ON Monday, the Securities and Exchange Commission (SEC) lowered the boom on the controversial online news organization Rappler, revoking the license to operate of both the news site and its parent company Rappler Holdings Corp. for violations of the constitutional proscription against foreign ownership of Philippine media businesses.
In its 29-page ruling dated January 11, the SEC said that Rappler had sought to circumvent the ownership restrictions by issuing nearly 20 million Philippine Depositary Receipts (PDRs) to eBay founder Pierre Omidyar and another foreign entity, North Base Media, effectively giving the outsiders control of the “social network news” organization.
Rappler has argued, and will undoubtedly argue again in its inevitable appeal to the courts that a PDR does not confer any ownership, but as the SEC ruling points out, ownership privileges (such as the requirement that Rappler confer with the PDR holders on certain management decisions) were specifically attached to the arrangement. Even if they were not, under International Accounting Standards (it’s IAS 32.16, if any of you playing along at home feel like looking it up), PDRs are considered equity instruments.
The SEC decision was the result of a lengthy investigation begun in December 2016 at the behest of Solicitor General Jose Calida. Although Calida of course has not said as much, it is widely assumed that his prodding the SEC to look into Rappler’s ownership arrangement was an official reaction to Rappler’s aggressive and at times reckless criticism of the Duterte administration, as well as its equally unapologetic favorable bias towards the discredited Liberal Party of former president BS Aquino 3rd.
Reactions to the SEC decision have been predictable; the media community has largely joined the opposition in condemning the government’s move as an attempt to stifle press freedom, while Duterte supporters have been equally obnoxious in gloating over Rappler and its annoying chief Maria Ressa being taken down a couple pegs.
In a Facebook post on Monday evening, respected Manila Standard columnist and radio host Jojo Robles made a sensible observation about the controversy:
Therein lies the rub; if left alone, Rappler would have almost certainly folded within a year or two. Never profitable, the badly-managed Ressa brainchild was evidently struggling for fresh funding, even resorting to soliciting public donations in recent months, an effort that earned an embarrassingly lukewarm response.
Most of its failure as a going concern can probably be laid at the feet of Ressa herself. At one time one of the noteworthy media personalities in the country, Ressa left ABS-CBN under a cloud of controversy and then turned what was a novel, risky, but potentially game-changing business model into a personal pulpit. Rather than creating a new kind of news organization, she and a few like-minded partners simply created a sophisticated collective blog.
There is actually nothing wrong with that, but it puts one into an entirely different ecosystem than mainstream media, which Ressa, for all her aspirational crowing about “taking back the social media,” obviously never understood. Unlike the mainstream media, where one can get by, at least in a financial sense, on reputation and access, social media success or failure is entirely dependent on content. On the one hand, it can be liberating; the pretension of objectivity the mainstream stubbornly clings to as though anyone is still fooled by it can be discarded. On the other hand, it holds one to a paradoxically higher critical and creative standard; bias alone does not confer credibility beyond a narrow, unthinking audience.
That is where Ressa and Co. fell apart. Rappler could have been a smart, consequential voice of dissent, the sort those who it opposes are obliged to respect and respond to thoughtfully, but the organization ruined its opportunity with sloppy work. That haphazard approach apparently applied to its management as well, and in reading the SEC decision, the overwhelming impression is that never has the old saying “those who live in glass houses shouldn’t throw stones” had a better real-life example.
Nevertheless, the end of Rappler should be regarded not with smug approval but with alarm, no matter what one’s political leanings may be. The government may say that it is simply enforcing the law, but unless it continues beyond Rappler to legally hold to account the many Philippine businesses – media and otherwise – who openly flout foreign ownership restrictions through the use of the PDR loophole, then it will be very hard to believe that its move against Rappler is anything but a heavy-handed silencing of dissent, regardless of how inept and annoying that dissent may have been.
Beyond that, the Rappler controversy highlights a couple of larger issues the country would do well to discuss and resolve, beginning with the question of to what degree foreign ownership restrictions are actually a benefit in an increasingly borderless world. With respect to the country’s media, the fact that it can spawn something as craptastic as Rappler in the first place suggests the answer might be no.
JUST before the holidays, President Rodrigo Duterte signed into law the first significant piece of policy work his administration or the current Congress has accomplished, the long-promised tax reform package awkwardly dubbed “Tax Reform for Acceleration and Inclusion.” The only reason it is called that is so the government could make the acronym TRAIN from it, since a policy initiative in this country cannot be considered official until it has a cute-sounding shortcode.
For the record, that will be the last time I will refer to the program as “TRAIN.”
The tax reform scheme began to take effect this week, and has been met with completely predictable reactions. The government and supportive analysts and pundits naturally have touted the package’s benefits, stressing that it will provide a more equitable, poor-friendly tax regime while still providing sufficient revenue for government programs. The opposition and the more socially-minded dispute this, claiming that the measures put in place to compensate for reduced income taxes will put an undue burden on lower-income people.
