14 Charts: What the Government Has Done to Our Pandemic Economy

by IBON Communication

If you bothered to start to read this then you probably know by now that the 9.5% contraction of the Philippine economy last year was the worst on record – which is to say since the end of World War II which is only when gross domestic product (GDP) started to be estimated for the country.

he government blames the bad economic performance on the pandemic. Well, COVID-19 certainly was a problem for the country.

In September last year, the well-respected Lancet medical journal reported to the United Nations 75th General Assembly that the Philippines ranked 65th out of 91 countries worldwide in terms of COVID-19 response. We were already the worst performer in Southeast Asia then.

The Lowy Institute came out with a similar study last month. In the chart showing the Philippines and a few of our Southeast Asian neighbors, a higher line means better performance in dealing with COVID-19 as the weeks go by. The Communist Party-led Socialist Republic of Vietnam was a star performer from the very beginning.

The Philippines fared even worse in the Lowy Institute study and placed 79th out of 98 countries worldwide. The only countries that ranked lower in Asia were Bangladesh (84th), Indonesia (85th), and India (86th). Perhaps not coincidentally, what the four worst performing countries in Asia have in common is that the pandemic hit as they all struggled with authoritarian leaders and democratic decline.

Effective public health response is the most important starting point of good COVID-19 response without which other measures wouldn’t get much traction. But the economic response is also very important.

Unfortunately the Philippines lagged badly even here and, measured as share of gross domestic product (GDP), had among the smallest fiscal response in the region. The poor public health response combined with the trifling fiscal response to result in the Philippines having the worst economic performance in the region.

And is actually set to have the worst performance not just in the region but to as far away as South Asia and across East Asia.

The Duterte administration insists that it was a choice between health and the economy, kalusugan or kabuhayan, and portrayed itself as having agonized but made the difficult choice to prioritize health. The economic collapse was the price to pay, it said.

But that is a false choice – both could have been attended to well as the experience of the likes of Vietnam and Thailand have shown.

And it’s also not really the choice the administration made. In terms of COVID -19 response, the choice they made was the militarist one to treat the people as the enemy and rely on harsh lockdowns and long community quarantines. And also the choice to prioritize creditworthiness over spending to contain the pandemic and to ease the suffering of tens of millions of Filipinos.

The Duterte government chose not to spend. In the first 11 months of 2020, it only spent Php3.69 trillion which is just an 11.6% increase from the same period in 2020. Unless government spending picks up substantially in December, the last month of the year, this means that it even underspent its 2020 budget which is supposed to be as much as 13.6% more than the 2019 budget.

The historical annual average increase of budgets for the last four decades is 11.1% so the government can’t claim that there’s any stimulus happening.

And so the economy’s unprecedented collapse – because the pandemic was not contained and then because the government did not spend to stimulate it.

Hotels and restaurants, transport and storage, and construction were hit especially bad. Investments and foreign trade as well.

The biggest job losses were in hotels and restaurants, transport and storage, and manufacturing.

Agricultural employment increased – maybe partly because so much of farming and fishing is physically-distanced already, and maybe partly because retrenched and laid-off workers thought to find work there instead. Somewhat surprisingly, employment in education rose.

The biggest job losses were in hotels and restaurants, transport and storage, and manufacturing.

Agricultural employment increased – maybe partly because so much of farming and fishing is physically-distanced already, and maybe partly because retrenched and laid-off workers thought to find work there instead. Somewhat surprisingly, employment in education rose.

The drop in employment was unparalleled. In April 2020, at the height of the government’s lockdown, the number of employed suddenly fell to 33.8 million which was as low as a dozen years before in 2008.

In short, there’s a huge social crisis with millions of unemployed, poverty increasing, and hunger worsening.

Yet the Duterte administration seems oblivious and COVID-19-related emergency cash assistance, or ayuda, has dwindled to almost nothing this year – while corporations (especially large and foreign firms) are being given Php133 billion in corporate income tax cuts.

Meanwhile, hundreds of thousands of distressed micro, small and medium enterprises (MSMEs) are getting scant support. Various surveys by the International Trade Center (ITC), Department of Labor and Employment (DOLE), United Nations Development Program (UNDP) and World Bank reported as much as 10-15% of businesses expecting to close permanently.

Yet, according to the president’s reports to Congress, Bayanihan 1 and Bayanihan 2 have extended financing support to less than 28,000 by the end of last year.

The government’s preferred approach of using monetary and financial policy to stimulate the economy simply isn’t working. Despite hundreds of billions of pesos in liquidity poured into the economy and interest rates down to record lows, businesses aren’t borrowing – with loan growth even contracting for the first time in 14 years.

This is most of all because so many ordinary Filipinos with no work and no incomes just don’t have enough money to spend so businesses have no reason to stay in or expand their businesses.

Now it’s true that the government is grappling with record budget deficits…

… and with record debt.

The problems are huge but the equally huge solutions are well within the capacity of the government to implement if it so wanted. The Philippines needs a much more ambitious COVID-19 economic response than the Duterte administration’s current business-as-usual approach.

In broad strokes, the Duterte administration has to take much more decisive measures to contain the pandemic such as by: tracing better, more judicious quarantines, and more rapid isolation; giving more emergency cash subsidies and support to MSMEs; and actually starting on long-term reforms to strengthen domestic agriculture and build national industry.

Most of all, it has to respond in a much more rational and humane manner. Too many Filipinos and their families are suffering from the government’s inaction, and too many small businesses are distressed from being left behind.

IBON takes up the economy’s problems in more detail and outlines possible solutions more concretely in our forthcoming Birdtalk paper. Please have a look at it! #

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Kodao publishes IBON articles as part of a content-sharing agreement.

Shifting to MGCQ a short-sighted and desperate move without containing pandemic

By IBON Communications

Research group IBON said that lifting COVID-related restrictions to boost the economy is a short-sighted and desperate move amid continuing failure to contain the pandemic. The group agreed that the government’s excessive quarantine restrictions since last year are behind the economy’s unprecedented and continuing collapse. IBON however said that easing restrictions will not spur recovery without a real fiscal stimulus while risking the more rapid spread of COVID-19.

Economic planning secretary Karl Kendrick Chua recently advised Malacañang to put the entire country under modified general community quarantine (MGCQ). The ‘less restrictive’ MGCQ will supposedly allow the resumption of business activities previously limited under the pandemic lockdown.

IBON pointed out that the proposal to ease restrictions comes while the number of COVID-19 cases has been increasing since the start of the year. The 9,161 cases in the first week of the year increased to 10,741 so far in the week February 4-10. Data for this most recent week may even still be incomplete because of delays in reporting. The group asked where the optimism that the coronavirus is contained is coming from.

IBON stressed that the administration needs to greatly improve its measures to contain COVID-19 instead of relying on its favored blunt instrument of protracted community quarantines. The group enumerated the measures needed as better testing, more aggressive contact tracing, selective quarantines of possible cases, and speedy isolation of confirmed cases. With the number of cases still increasing, easing restrictions without these measures in place risks COVID-19 spreading even faster.

At the same time, IBON added, shifting to MGCQ may not even spur the economy all that much because the government still refuses to spend on any real fiscal stimulus. The group stressed that significantly higher levels of government spending are needed to make up for the lockdown-driven collapse in consumption and investment. This is more so given the now record joblessness and widespread loss of incomes and savings.

Government first of all needs to contain the pandemic better, IBON said. On top of this, it simply has to spend more to help households and small businesses cope with record jobs and income losses and to recover from the economic shock, stressed the group.

The group pointed out how the record 9.5% contraction of the economy in 2020 was substantially due to how the Philippine government refused additional spending last year. In the first 11 months of 2020, its disbursements only increased by 11.6% which is not just below the originally programmed 13.6% increase for the year but even lower than the average 12.9% increase in spending over the period 2017-2019. 

IBON also highlighted how spending even slows this year with the Php4.5 trillion 2021 national budget just a 9.9% increase from the 2020 budget. As it is, the Philippine COVID-19 response is the smallest of the major countries of Southeast Asia at just 6.3% of GDP according to the Asian Development Bank (ADB).

IBON proposes the following to address people’s urgent needs and stimulate the economy:

  1. Php10,000 monthly emergency cash subsidies to 18 million poor and low-income families (poorest 75% of families) or Php10,000/month for up to three months or Php5,000 for six months. This amount comes to Php540 billion.
  2. Php100 emergency wage relief for workers (towards eventual implementation of a Php750 national minimum wage). Micro, small and medium enterprises (MSMEs) can be supported to give this for three months with a Php101 billion fund.
  3. Php40.5 billion cash-for-work programs for the unemployed.
  4. Php78 billion financial assistance (zero/low interest rate and collateral-free loans) for informal earners.
  5. Php200 billion in financial assistance (zero/low interest rate and collateral-free loans) prioritizing Filipino-owned and domestically-oriented MSMEs.
  6. Php220 billion in agricultural support to increase the productivity of farmers and fisherfolk.
  7. Php200-billion COVID-19 health response and Php113-billion distance education to ensure quality education.

The group also stressed that the government can finance these if it really wanted to. IBON identified a universe of at least Php3.9 trillion in funds from which realignments can be made, Php1 trillion in emergency bonds and other government securities, Php391.9 billion in immediate revenues from progressive taxes especially a wealth tax, and at least Php333 billion more from a land value tax. #

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Kodao publishes IBON articles as part of a content-sharing agreement.

Wage hike necessary, overdue amid pandemic and high prices

The Duterte administration gave least number of wage hikes and lowest wage increases of any administration in past 35 years.

by IBON Media & Communications

Research group IBON said that, amid rising prices of basic commodities, minimum wage earners are suffering from how the Duterte administration has been giving the least number of wage hikes and lowest wage increases of the past six administrations in the post-Marcos era. This only made working class families even more vulnerable to the economic shocks triggered by the pandemic. Multiple strategies are needed to arrest the economic distress of poor and low-income households especially since the onset of the pandemic.

IBON noted how the real minimum wage, or the value of wages after adjusting for inflation, is worth 7.2% less today than at the start of the Duterte administration. (See Table) This does not even yet fully include the recent surge in prices of pork, fish, chicken and vegetables. IBON estimates that the real value of the National Capital Region (NCR) minimum wage has fallen to Php434.47 from Php468.06 in June 2016. This is the lowest real wage in over eight-in-a-half years or 103 months.

The Duterte administration was sparing with its wage hikes even before the pandemic. The NCR minimum wage was only increased twice, in September 2017 and November 2018, and by such small amounts that they did not even make up for inflation. When the lockdowns started in March 2020 the real value of the minimum wage was already 3.6% less than in June 2016 – this only deteriorated further to being 7.2% less today.

IBON pointed out that other administrations hiked wages six or seven times and that even the Estrada administration hiked wages twice in its short 2 ½ years in power. These resulted in the real minimum wage increasing by 2.7% (Arroyo) to as much as 54% (Cory Aquino) compared to the more or less continuous decline under the Duterte administration.

