That Protectionist Winnie Monsod!

  • NOTE: This is an updated version. An update was made to deal with some of Monsod’s assertions. I found out that some of her sources appear to be outdated and UNRELIABLE. Did she even bother to verify the accuracy and reliability of her sources?

Not all so-called economists properly understand economic realities. Economic ignorance is not merely a product of one’s failure

You've got so much blood on your hands, protectionists!

to understand statistical facts and economic indicators, but also a result of one’s embrace of collectivism and anti-reality ideologies. There are certainly highly schooled ‘intellectuals’ who base their wrong, anti-reality judgments on mangled ideologies or poorly conceived philosophies.

I now understand that the study of economics requires a reality-based philosophical viewpoint. Economics is not purely about the study of statistics and economic figures and numbers, which are merely the results of man’s economic activities. As one great economist argued in the past, economics is certainly not a study of material goods, services, and products—but a study of human actions. One should understand that statistics and economic graphs and figures are merely a representation of a particular source: human actions.

Objective economics requires a solid, reality-based philosophy, because most economic issues of today are primarily philosophical. For instance, the issue of protectionism, or whether a state must restrict foreign participation or the flow of foreign goods, is not merely economic or political; it is primarily philosophical. To approach this particular issue, one must have a strong, objective grasp of basic concepts, such as the proper function of government and individual rights, as well as basic principles, such as the principles of reciprocity in international law and free trade. One cannot approach these concepts using one’s crude economic knowledge, for these are at base philosophical issues.

A bad economist can always claim that protectionism is for the good of the native people because it adheres to the collectivist concepts of ‘social justice’ and Filipino First politics, but he/she certainly cannot trick or fake economic realities. It is now (and should be) commonsensical that today’s technology and globalization (which is the result of nations’ willingness to participate in global trade by relaxing their protectorate laws and embracing economic reforms and intellectual property rights) require that nations should be more responsive to the ongoing changes (economic and political) in the global marketplace. For example, from being a purely socialistic state under its past socialist regimes, China gradually embraced economic reforms and thus opened its economy to foreign investors. After joining the World Trade Organization in 2001, the Chinese government adopted certain principles of the free market, such as property and intellectual property rights, lower taxation, free trade, and the idea that market-players should be left free to make and apply crucial business judgments. But of course, China, politically, is not yet totally free due to its socialistic or dictatorial political framework. In reality and economically speaking, China is more economically free than the Philippines.

In the Philippines, the strongest advocates of protectionism and economic regulations are the country’s so-called intellectuals and oligarchs/cronies. The oligarchs and cronies (these terms should not be used interchangeably, I believe) strongly support protectionism because they are its economic beneficiaries. On the other hand, the so-called intellectuals, who are mostly leftists and statists, provide strong pseudo-intellectual ammunition to the protectionist movement. Ironically, most of these intellectuals denounce the “rich” for dominating the land’s economic battlefield. The rich, according to these protectionist intellectuals, benefit from our political system, which is true. They believe that the rich should be taxed more to serve what they call social justice and the greater good. Social inequality, they argue, widens because the rich become richer while the poor become poorer. This is the reason why they want more regulations to  moderate the rich’s insatiable ‘greed’.

But who is/are the ‘rich’ they’re talking about? Certainly not all Filipino rich achieved their success through dishonest means and political machination. Certainly they’re referring to the country’s cronies and oligarchs. But did it ever occur to these intellectual MORONS that it is their pseudo-intellectual ammunition that helps these oligarchs and cronies maintain their corporate power/dominance? In reality, they are what Vladimir Lenin called “the USEFUL IDIOTS”.

For instance, so-called economist Winnie Monsod passionately denounced the Philippine Airlines (PAL) corporate abuses calling it “the exploiter of labor”. If this UP-educated statistician (not economist) would only try to understand that the most effective way to stop this so-called corporate abuse or “exploiting of labor” is to allow free market competition to flourish in the country. One needs to understand that it is our political system– our Constitution– that causes market monopoly or cartelization. All of our industries are monopolized by the dominant corporate few because of our protectionism. But first, the biggest monopolist is the Philippine government, which owns all GOCCs, government hospitals, more than 100 tertiary institutions, hundreds or even thousands of basic educational institutions, gambling facilities, public utilities, among others. Monsod should only try to compare the Philippines with Hong Kong or Singapore to see the difference.

