If public opinion is ultimately responsible for the structure of government, it is also the agency that determines whether there is freedom or bondage. There is virtually only one factor that has the power to make people unfree—tyrannical public opinion. The struggle for freedom is ultimately not resistance to autocrats or oligarchs but resistance to the despotism of public opinion. It is not the struggle of the many against the few but of minorities—sometimes of a minority of but one man—against the majority. The worst and most dangerous form of absolutist rule is that of an intolerant majority. Such is the conclusion arrived at by Tocqueville and John Stuart Mill—Ludwig von Mises
In this issue
ECQ Policy: A Stunning Revelation by the DTI Chief! DoH’s Moving Goalposts, Oligarchy or Plutocracy?
I. A Stunning Revelation on the ECQ Policy from the DTI Chief!
II. Statistics and Politics: The Moving Goalposts of the DoH’s Policy Objectives
III. We Consistently Warned About COVID-19 Risks and its Economic Consequences
IV. Oligarchy or Plutocracy? It’s about the Leviathan State
V. The Agency Problem: The Fitch Warnings on the Non-Renewal of the ABS-CBN Franchise
ECQ Policy: A Stunning Revelation by the DTI Chief! DoH’s Moving Goalposts, Oligarchy or Plutocracy?
The DTI chief was a critical force behind the recent decision by the political leadership to keep the NCR at GCQ.
It’s not just economics, the DoH has also been using selective statistics to move goalposts.
I Told You So Moment: From January to March, we consistently warned of the COVID-19 outbreak and the economic consequences.
The difference between the oligarchy and plutocracy explained.
Credit rating agencies are not just about rating economic performance.
I. A Stunning Revelation on the ECQ Policy from the DTI Chief!
Continuing from last week’s discussion on the lockdown policy…
From GMA News (July 15): The Philippine economy cannot afford another lockdown, Trade Secretary Ramon Lopez said Wednesday. “‘Pag nagkaroon tayo ng phase na talagang mahigpit na pagsasara.... the economy will collapse talaga ‘pag tinuloy pa ‘yung masyadong mahigpit na lockdown,” Lopez said in a virtual press conference after the televised Pre-SONA forum. “Therefore, ang direksyon natin is finding the balance on economy, health and safety of citizens,” he said.
Did the DTI chief just confess? Did he admit that the ECQ pushed the Philippine economy to the brink of collapse, thereby have been vehemently resisting an extension of the strict lockdown policy?
Absolutely stunning!!
What was the likely basis for this conclusion?
From the ABS-CBN (July 16): Some 30 percent of businesses in the Philippines have closed since the COVID-19 pandemic hit, the Department of Trade and Industry said Thursday. Trade Secretary Ramon Lopez said the agency has yet to determine if the establishments were fully or temporarily closed due to the virus that shuttered businesses in Metro Manila for 11 weeks, leading to the first contraction of the Philippine economy in 22 years. Around 20 percent are fully operating while 50 percent have partially reopened, Lopez said. Of those who have partially resumed operations, the income of 90 percent were down, he added.
For simplicity's sake, let us assume a proportional distribution of the workforce with firms, regardless of the industry. Given the over 40 million labor force, how much would be permanently unemployed if only half of the 30% of enterprises closed for good?
And even for the firms that have been fully operating, given the lack of mobility, and the mountains of regulatory barriers erected, aside from the widespread economic disruption, how much productivity has been lost and will have to suffer?
This staggering statistics on closures, if anywhere true, would represent a historic dislocation of supply and demand (Say’s Law). Huge credit issues will also undermine or plague the financial system because of this.
And the DTI’s data signifies the initial impact.
Because the market economy represents a complex and dynamic process, yet to be manifested are the second and third-order effects from the action-reaction feedback loops.
And bailouts through massive monetary inflation and leveraging up of the balance sheet and other interventions that would spur more misallocation of resources will solve this imbroglio?
And these events are supposedly bullish for the economy?
Even the DTI chief seems to be in a panic!
Good luck to the faithful.
II. Statistics and Politics: The Moving Goalposts of the DoH’s Policy Objectives
The following excerpt should serve as another prime example of a normative “what ought to be” claim. (All bold emphasis mine)
In defense of the administration’s policy, this report from the ABS-CBN news (July 15): The Philippines has "successfully flattened" the COVID-19 pandemic curve since April, the country's health chief said Wednesday, even as more cases of the disease have been recorded in recent days. Health Secretary Francisco Duque III said the conclusion was based on the longer COVID-19 case doubling rate and mortality doubling time. "We have successfully flattened the curve since April," he said during a virtual presser with reporters past noon.
Then, later, the retraction …
From the Inquirer (July 15): Health Secretary Francisco Duque III was referring to the longer case doubling time for the coronavirus disease 2019 (COVID-19) or the period it takes for the number of confirmed cases to become two-fold, and the readiness of the Philippines’ health system when he said the country has flattened the curve since April. Health Undersecretary Maria Rosario Vergeire said this on Wednesday after Duque drew flak on social media for his statement on Tuesday on flattening the COVID-19 curve. Duque later retracted the statement. Vergeire explained that flattening the curve should be interpreted with two indicators, such as the case doubling time and the readiness of the health system in responding to the pandemic.
