Plenty has been written about the injustice of third-world debt
elsewhere.Plenty is also written
suggesting that it is the corruption and greed of third-world politicians which
has mainly contributed to the size, and inexorable growth, of that debt.
We are not going investigate these questions here.Instead, we are simply going to look at how
third-world debt is created, and establish to whom, precisely, it is owed.
The
money borrowed by third-world countries is not owed to the wealthy nations, as
is generally believed, any more than our own national debt is owed “to
ourselves”. How could it be, when all the developed
countries are themselves fighting a losing battle against debt-America,
the wealthiest and most powerful among them, being the most indebted of all ?
Where, then, does all this money owed by the developing nations come
from?
Like the “credit” which currently provides the UK with 97% of its money supply,
third-world debt is almost completely made up of money created by the
commercial banking system to fund specific loans.
This happens in three ways.
Firstly…
…international commercial banks
make loans directly to governments and private businesses in third-world countries, creating the money in the usual way.
As
with bank “lending” within the domestic economy, no depositor’s account is
debited or affected in any way: and just as, within the domestic economy, the
money loaned creates new deposits in the national banking system, so money
loaned across borders quickly finds its way into somebody’s bank account and,
somewhere in the world, brand new deposits are created, priming the global
banking system for further “lending”.
Since the loans are designed to purchase goods from abroad-indeed, they are often “tied” to specific purchases from specific
countries-theyusually come either in dollars or in the currency of the country making
the sale.
However, the money is owed neither to that country itself nor to private
citizens within that country.
It is owed to the commercial banking system which created it.
Secondly
…
…further loans may be brokered
by the World Bank.Although the
developed nations make contributions to its nominal reserves, the
money which this bank “lends” is, again, conjured up by the commercial banking
system.
The process here is closely akin to the way a national debt
operates.The World Bank draws up bonds
and sells them to the commercial banks, which, using their deposits as
collateral, create money specifically in order to buy them.And of course, the end result is yet more
deposits in the banking system, to be used as collateral for further lending.
Since the money owed is not denominated in the currency of the
“borrowing” country, this debt, unlike national debts, cannot be rolled over internally
by the borrowing government with the issue of more bonds when payment falls due.If it could, third world debt would be no
more of a problem to the debtor countries than our own unrepayable national
debts are to us.(This is not to say that
national debts are not a problem: only to point out that at least they do not
lay the borrowing country open to equal manipulation and exploitation by their
creditors.)
Nevertheless, the money is not owed to any other nation: it is
owed to private, commercial banks, which enjoy the privilege of creating it at
their own discretion, and to those who purchase the bonds.
Thirdly …
…there is the International
Monetary Fund.Here, too, money
creation, rather than money lending is paramount.
Most nations pay “quotas” into the IMF’s financial reserves.Twenty-five per cent of each nation’s quota
is paid in gold, the remainder in the national currency-and
since there isn’t a country in the world which isn’t strapped for cash, the
national currency componentis-you’ve guessed it-created specially for that purpose, through
the sale of government bonds: adding to what are already monstrous national
debts (owed to specific individuals and private businesses).
In addition to the national quotas, which serve as a pool of funds
available for loans to developing countries, since 1979 the IMF has also issued
“Special Drawing Rights”, or SDRs.These
operate in the same way as a bank overdraft: if a nation borrows them, they
must be repaid.
The IMF, therefore, is effectively creating and issuing a form of
international currency, boosting the global money supply as it sees fit, in
parallel with an equal amount of debt.
Recently the IMF has also started to provide “loan packages”, some of
the money being paid out of its own quotas, and the rest created and “lent” by
commercial banks.
Clearly, in a world where everyone is short of money, and every country
owes more to the banking sector than is available within its own economy, third
world debt is no different from any other kind.
Ultimately, it is owed not to the developed nations, but to transnational
financial institutions operating within those nations; and it is a minor-though, for those debtors who so generously made its creation possible,
ruinous- component of the global money
supply.
A case study from the Philippines:
THE SYNTHESIS OF ALL SCAMS OF DEBT MONEY SYSTEM
(With My Proposed Solutions Below)
�YOU ARE DOOMED, YOU THAT TWIST JUSTICE AND
CHEAT PEOPLE OUT OF THEIR RIGHTS.� � Amos 5: 7
By Eric V. Encina
The
Philippine Fiscal Crisis and the Neo-ColonialState (UNDER THE U.S.
IMPERIALISM DEBT-BASED ECONOMY, INTERNATIONAL BANKERS, WTO, MULTINATIONAL
CORPORATIONS, BUREAUCRAT CAPITALISTS, GREEDY AND CORRUPT POLITICIANS)
The Philippine Government under President
Gloria Macapagal Arroyo has been horrendously accumulating debts to the
tune of P1.2 billion daily around US$100 Million daily. (Correct me if I am
wrong in conversion)
FILIPINOS ARE BEING SKINNED ALIVE DAILY BY THIS HORRIBLE
CRIME OF DEBT MONEY SYSTEM. THERE IS NO ANY POSSIBLE ABSOLUTION OF THIS SINUOUS
CRIME AGAINST HUMANITY.
According to Dr. Edberto M. Villegas: �The
fiscal crisis that the Philippine government is presently undergoing is the
worst ever in the history of the country, and is caused by its own doing. And
yet the government would pass the burden of solving this crisis to the people,
with increases in taxes and prices like those for electric power and petroleum.
It has even put up a so-called Bayanihan Fund (or Filipino Solidarity Fund� so
that ordinary citizens (Filipinos) can contribute their shares for the
government to weather the storm. And now the
national government has the temerity to ask the people to practice austerity
and contribute their small pittance to the �Bayanihan� Fund, (Solidarity Fund)
when all the fat cats in the bureaucracy together with their foreign
partners have already long been feasting on the blood of the people. And
when we consider other anomalies at other government corporations, Public
Estates Authority(Amari scam, Diosdado Macapagal Boulevard scam, Expo Filipino
scam) and the GSIS (BestWorld scam), no one will wonder anymore where a
great bulk of all the borrowings of the government are disappearing to.
IT IS SHAMEFUL FOR THE PHILIPPINE GOVERNMENT TO BE DIRECTLY AND
VIRTUALLY INVOLVED IN SCAMMING THE FILIPINO PEOPLE for all these debts
and projects and imposition of more taxes to people. Now it is already in
colossal debts, the Government is ASKING THE FILIPINOS TO DO AUSTERITY MEASURES
AND CONTRIBUT to Solidarity Fund donation MORE THAN INTENSIFIED TAXATION
for the payments of most odious debts and for the greed and avarice of
those government officials at the terrible cost of human lives of the poor
Filipinos in the most abject poverty, hunger and starvation in the countryside.
SOLIDARITY FUND TO PAY INTEREST, TO
FILL UP THE BUDGET DEFICIT AND OFFSET THE GLOBAL FINANCIAL CRISIS? This is a
nightmare of a great insanity!
WHERE WILL THE FILIPINOS GET THE
MONEY? To borrow from the same banking system at interest? To sell the Philippines
assets? To make money out destroying our environment? To work like animal
carabao overseas? To work like slaves in foreign countries just to raise money
and give to the government to pay interest? To sell our Filipino women and
children for prostitution? To kill the innocent children by methods of abortion
and sell the body parts and tissues to make money? WHAT ELSE? WHERE ELSE
TO FIND MONEY TO PAY DEBT?
SHOULD WE FORCEFULLY COLLECT ALL THE MONEY OF THE FILIPINO PEOPLE AN
PAY INTEREST TO THOSE ODIOUS DEBTS? EVEN THOSE SO-CALLED LEGITIMATE DEBTS ARE
KILLING US, BECAUSE WE HAVE PAID MORE THAN TOO MUCH FOR MORE THAN 30 YEARS.
WE ARE IN THE ULTIMATE ECONOMIC IDIOCY IN THE 21ST CENTURY
AND IT WILL CONTINUE SO LONG AS WE ARE UNDER THE IMPERIALISM OF DEBT MONEY
SYSTEM AND NEFARIOUS AND PERNICIOUS MEN IN THE POLITICAL AND ECONOMIC POSITIONS
IN THE COUNTRY.
