV Reply:
January 1st, 2011 at 1:11 pm
Luck favors the prepared. Ford prepared for the upcoming cycle by re-engineering its processes and redesigning its global supply chain to become agile and resilient. Ford embraced globalization while GM got stuck in Detroit.
The Lazzo Reply:
January 2nd, 2011 at 12:22 am
Sounds like GM got too big to manage effectively, then. You’ve heard the joke about how GM is really GMAC (financing and credit) while making cars on the side?
And by the way, until you stamp out the falsehoods and the twisting of facts like these to support your whining (I wouldn’t even call this site anything other than it), people who aren’t easily fooled will brand antipinoy as nothing more than joke.
For instance:
“Like Korea and the Southeast Asian tiger economies, the Irish economy passed through two phases. In the first phase, that of export-oriented growth, there was real growth, especially in manufacturing and services. The growth was foreign investment driven, particularly in high tech”
Nothing could be further from the truth:
http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Korea-South-OVERVIEW-OF-ECONOMY.html
“The South Korean government has helped the industrialization of its country VIA PROTECTIONIST measures (the imposition of import quotas and tariffs aimed at limiting foreign competition in South Korea) as well as generous government financing for emerging industries and subsidization to make their products competitive in international markets.”
South Korea was highly closed and protectionist from the 1960′s up to the late 1990′s which is what drove Korea’s industrialization programs. Anyone with half a brain who can think for himself and not recycle spewed out trash from free-market liberals will readily see this is not the case. If you want to be taken seriously, state facts and not hogwash to support your claims.
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BongV Reply:
January 1st, 2011 at 10:08 am
If protectionism was successful – Korea would have opted to continue the policy. But it did not – because protectionism did not work for Korea. It was only AFTER opening up the economy when it allowed foreign investments to come in and introduce competition and innovation that South Korea progressed.
Had South Korea retained the protectionist policy – as the Philippines did – then circa 2010 – it will have a similar performance to the Philippine economy.
http://www.nytimes.com/1998/01/25/world/a-south-korean-s-rise-to-free-market-evangelist.html
“Mr. You, 53, is chief economic adviser to Kim Dae Jung, South Korea’s President-elect, and his presence in Mr. Kim’s inner circle has been enormously reassuring to foreign bankers and Western officials. A fervent evangelist for free markets and foreign investment, Mr. You insists that South Korea must open itself up to the world not just because the International Monetary Fund says so, but because that is the only way for the nation to thrive.
”Toward the end of the 19th century, our ancestors tried to isolate ourselves, and the consequences were ruinous,” he said, referring to Korea’s refusal to open up, enabling a modernizing Japan to force itself on Korea and colonize it.”
what a joke
– keep posting as anonymous .. what a limp-dicked joker 
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anonymous Reply:
January 1st, 2011 at 10:33 am
“If protectionism was successful – Korea would have opted to continue the policy.”
They didn’t continue it not because it didn’t work, they discontinued the policy because they were under pressure from the IMF, WB, The United States, Japan and the European Union (you know, its big markets) to open up its economy. As the same website notes:
http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Korea-South-OVERVIEW-OF-ECONOMY.html
“These government measures continued until the 1990s when they provoked criticism on the part of South Korea’s competitors and trading partners, including the United States, Japan, and the European Union. Their growing pressure on the South Korean government to open its market to foreign competition and to stop subsidizing South Korean exports forced it to begin addressing these demands.”
Furthermore, it was protectionism itself, you know, the very thing that you morons here in antipinoy always harp about, that got South Korea out of its ashes and into industrialization, and not economic liberalization that made it prosperous, which again you like to ignore because it makes you look like a buffoon every time you spout out nonsense regarding an economic theory that doesn’t take into account government or corporate manipulation.
You’re wrong, again. You must’ve set a new world record in the number of failures. But keep going at it though, at least we have comedic relief to laugh at
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BongV Reply:
January 1st, 2011 at 12:06 pm
your source is wrong again
Mises, hayek and Friedman – right on the money – free markets trump protectionism –
Excuses, Excuses, and More Excuses
Korea was highly protectionist of its own economic environment. So was the Philippines — still is.
Korea had a government which supported its own government-controlled corporations, not sell them to the private sector. The Philippines had to sell off its corporations because they were inefficient – Pinoys weren’t paying taxes, and excpected public services – then wala ng revenue pinagnakaawan pa — they were a frakking shame. If the Philippine GOCC was run as efficient as the Korean GOCC then it would be a waste.
Korea had high-tarrifs on imports which could directly compete with its own local industries. Philippineas had high tariffs on imports which could directly compete with its own local industries, TOO.
Korea invested heavily in education, which paid off. Tough luck, Filipinos don’t vote for politicans who support legislation of that nature – mga ignorante kasi.
Korea then opened up its economy when it was ready on the world stage. That’s crap. How can you just “open up” when their constitution, allowed foreign ownership of land, even BEFORE they “opened up”.
