(This long essay posted in Red’s Herring on August 11, 2005 had first appeared in the moribund Pinoy-rin.net. The updated version is now Chapter VI of the UST publication of BUILD or PERISH!
I am sharing the piece with FV basically to dispel certain speculations about my intentions in my recent post, comments and responses).
Where is the business class?
Filipinos are seemed conditioned into thinking that the government is both the problem and the solution, and the people deserve only the government they create. What seems to be excluded from this equation of blame is the immense and intricate involvement of the private sector (principally the economic elites or the “entrepreneurial or business class”) in the governance system. But former President Ramos speaking before the Makati Business Club on August 27, 2003, seemed to have clarified the slipshod cliché. Ramos cited the “unholy alliance” and “perverse symbiosis” between politicians and a few families, powerful, wealthy and “greedy rent-seeking,” to whom many of the former are beholden—which makes the unequal alliance and symbiosis doubly unholy and perverse—as the “mother of all our problems” throughout history. On the other hand, Romulo Neri, the Philippine government’s chief economist, has described (December 2003) the relationship as “booty capitalism” (a derision first coined by American political scientist Paul D. Hutchroft) practiced by a well-entrenched oligarchy that invests in politicians to curry policy favors and “capture economic power.” Neri certainly was apprehensive this oligarchy would again control the outcome of the May 2004 elections. If Filipino politicians and government bureaucrats are mere errand boys of the business class and the ordinary citizens are no more than unenlightened accomplices in the political process, shouldn’t the inquiry and criticism be centered more on the performance of the business class rather than the grandstanding politicians, the messianic mutineers or the mobocratic street marchers?
The competitiveness of a nation’s economy, for example, largely depends on the competitiveness of the businesses that operate within and export from the country. Therefore, if our business class are inept in the way they invest and innovate, or to make use of the technology developed elsewhere, could they remain blameless themselves by simply putting the blame—often through the mass media they control—upon the corrupt politicians, the bungling bureaucrats, and the ignorant masses?
Governments, of course, can destroy competitive advantage, or the dynamism of businesses within their national boundaries, due to inconsistent policies, whether self-inflicted or externally exerted. But it takes more than a “level playing field” to build and compete. It requires patriotism, national pride, and the will to develop in the first place.
The elites of strong republics
The ruling elites of the infant American republic readily responded to the call of Alexander Hamilton to lend their prestige and credit in the securitization of the Revolutionary war debt and then in aggressively risking into manufacturing ventures in the early phase of the American economy. The Japanese samurai who laid down the foundation for the industrial economy of Japan from scratch, drawing on their strong sense of social obligation, put the development of the nation ahead of short-term gains. Only recently during the Asian financial crisis, the South Koreans were said to have lined up for miles to give their jewelry toward the country’s dwindling foreign exchange reserves. The Americans, the Japanese, and the South Korean did what they had to do in the name of national pride.
Indeed, crucial to the nation’s economic take off is patriotic elitism (or what Philippine Inquirer columnist Conrado de Quiros calls a “sense of country”) not necessarily on the part of the seemingly hopeless trapos but of the business class. Economic growth and development demand the calculated sacrifice of the economic elites to bear risks, to accumulate not only for their family’s empire but for the Empire of the Nation, through innovation and experimentation, vigorous investment expenditures in high-valued productions, and pursuit of entrepreneurship not otherwise shielded from international competition, instead of minimizing risk and optimizing gains by simply playing safe in some underhanded rent-seeking activities or securing their resources and wealth in safer havens in other climes, all at the expense of the many who are not so endowed.
A redemptive changeover
More significant therefore than the presidential bold assertion that “unbridled globalization is no longer in vogue” is the redemptive changeover manifested by GMA in her post-Rizal Day pronouncements (at the Philippine Stock Exchange on January 10, 2003) when directly she challenged the country’s business elites. GAMBLE, she demanded. Take risks as “I (have taken) the plunge” (apparently alluding to her announcement not to run in 2004, a decision she has reversed, quite ceremoniously, nine months later). The call couldn’t be any more propitious for, critical to economic development is, to repeat, the will to develop on the part of the captains of the industry or the nation’s empire builders, if you will, who want it so badly to attain national development. It was as if GMA’s call has made the renewed rumblings for charter change look more like an unintended diversionary tactic of political louts and troglodytes or an offer by a highway mechanic to repair a totaled car along EDSA.
From a cautious start
As part of the nation’s transformation, the system in place nurtured in elitism and market-democracy must therefore give way to experimentation and adventurism, something that GMA cautiously shunned a couple of years ago and just days immediately following the People Power II uprising.
At her first Vin D’Honour on January 23, 2001, GMA, opting expressly for a business-as-usual approach to govern the nation, announced what was then perceived as her governance vision that “During my administration democracy and the market will be the guiding principles of my domestic and foreign policies.”
Reacting to GMA’s speech, we submitted in our web forum the proposition that democracy and market alone, without social justice, will not succeed to “Advancing the Welfare of Filipino People” (the title of her Vin D’ Honour speech).
Social justice defined
Instead of strict adherence to the market paradigm, we called for the balancing of the market forces with the pursuit of social justice as postulated by Justice Jose P. Laurel in Calalang vs. Williams (70 Phil. 726). About 65 years ago, Justice Laurel in Calalang wrote:
Social justice is “neither communism, nor despotism, nor atomism, nor anarchy” but the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. Social justice means the promotion of the welfare of all the people, the adoption by the government of measures calculated to ensure economic stability of all component elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally, through the adoption of measures legally justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex (underscoring supplied).
If GMA’s accession to presidency has been justified by Chief Justice Davide on the principle of salus populi est suprema lex, reliance upon the market and formal democracy alone without social justice and stewardship on the part of the nation’s patricians would look like a policy disconnect to the rhetoric of advancing the welfare of the Filipino People. For, social justice, the main tool for the advancement of its cause being state intervention through “the humanization of laws and equalization of social and economic forces,” is traditionally antithetical to free market that follows, first and foremost, the dictates of “rational self-interest.”
Empowerment liberates
On the other hand, we pointed out that limiting the conception of democracy to nothing more than a citizen’s choice in the ballot box, which encapsulates an illusionary empowerment, has been proven, more and more, to be rather a disincentive to responsible citizenship.
Empowerment, one which allows people to be as best as they can be, change circumstances, and develop alternatives, in itself, as the Filipinos now realize in two great people’s upheavals, is an engine of profound transformation that releases liberating individual energies and initiatives in any organization, both public and private, as did such great forces as the industrial revolution at the turn of the last century. This is an irreversible truism that will continue to pervade the Information Age. The “text gen” that swamped and swarmed EDSA II and the virtual participants in the revolution from around the world are proofs of the potency of people’s empowerment. (By the estimate of some industry experts, there are now about 100 million text messages circulated in the Philippines on a daily basis.)
The pressure for radical transformation notwithstanding, and just two days after the upheaval of People Power II that swept her to power, GMA did not equivocate, in her first chance to articulate her vision, to say her “administration will resist the temptation to take (adventuristic) initiatives and directions for the sake of appearing to be innovative.”
That was unfortunate, we thought.
The real political, social and economic challenges of GMA’s administration, we contended, would be how to balance the market prescriptions (freedom from state interference) with social justice (freedom to self-realization) on the one hand, and, on the other, how to marshal and factor democracy, expressed in people power through consultation and consensus, in bureaucratic efficiency. We feared that GMA was about to lose one great window of opportunity by balking to fully legitimize People Power II and to venture into a fresh start, preferring to look backwards to the status quo ante, a situation her predecessor ousted by the revolt has continued to exploit. Thus we urged her to welcome and take the path of adventure, of being a visionary and a revolutionary, not just a “good president.”
No magic
But GMA has insisted: “I have no grandiose ambition of being great. I just want to do my work well. I don’t want magic. I just want to be 100 percent right—morally right.”
That last one was GMA’s explicit promise: to restore moral authority in governance. By swiftly paving the way for Erap’s arrest, GMA has shown her great resolve to fulfill that promise, an opportunity that somehow had eluded Cory as to her own Ninoy’s tormentors.
Before the start of the plunder trial we had noted that the ball even at that stage was on Erap’s court given the scope and weight of the evidence adduced during the impeachment hearings; that whether Erap would then be placed on house arrest, detained with special privileges appropriate to a former head of state, or allowed to exit via exile, the nation would do well if it would accord GMA abundant discretion to exercise her presidential prerogative; and that the exercise of such a prerogative would become more significant if weighed as a necessary precondition to the fulfillment of her implicit promise for social and economic reforms.
After two uprisings, one, that had toppled an illegitimated government, and the other (EDSA Tres), that sought to express violently the powerlessness of the poorest of the Filipino poor, one would have expected that the logical path of the new leadership would be toward radical rather than gradualist reforms. Quite unfortunately, GMA has opted for incremental solution having thus eschewed any “grandiose ambition of being great.”
During the early phase of GMA’s administration and certainly before the July 27 (2003) mutiny, we had exchanges about GMA’s route to achieve fundamental restructuring one of which was in terms of reforming the wretched state of the electoral process. We argued that if a “failure” of an honest and peaceful election is perceived again as too likely to occur in 2004 owing to the same official neglect to reform the process now, it could trigger to test anew the breaking threshold of the silent middle, which already evinced its agitated state in People Power II. A gradualist approach to this acute political, nay, social malady might end up inadequate to fulfill the explicit promise of moral uprightness.
Therefore, we contended, should a conciliatory approach to Erap’s case (a plea of guilty, presidential pardon and then exile) be pursued thereby saving the government precious resources, a redirected or rather intense effort towards electoral reforms could prove in the long term to be more salutary than the clamor for retributive justice. A later editorial of Philstar (January 2, 2004) was equally foreboding:
The presidential elections in May (2004) will be the first since EDSA II. The same camps are once again facing off, and emotions are running high. Less than credible elections could trigger an upheaval that the country can’t afford. The stakes are unusually high in seeing to it that the elections will be clean, honest and orderly, but developments at the Comelec are far from encouraging.