It has been more than two years or 27 months since the Duterte administration’s last wage hike to Php537 in November 2018, said IBON. This is the longest period without an increase since July 2004 under the Arroyo administration when the wage increase came after a dry spell of 29 months.

IBON noted that the current minimum wage is even further away from meeting the basic needs of workers’ families. The Php537 minimum wage in NCR is Php520 or 49% short of the Php1,057 family living wage or the amount a family of five needs for a decent living as of December 2020.

As it is, the December 2020 inflation rate of 3.5% is the highest in 21 months, mainly due to higher inflation in food and non-alcoholic beverages, health and transport. The prices of pork, ampalaya, sitao, cabbage, carrots, habitchuelas, tomato, potato and eggplant significantly went up from anywhere between Php40 to Php120 per kilo since December last year. Price increases were even worse for the poorest 30% of households nationwide with a 4.3% inflation rate.

IBON said that the Duterte administration needs to give much greater attention to alleviating widespread economic distress among poor and low-income families. The most urgent measure are new cash subsidies of Php10,000 monthly for at least 2-3 months especially while record unemployment and falling household incomes are not resolved. Price controls are also needed on the food items whose prices are soaring especially amid reports of alleged exploitative pricing by wholesale and retail traders.

The Duterte administration however also needs to go beyond short-term damage control, stressed IBON. The long-term solution to rising food prices is for meaningful government support for farmers and fisherfolk to increase agricultural productivity and output. Yet, IBON pointed out, the share of the national government budget for agriculture has been falling from 3.6% in 2019 to just some 3.2% in 2021.

IBON moreover stressed that a substantial wage hike remains just and necessary even amid the pandemic economic shock. The group said that it is incumbent on the government to come up with schemes to enable a wage hike that increases incomes of low-income households and which will also stimulate aggregate demand in the economy. Among others, this can include mandating higher wages while giving wage subsidies to micro, small and medium enterprises (MSMEs). Wage hikes are long overdue and it is unfair for the working classes to always be made to bear the burden of adjustment to economic crises. #

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Kodao publishes IBON articles as part of a content-sharing agreement.

IBON debunks economic Cha-cha movers’ claims on FDI

Claims that changing the supposedly restrictive economic provisions of the 1987 Constitution and liberalizing foreign direct investment (FDI) into the country will help economic recovery and lead to development are unfounded. On the contrary, said research group IBON, further FDI liberalization will have long-term adverse impacts on national economic development.

In its Birdtalk semi-annual discussion of economic and political trends, IBON debunked three major myths about FDI and development.

First, increasing FDI is not in and of itself necessary for development. South Korea and Taiwan are the last newly-industrialized countries (NICs) to graduate to developed country status. They did this in the 1970s and 1980s with less FDI than the Philippines is getting today, according to data from the United Nations Conference on Trade and Development database (UNCTADStat).

The two NICs had growth rates averaging some 7-10% in the fifteen years between 1970-1984, especially on the back of rapid industrial development. (See Table) They did this with FDI inflows over that period averaging just 0.5% of gross domestic product (GDP) in the case of South Korea and just 0.4% in the case of Taiwan.

In stark contrast, FDI inflows to the Philippines are over three-fold these and averaged 1.6% of GDP in 2005-2019 but with growth at an annual average of only 5.8 percent. In 1984, FDI inward stock was equivalent to just 1.7% of GDP in South Korea and 5% in Taiwan. In contrast, FDI inward stock in the Philippines was already as much as fourteen-fold that and equivalent to 23.1% of GDP in 2019.

These indicate that the two East Asian NICs rapidly developed during their break-out period in the 1970s and 1980s while having much less FDI than the Philippines today. South Korea and Taiwan are today still less reliant than the Philippines on FDI, in relative terms. Measured as share of GDP, FDI inward flows and stock to them are smaller than FDI to the Philippines over the period 2015-2019.

Second, FDI is not in and of itself sufficient for development. Despite hysterical claims that the Philippines is being left behind in the FDI race, FDI to the country has soared. FDI inward flows have increased over thirty-fold from an annual average of US$187 million (equivalent to 0.5% of GDP) in 1980-1984 to US$6.3 billion (2% GDP) in 2015-2019.

This includes manufacturing FDI tripling from an annual average of US$286 million in 2000-2004 to US$728 million in 2015-2019, according to data from the Bangko Sentral ng Pilipinas (BSP). Yet manufacturing’s share in GDP has actually fallen from 22.5% in 2000 to 18.6% in 2019, with the share of manufacturing to total employment also falling from 10% to 8.5% over the same period.

This includes US$8.3 in foreign investments by Intel, Hanjin and in the Malampaya project. Yet despite headline-grabbing billions of dollars in investments and exports and as much as around 35,000 in jobs created over decades in the country, the Philippines has still not developed any Filipino electronics, shipbuilding or natural gas industries.

Third, increased FDI may not even be immediately forthcoming while the constriction of the policy space for economic development is going to be foreclosed. Economic cha-cha proponents decry the Philippines supposedly having among the most restrictive FDI policy regimes in the world. Yet there does not in general appear to be any strong correlation between FDI restrictiveness and FDI inward flows.

Plotting FDI inward flows as a share of GDP against the FDI Restrictiveness Index of the Organization for Economic Cooperation and Development (OECD), both for 2019, does not even support the idea that less restrictive economies will receive more FDI. (See Chart) The uncertain effect on FDI flows is made more uncertain by how UNCTAD also reports FDI inflows generally falling even before the pandemic hit from US$2 trillion in 2015 (2.7% of GDP) to US$1.5 trillion in 2019 (1.8%).

On the other hand, removing the last remaining protections against FDI through economic Cha-cha will make the nationalist and pro-Filipino economic policies needed even more difficult to put in place. Potentially powerful Constitutional provisions to regulate foreign investment for development – as the currently developed countries have all done in their respective periods of break-out progress – will be lost.

IBON stressed that the economic arguments for lifting restrictions on foreign ownership in crucial areas of the economy – natural resources, land, public utilities, education, mass media and advertising, and any identified strategic enterprises – need to take much greater consideration of historical facts and the current global context.

The research group said that the economy’s development lies in using the protections in the Constitution to gain from foreign investment, not in taking away the protections and giving self-interested foreign investment free rein over the domestic economy. Foreign capital can contribute to development but IBON stressed that responsible government intervention and regulation is needed to create meaningful linkages and long-term benefits for the economy. #

2020 Yearender: Economic lessons from Jose Rizal

by Sonny Africa

Wrapping up a cataclysmic year, Jose Rizal’s legendary quote is something for the Duterte administration and its economic managers to reflect on: “Ang hindi marunong lumingon sa pinanggalingan ay hindi makakarating sa paroroonan.

The worst economic collapse in Philippine history and in Southeast Asia is mainly due to the government’s stumbling pandemic response and lackluster economic measures in 2020. If, again, there is more bluster than action in 2021 then real recovery will be much farther away than it should be.

Big promises

The economic managers announced a grandiose “4-Pillar Socioeconomic Strategy Against COVID-19” in April. The “Grand Total” of Php1.17 trillion was equivalent to 6.3% of gross domestic product (GDP) and sought to give the impression of grand action. This number was extremely misleading though.

There was significant double-counting. Supposedly Php338.9 billion in government spending on emergency support and health measures was counted alongside Php615 billion in borrowing – almost half of which debt was not even really going to be spent on COVID response. Another Php220.5 billion in additional liquidity and tax relief was also added.

The latest package released in October corrects some of these deceits while introducing new ones. The “Grand Total” is now an imposing Php2.57 trillion equivalent to 13.8% of GDP. The borrowing was removed while emergency support and health measures increase to Php558.8 billion. Emergency support now includes supposedly Php132 billion in credit guarantee and loan programs for small business.

The value of the package is particularly inflated by Php1.31 trillion in additional liquidity from Bangko Sentral ng Pilipinas (BSP) measures, Php459 billion in estimated incremental loans to MSMEs, and Php61.3 billion in foregone tax revenues especially because of corporate income tax cuts under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill.

These are still misleading. The additional liquidity and incremental loans cited do not mean actual investments or economic activity. Smaller businesses are not borrowing because of collapsed aggregate demand and uncertain market conditions – the “incremental loans to MSMEs” are just an illustrative extrapolation from a Php45 billion capital infusion to government financial institutions. Banks meanwhile are becoming more risk averse with non-performing loans already nearly doubling to 3.2% of total loans in October from 1.7% in the same period last year.

The big numbers seem to be designed for press releases and media briefings to convince the public that the Duterte administration is undertaking herculean efforts to boost the economy. The reality is very different.

Tiny action

Measured against the economic devastation from poor pandemic containment – including over-reliance on long and harsh lockdowns and under-investment in effective testing, tracing, quarantines and isolation – government efforts border on the trivial. The most recent official estimate of -9% real GDP growth in 2020 means that the economy will be Php1.74 trillion smaller than in 2019.

There has not really been any stimulus which, to mean anything, has to involve significant additional spending beyond pre-pandemic levels. The government originally projected Php4.21 trillion in disbursements in 2020. Upon the pandemic, planned disbursements increased only slightly by Php121.4 billion to Php4.34 trillion or just a 2.9% increase.

Measured in current prices, GDP in 2019 was Php19.52 trillion which means that additional government spending in 2020 will be equivalent to just 0.6% of GDP in 2019. The economic managers refuse to spend more because of their fixation on being creditworthy to foreign debtors. The stingy non-stimulus is due to their narrow-minded fiscal conservatism.

How to reconcile this with the Php500.7 billion figure allotted for COVID-19 response as of mid-December – consisting of Php386.1 billion under Bayanihan 1, Php6.6 billion under Post-Bayanihan 1, and Php108 billion under Bayanihan 2? Most of this spending comes from existing budget items – either discontinued programs/projects (Php306.7 billion), existing special purpose funds (Php109.3 billion), regular agency budgets (Php21.2 billion), and unutilized automatic appropriations/excess revenue collections (Php63.5 billion).

The Bayanihan 2 funds released also do not even seem to have been spent yet including for vital cash assistance. The social welfare department supposedly has Php6 billion budget for around 1.2 million beneficiaries. As of mid-December, only Php931 million has actually been disbursed to just 142,058 beneficiaries.

It is likewise with labor department emergency assistance of Php16.4 billion for around 800,000-1.4 million formal workers under CAMP, 500,000 informal workers under TUPAD, and 200,000 OFWs under AKAP. Only 350,000 workers have been reported to get assistance as of the first week of December.

The rigidity and obsession with creditworthiness unfortunately carries over into the New Year. The recently approved Php4.5 trillion national government budget for 2021 is 9.9% larger than the 2020 General Appropriations Act (GAA). This increase is smaller than the historical annual average increase of 11.1% since 1987. It is actually even smaller than previous budget increases of the Duterte administration in 2017 (23.6% increase) and 2020 (13.6%). So, again, there’s no stimulus there.

Devastating consequences

The Duterte government’s inadequate efforts are behind the extreme economic collapse and excessive suffering of tens of millions of Filipino families. The biggest blunder is the failure to contain COVID-19 – economic activity will remain repressed as long as the pandemic is raging. The administration diverts from this original sin whenever it invokes the false dichotomy between health and the economy.

