Dr. Legarda in life and beyond life

Published April 29, 2021, 12:25 AM

by Diwa C. Guinigundo


Diwa C. Guinigundo

The Philippine Review of Economics (PRE) is releasing a special issue in honor of Dr. Benito Legarda, Jr., former deputy governor for research of the then Central Bank of the Philippines. I had the good fortune of succeeding him after his three worthy successors, Mrs. Escolastica B. Bince, Mr. Edgardo P. Zialcita and former Governor Amando M. Tetangco, Jr.

In life and beyond life, Dr. Legarda was always relevant.

With UP’s Dr. Emmanuel F. Esguerra, former NEDA Secretary and my PREco-editor, this was an exhilarating realization upon reading the contributions. Dr Esguerra was my undergraduate thesis partner at the UP School of Economics and also my predecessor as Philippine Collegian editor.

One good example is Dr. Legarda’s June 26, 2020 letter, one of his many, in response to the Philippine Star columns of Dr. Gerardo P.  Sicat, UP Economics Professor Emeritus and former NEDA Secretary who contributed to the special issue. Dr. Sicat described this letter as “dynamite.”

His letter read: “You may be interested in the following incident. Jobo Fernandez told me in the early 50’s that when the communists were about to win in China, Chinese industries were looking for countries of refuge. Jobo told me the whole Shanghai electrical industry led by Steve Cheng was ready to come to the Philippines, but was rebuffed by our authorities fearing foreign domination. You will recall that in the mid-50’s the nationalist slogan was “Loans not investments.’ You have yourself commented on the constitutional antipathy to equity investments as a major factor in our unsatisfactory growth.”

We tried loans and we were trapped in our own excessive debt in the 1980s. We joined Argentina and Mexico in restructuring our sovereign exposures. Moratorium was the only resort because one, the Philippines ran out of foreign exchange for debt servicing and two, those loans failed to self-amortize. Obviously, the loan proceeds did not work out well. After our maturing obligations were restructured, they were securitized later. No one knew how those foreign loans were fully translated into infrastructure and social capital.

Legarda’s letter is also relevant to the proposed amendments of the economic provisions of the Philippine Constitution. All these years, the Philippines remains short of investment capital. If political governance is straightened out, that small historical footnote could lead us toward avoiding missed opportunities. Dr. Legarda would have been an excellent resource person to a T.

Beyond life, Dr. Legarda drew in an amazing compendium of articles with contemporary flavor and relevance. Legarda was the quintessential central banker, economic historian and cultural aficionado.

One relevant contribution is “Fighting COVID-19: Patterns in International Data” written by our very own, Dr. Roberto S. Mariano, and Dr. Suleyman Ozmucur, both of the University of Pennsylvania.

This is an empirical assessment of different countries’ performance in managing the health pandemic by using a “disaster index.” This was constructed based on four indicators namely deaths per population size, deaths per confirmed cases, quarterly real GDP and monthly unemployment rate against pre-pandemic levels.

Mariano and Ozmucur’s methodology ranked Singapore, Taiwan, Belarus, Korea, New Zealand, Japan, Norway, Israel, Czechia and Lithuania  as the best avengers against COVID-19. Laggards, from bad to worse, were Sweden, US, Canada, Philippines, France, Columbia, Spain, Belgium, UK, Ecuador, Italy and Peru. This finding is bound to change when subsequent developments like the vaccine rollout are considered.

They found that death rate is generally higher in larger economies, aging population, urbanization, export trade and tourism receipts. However, mortality is negatively correlated with a country’s surface area and population size.

Their insights are indispensable from a policy standpoint.

To them, framing the question “health or economy” is wrong. They are not competitive, they are complementary. They are negatively correlated. Pandemic spreads more rapidly if healthcare is weak. Therefore, the government should support individuals and entities if they are locked down with the upsurge. Support should also extend to COVID-19 tests and vaccines.

The reasoning is no different from Israel’s decision to procure vaccines at a premium because the cost of the economic scars when the pandemic is not contained is a multiple of such premium.

The authors also disagree with government’s fiscal timidity in order to uphold fiscal sustainability. Deficit and debt which are likely to inflate during this pandemic should be handled during the recovery. What is urgent today is to secure the life of the community.

Business leaders should think twice before proposing to re-open the economy only because they are worried about the economic costs. The authors argue that funds are needed to ease the pain of the people today. “Tomorrow may be too late for the problem.”

After all is said and done, the likely outcome may be defined by countries’ flexibility to spend and bring society closer to what is needed. This possible outcome can be delivered neither by the private sector nor the smart businessmen in the context of a dysfunctional system.

“These problems can only be solved with capable leaders, sound public policies and a very solid foundation of national and international cooperation and coordination. Rulers and public authorities are expected to deliver these to be considered as ‘true leaders’.”

It’s like hearing Dr. Legarda speaking after humming the tune of a favorite aria.

(Dr. Legarda passed away on August 26, 2020 at the age of 94).