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China’s factory activity seen contracting for sixth month

BEIJING — China’s factory activity is expected to have shrunk for the sixth month in October, a Reuters poll showed, suggesting hardly any let up in pressure on the domestic and export sectors from slowing global demand and a trade war with the United States.

The official Purchasing Managers’ Index (PMI) for October was seen at 49.8, unchanged from September, but still below the 50-point mark that separates expansion from contraction, according to the median forecasts of 35 economists.

The extended downturn in manufacturing reinforces evidence of further weakening in the world’s second-biggest economy and puts pressure on authorities to roll out more stimulus to avert a sharper slowdown and large-scale job losses.

While US and Chinese trade negotiators are working on nailing down a “Phase 1” trade deal for their presidents to sign next month, analysts and investors remain cautious given there are still a number of differences between the two sides on key issues.

Many expect a durable resolution to the protracted trade war is unlikely in the near term. China still faces new US tariffs set to kick in on Dec. 15, on top of the existing 25% tariffs on $250 billion of Chinese imports.

That is likely to weigh on businesses and consumers.

China’s gross domestic product (GDP) growth slowed more than expected to 6.0% year-on-year in the third quarter, its weakest pace in almost three decades.

For the whole of 2019, GDP growth is expected to cool to 6.2% and then hit 5.9% in 2020, according to a Reuters poll, underlining the growing challenges faced by Beijing in its efforts to stabilise the economy.

In September, a slide in China’s exports picked up pace while imports contracted for a fifth straight month, official data showed.

Profits at China’s industrial firms fell in September for the second consecutive month as the cooling economy and trade war weighed on corporate balance sheets.

For January-September, industrial firms earned profits of 4.59 trillion yuan, down 2.1% from a year earlier, and worse than the 1.7% reading in the first eight months.

China unexpectedly kept unchanged its new benchmark lending rate in October after reductions in August and September, suggesting Beijing is keen to avoid overly loosening monetary policy for fear it may push up already-high debt levels across the economy.

The government has been trying to spur domestic demand for over a year through higher infrastructure spending, but the measures have been slow to gain traction.

A private survey — the Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI)- which focuses more on small- and medium-sized, export-driven Chinese firms, is expected to show factory activity expanded in October.

However, it is still forecast to show subdued growth with the headline gauge edging lower to 51.0 from 51.4 in September.

The official PMI and its sister survey on the services sector will be released on Thursday.

The Caixin manufacturing PMI will be published on Friday and the Caixin services PMI survey will be out on Nov. 5. — Reuters

DTI names six initial focus areas for upskilling

Department of Trade and Industry (DTI) logo

THE Department of Trade and Industry (DTI) said it has identified six priority sectors for upskilling employees in a program it is carrying out in partnership with the Singapore government.

The DTI in September signed a memorandum of understanding with SkillsFuture Singapore — an arm of Singapore’s Ministry of Education — to address the skills gap in the Philippine workforce.

In a briefing Tuesday, DTI said that the project will target tourism, food services, retail, logistics, design, and global competitiveness as priority skills tracks.

In setting priorities, the DTI considered the availability and readiness of different sectors to collaborate with.

“We’re really looking at three lenses. The lens of the individual or the employee, and then the business side, and then the training provider,” DTI Competitiveness Innovation Group Assistant Secretary Mary Jean T. Pacheco said.

She believes that the sectors identified are “more ready than most” for a skills upgrade program.

Philippine Trade Training Center Deputy Executive Director Nelly Nita N. Dillera added that the sectors were also chosen based on the readiness of plans such as the Philippine export development plan.

Singapore’s skills development framework took around five years to complete, Skills Development Systems Singapore Director Anderson Tan said in an interview after the conference. This is because of challenges in getting the education system on board.

Mr. Tan believes that because the Singapore framework already exists, the program can start addressing at least 20 Philippine sectors within two years.

He said that implementation in terms of reaching a larger Philippine population and stitching together various stakeholders could prove a challenge.

“I think where the challenge will be… it is not just about contextualizing the skills framework which is the content. It is about the media and getting all the players and various stakeholders together,” he said.

“Implementing the skills framework will be a challenge, but it is not insurmountable.”

Ms. Pacheco said that DTI is banking on existing engagement from the private sector, and is reaching out to the academe and other training providers to complete a comprehensive training ecosystem.

