Thursday, September 05, 2019

BWorld 365, FIRe, Innovation and rising income

* This is my article in BusinessWorld last September 03, 2019.

Next week, on Sept. 9, the BusinessWorld Industry 4.0 Summit with the theme “Winning Together in the Fourth Industrial Revolution” (FIRe) will be held at the Shangri-La at The Fort, BGC, Taguig City. This big event is a partnership of BusinessWorld, the Department of Information and Communications Technology (DICT), and the Philippine Chamber of Telecommunications Operators (PCTO).

The main speakers will be DICT Secretary Gregorio Honasan II, Senator Grace Poe, Anthony Oundjian of Boston Consulting Group, and Dr. Jose Ramon Albert of the Philippine Institute for Development Studies.

FIRe is the most recent of the technological revolutions that modern humans have invented. I searched for the approximate timeline, here is what I got. Others will have slightly different years but the period will not be far from what I have stated in Table 1. 

Taking this timeline, I am curious how major economies and ASEAN countries have developed since the First Industrial Revolution, at least from 1800. I found data from the University of Groningen, Groningen and Growth Development Center (GGDC) – the Maddison Project Database, version 2018. Bolt, Jutta, Robert Inklaar, Herman de Jong and Jan Luiten van Zanden (2018), “Rebasing ‘Maddison’: new income comparisons and the shape of long-run economic development,” Maddison Project Working Paper, nr. 10, (See Table 2.)

Here are some important points to consider from the data in Table 2:

• One, growth and income from the First to Second Industrial Revolutions was modest, per capita income of the United States of America and the United Kingdom expanded only two to three times after 100 years.

• Two, incomes from the Second to Third Industrial Revolutions have expanded by 1.5 to 2.5 times after 50 years. Since ASEAN countries have no data in 1900 except for Singapore, we use 1913 as the region’s Second Industrial Revolution income baseline. For the region, there was a decline or a modest increase in income from 2013-1950, that is after World War II.

• Three, the recurring belief that the “Philippines was the second strongest Asian economy after Japan after World War II” is a myth, not true. In the ASEAN alone, Malaysia and Singapore had per capita incomes nearly two times that of the Philippines.

• Four, the Third Industrial Revolution ushered fast growth in wealth worldwide, with incomes expanding by 1.5 to four times (Singapore) and eight times (Japan) in just 30 years between 1950-1980.

• Five, the Fourth Industrial Revolution (FIRe) was even more expansionary in terms of the material wealth and prosperity of people. Incomes have increased two to six times (Vietnam), and seven times (Singapore) from 1980 to 2016. The Filipinos’ incomes expanded only more than two times during that period. Marcos’ Martial Law’s repression of the economy, and huge natural disasters (the Pinatubo eruption in 1990, the big earthquake in 1991) contributed to this sad story.

We have entered the beginning of FIRe, where smart mobile phones have become affordable to billions of people and they have more access to internet, where drones take aerial photos and videos much better, where robots and modern machines are used more in manufacturing, commerce, and restaurants.

It is also in FIRe period where intellectual property rights (IPR) are becoming more and more prominent. Innovation is the keyword that is almost interchangeable with modern IR and innovation cannot happen fast if innovators’ patent and trade secrets of their inventions, trademarks and brands of their companies, copyrights to their compositions, are not respected and protected.

On Sept. 24, strong advocates of private property and market competition, the Geneva Network (UK) and the Minimal Government Thinkers (MGT, Manila) will launch a new report, “The importance of IPR for progress: A reform agenda for ASEAN countries” at the Holiday Inn Makati. Speakers will be DTI Secretary Ramon Lopez, Philippine Chamber of Commerce’s IPR Committee Chair Jess Varela, Geneva Network Executive Director Philip Stevens, and yours truly for MGT.

IPR protection ensures more innovation, which fuels endless modernization and disruption under FIRe. Humanity’s material prosperity is further ensured. More people, rich and poor, will ride cars, motorcycles, e-bikes and they will ride horses and bicycles only for leisure and sports. This is the positive impact of continuing IR and innovation, enabled by private property protection and market competition.

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