First Quarter 2015 Update on the Economy: On Solid Ground

I attended the Economic Forum organized by the Nordic Business Council of the Philippines (NBCP) last April 23, 2015 at the BDO Corporate Center in Makati City. One of the speakers was Mr. Jonathan Ravelas, Chief Market Strategist of BDO, who gave a very interesting take on the prospects of the Philippine economy.

Mr. Ravelas showed forecast data that while the Euro Zone, the USA and the world economy will continue to show meagre growth in 2015 and 2016 (the world growing at 3% at most in 2016, with Europe only by 1.6%), Asia will continue to lead the charge as it had since 2011. Asia’s growth is forecasted to be 6.7% in 2015 and 6.2% in 2016. China and the Philippines will still be the 2 fast-growing economies, but with the prognosis that in 2016, the Philippines (7%) will overtake China (6.7%), growth-wise.

The main drivers behind the growth of the Philippines according to BDO’s Chief Market Strategist are: (1) growing population, (2) growing middle class, and (3) BPOs & OFWs.  However, he also explained that the continuing government infrastructure spending will be a key factor as well. After the drive to clean up the bureaucracy of corruption, government has shifted its efforts last year to infrastructure development, both in terms of government-funded projects and PPPs.

We all know that a growing population acts like an engine in terms of fuelling demand for goods and services such as utilities (power, water, transport) and consumer products. The economy grows as goods and services are produced and money exchange hands several times, generating a multiplier effect. With a growing middle class, it means that more people will have the ability to pay for those products and services, therefore also allowing for producers to focus on producing more durable and quality outputs in order to court the paying public into patronizing their brands.

While it is absolutely fascinating to see how the middle class is able to drive an economy towards expansion, it is particularly enthralling that the rise of the middle class in the last decade is really a combo effect of the rise of the BPOs and the continuation of the OFWs’ significant contribution to the economy (which in recent years were more than 10% of GDP). The BPOs are providing decent jobs and decent pays. They are not just in the metro areas these days. They have moved out to the provinces in more than 20 new locations to avail of both cheaper regional wages and good, less congested communication infrastructure. On the other hand the OFWs are sending money back to send their siblings to school. As these people graduate from college, they join the army of the employed, and it would not be a surprise that they actually join the BPO industry, where young, energetic and ambitious people are welcome to take part in a hectic, fast-paced job, and the money is good. Barring any complications that may be brought in by natural calamities or early marriages (which could happen to young people who get overwhelmed by the sudden ability to earn thick wads of cash), these people will in turn help their younger sibling to go through school. And the cycle turns anew.

Indeed if you look at it, education is still the main tool in breaking the poverty cycle, and is the main reason behind the rise of the middle class in the country. As an aside, I know of a woman from 10 years ago who sent two daughters through college by operating a small pigpen and doing laundry for the neighbours. Now she lives in a 3-storey concrete house and goes to Singapore twice a year to visit one of daughters who now works there as a physical therapist.  Her family is certified middle class these days.

The faith of BPOs in the Filipinos’ gift of gab (or gift of tongues?) has led to our unemployment rate staying below double digits since 2005. In 2014, the unemployment rate is only 6% and expected to drop some more.

Mr. Ravelas also emphasized that this a very good time indeed for the Philippines, noting that 2016 is another election year. By experience, the massive spending that occurs during an election year tends to drive the economy to expand. This expansion is not only felt in the current year but straddles a few years thereafter. We should just be on the lookout for inflationary effects. Having said that, BDO’s prognosis is that inflation rate will rest at 2.5% in 2015 and 3% in 2016.

 We all know that a high-growth, low-inflation economy is the best there is. And this is what we had been having since 2013, when Dr. Nouriel Roubini (a.k.a. the Prophet of Doom in the economists’ circles) turned into the Prophet of Boom and deemed that the Philippines is Asia’s new rising tiger.

