The people’s money still hidden in offshore banks

With the Marcos-Duterte apologists in Congress moving to abolish (or otherwise marginalize) the PCGG, is there any chance that the Marcos’ stolen wealth can be recovered?

No doubt, the purveyors of fake news will be quick to defend this act by saying that there is nothing to recover in the first place. What is the reality? Time for a fact check….

Grand Corruption

Professor David A.Chaikin of the University of Sydney explains the daunting challenges in recovering the stolen money in the book entitled Corruption and Anti-Corruption edited by Peter Larmour and Nick Wolanin:

A major obstacle in the recovery of the hidden wealth of the Marcos family is that the former President was a master manipulator of financial transactions and used an extensive and complex system of laundering monies through Swiss and offshore banks. Marcos did not generally use his own name in illegal transactions; instead he used nominees such as friends, cronies and layers of foundations and companies to conceal his activities. The Marcos family thrived on the idea of secret names. For example, in a letter dated 18 October 1968, Marcos informed his Swiss bank that the ‘word John Lewis will have the same value as our own personal signatures’… The Marcoses used every laundering scheme available to conceal their investments. At the same time his Swiss banks offered him various instruments of bank secrecy to protect his interests, such as numbered accounts, Liechtenstein Foundations and attorney with professional secrecy obligations. (p.102)

William Saunders

Despite all the difficulty, the PCGG has had some modest successes, recovering about ₱ 170 billion by December 2015. The following Inquirer article lists some of these assets in detail.

Where Marcos stashed multibillion loot

The following article from The Guardian narrates the history of the recovery effort describing it as a story of the PCGG “dragging victories out of the swamp”. Since it was written around the May 2016 elections, it also expresses alarm at the prospect of Bongbong Marcos becoming Vice-president.

The $10bn question: what happened to the Marcos millions?

The Birth of Leaktivism

Without an investigative agency like the PCGG, is there any hope to recover the rest of the Marcos loot? This is where perhaps we can look to the International Consortium of Investigative Journalists (ICIJ), an unstinting collaboration of hundreds of highly credible investigative journalists across the globe aiming to uncover the attempts of some of the world’s wealthiest politicians, businessmen, and sports and art personalities to misuse the global offshore banking system for fraud, tax evasion, evading international sanctions and other illegal acts. In the absence of a properly functioning Freedom of Information Law in all the different countries, this courageous band of journalists have taken it upon themselves to leak offshore financial dealings in an attempt to keep the world’s wealthiest individuals and corporations honest. (That said, the leaking of private information can be vastly controversial because not everyone with offshore deposits can be assumed to have committed a crime – a fact that ICIJ acknowledges.)

In 2015, 11.5 million documents that detail financial and attorney–client information for more than 214,488 offshore entities were leaked by an anonymous source. These documents – since called the Panama Papers – named 12 (then) current and former world leaders, 128 other public officials and politicians, and hundreds of other members of the elites of over 200 countries. Some of the names mentioned included Malcolm Turnbull, Silvio Berlusconi, Benazir Bhutto, Ronald Reagan, Stanley Kubrick, and officials from FIFA.

Irene Marcos Araneta, the youngest child of the dictator Marcos, along with her husband Gregorio Ma. Araneta III was named in the Panama papers. Both are listed as shareholders of Orient Wind Development Limited, registered in the British Virgin Islands.

Before the Panama Papers, there was the 2013 Offshore Leaks based on a cache of 2.5 million files containing information on more than 120,000 offshore companies and trusts worldwide, also revealed by the ICIJ. The ICIJ said that 86 journalists from 46 countries sifted through the data during their 15-month collaborative investigation. In the Philippines, the Philippine Center for Investigative Journalism (PCIJ) was the partner organization.

In the Offshore Leaks probe Ilocos Norte Governor Maria Imelda “Imee” Marcos Manotoc is revealed as one of the beneficiaries of the Sintra Trust, a company based in the British Virgin Islands. Named with Imee are her three sons—Ferdinand Richard Michael Manotoc, Fernando Martin “Borgy” Manotoc and Matthew Joseph Manotoc.

