While summing up the thesis of World Bank economist Alessandro Magnoli Bocchi in “Rising Growth, Declining Investment: The Puzzle of the Philippines,” Cocoy has tried to explain the puzzle in his own words:
The answer according to the same policy paper (of Bocchi) is that while foreign direct investment has fallen since the 1990s, the local market has not picked up the slack. Big Business has refused to reinvest substantially. The World Bank blames the lack of reinvestment on lack of incentives to do so. Businesses are profiting now, so why go out of the way to reinvest capital more than necessary? The rot sets in.
BenignO has been quick to respond, quoting himself:
We pester the elite of our society with calls for acts of heroism when the burden of extra hard work in reality falls on the shoulders of the poor masses.
We Filipinos have been imbued with the idea that our hopes for prosperity lie squarely on the shoulders of the elite, the “haves,” a handful of leaders and/or a few “extraordinary” individuals. Our society has come to (or, more appropriately never matured beyond) a penchant for giving heroic labels to these “messiahs,” as if the Philippines is constantly waiting for a hero to rescue her from her dysfunction. We expect heroic efforts from the few and continued mediocrity from the majority. We expect the low product of the majority to be SUBSIDISED by the exceptional output of the minority.
When it comes to offering solutions to the Philippine puzzle, I proceed from a standpoint quite opposite to Benigno’s. Let me also quote myself to explain my point based on established historical facts:
There are historical patterns that if we care to seriously reflect on would inform us of certain repeated forces known to have driven great events, among which is this: That history is often made by people and institutions in power and by how their power is employed by them to produce goods and services for society through the development and use of science and technology or otherwise dominate other peoples and grow more power.
Great historical events are also made when people and institutions in power, perceived to have failed society, have been overthrown, thereby allowing new institutions and ideas to be developed and instituted by the succeeding power.
Powers of ordinary men, like you and me, (not to speak of the shirtless, shoeless and toothless) are often circumscribed. For example, we in FV would like to believe that we have purposeful ideas and intentions for the Philippines, but we can only carry our purposes as far as our relative position in the hierarchy of powers can take us, unless of course we succeed in creating movements to match the strength of the powers that be.
So, in the Philippines, there are men and women, being in command of powerful institutions of modern society, whose decisions and non-decisions have immense consequences to our society. We do know that these special people own the financial establishments, control major corporations and organizations and for the most part “capture” the machinery of the state or, at the very least, have the ready ear of those who occupy positions of direct power.
There are thus dreadful consequences if our economic elites, the taipans or the old oligarchs for example, are risk averse, content as they seem with operating public utilities with captured markets, or mega malls and real estate ventures sustained by OWF remittances. Their lack of vigorous entrepreneurship translates into our economic engines not being propelled to create greater wealth and employment opportunities to provide decent incomes for a growing population of ordinary or less than ordinary people.
The above postulations comport with the “power elite theory” which, according to H. T. Reynolds, “perceives a pyramid of power” and where 1) the most important decisions for everyone below the pyramid is made at the top by a tiny elite; 2) a relatively small middle level consists of individuals that one normally would have in mind when talking about government, e.g., senators, representatives, mayors, governors, judges, lobbyists, and party leaders, and 3) the masses, the average men and women who are powerless to hold the top level accountable, occupy the bottom.
The power elite model of C. Wright Mills, the most renowned among power-elite theorists, as restated by H.T. Reynolds goes this way: “that single elite, not a multiplicity of competing groups, decides the life-and-death issues for the nation as a whole, leaving relatively minor matters for the middle level and almost nothing for the common person.”
Thus when “Big Business has refused to reinvest substantially” or, as Bocchi puts it, when politically-connected economic elites and corporate conglomerates in the Philippines find it convenient to not invest or invest only a portion of its revenues in-country, while sending considerable portions offshore, the consequence is slower economic growth in the country and less inclusive than it could potentially be.
I think I have had another occasion to reflect on the Philippine puzzle in a fairly recent response to a comment in FV in this fashion:
. . . why some nations have fared better than others in developing the institutions of capitalism, the late American political scientist Samuel P. Huntington . . . has pointed, among other things, to the “lack of national unity and the failure of dominant immigrant minorities (e.g., the Chinese Diaspora in the Philippines) to assimilate” and in the absence of such unity and assimilation, “there generally is no development of a legally, economically and politically empowered civil society concerned with the welfare of the entire nation and all its people.”
Citing liberal economist Jeffrey Sachs, Huntington also referred to “obstructive elites” whose interests are “vested in traditional conditions,” and “resist institutionalization of rule of law legal systems, norms of social mobility, and capitalist markets – all of which threaten their elite status.”
These insights are interesting if juxtaposed with benignO’s lavish adulation of the market dominant Filipino-Chinese community which he seems to characterize, quite naively, as homogeneous.
But here’s what Clinton Palanca, an Oxford postgraduate tsinoy, wrote on this score:
“The ideal of the ethnic Chinese who is integrated and thinks of himself or herself as Filipino while retaining Chinese cultural identity does exist, but so does the bigot who sees Filipinos as inferior and adopts a ‘sojourner’ mentality and an instrumental attitude toward the Philippine economy. These two figures form the endpoints of a spectrum along which the Chinese in the Philippines are ranged.”
Palanca however excluded the First Filipinos from his “range” (Rizal, Aguinaldo, Mabini, Bonifacio, etc who were of Chinese ancestry and the next generation, such as Osmena, Lopez, Roxas, Laurel and even Marcos not to speak of Cojuangco, Puyat, Ongpin, and the still monosyllabic Lims and Tans). The Villafuertes and Robredos of Bicol in the regional scene are descendants of more recent Chinese Diaspora but also outside of Palanca’s range.
The “Chinese” economic elites in the Philippines who own about sixty percent of market capitalization, in particular those rentier taipans with sojourner mentalities, are ultimately recipes for a lackluster national economic progress.
In another post I also pointed out that the “Chinese” in the Philippines were Hispanicized during the Friar regime and then Anglo-Americanized during Uncle Sam’s rule.
Now this again from Palanca about the chameleonic aspect of Chinese identity triggered this time by the awakened dragon or the “emergence of China as a dominant force in the Asian economy”:
“The descendants of the older Chinese mestizo classes, who had previously downplayed their Chinese ethnicity, are now suddenly rediscovering the Chinese aspect of their ethnicity. The generation of Chinese-Filipinos who had emigrated in the first half of the century in the years leading up to the communist takeover of China and their descendants are now held in higher regard. But what has the potential to become respect can easily swing the other way to distrust if the power of the Chinese-Filipinos is seen to be too dominant — or, more to the point, if they are seen not as Filipinos, but as an ethnic minority group who has gained an incommensurate degree of influence.”
I was likewise thinking of the market-dominant and oligopolistic minority when a couple of years ago I blogged about what it would really entail for the Philippines to position itself for “economic takeoff”:
Many parts of the country still retain the basic features of the so-called traditional society. A traditional society is one whose structure has limited production functions because of its incapacity to manipulate the environment through science and technology. To break from the conditions of a traditional society that put a ceiling on its attainable output, new types of enterprising men willing to take risks in pursuit of profit or modernization must come forward. The risk-taking must happen in conjunction with the appearance of institutions for mobilizing capital like banks, the investment in transport, communications, and in raw materials in which other societies may have an economic interest, and the setting up of manufacturing enterprises using modern methods. xxx
Takeoff however may not occur if the transition is proceeding at a limited stride in an economy still primarily typified by “traditional low-productivity methods,” by dated societal institutions and values, and by parochial political institutions.
The key to economic progress is somehow attitudinal too and this happens when economic men and political animals judge such progress to be good not only for the material comfort it brings forth for their pioneering spirit but also for national identity and dignity, the welfare of the next generation and the common good.
Historically, the decisive ingredient during the transition is the building of an “effective centralized national state” imbued with a “new nationalism” x x x. When growth becomes steady and normal and institutionalized into habits and social structure and dominates the society, takeoff is said to occur.
To economist Walt W. Rostow (his two seminal books are: The process of Economic Growth [1952] and The Stages of Economic Growth [1960]), from whose insights the above ideas are mainly culled, the takeoff is spurred not only by the investment in “social overhead capital” (such as in railways, ports, roads and education) and the expansion of technological development in industry and agriculture, but also by the rise to political power of a group dedicated to the proposition that the modernization of the economy is a national goal of paramount order (underscoring not in the original).
