A question that is frequently asked but rarely answered correctly is this: Why does the Philippines remain a backward country? One answer I often hear from fellow Filipinos, especially those who live here in the U.S., is because Filipinos are lazy and have very low ideals of good citizenship. Well, the results of a worldwide survey does indicate that on average, Filipinos have high ideals of good citizenship; and so it seems we sell ourselves short in this regard. We are not lazy, and we are better citizens than those in most other countries.
Why does the Philippines remain a third-world country then, if its citizens have one of the highest ideals of good citizenship? Shouldn’t those high ideals result in economic progress? I think it should, but having civic-minded citizens is only one ingredient in the overall recipe for economic progress. It is necessary but not sufficient.
I believe what we need is more economic freedom. We need freer markets. I don’t pretend to be a full-pledged economist, but this is an area I have been thinking about since college days. The site www.freetheworld.com defines economic freedom in terms of the following elements:
- personal choice
- voluntary exchange coordinated by markets
- freedom to enter and compete in markets and
- protection of persons and their property from aggression by others.
Each of these four elements can be measured; and according to these measures, the Philippines is not as economically free as newly liberalized economies such as Lithuania, Latvia, and Estonia. To the degree that each nation in the world is economically free, its citizens (including its poorest citizens) also enjoy roughly as much prosperity. FreeTheWorld.com has an annual ranking of all countries that report on all four measures, and the data does support the idea that free markets mean economic progress.
Let’s go through all four measures of economic freedom:
- The first and most important measure in my mind is the degree to which private property is respected by the government and the laws of the land. A free market system requires strong but simple laws regarding property ownership. Until China grants full respect to property rights, for example, it cannot call itself a free market system. Unfortunately in the Philippines, we subscribe to the idea of property ownership as "stewardship", which has resulted in the watering down of the principles of private property. In the Philippines, your title to land you own is not as sacred a document as it is regarded here in the U.S. by way of laws, traditions, people’s habits, etc. In Pinas, your tenants, for example, can grab your land from you by way of land reform laws.
- Personal choice is the next important component of freedom. A system of rules and enforcement like local traffic laws demand strict adherence to those rules, but nowhere in the rules should it prescribe my DESTINATION. The purpose of traffic rules is to prevent us from killing each other in accidents, but never to dictate WHERE we are supposed to go.
- Voluntary exchange means that ideally you and I, or Costco and I, or you and Sam’s Club can enter into mutually beneficial transactions without interference from government. The percentage of sales tax, then, is inversely proportional to this freedom.
Voluntary exchange also means that I can work for anybody I wish, and in exchange for my labor get paid accordingly. As long as the employee-employer relationship is beneficial to both parties, employment continues. I can leave the company I work for anytime, and they can fire me anytime also ("at will" employment).
- Freedom to enter and compete in markets means there should be no laws governing WHO can enter a business. I can be crazy enough to compete with Microsoft myself, and nobody can stop me even to protect myself from financial ruin. Microsoft, in turn, is not constrained to crush me. On the other hand, anybody, even a newcomer such as Google, can topple Microsoft because there are no special rules about entering its business.
The U.S. is not the freest market in the world, but compared to the Philippines, the system here is far superior. That’s one big reason we are here, you and I. However, things may change for the better in the Philippines, and I am really hoping it will.
We had a high total measure of economic freedom in the year 2000 (7.1); it declined to 6.6 after that; and roughly remained there until 2005, the last year for which data is available. If President Gloria Macapagal-Arroyo had been successful in fighting corruption and rules-based bias against freedom (as she promised in 2001), then we should at least have been back at 7.1 by 2005. I guess we should be happy it is not any number below 6.6. The battle for freedom is not easy, but in time I expect our economic freedoms to increase.