Why the Duterte Government’s “Build, Build, Build” Signifies a Recipe for a Crisis

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 characteristics” has been no different.

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.

The Path to Ochlocratic Socialist Dictatorship: How Phony Statistics Have Been Used as Instruments of Repression!

I have repeatedly been saying here that the Mr. Duterte’s “war on drugs” has truly been intended to impose an ochlocratic socialist dictatorship.

The “war on drugs” has served as MEANs (an instrument) to an END (goal: dictatorship) rather than thepublicized end itself (eradication of drugs).

Given that the Philippine populace has become tremendously short-term focused (high time preference—Austrian economics vernacular), which has signified a pivotal ramification of the BSP bubble ‘trickle down’ policies, attraction to short-term solutions, particularly towards “totalitarian” tendencies have become exceedingly popular.

Hence, Mr. Duterte’s election and drastic and radical implementation of the “war on drugs” represents a backdoor scheme to the establishment of such ochlocratic socialist dictatorship.

Importantly, through popular consent, the means has been used to justify the end. Thus, the ochlocracy (rule of the mob)

Here are more proofs to demonstrate how the “war on drugs” has signified a tool for the twenty-first-centurysocial repression/dictatorship in the Philippines.

One, statistics used in the "war on drugs" have been obscured, are phony, inflated or have no basis at all!

From Reuters (Interaksyon/ Huffington Post, October 25) [all bold mine]

President Rodrigo Duterte ended a recent speech in Manila with a now-familiar claim: Two policemen were dying every day in his violent battle to rid the country of illegal drugs.

But police statistics have shown that figure to be exaggerated. From July 1, when Duterte launched his "war on drugs," to October 12, when he spoke in Manila, 13 police officers were killed. That's an average of one every eight days.

This is not the only dubious claim Duterte has used to justify his bloody anti-narcotics campaign, according to a Reuters review of official government data and interviews with the president's top anti-drug officials.

These officials say that data on the total number of drug users, the number of users needing treatment, the types of drugs being consumed and the prevalence of drug-related crime is exaggerated, flawed or non-existent. But they say the problematic statistics don't matter because the campaign has focused attention on a long-neglected crisis in the Philippines.

More…

In his inaugural State of the Nation Address on July 25, Duterte declared that there were 3.7 million "drug addicts" in the Philippines.

"The number is quite staggering and scary," he said. "I have to slaughter these idiots for destroying my country."

But according to a 2015 survey by the Office of the President's Dangerous Drugs Board, the main drugpolicy and research unit, the Philippines has fewer than half that many drug users.

And rather than being "addicts," as Duterte refers to all drug users, about a third of the 1.8 million users identified in the DDB survey had taken drugs only once in the previous 13 months. Fewer than half of them -- 860,000 -- had consumed crystal meth, or shabu, the highly addictive stimulant widely blamed by officials for high crime rates and other social ills. Most were marijuana users.

The equivocal use of statistical definitions…

Statements by Duterte and other officials not only fail to distinguish between users and problem users, say drug-treatment specialists, but also between users of shabu and marijuana. Shabu is a highly addictive stimulant with side effects that can include aggression and psychosis.

"They are completely different substances in terms of risk profiles and harms," said Robert Ali, director of a University of Adelaide research center on drug and alcohol treatment who works with the World Health Organization. "Shabu has a higher risk of addiction. It is associated with a greater range of physical and psychological harms."

While drug abuse is a real problem in the Philippines, said Ali, it was hard to devise an effective national response based on flawed data. "With public health, whether it's diabetes or drug use, you need a sense of the burden of harm to understand how to use your resources," he said.

Joanne Csete, a specialist in health and human rights at the Mailman School of Public Health at Columbia University in New York, said that the term "current drug users" usually refers to those who have used drugs in the past month. However, the DDB survey counts anyone who has used drugs in the past 13 months, which Csete says could inflate the number of users.

"So the president can make up whatever numbers he likes -- the survey does not adequately estimate current use," she said.

The picking figures from the sky…

The claim that 75 percent of "heinous crime" in the Philippines is drug-related features in an official booklet called "Winning the First Phase of the Drug War." It was handed out by the president's media team in September at a regional summit in Laos attended by world leaders.

According to the booklet, heinous crimes include murder, rape, human trafficking and treason.

It is not clear where the president's media team got the 75 percent figure. The booklet identifies the source of the number as the Philippines National Police Directorate for Investigation and Detective Management. But six officials in the office responsible for the booklet and at the DIDM were unable to point to a specific study or explain how the figure was calculated.

Nimfa Reloc, who monitors heinous crime cases for DIDM, said the office had released no such data or analysis and did not know where the number came from. She said 15 percent of heinous crimes are drug-related.

Benjamin Reyes, the DDB's chairman, said there was "actually no data" on crimes committed under the influence of drugs.

An estimated 18 percent of convicted prisoners worldwide are in jail for drug-related offences, according to the United Nations Office on Drugs and Crime.

So the "war on drugs" essentially pillars its arbitrary violence and repressive actions from a set of conjured spurious numbers which it has used as a political bogeyman for repression.

