WHAT RICE SHORTAGE? SACKLOADS CAN FILL MOUNTAINS!

Bro. Erle Frayne D. Argonza

[Writ 03 May 2008, Quezon City, MetroManila]

Good day, Fellows!

You see, if you’re going to beg (panic buy) from any rice trader in Cagayan Valley (northern Philippines) for some rice, accompanied by your melancholic look like as if all rice will disappear from Earth very soon, the stunned trader would most likely say, “you’re asking only for a few rice? By golly we got mountain loads of them here!” “What? You say there’s a shortage of rice? Tell that to the Marines! What a Big Lie, this shortage!”

 

Development partners, peace builders, this is the latest news update I got on the ground. A structural  engineer up north, who contracts projects for the Department of Agriculture, laughed with guffaws about the ‘shortage lie’ as he narrated to me his fresh reportage passed on to him by traders. There’s plenty of rice to last for months, for Christ’s sake!

 

Look at what the organized chaos had done so far here in Manila and other regions. It had made the poorer more pathetic as they have to line up for supposedly cheap rice, made to believe as they are by public relations Pied Pipers that rice is going to run out soon. We’re almost near to stampedes here already, thanks heavens there’s still some dignity left among our poor folks they won’t stampede for rice alone. They would do that for a Wowowie TV program that promises to turn them into millionaires overnight, but to stampede for 5 kilograms of rice? Hello! Our folks are too civilized to buy that bullet.

 

To continue, listen to what some traders said: “Kabayan, how tragic this shortage lie had done not only to our poor but to us traders. We got so huge stocks in the warehouses, but now we cannot just bring them to Manila for unloading, afraid that no retailer might buy them because suddenly their wholesale prices are sky high. So now even our pockets have to wait for the more stable days. Sad!”

 

That’s the real picture at ground-level, Partners in development & peace. THERE IS NO RICE SHORTAGE. The shortage was stage-managed. Whether the theatrics was designed overseas and spilled over here, or that it’s only a domestic script is something worth investigating. Our intelligence community should get busy getting to this business of pinning down who staged managed what.

 

Meantime, the Thailand & Company (states) that cartelized rice recently has done an act that now seems reactive. It is pure and plain panic, disguised as anything worth the ‘rationalization’ of the rice sector. True, for a time this measure can stabilize rice price and bring it down a bit. But now, this company has to prove itself worthy to the global community that its cartelization effort—state-sponsored, using the nation-state as mediating instrument—will make rice available to rice-consumers at relatively reasonable (note: cheap is out of the question) and sustained supply.

 

If the Thailand & Co will fail to meet global expectations, its member-states will be stoned with fiery embers of public wrath. And that is because, by placing themselves in the line of fire between the global consumers (who were the ‘victims’ in the shortage game script) and the global financiers-speculators (the real culprits in the criminal rise of price rice and stage-managed shortage), the national cartels will be the vent object for public ire. And there it goes, the real culprits go unnoticed and unpunished.

 

The real story of the price fluctuations in grains and foods in general is that many hedge funds and related financiers decided to park their money a bit in food for their commodity futures operations, eventually driving prices higher up. The reason being that it’s safer to park and earn money in food, period. Look at how the hedge funds were burnt out by their over-exposures to the subprime housing in the USA, that’s enough a precedent for the same financiers to go to safer investment havens. Or else the various global stakeholders will focus their eyes on these gung-ho derivatives investors and ‘burn them at stake’ (criminalize in world courts, regulated via new global treaties and instruments).

 

And that’s where price stabilization would start later: regulate speculative finance, take down the ‘virtual economy’ based on predatory speculation, dismantle global monopolies, return to fixed currencies backed up by the gold standard, tax cross-border financial transactions, and so on. Quite a wish list for now, true. Crisis after crisis will bring us to their galvanization…and, returning to the ‘real economy’, there’ll be enough grains, cereals, staples for all the earth’s peoples.

FOOD CRISIS AND ORGANIZED PANIC BY FOOD CARTELS & OLIGARCHY

Bro. Erle Frayne Argonza

[Writ 28 April 2008, Quezon City, MetroManila]

We’re having a production-related problem with rice today in the Philippines today, which looks more like an echo problem of a larger global phenomenon of food crisis. Riots have already been experienced in at least 33 countries, and we may expect the frequency to rise in the months ahead.

