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| ON THE OTHER HAND |
| In Defense of the Much-Maligned Elite By Antonio C. Abaya November 6, 2001 In his column in the November 5 issue of the Philippine Graphic magazine, fellow columnist John Mangun took issue with my critique that the Arroyo Government�s medium-term development plan is biased against manufacturing and thus will have uncertain success in generating the jobs needed to pull millions of people from poverty and into the middle class. Mr. Mangun disagrees �that manufacturing should be the centerpiece of planning, as I believe that agricultural self-sufficiency must come first�.Although I recognize the need for (manufacturing), we part ways as to the factor that stimulates this important middle class.� He further wrote �there is only one common denominator to economies with a viable middle class: broad access to personal credit. It is on this level that the oligarchic structure of the Philippines has stifled economic growth and prosperity.� And in what could be a heaven-sent manna to the flagging communist movement in this country, he accused the much maligned Philippine elite of engaging in �financial terrorism� as a means of perpetuating the �oligarchic ruling class of the Philippines and our own perpetual economic stagnation.�. He defined �terrorism� as an �unannounced attack against non-combatants to further a political or economic agenda.� So expect a new phrase, �financial terrorists�, to be added now to the graffiti and the posters of the red-flag-waving militants as they storm the US embassy or join the picket lines of strike-bound companies, assuming they read John Mangun. Whether he intended to or not, he has now put the Philippine �elite� on the same moral level as the suicide hijackers who leveled the World Trade Center. ***** Who are this Philippine �elite� and why is John Mangun writing nasty things about them? Every society, including supposedly egalitarian ones like the former Soviet Union, is ruled by an elite. In the Philippine context, this is made up of descendants of the old, landed aristocracy who inherited vast expanses of hacienda land from their Spanish, Chinese and/or indio forebears. In many instances, their postwar offspring parlayed their land holdings into investments in banking, insurance, manufacturing, car assembly, media, credit cards, utilities, hotels, trading, entertainment, upscale real estate development and other activities which helped create the middle class as we know it today, puny as it may seem, compared to the middle classes that have grown in South Korea, Taiwan, Hong Kong, Singapore, Thailand and Malaysia. Common sense tells us that there is nothing more that this elite would like to see than the expansion of the middle class as this would mean more consumers and customers for their enterprises in banking, insurance, manufacturing, car assembly, media, credit cards, utilities, hotels, trading, entertainment, upscale subdivisions and shopping malls and other activities. To accuse this elite, therefore, of engaging in �unannounced attacks� (�financial terrorism,� according to John Mangun) against its own market base is absolute nonsense. At the very least, it goes against the grain of self-interest. What advantage can the elite possibly gain by slitting their own throats? This is like saying that the al-Qaeda network of Osama bin Laden deliberately blows up medrassahs or religious schools, traditional breeding ground for potential suicide bombers, to further its political or economic agenda, whatever that may be. ***** However, it is true that there is a dearth of personal credit in the Philippine economy. But this is not the result of a deliberate policy hatched by the scheming elite. Again, a wider availability of credit would favor the elite as this would mean more customers for their many businesses. Restricted credit means fewer customers. To understand why credit is restricted here, one must look at the savings rate, the interest rate, and the exchange rate, all of which are interrelated. The Philippines has one of the lowest savings rate as percent of GDP, in all of East Asia; only about 65% of the savings rate in, say, Malaysia. Because of the relative scarcity of money, its cost is relatively high. That means that the interest that banks charge when they lend their relatively scarce money is also high. Among the countries in East Asia, only Indonesia and the Philippines have been saddled with this burden for decades. Interest rates are dictated by the prime lending rate set by the Bangko Sentral and the International Monetary Fund, not by the much maligned elite. Theoretically, the BSP and the IMF can unilaterally lower the prime lending rate to the level of, say, Japan�s. In this theoretical regime, John Mangun�s ideal of widely available personal credit would automatically follow. But the danger here is that, with a low prime lending rate, banks would also lower both lending and savings interest rates. This would compel money in time deposits (from portfolio managers, corporate and pension savings and as well as surplus assets from the elite) to fly away to other countries where the savings rate is higher, or at least higher than the inflation rate here. This capital flight would weaken the peso as peso-holders convert their pesos into dollars, which would destabilize the exchange rate as well as fuel peso inflation, as pesos flood the market. The