Can Juan de la Cruz reinvent himself?

Probably not. And that means we’re bound to decline even more especially given the downturn in the global economy.

And Venezuela comes to mind. In other words, do we hue closer to Venezuela than to our neighbors, the Asian Tigers – all major export players?

Consider: On the one hand, we’re stuck with our version of the Dutch disease courtesy of the over $50 billion generated by the OFW remittances and call centers. And on the other, we have no investment-industrial base to be competitive export-wise.

Preeminent economist Ciel Habito captured why Juan de la Cruz suffers abject poverty and learning poverty. And why the Ramon Ang Bulacan initiative must be our rallying cry to generate $200 billion in exports.

The Dutch overcame the “Dutch disease,” while Venezuela couldn’t.

“The Netherlands, the sixth-largest economy in the European Union, plays an important role as a European transportation hub, with a consistently high trade surplus, stable industrial relations, and low unemployment. The industry focuses on food processing, chemicals, refining petroleum, and electrical machinery. A highly mechanized agricultural sector employs only 2% of the labor force but provides large surpluses for food-processing and underpins the country’s status as the world’s second-largest agricultural exporter.” [The Netherlands - The World Factbook (cia.gov)]

“The term Dutch disease was coined by The Economist magazine in 1977 when the publication analyzed a crisis that occurred in The Netherlands after discovering vast natural gas deposits in the North Sea in 1959. The newfound wealth and massive oil exports caused the value of the Dutch guilder to rise sharply, making Dutch exports of all non-oil products less competitive on the world market. Unemployment rose from 1.1% to 5.1%, and capital investment in the country dropped. [Dutch Disease Definition (investopedia.com)]

“Venezuela, which has the world’s largest known crude oil supplies, is left with an economy barreling out of control. On 22nd Jan, Venezuela’s oil price fell to $21.50 a barrel, compared to over $100 in 2014 (Yahoo News, 2015). As prices continue to fall, Venezuela’s surplus of oil stocks grows. Rising oil surplus, however, does not translate into food, medical supplies, and political and domestic stability in Venezuela, as President Maduro is quickly finding out. A country rich in one of the world’s most demanded natural resources, Venezuela is riddled with poverty and instability, having been cursed by the resource upon which it depends so deeply.” [Venezuela’s Case of Dutch Disease: Cursed by Oil | Panoramas (pitt.edu)]

What to do?

“Addressing the Philippine education crisis,” Bernardo M. Villegas, Human Side Of Economics, BusinessWorld, 27th Sep 2022.

“Food security and quality education are the two most significant challenges to attaining sustainable and equitable economic development in the Philippines during the coming decade.

“The DepEd decision to join PISA for the first time in its 2018 round is a step towards globalizing the quality of Philippine basic education. Together with the changing landscape of education, global standards are also changing, and the country needs to have a complete view of the gaps and areas for improvement.”

“The results of international assessments, coupled with our own National Achievement Test, will provide the necessary data that will inform the efforts of DepEd to formulate a plan to improve the quality of Philippine education significantly. This master plan will install aggressive reforms in four key areas: (1) K to 12 curriculum review and updating; (2) Improvement of the learning environment; (3) Teachers’ upskilling and reskilling through a transformed professional development program; and (4) Engagement of stakeholders for support and collaboration.

“How are these reforms directly related to the overall plan of Philippine society to attain First World status of its economy from 2040 to 2050?”

It’s worth repeating: Food security and quality education are the two most significant challenges to attaining sustainable and equitable economic development in the Philippines during the coming decade.

“Land consolidation is the answer,” Calixto V. Chikiamco, Introspective, BusinessWorld, 2nd Oct 2022

“The primary binding constraint in developing Philippine agriculture is land fragmentation. The answer to our agricultural woes is farm consolidation and modernization, nothing else. All other efforts will fail.

“More so if PBBM relies on the government and the Department of Agriculture (DA) to solve problems. Experience and studies have shown that the DA is dysfunctional, inefficient, and corrupt. Therefore, increasing the DA’s budget or announcing new government-directed programs, like reviving the National Food Authority’s trading operations, won’t be the answer. It may be too late if he realizes this after six years because he would have failed by then.

“The central problem of agriculture is that too many farmers marginally tilling small parcels of land (average of 1 hectare or less.) Many farmers are just producing enough for their consumption. Many farmers, too, are part-time farmers because farming isn’t profitable, and they have to earn non-farm income, such as driving tricycles.

