I found this article by Mr. Boo Chanco very enlightening!
Being trained in economics, I think there are a few pointers here that were prescribed by Dr. John Nye as sensible for our crawling economy vis-a-vis countries from ASEAN and Asia in general! To drive home a point , we've been boasting with simply enjoying "growth" year-to-year without considering or probably missing the fact that our regional neighbors are growing significantly more than ours! Just note the anecdote about out-running one's "partner" if you can't outrun the "bear"!
Also a related and relevant mindset is having a "cosmopolitan" outlook! It pays to look outwards occasionally for new approaches , thinking and practices to enhanced our "position". This is the new lingo for what used to be the principle of "best practices" almost two decades ago ! There is a trap here though as too much "outward" looking may lead us to neglect our "natural" strengths!
Go read Mr. Chanco's article...it would be better though if we get hold of the study by Dr. Nye itself for a more intelligent and scholarly appreciation of his treatise !
One kaklase P-Noy should listen to
DEMAND AND SUPPLY By Boo Chanco
(The Philippine Star) Updated August 08, 2011 12:00 AM
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What is worrisome about the Philippines,
Dr. John Nye told an audience of businessmen last Thursday, is how we
are falling behind our Asean neighbors in terms of economic growth. We
grew five percent in the last decade but our neighbors grew seven to
eight percent. This is unnatural, the Filipino-American economics professor observed.
Dr. Nye is no ordinary economist. He was valedictorian of P-Noy’s
Ateneo High School class. He has a bachelor’s degree in physics from
CalTech and a masters and doctorate degree in economics from
Northwestern University. A professor of Political Economy at George
Mason University and a national fellow at the Hoover Institution at
Stanford University, he is a specialist in European economic history and
institutional economics.
His lecture last week under the sponsorship of Asia United Bank was
on “Speeding up Philippine Economic Growth: a Historical and
Institutional Perspective.” His lecture was well received and the
question on everyone’s mind was, “has he talked to P-Noy?”
He wouldn’t say anything about it, neither confirming nor denying any
contact. But I understand he did meet the President and the next
question is, did P-Noy get anything out of the meeting?
I want to believe P-Noy did imbibe some good ideas. For one thing,
Dr. Nye isn’t like most economists we have met… he takes a stand and
ordinary mortals can actually understand him. That’s because he doesn’t
scare people off with esoteric econometric models and formulas but talks
about the real world – the impact of elites, special interests and
institutions on a country’s economy. He also thinks there is too much
focus on higher taxes, fiscal balance and infrastructure spending when
structural imbalances in the economy are the more urgent impediments to
growth.
In talking about our situation, Dr. Nye said it is good to take a long-term view and not be too impatient. He believes in incremental progress so long as the steps we take are in the right direction.
We may not feel it today, he said, but if we have consistent growth
over time, we will just wake up one day and see people are actually
better off. We must, however, get things right. Our economic history, he
observed, is one of constant missed opportunities.
We don’t have to be a stellar economy, he said, we only need to be ahead of our neighbors. He then illustrated his point with a little anecdote about some campers and a bear.
A couple of campers were out in the woods when both caught sight of a
bear. One of the guys took his running shoes out of his knapsack and
started putting it on.
“What are you doing,” the other camper asked.
“Run as fast as I can, of course,” was the reply.
“You’re silly,” the other camper said. “You can’t outrun the bear!”
“I know that,” the first guy said. “I was only intending to outrun you.”
That’s the point: we probably cannot outrun economies like China but
we should be able to outrun Vietnam, Indonesia and horrors, Myanmar,
Cambodia and Laos… And his advice on how we can do that is to get rid
of our nationalist insecurities and open up our markets to global
competition.
Dr. Nye said he doesn’t understand why we have so many laws that bar
the entry of foreign investment that would create jobs here in the
country. We are so afraid of having foreigners exploit our labor at home
but we don’t seem to mind letting foreigners exploit them abroad, he
observed. Thinking global is the way to create jobs for these workers at
home, he stressed.
