is the subject of my Trade Tripper column this Friday-Saturday issue of BusinessWorld:
Ralph Waldo Emerson once wrote: "common sense is genius dressed up in work clothes." If that’s the case, then our capacity for genius is seriously deficient. I, for one, can’t tell if we actually have any policy direction regarding our economy and finance. Or to be more accurate, we probably do have policy direction, it’s just that it doesn’t seem to be grounded in common sense.
The problem is that this inadequacy is disguised by all those celebratory reports found in recent newspaper articles: "fourth-quarter acceleration 7.3% growth in 2010 (the fastest in more than two decades!)," "GDP growth strengthened by 7.1% in the last three months of the year," with "full-year result surpassing the official 5-6% target (the highest since democracy was restored in 1986!)." The truth, however, is less glowing.
My BusinessWorld colleague, Benjamin Diokno, beat me to it when he cogently and thoughtfully wrote in his article last week that "serious policymakers should be concerned with equity as well, and should work for an economic growth that is inclusive, strong, and sustainable." He was writing in response to this administration’s penchant for drumbeating the country’s growth numbers. I agree. Their enthusiasm for growth is misguided. First, because any growth that we have at the moment should in all probability be better attributed to factors that have nothing to do with this administration’s policies. As Mr. Diokno wrote: "public policy works with a long and variable lag. It is more appropriate to attribute the economic growth in the second half of the year to Mrs. Arroyo’s administration. Second, the contribution of government consumption spending and public construction in the second half of 2010 was negative. Third, the strong 2010 growth is largely attributable to base effects owing to the recent global crisis."
Furthermore, to claim credit for growth would also entail shouldering responsibility for any downturn on the economy. Which this administration seems to be incapable of doing considering its silence regarding the recent dip in performance of the country’s stock exchange.
Finally, as I wrote last week, to focus on growth, whether it be GDP or GNP, bespeaks of intellectual sloppiness: "Nobel laureate for economics Amartya Sen recently chided India for focusing too much on growth (calling such ‘very stupid’) when more serious indicators need to be addressed, such as nutrition. The same goes for the Philippines and to which I add education, health, and social mobility." As Professor Sen puts it, growth would only be a "positive thing" in the "context of social justice, poverty reduction and directing greater public revenues towards health and education."
Professor Sen’s remarks quite apply to the Philippines. And as Mr. Diokno pointed out, equity (i.e., the equal distribution of wealth or opportunities) is an area that we should seriously direct our attention to. The truth is, what does growth mean to the country if in the end its only effect is that some stupid spoiled brat from a wealthy family can have a new sports car? In other words, what is the use of growth if it only benefits the rich and not the 40% or so in the country (including 33% of our schoolchildren) who go to bed without having had anything to eat during the day?
I personally would focus on education. Want a good economic policy? Improve education. And considering that the Philippines’ comparative advantage is in services, education is obviously a paramount factor that must be addressed. Education, after all, does not mean only literacy and the ability to speak English (although the latter, it has been noted, has been steadily deteriorating as well). Our education should be geared to strengthening values and patriotism, encouraging innovation, creativity, and greater productivity, as well as critical thinking. Our students should be more rigorously tested and teachers held to greater accountability. None of this is being done.
Finally, of what use is growth if it doesn’t lead to jobs? Unemployment is high. And with toll rates, MRT/LRT rates, jeepney fares, water and electricity rates, gasoline prices, and inflation rising, where would the people get the money to pay for their subsistence? Worryingly enough, WTO Director-General Pascal Lamy noted that "2011 will see the prices of most commodities rise, as the rise in global GDP bolsters demand, led by emerging economies ... Over 70% of the growth will come from commodity-intensive emerging markets." Now while the same could be a boon for countries supplying those raw materials, nevertheless, as pointed out by David Nabarro, the UN’s special representative on food security and nutrition, "higher food prices can also pinch the world’s poorest people, who spend almost all of their income on basic staples."
The problems that need to be confronted are clearly complex, difficult, and dangerously subtle. It’s perhaps no coincidence that both Diokno and Sen, in writing respectively of such, impliedly indicated the need for serious policymakers. Sadly, that’s what we lack the most right now.