The stingy fiscal response and inappropriate monetary measures come on top of that. The lockdowns and continued physical distancing have most of all caused household incomes, business investments and aggregate demand to collapse. These warrant a much larger fiscal response especially in terms of emergency assistance to households to improve their welfare and boost consumption spending in the economy.

Yet the economic managers were stingy in providing cash assistance under Bayanihan 1 – at the height of the draconian lockdowns – and only deign to give token amounts under Bayanihan 2 and in the 2021 national government budget. The trillion peso liquidity infusions gave the illusion of meaningful intervention but, with domestic and even global demand so weak, were really just pushing on a string with little or no results.

Measured as a share of GDP, the Philippines has the smallest fiscal response in Southeast Asia – which, along with the poor health response, goes far in explaining its experiencing the biggest economic contraction in the region. The economy is smaller today than it was in 2018, and will likely only return to its size last year at the earliest by 2022.

The insistence of the economic managers that the economy was going strong coming into the pandemic harkens to glory days that never were. Economic growth has been slowing in every year of the Duterte administration from 6.9% in 2016. This fell to 6.7% in 2017, 6.2% in 2018, and 5.9% in 2019. Average annual employment growth of 1.2% in 2017-2019 is the lowest in the post-Marcos era.

The number of employed Filipinos in 2020 has fallen to its lowest in four years. The 39.4 million reported employed Filipinos in 2020 (average for the whole year) is 2.6 million less than in 2019, and even less than the 41 million reported employed four years ago in 2016.

There were probably at least 5.8 million unemployed Filipinos and an unemployment rate of 12.7% as of October 2020, more than the official count of just 3.8 million if the nearly two million invisibly unemployed for dropping out of the labor force due to the pandemic shock are also counted. There were more unemployed Filipinos in 2020 at any time in the country’s history.

Domestic unemployment is bloated by displaced overseas Filipino workers (OFWs). The labor department reported over 680,000 OFWs seeking emergency assistance as of end-November. Deployments have also drastically collapsed with the 682,000 OFWs leaving in the first nine months of the year a huge 60% less than the 1.7 million deployed in the same period last year.

Household incomes are collapsing. Family incomes are only measured every three years with the last time this was done being in 2018. At the time, 17.6 million Filipinos were estimated to fall below the low official poverty threshold of about Php71 per person per day. In a worst case scenario of incomes contracting 20% without emergency cash subsidies, the Philippine Institute for Development Studies (PIDS) estimates the number to rise to as much as 29.7 million.

As it is, extrapolating from BSP Consumer Expectations Survey data, as much as 2.6-3.2 million households have had their savings wiped out by the pandemic economic shock. These are the vulnerable families whose income and livelihood losses were so large as to eat up their savings that were so low to begin with.

Lessons for 2021

The plight of tens of millions of Filipinos adversely affected by the pandemic and poor government response is not helped by the administration insisting that all is well.

The government could have pre-empted complete economic decline with a more rapid and effective health response as in Vietnam and Thailand. This remains the most urgent concern today. Unfortunately, despite relatively large numbers of COVID-19 testing, contact tracing and quarantining are lagging which means the coronavirus is still spreading. The vaccine-driven strategy is also not reassuring with emerging controversies around procurement, potential distribution bottlenecks, and self-serving preferential inoculation.

Economic distress in 2020 could also have been mitigated by a larger and better economic response of more emergency assistance, bigger support for MSMEs and domestic agriculture, and larger government spending on social infrastructure and services. These could also have been paid for with a more creative debt and finance mobilization strategy.

Instead, the Duterte administration’s poor health and economic response has resulted in the destruction of large swathes of service-oriented informal sector livelihoods, hundreds of thousands of displaced workers, reduced wages and benefits, worsened insecurity, MSME closures, and record joblessness. The wealthiest families and biggest corporations on the other hand will easily weather momentary income losses, with many even seeing their profits and market shares increase.

And yet despite a meager economic response, the budget deficit is soaring to record highs because of the collapse in revenues and continued misprioritization of infrastructure, militarism and debt service. Government debt is moreover bloating not to finance COVID-19 response but mainly to pay for unchanged government spending mispriorities.

The biggest economic lesson of 2020 is clear – the government has a vital role in economic development especially in times of crises. COVID-19 hit the entire world and the difference was in how each country dealt with it. The public has a right to decent governance which civil society groups and many other concerned Filipinos have been asserting throughout the year, many even at great risk to their lives and liberty.

Sustained administration disinformation and diversionary tactics seek to hide a plain fact: the government’s mismanagement of the pandemic and economy is behind the worst economic collapse in the region and in Philippine history. The coming year can be better only if the people keep working at changing the government and governance for the better.

As Rizal of course also asserted: “There are no tyrants where there are no slaves.” #

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Kodao publishes IBON articles as part of a content-sharing agreement.

Capitalism Upon COVID-19

by IBON Media & Communications

The pandemic, by far the biggest global and national event this year, is accelerating long-standing systemic problems and processes. COVID-19 has already infected 79 million people and caused over 1.7 million deaths globally. The biggest number of stricken and dying are in the US, India, Brazil, Russia and France which cumulatively account for over half of cases and nearly half of deaths. In recent months, the most new cases and deaths are coming from the Americas and Southeast Asia. Yet the pandemic is still unfolding with renewed waves of infections in the USA, Europe and elsewhere.

The pandemic’s impact drew attention to many of the worst aspects of the world capitalist system – inadequate health care systems, vast inequalities in income, wealth and conditions, gaps in essential goods and services, economic resources going to non-essentials, environmental impact of economic activities, disproportionate burdens on the working class, regressive fiscal systems, authoritarianism, racism and xenophobia, and more. These are all pre-existing conditions but, for many, were seen in a new light.

Overall economic situation

The 2008-09 crisis firmly ended some three decades of generally increasing economic growth and ushered in a decade of global economic stagnation. The pandemic shock comes on top of this and makes economic conditions even more unstable.

Chart 1: Global real GDP growth, 1980-2020e (%)

The International Monetary Fund (IMF) expects the global economy to contract with GDP growth falling to -4.4% in 2020 before rebounding with 5.2% growth in 2021 (see Chart 1); UNCTAD sees -4.3% in 2020 with a weaker rebound to 4.1% in 2021. Containment measures will continue to depress economic activity aside from possible further shocks if the pandemic continues to spread or accelerate in places. This uncertainty makes global growth prospects uncertain despite the initial rebound as lockdowns were eased.

The IMF estimates that the pandemic shock will cost the world economy US$28 trillion in lost output over the next five years. This is equivalent to over a third of the global economy or the economic output of Japan, Germany, India, UK, France, Brazil, Italy, Canada, Russia, South Korea, Australia and Spain combined in 2019.

More vulnerable to disruption because of their domestically integrated economies and extensive global supply chains, the advanced capitalist countries are projected to have -5.8% growth in 2020 with a 3.9% rebound in 2021. The underdeveloped countries with more backward economies are projected to have growth rates of -3.3% and 6%, respectively. It is however notable that they are cumulatively contracting this year unlike in 2008-09 when they still had positive growth as a whole. In particular, even the so-called East Asian miracle economies are seeing their first combined contraction in six decades.

Government measures to contain COVID-19 caused the deepest non-wartime related global recession since the Great Depression in the 1930s that eventually led to World War II. (See Chart 2) However, today’s recession is more widespread than in the 1930s with the most economies simultaneously contracting in history. The recession in 2020 will also be more than twice as deep as the recession from the 2008/09 financial and economic crisis. (See Chart 3)

Chart 2: Global per capita GDP growth, recession years (%)

Chart 3: Economies with contractions in per capita GDP (% of total economies)

Some observations can be made about major trends upon COVID-19.

Pandemic shock the same but also unique

The COVID-19 pandemic is a direct result of the very same processes that have driven the global capitalist system into deeper crises especially since 2008/09 – the anarchic expansion of monopoly capitalism amid the system’s irresolvable crisis of overproduction.

In 2008/09, the bloating of fictitious capital to artificially boost demand and increase profits resulted in a financial meltdown, a global crisis, and the protracted slowdown. Financial contagion spread quickly through the circuits of capital built up during financialization of the neoliberal era before hitting the real economy. As such, the biggest hit was on advanced capitalist economies with globally inter-connected financial sectors. This quickly affected their real economies which eventually spread through their trade, investment, and migration links with the underdeveloped countries.

In 2020, the relentless profit-driven expansion into the natural environment resulted in COVID-19 as the latest zoonotic disease to emerge. The real economy in both the advanced capitalist economies and the rest of the world was immediately and severely hit because of the unprecedentedly quick spread of the disease – from people travelling more and faster with globalization – and from containment measures being simultaneously implemented worldwide. There was further economic contagion from the widespread disruption of extensive global supply chains created during the neoliberal era.

The pandemic is however unique among the 14 global recessions in the age of imperialism. The majority or ten (10) recessions were mainly due to crises exploding from the intrinsic economic contradictions of capitalism: 1876, 1885, 1893, 1908, 1930-32, 1938, 1975, 1982, 1991, and 2009. These recessions basically occurred because of uncontainable economic pressures or imbalances erupting in the system and disturbing economic activity. They were the end result of overproduction-driven internal imbalances such as overinvestment or unpayable debt so returning to ‘normalcy’ or a degree of stability meant having to resolve or work through these imbalances.

After the 2008-09 crisis, for instance, investment had to slacken to shed excess capacity and labor had to cheapen to restore average profit rates. At the same time, debt continued to grow to fuel demand and financial profits. This bloating debt was managed with a combination of reduced consumption, austerity, corporate bailouts, and financial regulations – and especially by relying on public debt rather than private debt (because of the conventional view that governments don’t go bankrupt and so sovereign defaults are rare). Yet though seemingly ‘managed’ the problem of debt bloating to record highs is the seed of financial turmoil down the line.

Another three (3) recessions were wartime-related: the 1914 recession was pre-World War I but triggered by fears of a major war in Europe following the assassination of Archduke Franz Ferdinand; and the 1917-21 and 1945-46 recessions were due to transitions back to peacetime production from a war economy (with the former compounded by the Spanish Flu pandemic). The destruction of productive forces during the world wars was however more literal and widespread even as production capacity among the countries fighting received a wartime boost.

The 2020 global recession is the only one resulting from government policy choices around the world to intentionally restrict economic activity to contain the spread of the coronavirus. The disruption from global lockdowns, travel restrictions, and other containment measures was in this sense externally-driven rather than from internal economic imbalances. Still, the disruption was severe enough to drive economic activity to historic lows.

The current crisis is not yet the result of internal economic pressures or imbalances per se – unlike previous non-wartime related recessions such as recently in 2001 and in 2008 – so while such pressures and imbalances certainly continued to mount they have not yet reached the point that they are the primary problems to work through or resolve.

This is likely the reasoning underlying more optimistic forecasts which assume that lifting lockdowns, easing quarantine measures, and the availability of a vaccine soon will go far towards making economies recover from the enforced slowdown in economic activity and its aftereffects. The thinking here is that widespread vaccinations over the next 1-2 years will be effective enough to completely end the pandemic and the main problem is just how economic activity will be constrained by social distancing until then.

