``There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
``Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.”- Bastiat, Frédéric (1801-1850)
In the tradition of Frédéric Bastiat’s Parable of the Broken Window or the precept of “That Which is Seen and that Which is Unseen”, we apply this analytical methodology to the so-called “Holiday Economics”.
That Which is Seen
Public Holidays are declared to commemorate dates of historical, religious or cultural significance.
But by virtue of the current administration’s “Rationalizing the Celebration of National Holidays (R.A. 9492), public holidays have been made adjustable. The promulgated reason behind this law is to “to reduce disruption to business and production schedules, encourage domestic tourism and give employees long weekends.” (inq7.net)
In addition, the administration using moral justification, says the law would “encourage quality time” among members of Filipino families.
That Which is Not Seen
The zeitgeist of this law has been primarily economics, hence called as “holiday economics”. Weekends juxtaposed with holidays have been alleged as encouraging domestic tourism.
If one goes by the contribution share of the tourism industry to the Philippine economy we note of the following data from World Travel and Tourism Council:
Additionally, the Philippine government economic agency, the National Statistical Coordination Board (NSCB) further says that in 1994-1998, ``The share of internal tourism consumption to GDP was 5% and 7% in 1994 and 1998, respectively.”
In short, Holiday Economics arbitrarily promotes an industry which contributes to only about 9% of country’s GDP (5-7% of domestic tourism) and 10.3% (direct and indirect) to total employment coming at the expense of the OTHER industries with larger contribution to the domestic economy!!!
Inflationary Impact
Moreover, such distortive law is obviously inflationary or can contribute to higher prices of goods and services to the society and the further impoverishment of the society.
How?
In a non-working holiday, if a business decides to operate, it would have to absorb increases in labor wages as mandated by law. On the other hand, forced vacations mean suspensions of business activities in compliance to the fiat.
In other words, the said policy affects the production structure of the Philippine economy by
1) skewing capital investment incentives heavily to one industry,
2) increasing the costs of doing business,
3) lowering profit margins,
4) diminishing labor productivity and
5) reducing relative output.
The obvious economic implication is that of higher risk premium for the economy and stiff hurdle rates which diminishes the attraction of capital investments thereby raising the prospects of unemployment levels. Moreover, the policy induced economic imbalances will reduce production output which means pressures of HIGHER prices of goods and services.
Worst of all, the accrued negative impacts would suggest for GREATER government spending and MORE future interventions, as media will focus on the effects than the cause which will generate popular demand and pressure policymakers to oblige, and from which, politicians will willfully administer. But, beyond public knowledge, this should translate to the prospects of higher taxes, lower purchasing power of the Peso and lower standards of living.
On the government side, more intervention and more government budget for “welfare or entitlement” spending means more opportunities for corruption and the never-ending farcical investigations (turned into soap operas) aside from the economic dislocations emanating from such skewed political policy.
Moreover, the truth is that domestic tourism will be limited to the income capacity of Filipinos. Lengthening of vacations do not automatically translate to hefty progress in the domestic tourism industry if the citizenry's incomes remain marginalized. And any advances of the industry based on credit instead of genuine wealth creation will only lead to temporary booms followed by a nasty bust. Profligacy isn’t a sound way to enrich a country. Besides, the squeezing of other industries will only put a kibosh to Filipino incomes.
Think of it, instead of promoting education, Filipino children with reduced school hours will be cultured towards indolence, intellectual inertia and hedonistic lifestyles, which runs contrary to the avowed objective of attaining quality family time. The derivative value formation from such policies doesn’t signify as sound economics or translate to better economic prospects over the long run.
Fatal Conceit
Besides, “quality time” accounts for as a fallacious argument of “begging the question”. More vacations do not automatically guarantee more quality time for the family. Quality time stems from personal virtues of responsibility and time management than from government’s controlling of people’s action. If a person insists on staying with a paramour than with the legal or connubial partner and or the family, no amount of “vacation” will change the person’s preference or priorities. More vacation may, on the other hand, even further such an immoral lifestyle.
And it goes the same with business, the idea that government knows the interest of business more than the industry itself is a concrete example of the Hayekian “Fatal Conceit”. The law’s stated aim of reducing “disruption to business and production schedules” runs contrary to its goals. Raising the cost of business disrupts production schedules instead of facilitating them. And some business groups as the American Chamber of Commerce have raised this issue.
Finally there is also a cultural dimension for the “holiday economics” debate. The major reason for such holidays is mainly for the celebration of the historical significance of the particular dates. By moving these, with the aim of attaining tenuous economic goals, vastly erodes the meaning of such rites. What good is it to remember history, if we only opt to look beyond its very essence?
Holiday Economics is representative of the inflationary, distortive and bad economics which is what Frédéric Bastiat admonished against. At worst, it is prejudicial to the Filipino heritage. The unseen costs look patently greater than its superficial and immediate benefits. The law deserves to be repealed or revoked.
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