The Philippine references in the ICIJ Offshore Leaks Database

Just last November 2017, the Paradise Papers comprising of 13.4 million confidential electronic documents relating to offshore investments were leaked to the German reporters Frederik Obermaier and Bastian Obermayer from the newspaper Süddeutsche Zeitung. The newspaper shared them with the ICIJ’s network of more than 380 journalists. The papers contain the names of more than 120,000 people and companies. At 1.4 terabytes in size, this is second only to the Panama Papers in 2016 as the biggest data leak in history.

The Paradise Papers Explained in a Video

The database of the Paradise Papers has been recently catalogued and made public but there appears to be no early references to the Marcoses, although many wealthy Filipinos do appear.

Micah White, co-founder of Occupy calls this recent phenomenon as “leaktivism “.  If this can evolve into a widely accepted ethical and professional counterbalance, then we may just be waiting for Imelda’s other shoe to drop.

Imelda's shoes


Why is Heneral Luna a hero?

Heneral Luna: A misunderstood identity?

The movie Heneral Luna that came out in 2015 was a surprisingly big hit, becoming the highest grossing Filipino historical film of all time by earning more than ₱ 240 million. The main protagonist, General Antonio Luna, was a brash fellow with euphemistically “mabulaklak na salita” or flowery language but whose heart was in the right place. Clearly the movie-going public found him an authentic and lovable hero.

It is not the brashness that made Luna a hero, though. He is a hero despite the temper, the boorish manners and the foul mouth. Some may say it added to his charm – it made him visibly human. But in the end, I believe that these traits made him an ineffective leader and may have contributed to his downfall.

What were his heroic traits?

He was a firebrand of an army commander. He was known for a disciplined and professional demeanor in running military affairs. He was an excellent military strategist. These made him an immensely successful professional soldier but these were not enough to make him a hero.

What, then, made him a hero? In my view, there were three things that made him a Filipino hero.

He faced a crucible that deepened his convictions.

His heart was in the right place, to begin with. He was a propagandist that wrote under the pen name “Taga-ilog”

A hero often has a crucible moment, that is, a defining moment where his beliefs are severely tested from which he rises from. Perhaps Luna’s crucible that fortified his convictions was when he was arrested and jailed in  Fort Santiago, exiled and then jailed again at the Carcel Modelo de Madrid for participating in the revolution against Spain. This is no different from the modern day experience of Ninoy Aquino  and Pepe Diokno under their principal jailer, Juan Ponce Enrile, during the dark days the Marcos dictatorship.

He was steadfast with his cause.

He was studious and meticulous: After his release from jail, he studied military science under the Belgian General and war hero Gerard Leman. No doubt he was up to this task because he was a tried and tested intellectual. In his early years, he wrote a scientific treatise on malaria and was at one time chief chemist for the Municipal Laboratory of Manila.

He saw the dire need for professionalism in the disorderly and incompetent revolutionary army. To address this, he set up the precursor to the Philippine Military Academy in 1898 in Malolos, Bulacan.

His temper was most evident whenever his troops could not live up to his disciplinarian ways. Take the case of when General Tomas Mascardo failed to reinforce Guagua after Luna ordered this. Luna detained General Mascardo when the former received a report that the latter’s failure was due to a tryst with a girlfriend.

He was a leader for all of the people and not just some of them.

The Philippine revolution was being fought to turn back foreign oppressors – first Spain and then afterwards, the United States. There was no real consciousness to build a common nation for all Filipinos.  At that point in time, there were only Ilocanos, Pampangos or Tagalogs  for whom being Filipino came only second. He saw the need to overcome the divisiveness of the regional politics and insisted on organization and discipline to unite the army and foster this national consciousness.

Luna coin

The BSP recently issued a 10 Peso coin to commemorate the 150th birth anniversary of Antonio Luna

The power of a movie hit

The temper, the brashness and the “flowery words” make a blockbuster screenplay. Sometimes I wonder if this powerful movie somehow made many of us hope that, going into the 2016 presidential elections, the uncouth Mayor Digong Duterte will be our modern day Antonio Luna.

I truly loved this movie when I saw it. It was entertaining and did get the young people interested in our history. But if it somehow contributed to the present big mess that we find ourselves in, I don’t think I like it at all.

I do hope that the next historical movie due in 2018, Goyo: Ang Batang Heneral, manages to better capture and highlight the essence of the heroism of Gregorio del Pilar. If it does and it comes out before the Congressional elections, maybe our young electorate can be inspired to sweep the super-majority of trapos out of the House once and for all.