Mr. Ravelas opined that the Peso will stay within the 44-46 levels against the dollar. And the key sectors where investments could really thrive are: Food & Beverage, Retail and Real Estate. These are the three (3) main sectors driven by consumer spending. At this point it comes to mind that the proliferation of milk tea shops and retail perfume stalls in malls and every nook and cranny in metro areas is evidence of the spending power of the young, free and single. Testimonial evidence also shows that young people in early to mid-30s compose the main market for studio-type condo units in Metro Manila.

What remains as risk areas for the Philippines are apparently, (1) the growth challenges (I presume referring to growth with equity, trickle-down or what has been a buzzword these days: inclusive growth), (2) the geopolitical noise (both the outbreak of wars in the Middle East and elsewhere affecting our OFWs, and the territorial disputes in the West Philippine Sea), and (3) the rising US interest rates, which up to this time is not yet felt locally.

The Philippine economy indeed stands currently on solid ground; roaring in the first quarter of 2015. Moving forward, the government has to complete the infrastructure investments. Those airports, roads, communications, power and water supply need to be in place and operational. Moreover, more school buildings, hospitals, transport terminals, public markets and sports arenas should be built, spreading out these facilities to the regions and provinces where they are most needed. It is no rocket science, and no need for an economist’s gobbledegook.

A Salute to Economists

[Keynote Speech delivered during the University of the Philippines at Los Banos-College of Economics and Management (UPLB-CEM) 36th Foundation Day]

FIRST OF ALL, TO THE BIG BOSS UPSTAIRS, WE PRAISE YOU FOR THIS BEAUTIFUL DAY.

DEAN ISABELITA PABUAYON, THE FACULTY MEMBERS AND STAFF OF THE DIFFERENT DEPARTMENTS UNDER THE COLLEGE OF ECONOMICS AND MANAGEMENT, MY FORMER PROFESSORS, MENTORS AND TORMENTORS, MY BROTHERS AND SISTERS IN THE UPLB ECONOMICS SOCIETY, STUDENTS, GUESTS, LADIES, GENTLEMEN AND FELLOW LETTY’S BUKO-PIE LOVERS, A PLEASANT GOOD MORNING TO YOU ALL.

I AM DEEPLY HONORED TO BE MADE PART OF THIS YEAR’S ANNIVERSARY CELEBRATION OF THE INSTITUTION THAT MOLDED AND MADE ME INTO WHAT I AM TODAY. IT MAY SOUND TRITE BUT IT IS TRUE.

MY FATHER, THE LATE RODOLFO V. AZANZA, DOUBLE DOCTORATE, AND A FELLOW FOR SOME YEARS AT THE LONDON SCHOOL OF ECONOMICS, ASKED ME TO TAKE THE B.S. ECONOMICS COURSE HERE IN UPLB-CEM WAY BACK IN 1986. AND I STILL REMEMBER HIS WORDS. HE SAID, HELLO SON, VEN AQUI, POR FAVOR. YOU WILL GO TO U.P. LOS BANOS AND TAKE THE B.S. ECONOMICSDEGREE BECAUSE IT WILL MAKE YOU UNDERSTAND WHAT MAKES THE WORLD GO ROUND. YOU WILL KNOW HOW PEOPLE BUILD NATIONS, AND HOW NATIONS RELATE WITH ONE ANOTHER TO BUILD UP THE GLOBAL ECONOMY. AND WHEN YOU HAVE THAT UNDERSTANDING, YOU WILL BE ABLE TO APPRECIATE THE MINDSET OF EVERY BREADWINNER, EVERY BUSINESS OWNER, AND EVERY POLITICIAN, DECISION MAKER, EVEN THE PRESIDENT OF THIS COUNTRY.

I STOOD THERE SPEECHLESS INFRONT OF HIM UNABLE TO WRAP MY BRAIN AROUND WHAT HE JUST SAID, AFTER ALL, I WAS ONLY 15 YEARS OF AGE. SESNING MY HESITATION HE ADDED, AND YOU KNOW SON, WHEN YOU ALWAYS HAVE SOMETHING OF SUBSTANCE TO SAY ABOUT EVERYTHING THAT THE PRESIDENT OF THE PHILIPPINES SAYS OR DECIDES TO DO, YOU KNOW, THE GIRLS DIG IT, THEY FIND IT SEXY.