The Philippine government sold every government-controlled corporation to the private sector. Now you complain of high water and electricity prices. But LIMITED it to FILIPINO corporations – FOREIGN corporations could have provided a better deal – we will never know, because we kept them out.
The Philippines was highly lax and liberal in foreign trade. Not really,for example, importation of galvanized iron — the most common material used as roofing by the poorer sectors.
The Philippines opened up its markets too early – Is a myth. Korea opened up, and it developed. It did not develop first then opened the market. Markets are created every day – one market is up one day, down the other – either open up and get on the gravy train – or miss out, simple as that.
The Philippines had too much foreign debt which of course just went into the pockets of corrupt politicians. If I believe that foreign debt brouhahaha, the US will be so poor right now – it owes TRILLIONS OF DOLLARS.
The Philippines never invested much in long-term solutions and left its budding engineering graduates to rot high and dry. Well, Filipino voters chose to vote for politicans who wre myopic, you get the government you deserve. Foreign companies could have provided for solutions and employment for budding engineering graduates instead of being wasted in Filipino corporations that treat people like dirt.
In short, you guys are suggesting we make the same mistakes again. Definition of insanity: Doing the same thing over and over again and expecting different results. Sorry, economic liberalization is not the answer contrary to factual events – Actually, the instanity is yours, half a decade of protectionism – same tired policy that has factual results – kulelat ang Pilipinas, angat ang Korea. That’s what insanity does to you – you never notice that YOU already are in a protectionist environment and are showing the results of such environment. Low tariff rates without open FDI policy = kulelat. Low tariff rates WITH open FDI policy = angat.
Apparently, the Philippines… and Filipinos remain… clueless and would rather remain protected as infants forever.
anonymous Reply:
January 1st, 2011 at 10:36 am
“Had South Korea retained the protectionist policy – as the Philippines did – then circa 2010 – it will have a similar performance to the Philippine economy.”
And by the way, this is a priori argument. You have any facts and sound scientific theories to base your predictions on or are you just pulling this one out of your ass? Yeah, thought so. I’m not surprised though, you’re just another dumb Pinoy after all
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BongV Reply:
January 1st, 2011 at 12:08 pm
not a priori but a deduction
http://antipinoy.com/a-tale-of-two-countries-korea-and-the-philippines/
BongV Reply:
January 1st, 2011 at 12:11 pm
The Asian financial crisis has altered the economic landscape for South Korea’s chaebols, or conglomerates. Most chaebols have built their market share on governmental favoritism, protectionist policies, debt and expansion. The country’s new government seeks to convert to a free market, including foreign investment and debt reduction programs, over the chaebols’ protests.
Read more: http://www.faqs.org/abstracts/Business-general/Taming-Koreas-mighty-chaebol-Lets-make-a-deal.html#ixzz19nwar5h4
ChinoF Reply:
January 2nd, 2011 at 4:19 am
“South Korea was highly closed and protectionist from the 1960′s up to the late 1990′s”
Wasn’t it in the 1990s that companies like Hyundai, Samsung and Goldstar (now LG), among others, took off? Why didn’t they take off in the 1980s? Protectionism, isn’t it?
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Lookit, Philippines is totally F-uped because even our only-lonely Ivy-tower called University of the Philippines F-uped the release UPCAT 2011 results!!!! How in the friggin’ word they can produce “top-notch” children when they cannot even get the results released right!!!! DUH!!!! http://wawam.wordpress.com/2011/01/03/upcat-2011-results-secrets-revealed-here/
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Once again our favorite anti-pinoy blogger does not let the facts get in the way of his truth. He just loves using slogans like free trade and free markets. Instead of addressing the basic reality put forth by Bello he starts sloganeering. He writes just like Glenn Beck speaks on Fox News.
Take up Bello’s piece by doing your own take on the optimum currency area theory (OCA) and the efficient market hypothesis (EMH). Back it up with empiricaL DATA.
The links below are short and sweet.
Please note that Keynes was said to have remarked on the issue of EMH …”markets may remain irrational longer than one may remain solvent. ” Markets based on historical experience can overshoot in either direction if left on its own.
http://krugman.blogs.nytimes.com/2010/06/03/things-everyone-in-chicago-knows/
http://krugman.blogs.nytimes.com/2010/12/15/orwell-and-the-financial-crisis/
http://krugman.blogs.nytimes.com/2010/12/16/decade-of-the-living-dead/
http://krugman.blogs.nytimes.com/2010/12/17/fannie-freddie-forked-tongue/
http://www.nytimes.com/2010/12/17/opinion/17krugman.html?partner=rssnyt&emc=rss
http://www.huffingtonpost.com/2010/12/14/financial-crisis-panel-wall-street_n_796839.html
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BongV Reply:
January 3rd, 2011 at 8:28 am
I go with the free market oriented Austrian school on the issue of OCA.
