Part III
When interest rate was deregulated, or should we say, usury was made legal, the monetarists had to put more money in circulation to stave off the shock caused by the system of unregulated profit. The monetarists failed to anticipate that business would rely more on lending because the risk is much lower than production, and is not affected by labor unrest.
The money that the monetarists anticipated to bring about the revival of industries did not come. Instead, the excess money resulted in uncontrollable inflation that even reserve bank capital had to be invested for fear it could well be dissipated. As former first lady Imelda Marcos would succinctly put it, “money placed in a vault is like ice that it could melt.”
Manufacturers had to fight for its survival due to increasing production cost. This explains why multinational companies had to relocate their production plants to China because of lower cost of labor and raw materials. They felt betrayed by their own government for focusing on lending than on creating wealth through the conventional process of manufacturing and production.
It was the height in what Marx predicted as capital’s own contradiction, for while production began with the use of capital, and brought about the industrial revolution, the monetarists transformed capital into a cannibalistic mutant devouring its own specie without producing anything of value except that theoretically, money increased by its figure but not in value. Effectively, the deregulation of interest rate erased from the public mind the idea of public service, a concept that justified the payment of tax.
The monetarists soon discovered that their decision created a big hole in the national budget. Revenues from taxes were no longer sufficient to provide salaries for government personnel. It could no longer sustain public services. That means all the basic duties of the state must be charged.
They then enacted the value-added tax to ensure that all goods purchased are taxed. The public must now pay toll fees for the use of roads and bridges to pass through these privately constructed highways. From Balintawak to Binalonan, motorists will pay an average toll amounting to almost P1,000; plane passengers must pay an average of P600 terminal fees, pay road user’s tax and car registration when supposedly tax is already imposed in the sale of vehicles; government collects garbage fees, irrigation fee, etc.
Certification and authentication of public documents like land title, clearance from the police, NBI and barangay for pre-employment and certification of residence must all be paid. In other words, a requesting citizen must pay, otherwise he can be denied of his right to exercise his profession, engage in legitimate business or even sue in court if he does not pay the docket fee.
China’s refusal to revalue its currency has been subjected to criticism, for allegedly undervaluing the value of their exports. The US now accuses China of currency manipulation, that it is engaged in unfair trade or worse, for dumping of goods. But a second thought of that policy has greatly favored US manufacturing companies were able to export their products to the world market at competitive prices.
Rather, it is not the aggregate value of China’s exports that the US is seeking to demolish but its comparative advantage. A revaluation of the currency would result in the increase in the value of its exports. Invariably, that could increase domestic wage and diminish the purchasing power of its consumers.
Today, the US is the only country that refuses to acknowledge that the regulation of the renminbi has benefited many countries mostly suffering from huge trade deficit or worst, experiencing acute foreign exchange earnings. The low value of Chinese export products facilitated the rapid increase in trade, revived manufacturing, and allowed the transfer of technology.
For its failure to pressure China to revalue the renminbi, it now resorts to the most debasing form of currency manipulation called “quantitative easing.” That has allowed the US Federal Reserve to purchase more government securities from the market at lower interest rate and increase money supply.
Admittedly, the prices were kept low because of increased money supply. But this has only encouraged stock speculation, borrowing from collateralized debt obligation, and made the business of hedge funds lucrative. Ironically, the US seems happy every time the value of the peso plunges against the dollar.
In fact, the US need not tell us to devalue our peso because they imposed an automatic mechanism called “floating rate.” Revaluing our currency has never happened since former President Macapagal implanted that into our monetary system calling it “decontrol.” From an original value of 2:1, the peso then began to decay; such the value of the dollar today is 50:1.
Nationalists insist that if President Duterte truly wants to adopt an independent foreign policy, he should begin by formulating an economic policy that would detach the peso from the dollar. The country should align the valuation of our currency to one reflecting more of its true value. If that currency is slightly undervalued, as the US would say, that would be favorable to us. Philippine imports would increase due to the higher valuation of our currency against the renminbi. Invariably, we will be importing more machinery to boost our manufacturing industries, raw materials for our local industries and semi manufactured goods to accelerate employment.
There is no more impediment to this, much that the renminbi is now recognized and accepted as part of the international currency basket. However, the present valuation of the peso to the dollar, aside from being overvalued, has already reached a disproportionate level, and this explains why the country has perennially suffered trade imbalance.
One must take note that weak currencies create frenzy for our domestic exporters. They failed to realize that the increase export is not an increase in demand, but due to the devaluation of the currency resulting in reduced export prices. Many of us could not even feel that it equally lessens our capacity to match our neighbors in the race to industrialize. Devaluation of the currency and increase in the price of oil are two factors that compel the government to increase the minimum wage resulting in inflation, and bury us deeper in debt.