Vast Difference

Written on Saturday, July 12th, 2008 at 3:32 pm | by Marck Ronald Rimorin

A few days ago, I made a suggestion that maybe – just maybe – the Philippines should stop honoring its outstanding debts to the World Bank and to the International Monetary Fund, given the premise that there is a global financial, food, and energy crisis. The alternative would be to re-appropriate the funds allocated for debt servicing as a subsidy to mitigate rising costs of fuel, food, and basic commodities. Government intervention is a page off Keynesian economics: something I think the President and her economic advisers should be very, very familiar with. The market, at this point, will not cure itself and restore equilibrium in its system, without drastic and serious consequences. It is a more proper and more relevant subsidy that P500 notes passed around at LandBank. A P500 subsidy per poor family is simply not enough to address, much less mitigate, an economic crisis.

Arbet Bernardo of AWBHoldings.com asks me, “Should we do an Argentina?” I would rather see things in terms of context. While it would be a great – no, terrific – idea if we give global financial lending institutions the middle finger and say we’re not paying for debts we never benefited from as a nation, there is still prudence in honoring our debts, just not now when we cannot afford to do so. The premise is rather simple: if you can’t afford to pay an outstanding debt, you should only pay it when you are financially capable of doing so. We can’t undo that crucial financial mistake made by former President Cory Aquino, but what we can do is to respectfully renege on the promise of “honor all debts” until such time that we can pay debt without feeling anything drastic or dramatic.

Much of current economic policies revolve around a “trickle-down” effect: changes made above will eventually be felt by those below. Obviously, this approach doesn’t – and cannot – work; it violates the law of conservation of resources, like the people below are waiting for the scraps to fall from table to the ground (read your Galbraith). You can’t tell poor people to live much more frugal lives if they already live at a point of desperation. The bulk of economic and social services should not be used to reconfigure Government or to reshuffle the Cabinet and put someone like Romulo Neri in charge of something as important as social security (woe upon me and my SSS payments), but to use existing Government structures to route these resources directly to those who need it most.

While a P500 subsidy is a welcome reprieve from crisis, it’s too little, too late, and is a misdirected waste of precious financial resources. You can’t expect monthly Government aguinaldo to last long if prices continue to increase, if jobs are continually laid-off, if wages do not increase (even decrease in some cases), and if This Government continues dubious none-of-your-business deals like NBN-ZTE, Northrail, coconut levies, and whatever’s done with fertilizer funds these days. Rather than intervene positively in the people’s economic life – what it should be doing – The Government intervenes negatively. What can you do with five hundred pesos these days?

My own recommendation would be to reallocate our financial resources, not pay debt for now, and redirect debt servicing to subsidize the people’s cost of living. From there, we could think of other solutions that go beyond Presidential recommendations for a family to eat camote and have a viand of munggo at dilis while everyone asks what’s really up with “borjer” served somewhere in Greenhills.

“Do an Argentina?” Let’s do something Filipino for a change.

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About The Author: Marck Ronald Rimorin is a twenty-something blogger, "critic," and writer from Baguio City, and currently works in Metro Manila as a writer. His personal blog is at The Marocharim Experiment

Filed Under Business and Economy, National News, Politics

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14 Responses to “Vast Difference”

  1. sparks on July 12th, 2008 3:48 pm

    An excerpt of the paper I wrote on the 2001 Argentine financial crisis.

    The year 2001 was, in many ways, a turning point in Argentina’s history. It was the year when one of Latin America’s few success stories joined the ranks of tragedies and failed expectations. From the rapid growth of the early 90s, today Argentina is burdened with a total external debt of $169 billion, 300 percent more than in the height of the debt crisis of the 80s.

    $106 billion of this debt is owed to the private sector from all around the globe (World Bank 2006). Today Argentina has the developing world’s highest debt per capita at $4,420 per Argentine (Escude 2002). From having been a ‘darling star pupil’ of the IMF for much of the decade before (Santiso 2003: 177), Argentina is a recent case of another ‘emerging market’ getting both economics and politics wrong.

    There are many versions in the telling of how this has come to pass. In unravelling the Argentine crisis, much is revealed about the blurring of borders separating the national from international, the political from the economic. The idea of state accountability in the domestic context is also challenged by today’s globalising world, perhaps more so in the realm of international credit creation, where debtors are sovereign nations and creditors are private multinational entities and individuals.

    The Argentine debt default in 2001 is as much a story of Argentina as it is the story of financial globalisation. This paper argues that the financial crisis was a symptom of the Argentine state’s continuing inability to carry out its function as an aggregator of interests more or less equitable to all within its domestic constituency. In the past half century, it has repeatedly financed government deficits with external credit. Due to its indebtedness, this dilemma is compounded by constraints and pressures by external actors such as international financial institutions and private creditors. The structure of the international monetary system since the 1970s allowed, even encouraged, debt-financed development which would continue on for four more decades despite limited results and repeated failures in many other debtor countries. The IMF’s early mandate of lender of last resort has changed significantly. It was politicised by the debt crisis of the 80s as it mediated between sovereign debtors and creditor banks. Because of the implicitly political nature of the IMF today, it is open to policy capture by strong creditor and certain national interests. The politicking within the IMF is difficult to monitor due to the nature of the institution itself. Its lack of transparency and accountability is highly disproportionate to the magnitude and reach of its policy-making.

