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PNoy’s New Economic Czar a Hardcore Statist, Strong Believer of Redistribution of Wealth and Population Control

May 12, 2012

In a mixed economy bordering on socialism like the Philippines, public economists play a [highly destructive] role in the implementation of

New economic czar Arsenio M. Balisacan

New economic czar Arsenio M. Balisacan

intrusive economic policies, high-cost welfare programs, as well as rights-negating population control measures.

Inside their comfortable offices and boardrooms, these public economists deal with government matters like how to centrally plan the economy to address issues of poverty, unemployment, overpopulation, and income distribution, how to finance increasing government programs with highly limited taxpayers’ money, and how to fix fiscal problems, high budget deficit, increasing national debt, and dwindling tax collection. In other words, these economic geniuses in the government sector have the power to destroy.

The question that everyone needs ask to is: Is it possible to centrally plan a highly complex national economy? To plan an economy, a government economic czar needs to posses omnipotence in order to cover and understand all aspects, areas, and units of a large-scale economy. He needs to consider crucial issues related to wealth-creation and economic gains, such as the primary source of wealth, how this wealth is created, the role of producers or manufacturers, the role of consumers, the importance of a stable currency, the factors of global trade, among others. However, the most important question of all is: Who creates wealth? Is it the government or the private individuals?

In the entire political history of this country, the appointment of economic czars was mostly based on political ambition and ideology. Unlike the country’s politicians who are regularly elected to public office, the appointment of cabinet members and other appointive officials is highly politically motivated. 

Following the resignation of the Yellow regime’s first economic chief, President Benigno Aquino III recently appointed his newest czar to lead the  National Economic Development Authority (NEDA). This government entity is primarily responsible for economic development and planning. Its powers and functions reside in the NEDA Board, which is composed of various high-ranking government officials, such as the President as chairman, the Secretary of Socio-Economic Planning and NEDA Director-General as vice-chairman, and the following as members: the Executive Secretary and the Secretaries of Finance, Trade and Industry, Agriculture, Environment and Natural Resources, Public Works and Highways, Budget and Management, Labor and Employment, and Interior and Local Government.

Arsenio Balisacan, the new NEDA Director-General, is the current dean of the University of the Philippines School of Economics.

According to the the UPSE Web site, Balisacan’s research interests include agricultural economics, population management, development economics, and poverty and income distribution.

Abigail Valte, one of the President’s spokespersons, said the new economic chief was also an adjunct professor at the Australian National University and executive director of the Philippine Center for Economic Development.

“Dr. Balisacan also served as an adviser and expert on poverty, food security, agricultural and rural development, human development, impact assessment, and governance issues to public chief executives and legislators, non-governmental organizations, multilateral development institutions, like the World Bank, the ADB, and various United Nations agencies,” Valte said.

“He’s also the author and co-editor of seven books and has written over 100 articles and technical journals and book chapters. He founded and continues to serve as the editor of the Asian Journal of Agriculture and Development, an internationally referred journal,” she added.

Valte said Balisacan has a doctorate in economics from the University of Hawaii and a master’s degree in agricultural economics from UP-Los Baños. He graduated magna cum laude with a degree in agrciulture from the Mariano Marcos State University.

I did some research to know Balisacan’s stand or views on certain economic issues, such as redistribution of wealth, population control, poverty reduction, and welfare programs. That is, my purpose is to know whether he’s a Keynesian, Marxist/statist, or a free market economist.

So, I visited this site to personally read and study Balisacan’s previous research and published papers. I wasn’t surprised by what I discovered. Based on his published works, Balisacan is a hardcore statist who believes in government planning of the economy, income distribution, redistribution of wealth, and population control or management.

For instance, in his 1991 paper titled Why Does Poverty Persist in the Philippines? Facts, Fancies, and PoliciesDynamics of Rural Development: Linkages, Poverty, and Income Distribution, Balisacan argues that focusing on economic growth cannot solve poverty, which he defines as “nothing but a concrete manifestation of gross economic and social inequities.” Instead of focusing on economic growth, he argued that the government should concentrate on “redistributive reforms.”

