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Tuesday, February 23, 2016

Don’t thank PNoy: Economic growth does not necessarily mean good governance!

February 22, 2016
by David Yap II
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Lately I’ve been seeing these posts thanking the president for increasing our Gross Domestic Product (GDP) by something like 120 billion USD.
It upsets me because it betrays a piss poor understanding of economics.
I’ll give you two reasons why this thinking is wrong — because two is more than enough.
First and foremost, the government has spent massive amounts of money in the past five years. The current budget alone is 3 trillion pesos. A three trillion peso government budget is a massive infusion to the GDP. That’s approximately 250 billion USD even before factoring multiplier effects (and of course government inefficiency – an indispensable variable in any equation that involves the government). Put simply, any administration can jack up the GDP by simply enlarging the national budget and spending government tax revenue and loans. It’s what the government does. It spends money. I’m not even going to go into how much debt we’ve incurred to finance that gargantuan budget.
You’d think that with that kind of budget we would have state-of-the-art trains, seamless and reliable transport systems, better and more affordable healthcare, free colleges, fast and reliable public internet, high-quality public K-12 schools, license plates with functioning bar codes (or license plates for that matter), and highly automated government services buuuuut, yeah, never mind.
Second, overseas Filipino worker (OFW) deployment has been surging for the past five years. On average there are 350,000 to 400,000 new officially-registered deployments every year. That is almost 2 million Filipinos sent abroad as OFWs in the past five years. That is an extra 2 million OFWs on top of the previously deployed OFWs. That’s billions of dollars in remittances – every month, every year. That is billions of dollars that will feed into the economy through consumer demand. You’re going to thank the government for sending our countrymen and countrywomen abroad? I suppose you can tout that as an “export-oriented policy” wherein your primary export would be people.
What economic reforms were put in place? What productivity enhancing major infrastructure projects were completed in the past five years (sans those began by the previous administration)?
How about the real performance of the economy as measured by real income gains? Nobody is talking about real income gains BECAUSE THE REAL INCOMES OF MOST PEOPLE DID NOT INCREASE. How about poverty? The poverty incidence numbers have stayed the same despite the fact that the poverty threshold is increasing at a rate lower than the headline inflation rate. Never mind that the inflation rate among the poor is easily twice or thrice the headline inflation rate – which basically means that we are grossly underestimating poverty. How about inequality? Our GINI is inching dangerously close to 50%. While real incomes of most people stay the same, the net worths of the elite is doubling – even tripling. How about the agricultural sector? Myanmar is about to overtake us in terms of agricultural productivity. Myanmar guys Myanmar. They’ve been at each other’s throats for years, decades even, and they are about to eclipse our agricultural productivity.
But, you know, who cares. The GDP INCREASED.

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