Politics for Breakfast

That DVD Incident, Intellectual Property, and Innovation

2012-02-03T18:59:00.001+08:00

This photo is being circulated in Facebook
by a certain Jerry Ocampo. It may be part of
the systematic demolition job vs. Llamas.

This is related to an earlier article: http://bitly.com/plagiarismculture.

We all know that Presidential Political Adviser and known socialist Ronald Llamas is again the subject of another controversy – that of being caught buying “pirated” DVDs. We all know that he apologized (for putting the government in an awkward position) and that President Aquino announced that he will stay in office despite the protestations of the noisier members of the chattering class. But amid the brouhaha, the question of substance remains unasked: what should be our government’s policy on intellectual property?

Here is an unsolicited advice: the government can continue with the rhetoric against intellectual property “theft”, but it should be lax in its implementation. It’s simple: placate the international community by token efforts to address “piracy” (and even this can be staged – just set up a DVD booth and pretend to smash it in front of international TV) while letting the underground economy persist, providing millions of unemployed Filipinos a lifeline while maintaining digital entertainment cheap.

Copying your Way to Modernity

Lest one should accuse me of being insane (or worse, a scoundrel), we have to remember that this is the same policy employed by China for the longest time, and they have been doing well these days. And unless one may forget, it is the same track followed by South Korea when Samsung was busy ripping parts of Sanyo collections and copying them one by one, and even Japan when it first launched poorly copied versions of American automobiles (earning “Made in Japan” a derogatory connotation not unlike “Made in China” now, but what the heck – they’re rich now).

Also, never mind the fact that the United “IPR” States stole many ideas from the British Empire during its industrialization period. Until now, instinctive copying – legally or illegally – practically remains in their genes. Consider, for instance, the plan to blatantly copy Sherlock.

"Piracy, my dear Watson."

But in fact, almost all nations which successfully leapfrogged from poverty to modernity did not respect intellectual property until after they can produce intellectual stuff that can already be propertied. Cambridge economist Ha Joon Chang made a very good point on this:

The historical record reveals that industrialised countries did not recognise or enforce patents until after the process of industrialisation was complete. Switzerland introduced a patent law that protected mechanical inventions in 1888, but a comprehensive patent law was introduced only in 1907 (Schiff 1971). The Netherlands first introduced a patent law in 1817, but then abolished it in 1869 because patents were seen to create a monopoly that was inconsistent with the country’s commitment to free trade and free markets (Schiff 1971). Patent law was reintroduced in the Netherlands only in 1912. Interestingly, the 19th-century economists that were most committed to free trade and free markets rejected patents because of the monopoly argument (Machlup and Penrose 1951).

The lesson? Respect for intellectual property is an outcome, not a requisite, of economic development. One should not put the cart before the horse. But of course, we can understand where the developed nations like the United States and those in the European Union are coming from - they don't want their hegemony in technology, arts, and entertainment challenged. And since we live in an international community in which they set the standards - the best way is to pay token respect to the standards and pretend to respect Intellectual Property Rights (IPR) while doing otherwise.

Actual Determinants of Innovation

But what are they actually saying on IPR? Their strongest argument is that by granting innovators andartists the commercial right on their creation, we allow them to benefiteconomically from the fruits of their ideas and labor. Thus, we promote furthergeneration of ideas. Moreover, proponents of IPR protection argue that commercialprotection offered to the innovators and artists actually incentivizes thedisclosure of the details of the innovation or creation – and thus, paves wayto the public’s eventual access to it (once protection is there) for thefurtherance of knowledge or the arts. Without IPR protection, it may never havebeen disclosed to begin with.

But economic incentive is not that strong determinant of innovation andart or its disclosure. For one, the primary incentive of an innovator or anartist is largely psychological - the joy of contributing, or of creating, isusually enough. Financial reward (due to a period of IPR-driven monopoly) mayin fact only be a far second. I guess the important thing is that we make surethat our thinkers are (1) publicly recognized for what they did, (2) they liverelatively good lives (and not on subsistence jobs, like Filipino inventorsforced to sell rights to countries like Japan as an important industrial inputs, or award-winningindependent movie makers forced to create mainstream junk), and (3) oureducation system allows for emergence, nourishment, and development of scienceand the arts.

Dr. Jonas Salk, the inventor of the first polio vaccine, was asked ifhe would patent the vaccine (and thereby earning him millions, more likely thannot). Salk replied: “There is no patent. Could you patent the sun?” Regardlessof the legalese involving intellectual property (and property as defined bylaw), the point here is simple: ideas are as natural for humans as the sun is.Why should anyone own ideas when all we add to knowledge are a product of whatwe have learned from others?

Another argument is that you are not violating IPR if you are onlyusing it for non-commercial purposes. You can, for instance, reverse-engineeran invention as long as you don’t use the knowledge you gained from the productfor commercial purposes (as per R.A 8293, Section 72.2). This is another issuealtogether, one that deserves more explanation because it is actually how IPRbecomes an obstacle to economic development. Let us then tackle innovations that have economic value.

Innovative Firms and IPR

To explain this better, we have to separate first the innovator fromthe manufacturer. As I argued, the primary incentive for the innovator is theact of innovation itself. However, the primary incentive of the manufacturer isprofit. By preventing the commercial use of an innovation by other firms evenif they can replicate the product more cheaply or are willing to sell them at aless price, what IPR does is to stifle the efficient manufacturing anddissemination of the innovation while doing very little to incentivizeinnovators.

The developmental consequences are staggering. Even if the knowledgehad become known to the public because of disclosure polices, products based onthose knowledge cannot be mass manufactured except by the source of innovation– which usually rakes in exorbitant profits and rents because of itsmonopolistic position. Because of these firms' ability to impose artificialscarcity (to maximize profits), people are denied access to some oflife-improving innovations, in medicine for instance. This lead to outrightopposition, with Thailand producing some generic antiviral drugs in 2002(prompting US to put it in the list of copy right violators) and Brazildeclaring efavirenz (of Merck) a public interest medicine. Opposition to TRIPSalso emerged in India in the 1990s.

Even if there are those who may eventually waive their IPR for the sake of collective good, there arethousands more – usually companies – who are willing to stop the production ofa product based on a good idea if it harms their economic interests. Justconsider the killing of electric car in the US, or the failure of solar energyto take-off because of exorbitant cause of royalties. Moreover, there are "patent trolls" (among those accused are Intellectual Ventures and even Thomas Edison himself) who will opportunistically register a lot of patents with the intention of reselling them.

It would have been justifiable if the actual innovators (the people)are the ones who usually benefit financially. But the real world points all tooclearly at the real beneficiaries – the majority shareholders of transnationaland multinational corporations (the 1%, in "Occupy Wall Street"parlance) which have the actual innovators – the scientists and artists – intheir payrolls. The real innovators then receive compensations that are usuallyfar less than the profit-taken by their employers. This is true from theentertainment (we know how much really goes to the artist after studios gettheir chunk) to the pharmaceutical (leading India to oppose the TRIPS agreementon medicine products) to the ICT industry.

Not surprisingly, developing economies dedicated to a modernizationproject usually ignore IPR restrictions when manufacturing products for exports(and fortunately for these economies, with a majority of consumers usuallyignoring this fact as well). This is true in the case of Japan, South Korea,and in the recent decades, China (now known as the hotbed of piracy). Lookingat it at a global perspective, ignoring IPR has the effect of acceleratingglobal technological development, because firms retain their competitiveposition by innovating more andkeeping them on their toes.

Government intervention

This effectively debunks the argument that IPR is an effective way toinduce firms to invest on research. In fact, all evidence points at theopposite. But even assuming (without conceding) that it is, should innovationsemerge only out of private investment of firms? Why not from the public as awhole through direct government support for innovators?

This is where we argue again for government intervention. It ensuresthat innovations remain in the public domain and there is no limitation to itscommercial use by firms (which then subjects it to competition, driving downcosts). As for the innovator, public and peer recognition for her or hishistorical contribution is usually enough, on top of the government assuringthem of good and respectable life through welfare and other incentives.

US Defense Advanced Research Projects Agency (DARPA) was responsible for
creating the basis for Global Positioning System (GPS) and Internet technologies.

Come to think of it, if the innovators still innovate despite theirmeager compensation (relative to their shareholders of the firms which employthem), imagine how cheaply we can actually manufacture innovations if theyreceive support and compensation from another entity, like the government for instance.

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To summarize, not only is partial excludability of innovation throughIPR a weak incentive for innovators, it is in fact a huge obstacle for overalltechnological development. It keeps costs high, it delays the progress ofinnovations, and together with weak government investment for research, makesinnovators dependent on the financier.

Persisting Problems on the link between Macroeconomics and Microeconomics

2012-01-30T15:42:00.001+08:00

Permanent link: http://bit.ly/microfoundations
As a requirement for our macroeconomics class, Dr. Dante Canlas asked us to submit a survey paper on a macroeconomic issue of our choice. I especially took interest on the approach of modern macroeconomics based on so-called "microfoundations" - microeconomic assumptions used to explain aggregate phenomenon. New classical economists see this as the final bridging of macroeconomics and microeconomics, spurring hopes of a single economic theory that would explain both the individual and aggregate economic phenomena. (note how this parallels physicists' dream of uniting large-scale relativistic physics with quantum mechanics). This spurred an orientation in economic research and pedagogy characterized by complex mathematical models capturing "deep" parameters in taste, technology, and expectations.

Recently, the microfoundations approach came under attack after models with "deep" microeconomicparameters supposedly failed to predict and recommend effective policyrecommendations to mitigate the current global economic crisis. Evenrecent Nobel Laureate Thomas Sargent - one of the pioneers of modernmacro - is under fire. Why this is so - as well as earlier, almost forgotten challenges to the microfoundations approach - is the subject of the survey paper I submitted. Read the abstract and full text below:

Abstract

The history of economics, for the most part, has been bifurcated between the study of individual economic decisions (microeconomics) and the aggregate economic phenomena (macroeconomics). The attempt to marry the two, via incorporating “microeconomic foundations” or “microfoundations” to explanations for macroeconomic observations and predictions, has so far taken sway a majority of mainstream economists with the failure of Keynesian models to accurately predict aggregate behavior in the presence of government policy. Robert Lucas Jr. posited that people form “rational expectations” of government policy and act so as to render forecasts unstable.

However, there are some persisting theoretical and empirical challenges on this research direction – the empirical instability of macro-models which incorporated microfoundations, the Sonnenschein–Mantel–Debreu result which may spell the theoretical dead end to economic aggregation, the still unresolved Cambridge capital controversies started by the reswitching argument by Italian economist Pierro Sraffa and American economist Joan Robinson in the 1960s, and the missing “representative consumer or firm” that can take into account the behavior of the aggregate. These challenges give the idea that aggregate economic behavior is almost impossible to deduce from microeconomic behavior of agents. Post-Keynesianism – which asserts that long-term expectations are largely determined by non-economic, psychological processes exogenous to the model – is posited as a possible way forward.

To read full text, click:
Persisting Problems on the link between Macroeconomics and Microeconomics

Some notes:

There are other interesting discourses that the paper has not covered. For one, recent advances in behavioral and "neuroeconomics" may in fact convince us that it is not macroeconomics, but rather microeconomics, which lacks and needs foundations. The rationalizing agent which neoclassical microeconomics thought to be the analytic primitive may prove to be non-existent at all, which means that explaining macro phenomenon through rational representative agent is the wrong way to continue.
Post-Keynesianism is not the sole counter-framework to microfoundations. Evolutionary economics, which relies on technological explanations more than information on actual aggregate demand, may also prove to be a good starting point. At this point though, evolutionary economics retains the agentic approach in many of its models, which may prove to be limiting.
Advances in "crowd psychology" and sociology may be helpful. The debate between "contagion theory", which states that crowd acts on the individual, and "convergence theory", which holds that crowd behavior is a product of certain individuals carried into the crowd, is a good starting point. Thus, the question is best dealt through a multidisciplinary approach rather than a purely economic one.

The Legacy of Dennis Ritchie

2011-10-14T09:31:00.002+08:00

This has escaped my attention. Dennis Ritchie, the creator of C and Unix, died on October 8 - his death overshadowed by the death of another pioneer Steve Jobs. Much of our modern information technology backbone - from web servers to operating systems to network software - had been developed using the C programming language. To quote a google Engineer, the internet "is basically a C shop". His legacy, indeed, is incalculable.

main() { printf("Thank you Dennis Ritchie!"); }

Climate Change, Reverse Dutch Disease, and Third World Industrialization

2011-08-15T11:50:00.000+08:00

Climate change is one of the "great pessimisms" of the 21st century, to quote Matt Ridley - author of the "The Rational Optimist: How Prosperity Evolves (2010). Indeed, it is the primary threat to humanity's vision of a bright future of technological prosperity. And for very good reasons. According to the Intergovernmental Panel on Climate Change (IPCC), a global average temperature increase of 1–4°C (relative to 1990–2000) may result to partial de-glaciation of the Greenland ice sheet. Add to this the possible contribution of partial de-glaciation of the West Antarctic Ice Sheet, sea level may rise by 4 to 6 meters (13 to 20 ft) or more, with disastrous consequences to small island states and coastal settlements.

A farmer takes water form a dried-up pond to water his vegetable field on the outskirts of Yingtan, Jiangxi province. Photograph: Stringer Shanghai/Reuters. From here.

Moreover, weather patterns across the globe will be disturbed, radically changing livelihoods and economic activities. A particular climate-induced economic change we ought to be watching is the transition of some developed countries from having a humid continental or tundra climate to tropical or rain-forest, simultaneous with desertification in agriculturally-rich developing countries. This is already happening now, as climate change render previously agriculturally-viable lands to lands not fit for horticulture.

This gave me an insight. While it is true that this will have debilitating effects on the economies of the South, I can also see an economic opportunity which we developing countries can maximize - at least in the medium-run.

Reverse Dutch Disease

This opportunity is the fact that countries of the North, previously compelled to develop an industrial and manufacturing base due to lack of natural resources and arable lands, will now see an increase in relative profitability of agriculture in their countries. Although some other factors must come into play, this may cause a shift of economic activity of the North to agriculture, as they become afflicted by the so-called "Dutch disease" - the relationship between the increased economic activity dependent on natural resources (such as arable land) with the decline of the manufacturing sector.

At this point, there is favorable global economic environment for Southern countries to transition from export-led agricultural sector to an agricultural sector attached to a domestic industrial base - a local market-oriented industrial economy (which will be developed through various mechanisms of state intervention, e.g. import substitution, protectionist trade policy, etc.) that can more efficiently feed our population. In fact, we may be forced to, because of possible drastic decrease in agricultural yield due to climate change.

For instance, even as merely 1.2% of the US economy is engaged in agriculture, it is in fact a net food exporter because of its manufacturing base which invests its surplus in technologically advanced agribusiness. Not that we want US as a model (there are other models to follow on top of other indigenous models in the Philippines, like the Organopónicos system of urban organic gardens in Havana, Cuba and the periurban agriculture development in China - located at the Modern Agricultural Science Demonstration Park in Xiaotangshan), this is just to illustrate that we need not have a large agricultural sector to be food self-sufficient. In fact, food self-sufficiency is often a factor of a robust post-harvest industry and service economy that is much larger than the agricultural sector.

But more than being forced to become food self-sufficient, this is an opportunity to transition towards a an industrial (not in the smokestack, 20th century meaning of the term, but one that is more technologically advanced and incorporating our knowledge of the ecosystem) economy as previously advanced economies experience "re-agriculturalization" and possible decline in industrial and service activities. Hopefully, the accumulated surplus of their previous industrialization process will be transferred to us through trade as we trump them in manufacturing.

Development Space and First World's Climate Debt

But won't engaging in industrialization worsen climate change? Shouldn't the South be joining the global effort towards climate change mitigation by reducing their carbon emissions - which means foregoing carbon-based energy production and manufacturing?

On this, I say that it is but fair for developing nations to engage still in carbon-based industrialization because in the first place, they weren't the ones which were responsible for climate change to begin with. According to the Third World Network (TWN) - a non-profit international network of groups involved in development issues, Third World and North-South affairs - with less than 20% of the population, developed countries have produced more than 70% of historical emissions since 1850, far more than their fair share based on equal per-person emissions.

