Is capitalism really working?

Published April 6, 2021, 6:00 AM

by Zoilo "Bingo" P. Dejaresco III


Is the Philippines the worst version of “free-market capitalism”?

Alex Lacson, lawyer-author of the book ” 500 Years Without Love”  referring to Christianity’s pervading influence over the nation has some answers to that question found in his magnum opus which follows his highly successful book “12 Things Every Filipino Can do For Our Country”.

 China, Korea, and Singapore – 60 years ago – were behind the Philippines in economic standing. Today, China, adopting “free market” philosophies in her largely socialist orientation, is now the world’s second-largest economy. South Korea, hobbling from a geographic split, is now a manufacturing hub of the world while Singapore is one of the wealthiest financial centers. What went wrong with us?

Lacson points to dynastic politics and oligarchic control of the economy – and we may add, the often collaboration between the two – that provided the stranglehold that resulted in the Philippines being riddled with criminality (due to poverty) and inequality of wealth. Inequality, as we know, often leads to social division.

 Lacson is not the first to see it in this light. Another book ” Why Nations Fail” often cited the two phenomena as well – as contributory to the rise of dysfunctional states.  Inordinate greed for power and money did Philippine capitalism in, he argues.

Citing Philippine statistics and international references, in the last 10 years or so before the pandemic, he pointed out that PH was No. 5 in GDP growth rates among 55 nations in the Asian region. And yet, that hefty growth was cornered 80 percent of the time by some 100 billionaire oligarch families only, who, de facto, rule the economy. As a result, a huge 10 million of the  Filipino populace still live in extreme poverty facing daily hunger all the time.

 Poverty is given a face by the news  samples of ” Filipinos selling their kidneys to avoid starvation, mothers and grandmothers selling their young ones to prostitution and cybersex, people forced to go peddling illegal drugs and some becoming guns-for-hire for as low as P10,000 per kill.”

 He cited 12 successful “capitalist” states whose government found ways to regulate business such that it served both private profit and the public good. In that thought process  it is essential, therefore, that a different breed of politicians with a mindset of “inclusivity” (rather than compartmentalized prosperity) are elected into office by 2022.

 On the other hand, Lacson saw a ray of light in last year’s “Share Phils”  grouping where some Filipino businesses led by the Ayala Corporation vowed to find ways for sharing prosperity among its many shareholders (including labor) which will lead to “inclusive capitalism.”

 In the United States of America, there is also a growing surge of dislike for capitalism in favor of more socialist views of governance. (It has been 80 years since the preference of Americans for either capitalism or socialism has been tracked by many pollsters including Gallup, Harvard and others.)

 In 1952, only 22 percent viewed capitalism negatively,  38 percent (especially among the young millennials) in 2010 and surged to 50 percent in 2018-2019. It appears that the unemployment rate and median income among the youth had worsened over the years. At comparative ages, the youth today tend to own homes much later in life and unlikely to out-earn their parents.

The youth’s surging “preference” for socialism does not mean, however, embracing the surrender of many basic freedoms but in getting more general social welfare benefits from the government like free medicine, free education, hefty pension and the like. Often mentioned in awe by them are the governments of Germany and Denmark, which are capitalist in name but with extended welfare benefits for the common man. 

 In the private sector, on the other hand  we are reminded of Henry Ford, owner of the automotive company, who said in the 1950s that he wanted to increase the salaries of Ford’s employees so that “they can afford to buy our cars.” Or what is good for one, will eventually be good for all.

It is, thereby, not surprising that a lot of millennials have been supporting self-subscribed “socialist” politicians like Bernie Sanders and Elizabeth Warren. The latter proposed, for instance, the “Accountable Capitalism Act” calling for a liberal charter change in large firms’ business character to emphasize more inclusion (like 40 percent of the board being represented by employees).

 Discontented with the system about 40 percent of those employed today are willing to resign and work with smaller outfits but which guarantee profit sharing. Many millennials are desirous of entrepreneurship and are putting the government to task in making small businesses regulations and permits more relaxed.

Among the reforms they seek are “after office” training in entrepreneurship by firms they work with and an appeal for the academe to open more vocational courses.  What about making “Accounting” subject part of the high school curriculum?

 In the last 25 years, people were told that low taxation brings prosperity in that it results in firms giving more employment and pursuing business expansion. Millennials gun for the preferred marginal tax rates to “tax the rich more” and persuade them to “share the wealth we have collectively created.” 

All the above shows that some of the lines that used to distinctly separate “capitalism” from “socialism” are slowly getting blurred today. But one thing sure: the track record of iron-hand socialism is far worse than the imperfections of capitalism.

 The call of the day, therefore, is to meld the good nuances of both in order for nations to prosper.

(Bingo Dejaresco, a former banker, is a financial consultant, media practitioner and book author. He is a Life and Media committee Member of Finex. His views here, however, are personal and do not necessarily reflect those of [email protected]).