external debt stock

Lies, Damned Lies and Statistics: Or why De Quiros is a bit of a crank

In his two most recent op-ed pieces published successively in the Inquirer between Monday and Tuesday this week, Conrado De Quiros proves why his writing should be taken with a grain of salt.

Apologist

In Repetitions, Mr De Quiros talks of parallels between the two Aquino administrations and uses the argument that history may be repeating itself against those who despair at the current lackluster performance of PNoy in his freshman year. The implicit parallelism here is between the Marcos and Arroyo loyalists who claim that life deteriorated under their successors.

De Quiros uses a number of “lies, damned lies and statistics” in making his case. These fibs undermine his credibility. He states first of all that

(o)ne year after he came to power, the Gloria Macapagal Arroyo (GMA) loyalists are out saying how things have gotten worse from GMA’s time. Proof of it is that unemployment is rife, prices are higher and the hungry are getting hungrier. And they have the figures to show it.
What they forget to say is that Gloria borrowed more than Tabako (President Fidel V. Ramos) and Erap (President Joseph Estrada) combined in the course of her long, vicious and illegitimate rule from January 2001 to May 2010 which did not keep prices from soaring anyway, and which debt has added immeasurably to an already gigantic one the people are paying during P-Noy’s time and will continue to pay well past P-Noy’s time.

Ok, let us subject the first part of the argument to the Truth-o-meter. What was the level of external debt during the presidencies of Messrs Ramos and Estrada in contrast to Madame Arroyo? The chart below is taken from World Bank data which is hosted on Google Data Explorer.

It shows that the total external debt stock in 1991 prior to the election of Pres Ramos stood at 32.5 billion current US dollars. In 2000, the year before Mrs Arroyo succeeded Mr Estrada in office it rose to 58.3 billion dollars. That is a jump of about 25.8 billion. In 2009, the year before Mrs Arroyo handed power to Mr Aquino, the total external debt stock was 62.9 billion dollars or an increase of a mere 4.6 billion!

So on point one, Mr De Quiros’s claim that GMA had borrowed more than Messrs Ramos and Estrada combined is not only untrue, it misses the truth by a longshot. The growth of debt during the latter was 5.6 times more than under the former.

Let us examine the second part of the argument about price inflation under the Arroyo administration. The chart below shows inflation from the same data source. I am afraid that again in this case, the data conflicts with De Quiros’s claim. It shows that under GMA, inflation was tame. The country experienced some of the lowest price rises that it experienced since the 1970s, much of this is a result of the economic reforms instituted since the mid-80s of course.

So on point two, once again Mr De Quiros is caught fiddling with the truth.

Moving on to the rest of his argument, De Quiros states that

The economy Gloria left to P-Noy is not a rundown restaurant that has been sold to a new owner who with unlimited funds can renovate it and open with the sign, “Under new management.” It is a horse that has been starved and flogged to near-death and bequeathed to an impoverished nephew by a good-for-nothing aunt upon her death. You cannot make that horse spring back to life overnight, especially when it’s all you can do to keep body and soul together. It will take a great deal of nursing to make it so. Along with a great deal of cursing the departed.

You can’t blame everything that is wrong with the economy on Gloria. But you can, and ought to, blame her for a great deal. The people of this country did not start getting unemployed during P-Noy’s time, they started getting unemployed during Gloria’s time. Hell, they started getting hungry—yet another statistic a few months ago said people had gotten hungry of late—during Gloria’s time, as a result of abandoning the farmers completely and relying on importations of rice. And stealing billions of bukols along with the rice.
Gloria is the cause, this is the effect.

So, to verify these claims, let us look first of all at the level of income during Mrs Arroyo’s presidency. The chart here shows that per capita incomes grew quite rapidly and consistently for the most part during her term from $899 in 2001 to $1,752 in 2009, an increase of about 95%.

In a comparable period from 1991 to 2001, GDP per capita only rose from $710 to $899 or an increase of a mere 27%. Again, it seems that calling the economy a rundown hand-me-down does not seem appropriate.

Well, you might say, De Quiros is really talking about the hardships suffered by the most marginal sectors of society getting worse under Mrs Arroyo. So, let us examine the income share of the poorest quintile of the population in the following chart.

We find here that the lowest 20% of the population had a 6.5% share of total income in 1988 and this dropped down to 5.36% in 1997 and remained steady at 5.37% in 2000. From there it rose to 5.6% in 2006 where the time series stops. So it seems that for the greater part of GMA’s term, the decline was arrested. The time series unfortunately ends there, right before the surge of rice importation.

As a sidebar, it is worth noting that the economic liberalization instituted since the mid-80s as prodded by the Washington Consensus may have moderated inflation but failed to provide protection to the most vulnerable. Mrs Arroyo’s rice program was also aimed at limiting the effects of price rises, but may have impacted the farming sector adversely. In that case, it was simply extending the existing policies further.

Revisionist

In Visions and Revisions, the second thesis of De Quiros is a stab at economic revisionism. His very first line exposes him to this charge:

P-noy isn’t making things worse, economically or otherwise, but he’s missing a lot of chances to make things better.

Unfortunately, the first quarter results say otherwise. The latest 4.9% GDP growth figure reported by the National Statistical Coordination Board, while nothing to sneeze at, was at the lower end of the expected range that analysts had predicted of between 4.8% and 5.6%. It was almost half the 8.4% growth registered in the same period of the previous year under Mrs Arroyo and a far cry from the government’s own target of 7-8% for the year. Given the recent tweaking of the way GDP is computed, the growth rate of 4.9% is actually higher than it would have been under the previous method.

PNoy tried to remain upbeat and blame the less than targeted performance on economic headwinds coming from conflicts in the Middle East and North African region as well as natural disasters closer to home. He also sought to paint a favorable picture by comparing it to the milder growth experienced by our ASEAN neighbors.

What he conveniently failed to mention was that the growth could have been higher had his government not contracted spending by 17%. Today’s banner headline of the Businessworld says it all, Underspending Curbs Growth. What this means is that the higher unemployment, hunger and poverty reported during the period is partly the government’s doing.

None other than Budget Sec Buth Abad confirmed that the first quarter was “not regular” in that government spending slowed as a result of project costings being reviewed. While he claims they can play catch up during the remainder of the year, Prof Ben Diokno, a former budget secretary, and Gov Joey Salceda, a former analyst and political advisor to Mrs Arroyo think otherwise.

Unfortunately, not only is “PNoy missing a lot of chances to make things better”, he is also “making things worse, economically”. No amount of economic revisionism can change that fact.

In bolstering his claims, Mr De Quiros needs to steer away from using spurious statistics. He has failed the truth-o-meter on all counts. Such flagrant misrepresentations do not aid his cause one bit. They merely expose the hollowness of his arguments.