There is likely a considerable amount of truth in both sides’ arguments, but both tend to oversimplification. That is unavoidable; taxes are complicated, and difficult to explain to the wholly uninformed in a way that is easily digestible and still detailed enough to be accurate. Some take this as an indication that taxes should be simpler, and argue — erroneously — that this would also make them more “fair.” The reason tax regimes are complicated, however, is precisely for reasons of fairness, or at least ostensibly fair intentions, not only toward the people subject to them, but to the governments who rely on them for income.
To avoid oversimplifying things while still keeping an analysis down to a size an ordinary person can wrap his head around, over the next several weeks — as the demands of paying work, single parenthood, and the occasional compelling non-tax related topic allow — I will be posting a series of what I hope will be helpful explanations of the various components of the tax reform package, according to the order in which they catch my attention. For those who would like to see the entire law, you can find it on the Department of Finance website, or even better, the website of P&A Grant Thornton, where you will also find a helpful infographic summarizing the reform package’s key provisions.
The Coal Excise Tax
Now that I have gotten that extended preamble out of the way, let’s turn our attention — because as far as I have been able to determine, no one else seems to have noticed it — to a provision of the tax reform package that may turn out to be a much more serious imposition on the public than it appears at first.
Under the tax reform package, the excise tax on coal will be raised from the current P10 per metric ton to P150/MT by 2020 in P50/MT annual increments. The tax would properly be referred to as a royalty, since it applies to coal mined in the Philippines; imported coal is subject to different tariffs. According to Department of Energy data for 2016 (2017 statistics have not been compiled yet), the Philippines consumed 19.39 million MT of coal for power generation, about 40 percent of which was from domestic mines. Coal-fired plants accounted for 47.7 percent of the 43.3 million MW of electricity generated in 2016; both the total consumption of coal and its share of the power generation mix will increase in the coming years, as most of the planned and already building new capacity will be coal-fired.
Coal is also a fairly expensive power source, as coal prices have more than doubled since January 2016 (the current price is about P5,150/MT), and accounts for about 70.6 percent of the generation cost from coal-fired plants.
Consumer Impact of Tax Increase
Based on current prices, fuel costs for coal-fired plants due to higher taxes will increase by 0.78 percent this year, 0.96 percent in 2019, and 0.95 percent in 2020, which will raise overall generating costs by 0.55 percent this year, and 0.69 percent in the next two years.
This will result in an increase 0.26 percent to 0.37 percent in your electric bill in 2018, depending on how much electricity you use; because generation cost is a pass-through charge, it is scaled so that its percentage of the total bill decreases with higher usage. For example, a family that consumes 60 kWh per month pays a little more than 68 percent of its bill toward generation charges and would see its total bill increase by about P1.50 per month as a result of the tax. About 47.3 percent of the bill for a household that uses 230 kWh per month is generation charges, and the tax would add about P2.75 to the monthly bill.
The increase in electricity costs will have a modest direct impact on inflation, adding between 0.012 and 0.017 percent to CPI this year, and about 0.02 percent from next year onward. There will also be an indirect effect; higher electricity costs, marginal though the increase attributable to the coal tax may be, will lead to higher prices for goods. The increase in inflation will probably be rather small — likely no more than a tenth of a percent — but it will be an increase nonetheless.
On its own, the increased coal excise tax does not impose a significant hardship on individual households; it will result in electric bills a few pesos higher than they are now, and incrementally higher costs for food and other expenses. The entire tax reform package, however, appears to be filled with these sorts of sleeper provisions that, taken altogether, could place a considerable financial burden on Filipino families.
What is particularly alarming about the coal excise tax provision is that first of all, it is a regressive tax; those who use less electricity — read, lower-income families — are proportionally affected more than those who use more electricity. This was perhaps unintentional, but it nevertheless violates the expressed objectives of the reform policy.
Second, although the impact of the excise tax on an individual household is minimal, there is very little likelihood that it will ever be less than the estimates provided above, and it could be much more. The significant variable here is fuel prices; a drop in coal prices would certainly result in lower generation costs and consequently lower electric bills for consumers, but because the tax is indexed to volume and not price, the reduction in coal prices would have to be fairly substantial for the impact to be felt.
In addition, the government’s energy policy, which is heavily committed to adding coal-fired capacity, would likely cancel out much of the benefits of lower coal prices because the proportion of electricity generated by coal power will increase in the near term. As the Duterte administration is at this point largely continuing the Aquino-era policy of giving little more than lip service to energy alternatives, success in developing generating capacity as an expression of its “build build build” mantra could actually turn the coal excise tax into a noticeable financial annoyance for ordinary Filipinos.
As it is now, the coal tax is just a pebble to add to the pile of expenses the country’s consumers must manage. Add enough pebbles, however, and the pile can suddenly become very heavy.