Can the Pan de Sal Shrink Even More?

In this installment of Pinoy Ekonomiks, we use the ever shrinking pan de sal as a metaphor for the demon of inflation (My daughter says that Jollibee’s peach mango pie is a more interesting metaphor, though.)

The Philippine Statistics Authority reported on July 5 that inflation rose by 1.9% in June, up from the 1.6% recorded in May. Former UP Economics Professor and now NEDA Director-General Ernesto Pernia attributed the increase to the residual effects of the weakening El Niño and the slight recovery of oil prices. Gas and other fuels, housing and electricity prices pushed non-food inflation to 0.9%. Disturbingly, food prices rose by 3% with the drought in some provinces affecting different food groups, notably vegetables and livestock. The immediately preceding NEDA Secretary Arsenio Balisacan has expressed concern about the higher than average increase in the cost of food and its impact on poverty levels. Balisacan has stressed that “Food price inflation [is] the main culprit. The very high prices of food wipe out the gains in per capita income of poor Filipinos. If not for inflation, we would have inclusive growth.”

This installment of Pinoy Ekonomiks tackles the topic of inflation and examines whether this should cause concern to the general public during these times of change.

What is inflation?

Inflation is a term used to refer to the general level of prices going up. When there’s inflation we will need more money to pay for goods (like dinorado rice or a loaf of pan de sal) and services (like the cost of the jeepney ride from Ayala to Mantrade). Inflation can be generally attributed to money in circulation growing at a faster rate that the production of goods and services in an economy – in short, too much money chasing too few goods.

Money is the lifeblood of commerce. It is the medium or the means by which all exchanges of goods and services in an economy occur. Naturally as the economy grows, the government has to print more money in order to permit the market to operate efficiently. In a well-managed economy, the level of prices of goods and services should remain stable and inflation should be well in control.

When government prints money faster than the rate of growth of the economy (usually measured through GDP growth), this tends to push prices up as more money compete for a limited supply of items. For the ordinary citizen, this translates into getting less for the same money that he or she used to be able to get. When inflation is not controlled over a long period of time, the economic disruption it causes can ultimately slow GDP growth.

Philippine inflation

Ilang Cornetto lang ang 500 pesos?  (Photo credit: Jamich FB page)

Inflation and the poor

Inflation affects different people to different extents. When inflation rises, fixed wage earners straightaway have to spend more of the money to buy the same things that they used to be able to buy for less. The owner of the neighborhood 24-hour grocery can at least raise the prices of some or all of the goods he sells in order to offset the impact of inflation.

While inflation usually causes the purchasing power of the entire nation to fall, its ugliest effect is the wholesale transfer of wealth from poor people and the middle class to the wealthy individuals and the large corporate monopolies. Many economic studies have observed that the most important contributing factor to increasing poverty and hunger is inflation in the cost of living.  Even short-term spikes in inflation are extremely painful for the poor.

Poverty statistics simple

Give us this day … lower inflation (Photo credit BusinessWorld)

Can government affect inflation?

Politicians love to spend but do not want to raise taxes because higher taxes are extremely unpopular. When the government spends more than it earns through taxes, it will have to borrow money from financial institutions. This is called deficit spending or deficit financing. When the government expands the money supply to finance its debts, it feeds the beast called inflation. The more aggressive the deficit spending, the more uncontrollable the beast becomes.

Without any question, run-away inflation destroys economies. We can see this in the tragic spectacle of 500+% inflation in Venezuela today. This has led to a complete meltdown in law and order and demonstrates the appalling incompetence of the government of President Nicolas Maduro. Unfortunately, we do not have to look far for more examples. The massive deficit spending of the Marcos regime in the late 70s and early 80s led to a stunning collapse in the Philippine economy that took two decades to recover from.

The wanton fiscal practices of the Marcos years have served as backdrop to the fiscal caution practiced by the Aquino administration over the last six years. The wisdom of the fiscal conservatism displayed by the immediately preceding government has been widely recognized by the international credit rating institutions, by the multilateral financial institutions like the World Bank and the Asian Development Bank, and by businessmen and investors generally. The Philippines achieved investment grade status under President Aquino.

The current Budget Secretary, Benjamin Diokno however has come out with guns blazing, claiming “The Department of Finance [under Aquino] sees underspending as virtue, calling it “fiscal space,” but to me I see it as epic incompetence.” Diokno added that the administration of Mr. Duterte plans a further hike in infrastructure spending to up to 7 percent of the economy this year, higher than the 5 percent target of the previous government.

The Budget Secretary assured that “The Duterte administration will not spend money for spending’s sake.” Diokno further told the Inquirer, “The economy is deficient in all types of infrastructure—highways and bridges, ports and airports. Specific infrastructure projects to be pursued by the Duterte government include “small, medium and large-scale projects [that] will be done in all regions—[both] highly developed and lagging—simultaneously, not sequentially.”

Benjamin Diokno

We need more spending, my preciousss (Photo credit

The Budget Secretary’s intentions are clearly laudable but, sadly, begs the question. Many of the infrastructure projects to be pursued by the current administration were in fact already drawn up during the Arroyo and Aquino administrations. Spending on the array of projects already on the drawing board would have been the easiest thing for the previous administration.  Recall that politicians just love to spend our money. This is precisely what Marcos did several decades back – with much gusto. Clearly there is more than meets the eye here.

There was a lot of debate about the Philippine economy’s “absorptive capacity” around the time the country achieved investment grade status. Some analysts argued that the Philippine economy needed to hike its absorptive capacity in order to utilize large inflows expected following the country’s enhanced credit status. Borrowed funds should be channeled carefully to the most productive infrastructure investments in order to avoid asset bubble formations, the analysts added.

We will explore the concepts of absorptive capacity and asset bubbles in the next installment in this series. For now, suffice it to say that economists argue that there are a whole set of macroeconomic, institutional, policy, technical, operational and other constraints, (e.g., corruption) that keep an economy from gaining the greatest benefit from a sudden and massive increase in government spending. It appears that there is such a thing as indigestion from too much money – like winning the Lotto and not knowing what to do with all the cash.

Confused about money

I don’t have the absorptive capacity for this….

Before we embark on aggressive spending, there should be an extensive and open discussion on the economy’s absorptive capacity. The nightmare of the Marcos years leads us to appreciate the dangers of irresponsible public finance. We now recognize that there is a fine line between bold and decisive public spending and reckless and simplistic deficit financing. Clearly an increase in spending should be lock-in-step with a reform program that expands the economy’s absorptive capacity. What does this reform program look like under the Duterte administration, Secretary Diokno?

Peach mango pie

Photo credit Kim Agnes,

Despite all the good intentions, reckless and simplistic deficit spending can only feed the demon of inflation – and shrink the pan de sal and the peach mango pie yet again. In an economy where people can only purchase the products they need in small sachets and the common pan de sal is already tiny, the smallest mistake can be truly costly.


Photo by Katherine Visconti,

Next Week:  We discuss absorptive capacity and asset bubbles in a post entitled: Lotto Winners Do Not Really Win

Featured Image: Photo credit to Amalissa Uytingco, The Culture-ist


Inflation rises by 1.9% in June 2016,, July 5, 2016.

Inflation is Eating Our Lunch, Lila Ramos Shahani, The Philippine Star, March 16, 2015.

Duterte admin to hike infrastructure spending to up to 7% of GDP, Ben O. de Vera, Philippine Daily Inquirer, June 3, 2016

Gov’t underspending is ‘epic incompetence’ – Diokno, Chris Schnabel,, August 7, 2015.

Phl economy needs better absorptive capacity – analysts, Prinz Magtulis, The Philippine Star, May 8, 2013

Pinoy Ekonomiks 3: Rating the Performance of Benigno Aquino

The charts tell a story….

In the last installment, I wrote about how the Aquino government instilled discipline in public finance by ensuring that the country did not incur more debt that it can pay. In this post where we explore the issue a bit more, I will use the term fiscal discipline to mean discipline in government borrowing, tax collection and spending.

Some people see the conservatism of the Aquino government with its fiscal management as a problem and argue that maybe the government did not spend enough to improve the lot of our countrymen.

Philippines government spending

Again, we rely on historical charts to tell the real story. The graph above shows us the trend in government spending starting from 1981. By the early 80s, the corruption-ridden Marcos government had already maxed out its borrowings and could not raise any more funds. After the Marcos regime acted like an irresponsible credit card user, subsequent governments had to suffer the consequences trying to get the debt amortizations back to affordable levels – in the process starving the spending for infrastructure. It was only mid-way through the term of Gloria Arroyo that fiscal order was finally restored. As the graph above shows, government spending likewise started rising and continued with the Aquino government.

Dictator Marcos with credit cards

Get me more credit cards quick!

The Aquino government has been severely criticized for the traffic and the rail transit problems in Metro Manila. The Japanese International Cooperation Agency (JICA) put the cumulative infrastructure deficit up to 2014 for the National Capital Region alone to a total of USD 12 billion or more than a quarter of our annual national budget and almost 90% of our total infrastructure spending. This is the accumulation of the lack of spending in the last 25-30 years. The graph below highlights the particular dearth in spending during the Estrada and early Arroyo years. Any government today will be hard pressed to make the difficult choice of which urgent infrastructure requirement to prioritize – whether it be roads and bridges, transportation, ports and docks, water or power utilities, or irrigation and other agricultural facilities. As it stands the infrastructure spending in 2015 already stood at 3.7% of GDP, the highest since 1991. In 2016, this will reach 5% of GDP. Under the circumstances, it is grossly unfair to condemn the Aquino government for inaction and lack of focus.

Philippine infrastructure spending

Government also needs to ensure that people have jobs and are paid decent wages. This is a tall order especially because we have one of the highest population growth rates in the world. Any government anytime anywhere will find this a daunting task. And yet, the unemployment trend below shows that somehow we are managing to keep unemployment under check – the lowest in 10 years.

Philippines unemployment rate

Not only are there more jobs, the average wage is also rising steadily. This is exceptional given that the whole world has persistently been in and out of recession for the entire term of President Aquino.

Philippines wages

Remarkably, the number of job vacancies is high and continues to rise, albeit at a slower rate (below). This means that our universities are not producing graduates that have the skills that companies require. Government’s effort at introducing the K to 12 program should help but more should be done by the universities themselves – fast. Otherwise, this may become a lost opportunity when more people can, in truth, be employed!

Philippines job vacancies

Our reputation in the global community of nations has vastly improved driven by, among other things, the consistent fiscal discipline that the Aquino government has demonstrated. This has led to multiple credit upgrades capped by the achievement of investment grade status in late 2015. This development should lead to even greater levels of capital investment from multinational companies. The chart below shows that Foreign Direct Investment has, on average, been much higher during the Aquino administration. This is a leading indicator or a predictor of the number of jobs that will be created in the future.

Philippines foreign direct investment

Another hallmark of the stellar economic management the Aquino government is the fact that inflation has returned to its historical lows in the late 1950s. This means that the wages that the average Filipino earns has largely been keeping its value.

Philippines inflation cpi

The improved reputation of the country together with the Department of Tourism’s highly successful It’s More Fun in the Philippines

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campaign has also translated to ever higher levels of tourist arrivals.

Philippines tourist arrivals

The optimism of businesses in the country never dipped into negative territory. This is because we did not see the persistent boom-bust cycles in our economy during the Aquino administration.

Philippines business confidence

The competitiveness of the Philippine economy compared to other countries has been rising steadily. We now belong in the top 50 most attractive countries for business – for the first time in 10 years. The country is among the eleven countries being seen as the world’s Global Growth Generators or GGGs.

Philippines competitiveness rank

Ironically, the one disappointing record particularly in the light of the government’s vision of Daang Matuwid

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or The Straight Path is the failure to bring our corruption rank back to the levels during the Ramos administration. That was when the country undertook a bold step at economic liberalization that involved the breakup of corporate monopolies. To put things in perspective, the Aquino administration has made a lot of effort to reduce corruption. It is nevertheless paradoxical that the Aquino administration never pushed hard enough for a key reform as the Freedom of Information Law. We now know that should put more effort into cleaning up the government of crooks since many other countries are also trying to clean up their acts and be a better, more predictable and more transparent host for global business.

Philippines corruption rank

The Aquino government has many vocal critics and even the President himself will admit that his government is not perfect. But there is a Silent Majority

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who can discern the many accomplishments of the outgoing government with objectivity. Hence, his high approval rating even as his term ends. I believe that over time, President Aquino will be recognized as one of the most competent Presidents in our history.

Photo of President Aquino courtesy of the Philippine Star.

