Book Review for Development Studies: Nationalist Economics by Alejandro Lichauco

1. What are Lichaucos arguments for and against Classical Liberalist Free Market Economics and Nationalist Economics? How valid is his position regarding Nationalist Economics particularly in the context of Philippine economic development? Do you agree or disagree? Through his book Nationalist Economics, Alejandro Lichauco briefly presented scholarly arguments for and against Classical Liberalist Free Market Economics and Nationalist Economics. First is Nationalist Economics. It is a kind of economic policy in which could trace its roots on mercantilism, an economic doctrine wherein the state intervenes in foreign and domestic trade. Mercantilism also believes in the superiority of industry over agriculture as the main economic activity of a country; and said that the state should give priority to develop this sector. Generally, Nationalist Economics characterized as an economic policy that emphasizes industrialization, state intervention to the economy, and protectionism. Nationalist Economics is a good economic policy, according to the explanations from the book, because it helps local industries to rise and later on can export its goods and compete with the international market. Adherents of Nationalist Economics believe that the income of the country will be increased if investment is on machinery and industries. Adherents also said that the economic activity of a country could be wellmanaged and planned if there is state intervention. Lichauco on the other hand also showed to its readers the flaws of mercantilism (which could be later on evolved as Nationalist Economics). It was not on the point of the author, but of the so-called Physiocrats. These economic philosophers from the Age of Enlightenment argued that state intervention into the economic activity of a nation restricts the natural right of its citizens to control his/her own life and economic activity. Another argument that the Physiocrats made is that accumulation of much money from industrialization is not needed, but rather to focus on the agricultural sector since it provides the basic needs of the people. The Classical Free Market Economics, the opposite of Nationalist Economics, could trace its roots on the ideas of the Enlightenment Period, specifically on the idea of Physiocracy. This French idea/movement called for the abandonment of mercantilist

Book Review for Development Studies: Nationalist Economics by Alejandro Lichauco

principles sat that time, free trade between nations without protectionism, and for socalled liberalization of economic activities in the country. The Physiocrats said that agriculture is more important than industry since it is the base of foundation of the economy, by providing food to the people and raw materials for production. Trading between nations should be as free as possible and without any trade barriers or state protectionism (Ex. quota, tariff) according to Free Market Economists. And lastly, privatization of economic institutions is better than state controlled ones because individual entrepreneurs are better than the government to maintain the economic activity of businesses. If there is a separation of Church and State, I think on what the Classical Economists at that time tells us, there should be separation of Market and State. Having a free market economy is beneficial to a country, as said by its advocates due to a number of reasons: goods being sold in a country could be cheaper since competition undergoes between producers. Another advantage is that quality control and technological advancement is possible if a competition is happening in the market unlike in a Mercantilist economy wherein no monopoly is happening which results to low advancement and innovation of business activity and technology. The critics of the Free Market Economy (likely the nationalist economists) are saying that the economic conditions under it will be uncertain or unpredictable because the only sign of economic activity is through the move between producers and consumers. Nationalist economists also said that free trade lessens the survival of domestic/local industries against foreign, multinational corporations. According to Lichauco, the Philippines needed to have a nationalist economic policy. he said that the countrys policy of mainly agricultural economic activity and promoting labor-intensive industries are signs of the Philippines following the Free Market Economic strategy, which caused for the present developing status of the nations economy. Lichauco said that the solution to the economic problem of the Philippines is a shift in economic policy: from Free market Economy to a Nationalist Economy. I agree to Lichaucos position to have this shift in economic policy because it is so obvious that the countrys economy, from the time of former president Macapagal

Book Review for Development Studies: Nationalist Economics by Alejandro Lichauco

(Father of Decontrol Policy) up to the present, faced a setback on its sector. From his administration up to the present, they chose to call for foreign investment in the country than to talk with the local entrepreneurs to strengthen the industrials sector in the Philippines. For me, I affirm to the suggestion in which Mr. Lichauco said to reverse our present economic situation: to take the path in which todays rich nations did...to have a nationalist economy.

2. How did Lichauco prove the thesis state intervention makes for bad economies and produces inefficiencies is not true based on the experiences of India, South Korea, Malaysia, Thailand and Singapore? To what can you contribute the so-called economic success of these countries? Mr Alejandro Lichauco proved his thesis that state intervention makes good economies. This is totally opposite to the assumption of Free Market economists that government intervention cannot contribute to economic growth and development. In the cases of India, Thailand, South Korea and Malaysia, these countries similarly made a decision to take the risk in investing government funds in spending for the mobilization of heavy industries in their respective countries, like steel, tin, and other important metals needed for industrial production. These respective government s did such because their local entrepreneurs are lack of money to engage in such capital-intensive industries. Later on since these countries have their own supply of metals; the local entrepreneurs there had the opportunity to but this on low price and then made industrial goods out of these metals, and then sold domestically and/or internationally having a high value. Industrial products can be sold at a higher price than perishable agricultural products of agriculture-based economies like the Philippines. The said states also did protectionist policies, such as not importing products in which their respective countries could produce. It could not only protect their local industries, but also made their businesses to have profit and to strive for the quality of its products and can produce more jobs for their own people. The economic success of these Asian nations, according to Lichauco, is the result of the hands-on policy of their governments in ensuring that their local economy

Book Review for Development Studies: Nationalist Economics by Alejandro Lichauco

could industrialize and produce goods having double or triple the value than agricultural goods when sold. Even though at those times, these Asian countries faced criticism from the US and its ally international financial institutions like World Bank and International Monetary Fund, saying that such policies are communistic and against human economic rights. Lichaucos work proved that it is not true and opposite on what US and WB-IMF thinks. These governments in Asia that made Nationalist economic policies had the aim of empowering their economies through industrialization. These governments do not own all the industries in their countries, but making publicprivate cooperation in developing their economies. The private in the term means local entrepreneurs, not foreigners. In general, South Korea, India, etc. pursuance of Nationalist economic policies was democratic and pro-people, because they are thinking for the growth and development of their own industries, not of foreign people.

