ReInventing Philippines Inc.,

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.

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.