Inertia at rest

How are we gearing up for post-COVID-19? In case we’ve forgotten, given this longish lockdown, we’re the regional laggard with a poverty rate that should have jolted us from our stupor decades ago.

But will inertia play itself out? Enter: Google. Inertia – the tendency of a body at rest to remain at rest or of a body in straight line motion to stay in “motion” in a straight line unless acted on by an outside force; the resistance of a “body” to changes in momentum; “resistance” or disinclination to motion, action, or change: an entrenched bureaucracy’s inertia, for example.

Let’s reprise why we’re the regional laggard and start with these poverty-rate numbers: Thailand = 7.20%; Vietnam = 8.00%; Malaysia = 3.80%; Indonesia = 10.90%; Philippines = 21.60%.

Question: How can these neighbors so embarrass us? Try exports (US$ billion): Thailand = 245.3; Vietnam = 304.3; Malaysia = 238.1; Indonesia = 183.5; Philippines = 70.3.

But what is on our mind? Consider: “When I would write and advocate about the need to protect local industries to preserve local jobs, others said that I was still advocating protectionism and economic nationalism. These concepts were supposedly anti-business and obsolete in this globalized world.

“I would argue that this ‘trickle-down’ theory did not work, and business was losing jobs in our economy. That was the time when the overseas workers became ‘heroes.’ My question then was, why were jobs being created abroad and not here in the Philippines?” [The end of globalization, Elfren S. Cruz, BREAKTHROUGH, The Philippine Star, 24th May 2020]

Jobs are not magically created, with due respect to Elfren. But he can’t be alone. So, let’s drill it down.

Have we forgotten that we’re stuck as a service-consumption economy? Why? We once assumed that the OFW phenomenon was a stopgap measure, yet we never lifted a finger – then embraced the “Dutch disease.” 

For example, where is Arangkada? Why aren’t we actively debating it? It is one of the very few times industrialization started a national conversation!

On the other hand, our neighbors, starting with the Asian Tigers, were smart enough to recognize the imperative to industrialize and beg for Western money and technology. That’s why jobs were created abroad and not here in the Philippines.

Benchmark. Benchmark. Benchmark.

Question: Why don’t we benchmark? Consider: We, especially in the elite class, assumed that we couldn’t be Singapore because Lee Kuan Yew was an autocrat. Ditto for Mahathir. But wasn’t Marcos a dictator?

These three leaders or autocrats had their infrastructure development and industrialization initiatives. But only Marcos did not deliver to take us from the third world to the first world.

Why?

Given our caste system, hubris has infected us. Our servants and subordinates can do our bidding, but that won’t suffice to elevate us to an industrialized economy. We cannot even provide Juan de la Cruz with “water and electricity.”

There is a hierarchy of human needs that we can’t take for granted – and expect to progress as a nation and develop an innovation culture and be a globally competitive economy.

We don’t call it hubris; we call it compassion, i.e., preserving jobs, so we’re stuck with the jeepney instead of thinking forward and developing an efficient public transportation system – which can’t be a priority in a two-car garage world. [In fairness, there is a modernization plan in the works triggered by the pandemic, per Andrew J. Masigan’s recent column.] 

Do we then want to conflate our problems with the US, i.e., that even the US suffers from globalization? But we are not in the same league that we chose to kick out the US military?

Greed was the cause of the 2008 Global Recession, and the US hasn’t fully restored the wherewithal of its economy. And that was driven by its financial services sector with a little help from European bankers.

And not to forget, the universe never stops being a 24/7 dynamic phenomenon. For instance, the coal industry is declining, while shale oil and natural gas are rising. Trump can make empty promises to coal miners, but that is that empty.

What about Brexit and the populism we see in a handful of Central and Eastern European countries? The UK represents the classic island mentality. That’s an easy one. And like the US, it is polarized – and why to this day it struggles to define itself.

While in a few former Soviet satellite countries, a bit of commissar mentality remains, and so Putin has a ready client base. On the other hand, as the world sees in Ukraine, these people would instead run to America, no different from Vietnam, running away from China to America.

People understand what freedom is. The writer and wife keep a home in the heart of Eastern Europe, and local friends haven’t stopped educating them on what freedom means to them.

In the meantime, given all its wealth, we can’t commiserate that the US is behind the curve. Did the world pity the UK when the US overtook them despite their lead in the industrial revolution? And this is not the first time the US confronts a big-sized challenge.

