The Philippines’ Chronic Financial Crisis and the People’s Struggle

A government that has a weak economic base mainly due to its own doing cannot be trusted upon by the people, and definitely will not last. Corruption and plunder in government continues unbridled and makes the current administration bereft of any moral and political ground to rule.

By Bobby Tuazon
Bulatlat

The General Assembly of the Ecumenical Bishops Forum is indeed very timely because more than any other recent historic epoch the role of the progressive Church in social and political transformation is quite crucial today. This is the time not only for reflection but more so in marshalling all our wisdom and guidance to make sure that we, together with the rest of the Filipino people, shall have the full grasp of the current national situation and will be able to unite on what needs to be done.

Yesterday, on Oct. 18, about 5,000 farmers from Central Luzon, Southern Tagalog and the Bicol Region began a “farm strike” by leaving their farms to participate in a series of protest actions against poverty, landlessness and hunger. They will converge in Metro Manila where they will picket the Department of Agrarian Reform (DAR) office in Quezon City and then march on to Malacañang to call for an increase in palay selling prices – from the current P7-P9 to P15 a kilo. The protest actions in these areas are being repeated in other regions of the country.

Last week, organized and militant workers stepped up their campaign for an immediate and legislated nationwide across-the-board minimum wage increase of P125, the same amount which they have been fighting for since 1999 during the Estrada presidency. They are joined by unionized government employees, public school teachers and hospital workers in their thousands who are also demanding an immediate salary increase of P3,000 or more.

The upsurge in these social protests has come about in the midst of the public clamor for the resignation of GSIS president Winston Garcia who is accused of not only graft but also of incompetence. Tens of thousands of urban poor families most of them living along railways are restive as they face eviction from their abode and livelihood and then dumped in inhospitable areas outside the metropolis – all these to make way for an ambitious, multi-million Northrail project that will favor multinational business interests.

These are some of the dire effects of a chronic economic crisis that takes its roots nearly 60 years ago following the country’s “granting of independence” by its colonial master and which has over the past years worsened particularly under the Macapagal-Arroyo administration.

Unprecedented unemployment

As of April this year, 11 million Filipinos are either out of work or are otherwise not working enough for a decent living – nearly two million more than in April last year.¹The 11 million jobless include five million who are totally unemployed and six million underemployed. This translates to almost 14 percent unemployment rate compared to last April 2003’s 12.2 percent – and is considered the worst in 50 years. Quite appalling is that more and more of those who have full-time employment are sliding into under-employment to join the growing ranks of those who hold casual, low-paying and uncertain jobs.

This should not surprise us at all because even those who should be better off than the average worker or even the domestic - such as doctors and nurses - are now forced to work abroad because of lack of better job opportunities at home. In 2003, according to the World Health Organization (WHO), 250,000 Filipino nurses were reported to have relocated in the United States, United Kingdom and other countries. In 2001-2002 alone, about 16,500 Filipino nurses left for 31 countries.² They now join the 10 million overseas Filipinos – about 12 percent of the Philippine population - working either as contract workers, semi- and skilled-workers and relocated or expatriate professionals and intelligentsia such as physicians, programmers and the like. Marcos may have started the labor-for-export policy as a source of dollar revenues for the cash-strapped government but it has been under Macapagal-Arroyo where the biggest number of Filipinos are going away so desperately that they are willing to die working even as auxiliary workers for the U.S. military in the Persian Gulf so long as they can feed their families back home.

Under the Macapagal-Arroyo government, the gap between daily minimum wage and the value of basic daily requirements has grown even wider. In nominal terms, the daily wage is now P250 in the National Capital Region (NCR, where it used to be P194 five years ago) and is even lower in the provinces.

Five years ago, the daily cost of living was P383.30 in national average and P455.74 in the NCR. This year, the daily cost of living in the NCR has risen to P594. This means that a family of six in Metro Manila should have a monthly income of P17,820 but the minimum wage earner can only get at most P6,600 monthly. Despite limited but nominal increases, all minimum wage earners throughout the country cannot make ends meet. In the NCR alone, even three minimum wage earners are not enough for a family of six to survive. ³

It is far worse in the Autonomous Region of Muslim Mindanao (ARMM) where, statistically speaking, a family of six needs eight wage earners in order to live decently. Reason: The daily minimum wage rate in the region has remained unchanged at P140 since 1998, making it the lowest in the entire country. Yet, the ARMM has the highest family living wage requirement, according to the National Wages and Productivity Commission (NWPC). As of February 2004, a family of six needed P748 daily to meet food and non-food requirements or P22,440 every month. Considering that a minimum wage earner can only earn a gross monthly income of P3,080 (assuming that he or she works for 22 days in one month), something like eight minimum wage earners are needed to meet the needs of a family of six! ⁴