To single out production factors, and especially to pinpoint flawed land-use patterns as the cause of the crisis, tends to blur the real cause behind much of our peace and development problems in the world today. This crisis is one of the anarchic results of orchestrations done by financial speculators over a stretch of three (3) decades, followed through recently by food cartels’ machinations to heighten up their looting of the public’s resources via the food market.

Let us recall that as early as the 1980s, the move towards liberalizing the food markets and integrate this sector into the evolving ‘virtual economy’—by unleashing speculative practices on agricultural products via instrument of ‘commodities markets’—already crept into our national boundaries. Gradually did the pattern get integrated into a global mesh of transactions involving not only food but a long list of articles of trade and services being transacted via the secondary markets or hedge funds.

The objective, as far as this observer now sees it, is to emerge a few gigantic cartels globally that some day dominate a global oligopoly. Probably as little as five (5) such colossal mega-corporations will be well prepositioned to control global food, thus enabling their control not only of the gene stocks (intellectual properties) but of prices most of all.

This scenario is now happening in steel. As soon as we hit the 900+ tones per annum or TPA production of global steel in the 1990s, plans were already afoot to eventually cartelize steel via mergers of giant steel firms, with the participation of fund managers in the process and ownership structures. The merger of Mittal and Alcelor, which resulted to the gigantic firm that now produces over 100 tpa, had now clearly substantiated this long forecast move to cartelize steel. In the near future, just about 3-5 such giants, each one producing 150+ tpa, will be left to control the global market of steel.

Didn’t you notice the sudden fluctuations in the prices of metals globally beginning in the middle of this decade yet? Often than not, based on our experience of the depression-era Weimar Republic, this phenomenon of hyper-inflationary swings in base and precious metal prices are preceding events prior to a global depression. This time around, the panic created by the corresponding process would be the sweetening of the steel merger option (with fund manager participation or rather manipulation) and, voila! Steel cartels are up! Hail the Cartels to the highest heavens!

The pattern is getting to be noxiously obvious that even a mere high school student of economics and history could easily see them. This same pattern is now creeping thru the food sector, even as it has also been taking down aluminum, nickel, copper, gold, banking, retail, realty, and lots of more sectors, with steel being the prototype experiment.

For the sharp observers out there, do make your tallies now as to which of the present food giants would emerge the victors. I will not be surprised if one day, my country’s own biggest F&B group, the San Miguel Corporation, will be gobbled up, via a merger with a larger corporate fish, and melt out into existence except in mere concept and memory of a once mighty firm.

Start making your tallies now. Meantime, let’s also start tallying the riots and casualties due to famine and food-related problems, and see where the casualty level will reach before the 3-5 cartels will become sacrosanct global food market controllers. It surely takes so much blood spillage to advance the interests of the Global Oligarchy, this is what we can get from the picture.   

OPEN UP MARKETS

 

Erle Frayne D. Argonza

 

[Writ 23 March 2008, Quezon City, MetroManila]

 

As one can observe from my previous articles, New Nationalism supports a continuous entry of investments to the domestic market from overseas. This article articulates the specific contention about the matter.

 

Autarchy is bad policy and practice to begin with. If it worked for the Habsburg Empire for a while, it worked only because there were draconian measures employed to make them work, and that the territory of the Empire was large enough for autarchy (also autarkie). This empire is long gone, autarchy is ridiculously obsolete, but Old Nationalists abound who still tend to be autarchic in their discourse. They are among our living dinosaurs, come to think of it.

 

Just because capital investments come from the outside shouldn’t make them necessarily suspect or deleterious to the national interest. As already previously articulated, there should be ‘safety nets’ or institutional and policy mechanisms, such as fair trade –based regimes, that can mitigate the deleterious impact of globalization.

 

But before articulating on the other base mechanisms for such mitigation, it should be first accepted that overseas capital can serve the national interest. If domestic investment and savings rates are perennially low or insignificant, there should be greater reason to open up the market to external investors. As an observation, the Philippines has had a bad track record of attracting investments amid the massive opening up of the market via financial liberalization policies.