The writer represented corporate America during the heyday of Japan Inc., and even in the Philippines, we felt it because American companies had to embark on massive restructuring efforts to survive the Japanese manufacturing and quality prowess.

In other words, America is a big boy and must respond to all comers, good and bad, like a good sport: “Bring them on!” It claims “American exceptionalism” for a reason. And why Trump represents the minority, not the majority view.

The moral of the story: Toss the fixed mindset, and develop a growth mindset, a recurring theme of the blog.

Those familiar with the blog would remember that until we stand face-to-face with our instincts – from parochialism to why we are a culture of impunity – and resolve to step up to the plate, we won’t develop a growth mindset. Nor forward-thinking. Or to recognize the story of creation and the dynamism of the universe. 

Consider: Humankind did not go extinct after the banishment from Eden nor after two World Wars and several plagues and pandemics. Sadly, in the Philippines, because of our caste system, Padre Damaso lives on. Unsurprisingly, we are the regional laggard!

And for the quants, neither would we develop analytics skills no matter how good we are in analyzing because analytics demands forward-thinking. It cannot be driven by technology like SAP alone, for example. 

How many companies in the Philippines have SAP? Yet, our most significant companies – combined – can’t even match Samsung Vietnam in income generation. In other words, until we learn to forward-think, we are not ready for the big league. And we will continue to pay the price. See above how our neighbors embarrass us, as in our alarming poverty rate.

Technology helps, but even with AI, human intervention won’t cease. There will be a need for fewer bean counters, but AI is not into metacognition yet. It may get there but not tomorrow. That is why it is taking so long to develop a vaccine for COVID-19 despite the advent of quantum computers. They are supposed to do some of these chores at warp speed.

But let’s get back to China. As the blog has argued, it was our shortsightedness that made us kick out the US military. China remains an autocracy, and that we should have known that in making friends, we cannot project our self-image, i.e., we love tyranny because we value hierarchy and paternalism – aka a caste system.

On the other hand, we assumed we should forever be beholden to our once colonizer, the US. What did we miss? That humans develop. That the US and Juan de la Cruz will move up in human development and servitude is not cast in stone.

For the sake of argument, let’s grant that once upon a time, America had an expansionist agenda, i.e., they deliberately took a big chunk of North America, including Puerto Rico in the Caribbean.

But can we imagine a reality where the US military will take over any island or territory of the Philippines in this 21st century? For future reference, we better learn how to figure out how to define who are friends must be. But we know that in the case of Japan. 

In other words, permanence is not of this world – nor is perfection. On the other hand, absolutism is hubris, as in Padre Damaso.

Globalization is not perfect. Neither is capitalism or socialism.

The universe we live in isn’t about any isms but dynamism.

Simply put, to overcome the shortcomings of globalization, we must learn dynamism.

Let’s pretend that from tomorrow the nations of the world will shut themselves out to the rest of the world.

Consider: OFW remittances bring in $34 billion, and if we add the BPO revenues, we are talking $60 billion. Who will cover for these income streams, the two drivers of the Philippine economy?

But that’s not all: “PH is world’s biggest rice importer for 2019,” Karl R. Ocampo, Philippine Daily Inquirer, 12th Nov 2019.

“A report by the United States’ Department of Agriculture-Foreign Agricultural Services (USDA-FAS) has projected the country’s rice imports to reach a record three million metric tons (MT) by year-end—the highest in the world and the highest for the country.

"This tops the current biggest importer of rice, China. With a population of 1.4 billion, the Asian nation expects to import 2.5 million MT of rice this year. Last month, the two countries tied at the top spot with a projection of 3.1 million MT of rice imports."

Are we turning our back to $60 billion in revenue streams plus three million metric tons of rice?

We can, once we become an industrial-investment economy. And once we recognize that rice production is not about food security. That like any industry, it presupposes the creation of a virtuous circle. For the longest time, we confined ourselves to productivity. And even at that, we failed.

To create a virtuous circle, demands forward-thinking. For example, beyond productivity, we must recognize that the market does not offer free lunch.

Competition. Competition. Competition.

And competition is beyond legislating and enacting a competitiveness commission. It is making our products and services desirable that consumers will want them. Think of Steve Jobs, a great innovator because he respected human dignity and understood that the hierarchy of human needs equipped people to thrive in this dynamic universe.

Of course, because of hubris, Padre Damaso saw it differently, no different from the scribes and Pharisees. That only he, not humankind, has the choice to create and pursue a virtuous circle.

Let’s pause and continue with a bit more of physics.