�THE ISSUE (debt money system) WHICH
HAS SWEPT DOWN THE CENTURIES AND MUST BE FOUGHT SOONER OR LATER IS THE
PEOPLE VERSUS BANKS.� � Lord Acton
THE PRESENT AND FUTURE SITUATION
OF THE FILIPINO PEOPLE AND THE PHILIPPINES
IS DOOMED TO DESTRUCTION IF WE WILL CONTINUE TO REFUSE AND REJECT THE SOCIAL
CREDIT SOLUTION.
Sample of Philippine Government Credit
Check
for debt free money creation by legislation or by emergency currency as
bail-out for the Filipino people
Republic of the Philippines
Check
No. 2009-1
Congress of the Philippines
Constitutional Hills
1119, Date:
01/10/2009
Quezon City , Metro Manila
Pay to the order of: Bureau of Treasury P500,000,000,000.00
Exactly: Five Hundred Billion Pesos / and no
centavos
Authority Signature
Sponsoring Congressman
Speaker of the House
President of the
Senate
President of the
Philippines
Philippine Government-Credit
Disbursement Account
No: 2009-1-A
Project
title: BAIL-OUT FOR THE FILIPINO PEOPLE IN
THE FORM OF EXTRA BASIC INCOME TO EVERY FILIPINO CITIZEN ANNUALLY
THE PHILIPPINE GOVERNMENT THROUGH THE DEPARTMENT OF FINANCE UNDER THE
PRESENT DEBT-BASED HORRENDOUS FINANCIAL-ECONOMIC SYSTEM ONLY PRINTS THE
BORROWED MONEY AT INTEREST DECEPTIVELY THROUGH THE FACILITIES OF THE
PRIVATELY-OWNED CENTRAL BANK BUT DOES NOT CREATE THE MONEY. ALL THE MONEY BEING
PRINTED ARE FROM INTEREST-BEARING LOANS FROM THE PRIVATE, COMMERCIAL, FOREIGN
AND INTERNATIONAL BANKS.
IT IS THE CRITERION OF A JUST MONEY SYSTEM THAT WHAT IS BOTH
SOCIALLY AND PHYSICALLY POSSIBLE SHOULD ALSO BE MADE
FINANCIALLY POSSIBLE.
THE ULTIMATE SOLUTION AS A SAMPLE
ABOVE. THE NATIONAL SOCIAL CREDIT MONETARY REFORM ACT:
The Philippine Government must stop borrowing money from the private, foreign and
international bankers. Cancel the debts. We have paid more than enough.
Withdraw membership from IMF, WB, BIS. Cancel all the bilateral lending schemes
and agreements.
CREATE OUR OWN MONEY DEBT AND INTEREST
FREE according to the needs of the country: the government expenditures and the
population, backed by the GOVERNMENT OR THE STATE AND THE FILIPINO
PEOPLE AS SHOWN ABOVE THROUGH the THE FACILITIES OF THE GOVERNMENT
CONTROLLED CENTRAL BANK.
There is no valid reason for the Philippines to
be hugely indebted and to suffer horrors of poverty and hunger of families
in the countryside. There is no lack of figure or number, no lack
of ink and paper with which to create and print the money for the
needs of the country.
Social Credit Monetary Reform Policy Proposals TO SOLVE
POVERTY AND DEBT PROBLEMS IN THE PHILIPPINES :
THE CASH CREDITS OF THE
POPULATION OF ANY COUNTRY SHALL AT ANY MOMENT BE COLLECTIVELY EQUAL TO THE
COLLECTIVE CASH PRICES FOR CONSUMMABLE GOODS FOR SALE IN THAT COUNTRY, AND
SUCH CASH CREDITS SHALL BE CANCELLED OR DEPRECIATED ONLY ON THE PURCHASE OR
DEPRECIATION OF GOODS FOR CONSUMPTION.
2. THE CREDITS REQUIRED TO
FINANCE PRODUCTION OR DEVELOPMENT SHALL BE SUPPLIED NOT FROM SAVINGS, NOT FROM
TAXES, BUT BY NEW FINANCIAL CREDITS RELATING TO NEW PRODUCTION.
3. THE DISTRIBUTION OF CASH TO
INDIVIDUALS SHALL BE PROGRESSIVELY LESS DEPENDENT UPON EMPLOYMENT. THAT
IS TO SAY THAT THE DIVIDEND SHALL PROGRESSIVELY DISPLACE THE WAGE AND SALARY.
DIVIDEND OR
EXTRA/SUPPLEMENTARY BASIC INCOME FROM DEBT FREE MONEY CREATION OF MONETARY
REFORM ACT CAN BE SAID IN A SIMPLE, STRAIGHFORWARD, ULTIMATE RIGHT AND FAIR
SOLUTION TO AN AWKWARD ECONOMIC AND FINANCIAL PROBLEMS IN THE WORLD.
A NUMBER OF TREMENDOUS BENEFITS WILL HELP
HUMANITY AT LARGE IN THE FOLLOWING BELOW:
1.No more unnecessary material and, per se, monetary
poverty
2.No more homelessness
3.No more hunger, malnutrition and starvation
4.No unemployment as everyone can be potential
self-employed at his/her productive initiative
5.No more inflation since there would be enough purchasing
power at the hand of every citizen
6.Far less crime or no more poverty-money-related crimes
7.Little or possible no more discrimination on the basic or
race or sex
8.Less threats of war
9.Less threats of rebellion and insurrection
10.Less
rallies and commotions
11.Less
environmental degradation
12.Less
beggary and unnecessary mendicancy
13.Happy
community and happy nation
14.Happy
working condition and work force
15.Less
bankruptcy or possibly no more bankruptcies
16.Less
illegal activities or possibly no more illegal activities
17.Less
killing or possibly no more killing of the unborn and innocent children
18.Less
suicide or possibly no more suicide cases because of poverty, unemployment and
money problems
19.Less
cases of divorce or possibly no more divorce and family breakdown caused by
money problem.
20.Less
overseas aid or foreign aid or possibly no more necessity of massive foreign
aid from the foreign taxpayers
21.Less
brain drain or possibly no more brain of each nation on earth except by
necessity
22.Less
sending out of overseas workers or possibly no need of sending our people overseas
for overseas employment that oftentimes suffer exploitation and abuses.
Pragmatically,
extra basic income can help every citizen:
1.for the rainy day or in times of calamity
2.for everyone�s old age as pension is not enough
3.for everyone�s hospital stay of additional medical costs
4.for educational, cultural and religious travels, etc.
5.for the children�s primary, secondary and college
education to prevent from tuition fee debt bondage
6.for house or shelter/home security.
IT CAN BE GUARANTEED THAT THERE ARE OTHER PROBABLY
HUNDREDS TO THOUSANDS OF GREAT BENEFITS IF EXTRA BASIS INCOME TO EVERY CITIZEN
IS GIVEN AS A MATTER OF ECONOMIC RIGHT OF CITIZENSHIP BY BIRTH, NOT AS A
MATTER OF WELFARE, OR DOLE-OUT OR NOT AS A MATTER OF CHARITY.
THE
ADDITIONAL PROPOSAL FOR MONETARY REFORM FOR THE INFORMATION AGE BY
Joseph Huber & James Robertson
Central banks should
create the amount of new non-cash money (aswell as cash) they decide is needed
to increase the money supply, by crediting it to their governments as public
revenue. Governments should then put it into circulation by spending it.
The Central Bank of the Philippines should
be for the service of the Filipino people and the Philippine government and it
is only possible if this central bank would be nationalized, would be under the
control of the government to create money debt and interest free for the needs
of the republic and the people. THIS IS THE ONLY SOLUTION AS PROPOSED IN
MODIFICATION BY MONEY REFORM to free this country from the slavery of debts and
poverty. This is the solution to have better money supply in the country to
finance private and public enterprises, to give sustainable living to all
people, to protect and save the environmental from total deterioration, to save
millions of helpless and miserable poor Filipinos in the countryside, and
provide true health care for the entire population and for other good things
through debt money creation supply.