Thus, if there are the ones who have to engage in massive mitigation, it is the so-called Annex I countries to begin with - rich and industrialized nations made prosperous by emission-intensive industrialization process. In fact, developing countries reserve the right for "development space" since we haven't maximized yet our claim for the "atmospheric space". We can, and should, transition from export-oriented agriculture to domestic market-based manufacturing. And climate change will provide an impetus for that through the reverse dutch disease.

A Caveat: We still need to mitigate

This pragmatic contingency approach does not preclude, of course, our aim to stop climate change from happening in the first place - we have to, but even assuming that we will be able to, climate change at its present state may be hard to reverse and will take time, and we have to see this largely as an adaptation measure (it is still a matter of policy after all, not a spontaneous transition from agricultural to industrial) while the impact of climate change is being felt.

What type of industries? There are many that already take advantage of the recent increase in interest on ecologically-sound activities that addresses concrete needs - like investing in an industrial base that manufactures renewable energy technology and organic agriculture for the middle class market - both of which Taiwan is concentrating on now. We may be a little too late on this global market-wise, but we can always search for different niches on the same industry.

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Two Pre-SONA Talks on the Philippine Economy (@ UP Diliman)

2011-07-15T18:22:00.000+08:00

Economics students and would-be policy makers cannot afford to miss these two events - two talks (in the University of the Philippines Diliman) on Philippine development prospects and outlook days before President Benigno Aquino III's second State of the Nation Address (SONA). From two contending ideological camps, the Freedom from Debt Coalition (FDC) which espouses a developmentalist state and the UP School of Economics (UPSE) which retains its neoclassical foundations, we stand to learn more about the dynamics of the Philippine economy, the interaction of government, firms, and the consumers.

See details below.

Deconstructing Aquino's PDP*
A Pre-SONA Forum with FDC President Ricardo Reyes

Palma Hall (College of Arts and Science) Room 400, University of the Philippines Diliman (UPD).

July 21, 2011, 4pm to 7pm.

*Philippine Development Plan (PDP) 2011-16. Available here. Forum organized by: Freedom from Debt Coalition (FDC), Magkaisa CSSP, Geographic Society - UP (GSUP), UP Economics Towards Consciousness (ETC), Sanlakas Youth, UP Political Society (PolSci), Phi Delta Alpha sorority, CRUSADA (Ateneo de Manila University).

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The Asian Economic Outlook, 2011-2012: A Philippine Perspective
Speaker – Mr. Vivek Arora, Assistant Director, Asia and Pacific Department, IMF, IMF Mission Team Leader for the Philippines

Discussants – Dr. Vic Abola, Dr. Dante Canlas, Dr. Benjamin Diokno, Hon. Joey Salceda
J. Duavit Lecture Room, UP School of Economics
July 18, 2011, 2:30 to 4:00 pm

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I have campaigned for Mr. Ricardo Reyes as Pasig Mayor during the 2010 elections, while Dr. Dante Canlas (former NEDA Chair) is presently my professor in Macroeconomics (Econ 201) at the UP School of Economics. Coming from vastly different viewpoints and ideologies, I am sure that listening to them will enrich anyone and inspire her/him to know more about contemporary economics and political-economic realities.

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Deconstructing Rizal: Veneration Without Understanding by Renato Constantino

2011-06-19T11:48:00.000+08:00

Today is Jose Rizal's 150th birthday. This week - a week of patriotic fervor, began with the 113th "Independence Day" and now ends this week with Rizal's birthday. Interestingly, the celebration is juxtaposed with several events, events that expose the fact that while we are supposedly sovereign, our national elite has failed to actualize and protect this sovereignty - them begging for United States protection (interestingly, when Gen. Emilio Aguinaldo declared Philippine independence on June 12, 1898, it was "under the protection of the potent and humanitarian North American nation") amid helplessness on China's incursions on the West Philippine Sea. What can be more ironic than that?

In any case, Rizal's life and struggle has to be celebrated - but it should be celebrated with a critical mind and a nationalistic temperament. Rizal as a hero has to be deconstructed so we can extract the essence of his heroism and put it in the context of his time. For this purpose, I am posting an article (which we were asked to read in our History I class in UP Manila) from the late historian Renato Constantino on Jose Rizal, Veneration without Understanding (taken from this site) - a brilliant excursion on the personality and historical place of our national hero. Enjoy reading!

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Veneration Without Understanding

by Renato Constantino

In the histories of many nations, the national revolution represents a peak of achievement to which the minds of man return time and again in reverence and for a renewal of faith in freedom. For the national revolution is invariably the one period in a nation's history when the people were most united, most involved, and most decisively active in the fight for freedom. It is not to be wondered at, therefore, that almost always the leader of that revolution becomes the principal hero of his people. There is Washington for the United States, Lenin for the Soviet Union, Bolivar for Latin America, Sun Yat Sen, then Mao Tse-Tung for China and Ho Chi Minh for Vietnam. The unity between the venerated mass action and the honored single individual enhances the influence of both.

In our case, our national hero was not the leader of our Revolution. In fact, he repudiated that Revolution. In no uncertain terms he placed himself against Bonifacio and those Filipinos who were fighting for the country's liberty. In fact, when he was arrested he was on his way to Cuba to use his med- [p. 125] ical skills in the service of Spain. And in the manifesto of December 15, 1896 which he addressed to the Filipino people, he declared:

From the very beginning, when I first had notice of what was being planned, I opposed it, fought it, and demonstrated its absolute impossibility.

I did even more. When later, against my advice, the movement materialized, of my own accord I offered my good offices, but my very life, and even my name, to be used in whatever way might seem best, toward stifling the rebellion; for convinced of the ills which it would bring, I considered myself fortunate if, at any sacrifice, I could prevent such useless misfortune…. I have written also (and I repeat my words) that reforms, to be beneficial, must come from above, and those which comes from below are irregularly gained and uncertain.

Holding these ideas, I cannot do less than condemn, and I do condemn this uprising-which dishonors us Filipinos and discredits those that could plead our cause. I abhor its criminal methods and disclaim all part in it, pitying from the bottom of my heart the unwary that have been deceived into taking part in it. [1]

Rizal and The Revolution

Rizal's refusal to align himself with the revolutionary forces and his vehement condemnation of the mass movement and of its leaders have placed Filipinos in a dilemma. Either the Revolution was wrong, yet we cannot disown it, or Rizal was wrong, yet we cannot disown him either. By and large, we have chosen to ignore this apparent contradiction. Rizalists, especially, have taken the easy way out, which is to gloss over the matter. They have treated Rizal's condemnation of the Katipunan as a skeleton in his closet and have been responsible for the "silent treatment" on his unequivocal position against the Revolution.

To my knowledge, there has been no extensive analysis of the question. For some Rizalists, this aspect of Rizal has been a source of embarrassment inasmuch as they picture him as the supreme symbol of our struggle for freedom. Other in fact [p. 126] privately agree with his stand as evidenced by their emphasis on the gradualism of Rizal's teachings particularly his insistence on the primacy of education. They would probably praise Rizal's stand against the Revolution, if they dared. Since they do not dare for themselves, the are also prudently silent for Rizal's sake. Others, careless and superficial in their approach to history and perhaps afraid to stir a hornet's nest of controversy, do not think it important to dwell on this contradiction between our Revolution and our national hero and elect to leave well enough alone. Perhaps they do not perceive the adverse consequences of our refusal to analyze and resolve this contradiction. Yet the consequences are manifest in our regard for our Revolution and in our understanding of Rizal.

The Philippine Revolution has always been overshadowed by the omnipresent figure and the towering reputation of Rizal. Because Rizal took no part in that Revolution and in fact repudiated it, the general regard for our Revolution is not as high as it otherwise would be. On the other hand, because we refuse to analyze the significance of his repudiation, our understanding of Rizal and of his role in our national development remains superficial. This is a disservice to the event, to the man, and to ourselves.

Viewed superficially, Rizal's reaction toward the Revolution is unexpected, coming as it did from a man whose life and labors were supposed to have been dedicated to the cause of his country's freedom. Had someone of lesser stature uttered those words of condemnation, he would have been considered a traitor to the cause. As a matter of fact, those words were treasonous in the light of the Filipinos' struggle against Spain. Rizal repudiated the one act which really synthesized our nationalist aspiration, and yet we consider him a nationalist leader. Such an appraisal has dangerous implications because it can be used to exculpate those who actively betrayed the Revolution and may serve to diminish the ardor of those who today may be called upon to support another great nationalist undertaking to complete the anti-colonial movement.

An American-Sponsored Hero

We have magnified Rizal's role to such an extent that we have lost our sense of proportion and relegated to a subordinate position our other great men and the historic events in [p.127] which they took part. Although Rizal was already a revered figure and became more so after his martyrdom, it cannot be denied that his pre-eminence among our heroes was partly the result of American sponsorship. This sponsorship took two forms: on one hand, that of encouraging a Rizal cult, on the other, that of minimizing the importance of other heroes or even of vilifying them. There is no question that Rizal had the qualities of greatness. History cannot deny his patriotism. He was a martyr to oppression, obscurantism and bigotry. His dramatic death captured the imagination of our people. Still, we must accept the fact that his formal designation as our national hero, his elevation to his present eminence so far above all our other heroes was abetted and encouraged by the Americans.

It was Governor William Howard Taft who in 1901 suggested that the Philippine Commission that the Filipinos be given a national hero. The Free Press of December 28, 1946 gives this account of a meeting of the Philippine Commission:

'And now, gentlemen, you must have a national hero.' In these fateful words, addressed by then Civil Governor W. H. Taft to the Filipino members of the civil commission, Pardo de Tavera, Legarda, and Luzuriaga, lay the genesis of Rizal Day…..

'In the subsequent discussion in which the rival merits of the revolutionary heroes were considered, the final choice-now universally acclaimed as a wise one-was Rizal. And so was history made.'

Theodore Friend in his book, Between Two Empires, says that Taft "with other American colonial officials and some conservative Filipinos, chose him (Rizal) as a model hero over other contestants - Aguinaldo too militant, Bonifacio too radical, Mabini unregenerate." [2] This decision to sponsor Rizal was implemented with the passage of the following Acts of the Philippine Commission: (1) Act No. 137 which organized the politico-military district of Morong and named it the province of Rizal "in honor of the most illustrious Filipino and the most illustrious Tagalog the islands had ever known, " (2) Act No.243 which authorized a public subscription for the erection of a monument in honor or Rizal at the Luneta, and (3) Act No. 346 [p.128] which set aside the anniversary of his death as a day of observance.

This early example of American "aid" is summarized by Governor W. Cameron Forbes who wrote in his book, The Philippine Islands:

It is eminently proper that Rizal should have become the acknowledged national hero of the Philippine people. The American administration has lent every assistance to this recognition, setting aside the anniversary of his death to be a day of observance, placing his picture on the postage stamp most commonly used in the islands, and on the currency …. And throughout the islands the public schools tech the young Filipinos to revere his memory as the greatest of Filipino patriots. (Underscoring supplied) [3]

The reason for the enthusiastic American attitude becomes clear in the following appraisal of Rizal by Forbes:

Rizal never advocated independence, nor did he advocate armed resistance to the government. He urged reform from within by publicity, by public education, and appeal to the public conscience. (Underscoring supplied) [4]

Taft's appreciation for Rizal has much the same basis, as evidenced by his calling Rizal "the greatest Filipino, a physician, a novelist and a poet (who) because of his struggle for a betterment of conditions under Spanish rule was unjustly convicted and shot…. "

The public image that the American desired for a Filipino national hero was quite clear. They favored a hero who would not run against the grain of American colonial policy. We must take these acts of the Americans in furtherance of a Rizal cult in the light of their initial policies which required the passage of the Sedition Law prohibiting the display of the Filipino flag. The heroes who advocated independence were therefore ignored. For to have encouraged a movement to revere Bonifacio or Mabini would not have been consistent with American colonial policy.

Several factors contributed to Rizal's acceptability to the [p.129] Americans as the official hero of the Filipinos. In the first place, he was safely dead by the time the American began their aggression. No embarrassing anti-American quotations could ever be attributed to him. Moreover, Rizal's dramatic martyrdom had already made him the symbol of Spanish oppression. To focus attention on him would serve not only to concentrate Filipino hatred against the erstwhile oppressors, it would also blunt their feelings of animosity toward the new conquerors against whom there was still organized resistance at that time. His choice was a master stroke by the Americans. The honors bestowed on Rizal were naturally appreciated by the Filipinos who were proud of him.

At the same time, the attention lavished on Rizal relegated other heroes to the background-heroes whose revolutionary example and anti-American pronouncements might have stiffened Filipino resistance to the new conquerors. The Americans especially emphasized the fact that Rizal was a reformer, not a separatist. He could therefore not be invoked on the question of Philippine independence. He could not be a rallying point in the resistance against the invaders.

It must also be remembered that the Filipino members of the Philippine Commission were conservative ilustrados. The Americans regarded Rizal as belonging to this class. This was, therefore, one more point in his favor. Rizal belonged to the right social class -- the class that they were cultivating and building up for leadership.

It may be argued that, faced with the humiliation of a second colonization, we as a people felt the need for a super-hero to bolster the national ego and we therefore allowed ourselves to be propagandized in favor of one acceptable to the colonizer. Be that as it may, certainly it is now time for us to view Rizal with more rationality and with more historicity. This need not alarm anyone but the blind worshipper. Rizal will still occupy a good position in our national pantheon even if we discard hagiolatry and subject him to a more mature historical evaluation.

A proper understanding of our history is very important to us because it will serve to demonstrate how our present has been distorted by a faulty knowledge of our past. By unraveling the past we become confronted with the present already as [p.130] future. Such a re-evaluation may result in a down-grading of some heroes and even a discarding of others. It cannot spare even Rizal. The exposure of his weaknesses and limitations will also mean our liberation, for he has, to a certain extent become part of the superstructure that supports present consciousness. That is why a critical evaluation of Rizal cannot but lead to a revision of our understanding of history and of the role of the individual in history.

Orthodox historians have presented history as a succession of exploits of eminent personalities, leading many of us to regard history as the product of gifted individuals. This tendency is strongly noticeable in those who have tried of late to manufacture new heroes through press releases, by the creation of foundations, or by the proclamation of centennial celebrations. Though such tactics may succeed for a limited period, they cannot insure immortality where there exists no solid basis for it. In the case of Rizal, while he was favored by colonial support and became good copy for propagandists, he had the qualifications to assume immortality. It must be admitted however, that the study of his life and works has developed into a cult distorting the role and the place of Rizal in our history.

The uncritical attitude of his cultists has been greatly responsible for transforming biographers into hagiographers. His weaknesses and errors have been subtly underplayed and his virtues grossly exaggerated. In this connection, one might ask the question, wht would have happened if Rizal had not been executed in December of 1896? Would the course of the Philippine Revolution have been different? This poses the question of the role of the individual in history. Was this historical phase of our libertarian struggle due to Rizal? Did the propagandists of the 19th century create the period or were they created by the period.

The Role of Heroes

With or without these specific individuals the social relations engendered by Spanish colonialism and the subsequent economic development of the country would have produced the nationalist movement. Without Rizal there would have developed other talents. Without Del Pilar another propagandist would have emerged. That Rizal possessed a particular talent which influenced the style of the period was accidental. That [p. 131] he was executed on December 30 only added more drama to the events of the period. If there had been no Rizal, another type of talent would have appeared who might have given a different style to the historic struggle; but the general trend engendered by the particular social relations would have remained the same.

Without Rizal there may have been a delay in the maturation of our libertarian struggle, but the economic development of the period would have insured the same result. Rizal maybe accelerated it. Rizal may have given form and articulation and color to the aspirations of the people. But even without him, the nationalist struggle would have ensued. This is likewise true in the case of present-day national liberation movements. The fundamental cause of mass action is not the utterances of a leader; rather, these leaders have been impelled to action by historical forces unleashed by social development. We must therefore not fall into the error of projecting the role of the individual to the extent of denying the play of these forces as well as the creative energies of the people who are the true makers of their own history.

Because Rizal had certain qualities, he was able to serve the pressing social needs of the period, needs that arose out of general and particular historical forces. He is a hero in the sense that he was able to see the problems generated by historical forces, discern the new social needs created by the historical development of new social relationships, and take an active part in meeting these needs. But he is not a hero in the sense that he could have stopped and altered the course of events. The truth of this statement is demonstrated by the fact that the Revolution broke out despite his refusal to lead it and continued despite his condemnation of it. Rizal served his people by consciously articulating the unconscious course of events. He saw more clearly than his contemporaries and felt with more intensity the problems of his country, though his viewpoint was delimited by his particular status and upbringing. He was the first Filipino but he was only a limited Filipino, the ilustrado Filipino who fought for national unity but feared the Revolution and loved his mother country, yes, but in his own ilustrado way.

