Ghost month

The notion of August being a “ghost month” gained global currency of late. The notion originates in ancient Chinese superstition about a season when bad things happen.

It should be easy for Filipinos to abide by this superstitious belief. In our own history, many bad things did happen in August: the occupation of Manila by US forces out to abort Asia’s first republic, the Plaza Miranda bombing, the Aquino assassination and, recently, the tragedy of Robredo’s death. The worst typhoons, and their attendant calamities, usually hit us during August.

As August ended this week, our stock market fell and a substantial increase in oil prices hit our consumers.

The notion of August as a “ghost month” proliferates in the world of finance. The dynamic of that proliferation is rather removed from the concept’s roots in Oriental mythology.

August is simply the month of least activity in the market. Trading volumes are low. Sentiment is generally down. Investors are in their most conservative mode.

There is a reason why this is the norm. In the northern hemisphere, August is the depth of summer. Remember that quip about Canada: that it had only two seasons, winter and August.

In Europe and the North America, August is the month most people take off to vacation. Decision-makers are away from their offices. Investors are on holiday cruises. Shopkeepers close down their businesses for a month. Nothing much happens.

In August, therefore, business is in hibernation. The mood is laid back. Few people are making trades.

This is why the global equities market tends to slide during August. There is little by way of good news to animate the markets. There is little by way of adventurousness to propel growth.

This year, however, August was particularly lackluster. The European debt crisis remains without a dramatic solution in sight. China’s growth, relied upon to drive the global economy, is showing signs of tapering off. US recovery remains weak and fragile.

This week, negative sentiment swept across all the world’s stock exchanges. Investors, they say, were waiting for this weekend’s speech by US Fed chairman Ben Bernanke in the hope he might announce a third round of quantitative expansion (QE3). That is the only instrument available at the moment to pump liquidity into a sluggish market through massive government purchases of stocks and bonds.

We will see next week if Bernanke, whatever he has to announce, could break the inertia. People are hoping that with the end of August, we might also end the phlegmatic market conditions.

It might be useful to point out, though, that the Chinese calendar does not exactly suit the Roman calendar most of us use. The “ghost month” does not end until the Mooncake Festival, when we all eat the rich pastry and hope the days of prosperity return.

LGUs

Yesterday, headlines screamed about “leaked” information about who will replace Jesse Robredo at the DILG.

It is not surprising that the decision on this matter hewed closely to the expectations of the President’s party. Nevertheless, we hope Robredo’s successor will not be confined to a partisan agenda for the post.

Within the new framework of devolved power and decentralization, local government units (LGUs) play a vastly more important role in the nation’s development. The quality of government service that reaches the people depends largely on the quality of local governments. More important, the rate any locality achieves its potential for wealth creation depends on the ability of the local government to open opportunities for its constituents.

Jesse Robredo, with his sterling record as Naga city mayor, understood quite well the requirements for raising the quality of local governance. He wanted a local bureaucracy with a passion for doing its job well. No law nor decree alone can make that happen. The local executive must be driven by that passion and infect his co-workers with it.

It helped a lot that Jesse did not at all see his job as helping the ruling faction at the national level consolidate its hold on power. He was an advocate of empowering local leaders, not an apparatchik intending to rope in local political support to benefit power players at the national level.

The empowerment of local governments and the partisan interests of the faction in power are, unfortunately, contradictory goals.

If the DILG becomes an instrument for perpetuating partisan control at the national level, the agency will defeat the purpose of empowering local governance. This will work against robust and responsible local leadership that responds to stimulus from the grassroots rather than partisan orders from the national authority.

National government and the LGUs will often be at cross-purposes. National government will always be disposed towards consolidation and centralization. LGUs, in order to meet the expectations of their constituents, will always be disposed towards asserting autonomy.

The internal revenue allocation (IRA) is often the focal point of struggle between the national leadership and local executives. The party in power will be disposed to use the IRA in order to enforce partisan conformity on local leaders and use the leaders to help the party in power consolidate its hold. Local leaders prefer the IRA to be automatically apportioned with the least partisan interference marring the process.

Jesse Robredo was unique in that while he headed a national agency, he looked at the issues from the point of view of local executives. That is why he was so loved by local governments — and why he was considered a bit unreliable as an apparatchik by his party bosses.

We will see how his successor, a strict partisan with no experience in local government, will try and live up to the expectations Robredo created.