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. 

What The World Needs Now : Notes From England

England - I am here for my alumni reunion at the Institute of Development Studies (IDS) at the University of Sussex.

 IDS “aims to understand and explain the world, and to try to change it- to influence as well as to inform.”

In this two day meeting, the alumni are scholarly articulating the problems of the world and plotting what development work needs to be done in a changing landscape and shifting geopolitics.

One of the major theses that needs to be communicated is that reduction of so much inequality should be done with or without the global economic crisis.

Among others, the global economic crisis is a failure of the banking and financial systems and so one proposal is not to deal with the economic crisis because to spend much time in terms of more research to produce more knowledge for something that has happened already will be derailing in many ways.
The lessons of the global economic crisis speak for themselves or to wax Latin :Res ipsa loquitor.

This call is to let the economic crisis evolve and hope it will metamorphose into a less virulent strain.
 It is more efficient to focus on something that is sure to change the world and that is to work on instruments towards reducing inequality without excluding the importance of economic growth.

The alumni are poised to embark on a project that believes that reducing inequality can be one of the solutions to the global economic crisis.
This 2009 crisis is a crisis at the core ( rich) affecting both core and periphery (poor.)
 Hubert Schmitz, IDS research fellow working on globalization, thinks that to concentrate work on the poor countries is limiting because “ concentrating on the dependent variable ‘poverty’ would cut off from understanding the dynamics which leads to shifts in poverty and prosperity.”
In short, former poor countries in East Asia which are now the so called emerging markets are driving the changes in the center.

Definitely, we need a new language or discourse or paradigm or new conversations to describe the changing development landscape.
In these uncertain times, the task is to ask the right question.
It was noted that in our management of these uncertain financial times, some of the myriad of responses are mistaken views to go exclusively global or focus exclusively on the local when the response should be integrating both the global and local.
There is a disconnect between macro and micro economics and the task is to articulate the discourse between the macro and micro or to find the middle space between the big picture and the small picture.

There is no one shared view on development perspectives.
Development policies are most often influenced by voices from positions of power and authority.
Which is why in this age of mobile phones and internet connection, it is important to hear different perspectives or to hear our own local stories of what we think the changes should be.

Making the world a better place is not a monopoly of development experts.
One challenge put forward by Professor Lawrence Haddad, head of the Institute of Development Studies is how to successfully collaborate with other voices such as the private sector, or the great majority who are very connected via information technology who are “just getting on with their work and who are not too bothered whether the self designated development experts work with them or not.”


https://www.flickr.com/photos/ids_uk/sets/72157621859137086
https://www.flickr.com/photos/ids_uk/sets/72157621859137086/

Let me share a feedback about the above piece ( What The World Needs Now)  from an economist  in Wall Street, New York  who studied at the Wharton School of business on the ailing economy of the United States :

“The US condition does not keep me awake at night, but it disturbs me...Great powers of course in most cases, do not instantly collapse (though Russia quickly unraveled not too long ago).  They tend to linger, remain relatively wealthy, though with less influence in the world.

The US dollar does bother me...It is a matter of time as to when it will experience a big decline...There might be like a sand pile phenomenon...you never know when the last grain of sand will cause the sand pile to collapse.

China will never flex its global powers until it has too.  I think it operates consistent with my view:  one should not make unnecessary enemies.  Messianic powers (e.g. US) often do...and they get conflicted between their self-interest and their messianic goals of imposing freedom and democracy.”