July 23, 2024

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The Global (Financial) Economic Crisis

The Global (Financial) Economic Crisis

Contrary to popular belief and what most of mass media is feeding the world’s citizenry, the global (financial) economic crisis did not come as a sudden phenomenon, which besets most, if not all, the countries in the world today.

The advent of the global financial crisis started around the late 1990’s to the first couple of years of the new millennium. With the recent shift towards more of a credit card-driven purchasing system of marketing and advances in Internet protocols which resulted to a heightened viability and practicality of e-commerce and the increase in use of credit cards thereof, consumerism has been upped several notches even to the point that an individual reaches a particular point where he or she is so much indebted that he or she can no longer manage to pay his dues on time. There maybe collaterals in credit and pre-need services but such cannot suffice for the millions even billions and possibly even trillions worth of funds outsourced to support consumer spending and extravagant lifestyle.

Such a scenario posted and continues to post an alarming difference between the rate at which funds are outsourced from banks and other pre-need and lending institutions such as mortgage, memorial plans and the like and the respective returns of investment. This creates stagnation in the economy in that the aforesaid entities cannot anymore bankroll the demands of their customers since their funds are slowly drained due to the wide gap between fund outsourcing and return of investment. In effect, an economic downturn ensues since the money or capital that is supposed to circulate around the market is left in the hands of either the banks and financial institutions or their myriads of customers, many of whom have not yet serviced the credits they owe the lending or pre-need institutions they ascribe to.

The Global Financial Crisis and the Plight of the Filipino Worker

Though it may not be readily seen or felt in the country the global financial crisis is bit by bit drowning the country’s economy since many Overseas Filipino Workers (OFW’s), who are easily the biggest contributors to foreign exchange and dollar reserves via their remittances, are laid-off and find it hard to look for employment elsewhere. They are then forced to go back to their native soil and join the ranks of the millions of unemployed Filipinos or seek other jobs that are most of the time not in line with their training and skills.

How does this happen?

The points illustrated in the general outlook or view with regard to the global financial crisis may and will explain most, if not all, the events that precede thereunto which basically start from more of a credit card, fund outsourcing-driven economy or exchange. Filipino migrants and overseas workers are affected in that the companies or firms they are employed in are either cost-cutting and thereby laying off some of the auxiliary, “not so important,” “can be done with fewer members” part of the production line, trimming down working hours to the basic minimum or even closing on certain days of the week or worst, are going bankrupt and choosing to close shop entirely. These firms then go and invest their capital elsewhere where labor is cheaper as in the case of China and its people. Many companies nowadays flock to China since labor is relatively cheaper and the market is a lot bigger. It is the country with the largest population after all which only means a larger market and then again a larger return of investment and flourishing of enterprise-for further development and later expansion.

Since our country specifically our labor force is largely dependent on other countries for investment vis-à-vis employment we are then subject to the business tactics of big foreign companies and even small and medium foreign investors and are at the mercy of our employers-whether they choose to lay-off some workers, cut down on working hours or close shop entirely and invest their capital in countries with lesser labor compensation and ever detail that goes with it. The primary examples of such occasions that happened in the country fairly recently are that of FedEx and Intel. The former, door-to-door delivery and logistics solutions provider closed shop and transferred to China and elsewhere while the latter closed one of their plants in a Cavite thereby laying-off some five thousand to around ten or twenty thousand.

Also, the Philippine Export Zone Authority plant located in some parts of the archipelago and especially that in Baguio City where a number of companies engaged in semiconductor production and assembly has considerably laid-off several hundreds to thousands of workers or cut down on working hours. Moog, for example, does not anymore allow its workforce to have overtime in. The measure was implemented in order that the workforce be maintained (meaning no one is laid-off) while considerable cost-cutting is ensued. Texas Instruments meanwhile has laid-off several thousands of workers in lieu of cost-cutting and better management of resources both human and capital.

In countries abroad, companies especially pre-need firms engaged in fund outsourcing, mortgage, housing and the like down to the ones which invest in construction, engineering, research and many more have either laid-off a significant percentage of the workforce (which includes Filipinos of course), cut down on working hours or declared bankruptcy and closed shop entirely. Such came about in the case of AIG (American International Group, Inc.), which according to the 2008 Forbes Global 2000 list, was the 18th-largest public company in the world[1] and Layman Brothers Holdings Inc. in the United States who have filed for bankruptcy protection or bailout.

