Poverty rate at over three-year high at 52%

SWS recently released its 2018 Q3 self-reported poverty survey results. Link here: https://www.sws.org.ph/swsmain/artcldisppage/?artcsyscode=ART-20181009230934

At 52%, this is a record high for the Duterte administration, and last happened in December 2014. The figure means that most (median) of the 12.2 million poorest families in the Philippines are living on less than the national threshold of P10,000 monthly, which in itself is a ridiculous amount to keep even a family of four together.

The data show that it is not uncommon to see a steep rise in self-reported poverty. Steep rises have occurred for all past administrations. However, it also appears that those sharp increases did not go on for more than just a few (possibly three) quarters. Though this is only the second quarterly poverty rate increase under Duterte since Q2, the next quarter is crucial as it appears prices are still expected to rise.

Note, however, that poverty is at a historical low for Metro Manila, the seat of political action in the country. The increase is rather due to sharp increases (12 points) in "Balance Luzon," plus the five points in Mindanao, where poverty has always been intense and is currently at 65%.

Previously in this blog I highlighted that the national poverty rate has been going down. Apparently it's only because of what can be called the "NCR-Luzon effect." This makes sense as most direct investments probably just end up there. Meanwhile, life for those in the Visayas and Mindanao is very hard at best. The economy is clearly not working for all, and is clearly a result of government's failed policies at the national level, or lack of it.

The Making of Global Capitalism: Current Thoughts for the Philippine Left

In 2012, Leo Panitch and Sam Gindin published The Making of Global Capitalism: The Political Economy of American Empire. The subject matter of MGC is Capitalism itself -- how it works, the institutions that run it, the crisis it spawns -- and the state that holds it all together, the United States.

It is a mammoth of a book, the life's work of two scholar-activists who have devoted their entire lives to the socialist cause. It is a must read if one has to be up to date on the subject. (And In a Left community that hardly updates its dogmatic understanding of things, it's even more relevant.)

In the Philippines, probably much of the Left's understanding of the workings of Capitalism is tied to the single most dominant paradigm still plying its trade in the country, the paradigm of Imperialism.

According to this understanding, the current capitalist stage is one characterized by an American state in a crisis of overproduction which drives it to look for "semi-colonies" where it could export goods and capital to, to make up for the saturation of its markets at home. The paradigm also points to a logical conclusion of imperialist wars, as many different capitalist/imperialist powers supposedly battle it out for global dominance.

Much of this is outdated. A key point Panitch and Gindin make is that the American economy is far from saturated. American consumer spending is unparalleled in the world (and is in fact a key growth driver for the global economy for having a population with a very high purchasing power, and which is a recipient of much of the world's exports).

On the other hand, it is equally counterproductive (if not dangerous), to still be fixated to a pre-World War II view of the world in the face of one glaring reality -- global capitalism at present is in fact upheld by all the major industrialized nations, and to make capitalism work they all look to a singular leader -- America. The most developed nations' leadership has in fact been institutionalized through the formation of the G7/G8 -- one of whose primary tasks is to ensure harmony in the global financial system.

Global finance

This latter cooperation for the sake of the financial system is inseparable from global capitalism, especially because the system is under constant threat -- not from overproduction but from financial crises.

According to the authors:

"The unresolved dilemma for all capitalist states today is how to both stimulate the economy and regulate financial markets so as to limit increasingly dangerous volatility without undermining the ability of finance to play its esential role in global capitalism."

Put another way, capitalism's central contradiction is that to keep on stimulating the economy, it allows for the activities of finance which eventually threatens the system itself by eroding regimes of value. Financial crises cannot be predicted. We do not know when the next Dotcom Bubble or the next Subprime Mortgage Lending Crisis will occur, and there is only so much that regulators can do to keep profit-seekers from unwittingly conjuring the next crash. (In many cases, the policies that once checked finance have themselves been removed to accommodate more profit-making.)

