As slick as an hour-long TV commercial and about as credible Gloria Arroyo’s state of the nation address (SONA) seemed out of sync with the real economy. Few economists use anecdotes to measure performance. But for her choir, slick is par for the course.
For zombie applauders, it is not uncommon to be peppered with a litany of accomplishments under Arroyo. Never mind that the contraction in seasonally-adjusted gross domestic product (GDP) was the steepest in two decades. GNP likewise fell marking for the first time since taking the presidency that GDP and GNP contracted simultaneously quarter on quarter.
For some, the governance exemplified underlies the rationale for Arroyo’s perpetuation. One concerns GDP growth and expenditures where roads are paved with kickbacks and bridges with bribes. The other is sundry footnotes from the anonymous testifying their lives improved. One validated by fact. Another, the human condition.
But what is the human condition under Arroyo? While admitting failures on the economy’s social dimensions, a former NEDA official praised successes in Arroyo’s GDP growth and inflation control. The naiveté reveals the underbelly of benchmarks and the necessity of relating other indices to GDP.
Our Gini index is 45.8% indicating severe income inequalities. Poverty incidence is one-third of total families. The hunger index is 20%. Leading economic indicators (LEI) fell 0.195% in the second quarter. Per capita GDP is half of Angola’s. The fiscal deficit may hit US$ 250 million from US$ 164 million when Arroyo first declared a fiscal crisis. Moody’s upgraded us. From “generally poor” we’re now “questionable”. We ranked 14th on the global happiness meter but that’s as appealing as the incised smile on the Joker’s face.
In the 60’s, economist Arthur Okun, developed an equation relating unemployment to GDP. To maintain employment constancy GDP growth must equal the sum of labor productivity growth and employment growth. Okun’s Law states that unless GDP grows beyond 3% unemployment remains static. While controversial where absolutes might vary among economies, it maintains that without extraordinary GDP growth unemployment increases.
Unemployment is a validating measure of GDP growth reflecting the capacity of families to cope – matters more important than GDP or inflation.
Under Arroyo’s nine-year average inflation rate was 9.64%. One hack considers that “wonderful”. Never mind that, for the jobless, costs of survival just rose.
Arroyo claims unemployment is 7.5%. Alternative NGO’s count peak at 11.4%. Some count 6.6 million underemployed, government ignores it. Government counts temps and fudge with the non-earning. The discordant cacophony understates labor weakness considering the underemployed, the mismatched and Arroyo’s 600,000 perpetually contractual BPO nightwalkers.
Where’s the vaunted competence that produces well-being? Employment is a multiplier with a coefficient of five reflecting the average family size. One unemployed equals five starving. GDP sank from 7.1% in 2007, to 3.8% in 2008 and 0.40% for the first quarter of 2009. Considering GDP’s peaks, unemployment reflects deeper troughs.
On the demand side, OFW remittances failed to spur spending as seasonally adjusted personal consumption expenditure dropped 3.1 % while life-critical food spending declined 2.8% thus validating the hunger index. Add here a 60% school drop-out rate partly from inadequate incomes. As GDP drivers, depressed labor incomes catalyze falling consumption.
The IBON Foundation said of the 1.5 million new jobs Arroyo claims, 1.3 million were non-earning. Because the employed are insufficient to buoy aggregate demand, even when inflation was low, consumption fell.
Declaring that the unemployed affected by the global crisis is “not that huge” labor officials declared, “There will be employment gains in the retail and business process outsourcing sectors”. The SONA spun the same.
What nonsense. Industry sank 6.6%, the lowest in twenty years. The services sector was flat for the first quarter of 2009.
Given seasonally-adjusted GDP contraction at 2.4%, the first quarter 0.4% growth when annualized turns the World Bank forecast of a negative 0.5% likely. Even granting GDP grows at NEDA’s 1.8%, per Okun’s math, unemployment will worsen. These debunk Arroyo’s myth of economic competence.
Macroeconomists define recovery as moving towards full employment potentials. It doesn’t take brains to see that. Although being on the wrong side of a political fence can obscure the writings on the wall forcing hacks to parrot the Palace productivity propaganda.
Given Okun’s Law, officials will have to manipulate the unemployment data more. Otherwise, the SONA is simply prom night, an occasion for the fashion-challenged. The video collage of public works infrastructure evokes kickbacks, the potshots show guttersnipe temper and the one-off footnote collection of anonymous examples shows nothing.
Popularity: 1% [?]
You cited a lot of statistics. But then what is the causal relationship between Arroyo (or any president/administration for that matter) with the performance of the economy? If Arroyo or whoever is president next year OR NOT, what exactly will change — or NOT change in Pinoy society, the way we work, the way we conduct business that will result in a measurable change in those statistics you cite.
Specifically refer to this article I wrote way back…
Who cares if Gloria is president after 2010?
…where I issue the following simple challenge:
=========
How big a factor is a President, really in terms of influencing the course of progress (or lack of it) in the Philippines?
I mean, really.
