That’s lifted from the “Editorial,” Philippine Daily Inquirer, 6th Aug 2018. “While the timing of TRAIN 1’s implementation could have been improved, in the case of TRAIN 2—a key reform measure that Presidents Estrada, Arroyo and Aquino all tried to push without success, due to well-entrenched lobbies—the right time is now. But for it to work, the proper spadework must be done.
“What economic managers can do is to ensure that the bill presented to Congress will not result in higher consumer prices but will clearly redistribute the tax burden to 3,000 companies that should be pulling more of their own weight. But the Palace economists shouldn’t stop there. The Filipino public needs to understand what the bill is about and what its long-term benefits are.
“The regiment of technocrats that crafted TRAIN 2 would do well to fan out and engage the citizenry more fully and transparently in this regard, without dismissing their concerns as ‘bellyaching’—as Budget Secretary Ben Diokno once characterized public criticism of the inflation spike.
“The second phase of the administration’s tax reform package is, in truth, a tax cut for all companies registered in the Philippines; it proposes to reduce their corporate income tax rate from the current 30 percent down to 25 percent.
“This proposed tax reduction will benefit about 1 million registered corporations, from conglomerates all the way down to the smallest ‘mom and pop’ operations. In theory, the billions of pesos that companies will save in tax payments will almost certainly be used for another round of investment activities to expand their operations and, thus, create more jobs.
“Unfortunately, these tax cuts are not free, and someone has to pay for them. Under the proposal, that ‘someone’ will be an estimated 3,000 companies currently enjoying tax perks under over 200 special laws granted by a motley assortment of 14 state agencies. These tax-free benefits were meant to help them gain firmer footing during their startup years, but some of these companies have been enjoying the perks for three decades now.”
Let’s get back to reform. Has Juan de la Cruz internalized what reform is? Google is a good go-to reference if not arbiter. Reform: “To make changes in something – e.g., a social, political, or economic institution or practice – in order to improve it … To bring about a change in (someone) so that they no longer behave in a … self-destructive manner … To mend one's ways, change for the better, turn over a new leaf.”
There is a body of knowledge that says humans have three brains: the brain-brain, the heart-brain and the gut-brain. And change is next to impossible when we cannot bring it down from the intellectual level to the heart and to the gut. Think about the jeepney.
It is the greatest example of our lack of foresight, the inability to change and backwardness – where we undermine progress and development given our faulty perceptive judgment. It’s about cause and effect, i.e., unemployment and poverty in an underdeveloped nation are the effect of underdevelopment, not the cause.
Think of how our neighbors brought global poverty drastically down while we’re stuck in the war on poverty. Yet we know how to define insanity. And the blog has repeatedly discussed the “growth mindset” imperative to progress and development as opposed to the “fixed mindset” that has defined Juan de la Cruz.
Consider: We’ve taken it for granted that economics is the be-all the end-all of development. Yet we know what brainstorming is. For example, the “6 thinking hats” of creative thinking says there are typically six perspectives to deal with a challenge. Not one. Think ecosystem ... and connect the dots.
And we pay lip service to reform because we take our “culture” or way of life as gospel truth. And would rather blame others than ourselves – i.e., our colonizers, the MNCs, the politicians, the oligarchy, etc., etc. Put simply, reform presupposes “change”, to no longer behave in a self-destructive manner and to mend one’s ways to improve our lot and not be the regional laggard.
Reform cannot occur within a shortsighted and dysfunctional system. With due respect to our economic managers, “Build! Build! Build!” + Train 1 + Train 2 won’t suffice to connect the dots from poverty to prosperity.
Even when underpinned by the war on drugs or the war on drunks. As the blog has argued, the road from poverty to prosperity has been traversed by practically every one of our neighbors in the region. While we keep reinventing the wheel. Why? Parochialism and insularity are instinctive to Juan de la Cruz.
Remember OFW remittances and the BPO industry that are the drivers of the economy ... because we’ve been kicking the can of Arangkada, as Marichu A. Villanueva in her column, COMMONSENSE, will remind us. “A stop-gap measure,” The Philippine Star, 8th Aug 2018. “Now we, too, have to bear the brunt of surging inflation as a consequence of a consumption-led growth, which is the weakest source of economic development for a country.
“This is the sad reality we have been living with through these years after the ambitious plans in the past to industrialize the Philippines were abandoned.”
The blog has often discussed how Steve Jobs moved from the Mac to the iPod – by pulling together [or connecting the dots; which is how he defined creativity] technologies that were already around. Or how Beethoven pulled different sounds – big and small – to create a unique Beethoven signature. Both had foresight, a vision of a new creation. And beyond forward-thinking they were outward-looking.
Outward-looking? Think FDIs. How does one truly attract enormous investments? Why does Singapore always get a windfall and we get the crumbs? Think Jobs and a Buffett will come along.
