Pax Silica: Industrial or imperial policy? (2)

Last autumn, shortly before flying out of Manitoba en route to Ottawa (in preparation for my next public lectures), I accidentally caught Canadian Prime Minister Mark Carney on television. It was no ordinary speech. He laid out his vision for industrial revival and national economic security. Unquestionably, it was one of the most authoritative speeches by any statesman in recent memory. An Oxford-trained economist (his Ph.D. dissertation focused on the interaction between market forces and national competitiveness), Carney knew exactly why industrial policy is an integral part of preserving Canada’s economic momentum and overall national interest.

As soon as a friend in Washington got to know about my Visiting Scholar (under the Asia-Pacific Foundation of Canada) tour right across the border, he asked whether I had time to drop by Johns Hopkins University. As much as I wanted to immerse myself back in the DC Debates—where I first witnessed how the birthplace of neoliberalism rapidly succumbed to industrial policy adoption in the face of fierce Chinese competition—I had to head back to Asia before flying to Europe to start my de facto academic retreat at Oxford.

Fortuitously, there were a plethora of enriching lectures on industrial policy and development, most notably a power panel in my department: Nobel Prize-winning economist Joseph Stiglitz (Columbia University) tag-teamed with Professor Ha-Joon Chang (School of Oriental and African Studies University of London). While Stiglitz emphasized the stale nature of orthodox trade theory, which fails to appreciate strategic learning by nations and structural imbalances in the world economy, Chang reiterated the importance of industrial policy as both a function of and an enabler of state-building. Of particular importance is their emphasis on how 21st-century industrial policy can go beyond subsidies—focusing on the “Triple Cs” of credit allocation; coordination and monitoring among firms and suppliers; and certification and technical standards—as well as transcend traditional industries by focusing on construction and services. Even luckier, I had the chance to interview, inter alia, two leading economists at Oxford’s Blavatnik School of Government, Sir Paul Collier and Professor Stefan Dercon, for my podcast “Deep Dive” (both economists also happen to be my former professors in economics).

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What repeatedly captivated my interlocutors across multiple continents was how to revive manufacturing both as an engine of inclusive growth and a pillar of national security. But one place proved exceptionally immune to the profound sense of urgency that had gripped all leading thinkers in all major capitals I visited in the past year: the Philippines!

All I heard from our pundits and advocates was the same simplistic, moralistic line about how corruption alone explains everything. Never mind that actual research shows that corruption is itself a function of economic underdevelopment—among the most corrupt nations on Earth are also some of the least developed, with widespread poverty and ramshackle governments!—and that equally corrupt countries, such as Türkiye and Thailand, have managed to become almost twice richer than the Philippines in per capita income. It’s precisely this poverty of political economy discourse in our country that has compelled me to repeatedly go against the grain by emphasizing how we need to institute good economic policies so that we can break out of networks of patronage politics—the negative dialectics of widespread poverty feeding systematic vote-buying, which, in turn, incentivizes institutionalized corruption—toward a better equilibrium of national development.

One of the most frustrating aspects of the ongoing debate about Pax Silica is the complete absence of any serious mention of industrial policy by supposed experts. We clearly need to pressure the government to protect not only our sovereignty and resource security but also the sanctity of our ecological resources and potentially affected communities. The framework agreement won’t likely be finalized until United States President Donald Trump’s visit to Manila later this year.

But we also should discuss how the Philippine government can leverage the Pax Silica to nudge multibillion-dollar local conglomerates away from low-end services and speculative business toward high-value-added production and high-tech manufacturing in tandem with prospective global partners. That’s how national champions from Japan to South Korea, Taiwan, and China were born. Thus, there is the centrality of ensuring technology transfer; upward mobility in the value chain; and gaining an autonomous foothold in next-generation technologies. Otherwise, we could end up with just a fancier version of the same vacuous pledges of Chinese investment under the former mayor-president.

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richard.heydarian@inquirer.net