Substance matters in an economic crisis
22 January 2009
Equity. It is that ethereal quality of an entity -- be it a person, a business, or an entire society -- that spells the difference between the authentic and the pretentious, the sustainable and the fleeting, the substantial and the shallow. When you think "America" what comes to mind? Most likely it will be names and concepts like Walt Disney, Hollywood, Nike, New York City, the NBA, iPods and iMacs, Microsoft and Windows, Silicon Valley and Dot.Com, Coca Cola, Superman, and lately, Barrack Obama - the rock star American President.
For that matter, think "Japan" and "Germany" both of whose membership in the club of holders of exceptional cultural capital is a no-brainer. Like the earlier, names and concepts come up: Toyota and Mercedes Benz, Anime and Manga, Samurais, Ninjas, and the code of Bushido, Teutonic Knights and cutting-edge engineering, Just-in-Time Manufacturing and Kaizen (continuous improvement), precision equipment and tools, sushi, sakura (cherry blossoms), and efficiency. Sweden and greater Scandinavia? There's Nokia, Volvo and Saab, Ikea, ABBA, the Vikings, Scandinavian minimalism and environmentally-sound prosperity. Let's not even get started with the French, the Spaniards, and the Italians, not to mention the cultural stars of the Third World -- India, China, Thailand, Cuba, Jamaica, and Tibet, to name a few.
And then there is the Philippines -- that quintessential society of "educated hard workers" that remains impoverished and utterly vulnerable to economic forces and trends outside of its control.
One thing that financial "crises" reveal is how much substance one has. It sets apart those who have sustainable sought-after trades and those who are expendable or readily-replaceable.
In the aftermath of the 2008 financial collapse and the ensuing global recession, at least a million Philippine jobs are either at risk over the next 12 months or are already evaporating as of this writing. As rich societies feeling the pinch turn inwards and focus on their own invidual survival prospects and the welfare of their own citizens, the jobs of up to 500,000 Filipino overseas foreign workers (OFWs) come under pressure. In countries that host a significant number of OFWs, absorption of local workers displaced by business closures becomes a politically-hairy priority and the flood of surplus labour supply suddenly makes the labour market an employer's market. The resulting downward pressure on wages suddenly makes a return to domestic in-sourcing increasingly viable. Another 100,000-odd jobs in the BPO scene in the Philippines -- an industry that, just a couple of years ago, experts crowed will be a million jobs strong by 2010 -- all but goes kaput. Already, Accenture, one of that industry's biggest players, had laid off 500 personnel certainly making the remaining 15,000-odd beavering away at its Manila offices a nervous lot.
Fly-by-night labour-added-value sweatshops are also falling in succession. The venerable chip maker Intel is waving sayonara to the Philippines putting the remainder of its 1,800 Filipino personnel on the streets; the survivors of an earlier November chopping spree on its then 3,000-strong workforce. If Sulpicio Line ships that snuff out thousands of Filipino lives annually no longer make headline news, at least this relatively abstract analogy to sinking ferries still does in Philippine society.
Include the 100,000 to 200,000 workers employed by manufacturers and exporters of the Philippines' undifferentiated and weakly-branded range of furniture and jewelry products. Certainly as demand for even the most essential products, services, and commodities weaken, a larger decline in the market for non-essentials (coupled with an increased focus on domestic sourcing) could lead to a collapse in these exports as well.
The biggest challenge facing returning OFWs and laid-off workers is coming to terms with what exactly they will be coming back to.
When a society's economic house is built on top of a sand dune of me-too approaches to business development, employment hinged upon capital created by entities not inherent or indigenous (in other words, external or foreign) to it, and ephemeral cost-plus commercial transactions, it is difficult to see a bottom in the event of economic collapse. There is no real equity at the core of such a society's economic house of cards. There is nothing in the Philippines beyond the muscle of its workers that is worth buying. When demand for labour vanishes, Filipinos are left with virtually nothing. No world-class business assets and brands to sell, no safe and pleasant (much less interesting) cities and countrysides to offer to European and Japanese backpackers, no lush forests to pitch to researchers and eco-tourists, no world-class cutting-edge indigenous technology and scientific achievement to fall back to and build upon from scratch if necessary. Nothing.
Rather than build an asset base of people, infrastructure, knowledge and expertise, and culture of enduring value, Filipinos spent the better part of the last half-century harvesting its low-hanging assets and exporting them raw as stop-gap measures to prop up a mediocre economy. Much of what Filipinos take pride for in their country is its natural beauty. But that is rapidly being physically degraded as well as overlooked because of peace-and-order issues in the remaining viriginal parts of the archipelago. That leaves the human achievement component of the intrinsic value of the Philippine Nation. Not surprisingly, while Filipinos get heaps of kudos from their foreign employers (and themselves) for being such hard workers, not much can be said about the collective design and innovation faculties of the society. Unfortunately it is in the furnaces of design and innovation that Capital (with a big "C") is ultimately forged.
Design-added-value results in creation of enduring value. Even in stillness, a truly valuable painting or literary work, for example, can keep a viewer transfixed, spellbound and reflective; offering a richness and depth that continuously reveals subtle aspects of itself with every additional hour spent exploring it. Its value is inherent and stored. Its value is capitalised -- a finite amount of labour input resulting in an immeasurable quantity of value continuously delivered over a timescale that transcends the labours of its creator. On the other hand, labour-added-value is fleeting and volatile. The value it yields over time is dependent on a sustained effort. The need for said effort can easily disappear in one of those turns in fortunes that are notoriously impossible to forecast -- such as the current financial "crisis".
In good times, the economic value sustained by commercial activity in most economies keeps peoples' quality of life safely above the absolute poverty line. The inherent risk that is always present in labour-intensive economies becomes apparent in bad times.
Whereas a robust equity base in a well-capitalised economy helps keep its peoples' heads above water in a depression, there is no such rock bottom in a labour-intensive economy. Like a super-massive star destined to collapse into a dimensionless black hole, economic collapse in a labour-intensive economy can plunge the majority of its population below absolute poverty into wretched levels of existence.
Decades of dependence on foreign employment (and a lack of appreciation of its social costs), sustained prostitution of the economy at the altar of the gods of "foreign direct investment", and a consumer market opened to a flood of non-durable imports has rendered Philippine society one that utterly lacks substance -- one that could now be providing a safety net for workers once hailed as "heroes" of the Republic now returning to become its burden.
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