A colleague of mine made a wry observation last week, and I’m paraphrasing here, “That every problem in this country, they either blame it on P-Noy or the truck ban.”
The comment was made in reaction to a news advisory about a statement made by the Department of Trade and Industry (DTI) that food prices would drop by seven percent after the congestion at the Port of Manila is cleared, which the DTI is optimistic will happen later this week.
Sarcasm is funny because it has an element of truth to it. President B.S. Aquino 3rd is blamed for a large number of political, economic, and social woes, and since the city of Manila’s daytime truck ban went into effect in February, slowing the flow of traffic from the port, the unpopular ordinance has been blamed for everything from high consumer prices to slumping corporate incomes.
While both the hapless president and Manila’s well-intentioned but perhaps not well-planned traffic reduction scheme have unquestionably caused a number of problems, they have not caused nearly as many as are attributed to them. It is simply because the legitimate problems for which they can be blamed are so visible that other issues are assumed to have the same source.
For example, the creation of the condemned Disbursement Acceleration Program by Aquino’s inner circle in the latter part of 2010 has been widely blamed—even in one or two previous columns of mine, to be honest about it—for the gross government underspending in 2011, which in turn has been blamed for the country’s GDP growth rate being cut in half that year. But if we step back and take a critical look at all the factors underlying 2011’s poor economic performance, we are obliged to admit that the DAP was actually a very small part of a much larger set of problems. Yes, the DAP was an execrable abuse of power and a shamefully reckless waste of a considerable amount of public money, but on its own was more a symptom than an actual disease.
The problem with jumping to conclusions about the underlying causes of problems—or put another way, picking the easiest, most visible targets to blame for various woes either from an honest lack of complete understanding of the issues or just simple laziness—is that it encourages vain expectations. The DTI’s “7 percent decrease in food prices as a result of decongesting the port” is a good example. While port congestion does affect some food items, the vast bulk of those are intended for destinations in the NCR. In the July Summary Inflation Report, the Philippine Statistics Authority points out that the food and non-alcoholic beverage index inflated by 7.7 percent for the NCR, while for areas outside the NCR it grew at an 8.4 percent pace. As a component of the complete consumer price index (CPI), the food and non-alcoholic beverage category accounts for 38.98 percent, of which the NCR contributes 6.78 percent and areas outside the NCR contribute 32.2 percent.
The DTI estimate obviously assumes that prices of food affected by port congestion will drop when those shipments are able to move freely, but that amount comprises only a portion of all the food bought and sold in the NCR. And that amount in turn comprises only about one-fifth of all the food in the country that contributes to the CPI. While the DTI’s estimate may not be wrong, the conditions that would make it right are almost infinitesimally small, given the enormous decline a portion of the NCR component of the food and non-alcoholic beverage index would have to register in order to virtually reverse its inflation rate.
The DTI is an example here, but is not at all unique; the tendency to jump to a conclusion based on a misinterpretation of cause is almost a cultural trait in the Philippines. If, by the end of the month when inflation is calculated again, the DTI discovers prices have not declined by the anticipated amount, or worse, have stayed the same or possibly even increased, what then? Any policy that was implemented based on the erroneous assumption will be leading in the wrong direction. And if wrong assumptions are made again, problems in implementing effective policy will simply compound. Multiply that scenario by the number of government agencies, business planning and forecasting groups, and large corporations in the country and a sense of the scale of the flaws in root cause and risk analysis becomes apparent, and perhaps begins to offer an explanation for why, despite progress in some areas, critical aspects of Philippine economic health like unemployment, poverty, and wages appear perpetually stagnant.
Of course, offering that as an axiomatic observation risks making the same jumping-to-conclusion mistake—keeping it in mind while keeping an open mind that any “explanation” may simply be a “factor” should be the order of the day, whether for policymakers, or for those whose stock in trade is keeping an eye on them.