This view however significantly overlooks or downplays many risks from the ‘external’ disruption that intensify pre-existing internal economic pressures and imbalances. The generalized quarantine measures have resulted in processes that are together bringing these pressures and imbalances closer to the point of erupting into a systemic crisis with generalized economic and financial meltdowns.

In general, there are three main sources of possible flashpoints: 1) the impact on the real economy; 2) the unprecedented bloating of debt which lays the basis for a financial and economic upheaval even greater than in 2008-09; and 3) from chronic conflicts in the imperialist system (such as between the imperialist powers, or between capital and labor).

Impact on the real economy

The speed and severity of the economic contractions from COVID-19 containment measures in the first half of the year is unprecedented. Measures started to be eased since the middle of the year so economic activity has rebounded somewhat. However: 1) varying degrees of containment measures including renewed lockdowns can still happen as second and third waves of the pandemic occur such as in the US and Europe; and 2) the structural damage to economies is just emerging and will continue. The economic impact will also become clearer as government support eventually weakens.

The basic danger is that the widespread destruction of productive forces in the first half of 2020 and still to come is so bad that pre-existing imbalances worsen to the point of erupting into a systemic crisis. This can happen with: too many firms going bankrupt, not reopening, and productive capacity collapsing; unemployment staying too high, incomes falling, and too many households falling into distress; and the banking and financial system correspondingly crashing.

There was a generalized across-the-board collapse in economic activity. The impact on sectors in terms of severity and prospects for rebounding/recovery varies depending on how essential the good/service is and how much social distancing affects how they’re produced or consumed. Globally, essentials such as food (and agriculture), utilities and financial services have been least disrupted.

The worst affected sectors are transportation (especially air travel), hotels and restaurants, retail trade, and recreation/leisure. Many underdeveloped countries are over-dependent on tourism which cuts across all these sectors. They will have difficulty recovering as long as concerns over exposure to COVID-19 linger (i.e. absent widespread vaccination or even herd immunity). Hundreds of millions of jobs worldwide have been lost in these sectors which will remain unviable for years to come. The International Air Transport Association (IATA) has already estimated that some 25 million employed in the aviation industry may lose their jobs from the collapse in air travel. Overall, the World Travel and Tourism Council (WTTC) estimates up to 50 million travel and tourism jobs at risk.

The oil industry and oil exporters are however also badly affected with the demand for fuels and prices falling in line with the collapse in economic activity. Oil prices have already fallen from around US$61 per barrel in 2019 to around US$41 today.

The impact on manufacturing is mixed. Initially, the generalized disruption of now expansive global supply chains was far-reaching. Some subsectors resumed as lockdowns eased but many others still could not immediately bounce back. Subsectors related to the worst affected sectors are in the most difficulty such as aerospace and related industries. The automobile and other consumer durable goods industries have supposedly done better but sales are still weak; many households hit by job losses and uncertain incomes are no longer making big purchases.

Foreign direct investment (FDI) can be used as a rough proxy for investments in the real economy (even if FDI may include mergers and acquisitions and does not reflect other domestic investments). Global FDI flows were already weakening even before the pandemic from US$2 trillion in 2015 to US$1.6 trillion in 2019 – indicating that global economic activity was drastically slowing even before COVID-19 containment measures. (See Charts 4 and 5) UNCTAD now sees global FDI flows falling even further to below US$1 trillion in 2020 which is as low as before 2005. FDI is projected to decrease further in 2021 and will supposedly only begin to recover in 2022 at the earliest.

Chart 4: Average annual growth in FDI, 1990-2018 (%)

Chart 5: Global FDI inflows by group of economies, 1995-2015 (US$ billion)

On the other hand, financial investments kept growing. (See Chart 6) These are overwhelmingly financial assets that, unlike tangible productive investments, do not have inherent physical worth or form.

Chart 6: Total assets of financial institutions worldwide
by institution type, 2002-2018 (US$ trillion)

The bloating of fictitious capital in the run-up to 2008-09 was the biggest factor in the unsustainable gap between the financial economy and the real economy. The extreme financialization led to an excessively wide gap and the 2008-09 financial crisis. More and more profits came from financial instruments rather than real production. Such bloated financial profits vastly increased the economic and political power of the financial sector as well as further skewed economies away from producing for people’s needs.

This wide gap did not really narrow after 2008-09 because of relentless quantitative easing (QE) and stagnant real economies. It will only grow even wider today with extremely low interest rates that keep asset prices high amid real economies weakened by joblessness, closures, and low incomes.

Again, debt to deal with capitalist crisis

Governments undertaking unprecedented fiscal responses to deal with the pandemic-driven economic contractions have driven global debt levels to even greater historic highs. The IMF reports that governments have committed US$11.7 trillion to deal with the pandemic and economic collapse – equivalent to some 12% of global GDP and which is nearly the size of the Japanese, German and French economies combined. Economic stimulus responses today are many times over those during the 2008 financial crisis. (See Charts 7 and 8)

Chart 7: Economic stimulus responses, 2008 and 2020 (% of GDP)

Chart 8: Government expenditure, 1990-2020e (% of GDP)

There is unprecedented government debt. The bloating of public debt to finance stimulus packages makes sovereign defaults a particular point of concern. The IMF sees public debt in the advanced capitalist centers significantly rising from 105% of GDP in 2019 to 126% in 2020 and 2021 with the highest public debt levels in Japan (264% of GDP) and the US (134%). (See Chart 9) China, not considered an “advanced economy” by the IMF, sees its public debt increasing from 53% to 67% over that same period. Total public debt will be equivalent to 100% of the global economy in 2021. These are the highest levels of public debt to GDP ever recorded. In the US, public debt which accelerated after 2008 has spiked even further in 2020. (See Chart 10)

Chart 9: Public debt-to-GDP, 1900-2020e (%)

It is notable that central banks have emerged as major purchasers of government debt – the US Federal Reserve has taken up 57% of all US government debt issued since February 2020, the European Central Bank 71%, and the Bank of Japan 75% – which is basically monetizing fiscal deficits or printing more money to finance these. According to the IMF, the major central banks have in this way already injected over US$7.5 trillion into their economies which is an amount approaching one-tenth of the US$90 trillion global economy. The new money is driving interest rates to ever lower and even negative interest rates which will only tend to inflate asset price bubbles further.

Chart 10: Public debt of the US, 1990-2020e (US$ billion)

These efforts are continuous with massive efforts at QE to increase the money supply since 2008-09 that have actually just fueled speculation, stock markets, and asset prices. Large parts of cash injections went to the world’s biggest investment banks and financial institutions who used these for speculation and generating profits from financial and real estate investments instead of productive use in the real economy, improving working class welfare, and equitable and sustainable growth. This finance capitalism is a debt-driven system of speculative bubbles, bloated financial profits, and expanding fictitious capital.

Such large expansions of cash in the economy are normally seen as inflationary which is why there are limits to how governments have used these in the past. This is not yet resulting in such runaway inflation today partly because there is enough productivity and capacity to provide supply, but mainly because mass unemployment has caused household incomes to collapse so much that overall demand is substantially repressed with corresponding downward pressure on prices and inflation. This is worth highlighting because the intrinsic insufficiency of aggregate demand – the other side of overproduction in the capitalist system – is not being resolved by the growing debt.

Large parts of the debt in advanced capitalist countries are financing corporate bailouts or used by firms to finance speculation in financial markets instead of COVID response or social programs. The US and EU for instance have in effect also used their central banks to backstop or guarantee huge amounts of corporate debt.

There is unprecedented global debt. In 2019, total global debt was distributed among non-financial corporations (29%) and financial corporations (24%) followed by governments (27%) then households (19%); about 70% of global debt is in the advanced capitalist economies with the balance of 30% in underdeveloped countries.

Even before the pandemic, the wave of debt since the 2008-09 crisis was already the largest and involved the most countries in history. It exceeded the previous waves from 1970-1989, 1990-2001, and 2002-2009 which all ended in financial crises. The pandemic brings this debt to ever greater historic highs. (See Chart 11)

Chart 11: Total global debt, 2013-2020e (% of GDP)

The Institute of International Finance (IIF) already noted that global debt increasing by over US$52 trillion since 2016 is the most rapid debt buildup over four years on record, far outstripping the just US$6 trillion increase over the previous four years. As of September 2020, pandemic-driven debt ballooned by an additional $15 trillion to reach over US$272 trillion or around 360% of global GDP with governments accounting for nearly half the increase.

Total global debt (i.e. government, financial and non-financial companies, households) was already at a record US$255 trillion or 322% of global GDP in 2019, according to the IIF, and is estimated to reach US$277 trillion by the end of 2020 or equivalent to around 365% of global GDP.

Overall debt in the capitalist centers was up to 432% of GDP. Total US debt is likely to hit US$80 trillion in 2020 from US$71 trillion at the end of 2019, while Euro area debt will reach US$53 trillion; China’s debt could reach 335% of GDP in 2020. The total debt of the underdeveloped countries will hit around 248% of GDP.

Aside from public debt, corporate debt is also rising as firms take on new cheap loans to compensate for collapsing demand and markets. Just in the first quarter of 2020, financial and non-financial debt increased US$4.8 trillion from the same period the year before to US$139.9 trillion. By September, global non-financial corporate debt was over US$4.3 trillion higher than at the start of the year and reached a record high of almost US$80 trillion.

The explosion of debt is a desperate measure to support unprecedentedly crisis-ridden capitalism. However total debt-to-GDP and public debt-to-GDP ratios cannot keep on rising forever. The bloating debt will seem sustainable as long as there is a constant flow of money whether from expanding economies, financial profits, or indeed more debt. But this is an increasingly fragile situation and an interruption in any of these areas that triggers a cascade of debt defaults will set off a financial crisis.

There will never be enough economic growth to pay down such huge debt across countries, governments and sectors which means chronic conditions for mounting instability, growing vulnerability, and unprecedented financial and economic turmoil. Substantial wealth taxes may be able to prolong deficit spending and even repay debt but capitalist elites will not allow these to any significant degree.

The debt crisis of backward countries is worsening. Collapsing revenues and foreign exchange earnings amid the demands of domestic pandemic response compelled increased foreign borrowing and greater debt burdens. Banks and bondholders are however not giving any concessions while the IMF and official creditors only offer a few months of suspended debt servicing – and, even then, only to a few dozen mainly smaller economies.

The total external debt stocks of the underdeveloped nations (“developing countries and transition economies”) reached a record US$10.1 trillion in 2019; this was already more than double the US$4.3 trillion when the 2008-09 global financial crisis erupted. As it is, the IIF estimates that the underdeveloped countries (“low-income countries and middle-income”) will be making debt service payments on public external debt of US$700 billion-1.1 trillion in 2020 and 2021. Increasing shares of government budgets are going to public debt servicing.

