The Philippines recently moved up seven notches from 59th to 52nd out of 144 countries in the ranking of the World Economic Forum (WEF) for “global competitiveness.” Malacañang hailed it as a major achievement and a gauge of the success of its ‘good governance’ thrust. Finance Secretary Cesar Purisima said it is an indicator of the “good governance is good economics” platform of the Aquino government.
Ibon Foundation belittled this saying that the WEF report is only meaningful to corporations that intend to do business in the country to gain profits. It does not, according to Ibon, reflect the socio-economic conditions of the people in a country.
In deciding whether this recent development benefits the Filipino people or not, let us look into the construct and underpinnings of the Global Competitiveness rankings.
Global competitiveness is measured by the WEF through a Global Competitive Index (GCI), which is “the set of institutions, policies, and factors that determine the level of productivity of a country, conditions of public institutions and technical conditions.” It looks into the “factors that play significant role in creating favorable business-climate environment in the country and are important for competitiveness and manufacture point of view.” (The Global Competitiveness Report)
There are 110 variables being analyzed, which are grouped into 12 pillars:
3. Macroeconomic stability
4. Health and primary education
5. Higher education and training
6. Goods market efficiency
7. Labor market efficiency
8. Financial market sophistication
9. Technological readiness
10. Market size
11. Business sophistication
The weight of each factor varies according to the categorization of a country. Countries are categorized into three stages of development: Factor-driven (low income) countries, Efficiency-driven (middle income) countries and Innovation-driven (high income) economies.
Factor-driven countries rely on its natural resources and the productivity of its labor force, who are mainly unskilled. The more important variables for factor-driven countries are in pillars #1-4.
Efficiency-driven countries are characterized by efficient production processes and good product quality. To maintain its competitiveness, pillars # 5-10 are deemed important.
The competitiveness of Innovation-driven economies is determined by their ability to provide new and unique products. Thus, pillars #11-12 are most important for them.
The different categorizations represent stages of development: from the lowest (factor-driven) to the highest (innovation-driven). The underlying theory is that as corporations compete, they become more efficient and produce better products. Thus, the economy moves from relying on the wealth of its natural resources and the productivity of its labor, in its natural state, to achieving a high level of efficiency, producing quality products.
At the second stage, workers develop from being unskilled, requiring only primary education, to becoming skilled, requiring higher education (high school to tertiary education). For factor-driven countries, more weight is given to enrollment in primary education, while for efficiency-driven economies, more weight is given to enrollment rates in secondary and tertiary education, as well as the quality of math and science education because of the higher level of skills required at this stage.
As corporations become more efficient, producing high quality products, their competitiveness would then be determined by the development in the sophistication of their business models and processes and their ability to innovate. This is the highest stage.
How is the stage of development of a country determined? It is determined mainly by the GDP per capita or the value of the Gross Domestic Product divided by the midyear population.
The Philippines, with a GDP per capita PPP of $4,339 in the first half of 2013, is supposedly in the second stage.
What is the method of measurement? The Global Competitiveness ranking is heavily based on the Executive Opinion Survey the WEF conducts with corporations as respondents, which constitute two-thirds of the 110 variables, and one third comes from public sources such as IMF-WB and UN reports.
Neoliberal, trickle down economics
The Global Competitiveness ranking is underpinned by the same neo-liberal, “trickle down” theory of mainstream economics. The basic assumption is that as corporations and productivity grow, the benefits would trickle down to the people through more employment, higher wages, and better products and services.
It is assumed that as the country’s economy moves from one stage to another, wages correspondingly increase and the people become more prosperous.
Health and education are variables only to the extent that it affects the productivity of workers. Examples of health variables are business impact of malaria, business impact of tuberculosis, business impact of HIV and AIDs, among others. This is also why enrollment in primary education carries more weight at the first stage while enrollment in high school and tertiary education and the quality of math and science education have more weight at the second stage.
The comprehensive socio-economic development of the people is not being measured in the rankings.
The variables for the pillar on macroeconomic stability are “government budget balance,” debt-to-GDP ratio, “country credit rating,” “Gross national savings,” and inflation.
The variables and the sources of data are heavily biased toward the needs and perspectives of large companies. For example, the positive variables under the pillar of Labor Market Efficiency are “flexibility of wage determination,” “hiring and firing practices,” and “redundancy costs, weeks of salary.” The negative variables are “labor-employer relations,” “pay and productivity,” “reliance on professional management,” “brain drain,” and women-men ratio in employment.
All the pillars are actually patterned after the needs of corporations in order to ensure that they generate profits.
Joblessness, poverty, inequality are not factored in the measurements. In fact, the WEF does not think that inequality is a problem. An article Are we getting it wrong on inequality?, which was written by Richard Haass and posted at the WEF website in August 6, 2014, read: “The issue is not inequality between countries, which is actually down in recent decades, thanks in large part to higher growth rates and longer lifespans in many emerging countries (especially China and India). Rather, the focus is on income disparity within countries.”
So for the WEF, the fact that there are a few countries whose companies control production and finance capital on one end, and a lot of countries who are stuck with exporting raw materials and semi-processed, low value added semi-manufactures while importing machineries, capital goods, and essential goods on the other end, does not matter.
It added: “What should matter is not inequality per se – to paraphrase the gospel according to Matthew, the rich will always be with us – but rather whether citizens have a genuine opportunity to become rich, or at least become substantially better off. It is the lack of upward mobility, not inequality, that is the core problem.”
The article advised against progressive taxation or imposing more taxes on the rich. “The flaw in the politics of redistribution is that it emphasizes shifting wealth rather than creating it. Making the rich poorer will not make the poor richer.”
Its argument against the “politics of redistribution” may well apply to other redistributive measures as well such as agrarian reform.
The article batted for education. However, “this does not imply the need to spend much more on education; here (and elsewhere), how money is used is more important than how much is spent. The most critical variable affecting students’ performance is the quality of teaching. The resources that are required for additional teacher training and for paying more to talented people to become and remain teachers can be offset by a willingness to shed those teachers who are not up to the task.”
Lastly, it advised against increases in the minimum wage. “It would be better to keep wage increases modest so that people can get jobs, and to look for other ways to subsidize education and healthcare for those who need it.”
Thus, it is no wonder why the Aquino government is trying to generate more revenues not by increasing taxes on corporations and the rich but by running after professionals, small and medium enterprises. This explains why the Aquino government is moving toward radically reducing government subsidies to social services such as health and most especially in tertiary education and why it is being deaf to the demands of public school teachers, government and private employees and workers for salary increases. This is also one of the reasons why the Aquino government does not appear serious in implementing a genuine agrarian reform program.
The Aquino government’s bias toward CCT dole-outs and micro-lending projects as against job generation, safeguarding job security and increasing wages is also based on this neo-liberal framework. No wonder the Philippines is being touted as an economic miracle and model by the IMF-WB and the WEF. (bulalat.com)