“That’s the next step, to put the right people there who will make the contributions so that Philippine industries will be more prepared,” she said, referring to having training providers get the workforce ready for rapid changes in industry.

The DTI plans to expand the upskilling program to 21 sectors or more following the initial six.

DTI will be holding its Leaping the Gap: Philippines 4.0 Skills Forum and Exhibition on Nov. 20-21 in Pasay City. — Jenina P. Ibañez

Peso ends flat vs dollar

THE PESO inched down on Tuesday as market players went bargain hunting ahead of key events later this week.

THE PESO moved sideways against the dollar on Tuesday on bargain hunting as the local unit approached the P51 level.

The local unit finished trading at P51.09 against the greenback on Tuesday, a centavo weaker from the P51.08-a-dollar close on Monday.

The peso opened the session at P51.08 versus the greenback. Its weakest point for the day was at P51.105, while its intraday best was at P50.98 per dollar.

Dollars traded on Tuesday rose to $1.035 billion from $665.3 million on Monday.

A trader said the peso’s movement on Tuesday was affected by bargain-hunting.

“The peso slightly weakened today with market participants bargain-hunting for the greenback near the P51 level following the recent appreciation of the local currency,” the trader said in an email on Tuesday.

For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the peso’s performance could be attributed to the narrower US trade deficit and the gains in the US stock market as well as the benchmark 10-year US government bonds.

“Peso was slightly weaker after some US stock market index posted new record highs and the narrower US trade deficit data,” Mr. Ricafort said in a text message.

The US goods trade deficit fell in September as trade tensions restricted the flow of goods, but that did not change views that economic growth decelerated further in the third quarter amid slowing consumer spending and declining business investment.

The report from the US Commerce Department on Monday also showed inventories at retailers rising moderately last month, but stocks at wholesalers dropping, leading the Atlanta Federal Reserve to trim its gross domestic product growth estimate for the third quarter by one-tenth of a percentage point to a 1.7% annualized rate.

The economy grew at a 2.0% rate in the second quarter, slowing from the January-March quarter’s 3.1% pace.

For today, the trader expects the peso to range at P50.95-51.15 against the dollar, while Mr. Ricafort predicts the local unit will trade at the P50.90-51.20 band. — L.W.T. Noble with Reuters

PSEi inches closer to 8,000 on positive sentiment

By Denise A. Valdez, Reporter

THE PHILIPPINE Stock Exchange index (PSEi) inched closer to breaching the 8,000 mark yesterday as investors reacted to earnings reports and positive developments in the US-China trade war.

The main index grew 44.66 points or 0.56% to close at 7,991.19 on Tuesday, as the broader all shares index added 12.92 points or 0.27% to 4,787.17.

Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a text message that the PSEi’s gains can be attributed to the “optimism on third quarter earnings and hopes on the US-China negotiations.”

Several foreign news outlets reported on Monday that US President Donald Trump is looking to sign “a very big portion” of the trade deal with China ahead of schedule. Reuters likewise reported that US is looking to extend its tariff suspensions on P34-billion Chinese goods from its Dec. 28 expiration.

Wall Street was positive at the close of Monday’s trading, with the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite gaining 0.49%, 0.56% and 1.01%, respectively.

In Asia, indices ended mix: Japan’s Nikkei 225 and Topix indices were up 0.47% and 0.86%, respectively, together with Singapore’s Straits Times by 0.13%.

Meanwhile, back home, services was the only sectoral index that declined, losing 0.20 point or 0.01% to close the session at 1,526.69.

The rest ended in the green, led by mining and oil, which rose 143.91 points or 1.57% to 9,285.91. Property climbed 39.96 points or 0.96% to 4,188.79; holding firms went up 48.50 points or 0.62% to 7,823.89; industrials gained 40.43 points or 0.38% to 10,487.73; and financials added 5.41 points or 0.28% to 1,912.31.

Mr. Tantiango said another contributor in the PSEi’s rise on Tuesday was the increasing value turnover, which climbed to P6.63 billion from Monday’s P5.88 billion.

“This week so far, our average daily value turnover is at P6.25 billion which is higher compared to last week’s average of P5.25 billion. This shows improving participation from investors,” he said.

He added that the bullishness of offshore investors helped pick up the main index as net foreign buying closed at P432.68 million, higher than Monday’s net purchases worth P142.55 million.