Though we assert that the general course of history is not directed by the desires or ideas of particular men, we must not [p. 132] fall into the error of thinking that because history can proceed independently of individuals it can proceed independently of men. The fact is that history is made by men who confront the problems of social progress and try to solve them in accordance with the historical conditions of their epoch. They set their tasks in conformity with the given conditions of their times. The closer the correspondence between a man's perception of reality and reality itself, the greater the man. The deeper his commitment to the people's cause in his own time as evidence by his life and deeds. Hence, for a deeper understanding and a more precise evaluation of Rizal as Filipino and as hero, we must examine at some length the period during which Rizal lived.

Escolta 1899

Innovation and Change

Rizal lived in a period of great economic changes. These were inevitably accompanied by cultural and political ferment. The country was undergoing grave and deep alterations which resulted in a national awakening. The English occupation of the country, the end of the galleon trade, and the Latin-American revolutions of that time were all factors which led to an economic re-thinking by liberal Spanish officials. The establishment of non-Hispanic commercial houses broke the insular belt that had circumscribed Philippine life for almost two centuries and a half. The middle of the 19thcentury saw 51 shipping and commercial houses in Manila, 12 of which were American and non-Hispanic European. These non-Spanish houses practically monopolized the import-export trade. The opening of the ports of Sual, Cebu, Zamboanga, Legaspi and Tacloban, all during the second half of the 19th century, enabled these non-Spanish interests to establish branches beyond the capital city, thus further increasing cosmopolitan penetration. [5]

European and American financing were vital agents in the emerging export economy. Merchants gave crop advances to indio and Chinese-mestizocultivators, resulting in increased surpluses of agricultural export products. The Chinese received loans for the distribution of European goods and the collection of Philippine produce for shipment abroad. Abaca and sugar became prime exports during this period as a result of these European and American entrepreneurial activities. The Transformation of the sugar industry due to financing and the in- [p.133] troduction of steam-powered milling equipment increased sugar production from 3,000 piculs in mid-19th century to nearly 2,000,000 piculs in four decades. [6]

These economic developments inevitably led to improvement in communications. The infra-structure program of the Spanish government resulted in a moderately functional road system. The third quarter of the century saw the opening of railroad lines. The steamship effected both internal and external linkages, postal services improved, the telegraph was inaugurated in 1873, and by 1880, we were connected with the world by a submarine cable to Hong Kong. Manila's water system was modernized in 1870; we had street cars in 1881 and telephone and electric lights in the metropolitan region during the same period. Material progress set the stage for cultural and social changes, among them the cultivation of cosmopolitan attitudes and heightened opposition to clerical control. Liberalism had invaded the country as a result of the reduction of the Spain-Manila voyage to thirty days after the opening of the Suez canal. The mestizo that developed became the crude ideological framework of the ferment among the affluent indios and mestizos. [7]

The Ideological Framework

Economic prosperity spawned discontent when the native beneficiaries saw a new world of affluence opening for themselves and their class. They attained a new consciousness and hence, a new goal - that of equality with the peninsulares - not in the abstract, but in practical economic and political terms. Hispanization became the conscious manifestation of economic struggle, of the desire to realize the potentialities offered by the period of expansion and progress. Hispanization and assimilation constituted the ideological expression of the economic motivations of affluent indios and mestizos. Equality with the Spaniard meant equality of opportunity. But they did not realize as yet that real equality must be based on national freedom and independence. The were still in the initial phases of nationalist consciousness - a consciousness made possible by the market situation of the time. The lordly friar who had been partly responsible for the isolation of the islands became the target of attacks. Anti-clericalism became the ideological style of the period. [p. 134]

These then were the salient economic and ideological features of Rizal's time. A true historical review would prove that great men are those who read the time and have a deeper understanding of reality. It is their insights that make them conversant with their periods and which enable them to articulate the needs of the people. To a large extent, Rizal, the ilustrado, fulfilled this function, for in voicing the goals of his class he had to include the aspirations of the entire people. Though the aims of this class were limited to reformist measures, he expressed its demands in terms of human liberty and human dignity and thus encompassed the wider aspirations of all the people. This is not to say that he was conscious that these were class goals; rather, that typical of his class, he equated class interest with people's welfare. He did this in good faith, unaware of any basic contradictions between the two. He was the product of his society and as such could be expected to voice only those aims that were within the competence of his class. Moreover, social contradictions had not ripened sufficiently in his time to reveal clearly the essential disparateness between class and national goals. Neither could he have transcended his class limitations, for his cultural upbringing was such that affection for Spain and Spanish civilization precluded the idea of breaking the chains of colonialism. He had to become a Spaniard first before becoming a Filipino. [8]

As a social commentator, as the exposer of oppression, he performed a remarkable task. His writings were part of the tradition of protest which blossomed into revolution, into a separatist movement. His original aim of elevating the indio to the level of Hispanization of the peninsular so that the country could be assimilated, could become a province of Spain, was transformed into its opposite. Instead of making the Filipinos closer to Spain, the propaganda gave root to separation. The drive for Hispanization was transformed into the development of a distinct national consciousness.

Rizal contributed much to the growth of this national consciousness. It was a contribution not only in terms of propaganda but in something positive that the present generation of Filipinos will owe to him and for which they will honor him by completing the task which he so nobly began. He may have had a different and limited goal at the time, a goal that for us is already passe, something we take for granted. However, for[p.135] his time this limited goal was already a big step in the right direction. This contribution was in the realm of Filipino nationhood - the winning of our name as a race, the recognition of our people as one, and the elevation of the indio into Filipino.

The Concept of Filipino Nationhood

This was a victory in the realm of consciousness, a victory in a racial sense. However, it was only a partial gain, for Rizal repudiated real de-colonization. Beguiled by the new colonizer, most Filipinos followed the example of Rizal. As a consequence, the development of the concept of national consciousness stopped short of real de-colonization and we have not yet distinguished the true Filipino from the incipient Filipino.

The concept of Filipino nationhood is an important tool of analysis as well as a conceptual weapon of struggle. There are many Filipinos who do not realize they are Fiipinos only in the old cultural, racial sense. They are not aware of the term Filipino as a developing concept. Much less are they aware that today social conditions demand that the true Filipino be one who is consciously striving for de-colonization and independence.

Perhaps it would be useful at this point to discuss in some detail the metamorphosis of the term Filipino not just as a matter of historical information but so that we may realize the importance of Rizal's contribution in this regard. Even more valuable are the insights we may gain into the inter-dependence between material conditions and consciousness as manifested in the evolution of the word Filipino in terms of its widening applicability and deeper significance through succeeding periods of our history.

Indios Bravos, a band

It is important to bear in mind that the term Filipino originally referred to the creoles - the Spaniards born in the Philippines - the Españoles-Filipinos or Filipinos, for short. The natives were called indios. Spanish mestizos who could pass off for white claimed to be creoles and therefore Filipinos. Towards the last quarter of the 19th century, Hispanized and urbanized indios along with Spanish mestizos and sangley [Chinese - rly] mestizos began to call themselves Filipinos, especially after the abolition of the tribute lists in the 1880s and the economic [p. 136] growth of the period.

We must also correct the common impression that the Filipinos who were in Spain during the Propaganda Period were all indios. In fact, the original Circulo Hispano-Filipino was dominated by creoles and peninsulares. The Filipino community in Spain during the 1880's was a conglomerate of creoles, Spanish mestizos and sons of urbanized indios and Chinese mestizos. [9]

This community came out with an organ called España en Filipinas which sought to take the place of th earlier Revista Circulo Hispano Filipino founded by another creole Juan Atayde. España en Filipinas was mainly an undertaking of Spanish and Spanish mestizos. The only non-Spaniard in the staff was Baldomero Roxas. Its first issue came out in 1887. It was "moderate" in tone and failed to win the sympathy of the native elements. In a letter to Rizal, Lopez-Jaena criticized it in these words:

From day to day I am becoming convinced that our countrymen, the mestizos, far from working for the common welfare, follow the policy of their predecessors, the Azcarragas. [10]

Lopez-Jaena was referring to the Azcarraga brothers who had held important positions in the Philippines and in Spain, but who, though they had been born here, showed more sympathy for thepeninsulares. It is fortunate that a street wich was once named for one of them has become Claro M. Recto today.

Differences between the creoles and the "genuine" Filipinos as they called themselves, soon set in. It was at this time that Rizal and other indios in Paris began to use the term indios bravos, thus "transforming an epithet into a badge of honor." The cleavage in the Filipino colony abroad ushered in a new period of the Propaganda which may be said to have had its formal beginning with the birth of La Solidaridad. Its leaders were indios. The editor was not a creole like Lete or a Spanish mestizo like Llorente but Lopez-Jaena and later Marcelo H. del Pilar. La Solidaridad espoused the cause of liberalism and fought for democratic solutions to the problems that beset the Spanish colonies.

From the declaration of aims and policies the class basis of the Propaganda is quite obvious. The reformists could not [p. 137] shake off their Spanish orientation. They wanted accommodation within the ruling system. Rizal's own reformism is evident in this excerpt from his letter to Blumentritt:

….under the present circumstances, we do not want separation from Spain. All that we ask is greater attention, better education, better government employees, one or two representatives and greater security for our persons and property. Spain could always win the appreciation of the Filipinos if she were only reasonable! [11]

The indios led by Rizal gained acceptability as Filipinos because the proved their equality with the Spaniards in terms of both culture and property. This was an important stage in our appropriation of the term Filipino. Rizal's intellectual excellence paved the way for the winning of the name for the natives of the land. It was an unconscious struggle which led to a conscious recognition of the pejorative meaning of indio. Thus, the winning of the term Filipino was an anti-colonial victory for it signified the recognition of racial equality between Spaniards and Filipinos.

The "Limited" Filipinos

Rizal, Ltd.

But the appropriation of this term was not the end of the historic struggle for national identity. While for Rizal's time this was a signal victory, it was in truth a limited victory for us. For the users of the term were themselves limited Filipinos based on education and property. Since this term was applied to those who spoke in the name of the people but were not really of the people, the next stage for this growing concept should be the recognition of the masses as the real nation and their transformation into real Filipinos. However, the Filipino of today must undergo a process of de-colonization before he can become a true Filipino. The de-colonized Filipino is the real goal for our time just as the Hispanized Filipino was once the goal of the reformists.

Though Rizal was able to win for his countrymen the name Filipino, it was still as ilustrado that he conceived of this term. As ilustrado he was speaking in behalf of all the indios though he was separated by culture and even by property from the masses. Hisilustrado orientation manifests itself in his novels. [p. 138] Though they are supposed to represent 19th century Philippine society in microcosm, all the principal characters belonged to the principalia. His hero, Ibarra, was a Spanish mestizo. The Spaniards, the creole, themestizo, and the wealthy Chinese - these were characters he could portray with mastery because they were within his milieu and class. But there are only very hazy description of characters who belonged to the masses. His class position, his upbringing, and his foreign education were profound influences which constituted a limitation on his understanding of his countrymen.

Rizal, therefore, was an ilustrado hero whose life's mission corresponded in a general way to the wishes and aspirations of the people. He died for his people, yet his repudiation of the Revolution was an act against the people. There seems to be a contradiction between the two acts; there is actually none. Both acts were in character; Rizal was acting from patriotic motives in both instances.

He condemned the Revolution because as anilustrado he instinctively underestimated the power and the talents of the people. He believed in freedom not so much as a national right but as something to be deserved, like a medal for good behavior. Moreover, he did not equate liberty with independence. Since his idea of liberty was essentially the demand for those rights which the elite needed in order to prosper economically. Rizal did not consider political independence as a prerequisite to freedom. Fearful of the violence of people's action, he did not want us to fight for our independence. Rather, he wanted us to wait for the time when Spain, acting in her own best interests, would abandon us. He expressed himself clearly on these points in the following passage from a letter which he wrote in his cell on December 12, 1896, for the use of his defense counsel.

….. many have have interpreted my phrase to have liberties as to have independence, which are two different things. A people can be free without being independent, and a people can be independent without being free. I have always desired liberties for the Philippines and I have said so. Others who testify that I said independence either have put the cart before the horse or they lie. [12]

He had expressed much the same opinion earlier in his El Fili- [p.139] busterismo when Father Florentino said:

I do not mean to say that our liberty will be secured at the sword's point, for the sword plays but little part in modern affairs, but that we must secure it by making ourselves worthy of it, by exalting the intelligence and the dignity of the individual, by loving justice, right and greatness, even to the extent of dying for them - and when a people reaches that height God will provide a weapon, the idols will be shattered, the tyranny will crumble like a house of cards and liberty will shine out like the first dawn. 13

Yet the people revered him because, though he was not with them, he died for certain principles which they believed in. He was their martyr; they recognized his labors although they knew that he was already behind them in their forward march.

In line with their avowed policy of preparing us for eventual self-government, the Americans projected Rizal as the model of an educated citizen. His name was invoked whenever the incapacity of the masses for self-government was pointed out as a justification for American tutelage. Rizal's preoccupation with education served to further the impression that the majority of the Filipinos were unlettered and therefore needed tutelage before they could be ready for independence. A book, Rizal, Educator and Economist, used in certain Philippine schools, supports this thesis by quoting a portion of Rizal's manifesto of December 15, 1896 which states:

…..I am one most anxious for liberties in our country and I am still desirous of them. But I placed as a prior condition the education of the people that by means of instruction and industry our country may have an individuality of its own and make itself worthy of these liberties. [14]

The authors of this book then make the following comment:

Rizal intentionally avoided the use of the term independence, perhaps because he honestly believed that independence in its true, real, and strict sense should not be granted us until we were educated enough to appreciate its importance, and its blessings, and until we were economically self-reliant. [15] [p. 140]

This statement not only supports the American line but is also an example of how our admiration for Rizal may be used to beguile us into accepting reactionary beliefs, the products of colonial mentality.

A people have every right to be free. Tutelage in the art of government as an excuse for colonialism is a discredited alibi. People learn and educate themselves in the process of struggling for freedom and liberty. They attain their highest potential only when they are masters of their own destiny. Colonialism is the only agency still trying to sell the idea that freedom is a diploma to be granted by a superior people to an inferior one after years of apprenticeship.

The Precursors of Mendicancy

In a way, Rizal's generation is no different from the generation that was engaged in our independence campaigns. Neither was his generation much different from those who today say they stand for independence but do not want to hurt the feelings of the Americans. In a way, Rizal and his generation were the precursors of the present-day mendicants. It may be shocking to say that Rizal was one of the practitioners of a mendicant policy, but the fact is that the propagandists, in working for certain reforms, chose Spain as the arena of their struggle instead of working among their own people, educating them and learning from them, helping them to realize their own condition and articulating their aspirations. This reflects the bifurcation between the educated and the masses.

The elite had a sub-conscious disrespect for the ability of the people to articulate their own demands and to move on their own. They felt that education gave them the right to speak for the people. They proposed an elitist form of leadership, all the while believing that what the elite leadership decided was what the people would and should follow. They failed to realize that at critical moments of history the people decide on their own, what they want and what they want to do. Today, the ilustrados are shocked by the spate of rallies and demonstrations. They cannot seem to accept the fact that peasants and workers and the youth have moved without waiting for their word. They are not accustomed to the people moving on their own.[p. 141]

The ilustrados were the Hispanized sector of our population, hence they tried to prove that they were as Spanish as the peninsulares. They wanted to be called Filipinos in the creole sense: Filipino-Spaniards as Rizal called Ibarra. They are no different from the modern-day mendicants who try to prove that they are Americanized, meaning that they are Filipino-Americans. As a matter of fact, the ilustrados of the first propaganda movement utilized the same techniques and adopted the same general attitude as the modern-day mendicants and pseudo-nationalists, in so far as the colonizing power was concerned.

Ilustrados And Indios

The contrast to the ilustrado approach was the Katipunan of Bonifacio. Bonifacio, not as Hispanized as the ilustrados, saw in people's action the only road to liberation. The Katipunan, though of masonic and of European inspiration, was people's movement based on confidence in the people's capacity to act in its own behalf. The early rebellions, spontaneous and sporadic, could be termed movements, without consciousness. Rizal and the propagandists were the embodiment of a consciousness without a movement. It was Bonifacio and the Katipunan that embodied the unity of revolutionary consciousness and revolutionary practice.