ON one level, Michael Wolff’s controversial new book about Donald Trump and his inner circle simply confirms what many of us already knew or suspected: That Trump himself is a horrifying caricature of an actual human being, surrounded by an enabling coterie of incompetent sleazebags motivated solely by personal greed, a twisted circus troupe that, in defiance of all reason or logic, now leads one of the world’s superpowers.
On another level, however, Fire and Fury: Inside the Trump White House describes something much worse: Donald Trump is apparently a Trojan, an impostor file carrying malicious code to infect parts of the program that runs the complex computer simulation we perceive as our Universe and reality.
An assertion like that is enough to cause so much eye-rolling I can actually hear it from here, so let’s go through this step by step, starting with the possibly alarming idea that we live in the Matrix.
The theory that the Universe as we know it is actually an enormous simulation is not all that new; the concept has floated around in one form or another since the 1930s, and is intricately connected to quantum mechanics.
Our best understanding of the Universe — reality, in other words — at the quantum level, the smallest building blocks of everything we can perceive, is that it is a biocentric, model-based reality. For any practical purpose, it doesn’t exist until we observe it; until then, it is just a stew of quantum probabilities. American physicist John Archibald Wheeler described reality as “participatory,” and experiments with his ideas have tended to support his notion that “everything is information.” This gives rise to the idea that, if we have not created the Universe on our own, we may simply be living in someone else’s simulation of it.
While it is not the only possible explanation of our Universe, the simulation-as-reality theory is compelling enough that it’s perhaps the best explanation we have. After all, we have already simulated the Universe ourselves — albeit on a subatomic scale — and the theory neatly answers the thorny mystery of the genesis of the quantum stew that our observations make real. Plus there is there is the startling discovery in recent years of a specific type of computer code buried in the complex mathematical operations of string theory, which describes the fundamental makeup and interactions of the Universe at its smallest possible scale.
Too Dumb for Democracy
The simulation-as-reality does not preclude the existence of what we think of as “free will”; after all, even in computer programs we develop at our comparatively miniscule scale, algorithms that give parts of programs (such as non-controlled characters in a video game) a certain measure of autonomy are commonplace. Thus we are able to develop certain routines and behaviors on our own, sometimes to our own detriment; we are, apparently, encoded with the capacity to conceptualize things that are beyond our intellectual capacity to effectively operationalize.
A perfect example of that peculiarity in our design is the concept of democracy. In order for democracy to work effectively, we should hypothetically choose the most competent candidate for an elected office. In practice, however, we almost never do.
There are a couple of well-known reasons for this. First is the so-called Dunning-Kruger effect (named for its discoverers from Cornell University), which manifests itself as self-delusion about our own intellectual capacity. Since we are inherently incapable of accurately assessing our own competence, we are unable to accurately assess the competence of others. We tend to overestimate our own intelligence, which prevents us from recognizing our lack of competence in assessing others (such as political candidates), thus we tend to overrated them as well. We rely on what we understand in doing so, which means that we often rely on cues such as displayed confidence — which is, apparently, inversely proportional to intelligence — in order to make judgments.
Second, democracy on a large scale provides no incentive at the individual level to acquire political knowledge, because the individual benefit is quite small. Georgetown University professor Jason Brennan describes how democracy works with this analogy:
How all of us vote, collectively, matters a great deal. But how any one of us votes does not. Imagine a college professor told her class of 210 million students, “Three months from now, we’ll have a final exam. You won’t get your own personal grade. Instead, I’ll average all of your grades together, and everyone will receive the same grade.” No one would bother to study, and the average grade would be an F.
As a result, voters can indulge shallow, irrational, and even destructive beliefs in supporting a candidate, because there are no discernible direct consequences; Brennan likens this expressiveness to supporting one’s favorite sports team. Not only are the odds that a particular individual vote is the one to decide an election incredibly small, identifying the voter is essentially impossible.
In the context of computer programs, these characteristics of democracy represent a serious security risk, because it is very easy to manipulate them to produce negative outcomes, and very difficult if not impossible to make them produce more than average or perhaps just slightly better than average results.
The nature of our reality and our adherence to a political system that we are not actually equipped to handle provide an explanation for why Trump, who Wolff at one point in his book describes as the “rent-in-the-fabric-of-time president-elect,” a man so diametrically opposite everything that a President of the United States — or for that matter, a normally civilized human being — ought to be, was suddenly vaulted into the highest office in the land.
Whether by design or coincidence, he was perfectly suited to exploit the flaws in the American character and its electoral system. To a certain segment of the American population (opinion polls and the results of the November 2016 election suggest it’s about a third), Trump was the equivalent of an email promising the recipient that everything that makes him uneasy — soft borders, free trade, feminism, government regulation, being required to give a damn about the environment, science in general, churches that don’t include Jay-sus, dope suckers, homos, niggers, spics, Chinamen, and especially them goddamn ragheads — could be made to go away if he just opens the attachment.
Trump himself is not actually the problem; he made it clear with his own behavior that he is too stupid to do anything but make a mess of anything he touches, a conclusion Wolff’s book simply confirms. It is the dangerous collection of actors attached to him who are now pillaging the country who are doing the real harm.
