WANTED: Empire builders
(This essay has first appeared in the moribund Pinoy-rin.net. The updated version is now Chapter VI of the UST publication of BUILD or PERISH!)
Where is the business class?
Filipinos are seemed conditioned into thinking that the government is both the problem and the solution, and the people deserve only the government they create. What seems to be excluded from this equation of blame is the immense and intricate involvement of the private sector (principally the economic elites or the “entrepreneurial or business class”) in the governance system. But former President Ramos speaking before the Makati Business Club on August 27, 2003, seemed to have clarified the slipshod cliché. Ramos cited the “unholy alliance” and “perverse symbiosis” between politicians and a few families, powerful, wealthy and “greedy rent-seeking,” to whom many of the former are beholden—which makes the unequal alliance and symbiosis doubly unholy and perverse—as the “mother of all our problems” throughout history. On the other hand, Romulo Neri, the Philippine government’s chief economist, has described (December 2003) the relationship as “booty capitalism” (a derision first coined by American political scientist Paul D. Hutchroft) practiced by a well-entrenched oligarchy that invests in politicians to curry policy favors and “capture economic power.” Neri certainly was apprehensive this oligarchy would again control the outcome of the May 2004 elections. If Filipino politicians and government bureaucrats are mere errand boys of the business class and the ordinary citizens are no more than unenlightened accomplices in the political process, shouldn’t the inquiry and criticism be centered more on the performance of the business class rather than the grandstanding politicians, the messianic mutineers or the mobocratic street marchers?
The competitiveness of a nation’s economy, for example, largely depends on the competitiveness of the businesses that operate within and export from the country. Therefore, if our business class are inept in the way they invest and innovate, or to make use of the technology developed elsewhere, could they remain blameless themselves by simply putting the blame—often through the mass media they control—upon the corrupt politicians, the bungling bureaucrats, and the ignorant masses?
Governments, of course, can destroy competitive advantage, or the dynamism of businesses within their national boundaries, due to inconsistent policies, whether self-inflicted or externally exerted. But it takes more than a “level playing field” to build and compete. It requires patriotism, national pride, and the will to develop in the first place.
The elites of strong republics
The ruling elites of the infant American republic readily responded to the call of Alexander Hamilton to lend their prestige and credit in the securitization of the Revolutionary war debt and then in aggressively risking into manufacturing ventures in the early phase of the American economy. The Japanese samurai who laid down the foundation for the industrial economy of Japan from scratch, drawing on their strong sense of social obligation, put the development of the nation ahead of short-term gains. Only recently during the Asian financial crisis, the South Koreans were said to have lined up for miles to give their jewelry toward the country’s dwindling foreign exchange reserves. The Americans, the Japanese, and the South Korean did what they had to do in the name of national pride.
Indeed, crucial to the nation’s economic take off is patriotic elitism (or what Philippine Inquirer columnist Conrado de Quiros calls a “sense of country”) not necessarily on the part of the seemingly hopeless trapos but of the business class. Economic growth and development demand the calculated sacrifice of the economic elites to bear risks, to accumulate not only for their family’s empire but for the Empire of the Nation, through innovation and experimentation, vigorous investment expenditures in high-valued productions, and pursuit of entrepreneurship not otherwise shielded from international competition, instead of minimizing risk and optimizing gains by simply playing safe in some underhanded rent-seeking activities or securing their resources and wealth in safer havens in other climes, all at the expense of the many who are not so endowed.
A redemptive changeover
More significant therefore than the presidential bold assertion that “unbridled globalization is no longer in vogue” is the redemptive changeover manifested by GMA in her post-Rizal Day pronouncements (at the Philippine Stock Exchange on January 10, 2003) when directly she challenged the country’s business elites. GAMBLE, she demanded. Take risks as “I (have taken) the plunge” (apparently alluding to her announcement not to run in 2004, a decision she has reversed, quite ceremoniously, nine months later). The call couldn’t be any more propitious for, critical to economic development is, to repeat, the will to develop on the part of the captains of the industry or the nation’s empire builders, if you will, who want it so badly to attain national development. It was as if GMA’s call has made the renewed rumblings for charter change look more like an unintended diversionary tactic of political louts and troglodytes or an offer by a highway mechanic to repair a totaled car along EDSA.
From a cautious start
As part of the nation’s transformation, the system in place nurtured in elitism and market-democracy must therefore give way to experimentation and adventurism, something that GMA cautiously shunned a couple of years ago and just days immediately following the People Power II uprising.
At her first Vin D’Honour on January 23, 2001, GMA, opting expressly for a business-as-usual approach to govern the nation, announced what was then perceived as her governance vision that “During my administration democracy and the market will be the guiding principles of my domestic and foreign policies.”
Reacting to GMA’s speech, we submitted in our web forum the proposition that democracy and market alone, without social justice, will not succeed to “Advancing the Welfare of Filipino People” (the title of her Vin D’ Honour speech).
Social justice defined
Instead of strict adherence to the market paradigm, we called for the balancing of the market forces with the pursuit of social justice as postulated by Justice Jose P. Laurel in Calalang vs. Williams (70 Phil. 726). About 65 years ago, Justice Laurel in Calalang wrote:
Empowerment liberates
On the other hand, we pointed out that limiting the conception of democracy to nothing more than a citizen’s choice in the ballot box, which encapsulates an illusionary empowerment, has been proven, more and more, to be rather a disincentive to responsible citizenship.
Empowerment, one which allows people to be as best as they can be, change circumstances, and develop alternatives, in itself, as the Filipinos now realize in two great people’s upheavals, is an engine of profound transformation that releases liberating individual energies and initiatives in any organization, both public and private, as did such great forces as the industrial revolution at the turn of the last century. This is an irreversible truism that will continue to pervade the Information Age. The “text gen” that swamped and swarmed EDSA II and the virtual participants in the revolution from around the world are proofs of the potency of people’s empowerment. (By the estimate of some industry experts, there are now about 100 million text messages circulated in the Philippines on a daily basis.)
The pressure for radical transformation notwithstanding, and just two days after the upheaval of People Power II that swept her to power, GMA did not equivocate, in her first chance to articulate her vision, to say her “administration will resist the temptation to take (adventuristic) initiatives and directions for the sake of appearing to be innovative.”
That was unfortunate, we thought.
The real political, social and economic challenges of GMA’s administration, we contended, would be how to balance the market prescriptions (freedom from state interference) with social justice (freedom to self-realization) on the one hand, and, on the other, how to marshal and factor democracy, expressed in people power through consultation and consensus, in bureaucratic efficiency. We feared that GMA was about to lose one great window of opportunity by balking to fully legitimize People Power II and to venture into a fresh start, preferring to look backwards to the status quo ante, a situation her predecessor ousted by the revolt has continued to exploit. Thus we urged her to welcome and take the path of adventure, of being a visionary and a revolutionary, not just a “good president.”
No magic
But GMA has insisted: “I have no grandiose ambition of being great. I just want to do my work well. I don’t want magic. I just want to be 100 percent right—morally right.”
That last one was GMA’s explicit promise: to restore moral authority in governance. By swiftly paving the way for Erap’s arrest, GMA has shown her great resolve to fulfill that promise, an opportunity that somehow had eluded Cory as to her own Ninoy’s tormentors.
Before the start of the plunder trial we had noted that the ball even at that stage was on Erap’s court given the scope and weight of the evidence adduced during the impeachment hearings; that whether Erap would then be placed on house arrest, detained with special privileges appropriate to a former head of state, or allowed to exit via exile, the nation would do well if it would accord GMA abundant discretion to exercise her presidential prerogative; and that the exercise of such a prerogative would become more significant if weighed as a necessary precondition to the fulfillment of her implicit promise for social and economic reforms.
After two uprisings, one, that had toppled an illegitimated government, and the other (EDSA Tres), that sought to express violently the powerlessness of the poorest of the Filipino poor, one would have expected that the logical path of the new leadership would be toward radical rather than gradualist reforms. Quite unfortunately, GMA has opted for incremental solution having thus eschewed any “grandiose ambition of being great.”
