What happens when social media takesover the justice system?

As per the Julian Assange case in Britain where the WikiLeaks founder may find out about his fate through the social networking site, could the same thing be envisaged here? Could the use of social media [...]]]> Tweet

What happens when social media takesover the justice system?

As per the Julian Assange case in Britain where the WikiLeaks founder may find out about his fate through the social networking site, could the same thing be envisaged here? Could the use of social media be the same as serving notice to the parties to a trial?

Imagine what would have happened in the case involving Gloria Arroyo’s hold departure order if that had happened? The government’s excuse that it had not received a copy of the decision would not have been available if the decision had been uploaded immediately and tweeted to the court’s “followers” within minutes.

The trial of Chief Justice Corona too could be determined by the media (including Facebook and Twitter). Once cannot discount the possibility of an Arab Spring-like uprising taking place in the aftermath of the trial. Since the prosecution seems to be facing strong headwinds, the conduct of a separate trial by citizen’s groups and netizens in the public arena including the blogosphere seems to be suffering no setbacks.

Forget about establishing the “facts” of the case in the formal court, this is all about shaping the minds of the jurors in the court of public opinion. Call it forum shopping if you like, but parties to this impeachment trial do not feel compelled to abide by the “rules of the game”… so much for strengthening the “rule of law” and “institution-building”.

All this wouldn’t sit too well with senator-judges who are hoping to make an impartial decision based on evidence. What we are witnessing is the mirroring of the justice system in the trial by the senate, where poor evidence gathering, poor homework lays a poor foundation for the prosecution, which inevitably leads to a poor conviction rate.

Except that in this case it is a trial by jury, and the jurors, unlike a proper court, are not restricted from reading (and discussing) the news related to their case. As such, their decision will ultimately reflect the biases formed in the gallery. In a proper court, this would be grounds for a mistrial, but in this pseudo version of Law and Order, the rabble run the show.

Here we go again. As the Philippines enters 2012, the stage is set for another round of reality TV/courtroom drama to unfold as the trials of former president and now congresswoman (FPANC?) Gloria Arroyo and her minions get underway.

Despite the political, economic and natural [...]]]> Tweet

Here we go again. As the Philippines enters 2012, the stage is set for another round of reality TV/courtroom drama to unfold as the trials of former president and now congresswoman (FPANC?) Gloria Arroyo and her minions get underway.

Despite the political, economic and natural disturbances that visited the country last year, President Noynoy Aquino (P-Noy) ended last year cresting on a wave of popularity as evidenced by his public poll figures. Depending on which side of the debate you are on, 2011 proved to be either a very productive or very unproductive year for the country.

For those seeking to go after FPANC Arroyo and her proxies, 2011 yielded a very rich bag of goodies. The body count of former Arroyo allies piled up during the year to include: one former armed forces chief of staff (who fell on his sword), the ombudsman and a junior senator (who both resigned),  an anti-insurgent general (on the run and in hiding) and several police officials, and the former Comelec Chair, current Chief Justice, and the former first gentleman  himself (who are all awaiting trial). To the faithful, P-Noy promises many more scalps, including some associate justices of the Supreme Court appointed by Mrs Arroyo.

To those looking for a steady hand on the till to manage the economy, 2011 left much to be desired. I won’t go into all the details. One only needs to look at the slowing GDP growth figures. Employment generation may have been robust and inflation might have been under control, but this can be attributed mostly to the prudent handling of monetary policy by the Bangko Sentral, not the administration.

As one of the worst cyclones in living memory devastated northern Mindanao, the president too weathered some criticism over his response to the crisis. Such criticisms however were easily swept away with the torrent of foreign assistance and soft loans offered by the international community in the wake of the incident and the public outpouring of solidarity for the victims during the Christmas season.

Finally, to those seeking for “space” to allow our institutions to recover from the constitutional and legal brinkmanship that occupied the nation’s attention during the nine years of the Arroyo presidency, 2011 provided no respite from the political derby. The current lull in hostilities between the competing forces of the Aquino and Arroyo camps only offers them a chance to brace for the bumpy ride that is about to ensue.

The task of any rational observer of these events is not so much to determine who is right and who is wrong. As Daniel Kahneman, the father of behavioral economics wrote,

Our preferences are about framed problems, and our moral intuitions are about descriptions, not about substance.

Was the government’s treatment of Mrs Arroyo and Chief Justice Corona fair? The answer depends on how you frame the problem. If it is about making her ‘accountable’ for her actions, then the answer would be, ‘yes’. If it is about adhering to the principles of separation of powers and the rule of law, the answer according to many legal peak bodies is ‘no’.

Is the government doing a good job? Again, that depends on the mental frame. If it is about ‘restoring faith and trust’ then, we would have to answer in the affirmative. But if it is about delivering the fruits of development in an experiential manner, then we would have to answer in the negative as far as fiscal spending is concerned.

As for the continued confidence the public expresses through polls in the president, one would have to conclude either they agree with the way he has been running the country or that Filipinos are extremely overconfident and optimistic about his prospects despite a lack of tangible results.

A study by Kahneman and Richard Thaler (the co-author of Nudge, which is the how-to book of applying behavioral economics to public policy) into fairness in economic transactions offers us a clue as to why P-Noy’s number remain above the clouds. As Kahneman explains,

Remarkably, altruistic punishment is accompanied by increased activity in the “pleasure centers” of the brain. It appears that maintaining social order and the rules of fairness in this fashion is its own reward.