*************
*****
EMH
- and my response to the EMH – is that any market which is inefficient needs to be scrutinized even further – what is causing the inefficiency? legislation in favor of vested interests? Barney Frank and Walden Bello… hello
***
And on the issue of free markets – the issue boils down to this – for every regulation imposed on the market – the question should be raised on WHO actually benefits from the regulation (http://www.roubini.com/emergingmarkets-monitor/254995/free_market_myth).
In the case of the Philippines, a high Gini coefficient, an entrenched oligarchy that has sent three of its scions to the Forbes 500, government privatization policies where the deals keep going either to Lopez, Ayala, Tan, Ayala, Pangilinan, and a constitution that restricts foreign investments to only 40% equity as a joint venture partner – and an entire slew of the constitutionally mandated Foreign Investments Negative List – that further restricts foreign investments. This is what Walden Bello is protecting- is he really for the people or the oligarchs – he is talking one thing but walking the other way.
****
and here’s a short and sweet link to bring your neurons back to life – mister RIP VAN WINKLE
http://www.krugmaniswrong.com/
http://www.downsizinggovernment.org/hud/housing-finance-2008-financial-crisis
but it’s not for zombies and people whose neurons conked out in a RIP VAN WINKLE state of mind.
****
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http://www.ritholtz.com/blog/2010/06/james-k-galbraith-why-the-experts-failed-to-see-how-financial-fraud-collapsed-the-economy/
The above link is not for zombies or the living dead. It is a good exercise for live neurons.
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ChinoF Reply:
January 3rd, 2011 at 1:55 am
Speculation can also be seen as a kind of fraud. And that is also a factor in the US economic bust. And many are saying Bush’s spending of government money on the Iraq War and the consequent raise in oil prices were other strong factors – welcome to oligarch America.
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BongV Reply:
January 3rd, 2011 at 7:44 am
J-ag,
exercise your neurons – that’s exactly how vested interests operate to skew the market – through government.
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Lookit, Ivy-school University of the Philippines cannot even post a simple UPCAt result on their website. I checked January 1st as what they have promised. The site said check the following mirror sites! DUDE, parents in the Philippines do not have access to computers and internet. Parents do not know what “mirror image” is. UNIVERSITY OF THE PHILIPPINES PRODUCE IDIOTS!!!!! THEY MIGHT AS WELL E-MAIL THE FILE TO BONGV AND have him post it in this site!!!!
STUPID FILIPINOS! STUPID UNIVESITY OF THE PHILIPPINES!!!!! STUPID STAFF!!!!! STUPID STUDENTS!!!! HA!HA!HA!HA!HA1HA!
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And you know what? They took down their site because they cannot post as simple as posting the results of passers!!!!!! IDIOT!!!!!! They could have send the students their scores before the site should go live!!!! IDIOTS!!!!! NO WONDER UP ECONOMIOSTS TOTALLY F-uped Philippines because they have low-IQ. wELL, TELL you guys, UP has the highest of low-IQs in the Philippines.
PAANO UMA-ASINSO ANG FILIPINAS WHEN THEY CANNOT EVEN EFFECTIVELY POST AT DESIGNATED DATES THE RESULTS!!!!! IDIOTS! IDIOTS!!!!!
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Hyden Toro Reply:
January 3rd, 2011 at 12:54 pm
Don’t act-up. The UP people are just following their leader. Noynoy Aquino is an imbecile…what would you expect from a Filipino Wowoowee Generation? Wowoowee Philippines…Wowoowee Politics…Wowoowee Mindsets…now: Wowoowee U.P….giling-giling!!! Igiling mo, Baby!!!….Wowoowee Revillame for President!!!
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Oh, yeah, guys! I found it! NOT FROM THE IVY TOWERS OF UNIVERSITY OF THE PHILIPPINES but from an independent hacker!!!!!!! http://www.jlapitan.com/2011/01/03/upcat-2011-results/
DUMB STUPID IDIOT!!!!! ABOUND !!!!!!!
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http://blogs.forbes.com/halahtouryalai/2011/01/03/3-billion-later-bank-of-americas-mortgage-problems-arent-over/
What happens to zombies when faced with facts. They keep on dancing to their own tune..
Bank of America has to repay Fannie Mae ove a couple of billion dollars for selling them fraudulent mortgages. However they still sold over $750 billion dollars of probably bogus mortgages to private sector investors. Zombies do not know the difference between mortgage originators and secondary buyers of mortgages.
Dance zombie dance….
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BongV Reply:
January 3rd, 2011 at 8:04 pm
Fannie Mae and Bank of America… plugging a leak in the dike, vested interests out to save their necks – coffee and coffee mate
http://www.cato.org/pub_display.php?pub_id=11621
It’s politics, not economics, that made them behemoths
Big banks are bad for free markets. Far from being engines of free enterprise, they are conducive to what might be called “crony capitalism,” “corporatism,” or, in Jonah Goldberg’s provocative phrase, “liberal fascism.” There is a free-market case for breaking up large financial institutions: that our big banks are the product, not of economics, but of politics.
J_ag is the star dancer… keep on dancing – head zombie trapped in the 1950s aka J_ag
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