 

The same contention should hold water for other countries. The USA at this moment needs fresh funds to the amount of trillions of dollars per annum coming from overseas to be able to bring it back to macro-economic wellness. There is no way that the USA will be semi-insular, more so autarchic, when its economy had clearly crashed.

 

However, attracting foreign investments doesn’t mean a perpetuation of trade liberalization  policies pertaining to investments and cross-border monetary flows. It’s got to do more with strengthening institutions and keeping macro-economic fundamentals at their most positive levels indicative of economic health and wellness.

 

Look at Malaysia’s previous experience for instance. As a response to the devastating effects of the financial meltdown in 1997, the state immediately instituted financial, monetary and capital control policies. They worked precisely because governance institutions and macro-economic fundamentals (particularly fiscal health) made it worthy to invest in the country, as risk levels were tremendously brought down and volatility ebbed.

 

Recently the Malaysian state decided to take down altogether the capital control policies as macro-economic wellness and financial volatilities were put under control. This is a clear case for flexibility in development policies: know when to institute regulations and deregulations well, without necessarily impeding or degrading the national interest whatsoever. I salute the grand patriarch of Malaysian nationalism for the matter, the venerable Mahathir Mohammad.

 

The contention for foreign investments culled from the New Nationalism article is shown entirely below.

 

Continuously open the market to external investors.

 

National savings continue to hover at a pathetically low rate of seventeen percent (17%), which is significant but is way below the minimum of thirty percent (30%) to render it as ‘critical mass’, like that of our neighbors’. The problem cannot be addressed sufficiently than through a continuing inflow of capital from external investors. Note that in today’s global context, the term ‘foreign capital’ has already lost its meaning, as the boundary between ‘domestic’ and ‘foreign’ has been effectively erased. The cross-country partnering cum out-sourcing arrangements among diverse firms have become the norm of today’s business, rendering obsolete the previously sacrosanct notions of ‘domestic’ capital and ‘foreign’ direct investments. Not only that. Latest researches have verified that transnational corporations or TNCs now tend to create more values within their host countries and reinvest the profits locally than remit them back to their ‘home country’ (a term that has also begun to lost meaning).

 

This doesn’t mean though that such investors should be served ‘free lunch’, through very long regimes of tax havens or through spurious ‘strike-free zones’ (read: haven for wage freeze) which makes our laborers appear like wild jackals who need to be perpetually gagged. Some forms of valves (capital controls) should also be instituted, so that the capital investments and profits wouldn’t just flow out like hemorrhage the moment that the economy hits cyclical crisis. Surely, pro-active measures can be devised to let the said investors stay, more so for those that truly re-invest their ROI for their original and diversified business concerns, as well as to those that conduct dynamic R&D and truly transfer technology.

 

In today’s globalizing context, corporate ‘national champions’ have become obsolete. The  bygone era of ‘national champions’ can still be observed in the names of certain firms, such as in the names Philippine Airlines, Philippine Long Distance Telephone, or in Bank of America, American Express. Asset re-structuring is the norm, and large corporations are becoming rapidly globalized. Mergers and de-mergers are happening at rapidly ‘chaotic’ paces. The circumstances challenge investors/stockholders to quickly grasp the lesson of   ‘thriving on chaos’ or else their ventures would face bankruptcies and foreclosures as what befell many former large ventures, inclusive of former ‘national champions’.

 

The thought that “foreign capital might harm national interest” is simply passé and out-of-context, in as much as the term ‘foreign’ has lost its meaning save for the antiquarian Old Nationalists who regard foreign things as essentially dangerous (but are they not using foreign frameworks in their perceptions of foreign things?). Let the investors come in, recombine their assets with our domestic investors’, extend their stock participation beyond the forty percent (40%) constitutional limit. Note that “our very own” big corporations are participating in ‘foreign’ countries, and their levels of investment participation go beyond forty percent (40%). It is high time that we readjust our thinking about the matter.

