How the Philippines fell from its Industrialization PathMarch 30, 2022 by Juan
Like most countries, the Philippines was hard hit by Covid-19 both in 2020 and 2021. However, unlike wealthier countries, it had a severe lack of vaccines, medicines, and personal protective equipment (PPEs) needed to fight the pandemic.
- The production of vaccines is the domain of biotech which India, South Korea, and Singapore are good at.
- The production of PPEs, on the other hand, are done by manufacturing, which China, Taiwan, and even Vietnam excel in.
The Philippines has no strength in either and so its Covid response was deficient. This was made worse by the overpopulation problem caused by the Church .
Because of the lack of local biotech and manufacturing, the country had to literally beg for supplies from China and the US. When begging got nowhere, the government turned to bashing rich countries, even if it was really the fault of Philippine policy in the first place.
The nation had focused too much on services such as hospitality, food services, and tourism. It had neglected industry.
The Process of Industrialization
Compared to its ASEAN neighbors, the Philippines actually had a headstart in industrialization because of postwar American surplus equipment and materiel. This is similar to how South Korean industry got a boost after the Korean War from all the equipment left behind.
The difference is that South Korea continued to industrialize, but the Philippines did not. Why?
It takes around 40 years for a non-industrialized country to be industrialized because a lot of infrastructure and skills are needed for the switch. The locals need to be trained in science, math, mechanics, etc. and gain experience in manufacturing and sourcing raw materials.
Japan started industrializing in 1868 and achieved it in 1905. In 1890’s it was already a baby industrial country, overtaking Russia which had stayed largely feudal. Russia’s backwardness caused it to be defeated by Japan and Germany in World War I. It even led to the loss of land when Alexander II sold Alaska to the US to pay for its war debt.
Singapore started industrializing in 1963 after it got kicked out by Malaysia. By the 1980’s Singapore was the world’s leading producer of hard disk drives. The details are in Lee Kwan Yu’s book.
Parallels Between Cuba and the Philippines
The Philippines fell from its industrialization path because of US policy. It turned out that US’ plan was to make its colonies as source for raw materials instead of making them its equals. They used Cuba for sugar supply and the Philippines as hemp supply.
Cuba and the Philippines were both Americanized at the same time and both complained about this. Cuba’s solution was to switch to Communism starting from 1955-1959.
Like Cuba, the Philippines did fight back, but through legal means instead of through violence. President Quirino and Magsaysay changed the US policy with the Laurel-Langley agreement of 1955 which allowed the country to apply tariffs on US imports. President Garcia’s Filipino First policy worked well with this, as it put the country on an industrialization path.
The Empire Strikes Back
However, this was reversed by Diosdado Macapagal from Pampanga which is an agricultural province. He removed the controls on the Peso and some imports which killed off the industrialization drive. Instead of exporting manufactured goods and electronics, the country exported cash crops first, as sugar and tobacco, and then the people themselves as Overseas Filipino Workers (OFWs).
Yesterday, January 21, 1962 I approved a unanimous decision by the Monetary Board of the Central Bank, embodied in its Circular No. 133, to institute the first large measure of genuine decontrol in our foreign exchange transactions. This is both in fulfillment of our electoral pledge to the Filipino people and in compliance with the provision of the law requiring decontrol by 1963. In an atmosphere of freedom, our entrepreneurs and citizens may now achieve prosperity for themselvesDiosdado Macapagal
**How did this happen? **
In the 1950’s and early 60’s an American named Harry Stonehill owned a huge business empire in the Philippines exporting cash crops. A fixed peso-dollar rate, as well as import controls on processing machinery, would not make such a business too profitable. To increase profits, such businesses naturally lobbies for a weaker exchange rate and free trade, just as the current EU Common Agricultural Policy does the opposite protectionist measures* to protect itself.
*This explains why Brexit happened. We can say that the Brexiteers sabotaged the UK economy just as Macapagal sabotaged that of the Philippines.
Instead of lobbying, Mr. Stonehill resorted to direct bribery of Garcia, Macapagal, and Marcos*.
*This explains why Marcos did not reverse Macapagal’s devaluation and import relaxation policy – because he likely had his first taste of the big money that comes with controlling public policy. Lee Kwan Yu, on the other hand, was also bribed by Americans but had better morals and refused them, asserting that Singapore was not for sale.
Bye bye Economic Sovereignty
The Philippines thus gave in to American policy (starting with Diosdado Macapagal in 1965 nearly the same time when Cuba fully implemented Communism). Based on Cesar Virata’s interview, it is clear that Filipino policymakers were ignorant (bobo, mangmang) of the effects of Macapagal’s policy shift:
- The Filipino First Policy was cancelled
- Import controls were removed
- The peso devalued
- Foreign imports came in and destroyed Philippine industry
This led to the export of cash crops and raw materials instead of manufactured goods.