What this means is that bringing the Arroyos and their ilk to justice provides just as much utility to a majority of Filipinos as milk and honey. In other words, they are engaged and have decided to go along with P-Noy on the “joyride” down the high road of Daang Matuwid.

The problem is that sacrificing actual bread and butter issues for “mental stimulation” could prove destructive down the road, especially given the length of time that would be required to complete the journey. This is perhaps where the exuberance and overconfidence argument sets in.

Currently, the plan is to impeach not just the chief justice but a majority of his associates on the bench appointed by Mrs Arroyo. With the Supreme Court set to weigh in on whether the articles of impeachment were signed by the congressmen under duress, it seems unlikely whether the trial of the chief justice could be wrapped up in the three to six months originally projected by one senator-juror.

Despite calls for the CJ to go “softly into the night” and rumors of two associates willing to retire early of their own accord, it seems unlikely that they will. Even if the CJ were convicted and the two rumored justices resigned in the coming year, the Arroyo appointees would still hold a majority. Three more justices would have to be impeached to gain a comfortable margin for P-Noy in the high court.

Assuming an average of six months each (an optimistic assumption) to impeach and try the CJ and three other justices along with the heroic assumption that two would go voluntarily in the interim, it would take another 24 months to finish the task. Insert a six month period in between as 2013 is an election year, and that means middle of 2014 would be the soonest possible date for P-Noy to “clear the decks”. That leaves him one year to push his “reforms” as the last twelve months of his presidency from July 2015 to June 2016 is a lame duck period.

According to P-Noy, the Arroyo influenced Supreme Court is standing in its way preventing major “reforms”. Talk of “original sin” has alluded to this. If that is truly the case, then the nation will have to wait until late into the Aquino II presidency before anything gets accomplished. The fact that they have succumbed to a kind of “confidence bias” in predicting when this will be has led them to view P-Noy’s presidency with favor (a case of irrational exuberance?).

Another warning to those entertaining such stroking of the nation’s erogenous zones again comes from Kahneman who tells us that

Other classic studies showed that electrical stimulation of specific areas in the rat brain (and of corresponding areas in the human brain) produce a sensation of intense pleasure, so intense in some cases that rats who can stimulate their brain by pressing a lever will die of starvation without taking a break to feed themselves.

Indeed, taking the need to fulfill some sense of fairness or altruistic justice to the extreme could cause the nation to be mesmerized, intoxicated with the chemicals that stimulate those “pleasure zones” in the brain. At some point, however, either the powerful effect of this stimulant could wear off or millions of our countrymen could follow the trajectory of these lab rats, withering away, unable to wean themselves off the steady drip of anti-Arroyo mania.

With the release of third quarter GDP figures upsetting all but the most ardent economic apologists for this administration, the time has come for it to re-think its priorities.

The situation is nearing a critical level. As the whole of Europe is placed on credit watch [...]]]> Tweet

With the release of third quarter GDP figures upsetting all but the most ardent economic apologists for this administration, the time has come for it to re-think its priorities.

image from wallpapers-diq.net

The situation is nearing a critical level. As the whole of Europe is placed on credit watch and as recovery in the US struggles for momentum, the vibrancy in the domestic economy is being sucked out by government’s poor infrastructure spending rate just at a time when it is needed. Cabinet officials throughout the year have been promising a more rapid deployment, but this has so far not materialized.

The incorrigible ‘prophet of boom’ from the Ateneo Graduate School of Business Cielito Habito despite his best efforts at painting a rosy picture for the government has himself acknowledged the third quarter results to be disappointing. Here is how this professor of ‘Aquinomics’ concludes his most recent column for the Inquirer entitled, Is confidence dissipating?

(W)hat worries me most is the possible dissipation of the initial confidence surge that greeted the new administration and led to brisk private domestic investment growth over the past year. With these private domestic investment numbers now apparently slowing down while price increases have been speeding up, the President and his men on top of the economy should keep a close eye on the ball—or risk losing steam altogether (emphasis added).

That’s it—the penny has finally dropped. Only a delusional person would keep insisting that the government is headed in the right direction when it comes to managing the economy. Will this lead to a teachable moment, or will the administration remain antagonized by criticism seeing sinister plots behind them, spooked by shadows and haunted by the spectre of its immediate predecessor?

Throughout the year, the government has continued to fall back on its good poll figures to demonstrate that it has been performing to the satisfaction of the people. Poll figures however may not be a good barometer of the government’s competence in economic affairs given the ‘halo effect’ that has made the administration appear more creditable than it should.

Market analysts have already pointed out and the Bangko Sentral agrees that stimulating greater demand to address the slowdown in growth lies not in the hands of monetary authorities at this point but with fiscal managers. What this means is that the government has to spend more and talk less. Or in the words of Jerry Maguire, it has to “show me the money!”

All talk, no action

The government talks profusely about the need to ramp up infrastructure spending in its Philippine Development Plan released early this year (see page 17). “An inefficient transport network and unreliable power supply”  is what has created a poor investment climate according to the Plan. Solving this meant greater spending, but when it comes to actually delivering on this, the government fell short of its rhetoric. Next year’s appropriations will hit a mere 2.5%, when the benchmark for a middle income country such as ours is 5% of GDP.

P-Noy in his first SONA said that the infrastructure build-up would be achieved through public-private partnerships, but nearly eighteen months on and counting, the fulfillment of the now diminished scope of this program remains to be seen. The confidence of the business community will eventually wear thin as Habito suggests if delays persist.

