Sunday, January 30, 2011

A couple of execution challenges

It appears Philippine economic managers are doggedly pushing investments and priority projects. Indeed their tasks are daunting. They would miss it here and there but that’s reality. The key is for them to keep their North Star – i.e., constantly prioritizing via the 80-20 rule. For instance, not every revenue-generating initiative pitched by every sector is a priority. A low-lying fruit may appear to be so but if it undermines the building blocks of key investment or innovation or reform efforts then it’s a ‘no-no’. Net, we can’t afford to contract another ‘Dutch disease’?

There are two areas where President Aquino and his trouble shooter could likewise focus their attention and efforts. One is agribusiness and the other is reconciling national and local agendas. As we go through the negotiations of foreign trade agreements, the instinct to deemphasize agriculture for now should not equate to a repeat of decades of underdevelopment? We’ve not help the farmers all these years; and we won’t help them still if we stick to the old mindset – of taking decades to move reform forward. Politics and political patronage always rear their ugly heads – and why it is imperative to slay corruption. Could the Church be involved, i.e., corruption has eroded our moral fiber? It’s encouraging that the private sector has opted to be proactive.

It is understandable that we first want to raise agriculture’s readiness before it could be a driver of global trade or a strategic industry. But in order to prevent a repeat of failed initiatives, we need a well thought out and a prioritized plan for agribusiness. Beyond the imperative to overcome our cacique past via individual farm ownership, it is important to recognize that the vision or our end goal is sustainability. And that means agribusiness must attain efficiency, productivity and competitiveness via economies of scale.

How do we reconcile individual ownership and economies of scale? We need to understand that land and resources must be pulled together and so do modern agribusiness interventions – from infrastructure to business development, i.e., from production to logistics to marketing. In short, overcoming a cacique past does not end with individual ownership. Our agribusiness efforts must win in the marketplace. Even ex-socialist countries have learned that.

The other challenge for the administration is reconciling national and local agendas. Proximity to local political leaders makes parochialism at the local levels inherent. And if the administration does not become an element of the equation, national priorities would be undermined. To aggressively push strategic priority industries, for example, the administration needs first-rate efforts to reconcile its agenda with the needs of local communities. (But as a nation we have to learn that subsidies or similar short-term programs, for instance, don’t necessarily address structural problems, i.e., reform means tough-minded reform?)

Even MNCs deal with local challenges – when marketing to 200 countries headquarters must remain part of the equation otherwise the broader company agenda could be undermined by local priorities. At Apple, Jobs no. 2, Tim Cook, ‘relentlessly works’ with key elements of the supply chain to get products out on time and at planned margin levels. And for President Aquino and his trouble shooter, this is truly a big job. He may not be campaigning for reelection, but he needs to campaign to successfully execute his agenda. And it means investing time and effort. Jack Welch, the former CEO of GE, saw succession planning as his personal initiative because GE has over a dozen Fortune 500-sized companies that must have world-class leadership teams – and so he literally spent half of his time in succession planning sessions and meeting face-to-face with promising talents wherever they were in the world.

There is now an effort between the Executive and the Legislative to work together, there must be a similar discourse between the Executive and local governments to ensure there is congruence and synergy in their initiatives. Politics and political patronage though may have their tentacles traced back to politicians in the Executive or Legislative or even local governments, e.g., they are godfathers and godmothers of GOCCs and/or local kingpins. In short, there has to be a truly vigorous campaign to slay corruption – because every positive and promising initiative could be undermined by insidious corruption. “The human spirit is never satisfied with things as they are and seeks the better life. It always plans something better than what it now has,” says a Jesuit priest. Amen!

Thursday, January 27, 2011

Sustainable or a mirage?

Because of our compassion, is our ‘default-setting’ the unbridled support of subsidies – and so we take it as gospel truth? “The Roman Catholic Archdiocese of New York announced on Tuesday that 26 elementary schools and one high school that had received heavy subsidies in recent years because of declining enrollment would be closed at the end of the current school year”, reports the NY Times, Jan 11th.

The announcement capped a two-year review process and represented the largest school consolidation in the history of the archdiocese, which includes 2.5 million Catholics . . .The 27 schools marked for closing received subsidies totaling $10 million this year. By comparison, the remaining 189 parochial schools in the archdiocese received a total of $13 million in subsidies . . .” (Background: church collections cover these subsidies.)

