Why doesn’t GMA do it the Maggie ‘Iron Lady’ Thatcher way?

I was happy to see President GMA last night at the "Quality Britain" reception, since we managed to exchange a few words on that occasion at the Inter-Continental Hotel.

You have to give it to La Presidenta: She works hard at her job, even taking time off to sweet-talk British businessmen and investors, led by, of course, the UK’s Ambassador Paul Dimond.

Although GMA is besieged by many problems, among them our strained relations with Washington, DC (despite the cheerful smiles which probably strain the rictus muscles of US Ambassador Frank Ricciardone, Jr.), she looked serene in a gray suit, and patiently gladhanded everybody at the affair.

She told me she had thoroughly enjoyed being with us at the "President’s Night" of the Manila Overseas Press Club, by coincidence held in that same ballroom.

Her speech and open forum remarks, if you’ll recall, made headlines for two days afterwards, but that’s not what she had appreciated. She had felt, she intimated, she was among friends that evening.

Ambassador Dimond, for his part, retailed in a short speech the many ways in which Britain was working, trading, and investing in the Philippines.

This got me to thinking. While we’re on the subject of what we’re getting from Britain, indeed the United Kingdom, why don’t we – in this dark hour of crisis and uncertainty – "import" the Margaret Thatcher spirit? This is very apropos for GMA since the "Iron Lady", as they used to call Thatcher, took over the helm of a distressed country and – to the surprise of the scoffers and, admittedly, the male chauvinists – turned the country around.

This writer happened to be in London when Prime Minister Thatcher decided to declare "war" on Argentina over its "invasion" of the Falklands, a British scrap of territory, some off-shore islands which the Argentines call Islas Malvinas, and asserted belonged to them.

As the Iraq war – the way it’s going – has been amply demonstrating, dissolving, as it’s happening, into a bloody mess (with outside zealots provoking a virtual civil war), every war is a product of miscalculation.

When the then military dictatorship in Buenos Aires decided to annex the Falklands, the Brits were caught completely off-guard. Most of them didn’t even know they still had a "colony" just off Argentina and South America. The British government and military, too, hadn’t expected the Argentines to be so aggressive – and thought they would, when London shouted "boo," meekly hand back the Malvinas islands.

To them, the military junta leader, Gen. Leopoldo Galtieri, a son of Italian immigrants (the Argentines are 40 percent of Italian origin, the other 40 percent Spanish), was just another Latin American "tinpot dictator".

They overlooked the fact that Argentinian resentment over the Falklands had been smouldering since 1833 when seamen from the British warship HMS "Clio" had occupied the islands, planted the British flag, and ignited a slow-burning resentment of 150 years.

They didn’t realize that a country with a 150 percent rate of inflation, where the value of the peso to the US dollar was 20,000 pesos to one (worse than ours! By golly), where the foreign debt was escalating by the week from $32 billion to $50 billion (looks like ours) – simply had to have an issue to distract 28 million restive Argentinians from their troubles – and the murderous evils of El Proceso, the abuses of the generals.

The Caesars had given the plebes of Rome, the masa, bread and circuses. General Galtieri thus gave his own gladiators something to fight about.

The Argentine military junta, for their part, may have thought the Brits, saddled with more than three million unemployed and a host of in-house problems within the European Community, wouldn’t come charging across 8,000 miles of choppy and chilly ocean, braving waves that could crest as high as 100 feet. What? Just to recover an almost treeless scatter of islands, a small population called "kelpers", and a few score thousand sheep?

They didn’t count on Maggie Thatcher. She decided that Britain must not back down, or be seen as puny and penniless. In truth, Britain was broke. Thatcher had to borrow back from the Australians, for instance, an aircraft carrier the Brits had already sold to them. She had to convert a famous ocean liner, booked for dry-docking and refurbishing, into a troop transport. Twice a week, every Tuesday and Thursday, Thatcher had to face critics in Parliament during the "Question Hour", who assailed her decisions as being insane.

But she persisted. And she won.

Yet, I remember one thing Thatcher used to say in times of crisis when she was P.M. "I never read the morning newspapers, because it just ruins my day!"

Hopefully, this is one trait our own La Emperadora won’t imitate.

However, the following paragraphs will illustrate how tough the decision-making process must be for a leader:

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President GMA’s State of the Nation Address correctly points to the country’s ballooning debt and budget deficit as our most urgent problem. The debate on solving this looming fiscal crisis has somehow disproportionately centered on raising tax revenues. Although raising tax revenues are definitely in order, many are not too optimistic of the President’s attaining her stated goal of an additional P80 billion in yearly revenues.

The other half of the solution, that of controlling expenditures and losses of government-owned corporations, has thus become more vital. NAPOCOR’s expected losses of P118 billion for 2004 is already expected to account for close to a third of the total public sector borrowing requirement for the year. NAPOCOR’s losses have now become the fastest-growing component of the ballooning Consolidated Public Sector Deficit and has contributed significantly to the rapid rise in our National Debt.

