BUSINESS WORLD
Posted on September 07, 2014 08:59:00 PM
Introspective
Raul V. Fabella
WE CAME very close to beating Croatia, Puerto Rico and Argentina in FIBA Spain. We beat Senegal by a whisker. All the basketball world marveled at our fighting spirit. The entertainment value was unmatched. But in the end we were eliminated. We tried; we even enlisted Congress to accord citizenship to foreign behemoths to raise our ceiling. This leaves a bad taste in the mouth, for how far can you go with instant citizens without eroding our team identity? Still, a win is a win. It was not quite our dream but it was certainly better than a “zero win “for China and India. Our genes in the end let us down.
And yet there is nothing wrong with our genes; the wrong is with our choice of competitive games. Basketball is a game of physical, not mental elevation. That is why a Jewish NBA player always inspires a chuckle like a ghost. And Jews are not insulted. It’s the case again of some Ivy League schools -- when their lowly football teams surprise some nationally ranked teams, a blue moon moment, there follows a groan of self-examination: a sign perhaps that we have lost our academic edge? For there is no free lunch, not even and especially academic edge. Wisdom dictates that we embrace our genetic make-up and choose the contests that enlist our genetic strengths. And for Filipinos, basketball cannot be the repository of lofty dreams. Jews don’t do so badly reposing their dreams in bio-, nano- and other techs. We can too.
As in sports, so in life. But in life, swimming against the tide can be disastrous. Basketball is at least fun and costs the taxpayer no money. Not rice self-sufficiency. In the annals of myths, rice self-sufficiency stands out as the most enduring. Dreams repeatedly get bludgeoned here, but it does not die. The fallacy is that any nation can just engineer it and thus should. In December 2011, Agriculture Secretary Proceso Alcala bragged that by 2014, the Philippines will be a rice exporter because by then the Philippines will have achieved rice self-sufficiency.
So a program of rice import reduction pulled imports down from 860 metric tons in 2011 to 350 metric tons in 2013 in the hope that domestic rice production will fill the void. Well, domestic production did not, despite the huge budget allocation for rice. In the first quarter this year, rice prices spiked. PNoy’s sagging rating had little to do with the Disbursement Acceleration Program (DAP) and everything to do with the price of rice.
Alcala’s was not just a shattered dream; it almost derailed Matuwid na Daan. The besieged Aquino administration quickly reversed course and rushed an import order of 800 metric tons of rice. It also stripped Alcala of four crucial units of the Department of Agriculture. In Japan, where honor is highly regarded, the same chain of events would have triggered a hara-kiri. Here, Alcala is still there.
Why did rice self-sufficiency fail? Rice self-sufficiency is a matter of geography. This is the message of the recent International Rice Research Institute study. Many economists, including Planning Secretary Arsenio Balisacan, have raised the warning. We do not have a comparative advantage in rice production. Our cost per cavan is too high. You can blame lack of infrastructure and farm-to-market roads till you are blue in the face, but if you do not have steady abundant water and a friendly soil, you will be marginal. Which means only limited areas in the Philippines will be competitive and not nearly enough for self-sufficiency. As Adam Smith once observed, Scotland can produce more wine, but if you have to artificially provide the warmth and abundant sunshine freely available in Portugal, you will go bankrupt. Why not produce woolens instead? Producing efficiently if only a fraction of consumption requirement and importing the rest is common sense. Geography is unfair; but it gets bloody if you bang your head against it. As with genes, you choose crops that suit your geography and not the geography that suits your crops.
It is the familiar law of comparative advantage in trade theory once again. If a country specializes according to comparative advantage -- that is, produce crops where it has a cost advantage, say rice for Thailand -- it realizes increases in its welfare. I prefer to emphasize perverse specialization in my class: countries often harvest a nightmare because their governments decide to defy comparative advantage, which for the Philippines is self-sufficiency in rice.
For an epilogue, I always observe that if left to the private sector, this madness does not arise because private business hates to lose money, its own money. Government bureaucrats, though, lose only other people’s money and worse perhaps make a pile for themselves on the side, making perverse specialization common.
Let me end by telling the story of a friend and fellow BusinessWorld contributor, Romy Bernardo, who turned 60 last week. Romy’s singularly successful career is a parable of genetic jujitsu. Had Romy chosen the tennis or basketball court as his Thermopylae, he would be dirt poor and miserable. But he chose as rapiers what the genetic gods dealt him -- abundant IQ and charming wit -- and he and we are all the better for it.
Raul V. Fabella the chairman of the Institute for Development and Econometric Analysis, a professor at the UP School of Economics, and a member of the National Academy of Science and Technology.
http://www.bworldonline.com/content.php?section=Opinion&title=grains-and-gilas:-geography,-genes,-dashed-dreams&id=94092
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