“That too many small farmers working on atomized farmlands cause other problems down the supply chain line. Volumes are just too small to ship economically. Ask domestic shipping companies, and they will tell you that their prices are high because agriculture produce volumes are too low. There are “middlemen” that can aggregate these small volumes, but the transaction costs of dealing with many small farmers are too high.

“Middlemen or traders also have inordinate power over the farmers and are criticized for exploiting them. With so many small farms, the power dynamics skew toward the trader.

“Therefore, the government must promote land and farm consolidation to create giant, better-managed farms—commercial farming or agri-business, in other words. We need more giant farms that can use science, technology, capital, and management to increase agricultural production and produce for profit.

“However, creating more giant and better-managed farms is impossible under the Comprehensive Agrarian Reform Law (CARL). Successful farmers are not allowed to expand beyond five hectares. Often, farms get subdivided into ever smaller plots of land with each succeeding generation.

“It’s good that PBBM has included debt condonation of agrarian reform beneficiaries as part of his legislative agenda. Debt condonation won’t affect government finances because it will involve an accounting write-off in the government’s balance sheet. Most agrarian reform beneficiaries (ARBs) (at least 75%) don’t pay.

“More importantly, farmers will be free to sell or lease their lands because, under the law, they aren’t allowed to do so until they fully repay their loans. The theoretical effect of debt condonation is a more vigorous and unrestrained land rental market that will promote land consolidation through leasing.

“Other reforms can also help reduce transaction costs and create a more efficient and frictionless rural land market.

“However, debt condonation won’t be a cure-all. Only mega-corporations like Dole or Del Monte can pay rent. Small- and medium-sized farmers prefer to share tenancy, which isn’t allowed under the law – but is prevalent. Share tenancy rather than fixed rental makes sense for the small farmer without capital because of the vagaries of farm production, affected by weather, pests, and other unforeseeable factors.

“We must promote land consolidation through ownership. Farmer families would rather own the land rather than rent it so they can pass it to succeeding generations. Increasing the land retention limit to 24 hectares will lead to more family-owned agribusiness ventures.

“Moreover, there’s another compelling reason land consolidation through ownership should be promoted: lessees tend to overfertilize the land because they don’t own it, thereby degrading the quality of the soil, and its productivity, over the long term.

“Why 24 hectares? Because that was the size allowed for homestead and agricultural patents under the 1935 Constitution. In other words, the 1935 Constitution fathers thought that that size would constitute a good-sized, economical family farm. Studies by the University of Asia and the Pacific economists led by Dr. Rolly Dy bear this out. Ideally, there should be no land retention limit because the market should dictate the limit, but this may be politically unfeasible.

“The government can’t shirk promoting land consolidation. There will be some form of creative destruction with more efficient farmers displacing less efficient ones. Farmers who sell or lease their lands can earn higher incomes by becoming farm workers on much bigger but more productive farms or factory workers in secondary cities. In China, their industrialization took off because farmers and rural workers were encouraged to move to the cities to work in labor-intensive factories where their incomes were higher and more stable. Therefore, we must amend labor laws and ease labor rigidities even as we promote land consolidation.”

Question: Hasn’t the Philippines proudly proclaimed our ability to grow the GDP by 6%-7%, consistent with the World Bank-endorsed metric?

What are we missing?

“Horatio Nelson had a problem. The British admiral’s fleet was outnumbered at Trafalgar by an armada of French and Spanish ships that Napoleon had ordered to disrupt Britain’s commerce and prepare for a cross-channel invasion.

“The prevailing tactics in 1805 were for the two opposing fleets to stay in line, firing broadsides at each other. But Nelson had a strategic insight into how to deal with being outnumbered. He broke the British fleet into two columns and drove them at the Franco-Spanish fleet, hitting its line perpendicularly.

“The lead British ships took a significant risk, but Nelson judged that the less-trained Franco-Spanish gunners would not be able to compensate for the heavy swell that day. And that the enemy fleet, with its coherence lost, would be no match for the more experienced British captains and gunners in the ensuing melee.

“He was proved right: the French and Spanish lost 22 ships, two-thirds of their fleet. The British lost none. Nelson’s victory is a classic example of good strategy, which always looks this simple and obvious in retrospect. It does not pop out of some strategic-management tool, matrix, triangle, or fill-in-the-blanks scheme.