More shares improved than declined yesterday, 97 against 81, while 56 ended flat.

AAA Southeast Equities, Inc. Research Head Christopher John Mangun said the main index may go above the 8,000 level on Wednesday on improved activity.

“We may see (the PSEi) blow through that (8,000) level tomorrow; however, we are not out of the woods yet. Selling pressure always intensified as it traded above 8,000. We are expecting to see this trend continue,” he said in an e-mail on Tuesday.

Barely a whimper: the new normal

It was an encouraging surprise to find human rights activist Etta Rosales being interviewed on TV and pointing out the ridiculousness of the Sandiganbayan decision to dismiss still another one of the Marcos graft cases, this time worth P168 million. Rosales raised the issue of what this could have done to help alleviate poverty among our rural people. It could have paid for the enhancement of irrigation systems and fertilizer subsidies, and both investments could have made food more accessible to the majority of our people, both rich and poor.

Rosales went as far as to demand the resignation of Solicitor General Jose Calida whom she said was a Marcos friend who could have, if he had wanted to, prevented the ridiculous technicality that was the basis for the dismissal of the graft and corruption case by the Sandiganbayan: the documentary evidence was composed of photocopies, and not originals. Really now. If there were photocopies, there must have been originals. Couldn’t the SolGen have mobilized assistance from the Presidential Commission on Good Government (PCGG) and other government agencies to locate the originals? Or have they been stolen and/or destroyed?

Sadly, Etta Rosales’ voice was a mere whimper, hardly heard in the midst of the deafening silence that has become the new normal in response to huge injustices from our judiciary. This judiciary has dismissed cases against Danding Cojuangco, thus legitimizing his ownership of San Miguel shares which had been funded by loans secured from the United Coconut Planters Bank of which he was CEO. The Sandiganbayan also dismissed the plunder case against Bong Revilla while convicting his chief of staff for the same offense, and instructing Revilla to return the millions found in his bank account. How far can we go to insult the intelligence of the Filipino people? But there he is, back in the Senate, getting more votes than the hardworking Bam Aquino. And now a colleague of Senator Imee Marcos.

It is only a little over 30 years (or a generation) ago since we marched in the streets for years, and succeeded in ousting the corrupt dictator, his family and cronies from our country. We have such short memories. Today, here they are holding elective office once more, and, as far as I know, none of the wealthy cronies, not even members of the dictator’s family, have been sent to jail. The former First Lady, Imelda Marcos has been convicted of graft charges but she is out on bail, because at the time the crimes were committed, the plunder law had not been passed.

If this is the new normal, where will this lead our country? Our children and their children hardly know about the Marcos dictatorship and its violations of human rights and governance ethics. Besides, ethics has become an alien concept. Now and then, some government official is found guilty of some offense such as conflicts of interest (e.g., SolGen Calida and Health Secretary Duque); but they are still in office or reassigned to another government post.

Thanks to the economic cluster in the Cabinet led by Finance Secretary Carlos Dominguez, the business community is complacent and does not rock the boat because there are so many opportunities for them, especially for the top 20 or so conglomerates who are raring to get into the billion-peso Build, Build, Build projects. The rich will get richer. But the poor still suffer from involuntary hunger. And they are too weak and ill-informed to raise hell about all the injustices.

What will it take to get at least our middle class to start raising hell and organizing once more against all the thievery that has been and is being done to the modest assets of our government? How much can we tolerate the degradation of our ethical norms and our civilization?

We are being left behind by our neighbors in reducing or getting rid of poverty. Singapore, Malaysia, and Thailand have left us behind. We are about to be surpassed by Indonesia and communist-run Vietnam.

What will it take to wake us up?

 

Teresa S. Abesamis is a former professor at the Asian Institute of Management and Fellow of the Development Academy of the Philippines.

tsabesamis0114@yahoo.com

Quid Pro Quo

Quid pro quo is the phrase of the month in US politics and it could be the key to the impeachment of President Donald Trump. The Latin phrase means “something for something” and that is what Trump has been accused of trying to arrange with the new president of Ukraine, Volodymyr Zelensky.

That something for something — that quid pro quo — has been characterized as unconstitutional and even criminal and thus sufficient ground for impeachment. Of course Trump has vehemently and repeatedly denied it, even while White House insiders who have direct knowledge of the circumstances have admitted it in depositions before the US Congress.

