COVID-19 economic collapse is the crisis the Philippines had to have!

Filipinos can no longer rely on their traditional gravy trains — OFWism, work outsourced from the First World, foreign investment, and foreign aid — to prop up their labour-added-value economy. Foreign workers are coming “home” by the droves, the First World is rapidly repatriating its offshore work, and governments all over the world are diverting state resources to their own citizens’ safety nets, thus reducing their foreign aid budgets. This leaves the Philippine economy with just its domestic market and capital base to chug along with.

Even the most conservative estimates put the portion of the economy accounted for by the economic activity generated by these non-sustainable sectors at nothing less than 25 percent of national “output”. When one factors in other industries severely impacted by the COVID-19 pandemic — travel, tourism, and entertainment — that percentage may go up. The collapse of these employment-generating activities then impacts consumption and, with this decline, goes the revenues of retail, leisure, and other non-essentials. The last economic holdout will be capital-intensive industries like manufacturing, infrastructure, and technology industries which happen to be areas the Philippines is thin on.

In short, the Philippines sports the sort of economy — one propped up by consumption and labour-intensive industries — that is just one crisis away from catastrophic collapse. That time has come.

It is easy to build an entire Opposition “platform” on the notion that the government — that of Philippine President Rodrigo Duterte, in this case — is to blame for any sort of economic crisis. To be fair, the Duterte government had been remiss on a lot of measures that could have been put in place early to reduce the impact of the pandemic not to mention competently managing and leading through the crisis as it ripped through the country. There is room to argue that good crisis management could have mitigated a portion the economic pain being felt by Filipinos today. However, a truly honest assessment of the economic fallout requires a complete stock take of what contributes to the economic impact in terms of both (1) the effect of the quality of the Philippine Government response and (2) the effect of factors outside of the control of the Philippine Government.

Let’s explore then the ideal scenario, one where the Philippine Government had managed to ban all travel before carriers of the COVID-19 virus infected anyone within the islands. In such a scenario, the Philippines would have been completely sealed (and quarantine rules strictly followed for returning Filipino nationals) and physically isolated from the rest of the world. The best responses still involved some degree of curtailment of freedoms and economic activity and, of course, OFWs would still be losing their jobs and work offshored from the First World returning back onshore. The travel and transport industry would still collapse and a global economic downturn would still have an effect on the Philippines’ foreign trade.

Taking all of that into account, and the structural weakness of the Philippine economy which, as I described in a 2014 article, is characterised by a stunted capital base and depends on labour-added-value for most of its output, it is likely that the Philippines would still suffer a significant economic collapse even under the best circumstances. I wrote back then…

In good times, the economic value sustained by commercial activity in most economies keeps peoples’ quality of life safely above the absolute poverty line. The inherent risk that is always present in labour-intensive economies becomes apparent in bad times.

Whereas a robust equity base in a well-capitalised economy helps keep its peoples’ heads above water in a depression, there is no such rock bottom in a labour-intensive economy. Like a super-massive star destined to collapse into a dimensionless black hole, economic collapse in a labour-intensive economy can plunge the majority of its population below absolute poverty into wretched levels of existence.

So then coming back to the matter of the dishonest assertion of the Philippine Opposition, we might ask in this regard:

Is Duterte to blame for the economic collapse?

A truly competent economist would approach that question armed with the right perspective — that there is a part of this economic collapse attributable to external forces outside of the control of the Duterte administration, and there is a part of it that will have been mitigated had the government done things a certain way (the “right” ways being, for that matter, being hopelessly debatable too).

One can consider anything short of such an approach to analysing the situation to be an incompetent effort. To go so far as to backward-engineer an “analysis” from a preconception (or agenda) that seeks to pin all blame for an economic collapse on one person or even one government is an absolute dishonest and malicious effort.

The venerable band Joy Division had this to say in its 1980 song “Passover”…

This is a crisis I knew had to come
Destroying the balance I’d kept
Doubting, unsettling and turning around
Wondering what will come next
Is this the role that you wanted to live?
I was foolish to ask for so much
Without the protection and infancy’s guard
It all falls apart at first touch

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7 Comments on “COVID-19 economic collapse is the crisis the Philippines had to have!”

  1. duterte lifts up the philippine economy it’s just that the pandemic really is a plague that destroys even USA and all the world.

  2. The COVID 19 pandemic has brought economic problems, even in industrialized countries…First world countries, who relied their manufacturing base on other countries, are pulling back the manufacturing to their own countries…

    There is only one industry, that is sustainable : the food production industry…People have to eat.
    In our country, we even import the rice and other needed foods …I believe in Land Reform Program. I don’t believe in Feudalism….

    Other industries that are needed are the manufacture of basic necessities…and the advancement of Science and Technology…

    So, there we go…we don’t solve the present economic problem with “Blame Game”….No one is to blame than China, who let the COVID 19 virus, got out of its research laboratory in Wuhan, China…

    Maybe, we can also “blame the fruit bats” who are the carriers of the COVID 19. ..We should research on how their immunity system works, against the COVID 19 virus…this will solve the COVID 19 problem…people who have the “Fruit Bat( Paniki) immunity” against the disease, will only be the one to survive…

    So, if you point your finger to blame any person; your other “three fingers” are pointing back at you !

  3. Nothing else can untie and expose the flaws than a crisis. The nation and everybody else will be required to revive themselves.

  4. Now is the time for the phillipines to build their manufacturing industry to pick up all the ones that other countries are closing in China and start making products here. The U.S. wants to pull all manufacturing out of China.Also your country needs to do more domestic farming to create more jobs.It will be a uphill battle to do this,But your country is rich in minerals agriculture and educated workers. My Filipino wife says about her province is to get rid of the crab mentality and move forward.

    1. this would be nice but the Philippines has very restrictive laws when it comes to foreign investors. The Philippines has a willing workforce that can speak English very well. If these regulations were removed you’d see a lot more companies interested in moving to the Philippines. until then they are stuck with the shityy 60/40 rule.

  5. It would be easier to get more foreign money pouring into the Philippines if they got rid of the stupid 60/40 rule. No one want’s to invest in a country where you can’t even fully own your own investment.

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