I THANK Richard Heydarian for inviting me to be on a panel with professors Jesus Felipe and Leloy Claudio at Manila House last Jan. 8 on the Philippines’ economic prospects and corruption. It was very illuminating to meet and listen to the two professors who have thought both deeply and insightfully not just where we are, but what we should do. Dr. Claudio’s scholarship covers our centuries-long disastrous economic policies that got us here and Dr. Felipe our false analysis of what caused our economic underperformance. It is available on YouTube.
I am glad they share my disdain for the Washington Consensus and the lazy thinking exhibited by many of our economic managers and academics since at least our crisis in 1983. I am grateful for the kind words they have for my unscholarly and layman take on our problems, and where we are (lack of critical thinking, slavish teacher’s pet mentality to what our multilateral overlords have told us to do but not followed themselves and the need for industrial policy aimed at manufacturing when all we have done is destroy it, among other points). Dr. Claudio explains the long arc of economic history and analysis of why we are at this point, and the reasons and context behind it. Dr. Felipe analytically explains why we are here, and the regressive and unimaginative economic mindset that underlies that. I urge you to check out their interviews on YouTube and read their books and papers. You will be a lot smarter and more informed.
I thank Richard for his indefatigable work in bringing intellectual analysis and discourse to us. I am grateful all three noted my efforts as a banker and nonacademic in stimulating discussion in the media for this type of economic analysis and discussion. Shortly after I started appearing monthly on “Market Edge” (thank you ANC and Mimi Ong), I was at a Manila Times forum (thank you for the column) and then-Bangko Sentral ng Pilipinas (BSP) governor Felipe Medalla was a speaker as well, and afterward he congratulated me but also said the problem is I am too intellectual. I disagreed and told him; I do not get paid for this or do it for a living, so I want to speak intelligently and respectfully to my audience rather than talk down to them like some in search of popularity or fame. I still believe in that, and I am grateful that at least for a limited but sizable audience, experts like Leloy Claudio, Jesus Felipe, Richard Heydarian, former NEDA director general Cielito Habito and when he writes his occasional but insightful columns, former Finance secretary Margarito Teves do that. On other topics, for elevated insight, I greatly respect Ben Kritz, Jose Dalisay and Marlen Ronquillo for their intelligent discourse that I learn from. I would rather our audience be challenged and illuminated rather than be condescended to. I also really admire the quiet confidence, intellectual openness and humility of secretary Teves. This was again seen at the forum where, rather than agree or disagree, and he seemed skeptical of some of what was said, he asked for explanations and clarifications regarding the points raised by Dr. Felipe.
What did I like most about the panel discussion? We talked about weighty issues — economic underdevelopment and corruption — with depth, nuance, embraced its complexity and difficulty, and without resorting to personalities and partisanship. I will not cover what I said as I have discussed it many times in this column and elsewhere.
Dr. Felipe’s main point in the discussion is how money is created by the BSP and the characteristics of fiat money and its effect on the government, banks and us. It was over an hour of the two-hour panel, and it is a complex and for many, novel issue. One of his points is that developmental money is there and is necessary if we are to stop underperforming as we need to move to quality manufacturing jobs rather than only services and exporting labor. While he is factually correct, and he did say the creation of money must be productive and has limits, we did not discuss that part. Let me add my caveat, which is only attributable to me. While clearly, we have much more room for developmental spending that we can afford, there are limits and too much becomes inflationary when creation of fiat money is abused. See many cases in Latin America, Africa and Weimar Germany. How much depends on the absorptive capacity of the economy and its productive use. You can create money to be profligate and waste it or issue beyond the economy’s capacity (including growth not just status quo). Also, on debt-to-GDP (gross domestic product) levels, I noted that most Third World countries are investment grade if their debt-to-GDP is about 60 percent. Yet the debt-to-GDP of the US is about 120 percent (source: FRED, the Federal Reserve Bank of Saint Louis) and Japan’s over 250 percent (source: DebtClock.io). Dr. Felipe’s view is that the 60 percent is an arbitrary dictate of the multilateral agencies. I would add the US and Japan are reserve currencies, majority of the debt is domestically sourced, and they have the absorptive capacity. Not the same for us humble Third Worlders. The panel all agreed there is space for a more expansive economic policy with a developmental approach to encourage manufacturing, it is not without limit. We did not discuss what that level is, so the view stated above is mine and do not attribute it to the others on the panel.
Every time I listen to Dr. Claudio, I learn a lot, and his insights are deeper and different from my own, which I am extremely grateful for. He may become the most influential person on Philippine economic history given his very perceptive insights and explanation. I look forward to reading his recently published book “The Profligate Colonial: How the US Exported Austerity Through the Philippines” (Cornell University Press) shortly and his other books. He is an associate professor at UC Berkeley, which together with Yale and Princeton are considered the top 3 universities in the US for Asian history. One of his insights is how we seem to have taken economic discourse away from debate and view it as settled. He gave a great example: When the Supreme Court decided on the impeachment of the VP, there was much commentary. Contrast the lack of discussion over the decisions of the BSP. Compare that as well to how Federal Reserve decisions are analyzed, praised or criticized. Also, how “crony capitalism” was a colonial term used to fight against independence started by Governor General Leonard Wood that we have accepted and internalized. Rather than repeat his many other insights, watch his interviews and read his books.
Reprise to what I wrote last week and now see, it seems congressmen Leandro Leviste and Francisco Barzaga did throw boomerangs.
Disclosure: The author is an independent director of the state-run Maharlika Investment Corp.