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IF a
country like the
Philippines
wants to achieve First-World status, it must learn to
improve its institutions by implementing policies and
standards that are uniquely its own, according to a
Nobel laureate in economic science.
Nobel
laureate in economic science Prof. Douglass North said
that limited-access order (LAO) countries—or those
considered natural states like the Philippines—can only
move on to become an open-access order (OAO) country or
a First-World country if it thinks out of the box in
creating policies to promote economic growth and
development.
LAO
countries are characterized as states that are
agriculture-based and built around powerful individuals;
OAO countries are characterized by open access and entry
(by citizens) to political and economic organizations
fostering competition for rents, both in
politics and the economy. Around 80 percent of the
world’s economies are classified as LAO and only 20
percent as OAO.
“It’s a
new world; the things that made it work are not the same
things that will make it work. We need to think of fresh
ideas,” North said at the open forum of the luncheon
held in his honor at Makati City last Friday. He is in
town as one of the former Nobel winners and
distinguished resource persons gracing the
dialogues-lecture series under the Bridges project of
the International Peace Foundation.
Before
North, the Bridges speaker was former World Bank
president James Wolfensohn.
“We need
institutions that encourage trial and error. We need to
implement the bankruptcy law to wipe out things that do
not work,” North said in his luncheon presentation.
North
said that it would also be a mistake for LAO countries
to carry out policies and standards according to the
template of First-World countries. He believes economic
development depends on a country’s beliefs, history and
culture.
An
example of this is what happened to China. North said
that China, which was a natural state economy until
recently when it became an OAO and is now driving the
economy of Asia, implemented a successful incentive
system.
North
said that since property rights were nonexistent in
China, the government gave incentives from television
sets to business permits every time the country produces
more goods.
This, in
turn, induced OAO characteristics to surface. These
characteristics include businesses which enjoy property
rights and encourage competition in industries.
A strong
military that is controlled by the state is present in
an OAO, according to North. This may be taken in a wrong
context, but he said that a military that comes under
citizen control will ensure social order.
He said
that peace and order as well as the prevention of
violence in society will also ensure economic stability.
For his
part, former Budget Secreatry Benjamin Diokno said the
Philippines needs to have a clear understanding of where
it is and look at existing institutions and look for
ways to move forward.
Diokno
said the country is already retrogressing in many ways
due to weak political institutions, as seen in an
impeachment process that does not work and the system of
checks and balances in government.
“How do
we get back on track? But it all boils down to
leadership and the private sector. We need to think
strategically of the kind of institutions we want in
place and how to do it,” Diokno said at the sidelines of
the event.
Former
National Economic and Development Authority (Neda)
Director General Felipe Medalla agreed and said the
country needs to have a shared vision of what can be
done, particularly in weak institutions like education
and infrastructure.
Medalla
also said that maybe the next president of the
Philippines would be able to do a better job at
improving the country’s weak institutions. |
