Discontent

Approval ratings given our political leaders are not the most precise indicators of the temper of our citizens. But these are the best indicators we have.

Months of polling have shown inflation to be our public’s foremost concern. This is not unique. The entire world experiences an inflationary wave and citizens everywhere are unhappy with their governments.

Citizens everywhere, however, acknowledge that inflation is a scourge much larger than governments could handle. They limited their expectation of what government could do. In exchange, governments try to manage expectation by setting limited objectives – nothing grand, such as bringing down the price of food staples to some fabulous number.

Because of limited public expectation and realistic goal-setting by governments, we have not seen massive political upheavals such as we saw several times in the past century. In politically volatile South America, we have seen recent elections install either far-right or far-left candidates who dared make grand electoral promises. Once in office, however, these otherwise ideological leaders immediately moderate their goals and hew closely to the pragmatic.

Much commentary has been made the past few days over the most recent results of Pulse Asia’s approval and trust survey. The headline numbers pertain to double-digit drops in the approval ratings of Ferdinand Marcos, Jr. and Sara Duterte.

The falling approval numbers are indeed notable. Comparatively, our most recent presidents and vice presidents maintained higher ratings at the same time during their respective terms.

Also notable is that the leaders of the legislative and judicial branches suffered large declines in their approval ratings. A larger number of our citizens are expressing discontent over the economic distress they are suffering. They are blaming all of government for so many months of elevated inflation.

For context, it must be mentioned that the approval ratings received by the President and the Vice President are high by international standards. These are ratings that leaders elsewhere can only dream about. Our citizens are either more tolerant of the quality of governance they get or are easily appeased by the many dole-out programs our government runs precisely to shore up public support.

When rice prices rose and the administration decided to impose unwise price caps, rice retailers were compensated for losses incurred because of the price caps. Rice farmers, for their part, benefitted from higher government-dictated prices for unhusked rice. When fuel prices spiked, government activated a fuel subsidy program for public transport. All these are intended to shield consumers from the immediate pain inflation inflicts.

Eventually, however, real world prices will come home to roost and all consumers will harvest the pain. In addition, the larger debt incurred to run the subsidy programs will curtail future growth – and could push us closer to a debt crisis. But governments and their citizens, by nature, do things on a much shorter horizon.

For President BBM, the onus for both managing inflation and ensuring reliable food supplies is magnified by that wrong-headed campaign promise of bringing down rice prices to P20 per kilo. Rice will never be that cheap even if government heavily subsidizes the commodity. That campaign promise has now become a large dartboard for critics to snipe at.

The buying price for unhusked rice is now over P20. With only a 65 percent recovery after milling, retail prices for rice will just continue to rise – with or without the price caps. The two other major rice importers in our region – Malaysia and Indonesia – are expecting to import more even as the main rice exporters – India, Vietnam and Thailand – are trying to curtail exportation to ensure the food security of their own populations.

The problem with rice can only become more severe in the coming period. President BBM’s rejection of the proposal to trim tariffs on rice imports will only result in a price spike for all categories of this staple commodity.

The unwise price caps on the cheapest varieties of rice have been lifted. It will be an lamented policy remembered more for its costs than its benefits.

Our inflation rate is driven by two main factors: food and fuel costs. Both will be unremitting in the coming period.

Crude oil prices are expected to climb up to $100 per barrel very soon. Many factors contribute to this: higher demand from China, the need of the US to refill its strategic petroleum reserves and the decision of both Russia and Saudi Arabia to reduce their production to force up prices.

There is one other factor that has not been sufficiently examined: the role of the hedge funds.

Over the past few months, the large institutional investors have been speculating on oil futures. They are betting that oil prices will rise to $100 per barrel. That, in the light of the other factors mentioned above, virtually ensures higher oil prices in the near term.

Food and fuel prices ensure that our inflation outlook remains elevated into the foreseeable future. That means our consumers will be even more distressed. In turn, approval ratings for our political leaders will continue to be under pressure.

Instead of going for palliative policies seeking to shore up his popularity ratings, President BBM should exercise economic statesmanship instead. He should get structural reforms in our agriculture going even if the final benefits from these will accrue to future governments.

Instead of vainly conserving political capital, he should throw everything in to finally get our whole economy right.