We now know what happened; what is still a mystery is why, and who’s responsible. The simplest explanation is that Trump may be a function of reality itself; the program of the Universe, or at least that part that pertains to post-modern American society, may have enough bugs in it that it created its own human malware. Or he might be the astonishing creation of something above our ken, what to us would appear to be a malevolent deity: A supercosmic hacker, so to speak. Or he may be a creation of boredom and a mean streak, a deviant player in a cosmic-scale Sims game.
Whatever his genesis, what happens next is unknown, but probably not good; compromised computer programs can’t fix themselves, at least as far as we know.
IN an optimistic editorial just before the year ended, editor-in-chief Zanny Minton Beddoes of The Economist predicted three great changes beginning in 2018 would shift the balance of power from markets back to governments, leading to — hopefully — a new Progressive Era akin to the one that marked the beginning of the 20th century.
Unfortunately, heaping bad historical comparisons onto a shallow dish of liberal wishful thinking and misread economic indicators does not a convincing argument make. 2018 may indeed be the start of a new era, but it is very likely to be anything but progressive.
The case Beddoes makes is that despite the modest results in 2017 of 2016’s “shock” populist political victories — she singles out the post-Brexit vote gains of Britain’s Labour Party, Emmanuel Macron’s victory in France (he was actually elected in 2015, and took office in 2016), and Donald Trump as the most salient examples — populism will continue to surge in 2018 and beyond, leading to a tipping of the balance of power from markets back to the state. The implication is that the new era will mark a renaissance of social democracy, akin to the Progressive Era that marked the beginning of the 20th century, a period with which the present day has what Beddoes feels are eerie similarities.
Signs indicating populism will continue to gain strength include the rise of “insurgent parties” in Germany, the Czech Republic, and Austria; the possibility that Italy’s Five Star Movement “might” gain a parliamentary majority in elections this year; and a bit farther from the liberal white European center of Beddoes’ universe, the surge in popularity (thanks to Trump’s anti-Mexican rhetoric) of career political outsider Andrés Manuel López Obrador in Mexico.
The decades straddling the turn of the 20th century saw a number of remarkable technological advances that reshaped the world economy; Beddoes mentions electricity and the railroad, but she might well have included communications (the telegraph first, and then radio) and the development of air transport. The modern corollaries, according to her, are artificial intelligence and the so-called Internet of Things. The scale of wealth creation and income inequality is approximately similar now as it was then. And the “anger of those left behind” is being directed now, as then, at both the elites and immigrants.
The present environment, which Beddoes points out is also marked by the strongest economic growth in a decade, record highs for markets, and “unusually low” measures of financial risk, has created three forces that will shape the new age beginning in 2018. The first is the “techlash”:
Across the rich world, politicians will turn on the technology giants—Facebook, Google and Amazon in particular—saddling them with fines, regulation and a tougher interpretation of competition rules. It will be the 21st-century equivalent of the antitrust era, with the tech giants vilified as malevolent quasi-monopolists whose behavior is weakening democracy, suppressing competition and destroying jobs. There will even be talk of breaking them up.
Ms. Beddoes also places high hopes on the abilities of France’s Macron:
The second force of change will be Mr. Macron, who, notwithstanding his incrementalist start, will emerge as a modern-day equivalent of Teddy Roosevelt, the American president most associated with the Progressive Era. There are strong similarities between the two men: both wrap a reform agenda in the rhetoric of national renewal and greatness. Like Roosevelt, Mr. Macron is pushing a new kind of social contract, one that boosts competition and entrepreneurship while protecting workers who lose out.
Finally, fear of the rapid ascendancy of China, which Beddoes asserts has a historical parallel in the impact of Germany’s rise on European policy in the pre-World War I era, will influence geopolitics in ours:
From Australia to Europe, rules on foreign investment will be tightened, with the goal of deterring Chinese takeovers. Mr. Macron will become a cheerleader for investment regimes that protect European interests. America will impose tariffs on Chinese steel and will levy sanctions for intellectual-property theft. The norms of the World Trade Organization will be weakened. Protectionism in pursuit of restraining China will be condoned.
Where all this will lead is uncertain, Beddoes concludes, although she is not shy about which of the two possible outcomes she sees is her preference. The balance of power will either tilt toward the state in the form of “a more regulated, defensive, and protectionist kind of capitalism,” or
But with luck, the new balance will be marked by a broader embrace of competition as the best way to counter the power of entrenched elites, and involve an imaginative rethinking of the state’s role in protecting the individual. That would make it a progressive era to be proud of.
A view not of this world
If there is a reliable prediction about 2018 and beyond that can be made, it is that a world that resembles something very different than either of Beddoes’ glib models is a virtual certainty, since the world as it is now is a hell of a lot more complicated than it apparently looks from inside The Economist’s newsroom.