When the president addressed a meeting of the Makati Business Club, a community highly supportive of his candidacy, there was some disappointment over his over-emphasis on the case against former president Gloria Arroyo and his squabble with the Supreme Court. As these businessmen suggest, the risk is for P-Noy to get so focused on prosecuting Mrs Arroyo that he fails to keep his ‘eye on the ball’.

And it requires some doing. To ramp up spending by 2.5% of GDP will require as much concentration as he can muster. In a ten trillion peso economy, this will mean doubling the present effort of 250 billion pesos a year. This will dwarf  the growth of the CCT or conditional cash transfers which cost about thirty billion.

Because the president closed off the avenue of raising revenues through new taxes, he found himself left with no other option but to fund his development plan through private financing. That has proven tricky as well, which is why he now needs to consider a third option.

That third option which I had first written about late last year which then got echoed by no less than the BSP Governor a few months back is for the government to issue infrastructure bonds to the BSP which is at present earning negative returns on its foreign currency reserves.

Better returns

By offering the Bank a better yield, the government would be doing it a favour. Raul Fabella a former dean of the UP School of Economics has lent this proposal his seal of approval. He believes the risk from runaway inflation to be negligible under the proven monetary stewardship of the BSP.

The continued growth of foreign remittances from OFWs makes this option feasible, but if the government needed further convincing, then the following points should help build the case for it:

1. Infrastructure spending is needed as we face a slowdown of demand from Western economies for our goods and services.
2. It is the best vehicle for avoiding the ‘Dutch disease’ that afflicts countries experiencing windfall profits from resource booms (in our case, this stems from human not natural resources).
3. Unlike increased social entitlement spending during a boom which becomes painful to retract at the end of the cycle, infrastructure spending leaves a tangible legacy and productivity dividend.
4. It will help our exporters remain competitive because the increased spending will lead to a modest rise in inflation which will stem the appreciation of the peso against the greenback.
5. It will unlock complementary investments by the private sector which is being deterred by poor public infrastructure.
6. Government failure will be minimized as most transport and power projects can be turned over to the private sector under a PPP arrangement once completed. Revenue earned from transport and power projects would settle the interest and debt owed to the BSP.
7. It will help prop up employment and growth which will spur increased tax collection.
8. It will reduce the cost of doing business for most firms, not just exporters.
9. It will help achieve the government’s growth target of 5-7% in the medium term.
10. It will fulfill the government’s own development plan and set us on a higher growth plane.

Greater public infrastructure spending not by new taxes, nor by increased external or internal borrowing (as per Mrs Arroyo’s stimulus program in 2008/09), but by tapping our excess foreign currency reserves is not only appropriate, it would be the most effective and innovative way for this government to sustain economic growth through the turbulence in the global economy and beyond.

But we have to get real now. When faced with a possible course of action that is within the feasible set as defined by technocrats, what often prevents governments from acting is not the lack of rational arguments but the incentive problem. What led to this whole debacle in the first place was the administration’s fear of spending that would benefit internal patron-client networks left behind by its predecessor. In other words, politics rather than economics has been driving its decisions.

Making daang matuwid work

In the past we have seen how corruption and rent-seeking have reduced the amount of money available for developmental spending, but now we see how the opposite has reduced that amount even more. In the words of Samuel Huntington, “In terms of economic growth, the only thing worse than a society with a rigid overcentralized, dishonest bureaucracy is one with a rigid, overcentralized honest bureaucracy.”

The challenge for P-Noy is to make his mantra of daang matuwid work for the country rather than against it. Through the discipline and hard work of Filipinos working overseas, the country has a rather unique opportunity to make up for the shortfall in taxes generated internally. The current situation reminds me of the parable of the talents where the honest, but slothful servant dug a hole in the ground to store the talent that was entrusted to him by his master for safekeeping.

The Aquino government is like that servant. It was entrusted with a small but buoyant economy at the beginning of its term. So far, it has managed to keep it afloat, running while standing still, growing on aggregate but shrinking in real per capita terms. At the end of the story, the master reprimands the servant by saying, “To everyone who has will be given, and he will have abundance, but from him who doesn’t have, even that which he has will be taken away.”

That sound a lot like where the economy is heading under the president’s watch. The little that the Philippines had at the start could be taken away from it, while the plenty that our ASEAN neighbours have keeps on growing. It is time this government put its money where its fiscal mouth has been and start showing us the money. From another biblical parable comes the saying, “to whom much is given, much is required.” P-Noy was given a huge electoral mandate back in 2010. It is time he used it.

That is not how the government acted in seeking to put Mrs Gloria Arroyo behind bars. Rather than keep the former president guessing as to the date when formal charges against her would be laid, President Aquino announced back in September what the timetable for it would be. [...]]]> Tweet

image of Michaelangelo's Last Judgement from freepublic.com

That is not how the government acted in seeking to put Mrs Gloria Arroyo behind bars. Rather than keep the former president guessing as to the date when formal charges against her would be laid, President Aquino announced back in September what the timetable for it would be. Here is how he phrased it,

We will start filing the cases before the end of this year and with a little cooperation from the judiciary, maybe we can put some of these people in jail next year.

This signalled to Mrs Arroyo that she had to make travel plans as soon as possible, which then forced Justice Secretary Leila De Lima to take it upon herself to place the congresswoman under a departure watch list to keep her in the country even before preliminary investigations were concluded. This according to one justice meant that De Lima was now “more powerful than the court“ which can only do the same “after the filing of the information and the issuance of an arrest warrant“.

