Why can’t we overcome the tyranny of hierarchy?

It is a function of our values – and why we rely on political patronage and oligarchy.

To add insult to injury, we’ve taken the credit away from Juan de la Cruz, who brings over $50 billion in remittances – and call center revenues – to our coffers.

With the pandemic no longer a serious threat, we are proud that Q3 2022 GDP is up 7.6%.

Then consider: In 2021, Vietnam’s poverty (per ADB) was already down to 1.2%, with the Philippines’ still at a staggering 23.7%.

But let’s hold our breath: Given our blinders – an inward-looking bias – we can’t see that Vietnam did 13.67% (Q3 2022 GDP.)

Can we look in the mirror? 

Why can’t we overcome the tyranny of hierarchy?

In other words, we are a classic perfect storm, a dysfunctional system – call it an infirmed economy or nation.

Of course, we can celebrate the economic rebound especially given the horrors brought by the pandemic. But it is irresponsible and a disservice to forget our structural challenge for the umpteenth time: The Philippine economy relies on the OFW phenomenon and call centers.

Indeed, we must move up the value chain from call centers to IT. We can look up to Ireland, but given the enormous disparity in population – less than 6 million to our over 115 million – PH GDP per capita won’t even come close to Ireland’s.

Granted that the fifteen wealthiest Filipinos saw their treasures rebounding with the GDP, it is not the answer to Juan de la Cruz’s abject poverty – nor his learning poverty.

Local businesses don’t meet the character of the 21st century, i.e., innovation and global competitiveness. Conversely, they grew up in a protectionist, if not rent-seeking, setting. And it explains why innovation is foreign to us.

On the other hand, look at Vietnam. They went to bed with Samsung and competed successfully globally.

Beyond binary thinking, the Vietnamese have internalized multiplicity and, even more profoundly, lived through relativism. In other words, they’ve moved up the cognitive development curve. That a solution will fall short absent “context.”

Should we cry when our economic managers – and the Philippine elite and chattering classes – can’t stop talking about the 6%-7% GDP growth mantra? 

It is the classic insanity defined by Einstein.

Why does the blog often speak to my Eastern European friends? The two global crises – the 2008/9 great recession and the 2019 pandemic – saw their business take quantum leaps. They generate 70% of revenues – mirroring the profile of my old Fortune 500 company – outside their home market.

But recall where they started. The Soviets turned their nation into a godforsaken place like their other satellite states. And remember what the wife said when we first arrived, “Why are we in this godforsaken place?”

And one will only appreciate what that means in the psyche of the Ukrainians. How else to explain the measure of humankind? How did the Ukrainians turn the tide of the Russian invasion in their favor?

How can our economic managers, legislators, think tanks, the Philippine elite, and chattering classes rationalize the dire situation of Juan de la Cruz – that we can’t move beyond a service economy?

It is defeatism.

“The biggest mistakes in economics are failures of imagination. It reflects an assumption that today’s regime will last forever. It never does. Change is coming. Get ready.” [The Economist, 6th Oct 2022.]

How does a “discipline” fight “failures of imagination”?

Those familiar with the blog may remember how often the blog speaks to innovation, being beyond R&D. And why, when I first arrived in Eastern Europe, we set up the business units to cover both R&D and Marketing. Moreover, we trained the brand managers on “horizontal leadership.” They don’t need formal authority to win the rest of the organization’s support of their brands.

Free enterprise is about principles, not rules. Recall that from the beginning, I purposedly disabused the minds of my friends. And to demonstrate how it plays out in the real world, I agreed to run the sales force – to set up the regional and then global structure – for only two years. 

You will not embrace the principles of free enterprise if you keep relying on me as though I am a demigod. You will trip and fall flat on your face, but that’s how best to learn a trade – by experience.

But that means learning the basics of “self-government,” which is the heart of freedom, democracy, and the free market.

We Filipinos can be critical of democracy because we hew closer to autocracy – in the continuum of authoritarianism to freedom. In other words, we reflect binary thinking – and the failure to move up the cognitive development curve.

Consider: Will (a) incompetence and (b) tyranny explain why despite over 400 (and counting) export processing zones, we could only generate roughly $80 billion in exports in 2020 – when Vietnam did over $280 billion?

Why incompetence? The BOI was born in 1967. Consider: Vietnam was at war for 20 years, from 1955-1975. In other words, why haven’t we developed the competence to attract foreign investments despite 55 years of experience?

The BOI also predates the Pearl River Delta Economic Zone by 12 years. It was at the heart of the China economic miracle.

Why did we allow our BOI to fall behind our neighbors?

(1) Because of our parochialism and insularity, we don’t benchmark against best practice models. 

(2) Moreover, we are too academic in crafting our initiatives. We are too “ivory tower” that we miss the context, the “acid test,” which is called the real world. 

But we still don’t get it. 

Why can’t we overcome the tyranny of hierarchy?

How do we rationalize our incompetence? “Becoming a manufacturing hub like China or Vietnam is out of the question, what with our expensive power cost, inefficient logistics, and bureaucratic red tape standing in the way. Neither can we do it through agriculture, considering our weak cooperative structure, politicized agricultural policies, and outdated farming methods?” [“Capitalize on our workforce; lessons from Ireland,” Andrew J. Masigan, THE CORNER ORACLE, The Philippine Star, 16th Nov 2022]

Whom should we blame? Ourselves? Because of the tyranny of hierarchy, we raised barriers to FDIs.

