Filipinos’ Fallacy of Politico-Economic Equivalence

Certainly, Asian countries are not economic equals
Certainly, Asian countries are not economic equals

A Facebooker commented on this blog article I posted on July 4 by asking the following question:

Question: So where in the world can we find what you call as “free-market” model being implemented?

The main argument laid down in the article is about dismantling our protectionist system and Cartel system in the water sector and allowing foreign investors to compete.

I gave the following response:

Another question is: where did we get the protectionist and Big Government model we currently apply? It’s as if the tenor of your question suggests that the free market model you so dread does not exist and was never implemented in the past.

Here’s one thing you should know: Capitalism or free market system is a concept that demands limited government, rule of law and individual rights. You ought to understand that any society is defined by its degree of freedom or government control. And this is the basic issue. The real battle that humans actually face is the fight between freedom and statism. That is, the fight between individualism and collectivism. 

Where will we get it? We have to figure it out. It’s not the same as simply getting construction materials for your ideal home or building. As an architect, you have to figure out what’s good for you.

Humans or societies don’t just shop or buy political models. If this is what you believe, then you ought to reassess your thought process. There’s no such thing as a ready-made political model.

But you should understand if you live in the real world, there are right and wrong ideas. And as a rational (I must remind you rationality is a choice) or sentient being, you ought to choose the right ideas if you want to live as a civilized, dignified human being.

I have my own term for this human behavior: cultural adaptation. Humans have the capacity to adapt to other cultures or traditions. The Romans did not totally reject the Greek culture. In fact, they embraced some of Greeks’ rational and reality-based cultures and achievements. This means that you as a being have the capacity to know what is good for you, otherwise you’re not a human being.

What I am trying to tell you is this: You should not be a human being only when it comes to your basic biological survival, like getting food and then consuming it. You ought to know the difference between food and poison. Also if you want to live, you ought to know whether the food you’re about to take is good or bad for you.

Now we apply the same principle when it comes to choosing and applying the right politico-economic model. You ought to know what makes a political-economic model works by studying history and by understanding the right principles. Logic will help you understand that there are universal principles, such as: you cannot eat your cake and have it too, you cannot consume more than you earned, etc.

By objectively and factually looking at history, you can tell whether a socialized or communal political model that rejects property rights and individual rights worked or failed wherever it was adopted and practiced.

The free-market model is not technically speaking an American model. It’s just so happened that the Americans were the ones that nearly adopted it and practiced it. They didn’t fully implement a free market system, but they were the ones who established the freest economy the world had ever known. Since America had the freest economic model (very poor immigrants went to the U.S. without too much restrictions and and businessmen were able to start businesses and to trade without too much regulations), it achieved the most.

Most progressive countries in Asia, like Singapore, Japan and South Korea, were inspired by the American free market model. Lee Kuan Yew himself said he was inspired by America’s free market and immigration system. This is why two decades ago Singapore began freeing its fledgling economy and allowing foreign investors and professionals to be part of its team.

Here’s a related video you need to watch:

I am not saying Singapore is an example of a free market society. But Singapore has a higher degree of economic freedom. And when we talk about free market system, we talk about a society’s level of economic openness.

But where did the communists and socialists get their model, anyways? Where?

Just imagine the degree of freedom versus government control, zero (0) being “Anarchy Level” and 100 being the “Absolute Government Control Level”. Using this freedom-statism scale, the Philippines must be somewhere between 60 and 50 percent. We have more controls and degree of government intervention. Singapore must be somewhere between 40 to 30 percent. A true free market model should be between 15 and 10%.

There’s this one particular fallacy many Filipinos commit whenever they try to compare the Philippines with other Asian countries. And this fallacy is what I call the “fallacy of politico-economic equivalence”. Some pinoys— especially the economic illiterates– tend to think that while the Philippines is way poorer than Singapore and Japan, the three are equal in terms of politico-economic foundation and fundamentals. They’re not. That’s why we’re economically inferior to Japan, Singapore and South Korea, which all have superior economic models. But what makes their econ models superior or successful?

