Friday, January 5, 2018

Drive sustainable wealth generation … not the war on poverty (or drugs)

That is to build upon a recent posting, to wit: “To conquer poverty, we must think wealth – sustainable wealth generation – not subsistence farming and paternalism nor charity and subservience. Recall the distinction between a growth mindset and a fixed mindset.” 

If it isn’t obvious yet, the blog has constantly raised the imperative of a growth mindset if Juan de la Cruz will have a prayer in his aspirations to attain a better life. A fixed mindset undermines the ability to imagine and visualize the future – which is what foresight is about … that made Adam and Eve superior to the rest of creation.

Unfortunately, this phenomenon is a recent discovery (from the social sciences) and is yet to become the norm. While logical, linear and incremental thinking has guided Western higher education from day-one. 

That is why all along we assumed the war on poverty is the key to move the nation and Juan de la Cruz forward. As the blog has argued, Juan de la Cruz is programmed to wear a fixed mindset. And that is reinforced by our deference to hierarchy that all he could demand is paternalism.

And it gets worse. We submit to tyranny – courtesy of political patronage and dynasties and oligarchy – because our instincts say we must be inward-looking, i.e., parochial and insular.

It explains why we can’t imagine and visualize prosperity and sustainable wealth generation. Unsurprisingly, here is an example of how we are greeting the New Year: “Bright prospects for the new year,” Editorial, Philippine Daily Inquirer, 1st Jan 2018.

“Prospects remain bright for the Philippine economy in 2018, thanks to the continuity in fiscal and monetary policies and the enactment of the crucial first phase of the tax reform program of the Duterte administration.

“Add to this the intentional focus on ramping up infrastructure spending, dubbed the ‘Build, Build, Build’ program … The board of the National Economic and Development Authority chaired by the President approved in 2017 P1 trillion worth of infrastructure projects, and these will most likely go on stream in 2018.

“With the expected jobs to be generated by these projects and the increased purchasing power to be triggered by the income tax cuts starting this month, the economy is truly looking forward to a prosperous new year.”

Nothing wrong with the message. It is classic logical, linear and incremental thinking. Which is no different from how we conceived and waged the war on poverty. With the bulk of poverty coming from rural Philippines, we pursued land reform and supported it by a menu of initiatives albeit with varying degrees of success, i.e., agriculture extension programs, irrigation, farm mechanization, farm-to-market roads, finance access, etc., etc.

Throw in CCT for good measure – because the farmer’s income hasn’t moved him up the ladder, mired in subsistence farming ... Not large-scale cooperative agribusiness with a clear-eyed focus on producing and marketing a portfolio of products that will win in the market place. This is not the first time the blog raised this critical and crucial point. We need more of our collective imagination and energy behind it.

The issue is when it comes to economics and economic development we focus on finance but not the products and services – which make up the GDP numbers – that will give us the greatest revenues, and why we fell into shortsightedness and the trap of OFW remittances. Because we have yet to learn, develop and employ the “how to” of foresight.

Sustainable wealth generation comes from competitive products. And Tim Cook, the Apple CEO, must be the first one to recognize it. Recall Steve Jobs and his product ideas made Apple the most valuable enterprise in the world. And that is a tough act to follow.

The bottom line: PH poverty remains embarrassing and pitiful while our neighbors have long fixed the problem. How? They figured out and traversed the journey from poverty to prosperity. It’s a great model of foresight.

But Build, Build, Build is our eye to the future? It still equates to logical, linear and incremental thinking. Think of the latest UN SDGs (sustainable development goals), i.e., rapid infrastructure development, industrialization and innovation and competitiveness.

And recall how the JFC expressed frustration that after 6 years of the Aquino administration – while the Du30 administration still must make a definitive pronouncement on where they stand – Arangkada Philippines (aka the 7 Big Industry Winners) hasn’t really progressed. That is notwithstanding the uptick in manufacturing that is ahead of our neighbors, i.e., we are coming off a low base that is a function of our structural flaws and deficits. We cannot keep our eye away from the ball and fall into the trap of denial.

The bottom line: All the positives we are seeing are factored in our GDP growth, that is in the 7% range. And that means we need at least one generation at these growth levels – confirmed by the international financial institutions that are supportive of these GDP numbers – for Juan de la Cruz to see the end of the tunnel.

Of course, those of us in the elite class will naturally benefit from a year-on-year bump but those outside the economic mainstream will not. And they constitute most Filipinos, including subsistence farmers. [The first 20 years of the writer’s career were spent in the Philippines and lived through this year-on-year phenomenon, yet 30 years since we are still a poor, underdeveloped nation and the regional laggard to boot. And why he is beating up on the elite class that he represented.]

Hence, we want to drum up MSMEs while raising the alarm bells that foreign competition can undermine our small businesses. But precisely why the blog explained the difference – that is, self-reliance – between Uncle Sam and our Chinoys on one hand, and our small entrepreneurs on the other.

In other words, victimhood is our starting point instead of self-reliance; not surprising given our hierarchical instincts and deference to oligarchy.

What is the reality in the bigger world? Try this news report from Wall Street: “Unilever: If you can't beat 'em, imitate 'em,” Yoel Minkoff, Seeking Alpha News Editor, 3rd Jan 2018. 

“Under siege from an army of small-batch upstarts, Unilever (ULUN) is looking to imitate its ‘ankle biter’ competitors … ‘We have to match them in terms of insight, speed and the ability,’ said CFO Graeme Pitkethly, who is helping spearhead the company’s globe-spanning reorganization.

“Consumers have gravitated in droves toward smaller, niche or locally made products, and in many cases, they are seeking out healthy alternatives.”

To the writer’s Eastern European friends, that is no news. They know it firsthand since they have been approached by these Western behemoths – wanting to partner with them – being the David amongst the Goliaths.

And we Pinoys have snacks brands, among others, that are successful despite global competition. We just need more of them. And that brings us back to the imperative – to rapidly drive industrialization and innovation and competitiveness – beyond Build, Build, Build.

As important is for our MSMEs to exercise greater foresight and chart a course of self-reliance. We cannot be globally competitive – and drive sustainable wealth generation – if we fear competition. But will instead find ourselves in a race to the bottom, in the company of uncivilized societies and their despotic leaders.

Happy New Year to one and all!

“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]

Now I know why Paul dared to speak of ‘the curse of the law’ (Galatians 3:13). Law reigns and discernment is unnecessary, which means there is little growth or change in such people. When you do not grow, you remain an infant.” [Faith and Science, Open to Change, Richard Rohr’s Daily Meditation, 23rd Oct 2017]

“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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