As everyone including Malacañang has warned, the $700-billion bailout signed by US President George W. Bush over the weekend will not spell instant relief for troubled financial markets and the global economy.
Valuation alone of the toxic assets of troubled US investment banking giants would be tricky. There is no precedent for price-setting in this disaster. Price the assets too low and the bailout becomes useless. Price them too high and it rewards those responsible for the mess.
Even the oil-rich Gulf states cannot be immune forever from an economic slowdown. As fears of a recession starting in the United States pull down world oil prices, economic growth forecasts in the oil-rich Gulf are being revised downward and analysts think even the Dubai economy has overheated and is ripe for a correction in the near future.
This is bad news for our overseas work force, a large chunk of which is in the Middle East. Stop over in Dubai and you’ll think you’re back in the Philippines as soon as you step out of the plane; there’s a Filipino at every corner and behind every counter, except the airport is so huge and modern it cannot possibly be the NAIA.
The recession will affect other regions. Already Europe is reeling from the financial crisis. What do we do when the international job market starts contracting, closing its doors to migrant workers including Filipinos?
In the coming months world leaders will be discussing measures to prevent a repeat of the meltdown on Wall Street, which collapsed from the weight of unrestrained speculation and greed, and whose fallout is being felt around the globe.
An emerging buzz phrase is responsible capitalism. The idea is that like individual freedoms, a free market cannot be completely free; the system must bear responsibilities.
Certain governments are pushing for multilateral financial regulation, with the US losing the lead. There are proposals to put some curbs on short-term profit-making.
European leaders are calling for a greater focus on entrepreneurial rather than financial capitalism. The first type values hard work and production, creates jobs and promotes national economic growth. The second type, in contrast, often creates wealth mainly for a handful of individuals, with wealth generation based mainly on a more sophisticated version of high-stakes gambling.
The value of assets of companies that succeeded through long years of hard work, brand development and quality control can be held hostage to the fear, greed and presumably educated guesses of such high-stakes gamblers.
After a long period of wrong guesses and bad bets, the market finally imploded. The US looks headed for its deepest recession in decades, and American taxpayers are left holding the $700-billion bailout bag.
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Few Filipinos are market-savvy enough to engage in any degree in short-selling or dabble in derivatives. The typical Filipino is leery of the stock market in general, aware of weak market regulation and insider trading that compromises investments in this country.
But we are also easily seduced by promises of big returns within a short period, even if the profit scheme is poorly understood and lacks transparency, and the legitimacy of those offering to manage our investments has not been established.
This is why despite the collapse of several pyramiding schemes and the high-profile arrest of their brains, there are still suckers born every minute in this country who will put good money into new types of pyramid scams.
Filipinos are also gamblers, but only when it comes to primitive games where the stakes are clear and the rules simple, and where the bets – this being a poor country – are minimal. Thus the popularity of state-operated lottery as well as illegal numbers games such as jueteng, despite the endless sermons of the Catholic Church about the evils of illegal gambling.
We do understand how a protracted losing streak or an unusually large loss in a single bet can spell long-term disaster for a gambler.
The global economy is facing the consequences of such unrestrained gambling in a sophisticated market, and world leaders want to put an end to it.
They want long-term commitment to responsible capitalism. They want morality and a code of ethics in a market economy that for a long time fueled global growth.
Freedom without responsibility is anarchy. This cannot happen in the world economy. Free also doesn’t mean you don’t pay. Those responsible for Wall Street’s meltdown must be made to account for the disaster.
There is the sense that the market is no longer always right. This process of bringing responsibility to a free market that has failed in self-regulation is going to be long and, in several aspects, painful.
Exercising freedom with responsibility has never been easy. The road to a new global financial order will be long and tortuous.