First of all, I throw out this question to the FV community. Is there some kind of evidence or at least some kind of logical construct that convincingly describes some kind of causal relationship between (A) the character or even identity of the President of the Philippines and (B) the prospects of the Philippines achieving some semblance of sustainable prosperity?
Can we, infer from a value of A, what the probability distribution for a set of values of B might be?
For example, what many people claim to be a certainty can be expressed like this (using the conventions I loosely spelled out above):
IF A = GMA and Year > 2010,
THEN B = Disaster for the Philippines
or, for that matter;
IF A is NOT equal to GMA and Year > 2010,
THEN B = Prosperity for the Philippines
My question is this: Is there an A=>B relationship?
Think for a minute of the implications of the answer to this question. Because, if there is none, if there is no convincing answer to this question, or if a debate about whether such a relationship between A and B exists gets drawn out over comments ad infinitum and never gets resolved convincingly, it brings to light this SIMPLE question:
WHO CARES IF GLORIA ARROYO IS STILL LEADER OF THE FILIPINO PEOPLE AFTER 2010?
If we are not able to prove that our prospects for prosperity are a function of who is sitting in Malacanang, then why bother even wasting precious bandwidth on any discussion about whether Gloria is out to extend her term or not?
=========
If there is no proven or demonstrable CAUSAL LINK between the President and the economy, then what is THE POINT of citing all of the above statistics you site here in reference to this “SONA” that is currently the topic of choice amongst the chattering classes?
Enlighten us plez.
interesting. incidentally i came across this article.
http://www.mackinac.org/article.aspx?ID=3416
an excerpt:
“What role does the President of the United States play in how well (or poorly) our economy is doing?
The president has influence over the course of the U.S. economy, but less than is generally supposed and certainly far less than presidents themselves like to claim, especially when the economy is doing well.”
this is a classic illustration of the “messiah syndrome” that pervades the pinoy psyche. everything wrong (from payatas to bad weather) is always the fault of the messiah, a.k.a., the president, who is tasked to make everyone prosperous, happy and healthy, regardless of one’s own personal effort. that is, as i see it, the real “okun’s law”, whatever the hell that means.
bencard: “messiah president” has been registered already. . By Obama-2012-reelection committee.
upn, in the case of obama, the wisdom of the american people will ultimately prevail. they are a stickler for the adage, “fool me once, shame on you, foll me twice, shame on me”. i’ll bet my bottom dollar, he will be a one-term president worst than carter, that is if a violent racial war instigated by him, does not first happen.
bencard:
in the philippines, the adage goes
“fool me once, shame on you, fool me some more, i’m loving it, please fool me forever”
it sure looks that way, bongv.
also,
someone else has to be responsible for his personal responsibility – the system sucks that why he is irresponsible… susmaryosep
BongV and Bencard, stop blaming yourselves for the failures of government! When the people has done their part, the government should do what are expected of them. And what are expected of them is to serve the people and country…not themselves.
I know your answer to this: “the people elected those bosos”. Yes?
You are hopeless!
I BEG TO DISAGREE. The people have not done their part.
eto na lang Bert:
look at your province – are the family names of the people in power the same names or from the same families?
what’s the governance like? your electorate voted for these same names right? what have you gotten thus far? are you telling me that the pool of talent in your community is that retarded that only candidates from the same families are able to win?
the voters are practically saying that these local officials are in cahoots with arroyo, yet they vote for these same local officials – the one who can bring in the bounty, the malakas? yes? no?
they keep on voting for these same families? do they not? and they keep complaining about the governance (which happen to be led by these same families that they voted).
so, they voted. so the officials are in power. so? voters can recall – where’s the recall? none! therefore – voters have not done enough!!
So even my dog could be President and it won’t make a difference?
So what’s the point in you asking people to vote intelligently? What’s the point in your “platfrom plez” advocacy, eh?
ricelander, that is only if one is stupid enough to vote his DOG for president. voting intelligently means NOT voting for a dog.
bert, your responsibility doesn’t stop with just the act of voting. you have to do all the things required of a good citizen. you don’t vote for a president just to have someone to blame for your failures as a person.
A constitution change can give that strong blast of investments to null out Okun’s law (at least in the first years of the next Malacanang-resident).
Okun’s law does not apply to the Philippines.
Murphy’s law is operative.
Or Joe’s law,
the level of unemployment is inversely related to the number of condoms sold.
Joe
It is a lagging indicator . . .
hahaha. nice law.
Rising volume in the sale of condoms speaks of higher discretionary income. Condoms definitely a good thing!!!!
We are not Economists like her. But we know how Economics work on our
lives. If we cannot find good decent jobs for livelihood. If we are
laid off from the company we have been working for a long time. If
our monthly pays can barely make us alive.
Then, we dont need those Economic statistics figures to assure us
we are alright. Our stomachs are the best indicators.
toro, those statistics are obviously not for you, man. just speak for yourself.
Yes, they are product of illusion, a Mirage of Prosperity. What a way to con people.