BSP can defy the IMF and lower the prime lending rate without risking collateral damage to the exchange rate, but this can be done only if the BSP were to tightly control the inflow and outflow of hard currencies such as the US dollar. This was in fact what Japan, South Korea and Taiwan did during their early formative years, when they were building up (rebuilding, in the case of Japan) their economies, and this is also what the People�s Republic of China has done since 1949, and what Malaysia has been doing since the Asian financial crisis of 1997. In other words, full convertibility has to be scrapped. But this is a political decision that can be taken only by the government, not by the elite. The two are not necessarily the same thing. ***** As for the debate between agriculture and manufacturing, there is really no argument that the two should go together. Agriculture should be developed to keep prices of food items low and stable; manufacturing should be developed to provide the millions of jobs needed to rescue people from poverty into the middle class. Agriculture, without manufacturing, cannot provide jobs in the numbers needed to mop up our huge surplus of unemployed and underemployed, since we have a population of 78 million. A hectare of agricultural land planted to rice or corn cannot sustain even one family; a hectare of land converted to a manufacturing zone can sustain hundreds of families. Furthermore, it should be kept in mind that as agriculture is developed, more and more agri-workers leave the farms to migrate to the cities. In the US, only three percent of the work force do the farming; in Europe, only eight percent. The same is basically true in Japan, South Korea, Taiwan, etc. Without a broad manufacturing sector to absorb the migrants, this irreversible migration to the cities will lead only to slums, urban poverty, crime and despair, as it has in fact been doing in the Philippines. John Mangun and other concerned observers should read the Medium-Term Philippine Development Plan of the Arroyo Government. It is there in black and white. To create the jobs needed to rescue people from poverty, focus will be concentrated on three sectors: agriculture, information and communications technology (ICT), and tourism. Not a word is mentioned regarding manufacturing. With ICT imploding long before September 11, and tourism devastated after, that leaves agriculture as the only viable option in the medium term for the Arroyo Government, given its self-imposed narrow focus. John Mangun should be happy; isn�t this what he wants? ***** This article appeared in the November 26, 2001 issue of the Philippine Weekly Graphic magazine. |
| OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO Reaction to �In Defense of the Much Maligned Elite� I read your article �In Defense of the Much Maligned Elite� (indexed under Agriculture versus Manufacturing) since I came from the manufacturing sector. And you know what your problem is with John Mangun? You talk in terms that cannot be understood by the common people. You talk of credit and financial terrorism. Isn�t there anybody in this planet to tell our common people folks that their lives are entirely in their hands. But for them to realize that so much leg effort has to be done to make them. (MY REPLY: And you know what your problem is with the English language? You are not clear as to who �you� refers to, John Mangun or me, in your sentence �you talk in terms that cannot be �.� And you are too abrasive to get your message across. Why should he or I write �in terms that can be understood by the common people?� They have no computers, anyway. What would be the use? If you are really annoyed that there is no one in the planet to tell our common people blah blah blah, why don�t YOU do it and see where it gets you?) We talk of poverty but we don�t dwell on its reasons, we dare not touch the fact that some of our really poor people are not helping themselves in any way. Why? You study their spending habits; you determine how much of their take-home pay goes to drinking, buying lotto or masiao tickets; how often they celebrate fiestas or how fast they can think of something to spend their meager earnings on rather than on the really important ones. Why is the government not doing much in this area? The more impoverished voters there are, the easier to win an election by vote-buying, terrorism, intimidation, job harassment, etc. Why is the church not lifting a finger to alleviate the suffering of this people? They are the children of God. Can you believe that a Cardinal in Cebu said that the poor people are the children of God? But would he say a requiem mass to one who died of hunger? You bet. Only for the rich. Of course, the poor are easier to pull the hood of faith goobledygook over. Write something that the poor can understand, not the elect. (MY REPLY: Why don�t YOU do it?) And a parting shot to John Mangun. I would support his hypothesis if he can present an example of a progressive country made so by the power of the poor masses. Joe. [email protected] November 11, 2002 MY REPLY: You sound like a frustrated columnist. May I suggest that you learn to suppress your abrasive tone first, and then master the English grammar and English idioms. Or better yet, write in Pilipino so that you can communicate directly with the poor people that you are so concerned about? OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO |