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!

Oh PSE, I beg to disagree

A tale of two Presidents

I heard a story about how President Ramos quarterbacked the country’s response to the collapse of the Thai Baht in July 1997 when the BSP Governor and the Secretary of Finance often found themselves at odds in steering the economy through the oncoming financial storm. Ramos ended his term in a fine display of skillful crisis management: The Philippines survived the worst part of the economic meltdown relatively unscathed as Ramos’ term was winding down.

When Joseph Estrada assumed the Presidency in June 1998, the economy had somehow started heading south as the impact of the crisis spread throughout Asia. The country registered negative overall growth in 1998. The lackluster economic performance continued even as our neighboring countries started to turn the corner.

Noynoy Aquino and the economy

Noynoy’s critics argue that the Philippine economy grew throughout his term despite his performance. We can go into a lot of detail about what Noynoy’s government did to contribute to the economic growth but that would turn this simple blogpost into an academic paper. I will merely cite the anecdote about FVR and Erap to argue that, for better or worse, the competence of the President and the soundness of his policies do have a substantial impact on national economic performance. I will also point out that during Noynoy’s term, the great majority of countries across the globe experienced economic difficulties as contagion from the slowdown in the US, Europe, and China affected them. The Philippines’ growth was actually being driven by domestic demand more than by the performance of our trading partners. It was the growing affluence of our people as a whole and their confidence about their future that drove our country’s GDP growth in the last few years.

Another commonly foisted argument that it is just the corporate interests that benefited from the Aquino government. This simply does not hold water – companies need to sell to people to make their profit targets. Our economic resiliency stems from strong domestic demand.

The future with Mar Roxas

There is no debate that the benefits of economic growth should be more inclusive. Many have benefited in the past but many, many more need to have access to education, to employment opportunities, to medical services, and to a clear path out of poverty. Only Mar Roxas among our Presidential candidates has the training and the experience to manage a complex and frustratingly dynamic superstructure as our national economy. Singapore has a battery of well-trained and well-experienced technocrats to run its economy of 5.5 million people. With all due respect to all his achievements in Davao, the country cannot be run by an aging, provincial mayor with a penchant for the crude, anachronistic, and insensitive responses.

I have seen articles that try to assuage our people that the economy has sufficient momentum from the Aquino years and that we should be fine irrespective of who wins the election. I believe that this is what the brokers at the Philippine Stock Exchange are thinking.  I beg to disagree. The recent experience with the transition from FVR to Erap tells me that without Mar building greater momentum and reaching that tipping point in about two more years where the Philippines will most certainly be top Asian tiger, we might just find ourselves regressing to the global mean – less jobs, less opportunities, spreading poverty and greater unrest. In the latter case where Mr. Mayor becomes President, the poor and dispossessed can only get more disappointed, disillusioned, and angry. (PSE brokers with your heads in the sand, this means declining stock prices.)

For the sake of the country, who are you voting for now?

Eyes Wide Open in the Coming Elections

I normally reserve this space for my musings on my professional interests. Today, I write as a Filipino citizen.

Many of my friends treat the candidacy of Mar Roxas as a referendum on the administration of Noynoy Aquino and rightfully so. Mar has been an indispensable driving force for the programs of the government over the last six years and is accountable to a large degree for its successes and failures.

Let me get the failures out of the way first. I have been a vocal critic in social media of the ineptitude in transportation and traffic management and more particularly of the airport administration. The “achievements” in this areas have been mostly too little too late. That said, no administration in the past, present or future can be perfect. I say continue to criticize but be mindful that the quest for Shangri-La is only for naive dreamers.

Nobody can deny that the Aquino administration has managed to burnish the country’s credibility in public governance and economic management, particularly among the country’s trading partners, foreign investors and creditors. This is no small feat and the impact of this accomplishment is significant in our global economy. Our public debt management is under firm control. The country is the absolute darling of the global credit markets and we have achieved an investment-grade rating that no one would have even dreamed of before this current government. We all would like to see the investment in infrastructure, in public health and safety, in grassroots livelihood and poverty reduction. What the Aquino administration has managed to accomplish is ensuring the health of our public finance so that all that is good and right can now be delivered by the next government – without the need to hock the future of our children to our creditors.

We have seen the highest average growth rates ever of the Philippine economy on the back of “Daang Matuwid”. No government can deliver the needs of its citizenry by itself and would always need the private sector to move lockstep with it. At the GDP growth we have achieved, the private sector now has the ability to match the programs of government. The next government will have to then focus on ensuring that the economic growth can now trickle – perhaps even pour – down to the poorest sectors of our economy. Which brings us to the Presidential elections.

I fully understand how many of my friends hanker for the change that will bring about greater equity in our society. The economic elite of this country has not been known for its concern for the masses and that is putting things mildly. I fully understand the yearning for BIG CHANGE.

I can see that many of us equate continuity with indifference to the plight of the country’s countless needy. This is a fair concern. But let us not be pushed towards a reckless path just because we are fed up.

