Economic Analysis of the Philippine Situation

November 21, 2008

Economic Analysis is an overview on what is to come in the next series of Economic subjects designed for any student in Masters of Science in Economics. Fortunately for this presenter, he has been able to take up two very relevant economic subjects namely: Economic Development and Economic Thoughts. The diagrams and figures that will be presented herein are parts of the previous presentations, reports and research work that have been required by the previously mentioned subjects. In this case the presenter’s Economic Development concepts are just more elaborative and summative with reference to the issues, theses he has previously mentioned in his papers.

A. Background on my Country: Present Situation

What brings about poverty and what is poverty? What are the results and causes of poverty? Social scientists main purpose is to answer these questions. In the internet and conventional libraries there are at least billions of materials that explained the causes and effects of poverty in different perspective, framework and context. This paper is just a redundancy so to speak.

According to the deceased father of the presenter, you only need to have three books to learn what “life” is. One is the Bible, next is the works of Shakespeare and lastly, an American Dictionary. The logic is that what has happened then is happening now. The Bible talks about Jesus’ engagement with the poor and the marginalized. Shakespeare’s work vividly pictures people from the different echelon of society, from the kings to the pauper and the ordinary middle class. The dictionary on the other hand defines the meaning of a new word that one has never heard or read.

But what do these books try to tell its readers? In one internet article where the verses of the bible has been enumerated to elaborate on the issue of “Wealth and Poverty in the Bible”[i], the author writes :

A Survey of Wealth and Poverty in the Bible

From the beginning of creation, God demonstrates a desire to bless humanity with the abundance of the material world (Gen. 1:28-31). God had blessed the patriarchs in many ways, including that of wealth, for the purposes of blessing others (Gen. 12:2-3). By the time of Moses, God had promised his people the land of Canaan, an abundant land flowing with milk and honey (Deut. 11:9). There were also specific laws about regulating material possessions: ownership of property (Deut. 19:14), gleaning rights for the poor (Lev. 19:9-10), and the Jubilee (Lev. 25:8-55).

The Psalms and Proverbs hold tension between material well-being and justice to the poor. Whole Psalms and passages in proverbs ask God for blessings, including material blessings (Ps. 128, Prov. 13:21). There are other passages that speak about justice for the poor (Ps. 82:3-4, Prov. 29:7). There are also very specific passages in Proverbs that speak about the danger of accumulating wealth as a goal in itself (Prov. 8:10-11, 15:16-17, 23:4-5).

The prophets are very vocal about the sins of Israel with respect to wealth and poverty. They often point out how the rich are oppressing the poor (Ezekiel 22:29, Mal. 3:5), leaders abuse material possessions (Isaiah 3:14-15, Micah 7:3), and using wealth for rituals rather than obeying the Lord (Isaiah 1:10-20).

He further elaborates that in the New Testament, Jesus advocated stewardship of material possessions, indifference and respect of people from different economic backgrounds, being cautious on the love of money and the danger of accumulating wealth as the goal in itself.

Shakespeare on the other hand during the Elizabethan Era may have just glamorized or romanticized the contexts of the travails of Englishmen in the different social bracket; nonetheless his plays show his sensitivity to the issue during his day.

O! reason not the need; our basest beggars

Are in the poorest thing superfluous:

Allow not nature more than nature needs,

Man’s life is cheap as beast’s.

King Lear (2.4.276)

A most poor man, made tame to fortune’s blows;

Who, by the art of known and feeling sorrows,

Am pregnant to good pity.

King Lear (4.6.216)

Poor naked wretches, wheresoe’er you are, That bide the pelting of this pitiless storm, How shall your houseless heads and unfed sides, Your loop’d and window’d raggedness, defend you From seasons such as these? O! I have ta’en Too little care of this. Take physic, pomp; Expose thyself to feel what wretches feel, That thou mayst shake the superflux to them, And show the heavens more just.
King Lear (3.4.33)

I can get no remedy against this consumption of the purse: borrowing only lingers and lingers it out, but the disease is incurable.
2 Henry IV (1.2.74)

The naked truth of it is, I have no shirt.

Famine is in thy cheeks,

Need and oppression starveth in thine eyes,

Contempt and beggary hang upon thy back;

The world is not thy friend nor the world’s law:

The world affords no law to make thee rich;

Then be not poor, but break it, and take this.

Romeo and Juliet (5.1.76), Romeo to the Apothecary

Well, whiles I am a beggar, I will rail,

And say there is no sin but to be rich;

And being rich, my virtue then shall be

To say there is no vice but beggary.

