Cause and effect in our global village

ROSES & THORNS - Alejandro R. Roces () - July 22, 2008 - 12:00am

The just released July 21, 2008 edition of Fortune magazine unveils the Global 500, or the largest companies in the world. Unfortunately, it does not contain any Philippine company, yet.

The issue focuses on the fluid nature of the new global economic structure and the current global environment. In the cover article, written by Barney Gimbel, Robert Mcdonald, chief operating officer of Procter and Gamble, we note the use of the acronym ‘VUCA’, an old military axiom that means volatile, uncertain, complex and ambiguous to describe the current state of the world. I am struck with Mr. Mcdonald’s statement that “the idea that a butterfly flaps its wings in Africa and an earthquake occurs somewhere else in the world is our reality.” He is of course referencing the “butterfly” or “Chaos” effect that was popularized by Ray Bradbury in his 1952 time travel story, “A Sound of Thunder” and used as the basis for many movies, including the Back to the Future Trilogy and It’s A Wonderful Life. The basic hypothesis, first theorized by Jacques Hadamard in 1890, is that a small change or action can have ripple, or unforeseen, reactions elsewhere. Global warming, for example, is now a major problem, with too much pollution in many countries caused by the continuous emission of toxic gases in the air as people use cars, manufacture things and accumulate wastes. It is indeed a terrible tragedy if the simple flap of a butterfly’s wings in Brazil can cause a tornado in Texas! Then the world will have become too fragile for anyone’s comfort.

We remember arriving in Makati in the 1950s via airplane. The terminal at that time is where the current Filipinas Heritage Library stands. Makati was empty, a state that it is certainly not today. Makati in 2008 is teeming with multi-national businesses of all types, it is the epicenter of the new global order in the Philippines. The new global order is simple: Globalization and interconnected economies. The “Butterfly Effect” is no longer an esoteric theory, but a practical reality.

The last few years have seen economic growth in the country, not so this year. As of July 17, 2008, the Philippine Stock Exchange is down 33.91 percent; last year it posted a positive 21.43 percent return. The underlying fundamentals of the Philippine economy are relatively solid. But, with the collapse of the United States housing market, a domino, or butterfly effect, was put into motion. The fallout has touched every country and every industry throughout the world. It has resulted in bank failures in three continents (North America, Europe and Asia) and a slow-down in global economic growth. As global growth slows down, growth in the Philippines comes to a halt.

Outside of the Philippines there are around 11 million overseas Filipino workers; this is equal to approximately 11 percent of the total population in the country. We send close to one million Filipinos overseas each year. They remitted $14.45 billion dollars in 2007 — money that was vital to supporting the economy. In many ways, more than any other country in the world, the Philippines is at the mercy of global economic factors. Our largest trading partner is the United States and most remittances come from the United States and the Middle East. We worry that if economic conditions continue to worsen those remittances may begin to slow down and our economy may slip into another recession.

We were relieved to learn that in May 2008, a record $1.43 billion was remitted. This is directly attributable to the 39.5 percent increase in Filipinos deployed overseas in the first five months of this year. We cannot think of a greater testament to the high regard that Filipino workers are held worldwide and the love the Filipino has for his country. However, it is important to remember that the new world order is a reality. We need to reorient our thinking and begin to consider factors outside of our city, our province, our country and even region, taking into consideration the statement of CEO Mcdonald that the simple flap of a butterfly’s wings may have an effect on the world.

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