* This is my article in BusinessWorld last Monday, May 21, 2018.
The past three decades showed major disruptions in global
politics and economics. These include the fall of European socialism with the
collapse of the Berlin Wall in 1989, the creation of many new countries from
the former USSR, the move towards freer trade with the creation of the World
Trade Organization (WTO) in 1995, and the transition from heavy central
planning to the market economy of two big socialist economies in the world,
China and Vietnam.
Disruption in macro economy and business is a result of
endless innovation by new players both in business and politics. What used to
be dirt-poor economies have transformed to middle-income, Internet-savvy ones.
Let us review global economic performance over the past
25 years. We use 1992 as base year because there was no WTO at that time so
many economies were still grappling with trade restrictions and by extension,
investment constraints. The then top 10 East Asian economies are covered here
(see table).
These numbers show the following disruptions over the
past quarter of a century.
One, China’s communist central planning until the ’80s
has resulted in a very poor economy. Its transition to some principles of the
market economy resulted in massive turn-around towards more prosperity: GDP
size has expanded 24x in current prices and nearly 16x in PPP values.
Two, India has similar economic policies with China until
the ’80s, very nationalistic, socialist, and restrictive. Its transition to
some market reforms allowed it to expand its GDP size nearly 9x.
Three, seven to eight ASEAN economies have experienced
GDP size expansion of at least 5x in just 25 years, whether in current prices
or PPP values. Only Thailand and Brunei failed to expand 5x because they have a
relatively high economic base in 1992 or earlier.
Four, traditional rich economies of Europe, Japan, and US
were only able to expand three times at most. This is because they already have
a high economic base in 1992, and they have become more regulated and more
bureaucratic recently owing to very high labor, energy, environment, and other
standards.
Going to the micro and enterprise level, many previously
domestic and nation-limited companies in East Asia have become regional players
and multinationals initially, then became global players.
The Philippines for instance has produced a number of big
regional players: San Miguel, SM, Jollibee, Unilab, Zuellig, Max’s, and
Pilmico/Aboitiz.
There are many new players that experienced disruptive
ascent in just a few years of existence, like Udenna/Phoenix/Chelsea, Voyager,
Mobext, AdoboMall. Their CEOs and presidents were among the speakers in the
BusinessWorld Economic Forum 2018.
Endless innovation has brought new players to the top and
they are the disruptors of the corporate status quo. But their ascent to the
top is not guaranteed because new breed of disruptors are being born and
created every year.
The market economy has an inherent disruptive,
innovative, and subversive nature. Corporate expansion and bankruptcy, boom and
bust, are 100% part of its DNA. This uncertainty and several other disruptions
may be bad for existing players but they will always be good for consumers.
Satisfying consumers is the single biggest challenge to all players, old and
new.
The Philippine and Asian governments should ride the wave
of disruptions and allow more market reforms, more deregulation,
de-bureaucratization and less taxation of the business environment.
Governments’ goal of more welfare, less inflation to the people can be better
provided by a competitive and dynamic economy. Plenty of private players can
create more jobs and produce newer products and services at lesser cost, better
quality, and more variety.
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See also:
BWorld 213, Disruption, inflation and taxation, May 23, 2018
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