Modern development involves a switch from low productivity to high productivity areas.
China, he said, is the latest example. Its impressive story is all
about moving workers in great numbers from the low wage/low productivity
rural/agricultural sector to higher productivity industrial
(export)/service sectors. We, on the other hand, have policies like
high minimum wages and strict employment protection in the industrial
sector that prevents industry from absorbing more workers and thus spark
the economy’s transformation. That is also why the unemployment rate
for college graduates is higher than those with less education.
We were once the leading economy in our region, he lamented, but
we squandered our early advantages through protection (import
substitution), manipulated currency, anti foreign rules. Extreme
nationalism, he said, turned the nation inwards in the 50s and 60s. Like
Argentina, we basically raised the cost of capital and destroyed
investment. We also slowed the growth of English in the 70s when the
whole world was anxiously trying to learn it.
The key for us, according to P-Noy’s kaklase, is structural transformation which also means we have to get rid of first order distortions.
He identified these as: high industrial minimum wage + regulation;
restriction on foreign ownership of land and businesses; multiple
barriers to competition, complex and intrusive tax system and our
version of agrarian reform.
Dr. Nye thinks our land reform is ineffective and inefficient, worse than the old system. It preserves the dominant groups and kills new competition without redistribution. The rules benefit existing elites.
On how we run our economy over all, Dr. Nye denounced what he sees as
a marriage between nationalist and populist thinking with the interests
of the elite in preserving restrictions to global competition. It is only global competition that can break the stranglehold of the traditional oligarchs on the economy, he stressed. This is specially so because we have weak institutions and arbitrary enforcement of rules.
Our problem, he said, is that we Filipinos love making new laws too much. Right policies rather than more rules should do better for us.
He cited the telecoms deregulation policy of FVR as one outstanding
example of how opening up an industry delivered better service and
contributed to economic growth. Here, the state’s role is merely to
provide a level playing field.
An example of failed policy that saw massive state intervention is what has happened to the power sector and because of it, we are still suffering the region’s highest electricity rates.
He does seem to have a point there because we are about to fall into
that same trap of state intervention mandating massive subsidy to
renewable energy through so-called feed-in tariffs that will allow
vested groups to rent-seek at the expense of consumers who must bear the
burden of even higher power rates.
How do we get going? Dr. Nye was realistic enough to acknowledge
that the path to reform is difficult because entrenched interests will
fight to keep their privileges. Even communist China, he observed,
had its entrenched interests in its major cities of Beijing and
Shanghai. That is why the economic revolution started in far away
Guangdong and Fujian, he pointed out. And when the reforms in these
second tier provinces started bringing prosperity there, it was easier to introduce similar reforms in Beijing and Shanghai.
He suggested that we open up the market in small regions, establish mini Hong Kongs or mini Singapores. I thought that was what we were trying to do with Subic but somewhere along the line, the entrenched interests prevailed and Subic
is nowhere near the dream being peddled at its inception as a special
free port. Its free port status (followed by countless others) just
became a legal excuse to smuggle highly dutiable merchandise, another
form of rent seeking by established politicians.
He also thinks we should be cosmopolitan… find ways to involve international players not beholden to local interests.
We should encourage regional competition and increase market access so
that different businesses are involved. Then, don’t be fixated on legal
details.
Finally, he called on us to always look outwards. Filipinos, he
said, are not afraid of the world, so why not let more of the world in? By allowing more globalization, you will keep Filipinos working at home and not have to send them abroad. And
he said, he is making these points from the perspective he has of world
economic history… of how winners and losers are made of economies
through time.
I sure hope he spends more time talking to P-Noy. I am afraid it is
difficult to absorb everything he has said in the course of one
briefing. Dr Nye is one kaklase P-Noy should really spend more time with.
Resign?
Robin Tong and Rosan Cruz sent this one on Migz resignation.
JPE: “An unselfish act..”
Ed A: “A brave decision that will change the course of politics...”
Lito L: “Bakit siya nag-resign? Puwede namang mag-absent!”
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