A few days ago, I made a suggestion that maybe – just maybe – the Philippines should stop honoring its outstanding debts to the World Bank and to the International Monetary Fund, given the premise that there is a global financial, food, and energy crisis. The alternative would be to re-appropriate the funds allocated for debt servicing as a subsidy to mitigate rising costs of fuel, food, and basic commodities. Government intervention is a page off Keynesian economics: something I think the President and her economic advisers should be very, very familiar with. The market, at this point, will not cure itself and restore equilibrium in its system, without drastic and serious consequences. It is a more proper and more relevant subsidy that P500 notes passed around at LandBank. A P500 subsidy per poor family is simply not enough to address, much less mitigate, an economic crisis.

Arbet Bernardo of AWBHoldings.com asks me, “Should we do an Argentina?” I would rather see things in terms of context. While it would be a great – no, terrific – idea if we give global financial lending institutions the middle finger and say we’re not paying for debts we never benefited from as a nation, there is still prudence in honoring our debts, just not now when we cannot afford to do so. The premise is rather simple: if you can’t afford to pay an outstanding debt, you should only pay it when you are financially capable of doing so. We can’t undo that crucial financial mistake made by former President Cory Aquino, but what we can do is to respectfully renege on the promise of “honor all debts” until such time that we can pay debt without feeling anything drastic or dramatic.

Much of current economic policies revolve around a “trickle-down” effect: changes made above will eventually be felt by those below. Obviously, this approach doesn’t – and cannot – work; it violates the law of conservation of resources, like the people below are waiting for the scraps to fall from table to the ground (read your Galbraith). You can’t tell poor people to live much more frugal lives if they already live at a point of desperation. The bulk of economic and social services should not be used to reconfigure Government or to reshuffle the Cabinet and put someone like Romulo Neri in charge of something as important as social security (woe upon me and my SSS payments), but to use existing Government structures to route these resources directly to those who need it most.

While a P500 subsidy is a welcome reprieve from crisis, it’s too little, too late, and is a misdirected waste of precious financial resources. You can’t expect monthly Government aguinaldo to last long if prices continue to increase, if jobs are continually laid-off, if wages do not increase (even decrease in some cases), and if This Government continues dubious none-of-your-business deals like NBN-ZTE, Northrail, coconut levies, and whatever’s done with fertilizer funds these days. Rather than intervene positively in the people’s economic life – what it should be doing – The Government intervenes negatively. What can you do with five hundred pesos these days?

My own recommendation would be to reallocate our financial resources, not pay debt for now, and redirect debt servicing to subsidize the people’s cost of living. From there, we could think of other solutions that go beyond Presidential recommendations for a family to eat camote and have a viand of munggo at dilis while everyone asks what’s really up with “borjer” served somewhere in Greenhills.

“Do an Argentina?” Let’s do something Filipino for a change.

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