Rebuilding the country

The last issue of this column emphasized the need for people to have a healthy hope for the future. Now, we continue to detail what we must do as a country and people so we can have our hope clearly in place. Hope by itself, though a positive attitude to start with, is without good if unaccompanied by the proper action to back-up the virtue.

The soundness of any economic program of government is tested and rated against its ability to provide employment to our people, generate income for them, and enable our countrymen to have the purchasing power to supply their basic needs for food, clothing, shelter, education, health care, and some to spare for savings and leisure. The more jobs created and the more purchasing power given to our workers, the more effective and successful is the government program.

Indeed, the economy is nothing but the sum of the income received by the people out of their skills and efforts and what they could buy out of their receipts. Corollary thereto, a concern of the economy should be price stability so that the income received by the employees from their employment will not be eaten-up and eroded by inflation, as increases in the price of services and commodities effectively reduces the peso’s purchasing power. It should be clear then that government must create the economic atmosphere that is favorable for both the workers and the employers.

Favorable towards the worker in the sense that more businesses and industries are to be set-up that would employ more people. Government must, therefore, in tandem with the private sector, build all the needed infrastructure all over the country such as roads, highways, bridges, ports, airports, schools, hospitals, markets, as well as establish the requisite utilities such as in power, water and telecommunications. One can imagine the tremendous jobs that will be created for our people should government and the private sector work closely together in doing so. Then shall we have a worker’s haven and market.

The twin side of the coin is for government to create a favorable atmosphere for the businessmen, entrepreneurs, and corporations – especially those that are engaged in the key industries of providing the basic commodities and services to the people – by supporting them with long-term, low-interest credit facilities that matches their financial and capital requirements. The loans to be extended should not be based on or be dependent upon collaterals extended but rather on the capacity to produce or render the goods or services. Instead of a collateral-based loan, the credit should be supervised and closely monitored by the government to ensure the moneys are properly channeled to the production sector instead of the consumption area, or, worse, to the pockets of some unscrupulous borrowers.

The question inevitably arises though: While a concerted government program to create a favorable economic climate for both the workers and the businessmen - employers is an ideal program, where does government get the huge amount of money to finance these objectives? As it is, government revenues are far insufficient to meet the financial demands for these endeavors. Our annual national budget is ridiculously low to even satisfy the basic needs to run a government, much less to pay the interest on our foreign loans.

All through the years since our independence in 1946, government has resorted to foreign borrowings to finance our development efforts. The result, without exception, has been destructive to our country and people. Our foreign debt has increased exponentially from $26 billion at the time of the collapse of the Marcos regime in 1986 to close to $60 billion today. With this gargantuan international debt, the ability of the country to pay is cast in serious doubt comprising our pride and dignity as a people. Even now, we have no coherent policy or program for earning foreign currency with which to pay our mounting foreign debt.

It taxes our mind no end, therefore, to see the logic or reasoning of our government officials and monetary policy-makers in doggedly insisting that we continue to borrow externally when we can very well borrow internally using our own currency. It puzzles us no end why we have this fixation for foreign money when it is not even legal tender in this country. That our monetary authorities prefer the greenback over the peso shows eloquently the level of confidence of our government in our very own currency. It has come to the point that whereas the dollar is weakening against all other currencies worldwide, yet the peso is still losing value as against the American greenback.

While we have said it before, and again and again, we shall repeat it now and continuously in the future until our cries in the wilderness will finally be heard by our responsible authorities. The solution to our problem of financing our development is simple and tested. It had been the successful formula of all the modern and developed countries from the United States, England, Germany, Japan and, lately, our Asean neighbors.

The alternative way and more lasting and permanent solution is for the country to borrow internally by allowing our very own central bank to financially support our government and our local companies and businessmen by directly buying government bonds and securities through the issuance of new local money. As taxes are a certainty, anyway, these bonds shall eventually be paid and retired from future taxes that shall surely be collected from transactions out of the new money. These new money shall then be lent as long-term and low-interest facilities to the productive sector which will then produce locally the goods and services as well as build and establish the infrastructure and utilities, and employ our people in the process.

It should be obvious that change must be immediately undertaken in certain areas of our national life that has been locked in heretofore-unquestioned traditions. Traditions which our leaders have followed like a religion, without questioning their efficacy and without attempting to change them for fear of adverse reactions from the people themselves. Today, we dare say that change is the order of the day if government should be faithful to its task of serving and protecting its people.

Seventy-one years ago in 1932, Franklin Delano Roosevelt in his address to the Democratic Convention emphasized that "We must lay whole of the fact that economic laws are not made by nature". This should challenge our financial leaders who invariably think that economic laws are sacred, inviolate and unchangeable. Being of this belief, they thus refuse to think outside the box. They refuse to re-think, re-examine and re-evaluate their failed and ineffective policy of preventing our central bank from providing long-term, low-interest loans to our government, both national and local, to finance our development requirements.

For, indeed, how can we build all these development needs of our country and people unless we have our own money with which to finance them? Do our authorities expect houses to be built without money? Classrooms to be provided without cash? Roads, highways, bridges, ports, airports, water, power and communication facilities constructed without tremendous amounts of wherewithal? Do they expect these infrastructure and utilities to build out of foreign money alone and in the process deepen the country’s quagmire into foreign debt?

If the monetary and fiscal policies that we have stuck to no longer effectively accomplish the ends for which they were aimed to serve, isn’t it high time to change them for more responsive policies? As FDR has reminded us that economic laws are not laws of nature but the creation of men, could we not then change these man-made fiscal and monetary policies that have utterly failed the country and people?

It is high time then that the man-made section 117 of the Charter of the central bank (that bars the Bangko Sentral from buying government-issued securities such as government bonds) be amended to allow the government to borrow long-term, low-interest funds from the central bank that is secured against future taxes, which will eventually retire the government bonds so issued. These new central bank money will be used to buy the government bonds that can then be managed and directed to finance the full development of the country.

While, indeed, time is running out on us as our Asean neighbors have left us in the march to progress and development, there is still precious time left to change our outdated policies to more effective and tested methods. As we said before, we either innovate or perish.

You may write your comments / suggestions at 15/F Equitable Tower, Paseo de Roxas, Makati City or through e-mail at HYPERLINK "mailto:[email protected]"

(Editor’s note: We beg the indulgence of our leaders who are at times asked to read a lengthy piece. The purpose of our writings, however, being advocacy and not merely commentary in nature, compels us to dissect a given problem, analyze its causes and effects, and offer studied solutions. The length of the article should be irrelevant to such an approach..)