Arroyo’s bankrupt and deceptive economic policy

By Professor JOSE MARIA SISON
NDFP Chief Political Consultant

Gloria M. Arroyo, the fake president, keeps on babbling that her regime is propelling the Philippines to become a “first world country”. She is obviously lying.

By Professor JOSE MARIA SISON
NDFP Chief Political Consultant

Gloria M. Arroyo, the fake president, keeps on babbling that her regime is propelling the Philippines to become a “first world country”. She is obviously lying.

In utter subservience to the US-dictated policy of “neoliberal” globalization, she has worked against the line of national industrialization and genuine land reform and has aggravated and deepened the agrarian, pre-industrial and semi-feudal character of the Philippine economy. She has worsened the backward and impoverished “third world” conditions of the Philippines.

The US and other foreign monopoly capitalists have collaborated with such local exploiters as the big compradors, landlords and the corrupt bureaucrats represented by Arroyo to denationalize the economy and prevent its industrial development through the so-called liberalization of trade and investments, the privatization of public assets and anti-social deregulation at the expense of the working people, women, children and the environment.

The Arroyo regime has misrepresented as “development” the consumption-led and debt-ridden growth of the economy. It has used domestic and foreign borrowing to finance and abet the growing trade and budgetary deficits and to conjure the false illusion of economic growth. It wastes public funds through overpriced and graft-ridden infrastructure projects and the purely parasitic expenditures for the military and bureaucracy.

The Philippine economy remains dependent on the production of agricultural and mineral raw materials, which are being exported at greater volume but at lower prices. At the same time, agriculture has become lopsided, as production of staple food is neglected and food products are dumped on the Philippines from abroad under the policy of trade liberalization. Thus, the country has become a net food importer.

The low value-added semi-manufacturing for re-export provides little net income because of transfer pricing and the heavy amount of imported components. The large-scale export of women and men (now more than 10 per cent of the population) as overseas contract workers is the result of the worsening underdevelopment and lack of job opportunities in the Philippines. It has become the biggest source of foreign exchange income although at great social cost to the country.

The Arroyo regime has deliberately raised the value of the peso by grabbing and undervaluing the foreign exchange earnings of the overseas contract workers, by increasing the foreign debt through program and project loans and the sale of bonds in the commercial market and by attracting portfolio investments, structured dollar loans and Japanese yen in the carry trade.

The national debt keeps on increasing because there is no real development base for reducing the trade and budget deficits. The attempt of the regime to increase revenues has dismally failed because of the underdeveloped, bankrupt and depressed condition of the real economy, the policy of trade liberalization and the unbridled corruption that allows tax evasion and raids on the treasury. The Arroyo regime has been auctioning off state assets to foreign vultures in combination with local vultures who are cronies and close relatives of the Arroyo couple.

What is in store for the Philippine economy in 2008? The underdevelopment and chronic crisis of the Philippine economy make it extremely vulnerable to the current financial crisis and recessionary trend being generated globally from the US. These have started to have a severely adverse impact on the Philippines. The Filipino people will undergo unprecedented economic and social suffering in terms of rising unemployment, decreasing real income, soaring prices of basic goods and deteriorating social services.

The US and global demand for both the Philippine raw-material exports and semi-manufactured re-exports will contract because of the continuing industrial decline, reduced employment and recessionary trend in all the imperialist countries. US economic growth is expected to go down to less than two per cent from the usual level of around 3 per cent. The thirty OECD countries are expected to have an average growth rate of less than 3 per cent from the usual level of more than 5 per cent.

The US consumer market has drastically contracted because of the decline of regular employment and incomes as a result of the series of attacks on the US working class. Under the piratical banner of neoliberalism, the monopoly bourgeoisie has pushed down the wage level, cut back the social benefits and eroded the democratic rights of the workers. It has undermined the US consumer market and caused the crisis of overproduction to recur.

And yet many of the workers were inveigled to engage in stock speculation through easy credit and to let investment managers raid their pension funds during the high-tech bubble in 1995-2000. The bigger scam came when more workers and other people were drawn to far easier credit for consumption during the housing bubble from 2001 onwards. In the wake of the ongoing mortgage meltdown, the American consumers are without savings and are deeply indebted.

The mortgage meltdown has acquired global dimensions because US mortgages were repackaged and sold as financial products under such fancy names as “structured investment vehicles” and “asset-backed securities” to foreign banks and investment houses. Since August this year there has been an epidemic of write-offs and write-downs, involving the evaporation of more than USD 400 billion. This is expected to result in the tightening of international credit by USD two trillion as federal and commercial banks become more prudent in lending.

But the financial crisis generated globally by the US is not only about the mortgage meltdown and the necessity of writing down or writing off “asset-backed securities” by foreign banks. The US national debt has risen so fast from the level of USD 5.7 trillion in 2001 to USD 9.1 trillion at present. It is expected to rise to the level of USD 10 trillion before Bush steps down. The US has abused confidence in the US dollar as the global currency.

The US trade deficit has rapidly grown to the annual level of more USD 850 billion because of the US industrial decline and outsourcing of consumer goods, such as those produced in China, India and Southeast Asia. The US budget deficit has also grown rapidly because of the tax cuts to corporations and the wealthy and the unbridled spending for the Pentagon and the wars of aggression. The Pentagon budget has risen to the annual level of USD 600 billion and the costs of the Iraq war have gone far beyond the officially admitted level of USD 500 billion for “operations” and are already in the range of USD one to two trillion if related costs are taken into account.

The abuse of international credit by the US to cover trade and budget deficits has led to a rapid decline of the dollar and to pressures for an international credit crunch. The dollar decline is generating defensive responses from such big US creditors like Japan, China and the oil producing countries. To play safe, they are gradually reducing their dollar positions in favor of other currencies or a basket of currencies. The financial crisis of the US is serious enough to start undermining the standing of the US as the sole superpower in economic and politico-military terms, as the main engine of global economic growth and as the global market of last resort.

In 2008 the underdeveloped and semifeudal Philippine economy will face serious problems in relation to the export of raw materials and the re-export of low value added semimanufactures in a shrinking global market as well as in relation to the securing of new loans and selling bonds to service the accumulated debt and finance the import of oil and other critically needed goods. The international credit standing of the reactionary state will be further degraded as its difficulties to repay the public debt and collect revenues become obvious.

As the international reserves will decrease conspicuously, the Arroyo regime will not be able to conjure the illusion of economic growth and raise the value of the peso against the US dollar and other major currencies. In the real economy of the Philippines, the working people and middle social strata will be beset by intensified exploitation, increased poverty and misery and the heavier weight of oppression. The social discontent and people's resistance will further spread and intensify.

 

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