Instant versus delayed gratification

Not being an economist, I often ponder how globalization will guarantee an improvement in the wealth potential of countries like the Philippines. I see it in simplistic terms. Our pre-WTO, regulated economy attracted investments looking for a share of our protected markets. The traditional model of a multi-national, building a factory, generating jobs and supplying a population with a product have gone out of style. The new business logic argues that products previously restricted to one market can now be sold to the world, as long as they have a clear competitive advantage. This advantage attracts investment, the business prerequisite requires an economy of scale, the volume generated creates jobs, jobs create wealth, and wealth allows the opportunity for people to participate in the economy. Since the type of investment capital seeks an exit within relatively short periods through the equity market, the opportunity open to people, regardless of who they are, is to invest their savings generated from their jobs in the company public offerings and to share in its profit and wealth.

In this sense, it may no longer matter that the barrier to entry for many has become formidable. We can aim instead to become shareholders in large-scale and widely-owned public companies while we pursue our careers or run our own businesses. If opportunity to share wealth is one of the positive outcomes of a post-WTO future, I am afraid that we have a long way to go.

It amazes me, for example, how so many public companies continue to have the lucrative parts of their business like purchasing or materials supply, contracted to management firms owned by a selected set of privileged shareholders. This type of tyranny or abuse, tolerated too long by a passive and impotent public, is equivalent to the same lack of governance and transparency we abhor in government. Needless to say, it is imperative that the steps to clean up the system, already begun at the Securities and Exchange Commission, as well as initiatives being taken by the Stock Exchanges, are pursued with urgency.

There are still too many people who use unscrupulous means to get to the starting gate ahead of everyone else, or who try to catch all the fish in the water at the expense of all. The unfortunate outcome of some of these strategies is that more often than not, everyone loses. Unless we make major changes to corporate governance and accept strict controls over public companies, we will not build the trust and credibility to attract the capital we need to position ourselves during this crucial period. During the next few years, all the player countries and businesses will move around like musical chairs, settling in their niches, as a prerequisite to remain in the game. The IBMs and Procter and Gambles will decide where their factories will be located, and who will do their IT and accounting. We either stay on as a player, or end up watching and playing small supporting roles. Once everyone is seated, it will take another generation before new ideas in business processes will allow us to try again.

I asked a friend who is attuned to many dimensions of our political and business practices why we have a difficult time sacrificing short-term gains for longer-term benefit. I call it instant versus delayed gratification. She explained that during the Spanish colonial times, the indio was so disenfranchised that he had absolutely no hope of ascending politically or economically. As a result, he learned to grab what he could get before it was taken away. That was three hundred years ago. We must be vigilant that we do not repeat, three hundred years later, the tyranny of the ruler over a disenfranchised small public shareholder, this time with faulty corporate governance instead of colonizers. It is about time that we use power instead as a means to uplift people within our own sphere of influence. After all, this time, the governance of the economic rulers that will drive the potential success of our nation’s future, and which will benefit each and everyone in greater ways than we imagine, is in our hands alone.

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Thank you for your comments. I can be reached at dorisho@attglobal.net.