The bottom line: sustainability is not optional, it’s mandatory – like a red light means stop! While subsidies are a mirage – not a cure-all – even when the leadership is a cardinal? And so New Yorkers went ballistic and in their passion called it unchristian – where is the compassion? What will happen to the teachers and administrators of these schools especially in a high-cost city? Affected children would be accommodated in other parishes but that means a longer commute for the children, including the little ones. Isn’t the church the fortress of compassion?

Does the news go against our grain? We value compassion and inclusion – and by extension we see subsidies as a manifestation of our Christianity? And which explains why we are up in arms whenever there is an increase in toll fees at our expressways? (The writer and the wife are in Manila and people are bending their ears about this supposed ‘anti-poor initiative’ of the administration.) That beyond being anti-poor, it is unchristian? Others say they are raising an all together different issue; and that is, they suspect corruption in major road projects and therefore find increased toll fees adding insult to injury.

They’re raising a fair point about our insidious corruption; yet the fact remains, our economic fundamentals are weak – e.g., our GDP per capital is a minuscule 10% that of developed economies, and can’t arrest poverty. And to rely on subsidies would not cover our shortcomings – because even ‘status quo’ demands dynamism, i.e., it shifts into decline as the rest of the world moves forward and leaves us behind?

Similarly, helping the poor is imperative. And if the CCT would put more children to school, they would have better chances in the future. Yet, great as they sound poverty initiatives would only go so far given budget limitations – precisely why the good Archbishop of New York did what he did; and also the cardinal before him, who had shut down parish churches and their schools for similar unsustainable subsidies – and has since been given a bigger job in Rome.

Something had gone seriously wrong”, says Lee Kuan Yew. “Millions of Filipino men and women had to leave their country for jobs abroad beneath their level of education. Filipino professionals whom we recruited to work in Singapore are as good as our own. Indeed, their architects, artists, and musicians are more artistic and creative than ours. The difference lies in the culture of the Filipino people. It is a soft, forgiving culture. Only in the Philippines could a leader like Ferdinand Marcos, who pillaged his country for over 20 years, still be considered for a national burial.”

Our instincts make us value compassion and inclusion, yet even the Catholic hierarchy of New York sees things differently. Would we be able to embrace sustainability given it demands tough-mindedness – or why Lee Kuan Yew speaks to our soft, forgiving culture? Ergo: we must learn to bite the bullet? We must step-up to the plate and accelerate our efforts to fix our economic fundamentals – and there is no denying, we would be in pain while going through ‘detox’ or national cleansing? Yet building for the future gives us a tangible, uplifting endpoint – unlike the mirage that we’ve embraced for decades, that is, it would yield further economic decline?

Sunday, January 23, 2011

Poverty is the effect, not the cause . . .

It is encouraging – if news reports reflect the country’s changing perspective – that we seem to be recognizing the need for an open economy. Why so? To replicate the advances achieved by our neighbors . . . we now realize the need to lift our restrictive investment climate? Yet the media are sounding impatient about the efforts of the Aquino Administration to move us forward as an economy – from truly addressing corruption to demonstrating plan execution and efficiency? For instance, we continue to slip in the Global Economic Freedom rankings, while the EU is nagging us about the taxes we ‘impose on airlines’ and as importantly, ‘to pick up the pace in our free-trade talks’; and the ‘delay in tariff mechanism is dampening [foreign investor’s] interest in [our] renewable energy’ initiative.

Is lack of urgency again on display? Writes Lee Kuan Yew about Marcos, in ‘From third world to first’: ‘I was to discover that for him, the communiqué was the accomplishment itself; its implementation was secondary, an extra to be discussed at another conference’. Is it another explanation of why the world has left us behind? And it brings to mind a Jesuit friend (May he rest in peace!) who would talk about the need to be grounded in reality – as opposed to being ‘plastic’, being results-driven not PR-driven’!

