System change: why can’t the Philippines take off


From the time our country has achieved its political independence from American rule 66 years ago, we have only known poverty and underdevelopment while many of our Asian neighbors have long worked their way to progress and prosperity.

Time and again we put our hopes on a new leader that could lead us to a better life and a loftier place among nations, only to be disappointed by the gap between promises and performance.

We take pride in saying that we have the freest democracy and press in the world, yet we remain in bondage with poverty, hunger, disease and ignorance.

We have had two successful “people power revolutions” in the past 26 years, but the social inequities that breed corruption, impunity and insurgency are still with us today.

With its rich endowment of natural and human resources, why can’t the Philippines take off? 

Before that, a cursory comparison between the major economies of the West and Asia in the aftermath of economic globalization would be helpful in addressing the question.

Fueled by cheap credit and high salaries, Western economies have prospered for many years on account of consistent growth in consumer spending.  Banks borrowed money and liberally lent to people and the economy grew. 

Consumption-based economic growth, however, cannot be sustained indefinitely unless supported by a competitive manufacturing sector and favorable balance of trade. 

When the sub prime market and banking system in the U.S. collapsed in 2008, the weak spots in the economy of the West for the past 20 years or so  — excessive consumption on credit and loss of competitive edge in manufacturing — came to a head. 

As credit became scarce and interest rates went up, close to a million American families lost their homes to foreclosure in 2008 alone.  Huge financial institutions and industrial corporations that employed millions and relied on the availability of cheap credit to operate teetered on insolvency, requiring a massive financial bailout from the Bush government to rescue these private entities from bankruptcy and save American jobs.

The financial crisis in the U.S. spread throughout much of the interdependent economies of Europe.  Weighed down by stagnating economy and excessive sovereign debt, many countries in the Eurozone fell into economic recession and were forced to adopt tough austerity measures that are now the source of social tension and unrest in Greece, Spain, Portugal, Italy and France.

The German economy is still doing well because of its strong industrial base and positive balance of trade but is in constant pressure to bail out its ailing Euro neighbors; while the plodding Briitish economy is not foreseen by many economists to significantly grow in at least the next 5 years. 

In contrast, the so-called “tiger economies” of Asia have been producing and exporting highly competitive products on domestic savings and lower wages for decades now.  By producing and exporting more goods than their consumption of imported goods, these economies have consistently sustained high growth rates in productivity, employment and trade surplus, beating the West in its own game of globalization

Today, the second and third largest economies in the world (China and Japan) are in Asia.  Millions of jobs have also shifted from the West to Asia with the migration of Western companies that relocated their production facilities or distribution hubs in Asia to take advantage of better business climate and lower operating cost in the region.

In the Philippines, we missed the bandwagon of Asian “economic miracle” because we were marching to a different drum beat.  While most of our Asian neighbors were forging ahead with what we branded as “undemocratic system of government” and “state-sponsored industries,” we persisted in pursuing the Western model of democracy and economic development that brought us nothing but frustrations and despair.

Our political and economic systems are simply not suited for the chances and challenges of economic globalization.  As shown by the examples of China, Japan, South Korea, Singapore, Taiwan and Malaysia, progress requires a long period of political stability and economic growth.

Our economy can best be described as a two-legged economy that relies heavily on export of agricultural produce and remittance of money by Overseas Filipinos for its development and growth.  When destructive typhoons visit the country (as they often do) or when the demand for overseas jobs is low, our economy inevitably suffers. 

In the event of a dip in our foreign currency earnings from these two sources, we have little to make up for it from the other sectors of the economy.  Our major exporting industries in the productive sector are too dependent on import for their raw materials and other production inputs that their combined export receipt is practically negated by their total cost of import.

We need to diversify our economy and refocus our development strategy from borrowing and consumption to production and export.  To attain these, we must graduate from a mere exporter of raw materials to a producer and exporter of downstream value-added products with indigenous base.

The bottom line is produce more than we consume.  Put it another way, export more than our import.

How and when to introduce system change in our body politic — be it through a shift to a parliamentary system, as some people have suggested, or by any other means — is up to the Filipino people to decide themselves. 

But what is important and mostly needed for now is a system change in the attitude of the people toward their government and the government toward the governed.

No other system change can bring about the aspirations of the people for as long as traditional politicians and political dynasties are controlling the levers of power in this country.

A shift to a parliamentary system of government will only bring about a change in the title of our well-entrenched politicians — from congressman or senator to MP (member of parliament).

And we would be back to where we started.

Author:  Rene “RC” Catacutan
Published 19 May 2012


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Row of foreclosed homes in the U.S. (Photo credit: The Coming Depression.)

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