THERE I FOUND MY WORDS AND I SAID, OK DAD, YOU GOT ME AT HELLO.

I DON’T KNOW IF IT IS RIGHT TO SAY THIS. BUT I KIND OF BREEZED THROUGH MY BS ECONOMICS LIFE. AS THEY SAY, TIME FLIES SO FAST WHEN YOU ARE HAVING FUN. WHEN I GOT INTRODUCED TO THE CONCEPT OF DIMINISHING MARGINAL UTILITY, ME AND MY FRIENDS, WE TRIED IT ON SAN MIGUEL BEER, AND IT TOOK US ALL NIGHT TESTING AND TESTING AND TESTING. AROUND 5AM THE NEXT MORNING WE CONCLUDED THAT THE THEORY DOES HOLD WATER, OR BEER. BUT WE ALSO REALIZED AT THAT AGE THAT FOR SOME GOODS LIKE ALCOHOLIC BEVERAGES, THIS DIMINISHING MARGINAL UTILITY THING RESETS EVERY 48 HOURS. OH, THAT WONDERFUL PARABOLIC SHAPE THAT EXPLAINS SO MANY THINGS IN LIFE.

ANYWAY, FAST FORWARD. AFTER 4 YEARS, I GRADUATED AND STARTED EARNING MY KEEP. AND SOON I REALIZED THAT EVERYTHING THAT MY FATHER SAID WAS TRUE ABOUT THE IMPORTANCE OF HAVING THE ABILITY TO COMPREHEND WHAT GOES ON AROUND ME. THE ABILITY TO DO A QUICK BENEFIT-COST ANALYSIS MAKES US A NOTCH ABOVE THE REST IN EVERYTHING THAT WE DO.
WE DO NOT BUY THINGS ON IMPULSE, RIGHT? EXCEPT WHEN SOMEONE ELSE IS PAYING FOR IT. WE DO NOT WASTE OUR TIME ON SENSELESS THINGS LIKE PLAYING CLASH OF CLANS AND CANDY CRUSH ON OUR IPAD, RIGHT? EXCEPT WHEN WE NEED TO UNWIND. SINCE IT IS CHEAPER THAN TAKING ANTI-STRESS TABLETS.
WE ARE BARGAIN HUNTERS. WE DO NOT BUT THINGS UNLESS THEY ARE DISCOUNTED. WE WAIT FOR A WEEKEND SALE BEFORE WE BUY THAT NICE PAIR OF JEANS FROM UNIQLO OR THAT PRETTY CARDIGAN AT COTTON ON. WE LOVE CHRISTMAS BECAUSE OF THE TIANGGE. WE BUY FLOWERS FOR OUR GIRLFRIENDS OR WIVES ON FEBRUARY 15. AND CORRECT ME IF AM WRONG, BUT NOW WE ARE ALL EXCITED ABOUT BUYING IPHONE 5 BECAUSE THE IPHONE 6 HAS BEEN LAUNCHED.

THE PEOPLE AROUND US, THEY MUST THINK WE ARE A BUNCH OF CHEAP BASTARDS (EXCUSE MY FRENCH). BUT WE ARE NOT. WE ARE JUST RATIONAL. WE ARE THE FUTURE OF THIS COUNTRY; WE ARE THE FUTURE OF THE WORLD. WE INTRODUCED MULTI-TASKING TO THE HUMAN RACE. WHEN THINGS BECOME TOO COMPLICATED FOR THE POLITICIANS WE SIT BACK AND WRITE A FORMULA FOR A MULTIPLE REGRESSION ANALYSIS. AND WE TEST IT FOR HETEROSCEDASTICITY AND MULTICOLLINEARITY AND WHAT HAVE YOU. AND ALL THEY CAN DO IS BUT AGREE. AND IN SILENCE THEY THINK, THESE ECONOMISTS ARE THEY SPEAKING IN TONGUES, OR PERHAPS THEY SPEAK KLINGON.