During the early phase of GMA’s administration and certainly before the July 27 (2003) mutiny, we had exchanges about GMA’s route to achieve fundamental restructuring one of which was in terms of reforming the wretched state of the electoral process. We argued that if a “failure” of an honest and peaceful election is perceived again as too likely to occur in 2004 owing to the same official neglect to reform the process now, it could trigger to test anew the breaking threshold of the silent middle, which already evinced its agitated state in People Power II. A gradualist approach to this acute political, nay, social malady might end up inadequate to fulfill the explicit promise of moral uprightness. Therefore, we contended, should a conciliatory approach to Erap’s case (a plea of guilty, presidential pardon and then exile) be pursued thereby saving the government precious resources, a redirected or rather intense effort towards electoral reforms could prove in the long term to be more salutary than the clamor for retributive justice. A later editorial of Philstar (January 2, 2004) was equally foreboding:
Poverty alleviation is yet another case. The poor are just poor. But most of the time, contrary to the assumptions of many, they are not dumb. They will temporarily allow themselves to be lulled or entertained by the promises and antics of the politicians who condescend to them during elections or will even sell their vote twice, one to each warring camps. At the end of the day, the poor will lump election dole-outs and symbolic social justice officially endorsed by the state as one and the same entitlement. Long accustomed to inherited injustice, their plaints could lay as torpid as the inaudible tremor of a long dormant volcano. But like EDSA Tres, the stupor could be tilled or goaded into violence by some “enlightened” provocateurs or charlatans. And since they are only poor not dumb, they know all too well the difference between their caste and those of their pseudo-leaders. In the event of a successful power grab, the strongest of them will likely keep the power to himself. A triumphant “rebel without a cause,” while too hard to come about, is likely to sow anarchy when he does.
Filipinos’ most recent experience has shown that both electoral and socio-economic problems have now risen to a well-nigh calamitous proportion. But while, it is believed, electoral issues could still be righted just by doing things right, socio-economic reforms will require “grandiose ambition,” highly viable design, and broad consensus to accomplish. Hence, as to the latter, a business-as-usual approach might not be enough to contain a potential seismic eruption however its occurrence is still perceived by some to be remote for now.
The business class, a political animal
What is the crucial role of the business class during these trying times? The Filipino business class, by Harold Lasswell’s standard, is as political an animal as any trapo. Business leaders are power players in essential policy formulation and implementation as to who gets what, when and how. Business decisions or non-decisions (e.g., to rightsize the workforce, build or shutdown a factory, own a “privatized” national airline, or engage in corporate citizenship) are ultimately political decisions. Without therefore the active participation and cooperation of the private and business sectors in any well-intentioned allocative program through job creations as well as in productive-capacity building, it is destined to founder again. But even as the saliency of the issues—raised by EDSA Tres, by the July 27 mutiny, or by what some well-meaning political observers consider as threats of potential civil war—is reaching its high point, we have yet to hear any meaningful offer of leadership role and spirited involvement from the business oligarchy of the Philippine society.
Arguably, it is conceded, initiatives that seek to bring about radical changes are not easy to carry out because they involve similarly fundamental changes of behavior among the participants, particularly of those who would be asked to share more. One such behavior we are pounding on is national pride above self-interest. Another is over an innovative and possibly innately Filipino economic arrangement that takes into account the guiding framework Justice Laurel postulated in the Calalang case, versus a system dominated by the Bretton Woods triplets (IMF, WB and WTO) and foreign creditors.
Tripartite power sharing proposed
At the height of People Power II and before Erap abandoned the Palace, we have fiddled with the idea of a tripartite power sharing among: GMA, representing the People Power II coalition, FVR (former President Ramos), the civilian representative of the military, and Edgardo Angara, then Erap administration’s executive secretary. The trio would exercise revolutionary powers largely to put the house in quick order for needed economic reforms but only during the unexpired term of Erap and until normalcy would be returned in 2004 in time for the constitutionally prescribed presidential elections. Obviously that wishful thinking has been overtaken by several events. With little time before another deadly national elections traumatize the nation (or a vicious destabilization plot succeeds), it is only hoped some “magician” could do the tricks.
One magic trick that comes to mind is the one South Korea successfully pulled. South Korea, a highly homogeneous society, took the innovative route of embracing crony-capitalism while subjecting it to strict discipline by imposing performance standards, down to the activities in the shop floor, upon business recipients of state largesse. The chaebols then assumed industrial leadership by risking into productive enterprises instead of simply preserving their rent-seeking activities. The state subsidy (from borrowed foreign funds) for diversification into new industries proceeded in tandem with the decision to invest heavily in education. Official cronyism and education, while still conforming to market mechanism, lay at the heart of the late-industrial expansion of South Korea. With fewer multi-national corporations in Korea than in any late-industrializing countries, its economy took off on the basis of nationally owned firms.
Taiwan took a different route to do the trick. Through broad distribution of land ownership and capital, and high returns to labor, the individual Chinese was greatly motivated to produce much of the rapid growth of Taiwan’s economy. Taiwan’s small-scale capitalism as a base for industrial development can serve to Filipino economic planners as just another model for accumulation.
City-state Singapore, on the other hand, has placed economic pursuits, via a domestic economy dominated by foreign affiliates, above political ideology (in a highly regulated society). The result is per capita income of a First World state.
There certainly are other economic models that could be investigated for best practices. But the ones that appear to stand out as common denominators for the success of the three countries above mentioned are: 1) the reciprocal relations between the state and businesses, 2) extensive investment in education and 3) the grandiose ambitions of their pioneering leaders.
GMA transformed
On January 10, 2003, before the Makati businessmen, the President, who 10 days earlier had stunned the nation upon announcing she’s relinquishing her bid to extend the tenure of her presidency, sounded transformed as she challenged the rich to take a similar plunge:
Free market called to task
It is apposite to listen at this point to the voice of Christina Morales, a lecturer from the Department of Economics of Ateneo de Manila University. She may neither be the nearest nor the loudest, but hers could be one of the sanest propositions for an accumulation model that calls to task the orthodoxy of free market. As a reaction to GMA’s speech at the Philippine Stock Exchange, Ms. Morales wrote “that coherence and completeness of a country’s industrial promotion strategy” proves to be “the most resonating lesson of the East Asian Miracle.” Hence,
What could possibly be added to Ms. Morales’s proposal is that the strategy to favor targeted firms and industries (in South Korea, for example, long-term capital with favorable interest rates was allocated to Hyundai, Samsung and Daewoo over smaller firms) may not necessarily be limited to manufacturing because services and information technology are areas of competitive advantage with great value-added potentials that we could also take a shot at. We however need precise information about the long-term prospect for certain industrial segments or particular firms in the changing patterns of the global markets. This is where the full partnership of the political, bureaucratic and private sectors come into play in terms, for instance, of facilitating exchange of information on company and other relevant data with a view to inducing the least competitive to exit from the industry or nourishing the ones with the best outlook to compete internationally.
A different approach, it should be mentioned, is one proffered by our town mate, Nick Nadal, a private sector consultant operating in the Middle East, who calls for “a devolution of power away from the crony induced political system . . . and (for the development of) a strong civil society—in the local level especially—that would demand for greater transparency and question the prevailing (local) fiefdoms,” while insisting that “at the same time, the private sector (specifically the SMEs) needs to be fostered, harnessed and developed—through microfinancing, technical support, etc., administered by the private sector (or other independent entities) and not the government.” Nick Nadal strongly believes that “Dependence on government breeds the sad cronyist political system we have.”
In our virtual community, we had some exchanges about start-up business concepts as fanciful as “technopreneurial stewardship.” It’s always exciting to hope.
A Bayanihan pact
The idea that during a nation’s initial developmental thrust industrial enterprises merit the protection of the State in breach of the market paragon so that if such a national collaborative undertaking flourishes all may flourish is not adventurism “for the sake of appearing to be innovative.” When all the participants in a uniquely Filipino Bayanihan project of sort understand what’s envisioned and are fully committed to it, then that translates into a national aspiration for a “strong republic” sans all the empty shibboleths.
Let’s face it. Capital, labor, the community, and the government are mutually interdependent. Therefore, a Bayanihan pact where everyone makes the sacrifice (or, more appropriately, exercises the privilege) so that each may come out with something while preserving the survival of the State should be explored. By everyone, I mean to include everyone such as the poor sacrificing to vote their conscience instead of allowing themselves to be bought, so that the representatives they send off into the public sector as policymakers will serve as competent partners, not mere stable boys (that much the powerless can share and most certainly that will matter, if only to regain their individual self-respect) or labor being more compromising and cooperative, or circumspect in resorting to concerted actions such as work slowdown or strikes, otherwise there would be no work to hamper or strike about.
On the other hand, the media elites (as well as media practitioners doing diligently their homework) must perform their proper role as a “public trust” to put in appropriate context the definition of the goals envisioned and the precise trade-offs to be negotiated, and then articulate them in a proper balance.
The Japanese example
The route the Japanese had taken, as a late-industrializing country as earlier alluded to, is too close an example to ignore.
