Debt as Modern Slavery (Part 1 of 3)

Part I – Currency Wars, Chimerican Crisis, and the Debt-based Monetary System

By James Matthew B. Miraflor

Presented to the Southeast Asia Regional Socialism Conference of Partido Lakas ng Masa, together with Transform Asia Gender and Labor Institute, November 27, 2010, College of Social Work and Development (CSWCD), University of the Philippines Diliman

Revised on November 29 and 30, 2010

Warm revolutionary greetings to all of our comrades here. I was tasked to discuss on the debt and the financial crisis. As we know, this is a very difficult topic to talk about, as it is related to the most complicated inventions in human history – banking, monetary system, fiscal policy, and investment practices, among others. No one can pretend that the whole thing is already understood completely, for even its inventors have often been labeled as not knowing what they are doing.

Thus, to make things simpler, it is good to begin with a discussion of the current updates in the global financial and monetary practice. Right now, the United States is conducting what it calls as “quantitative easing” (QE). Simply put, this is simply printing dollars out of nowhere. The Federal Reserve already printed $600 billion to buy securities from the US Treasury. The printing press has now become, to paraphrase Ben Bernanke, the secret weapon of the American economy. This devalues dollar vis-à-vis other currencies, making exports to the US more expensive and favoring domestic producers’ access to US market.

Seen as a form of subtle protectionism and as “revenge” over China’s supposedly “undervalued” currency, it had the effect of depreciating the value of dollar worldwide. For export-oriented economies of the world, this may spell ruination, as it means that American exports will be relatively cheaper. This may have the effect of import-substitution in the United States as cheaper American goods replace goods exported by the manufacturing giants like China and Germany to the US market. In the Philippines, this had the effect of shrinking the relative value of the dollars migrant workers send back home, and compromising Business Process Outsourcing (BPO) companies which earn in dollars.

During the conference. University of the Philippines Diliman - CSWCD.

But beyond QE’s immediate effects lie a more structural cause. It is this cause, which will later be called as debt-based monetary system, that I will attempt to discuss in this paper. Knowing what the systemic impulse behind the production of money is brings us closer to a good explanation on the current phase of the finance capitalist system the whole world is now in. It also allows us to understand alternatives which we may have to implement as a global community if we are to avert financial disaster and transition to socialist alternatives. 

Surprising results from a statistical analysis on PH education data

Photo by Dean Lozarie of Tinig ng Plaridel (UPD-CMC)

Yesterday, University of the Philippines (UP) students protested against the P1.39 billion budget cut for 2011. That there is an actual budget cut is contested, but we must know that this is not happening in a vacuum. Worldwide, students are protesting budget cuts on education as austerity measure for governments to survive the global economic crisis. Italian students did the same recently.

For this purpose, I am posting with permission from my co-author, Ivan Eugenio, a non-parametric statistical study we made on Philippine education data submitted as a requirement for Statistics 130. It uses data culled and prepared by Partido ng Manggagawa (PM) on education, gathered from Commission on Higher Education, Department of Education, and other government agencies.

The study yielded suprising results. First is that there is no change in ratio of enrollees to graduates, and it remains significantly low by inspection. Second is that government appropriation of funds to secondary and tertiary schools are equal. And third, the laborer-job ratio is still close to ideal. But there are implications on these data, given the socio-economic conditions our education system is in.
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Excerpts from Chalk Dust: A Discourse on the Status of the Philippine Education System

A Non-Parametric Statistical Study by Ivan Eugenio and James Miraflor

In any developing nation, one of the biggest components of the enabling environment for industrial growth and capital expansion is the general educational state of the people. The concept is not alien at all to the civilized world. In fact, most liberal democracies often allocate a huge amount of its budget for the education and training of its citizens.

Pilipinas Kay Ganda and the Culture of Plagiarism: An Acceptable National Instinct?

The photo was taken here. Created by Spanky Hizon.