DOMAIN OF WEALTH OF NATIONS: BOTH DOMESTIC & OVERSEAS

Erle Frayne Argonza

 

[Writ 23 March 2008, Quezon City, MetroManila]

 

 

The antiquated debate regarding which domain should be the main source of national wealth—whether domestic or overseas—is still alive today. In the article of New Nationalism, I argued that in the emerging context of post-industrialism, this debate has become futile and unproductive. Instead of stressing a domestic versus international mindset, I argued for a both/and frame.

 

Admittedly, the overseas domain as a source of wealth is as palatable as it used to be during the era yet of the city-states of Northern Italy (Venice, Florence). This has become the backbone of mercantilism, which in turn became the backbone of nationalist economics. Old Nationalism henceforth carried the pro-mercantilist banner of seeking wealth primarily from international operations. But this time around, this position has to be revised in the light of import-substitution success.

 

In the Philippine case, we have been having it both ways. On the one hand, our manufacturing sector’s products are largely consumed 86% of the time for the domestic market, indicating the optimization of the import-substitution aspect of our development efforts. On the other hand, our overseas employment and investments have been churning out a whopping Net Factor Income from Abroad or NFIA worth 11% of the GDP.

 

New Nationalism, to my mind, should rather have it both ways, as culled from this and other parallel experiences in emerging markets. At this time particularly, Foreign Direct Investments or FDIs by Philippine-owned or controlled companies has begun to take off and contribute to our national coffers. Add to this our exports worth 40% of GDP, and remittances from labor export of worth 10% of GDP, and one can see the broad picture of the potency of the overseas domain as source of national income.

 

Below is the entire subsection on the domains of wealth production culled from the New Nationalism article.

 

Generate wealth from both external and domestic markets.

 

Various stakeholders in the past were divided along the question of what should be the driver of growth & development (demand-side discourse): the external, or internal market? The followers of the ‘externalists’ were the ones behind the export-oriented development strategy, whose rationalizations for massive exports were quite poor recycles of the mercantilist contention that wealth should be produced more from out of the external markets (colonies during the time of empires). The ‘internalists’ were the ones behind import-substitution strategies, whose rationalizations were poor photocopies of Keynesian demand-side formulations.

 

In today’s context, it is wiser to view both the external and domestic markets as synergistic spheres for accumulating national wealth and meeting head-on the demands for delivering welfare. The external market discourse can work only in circumstances where a domestic demand has failed to develop, which in our case was the pre-1990s economy. By the late 1990s, it was clear that a significant change had taken place on the demand side of our economy, as folks were buying a lot of articles of commerce at a time of crisis. The middle class population is rising relative to the entire population, whose households’ needs have become more differentiated and have leaped beyond the bounds of ‘rice-and-galunggong’ expenditures. Today, Filipino families purchase around fifty-three percentum (53%) of their household needs from supermarkets, malls and large retail centers, even as the wet markets and sari-sari stores are declining in importance. These changes are real, and we cannot be blind to them by continuing to harp on an export-driven growth.

 

We must then fast-track large-scale redistribution schemes, such as to witness the rise in purchasing powers of our own people. This cannot be done outright during the next three (3) years, as we face a fiscal dilemma of crisis proportions. But beyond 2007 lies new opportunity fields. The fiscal route to stabilization will have been solidly achieved by then, and the nation can embark on more ambitious endeavors aimed at increasing incomes, reducing unemployment and poverty and increasing domestic consumption.

 

As the domestic market catches up in stabilizing the economy and producing national wealth, stakeholders shouldn’t be remiss in improving the competitiveness of our export products. Our great advantage is that we have ample supplies of skilled labor, with wages still relatively low. The power sector is also quite rich in supply of electricity, even as new projects are now being planned to neutralize possible supply problems in the short run. Hopefully, power supply would stabilize and electricity cost would decrease, contributing thus to rendering our exportable articles more competitive enough. Save for capital goods and petroleum, large volumes of which our producers continue to import, the other factors of production are within our hands to control and manipulate, inclusive of rent and interest rate. It is hereby argued that, with such factors controllable enough, we can optimize conditions for rendering our exportable articles maximally competitive and continue to permit the external market to be a source of substantial wealth. What more if we produce all of our essential capital goods, thus further bringing down the cost of production, given that the price of other factor inputs also go down?