Friday, January 25, 2008

America sneezes—are we supposed to get flu?

Are we going to get hurt badly because of US recession? It’s so easy to worry about that especially that we sell lots of stuff to the US market. But time has changed.

Ten years ago, electronics and semiconductors accounted for only 42 percent of the country’s exports with farm-based products like coconuts, pineapples, bananas, tuna, seaweeds, and baskets having significant percentages. Today, manufactures account for 86 percent of the country’s exports, the bulk of which are electronics and semiconductors. Farm-based products now account for only 4 percent.

Ten years ago, 36 percent of our exports were purchased by the Americans, such that we would always a catch cold, nay influenza, when America sneezed. When combined with our exports to Japan, Netherlands, Hong Kong, Great Britain and Germany, more than 70 percent of our exports were purchased only by seven countries. China and India were not even listed among our markets.

Today, America only accounts for 18 percent of the country’s exports. China is now our third largest market next to Japan. Suddenly we can see our friends in the Asean buying about 17 percent of our products. The rest are accounted for by Europe and the rest of the world.

What we see here is a diversifying export market for Philippine products, a trend that should lessen our vulnerability to external shocks. And yes, the World Bank, it seems, has taken an optimistic note on the Asia Pacific Region, including the Philippines.

I’m trying to be optimistic here, of course. China ultimately sells to the US. Once the American orders for Chinese goods are down, so the Chinese orders from us will probably be. This is still an interconnected world.

But let us see, because even in the US experts don’t agree on the extent of the recession. And here in the local front, the National Statistical Coordination Board has yet to report to us the whole 2007 performance. The numbers would surely be good, considering we had good numbers from the farm sector. But the enthusiasm will surely be dampened by the sobering thoughts about the recession. So let’s wait on January 31, the official announcement of the 2007 growth rate, what the experts will say.

Meantime, you may read the take of Finance Secretary Margarito Teves by clicking here.

Tuesday, January 22, 2008

After the Neocons: America at the Crossroads

After the Neocons: America at the Crossroads
By Francis Fukuyama, 2006
Profile Books Limited, 226 pages

“Neoconservatism” as a way of thinking is a mishmash of contradicting social and foreign policy ideas originated by some New York City intellectuals who used to worship Leon Trotsky, Vladimir Lenin’s buddy who espoused “world proletarian revolution.” How these once communist intellectuals and their thoughts permeated into America’s foreign policy during the administration of George W. Bush and brought the world’s superpower to a disastrous misadventure in Iraq and the Middle East, therefore, is a very compelling story. In his latest book After the Neocons: America at the Crossroads, Francis Fukuyama, political scientist and a former neocon himself, tells us this story with great depth and forceful insights, then proceeded to disavow and castigate the movement that he was once a proud member of.

Fukuyama traces the origins of neoconservative thinking to a group of working class intellectuals studying at the City College of New York in the 30s. They were once Marxists who turned to the right shade of the political spectrum following Trotsky’s exposes of Joseph Stalin’s brutality. Thus from being ardent supporters of socialism, these intellectuals, mostly Jews, became haters of communism and bitter critiques of “social engineering” programs and social planning that they thought tend to create unintended social consequences that make societies even worse off. When America joined the Allies to defeat Germany and Japan during World War II, the neocons started to see American military power as a force for good, something that America’s leaders should use to transform the world in an exercise of “benevolent hegemony.”

Neocons, having taken some pages from Plato and Aristotle, believe that “regime” or the internal character of states matter in foreign relations. “Rogue states” are likely to become a destabilizing force in global affairs, as “regimes that treat their own citizens unjustly are likely to do the same to foreigners.” America and her allies usually deal with these totalitarian and tyrannical states through carrot and stick but said measures are likely to be ineffective, according to the neocons. The best way out therefore is through changing the “underlying nature of that regime,” a phrase that translates into what is known as “regime change” under the Bush administration.