So finance is integral to -- and inseparable from -- the working of Capitalism. It oils up the wheels and sprockets of global economic activity. But its bullish activity breeds financial crisis. In a financial crisis, assets – bonds, stocks, currencies -- dramatically lose their value. This eventually results in a widespread slowdown in economic activity.

The coordination of policies especially among the most advanced capitalist states is thus important in managing global finance, and in containing crisis when it does eventually arise. Policies relating to capital risks, reserves, lending ratios (the Basel accords), financial liberalization, and liquidity during periods of crisis all have to be coordinated.

Perhaps part of what this means for us in the Left is to endeavor to have a very deep understanding of the financial/capital markets, to be able to show just how irrational the entire system is. Just as the Left periodically tracks statistics relating to poverty and wages, so should it record movements in local interest rates (from the Bangko Sentral) and hot money flowing in from abroad (a.k.a. "portfolio investments").

At present, global capitalism is a creation of a global capitalist class led first and foremost by one state, the United States of America. Its current agenda is to promote capitalist production in the entire globe; exploit or/and develop new markets; and maintain international regimes of value especially in times when the financial system makes a mess of itself. The global Capitalist system is run by the Federal Reserve, the de facto central bank of the world. Together with the US Treasury, it conducts US monetary policy which is the global basis for short-term economic policy everywhere else.

Philippine setting

Another danger of looking at capitalism from an overproduction/market saturation perspective is that the Left would cling to the hope that some final rupture will eventually occur that will finally end the rule of global capital. It is very unlikely that that will happen. As Panitch and Gindin showed, one remarkable phenomenon that occurred during the last crisis, in '07-'08, was how quickly the governments of the G20 lined up in support of the United States in helping avert further potential economic loss.

But what insights can MGC offer the Philippine Left in relation to its own local situation, and in the context of Philippine political realities, for example the current Menace in Malacanang?

Perhaps we will need to understand how Philippine economy is currently integrated to the international capitalist system, especially to international finance. From the perspective of global Capital, the Philippines is basically a low-income nation that offers cheap, English-speaking labor whose economy is ultimately propped up by a long-standing labor export policy. It should hardly be an inviting site for hot money/portfolio investments, although this is something that the Left should probably guard against.

But perhaps one of the things that need to be pointed out is that Philippine economic development is not materializing not because there are international Capitalist forces preventing it from doing so. In fact, it could instead probably be sufficiently argued that it is in the interest of global capital to see the local economy grow, so that it becomes a broader market for higher-end exports. Rather, economic underdevelopment will have to be blamed on the local class interests that no longer care about such worthless cases as national economic development. Economic development necessitates land reform, something never palatable to the local (landed) ruling elites.

But at the same time, it will be in the top interest of global capitalist elites to not rock the local class alignments in the Philippines that in the end are their own caretakers for their own economic interests in the country. It is in this context that for as long as Rodrigo Duterte is a faithful steward of global Capital in the Philippines, he can count on continuing his activities, including killing citizens, with impunity. All the Western powers will eventually turn a blind eye -- except for the occasional token condemnation.

In the final analysis, Third World governments are really nothing more than the local stewards of global Capital. As such, they have only one role: to ensure that the system of private property, financial liberalization and regimes of Value are protected. All other tasks, such as the niceties of human rights and "good governance" are a mere bonus -- and are in any case done not for their own sake, but in aid of the smooth running of the international system as a whole. Marcos was, after all, a son of a bitch. but he was "[their] son of a bitch."

Panitch and Gindin mention that it is the contradictions that emerge within, rather than between, states during times of severe economic crisis that show the openings for political action. Whether one of the future political battles will get to tackle the unmaking of the irrationalities of capitalism in this part of the world is one local democratic socialists should decide. xxx

What does the Philippine economy produce?

Bourgeois economics has a fetish with the national GDP (gross domestic product), a number which represents economic production. Quarter after quarter, journalists, economists, policymakers, and the local elites join together to hear the most recent GDP number from the government, hoping from anywhere near 6%-7% growth each time.

