Our absolutist approach to poverty

[Why is ours a damaged culture? Then consider: We are too weak to face a pandemic and the 21st century. Beyond survive, how can we make Juan de la Cruz thrive?]

Can we think out-of-the-box?

How come supposedly more impoverished Vietnam has only a third of our poverty rate? Yet, our failure isn’t from lack of trying.

We have been waging war against poverty for the longest time. Start with the comprehensive agrarian reform program. And because rural poverty far exceeds that of urban poverty, we continue to focus on the challenge, including the emphasis on LGUs where we put our money where our mouth is.

LGUs now have their share of tax revenues courtesy of the national government. And we want to follow that up with Federalism. And with the election of Duterte, there has been an apparent effort to direct investment in Davao. 

And not to forget the 4Ps.

We were awed by Duterte’s war on drugs in Davao, and we applauded when he made this into his agenda as president.

Beyond an absolutist approach to poverty, we now have a mirror image of the war on drugs.

Let’s pause there for a moment. And ponder. Is this our reality?

How come supposedly more impoverished Vietnam has only a third of our poverty rate? And they’re not done yet. They are in acceleration mode and soon will leave us in the dust, as did the Asian Tigers before them. And the signs don’t bode well. Beyond the pandemic, our caste system hasn’t faded an iota because of our love for tyranny. 

Consider: When the blog started (2009), it quoted Vietnam’s exports at $48.07 billion against our $49.32 billion (2007/8). Think of that as we go through the rest of this posting.

As the blog has maintained, our lack of experience in development gives us fewer options and perspectives on the way forward. We’re stuck with the same old, same old. Yet, being the incurable optimists, we assume that things will change for the better. After decades of submission – as in “que sera, sera” – we can only make Einstein incredulous. We reap what we sow. 

In the meantime, to overcome poverty, we believe we must mandate our enterprises to abide by the universal basic income. Paying the UBI, indeed, will address poverty. But other than that, it is classic absolutist thinking that won’t see the light of day.

As the war on poverty (as we know it) won’t see the light of day. Despite being a $20+ trillion economy and generates over $400 billion in charity contributions, not even America has won the war on poverty.

In the war on drugs, only Portugal has bragging rights. But they did not see it as a war to be fought – and kill people. They saw it as a wellness challenge, so they employed the virtuous circle model – because wellness is not a one-dimensional enterprise.

A virtuous circle is what we as a people, must seek if we are to thrive in this dynamic universe, we call home. It is not black or white or an absolutist world. 

Why is it Vietnam showing us the way?

Consider: Unlike us, Vietnam isn’t parochial and insular. Nor are they beholden to a caste system. They benchmarked against Singapore, Malaysia, and China and concluded that they must likewise be partners with a wealthier nation, South Korea.

They did not bark at the wrong tree of poverty. Instead, Vietnam took the road from poverty to prosperity. And are poised to overtake even Singapore. People go with the winners, not the losers. Surprise, surprise, even Apple moved their AirPods manufacturing to Vietnam.

Let’s look at some numbers to make the treatise more tangible.

Samsung Vietnam had export revenues (2017) of $58 billion. Vietnam’s total exports in 2019 were $304.3 billion. 

Do they have to mandate the UBI to address poverty?

In other words, did Portugal kill people to overcome the drug menace?

But let’s intrude into the Zoom discussions of Boo Chanco and his FEF friends. “Never waste a crisis,” Boo Chanco, DEMAND AND SUPPLY, The Philippine Star, 1st May 2020.

“My friends at the Foundation for Economic Freedom (FEF) are hopeless ‘incrementalists.’ We endlessly talk about this reform or another and often rejoice if one pet reform appears to be on the verge of being realized.

“We also believe we should never waste a crisis. When a crisis strikes, we think it may make our reform agenda possible.”

How can we make our reform agenda possible?

Vietnam did not say we must focus on raising consumption because the world is turning inward. Note the Apple-Vietnam AirPod partnership is fresh out of the oven. In other words, they will grow even more their staggering export receipts of $304.3 billion.

And where are we? In 2019, our exports were $70.3 billion, a mere fraction of Vietnam’s. And 64.4% came from two categories: (1) Electrical machinery & equipment, 49.3% or $32.7 billion; (2) Machinery, including computers, 15.1% or $10.6 billion. 

While fruits and nuts came in third at 3.7% or $2.6 billion, but growing 25.5% or to $3.263 billion, if we make a one-year projection.

For comparative purposes, let’s again put up the numbers for our eight top listed companies. Compared to Samsung Vietnam’s export revenues (2017) of $58 billion, our top enterprises delivered much less, $43.1 billion.

And this is where Pareto comes in. If we are to overcome poverty like Vietnam did, we must generate export revenues much more than $70.3 billion. 

Let’s hold it there: That is what our challenge is, not a drop in the bucket here and a drop in the bucket there.

Otherwise, we shall continue to rely on MSMEs to take on the bulk of employment of roughly two-thirds. And they cannot pay the UBI. 

But what about agriculture? See above; fruits and nuts are among our top exports. But then again, we must go beyond the analysis and do the analytics and forward-think. How do we create a virtuous circle in this industry?

Not by staying with the same old, same old. If we must benchmark and figure out how to replicate the Samsung Vietnam phenomenon, we must do likewise with fruits and nuts. How do we make a full circle from farming to globally competitive packaged food and beverages? And a similar exercise applies. What is the next Samsung Vietnam or AirPods Vietnam?