Poverty threshold

Clearly, the income earned by an average Filipino family today is miserably short of what even the World Bank (WB) estimates as the poverty threshold: $1 a day per individual or, in Philippine standards, P387.70 a day for a family of six (multiply P56 by 30 days and divide it by 26, the number of man days in a month). In the NCR, the daily wage falls short of the WB poverty threshold by P137. ⁵

Because government, particularly the National Economic Development Authority (NEDA) during the Marcos years, continues to manipulate statistics in order to paint a rosy picture about the Philippine economy that in turn is expected to entice foreign investment, it is quite hard to estimate the extent of poverty in the Philippines today. Administration economists can only admit 40 percent of the population in the poverty threshold; independent estimates say otherwise – from 60 percent to even 80 percent.

So based on National Statistics Office (NSO) surveys, the actual number of poor families has gone up from 4.36 million (26 million individuals) in 1985 to 5.14 million in 2000 (30 million persons) or roughly 40 percent of the Philippine population. On the other hand, the income disparity between the top 10 percent of the national population whose income was 19 times greater than that of the bottom 10 percent went up 24 times between 1994 and 2003. ⁶

Seven in every 10 poor Filipinos are found in the rural countryside. Furthermore, nearly half of all persons living in the rural areas are poor. ⁷

Poverty and hunger has worsened under Macapagal-Arroyo. About two weeks ago, the Social Weather Stations (SWS) disclosed that 15.1 percent of Filipino household heads it surveyed said their families had nothing to eat on more than one occasion in the last three months. This, the SWS said, was triple the number of Filipinos who went hungry in 2003. All this means that with roughly about 13.3 million families in the country, about two million families or 12 million individuals can hardly eat three square meals a day.

Just last week, our writers in Bulatlat who were writing a report for World Food Day (which fell on Oct. 16) found that if you want to see the visible faces of poverty and hunger in Metro Manila all you need to do is walk by the avenues at night near hotels, fastfoods and restaurants and right before your eyes are hordes of people, young and old, preparing to sleep by the road, some even picking leftover foods from the garbage. We never saw these sights years ago.

But I don’t think I need to elaborate on this as all of us are aware what economic crisis means to the average Filipino. Foremost of which is that every time the country is riveted by news about economic crisis the people are always the victims and the first to sacrifice even more.

More lies, more of the same

Under these conditions, what is the Macapagal-Arroyo administration’s response? I think it is simply this: More Lies and More of the Same.

One of the lies or farcical arguments being hyped by Mrs. Macapagal-Arroyo and her economic advisers and spin doctors like Press Secretary Ignacio Bunye is that the only economic problem that we have is a “fiscal problem.” After confirming a study by 11 professors from the UP College of Economics that the Philippines is facing a “fiscal crisis,” the president’s own Cabinet and economic advisers backtracked and chorused that we only had a “fiscal problem.” Simply defined, fiscal crisis is the imbalance between revenues and expenditures often attributed to defects in the fiscal structure. Technically, they said, a fiscal crisis arises if government is in default of its public debt and has a deficit that can no longer be financed due to limited access to the capital markets. The country, they said, has not slithered to this point. True, it is able to pay its debts amounting to as much as 70 percent of the national budget by continually bleeding the poor taxpayers dry.

But we don’t need to argue with that – one can never argue sanely with a perennial liar. We just look at the figures: As of end-2003, government’s total consolidated public debts amount to P5.9 trillion or 137 percent of the GDP (which is many times higher than even WB’s manageable public debt ceiling at 30 percent of GDP). The Philippines has surpassed all other countries in Asia in the size of its consolidated public debts. ⁸

Granting that what Macapagal-Arroyo can only admit is a fiscal problem, just the same she hides the fact that compared to past presidents, she has borrowed the most. Her borrowings alone from 2001-2003 (three  years) amounted to more than the combined borrowings of Presidents Ramos and Estrada (or a total of nine years), with debts accumulated at P1.2 billion daily.⁹ The heavy debt of the government has thereby brought about its current huge fiscal crisis, with budget deficit nearing P200 billion.

