Tuesday was a day of ignominy for the Philippines. Nine justices disgraced the nation. I’m going to rob a bank and have nine justices exonerate me.
Here is the conclusion of my column last week quoting US President Barack Obama’s piece in The Economist (“The Way Ahead,” 10/8/16):
“More fundamentally, a capitalism shaped by the few and unaccountable to the many is a threat to all. Economies are more successful when we close the gap between rich and poor and growth is broadly based. A world in which 1% of humanity controls as much wealth as the other 99% will never be stable.”
In the Philippines it’s a bit better, but the ratio is still bad as an estimated 10 percent of the population has about 60 percent of the wealth.
“Expectations rise faster than governments can deliver and a pervasive sense of injustice undermines peoples’ faith in the system. Without trust, capitalism and markets cannot continue to deliver the gains they have delivered in the past centuries. [Getting] ahead requires addressing four major structural challenges: boosting productivity growth, combating rising inequality, ensuring that everyone who wants a job can get one and building a resilient economy that’s primed for future growth.”
Obama suggests that reducing the distortions and getting the poor out of poverty with a better life for all require reform in business taxes; improved education with high quality job training; and lifting productivity and wages, which is helped by opening trade borders and moving more into export (he supports joining the Trans-Pacific Partnership or TPP, which, worrisomely both Donald Trump and Hillary Clinton don’t). Inequality must also be addressed, without dragging down the wealthy. As Obama says, “Research shows that growth is more fragile and recessions more frequent in countries with greater inequality. Concentrated wealth at the top means less of the broad-based consumer spending that drives market economies.”
Major reform in the tax system is necessary, where the lowly paid pay less and the rich more. So Finance Secretary Carlos Dominguez’s tax reform proposal makes great sense, which Congress should accept for immediate enactment. Effective Jan. 1, 2017, would be good, not the 2018 discussed.
There’s been much discussion about raising minimum wages. (Note the “s”: Wages must be different in different Philippine regions, to match the cost of living in those places.) Obama suggests wages need to be raised BUT unions—which can also be of crucial help here—should be “flexible enough” to adapt to global (regional here) competition. You can’t price workers out of the market. Yet this is what the Left wants to do.
The daily minimum wage rates across Southeast Asia are: Philippines $10.2; Thailand $8.7; Malaysia $8.1; Vietnam $8.1; Indonesia $8; Cambodia $4.7; Laos $3.6; and Myanmar $2.8.
Based on the figures, if you want to hire 1,000 workers, where would you go? It wouldn’t be the Philippines, would it? And it isn’t. The Philippines gets the lowest foreign direct investments, and in 2010-2015 was trumped by its Asean peers in that respect. During that period, Indonesia received $122 billion, Malaysia $68 billion, Thailand $57 billion, Vietnam $54 billion, and the Philippines $22 billion.
President Duterte will appreciate this. Joblessness is “related to a devastating rise of opioid abuse and an associated increase in overdose deaths and suicides.” So giving the youth jobs will reduce drug use. And reduce the attraction of joining the New People’s Army.
Obama concludes: “A new future is ours to write. It must be one of economic growth that’s not only sustainable but shared. To achieve it America must stay committed to working with all nations to build stronger and more prosperous economies for all our citizens for generations to come.”
For Mr. Duterte the message is there: Growth shared by all citizens, and working amiably with all nations in this globalized world must be the goal. I doubt any economist could write a better speech than what Obama laid out.
E-mail: wallace_likeitis@wbf.ph. Read my previous columns: www.wallacebusinessforum.com