I therefore believe that the Philippines will attain “First World” status not by the action of the “ordinary schmoe” of the tingi variety (to borrow some of BenignO’s unflattering labels) but by men and women who are in command of powerful institutions of modern society. This is so, as I said in another comment, because -
. . . a nation like the Philippines attempting to modernize must first create economic surplus. This surplus will be long in coming if we follow BenigO’s formula of “culture change” first.
My route is economic take off first, then use the economic surplus created to promote and develop quality education, the ultimate telos being “democracy of the educated” to dispense with the need for “moral and intellectual aristocracy.”
I don’t see economic take off happening with “Juan Tama” or “Ako mismo” routes, because to me these are all diversion – much like the perpetual blaming of the government, the politicians, and the supposedly culturally damaged Juan Tamad – away from holding accountable those with the wherewithal to create wealth by vigorous entrepreneurship and a great sense of country.
Now, despite the retreat of BenignO’s heroes or their less “exceptional output,” why does the Philippine economy, while not taking off, manage to chug along somehow? Well, it is because of the extra hard work of non-elites or “the poor masses.”
Or, according to economist Bocchi in his research paper -
Because its least protected sectors – the informal labor market and the non-capital-intensive activities – stimulate demand and drive supply.
- On the demand-side, work-seekers – denied entry into the formal labor market migrate massively to industrialized economies, attracted by better remuneration; the resulting remittances and transfers (which, combined, account for over 13 percent of GDP) fuel consumption-led-growth (i.e. Filipinos abroad send money to their families in country, and these spend it).
- On the supply-side, the innovative service sector and a few non-capital-intensive manufactures, still free from regulations that favor the local élite, boost exports.
To Montesquieu, what is required of a republican government to thrive is virtue which he defines as “the love of the laws and of our country.”
Virtue is taken for granted when rent seeking elites bend the laws for private gains or would rather invest offshore than in-country.
Bocchi is also blunt about it in economic terms: “To accelerate economic growth, increase employment generation, and generate public resources for social programs, rent seeking by the élites that exercise political and economic power – or ‘élite capture’ – must be addressed.”
It is that simple.
Popularity: 2% [?]
I think the Chinese is past the assimilation stage. Koreans at first limited their businesses for themselves, like their convenience stores, having their own tour guides ad hotels, now they are slowly blending in. Our low cost of living notwithstanding the second costliest power rates(in Asia) is still a turn on to them.
For me their largest contribution is ship building, because it showed that shipbuilding can be done by Filipinos.
Rather than rely on refurbished ships we must build our own ships, if it’s a matter of resources and cost of doing business then all they have to do is to go over that hurdle.
Lumalayo na ako, but I still have to say this, unless we have our own ships that are new, even if we kick Sulpicio out of business, nothing will happen.
Another thing is we are an archipelago, we should have our own ship builders, historically we have been building galleons for the Spaniards, we can do this again.
Now, it becomes complicated. He he he
Aboitiz set up their shipbuilding enterprise in Cebu years before Hanjin did, and Hanjin’s shipbuilding yard is jinxed with no less than 16 work-related deaths within 4 years.
Personally I hope some enterpreneur would take up the challenge to formalize the small-to-medium sized banca/small boat business.
Yes, Jon.
But even the Aboitizes are about to give up anything to do with shipping anytime soon.
Yeah those work related deaths cannot be ignored.
I also agree that someone must raise up to the challenge with our small to medium sized boats.
those work related deaths must not be ignored.
regarding the aboitizes, they are about to get away from the shipping business altogether.(to concentrate on power)
now who will be left for our passenger shipping?
about boats,ships. i have to agree, before thinking of big ships why not also think of the smaller ones.
we need it for our tourism, maritime security, fishing, mariculture,etc.
now regarding philmanila’s comment on disposable income; budget airlines is also a competition for passenger shipping(big or small), so maybe we could have both, without having to kill one industry.
Abe,
Would you please draft the new Constitution? In needs this kind of profound perspective.
Capitalism as it is practiced in the US and socialism as it was practiced in Russia and China, are methods of creating and controlling wealth, THE BENEFIT OF THE WEALTH BEING AT THE MERCY OF THE GOVERNMENT. Ideally, everyone gains, but Russia and China found their systems could not match capitalism in wealth-generation, so they are changing over. The Philippines is an example of capitalism gone awry because it is operating within a class social system (the classes being the “In’s and the “Outs”, avoiding terms such as “elite” that mean different things to different people). The government indeed has a “love of the laws of the country” that you cite, but it is qualified: the law is loved insomuch as it protects and serves, first and foremost, the “Ins”, and second of all, if it is convenient or will help on re-election, the “Outs”.
As an example of broken Philippine capitalism, you have Philippine Long Distance Telephone Company (PLDT), sole owner of Smart and other phone and tech businesses, one of the “Ins” for its size, command of market, connections of its top executives to other Manila “Ins”, publicly owned, doing precious little to invest in the overall well-being of the Philippines. A full 21% of the shares are held by a British company and 26% are held by a Philippine company listed on the NYSE with 45 million shares outstanding in the US. In 2008, PLDT issued dividends of P 37 billion on net income of P 35 billion, a neat trick called milking the cash flow created by depreciation of prior year investments.
So not only is PLDT NOT RE-INVESTING IN THE PHILIPPINES, it is taking out the previous investment and sending a sizable chunk overseas. It is undermining the normal earn, invest, grow, earn, invest, grow cycle that makes capitalism so beneficial to SOCIETY.
The term CARPETBAGGER comes to mind. It originated in the US as the North sent its industrial pros south – with their carpetbag suitcases – to pull wealth from the south and send it north. Here, PLTD is taking wealth from the impoverished Philippines and sending it to (presumably rich) shareholder pockets, many non-Filipino.
There is nothing wrong with Foreign ownership. There is something decidedly wrong with paying out 100% of profits to ANY shareholder. Especially a company with a public service underpinning (its the Telephone Company, for Chuck’s sake) and over 50% share of market.
In balanced capitalistic states, public interest groups and regulatory agencies watch out for abuses and correct them. Europe’s antitrust mechanisms are powerful – ask Microsoft. But here, looking at all the family ties in the Legislature, names attached to wealth and street names across Manila, they seem mainly to be among the “Ins” and, if there is an impetus “to redistribute wealth to our poor, hard-working people”, or to “stop abusive corporate practices (phones, mining, electrical, petrol companies, and on and on), it does not seem to be working.
So how exactly do the “Outs” get a voice around here?
Righting this listing capitalistic ship cannot be done by the “Outs” alone. Some substantial group of “Ins” – your conclusion, too – have to see that it is in their interest to think of the well-being of the “Outs” in a genuine way, not a dismissive, vote-gaining way.
It would be nice if the President were one of those who understands that the Philippines is one nation, not two. Here, I think, is a tangible issue for presidential candidates to run on this next year: carpetbagging corporations that live high while the greater nation lives low.
Joe
in the world of business, the investor/capitalist puts his money where there is not only a good rate of return but, equally, where he can be assured complete control of it, i.e., do whatever he wants to do with it. this has been brought to the fore with the advent of “global economy” where the old nationalization, protectionism, “filipino-first policy” and patrimonial monopoly, have been given a long, hard look. those policies have been found to impede the flow of foreign investments contributing heavily to economic stagnation and stunted growth. thus, for instance, under former president ramos, the BOT system was put in place with full guarantee of capital and income repatriation for the investor, among other things.
in the case of pldt, the remittance of the foreign investors’ return on their investments to their home country is no more harmful to the filipinos than the remittance of overseas filipino workers income to the philippines is inimical to the interest of the countries where they work.
if the philippines keeps foreign companies out – pinoy brain power will go overseas and seek out the foreign company which recognizes and rewards topnotch talent.
it’s the philippines loss’ – not the investor.
homeland pinoys will just have to put up with the lousy local investors
they get what they deserve :lol:
Ben,
I agree halfway. I think there is such a thing as “corporate citizenship”, and I think there is such a thing as “private entities allowed to use public resources” (media companies, for instance), and such a thing as “utilities” that have an obligation to provide needed services, and because of that, are allowed special privileges. They need to be regulated under laws that ensure a proper balance of freedom to operate, and caretaking of public interest. Same same with banks, which caretake the wealth of the nation. I think PLDT’s “milking” of the company is excessive, but you are certainly entitled to your “Republican” view. We both come from the perspective of our political anchors, I suppose.
Good to know your view.
Joe
i think you’re right, joe. abe evidently draws heavily from his socialist orientation and persuasion in writing this article – sounding off the obamesque message to the haves and the elite to “spread the wealth around”.
Precisely my question as to our means to participate in a democracy.
We can only give ideas, and we are almost powerless to make it happen.