“Instead, a talented leader has identified the one or two critical issues in a situation—the pivot points that can multiply the effectiveness of effort—and then focused and concentrated action and resources on them.

“A good strategy does more than urge us toward a goal or vision; it acknowledges the challenges we face and provides an approach to overcoming them.” [“The perils of bad strategy,” Richard Rumelt, McKinsey Quarterly, 1st Jun 2011]

Consider: On the one hand, we’re stuck with our version of the Dutch disease courtesy of the over $50 billion generated by the OFW remittances and call centers. And on the other, we have no investment-industrial base to be competitive export-wise.

Can Juan de la Cruz reinvent himself? Can he overcome our crab mentality – or our academic approach to problem-solving – and focus on what separates us from our neighbors?

In other words, what will it take to separate the wheat from the chaff, the “vital few” from the “trivial many”?

Focus. Focus. Focus.

“Do you, as a leader, make an explicit choice to grow? Or do you pay lip service to your growth ambitions and let your resolve falter if profit isn’t immediate?

“When sustainable, inclusive, and profitable growth becomes a conscious, resolute choice, it shapes decision making across every business area. “Growth” becomes the oxygen of an organization, feeding the culture, elevating ambitions, and inspiring a sense of purpose. Growth leaders generate 80 percent more shareholder value than their peers over ten years. Beyond creating shareholder value, growth attracts talent, fosters innovation, and creates jobs.

“The leaders who choose growth and outperform their peers think, act, and speak differently; they align around a shared mindset, strategy, and capabilities. They actively track leading and lagging growth indicators to tie their aspirations to clear and measurable key performance indicators (KPIs). They explore and invest in opportunities both within and outside their core business. Their commitment to growth leads them to invest in an appropriate mix of enablers at the right time and scale. They stay resolutely faithful to their growth vision in the face of unexpected challenges in their business and operating context, even turning disruption to their advantage.” [“Choosing to grow: The leader’s blueprint,” McKinsey & Company, 7th Jul 2022]

Recall that the blog often distinguishes between (a) logical yet linear and incremental thinking and (b) forward, lateral, and creative thinking.

Consider: “William Perry’s Theory of Intellectual and Ethical Development discusses three stages: dualism, multiplicity, and relativism.

“He believes college students go through four mental and moral development stages. The four states are dualism, multiplicity, relativism, and commitment. These four stages are then further divided into nine positions.

“Perry’s theory is instrumental because he details specific stages and how people arrive and change to get to each “stage.”

“The first stage (typically discussed for incredibly young people) is dualism. Dualism is the belief that every problem is solvable, that students are to learn the correct answers, and that one must obey authorities. The second stage is known as multiplicity.

“Multiplicity is that there are two types of problems: solvable and issues that the answer is not yet known. In addition, in this stage, students trust their inner voice.

“Relativism is the third stage. The basis for this stage is that every issue needs evaluation because everything is contextual. During this stage, all solutions to problems must have reasons within a specific context.

“Lastly, commitment is the stage where we allow uncertainty as part of life. During this stage, students use the combination of personal experience and evidence learned from outside sources to arrive at conclusions.” [Perry - Student Development Theory (weebly.com)]

Recall that the blog speaks about our lack of experience in development – unlike the Asian Tigers, our neighbors.

What makes us an oddball compared to our neighbors? In the beginning, they also did not have development experience. But they were not like us in parochialism and insularity. They begged for Western money and technology. And they learned from one another, as demonstrated by Deng, who followed the advice of Lee and Mahathir. And more recently, Vietnam followed suit.

Sadly, we can’t seem to recognize that we can’t do it alone, even in how we problem-solve.

Why? Consider our instincts expressed in our caste system: We are parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy; ours is a culture of impunity.

Can Juan de la Cruz reinvent himself?

Probably not. And that means we’re bound to decline even more especially given the downturn in the global economy.

And Venezuela comes to mind. In other words, do we hue closer to Venezuela than to our neighbors, the Asian Tigers – all major export players?

Consider: On the one hand, we’re stuck with our version of the Dutch disease courtesy of the over $50 billion generated by the OFW remittances and call centers. And on the other, we have no investment-industrial base to be competitive export-wise.

Gising bayan!