How Gloria Arroyo’s Keynesian Madness Bankrupted the Philippines?
I’m not really surprised by Pres. Benigno Aquino’s communiqué that his predecessor, Gloria Macapagal-Arroyo, left the
government with empty coffers. I wasn’t shocked despite the President’s pronouncement that “even those of you in the know will be shocked.”
Well, what do we expect from a post-modern, Keynesian chief executive like Mrs. Arroyo?
There’s no question about her highfalutin educational background. She was educated in what they call “elite” Catholic schools, which means she must be very religious (for God’s sake!). She obtained her bachelor’s degree in AB Economics from Assumption college and then took her master’s in Economics at the Ateneo De Manila University and her PhD. in Economics at the University of the Philippines-Diliman. She also studied at Georgetown University for further educational upgrade.
Everything she learned and acquired from those top-tier universities somehow changed the course of the country’s history for the worse. Many people cheered when she replaced ousted President Joseph Estrada, as most of them said it was time to have an economist president. Since the country was bankrupt due to corruption, mismanagement and anti-reality policies by our past leaders, we needed a president who’s an economics expert, they said.
Before she entered politics, Mrs. Arroyo was assistant professor in Economics at the Ateneo from 1977 to 1987. One of her famous students at Ateneo is former Agriculture undersecretary Jocelyn “Joc-Joc” Bolante, who is primarily involved in the infamous P700-million fertilizer scam in 2004. She was chairman of the economics department at the Assumption College from 1984 to 1987. She also taught economics at Mary Knoll College and St. Scholastica’s College. If extent of teaching experience in economics were a gauge, Mrs. Arroyo could be considered a brilliant economist. But is she?
Her performance as former president of the land disproves any claim that Mrs. Arroyo is a good economist. Not only did she fail to solve rampant corruption under her watch, she also left empty coffers and huge amount of foreign debt, which means she was never a conscientious, efficient custodian of presidential power.
Most, if not all, economics professors of the so-called “elite” universities are latter-day Keynesians. Only a handful of them, particularly those who believe in Austrian economics, understand how economics works. Also, most philosophy professors in these well-known schools are Kantians, and most liberal social sciences professors are post-modernists and/or Marxists. I say it with full conviction: all Keynesian economics professors are NOTHING but breeders of future leftists, statists, and collectivists, and all liberal professors are NOTHING but a scourge of mass ignorance and stupidity.
What could be the reason why Mrs. Arroyo is considered a failed president? The only possible explanation to her enormous presidential failure in almost all aspects of leadership (e.i. politics, economics, governance, peace and order, etc.) is that she’s a Keynesian economist who believed- and perhaps still believes- in the magical power of big government.
Her predecessor, President Aquino, revealed how she performed in handling the economic aspect of the government: “Almost all of the funds that we were to use in the coming months have been sucked dry.”
“Not even half of the storms that we’re expecting this year have come in. So when I’ll call on you for search and rescue operations, you will be armed with heart and courage because of the dearth of funds and resources,’’ Aquino said.
This only means that having an economist President is never a guarantee to a better Philippines. Yes, one of the biggest problems in our country is economic mismanagement. The only way for the current president to solve the country economic problems is to overcome this obstacle and adopt economic policies that are consistent with economic realities.
I’m currently rereading Henry Hazlitt’s Economics in One Lesson for my future projects. I was really amazed by the accuracy and preciseness of his observations and ideas. Economics is a universal discipline that must be grounded in reality, and its purpose is to improve man’s condition on earth. In order for it to work in any given economic setting, economics must be in accordance with the facts and events of reality. Economic principles must be fact-based and reality-based, otherwise they would only cause destruction and failure.
There are two laws that can be applied in economics. One is the Law of Identity; the other is the Law of Causality. If economists and public leaders go beyond or disregard these fundamental laws, the policies they create or implement would only lead to economic chaos and destruction.