Maybe that is why benign0 suggested that the powers that we put in power are the ones with the ideas to begin with.
I maybe wrong,but that is how I understand his thesis.
If our representatives are receptive to the ideas of those not in power, I mean all of them.
We have seen proposed legislations resulting in a finished product way off the original,it may be a result of particpation from the different sectors, but more often than not, it would still be a product of power and influence.
“that the powers that we put in power are the ones with the ideas to begin with.”
edit to:
the people we put in power, are the one with ideas….
most in the Pinoy blogosphere in FV recognize only one form of power – political power.
however, economic power and military power are powers unto themselves and have the capacity to challenge or transform into other forms of power.
inidividuals group into organization, organization bundle into networks, networks form mass movements, mass movement appoint/select their spokespersons/representatives/elites.
thus, the elite is only elite as long as there are “non-elites” who consent to the “elite” role being played by the personalities concerned.
however, when the personality no longer serves the need of the network – the personality can face a counterculture. today’s revolutionary becomes tomorrows reactionary. a challenge is launched and depending on the nature of the society – the challenge can be successful or it can be catastrophic.
at the end of the day, it still boils down to who and how many have the guts to get things done.
Thanks for your POV, Bong!
like what you said below,
i think the term “elites” are overrated.(i have to agree!)
i fully understand where you are coming from, re: power.
( i have also read your other comments below)
The country needs more jobs.
Jobs are created by investments.
The domestic players are not making enough domestic investments.
The domestic players have limited competition.
—————-
Foreign investors can bring much more competition to the marketplace.
Foreign invetors want to make domestic investments here.
That means more jobs (and lower prices for goods and services).
————–
I don’t see any alternatives other than letting foreigners compete against the existing elite. No one else can.
There is something about Pinas where the financial ratios (that determine wisdom of investing money) is such that the domestic players find it attractive to put their money in Vietnam, Australia, China, other places.
This statement is true for the Cojuangcos, Lucio Tam and the Gokongweis (who invest in refineries and shopping malls) as it is for the Ping Lacsons, Arroyos and “regular upper-class” who capitalize friends or relatives’ small businesses overseas.
But there is hope (like maybe bad habits are dropping by the wayside) when Abe Margallo can write a blogpost submission without mentioning Edsa PeoplePower(the brand).
Financial ratios are not the only determining factor.
One can assume that those who make money here want to spread their risks and thus go overseas with a portion of their assets. Simple diversification.
Meanwhile, some investments are purposefully conservative (safer, less rewards) and some are aggressive (riskier, bigger rewards). Advanced economies offer a lot of high-rated vehicles that can’t be found in developing economies.
————-
But again, some foreigners want to invest in Pinas because of the potential high returns and despite the higher risks. Why not make it easy for them?
To RealityCheck: What you said makes sense.
(I) FilipinoMoney is either “old” or “new”.
(1-a) Old-Filipino-money gets conservative so they diversify their risk by investing chunks of cash overseas despite higher-return/higher-risk in Pinas.
(1-b) New-Filipino-money wants the higher-return/higher-risk of Pinas, BUT there is very little New-Filipino-money.
(II) Overseas-investor-money likes Pinas higher-return/higher-risk and they want to invest a small portion of their money in Pinas (small-by-foreign-standards, huge by Philippine standards); BUT there are roadblocks to more overseas “small-money-FDI” from entering Pinas.
“It’s that simple!” :-)
it is not only hard for foreign and overseas filipino investsors, it is also hard for ordinary filipinos to start a business.
those roadblocks must be bulldozed already.
UP n’ grad:
The financial ratios are reflections of an antiquated investment regime – bolstered by jurassic mindsets.
G William Domhoff wrote
more at http://sociology.ucsc.edu/whorulesamerica/theory/four_networks.html
Michael Mann provides a more comprehensive model more modern than C Mills Wright.
Elites may appear to function a a permanent fixture. But, that is an illussion. Elites come and go as the primacy of any of the 4 networks comes to play.
300 years ago in the Philippines, the elite was made of up of the ideological and military networks – the Padre Damasos and the Spanish Governor General.
With the entry of the American colonial period, the elite shifted to the Political network.
The post colonial period ushered in the ascendancy of the economic and political network.
With martial law, the political and military network took primacy.
Today, the the Philppines current power structure is ruled by the economic and political network.
BongV,
Well, the political elite wants to pass a law opening up the economy much more…perhaps to the detriment of the ecomic elite.
How do you read that?
RC:
That’s a struggle between the political network vs the economic network.
Elites are only elites when people that make up the organizations that make up each network allow them to – otherwise “elites” go like Mario Antoinette or the Romanovs.
Elites are overrated – thus the push to brainwash people about “elites” – that people have no power to make choices on their own and based on those choices bring about change – it is a myth as far as i am concerned. It is a myth being purveyed to keep people complacent and apathetic.
There is also the danger of equivocation, as if the elite is a homogenous body that dictates to the entire social spectrum. Each elite is only effective within its own network. GMA, JdV may be the “elite” in political network, but Lucio Tan/Jaime Zoibel de Ayala/Henry Sy are the “elite” in the economic network. At the moment GMA is courting the “elite” of the military network. Meanwhile the “elite” of the ideological networks – the Caliban, the Iglesia ni Cristo, and the Born Agains, the CPP/NPA/National Democrats/Akbayan, the Social Democrats/Fr Intengan aren’t exactly dominant right now.
So, reducing the equation to a homogenous one size fits all “elite” is not accurate – and I disagree – it ain’t that simple.
BongV,
No, it ain’t ever that simple, is it? :-)
I agree with your basic argument — there are different elites and that the balance of power varies over time.
But I wonder if the CHANGE within the few elite groups/types (political, economic,…) is all that fluid. I wonder if there is a decent study of the mobility within the Philippines’ socio-economic classes. How often — at what percentage/at what rate — do individuals/families migrate from one class to another? How dynamic is the change?
It depends. The “change” needs to be defined more specifically.
A. Economic elites transitioning to become the political elite
B. Military elites transitioning to become the economic elite
C. Political elites transitioning to become the economic elite
D. “Elite” status in name only – formerly elite, but assets wise, financially belonging to the upper middle class.
But this enough I know, those who have the foresight and the ability to see trends are able to position themselves early and ride the wave.
BongV,
Sorry. I wasn’t clear.
I specifically meant the mobility from one economic class to another. (I said socio-economic)
——–
Anybody know of any reliable studies?
RC –
Here’s a sample study on intergenerational economic mobility
Here’s another study –
A Comparative Survey of
DEMOCRACY, GOVERNANCE AND DEVELOPMENT
Working Paper Series: No. 21
Getting Ahead in Rural China:
Elite Mobility and Earnings Inequality in Chinese Villages
http://www.asianbarometer.org/newenglish/publications/workingpapers/no.21.pdf
***
Summary of findings:
All individual-level and village-level conditions being equal, factors that affect an individual to be a village cadre are male, advanced schooling, and party member. The village electoral institution has a significant effect on elite mobility. For example other things being equal, a party member would have relative less chance to be a village cadre in a democratic village.
The more industrialized or commercialized one village is, the more likely for its villagers to enter business career, holding other conditions being equal. The effects of education on one’s entering business career are not significant if controlling for individual and village-level contextual factors.
There exist very different mechanisms for one to be elected as village director between democratic and undemocratic villages. In democratic villages, party membership is the sole factor to associate one being a village director. In undemocratic villages, in addition to party membership, all other individual characteristics (gender, age, and education) have effects on one’s chance to be a village director. This difference deserves a closer examination and careful explanation.
In a democratic village, villagers are allowed to elect competent candidates they trust. The characteristics of being capable and being trusted may not correlated with one’s education, age, or gender. In today’s Chinese democratic villages, township party officials still need to recruit capable villagers into the party. For a non-party member who was elected as village director, he/she was usually invited and recruited by township party leaders before or after the election. This is a responsive way of local governance in contemporary rural China.
As to income determination, the effect of social capital at individual level, which was not examined in previous literature, is significantly positive. There is no significant effect of occupations (being a village cadre or a businessperson relative to a farmer) on earnings, controlling for education and other variables. The village-level characteristics that affect one’s household income are related to the village’s economic development and structure. Holding all conditions equal, households in agriculture-dominated villages receive relatively less income than nonagricultural villages
*****
As to mobility within the Philippines, am not sure if social scientists have done any studies – I guess they are too preoccupied with being doormats of the Caliban.
Jeez, Bong, you impressed me (“wow, BongV retrieved applicable info so quickly. This guy is goood.”)
