This post stems from a question raised in Quora.
The question was “How did the Philippines collapse from being the second most progressive country in Southeast Asia (vying behind Japan) to a third-world country amassing billions of debt in the course of a couple of decades?”
For most Filipinos, the quick and ready answer is “Blame Martial Law”. Is there some truth to this – or is there more to this than is being said on the presstitute media?
And so, I begin this exploration.
The economic basket case that the Philippines is known as today – has at its roots, an issue of government intervention namely – non-tariff barriers (regulations) and tariff barriers (fees/taxes).
Note that Japan isn’t exactly a paradise that it appears to be, given its unending bout with stagflation – inflation rate is high, the economic growth rate slows, and unemployment remains steadily high.
Still, just to get a sense of the disparity, let’s use the GDP per capita as a metric.
(GDP per capita is gross domestic product divided by midyear population).
Japan has a higher GDP per capita income (in current US$) than the Philippines – albeit decreasing from $46,203 in 2011 to $36,194 in 2014.
Philippines showed an increasing GDP per capita income (in current US$) – $2,371 in 2011 to $2,870 in 2014
With that in mind, let’s review the numbers – Refer to the table below.
This table compares the Philippines and Japan, from 1966 to 2014 – in terms of:
a) YOY change % in GDP per capita (Col 3 and Col 5)
b) Ratio of PHL GDP.PCAP to JPN GDP.PCAP (Col 6)
You will note the following for Ratio of PHL to Japan GDP Per Capita – it’s a measure of how many times bigger is Japan’s GDP per capita vs the Philippines.
1) Was best before ML – ranged from 5 to 11.
2) Ratio ranged from 11 to 20 during ML.
3) Ratio was highest during time of Cory Aquino and Fidel Ramos
4) Ratio was still above 30 during Estrada’s term (incl the period served by Arroyo)
5) Ratio was at 20-24 during Arroyo’s term
6) Ratio ranged from 13 to 19 during Noynoy’s term
In other words, Martial Law adverselely affected the Philippine economy.
The Post Martial Law scene however, made matters worse.
It might appear that the ratio improved during Noynoy Aquino’s time. But it had nothing to do with the change in the ratio. Rather, the “improvement” came about due to a 17% reduction in the GDP per capita income of Japan in 2013 –
So based on the numbers, to state that Marcos was the culprit is only partially correct, because the regimes after Marcos performed WORSE.
Why?
Plain and simple economics.
Note that the ratio prior to martial law was around 5 to 7 and increased to 11 in the prelude to ML.
One reason for this rapid drop could be the decoupling of the dollar from the gold standard announced by Nixon.
The most marked difference however, appears after martial law – when the ratio went past 11 and has not come down ever since.
What happened during martial law?
Protectionist provisions were embedded in the constitution that restricted the entry of foreign investments to only 40% equity ownership AND a mandatory requirement to have a Filipino partner who will own 60%.
Right off the bat – this reduced the pool of capital, investments, services, and goods available to the Philippine economy as supply was restricted to those that were provided by Filipino owned firms only.As if, the quality of the good is superior if it is distributed or made by a Filipino owned firm.
The next item was nationalization of private firms in power, telecommunications, and broadcasting. This is a drain on taxpayers as nationalized firms are not accountable to customers. This marks the beginning of the era of systemic corruption.
Monopolies were the order of the day.
What happened after martial law?
a) Economic restrictions that favored cronies were not removed
After martial law, the restrictions and regulations which allowed Marcos and his cronies to capture the economy were not removed.
Instead of repealing the regulations that lead to economic capture – the reverse was done.
We kept foreign investors out to protect ABS-CBN, Globe, PLDT, SM – and all the lousy Filipino firms they stand for. Then we send Juan de la Cruz and Maria Sawimpalad to become serfs to foreigners outside the Philippines. Can you see what’s seriously wrong with this picture?
Are Filipinos who don’t own businesses SECOND CLASS CITIZENS in the Philippines? Obviously, they are.
b) More agencies were created = more opportunities for corruption
Worse, more restrictions were added – and the Philippine welfare state was formalized in Article 13 – Social Justice – more agencies were created – which of course means more impositions on taxpayers. And naturally, new government agencies means MORE CORRUPTION.
c) Legislative body was expanded to include party list = more opportunities for corruption
The belief was that adding the party list system will make the system more humane. Clearly that was a load of dung.
What happened instead is that the former street parliamentarians now turned “Honorable” party list member became an addition to the pigs that fed on the PDAF and DAP.
The plunder was democratized.
d) More regulations were crafted = more opportunities for corruption
After expanding the legislative body, the newly minted legislators had to show that they were “working”. What better way to show proof of work than by churning out volumes of laws.
Here’s the thing – there’s too many laws, too many loopholes, and enforcement is a sham. The fact that a law needs to be enforced shows that it is a DECEPTION.
Any measure which is reasonable and logical will not need laws to be enforced as citizens will voluntarily take upon the measure themselves.
So in the face of an obviously immoral law, the individual imperative is self preservation – and then remedies are availed of, “legally ” through the “criminal justice system” – or through extalegal channels. Both ways, the impact of an IMMORAL TYRANNICAL law is averted.
e) State monopolies to Private monopolies do not remove the inefficiency of monopolies
Realizing that nationalization only led to massive losses from subsidies and corruption. The decision to privatize was made.
The firms were awarded to cronies. Non-Filipinos who can provide better service are excluded by default.
Anyone smell the stench???
f) More spending – more opportunities for corruption
Keynesianism or the belief that government is the driver of economic growth aka socialism lite – is widespread among government economists – after all it pays their salary.
The problem with that is – instead of letting the individual decide how he or she intends to spend his own income , government forcibly takes the income away via taxation. Then government bureaucrats and legislators pretend to know more than the individual on what the individual should choose – what a FRAUD!
Luckily for these politicians, the Filipinos are still asleep and only a few have awakened to this massive deception – but not for long.
Economics isn’t a strong suit among Filipinos – they have yet to make the connection that – more money for government means less money for citizens – more money to waste.
The ruse of corruption
Corruption is a problem, yes. However, it is a symptom, an outcome of a fundamental defect in the way society conducts it affairs.
Notice that corruption always takes place when:
a) There are ridiculous regulations that people don’t want to deal with
b) There are ridiculous fees that people don’t want to deal with
On both instances, the commonality always involves GOVERNMENT.
Filipinos (and other nationalities as well) have been duped into thinking that the private sector is the source of corruption since they are the one handing out the money.
People forget that without any government regulation or fees that get in the way of people doing business – will there be corruption?
Summary
To summarize, the Philippines got to where it is today due to the lack of free markets or due to massive government intervention in markets leading to disruption of supplies.
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