* This is my article in today's BusinessWorld 31st Anniversary special issue, "The Changing Game", S7 page 2.
“Money
cannot call forth goods, but goods can call forth money…”
-- David Ricardo, on the “mere
increase of money” (1809)
That statement from one of the world’s
famous classical liberals is the early seed of monetary explanation for
inflation. David Ricardo, known for his free trade theory of comparative
advantage and the labor theory of value, argued that greater output can only
come from greater savings and
investment, not from greater quantity of money being put into circulation by
governments.
Fast forward two centuries, monetary
policies by many governments to tweak their local interest rate, exchange rate
and inflation rate are done more often.
The Philippines experienced high
inflation in January 2018 (4.0%) vs December 2017 (3.3%). TRAIN bill became a
law in December 2017. And the inflation rate kept rising until May 2018 and
public dissatisfaction keeps rising too.
On June 7, 2018, the Department of
Finance (DOF) produced a chart and posted in its social media accounts with
this note:
“With
a running average of 2.8%, the Duterte Administration’s inflation rate is well
below the 6.3 % average of the past five administrations.
According
to the data released by the Philippine Statistics Authority (PSA), the average
inflation rates during the respective terms of the past five presidents are:
(1) Aquino, C. 10.2%; (2) Ramos - 7.8%;
(3) Estrada - 6.5%; (4) Arroyo - 5.2%; and (5) Aquino, B. - 2.8%.”
That is a deceptive campaign by the
DOF and give high credit to Dutertenomics. Asiawide or worldwide, inflation rates are
declining in many countries from the 70s and 80s. Interest rates too are
declining, GDP size of countries are rising.
So almost all recent administrations
in many countries can claim or grab credit for themselves what are actually
global phenomenon.
Canada’s Trudeau, USA’s Trump,
Australia’s Turnbull, UK’s May, Germany’s Merkel, Japan’s Abe, Taiwan’s Tsai,
South Korea’s Moon, China’s Xi and HK’s Lam can also brag that inflation in
their administration is lowest compared to many or all previous
administrations’ record over the past 30+ years.
Also Thailand’s Prayut, Singapore’s
Lee, Cambodia’s Hun Sen, Indonesia’s Widodo, and Vietnam’s Nguyen (see table).
Inflation
rate, average for period, in %
(Country groups are arranged based on
their numbers in 2010-2015 period)
Source: IMF, WEO April 2018 database
Country
(PH admin)
|
1980-85
FM
|
1986-91
CA
|
1992-97
FR
|
1998-00
JE
|
2001-09
GA
|
2010-15
BA
|
2016-17
RD
|
Germany
|
4.1
|
1.7
|
2.8
|
0.9
|
1.9
|
1.4
|
1.0
|
Canada
|
7.9
|
4.7
|
1.5
|
1.8
|
2.3
|
1.7
|
1.5
|
USA
|
6.8
|
4.0
|
2.8
|
2.4
|
2.8
|
1.7
|
1.7
|
Australia
|
8.6
|
7.2
|
2.0
|
2.2
|
3.2
|
2.4
|
1.6
|
UK
|
8.7
|
5.3
|
2.6
|
1.2
|
1.9
|
2.4
|
1.7
|
Japan
|
3.6
|
1.7
|
0.9
|
-0.1
|
-0.1
|
0.5
|
0.2
|
Taiwan
|
6.6
|
2.4
|
3.2
|
1.0
|
1.2
|
1.0
|
1.0
|
Korea
|
10.9
|
6.1
|
5.2
|
3.5
|
3.3
|
2.1
|
1.5
|
China
|
3.7
|
9.5
|
12.2
|
-0.6
|
2.4
|
2.9
|
1.8
|
Hong Kong
|
7.8
|
8.1
|
8.1
|
-1.6
|
0.2
|
3.9
|
1.9
|
Brunei
|
2.2
|
1.5
|
2.9
|
0.2
|
0.5
|
0.0
|
-0.4
|
Thailand
|
7.4
|
4.2
|
5.0
|
3.3
|
3.0
|
2.2
|
0.4
|
Malaysia
|
5.4
|
1.9
|
3.6
|
3.2
|
2.5
|
2.3
|
2.9
|
Singapore
|
4.1
|
1.6
|
2.1
|
0.4
|
1.6
|
2.6
|
0.0
|
Philippines
|
19.2
|
9.8
|
7.8
|
7.4
|
4.8
|
3.4
|
2.5
|
Cambodia
|
--
|
77.7
|
37.9
|
4.7
|
6.2
|
3.4
|
3.0
|
Laos
|
82.9
|
17.1
|
13.5
|
75.6
|
8.8
|
4.9
|
1.2
|
Indonesia
|
11.1
|
7.8
|
8.3
|
27.5
|
9.5
|
5.6
|
3.7
|
Myanmar
|
--
|
--
|
--
|
19.4
|
25.1
|
5.8
|
5.9
|
Vietnam
|
66.0
|
233.6
|
13.5
|
3.5
|
7.8
|
8.0
|
3.1
|
Source: IMF, WEO April 2018 database
The acronyms for Philippine administrations
are: Ferdinand Marcos (FM), Cory Aquino (CA), Fidel Ramos (FR), Joseph Estrada
(JE), Gloria Arroyo (GA), Benigno Aquino III (BA), Rodrigo Duterte (RD).
The proper comparison should be the inflation
rate of the Philippines vs other countries over the same period and years, say from
2016 to 2018. Many countries’ inflation rates declined in 2018 despite the rise
in world oil prices, except the Philippines and few other countries.
Aside from credit grabbing of
Dutertenomics, notice also its cherry picking of years. Why compare inflation
under Du30 vs past five administrations only, why not six? Why did they skip
the last six years of Marcos where inflation rate was nearly 20%? So that the
Duterte idol of Marcos family won’t be upset?
A few groups and former NEDA, DOF,
DBM, BSP officials are producing statements blaming many factors for the high
inflation rate – world oil prices, peso depreciation, “profiteering” by the
private sector, "our own worst enemies" self-infliction, etc – but
not TRAIN tax hikes.
So long as Dutertenomics will not have
the humility to admit that (1) series of tax hikes in TRAIN 1 has unleashed
high inflationary pressure, (2) fare hikes and limited wage hike adjustments
must be done before January 2019 or part 2 of oil/lpg/coal tax hikes will be
implemented, the ills of TRAIN 1 will only be replicated in TRAIN 2 bill that
will soon become a law.
---------------
See also:
BWorld 227, Inflation, taxation, and protectionism, July 14, 2018
BWorld 232, Effects of fare control, July 21, 2018
BWorld 233, Federalism, Cha-cha, and more government, July 23, 2018
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