Forum highlights economy in shambles in Marcos Jr.’s 7th month in office

On their January 25 yearstarter forum Birdtalk, independent think tank IBON Foundation highlighted the problematic aspects of the economy under President Ferdinand Marcos Jr., who has been in charge of the executive department since July 1, 2022.

“There are so many things to fix – the country’s dysfunctional economy where a few benefits and often at the expense of the many, the dysfunctional politics that sustains this kind of economy, and even the recent populist turn where these dysfunctions are concealed behind a thick veil of disinformation. The struggle for democratic reforms has become even more challenging,” they said.

Rosario Guzman, IBON Foundation’s head of research, talked about the continually rising prices of goods, especially with Philippine inflation going beyond the government’s two to four percent target.

“In economics, inflation is a good thing. In a market economy, that’s a normal thing, but not the inflation right now. It only shows the failure of the market economy,” Guzman said.

“The inflation rate last December, for example, [is] 8.1 percent. It’s the highest in 14 years and it’s being pushed by food and fuel inflation. It’s being also pushed by fuel prices,” she added.

(RELATED STORY: Kakulangan ng aksyon sa ekonomikong krisis, iprinotesta ng mga progresibo sa unang SONA ni Marcos Jr.)

Guzman associated the rising prices of goods and services with the country’s import dependence. According to data from the World Bank, the Philippines imported more than it exported in the past four decades since 1981, and there have only been six years that the country underwent a trade surplus: 1985, 1986, 1988, 2000, 2006, and 2007.

_{Source: World Bank.
Graph by Mark Famatigan.}

“Why are prices higher than they should be? What we have is a trading and import-dependent economy. It’s not a producing economy. What dominant class prevails over a trading economy? Are they the producers? No, but the traders, compradors, importers, and smugglers,” she said.

She pointed out that higher prices are due to the liberalized environment that leads to all scrupulous trading practices including smuggling. They become the norm and the basic goods including the staple goods are cartelized. 

IBON’s research head also described agricultural importation as “chronic” ever since the Philippines’ membership in the World Trade Organization (WTO) in 1995. The country’s WTO membership gave way to market-based policies such as the lift of quantitative restrictions (QRs), the rise of liberalization laws, and according to Guzman, the dictation of the country to import goods.

“Agricultural and food stuff, even if we don’t need them, even if we can produce them abundantly, it’s in the agreement that we have to import,” she said. 

She also blamed privatization – private sector profiteering off supposedly state-provided basic social services – for the exorbitant rise in prices of goods and services.

“If you put these sectors in private hands, the consequence is monopoly prices. And privatization has normalized high out-of-pocket and household expenses for otherwise government-provided social services…Privatization is a violation and abrogation of basic human rights,” Guzman added. 

She also said that the government also played a role in high prices, due to its preference for “regressive consumption taxes”, rather than collecting from the wealthy.

“Excise and Value Added Tax (VAT) is three percent of gross domestic product (GDP) while the Corporate Income Tax (CIT) is just 2.8 percent of GDP. You see, regressive taxes are fastly becoming dominant,” Guzman said.

_{Source: DBM, DOF-BTr, through IBON Foundation.
Graph by Mark Famatigan.}

The think tank also criticized the Philippine Development Plan (PDP) 2023-2028, which was released by the National Economic and Development Authority (NEDA) by the end of 2022. The PDP was described by the planning agency as “a plan for deep economic and social transformation to reinvigorate job creation and accelerate poverty reduction by steering the economy back on a high-growth path.”

While IBON Foundation recognizes that the PDP 2023-2028 has a good understanding of the end goals of meeting society’s needs, they also call the plan “voluminous and problematic”, due to its emphasis on corporate profits, foreign investment, infrastructure, deficit and debt, creditworthiness, and growth, all of which were supposedly a “means to development and not its ends.”

“The plan usefully acknowledges major setbacks because of the pandemic – particularly due to the over-long and harsh lockdowns – and has some sense of important adverse global economic and geopolitical trends,” they said.

However, they added, “It falls short as an ostensibly comprehensive development plan. It lacks many key indicators of development. In many instances, what is mentioned lacks ambition and is disproportionate to the magnitude of current problems.”

IBON mentioned that PDP was also “fundamentally compromised” by neoliberalism, an economic philosophy with liberalization, privatization, and deregulation at its core.

“The PDP 2023-2028 is blinkered by the obsolescent neoliberal lens it uses. It does not recognize that the long-term decline of domestic agriculture and industry is from decades of globalization policies and the action of market forces,” they said. 

These were the pointed root causes of persistent joblessness, poverty and underdevelopment in the country’s economy. 

The think tank stressed the importance of democratic policymaking, that is, when the people have a say on the economic policies being implemented by the state. A difficult challenge, considering the sorry state of the Philippine Congress being currently dominated by families of landlords and large bourgeois compradors.

The foundation signifies that real development demands strategic action and wielding of the government’s considerable resources and their authority for the common good and genuine development of the country. 

“Governance is not good when it upholds property rights and market structures, but when it is democratic and ensures decent work, the essentials of life, and protects the environment for everyone,” IBON Foundation highlighted. [P]