Posts Tagged ‘John Maynard Keynes’

There seems to be a firewall between the Philippine economy and the political sphere such that the economy can still grow (GNP- and GDP-wise) even if the political situation is messy.

This may mean two things: there is a learning process in earnest and that previous key economic reforms have born fruit.

Despite the current non-achieving and blame-duck presidency, despite the thieving GMA and Erap administrations, our economy has grown nonetheless. Of course, OFW remittances played a great role in this spurt.

Nonetheless, pace Lord John Maynard Keynes, so-called ‘animal spirits’ also got into play.

Perceptions become material force. The impression that this non-achieving administration is seriously fighting corruption (Exhibits A–: SC Court Justice Renato Corona, hospital-arrested PGMA, Tanda, Sexy and Pogi) had induced vigorous bourse activity. After all, portfolio managers will not shun any profit possibility.

Note too that this TUWID administration is trigger-happy to clear its own ilk starting with DILG USec R Puno to ExecSec Ochoa to SecDILG and Liberal Party SecGen Joseph Abaya, SecDA Alcala, SecDoE Petilla, and last but not least, SecDBM Butch Abad) of all hints of corruption.

Perhaps this President and his rah-rah boys (Coloma, Lacierda, and Valte) must be reminded of the separation of powers; that the executive is not the judiciary.

Credit must be given to where credit is due. The Ramos-Almonte duo locked the country into difficult and relatively-unpopular economic reforms (at a conjunctural moment) in the 1992-1998 span. Key reforms were the WTO treaty accession and related trade reforms. Another is the decontamination of the new Bangko Sentral from the toxic Central Bank of the Philippines.

The GMA and Pnoy administrations should acknowledge their debts to the Ramos reforms.

Of course, no presidential administration is not without its own achievements, weakness, shortcomings, lapses, etc. Every administration after Ferdinand Marcos is hobbled not only with human weakness, foibles, and imperfections but also by the constitutionally-mandated single term.

For this reason, almost all post-Marcos administrations, save for the Ramos presidency, simply had short-term, rather than strategic, planning horizons.

Legitimacy problems prevented PGMA from making full use of an unprecedented extended term (2001-2010).

I will not say much about the short-lived Erap presidency except to assert that Erap is obviously in his element as LGU chief executive.

The current presidency has yet to step down on June 30, 2016 and it’s too early to come up with a definitive judgment of its true worth. My own words about it now and in the past are at best mere impressions, or, simply my educated personal opinion.

I promise to continue studying this administration in a comparative perspective not only with previous Philippine presidencies (Ferdinand Marcos’ included) but with those of our neighbors in Southeast Asia and East Asia (China specially).

Beyond analysis, I will also essay or propose reforms for our political economy. In this regard, the interests of our people and nation will be held paramount, superior to any political administration, party, group, personality, and vested interest.

These praxiological pieces will find their way into my several outlets (FB, Tweeter, Tumblr, LinkedIn, Pinterest, Instagram, Skype, Mixx, StumbleUpon, my WordPress blogs, speaking engagements and academic interventions, among others).

I will want to hear from you in every which way and you can reach me through


Mitt Romney introduces Paul Ryan to Republican Party faithfuls

Mitt Romney recently announced in Norfolk, Virginia that his vice presidential running mate is Rep. Paul Ryan of Wisconsin.

ABC News reported on the elaborate measures taken by the Romney campaign to keep the decision under wraps until the right moment. The report ( read: “Mitt Romney decided on Paul Ryan on Aug. 1, the day after returning from his trip overseas to the Olympics in London and to Israel and Poland. The candidate and his campaign kept the secret for nine days, according to campaign sources. Romney and Ryan met secretly on August 5th, after the decision had been made and just before Romney submitted to round-the-clock coverage by reporters who had been traveling with him.”

Ryan is known as a fiscal ideologue who is in favor of spending cuts to reduce the government budget deficit.  He is respected within the Republican Party for his economic acumen and is considered by many as a key party leader.  Romney’s choice of Ryan as running mate reportedly energized party activists.

The choice of Ryan is considered by many to reflect the fundamental truth underlying the 2012 US elections: “It’s the economy, stupid!”  Both the Republican and Democratic parties must answer voters’ queries on immediate prospects of the sluggish  US economy beset with unemployment since the start of President Obama’s term.  

Ryan tangled with President Obama repeatedly in the past over proposed budgetary allocations for the Medicare program (the so-called ObamaCare).  The Wisconsin representative believed that Obama’s allocations were not sustainable given substantial US budget deficits.  

Notwithstanding these public deficits, Ryan follows the lead of several Republicans since the late 1970s to propose cuts in tax rates, especially for upper income individuals and corporations.  This suggestion is counter-intuitive and must have some solid theoretical backing.

During the late 1970s, the Western countries dealt with a new phenomenon–‘stagflation’–the coexistence of high prices and stagnant economic growth.   It was theorized previously that these cannot happen simultaneously–that inflation sets in only during full employment and that recession dampens prices.  This was the Keynesian consensus at the time.  

John Maynard Keynes

Keynesians ordinarily prescribed increased government spending (and sometimes tax cuts for ordinary consumers) to get out of economic slowdowns.  For this reason, Keynesians are called demand-side economists.  On the other hand, monetarists or so-called supply-side economists, led by Nobel Prize-winning economist Milton Friedman of the University of Chicago, believed the key policy tool is the control of money supply to control inflation, that is, tighter money leads to lower prices.  They also believed that artificial market imperfections such monopolization by trade unions  of labor markets, capital controls, and excessive government regulations should be dealt with since they raise wages, interest rates and overall prices.

Nobel Prize-winning economist Milton Friedman

Supply-side economic policies were adopted by President Ronald Reagan during his first term in the early 1980s.  The situation then was similar to current conditions: tax cuts were proposed for corporations and upper income individuals  amid US deficits.  The reasoning: corporations did not invest as much so the economy could grow because of excessive tax rates and regulations.  The tax cuts were adopted but the deficits did not decrease; in fact, they increased.  

President Ronald Reagan

The clarion call then was deregulation.  Government should stop regulating and interfering in the economy and allow market forces to work freely.  

President George Bush Jr.

However, it was not to be a simple binary choice.  One policy program does not exclude the other.  When the big US financial institutions started to go under in the aftermath of the 2007-2008 housing crisis, the US Congress at the urgent request of President George Bush Jr. approved a $700 billion bail-out program for the Wall Street banks as well as General Motors and Chrysler.  Alienating many within his ‘Main Street’ constituency, President Barack Obama had to maintain the program.  In many instances, Obama was accused of being soft on the banks, considered by many to be responsible for the financial crisis.  The five biggest banks were recently allowed to settle lawsuits over practices that forced millions of American families from their homes(see

Obama weighing alternatives?

Our historical discussion shows that political leaders cannot be held captive by their ideologies.  They may be forced to adopt policies that work, pragmatic policies that is.  Should Romney and Ryan get elected in November 2012, I will be very interested to see if their ideology survives its first brush with reality.

Paul Ryan with his latest budget proposal