ReInventing Philippines Inc.,

Competition is stressful.  Can you imagine a business or an individual having to prove himself again and again?

The United States economy is the richest, and stressful economy because it fosters competition.  Many people complain about it but there is no other way.  Oh there is.  There is always the short cut way of asking government to choose sides, and choose the winner. Indeed, this is playing out in all areas of the world.  But everytime the winner wins because of government regulation rather than free competition, we all lose. We end up with products that are more costly, or less than the best.

Every week, four hundred thousand Americans lose their jobs, and another 600,000 change or leave their jobs voluntarily.  ON the other hand, about a million or so  find new jobs. How stressed is that?

This is the 21^st century malady. Competition brings out the best in us.  Unfortunately in an effort to get winners, there will be losers. Can you imagine if the Olympics, or the American idol  ( or the Philippine elections for that matter) was rigged, and not the best wins?  Would you still be interested to watch it?

We have to welcome change, and maybe what separates the winner is the willingness to change, and to accept change.

In a recent survey of executives from the United states and Europe, businessmen were asked: “ What is the opposite of change?  The Americans mostly answer: stagnation.  The European answer: stability.

What’s your take?  I guess our ability to change, and to continue to compete will determine how high we will be able to go.

Productivity is efficiency that maximizes output while minimizing inputs.  In the United States, it is the most important indicator that is tracked every quarter. If your productivity is going up, it almost always follows that your competitiveness, as well as your quality of living goes up. Regretfully, it is not given much importance or credence in the Philippines.

If low wages were the sole barometer of where companies want to invest, they would all be going to Africa.  When NAFTA ( North American free Trade Agreement) was signed which allows Mexico free access to the United States market, it was predicted that the Americans would lose their jobs to the Mexicans, who are willing to work at minimum 5 or 6 times less salary.  But that has not happened. If the American worker is more educated, and skilled, and as a result can produce units or value 10 times more, then he can still be a more valid alternative.

The reason why China is so strong, is that while its wages have doubled since 2000, its productivity have risen almost fourfold. In contrast, productivity of the Filipino workers was noted to have risen only 2.3 percent in the 1995 -2000 timeframe, and by a marginal 0.9 percent in 2000-2005.

Take, for instance, two firms, firm A and firm B, with the same level of output. Firm A however utilizes lesser input than firm B. Thus, firm A is more productive. With lesser usage of input, it is expected that firm A will have a lower cost of production and can charge a lower price for its products. Consequently, it is likely to have a larger market share and higher revenues.

Improving productivity through skills training and education is essential in attaining global competitiveness with the end goal of achieving sustained economic growth.

I have many expatriate friends who tell me that working here has been a big inconvenience.  There are a lot of paperworks, and lots of payments, over and under the table.  It was almost as if people think it was patriotic to make your life hard and expensive for working here because you were getting a job away from a Filipino.

Meanwhile, the Bureau of Immigration announced that they have record revenues.  Is the immigration department supposed to be a money making thing?

If I were a businessman who owns a hotel with a parking lot, and the hotel business stinks, but the parking is earning good money, maybe it is time to think that the business could be improved if I offered free parking.

IF the Philippines can attract skilled immigrants, it should be encouraged. Well educated immigrants are almost always positive for a country.  In fact, half of Silicon valley startups are founded by immigrants (mostly Indians and Chinese.  Several notable tech companies were started by a Filipino immigrant – Dado Banatao), and these companies hire huge numbers of US workers.  Over 25 percent of America’s Nobel laureates are foreign born, and 40 percent of their doctorates in computer and engineering are foreign born.  Economists disagree on a lot of things, but almost all agree that the United States is a much more prosperous country, and has a lower unemployment rate by being open than by shutting its doors.

When skilled professionals live and work on a place, they benefit the place with their expertise, and create opportunities for everybody.  On the other hand, losing your best people to work overseas is  probably the worst, and least sustainable way to help the economy.

Whether he is a communist leader in Europe, or a self professed public servant, there are not many leaders that are truly altruistic.  Many have been exposed to be looking after their self interest. It is human nature to look after yourself and your interest first.  However, it does not mean this will not redound to public good.

Adam Smith, the father of Economics, in his treatise The Wealth of Nations, widely considered as one of the greatest achievements in intellectual history, expounded that:

“The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security is so powerful a principle, that it is alone, and without any assistance, capable of carrying on the society to wealth and prosperity.” He is saying that individuals who compete for private gain will, as if led by an invisible hand, promote the public good.

You don’t have to look far. You go to Singapore, or any modern city. You find good service in hotels, food in the supermarkets, seats in the bus, and pretty much every convenience you are looking for.  Nobody tells the people to offer this product or service. It is only that they, sensing an opportunity for private gain in offering so, does it.

Competition is also a key factor because it motivated each person to become more productive.  And the greater the productivity, the greater the gain for the individual and prosperity for the community.

As Adam Smith puts it, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner but from their regard to their own interest.”

Market economy works best because policies and regulations most closely aligns personal interest with public good. When the winner is able to win big, there is every incentive to work harder. When the winner wins small, and is taxed heavily, and the consolation prize is also substantial, then people lose the incentive to compete.

No country in the world owes its success to aid, and the Philippines is not going to develop or lift its people out of poverty by aid either.   They became rich by becoming successful market economies, and by investing and developing their people and their industries.

There is little to show for the over $100 billion of aid that have been poured annually into the poor countries.  Even more important, it was established that aid has had little to do with the success of those countries that have successfully lifted hundreds of millions out of poverty.

European countries give roughly 0.5% of their GDP in aid, while the average Nordic country gives 1 percent.  The United States and American private foundations gives more than 1 percent.

Aid encourages a culture of dependency.  It is no wonder that many poor countries are now up in arms that instead of giving them aid, they would prefer market access and removal of trade barriers.

Over the last 40 years, the programs have been the same, the results have been the same, and yet we never learn.  Since people has no capital, the government establishes that the best way to help them is to give them aid in terms of money ( is that a loan or a handout?).  After billions of pesos have been defaulted with nothing to show for it, the continuing programs are still to grant more and more credit.

Access to credit is a very laudable objective but politicians and government bureaucrats makes very bad bankers.