A quid pro quo is not, by itself, illegal or immoral. It depends on what that “something” is which is being exchanged for “something.”

For instance, in the movie business the “something” a director may offer could be a lead role in exchange for sexual favors. That is immoral. In politics, the “something” offered is usually a lot of money in exchange for a government contract. That is illegal.

In foreign affairs or in the relationship between countries, it could be a trade or defense quid pro quo. The parties may be of unequal economic or military capability, in which case the stronger country may tend to make the weaker one an offer it cannot refuse (sometimes referred to as a Godfather offer).

America has often had such a relationship with other countries, the Philippines among them. While such a quid pro quo may leave a bad taste in the mouth, it is neither immoral nor illegal but just one of the harsh facts of life.

An economic quid pro quo is something that Trump is not famous for — in fact he is notorious for getting something without paying for it, as several suppliers have testified (as one Republican congressman put it, “More quid and no quo!”). On the other hand, Trump has been accused of what could be described as a moral quid pro quo, having been exposed of paying off a porn actress and a Playboy bunny to keep quiet about their illicit affairs with him.

Trump’s current problem arose from a foreign affairs situation — America’s relations with Ukraine. It could have been one of those instances where a stronger country pressured a weaker country on such issues as trade or ideology — and while that could have left a figurative bad taste in the mouth of the weaker party, that would not have been illegal, much less unconstitutional.

When the US won the Spanish-American war, Spain had to give up claims of sovereignty over Cuba, Puerto Rico, and Guam and had to give up the Philippines for $20 million in the Treaty of Paris.

After the British Empire defeated the Qing dynasty in the first Opium War, China had to cede Hong Kong to the British. And after China lost the second Opium War, the British forced the Qing dynasty to cede Kowloon and lease the new territories for 99 years.

Those were examples of a quid pro quo where the “something” that the victors gave the losers was peace in exchange of territories. A very lopsided quid pro quo but “somethiing for something,” nonetheless.

When the US gave the Philippines back its independence, one of the conditions was what Don Corleone would have imposed. The Philippines had to agree to give the US equal rights to exploit the country’s natural resources. That condition had to be grudgingly accepted.

Another condition was the continued presence of US military bases in the Philippines. In an international environment where imperialist countries were like sharks waiting for prey, looking for weak nations to usurp, that was a condition necessary for the survival of the newly independent nation.

This kind of quid pro quo was what acting White House Chief of Staff, Mick Mulvaney, probably meant when he admitted that the US “does it all the time” in its dealings with other countries.

Unfortunately for Mulvaney, he had responded to a question from the media specifically about Trump’s phone call to the Ukranian president. The “something” Trump wanted was dirt on a potential rival in the 2020 presidential elections, allegations of corruption involving former Vice-President Joe Biden and his son, Hunter Biden.

Also “requested” by Trump was a probe into alleged Ukranian, rather than Russian, meddling in the 2016 elections — a wild theory debunked by US intelligence agencies.

What’s more, the “something” that Trump was withholding was over $400 million in aid already appropriated by the US Congress and which Ukraine desperately needed.

White House insiders have confirmed in testimony before Congressional committees that Trump had made the release of the funds contingent on the public announcement by the Ukranian president that his government would initiate the investigations Trump wanted.

The quid pro quo required by Trump, according to the Democrats, the media, and even by some Republicans in effect invited a foreign country to get involved in the US electoral process — a conclusion that the report of Special Counsel Robert Mueller could not make about Trump in the case of Russia’s meddling in the 2016 elections.

The Democrats believe they have the goods on Trump and can move to impeach him. Of course, the battle will still have to be fought in the Republican-controlled Senate.

The question is will the Republicans’ loyalty to their country end where their loyalty to Trump and the party or their political interests begin?

Who knows? President Richard Nixon was a Republican like Trump. But he was pressured to resign by fellow Republicans who were more loyal to their country than to their personal interests.

 

Greg B. Macabenta is an advertising and communications man shuttling between San Francisco and Manila and providing unique insights on issues from both perspectives.

gregmacabenta@hotmail.com

Disclosure and reportorial requirements for lending and financing Companies

The common practice of advertising services through television, social media, websites, radio and the like, as well as the use of online lending platforms are becoming tools of fraud, leading to the increased number of borrowers falling prey to unlawful acts of lending and financing companies. Thus, the Securities and Exchange Commission found the need to impose additional regulatory measures on lending and financing companies to safeguard the public through the issuance of Memorandum Circular No. 19 (“MC No. 19”) dated Sept. 17, imposing disclosure and reportorial requirements.

