Blame the messenger

It is human nature to find something or someone else to blame for a policy failure, especially when the public spotlight searching for that culprit is pointed at one’s direction.

And in the Philippine political context, the media is one of the favorite whipping boys of government officials faced with unpalatable truths.

But where economics and politics intersect — as in the case of the mismanagement and policy failures that contributed to last year’s painful spike in consumer prices — at least one ranking central bank official, Deputy Governor Diwa Guinigundo, believes that the work of reporters and market analysts created an unholy alliance that conspired to make the situation worse.

Put another way, according to the second most senior official of the Bangko Sentral ng Pilipinas (BSP), the opinion of private sector economists and analysts, as reported by business journalists, made the public believe that the situation was worse than it really was.

In particular, Guinigundo believes that this reporting of adverse economic realities created a situation where consumers, fearful that prices would continue rising, made a mad scramble for the goods that were available in the market, thereby making their fear a reality — the textbook definition of a self-fulfilling prophecy.

“Unfortunately, we have seen the proliferation of some market analysts who would analyze the dynamics of inflation based on one-month-ago reading and prescribe monetary policy to the BSP on the basis of history,” he said recently before members of the Economic Journalists Association of the Philippines. Worse, “our local media gave some prominence to this type of analysis. As a result, the markets’ inflation expectations spiraled…”

Guinigundo’s concern is a valid one, as self-fulfilling prophecies are a known phenomenon in economics and market dynamics. The problem with this argument is that it cannot be quantified or proven empirically.

It also completely ignores the fact that calls for the central bank to act against inflation were made as early as January 2018,  just when the rice crisis was beginning. Who was begging for the central bank to act? Yes, the very same analysts that are now being blamed for making things worse.

Indeed, what can be shown empirically is the failure to act preemptively against inflation when the numbers were showing early on that prices were about to spike upward in the coming months.

In this, the BSP — arguably the most professionally run government agency in the country, whose primordial mandate is to fight inflation — failed its stakeholders, the Filipino people. The numbers don’t lie.

Analysts and business journalists get no satisfaction from stressing this unhappy point. But when officials responsible for guarding the value of the hard-earned money of citizens try to blame everyone else except themselves for a crisis that could have been mitigated, they must be called out.

Before the 1997 East Asian financial crisis, local analysts who warned of an impending economic tsunami were dismissed as alarmist by Malacañang and the central bank, and their employers subjected to the ire of government mandarins who wanted the good times to continue rolling despite the underlying rot in the economy. In hindsight, the analysts were correct.

But when they are wrong, as the government believes them to be in last year’s case, they will, by themselves, fall into disrepute over time, once the public sees their pattern of incorrect predictions. To lay blame on them, however, for issuing adverse forecasts can only erode the quality of the

public discourse on the economy, because when stakeholders are fed only good news despite the presence of unpalatable realities, confidence flies out the window.

Did the alarmist readings by economists and subsequent reporting by the media aggravate the inflation crisis? Maybe. Who knows? But did the policy failures of government agencies result in Filipinos suffering more than they should have? Definitely.

The Filipino people pay the salaries of government employees in economic management agencies—especially those at the BSP who earn a premium wage—to defend the economy against inflation. Assigning blame in the wake of their failure is not part of that mandate.