IN TRUTH THEY WILL NEVER UNDERSTAND OUR LANGUAGE. THE LOOSE COINS WE DROP INTO OUR PIGGY BANKS WE REFER TO AS OUR MARGINAL PROPENSITY TO SAVE. AND AFTER PAYING FOR AN EXPENSIVE DINNER DATE AND A MOVIE PREMIER, WE REFER THE GOODNIGHT KISS FROM OUR GIRLFRIEND AS A CONSUMER SURPLUS. EVEN IN BEAUTY PAGEANTS THEIR FAVORITE JUDGES ARE ECONOMISTS. AFTER ALL, WE KNOW HOW TO READ CURVES. AND WE WORK A LOT WITH MODELS, RIGHT?

I CAN TELL YOU, WE ARE A DIFFERENT BREED. WE ARE ALMOST NOT HUMAN.

WE NOW LIVE IN A PERIOD OF UPHEAVAL. CHANGE NOW HAPPENS IN BIG JUMPS RATHER THAN IN MINUTE BITS. THE ASEAN INTEGRATION IS JUST AROUND THE CORNER, AND WE CAN EXPECT THAT IT WILL BRING A BIG CHANGE TO HOW GOODS WILL BE PRODUCED, HOW SERVICES WILL BE DELIVERED AND HOW VALUE WILL BE CREATED. AS ECONOMIC BOUNDARIES DISAPPEAR IN THE ASEAN REGION, PRODUCTS AND PEOPLE WILL BE GOING TO AND FRO, LIKE THE WAY IT IS FORETOLD IN THE BOOK OF REVELATION. AND THE MANTRA IS: EVOLVE OR DIE LIKE THE DINOSAURS. WE CAN EXPECT THAT THE PEOPLE OWNING BUSINESSES, AND EVEN THE PEOPLE RUNNING THE ASEAN ECONOMIES, WILL TURN THEIR HEADS TO WHERE WE SIT NOW, TO THE COLLEGE OF ECONOMICS AND MANAGEMENT OF EVERY SCHOOL AND UNIVERSITY ALL OVER THE REGION, AND THEY WILL ASK THE QUESTION: WHAT ARE WE GOING TO DO NOW?

EXPECT TO BE ASKED THE QUESTION, BECAUSE WHAT IS THE POINT OF ASKING BIOLOGISTS OR PHYSICISTS OR VETMEDS OR ENGINEERS ABOUT HOW TO RUN AN REGIONAL INTEGRATED ECONOMY; A REGION WITHOUT BARRIERS. OF COURSE THEY CAN ALWAYS ASK THE LAWYERS, BUT THEY KNOW THAT IF YOU ASK 2 LAWYERS YOU WILL GET 3 OPINIONS.

BUT I DARE SAY THAT INSITITUTIONS LIKE THE CEM WILL ALSO HAVE TO EVOLVE. IT HAS TO IDENTIFY AND RECOGNIZE THE CROSSROADS OF CHANGE, AND DEVELOP ITSELF AS A KNOWLEDGE CENTER FOR THESE CHANGES. FOR EXAMPLE, I THINK IT IS CURRENTLY IN THE RIGHT TRACK IN GIVING FOCUS AND ATTENTION TO ENERGY ECONOMICS AS A NEW AREA WHERE STUDENTS CAN SPECIALIZE. WE HAVE TO ASSURE THE ENERGY COMPANIES A STEADY SUPPLY OF ENERGY ANALYSTS, POWER TRADERS, AND FORWARD MARKETS PRODUCT DEVELOPERS WHO WILL COME TO THE WORKPLACE ALREADY EQUIPPED WITH THE RIGHT ANALYTICAL TOOLS AND MINDSETS, RATHER THAN HAVING TO TRAIN THEM STILL. WE NEED MORE KEY PEOPLE IN GOVERNMENT AND IN THE PRIVATE SECTOR WHO UNDERSTAND THAT ENERGY IS NOT JUST AN INPUT TO PRODUCTION. IN THE INTRODUCTION OF WHAT IS NOW CALLED THE NEXUS PERSPECTIVE, WE REALIZE THAT ENERGY SECURITY HAS TO BE BALANCED WITH FOOD SECURITY AND WATER AVAILABILITY. THE OBJECTIVE HAS TO GO BEYOND MAXIMIZING PRODUCTIVITY OF THE ENERGY, FOOD AND WATER SECTORS IN ISOLATION FROM EACH OTHER. THE NEW OBJECTIVE HAS TO BE SYSTEMS EFFICIENCY, IN ORDER FOR US TO DEVELOP TRUE AND HONEST RENEWABLE ENERGY PROJECTS THAT ARE FIT TO BE CALLED SUSTAINABLE.