The Health Secretary had been technically right. Partly. In the context of the base effect, the doubling time of an outbreak, say from 10 to 20 cases compared to 10,000 to 20,000 cases, would naturally slow.
But this assertion would be misleading. By making selective use of statistics while ignoring the others, and more importantly, distorting its presentation, the intent had seemingly been to defend the effectiveness of their policies.
But since most of the data, including the doubling rate, disputed this claim, the public easily called the bluff and compelled a retraction.
The above chart shows that the doubling rate of deaths has indeed been slowing, but continues to rise. In recent days, however, instead of bending, it has begun to break this trend to the upside. And seen from the 7-day moving averages, confirmed infections and death cases have spiraled upwards, which translates to the absence of bending or flattening of the curve (for now).
The DOH also said that the readiness of the health system matters.
But…
From Philstar (July 15): Most hospitals in Metro Manila, Cebu City and Iloilo have almost reached their full bed capacity for coronavirus disease 2019 (COVID-19) cases, according to the Private Hospitals Association of the Philippines Inc. PHAPi president Rustico Jimenez said there is a need to decongest hospitals of patients who can be transferred to quarantine facilities, but do not want to. “These areas have the highest number of cases and are nearing their full capacity. Other areas are still manageable, unless the cases will continue to surge,” Jimenez told The STAR.
And the WHO has pressed the DoH to facilitate the release of testing results.
From the Inquirer (July 15) The World Health Organization (WHO) urged Philippine health officials to conduct verification of COVID-19 cases in a “much faster scale,” noting that quicker reporting of infections can help the public take precautionary measures more effectively. Dr. Rabindra Abeyasinghe, WHO’s representative to the Philippines, underscored on Tuesday the importance of expediting the verification process of COVID-19 cases. “This is what we have been urging the DOH [Department of Health] to do and we are seeing an improvement in that information sharing but this is a process and we are hoping that this validation of information can be done on a much faster scale so that information can be shared readily with the public,” Abeyasinghe said during a Foreign Correspondents Association of the Philippines (FOCAP) online forum. “If this is done, the public can take measures to protect themselves more effectively…In this outbreak, we’ve seen that what is most important is speedy contract tracing. To get an initial speedy contract tracing and make quarantining and isolation possible, you need to be able to get testing results very early,” he added.
How much of the increases in cases and deaths were from the late release of testing results due to bureaucratic red tape?
Despite its significance, statistics won’t show us such unrecorded events.
After the aborted cherrypicking of statistics, moving the goalpost and the strawman fallacy comes next.
From the Inquirer (July 18): Presidential spokesperson Harry Roque said the government’s response was still “effective,” since millions have been spared from contracting the illness. Malacañang on Friday defended the government’s response to the COVID-19 pandemic, as cases breached an earlier projection of 60,000 by the end of July. Presidential spokesperson Harry Roque said the government’s response was still “effective,” since millions have been spared from contracting the illness. “It’s working. Because if we didn’t take steps, then millions would have fallen sick from COVID-19 like what UP (the University of the Philippines) initially predicted. It’s working, because only a small number died from the disease,” Roque said.
So the moving of goalposts applies not only to economic targets but also on health policy goals. Of course, such measures, we've been told, should be seen as a sign of success/effectiveness.
Whether in health or economics or other social activities, statistics has served as a convenient tool for the advancement of political agendum rather than explaining reality.
As an aside, given the spate of surging COVID-19 cases and deaths, will the political leadership submit to the recommendations of the health authorities to impose a second-round of lockdowns in the NCR against the entreaties of the economic managers?
III. We Consistently Warned About COVID-19 Risks and its Economic Consequences
Ever since the COVID-19 outbreak in China that impelled their government to lockdown almost half of their population in late January to early February, we have consistently been warning of the risks of an outbreak here, as well as the prospective policy from it, and the likely economic consequences.
Here are selected excerpts from previous outlooks. [bold and bold italics original]
The first few cases may have sown the seeds of the outbreak, and the impact of China’s lockdown. ….
Just a thought experiment: what could happen if just one of the nCoV finds its way to the high density, population packed, depressed area in the NCR? ...
Because the war on people translates to the disruption to the global division of labor, shocks to the demand and supply chains will occur.
In response to the denial by local authorities on the spread of nCov…
If there is anything steady, change is it. But instead of small oscillations, the nCoV, with its present multiplicative process, may bring about fat-tailed risks or rare events that may produce large shocks…
Why then should we discount the risk of the escalation of this tailed risk event to the domestic economy? Because we have been told so? …
The strange part is that who is to tell what defines or qualifies as fake news or misinformation from real events? Is it something really unlinked to the issue/pathology? Or is it something said that goes against the palate or interest of the establishment? Or is it the deliberate manufacturing of evidence?