Compassionate as we are, we must recognize that poverty is the effect, not the cause of our failings? Put simply, job-one is not poverty – it is to lift the economy! Fundamental in problem-solving is to identify, define and attack the cause – the way doctors process their diagnosis and cure? Until we turn our economy from impoverished we would have massive poverty – the pie is simply too small [for dole outs], so says President Ramos! And thus the Aquino Administration is on the right track by focusing on investment. And that means not just local, but as importantly, foreign investments – because they can bring us technology, innovation, talent, products and markets; precisely what we need to raise our competitiveness and be relevant in the 21st century!

Another reality we have to confront is that a truly open economy would impact – be a threat – to our ‘big boys’ or major industries especially those in infrastructure. They require major investments and by definition are regulated under the assumption that they need to be viable, and not exactly ruled by open-market competition. Unfortunately, when the ‘sun is not shining’ big-time corruption is not far behind – e.g., Terminal 3 and other major projects – making world-class investors shy away from the Philippines; while making international institutions out to assist us given our poverty to scratch their heads in wonderment – why do we keep digging our own grave (yet we insist we are patriotic and do care for the poor)? And we’ve had 40-50 years (or ‘106 years of old habits’, as spelled out in one scathing op-ed piece) of this egregious custom – and so we’re literally in the dark ages owing to inadequate power supply, for example. Not surprising, says Lee Kuan Yew:The Philippines had a rambunctious press but it did not check corruption. Individual press reporters could be bought, as could many judges.”

But our worst failing, because of our oligarchic economy (or ‘two different societies’, as described by Lee Kuan Yew), is we did not develop our competitive sense and spirit, crucial in today’s competitive world if we are to lift the economy and our standard of living – which is what human institutions are meant to be? And why the international community initiated the Global Economic Freedom rankings, for instance.

It’s nice to hear our concern about poverty, yet the real challenge is to expunge our two different societies? That while it may be more convenient to give fish than to teach how, we must pursue smart economics . . . for the greater good of the greater number? And that means all of us pulling together?

We must recognize where we are so that we can get our bearings right and then figure out where we’re going? “One of the best ways for us Filipinos to realize the Truth about ourselves and our country is to find out how people from other countries observe us and our society”, says a concerned Filipino, referring to the words of Lee Kuan Yew.

Thursday, January 20, 2011

Positive developments since the genesis . . .

The good news is we’re seeing positive developments in our economic initiatives. It was early 2009 when the writer started this blog, urged by friends and family who knew about his atypical worldview – to respond to the question: why are we economic laggards if not a basket case? And what can we do? The writer talks about focus because successful enterprises, for profit or otherwise, mirror world-class athletes in their ability to focus. And when one looks at the fundamentals of our economy our meager investment levels jump out. It’s no different when we look at the financials of a publicly-listed company; we would focus on and assess its fundamentals before investing, for instance.

It is encouraging that the Aquino Administration is pushing investment. But our psyche veers to the holistic and inclusive – making execution elusive? Can we move the economy by focusing on investment, we ask? Our ambivalence may explain our problem – focus, focus, focus – and consequently an ex-NEDA chief says: ‘If the program looks familiar, discard it, it’s been tried, it failed. Look for the unfamiliar’. (He deserves praise for his courage to acknowledge our shortcomings.) But intuitively we know that investments are indispensable in an economic endeavor?

But we don’t exactly embrace foreign investments? Unwittingly we’re inward-looking and it makes us feel good to invoke nationalism or patriotism? And even tolerate oligarchy, ‘they’re one of us anyway’? And then comes a big piece of who we are: the church or religion. And our yardstick is stringent? For instance, we’re of two minds about ‘consumerism’? Between our parochial bias and stringent religion, it is not surprising innovation is not top of mind? Innovation is an imperative to move the country forward because beyond investment is innovation – and it starts with understanding the consumer. And to be able to pursue innovation we need a foundation, science and technology!

Unfortunately, we don’t have a track record in successful economic development to bank on. We’re smart people but we still have to seek the ‘unfamiliar’, which is counterintuitive? And we can use talents beyond our own – or why Bill Gates wants the US to remain a country of immigrants, something the Japanese have yet to adopt? Bill Gates is well aware that natives, like hierarchy, don’t have a monopoly on innovation. Thus, for us to develop products that will win in the global marketplace we have to tap talents wherever they may be. Even big pharmaceutical companies, with their world-class R&D, partner with small entrepreneurs, acknowledging that a college kid could develop a global winner like Facebook. We can’t limit ourselves to the local market either if we are to be a global entity!