King John (2.1.612)

Whiles, like a doe, I go to find my fawn

And give it food. There is an old poor man,

Who after me hath many a weary step

Limp’d in pure love: till he be first suffic’d,

Oppress’d with two weak evils, age and hunger.

As You Like It (2.7.138)[ii]

The most common phrase “history repeats itself” in the Old and the New Testament through the Elizabethan / Shakespearean era can always be used in the context of poverty. Now, in the Philippine setting, we can say that what has happened in the Bible and on the plays of Shakespeare is also happening now. But the logic of writing about the poverty issue should focus on the concrete definition of the source or the root of poverty and its effect. How to deal or solve it would be another huddle… the question is… Are we solving the root… or are we solving the cause?

The preceding part of this presentation is an enumeration of social and economic issues in the Philippines. Pictures and diagrams are self explanatory and most of them have been already used in the presenters articles as a requirement the subjects he has taken a semester ago at the time of writing.

1. The Migration Phenomenon

According to the Philippine Government statistics there are about two thousand four hundred (2,400) Filipinos leaving their homeland everyday. More than ninety percent of this figure are contract workers who have left their spouses and children for a work contract in order to earn a living in in the More Developed Countries such as New Zealand, Astralia, US, Canada, Singapore, Malaysia, Japan, and other Mid-Eastern Countries. On the other hand, official records do not show the actual ratio of permanent and temporary migration. Permanent migrants’ or OFWs who intend to permanently settle in the US, Canada, New Zealand and Australia have brought their families with them.

Why permanently settle in their preferred country?

In one of the study done by the presenter there are three general issues that has made the permanent migrants decide to leave their homeland and settle in their country of preference for good. The samples are young married couples from the middle class community in of the one subdivisions in Metro Manila. The Influencing Factors are as follows :

1. Salaries and Wages do not make both ends meet.

2. Negative perception on the government’s stance on globalization

3. Discouraging issues on establishing a business enterprise such as high rental and unfair competition.

The Temporary Migrants or OFWs who are working under a short term contract in countries such as Singapore, Japan and Middle Eastern nations. In their case, several issues stemmed up from human trafficking, prostitution, discrimination and maltreatment.

From the signals being sent by the current administration, this migration phenomenon seems to them a solution to the economic problem that we have at hand. The Twelve point three Billion from the net factor income from abroad or in layman’s term, the remittances of the OFWs should be increased. Therefore, the labor capital market should be geared towards the development of skilled workers that has a high rate of return in terms for remittances. The basic premise is that we educate and train our young Filipinos to become laborers of the more developed countries.

Is motivating Filipinos to migrate really a solution?

Figure 1 – Overview Diagram of Permanent Migration

Figure 2 – Context Diagram of Permanent Migration

2. Degeneration of Morals and Mental Sanity Trough the Boobtube Media

Talk shows, variety shows, drama and fantasy anthologies in the television is a way of life of the current generation. Even the buses roaming in Metro-Manila to the provinces have their own TV sets that are either tuned in to ABS-CBN or GMA. You can watch noontime shows where TV hosts encourages people to join their game shows and become rich… instantly. About two months ago from the time of writing one talk show host slipped up on national and international television the modus operandi of how contestants and viewers alike is being cheated. The incident has been posted on youtube.

We can watch talk shows hosted by gay personalities such as Boy Abunda who at one time presented his house and his boyfriend in his segment called Homeboy. Like what I’ve mentioned in my previous writings, the “boy” term in the Filipino context is already a term for gay. Since Boy Abunda is a gay, he should not be called “boy”. He should be called GAY ABUNDA. From him stems up a lot of validation process for young male Filipinos that it is ok to be gay in the Philippines. The church on the other hand tolerates these aberrations. One need not be surprised about it because their men in cloak are mostly men in palda so to speak.

We see soaps depicting everyday the misery of one’s story, the plight of the oppressed hero or heroine against the kontrabidang mayaman. On Sundays we see variety shows that commemorate the anniversary, birthday of artistas and or newbie artists… nothing new, nothing better and nothing worth watching.

Figure 3 – Gay Showbiz Abberations

3. False Concept of Peace and Order

What now then is Peace on Order Philippine style? It’s a continuous war against muslim separatists to justify the military presence and existence. About hundreds and thousands of Muslims are being slaughtered another thousand left homeless and orphaned. On one hand, an office called the Office of the Peace Process has been there since this current administration took over the government to sit and talk with the communist insurgents and the muslim separatists. Yet a month ago a soldier was beheaded and cut into pieces. Still at the time of writing a soldier father of a friend of this presenter was just killed in Basilan. Perhaps policy makers should take a little more time watching the movie Beautiful Mind and try to learn what Game Theory means.