March to Prosperity: A History in Pictures

Ninang Riza of UNTV fame feels very strongly about improving the money handling skills of the needier sectors of our society: those who often find themselves in debt need to be equipped with the ability to find a way out. She thought that a sprinkling of basic economics should be part of the skills base for money-mindedness. More than a year ago, she challenged me to chat about economics in her TV program. I hesitated because beyond the challenge of squeezing the concepts into practical everyday tips and beyond explaining in a crisp 30-second sound bite, I also needed to speak in plain Taglish[i]!

She explained that it’s not as difficult as it seems and all it needs is a little creativity. She mentioned that she already spoke about GDP in her program and even differentiated it from Gross National Product or GNP. GDP means “Gawa Dito sa Pilipinas”. GNP means “Gawa Ng Pilipino”. Easy, right? That level of creativity is the Holy Grail, right there.

Back to our topic from the last blog post

In my last blog post, I introduced the term per capita GDP as a measure of the affluence of a country’s population. We will now use this measure to establish how we, as a people, have fared through recent history.

The Good Old Days

We always hear about how the Philippines was the second wealthiest country in Asia next only to Japan. I thought that the 1930s would a good period to try to show this. The country had started to flourish after the Spanish and American wars. Old Manila was both prosperous and charming, even drawing comparisons to Paris.

Manila in the 1930s

Manila in the 1930s

The chart below traces per capita GDP back to 1934 and shows that we were close to being second after Japan and Hong Kong. There are a few ways to argue we were really second. One, Hong Kong is an autonomous territory but not a country. Another is that the population of Hong Kong is so small compared to the Philippines that our economy was far larger than Hong Kong’s back then.

Per capita GDP of the Philippines and the First Wave Tigers

Per capita GDP of the Philippines and the First Wave Tigers

A few other things need to be pointed out from the chart. The acceleration of economic growth in Hong Kong and Japan is very visible from 1954. Both countries embarked on an aggressive drive to industrialize in the early 1950s. Hong Kong’s textile industry grew, helped by a US embargo on China beginning with the Korean War. Japan had started to produce very small cars such as the Toyopet Master.

1955 Toyopet Master

1955 Toyopet Master

For purposes of this chart, I needed to combine the statistics for North and South Korea, which split into two separate countries in 1950.

Korea split into two in 1950

Korea split into two

Singapore did not become independent until 1965, when it split from Malaysia.

Singapore independence

Singapore Independence

The Bad Old Days

Rabid Marcos fanatics glibly claim that the country was second to Japan during the Martial Law years.

In reality, comparing the Philippines versus Japan, South Korea, Hong Kong and Singapore during the Martial Law years is not even meaningful because the Philippines would merely be flat-lining at the bottom of the graph against the massive increases in affluence of those countries. A comparison of per capita GDP with the emerging tigers of that period – Thailand, Indonesia, and Malaysia – will be more instructive.

The Philippines and the Second Wave Tigers

Per Capita GDP of the Philippines and the Second Wave Tigers

Note how all four countries were clustered closely together around the beginning of military rule. Despite the borrowing binge by Marcos at the beginning of the 1970s, the stranglehold of his cronies over the economy choked all momentum out the economy. As a result, our country could barely match the growth rates of the other countries. Further, the Philippines was the only country to lose ground during the period when the per capita GDP sank between 1980 to 1984 – bringing untold suffering on the Filipino people. By the time of the 1986 People Power Revolution, historical laggard Indonesia had caught up with our country.

A Double Dip

The last 30 years saw a growing income gap between the Philippines and its neighboring countries.

Per Capita GDP in the Last 30 Years

Per Capita GDP in the Last 30 Years

The 1997 Asian financial crisis was a mere breather for the region’s extraordinary progress, with Indonesia being the worst affected. The Philippines saw its per capita GDP dip a second time in recent history during the term of Gloria Arroyo (even after the massive election spending in 2010), allowing Indonesia to once again overtake our country. Despite that drawback, our strong economic growth during the term of Noynoy Aquino allowed the country to keep in step with the rest of the ASEAN region. At the end of his term, there is renewed hope that the Philippines may at last join the Asian community of tiger economies. President Duterte has big shoes to fill indeed.

[i] A mix of Filipino and English often spoken in the Philippine cities.

Pinoy Ekonomiks 1: What is GDP?

