Thesis – an Opinion

As the obsessed car guy that I am, my undergraduate thesis for my Economics course was about evaluating whether car sales as represented by new vehicle registration by the Land Transportation Office (LTO) can measure economic performance. Long story short, it can. The better the economy, the more money people got, and the more money people got, the more cars they can buy. It’s like, duh, ‘di ba? For me it was self-evident when I proposed it to my thesis adviser, and when he approved it I was as cocky as a porn star on Viagra. I thought I’ll be able to finish it in a month, two months tops, and relax for the rest of the semester as far as that requirement was concerned. But well, I just finished it, it had taken five months, and it proved to be harder that I thought. Score one for eating humble pie.

There are some interesting things I’ve learned while researching, but are of tangential relevance to my thesis. Like for one, how are inflation and lipstick sales the same? Guess what, both respond in inverse proportion to the economy. High inflation diminishes buying power thus reducing consumption, that is clear to anyone who has taken macroeconomics. Oddly, lipstick sales go up when women feel the crunch as they buy cheap cosmetics like lipstick to make themselves feel pretty good despite the economic environment.

Speaking of women, I’ve read somewhere about the Hemline Index by a 1920’s economist called George Taylor that proposed that the height of the hemline, which is the lower edge of bottom garments like skirts and pants, show how well the economy is doing. Eras where long skirts where in vogue correspond to periods of economic depression, while miniskirts were all the rage during the boom years of the 60’s. I see what girls wear during my classes, and I thought of updating the Hemline Index theory. Should I consider pursuing higher studies in Economics, I will propose the hypothesis that a girl’s reckoning of the use of short shorts as decent collegiate attire indicates either one of two possibilities. Either (a) she is from a family with high income generating potential and social status, or (b) she’s just slutty.

And I thought new vehicle registrations as an economic indicator are silly. I did and can think of more frivolous things.

Going back to my thesis. During the time I was writing it, I was also researching what truck to buy for the family business. That got me thinking. Nobody buys trucks for personal use. Companies buy trucks for their deliveries, and trucks are big-ticket purchases that form part of capital investment in their business. Can truck sales indicate aggregate economic investment? I tested the data and compared it with figures for indicators such as GDP, durable good investments, imports and exports, and inflation. Correlations between the cyclical fluctuations of truck sales and durable good investments are above moderate levels, so yeah, they can. But then the analysis showed that the co-movement of truck registrations with imports is strongest, above the correlation with investments.

The raw data tell an even more fishy story. The Chamber of Automobile Manufacturers of the Philippines, Inc. (CAMPI) is a consortium of car companies selling brand new vehicles. You know the marques sold by its members: Mitsubishi, Toyota, Hyundai, Nissan, etc. CAMPI reports yearly data of sales figures from its members, and they sold a gross total of 1,219 trucks for 2009. How can you then explain the 18,711 trucks registered on the same year in the LTO?

Simple. The majority of trucks newly registered in the country are surplus units from Japan, converted from right-hand drive and sold to the buying public for less than half the price of a brand new unit from the car companies. In my thesis I defined firms in this line of trade as part of the informal automotive industry. These are the cavaliers that in essence turn trucks that are otherwise considered scrap in Japan into usable and relatively dependable workhorses. Some even remanufacture the units and give you what in effect are trucks that would last almost as long as those from the casa.

Understandably, the car companies are pissed that these players exist. If I were in their shoes, I would agree. If they would like to get rid of them and at the same time get more people to buy their trucks, I propose that they lobby the government to impose strict vehicle emission, safety and operability inspections during new and subsequent registrations. This stops the registration of shoddy, crappy used trucks, eliminates dangerous vehicles on our roads, increase sales of new vehicles as people will dispose of their broken-down claptraps, and enable us to breathe easier. Copy the British Ministry of Transport (MOT) testing procedures and systems of doing things and we will be all set.

But whatever the casas say or do, I respect those in the informal industry. They embody the Filipno spirit of ingenuity. Look at the jeepneys, those monstrous galvanized dinosaurs of the road. The Americans gave us democracy, an educational system, and a crapload of Willy’s Jeeps that they left behind after the War, which we then converted into people carriers and is up to now irreplaceable as public transportation. They still provide affordable, though not safe, carriage for the common man. The jeepney lives on, and so will these surplus truck dealers, unless of course the car companies get their way.

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