Figure 4 – Peace and Order pictures

4. Tax Cheating and Malicious Spending of Treasury Money

When you talk of cheating you talk of three players:

  1. The Tax Evader (the Cheater)
  2. The Tax Collector (the Extortionist)
  3. The Budget Spender (the Thief)

Tax Evaders are the private citizens and companies who are bounded by law to pay taxes. The main reason for tax evasion is maximization of profit. But the other twisted reason according to some of the businessmen is that the government does not do its function properly. They say that they do not experience the benefits of what they are paying to the government such as widening of roads in the urban area, peace and order situation getting worse to worst and other blah blahs.

The Tax Collectors are government employees in the major revenue generating agencies namely the Bureau of Customs and the Bureau of Internal Revenue. “It takes two to tango” in the collection side. The tax evader evades paying taxes, while the extortionist takes a percentage of what the evader saves. In street lingo… Everybody is happy. One should be thankful if the extortionist still collects for the government and not for his own pocket alone.

The Thief or the Budget Spender is the worst kind. The revenue collected by the tax collectors plus the money borrowed by the government from IMF-WB is called treasury money. Thievery of this money comes in many forms under the civilized budget allocation system. When the budget is already disbursed in the executive, legislative and the judiciary… that is already bye bye for the yaman ni Juan. Remember the JocJoc Bolante case and the most recent ZTE scam?

Figure 5 – Context diagram of Taxation in the Philippines

5. The Widening Gap Between the rich and the poor

In a street called Daang Hari somewhere in Las Pinas is a very clear picture of the great divide between the Rich and the Poor (see Figure 6 – Widening Gap Between the Rich and the PoorFigure 6 – Widening Gap Between the Rich and the Poor) In the presenter’s paper on research method, he’s tried to define the social brackets in the urban community through the satellite pictures taken by google earth.

It is so obvious that the lots subdivided in the Ayala Alabang Subdivision on the right side of the divide are extremely larger than the ones on the left. Shanties of twenty where around forty families eat, live and sleep can fit into one subdivision lot.

Figure 6 – Widening Gap Between the Rich and the Poor

6. The Favored Multinationals vs. the Local Traders and Entrepreneurs

In the Economic Development class, the presenter had a chance to present a powerpoint on the harris-todaro concept of import substitution. The slide shows the different incentives given to multinational companies who have put up their companies in the Philippines. Tax incentives, shelters, tariff covers, subsidized or tax free importations are given to multinational companies such as Proctor and Gamble, Nestle and Mitsubishi Motors.

Mitsubishi Motors in the guise of producing cars locally through our local labor is protected by the government where it has almost outlawed the importation of cars. On one hand, Filipinos are left off to forcibly by from these manufacturing companies at a very high price of Completely Knocked Down (CKD) vehicles that are assembled here locally. An ordinary Filipino cannot import from abroad because in according to policy makers these companies generate jobs for the Filipinos. Really? Mitsubishi has only around five thousand (5,000) employees. It’s just an insignificant speck of the total population of Filipinos. Are we really dumb enough to say that this company is not earning that much?

Tax incentive comes in a form of delayed payment of taxes thus saving the company a significant amount of interest earnings from the bank. Mitsubishi does not pay the government outright or upon importation, payments are delayed under the customs bonded warehouse scheme. They only pay the taxes on raw materials upon assembly or release of goods for the CBW during the actually assembly day.

What is worse is that it is a foreign company earning its profit in the local ground and employing Filipinos as the labor force. Do we get the biggest slice of the pie?

Figure 7 – Tax Incentives, Tax Shelters of Multinational Companies

7. Continuous Rape and Rampage of the Natural Resources

One does not need to research on what urban development has done to the Pasig River, Manila Bay and the Laguna Lake. We have made these God given resources black, stinky and fugly (fucking ugly). One lawyer student commented that the Laguna Lake is the largest toilet bowl in Asia. This writing gives the presenter the opportunity to say that the Pasig River is the largest sewer in Asia. Annoying as it may sound but it’s true. All the sewers in metro manila connects to the three bodies of water.

Kapaligiran, the song of a band called Asin has been composed more than twenty years ago. Along this thought the presenter would like to make another parody.

Wala ka bang napapansin (Tanga ka na pag di mo napansin)

Sa Iyong mga Kapaligiran (Sa ginawa mong kababuyan)

Kay dumi na ng hangin (Kay baho na ng hangin)

Pati na ang mga tubig natin (Itim na ang mga ilog natin)

Enough said!