“With a little cooperation from the judiciary”: those words of P-Noy now seem ominously prescient of events as they unfolded because straight after thwarting an attempt by the former president to leave by disregarding an injunction from the high court on the watch list order, the government then turned to a joint panel between the Comelec and the DOJ set up to look into electoral fraud to file a case before a regional trial court against Mrs Arroyo. This timeline shows that within the space of a few hours upon receiving their case files which numbered several thick ring binders, a judge issued an arrest warrant.

Had this judge not been so “cooperative”, Mrs Arroyo might have successfully fled the scene since the Supreme Court had by then thrown out the government’s appeal to have its injunction on their watch list order lifted. And so despite the fact that it had foolishly forewarned the former president of its intended moves, the government somehow managed to keep her in the country long enough for an arrest warrant to be served.

In the process of doing so, however, the government may have committed a few grave mistakes. These might come back to haunt its case. Certainly if it is found that it acted inappropriately, the president needs to own up to it because it was he who set the wheels in motion that eventually landed the government in a whole heap of trouble. Particularly with respect to his campaign promise to uphold the rule of law, P-Noy will be ultimately responsible if it is determined that his government usurped judicial powers or acted in contempt of court.

At the moment, the president is assailing the Supreme Court for the speed in which it issued its injunction on the government’s watch list order as he spoke before his “home court” the Makati Business Club, saying

(O)ur lawyers all know that it takes the Supreme Court 10 days, normally, to attend to motions, and it decides to issue a TRO for Mrs. Arroyo in three, who can avoid wondering what she did to merit such speedy relief?

And yet the president doesn’t see the irony of his position because the government was quite happy to get a lower court judge to issue an arrest warrant on his adversary in a matter of hours, which was a far more difficult decision to make. Certainly, when it comes to fostering the rule of law, what this government has in mind is something quite different from the standard.

Like a thief in the night–that is how the Hacienda Luisita decision was handed down by the high court in the midst of all this. Oral arguments had been heard and the judgement of the court had been pending. No one knew the day or time when it would materialize. Suddenly either by coincidence or by design the justices rendered a unanimous vote in favour of the farm worker beneficiaries to have the Aquino-Cojuangco estate title transferred directly to them.

Having justified its bold and decisive actions against the court’s injunctions because of the ensuing confusion surrounding it, the government through its spokesman immediately informed the public that it would respect this particular decision as public support had been mounting in favour of it. The only caveat was for the determination of ‘just compensation’ for the president’s relatives and other issues that the court still has to settle.

The initial action by the Arroyo government to revoke the stock distribution option taken by the Cojuangcos in complying with the agrarian reform law was suspect according to US officials based on confidential diplomatic cables as a form of retaliation by Mrs Arroyo on the matriarch of the Cojuangco clan for supporting calls for her ouster back in 2005. What the Supreme Court ruling now does is open up the possibility for a counter-retaliatory move on the part of Mr Aquino against the Macapagal-Arroyo clans who also own sugar plantations.

This tantalizing opportunity could reverse the destructive pattern of competition by ruling elite factions to accumulate wealth through landholdings using the weak system of property rights in the country in order to consolidate power. Now in a bid to weaken each other, these same ruling elites might now work to dismantle each other’s landholdings. Given that one faction controls the executive and another holds the sympathies of the judiciary, this feud might actually produce something positive for the country.

Like a thief in the night—that is not how events overtook this government on the economic front. For one, the debt crisis in Europe was unravelling like a train wreck in slow motion for several years now. The seeds of this crisis were actually sown during the last one when governments pumped liquidity into their banking systems and engaged in stimulatory fiscal spending. It was only a matter of time before bond holders began to raise the cost of public debt.

The government had ample time to prepare the nation for this crisis, to bullet proof it by sustaining demand through public construction and investment. The early warning signs that its fiscal consolidation was going too far and actually dampening growth in demand were quite evident during the end of last year. The government had ample opportunity to correct its course and make the necessary adjustments. It may turn out in the end that a transition to a new government may have caused unnecessary disruptions to patron-client networks in the bureaucracy. Reconfiguring these networks took too much time.

Finance officials might have taken this as a welcome blessing as the slow spend rate allowed them to limit the fiscal deficit while sticking to the president’s no new taxes pledge. Meanwhile,with the fiscal space it had from fiscal consolidation, it cut tariffs on certain industries. It balanced this decision by removing power subsidies to exporters in special economic zones. These could threaten the growth of some industries and lead to the closure of others at a time when global demand for our exports is already weakening or restructuring as some economists have noted.

The biblical phrase “like a thief in the night” comes from the parable of the ten virgins found in the canonical gospels of the New Testament. It is also known as the parable of the wise and the foolish virgins. The five virgins who were prepared for the bride-groom came to his wedding feast, while the other five who weren’t were excluded. It has an eschatological message: to be prepared for the day of judgement. The final reckoning.

With the second coming of the Aquino dynasty, will the country be prepared to pass the test? Or will it simply slip into oblivion? The day of judgement is nearly at hand!

The halo effect is a cognitive bias first studied by Edward Thorndike in 1920 whereby the perception of one trait (i.e. a characteristic of a person or object) is influenced by the perception of another trait (or several traits) of that person or object. An example would be judging a good-looking person [...]]]> Tweet

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The halo effect is a cognitive bias first studied by Edward Thorndike in 1920 whereby the perception of one trait (i.e. a characteristic of a person or object) is influenced by the perception of another trait (or several traits) of that person or object. An example would be judging a good-looking person as more intelligent or believing a politician’s policies are good, just because the person appears good.

In the case of President Aquino and his high public satisfaction ratings, there seems to be a substantial amount of this effect taking place. The general impression of P-Noy is that he is honest. This comes from being who he is, the only son of two national heroes. This has translated into very positive sentiment towards the actions taken by the government under his watch.

Part of this has to do with the anti-GMA sentiment or the reverse halo effect. So pursuing cases against his predecessor is seen to be the legitimate thing to do, and rightly so, given the shenanigans that her administration was accused of. It also ties in with the president’s retraction and review of contracts and projects already approved for fear that they would somehow benefit her proxies within certain departments and sub-contracting firms.

But if you look at the outcome of these actions, it becomes immediately apparent, leaving our cognitive biases aside, that the positive evaluations given to P-Noy by the public are probably unjustified.

First of all, with respect to the way in which his justice department has gone after Mrs Arroyo, certain questionable legal manoeuvres have actually undermined the rule of law rather than upheld it. And secondly, with regards to the handling of the economy, the third quarter GDP figures clearly show that the overly cautious due diligence performed on public contracts undermined economic growth rather than encouraged it.

On the first point, I am referring to the use of a joint panel composed of the Department of Justice and the Commission on Elections that investigated allegations of vote rigging in the 2007 elections. This is said to have been anomalous in that a supposedly independent constitutional body such as the COMELEC is not meant to be seen as partial or collaborating with the administration in any way. Also, when their joint findings were published, it took a judge a few hours to read their eight ring-binder document and issue an indictment on Mrs Arroyo.

The undue haste with which such decisions were reached coming on the back of a temporary restraining order issued by the Supreme Court on the hold departure order issued by the DOJ on Mrs Arroyo that was “in effect” despite the dissenting opinion of some justices makes it highly likely that politics rather than due process was observed. This TRO was issued because the legality of the DOJ’s hold order was questionable to begin with.

Had these actions been undertaken by Mrs Arroyo while she was running the country, the protests from civil society regarding the “creeping authoritarian” nature of her government would have occupied public discourse. But because it was attempted by the meek and mild administration of the “benign one” there does not seem to be the same level of public indignation, although the result is the same—if upheld, it would grant vast powers to the state to curtail individual freedoms.

If we turn to the second point, on economic governance, the promised economic take-off billed as a public-private partnership by the president did not take place. Instead the economic deceleration has been rather remarkable in a region that is seeing quite robust growth despite the downturn in Europe and the US. The government which was prepared to take the credit for positive growth in agricultural output in the first half when early rains produced a bumper crop is now shifting the blame for poor production on storms both natural and man-made.

Public construction continued to show weakness despite the government’s promise to fast-track the roll-out of resources in response to the slump in the first half. Even with the announcement of a “stimulus” to deal with the effects of the EU debt crisis, there still appears to be little traction on this front. All hopes are pinned on the fourth quarter, but as the country’s chief statistician has pointed out, to attain even the lower end of the government’s modest growth target range for the full year, the economy would have to expand at a pace rarely seen.

In attributing the weak economic performance registered this year, there are certain factors that lie outside the government’s control (storms and financial crises overseas) which have to be acknowledged, but a portion of it definitely lies within its sphere of influence (public construction spending). It is clear that external factors did dampen growth, but the government’s action or inactions dampened it even further.

Again, had this occurred under Mrs Arroyo, the government would have been pummelled. Hounded by questions of legitimacy, it was her economic credentials that proved her only saving grace. Now that the government is run by someone whose electoral mandate is unquestioned, his now sullied economic credentials don’t seem to be much of a problem.

To counter the cognitive bias associated with the halo effect on the part of an evaluator, “blind-fold” tests or blind experiments are often administered where the person rates a product based on its actual attributes or performance, not on the subject’s perceived reputation. Respondents are often surprised with the results when they remove their blindfolds. I wonder what would happen if a poll was conducted that used the same principle in evaluating the performance of our presidents.

If faced only with the indicators of success and not the name of the person being rated, what marks would be given this president? What the government under him did this year countered its aims of fostering good government, rule of law and economic growth, but somehow its acts of commission and omission get glossed over and given a positive spin. Not only that, but the public by and large is willing to accept the message given them that all is well. So it seems the halo effect can cover a multitude of sins.

That is how much of P-Noy’s term of office would have expired by the end of next month. It usually marks the end of the window of opportunity for introducing major reforms. In the case of the US presidency, the current occupant of the White House President Obama [...]]]> Tweet

image courtesy of 123rf.com

That is how much of P-Noy’s term of office would have expired by the end of next month. It usually marks the end of the window of opportunity for introducing major reforms. In the case of the US presidency, the current occupant of the White House President Obama was able to introduce his stimulus program, banking reform and of course, the once in a lifetime reform of the healthcare system within his first eighteen months in office.

At the end of that period, the tea party movement rebelled against the direction he was taking the nation and voted the Democrats out of their majority in the lower house of congress. The new Republican-led house’s intransigence over the deficit has blocked any further reforms (witness the failure of the super committee over the weekend), and it will probably take another election to allow the grid-lock to be broken.

As we approach the quarter mark of P-Noy’s presidency, it is worth reflecting on his accomplishments or lack thereof and the conditions under which he has had to govern that may or may not have enabled him to achieve what he promised during his campaign. More than anything, I believe that these first eighteen months have highlighted the inconsistencies in his promises and the inevitable tensions that come about from pursuing them.