The notion is that higher GDP growth is better, and lower GDP growth sucks. GDP growth is supposedly better for all of us. That may be true, but it is important to know what the economy is actually made of.

In 2016, going by current prices, the Philippine economy based on PSA data amounted to some P15 trillion (not considering a category called "Public Administration and Defense; Compulsory Social Security" for which I could not find data).

Our Top 15 economic activities and their worth at current prices in 2016 are as follows (in millions):

1. Retail Trade	2,056,789	SERVICE SECTOR
2. AGRICULTURE SECTOR	1,397,615	AGRICULTURE
3. Construction (Private)	1,359,660	INDUSTRIAL SECTOR
4. Food manufactures	1,347,029	INDUSTRIAL SECTOR
5. Renting and other Business Activities	969,128	SERVICE SECTOR
6. Education	557,836	SERVICE SECTOR
7. Banking Institutions	529,041	SERVICE SECTOR
8. Wholesale Trade	508,306	SERVICE SECTOR
9. Ownership of Dwellings	485,451	SERVICE SECTOR
10. Construction (Public)	465,995	INDUSTRIAL SECTOR
11. Real Estate	444,319	SERVICE SECTOR
12. COMMUNICATION	377,092	SERVICE SECTOR
13. ELECTRICITY	373,196	INDUSTRIAL SECTOR
14. Non-bank Financial Intermediation	371,342	SERVICE SECTOR
15. Chemical & chemical products	356,133	INDUSTRIAL SECTOR

What do we produce as a country, then?

A lot of the activity is in a category called "Retail Trade" within the Service Industry. Retail trade means nothing more than selling goods. According to the 2013 Annual Survey of Philippine Business and Industry (most recent), establishments within this category are engaged in activities such as retail and wholesale in household equipment (appliances, etc.); food, beverages and tobacco; and specialized items.

Retail sale in a category called "non-specialized stores" according to the PSA employed the largest number of workers among all Philippine industries, with 130,834 employees at the time. For their troubles, workers in the sector (which include "salesladies" in malls) received an average of P11,260 per month.

We are basically a nation of malls, salespeople and construction workers that receive low pay. And a lot of the wealth really comes from people renting out the capital resources that lie firmly in the hands of the elites, whether land, buildings, telecommunications infrastructure and electricity.

Another conspicuous detail is that our logical economic base, agriculture, amounts to a only around 9.3% of the economy by current value. And because we failed our economy at its base, it follows that we also do not have any serious industrial manufacturing capability, especially in machineries (which is among our top imports), industrial chemicals (not just chemicals for producing soap and shampoo) and electronics (beyond making chips for export, which return to us as finished goods in the form of cellphones and laptops). We have a Communication service sector, but not an industrial manufacturing sector dedicated to this. At this point, one can see the folly of arguing for a mining renaissance in the Philippines -- all of that raw material will only be exported, because we have no serious industry within to use them on.

Meanwhile, Rodrigo Duterte has vowed to up government spending in infrastructure (our No. 10 economic activity) during his administration. Earlier in his campaign, he said he would espouse Philippine industrialization and pay attention to agriculture. Of course, those were the days. Almost a year later, not even a hint of any industrialization plan has been made, and we still import rice, our staple, by the ton.

Next time they give us the numbers on GDP growth, we should ask -- growth for who?

Sources:

http://psa.gov.ph/nap-press-release/pr/2016%20Q4
http://psa.gov.ph/content/2013-annual-survey-philippine-business-and-industry-aspbi-wholesale-and-retail-trade-repair

REPOST: 'P334M from only 13 donors funded Duterte’s presidency'

The Philippine Center for Investigative Journalism (PCIJ) published a nice report that sheds light on the class background of the Duterte presidency. The findings won't actually surprise you. But it's important to get substantial information on the interests of Duterte's cronies in the fields of mining, agriculture, real estate, procurement, and others.