Record debt burdens are bringing debt-distressed countries into a new period of austerity with certain cuts in essential, health, education and infrastructure spending. These will worsen social services for the people as well as erode backward economies further. New taxes are likely for poor populations in many countries while the accumulated wealth and incomes of domestic elites and foreign capital will remain untouched. The IMF and World Bank have already identified 36 debt-distressed countries especially underdeveloped countries made dependent on commodity exports and foreign tourism. Argentina, Ecuador, Lebanon, Suriname and Zambia have already defaulted on their sovereign debt.

Growing state intervention to support monopoly capitalist firms

The main relationship to consider remains labor versus capital rather than state versus market. The trend is not towards ‘state capitalism’, as if the political state has not always been intertwined with economic elites even during neoliberalism, but towards more overt use of the state and its resources in the interest of capital than before – through protectionism and through direct support for private firms. This already started accelerating after 2008-09 and will intensify further upon the pandemic and government economic responses.

Yet even while this is happening the imperialist-designed architecture of world trade and investment remains. International economic agreements and neocolonial policies, programs and laws built up under neoliberalism are still biased for monopoly capitalist profits and continue to drive plunder and underdevelopment.

Imperialism has always been two-faced in pushing free market policies of neoliberal globalization since the 1980s – opportunistic in pushing market-based policies on other countries and their own people when profitable, but protectionist and using state resources whenever needed. Among others, this is reflected in the steady weakening of the WTO and so-called multilateralism especially since 2008/09 when the imperialist countries all started to take more aggressive protectionist measures to support their corporations. The US in particular has been aggressive in circumventing the WTO and, by blocking its critical dispute settlements body, even sabotaging it. Britain has already opted for Brexit.

Coming into the pandemic, far more protectionist measures were already being implemented than liberalizing measures. (See Charts 12 and 13) The imperialist powers in the G7 are implementing the most protectionism – led by the US followed by the UK and Germany – but large underdeveloped countries like India and Brazil are also intervening. China and Russia have always been heavy users of interventionist policies and are among those taking more protectionist steps. Protectionism however has spread across the G20 countries which cumulatively account for 90% of the global economy.

Chart 12: Number of new interventions implemented each year, 2019-2020

Chart 13: Incidence of G20 trade measures, 2009 and 2020

2009

2020

Percentage of bilateral exports facing importers’ trade distortions

Protectionist measures have been growing in a wide range of sectors and products spanning not just obvious tariff barriers but also relatively more invisible non-tariff barriers. The most measures have been in basic industries – products of iron, steel and other fabricated metals, motor vehicles, machinery, electrical equipment, chemicals, and pharmaceuticals – but also in many food and agricultural products.

The pandemic gives governments including of the advanced capitalist powers a serviceable pretext for even more protectionism. The imposition of export restrictions on medical supplies and equipment and on food by so many countries around the world – including the large economies of the US, EU, Russia, India, Brazil, and others – highlighted the self-interest underpinning all foreign economic trade relations. These and more will greatly intensify inter-imperialist rivalries.

The US and China account for over two-fifths of the global economy and entered the pandemic while already in the middle of a trade and technology war since 2018. Under an “America First” banner, the US has been particularly aggressive in restricting trade and investment with China and especially blocking its access to technology. Among others, it blocked the use of Chinese 5G technology and disallowed Chinese investors that might learn semiconductor technologies. But the US has also been restricting trade even with supposed allies EU and Japan.

With the pandemic, the US started encouraging firms to relocate and diversify their supply chains from China to, for example, Mexico or Vietnam; it is coordinating with the governments of Japan, UK and Australia on this. US-China trade and investments have fallen but decoupling will be limited, at least in the short-term, given extensive trade and investment links built up in the last two decades. China is an important production platform for many US firms and a major market for US products and services.

China, on the other hand, has of course always ensured that the state has a dominant role in the economy. China’s economic expansion has been driven by state-owned enterprises, foreign investment restrictions, forced technology transfer or outright theft, and generous subsidies on companies and exports.

Still, in September 2020, the CPC-CC called for strengthening state control of the private sector “to build a backbone of private economic actors that are reliable and useful at critical moments”. The October 2020 plenum of the CC moreover saw affirmation of China’s “dual circulation” policy which means strengthening domestic capacity while also opening up global markets (such as through RCEP). China is being particularly aggressive in trying to counter global protectionism because its unequal and still basically low income internal market is not enough to absorb excess capacity and maintain industrial momentum.

Economic blocs will start tending to be formed particularly around the US and China. The US is already exploring the possibility of a new economic agreement for the Americas, possibly starting with additional bilateral agreements towards a single expansive one. The US currently has trade deals with Mexico-Canada and a number of countries in Latin America. It will have to deal with governments asserting independence from the US such as Bolivia, Cuba, Uruguay, and Venezuela.

China meanwhile has recently been able to conclude the RCEP with ASEAN, Japan, Australia, New Zealand and South Korea. With India opting out to protect its economy, China accounts for almost three-fifths (56%) of RCEP member economies combined. While in some ways less aggressive than previous US-driven FTAs – which merely reflects how China is limiting free market-based measures in RCEP too inconsistent with its economic model – RCEP nonetheless draws in its member countries closer to China’s orbit especially with the Trump administration’s withdrawal from the US-centered TPP.

At the same time, the pandemic economic shock is being used to compel governments of backward and underdeveloped economies to further open up to foreign trade and investment and to give even more incentives for foreign capital – supposedly for resiliency and to hasten recovery. The big powers are already mobilizing the rhetoric of “fairer globalization” and “more resilient multilateralism” to push their exploitative economic agenda.

The pandemic also gives governments a serviceable pretext for even more support to corporations using public resources. This will drive even greater concentration of production and accumulation of capital. Corporations and financial firms are directly gaining from various so-called pandemic response measures.

Monetary easing and liquidity measures cheapen financing/capital for corporations – liquidity injections by Central Banks already amount to over US$7.5 trillion, according to the IMF. Many banks and corporations, especially the largest ones, are using these to speculate in financial and stock markets rather than real investments. These are aside from governments giving firms hundreds of billions of dollars in tax cuts and direct payments (ex. wage subsidies) to boost cash flows and profits.

There is wide-ranging government support for corporate profit-seeking.

The global pharmaceutical industry reportedly had revenues worth US$1.3 trillion in 2019. Big pharmaceutical firms are already prospering from providing treatments and will prosper even more with the COVID-19 vaccines and other treatments being developed for what is the largest market for a vaccine in the history of the world. Vaccine producers worldwide are already receiving huge subsidies from governments and will be further supported later with government-funded distribution schemes.

The six reportedly front-running vaccine developers are getting US$12.3 billion in government subsidies: Moderna/Lonza (US$2.5 billion); Pfizer/BioNTech (US$2.5 billion); GlaxoSmithKline/Sanofi Pasteur (US$2.1 billion); AstraZeneca/Oxford University (US$1.7 billion); Johnson&Johnson/BiologicalE (US$1.5 billion), and Novavax/Serum Institute of India (US$2 billion). The US government has reportedly allotted almost US$10 billion to produce and deliver 300 million doses of COVID-19 vaccines by early 2021.

COVID-19 vaccines are going to be priced exorbitantly and be worth hundreds of billions of dollars to the big pharmaceutical firms. At two doses each, as much as 14 billion vaccines will be needed to immunize everyone in the world. The profit stream will also continue for years if, as is expected, vaccine-produced immunity wanes and booster shots are needed.

Other industries are also getting substantial government support. This includes for all-important high technology firms – not just ICT companies but especially new emerging technologies opening up new products and labor-saving methods (ex. robotics, artificial intelligence, 3D printing, nanotechnology, neurotechnology, biotechnology, quantum computing, energy storage). There is also greatly expanded support for infrastructure projects worldwide which is often also justified as support for so-called green infrastructure and low-carbon development to help combat climate change.

China, for instance has announced a US$1.4 trillion government “new infrastructure” plan to develop and promote 5G, smart cities, and other technology infrastructure. This is actually a key part of its overall drive for technological “self-sufficiency/self-reliance” by achieving major breakthroughs in “crucial/key/core” technologies by 2035 (e.g. AI/quantum computing, energy, telecommunications, high speed rail) and becoming a manufacturing cyber and digital economy powerhouse.

Shifts in the globalization of production

Growing protectionism may be the initial stages of a shift of industrial production back to the centers of monopoly capitalism. The concentration and centralization of capital on a global scale accelerated in the 1950s and 1960s as monopoly capitalist firms set up foreign subsidiaries. This globally interlinked production reached new heights with neoliberal globalization and global supply chains (also called global value chains, or GVCs).

Over the last four decades of globalization, monopoly capitalism offshored increasing portions of its manufacturing and services to the backward countries to take advantage of cheap labor abroad. GVCs were created, expanded and deepened for transferring even more surplus value to the imperialist countries.

More extensive global supply chains were made possible by developments in ICT, cheaper transport, and tighter control of technologies (such as through intellectual property laws and regulations). These allowed monopoly capitalist firms to locate more of their operations abroad as well as to engage arms-length domestic and other subcontractors (i.e. beyond established foreign subsidiaries). Monopoly capitalists remained the ‘lead’ firms making the most profits with globally dispersed production and multiple dense tiers of subcontractors. The integration of China and the former Soviet bloc countries was also particularly effective in greatly expanding the global cheap labor force for capitalist exploitation.

Global supply chains expanded rapidly from the 1980s until the 2008-09 crisis after which trade and FDI fell. TNCs used GVCs to attain maximum profitability from low wages vis-à-vis productivity, generous fiscal incentives, and lower costs of transport and raw materials. Foreign capital created pockets of low value-added manufacturing and natural resource extraction in many countries. This also conjured the illusion of development in the backward countries where shallow growth, increasing manufacturing employment and growing manufacturing exports hid the accelerated decline of domestic industries, backwardness of agriculture, and persistent export of natural resources.

The pandemic-driven shock to global supply chains and growing protectionism is triggering another round of reorganization of world production. Monopoly capitalism will still keep operations abroad in their perpetual search for the most exploitative labor conditions and lowest unit labor costs worldwide. Many if not all of the biggest US, European and Japanese TNCs already employ more workers abroad – in huge export and special economic zones including indirectly through their captive subcontractors – than in their home countries.

The immense and complex web of hundreds of large and small suppliers spread out across dozens of countries to profitably produce single products or services will not be dismantled. These are critical for generating profits and monopoly capitalists will ensure that they are disrupted as a little as possible. The imperialist powers have tried to protect supply chains as much as possible and have moderated the collapse in trade to less than in 2008-09, according to the WTO.

China in particular has come to have a central role in the world’s supply chains. This is partly reflected in how its share of inflows of FDI have increased almost ten-fold from just around one percent in 1990 to some nine percent in 2019, and its share in global imports and exports increasing from around two percent to over 10% over that same period.

Nonetheless, it appears that a degree of reshoring of industrial production and services is being seriously reconsidered – if not back to home countries then at least to closer or more allied countries. This also reinforces trends towards the formation of new economic blocs. The US is reportedly considering a US$25 billion reshoring fund of tax breaks and subsidies. Japan in turn proposes a US$2.2 billion fund specifically for its manufacturers to shift production away from China and back to Japan.