It should become
infeasible and be made illegal for anyone else to create new money denominated
in an official currency. Commercial banks will thus be excluded from creating
new credit as they do now, and be limited to credit-broking as financial
intermediaries.
It will be for central
banks to decide at regular intervals how much new money to issue. They will
make their decisions in accordance with monetary policy objectives that have
previously been laid down and published, and they will be accountable for their
performance.
But they will have a high
degree of independence from government, giving governments no power to
intervene in decisions about how much new money to create.
Scaremongers will
raise the spectre of inflation.
But we show that,
among other benefits, seigniorage reform can be expected to provide more
effective safeguards against the risk of inflation than exist today, when
commercial banks print almost all the new money.
There are four
comparatively straightforward changes will beneeded, as follows.
1. Sight deposits
denominated in the official currency will be recognised as legal tender, along
with cash.
2. The total amount of
non-cash money existing in all current accounts (including those of bank
customers, banks, and government), together with the total amount of cash in
everyone�s possession, will be recognised as constituting the total stock of
official money or legal tender immediately available for spending.
3. Customers� current
accounts will be taken off the banks� balance sheets, and the banks� will
manage them separately from their own money (which is not what they do today).
As a result, a clear distinction will be introduced between means-of-payment
money (�plain money�) in current accounts, and store-of-value money (�capital�)
in savings accounts. In practice this will mean that, except when a central
bank is creating new money as public revenue, payments into current accounts
will always have to be matched by payments out of other current accounts, or
paid in as cash.
4. Finally, if any person or organisation other than a central bank fails to
observe that distinction and prints new non-cash legal tender into a current
account, they will be guilty of counterfeiting or forgery � just as they would
be if they manufactured unauthorised banknotes or coins.
Proposals for monetary
reform have often advocated 100% banking (in place of fractional reserve
banking) as a way to prevent banks creating new money.
Failure to get
those proposals adopted has been at least partly due to the difficulty of
implementing them, reflecting as they did an out-of-date understanding of the
changed nature of money and the process of creating it.
The plain money
proposal will achieve the same aim as 100% banking would have done, but in a
simpler way � easier to understand and implement, and more fully reflecting the
nature of money in the Information Age.
Among
possible advantages are:
greater
equity and social justice
reducing
inflationary tendencies in the economy
creating
greater economic stability by reducing the peaks and troughs of business cycles
improving
the safety and stability of domestic banking institutions
removing
distortions caused by channelling 95% of new money into the investment and
spending priorities of banks and their customers
reducing
monetary pressures and constraints arising from the creation of new money by
commercial banks as interest-bearing debt, that encourage environmentally
unsustainable development, and
a
monetary and banking system that is transparent and open to public
and
political understanding of how it works.
Allowing
banks to create new money out of nothing enables them to cream off a special
profit. They lend the money to their customers at the full rate of interest,
without having to pay any interest on it themselves.
So their
profit on this part of their business is not, say, 9% credit-interest less 4%
debit-interest = 5% normal profit; it is 9% credit-interest less 0%
debit-interest = 9% profit = 5% normal profit plus 4% additional special
profit.
This
additional special profit is hidden from bank customers and
the
public, partly because most people do not know how the system works, and partly
because bank balance sheets do not show that some of their loan funding comes
from money the banks have created for the purpose and some from already
existing money which they have had to borrow at interest.
I
welcome comments, suggestions, correction and if possible assistance.
I
am preparing intensively for PEOPLE'S FORUM FOR MONETARY REFORM AND FOR
OUR INTERIM MEASURE PROJECTS ON JANUARY 17, 24, 2009 FOR THE
SURVIVAL OF THE POOR FAMILIES AND CHILDREN.
We
desperately need any donation today, this week.
Thank
you.
Eric
V. Encina
Filipino
Social Crediter/Monetary Reformer
Filipino
Alternative Solutions For Sustainable Survival Movement\
c/o
Lito Alhambra Old House, Homesite, Km2, Brgy. Lawa-an,
The Philippine Fiscal Crisis and the Neo-ColonialState
by Dr. Edberto M.
Villegas
The fiscal crisis that the Philippine government is presently
undergoing is the worst ever in the history of the country, and is caused by
its own doing. And yet the government would pass the burden of solving this
crisis to the people, with increases in taxes and prices like those for
electric power and petroleum. It has even put up a so-called Bayanihan Fund so
that ordinary citizens can contribute their shares for the government to
weather the storm.
It
must be emphasized, however, that the fiscal crisis that the government is
experiencing was bound to happen based on its heavy indebtedness to foreign and
domestic creditors, the latter also affiliated with foreign capital like
Citibank and the Bank of America from which the government heavily borrows. The
country�s external debt alone as of September 2003, already stood at P1.5
trillion, of which 51% are direct government debt from international financial
institutions, like the IMF and World Bank, and bilateral creditors, and 49% are
from foreign bonds.[1] By January, 2004, total
outstanding debts of the government already exceeded the P3 trillion mark,
surging particularly in the second half of 2003. It is Gloria Macapagal Arroyo
who has borrowed the most among all Philippine presidents, with her borrowing binge,
mostly from the US
, from 2001 to 2003 �more than the combined borrowings of Presidents Ramos and
Estrada for eight years, 1992 to 2000.�[2] The Arroyo administration
has been accumulating debts to the tune of P1.2 billion daily.
Chart 1. Outstanding National Government Debt
Source: Bureau of Treasury
The heavy debt of the government has thereby brought about its current
huge fiscal crisis, with budget deficit nearing P200 billion, since revenues
from taxes and other non-tax sources have been greatly left behind by its
galloping debts to foreign and local creditors.. Even with the heavy budget
reduction for social services through the years, mandated by memoranda of
agreements with the IMF, [3] to assure debt payments, the
continuous increase of the national debts, especially during the Arroyo administration,
has made all the cost-savings measures of the government meaningless but
debilitating to the Filipino people, who have to suffer poor government social
services like in education and health.
Table:Real Per Capita National Government Expenditures on Social
Services,1996-
2004 (2000 Prices)
1996
1997
1998
1999
2000
2001
2002
2003
Prel
2004
Pres
Total Social Services
2,188
2,487
2,417
2,323
2,302
2,035
2,002
2,016
1,999
Education
1,534
1,789
1,761
1,675
1,608
1,515
1,505
1,455
1,415
Health
230
266
221
223
202
166
171
151
141
Soc. Security, Welfare, &
Employment
317
392
387
364
376
331
327
392
418
Housing & Com. Devt.
107
39
48
61
115
22
19
19
29
Source: Rosario G. Manasan, Fiscal Reform Agenda: Getting
Ready for the
Bumpy
Road Ahead, Table 2, p.5.
The debt of the national government has already reached 78% of GDP at
the end of 2003. And if you add the debts of the government owned
and controlled corporations, (GOCC), the GFIs(government financial
intermediaries), LGUs, projects under BOT, and those of the SSS and GSIS,[4] debts the government
assumes, total consolidated public debts at end of 2003 amount to P5.9 trillion
or 137% of GDP! This indeed is alarming and is creating grave
apprehension to the country�s foreign creditors and potential investors. In
fact, Standard and Poor, an international credit rater for countries, has
downgraded the Philippine long-term currency rating by a notch to BBB-minus.