In the next few blog posts, I will bravely attempt to make economics accessible to all those who are not Filipina mothers. As we know, Filipina mothers are already the best economists in the world, amazingly able to make ends meet for their large families. This series of blog posts is meant for those of us that chose that other elective course in college just to avoid this dreaded subject matter. I admit that I did take up Economics myself and was foolhardy enough to take it under the eminent Mareng Winnie. In that economics course, I discovered the full depth and breadth of my intellectual limitations – but that is another story.

Whenever people gather together and imbibe their favorite pale Pilsen, the conversation would sometimes drift to how well the government is managing the economy. People who dislike the government will naturally argue that the country’s economic performance is poor. These malcontents will conveniently cite that nearby barangay (village) with a lot of informal settlers (or squatters) to support their case. Families living in these impoverished communities suffer in the squalor without any relief for many years. Apologists for the government will cite that brand new mall selling all the fancy gadgets and stylish products or that cluster of new, state-of-the-art buildings at the edge of the city as evidences of the extraordinary health of the economy. As we listen quietly to both sides, we know that the truth probably lies somewhere in between. In order to discover this truth, we turn to the dismal science called Economics.

Gross Domestic Product

The most common (and objective) way to measure a country’s economic performance is through its Gross Domestic Product or GDP. GDP is calculated by adding together the value of all the goods and services produced in a country. In a poor country, this means adding the value of the rice and chicken produced, the value of the tricycle rides taken by the commuting public, the cost of all the “salakot” and “bakya” made, etc. In a rich country, it will include all the basic commodities produced similar to what you find in the less affluent countries plus the cost of the Ferraris built, the iPhone 6’s produced, the healing spas given, the skyscrapers constructed and the Maroon 5 concerts held. In short, the greater the value of the products produced and services delivered in a country, the healthier its economy is supposed to be.

Philippine GDP

The GDP of the Philippines in 2014 is USD 285 billion. By itself, this figure is largely useless for most of us. One way to make this figure understandable is to compare the latest GDP figure against the historical trends. The bar graph below shows the GDP levels from 2006. Note the steadily rising GDP under the current Aquino administration beginning 2010. This is good news as this indicates a steadily growing level of economic activity every year.

GDP graph

We are a predominantly Catholic country that loves to raise large families. Larger families need more soap bars, more shirts and pants, and more Starbucks coffee. GDP should naturally grow as the population increases.

How do we know then that the rising economic activity reflected in our GDP numbers is not just the result of a growing population but can be attributed to rising affluence instead? For this purpose, we can calculate per capita GDP – this represents the average share of each Filipino of the aggregate GDP. The line graph below shows that the per capita GDP all the way back to the term of Diosdado Macapagal as president. There have been ups and downs but has been steadily increasing from around 1993 and has been picking up strongly from 2010. Some people will look back nostalgically at the Martial Law days and refer to those years as the “golden age” in our economic history. Per capita GDP tells a starkly different story: The line graph shows that the per capita GDP at the end of the Marcos regime in 1986 is barely higher than the per capita GDP in 1972, 14 years earlier. The entire period of military rule and dictatorship resulted into an economy that was largely stagnant, notwithstanding the bump in the middle. The good old days were hardly good at all, as it turns out.

Per capita GDP

The sharp rise in per capita GDP during the term of Benigno Aquino is a very positive development, but with one cautionary note. Per capita GDP shows an average figure and does not necessarily mean that each Filipino is being benefited equally. It may be that some Filipinos are benefiting more while others are benefiting less. Income inequality is a topic I can spend time on in the future, if there is any interest from the readers.

Another way to make the GDP numbers more understandable is to compare the Philippine GDP trends is those of some other countries. Some of us like to compare ourselves with Singapore or Japan or Vietnam. We can do this comparison, of course, but this will have to wait until the next blog post. Abangan ang susunod na kabanata!

Marcos: Sinister Shadows of the Past

The year was 1972. Ferdinand Marcos had time and again declared himself the champion of the poverty-stricken masses against the callous wealthy Filipino elite (the oligarchs). He was progressively exhibiting iron fisted tendencies, espousing taking a hard line against the communists, student activists, crime syndicates anddrug dealers, among others. He had also somehow hoarded a stash of cash into a number of secret bank accounts and had the appetite to amass even more. All he needed then was to declare Martial Law with change  – through his so-called New Society – as a plausible justification.

