Class war

is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:

Amid the sloganeering of the Occupy mob regarding the hated 1% were proper calls for restraint. Firstly, the Occupy Wall Street crowd actually is part of the 1%, income-wise if one takes that in the context of incomes made by individuals globally. But more importantly, to target the rich is mindless prejudice against men that would normally include the likes of Steve Jobs, Mark Zuckerberg, Bill Gates, and Warren Buffet. These are guys who built their wealth on sheer talent, intelligence, hard work, and - most importantly - without receiving an iota of goverment subsidy or bailout.

Thus, calls for class warfare in the US (or even Britain, Germany, and the rest of Europe) is uncalled for, even idiotic. The declaration by US President Barack Obama that the taxation of the rich is "not class warfare. It's math" is ingenuous at best. The Economist (Hunting The Rich, 24 September 2011) got it right (when has it not?) by calling for a more studied approach in taxing the rich, ensuring that shouts for undue redistribution be not indulged in, and yet recognizing that a more equitable sharing of the burdens of the economy should be made. In short, avoid class warfare. Nevertheless, Filipinos should be encouraged to read such within proper contexts. If one is to be asked if class warfare is to be applied in the Philippines, then there is a decidedly and hugely reasonable ground to answer in the affirmative.

The difference lies in the nature of their rich. The US and other Western countries have an incredibly healthy social mobility. Forbes' annual 400 richest Americans ranking points to the fact that the list of the richest men in 1990's US is far different from the list of 2011. This indicates a robust and effective competitive business environment, where talent (and not one's surname) is what matters. Another significant difference is that the people who lead in business would not be the same people who comprise government. While undoubtedly relationships exists between the two groups in any country, that is a far cry from having the same families actually in control of both business and government.

The Philippines obviously has a circumstance very different from the context with which The Economist placed its analysis. Social mobility here is non-existent. Any cursory reading of our history would show that the same names in government and business appear over and over and over and over again. The same names, the same families, would side with the Spanish against the Katipunan, collaborate with the Americans, collaborate with the Japanese, then see their kind give pardon to the collaborators, preside over ever increasing corruption and stagnation in the Third Republic, and then exploit (either in government or in opposition) the Marcos era, People Power, and Edsa Dos.

As Tony Lopez of BizNewsAsia once wrote: "In the last quarter century ... Filipinos must note: 1. The Philippines became the slowest growing economy in Asia in terms of per capita income ... 2. The same families who ruled today are the very same families who have ruled the country in the last 25 years. So if nothing happens to Filipinos, blame these dynastic families.” Ditto Elmer Ordonez of the Manila Times: "Self-interest and conspicuous consumption appear to be the oligarchy’s guiding lights. x x x Events like EDSA 1 and 2 are sometimes described as 'revolutionary' but they are actually transfers of political power from one set of oligarchs to another." The idea being peddled by the political class (which, it must be remembered, also constitutes the wealthy end of our social spectrum) pointing to corruption as the problem is misleading. It’s the elite families who are the problem. Commentators from vastly different ends of the political spectrum converge on this point.

That's why books or biographies about our "great" families or men are simply laughable. Claims of having succeeded out of nothing, through wars or poverty, or against political enemies all conveniently forget that their relatives or in-laws (or classmates) own the banks from which they get behest loans, or are part of governments that generously gives them subsidies, protectionist treatment, allowed war profiteering, or simply looks the other way when enforcing laws.

Albert Einstein once said that “insanity is doing the same thing over and over again and expect different results.” Well, it's insanity to have these same families ruling over and over again over the Philippines. We need laws and policies that directly address this insanity: stronger and more comprehensive estate taxes, taxes that focus on property (akin to Britain's Liberal Democrats' proposed "mansion taxes") rather than on wages or salaries, strong competition laws that restrains family control rather than the companies themselves, consistent and sustained liberalization of trade and the economy, controlled election spending, and an overhauled, stricter educational system.

To borrow US President Obama's line (for a more Philippine appropriate context): This is not class warfare; it's nation building.