- Saudi Arabia exports oil
- Indonesia exports palm oil
- The Philippines exports sugar
When sugar was killed by the high fructose corn syrup of the Americans, the Philippines started exporting people as Overseas Filipino Workers.
This trend only changed after Fidel Ramos implemented a neoliberal industrialization policy called ‘Philippines 2000*’ in 1992. Instead of Filipinos creating local companies comparable to Samsungs, Acers, Mitsubishis, they just end up as employees of outsourcing and offshoring companies which use their labor.
*This is not a sustainable industrialization policy since the owners are foreigners who can close down their local operations and move to other countries. Proof is the closure of the Intel plant.
Should We Go Back to the Policies of 1955-1961?
To incubate any industry, a country needs to block off cheaper and higher quality overseas competition. Why would a local invest in his time and effort into making a thing that China and Japan already can make very well?
This would be very difficult now that WTO has lowered tariffs. It would even be political and economic suicide to go back to the protectionist policies of the 1950s. A recent proof is the decline in the British economy because of Brexit.
The best solution would have been for the country to nationalize its utilities which provide the base for industrialization:
- NAPOCOR and state-run Meralco are brought back and WESM and PSALM are cancelled
- PLDT is recovered from the Salims of Indonesia
- MWSS recovers control of the water system that it delegated to Maynilad and Manila water
- PNOC-Petron recovers the shares it sold to Aramco
However, it would require too much effort to undo the policies from 1987. Moreover, the lack of any new moral philosophy means that the corruption that led to the bankruptcy of the Marcos state-owned companies still exists.
Instead, the Duterte government seems to be going for neoliberal workarounds:
- It seeks to revise the Constitution to add more competition in utilities such as power and water
- It added DITO (Chinese) to counteract PLDT-Smart (Indonesian) and Globe (Spanish)
- It revised the onerous contracts by Maynilad and Manila Water
- It encouraged oil exploration by Udenna at Recto Bank
- It amended the foreign investment act by changing definitions and allowing the Negative List to be flexible
These surrender economic sovereignty, and turn the country into a nation of employees instead of being innovators and captains of industry*.
*It is true that Ferdinand Marcos left behind dysfunctional state-owned corporations. But the correct policy would have been to fix them and not sell them to foreigners. If your spouse had influenced your son to have vices and bad manners, you do not sell him to your neighbor. Instead, you do the hard work to rehabilitate him. Selling one’s child is the easy, but immoral way out of parenting problems
Maharlikan Solutions: From Employee to Employer
Mahalikanism is anti-imperial and pro-self-reliance. We suggest the following policies to convert slave-driven, dependent Philippine economy into an industrialized and independent Maharlikan economy
Tweak the Foreign Investment Act
A glaring flaw in the FSA Amendment is the lack of environmental representation. The DENR is not part of the regulatory body (IIPC). Only DTI, NEDA, and business chambers are the significant regulators. The DENR should be added and have the same powers as NEDA.
The FSA should be used to create semi-state owned corporations that will build dams, power generation, and transportation infrastructure.
For example, each province should have its own powerplant run by the government with 10-90 to 30-70 equity split, with the larger belonging to foreign investors who will provide the equipment and expertise. This will replace the centralized baseload configuration of the energy sector into a more diversified and independent one that can use solar, wind, geothermal, or hydro.
In this way, only excess capacity will be routed to the Wholesale Electricity Spot Market (WESM). In effect, this will reduce the impact of EPIRA and the influence of market forces (money) on the basic right to electricity.
Households and businesses can use their own solar power in the daytime and switch to the grid at night. This will remove the need for local batteries.
Open Religous Policy
The Europeans achieved technological and economic advancement after their Protestant Reformation removed the power of the Catholic system. This ushered in the enlightenment through Johanes Kepler, Isaac Newton, Spinoza, Montesquieu, Voltaire, David Hume, Adam Smith, and Francois Quesnay.
Japan and China were keen to see the weakeness subtly imposed by Catholicism and took steps to ban it from their lands. Japan was successful in this, allowing it to keep its high intellecual levels, leading to its industrialization during the Meiji restoration.
Maharlikans are naturally spiritual. This is why we suggest the adoption of the original Maharlikan traditions as Buddhism or Hinduism (via yoga). This will put the country in line with Thailand, Vietnam, and Bali Indonesia in Southeast Asia, as well as China, Japan, Korea, and India.
Catholic morals can be replaced with Constitutional Virtues. These will be taught to all and will be the main mechanism to prevent corruption.
Aggresively Push Science and Math
Because of a mental staticity, Filipinos easily get into debt. On a national level, this is seen as the huge debts of the Marcos and Duterte administrations. In a common level, this is seen in farmers getting into debt from loansharks.