The indio as Filipino rose in arms while the ilustrado was still waiting for Spain to dispense justice and reforms. The ilustrado Filipino was now being surpassed by the indio in revolutionary ardor. The indio had a more legitimate claim to the title of Filipino because he was truly liberating himself. The revolutionary masses proclaimed their separatist goal through the Katipunan. Faced with the popular determination, the ilustrados joined the Revolution where, despite their revolutionary rhetoric, they revealed by their behavior their own limited goals.

Though their fight was reformist and may be regarded as tame today, the historic role of the ilustrados cannot be denied for they were purveyors of ideas which when seized upon by the masses became real weapons. Today their ideas are orthodox and safe. However, the same concepts when made relevant to present society again make their partisans the objects of persecution by contemporary reactionaries.

The role and the contribution of Rizal, like that of the ilus- [p.142] trado class, must be evaluated in the context of his particular reality within the general reality of his time. Rizal was a necessary moment in our evolution. But he was only a moment, and while his validity for his time amounted to a heroism that is valid for all time, we cannot say that Rizal himself will be valid for all time and that Rizal's ideas should be the yardstick for all our aspirations. He provided the model of a form of heroism that culminated in martyrdom. He was a Filipino we can be proud of, a monument to the race despite all his limitations. But we cannot make him out to be the infallible determinant of our national goals, as his blind idolators have been trying to do.

We must see Rizal historically. Rizal should occupy his proper place in our pantheon of great Filipinos. Though he is secure to be in our hearts and memories as a hero, we must now realize that he has no monopoly of patriotism; he is not the zenith of our greatness; neither are all his teachings of universal and contemporary relevance and application. Just as a given social system inevitably yields to new and higher forms of social organization, so the individual hero in history gives way to new and higher forms of heroism. Each hero's contribution, however, are not nullified thereby but assume their correct place in a particular stage of the people's development. Every nation is always discovering or rediscovering heroes in the past or its present.

Blind Adoration

Hero-worship, therefore, must be both historical and critical. We must always be conscious of the historical conditions and circumstances that made an individual a hero, and we must always be ready to admit at what point that hero's applicability ceases to be of current value. To allow hero-worship to be uncritical and unhistorical is to distort the meaning of the heroic individual's life, and to encourage a cult bereft of historical meaning - a cult of the individual shorn of his historical significance. It is form without content, a fad that can be used for almost anything, because it is really nothing. We must view Rizal as an evolving personality within an evolving historical period. That his martyrdom was tainted by his attacks on our independist struggle is not a ground for condemning him entirely. We must determine the factors - economic and cul- [p. 143] tural - that made Rizal what he was. We must see in his life and in his works the evolution of the Filipino and must realize that the period crowned by his death is only a moment in the totality of our history.

It is a reflection of our lack of creative thinking that we continue to invoke Rizal when we discuss specific problems and present-day society. This is also a reflection of our intellectual timidity, our reluctance to espouse new causes unless we can find sanctions, however remote, in Rizal. This tendency is fraught with dangers.

Limitations of Rizal

We are living in an age of anti-colonial revolutions different in content from those of Rizal's period. Rizal could not have anticipated the problems of today. He was not conversant with economic tools of analysis that would unravel the intricate techniques that today are being used by outside forces to consign us to a state of continued poverty. The revolutions of today would be beyond the understanding of Rizal whose Castilian orientation necessarily limited his horizon even for that period. He was capable of unraveling the myths that were woven by the oppressors of his time, but he would have been at a loss to see through the more sophisticated myths and to recognize the subtle techniques of present-day colonialists, given the state of his knowledge and experience at that time. This is not to say that were he alive today and subject to modern experiences, he would not understand the means of our times. But it is useless speculation to try to divine what he would now advocate.

Unless we have an ulterior motive, there is really no need to extend Rizal's meaning so that he may have contemporary value. Many of his social criticisms are still valid today because certain aspects of our life are still carry-overs of the feudal and colonial society of his time. A true appreciation of Rizal would require that we study these social criticisms and take steps to eradicate the evils he decried.

Part and parcel of the attempt to use Rizal as an authority to defend the status quo is the desire of some quarters to expunge from the Rizalist legacy the so-called controversial aspects of his writings, particularly his views on the friars and on religion. We have but to recall the resistance to the Rizal bill, [p. 144] the use of expurgated versions of the Noli Me Tangere and the El Filibusterismo, and objections to the readings of his other writings to realize that while many would have us venerate Rizal, they would want us to venerate a homogenized version.

In his time, the reformist Rizal was undoubtedly a progressive force. In many areas of our life today, his ideas could still be a force for salutary change. Yet the nature of the Rizal cult is such that he is being transformed into an authority to sanction the status quoby a confluence of blind adoration and widespread ignorance of his most telling ideas.

We have magnified Rizal's significance for too long. It is time to examine his limitations and profit from his weaknesses just as we have learned from the strength of his character and his virtues. His weaknesses were the weaknesses of his society. His wavering and his repudiation of mass action should be studied as a product of the society that nurtured him.

The Negation of Rizal

Today, we need new heroes who can help us solve our pressing problems. We cannot rely on Rizal alone. We must discard the belief that we are incapable of producing the heroes of our epoch, that heroes are exceptional beings, accidents of history who stand above the masses and apart from them. The true hero is one with the masses: he does not exist above them. In fact, a whole people can be heroes given the proper motivation and articulation of their dreams.

Today we see the unfolding of the creative energies of a people who are beginning to grasp the possibilities of human development and who are trying to formulate a theoretical framework upon which they may base their practice. The inarticulate are now making history while the the articulate may be headed for historical anonymity, if not ignominy. When the goals of the people are finally achieved, Rizal the first Filipino, will be negated by the true Filipino by whom he will be remembered as a great catalyzer in the metamorphosis of the de-colonized indio. [p. 145]

_______________

* Third National Rizal Lecture, December 30, 1969.

1 The full text of the manifesto may be found in Jose Rizal, Political and Historical Writings. Vol VII (Manila: National Heroes Commission, 1964), p. 348.

2 Theodore Friend, Between Two Empires (New Haven and New York: Houghton Mifflin Company, 1928), p. 15.

3 W. Cameron Forbes. The Philippine Islands(Boston and New York: Houghton Mifflin Company, 1928), p. 55

4 Ibid. p. 53

5 See Robert R. Reed, Hispanic Urbanism in the Philippines: A Study of the Impact of Church and State (Manila: The University of Manila, 1967), Chapter VIII.

6 Ibid, p. 125

7 For a discussion of cultural and social context of the period, see Edgar Wickberg, The Chinese in Philippine Life, 1850-1898 (New Haven and London: Yale University Press, 1965), pp. 131-134

8 A fuller discussion of the developing concept of the true Filipino may be found in my book, The Making of a Filipino (Quezon city: Malaya Books, 1969), Chapter 1. [p. 190]

9 Ibid., see also my essay, "The Filipino Elite," found in part two of this book.

10 Graciano Lopez-Jaena. "Letter to Rizal, March 16, 1887," Rizal's Correspondence with Fellow Reformists, Vol. II, Book II (Manila: National Heroes Commission, 1963), p. 103.

11 The Rizal-Blumentritt Correspondence, Part 1: 1886-1889, Vol. II, January 26, 1887, p. 44.

12 Rizal, "Data for my Defense," Political and Historical Writings, p. 340

13 Rizal, The Reign of Greed, translated by Charles Derbyshire (Manila: Philippine Education Company, 1956), p. 360.

14 Rizal, "Manifesto, December 15, 1896," Political and Historical Writings, p. 348.

15 Hernandez, Ella, Ocampo. Rizal, Educator and Economist, (Manila, 1949), p. 94 [p. 191]

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Beyond Appointments: Reorganizing DOTC and DPWH

2011-06-16T20:33:00.000+08:00

The appointment of Sen. Mar Roxas to the position of Secretary of the Department of Transportation and Communication (DOTC) after the resignation of Department of Transportation and Communication (DOTC) Sec. Ping de Jesus (plus three other DOTC undersecretaries) has given Aquino's party president a strategic post with which to propell his political fledging political career. Being in charge with DOTC means, as a columnist put it, being “in charge of huge projects, big-ticket items that have been the milking cow of corrupt individuals in the past.” ZTE-NBN, NAIA Terminal 3, North Luzon Railways Project, SCTEX, RORO, and the STRADCOM controversies clearly come to mind.

DOTC is in fact one of the more strategic agencies in the Philippine bureaucracy, since a "viable, efficient, and dependable transportation and communications systems" are "effective instruments for national recovery and economic progress," as DOTC's wikipage puts it. It is thus not surprising that former Sec. de Jesus' resignation caused some panic on possible political impacts (see this also) of such on Aquino's 1-year old administration, but this is mostly because DOTC is a crucial position to begin with. DOTC's political power derives from its position in the overall narrative of economic development - a behemoth of sorts combining in one agency two widely different sectors: the transportation industry and the communications sector.

Is such a gargantuan creation as DOTC fit to lead us towards economic modernization?

Transportation, Communication Agencies in other countries

Strong Republic Transit System (SRTS)

To answer this question, let us take a look at the transportation and communications portfolio in other countries. In the United States, for example, there is a federal cabinet department called Department of Transportation that is separate from the National Telecommunications and Information Administration (NTIA), an agency under the US Department of Commerce (our counterpart would be the Philippine Department of Trade and Industry, formerly headed by Roxas during the Estrada and Arroyo administrations). In United Kingdom, there is a Department for Transport (or DfT) solely responsible for the English transport network and a limited number of transport matters in Scotland, Wales and Northern Ireland which are not devolved.

But even with our neighbors, transportation and communication departments are separate. In Malaysia, there is a Ministry of Transport and a Ministry of Information, Communiations, and Culture (recently formed from the merger of three separate ministries under Rais Yatim). In Thailand (which can serve as model for us), there is a Ministry of Transport and a Ministry of Information and Communication Technology. These are two separate functions that deserve two organizations and two cabinet heads.

PROPOSAL: Instead of maintaining DOTC in its current form, it is better to follow the lead of other nations and separate the "communications" function with that of "transportation", reorganizing the cabinet in the process. The following steps are recommended:

Split the "Transportation" function with the "Communications" function of the DOTC.
Split the "Public Works" function with the "Highways" function of the DPWH. The latter can be fused with the transportation function of the DOTC to form a Department of Transportation.
The communications function can then be placed under the proposed Department of Information and Communication Technology (DICT).
Setup a separate "Department of Public Works", to address the remaining functions, or focus instead on creating a "Department of Water"

The proposal will not seem to far fetch if we are going to review our history here. During the pre-Commonwealth period in 1931, the Philippine Legistature named what was then the Department of Commerce and Communications into the Department of Public Works and Communication (DPWC). By 1935, the colossal DPWC was made to contain the Bureau of Public Works, Ports, Aeronautics, Coast and Geodetic Survey, the Metropolitan Water District Division of Marine, Railway and Repair Shop, National Radio Broadcasting, the Irrigation Council and Board of Examiners for Civil, Mechanical, Chemical and Mining Engineers. This even became bigger in 1951, during the Quirino administration, when DPWC became the Department of Public Works, Transportation and Communications, or DPWTC. This is like our present day DPWH and DOTC combined.

During the Martial Law era, in 1976, DPWTC became the Ministries of Public Works, Transportation and Communications, and Public Highways (MWPTC), but the giant ministry was split into two: Ministry of Public Works (MPW) and the Ministry of Transportation and Communications (MOTC), now renamed as the Department of Transportation and Communications. As for MPW, it was merged with the former Ministry of Public Highways to form was will then be DPWH.

Departments change according to times to effectively serve its mandate. Of course, we can't discount political motivations in the restructuring processes before, but purely politically-motivated actions are more possible in very powerful agencies which have very broad scopes. It is not surprising that the DOTC is involved in lots of questionable projects.

What should be the features of Department of Transportation, DICT, and Department of Public Works (or Department of Water)? We have some ideas on this.

Department of Transportation

This is in fact in line with Philippine Development Plan (PDP) 2011-16's proposal to adopt a comprehensive, long-term National Transport Policy (NTP) which will "guide the restructuring of the transport sector into a well-coordinated and integrated multimodal transport and logistics system" (Chapter 5, page 124). The PDP responded to the "lack of integration between national and local government plans" resulting in gaps in the transport sector and poor quality infrastructure.

It is only logical that roads, bridges, and highways planning be integrated with other modes of transport for a more effective planning process. For instance, people ride RORO in order to access a highway, at the end of which can be a medium-rise parking area (for motor vehicle users) so he can use an elevated railway transit like MRT/LRT. In most countries, airports are outside the metropolis (in order to save space), and is only connected to the city via a high-speed subway/railway, or a dedicated high-speed bus lane. Mobility should be designed in a coherent, comprehensive, and systematic manner, in order to create seamless-ness. On this, former President Arroyo's plan of a Luzon Urban Beltway (one of the four super regions announced in the 6th SONA, see also this) is a good start.

Transportation is an important element in urban planning. In fact, we can even integrate traffic management to the tasks of the Department of Transportation (either it shares this with MMDA or it fully absorbs this task) because traffic flows are a function of the transportation modes and their load capacities. For instance, one could imagine that constructing LRT/MRT extensions is dependent on the assessment of how much economic benefit can be derived from off-loading commuter volume on the road-based transportation versus the cost of construction. On a more practical level, the construction of these railways are often a traffic nuisance (see video below), and leave adjacent roads in need of repair (which is, at the status quo for major roads, is a mandate of DPWH).

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Annex I: Department of Information and Communications Technology

The proposal to create a "Department of Information and Communications Technology (DICT)" has already been floating for some time. In fact, when President Gloria Macapagal-Arroyo signed Executive Order No. 269 on January 12, 2004 creating the Commission on Information and Communications Technology (CICT) which is independent from DOTC, it is as a transitory measure to the creation of a DICT. CICT absorbed the functions of the Information Technology and Electronic Commerce Council (ITECC), which was abolished through EO 334 on July 20, 2004.

Bills in the Congress have been filed proposing the a DICT, transforming the CICT into a department. A consolidated bill, House Bill No. 4300, was approved on third and final reading on August 5, 2008 and transmitted to the Senate on August 11, 2008. A few days after, a consolidated bill, Senate Bill No. 2546, was approved by the Senate Committee on Science and Technology on August 19, 2008, but did not make it to second reading by the time Congress adjourned session. With this failure, the legal basis of CICT remains to be EO 269, which can be revoked anytime by Aquino.

Senate CR 93

What functions would DICT have? We can start with the current CICT, which is composed of the National Computer Center (NCC), the Telecommunications Office (TELOF), and all other operating units of the DOTC dealing with communications. The National Telecommunications Commission (NTC) and the Philippine Postal Corporation (PhilPost) were also attached to the CICT for policy coordination. But we can add more. The section of the Department of Trade and Industry (DTI) that is concerned with IT industries, including the Business Process Outsourcing (BPO) industry (given the strategic potential of the BPO industry, see also this and this), can actually be transferred to a DICT if created. This would make sure that the private sector plans for expansion and development is in line with government's own plans for the sector.

DICT is pushed by many sectors, from the National ICT Confederation of the Philippines, Bacolod-Negros Occidental Federation for Information and Communications Technology, to the Joint Foreign Chambers of the Philippines. It is thus mind-boggling that Aquino (see article) and our own Department of Science and Technology (DOST, see related article here) refuses to set it up.

Annex II: Department of Water

What are public works besides highways? The DPWH webpage on its mandate lists "(a) the planning of infrastructure, such as roads and bridges, flood control, water resources projects and other public works, and (b) the design, construction, and maintenance of national roads and bridges, and major flood control systems". Taking away roads and bridges, this leaves merely all water related projects - flood control, water resources management and development, and irrigation. This clearly calls for the creation of a separate "Department of Water."

In the status quo, management and development of the Philippine water supply, sanitation, and resources is largely incoherent and is governed by several laws, but there had been two major attempts to consolidate these laws: the 1976 National Water Code and the 2004 Clean Water Act. These laws specify the Department of Environment and Natural Resources (DENR) as the lead department for implementing water sector legislation, with the National Water Resources Board (NWRB) under the DENR being tasked on water resources management. The DPWH provides technical assistance within rural water supply systems, although the Department of Interior and Local Government (DILG) also has its share of responsibilities in defining and enforcing quality and performance standards even as the Department of Health (DOH) sets national standards for drinking water quality as well as standards concerning sanitation and sewerage collection.