The zaibatsu2 (literally, “money-cliques”) were “great Japanese business houses” with vast business enterprises which comprised of banking and insurance, foreign and domestic trade, electrical apparatus and machinery, textiles, paper, cement, glass, chemicals, maritime shipping, shipbuilding, mining, metals, and mechanical engineering. They had a feudal past and family councils regulated their activities. The zaibatsu, together with those enlisted from the ranks of the samurai, not only helped finance the Meiji restoration (the reign between 1852-1922 that marked the downfall of Japanese feudalism and the introduction of Western ideas into Japan) but transformed government economic policies from a feudalistic economy.3
On the other hand, by subsidies and a favorable tax policy, the government granted the zaibatsu a privileged position in the economic development of Japan. They later helped bankroll strategic semiofficial enterprises in Japan and abroad, particularly in Taiwan and Korea. Far from the prescriptions of laissez-faire, one of their methods was for certain business families who could provide resources and means for assistance to network with particular statesmen who had great but concrete ideas to enact such as the later concept of “wage plasticity” where the earnings of particular workers were made to bear close correlations to their employer’s prosperity. The zaibatsu transformed themselves into active change agents to modernize and industrialize Japan.
During the Allied occupation, the zaibatsu were broken but in the 1950s and 1960s, the old groups reemerged as keiretsu. The bold initiatives of the keiretsu following World War II to pool their resources together paved the way for Japan to rise as a global economic power.
The market hypocrisy
We have some discussion [in another post] about how a mutant form of democracy was handed down to the Filipinos by the American colonizers. In a sense, the delivery of democracy in the Madisonian contrivance (a.k.a. democratic elitism) was fair because the Filipinos were given what the Americans have had in practice. Not so with respect to the market system. For, whereas America also mutated the market system, it has kept the mutant form to hold sway in its backyard while requiring Third-World countries like the Philippines to practice the pure variety through the bitter prescriptions of the market discipline by such institutions as the IMF and the WTO.
Despite the market rhetoric, state-capitalism (as opposed to market-capitalism) has been adopted by powerful nations—such as France, Great Britain and Germany. Britain then had emerged as the world’s most advanced “developmental state” (ironically, a label the West pejoratively ascribes to Japan), a model that has become endemic in the industrial world and certainly the United States being among its earnest adherents up to the present.
The United States has employed market-distorting schemes such as tariffs, quotas, tax breaks and abatements, loan subsidies, bailouts, and regulatory rollbacks to protect its industries. One recent and obvious instance of market mutation in America is the 2002 $15 billion corporate dole-out ($5 billion grants, $10 billion loans) to the airline industry post 9/11 for the industry’s pre-9/11 failures. Today, non-military aircraft production is concentrated in only two firms, Boeing-McDonald and Airbus, a European consortium, both being recipients of enormous state subsidy.4 This mutant form of the market permeates in agriculture with the mind-boggling $180 billion farm subsidy over ten years benefiting mainly wealthy US farmers. Amadou Toumani Touré and Blaise Compaoré, the presidents, respectively, of Mali and Burkina Faso, two cotton-producing countries in Africa, together wrote on July 11, 2003 an op-ed article to New York Times about the ill-effects to their least developed countries of market-distorting farm subsidies given to cotton producers in wealthier countries which lead to worldwide overproduction and deprive their poor counties of their only comparative advantage, cotton being their sole agricultural product to trade in the international market. The op-ed letter expressly noted that—
By contrast, there is no question that even in other key sectors of the American economy than agriculture, such as in the high-technology industry including the Internet, robotics, biotechnology, and pharmaceuticals, the nursing hand of the nanny State abounds.5
Don’t we ever notice that trade barriers (not to speak of capital controls) are standard subjects of economic protestations voiced by industrially advanced nations, which manufacture most of the “goods” traded, but not labor barriers consisting of highly restrictive immigration laws they imposed against “service” exporting nations (and I’m not talking here about financial services, consultancy, e-commerce, tourism, or water supply but about the services of natural persons such as household helpers, nurses, teachers, and carpenters).6 Can we still deny the fact that migration and remittances by overseas workers constitute a transnational individual framework (a poor nation’s version of the transnational corporation phenomenon, where TNCs seek cheap labor while TNIs, if you will, seek higher wages or salaries) that brings immediate relief and stability to Third-World countries better than foreign direct investments? Following the coup attempt in July 2003, and the attendant political bickering by the trapos and profiteering by those so-called self-made paper entrepreneurs (mostly bankers), the plea made by the GMA government—not to investors, foreign or otherwise, but for individual Filipinos to convert their dollars into pesos and for the unsung OFWs to make their remittances earlier than Christmastime in order to arrest the decline of the peso to near historic low—categorically illustrates the whole point.
[One IMF study reported by Business World (November 5, 2003) claims that OFW remittances are a “moral hazard” because they are primarily devoted to private consumption “leading to decreased efforts on the part of the domestic workers, firms and entrepreneurs” rather than as development capital, especially where such remittances were treated as returns of human capital invested abroad. This is quite understandable considering that OFW remittances are not directly available to service foreign debts—the unstated raison d’etre underpinning IMF policies towards a developing country that is heavily indebted and whose enfeebled economic sovereignty, owing to those policies, has failed to grow an economy capable of absorbing overseas workers.
What cannot be ignored are the facts that remittances from OFWs (largely from the US, Saudi Arabia, Hong Kong, Japan, Singapore, and the United Arab Emirates) reached 7.6 billion dollars in 2003 accounting for about 16 percent of Philippines’ total current account receipts and 10 percent of GNP. These remittances are sources of funds for education, housing, and investments in SMEs as well as for payment of imports such as oil and parts and components for local industries.]
A brief look at the economic history of the United States shows that during the last quarter of the 19th century, the “robber barons” (from the label of feudal lords who owned huge estates during medieval Europe), the likes of J.P. Morgan, the lord of finance capitalism, John D. Rockefeller, the oil mogul, Andrew Carnegie, the sultan of steel, set the stage for what historian Howard Zinn calls the “greatest march of economic growth in human history.”7 The economic elites took the lead with the connivance of the American trapos, if you will, as well as the US Supreme Court. While Congress made sure tariff laws were passed to keep out foreign competition, the embodiment of “somber, black-robed fairness” did its own “bit for the ruling elite”8 by accepting the argument in a groundbreaking decision in Santa Clara County vs. Southern Pacific Railroad (1886), that corporations were “persons” and their money as property within the meaning of the Fourteenth Amendment, an amendment originally adopted to protect Negro rights.9 However, since the poor whites, the blacks, the women, the children, the European newcomers, and the Chinese labor were not there at the formation, the march exacted an enormous cost to them. The Chinese coolies were among those who suffered the most even as they worked for “starvation” wages to build the railroads for the engine of the American industrial revolution and for the vast network of business empires of the robber barons. However, while often performing the life-threatening part of the railroad constructions, by court fiat10 the Chinese were not considered 100 percent “persons” juridically speaking, even as late as 1871 or about a century after Americans declared the rhetoric that “all men are created equal.”
As a late-industrializing country, the Japanese caught up quickly by avoiding the pitfall of the American “ingenuity” and by seeing to it everyone was on the same page where work and patriotism were defined together.11
The Korean students, emulating Japan’s great sense of social obligation, kept the military regime and the chaebols in check in the unorthodox experiment of rebuilding their even later-industrializing nation.12
Lest we forget, Rizal, writing for La Solidaridad, the main propaganda organ of the Filipino expatriates’ movement against Spain, expounded in no uncertain terms on the “sense of country” and “revolutionary spirit” as vital requirements for economic development:
A plunge forward
The challenge therefore that GMA posed to the economic elites to take the plunge with her—which could also mean EMPOWERING themselves to redeploy their resources against external dictation, mobilize their capital, pool their talent, and tap their network of connections, internal or external, if need be and, then, to gamble, create wealth, develop their own economic model, explore new economic opportunities in terms of new products, processes and markets, build an empire and a strong republic while dispensing social justice—if not mere rhetoric, is a great leap forward.
Doesn’t Jonathan Swift remind us in Gulliver’s Travels, “ . . . whoever could make two ears of corn, or two blades of grass to grow upon a spot of ground where only one grew before, would . . . do more essential service to his country than the whole race of politicians put together”?
