Stuck to a 6%-6.5% GDP growth-rate paradigm

[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?]

The Philippine GDP growth rate over the past five years averaged 6.33%; it was 6.306% the past ten, and fifteen years earlier, in 2004, it was a whopping 6.698%. They were all in the 6%-7% band, the global standard for a fast-growing economy.

Question: Who is the regional laggard today?

Does Juan de la Cruz only have a hammer – in his toolkit, aka his mindset – that for half a generation, he boasted about the GDP growth rate? In fairness, every so often, he thanked the OFW for paying the social costs to fuel our sprinting economy.

Enter: COVID-19. The good news is that every nation was held back by the pandemic. But if our mindset remains stuck in neutral, still proud of “Pinoy abilidad,” God bless us!

We must learn to walk and chew gum at the same time.

In an earlier posting, the blog discussed the Marcos 11 major industrial projects, circa 1979. And none of them drives the economy today like the OFW phenomenon and the BPO industry.

Since the time of the Aquino administration (2010-2016), we have had Arangkada on the table, and the 42 industry road maps on the DTI’s agenda. And in 2016, NEDA launched AmBisyon 2040, while a year ago, Senator Juan Edgardo “Sonny” Angara introduced Tatak Pinoy.

In other words, as far back as 41 years – over a generation – ago, to as recently as a year ago, we have attempted to move beyond the square-one of modern economic development, a service-consumption economy, and are yet to notch a win. Why? Because as recently as a week ago, the CB Governor was bragging about the $90 billion forex reserves.

In fairness, it was perhaps to assure us that we can deal with the fallout from COVID-19. But if our economic managers cannot walk and chew gum at the same time, as the last 41 years show, how do we expect Juan de la Cruz to know any better?

To pursue a significant undertaking demands a clear head, not premature, and a continual celebration. Indeed, to figure out and traverse the road from poverty to prosperity, it must be the song sheet that Juan de la Cruz must play.

Can we pause here for a moment and ponder how we can get our act together? Is that what the economic cluster within the cabinet must answer? When the Duterte administration came, this team found time to meet society at large to explain the Duterte “economic program.” Yet, the real question of Juan de la Cruz is, can you figure out the road from poverty to prosperity and how are you going to lead us?

Consider: We are again in survival mode that the mental model responsible for the comprehensive agrarian and land reform program, the OFW phenomenon, the 4Ps, the POGO spectacle, among others, is at the forefront. Because “the Pinoy knee-jerk” is the hammer, the only one in our toolkit. So, let’s add the universal basic income (UBI) or “Balik Probinsiya?”

“Here is a land in which a few are spectacularly rich while the masses remain abjectly poor. And where freedom and its blessings are a reality for a minority and an illusion for the many. Here is a land consecrated to democracy but run by an entrenched plutocracy, dedicated to equality but mired in an archaic system of caste. 

"But the fault was chiefly their own. Filipinos profess the love of country, but love themselves – individually – more."

That was Ninoy Aquino, in Foreign Affairs magazine, July 1968, as quoted by Stanley Karnow in the New York Times Magazine article, “Cory Aquino’s Downhill Slide,” 19th Aug 1990.

As the blog has repeatedly said, no one can save us but Juan de la Cruz himself. But we need more than a hammer. Or the mindset that has turned us into the regional laggard. 

We need more than the success of our top eight enterprises in the Forbes list. 

We need more than the efforts of close to 800,000 MSMEs that employ two-thirds of the working population yet represent 99.6% of registered enterprises but only 35% of national income.

To add insult to injury, do we want to mandate the UBI for these MSMEs? Why can’t the big retail players hire every employee permanently, for example? Brick-and-mortar stores have fragile margins globally and going extinct in the West. If they go extinct in the Philippines, what picture do we expect to see?

What to do? That’s why the blog has never ceased discussing the imperative to move up to an industrial-investment economy. 

