When even the president cannot explain convincingly why prices are rising fast in his watch, something big is missing in the literacy of our people in economics. Of course, the government has a platoon of economist at the DBM, NEDA, DOF and BSP who can explain inflation and other economic issues we are facing. Only that being in government, when they talk, they seem to speak only of what is necessary to protect the government from being blamed for the current general increase in prices that many people see as due to or started mainly by the newly passed TRAIN Law and the failure of the NFA and DA to maintain stable supply of rice and other basic food products. Of course there are typhoons that destroy our crops but then we already know they come every year and should be prepared for it.
As we know the new law substantially increases the level of income annually to be exempted from income taxes and also reduces the marginal tax rates on income in excess of that amount. These provisions benefit the higher income groups but not the poor who with their low income were already exempted from taxation previously. The new law also imposes additional excise taxes on certain products and expanded the coverage of the value added tax to those products or services formerly exempted. These directly increase their prices but which indirectly affect the prices of other products also in the production chain which hits the poor who are not benefited from the rise in tax exemption and reduction in marginal income tax rates.
Unfortunately, the schools or perhaps the economics faculty can also be faulted for not being helpful enough in explaining to their students the nature of inflation and other economic issues, particularly on how the national economy operates and the problems that arise when there are imbalances in its various markets, including what we have to do in such occasions.
Such as how the goods market works, both at the local and international level, and the nuances of cost push and demand pull inflation. Or the financial market where the interest rate is determined through the interaction of those in need of funds and those who have surplus of funds and the role that financial intermediaries play in bringing the two together, including what the monetary authorities had to do to regulate their activities and maintain macroeconomic stability. Or the foreign exchange market that determines the value of the peso against all the other currencies in the world and why the peso will rise and fall against other currencies at times. Or why our wages are depressed and what the government must do to protect the interest of our wage earners that comprise the bulk of our workers.
How many colleges and universities now offer a one or two semester course in economics in their various departments? Not the University of San Carlos (USC) today. Except for it’s few BS Economics students at the USC School of Business and Economics (SBE) and other students who are taking economics as a minor course at the USC’s School of Law and Governance.
Previously, macroeconomics and microeconomics were standard fare when one enrolled at any course at the USC SBE where the largest pool of students at USC are enrolled. It is not so anymore beginning this school year. There is a replacement one semester economics course with focus on management which I believe is not enough if a business student really have to understand fully how business operates to maximize it’s objectives and how business is impacted by the overall economic environment and economic policies of the government.
Unlike the president, I am serious and not joking here.