Only a handful families control the banking system in the Philippines. That makes for the establishment of a private development bank of some kind specifically targeting to: help emerging industries capable of higher-valued productions; respond to the needs of older industries that have the best chance of becoming internationally competitive; develop, in parallel strategy, local capacities through large-scale microfinancing; underwrite research and development projects; and promote high-quality education and training, a realizable proposition. The bank will operate in conjunction with other financing sources. Primary reliance on international capital flows either as foreign direct investment, portfolio investment, or foreign assistance (we will expound more on this last one in the next chapter) as we have thus far experienced is precarious to say the least. A review of some pertinent economic figures14 indicates that US overseas manufacturing investments, for instance, have shifted invariably with great consequences to the host countries. In the 1950s, most of the US investment in the Asia region was in India, Indonesia and the Philippines accounting for 90 percent of the region’s total. While Philippine Gross National Product (GNP) per capita then was about just half that of Japan, it was a third higher than that of Taiwan and more than twice that of South Korea. As of 1970, by GNP ranking, India placed 10th in the world, Indonesia 32nd and Philippines 40th; whereas, South Korea was 43rd, Taiwan 60th (and Singapore was not even among the first 100 even as late as 1976). By 1988, US dramatically shifted its overseas manufacturing investments to Singapore, South Korea, Taiwan, and Hong Kong at 68 percent of the region’s total with Malaysia and Thailand accounting for a further 14 percent. Of these six countries, Singapore had the largest share at 32 percent. During this later period, the combined US manufacturing investments in India, Indonesia and the Philippines were reduced to 18 percent of the total in the Asia region, less than the share of Taiwan at 18.5 percent. Moreover, the US government redirected its foreign assistance to such political and security dependencies as Israel and Saudi Arabia.
On the other hand, portfolio investors are as flighty as a day trader. For all intents and purposes, they are speculators of the casino type moving in and out, at a moment’s notice, of different national currencies or exotic derivatives in a virtual world of finance capital.15 This then leaves us with domestic private credits and personal investments to finance a rather ambitious national development project without being subject to the dictates of foreign assistance establishments like the IMF and World Bank or to the fickleness of fly-by-night foreign operators. These foreign resources should therefore serve merely as supplementary to a vigorous entrepreneurship of our local economic elites.
The Philippines is also awash with business and management talents. In 1980, I took an abbreviated business management course at the Asian Institute of Management and I was elected president of our class, which consisted not only of Filipinos in middle-level management but Singaporean, Malaysian, Thai, Korean, Japanese and even Mexican mid-level business leaders and managers. We learned from our Filipino business gurus that good business management should really be nothing more than “resourcefulness” and the ability to work collaboratively and innovatively to tackle real-world problems. And that seemed where the rub was. My foreign classmates have practiced the theories they learned from our experts while we’ve tarried in our ingrained habits of risk aversion. So, money might not really be the problem after all but “in-kind investment” is, in the form of the right attitude to avail of our ability to use money that’s available. If at the slightest sign of turmoil domestic capital is exported abroad faster than foreign investments are withdrawn, or rather securely placed in passive investments or other rentier schema, then late learners like my classmates would overrun us, as they did, hands down. We do recognize that in today’s environment stakes are higher, return could be slower, and penalties for misjudgment harsher. But that’s the price of adventurism, of being “pariahs and pirates” of the ancient, or in today’s jargon, the prize of being mavericks. GMA’s call is therefore as much a challenge to plunge forward as to leap away from the old ways of doing things.
If all bets are on, we could expect some so-called liberal economists to label this “development strategy” with many epithets—“mercantilism,” “protectionism,” or “carterlization” even as their own economies blatantly continue to employ arrangements of the same nature although couched in friendly terms like “economic union,” “trade alliances,” “strategic competitive policy,” or, on rare occasions, “preemptive strike” in the service of “military Keynesianism.”
This is not to suggest that if we move towards the direction intimated here, we would in the meantime delink ourselves from the existing global economic relationship. Far from it (although, through democratic exchanges, novel economic alternatives can be imagined and fashioned). What’s being postulated furthermore is that even the market construct could become fair if struggling but willing and ready nations are given a decent chance to build and accumulate just as exactly as the leading economic powers of today did during their own growing pains and struggles; and enabled to be on similar footing, then and only then should these latecomers be made to face up to the challenge of competition. On an individual level, they call this “affirmative action” in America. I believe even nations are entitled to equal opportunity. This axiom, possibly more legitimating than “economic liberalism,” requires that adjustments to transformation of this sort relative to the prevailing international economic order should demand more of the stronger states than the weaker ones, not the other way around.
It’s never really too late to dream. But, let’s dream and go it together for the collective good.
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1. Christina Morales, “‘From lazy liberalization to lazy protectionism’, ” January 27, 2003, Inq7.net..
2. The information about the zaibatsu is derived mainly from G.C. Allen, A Short economic History of Japan, 4th ed. (New York: St. Martin’s Press, 1981).
3. For a thorough account of the Meiji Restoration and the changing roles of the samurai during the period see David S. Landers, The Wealth and the Poverty of Nations: Why Some Are So Rich and Some Are So Poor (New York: W. W. Norton & Company, 1998) esp. Chapters 22 and 23.
4. Noam Chomsky, “Market Democracy in a Neoliberal Order: Doctrines and Reality,” May 1997, Zmagazine..The piece was given as a Davie Lecture, University of Cape Town.
5. Ibid.
6. In New Jersey where I reside, the state Senate unanimously approved in December 2002 a legislation banning cheap overseas labor from being hired as customer service representatives to operate telephone call centers. The employments in call centers abroad are considered jobs “exported” from New Jersey, hence, the ban on the export. “Imports” of workers into US are generally subjected to immigration restrictions.
7. Zinn, A People’s History of the United States, p.253.
8. The quotes are from Ibid., p. 260.
9. Ibid., p.261.
10. People vs. Brady, 40 California Reports 198.
11. See Landers, p. 383, where the author explains: “a primary task of the new imperial state (during the Meiji reform): to imbue its subjects with a sense of higher duty to emperor and country and link this patriotism to work.”
12. Alice H. Amsden, Asia’s Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, Inc., 1989), p. 51-52. Amsden postulates: 1) The students kept the government honest (and coming off the streets, they became the managers of the modern factories), and 2) The American occupation drove Korea towards “developmentalism.”
13. Quoted in Guerrero, p. 193.
14. See Holly Saklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management (Boston: South End Press, 1980), Table 1, p. 10, in relation to Peter Dicken, Global Shift: The Internationalization of Economic Activity, 2nd ed., (New York: The Guilford Press, 1992), p. 65.
15. For a fuller exposition of the workings of the financial markets, see William Greider, One World, Ready or Not: The Manic Logic of Global Capitalism (NY: Simon & Schuster, 1997), esp. Chapter 13 (The Rentiers’ Regime).
Where is the business class?
Filipinos are seemed conditioned into thinking that the government is both the problem and the solution, and the people deserve only the government they create. What seems to be excluded from this equation of blame is the immense and intricate involvement of the private sector (principally the economic elites or the “entrepreneurial or business class”) in the governance system. But former President Ramos speaking before the Makati Business Club on August 27, 2003, seemed to have clarified the slipshod cliché. Ramos cited the “unholy alliance” and “perverse symbiosis” between politicians and a few families, powerful, wealthy and “greedy rent-seeking,” to whom many of the former are beholden—which makes the unequal alliance and symbiosis doubly unholy and perverse—as the “mother of all our problems” throughout history. On the other hand, Romulo Neri, the Philippine government’s chief economist, has described (December 2003) the relationship as “booty capitalism” (a derision first coined by American political scientist Paul D. Hutchroft) practiced by a well-entrenched oligarchy that invests in politicians to curry policy favors and “capture economic power.” Neri certainly was apprehensive this oligarchy would again control the outcome of the May 2004 elections. If Filipino politicians and government bureaucrats are mere errand boys of the business class and the ordinary citizens are no more than unenlightened accomplices in the political process, shouldn’t the inquiry and criticism be centered more on the performance of the business class rather than the grandstanding politicians, the messianic mutineers or the mobocratic street marchers?
The competitiveness of a nation’s economy, for example, largely depends on the competitiveness of the businesses that operate within and export from the country. Therefore, if our business class are inept in the way they invest and innovate, or to make use of the technology developed elsewhere, could they remain blameless themselves by simply putting the blame—often through the mass media they control—upon the corrupt politicians, the bungling bureaucrats, and the ignorant masses?
Governments, of course, can destroy competitive advantage, or the dynamism of businesses within their national boundaries, due to inconsistent policies, whether self-inflicted or externally exerted. But it takes more than a “level playing field” to build and compete. It requires patriotism, national pride, and the will to develop in the first place.
The elites of strong republics
The ruling elites of the infant American republic readily responded to the call of Alexander Hamilton to lend their prestige and credit in the securitization of the Revolutionary war debt and then in aggressively risking into manufacturing ventures in the early phase of the American economy. The Japanese samurai who laid down the foundation for the industrial economy of Japan from scratch, drawing on their strong sense of social obligation, put the development of the nation ahead of short-term gains. Only recently during the Asian financial crisis, the South Koreans were said to have lined up for miles to give their jewelry toward the country’s dwindling foreign exchange reserves. The Americans, the Japanese, and the South Korean did what they had to do in the name of national pride.
