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Deimoy,Charls Darwin E. English 13-MSR, Prof.

2018-00278 10/31/18

On Capitalism in the Philippines

Capitalism today is going through a serious crisis, one which is distinguished by a

gradual fragmentation of the global economic and political order that was critically built by the

world’s political and economic superiors soon after the guns of World War II fell silent. There is

an emerging concurrence, moreover, that the current predicament faced by capitalism in most of

the countries, but prevalent in Third-world, like in the Philipiines, and ex-communist countries,

such as Afghanistan, Cambodia, etc., today’s universally accepted form of economic

organization, is the most severe yet in its nearly 250-year history (Poblador, 2017).

Having that said, many of the people think that the aforementioned economic system is

actually defective since it causes the rising inequality in many nations (Heydarian, 2013), but

actually the problems attributed to the economic system is not inherent to it and the one that

causes troubles are the laws and policies surrounding it (De Soto, 2000) and this will be

discussed in the Philippine context.

What is Capitalism?

Adam Smith’s book “Wealth of Nations” (1776) introduces the idea of capitalism. The

book states the idea of “economic individualism” in which its basic premise is the pursuit of self-

interest and the right to own private property are morally defensible and legally legitimate while

the State has a function of protecting the individual rights. Individuals are free to decide what to

produce or sell, what prices to charge, and where to invest, in a such a way that governed by laws

and restrictions. But the actual term was coined by socialists in the mid-19th century as a form of

disparagement and currently defined as private ownership for production and profit (Hessen,

n.d.). This form of economic system was pioneered by the Western countries during the 17th

century, at the advent of the Industrial Revolution, and eventually perfected at the time of 20 th

century (De Soto, 2000).

Inherent Goodness of Capitalism

Capitalism’s main feature is the individual’s freedom in terms of economic activity.

Economic activity takes place in markets where individuals are free to choose to greater or lesser

degree what they do, how they allocate their income and wealth and where they will work

(Friedman, 1962). Having freedom gives someone the mobility to act and also pursue his/her

own interests and that will provide him/her a sense of fulfillment (Smith, 1776). Much more in

the market economy, an individual has the ability to improve his/her state in the society.

Definitely, there is a need for government interventions for regulations and laws, and more

important for capitalists are incentives. Incentives are given by the government to the economic

participants that produced desired outcomes, and this boosts economic activity (Meltzer, 2012).

To add to that, Capitalism drives innovation for the reason of it promotes competition. Since

there’s a competition, the producers were obliged to further improve their product in accordance

to the taste of consumers. Furthermore, the consumers have freedom to choose in the market

economy as long as it benefits them, what most prefer will thrive and those who aren’t likable, or

doesn’t develop, will eventually be out of the system (Friedman, 1962). Competition also boosts

production, since many consumers need to be catered, producers need to step-up their

manufacturing process. In effect, there is mass production, mainly due to technological

advancements. In accordance to economies of scale that states “reduction of costs per unit

because of increased total output”, this drives down the prices of consumer products with the

benefit of a more innovated product (Marshall, 1890). A consumer gets more for less. Another

aspect that contributed to the appropriateness of capitalism, is its effect on specialization of

labor. The aforementioned economic system expands the available labor and also create new

forms of economic activity. As stated earlier, capitalism brought affordable and also innovative

products in the market, the consumer also has the chance to create his/her own economic activity

and promote an idea since he/she has a freedom in a market economy as well as remaining

income to spend. This leads to specialization of labor and greater development in the whole

economy and the nation (Smith, 1776). These are the main reasons why capitalism thrives and

remains its superiority in the economic system, albeit not perfect, but considered as less evil and

more innovative.

In the case of the Philippines, capitalism brought also benefits and certain innovations.

There is an evident modernization due to industrialization and the rise in manufacturing sector.

This was implicitly instituted by trends in globalization and also pioneered by the modernizing

sector—the self-propelling capitalist class (Raquiza, 2014). Filipino consumers get to enjoy the

products coming from the global market, and in that, we acquire the fruits of being in the

capitalist society. In addition to that, Filipinos also get to share the ideas and technological

advancements coming from the West, and we are able to adapt and integrate those in our system.

There is also a boom in infrastructure building, like malls and condominiums, and modern

facilities, like newly-built airports, that were funded by capitalists and government initiatives that

will surely enhance the standard of living of the Filipino people (Heydarian, 2016). There are

also a lot of foreign investment poured into our economy in recent years, mainly because of the

BPO industry, which amounts to more than $13 billion in the Philippine economy in 2013

(World Economic Forum, 2014). Rapid utilization of lands is also evident through developing it

into a community with complete amenities. These things are the result of capitalism. The market

pushes innovation, development, and globalization in order to provide for the consumer and

boost economic productivity and growth (Marshall, 1890).