The government refuses to heed the calls of concerned sectors including progressive legislators who believe that, on a short term, government can reduce the public debt and earn P80 billion which it wants to raise immediately by making tax collection efficient (collecting taxes from big tax evaders, for instance) and going into debt renegotiation or moratorium, which other debt-strapped countries have done successfully. Instead, the Macapagal-Arroyo government wants to impose new taxes even if these taxes will hurt the poor more than the middle class.

Diversionary tactic

Insisting that more tax measures and belt-tightening will do the trick in saving the economy from a fiscal problem is the Macapagal-Arroyo government’s way of diverting public attention away from the fundamental issue, i.e., that the current fiscal crisis is the worsening symptom of a deeper wound. By passing the burden of new tax measures and belt-tightening on the people, the government is adopting the same onerous and ruthless remedy that its monopoly-capitalist masters led by the U.S. and the triumvirate IMF-WB-WTO always prescribe particularly to Third World former colonies or neo-colonies: Make the people suffer even more not only through new tax burdens but also reducing budget deficits (hence, further cuts in health, education and housing appropriations) and the acceleration of structural adjustment programs such as deregulation, privatization and liberalization.

Years after maintaining the Philippines under neo-colonial control following the “grant” of independence in 1946 through such onerous policies as the free trade act, Parity Rights amendment, Laurel-Langley agreement and the like, the U.S. government in 1959 cut off loans from the U.S. Export-Import Bank and U.S. private banks, thus precipitating a financial crisis. ¹⁰ During his presidency, Diosdado Macapagal proclaimed a full decontrol policy allowing U.S. corporations to remit superprofits thus causing the first major devaluation of the peso and increasing trade deficits. The $200 million foreign debt incurred by the Garcia presidency ballooned to $600 million by the end of the Macapagal regime. Ferdinand Marcos borrowed heavily for his ambitious infrastructure projects favoring his cronies and, after declaring martial law, went on a frenzy of heavier foreign borrowings while giving unprecedented incentives including unlimited remittances to U.S. and other foreign investors. A severe financial crisis broke out in 1983 right after the Aquino assassination. By the fall of the Marcos dictatorship in 1986, foreign debt had risen to $27 billion and local public debt to P144.4 billion.

All Marcos’ predecessors, from Corazon Aquino to Joseph Estrada continued to rely on foreign borrowings but it was Fidel Ramos who surpassed Marcos’ total local and foreign borrowing: In only six years, local public debt rose to P922 billion and foreign debt to more than $45 billion. By the last year of the Ramos presidency, another financial crisis set in. Meanwhile, foreign debt under Macapagal-Arroyo is $56.3 billion as of June 2004.

Presently, the Macapagal-Arroyo government is under IMF incubation to give priority to automatic debt servicing (which gobbles up nearly 50 percent of the national budget or up to 70 percent including public debt), to raise the tax burden, to reduce deficit spending and adopt austerity measures – all at the expense of the people.

The other facts hidden – or which the Macapagal-Arroyo presidency continues to deny – is the fact that huge public debts continue to accrue due to corruption and tax evasion mostly by the president’s own cronies and political financiers. This government is not only friendly to big tax evaders but is supportive of top bureaucrats in both the civilian and military bureaucracy who are now accused of graft and corruption. It continues to promote generals and other senior AFP officials who face charges of committing human rights violations as well as graft.

Tariff revenues

Also hidden from the public is that a big loss of government revenues is the result of the removal of tariffs on imported products, one of the requirements of the trade liberalization policy. Tax revenues as part of the country’s gross domestic product (GDP) decreased from 16.9 percent in 1996 to 12.3 percent in 2003. Import duties went down from 5.6 percent of the GDP in 1993 to 2.4 percent in 2003. In 2003 alone, the government lost P100 billion ($1.79 million based on a $1:P56 exchange rate) from reduced tariffs and P170.8 billion from fiscal incentives, tax exemptions, and subsidies to foreign investors.

Above all, the Macapagal-Arroyo government is silent about the roots of the financial crisis. The roots of the financial crisis are the foreign domination of the economy, a backward feudal economy and bureaucrat-capitalism. Like her predecessors, Macapagal-Arroyo screens the accountability of U.S. and other foreign monopoly capitalists in keeping the Philippine economy agrarian with the collaboration of the local ruling elite.

President Macapagal-Arroyo cannot just wash her hands off the current financial crisis. She should also be squarely blamed for the deterioration of the economy – and the economic conditions of the people – after she, as a senator in 1994, engineered the Philippines’ entry into the regime of the First World-dominated General Agreement on Tariffs and Trade (GATT) and later, the World Trade Organization (WTO). Recent assessments reveal the fact that “free market” globalization has further weakened the country’s economy, increased its trade deficits, entrenched foreign monopoly control of the economy and led to the further immiserization of the people – the same conditions that now plague many peoples and countries particularly in the Third World today.

