Thursday, 1 March 2012

P-Noyconomics 2012

Business Mirror

RARELY in this column will you find much reference to the political arena. I was a diligent student of the subject in college, but found that the real world had little relationship to the theories. What I did discover was that the systems may greatly vary, but the end-result is always the same.
The few rule the many. The few are given or take the power to make decisions for the many.

Perhaps the best illustration of this is found in the works of German philosopher Georg Hegel. While not a political theorist, he summed things up pretty well by writing, “...the State has the supreme right against the individual, whose supreme duty is to be a member of the State...for the right of the world spirit is above all special privileges.”

In other words, we all ultimately belong to the government and the government’s needs come before the peoples’ needs.

Each administration in the last 20 years has created a somewhat unique and individual economic policy based on the circumstances that it had to face. The Cory Aquino administration was the exception, as this transition period was fairly empty of any concrete policy. It might be said that the best that was offered at the time was to create a partial framework for the future. However, as to concrete results, there were very few.

We might best think of the President through the administration as the Chief Executive Officer, not necessarily of the country, but of the largest institution that has so much control over every economic sector. The government is the largest financial entity in the country and what it does affects everything else. It is like the only large factory in a small town. The board of directors must not only make decisions that benefit the corporation but also must consider that all the other businesses in the area suffer or benefit from its choices.

The Ramos presidency was a time of disentangling government from business, both in terms of getting government out of private-sector enterprises as much as possible and creating rules and an environment to allow the private sector to function more freely and efficiently.

President Estrada had little time to push his agricultural reforms. However, the one little recognized accomplishment was that the Bangko Sentral reacted well to the aftermath of the Asian financial crisis.

Every CEO is responsible and has an obligation to manage the financial state of the corporation. President Arroyo might be characterized as having tackled the poor Income Statement (IS) that both the government and the country faced. On the government side, the enactment of the despised value-added tax quickly increased the government’s revenues while helping to slow the growth of borrowing. As a result of the government’s improved income statement, the broader economy was better.

Now we come to what might be called P-Noyconomics.

In any company, once revenues stabilize or are even rising, the next step is to attack further IS problems and have a balance sheet that shows the assets and liabilities. President Aquino’s administration has done an excellent job of improving both. But this has come, using corporate terms, at the sacrifice of profits.

A company increases revenues to lower borrowing to pay expenses. Then it reduces spending for expansion or improvement to better its balance sheet. It is now financially stronger but it is not growing.

That is the situation that the country is in right now.

But the problem is that government improves its financial statement at the expense of the private sector. That is what happened in 2011 and looks to happen in 2012.

Total gross domestic product is about $216.1 billion, over P9 trillion. The government expects to collect P1 trillion in taxes. That, in effect, takes 10 percent out the total producing economy and gives it to the government.

The banking, power, and real-estate sectors will contribute P195 billion. Which sector, the private or the government, could more effectively spend that P195 billion for national economic growth?

If P-Noyconomics does not move soon to the next step of improved profitably for the nation, 2012 will actually be worse than 2011.

A single conversation across the table with a knowledgeable man is worth a month’s study of books—Chinese proverb. On a personal note, I will conduct a stock-market trading seminar on March 24. I will discuss how to make money in the market and how to avoid losing. This seminar is for everyone. If you have never invested, learn why and how you should. If you are having success problems, learn how to change that. If you are a successful investor, learn some new profit-making ideas. Send me an e-mail at for details.

E-mail to and Twitter @mangunonmarkets. PSE stock-market information and technical-analysis tools provided by Inc.

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