[OPINION] Politicizing GDP growth 1

[OPINION] Politicizing GDP growth

Dean dela Paz

Posted at Sep 08 2022 02:53 PM

Politics has long been the curse and bane of the Philippines. It has accounted for its descent from prosperity nearly three-quarters of a century ago, plummeting through the pillorying pains of plunder, and eventually falling all the way to our unfortunate ignominy among neighbors. 

Far worse, and even more toxic, are our politicians. These are the characters, the operators behind the politicization of everything, all in the pursuit of perpetual political power - the infernal persistent greed they cannot keep buried and must periodically resurrect every three years, six, or every half-century.

French revolutionary Maximilien Robespierre said ‘’the secret of freedom lies in educating people, whereas the secret of tyranny is in keeping them ignorant.’’ Relevant as that might seem, Robespierre himself is even more representative of his own dissertation. Uncannily familiar, upon seizing political power, he turned tyrannical and validated his thesis.

Keep them stupid. As persistent as politics is, the other curse is mass ignorance that enables politicians to resurrect, profligate perpetually and multiply like deadly bacteria. Note our recent failure when we attempted at an enlightened leadership and an educated electorate. The darkest demons were quick to label and demonize the endeavor as insulting, transforming the words ‘’voter’s education’’ into something elitist, divisive, and dirty.

But it is not only politicians who are anti-education and pro-ignorance. It is also their enabling minions, alter-egos, and operators. Even something as apolitical as a number has been politicized, spun and weaponized. 

Indulge a peek at three metrics that dominate the political discourse. All three are macroeconomic indices calculated from economic data. Unfortunately, like the current 6.10% plus inflation rate that casts a dim view on the competence of our economic managers and politicians who have failed to explain the statistic well enough to a wary and weary public, much less devise a game plan to battle it, the inflation percentage has been politicized and its credibility questioned.

The inflation rate reflects the increase or decrease in the cost of goods and services reflected in another macroeconomic benchmark called the Consumer Price Index (CPI). The CPI reflects prices or costs paid or incurred for a basket of goods which relate to typical spending practices. Each item in the basket is weighed and the weighted average reflects monthly changes in prices thus reflecting inflation. 

Given vast differences in the levels of income, there are also differences in the weighted percentages of items in the CPI basket. For instance, the relatively poorer sectors spend more on food than they would on medications which costs might be prohibitive. For those with limited access to electricity, their energy bill might be lower considering government lifeline subsidies. Household spending would reflect relative energy costs where appliances do not include high energy cost air-conditioning, high wattage white appliances, washing machines, microwave ovens and entertainment centers.

Policies impact heavily on the CPI where basket inputs are more cost sensitive or elastic. Do the math. Philippine Statistics Authority data from 2012 to 2022 tracked electricity inflation among the bottom 30% of households. Since 2021, the poor have been experiencing record-high electricity inflation due to the removal of subsidies.

It is both revealing and revolting when politicians claiming a degree in economics deny the official inflation rate given the intellectual gravitas assembled to quantify this most critical index. Politics cannot trump facts much less the truth.

The public deserves to be told the truth.

While the inflation rate involves prices, the other most widely used measures do not. Two others, Gross Domestic Product (GDP) and GDP growth, are related but reflect vastly different prima facie conditions. GDP measures economic output. It is a peso value. Among its drivers are government and consumer spending. Both are unusually high during an election year. 

GDP growth measures change. It is a percentage. When it measures the rise from a deep GDP fall then growth can appear awesomely high and is often politically spun accordingly especially in the aftermath of elections. Since presidential elections are scheduled in the middle of the year, the increased consumer spending due to increased money in circulation catalyzed by campaign doles, ayuda, campaign per diem and vote-buying lead to fantastic albeit illusory growth for the year’s first half. 

Given the deepest pits from which GDP fell, discern now how all three metrics are woven to politicize otherwise apolitical numbers.

(Dean dela Paz is a former investment banker and a managing director of a New Jersey-based power company operating in the Philippines. He is the chairman of the board of a renewable energy company and is a retired Business Policy, Finance and Mathematics professor.)

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Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.