Benigno, Bencard,UPn, and BongV
Nibbling at the fringes of a well thought out and sybstabtiated essay bt Dean de la Paz, Why don’t you attack his numbers if you disagree with his analysis? Economics is too complicated for you?
MCB:
There’s nothing to disagree with. And I agree with his numbers and I have the same observations as well.
Ngayon mo lang naintindihan ang economics?
The gist of it is that the GMAs numbers have to be taken with a grain of salt. And I agree.
For instance, in education – when the Education secretary proclaimed that there was a lack of classrooms – GMA instructed her to pack more children in a classroom – WTF.
GMA claimed there was economic growth – I agree.
NOW, whether this growth was equitably distributed is another matter, given the Gini coefficient.
I have also mentioned in previous blogs that a lot of the NCSO baseline data specially in poverty and employment have been redefined and therefore there will be some inconsistency in the time series.
There is nothing new to what the author is saying that I am not aware of. And the conclusion he derives from the data are no different from the conclusions I will make based on the data.
So anong problema mo ngayon MCB?
Having said that, there’s a reason why the numbers are such – and
you have vacous voters – that might even count the traditional pundits :)
so the author has his own “statistic” that disputes pgma’s. but, with all due respect to his title (which i don’t think is part of his given name like djb’s), his main thesis with which i have a problem, is if there is still poverty in the land ( a lot of it, he says), blame it all on the president, and ignore whatever she has achieved.
How does Dean (is Dean his first name?) expect discussions about this sentence:
I can accept this as “sounds sensible: “Okun’s Law states that unless GDP grows beyond 3% unemployment remains static.”
But accepting/rejecting this one is based on what two vowels were used most often:
When all is said and done, delaPaz “stuff” has as much academic content (okay, a bit more) than a Primer primer on GMA or “PlatformPlez”.
substantiated pala
What makes you think I disagree with his numbers, buencamino?
They are what they are. The question is, is our chronic failure the President’s (whoever he or she may be) fault?
Read and understand first, dude. And be prepared to substantiate any assertion you make when challenged. :-D
how come the author is not participating in this discussion. isn’t he supposed to defend his handiwork (according to FV rules) – or are we too lowly to merit his attention?
He’s one of those Post-and-Run sort of bloggers. At least some stick around and put up a good fight before they run. Hey wait, what a coincidence…
The statistics are from official sources.
The causal relationships are econometrics so anything can be related. Such as the price of bananas and the inequity in income distribution.
Someone said that the best statistic comes from the feeling he gets when he’s hungry? I agree.
That’s how GMA is rated by the public and that’s as accurate as any. It’s just hard to survey that way.
Ok. Time to run.
Dean
wait, mr. dean, before you “run”, are you saying the tangible accomplishments of gma’s administration are canceled and rendered naught by your “econometrics”? you can conjure up all the numbers you want and confuse the “zombie applauders” to your delight, but just look around you and tell the people that everything they see is a mirage. hunger, poverty, unemployment? what country, what leader, what political system, ever succeeded in eliminating that?
as an “economist”, you could probably appreciate the fact that the economy was in shambles, both theoretically and realistically, when gma took over the presidency from erap. can you imagine what the country would have been had the same direction continued to this day? on top of her achievements, gma has been able to mitigate the dire effects of world recession that practically every country is suffering from. but people like you would ignore things like that, and instead mouth all preferred “explanations” such as ofw remittances (as though they are not a part of gnp) which are portrayed as heroic “sacrifice” to prop-up the philippine economy.
i don’t know if “dean” is your first name or your occupational title. if the latter, i kind of doubt it’s in the field of academics, judging from the partisan tone of your writing which could rival that of a professional spinmeister.
At the end of the say, those statistics, even when substantiated or based on the National Statistical Coordinating Board, matter less than the reality felt by the 8 out of ten who want Arroyo out.
If Arroyo’s numbers are correct and the ones I quoted are wrong, then 8 out of ten Filipinos are either wrong, liars or self-delusional. By declaring Arroyo correct, we would inadvertently be declaring a good majority of Filipinos as liars if not to the world then to themselves.
To validate the perception of 8 out of ten is simple. Come home and stay in the country and experience what they experience. If one can’t do the math, then one can at least experience it.
For those who debunk both experiential validation or the arithmetic, there is really a sense of rationality in that.
When faced with reality, Ramos, and eventually, even Estrada blinked.
Rather than blink, Arroyo even managed a smirk. If there is anything frightening about our future, it is not the economic numbers or even our worsening hunger index. It is that smirk.
anyway guys, I’m conducting a research regarding Okun’s law in the Philippine setting…. in an observation of our GDP and unemployment rate during 2003 – 2006 (quarterly)the r-squared is around 56.76%, meaning that around half of the Unemployment can be explained by the GDP…. (ofcourse… this is not a satisfying result) so i conducted another regression including using data of 2001 – 2008…. and guess what….. r-ssquared is less than 1%…. meaning… GDP is not a good determinant of Unemployment…..
guys… im just a student… and i dont know much of this things… maybe someone could comment on my findings?