Some of the names of rich people that appeared belong in the Forbes list, which was previously also mentioned in this blog.

REPOST: FDC warns against regressive effects of new tax reforms

MANILA, Philippines – While the Freedom from Debt Coalition (FDC) welcomes the Duterte administration’s move to reform the country’s outdated 19-year old tax scheme, it cautions against the regressive effects that the five tax policy packages as they could penalize ordinary wage-earning citizens.

“We urge Finance Secretary Carlos Dominguez to reveal to the public the details of the tax reform packages he presented to Congress so we would know how these measures will impact the lives of millions of Filipinos to whom every centavo counts in their daily struggle to make ends meet,” FDC Secretary-General Sammy Gamboa said in a news release Sunday.

Gamboa expressed concern that the reforms would be based on trade-offs and compromises with corporate interests rather than principles of equity, fairness and justice. 

“Any increase in workers’ take-home pay due to lower individual income tax would be hardly felt with higher prices of goods and services as a result of increases in excise tax on oil, which would hike fares in public transportation, and reduction of Value-Added Tax exemptions.” Gamboa said.

Earlier pronouncements of the Department of Finance (DOF) showed plans to cut tax rates on individual and corporate income, fiscal incentives to investments, property and capital income alongside increases in excise tax on oil, property valuation, and stocks traded in the stock market. Exemptions from the VAT will be limited to raw food, health, medicines and education. Also identified were additional measures on sugary and fatty foods, mining, alcohol and tobacco, gambling, luxury items and carbon.

With the proposed five tax policy packages, the government stands to lose P198.3 billion but collect P566.4 billion in new taxes resulting in a net gain of P368.1 billion by 2019. These figures, according to Gamboa, are worrisome.

“Net gain from the trade-off between lower personal income tax and higher excise tax on oil, lesser VAT exemptions and new levies on sugary and fatty foods will be P220.7 billion. Meanwhile, there will be a P1-billion net loss from the swap between lower corporate income tax and rationalization of fiscal incentives. This means that Duterte’s new revenue-generating measures will be borne mostly by salaried workers!” Gamboa said.

He added that public transportation subsidies and the Conditional Cash Transfer (CCT) program would not be enough to cushion the effects of price hikes. He stressed that livelihood assistance and employment for affected sectors should be assured and could be funded by earmarking proceeds of the increased tax on oil for this purpose.

“We need to know. The public deserves to be consulted. Will the proposed revenue measures facilitate economic gains to ‘seep through’ or will it force hard-earned money to pour out of ordinary people’s pockets?” Gamboa said in allusion to the Duterte administration’s promise of equitable prosperity for all. ###

 

http://www.fdc.ph/press-statements/debt-public-finance/707-fdc-warns-against-regressive-effects-of-new-tax-reforms

REPOST: 2nd quarter growth weakest in five election years: Bold new economic policies needed

