“Capitalism is culture . . .”

“To sustain it, laws and institutions are important, but the more fundamental role is played by the basic human spirit of independence and initiative.” [Robert J. Shiller, Why Innovation Is Still Capitalism’s Star, The New York Times, 17th Aug 2013] “The decisive role of the “spirit of capitalism” is an old concept, going back at least to Max Weber, but it needs refreshing today with new evidence and new thinking. Edmund S. Phelps, a professor of economics at Columbia University and a Nobel laureate, [wrote] “Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge and Change” (Princeton University Press), and it contains a complex new analysis of the importance of an entrepreneurial culture. Professor Phelps discerns a troubling trend in many countries . . . He is worried about corporatism, a political philosophy in which economic activity is controlled by large interest groups or the government.” Professor Robert Shiller, of Yale University, is probably best known for his book, Irrational Exuberance.

 

“Semiconductor industry needs government boost.” [The Manila Times, 16th Aug 2013] “. . . [T]he four constraints the semiconductor and electronics industry faces today [are]: high cost and low quality power; poor infrastructure; high cost of labor . . . The roadmap for the industry . . . aims to transform the Philippines into a regional center of excellence in selected electronics industry products and processes . . . [T]he semiconductor and electronics industry will have three growth drivers: consumer products like smart phones and tablet computers; medical equipment; and electronic parts for automotive applications.”

 

PHL has been busy working on industry road maps starting with 32 of them – and as many as 50, if not more, were likewise into the exercise? Clearly given our deficiencies in infrastructure there is a major role for government if we are to establish a strategic and a competitive industry base. But are we socialists at heart (given our compassion and faith) and want more government (given our "success model" of oligopoly as in franchises and concessions)? “Capitalism is culture,” so says Shiller! And if we look at our failed good-governance initiatives like land reform, party-list, or even EPIRA, Shiller is no space cadet?

 

Is there too much “cobwebs in our heads”? Does it explain why in the 21st century we still don’t have the basics like power, basic infrastructure, a modern airport, etc., – because we can’t simply prioritize? And the classic example to note is the lobby industry in Washington and why the US tax system is so convoluted. The bottom line: Our industries must very quickly move away from simply being third-party providers and invest in understanding markets, and learning and embracing innovation. I’ve been a development worker in Eastern Europe for ten years and the major advantage (beyond their currency at two-to-one over the euro; which we also have in PHL and in a bigger way, at over 40-to-one over the dollar; and something to note is their low tax rate of 10%, individual and corporate – to attract foreign investments, a learning from the Hong Kong/Singapore models) my friends had was their accession into the EU; meaning, there was a huge market that opened up to them. But it wasn’t meant to be a cakewalk. They had to learn to compete and embrace innovation. (And APEC will not be a cakewalk for us either – because we didn’t do our homework?)

 

The reports about PHL’s various road maps don’t dwell much on innovation especially product innovation. As every marketer knows, the first element in marketing is the product – i.e., there must be a product or service (the aggregate of which spells a nation’s GDP) that must find a sustainable market in the first place. The operative word is sustainable, which is this case is the simplest definition of innovation. I’ve kept talking about what I have preached in Eastern Europe, and they are: margins (for a sustainable economic activity) and product innovation (for a sustainable market) and they come from investment, technology, education and training, product development and market development.

 

And where are we in PHL? We’re still at the levels of: “high cost and low quality power; poor infrastructure; high cost of labor; and government taking away subsidies.” The issue about power is true, and so is infrastructure; but high cost of labor and absence of government subsidies are magnified as barriers because we don’t have the innovative products to market – and so we can't compete in the region or globally. Margins are not only a function of costs but also economies of scale. The bottom line again: we must very quickly move away from simply being third-party providers and invest in understanding markets, and learning and embracing innovation.