Poverty alleviation
Poverty alleviation is yet another case. The poor are just poor. But most of the time, contrary to the assumptions of many, they are not dumb. They will temporarily allow themselves to be lulled or entertained by the promises and antics of the politicians who condescend to them during elections or will even sell their vote twice, one to each warring camps. At the end of the day, the poor will lump election dole-outs and symbolic social justice officially endorsed by the state as one and the same entitlement. Long accustomed to inherited injustice, their plaints could lay as torpid as the inaudible tremor of a long dormant volcano. But like EDSA Tres, the stupor could be tilled or goaded into violence by some “enlightened” provocateurs or charlatans. And since they are only poor not dumb, they know all too well the difference between their caste and those of their pseudo-leaders. In the event of a successful power grab, the strongest of them will likely keep the power to himself. A triumphant “rebel without a cause,” while too hard to come about, is likely to sow anarchy when he does.
Filipinos’ most recent experience has shown that both electoral and socio-economic problems have now risen to a well-nigh calamitous proportion. But while, it is believed, electoral issues could still be righted just by doing things right, socio-economic reforms will require “grandiose ambition,” highly viable design, and broad consensus to accomplish. Hence, as to the latter, a business-as-usual approach might not be enough to contain a potential seismic eruption however its occurrence is still perceived by some to be remote for now.
The business class, a political animal
What is the crucial role of the business class during these trying times? The Filipino business class, by Harold Lasswell’s standard, is as political an animal as any trapo. Business leaders are power players in essential policy formulation and implementation as to who gets what, when and how. Business decisions or non-decisions (e.g., to rightsize the workforce, build or shutdown a factory, own a “privatized” national airline, or engage in corporate citizenship) are ultimately political decisions. Without therefore the active participation and cooperation of the private and business sectors in any well-intentioned allocative program through job creations as well as in productive-capacity building, it is destined to founder again. But even as the saliency of the issues—raised by EDSA Tres, by the July 27 mutiny, or by what some well-meaning political observers consider as threats of potential civil war—is reaching its high point, we have yet to hear any meaningful offer of leadership role and spirited involvement from the business oligarchy of the Philippine society.
Arguably, it is conceded, initiatives that seek to bring about radical changes are not easy to carry out because they involve similarly fundamental changes of behavior among the participants, particularly of those who would be asked to share more. One such behavior we are pounding on is national pride above self-interest. Another is over an innovative and possibly innately Filipino economic arrangement that takes into account the guiding framework Justice Laurel postulated in the Calalang case, versus a system dominated by the Bretton Woods triplets (IMF, WB and WTO) and foreign creditors.
Tripartite power sharing proposed
At the height of People Power II and before Erap abandoned the Palace, we have fiddled with the idea of a tripartite power sharing among: GMA, representing the People Power II coalition, FVR (former President Ramos), the civilian representative of the military, and Edgardo Angara, then Erap administration’s executive secretary. The trio would exercise revolutionary powers largely to put the house in quick order for needed economic reforms but only during the unexpired term of Erap and until normalcy would be returned in 2004 in time for the constitutionally prescribed presidential elections. Obviously that wishful thinking has been overtaken by several events. With little time before another deadly national elections traumatize the nation (or a vicious destabilization plot succeeds), it is only hoped some “magician” could do the tricks.
One magic trick that comes to mind is the one South Korea successfully pulled. South Korea, a highly homogeneous society, took the innovative route of embracing crony-capitalism while subjecting it to strict discipline by imposing performance standards, down to the activities in the shop floor, upon business recipients of state largesse. The chaebols then assumed industrial leadership by risking into productive enterprises instead of simply preserving their rent-seeking activities. The state subsidy (from borrowed foreign funds) for diversification into new industries proceeded in tandem with the decision to invest heavily in education. Official cronyism and education, while still conforming to market mechanism, lay at the heart of the late-industrial expansion of South Korea. With fewer multi-national corporations in Korea than in any late-industrializing countries, its economy took off on the basis of nationally owned firms.
Taiwan took a different route to do the trick. Through broad distribution of land ownership and capital, and high returns to labor, the individual Chinese was greatly motivated to produce much of the rapid growth of Taiwan’s economy. Taiwan’s small-scale capitalism as a base for industrial development can serve to Filipino economic planners as just another model for accumulation.
City-state Singapore, on the other hand, has placed economic pursuits, via a domestic economy dominated by foreign affiliates, above political ideology (in a highly regulated society). The result is per capita income of a First World state.
There certainly are other economic models that could be investigated for best practices. But the ones that appear to stand out as common denominators for the success of the three countries above mentioned are: 1) the reciprocal relations between the state and businesses, 2) extensive investment in education and 3) the grandiose ambitions of their pioneering leaders.
GMA transformed
On January 10, 2003, before the Makati businessmen, the President, who 10 days earlier had stunned the nation upon announcing she’s relinquishing her bid to extend the tenure of her presidency, sounded transformed as she challenged the rich to take a similar plunge:
THE CHALLENGE IS NOT JUST TO REACH OUT TO THE POOR . . ..
THE CHALLENGE IS TO ACTUALLY ALLEVIATE THEIR MISERABLE CONDITIONS. AND DO IT IN THE SHORTEST TIME POSSIBLE . . ..
IF THE POOR DO NOT HAVE THE STRENGTH TO HOLD OUT, AND HELP OUT, NO LONG-TERM SOLUTION WILL SUCCEED. YOU CANNOT POSTPONE EATING WELL, DRINKING SAFELY, LEARNING USEFUL THINGS AND HAVING GAINFUL WORK. ONLY THOSE WHO EXPLOIT THE WEAK BARGAINING POSITION OF THE POOR BELIEVE THE POOR CAN WAIT.
. . .WE SHOULD NOT LIMIT OURSELVES TO TEMPORARY SOLUTIONS. WE DO NEED DEEP AND FAR-REACHING REFORMS THAT WILL LEAD TO STRONGER POLITICAL AND SOCIAL STABILITY AND TO SUSTAINED ECONOMIC RECOVERY. BUT NONE OF THESE REFORMS SHOULD EVER ENTAIL KEEPING DOWN THE POOR OR MAKING THEM SUFFER MORE.
Free market called to task
It is apposite to listen at this point to the voice of Christina Morales, a lecturer from the Department of Economics of Ateneo de Manila University. She may neither be the nearest nor the loudest, but hers could be one of the sanest propositions for an accumulation model that calls to task the orthodoxy of free market. As a reaction to GMA’s speech at the Philippine Stock Exchange, Ms. Morales wrote “that coherence and completeness of a country’s industrial promotion strategy” proves to be “the most resonating lesson of the East Asian Miracle.” Hence,
rather than taking liberalization alone or protection alone, the strategy should be to customize industrial policy according to the specificities of each industry, guided by a realistic assessment of their competitiveness, potential and viability in the medium term (underscoring mine).
Given the limited resources and skills in the government and the economy at large, it is best to adopt a targeted and selective approach. This strategy should clearly be developed after a close study of and in collaboration with the industrial sector [as well as civil society, I should add], and should be pre-announced so that enterprises [and other sectors such as labor, I should add further] will have time to adjust. This should perhaps be Economic Secretary Romulo Neri’s top priority. Moreover, once the program is announced, the government must not consent to backsliding that will only allow inefficient performers to survive indefinitely and create room for rent-seeking and corruption (underscoring mine).
An important caveat, though, is that interventions have to be designed flexibly and monitored constantly so that mistakes can be rectified as they become apparent. Finally, this industrial promotion program must be situated within a broader, long-term development framework that is cognizant of social considerations other than competitiveness and efficiency (underscoring mine).1
Ms. Morales took further note of the apparent tentativeness of the government of GMA “to play a more activist role in industrial promotion beyond simply sticking to bare minimums.”
What could possibly be added to Ms. Morales’s proposal is that the strategy to favor targeted firms and industries (in South Korea, for example, long-term capital with favorable interest rates was allocated to Hyundai, Samsung and Daewoo over smaller firms) may not necessarily be limited to manufacturing because services and information technology are areas of competitive advantage with great value-added potentials that we could also take a shot at. We however need precise information about the long-term prospect for certain industrial segments or particular firms in the changing patterns of the global markets. This is where the full partnership of the political, bureaucratic and private sectors come into play in terms, for instance, of facilitating exchange of information on company and other relevant data with a view to inducing the least competitive to exit from the industry or nourishing the ones with the best outlook to compete internationally.
A different approach, it should be mentioned, is one proffered by our town mate, Nick Nadal, a private sector consultant operating in the Middle East, who calls for “a devolution of power away from the crony induced political system . . . and (for the development of) a strong civil society—in the local level especially—that would demand for greater transparency and question the prevailing (local) fiefdoms,” while insisting that “at the same time, the private sector (specifically the SMEs) needs to be fostered, harnessed and developed—through microfinancing, technical support, etc., administered by the private sector (or other independent entities) and not the government.” Nick Nadal strongly believes that “Dependence on government breeds the sad cronyist political system we have.”
In our virtual community, we had some exchanges about start-up business concepts as fanciful as “technopreneurial stewardship.” It’s always exciting to hope.
A Bayanihan pact
The idea that during a nation’s initial developmental thrust industrial enterprises merit the protection of the State in breach of the market paragon so that if such a national collaborative undertaking flourishes all may flourish is not adventurism “for the sake of appearing to be innovative.” When all the participants in a uniquely Filipino Bayanihan project of sort understand what’s envisioned and are fully committed to it, then that translates into a national aspiration for a “strong republic” sans all the empty shibboleths.
Let’s face it. Capital, labor, the community, and the government are mutually interdependent. Therefore, a Bayanihan pact where everyone makes the sacrifice (or, more appropriately, exercises the privilege) so that each may come out with something while preserving the survival of the State should be explored. By everyone, I mean to include everyone such as the poor sacrificing to vote their conscience instead of allowing themselves to be bought, so that the representatives they send off into the public sector as policymakers will serve as competent partners, not mere stable boys (that much the powerless can share and most certainly that will matter, if only to regain their individual self-respect) or labor being more compromising and cooperative, or circumspect in resorting to concerted actions such as work slowdown or strikes, otherwise there would be no work to hamper or strike about.
On the other hand, the media elites (as well as media practitioners doing diligently their homework) must perform their proper role as a “public trust” to put in appropriate context the definition of the goals envisioned and the precise trade-offs to be negotiated, and then articulate them in a proper balance.
The Japanese example
The route the Japanese had taken, as a late-industrializing country as earlier alluded to, is too close an example to ignore.
