Political Economics 101

It is always interesting to analyze political economy especially during election time.

Political economy is about how politics affects the economy and the economy affects politics.

Economic conditions have a powerful impact on elections. Voters on different sides of every economic issue fight their battles in the political arena.

All countries around the world were exposed to the same virus but countries had different responses and policies.

The current administration in the Philippines failed to “flatten the curve” of Covid cases and instead succeeded in flattening the economy.

The Philippines had a Gross Domestic Product (GDP) contraction of -9.6% in 2020, the worst in Asia that year and the worst in Philippine economic history since post World War 2, according to a manifesto recently issued by alumni and students of the University of the Philippines School of Economics (UPSE).

Aside from flattening the economy, the current administration also raised big time the public debt, from P8.22 trillion (actual and guaranteed) in 2019 to P10.25 trillion in 2020, and P12.15 trillion in 2021.

High public debt will require high and multiple taxes. The Philippines should avoid this situation of more taxes.

The manifesto briefly outlined their proposed pathway for hope and economic recovery for a better Philippines.

The manifesto was signed by more than UPSE 400 alumni and some 150+ students expressing support for the candidacy of Leni Robredo and Kiko Pangilinan in the coming May 9 elections.

The manifesto stressed that Robredo has shown that having big agency budgets via big taxes and huge borrowings is not a guarantee for real public service and for improving the ordinary Filipinos’ lives.

The budget for six years (2017-2022) of the Office of the Vice President (OVP) was only P0.6 to P0.9 billion a year, always below P1B/year.

The 2022 total budget is P5 trillion, while the OVP budget is only P0.7 billion, or 0.0001 or 1% of 1%. So for every P100 in total budget, the OVP budget is only P0.01 — not even P1 but only 1 centavo.

Compare that to the budget of the Office of the President amounting to P8.24 billion plus discretionary and intelligence funds of P65.10 billion.

And yet Robredo was able to inspire confidence and transparency and attracted many private donations during the pandemic that enabled her office to deliver PPEs to many frontline health workers and Covid treatment kits to poor households.

Economics was not my first choice when I took the  entrance exam at the (UP)  in mid 1980s but another quota course, accounting.

I ended up cherishing my course, BS Economics, which is a four-year undergraduate degree in economic theory, econometrics and applied economics, involving a deluge of formulas and graphs.

It is definitely not an easy course as it requires a high level of mathematical and statistical skills and the ability to apply economic principles and models to problems in business, finance and the public sector.

In general, economics is the study of scarcity and its implications for the use of resources, production of goods and services, growth of production and welfare over time, and a great variety of other complex issues of vital concern to society.

Economics is derived from the Greek word oikonomia, which in turn is composed of two words: oikos, which is usually translated as “household”; and nemein, which is best translated as “management and dispensation.”

We read the book “The Wealth of Nations” by Adam Smith (1723–1790), one of the most influential economists in history, where he argued for free trade, market competition and the morality of private enterprise.

One of the basic principles that I recall is the law of supply and demand which defines the relationship between the price of a given good or product and the willingness of people to either buy or sell it: as price increases, people are willing to supply more and demand less and vice versa when the price falls.

We dealt with relationships between variables,   formulas, and graphs. A variable is simply a quantity whose value can change. A graph is a pictorial representation of the relationship between two or more variables.

The UPSE was established in 1965, and is known for graduates who have been vigorously trained and prepared to become leaders in various fields.

Many of the prime movers in government, business, civil society and academe obtained their formal training in economics from UPSE. One of them is Vice President Leni Robredo from batch 1986.

I finished my BS Economics in 1991 then proceeded to UP College of Law. Robredo was our guest speaker during the silver jubilee homecoming of my batch  in 2016.

We need a leader who considers economics as a vital branch of knowledge and essential to good governance.

(Atty. Dennis R. Gorecho heads the seafarers’ division of the Sapalo Velez Bundang Bulilan law offices. For comments, email [email protected], or call 09175025808 or 09088665786)