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Under President Gloria Macapagal-Arroyo, the rich became richer, the
poor became poorer. Not only that, those who were marginally rich
crossed the line toward poverty.
All these happened under seven
years or 29 quarters of robust, consecutive and sustained economic
growth, averaging more than 5 percent per quarter and 5 percent per
year. This is the longest economic expansion in the country’s
history. This makes Arroyo our best president.
How and why did this paradox
happen? The answer lies in government’s capacity for dictating the
growth and direction of the economy with its policies and
pump-priming efforts.
GMA’s economic policies
benefited mostly the rich. In 2007, the market capitalization of
companies listed in the Philippine Stock Exchange reached a record
P7.96 trillion, almost four times the P2 trillion market cap in
2002—the second year of the Arroyo presidency. That’s a gain of
a whopping P5.87 trillion in five years or P1.17 trillion per year.
This is the largest wealth creation in any five-year period in the
history of the bourse. There are only 430,681 investors in the stock
market. Each of them had P4.83 million worth of stocks in 2002. By
end-2007, the value of their stocks had increased to P18.48 million,
with them doing nothing more strenuous than sit on their asses.
What does President Arroyo get in
return for making the rich richer? They are mad with the President.
In the Pulse Asia survey of July 2008, 49 percent of the ABC Class
had no trust in her; only 24 percent had a big trust; 45 percent
disapprove of her performance (down from 30 a year ago); only 23
percent approve (down from 33 a year ago). In the Social Weather
Stations survey July 2008, 59 percent of ABC income classes were
dissatisfied with her performance in June up from 48 percent
dissatisfied in March this year.
Talk about gratitude.
Unemployment surge
In the meantime, more people
became poor and jobless. Between 2003 and 2006, poverty increased
from 30 percent of total households to 32.9 percent. That’s the
equivalent of 800,000 families or 4.4 million people joining the
ranks of the poor in just three years at a time when average
economic growth was a robust 5.6 percent.
Meanwhile, 240,000 people lost
their jobs in the 12 months to April 2008. The number of employed
went down to 33.53 million from 33.77 million in April 2007.
Unemployment surged to 8 percent in April 2008 from 7.4 percent last
year. This happened despite the economy growing at its best in 31
years at 7.3 percent in 2007 and by 5.2 percent in the first quarter
2008.
In fairness, the government
claims Arroyo created 9.78 million jobs (163 percent of the six
million jobs she promised to create) between 2004 and June 2008,
through government intervention in different programs like
micro-lending where the middle income borrowed P102.2 billion, 37
times more than the P2.8 billion in 2001.
President Arroyo blames a slack
in government spending for the worsening incidence of poverty from
2003 to 2006.
The government didn’t spend
enough because it wanted to balance the budget, if not produce a
surplus. This was to satisfy the foreign credit rating agencies.
They were, and hence, improved the country’s credit standing which
meant lower cost of borrowing. But cheaper capital didn’t benefit
the poor simply because they couldn’t afford to borrow, while the
rich who could borrow money didn’t borrow much because as a I
said, they were already raking in gains at the stock market where
one can raise money cost-free.
The rich did not invest
And even if cost of money became
cheaper, the rich didn’t put up factories to employ people. This
explains the job losses. The rich were investing instead in cellular
phone networks and in power plants whose profits were guaranteed by
the government and whose any increases in costs—interest rate,
peso devaluation, higher price of raw materials—were paid for by
the government. As for the wireless phone providers, the government
gave them a fancy tax incentive called net operating loss carryover
or Nolco. Whatever their losses, they can be deducted from future
profits. Despite raking in record annual profits, the phone
companies ended up paying very little tax to the government.
The pump-priming efforts were not
enough or done early enough to benefit the poor, so that when the
twin evils of high food prices and high fuel prices came, they
devastated the poor.
The rich, meanwhile, had built up
enough wealth buffer to cushion themselves from the perfect storm of
record-high food prices and high oil prices made worse by the
slow-motion decay in the United States economy, the world’s
largest in terms of size and in terms of consumption, as
demonstrated by the subprime mortgage crisis.
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