A government that has a weak economic base mainly due to its own doing cannot be trusted upon by the people and definitely will not last. Corruption and plunder in government continues unbridled and makes the current administration bereft of any moral ground to rule. The Macapagal-Arroyo government is further weakened by the corruption that like a termite renders the Armed Forces of the Philippines structurally defective even as it engenders further disillusionment among some officers and men who have lost trust in their commanders.

In the next few months, we will expect an upsurge in mass protests owing to the deterioration of the people’s economic lives and the sheer inability of the government to deliver its avowed promises of a better life. But I believe that there are three conditions or possible scenarios that the people have to confront: first, a rise in political repression; second, possible coup threats by military extremists; and third, greater U.S. intervention.

Rise in political repression

Last week, a survey conducted by the Wallace Business Forum noted that 50 percent of top Filipino executives believe a high probability of civil unrest if the social, economic and political conditions of the poor are not improved. Almost at the same time, the World Bank which has traditionally prescribed bitter, anti-people economic pills for the country for some 50 years surprisingly called for granting Filipino workers’ demand for a wage increase saying that labor could no longer cope with the current economic conditions in the Philippines.

Civil unrest is nothing new in the Philippines as the history of the Filipino people over the past five centuries has been an epoch of social and political struggles. We fought three colonial powers and continue to fight one of them; we also toppled two despotic and corrupt presidents over the past 20 years. What is new under the Macapagal-Arroyo government is that the signs of worse things to come are coming from some of the sectors that support the regime – the business elite and a world multilateral agency.

Expecting an upsurge of mass protests, Mrs. Macapagal-Arroyo last week urged Congress to pass the anti-terrorism bill (ATB) saying it was “a prerequisite to our fight against poverty.” How the ATB is connected to the “fight against poverty” is beyond me but we can only surmise – and not without basis – that it will be used to give more teeth to present repressive laws and instruments, many of them dating back to the Marcos dictatorship, to silence militant labor, peasant, Church and other sectoral and multisectoral organizations. The ATB, as we all know, is an authoritarian measure that, in the guise of “fighting terrorism,” is actually meant to curtail freedom of expression and other civil liberties.

The ATB will only institutionalize all previous moves, particularly during the Ramos and Estrada regimes, to restore authoritarian rule in the country and entrench the monopoly of power by the ruling clique and foreign intervention.

We don’t need to look of course into the ATB to say that the suppression of people’s rights is threatened. Since the fall of the Marcos dictatorship, except for the elections that window-dress reactionary rule, people’s democratic rights continue to be suppressed particularly in the labor front and in the rural countryside where human rights abuse is mounting.

In less than three years, military and police authorities under Macapagal-Arroyo have reportedly committed 3,133 cases of human rights violations victimizing 172,281 individuals including 17,201 families. Specifically as of August this year, there were 319 victims of summary execution and massacre; 1,191 victims of illegal arrest and detention; 113,211, forcible evacuation and displacement; 1,236 victims of hamletting. In new cases that rarely happened before, 14 human rights workers have also been summarily executed. As of July this year, there are 248 political prisoners all over the country.

Possible coup threats

Since Marcos, the armed forces have been the main pillar of elite political rule in the country – without the AFP, the reactionary government is nothing. Many AFP officers believe that they are not only a military force but also a political force. Their role today is mainly as a power broker: Whoever its top command sides with is assured of political rule. That’s why since Marcos, the AFP – along with national police – has been most favored by presidents in terms of budget priorities, salary increase, perks and like. That’s why, even if it decides to, it cannot curb corruption in the military bureaucracy.

But economic and political conditions remain today for a possible military power grab through a coup d’etat. Military coups have become an institution in the armed forces.

In my own count, there have been 13 coup attempts since the Aquino presidency, including last year’s Oakwood mutiny which could have led to a military coup. Especially for an institution that is continually weakened by rivalry for promotions, systemic corruption and other problems, and mass demoralization in the midst of acute economic, social and political crisis the AFP is now, more than ever, vulnerable to a military coup that could lead to a power grab of the civilian authority.