Interestingly, a week prior to the issuance of MC No. 19, the Commission, upon motion by the Enforcement and Investor Protection Department, issued Cease and Desist Orders against 19 companies for violations of the Lending Company Regulation Act.

The cases started with complaints from the public regarding unreasonable and abusive lending and collection practices by online lending companies. Upon investigation, it was gathered that Online Lending Operators advertise and promote their lending businesses on Facebook and offer loans to the public through their respective online applications/platforms. These Lending Operators require the installation of their online lending application as a prerequisite to apply for a loan. The act of downloading the application, however, gives the Lending Operators access to personal information in the mobile phones of the downloader, including his contact numbers, Facebook accounts, and e-mail addresses, to which the Lending Operators will eventually forward text blasts or send messages informing recipients about the debtor’s refusal to pay, with statements that such information will be referred to barangay officials or posted on social media, as a way to exact prompt payment.

Further, these Operators were found not to have the required permit from the Commission, in violation of the Lending Company Regulation Act, particularly Section 4 which states that no lending company shall conduct business unless granted an authority to operate by the Securities and Exchange Commission (SEC). Section 12 of the Act penalizes by a fine of P10,000 to P50,000, or imprisonment of six months to 10 years, or both, at the discretion of the court, any person who engages in the business of a lending company without a validly subsisting authority to operate from the SEC. The same penalty applies to the president, treasurer, managing officer, and other officers of a corporation who knowingly and willingly take part in the corporation’s act of engaging in the business of a lending company without the SEC’s authority to operate or the act of holding out to be a lending company, either through advertisement or through other representations without authority.

Days after the issuance, another set of orders to cease and desist from operating, engaging in, carrying out and/or promoting lending/financing business were issued to 11 companies based on the same grounds.

Online lending- related fraud is no longer new. As long ago as Aug. 17, 2017, the SEC released a warning against lending activities by unregistered companies. As explained in the advisory, the lending scheme commonly utilized by unregistered lending companies was to operate through social media such as Facebook, Twitter, LinkedIn, and other similar platforms, where they asked borrowers to give general and personal information and required the deposit of a certain amount as the “processing fee.” After getting hold of the money, all communication threads were blocked off and the borrower could no longer recover the amount deposited. However, being a mere advisory, the SEC’s solution back then was simply to urge the public to always check with the Commission whether the company they were dealing with was registered with the SEC and to verify if it had a Certificate of Authority to operate as a lending company.

The recently issued memorandum circular offers a better way of protecting the public. MC No. 19 requires lending and financing companies to fully disclose in a conspicuous portion of their ads and Online Lending Platforms their corporate name and their SEC Registration Number and Certificate of Authority to Operate a Financing/Lending Company Number, and reflect an advisory for their prospective borrowers to study the terms and conditions in the Disclosure Statement before proceeding with the loan transaction.

The Circular likewise requires the submission to SEC’s Corporate Governance and Finance Department of an Affidavit of Compliance containing a report on Online Lending Platforms, applicable to existing platforms and those that are yet to be developed. Such reports must contain vital information, including but not limited to, the following: name of the Online Lending Platform, proof of compliance with the requirement under SEC M.C. No. 13-19 that the lending and financing companies must register their Online Lending Platforms as business names, images of the Online Lending Platforms as they appear to the public, and illustrations of the Online Lending Platforms showing how the required Disclosure and Advisory are displayed.

With the issuance of MC No. 19, it is expected that the SEC can deter and better detect the unlawful act of engaging in lending or financing activities without securing a Certificate of Authority from the SEC, and ultimately minimize the number of victims of lending fraud.

The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes, and not offered as, and does not constitute, legal advice or legal opinion.

 

Mysa Jade J. Mejica is an Associate of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW), Cebu Branch.

(6332) 231-4223

mjmejica@accralaw.com

The ASEAN’s identity crisis at the crossroads

The Association of Southeast Asian Nations, better known as ASEAN, has long been a paradox as much as it is a special and unique case in the parlance of international regional cooperation. One of the more mature transnational organizations in the world, its presence and longevity make it the poster child of stability that newer international organizations aspire to emulate. The ASEAN has successfully made it through several crises, transitions of power, and shifts in the balance of world affairs since its inception in 1967.

