Development progeria

Progeria is a rare genetic condition that causes a child’s body to age fast. When a poor country displays the economic structure of a rich and mature economy it is said to be suffering from development progeria.

Normally, the country’s development starts from agriculture. As agriculture expands beyond the household level, some industries start to develop such as in small mining and mineral processing, processing of agriculture products, and the production of textile and other varied consumer products. Service activities naturally comes around also at this time, particularly in the retail of consumer items and the distribution of agriculture and minor manufactured goods.

The deepening of the industry sector then starts with the production of intermediate goods needed as inputs in the production of other manufactured goods. It is then followed by the entry of higher order industries which manufacture capital goods or the tools and machineries that are used in farming, mining, and in the growing number of manufacturing and service industries.

The growing agriculture and industrial activities generate more jobs and income to many people who now demand more sophisticated services such as banking, real estate, insurance, health, education, and other high level community and personal services. This again provides an opportunity for service industries to expand further until it becomes the dominant sector in the economy.

The Philippines did not follow this pattern of development. Agriculture was our dominant economic activity up to the last war. After the war we started to industrialize following the import substituting industrialization strategy. This strategy encouraged local entrepreneurs to go into the manufacture of what we were once importing. Tax incentives and prioritization in the allocation of scarce foreign exchange for import of raw materials and machineries they needed were provided. High import tax, low import quota, or outright import ban were also imposed to protect the local industries from foreign competition.

Through this strategy, our economy grew fast in the decade and a half following the last war. Unfortunately, economic growth slackened in the following decades because of our failure to graduate into the production of goods for exports and in our inability to go deeper into intermediate goods and capital goods manufacturing like what was done by our close neighbors in the north. We went ahead instead into full scale development of our service sector.

But with our anemic agriculture and limited number of industries, the small income they provide for our people can only support the growth of the service industry up to a point. Hence our nation remains poor up to this time and left behind in development by our neighbors which has a flourishing industrial sector.

What is wrong with failing to industrialize? It is wrong because basing on our experience, labor productivity or gross value added per worker contributed to the economy in industry are two times more than those in services and five times than those in agriculture. This forgone industrial output is our great loss that comes with economic progeria.

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