Deepening U.S. intervention

Under President Macapagal-Arroyo U.S. armed intervention and aggression in the Philippines has increased. In exchange for economic and military aid, the president conspired with U.S. President George Bush in making the Philippines as the “second front” of the “war on terror.” On the pretext of fighting terrorism, the U.S. military has used the Cold War-vintage Mutual Defense Pact of 1951 and the Visiting Forces Agreement to violate once more the country’s national sovereignty and territorial integrity by deploying thousands of troops and special forces and revitalizing its military presence here as a base of operations for power projection in Southeast Asia and elsewhere. The Macapagal-Arroyo government has also acceded to U.S. demands to grant immunity guarantees for its forces from criminal prosecution and to meddle into what is purely an internal civil war not only through the JUSMAG and the supply of military logistics but also by tagging legitimate revolutionary forces fighting an ideological cause as “terrorist” thus jeopardizing the ongoing peace process.

The other arm of U.S. intervention in the Philippines is the U.S. Aid for International Development (USAID). Last year, the USAID came under scrutiny by members of the Philippine Congress for dipping its hands into the country’s legislative and executive affairs through AGILE (Accelerating Growth, Investment, and Liberalization with Equity). The multimillion-funded AGILE project – which count some Cabinet secretaries as its consultants and advisers - was reported to be involved in the drafting of bills and the formulation of policies seeking to speed up the process of privatization of some GOCCs as well as agencies such as the National Food Authority (NFA).

It is in Mindanao however where USAID, in coordination with a number of U.S.-based NGOs linked to the U.S. Congress and state department, has funneled huge funds intended for so-called MNLF rebel returnees as well as in enticing the Moro Islamic Liberation Front (MILF) to reach a final agreement with the GRP in return for millions worth of grants in aid. There have been reports that Mindanao particularly in the southern provinces is being developed into a haven for foreign monopoly capitalist investment as well as a staging base for projecting U.S. military power in Southeast Asia.

U.S. intervention in the Philippines will increase in the years ahead as the region including South China Sea increases in importance to U.S. strategic security and commercial interests and as people’s revolutionary struggles in the Philippines and other parts of Asia intensify.

Conclusion

Questions have recently arisen in many circles including the Philippine media how long the Macapagal-Arroyo government will last considering the bad weather that it us now grappling with could deteriorate into a disaster. Will there be another Edsa? Will the Filipino people support another Edsa?

The financial crisis which aggravates the chronic economic crisis only signifies a government that is already unable to rule. The Macapagal-Arroyo presidency only exists to delay an economic collapse that is bound to happen anyway and, politically, to make sure that the interests of the ruling elite are protected in the midst of the economic crisis that they themselves are accountable for. Given that the elite-dominated government is unable to institute lasting and comprehensive solutions to the current financial crisis - unless by a stroke of miracle it decides to attack the fundamental roots of the crisis and take up the broad interests of the people – its remaining role is the application of all manipulative and coercive measures to suppress an organized civil unrest and make sure that the state remains safe in the hands of the ruling elite and their foreign monopoly capitalist master.

If this is the case, then I believe the only recourse for the people is to call for the president’s resignation.

SOURCES:

1.     Sandra Nicolas, “Government Destroys One-Half Million Jobs, Record 5 Million Jobless,” Bulatlat, April 2004.

2.     Bobby Tuazon, “Filipino Nurses as ‘Band Aid’ Solution,” Philippine Graphic, May 2004.

3.     Danilo Araña Arao, “3 Family Wages Earners Not Enough,” Bulatlat, Vol. IV, No. 21.

4.     Danilo Araña Arao, “8 Breadwinners Needed to Support a Family of 6 in ARMM,” Bulatlat, Vol. IV, No. 33.

5.     Joseph S. Yu, “Workers Need P137 More to Meet WB Poverty Standard,” Ibon Features, Posted by Bulatlat, Vol. IV, No. 36.

6.     Zelda DT Soriano, “16 Years of Agrarian Reform: Are Peasants Better Off Now?” (Last of 2 Parts), Bulatlat, July 2004.

7.     Jose Ramon G. Albert & Paula Monica Collado, “Profile and Determinants of Poverty in the Philippines,” Statistical Research and Training Center.

8.     Edberto M. Villegas, “The Philippine Financial Crisis and the Neo-Colonial State,” Paper, Center for Anti-Imperialist Studies, Oct. 2004.

9.     Villegas, ibid.

10.   Jose Maria Sison, “Chronic Financial Crisis and the Way Out,” Paper for Forum of Bayan-NCR, Oct. 2, 2004.

(Paper for the General Assembly of the Members of Ecumenical Bishops Forum, Camiguin Island, Oct. 19-20, 2004)

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