Should we abolish the BOI, PEZA, and the Department of Energy – the Department of Agriculture and the public sector, too – for incompetence? And instead, focus on creating the ecosystem for a world-class service economy.

Before we get any further, how can we undo incompetence in the two sectors – industry and agriculture – via a focus on the service sector?

Doesn’t incompetence run across our endeavors and undertakings – as an economy or nation?

Can we problem-solve?

If top companies and over 400 export processing zones can’t put the Philippines on the path of innovation and global competitiveness, what more of MSMEs? 

The Philippine caste system, wittingly or not, consigned MSMEs to livelihood projects that they can’t overcome a fixed mindset — dynamism and context be damned. 

Consider our instincts, reflected in the Philippine 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.

What to do?

Should we step back and hold our breath?

If we are doing a restructuring initiative to address our predicament, we will have to brush up on how humankind learned to get from point “A” to point “B.”

Think of the Kennedy moonshot speech: “We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win, and the others, too.”

Kennedy demonstrated several qualities confirmed by science: (a) the 3C’s of a hardy mindset, (b) the elements of cognitive development, and (c) the imperative of an ecosystem.

Those familiar with the blog will recall the characteristics of a hardy mindset: Commitment. To be involved with others and to experience a sense of purpose and meaning, how ordinary people can do extraordinary things.

Challenge. It is to appreciate that change rather than stability is the norm, take new or difficult situations as opportunities for learning, and the importance of thinking “outside the box.”

Control. Focus on situations where we influence, not where we have little if any, control; you have control only over yourself; you must be the one to change. Develop a problem-solving attitude; why can’t you succeed in your efforts?

What about the elements of cognitive development? (a) dualism or binary thinking; (b) multiplicity; (c) relativism.

Without the benefit of experience, students find comfort in binary thinking. And as they move on, they begin recognizing multiple options when addressing a problem. And with experience, they learn that relativism presupposes “context.”

A solution can be off-base if it ignores the context.

Let’s get back to Kennedy: We chose to go to the Moon this decade and do other things, not because they are easy, but because they are hard.

Does the word “hard” register in our psyche? Or are we the personification of Juan Tamad?

Moreover, we can’t send a man to the Moon if we don’t create an ecosystem that will “connect the dots.”

Let’s get back to Juan de la Cruz. We can translate the above concepts into familiar lexicons.

Take a paradigm shift or think out of the box. Or consider the GPS: Where are we; Where do we want to be; How do we get there?

Where are we?

Consider: Will (a) incompetence and (b) tyranny explain why despite over 400 (and counting) export processing zones, we could only generate roughly $80 billion in exports in 2020 – when Vietnam did over $280 billion?

That is where we are. Instead of running away from our shortcomings, we must own them; otherwise, we can’t begin to embrace dynamism. We must not forget that we are a subset of this dynamic universe in constant motion and expansion.

In the meantime, we are not demonstrating a hardy mindset. Because of the tyranny of hierarchy, we rationalize incompetence – by throwing jargon like “our competitive advantage is our people.”

That is a fallacy. If our competitive advantage is our people, we can problem-solve and not be the regional laggard – with Juan de la Cruz suffering the consequences of abject poverty and learning poverty. And let’s not forget that Philippine education is behind our neighbors.

“Philippines needs to improve its education system. It isn’t just a Swiss business school that thinks the Philippines needs to improve its quality of education. The Philippine Business for Education (PBEd) says that while the state of education nationwide has progressed in terms of accessibility, it still has a long way to go when it comes to the delivery of quality learning for the success of every learner.” [Philippines needs to improve its education system | The ASEAN Post]

Where do we want to be?

We want to be a first-world economy. That is the context beyond 6%-7% GDP growth.

Note that Vietnam’s poverty is down to less than 2% against our 23.7%. And population-wise, the two countries are over 100 million strong. In other words, our benchmark should be Vietnam, not Ireland, with less than 6 million people. We need tons of blue-collar jobs beyond white-collar ones.

What about the imperative of an ecosystem? “Becoming a manufacturing hub like China or Vietnam is out of the question, what with our expensive power cost, inefficient logistics, and bureaucratic red tape standing in the way. Neither can we do it through agriculture, considering our weak cooperative structure, politicized agricultural policies, and outdated farming methods?”

That hypothesis is a fallacy. It demonstrates the tyranny of hierarchy.

In other words, we must: (a) Fix the incompetence of BOI, PEZA, the Department of Energy, and the public sector. We must match Vietnam’s export prowess, raise the caliber of Philippine logistics and fix bureaucratic red tape; (b) Fix the incompetence of agriculture and outdated farming methods.

Note the word “fix” in (a) and (b) above. “Fix” must translate to “no ifs and buts.”

How? Kennedy demonstrated several qualities confirmed by science: (a) the 3C’s of a hardy mindset, (b) the elements of cognitive development, and (c) the imperative of an ecosystem.

Why can’t we overcome the tyranny of hierarchy?

It is a function of our values – and why we rely on political patronage and oligarchy.

To add insult to injury, we’ve taken the credit away from Juan de la Cruz, who brings over $50 billion in remittances – and call center revenues – to our coffers.

In other words, we are part of the problem, not the solution.

We are a classic perfect storm, a dysfunctional system – call it an infirmed economy or nation.

Gising bayan!