    Read the rest here.

  2. mab on July 12th, 2008 4:15 pm

    I think its high time for the country to reexamine its overal economic development policies with a view of repudiating its foreign debts particularly those extended by World Bank and International Monetary Fund. As we all know these debts were intertwined with the policies or adjustments prescribed by WB and IMF. Those policies which includes the labor-intensive-export-oriented program has certainly failed even resulting to massive loss of jobs (trasfer to China of garment factories and other MNCs). The annual debt service of the country is more than P700B in 2006. Let the WB and IMF suffer for their erroneous prescription rather than the Filipino people.

  3. cvj on July 12th, 2008 5:33 pm

    In the comments section of Manolo’s blog post on the Annual Government Budget, i was discussing with another commenter the SMC-Kuok deal with the government which grants the former 1 million hectares of government land for food production.

    I proposed an alternative where, instead of allocating this one million hectares to a Corporation, the government grants use of this 1 million hectares to 26.7 million filipino rural (and urban) poor instead, at 1500 square meters per family of four, for these families to plant and harvest the 20 kilos of palay or palay equivalent needed per person per month.

    Assistance from the government in the form of seeds, irrigation and fertilizer amounting to 45,000 pesos per hectare per planting season or 90 billion pesos per year would then be needed. (This amounts to an assistance of 3,400 pesos per person per year or less than 300 pesos per person per month.)

    While this 90 billion pesos per year figure looks big, this is less than one-eight (1/8) the amount we pay for debt service per year. I think reducing debt service payments to address the food needs of tens of millions of the poorest segment of our population is worth it.

  4. Bencard on July 13th, 2008 12:47 am

    cvj, just how can you reduce debt service payments? by incurring more debts? and how do you propose to spend 90 billion pesos annually while trying to meet your debt obligations? remember, the road to hell is paved with good intentions. think about it.

  5. Bencard on July 13th, 2008 1:18 am

    the balasubas prescription being discussed here is the kind of kakamamie idea that often leads to world lawlssness, chaos and global warfare.

    you don’t sell your soul to the devil and decide, on your own, not to pay back. unless you expect not to borrow ever again, you may try being a deadbeat and risk being ostracised, if not blown away to smithereens by an aggrieved creditor with bigger guns than yours.

    it’s easy to say, i can’t afford to pay so i’ll pay when i can, if i can. the one who let you do that is the bigger fool.

  6. cvj on July 13th, 2008 2:23 am

    Bencard, i didn’t expect you to compare the United States to the ‘Devil’, but i guess it can’t be helped as the analogy fits.

  7. Bencard on July 13th, 2008 2:37 am

    cvj, have you heard of ‘figure of speech’. u.s.is not our only creditor, you know that? you are the one making the analogy and revising my comment in the process, not me.

  8. Marck on July 13th, 2008 12:29 pm

    Bencard:

    It’s called resistance. :)

  9. obscenely oppressive, that’s VAT! on July 20th, 2008 2:45 am

    […] sa ating mga utang. kulang kung kulang. better yet, moratorium muna, until better times, as marck ronald rimorin suggests sa filipino voices given the global financial, food, and energy crisis. Arbet Bernardo of […]

  10. DJB Rizalist on July 20th, 2008 10:19 am

    I agree with bencard. Balashubasism will get us nowhere in the current environment. It can be done, but given the character of our leaders and our people (undisciplined, fun loving) I doubt we would have the stomach for the consequences.

  11. cvj on July 20th, 2008 12:22 pm

    DJB, in using the word ‘our’ (addressed to your fellow Fil-Am Bencard), are you speaking as an American or a Filipino? That’s always been a point of confusion to me when it comes to Fil-Ams (our FV Editor excepted). Or should i adopt the following rule of thumb: whenever you use ‘our’ followed by something negative, you’re referring to your Filipino-side, while if you use ‘our’ followed by something positive, you’re referring to your American side?

  12. Bencard on July 21st, 2008 5:24 am

    cvj, as for me, i’m a dual citizen and as such, i am an american by legal fiction, and a filipino by birthright. i don’t think there’s much difference when i criticize some of our (pinoy) cultural flaws from your criticizing the philippine president, the government, and the pinoy middle class and oligarchs. we both have the same rights. there’s no need for a rule of thumb. you should be smart enough to comprehend the context of my comments.

  13. cvj on July 21st, 2008 9:11 am

    Bencard, yeah we both have the same rights but you and DJB have the same habits.

  14. Bencard on July 21st, 2008 9:22 am

    cvj, for sure, not the same habit as your’s.

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