The Philippines is going down a FAKE development path

The Philippines is a vulnerable society — vulnerable because, though it is resource-rich, it is almost wholly dependent on external capital for its survival. Japan and Singapore, for example, are resource-poor countries, yet they are among the world’s most prosperous and highly-developed. The Philippines along with many African and South American countries lie in a fertile belt rich in minerals and other resources. Yet chronic impoverishment and underdevelopment characterise these societies.

Resources are therefore not a key ingredient in the development of a society from Third World to First World. What separates the winners from the losers in human development is a talent for smart work. There is a key truth in the observation that a small elite set of human beings control an astoundingly disproportionate amount of the world’s wealth. This truth is that quality — not quantity — is what ultimately matters in the on-going competition for power and wealth going on within our species.

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In the case of Filipinos, no amount of resources lying for the picking within their borders guaranteed prosperity. Indeed, to this day, control over the capability to create financial wealth out of those resources lies in the hands of foreigners and the small elite circle of Filipinos who are in partnership with these. Ordinary Filipinos only have token claim over their land’s wealth by mere virtue of their being citizens of the state that happens to claim sovereign rule over the territory where these resources are physically located.

This is where the confusion lies. Human civilisation measures wealth using an abstract concept: money. Unfortunately for people welded to the notion of wealth being tied to land and physical stuff, money transcends time, borders, and states. This is why it is possible for beautiful people sipping cognac on a yacht on one side of the planet to further enrich themselves on the back of poor sods toiling away in mines, sweatshops, and plantations in the world’s underbelly.

When we recognise what underlies real wealth in today’s world order, the flaw in the sort of “activism” we are subjected to becomes crystal clear. In the Philippine setting, in particular, much of this dysfunctional “activism” revolves around Filipinos’ entitlement to labour rights and territorial claims. The trouble with this is that even if all these “activist” advocacies are realised — with every Filipino worker paid “just wages” and all territorial claims from the state down to indigenous communities’ resolved — there is no guarantee that wealth at First World levels will follow. The key to wealth will remain elusive because the key to sustained and scalable wealth is in capital expansion.

Perhaps Filipinos will increasingly become highly-paid employees thanks to more foreign investment and more foreign-owned capital (like multinational corporations) finding homes within their country’s borders. But unless Filipinos become a society of better (more skilled and productive) workers, more adept at making nice things, and more innovative at creating new markets through the development of new products, services, and processes, they will remain a fundamentally poor society.

Examples of fundamentally poor societies with people enjoying high incomes can be seen in oil-rich countries like Saudi Arabia and Brunei. These two countries own the oil within their territories but rely on foreign expertise and capital to convert these resources to financial wealth. Oil, after all, is a worthless resource without the demand created by technologies that require it as fuel. Those who grew wealthy on the back of Arab oil were those who capitalised technologies and built vast industries fueled by this oil. While these societies that built oil-hungry economies became open, liberal, and free-market First World societies in the true sense, Saudi Arabia and Brunei remained backward authoritarian fundamentalist states despite being awash in cash.

Like Saudi Arabia and Brunei, the Philippines also struggles to develop a smart society built on technological innovation and engineering excellence. Unfortunately, the Philippines lacks oil so it cannot get rich in the same easy way that Saudi Arabia and Brunei did. The closest resource to oil the Philippines has are warm human bodies and this is what it exports in vast quantities to the tune of an estimated 10% contribution to its economy. Like oil, employment of warm Filipino bodies is dependent on the deep industrial bases of countries that import this commodity. In short, oil and labour pool wealth is only as good as the demand created by advanced societies and their vast technological and capital bases.

The Philippines’ enormous supply of workers is a liability to an economy that lacks the industries to employ enough of its members.

And so here is the point of all this.

Nowhere in the development path the Philppines is taking is there anything substantial that points to an overall goal of building a similar largely domestically-originated industrial-capital base. The wherewithal to absorb new technology and expertise seems to have expired since the heady “import substitution” days of the 1970s. If there are programs to encourage clustering of upstream and downstream local industries around manufacturing, none seem to be effective. Government statistics point to an anemic growth in jobs created in the Philippines’ industrial sectors. The handful of sub-sectors in manufacturing where growth is recorded deliver employment growth rates consistently way below overall population growth rates.

There are also industries that deliver high value to advanced and emerging economies that are not reliant on expensive bricks-and-mortar capital. The entertainment and technology industries, for example, contribute enormous value to many advanced countries. But these industries demand even more intellectual added value than manufacturing — specifically creativity, orginality, and innovation. In those fronts, Filipinios are also severely falling short. One would be hard-pressed, for example, to name a true international hit performer or media product coming from the Philippines, a country of 100 million. Even more disturbing, there are hardly any up-and-coming or major established indigenous Filipino technology businesses.