Reshoring will still not necessarily increase domestic employment though because of the increasing use of robotics and sophisticated automation. Weak employment effects will only worsen how domestic aggregate demand is repressed by labor exploitation and inequality which adds pressure to intrinsic imbalances due to overproduction.

Technology- and information- firms even bigger and more powerful

Monopoly control of technology has always been important for firms to dominate industries and economies. Recent decades have however seen the conspicuous rise of information- and communication-related firms providing mainly intangible services (e.g. Microsoft, Amazon, Google, Facebook, Alibaba, Tencent). Some, like Apple, started as manufacturers but are now also into services. (Apple was valued at over US$2 trillion in August 2020, which is more than five times Philippine GDP last year and more than seven times the value of all listed Philippine companies)

Technology firms sit astride traditional industrial (e.g. auto, energy, chemical, pharmaceutical) and financial giants. Financial services, real estate, consumer and retail trade, and commodities remain huge sources of profits but these have apparently slowed with bigger increases by technology firms in recent years.

The greatly accelerated rise of so-called technology firms highlights how monopoly control of industrial technologies are central to the accumulation process. Smaller firms, aside from benefiting least from government supports and bailouts, are less able to make the technology investments needed which will further worsen concentration among the largest companies. The pandemic is moreover spurring increased regimentation of workers as well as their replacement with robotics, software and artificial intelligence.

Information technologies and communication services sectors are flourishing. Technology companies such as Apple, Microsoft, Amazon, Google (Alphabet), and Facebook are big beneficiaries of people staying or working from home more. They are the five largest publicly traded companies in the US: Apple (US$2.02 trillion stock market capitalization), Microsoft (US$1.62 trillion), Amazon (US$1.59 trillion), Google (Alphabet, US$1.19 trillion), and Facebook (US$789 billion). Their stocks rose 37% in the first seven months of 2020 while all the other stocks in the S&P 500 fell a combined six (6) percent. They now account for 20% of the stock market’s total worth which is the biggest concentration in a single industry in at least 70 years.

Correspondingly, billionaire wealth in technology firms has significantly spiked in 2020. (See Chart 14)

Chart 14: Billionaire wealth by industry (% standardized annual growth)

Still, stock valuations are fueled by financial speculation as much as by real value. Ranked by revenue according to Fortune’s Global 500 in 2020, the technology firms are less dominant: Amazon (9th globally), Apple (12th), Google (29th), Microsoft (47th), and Facebook (144th). The top 10 biggest firms by revenue are: Walmart, Sinopec Group, State Grid of China, China National Petroleum, Royal Dutch Shell, Saudi Aramco, Volkswagen, BP, Amazon, and Toyota.

Trade in ICT/telecommunications equipment – including consumer electronics such as smartphones, tablets and laptops – have continued as households, businesses and governments upgrade information technology infrastructure for remote and distance work. Media streaming companies such as Netflix also gained as households compensated for the lack of outside recreation activities.

China is further closing the economic gap with the US

The era of neoliberal globalization since the 1980s saw the relative weakening of US imperialism and the rise of China as an increasingly assertive global power. Chinese state monopoly capitalism has driven its economy to already be at least as large or even larger than the US economy, depending on how GDP is measured. China already has the most firms in the Fortune’s Global 500 at 124 followed the US (121 companies), Japan (53), France (31), and Germany (27).

China is seen by the US as an increasingly serious economic and military threat. By the start of the Trump administration, the US explicitly declared China and Russia (especially China) as the main global challenges to its superpower status and imperialist domination.

China’s industrial might made it encroach into sectors previously dominated and controlled by the traditional imperialist powers. Still, it eventually reached the limits of using cheap labor to drive its ‘competitiveness’ and industrial expansion and so it has become more aggressive in seeking technological advances to generate surplus value. It also needs larger export markets to realize this surplus value. China is pressured by how its economic growth has been generally falling from 10.6% in 2010 to just 6.1% in 2019. Even before COVID-19, China’s growth was already down to less than half the rates which were even as high as 14.2% relatively recently in 2007. These are the objective conditions for the US pushing back and the intensified US-China trade and technology war.

Still, in June 2020, China became the first major capitalist power to return to positive economic growth since the onset of COVID-19. Its economy is recovering from the pandemic demand and supply shock faster than the US and so is making some more gains in closing the economic gap with it. China is the only major power projected to have positive economic growth in 2020 and is seen to have the fastest growth by far in 2021.

Measuring GDP at current prices, China’s share of the global economy increases from 16.6% in 2019 to a projected 18.7% by 2022; the US’s share on the other hand decreases from 24.7% to 23.9% over the same period. (See Chart 15) China however is still very much lagging in per capita terms with per capita GDP still just around one-sixth of the US’s. (See Chart 16)

Chart 15: Global GDP, 1980-2020e (US$ billion, at current prices)

Chart 16: Global GDP per capita, 1980-2020e (US$, at current prices)

In any case, the US is aggressively counter-maneuvering with the most exaggerated approach being so-called decoupling although it remains to be seen how far this can go with their trade and investment so inter-linked.

As in 2008-09, China appears to again be taking up the global economic slack with its Keynesian spending offensive especially on infrastructure. China’s debt-driven economic offensive spurred imports of raw materials and commodities from underdeveloped countries and of goods and services from developed countries, providing a boost to their growth after the 2008-09 global crisis. This caused its debt to more than quadruple in the last decade. The expansive overseas Belt and Road Initiative (BRI) is an effort to augment this domestic effort further.

The Chinese economy is slowing today but looks to still be providing the same kind of boost, albeit to a lower degree and especially with the protracted economic crisis in general even before the pandemic. It remains to be seen how far and for how long this will be able to alleviating the stagnationary crisis.

Multiple pressures for ever-greater labor exploitation

The neoliberal era since the 1980s greatly intensified labor exploitation. There was first of all the vast expansion of the labor force for capitalist exploitation and of the global reserve army of labor with the opening up of China and the former Soviet bloc. This was complemented by the redoubled assault on trade unions and labor rights which greatly weakened the negotiating position of organized labor. The roll-back of labor rights gave way to greater flexibilization of work arrangements, while new technologies and work methods enabled greater regimentation in the work place.

All these resulted in increasingly depressed working class incomes, worse working conditions, and greater exploitation. The conditions of the working people continuously deteriorated after 2008/09 with austerity measures further reducing welfare and social spending. The biggest banks and corporations on the other hand were bailed out. The last decades have seen labor getting an even smaller share of national income.

The people are the worst affected by the pandemic health and economic shocks – small scale farmers, poor and low-income working class families, informal sectors, migrants, and indigenous peoples. The people in the most underdeveloped countries are the worst affected in having the lowest household incomes, weakest social programs, and governments with the least resources to respond. Underdeveloped economies hollowed-out by globalization were badly affected by collapsing commodity prices, displaced migrant workers and reduced remittances, and the interruption of globally-integrated manufacturing.

Mass protests of the people are already on the upsurge this year around the globe including many directly against governments – US, Britain, Argentina, Chile, Ecuador, Lebanon, Iraq, Hong Kong, the Philippines, Thailand, Indonesia, India, and many other countries. These follow waves of mass protests and demonstrations since last year across the globe on a wide range of issues that are historically unprecedented in frequency, scope and size; over a hundred major anti-government protests have erupted worldwide.

The pandemic is intensifying multiple pressures for labor exploitation and the capitalist appropriation of greater absolute and relative surplus value.

The bloating global reserve army of labor will force down worker wages and benefits further.

The overwhelming majority of the world’s workers are precariously employed with low wages or otherwise in informal, irregular, or part-time work. Aside from them are the hundreds of millions of jobless workers.

The International Labor Organization (ILO) estimated that the equivalent of 495 million jobs worth of working hours were lost around the world by the middle of 2020 due to the pandemic. Lower-middle-income countries were the hardest hit losing the equivalent of 240 million jobs. The ILO also estimates huge losses in labor incomes with a global decline of US$3.5 trillion or almost 11% already in just the first three quarters of 2020. Even with the supposed rebound in the third quarter, the equivalent of 345 million full-time jobs was still lost compared to the year before. The ILO also reported that 1.6 billion informal economy workers, or 76% of the world’s informal employment, were adversely affected by the crisis especially those in devastated micro and small enterprises.

World Bank researchers, using a poverty line of US$1.90 per day, estimate that the pandemic economic shock will push 131 million more people into extreme poverty, mostly in South Asia (82 million) and Sub-Saharan Africa (33 million). A higher poverty threshold of US$3.20 per day doubles the new poor to 257 million, again mostly in South Asia (183 million) and Sub-Saharan Africa (30 million). With the status quo at 759.2 million (using US$1.90 per day) or 1,898.5 million (US$3.20 per day), the number of poor increases to 890.2 million or as much as 2,155.5 million, respectively.

A UNU-WIDER paper however sees the number of poor rising by as much as 420-580 million people depending on the poverty threshold used – to 1,178 million (US$1.90 per day) or as much as 2,480 million (US$3.20 per day). The food security and nutrition of hundreds of millions are under threat – the ILO, FAO, IFAD and WHO already estimate that the 690 million undernourished people worldwide will reach some 822 million this year. They also estimate that nearly half of the world’s 3.3 billion workforce are at risk of losing their livelihoods.

Among workers, migrants are disproportionately facing wage cuts and job losses because of their vulnerable status. Those in informal sectors, lower-skilled jobs, and undocumented/irregulars are worst off. This bears down heavily on remittance-dependent households. The stock of international migrants worldwide is also likely to fall in 2020 for the first time in decades.

The World Bank projects remittance flows to low- and middle-income countries to decline by 7.2% in 2020 (to US$508 billion) and to decline by a further 7.5% in 2021 (to US$470 billion). This is much larger than the 5% decline in 2009 and the worst in recent memory. India, China, Mexico, Philippines and Egypt are the top remittance receiving countries in the world.

The pandemic is also being used to justify even greater labor exploitation. Work-at-home arrangements for instance that conflate paid work and reproductive time, while lowering corporate expenses, are being pushed. In advanced capitalist and backward countries around the world, such as Indonesia and the Philippines, brazenly anti-labor laws and regulations are being passed. These include lowering wages and benefits, extensions of working hours, and expansion of outsourcing schemes and other flexibilization of work. Thus, labor exploitation is drastically worsening not just from record joblessness bloating the reserve army of labor but because of government and government-supported measures.

The huge debt in the system is an additional driving factor here. Corporate debt needs to be repaid by extracting even more surplus value from the working people, which supports the increasingly fragile financial system, and will actually be used to enable even more debt.

Amid widespread and growing poverty, collapsing wages and unprecedented misery, the world’s richest are getting astronomically richer. The world’s 2,189 billionaires became even richer and increased their wealth by 27.5% to reach US$10.2 trillion by July 2020. Much of this came from buying assets cheaply as stock markets and prices collapsed, then accumulating wealth as values recovered. Fueled by unprecedented government stimulus packages, the recovery from bear markets is reportedly the fastest ever recorded. Billionaire wealth from technology and health grew the fastest.