“Water seeks its ‘own’ level. That is a consequence of Pascal’s principle, whereby pressure transmits uniformly throughout a liquid.” [Wolfram Demonstrations Projects]

There are also universal laws like cause and effect, vibration, correspondence, and divine oneness.

For example, globalization is not an ism per se but reflects the law of “divine oneness” – as in the story of creation or the big bang – and mirrors the Pascal principle, i.e., water seeks its “own” level.

How does that relate to the real world? How are many simultaneous efforts in different countries in progress today to develop vaccines for COVID-19?

Why did our forebears engage in barter trade? It was not water they needed but things humankind needs but aren’t available locally follow the physics of water.

In case we have forgotten, there is such a thing as smuggling too. No matter how many barriers nations erect, it can’t guarantee to stop trafficking, for example.

How many of us grew up with the Cartimar market where smuggled goods from US military bases would magically appear?

The good news is that our economic managers don’t buy the idea that globalization is coming to a screeching halt.

“‘Tailor-fit’ perks eyed to lure investments, Julito G. Rada, manilastandard.net, 24th May 2020. Finance Secretary Carlos Dominguez III said he was pushing for a more proactive, targeted investment promotion strategy in a briefing. Of directly approaching the kind of foreign investors that the government wants to relocate here and offering them a set of tax and non-tax incentives tailor-fit to their needs, as part of the efforts to reenergize the economy and create more jobs.

“Dominguez said the government should discard its old ‘one-size-fits-all’ incentives program, and shift to a demand-driven approach. That means it identifies the types of industries that the economy needs to flourish, so incentives can be granted based on the industry players’ specific requirements that it wants to set up shop in the country.

“These industries include those that are labor-intensive and, thus, create stable, decent-paying jobs, provide excellent technology transfers that improve the country’s workforce skills, and have stable markets, Dominguez said.

‘We must identify these industries and then go to each of the companies, i.e., the leading companies in those industries around the world—and asking them: what do you need for you to come to the Philippines? Instead of waiting for them to apply, we should be going to them and offering them a package,’ Dominguez said.

“Dominguez said the obsolete ‘one-size-fits-all’ formula of attracting prospective investors failed to make the Philippines an investment magnet. That is why the country persistently lags its Southeast Asian counterparts in terms of the volume and amount of foreign direct investment inflows despite being among the region’s leading economies to offer fiscal incentives.

“On top of the massive infrastructure gap, which the Duterte administration is now fixing through its ‘Build, Build, Build’ program, and the constitutional restrictions on foreign ownership is the outmoded investment promotion strategy. That was among the reasons why the country lagged in the region in terms of FDI inflows despite the Philippines’ status as one of Asia’s fastest-growing economies.”

Thank God. We’re finally demonstrating dynamism and recognizing why we’ve become the regional laggard.

Recall the blog raised the real challenge we face. That we need incremental GDP of $200 billion – to get ahead of Malaysia, Thailand, and Vietnam and overcome poverty to the extent they did.

The major industries have the best chance to give us the quantum leap we badly need and why the above news from Sec. Dominguez is most welcome and can be a real game-changer for the Philippines.

What about the MSMEs? Let’s take them up in succeeding postings.

To end this posting, let’s get back to inertia at rest. How can we overcome it? Recall the 3Cs of the hardy mindset: (a) Commitment; (b) Challenge; (c) Control.

Until we commit to moving this nation forward, we won’t feel impelled to be the engine of this undertaking we call the Philippines. Because we won’t have the wherewithal to accept the challenge it presents. Likewise, until we stop blaming everyone and his uncle, we won’t recognize that the only one we control is Juan de la Cruz.

Gising na ba?

“True social reform has little to do with politics. To unmoor ourselves from the burdens of the past, we must be engaged in the act of continual and conscious self-renewal. All men are partially buried in the grave of custom. Even virtue is no longer such if it is stagnant.

“Change begins when we finally choose to examine critically and then recalibrate the ill-serving codes and conventions handed down to us, often unquestioned, by the past and its power structures. It is essentially an act of imagination first.” [David Henry Thoreau; American essayist, poet, and philosopher; 1817-1862]

“Why independence, if the slaves of today will be the tyrants of tomorrow? Moreover, 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]

“You have to have a dream, whether big or small. Then plan, focus, work hard, and be very determined to achieve your goals.” [Henry Sy Sr., Chairman Emeritus and Founder, SM Group (1924 - 2019)]

“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]