In her latest opinion piece, Monsod claims dismantling our protectorate system is “not necessary”.  She is indeed a typical mediocre academic who naively uses the term “empirical evidence” to display a veneer of rationality and understanding. The truth is, Monsod is actually the “bad economist” Henry Hazlitt warned us about.

She opened her PDI column with the following lead:

“Concord, or Constitutional Correction for Development, was then President Joseph Estrada’s attempt at Cha-cha (Charter change). Estrada assured all and sundry that unlike the attempt of his predecessor (Fidel Ramos) at Cha-cha, his was not going to touch the system of government at all, but would “only” amend the economic provisions of the 1987 Constitution which limited the share of foreign investors in certain sectors (e.g. mining, utilities, transport and communications) and which, it was further asserted, was the reason for the relatively (compared to other countries) small foreign investment inflows into the country. Which resulted, it was then argued, in lost employment and growth opportunities. The conclusion: The restrictions on foreign investments were ANTI-POOR.”

I don’t give a damn about what Estrada or his minions thought of protectionism. I don’t care about their so-called defense of economic reforms. To me, amending the Charter’s economic provisions is just one thing. We have to dismantle, destroy, obliterate the Constitution’s welfare provisions. That is, we have to destroy our welfare state, which is bringing our already cash-strapped failing state to economic disaster. Amending the 1987 Constitution’s economic provisions would be futile without phasing out our welfare politics. The tragic experiences of Greece and other European nations strongly support my claim that welfare state is the enemy of economic freedom and progress. Certainly, Greece doesn’t impose the same 60-40 protectionism that our country currently implements, but it was destroyed by its welfare/socialistic politics. Dismantling our protectionism to attract more FDI while keeping our disastrous welfare politics would be like sending a bunch of foreign investors to a pack of welfare vampires. This is what Mrs. Monsod fails to understand.

Again, Monsod is trying to argue that economic freedom (translation: abolition of protectionism, political controls and economic restrictions) is not necessary. This UP-educated (so-called) economist claims that “no empirical evidence was presented” to prove that protectionism in the Philippines resulted “in lost employment and growth opportunities and that such “restrictions on foreign investments were ANTI-POOR.”

I guess Monsod is simply out of touch with reality. That she simply failed to see the very clear, obvious, patent, visible FACT that as this country miserably slipped into a higher degree of poverty due to lack of foreign direct investment, technology transfer and economic activities, many Asian nations, which were formerly socialists by definition, like China, Vietnam and now Myanmar, embraced free market reforms.

But since I don’t have enough time to waste on such an utterly ridiculous piece of crap, let me just reproduce my answer to a protectionist creature who also shares Monsod’s protectionism and failure to understand proper economics.

The following is my answer to a protectionist who shares Monsod’s version of RP’s economic/political reality:

What you don’t realize is that protecting our so-called local industries breeds CRONIES and OLIGARCHS that the leftists and people who favor protectionism hate and detest. Isn’t that so ironic? Pinoy leftists and statists (translation: those who favor protectionism and excessive government intervention) HATE and detest Filipino oligarchs like the Lopezes, Enrique Razon, Ayalas, Lucio Tan, etc. yet they’re too naive and clueless to understand that it’s protectionism and regulations of foreign investors that keep these protected cronies and oligarchs in government-backed corporate power.

For your information, China is more economically free than the Philippines. While former socialist countries like China, Vietnam and Myanmar opened their economies to foreign investors, allowing the latter to own up to 100% equity in business and land, the Philippines continues to limit foreign participation and discourages foreign investors due to rampant corruption in the government sector, high taxes, more regulations and restrictions.

Masyadong MAYABANG ang pinoy. What you don’t know is that even developed and oil-rich countries in the Gulf region like Saudi Arabia, UAE and others long understood that they needed foreign investors to prop up their economies. Saudi Arabia, for example, liberalized its economy and introduced business-friendly economic reforms to attract foreign investors. Today, Saudi Arabia enjoys more than $24 billion in FDI. Not only that, the Saudi government is determined to upgrade to TRIPS-plus (Agreement on Trade-Related Aspects of Intellectual Property Rights) through multilateral and bilateral agreements with developed nations (e.g., USA and EU) to attract TECHNOLOGY TRANSFER and more foreign investment in its pharmaceutical, technology and petrochemical industries. Why is Saudi Arabia, which is far richer and more developed than the FAILippines, doing this? Because its officials understand that it has no technical capability to create technologies; it can only acquire new and most-needed technologies through technology transfer, and technology transfer is made possible by establishing a business-friendly environment, embracing economic reforms and liberalization, and protecting intellectual property rights. No foreign investor in his right mind will ever invest in an economy that limits foreign participation.