The following is the abstract of his paper:

Proposals peddled to address the poverty problem are plenty-and keep growing. At one end of the spectrum are proposals contending that the root of the problem is simply the lack of a respectable economic growth. Putting the economy on a high-growth path is prescribed as all that is needed to lick the poverty problem. At the other end are proposals asserting that the poverty problem is nothing but a concrete manifestation of gross economic and social inequities. Redistributing wealth and opportunities is viewed as the key to winning the war on poverty. A variant of such proposals holds that economic growth does not at all benefit the poor. Focusing on growth rather than on redistributive reforms is seen to exacerbate inequities, which could lead to further erosion of peace and social stability.” (Emphasis mine)

Does this mean he doesn’t believe at all in the value of economic growth? No, the president’s new appointee is not trying to eliminate economic growth from the equation, as he also believes that “sustained increases in national income – that is, economic growth – are  required  for poverty reduction.” Relying on previous research, he argues that countries that made crucial developments in poverty reduction and human development have also “done quite well in securing long-term economic growth.”

Then, he made the following observations:

  • The role of growth in financing government welfare programs: “[E]conomic  growth is an essential condition for the generation of resources needed to sustain investments in health, education, infrastructure, and good governance (law enforcement, regulation), among others.”
  • Philippine’s continued economic failure: “Poverty reduction in the Philippines lagged far behind those of its East Asian neighbors, particularly Indonesia, Thailand, Vietnam, and China Both China and Vietnam started with higher levels of poverty incidence than did the Philippines during the early 1980s, but their absolute poverty soon dwindled and became much lower than the Philippines’ during the early 2000s. Both Malaysia and Thailand also had virtually eliminated absolute poverty in the past 20 years.” This is an issue which he failed to analyze.
  • Philippine’s failure to address poverty: “[T]he unenviable performance of the Philippines in poverty reduction has to do largely with its inability to achieve – and sustain – an income growth substantially higher than its population growth. But is this all that can be said about the poverty problem in the Philippines?” The main question is- why? He said this failure is “attributed in part to the relatively large variation in access to infrastructure and social services across regions and island groups.” Balisacan strongly believes that public infrastructures have positive impact on the pace of poverty reduction.
  • Low productivity in agriculture: He believes that the area of agriculture is where the country’s poor primarily depend for incomes and livelihood. He thus suggest massive government intervention to address this problem. “As recent experiences in Asia and elsewhere suggest, productivity growth in agriculture exerts a strong direct and indirect influence on poverty and food insecurity.”  His suggested government response include “investments in rural infrastructure and human capital, removal of public-spending biases favoring large farmers and agri-business enterprises, promotion of small-scale enterprises, improved access to land and technology, and macroeconomic and political stability.”
  • Population growth and economic growth: “Compelling evidence demonstrates that demographic dividend has contributed immensely to the rapid economic growth in the so-called “East Asian miracle” countries during the past three decades.” To address this particular problem, he argues that the government should spend more on basic education, basic health and family planning services, rural infrastructure, feeding programs and food stamps, irrigation systems, and micro-financing.

There you see the ideology and nature of the new economic czar. He believes that the government should redistribute wealth in order to reduce poverty by focusing on massive government spending in infrastructure, agriculture, public education, public health, and other welfare programs like breast feeding and food stamps, and control or manage population.

In regard to the issue of population growth, Balisacan argues that the government must “mainstream” population management in the government’s development agenda because rapid population growth in the country proves to be a potent obstruction to economic development. In another working paper titled Population Management should be mainstreamed in the Philippine Development AgendaBalisacan also makes the following arguments favoring the urgent passage of the Reproductive Health Bill:

Policy makers must address the country’s rapid population growth head-on though proactive government policies, such as the Reproductive Health (RH) bill. The failure to pass the RH bill in the 14th Congress is very unfortunate for the damage that a rapid population growth will bring to this generation and the next are irreversible. We simply cannot afford to have millions of Filipinos go through the vicious cycle of high fertility and poverty:  high fertility rate prolongs poverty in households and poor households contribute to high fertility rates.”

He further argues that the government has the duty to intervene to address rising population growth and other related problems by making policies “that will increase the capacity of women to participate in the labor market, invest in health to decrease child mortality and enhance education, particularly of women.”

According to Balisacan, the source of poverty “has to do largely with its inability to achieve – and sustain – income growth substantially higher than its population growth.” Is this exactly how economic professors at the University of the Philippines teach economics to their students? How should the government sustain economic growth in the first place? By making new laws and economic policies? So, the government could just fix economic and poverty problems by simply issuing new redistributive programs? But what is the primary source of wealth?

