Proem

The government tells us that the economy is good. The people are wondering, if the economy is good, why are we still hard up? So the next question is, to whom is the economy good?

Conflicting Theories

The government espouses the Keynesian theory of economics. It is the theory taught in schools because it is the theory used in the United States and written in American textbooks. We study American textbooks and our graduates learn the Keynesian theory.

The Monetarist economy is not studied and it is not favored by our laws and legislations.

The Boholanos, even though they do not know it, are espousing the Monetarist theory of economics. The event of a fiesta is a good example of an application of the Monetarist economic theory.

The Keynesian theory favors economic growth. The Monetarist theory favors economic expansion. In the Keynesian theory the economy can grow like a tree but it may not expand. The export processing zones are examples of growth in the economy but it does not cause the economy to expand.

The Monetarist economy, like an adult person, can expand, even if it can no longer grow. The establishment of many sari-sari stores or small repair shops are examples of the application of Monetarist economy.

Inherent Differences

Keynesian economic theory favors controlled inflation, usually 4%, as the fuel of economic growth. Monetarist theory does not want inflation. The growth should be fueled by expanded economic activity or many small businesses.

Keynesian theory favors credit or spending now what is to be earned in the future. Due to the inherent inflation, it is better to spend now while your future deflated earning has still a greater purchasing power. This is the reason why Americans always buy on credit.

Monetarist theory favors spending only what you earn after you earn it. The Boholanos favor the baylo and hulam of money. The Boholanos will say "Pabayloa o pahulama ko og kwarta. = Let me borrow money." In the Boholano culture the baylo and hulam do not entail money interest. The "borrow (hulam)" in the bank is different because it is a Keynesian theory and it already entails interest. No bank will let you borrow without interest and collateral.

Keynesian theory is measured in terms of wealth and poverty while Monetarist theory is measured in terms of satisfaction and quality of life. The fiesta in Bohol is a Monetarist economy because it is anchored on thanksgiving for God's blessings. The money is spent to share one's blessings with his fellow Boholanos. In other words it is measured in terms of satisfaction.

The Consequence

The government tells us that the economy has grown because foreign money is invested in the Philippines. However, this money is invested by foreigners for the purpose of their own profit. Once they earn the profit they brought their profit outside the country. The lower strata of the economic pyramid do not benefit from this investment and therefore they are still hard up.

Add to this the monetary policy that your bank deposit earns only 2% with 20% tax. However, if you borrow from the bank you will pay interest of 20% for the borrowed money. In spite of this situation the Boholanos still continue to deposit in the bank and would not borrow.

There is an oversupply of money in Bohol as shown from the fact that local banks are declaring losses. They pay more interest to the deposits than the earnings from borrowings. That is the reason why our local banks do not pay income taxes because they do not have income.

Since our government and our economists fail to appreciate the Monetarist economics of the Boholanos, the money of the Boholanos is invested in the informal economy. The informal economy does not pay taxes and the government would not earn. Those who have extra money to invest, finance the "swertres." Where else could they earn from their money? The bettors hope that they will win. Where else could they hope to earn money also?

The economy of mainland China is an example of a Monetarist economy that has survived the stranglehold of the Keynesian economy of the United States. Since 1948 and until the present the salary level of the workers in mainland China is still the same.

But the workers have little to worry because education and medical care are free.

In the Keynesian economy of the Philippines the inflation since 1948 is already 6,150%.

(Note: In 1948 the daily wage was only P4 compared to today's P250). So the stable 1948 prices in China become very cheap compared to our own.

When and unless our economists can reconcile the conflicting economic theories, the people will remain hard up.