ON BIO-ENTREPRENEURSHIP, THERE IS, IN THE FIELD OF BUSINESS MANAGEMENT, A CONCEPT ABOUT THE RED OCEAN AND THE BLUE OCEAN. THE RED OCEAN IS WHERE PEOPLE AND COMPANIES COMPETE FIERCELY TO THE POINT OF UNDERCUTTING EACH OTHER. AND THE WAY TO SURVIVE IN BUSINESS IS NOT TO COMPETE IN THE RED OCEAN, BUT TO FIND A NEW PART OF THE OCEAN WHERE IT IS STILL BLUE. FOR MANY BUSINESSES, THE RED OCEAN IS THE URBAN CENTER, AND THE BLUE OCEAN CAN BE THE RURAL AREAS, WHERE WE HAVE, WITH THE HELP OF THE ACADEME, A NEED TO RETOOL OUR FARMERS AND SHIFT TEHIR MINDSETS FROM THAT OF JUST BEING TILLERS OF THE SOIL AND PRODUCERS OF INPUTS TO PRODUCTION TO THAT OF A TRUE BLUE BUSINESSMEN.

ANOTHER AREA WHERE THE COLLEGE CAN ALSO FOCUS ON IS CORPORATE SOCIAL RESPONSIBILITY. THE COMPANIES I KNOW THAT ARE BASED IN EUROPE HAVE FULL-BLOWN CSR DEPARTMENTS IN THEIR ORGANIZATION S. WHAT USED TO BE DONE ONLY AS A SIDE NOTE TO MARKETING AND H.R. IS NOW BEING GIVEN REAL ATTENTION. MY FORMER EMPLOYER HAD THE CSR HEAD AS NUMBER THREE IN THE WHOLE ORGANIZATION. THEY HAVE THE CEO, THEN THE CFO AND THIRDLY, THE CSR EXECUTIVE VICE PRESIDENT. WHAT USED TO BE CALLED COMMUNITY OUTREACH AND DEVELOPMENT PROGRAMS ARE NOW BEING REFERRED TO AS COMMUNITY INVESTMENTS. THERE IS A BUSINESS CASE TO CSR.

AS OUR VERY OWN COLLEGE OF ECONOMICS AND MANAGEMENT CONTINUES WITH ITS ROLE AS AN ECONOMIC CHANGE KNOWLEDGE CENTER AND PRODUCER OF FUTURE ECONOMISTS AND MANAGERS THAT THIS COUNTRY NEEDS, WE WHO HAVE THE PRIVILEGE TO BE PRODUCTS OF THIS INSTITUTION WOULD AND SHOULD NOT BE AFRAID TO PROSPER IN THE FIELD WE HAVE CHOSEN TO CONQUER. TODAY WE MIGHT BE UNDERPAID OR UNDERHEIGHT, BUT WE DO NOT NEED MUCH TO SUCCEED, REALLY. WE HAVE A RATIONAL MIND, AND THAT IS ALL THAT WE REALLY NEED.

WHEN THE WORLD GOES CRAZY, WE THE ECONOMISTS WILL HAVE THE ABILITY TO PROVIDE THE MUCH NEEDED DIRECTION. BECAUSE WE HAVE THE ABILITY TO HOLD SOME THINGS CONSTANT. WE ONLY HAVE TO SAY CETERIS PARIBUS AND THE COMPLICATED BECOMES SIMPLE. IT IS ALMOST MAGICAL.

