If we can’t forward-think, we can’t problem-solve

Here’s a breath of fresh air: “1987 Charter framer joins call for change,” Tyrone Jasper C. Piad and Cai Ordinario, BusinessMirror, 1st Dec 2021.

“THE ‘Filipino First’ mentality that guided the crafting of the 1987 Constitution will not propel the Philippines to a higher economic growth path that is needed to eradicate poverty, according to a framer of the country’s charter.

“In the first plenary of the virtual Arangkada Philippines Forum on Wednesday, constitutionalist and economist Bernardo M. Villegas said removing restrictions to foreign investments would allow the country to recover from the pandemic and help eradicate poverty.”

Whew! I wanted to say that the first plenary at the Arangkada Forum made my day. And it should.

But, as a “change management” practitioner, I’m very much aware of the two operating systems of the brain: (1) automatic or “reflex” mode and (2) conscious or “reflection” mode.

Change is not a walk in the park. But I will root for the effort. Thanks to the JFC!

Consider: This blog will soon be 13 years young and has spoken to the “Philippine Economy: Reinventing Ourselves” nonstop – through two administrations, Aquino and Duterte.

And it appears we are now on the cusp of change.

But then, recall what the blog says about our instincts: We are parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy that ours is a culture of impunity.

Unsurprisingly, Juan de la Cruz spells status quo.

And that brings us – those familiar with the blog – to Kurt Levin’s force-field theory, which we can easily Google: “The force-field theory of change proposes that two sets of opposing forces determine how the process of change will take place.

“It is a common observation that a group would endorse the change while another would oppose it. The force-field theory states that the dynamics between these opposing forces determine the overall success of the change process.

“The two opposing forces are (1) Resistance to the change and (2) Forces that accept change. The former are those that want to maintain the status quo and challenge any attempt for change; the latter are those that believe in constant learning – they understand the dynamic societal context and know that change is often necessary for survival.”

And that’s why the blog addresses us in the Philippine elite and chattering classes: It was us, not Juan de la Cruz, that crafted the Constitution; thankfully, a framer joins call for change.

How do we then edify Juan de la Cruz? It takes a village to undo our instincts.

Recall that when I first arrived in Eastern Europe, they wanted me to “spoon-feed” them of the “how-to” of freedom and the free market. But “change” isn’t imposed because it demands “learning” and “ownership.” They must “own the change effort” – although born and raised socialists under Soviet rule.

It is similar to Juan de la Cruz. We were born and raised insular and parochial – and value hierarchy and paternalism and rely on political patronage and oligarchy that ours is a culture of impunity.

And after decades since independence, we can’t claim that we have internalized what democracy and the free market entail. For example, while leadership is inherent in a democracy, it is a self-government undertaking, “the common good.”

The instincts of crab mentality and the submission to tyranny because of the value of hierarchy and paternalism are anathema to freedom and the free market. And the easy way out is not the embrace of another ism that is merely a human construct.

If Arangkada finally takes off, we in the Philippine elite and chattering classes must show the way, but Juan de la Cruz must own it.

On the other hand, we in the Philippine elite and chattering classes must acknowledge that beyond crafting a constitution that restricts foreign investment, we too kicked out the US military, for example. Juan de la Cruz wanted to keep the Subic Bay Naval Base. And it was unsurprising; rank has its privileges – instinctively, we tried to pull rank.

In other words, even free people are subsets of more significant sets given the character of the creation story and this universe, i.e., dynamism and interdependence.

Sadly, we kept piling challenges after challenges on the shoulders of Juan de la Cruz.

It has not stopped. We are playing into the hands of the dynasts cum tyrants that want to rule this country post the presidential election. Every time my Romanian friends hear about our acquiescence of EJKs, for example, they would remind me of Ceaușescu. Worse, freedom-loving nations saw the Philippines as a pariah.

Should we pause and ponder?

We love tyranny, and that’s why we submit to it, per Rizal.

That inability to forward-think explains why we took another wrong turn at the fork: a deceleration of GDP growth is imminent post-pandemic because of the Mandanas law.

News item: Implementation of the Mandanas ruling seen to dampen economic growth.

How often did the blog raise the Pareto principle? But our crab mentality is so consuming that we have been running around like a headless chicken.

Let’s start with our GDP per person (in USD) against our neighbors: Philippines = 8,000; Thailand = 17,300; Malaysia = 26,400. Even Vietnam is now ahead of us at 8,200.

News item: 45% of Filipino families feel poor — Sept. 2021 SWS survey.

Why are we poor, and why do we have to borrow even more because of the pandemic? Indeed, even before the pandemic, we borrowed tons of money for the 4Ps – to keep Juan de la Cruz’s body and soul together.

Of course, it is not for us in the Philippine elite and chattering classes. And so we challenge the wisdom and the prudence?

News items: (a) World Bank approves $600-million loan for PHL 4Ps program; (b) World Bank and ADB approve $900M in loans for PH vaccine procurement, pandemic response.

Let’s try the education metric and raise our education investment to 6%. How much will that mean per person – and simplify the comparison based on GDP per capita?

