DOMAIN OF WEALTH OF NATIONS: BOTH DOMESTIC & OVERSEAS

Erle Frayne Argonza

 

[Writ 23 March 2008, Quezon City, MetroManila]

 

 

The antiquated debate regarding which domain should be the main source of national wealth—whether domestic or overseas—is still alive today. In the article of New Nationalism, I argued that in the emerging context of post-industrialism, this debate has become futile and unproductive. Instead of stressing a domestic versus international mindset, I argued for a both/and frame.

 

Admittedly, the overseas domain as a source of wealth is as palatable as it used to be during the era yet of the city-states of Northern Italy (Venice, Florence). This has become the backbone of mercantilism, which in turn became the backbone of nationalist economics. Old Nationalism henceforth carried the pro-mercantilist banner of seeking wealth primarily from international operations. But this time around, this position has to be revised in the light of import-substitution success.

 

In the Philippine case, we have been having it both ways. On the one hand, our manufacturing sector’s products are largely consumed 86% of the time for the domestic market, indicating the optimization of the import-substitution aspect of our development efforts. On the other hand, our overseas employment and investments have been churning out a whopping Net Factor Income from Abroad or NFIA worth 11% of the GDP.

 

New Nationalism, to my mind, should rather have it both ways, as culled from this and other parallel experiences in emerging markets. At this time particularly, Foreign Direct Investments or FDIs by Philippine-owned or controlled companies has begun to take off and contribute to our national coffers. Add to this our exports worth 40% of GDP, and remittances from labor export of worth 10% of GDP, and one can see the broad picture of the potency of the overseas domain as source of national income.

 

Below is the entire subsection on the domains of wealth production culled from the New Nationalism article.

 

Generate wealth from both external and domestic markets.

 

Various stakeholders in the past were divided along the question of what should be the driver of growth & development (demand-side discourse): the external, or internal market? The followers of the ‘externalists’ were the ones behind the export-oriented development strategy, whose rationalizations for massive exports were quite poor recycles of the mercantilist contention that wealth should be produced more from out of the external markets (colonies during the time of empires). The ‘internalists’ were the ones behind import-substitution strategies, whose rationalizations were poor photocopies of Keynesian demand-side formulations.

 

In today’s context, it is wiser to view both the external and domestic markets as synergistic spheres for accumulating national wealth and meeting head-on the demands for delivering welfare. The external market discourse can work only in circumstances where a domestic demand has failed to develop, which in our case was the pre-1990s economy. By the late 1990s, it was clear that a significant change had taken place on the demand side of our economy, as folks were buying a lot of articles of commerce at a time of crisis. The middle class population is rising relative to the entire population, whose households’ needs have become more differentiated and have leaped beyond the bounds of ‘rice-and-galunggong’ expenditures. Today, Filipino families purchase around fifty-three percentum (53%) of their household needs from supermarkets, malls and large retail centers, even as the wet markets and sari-sari stores are declining in importance. These changes are real, and we cannot be blind to them by continuing to harp on an export-driven growth.

 

We must then fast-track large-scale redistribution schemes, such as to witness the rise in purchasing powers of our own people. This cannot be done outright during the next three (3) years, as we face a fiscal dilemma of crisis proportions. But beyond 2007 lies new opportunity fields. The fiscal route to stabilization will have been solidly achieved by then, and the nation can embark on more ambitious endeavors aimed at increasing incomes, reducing unemployment and poverty and increasing domestic consumption.

 

As the domestic market catches up in stabilizing the economy and producing national wealth, stakeholders shouldn’t be remiss in improving the competitiveness of our export products. Our great advantage is that we have ample supplies of skilled labor, with wages still relatively low. The power sector is also quite rich in supply of electricity, even as new projects are now being planned to neutralize possible supply problems in the short run. Hopefully, power supply would stabilize and electricity cost would decrease, contributing thus to rendering our exportable articles more competitive enough. Save for capital goods and petroleum, large volumes of which our producers continue to import, the other factors of production are within our hands to control and manipulate, inclusive of rent and interest rate. It is hereby argued that, with such factors controllable enough, we can optimize conditions for rendering our exportable articles maximally competitive and continue to permit the external market to be a source of substantial wealth. What more if we produce all of our essential capital goods, thus further bringing down the cost of production, given that the price of other factor inputs also go down?

