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Monday, May 9, 2016

Why The Philippines Continues To Remain Within The 3rd World

Why The Philippines Continues To Remain Within The 3rd World

Hunter S Thompson - AvatarPolitical and economic institutions, which are ultimately the choice of society, can be inclusive and encourage economic growth. Or they can be extractive and become impediments to economic growth. The Philippines has failed because they have extractive economic institutions, supported by extractive political institutions that impede or even block economic growth.
When one comes to understand this, that is when enlightenment will follow. That simply throwing money at a problem is not always the most effective solution. In fact, in third world countries where the poverty is caused not by being overly populous as many would have you believe, but is caused by having governments which are extremely corrupt and controlled by a very small but powerful elite.
The idea that rich Western countries should provide large amounts of “developmental aid” in order to solve the problem of poverty in sub-Saharan Africa, the Caribbean, Central America, and South Asia is based on an incorrect understanding of what causes poverty.
Countries such as the Philippines for example, are poor because of their extractive institutions, which result in lack of property rights, law and order, or well functioning legal systems and the stifling dominance of national, and, more often local elites over political and economic life.
The same institutional problems mean that foreign aid will be ineffective, as it will be plundered and it is unlikely to be delivered where it is supposed to go. In the worst-case scenario, it will prop up the regimes that are at the very root of the problems of those societies.
If the 1st world is genuinely serious about resolving these situations, that is where they need to start, by force if necessary, compel system change, tie all aid to it, the fact is they have nothing to lose, because the aid they have poured into these places in the past has not reached the needy anyway so forcing systemic managerial change overseen by perhaps the UN would in the end have a far more telling impact.
Countries such as Great Britain and the United States became rich because their citizens overthrew the elites who controlled power and created a society where political rights were much more broadly distributed, where the government was accountable and responsive to citizens, and where the great mass of people could take advantage of economic opportunities.
filipino corruptionThe success and failure of specific groups notwithstanding, one lesson is clear; with the Philippines, powerful groups have moved against economic progress and against the engines of prosperity. In the Philippines, economic growth is not just a process of more and better machines, and more and better educated people, but also a transformative and destabilizing process associated with widespread creative destruction. Growth could move forward only if not blocked by the economic losers who anticipate that their economic privileges will be lost and by the political losers who fear that their political power will be eroded. In fact, these extractive political and economic institutions have created a general tendency for infighting, because they lead to the concentration of wealth and power in the hands of a narrow elite.
As we will see many times, and as is the case of the Philippines. Economies based on the repression of labour and systems such as slavery and serfdom are notoriously non-innovative. This is true from the ancient world to the modern era.
And with all the above noted. Does the Philippines possess the ability to lift itself from 3rd world to 1st, as did Singapore? Of course it does. Sadly, it continues to be governed by a very self serving and repressive Oligarchy, for what seems to be an endless, decades long cycle. All of which could change with the coming elections in early May. And with the Filipino patronage mentality when it comes to voting, is something that remains to be seen.
[] Portions of this text, were borrowed from the book: Why Nations Fail: The Origins of Power, Prosperity, and Poverty

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