Born from the vestiges of other regional initiatives such as the Southeast Asia Treaty Organization (SEATO) and Greater Malayan Confederation (Maphilindo), the ASEAN was the evolution of its predecessors. As the nation-states were making their way through rehabilitation after World War II, the need to create alliances and improve their leverage was much sought after. However, it was not as easy as it was thought to be, and the trade-offs the ASEAN countries needed to make during the time of its creation have been the glass ceiling that has hampered the region’s evolution over the last few decades.

One of the most significant differences between the ASEAN and other regional collectives is the culture of “non-intervention.” In an attempt to honor the diversity in the region, the ASEAN upholds this norm to facilitate dialogue but without the prescriptive imposition of authority as seen with other organizations, such as the European Union. The “ASEAN Way” is perceived as one of the main reasons for the ASEAN’s longevity. By respecting domestic affairs and sovereignty, the ASEAN has averted conflict among member states, thus achieving a semblance of peace and unity.

But non-intervention prohibits the regional organization from realizing its full potential by setting invisible boundaries on itself. Rather than a unified collective of states in one of the fastest-growing regions in the world, the ASEAN is still a hollow shell that has yet to discover its own identity. For nearly a half-century, the ASEAN has been unable to evolve, all because of its challenges in imposing a rules-based approach in transnational governance. Since diverging interests, histories, and identities were considered in the creation of a non-interventionist approach, this approach hampers the regional bloc from advancing groundbreaking initiatives to aid in converging interests of the majority of ASEAN member states.

FREEPIK

The ASEAN Way has had a negative impact on the region by forcing the regional organization to settle differences by indecision — problems and issues are “swept under the rug.” Due to the absence of true leadership and the challenge of rules-based international order, the ASEAN does not have the integral rudder that should steer the region to a better future. The ASEAN is a victim of its success by being trapped in a norm that should have long been outgrown. Due to this, ASEAN’s dream of economic integration and regional security are still to be realized.

The ASEAN today is a collection of nation-states that are unified by loose alliances. Facing headwinds in security and trade, what is important for the region is to finally mature and push towards its full development by properly and effectively positioning itself to gain from the volatility of the US-China trade war as well as the South China Sea issue.

By fast-tracking the ASEAN Economic Community project, focusing on policy streamlining among member states and ironing diverging interests, the region can benefit from the outflow of businesses coming from China, such is the case with Thailand and Vietnam. The effect of this can further be amplified by showing a cohesive, strong, and consistent voice against Chinese aggression in the disputed waters of the South China Sea. If the ASEAN can finally settle differences and have a coordinated plan of action like airing its discontent and grievances to China, then it solidifies the region’s power and influence as a serious partner in international affairs.

The lack of clout is rooted in the absence of true unity and voice that binds the caucus of states, and this is what is desperately needed by the collective. With its growing economic power as it reaches the demographic golden age of its population, the ASEAN is indeed at the crossroads of its development. The renaissance of the ASEAN, oddly enough, depends on its will to redefine and grow out of the old formula that made it last. When one takes into consideration the admonitions against forgetting one’s history, the ASEAN is a one-off case where it’s members need to forget its past to finally realize who they really are and what they can do; hopefully as early as the 35th ASEAN summit in Bangkok this November.

The only way for the region to advance is by moving away from who it was. Though a challenge, the ASEAN must find the courage to settle its own identity by looking beyond and envisage gaining its voice as a regional actor.

 

Ren de los Santos is a Resident Fellow for Global Politics, Stratbase ADR Institute.

How can California be left in the dark?

By Tyler Cowen

AMERICA CONTINUES to innovate wonderfully in cyberspace, but when it comes to solving actual, physical-world problems, its record is deteriorating. The fires in Northern California — and the resulting power blackouts, affecting millions and running for days on end — show just how many nodes of failure Americans are willing tolerate or even encourage.

The practical and moral failings in this matter are so numerous it is hard to know where to start.

How about this: Systemic blackouts are commonly associated with nations such as Haiti or Pakistan, not the United States. Yet here is California, America’s biggest and probably most innovative economy, treating a blackout as some kind of unavoidable natural event. Why is this development not seen as an unacceptable outrage?