In the US for instance, the combined net worth of its 644 billionaires grew by US$931 billion to US$3.9 trillion since March; this is nearly double the US$2.1 trillion in total wealth of the bottom half of the population or 165 million Americans. Their wealth bloated even as nearly 62 million Americans lost work since March, 25 million were collecting unemployment, and over 12 million lost their employer-sponsored health insurance. Some 22 million households reported not having enough food, with 14 million of these families having children.

The wealth of Amazon’s Jeff Bezos grew US$90 billion since March 2020 to US$203 billion by October, of Facebook’s Mark Zuckerberg by US$46.3 billion to US$101 billion, and of Tesla’s Elon Musk by US$68.2 billion to US$92.8 billion. The wealth of Alibaba’s Jack Ma increased by US$18.2 billion since the start of the year. Over the past year, China added another 257 billionaires.

The planet’s richest 30 billionaires now own more than the poorest four billion people or over half of the world’s population combined.

The world economy is ending 2020 on a bleak note for billions of the working people everywhere. The debilitating toll on their lives is set to continue in 2021 and, indeed, for the whole historical epoch that the inherently exploitative and anarchic capitalist system is not yet replaced by a more just and humane socialism. Authoritarianism and fascism will grow as the social and economic meltdown spreads – but so too will the strength of people organizing to take control of their lives and society. #

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Kodao publishes IBON articles as part of a content-sharing agreement.

Winds of democracy in the Philippines

By Sonny Africa

Delivered at the International People’s Research Network (IPRN) Webinar on “Building People’s Democracy” held on November 27, 2020

What struggles to build a democratic society truly fulfill the aspirations of the people? IBON will briefly share our experience in the Philippine context and look forward to discussions to enrich this from different perspectives. The winds of democracy are blowing strong here.

We can start by affirming the essential character of the Philippine state. It remains as it has always been – political and economic elites inextricably intertwined and using the powers of government to advance their narrow interests. But it may be useful to look at some major developments over the last four decades of neoliberal globalization. This may help clarify authoritarian trends seen today and also point to areas needing particular attention.

Globalization and democracy

The 1980s saw hype about the “end of history” and the supposed triumph of Western liberal democracy with its distinct blend of free markets and private property, civil liberties and human rights, and supposed political freedoms. (Even then, giant China was of course a conveniently disregarded outlier.) Since then, there has been an increase in pluralist electoral democracies enshrining the popular vote for choosing leaders – as in the Philippines upon the fall of the Marcos dictatorship in 1986. (Even Russia started choosing its president by popular vote in 1991.) There has also been a huge expansion in mass media and then the internet which, it was argued, strengthened liberal democracies by democratizing information.

In economic systems, free market policies of neoliberal globalization were promised to unleash economic potential, develop backward economies, and bring prosperity to all. In reality, we’re all familiar with how neoliberal globalization has resulted in greater exploitation, greater destruction of natural resources and the environment, and greater wealth and economic power in the hands of a few. Hundreds of millions or even billions of people exploited, abused and left behind made the rumble underfoot grow stronger as economic crises erupted and deepened.

Elites however twisted this dissatisfaction, went on an all-out disinformation offensive in mass media and the internet, and manipulated elections to rise to power as today’s populist authoritarianisms – the Philippines’ own Pres. Duterte is a case in point. In too many places around the world, demagogues of different degrees are elected and have risen to the top of falsely democratic political systems.

They mostly keep the forms of liberal democratic institutions in place – free elections, the branches of government, mass media, even civil society. But these are wielded self-interestedly, subverted in practice, and any portions particularly inconvenient are carved out. But they are fundamentally authoritarians and we see everywhere the growing use of state violence, against any and all opposition, to protect elite economic interests and to retain political power.

These processes have played out in the Philippines as elsewhere. In our specific circumstances, how do we build a democratic society?

People, most of all

The most critical foundation remains people’s organizations with a vision of a democratic society. The Philippines is fortunate to have a long-standing core of this in the mass movement built up over decades. These include the country’s largest organizations of politicized peasants, formal and informal workers, youth and students, women, indigenous people, teachers and academics, and more.

The mass movement combines concrete struggles on immediate concerns with constant education work on systemic issues. Concrete struggles and constant education are both essential to build solid core constituencies for genuinely transformative change for the better.

These organizations are at the forefront of challenging anti-people social and economic policies and countering neoliberal globalization. They are also an army that reaches out not just to their direct constituencies and networks but also communicates to the widest number of people through mass media, social media, and other internet platforms.

They are supplemented by tactical formations and alliances on urgent issues to more immediately reach out to and mobilize the wider public. For instance, the steady assault of the regime on accustomed liberal democratic institutions creates wide opportunity for this. The attacks on senators, congressional representatives, the Supreme Court chief justice, the Ombudsman, the Commission on Human Rights (CHR), major broadcast and internet media outfits, civil society, activists and others have stirred wide outrage. This scattered dissent needs to be brought together.

Progressives in government

At the same time, people’s organizations have enough strength and flexibility to also directly engage in traditional elite-dominated governance through elected parliamentarians such as via the party-list system in Congress. Progressive party-list groups have always been among the frontrunners in Congressional elections and already form a solid pro-people bloc in the House of Representatives.

While fully part of the traditional institutionalized political system, progressive parliamentarians remain solidly grounded in people’s organizations and are relentless in challenging the boundaries of the country’s so-called democracy. As real representatives of and from the people, their legislative measures and political work are consistently biased for the people. They seek to deliver concrete benefits while consistently seeking to weaken the economic power and fight the political abuses of self-serving elites.

Through their visible public service, they enable the general public to see that more democratic economic and political policies are possible. But they are also the beachhead of democracy in the authoritarian Duterte government for launching attacks from within. They are valuable for reaching out to other progressives and potential allies within the government, and for organizing efforts to push for democratic changes in the centers of reactionary politics.

Research matters

The superstructures of power are defended not just by sheer violence but by the hegemony of self-serving and reactionary knowledge. We of course give special attention to the invisible power of ideas, values and beliefs in reproducing capitalism and today’s worsening authoritarianism. Among the most important ways to challenge this is with solid research from the perspective of and upholding the aspirations of the people for social justice, equity, and a decent life for all.

The struggle of ideas is one of the most urgent realms of political struggle. Solid research and tenacious advocacy are vital to overcome the dominance of ruling class ideas and values. More and more people must unlearn that oppression is just to be accepted and that the only improvement in our material conditions is what ruling elites will allow.

Solid research is vital to support the campaigns of people’s organizations and of progressives in government. For instance, research on economic issues reveals what changes decades of imperialist globalization have wrought as well as confirms what remains the same. And we know that ideas are meaningless if not transformed into a political force so these need to be formed with or by the mass movement and then taken up by it.

Solid research is vital to credibly challenge anti-people policies and to articulate our new ideas and visions for a more just and democratic society. We challenge capitalism not just because it is exploitative and oppressive but also because it isn’t immutable, can be replaced, and should be replaced. We look to the socialist alternative not just because we imagine it as just, humane and liberating, but also because it is possible and can already start to be built. Research makes our critique potent and also makes our alternative real.

Research is about ideas and we are today facing a deluge. What does it take to be dynamic in the digital age with its endless tsunami of trivialities and information? It isn’t enough that our analysis is correct and that we are credible – to communicate today we have to be real-time, interactive, and nimble with text, photos, graphics, audio, video and animation. And while we will continue to distribute our research, we also have to be ever more accessible not just conceptually but also literally. More than ever, people constantly seek information with a mere click of their finger or a swipe of their thumb.

Democracy in progress

Finally, we all know the value of seeing that oppressive structures can be changed and that what is accepted as ‘normal’ can be replaced. In the Philippines, the most radical flank and most direct challenge to the oppressive status quo are the scattered but growing sites of democratic governance in the countryside. In many rural areas across the country, communities are undertaking examples of how local political and economic democracy can be interlinked to benefit the majority people and not a few elites. These are areas where landlords, agri-business, and mining corporations do not dominate and where people’s organizations have taken control of their communities and their lives. They push the envelope of our democratic struggles.

On a historical scale, there’s no doubt that the world is changing for the better. There’s too much creativity, energy and bravery committed to that for it to be otherwise. Perhaps in fits and starts, or with setbacks big and small – but, still, we’re inexorably moving forward on the back of millions of steps and struggles every day around the world. #

Surviving surgery in the middle of COVID-19

by Jose Lorenzo Lim

COVID-19 has struck the country’s healthcare system in a major way. The system became too overloaded that healthcare workers in August sought a two-week return to modified enhanced community quarantine (MECQ). Government has since been touting that the country’s active COVID cases are going down and that the healthcare system is unloading. But what was it like having a family member who needed minor life-changing surgery amid this pandemic?

Hospital 1

The night that we decided to take my grandmother to the hospital was when she nearly fainted, was feeling weak, and had a low heartbeat. It was already the second time that this happened. It was a night filled with questions – where do we take her? Is it COVID-19 free? Are they going to accept us? These were the things running through our heads when we decided to take her to our trusted family hospital (Hospital 1). There, even with the growing number of patients, there was an available slot in the intensive care unit (ICU) where they stabilized her. 

My grandmother’s cardiologist said that she needed a pacemaker to stabilize her heartbeat and bring it back to a normal level from 40 beats per minute to around 60 beats per minute. Pacemaker surgery would cost around Php250,000 for a single-chamber pacemaker alone. This does not yet include the professional fees of the doctors that would operate on my grandmother. Prices vary depending on the type of pacemaker – if it’s dual or single chamber, and if it can pass through a magnetic resonance imaging (MRI) machine. Additionally, payment would only be on a cash basis for the pacemaker.

My grandmother decided not to have the surgery and to just go home. She believed that the surgery was costly and not worth it given that she was already old.

Hospital 2

Just a few days after, she had another episode and nearly fainted again. This fell on the month of August when Metro Manila was put back on MECQ. We went back to Hospital 1, luckily was able to get another private room, and planned to have my grandmother get her surgery. Financially, it would cost around Php350,000 for the whole pacemaker operation which would have to be done at another hospital since Hospital 1 doesn’t have the facilities for this type of surgery. Before a surgery could take place, my grandmother had to get an RT-PCR swab test. Since she had to be operated on quickly, we had no choice but to avail of a Php12,000 test at the big hospital nearby (Hospital 2) that would show a result in 24 hours.

Hospital 3

My grandmother tested negative for COVID-19 with Hospital 2’s swab test. A negative result is said to have a validity period of only one week. On the day of her transfer to a medical center and hospital (Hospital 3) for the surgery, we paid Hospital 1 around Php100,000 for the doctor’s fee, private room, and medicines. We decided it was best that she have her surgery since the cost of her one-week hospitalization was like getting a pacemaker already. When we reached Hospital 3, they looked at her charts and found a problem. First, her doctor wasn’t really an affiliate at Hospital 3, and second, her chest x-ray showed some white particulates which is said to be an indication of COVID-19. Hospital 3 gave us two choices, either go home and treat the particulates or have a Php12,000 CT-Scan to check if it really is liquid in the lungs.