Philippines = 480; Thailand = 1,038; Malaysia = 1,584; Vietnam = 492.

Shouldn’t we spend more on education than 6%, given how meager $480 is – if we want to address the education crisis? But where will we get the money? Will we borrow more?

Let’s push the exercise and compare “tax-revenue income” against GDP per person because that is where we get the money to pay for education and healthcare, and housing, among others.

And to simplify the analogy, let’s say the countries are equally efficient in generating tax-revenue income of 20%: Philippines = 1,600; Thailand = 3,460; Malaysia = 5,280.

What is so mysterious about that? Aren’t our heads merely dug deep in the sand?

We cannot squeeze blood out of a stone. But insanity is not in our vocabulary, so we keep championing more LGU initiatives and farm out the meager PH tax-revenue income to local governments – the “common good” be damned.

If we pause and switch from “reflex” to “reflection” mode, we will figure out that we can’t afford much to sustain Juan de la Cruz no matter how we slice and dice our tax-revenue income – because our national income or GDP is at such a pathetic level? In other words, being over a hundred million strong is a double-edged sword. We have more mouths to feed.

If we can’t forward-think, we can’t problem-solve.

Why are we poor, and why do we have to borrow even more because of the pandemic?

Recall that the blog often raises that the Philippines has a structural problem, celebrating a consumption-service economy and suffering from the “Dutch disease.” In fairness to the Dutch, we can now own – and call – it “OFW disease.”

And we in the Philippine elite and chattering classes exhibit the symptoms of the disease as much if not more than Juan de la Cruz.

Why? How? We generate $60 billion on the backs of over 10 million OFWs and 1.3 million in call centers. The social costs of these remittances are staggering even as we enjoy their fruits – we created a handful of dollar billionaires, for example.

See no evil. Hear no evil. Speak no evil.

In other words, our economic managers, as a retired bank president shared with me, cannot brag about our ability to manage inflation and the exchange rate given this manna – the $60 billion – from heaven. It is no different from coming to work every day, and it is their day job, nothing out of the ordinary.

And in the process, we failed to edify Juan de la Cruz on the imperative of moving to an investment-industrial economy – that generates tangible things that raise one’s well-being. That is where the multiplier effect of investment comes from and why Vietnam left us in the dust.

And we cannot be partial to the Philippine oligarchy. These oligarchs have embarrassed themselves; collectively, they failed to match the revenues generated by one Vietnam enterprise, Samsung Vietnam.

And here’s the rub: Getting a freebie – as staggering as $60 billion may seem to us Pinoys – does not generate the multiplier effect as that of an investment-industrial economy.

And creating tangible things or products is where the human side of an enterprise begins. Producing products that will raise one’s well-being respects humankind’s hierarchy of needs.

But it is not a cakewalk. And in the 21st century, it is called innovation. Because humankind must thrive in this dynamic world, not merely survive, that is why it is called innovation – and it is extraordinary.

And it demands forward-thinking. For example, successfully implementing an industrialized economy requires managing several dynamics.

And depending on the industry, these are the dynamics of (a) the marketing mix, (b) resource mix, and (c) execution mix. They represent a “wall-to-wall” process and mimic the photosynthesis phenomenon.

In other words, we cannot afford to be shortsighted; else, we become a dysfunctional economy and nation.

And that brings agribusiness and MSMEs to mind. The principle does not change, and these endeavors must seek a quantum leap and not merely raise revenues incrementally — as in livelihood undertakings. They have no fighting chance in the 21st century, where innovation and global competitiveness are the norms.

The outcome we seek is to traverse poverty to prosperity rapidly. And increasing government support and budget allocations can only fall short. See above; our GDP is at such a pathetic level.

Agri and MSMEs must not fall into the “trivial many” trap as we did in developing scores of industry road maps. We must define the “vital few” as in Pareto and craft a world-class game plan.

What industries and products will bring a quantum leap in revenues? Recall that my first challenge to my Easter European friends was to seek to become a $100-million enterprise because that is the median size of a Fortune 500 subsidiary that was their competition.

And Pacquiao knows that to win, he can’t fight above his weight class. And here is where the Theory of Change comes in. We must trace or map backward to define the outputs of the three dynamics of (a) the marketing mix, (b) resource mix, and (c) execution mix. See above; a “wall-to-wall” process that mimics the photosynthesis phenomenon.

Let’s briefly address the marketing mix: At its heart are the norms of the 21st century, innovation, and global competitiveness. The good news is that when figuring out which industry and product to prioritize, those that command the most significant human needs generate the most revenues. That makes for a sizable bullseye to target.

And whoever dominates that market must be the benchmark. Why is the market leader successful? Is there room in the industry for another player? Most likely, because the business is attractive, there will be lots of wannabes. But what differentiates the market leader from the crowd? And it won’t be surprising that there is a vast chasm between them. That will make for a sharper definition of the outcome the enterprise must seek. That means designing the undertaking to replicate the market leader and leave the wannabes in the dust.

That is why it is critical to learn how to trace or map backward and define the range of outputs for the marketing mix, the resource mix, and the execution mix.

