9:05 pm | Sunday, December 29th, 2013
Great men of history are usually remembered for what they can teach even though they may have lived long in the past. Thus, we recall what Socrates and Aristotle said thousands of years ago for the lessons they give on politics and morality. The Philippines has its own great men, foremost among them Jose Rizal, whose martyrdom we commemorate every Dec. 30. What can he teach us regarding our most urgent problem today—a stagnant economy and its consequence, abject poverty?
Rizal is more widely known for his fight for the equality and freedom of Filipinos. But what were his views on economics? In his two novels, “Noli Me Tangere” and “El Filibusterismo,” he dramatized the injustices of Spanish colonial rule through the travails of their characters. Sisa, the unfortunate mother of two children brutalized by a Church deacon, was the very snapshot of poverty.
In a brief scene in the “Fili,” Rizal made known his thinking on economic development through the protagonist, Simoun, a well-travelled and wealthy Filipino businessman. When asked by a group of Chinese merchants, who were bewailing the poor economic conditions then in the Philippines, for his opinion on what it should do in order to prosper, Simoun huffed, “My opinion? Study how other nations prosper, and then do what they do!”
It seems that Philippine officials and their economic advisers, like the Spanish administrators then, have ignored this commonsense advice. What they have been following since the 1960s is neoliberalism, a theory of economic development initiated and directed by rich Western countries.
Advocates of neoliberalism back economic liberalization, free trade and open markets, deregulation, and privatization. In short, less government, as championed by US and UK leaders Ronald Reagan and Margaret Thatcher.
The privatization of our power and water industries is an example of neoliberalism, which is also known as “globalization.” Among the reasons given by neoliberal economists for privatization is that government-run industries are inefficient. Inefficiency leads to higher costs, and therefore to higher prices, whereas privatization results in greater efficiency, less production costs, and lower prices.
But what we have seen is that the privatization of our power generation and water distribution has led to higher rates. Informed critics say our power rates are the highest, not just in Asia, but in the world. The cost of water services has also somersaulted upward many times, causing consumers, which include everybody, to protest loudly. The prohibitive costs of these essential services make our industries less competitive and lower our productivity drastically.
In the United States, the biggest power utility is owned by the federal government. The Tennessee Valley Authority, built at the height of the Great Depression in 1933, now runs 29 hydroelectric power dams, three nuclear power plants, nine combustion turbine plants, and five combined cycle gas plants. It provides cheap electricity to seven states. Numerous petitions to privatize it have been dismissed by the US Supreme Court on the ground that regulation of public utilities is in the public interest. On the other hand, the privatization of power in California by Enron turned out to be a disaster, resulting in blackouts and higher rates.
A look at the rise of rich nations will show that they all went through a process of economic protectionism under state direction—the opposite of liberalization—before becoming rich. Ha Joon Chang, a professor of economics at Cambridge, wrote in his book “The Myth of Free Trade and the Secret History of Capitalism” that the United States, now the world’s richest economy, and Britain, once the richest, were both protectionist for long periods before they became rich.
Citing historical facts and statistics, Chang wrote that “the two champions of free trade, Britain and the US, were not only not free trade economies, but had been the most protectionist economies—that is, until they each in succession became the world’s dominant industrial power.” It was then that they “kicked away the ladder,” to prevent other nations from following and competing with them. During their protectionist period, from the mid-19th century to the end of the 20th, they charged the highest tariffs, 50-55 percent, versus 0-5 percent in the Philippines now.
What Rizal was telling Filipinos was that in striving for self-sufficiency and prosperity, they should look at what successful countries had done, rather than just listen to what they preached. In the postwar era, many countries emerging from colonization, like Singapore, Malaysia, South Korea and Taiwan, followed Rizal’s advice. In the early 19th century, Japan went ahead and followed the protectionist footsteps of the prosperous Western countries which organized state-owned enterprises (SOEs) to monopolize strategic industries.
According to Chang, Singapore’s SOE sector is “twice as big” as South Korea’s, and the latter is “five times bigger than that of the Philippines.” If state ownership of strategic industries is bad for development, and privatization is good, then the Philippines should be ahead of these two other countries in economic growth.
In the 1950s, the Philippines, under Presidents Magsaysay and Garcia, adopted import and exchange controls to push industrialization, in defiance of the “open market” championed by neoliberalism. This lifted our country next to Japan in economic growth. There were full employment and high wages. But when the protectionist measures were scrapped at the beginning of the 1960s, the Philippines started sinking and is now at the bottom of the economic scale in Southeast Asia.
In La Liga Filipina, which he founded on July 3, 1892, Rizal introduced the rule of “mutual protection” of Filipinos. It also stipulated that “the introduction of machines and industries, new or necessary, shall be favored.” He learned from his travels and historical readings that without mechanization and technological competence, nations would fail. He was envisioning a Filipino society that is highly industrialized, like America and Europe. His idea of economic development was not derived from theory but from observation. It’s time we adopted Rizal’s pragmatic and curt advice.
Manuel F. Almario (mfalmario@yahoo.com) is a veteran, semiretired journalist. He is also spokesman for the Movement for Truth in History, Rizal’s MOTH.
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