Antonio C. Abaya - Letter from Oakland Hills

In the 20-odd times that I have been to San Francisco (my favorite American city) since the 1980s, the city of Oakland at the other end of the double-decker Bay Bridge has always registered in my consciousness as a grubby working-class industrial exurb, predominantly black and saddled with an alarmingly high crime rate. Why, only last February or March, three Oakland policemen had been gunned down and killed in a drug-related shoot-out.

I was pleasantly surprised, therefore, to find myself in the pleasant suburbs of Oakland Hills, east of industrial Oakland. Nestled in the rolling hills, along tree-lined impeccably maintained suburban streets, and set among English-style gardens accented by some of the most exotic flowering plants that I have ever seen outside a botanical garden, are handsome residences straight out of the pages of Architectural Digest.

It was a wine-pouring soiree organized by some parents whose children attend the Crocker Heights Elementary School, also in Oakland Hills, to raise funds for some school activities.

Wine-pouring because it was hosted by two families who own vineyards and wineries in the Napa Valley area: the McFaddens, who own a 35-acre for-home-consumption-only vineyard, and the Molnars who operate a commercial scale 200-acre spread in Carneros and Obsidian.

Various vintages going back a few years were on tap for the cognoscenti to imbibe and compare. Not being a wine connoisseur, I have a hard time telling one from the other, and my intake usually follows a straightforward route: in one end and out the other, without registering anything in my brains, except to warn me that I am getting a little tipsy.

(The most memorable commentary that I have ever read on wines was one by Editor Derek Davies of the now defunct weekly Far Eastern Economic Review â€“ still operating as a pricey monthly out of Hong Kong. Davies mockingly enthused about an Australian wine that is marketed under the Savior brand, whose aroma, he wrote, was between that of soiled hospital dressings and that of unwashed underwear. Why Savior? Because, Davies explained, anyone who takes a sip of it invariably exclaims, â€œJesus Chrrrist!â€)

This is not to say the McFadden and Molnar products are in that category. Far from it. The Molnar wines pressed from previous yearsâ€™ excellent harvests will be marketed later this year under the Obsidian brand, possibly to retail at a recession-oblivious $40 a bottle. Perhaps my friend Lester Harvey of Le Souffle should get in touch with the Molnars.

The Molnars, of whom I was a guest at the wine-pouring session, were Maya (daughter of Marla Yotoko-Chorengel) and her husband Arpad, both graduates of the Harvard Business School, she a magna cum laude, he a cum laude. (Arpad is a Hungarian name and belongs to the most prominent dynasty in Hungarian history). His parents, Kati and Miklos Molnar, escaped from Hungary during the 1956 Revolution against the Soviets and migrated to the US, where they started their vineyard/winery enterprise.

I told them that at that time I was a student in Northwestern University and, in sympathy with the Hungarian Revolution, I displayed a Hungarian flag in my room, with the Communist symbol pointedly cut out. I also tried to teach myself Hungarian, but found it a very difficult language, and so gave up after a few weeks.

The patriarch of the McFaddens (who co-hosted the wine-pouring session) is Dr. Daniel McFadden, professor of Economics at the University of California at Berkeley, director of its Econometrics Laboratory, and co-winner, with James Heckman, of the 2000 Nobel Prize in Economic Science.

This was the first and only time ever that I had the honor to meet a Nobel Prize laureate. I took advantage of the occasion to talk Economics with him, especially as it was sadly
exemplified by the Philippines.

Dr. McFadden had some familiarity with the economy of Indonesia, as he had some Indonesian students or colleagues at Berkeley. But he had little knowledge about the Philippines other than that it had a dysfunctional economy marked by low GDP growth over the decades, forcing millions of Filipinos to look for jobs abroad which they could not find in the domestic economy.

I gave him as best I could an overview of the Philippine economy, and he seemed genuinely interested since he asked relevant and probing questions as we stood there for more than one hour in one corner of the McFadden (his son Rayâ€™s) living room, eschewing the usual cocktail party small talk for some serious discussion of a subject dear to his heart.