If this doesn't appear to be a mess yet, for financing, the Department of Finance (DoF) takes the lead in financing water policies at the national level, although there is a Local Waterworks and Utilities Administration (LWUA), a specialized lending institution that promotes and oversees the development of provincial waterworks. This is on top of the National Irrigation Authority (NIA) which is also supposed to invest in irrigation development. The summary of all agencies tackling water is listed in this article.

Status of Water Delivery in the Philippines

Thus, a cabinet-level Department of Water similar to that in Western Australia should be considered by the Aquino administration. Several functions have to be integrated, and operations have to be streamlined for more effective intervention. If this is not feasible, the government can also opt to centralize all operations to the NWRB, positioning it as the lead national cabinet-level body charged with all water-related policies. Regional, provincial and municipal NWRB offices must be established for this purpose.

This will necessitate some rationalization processes. Water-related institutions whose mandates duplicate or conflict must be abolished, with other water agencies attached to other departments transferred to NWRB. In particular, the mandate of NAPOCOR and other power generation entities in managing water resources within sites of operation should already be removed with all responsibilities transferred to the lead agency.

Anti-Cory Propaganda Youtube Video

2011-05-20T17:53:00.000+08:00

Someone forwarded me this YouTube video. Judging by the sophistication of this video (graphics, technology used, and all), either it was made by a very political multimedia professional, or someone out to demolish the Noynoy administration hired an expensive multimedia professional to do this. Let us watch the video with a critical mind, and an appreciative eye for cool animation. Enjoy!

This video represents a long-running line of argumentation blaming the EDSA system for the economic and social quagmires we are in, while positioning the Marcosian authoritarian government of the 70s as the one that put Philippines on the global map of competitiveness. This argumentation has many flaws, as both Marcos and Aquino had their share in pushing the Philippines towards the path of maldevelopment.

In any case, one cannot simply dismiss the criticisms of the pro-Marcos camp, especially with Bongbong's assertion that we could have been a Singapore had EDSA I never happened (with Aquino III answering that we could have been a Libya otherwise) having appeal on those who witnessed the economic wrath and misery of the neoliberal era.

Setting Fair Oil Prices for the Filipino People (by Rep. Walden Bello)

2011-05-18T18:34:00.000+08:00

Just this Monday, Rep. Walden Bello, a progressive Filipino solon, world-renowned economist and the originator of the "deglobalization" movement, recently spoke in halls of Congress on the need to set fair oil prices and increase income in a time of inflation. A series of urgent demands for relief, Bello's proposals perfectly complements Pagkakaisa ng Manggagawa sa Transport's (PMT) strategic and medium-term "Proposals to End the Recurring Oil Crisis" (http://bit.ly/endoilcrisis).

This is a must-read for policy-makers who are considering a lasting but feasible urgent solution on the oil inflation problem. Enjoy!

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Setting Fair Oil Prices for the Filipino People
Privilege Speech of Rep. Walden Bello, May 16, 2011

A year after its election, the administration can point to the high economic growth rate, particularly in agriculture, as one of its achievements.

However, perhaps more than economic growth, people prize economic stability, and the way things are going right now, there is a sense of things slipping out of control. The main challenge citizens want the administration to meet is, far and away, the economy. And among the economic issues, inflation receives the highest priority as a problem that must be addressed by the government in a recent Pulse Asia survey, with some 53 per cent of respondents citing it.

Rep. Walden Bello

A key factor that contributed to the unpopularity of the previous administration was the duet of uncontrolled rise in fuel prices and food prices in 2007-2008. The same scenario of unrestrained ascent of food and fuel prices threatens to repeat itself in 2011.

What is unraveling things is the rapid rise in the price of oil, which induces an inflationary effect on all other goods, including food, the price of which is greatly determined by oil-intensive transportation, refrigeration, fertilizers, and pesticides. In the last four months, the oil majors have raised prices six times, increasing the price of gas by P10.25/liter since January. Gasoline prices now range from P53.95/liter to P60.22/liter with a common price of P56.95/liter. True, there have been slight rollbacks during the last two weeks, but this is a case of one step backward and two steps forward on the part of the oil majors, who are wary of rising public resentment.

There is one attitude that the administration cannot afford to project in this crisis, and that is the sense that it cannot do much about the rise in prices. A non-interventionist strategy is political suicide, as the previous administration learned in 2007-2008. An attitude of we can’t do anything because that’s what the market says or because the oil companies will only shut off their supply if we try to tamper with their profits will not fly with the public, whatever the ill-conceived Oil Deregulation Law says. People want to have a sense that their government is doing something pro-active, that it is in control of events. After all, that is why they elected the administration to power in the first place: to effectively manage things in the public welfare.

Yet this sense of fatalism is what has been projected by recent statements by Energy Secretary Rene Almendras who said that addressing the rising price of oil must take a backseat to assuring oil supply because “What can we do when the oil companies tell us they want to back out?” The same sense of helplessness has been transmitted by Senate Energy Committee Chairman Sergio Osmena III, who recently stated, “There is no law dictating prices (of oil products), that is why there is no overpricing to talk about. If they (oil firms) want a huge profit, we cannot stop them.”

President Aquino must reject such fatalism from his subordinates.

Causes and Dynamics of the Oil Price Rise

The price of crude has risen from some $33 a barrel two years ago to $116 a barrel currently. The long-term rise in the price of crude has been traced to the combination of a limited supply of oil owing to few new discoveries of significant oil fields and a growing market owing to the emergence of dynamic new markets like India and China. In the short term, however, the skyrocketing of oil prices has been sparked by heated speculation on oil futures, that is, by speculators betting on the price of oil rising, and this act itself contributes to the price rise. While the political developments in the Middle East may have contributed to some disruption in supplies, this is very minor and certainly does not explain the massive rise of over 400 per cent in the crude price.

Now, while transnational oil giants may not be the main instigators of this process, they are benefiting from it. In the last week of April, the world's six largest publicly traded oil companies (among which are the mother companies of two of the oil operators in the Philippines) reported a combined $38.1 billion in first-quarter profits owing to the rapid rise in the price of crude.

Breaking the Price Spiral

Image via Wikipedia

Oil Exports per Country

But while oil TNCs may not be the prime movers behind the oil price rise, they can stop it. The same thing can be said about the oil producers, that is, the Organization of Petroleum Exporting Countries (OPEC). How? By simply acting in concert to stop the rise in the pump prices and the crude price. This will break the price spiral and serve as a signal to the speculators that the party is over, drive them from playing in oil futures, and rapidly bring down the price of oil.

Herd behavior is behind the speculative rise in oil price, and what is needed is a firm signal that would drive the horde of speculators in the other direction. One of the key factors that drove the herd in the other direction in 2008-2009, when oil prices crashed from $148 a barrel to $33 in slightly over six months was global recession, of which the oil price rise had been a major cause. If there is anything that can be learned from that crisis, it is that we cannot wait for recession, with all its painful consequences, to serve as the command for the speculative herd to retreat.

Allowing the prices to continue to rise threatens not only consumers but business. While people may think businesses can simply pass on the rising costs to consumers, it is not that simple. During the 2007-2008 oil price rise, Philippine Air Lines passed on price increases to passengers. But its effort to assure its oil supplies to maintain its profits led to it making futures contracts at inflated prices that led to massive losses when the oil price collapsed. Even the oil giants suffer the consequences of unregulated price rises: like PAL, Petron lost four billion pesos from forward hedging deals when oil crashed in 2008. Nobody’s interest except that of the speculators is served by uncontrolled inflation.

Need for a Comprehensive Strategy

What is needed is a comprehensive strategy not only to blunt the impact on both the consumer and business of the rise in the price of oil but one that would frontally tackle the root cause of the crisis itself. So far, proposed solutions, while useful, have been advanced in a largely piecemeal fashion, and these have been defensive and of limited impact. Allow me first address the measures that the administration has taken so far.

Wage Increases

Raising the basic wage is critical to helping workers and their families contain the rapid erosion of their living standards. In this regard the increase in the Emergency Cost of Living Allowance (ECOLA) (by 22 pesos in the National Capital Region) by the Regional Wage Boards will have minimal impact in terms of reversing negative trends. The National Wages and Productivity Commission (NWPC) must accompany the ECOLA with a minimum increase of not less than P100 in the basic wage.

Targeted Subsidies

Like wage increases, “targeted subsidies” are a good idea. However, the current scheme mandated by Executive Order 32 appears to be, as Business World puts it, “hardly more than political gimmickry.” The present initiative, which gives a 1050 peso subsidy for jeepneys and 300 pesos for tricycles, has two problems. The first is that it mainly benefits the owners of jeepneys and tricycles because it awards the cards only to owners who can produce the franchise, original registration certificate, and route designation. The owner would merely calculate the 1050/300 peso into his "boundary," and this would amount of two days worth of owner's income in one month. The second is that the amount is too small, now being a one-time 1050/300 peso subsidy.

A more effective approach would be for the administration to 1) set up an ID system that would allow jeepney and tricycle driver to claim and calculate the 1500/300 pesos into their boundary; and 2) commit to renewing the subsidy every three months should oil prices continue to rise.

Suspending or Eliminating the VAT on Oil Products

Eliminating or temporarily suspending the Value Added Tax (VAT) on oil products was recently mentioned as a possibility by Secretary of Finance Cesar Purisima. This is a positive suggestion that could result in significantly lower prices and thus benefit the consumer. A balanced must be achieved, however, between the benefit to the consumer and the loss of tax revenue, as some have suggested. Also, there must be an effective method to ensure that the suspension of VAT is being reflected in the pump price.

On the first issue, benefiting the really needy while moderating revenue loss can be achieved by having the VAT exemption limited to tricyles, jeepneys, commuter FXs and taxis. On the second concern, to ensure that oil companies will not pick up the slack in prices from the vat exemption, one can have the tax exemption reflected in the receipt, which will give consumers a clear way to differentiate and monitor changes in oil prices and the application of the VAT exemption.

The Need for Flexible Price Management

Intervening in some way to contain the rise in the price of oil cannot be avoided in any viable solution, and this course of action will necessitate more than the Department of Energy examining the books of the oil giants, as suggested by Reps. Rufus and Maximo Rodriguez. But before forceful intervention on prices can take place, one must convince people like Energy Secretary Almendras and Senator Osmena that their fears of the oil majors withdrawing from the Philippines are groundless.

DOE Sec. Jose Almendras (left) and Sen. Sergio Osmeña (right)

These two gentlemen simply unwittingly repeat the threat of the oil majors when they perceive the threat of price controls. First of all, being now a majority-Filipino-owned company, Petron has, for all intents and purposes, nowhere else to go but the Philippines. As for Chevron Caltex, it has been uttering the threat of withdrawal for some time now, yet it stays. The reason leaving the Philippines is an empty threat is that no one withdraws from a very profitable market owing to temporary dips in profitability. Should one of the oil majors withdraw, that would translate into the two others taking over its market share, with increased profits from increased sales volume. Should the three, in a display of collective solidarity withdraw, there are many smaller, independent companies that would come in to fill the demand. In a competitive world where participants see every normally profitable market as vital to long-term profitability, no one would think of voluntarily yielding market share.

Is there empirical evidence for this claim? In late 2009, when there was a temporary freeze on the price of oil owing to Typhoon Ondoy, none of the oil majors withdrew, though they complained loudly. Why? Because the market was so profitable that they, the majors, still recorded significant profits. According to Petron Corporation, the company posted a net income of P4.3 billion in 2009.

Pushing the oil majors to moderate prices is one key part of the solution. Convincing the oil producers, that is, the Organization of Petroleum Countries, is another.

To motivate the oil majors and OPEC to take steps to break the speculative spiral will require government action at both the national and international level. At the international level, one course of action is, as suggested by the UN, to have oil-consuming countries negotiate a benchmark “fair” cost of oil with the Organization of Petroleum Exporting Countries and limit price movements within a band. At the national level, the government can impose price controls on the pump price of gas and diesel.

Before we go any further, let me say here that I agree with Rep. Antonino of Nueva Ecija’s assertion in his privilege speech last week that there is no strategic solution to the energy crisis except to promote renewable energy. I think we should start now to reduce our dependence on fossil fuels by seriously implementing the Renewable Energy Act. We have, however, to deal with the short-term, because, as the economist John Maynard Keynes said, unless we do so, “we are all dead.” And the short run is the reality of the oil price rise that is crippling our people.

Elements of a Flexible Oil Price Management Program

The following proposal proposes the establishment of a flexible price-setting mechanism and complementary measures to ensure its effective operation.

1. Fair Oil Price Setting Mechanism

Government must establish an oil price setting mechanism that will keep oil prices within a range or band that is fair and affordable to consumers, while allowing oil companies a reasonable level of profits. The range of the price band should be computed based on three main factors, namely: the purchasing capacity of consumers (e.g. based on a predetermined maximum allowable percentage share of oil based expenditures to total household expenditure) an approximation of a fair and reasonable level of profit for oil companies, and the prevailing prices of oil in the international market. The price band must be reviewed and reset on a monthly basis.

President Aquino must create a committee that will set and review the price band. The committee should be headed by the Department of Energy, and should be composed of representatives from oil companies, consumers’ groups, and three independent experts.

Should the monthly balance sheet of the oil corporations reflect a loss, the government will not be held accountable for reimbursing this loss. Should the balance sheet reflect a more than moderate rise in profits—say 10 per cent or above—this sum should be subjected to a windfall profits tax.

2. Setting up a Strategic Oil Reserve

To protect itself from price and supply volatilities of oil in the international market, government must seriously consider building oil reserves as a strategic objective, a proposal that has also been suggested by Secretary Almendras. Establishing a strategic oil reserve will help provide government the capability to cushion oil consumers from the vagaries inherent in the oil market, and also provide it with the necessary stocks to influence prices .

President Aquino must direct the Department of Energy to create a blueprint for the establishment and management of such reserves, including identifying sources of funding for building the country’s oil stocks. The DOE can look at tax revenues from oil companies as possible sources of funding for the creation of the said reserves.

Establishing an oil reserve might require legislation, but it would be best if the initiative can be put in motion immediately by invoking the charter of the Philippine National Oil Corporation (PNOC).

3. Strategic plan to regain control of Petron

President Aquino must begin developing a medium-term plan to regain control of Petron, as a strategy to increase government’s capability to intervene in the market and break the oligopolistic tendencies of oil companies. Petron’s share in the domestic oil market is at 38.6%, giving it the clout to effectively lead and influence oil prices.

Regaining control of Petron can be achieved by government buying back at least 51% of Petron shares, or by a combined action of acquiring a substantive share of Petron and maximizing government participation in the SMC Board, which now controls the oil company.

The President must direct the Department of Finance, the Department of Budget and Management and the Department of Energy to lead this planning process, in consultation with relevant members of the Cabinet.

While this process is in motion, the administration must exercise “moral suasion” on Petron, which is now majority Filipino-owned, to serve as a price-setter. Industry insiders still see as a model of effective moral suasion the pressure exercised by former President Joseph Estrada’s Energy Secretary Mario Tiaoqui in keeping down prices. These tactics included the threat of imposing negative sanctions.

Separate but related to these considerations is the issue of who controls Petron at present. If the persistent news that Petron has fallen under the control of a predatory family is indeed true, then it is all the more important for the government to put in motion a process of regaining control of the firm.

4. Support UN Advocacy for International Oil Price Controls

The Philippines must support the United Nation’s call for an international negotiation to determine a fair cost of oil, and to limit international oil price movements within a certain band. However, this should not be a conference limited to OPEC and the G 20 but a UN-sponsored meeting bringing together all oil-consuming and oil-producing nations.

The President must call on the Department of Foreign Affairs and the Department of Energy to look at how the Philippines can relay and actualize it support to UN. The DFA can also look at the possibility of the Philippines bringing this as an agenda in the next ASEAN Summit in September this year.

Legal Considerations

Before we move ahead with this program of flexible oil management, we must address the objection posed by the representatives of the oil companies. Is not the government powerless to act owing to the Oil Deregulation Law (Republic Act No. 8479)? The answer is no. The president can invoke Section 14 e of the law as the former administration did, under popular pressure, with EO 839 on Oct 23, 2009, to protect consumers against predatory pricing by oil companies in the aftermath of Typhoon Ondoy. Section 5 e reads: “In times of national emergency, when the public interest so requires, the Department of Energy (DOE) may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any person or entity engaged in the industry.”

