Clinical economics vs. development economics

(Conclusion)

Before anything else, let me thank Ed de Dios of the UP School of Economics who took the trouble to e-mail me in order to provide a correction to the spelling of "Sachs," which came out in Part One of my article as Zachs. With Sachs’ book right in front of me, which I had used as my reference, I really do not know what happened except to charge it to the deadline rush, and probably because I am a senior citizen. Mr. de Dios also kindly volunteered the information that Jeffrey Sachs was in the Philippines to advice the Cory Aquino government on the debt crisis, something I knew but did not include in my article because his concept of clinical economics was evolved about a decade after.

So here we are two decades later, in the worst financial and economic crisis our country has ever been through. Perhaps it is worthwhile examining our conscience – where a leadership, in three years, spends much more than what was spent by the two preceding leaderships combined, and where economic reforms never really got seriously underway, what can the citizens expect in spite of the fact that we have a holder of a PhD in economics at the helm who must have employed development economics, not the clinical economics proposed by Sachs. But let us hope. It’s all we’ve got. And hope is one of the three cardinal virtues.

Let me quote the words of the La Salle president Brother Armin Luistro when he delivered the welcome remarks recently before the Holy Mass and the inter-faith prayers that ensued: "We owe it to ourselves to seek the truth. But truth-seekers are not necessarily saints. In fact, sinners as we are, we passionately search for the truth, for we know it will set us free."

Brother Armin, already president of La Salle, hardly 40 years of age, speaks with the strength and voice of a learned man. It is amazing how a man with his ideals, goals and moral values, shining and strong, has gained a following with his older countrymen. His words on hope warrant strong beliefs among us because of their efficacy today. As regards hope, he quotes the words written on the prison walls of Auschwitz: "I believe in the sun even when it is not shining," and goes on to say these words: "I believe in the truth even when the mighty hold it in captivity. And we shall not cower in fear nor slumber in apathy until we can set it free!" This is hope in action. This is freedom to aspire for what is moral and true. And this is hope at its best and purest.

Sachs, in recommending this new dimension of clinical examination and analysis as regards the struggling state mired in poverty and seemingly helpless to contain the feeling of desperation fast contaminating the poorest communities in our country where, in a number of slum areas that I had referred to in Part 1, have to survive on pan-fried mice and charcoal broiled rats, categorically states that the salvation of such a state is dependent on a "differential diagnosis," which he says "involves patterns of governance beyond the specifics of the budget process and detailed economic policies."

In the process, he says that such clinical analysis must necessarily involve the following questions: "Do the systems of public management – for registering business, trading property, defending contracts, bidding of government tenders – work effectively? Are public services, such as water and sanitation, power, and basic health and education, efficiently provided (given the resources at hand), or are they subject to massive waste and fraud? Is corruption rampant, and at what levels of government? Is the succession of power from one government to the next regularized, or subject to the whim and abuse of the current rulers?"

According to Sachs, the key to clinical economics is a thorough differential diagnosis followed by an appropriate treatment regimen. He says that in the course of a physical exam, the doctor runs through pages of questions: "Are you taking medication? Do you have allergies? Have you been operated on recently? Do you have a family history of the following diseases?" As earlier stated, the clinical economist must do the same. There has to be a diagnostic checklist that’s part of the physical exam of any struggling impoverished state.

And when the treatment regimen is commenced, the ugly head of politics must never be allowed to intervene. The head of state must govern, and govern with the purest of motives, in light of the fact that this patient-country has been entrusted to him or her as a sacred duty. If she or he allows politics to intervene, because the patient is in real dire straits, the proverbial axe should fall. Remember what Ronald Reagan, the 40th president of the United States, said: "Politics is supposed to be the second oldest profession. I have come to realize that it bears a close resemblance to the first."

And that’s when the people’s voices should be heard, not ridiculed, as we heard our leader say: "Let him who is without sin cast the first stone… they are all sinners anyway!" And in connection with the oil crisis hitting the world, ridicule your critics even more by saying: "If we could harness all their hot air, we will not have an energy crisis."

How picayune of a leader to say so! In case such leader has forgotten: "One voice is tiny, and alone it cannot be heard above the din of politics as usual. The people’s voice, when it cries as one, can be a great insurmountable roar."

The role of governance is so important that intensity and less frivolity are critical. "In the course of mapping poverty, the clinical economist should also identify risk factors that may exacerbate poverty in the coming years," is what Sachs highlights.

The questions to be asked in this connection are: "What are the demographical trends (births, deaths, internal and international migration) that may affect the numbers and distribution of the extreme poor? What environmental shocks and trends (sea level changes, coastal erosion, deforestation, land degradation, depletion of water aquifers, biodiversity loss) might impinge on poverty? What climate shocks (El Niño, long-term warming, chronic drought, extreme weather events) are likely to affect public health, disease and agricultural productivity? What changes in infectious disease incidence and prevalence may weigh on the national or regional economies? How might world-market fluctuations in key commodities affect extreme poverty and the prospects for economic growth?"

Another set of questions involving the economic policy framework has to be asked. Being merely traditional questions, they should, however, according to Sachs, be asked systematically. These are: "What is the cost of doing business in the country (and in different regions within the country)? What is the coverage of key infrastructure (power, water, roads, communications and transport services) focusing on sub-national regions, both urban and rural, as well as national averages? How are costs affected by the lack of infrastructure? What is the trade policy framework, and how are trade barriers impinging on the costs of production, especially for export-oriented businesses? What are the incentives in place for potential domestic and foreign investors, and how does the incentive system compare with those in place in competitor countries? Is the government investing adequately in human capital through programs on nutrition, public health, disease control, education and family planning?"

These questions have to be addressed if governance of a struggling and impoverished state is to succeed. A study of the answers and solutions to be undertaken has to be an all-consuming job, intense and thorough, done with dedication and sacrifice. Leading an exodus of political leaders to the seat of a world body in numbers that will overwhelm the observer, and flirting with the idea of delaying an arrival home in order to arrive with a boxing champion are sickening. The problems are not only huge, they’re humongous! It’s time to drop everything else and attack the problems with a ferocity that is true and not feigned.

This is what a leader dedicated to institute the reforms and solve the problems of his or her struggling state must do. There is simply no substitute for this at this point in the life of the patient-state.

There is, of course, the fiscal framework that Sachs feels should be drastically attended to, "since the budget must carry much of the burden of key investments in infrastructure and social services." Asking the following questions should be easy, but addressing them is vital: "What are the current levels of budget spending and public revenues?" According to Sachs, this should be measured both as a percent of GDP and in dollars/pesos per person. He stresses the fact that "the share of public spending in GDP in various categories (health, education, infrastructure) gives a sense of the level of effort a country is making to reduce poverty."

Sachs says that the absolute spending in dollars and pesos per person gives a sense of the adequacy of the spending to ensure basic needs and to support the escape from the poverty trap. He ends this dimension of the question period by asking: "To what extent is the government hampered by an overhang of public sector debt inherited from the past? How much would debt relief contribute to the capacity of the government to expand public services? Are there hidden or off-balance sheet lines on the public sector, such as debts of the central banks, or hidden losses of the commercial banking system that will have to be covered by the government’s budget?"

Hey! All these are beginning to sound like traditional economics – development economics after all. Why haven’t our learned PhDs, with their training and experience, been able to answer the questions with frankness, and resolve the problems with passion and dedication?" It boils down to the political will of the leader… unalloyed determination, unbesmirched and corrupted by political debt-servicing and politics, the second oldest profession in the world, now bearing such a close resemblance to the first.

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Thanks for your e-mails sent to jtl@pldtdsl.net.