HOW Rich Countries Got Rich

I was preparing a lecture on the economy and the task brought me to a continuum in time or to where we have been and to where we are going in achieving our goals as a nation. As teachers or as social development activists we should feel implicated and responsible for the unspeakable poverty that we Filipinos are in.

If we really think deeply and study the past centuries or if we look around with empirical eyes, some of the reasons why some countries are rich and why so many countries are poor are not really a secret. These observations can be likened to immutable laws of science like the law of gravity. This is the thesis of the book I am reading now by Erik S. Reinert which has inspired my piece today.

Yes - we need agriculture for food security but it is not enough. Yes, the agriculture sector complements the industrial and manufacturing sectors. But, rich countries are really into massive production of finished products – the kind that brings increasing returns as well as employment as opposed to the kind that produces raw materials that is bringing us diminishing returns and so much poverty. The world economy has been like this for many centuries and this is becoming relevant again because there is an emerging similarity between poor countries and the rich countries which are in a financial mess now. The similarity is in the variable called production. Just as poor countries are producing much less & in raw materials; the rich countries which are in financial trouble now are not that into basic production like they used to be. The rich countries which are in trouble now have somehow neglected the variable called basic production as they have focused now on finance and trade. This trade is the kind where one trades stocks, bonds, real estate, debentures, financial debts, commodities trading without delivery and the like which is not unlike the pyramid scam that we know so well here in the Philippines. And the financial elite are doing these with ease through “rent seeking behavior”: the kind that is in cahoots with policymakers at the expense of the ordinary taxpayer.

But, never mind the rich countries. How do we attain sustainable development  in the Philippines? Let us start the action by naming & framing the issues. One place to do this is in the academia.. What kind of graduates are we producing? There is a common observation that we have so many unemployed & underemployed professionals. I think one of the reasons is that our society is so enamored with titles as the route to achieving stature in our society. But, if such kind of titles & college degrees do not bring us employment then our parents, students, and our schools must think again.

One of my students said that one solution to unemployment is for schools to be able to produce employers instead of employees. This is another way of saying that we must produce entrepreneurs instead of more graduates who are aspiring to be civil servants or rank & file employees.

Those who have access to these air conditioned malls are a small percentage of the total population. The large majority have excluded themselves from these establishments due to unspeakable poverty. This is an initial observation that we are in for difficult times. And our solution for this is really simple. Both state & market must provide the climate for economic activities for our ordinary citizens so that we all can afford the basic necessities in life. And this is going back to the basic premise of why poor countries are poor. For now, the experts are saying that to increase the gross national product the magic variable is to engage in real production & manufacturing. This clarion call is indicated for both state and market institutions. And hopefully, other sectors like the academe will give a supporting & crucial role in developing our human resources.

But, the more important question would be who and how many will benefit from the national goal of improving our economy. In economic parlance, we have given these many names "redistribution with growth" or "inclusive development" & the like.

The globe is interlinked. There is a brewing twin American & European financial mess. The trend is towards Asia becoming the center of the global economy. Our traditional theories in Economics are not working or are not able to solve the economic problems of the world. We also need to revisit some of these theories because some of these are true. On top of these theories is the one about the world economy divide as well as the socio- economic divide inside nation-states. The divide inside nation states ( read : so much Philippine poverty) is an issue that national economies like the Philippines can continually address even as the world economy is undergoing reconfiguration.