Tuesday, October 14, 2014

Just drop the P4.1 trillion from helicopters to the Pinoy poor


THE term “ helicopter drop” came back to life during the Lesser Depression in the US, which started in 2008 and lingered on to 2011. It simply means dropping money from helicopters into hamlets of poverty for the poor to pick up and spend. Some progressive American economists argued that the best way to stimulate the US economy was to give cash to the poor. Because the root of the problem was on the demand side, aggressive spending by the recipients would boost demand and perk up the dying economic sectors.

And so the term “ helicopter drop” entered the national conversation in the US on how to beat the meltdown. The fact that Ben Bernanke, the Fed Chair during the Lesser Depression mentioned “helicopter drop” in passing in a Nov. 2002 speech on fighting deflation (a few years before 2008) just heightened the interest in “helicopter drop.” Before the Lesser Depression even set in, Bernanke, a respected economist who used to head the Princeton University economics department, was occasionally referred to as “Helicopter Ben.”

No economic stimulus program would work better and faster than simply doing “helicopter drop,” the progressive economists argued. No other program could boost demand that fast and that effectively. Even an inspired government spending, a fiscal intervention on a massive scale, would not be as nearly effective as the simple act of dropping money from choppers for the poor to pick up and spend.

As many of us know, “ Helicopter Ben” – during his term as Fed chair, did not propose money drops from helicopters but instead did resort to QE, or quantitative easing. This is an unconventional monetary strategy used when conventional expansionary monetary policies no longer apply. But it is definitely less radical than doing money drops from helicopters.

The term recently became relevant to our country’s discussions on what strategy can help the poor best. Some have argued that the government, instead of spending P4.1 trillion for its so-called “inclusive growth” strategy which takes time, has the option of just dropping money from the sky from choppers to help the poor and the “nearly poor.”

Choppers would carpet bomb areas of poverty with cash and the poor can pick up the manna from the sky.

Is that a wild proposition? Or a perfectly valid strategy? Before we look into this, let us first break down the P4.1 trillion that the Aquino government plans to spend from 2013 to 2016 to supposedly help the poor and the “nearly poor” and usher in its favorite scenario – a regime of inclusive growth.

Quoting the NEDA’s own turgid jargon, the P4.1 trillion spending is at the heart of a so-called “Revalidated Public Investment Program” or PIP. A total of 1,500 “priority” programs would be funded by the PIP, with the ambitious aim of reducing the country’s “multidimensional poverty.”

Of the P4.1 triillion, half of the amount would be spent on infrastructure. “Social development projects” would get P727.7 billion. “Agriculture and fisheries,” the same sector supposedly funded by the Napoles NGOs, would get P522.7 billion. “Sustainable and climate-resilient environmental and natural resources projects”would get P166.2 billion.

Looking at the general heading of the major components of the spending program, this question is worth asking. Will PIP be a better strategy than HD, or helicopter drop? Or would it be less effective than urgent cash transfers to the poor?

Given the historic intemperance that characterized the spending of cash transfers, just look at how the Pantawid cash transfers are spent on tong-its and gin bulag, an aggressive P4.1 trillion spending program would be a more preferred policy option. Roads and bridges, seaports and airports, grains silos and dams – among other structures – shall be built.

And the context is ideal for a massive fiscal intervention. The country’s infrastructure is one of the most outmoded in the region and the Asean economic integration next year requires infra upgrades for competitiveness.

But as in most policy options, even those that look as ideal on the surface, there is a rub.

In the four years of the Aquino presidency, the yearly national budget at a trillion peso level has become the “new normal.” GDP has risen, the Davos crowd has heaped alleluias on Mr. Aquino’s governance. The international press has called Mr. Aquino a reformer and a technocrat for the sterling growth rates. The rating agencies have done credit upgrades in succession.

Forbes has tracked the increase in the number of Filipino dollar billionaires. Bloomberg has a super rich category called “ those who can buy a small country rich” and some Filipino dollar billionaires are in that elite category.

But as Bobby Kennedy, while traveling through the poverty and alienation of the Appalachians said, GDP figures were worthless unless they can change lives. That is precisely what is happening in our country right now.

In an opening statement on why the PIP is necessary, Mr. Balisacan himself acknowledged that the growth rates under Mr. Aquino have barely touched the lives of the poor and the near-poor and that the PIP has the agenda of putting in place the foundation for “inclusive growth.”

Many think that the 1,500 programs that the PIP intends to fund will not really have the intended impact. From time immemorial, for example, programs on “agriculture and fisheries” have been heavily funded and massively advertised as the antidote to massive rural poverty.

The agri and fisheries programs were mostly white elephants, or poorly executed programs that resulted in leakage, wastage and corruption.

Oh, what will make up those programs intended to ease climate change or protect the environment? Will they be the usual same old, same old projects that guarantee fund wastage and zero results?

Many feel that the P4.1 trillion allotted for the PIP should be converted into cold cash, then dropped from the sky for the poor to pick up and spend from now to 2016. The national economy would be given an instant and massive jolt and kick.

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