By any definition, a situation of unregulated, sharp price increases at the pump brought about by a more than 400 per cent rise in the price of crude in two years, which sparks inflation and brings an economy to the edge of recession at the same time, qualifies as an national emergency.

However, to enhance the effectiveness of temporary government intervention, it will be necessary to amend the Oil Deregulation Law. In other words, Congress must review and amend RA 8479 with the goal of introducing provisions that will (1) instititutionalize flexible intervention in the market to protect the interest of retail oil consumers (2) integrate the purchasing capacity of consumers as an important factor in considering the operation of the Automatic Oil Pricing Mechanism, (3) formally define a condition of national hardship brought about by extreme oil price volatility as an emergency, and (4) better monitor and ensure the compliance of oil companies in providing reports on, among other things, oil price and supply as well as revenues to the Department of Energy.

Conclusion

The foregoing program, which combines subsidies and tax reductions with mechanisms to moderate the rise in the price of oil, if implemented with sensitivity cum determination, will achieve two things: 1) it will significantly slow down the erosion of people’s living standards by lowering inflation; and 2) it will eliminate the chaos induced by oil prices that rise arbitrarily and thus allow households and firms to more rationally plan their production and consumption.

That there is no smooth road to containing the drastic rise in the price of oil brought about by uncontrolled speculative activities is a stark reality. There might even be threats of supply price disruptions on the part of the oil majors. Such threats must, however, be expected from them. Carrying them out is another thing, for this will cross the line to illegality, and the oil majors will find it difficult to take this course on pain of courting both popular condemnation and legal action from the government that would significantly affect the future profitability of their operations in the Philippines.

The flexible price-setting mechanism and its associated components outlined above are reasonable. They will not harm the oil majors’ interests; they will simply encourage them to be satisfied with moderate profits, while pushing them to take action to break the speculative price spiral that harms both their interest and the interest of consumers and business.

But while reasonable, these measures will provoke much lightning and thunder from the oil majors and their propagandists. On this issue, political will will be demanded from the president. He has shown this in addressing other challenges. I am confident he will show it in this instance as well.###

Jan-jan’s Abuse and the Middle Class Disconnect

2011-04-05T14:25:00.000+08:00

NO DOUBT ABOUT IT. What Willie Revillame made Jan-jan do in an episode of his popular primetime show is wrong. It is very probable that the humiliation and psychological torture Jan-jan experienced under the crowd of Willing Willie may leave an indelible imprint of a hostile society in his young psyche. But even if Friedrich Nietzsche is right, that what doesn't kill you makes you stronger (and I do hope than Jan-jan would come out of this a stronger person), it should have been a decision an adult Jan-jan would have to make, not Revillame. Revillame should be dealt with according to our laws.

The dozens of articles I read written by various "concerned citizens" through facebook, blogs, and columns on the topic had a unanimous verdict on the Revillame’s show. That in itself is not interesting. What is interesting is that they were puzzled by the seeming indifferent stance by Jan-jan’s parents. Why did they let their son do that demeaning dance? Are they bad parents? The parents are equally puzzled by the reaction of these "concerned citizens". “What’s the big deal?” - they seem to be thinking.

Disparity

Honestly, I am not surprised that Jan-jan’s parents did not know that Jan-jan went through child abuse. It may be desensitization, but it’s not quite it. That you cannot force your child to do “macho dancing” in national TV (against the kid’s will) simply never occurred to them as child abuse. That concept did not become part of their culture or their reality. In fact, wherever l look around, children are being abused worse than Jan-jan, without the viral effect of Jan-jan’s case. They are brought around as props by their parents who beg at the streets or at MRT stairs. Some do the actual panhandling, sometimes even bringing a piece of paper with scribbles saying that they belong to a particular displaced indigenous group. But I do not see enough gasping by those who tread the streets and ride the MRT for these kids to make it to the news.

The disparity of the “concerned citizens” ranting I saw in social and mainstream media with the reactions of the parents and probably the same neighborhood Jan-jan lives only shows the degree of the cultural alienation of our hoi polloi with the English-speaking facebook netizen or those who can afford a copy of an English-language mainstream daily (which costs about a kilo of NFA rice, and would be too much of a financial burden for an average Filipino poor). They see abuse; Jan-jan's parents shrugged. They see humiliation; Jan-jan's parents see normality. After all, if Jan-jan was forced to do his dance during an extended urban poor family gathering instead of national TV, would it really be an unusual incident for the average Filipino family? If not, why shouldn't the same principles apply? And why didn't the masses in the studio flare up?

More than Abuse

Again, I am not questioning the abuse. Of course, the moral standards of the Filipino should always be pushed up. That a thing is "normal" now doesn't mean it’s not abuse. Patriarchy, Violence Against Women (VAW), discrimination against LGBT (lesbians, gays, bisexuals and transsexuals), and child labor are tolerated before (some even just recently), but they have eventually been recognized as forms of oppression that should be ended. We should always struggle to end repression in all its manifestations.

But is this the purpose of the “concerned” netizens, most of which belonged to the middle class, that condemned Willie and Jan-jan's parents? I ask this, for I cannot help but sense a tinge of self-gloating and condescension with every cry of abuse! abuse! at Willie and the masses present at the show of Willing Willie. I can't help but imagine their thoughts: Look at what those dirt-poor parents are doing to their kid! They and their uneducated peers should be ashamed of themselves! I mean, we wouldn't do that to our Montessori-enrolled kid right, hon?

For if that section of the middle class is really serious in the struggle for moral uplifting of society, they would have understood or struggled to learn that the condition for this is economic change. It is the economic condition that defines the hegemonic ethic. The middle class can afford education that teaches so-called “sensitivities” and "political correctness". Poverty demands indifference to abuse, if what Jan-jan's experience will even classify as abuse in the world of the average Filipino poor. (In fact, the aware but cynical may say: Better that Jan-jan experience it now than later. Anyway, being poor as he is, he will always be forced to do things against his will anyway, for that is the life of the poor.) The middle class can afford a lifestyle that creates for them a sense of "self-esteem" and "pride". Poverty demands that momentary humiliation, if it can even be defined as humiliation in the world of the poor (after being bombarded by slapstick entertainment that defines self-mistreatment as source of humor), is a little price to pay for food to eat for the next few weeks.

Responsibility

The truth is, it is not just Willie that humiliated Jan-jan. That condescending section of middle class I am talking about is part and parcel of the system that executed the horrible abuse. They too abused Jan-jan. They abuse Jan-jan every time they condemn Willie but refuse to involve themselves in political activities that would have helped in condemning the system that perpetuates poverty, or the fact that Willie exists because they refuse to help in changing the system. They abuse Jan-jan every time they condemn Jan-jan parents but even refuse to visit the poor family's community to know their needs, and know why these are refused to them by society, because it may be "delikado" (unsecure) or "unhealthy" there.

But alas, I bet some of them didn't even get to watch a single Willing Willie episode (they may have known it through viral youtube videos made by people like them), because they are probably glued to their cable TV channels showing their favorite American soaps. They may have scored some goodwill points to ease their conscience, because they thought they did their share in ending the moral corruption of mass media.

In the end, unless they get out of their comfort zones to do something more for the suffering classes - more than blogging about a culture they probably do not understand - they would fail to prevent an even more pervasive corruption that is eating our collective moral soul.-30-

People Power and Prosperity

2011-02-24T16:59:00.000+08:00

, I recently gave a presentation at the Forum on People Power and Poverty Reduction (Celebrating the Silver Anniversary of EDSA 1) organized last February 23, 2011 at the Institute of Social Order (ISO), Ateneo de Manila University. This was organized by several NGOs in coordination with the Cabinet Cluster on Poverty Reduction (which is composed of secretaries of DSWD, NAPC, among departments). I gave a presentation on economic alternatives (after the one by Freedom from Debt Coalition President Ric Reyes on a critique of the "EDSA Economy" - check it out here).

My intro was: maybe, all government interventions should go beyond the meager dream of poverty reduction and the proverbial "providing food for the table". Our generation (EDSA Babies - Generation Y) ought to have dreams more ambitious than that. I then proposed that the theme of an economic alternative should be, instead of poverty reduction, prosperity - the creation of spiraling wealth that will increase incomes, employment and productivity. We should go beyond palliative economics and instead address the roots of poverty. It is with this concept that I delivered my presentation:

Towards a Modern and Prosperous Philippines on Prezi

(If it doesn't appear in your browser, try clicking the Read More link below)

The presentation was also to promote FDC's HANEP 2020 - an alternative national economic development program that focuses on creating an equitable and just Philippine society by promoting asset reform, ecologically-sound industrialization, and technological leapfrogging. The document is in its very early stages, and is currently being refined through FDC's internal processes and consultation with sectors. You can view the draft at the end of this blog entry (a Scribd document).

The presentation I made, however, only focused on five out of ten aspects of the HANEP 2020 program. The five components constitute already a coherent development strategy that is in-line with our constitution and consistent with some elements of the "Filipino First" policy of former President Carlos P. Garcia:

1. The government must pursue an Industrialization Strategy that synergistically links an integrated domestic industry that scales the entire value chain with a strengthened domestic market for demand and sustainable local economies for supply. The industrial policy must facilitate technological leapfrogging, facilitate industrial evolution (from Original Equipment Manufacturing, to Original Design Manufacturing, to Original Brand Manufacturing) , and eventually, create uncontested market spaces. All developed economies of the United States (US), United Kingdom (UK), Japan, South Korea and the rest of the Asian Tigers used such strategy. An industrial policy is necessary if the government is to aim for a full employment policy.

2. The government must still complete the long overdue Land Reform program. Tenure instruments, which should go beyond farms and include coastal areas owned by fisher-folks and uplands managed indigenous communities, should serve the dual purpose of equity/social welfare, and agricultural-industrial development. Land reform that encourages land stewardship through institutional support must be fully implemented. Public ownership and management modes of agricultural enterprises through cooperatives must be strengthened. The Taiwan, Vietnam, and China experience should also be emulated and improved for this purpose.

3. The government must replace the Cheap Labor Policy with a High Wage Labor Policy to induce demand and increase marginal labor productivity. Ensuring that workers are paid well, free to spend on non-basic commodities, and save for their future will thus facilitate the creation of a strong domestic market and large savings base which domestic banks can capitalize. Public goods for human development should thus be provided. The United States (US), after the Great Depression, sought to increase workers wages in order to establish a Fordist regime.

4. The state must recognize the intrinsic capacity of each member of society to work, through the provision of a social wage even for the unemployed. Aside from incentivizing the government to create jobs in order to reduce cost, this has an added benefit of ensuring that women in households, which have no formal market work, will have purchasing power – the absence of which perpetuates imbalanced relations in the household level. A Guaranteed Minimum Income (GMI) system – a system that goes beyond the current Conditional Cash Transfer (CCT), must be implemented, filling up the difference between ones' actual wage and living wage via mechanisms.

5. The government must finally free public finance from constraints and fiscal hemorrhage by Strategically resolving the Debt and debt service problem, and by accelerating the shift to a treasury policy that is biased on domestic savings rather than the global credit market. We must accelerate shift to peso borrowings, national treasury policy that is biased on domestic financing and savings. It is time to resolve the Public Sector Debt Problem and the consequent resource-gap by conducting a comprehensive audit of foreign debts and subsequent repudiation of illegitimate ones. Argentina’s experience must be explored by the Philippine government.

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Check out the rest of the HANEP 2020 document below:
HANEP for 11th FDC Congress (draft)

EXTRA: You might also be interested into looking deeper on the Blue Ocean strategy, the aim of which is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant.

Blue Ocean Strategy Summary

View more presentations from jessestarmer

Progress of Civilization: from BBC's Hans Rosling

2011-01-03T17:03:00.001+08:00

Happy 2011 everyone!

As we celebrate the coming year with hope and optimism for change and progress, let us look at the video clip below to remind us, despite the apparent global convulsion due to the flawed economic paradigm of neoliberalism, how much the world has progressed across centuries. The presentation by Hans Rosling, a Swedish medical doctor, academic, statistician and public speaker, can serve as inspiration of how much innovation and technological change can push nations from the brink of poverty towards modernity.

The trajectory of growth (and how they sort of "converge") reminds me of the Solow–Swan model (also known as the exogenous growth model and the neoclassical growth model) - a model of a long-run economic growth. The model was developed independently by Robert Solow and T. Swan from the earlier Harrod-Domar model used to explain an economy's growth rate in terms of the level of saving and productivity of capital.

Conditional Convergence - Solow Swan Model

A key prediction of Solow-swan is that the income levels of poor countries will tend to catch up with or converge towards the income levels of rich countries as long as they have similar characteristics – like for instance saving rates (http://bit.ly/solowconvergence). This is because growth in more developed nations will supposedly tend to be slower than that of developing nations. But of course, we still have to isolate the effect of inflation and impacts of currency wars and dollar fluctuations on income per capita.

Image via Wikipedia

Empirical evidence still needs to be gathered though, and we yet have to confront the intrinsic limitations of the neoclassical framework. For instance, we have to take into account the leapfrogging of several countries like Japan and South Korea which doesn't conform to the model. Also, Solow-Swan suffers from major theoretical limitations, which makes it inapplicable for predicting future trends. It is for this reason that endogenous growth models have been developed, which can be a different topic for this blog another day.

Debt as Modern Slavery (Part 1 of 3)

2010-12-02T13:51:00.000+08:00

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.

The Emergence of Chimerica

We have to trace the QE strategy with what we call as the emergence in the past two decades an entity called the “Chimerica” – a marriage of China as producer and creditor and United States as consumer and borrower, fusing the two economies in a form of symbiosis. On this perspective, QE is seen as an annulment strategy, delinking US from the Chinese economy by devaluating the dollar and rendering worthless China’s dollar reserves and dollar-based instruments.

Debt as Modern Slavery: Currency Wars, Chimerican Crisis of Finance Capital, and the Debt-based Monetary System on Prezi

But we are getting ahead of ourselves. Let us first see why the marriage had been done in the first place. According to economist Neil Ferguson who invented the term, China was attracted to the Chimerican marriage because it gives potential to propel its economy forward via an export-led led growth. In fact, China was able to quadruple its economy since 2000, quintuple its export, import Western technology and create tens of millions of manufacturing jobs for the poor.

For the United States, it allowed overconsumption – Americans can consume more, save less, and still maintain low interest rates and a stable rate of investment. The US, in fact outspent its national income by a cumulative 45% from 2000 to 2008, a third of which was spent on Chinese goods. On the macroeconomic level, US debt is rising, pegged at $13.8 trillion as of this month – with each citizen having a debt of $44,571.36.

Focus on the US: The need for credit

Let us take a closer look on America. So why is the American people overspending? At the household level, a large part of this explanation is not just increasing consumption, but also decreasing income.

From a Marxist perspective, this is clear. Before the neoliberal era of the 1980s, US workers are benefitting from the concessions they gained from capital. Strong labor unions pushed President Franklin Delano Roosevelt to enact pro-labor provisions of the “New Deal” which lasted up to Nixon’s time, as expanded by Lyndon Johnson’s Great Society.

With Reaganomics, we have seen this concessions dismantled. Labor power was crushed. Minimum wages have been abolished in favor of “competitive” and “market-set” wages. Pensions have been cut, mandatory retirement age has been raised, and social security has been reduced. Flexi-labor has been started, and labor unions which refused saw their jobs being outsourced offshore or contracted in China or India. Government kept wages down by increasing unemployment – forcing workers to be satisfied with decreasing salary by surrounding them with unemployed citizens.

This is where credit comes in. To address declining wage and prevent under-consumption, the United States ushered an era of credit cards, home mortgage, and other lending instrument to American workers. This resulted in financial boom in the United States. According to Robert Pollin, a contributor for the New Left Review, “wage repression” during the Clinton era resulted into a “financial excess”. Declining labor power translated to increasing financier power.

As we know, the consequences of this have been staggering. The financial capitalists in the United States used these debts to build a whole new gambling economy. Subprime mortgage debts were converted into Special Purpose Vehicles (SPVs) and huge portfolio of Collateralized Debt Obligations (CDO). When the debts aren’t being paid already (they are unsustainable to begin with), this resulted into a into a liquidity crunch that resulted into a catastrophic economy from 2007 up to now.

