My friend DataChimp and I were having an extended discussion about events both here and abroad, since the election in May. As is with the Chimp, it covered a whole range of socio-economic subjects, again both here and abroad.
At the top of the list was Marcos’ economic managers. The Chimp isn’t a fan of Arsi Balisacan. Neither am I. For that matter, we were in agreement that it’s not good to put the economy in the hands of a team who are all academics, including the DTI under Federico Pascual.
But then again, Balisacan is a Genuine Ilokano who has worked with BBM in the past when he was Governor and Congressman of Ilocos Norte. Diokno has been with several administrations. Medalla was with the NEDA during the Erap administration and Pascual is well-known among management professionals.
The basic argument is that they are all academics who haven’t had exposure in the real world of business unlike former Finance Secretary Sonny Dominguez. The Duterte administration had tax reform and BBB as its flagship economic programs. The Marcos administration only has an eight-point socio-economic agenda that is all motherhood statements. Long story short, it’s long on theory but short on practice as to a strategy and the implementation of the same.
The discussion then went to the subject of the US. The socio-political climate in the US has been chaotic ever since Trump’s election and even after he was defeated by Biden. The US has withdrawn from Afghanistan but managed to land themselve in Ukraine, even if indirectly.
The talk came to the subject of the US economy. Why is the stock market still up when its crash had been predicted by several experts such as Ray Dalio and Michael Burry? The inverse relationship between stocks and bonds hasn’t manifested. The Chimp’s answer was simple enough. US inflation is not only due to supply chain difficulties but also because it has overprinted dollars.
Whoa. It all suddenly made sense. The European Central Bank had been maintaining negative interest rates for eleven years since the 2008 financial crisis. It had only recently raised rates again after inflation surged after the pandemic lockdowns and the conflict between Russia and Ukraine. But as it turns out, it’s not only demand-pull and cost-push inflation that’s driving prices up in Europe but also the fact that they overprinted Euros as well.
Proof? German Chancellor Olaf Scholz announced a subsidy of 65B Euros for German’s power costs. This is the direct result of Germany being on the side of NATO in the Russia-Ukraine conflict. The same issue had been brought up by Trump when he was President and met with the leaders of the NATO member countries, all of which, at that time, was buying oil and natural gas from Russia.
All of these reminded me of the events in history from the 18th to the 19th centuries, in the run-up to World War I and what happened prior to World War II, both on the political and economic fronts. At that time, there were competing hegemons; the Americans and the British had been allies, while Germany was on the warpath because of the onerous terms of the Treaty of Versailles and Hitler’s rise as the leader who stoked the intense patriotism of Germans into an economic recovery.
The emerging Asian hegemon was Japan, which had engaged both the Chinese and the Russians in battles to test its military strength. The Japanese didn’t quite conquer all of China but they did manage to defeat the Russian Navy during the Russo-Japanese war. Japan’s future plans for its Greater East Asia Co-Prosperity Sphere was inspired by a British naval expert.
As the United States commemorates the 76th anniversary of the Japanese surprise attack against the U.S. naval base at Pearl Harbor on December 7, 1941 few people know that Japanese war plans were inspired by a 1925 novel titled The Great Pacific War, written by the British author Hector Bywater.
The novel predicted a Japanese surprise attack on U.S. naval forces in the Pacific, the Allies’ island hopping strategy used during the actual Pacific War, and the eventual U.S. victory over Japan. Bywater’s work of fiction is thought to have influenced Imperial Japan’s chief naval strategist and commander of the Imperial Navy’s Combined Fleet, Marshal Admiral Isoruko Yamamoto, when he was planning his naval campaign against the United States.
As it is now, there is already war in Europe between Russia and Ukraine. It’s actually a proxy war between the US, NATO and Ukraine on one side, and Russia on the other.
China and Russia have been developing a closer relationship while the US has also been needling China on the issue of Taiwan, which has increased tensions in the water of the East and South China Sea and the Taiwan Strait.