The truth is, Japan, SK, Singapore and HK are economically freer than us. In terms of ease of doing business, it is easier to start a business in these Asian tiger economies. Which means that they have a higher degree of economic freedom. They embrace foreign investors. They don’t have the 60-40 rule that we currently apply. We totally ban foreign professionals; they don’t. They’re certainly not representatives of capitalism or free market system, but they’re freer than other economies or societies. They’re many times FREER than us. In fact in terms of economic policies, China is freer than us.

But really, where do you think we should get the political and economic model for our country? Please answer.

The actual conversation:

Commenter: “I’m coming from your argument that a hands-off approach by the government in the conduct of business will solve the problem like that of water… so I asked, where in the world do you see a country where its government does not involve itself with the activities of business sector, like putting restrictions and regulations… You’re replied it’s not about having a hands-free approach but the level of “being free” that it allows… (tama ba ako?)”

My reply: “No. The argument laid down in the article is about dismantling our protectionist system and Cartel system in the water sector and allowing foreign investors to compete.

“Where did you get this: ” hands-off approach by the government in the conduct of business will solve the problem like that of water”?

“Kindly cite a statement or passage that supports your assumption?

“While I’m for what you call “hands-off approach”, that’s not the article’s main argument. But thanks for reminding me. That’s definitely for another future blog article. 😉

“Well, many progressive countries removed their protectionist policies in the past (ever heard of the British Corn Laws in the 18th century and others?), if that’s what you call a “hands-off approach” then so be it. But it works. China went from absolute closed economy but then it gradually opened its economy since 1979. Today foreign investors are allowed 100% equity and to own lands. Japan, Singapore, and SK did the same approach.”

Commenter: “i erased yung last post ko, kasi i realized what I was saying and what you are saying are still the same thing in essence… if the government removes what you call as “protectionist system,” it’s already the same as the government having a hands-off approach in dealing with the business community.. so explains my question which in a way states na ala namang gobyerno ang hindi naglalagay ng restrictions on businesses in the form of ownership limits and regulations…it all boils down to what extent these are, and the kind of business they intend to favor… (and to achieve the goal, i say we first need to remove from people’s mind the concept of nation and country…)”

My reply: “But removal of protectionist policies is not, by definition, a “hands-off approach”. You can allow foreign investors but fry them with regulations and punitive tax rates once they’re in. This is what Greece did. In other words, you can allow foreign investors to own lands and control 100% of their business, BUT you can still fry or destroy them by imposing higher tax rates and regulations once they’re in. Countries that impose this economic policy barely attract investors.”

Related Facebook Discussion

Some clueless statists from this group talked about contractualization, lower wages and lack of workers’ rights, among others as of the effects of the Philippine’s so-called free market system.

For instance, a guy named  Pistong Melliza made the following claim: “You don’t know the practice of contractualization which fires workers every five months to prevent regularization, on top of measly pay and unpaid overtime given the workers…”  “You also surprise me by your concern on labor, and your advocacy for legislated workers rights, that is, fix minimum wage and ban labor-only-contractors which began during the time of Ason Aquino…” ” It surprises me further that you are unaware that workers’ right is the last in the agenda of capitalists…” ” Since 1898, the US alredy pried open, raped and plundered the Philippines. the Pilippines has been a paradise for multinational companies.”

I gave the following reply:

Pistong Melliza, so you want a closed economy?

— Everything you said above is an economic fallacy. Contractualization usually occurs a in semi-closed or protectionist economy. If you look at the freest economies on earth, contractualization is rarely practiced or even non-existent. Why is this the case? Well, it’s because in a free economy companies compete for workers, and workers have better and more extensive choices.

“your advocacy for legislated workers rights, that is, fix minimum wage and ban labor-only-contractors which began during the time of Ason Aquino.”

— There’s no such thing as workers’ rights. Also, there’s no such thing as employers’ rights. It’s as if you’re saying you have a natural right to a job. While you are free to find a job of your own choice, you cannot force the employer to hire you. There’s what we call “employment contract”. Try to start a new company to know what I’m talking about. All the labor standards that we have today were first practiced by American businesses about 100 years ago. Governments did not create or originate them. Private companies did. Know the history of labor standards. They were first practiced by companies. Why? Because they wanted high retention rates and productivity.