Indeed, crucial to the nation’s economic take off is patriotic elitism (or what Philippine Inquirer columnist Conrado de Quiros calls a “sense of country”) not necessarily on the part of the seemingly hopeless trapos but of the business class. Economic growth and development demand the calculated sacrifice of the economic elites to bear risks, to accumulate not only for their family’s empire but for the Empire of the Nation, through innovation and experimentation, vigorous investment expenditures in high-valued productions, and pursuit of entrepreneurship not otherwise shielded from international competition, instead of minimizing risk and optimizing gains by simply playing safe in some underhanded rent-seeking activities or securing their resources and wealth in safer havens in other climes, all at the expense of the many who are not so endowed.
A redemptive changeover
More significant therefore than the presidential bold assertion that “unbridled globalization is no longer in vogue” is the redemptive changeover manifested by GMA in her post-Rizal Day pronouncements (at the Philippine Stock Exchange on January 10, 2003) when directly she challenged the country’s business elites. GAMBLE, she demanded. Take risks as “I (have taken) the plunge” (apparently alluding to her announcement not to run in 2004, a decision she has reversed, quite ceremoniously, nine months later). The call couldn’t be any more propitious for, critical to economic development is, to repeat, the will to develop on the part of the captains of the industry or the nation’s empire builders, if you will, who want it so badly to attain national development. It was as if GMA’s call has made the renewed rumblings for charter change look more like an unintended diversionary tactic of political louts and troglodytes or an offer by a highway mechanic to repair a totaled car along EDSA.
From a cautious start
As part of the nation’s transformation, the system in place nurtured in elitism and market-democracy must therefore give way to experimentation and adventurism, something that GMA cautiously shunned a couple of years ago and just days immediately following the People Power II uprising.
At her first Vin D’Honour on January 23, 2001, GMA, opting expressly for a business-as-usual approach to govern the nation, announced what was then perceived as her governance vision that “During my administration democracy and the market will be the guiding principles of my domestic and foreign policies.”
Reacting to GMA’s speech, we submitted in our web forum the proposition that democracy and market alone, without social justice, will not succeed to “Advancing the Welfare of Filipino People” (the title of her Vin D’ Honour speech).
Social justice defined
Instead of strict adherence to the market paradigm, we called for the balancing of the market forces with the pursuit of social justice as postulated by Justice Jose P. Laurel in Calalang vs. Williams (70 Phil. 726). About 65 years ago, Justice Laurel in Calalang wrote:
Social justice is “neither communism, nor despotism, nor atomism, nor anarchy” but the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. Social justice means the promotion of the welfare of all the people, the adoption by the government of measures calculated to ensure economic stability of all component elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally, through the adoption of measures legally justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex. (Underscoring supplied.)If GMA’s accession to presidency has been justified by Chief Justice Davide on the principle of salus populi est suprema lex, reliance upon the market and formal democracy alone without social justice and stewardship on the part of the nation’s patricians would look like a policy disconnect to the rhetoric of advancing the welfare of the Filipino People. For, social justice, the main tool for the advancement of its cause being state intervention through “the humanization of laws and equalization of social and economic forces,” is traditionally antithetical to free market that follows, first and foremost, the dictates of “rational self-interest.”
Empowerment liberates
On the other hand, we pointed out that limiting the conception of democracy to nothing more than a citizen’s choice in the ballot box, which encapsulates an illusionary empowerment, has been proven, more and more, to be rather a disincentive to responsible citizenship.
Empowerment, one which allows people to be as best as they can be, change circumstances, and develop alternatives, in itself, as the Filipinos now realize in two great people’s upheavals, is an engine of profound transformation that releases liberating individual energies and initiatives in any organization, both public and private, as did such great forces as the industrial revolution at the turn of the last century. This is an irreversible truism that will continue to pervade the Information Age. The “text gen” that swamped and swarmed EDSA II and the virtual participants in the revolution from around the world are proofs of the potency of people’s empowerment. (By the estimate of some industry experts, there are now about 100 million text messages circulated in the Philippines on a daily basis.)
The pressure for radical transformation notwithstanding, and just two days after the upheaval of People Power II that swept her to power, GMA did not equivocate, in her first chance to articulate her vision, to say her “administration will resist the temptation to take (adventuristic) initiatives and directions for the sake of appearing to be innovative.”
That was unfortunate, we thought.
The real political, social and economic challenges of GMA’s administration, we contended, would be how to balance the market prescriptions (freedom from state interference) with social justice (freedom to self-realization) on the one hand, and, on the other, how to marshal and factor democracy, expressed in people power through consultation and consensus, in bureaucratic efficiency. We feared that GMA was about to lose one great window of opportunity by balking to fully legitimize People Power II and to venture into a fresh start, preferring to look backwards to the status quo ante, a situation her predecessor ousted by the revolt has continued to exploit. Thus we urged her to welcome and take the path of adventure, of being a visionary and a revolutionary, not just a “good president.”
No magic
But GMA has insisted: “I have no grandiose ambition of being great. I just want to do my work well. I don’t want magic. I just want to be 100 percent right—morally right.”
That last one was GMA’s explicit promise: to restore moral authority in governance. By swiftly paving the way for Erap’s arrest, GMA has shown her great resolve to fulfill that promise, an opportunity that somehow had eluded Cory as to her own Ninoy’s tormentors.
Before the start of the plunder trial we had noted that the ball even at that stage was on Erap’s court given the scope and weight of the evidence adduced during the impeachment hearings; that whether Erap would then be placed on house arrest, detained with special privileges appropriate to a former head of state, or allowed to exit via exile, the nation would do well if it would accord GMA abundant discretion to exercise her presidential prerogative; and that the exercise of such a prerogative would become more significant if weighed as a necessary precondition to the fulfillment of her implicit promise for social and economic reforms.
After two uprisings, one, that had toppled an illegitimated government, and the other (EDSA Tres), that sought to express violently the powerlessness of the poorest of the Filipino poor, one would have expected that the logical path of the new leadership would be toward radical rather than gradualist reforms. Quite unfortunately, GMA has opted for incremental solution having thus eschewed any “grandiose ambition of being great.”
During the early phase of GMA’s administration and certainly before the July 27 (2003) mutiny, we had exchanges about GMA’s route to achieve fundamental restructuring one of which was in terms of reforming the wretched state of the electoral process. We argued that if a “failure” of an honest and peaceful election is perceived again as too likely to occur in 2004 owing to the same official neglect to reform the process now, it could trigger to test anew the breaking threshold of the silent middle, which already evinced its agitated state in People Power II. A gradualist approach to this acute political, nay, social malady might end up inadequate to fulfill the explicit promise of moral uprightness. Therefore, we contended, should a conciliatory approach to Erap’s case (a plea of guilty, presidential pardon and then exile) be pursued thereby saving the government precious resources, a redirected or rather intense effort towards electoral reforms could prove in the long term to be more salutary than the clamor for retributive justice. A later editorial of Philstar (January 2, 2004) was equally foreboding:
The presidential elections in May (2004) will be the first since EDSA II. The same camps are once again facing off, and emotions are running high. Less than credible elections could trigger an upheaval that the country can’t afford. The stakes are unusually high in seeing to it that the elections will be clean, honest and orderly, but developments at the Comelec are far from encouraging.Poverty alleviation
Poverty alleviation is yet another case. The poor are just poor. But most of the time, contrary to the assumptions of many, they are not dumb. They will temporarily allow themselves to be lulled or entertained by the promises and antics of the politicians who condescend to them during elections or will even sell their vote twice, one to each warring camps. At the end of the day, the poor will lump election dole-outs and symbolic social justice officially endorsed by the state as one and the same entitlement. Long accustomed to inherited injustice, their plaints could lay as torpid as the inaudible tremor of a long dormant volcano. But like EDSA Tres, the stupor could be tilled or goaded into violence by some “enlightened” provocateurs or charlatans. And since they are only poor not dumb, they know all too well the difference between their caste and those of their pseudo-leaders. In the event of a successful power grab, the strongest of them will likely keep the power to himself. A triumphant “rebel without a cause,” while too hard to come about, is likely to sow anarchy when he does.
Filipinos’ most recent experience has shown that both electoral and socio-economic problems have now risen to a well-nigh calamitous proportion. But while, it is believed, electoral issues could still be righted just by doing things right, socio-economic reforms will require “grandiose ambition,” highly viable design, and broad consensus to accomplish. Hence, as to the latter, a business-as-usual approach might not be enough to contain a potential seismic eruption however its occurrence is still perceived by some to be remote for now.
