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‘BBB’ bellyaches, barfs

“Infrastructure spending catalyzes agricultural productivity where bridges, ports, and roads reduce distribution costs, increase margins and reduce prices to induce demand, increase supply and spur productivity.

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It’s boorish and almost totally baseless. What basis there might have been was proven dated, and that makes the declaration irrelevant verging on fake and false. To describe the centerpiece economic initiative of infrastructure catch-up by the Duterte administration as a dismal failure is not only wrong but the sound bite reeks of ignorance and an insidious partisan attempt to stain the administration as a failure going into the last years of its incumbency.

Note the tainted source of the shallow sound bite. Do the arithmetic and see where there is a conspiratorial gambit to weaken the people’s trust in Rodrigo Duterte, first by attacking his popular anti-illegal drugs program that sought to control drug trafficking institutionalized in the previous Liberal Party-ruled presidency of Benigno Aquino III, and then in the “Build, Build, Build” (BBB) initiative meant to fill in gaping lapses likewise widened under Aquino.

LP stalwart and Senate Minority Floor Leader Franklin Drilon, in an unrehearsed interview moments from a hearing on the matter and without the benefit of analytical thought, had quickly adjudged the Duterte infrastructure initiative a “dismal failure.” Offering neither palliatives nor solutions, not even well-thought through suggestions, what were formerly obstructionist views degenerated into mere bellyaching as all he did was perform a clerical count.

Allow us to analyze critical if not fatal flaws in the arithmetic Drilon cites. More important, discern the logic and economics he employs, the cumulative effect of which convinces us that not only does the opposition not know much about the Duterte agenda they cavalierly attack, but they are totally clueless on the basic canonical macroeconomics underlying his agenda.

Let’s start with Drilon’s sound bite analysis. He premises his argument on a 20 percent contribution of government spending (GS) to gross domestic product (GDP) where the BBB is tucked in. He imagines that since BBB spending was below targets then as a 20 percent driver it would necessarily fail to be productive.
On this, he is wrong on many counts.

One, GS may be one of five addends in the GDP expense formula but it is not a one-fifth (20 percent) GDP contributor. To validate, think of agriculture as also being one of five and yet its contribution to GDP is not 20 percent. In mathematical analysis being one in a set of five is not the same as a 20 percent quotient unless all addends have the same value. But that’s impossible. If Drilon had understood the arithmetic, he would have employed the weighted average formula.

Two, the opposition leader wrongly assumes the success of the BBB is in its role as a stand-alone spending activity where the volume of spending determines productivity. That is not only sophomoric, it’s simplistic verging on ignorance. An expenditure is never undertaken for itself. That is only true in the universe of corruption. Government spending are virtual multipliers that eventually produce more than was expensed.

In the case of the BBB, the yields are not only far into the future and thus unmeasurable in the present, but its fluid calculus is also reflected in other GDP addends apart from government spending.

Infrastructure spending catalyzes agricultural productivity where bridges, ports, and roads reduce distribution costs, increase margins and reduce prices to induce demand, increase supply and spur productivity. BBB also reduces utility, water and energy costs to increase manufacturing margins, increase supply, bring down product costs and again increase demand that compels household consumption and exports, where the latter two are GDP formula drivers themselves.

Note synergies of even the most modest infrastructure project. Things inherently multiply. Even negatively. Even the most modest achievements in the BBB can yield unprecedented productivity as much the most clandestine corruption can hide even greater costs. Remember the forgotten P62 million Iloilo Convention Center whose costs ballooned to P747 million?

If Drilon had wanted to determine the full measure of productivity or non-productivity of those BBB projects that had gotten off the ground, he needs to quantify the total econometric impact on the other GDP addends before he can declare the BBB to be a “dismal failure.”

Unfortunately, more than bellyaches, that would probably make his nose bleed. He may fancy himself an Adam Schiff. But he’s certainly no Paul Samuelson, much less an Adam Smith.

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