What do most Filipinos, particularly professionals, do today? They migrate to developed nations, which allow them to enjoy things and rights (e.g., practice of their profession, ownership of land and business, etc.) that are denied to foreigners here in the protectionist FAILippines. In fact, FOREIGN INVESTORS SHOULD BAN RP. Economically freer nations like Hong Kong, Singapore, USA, Canada, Japan, among others should NOT do business with the Philippines. We’re being unfair. We limit foreign participation in our country, as foreigners are not allowed to own land and over 40% equity in business, when Filipinos do not face the same restrictions in many foreign countries.

Hanggang domestic helper na lang tayo. Mayabang pa tayo. BOBO na, NAGYAYABANG PA. Nothing will happen to our so-called rich and abundant natural resources because NO ONE in this country can convert them into new forms of wealth. Asahan mo yung mga taga-UP na mga sayangtists kuno? Good luck with that!

After years of protectionism our country achieved nothing but a higher degree of poverty, unemployment, and KAYABANGAN. A number of Asian countries learned from their socialistic past. China prospered economically after joining the WTO in 2001 and embracing economic reforms that attracted foreign investors. Singapore did the same. In fact because of Singapore’s less regulated economy, lower taxes (it has no capital gains tax and other taxes), and foreign-friendly business climate, billionaire and one of Facebook founders Eduardo Saverin decided to renounce his US citizenship and moved to Singapore.

Great leaders understood the role of marketplayers in improving a domestic economy. IDIOTIC, STUPID, MORONIC, DIPLOMA-TOTING FILIPINO TRAPOS know nothing but more papogi and pa-welfare effect. And many stupid Filipinos are buying their lies, including the BIG LIE that we must limit foreign participation to make Filipinos the master of their own land.

If there’s no “empirical evidence” to support the argument that protectionism produced “lost employment and growth opportunities”, then, Saudi Arabia, UAE, and even China should go back to their formerly protectionist states and conditions. What is very much clear is that  economic and political realities strongly debunk Monsod’s anti-reality, clueless economic gibberish.

Monsod said: “It is not known whether FDI causes the higher levels of income, or whether higher levels of income attract FDI.”

First, there are a lot of reasons why ‘enlightened’ nations attract more FDI. Some of these reasons include more investment, more business opportunities for locals, higher employment rate, technology transfer, etc. For example, despite being rich and economically stable due to its oil industry, Saudi Arabia is determined to attract foreign investors to fuel technology transfer by upgrading to TRIPS-plus (Trade Related Intellectual Property Rights). If protectionism has no negative impact on our economy, as Monsod claims, then why do stable/rich economies like Saudi Arabia scramble to attract foreign investors? Why don’t they just up their degree of protectionism, or just copy our 60-40 protectionism?

Second, there are a number of factors that determine higher levels of income, and FDI is just one of them. More competition in a market place has been proved to have an undeniable impact on income levels. Higher competition means more opportunities for the people. Higher competition also means companies would be forced to offer better compensation package and perks to attract competent workers/professionals.

What Monsod fails to understand is that dismantling protectionism is NOT enough to attract foreign investors. For even without protectionism (or a higher degree of the same), there are other factors that could effectively discourage foreign investors, such as high tax rates, excessive/intrusive welfare policies, interventionist economic policies/programs, etc. A higher degree of welfarism is the reason why investors/companies fled Greece despite not having 60-40 protectionism that our country implements. What I’m trying to say is that Monsod is merely looking at the impact of one economic activity (FDI) on one economic aspect (income levels) without looking at the whole picture.

What is clear and indisputable is that countries with high income levels do not impose our version of protectionism (60-40 and absolute limitation on foreign professionals to practice their professions). I would agree with Monsod’s FAILED arguments if she could give me at least ONE ECONOMICALLY STABLE NATION that imposes RP’s version/model of protectionism. Because as we all know, each nation has its own version of protectionism, and each version varies in terms of degree and implementation.

Monsod said: ”Translation: Not all FDI will result in inclusive growth or in sustainable development.”

I need to see the research methodologies used in those studies she mentioned. Again, she’s only looking at one particular effect of foreign investment. Foreign investment produces not merely FDI, but technology transfer as well. Also she’s looking at FDI from a Marxist or Keynesian economic POV. You cannot merely reduce the benefits of FDI to statistical terms. FDI will certainly not result in “inclusive growth” or that Marxist concept of “sustainable development” if there are other factors (e.g., government intervention, welfare policies, higher government spending, high taxes, etc.) that effectively stunt or negatively affect such growth or development.

How can Winnie Monsod expect that “all FDI will result in inclusive growth or in sustainable development” with the presence of government-induced interruptive factors? And, how will statisticians or economists measure FDI’s impact on “inclusive growth” and “sustainable development”? I’d like to see their methodologies.

Monsod said: ”Historically, FDI played only a minor role in the growth of most high-performing Asian economies. No need to translate.”

I conducted minor investigation and found out that Monsod’s source for the aforementioned statement was taken from this site. The source states:

Historically, while FDI may have positive externalities, it has played a minor role in the growth of most high-performing Asian economies:

  • 1967-1986 countries where FDI >5% of GDI were HK, Malaysia and Singapore. Countries where FDI <2% of GDI were Taiwan, Korea, China and Japan
  • More recently, Except for China and Singapore, FDI in East and SE Asia comprise <10%>”

Monsod’s claim/statement, which she borrowed from an UNKNOWN blog or study (???) covers 1967 to 1986. I don’t know if such a claim is backed by a reliable study. But certainly, a more recent study (dated 2002) by the IMF found that “China’s increasing openness to foreign direct investment (FDI) has contributed importantly to its exceptional growth performance.” It is worthy of note that China’s accession to the WTO was in 2001.

Also, here’s ONE PROOF that Monsod’s unreliable source is UTTERLY OUTDATED. Here’s a 2006 economic study commissioned by UNCTAD. It makes the following conclusion:

“No longer can it be assumed that FDI is mainly negative (as may have been a dominant perception in the 1970s) or only positive (as may have been a dominant perception in the 1990s). The type and sequencing of general and specific policies in areas covering investment, trade, innovation and human resources are all important. Appropriate policies to benefit from FDI include building up local human resource and technological capabilities to capture productivity spillovers.”

I suggest that Monsod’s questionable claims and sources should be critically, thoroughly investigated.

12 thoughts on “That Protectionist Winnie Monsod!

      • monsod: “Not ALL (caps mine) FDI will result in inclusive growth or in sustainable development.”

        unctad:“No longer can it be assumed that FDI is mainly negative (as may have been a dominant perception in the 1970s) or only positive (as may have been a dominant perception in the 1990s). The type and sequencing of general and specific policies in areas covering investment, trade, innovation and human resources are all important.

      • The real difference, which you ignored, is that Monsod’s source downplays FDI, while the UNCTAD paper highlights the importance of FDI.

        Besides, Monsod’s source includes years ranging from 1967 to 1986.

      • dear mark,

        if u read her column, she writes “t would be well for the proponents of Concord II to read Unctad’s 2012 World Investment Report before they continue their advocacy. It is not titled “Towards a New Generation of Investment Policies” for nothing. “New” meaning more—recognizing that FDI does not automatically lead to inclusive growth and sustainable development, and choosing only the FDI that will do so.”

        and that definitely agrees with the unctad quote you used. ” viewing the impact of FDI on economic growth as not only positive or only negative (the volume of FDI is not a sufficient indicator for growth prospects), but that the effects depend on the type of FDI, firm characteristics, economic conditions and policies.”

        so, both unctad and monsod are cautious about FDI. they both are saying the same thing.

        froi on the other hand, has NO RESERVATIONS. which is totally not what unctad is saying.

        now, as for the years, that doesnt matter. the effect of fdi shouldnt matter WHEN.

        if WHEN matters, then what happens in the future? anything goes? good or bad?

        what changes over time might be the opinion about FDI. but the effect of fdi itself should be invariant.

      • To claim the unctad agrees with Monsod is to show you neither read nor understood both articles. To be very clear, Monsod claims that removal of protectionist provisions in the consti is not necessary because of her view that FDI does not result in positive econ changes. She downplays the role of FDI.

        On the other hand, the unctad paper supports economic liberalization and highlights the positive role of FDI.

      • mark, i just block quoted from both documents, saying the same thing. wala nang mas malinaw doon.

        i guess you can “read” whatever you want to read into it.

        lets test your theory. can you quote anything from the unctad document that says governments MUST liberalize? that they recommend it unequivocally, like how you or froi do?

      • You may continue to insist on your view, but that merely proves you didn’t read both articles. Monsod’s opinion article tries to downplay FDI in order to support her stance that the removal of protectionist provisions is “not necessary”. The problem is she relied on an outdated and unknown study she found online.

