Economic Forum

In a recent economic forum hosted by ANZ,

The hot issues are: subsidy
VAT
Government Spending
Wages
oil prices/ food prices

Panelist, who are mostly academic economist, tried to somehow clear the uncertainties by somehow providing incisive analysis of the present day economic crunch. As an ordinary citezen, I had a hard time following their discussion, and I found little economic wisdom which I could apply to my daily economic struggle.

However, with the help of Greg Mankiw's "10 second macro economic review';

GDP = Consumption + Investment + Government spending + Exports - Imports = C + I + G + X - M.

I could somehow understand what the government economist are trying to tell about the importance of investment. And how pump priming are being equated to Government spending.

Indeed, when the government provides assistance to the poor constituents, in form of money or in kind, the short term effect would be the fullness of the stomach. The C in the GDP equation however will hardly be affected since the majority poor will still have no money to spend. And as ordinary person on the street, I will lost more earning opportunities when I wait for government assistance to come. And more of the aid will go to the pocket of the officials than to us poor constituents. The programs are not delivering the desired effect.

Micro-lending for example. My understanding about its effect is that it does not help the less fortunate the way the proponents expected. People are not becoming entrepreneurs, rather, they are becoming micro-creditors. Goverment spending in this form have a significant impact on the upper class who have access to the GFI's and other financial institutions. It may perhaps affect the year end GDP, but it will not be of great help in curving poverty. (There should be a study on the real effect of CARD, KMBI and other similar programs, on the lives of the poor constituents. Did the program made their lives a lot better?)

Wage and salary increases. The 20 pesos wage increase and the 10 percent the government employees recieved have been wiped out by the 12% inflation. But an increase is an increase, without it they should be 12% percent in deficit. I agree with the experts that it is impossible for all business enterprises to icrease wages for certainly many will close shop. And that increase, if forced to those who could somehow make ends meet, will push the prices of the products upwards.

So with the increasing food and fuel prices, what should the government do? One thing that it could do is not to imposed new taxes. It could retain the VAT, because removing it would mean fiscal problem and the consequence of balooning budget deficit is even worst. As a small fish, I don't mind paying the VAT, but I mind the increasing food prices, and fuel. However,fuel prices, is something that is not within the control of our national leaders, so we have to swallow this bitter reality. Food on the other hand is something that within their control, and it is not a long term problem. With correct approach, in 4 to 6 months, the food prices would go down. We will not be poorer in 6 months of high food prices, we are already poor, and surviving is already a way of life. The answer as everybody knows is increase productivity. The government should be more creative here because providing the support to the small farmers will not solve the problem. We will have more of the same productivity if the focus will simply be on improving the infrastructure, input aid, credit or financial assistance. That will not result to a sustainable and greater productivity.

Perhaps the answer is in commercial/industrial food production. Dole, DelMonte or San Miguel are example of this kind of farming. Rice farming should be transformed towards this format, and farmers will become incorporators instead of being just ordinary farmers.

This is a long term solution, but a long term solution is what we need. I don't believe that the filipinos are dying. The economic condition in the 80's is worst than today, but we manage to survive. One of the small things that we ordinary citezen could do is not paint a negative image of our situation.

I may not have enough money today, but I am not poor. I could still find solution to my daily needs, and I could still send my kids to school. I could still buy my medicine. In short, help the people to focus more on what they can do. And they could do it.