The first flaw in Beddoes’ thesis is her gross misreading of the state of the world economy, in that she makes the assumption that it is actually healthy, and will continue on its current trajectory for the foreseeable future. That is unlikely to be the case for very long; the good times might last until the latter part of this year, but will certainly not continue beyond that, as this enlightening and alarming article by David Stockman explains. Overvalued equities, particularly in tech stocks, overvalued real estate, massive debt bubbles, and the continuing insanity of cryptocurrency are all going to find themselves in free fall as liquidity vanishes, and recovering from it will be an insurmountable challenge, at least for longer than anyone’s comfort can endure, for either markets or governments.
The second flaw in the argument is that the real technological drivers of the global socioeconomic shift are left out. Indeed, AI and IoT are remarkable and are having an impact, but their influence pales in comparison to that of social media and the increasing democratization of commerce. On the positive side, the unprecedented connectivity of people and the almost limitless opportunities for economic participation it provides — without ignoring, of course, that there are still masses of those who are yet disconnected — has weakened the power of the global industrial complex over the individual.
On the other hand, it has deeply fractured human society; organizing any sort of majority of views has become virtually impossible, because instead of creating a world community, it has empowered everyone to be their own community. Human nature and our sense of self-preservation being what it is, the coming economic crisis is likely to aggravate our differences. The most likely response of governments under pressure will not be a “techlash,” it will be a “peoplelash” — something we may be seeing the first signs of in moves like the rollback of net neutrality in the US, and South Korea’s increasing crackdown on the cryptocurrency craze.
Third, while Macron might yet be a surprising reformer, there is actually nothing about him to suggest he is anything but a business-friendly centrist. A former investment banker and Minister of Finance, among the moves he has made in his career have been to oppose (unsuccessfully) a tax increase on high-income earners and (successfully) a measure that would have regulated the salaries of CEOs. Leading a deeply-divided France in an EU that is increasingly in disarray, his “incrementalist” approach is probably as good as it gets; historically, progressive reformers (like T. Roosevelt, to whom Beddoes fangirlishly compares him) have always found much more success in front-loading their initiatives rather than backing into them. If Macron hasn’t started by now, it is not likely he ever will.
Finally, the comparison of China now to Germany at the beginning of last century is completely specious, because there is no precedent for modern China. For one thing, Bismarck’s Germany never had the soft power China has now, nor did it pose the same economic challenge to powers like Great Britain and France. The geopolitical circumstances of last century were much simpler, because individual economies were not so intricately linked as they are now; the Western world simply cannot afford to push China too far without risking their own well-being. In the coming economic crisis, provided China can hold its own economy together, it stands to dominate a new iteration of globalization — one that most definitely will not be characterized by the sort of nanny-state supported individual freedom that The Economist judges to be the proper aspiration of the world.
Photo released to the media by Presidential Assistant Christopher Go
IT is one of the more discouraging parts of the routine here in the Philippines that the country cannot get through its most important holiday (Christmas actually begins around the first of September here) without suffering from one or more horrific tragedies. If it’s not a natural disaster such as one of the country’s frequent destructive tropical storms, it’s a massive fire with casualties numbered in the dozens.
On Friday, the NCCC Mall in Davao City went up in flames shortly before 10 am, when it would have opened to the public. The fire began on the third level of the four-story mall, in an area where furniture, dry goods, and housewares – in other words, mainly cheap flammable crap imported either from China or from the sketchy beehive of manufacturers of cheap flammable crap around Metro Manila – and spread rapidly, trapping and ultimately killing 37 people, all of them workers at a call center located on the mall’s fourth floor.
The tragedy momentarily attracted media coverage here because Davao is the personal fiefdom of President Rodrigo Duterte, who was mayor of Mindanao’s largest city for 27 years, and installed his daughter and son as mayor and vice-mayor, respectively, upon his election to the presidency. The most important part of the story of the mall fire, apparently, was the fact that Duterte broke into tears upon meeting the families of the missing people and informing them that there was no chance anyone who didn’t make it out of the building could have survived.
But to be fair to Duterte on a personal level, disasters do seem to bring out his human side; unlike his elitist and misanthropic predecessor, he is neither ungenerous nor self-conscious with his sympathies for the victims of tragedies. But the other facts of the case – the destruction of the city’s second-largest business establishment, a fire that should not have happened and certainly should not have been as bad as it was, and the extremely problematic fact that the business that suffered the worst loss was an American-owned BPO office – are not quite so appealing as media fodder, and the story had dropped off the local news radar by midday Sunday.
That is, unfortunately, probably not surprising for a country where major industrial fires happen a couple of times a year, and where a neighborhood of squatter shanties goes up in flames almost every day. That Filipinos are so inured to disasters like this is the result of an almost willful disregard for standards when it comes to buildings and matters of occupational health and safety, despite the existence of enough regulations to fill a book big enough to stun an ox. As a former mayor and now as president, Duterte, whatever grace he has in commiserating with his people, deserves some of the blame for that dangerous attitude.
