The Asia Co-Prosperity Sphere

Subject: The Asia Co-Prosperity Sphere

Condemned to be Marginal

In the Second World War, the dreaded Kempeitai would round up people, and under the threat of death or worse, they would force Filipinos to listen to what would effectively be attempts at indoctrinating the citizenry on the ideals of a near-Utopian economic world order known as the Asia Co-Prosperity Sphere. 

Within the transnational hierarchical cultures deeply prevalent in Asia, as opposed to the typically western ideals of cultural equality, it was easy to impose the idea of cooperation among aggregated states under a supreme power. Save for Thailand, most, if not all of Asia had been under western rule at some point in its history and at the time of the Asia Co-Prosperity Sphere quite a number were then occupied by non-Asians.

It was not too much of a cultural aberration then to foist the concepts of a transnational fraternity, even if, within its emergent hierarchy, there persisted inevitable inequity where one state would be more equal than others, some higher, others, lower, some richer, others, poorer. Within Asia's sub-cultures, hierarchical subjugation and feudalism were prevalent and deeply ingrained. The lower castes depended on the benevolence of the privileged and a modus vivendi akin to state protectorates was achieved. As the idea of the Asia Co-prosperity Sphere emanated from a single entity, within its origins, the concept of supremacy over subservient states were genetic and in-bred. The pill was easy to swallow.

The difference then was that Japan was Asian. The colonizer was not Spanish, Portuguese, Middle Eastern, Dutch, British or American. 

Applying this as an analytical framework to assess the globalization model that our officials would spend over Php 10 Billion of our taxes for a Kodak moment celebrating the Asia Pacific Economic Cooperation (APEC), allow us to scrutinize the paradigm's upsides and downsides within APEC.

If government is to shove it's citizenry to the gutters as officials spend billions for limousines that speed unencumbered along lanes separating the privileged from the un-entitled, then those who sacrificed are entitled to an explanation.

To start off, indulge us a premise. We believe in capitalism and in Adam Smith's "Invisible Hand." We likewise believe in market-driven economies linked in a grand value chain. These are not Asian concepts. Smith was a Scott. Curiously APEC is likewise not a natural-born Asian. It was conceived in Australia, and one of its first conferences was in Puget Sound, east of Manchester.

While we believe in globalized capitalism, it has both upsides and downsides. Sans brick and mortar, a trader in Manila with a telephone can order pre-packaged dim-sum from China and redistribute these to entrepreneurial carts along Morayta. Save for the carts, manned by, at most, two, manufacturing and labor are essentially provided offshore. Given the cost options, why would the trader manufacture locally?

In an Ethiopian savannah, a farmer plants beans that, at the far end of a global value chain, a barrista  mixes into an upsized Frapuccino Venti, which costs about the same as the Ethiopian farmer's weekly pay. 

These dissect the downsides where predation is self-perpetuating, and players, compelled to cooperate through membership clubs as APEC, may be condemned to forever be marginal.

A product of economic and geopolitical subservience, a toxic chemistry of myopic domestic policies and impositions from international regulators and creditors doom specific economies to forever wallow within the marginally-earning levels of the global value chain. For the Ethiopian farmer, poverty sentences him  indefinitely as a raw material contributor. Real revenues are earned farther down the chain starting from where his farm-gate ends. For the dim-sum trader, the widest margins are paid by the end consumer for a product that was imported due to the demands of economies of scale and arbitrage pricing. 

Along the global value chain allow us to review and see where the Philippines might find itself, stuck and trapped  through its membership in a cross-economy club that perpetuates these predatory downsides.

From aggressively pursuing industrialization in the 1960's, we re-channeled a substantial amount of our capital to the services sector. While that alleviated some of our unemployment problems, we've damned Filipino labor to the lower ends. Worsening that, we then tailored-fit our educational systems downwards.

In the global value chain we thus wallow where margins are thinnest and our contributions are limited to unskilled sweat. In the middle links where most of Asia operates and earns, we have very little.

As APEC's initiatives center on the liberalization and deregulation of institutions, these should have inclusive domestic growth priorities. Unfortunately, they don't. Their focus is to source cheaply and supply offshore economies. We are merely raw input suppliers. Much of the values added are tacked on elsewhere.

Worse, APEC's small to medium scale enterprises (SME) initiatives are a farce. The numbers don't lie. Nearly half of SMEs are middlemen who import everything from fishballs to toothpicks. There are hardly any capital assets necessary to jumpstart true industrialization. As for the balance, note that the degree of financial inclusion of Philippine SMEs is the lowest in the region.

Combined these turn predatory where the Philippines is reduced to paying the highest end-chain margins and yet earns from the lowest at the supply end. 

In 1942, the Kempeitai admonished that Asians must not "cooperate against each other". Indeed, past is prologue.