3. The development (or underdevelopment) of the Philippine economy has been traced by Lichauco to several structural and historical factors. Which of these factors strongly affect the present Philippine economy? Do you agree or disagree with Lichaucos analysis? Why or why not? The Philippine economys underdevelopment today could be traced back by several factors according to Lichauco. It is predominantly political, since central to his promotion of Economic Nationalism is the governments key role in boosting its nations economy. An example of such factors were the occurrence of Parity Rights Amendment after World War II, the implementation of Martial Law, and the adoption of the country during Marcos Era of the Philippines having an Labor-Intensive Export Oriented Development Strategy. These following political policies by our presidents made blows against industrialization of our country, our only key to economic success. But the most lethal blow, according to Lichauco against Philippine industrialization was the policy of former president Diosdado Macapagal to decontrol our national economy. Because of this, foreign investors and multinational corporations easily penetrated into the local market (together with the support of their mother country, the USA through promoting American way of living as beautiful, speaking of English, etc.) and infested domestic

Book Review for Development Studies: Nationalist Economics by Alejandro Lichauco

products throughout the country. This is the economic policy that made Macapagal only to serve one term, and then replaced by Marcos through a landslide victory. Marcos sought this economic problem, but it is too late for him and to the government. In the 1970s South Korea, Japan and other Asian countries bringing their economies into industrialization while the Philippines chose to emphasize on agriculture. I agree to Lichaucos analysis into the historical roots of todays economic condition in our country. It is because if you want to run your economy by foreigners, the latter will give more of their profits in their own country than to us. These foreign businesses have been helped by their governments in ensuring that their investments will prosper to any target market that they desire. In that sense, our local industries had been in a comatose. I think it really happened during Macapagals term.

4. Do you agree with Lichaucos analysis of the weaknesses of Philippine development policies? Is it comprehensive enough to cover all factors affecting economic policy formulation or are these areas that must be looked also? I agree on Alejandro Lichaucos analysis on why our country and its citizens are poor nowadays. It is because mainly our government does not really care for us. The government is supporting foreign enterprises in expense of our local entrepreneurs in using our natural and human resources. Just look on how these foreign firms polluted our environment and exploited our resources, they did it because they do not care on the environment that they have benefitted to and it is not their country, anyway. The governments adoption of a Labor Intensive Export Oriented (LIEO) economic policy does not really contribute to the whole economy of the country and not being enjoyed by most Filipinos. The first chapter of Lichaucos book showed to me a brief but simple explanation on why is our county poor today. It is because our government has a wrong economic policy, that against the interest of its own people and the incapability of governing and asserting their authority against external forces (specifically with US-backed IMF-WB Group and other foreign economic institutions). Maybe Lichaucos book does not cover all of the factors that surrounds our todays

Book Review for Development Studies: Nationalist Economics by Alejandro Lichauco

economic misery (e.g. corruption). But as Mr. Lichauco and I sees it, its mainly due to our governments un-Filipino economic policy.

5. Lichaucos book was written about ten years ago. Will there be new developments at present which might also affect the present status/condition of Philippine economy? To what extent has globalization been considered as a critical factor in our development? After many years when Mr. Alejandro Lichauco published the book Nationalist Economics, there are many (under)development s happened in the Philippines. One of which was the retention of the economic policy that promotes foreign investment into local businesses; another was the establishment of Economic Processing Zones throughout the country, especially in CALABARZON area, contractualization of labor, subcontracting of foreign companies through outsourcing (e.g. call centers), governments promotion in exporting products that foreign companies want (e.g. semiconductors, assembly parts), etc. The following mentioned are the recent development under the economic policy which makes our country underdeveloped up to now. Instead of development, many underdevelopments happened to our local economy. Now, the these policies said above were the trends in what we called today as globalization. Now, economies across the world has been dependent to West-driven information and communications technology, making the sharing (and hegemonizing) of information across nations possible in just seconds. Globalization is a really gigantic economic phenomenon that the nationalist economists must face nowadays.

Book Review for Development Studies: Nationalist Economics by Alejandro Lichauco

6. After having studied these issues, what do you think are the policies and programs that the Philippines should pursue to attain a genuine, liberating national development? If there is a will, there is a way. I think we cannot remove from us Filipinos to be hospitable, as in hospitable to foreigners. We pamper them, we enjoy mingling with them and then today to have business with them. In expense, we Filipinos are hostile with each other. We often distinct oneself to another fellow by various reasons like language, race, complexion, class, etc. just to say we are higher than our own brother and sister. In a society like the Philippines that had been given bad values by our colonizers, it is hard to make economic plans that would help one another in bringing our country the spirit of unity and power... the spirit of a nation. For me, its too late for us to pursue Nationalist economics. Free Market Economics is evolving into a new form that we cannot escape, which is globalization. If we like to be as rich as Singapore, so be it. Well, our current economic policy is based on what Singapore did to achieve development, which is through befriending foreign businesses. Since most of us Filipinos (Americanized and Hispanized Middle-class) believe that the Wests perception that wealth is through free trade and liberalization of national economies is the genuine path to development, let us go for it. I can only say, sa huli...walang sisihan.