The first part of this paper will delve into how the Philippine government has adopted GDP accounting, while the second section will analyze the historical background and ideological basis of this capitalist criterion of development. Finally, alternative methods of measuring development vis-à-vis the GDP will be discussed.
BY PROF. EDILBERTO M. VILLEGAS
Contributed to Bulatlat
Vol. VIII, No. 9, April 6-12, 2008
This essay will examine the ideological basis of the method of Gross Domestic Product accounting of the modern free-market economists (the neo-classicists), who are the heirs to the theory of capitalism as primarily purveyed by the classical economist Adam Smith. While neo-classical economists and the Keynesians, who also espouse free enterprise, contend that national accounting should be impartial and objective in presenting the accumulation of capital and consumption of goods and services in a society, this study will show, on the other hand, the class-bias of GDP accounting for the capitalist class. It will elucidate how the use of numbers in measuring the wealth and goods of society cannot be neutral but inevitably value-laden. It will analyze the political economy of GDP accounting where the upper classes, represented generally at present by monopoly capitalism, perpetuates their economic hegemony through the myth of development of GDP growth of their nations. Thus, GDP accounting could reveal the social relation of production of the owners and the non-owners of the means of production.
The first part of this paper will delve into how the Philippine government has adopted GDP accounting, while the second section will analyze the historical background and ideological basis of this capitalist criterion of development. Finally, alternative methods of measuring development vis-à-vis the GDP will be discussed.
The GDP method as used by the Philippine government
The first National Income Accounting (NIA) was undertaken in the Philippines in 1947 by a joint Philippine-American Finance Corporation, which also laid down the ground works for the establishment of the Central Bank of the Philippines. The Philippine government had no political will to question how capitalist economics measures the economic growth of a nation and it accepted blindly the method of obtaining GDP advised by its American patrons. The period covered by the first NIA in the country was 1938 to 1948. In 1950, the new Central Bank of the Philippines assumed the task of estimating the NIA, placing the base year at 1955(1955 = 100). Ever since, the Philippine System of National Accounting (PSNA), which is now conducted by the National Statistics Coordinating Board(NSCB), has been beset with sloppy data-gathering which has consequently placed its estimates of the gross domestic product (GDP) of the Philippine economy in serious question. This has been exacerbated during the present Arroyo administration.
National accounting in the Philippines adopts the production approach, called by NSCB the economic activity approach (covering agriculture-fishery-forestry, industry and services) as well as the expenditure approach (personal consumption, government purchase, investment, export, less import). But because of constant lack of production data for a current period, especially on intermediate costs which should be deducted from the gross value of output, the NSCB has resorted to mere estimation or indirectly deriving the gross value added (GVA) of current products by making use of relative prices of output and inputs from the most recent cost of production when such data were available (how recent?). This is what the NSCB calls their method of gross value added ratios (GVAR) and is now applied to all production costs when lack of information on the current prices of intermediate products occurs which is often the case. This is done for all sectors of the economy, except for electricity, gas and water and government services which directly estimate the GVA of intermediate costs by its factor shares.. This method of arriving at the prices of intermediate goods for all sectors except for the two sectors mentioned arbitrarily assumes that the ratio of output to input costs remains as with the latest survey of prices when input prices were available. It is to be pointed out, however, that input prices in production in the Philippines, particularly raw materials and other supplies, behave differently from output prices and assuming a ratio based on a past price survey may be invalid.
This defect in estimating the final prices of goods and services for arriving at current GDP has spilled over to the determining of constant or real GDP. The choice of base years for the Philippines GDP in the determination of constant prices has been undertaken four times, from 1955 to1967, then 1968 to 1972, and 1972 to 1985 (the present base year). The Arroyo government has tasked the NSCB to change the base year again from 1985 to 1994. Any economics student knows that by changing the base year to a more recent date would decrease the growth of inflation in a country where prices tend to rise like in the Philippines, especially with the constant increase of oil prices. Also, because of incomplete information on prices, especially on new products like computer components, the NSCB has made use of substitute or proxy prices. In the words of the NSCB “Existing price data do not cover all commodities. For example, for manufactured commodities, there are no available prices for microcircuits (used for computers) considering that such commodity accounts for seventy percent of the total electrical machinery. With this, trends of proxy prices are used instead. For microcircuits for computers, substitute prices of radio, television and communication equipment are used.” But substituting the more expensive prices of radio and television for microcircuits of computers would increase the final prices of the latter in the market, thus helping boost total GDP at constant price.