8. Who Controls the Land, Money and Honey

Who is well off nowadays? Who rides the big AUV cars? Who can afford to travel to and fro from favorite tourist spots destinations in the world? Who lives in the posh villages and condominiums such as Ayala Alabang, Dasma, Corinthian and Forbes? Whose sons and daughters can afford to spend beach bumming in Boracay or surfing in some beaches in the Philippines? Who can afford to put up high-end restaurants and entertain high-end clients? Who visits the holy land frequently with some boytoy priest and prays with a gold-plated rosary? Look at the diagram below.

Figure 8 – Where does the money flow?

B. Economic Concepts Applicable to the Situation

1. Conventional Economic Development Concepts

There are several definitions and models for economic development. In synthesis, and based on the context and definition of wikipedia, ecodev is an interplay and interconnection of entities, goods and services and the general process of PRODUCTION and DISTRIBUTION. Figure 1 is the author’s analysis utilizing the Systems Analysis and Design’s approach on the context that is stated in “The economic development process supposes that legal and institutional adjustments are made to give incentives for innovation and for investments so as to develop an efficient production and distribution system for goods and services. (”

Figure 9 – Economic Development – Context Diagram

There are three building blocks of most growth models

  1. the production function
  2. the saving function
  3. the labor supply function (related to population growth)

Wikipedia has also enumerated the following models as they are quoted verbatim :

Harrod-Domar Model

The Harrod-Domar Model delineates a functional economic relationship in which the growth rate of gross domestic product (g) depends directly on the national saving ratio (s) and inversely on the national capital/output ratio (k) so that it is written as g = s / k. The equation takes its name from a synthesis of analyses of growth process by two economists (Sir Roy Harrod of Britain and Evsey Domar of the USA). The Harrod-Domar model in the early postwar times was commonly used by developing countries in economic planning. With a target growth rate, the required saving rate is known. If the country is not capable of generating that level of saving, a justification or an excuse for borrowing from international agencies can be established. An example in the Asian context is to ascertain the relationship between high growth rates and high saving rates in the cases of Japan and China. It is more difficult to introduce the third building block of a growth model, the labor and population element. In the long run, growth rate is constrained by population growth and also by the rate of technological change.

Exogenous growth model

The exogenous growth model (or neoclassical growth model) of Robert Solow and others places emphasis on the role of technological change. Unlike the Harrod-Domar model, the saving rate will only determine the level of income but not the rate of growth. The sources-of-growth measurement obtained from this model highlights the relative importance of capital accumulation (as in the Harrod-Domar model) and technological change (as in the Neoclassical model) in economic growth. The original Solow (1957) study showed that technological change accounted for almost 90 percent of U.S. economic growth in the late 19th and early 20th centuries. Empirical studies on developing countries have shown different results (see Chen, E.K.Y.1979 Hyper-growth in Asian Economies).

Also see, Krugman (1994), who maintained that economic growth in East Asia was based on perspiration (use of more inputs) and not on inspiration (innovations) (Krugman, P., 1994 The Myth of Asia’s Miracle, Foreign Affairs, 73).

Even so, in our postindustrial economy, economic development, including in emerging countries is now more and more based on innovation and knowledge. Creating business clusters is one of the strategies used. One well known example is Bangalore in India, where the software industry has been encouraged by government support including Software Technology Parks.

Surplus labor

The Lewis-Ranis-Fei (LRF) Model of Surplus Labor (LRF) is an economic development model and not an economic growth model. Economic models such as Big Push, Unbalanced Growth, Take-off, and so forth, are only partial theories of economic growth that address specific issues. LRF takes the peculiar economic situation in developing countries into account: unemployment and underemployment of resources (especially labor) and the dualistic economic structure (modern vs. traditional sectors). This model is a classical model because it uses the classical assumption of subsistence wage.

Harris-Todaro model

The Harris-Todaro (H-T) model of rural-urban migration is usually studied in the context of employment and unemployment in developing countries. In the H-T model, the purpose is to explain the serious urban unemployment problem in developing countries. The applicability of this model depends on the development stage and economic success in the developing country. The distinctive concept in the H-T model is that the rate of migration flow is determined by the difference between expected urban wages (not actual) and rural wages. The H-T model is applicable to less successful developing countries or to countries at the earlier stages of development. The policy implications are different from those of the LRF model. One implication in the H-T model is that job creation in the urban sector worsens the situation because more rural migration would thus be induced. In this context, China’s policy of rural development and rural industrialization to deal with urban unemployment provides an example.