 

THE STATE IS NO ‘BIG MAMA’ BUT AN ENABLER

Erle Frayne D. Argonza

 

[Writ 22 March 2008, Quezon City, MetroManila]

 

To continue, in the same article on New Nationalism, this author took up the contention about the shift from ‘provider state’ to ‘enabler state’ model. I agree to a large degree with Peter Evans regarding the matter in his elucidations on synergism and development.

 

While I argue strongly for a dirigist paradigm of development, I do not at all go for maximum state intervention such as the ones experimented on in socialist states and welfare states. Government is no Big Mama nor Santa Claus that provides everything for its citizens.

 

There should always be room for private initiatives, social spaces for people to think creatively and innovatively to provide for their own needs. State and civil society can come in to do enabling tasks when needed, but not to role-play as the Big Mama Forever of her infantile clientele who are forever dependent on ‘milk from mama’ (dole-outs, essentials of life).

 

Unfortunately, many experts today, including those with PhDs and advanced studies, haven’t gotten away with the ‘provider state’ model of development. To my own shock, I found out lately that my close friends in the academic and development fields still bear the old fogey mindset of a Big Mama state model. The rugs have already changed under their feet!

 

Consider for instance a musician friend in the University of the Philippines. He felt bad that state funds for musicians have dried up in the Philippines, but has been flowing like honey for sports. I had to explain to him that the music industry is already very mature here, that musicians and industry leaders themselves can produce and propagate music without any further state assistance, that the ‘music sector’ is in fact a model sector of an industry that had already reached a very mature level of development.

 

The same pal is as old as myself (late 40s) and has simply been accustomed to old habits. The Martial Law regime here (1972-86) was particularly very supportive of music, and the former 1^st Lady Imelda Marcos took on the cudgels for state support for the culture industry including music and theatre. But that was long ago!

 

The music industry was then in its high growth state, and badly needed state support for that steep climb to glory. But eventually, the musicians and industrialists like the Jacinto family who went into musical instrument manufacturing (one of the Jacintos is s musical giant here) took upon themselves the duties for lifting up the sector. The airwaves were reformed, so that 50% of the time the radio stations should air Filipino music. And Philippine music succeeded stunningly!

 

Today the industry had matured to meteoric heights. But many musicians feel and think like it’s still the infantile days of the sector. Look at how dependency can blind people including university-based experts such as the professor of music that I’m citing here (name withheld).

 

For further elucidation, let me quote entirely the excerpts from the essay, to note:

 

Shift intervention from the ‘provider state’ to the ‘enabler state’.

 

The failure of neo-liberal policy regimes does not mean that the state should go back to a full interventionist role, performing a guardian regulator and ‘provider’ for all sorts of services. The problem with the excessive ‘provider’ role is that it had (a) bred rent-seeking on a massive scale among market players, (b) reinforced dependence among grassroots folks who have since been always expecting for a ‘Santa Claus state’ to provide abundant candies, (c) produced new forms of rent-seeking, with civil society groups serving as the beneficiaries, and (d) further reinforced graft practices in both the public and private sectors. Thus, the ‘provider state’ further reinforced  the patron-client relations in the various spheres of life (‘feudalism’ is the term used by Maoists for clientelism), consequently dragging all of our development efforts into a turtle-paced sojourn.

 

In the new intervention mode, the state, armed with a leaner organization and trimmed down budgetary purse, performs a superb catalytic role. It engages various stakeholders in the growth & development efforts, challenges them to directly embark on development pursuits, and demonstrates unto them how welfare can be accessed to through alternative means other than through the state’s baskets. As the state continuously engages the stakeholders through dialogue and cooperation, institutions will also become strengthened along the way. The state will gain its esteem as an ‘activist state’, while at the same time receive acclaim as a truly ‘modernizing state’ as it propels society gradually away from clientelism towards a context marked by rule-based (modern) institutions, citizenry and dynamic/autonomous constituencies.

 

However, within a transition period from ‘maximum provider’ to ‘maximum enabler,’ the state should continue to perform a provider role in such areas as education, health and such other human development concerns that are, in the main, crucial to building national wealth. Combining state regulations and at the same time giving ‘fiscal autonomy’ in tertiary education and vocational-technical level would remain to be a fitful strategy of ‘minimal enabler’. A similar strategy will have to be applied to some other economic sectors to be able to advance gender equity, by recognizing rights of marginalized gender to education, employment, representation in managerial positions and other related concerns.