The business class, a political animal
What is the crucial role of the business class during these trying times? The Filipino business class, by Harold Lasswell’s standard, is as political an animal as any trapo. Business leaders are power players in essential policy formulation and implementation as to who gets what, when and how. Business decisions or non-decisions (e.g., to rightsize the workforce, build or shutdown a factory, own a “privatized” national airline, or engage in corporate citizenship) are ultimately political decisions. Without therefore the active participation and cooperation of the private and business sectors in any well-intentioned allocative program through job creations as well as in productive-capacity building, it is destined to founder again. But even as the saliency of the issues—raised by EDSA Tres, by the July 27 mutiny, or by what some well-meaning political observers consider as threats of potential civil war—is reaching its high point, we have yet to hear any meaningful offer of leadership role and spirited involvement from the business oligarchy of the Philippine society.
Arguably, it is conceded, initiatives that seek to bring about radical changes are not easy to carry out because they involve similarly fundamental changes of behavior among the participants, particularly of those who would be asked to share more. One such behavior we are pounding on is national pride above self-interest. Another is over an innovative and possibly innately Filipino economic arrangement that takes into account the guiding framework Justice Laurel postulated in the Calalang case, versus a system dominated by the Bretton Woods triplets (IMF, WB and WTO) and foreign creditors.
Tripartite power sharing proposed
At the height of People Power II and before Erap abandoned the Palace, we have fiddled with the idea of a tripartite power sharing among: GMA, representing the People Power II coalition, FVR (former President Ramos), the civilian representative of the military, and Edgardo Angara, then Erap administration’s executive secretary. The trio would exercise revolutionary powers largely to put the house in quick order for needed economic reforms but only during the unexpired term of Erap and until normalcy would be returned in 2004 in time for the constitutionally prescribed presidential elections. Obviously that wishful thinking has been overtaken by several events. With little time before another deadly national elections traumatize the nation (or a vicious destabilization plot succeeds), it is only hoped some “magician” could do the tricks.
One magic trick that comes to mind is the one South Korea successfully pulled. South Korea, a highly homogeneous society, took the innovative route of embracing crony-capitalism while subjecting it to strict discipline by imposing performance standards, down to the activities in the shop floor, upon business recipients of state largesse. The chaebols then assumed industrial leadership by risking into productive enterprises instead of simply preserving their rent-seeking activities. The state subsidy (from borrowed foreign funds) for diversification into new industries proceeded in tandem with the decision to invest heavily in education. Official cronyism and education, while still conforming to market mechanism, lay at the heart of the late-industrial expansion of South Korea. With fewer multi-national corporations in Korea than in any late-industrializing countries, its economy took off on the basis of nationally owned firms.
Taiwan took a different route to do the trick. Through broad distribution of land ownership and capital, and high returns to labor, the individual Chinese was greatly motivated to produce much of the rapid growth of Taiwan’s economy. Taiwan’s small-scale capitalism as a base for industrial development can serve to Filipino economic planners as just another model for accumulation.
City-state Singapore, on the other hand, has placed economic pursuits, via a domestic economy dominated by foreign affiliates, above political ideology (in a highly regulated society). The result is per capita income of a First World state.
There certainly are other economic models that could be investigated for best practices. But the ones that appear to stand out as common denominators for the success of the three countries above mentioned are: 1) the reciprocal relations between the state and businesses, 2) extensive investment in education and 3) the grandiose ambitions of their pioneering leaders.
GMA transformed
On January 10, 2003, before the Makati businessmen, the President, who 10 days earlier had stunned the nation upon announcing she’s relinquishing her bid to extend the tenure of her presidency, sounded transformed as she challenged the rich to take a similar plunge:
THE CHALLENGE IS NOT JUST TO REACH OUT TO THE POOR . . ..
THE CHALLENGE IS TO ACTUALLY ALLEVIATE THEIR MISERABLE CONDITIONS. AND DO IT IN THE SHORTEST TIME POSSIBLE . . ..
IF THE POOR DO NOT HAVE THE STRENGTH TO HOLD OUT, AND HELP OUT, NO LONG-TERM SOLUTION WILL SUCCEED. YOU CANNOT POSTPONE EATING WELL, DRINKING SAFELY, LEARNING USEFUL THINGS AND HAVING GAINFUL WORK. ONLY THOSE WHO EXPLOIT THE WEAK BARGAINING POSITION OF THE POOR BELIEVE THE POOR CAN WAIT.
. . .WE SHOULD NOT LIMIT OURSELVES TO TEMPORARY SOLUTIONS. WE DO NEED DEEP AND FAR-REACHING REFORMS THAT WILL LEAD TO STRONGER POLITICAL AND SOCIAL STABILITY AND TO SUSTAINED ECONOMIC RECOVERY. BUT NONE OF THESE REFORMS SHOULD EVER ENTAIL KEEPING DOWN THE POOR OR MAKING THEM SUFFER MORE.
Free market called to task
It is apposite to listen at this point to the voice of Christina Morales, a lecturer from the Department of Economics of Ateneo de Manila University. She may neither be the nearest nor the loudest, but hers could be one of the sanest propositions for an accumulation model that calls to task the orthodoxy of free market. As a reaction to GMA’s speech at the Philippine Stock Exchange, Ms. Morales wrote “that coherence and completeness of a country’s industrial promotion strategy” proves to be “the most resonating lesson of the East Asian Miracle.” Hence,
rather than taking liberalization alone or protection alone, the strategy should be to customize industrial policy according to the specificities of each industry, guided by a realistic assessment of their competitiveness, potential and viability in the medium term. (Italics mine.)Ms. Morales took further note of the apparent tentativeness of the government of GMA “to play a more activist role in industrial promotion beyond simply sticking to bare minimums.”
Given the limited resources and skills in the government and the economy at large, it is best to adopt a targeted and selective approach. This strategy should clearly be developed after a close study of and in collaboration with the industrial sector [as well as civil society, I should add], and should be pre-announced so that enterprises [and other sectors such as labor, I should add further] will have time to adjust. This should perhaps be Economic Secretary Romulo Neri’s top priority. Moreover, once the program is announced, the government must not consent to backsliding that will only allow inefficient performers to survive indefinitely and create room for rent-seeking and corruption. (Italics mine.)
An important caveat, though, is that interventions have to be designed flexibly and monitored constantly so that mistakes can be rectified as they become apparent. Finally, this industrial promotion program must be situated within a broader, long-term development framework that is cognizant of social considerations other than competitiveness and efficiency. (Italics mine.)1
What could possibly be added to Ms. Morales’s proposal is that the strategy to favor targeted firms and industries (in South Korea, for example, long-term capital with favorable interest rates was allocated to Hyundai, Samsung and Daewoo over smaller firms) may not necessarily be limited to manufacturing because services and information technology are areas of competitive advantage with great value-added potentials that we could also take a shot at. We however need precise information about the long-term prospect for certain industrial segments or particular firms in the changing patterns of the global markets. This is where the full partnership of the political, bureaucratic and private sectors come into play in terms, for instance, of facilitating exchange of information on company and other relevant data with a view to inducing the least competitive to exit from the industry or nourishing the ones with the best outlook to compete internationally.
A different approach, it should be mentioned, is one proffered by our town mate, Nick Nadal, a private sector consultant operating in the Middle East, who calls for “a devolution of power away from the crony induced political system . . . and (for the development of) a strong civil society—in the local level especially—that would demand for greater transparency and question the prevailing (local) fiefdoms,” while insisting that “at the same time, the private sector (specifically the SMEs) needs to be fostered, harnessed and developed—through microfinancing, technical support, etc., administered by the private sector (or other independent entities) and not the government.” Nick Nadal strongly believes that “Dependence on government breeds the sad cronyist political system we have.”
In our virtual community, we had some exchanges about start-up business concepts as fanciful as “technopreneurial stewardship.” It’s always exciting to hope.
A Bayanihan pact
The idea that during a nation’s initial developmental thrust industrial enterprises merit the protection of the State in breach of the market paragon so that if such a national collaborative undertaking flourishes all may flourish is not adventurism “for the sake of appearing to be innovative.” When all the participants in a uniquely Filipino Bayanihan project of sort understand what’s envisioned and are fully committed to it, then that translates into a national aspiration for a “strong republic” sans all the empty shibboleths.
Let’s face it. Capital, labor, the community, and the government are mutually interdependent. Therefore, a Bayanihan pact where everyone makes the sacrifice (or, more appropriately, exercises the privilege) so that each may come out with something while preserving the survival of the State should be explored. By everyone, I mean to include everyone such as the poor sacrificing to vote their conscience instead of allowing themselves to be bought, so that the representatives they send off into the public sector as policymakers will serve as competent partners, not mere stable boys (that much the powerless can share and most certainly that will matter, if only to regain their individual self-respect) or labor being more compromising and cooperative, or circumspect in resorting to concerted actions such as work slowdown or strikes, otherwise there would be no work to hamper or strike about.