I SAY THESE THINGS BASED ON PERSONAL EXPERIENCE. AFTER 44 YEARS OF LIVING IN THIS WORLD, I CAN PUT ON THE HAT OF A PLANNER, A MANAGER, AN ADVISER, A DIRECTOR, A DECISION MAKER, AND A CEO. BUT THROUGHOUT ALL THESE ROLES I WILL POSIT THAT I CAN ONLY BE EFFECTIVE IF I CAN BE RATIONAL. AND THAT IS WHY I SAID IN THE BEGINNING THAT THE COLLEGE OF ECONOMICS AND MANAGEMENT MOLDED AND MADE ME THE PERSON THAT I AM TODAY. I AM WHAT YOU MAY CALL AN INTERMITTENT ECONOMIST, BUT AN ECONOMIST NONETHELESS.

OUR WORLD WILL ALWAYS NEED PEOPLE WHO ARE EXPONENTS OF THE APPLICABILITY OF BASIC ECONOMIC PRINCIPLES IN ALL FACETS OF LIFE, FROM FAMILY TO BUSINESS TO GOVERNANCE AND EVEN WORLD DOMINATION. PEOPLE LIKE US WHO HAVE DEEP-SEATED UNDERSTANDING THAT THERE IS NO SUCH THING AS FREE LUNCH; THAT IT IS NOT THROUGH THE BENEVOLENCE OF THE BUTCHER OR THE BAKER THAT THERE IS MEAT OR BREAD IN THE MARKET; THAT THERE IS AN INVISIBLE HAND, WE WILL ALWAYS HAVE A JOB. SEEMINGLY UNEXPLAINABLE THINGS THAT BAFFLE OTHER PEOPLE, WE JUST EAT THEM FOR BREAKFAST. WE CAN EXPLAIN WHY THE SEATBELT LAW CAN ACTUALY KILL MORE PEOPLE, OR WHY DRUG DEALERS LIVE WITH THEIR MOTHERS, WHY IT IS BETTER TO COURT THE SECOND LESS PRETTY GIRL, WHY THE AMERICANS WERE DESTINED TO LOSE THE VIETNAM WAR AND WHY THE CARBON CREDITS MARKET WAS BOUND TO FALL. WHILE OTHERS WOULD BLOW A GASKET TRYING TO DISCERN THESE QUESTIONS, THE ANSWERS JUST COME TO US NATURALLY; AS NATURAL AS KC CONCEPCION’S SKIN COMPLEXION.

ANYWAY, TIME IS FLEETING, LET ME END BY SAYING THAT Y= C + I + G + X – M IS THE FIRST AND NOBLEST OF ALL EQUATIONS. BECAUSE IF YOU UNDERSTAND THAT, YOU ALSO THEREFORE UNDERSTAND HOW PEOPLE BUILD NATIONS, AND HOW NATIONS INTERACT TO BUILD A GLOBAL ECONOMY.

AND BETCHA BY GOLLY WOW, THE GIRLS DO FIND THAT SEXY.

THANK YOU EVERYONE, AND MORE IMPORTANTLY, THANKS TO THE GREAT ARCHITECT OF THE UNIVERSE UPSTAIRS, WHO ENABLE US TO BE WHAT WE ASPIRE TO BE.

China, When Construction Grounds To A Halt

This is a great article I read: http://davidstockmanscontracorner.com/why-china-will-implode/. It talks about the looming event of bursting the China bubble. The bubble economy is currently being inflated to a humungous size by the seemingly incessant construction activities happening all over the country. As the article suggests, the construction will stop at some point, perhaps in a little over a decade from now. And when it grounds to a halt, demand for cement, rebars, and other construciton inputs will drastically fall, taking down with it employment and the buying power of the common people, among others. The whole thing then implodes; growth rates will nose- dive while prices inflation will kick-up, hyper-inflation style.