The complexities of the viral outbreak…
Aside from complexity, issues related to government responses, transmission channels (e.g. airborne or not?), detectability, availability of applicable testing kits, medical supplies and workers, quarantine centers, the number and the quality of public health centers, the monitoring, surveillance and control measures, the accuracy of disclosed cases, transparency of information, public awareness and precautionary measures, as well as, compliance with medical treatments, and many more, have influenced the rate and scale of dispersion of the coronavirus.
In reaction to the proposed festivities to revive tourism and shopping mall activities…
Is the DOH certain that the public will practice their prescribed precautionary measures? What if they don’t? Are they not sacrificing the public weal for temporary GDP and taxes? Have they considered the probability of an outbreak? If so, will this be GDP and tax revenue positive?
Are people just dollops of statistics to them?...
In a rare episode, we used the combination of positive and normative economics to predict the use of testing and a coming lockdown. …
The most efficient way to contain the spread and mitigate the impact of the virus could be through aggressive testing….
It is easy to say that there have been no infections; that is because no testing produces no incidence of infections.
Has the DOH adopted a ‘DON’T test, DON’T tell’ policy? …
Instead of transparency, the next course of action may be about the DOH controlling the flow of information for political goals. …
…
It’s not about cases, but about clusters now!
To paraphrase Ben Hunt of the Episilon Theory said, "case, case, case, cluster, cluster... then boom!"
The tendency for authoritarian regimes has been to cover-up COVID19 incidences. …
In any case, once a cluster or clusters appear, do the Philippines have sufficient public health facilities to accommodate an epidemic?
Or because of this, will the DOH adapt a Xi-style lockdown?
On March 8, the Philippine leadership placed the entire nation under public health emergency.
On March 12, the Philippine leadership announced the community quarantine of Metro Manila, which took effect on March 15th.
Effective March 17th, the entire Luzon was placed under the ECQ.
The rest, as they say, is history.
Oh, in fairness, the improved testing now said to reach over a million, seems like a step in the right direction.
IV. Oligarchy or Plutocracy? It’s about the Leviathan State
Oligarchy, according to Merriam Webster, is a government by the few. The other definition is a government in which a small group exercises control especially for corrupt and selfish purposes.
According to the Dean of the Austrian School of Economics, Murray N. Rothbard*:
But while, as in the lynch mob, the majority can become actively tyrannical and aggressive, the normal and continuing condition of the State is oligarchic rule: rule by a coercive elite which has managed to gain control of the State machinery. There are two basic reasons for this: one is the inequality and division of labor inherent in the nature of man, which gives rise to an “Iron Law of Oligarchy” in all of man’s activities; and second is the parasitic nature of the State enterprise itself.
Oligarchy exists in all forms of modern government wrote Professor Robert Higgs**:
In the modern world, many people demand a voice in how they are ruled. In reality, however, every actual system of rule in a large society is and must be an oligarchy. Neither democracy in the simple sense nor autocracy in the sense of strict dictatorship or monarchy is workable. But oligarchy, a system in which a relatively small group of cooperating rulers (though it may have a nominal head ostensibly in charge) and their key financial supporters applies the nuts and bolts of rule is workable, indeed, indispensable. So, whether by design or by piecemeal pushing and pulling, this is the form that all modern governments take.
A rule by a coercive elite translates to the fact that there can be no dismantling of oligarchy, there can only be a transfer of political power.
Meanwhile, plutocracy is defined by Merriam Webster, a government of wealthy or a controlling class of the wealthy.
Plutocracy is a political form in which the real controlling force is wealth, the great American classical liberal William Graham Sumner.
Mr. Graham further explained***:
The principle of plutocracy is that money buys whatever the owner of money wants, and the class just described are made to be its instruments…Modern plutocrats buy their way through elections and legislatures, in the confidence of being able to get powers which will recoup them for all the outlay and yield an ample surplus besides.
Plutocrats use political machinery and legislation for personal and political gains.
More from Mr. Graham:
A plutocrat is a man who, having the possession of capital, and having the power of it at his disposal, uses it, not industrially, but politically; instead of employing laborers, he enlists lobbyists. Instead of applying capital to land, he operates upon the market by legislation, by artificial monopoly, by legislative privileges; he creates jobs, and erects combinations, which are half political and half industrial; he practises upon the industrial vices, makes an engine of venality, expends his ingenuity, not on processes of production, but on "knowledge of men," and on the tactics of the lobby. The modern industrial system gives him a magnificent field, one far more profitable, very often, than that of legitimate industry.
Plutocracy resonates with crony capitalism.
At the end of the day, the common denominator of oligarchy and plutocracy is the control of the state.
V. The Agency Problem: The Fitch Warnings on the Non-Renewal of the ABS-CBN Franchise
As previously discussed, the ratchet effect or the use of a crisis to expand political power and control of society by governments, is epitomized by the ratification of the Anti-Terror Law and the non-renewal of the ABS-CBN franchise.