My personal evaluation of Balisacan’s statist paper are as follows:

  • Balisacan categorically implies two political actions: 1) state-management or planning of the economy; and 2) adoption of more redistributive or welfare programs. He believes that the government can reduce poverty and address economic inequality by simply providing the people with more welfare services, such as infrastructure, public education, public health, population management services, and so on. But where will the government get the money to finance all these welfare programs? To be fair, he indicated that instead of focusing on economic growth, it should focus more on redistributive programs. This is exactly a Rawlsian approach. Balisacan’s paper does not categorically state it, but what is clear is that he’s speaking from Rawslian ‘social justice’ and ‘comprehensive welfare state’ perspectives.
  • The government is NOT the source of wealth. How will our politicians, along with their public economists, sustain economic growth? By reducing population growth? Balisacan categorically states that “while economic growth is good for the poor, it is not good enough.” But what makes it good enough? What makes economic growth possible? By redistributing the private sector’s wealth? By increasing tax rates and making more sources of government revenue? This public economist should understand that the power to tax is the power to destroy. By increasing capital gains tax rates, you destroy the incentive to create wealth and to sell capital. By inflating corporate tax rates, you discourage both local and foreign investors to invest in this protectionist market. By increasing individual income tax rates, you deprive millions of wage-earning citizens of their right to their income.
  • Where will the government get the money to make its redistributive dream possible? There are only five sources of government revenues: 1) taxation, 2) inflationary currency, 3) debt; 4) privatization; 5) foreign financial aid. If you levy more taxes, you destroy certain sectors and industries. The government might be able to substantially finance some of its welfare programs, but for how long? If the government relied on monetization of debt, it would wipe out the savings of its income-earning citizens. Increasing our national debt would also mean more government revenue for debt servicing. According to Bangko Sentral, the country’s net external debt service could reach $8.52 billion or P358 billion. Privatization is good and advisable, but this has to be complemented with lower government spending and free market measures like lower taxes, deregulation, and non-protectionism. Also, we cannot simply rely on foreign aid. Even first-world countries have their own national concerns to attend to.
  • Balisacan’s paper is technically not an economic paper, but a social policy paper focusing mainly on certain redistributive and welfare policies.
  • The source of wealth is the private sector willing enough to work, to produce, and to engage in various economic actions.

The government cannot possibly sustain economic growth and reduce poverty with statist actions and solutions. The way out of poverty is not through adoption of more laws and regulatory economic policies. The only way to solve these pressing, worsening economic issues is to free the economy. Since the issues of poverty reduction and economic growth are both economic and political/constitutional issues, Balisacan’s solutions cannot do anything to secure long-term economic growth. In fact they would only worsen the country’s economic problems. Because even if you seize all the property and incomes of the top 30% or 40% of this country, the collected revenue would not be enough to finance all government services, programs and welfare for at least two to three months.

Any redistributive program requires an adequate amount of  budget. This means that the government has to think of possible sources of revenue in order to support its welfare programs. This also means that somebody or some group of people needs to continue working and creating wealth in order to sustain the government’s increasing welfare spending. Without this source, this country would end up like Greece or worse, Zimbabwe.

What this country urgently needs is not redistributive politics or statist economic planning. Since economic and political realities now show us the ill effects of Big Government, protectionism, and regulations, we need to revise or reform the Constitution to pave the way for important political and economic changes we urgently need to survive as a nation. We need to scrap protectionism, economic regulations, welfare programs, and other destructive taxes. Free market system, not statism, is the only solution to our national predicament. However, it appears that the current administration is averse to proper constitutional reform. Based on the composition of its economic team and advisers, this Yellow regime is not in favor of free market reforms, but of more government intervention and statism.

We’re all aware that the main function of an economic chief is not to write so-called economic papers. His functions include proposing economic policies, giving so-called economic advice to the president, assessing fiscal and monetary matters and balance of payments, among others. As a newly appointed economic chief, will Balisacan help push this cash-strapped nation toward a higher degree of national bankruptcy, statism, and economic crisis? Let’s wait and see.

The new economic czar’s other so-called economic papers are as follows:

In Search of a Strategy for Making Growth More Pro-Poor in the Philippines:

Abstract: The main driver of poverty reduction has shifted from agricultural to non-agricultural income growth in rural Philippines in the past two decades. Agricultural growth is still relatively more important (vis-a-vis non-agricultural growth), however, in reducing rural poverty in relatively more isolated provinces. Our results suggest that agricultural investments should focus on areas with underdeveloped infrastructure but with comparative advantage in agriculture. At the same time, non-agricultural income growth can be made more pro-poor by investing in mobility infrastructure and health, facilitating international labor migration, and lowering income inequality.

