Perfect storm

Posted: June 13, 2008 in Socio-Political
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Even the mainstream economists can no longer ignore the gravity of the crisis.

The current economic crisis which saw inflation at a 9-year high, combined with widespread unemployment, has the makings of a “perfect economic storm”, according to economist Benjamin Diokno. There will be unrest he says. Prices of rice, fuel and other basic commodities are increasing every week and the government is not making any headway in protecting consumers.

No longer can the administration hide behind the rhetoric of “economic growth”, not when rice prices, fuel prices, power rates, tuition rates and other basic needs are rising. If anything, the current crisis exposes how shallow claims of growth were in the first place. Those figures, like the 7.3% GDP growth of 2007, are stacked like a house of cards, pretty to look at yet flimsy to begin with.

The current crisis is borne out of years of abuse of neoliberal policies such as liberalization, deregulation and privatization. The imposition of these policies on a basically backward, agrarian, semi-feudal and semi-colonial economy such as the Philippines proved disastrous in the long-term.

Agricultural liberalization, land-conversion and production for exports combined with semi- feudal relations in the countryside, severely undermined the country’s food self-sufficiency. Our reliance on imported rice put the country at the mercy of international price speculators amidst tightening global food supply. The rice crisis hasn’t eased as long lines to NFA warehouses continue to form.

The deregulation policy in the oil industry along with oppressive tax policies such as the VAT, have combined to raise fuel prices to unprecedented levels. It is believed that pump prices could reach up to P60/liter, even more. The current trend in global oil prices is also believed to be the product of speculation. Some say that as much as 60% of prices are speculative. This should be enough reason for the government to stop the policy of deregulation of prices. This should also be enough basis for the government to scrap the VAT on oil, as the tax take increases as prices go up.

The deregulated and privatized power industry on the other hand has given rise to high power rates and billions of pesos worth of unjust charges. Take-or-pay provisions in contracts with Independent Power Producers have allowed guaranteed profits for Filipino and, multinational firms. Unjust charges and high taxes have also combined to raise rates. Under the Electric Power Industry Reform Act, an IMF-WB-ADB imposition, power rates are expected to remain high in the coming years. The policies embodied in this law have been used by Napocor, Meralco, and other distributors and IPP’s to enable them to gain huge profits at the expense of consumers. Given these conditions, the P500.00 one-time power subsidy is nothing more than a token measure aimed at appeasing growing public disgust.

If there is a “perfect economic storm”, government is readying its “Noah’s Ark” of economic measures. Many doubt that this is in any way a serious response to the crisis. Government measures have long been reduced to tokenism. The P20 wage hike, the fertilizer subsidy, the student tuition subsidy, the electricity subsidy, all short term measures that do not provide real and long-term solution.

And while people are desperately trying to make ends meet, the top officials of the administration are living the life off stolen wealth. Contracts and projects entered into by the Arroyo administration have been exposed as overpriced, a condition aimed at accommodating
systematic bureaucratic corruption. What makes this even more oppressive is that these overpriced projects used as milking cows of the corrupt are being paid for by taxpayers themselves. These same overpriced projects are used to justify such oppressive tax measures
as the Value Added Tax.

The long-awaited de Venecia testimony may shed light on the corrupt practices of the regime. This is perhaps the reason why Palace spin-doctors are busy trying to pre-empt the testimony.

The brewing storm will not just be a confluence of economic indicators. It would be the result of the people’s outrage over government’s anti-people policies, systematic corruption and decades-
old oppression and exploitation. Streets would be flooded with marchers, and righteous anger will rain on the oppressors.

And when the storm comes bearing down on Arroyo, the only boat or “Ark” available for her would be the one waiting along the Pasig river, just outside Malacañang. The same boat that ferried a former president out of the Palace in 2001. ###


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