Even though that’s the case in the Philippines, it seems like it is not felt by the masses.

There is some kind of illusion of prosperity (Heydarian, 2016). The success of capitalism in the

West, albeit not perfect, leads to modernization, but isn’t manifested here in our country. There

are sights of urbanization but no improvement in Filipino lives. Why is this happening? There

are many contributing factors, but selected ideas regarding laws and regulations will be presented

on the reason why capitalism flourished in the West and failed here in our country (De Soto,


Problems with Capitalism in the Philippines

As discussed before, capitalism is naturally for the improvement of one’s lives and also

for the common good (Smith, 1776). But with no proper political and regulatory factors, this

form of economic system will be eventually be abused. Discernible from the lenses of history,

the events of Great Depression in the 1930s (Keynes, 1936) and the 2008 US recession which

told us that appropriate government intervention is essential in maintaining the stability in the

market economy. Without proper state intervention, things might go out of hand. This is

currently happening in our country, it is just that improper government intervention in the market

economy is a norm that most of the Filipinos tend to ignore about the governing laws in the

market economy. And also, we are in a third-world country, so Filipinos somehow get used to

this kind of living (Raquiza, 2014). But actually, that is unjust and it negatively affects the

economic system. Making us, Filipinos, not getting the full potential of the capitalist society (De

Soto, 2000).

One of the ideas is the flagrant interventions of U.S. Government in economy-policy

making in our country. It imposes neoliberal globalization policies on the Philippines to benefit

American corporate export and commercial interests as well as to create the kind of free market-

driven trade and investment system in the Asia-Pacific that allows it to maintain its hegemony

and dominant economic position. For example, the Partnership for Growth (PFG) program by the

U.S., at least US$739 million in funding and is the most comprehensive US intervention in

Philippine economic policy-making in decades. Another is the The Arangkada Philippines

project (TAPP) which started in 2010. Still under the PFG initiative, the project is administered

by the American Chamber of Commerce and implemented with the Joint Foreign Chambers of

Commerce in the Philippines. The aforementioned project lobbies policymakers on 471 policy

recommendations and reports that, by 2015, 75% of these recommendations have been started or

already completed. It is also among the most aggressive groups seeking to change the 1987

Philippine Constitution in terms of free trade policies, removing those last legal impediments to

foreign capitalism in the country (IBON, 2016). These are the few examples of the pervasive

presence of U.S. in the Philippine-policy making. Due to capitalism, we entered globalization,

but with the expense of being abused by international powers. Our leaders can’t do much about

that since our nation is still developing and need of assistance of those Western nations. In turn,

it impedes our economic growth as a whole (Raquiza, 2014).

Another point of view of why Capitalism failed here in the Philippines is introduced by

De Soto (2000) in his book “Mystery of Capital”. It was discussed in his book that the absence of

formal property rights, rights that aren’t just official entitlement but also can be ‘fungible’ to

other commodities in the market economy and there’s a genuine representation which can be

recognized by the international community, here in our country contributes to not accessing the

potentiality of “capital” that can be utilized in the market. His team researched around the late

1990’s how much ‘dead capital’, the capital that cannot be utilized in the market because it is

embedded in the informal economy, is actually circulating here in the Philippines. It amounts to

US$ 132.9 billion and it is actually 4 times greater than the market value of the 216 companies

listed in the Philippine Stock Exchange (US$ 31.4 billion) at the end of 1997. As we witness,

the dead capital would be a greater boost in our economy if only it would be integrated into the

formal market economy, but since it’s embedded in the informal economy, economy that is not

regulated by state, our nation can’t use it for trading around the global market. De Soto (2000)

advocates the formulation of formal property rights in order to integrate the dead capital from the

informal economy into the formal market economy.


I am truly admitting the fact that capitalism has lost its way in developing and ex-

communist countries. Instead of being a cause that assures opportunity for all, capitalism appears

increasingly as the theme of a self-serving club of businessmen and their technocracies. With its

triumph over communism, capitalism’s old agenda for economic progress is exhausted and

demand for a new set of commitments (De Soto, 2000). We were able to witness that improper

state intervention and regulations is one of the main reasons why capitalism failed in the

Philippines. I am not a steadfast supporter of capitalism and not a defender of status quo, but it is

the only system we know that provides us with the instruments required to create innovation and

massive surplus commodities.


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