MDG 1 in the Philippines: Setting the Scores Right and Achieving the Targets:

Abstract: The official poverty data fall short of properly informing public policy and governance concerning the progress, or lack of it, in achieving the country’s commitment of halving, between 1990 and 2015, the incidence of poverty and hunger. Imposing consistency in poverty estimation shows that the poverty trend is actually even more alarming than what the official data depict. “Business as usual” keeps the country from achieving the MDG 1 targets. Meeting the huge policy challenge of poverty reduction requires nothing less than rapid but sustained and inclusive growth.

Population Management should be mainstreamed in the Philippine Development Agenda:

Abstract: The performance of the Philippine economy has been hindered by the country’s bourgeoning population due to its rapid population growth. For the last decade, the Philippines had the highest annual population growth rates in the Southeast Asian region. In 2009, it has become the second most populous country in the region with a population of more than 92 million, next only to Indonesia. Unfortunately, these have resulted to forgone economic growth, losing the chance to improve the poverty situation in the country. Thus, it is imperative to speed up the demographic transition in the country through proactive government population management policies aimed at harvesting the demographic dividends quickly. By performing simulation analyses on total fertility rate (TFR) under two scenarios, it was shown that the Philippines can hardly experience in the near future the Goldilock period, or the generation when fertility rate is neither too high nor too low, especially when the government does nothing to address the problem. Under the business-as-usual scenario, the Goldilock period will be reached by year 2030, or twenty years from now. In the second scenario where the government intervention targets only the households with unwanted fertility, the Goldilock period will be achieved ten years earlier, or in about 2020.

Population Management should be mainstreamed in the Philippine Development Agenda:

Abstract: The performance of the Philippine economy has been hindered by the country’s bourgeoning population due to its rapid population growth. For the last decade, the Philippines had the highest annual population growth rates in the Southeast Asian region. In 2009, it has become the second most populous country in the region with a population of more than 92 million, next only to Indonesia. Unfortunately, these have resulted to forgone economic growth, losing the chance to improve the poverty situation in the country. Thus, it is imperative to speed up the demographic transition in the country through proactive government population management policies aimed at harvesting the demographic dividends quickly. By performing simulation analyses on total fertility rate (TFR) under two scenarios, it was shown that the Philippines can hardly experience in the near future the Goldilock period, or the generation when fertility rate is neither too high nor too low, especially when the government does nothing to address the problem. Under the business-as-usual scenario, the Goldilock period will be reached by year 2030, or twenty years from now. In the second scenario where the government intervention targets only the households with unwanted fertility, the Goldilock period will be achieved ten years earlier, or in about 2020.

The Philippine Economy and Poverty During the Global Economic Crisis:

Abstract: Anecdotal evidence permeates accounts on the impact of the global economic crisis (GEC) on Philippine poverty. This study systematically assesses the evidence and recent data. It adopts a somewhat eclectic approach, applying regression and decomposition techniques to trace the GEC impact on GDP and its major components, constructing panel data from nationally representative household surveys to trace the changes in household welfare during the crisis, and combining national income accounts and household survey data to simulate the differential effects of the crisis across population groups and social divides. Empirical findings suggest that although the Philippine economy did not slide to recession during the GEC, the impact of the crisis on the economy and poverty across population groups was nonetheless severe — and may linger for many years to come.

6 Comments leave one →
  1. marty permalink
    May 13, 2012 3:38

    It’s because of those “Big Government, protectionism, and regulations” policies, that your so-called “yellow regime” implemented, that the Philippines is unscathed by the Economic Recession.

    That said, I think that since the Aquino administration is curbing corruption, these “statist” policies that Balisacan might choose to implement in the future will actually make great effort against poverty. But for corruption, I don’t know if one tenure of corruption-free government would do the trick for long-term economic stability and long term corruption-free government.