The Philippines has already
surpassed all other countries in Asia in the
size of its consolidated public debts.[5]
The Napocor Debt
But where do all the money go? A great portion of these foreign loans
go to the payment of the interest and principal of the national debt, for
instance, 49%(33% interest, 16% principal)[6] for the year 2004, and another big
hunk is lost to corruption of bureaucrat capitalists. Among such big cases of
bureaucratic corruption is the sweetheart deal that Napocor made with
independent power producers(IPPs). Under Executive Order (EO) 215, the IPPs
were funded by foreign loans secured by a government guarantee and most
contracts with the IPPs even included a �take or pay� onerous (but profitable
to the bureaucrat capitalists) provision, which required Napocor to pay for 70%
to 100% of the output of an IPP whether or not the electricity is actually used
by the public. For 2004, Napocor will pay to the IPPs P19 billion worth of
power which is not yet consumed.[7] On the average, Napocor only utilized
20% to 40% of the power it buys from the IPPs. Such shady going-ons of course
enriched former President Ramos and his cohorts but Napocor is now saddled with
a $7.4 billion debt which the government through the so-called Electric Power
Industry Reform Law(EPIRA) has the gall to allow power distributors
like Meralco to pass on to the ordinary consumers. Meralco owes Napocor P13
billion but was allowed by the Arroyo government to rescind its contract with
Napocor and to purchase power from its own IPPs. Thus, Meralco in order to
defray its past obligations to Napocor has been allowed by the government to
pass theses debts to the consumers. Notice the Purchased Power Cost
Adjustment(PPA), the Fuel Cost Adjustment (FCA), and other such euphemistic terms
in your monthly electric bill.[8]
All these nefarious deals within Napocor, including its infamous contract
with Westinghouse during the Marcos regime to build the now defunct Bataan
Nuclear Power Plant, which has not produced a single watt of electricity,[9] has pushed its debts to $23.5
billion(P1.3 trillion) more than a third of the national debt of P3.32 trillion
as of October 2003. And now the national government has the temerity to ask the
people to practice austerity and contribute their small pittance to the
�Bayanihan� Fund, when all the fat cats in the bureaucracy together with their
foreign partners have already long been feasting on the blood of the
people. And when we consider other anomalies at other government corporations,
Public Estates Authority(Amari scam, Diosdado Macapagal Boulevard scam, Expo
Filipino scam) and the GSIS (BestWorld scam), no one will wonder anymore
where a great bulk of all the borrowings of the government are disappearing to.
The Government and the Group of 11 UP Economic Professors�
Proposals to Solve the Fiscal Crisis
To
confront the magnitude of the fiscal crisis, the Arroyo government is again
resorting to transferring the burden of solving it to the people by introducing
8 new tax measures to raise an additional P84 billion. As usual, these follow
the receipts of the IMF which is constantly worried that the Philippine
government may not be able to pay its foreign loans. Among these onerous tax
measures which will hit the lower-income classes more adversely are an increase
of value-added-tax or sale taxes (note that it was the IMF that imposed on the Philippines the
adoption of VAT during the Aquino regime) and an increase in petroleum taxes.[10] Malacanang also would reduce the
IRA for local governments, but refuses to cut its huge pork barrel, the
so-called presidential discretionary fund, which amounts to a hefty P3
billion.
The government is specially alarmed of the current fiscal crisis
because foreign credit analysts have started downgrading the Philippines as
an investment destination and new foreign loans may not be forthcoming if
government deficit keeps on increasing. This may lead to a defaulting by the
Arroyo administration of its foreign loans since new loans are spent to pay for
old loans in a vicious cycle which again hikes total loans. The new taxes being
vied for by the government have been referred to Congress for legislations since
members of Congress are also reluctant in giving up their pork barrels, P70
million annually for each congressman and P200 million for each senator.
Everyone is ganging up on poor Juan de la Cruz, as most of the taxes being
considered are regressive in nature like the VAT and taxes on petroleum, the
latter causing a chain reaction of an increase of prices of basic commodities.
A
group of 11 UP economics professors have also come out with their proposals to
hurdle the fiscal crisis of the government. In a paper entitled �The deepening
crisis: the real score on deficits and the public debt�, recognizing the
unprecedented and the seriousness of the fiscal crisis, they recommend that the
government should increase its surplus by 3.5% of GDP ( using the nominal value
of P4300 billion as of 2003) from its present 0.6% to maintain current debts
and support the budgets for vital infrastructure and education. According
to this group of professors, the government must also limit the servicing of
the off-budget liabilities (items not stated in the annual government budget or
the General Appropriation Allocation, called off-items, the most notable of
which are debts of the GOCCs) by 1.5% of GDP.[11] But how to do these? This
group of professors(GP for short) advised measures which are mostly along the
vein of the government�s proposals and which reiterate the usual IMF policy
recommendations for the Philippines and other Third World countries to confront
their debt problems. These recommendations adopt the free-market framework
(called neo-liberal reforms) under the aegis of globalization or a policy of
open economy, specially promoted by the US under the Uruguay rounds of talks,
which established the WTO, but which is not taken seriously by even the US
itself and the leading capitalist countries (members of the European Union and
Japan), who have become more protectionists in their economies starting in the
late 1990�s.
The GP�s policy recommendations include: privatization, especially of
Napocor; deregulation, or what the group calls the abolition of the
�politicization of prices�(p.24); and liberalization of tariffs. For
liberalization of tariffs, the GP is particularly against increasing the
tariffs on oil imports, because, according to them, �international commitments
prevent significant tariff adjustments�(p.19), a shortcoming which is not,
however, �encountered when the tax is domestic.� (Ibid.) With this
self-assurance, the GP therefore recommends an additional two-peso domestic
tax(called excise tax) on petroleum, purportedly to control air pollution(!), a
two percent increase in VAT and its expansion to cover finally all
professionals like lawyers and doctors, an increase of 10% tax on new cars and
an indexation(or continuous adjustment of taxes, which often go up) on the
so-called sin products like tobacco and alcohol, this latter tax along the
comprehensive tax reform program, first advocated by the IMF in the 1992
memorandum of agreement of the Philippines with this institution. To reduce the
servicing by the government of its off-budget liabilities by 1.5 % of GDP, the
GP advises price and fee-adjustments ( especially higher power rates for Napocor
to pay off its debts) of government corporations. Another measure backed
by the GP which will hit the poor mostly, is the reduction of IRA
releases to 30% from its current 40%. Aware of the corruption in the
government, which the WB solely singles out as the main cause of the Philippine
fiscal deficit, the GP is also for plugging tax leakages and the reduction of
the salaries of management in government corporations.[12]
It must be noted that an IMF post program monitoring team visited the Philippines in
June, 2004 to find out how the Philippine government is abiding by its
commitments to balancing its budget. The team was particularly worried about the
growing budget deficit of the government and warned that it was in a �crucial
juncture� (Arroyo used the same term �crucial juncture� when she announced that
the country is in fiscal crisis last Aug. 23, 2004). The IMF team recommended
among other things: government assuming Napocor debts and fast tracking its
privatization, increases in taxes like that of VAT and on petroleum, and a more
efficient tax administration.[13] Soon afterwards, Arroyo announced
her 8 tax measures during her State of the Nation Address and the GP came out
with their position paper. Notice the pattern.
It
could be seen that the main brunt of the GP�s proposals to solve the fiscal
crisis is anti-people. It is primarily concerned with restoring investor�s
confidence, with an eye for a favorable foreign credit rating as an investment
destination for the Philippines, in the country�s capacity to pay off its
foreign loans and to become an attractive place for good profits.(p.22-23) The
GP is also worried of the eroding competitiveness of the Philippines in the
world market (p.16) and an increase in interest rates for credits extended to
the country due to an escalating budget deficit(p.22). Though the GP also
recommends a cut in the pork barrel of Congress by one half and the reduction
of the pay of management in government corporations, most of its policy
proposals would cut deeply on the livelihood of the ordinary people like the
introduction of new taxes and the increase of prices. The GP claims that
there should be an equitable share of meeting the fiscal crisis both from the
government side and the people, and that the government must be �first in the
line of fire�. However, its proposals would squeeze the meager money of the
people more thoroughly, following the regular medicines of the IMF-WB in
demanding greater stringent measures from its client governments when they get
into a fiscal rut.
However, It has been proven time and time again that abiding by the
malodorous receipts of the IMF-WB to cure its patient only makes the patient
sicker. A study by the UNICEF of 56 countries (26 from Africa, 19 from Latin
America, 8 from Asia, including the Philippines, and 3 developing countries in
Europe), which had undergone so-called stabilization programs and structural
adjustment programs of the IMF-World bank from 1980 to 1985 to hurdle their
budget and trade deficits, found that the poverty situations of these countries
have only worsened through the application of the IMF-World Bank programs. The
UNICEF study concludes that: � The urgency of finding new solutions is
especially pressing when considering the poverty-inducing effects that
the current approach(the IMF-WB programs) tends to have, and the direct
negative effects that some macro-economic policies have on the health and
nutritional status of the poorest, and of children in particular�.�(Parenthesis
ours) [14] In the 1990�s one can only
remember the economic crises that wracked the former USSR, Brazil, Mexico,
Argentina and Indonesia , which have been likewise victims of the policies of
privatization, deregulation and liberalization peddled by the Big money-baggers
of the world and their local subalterns in the Philippines, including the group
of professors at the UP school of economics. It can be said that dire lessons
in history are not learned by those who benefit from them.
