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Gov’t needs to revise its economic philosophy

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In turning down the offer of Petron to sell back to the government its oil refinery in Bataan, President Aquino articulated what could be his core economic philosophy. “Government isn’t efficient in running something that has purely business applications.” (Inquirer, 10/19/11). Indeed, “less government is the best government” is conventional thinking.

However, the raging global economic crisis is increasingly challenging this neoconservative view. In his speech last September before a joint session of the US Congress, President Barack Obama argued for more government action in the economy as he asked for an additional $450-billion economic stimulus.

“Ask yourselves – where would we be right now if the people who sat here before us decided not to build our highways, not to build our bridges, our dams, our airports? What would this country be like if we had chosen not to spend money on public high schools, or research universities, or community colleges?” Obama said.

“How many jobs would it have cost us if past Congresses decided not to support the basic research that led to the Internet and the computer chip? What kind of country would this be if this chamber had voted down Social Security or Medicare just because it violated some rigid idea about what government could or could not do?”

Joseph E. Stiglitz, winner of the 2001 Nobel Prize for Economics, supports Obama. In his book, “Making Globalization Work,” he says: “The conventional wisdom that (the US) development was the result of unfettered capitalism is wrong…. Historically, the US government played an even larger role in the economy…including the development of technology and infrastructure…Huge land grants spurred the development of western railroads….the US government funded the first telegraph line…it funded the research that led to the Internet.”

He adds, “the most successful countries have been those in Asia [where] government played a very active role.”

In a recent article for Project Syndicate, Dani Rodrik, professor of International Political Economy at Harvard, cited “the evident reality that all successful economies are, in fact, mixed.” He pointed out that China has “an economy that is a peculiar mix of private entrepreneurship and state direction.”
Probably because of his economic mindset, Aquino scrimped on government spending in his first year at the helm. The result has been a lowering of our economic growth to 3.4 percent of GDP in the first quarter of this year after hitting 7 percent last year. This meant more unemployment and poverty.

Aquino’s private-public partnership program has not taken off because the private sector is waiting for the government to take the lead in spending.
With hunger and poverty deepening in our country under the rubric of a free market, globalization, deregulation and privatization (which entail less government intervention in the economy), it becomes imperative to reexamine the dominant economic thinking to provide both relief and hope to our people.

By Manuel F. Almario




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