Globalization of the Philippines

Globalization and Its Impacts in the Philippines

Globalization is that ephemeral buzzword thrown around to describe a myriad of historical processes that are, in reality, incredibly hard to pin down. At its most basic, globalization refers to the process by which national economies are increasingly integrated with one another in a transnational network of producers and consumers. Phenomena such as manufacturing labor being shifted to the developing world to make products that will only be sold in developed nations is an example of the kind of event usually attributed to globalization. Like all complex global phenomena -- especially those that involve prodigious amounts of money -- there is significant disagreement over whether or not globalization is a positive or negative force in the world. The distinction is important, as the decision to embrace or eschew globalization will have significant impacts on national and regional economies.

Of course, globalization is not new. To some degree, it has always been present, albeit in less extravagant ways. The era of European colonialism is a centuries old example of economic and cultural globalization as the European superpowers scrambled around the globe to acquire resources and access to cheap labor. The most significant difference today is that the process of deepening integration of the world economy is occurring at paces never before seen in human history. Global communication is nearly instantaneous, transportation routes are fast and efficient, and extensive infrastructure exists to facilitate global trade routes. The problem is that globalization on this scale and pace has never been seen before, and thus it is difficult to make predictions about what the long-term effects will be. In other words, the deepening integration of the world economy infuses globalization with a high degree of uncertainty ("International" 1). Especially for nations with less-than-developed economies, the prospect of accepting globalization is fraught with peril. While globalization may seem like a quick fix to local economic problems, for developing nations the uncertainty of the long-term effects of globalization makes integration with the global economy a significant gamble.

In the midst of this uncertainty stand the Philippines. Long thought to be an economic failure among other Southeast Asian nations that have successfully capitalized on globalization. Nations like China or even India seemed to have more successfully embraced globalization and represent powerful icons of what is possible if everything goes according to a well-devised plan. The Philippines, however, has not had as much success in this regard. An examination of the circumstances of this failure reveals that the Philippines consists of weak, self-serving state institutions that are ill-suited to the task of managing domestic affairs let alone integrating the Filipino economy with the world economy. Despite repeated efforts to embrace economic and trade liberalization in order to ride the wave of globalization to increased prosperity, the Philippines has only managed to repeatedly demonstrate the inherent problems at the social, institutional, and bureaucratic levels. This has been the legacy of globalization in the Philippines: distracting concerted development of the country with promises of significant, if fundamentally uncertain, economic wealth.

Dominant economic theory, in both the Philippines and the West, is that minimal government intervention is the best way to facilitate economic growth (Tillah vi-vii). In other words, trade liberalization is perceived to be the best means by which to encourage growth and economic development. This is the philosophy -- touted with almost religious fervor in the West -- that has come to dominate the process of globalization and which has certainly infiltrated economic thought in the Philippines. As early as the late 1980s, as the Philippines was shrugging off an authoritarian regime and attempting democratization of the country, economic liberalism began to assert itself in economic policy. By 1995, the nation had joined the World Trade Organization along with the political strings that come with membership (Tillah vii; Banlaoi 203).

Over the course of the last twenty years, then, the Philippines has implemented significant trade and investment policy reforms in the nation in order to open the economy along the lines of classic economic liberalism. These policies have been designed to promote an export-based economy and reduce barriers to trade with international trade partners. Despite these efforts, few of improvements have materialized in the Philippines and there has been no significant growth in industrial manufacturing in the intervening period (Austria, "The Philippines" 1). Why has this been the case? The liberalization of the Filipino economy should have had the effect of encouraging economic growth and propelling the island nation onto an equal footing with some of the more prosperous developing nations in Southeast Asia. Upon closer examination, however, it is apparent that the free market policies of the Philippines have utterly failed to produce the desired goals because they have opened up the nation to the worst effects of globalization, while allowing international trade partners and investors to reap significant benefits at the expense of the Filipino worker. The schism between intention and result is wide in this case, and the Philippines must stand as an example of how globalization can negatively affect a nation.

The most significant issues affecting how globalization impacted the Philippines are most related to the nature of the Filipino state. The Philippines became a nation in 1945 after being a colonial holding of the United States. Unlike other nations, the formation of the Philippines did not arise out of a shared national consciousness amongst the people but rather was artificially created when the United States decided to decolonize the territory. As a result, the government's legitimacy is perpetually in question. Domestically, many groups challenge the government's right to rule in the Philippines including local communists and Muslim secessionists. The result has been the development of weak bureaucratic institutions incapable of managing the religious, ethnic, and socioeconomic tensions extant in the nation (Banlaoi 204-206). Throwing the challenges of globalization into this situation only complicates the situation and makes it more difficult for the embattled government to manage the issues at hand.

The Filipino bureaucracy is simply not up to the task of managing their own affairs in a judicious manner, let alone creating a stable democratic economy that would be attractive to investors and foreign capital. A persistent lack of funds, widespread government corruption, highly politicized administration of affairs, and little capital investment in economic development have combined to undermine the strength of the economy and the society in the Philippines (Tillah viii). These are important factors. After all, if the government cannot credibly enforce the rule of law in the country, then it will be incredibly difficult for the nation to compete effectively on a global scale (Patalinghug 7). Investors will invariably be drawn to sites that are perceived as more stable than others and better able to protect property rights and enforce international standards. Though efforts are being made to develop the Filipino bureaucracy in this way, it will still require significant investment in reform in order to reap the benefits of globalization without succumbing to its pitfalls (Patalinghug 8).