And so this blog talks about investment, innovation, technology, talent, product and market – focusing on the key elements that will drive our economy and move the country forward. A third of Filipinos have lost their human dignity. That’s the crux of the matter! The blog is not an academic discourse or an intellectual exercise – and it is anonymous, open for anyone to build upon, i.e., innovation thrives in an open environment. As much as he can the writer shares ‘best practice’, an instinct valued by MNCs in order to raise the performance bar. Our failings over the last 40-50 years can’t be pinned on the poor but the ‘elite and the intelligentsia’ – they have run the country? And they include industry, the government, the school, the church, i.e., all of us; and must now heed Lee Kaun Yew’s challenge that we’re two different societies (from his Singapore story: From third world to first)?

When the writer first met his Eastern European friends, they were looking for the unfamiliar: to compete in the EU market. Yet they struggled to accept unfamiliar ideas – people who supposedly wanted to move from socialism to the free market were, like people, a product of their own experience! They would ask: ‘how would a Fortune 500 practice (e.g., transparency) apply to a private enterprise’? At the other extreme, they would ask for specific rules of free enterprise because in their old system hierarchy dictated the rules. Thus the writer had to develop a mental model that starts with basic principles to introduce and explain an idea. And he had to relearn a fundamental axiom in development, ‘start with the familiar’. So he had to understand how their old system worked or didn’t work – the familiar to them!

Our challenge as Filipinos is bigger than those of the writer’s Eastern European friends: we are carrying more baggage – about economics, free enterprise, competition, etc. – and have plenty to unlearn before we could ‘look for the unfamiliar’. Fundamental to adult learning (or andragogy) is learning to ‘unfreeze’ our mindset (of 40-50 years) and make room for the unfamiliar!

Monday, January 17, 2011

Beyond low-lying fruit . . .

The efforts of the private sector and the JFC (Joint Foreign Chambers) with their proposed economic roadmap – ‘Arangkada Philippines 2010: A Business Perspective’ – could be undermined if we allow ourselves to be blindsided by the low-lying fruit. Clearly we need something to happen fast, but we can no longer keep missing on the foundation for the future. As kids we played Chinese checkers and it taught us the fundamentals of building for the end game or the future and winning? Arangkada tells us how we could elevate our investment levels, the nub of our problem, by as much as $75 billion; and which industries would deliver incremental revenues or GDP of $100 billion, and generate millions of jobs and reduce poverty. The end view provided by Arangkada is meant to overcome our own Dutch disease!

Dutch disease’ is the typical outcome when economies fail to see beyond the low-lying fruit. Desperate to prop up our economy, like the Dutch before us, we also succumbed to our Dutch disease – the increasing OFW remittances – thus failing to establish the right foundation for the future. Specifically, we failed to move toward industrialization. We can’t afford to lose our sense of purpose given the enormity of our challenge? Nor can we afford to stick our head in the sand?

The key is for government to reconcile what we must pursue as strategic industries – so that we can aggressively and confidently direct our meager resources against them, including the requisite legislations. It is encouraging that the Executive and the Legislative appear committed to work together. And given the 21st century is highly competitive, innovation, by definition, is crucial for these industries to be truly strategic and sustainable. Thus, the question to ask is: are we incorporating innovation, competitiveness and sustainability in tourism as we see? In BPO as we see it? In electronics, as we see it? In mining? Or housing? Or agriculture?

Of course we need to do stop-gaps but must recognize that while programs like rural and poverty initiatives are imperative, such efforts won’t suffice given the magnitude of our challenge. (It should not be surprising, we do distinguish between teaching how and giving fish?) The same applies to CCT. Brazil’s success model comes from better economic fundamentals. Their GDP per capita is 3 X more; their exports (beyond mining they produce transport equipment) are 4 X more and their FDIs (Foreign Direct Investments) are over 14 X more. Net, they are aggressively pushing industrialization via FDIs, strategic industries and innovation (and so that they don’t miss out, the CEO of GE directed his people to erect an R&D center in Brazil) and are generating more revenues than we do and thus have more to spare for the poor via CCT. Our CCT can’t cope with the increasing rate of our out-of-school kids.