China should try to cool down a little. Taking the speed down little by little, so the economy can grow in am uch more steady and manageable pace, allowing the multiplier effects of the construction boom to permeate the segments of the economy.

Scale Up the Relief Pack

The standard DSWD relief pack is 5kg of rice, 6 noodles, 6 canned goods and 6 sachets of coffee. It differs a little bit in various situations, of course.

So a family representative queues up at the relief center, gets a pack and goes back to where his family of six is currently holed up, say a kilometer or two away but hopefully unexposed to the elements. After a day or so, his family runs out of food and queues up again at the center. It means that he is wasting his energy everyday as he keeps coming back, and likewise it does not help that the relief center is always congested with people in need.

Some scaling up may have to be done when we are packing our relief goods. Perhaps a pack that will last a week for a family of six. This will help in  managing the congesting effect of "return customers" of the center, and allow breathing space for those running it.

Every family that achieves some level of comfort in terms of having secured food for a week, will then find time to focus on reestablishing their foothold in this life. They can start clearing up their devastated houses, bury their dead, set up perimeters of safety, and even extend a helping hand to their old neighbours. But the nagging fear of whether the family will eat tomorrow will create a state of mind that simply awaits for daybreak to come so the father can walk 2 kilometers and queue up at the relief center again.

On Haiyan aftermath, If I am Government - Part2

A couple of weeks from now, the government should already start pondering about what is next after the first few salvos of aid go into the areas ravaged by Yolanda. At some point, after people had been relieved of their initial needs, the next question is how to re-ignite the local economy. Today it has gone into full-stop mode, with people more concerned about basic survival stuff than being productive. As we all know, productivity is the fuel of the economy, so it has to be kick-started again. Real recovery starts when people start producing food again rather than relying on food caravans being brought in.

Local governments should get re-established, and calamity funds given to achieve certain magnitude of control. The LGUs should start hiring people to work, e.g., for clearing operations, so the ability to buy will be restored. But the other side of it is that there should be something to buy.  So mom-and-pop stores will have to be rebuilt and re-stocked. Food and groceries on-wheels, and construction materials can be brought in by entrepreneurs from nearby towns spared by the calamity.

The other thing is that people should be able to produce food itself. So that they can first produce what they need on their own tables, and sell or trade any excess. Vegetable seeds and seedlings should be brought in and people should be coaxed into planting, rearing and eventually harvesting the fruits of their own labor. The process is by itself a good healing for the psyche. It will aid in the restoration of sense of control of their own lives at the family level, which after all is the basic unit of society.

On Haiyan aftermath, If I am Government.

Looking at what is happening in Central Philippines in the aftermath of Yolanda (Haiyan), government must realize that it is all basic supply and demand. There is now very little food, water, medicines, medical care, law and order, etc. The demand for all these is sky high, and supply is almost nil.

If I am government my approach will be 2-pronged. One, to bring in as many, in the shortest time possible, which I realize is a tall order. but the second, which is just as important as the first, is to decongest the ravaged places by allowing people to get out of there and move to their relatives in Cebu, Catarman, Maasin, Bicol, CARAGA, Metro Manila, etc. Every person that we will manage to bring out of the affected areas has a double impact in terms of capacity of government and the NGOs currently trying to bring order and manage the disaster areas. There will be less strain on the food and medical service resources, there will be less possibility of getting affected by any outbreak of diseases, and there will be less partcipants to any chaos that might ensue.

Every plane, boat and vehicle that arrives in those ravaged areas should be mandated to take in a full load of passengers when going out. Cut the suffering population by half by moving them out, and solve the problem twice as fast.