This reminds me of the great libertarian, Henry Louis Mencken (HL Mencken) in his In Defense of Women

Civilization, in fact, grows more and more maudlin and hysterical; especially under democracy it tends to degenerate into a mere combat of crazes; the whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, most of them imaginary.

Two. Excerpts that reveals how phony statistics are used to justify populist politics…

Police and senior officials have used the claim to justify tough measures against drug users and pushers, and say those measures have been vindicated by a drop in crime since the anti-drug campaign began.

The faulty figures have other real-world implications. They determine, for instance, how many people the government says must be targeted to eradicate drug demand in the Philippines. That has led to the drawing up of police "watch lists" with the names of drug suspects, hundreds of whom have been shot dead either in police operations or by unknown gunmen.

The president's statistical claims continue to drive policy. In September, Duterte said the number of "addicts" would rise to four million by the end of the month and vowed to extend his drug war for another six months -- to June 2017. That statement came after remarks on September 30, when Duterte seemed to compare himself to Hitler and said he would be "happy to slaughter" three million drug addicts.

Burden of harm

A senior law enforcement officer said Duterte's "arbitrary" figures had put pressure on police and government officials.

"The problem is, every time the president says something, it's already some sort of a policy statement," said the officer, who spoke on condition of anonymity. "We have to toe the line."

The officer pointed, for example, to the more than 700,000 people who have registered in the past three months with the authorities as drug users or pushers, a process known as "surrendering." But, he said, authorities were expected to produce at least 1.8 million "surrenderers" to match the number of users cited in the DDB report.

"That's the reason we are having a hard time. We need to produce," he said. "Even if we add up everything ... we are not even close to 1.8 million."

In other words, the war on drugs hasn’t just been about extrajudicial killing, but likewise about "mass arrests" out of mere suspicions and of hitting quotas. This showcases the progression of systemwide repression.

Three. The so-called accomplishments by the administration have been inflated…

Of the 1.4 million shabu users Villanueva had identified by his method, about 700,000 people had already "surrendered" to the police as drug users and pushers, he said.

"We are taking away already one half of the demand," said Villanueva.

Treatment experts dispute this claim, since the severity of drug use among those who surrender is unclear. A spokesperson at the Philippines' Department of Health said he didn't know how many "surrenderers" had been medically screened.

This matters, said Ali, the University of Adelaide treatment specialist, because "drug use is not necessarily drug dependence." Only about 10 to 15 percent of shabu users might require residential care, he said. Ali said he based this estimate on his clinical experience and the experience of treatment services in the United Kingdom.

The DDB’s survey does not distinguish between users and problem users.

"We did not try to categorize them, whether or not they were addicts, problematic drug users, or just plain users," said DDB chairman Reyes.

To calculate the number of problem users, said Reyes, the DDB relied on global estimates from the UNODC that say 0.6 percent of drug users are problem users, which means they require treatment.

Killings based on mere suspicion and inadequate evidence, without due process is MURDER!

This also speaks of the hapless numbers of poor souls, who were slaughtered for political convenience (appease the bloodthirsty mob) and for the leadership’s ego trip.

Forced surrenders are also acts of repression and injustice.

Four. As predicted, murder has now been substituting for drugs!   

As I wrote last August: (Philippine Political Theater: The Deepening State of War: From War on Drugs to Mining to Oligarchy! August 15, 2016)

when the cost of doing murder is reduced, then murder or killings will flourish.

It’s all about incentives.

So the government has only been substituting one vice and crime for another crime. Or the government has been subliminally promoting the replacement of drugs with murder.  The worst outcome is that we may have both.

Back to the article…

While the crime rate has been dropping for several years, under Duterte the murder rate has risen since he launched his anti-drug campaign. In the first three months of his administration, police recorded a total of 3,760 murders, compared with 2,359 in the same period last year, a rise of 59 percent.

"Compared with last year, we are better off this year," said Dionardo Carlos, the national police spokesman. "Most of the victims this time are the drug users."

In Davao City, where Duterte was mayor for 22 years, he led an equally brutal anti-drugs crackdown. There, death squads killed hundreds of alleged drug dealers, petty criminals and street children, said Human Rights Watch in a 2009 report. Duterte denied any involvement in the killings.

Despite the crackdown, Davao still ranks first among 15 cities in the Philippines for murder and second for rape, according to police crime data from 2010 to 2015.

Bullseye!

Statistics can function as a fatal weapon.

As the late great dean of the Austrian school of economics, Murray Newton Rothbard wrote, (Statistics: Achilles' Heel of Government April 28, 2013 Mises Institute)

Statistics, to repeat, are the eyes and ears of the interventionists: of the intellectual reformer, the politician, and the government bureaucrat. Cut off those eyes and ears, destroy those crucial guidelines to knowledge, and the whole threat of government intervention is almost completely eliminated.

Perhaps such questionable statistics applies not only to the “war on drugs”, but also to the government’s economic-financial data. After all, given that these numbers signify a monopoly (not subject to audit), then the government can say what they want to say.

The “war on drugs” should function as notable example of how statistics are abused and can be manipulated to support political agenda (or social repression)

Yet, the economic and political consequences of the war on drugs will be far reaching.