Who’s afraid of state capitalism?

Second of 3 parts

ONE obvious problem in the debate over the creation of the Maharlika Investment Fund (MIF) is that President Marcos Jr., his political lieutenants and economic managers have been unable to communicate what the MIF proposal involves in detail.

They have overestimated Marcos’ political support, and underestimated those very much against him and his family, and thus miscalculated that it would be a breeze to pass the law creating it. While he won with 59 percent of the votes, his rival had 30 percent. This is still a substantial sector which, more importantly, includes the noisy, chattering class with the most access to media. I haven’t heard of a Yellow believer supporting the plan, while the Yellow and Red ideologues were quick to condemn it without even reading the bill.

Marcos and his officials had also wrongly thought that the decades-long propaganda against the martial law regime had been buried by his landslide victory. Marcos and his family indeed appear to be unconcerned about undertaking a program to debunk the anti-Marcos lies spread, and still being disseminated, by the Reds and the Yellows.

A good example is that even an economist — note that he was even awarded the stature of a National Scientist — claimed the SWF would extend “behest loans” to favored businessmen as what allegedly happened during martial law.

Doesn’t this guy know that martial law ended four decades ago, and today when even the slightest rumor and suspicion of wrongdoing will lead to congressional investigations, when so many mainstream and social media are on the prowl to uncover corruption, and when so many methods of checks over financial institutions have been set up? Does he think that Filipinos and their governments will forever be corrupt? This guy’s frame of mind is so stuck in the past that it is, to use his words, “beyond repair.”

Maharlika

The use of the term “Maharlika” threw the Yellow but noisy stragglers in this land into an anti-Marcos delirium. According to them, it was honoring the elder Marcos, whom they have hated without end. Marcos had led a guerrilla group during World War 2 called Maharlika, and had been pushed for a time to rename the Philippines “Maharlika.”

I hope that the sponsors of the bill to set up the Fund do change its name. Irrational as the anger against the term is, it would have been easier to sell the idea without that term. “Philippine Investment Fund” works quite well: Doesn’t that subconsciously change one’s view about the plan?

Other than due to the continuing odium against the elder Marcos and martial law. there is another major source of opposition to the MIF.

The joint statement of several business associations and laissez-faire true believers revealed this big-business ideological bias against the MIF since it is a form of state capitalism: “The proposed SWF will create a platform for the government to actively participate and intervene in the economy, a role which administrations since 1986 have tried to de-emphasize, learning the lessons of statist interventionist economic policies.”

History

These guys need to read more history rather than adhere to their ideological biases, which is nearly a religious faith. Marcos’ state-interventionist attempts during martial law were half-hearted and thwarted by the IMF and the World Bank, especially with their lackey Finance Minister Cesar Virata who did all he could to stop the state-interventionist 11 major industrial projects that Trade Minister Roberto Ongpin championed. The country’s debt crisis, Marcos’ illness and the Aquino assassination in the early 1980s made up a perfect storm that made pursuing the 11 projects impossible.

Indeed a more accurate economic history of martial law needs to be written.

But whatever it was, what kind of economy resulted from post-Marcos administrations’ moves to “de-emphasize” state intervention? Two obvious examples: 1) the telecom industry became a duopoly of conglomerates owned by foreigners, with the industry lagging behind, endangering our participation in the Digital Revolution; and 2) the power industry, which has remained inefficient yet having the highest prices in the region, a major factor discouraging foreign manufacturing investments

The post-EDSA, anti-state-intervention tack has resulted in a mediocre economy which has never posted a double-digit GDP growth rate. In contrast, countries like China, South Korea, Singapore, Malaysia and Taiwan which undertook state interventionist policies zoomed ahead, posting double-digit growth rates for many years which transformed them into developed countries. This laissez-faire faith that “a stable macroeconomy with free market” just hasn’t worked: it is simply an article of faith, unpatriotic capitalists’ biggest myth for their profit-making to be always unimpeded.

Monopolies

Only an entity like the MIF — with its capital and sovereign clout — can challenge big-business foreign monopolies and buy them out, as a sovereign should, especially when these are in strategic industries. For example, once the MIF gets additional funding from other Funds in the world, it will be the only entity with enough funds, and a sovereign as its muscle, to buy out the foreign stranglehold on our telecoms and power industries.

The criticisms against the Maharlika Fund should at least lead to a more enlightening debate on whether state capitalism, or degrees of it, is what this country should embrace to get out of the rut it has been in since 1986. There is so much empirical evidence — the Chinese, Korean and Taiwanese cases, among others — that forms of state capitalism with free-market competition had worked to transform poor countries into economic tigers in Asia, while solely laissez-faire economic systems have resulted in mediocre economies dominated by monopoly capitalists, as in our case.

SWFs indeed are a form of state capitalism that has impacted not only local economies but global markets that a Senate committee in the US — the world champion of capitalism — called hearings to investigate SWFs in 2007, as to whether these were a threat to the “world order” America ruled. In a report to that committee, a ranking official of the Standard Chartered Bank claimed: “State capitalism rather than all aspects of SWFs, that is the crux of the issue. State capitalism is the use of government-controlled funds to acquire strategic stakes around the world.”*

We cannot be doing what we have been doing in the past 36 years, or the war-ravaged Socialist Republic of Vietnam — which adheres to a state-capitalist-driven view and which set up its SWF in 2005 — will very soon overtake us, and become the next Malaysia.

The setting up of the MIF could start a change in our old-fashioned thinking on how the economy can be developed.

• Lyons, Gerard. 2007b. “State capitalism: The rise of sovereign wealth funds.” Testimony to US Senate banking committee, dated Nov. 13, 2007.

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Who’s afraid of state capitalism?
Source: Breaking News PH