The zaibatsu2 (literally, “money-cliques”) were “great Japanese business houses” with vast business enterprises which comprised of banking and insurance, foreign and domestic trade, electrical apparatus and machinery, textiles, paper, cement, glass, chemicals, maritime shipping, shipbuilding, mining, metals, and mechanical engineering. They had a feudal past and family councils regulated their activities. The zaibatsu, together with those enlisted from the ranks of the samurai, not only helped finance the Meiji restoration (the reign between 1852-1922 that marked the downfall of Japanese feudalism and the introduction of Western ideas into Japan) but transformed government economic policies from a feudalistic economy.3
On the other hand, by subsidies and a favorable tax policy, the government granted the zaibatsu a privileged position in the economic development of Japan. They later helped bankroll strategic semiofficial enterprises in Japan and abroad, particularly in Taiwan and Korea. Far from the prescriptions of laissez-faire, one of their methods was for certain business families who could provide resources and means for assistance to network with particular statesmen who had great but concrete ideas to enact such as the later concept of “wage plasticity” where the earnings of particular workers were made to bear close correlations to their employer’s prosperity. The zaibatsu transformed themselves into active change agents to modernize and industrialize Japan.
During the Allied occupation, the zaibatsu were broken but in the 1950s and 1960s, the old groups reemerged as keiretsu. The bold initiatives of the keiretsu following World War II to pool their resources together paved the way for Japan to rise as a global economic power.
The market hypocrisy
We have some discussion [in another post] about how a mutant form of democracy was handed down to the Filipinos by the American colonizers. In a sense, the delivery of democracy in the Madisonian contrivance (a.k.a. democratic elitism) was fair because the Filipinos were given what the Americans have had in practice. Not so with respect to the market system. For, whereas America also mutated the market system, it has kept the mutant form to hold sway in its backyard while requiring Third-World countries like the Philippines to practice the pure variety through the bitter prescriptions of the market discipline by such institutions as the IMF and the WTO.
Despite the market rhetoric, state-capitalism (as opposed to market-capitalism) has been adopted by powerful nations—such as France, Great Britain and Germany. Britain then had emerged as the world’s most advanced “developmental state” (ironically, a label the West pejoratively ascribes to Japan), a model that has become endemic in the industrial world and certainly the United States being among its earnest adherents up to the present.
The United States has employed market-distorting schemes such as tariffs, quotas, tax breaks and abatements, loan subsidies, bailouts, and regulatory rollbacks to protect its industries. One recent and obvious instance of market mutation in America is the 2002 $15 billion corporate dole-out ($5 billion grants, $10 billion loans) to the airline industry post 9/11 for the industry’s pre-9/11 failures. Today, non-military aircraft production is concentrated in only two firms, Boeing-McDonald and Airbus, a European consortium, both being recipients of enormous state subsidy.4 This mutant form of the market permeates in agriculture with the mind-boggling $180 billion farm subsidy over ten years benefiting mainly wealthy US farmers. Amadou Toumani Touré and Blaise Compaoré, the presidents, respectively, of Mali and Burkina Faso, two cotton-producing countries in Africa, together wrote on July 11, 2003 an op-ed article to New York Times about the ill-effects to their least developed countries of market-distorting farm subsidies given to cotton producers in wealthier countries which lead to worldwide overproduction and deprive their poor counties of their only comparative advantage, cotton being their sole agricultural product to trade in the international market. The op-ed letter expressly noted that—
Although African cotton is of the highest quality, our production costs are about 50 percent lower than in developed countries even though we rely on manual labor. In wealthier countries, by contrast, lower-quality cotton is produced on large mechanized farms, generating little employment and having a questionable impact on the environment. Cotton there could be replaced by other, more valuable crops.
The figures provided in the same letter by the governments of Mali and Burkina Faso in the period of 2001 to 2002 are compelling:
America’s 25,000 cotton farmers received more in subsidies—some $3 billion—than the entire economic output of Burkina Faso, where two million people depend on cotton. Further, United States subsidies are concentrated on just 10 percent of its cotton farmers. Thus, the payments to about 2,500 relatively well-off farmers has the unintended but nevertheless real effect of impoverishing some 10 million rural poor people in West and Central Africa.
According to another figures closer to home provided by Senator and former Agriculture Secretary Angara, “The protectionist trade policies in rich economies cost poor countries 100 Billion US Dollars annually—twice the amount they receive in aid.” In seeming resignation Angara fretted about the particular situation of the Philippines. “Our agricultural products, he complained, “will always be more expensive since we cannot afford to give any substantial support to our farmers.” (Manila Bulletin, September 7, 2003)
By contrast, there is no question that even in other key sectors of the American economy than agriculture, such as in the high-technology industry including the Internet, robotics, biotechnology, and pharmaceuticals, the nursing hand of the nanny State abounds.5
Don’t we ever notice that trade barriers (not to speak of capital controls) are standard subjects of economic protestations voiced by industrially advanced nations, which manufacture most of the “goods” traded, but not labor barriers consisting of highly restrictive immigration laws they imposed against “service” exporting nations (and I’m not talking here about financial services, consultancy, e-commerce, tourism, or water supply but about the services of natural persons such as household helpers, nurses, teachers, and carpenters).6 Can we still deny the fact that migration and remittances by overseas workers constitute a transnational individual framework (a poor nation’s version of the transnational corporation phenomenon, where TNCs seek cheap labor while TNIs, if you will, seek higher wages or salaries) that brings immediate relief and stability to Third-World countries better than foreign direct investments? Following the coup attempt in July 2003, and the attendant political bickering by the trapos and profiteering by those so-called self-made paper entrepreneurs (mostly bankers), the plea made by the GMA government—not to investors, foreign or otherwise, but for individual Filipinos to convert their dollars into pesos and for the unsung OFWs to make their remittances earlier than Christmastime in order to arrest the decline of the peso to near historic low—categorically illustrates the whole point.
[One IMF study reported by Business World (November 5, 2003) claims that OFW remittances are a “moral hazard” because they are primarily devoted to private consumption “leading to decreased efforts on the part of the domestic workers, firms and entrepreneurs” rather than as development capital, especially where such remittances were treated as returns of human capital invested abroad. This is quite understandable considering that OFW remittances are not directly available to service foreign debts—the unstated raison d’etre underpinning IMF policies towards a developing country that is heavily indebted and whose enfeebled economic sovereignty, owing to those policies, has failed to grow an economy capable of absorbing overseas workers. What cannot be ignored are the facts that remittances from OFWs (largely from the US, Saudi Arabia, Hong Kong, Japan, Singapore, and the United Arab Emirates) reached 7.6 billion dollars in 2003 accounting for about 16 percent of Philippines’ total current account receipts and 10 percent of GNP. These remittances are sources of funds for education, housing, and investments in SMEs as well as for payment of imports such as oil and parts and components for local industries.]
A brief look at the economic history of the United States shows that during the last quarter of the 19th century, the “robber barons” (from the label of feudal lords who owned huge estates during medieval Europe), the likes of J.P. Morgan, the lord of finance capitalism, John D. Rockefeller, the oil mogul, Andrew Carnegie, the sultan of steel, set the stage for what historian Howard Zinn calls the “greatest march of economic growth in human history.”7 The economic elites took the lead with the connivance of the American trapos, if you will, as well as the US Supreme Court. While Congress made sure tariff laws were passed to keep out foreign competition, the embodiment of “somber, black-robed fairness” did its own “bit for the ruling elite”8 by accepting the argument in a groundbreaking decision in Santa Clara County vs. Southern Pacific Railroad (1886), that corporations were “persons” and their money as property within the meaning of the Fourteenth Amendment, an amendment originally adopted to protect Negro rights.9 However, since the poor whites, the blacks, the women, the children, the European newcomers, and the Chinese labor were not there at the formation, the march exacted an enormous cost to them. The Chinese coolies were among those who suffered the most even as they worked for “starvation” wages to build the railroads for the engine of the American industrial revolution and for the vast network of business empires of the robber barons. However, while often performing the life-threatening part of the railroad constructions, by court fiat10 the Chinese were not considered 100 percent “persons” juridically speaking, even as late as 1871 or about a century after Americans declared the rhetoric that “all men are created equal.”
As a late-industrializing country, the Japanese caught up quickly by avoiding the pitfall of the American “ingenuity” and by seeing to it everyone was on the same page where work and patriotism were defined together.11
The Korean students, emulating Japan’s great sense of social obligation, kept the military regime and the chaebols in check in the unorthodox experiment of rebuilding their even later-industrializing nation.12
Lest we forget, Rizal, writing for La Solidaridad, the main propaganda organ of the Filipino expatriates’ movement against Spain, expounded in no uncertain terms on the “sense of country” and “revolutionary spirit” as vital requirements for economic development:
In order that the (Filipino) may make progress, it is necessary that revolutionary spirit, so to speak, should boil in his veins, since progress necessarily requires change; it implies the overthrow of the sanctified past by the present, the victory of new ideas over the old accepted ones . . .. The lack of national consciousness gives rise to another evil, which is the absence of all opposition measure prejudicial to the people and the absence of initiative in whatever may rebound to their good. A man in the Philippines is only an individual; he is not a member of a nation.13
Rizal demanded that the Filipino must transcend the self in order to build a nation.
A plunge forward
The challenge therefore that GMA posed to the economic elites to take the plunge with her—which could also mean EMPOWERING themselves to redeploy their resources against external dictation, mobilize their capital, pool their talent, and tap their network of connections, internal or external, if need be and, then, to gamble, create wealth, develop their own economic model, explore new economic opportunities in terms of new products, processes and markets, build an empire and a strong republic while dispensing social justice—if not mere rhetoric, is a great leap forward.
Doesn’t Jonathan Swift remind us in Gulliver’s Travels, “ . . . whoever could make two ears of corn, or two blades of grass to grow upon a spot of ground where only one grew before, would . . . do more essential service to his country than the whole race of politicians put together”?
Only a handful families control the banking system in the Philippines. That makes for the establishment of a private development bank of some kind specifically targeting to: help emerging industries capable of higher-valued productions; respond to the needs of older industries that have the best chance of becoming internationally competitive; develop, in parallel strategy, local capacities through large-scale microfinancing; underwrite research and development projects; and promote high-quality education and training, a realizable proposition. The bank will operate in conjunction with other financing sources. Primary reliance on international capital flows either as foreign direct investment, portfolio investment, or foreign assistance (we will expound more on this last one in the next chapter) as we have thus far experienced is precarious to say the least. A review of some pertinent economic figures14 indicates that US overseas manufacturing investments, for instance, have shifted invariably with great consequences to the host countries. In the 1950s, most of the US investment in the Asia region was in India, Indonesia and the Philippines accounting for 90 percent of the region’s total. While Philippine Gross National Product (GNP) per capita then was about just half that of Japan, it was a third higher than that of Taiwan and more than twice that of South Korea. As of 1970, by GNP ranking, India placed 10th in the world, Indonesia 32nd and Philippines 40th; whereas, South Korea was 43rd, Taiwan 60th (and Singapore was not even among the first 100 even as late as 1976). By 1988, US dramatically shifted its overseas manufacturing investments to Singapore, South Korea, Taiwan, and Hong Kong at 68 percent of the region’s total with Malaysia and Thailand accounting for a further 14 percent. Of these six countries, Singapore had the largest share at 32 percent. During this later period, the combined US manufacturing investments in India, Indonesia and the Philippines were reduced to 18 percent of the total in the Asia region, less than the share of Taiwan at 18.5 percent. Moreover, the US government redirected its foreign assistance to such political and security dependencies as Israel and Saudi Arabia.