In fact, there is every indication that up until this point, the Filipino bureaucracy has been unable to accomplish this feat, even after twenty years of trying. Workers in the nation are increasingly exposed to the risk of exploitation via globalization as liberalization policies have consistently broken down the old protectionist policies (Lanzona 1). Once those protections began to dissolve, and without adequate judicial and political protections through rule of law, the Filipino worker suddenly found himself adrift in a global marketplace that was all too willing to take advantage of the situation. At issue is the failure of Filipino policymakers to take the long view of development -- both economic and social development. Though the ruling elite of the nation has consistently enacted reforms and economic policies designed to modernize and liberalize the nation, the economy has been consistently deteriorating since the mid-1980s (Bello 2). This downturn can be directly attributed to short-sighted ruling elites who were unable, or unwilling, to deliver on policies promised to enhance democracy and encourage development.

Yes, corruption is a factor in the inefficiencies in the Filipino bureaucracy, but the problems the government faces are much more systemic than that. After all, many other nations have faced corruption problems. But the existence and even persistence of corruption doesn't necessarily mean that economic development will falter. The primary issue in the Philippines is that the state has been long ruled in the interests of consolidated the power of a few elite individuals, accumulating capital for the families of the bureaucratic elites, and resisting efforts to enact social reform (Bello 2-3). Combined with the complete failure of market liberalism to improve economic development, and it is little wonder that the impact of globalization in the Philippines has been largely negative. Without an existing institutional and infrastructural system in place designed to protect the economy, the forces of globalization have consistently acted to exploit the institutional weaknesses inherent in the Philippines.

Worse, economic reforms that have been enacted since the 1980s have been built to turn the Philippines into an export-based, manufacturing nation -- a goal that has thus far gone unrealized. No efforts have been made to create a strong consumer base in the Philippines itself by improving the lot of the Filipino workers (Bello 3). Had a local market been created and some protections afforded to Filipino workers, development may well have proceeded in a more positive direction as the nation would have been better able to take advantage of those aspects of globalization that offered true benefits, rather than sinking all economic hopes into the long shot that the small nation could compete with nations like India and China as a source of cheap labor. Despite this reality, economic reform in the Philippines has consistently focused on re-creating the nation as an export economy, specifically in the it industry. It probably seemed like a natural extension of economic development in the 1980s and 1990s when the Philippines was attempting to embrace globalization. Globalization offered a way to integrate with the world economy, and the it industry was one of the most in-demand industries in the world. Thus, by the mid-1980s, the Philippines was already trying to capitalize on this fact by focusing on manufacturing semiconductors, a tack the country has relentlessly pursued ever since. Unfortunately, semiconductor manufacturing is a low-value it industry and has done little to improve the Filipino economy (Austria, "Assessing" 1). Low-value technology, like semiconductor manufacturing, doesn't create a product that consumers are willing to pay highly for. These stand in contrast to high-value it products, such as computers or cell phones, which combine many cheaply manufactured parts but are sold at incredibly higher prices. Instead of encouraging the development of a value added it industry, the pursuit of semiconductor manufacturing has only created low wage factory jobs in the Philippines.

This incredible focus on the manufacture of semiconductors has, to some degree, enabled the growth of manufacturing in the Philippines. However, this growth has not translated into economic development or social improvements for the nation as a whole. What's more, the high degree of focus on this one aspect of the it industry makes the nation highly dependent on the success of semiconductors and the whims of the market (Austria, "Competitiveness" 2). Without a diversity of production, without a local consumer market, and with a political bureaucracy intent only on its own self-serving interests, it seems likely that the it/semiconductor focus will undermine the long-term development of the nation. Because semiconductor manufacture does not require skilled laborers, it offers no incentive to make social reforms and improvements throughout the Philippines that would spur on further development. Investments in education, for example, would have the end result of producing a population that is better able to compete globally and improve the fortunes of the nation as a whole. But since market liberalization has been centered on low-value it manufacturing, there has been little incentive to make such social investments. Combined with a lack of political support, low R&D investment, the lack of worker education, and institutional bottlenecks, conditions have been created in the Philippines that actually hurt development instead of encouraging it (Austria, "Competitiveness" 4-5).

Without question, the reforms that have been made to the economy since the 1980s have made it possible for the Philippines to enter into the global economy. However, those reforms have not helped the Philippines to compete effectively in that market and are only managing to exasperate the problems that were already extant in the country. The complete lack of growth in manufacturing, the low skill focus of the it industry, and the lack of strategic focus between the international market and the domestic economy demonstrate that the reforms that were enacted have not produced the end results that were originally desired (Austria, "The Philippines" 41). The primary goal of the state -- and arguably of any state -- especially in the developing world must be to strengthen social institutions such as education, labor standards, worker participation, and rule of law. In doing this, the developing nation can create a solid domestic foundation upon which international development and economic growth can occur. Up until this point, this stratagem has not been extensively followed in the Philippines (Lanzona 1). The case of the Philippines highlights the importance of creating these domestic policies that will strengthen institutions, bureaucratic efficiency, and competitiveness prior to entering into regional or global economies (Austria, "Liberalization" 2).