But before we get too far, let’s recall the distinction between analysis and analytics. Analytics demand forward-thinking, beyond incremental thinking. For example, back in 2004, 16 years ago, we had a GDP growth of 6.698%, and over the past ten years, we averaged 6.306%. If we analyze and compare the performance of our economy to the global yardstick of 6%-7% (a fast-growth economy), then we can indeed celebrate as we have been for the longest time. That is why we now own the “Dutch disease.”

We can be blind to the social costs OFWs pay for this misplaced celebration because we in the elite class enjoy the spoils, given our caste system. 

On the other hand, if we do the analytics, we will forward-think and ask, what is nirvana if the 6%-7% yardstick will take us a generation to lift Juan de la Cruz from abject poverty? The reason we fall back on quick fixes is that we recognize Juan de la Cruz cannot afford to remain poor counting generations.

To forward-think, we must be better than our neighbors that have overcome poverty. But that is too abstract for Juan de la Cruz to appreciate. We need something concrete, but we also know that the GDP growth numbers that have consumed us all these years can’t define nirvana. In an earlier posting, the blog introduced raising our GDP by an incremental $200 billion because that will put us ahead of Malaysia, Thailand, and Vietnam.

The exercise is also to distinguish “drivers” from “objectives.” The 6%-7% GDP growth metric is an objective from traditional economics that relies on monetary and fiscal policies as the drivers. But that is a very Western concept consistent with the free enterprise system and upended when the Asian Tigers demonstrated how to leapfrog economic growth and development. For example, beyond begging for Western money and technology, which Deng learned from Lee and Mahathir, China transformed the Pearl River Delta – mostly agricultural land – into a manufacturing hub and a global economic superpower.

Meanwhile, we can start with defining nirvana – a more tangible, profound “objective” – as raising our GDP by an incremental $200 billion. And to then prioritize the initiatives from Arangkada, AmBisyon, the 42 industry road maps on the DTI agenda, and Tatak Pinoy to be the “drivers” – to attain rapid growth, sooner than a generation if we stay with the 6%-7% norm.

Dynamism. Dynamism. Dynamism.

The dynamic behavior of COVID-19 is a lesson we must not take for granted. Organisms for good or ill are a dynamic phenomenon. How we win over the “vicious” ones presupposes that we are the “virtuous” counterpart. Satan is a given. We must make the choice of good over evil because we represent the good in the story of creation.

For example, the big players of the Philippine industry can be the likely source of new vigor for this economy. But they must shed our parochialism and insularity. That is why the blog has posed a challenge.

The next order of business must be: To replicate the success of the Samsung Vietnam marvel because that will put us a quarter of the way toward the $200 billion incremental GDP definition of nirvana. 

And given the magnitude of the task, we need the best players we can tap to form a small task force, and the blog suggested Mr. Ang of San Miguel. The writer doesn’t know him. The operative word is “small,” so we don’t imagine a big committee. And members of the task force must forego their interests and be dedicated to Juan de la Cruz, and led by Finance Secretary Dominguez. See above; what Ninoy Aquino said of us Filipinos.

Consider: Samsung Vietnam by its lonesome self, generates roughly the combined output of our OFWs and the BPO industry, and beats our top eight listed companies in the Forbes list, by a mile. That is why we may have to define a couple of other priority industries if we can’t identify one that will meet the desired outcome.

[Recall from an earlier posting that the exercise is for us to learn how to prioritize. Think of the Pareto principle and the imperative to overcome the crab mentality. And to adopt the “fast-fail” model of Silicon Valley of rapid prototyping. The object is to quickly gain knowledge in the pursuit of the undertaking while being in continual learning mode so that each prototyping cycle yields a better outcome. A project will have any number of subsets and may require a hypothesis that is tested and then translated into a prototype. The exercise must then be replicated to pursue the rest of the priority industries accordingly, and not try to implement all 42 industry road maps on the DTI’s agenda. We must learn from our failed attempts to chase industrialization. We must not bite more than we can chew.]