The United States (US) quantitative easing, and even the earlier $700-billion bailout (through the Emergency Economic Stabilization Act of 2008), does not solve this problem. In fact, it only transferred this debt from the private sector to the government, now saddled with humongous debt and budget deficit – triggering the Republican Party-manipulated Tea Party movement. Debt and credit remains to be the prime mover of American economy.

Focus on China: Currency Regime and Export-oriented Growth

Let us take a look on China and bring our discussion back on the currency regime. Is there a basis on the United States’ claim that China’s currency is overvalued?

We have to remember that the Chinese government’s exchange rate regime is not flexible. For the longest time, it is pegged on the dollar, recently adjusting only through a series of revaluations. In a flexible exchange rate, there is an automatic adjustment according to the balance of trade. Trade deficit increases demand and price for foreign vis-à-vis domestic currency, making the price of foreign goods less attractive to the domestic market which pushes down the trade deficit.

With China’s peg to the dollar for decades, this rebalancing didn’t occur. Trade surplus didn’t decrease the price of dollar relative to RMB, keeping exports to the United States cheap and imports from the United States expensive insofar as China is concerned – and earning China more dollars. Edwin Truman of the Peterson Institute for International Economics gives us an idea how much China’s foreign reserves are: “China’s international reserves as of the end of June 2007 were $1.3 trillion, virtually all of which were in foreign exchange. At the end of 2006, China’s foreign exchange reserves were $1,066 billion, or 40 percent of China’s GDP. In 1992, reserves were $19.4 billion, 4 percent of GDP. They crossed the $100 billion line in 1996, the $200 billion line in 2001, and the $500 billion line in 2004.”

How did China come to accumulate such massive reserves? Much can be explained by China’s extremely strong export economy, which brought successive years of trade surplus and with it, foreign currency. From 1992 to 2007, China's exports grew more than tenfold, a rate far faster than the tripling in the world trade taking place in the same period. In 2004, China was already ahead of Japan as the world's third largest exporter, just behind Germany and United States. In 2007, export growth rose further to 27%, with the WTO predicting that China will finish above US at that year. It is also predicted that China will overtake as the world's biggest exporter by 2008.

We have to see China’s logic on pursuing an export-oriented strategy while maintaining its relatively inflexible exchange rate. This is, in fact, reminiscent of the mercantilist era wherein the primary purpose of public policy is for the economy to gain foreign currency, which is gold at that time. China is undergoing the same period. It does not want its sources of dollars compromised. But we should not see this as phenomenal – Japan was in the same situation until the United States forced it to appreciate the Yen in the Plaza Accord of 1985, resulting to two-decades of contraction for the Japanese economy.

That is why China is always leery of currency appreciation, despite constant calls by the capitalist community. It does not want to follow Japan’s path of decline. But with them gaining so much in dollars, China would have to find a way to “recycle” American dollars and inject it back to the American economy. They did so by buying US Treasury securities. In other words, this means lending it back to the Americans. Debt has been the instrument of China to maintain currency stability.

So when the QE strategy kicked in, the Chinese government looks at its huge reserves of dollars and US Treasury securities and sees a continuous deterioration of value in its coffers. If the US keeps up with its reliance on the printing press, a good part of China’s wealth as lender to the United States might be converted into merely, Mickey Mouse money.

The Debt-based Money System

What explains these phenomena? What narrative successfully weaves these seemingly disparate events in China and the United States?

We see a term which props up everywhere, and that is debt. I then assert that both export-oriented growth and the growing need for credit is but a result of what we can call as the “debt-based monetary system” - a consequence of what economists call as the “fractional reserve banking system”. Now, fractional reserve banking has many other problems. But for now, let us zero in on one. Under this system, money creation requires loans from the banking system, people are required to go into debt in order for any new money to be created.

This is only too obvious in the United States. The Federal Reserve (the Central Bank of the United States) is able to inject money in the system mostly by “loaning” the amount to US Treasury. The same is true in the other Central Banks, even here in the Philippines. Increase in monetary supply accompanies increase in debts and deficits, insofar as domestic currency is concerned. Money is simply debt.

We have to see the debt-based monetary system for what it is, because it is crucial to the functioning of capitalist accumulation and finance capital imperialism for a century now. And this begins with the application of interest.

Listen closely to this. We have to remember that all money in any particular economy is debt owed to its Central Bank. This means that for all these debts to be repaid, all money should go back to the Central Bank. But what happens when Central Bank imposes interest rate? It claims from the economy more money than what is actually available in the system. This now explains the eternal scrambling for money in the micro level. The grasping for money in order to pay for interest reveals that there is too few of it. It is only through loaning again to the economy that the Central Banks enable us to repay interest. But this only increases debt, perpetually.

Modern Slavery

The real effect of this has been inhumane. At the macroeconomic level, this explains the constant need for economic growth, because the economy needs to grow if only to pay for the interest. This means extracting more out of nature, or getting more out of labor. Companies, for example, have to keep wages low so it can pay interest from the banks and maintain profit – even if for accumulation only. Wage repression has to occur in order to pay interest. Ask any capitalist what capital accumulation means, and you will begin to understand that in order to expand, he must build his capital stock, not for its own sake, but so he can loan a proportional amount from the banks if he is to pay his maturing debts. Instructive in this sense is the case of Philippine tycoon family of the Lopezes, which was compelled to give up, maybe temporarily, the Manila Electric Corporation (MERALCO) due to maturing debts.

That there are international loan sharks swarming over Southern seas can also be explained by this. The mad scrambling for money back home means that countries have to sort of pass the hot potato to Southern nations. Since all money are owed to Central Banks, when they lend to third world nations through International Financial Institutions (IFI) and bilateral lending institutions, it is actually a relent, so they actually pass the interest rates effectively to the Southern nations. This pushes the South to engage more in export-oriented and/or extractive industries – by balding their forests or ravaging homelands for mining, in order to produce value to pay for the interest of the debt.

To quote Peter Joseph, this is a system of modern slavery. The debt-based monetary system is now the engine of the capitalist system with which it maintains its hegemony. This is the cause of the debt trap that IFIs put Southern nations in (from Latin America to Asia) for a good amount of time decades ago. This is the cause of the financial crisis now as US workers fail to pay their debts. This is the cause of China’s overdrive and the massive exploitation of the environment as the need to earn foreign currency increases.

Up next, the origins of the debt based monetary system.

References

Amiti, Mary, and Caroline Freund (2007, September). “China's Export Boom.” F&D (Finance and Development), a quarterly magazine of the IMF. Vol. 44. no. 3. International Monetary Fund (IMF).

BBC News. (BBC News. 2007, April 12). “China's foreign reserves balloon.” http://news.bbc.co.uk/2/hi/business/6548015.stm.

Ferguson, Niall and Moritz Schularick (2009, October). The End of Chimerica. Working Paper 10-037. Harvard Business School.

Grignon, Paul (2002). Money as Debt. A short animated documentary film.

Truman, Edwin M. (2007). The Management of China’s International Reserves: China and a SWF Scoreboard. Conference on China’s Exchange Rate Policy. Peterson Institute for International Economics.

Surprising results from a statistical analysis on PH education data

2010-11-26T17:32:00.000+08:00

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.

The Philippines is not an exemption. A huge portion of the budget allocation goes to the education sector, especially in elementary and secondary public schools. It has been stipulated by the Philippine constitution that education should remain to be the country’s top priority. With such prioritization, one can only imagine the Philippine education sector as the most dynamic and developed sector in the country.

The quality of education in the Philippines, however, seems to prove otherwise. Despite having considerable figures for literacy rate and other benchmarks, the popular notion is that the functional literacy of the people still lags behind. In fact, it is not uncommon to hear comments, surveys, news, indexes and competition results showing that the Philippines is not doing well in aspects like training its citizens in mathematics, natural sciences or even in some technical skills.

Whether such claims of lack of quality in the Philippine Education Sector are true or not then just depend on a number of factors:

First factor is number of graduates produced by the educational institutions, primarily the tertiary level institutions that produce the workforce. If the input is considerably higher than the output, i.e. the number of graduates is higher than the enrollees; it just clearly shows that the drop-out rate is high.

Result 1: Using Spearman Rank Correlation Coefficient Test, which is a non-parametric test for association, we concluded that that there is no significant correlation between the year and the ratio of graduates and enrollees from 1994-1999. Thus, there is no significant decrease in the ratio even if our chart says so. This implies that during the five-year interval, there has been no significant change in proportion of the input of students to the tertiary education and the output of the tertiary education to the workforce.

Second factor, is how the government distributes the resources allocated for education. The second factor is directly linked to the first one by saying that the deficiency of the tertiary education may have been caused by allocating more the scarce educational resources to the elementary and secondary education. The question here is where the government should allocate more now given the present socio-economic demands.

Result 2: Using Mann-Whitney non-parametric statistical test, we concluded that government allocation of funding is just equal for both Secondary and Tertiary schools, given the demand for both (given a dataset from 1965-1991). We can then say that the government, as composed on entities with political (electoral) goal is merely satisfying the interests of their constituents. This may imply, however, that the government has no clear plan on the whole educational system, given the lack of focus for either the Secondary and Tertiary school systems.

The third and most ambiguous factor is the relevance of education itself in the lives of the Filipino people. Given the quality and accessibility of education, and the availability of work afterwards, is it still necessary to send children to school? Here, what will be investigated is whether current government actions is mitigating the gap between the new jobs created and workers produced or not.

Result 3: Using Wilcoxon Signed-ranks Test (one-sample), we have concluded that from 1991-1995, the laborer-job ratio is still, or close to, the ideal 1.0. Thus, since people can still be accommodated in the labor-force, education will still be of use for the Filipino people. This is more important in the present, since we are moving from industrial-machinery-based work towards a knowledge-based one. Education will then facilitate the production of workers sophisticated and learned enough to thrive in this kind of environment.

Conclusion

We have successfully proven three things. 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.

What do these results imply? This means that industries are already close to saturated (with almost 1:1 ratio to demand and supply of jobs) and that the relative output of tertiary education is low and remains to be low. This presents us with a dilemma. If the tertiary institutions will have a better output rate (there will be an improvement in the ratio), the industries may not be able to absorb the new entrants.

A good solution to this is to increase the number of industries concurrently with an increase in funding in the tertiary sector. This may of course, reduce the allocation for the secondary education institutions, given the equal spending ration on secondary and tertiary. We do not want this, but if we are to focus more on the immediate problems of the economy, then the government should focus more on the available, ready-to-be-tapped, labor potential - and this means boosting tertiary education budget.

Full Paper

The full paper is available on Scribd:
Chalk Dust: A Discourse on the Status of the Philippine Education System

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

2010-11-22T14:14:00.000+08:00

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?

The Supreme Court and Plagiarism

Let us have a briefer. The Supreme Court en banc recently ruled ("Vinuya vs Romulo"), on April 28, 2010, to dismiss the petition of more than 70 comfort women belonging to the “Malaya Lolas Organization” to compel the Philippine government to secure from Japan an “apology and other forms of reparations” for the World War II crimes of the soldiers of the Japanese Imperial army against them. Ironically, the decision was claimed to have been lifted straight (allegedly without citation) from at least three sources - including Dr. Mark Ellis', “Breaking the Silence: On Rape as an International Crime” published in the Case Western Reserve Journal of International Law in 2006. Ellis, in an email sent to the justices on July 23 signed as “executive director” of the International Bar Association based in London - the largest lawyers’ organization in the world - expressed his concern that the SC "misread" the arguments he raised in the article because it was written "precisely to argue for the appropriate legal remedy for victims of war crimes".

vinuya vs romulo

(The accusation is not just about plagiarism, but deliberate misinterpretation. I have a thing or two on the Philippine's culture of misinterpretation and filtered absorption of reality, but that would be a good blog topic post altogether, so let's defer discussion on that for now.)

Compelled to answer on the plagiarism accusation, the Supreme Court surprisingly decided to protect its own and then turned the table against the UP Lawyers who exposed the plagiarism incident, ordering the 37 faculty members to explain why they should not be sanctioned for airing a statement against a Justice who served as the decision's ponente. President Aquino later sided with the faculty members - pithing him in another legal wrangle with the magistrates.

The picture was taken from GMAnews.tv (see here).

The issue that was raised is about intellectual integrity. If the Supreme Court can actually absolve itself of plagiarism as long there is no malicious intent (in fact blaming Microsoft Word for plagiarism), then the same must apply to all instances of plagiarism - in effect legalizing the practice.

But is the Supreme Court really trailblazing into a brave new culture? Or are they merely a reflection of a sociological characteristic of the Filipino psyche? Or are these a consequence of a period of social development

Filipinos and Plagiarism: Analysis

We must begin with the thought that “compelled attribution of an idea to an individual” is more than just a norm. In developed societies, it is usually enforced by law or by convention. There are stiff penalties against it, apart from the informal punishment given by the intellectual community.

But we have to understand that plagiarism has not been around since time immemorial. Just as any normative and cultural construct, plagiarism only emerged during a specific phase in institutional developmental. In fact, plagiarism as a concept only evolved during the 18th Century. Prior to that, scholars and apprentices are encouraged to copy the master as adeptly as they can. Not much different from a toddler taught to copy the manners of his parents.

So why is plagiarism still prevalent in the Philippines? Here, I hypothesize. I believe that ruthless copying from foreign text is prevalent because we believe we can get away with it. We still feel relatively isolated from the global “ideas” community, whether in academic or commercial setting – whether we are talking about a scientific treatise, an advertising concept, or a legal text. Thus, because of our perceived isolation, we believe that getting caught copying does not have that much cost or price. We believe, deep in our hearts, that we will naturally be ignored anyway, being the small fish that we are.

But what is the root of that? I feel that this is born of a perception that at least in this period, we still cannot compete with foreigners in the production of ideas. We need a logo? Let us look for a tourism logo from other countries using Google. We need technology? Let’s check out what the Japanese are doing now. We need to assert something but we are unsure? I’m sure some foreigner already said this. Let’s quote him. On this note, even our own Supreme Court has the instinct to systematically look into the US Supreme Court to justify its decisions. [For that matter, why not rely more on Latin American courts for precedence?]

Is copying necessarily bad?

Is this feeling necessarily bad? I don’t think so. In fact, it is a natural phase of institutional development. While morally hard to defend in itself, the emergence and persistence of plagiarism is actually a signal that something good is happening. This is merely a signal that we are in a phase where it feels natural to “copy” ideas as we learn and assimilate foreign knowledge. DOT or its contracted party may have felt that they have much to learn from Poland’s tourism branding strategy, and decided to adopt the idea and “indigenize” it – and later, to improve on it.

In fact, the “copy-and-improve” approach is seen as very Filipino – the culture of innovation and improvisation is very much in the Filipino spirit of the current era, being associated mostly with the entrepreneurial zeal and humility. Filipinos are really not that sensitive of copy-cats.

A particularly useful story on ruthless copying would be that of Samsung of South Korea and Sanyo of Japan. Samsung started as merely a supplier and assembler of Sanyo. But Samsung had been ruthless in reverse engineering, and had systematically, unilaterally copied whatever it is that they actually assembled. The result is, a Samsung that has transcended from being an Original Equipment Manufacturing (OEM) firm to a globally-competitive (even more competitive than Sanyo) Original Brand Manufacturing (OBM) corporation. Had there been a phrase “Samsung, learning from Sanyo” in the company’s motto, not only would that have been ridiculous, that would have been disastrous.

But even Japan itself, in its early industrialization phase, had been unscrupulous in copying American technology and producing better versions of American products. In fact, the practice has widely been criticized as merely focusing on “operational” rather than “competitive” advantage – that in the long run it is anti-innovation. [Whether this is true or not is yet to play out, but there are many things have to be considered, such as the language barrier which may have prevented to widespread adoption of Japanese “symbolic” technology].

Photo taken from here.

If we want a more recent example, we have only the most dynamic economy to look at: China. Known before as a center of global piracy and imitation of branded products (churned out of its sweatshops and factories), China is now beginning to look at its humongous domestic market as a testing site for its newly developed products and innovations after gaining strides in increasing productivity and citizens’ take-home income. How did it increase its productivity? It did so by brain gain. When its intellectuals left China for abroad, they gained important knowledge from the West. During the Deng Xiao Ping’s rule, many of these intellectuals returned armed with foreign technology. Imagine what China will be if its products will contain “Powered by Manufacturing 2.0, obtained from Germany”.

