Friday, August 3, 2012

Trickle down is sub-optimal

The writer remembers a conversation with a tycoon and like all successful enterprises, like in athletics, these folks 'are in a zone.' "We're heavily committed to the nation as you will note, yet we are always reminded that our economy remains underdeveloped . . . There are many things that are undermining our progress but as entrepreneurs we have to navigate around these obstacles."

Given that we substantially lag the investment levels of our neighbors, as night follows day, we likewise substantially lag in economic output. While we have a handful of tycoons and countless smaller entrepreneurs, collectively, we only have very little to show investment-wise. And given the multiplier effect of investment, our entrepreneurs are wealthy especially because of our large population base and the over $20 billion in OFW remittances. Yet investment in the 21st century is diametrically opposed to our cacique past when goods and services were very basic. It still works in an underdeveloped nation like ours and yet it explains why our marketing community recognizes that our products can’t travel outside our shores. It is not about advertising or exports per se; it is about competitiveness. We are unable to export our products – to the much bigger global market that could raise our national income substantially – because they don’t deliver higher value-added benefits. And which is why investment in this day and age has to be coupled with technology and innovation. The old paradigm no longer applies. And the biggest fallout is Juan de la Cruz paying the price for his disorientation in the 21st century world?

The paradox, unfortunately, is that the supposed positives we see in our economy – wealthy entrepreneurs, large population base and robust OFW remittances – create their own ecosystem that for those in the establishment makes our economic fundamentals strong. Yet there is a large segment of the population that is marginalized thus breeding elevated poverty – and consequently our fight against poverty and call for inclusiveness. But there is a wide fissure between the rhetoric of inclusion and its reality. As Harvard professor emeritus Edward O. Wilson postulates, unless we have more groups that are altruistic, Juan de la Cruz would be sitting pretty owing to our 'strong economic fundamentals.' And while we are critical of the US model of trickle-down economics, we in fact have mirrored the model. The big difference is the US is a highly developed economy and thus their growth trajectory is not as appreciable as our potential being an underdeveloped economy.

The bottom line: we have to steer off the complacency of ‘strong economic fundamentals’ simply because there is only one Juan de a Cruz. We can't define our economic fundamentals strictly for those within the establishment – or we shall in fact be frozen in time, i.e., in our cacique ecosystem! On a roll, but not quite,” quips the iconic Solita Monsod. [Philippine Daily Inquirer, 6th Jul 2012.] The Philippines is in the bottom 25 percent (4th quartile) of the 180 economies measured in so far as attractiveness is concerned, although it is in the top half (2nd quartile) of countries with regard to potential. Not surprisingly . . . we are performing “below expectations.” The Philippines is among the least attractive of countries to inflows of FDI, and the FDI it attracts contributes the least (relative to other countries) to our development.”

While international agencies have their share of the blame for the underdevelopment of many countries, life was never meant to be fair – as countless would have read from the story of the young Henry Sy. And as the writer would hear from the stories of his Eastern European friends – the past does not predict the future because the human spirit fuels self-improvement. [Reality was a lesson the writer struggled to learn from his Jesuit friend – May he rest in peace! It was many years later before he appreciated it and then understood why the friend kept the topic alive for so long.]

If we are not blaming international agencies we are blaming bully countries – because it is not easy to articulate why the successful efforts of our neighbors, for example, and founded on a broader economy with high levels of foreign investment and technology, don’t apply to us or that they violate our faith or our culture? The sun shines on everyone and thus the future is fair game. Juan de la Cruz is capable of growing up?

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