The No. 1 responsibility of a power company is to supply its users with power. So when the first-order response to a pending major problem is to cut the power for days, that is clear-cut evidence that the systems are badly designed.

High on the list of America’s failings would be its wanton disregard of climate change. True, it is difficult to pinpoint particular events as caused by climate change. It is entirely plausible, however, that climate change has made the fires more likely or more intense, due to the greater heat, dryness, and wind.

Yet the US’s carbon emissions are increasing. Even when there are successes in the fight against climate change, such as fracking natural gas to replace coal emissions, the benefits to the climate are an afterthought for most people.

In other words: Parts of our natural environment are deteriorating around us, and we are responding passively and defensively rather than with a dynamic, can-do attitude.

Add American liability law to the list of culprits. Because of legal liability from past fire-related events, the share price of Pacific Gas and Electric (PG&E), the public utility in California, has fallen from almost $50 to about $5 over the span of a year. It is thus no surprise that the utility is afraid of further fires and will limit them simply by pulling the plug on everyone’s power connections.

Surely it is possible to design better regulation and better incentives for such an important supplier. Yet that problem has not risen to the top of the agenda.

Higher utility rates, to be used for financing capital improvements and maintenance, would be one obvious ameliorating policy change, and indeed Australia has used such policies to limit brushfires. But no, in California the Office of Ratepayer Advocates, within the California Public Utilities Commission, generally has pushed for low rates and lower capital expenditures. California voters, meanwhile, are hardly screaming for higher utility rates to help pay for a more secure power system. Instead they prefer to ban plastic straws.

Economists themselves have been of no great help. My Twitter feed includes plenty of the world’s greatest (or at least best-known) economists. They love to debate Elizabeth Warren’s plan for a wealth tax, an idea that probably isn’t going to happen (just ask Mitch McConnell or, for that matter, any moderate Democratic senator). When it comes to designing a better incentive model for California power utilities — a concrete problem for which economics is remarkably well-suited — there has been close to complete silence.

Economists are just reflecting a more general failing in American political debate. The old saying that all politics is local has been turned on its head: All issues are now national in scope and partisan in nature. People are less interested in the day-to-day mechanics of actual governance, including at the state and local level. The comeuppance for those ideological obsessions is now upon us.

Another possible problem is how difficult it is in California to cut down trees. Some experts have suggested that making tree thinning easier could alleviate fires. While that is not the major issue at hand, neither are other second- and third-tier issues being treated with much urgency. For example, the PG&E website has been crashing periodically, making it harder for customers to learn when blackouts might be hitting their areas.

Finally, there is the news media’s response to these problems. On Sunday the New York Times published a story with the headline, “Up to 2.7 Million Face Utility Shutting Power as California Fires Rage.” It was on Page 25 of the print edition. Granted, it received more prominence online, as does other coverage elsewhere. But this should be a No. 2 or No. 3 story, as Hurricane Katrina was for several weeks.

California has long been a bellwether for the country. Thus its inability to address problems with the physical environment is cause for concern. Is America really doomed to a future of complete incompetence?

 

BLOOMBERG OPINION

Magnitude 6.6 quake kills at least 4 in Mindanao

A MAGNITUDE 6.6 earthquake struck central Mindanao on Tuesday morning, the second major tremor to hit southern Philippines this month, geologists said.

The quake killed at least four people, based on reports from the Philippine News Agency and the local disaster agency.

The shaking lasted up to a minute in some places, damaging homes, buildings and roads in a region where hundreds were still reeling from a quake that killed at least five earlier this month, according to the Philippine Institute of Volcanology and Seismology (Phivolcs).

The Philippines lies in the so-called Pacific “Ring of Fire,” an arc of intense seismic activity around the Pacific Ocean where most of the world’s earthquakes strike.

A teenage boy died after he was crushed by falling debris as he tried to escape his school in Magsaysay town in Davao del Sur, the state news agency said. A man also died after he was hit by concrete blocks at their church where he was working, it said.

Meanwhile, the National Disaster Risk Reduction and Management Council in a report said a father and his son from Arakan town in Cotabato also died in the quake.

Tuesday’s quake, which was followed by several aftershocks, had its epicenter in Tulunan, Cotabato, the same area where a 6.3 earthquake struck on Oct. 16, based on monitoring by the state volcano agency.

