Last weekend, I wrote
The NEDA just did NOT get the memo. Like the war on drugs, political mega deals with the Chinese government will be beyond the scope of edicts, legislation and mandates—or even the constitution.
Confirmed!
From the Friday’s proposed massive infrastructure spending program (Inquirer November 4, 2016)
“Build, build, build” is the battlecry of the Duterte administration as it intends to ramp up infrastructure spending to the tune of P8 trillion in the next five years, according to Transportation Secretary Arthur Tugade.
Cabinet members on Thursday called on Congress to grant President Duterte emergency powers on transportation projects as they presented the administration’s planned infrastructure program to spur development and ease traffic congestion in the country.
Without the emergency powers, the projects, which include new roads, bridges, railways, and the improvement of airports, will be delayed, Tugade said.
Selective bidding
“Is the population willing to wait some more?” he said at a press briefing in Malacañang.
The emergency powers being sought for the President would allow him to conduct selective bidding, direct contracting, or negotiated procurement for materials or services for projects intended to deal with the transport problem.
The bill that would authorize these powers would also bar lower courts from issuing temporary restraining orders or injunctions against the projects. Only the Supreme Court would be given the authority to issue such an order.
First, emergency powers simply omit or bypass the check and balances provided by the extant institutional and legal framework. Through centralization, the executive imbues or absorbs MORE political control over the economy.
Short circuiting the defective check and balances would entail of even MORE abuses than less. Greater risks of abuses have been sidelined due to the populist embrace of the superhero syndrome. Or the public’s blind faith on the strong man government to deliver promises. Yet the public forgets that the leadership is NO god and is just a human being who is subject to mortal frailties.
Second, it is pretty much obvious that martial law would NOT be required at all for the current drift to an ochlocratic leftist dictatorship.
The executive only requires a stamp pad legislative branch and a supine supreme court to put in effect its pet projects.
By virtue of complete control over the other branches of government, the executive branch can unilaterally impose whatever it desires.
Third, transforming the consciousness of the society requires a strong command of language that gains popular acceptance.
And this has easily been attained by virtue of indoctrinating fallacies as reality.
Government infrastructure spending equals G-R-O-W-T-H has signified a shibboleth for the majority, including so-called experts.
Benefits are seen, but never the cost.
Mao’s China, USSR, Cuba and North Korea have all relied on government spending including infrastructure, but where are they now?
The Japanese government has embarked on a series of fiscal infrastructure stimulus since its bubble imploded in 1990s. Yet more than two decades after, the Japanese economy still wobbles from economic stagnation while the cost of such undertaking has catapulted its debt conditions to the largest in the world. It’s why Abenomics embarked on a grand NIRP experiment which also includes never ending infrastructure spending. So Abe-Kuroda’s grand experiment has now translated to greater risks of instability more than G-R-O-W-T-H. [I dealt with this in Philippine Peso Tumbles 1.4% the Largest Weekly Loss Since 2014; Why the Weak Peso Signifies a Long Term Trend September 18, 2016]
Modern day China or “Communism with Chinese charac
Even the Chinese government’s addiction to credit intended just to inflate GDP statistics has become so evident for the mainstream to ignore
From Bloomberg (November 2 2016; bold mine)
In the five fastest-growing provinces, total fixed-asset investment exceeded the sum of their gross domestic product in the first three quarters of this year, according to new data from 29 of 31 provincial governments. In Chongqing, Guizhou, Tianjin, Jiangxi and Anhui, combined total investment was 6.56 trillion yuan ($969 billion) versus their combined economic output of 6.37 trillion yuan, the data show.
Despite a transition toward services and consumer-led growth, investment by the government, developers, or companies is still the engine fueling the fastest expansion rates. While the economy looks resilient for now -- the latest evidence of strength coming Tuesday with data showing the official manufacturing gauge jumped to a two-year high -- the addiction to investment and rapid credit growth needed to fund it is a growing concern.
China’s government has vowed break its stimulus addiction by boosting services, which accounted for more than half of the overall economy’s output last year for the first time, and consumption, a major prop this year. But quitting the old build-it-and-they-will-come mentality is proving harder to do at the provincial level as it remains the quickest way to juice GDP.
The reason why the Chinese economy seems “buoyant” today has been due to the astounding skyrocketing of social financing costs to the tune of $2.6 trillion (Yardeni.com). Bank loans have shot to the moon with a stunning $1.9 trillion of credit growth in a YEAR! That’s T-R-I-L-L-I-O-Ns!
It’s a grand stimulus which has been DWARFED the 2008 (US $586 billion) scale. The IMF warned last August that China’s 254% debt to GDP is unsustainable and must "urgently address the problem." (CNN MoneyAugust 12)
Such massive infusion of credit has only stoked a runaway bubble in property that may spillover to stocks.
Yet the Chinese government cannot wean away from credit, because doing so would mean a collapse of the house of cards entirely DEPENDENT or built on credit expansion.
Government infrastructure spending does NOT represent the HOLY GRAIL.
Since resources are scarce, government spending would entail resources taken away from the productive economy. The significance of the proposed “Build, build, build” project is the expansion of the government at the expense of the productive economy.
Another is that since the said infrastructure projects are political, then distribution of benefits would favor the politically well-connected parties from the private sector. Chinese and Japanese sponsors are likely to benefit from the administration’s doleouts.
Yet once China and or Japan will be engulfed by a crisis those deals with Philippine government can be expected to vaporize.
Third, with government growing faster than the private sector, this entails more debt, higher taxes and increased inflation which will all be manifested through a weaker peso. Yet more politicization would postulate to greater risks of instability and crisis.
Finally, all it takes to increase investments is to respect and uphold private property or property rights and its ramifications: promote voluntary exchanges and sanctity of contracts. The short of this is to implement Economic FREEDOM.
But since HUMAN LIFE is the ESSENCE of property rights, and since life has NOT been respected—having been subjected to political fetishes by playing the role of god—then NO amount of government spending will translate to an avalanche of investments.
That’s because investors would not only seek a Return on Investments (RoI), but more importantly, desire an assurance of the Return OF Investments as a fundamental feature of a commercial environment. If the latter can’t be secured, then there would hardly be any investments at all.
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