” It surprises me further that you are unaware that workers’ right is the last in the agenda of capitalists…”

— Where’s your proof? There’s A BIG DIFFERENCE between a BUSINESSMAN and a CAPITALIST. A capitalist is someone who promotes and supports capitalism, while a businessman is someone who owns a business. The truth is, there are many businessmen who support capitalism. The Lopezes are not capitalists; they are protectionists or corporatists. Karl Marx, the father of Marxism or Communism, was a son of factory owner. Do not confused businessmen with capitalists.

Now that means you want industries and businesses run by the state. Why not make your arguments clearer?

 Now, if you claim that there are such things as workers’ rights, then in the name of fairness, employers should also be entitled to employers’ rights. Am I right?

The rights of workers are essentially part of INDIVIDUAL RIGHTS. This means that you do not acquire any better right by joining a workers’ union, an association, or a gang. The concept of workers’ rights is actually hinged on Karl Marx’s class warfare rhetoric. It pits the working class against the providers of jobs or employers. [Related blog: The Workers’ Rights Folly


Another statist made the following argument “Talamak ang kontraktwalisasyon na syang pangunahing suliranin ng sektor sa paggawa kung kaya di man lang talaga makakaipon sa loob ng 5 buwan na pagpapa-alipin!”

My response:

 It’s because you and the government have allowed it. SM and other companies have the audacity to abuse contractualization because they don’t face stiff competition. Like I said many times before, our laws and regulations excessively limit foreign competition and protect the oligarchs. That’s why you see a few families controlling our industries. These big, heavy industries are protected against foreign competition. I case you don’t know, Japan, South Korea, Hong Kong, Singapore and even China invited, encouraged and attracted foreigners to invest in their economies. Like the Philippines, these present-day Asian tigers were protectionists, a few were CLOSED ECONOMIES (like Japan and China). But they began to liberalized their economies over 20 to 30 years ago. China under Deng Xiaoping started to open its economy to foreigners in 1979. In the 1980s Deng, who betrayed Mao and reversed his communist model, visited Singapore and asked Lee Kuan Yew some economic advice. Deng asked LKY why most Singaporeans had jobs and were home-owners or property owners. LKY simply said he used capitalism to improve the people’s lives. In other words, LKY combined capitalism with egalitarianism. When Deng returned to China, he immediately opened 12 economic zones where foreigners were allowed to invest and do business. In 2001 China joined WTO. It was America’s strategic move to get China to respect Intellectual Property Rights. Of course China now has the incentive to observe international laws and IP rights because it’s conducting research and innovation in all sectors, including Life Sciences.

Singapore started to liberalize its economy over 20 years ago. Now there’s almost no contractualization in Singapore (as well as in Hong Kong, SK and other freer economies). It has more jobs than workers, and that’s the reason why it can provide jobs to millions of expats. This is also the reason why it adopted a new immigration policy to attract millions of immigrants to be part of its economy and team. In an interview, LKY said: “USA and Europe brought us to where we are.”

Japan and South Korea did the same thing. All these Asian tigers opened their economies to foreigners so their people would learn and absorb foreign knowledge and technology. For instance, LKY said most Singaporeans worked for foreign companies. The pioneers then became supervisors and managers, while others started their own companies. The most important contribution of foreign involvement is technology transfer and knowledge-sharing.

Now if you reject foreign involvement and economic liberalization, then do not complain about contractualization, low wages and increasing unemployment rates. You’ve made your choice. It’s either you want us to stick to our protectionist status quo or to try socialism.

Ease of Doing Business Index

Comparison between Philippines, China, Hong Kong, Taiwan, South Korea, Singapore and Japan in terms of ease of doing business:

  • Philippines: 138
  • China: 91
  • Hong Kong: 2
  • Taiwan: 16
  • South Korea: 8
  • Singapore: 1
  • Japan: 24


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