We took a gamble and went for the Php12,000 CT-Scan that does not have a senior citizen discount. They confirmed it was liquid in her lungs which could be indicative of COVID-19. We were stunned since she had already tested negative. We had no choice but to get her home, isolate her, find other options and rest.

The next day, we called her former cardiologist from Hospital 1 again. He just apologized and advised us to take her back to Hospital 1 because at her age she needed medical attention. My grandmother returned to Hospital 1 but was told that all COVID-19 isolation rooms were full. The accounting department told my dad that her only choice was to go to a tent that would cost around Php100,000 for a three-day stay inclusive of doctors’ fees. Of course, my grandmother chose to come home and continued her isolation.

Hospital 4

Luckily, we knew someone from another medical center (Hospital 4), a public hospital. Through connections, we were put in the emergency room. The plan was to get my grandmother to test negative for COVID-19 and find her a new cardiologist so she could be operated on. If she tested positive for COVID-19, then she would be admitted to the COVID-19 ward of Hospital 4. It was like going through a limbo of uncertainty.  While waiting for the result, my grandmother and father stayed at the emergency room and were transferred two days later to the COVID-19 isolation ward once a room was available. Eventually, my grandmother tested negative for COVID-19.

Of course, Hospital 4 did not have any private rooms so she had no choice but to go to the ICU where she met her new cardiologist who was affiliated with yet another medical center (Hospital 5). They quoted around Php500,000 for the whole operation with a single-chamber pacemaker.  We immediately agreed and scheduled the operation with the doctor. We left Hospital 4 with a total bill of around P10,000 which was reduced due to PhilHealth and a senior citizen discount.

Hospital 5

The transfer from Hospital 4 to Hospital 5 was smooth since there was proper coordination between the two hospitals. Of course, before being operated on, my grandmother had to undergo her third and hopefully last swab test. After getting her swab test, she was transferred to the COVID-19 isolation room and got her result in 24 hours. The test cost around Php2,500, which was way less than at Hospital 2.

After her negative result, her new cardiologist immediately decided to push through with the operation. The operation was successful. However, there were no private wards available and she ended up at the ICU again. After two days, she was discharged from the hospital and allowed to go home.

Health neglect

The experience of going back and forth to various hospitals was hell. This is what patients who need surgery are going through. If you have symptoms of cough or colds, then you are immediately tagged as a COVID-19 suspect and would have to go through anxieties on top of being sick. If you don’t have money, you won’t be fixed. We were very fortunate enough to have my aunt, uncle, and other family members to financially support us through this.

A family of five living under minimum wage wouldn’t be able to afford getting a pacemaker. While I do understand that each hospital has its own set of protocols, the additional cost of swab tests is really hard especially if you don’t have enough money. I can’t imagine the number of patients who have to delay their life-saving surgery due to the overcrowding at hospitals and the burden of producing money for the operation itself. I would even call it criminal negligence on the government’s part for not immediately addressing the COVID-19 situation of patients who need surgery.

PhilHealth and a senior citizen discount really helped to lower my grandmother’s hospital expenses, but then again the situation at Hospital 4 was that they didn’t have the facilities to carry out pacemaker surgery. The government should invest in our public hospitals so that they are able to do these minor surgeries. Patients are forced to go to private hospitals just to get a pacemaker implanted. We were shocked at the Php10,000 bill of Hospital 4 and I think that if government invests funds in our healthcare system then more patients would be able to access and afford life-saving operations.

In the end, its priorities will still depend on government’s political will or lack of it. The government could invest in social services, especially health, instead of allotting Php19 billion to fund a deceptive and destructive National Task Force to End Local Communism and Armed Conflict (NTF-ELCAC). The latter, which has been on a spree of terrorist-tagging activists and progressive personalities and institutions, appears to still be the government’s priority even while COVID-19, typhoon relief operations, and even the economic downturn, warrant much urgent and greater attention. #

Jose Lorenzo Lim is a researcher at IBON Foundation. His research topics include Build, Build, Build, the oil industry, and social services. Prior to IBON, he served as Editor-in-Chief of the UPLB Perspective for the academic year 2016-2017. When not in the office, Jose Lorenzo enjoys writing with his fountain pens and trying out new ink.

Duterte gov’t fails to meet its human rights obligations amid the pandemic

by IBON Media & Communications

The Philippine government is a signatory to the International Covenant on Economic, Social and Cultural Rights (ICESCR). The covenant obliges the government to take measures to prevent or at least mitigate the impact of the pandemic. Its gross failure to do so is leading to unprecedented but preventable suffering for millions of Filipinos.

The country’s poorest and most marginalized are being left behind by the COVID-19 response of the Duterte administration. On the other hand, wealthy creditors are protected and large corporations including foreign investors are getting their profits boosted.

COVID-19 spreading

The Duterte administration’s inability to contain COVID-19 is the clearest sign of its failure to address the pandemic. In Southeast Asia, Vietnam and Thailand show that an effective government response is possible. Yet the Philippines, adjusting for population size, has the second most number of COVID cases next to small city-state Singapore, and the most number of deaths.

The Philippines has over 4,000 cases per million population (more than double the regional average of around 2,000), and nearly 80 deaths per million population (more than triple the regional average of 26). This is despite the longest and harshest lockdowns and quarantine measures in the region.

Emergency aid falling

The government’s refusal to give meaningful aid is causing unparalleled suffering. The latest labor force survey reported 3.8 million unemployed Filipinos and an unemployment rate of 8.7% in October. IBON however estimates the real number to be at least 5.8 million, with an unemployment rate of 12.7%, if those who were forced out of the labor force by the pandemic or discouraged by the obvious lack of work are also counted. Earlier, private opinion surveys already reported 7.6 million families going hungry.

At least 12-13 million Filipino families, or the poorest half of the population, are facing economic distress because of the pandemic and the worst economic collapse in the country’s history. The administration’s Bayanihan 2 however gives emergency aid to at most around 3.3 million families, who are even getting just half as much cash subsidies as supposedly given under Bayanihan 1.

This is because the economic managers refuse to spend on emergency aid for poor and vulnerable families and only allowed a token Php22.8 billion under Bayanihan 2. This is a far cry from the Php238 billion in aid under Bayanihan 1 which has already been used up by beneficiary households. It is even worse in the proposed 2021 national government budget where pandemic-related aid falls to just Php9.9 billion.

As it is, with only nine days left in the effectivity of Bayanihan 2, the social welfare department has only given one-time emergency subsidies to a mere 64,839 beneficiaries at an average of just Php6,720 per family. The labor department meanwhile has only given CAMP support to around 350,000 workers.

The Duterte administration’s so-called emergency assistance is so small that it is just a token measure to give the illusion of responding. Tens of millions of Filipinos are not getting any help causing millions to go hungry and sink deeper into poverty.

Corporate profits rising

The government is also making inequality worse. While millions of poor families are neglected, large corporations including foreign firms are going to get hundreds of billions of pesos in additional profits over the coming years from big corporate income tax cuts.

Disregarding the critical need for revenues to respond to the pandemic, the economic managers pushed their Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and even dishonestly presented this as a COVID-19 stimulus. This is a willful violation of the obligation to mobilize the necessary resources for responding to serious health and economic distress from COVID-19.

Rights being violated

The proposed 2021 budget also violates human rights. The state has an obligation to devote the maximum available resources to combat COVID-19 and the economic crisis in the most equitable manner.

However, the 2021 budget fails to allocate resources in a way that prioritizes the public health crisis and the economic burdens the poor are facing. The proposed 2021 budget spends less on health and on emergency aid than in 2020. On the other hand, the budgets for infrastructure, military and police, and debt servicing all increase. Next year’s budget does not protect poor and vulnerable groups nor mitigate the impact of the pandemic on them.

The Duterte administration’s contempt for human rights is complete. It violates civil and political rights with its systematic political repression and killings of activists and alleged drug offenders. With its neglectful pandemic response, it also violates the social and economic rights of tens of millions of Filipinos. The country is even further away from the full and equal enjoyment of the social and economic rights enshrined in the ICESCR and even in the 1987 Philippine Constitution. #

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Kodao publishes IBON articles as part of a content-sharing agreement.

PH labor market rebounding but not recovering – IBON

In reaction to the statement of the National Economic and Development Authority (NEDA) upon the release of the recent labor force survey, research group IBON said that the labor market rebounding as lockdown restrictions are eased should not be mistaken as ‘recovery’. More than people returning to work, the term should mean returning to the same levels of employment as before. Recovery can only happen with substantial economic stimulus including sufficient government financial assistance or emergency subsidies to workers affected by the pandemic, IBON said.

The official unemployment rate according to the Philippine Statistics Authority (PSA) is 8.7% or about 3.8 million unemployed in October 2020. NEDA compares the October unemployment figure with those of previous quarters (10% in July and 17.6% in April) to show as a sign of recovery.

But IBON noted that the number of employed fell by 2.7 million to 39.8 million in October 2020 from 42.6 million in October last year. The group also noted that labor force participation rate (LFPR) has fallen to a remarkably small 58.7% in October 2020, causing the labor force to shrink by 933,000.

IBON estimated a different unemployment figure.According to the group, if LFPR in October 2020 stayed at its 61.4% level in October 2019, the labor force would be around 45.6 million, which is 1.98 million more than officially reported.

IBON added this 1.98 million, which it referred to as invisibly unemployed, to the officially reported 3.81 million, bringing the real number of unemployed to 5.79 million and the real unemployment rate at 12.7 percent.

The group also said that though underemployment rate fell to 14.4%, this does not indicate that the quality of work has improved. This is most likely, IBON said, because many of the employed have stopped searching for work due to pandemic conditions and lack of job prospects with many small businesses closing down.

The group pointed out that the inability of the economy to recover thus affecting job creation is hugely due to the lack of a substantial economic stimulus. This pertains to government spending that can arrest economic decline through increased or revitalized economic production and strengthened consumers’ purchasing power.

But government’s response is too little for such a huge economic decline, IBON said. The Php165.5-billion Bayanihan 2 is niggardly for urgent attention areas such as health system recovery, financial aid to vulnerable sectors and support for agriculture and small businesses. IBON also hit the 2021 proposed national budget, that except for tokenistic allocations, is no longer providing socioeconomic relief to workers and financial assistance to agriculture and MSMEs.

Meanwhile, government’s economic managers are determined to retain the huge Php1.1 trillion budget allocation for infrastructure development as their main stimulus program and to propose corporate income tax cuts through the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill.

Recovery cannot happen with such government neglect of labor and the economy, IBON said. Scrimping on meaningful economic stimulus prevents the health system to cope with the pandemic and the workers to return to work. It also leaves behind the more basic economic sectors of agriculture and domestic manufacturing in creating more meaningful jobs, IBON added.

The economy may indeed recover from its collapse. But like such ‘recoveries’ of the past when no meaningful government intervention took place, it would take a while, if at all, for jobs and incomes to be fully recovered and improved, said the group. #

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Kodao publishes IBON articles as part of a content-sharing agreement.