Martial Law1

With Proclamation 1081 (Martial Law), Marcos launched a perfect storm that would bring untold suffering on the Filipino people, send the economy into a tailspin and lead to the declaration of a debt moratorium in October 1983. That meant that in 1983, the country was effectively bankrupt with the government coffers practically empty and the Central Bank completely drained of foreign currency to pay for international debt obligations as well as the goods and services that were badly needed by the people.

The deep crisis that followed is perhaps the lowest point in the country’s recent history, leading to the uprising by the long-suffering Filipino people that we now call the EDSA Revolution.

I am sometimes dumbfounded that many of our young people seem to believe that the Marcos years are the golden years of the Republic. Ito ay malaking kasinungalingan. I wish to disabuse the minds of our youth of this brazen lie. Marcos was evil.  I am writing this post to chronicle the insights from my personal research about those years, particularly in respect of the hidden wealth amassed by the Marcos Family during the Martial Law regime and which the Cory Aquino government sought to recover afterwards.

I had spoken about what I have discovered about the ill-gotten wealth of the Marcoses once before. In September 1999, the Gaston Z. Ortigas Peace Institute and the Ateneo de Manila University sponsored the Conference on the Legacies of the Marcos Dictatorship: Memory, Truth-telling, and the Pursuit of Justice. We really should hold more of these conferences but as far as I know, this has been the only one of its kind. A Philippine Daily Inquirer editorial in February 2004 referenced this path-breaking conference in an article entitled Evil LegaciesFinger icon.

I am publishing my presentation in that conference entitled The Plunder of the Economy under Martial LawFinger icon as part of this post. I must admit that this is not easy reading. But if our children will take the necessary lessons from our history, it behooves us to understand how the elder Marcos manipulated Philippine society to advance his family’s selfish ends to the detriment of the Filipino people. With better insight and understanding, we can guide our children in a way that our deficient history books cannot.

Allow me to point out a couple of insights from the presentation that is particularly relevant in this political campaign season: Marcos was corrupt even before he became President, extorting kickbacks from war reparations by the Japanese government. The lesson here is that corrupt politicians become more – not less – greedy as they assume more power. As they say, absolute power corrupts absolutely. Ang sinasabi nang iba nating kababayan ay hindi na baleng kawatan ang kandidato basta lamang siya ay namamahagi ng benepisyo sa mga mahihirap. Ang ating kasaysayan ay nagpapatunay na ito ay maling akala. Ang masang Pilipino ang nagdurusa kapag naluklok sa kapangyarihan ang corrupt na kandidato. The seeming concern for the poor is merely a pretext for more rapacious thievery once elected to higher office.

The Marcos ill-gotten wealth is real and is immense. Hence the actions of the Marcos family to dissolve a global freeze in a racketeering case filed by the PCGG in California in 1987. Los Angeles Federal Judge Mariana Pfaelzer, in addition to the global freeze on the ill-gotten wealth of the Marcos family also imposed a spending cap of 10 thousand US dollar on personal expenses of the Marcos Family in 1989, the same year that Ferdinand Marcos died. At that time, Bongbong Marcos was already 32 years old and two years away from being elected as Congressman for the first time. In 1991, in a serious tactical blunder the post-Salonga PCGG agreed to dissolved the worldwide freeze in exchange for a USD 50 million settlement with Imelda Marcos.  This was a settlement that the Marcos lawyers worked very hard to reach. This allowed the Marcos family free access to all of their ill-gotten billions across the globe, which wealth is available to the Marcos family today and allowed the family to re-establish itself in the Philippines after the legal settlement. The significance of the events of this time period is not lost on Bongbong Marcos. Maraming kailangang ipaliwanag si Bongbong sa kanyang kaalaman tungkol sa nakaw na yaman ng kanyang mga magulang. Kaalaman na natitiyak natin na mayroon siya.

 The glib exhortation of Bongbong Marcos to move on in order to move forward is a recipe for disaster. Bongbong is asking us to ignore the painful lessons of our history. In response, we should vow to try harder in teaching our children about these tragic lessons. To Bongbong Marcos and his ilk  we say: Never again.

Barbed wire 2

Art depicting barbed wire courtesy of Alfredo Liongoren.