II. Proposed Development Program

Development according to the Harris-Todaro model should always have a different approach on the rural and the urban areas. CSBCOM should approach it on the same context. Another concept should be segregating the development for the Indigenous people. On the other hand where the more developed countries such as the United States and Australia is giving due importance to their indigenous people, the Philippines is now on the verge of exterminating them.

Countrywide development has to be done most importantly in the mindset of the people. Minds setting coming from the context of where Moses has rallied the Israelites from Egypt to the promise land by mere play of words; and where Winston Churchill has made a stand through the radio broadcast by motivating the English men, women and children to be watchful for the German invaders coming from the other side of the English channel… thus prevented Hitler for capturing one of the most strategic country in the European peninsula.

These four areas need to be taken into account if Philippines should move from across the red sea to the promise land.

1. Proper Mindsetting

In the television and radio broadcast are being controlled moneyed clans such as the Lopezes, the Cojuancos and the Jimenez’s. They make all of the Filipinos dumb…. If not dumber. Gay people should completely be eliminated from anything that has to do with broadcasting to return the right concept of the Filipino malehood. This idea does not stem out from a homophobic tendencies because such word does not really exist but it stems out from the fear that one day all Filipino males will become Boy Abunda and Ricky Reyes is now almost possible because such aberrations are being tolerated.

What needs to be broadcast in the media should be rallying concepts of development. Marcos has then been on the right track when he made the Bagong Lipunan axiom or the New Society. Depressing soap operas, trash noontime shows and stupid fantasy series should be replaced with value forming shows that features the Filipino Culture and its decent origins.

Warring factions, ideologies should sit down and talk and come up with a compromise. Muslim separatists should really know what they want. The government on the other end must be able to consider the irony of facts of these conflicts not only with Muslims but with the communist insurgents as well. They should negotiate for a win-win situation.

Revolution always starts in the minds and the hearts of the people. It is not a one shot deal but a continuing process when problems always pops up and solutions are just ready to be designed and implemented.

The first EDSA revolution is successful because of the media radio broadcast. Along this historical context the Philippine Government has to use this component in order to capture the hearts and minds of its people.

2. Urban Setup

There should be a separate model for the urban areas particularly for areas such as the Metro Manila and Cebu. The urban areas have different environment, pollution level, population density and poverty level. Urban areas are convergence of cultures since ninety percent are all migrants from different provinces.

Pollution level of the Pasig River is different from the Pagsanjan River and Taal Lake from the Laguna de Bay. Population density of a squatter area in Parola, Tondo is different from Liliw, Laguna so is with the culture of the people. Resettlement will only be the key to make the people of the poor and the marginalized uplift their standard of living. Such resettlement need not be pa-pogi points type but a resettlement in a holistic approach. First they should identify the area where they will be resettled and provide them technical know how on the products or services they will produce.

3. Rural Setup

Rural areas only need farm to market roads, proper irrigation and marketing. Theirs are still a culture not yet so bastardized by the stupid things one could see in the Philippine media. Where Liliw has thrived in the areas of production and marketing of vegetables and tsinelas, the different towns in the Philippine archipelago in all probability can do the same thing. Philippine rural towns still have the land and the watershed. Only thing that has to be done is to motivate and channel the development fund properly.

4. Indigenous People

The Aetas, Negritos, Mangyans, Dumagats and the Igorots are keepers of the earthly traditions. They are the bearers of cultural knowledge and wisdom. War dance of the Igorots and the American Indians if not similar are almost the same. An Australian aborigine’s village doctor gets his medicine from local plants which is being done by the local arbularyo of the Dumagats. When more developed countries such as the US and Australia are protecting the ancestral lands of their indigenous people, the Philippines is doing the reverse. Pushing them out of their ancestral homes is like exterminating them. Along with this extermination process is a death of centuries old of earthly rooted culture of economics, medicine and arts.

If the Australians and the Americans thrive on the idea that they have a lot to learn from the culture of their indigenous people, so do we as Filipinos.

Figure 10 – Indegenous Aeta

III. Conclusions

The Philippines can be better off if only people who are steering the wheels of power realize that there is no point in greediness. Through such realization is a notion that the twenty percent (20%) of the landed and moneyed powerful clans should be able to converge, sit down and think what should be done to uplift the country in the current economic chaos. Without them wanting to change the way they run things in our present chaotic economic condition… any vision for this country will just be a dream… a broken dream.

[i], “Wealth and Poverty in the Bible”, February 7, 2007



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