And how should a plan to establish a system look like, if I am government? My answer is also two-fold. One is go right into the center and try to establish a stronghold. Clear out an area near the port or airport, and establish a "government" that is primarily secure (with military presence), and ready to receive humantiarian aid from established organizations like the Red Cross and UN. I understand this is what government is doing now. In addition, clear out an area so a makeshift hospital and command center can be established by the Red Cross. Set up a repository of relief goods designed to take in, and take out for distribution on the same day. If any relief pack stays in storage for a full day, the system is not good enough. This means that a network of distribution has to be done immediately using a spider-web approach. Bring the goods to the closest areas, assure them of supply of food in the next few days so that order can be established, and people can concentrate on clean up, finding their deceased kins and burying them decently. Then , move the web of supply to the next surrounding layer. On the other hand, government should also set up and replicate the command centers  in nearby towns spared by Yolanda. For example,  in Catarman (or Catbalogan?) in order to reach out to Borongan; Maasin in order to reach Ormoc and Tacloban; and Iloilo in order to reach Roxas and Aklan. Let the efforts emanate from both  center and periphery, so that people in the middle will be encouraged to move outwards rather than congest in the center only because that is where help is pouring in.

LGUs in surrounding unaffected towns need not send in relief goods, but rather help clear up and secure road networks, and send in vehicles to ferry people out. Keep the relief goods in their own towns and use them to provide care for whoever will be brought into their towns by their convoys.
CARAGA and other Northern Mindanao LGUs can bring in boats, not to bring aid but to invite people to go with them into their provinces, and there be assured of care and sustenance.

The operative word is "decongest". Supply and demand are two sides of the same coin.

 

The Issue of Unemployment - Part 6 (Enter the Planner)

Monetarism will not guarantee solutions to equity and unemployment concerns. Likewise, it can not resolve structural problems at hand simply because the problems are no macroeconomic, but rather,  spatial in context.

Providing efficient mass transit systems to bridge the physical gap between work and home may be one of the obvious solutions to immobility. However, it may not change the physical proximity and may only lessen the travel time factor involved to  a certain extent. Other much more integrated type of approach must be thought of. For instance, the provision of affordable housing  close to where the jobs are may be  considered similar to what was implied in the Industry Commission  Report (cited in BIE, 1994). Residential segregation should likewise be  overcome  while social mix and other socially-desirable strategies (on taxes, superannuations, training, wage flexibilities etc.) may be included in the integrated approach.

Again, as all these are more spatial and in the micro-level  rather than macroeconomic, there is now a shift of burden from the macroeconomist to the planner in terms of drawing solutions to the structural unemployment problems. In the hands of the planner, more realistic solutions based on realistic experiences and views are expected to be conceived.

With the above conclusion, it follows that governments need not abandon their job-creation objectives and strategies under a Keynesian  approach. It will make more sense if instead, governments continue their interventionist role by deliberately creating jobs while at the same time, assisting the business/private sector in the expansion of their productive activities. There should be a foresight that supporting the private sector will mean  more people being employed in the long run.

 

As interventionist, the government may be able to ensure that the new money injected through public expenditures and private sector supports will accrue to increases in  production and  employment  and will not trigger inflationary effects. In other words, inflation may still be put under control without necessarily sacrificing  employment, thus, disproving the Phillips Curve. xxx

LIST OF REFERENCES

Baddock, G. R.E. Baxter and E. Davis (1992) “Dictionary of Economics” Penguin  Group,          England.

Bureau of Industry Economics (1994) “Regional Development: Patterns and Policy Implications” Research Report No. 56, Australia

Hall, P. (1991) “Cities in the Informational Economy”. Urban Futures, Vol. No. 5

Kalachek, E.D.  (Rasmussen, D.W. and C.T. Haworth, eds.) (1973) “The Modern City”. Harper and Row, Publishers, Inc., New York.

Mcconell C. (1988) “Principles of Economics”. Prentice Hall, Australia.

Netzer, D. (1970) “Economics and Urban Problems” Basic Books, Inc., USA.

Neutze M. (19__) “The  Need for a Government role”.

Samuelson, P. (1982) “Economics” McGraw-Hill Publishing, Inc., New York.

Stillwell, F. (1993) “Reshaping Australia: Urban Problems and Policies” Pluto Press,   Leichhardt.

           

Wadell, P. (1994) “Dallas: Will the Suburbanization Never  Cease” Built Environment Vol. 20. No.1, Alexandrine Press, Oxford.