Trust is the cornerstone of a functioning economy

Back in August 2021, when the COVID-19 Delta variant – the fastest-spreading and deadliest variant yet – rampaged through the population, Metro Manila went into a two-week lockdown to arrest the spread of the virus. It was a hard sell for the business community, coming after months of economic inactivity because of the outbreak. But lock down we did, and it was all to save the most important time of the year: Christmas.

This was not for purely sentimental reasons. For millions of small businesses, the fourth quarter is when months of planning, inventory buys, and narrow margins either pay off or don’t. That rhythm is delicate and depends on a basic social contract: that consumers feel confident enough to open their wallets. You can’t do that with a virus running rampant among the population.

In today’s turbulent political climate, the recent corruption scandal engulfing our government is the virus that is attacking the people’s trust. It could significantly impact consumer spending in the fourth quarter of this year – a time when many businesses rely on the holiday season to bolster their annual revenues.

Trust is the cornerstone of any functioning economy. When consumers lose faith in their government, they become hesitant to spend. The ripple effect of this reluctance is particularly detrimental to small businesses, the backbone of our local economies. These enterprises thrive on consumer expenditures; a slowdown in spending during the crucial fourth quarter could lead to widespread financial hardship, layoffs, and even closures.

Zoom out to the larger impact of the corruption scandal, and you’ll see wary foreign investors clutching their wallets closer to their chests and having second thoughts about engaging in business with the Philippines. The contract is fraying, and it hurts to see it after the country has done so well in the past few years to regain its position in the international community.

When allegations of impropriety touch government institutions entrusted with people’s hard-earned money, the immediate consequence is outrage. The next, more insidious effect is the erosion of trust. And trust – in leaders, in institutions, in the market – is the quiet fuel of consumer spending and investor confidence.

Why does this matter for the fourth quarter? Because consumer (and business) decisions are not made in a vacuum. Households weigh not only income and prices but expectations: Will my job be secure? Will prices rise further? For investors, how can they be sure that they will see their money again and not have contracts cancelled because of the greed and avarice of government officials and politicians?

Small enterprises are particularly vulnerable. They carry thinner cash buffers, have less negotiating power with suppliers, and often depend on the holiday rush to cover operating costs for the year. A lost quarter can close a door permanently. These businesses are not abstract economic indicators; they are as real and ubiquitous as the sari-sari store down the street.

Economists often point to the multiplier effect: when money enters the local economy, it circulates, boosting various sectors and creating jobs. Small businesses are at the heart of this cycle; they hire locally, source materials from nearby suppliers, and engage in community initiatives. They provide the stability that is felt immediately by the citizen.

Beyond investigating wrongdoing and holding individuals accountable, there is a need to stabilize the public’s sense that the rules are applied fairly. Political will matters. While swift, transparent action that demonstrates a commitment to accountability will not magically restore every lost sale or shuttered business, it can arrest the slide of public confidence. When people see genuine efforts to right foundational wrongs, trust can begin to be rebuilt.

But the solution doesn’t rest solely on the shoulders of politicians. The private sector can respond to the needs of vulnerable enterprises and keep commerce moving by helping small enterprises have ready access to capital, to mentoring, and to markets. The private sector and government can help bridge cash-flow gaps and upskill entrepreneurs while consumer confidence rebuilds. They can also refuse to avert their eyes from the crime.

The potential fallout from the current scandal, if left to fester, is not one to be taken lightly. Our ASEAN hosting next year is very important; this makes me confident that the President would not risk such a legacy-defining moment of his administration, the one big event that can showcase the Philippines’s economic potential. I myself will continue to help this administration, having seen for myself the hard work that even the First Lady has put into helping those who are at the fringes of society. It is work that needs to continue.

Had we not taken that bitter pill that was the two-week lockdown back in August 2021, had we not braved the harsh words thrown at us or pushed for it as hard as we did, when we did, we would be living a different timeline right now. The longer it takes to assure consumers and investors that the government is trustworthy, the more likely they are to modify their behavior based on uncertainty. People want to believe that facts will be followed, wherever they may lead, and the government must not let them down. The years of abuse have made them wary of performative gestures; they clamor for systemic fixes.

Trust is an essential economic policy tool — as important as a vaccine, as effective as a lockdown. When political leaders act with integrity and decisiveness, they slow the contagion of doubt. Conversely, when they hesitate, obfuscate, or appear to shield the powerful, the damage multiplies, and recovery becomes less certain.

This is an avoidable tragedy. The fourth quarter is here, and for the health of the economy and the resilience of our communities, we cannot afford for trust to be the casualty that turns a seasonal slowdown into a wider, long-lasting contraction. The time for decisive, trust-restoring action is now.

Source: Go Negosyo - www.philstar.com