A simple solution

January 24, 2009

For most of us, it might be difficult to understand the reason for the downward spin of the global economy but it boils down to overproduction and speculation. While we can point to the highly-excessive US economy and its neo-liberalist policy, which makes it vulnerable to abuse by some enterprising multi-nationals with a lot of grease money to make sure the market forces are artificially stable, we can also cite some countries (led by China), flooding the world with cheap goods and imitations which makes it virtually impossible for small businesses to compete.

Of course, free market forces adhere to the maxim that supply creates demand. What is happening now, however, is not the lack of supply but production is not meeting the demand of quality in products. To put it simply, it’s the case of putting the cart before the horse. There are too many cheap products of the same design but nobody is buying after hearing too many horror stories of toxic poisoning in children, breakable products, and unreliable warranty.

This distrust towards cheap products is further aggravated by the economic downturn which creates a vacuum of demand for non-basic products, which leads to retrenchments and profit loss. It’s no wonder therefore that China is badly-hit by the global recession since it forces nations to cut down on imports and develop local products.

You have the richest family on the block, which becomes the envy of the neighborhood because the parents, who were savvy entrepreneurs, always had the most beautiful cars and clothes, the kids had the latest toys and gadgets, the mansion covers nearly half the block with a 24-hour security detail.

One day, the rich father showed you how he devised a system through maximized use of credit cards, subprime mortgages, and manipulating the market to keep profits soaring. You tried it and saw your bank account expand, you get a new car, renovate your house, send your kids to exclusive schools. Finally, you’re living the American dream.

So what happens when you notice the cars of your neighbor missing one by one? When his kids are now taking buses to school or even transferring to another cheaper school? One day, you see furniture and appliances being wheeled out of the mansion and rumors have it that they are being pawned off. The pool dries up, the dogs stop barking, the security guard goes missing.

You know something is wrong but you’re not sure what. Then you start hearing rumors about banks foreclosing properties, loans getting rejected, markets falling, your friend getting fired from his job, and your center of balance start spinning. You hold on to your valuables and hard-earned money hoping to weather the difficult times. But you know in your heart it’s only a matter of time before you get what’s coming to you.

At work you hear whispers, softly bouncing off walls at first but it gets louder and more persistent. You are next to go.

What do you do?

Our lawmakers found a solution: just add another P2 billion to the pork barrel.