The headline story today of Inquirer is clear, President Aquino wants the Department of Tourism to get another logo and branding for its promotion project. The criticism over the "Pilipinas Kay Ganda" seems to be too hot for them to handle, after taking flak from solons, including Sen. Miriam Santiago who was not amused.

Frankly, I can't see how WOW Philippines cannot sell. It already did, albeit not as effective as the tourism strategy of our neighbors Indonesia (beach-wise Boracay is so much better than Bali) and Malaysia, which tourism industry are reaping billions. But that is a topic for another day.

And there is another thing, the more fundamental question of whether we should really be promoting tourism industry this much if it is actually found to be ecologically-destructive (even Ecotourism is not immune to this) and damaging and/or demeaning of our indigenous cultures and national identity. This, when we should really be focusing on more sustainable and robust sources of economic development, like industrialization. But again, that is another topic for another day.

But I want to focus on one issue, and it is the claim that Pilipinas Kay Ganda logo is a product of plagiarism. Blogger Spanky Hizon revealed what is to be a lethal monkey-wrench to the DOT's project - by putting it side-by-side with Poland's "Polska" tourism logo and saying that the similarities are simply, too hard to ignore. Someone in the DOT (or whoever they commissioned) must have been a great Google fan.

But is it just a mere slip-up on the part of DOT? I say, that it is more than that. It is, in fact, related to recent controversy hounding the Philippine Supreme Court  and the claims that the Supreme Court, by protecting itself from accusations that it plagiarized a legal text and censoring the UP College of Law who fought against it, may have just legalized plagiarism "without malicious intent".

For that matter, the question then becomes: is the culture of plagiarism really, morally detestable? What are the conditions with which it becomes permissible and even necessary?

MMDA's odd-even scheme, biased against the poor

MMDA's odd-even scheme as implemented only to public utility buses shows MMDA's bias for owners of privately-owned vehicles - bias for the well-off as against the poor who can't afford their own vehicle. Politicians are going for the kill as they pith the transport workers and the commuters. This is very saddening.

Commuters wait for buses during rush hour on Monday after bus operators went on a flash strike to protest a number coding scheme being implemented by the Metropolitan Manila Development Authority with a view to reducing traffic congestion. Image Credit: AP (caption and pic lifted here)

If anything, we should be regulating private cars first, with private cars' "road-space-taken" per "person-transported" ratio being way more than that of buses. To prove this, we only need to see that even as the odd-even scheme was applied (setting off a bus strike), traffic was not substantially reduced (see lead paragraph).

Call for a Fixed Currency Peg for the Philippines

Image via Wikipedia

Countries that were most affected by the 1987 Financial Crisis

Let me quote from Cesar Purisima: "I will not recommend competitive revaluation. We should allow the market to determine the exchange rate. Our role is to smoothen these adjustments."

Now is a very good opportunity to challenge G20's effort to preserve the failed global financial system by preserving the floating exchange rate regime (putting US in a very good export position at the expense of our OFWs and exporters). We must call on the Aquino administration for the return of a fixed exchange rate, probably pegged at P50=US$1 in order to protect our migrant workers and what little is left of our export industries, including the Business Process Outsourcing (BPO) industry.

The G20 does not want this (maybe some members, but not the US-allied countries). The Aquino government, despite its token protestations, does not want this because it puts us in a good position for "debt prepayment". But OFWs will be with us on this. Well-meaning economists, even those in the neoclassical frame (but they may remain silent so as not to alienate the mainstream), will accede and even support us on this matter. By fixing the exchange rate, we also permanently remove a strong excuse for debt prepayment and force the government to use it reserves for capital build-up and technology transfer.

It is time to fight fire with fire. If the US will continue with its "quantitative easing (QE)" (the Federal Reserve already printed, out of nowhere, $600 billion to buy securities from the the US Treasury) and unilaterally decide on the foreign exchange markets, then we should protect our currency from the market. This is what China and Malaysia did during the 1997 Asian Financial crisis and had been a factor for its survival and development.

The time is ripe for this call.

