Benjie Oliveros | The world economic crisis and the state of the Philippine economy

Published on July 15, 2011

By BENJIE OLIVEROS
Bulatlat.com

There seems to be no relief in sight , even temporarily, to the world economic crisis that imploded in 2008. While economists declare every seemingly positive sign, such as an increase in stock prices or in consumption expenditures, as the start of economic recovery, they have been disproven time and again by signs of another downturn. In early 2010, the sovereign debt crisis that hit Greece dashed all hopes and pretensions that the world economic crisis is about to end. Portugal and Ireland followed soon after. Italy is not far behind and Spain is becoming a cause for concern. An indication of the festering crisis is the unemployment situation. Data from Visual Economics.com reveals that Austria registered an unemployment rate of 4.5 percent, Belgium 7.4 percent, France 8.8 percent, Germany 8.3 percent, Greece 9.1 percent, Spain 18.7 percent, Sweden 8.9 percent, Netherlands 4.4 percent and France 8.8 percent.

Recently, economic data from the US has not been so encouraging either. Unemployment soared at a high 9.2 percent. U.S. gross domestic product grew by just 1.9 percent in the first quarter of the year and is expected to be a low 2.7 percent to 2.9 percent for the whole of 2011. And the housing crisis is far from over. According to a yahoo news report, Gary Shilling, President of A. Gary Shilling & Co. and author of the Age of Deleveraging, who predicted the housing crisis said that there are 2 to 2.5 million excess homes in the US. He projects that housing prices will fall further by 20 percent in 2012 and underwater mortgages will shoot up from 23 percent to 40 percent. Desperate, Federal Reserve Chairman Ben Bernanke is talking about another round of quantitative easing. Quantitative easing, as defined, is a measure to increase money supply when interest rates hit zero. Normally, the method of economists to increase the money in circulation – to ease credit availability and stimulate business – is by lowering interest rates. If this is no longer effective, the government buys back its securities. How does a government do this in the context of a fiscal deficit such as that being suffered by the US? One measure is to print more money. US President Barack Obama is also proposing ending tax breaks for millionaires and subsidies for oil companies, as well as cuts in government spending for social services.

Thus, anybody who would claim that the Philippine economy has been improving under the Aquino administration is lying. The country is reeling from a crisis not only because the Philippines is part of the world economy, but mainly because the government has been merely pursuing the failed neoliberal/globalization policies of deregulation, liberalization and privatization. Under the Aquino administration, the economy continues to slow down with an 8.9 percent growth in the second quarter of 2010, 7.3 percent in the third quarter, and 6.1 percent in the fourth quarter, followed by the 4.9 percent GDP growth in the first quarter of this year (The growth rates are compared year on year). As it is, the GDP growth for 2010 was not even surprising considering that the economy registered a mere 0.9 percent growth in 2009 and 2010 was an election year.

Estimates by Ibon Foundation place the number of unemployed at 4.5 million. Underemployment is at 19.4 percent affecting 7.1 million Filipinos. Added to this are the 16.5 million Filipinos in poor quality jobs: unpaid family workers at 4.2 million and own account workers at 12.3 million. There are also 1.9 million employed as domestic household helpers. If we add this up, there are 30 million out of the 38.9 million labor force who are either unemployed, underemployed or laboring in poor quality jobs. If we subtract from the number of employed, the 4.5 million, as per estimates of the Commission on Filipinos Overseas, who are working temporarily abroad, then only a small fraction of the labor force would be left as gainfully employed locally.

Is the crisis now being addressed? The European Union has been pushing member-countries to follow the lead of Germany, which has been implementing harsh neo-liberal measures. The US has been refusing to veer away from the “free market” ideology, prompting Joseph Stiglitz, an American economist, to warn about the resurgence of right-wing economics in both the US and Europe. He said that deregulated capitalism, which “brought the world to the brink of ruin,” is still being strongly pushed.

Stiglitz added, “As Greece and others face crises, the medicine du jour is simply timeworn austerity packages and privatization, which will merely leave the countries that embrace them poorer and more vulnerable. This medicine failed in East Asia, Latin America, and elsewhere, and it will fail in Europe this time around, too.”

Likewise, the Philippine Development Plan 2011-2016 of the Aquino administration is merely a rehash of the failed policies of the previous Arroyo administration, which made the country more vulnerable to the world economic crisis. Ibon Foundation said, “The essential economic thrust is straightforward: stick to globalization policies implemented over the last decades, deepen and broaden privatization through Public-Private Partnerships (PPPs), and selectively implement social protection programs especially conditional cash transfers (CCTs).” While these temporary, unsustainable social protection programs such as the CCT are being implemented, the Aquino government has been cutting back on its budget for social services.

It may be funny but, in assessing the Aquino government’s development plan, Jose Enrique Africa of Ibon aptly used Einstein’s definition of insanity: “doing the same thing over and over again and expecting different results.” This may as well apply to the US and Europe.