1. The role of government is to create wealth, not redistribute wealth
The Soviet Union, former Eastern Europe, China, Latin America, and India experimented with various forms of communism and socialism in order to redistribute wealth more equitably. They failed.
This philosophy of redistribution is anchored on the thinking that people are entitled to their share of the pie, and therefore have created the fundamental policy of taking from Peter to give to Paul. However, the growth of the Philippines the last 50 years have been limited to 3 to 4 percent. At this rate of growth, and especially if the population is growing 2-3 percent as well, no amount of redistribution will lift people out of poverty, and we have failed as well.
According to Arthur Okun, whose saying has become known as Okun’s law, GDP growth of 3 percent will not be able to lower the unemployment rate.
The experience of the 4 tigers ( Hong Kong, Singapore, South Korea, Taiwan) , SouthEast Asia and lately of China and India have shown us that when the GDP is growing faster than 7%, then it is like a tide that lifts all boats. The wonder of China’s economic growth is not only that it created millions of millionaires, but that it lifted a few hundred million people out of poverty.
Philippines should adopt a policy of fast growth, and should do what it can to insure the competitiveness of its industries, by insuring that the cost and ease of doing business is competitive, and remove all hindrances to growth.
It is great to talk about justice or land reform, but above all else, we need to grow…. Fast! The number 1 priority should be to lift people out of poverty and the only proven way is to grow the pie by focusing on positive sum strategies, not zero sum policies.
May 21st, 2010 at 8:40 am
Wilson, I agree – but I am concerned about justice. Without a functioning and fair justice system, we are prone to abuse and even unfair competition….
May 22nd, 2010 at 4:03 pm
Hey, Thanks for making my morning a little bit better with this great article!!
May 23rd, 2010 at 3:37 am
hi dad
i agree with what you’re saying, and i think that the fastest way for us to “Increase the size of the Pie” is not to “Take from Peter to Give to Paul” but to “Teach Peter how to HELP Paul” and also for our government to be able to produce a more efficient program towards training Filipinos to be more competitive and aggressive towards growth.
May 24th, 2010 at 3:52 pm
i agree with you wilson.the problem of our economy the inflation rate is to much compare to the income of common people .so the result expenses and credit before income is deficit.the government spent over flowing expenses and it came from borrowed money.
May 25th, 2010 at 9:36 am
I think Iused the wrong word. Yes, justice is very important as it is the one that attracts investments. Let me think about another so called thing that politicians deemed so important, but is really not as important as growing the pie….
May 25th, 2010 at 6:38 pm
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May 27th, 2010 at 5:44 am
Hey, Of course,what a great site and informative posts,I will add backlink – bookmark this site? Regards,Reader.
May 27th, 2010 at 7:47 am
Thank you so much for a very intelligent and refreshing article. Great job!
May 27th, 2010 at 11:38 pm
Sure. Would appreciate everybody’s help to make these ideas more available to all!
May 29th, 2010 at 4:16 am
Partly there is a need for some government intervention for the there exists negative externalities in society. As basic economic theory tells, we live in the second best world where private costs may exceed benefits. Government is a necessary evil..
May 31st, 2010 at 10:05 am
Arthur Okun- Law says, for every 1% increase in unemployment leads to 2% decline in output or GDP. that is why unemployment is essentially not good, however low unemployment (high employment) leads to inflation (Phillip’s curve). As far as i can recall… anyway, politicians should better understand these trade-offs in macroeconomic goals and policies.
June 15th, 2010 at 5:24 am
politicians should understand what is the real meaning of being a leader not to have money but to help the country mostly to the people that are really in need , politician should think the future of the people not just to have power and fame.
July 2nd, 2010 at 10:04 am
you know you are right .. there are many company here in the Philippines… even multinational company but I thnk the policy and the system of the govt. about the employees protection is not clear and is not good. this kind of economic system is beneficial to the investors and those who belong to the middle class only.. i thnk the govt. must also find ways to elevate the life of the employees… the ordinary ones and the masses by revising the laws and implement it properly to elevate peoples lives..
July 5th, 2010 at 3:43 pm
There seems to be a certain misconception on equating “fast growth” to a rapid ascend to economic stability. This may have been the experience of our ASEAN neighbors but the circumstances and conditions that made them as they are, is not quite the same for us. Simply said, we may emulate the way South Korea did to lift their economy but we will not be guaranteed that it will yield the same results.
Our economy of the moment is propelled forward by three things, call center employment; government spending; and, OFW dollars. Our exports are severely limited, if not controlled by foreigners. Our farmers are pawns swaying to the music of the middlemen, oil and gas cartels control our mobility, flour and sugar businessmen control our morning padesal and a president that gets caught in traffic.
Without the call center industry, we’d get a ballooning unemployment, without government spending, regional,provincial and municipal economies will simply whither and without the OFW dollars we’d be on the fast road to hyper-inflation.