Swamp of corruption
Fire safety standards are nominally managed by the Bureau of Fire Protection, a national-level agency, but one that in practice devolves a lot of authority on local departments organized at the level of cities or municipalities. Among business owners in the Philippines, the BFP is considered one of the most notoriously corrupt agencies anyone has the misfortune to have to deal with. Although there are maybe local exceptions, it is considered standard practice that to obtain the necessary BFP permit, one will be obliged to purchase sprinkler systems or fire extinguishers from BFP personnel or their designated suppliers. But on the other hand, for the cost-conscious businessman, that is often the limit of BFP’s interest in conducting inspections and actually ascertaining if an establishment is up to code or not. Even the equipment purchased under compulsion may not be adequate or appropriate; as long as one is willing to pay the ticket, he gets the permit.
And since fire inspection clearances are connected to other construction permits, which fall completely under the purview of the local government, the BFP racket requires the cooperation – connivance would be a better word – of the mayor’s office, which can be assumed to be compensated for its indulgence.
As long as nothing blows up, everything’s fine. And if it does go up in flames, the business will invariably be found liable – although in actual fact, accurately in most cases, since the corruption encourages this sort of behavior – for having made alterations or engaged in unsafe activities contrary to the building permits. Fines will be levied, compensation will be paid to the victims’ families, and the relevant officials will huff and puff about yanking the afflicted firm’s business license (noise that always seems to stop if it’s muffled by enough cash). But after a relatively short time, everyone will quietly get back to business as usual.
Any protest that Duterte was somehow above all this as mayor is rather starkly refuted by the four stories of smoldering wreckage now gracing one of the main thoroughfares of his hometown. The swamp of dangerous corruption is part of the cultural ecosystem, much bigger than even his outsized personality and reputation can contend with. And the fact that Davao, though not an unsuccessful place by any means, is otherwise not usually the first place on most foreign investors’ lists of potential landing places suggests that it doesn’t impress as one that is fundamentally different from the rest of the Philippines.
The biggest victim of the mall fire was Research Now SSI, a market research firm with headquarters in Texas and Connecticut. The company is the product of a merger completed only this past October; the Davao office was originally an SSI location, and employed a total of about 500 people.
The explosive growth of both the BPO and shopping mall sectors in the Philippines has led to a productive sort of symbiosis. BPO firms are of course drawn to the country because of the favorable environment: A population of youthful workers, most of whom are aware that English is a language; government investment agencies eager to dole out incentives to locators; and labor laws that, once a business is established, largely let the firm’s own conscience dictate matters such as compensation and working conditions. Malls offer good locations and facilities, and allow firms to set up relatively quickly. Mall owners, faced with intense competition, are only too happy to have large cuts of leasable space, particularly if it’s space that’s less than ideal for retail, soaked up by long-term BPO tenants, who bring with them large numbers of small-cap but reliable customers in the form of staff.
The fire in Davao, especially because it was as deadly as it was, will almost certainly put this happily budding relationship between malls and BPOs in jeopardy. Even if there was nothing but a tragic accident involved in the Davao fire – which seems likely to be the case, as the fire is a serious setback to NCCC’s plans, announced last month, to undergo a major renovation – the corrupted nature of the permit processes means that any certification of a prospective location’s safety ought to be considered unreliable.
One could hope that potentially driving away BPO business might encourage the government to take proactive steps to enforce a culture of safety, because nothing else has so far. Derailing a long-running gravy train for apparatchiks and local potentates, however, is risky business even for someone of Durterte’s advertised caliber; after all, he is a hereditary product of the same culture. Safer, most likely to simply handle this tragedy as such tragedies usually are handled: Make some angry noises, hand out a few fines, and let the naturally short Filipino attention span move on to something else. If that bothers you, just make sure you know how to get to an exit any time you go somewhere.
THE Philippines’ official unemployment statistics were released earlier today, and showed that in spite of near-7% GDP growth, sovereign credit ratings upgrades, and being showered daily by uncritical adulation by all and sundry, President Rodrigo “сука блять” Duterte and his economic team continue to utterly blow it when it comes to cultivating job creation.
The October Labor Force Survey (LFS) pegged unemployment at 5%, an improvement over July’s 5.6% but an increase from the 4.7% jobless rate in October 2016.
While 1.4 million more people were employed in October than in July, there were about 136,000 fewer workers than a year earlier, despite the size of the labor force being virtually unchanged. The working-age population (15-64 years old) meanwhile grew from 68.743 million in October 2016 to 70.401 million.
The October LFS is the fourth and last for 2017. Across all four LFS during the year, every significant employment indicator was lower than the previous year: The labor force participation rate (LFPR, the percentage of the working-age population working or seeking work) averaged 2.2% lower; the size of the labor force shrank by an average of 413,000; and an average of 485,000 fewer people were employed throughout the year.
Since taking office at the end of June 2016, Duterte has seen improvement in only one of the six LFS conducted during his term so far, in October last year, when the country made a net gain of about 280,000 jobs from the previous survey in July 2016.