Consider: “Warren Buffett's Berkshire Hathaway can't seem to get enough of Apple. A regulatory filing released on Saturday showed that the conglomerate added 2.67 million shares to its stake in the first quarter, which was worth nearly $50 billion as of June 30. Berkshire Hathaway owned approximately 246.5 million shares at the time, or 5.1% of the company's outstanding shares.
“Assuming Berkshire Hathaway hasn't bought or sold more share since then, the stake was worth $51.3 billion in early trading on Monday, making it by far the most valuable slice of any company Buffett is invested in.” [Warren Buffett's Berkshire Hathaway now owns a whopping $50 billion-plus stake in Apple, its largest in any single company; Akin Oyedele, Business Insider, 6th Aug 2018]
Investors like people go with winners. Think Ateneo versus La Salle. Or think being the first trillion-dollar enterprise.
“In 1997, Apple was on the ropes. The Silicon Valley pioneer was being decimated by Microsoft and its many partners in the personal-computer market. It had just cut a third of its work force, and it was about 90 days from going broke, Apple’s late co-founder, Steve Jobs, later said.
“On Thursday, Apple became the first publicly traded American company to be worth more than $1 trillion when its shares climbed 3 percent to end the day at $207.39. The gains came two days after the company announced the latest in a series of remarkably profitable quarters.
“Apple’s ascent from the brink of bankruptcy to the world’s most valuable public company has been a business tour de force, marked by rapid innovation, a series of smash-hit products and the creation of a sophisticated, globe-spanning supply chain that keeps costs down while producing enormous volumes of cutting-edge devices.
“Mr. Jobs slashed 70 percent of Apple’s product plans, commissioned the company’s ‘Think Different’ ad campaign and reimagined how it put its products together.
‘We’re trying to get back to the basics,’ a weary Mr. Jobs said in a 1997 internal meeting with staff. A video of the meeting posted online later showed him sporting shorts and sandals. ‘The question now is not: Can we turn around Apple? I think that’s the booby prize. I think it’s: Can we make Apple really great again?’
“The focus on simplicity became a hallmark of Apple, from the way Mr. Jobs dressed — jeans and black mock turtlenecks became his uniform of sorts — to the way his products operated to the eventual look of his company’s retail stores.” [Apple Is Worth $1,000,000,000,000 –Two Decades Ago, It Was Almost Bankrupt; Jack Nicas, The New York Times, 2nd Aug 2018]
The referenced video can be accessed on YouTube: “Apple Confidential Steve Jobs on 'Think Different' Internal Meeting Sept 23, 1997.” It is a great example of foresight and visionary thinking. If it isn’t obvious yet, the writer has referenced Jobs and Beethoven and Einstein often – but not only in the blog but over the 15 years he has been guiding his Eastern European friends.
But that is straying away from PH. So let’s get back to PH. But before doing so, here’s what The Economist says about “animal spirits”: The colorful name that Keynes gave to one of the essential ingredients of economic prosperity: confidence. According to Keynes, animal spirits are a particular sort of confidence, "naive optimism". He meant this in the sense that, for entrepreneurs in particular, "the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death". Where these animal spirits come from is something of a mystery. Certainly, attempts by politicians and others to talk up confidence by making optimistic noises about economic prospects have rarely done much good.
How do we measure against the yardstick of “animal spirits” given how we’ve approached development for decades? Development is beyond economics as in the tools of fiscal and monetary policies. And beyond infrastructure development, rapid development demands industrialization that is geared to innovation and global competitiveness. And they are alien to us. Why?
Sadly, we don’t have the “naïve optimism” that Keynes speaks to. As the blog has argued, “We are parochial and insular. We value hierarchy and the paternalism it brings. And we rely on political patronage and oligarchy given the spoils they bestow. That when all is said and done, we bite the bullet – aka a culture of impunity.”
Not surprisingly, these are examples of what we come across in our media: (1) The quality of justice, Boo Chanco, DEMAND AND SUPPLY, The Philippine Star, 6th Aug 2018; (2) Gloria Arroyo, master of Machiavellian politics; Oscar P. Lagman, To Take A Stand, BusinessWorld, 6th Aug 2018
“As Filipinos, we ought to be nationally embarrassed that we have to depend on the US justice system to do the job our own judicial system should have done. It happened before with some of the Marcos cases. It is happening again now with the Napoles case.” [Chanco, op. cit.]
“As vice president, she saw no evil and heard no evil, when she, as the titular head of the opposition, was duty-bound to take issue with President Estrada’s hollow programs, self-serving policies, and dubious acts. She refused to take a stand on the many issues confronting the nation, choosing instead to only stand and wait — for Erap to self-destruct, physically or politically.” [Lagman, op. cit.]
Try to count the number of times we come across the word “reform” in our dailies or while watching TV.
Gising bayan!
“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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