Historically, the Japanese and South Koreans are enemies of China because of past aggressions. The Japanese and South Koreans are the same with each other, but they could be allies against a push by China to become the dominant economic and military power in the region.
I mentioned to the The Chimp that the way I saw it, all the pieces are in place for another global conflict to begin. He countered with, “do you think it hasn’t started yet?”
On quick hindsight, I concluded it already has, given the current geopolitical events taking place. It was an “Aha” moment for me. Think of a world war with localized battles or wars, with battles being fought on several fronts; physical, the financial markets, economic sanctions and cyberspace.
All of these is informal at the moment but the battle lines have clearly been drawn as it is the US, NATO countries and other allies on one side, against China, Russia and their allies on the other.
We got to the point of asking the elephant-in-the-room question of where does the Philippines figure in the middle of all of this?
For starters, we’re coming off a thirty-year rule of doing nothing for the genuine interest of Filipinos under Yellow administrations which focused on its own agenda of power and money.
The Duterte administration was a breath of fresh air but unfortunately didn’t have the benefit of time to finish with its reform agenda. The Marcos-Duterte ticket won a landslide mandate on the platform of continuity but the performance of President Marcos leaves much to be desired in the time since his inauguration.
The country is being battered by internal and external factors which by any means isn’t the fault of Marcos but the onus is on him to crack the whip among government officials and the oligarchs to serve the public interest instead of their own. Not much has been done to this effect.
We are import-dependent on key basic commodities, particularly rice. We have shortages of other agricultural commodities. Agriculture itself doesn’t contribute much to the GDP. Exports are down, including electronics and semiconductors as China’s economy slows down as demand falls in the rest of the world battered by inflation and socio-political turmoil.
Our foreign exchange is dependent on two main sources; OFWs and the BPOs. If this is the case, we might as well gear up and develop our workers for us to become the labor supplier to the world. I doubt very much if we can still fail at this.
Our inflation is driven primarily by the cost of oil imports, which has a domino effect on all goods. With the US Federal Reserve showing no signs of stopping interest rate hikes, the peso is going to depreciate further. The next round will begin on September 20, which is the next meeting of the Federal Open Market Committee in New York.
Despite amendments to key anitiquated laws regarding certain industries which have been opened up to foreigners, we are still the laggard in foreign direct investments in ASEAN due to the red tape and corruption in our bureaucracy and our still deficient infrastructure. It will take time to modernize agriculture and the present strategy adopted by the Marcos administration with respect to agrarian reform doesn’t hold bright prospects because the economies of scale for production viability is absent.
Marcos has to read the riot act to the oligarchs and ask them to open their wallets and invest in the country in the absence of foreign direct investment but the oligarchs are still focused on rent-seeking businesses all geared to exploit the Filipino consumer. There aren’t that many jobs to be created by renewable energy investments. What is certain is the proponents will get rich off the initial public offerings of their companies in the local stock exchange. But this will just be the rich getting richer.
In the meantime, the entitled poor will again demand for their share of the spoils, not understanding the concept that nothing really comes for free. Our politicos will continue to pander to the poor for their votes in the next election. This means more safety nets in the form of subsidies which only serves to widen the budget deficit. We can’t afford to borrow anymore without risking an economic crash.
This is the vicious cycle we must get away from but from the looks of it, it will be business as usual under Marcos. What is left is the hope that Marcos realizes that he has to do more if he is to succeed in obtaining redemption and vindication for his family. It doesn’t stop with his achieving his goal of becoming President. He has to do more. He has to have a better vision for the country and his countrymen.
As history has proven, with Singapore being the best example, it doesn’t pay to be on the side of elephants in a conflict between two which are fighting. What’s best is to adopt your own growth strategy and develop it to adapt with the changing times.
The root of our problem lies in the root cause not being addressed which is the plantation-style political and economic order which has been with us since the time of our colonizers.
This leaves us very vulnerable now that the elephants are fighting and we are lost in the fields of grass where they are doing battle. It will be a struggle to survive in the tempest of the political, social and economic conflicts which are all part of the birth of a new world order.
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