Wealth creation

It did not create blaring headlines: the fact that the country’s economic managers raised the GDP growth target for this year from 2.5 – 3.5% to 5 -6%. What just happened was unprecedented. In midyear, the growth forecast was basically doubled.

The previous growth forecast was constructed at a time when the strength of recovery from the global recession seemed weak. It has since appeared stronger, more broadly based. In the first quarter, the Philippine economy posted a spectacular growth rate of 7.3%.

Our economic managers were not the first ones to begin revising growth forecasts. Credit risk agencies, international financial institutions like the ADB and foreign investment banks were raising their forecasts months ago. Our economic managers maintained a conservative stance even as trade data showed a recovery that was stronger than expected.

At the rate things are going, we could match our 2007 growth performance. It was a growth performance we could not sustain, however, given the onset of the subprime crisis that forced most of the world’s economies into recession. The global bout with recession shrunk markets for our exports. Our electronics sector, representing the biggest bulk of our exports, was severely hit. Nevertheless, we averted sliding into recession due to the timely implementation of an economic stimulus package.

The second factor that kept us from sliding into recession was the sustained growth of remittance inflows. Even as the number of Filipinos working abroad remains relatively constant, remittance inflows are characterized by a sustained growth. That can only mean one thing: the skills and wage profile of our expatriate labor force has been improving over the years.

Our economic expansion has always been consumption-driven. Remittances keep domestic consumption demand robust. That helps us sustain the expansion.

We cannot long rely on remittances and electronics to keep our growth going. Manufacturing is a long bet, considering (as I explained in the previous column) it will take us about two decades to alter our energy mix and bring down our power costs to regionally competitive levels.

In the near- to medium-term, our best bet is tourism as the source of wealth-creation in our society. The tourism industry has the best and quickest returns for every unit of investment. It creates jobs at the medium-skill level. Our competitive advantages are intrinsic in our natural endowments and cultural inclinations. It has great multiplier effects on communities hosting tourism facilities.

In addition, tourism fosters a popular culture that is protective of the environment. If our communities depend on tourism revenues, they will fight spoilage of our beaches and the poisoning of our seas.

Tourism has the same potential for generating jobs and creating wealth as the establishment of smokestack industrial centers —- with the advantage of sustainability. We cannot compete with China in the area of light and heavy industries. Our big neighbor has lower power costs, cheaper labor and a firm grip on export markets for industrial goods. Our best bet is to grow our services sector: host entertainment centers, supply content for the world’s multimedia, improve our capacities for cultural production.

Over the long haul, of course, only broad-based entrepreneurship will ensure us a dynamic economy.

For the longest time, our domestic discourse on poverty alleviation has been keyed to state-led investments and state-brokered redistribution. That discourse is self-limiting. A society can redistribute only the amount of wealth it is able to create. If the pie is small, the portions will also be small. In the last analysis, we end up redistributing poverty, not wealth.

We have to alter our domestic discourse, centering it on wealth-creation rather than on redistribution. Our communities need to focus on initiatives to improve wealth-creation rather than constantly waiting for government to provide them the goods.

At the grassroots, we need to build a new popular culture of entrepreneurship. In that new popular culture, the state is expected to redistribute opportunities for wealth-creation — not the redistribution of wealth itself, wealth created by others.

Among the most dynamic societies in the world today, the young look to successful entrepreneurs as role models. In the US, for instance, young people look to the likes of Bill Gates and Steve Jobs as inspirations for designing their own lives. In China, Deng Xiaoping launched the real revolution, the one that truly lifted tens of millions out of poverty, by declaring; “To be rich is glorious!” With that slogan, he put wealth creation at the front and center of his society’s historical project.

Our traditional cultural outlook encouraged dependence on the rich and powerful for protection and generosity, for mercy and for aid in times of need. That traditional cultural inclination mutated into dependence on the state, on the political apparatus, for subsidies and dole-outs, for the provision of jobs as well as the determination of winners and losers in life.

We need to change that. We must evolve our institutions and our discourse so that risk-taking is admired and just reward for hard work is respected. Our people must revere merit, admire achievement and accept wealth-creation as a way of life.

 Only if we do so can we build an economy that is truly broad-based — and being so, increasingly more equitable. Only if we do so can we build a society where every citizen values time and talent as capital, where everyone is willing to work hard because work is justly rewarded.

We will never progress if we continue, as we have done, maintaining a system where people expect their share of the social pie to come by means of complaining loudly enough until they are appeased by one form of subsidy or another.