Economic Nationalism or Economic Internationalism: Which Path Should the Philippines Adopt? Essay
No complete realization of either is practicable. We must understand the real alternatives clearly. Therefore, the choice should not be between a complete suppression of international trade on the one hand and its complete freedom on the other. Rather we shall look at the restrictions present in status quo which walls our path to development. In the context of constitutional reform, the development of the country necessitates a more positive definition of economic nationalism.
It is evident that our economic policy has longed emphasized economic nationalism. Based on our laws, our strand of economic nationalism emphasizes the fear of exploitation by foreigners. In fact, from the time of Quezon until present we have adopted a system of laws, starting with our Constitution, reserving to the state the role of providing cover and protection for the Filipino, defining his exclusive rights over others.For a long time now, we have constricted the degrees of economic freedom with which we should have maximized to solve poverty, and other challenges of our time. Our Constitution and other laws, such as Retail Nationalization Law, Anti-Dummy Law, Board of Investment, etc. , work as barriers for development. There were times in our history when our leaders tried to amend these “barrier laws” and change our circle; however, as we always go back to the ultranationalism stance we have, we always stop the reconstruction of our economic development.
Our economy has been always halfway to the development, impaired by the citizenship requirement in economic participation found in the Constitution and other subsisting laws; therefore, we must amend these provisions. If our nation continues to face an ever increasing task to overcome poverty, the blame for the severity of the challenge is not on foreigners, but on our leaders and us.To briefly historically analyze our economic situation, it all started in our 1935 Constitution when our forefathers incorporated the citizenship requirement regarding economic participation of foreigners and foreign capital in our economic development. Right after, the consequence of our action led foreigners, specifically Americans to become cautious of their accumulated capital and land in the country; therefore, passing parity amendments and Bell Trade Agreements, which commenced our “Filipino First”.Our enactment of “barrier laws” continued as the rhetoric of economic nationalism grown; Import trading was Filipinized in conjunction with import controls; the Central Bank and General Banking Acts were passed, so the subject of foreign banks was left to banking regulation; Retail Trade Nationalization law was enacted; and less dramatic restrictive laws were placed on in the laws on procurement, on public utilities, interisland shipping, transport, on professional practice and employment. As an effect, our external market growth was hampered.Firstly, through the General Banking Acts no foreign banks could be admitted into the country. Foreign banks operating in the country were allowed to continue, but the operations of these banks were restricted to their main head offices.
This decision severely restrained the growth of bank financing especially in international trade, since the domestic banks created were largely new, undercapitalized, and inexperienced. Secondly, the Retail Nationalization Law caused one avenue for future export growth in industry to be closed.It also encouraged monopolization inside the country.
The public debate on this law emphasized the need for the small Filipino retailer and the poor sari-sari vendor the opportunity to grow. It was directed mainly against the Chinese control of retail trade, but it had significant impact on large-scale distribution in which American interests were still present. What it did was to reserve to citizens a very profitable segment of trading and marketing to citizens, and put the writing on the wall for foreign interests to stay out of retailing.Slowly, the substantial American retailing interests would sell out to Filipino corporations. Lastly, public utility suffered long periods of poor service partly because the former owners had no incentive to expand their service and indeed had to sell out at the end of parity. As a result, widely energy blackouts of one decade ago and other kinds of poor service in public utilities had become apparent. The need for large investments in public utilities and in public infrastructure in the country is never more urgent as today and the capital needs to be harnessed.Even Lee Kwan Yew in one of his speeches addressed this issue.
In simple terms, our industrialization failed due to a pre-emptive protectionist economic policies which were provided in our Constitution. We could also attribute this failure in the government’s faulty judgment and decisions of how to view the real essence of “economic nationalism”. At present, these problems have been supplemented by more “nationalist issues”. Filipino owned industries insist on high tariff protection or a guaranteed domestic market that assure them profits.This means high tariffs on rival, imported products, while low tariffs on the raw materials. They desire long years of protection.
When reminded of the need to reduce the tariff, or to have a program of tariff reductions, they do not want to have any “premature” reduction of tariffs. In addition to this, they wanted the preferential access to credit from the government that, in the past, even took the form of governmental guarantee when the project accessed external loans. The record of credit payments of many of these industries is poor, basically because of their crisis prone nature.The other part of the equation that explains this behavior was that many of them got arranged as projects because of their political connections. In fact, another perspective to be explained is the import substitution industries promoted by the government. Politics and cronyism often get involved in the project selection process. Economic nationalism that is based on protectionism, discrimination to foreign investment, unequal rules in favor of Filipinos in all areas, patronage, and corrupt political processes is very much tainted and exploitative; thus, must be changed, especially if we are to progress.If we are to promote industrialization in the true spirit of economic nationalism, we must apply competition, and prevent monopoly; we should allow trade and competitive advantage; and government should undertake targeted interventions to correct deviations from these principles of economics.
As how Gerardo Sicat(2002) puts it: “Competition implies the acceptance of open trade environments and the rejection of monopolies as a way of organizing the economy.It also means promoting the best use of the country’s resources, supplementing those resources that are most lacking so that the resources that are abundant are able to play a useful role in economic life. Other countries try to attract foreign investments by giving them a welcome equal to the opportunities available to citizens. In our country, there is a tendency to make rules convoluted and difficult. Of course, it begins with Constitutional provisions that we should revise if we are to attract investments effectively.
Economic nationalism should not promote the welfare of the small minority of rich countrymen at the expense of the poor, large majority. The demand for monopolies, special advantages, and accommodations that tilt the playing field only for citizens create opportunities for monopolistic positions of the few who could take advantage of those opportunities. The result is monopoly position over certain opportunities. Many of the ills of the country can be traced to the measures undertaken by the government – on the backing of nationalistic xenophobia – to require a citizenship qualification for many types of economic activities.The current demand to expand opportunities and the role of outside capital has been the result of citizenship requirements that impeded progress in the country. To be truly independent, the citizenship requirement for public office is the most important and perhaps the only one that matters. Extending that to many areas of life is likely to constrict many opportunities available to our people in realizing the best possible growth of economic opportunities.
But aside from that, the rules for business should be made fair for all, with the rules of the game being made equal rather than tilted.That is the way we can promote greater competition and more openness and, above all, improved performance and productivity for the nation. ” Definitely, the idea of economic internationalism is a continuum of economic nationalism. The two are compatible, and the right path for the country. Although World Trade Organization negotiations are undeniably for the interest of industrialized countries, disputes of industrialized countries and the rise of developing states as big economies, brought about by divergence of interests, could arguably promote the interest of small economies.
Gerardo Sicat (2002) wrote: “The true interests of the Philippines are on the side of developing countries through the common denominator of ASEAN support. Developing countries need to get a fair shake in the negotiations for improved rules for trade, in all aspects of the many trade rules and standards that are being negotiated with all countries. Recognizing the multilateral character of the negotiations provides assurance that there are many little Davids that can unite on common issues and that there are two to three, not one, Goliaths that are likely to be in contention. Again, economic nationalism must reverse its trend if we are to work towards development. We must begin by getting rid of xenophobic restrictions that are found in the Constitution. We must have an enlightened position in terms of foreign participation and creatively utilizing means of promoting economic development in the country.Reference:Sicat, Grardo.
(2002). Philippine economic nationalism. “UPSE”:1-24. University of the Philippines Press.