Below is an article on the impact of QE on the Philippines and government response:

Why Indonesia outperforms RP - Prof. Ed Tadem

Inquirer Opinion / Talk Of The Town
Why Indonesia outperforms RP
By Eduardo Climaco Tadem
Philippine Daily Inquirer

Posted date: October 30, 2010

NOT TOO LONG ago, Indonesia was Southeast Asia’s basket case. Within the region, it was the hardest hit by the 1997-1998 financial crisis and subsequently plunged into a cycle of political and social unrest and economic decline. Today, however, under its current political and economic setup, Indonesia has attained levels of stability and prosperity few would have imagined possible just a decade ago.

This was the conclusion reached by scholars of Indonesian studies at a recent First Indonesia Forum held at the Kyoto University Center for Southeast Asian Studies.

Political recovery

Historian Takashi Shiraishi, Japan’s most distinguished Indonesianist, attributes the country’s remarkable recovery to three factors: (1) a successful decentralization program (2) the containment of religious and ethnic conflicts at the local level and (3) a strong nationalist imprint traceable throughout the country’s history.

Economist Kosuke Mizuno, on the other hand, notes the ability of the Indonesian economy to weather the worst effects of the 2008-2009 global economic meltdown by keeping a balanced financial and current accounts while increasing employment.

The devolution of political power saw the channeling of 60 percent of public works funds to local governments. This has resulted in the proliferation of local governments through the creation of new districts and an increase in the number of local political parties.

Conversations on the Economy

Through Facebook, three of my good friends, Bonn Juego, Marvin Beduya (please visit http://synthesistblog.com), and Michael Ocampo, and I have been discussing interesting issues on the economic profession, the economic schools of thought, the status of mainstream economics, and other thoughts on heterodox evolutionary economics (Nelson and Winter had been mentioned several times in the course of the discussions). Looking at heterodox economics is important specially in the light of its failure to aid development of Southern countries and explain the current economic ailments of the Northern developed countries.

What is considered mainstream economics? What schools of thoughts constitute the mainstream? It is instructive that mainstream economics is sometimes called as the neoclassical synthesis (the term was supposedly developed by John Hicks and popularized by Paul Samuelson), being largely Keynesian on macroeconomics and neoclassical on microeconomics. But the mainstream is still evolving, incorporating elements of Milton Friedman's Monetarism (as practiced by Paul Volcker),  new classical economics by Robert Lucas (Chicago), Thomas Sargent (Stanford), and Robert Barro (Harvard), and supply side economics promoted by the likes of Arthur Laffer and manifesting in Reaganomics and Thatcherism of the 80s.

I hope this conversation will contribute in promoting interest on the history of economic thought and starting  debates and discourses amongst Filipino economists, political-economists, and students of development on the current status of mainstream economics and alternative schools. It is now more than ever that we should discuss what constitutes an effective economic development strategy for the Philippines, and this begins with the discussion on the warring schools of economic thought.

Hegemony of Globalization

This is a simple movie clip on the hegemony of economic globalization, and the often chain of unintended consequences it brings. Enjoy!



Not exactly a "butterfly effect" (of Chaos Theory) given that capitalist dynamics and impacts had more or less been already described and predicted, but it nonetheless describe how seemingly unrelated events are actually connected by causal relations, albeit complex.

Nowhere to Hide

Dr. Michael Lim Mah-Hui, an internationally-known expert and speaker on international finance, has recently come to the Philippines to talk about his latest book, "Nowhere to Hide: The Great Financial Crisis and Challenges for Asia" which combines the disciplines of economics, finance, sociology and politics to analyze the consequences and challenges of the crisis and propose that its causes be understood at three inter-related levels - the level of theory and ideology, the level of financial  industry practices and malpractices; and finally the level of  structural imbalances in the international economy.