Research group IBON said that the 7.0% growth in the second quarter of 2016 and 6.9% growth in the first semester are the weakest in the past five election years and challenge the Duterte administration. Bold changes in economic policies are needed to achieve sustained higher growth, said the group.
According to IBON, the growth rates in gross domestic product (GDP) so far this year compare poorly with previous election years. Second quarter growth this year is lower than in 2013 (7.9%), 2010 (8.9%), 2007 (7.6%), and 2004 (7.7%). First semester is also lower than in 2013 (7.7%), 2010 (8.7%), 2007 (6.9%), and 2004 (7.5%). This indicates weaker economic fundamentals that weakened the overall impact of the election spending stimulus.
IBON added that the second quarter growth results virtually confirm the country’s economic slowdown and whole year 2016 growth is likely to be slower than the recent peak of 6.9% growth in 2013. The economy has to grow by at least 7% until the end of the year to even just match its performance in 2013. But post-election quarterly growth is usually markedly slower and there have only been two election years in the post-Marcos period, in 1995 and 2001, when growth accelerated rather than slowed, the group noted.
Recent relatively rapid economic growth has not made much of a dent n the country’s high joblessness and chronic poverty. The prospects for the majority of Filipinos can only worsen with slowing growth, IBON warned.
Farmers and fisherfolk have it worst off, the group observed. The agriculture sector has already been losing some 73,000 jobs yearly over the course of the Aquino administration and this is down to just 11.3 million. Comparable employment data for the year so far is not available but the negative 3.3% agricultural growth in the first semester could mean over a hundred thousand jobs more lost, according to IBON.
The group stressed that the Duterte administration and its economic team needs to take the long view. Beyond mere quarter on quarter or even year on year figures, the economy remains on a trajectory of exclusionary growth and underdevelopment. The administration has a convincing electoral mandate and has often expressed its bias for the poor and being unafraid of foreign and domestic elites.
These need to be reflected in a bold economic program that breaks land monopolies, gives substantial support to agriculture and rural development, and unleashes farmer productivity, said IBON. It also needs national industrialization. This means actively building and supporting Filipino industry even if this unsettles domestic oligarchs and will be opposed by foreign investors preventing the rise of Filipino industrial competition. These are needed for sustained higher growth that improves the lives of millions of Filipinos, the group said. ###

http://ibon.org/2016/08/2nd-quarter-growth-weakest-in-five-election-years-bold-new-economic-policies-needed/

Duterte's first budget

The Budget department has submitted to Congress its proposed national budget for 2017. This is the first budget proposal under the Duterte government, which came to power without any coherent economic platform (apart from references to improving Philippine agriculture).

As far as agrarian reform is concerned, this has quietly disappeared based on the government's 10-point economic agenda released less than a month ago.

What's in store for Filipinos out of all the blood-and-sweat taxes the government takes from them? 

• A lot of Police Power. The PNP budget planned for next year is P110.4 billion. This figure is 24.6% higher than last year's budget, as the administration proudly announced. This acceleration is second only to the 32% planned budget growth intended for the DENR which is only getting P29.4 billion anyway.

• Militarization. The Armed Forces of the Philippines still corners a significant portion of the budget at P130.6 billion. The budget for the AFP is still higher than areas such as agriculture and agrarian reform (P120.5 billion) and the DSWD (P129.9 billion less the P78.7 billion expense for the conditional cash transfer or the "Pantawid" of the previous administration).

• Token funding for relevant areas. While the AFP will get to keep its militarization perks, areas such as science and housing will get a measly P20.8 billion and P12.6 billion respectively.

• Meanwhile, according to the Freedom from Debt Coalition, due to a Marcos-era-derived law, the Philippines for 30 years has been spending 27.21% of its national budget automatically to fraudulent and useless debts -- or rather, interests to these debts. Scheduled debt servicing for foreign liabilities amounted to P214.5 billion in 2016, a figure higher than the combined proposed budgets for health and calamity funding next year.

Summary:

Infrastructure  P860.7 billion
Education  P699.95 billion
Health   P151.5 billion
 PhilHealth P50.2 b
 RH Law  P4.3 b
AFP   P130.6 billion
DSWD   P129.9 billion
 CCT P78.7 b
 rice allowance P23.4 b
Agri/AR   P120.5 billion
PNP   P110.4 billion
NDRRMF  P37.3 billion
DENR   P29.4 billion
DOST   P20.8 billion
DOLE   P13.5 billion
NHA   P12.6 billion
DoT   P7.3 billion
Energy   P5.6 billion

Nothing is fundamentally different with these numbers. They basically affirm status-quo neoliberal economic policies -- the same policies that during the Arroyo and Aquino administrations (total of 15 years) have resulted in self-rated poverty hovering at the 50% territory.

Data sources:

http://www.dbm.gov.ph/?p=16394
http://www.gmanetwork.com/news/story/570703/money/economy/duterte-s-economic-team-reveals-10-point-socioeconomic-agenda