Prior to the collapse of Berlin Wall, foreign policy circles in Washington DC didn’t really take the neocons seriously even if their views fitted well with Ronald Reagan’s Cold War rhetoric about the Soviet Union as “evil empire.” The more credible voice then were the “realists” in the tradition of Henry Kissinger who respect power, downplay human rights as well as the internal character of states. For the realists, all states whether liberal democratic or authoritarian, seek and power and America and other democratic societies have to accommodate them.

After the collapse of the Soviet Union, however, the influence of neocons soared, vindicated as they were with the fact that the communist threat didn’t vanish through containment and détente as proffered by foreign policy “realists” but by the transformation of Eastern Europe and Russia into “democratic states.” It was a profound lesson Fukuyama thinks that Neocons—deeply ensconced into the mainstream foreign policy establishment under George W. Bush—wrongly applied in a world that has drastically changed since 911.

For Fukuyama, the Neocons, in a rapidly globalizing world, have failed to appreciate the growing influence and power of non-state actors (e.g. terrorists groups like Al Qaeda and Hamas) that couldn’t be deterred by conventional military forces. They have overestimated the capacity of the American military that, while unmatched in the conventional and high-tech warfare, was not prepared to deal with insurgency and the task of nation building. Neoconservatism, he argues, has proved contradictory in the real world in that, while neoconservatives loathe social planning and “nation-building,” measures toward these ends are necessary if Bush’s democratization project in Iraq and Middle East has to succeed.

The Neocons assumed that the world will buy the idea of America’s “benevolent hegemony” and confer her actions—clothed with scary rhetoric about preemptive wars against the axis of evil—with legitimacy, unmindful of the fact that anti-Americanism had been brewing all over the world decades prior to the American invasion of Afghanistan and Iraq. Anti-Americanism—Fukuyama contends—came about as a result of several factors, among them the American-led IT revolution and globalization that are perceived by Europeans as threats to the European welfare state system, the uneven result of “Washington consensus” (i.e. structural adjustment loans that tried to foster market-driven policies) in Latin America, and the Asian financial crises precipitated by American pressure to open up financial markets without adequate safeguards.

This book is Fukuyama’s way of explaining why he turn-coated on the neoconservative movement. And yet, he remained a Neocon in essence, warning against the greater dangers of American isolationism following the debacle in Iraq. This time, however, he labels his new advocacy as “realistic Wilsonianism” characterized by the greater reliance on soft power, the promotion of economic and political development worldwide, and the creation of legitimate international institutions that could respond effectively vis-à-vis global threats and issues emerging out in this brave new world of globalization and technological change.

Readers won’t probably agree with all the things that Fukuyama say in this book, but this piece of work once again seems to prove why many think Fukuyama is one of most engaging thinker and analyst of this era. It’s his finest piece since his equally controversial work, The End of History and the Last Man, came almost two decades ago. It’s a must-read for all those who want to understand the nature of America’s foreign policy after 9/11 and figure out where it is heading for.

Friday, January 18, 2008

Will the US recession hurt the Philippine economy?

America is definitely in recession. Lately, US president George Bush has lately called on the US Congress to give tax relief to consumers and business to boost the American economy. Many of us are probably wondering how it will impact the Philippine economy.

When America sneezes, the Philippines catches cold. We used to say that to highlight the Philippine economy’s dependence on the America economy. It’s a relief therefore to learn from experts from the World Bank that emerging economies including that of the Philippines could actually deal with this recession in America quite well. The reason? The continuing rapid growth in the Asia-Pacific region, particularly China, is going to cushion impact of the US recession. Says the World Bank lately:

“Resilience in developing economies is cushioning the current slowdown in the United States, with real GDP growth for developing countries expected to ease to 7.1 percent in 2008, while high-income countries are predicted to grow by a modest 2.2 percent."

The World Bank adds:

"GDP in East Asia and the Pacific is expected to grow about 10 % in 2007, with China expected to grow by more than 11%. Growth for the region should ease to 9.7 % in 2008 and to 9.6 % by 2009. The effects from the turmoil in the world’s financial centers may be small in most economies in the Region. Except for China, direct exposures of financial institutions in the region to mortgage-based securities (or sub-prime crisis) are limited.”