Liberalization, Privatization and Deregulation
In the Philippines
with the introduction of more aggressive liberalization policies in 1995
through the entry of the country into the WTO (closely synchronizing its
policies with the IMF-WB)[15], thousands of farmers became
bankrupt because of the influx of agricultural goods, particularly from the United States ,
into our economy. Around 25,000 farmers became deprived of their livelihoods at
the second quarter of 1995, and thousands more are continuously being thrown
into the streets, many migrating to the cities and hawking for any jobs
available.[16] Also during the third quarter of
1995, the Philippines suffered a rice shortage with the price of one ganta of
rice increasing from P10 to P20.22 as a result of the closing down of many
small farms, aggravated by the lowering of the farm gate price of rice paid to
the small farmers by the NFA.[17] The reduction of the farm gate
price of rice by the NFA is part of the conditions of WTO for governments to
gradually remove subsidies to farmers. A direct effect of the liberalization
policy on the budget deficit is that the foregone revenues of the Bureau of
Customs due to various tariff rates reductions amount to P100 billion annually
from 1994 to 2001.[18]
The policy of privatization of government corporations, also a
condition of the IMF for new loans from it and its consortia of banks, has
affected thousands of government workers and the quality of service formerly
offered by the government. Thousands of government employees have lost their
jobs when this policy was first started in 1989 after the implementation of the
MOEFA[19] of the Aquino government with the
IMF. At the PNB 3,500 workers lost their jobs and at the MWSS, 3000 more
suffered the same fate. And as part of the cost-saving measures by the Arroyo
government to meet its present fiscal crisis, it is also planning to
reduce government personnel by another 30%.
The quality of service of government GOCCs does not improve at all
after privatization; as a matter of fact, it even worsened at Maynilad,
the privatized west portion of MWSS controlled by the Lopez group.
Because it could not maintain good services and with its debts accumulating,
Maynilad appealed to the government to bail it out from its $180 million loan,
which the latter agreed to do. In the first place, Maynilad should be
taking care of its own and providing quality service at affordable price of water
to the public. But instead Maynilad together with Manila Water (the east
portion of the privatized MWSS and majority-owned by the Ayala family)
reneged on their contracts with the government not to raise the price of water
within a period of 5 years and the former now has the audacity to ask for
government assistance, which was duly given. Talk about the alliance of the
bureaucrat capitalists and the komprador bourgeoisie, in which latter category
the Lopez family belongs to(the Lopez family is likewise the majority-owner of
Meralco, another favorite cow of the government).With regards to the
deregulation of prices, as also advocated intensely by the GP, need we say
anything more concerning its debilitating effects on the populace? The almost
weekly increase in the price of petroleum products, which the GP will aggravate
with their proposal of a P2 petroleum tax, is testimony enough to this kind of
callous policy to solve the fiscal crisis of the government proposed by the
IMF-WB and its local cohorts.[20]
The Fiscal Crisis and the Economic Crisis
When
one understands the difference between a fiscal crisis and an economic crisis
one will realize the magnitude of the callousness of the government to the
plight of the people. A fiscal crisis is characterized by an unmanageable
budget deficit, with government spending more than its revenues, which in the
case of the Philippines
is due to its heavy debt servicing. An economic crisis, on the other hand, is
the growing impoverishment of the majority of the people.[21] Philippine society has long been
suffering from a worsening economic crisis from the year 1975 up to the
present. Filipinos living below the poverty line have increased from 57% of
total Filipino families in 1975 to 70% in 1998 then to 85% in 2003.[22] The purchasing power of the
peso has dropped to P.56 in 2004, with 1994 as the base year. The
minimum wage has been pegged at P250/day but the income required to enable a
family of six (the average size of a Filipino family) in 2004 to live on a
subsistence level(poverty level) is P479.06 per day. Unemployment has also
grown from 8.1% in 1990 to its highest ever at 13.7% in the first quarter of
2004. But in spite of the deteriorating conditions of the majority of the
people, the budget for social services continues to be cut by the government
through the years to accommodate the payment of foreign debts..
Chart 2. Purchasing Power of the Peso
Source: Yearbook, National Statistics Office
Chart 3. Unemployment and Underemployment Rates
Source: Yearbook, National Statistics Office & Current Labor
Statistics, Bureau of Labor Statistics
The implications of the government defaulting its debts because of the
fiscal crisis is horrendous for the upper class of Philippine society to
contemplate. Government treasury bills (TBs) and bonds held by local banks,
corporations and rich individuals may become worthless and this situation may
force many banks to declare a holiday (hold the withdrawals of deposits ). With
the unavailability of new dollars, which have been the oxygen tank of our
dependent economy, from local and external sources, factories and other
business concerns may not able to finance their imports of capital goods
and other inputs. Since the Philippines is unable to produce its own heavy
machines and other vital facilities for industrialization and is forced to rely
on imports, a scarcity of dollars to buy these imports will deal a heavy blow
to the life of our economy. Government guarantees of new dollar loans to the
private sectors will likewise not be honored anymore by foreign creditors, if
especially the IMF-WB brands the Philippines
as a risk for the extending of loans from its consortia of banks under the Paris Club and the London
Club.[23]
During the year 1983, when new loans from the IMF( $630
million) to the Marcos regime was not granted, Philippine industrial
production went down by 40%, average interest rate shoot up to 31% and
inflation rate by 60%.[24] Such a scenario is most feared by
the local bourgeoisie and this is the reason why they are one in asking the
people to help the government in solving the fiscal crisis with some of them
even doling out P1 million(including the billionaire Lucio Tan, who has a
pending charge of tax evasion of P24 billion) to the �Bayanihan� Fund. Like the
IMF-WB, which salvage the big TNBs when they get into financial trouble by
imposing more austerity measures on a people, the komprador bourgeoisie have
also no compunction in appealing to the people to bail out the government from
the latter�s own self-made fiasco.
The Neo-ColonialState and the Semi-Feudal
Agricultural Economy
The
root of the present fiscal crisis and the economic crisis of our society is the
neo-colonial status of the Philippine state. A neo-colonial state, though it is
not directly governed by another country like the Philippines under direct
American rule from 1899 to 1946, is, however, dependent on external
sources for its economy to function.. In the Philippine case, the country is
dependent on loans and investments supported by US monopoly capitalism or
imperialism, for its economy to survive. It is a situation where the
subservient economy is forced to abide by agreements and other treaties in
favor of foreign business allied with imperialism. For instance, the
conditionalities of the IMF-WB-WTO are made to be religiously followed by the
Philippine state in order for the latter to be assured of new loans. But as we
have seen, since the people can only produce so much, even including the
remittances of OFWs to the Philippines, which have precariously propped up the
Philippine GNP for many years[25], and that corruption of the
bureaucrat capitalists also eats up a substantial amount of government money,
the deficit of the government continues to grow at the consternation of its
foreign creditors.[26] Thus, the government is
constantly sinking in its own neo-colonial quagmire and its profit-seeking
foreign creditors may altogether halt granting new loans unless the government
squeezes more sweat and blood from the toiling masses. For who else will it
squeeze if not the hapless and often unknowing masses. While the government is
quick to deregulate prices of the leading TNCs in the Philippines ,
particularly in the oil industry, it refuses to increase the wages and salaries
of government employees and legislate an increase of a measly P125 of the
minimum daily wage, due to the dictates of the IMF.[27]
Ever
since the Philippines became
an American colony in 1899, the Philippine government has always placed first
its obligations to US
business rather than its social responsibility to the Filipino people.