More than mineral or natural wealth, it is the ability of a society to build and mobilise its collective intellectual chops to create capital to generate more wealth per capita. This is the development path the Philippines should be taking — not one that involves putting in a disproportionate amount of effort scrounging around for “foreign investment”, pandering to an army of overseas workers, and twisting private enterprise’s arms to up the minimum wage. All of these are puny short-term fixes that create an unhealthy sense of entitlement rather than a productive ethic of self-reliant wealth creation.

Perhaps, for starters, the Philippines’ shrill “activists” should be put on notice — to stop giving Filipinos fake promises that good things can be had for no cost (like higher wages without increased labour productivity to fund it). If there just has to be activism, what Filipinos need are more intelligent activists who understand real economics and not the fantasy pseudo-science that they backward engineer from their lame and obsolete ideologies.

7 Replies to “The Philippines is going down a FAKE development path”

  1. Our pseudo activists are excellent at whining and barking. They are the type who will hold on to their ancient ideology, too afraid to step out of the box because they offer nothing to achieve economic stability. Our best talents, our creative geniuses, are working elsewhere, their names subsumed by the companies that employ them. In the meantime, we’re happy with having a plateful of pancit, adobo, and lumpia, and be praised by unknowing foreigners for such food.

  2. We had a lack for the last fifty years on industry leaders and fair competition, we got the oligarchs instead and we became a Service Economy, even though we were back then two decades ahead of China and South Korea in the 60s to 70s when it came to development, we squandered it all.

  3. Filipinos are not interested to develop their natural resources. They are content to sell them to semi finished products, and buy them back as finished products at high prices.

    As long as we engage too much in politics, as we are now, and has always been; no amount of coaching for development will be realized. All will fall on deaf ears. Politics is our biggest industry. Our thieving politicians are the “Titans of this political industry”…

    We have exported most of our people with education, skills, talents and brains, as OFWs. Most of those Filipinos remaining are : EDSA zombies; NPA commies; Activists of all sorts, politicians and political wanabees; shabu dealers; and thieving politicians’ followers. They are not interested in creating industries.

    So, we have a growing service industries; a growing OFW slave industries that caters house help slave services to any country that can afford OFW slaves. We also have a growing foreign goods consumer industry. A reason why Sy’s ShoeMart is thriving…

    Unless , we awaken from being “EDSA Zombies”, and work for true development programs for ourselves and for our country. We will remain the economic basket case of Asia !

  4. Hello and a good day.

    I visit GRP from time to time and I find myself agreeing with views expressed here, such as the flaws of Filipinos and the useleness of the opposition…

    I have also known about the “resource curse.” The fact that resource-poor nations are the ones on top is telling.

    But I am skeptical of a central thesis of this article: That we must not hinge our development on foreign capital.

    Foreign investment is the path China and our SEA neighbors took.

    Pioneering nations Japan, America, and Britain took an awful long time to build native capital and technology. Shall we have the Philippines undergo decades down this path, maybe try to build backyard steel mills like China tried to do under Mao? Or shall we have foreign investment help in technology transfer?

    At the head of Japan and the Asian tigers were strong, effective governments. Not the dole-out type, but visionary leadership that crafted economic strategy on a national scale. They supported the economy initially and the private sector followed. They set the policies and people followed. Shall we expect the individual Filipino to transform on their own? Some might be able to pull it off, but that goes against human nature, not just Filipino nature.

    Good thing the government is shaping up these days. There is hope for this country.

    1. I have nothing against foreign investment. What I do notice, however, is our capability for deep absorption of capital funded by foreign investment. The jeepney industry is a good example. It is actually the product of accidental “foreign investment” in the form of the surplus US Army jeeps left in the Philippines after World War II that then went on to seed what had now become this parasitical industry.

      Rather than innovate further from this seed capital, manufacturers of jeepneys simply went on to continue manufacturing their products up to this day in virtually the same way that they did back in 1946.

      Teach Filipinos how to fish and they will still prefer to beg for fish is sort of the underlying dysfunction at work here.

      This lack of an ethic to create and build capital bases is not compatible with our talent for multiplying like cockroaches. You require a capital intensive economy to match an aspiration to support an enormous population at First World standards. Japan did just that. It had an enormous population but its industry and economy caught up — because its people embraced a strong ethic of innovating and capitalising their way to prosperity.

      Foreign investment is ok, so long as its recipients can run with it and make something out of it. Filipinos have so far not demonstrated an ability to do that.

    2. Bit them in the ass though, the rest of ASEAN’s economy collapsed in the Asian Crisis while the sickman powered through it mostly unscathed. First sign of trouble they leave and the economy crashes as a result.

  5. The barrier during self-improvement is not so much that we hate learning, rather we hate being taught. To learn entails that the knowledge was achieved on one’s own accord – it feels great – but to be taught often leaves a feeling of inferiority. Thus it takes a bit of determination and a lot of humility in order for one to fully develop.

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