FOR many people, 2017 will be remembered as an extraordinarily bad year, and it will be a tremendous disappointment to wake up on New Year’s Day 2018 and realize that no, it wasn’t a bad dream: An openly racist, misogynist, pathological liar is still the president of the United States, terrorists are still running amok in every corner of the globe, the world economy is still based on IOUs and imaginary fairy tokens, and basic facts are still being scorned in favor of willfully ignorant opinion.
By the time 2018 is over, however, we may all very likely be looking back on the year of Trump, Bitcoin, fake news, self-identifying as a gender/ethnic group/inanimate object of one’s choice, and discussing whether or not the Earth is flat like it’s even a debatable topic with a certain nostalgia. As the old saying goes, it’s always darkest just before it goes completely black. With that in mind, here are some predictions for a year we’re going to regret we had to live through, if the human species even survives it:
1. The Bitcoin Implosion
When Bitcoin first appeared, it was a novel concept, if a bit rough in that first-draft sort of way most eventually world-changing ideas seem to be when they are introduced. The distributed ledger technology – the blockchain – could have countless applications (and despite what Bitcoin zealots will tell you, it absolutely can exist without the imaginary fairy tokens), and even the idea of decentralized, digital currency had some appeal. All that went out the window in 2017, however, when Bitcoin turned into the world’s biggest Ponzi scheme. For no apparent reason – certainly not because it’s any good as a currency – it has become a hugely overvalued, sentiment-driven, speculative commodity, one that is not the diffused, crowdsourced store of wealth everyone hoped it would be, but controlled by a relatively small group of major investors and “mining” consortiums able to afford the enormous equipment and energy costs to operate the blockchain network.
That the bubble will burst sooner or later is a foregone conclusion, even among Bitcoin disciples; the most telling sign of that is the shift in tone in recent weeks of discussion in the mainstream and social media (remember, this is an asset whose value is driven by sentiment). Up until a few weeks ago, criticism of Bitcoin could elicit counterarguments with some basis in economics; granted, the arguments weren’t very good, because the idea, at least as long as its proponents were still trying to describe Bitcoin as a form of currency, has a few fundamental flaws. Now, however, all pretense of seriousness has been discarded; the only argument for “investing” in Bitcoin is its insane rise in value – a modern version of “X number of people can’t be wrong.” Since the Bitcoin market is sentiment-driven and purely speculative, its collapse is inevitable: At some point, investors will sense that it is no longer a worthwhile gamble to buy at a high price in the hope of selling at a higher price, and the rush for the exits will begin. What the trigger will be is anyone’s guess, but there will be a trigger; most likely it will come in the form of one or more big holders of Bitcoin dumping their stakes when the price passes a nice round-number threshold, $25,000, $50,000, maybe $100,000 if the insanity lasts that long.
As big as the Bitcoin market is, that catastrophic collapse would not have very serious implications if it was just confined to the strange world of cryptocurrency, but now, thanks to the world having more money than sense at this point, there is a real danger of contagion from Bitcoin’s demise having a serious impact on the real economy. Within the last two weeks, trade in Bitcoin futures and ETFs has been introduced, which puts the imaginary fairy tokens into real markets where people invest in real things, and are not going to be able to if a large part of their capital burns up in the Bitcoin conflagration. Perhaps even more alarming is the amount of venture capital that has been created through ICOs, which owe their existence to the success of Bitcoin. Once Bitcoin goes down, all those alt-coins that have value only because Bitcoin happens to be currently credible also vanish, which will de-fund a large number of startups, primarily tech firms. Thus we can look forward to witnessing both a market crash and the second coming of the dot-com bubble all at once. Good times!
When this will all happen is impossible to tell; it will be sudden when it does. The sooner the better, however, because the longer the Bitcoin bubble keeps inflating, the worse the damage will be.
2. Tesla Goes Bankrupt
Elon Musk is a visionary, multi-talented man, and something of a darling of the New Age. Unfortunately, one talent he seems to lack is the ability to run a business, as this well-researched and painstakingly detailed article published last month explains. About two months before that article came out, I did my own research into Tesla’s state in connection with my real job, and while I approached the assessment from the automotive industry perspective I’m familiar with as opposed to the market investor view of the author of the Seeking Alpha analysis, the conclusions were virtually identical, because numbers don’t lie: Not only is Tesla not working as a going concern, there is no possible way it could work without being radically restructured. The company won’t make it past midyear without that process starting in a painful way.
When it happens, it will pose a dilemma for the US government. Although Tesla is not a major part of the auto industry, it anchors a complex web of technology businesses that will feel the shock; it is an ecosystem that the US quite appropriately wants to see developed, which is why Tesla has been the beneficiary of a great deal of direct and indirect support. Given that it has a sound, or at least potentially sound, underlying product, Tesla probably could pare down its distracting, unprofitable sidelines, tighten up its management, pull its reach back to match its grasp in terms of production targets, and come out of the process a reasonably healthy company. But Tesla will hit the skids at just about the same time Bitcoin is imploding – in fact, the latter event may even trigger Tesla’s collapse, although that is not at all the source of the company’s problems – and that is going to make things very interesting indeed.