On the other hand, the media elites (as well as media practitioners doing diligently their homework) must perform their proper role as a “public trust” to put in appropriate context the definition of the goals envisioned and the precise trade-offs to be negotiated, and then articulate them in a proper balance.
The Japanese example
The route the Japanese had taken, as a late-industrializing country as earlier alluded to, is too close an example to ignore.
The zaibatsu2 (literally, “money-cliques”) were “great Japanese business houses” with vast business enterprises which comprised of banking and insurance, foreign and domestic trade, electrical apparatus and machinery, textiles, paper, cement, glass, chemicals, maritime shipping, shipbuilding, mining, metals, and mechanical engineering. They had a feudal past and family councils regulated their activities. The zaibatsu, together with those enlisted from the ranks of the samurai, not only helped finance the Meiji restoration (the reign between 1852-1922 that marked the downfall of Japanese feudalism and the introduction of Western ideas into Japan) but transformed government economic policies from a feudalistic economy.3
On the other hand, by subsidies and a favorable tax policy, the government granted the zaibatsu a privileged position in the economic development of Japan. They later helped bankroll strategic semiofficial enterprises in Japan and abroad, particularly in Taiwan and Korea. Far from the prescriptions of laissez-faire, one of their methods was for certain business families who could provide resources and means for assistance to network with particular statesmen who had great but concrete ideas to enact such as the later concept of “wage plasticity” where the earnings of particular workers were made to bear close correlations to their employer’s prosperity. The zaibatsu transformed themselves into active change agents to modernize and industrialize Japan.
During the Allied occupation, the zaibatsu were broken but in the 1950s and 1960s, the old groups reemerged as keiretsu. The bold initiatives of the keiretsu following World War II to pool their resources together paved the way for Japan to rise as a global economic power.
The market hypocrisy
We have some discussion [in another post] about how a mutant form of democracy was handed down to the Filipinos by the American colonizers. In a sense, the delivery of democracy in the Madisonian contrivance (a.k.a. democratic elitism) was fair because the Filipinos were given what the Americans have had in practice. Not so with respect to the market system. For, whereas America also mutated the market system, it has kept the mutant form to hold sway in its backyard while requiring Third-World countries like the Philippines to practice the pure variety through the bitter prescriptions of the market discipline by such institutions as the IMF and the WTO.
Despite the market rhetoric, state-capitalism (as opposed to market-capitalism) has been adopted by powerful nations—such as France, Great Britain and Germany. Britain then had emerged as the world’s most advanced “developmental state” (ironically, a label the West pejoratively ascribes to Japan), a model that has become endemic in the industrial world and certainly the United States being among its earnest adherents up to the present.
The United States has employed market-distorting schemes such as tariffs, quotas, tax breaks and abatements, loan subsidies, bailouts, and regulatory rollbacks to protect its industries. One recent and obvious instance of market mutation in America is the 2002 $15 billion corporate dole-out ($5 billion grants, $10 billion loans) to the airline industry post 9/11 for the industry’s pre-9/11 failures. Today, non-military aircraft production is concentrated in only two firms, Boeing-McDonald and Airbus, a European consortium, both being recipients of enormous state subsidy.4 This mutant form of the market permeates in agriculture with the mind-boggling $180 billion farm subsidy over ten years benefiting mainly wealthy US farmers. Amadou Toumani Touré and Blaise Compaoré, the presidents, respectively, of Mali and Burkina Faso, two cotton-producing countries in Africa, together wrote on July 11, 2003 an op-ed article to New York Times about the ill-effects to their least developed countries of market-distorting farm subsidies given to cotton producers in wealthier countries which lead to worldwide overproduction and deprive their poor counties of their only comparative advantage, cotton being their sole agricultural product to trade in the international market. The op-ed letter expressly noted that—
Although African cotton is of the highest quality, our production costs are about 50 percent lower than in developed countries even though we rely on manual labor. In wealthier countries, by contrast, lower-quality cotton is produced on large mechanized farms, generating little employment and having a questionable impact on the environment. Cotton there could be replaced by other, more valuable crops.The figures provided in the same letter by the governments of Mali and Burkina Faso in the period of 2001 to 2002 are compelling:
America’s 25,000 cotton farmers received more in subsidies—some $3 billion—than the entire economic output of Burkina Faso, where two million people depend on cotton. Further, United States subsidies are concentrated on just 10 percent of its cotton farmers. Thus, the payments to about 2,500 relatively well-off farmers has the unintended but nevertheless real effect of impoverishing some 10 million rural poor people in West and Central Africa.According to another figures closer to home provided by Senator and former Agriculture Secretary Angara, “The protectionist trade policies in rich economies cost poor countries 100 Billion US Dollars annually—twice the amount they receive in aid.” In seeming resignation Angara fretted about the particular situation of the Philippines. “Our agricultural products, he complained, “will always be more expensive since we cannot afford to give any substantial support to our farmers.” (Manila Bulletin, September 7, 2003)
By contrast, there is no question that even in other key sectors of the American economy than agriculture, such as in the high-technology industry including the Internet, robotics, biotechnology, and pharmaceuticals, the nursing hand of the nanny State abounds.5
Don’t we ever notice that trade barriers (not to speak of capital controls) are standard subjects of economic protestations voiced by industrially advanced nations, which manufacture most of the “goods” traded, but not labor barriers consisting of highly restrictive immigration laws they imposed against “service” exporting nations (and I’m not talking here about financial services, consultancy, e-commerce, tourism, or water supply but about the services of natural persons such as household helpers, nurses, teachers, and carpenters).6 Can we still deny the fact that migration and remittances by overseas workers constitute a transnational individual framework (a poor nation’s version of the transnational corporation phenomenon, where TNCs seek cheap labor while TNIs, if you will, seek higher wages or salaries) that brings immediate relief and stability to Third-World countries better than foreign direct investments? Following the coup attempt in July 2003, and the attendant political bickering by the trapos and profiteering by those so-called self-made paper entrepreneurs (mostly bankers), the plea made by the GMA government—not to investors, foreign or otherwise, but for individual Filipinos to convert their dollars into pesos and for the unsung OFWs to make their remittances earlier than Christmastime in order to arrest the decline of the peso to near historic low—categorically illustrates the whole point.
[One IMF study reported by Business World (November 5, 2003) claims that OFW remittances are a “moral hazard” because they are primarily devoted to private consumption “leading to decreased efforts on the part of the domestic workers, firms and entrepreneurs” rather than as development capital, especially where such remittances were treated as returns of human capital invested abroad. This is quite understandable considering that OFW remittances are not directly available to service foreign debts—the unstated raison d’etre underpinning IMF policies towards a developing country that is heavily indebted and whose enfeebled economic sovereignty, owing to those policies, has failed to grow an economy capable of absorbing overseas workers.
What cannot be ignored are the facts that remittances from OFWs (largely from the US, Saudi Arabia, Hong Kong, Japan, Singapore, and the United Arab Emirates) reached 7.6 billion dollars in 2003 accounting for about 16 percent of Philippines’ total current account receipts and 10 percent of GNP. These remittances are sources of funds for education, housing, and investments in SMEs as well as for payment of imports such as oil and parts and components for local industries.]
A brief look at the economic history of the United States shows that during the last quarter of the 19th century, the “robber barons” (from the label of feudal lords who owned huge estates during medieval Europe), the likes of J.P. Morgan, the lord of finance capitalism, John D. Rockefeller, the oil mogul, Andrew Carnegie, the sultan of steel, set the stage for what historian Howard Zinn calls the “greatest march of economic growth in human history.”7 The economic elites took the lead with the connivance of the American trapos, if you will, as well as the US Supreme Court. While Congress made sure tariff laws were passed to keep out foreign competition, the embodiment of “somber, black-robed fairness” did its own “bit for the ruling elite”8 by accepting the argument in a groundbreaking decision in Santa Clara County vs. Southern Pacific Railroad (1886), that corporations were “persons” and their money as property within the meaning of the Fourteenth Amendment, an amendment originally adopted to protect Negro rights.9 However, since the poor whites, the blacks, the women, the children, the European newcomers, and the Chinese labor were not there at the formation, the march exacted an enormous cost to them. The Chinese coolies were among those who suffered the most even as they worked for “starvation” wages to build the railroads for the engine of the American industrial revolution and for the vast network of business empires of the robber barons. However, while often performing the life-threatening part of the railroad constructions, by court fiat10 the Chinese were not considered 100 percent “persons” juridically speaking, even as late as 1871 or about a century after Americans declared the rhetoric that “all men are created equal.”
