Downgrade

It came as no surprise — although no one really thought anyone would really pull the trigger on Washington, save for a China-based rating agency that earlier downgraded US debt paper.

After the close of trade last Friday in New York, credit rating agency Standard & Poor dropped its rating of US creditworthiness by a notch. That might not mean much in terms of the cost of borrowing: about $100 billion more annually for the US to service its debt.

It means everything in terms of reputational cost because, for the very first time ever, the US lost its AAA credit rating. For generations, US debt paper was the gold standard for the risk averse. The countries that enjoy the highest credit rating possible do form an exclusive club.

The S&P downgrade is unprecedented for another reason: it was not based solely on the financial analysis of the US credit position. The negative outlook on US debt is based on uncertainty about the reliability of the American political establishment in managing the fiscal position of the world’s largest economy.

The initial commentaries regarding the downgrade, including that of the influential economist Paul Krugman, took account of the fact that S&P considered the political environment the main reason for its negative outlook on US debt. Krugman blamed the madness of the political Right in Washington for the mess. They pushed the country to the brink of a default by holding the debt-ceiling hostage to their doctrinaire refusal to consider new revenue measures.

The markets, however, will likely tend to ignore that element in the S&P report. Financial markets are prone to panic and driven by greed.

The first indication of market reaction to the downgrade came from the Middle East, where regular trading happens on weekends. Those markets reacted with horror, dropping stock prices dramatically.

If that trend continues in other regions of the globe as this new trading week begins, the negative momentum will be difficult to rein in. A global recession is not an inevitability, but it could be induced by a panic in the markets. At this moment, no one is really sure how deep the selling down of stocks will go.

Many weeks ago, I warned in this space that we should be checking our hatches in view of the rough sailing ahead. As financial panic sweeps across the globe, our people deserve reassurance from our economic managers.

When the global economy sank into recession three years ago, the Philippine economy was well insulated. We managed to grow our domestic economy without a single quarter of contraction in the midst of extremely adverse global conditions. This did not happen accidentally.

Our economic managers then responded proactively. Ahead of the others, we undertook stimulus spending. Bank lending was encouraged to grow. Currency volatility was restrained.

If our present economic managers have a comprehensive plan to ride out the forthcoming period of economic uncertainty, they certainly should unveil it soon. They should not just sit back and hope the adverse conditions will spare our vulnerable economy. If they do, that will be a failure of economic statesmanship.

Free expression

An interesting public debate broke out last week over a controversial art exhibit at the Cultural Center of the Philippines (CCP).

The exhibit featured a visual artist who used religious images in a rather interesting way, to put it lightly. His works were provocative, to say the least. If provocation is the intent of his art, he surely achieved that.

The artwork was not pretty. Then again, art is not necessarily pretty. Otherwise, all our artists will be squatting along Mabini St. painting bright flowers on cheerful vases for the tourists to buy.

Our collective experience as a society brought us far and away from the bright and sunny renditions of the great Fernando Amorsolo. Also, all over the world, art has begun to explore the dark side, the unseemly, the gory and the ugly. A major artist courted condemnation, as well as acclaim, by putting animal carcasses on exhibit.

A number of traditional Catholic groups demanded the exhibit be closed down. A very catholic couple broke into the exhibit and defaced some of the pieces on display. Soon enough, those who disliked the exhibit demanded the resignation of the CCP president.

To contain the controversy, the CCP management convened a public forum on the matter attended, on the one hand, by devout Catholics and other by the bohemian (of course!) artistic community. Quite predictably, the forum quickly descended into a shouting match that forbid any space for compromise.

Being a writer, I identify closely with the artistic community. My first reaction to this debate was to stand on the side of free expression. The intense Catholic reaction called up images of the fatwa issued against Salman Rushdie and the several attempts to assassinate a Danish editorial cartoonist who drew the prophet Mohammad with a bomb.

The more I think about the debate over the CCP exhibit, however, the more equivocal I become. The friends I have discussed the issue with are divided in their opinion. Those among them (not necessarily good Catholics) who say the artwork on exhibit is simply sacrilegious and intentionally disrespectful of the sensibilities of others do have a point.

The controversial artwork ought not to be banned — but perhaps should not be where they are presently displayed. Like films that are pornographic or gory, viewers must be protected from offense too by forewarning or restricted exhibition. As for those things on display, I fail to see artistic merit beyond the obsession with provocativeness for its own sake.