By Diego Morra
They are back in business, the economists and protectors of foreign capital who have sounded the klaxon that the country is going to the dogs, all because the peso is overvalued and Philippine exports cannot compete worldwide. This medieval wisdom harks back to the days of the mercantilists and the golden era of comparative advantage, when nations must concentrate on exporting low-cost products to enlarge their profits.
Their argument is that everything sanguine must be based on a weaker peso, never mind if it means shoveling mountains of pesos to buy the almighty dollar. As the world’s reserve currency, requires the US Mint to print tons and tons of the dollar to satisfy the fetish for it, and move trade goods from border to border. The US is already indebted to the tune of 114% of its gross domestic product (GDP) and the dollar is losing its value. Still, up to 80% of transactions are denominated in US dollars and euro, with the dollar alone estimated to account for up to 50% of transactions.
No gold, platinum or silver backs the US dollar and, like the crypto currencies, it no longer has underlying value. Speculation, the gambling operation we call the stock and futures markets, is the persistent subjective factor that determines the value of the dollar. Derivatives and exchange traded funds (ETFs) prime the market, with traders seeking minute-to-minute gain, while securities are chopped up into tiny slivers for trading, forming an alphabet soup of financial products that attract investors afraid of missing out. Many economists see the stock market casino as the hidden hand that determines the value of everything, including illusions.
One columnist recently declared that the Philippine peso is overvalued and this is the reason why our products lose out in the export market. If that were the case, Argentina, Venezuela and other inflation-ridden nations would be beating their competitors and leaving them to bite the dust. They are not luxuriating over the low value of their currencies and dominating the trade of goods and services. They are sweating bullets because of them, with China’s policy of keeping prices of raw materials low and the state funding exporters beating the living daylights out of their rivals. These very nations also suffer from huge debt amortizations that deplete their dollar reserves. Developed countries naturally love to see developing countries weaken their currencies since it means lower wages for workers in foreign-owned manufacturing companies in export processing zones pampered with tax incentives and other perks.
Is it unbeknownst to columnists and state economists, along with the prophets of boom, that neoliberalism and globalization had kept wages atrociously low to incentivize foreign investments while protecting them from national laws and ordinances of local governments? Curiously, as workers unions in Malaysia and Vietnam found out, their salaries had been frozen to prevent them from rising in the economic ladder. Filipino workers are said to be the highest paid in all of Southeast Asia purely on the basis of wages that merely replicate their labor power and do not improve their economic status.
The deception is palpable as when “overvalued” currency is cited as the reason why the Philippines is not progressing by leaps and bounds, failing to understand that the plutocrats that had profited from the country are actually plunking in their money in parts unknown, investing in casinos overseas, putting precious dollars in countries that lock them in, and buying equity in numerous corporations. We are not yet talking of the money flowing into family offices in Singapore, a favorite refuge of bureaucrat capitalists, and other tax havens in the Caribbean. Meanwhile, the much-touted huge foreign reserves have become a target for financial pirates who can coordinate dollar purchases for capital flight, which forces the central bank to defend the speculative attack. The template drawn up by George Soros in bringing down the British pound is a cautionary tale.
How would neoliberals and monetarists propose to set the economic ship aright? They are venting their spleen on the fact that the country is a big exporter of microelectronics since local manufacturers are committed like fried chicken to their overseas clients, many of which have equity in Philippine manufacturers. Thus, whatever they export to their clients actually takes the form of assembled microelectronics from subsidiaries to their parent corporations. They get their goods cheaper. With the imposition of the 19% tariff on most Philippine exports to the US, these products would now cost higher, and when some components are found to have come from China, they will be slapped an additional levy. Despite lying prostrate before Donald Trump, Philippine negotiators led by Frederick Go ate the dust when the US granted zero tariffs on Malaysian and Vietnamese products after the two countries pledged to invest in the US. George Barcelon certainly was miffed when Trump double-crossed the Philippines and he has every reason to be sore. As a congenital liar, Trump is not bound to honor his word.
In fact, until now, there is no written version of the “trade deal” between the Philippines and the US, just as there is no written record of the “trade deal” hatched by Trump and Chinese President Xi Jinping. The last time they did, in 2020, led to promises of huge purchases of US agricultural products. It never materialized, leaving Trump holding the empty bag. From being the champion of the “art of the deal,” Trump became the laughingstock in Beijing, the victim of the curse of the deal. For levity, Filipino experts who have been trying to seriously examine our economic pathology, it is time to analyze why we have been doomed to be a retail, low-wage paradise, with the two economic departments, agriculture and industry, being savaged by the continuing economic policy of pushing strange doctrines why neglecting the necessary new approaches to beef up the economy. By permitting such policy to be subservient to the interests of both the US and China, the country has constricted its wriggle room. Both China and the US might as well needle Bongbong Marcos and Frederick Go: That’s what you get for loving us.
