Monday, September 17, 2007

Debtbed

By Siesta-friendly

With the economy driving more of our people especially much-needed professionals like engineers, scientists, nurses and doctors to work abroad, with our new “mini-size me” culture[1] caused by our much decreased (and still decreasing) disposable income, with our government practicing its own brand of Ponzi scheme of borrowing from one creditor to pay off another, with negligible budget allocations for social programs (like healthcare and education), it is disturbing and very frustrating that campaigns for renegotiating, suspending or even repudiating some of our debts have not galvanized the masses to demand the immediate reversal of fiscal policies.

It’s not hard to understand – if you are poor why spend most of your income to pay off your debt and leave very little for your family’s food, medicine, education and other daily needs? That is slow suicide. Yet, that is exactly what our government has been doing for years.

What can we do? 1st, we’d do well to recognize the legal concept called “Odious Debt”. It’s a legal basis other countries including even the US and Great Britain have used to repudiate their own foreign debt.[2]

Repudiate Odious Debt

Legally, debt is to be considered odious if the government used the money for personal purposes or to oppress the people. Moreover, in cases where borrowed money was used in ways contrary to the people’s interest, with the knowledge of the creditors, the creditors may be said to have committed a hostile act against the people. Creditors cannot legitimately expect repayment of such debts.”[3]

The common argument against repudiating debt on the basis of it being odious is that such act would make the debtor-country an international outcast and will be avoided by future creditors. Since other countries have in fact repudiated their debt and have been able to avail of more loans, it is obvious that this is an argument concocted by creditors to scare poor debtor-countries from repudiating their debt so they can continue collecting.

The stand-out in the Odious Debt category, even in the international context, is the loan granted to the Marcos government for the creation of the Bataan Nuclear Power Plant which cost us USD155,000 a day (about USD2.3B in total) without a single watt of energy produced - on top of being set near 2 fault lines and a volcano, they were numerous safety risks found - and for a cost that would have purchased at least 3 plants instead of only 1.[4] And that’s just the tip of the iceberg for the Marcos regime and certainly together with the succeeding regimes.

A list of behest loans (i.e., government-guaranteed loans at the behest of cronies or public assumption of private debts) alone (for Ferdie’s friends to Glo’s) will probably take up dozens of pages. IPP contracts and NPC-guaranteed loans will add a few more. White elephants surfacing every few months would make it a perfect catalogue of how to bleed a country dry. And the list naturally goes on with the latest addition being the NBN (nationwide broadband network) deal, whether or not they find the missing contract.

But not only does our government favor the creditors’ stand (over providing for the people’s needs) but the government has, from the time of Marcos, bent over backwards to please our creditors by regularly automatically appropriating funds for debt repayment even before funds have been allocated for government programs.

Repeal the Automatic Appropriations law

Despite widespread poverty, rising unemployment and lack of adequate social programs, during each budget appropriation the government implements Section 31 of P.D. 1177 which states that:

“expenditures for … (b) principal and interest on public debt, (c) national government guarantees of obligations which are drawn upon, are automatically appropriated.”[5]

This means that the poor chooses to set aside funds to pay its debt before providing funds for anything else even if it results in hardly any funds allocated for its daily needs (even food or medicine).

Thus, in the 2007 national budget, the government allotted P7,133 per capita for debt repayment while allotting only P165 per capita for health and P1,827 per capita for education, culture and manpower.[6] With a government that has a propensity to borrow (its borrowings total more than the last 3 regimes combined) than to find ways to stem graft and corruption, scrap its pork barrel and streamline the bureaucracy, the Ponzi scheme continues (inducing Juan de la Cruz to either slowly starve or suffer from lack of healthcare or promptly escape if he can).

The dictator called for automatic appropriations to please his (possibly complicit) creditors. The dictatorship is gone, the housewife, the general and the actor who have succeeded have left office. The economist sitting at the top should know better but remains as insensitive as the rest who preceded her. We should discontinue the dictator’s practice and reverse the policy of pleasing creditors first before caring for the people’s welfare.

Uphold the Constitution

The Constitution lists and limits the authority of government and sets forth the following distinct mandates:

“The State shall pursue an independent foreign policy. In its relations with other states, the paramount consideration shall be national sovereignty, territorial integrity, national interest, and the right to self-determination.[7]

The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living, and an improved quality of life for all.[8]

The State shall develop a self-reliant and independent national economy …”[9]

Promoting the people’s welfare, providing an environment that protects local industries, stimulates production and creates jobs, and creating policies free from the influence of foreign self-interest are basic strategies for real national development.

There are clear ways to rise from our debtbed, we really can’t afford to ignore them.



[1] Olarte, Avigail and Chua, Yvonne T. “Mini-size Me”. PCIJ I-Report, Issue No. 1 Jan-March 2005. http://pcij.org/i-report/1/mini-size.html, accessed September 11, 2007.

[2] Taken from http://www.jubileeiraq.org/odiousdebt.htm, accessed September 11, 2007.

[3] Taken from http://www.jubileeusa.org/truth-about-debt/dont-owe-wont-pay/the-concept-of-odious-debt.html, accessed September 10, 2007.

[4] Cabacungan, Gil C. Jr. “Saga Of Bataan Nuclear Plant Debt Ends Next Year”. Inquirer, November 24, 2006. http://newsinfo.inquirer.net/inquirerheadlines/nation/view_article.php?article_id=34487, accessed September 12, 2007.

[5] July 30, 1977.

[6] IBON Media. “Debt Payments At All-Time High: Social Services Spending Still A Casualty Of Govt’s Debt Service”. IBON Media Releases, July 18, 2007. http://info.ibon.org/index.php?option=com_content&task=view&id=161&Itemid=51, accessed September 11, 2007.

[7] Section 7, ARTICLE II, supra.

[8] Section 9, ibid.

[9] Section 9, ibid.


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