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Aquinomics: no economics

In Peter Sellers’ 1979 hit comedy “Being There,” a simple-minded gardener’s utterances drawn from TV commercials and gardening knowledge are misinterpreted as profundity, so that he is mistaken as a policy wonk in Washington, D.C. circles.

The movie somehow reminds us of how awe-struck writers read profundity in President Aquino’s actions to even call these as making up “Aquinomics.” Assuming that the term refers to something, it would be “no economics.”

Mr. Aquino has demonstrated a penchant for eschewing economic thinking. After a year in power, we may be seeing the upper-class version of the masa’s Erap, hopefully only in terms of economic literacy.

Take “fiscal responsibility,” which a respected colleague claimed was an attribute of what he sees as “Aquinomics.” The Aquino government’s underspending, which most economists blame for the disappointing GDP growth rate in the first half of the year, had nothing to do with economic policy. Government underspending this year was due to Aquino’s frame of mind, embraced by his officials, that it is the rule rather than the exception that all government contracts made during the last administration were tainted with corruption. Consequently, numerous government projects were put on hold, to be reviewed and exorcised, before they are implemented. (The cynical view though is that the new officials simply want their cut, claiming they are now the “signing authorities.”)

Despite the consensus that this government underspending caused the economic slowdown, Aquino in a recent speech insists that he was right in putting major government projects on hold: “They claim that underspending weighed down the economy. The truth is, if there was corruption, even if funds circulated in the economy, I think it’s better to delay the projects and make sure that it really benefited the economy.”

The economics that escaped Aquino is that government is the biggest spender in any nation, so that even changes in its expenditures need to be properly executed, and solely for economic targets to avoid disastrous results for the entire economy. Taxpayers certainly hate to pay taxes that will only enrich the corrupt. But they abhor as much the idea that their taxes will only sit in the vaults of some government bank.

With little investigation, Mr. Aquino canceled the Belgian-funded Laguna Lake development project as well as the French-financed program for building more roll-on, roll-off-ports in the country. He didn’t even bother to order his officials to propose alternate plans for these projects that would have had significant impact on our economy.

Mr. Aquino demonstrated the depth of his economic thinking in his recent speech in China: “At the heart of our efforts are the Five R’s: our partnerships must represent the Right Project, at the Right Cost, with the Right Quality, undertaken by the Right People, and accomplished Right on Time.” Like the innumerable Five R’s that are merely mnemonic devices, Mr. Aquino’s Five R’s really says nothing at all, since the key question is how does one define “Right.”

What passes for the flagship project in “Aquinomics” is its conditional cash-transfer program, which is mainly a dole for the poor, with the requirement (making it “conditional”) that recipients undertake certain tasks, mainly keeping their children in school. While certainly commendable, it represents not an economic policy but mainly a redistribution of wealth, i.e., the use of taxes to subsidize the poor’s investment in human capital (education).

The program though cannot be sustained, as it depends almost entirely on government’s capability to finance it, which depends on the strength of the economy—which finally will be determined by the success of the administration’s economic policies.

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Following verbatim is the news article posted on the website of the Chinese Communist Party’s official newspaper People’s Daily. It was the sole report on the Sept. 1 meeting between President Aquino and Chinese Premier Wen Jiabao.  The article was headlined: “China urges the Philippines to properly handle aftermath of HK hostage incident.”

“BEIJING, Sept. 1 (Xinhua)—Chinese Premier Wen Jiabao on Thursday urged the Philippine government to properly handle the aftermath of last year’s Hong Kong hostage incident in Manila.

“During his meeting with Philippine President Benigno S. Aquino III, Wen urged the Philippine government to attach importance to the requests of the government and people of the Hong Kong Special Administration Region.

“Aquino, in response, said the Philippine government and people feel deep regret for the tragedy, noting that the Philippine government is handling the aftermath seriously and will keep in contact with China.

“On Aug. 23, 2010, Philippine ex-policeman Rolando Mendoza hijacked a bus carrying 21 tourists from Hong Kong and four Filipinos in Manila in a bid to be reinstated in the police force. Eight of the hostages from Hong Kong and the hijacker were killed after an 11-hour standoff.

“The main request of ‘the government and people of Hong Kong’ has been for an apology by Mr. Aquino for his government’s bungling of the hostage crisis that led to the deaths of eight Hong Kong tourists.”

Presidential Spokesman Edwin Lacierda last week claimed the hostage incident was discussed “only in passing.” I do hope Mr. Aquino and his foreign affairs officials understand better diplomatic language than Lacierda.

The state dinner Lacierda referred to could be the strangest ever. There were no photos or reports in any Chinese or Philippine newspapers on an event normally covered very closely by media.