The Bank has a favorable prognosis for the Philippine economy in 2007 and expects it to grow by a decent 6.2 percent in 2008. What explains this trend? Simple: these trends are a part of the economic and social transformation obtaining in the Philippines, a trend I call the “Revolution from Beyond.”

Sunday, January 13, 2008

Is the Economist pricing itself out of the Philippine market?

I went to the National Bookstore a few hours ago to check on the latest issue of my favorite economic magazine and was shocked to learn it’s now priced P250 pesos a copy (more than 6 US dollars). The last time I bought a copy it was less than two hundred bucks and I was agonizing whether or not to buy. Now, I feel it’s way too expensive for my limited budget. It means I’ll only buy it once in a blue moon when the issues covered are really so compelling.

One thing I like about the Economist is its intellectual courage. It’s the only magazine that takes positions on issues, usually reflecting its free-market orientation. You may like its arguments or not but it’s never afraid to draw the line. And it does prescribe solutions to issues or problems, unlike most publications that only present contending views without stating its own position.

That’s the true mark of intellectual courage. It’s so easy to criticize and analyze issues or problems, but it’s so difficult to propose solutions, essentially because alternatives could be lighting rods for scrutiny from others. And it’s in proposing solutions where we are shown whether or not we really have the discipline to think through what we offer in the market place of ideas.

But I’m digressing here too much. The fact is that I could no longer afford my favorite magazine. Oh my!

Wednesday, January 09, 2008

Reducing oil tariff: just another misguided policy

The other day, the government announced that it has reduced tariffs for oil products by one percentage point supposedly to cushion the impact of rising crude prices. Sounds good except this policy might end up becoming a subsidy to oil companies without achieving the social objective of “cushioning” the rise of oil products like gasoline, diesel and LPG.

The fact is that the industry is deregulated and movement of prices is determined more by global trends and the nature of local competition than government actions. Lower tariff for oil products simply means that importers are going to enjoy lower import costs or charges. Whether or not they are going to pass the lower import costs to consumers in terms lower prices is another matter. They probably won’t as they always did in the past. Market competition should theoretically force oil companies to go easy on raising prices but that’s only possible in a competitive environment. Right now, the local market is still dominated by the big three (Shell, Caltex, and Petron) and it seems the newcomers, the so-called independent oil producers, are simply taking the cue from actions of the Big Three.

The new policy therefore is another populist measure that may end up achieving nothing. The best thing the government could have done therefore is to maintain the current tariff levels and continue collecting the money to improve government finances. If policy makers suspect that oil companies are colluding, they might as well look for effective ways at bringing greater competition in the oil and energy sector.

Sunday, January 06, 2008

Barack Obama is an enemy of outsourcing

What?! Outsourcing is “a form of violence similar to the Virginia Tech killing?” That’s crazy, but Barack Obama, fresh from winning the Iowa caucus, thinks so. I thought all along he has the most realistic view about globalization and outsourcing among the US presidential candidates. Now he is pandering to the mob to fortify his lead over Clinton and Edwards who are both protectionist in their rhetorics. In his speech lately, courtesy of the Texas Rainmaker, Obama said:

“There’s also another kind of violence that we’re going to have to think about. It’s not necessarily the physical violence, but the violence that we perpetrate on each other in other ways,” he said, and goes on to catalogue other forms of “violence.”

There’s the “verbal violence” of Imus.

There’s “the violence of men and women who have worked all their lives and suddenly have the rug pulled out from under them because their job is moved to another country.”
I don’t have to react to this, for the blogosphere has plenty. Consider this one by Radley Balko of Reason Hit and Run :

"No one has the "right" to be paid by someone else for their labor. Employment in a free market is peaceful and voluntary, on both sides. So is the decision to stop that agreement, both for the laborer, who may find a better job, or for the employer, who may find someone who can do the job better, or cheaper, or both. There's nothing remotely violent about any of it. To compare a business decision to employ cheaper labor to the senseless slaughter of innocents--even if by way of tortured, nonsensical metaphor--is really reprehensible. It reeks of exploitation."

Ah politicians. They are the same all over the world. Now, surely this statement may have sent shivers down the spine of the American corporate economy that is benefitting immensely from global outsourcing.