The debt is an effect of the lack of algebra ability. People get tempted by having instant money now that is paid in small amounts over a long period. So they take the loan without making any fundamental changes to their circumstances due to a lack of knowledge of science. This leads to a loss which they have to pay with another debt, causing debt slavery.
The West, Chinese, and Indians, on the other hand, have a culture of math. This allows them to be creditors and feed off the ignorance of people. This eventually leads to debt traps where poor countries sell their lands and resources to foreign creditors.
A mad push for Science and Math is essential to stop the loss of both economic and territorial sovereignty. Science can even be enshrined as its own religion:
- Hierarchy is detremined by the number of degrees, Masters or Doctorates, as is done in the West, China, and Korea
- The language of communication is made up of mathematical equation.
- It discriminates against stupidity, superstition, and myths, just as bigot Christians discriminate against Muslims and other religions
This should go hand in hand with the open religious policy.
Abolish Minimum Wage
After the ingredients of industrialization are acheived, as low cost energy and intellectual growth, the next step is to abolish both minimum wage and contractualization.
Contractualization is really the effect of minimum wage. To meet the high minimum wages, businesses reduce the benefits, leading to contractualization. This is because there is not much productivity in the economy to pay for both wages and benefits.
This low productivity is in turn is caused by overpopulation:
- Instead of one child getting money for tuition in a good school, having many children splits up the tuition as to afford only inferior schools, or even no education for the other children
- Instead of 100,000 workers using a train meant for 100,000 passengers to get to their workplace on time, a population of 400,000 will cause a congestion in transportation, causing a delay for all of them.
This overpopulation is caused by the Roman Catholic system*. The Philippine ban on population control leads to an oversupply of Filipinos which lowers productivity and makes them cheap. This causes them to move overseas as cheap labor.
*The Roman Empire relied on military dominance through its citizen-army. This is why it encouraged marriage and banned divorce among Romans and disproved of abortion. Maharlika is not an empire and so such Catholic policies are irrelevant.
An open religous policy will legalize abortion and divorce. This will reduce population growth. Instead of relying on an external savior (as what Filipinos do), the Maharlikan will rely on his own skills, intellect, fellow-feeling, and constitutional virtues. This will allow a independent Maharlikan entrepreneurship mentality instead of the dependent Filipino employee mentality.
More people will quit their jobs to be entrepreneurs who band together as partnerships or corporations. It will be easier to start a business when utilities are cheap and there are no rules on monetary wages. The important thing is that the employer abides by the Labor Code as well as pay into social security.
The freedom of wages, and the rich ecosystem of entrepreuneurs, will entice higher quality foreign investors who can now depend on local suppliers for support. These are different from the low quality foreign investors who merely go into mining and extraction of natural resources.
Examples of advanced countries which have no minimum wage are:
Legalize Barter Trade
Our proposed bayanihan economy is based on points as a store of value . This makes it a kind of delayed barter system that is based on morals instead of money, specifically pakikipagkapwa. This would make entrepreneurship cheaper since morals (trust, integrity, honesty) are free yet very expensive.
According to historian Chau Ju Kua , barter was the natural commercial system very effectively used by Maharlika. So far, barter is only legal in Sulu through the Mindanao Barter Council.
Unknown to many, the British economist EF Schumacher proposed a similar international barter system called multilateral clearing wherein all countries act as one entity in a ‘pool’. This is opposite of the currency union of the EU, and world trade system which uses the US Dollar as an international reserve currency.
In Schumacher’s system, instead of the exports of Country A competing with Country B, the foreign trade of both countries are unified as to act like local trade. In this way, a country can industrialize or ‘agriculturalize’ faster.
The Philippines can implement multilateral clearing to export its way to pay the Covid-19 debts through the export of bananas, coconuts, and services. This will allow the government to free up its budget so that it can have money to incubate industry and continue the pre-Macapagal policies.
The Philippines fell from its Industrialization path because of neoliberal policies from Diosdadao Macapagal, which continues to this day as rice tariffication promoted by his daughter Gloria Arroyo.
Such a system really benefits the world of international finance, which to Adam Smith is really unproductive labor – if everyone could barter for anything, then there would be no need for finance nor money and the costs and manpower in maintaining them.
Therefore, to be a strong economy that is not dependent on China or the West, we suggest the following overhauls:
- Use the Foreign Investment Act to create semi-state-owned corporations to reduce the cost of utilities as the base of the economy, while protecting the environment
- Adopt an open religious policy to make the Catholic church insignificant and stop the stifling of critical thinking and mental independence
- A super-aggressive adoption and promotion of science and technology as if it were a religion, as a replacement to Catholicism (and extreme Islam)
- Abolish both Minimum Wage and Contractualization while encouraging entrepreneurship to get rid of the employee mentality and become more like the Netherlands
- Legalize barter trade to further reduce the cost of finance and avoid debt slavery and the loss of sovereignty