On the other hand, portfolio investors are as flighty as a day trader. For all intents and purposes, they are speculators of the casino type moving in and out, at a moment’s notice, of different national currencies or exotic derivatives in a virtual world of finance capital.15 This then leaves us with domestic private credits and personal investments to finance a rather ambitious national development project without being subject to the dictates of foreign assistance establishments like the IMF and World Bank or to the fickleness of fly-by-night foreign operators. These foreign resources should therefore serve merely as supplementary to a vigorous entrepreneurship of our local economic elites.
The Philippines is also awash with business and management talents. In 1980, I took an abbreviated business management course at the Asian Institute of Management and I was elected president of our class, which consisted not only of Filipinos in middle-level management but Singaporean, Malaysian, Thai, Korean, Japanese and even Mexican mid-level business leaders and managers. We learned from our Filipino business gurus that good business management should really be nothing more than “resourcefulness” and the ability to work collaboratively and innovatively to tackle real-world problems. And that seemed where the rub was. My foreign classmates have practiced the theories they learned from our experts while we’ve tarried in our ingrained habits of risk aversion. So, money might not really be the problem after all but “in-kind investment” is, in the form of the right attitude to avail of our ability to use money that’s available. If at the slightest sign of turmoil domestic capital is exported abroad faster than foreign investments are withdrawn, or rather securely placed in passive investments or other rentier schema, then late learners like my classmates would overrun us, as they did, hands down. We do recognize that in today’s environment stakes are higher, return could be slower, and penalties for misjudgment harsher. But that’s the price of adventurism, of being “pariahs and pirates” of the ancient, or in today’s jargon, the prize of being mavericks. GMA’s call is therefore as much a challenge to plunge forward as to leap away from the old ways of doing things.
If all bets are on, we could expect some so-called liberal economists to label this “development strategy” with many epithets—“mercantilism,” “protectionism,” or “carterlization” even as their own economies blatantly continue to employ arrangements of the same nature although couched in friendly terms like “economic union,” “trade alliances,” “strategic competitive policy,” or, on rare occasions, “preemptive strike” in the service of “military Keynesianism.”
This is not to suggest that if we move towards the direction intimated here, we would in the meantime delink ourselves from the existing global economic relationship. Far from it (although, through democratic exchanges, novel economic alternatives can be imagined and fashioned). What’s being postulated furthermore is that even the market construct could become fair if struggling but willing and ready nations are given a decent chance to build and accumulate just as exactly as the leading economic powers of today did during their own growing pains and struggles; and enabled to be on similar footing, then and only then should these latecomers be made to face up to the challenge of competition. On an individual level, they call this “affirmative action” in America. I believe even nations are entitled to equal opportunity. This axiom, possibly more legitimating than “economic liberalism,” requires that adjustments to transformation of this sort relative to the prevailing international economic order should demand more of the stronger states than the weaker ones, not the other way around.
It’s never really too late to dream. But, let’s dream and go it together for the collective good.
_____________________
1. Christina Morales, “‘From lazy liberalization to lazy protectionism’, ” January 27, 2003, Inq7.net. .
2. The information about the zaibatsu is derived mainly from G.C. Allen, A Short economic History of Japan, 4th ed. (New York: St. Martin’s Press, 1981).
3. For a thorough account of the Meiji Restoration and the changing roles of the samurai during the period see David S. Landers, The Wealth and the Poverty of Nations: Why Some Are So Rich and Some Are So Poor (New York: W. W. Norton & Company, 1998) esp. Chapters 22 and 23.
4. Noam Chomsky, “Market Democracy in a Neoliberal Order: Doctrines and Reality,” May 1997, Zmagazine. .The piece was given as a Davie Lecture, University of Cape Town.
5. Ibid.
6. In New Jersey where I reside, the state Senate unanimously approved in December 2002 a legislation banning cheap overseas labor from being hired as customer service representatives to operate telephone call centers. The employments in call centers abroad are considered jobs “exported” from New Jersey, hence, the ban on the export. “Imports” of workers into US are generally subjected to immigration restrictions.
7. Zinn, A People’s History of the United States, p.253.
8. The quotes are from Ibid., p. 260.
9. Ibid., p.261.
10. People vs. Brady, 40 California Reports 198.
11. See Landers, p. 383, where the author explains: “a primary task of the new imperial state (during the Meiji reform): to imbue its subjects with a sense of higher duty to emperor and country and link this patriotism to work.”
12. Alice H. Amsden, Asia’s Next Giant: South Korea and Late Industrialization (New York: Oxford University Press, Inc., 1989), p. 51-52. Amsden postulates: 1) The students kept the government honest (and coming off the streets, they became the managers of the modern factories), and 2) The American occupation drove Korea towards “developmentalism.”
13. Quoted in Guerrero, p. 193.
14. See Holly Saklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management (Boston: South End Press, 1980), Table 1, p. 10, in relation to Peter Dicken, Global Shift: The Internationalization of Economic Activity, 2nd ed., (New York: The Guilford Press, 1992), p. 65.
15. For a fuller exposition of the workings of the financial markets, see William Greider, One World, Ready or Not: The Manic Logic of Global Capitalism (NY: Simon & Schuster, 1997), esp. Chapter 13 (The Rentiers’ Regime).
Popularity: 7% [?]
Please don’t even try to publish the whole book the next time you planned to defend ‘your intentions’. Accept my thanks.
Welcome.
I sincerely wish Mr. Margallo gets acquainted with the oldest form of trade restraint since money came into widespread use. That and the issue of state sovereignty…..
Do not bother with guys like bO who distinctly have a neurological difference which puts him at a profound disadvantage due to his personal evolution. Overproduction and surplus capital through the invention of sovereign credit and debt have become the primary weapons of imperialism. The Chinese have just now realized their dilemma and the question now is what will be used to substitute for the dollar hegemony.
It is a complex problem that will get resolved but hopefully a war will not break out to resolve the roots of the problem.
The problems of the Philippines are deeply rooted also in the neurological difference in evolutionary development between the human species that invaded the islands. The more advanced species in development naturally dominated. The Europeans (American included) then the Chinese…It will take time for the natural evolutionary development of Pinoy neurological functions to develop to move up the evolutionary ladder of societal development. Even lower level of species when introduced into a new environment upset the traditional ecological balance. Nature takes time to adjust.
The environmental deterministic factors will play a big part. A country cannot develop way above the environmental factors available to it.
The American were very lucky that their European ancestors found a continent rich in factor endowments with hardly any people. The same can be said of Australia.
http://www.atimes.com/global-econ/DD11Dj01.html
Same neurological pathways, different external realities, ergo, different approaches.
J_AG,
I’m self-taught in macro-economics and obviously still learning. If you recall, I’ve asked you to refer me to some literature I could chew on about this potential paradigm shift in currency hegemony. I’ll work on it, and thanks for the link.
Abe,
Thanks for the article. I am in 100% agreement with your premises. We are a fragmented, kanya-kanya society, in which no particular class wants to take on the mantle of leadership, with all the hard work, decisiveness and consummate long-term planning and strategizing that it entails. The political economy of our country is something which even the most astute businessmen or industry leaders have a very shallow understanding. And yet we have allowed them to dictate progress — and where do false premises lead to, except in situations which are anathema to national progress. What a waste of talent of our intellectuals!
And I’ll echo what J_AG wrote:
“Do not bother with guys like bO who distinctly have a neurological difference which puts him at a profound disadvantage due to his personal evolution.” LOLs
If you go by Abe’s POV, the local elite class has the mantle of leadership (albeit a LOUSY ONE thus Abe has to lie prostrate and beg to the goodness of the heart of the local elite).
The political economy does not need rocket science to understand – the political economy has been held by the local elite and the rest of society are paralyzed and bereft of options after having been hoodwinked with the protectionist rent-capture regulations.
When in fact, participatory approaches to democracy can remove the stranglehold of the local elite – but homeland Filipinos are wont do do the same thing and expect different results – can’t have the cake and eat it too.
Wasted talent since 1946 – courtesy of Manuel Quezon’s hell for Filipinos, even Satan will not live in the hellish Philippines… bwa hak hak hak hak – baka manakaw pa yung trono nya..
BongV,
Do I sound like begging or warning?
begging… prostrate… on your knees.. bending over…
Hail Madonna, full of grace, wisdom is with you . . . .
Again Mr. Abe, it is unfortunate that you’d copy-and-paste such a lengthy blurb when the key point that you make lies in but one paragraph:
… which ends — drum rolllllll — with your usual all-too-familiar lament:
But last I heard, those “not so endowed” people prop up the economy to the tune of 10% of its GNP in the form of the remittances of its family members beavering away in some desert kingdoms halfway around the world.
Which is why I ask in an article I wrote waaaay back:
where do those OFW dollars go? They get pissed away on consumer non-durables and unimaginative ventures like tricycles, jeepneys, you guessed it, real estate. So even those “not so endowed” people you put on a heroes’ pedestal are not above doing a bit of rent-seeking themselves when they get hold of a bit of cash.
As I emphasised in my brilliant book an observation made by the esteemed Ambeth Ocampo on the marble industry of Romblon:
As such:
Kung baga, Mr. Abe, if you plan to make a generalisation about the wherewithal to invest in productive enterprise in the “elite” industrialists of the Pinoy business scene, be prepared to sweep it across the rest of the collective.
To cite the equally brilliant insight of the venerable Nick Joaquin in a seminal piece you are likely to be familiar with:
So, you see, Mr. Abe, as the popular character Crocodile Dundee would quip:
That’s not a copy-and-paste, mate. This (above) is a copy-and-paste.
Speaking of dreaming small and dreaming great.
I just can’t help to be reminded of our insistence on basketball.