The quakes were not expected to spawn a tsunami because these were “inland,” but more aftershocks were expected, Phivolcs chief Renato U. Solidum, Jr. said at a briefing livestreamed from Manila.

“We need to watch out for aftershocks and it is important that we do not panic,” he said in Filipino. Mr. Solidum said Tuesday’s tremors were related to the Oct. 16 earthquake.

Power lines were affected in several areas but the Mindanao transmission backbone “remains intact,” the National Grid Corp. of the Philippines said in a statement.

The Civil Aviation Authority of the Philippines said no damage was reported in all Mindanao airports, including terminals, runways and other facilities.

The main airports are in Butuan, Davao, Cotabato, General Santos and Laguindingan, while satellite airports are in Ozamiz, Camiguin and Iligan.

In Davao City, one of the most urbanized and populous areas, major cracks and some damage were reported by several shopping malls, schools and other public infrastructure.

Davao City and most local governments that felt the earthquake suspended classes, and at least three suspended work to give way to building inspections.

Cotabato Vice Governor Emmylou T. Mendoza called on local governments and the private sector to suspend school and work “if necessary.” — with a report from Maya M. Padillo

Duterte serious about making Robredo his anti-illegal drug czar

PRESIDENT Rodrigo R. Duterte’s offer for Vice President Maria Leonor G. Robredo to head the state’s crackdown against illegal drugs is a chance for her to prove her mettle as the head of the opposition, the presidential palace said yesterday.

“The ball is in her court,” presidential spokesman Salvador S. Panelo said. “She should take the opportunity.”

Mr. Duterte on Monday said he would make Ms. Robredo his drug czar for six months given her repeated criticisms. She declined to comment on Mr. Duterte’s offer, saying she was unsure whether he was serious.

Also yesterday, Senate President Vicente C. Sotto III recommended the appointment of Ms. Robredo as chairman of the Dangerous Drugs Board.

“If it’s a serious proposal, it’s best if the VP is appointed as DDB chair and concurrent Philippine Drug Enforcement Agency director general,” Mr. Sotto, a Duterte ally, told reporters.

Speaker Alan Peter S. Cayetano, another Duterte supporter, asked Ms. Robredo to clarify how to implement a “health-based approach” in the anti-drug campaign. He said the vice president did not offer a concrete alternative to solve the drug menace.

The vice president last week said Mr. Duterte should “assess and tweak” his war on drugs that has killed thousands because more and more people were still becoming hooked on drugs.

Mr. Duterte promised during his campaign in 2016 to end the illegal drug problem in six months.

Majority of Filipinos remained satisfied with Mr. Duterte’s deadly war on drugs that has killed thousands, despite worldwide criticism, according to a Social Weather Stations (SWS) poll in September.

The Philippine police have said they have killed more than 6,000 people in illegal drug raids, many of them resisting arrest. Some local nongovernmental organizations and the national Commission on Human Rights have placed the death toll at more than 27,000. — G.M. Cortez and C.A. Tadalan

Court junks motion to re-open massacre trial

A QUEZON City trial court has rejected a plea by the primary suspect in the massacre of more than 50 people in Maguindanao province to re-open the trial.

In a five-page order, Judge Jocelyn A. Solis-Reyes also denied Datu Andal “Unsay” Ampatuan, Jr.’s motion to suspend judgment on the 10-year-old case.

The prime suspect earlier claimed a prosecution witness had contacted his representative saying he wanted to recant his testimonies against him.

But the court said this had been denied by the witness in open court. “With the denial made by prosecution witness Sukarno Badal of his intention to recant his previous testimony given on several dates, it is crystal clear that the ground relied upon by the accused-movant for the reopening of trial has no leg to stand on,” it said.

Mr. Ampatuan is among the main suspects in the massacre of 58 people, including 32 journalists, in the town of Ampatuan in Maguindanao province on Nov. 23, 2009.

The ambush took place when media accompanied then gubernatorial candidate Esmael G. Mangudadatu and his family to the election body where he was to file his certificate of candidacy. Mr. Mangudadatu was then planning to challenge Datu Unsay for governor of the Autonomous Region in Muslim Mindanao.

The Justice department expects a decision on the case before the 10th anniversary of the murders.

Andal Ampatuan, Sr., father of Mr. Ampatuan and the alleged mastermind of the massacre, died of cancer in 2015. — Vann Marlo M. Villegas

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