This is presently especially exemplified in the notorious Presidentail Decree
1177, formulated during the martial law regime of Marcos and re-enacted
as Executive Order 292 by President Aquino, which requires the government to
pay for its foreign debts before any other expenditures. In principle, the
annual budget allocations for all other operations of the government, most
particularly for social services, can become zero if nothing is left
after meeting the country�s debt obligations, specially now with our ever
burgeoning debts. Such a law is unique in the Philippines , and has been called a
classic example of an exploitative neo-colonial policy. While many oppressive
laws enacted by the dictator Marcos through presidential decrees(note that
monarchs once issued laws known as monarchical decrees) have been rescinded, PD
1177 has been retained under the pressure of the IMF-WB by the Aquino
government and all other successive Philippine administrations.
PD
1177 is just an extreme manifestation of neo-colonial laws vis-�-vis the US that our
supposedly independent government has been forced to abide by since 1946(when
the Philippine state became a member of the IMF-WB). Another example of an
unabashed US neo-colonialism policy in the Philippines was the threat of not
granting to the latter a $430 million loan in 1946 for war damages incurred
during the Second World War (it was US planes and guns that actually wrought
extensive damage in the Philippines), if the Philippine government does not
amend its 1935 constitution with the incorporation of Parity Rights for US
business in the Islands. Parity Rights would extend the same privileges to
exploit the natural resources of the Philippines
to US
business as enjoyed by Filipino nationals. Though Parity Rights was gradually
phased out in 1974, it was nevertheless substituted by equally liberal
investment laws during the Marcos era. Other neo-colonial laws enacted in the
Philippines are: the Bell Trade(free trade) law in 1949, the 1962
decontrol law(which devalued the peso for the first time) of Diosdado
Macapagal, and the various very liberal investments laws of Marcos(Investment
Incentive Act of 1967, Export Incentive Act of 1970, PD 1034, the latter
allowing offshore banking units in the Philippines, etc.) , all compiled under
the Omnibus Investment Act, the Labor Code of 1974(disallowing strikes in
so-called vital industries) and the laws under various structural
adjustment programs of liberalization, privatization and deregulation,
implemented by the Aquino up to the Arroyo regimes. Most of these laws since
1949 have been commitments under various letters of intent with the IMF, now
called Memorandum of Economic Agreement.[28] Such agreements are made to
appear as if they embody reforms formulated by the Philippine government
itself, though they are in fact based on recommendations from various studies
conducted by IMF-WB survey missions before such economic reforms are
adopted by the Philippine government. Thus, there were the industrial reforms
of 1956 and 1979, financial reforms of 1972 and 1980, agricultural reforms of
1980 and 1996 and educational reforms of 1982, 1997 and 2001 implemented in the
Philippines following the proposals of sundry IMF-WB survey missions, from the
Bell mission, Ranis mission and others.
Neo-colonial laws are easily enacted in the Philippines due to the fact that
Congress is dominated by the upper classes of our society, composed mostly of
the landlord class and the komprador bourgeoisie or their representatives.[29] The komprador class basically
favor a dependent trade relationship with the US since their business in cash
crop exports, like sugar, coconut, hemp, etc., benefit from this relationship.
Thus free trade arrangements like the Bell
Trade Act and export incentive laws are to the great advantage of the
Philippine landed gentry. This is the reason why this class supported the US policy of
not dismantling the semi-feudal structure of Philippine agriculture when the
country became an American colony in 1899. A study of the US Bureau of Labor in
the first decade of the century recommended to the US government that the
feudal relationship of tenant to landlord already entrenched during the Spanish
regime must not be disturbed.[30] Soon after, the US passed the Payne-Aldrich Act(or the first
free trade law in the Philippines
) in 1909. The retention of semi-feudalism in the Philippines, semi
since a great part of the Philippine agricultural produce are exported, would
reduce the production costs of the komprador bourgeoisie in the countryside to
their advantage as well as their trading partners, since tenants and
sacadas(seasonal workers in haciendas many of which are tenants) incur for the
komprador lower payments for labor and thus cheaper export goods. The komprador
bourgeoisie have also maintained the backward state of technology in their
haciendas since manual labor in the countryside is plentiful and the
acquisition of machineries in their farms will just increase their cost of
production. Thus, throughout the years even with various land reforms, which
are always diluted by a landlord-dominated Congress, the tenancy and the sacada
systems persist in the countryside. In 1980 tenancy still existed in 26% of
total farms in the Philippines
and this further increased to 35% of all farms by 1996.[31]
The IMF Post Program Monitoring Team
Yearly, the IMF sends survey missions to the Philippines to monitor
closely whether the Philippine state is faithfully following its various
commitments under its programs with the Fund(the term commonly used to refer to
the IMF), especially with regards to debt servicing. An IMF survey mission
conducted a so-called post program monitoring(PPM) from June to July, 2004, on
how the Philippine government is managing its deficit as we have already
discussed above. The Philippine government last entered into a stand-by
agreement (under a credit line called by the Fund as a precautionary
agreement) during the Estrada administration, which secured a $1.3 billion from
the Fund. The IMF survey team last June made sure that all the commitments
under this precautionary stand-by agreement are being complied with. The Arroyo
administration is contemplating to borrow under another new stand-by agreement
with the IMF to meet the current fiscal crisis. With the entry of WTO in
1995 to supervise more stringently the observance of the trade liberalization
policy (a continuing commitment with the IMF) of the Philippines , the country has been
more closely integrated to serve the business agenda of the TNCs in the name of
so-called globalization.[32]
With
the Philippine state deeply mired in foreign debts, which even forebodes a
closing of its government within the next two years, its foreign creditors
through the IMF can bring it down to its knees and impose such deadly
requirements for the economy that its people will bleed white. Such a situation
will bring ruin to all, including the banks and the business of the komprador
bourgeoisie, ever faithful but dispensable partners of US
imperialism. But the majority of the people have long been ruined, forced
to a hand to mouth existence, millions robbed of their human dignity,
subsisting on morsels thrown by the government and the rich and living in squalid
places only fit for animals. The masses have seen one Philippine president
after another come and go without the least improvement in their lives even in
times of government budget surplus and supposed economic growths of GDP and
GNP. In fact, the plight of the masses has worsened through the years as we
have seen. Thus, one fiscal crisis after another, and there had been several in
the past, though the present is the most severe, have become of no concern
anymore to the long enduring and suffering masses.
What can be done?
The Philippines must first and foremost re-negotiate all foreign loans,
since a great part of these are odious loans, particularly those incurred
during the Marcos regime, when our external loans ballooned from $599.5 million
in 1965 before Marcos to $28.2 billion after he was ousted in 1986.Thus, Marcos
incurred a total of $27.8 billion loan during his regime, including the
scandalous $2.3 billion for the defunct Bataan Nuclear Power Plant and other
loans to his cronies.[33] The Philippine government still
continues to pay for the interests and principals of many of the
Marcos loans, which formed part of the total current $56.3 billion foreign debt
of the country. And there are other questionable foreign debts like those
incurred by Napocor from the Ramos up to the Arroyo regimes that a tough and
determined government mission can negotiate with the country�s foreign creditors.
Other countries like Peru , Bolivia , Ecuador
, Cuba , Ivory Coast , Nigeria
, Tanzania and Zaire have at
one time or another unilaterally suspended or repudiated part or all of their
debt servicing. Even the United
States repudiated some of its debts, such as
those which she incurred from British financiers in building railroad networks
in the 1800s. Several of the American allies also never paid back debts to the US acquired
during World War I.[34]
When Corazon Aquino succeeded the dictator Marcos after EDSA I, she had
all the moral ascendancy at that time to repudiate Marcos� debts of dishonor
since world opinion was behind the people�s movement that toppled the
dictatorship. But Aquino instead promptly went to deliver a speech before the
US Congress as an invited special guest to assure all the Philippine foreign
creditors that the country will pay for all its external debts, including the
loot that Marcos has stashed away in foreign banks, mostly in Switzerland ,
which is estimated to be around $10 billion to $13 billion. Indeed, this
subservience and cowardice of Aquino is one of the major factors why we are in
our present crisis.