We dream at least of being included in the Olympics and the World Championship.
We have different views, some say why bother we are not built for a giant man’s game, some say if you are just going to use naturalized players(which is the global trend by the way)again why bother,I could cite a lot of examples ending with the question: “why bother?”
Maybe this can also be the said of into going for big busiess, we also ask why bother if I will just be eaten alive by competition?…Why bother if my own government would not give me tax breaks,subsidies and protection from foreign competition……..
On the other hand as BongV said the trend even in America is Small and Medium Businesses.
Pati ba dyan mag aalangan pa tayo?
I see the avon model direct selling making waves.
As long as their is no bandwagon effect,lemonade stand effect,shawarma effect,lechon manok….;this is the way to go.
I have to agree with BongV on SMEs.
Oh, come on. What is selling Avon door-to-door going to do for the macro economy?
Small business is not the answer for large-scale infrastructure, large-scale investment, and large-scale job creation. It is a very good answer for community-scale development, and it is approached from that perspective in the US. Which relies on a functional definition of “small” as “any company of up to 500 employees”. By the standard, all but the merest fraction of businesses in the Philippines are “small”, and guess what, it ain’t working, at least not on a national scale. Here’s my past rant on that:
http://www.getrealphilippines.com/agr-disagr/busyness.html
But by the same token, the Margallo Formula of appealing to the sensibilities of the tip of the power pyramid is just as useless, as everyone pretty much seemed to agree yesterday. Which brings us right back to the essential message of Bocchi, i.e., competitiveness and structure should be the focus.
Avon isn’t the only game in town. There is a plethora of SME activities (Avon, Tupperware, cell phone sales, BPO, etc) which when aggregated props up the macro job creation figures, the macro revenue figures, and the macro tax figures which in turn drive the push for infrastructure.
The common held view relies on vertical linkages – the alternative view is to create more lateral linkages in addition the downstream and upstream activities. The BPO industry is built around the model – and for an SME it sure is hitting the bottom line macro figures with black ink.
Come to think of it, Microsoft and Apple started as SMEs in a garage
No. I’m throwing the b.s. flag on the small business idea. Here’s another article that summarizes the misguided attention to small businesses:
http://blogs.bnet.com/intercom/?p=2539&tag=nl.e713
The last line of the post, the quote from Professor Shane of CWU, EXACTLY spells out the problem with the whole thrust of the SME gospel here in the Philippines.
And, for every Microsoft or Apple (who only grew once they reached a point where they could attract massive infusions of venture capital), how many thousands of flops were there?
Not saying the guy who thinks he’s the next Steve Jobs shouldn’t try, nor should be denied resources (in whatever form — financing, tax incentives, friendly regulation, etc.) PROPORTIONAL to the scale of his business and wider economic impact. IF he demonstrates that he really is the next Steve Jobs, the big capital infusion will take care of itself. If not, well, he can go sell Avon, and the wider economy will not have been too damaged for giving him a chance, because the priority (in a sensible world) will have been on the bigger picture all along.
Carly Fiorina, former HP CEO, now an SME owner herself, disagrees .
http://blogs.wsj.com/independentstreet/2009/02/18/carly-fiorina-small-businesses-are-key-to-economic-recovery/
““One of the things I worry about is that I believe we are applying Depression-era models to a 21st Century crisis,” she said. Back in the 1930s, she said, big business, big labor and big government drove the economy, but those policies may not be effective today. “The only trouble is this is the 21st Century now. This isn’t the Great Depression. Technology and globalization have changed our economy forever.””
Fact is SMEs provide 2/3 of the jobs in the US economy (and replicated in the EU as well) today.
Small businesses key to economic recovery, report says
By Steve Green (contact)
Monday, Jan. 26, 2009 | 9:03 a.m.
* UNLV economist foresees darker times (1-23-2009)
* Businesses brace for legislative session (1-23-2009)
A new report is highlighting the importance of small businesses in the economic recoveries of Nevada and the rest of the nation.
The report, issued Friday by the U.S. Small Business Administration, calls on government officials to recognize the role of small businesses in the economy.
“Nevada depends on small business for jobs and economic growth,” said Shawne McGibbon, acting chief counsel for the SBA’s Office of Advocacy. “During this time of financial stress and economic instability, policymakers need to remember that the state’s small businesses provide the economic base for its families and communities.”
The SBA said that the United States has slightly more than 6 million small employers and they provide 50.4 percent of its private sector employment. These firms created 78.9 percent of the nation’s net new jobs from 2004 to 2005, and they generated more than half of the private non-farm gross domestic product, the agency said.
Compared to the rest of the nation, small businesses play a smaller role than big businesses in Nevada’s economy. Big employers with 500 or more workers like hotel-casinos employed some 651,000 people in Nevada in 2006 compared to about 515,000 people employed by smaller firms, U.S. Census data shows.
But in its updated Nevada Small Business profile issued Friday, the SBA said that from 2002 to 2005, 46,879 of the 67,846 jobs created in Nevada were created by businesses employing fewer than 500 workers.
***
Do the math.
Small Businesses Key to Economic Recovery
By John Paul Galles
The economy has shed 4.4 million jobs since the recession began in December 2007, with almost half of those losses occurring in the last three months alone. Pulling this economy out of recession will only be accomplished by creating jobs—the overwhelming majority of which will ultimately be created by small businesses across this country. As a nation, we must enable the small business community with the tools to turn this economy around.
According to the most recent data, using the Small Business Administration’s definition of a small business as having fewer than 500 employees, small businesses represent 99.9 percent of the roughly 27 million total businesses.
Small businesses are incredibly important to the U.S. economy. Two important facts: (1) Small businesses employ about half of all U.S. workers. (2) Since the mid-1990s, small businesses have created 979,102 net new jobs or 78.9 percent of net new jobs. Small businesses also:
• Pay nearly 45 percent of total U.S. private payroll.
• Create more than half of nonfarm private gross domestic product (GDP).
• Hire 40 percent of high tech workers (such as scientists, engineers, and computer workers).
• Are 52 percent home-based and 2 percent franchises.
• Made up 97.3 percent of all identified exporters and produced 28.9 percent of the known export value in FY 2006.
• Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.
Market research also shows small businesses are primarily financed by commercial banks and other depository institutions which together account for almost 65 percent of total traditional credit available to them.
With the U.S. economy in a tailspin, bank lending to small businesses has dwindled and even dried up in some regional markets. With higher lending standards, reduced property values and dramatically diminished secondary market lending, there is little wonder that small businesses are hurting and failing in greater numbers.
Even in non-recessionary times, research from the last decade shows the survival rate of new employer establishments to be only 67 percent in the first two years; 44 percent at four years, and a mere 31 percent at seven years. Critical to any business survival is an ample supply of capital.
In a recent announcement, President Obama promised $15 billion aimed at freeing the secondary credit market. That is NOT enough. That really is only priming the pumps because what is needed goes well beyond that figure. The president has also promised to eliminate the capital gains tax on small businesses. Thus far, his budget has postponed that action until 2014 given the economic crisis and growing budgetary deficits. It is necessary to implement this sooner.
How do you get small businesses growing again? In the words of the movie Jerry Maguire, “Show me the money!”
There must be rewards for the risk, the investments, the time and energy that small businesses require. Small businesses want a level playing field. They want to compete for quality workers, but hiring and retaining workers has become increasingly tough given the skyrocketing costs of health care, payroll taxes and pension plans. More often, larger firms can provide health care plans and pension programs at substantially lower costs than smaller businesses. And, increasingly, hiring workers is much less expensive in marketplaces outside the United States. Lowering employment costs will speed our economic recovery for the longer term.
Thus far, the emphasis for recovery has been focused on the banking system. Banks must be repaired to become finance agents for businesses, but small businesses create jobs and build wealth. Business owners and entrepreneurs must see the incentives lined up for them to invest in new ideas and new jobs and new markets. It is essential that there be rewards for risk, investment and jobs.
Sources: U.S. Dept. of Commerce, Bureau of the Census and International Trade Administration, U.S. Small Business Administration Office of Advocacy, Federal Procurement Data System, U.S. Dept. of Labor, Employment and Training Administration, Bureau of Labor Statistics
John Paul Galles is the publisher of Greater Charlotte Biz.
Economic Recovery May Be Resting on the Shoulders of Small Business
by The Obvious Expert on July 3, 2009
Uncle Sam Needs You and Your Business or Consulting Practice
As you celebrate your July 4 holiday, reflect on the newest information from The Small Business Advocate published by the US government’s Small Business Administration. Reading this may make you feel downright patriotic for being a small business person, consultant, coach, or entrepreneur.
Here’s part of what economist Brian Headd has to say discussing the more than 23 million people who are in business as a solo venture, as well as small business owners with employees:
“Small Businesses Most Likely to Lead Economic Recovery … While recent job losses are widespread, small businesses’ historical overall rate of net job creation makes them a key player in solving our labor market woes. And the number of newly self-employed, whether by choice or not, still offer glimmers of hope …”
“When the economy struggles, the number of non-employers (this is US government-talk for businesses with only one person and no other employees) tends to increase at higher rates, while the number of employer businesses stagnates or declines. For example, when the economy was humming along during the late 1990s, non-employers had annual increases in the 2 to 3 percent range; as the economy limped along from 2007 to 2008, they increased an estimated 8.1 percent or 1.7 million. The change in the number of employers is not nearly as sharp. Employers have tended to have annual increases of 0.75 percent to 1.5 percent when the economy has done well and negative to flat when the economy struggles.”
As Headd explains, non-employer small businesses are critical to our country’s economic recovery but are not simply in business because they have no other options in a down economy:
“Non-employer growth is not simply a response to economic factors; many personal factors cause people to go into business for themselves too.” Self-employment rates, the SBA says, increase with: (1) age, (2) income, (3) and generally education, with the economy playing less of a factor than you might expect.
So enjoy Independence Day; watch a parade, set off some fireworks, and then Monday morning, go right back to doing what you are doing in your small business, consulting practice, or entrepreneurial venture, because clearly, America needs you!
(Source:) SBA: Office of Advocacy – The July 2009 Small Business Advocate
http://www.cnbc.com/id/31387423
Small Business Is Still Key to Recovery: Office Depot CEO
SMALL BUSINESSES, OFFICE DEPOT, RECESSION, ECONOMY, HOUSING, LIQUIDITY, BANKS, BANKING, LENDING,
Posted By: JeeYeon Park |
CNBC.com
| 16 Jun 2009 | 12:11 PM ET
Small business has led the economy out of all past recessions and will do so again, Steve Odland, chairman and CEO of Office Depot told CNBC.
