Philippine Economy blah-blah at the start of Year 2013

So the economy is in the limelight again. Hmmmm…. What to say about the Philippine economy… hmmmm. What makes talking about the economy easy is that one need just highlight the same things again — that the Philippine economy is nothing more than an illusion propped up by “commercial activity” brought about by the flow of cheap food and trinkets imported from Australia and China, stockpiled in the nation’s malls, then marketed (a euphemism for shoving it through) to Filipino households, into their trash cans and crappers, ending up ultimately in the nation’s steaming landfills, cesspools, and septic tanks.

This “commercial activity” is funded by cash remittances from the nation’s multi-million strong army of overseas foreign workers (OFWs) who prop up the hundred billion-odd dollar national economy to the tune of at least 10 percent of its value. Throw in the odd election and the accompanying orgy of campaign spending on bread, circuses, tarpaulin, and road works and you will be able to scrape together enough cash figures to balance your national balance-of-payments spreadsheet.

Check out this synopsis of a CNN “report” on the Philippine economy’s epic “surprise surge” of that day…

[…] consumption accounts for “value” contributed to the Philippine economy to the tune of 70% of output according to Credit-Suisse head of research for the Philippines Haj Narvaez. And what fuels that consumption? What else? “It is estimated that 11% of the population of 92 million work overseas. Remittances account for about 10% of the country’s GDP, which totaled $225 billion in 2011.” Add to that is that other saving grace of the Philippine economy, the call centre and business process outsourcing (BPO) industries that employ thousands of the finest Filipino university graduates; “These jobs are considered well — paid — enough for workers to afford, after several years’ employment, down payments on condominiums in Manila’s booming property market, Narvaez said.”

That blurb was written back in mid-2012. You can copy all that and paste it into one of those “news reports” that infest the front pages of the major newspapers of the country and label it as fresh February 2013 economic “reporting”. Nobody will notice. The “reporter” just need update the numbers a bit to the latest stats then add the usual seasoning, perhaps spokesperson Edwin Lacierda’s recent insistence that “Private-sector activity has been enabled by the Aquino administration’s dedication to positive reform. Without doubt, good governance means good economics.” Easy money comes to Malacañang reporters, indeed. How does one get a gig there?

When one hauls a containerload of Collezione t-shirts (the ones with the map of the Philippines embroidered on their left breast) imported from China from the pier, then disposes it in a market of “patriotic” fashionistas for five times its manufacturing and shipping costs, that difference becomes a contributor to that popular economic “indicator” favoured by spin doctors and publicists — the oft-quoted Gross Domestic Product (GDP). In that instance we pat ourselves on our backs for hosting a transaction that “added value” to the Philippine economy as measured by its GDP.

The real test of economic health hinges on the answer to a simple question:

Did that “value” add value of substance to the national wealth?

Was anything of lasting value actually created? Was any of that profit capitalised? Unforunately, Filipinos lack a concrete track record of building anything of true consequence. Rather than build an asset base of people, infrastructure, knowledge and expertise, and culture of enduring value, Filipinos spent the better part of the last half-century harvesting its low-hanging assets and exporting them raw as stop-gap measures to prop up a mediocre economy. Much of what Filipinos take pride for in their country is its natural beauty. But that is rapidly being physically degraded as well as overlooked because of peace-and-order issues in the remaining viriginal parts of the archipelago. That leaves the human achievement component of the intrinsic value of the Philippine Nation. Not surprisingly, while Filipinos get heaps of kudos from their foreign employers (and themselves) for being such hard workers, not much can be said about the collective design and innovation faculties of the society. Unfortunately it is in the furnaces of design and innovation that Capital (with a big “C”) is ultimately forged.

Design-added-value results in creation of enduring value. Even in stillness, a truly valuable painting or literary work, for example, can keep a viewer transfixed, spellbound and reflective; offering a richness and depth that continuously reveals subtle aspects of itself with every additional hour spent exploring it. Its value is inherent and stored. Its value is capitalised — a finite amount of labour input resulting in an immeasurable quantity of value continuously delivered over a timescale that transcends the labours of its creator. On the other hand, labour-added-value is fleeting and volatile. The value it yields over time is dependent on a sustained effort. The need for said effort can easily disappear in one of those turns in fortunes that are notoriously impossible to forecast — such as financial “crises”.

The trouble with GDP as a measure of economic value is that it is easy to fudge behind-the-scenes stories such as these. Notwithstanding that, the very methods with which GDP is calculated vary depending on who calculates, something that Manila Times columnist Ben Kritz points out in detail…

Questions have already been raised about the reliability of the government’s GDP figures. In a column in these pages a couple weeks ago (“World Bank: 7.1 percent 3rd Quarter GDP Rate Could Be Wrong,” The Manila Times, January 14, 2013), Rigoberto Tiglao highlighted a problem identified in the World Bank’s Philippine Economic Update for December 2012, in which it was suggested that a “statistical discrepancy” of 1.4 percent accounted for part of the unexpected 7.1 percent GDP growth rate in the third quarter. The expectation of the World Bank was that the “zeroing out” of the full year’s statistical discrepancy — which is conventional practice in GDP reporting — would result in third quarter figures being adjusted downward, fourth quarter figures being in a more believable 5 percent to 6 percent range, or a combination of both. That did not happen; not only was the fourth quarter higher than expected, third quarter’s 7.1 percent was adjusted upward to 7.2 percent and the “statistical discrepancy” for the full year was not “zeroed out.” These results are highly unusual, and invite a deeper look at the real numbers behind the headlines; unfortunately, that investigation only seems to raise more questions than it answers.

Yikes!

If we cannot agree on a standard definition of what an inch is, then how are we to know whose penis is really bigger?

benign0

benign0 is the Webmaster of GetRealPhilippines.com.