Bleak as it may seem, my take is to look back at our basic principles. What are we as a nation? We are a agricultural country, so why do we spend so much to match with the technology and process of other countries? Our rice farmer spends about 12 pesos per kilo to produce rice. Vietnam, another agricultural country produces it at 6 pesos?
Our average farmer age is about 42-48 years old. Our agricultural schools experience a steady 7 percent decline in the enrollment in agricultural courses. Our farms in the past 10 years have shown a decline in productivity of up to 6% per cropping. Land Reform and Justice is severely encumbered by fantastic laws that even Socrates would have a hard time discerning. And to think, I am just a little warm.
Who would not want to live in a successful and progressive country? But unless we learn to re-focus the meager resources that we have to where we are as a nation, as a people – we will get to where we want to be. Just as a child must crawl before he can walk, let’s make our farms and farmers grow, before we turn our sights to other things. For as long as our farmers remain slaves to the soil, to poverty to the middlemen and to an oppressive system – we will never get to where we want to go.
Take South Korea for example, the strength of its economy is not the industrial plants, but its farmers who own banks and invest in technology. America did not start as an industrialize country. It started with fields of wheat and grains and plantation crops. History is clear – for as long as farmers are hungry, the country is also hungry and we don’t need “techno-rats” to tell us about this.
July 8th, 2010 at 6:46 pm
thanks jon,
At the heart is trying to cultivate what is our ‘natural’ competitive advantage.
many countries have the water, the climate, and the soil to built on agriculture. I think we have small pieces of land covered with water. We should develop our human resources, instead, and encourage investments. attract business people to do business here so that our people don’t have to go abroad looking for jobs.
Doing business is not exploitation. It is using the forces of demand and supply.
July 10th, 2010 at 11:04 am
But of course government is doing both. The governors and politicians are ever creatng wealth that has been redistributed among themselves. To be fair, the economy is growing, but for whom? I agree the government do more to keep the productivity of our agriculture and the farmers secure and fulfilled of their basic human wants. This means government ought to protec them more than making them carriers of concession chips in the zero-tariff and tree trade table games with more prosperous countries in US, Europe and the ASEAN. In the guise of removing trade restraints in the global and regional economy , these countries are helping themseves at the expense of our farmers who are ill equipped in a competitive arena where only the strong may survive.
July 16th, 2010 at 10:39 pm
That’s why I reinstated Sen. Recto.. He’s one of a kind.. di lng puro sarili iniisip.. he did his job well at the expense of his career.. majority of the politician main purpose is to distribute gov’t spending w/o adding a single penny to it.. taz nangunguna sa pagtuligsa sa EVAT.. don din naman kinuha porkbarrel nila.. hypocrites.. at least recto created other source of income para pagpartehan nila..
just my 2 cents!
July 17th, 2010 at 5:07 am
The role of the government is to create a level playing field, where the environment is conducive for growth and progress. The Philippines is endowed with many natural resources where it can be harness for better use among its citizens.
Harnessing of the resource should be done in a just, equitable and sustainable way. As a citizenof the land, we have a just claim for the harnessing of the resource, an equitable share for those who labored in the harnessing of the resource to be put in good use. Most importantly, sustainable harnessing of the resource to ensure its continued availability for the generations to come.
Our government is tasked as the manager of the wealth of the nation. Thus, it is only just to make those person in the governme accountable even after their tenure of service. Making them accountable will make them hopefully better manager if there is a prospect of consequential effects of their actions while in office.
It is deem equitable that we amply provide for the needs of our carrer government officials and their families while dispensing their duties to the outmost of their abilities – even after their term of office – if this will bring about honest and dedicated service in return. Thus, the harnessing of the nation’s wealth will have maximum effects to the majority of its citizens.
Sustainable harnessing of resources also should also involve due considerations to the maximum benefits that will be brought about to the citizens.
July 18th, 2010 at 9:16 am
The role of government is to create wealth, not redistribute wealth…
Here is a current issue that I will try to use as an example. The newly enacted Senior Citizens Law mandated all drugstore owners to “redistribute their hard-earned wealth” by ordering them not to collect VAT from our elderly citizens and at the same time give 20% discount to them. As I see it, the government’s constitutional mandate to take care of its elderly citizens is being passed on to the private merchants… a very clear case “of taking from Peter to give to Paul.”
December 23rd, 2010 at 12:06 pm
The big problems in the Philippines are political leaders attitude, government employees corrupts, most of the Filipinos are with mañana habits or laziness, envious, and crab mentality. That makes what is Philippines now.
December 1st, 2011 at 9:36 pm
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December 6th, 2011 at 3:05 am
Hello!
I’ve read your article. It is good.
I know that we aim to make the pie bigger but there’s a need for redistribution of wealth to ensure that the poor can be part of that growth- and ofcourse, this redistribution of wealth is spear-headed by our government.
If the focus is just to grow, the possible result would be this “the rich will be richer and poor will be poorer”. The government invest on programs to help the poor help themselves. Without this redistribution function, economic progress, i think becomes an impossibility.
I hope you get my point.
December 7th, 2011 at 7:20 pm
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