SyCip on Nation Building

Michael Alan Hamlin

Posted on January 31, 2007

It’s not the development model; it’s accountability for it

Asia’s strongest economies got that way because the introduction of democracy followed the attainment of broad prosperity on a national level according to Washington SyCip, SGV founder and internationally respected businessman. Before members of the Management Association of the Philippines last week he argued that the Philippines, in contrast to its fast-developed and developing neighbors, has “failed miserably” in part because the “elements of democracy” were forced on the Philippines before its people were wealthy enough to cope with them.

SyCip has long complained that western development models don’t work in Asia. Last week, he cited the miserable experience of the U.S. in Iraq to suggest that they may no longer work anywhere. Instead, he suggested that for the Philippines to grow it must address critical issues that have “plagued the Philippines for fifty years.” Those issues are elevating respect for the Rule of Law and undoing the economic domination of the elites to, well, democratize economic opportunity.

The passion and relative vigor with which SyCip makes his argument reveals a profound dismay with the country of his birth and its dramatic failure to live up to its promise in a region characterized by extraordinary success stories. Indeed, many accomplished Filipinos and their friends share that deep disappointment. But while there are elements of truth and accuracy in SyCip’s view of the Philippine tragedy, if that tragedy is to be reversed it is necessary to address the real reasons the nation lives in the shadow of most of Asia.

SyCip argues, for instance, that national unity has been an important contributing factor to economic growth throughout Asia, even suggesting that former president Ferdinand Marcos’ catastrophic administration may have been handicapped more by disunity than by greed, corruption, and immoral politics. A quick look around Asia demonstrates very clearly that national unity has had little to do with nurturing prosperity.

This is true even in Japan, a country once known as the land of a thousand kingdoms. Japan’s military complex used the Japanese Emperor Hirohito to convince a diverse Japanese population with widely varying social customs and traditions, cuisine, and dialects to unite behind a war that would destroy the Japanese economy, demonstrating that unity can be used for evil purposes with disastrous results as well as good ones.

The Japan example provides at least two other counterpoints to SyCip’s arguments. Japan rebuilt its economy from the ashes of World War II while it was introducing the elements of democracy that SyCip claims have no place in a developing scenario. Japan’s democratic development has been both messy and scary, as all democracies inevitably are. But it is doubtful that economic policies dictated by either an occupying force or a dictator could have done as well building the world’s second largest economy.

And it is important to note that the vibrant Japanese economy was a product of both elite conglomerates and upstart entrepreneurs. For every Mitsui there was a Morita Akio breaking all the rules of Japanese business and competition. While the established conglomerates were domineering and sought to corner opportunity, that didn’t stop determined individuals like Morita and Matsushita Konosuke from building world-class, industry-dominating organizations in an often rocky democratic environment.

Testing SyCip’s unity theory against other Asian economic development stories yields similar results from North to Southeast Asia. Take Taiwan, for example. A close business associate of SyCip, Acer Computer founder Stan Shih, said publicly for years that Taiwan was handicapped by its entrepreneurial culture because national unity could never be attained. Oddly, he made these remarks at a time when Taiwan had the highest trade surplus in Asia and record levels of foreign exchange. In this example, both men were wrong. Unity had nothing to do with Taiwan’s economic success, and a spirit of entrepreneurship didn’t hold it back, as Shih himself is testimony. It is also noteworthy that Taiwan’s greatest economic success was concurrent to its introduction of the messy elements of democracy.

SyCip comes closer to economic reality in his suggestion that the Rule of Law plays an important role in economic development. This is indeed clear in Asia’s many economic success stories. But even that is not to say that the Rule of Law always worked as intended. Instead, it has worked in fast-growing economies more often than it has not, at least in terms of preventing corrupt politicians and powerful businessmen from fatally undermining them. And that’s one important way in which the Philippines truly lags its neighbors: lack of public accountability.

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