I met and conversed with Dr. Lim during the “Understanding the Financial Markets” forum by Jubilee South - Asia Pacific Movement on Debt and Development (JS-APMDD) in cooperation with South Asia Alliance for Poverty Eradication (SAAPE) and hosted by Monitoring Sustainability of Globalization (MSN) Malaysia. This was held from April 14 to 17, 2009 at the NUBE Training Centre, Port Dickson, Malaysia. We later corresponded through email on statistical distributions and that how financial analysts and statisticians in the US blindly follow the normal (or the Gaussian) distribution curve in the computation of financial risk when they actually can test - using "goodness of fit" tests such as the Pearson's chi-square test or the Kolmogorov-Smirnov non-parametric test- the probability distribution curves of historical data.

I highly recommend that you buy this book. The financial crisis is still as relevant as ever with the collapse of Greece and possible fallout for Asian markets.

An alternative platform by Ted Alwin Ong

Young activist James Matthew Miraflor of the Freedom from Debt Coalition painstakingly prepared a discussion paper together with his team which serves as guide for an alternative economic platform for the country.

In the social movement, this paper is now known as the National Economic Platform or “HaNEP 2020.” The document is a by-product of different analyses covering various issues which significantly affect our people and nation. By collecting and consolidating the different analyses from the country’s social and political activists, James was able to formulate a fitting alternative platform from what we have today.

The “HaNEP 2020” was submitted to President Benigno S. Aquino III by FDC as an Agenda outlining demands for changes in the debt and public finance policy, the power industry, the water sector, and government’s stance on climate negotiations and responses to climate crisis.

Read more. http://www.thenewstoday.info/2010/09/16/an.alternative.platform.html

New Economics for a new administration

by Walden Bello*

THE dominant feature of the Arroyo administration was pervasive corruption, but its most destructive legacy in the long term will probably be its policy failures.  The ascent to power of a new president, backed by a new Congress, provides the opportunity for a fundamental shift in policy in order to end poverty and relaunch the Philippines on the road to development.

The policy paradigm of the administration was one it inherited from previous administrations. This was a promarket, neoliberal approach the key prongs of which were accelerated trade and financial liberalization, deregulation and privatization.  In addition, Arroyo continued her predecessors’ policy of fully servicing the foreign debt, dealt with the ever-widening budget deficit by imposing a 12-percent value-added tax that hit mainly the middle class and the poor, and left it to the market to address poverty and income inequality.

With its promarket orientation, the Arroyo presidency followed the lead of previous administrations in refusing to pursue an industrial policy, reducing budget support for agriculture to a minimum, and radically bringing down tariffs on both agricultural and manufacturing imports. Abandoned to global market forces as the administration embraced the ideology of globalization, the economy was channeled to the massive export of labor, export-oriented, low-value-added manufacturing, particularly of electronic components, and providing personnel for the outsourced operations of transnational corporations like call centers.

Appeared in:

Perspective, Business Mirror : July 30, 2010

Viewpoints/Columns, Inquirer.net (Afterthoughts) : July 29, 2010

Freedom from Debt Coalition

FDC on SONA: Keeping an eye on Aquino’s commitment to change

PRESS STATEMENT
Freedom from Debt Coalition
11 Matimpiin St., Pinyahan, Quezon City 1100, Philippines
Phone: +63.2.921.1985 | Telefax: +63.2.924.6399 | Website: www.fdc.ph

Keeping an eye on Aquino’s commitment to change

The new administration of President Benigno S. Aquino III begins with an extremely high trust rating of 88 percent – higher than any of the post-dictatorship presidents. This is a measure of people’s belief in the commitment of the Aquino administration to reverse the anti-poor policies implemented during the regime of Gloria Macapagal-Arroyo. 




We in the Freedom from Debt Coalition (FDC) submitted to the President an Agenda outlining demands for changes in the debt and public finance policy, the power industry, the water sector, and government’s stance on climate negotiations and responses to climate crisis. This is in the context of a looming fiscal crisis due to the record-breaking deficit and empty public coffers left by the Arroyo administration, electricity prices soaring past major Asian cities save Tokyo, a water crisis that is pushing Filipinos to desperate extremes, and a looming La Niña that might bring us another devastating Ondoy.