The
solution to our fiscal crisis is not for the people to carry its burden since
they had not been responsible for it in the first place. In fact, the masses
have long been subjected to the effects of the constant scrimping of the
national budget, mostly affecting the appropriations for social services, in
order to defray government debts. The solution is not to increase all kinds of
taxes, like what the government and the 11 UP professors are clamoring for,
which will just exacerbate the miseries of the people, but for the government
to have a strong political will to renegotiate all debts, specially foreign.
Another way out from the fiscal crisis is to likewise to renegotiate the
Philippines � commitments under various trade agreements to lower down and
eventually eliminate its tariffs for all sorts of products, particularly
agricultural, which ridiculously include products that the country has in
abundance like vegetables.[35] Revenues foregone from custom
dues, which are estimated at P100 billion annually, for the entry of diverse
products into the Philippines
, have contributed greatly to the escalation of the government deficit. Still
another alternative to confront this particular diminution of government
revenues is for the Philippines
to withdraw from WTO as a member. Instead the Philippines can enter into various
bilateral trade agreements with countries, whose products we need. Countries
like Taiwan and Vietnam are not members of WTO and yet they get
along very well with their foreign trade, compared to the Philippines
with its richer natural resources.
The
drain of around 30% from the annual national budget due to graft, patronage and
tax evasion must also be eliminated. This massive leakage from the national
budget has been the focus of the mainstream media as the supposed primary
cause of the fiscal crisis. In an effort to divert public attention from
the need to renegotiate the huge Philippine foreign debts, Malacanang has been
announcing vociferously complete with moral indignation for publicity sake that
the fat cats in the GOCCs and congressmen should trim their big salaries and
reduce their pork barrels. But this is like wishing that the tiger shed off its
spots since Malacanang is the leading scrounger of the money of the people with
its huge presidential discretionary fund of P3 billion which Arroyo
refuses to cut.
.
The
road we are opening may be too demanding and risky for the present government.
We know that it will require great courage and the support of the masses to
enter this road, and the government does not have both these strengths. In the
final analysis, it is a true government of the people who will traverse this
road which can lead to the emancipation of the majority of the people and
prosperity for our country. Saving from foreign debts, increases in government
revenues from tariffs, and the final elimination of bureaucrat capitalism, can
generate funds to launch a genuine land reform program, which will not this
time be defeated by a landlord-dominated Congress. An effective and successful
land reform program will lead to an effective national industrialization
program for the Philippines
, one that is not geared towards the needs of foreign countries but to provide
for the welfare of the Filipino people. Higher revenues for the government can
also subsidize substantially social services like education, health for the
people, housing, transportation, etc. Greater capital outlay from the national
budget can support infrastructures for development, all planned for the
advancement of the greater good. We as an organized people must act immediately
to travel the road that we are showing for the time is fast ticking away before
our national wealth may be completely dissipated and the country brought into
great economic chaos.
END
[1] IBON Facts
& Figures, The Economy in 2003, Mismanaging the Crisis, Vol. 27, No.
1, Jan. 15, 2004.
[2] Quoted from a
speech of Senator Joker Arroyo, Philippine Daily Inquirer, Sept. 6,
2004, A4.
[3] Memorandum of
Economic and Financial Agreements of the Philippine government with the
IMF(MOEFA), 1989- 1992, MOEFA, 1994-1997, and MOEA(Memorandum of Economic
Agreement), 1998-2000.
[4] All these
debts are not included in the statement of annual national budget, because they
are considered off-item budget by the government.
[5] Rosario G.
Manasan, Fiscal Reform Agenda: Getting Ready for the Bumpy Ride Ahead,
PIDS, p. 2,
[6] From
Department of Budget and Management(DBM) - only interest payment is included
in the annual budget declared by the government, while payment for the principal
is from data of the Bureau of Treasury, not stated in the annual budget of
Congress. This is due to a dictum of the IMF regarding the manner of reporting
the national debt.
[8] For a
thorough discussion on the EPIRA , see �Power Sector Restructuring Under EPIRA�,
IBON Facts and Figures, Vol. 27, No.12, June 30, 2004.
[9] The Bataan
Nuclear Power Plant was built through a loan of $2.3billion and the government
up to the present is paying its creditors $170,000 daily as interest alone for
this loan, which it conveniently passes to the public in the forms of taxes and
fees. The consummation of the debts incurred for the nuclear plant will be up
2018.
[10]Memorandum
of Economic and Financial Agreement with the IMF, 1989-1992.
[11] Emmanuel de
Dios, et al, The deepening crisis: the real score on deficits and the public
debt, pp.14-16.
[13] Statement by
IMF Staff Mission to the Philippines, July 12, 2004, International Monetary
Fund, Washington DC, and from Business World, June 30, 2004. With regards
to the debts of Napocor from World Bank, ADB, and Japan Bank for International
Cooperation, IMF recommended that it be taken over by a newly created Power
Sector Assets and Liabilities Mgt.(PSALM) of the government.
[14] Giovanni
Andrea Cornia, � Adjustment Policies 1980-1985: Effects on Child Welfare�,
Adjustment witha Human Face, Protecting the Vulnerable and Promoting
Growth, A Study by Unicef, Clarendon Press, Oxford, 1987, pp. 48-72.
[15] The tandem of
the IMF-WB-WTO has been called the three musketeers of the international
capitalist order. The IMF is widely known among NGOs in Africa as the
Institute of Misery and Famine.
[21] We prefer to
use the criteria of the increasing incomes of the majority of the people
especially of the last three deciles of the populace and decreasing unemployment
rate as measurements of economic growth rather than the mainstream economic
measures of the growth of GNP and GDP. While, GDP may grow, as the Arroyo
government is claiming that it grew from 4.1% in 2003 to 6% in the second
quarter of 2004, yet unemployment continues to grow in 2004 and many more
Filipinos are falling below the poverty level.
[22] Data in 1975
from US AID, Country Development StrategyStatement, Jan. 1980,
p.2, and from 1998 and 2004 from IBON Phil.
[23] The Paris
Club, which relies on the IMF-WB good listing of a country as a reliable debtor,
is composed of 400 transnational banks while the London Club, which is also
advised by the IMF-WB, is composed of 700 TNBs.
[24] Data from the
Center for Research and Communication(CRC), 1984, now the University of Asia and
the Pacific.
[25] It has been
estimated that Filipino OFWs� remittances to the Philippines is 285% of foreign
direct investment(FDI) and 1047% of ODA, and 14% of export of goods and services
in the Philippines ,(from a speech of former Finance Secretary Roberto Ocampo,
BW, Jan. 16, 2004, p. 25).
[26] Standard
Chartered Bank of London has warned of an Argentina crisis befalling the
Philippines , Inquirer News Service, Aug. 8, 2004.
[27] Deregulation
of oil prices and other commodities and austerity measures by the government,
including a freeze on the wage and salaries of government rank-and-file
employees, and the control of the minimum wage are contained in the MOEFA of
Aquino, Ramos and Estrada with the IMF.
[28] At one time,
in 1962 a governor of the Philipine Central Bank, Miguel Cuaderno, complained of
the dictatorial policy of the US state Department in influencing the IMF to make
the Phililppine shift dractically from a control to a decontrol policy(From
Cheryl Payer, The Debt Trap, Penguin Bks., 1976, p.59-60.
[29] 40% of the
Lower House of Congress come from the landlord class, while the rest have their
families in various business like real estate, manufacturing, etc. Only a very
few, around 1%, mostly from the party list, are from the lower middle class. In
the Senate, all are multi-millionaires or millionaires, belonging to the
landlord class or attached to business.(from the Rulemakers, Sheila
Coronel et al, PCIJ, 2003, passim) Also see Dante Simbulan, A Study of
the Socio-Economic Elite in Philippine Politics and Government, a doctoral
dissertation, The Dept. of Political Science Research School of Science,
Australian National University, 1965.
[30] �Labor
Conditions in the Philippines �, Bulletin of the Bureau of Labor,1905,
Washington , Government Printing Office, p. 777.
[32] Edberto M.
Villegas, Studies in Philippine Political Economy, Revised Edition, 1984,
Silangan Publ., 1984, Chap. I-III, V; Global Finance Capital and the
Philippine Financial System, Institute of Political Economy , 2001, Chap.
