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Is big business bad?

/ 05:06 AM March 12, 2020

I sense a mood in the public that they think big business is depriving them of the decent life they could lead by making huge profits that could otherwise have gone to them.

This goes back to 1848, when Karl Marx postulated that the best way to give everyone a decent life was to equalize it—to have society run by the state in collectives that gave everyone an equal share in the rewards. It was an attractive, enticing idea the NDF/NPA still cling to. It was called Communism. It not only didn’t work, it also dragged societies that adopted it into poverty. Just compare North Korea to South Korea—the same race with hugely different levels of personal well-being and freedom.

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Capitalism and the free market took hold, initially with all sorts of barriers to making that market global. But little by little, those restrictions came down and business flourished. With it, the world’s people benefited as millions and millions of jobs were created, that otherwise were not there.

The most dramatic example of its success was China, where Mao Zedong’s “Great Leap Forward” through the adoption of communism was to revolutionize China and its people. It was a massive failure; millions died. Deng Xiaoping came along and allowed private businessmen to open their own businesses, and dismantled much of the state-controlled business. China grew at a heady 10-15 percent annually and is today the second biggest economy in the world, from 10th just 20 years ago. It was phenomenal and it was achieved through capitalism. Today, Chinese unemployment is a negligible four percent and wages are at a minimum of $4,000 per annum.

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South Korea is another example of big business success. In the early 1960s, it was far behind the Philippines, but Park Chung-hee was instrumental in transforming South Korea into an export-oriented economy fueled by big business conglomerates such as Daewoo, Hyundai, and Samsung. By the 1990s, South Korea had become the world’s 11th largest economy.

Capitalism has one fault though: It leads to unconscionable wealth. No individual should be a billionaire when billions live in poverty. But that’s the way it is, and no one has yet come up with a fairer system. Some propose a supertax, but is it really the way to go? The billionaires would probably find a way to circumvent it. And there are disadvantages to this that outweigh the seeming benefit. Maybe some potential Nobel Laureate will come up with a scheme that works. A shift in corporate culture would help. Stockholder profit, the current primary focus, should not be the only motive for business. There should be an equal balance between stockholders, employees, subcontractors and suppliers, and customers.

But how do you achieve that, that’s the dilemma. That hasn’t been solved yet. For now, whether we like it or not, big business is necessary for the cheaper prices and services economies of scale bring (Henry Ford brought the price of a motor car down from $825 to $345 when he introduced mass production for the first time). All our consumer goods are cheap because of mass production by big business.

Big business has large factories where economies of scale lead to prices unachievable with small production runs. And the competitive drive to capture that market leads to ever-diminishing costs of production. The wonders of the electronic market are seeing prices declining almost daily.

Philippine agriculture is a good example of how forcing smallness leads to failure. A number of crops—sugar, bananas, pineapples—

thrive, and compete best when grown on large plantations. Small plots just aren’t efficient. Philippine sugar costs $1.23/kg, Australian sugar costs $0.23/kg from huge plantations. The other crops have similar stories. The ill-thought-out socialist CARP law is a reason Philippine agriculture performs so poorly.

So you may not like the rich (I’m just jealous), but they’re giving us the modern society we enjoy and the jobs we must have. For me, the overriding focus is on creating jobs. It’s only jobs that get people truly out of poverty. Conditional cash transfers and the like are temporary fixes—and can’t, shouldn’t be seen as a permanent fix. Focus on what’s best to give people jobs and you can’t lose. Also, the possibility of wealth entices the young to “give it a go,” to become young entrepreneurs with a desire to become rich, and so are driven to succeed. Money is a great motivator, and it’s an important underpinning of our society. In a country like ours, micro-, small-, and medium-sized enterprises (MSMEs), too, are an indispensable part.

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The real way to remove poverty is to create jobs. There are no numbers, but big business is estimated to have created about 3.3 million direct jobs, many millions more indirectly; while MSMEs contribute about 5.7 million jobs. So we need both and to look after both.

Big business is an evil that does more good than harm.

Email: [email protected]

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