The ethics and economics of inclusion

“Innovative leadership” and “rebalancing” were words that resonated for me in the past week, having listened to His Eminence Luis Antonio Cardinal Tagle and Socioeconomic Planning Secretary Arsenio Balisacan speak on inclusive growth in separate forums—the former at the 2015 Inaugural Meeting of the Management Association of the Philippines (MAP), the latter at the Ayala Corp.-University of the Philippines School of Economics seminar on the state of the Philippine economy. I found it fascinating to hear the same topic approached by a religious leader and a professional economist from their own very different perspectives.

While their own respective realms may be quite different, Cardinal Tagle was clearly no stranger to the milieu of Secretary Balisacan, and that of his predominantly business audience at the MAP forum. He was actually invited to address last year’s World Economic Forum in Davos, Switzerland, the annual winter gathering of the high and mighty in global business, economics and politics. Initially incredulous of the invitation, he got the explanation from the organizers that they wished to “strengthen the global agenda on faith and ethic for societal development,” and “we know that fiscal policies are not enough to transform society… we want to tap on the religious and ethical resources of religions.” On the same reasoning, his talk last week made a fitting complement to that of Secretary Balisacan, and vice versa.

For his part, Balisacan noted that securing and sustaining inclusive growth calls for a “rebalancing” of the Philippine economy, referring to the structural transformation that must happen, and indeed appears to be already happening. But he clarified that the rebalancing we need is the opposite of that which had economists in most of our dynamic neighbors mouthing as a prescription against the ill effects of the 2008-2009 global financial crisis. Those erstwhile export—and investment-driven—East Asian “tigers” began to see the need to source more growth from domestic spending and from services, after reeling under sharply curtailed export demand from troubled large economies of the West. Prior to that, they had already enjoyed rapid job-creating and poverty-reducing growth that surging manufactures, exports and foreign investments had made possible for them for decades. Suddenly, they found themselves needing to simply re-ignite growth itself—and “rebalancing” toward greater domestic spending was the answer.

Our own story has been quite the reverse. Domestic consumer spending fueled largely by overseas remittances had dominantly driven our economic growth in the last two decades. That growth in turn mostly came from a services sector that had become our economy’s dominant sector, accounting for well over half of total production, while agriculture and industry, especially manufacturing, trailed far behind. Lulled into complacency by excessive trade protection, these sectors failed to achieve international competitiveness. With highly inadequate public investments in cost-saving infrastructure and productivity-raising research and development, we had the formula for weak exports and investments that had us trailing far behind our more dynamic neighbors (including relative upstart Vietnam).

Sure, it helped insulate much of our economy when the global crisis put a brake on exports and foreign investments. But we had already paid the price of a protracted period of growth that lagged behind in the region. Worse, it was a growth that was narrow, shallow and hollow, propelled by non-tradable services like banking, real estate development and telecoms that have been the source of immense wealth for a narrow few. With the global economy now on the upturn, Balisacan argues that we must “rebalance” toward the more export and investment-driven growth that we’ve been missing, driven by agriculture and manufacturing. The good news is that recent data show this rebalancing to have already begun.

Enter Cardinal Tagle and his message on innovative leadership to managers. He defined an innovative leader, first, as an ethically inspired leader—one who sees others not as commodity or factor of production, but as a brother or a sister, one for whom “giving and sharing is genuinely concerned for the other, the giving that a humble beggar is able to give.” The innovative leader is also an inclusive leader, one who takes to heart questions such as: Are the poor included in our personal and corporate vision and mission? Are they factored in into our planning? Do we invite them to be part of our policy determination? Do we consider their real needs when we think of products to produce and sell? Do they become part of programs that are meant for them? Do our training programs for our leaders and managers explicitly contain a concern for the poor? Are the poor central in our skills development? Are our labor practices within our companies uplifting the poor among us? Do we propose to them our own idea of development, which may not be the type of development they are looking for? Tagle challenges: If we want to take inclusive growth seriously, we should reduce inclusive growth from a label or slogan to these difficult questions.

Together, Cardinal Tagle and Secretary Balisacan rounded up, through their respective talks, what inclusive growth would entail from the ethical and technical dimensions, and at the individual (“micro”) and economy-wide (“macro”) levels. One hopes that our business and political leaders would take heed.

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