Firstly, let me tackle his social contract and the plugging of the fiscal deficit. Due to his pledge of no new taxes, the finance and budget departments have had to rely on better tax compliance and program savings in order to bridge the government’s fiscal gap while attending to social and economic infrastructure programs. This is in a country of very wealthy elites who are averse to paying their fair share of taxes.

Despite my distaste for the government’s attempts at “fiscal consolidation” a euphemism for austerity measures I dubbed the “surplus fetish”, one benefit that I now see with the way in which they have gone about things is that it has exposed the inability of tax agencies even under the best efforts of honest officials to raise enough revenue to meet the government’s social compact obligations.

This is why Secretary Purisima, in a bid to shore up enough revenues down the track has flagged a few revenue measures to congress including the rationalization of fiscal incentives, the indexation of sin taxes, and as recently as this week the raising of a minerals tax similar in vein to the Australian resource rent scheme. These three taken alongside the stricter enforcement of the tax code on self-employed entrepreneurs and professionals could yield an estimated four hundred billion pesos, enough to close the fiscal gap and then some.

Enacting these revenue measures would lift the tax collection effort to a more sustainable nineteen percent of GDP, a position last held in the late-90s when the country eked out a surplus. The reform of the tax and incentives system would allow a more progressive and equitable fiscal expenditure program. One reason why the growth of the last decade was not felt by the broad masses of people was that the growth went largely to big business in the form of profits. Benefits through the tax system could not be shared with the less fortunate as the tax collection rate continued to decline despite the growth.

The absence of a successful asset reform program to tackle landlessness in the rural sector led to continued urban migration and growth of informal labor markets. This normally would lead to greater social insurance spending by the state, but this has only been recently addressed with the conditional cash trasnfers program. By next year, the government believes it will cover two of the four million poorest households. The funding comes from the scaling down of the grains importation program, a low lying fruit. To cover the remainder would require doubling the current thirty billion pesos spent on the program. This can only be accomodated through new taxes.

Secondly, given the new-found consensus around new revenue measures, getting them adopted will entail the exertion of executive will and the full cooperation from the congressional leadership. The legislative record of the government has been rather dismal with only 3.25 of its thirty three priority measures passed this year.

These include the reform of government-owned and controlled corporations, changes to labor regulations covering night shifts for women and the synchronization of the elections in the autonomous region of Muslim Mindanao with the rest of the country. The passage of an ammendment to the Electric Power Industry Reform Act that contained one fourth of the recommended changes of the administration accounts for a quarter-measure (hence 3.25 out of 33 measures).

At this rate, it will take a little over ten years to get all of the priority bills passed, including the reproductive health bill which has been seized on by the local Occupy movement. The actual tally of bills passed was seven, three of them not flagged as urgent including one that granted Philippine citizenship to a certain Marcus Eugene Douthit. The country spends about a hundred and ten billion pesos a year for both houses of congress. This is about sixteen billion pesos per measure, which represents very low value for money.

Contrast that with the performance of the Gillard government in Australia which passed two hundred and fifty measures this year including a highly contentious carbon tax and emissions trading scheme. This is quite impressive considering that it has had to seek an alliance with the Greens and a few independents to see these bills through both the lower and upper house.

In the Philippines, the majority in the lower chamber is always loyal to the president, which makes the Senate the only real check on executive power. But the senators unlike in the past are not particularly hostile to P-Noy, which represents a window of opportunity. Unfortunately, much of the upper chamber’s attention has been devoted to controversies involving the former regime which is perhaps why it has had little time to devote to other matters.

Thirdly, the pursuit of the rule of law and anti-corruption under the rubric of Daang Matuwid (Righteous Path) and the prosecution of the former president have come into conflict with each other. It is clear that P-Noy does not want a repeat of the ongoing saga with the Marcoses. This is perhaps the reason why he sought to bring Mrs Arroyo to justice by sending her to jail before Christmas this year.

The lady he has put to the task, his justice secretary, might have skirted a few legal formalities in order to make that happen. This is the conclusion arrived at by a few dispassionate observers including legal luminary Fr Joaquin Bernas, SJ, dean emeritus of the Ateneo Law School from where a number of the president’s men have been trained.

During the campaign, it seemed that the rule of law was intertwined with bringing Mrs Arroyo to justice for misdeeds done while in office. Now, given the situation where the high court is stacked with her appointees, certain exigencies have to be dispensed with in going after her. Indeed it would be preferable from Mrs Arroyo’s point of view for these cases to be tried immediately while she still enjoys some legal cache with those on the Corona bench.

In pursuing the case against her, P-Noy runs the risk of succumbing to the “dark side” by employing extra-legal or extra-constitutional tactics as she did during her presidency. Rather than lifting the country out of the mud, what could happen is that his presidency could get dragged through it with her. The impending release of the Supreme Court’s order to distribute his family’s hacienda to its poor tenants can be seen as a form of retribution. It distorts the narrative of “light vs darkness” by laying the blame for social inequity and injustice squarely on the president.

At any rate, what economists and foreign investors mean when they refer to the rule of law has nothing to do with prosecuting former incumbents but with the securing of ownership and property rights and the efficient enforcement of contracts. And here once again, the pursuit of daang matuwid has led to the scrapping of a few contracts involving foreign donors and their suppliers for the simple reason that they were signed by the former president. This has if anything maintained the image of the Philippines as a country with a high sovereign risk attached to it.

