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Editorial

Dramatic shift in economic policies

/ 04:30 AM July 06, 2022

President Marcos Jr.’s inaugural address delivered last week was notable for conveying to the Filipino people his thoughts, ideas, and plans for the nation in complete, coherent sentences that flowed logically from one paragraph to the next.

For many viewers and listeners, his speech was in stark contrast to the rambling monologues, often peppered with jaw-dropping, off-the-cuff comments, that his predecessor had subjected to the country over the last six years.

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However, the dramatic shift in economic policies that the President signaled was less evident to the audience.

If the Chief Executive was serious about it—and if his Cabinet will implement the ideas he outlined to the letter—the result will be nothing less than the greatest sea change in the nation’s economic philosophy since the liberalization wave started by President Ramos three decades ago.

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In particular, Mr. Marcos’ vow to look inward to solve the looming food crisis instead of relying on foreign markets, as the diktat of open markets has required Filipino policymakers to embrace since the 1990s, potentially turning the country’s current model on its head.

It also signals a reversal of a key inflation-fighting policy put into place by his predecessor’s economic managers, the rice tariffication law, which was hailed as one of the key achievements of the Duterte administration until its last few hours in office.

Under that framework, the government would allow massive imports, at lower tariff rates, of the staple food from countries that could produce more at lower prices, much lower than what the Philippines’ less efficient farmers could produce and sell it for.

The problem, the President pointed out, is that, under this model, crises like Russia’s invasion of Ukraine make all countries that produce a surplus of anything clamp down on international sales to ensure supply for domestic consumers.

Buyers like the Philippines, even if they could afford the expensive commodities, will simply have “nothing to buy,” he said.

Indeed, this worst-case scenario is enough to keep advocates of free-market economics awake at night and government policymakers fearful of being booted out by angry voters at the next elections.

Except for one thing: shortages of commodities like food brought about by total export bans by the countries that produce them have never happened. Restricted international sales of commodities are a constant worry for the open markets, but the fears and the resulting price spikes and artificial shortages—from rice, to crude, to palm oil, to precious metals, and more—have all proven to be short-lived.

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Expensive commodities? Yes. But a complete absence of anything to buy even at price-gouging levels? Never. There’s always someone, somewhere willing to sell critically needed commodities like food and oil at inflated prices. And, sooner or later, high prices tend to give way to the forces of gravity.

This is not to say, of course, that the country should abandon the quest for the elusive holy grail of food security. On the contrary, a country needs to strive to be able to produce what it needs. But it must do so realistically.

And by realistically, we mean it should shy away from pouring precious government resources into sectors with little chance of competing with international rivals. And if resources are poured into them, it must improve the competitiveness of our farmers and food producers so that they can stand toe-to-toe—not immediately but in the not-too-distant future—with their foreign competitors. In hackneyed terms, resources must be allocated to teach them how to fish instead of just giving them fish.

Most importantly, support for the local food sector must be done in a well-thought-out and well-implemented manner so as not to repeat the mistakes of the past, most notably the ill-fated Masagana 99 agricultural program of the 1970s that resulted in hundred of millions of pesos worth of soured loans by farmers who had a default rate of over 50 percent by the end of that decade.

The danger is that his economic managers will pander to his sweet sound bites and craft policies that would satisfy his promises over the short term but bring economic ruin over the long term.

There’s no need to reinvent the wheel or try untested solutions where the economy is concerned. History—the recent and not-so-recent—are replete with examples of what works and what doesn’t. We just need to pick up their lessons and learn from them.

Thankfully, the Marcos Jr. administration is still in its early stages—early enough to be steered toward calmer waters, the President’s siren song notwithstanding.

For the sake of the nation, rational economic heads must prevail.

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