Last we saw, the country’s public sector debt had already reached 135 percent Gross Development Product (GDP). That’s more than two and a half times the average debt ratio for Latin American and Asian economies!

Clearly, a disaster in the making. Analysts warn that if we don’t address this problem soon by the end of the decade, our debt levels will reach 175 percent of GDP. By then, our debt-to-GDP ratio will be one of the highest in the world and at par with that of war-torn Lebanon.

Such a catastrophe can simply be avoided by raising NAPOCOR’s rates. The government has already done the sensible thing by filing for a P1.87/kwh rate increase.

Should the Energy Regulatory Commission (ERC) grant this, it would mean cutting NPC’s expected loss of P118 billion for 2004 down to P40 billion.

Though highly unpopular, we have no choice but to do it. Not doing so will also result in consequently failing to privatize NPC and an inability to attract new power plant investments.

Surely, no private investor would like to sell power into a market with prices that are artificially suppressed. And given that it takes four to five years to finance and build new power plants, we may not make it in time to stop the looming power shortages expected to hit us in 2007. Crippling power shortages would be precisely the event that triggers a debt default and Argentina-like collapse of our economy.

Successfully raising NAPOCOR’s rates would definitely go a long way towards preventing this bleak scenario, solving our fiscal crisis, stabilizing our debt problem and winning back international confidence.

In every respect, it could be the "credibility shock" our country needs. This step in the right direction would show, if not shock, the world into believing that we have what it takes to raise ourselves back onto a virtuous cycle.

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However, unpopular deeds are never easy. Here GMA must learn from the experience of the "Iron Lady" herself, Maggie Thatcher.

When this grocery store owner’s daughter took over as Prime Minister of Britain in 1979 she inherited a country that was locked into a freefall of "descent and decay".

That country’s previous 40-year experiment with "Statism", that of looking towards government to solve all problems and run the economy, was fast turning Britain into the "poor man of Europe". The huge losses of many state-owned companies were insatiably draining taxpayers’ funds, unemployment and inflation were high, British industry was uncompetitive, the government deficit was swelling, the balance of payments was perennially in crisis and the government had just borrowed from the IMF to protect the pound and stay afloat. In addition, financing the huge government subsidies led to high tax burdens that in turn were suffocating the country.

There was no end in sight to the destructive downward spiral of "tax and spend".

Thatcher’s weaker male predecessors came into power originally intent on reducing state intervention but instead ended up expanding it. In the case of Prime Minister Edward Heath that came to be known as his famous "U-Turn" and his years in power instead saw the imposition of massive wage and price controls, a swelling public sector and a continuing deterioration of government’s finances. The whole country was practically living on doleouts from the national treasury.

Maggie Thatcher had decided early on that the old way of doing things no longer worked. All this had to stop. This led her to squeeze government spending and cut subsidies. The immediate result was a sharp rise in bankruptcies and unemployment with many labeling her as "uncaring". In the midst of the recession in 1980 over 365 economists wrote the London Times, urging her to indiscriminately use more government money to lessen the pain, curb unemployment and prevent the recession from turning into a full-blown depression. But the Iron Lady was driven more by her convictions rather than consensus and populism.

She stunned Britain with her steadfastness and fortitudeness uttering her now most famous line: "U-Turn if you want to. The lady’s not for turning."

* * *

Thatcher also knew that curing the "sick man of Europe" would not be painless. She was eventually to embark on the arduous tasks of reducing government intervention in business, privatizing government-owned corporations, reducing absurdly high tax rates and taming the government deficit. Of course as the economic pain grew, her popularity fell. But ultimately, the power of her convictions not only cured Britain’s ills but also set a new economic agenda and fueled a revolution in public sector governance around the world.

As a result, the "Iron Lady" became the longest standing Prime Minister Britain has had over the last 150 years.

Would you believe? The redoubtable "non-turning" Lady "ruled" for 12 years before quitting No. 10 Downing Street.

What the country needs right now is leadership with some of that conviction. A leadership that’s on the mark as well as relentless in its pursuit of curing the "sick man of Asia" whatever it takes. Our debt and fiscal timebomb is ticking and one key to defusing it rests with successfully carrying out the unpopular task of raising NAPOCOR’s rates. However, time to do what’s necessary but unpopular could be shorter than we think.

We have roughly 18-21 months before campaign madness begins anew for another election and every wannabe politician will be searching high and low for the next populist bandwagon he can get a free ride on. And we all know that promises to fight increasing power rates always wins easy votes. The longer we delay resolving the problem, the closer it brings us to catastrophe. If we don’t act with haste, in no time the problem will surely become irreversible and every Filipino man, woman and child will suffer greatly for it.

The President is fortunate enough to have won a six-year mandate – hopefully uninterrupted. On this issue of correcting the wrong inflicted by suppressing power rates she ought to show conviction. She still has an opportunity to turn the tide, get the country back on its feet and leave us with a legacy of sustainable growth.