In conclusion, it is worth reflecting on how the shadow and specter of Mrs Arroyo’s administration has haunted her successor. In the first instance, an absence of public trust in government has cemented the idea in P-Noy’s head that he could only fund his social contract by improving tax collection rather than new taxes. This has been shown to be a false economy of sorts. Secondly, investigations into anomalies committed by her have distracted congress from pursuing his legislative agenda. Thirdly, prosecuting her at all costs has compromised his pursuit of the rule of law, property rights and good governance.

At some point, P-Noy will have to pivot from correcting the errors of the past to ensuring a brighter future for all. To do that, he will have to wrestle with the internal inconsistencies of his reform agenda and exert executive will to get his measures passed as well as restraint when required to show an even hand in prosecuting Mrs Arroyo.

In the end, he would want to avoid a problem known to economists as the winner’s curse. This situation could arise if he becomes overly-invested in the hunt for personal vindication against Mrs Arroyo and her minions. In seeking to settle a few scores with her, he might eventually get side-tracked into a very personal and passionate fight. This could detract him from pursuing a much broader reform agenda for the country. In this manner, he could easily squander the remaining time he has in office and wind up with very little to show for it.

As America “pivots” towards Asia where the future economic centre of gravity of the world will be, how big or small a role will the Philippines play in this the Pacific Century?

Jim O’Neill the man from Goldman Sachs responsible for the acronym BRICs (which stands for Brazil, [...]]]> Tweet

As America “pivots” towards Asia where the future economic centre of gravity of the world will be, how big or small a role will the Philippines play in this the Pacific Century?

Source of image: taiwandocuments.org

Jim O’Neill the man from Goldman Sachs responsible for the acronym BRICs (which stands for Brazil, Russia, India and China) in a forthcoming book feels all the more convinced as ever of the accuracy of his predictions ten years ago when he first coined it to describe the growth potential of emerging markets. His sense of vindication for what he now characterises as his “conservative” estimates comes from the fact that in his words,

The world economy has doubled in size since 2001, and a third of that growth has come from the BRICs. Their combined GDP increase was more than twice that of the United States and it was equivalent to the creation of another new Japan plus one Germany, or five United Kingdoms, in the space of a single decade.

At this rate, China will be on track to surpass the United States as the world’s biggest economy by 2027, according to O’Neill, beating the earlier estimate of 2035. Predicting when this will happen has become an interesting past-time of analysts of late, which is why The Economist whose own projections for a 2019 year of reckoning made available the following interactive chart where you can play around with the assumptions and do-it-yourself  by entering them in the assigned fields (see below).

As Secretary Clinton has put it

The Asia-Pacific has become a key driver of global politics. Stretching from the Indian subcontinent to the western shores of the Americas, the region spans two oceans — the Pacific and the Indian — that are increasingly linked by shipping and strategy. It boasts almost half the world’s population. It includes many of the key engines of the global economy, as well as the largest emitters of greenhouse gases. It is home to several of our key allies and important emerging powers like China, India, and Indonesia.

In his address to the Australian parliament, President Obama welcomed the rise of a peaceful China stating that

Together, I believe we can address shared challenges, such as (nuclear) proliferation and maritime security, including cooperation in the South China Sea.
Meanwhile, the United States will continue our effort to build a cooperative relationship with China.
…We will do this, even as we continue to speak candidly to Beijing about the importance of upholding international norms and respecting the universal human rights of the Chinese people.
A secure and peaceful Asia is the foundation for the second area in which America is leading again – and that’s advancing our shared prosperity.

A constant theme in that speech which effectively marked the “pivot point” to the East was America’s adherence to the rule of law to govern international relations in security and economic terms, as well as its championing of open democracies and free markets in the region. In both cases, Obama was at his professorial best when he promoted the concept of rules based trading in commerce and politics.

His speech writers could be said to channel F.A. Hayek the founder of contemporary libertarianism who said that, “Only the existence of common rules makes the peaceful existence of individuals in society possible.”

This is consistent with America’s constitutional belief in universal principles. Prof Obama was also acting like Dr King, in that he was delivering a sermon. He may have seemed in Australia to be “preaching to the choir” but his real intended audience was not in Canberra, but Beijing. In Bali, he got to exchange a few constructive words with his Chinese counterpart. Much to the Philippine delegation’s dismay, the US defence posture in the region is not meant to intimidate the rising power of China into submission over the South China Sea issue.

Back home, President Aquino had another axe of sorts to grind with the placing of his predecessor Gloria Arroyo under hospital detention following her indictment for election fraud. This followed a week of controversy involving her attempted departure from the country to seek medical treatment following a Supreme Court decision to temporarily lift the Department of Justice’s hold departure order on her, a decision that was not accepted by the said department.

All of this puts into context, the question of where will the Philippines be in 2020? Will the Philippines be a prosperous democratic country governed by the rule of law? Or will it still be struggling to achieve this ideal that the US president spoke of so eloquently?

Today, the hot topic in Manila among political commentators is whether the action taken by the Aquino government to prevent Mrs Arroyo from leaving was in accordance with the rule of law. On the side of those who say yes is Randy David who believes what we have now is a “rule of justices” not a bona fide rule of law thanks to the lady at the centre of the controversy. On the side of naysayers is Solita Monsod who believes the speed with which the investigation was conducted points once again to the politicisation of the process. Both make reasoned arguments in support of their views.

The president convinced of the justness of his actions and mindful of his constituents exhorted his countrymen to “not waver.” He said that

We are all working for a new Philippines, one where there is equality, where whoever does wrong, whatever his status in life may be, is punished, a country where justice rules.