“Small businesses are so important to our economy—they create all the jobs, they lead through these kinds of different slowdowns and right now, all eyes are on small business,” Odland said in a live interview from the National Summit in Detroit.
However, Odland said small businesses are having a hard time financing their companies due to the housing market meltdown.
“Most small businesses finance their businesses through their homes—for example, taking out a second mortgage,” he said. “But because housing market is really leading this economic meltdown, we need liquidity to come back into the market place either through the housing market or through other means for small businesses to form their traditional mean to lead us through this.”
Odland said he expects to see a recovery at the beginning of next year.
January 20, 2009
Small Businesses Will Be Key For The Economic Recovery
Phil McKinney writes: I’m an eternal optimist when it comes to the ability of people to create innovations – especially when we find ourselves at our greatest need. This drive to solve problems is a prime catalyst for entrepreneurs. So are entrepreneurs better at innovating than large enterprises with all of their resources? In simple terms …. yes!
A Chi Research report prepared for the Small Business Administration (SBA) highlights the innovation output from small businesses. Specifically:
*
Small firms produce more highly cited patents than large firms on average. Small firm patents are twice as likely as large firm patents to be among the 1% most cited patents. That is, small firm patents are on average more technically important than large firm patents.
*
Small patenting firms produce 13-14 times more patents per employee as large firms.
*
Small firm innovation is more extensively linked to outside technology while large firms build more on their own technology.
This is confirmed by examining the patents with the highest citation indices. Small firms account for 6% of the patents issued to the 1,071 most innovative firms. But when these patents are ranked by citation index, we find that small firms account for:
*
8% of the top 10%,
*
9% of the top 5%,
*
14% of the top 1%.
In addition to the ability of small businesses to generate innovations, they also are the leading creator of jobs. According to a recent report released by the Office of Advocacy of the U.S. Small Business Administration (SBA), small businesses created 1.9 million jobs in 2004, – the most recent year for which job creation was studied.
Other notable statistics from the report include:
* In 2006, the nation had an estimated 26.8 million small businesses, of which 6.1 million were employer firms which means 20 million small businesses in the country have no employees (self-employed).
* Small businesses employed 50.9 percent of the nation’s non-farm private workforce in 2004.
* Women-owned firms totaled 6.5 million and generated $940.8 billion in revenues in 2002 (latest data).
Go small businesses!! We are depending on you to be a key catalyst for the economic recovery.
I’ve read most of these reports also and cannot argue with the statistics.
But nobody can argue with the reality. The US economy, of which SMEs are apparently such a vital component, is a disaster. Don’t bother saying it was the big banks, the derivative market, the automakers, yada yada yada, that’s to blame for it. They mostly are. The real point is, the strength of small business is a shibboleth. The economy goes up and down based on what big business does.
SMEs are still the best SOURCE of new big businesses. That’s called growth. But there is this disturbing tendency among adherents to the SME gospel to focus on a certain level and not look farther. Putting all your eggs in the basket labeled “highly competitive industries with low barriers to entry” (ahem, direct-selling [Avon is a US brand, btw, guess where your value-added is going], BPOs, franchising)does not support growth.
The by-now stale diota about “Microsoft and Apple began as start-ups in a garage…” misses the point, as does most of the SME gospel, almost as completely as Mr. Abe’s formula. Microsoft and Apple invented an entire industry, more than that, they developed something that is now an inseparable part of human social fabric. That’s innovation. Starbucks is another favorite example of mine.
Small business is not the basis of a sound economy, it is just an interim step on the way to one. You want to bang the gong for SMEs, okay. There’s some rationale in that. But bang the gong for the ones that have Microsoft- or Apple- or Starbucks-like potential for innovation and competitiveness.
still misses the point –
while big business is a client of SMEs – it is not the only client.
for every big business, there is an SME that is working to break the barrier.
moreover, the capacity of big business to provide jobs has already reached a limit – and big business ain’t hiring – it is downsizing, cost cutting, re-engineering – big that’s a fact.
are you going to be like abe, beg and implore big business to take on new hirees given that it is downsizing – thats quite absurd.
that’s putting all your eggs in one basket. when big business tanks – so does the rest of the economy. and if you think that’s a sound economy – i dunno what to say :)
the other basket which is going unnoticed is the SME route – it is more diversified, more agile, and more flexible – when big business tanks, small business takes on the slack.
a diversified economy which does not depend on big business – is a sound economy.
Karl,
I think I’ve pointed it out that there are lessons and best practices to learn from: e.g. the chaebols example or Taiwan’s small-scale capitalism.
But by the same token, the Margallo Formula of appealing to the sensibilities of the tip of the power pyramid is just as useless, as everyone pretty much seemed to agree yesterday. Which brings us right back to the essential message of Bocchi, i.e., competitiveness and structure should be the focus. – Ben K
Ben K,
I’m not sure if everyone agreed with you today or yesterday. But if you are looking for some consensus and not merely find-faulting, you would have noted that at the very outset I’ve posed the following: “The competitiveness of a nation’s economy . . . largely depends on the competitiveness of the businesses that operate within and export from the country. Therefore, if our business class are inept in the way they invest and innovate, or to make use of the technology developed elsewhere, could they remain blameless themselves by simply putting the blame—often through the mass media they control—upon the corrupt politicians, the bungling bureaucrats, and the ignorant masses?”
And aren’t you in fact agreeing with where my bias is with these posts of yours:
1) “Not saying the guy who thinks he’s the next Steve Jobs shouldn’t try, nor should be denied resources (in whatever form — financing, tax incentives, friendly regulation, etc.) PROPORTIONAL to the scale of his business and wider economic impact. IF he demonstrates that he really is the next Steve Jobs, the big capital infusion will take care of itself. If not, well, he can go sell Avon, and the wider economy will not have been too damaged for giving him a chance, because the priority (in a sensible world) will have been on the bigger picture all along”; and
2) “The economy goes up and down based on what big business does.”
Again, am I begging or warning?
when your focus is on “business that operate within and export from the country” and then allude to the local business class you sound begging and whimpering like a dog, waiting for crumbs from the local economic elite.
having said that – i understand where abe is coming from.
indeed, the local economic elite have a role to play in moving the economy forward. however, the actuality, the reality is the Philippine local elite has managed to keep the economy backward, astray, or at best, nowhere.
The economy is out for the picking and consumers choices are limited. Economic activity was severely limited UNTIL the economy opened up a little bit. Which takes us to the fundamentals of a vibrant market-driven economy.
The Philippine business sector has traditionally been anchored on the big business owned by the local economic elite – and the upstream, downstream, and lateral linkages to SMEs. Consider this:
* one company owns vast hectarage of corn and rice
* These agricultural commodities are sold to a company that makes feeds
* The feeds company sells the feeds to a company that grows raises poultry and livestock.
* In turn the livestock growing company sells the livestock and poultry to a meat processing company.
* The finished products of the meat processing company are sold to a retail chain.
* The goods are shipped by trucking company.
* Financing of operations is undertaken by the local bank.
All of these companies employ people. Most of all, these companies are all owned by just one individual/group/family.
That is a good thing. BUT, that is not enough. There are more people entering the work force. A country the land size of Arizona, with a 90M population – 28% of the total population of the US, 18% of the EU. The local economic elite cannot handle the job alone.
And having a rent-capture protectionist constitution ties the hands of government policymakers hands in crafting a solution. It is good that the economy is being opened up, BUT is not opening up fast enough to meet the demand for jobs of roughly 500,000 new graduates entering the work force. Deploying professionals overseas is only a stop-gap measure because it will take a toll on the nation’s intellectual capital plus the social ramifications on households.
There is no one “pure” solution – rather there is a MIX of solutions that build on the competitive and comparative advantages of the economy and its workforce.
Big business can’t do the job alone. SMEs can’t do the job alone. But the productive integration and interaction between big business and SMEs has to be carefully calibrated. Otherwise, we can have a phenomenon similar to the Detroit which supposedly were too big to fail, but fall they did – and along with them, the SMEs that formed the value chain.
Having a diverse portfolio of big business and SMEs in an open market will increase efficiency and economic velocity. The local economic elite however was able to leverage the charter and has kept market forces at bay – to the disadvantage of the citizenry. Sooner or later, somethings gotta give and it will be done via the political route where legislation is crafted – or ultimately the charter changed to remove the rent-capture protectionist provisions.
BongV,
Nice summary of the issue. It does require both large and small and lots of new middle-market wealth-builders. It requires a government that also sees the forest to be nurtured, not the trees to be taxed, and as you point out, foreign wealth in . . . and as I argue about PLDT’s irresponsible exporting of wealth . . . with rules to reasonably keep imported money in-country. The Philippine economy has too little money spread over way too many people. And all the money ala Marcos sitting in foreign banks helps little.
Tempering the annual baby boom would also help, long term.
Joe
. . . heritage of smallness . . .
Thank you for this commentary. It makes a lot fall into place for my new found study of my newfound living space. To some extent the smallness (jeepney businesses, for instance) is a reflection of the THINNESS of the Philippine economy. It is a small opportunity because that is all that exists for the masses of entrepreneurs here who have no real capital – money or ideas of how to do a bigger business. People try to make it in an impossible economic setting . . . millions of people, with too little money circulating amongst them . . .
But I think the government-sponsored smallness, featuring for instance small farms and fine concrete roads through empty rice paddies, rather than AGRIBUSINESS, is more legitimately worth criticism. There seems to be little appreciation of what makes business work in the agencies of government . . .
Anyway, I have been grappling with this smallness perspective, and appreciate the point of view.
Joe
the issue becomes muddled when non-businessmen prescribe remedies to people who actually own and run a business – like armchair commandos preaching revolution to a battle-tested veteran field operatives :)
Benigs,
If you care to be forthright, you know that the essay tackles more than one key point although you choose one where, as far as our mutual exchanges are concerned, the issues are clearly joined: on one hand, you complain of the “puede na yan” mentality of the run of the mill Pinoy, on the other, I ascribe the same disposition (although I prefer to call it as “lackadaisical performance”) to the power elites (the economic elites, in particular).
If I have to put my thesis in even simpler terms, the proposition is basically this: if RP goes my route, there’s greater likelihood to solving the problem of extreme poverty in the Philippines in the short term. The examples of South Korea and Taiwan which made it in a generation or two cannot be easily ignored.