    • May 13, 2012 3:38

      The main source of corruption is our big government politics and statist constitution. Like I stated in this post:

      “Big Government or more government powers is the root cause- that is, the cause of the cause- of these problems. For years we have been taught- by our teachers, professors, media pundits, church leaders, and political leaders- that the solution to our social problems or even personal predicaments is the government. In 1987, or a few years after Garcia launched his Filipino First Policy, we enacted the New Constitution, which had been our answer to foreign capitalist domination, poverty, and inequality. We’ve been gradually indoctrinated that the source of the country’s poverty, economic troubles, and political crisis was Western imperialism or foreign domination. We’re taught to blame others for our self-caused tragedy. We’re taught, by our leftist or statist professors, to blame imperialist America for our own economic troubles. We’re taught to hate multinational corporations for high unemployment and high prices of commodities. We’re taught to blame the Western media, which had long been dominated by liberal and statist media intellectuals, for our so-called ‘colonial mentality’. In the minds of these statist intellectuals, we did nothing wrong.”

      In other words, it is the welfare programs and policies in the government that encourage graft and corrupt practices. What are the most corrupt government departments and offices? They are the departments and offices where taxpayers’ money go, such as the DepEd, DPWH, BoC, BIR, etc. Just follow the money.

      Also, it is these welfare policies and programs that have been bankrupting this country. We have high budget deficit, high external debt, high corruption rate, and high taxes due to increasing government spending.

      The PNoy administration cannot apply Balisacan’s redistributive policies. The economy is the problem. FDI, investments, and economic activities are declining in this country because of its anti-business, anti-investment, anti-economic freedom policies and restrictions. Foreign investors do not want to invest here not only because of corruption in the government and unstable economic policies, but also because of our protectionism, too much regulations, and too much restrictions.

      The only way for our government to fight poverty is to guarantee economic freedom and to embark on free market reforms. This is what Myanmar is exactly doing, allowing foreigners to own 100% equity in land and business. More local and foreign investors means more jobs and business opportunities for Filipinos. More employment and business opportunities means more Filipinos do NOT have to depend on government welfare and services. This means that the poor do not have to depend on the government for free condoms, food stamps, government housing, government-funded health care, etc. As I said, corruption is rampant in government areas where taxpayers’ money go. What happened to PhilHealth? What happened to NBN? What happened to the PIATCO deal? What happened to the government’s cash transfer program? Just follow the money and you’d see disgusting cases of corruption. Government welfare programs are both making Filipinos highly dependent on the government and bankrupting this country. This is what many political analysts, academics, and so-called intellectuals fail to understand. Also, this means that the government need not spend too much taxpayers’ money. That it would be able to focus on paying out national debt. Finally, the only way to fight graft and corruption in the government sector is to downside the government itself.

      • marty permalink
        May 13, 2012 3:38

        National debt, you say. http://www.ft.com/intl/cms/s/0/a9654e40-8ee1-11e1-aa12-00144feab49a.html#axzz1unJKPfic

        The point is, the current administration is going through great lengths to curb corruption. Even first-hand experience of friends complaining that they have no more “nth” month pay (not 13th month) just goes to show that corruption is being eradicated.

  2. May 13, 2012 3:38

    Curbing corruption is a good way to start a political leadership. But under our political system, that is almost a futile act or mission. The source of corruption in the Philippines is our Big Government. In reality, the source of corruption is our 1987 Constitution.

    So, so-called anti-corruption platform is not enough. I don’t wanna assume that’s just for political show. But it appears that’s what’s happening in this country today. The Yellow regime cannot go on appointing statist economists and intellectuals whose beliefs and policies could, in the end, bankrupt this country.

    This country needs real free market reforms. That’s what we badly need today. But I still think that’s impossible, because we’re trapped inside an economic prison.

    The people need jobs. However, because there are no enough jobs, many Filipinos go abroad… and our politicians and the POEA are shamelessly lauding the continuing Filipino diaspora. In 1987, we upped our level of protectionism and statism. Those who drafted and passed the Constitution still wanted to limit foreign participation in our economy when Filipinos are allowed to work and practice their respective professions in many countries. Such a foreign limitation, according to these ‘political geniuses’, was inspired by the idea that Filipinos must be ‘first’ in their own country. That they must be the masters in their homes and in this domestic economy. That’s just part of the economic prison I’m talking about. Yet our evil Constitution failed and is still failing to help the poor and the middle class people, many of whom wanted to get out of this country to work abroad.

    As to our national debt… How much do we need to set aside for debt servicing?

Trackbacks

  1. PNoy’s Malthusian/Marxist Economist: ‘PH must manage its population and decrease its dependency rates’ « THE VINCENTON POST
  2. The Best Solution to PH Poverty: Economic Freedom « THE VINCENTON POST

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