We simply can’t keep exploiting the low-lying fruit, do stop-gap measures and not establish the right foundation for the future? Even when looking at the local market, we have to raise our competitiveness because as trade barriers come down in a globalized economy, we have to contend with competitors more agile than the ones at home. We wouldn’t want to cry ‘foul’ again – and pursue protectionism? Big guys can be bullies and small guys must thus be smarter! And so we like to write about and visit Singapore, once viewed as truly tiny, because it is a place where things do work.

Of course, some Westerners are not enamored at Singapore because they find it too squeaky-clean (and not the typical Western-style democracy) almost like Disneyland! But the bottom line is: their GDP per capita beats that of the U.S – they are able to provide bread on the table and roof over the Singaporean’s head! To be critical because they are export-dependent and had a recession is like telling Donald Trump he became poor when he declared bankruptcy? But he came back strong given strong economic fundamentals and smart marketing – of his own, personal brand?

The Aquino Administration appears moving in the right direction. But our challenge remains: to focus on what will move us forward and sustain our gains? The administration can’t be everything to everybody – that’s the failed formula of the last 40-50 years, of trying to please everyone, that stunted our development? We need to learn the unfamiliar, including being driven out of paradise?

Wednesday, January 12, 2011

A new paradigm for local investors – II

The efforts of the Aquino Administration and the private sector to accelerate economic growth open new doors to investors especially local. But we have to move beyond the old thinking, and it’s not easy? For instance, not everyone has to invest in ‘bangus’ farming or tilapia or shrimp or ‘lechon manok’ – and for the big boys, it means beyond infrastructure? The 21st century mantra is competitiveness. Philippine-style oligarchy cuts us by the knees – it robs our competitive sense and spirit, sets up protectionism if not outright isolation, thus our inability to attract foreign investors while perpetuating a vicious circle? (There’s plenty of blame to go around re the Terminal 3 fiasco; in the end we’re the losers – a legal process could lend itself to more delays, with bystander Juan de la Cruz already in dire economic straits denied justice? Passion can win over reason – thankfully Al Gore demonstrated what ‘country first’ means?)

The writer talks about Fortune 500 companies given the backdrop of a globalized economy: our economic engines – our largest industries – are still ‘Ladas’ as Eastern Europeans love to compare their products of old, to Eastern- as opposed to Western-built cars. Our challenge is not whether we can create billionaires (although Malaysia has >3 X more when our population is >3 X), it is that our GDP equates to an impoverish nation, with literally millions or a third of Filipinos having lost their human dignity. In the region we’re the least able to overcome poverty – because over the last 40-50 years the world left us behind? And the gaps that we can turn into economic drivers are: power supply, world-class airport, foreign trade agreements, investments, and competitiveness, for example? But as an ex-NEDA chief says, ‘If the program looks familiar, discard it, it’s been tried, it failed. Look for the unfamiliar’. And reality hurts?

Does our hierarchical culture make us cheerleaders of a failed economy – when we could be cheering something even greater? For instance, successful leadership fields criticisms – e.g., the CEO of the world’s largest enterprise, Wal-Mart, squarely addresses criticisms; and the CEO of Netflix believes that criticisms and the fear of failure keep his creativity in overdrive? And the more successful they are, including our major investors, the more confidence and passion they have to push the envelope, elevating them to the Forbes wealthiest. If our local investors begin to apply their muscle; and knowledge, attitude, skills and habit to the new economic blueprint of ‘Arangkada’, for example, they would be able to put our economy on a higher plane?

For instance, they can adopt 21st century competitive parameters and embrace a new paradigm starting with investment – it is beyond getting into a business, especially monopoly-like . . . and into visualizing the endpoint. In a globalized economy it means being competitive beyond the Philippines. And the critical elements are: technology, talent, innovation, product, market. (As Time magazine reports, Dec 17th: ‘iTunes accounts for about 66% of the downloadable music market, with Amazon trailing a distant second at around 13%. [Yet] Amazon beats iTunes in two of what you’d think would be the most fundamental areas: price and device support’. Ergo: it’s not all about price and even the add-on of device support.)