As you know I have responded to Nick Joaquin’s “Heritage of Smallness” in this manner:
“if the mountain will not come to Muhammad, Muhammad will go to the mountain”
The Philippine diaspora is a result of the inability of the protectionist economy to generate jobs. Thus, when the job creators are blocked from doing business, the job seekers will go to the job providers.”
To keep on harping for more from the local elites misses the point and is naive. Open up the economy, remove rent-capture protectionist regulations, let new players enter the market, and stimulate competition.
Ok, Abe.I have overlooked it,but as a consolation;
I tried to look back at where I first saw you discussing the heritage of smallness .
http://www.quezon.ph/2007/08/09/sandbagging-the-opposition/
Abe N. Margallo on Sat, 11th Aug 2007 11:09 am and
Sun, 12th Aug 2007 11:47 am
While this article is lengthy and has its merits, I find the title a bit disagreeable: empire builders?
An empire is something that takes over other nations and countries. By definition, an empire isn’t really nice.
Do we need to build the Philippines into an empire? All we need is a country with people who know how to behave properly and do things right.
All we need is a country with people who know how to behave properly and do things right.
Chino,
That’s what GMA in effect said when she was first swept to power. And I have argued in the essay that that seems to be where the rub is.
pick up a new word – something new manong – THE AGE OF THE INDUSTRIAL BARONS ARE OVER – that’s so kupong kupong panahon pa ni mampor, nangangamoy mothballs.
it’s the 21st century dude, here’s an acronym – SME – Small and Medium Enterprise :)
http://www.sunstar.com.ph/davao/antalan-people-leaders
This is what I am talking about.
I don’t need emperors. I don’t need heroes. I don’t need the local elite. I just need people who will do the right thing.
equal opportunity and affirmative action for nations, abe? you can level the playing field but you cannot equalize ability and innate desire to excel. equal opportunity may have paved the way for the election of a black man to the u.s. presidency but the economic and social status of the black population has, for the most part, remained essentially the same. of course, we have more black millionaires in the sports and entertainment industries but the real wealth of the nation, including the engines of economic growth, stay in the hands of whom they have always been.
the solution to the philippine problem is not more of the same social legislation and edicts. i think after all these years, e.g., after calalang v. williams, we have enough laws in the books to afford our disadvantaged citizens a fair shake. there is a limit to what the government can do beyond giving them the proverbial fish to tide them over for the moment, and teaching them how to fish. they have to WANT to catch a lot of fish, not only for today but also for tomorrow and beyond. ergo, the solution lies in the individual (unless physically and mentally disabled) to take full responsibility for his own self and the government to ensure that he has untrammeled freedom in his pursuit of happiness within lawful bounds.
Bencard,
I’m actually talking about industrial policies that today are banned in the current global economic order dominated by WTO, such activities I think as “export subsidies.” Given that even in emerging modern economies like the Philippines where extreme poverty and unemployment are still prevalent, the classifications of exempted countries should be looked into.
Anyway, didn’t you say you are (at least) a Clintonian democrat? What happened?
i voted for and supported clinton twice because, as reagan was a “middle-of-the-road” conservative, clinton was, or tried to be, a middle-of-the-road liberal. under both adminis5trations, welfare and government’s role in the economic life of the nation were significantly minimized, leading to mostly favorable results, including a budget surplus, at the end of their term.
i believe whether individually or nationally, welfare and subsidies, or free entitlements, of any form, given in an indefinite period of time, result in indolence, inefficiency, underproductivity and lack of ambition/aspiration, on the part of the recipient. but the worst part of it is that it creates a negative belief among non-recipients of being punished for success and rewarded for failure. undeserved entitlements are addictive and injurious to one’s self-respect and self-worth.
Ben,
Clinton was one smart dude. Oh where have all the surpluses gone . . . I agree with you 100% re entitlements. Efforts should go into creating jobs, not gifts.
Joe
The way corporate RP is run, it looks like government itself is into the business – very jealous lot.
So we have the economic elites on one side of the ledger and the political elites on the other.
These elites form a truly symbiotic relationship, come to think of it. In the end, politicians cannot live without the businessmen and businessmen cannot live without the politicians.
In the process, either the businessmen or the politicians have built empires.
Primer,
So how do you read the following situation?
The political elite is pushing for legal changes so that foreigners can compete a lot more…against the economic elite.
Primer,
The symbiosis is actually lopsided in favor of the economic elites. We don’t see them beaten up daily by the media they control, they way the trapos are whipped up relentlessly, do we?
There are no good solutions on the economic problems. Our colonial mentatily. The economic class herarchies that our
colonizers had placed as economic foundations are still working in our economic system. The colonizers established these economic class hierarchies. So that they can rule us and keep us a colony. It is
very hard for us to root out these colonial mentalities.
Our economic and political problems are the same problems that the
former Spanish Colonies in South America are facing. Unless, we go
back to the original Filipino thinking of BAYANIHAN Mentality. We
will never get out of the hole we had dug in for ourselves.
Our ancestors built the Banawe Rice Terraces without modern tools.
They traded with the ancient Chinese by Words of Mouth securities
only. They were the noble Filipinos. We can only say. We go back to
our roots. There we can see the solutions of our problems.
There are lots of good solutions to the economic problems. To get those solutions on the ground, political will needs to be exercised – specifically, removing the protectionist clauses in the charter.
Keep on with the protectionism, lose out on FDI and get crumbs.
Can’t have the cake and eat it, too. No such thing as a free lunch either.
Unless we change our mindsets. No good solutions will work.
It will be just Band Aid remedies to our problems.
I could be wrong, but a quick reading of Abe’s, (longish sigh :) )piece above gave me an initial take that what is being proposed is some sort of a Philippines Inc.
Along such lines, former President Ramos established a Team Philippines consisting of industry captains and business leaders whom he brought along in Presidential Visits to have a country team approach.
ah Japan Inc and its perennial depression
Investopedia explains Japan Inc.
The high degree of collusion between Japan’s corporate and political sectors led to corruption throughout the system and contributed to the downfall of the overvalued Nikkei.
to PhilManila: I thought that Abe was doing a psycho-slick “talangka”. The kind that says “… hanggang diyan na lang talaga ang Pinoy sa Pinas. Ang dahilan ay madaling makita. Crony capitalism may have worked in South Korea or other “tiger countries” but crony capitalism in Pinas does NOT work because the economic elite are not nationalistic enough.
And mga hijo at mga hija, wala kayong kinabukasan maski ano ang gawin ninyong pursigi kapag hindi nagbago sa puso ang mga economic elite.”
Even if you’re partially right, then I am dead wrong.
But now that I have your attention, I ask you this: have you donated lately to the UP scholarship funds?
You can run but you cannot hide. :)
kaya mga hijo at hija, put your candidates in positions of authority para kung ayaw magbago ang puso ng economic elite – pwedeng palitan ng mga mas matitino ora mismo.
to PhilManila: Have sent scholarship-fund contribution also to Trinity University/Quezon City (so they can train more nurses to replace those who leave for USA). :neutral:
I could be wrong, but a quick reading of Abe’s, (longish sigh :) )piece above gave me an initial take that what is being proposed is some sort of a Philippines Inc.
Phil,
Sort of. Although my suggestion is really to sort things out in round table dialogues among the politicians, the economic elites and the civil society.
I think HOW to do it is more important than WHAT to do, e.g., go SME or simply pick big winners.
Once the “process” is in place and the parties have faith in it, only the sky could be the limit – that’s why I call it Bayanihan Pact.
how many summits have been produced by the homeland pinoys – puro blah blah blah blah, ZERO RESULTS.
open up the economy, remove the rent-capture protectionist policies and regulations that distort the market will do more in a year than wasting saliva.
Benigno,
“where do those OFW dollars go? They get pissed away on consumer non-durables and unimaginative ventures like tricycles, jeepneys, you guessed it, real estate. So even those “not so endowed” people you put on a heroes’ pedestal are not above doing a bit of rent-seeking themselves when they get hold of a bit of cash.”
Many tsinoys started out by selling taho, mami, fixing shoes, buying bottles and newspapers. Starting “small” (by your standards) may seem unimaginative and unadventurous to you, but for the real people who undertake these efforts, it is quite an undertaking.
Any poor Pinoy who goes through the experience of being an OFW, saves his money and then puts up a business IN the Philippines (no matter how small/unimaginative that business is) is a hero by me anytime. Much more than any high-quality-university-grad with a prestigious job outside the Philippines. The former is a poor pinoy who uplifted himself amidst obstacles while the latter is a former pinoy who ran away from obstacles.
You forget the “high-quality-university-grad with a prestigious job outside the Philippines” who “saves his money and then puts up a business IN the Philippines” AND continues to generate savings by working overseas so he can diversify his investment portfolio in the Philippines and generate more jobs in his hometown in the process.
Yeah, you forget about the Filipino who holds a prestigious job abroad who then buys Filipino franchises that he sets up abroad. Also one Filipino abroad is one less competitor in the Filipino job market which just have 0.5 million new graduates this year alone. And you forget the Filpino OFW who is planning to retire one day in the Phil. Palawakin naman ang isip!!!
bongv & rosa,
I do not forget them (I am one of them in fact). I was just in the defense of the “small” OFW, which my father was, in relation to those abroad who don’t give a rat’s ass.
Those who got offended by my statement, you know yourself more than I do.
bongv,
mabuhay to you, if you were referring to yourself. may your tribe increase. thank you.
Reality check,
I guess when the government itself plays protectorate to multinational interests, it logically results in choking to death our local economic elites. If we do proportions, for every 10 units of economic value, the foreign investors get an 8, the poor elite counterpart a 2.
ConAss precisely sets to open the doors wide open to foreign ownership of land and units of production to satisfy the capitalist greed.
moonsoon,
It is a matter of statistical reality that our OFWs spread any part of the globe constitutes the domestic industry at a 90% whereas the professionals a tiny 10%.
Between the two, I don’t think anything too bad can be said of the latter than the former. The professionals as the more thinking class are not given to unwise spending.
abroad na nga.. ginawa pang domestic industry … ano ba yan
that’s correct primer. my point is this, benigno belittling the efforts of small-business-ofw’s is off mark. ideal society is the one with a large middle-class. if the poor ofw’s could uplift themselves and/or their families to middle-class then we are on our way. the professionals are already there, so their objective can be higher if they want. the elite is the elite, who knows what they want.
