7.1% growth is not due to Aquinomics, it’s a continuation of GMA’s use of Keynesian Economics

November 30, 2012

by Ilda

Inquirer editors doing what they do best

It’s beginning to look at lot like Christmas. ‘Tis the season to be jolly. Filipinos are known for being a little too indulgent during the festive season. This could very well be the reason why the Philippine government and the business sector have been trumpeting good news about the economy through various media outlets — to get consumers to open their wallets and spend.

Keeping consumers happy is a good strategy. After all, businesses both big and small need to keep the people constantly satisfied and distracted from reality. When people are joyful, they continue to celebrate and spend; when people spend, businesses are happy. All that spending does help keep the Philippine economy afloat —for now.

The term ‘Aquinomics’ does not go down well.

President Benigno Simeon “BS” Aquino also realized the advantage of spending after the economy only grew by 3.2 percent in the third quarter of 2011. The significant drop in growth the previous year compared to the 7.3% growth in 2010 had some of the President’s critics and likewise compelled members of the Makati Business Club (MBC) to strongly advise him then not to put on hold public infrastructure projects and, instead, “to pump prime the economy” with government funds. The records show that economist Benjamin Diokno even gave BS Aquino some advice that the President would later use but would never acknowledge:

Earlier in his administration, Aquino had been criticised by economists like Benjamin Diokno former budget secretary Benjamin Diokno for adopting austerity measures instead of continuing his successor, Gloria Macapagal-Arroyo’s strategy of using stimulus spending to prevent the economy from entering a downturn.

Spending to stimulate the economy: John Maynard Keynes

A year ago, President BS Aquino it seems didn’t realize that putting a hold on the infrastructure projects that were initiated by the previous government would backfire on his own administration. Some people even saw through his so-called “austerity measures” as vindictive and just a ruse to make people believe that he is unlike his predecessor Gloria Arroyo whom the President claims to have “depleted” the national budget through its alleged overspending.

President BS Aquino accused the previous administration of corrupt dealings and vowed to review government projects that were already approved because he believed that public funds were merely redirected to someone else’s pockets. But his accusations were based on hearsay and worse, were counter-productive because not only did they anger the foreign contractors the previous government signed with, BS Aquino’s government simply sat on some of the projects.

This included the cancellation — seemingly out of spite — of GMA’s PhP1.9 billion worth of various flood control projects as well as the P18.7 billion Laguna de Bay dredging project signed during her term. Some say that this resulted in the disastrous flooding that brought many industries — including the vital financial services industry — to a standstill for more than a week in the beginning of August this year. Worst of all, the Belgian company, Baggerwerken Decloedt en Zoon (BDC) who was contracted to do the dredging job filed a lawsuit against the Aquino government for the cancellation of the deal. This is something that media outlets owned and operated by family and friends of the President don’t seem to highlight in any of their networks. His lack of professionalism does put the whole Philippine society in a bad light in the international community.

The lack of activity from the time he was elected did slow the economy in 2011 and forced BS Aquino to do something. He quickly authorized additional government spending to stimulate the economy. His government has reportedly increased spending by 12 percent – “a record this year while seeking more than $17 billion of investment in roads and airports.”

Without admitting he was wrong, BS Aquino took credit for what GMA already started doing – which was to stimulate the economy through infrastructure projects and poverty alleviation programs such as the Conditional Cash Transfer (CCT) – during her term. The former President was even forced to highlight her achievements when the economy went sluggish in 2011 while President BS Aquino continued to blame her for it. In a paper she wrote while under hospital arrest for the charge of electoral sabotage, she outlined her disappointment:

The economy I turned over

Countless studies have shown that rapid increases in average incomes reduce poverty. Policy research, notes economist Stephan Klasen, has shown that “poverty reduction will be fastest in countries where average income growth is highest.”

When I stepped down from the Presidency in June 2010, I was able to turn over to the next Administration a new Philippines with a 7.9 percent growth rate. That growth rate capped 38 quarters of uninterrupted economic growth despite escalating global oil and food prices, two world recessions, Central and West Asian wars, mega-storms and virulent global epidemics. Our country had just weathered with flying colors the worst planet-wide economic downturn since the Great Depression of 1930. As two-thirds of the world’s economies contracted, we were one of the few that managed positive growth.

If you look around you in our cities as you drive by the office towers that have changed the skyline, if you look around you in our provinces as you drive over the roads, bridges and RORO ports where we made massive investments, that is the face of change that occurred during my administration.

By the time I left the Presidency, nearly nine out of 10 Filipinos had access to health insurance, more than 100,000 new classrooms had been built, 9 million jobs had been created.

We built roads and bridges, ports and airports, irrigation and education facilities where they were sorely needed. To millions of the poor, we provided free or subsidized rice, discounted fuel and electricity, or conditional cash transfers and we advanced land reform for farmers and indigenous communities.

No amount of black propaganda can erase the tangible improvements enjoyed by hundreds of thousands of families liberated from want during my decade at the helm of the nation. But these accomplishments have simply been part of the continuum of history. The gains I achieved were built on the efforts of previous leaders. Each successive government must build on the successes and progress of the previous ones: advance the programs that work, leave behind those that don’t

I am confident that I left this nation much stronger than when I came into office. When I stepped down, I called on everyone to unite behind our new leaders. I was optimistic and I was hopeful about our future.

However, the evidence is mounting that my optimism was misplaced. Our growth in the 3rd quarter of 2011 was only 3.2 percent, well below all the forecasts that had already been successively downgraded. The momentum inherited by President Aquino from my administration is slowing down, and despite his initial brief honeymoon period, he has simply not replaced my legacy with new ideas and actions of his own. .

It is such a shame that President BS Aquino and his minions continue to credit only his administration for the latest glowing economic growth statistics or for whatever projects that were finalized or something that he is just continuing but obviously were initiated by the previous administration. His public relations team is hell-bent on painting him as the architect of the country’s perceived good performance compared to its ASEAN neighbors. They even brand it as “Aquinomics”. They think the people are gullible enough not to know that the economic policy he is using is actually based on classic Keyenesian Economics of spending, which GMA used during her term.

And let’s not forget the Overseas Foreign Workers who are the backbone of the country. Without their remittances, which is said to make up “the equivalent of about 10 percent of GDP, surged to a record $1.8 billion in September”, our economy would collapse. Even Senate President Juan Ponce Enrile reportedly credits the OFWs contribution to boosting the economic numbers:

Our biggest export is OFWs. That is export. That’s why I’m against RH. What will improve our economy is the excess population that is used to accepting jobs that others don’t want to handle.

The question now is, how is President BS Aquino going to invite these OFWs back home when the economic growth they are boasting about is mostly fuelled by household spending and by government spending using public funds? Evidently, the economic growth he is trumpeting is not inclusive; meaning, it hardly makes a difference to the poorest members of society. Likewise, it is not sustainable under the circumstances because the population keeps growing. Like what I’ve said before, if the country’s population keeps growing, any economic growth achieved will not mean much for the additional mouths to feed.

Judging by the way Malacañang spokesperson Edwin Lacierda congratulates President BS Aquino’s administration for a job well done, the rest of the country can rest assured that this government will continue to think that they do not have to do much to find a more sustainable solution to the economic and social issues facing the nation. ‘Tis the season to be jolly for them, indeed.