3.
[33]Some of the
fraudulent debts of the Marcos cronies are:Rodolfo Cuenca, CDCP, $323 million,
Alfredo Montelibano, Planters Products, $150 M, Roberto Benedicto,
Nasutra/Philsucom, $265 M, Benjamin Romualdez, Meralco/First Holdings, $370 M,
Marcos/Jose de Venecia, Landoil, $165 M, Genonimo Velasco, PNOC, $123 M,
Geronimo Velasco, Nobel Phil.,$14 M, Geronimo Velasco, Republic Glass, $2M,
Herminio Disini, NPC, $795, Roberto Ongpin, NIDC, $795 M, Roberto Ongpin, NIDC,
$157 M, Roman Cruz, PAL, $321 M, Conjuancos, PLDT, $654 M.(From data of NEPA and
IBON data bank)
[34]The
Philippine Debt Crisis, published by the Freedom from Debt Coalition, March
1989, pp.25-26.
[35] The lowering
of tariff rates for cabbages, lettuce, string beans, tomatoes, etc., that
farmers in Northern Luzon produce in abundance, has bankrupted these farmers
after the entry of the Philippines into GATT.
BANKERS ARITHMETIC OF MASS DESTRUCTION
By Eric
V. Encina
The present deadly debt crisis in the Philippines is the �Bankers�
Arithmetic of mass destruction� that has looted and plundered and caused
litany of miseries in the Philippines for many years without
any hope in sight under the debt-fueled economy. Billions for the bankers
but debts for the Filipino people. Government(s) bail out the bankers to
prevent collapse or save them from collapse, but there is no any bail out or
any form of tax credits to poor and the needy poor Filipino
families in the countryside and small entrepreneurs struggling and thriving
in debt-based operation to cope with acute money crisis.
The international, foreign and commercial bankers have
looted and plundered the Filipino people for my cruel years in subjugation and
of following their bitters pills of increasing interest rates, devaluing
the Philippine Peso currency, imposing more taxes and borrowing money overseas
at racketeering degrees. An example of these, is the so-called
�Asian currency crisis� of 1997-98, when �global speculators� have
undermined the currency values the Philippines and of other
nations across Asia and since that time according to
evidences, there have been essentially zero Western financial flows into
the Philippines, except to REFINANCE debt, at ever higher interest rates�which
the economists and the bankers call it: �DEBT MANAGEMENT� while there is no way
to introduce �DEBT ELIMINATION�. Thus, the Philippines owed $46 billion
in 1998, paid almost $47 billion only in �debt service or interest payments�
between 1998 and 2004, and yet, despite no net real foreign investment, ended
up owing nearly $55 billion and now the total debts could be around more or
less ballooning US300 Billion in whooping TRILLIONS OF PHILIPPINE PESO
VALUE. The exchange rate, the devaluation of currency that is, $46-$47=$55
are some of the Bankers� Arithmetic to trick and
keep the country and the population in the endless bondage of debt
without any hope in sight to find the way out.
And on top of that, the debt itself has essentially doubled and
to be likely leading to tripled rate in the coming years, in value, in
terms of the national currency, because of the devaluation of the peso by more
than half in a continuous trend from 26.4 pesos to the dollar in 1997, to 56.4
in 2004 to P45 in 200. The exchange rate of US$1 was pegged to P4 in
1971.
Here come the shocking amount of P700.6 BILLION for 2009
for debt servicing or interest payments. Debt payment remains to be the top
priority of the Government over any other needs and expenditures at the
annual budget appropriations by the power of infallible
Presidential Decree. (NO ANY PRESIDENTIAL DECREE TO SAVE THE HUNGRY FROM
HUNGER AND DEATH)
The Philippine Government has raised the amount it will spend
for DEBT SERVICING OR INTEREST PAYMENT for 2009�from the original
P681.5 Billion- to accordingly accommodate more liabilities that will
eventually emerge as a result of endless budget deficit.
Under the silly system, the country�s debts to be settled in
2009 will be higher by 10% than the P636.1 Billion worth of maturing
debts to be paid in 2008. The original amount allocated for debt servicing in
2009 took into account a budget deficit of only P40 Billion.
Budget
deficit has been adjusted by the Philippine Economic Managers following the
dictation of the international bankers up to P102 Billion due to current
financial crisis that is expected to take its toll on tax collection, and the
need to raise public spending for pump-priming the economy.
ENDLESS DEBT SERVICING INCREASE EVERY YEAR. In 2009 debt
servicing is composed of P384.8 Billion worth of principal obligations and
P315.8 Billion worth of INTERESTS.
Philippine Foreign debts owed cost twice as
much to repay today, in terms of the local currency the Philippine peso,
because the currency was reduced by adroit mechanisms in value by half
against the dollar and to other foreign currencies. Accordingly, the peso
valuation of that debt service is a more accurate measure of the actual labor
power and national product which must be expended by the Philippine economy to
meet that debt service. Thus, if we take into consideration the impact of this
speculative, forced devaluation of the peso, and calculate the peso equivalent
of each year�s debt service payments in dollars, and then translate that peso
value back into dollars at the 1997 exchange rate, we get a true measure of how
much was extracted from the Philippine economy through taxpayers� money and
further massive borrowings from domestic and foreign banks to pay
the debt service or the skyrocketing interest payments. The actual worth
of the debt payments between 1998 and 2004 were about $89 billion, nearly twice
the amount that the nation was given credit for. This makes the Bankers�
Arithmetic even more absurd: $46-$89=$55.
The government of President Gloria Macapagal Arroyo has done
everything to comply the policies and conditions being demanded of it by
the IMF and the international financial institutions, and yet, as in the case
of Argentina in the 1990s, the economic obedience has only led to poverty
and bankruptcy.
When the IMF and the World Bank demanded an increase of
the regressive Value-Added Tax (VAT) from the already excruciatingly high 10%
that became 12% EXPANDED VALUE ADDED TAX or E-VAT, and other new tax
increases-all to be applied to debt service-the Arroyo government complied as
if there is no any choice. Although several of the tax plans were
rejected by the Philippine Congress, the VAT was recently rammed through
over the opposition politicians. Philippine Senate opposition leader Sen.
Aquilino Pimentel warned Arroyo that the new tax would only �add to her woes,
rather than bail her out of her predicament, for the simple reason that it
would cause more hardships for our people.� The Minority Leader in the House of
Representatives, Rep. Francis Escudero, said that the VAT, and the failure to
act on the spreading poverty, were the central causes of the collapse of
Arroyo�s popular support rating to 38%.Despite various accounting schemes aimed
at hiding the fact, it is estimated by several sources that two-thirds or more
of the nation�s national revenue is being eaten up by debt service and interest
payment.
A group opposing Arroyo led by three bishops, reported in May
that 88% of tax revenues in 2003 went to debt service and almost annually taxes
go to payment of interest payments and misused of government funds through
chicaneries and government scammed projects.
With a sovereign credit rating at �junk� status, that is, below
investment grade, the government must be forced to borrow at exorbitant
rates on the international markets that have a lot of traps and tricks to get
the country in further debts and further aggravating the crisis: FOOD
CRISIS AND ACUTE MONEY CRISIS. More Billions of dollars and other
foreign currencies in new overseas borrowings to foreign and
international banks are planned for 2009, all for debt service and
interest payment.
It only shows that �Bankers� Arithmetic is indeed a WEAPON FOR
MASS DESTRUCTION.
Debt virus is both the hidden and the conspicuous menace to
world�s peace!
Eric V.
Encina
THE GOVERNMENT WHITE PAPER ON INTERNATIONAL DEVELOPMENT
DEFENDING NATIONAL ECONOMIC SOVEREIGNTY By James Gibb Stuart In 1998 James Gibb Stuart was
asked to provide advice to the Malaysian government, which was then
struggling against an IMF induced economic crisis. The following is
taken from his Briefing Paper. Three days after receiving this material
the Malaysian government announced exchange controls.
Read more of this article, published in the September, 2001 edition of Prosperity, here: