March 6, 2016

2 Friends discuss Arroyo vs Aquino PH GDP Growth

Is the country's recent stellar growth caused by Daang Matuwid? Is the GDP growth differential between Aquino and Arroyo significant? TP and JC investigate.

TP: Anyway, tanong ko ‘teh, sa palagay mo, pag na DQ this week si Poe, san pupunta ang boto?

JC: Binay. If Binay wins, good luck na lang sa Pilipinas.

TP: Di ba ang premise ng usapan natin e maganda ekonomiya ngayon, so pag si Binay ang nanalo, balik tayo sa Gloria Arroyo days? Okay.

JC:: Where are we heading?

TP: Your statement “If Binay wins, good luck na lang sa Pilipinas” hinges on the assumption that if Binay wins then it’s the total end. I mean, I agree that things will suck real bad if Binay wins, but what we fail to ask is by how much it will suck.

Or more precisely…
“Is the GDP growth differential caused solely by Daang Matuwid?”, and, “How significant is that differential to begin with?”

JC:: Okay, I’m listening.

TP: I think it’s safe to assume that a Binay will run the economy like how Arroyo did it.
I am not defending Gloria here. I am not even defending Binay. I hate both of them with a passion. However, pero lets objectively cite statistics for a moment. We have been giving credit to the PNoy administration for the 6% average GDP growth from 2010 onwards, but we haven’t really wondered if it’s a case of post hoc ergo propter hoc.

DEFINITION: Post hoc ergo propter hoc

(Latin: "after this, therefore because of this")

A logical fallacy that states "Since event Y followed event X, event Y must have been caused by event X." The fallacy lies in coming to a conclusion based solely on the order of events, rather than taking into account other factors that might rule out the connection.

For example: A rooster crowed then sunrise came. Thus, the rooster’s crow caused the sun to rise.

This the part where TP explains his idea to JC.. The conversation was a bit long-winded, that’s why at this juncture, I will tell you the story in essay form so we can save time.

Citing and Analyzing Official Statistics

First, the official GDP growth statistics per the World Bank Database is as follows:

Source: World Bank

Second, let’s isolate the GDP growth figures from the Arroyo administration (2003 to 2008) and the Aquino administration (2010 to 2015).

Note the following:
  1. I did not include 2009 because it coincides with the effects of the global financial crisis caused by Western economic forces. That’s something that we cannot really blame on local politicians, in the same way that Fidel Ramos cannot bear the brunt of the blame for the 1997 Asian Financial Crisis.
  2. I also did not include 2001 and 2002 because those were days of severe economic and political uncertainty brought by the Second EDSA people power revolution.
  3. Pinartidahan pa natin ang PNoy administration because this table gives them full credit for 2010 growth, despite Q1 and Q2 (January to June 2010) being under the GMA administration.

Third, let’s examine the numbers.
From the table above:
  1. 6-year average growth during GMA was 5.41%.
  2. 6-year average growth during Pnoy was 6.16%.
  3. Based on (1) and (2), the GDP growth differential is 0.75%.

Fourth, let’s examine the complicating factor: Median Age.
In the 2000’s, the median age was 21.23, that is, most Filipinos are still in college or just fresh graduates. This is because Filipinos usually graduate from 4-year college course at the age of 21. In the 2010’s, on the other hand, the median age was 23.4, that is, most Filipinos have already graduated from college or have gained a year or two of work experience.

Basically, what I am saying is that the PH labor force is older and inherently more productive in the 2010s than in the 2000s. That is, the PNoy presidency is handling a more productive workforce to begin with.

Now, let’s go back to the conversation.

Back to TP and JC:

JC:: Hmmmm... you have a point here.

TP: Yes. A more favorable Median Age is a factor. It may not be the only factor, but it is a factor nonetheless. During GMA days, most Pinoys are in college pero we posted 5.5% average growth. During the PNOY days, most have graduated already, hence a more productive labor force. Exception ang 2008 at 2009 dahil global financial crisis non. It's the western world’s fault, not any of our politicians.

In short, it appears that 2000s vs 2010s GDP growth per “unit of productivity” is almost the same.

Part of growth differential was caused by the increase in median age, implying Daang Matuwid caused far less than a 0.75% increase in GDP growth.

Hindi ko sinasabi na Arroyo is good or bad, what I am saying ay parang wala namang pinagkaiba ang economic policies ng dalawa.

JC:: So it's possible that we've progressed in spite of ourselves.

TP: Parang ganun na nga. I mean, "Daang Matuwid" caused GDP Growth to rise by a lot less than 1%. Is that really something to brag about?

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