        I don’t think you read the UNCTAD paper. On the liberalization of FDI regime and policies.

        From the UNCTAD paper: “A major change over the past three decades has been that governments have become more favourable towards FDI, and have liberalized their FDI regime accordingly, though at different times, speeds and depths in different countries and regions. Over the past fifteen years, countries have regarded FDI increasingly as contributing to their development strategies for the technology and capital it provides. They have even have started to compete for FDI. Investment policies have become more liberal at the national and regional level, but there is no comprehensive framework at the multilateral level.”

        “Countries have used general policies (improving the investment climate) and specific policies (linkages programme, tailored human resource development) to make FDI work for development. All in all, there has been a marked shift towards liberalisation of the FDI regime, and FDI is regarded more favourably now than a couple of decades ago, but also governments increasingly realize that policies can influence the effects of FDI on development.”

        “With increased liberalization of trade and investment regimes and technological advances in areas such as information and communication technologies, countries are increasingly concerned about the competitiveness of their economies. This involves paying more attention to created assets, such as skills and infrastructure.”

        “Governments are liberalizing FDI regimes as they associate FDI with positive effects for economic development in their countries (e.g. Lall, 2000a).”

        “Almost all countries are now actively welcoming FDI. They have liberalised their investment regime, but at different points in time. South-East Asian economies (in 1960s: Hong Kong [China], Singapore, Malaysia) were first, while other Asian countries (Republic of Korea, China and India) and Latin America countries began to liberalise in the 1980s and 1990s (even the Republic of Korea, which had previously restricted FDI and imported technology through licensing, decided after the Asian crisis in 1997 to open up more to FDI for the capital and technology it could bring). Many African countries followed only in 1990s.”

        “Investment liberalisation has coincided with an increased attention to FDI protection and promotion. Countries now actively try to attract FDI and have established FDI promotion agencies for this, thereby aiming to chance an FDI screening task into true FDI promotion. The proliferation of other tools included incentives, export processing zones, science parks, etc.”

        “The rise of FDI, and the continued presence of FDI in countries, has led countries to think increasingly about the impact of FDI, rather than assume that all a country had to do was attract FDI. In the previous section we already emphasised the importance of three policies to enhance the positive effects of FDI (based on multi-country studies)
        • Creating a liberal trade regime
        • Related, creating a competitive environment
        • And, building up adequate human resources”

        “National FDI policies have increasingly become more liberal and provide increasingly for a welcoming investment climate.”

        “There are also international FDI policies; all of them have become more liberal (or more protective of FDI) over the past 3 decades. We discuss bilateral, regional and multilateral investment policies.”

        “All in all, there has been a marked shift towards liberalisation of the FDI regime, and FDI is regarded more favourably now than a couple of decades ago. Governments have also realised that policies can influence the effects of FDI on development. No
        longer can it be assumed that FDI is mainly negative (as may have been a dominant perception in the 1970s) or only positive (as may have been a dominant perception in the 1990s).”

        —–

        Now I don’t think it is advisable to continue to argue with someone who has very little knowledge about this issue/topic. Good day!

      • yeah… it looks like “unequivocal” is not something you were able to copy-paste.

        also, i’m pretty sure froi/mises, etc would frown on FDI incentives, which you also quoted:

        “”Countries have used general policies (improving the investment climate) and specific policies (linkages programme, tailored human resource development) to make FDI work for development.”

      • From the UNCTAD report:

        “A major change over the past three decades has been that governments have become more favourable towards FDI, and have liberalized their FDI regime accordingly, though at different times, speeds and depths in different countries and regions. Over the past fifteen years, countries have regarded FDI increasingly as contributing to their development strategies for the technology and capital it provides. They have even have started to compete for FDI. Investment policies have become more liberal at the national and regional level, but there is no comprehensive framework at the multilateral level. Some home countries are also increasingly facilitating FDI into developing countries using guarantee funds, matchmaking and other measures.

        “However, at the same time as countries have begun to realise the positive aspects of FDI, a more nuanced view on FDI and development has now emerged in the research community, viewing the impact of FDI on economic growth as not only positive or only negative (the volume of FDI is not a sufficient indicator for growth prospects), but that the effects depend on the type of FDI, firm characteristics, economic conditions and policies. For example, the type and motivation of FDI is important: an increase in efficiency seeking FDI in high value added manufacturing has been instrumental in transforming production structures in several East Asian countries since 1960s and hence their growth performance…”

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