The I found out that: “As to mobility within the Philippines, am not sure if social scientists have done any studies.” Sigh.
I’d love to see hard data. I have a inkling that there isn’t much mobility…that elites have — for the most part — remained as elites. But I’m not sure…..
RC:
sorry to burst your bubble – am a prick ya know :lol:
Anyways, the implication is mobility varies from culture to culture.
We have so-called “old rich” – money which was inherited from the generation that actually worked to make the fortune.
And we have the noveau-riche – “refers to a person who has acquired considerable wealth within his or her generation.[1] This term is generally to emphasize that the individual was previously part of a lower socioeconomic rank, and that such wealth has provided the means for the acquisition of goods or luxuries that were previously unobtainable. The term can also be used in a derogatory fashion, for the purposes of social class distinction, to describe persons with newfound wealth as lacking the experience or finesse to use wealth in the same manner as old money—persons from families who have been wealthy for multiple generations.” (source: Wikipedia)
***
Here’s another study – http://www.princeton.edu/~jbg/documents/england_sm.pdf – which seems to be more fitted to the Philippine temperament
RC – here’s your “hard” data
http://books.google.com/books?id=w7DZxNGffz8C&lpg=PA28&ots=H-VqlsGQhn&dq=philippine%20economic%20mobility%20elite&pg=PA30
BongV,
Regarding overrated “elites”, of which you cite military, economic, etc. There are political and social elites.
But if you take the military elite, and one of them hits you upside the head with a baton, all the personal responsibility in the world will not allow you to shout “Down with the Junta”. I think it is rather the same in economic terms. If you have no money, you can’t buy the paint to make a poster. And if the political and economic are in cahoots, you can go cast your vote, but will be overwhelmed by the swamp of purchased votes. So individual responsibility is overstated. It has to be individual, within a power bloc, methinks.
Joe
Joe:
As previously mentioned – the “elite” and the power structure made up of people exercising personal responsibility are part of a network.
Your military may have a baton – but you have other options as well – if it is an illegal military occupation – have the balls to wage asymmetric warfare – it was put to good use in Vietnam by Ho Chi Minh.
BongV,
Okay, I buy that. As a part of a network, an individual can exercise responsibility. And a candidate can, without buying votes, appeal to that network if his platform is structured properly. I’m thinking of ag or fishing cooperatives, and the number of votes represented in those groups. But the networks have to do their job of enrolling the voters. My, what a force . . .
Ho Chi Minh wielded a tough “anti-baton”, indeed. Neither napalm nor B-52 carpet bombing nor agent orange nor thousands of green hueys, thousands of artillery pieces and 600,000 soldiers could defeat well organized, righteousness indignity, in black pajamas. Balls, indeed.
Joe
Kudos to Abe. This thread is rated 5-star.
Agreed. A nice trend has been taking shape lately. Quality soaring; tirades decreasing (and I can only compare with a tiny portion of the past which I know). I like FV.
RC:
Some think the quality of discussion in FV has degraded because:
they are no longer in the spotlight
because their views were challenged
because commenters have no perfect enlitscheze
because other bloggers do not have the same profession as the people they esteem
because the “old school” blogger is is better than the in-your-face straightshooting Gen-X new blogger
Feeling….. :lol:
The original Pacman, the rent-seeking, carpet-bagging Eduardo Cojuangco who swindled the coconut farmers to buy-out San Miguel Corporation is living like a king in Australia.
The mindset and propaganda of Benigno (who also lives in Australia) seems to be tailored-fit for Danding Cojuangco’s agenda.
Danding Cojuangos is but one of many carpetbaggers reared by the Philippines. There’s more of that where it comes from – it is in your backyard.
great scholarly post, abe. kudos. however, how do you account for the fact that most, if not all, the chinese emigres (or their ancestors) who composed the present-day “chinese economic elites”, and who you say own 60% of market capitalization, came in not as “taipans”, moguls, barons or cash-loaded capitalists bringing in their own wealth, but were, for the most part, penniless, bedraggled, enclave-dwellers and segregated and shut out from positions of power? this, i believe, is the core of benigno’s argument – the failure of the original natives and their progeny to compete successfully with those transplants, whether “integrated” or “sojourners”. why were we not able to produce true “filipino economic elites” despite our obvious advantages, e.g., nationalism, protectionism, patrimonial exclusivism, and exclusive access to seats of power?
maybe there is something to benigno’s thesis on our innate reliance on someone else, e.g., the elites, big government, to make us prosperous and “happy”, and relegating our own personal responsibility and self-reliance to the back burner, if we have any at all.
exactly.
the fil-chinese elites did not start off as “elites”.
the “elite” will have this to say – “i sweat my butt to get to where i am, and they expect me to share the bounty with them (they did not take the risks that i did, they did not make the sacrifices that i made) – they have gotta be kidding me. they can kiss my a$z – it’s on my terms, my way or the highway. if they wanna have the same privileges i have, they will have to take the same path i took”
that’s right, bongv. the story is repeated all over the world over and over again. the europeans who came to north america, canada, australia, new zealand, and south africa; the chinese who came to singapore and malaysia, the jews that came to what had been palestine. there has to be connection, a practical explanation sans the usual excuses and cop-outs, e.g., no sense of nationhood, lack of unity, long period of colonization, official corruption, apathy, lack of political maturity, etc., etc.
Hold on a minute BongV, please clarify, are you saying that we should all – Filipinos from Batanes to Jolo – emulate, for example, the Gokongwei model?
Tranquil:
use a model that works – why keep on with a model that is unproductive or does not help you meet your goals.
have you come across Stephen Covey’s – 7 Habits of Highly Successful People? here’s an abstract from the Wiki:
Richard St John also has his “8 TO BECOME GREAT” – or the eight success principles, he writes in his blog:
There’s also the
“no pain, no gain.”
“no guts no glory”
“who dares, wins”
can’t have the cake and eat it too buddy
if Bill gates waited till government made the environment favorable to him – he wouldn’t be where he is today.
his personal ethic actually made government work against him – because he was just plain brilliant :lol:
Bongv,
Please do not digress into the individual because Abe’s topic takes on socio-economic analysis on a broader national perspective. The whole, not the component element.
You said this :
So I was asking if you were actually suggesting that on a national scale, we also take on this success formula.
Surely it is next to impossible (economic reality would dictate) that we can have 10 or 20 million Lucio Tan’s or Gokongwei’s in the country. The socio-economic environment or conditions which allowed the emergence of this Chinese tycoons is so disparate or inequitable such that it could have only allowed maybe a dozen of their kind depending on how cunning one could get in cornering those behest loans for start up capital for example.
Not all ethnic Chinese immigrants themselves became success stories on the scale of a Henry Sy even if they doggedly follow the same work ethic and discipline, which belies the generic if-I-can-do-it-you-can-do-it-too contention.
tranquii:
here’s my take – if you want collective success, you need collective efforts to remove unproductive behavior – otherwise you will have the same old crap.
cappicce?
let me ask you – what is your formula?
whine and wait? you have gotta be kidding me :lol:
ah BongV, you have not been forthright in you answer to my question, keep on evading it when it could have been answerable by a simple yes or no. So good day BongV, am done with you. I don’t want to ruin this excellent thread from Abe.
i have already stated the answer – use a model that works – gokongwei, tan, your neighborhood success..
Case in point. A family migrated from Amoy to Davao. The head of the household did not have white collar skills. He had some capital which paled in comparison to the entrenched Malay pinoys. I literally saw the guys bote dyary garapa newspaper business. Pinoys laughed at the migrant chinese – kesyo beho, kesyo di marunong mag-English, kesyo walang pinag-aralan, all the derogatory racism that Pinoys can muster. Years down the line, he owned a junk shop, which became an auto parts shop. All the time he sent his children to the best school in town his money can afford. His children helped out in the business, and were entepreneurial themselves. When his kids graduated, he expaned the auto parts operation, and he now had a few more branches – manned and ran by his kids.
During this time, a similar Pinoy family, with a white collar head of household, a type that was derogatory of the migrant – kesyo magbobote, blue collar, mabaho. Well, years down the line – he still has the same job, lives in the same house, drives the same car and his assets have not increased.
Both parties had the same government, had the same policy environment, and yet, the migrant Chinese thrived – inspite of government.
It’s not just about the cards one is dealt with, but how one plays the cards. Often times, you play your hand not to win, but to minimize your losses. And of course, when the cards are in your favor, strike with utmost efficiency, and win!
in addition to excessive reliance on government and the “elites” we also tend to pin our hopes on divine help, fortune tellers, horoscopes, feng shui, and native superstitions. so when we don’t achieve wealth, we blame God, the government, the “haves”, bad luck, but seldom ourselves, if ever.
Bloggers Pundits have a hard time understanding the economic structures of Filipino society. The Philippines has been ruled
by Datus. Datuism is still in the mentality of Filipinos. Then, came
the Spanish Colonizers. We were ruled then by: the Church, the Oligarchs, and the Spanish Military Occupiers.
We still have the same structure today. Religion is very important in
Filipino lives. So, nuns and priests are active in politics. Iglesia Ni Cristo members are told who to vote for. The
Oligarchs are mostly in the Senate and Congress. One is in Malacanang Palace. The Military and the Police took the place of the Spanish Guardia Civil. Look at their behaviors during the Ted Failon’s case. They are also helping a would be Dictator stay in power.
The Filipino Chinese were economic refugees from China. Like our present day OFWs.
Good Leadership, Innovativeness and Entrepreneurship are what make a country great.
If you just have a common product to sell. You can sell it dime
a dozen. If you have new products or new ideas to sell. You put your
own pricing. That is the reason Bill Gates became the richest man on Earth. He revolutionized the Information Technology field. Not just sell toothpicks, combs, etc. Henry Ford of Dearborn, Michigan, U.S.A., was a soybean farmer. Yet, he revolutionized industrial manufacturing methods.
Do we have people like these in our country? Can the young Filipinos
stand up to this calling?
“Do we have people like these in our country? Can the young Filipinos stand up to this calling?”
Hmmm.
It doesn’t take much imagination really for the industrialists. Let’s just put it this way: the industry captains and leaders are serving what the people want based on very limited disposable income:
i.e. SM and Robinsons’ for Pinoys’ addiction to malling, Smart and Globe for for texting, San Miguel and Tanduay for drinking, Boy Abunda and Kris Aquino for Wowwowee entertainment, etc.
And of course innovative Mang Andok for gourmet ‘lechon manok.’ :)
Oh my God, you miss the point…
maybe phil does actually get it, and his answer for the time being is: no.
i hope i am wrong.
It seems, Mr. Abe, that your whole opinion on the matter comes down to the above snippet; which is why a comment to this piece of yours becomes quite simple:
That the Philippines:
:D Job creation is NOT a business objective. So we shouldn’t go around waving this flag at investors.
:D If capital is not invested in the Philippines, it means that there is something about the Philippines that is not attractive to capital. It’s nothing personal.
I doubt if Mr. Abe here has had the experience of going out for the night to pick up chicks. Because if he did, he’d probably appreciate that you don’t get the good ones by using lines like “please hang out with me, it’s for a good cause”, or “please have a drink with me, ‘coz I’m lonely”. :D
It’s simple, really™ — though not for the small-minded.
BenignO,
Job creation is a government objective, which defines the rules by which investment is encouraged or suppressed.
As for pick-up lines that DO work, what would you suggest?
Joe
That’s not rocket science, or is it in the Philippines . :lol:
Political istability. Who would invest in a nation controled or
to be controled by would be Dictators? Only the Drug Cartels
do…
The decision to invest is hinged on the bottom line – and whether the investment policies allow an investor to meet the bottom line investors are looking for.
An unclassified OECD study by Stephen Thomsen on SOUTHEAST ASIA : THE ROLE OF FOREIGN DIRECT INVESTMENT POLICIES IN DEVELOPMENT is a good read – a MUST-READ, even.
Excerpts:
Pinoys can talk till the cows home, all about political power – the investors will just take their money elsewhere :lol:
Can’t have the cake and eat it too, baabbbyyy :)
Joe, see the following excerpt below which is trademark Margallo:
Note the words I set in boldface.
Abe seems to be implying that business’s decisions to invest are based on some kind of social obligation metric underpinned by some kind of moral responsibility expected of our business captains.
I have two words that you could put together into a phrase that describes that kind of attiutde:
(1) “Loser”
(2) “mentality”
Would you invest your hard-earned cash in a company whose decisions to allocate capital are based on a preference towards sorry-arse appeals-to-altruism?
Government’s role is to regulate and therefore counter-balance shareholder greed. Put on your shareholder’s hat, and you are motivated by cold returns on your investment. Put on a regulatory hat, and you are motivated ideally by a warm social agenda.
If Abe was describing Government’s role in the chronic failure-to-launch syndrome that grips the Philippines, then I can agree with that to some extent. But the above excerpt which he quoted (presumably to emphasise his point), says something different.
As to your last question, pick-up lines like any tool applied to mating, offers the best results when wielded in a way that broadcasts heritable or acquired fitness.
So following that principle, your pick-up line should reveal some underlying wit or strength of character in you that you hope will come across as sexually attractive to your prospect.
- ;)
Benign0,
Right, a corporation’s only true commitment is to its shareholders, the exception being those companies deemed to have a businesses that takes them into the public welfare (utility, television station, bank). I agree entirely with your statement.
And I suppose I should scrap my “leering and drooling” approach . . .
Joe
Failure to launch then there is always the blue pill. The failure to launch would mean you have everything necessary for launch to proceed.
Can a mutant five year old launch even with the blue pill?
I think not.
Arroyo’s admin is 5 years old – the Republic of the Philippines, is not five years old.
Singapore and the Philippines were both under colonial occupation. Both had dictators.
Counting from 1946, the modern Philippines is a 63 year old behaving like a 5 year old?
Singapore became independent of the Malaya Federation in 1965, the modern day Singapore is a 44 year old behaving like a 63 year old?
Giving a blue pill to a r*tard will just have a ‘tard with a boner – does not make it less a ‘tard :lol:
No serious policy maker should listen to your lethargic arrogance Benigno.
DJB was so right about your coconut racism.
tranquil,
I have discovered that the intensity of Benign0′s arrogance is inversely related to the degree of my agreement with his point. When I fully agree with his point, which is occasionally not so simple to find, yet fun to look for, amongst the purposeful meanderings of his quirky but sharp mind, he is undoubtedly profound. When I fully disagree, he is without question the most arrogant and irritating man on the planet.
Therefore, I conclude the relevant controlling variable is me, not him . . .
So I smile and truck off to some other blog and let Benign0 be different from most . . . a really, truly, fine quality.
Joe
Sheesh… prefer the arrogance of ignorance eh :lol:
wow this blogpost and the comments is really really interesting and an excellent read. Ang gagaling Kudos Abe and and the rest of the commenters.
Everyone’s got good points here. Seems that the sum of all this discussion points to those with money not investing or allowing the money to go to those without or with less. But those with less may also not be doing enough to address this inequality properly. This has always happened throughout history anyway. It’ll never change as long as people remain selfish.
I read up somewhere about collective effort being called for. For me, everything starts with the individual – I’ll add to Bongv’s listings of 7 habits and other practical slogans this one: Do It Yourself (DIY). Individual initiative is still where everything starts, and then only when someone else agrees to help his initiative, can collective effort start. I think this can explain the success of Chinese businessmen here. In American history, Asian immigrants would not be hired by American companies for racist reasons, so they set up their own businesses. That’s the “American” value of DIY at work.
I spotted counterculture up there too – I like that word. I think we need more of it. More to challenge the kind of culture that makes our country’s people do bad and not go for the good.
my confusion with this article is the notion of low investment (% of GDP). from a basic macro accounting perspective, CurrentAccount=Savings (S) -Investment (I).
since the CA is positive (as we are net exporters), then S must be bigger than I. but the article says savings as %of GDP is only 19%, this means that it must be that Investment must be smaller still… What i’m saying is, for a net exporter, the only way for I to be high is for Savings to be high…
savings rates for neighboring countries are much higher than RPs. i wonder why the WB economist failed to acknowledge that accounting reality.
in all the above discussions, the big elephant in the room is the perception of unstable political climate in the philippines that scares away potential investors and some present investors on the ground. incessant world-wide publicity of alleged government corruption, scandals, tainted elections, and soiled reputation of many government institutions, e.g., the legislature, courts, the police, the military, among others, create a picture of a no-man’s land vis a vis foreign investment. protest actions and edsa marches at a drop of a hat, violent rebellion and terrorists’ atrocities in the south and elsewhere, kidnappings, beheadings, murders for hire and other violent crimes, unending claims of government’s illegitimacy, surely don’t help.
for a would-be investor, it seems the great strategy is to make as much money as possible while the making is good, then take it home quickly and not look back.
meanwhile, the enemies of the state who are largely responsible for creating the unstable atmosphere are laughing, celebrating and salivating for an opportunity for a possible power grab.
Ben,
You are exactly right. I read yesterday that the Government is eliminating a trading tax on the PSE to try to encourage trading. Futile. What would encourage trading is a stable political and economic environment focused on growth. My money is in the US because I don’t have confidence about what will happen in 2010.
Joe
joe, it will be very hard, if not impossible, to have political stability until and unless we do something with the free-for-all, plurality-dictated, manner of electing presidents. the losing majority will always be dissatisfied with a minority incumbent no matter what the latter does. a coming together for the sake of the country, after the votes are counted, is always a pipe dream.
Ben,
Yes, so, no matter what, as long as the parties are based on personality instead of principle, and most feel robbed after the election, it is hard to find constructive common ground. Makes sense.
Joe
Case in point. A family migrated from Amoy to Davao. The head of the household did not have white collar skills. He had some capital which paled in comparison to the entrenched Malay pinoys. I literally saw the guys bote dyary garapa newspaper business. Pinoys laughed at the migrant chinese – kesyo beho, kesyo di marunong mag-English, kesyo walang pinag-aralan, all the derogatory racism that Pinoys can muster. Years down the line, he owned a junk shop, which became an auto parts shop. All the time he sent his children to the best school in town his money can afford. His children helped out in the business, and were entepreneurial themselves. When his kids graduated, he expaned the auto parts operation, and he now had a few more branches – manned and ran by his kids.
During this time, a similar Pinoy family, with a white collar head of household, a type that was derogatory of the migrant – kesyo magbobote, blue collar, mabaho. Well, years down the line – he still has the same job, lives in the same house, drives the same car and his assets have not increased.
Both parties had the same government, had the same policy environment, and yet, the migrant Chinese thrived – inspite of government.
It’s not just about the cards one is dealt with, but how one plays the cards. Often times, you play your hand not to win, but to minimize your losses. And of course, when the cards are in your favor, strike with utmost efficiency, and win!
The abstract of the study mentions:
What is Elite capture?
*
BV Comments:
The capital-intensive LOCAL private sector does not find it convenient to raise investment at the economy’s pace. HOWEVER, the FOREIGN private sector may have an angle that the LOCAL private sector does not provide. As the local private sector is able to capture the local market and exclude FOREIGN participation, prices can be changed at will without improviing service, and without fear of competition. The local private sectors’ lack of investment implies that local customers are not getting the best service available and have to put up with mediocre services. It is not surprising therefore that “growth” is exhibited despite minimal investments without reducing the disposable income disparity.
LOCAL/Domestic investments are not enough and need to be augmented by FOREIGN DIRECT INVESTMENTS (FDI). Given the abundance and competition of ecozones in ASEAN, China, Brazil, India attracting FDI stills boils down to the FDI policy environment. Restrictions on equity and real property ownership are seen by foreign investors as rent-capturing regulations which benefit only the local elites while leaving scraps to the rest of the population. These regulations are seen as a disincentive. This is supported by the fact that the Philippines has the lowest rates of FDI in the ASEAN.
it appears, however, that abe has decided not to participate in the forum after posting his article. it kind of reminds me of columnists in the mainstream newspapers who seldom submit themselves to questioning, rebuttals, interpellations, or requests for clarifications of their pov’s, from the readers. it’s like saying “i dish it out but i don’t have to take it”. then again, it’s abe’s right to clam up if that’s what he wants, i think.
i withdraw this comment. i spoke too soon. sorry.
O well.
abe evidently draws heavily from his socialist orientation and persuasion in writing this article – sounding off the obamesque message to the haves and the elite to “spread the wealth around” – Bencard
Bencard, the following excerpts are not from Bayan Muna or AKBAYAN manifestos but from the World Bank Policy Research Working Paper by Bocchi:
__________
For future competitiveness, it is essential to reverse the present under-investment.
Indeed, it is difficult to see how, at present levels of investment, a sufficiently robust growth can be sustained in the longer term, which is essential to deal with the country’s longer term development challenges (i.e., generate more jobs and reduce poverty). The country’s growth potential is untapped because of today’s inadequate investment. To reach speedier and more inclusive growth and sustain it in the long term, the country needs to address its lack of competitiveness.
To sustain growth the economy needs a phased competitive diversification … What is needed is a market-driven expansion of non-traditional products (or of new and more sophisticated products). Given the strength of rent seeking interests, moving too abruptly would entail political risks; hence, the reform of ologopolistic practices in the traditional sectors of the economy can occur only gradually. To mitigate and postpone confrontation with rent-seekers, the Government should follow a three-pronged strategy: (i) start by getting the economic zones right – while pursuing a competitive real effective exchange rate – in order to promote new exportables; (ii) increase revenues, to finance the needed boost in infrastructure and education spending; and (iii) implement gradual reforms to tackle the rent-seeking conglomerate economy.
… and concrete measures to open oligopolistic markets. Over time, as a result of this phased approach, the expanding competitive sectors should shrink the relative size of the rent-driven economy, and – in association with the businesses that are bearing the costs of rent-seeking – build a pro-reform political constituency, without creating conspicuous losers.
At that point, the Government should move to reduce élite-capture. Greater competition in ports and shipping, civil air transport, wholesale electricity and cement production markets would substantially reduce costs, spur investments, and create jobs. Reducing protection for agricultural products, particularly rice, will benefit the food processing and livestock industries. Political reforms are needed to trigger and sustain these economic gains.
The economy needs to reach an equilibrium that is more conducive to sustainable growth. In conclusion, moving to a “high-capital-stock” equilibrium – attainable through fewer élite-capturing regulations, more public-private risk-sharing, and greater government revenues – is needed to sustain speedier and more inclusive growth, and to reduce unemployment and poverty more rapidly.
x x x
Why a low productivity of capital? In the traditional sectors of the economy, several rent seeking corporate conglomerates, controlled by the local élite, use their political connections to: a) hinder tax collection, hence hampering public capital spending (which is a necessary condition for private investment: for example, the availability of public infrastructure is essential to stimulate the private sector’s willingness to invest); and b) limit economic entry, drive potential investors out, discourage smaller firms to grow bigger, produce expensive inputs, and enjoy market power and oligopolistic rents. As a result, marginal product of capital is low because of: i) insufficient public investment; and ii) a high cost of inputs, due to élite capture.
Oligopolies further reduce the investment appetite. Operating as monopolies and oligopolies, the corporate conglomerates find convenient to restrict production – and investment – below the competitive level. Also, their willingness to invest is inhibited by their concentrated ownership structure, and their uncertainties about the stability and duration of government favoritism.
x x x
The domestic private sector makes enough money within the status quo, and is reluctant to invest. In the domestic private sector, investment is low because of the combined effect of two factors. On the one hand, the capital-intensive sectors – dominated by well-protected monopolistic and oligopolistic insiders, and facing a low MPK – restrict production below the competitive level. On the other hand, in the non-capital-intensive sectors businesses are very profitable – and fast-growing – with relatively little investment efforts.
Foreign investors “stay out” and non-élite businesses “stay small and informal”. What is described above results in barriers to the entry of potential investors into the economy. For foreign investors – discouraged by a net of privileges and protections (e.g., in the banking sector and in the formal labor market), by policy-driven competitiveness shortcomings (i.e., the effects of agricultural and industrial protection) and by the lack of resources for education and training – the incentives are to stay out. For the small firms, not belonging to the corporate élite, the incentives are to stay small and not to become formal.
x x x
The economy needs to move from its “low-capital-stock” equilibrium to a higher one.
The “low-capital-stock” equilibrium is good for the well-protected conglomerates, but is it good for the country? Undeniably, the status quo is delivering economic growth, but it is difficult to see how – in the longer term – a sufficiently robust growth can be sustained at present levels of investment. In other words, today’s inadequate investment is curtailing a speedier and more inclusive economic growth, which is essential to deal with the country’s longer term development challenges (i.e., generate more jobs and reduce poverty). In order to achieve such growth, the Philippines need to reach a “high-capital-stock” steady state.
x x x
The presence of oligopolies in the traditional sectors of the economy hampers the country’s competitiveness. Agricultural protection creates rents, raises food prices and – by impacting wages – undermines labor competitiveness. Port and airline oligopolies make trade costly and tourism less attractive. Most banks, given their corporate ownership, lend within their conglomerate, limiting access to outsiders or unconnected companies, which face a declining availability of credit. In the electricity and cement sectors, oligopolistic rents undermine cost competitiveness across a broad range of fixed investments, especially in infrastructure. As a result, international foreign asset holdings are below regional benchmarks, although at a level comparable with those of economies with similar GDP per capita.
__________
btw, Bencard, I am not a socialist.
Bottom line:
1. Domestic Investments are not enough. To increase investments, given that domestic investors are willing to fork out capital AND the government unable to provide grants – therefore, the remaining source of capital to fuel investments will come from external sources – FDI.
2. There is a need to increase FDI FDI in the Philippines and other economies with similar GDP per capita are seen as economies where the investment policy regime is found unattractive to foreign investors as pointed out in the OECD study on FDIs in Asia.
3. The constitutional provisions on foreign equity and land ownership are a BIG disincentive to FDI. The Philippine constitution prohibits full foreign ownership of equity and land ownership. Joint ventures are not enough and are found wanting. Same as divestiture after leases expire.
4. Changing the FDI policy climate to be globally competitive requires charter change. No ifs, no buts. Shape up or ship out. The numbers are doing the talking – the Philippines receives CRUMBS of FDI.
5. Charter change requires a referendum. – Still boils down to the aggregated individual opinion – either the numbers are there or not.
BongV,
During the EDSA Dos upheaval, BSP figures have indicated even higher FDIs but Filipino overseas investment also increased by 335.3%.
FDI and foreign aids should only be treated as suppletory to vigorous domestic investments.
Abe:
The BSP reports higher FDI compared to its historical figures – a parochial inbred incestuous benchmark.
You can have a 500% increase in FDI if you want, but given the universe of FDIs into ASEAN – benchmarking with other countries shows the Philippines still gets CRUMBS.
Wake up. You can talk about vigorous domestic investments till the cows come home. The fact of the matter is your local elites are not buying your pitch and prefer to cook you in your own lard.
Open up the market to foreign competition – and watch your local elite shape, or ship out. Why do you tolerate those idiots?
o.k., abe, you could have fooled me. how about left-of-center liberal? btw, the way i see it, the WB is predominantly staffed by european liberals who believe in legislated or controlled economies in lieu of natural interactions of market forces. over regulation and micromanagement of businesses, including curtailment of “rent-capturing” regulations, will ultimately lead to socialized economy where the deadwood is allowed to plod along, propped up artificially by “altruistic” rules, and the strong weakened by demand to bear the brunt of maintaining “high-capital-stock equilibrium.
Bencard, I’m not sure if you are seeing things correctly, but my recent post on WB here in FV runs thus:
Williamson and the Washington Consensus (source: Wikipedia):
I think the Chinese is past the assimilation stage. Koreans at first limited their businesses for themselves, like their convenience stores, having their own tour guides ad hotels, now they are slowly blending in.
Our low cost of living notwithstanding the second costliest power rates (in Asia) is still a turn on to them.
For me their largest contribution is ship building, because it showed that shipbuilding can be done by Filipinos.
Rather than rely on refurbished ships we must build our own ships, if its a matter of resources and cost of doing business then all they have to do is to go over that hurdle.
Lumalayo na ako, but I still have to say this, unless we have our own ships that are new, even if we kick Sulpicio out of business, nothing will happen.
Another thing is we are an archipelago, we should have our own ship builders, historically we have been building galleons for the Spaniards, we can do this again. – Karl
I think there is such a thing as “corporate citizenship” – Joe America
Job creation is NOT a business objective. So we shouldn’t go around waving this flag at investors.
xxx
Would you invest your hard-earned cash in a company whose decisions to allocate capital are based on a preference towards sorry-arse appeals-to-altruism? – benignO
Karl, Joe, and benignO, the following is an on-line exchange between a UP-based community leader, a tsinay activist posting from New Zealand and myself that took place about a decade ago. I hope it would shed some light on where I’m coming from:
__________
DYANDI: What are some of the ways civil society could challenge the economic elites or the business class to take a more pro-active role in building Civil Society?
ABE: Well, one is by showing the business community that doing so will make good business sense. This requires elaboration, of course.
Let’s cite the past electoral exercise as one basis for discussion and in turn ask this question: How much did business spend, illegal or otherwise, to support its favored politicians in the elections?
Businessman and Manila congressman Mark Jimenez (he lost his congressional seat when he was extradited and convicted by a Florida court for illegal campaign contribution to Bill Clinton and other Democrats) could probably give us some estimation. But even without his help, it would not be an exaggeration to say that in Manila, for example, many businessmen have contributed to the campaign coffers of both Lito Atienza and Fred Lim who have contested the same mayoral position in the most recently held elections. This scheme has certainly been duplicated in many parts of the country involving the lowest public offices up for grab in the elections.
If the bids get higher every dirty elections, won’t it make good business sense to expend or set aside some funds now, by donations or in some other forms, to organizations (or to foundations the business community could itself set up and administer) that would be investigating and advancing the cause of a truly meaningful and effective electoral reforms and making it possible for those reforms to take root?
Business, arguably, thrives better in a general state of stability. Remember that to maintain stability, our ancient village communities, because of their growth spurred by trade, created a need for a stronger external force, we now call the State that could regulate their interrelations and more complex economic web. The State, on the other hand, would rely on its agencies and the civil society—those mediating institutions like civic and church organizations and the schools—to build not just physical, legal and other infrastructures but more importantly soulcraft and statecraft in the citizens, or the habit of patriotism, a good moral sense, and pride. Isn’t this the reason why corporate business divides the profits it generates not only among the stockholders and investors, through earnings distribution, and the enterprise itself, for its continued operations but also the State, in the form of taxes, for the State’s maintenance and expenditures for its various undertakings?
A bankrupt and weakened State, when shortchanged of the taxes owed to it or otherwise captured or corrupted by business and the private sector, could be incapacitated to extend the protections and services it has been established to provide and to nurture through formative education those public minds which are vital in a stable and democratic society. Civic virtue and communal pursuits are antidotes to criminality, graft and corruption, urban riots, and armed struggle in the countryside. When the State is unstable and weak and the society is impoverished, among the first to suffer most is business. One may not need further proof for such anecdote. Because of chronic turmoil, the peso has continued to struggle against the dollar, and the government reports the country’s economic growth has remained woeful.
DYANDI: But is isn’t it too “risky” for businesspeople to be involved directly in the politics of the nation?
ABE: Well, the politics that takes place in board rooms is real politics, no more, no less.
For example, if a business enterprise ignores the health of its employees because it does not believe in the connection between employee health and productivity, such business decision would impact not only the business but also the larger community in which the employees abide. The same can be said of a company that places profit margins over product safety or environmental protection, returns to stockholders over product re-engineering or, on the other hand, a company that practices citizenship by setting aside a sizeable percentage of its profits to public undertakings and other civic and community projects with a view to building capabilities and communal values.
What would have happened if about three decades ago the Yuchengco group of companies took the risk of competing in the electronics and semi-conductor industry instead of, say, buying up just another rent-seeking enterprise, or the Lopez, Aboitiz and Lucio Tan conglomerates together ventured into shipbuilding? Such productive enterprises would have been too adventuristic but where fortunate and successful, won’t they have hastened economic growth and other value-added benefits, driving industrial development in the country and providing fuller employments, possibly greater distributive justice and material prerequisites for civic responsibilities, and other socio-economic advantages to a good portion of the citizenry? Obviously, in such and similar cases, the private sector no less than the public sector decides “who gets what, when and how,” which is how political scientist Harold Lasswell defines “politics.”
That’s involvement in politics, pure and simple.
Now, if the profit motive were permitted to coalesce with the advancement of the national pride, “businesspeople” who have done so should be deemed to have transcended themselves to obtain the esteemed stature of “businesscitizens.” Is it worth the risk?
TERRA: Tell us something about risk-taking and rent-seeking.
ABE: The pressure on the peso had built up after some importers started buying dollars ahead of their importing requirements while exporters held on to their dollars, all in the expectation that the peso would further weaken. In other words, businessmen have speculated that the peso would slide further as much as P60 to $1, forcing the BSP to intervene by offering to guarantee (through “forward” contract) the price of the dollar at P54.50 to $1.
This scenario is a typical rent-seeking activity. The government is between a rock and a hard place here. To defend the peso, the government is forced to use up its precious dollar reserves in order to comply with its guarantee. If it doesn’t intervene, this speculative activity becomes a self-fulfilling prophecy because with the businessmen dumping their peso in favor of the dollar, the supply of the peso increases, thereby decreasing the value of the peso as speculated. Either way, the poor taxpayer has to punch another hole or two on his already tightened belt.
On the hand one, this is a destructive, not productive, wealth creation or preservation. On the other, this is an opportunity for “businessmen” to resist the temptation for purely personal gains and, letting business motives and goals converge with civic values and responsibilities, become businesscitizens. This is nothing less than Confucianism that puts premium on the obligations of service and altruism over profit.
Open up the economy, if the Yuchengco, Lopez, Aboitiz and Lucio Tan conglomerates don’t want into shipbuilding, let someone else do the job insteady of relying on CSR/altruism, which seems quite naive. Market forces will do the job.
BongV,
During a budget hearing a couple of years ago, Senator Manny Villar once commented that banks would rather acquire Treasury bills and other sovereign debt instruments than lend to businessmen because aside from the rates being so attractive, the “investments are risk-free and protected from depreciation.”
Former Trade and Industry Secretary Cesar Purisima also once remarked: “If we can convince rich Filipinos to have faith in the economy and invest their money in the country then private domestic sources alone could finance a critical mass of projects that will be necessary to jumpstart and sustain the country’s economic development” (underscoring mine).
And as Bocchi reports in his paper, bank lendings are basically intra-conglomerate, shutting out “outsiders” or “unconnected” start-ups and small businessmen.
Two things are needed for RP’s economic takeoff: 1) not necessarily altruism but a “sense of country” on the part of the economic elites, and 2) vigorous in-country entrepreneurship .
Abe:
1) not necessarily altruism but a “sense of country” on the part of the economic elites,
and 2) vigorous in-country entrepreneurship .
we have been pinning our hopes on the economic elites and ever since we have had hell ran like hell by Pinoy elites – since 1946 courtesy of Manuel Quezon .
hell is hell whether its pinoy or foreign. scr*w the local elite – get the foreigners who can do the job. about time we have a glimpse of “heaven”.
Abe,
A third thing is needed. Political stability, for the confidence of known risk that it provides investors. Maybe that is in your 1). But it is specifically why I will not invest in Philippine stocks right now.
Joe
Joe, I did say in the foregoing quoted exchange that “Business, arguably, thrives better in a general state of stability.”
But I’m not worried about the “volcanic theory” materializing in the Philippines very soon. My own thesis is to the effect that the two EDSA uprisings have in fact stabilizing effects to the polity. A better seismic gauge of a potential great social upheaval I believe is when people like BongV because of pessimism and frustration start preaching revolution.
you had two EDSA “revolutions” – and the PI is still in deep sh*t
the oligarchs are back
corruption is at an all-time high
the Philippines is the laughing stock of the world
and you call that “polity”… you have gotta be kidding me
EDSA stabilized the return of the oligarchs and the kleptocrats. susmaryosep ano ba yan.
we have been pinning our misguided “hopes” on the economic elites and ever since we have had hell ran like hell by Pinoy elites – since 1946 courtesy of Manuel Quezon.
hell is hell whether its pinoy or foreign. scr*w the local elite – get the foreigners who can do the job. about time we have a glimpse of “heaven”.
let the market forces decide – open up the economy, bring in competition.
Haha. BongV, are you a card-bearing member of Statehood USA (or Aussie), Inc.?
Last I heard however (and Bencard can confirm this), in the US it’s the Obama (not the market) forces that have been at work lately. Isn’t the market paradigm under siege nowadays?
Obama proposes regulation in order to remove market aberrations – not to do away with the market.
NO, I am not a card-bearing member of Statehood USA. I am a Philippine passport carrying beach bum who wants Filipinos to have more choices of jobs and services than putting up with LOUSY jobs, goods and services under a policy environment crafted by the local elites.
The local elites are benefiting from an oligopolistic market due to rent-capture protectionist regulations. Lousy overpriced DSL services, lack of cable broadband, etc. I don’t mind paying premium rates as long as am getting the service. In the case of the local telcos – the DSL packages are not only overpriced, these are ridiculously lousy as well as the local telcos take their sweet time.
They are the only players in town – you have no one else to go to so you have to put up with the crap. Put a worthy competitor in play – and you’ll see those mofos shape up faster than your “persuasion” route. Money talks, BS walks.
yeah, abe, that’s why unemployment is close to double-digit now and property values are at all-time low and still falling. there are other disasters on the horizon, not the least of which is the trillions of dollars in national debt and counting.
Ben,
The genesis of which rests with Bush programs and policies. you will recall Mr. Obama came in during a complete free-fall collapse of the economy, and his initiatives at least gave the confidence needed to stop the crash. I DO agree with you that his social spending, at this time, against this background, is dangerous. I am solidly in the Powell camp, heh. Best to correct the economy, for that is in the best interest of all.
Joe
Joe, the following was Obama’s extemporaneous response during an interview on the campaign trail with MSNBC’s Rachel Maddow :
Right, Abe.
Obama is not against free markets, he is against concentration of risk in “to big to fail” financial companies. And he has the typical democratic leaning toward having the people taken care of by government and responsible corporations, which conflicts with republican free wheeling which caused the collapse. Middle ground is best, I think.
Joe
Very good thread.
On the matter, I hope many of you can help the efforts of Concepcion’s GoNegosyo. That’s an endeavor you can believe in.
Hope (burden) lies in the middle class:
- the elites (whether real or imagined) cannot be counted on.
- the masses do not have the resources.
- it is in the middle class… with that mix of earned-success, connection/exposure with both the poor and the rich, potential nationalism, and numbers.
That’s why I believe advocacies like GoNegosyo that empowers ordinary and wiling Pinoys to achieve is something worthwhile.
Monsoon, I think I understand what GoNegosyo is. I used to be a Junior Achievement consultant. You can check JA’s website here, if only for purposes of comparing notes.
Abe:
Obama can’t do much except put in a stimulus plan – he can make a sales pitch – but it’s the investor who makes the buy.
Fiat is buying Chrysler – do you have an anyone remotely buying out local telcos that offer lousy overpriced services?
Market based economics does not have anything to do with statehood Abe, you should know better than that. Socialist China is is a market driven socialist economy, am I now a card-carrying party member? .
In retrospect, the ZTE-NBN deal could be a script written by PLDT and Globe’s owners – who don’t want ZTE to enter the market – lutong makaw …
i do have the same misgivings re zte-nbn frustrated deal, bongv. in the philippines, anything goes, and the usually gullible ignorant folks are manipulated by conniving economic and political “elites”. it’s a predictable pattern.
Bencard,
I’m with you guys…in a way. Look at this angle –
I think that the ZTE deal could not go BOO (it was not BOT) because it would have allowed the new telco to make tons of money from the gov (guaranteed) contracts, while not having to make the landline and other investments the other telcos did. In effect, they would be paid to leapfrog technologies and to take the national lead for a minimum investment.
The duopoly probably fought it tooth and nail…and paid plenty to many.
If the DeV deal had gone through, Joe and Joey would have catapulted to one of the highest asset values in the country.
The battle was between the DeV’s et al vs the telcos et al. The DeV’s greased a lot of palms to get as far as they did. Joe wrote the letter to DOTC. All was in order, seemingly…..
But, money was paid to make sure the gov opted to dump BOT (and DeV) and go GOO (the money for Abalos and offered to Neri). As it turned out, though, the savings and overall deal for the government by going GOO was better than BOT.
When Joey and Joe got dumped, they hired some PR muscle and made their move via the media. Joe’s defeat in his biggest deal ever dealt him defeat forever. His Texas hold ‘em “all in”…failed.
Unfortunately, we would have been better off if the gov’s GOO ZTE deal had gone through. Right now there is no solution. We’re stuck in the mud.
——-
Lots of yak yak, lots of accusations. Zero progress.
What the ZTE lacked in local investments it made up for by providing concessional loans whereas local telcos observe no pay no play
The local telcos will gladly cut the service for delayed payments, but will not offer refunds or rebates for OVERPRICED LOUSY SERVICE. You have to thank the local elites for that. And keep on begging till the cows come home for the local telcos to shape up.
I’d rather have ZTE kick the living daylights out of the LOCAL LOUSY TELCOS OWNED AND OPERATED BY THE LOCAL ELITE.
And I’d like to see the Gov build their own (cheaper to run) backbone with cheap loans (China) and low-cost providers (ZTE) and avoid being captive to the duopoly.
that all make sense to me, reality check. btw, do you have any low-down or educated guess on the status of the national railway redevelopment project which is also supposed to be financed by china? i understand this is another monumental enterprise, of great national importance, which is threatened by “lots of yak yak, lots of accusations”.
Bencard,
Sorry, I’m an electronics/communications type of guy. Not much knowledge of the RR sector, technically. Of course, lots of yak yak, tho.
I remember that a UP (I think) group started making a public explanation of their complaints…and it turned out that they had looked up ther wrong company/info. Of course, lots of accusations.