Asian Tigers grew because of nationalism–which is vanishing in our country

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FORMER US Ambassador Philip Goldberg—based on his alleged oust-Duterte plan reported by this paper—unsurprisingly described the President’s alleged frame of mind as “old-fashioned nationalism”. It’s a term economists like Bernardo Villegas blindly espousing that we open our doors totally even to foreign monopoly capitalists, and just trust that the market, would embrace.

Yet it is historical fact that the so-called Asian Tigers—the now highly developed economies of Hong Kong, Singapore, South Korea and Taiwan—grew starting in the 1960s because their leaders were economic nationalists, pragmatists without dogmas, or illusions, that free markets alone would magically lead to the most efficient allocation of resources, and thus, result in the prosperity of their peoples.

In contrast, economic nationalism in our country has been inanely caricatured as involving solely what were alleged to be disastrous “import-substitution” policies that were in place in the 1960s, protecting local industrialists—the elite—from foreign competition.

However, all the Asian Tigers did employ such protectionist policies, and in fact, so did almost all industrialized countries before their economic takeoffs in the 19thcentury. What they did, which we failed to do, was to shift to export-oriented industrialization when the local market could no longer absorb the products of the import-substitution industries.

In Japan, there was such close cooperation between the designated “champion firms” and government, particularly the Ministry of Trade and Industry, that the system was dubbed Japan, Inc. This was how the country miraculously achieved economic growth after its devastation in World War II. The engine of Japan’s growth was its keiretsus, and for South Korea, its chaebols—both of which were conglomerates assisted by their governments on the condition that they focused on certain industries regarded by state planners as vital to stimulating economic growth.

The governments of the Asian tigers nurtured their export-oriented industries—and key industries such as telecoms—through such means as preferential credit, subsidies hidden or overt, and lower tariffs for their inputs, to enhance their competitiveness in the world markets. (A very detailed account of this, using the case studies of Taiwan and the Philippines’ textile, semiconductor, and plywood export industries, is in Kuo, Cheng-Tian and Kuo Cheng-Tian’s Global Competitiveness and Industrial Growth in Taiwan and the Philippines, University of Pittsburgh, 1995.)

We have had no such keiretsus and chaebols, although the strongman Marcos in the late 1970s thought he could develop firms controlled by his cronies as such.

Our conglomerates operate as though there was no state at all, except perhaps in terms of bribing bureaucrats when needed, or betting on certain candidates during national elections. State officials operate as though there were no conglomerates at all, except to get bribes or campaign funds from them.

Framework for growth
Without such a framework for growth that the national economy should be directed through state intervention—as Japan, South Korea, Taiwan and China did—the ownership, whether foreign or local, of public utilities, especially telecoms, becomes unimportant. That has been one of our biggest weaknesses, one that has hobbled us since the era when the American GTE was the telecom monopoly. Today what we have is a monopoly of the industry owned overwhelmingly by foreigners.

“The developmental history of a nation is in its government’s hands,” * pointed out a very lucid and readable book on how the Asian tigers developed and why other Southeast Asian countries, including the Philippines, failed to follow the same path. That idea, really, is the essence of economic nationalism, in contrast to neoliberalism.

Neoclassical economics ideologue Bernardo Villegas and lobby groups such as the Foundation for Economic Freedom lobbying for the lifting of restrictions on foreign capital in public utilities have been claiming that we should emulate industrialized countries in adopting current liberal policy on foreign capital.

What they do not mention, though, is that in the period when these countries were still developing, they put restrictions on foreign capital in their strategic industries. They lifted these only when their state firms or those owned by their nationals were strong enough to withstand the impact of new competition amid the entry of foreign corporations. **

Nearly all industrialized countries, when they were still struggling during the development stage, had state-owned firms operating their power systems to have better control at ensuring the most efficient supply, not only to their citizens but also to their nascent industries. The power industry was too important to turn over to private companies, which, no matter how efficient they were, had profit generation—and distribution to their stockholders—as their prime directive.

It was only when they had achieved industrial status and their companies had become among the world’s strongest and biggest, that they privatized their power sectors and opened them up to foreign competition.

Why the restrictions? Such sectors involve limited national, and natural resources; in the case of telecoms, the radio spectrum for cellular telephony and a captive market that is the nation’s population. These sectors possess natural-monopoly features that must be reserved for citizens since these involve rent profits, part of which the state must appropriate for the welfare of its own people. These are public utility firms, which by definition must serve public welfare as their paramount objective, rather than the generation of dividends.

The country certainly needs foreign investment, why not? But not in public utility firms, and the framers of our Constitution must have realized this that they decided to put the 40 percent cap on foreign investment in public utilities, as well as land ownership—laws which have not been followed because of our weak legal and regulatory systems.

Nationalism fading
Nationalism is fading in our country, despite its resurgence in both the academe and policymakers in the rest of the world. The growth of the Asian Tigers and the emergence of China as an economic superpower constitute incontrovertible evidence that economic nationalism, rather than laissez-faire economics, will result in nations’ economic growth.

The nation’s youth have also been brainwashed into seeing themselves as “citizens of the world,” a cockamamie belief that in today’s world there are no more nations, that economic nationalism is the evil that generates poverty in the country. This erroneous thinking has even gained ground in the country in recent decades, what with economists such as Dr. Villegas propounding it, exemplified in his July 25, 2015 column with the preposterous title “Nationalist industrialization hurts the poor.”

Hasn’t he heard at all of industrialized countries like Japan, South Korea and Taiwan, which became rich through nationalist industrialization policies? (A recent, popular account of the economic growth of these countries on the basis of nationalist industrialization was done by Joe Studwell, How Asia Works: Success and Failure in the World’s Most Dynamic Region, Grove Press: 2013.)

Cronyism, corruption, and regulatory capture—in various forms, levels of government, and degrees—have been pervasive in our country, weakening the state so much that its efficiency and efficacy in serving not just a class but the entire nation and in redistributing assets have been drastically diminished.

The saddest phenomenon in our country is that the elite have lost the sense that they belong to a nation, which is not just a market. This has trickled down to the rest of this society so that many Filipinos have also lost their sense of nationalism, so that few care that our telecom industry is under foreigners’ control and that our government regulatory bodies have allowed them to trample upon our Constitution.

Economic nationalism is the worldview that we are not just consumers or producers in an each-to-his-own market but members of a nation—in this age the most important community a human can be a member of—organized for the welfare of all its members, and that the state has the duty, and all the resources and tools to do so.

The decline of nationalism since the 1990s, so obvious in our country today, is actually rooted in the fact that we have jettisoned economic nationalism as a plan of action, as the spell of neoliberalism and globalization descended on the country.

We have remained poor despite EDSA I and II, and through four Presidents, because we have not embraced the kind of economic nationalism that made the Asian Tigers the highly developed countries they are now.

Should we wonder why the GDP per capita growth rate of Vietnam—one of the most nationalistic countries in the world—averaged 5 percent from 2000 to 2015, significantly higher than our 3 percent?

Real change will not come under President Duterte,unless he breaks from his predecessors’ economic mindset.

* Studwell, Joe. How Asia Works: Success and Failure in the World’s Most Dynamic Region. New York: Grove Press, 2013.

** Chang, Ha-Joon. Kicking Away the Ladder: Development Strategy in Historical Perspective. 1st ed. Anthem Press, 2002.

This column is largely based on Chapter 13 of my book Colossal Deception: How Foreigners Control Our Telecom Sector — A Case Study of Corruption, Cronyism and Regulatory Capture in the Philippines,available at National, Popular and La Solidaridad bookstores.

FB: Rigoberto Tiglao and Bobi Tiglao