Chapter 2 THE PHILIPPINE ECONOMY: HOW DOES AN ECONOMY GROW Introduction Itis the intent of this chapter to Present and orient the reader about the present status of the Philippine economy, the history behind the development of our economy, and the factors that affect the development and growth of the economy. This chapter seeks to re-orient the school system to respond more positively to the need for more entrepreneurs on whom development depends. It aims to inculcate entrepreneurship into the consciousness of our young people as prestigious, challenging, and possibly more financially rewarding than law, medicine, engineering, education, the arts, and other more conventional professions. Objectives orient people on the status of Philippine Economy identify factors that greatly affects the business establishments in our country explain how a specific economy grows discuss how entrepreneurship could help improve the quality of life The Philippine Economy: How does an Economy Grow The Philippine Economy 1. The national economy is composed of business renieprises, and the iti e hoice 2. There are economic freedoms, like free competition, free cl of investments, and the prices, which are determined by the interaction between demand and supply. ‘ In economic development, knowledge; amen kD et s, and j a in the Philippines about 250,000 to y arrived ph La countries through ‘the land bridges. They had primitive economic existence. More civilized migrants came in later years. 5. The Philippines was a slave of three coloniat-masters: the United States, Japan, and Spain. Nevertheless, the Chinese dominated the retail trade even before the Spanish time. The Spanish rule introduced the tobacco monopoly and’ galleon trade for the benefits of top-ranking Spanish citizens. Similarly, the Americans exploited our agricultural economy. Japan completely ruined our economy. 6. The Philippine Government got its political independence in 1946, but not economic independence from the US. The import control program of President Carlos Garcia gave a breathing space for Filipino entrepreneurs. However, this did not last because the US had its own way of dominating the Philippine economy. 7. Under the-Martial rule, the friends of the Dictator controlled Philippine business. Democracy was restored finally upon the assumption of Corazon Aquino as president. Under her administration, the engine of economic development has been assigned to the private business sector. The Ramos government has sustained most of the good programs of the Aquino administration. 8. The national government, in its effort to alleviate poverty, has been promoting the growth of entrepreneurship. It has several financial and technical assistance programs for the poor who are interested in putting up their micro businesses. Even some NGOs are actively involved in entrepreneurial projects for the poor. The Role of Entrepreneurship in Economic Development 1. Entrepreneurship offers an economical and faster method of that accelerates economic — development. 2. Entrepreneurship is capable of a soot, aa 3. Entrepreneurship improves eee quality of life 4. Entrepreneurship contributes to more poets distribution of income, and therefore, eases social unrest. 5. Entrepreneurship utilizes and es Fesourresi make the country productive, So 6. Entrepreneurship brings soda ven ‘ough the government. a gag ae texa 7. €ntrepreneurship has several definitions. Any person who takes the risks and invests his resources to make something new or better is engaged in entrepreneurship. This applies not only to business, but also to social services. 8. Economic development is a process, while economic growth : is a product of economic development. Both economic and non-economic factors constitute the determinants of economic development. In less developed countries, economic development refers to the progressive process of improving human conditions by reducing or eliminating poverty, disease, injustice, illiteracy, and exploitation. 9. Development and Growth Theories a. Laissez-Faire Theory explains that the government should not interfere in economic activities. b. Keynesian Theory explains that the government should play the key role in economic development. c. Ricardian Theory. This is the theory of David Ricardo focusing on agriculture playing the major role in economic development.( prew ye P Yh Wes Pagar emcee d. Harrod-Domar Theory, conceptualized by Sir Harrod of England and Prof. Domar of the U.S., claims that more products can be produced through the use of machines. e. Kaldor Theory, by Nichols Kaldor, maintains that the key factor is technology. This theory explains that the application of modern technology/' in the production of goods and services has been responsible\for the economic success of the highly developed countries. ‘: Innovation Theory, developed by Joseph Schumpeter, stresses the role of innovators or entrepreneurs in economic development. 10. The contributions of entrepreneurship are: 1) development. 11. There is a need for a Filipino entrepreneurial economy. This means our productive resources should be in the hands of Filipinos for their own benefits. A reasonable economic nationalism Id dominate OU DUSIF 2SS 7G ure TC own prosperity as a nation. Schools should stress the value of entrepreneurship based on just economic nationalism. 12. The government can support entrepreneurs from their various assistance programs on the following: Peace and Order, Political " = oe f ie j 9 ; 2 Horan greets 7 oh ie yas foe as had a (oy ash warn g A f g f a ye j hag My nae as ‘ ik ssi 4 = a ¥ 7Taxes, Infrastructures, Education tability y lic administration, Production Technology, nd Financial Assistance. 13. We have seen that entrepreneurship directly affects the social and economic development of people. The more society engages in entrepreneurial undertakings, the more: it is likely to develop Our country still has a long way to economically and socially. go in order to catch up with more developed countries. Stability, Price S and Training, Pub Marketing Assistance, 4 How does an economy grow? . A. Theories of economic growth may be classified into three broad groups. One group consists of theories viewing economic growth as a natural and inevitable process. The second group of theories explains economic development as a rational process brought about when men respond to opportunities in the environment so as to promote their own self-interest or social welfare. The last group of theories views economic development as a result of seemingly economically irrational yet psychologically and sociologically satisfying activities of enterprising men. We shall label these groups as general, economic, and socio-psychological theories. B. General explanations of economic development 1. Economic development proceeds according to a master plan — or “Law of Nature.” : es ee ic development is brought about by an “Invisible 3. Economic Development i - Diffusion.” S brought about by “Cultural Sn ee TREY setae a ah aa ee 4. Racial herita Pe ; aye 4 ge determines the economic development of 5. Climatic conditions deter : min in turn its rate of tenes © energy levels of people ane 6. The challenge of the i thea Rags Sp Nestea environment is responsible for C. Economic explanations of economic development 1. Technology improve i avenue provements and division of labor lead t° 2. Population changes affect development 3. Entre | ; epreneurship is an important factor in development. D. —Socio-Psychological explanations of economic development ve e 1. According to the work societies are; eA pe pe se ese ree of Talcott Parsons, individuals in mode™ 12 . ¥d. e. b. unemotional; interested in themselves; = - able to relate to others in rere of their social rol re es their ability to do a job; a known for their accomplishments; and able to relate to others in specific economic terms. In contrast, members of traditional societies tend to: a. | be emotional; be more interested in the general welfare of the * community; relate to others in terms of their unique qualities; be known for who they are; and tie up economic relationships with all sorts of other relationships involving kinship and political, religious, and other social structures.