Sunday, May 14, 2017

With due respect to the DOF

“Inclusive growth is Duterte administration’s main goal — DOF,” Chino S. Leyco, Manila Bulletin, 9th May 2017.

Let’s borrow from an earlier post in the blog: “Rule of law is the rock that the wise man builds upon. While the foolish man builds upon the sand. [Mathew 7:26-27] In other words, the war on drugs is foolish not wise; if we still haven’t figured it out? Because it undermines the rule of law. It is tyrannical.

“The history of growth should be all about recessions,” The Economist, 8th Apr 2017. ‘THROUGHOUT history, poverty is the normal condition of man,’ wrote Robert Heinlein, a science-fiction writer.

“Until the 18th century, global GDP per person was stuck, around the same income level as the World Bank’s current poverty line of $1.90 a day. But global income levels per person have since accelerated, from around $1,100 in 1800 to $3,600 in 1950, and over $10,000 today.

“Economists have long tried to explain this sudden surge in output. Most theories have focused on the factors driving long-term economic growth such as the quantity and productivity of labor and capital . . . But a new paper [Growing, Shrinking and Long Run Economic Performance: Historical Perspectives on Economic Development, by Stephen Broadberry of Oxford University and John Wallis of the University of Maryland] takes a different tack: faster growth is not due to bigger booms, but to less shrinking in recessions.

“To their surprise, they found that growth during years of economic expansion has fallen in the recent era . . . even though average growth across all years in those two periods increased . . . [S]horter and shallower slumps led to rising long-term growth. Output fell in a third of years between 1820 and 1870 but in only 12% of those since 1950. The rate of decline per recession year has fallen too . . . In another paper the same authors find that conventional explanations—such as demographic change or a sectoral shift from volatile agriculture to the more stable services sector—do not fully explain the shift.

“More important is the rise of the rule of law, enabling disputes to be settled by impartial courts. Before the modern era, elites would fight between themselves for the spoils of growth and send the economy back to square one . . . Respect for courts to resolve disputes prevents this from happening.”

But let’s get back to “Inclusive growth is Duterte administration’s main goal.”

“The task of leadership is to ensure [that] growth [is] inclusive and will result in poverty reduction as quickly as possible,” [Secretary Dominguez] added.

“He said the Duterte administration will meet ‘head on’ the challenge of reversing inequality among the country’s regions by investing heavily in boosting farm productivity and improving the country’s logistical backbone in order to facilitate trade across its islands.

‘He said this challenge falls squarely into the theme ‘Linking People and Economies for Inclusive Development’ adopted for the 2018 ADB Annual Meeting that will be hosted by the Philippines next year.

“To realize the 2018 theme’s goals, Dominguez called on the ADB to ‘begin a process of reinvention’ so that its programs could be realigned to meet new global realities.

“As for the Philippines, the key elements of its inclusive growth strategy are a ‘massive infrastructure program to bring us up to par with the region and a comprehensive tax reform package that will support robust economic investments in the country’s future,’ Dominguez said.

‘The first element is indispensable. For decades, the country lagged its neighbors in economic investments as we grappled with a debt overhang. We have to close the infra gap to achieve investment-led growth and evolve a truly inclusive economy,’ Dominguez said.

“He said the second element, which is the tax reform program, ‘is unavoidable.’ ‘To meet the challenge of a larger and younger labor force, we need to fund social spending in education and public health. We need to bring down our income tax rate close to the regional average to make our economy more attractive to investments,’ he noted.

“Dominguez said that as with other emerging archipelagic economies, the Philippines needs to address the ‘unevenness’ in the economic development of its regions.

“A case in point, he said, is that Metro Manila’s gross regional domestic production grew 12 times the rate of the country’s poorest region—the Autonomous Region in Muslim Mindanao.”

With due respect, Juan de la Cruz needs more than motherhood statements. But first and foremost, if we look outward, is the rule of law. And the more we look outward, the more we will realize that we don’t have to reinvent the wheel.

For example, urban centers indeed grow much faster. There is a body of knowledge that says consistent with man’s progress and development, urbanization and industrialization come along. And which the World Bank confirms: “Globally, more than 80 percent of economic activity is concentrated in cities, and cities are essential to lifting millions of people out of poverty through the opportunities that density and agglomeration can bring with jobs, services and innovation.” [Urbanization to spur growth, productivity – WB, Mayvelin U. Caraballo, The Manila Times, 12th May 2017]

And the China experience is something the whole world knows about. Specifically, the Pearl River Delta Economic Zone, with its proximity to Hong Kong and Shenzhen, was purposely designed to be a mega urban center, and delivered growth at a mindboggling 16% against total China’s 9.8%. And which more recently Malaysia is replicating albeit in a much lesser scale in Iskandar Malaysia.

Sadly, we are silent on benchmarking. That’s the inherent blind spot when the elite class (a) calls the shots and has all the answers, (b) but will not acknowledge its own shortcomings, and (c) instead pull rank, as in learned, and (d) for good or ill reflects our parochialism and insularity.

It is also called personal responsibility. We as a people must take personal responsibility for the infamy of Juan de la Cruz, the regional laggard and laughing stock of the world.

We want to tell the world what to do when we can’t keep our own house in order? Recall the Serenity Prayer: God, grant me the serenity to accept the things I cannot change, Courage to change the things I can, And wisdom to know the difference.

We cannot tell the world what to do but we can lift Juan de la Cruz from ignominy! For example, why haven’t we moved beyond OFW remittances and the BPO industry. “Pwede na ‘yan” speaks volumes. Try scale and specialization and industrialization and moving up the value chain. We will appreciate them if we start looking outward.

We cannot stop progress even if we aren’t predisposed to change. The world does not owe us anything. Even Deng knew he could not be an ideologue – and China bolted to the Mao-imposed culture. More to the point, he embraced capitalism and heeded Lee and Mahathir and begged for Western money and technology. Consider: “Pope urges scientists ‘never to fear truth’ despite theological clashes,” Josephine McKenna, Religious News Service, USA Today, 12th May 2017.

In the meantime, we want to point to the Mindanao experience. Yet, that is again the outcome of the rule of law or its absence. It comes from our way of life or culture that we like to be locked in? Parochial and insular; hierarchical and paternalistic; political patronage and dynasties; and oligarchy. That when all is said and done is a culture of impunity.

In fairness, Secretary Dominguez means well. But if we are to lift Juan de la Cruz up, we in the chattering classes must call a spade a spade. It is worth repeating that we don’t have to keep reinventing the wheel. We’ve said that Thailand simply copied our economic development blue prints. It speaks volumes. That Thailand simply benchmarked and did not see the imperative to reinvent the wheel. Smarts is not what we think smarts is.

For a nation and its people, it is about the journey from poverty to prosperity. Are we missing the essence of economic development and nation building?

Beyond our insularity, we instinctively look backward not forward. And it undermines our ability to imagine, visualize and articulate the future of Juan de la Cruz. Lacking vision, we are handicapped in discriminating the vital few from the trivial many. Thus, our crab mentality and chaotic ways . . . paving the way for tyranny, represented by a Duterte who claims his autocratic ways are what the doctors ordered.

“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]

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