Wednesday, May 13, 2009

The Asian century . . . is 175 years hence?

(This article poses the question: Is this our wake-up call? And has a link to Paul Krugman’s article describing the economic model that won him the Nobel Prize; it is the foundation of his prescription for our economy.)

On May 8th two news reports appeared: (1) “Asian Century”, in Newsweek and (2) “Filipinos 175 years behind”, in The Manila Times. And the following day, Phil Star reported: “Foreign direct investments seen to hit only $700 million”.

“Every bit of economic data that comes across . . . these days seems to back up the idea that we're very quickly headed for the Asian century”, reports Newsweek: “Investors are steering what little money they have to Asia -- net portfolio investment into the region is running at a pace not seen in five years. It seems clear that Asia will recover from the recession faster than either the US or Europe, and that it will continue to leave other emerging markets in the dust, too. Korea returned to quarterly growth earlier this year, and there are positive signs in Japan, Malaysia and China, too”.

It appears that for us the Asian century is not due until 175 years hence: “It would take nearly two centuries for the Philippines to catch up with the living standards of industrialized countries at its current pace of economic growth”, the Asian Development Bank (ADB) reported Thursday, May 7th.

Do we want to pave the way for the next five or so generations to overcome such a verdict? Or do we . . . ?

What to do? Why worry, be happy?

Clearly 10% of us are happy since we disproportionally generate 31.2% of the country’s income and consumption. The top 5% or almost 5 million are very happy indeed; not to mention the 10 million OFWs who make middle-class income. Unfortunately 10% have to partake a measly 2.4% which is why 30% or almost 30 million of us are poor.

Given the vast number of Filipinos (and they are roughly equal to the population of Singapore or New Zealand or Norway) enjoying prosperous-level income and a lifestyle that is something to cherish – with access to chauffeurs, maids and other domestic help, on top of world-class local resorts, country clubs, gated communities and upscale condominiums, and unheard of to the average person in developed countries – it will not be surprising if none of the above news would give us a wake-up call.

Success (read as prosperous-level income) which has been attained by the top 5% of the population will most likely reinforce the status quo? And they are the opinion leaders effectively steering the course of our economic ship? In short, to them, “if it ain’t broke why fix it?”

Of course, it is a lifestyle that mirrors Latin America’s haves and have-nots which the religious community has been fighting – not very successfully? They probably need Krugman in their bag of tricks? (And similarly, Latin America mirrors our inward- or domestic-focused economy. It appears we share temperaments with the Latins more than the Orientals, more specifically the Asian tigers.)

And when we talk of Christian charity we talk in terms of compassion and giving. But as one columnist put it, “poverty has no cure in poor economies”. The writer could not have said it better.

Unfortunately, those frustrated (47% of Filipinos rate themselves poor according to SWS) about our economy entertain options that could unwittingly throw us from the “frying pan into the fire”. We cannot undo the collapse of the Soviet empire or the interconnectedness of the world? Europeans have realized that they no longer live for the past, i.e., New Europe; and they could share this realization with us?

See writer’s prior articles in (a) “Transparency . . . the best policy” and (b) “In survival mode?”. The first narrates a brief personal history of the collapse of a former socialist state. The second illustrates how our inward or domestic focus in driving our economy precisely puts us at odds with countries that have done better. And reinforces what Cielito Habito wrote on October 19th, 2008 in the Inquirer summarizing the “Krugman’s Philippines prescriptions” as follows: “In short, the only way to achieve long term sustainable growth was to have much higher export growth, by attaining export competitiveness that had long eluded the country’s highly sheltered economy. The essential policy change required, he wrote, “is a removal of the incentives that channel scarce resources into capital-intensive, inward-oriented production.”

Paul Krugman won last year’s Nobel Prize for Economics for his model describing trade and economies of scale which he explains in the following article:

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