Whatever the position either camp holds in this debate, all will agree that prosecuting the Arroyos has been quite a messy undertaking, much like the way President Joseph Estrada was deposed from office. The legality of it will be questioned and the merits of it will be argued for years to come in the court of public opinion.

Incidentally, 2011 is also the tenth year since Estrada’s ouster. Back in 2001, Mr Estrada will argue, the country’s elites conspired to bring a sitting and democratically elected president down by extra-constitutional means. Today, it has been argued that one faction of the elite has manipulated the legal system to jail the head of another.

In all this time, has the country progressed towards becoming a stable more prosperous country? To the analysts, the country’s growth rate over the last ten years has proven their rosy forecasts right. They will say that we are on track both demographically and economically to be a force to reckon with by 2020 and beyond.

To the “insiders” the same old problems of social inequity still prevails. One set of rules still seems to apply to one class of people, and another applies to the rest. To the administration and its followers, the Arroyos have become totemic of this system. To them successfully prosecuting and sending her swiftly to jail would prove once and for all that only one system of justice prevails in the country.

To the realists, the application of justice over the course of the next ten years will largely depend on who sits in power. By 2020, a certain boxer-legislator who happened to be one of GMA’s strongest endorsers believes he will be a strong contender for the Palace in 2022. By then he would have tucked a few billion pesos under his belt and followed a path set before by the populist Erap Estrada.

Should the reforms espoused by the current seat warmers of Malacañang not take route in the next five years the political pendulum could swing the other way and a revival of patronage-based populism with a new face could rise to replace the torch-bearers of our current elite democracy.

Similarly, China could match the US pound-for-pound in their rivalry for regional dominance. The Beijing Consensus might by then trump the Washington version. A different model for prosperity might be in play making the need for establishing common rules seem rather (how shall we put it?…) academic.

A national apprenticeship program that provides subsidies to both employers and employees in areas where a skills mismatch has occurred would fix the problem.

The president in answering the questions submitted and rated by viewers on Youtube reiterated many of his “talking points” during his second State of [...]]]> Tweet

A national apprenticeship program that provides subsidies to both employers and employees in areas where a skills mismatch has occurred would fix the problem.

The president in answering the questions submitted and rated by viewers on Youtube reiterated many of his “talking points” during his second State of the Nation Address. This comment was raised by many viewers of the 43 minute “Ask PNoy” event co-hosted by World View and the ABS-CBN News Channel.

The very first question asked concerned the plight of millions of Filipinos who seek employment overseas because of a lack of opportunities at home. The president’s reply was to cite the same statistic he noted during his SONA with regard to the skills mismatch of about fifty to sixty thousand job openings on the government’s PhilJobs.net website that have remained unfilled (see video below–at around the 1.30 minute mark to about the 3.30 minute).

The president’s solution as he declared during his speech last July was to instruct the agencies concerned to study ways to address this imbalance through the educational system. This is well and good, but the immediate concern of filling these vacancies, plus the prevailing unemployment of close to three million Filipinos needs to be addressed soon, not down the track.

During his interview, the president spoke of various government sponsored programs: (1) to address the need for “green” energy by replacing thousands of diesel powered engines and vehicles that make up our transport infrastructure, (2) to provide thousands of housing units to soldiers and policemen to address the peace and order situation in the countryside, (3) to beef up our coastline security through a defense modernization fund, and (4) to expand social insurance through conditional cash grants to indigent families to address intergenerational poverty.

But when it comes to addressing the first imperative of any government which is to provide jobs, jobs, jobs, it seems the solutions are not as solid or programmed, as such. A very quick and do-able solution would be for the government to provide employment and training subsidies to the firms unable to fill job vacancies.

The purpose of this subsidy would be to defray part of the costs of training cadets or apprentices on the role they will fill within the firms seeking to employ them. Part of this  subsidy could go to the employer to help pay for the wages of unskilled apprentices and trainees while they undergo a period of formal schooling, on-the-job training, or a combination of both.

This could last for a period of between eighteen-to-thirty-six months. To qualify for such a subsidy, the employer would have to show that an advertised job vacancy remained unfilled by qualified workers after a period of say six-to-nine months.

Another part of the subsidy could go to the apprentice or trainee for such things as transportation, uniforms, tools (if needed for the job) and other similar work-related expenses. Formal contracts of training would stipulate the responsibilities of each party under such a scheme and reviewed periodically.

Fifty-to-sixty thousand internet job ads on the government's website are not filled according to employment officials.

Fifty-to-sixty thousand unfilled vacancies is nothing to sneeze at. It constitutes about two percent of the nearly three million unemployed members of the workforce.  It would cost around one-and-a-half billion pesos annually to provide a two-and-a-half thousand peso subsidy per trainee each month (thirty thousand a year) assuming all of these vacancies are filled via this approach. That is a rounding error in the government’s total budget of over one trillion pesos.

It would provide presumably high paying, sustainable jobs in the end–something that social insurance programs cannot boast of. Surely with the “savings” PNoy was quite happy to highlight during his interview such an “investment” in people’s human potential would be worth making. Surely a new initiative such as this with a very modest budget impact and a significant contribution to raising employment would have earned the president praise from all sides (both employers and employees included). So why shouldn’t he do it?

That question sadly remains unanswered, but if the president were to temporarily overcome his strong aversion to criticism as he expressed by way of a Christmas wish to Santa towards the end of the interview, I am sure it could be made to work real soon.