OUTSIDE THE BOX
The global press and media would like you to believe that the continuing unrest in countries like Tunisia, Egypt and Jordon is about freedom, democracy and good government. Nothing could be farther from the truth. As the 1992 presidential campaign of Bill Clinton phrased it so well, “It’s the economy, stupid.”
From the Magna Carta in 1215 through the American revolution to the Philippines’ own Edsa revolt and now in the Middle East, all have been and are about the money not the “politics.”
A global survey some years ago, covering all levels of the socioeconomic spectrum, asked what would make you happiest. The No. 1 answer by a wide margin was, “A 20-percent increase in income/salary.” We talk of “world peace” and “freedom,” but what all people want is more money. What is the problem with a bad government led by corrupt politicians? Nothing, so long as that government does not keep the people from becoming wealthier. Perhaps, a good example is Russia.
Russia in 2011 is not very different from the Soviet Union in 1980. Political dissent is oppressed. The rule of law can be applied arbitrarily. A small inner circle headed by Vladimir Putin has iron-fisted control over the political process. But the per-capita gross domestic product (GDP) has more than doubled, the middle class grew from 8 million to 55 million, and industrial production rose 75 percent under Putin. It’s the economy.
The ongoing unrest in the Middle East is also about money. The political conditions in each of the particular nations, Tunisia, Egypt, Jordan, are no different than they were a decade ago. Tunisian President Zine El Abidine Ben Ali has been in power for more than two decades and Egypt’s Mubarak first took office in 1981. Jordan is a hereditary constitutional monarchy, and is yet considered a country of “high human development” by the United Nations and is No. 38 on the global Index of Economic Freedom, with Egypt at 96 and Tunisia at 100 (the Philippines is No. 115).
So then the question might be asked, why now in these countries and even, why not now in the Philippines? It’s the economy.
The fact that the US President is an incompetent fool and his economic team is even more useless has not penetrated the minds of some local pundits. Why is this important? Because the United States, as a result of its economic policies, is exporting economic hardship that is directly causing conditions leading to unrest. The Middle East may only be the first stop on the global tour of national turmoil.
The following article sums up the situation clearly. From the US newspaper, The Brazil (Indiana) Times: “In the past couple of months, there have been riots in Chile, Albania, Greece, Italy, France, Spain, Portugal, England, Ivory Coast, Morocco, Libya, Algeria, Tunisia, Egypt, Jordan and Yemen. What do all of these riots have in common? They all have governments with socialist economic systems and rising food and energy prices. As those who follow investment markets, particularly commodities, know well that the US and the European Union have been inflating their currencies like there is no tomorrow.
“As the dollar and the euro are inflated, the prices of commodities rise. This is felt worldwide in energy prices. As electricity, natural gas and petroleum prices rise, the price of all goods rise. Food production is highly energy-intensive. However, food has additional pressures. Grain is an international commodity traded like oil on the international market denominated in dollars. As the dollar inflates, the price of food on the international exchanges rises further.”
The problem is not political. From MSNBC: “One protester in Cairo waved a hand-drawn copy of his university diploma amid clouds of tear gas and shouted what may best sum up the complexities of the domino-style unrest in a single word: Jobs.”
From Jordan: “King Abdullah II also has tried to dampen the fury by promising reforms, and the prime minister announced a $550-million package of new subsidies for fuel and staple products like rice, sugar, livestock and liquefied gas used for heating and cooking.”
And in Tunisia, “Just days before fleeing Tunisia, the embattled leader went on national television to promise 300,000 new jobs over two years.”
From The Australian, speaking about riots and unrest in Yemen: “Since the Tunisian turmoil, [President] Saleh has halved income tax and imposed price controls.
“This is not pent-up displeasure with these governments suddenly exploding; this is a reaction to current conditions. It’s the economy.
“Prior to the infusion of nearly 4 trillion newly printed dollars into the global economic system in 2009, the US Dollar Index was at 90 and oil was priced at $70 per barrel. Now the dollar is at 78 [a fall of 13 percent] and oil is at $99 [an increase of 40 percent]. There is nothing in regard to supply or demand to justify a 40-percent increase in price. It is the US dollar. Currency cost pushes inflation.” Thanks, Obama.
And the Philippines? Not to worry.
Because of good fortune and some good sense, the Philippine economy is sheltered from the storm of US- exported inflation. Our economy is well diversified. For example, outsourcing now contributes 12 percent to GDP from zero less than a decade ago. We are sitting on a relative mountain of foreign reserves, giving the Bangko Sentral the ability to move the peso to dampen the effects of high oil prices. Interest rates are high enough to allow great flexibility up or down without damaging lending. Banks are very strong and profit margins of local companies are high, hereto allowing flexibility in consumer pricing.
Have I forgotten to say this is a while? Buy the peso. Buy the PSE. Buy the Philippines.
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Tuesday, 1 February 2011