Clarity of need and strength of intention

Winston Churchill, Mahatma Gandhi, Adolfo Suarez, Nelson Mandela, Lee Kwan Yew and our very own Manuel L. Quezon are among the transformative leaders of the 20th century. Two traits are common among them – clarity of need and strength of intention.

All nations face development barriers at various points in their histories. Gandhi’s and Mandela’s was to break free from colonial rule and apartheid, respectively. Churchill’s was to balance power in the western hemisphere amid armed conflict. Lee’s was to establish a republic from zero and build an economy without natural resources. Suarez’s was to establish a democratic government following 40 years of dictatorship. Quezon’s was to realize the dream to make the Philippines a self-governing republic.

Effective leaders are those who identify their nation’s development barriers and focus their energies towards resolving them.

Painfully, the Philippines is Asia’s sick man again after electing a Chief Executive who thought that illegal drugs was our most pressing development barrier. What President Duterte failed to realize is that the real enemy is, in fact, poverty and the country’s inability to rise in affluence.

Although massive resources were channeled to the drug war, its effect on our quality of life has been minimal. Neither has our peace and order situation improved – it has even deteriorated. President Duterte barked at the wrong tree and the country paid dearly for it by way of lost lives, a tarnished human rights record and missed opportunities in economic development.

Since economic matters were not forefront in Mr. Duterte’s agenda, its management was relegated to a handful of economic managers, who, in my humble opinion as an economist, failed to address the core weaknesses of the economy. These weaknesses are our stunted industrialization and the middle-income trap.

While many of our neighbors advanced to become more prosperous even despite the pandemic, the Philippines decelerated significantly in terms of GDP growth, foreign direct investments and overall economic competitiveness since its peak in 2017. Government’s decision to impose the world’s longest, most restrictive lockdown resulted in five quarters of economic contraction that put us further behind. The majority of Filipinos live from hand to mouth, 19 million of whom live in abject poverty. Adding acid to the wound is that government offers no reforms to accelerate economic recovery outside the vaccination program and a stimulus package that is too small to make an impact.

Let me be clear – our core problem was, and still is, being in the middle-income trap due to our inability to industrialize. The Philippines broke the $2,000 per capita income barrier in 1974 when we officially became a middle-income economy. Regretfully, we have stagnated in that lower middle-income bracket for 47 years. Income inequality worsens the situation. To be within the global norm, our (nominal) per capita income should be in the $7,250 level. Ours is presently at $3,323, half of where it should be.

To graduate from a middle income to a high-income economy, we must be able to produce goods and services with increasing sophistication and value added. To achieve this, we need a strong industrial backbone. This means our very own steel manufacturing industry, petrochemicals, textile milling, chemicals, etc. The Philippines was the first in Asia to have these industries but Marcos systematically sequestered them and ran them to bankruptcy. Re-building our industrial backbone and accelerating industrialization should have been Mr. Duterte’s priority.

Another priority was to migrate the millions of low-income workers in the agricultural sector (25 percent of workforce) and low-wage workers (23 percent of workforce) to higher paying jobs in the manufacturing or technical services sector. Unfortunately, neither the former nor the latter priorities were recognized and given the attention it required.

Another weakness is the death of local industries. We see it all around us – the successive demise of our aquaculture and fisheries sector, leather goods, garments, jewelry, creative industries, etc.  Sadly, government allowed the economy to be inundated with imports without giving due protection and support to local industries.

This resulted in a trade deficit that is alarming at about $42 billion in 2019, representing 11 percent of GDP. This, in turn, contributed to our overall budget deficit which stood at 3.4 percent of GDP in 2019 and 7.5 percent of GDP in 2020. If not balanced, government will have to continually fill these deficits with debt and this can lead to a debt and/or currency crisis.

In 2013, the DTI completed the country’s Comprehensive National Industrial Strategy to revive the manufacturing sector. Industry roadmaps were developed for some 60 industries. It was a success. For the first time in decades, the growth of manufacturing surpassed the growth of services in 2014 (7.6 percent vs. 6.7 percent) and again in 2017 (7 percent vs. 6.4 percent).

The tragedy is that the Duterte administration failed to sustain the National Industrial Strategy. The manufacturing sector eroded since 2017, decelerating to 5.1 percent in 2018 and 3.2 percent in 2019 until it collapsed during the pandemic, contracting by -11.5 percent. Instead of further developing local industries to generate jobs, exports and wealth, this government relied on infrastructure spending (and other types of spending) to drive economic growth. It was the wrong prescription.

Strength of intention is the second characteristic of a transformative leader. A leader who possesses it is one who has singularity of purpose. He/she is immovable and not swayed by political expedience or corruption.

Leaders with strength of intention have common characteristics. They are able to clearly articulate their vision and inspire the population to collectively work towards achieving it, like Gandhi. They are able to motivate the population to perform beyond their perceived limits and be the best they can be, like Churchill. They are able to change attitudes from one that is freewheeling to one who is highly disciplined, like Lee. They are able to lead people to see beyond self-interest and instead work for the interest of the community, like Mandela. They are able to govern according to what is righteous, decent and democratic, like Suarez.

Strength of intention translates to determination, boldness and tenacity towards achieving the national goal, as we have seen in Manuel Quezon.

The combination of clarity of need and strength of intention has the power to transform a country. Let us make sure the person we support in 2022 possesses these traits.

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Email: [email protected]. Follow him on Facebook @Andrew J. Masigan.