Duterte means big change. Or at least this is the rallying cry of his more rational supporters. Is it a change towards the right direction? Allow me to ask a few questions that could perhaps be the start of a more meaningful debate among the supporters of the Presidential candidates.

We want an end to corruption. The Aquino administration has taken the boldest steps of any Philippine government in this respect. Not enough, you say? Duterte can do better? How can an individual who nonchalantly declares that he has been cheating (copying) since Grade One have the moral compass to do more? This candidate thinks that revealing this tidbit is even amusing and charming!

We want to see an end to impunity and to the senseless killing of reporters and the helpless communities that they are trying to defend. We need the Freedom of Information Law and many other initiatives towards a fairer society. Sadly, we have seen how Duterte has been contemptuous of his obligation for greater transparency. A “magbubukid” named Emilio Aguinaldo? C’mon, have you ever seen anything as condescending and insulting of the voting public as that exchange in the last Presidential debate?

We want a government that is inclusive and fair.   The crass joke about raping a missionary is outrageous and despicable. I do not know of a single decent person who will cross that line under any circumstance. Certainly, none of my friends who profess to support Duterte. This candidate even has the nerve to demonstrate righteous anger with the backlash to his comments and even dares to insult our intelligence by justifying his act by saying he lost his temper? God help us, indeed.

We want a government that can act and deliver on its promises. Good public administration requires quiet toil, long preparation, consistency and steadfastness,  and incredible amounts of patient, hard work. Is this something that we can expect from someone who cannot even be bothered to prepare for a two and half hour Presidential debate? Someone who even facetiously claims that the debate questions were leaked to Mar beforehand? What a juvenile! The questions were about the most important issues of the land and each candidate is expected to have done his homework not just for the debate, but for the far more important task of governing 100 million Filipinos. Someone should ask the impatient and simplistic Duterte how fiscal policy should adjust to the fluctuations of the Philippine Peso in a case where extractive industries will be allowed to expand. I’m sure I would laugh out loud if I did not cry first.

Mar was the only candidate in that last debate who was well prepared and  could hit the ground running. End of story.

Let me end with an insight that I have in my own professional life. I realize that the company that I work for is good but is not perfect. It cannot offer all the opportunities for all its staff all the time – No company can. Because of this I need to make sure that I listen to every employee that asks for permission to leave and pursue opportunities somewhere else. In these conversations, I make sure that I understand what it is in our company that pushes the employees towards the new job quite apart from the intrinsic attraction of the new job itself. Whenever the “push” is greater than the “pull”, I ask the person to step back and reconsider because this situation is always a formula for career disaster.

Let me address my dear friends now. No government is perfect. No government can offer all the opportunities to all its citizens all the time – no matter how hard it tries. I realize the urgency, given the oppressive poverty in our country. I know that at some point, I will end up criticizing Mar and some his policies. But I will not be pushed into a desperate act of supporting a charlatan like Duterte just because the continuity being promised by Mar and Leni is not perfect.

Mar and Leni are the only viable candidates to lead the country in the next six years.

Struggles of the Morning Man

She’s working a midnight grind

Dressed in white by the dawn’s eerie light

She reaches my cobwebbed mind

She brews us up some coffee

And pulls the covers off me

Morning man, doesn’t take much to wake me

Just you shake your morning man

I’ve been dreaming of how you’ll wake me

Since this endless night began

Rupert-Holmes

Rupert rising to the 5 am skies

I was listening to a collection of old songs and one familiar tune from 1980 struck me. I guess I was listening to the song with a pair of fresh ears, so to speak. That song is called “Morning Man” and was written by the multi-talented Pointing finger Rupert Holmes.

Morning man

This poignant track was penned long before the era of the Philippine call center but it could well have been written for the couples who live under the same roof but in different time zones just because one spouse works in a call center. There’s an almost aching despondency that you hear in the song.  Couples in that distraught situation must feel it every time they kiss hello-goodbye in the morning and in the evening – being together and yet apart.
DSC_0098

Time for work

Companies may call the extra pay they give their employees “night differential” or some similar name. I think I will call that something extra “Morning Man Pay” or “Endless Night Pay”  to remind us better of the trade-off that families make so that one of the spouses can take a graveyard shift in a call center.

When Patrick Pichette retired as CFO of Google, he wrote in a Pointing finger parting memo that he looked forward  to not having to make tough choices and  constant trade offs, especially between business/professional endeavors and family/community anymore. Amen, say the heroic thousands in the graveyard shift.
Maraming salamat, Rupert Holmes.

Filipino Moderno in New York’s East Village

How would you like to taste Pacquiao’s punch? In Maharlika restaurant in New York’s East Village, you can. And you can pair the cocktail with the equally exotic sizzling sisig. This little resto that can has also been featured for its arroz caldo.

Maharlika's Permanent location

Photo credit: Foodyholic

But watch out. These New Yorkers sometimes eat strange and bizarre food. Watch this: Business Insider video on the balut. Balut