Technology, like infrastructure, is both hard and soft. It includes, beyond R&D and state-of-the-art technology, the way we think – beyond gearing for low-priced goods it is about developing products and services across the value chain. And the same construct applies to talent, innovation, product and market. In short, competitiveness is not being a bully – it comes from products and services that are innovative, with perceptible differentiating characteristics geared to generate economies of scale and healthy margins because their volumes are optimized across the value chain, making the law of averages work for the investor.

The typical enterprise in a poor country, and the writer has seen it many times outside the Philippines too, is to think small from the get-go – ‘the least investment’ instead of ‘the endpoint’ becomes the ‘guiding light’. Or why R&D in America generates more winners or commercialized product ideas, e.g., Apple, Google, Netflix, DuPont, etc. They start with the end in view. A ‘least-investment’ posture sets the bar low – and would influence low-talent parameters, a low-innovation sense, limited or low-product specs and limited-target and actual markets? The outcome: an uncompetitive industry and an economy like ours? Our challenge is to step up to the plate? And then we could truly be cheerleading?

Friday, January 7, 2011

Beyond investment is innovation . . .

Thinking outside the box’ doesn’t make it so? Beyond the gaping hole or shortfall in investments, we need to recognize the challenge of innovation? The 21st century is about competitiveness and thus the prerequisites of investment and innovation. Contemporary thinkers are studying successful global enterprises who are investing tons of money to learn how to think creatively. While they have a track record in innovation they still see themselves as being behind the curve – redefining and raising the bar for the rest of us!

It helps if we ourselves recognize that we have work to do? And since the church is a large measure of our culture, its hierarchical structure and lack of transparency have become part of who we are: at home and at work we’re expected to live up to the mores of hierarchy? Yet Catholics with unquestioned faith seriously play the role of the faithful by engaging the church. For instance, there are Catholic theologians who have criticized Encyclicals; moral theologians who have counseled responsible parenthood and religious who have spread ecumenism. If the predicate makes us uncomfortable, then we’re moving away from the imperatives of innovation? The challenge to Filipinos is innovation, not exports per se! Our ‘export-dependent’ neighbors are more innovative, playing in an altogether different league – if we are misreading it?

Being an archipelago in the middle of nowhere makes being parochial natural? In Europe and in the region, borders are man-made and people easily connect by crossing them. During the Cold War, obviously, people from Soviet satellites were not allowed to venture beyond their borders, under pain of death. And so in the case of Bulgaria, they called the area between them and Greece ‘no-man’s land’. Today though their wine-making heritage and creativity have taken hold; exploiting its soil and weather, they transformed the locale into a vineyard and are producing a fine dry red merlot-cabernet blend, very limited series, named No Man’s Land – and it doesn’t cost an arm and a leg.

Innovative thinking is counterintuitive and demands lateral thinking. But thinking outside the box starts with a mindset that goes against a parochial bias? It goes beyond cross-disciplinary, collaborative thinking. It presupposes that the mindset is not restricted; and why the Applied Physics Laboratory (APL) in Maryland, at The Johns Hopkins University, is geared to encourage curiosity by aspiring scientists. The GPS, says science author Steven Johnson, owes its eventual development to two young doctoral students who intriguingly tracked the Sputnik’s 1957 flight. They then reversed the mathematical model to track nuclear submarines before the era of the GPS.

China, the NY Times reports, has crafted an innovation strategy, sees innovation as the future, not cheap labor and generic products, and is perhaps aware of the Japanese’ shortcomings in ‘software writing’. And Bill Gates wants the US to remain a country of immigrants to build on Silicon Valley. If we, Filipinos, think local and believe we’re innately creative, if we think of solutions and markets as local, most likely we wouldn’t be prolific innovators? And if at the back of our minds we believe consumerism is evil, we wouldn’t generate product ideas to drive and raise our revenues as a nation, and overcome poverty?

Starting with the end in view’ is one way to get our creative juices flowing. For example, Steve Jobs visualizes ‘simple and easy’ as fundamental features of Apple products. Another is to visualize the end in view as a worst-case scenario. What is that scenario like? If we assume bare-bones benefits and low-price for a product we want to create, the worst-case scenario for the product could be that it won’t sell or if it does it would not generate the volume and margins to make it sustainable. And exhausting the elements of this worst case scenario would be a good exercise in exploiting lateral thinking. And then the next step would be: (a) to flip the worst case into the best case, and (b) describe the elements of this best case. To brainstorm the best case as a first step may, in and of itself, impose a barrier, but thinking the opposite allows the mind to be more expansive since there is nothing at stake. Of course, the exercise ought to start with such fundamentals as Maslow’s hierarchy of needs and the product-architecture – the value chain, from the basic product benefits all the way to its lifestyle or ego benefits. (The human ego could be channeled to the greater good like the world-class teaching hospitals in New York and elsewhere bearing the names of philanthropists that funded them.)