The Structure of Crisis, the Crisis of Structure

Last year, I was invited as one of the speakers during the "Waging Peace in the Philippines Conference of 2009 - Advancing a Citizen’s Peace Agenda in 2010 and Beyond" held at the Social Development Complex Audio Visual Conference Center, Ateneo de Manila University on December 7-8, 2009. I specifically attended and participated on the plenary on Significant Issues for Peace in 2010, with Atty. Marvic Leonen, Dean of the UP College of Law, as my co-speaker.

The organization I was representing, Freedom from Debt Coalition (FDC), was supposed to present on Climate Change, Global and National Crisis. Using existing data we culled from several government sources and presentations, this is the presentation I used. It begins with the then hot issue of Maguindanao massacre and then proceeds to discuss the structural causes of the confluence of crises we are facing. Check this out as a break from the optimism of the incoming Noynoy era:

The Structure Of Crisis, The Crisis of Structure

View more presentations from jmmiraflor.

This is also to serve as a counterpoint on the 7.3% growth pronouncement earlier by the Palace, which has largely been criticized as merely base effect of the manufacturing drop at the peak of the global crisis. But just some facts and observations to add to the point:

• It is an election year, one of the most expensive in fact in the history of the Philippines. While consumption indeed has been high, the net transfer will largely been from politicians (which means from the government, for how they became ultra-rich is already, a little too obvious) to the TV networks, or more likely, to Chinese companies which produced all those ground-war stuff (campaign paraphernalia, posters, etc.). The amount of redistribution (via vote-buying, etc.) has largely been limited by the phenomenon of a mass media-driven campaign. So while GDP may indeed have been boosted by transfers of wealth, it is merely one class taking money away from one pocket and putting it to another.
• This is not a new pronouncement. Curiously, the 7.3-percent figure already came up two years ago. But if this quarters growth is largely base effect, the growth then was largely spending-led, with National Statistical Coordination Board (NSCB) stating that among the components of the GDP by expenditure share, it is Government Expenditure Consumption (GCE) which grew the highest, by 10.0% from 2006-2007 - reflective of substantial increase in the proposed national budget from P1.045 trillion in 2006 to P1.126 trillion in 2007, an increase of P81.31 billion or 7.8%.

Long lines, pre-shaded ballots hound 2010 polls, observers say

05/12/2010 | 05:02 PM
JACQUES I. JIMENO, GMANews.TV
http://bit.ly/9gNwOj 

Foreign observers in the May 10 elections flash their Compact for Peaceful and Democratic Elections vests at a QC news briefing last week. GMANews.TV

Foreign observers in the May 10 elections flash their Compact for Peaceful and Democratic Elections vests at a QC news briefing last week. GMANews.TV

Long queues, pre-shaded ballots, malfunctioning voting machines, and bypassed electoral procedures were some of the problems noted by international observers who observed the Philippines’ first nationwide automated polls.

"A few machines were not working," Tiina Hiltunen of Finland said in a Balitanghali interview on Wednesday.

Transform Pasig

Great dreams are built piece by piece. The great dream of changing the Philippines and the world is now being done barangay by barangay, city by city, region by region. It is with this dream that Ric Reyes, and his team in Pasig, aims to inspire and unite Pasigueños in a project to transform Pasig City.

A Change in Perspective

Your browser may not support display of this image.But the capacity to inspire is getting more and more difficult, for if there is something the people of Pasig actually learned in its decade of collective struggle against elitist, corrupt, and undemocratic rule of the Eusebios – it is that collective struggle fails. Many have lost faith in trying to change things, as the opposition, repressed by the maneuverings of the entrenched dynasty, was defeated and demoralized.

Now more than ever is the opportunity to make the people remember the feeling of believing in change, and doing it together. This is Ric’s mission in Pasig. This is Ric’s challenge to the Eusebios.

RicReyesEqualsChange