Tuesday, May 2, 2017

Sub-optimization: The outcome of “pwede na ‘yan”

If it isn’t obvious yet, the blog constantly speaks to “creativity” but in its simplistic definition – connecting the dots – from Steve Jobs.

And there are positive and negative ways that dots connect. For instance, parochialism, insularity and security do connect and most likely result in sub-optimization – where the outcome is less than the best possible. On the positive side is synergy – where the outcome is greater than the sum of the parts.

How do they apply in the real world? Think “sub-optimized socialism” (e.g., our failed efforts in agriculture) on one hand, and “unfettered free market” (e.g., the 2008 Great Recession) on the other. And against that backdrop, imagine how the Asian Tigers showed the world what dots to connect . . . attain synergy . . . and navigate the journey from poverty to prosperity.

The writer witnessed for years and in different parts of the world, wealthy and poor, that it is easier said than done. Because linear thinking gets in the way. And why he would then introduce the “6 Thinking Hats” of Edward de Bono, the conceptual and lateral thinking guru. While via the blog he has reprised the 21st century skills set a few times: 1) collaboration and teamwork, 2) creativity and imagination, 3) critical thinking, and 4) problem solving.

And here’s how an Ateneo Economics professor connects the dots: “Like all industrialized countries, export earnings from agriculture and fishery, as well as earnings from industry and services, can provide us the means to import food for our daily needs.” [Self-sufficiency in rice policy leads to economic slowdown and poverty, Leonardo A. Lanzona Jr., Eagle Watch, Business Mirror, 27th Apr 2017]

Professor Lanzona made the writer’s day! For years from his overseas locations, he could only shake his head in disbelief to read economic news and briefings from the Philippines that would extol the “virtue” of our consumption-driven economy. And given the remittances from over 10 million OFWs, that we will be better than our neighbors that are dependent on exports. Yet, even if we add the BPO industry, we’re still not there. “Pwede na ‘yan” is classic sub-optimization.

More from Prof. Lanzona: “[A] specific goal of the Duterte administration is rice self-sufficiency in two years . . . [Rice] importation will decrease prices and will be a disincentive to rice farmers.

“This suspension of the rice importation gives the government good publicity, since historically, rice production has been a source of national pride, and rice self-sufficiency is a measure of government success. . . [The DA secretary] indicated he would give them all the support they would need, including irrigation, seeds, fertilizer and farm inputs. ‘But I will give them the sack if they fail. This government is results-oriented.’

“[T]his attention-getting but short-sighted policy only permanently jacked up domestic prices above the world levels . . . In the end, agricultural development remains as the only avenue both for economic growth and poverty reduction. Unfortunately, we are wasting our resources with these results-oriented, but sadly, myopic policies.”

“We need to develop a feasible industrialization program that is complementary to agriculture development . . . The role of the DA is, therefore, to determine the products that are highly demanded in other countries that we can produce here at a lower cost. We may have the advantage in producing certain tropical fruits and vegetables and fish, which are in high demand in other countries.”

How does that work? Here are “Narratives from agribusiness experts I & II,” Rolando T. Dy, Mapping The Future, Philippine Daily Inquirer, 1st May/13th Feb 2017. “Dave, my friend and global trade expert, discussed many aspects of trade in mango, garlic and onions.

[For example,] “Agri-processing. Dave has visited China many times. In Jiangsu area, he observed that there are 20 small-medium factories processing dried potato for two months, and carrots for another two months. In June-September, onions, garlic, and cabbage are dried. Dried carrots are exported to the Middle East.

“Most of the raw materials for processing are rejects. Thus, the processing plants have high-capacity utilization with multi-product inputs.

“Dave said that the Asian middle class is expanding; consumers demand high-quality fruits and are willing to pay a premium price. China’s middle class is huge. He notes that the Philippines cannot rest on its laurels in banana and pineapple alone. It must diversify toward new crops and varieties.

[Another critical factor is] “Farm consolidation. Former mayor Eddie Guillen of Piddig, Ilocos Norte, pioneered rice farm consolidation anchored on zanjeras (Spanish-era irrigators associations). The initial 100-hectare farm with 100 farmers yield six tons per hectare from 3.8 tons before the project, or a 60 percent jump. Net farm income almost doubled following mechanized land preparation and harvesting, irrigation and full inputs. Farmers who worked were paid minimum wages. Thus, they have two sources of incomes: Farm dividend and wages.

[And] “Management scarcity. Ramon Reyes, of the Mama Sita fame, doubts whether small farmers can transcend from being subsistence farmers to agribusiness entrepreneurs, despite heavy training and financing. Only managerial competence (which includes technical knowledge), coupled with entrepreneurial spirit, can modernize Philippine agriculture to global standards.

“He feels that ‘It is better for our aging small farmers to retire and live off from rentals from their land. Agrarian reform advocates must realize that land and peasant equal subsistence agriculture. Or land and peasant plus finance equal heavily-indebted farmers. Modern agriculture requires entrepreneurial initiative, professional management, capital, well-paid skilled farm workers, and land (the factors of production).’

“For decades, Mama Sita has been trying to source raw materials from farmers referred by the DA. But due to the above-mentioned circumstances, the company has not been successful in doing so.”

What then? It is the why of the blog. It’s 8 years old; but the writer started reading scores of our columnists and journalists a year earlier to get a sense of where Juan de la Cruz is coming from. And the blog draws inspiration from the progress he has witnessed with his Eastern European (the poorest in Europe) friends where he has been consulting for 14 years.

But doesn’t an economy differ from a private enterprise? An economy is meant to grow and develop and it is comprised of the aggregate of the goods or products and services that it produces. A private enterprise is a microcosm of an economy. If it understands evolution and development (something man is born with, expressed and expounded by Maslow in the hierarchy of human needs; and why tyranny is foolish) and can harness it, it will sustain growth and profitability – or navigate the journey from poverty to prosperity.

We Pinoys must focus on . . . and take personal responsibility for where PH is in our own journey – and not conflate the problems of the world with ours. Our problems are big enough. We must keep our eye on the ball – and not invite . . . and perpetuate . . . the complacency . . . cum tyranny Rizal saw.

Let’s come down to the gut level. How long did it take us to bring NAIA Terminal 3 into being? And where are we with MRT-3? Or where are we with Metro Manila traffic? And on and on . . . and round and round we go! It is called spinning wheels . . . and getting nowhere . . .

Our inability to move forward dates back over a century if we acknowledge the prescience of Rizal. Today we the chattering classes have become complicit in the war on drugs because it has brought peace and order – and it is pretty much limited to the poor? Community and the common good be damned?

Is that again as short-sighted as: (a) our celebration of OFW remittances, (b) the war on poverty, and (c) our economic thinking?

And so, from the Terminal 3 fiasco and the MRT-3 mess . . . we can connect the dots . . . to the deafening silence that we hear . . . that of the life of Juan de la Cruz. More to the point, why have his neighbors journeyed from poverty to prosperity and he has not?

The blog has raised it a few times. We take pride in our demographics – that PH is in a sweet spot – given the size of our millennials against our seniors. And that we have an ATM machine in our backyard represented by over 10 million OFWs.

Yet we are missing the “creativity” that fueled the Asian Tigers, i.e., exports and rapid industrialization. And that they shared common characteristics that include: (a) a focus on exports, (b) an educated populace and (c) high savings rates. More to the point, we rely on oligarchy beyond the over 10 million OFWs, yet the collective wealth of our billionaires won’t approximate the FDIs our neighbors have amassed and the exports they generate. 

“Why independence, if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted, for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]

“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]

“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]

No comments:

Post a Comment