There. Ruthless copying, without attribution if I may add, has been responsible what we come to call for these countries as “leapfrogging”. Relaxing rules for attributing ideas obtained from the outside has had the effect of “technology transfer”. All of these countries underwent a period of pervasive national impulse to copy what they can what they view as good from abroad. Again, not much different from a toddler who eagerly copies whatever actuations his parents might have. It is a natural necessity for early development.

Copying: Colonial Mentality or the End of it?

That sounds familiar right? It does because it is called by some as “colonial mentality”. I have a different opinion on this. I think, it is “colonial mentality” is when we refuse to copy because of an intrinsic feeling that we can’t do it. Colonial mentality begins when we look at ourselves, call ourselves not intelligent enough, and just depend on foreign entities to supply as with goods and services produced by ideas collectively developed by the global society.

Viewed in this manner Intellectual Property Rights (IPR) then becomes the highest form of colonialism. Akin to “kicking away the ladder”, IPR is used to limit the use of an idea by its originators, or compel the user to remunerate the originator – often at a pricey amount. Because really, is there any other term by which you can call the attempt to stop Indian pharmaceutical companies from manufacturing drugs originally produced by TNCs other than colonialism?

Back to Plagiarism: Is it’s opposite immoral?

Now that we established that copying is not necessarily evil, we then go back to the subject of plagiarism. Actually, IPR and Plagiarism is born of the same idea – that ideas can be attributed to persons or organizations. Attribution then functions, on the existential level, as a reward and incentive for further production of ideas. Only, IPR takes it further, asserting that ideas can actually be owned – purportedly because it gives an added incentive, that of monetary remuneration. This assertion has already been rebutted countless number of times, and it has been proven in many studies that ideas are generally generated for its own sake.

But “compelled attribution of an idea to an individual” as a normative concept may be resting on a shaky moral ground. This, for we have to understand that even if ideas are created by individuals, no one person is responsible for the creation of an idea – it is society as a whole which enables individuals to generate ideas. All ideas are generated by an individual from information – mostly ideas – the individual got from other individuals. Ideas are generated by society as a whole.

Moreover, it is society as a whole which lays down the condition that makes it possible for a person to generate ideas. As I write this blog, for example, I am dependent on the baker to bake me pandesal so I can think. I am dependent on coffee farmers to grind me coffee beans which coffee companies will later sell me as instant coffee, without which I may not be able to think straight. To take it further, I wouldn’t have been taught how to write if the jeepney driver refused to drive my English teacher to work.

Plagiarism seen on a new light

Given this, plagiarism can then be seen in a whole new light. Implicitly, we already recognize that all ideas are indebted to other ideas, but we do not need to attribute those ideas to persons or organizations as a moral obligation to persons and organizations. Viewed on this manner, “copying with attribution” takes on a more functional role, that of only tracing the evolution of ideas (akin to content analysis). A person then attributes “absurdism”, for example to Albert Camus, not for Albert Camus, but because it is convenient to do so since Camus operates in a set of ideas related to “absurdism”. This is even easier for the natural sciences.

So what should be our take on “Pilipinas Kay Ganda” plagiarizing “Polska”? Well, the proper answer should be: “so what?” If the answer to the “so what” question is that foreign markets are actually sensitive to plagiarism, then we should go ahead and change it. Otherwise, why should we? Copying and improving is a natural instinct of developing nations, and isn’t there an oft-stated cliché that copying is the best form of flattery? Poland has actually all the reasons to be flattered.

Plagiarism is a sin only on a functional sense, but again, that it is a moral transgression must be reevaluated. Intellectual integrity does not begin with attribution; it begins with acceptance that after all, no one person is responsible for any idea. In the end, the whole notion of intellectual attribution can actually be replaced by the invention of the hyperlink.-30-

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

2010-11-16T12:07:00.000+08:00

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).

It even managed to increase the fares of bus companies which recently had a fare cut due to increasing competition (due to the quantity of buses available). Now, the fares reverted back to higher levels, reducing accessibility to those who are financially challenged. Cheap mobility is a subsequent victim of MMDA's anti-poor policy. Because, really, what will commuters without private vehicles do, ask their vehicle-owner neighbor to car pool? Their only access to their work is public transport, and MMDA is making it more inconvenient (because buses will be more jam-packed) and expensive to use public transport.

THE PROPOSAL: We should be encouraging citizens to use public means of transportation rather than their own cars - it lessens demand (and thus price) of oil, it declogs traffic (because we need less vehicles to transport the same amount of people), and its more environment-friendly (since there are less vehicles around). It even generates income for transport workers because you increase demand for these buses.

Regulation in car procurement should be established, and should be heavily taxed. Singapore did so through their Certificate of Entitlement. The government must then invest heavily in modernizing public transport so they can be convenient for use. A proposal to set up a Long-term Strategic Transportation Strategy is elaborated in this article.

Improvements should be done, of course, like regulating the franchise granted, facilitating a schedule-based transportation system, improving services standards and others. There is also much to change on the protection of transport workers, amid the rapaciousness of bus capitalists forcing drivers to overcompensate in reducing travel time, resulting to increasing frequency in road accidents.

Call for a Fixed Currency Peg for the Philippines

2010-11-10T08:06:00.000+08:00

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:

Published on ABS-CBN News | Latest Philippine Headlines, Breaking News, Video, Analysis, Features (http://www.abs-cbnnews.com)

Philippines hoping G20 sets currency framework [1]

Reuters | 11/09/2010 5:26 PM

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MANILA, Phiippines - There is a need for the G20 meeting this week to work on a coordinated plan to deal with the flow of funds to emerging markets that has pushed up their currencies, the Philippine Finance Secretary said on Monday.

The Philippine peso hit a 2-½ year high against the dollar last week. Its gains of about 8 percent this year have raised concerns among exporters and millions of foreign workers who are getting less pesos for each dollar they send home.

"The worst thing that could happen is if we start talking about competitive revaluation, is that this whole thing can lead into protectionist measures," Cesar Purisima told reporters.

"I will not recommend competitive revaluation. We should allow the market to determine the exchange rate. Our role is to smoothen these adjustments."

Purisima said currency moves were largely driven by weakness in the U.S. dollar, which required coordinated action to find a resolution as unilateral action was undesirable.

"So I'm hoping the G20 meeting in Seoul later this week, they will agree to a framework that will lead to more coordinated action among the larger countries in particular," said Purisima, just returned from a meeting of Finance ministers of the Asia-Pacific Economic Cooperation forum in Japan.

"So that this process of the shifting of money from the slower growing economies to faster growing economies is managed in a more reasonable manner," he said, adding there were adjustment mechanisms other than currencies.

Investors around the world have been shifting money into fast-growing emerging economies as they search for returns.

The Philippines' plans to lure private sector money into public-private partnership schemes to develop the country's decrepit infrastructure could slow the peso's rise, with new roads and airports helping stimulate more business activity and resulting in imports of capital equipment.

"If this gains traction immediately, that will help reduce the pressure on the foreign currency," Purisima said.
The central bank has made it easier for funds to leave the country and has built up foreign exchange reserves to counter pressure on the peso to rise, and authorities are looking at prepaying foreign debt to create demand for dollars.

"We are looking at all options to smoothen the flow of foreign currency to the country," Purisima said.

as of 11/09/2010 5:26 PM

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Source URL: http://www.abs-cbnnews.com/business/11/09/10/philippines-hoping-g20-sets-currency-framework

Why Indonesia outperforms RP - Prof. Ed Tadem

2010-11-07T16:05:00.000+08:00

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.

Decentralization

Professor Shiraishi sees these developments as positive for two reasons: (1) local governments have become more important, and (2) more local people now have a greater stake in the running of local governments. Local parties are also able to extend their influence to national politics by joining major coalitions.

Decentralization has led to the containment of ethnic and religious conflict at local levels. Thus the “politics of identity” has now been relegated to the backstage leading to the rise of the “politics of economic growth.”

Shiraishi says Indonesians now look at politics as a way of achieving economic growth rather than as a vehicle for asserting one’s ethnic or religious identity. As for the Islamist groups, Shiraishi says they are now reduced to dwelling on issues such as pornography as part of their national agenda.

Nationalism

The third factor has to do with what Shiraishi calls Indonesia’s “robust sense of nationalism” which has been nurtured over the past decades.

The Indonesian military, for one, is not ethnic-based and culls its leaders from among the country’s various ethnic and religious groups.

The rakjat (people) factor has always been present throughout history and a heterogenous elite class is far more aware of the masses than its counterparts in other Southeast Asian societies. Even the much-maligned Suharto regime had to combine political repression with economic delivery.

At present, democracy and decentralization may have led to a fragmented local political scene but it has not jeopardized the sense of national identity or “Indonesianess.”

Alternative model

For his part, Professor Mizuno sees the Indonesian economic resiliency as offering an “alternative model of development” that contrasts with the East Asian experience of export-based authoritarianism.

Instead, investments focused on expanding a domestic market to take advantage of high levels of consumption among the public. Rather than relying mainly on financial instruments tied with the global system, the country leaned on what Mizuno calls “vernacular financial networks.”

Ironically, these self-finance initiatives were the outcome of a “weak bank lending and a weak bond market” which have characterized Indonesia’s economy since 2000.

Unemployment was held in check as “own account and family workers increased.” Furthermore, family businesses and an informal sector “absorbed the employment shock generated by the global financial crisis.”

Mizuno reports that recent financial data show a balanced growth for Indonesia particularly with its financial and current accounts. He concludes that Indonesia’s strength lies in its “balanced and open economy that relies heavily on a large domestic market, strong private consumption, vital family businesses and vernacular financial networks.”

Unquestioned legitimacy

Other than the above observations, it is also important to note that Indonesia’s national leadership has enjoyed a level of legitimacy not found anywhere else in Southeast Asia.

Indeed, until the May election of Philippine President Benigno Aquino III, Susilo Bambang Yudhoyono stood alone in the region as a head of state whose legitimacy was unquestioned. Not bad for a country that, upon the advent of democracy in the post-Suharto period, looked to the Philippines on how to conduct free and fair elections.

Back to barracks

It may also be added that the Indonesian military, once the bulwark and chief enforcer of Suharto’s orden baru, has, for all intents and purposes, returned to the barracks. Its dwifungsi (dual function) role has been severely curtailed, its once all-pervasive business interests dissipated and its guaranteed block of Parliament seats abolished by law.

In his keynote speech at the Kyoto University Forum, Shiraishi made pointed references to the Philippine experience and contrasted this with the Indonesian case. What makes for the disparity between the two Southeast Asian neighbors?

Philippine case

The Philippines had basked briefly in the glory of its 1986 Edsa uprising that toppled the Marcos dictatorship and inspired similar “people power” revolutions in other parts of the world.

In the long run, however, the country failed to effectively cash in on its hard-won democratic opening. A government decentralization program succeeded only in exacerbating the worst features of patronage politics as local government units became even more dependent on the central government for their internal revenue allotments.

All these were especially evident during the nine years of Gloria Macapagal-Arroyo’s turbulent tenure as president. With her 2004 election marred by serious charges of a manipulated count, Arroyo had to fend off continuous challenges from both the political opposition and reformist military officers.

Scandals

Allegations of high-profile corruption scandals involving Arroyo, her family and cronies further eroded her popularity which plunged to the lowest ever for a sitting Philippine president.

Furthermore, human rights violations reached a scale that rivaled the Marcos martial law years. The last months of Arroyo’s term was appropriately punctuated by the horrific Maguindanao massacre allegedly perpetrated by her close and loyal political allies.

Not surprisingly, her party’s presidential candidate suffered a humiliating electoral debacle in the May elections.

The Philippine economy continued to hew closely to the now discredited neo-liberal agenda of trade and investment liberalization and government deregulation. While growth rates were registered, it was what economists called a “jobless growth.”

Malls

Traditional rent-seeking business concerns and landed elites have retained their pre-eminence while skewing manufacturing and agricultural investments in favor of “quickie” ventures such as property development and shopping malls. The result was a collapse of industries and the stagnation of agriculture, particularly food production.

The 2009 statistical data graphically tell the story of how Indonesia now outperforms the Philippines (See table). Indonesia’s per capita GDP, at $2,362, was 35 percent higher than the Philippines’ per capita GDP of $1,750. Its GDP growth rate of 4.5 percent was four times higher than the Philippines’ measly 1.1 percent performance. Inflation was kept at a low 2.8 percent while the Philippines struggled with a 4.4-percent rate.

From 2005 to 2008, Indonesia had a higher unemployment rate (8.4 percent against 7.4 percent) but by mid-2010, Indonesia had improved with a 7.14 percent rate while the Philippines fell behind with 8.0 percent.

As a percentage of GDP, Indonesia’s budget deficit of 2.3 percent was more manageable than the Philippines’ 3.9 percent. The strength of Indonesia’s economy was shown by a gross domestic investment inflow that was 31 percent of GDP while the Philippines turned in an anemic 14 percent.

Foreign investments

Despite Indonesia’s inward-looking policy, foreign investments poured $14 billion into its economy for 2008-2009 while the Philippines had to make do with only $3.5 billion.

While the UNDP human development index for 2009 shows the Philippines with a higher ranking of 105th to Indonesia’s 111th, the more important indicators show the latter to be ahead.

Poverty rates in Indonesia are lower—53.8 percent of Indonesians living under $2 a day compared with the Philippines’ ratio of 57.4 percent. Indonesia also has a lower birth rate of 18.7 per 1,000 persons compared with the Philippines’ 25.8 percent.

In terms of income and wealth distribution, the Philippines registers a higher measure of inequality with a Gini index of 44.5 while Indonesia has only a 34.3 index.

Human development

The human development indicators where the Philippines performs better are in life expectancy (71.7 years against 70.7 years), infant mortality (23.1 deaths per 1,000 births as against 26.6), and the education index (0.89 vs. 0.83). These advantages, however, are slight and unless the Philippines stages a remarkable comeback within the next few years, they could disappear quickly.

Given the much improved political and economic situation, the number of tourist arrivals in Indonesia last year, placed at 6.4 million, was more than three times higher than the Philippines’ 2.7 million.

Less corrupt, happier

The biggest surprise was a Transparency International assessment of Indonesia as being less corrupt than the Philippines. For whatever it is worth, the Happy Planet index also ranks the Indonesian people as happier than Filipinos.

In only 12 years, and despite bumps along the way, Indonesia has managed well the transition from centralized authoritarianism to a vibrant and stable democracy, a feat none of its Southeast Asian neighbors have been able to achieve.

Future

Image by thaigov via Flickr

Its economy still lags behind the top regional performers—Singapore, Malaysia and Thailand—but it appears, for the moment, to have its fundamentals figured out. How long will this rosy picture last? Shiraishi expects Indonesia’s current upsurge to continue for the next 10 years.

As for the Philippines, 24 years after the historic Edsa revolt, its political life remains spineless and its economy brittle. It remains to be seen whether Mr. Aquino, riding on the wave of a landslide electoral victory, can rectify the overindulgence of the Arroyo years, invigorate the economy, restore confidence in government, and steer the country and its people forward.

(Eduardo Climaco Tadem Ph.D. is a professor of Asian Studies at the University of the Philippines Diliman. He is currently a visiting researcher at the Kyoto University Center for Southeast Asian Studies.)

Comparative Indicators



Indicators	Indonesia	Philippines

1. Economic
GDP at current prices (2009, in US$B)	546.4	182.7
Per capita GDP (2009, in US$)	2,362	1,750
Growth rate of GDP (2009)	4.5	1.1
Inflation rate (2009)	2.8	4.4
Unemployment rate (2005-2008)	8.4	7.4
Unemployment (2010, World Factbook)	7.14	8
Budget deficit as % of GDP	2.3	3.9
Gross domestic investment as % of GDP	31	14
Foreign investments inflow (2008-2009, US$B)	14.2	3.5

2. Human development
Poverty index (% living under $2/day)	53.8	57.4
Birth rate (2005-2010, per 1,000 persons, UN)	18.7	25.8
Income inequality (2009, UN; Gini, 0 = perfect equality)	34.3	44.5
Life expectancy (2005-2010, UN)	70.7	71.7
Infant mortality (2005-2010, UN) deaths/1,000 births	26.6	23.1
Education index (1 = perfect education attainment)	0.83	0.88
Literacy rate	92	93.4

3. Other
Corruption index (2010, higher rank, less corruption)	110th	134th
Tourist arrivals (2009, in million arrivals)	6.45	2.71
Happy Planet index (Higher rank, more happy)	14th	16th

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