3. Terror with a capital T
The chances that those of us who have never been personally impacted in any way by Islamist terrorism will be sometime in the coming year just grew alarmingly, thanks to the completely unnecessary, stubborn, ill-conceived, and intentionally antagonistic decision of the bloated orange freak currently occupying the White House to unilaterally declare the contested city of Jerusalem the capital of Israel. Up to that point, we could legitimately look at terrorism practiced by the likes of ISIS, al-Quaeda, Boko Haram, the Abu Sayyaf, LET, al-Shabaab – geez, there’s a lot of these fuckers, aren’t there? – as being a bastardization of proper Islam (although that might be somewhat debatable), but Trump’s call, which as far as anyone knows, absolutely no one asked him to make, just gave the entire Muslim world, the just and unjust alike, a unifying cause.
I realized just how much about two days after Trump’s decision was announced, when I listened to the noontime sermon at the local mosque (it’s a hundred yards or so from my house, and evidently has a good sound system), angrily denouncing Trump and Israel, and exhorting the congregation to protest the decision. This is a small, unimportant provincial town north of Manila, with a small, peacefully innocuous Muslim population; Jerusalem has no more practical importance to these people than Mars does. And yet Donald Trump has managed to piss them off. I would be surprised if anyone of my fervent neighbors would actually go beyond expressing their anger in harsh words, but if they are any indication of how deeply the offense has penetrated the Muslim world, there are undoubtedly thousands – tens or hundreds of thousands, more likely – who will not feel so constrained.
4. The US midterm elections will be a disappointment
On Tuesday, a little-known Democrat named Doug Jones narrowly defeated his Republican rival Judge Roy Moore in a special election to fill one of the state of Alabama’s Senate seats, left vacant by the promotion of former Sen. Jeff Sessions to US Attorney General. The win was immediately hailed as a blow to Trump and the Republican party, who had campaigned heavily for Moore in spite of his notoriety as a pedophile, his public exclamations that the US was better off when slavery was still a thing, that homosexuality should be treated as a criminal offense, and that all the amendments to the Constitution after the 10 that make up the Bill of Rights ought to be dropped, and despite his general demeanor as a complete piece of shit and total embarrassment to the human race.
The outcome of the election, which Moore has refused to concede and says he intends to challenge, narrows the Republicans’ majority in the US Senate to 51-49, and is being viewed as a preview of even bigger losses for the GOP in November’s midterm elections.
Except it probably isn’t. Roy Moore’s defeat, presuming he and his Republican backers don’t contrive a way to reverse it, is probably a blessing in disguise for the Trump regime. Although he is a comically grotesque, horrible, evil little man who should not even be allowed to walk around in public let alone run for the US Senate, Moore lost by less than 20,000 votes, out of about 1.3 million. Granted, that might not have happened anywhere else but in Alabama – never the brightest bulb in the American chandelier, this is the state that gave us George Wallace, after all – but it nevertheless hardly amounts to a stinging rebuke of the reign of the Pussy Grabber. On the contrary, it plays right into the hands of an administration that has been surprisingly adept at deflecting trouble.
Roy Moore’s questionable use of his penis threw Trump’s own manifold acts of sexual aggression into the spotlight, but that now goes away with Moore’s loss. Having already probably fatally derailed the special prosecutor’s investigation into his Russian connections by politicizing it in the most ludicrous way possible, inexplicably discredited most unfavorable press by shrugging it off as “fake news,” and generally gotten away with daily behavior so offensive it would get a normal person beaten to death by an angry mob, Trump has just been handed the golden prize of a political martyr in Roy Moore with whom to whip up his still evidently sizable power base. Just a few more votes, just a little bit more campaign money, and poor ol’ Judge Moore wouldn’t have been beaten by the scheming liberal elite and the biased, fake-news media, by God. You’d better believe the Trump machine will milk that for all it’s worth going into November.
And it will work, too, because by that time, the terrorist threat (that Trump provoked) will be nipping at every American’s heels; people everywhere tend to rally ‘round the flag at times like that, and conveniently forget whose fault it is they have to in the first place. By that time, the Bitcoin-inspired economic crisis ought to be at full steam as well; the message that “greedy Wall Street speculators” are ruining things for ordinary hard-working Americans has always worked no matter who’s tried it, and of course, the irony that it is usually members of that very avaricious caste shucking that particular line of jive never fails to escape the masses.
The Republicans might lose a few seats, but not enough to really matter, and certainly not enough to put Donny Trump’s crazy train off the tracks. Because Americans are, when it comes right down to it, the biggest collection of spoiled cretins in the world – a big dumb country with a lot of guns and serious self-esteem issues, who are going to wreck the entire planet with their deep stupidity.