Engine

In the last analysis, the storm now sweeping the world’s financial markets is attributable to China’s weakening economic performance.

After three decades of galloping growth, China’s economic performance appears headed towards a plateau. It has not flattened. The growth has simply moderated.

While no one is predicting China’s growth will completely dissipate, everyone predicts the growth will slow. “Slow growth,” by China’s standards, is about the same rate as our growth rate — or about treble the growth rate of the mature economies.

Over the past few months, Beijing has been trying to make adjustments to contain the economic slowdown. That has not been a very adept effort.

China’s leaders seem habituated to the thought any economic problem might be managed by turning a lever here or tightening a screw there.  That is the mindset of engineers. Modern economies are far more complex than those in the past century that enable state dictation. The most complex aspect of modern economies is the financial sector, which always seems to running off with a mind of its own.

Earlier this month, Beijing allowed its currency to depreciate — perhaps as a means to push exports growth after several quarters of declining manufacturing numbers. The currency plunged. Everybody started to panic.

In the face of declining growth, shares of many of China’s companies now seem overpriced. It is time for a correction. Instead of a correction, however, what we saw was a bloodbath. Gripped by fear, the tens of millions of ordinary citizens invested in the stock market began dumping their holdings.

When China’s equities market fell with a loud thump last Monday, markets everywhere else followed suit. From Asia, to Europe to North America, the trading boards turned ghastly red.

Fearing instability in the emerging markets, investors sought sanctuary in the US dollar. That drove the US dollar up, perhaps to unsustainable levels.

In the bad old days, when China was a largely isolated economy, economic experimentation by its leaders would not have perturbed any market outside its own. Over the last decade, however, the growth of the Chinese economy was the single engine driving global economic expansion. If China’s economic growth slows, global growth slows.

China is no longer just the workshop of the global economy. It is the workhorse. There is no other engine for global growth that will even approximate China’s economy.

This is why the twists and turns of the Chinese economy instantly reflect in the twists and turns of the global economy. When her equities markets fell dramatically, that means there will be less market capital for China’s industries to restart. That means so many things to so many other economies.

For instance, the troubles now plaguing the Chinese economy means Philippine exports will not likely grow. China is a major market for our exports – also a major source of our imports.

Before her stock market collapsed this week, Chinese stocks resembled a bubble ready to burst with unduly high price to earnings ratios. If her property sector turns out to be a bubble as well, then the global financial market is in for more of the volatility we saw this week.

Expensive

No other poll automation experiment has been as expensive as ours has been. Much of the cost has been inflicted by faulty procurement procedures and our own propensity for litigation.

Remember how, a few years ago, the Comelec spent a fortune procuring Polaroid machines that were subsequently junked without even being used. Then there was the multi-billion contract with Mega Pacific which was abrogated by a ruling of the Supreme Court.

Lately, the romance with the machines supplied by Smartmatic proved to be costlier than we expected. In 2010, we leased the PCOS machines for billions. In 2013, we decided to buy the used machines but made no plans to refurbish them to reuse in succeeding elections.

When the Comelec decided to contract out refurbishment by the same company, the deal was again abrogated by the Supreme Court. By the time the Comelec worked out a second contract for refurbishment, time was too limited to follow that course. No one was willing to bid for the job.

The 83,000 machines requiring maintenance work will now remain in storage. Instead, Comelec will rent out about that number of machines for next May’s elections. The rental arrangement will cost Comelec over P2 billion more than it would have cost had we promptly sent out the existing machines for refurbishment.

That rental expense, totally avoidable if our elections were governed a little more functionally, is in addition to the billions contracted out to buy about 20,000 more new PCOS machines to facilitate the voting process. We are spending money on our automation process like it was going out of style.

If technology changes dramatically in the near future, which it is prone to do, the 83,000 we could not use because we did not refurbish them in time might be headed for the junkyard. We should have, by then, spent enough money on poll automation to build two new LRT lines to help relieve the infernal traffic situation in the metro.

Despite the expense, much doubt about the integrity of the automated polling technology continues to be stoked by those wanting a drastic shift to an entirely new system.  Last heard, the detractors are said to be preparing yet another legal challenge to the latest set of contracts with Smartmatic.

True, Smartmatic will make more money from the latest deals. But the company did not invent the ineptitude that brought us down this costly road.