Then consider: We are still a lower-cost producer compared to the wealthy nations, especially in the West, but need the basics of water and electricity, and the vital infrastructure development. That holds even if we pay the equivalent of what OFWs make today to those hired to the enterprise that will be a match to Samsung Vietnam.

Note too that they can pay the UBI in Vietnam because their export revenues (of over $200 billion) generate higher margins than our MSMEs. Or even our big retail players. 

Pay is a function of the design of an enterprise, not an arbitrary or whimsical dictate. Recall why the MNC pay practices were the benchmark for the writer’s client-friends in Eastern Europe. The North Star of the enterprise is to compete and win against Western giants.

Recall personal responsibility is inherent in the free enterprise system. And so is transparency and the rule of law. Why? It must create a virtuous circle consistent with the story of creation and its subset, the garden of Eden.

That is why we need to boost our income streams big time. It cannot happen with happy talk and misplaced compassion. Or “pwede na ‘yan.” 

What about the global arena post-COVID-19? There is where the lower-cost producer wins, even in a decelerated global market. And we can be that lower-cost producer – as Samsung Vietnam is and why they generate revenues that dwarf even our big boys – given the pay levels of OFWs, assume they represent the benchmark, are still below the norm in developed markets.

Those familiar with the blog may recall that post the 2008 Global Recession, the writer’s Eastern European friends kicked the butts of Western global behemoths because of that cost advantage. But beyond that, they have relentlessly pursued the development of world-class products, continually expanding their portfolio.

And Western third-party providers of raw materials, which are likewise continually in pursuit of innovation and technology, have partnered with them. People go with the winners, not the losers. And they are today a more formidable competitor to these Western giants.

But we Pinoys will have to start somewhere, not drag our feet over decades and generations.

When and how do we introduce the imperative of dynamism to Juan de la Cruz? Should the educational system show the way? 

Sadly, we’re the regional laggard in higher education that may likewise explain our inability to walk and chew gum at the same time.

We cannot stick to a paradigm that has sunk us into the abyss. Our value of hierarchy and paternalism cum caste system is not limited to government and industry. It is present in the classroom too.

For example, professional jealousy is a given in education, as in “publish or perish.” That is why the blog has spoken to the way Fortune 500 companies in America took matters into their own hands. Their higher education shares the shortcomings. No, to lectures, but yes, to workshops, for example.

It is not to put the education community on the defensive, but it must step up to plate – of the story of creation too. It must rapidly learn dynamism. Recall the Ph.D. candidate the writer guided. He had access to the database commonly used in graduate research work, and could not help but shake his head. They were mostly dated when this universe we live in is a 24/7 dynamic construct.

In other words, institutions to be a subset of this universe must, by necessity, be dynamic. And why human needs are in a continuum and a perpetual fountain of innovation. Question: Does it explain why ours is a damaged culture? And why dynamism isn’t inherent in us?

That Ph.D. candidate, of course, successfully defended her thesis; and just the other day, she sent a proud note: “I am now the global marketing director of this major brand. The promotion came amid the lockdown mode we’re all in.” Why? Her dissertation was purposely designed to be executed and win in the real world.

But let’s bring it back to today. The administration and both the Senate and Congress are pulling together the must-do initiatives to restart Philippine life post-COVID-19.

Yet, that won’t suffice if we retreat to “Pinoy abilidad.” See above; what Ninoy Aquino said 52 years ago. We’ve wasted decades then, and we’ve lost even more since.

We must learn to walk and chew gum at the same time. Consider: We’re stuck to a 6%-6.5% GDP growth-rate paradigm when the road from poverty to prosperity for Juan de la Cruz demands dynamism and creating a sustainable, virtuous circle.

We must move from the square-one of modern economic development, a service-consumption economy that we’ve relied on for almost half a century, to an industrial-investment economy geared to win in the global arena. 

We must say goodbye to parochialism and insularity.

How will the economic managers figure out the road from poverty to prosperity? How will the administration lead Juan de la Cruz, given his need to aspire to be a wealthy nation?

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]