As a late-industrializing country, the Japanese caught up quickly by avoiding the pitfall of the American “ingenuity” and by seeing to it everyone was on the same page where work and patriotism were defined together.11
The Korean students, emulating Japan’s great sense of social obligation, kept the military regime and the chaebols in check in the unorthodox experiment of rebuilding their even later-industrializing nation.12
Lest we forget, Rizal, writing for La Solidaridad, the main propaganda organ of the Filipino expatriates’ movement against Spain, expounded in no uncertain terms on the “sense of country” and “revolutionary spirit” as vital requirements for economic development:
In order that the (Filipino) may make progress, it is necessary that revolutionary spirit, so to speak, should boil in his veins, since progress necessarily requires change; it implies the overthrow of the sanctified past by the present, the victory of new ideas over the old accepted ones . . ..13 Rizal demanded that the Filipino must transcend the self in order to build a nation.
The lack of national consciousness gives rise to another evil, which is the absence of all opposition measure prejudicial to the people and the absence of initiative in whatever may rebound to their good. A man in the Philippines is only an individual; he is not a member of a nation.
A plunge forward
The challenge therefore that GMA posed to the economic elites to take the plunge with her—which could also mean EMPOWERING themselves to redeploy their resources against external dictation, mobilize their capital, pool their talent, and tap their network of connections, internal or external, if need be and, then, to gamble, create wealth, develop their own economic model, explore new economic opportunities in terms of new products, processes and markets, build an empire and a strong republic while dispensing social justice—if not mere rhetoric, is a great leap forward.
Doesn’t Jonathan Swift remind us in Gulliver’s Travels, “ . . . whoever could make two ears of corn, or two blades of grass to grow upon a spot of ground where only one grew before, would . . . do more essential service to his country than the whole race of politicians put together”?
Only a handful families control the banking system in the Philippines. That makes for the establishment of a private development bank of some kind specifically targeting to: help emerging industries capable of higher-valued productions; respond to the needs of older industries that have the best chance of becoming internationally competitive; develop, in parallel strategy, local capacities through large-scale microfinancing; underwrite research and development projects; and promote high-quality education and training, a realizable proposition. The bank will operate in conjunction with other financing sources. Primary reliance on international capital flows either as foreign direct investment, portfolio investment, or foreign assistance (we will expound more on this last one in the next chapter) as we have thus far experienced is precarious to say the least. A review of some pertinent economic figures14 indicates that US overseas manufacturing investments, for instance, have shifted invariably with great consequences to the host countries. In the 1950s, most of the US investment in the Asia region was in India, Indonesia and the Philippines accounting for 90 percent of the region’s total. While Philippine Gross National Product (GNP) per capita then was about just half that of Japan, it was a third higher than that of Taiwan and more than twice that of South Korea. As of 1970, by GNP ranking, India placed 10th in the world, Indonesia 32nd and Philippines 40th; whereas, South Korea was 43rd, Taiwan 60th (and Singapore was not even among the first 100 even as late as 1976). By 1988, US dramatically shifted its overseas manufacturing investments to Singapore, South Korea, Taiwan, and Hong Kong at 68 percent of the region’s total with Malaysia and Thailand accounting for a further 14 percent. Of these six countries, Singapore had the largest share at 32 percent. During this later period, the combined US manufacturing investments in India, Indonesia and the Philippines were reduced to 18 percent of the total in the Asia region, less than the share of Taiwan at 18.5 percent. Moreover, the US government redirected its foreign assistance to such political and security dependencies as Israel and Saudi Arabia.
On the other hand, portfolio investors are as flighty as a day trader. For all intents and purposes, they are speculators of the casino type moving in and out, at a moment’s notice, of different national currencies or exotic derivatives in a virtual world of finance capital.15 This then leaves us with domestic private credits and personal investments to finance a rather ambitious national development project without being subject to the dictates of foreign assistance establishments like the IMF and World Bank or to the fickleness of fly-by-night foreign operators. These foreign resources should therefore serve merely as supplementary to a vigorous entrepreneurship of our local economic elites.
The Philippines is also awash with business and management talents. In 1980, I took an abbreviated business management course at the Asian Institute of Management and I was elected president of our class, which consisted not only of Filipinos in middle-level management but Singaporean, Malaysian, Thai, Korean, Japanese and even Mexican mid-level business leaders and managers. We learned from our Filipino business gurus that good business management should really be nothing more than “resourcefulness” and the ability to work collaboratively and innovatively to tackle real-world problems. And that seemed where the rub was. My foreign classmates have practiced the theories they learned from our experts while we’ve tarried in our ingrained habits of risk aversion. So, money might not really be the problem after all but “in-kind investment” is, in the form of the right attitude to avail of our ability to use money that’s available. If at the slightest sign of turmoil domestic capital is exported abroad faster than foreign investments are withdrawn, or rather securely placed in passive investments or other rentier schema, then late learners like my classmates would overrun us, as they did, hands down. We do recognize that in today’s environment stakes are higher, return could be slower, and penalties for misjudgment harsher. But that’s the price of adventurism, of being “pariahs and pirates” of the ancient, or in today’s jargon, the prize of being mavericks. GMA’s call is therefore as much a challenge to plunge forward as to leap away from the old ways of doing things.
If all bets are on, we could expect some so-called liberal economists to label this “development strategy” with many epithets—“mercantilism,” “protectionism,” or “carterlization” even as their own economies blatantly continue to employ arrangements of the same nature although couched in friendly terms like “economic union,” “trade alliances,” “strategic competitive policy,” or, on rare occasions, “preemptive strike” in the service of “military Keynesianism.”
This is not to suggest that if we move towards the direction intimated here, we would in the meantime delink ourselves from the existing global economic relationship. Far from it (although, through democratic exchanges, novel economic alternatives can be imagined and fashioned). What’s being postulated furthermore is that even the market construct could become fair if struggling but willing and ready nations are given a decent chance to build and accumulate just as exactly as the leading economic powers of today did during their own growing pains and struggles; and enabled to be on similar footing, then and only then should these latecomers be made to face up to the challenge of competition. On an individual level, they call this “affirmative action” in America. I believe even nations are entitled to equal opportunity. This axiom, possibly more legitimating than “economic liberalism,” requires that adjustments to transformation of this sort relative to the prevailing international economic order should demand more of the stronger states than the weaker ones, not the other way around.
It’s never really too late to dream. But, let’s dream and go it together for the collective good.
_____________________
1. Christina Morales, “‘From lazy liberalization to lazy protectionism’, ” January 27, 2003, Inq7.net.
2. The information about the zaibatsu is derived mainly from G.C. Allen, A Short economic History of Japan, 4th ed. (New York: St. Martin’s Press, 1981).
3. For a thorough account of the Meiji Restoration and the changing roles of the samurai during the period see David S. Landers, The Wealth and the Poverty of Nations: Why Some Are So Rich and Some Are So Poor (New York: W. W. Norton & Company, 1998) esp. Chapters 22 and 23.
4. Noam Chomsky, “Market Democracy in a Neoliberal Order: Doctrines and Reality,” May 1997, Zmagazine.
5. Ibid.
6. In New Jersey where I reside, the state Senate unanimously approved in December 2002 a legislation banning cheap overseas labor from being hired as customer service representatives to operate telephone call centers. The employments in call centers abroad are considered jobs “exported” from New Jersey, hence, the ban on the export. “Imports” of workers into US are generally subjected to immigration restrictions.
7. Zinn, A People’s History of the United States, p.253.
8. The quotes are from Ibid., p. 260.
9. Ibid., p.261.
10. People vs. Brady, 40 California Reports 198.
11. See Landers, p. 383, where the author explains: “a primary task of the new imperial state (during the Meiji reform): to imbue its subjects with a sense of higher duty to emperor and country and link this patriotism to work.”
12. Alice H. Amsden, Asia’s Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, Inc., 1989), p. 51-52. Amsden postulates: 1) The students kept the government honest (and coming off the streets, they became the managers of the modern factories), and 2) The American occupation drove Korea towards “developmentalism.”
13. Quoted in Guerrero, p. 193.
14. See Holly Saklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management (Boston: South End Press, 1980), Table 1, p. 10, in relation to Peter Dicken, Global Shift: The Internationalization of Economic Activity, 2nd ed., (New York: The Guilford Press, 1992), p. 65.
15. For a fuller exposition of the workings of the financial markets, see William Greider, One World, Ready or Not: The Manic Logic of Global Capitalism (NY: Simon & Schuster, 1997), esp. Chapter 13 (The Rentiers’ Regime).
posted by Abe N. Margallo at 10:04 AM
2 Comments:
Pucha ang haba ng article mo walang babasa nito.
Anonymous, yan ang problema ng Pinoy - sumasakit ang ulo kapag malaman at detalyado ang kinakailangan basahin. Kung walang magtiyatiyagang magbasa sa sinulat na yan, talagang walang pag-asa ang Pilipinas.
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