Tyrannical unions

I have been cultivating a theory about our underdevelopment that pins a large part of the blame on the politicization of trade unions.

This is a theory that obviously runs against the grain of the "politically correct" socialist view that holds labor to be the victim of exploitative social relations. It is a theory that – obviously – my former comrades on the Left would hear nothing of. Or would even kill to suppress.

But let me present the rudiments of this theory, anyway, even as this might infuriate the self-appointed guardians of political correctness.

In the social sciences, theories are useful to organize facts in a more meaningful way. The facts of our economic past and present cry out for more meaningful organization. The way we conduct our politics, the manner we debate daily issues and the affiliations we form will, no doubt, be infected by how we understand the causes and effects of things.

Before the disruption of the Second World War, we were a dynamic trading economy. Manila was an important trading port in East Asia, strategically positioned, when the sea lanes were main routes of commerce, to become a processing, manufacturing and even financial hub for the Orient. Port cities like Cebu and Iloilo were trading independently with Europe. Even Jolo and Cotabato were trading centers for the rim of the Sulu sea.

But in the postwar period, the configuration changed. While our neighboring economies began preparing to compete in the main channels of global trade, we began looking inwards. The war burdened us with bitterness and made us suspicious of the world.

An oligarchy, emerging from the landholding elite, took control of our manufacturing and financial system. This oligarchy fueled suspicion of foreign investments in order to eliminate competition in their turfs.

Our entire economy began evolving around the terms dictated by the emergent oligarchy. We stopped measuring our progress by the benchmarks of global competition. Domestic measures of quality, of economic efficiency, of wages and prices became unhinged from best practices elsewhere.

Parochialism overshadowed an incipient cosmopolitanism.

Economic protectionism distorted everything. An uncontested economic oligarchy produced low quality goods sold to a captive domestic market at exorbitant prices.

One outgrowth of this inward-looking economic framework was a corrupt political class that used power as a means to serve vested interests. The added cost of doing business brought about by corruption in the political sphere did not matter in an economy where consumers had no choice.

And so it was that in the decades after the war, income inequality widened. Poverty deepened. Governance became incoherent. Despair became a way of life.

Militant unionism is the other outgrowth of economic protectionism.

In a closed economy, especially one where government brokered everything including prices and wages, it was possible to constantly adjust wages independent of real productivity and contemptuous of competitiveness by simply passing on the costs to consumers without choice.

Militant unions were the barnacles on an economy sunk by protectionism.

This was a phenomenon dependent on an economic arrangement where wage levels were politically set. Remember that until the early nineties, government established the minimum wage by law and set even fuel prices dependent on what was politically acceptable.

The infamous oil price stabilization fund was, in the last analysis, a mechanism for appeasing populist demands at the cost of fiscal chaos. Legislated wage increases, in the same manner, were mechanisms for the political class to win short-term popularity.

For too long, we tried to compensate for an irrational economic configuration by over-exploiting our resources. We denuded our forests, over-fished our waters and sold our natural heritage in place of selling manufactured goods. There was no way we could sell our inferior and overpriced goods in a competitive global market.

We now pay the price for that in terms of ecological devastation.

There were great costs to be paid for politicizing economic decisions that market forces should have otherwise adjudicated.

Since wage adjustments were dictated by the intensity of political agitation rather than by real increments in productivity, our labor became grossly overpriced compared to the rest of the region. That compounded the inefficiency of our infrastructures. It also caused a high rate of domestic inflation and a high interest regime that further crippled the ability to our local enterprises to compete.

When Indonesia, Vietnam and China opened up their economies, our labor-intensive industries simply fled. We lost our garments industry first, forcing unemployment on hundreds of thousands of Filipino workers. Today, even Filipino companies like Bench manufacture their goods in China.

Cloistered by protectionism, there was little pressure on us to improve the efficiency of our production, modernize our industries and adapt modern management practices. We were spared from the cruel dictates of abiding by modern benchmarks of efficiency and rational economic management.

Under protectionism, government relied on tariffs and duties to raise revenues for itself rather than modernizing our internal revenue system. Exposed to competition, we now face a chronic revenue problem.

The protectionist arrangement that debilitated our economy worked well with the parochial nationalism of radical political movements. The militant trade unions sided with the oligarchy. In the last analysis, they could thrive only in the political economic framework of an oligarchic society.

And yet, despite the damage that inward-looking policies wrought on our nation, the radicals continue to press for regulation and nationalization. Like voices from the grave, they oppose market-friendly policies that will enhance investments and open more jobs for our people. At one point, radical leftist even kidnapped and terrorized foreign investors while our neighboring economies like Thailand were wooing them.

Today, the voices of irrationality, the harbingers of an economic orthodoxy that crippled our own economy, march in the streets to do more of the same that caused so much injury to us all.

A mirror should be held up to them: the mirror of a past devastated by misplaced nationalism. They ought to be confronted by a courageous rethinking of our economic history and our options for the future.