For example, what R&D efforts to establish, where to tap them, what manufacturing facilities to erect, and the utilities to support them like electricity and water? What about the logistics requirements? What are they? And continuingly, how and where to market and sell the products?

But that is why the market leader must be the benchmark – to replicate its winning ways.

Sadly, we will continue to struggle because of our inexperience in nation-building – and development. We are stuck at the binary level and are yet to move closer to “relative thinking.” That is why we must seek to benchmark against our neighbors.

Benchmarking is how we can overcome our inexperience – as Deng demonstrated, i.e., he heeded the advice of Lee and Mahathir: Beg for Western money and technology.

“McKinsey and Co. Philippines Acting Managing Partner Jonathan Canto said the Philippines should explore a potential niche as a manufacturing hub with 80% of US companies and 67% of European companies from China to elsewhere in Asia. And Vietnam, Thailand, and Malaysia are currently gearing up to take over China.

“Citigroup Hong Kong Chief Economist Johanna D. Chua said FDI will address the capital and technology needs to transform Philippine manufacturing.

“Mr. Canto recommended that the Philippines reassess its FDI strategy and priority sectors, build unique deal-focused value propositions, focus on investment promotion, and ensure end-to-end support for investors.” [“Foreign chambers tout FDI as key to economic recovery, poverty relief,” Bianca Angelica D. Añago, BusinessWorld, 1st Dec 2021]

Is that familiar to those who read the blog?

For example, given the metric of a 6%-7% GDP growth rate hasn’t worked for us – with Vietnam still leaving us in the dust – the blog raised a different metric consistent with the Theory of Change: To distinguish “outputs” from “outcomes.”

And we can define our desired outcome as “To traverse poverty to prosperity rapidly.” And the intermediate output we can set is to raise GDP by an incremental $200 billion – so that we can leapfrog our neighbors’ “economic” results.

For example, Thailand’s GDP per person is twice ours, and Malaysia’s is three times.

Because we are talking overwhelming numbers, instead of the linear and incremental thinking behind our scores of industry road maps, we must prioritize industries and products that will rapidly deliver the $200 billion. See above; we must respect the Pareto principle and not fall into the crab mentality trap.

And what better way to (a) focus on investment promotion, (b) ensure end-to-end support for investors than the Philippine president calling on these personalities: Bill Gates, the CEO of Apple and Samsung, and Warren Buffett – to ask them, “What can we in the Philippines do so that you would invest in our country as much as you would elsewhere?” Recall that Mahathir did a similar exercise and why Malaysia’s GDP per person is way beyond ours.

If we can’t forward-think, we can’t problem-solve.

Are we still in the game? Not if we can’t reinvent Juan de la Cruz.

Why does the blog keep raising our instincts? We are parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy that ours is a culture of impunity.

“KaPe” is the intoxicating mix of ‘Kapangyarihan’ (power) and ‘Pera’ (lucre/money) that makes most politicos salivate at the prospects of consolidating and accumulating more power and wealth by casting their lot with the likely winner.

“Among the top topics on the campaign trail is the PhilSTAR story on the alliance of the Marcos, Duterte, Arroyo, and Estrada clans to support Marcos for president and Davao Mayor Sara Duterte-Carpio as his vice-presidential partner.

“The four dynasties in the alliance have produced each a president if we take Sara Duterte as standing in for her father President Duterte, who still pretends to be keeping his distance from the Marcoses despite their having helped him in the 2016 elections.

“This time, the late dictator’s son [and namesake] needs Duterte’s help in what could be his last bid to recapture the Palace that the family lost. They fled in panic to Hawaii at the height of the 1986 People Power Revolt. Marcos cannot afford to wait for the 2028 elections.” [“Marcos ‘KaPe’ brew attracts top dynasts,” Federico D. Pascual Jr., POSTSCRIPT, The Philippine Star, 28th Nov 2021]

“Everything depends on our voters. Notwithstanding the infirmities of our Constitution, the foremost consideration in our voters’ minds should be: This is unprecedented—a group of former corrupt rulers of our country now uniting and asking us to restore them to power. Are we going to give them another chance to plunder our country? How will history judge us if we once again elect these people?

“Before us now is a case of the bad guys all congregating in one saloon: Bongbong Marcos for President, Sara Duterte for Vice President, Gloria M. Arroyo, prospective Speaker of the House, and the Estrada family. A ‘Confederation of Grafters’ (COG) gathered in one place is applicable. One meaning of ‘cog’ is a loaded dice game, an appropriate name for the group.

“These four ex-ruling families explain why we are still a Third World country. The COG group represents 39 accumulated years of graft and corruption in government: Marcos 21 years, GMA 9 years, Estrada three years, and Duterte six years. It’s been 75 years since we regained our independence in 1946; thus, the COG group has stolen from us more than 50 percent of our independent existence.” [“Filipino voters presented with a ‘COG,’” Hermenegildo C. Cruz, Philippine Daily Inquirer, 2nd Dec 2021]

If we can’t forward-think, we can’t problem-solve.

Are we still in the game? Not if we can’t reinvent Juan de la Cruz.

Why does the blog keep raising our instincts? We are parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy that ours is a culture of impunity.

Gising bayan!