Tapping the leadership of the economic elites

I’ve been taken to task once more by Anonie for running what, in fairness, are indeed remonstrations on my part about the rentier persona of the economic elites in the Philippines. He posts: “You seem to demonstrate an anti-Filipino businessmen agenda. You deride them when you really should be appreciative when Filipinos buy Philippine debt.”

But if I’m remonstrating, Blurry Brain, a self-styled free trader, is mercilessly haranguing:

Nevertheless, the point is: this country has been and is being held back by an oligarchic elite, and will remain so unless their power and influence is diminished vis-à-vis that of the rightful ruling class: the general citizenry. By “elite”, for present purposes, we exclude those that have worked hard and succeeded by their own merit, but do refer to those few families and individuals that have control over a substantive portion of the nation’s wealth; those families and individuals that turned their backs on the Katipunan, eagerly welcomed the Americans, “sat it out abroad” during the Japanese occupation (see Democracy and Discipline, Macaranas and Thompson), and have controlled our governments (by way of a seeming political rigodon) from the Third Republic onwards. Other countries have an elite or oligarchy and they have been done well by them. Ours just simply ... sucks. All you have to do is look around or read the newspapers to see their handiwork. You can’t really pinpoint anybody else for the rut this country is in as the same people, same families, same names have been governing this country since the Commonwealth days.

Over against the fury of Blurry, my reaction to Anonie could be a leap of faith:

Given the mediocrity of the Filipino political class, I’m actually looking, at this critical crossroad of our nation, for leadership from the economic elites, somewhere at the level of such ingenious American railroad men and financiers as Jay Gould, Edward Henry Harriman and J. P. Morgan whose shrewdness as well as sense of public responsibilities of wealth helped make America a global power. And greed notwithstanding, these American economic leaders, much like the Japanese zaibatsu, and later, the keiretsu (e.g., Mitsubishi, Sumitumo and Sanwa) and the Korean families who created the famous chaebols, have turned their nations around and triggered the second industrial revolution in America, the economic miracle in Japan or the founding of modern Korea in South Korea; these empire builders considered themselves first and foremost as Americans, Japanese or Koreans, something that should be compared to the hyphenated identities of the Philippine economic elites.

Watchful eye, on the other hand, vets the nation’s wealth holders:

Are they part of the nation’s problems or the solution? . . . Magkano ang investment nila sa China sa ngayon? (How much are they invested in China?) . . . Saan ba nagsisipagaral ang kanilang mga apo? (Where do they send their grandchildren to obtain education?) . . . Does it matter to them at all if two-thirds of the Filipinos don’t eat enough nutritious food?

And what is Blurry’s recipe?

Again, I am not advocating coups, violence, bloody revolutions, etc. What I am advocating for is precisely to avoid those. What I would rely on and work for and encourage others to work for is better education (which is the best economic policy a country can make), the strengthening of and reliance on institutions, better engagement of technology and globalization, and - finally - trade liberalization.

There could arguably be no surer formula for a nation’s development than better education for the citizens, pursuit of technical know-how and bankable institutions. But I’d digress from the expediency of liberalization if only to point out that most successful economies in the world have not been market fundamentalists when they started out. They began as developmental state with strong government involvement. It is therefore not fair to prescribe the strict discipline of the market and liberalization mantra to developing countries and taking those prescriptions like bitter pills before becoming competitive. This is how I look at Senator Mar Roxas’ alternative leadership potentials in my previous piece: he seems willing to challenge the prevailing economic orthodoxy when he threatened to opt out of WTO whereas President Arroyo, supposedly the economist, is willing to swallow hook, line and sinker the Washington Consensus of tight fiscal restraint, liberalization, privatization, and turboglobalization.

What I believe, as I have been pleading in protest (i.e., remonstrating), will lift the Philippines from its present state of laggardness is not Charter change or the Pauline conversion of the trapos but: 1) vigorous entrepreneurship on the part of the economic elites; 2) high-level capital investments by the same wealth holders; 3) a well-educated workforce whose skills are up to par to the requirements of modern business; and 4) continuing acquisition and promotion of technical know-how and zeal for innovativeness and creativity to sustain competitiveness.

I’m not passing over the liberalization route but for the contention that the attainment of competitiveness must come first, instead of the cart being put in front of the horse. I have once called this proposition as affirmative action at the level of nations, which means that struggling but willing economies must be given a decent chance to build and accumulate before being let loose to the vagaries of competition.

I have reckoned the gargantuan debt burden and the laggard performance of the economic elites as the two greatest obstacles to our economic takeoff and to a sustainable economic development. So, let me somehow think loud on how to get the economic elites wrapped up into the debt burden predicament in a different light in the conceptual scenario that follows:

Our economic elites (who own half of the debt burden), imbued with a deep sense of country, consider the possibility of entering into some form of “forbearance” with the national government with a view to a short-term moratorium on debt service payment, say, an 8-year temporary cessation. (This indulgence by the elites is in a way a matching counterpart to the acknowledged sacrifices of the OFWs, serving to keep the ship of the nation afloat.)

During the moratorium, the government in partnership with the same forbearing private sector, or vice versa, ventures into vigorous investments, targeting specific industries such as: the manufacture of the imported component of the electronic exports; bio-fuel as alternative source of energy; or exploration in the extractive sector. (I’d prefer to treat the forbearance as some sort of passive investment on the part of the economic elites; after all, the first beneficiary of dependable institutions and infrastructures, productive workforce and booming economy would be none other than the elites themselves.)

What’s withheld as otherwise rent payment, which, doubtless, is a considerable sum, may now be available for physical (maybe including contingency plans for undersea cable system disruptions) and social (certainly together with educational) infrastructure outlays as well as for state support for R&D. On the other hand, appropriate incentives like “tax holidays” for entrepreneurs directly involved in these targeted sectors are worked out.

Aside from moratorium on debt service and on capital strike, similar challenge is posed to the labor sector to bite the bullet by committing to a moratorium on labor strikes and other concerted actions during the experimental phase.

Foreign creditors and investors, not being importuned to make a change of position, are expected to regard the arrangement as a real honest-to-goodness resolve for internally driven strategic economic plan. On the other hand, in virtue of its ownership by local leaderships, the initiative is perceivable as one designed with a visceral sense of stewardship (to have lasting positive consequences for the next generation of Filipinos); hence, stabilizing and producing the effect of strengthening the country’s creditworthiness and standing in the world economy.

Experts improve on this model.

The above concept is neither ideologically populist nor elitist but motivated by the power of consensus is simply sensible. Quite unfortunately, the main problem with it at the moment is that President Arroyo remains hamstrung with legitimacy issue (principally because of the still unexplained Garci tapes fiasco) and as such may now be bereft of any political capital to bring to bear upon men of wealth and people in struggle.

Where does the office of the middling Filipinos fit in? My commentary in mlq3’s blogsite is thus:

Whenever I raise concern about the lackadaisical performance of the economic elites or their inability to produce the right goods the right way doing the best with what the Filipinos have, I am addressing my concerns to the relative deprivation of the Filipino middle class and hopefully allowing them to appreciate that no matter how the trapos change the constitution, if the economic elites are not creating wealth, they (the middling Filipinos) will someday find themselves opting out of the social contract, their sense of country notwithstanding, or ultimately leading the masa to try to transform the existing order.

One ray of hope: if only President Arroyo could be true to herself upon revisiting what inspired her to make the announcement in 2001 forgoing any further political aspiration, then the country could possibly start gaining faster traction on new ways forward, to use a Republican catchphrase, both toward national “character change” and a bona fide economic progress.