For example, how do we replicate the pig industry of Denmark or tree farming in Sweden? “White men can’t jump.” But we can. 

Consider: The writer’s Eastern European friends had all eight state-of-the-art factories running amid the pandemic. [They have something akin to a mini export processing zone except everything from product idea to finished product is in-house.] And the team in New York had their higher shipments arriving in higher quantities. That is why it’s called a virtuous circle.

To do the analytics is to forward-think.

In 2014, the writer sat through two economic briefings (Ateneo and UP), and he thought he was on another planet. Everyone was waxing poetic about the uptick in manufacturing. And so, the writer asked the rhetorical question, what’s the basis of the uptick? Local consumption and the global value chain (GVC) were the drivers. That is the analysis piece. 

But no one was talking about the analytics. OFW remittances and BPO revenues give us a free pass and cover our sins of omissions and commissions – aka the “Dutch Disease.” 

But where’s the analytics? It demands forward-thinking!

Ergo: There was no reason to celebrate, given how neighbors are leaving us in the dust export-wise.

After that bit of an aside, let’s get back and look at fruits and nuts. We’re in the process of identifying our priority for this first go-around. They miss the Pareto cut. So, we shall leave them aside briefly.

We must then look at the two categories responsible for 64.4% of our exports (a) electrical machinery and equipment and (b) machinery, including computers.

The blog, several postings ago, gave the example of a small Guangzhou enterprise that did their homework and learned that the writer’s old MNC-company was the global market leaders in their business. This Chinese enterprise had only their brand and dilapidated factory to offer. Because the JV had bigger plans than they thought, they had to reveal, “We are a poor Chinese enterprise. We rely on you for money and technology.”

Think of the Vietnamese; they were able to partner with Samsung and recently with Apple. That is not rocket science. That is the absence of parochialism and insularity and the caste system.

Enter: Messrs. Dominguez and Ang. They can have DTI, if not their respective organizations, figure out and then come up with a shortlist of brands and enterprises that are in the big league within our two top exports. Which is the next Samsung Vietnam or AirPods Vietnam?

If a small Guangzhou enterprise can knock on the door of a Fortune 500 company headquartered on Park Avenue in New York, why can’t Messrs. Dominguez and Ang be able to tap on whatever doors?

But let’s get back to Boo and his FEF friends. Where do we think we must locate a project or a couple of them, given the magnitude of our challenge? In other words, where will these global behemoths want their manufacturing facilities located? That we have a “one-product, one-province” program? And they must respect it?

They will want a location that gives them the infrastructure that will sustain their capacity as world-class enterprises, not misplaced compassion.

But that is where the crab mentality kills us. And Pareto too. We don’t recognize the impact of getting the biggest bang for the buck. Economists call it the multiplier effect. 

But why? Again, because of our lack of experience in development, we are yet to move up in the levels of human development. Recall the square-one is absolutism. 

Consider: We need a few humongous economic hubs that will radiate beyond their boundaries.

Let’s again pause and recall how we project our self-image when dealing with the rest of the world. We kicked out the US military because our caste system tells us we shall forever be beholden to a colonizer, and that is a no, no.

Likewise, we are parochial and insular and have a one-product, one-province program. 

What to do – in the absence of experience?

Benchmark. Benchmark. Benchmark.

Enter: the Pearl River Delta economic development zone. It is more prominent than big. Think of Central Luzon beyond Metro Manila.

How did China describe the Pearl River Delta? “The region cannot be a single city due to sheer physical land extent – slightly exceeds that of Massachusetts and rings around water bodies much like San Francisco.” [Wikipedia]

It is not enough to say we must decongest Metro Manila. We must create a virtuous circle by benchmarking against the Pearl River Delta and crafting a game plan for Central Luzon.

“Since the onset of China’s reform program, the Pearl River Delta Economic Zone has been the fastest-growing portion of the fastest-growing province in the fastest-growing large economy in the world.

“It is a world leader in the production of electronic goods, electrical products, electrical and electronic components, watches and clocks, toys, garments and textiles, plastic products, and a range of other goods.”

Benchmarking will also tell us how they crafted their investment incentives, including taxation. In other words, beyond the analysis exercise we did behind our tax rationalization initiative, we must then do the analytics and forward-think. Where will a tax rationalization effort get the biggest bang for the buck?

Again, it is not rocket science but simple arithmetic. For example, if we start with the hypothesis that we need incremental GDP of $200 billion to get ahead of Malaysia, Thailand, and Vietnam, we shall generate a far higher yield on our tax rationalization initiative than assume revenues coming from current revenue streams.

The bottom line: We must start somewhere in the quest to create a virtuous circle, and then we can prioritize the rest, and that includes fruits and nuts, of the industries from Arangkada, AmBisyon, the 42 DTI’s road maps, and Tatak Pinoy. 

We can then look at our other economic hubs and expand them accordingly, Cebu, Cagayan de Oro, and Davao.

“There will still be centers like Manila, Cebu, but there should be a hierarchy of local clusters that will lead to the development of their areas. Development is spread out in space as we re-examine geographic structure.” [Chanco, op. cit.]

The exercise starts with prioritizing the enterprises that will generate the kind of revenues that will address poverty. It is not the other way, where we insist on addressing poverty, yet clueless about how we will pay for it. 

The exercise, as presented in recent postings, is to generate incremental GDP of $200 billion and get us ahead of Malaysia, Thailand, and Vietnam.

Can we think out-of-the-box?

Gising bayan!

“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]