Book Review in Development Studies

7/31/2019 Book Review in Development Studies

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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 well-

managed 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 muchmoney 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


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principles sat that time, free trade between nations without protectionism, and for so-

called 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


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(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 inwhich 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


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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 public-

private 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 mostlethal 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


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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 ofa 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 ourgovernment 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


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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.


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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.

Documents

Book Review in Development Studies