The overview that I gave Dr. McFadden: Millions of Filipinos, about 10 percent of the total population, are forced to work abroad because they could not and cannot find jobs in the domestic economy. And there are not enough jobs in the domestic economy because the Philippines failed to industrialize-for-exports in the 1970s and 1980s, to the same extent that South Korea, Taiwan, Hong Kong, Singapore, Malaysia and Thailand did.

Agriculture and import-substitution industries â€“ the Philippinesâ€™ choice in economic strategies â€“ just could not create enough jobs for a population growing at the fastest rate in all of Asia, thanks to the Roman Catholic Churchâ€™s stubborn resistance to birth control by artificial methods.

Whatever few export industries were established were deliberately wrecked by Communist labor unions, who were allowed to organize and proselytize even by the Dictator Marcos, which would not have been allowed in South Korea, Taiwan, Malaysia, Singapore, Thailand and Indonesia.

With low domestic savings rate, low tax collection efforts, low foreign direct investments, and low income from exports and tourism â€“ the lowest or close to the lowest in East Asia â€“ the domestic economy cannot create enough jobs and the Philippine government is perennially unable to finance its own operations and must constantly borrow, abroad and domestically, thus forcing the constant devaluation of the peso. From two-to-one in 1946 to almost 50-to-1 in 2009.

Generally poor agricultural output makes necessary the importation of basic food staples. Food prices in relation to peso income is one of the highest in East Asia, thus adding to the burden of low- to middle-income families, and creating another incentive to seek employment abroad.

Endemic and pervasive corruption in government reduces further the revenues available for basic services, thus weakening education and health services, with implications for the quality of the work force in the near future, in addition to the social problems caused by the break-up of families as one or both parents are forced to work abroad.

In recent years, the flourishing of call centers and other business processing outfits has created a mini-boom in job opportunities for the urban middle class. But the current global recession has negated much of that gain, and has in fact decimated the export industries.
This year, the Philippine economy is expected to register zero growth rate. Which is actually a bonus, since the major exporting countries in East Asia â€“ Japan, South Korea, Singapore, etc â€“ are expected to suffer major declines in GDP. Our weakness in exports has ironically become our (temporary) strength.

How to get out of this rut? Neither the incumbent president nor any of the presidential contenders has come up with any viable economic plan. President Arroyo, an alleged economist, persists in her stupid fantasy of turning the Philippines into a First World country by 2020.

Since the World Bank and other international institutions have forecast zero or near-zero GDP growth rate for the Philippines in 2009, Gloriaâ€™s glorious future for the Philippines as a First World country must begin no earlier than 2010 (when she hopes to crown herself prime minister). From 2010 to 2020, she thinks she can raise our per capita GDP from its present $1,433 to $25,000, the average pci of the â€œpoorestâ€ countries in the First World: Portugal ($21,700) and Greece ($29,200).

This would require an average GDP growth of at least 34 percent per annum for ten years, compounded annually. One does not have to be a Nobel Prize winner in Economics to know that this is physically impossible. Even China, the fastest growing economy in the world for the past 25 years, managed â€œonlyâ€ 14 percent in one year, since cooled down to 10-12 percent per annum in succeeding years.

Yet President Gloria keeps on repeating her First World mantra, apparently relying on the abysmal ignorance on matters economic of the masa, the media and the political opposition, to peddle her silly fantasy. Where did she get her doctorate? In the Balic Balic School of Economics?

Instead, as befits a country dominated by lawyers, snake-oil panaceas are being proffered by, who else, groups of lawyers promising economic salvation if we would only shift from the presidential to the parliamentary form of government, or if we would only shift from a unitary state to a federal union, or if we would only adopt the jury system. No one talks of the nuts and bolts of a viable economic plan. This is the enduring tragedy of the Philippines.
I gave Dr. McFadden an oral outline of the economic plan that has been germinating in my mind since 1992. Perhaps he was just being polite, but he thought it was a good plan. I will now put it down in a two-page outline which I propose to submit to him for his professional critique and evaluation.

Who knows, after submitting it to the scrutiny of a Nobel Prize-winning economist, I may give my economic plan to the next president, whoever he or she may be, if he or she welcomes it. It can be said to have started in Oakland Hills.

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