Since Economics is a domain of concepts, it requires the application of a universally effective law— the Law of Identity, which states that an object is the same as itself: A is A. It simply means a thing is what it is, and its characteristics or attributes constitute its identity. A particular object cannot have two identities. A stone cannot be a leaf at the same time, a pencil cannot be a ruler, and a tree cannot be a computer. In the area of economics and politics, a paper cannot be 100-dollar bill at the same time, but this is what is happening in the real world. Most of the economic crises and catastrophes we experience in the past were caused by the non-recognition and disregard of the Law of Identity. This economic ignorance, nihilism, and subjectivity led to the enactment of anti-trust laws and the creation of the Federal Reserve in the United States.
In the Philippines, most of our economic problems were due to the lack of understanding of the Law of Identity. Most of our leaders tend to create policies and laws that are not consistent with economic and political realities. This mentality led to the passage of the 1987 Constitution that establishes a mixed economy bordering on dictatorship.
On the other hand, the Law of Causality is the law of identity applied to action. This explains that all actions are caused by entities. This law was best explained by Ayn Rand, an American philosopher and radical for capitalism, who states that: “The nature of an action is caused and determined by the nature of the entities that act; a thing cannot act in contradiction to its nature . . . . The law of identity does not permit you to have your cake and eat it, too. The law of causality does not permit you to eat your cake before you have it.”
Based on her performance, Mrs. Arroyo believed that we can eat our cake and have it too. This is why she left the government with empty coffers and higher foreign debt. A Keynesian economist, she embarked on government spending to stimulate the economy. However, it turned out that her Keynesian method was a failure since it was never anchored on reality. As a result, the whole nation went bankrupt, both morally and economically.
Mrs. Arroyo is the “bad economist” Henry Hazlitt warns us about in his book Economics in One Lesson.
“The bad economist sees only what immediately strikes the eye; the good economist also looks beyond. The bad economist sees only the direct consequences of a proposed course; the good economist looks also at the longer and indirect consequences. The bad economist sees only what the effect of a given policy has been or will be on one particular group; the good economist inquires also what the effect of the policy will be on all groups.”
The following are what made Mrs. Arroyo a “bad economist” and an enemy of our freedom and individual rights:
- A believer of “big government,” as she doubled the size of the government under her presidency;
- She doubled the size of our national debt;
- She was a great spender, as she believed that more spending could stimulate the economy;
- More interventionist and statist policies were created or enacted during her 9-year reign;
- She’s an enemy of free-market capitalism, as cronies and people close to her got rich during her term;
- She’s a Keynesian.
Our new president is yet to show his true color to the public. An economic graduate himself, Pres. Aquino is fully aware that the country is in bad shape due to the mismanagement and failure of his predecessor to address corruption and other economic issues.
The President knows that Mrs. Arroyo’s Keynesian magic didn’t work, as it catapulted the country not into economic progress and prosperity, but into an economic black hole. He has been saying a lot of good things since his inauguration. The very solution to Gloria’s Keynesian magic is to reverse it.
In order to get the country and the government back in shape, he must consider the following:
- Get rid of the Keynesians and big government economists and planners in the government;
- Read Atlas Shrugged and make it a mandatory reading among all public officials;
- Read and study Hazlitt’s Economics in One Lesson;
- Change the Constitution;
- Cut government spending;
- Cut all forms of subsidies, particularly export subsidy, rice, subsidy, etc.
- Cut all forms of taxes;
- Cut tariff and duties on all imports;
- Repeal all interventionist laws;
- Sell and privatize all government owned and controlled corporations;
- Make privatization a first-year priority;
- Guarantee economic freedom by not enacting anti-trust laws and interventionist policies;
- Respect property rights and intellectual property rights;
- Let both domestic and foreign investors and businessmen invest in intellectual capital, human capital, and financial capital;
- Make “Laissez–nous faire” (Leave us alone!) the nation’s economic motto.