Furthermore the repercussions of the global financial crisis can all the more be seen in the grassroots level of the household. How is this?

The effects of such phenomenon trickle down from the paradigm of the big corporations and pre-need or investment firms in whatever field of endeavor-from those which serve as employers to their employees, constituents and beneficiaries. The laying-off of workers, reduction of working hours, filing for bailout and bankruptcy and closing of enterprise primarily affect the rank-and-file, regular employees of private and government-owned institutions in that their jobs are the ones at stake.

In the long run all these events can and will result to inflation in that there will be lesser and lesser producers of goods and services in the country; the lesser the producers the lesser the product to be produced or the more strain put on production of the same quantity or amount of final produce thereby increasing production cost and mark-up in the process by virtue of law of supply and demand. This will increase the populace’s reliance on imported goods since they are cheaper. Case at point: China.

Chinese products have in recent years been on the boom. As the joke goes: “God made the world. Everything else is made in China.” Joking aside, there is a truth in the statement. In almost every facet or field of the local and global economy, China is present-from textile to construction to information and communication technology (China phones and gadgetry most especially), human resource allocation and outsourcing and even arms production and military personnel and armory enhancement and development-ironically albeit comically even your underwear has its own version made in China.

The “waking up” of the so-called sleeping giant has weaved its effect into the economic fiber and life of the global community. China’s provisions cheap labor and production has caused other countries to step-up their production process and human resource management in order to keep pace, be competitive pricewise and not be left out in the market. The Chinese global economic community is as is the outsourcer of one of the cheapest labor force and production staff the world over.

In comparison to other nations, the “Chinese economic boom” also affects the Filipino people’s economy. Our workforce or human resource may be one of the most well equipped or at least knowledgeable in various disciplines and competitive, but the cost of their labor and overall production process in our country is generally higher than that of China given that we have a relatively “exorbitant’ taxes compared to the latter giving them an edge over our products (since theirs is cheaper) though ours may have superior or the same quality and durability as theirs.

[1]Wikipedia, The Free Encyclopedia. American International Group. http://en.wikipedia.org/wiki/American_International_Group (accessed March 24, 2009)

The Philippine Government’s Response

Various governments approach the crisis differently. Nonetheless pump-priming, bail out or economic stimulus funds are the common denominator in them all. Governments are geared towards helping, bailing out companies especially those which employ a huge workforce in order that they continue operations and help not only in employment but more so in production and overall economic progress. President Arroyo for her part has signed into law a P1.414 pump-priming budget last March 13, 2009. The law, Republic Act 9524, is P188-billion higher than the previous year’s P1.226-trillion budget according to Budget Secretary Rolando Andaya, Jr.[1] He also said that the increase was meant to spur the economy in the face of the global economic crisis.[2]

The Education Department received the biggest allocation of P158.2 billion followed by the Public Works Department with P130 billion.[3] The Interior Department, which includes the National Police, received P63 billion.[4]

The other top recipients were the Defense Department (P56.5 billion), Agriculture Department (P41.2 billion), Health Department (P27.9 billion), Transportation Department (P25 billion), Agrarian Reform Department (P13.1 billion) and the Judiciary (P12.6 billion).[5]

Conclusion and Evaluation

The global (financial) economic crisis is nothing but an aftermath of man’s greed and want for riches and more and more money. Majority of it stems out from credit and pre-need ventures of firms and the millions of plan holders they service which is geared toward the consumption of goods in the fastest possible time albeit the advancement of consumerism. Pre-need plans and funds are outsourced in order that the participating entities are able to avail of goods and services presto often without regard for the repercussions which was stated in the aforesaid discussion (the ripple effect of unpaid dues by thousands and even millions of subscribers).

We owe it to ourselves to get out of this scuffle we put ourselves into. We contributed to the problem and we ourselves hold the solution to it. A change of attitude from consumer-mentality orientation towards wise spending and judiciousness will surely not hurt.

[2] Joyce P. Panares.Arroyo signs P1.4-T pump-primingbudget. Http://www.manilastandardtoday.com/?page=joycePanares_mar14_2009/ (Accessed March 24, 2009).

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6] Ibid.