BongV,
Hopefully one of the businesses put up by such individuals will be along with what they learned from their work overseas so your post seems a good answer to Benigno’s issue in an article he wrote waaaay back of “You’d think with all that knowledge, some of it is bound to be properly applied to the Philippine setting.”
Like your uplifting story of your friend from Deland which happens to be a good answer to another of Benigno’s issues.
http://filipinovoices.com/how-do-you-solve-a-problem-like-benigno/comment-page-1#comment-68836
Karl Garcia,
I scanned your link of MLQ3’s blog “Sandbagging the opposition”. Benigno’s reply to you at his Wed, 15th Aug 2007 8:41 am post was very interesting regarding the issue of his personal motives!
Benigno,
Obviously you can’t wipe your mirror clean enough for you so maybe you should buy a new one already.
http://filipinovoices.com/the-law-of-conservation-of-credibility/comment-page-1#comment-73177
Nick Joaquin definitely got that wrong with War and Peace about that one grand design.
http://filipinovoices.com/the-philippines-under-a-positive-light/comment-page-1#comment-62125
Did Nick Joaquin explain that Michelangelo’s family owned their own marble quarry and that while Michelangelo studied sculpture, the materials were provided for him in the academy and that most of his works were commissioned ones?
If Ambeth Ocampo and Nick Joaquin had commissioned works like the sponsors of Michelangelo; we’d probably have marble sculptors even greater than Napoleon Abueva.
Obviously other people like the Japanese had an aversion to risk too. please do add http
://filipinovoices.com/triumphing-over-evil/comment-page-1#comment-66542
And those wouldn’t be the only things Nick Joaquin wrongfully implied. This certainly isn’t the only country where people buy and sell one stick of cigarette.
It is done in Indonesia, Zimbabwe, Nigeria, ….. and in reference to your view; even legally in pygmy scale thinking areas like Wyoming, North Carolina, and New Jersey of the US of A! pls do add http
://www.foxcharlotte.com/dpp/money/single_cigarette_sales_on_the_rise
://wysac.uwyo.edu/HealthEducation/Tobacco/docs/YouthAccessFinal.pdf
://www.allbusiness.com/retail-trade/food-stores/4479646-1.html
Btw, I didn’t bother to type all those links above individually. All of those links are copy and paste too.
i believe whether individually or nationally, welfare and subsidies, or free entitlements, of any form, given in an indefinite period of time, result in indolence, inefficiency, underproductivity and lack of ambition/aspiration, on the part of the recipient. but the worst part of it is that it creates a negative belief among non-recipients of being punished for success and rewarded for failure. undeserved entitlements are addictive and injurious to one’s self-respect and self-worth. – Bencard
Bencard,
Your claim of being a Clintonian democrat appears problematic because your lines sound like coming straight from Rush Limbaugh to me.
What I’ve suggested in my essay is that despite pretense of adherence to the market system, most advanced economies today (e.g., UK. US, Japan, France, South Korea) have been “developmental state” in which businesses have taken lavish entitlements from the “nanny state.” It’s called “corporate welfare.” I’ve cited “long-term” farm subsidies to wealthy farmers in the US and market-distorting assistance to Airbus in Europe. Also, that Japanese companies have risen to world-class status through the nannying by MITI.
In China, firms are still state-owned, and today, emerging from bankruptcy, that seems where GM is going – US-owned.
This could only mean that many successful economies today have been quite easy about walking the talk of “boostrapping” (i.e., starting and growing a business without external help or capital or pulling one’s business by the owner’s own bootstrap).
GM will be owned temporarily by the government (majority of shares).
The US does indeed coddle some firms (farmers in particular) in the interest of protecting them from cheap overseas imports. But on the whole, it is an open, competitive, robust commercially competitive economy.
If Ben voted for Bill Clinton, he indeed has a mind of his own. Rush Limbaugh is a performer who gets his audience by being outrageous. He is rather the opposite of Jon Stewart to me, rather comical in his bluster.
Joe
if you wanna talk china, are you willing to transform the philippines into a socialist one party state –
strip off all the properties of the local economic elite
execute all corrupt politicians
execute the oligarchs
when you are ready for this in the Philippines, espouse the view – otherwise you cannot have your cake and eat it too
you point to democracy, you want its fruits, but you dont want to adopt the culture that makes democracy work
you point to socialist china, but you want to keep your local economic elite, and you don’t want the revolution
para ka namang timang na nag iilusyon
this site is boring
abe, your data concerning japan’s contemporary economic history is a little off. the last 10 years or so have been called the “lost decade” and the malaise has been largely attributed to the series of “stimulus” band aid that japan experimented rather unsuccessfully. the same mistake appears to be in the horizon for the u.s. with obama’s adventurism with 2 stimulus legislation and, at least another one in the democrats’ agenda. one result is, as you said, big businesses will soon be “u.s.-owned” and run by unelected, inexperienced “czars”. where do these two governments expect to get funding for these stimulus packages? from the back of taxpayers, of course, and from the labor of generations yet unborn.
speaking of the world bank, i believe this internationally-funded bank has to be conservative and non-selective in the implementation of its rules for it to survive and stay in the business of funding development projects the world over. all countries should play by the rules to merit its benefits. it doesn’t have inexhaustible resources. one of world bank’s primary sponsor and contributor, the u-s., is now a debtor-state having its own cash-flow problem of major proportions.
Bencard,
Interesting point of view. I question what you mean by “Obama Adventurism”. If this is adventurism, what do you call Bush economic policies that ran up the deficit to outrageous levels while provoking economic collapse? It would be helpful to know specifically what you consider to be adventurous: Ownership of banks and GM (you would let them fail, ala Shearson Lehman, which stoked the financial free fall?)? Huge spending on programs to try to stimulate jobs (you would let the economy drift?)? The Health Plan? Exactly what do you oppose?
I saw adventurism in Bush programs and deceptions like keeping the Iraq war out of the mainstream budget. In Obama, I see an ambitious man trying to do too much – right now — and I trust that the mechanisms of checks and balances will rein him in (as they are in a sharp cry from legislators for no second stimulus package and a shrinking of the Health program). I would not call it adventurism, a politically charged word aimed at disparagement. I would add that Obama is following through on campaign promises to the letter. You would prefer that he not have that kind of integrity?
I flinch at the total sum of the spending programs and curse Bush for being so incompetent as to leave the economic affairs of the country in shambles.
Regarding the World Bank, etc., I would remark that the US did not have a “cash flow” problem when Clinton left office.
Joe
how long are you going to blame bush for obama’s ineffectiveness? this is his presidency now, and what has he achieved in 6 months? biden’s confession that they have “misread” the economic problems reveals an utter lack of knowledge of what they are doing, obama’s approval rating is drastically plunging because, among other things, those who made the mistake of voting for him now realize that, true to the liberal democrats’ tradition, obama’s answer is the same tax and spend “solution” the country’s fiscal problems. is this the “change” he promised? most certainly, he doesn’t inspire confidence to those who have lost their jobs, their businesses, their benefits, and lost their homes and life-savings.
Bencard,
The people are in financial ruin because of Bush. You whine and lay the complaint on the new guy because you are fundamentally opposed to his ideology, an ideology shared by about half the country, more or less on any given day. You remind me of politicians who are willing to distort truths to advocate a cause that favors them, rather than look honestly at a situation. I will defend Obama as long as there are narrow-minded malcontents who unfairly lay blame on him, rather than accept responsibility for what the Chief of their Idiotology did to the country.
Joe
i assure you, joe, you’re gonna have a lot of puny “defending” to do not only from what you call malcontents like me but from the very people that got hoodwinked by slogans like “time for change” and “yes we can”. even “blue dog” democrats in congress are starting to balk at obama’s economic mish mash, especially the additional stimulus idea and so-called health care reforms. btw, unemployment in america is now at an all-time high of 9.5% and climbing fast to double digit. this after the democrats’ rosy projection of “drastically” reducing job losses after their first stimulus bill (there are two under obama so far).
Bencard,
My stocks are up 40% since Bush left office. How are yours doing?
Time indeed will tell about Obama and his social spending. What we know now is that the economic free-fall was stopped when Obama, before being sworn in, used his (temporary?) high credibility to do what Bush could not – talk up “calm” instead of panic. The destruction of the American economy took 8 years under Bush, who operated in a fiscal manner 180 degrees of separation from normal Republican fiscal prudence. To think that Obama can right the employment ship in six months reflects an abysmal understanding of economic realities. Companies don’t go out an hire people overnight because someone says the economy is improving; they add jobs when they can make money by doing so. Obama’s administration has counseled consistently that it will take time. Indeed, some economists say the jobs will never come back; they are gone forever with the demise of a few financial giants and halving of GM and the auto industry (under Bush).
What is disgusting to me is the patent failure of Republicans to “own up” to the disaster. Lehman, the trigger of the collapse, was a Bush/Paulson decision. I know you don’t, but I find today’s sharply partisan politics to be fundamentally a violation of the spirit of American ideal of putting public interest first – whether practiced by the Democrats or Republicans. It shocks me to see the absence of personal principal; in that sense, you are right, the US government is just as corrupt as the Philippine “me first” government. It is one of the truly disheartening things about current US politics, when watching C-SPAN, to see the deceits in action.
Obama, refreshingly enough, although seeing Republican partisan blame-spin, is willing to accept responsibility for whatever emerges on the economy:
———
Associated Press, July 14
“I love these folks who helped get us in this mess and then suddenly say, ‘Well, this is Obama’s economy,’” the president said in a pointed deviation from his prepared text. “That’s fine. Give it to me!”
“My job is to solve problems, not to stand on the sidelines and harp and gripe,” he said Tuesday, his sleeves rolled up, barely disguising his targets as congressional Republicans.
———
I’ll keep my trust in this man. And I’ll endure your carping and sniping for four years, as it is only fair. I sniped and carped at Bush for five (I supported him for three).
Joe
BongV,
By all accounts, you are “begging” for the lifting of protectionist industrial or economic policies in the Philippines. I’m not sure if you want it to happen across the board. Would you then care to give us a list of at least your top five protectionist pet peeves so here in FV we could debate their pros and cons?
Are you kidding me, you were raising the specter of folks like me who would raise revolution – a revolutionary does not “beg”.
A revolution ain’t about begging Abe :)
Tatanong ka pa ng pet peeves. ilang bese na bang pinaguusapan yan. nakakasawang paulit-ulit, i would understand if you are bobo, at dapat ko pang uulitin yun.
There are only two items in the charter which are rent-capture protectionist in nature. sheesh. WTF.