Suffering From Fundamentally Flawed Premises

The March 4-7 survey of the Social Weather Station, which it made exclusively for Business World, showed that 20.5 percent of respondents or an estimated 4.2 million families experienced hunger at least once in the past three months. This represents an increase from the 18.5 percent or an estimated 3.4 million families going hungry in November 2010. According to Business World, the recent result is seven points above the 12-year average of 13.8 percent.

Moreover, self-rated poverty increased to 51 percent, representing 10.4 million families. It means that majority of the Filipino people are poor and one-fifth have gone hungry despite belt-tightening efforts. Belt-tightening efforts, according to SWS, could be gleaned by the sluggish increase in the mean poverty threshold set by families, from P10,000 ($226 at that year’s exchange rate of $1=P44.13) in 2000 to P15,000 ($347 at the current exchange rate of $1=P43.21) in March 2011, equivalent to a P5,000 ($115) increase in 11 years. The 50 percent increase in the mean poverty threshold lags behind the Business World estimate of an over 60 percent increase in prices.

The increaes in poverty and hunger incidences are not surprising and may have even gone worse as prices of oil products have gone up – 12 times since January 2011 alone – as well prices of rice, bread, sugar, and other basic commodities, rates of utilities i.e. water and electricity, transportation fare and toll fees. What is worse is that the Aquino government is not doing anything about it because it is stuck with its fundamentally-flawed premises.

False premise #1 The spike in prices of oil products and other basic commodities are “external shocks” that the Aquino government could do nothing about.

Truth: There have been a lot of suggestions but the Aquino government simply refuses to do so because it would go against the prescriptions of the US and the IMF-WB, which made the country vulnerable to speculation and price manipulation in the world market, in the first place. It could regulate prices of oil products and basic commodities; it could embark on the wholesale importation of oil; it could nationalize the oil industry as well as transportation and basic utilities; and it could raise the wages of workers and employees.

False premise #2 – Regulating oil prices, as well as that of basic commodities, would scare away oil companies and other foreign investors.

Truth: Oil companies would not move out of the country if and when pump prices are regulated because first, they are currently engaged in exploration of oil and natural gas in the country. And second, they could not afford to lose a market. Multinational companies have been gobbling each other up, trying to put one over the other, spying on each other, and have been using all the dirty tricks in the book just to grab a market share from its competitors. It would not give up a market that easily.

Other companies would, in turn, benefit from lower power and transport costs resulting from the regulation of oil prices. The country, ironically, has very high power rates when it has abundant sources of renewable energy: geothermal, hydro, wind, and solar.

False premise #2″ The government would be at a disadvantage if it suspends or removes the VAT on oil products.

Truth: Since the VAT is being levied as a percentage of the price and not as a fixed amount, the higher the price the higher is the government’s profits. The Department of Finance is justifying this by claiming that the government’s windfall profits from the VAT in oil would be used for cushioning the impact of oil price spikes on the people. So if the Aquino government would really spend a substantial portion, if not all, of its VAT earnings on oil products to benefit the people anyway, what is the problem with removing it completely? In truth, the government is spending most of its budget and earnings on foreign and local debt servicing and military spending, the two biggest allocations, with the highest increases in budget.

False premise #3 Increasing wages would push prices up and result in the closure of small companies.

Truth: Prices have been going up and small companies have been closing down because of the policies of liberalization, deregulation and privatization even without an increase in wages. An increase in wages would not add to prices of commodities but would slice into the profits of big foreign companies and their subsidiaries and partners, without affecting their profitability and operations. According to Ibon Foundation, “The net income of the country’s top 1,000 corporations has overall been rising since 2001 despite a momentary dip in 2008. As it is, their combined annual net income of P756.0 billion ($17.495 billion) in 2009 is six-and-a-half times the P116.4 billion ($2.69 billion) in 2001, with a cumulative net income over the period 2001-2009 of P3,788.9 billion ($87.685 billion).”

Small and medium companies, on the other hand, are not compelled to implement minimum wage laws. But it should increase wages based on its capacity.

Neither would an increase in wages trigger a spike in demand, as economists claim. The world has been in a recession, nay a depression, and an increase in wages would merely enable workers and rank-and-file employees to catch up with the increases in the cost of living.

In the meantime, the Supreme Court ruled that the San Miguel Corporation (SMC) shares of Eduardo Danding Cojuangco, the president’s uncle, are his and did not come from the coconut levy fund. The majority of the honorable justices of the Supreme Court based their decision on two fundamentally-flawed premises: Cojuangco was not a Marcos crony and that he did not use his power and influence as director and corporate officer of the Philippine Coconut Authority (PCA) and the United Coconut Planters Bank (UCPB), the custodians of the coconut levy funds, to utilize it to buy substantial shares of SMC. He just “loaned” money from the bank and the Coconut Industry Investment Fund Oil Mills (another Marcos creation the funds of which came from the coconut levy fund).

The Supreme Court’s decision enabled Cojuangco to claim the funds, which were taken from coconut farmers, to supposedly improve the latter’s plight. From 1973 – 1982, the amount taken from farmers ballooned from the original levy of P15 to P100 per 100 kilograms or an average of P60 per 100 kilograms of copra that they sell. According to the Pambansang Koalisyon ng mga Samahan ng mga Magsasaka at Manggagawa sa Niyugan (PKSMMN), a national coalition of 30 small coconut farmers’ organizations, the coconut levy fund amounting to P9.7 billion then is now worth P100 billion ($2.314 billion), by PCA estimates.

In this country, the poor majority become poorer and the rich few become richer because of the fundamentally-flawed premises being used by the government as basis for its decisions. It just goes to show that in the Philippines, the government and its laws protect the interests of the few and disregard the rights of the majority.