Diokno’s ‘neo-liberal economics’ should be junked

FOOD prices in the Philippines are shooting through a leaking roof already eaten away by general inflation. 99.9 percent of hapless Filipinos don’t know the whys and wherefores of their hopeless situation as they suffer high prices.

When we try to explain the real reasons, they are dazed by the concepts of “neo-liberal economics versus physical economics,” the reasons for our economic difficulties. These ideas are simply too “alien” to them.

The majority of Filipinos only begin to understand inflation when they see their food items go up in cost, but they don’t understand that food prices are among the last to reflect inflation. Inflation actually start with the price hikes of other things, like fuel and electricity, or the cost of money (bank borrowing) that drive the whole economy. Why and how are some economies, like China and Vietnam, escaping today’s inflation dilemma? What can Filipinos learn from them?

Let’s start with electricity prices of the two abovementioned countries and compare them to the Philippines.

In Vietnam, electricity costs US$0.085 or P5.73 per kilowatt-hour (Vietnamese Dong 1,916). In China, electricity costs P4.55 per kilowatt-hour (Chinese RMB of 0.810). In contrast, Meralco’s electricity prices for Philippine consumers is P10.4612per kilowatt-hour. Simply, Philippine electric power rates are at least double those of Vietnam and China.

The same is true of inflation: today’s general inflation rate of Vietnam is 3.14 percent while China has a 2.7 percent inflation rate. In contrast, today’s inflation rate in the Philippines is at 6.3 percent—also more than double that of Vietnam and China

What accounts for the low electricity power rates in China and Vietnam in comparison with the Philippines and most of the rest of the world?

Contrast these with the U.S. electricity rates of US$0.146 or P8.20 per kilowatt-hour on the average, and its inflation rate at 9.1 percent.

Quite simply – China and Vietnam’s power companies are not-for-profit, state-owned enterprises; this is unlike the Philippines, the U.S., and most of the rest of the world whose companies are based on the profit-seeking model.

This ownership mode of electricity or power, and the low or high prices they offer, brings a series of consequences on productivity, competitiveness, investments and jobs-generation.

An August 26, 2022 news article from Vietnam that was posted on FB headlined, “Tech firms shift operations from China to Vietnam where FDIs are on the rise.”

A commentator from the Philippines asked, “Why not the Philippines?” Clearly, one reason is the high-power cost in the Philippines.

2022 reports on investments tell the story. “Foreign direct investment in China has grown 17 percent year-on-year to $117.56 billion (798.33 billion yuan) in the first seven months.

In Vietnam, “…FDI inflows into the country continue to make great momentum with US$14 billion arriving in the country in the first half of 2022.”

In contrast, a July 1, 2022 report said that, in the Philippines, “Total foreign investments (FI) approved in the 2nd qtr. 2022 amounted to P46.23 billion or only $812-Million, less than US$1-Billion.

Finance Secretary Diokno’s economic philosophy is neo-liberalism (new liberal economics) whose fundamental assumption is that government intervention is evil and the private sector (the “market”) is the force for economic good, never mind if it breeds monopolies, duopolies and oligarchy and plutocracy).

Marcos Sr. was a state-interventionist, until the UP School of Economics was captured by the Rockefeller and Ford Foundations when Solita Monsod, Cory Aquino, et.  took over government and institutionalized neoliberal economics.

These public-service versus profit-driven modes of ownership are behind the success or failure of the economies of societies. Unfortunately, the Philippines has chosen the wrong mode for the past 30-years.

The neo-liberal economists have had a hold on all the government administrations from the time of Cory Aquino to the present.

All the presidents that came after the Yellow-era feel they have no option but to go along with the neoliberal paradigm.

The private bandits-oligarchs control the economy and politics because the first Aquino presidency changed the membership of the Philippine Monetary Board from a majority of state representatives to private representatives; and from then on, the state lost control of the entire system.

The oligarchs anoint (and then constrain) the president with their money that comes from the privatized assets of the state (power, water, infrastructure, etc.). They also use their [privatized assets to control media: this is why the ABS-TV5 merger must be stopped and TV5 itself also shut down.

Otherwise, they will continue to use media to control the voters, in a vicious cycle of parasitic extraction on the economy and the Filipino people. How to get out of this cycle is the challenge.

To start a change, BBM can begin with organizing an economic advisory group of nationalist, physical and socialist economists to give him options to ponder and consider.