PRESIDENT Aquino said on Friday that the Philippine economy should expand by 7 percent to 8 percent this year. We will reserve judgment on that forecast. However, if attained, it would be the faster growth in 60 years. The President went on to once again the country will attain more success if voters will choose the right candidates in the 2016 elections.
Political leaders have this ingrained idea that they and their decisions are the primary factor in a nation’s economic growth, and without them, we would all be lost. But is that actually true?
In the October 2014 issue of the World Journal of Economic and Engineering, researcher Izac Schmieder presented a paper titled “Factors Influencing Economic Growth” to answer that question.
Schmieder’s article culled research and studies over many decades in both developed and developing countries to understand what are the most factors for better and sustained economic growth. One initial conclusion is that “democracy may both retard and enhance economic growth depending on the various channels that it passes through.” We have heard that before from Singapore’s Lee Kuan Yew.
There are at least a dozen factors and variables from geography and demographics to government policies and institutional strength that make an economy work better. However, there are several that are most important and stand out.
Interestingly some of the things that we in the Philippines worry about the most do not seem to be at the top of the list from the experts.
A global survey of academics, government policy-makers and business people of “Factors Advancing Economic Dynamism” put the quality of human capital and technology at the top. Therefore, it would probably be wise not to vote someone into office who is against better education and wants less technological advancement for the Philippines.
While “good infrastructure” comes in at No. 6, foreign direct investment (FDI) is lower at No. 9. After the human capital considerations, “secure formal institutions” including the legal system, property rights, tax system and the financial system is a priority. It would seem that the Judicial branch of the government is more important for good economic than the Executive branch. While the Executive branch touts its importance, the experts in both the public and private sector, as well as academia rate its role under “robust macroeconomic management” at No. 12.
Those are some of the positives. What are the negatives against economic prosperity?
No. 1 on the negative list is an unstable political environment. While we may think of that factor as a “restless military” and the like, perhaps the most unstable political environment is one where the leaders are more interested in power than performance.
“Insecure formal institutions” (No. 3) can cause more economic problems than “inadequate infrastructure” (No. 7) and is well above “low FDI” at No. 10.
The overall conclusion of Schmieder’s research is that all the factors are important. “Priorities in terms of policies for economic dynamism should be quite different between countries of different state of development.” Perhaps our conclusion should be that elected officials should understand what their job is, how the
nation’s economy actually functions and possess a large amount of common sense.
2 comments
PNoy was hallucinating or desperate to get one of his KKK elected president next year.
“Factors Advancing Economic Dynamism” put the quality of human capital and technology at the top.” The executive part of the government is mainly responsible for upgrading the quality of human capital and technology by its focus on education in terms of funding, curriculum, educators, school facilities, teaching aids, training tools, training programs. So behind the ability to advance human capital and technology is good leadership. The “sine qua non” for the progress of a country is a good leader.