• Introduction to social market economy: Laissez faire and socialism, the antecedents

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    LITO MONICO C. LORENZANA

    LITO MONICO C. LORENZANA

    First of two parts

    President Rodrigo Duterte’s recent visit and diplomatic detente to China and his proclamation of a military and economic “separation” from the United States was like a nuclear bomb detonated on a peaceful Friday afternoon.

    The people were in frenzy with different interpretations buzzing from every corner and every media platform. All of a sudden, people became instant economists speculating what will happen to the Philippines now that the president blustered out yet again another presumably unthought-of public policy; which perfunctorily will be re-explained by his subalterns the following day and subsequently be softened up by the President.

    For one thing I’m sure President Duterte’s predictably unusual rhetoric can jolt us out of our usual comfort zones and provoke the people to be critical, to be conscious about what’s happening in our society in terms of economy and politics.

    This economic consciousness of the people, though perhaps not refined yet, gradually develops through the easy access to information in media outlets and platforms. This consciousness and the willingness to involve oneself into discussions are key factors in understanding a different economic archetype Social Market Economy (SME) as a blueprint for the Philippines to follow.

    Hopefully, this will usher in the creation of policies and programs that will benefit the people at the “laylayan” or those at the fringes of our society. However, the most important thing for now is to educate the people on the principles of Social Market Economy, especially the legislators and the policy makers.

    Our Present Economic Situation
    President Aquino can brag all he wants and refer to the increase in GRP as a proof of his economic competence. He can even brag about the Philippines no longer the “sick man of Asia”, while a lot of our sick men, women, and children are detained in hospitals unable to pay the bills. For one thing, he can never deny his failure to alleviate the poor people in our society. Go to the nearest slum in your area should you not be convinced.

    A larger slice of the national wealth is still enjoyed by the very few families who are also game-players of our political and economic landscapes. They have been enjoying their present positions that they will do everything just to maintain their rankings on Forbes top wealthiest families in the Philippines.

    Top-to-Bottom approach of our current development framework is no longer viable and has failed generations of Filipino families working their way out of the slums, only to be slammed back to the ground because our present economic policies have never been pro-people; but pro-elitist!

    The past has to be recollected only for harvesting insights and lessons, and present options for a more comprehensive and sustainable economic framework. The present administration should look into Social Market Economy as a guiding concept and its imperatives, a tool for reducing poverty and nourishing conditions that respond to the needs of the people so they may also live a dignified and humane life.

    The two traditional economic models
    In a capitalist driven economy, an individual takes precedence over the community and one should be free to take sole decisions on the course of his life. However, extreme Liberal Capitalists practiced an uninhibited and untrammeled free market economy where prices of goods and services and the production and distribution thereof are dictated solely by the market (Kopepinger, 2010).

    On the other hand, leftist model is notorious for the direct intrusion of the state due to a very centralized economic structure. It determines what goods and services to produce, who will produce them and subsequently who will consume them. Private property is absent and the means of production and distribution of goods and services are in the hands of the state. The economy is therefore centrally planned; clearly, a direct opposite of the capitalist economic model.

    An economic framework that does justice
    Social Market Economy is a synthesis of two classical models of economic order. To the left is the Socialist Centralized Planning adapted by countries such as (the “old”) China and the Soviet Union, and to the right is the Liberal Capitalist Model practiced by the (erstwhile) United States. These two models both have certain vital characteristics that when put together, forms an economic model that carries with it the principles of social amelioration and the safety nets of the left, and the tempered free market of the laissez-faire.

    Social Market Economy first laid its Midas touch to the still recuperating German economy way back post-world war II era. Lessons from the war provoked the Germans to create a social and economic model that do justice and seeks the common good. The inherent dignity of man, irrespective of religious faith and the belief in a God, is to take precedence over all. It must involve the right to self-determination, freedom of personal development and decision making.

    Social Market Economy, therefore, acknowledges the importance of an individual’s creativity, innovation, and decision-making capacities – and from the social context, it seeks to aid the disadvantaged through channeling revenues and resources from the privileged in our society.

    The Philippine version of social market economy
    The proposed economic model for the Philippine version of SME does not veer away from that of the German model. Our country has inherited some of the important principles of Social Market Economy from our colonizers. Uncle Sam has planted the seeds of capitalism and independent mindedness in our social fabric. We are therefore more familiar with “free market” economy. This is a key value that also exists in the German model. The other important factor is that which was handed down to us by our Spanish colonizers; our Christian Faith that values also the inherent dignity of man.

    (The 2nd part of this article will appear on Thursday November 3)

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