News item: BOI fails to implement new auto program’. And now we want to think outside the box in order to see the light at the end of the tunnel?

Tuesday, January 4, 2011

Sustainability, ideology and platitudes

We appear to be starting on the right foot in our efforts to update our economic blueprint – ‘to sustain high economic growth and provide productive employment and effective social safety nets’. Likewise, we have the MDGs (Millennium Development Goals) that we must satisfy. The real challenge to us is: how to keep and meet the imperatives of sustainability without being blindsided by ideology and platitudes? Hence the need to focus like a laser? In the hierarchy of priorities sustainability is utmost, without it everything goes south, which explains our 40-50 years of marginal economic performance?

Focusing on sustainability without being distracted by ideology and platitudes would transform our economic blueprint . . . though imperfect . . . into a living, dynamic and expansive force; otherwise it could be undermined . . . and fizzle out? Because it is imperfect it would take negative hits – from interest groups – yet the trajectory would be upward as opposed to downward. In short, downsides can’t be eliminated – in an imperfect world – but a downward trajectory must be unacceptable, unless we would again invoke fatalism and rationalize our economic frailty?

An example of an unsustainable initiative is the US tax code. Its complexity allows the passion from both sides of the political aisle to win over reason. For instance, while housing in America has become a reality for majority of Americans, the law of diminishing returns has caught up with it – i.e., the implosion of the housing market owing to subprime loans packaged into exotic financial products and gobbled up by financial institutions across continents – and triggered the collapse of the global financial system. The UK, likewise a rich nation, does not have a similar tax provision on mortgage exemptions yet have the same level of homeownership.

The Bush tax cut – which yielded the opposite outcome – was bandied as affordable and a positive for the economy because it would encourage investment, post the Clinton presidency when the government had a surplus. But underneath it is the ideology of less government, i.e., force the cut in federal spending by taking away revenues within reach of Washington, Congress and the White House. ‘Less government’ responds to rabblerousing- or passion-politics even when ‘optimum government’ is the smarter choice, e.g., smart regulations. But it requires leadership-politics and man’s passion, unfortunately, is stronger than his reason.

There are natural laws that can’t be engineered despite the application of mathematics or Alan Greenspan’s denial – that the prolonged low-interest rate regime did the economy no harm? We, Filipinos, have had poverty for decades; we won’t engineer and overcome poverty over the short-term, thus have to focus on driving sustainability, starting with stepped up investments and the pursuit of competitiveness?

Marketers fight the law of diminishing returns by definition, its reason for being. But they don’t simply deal with mathematics but with the creation of tangible products with discernible characteristics that consumers could adjudge beneficial from a rational, emotional and/or experiential standpoint. Thus, old products that grow tired could be ‘engineered’ but via specific concrete efforts – a disciplined approach and a commitment to competitiveness.

Unfortunately, we may bow topassion’ when ‘reason’ is called for and seek ‘sophistication’ when ‘simple’ is demanded? For example, ‘consumerism’ lumps all and sundry when man’s superiority is meant for creative and productive pursuits thus his wellbeing – in this day and age neither the horse-back nor the snail-mail is preferred? Similarly, our meager investment levels won’t allow us to move the economy forward – from erecting basic infrastructure to pursuing competitiveness, i.e., source and/or develop the technology and talent to drive innovation in products and services and tap a wider market, and thus dramatically raise the nation’s revenues or GDP on a sustained basis? Absent clarity and congruence of economic drivers means we’re simply riding a carousel, neither here nor there?

We owe it to ourselves not to be blindsided by ideology or platitudes, when we’re starting to push and focus on sustainability? And we can’t allow the pessimistic view – that passion wins over reason – to cast our destiny in stone, an impoverish nation? And no one can want a decent, virtuous economy more than we do ourselves?