How Foreign Direct Investments Can Also Help in Local Philippine Agriculture
Protectionism ended up destroying agriculture than protecting it
Mao Zedong's "great leap forward" was evidence
Agriculture
Private plot farming was abolished and rural farmers were forced to work on collective farms where all production, resource allocation, and food distribution was centrally controlled by the Communist Party. Large-scale irrigation projects, with little input from trained engineers, were initiated, and experimental, unproven new agricultural techniques were quickly introduced around the country.
These innovations resulted in declining crop yields from failed experiments and improperly constructed water projects. A nationwide campaign to exterminate sparrows, which Mao believed (incorrectly) were a major pest on grain crops, resulted in massive locust swarms in the absence of natural predation by the sparrows. Grain production fell sharply, and hundreds of thousands died from forced labor and exposure to the elements on irrigation construction projects and communal farming.
Famine quickly set in across the countryside, resulting in millions more deaths. People resorted to eating tree bark and dirt, and in some areas to cannibalism. Farmers who failed to meet grain quotas, tried to get more food, or attempted to escape were tortured and killed along with their family members via beating, public mutilation, being buried alive, scalding with boiling water, and other methods.
Mao's methods tried to use a combination of brutality (so much for claiming to "free the masses" as he became a warlord himself) and protectionism to get "maximum results". Mao's desire for a "self-industrialized" China was nothing more than a fantasy. Yet, it's amazing that some "thought leaders" like Anakbayan, the League of Filipino Students, and other similar "think tanks" that I can't take seriously still adhere to Mao's failed doctrine. Mao's protectionist economy would give us these alarming facts about how protectionism truly "helped" stimulate the economy:
The End Result
The Great Leap Forward ended up being a massive failure. Tens of millions died by starvation, exposure, overwork, and execution in just a few years. It broke families apart, sending men, women, and children to different locations, and destroyed traditional communities and ways of life. Farmland was damaged by nonsensical agricultural practices and the landscape denuded of trees to fuel the steel furnaces. Thirty to 40% of the housing stock was demolished to obtain raw materials for collective projects. In industry, massive quantities of capital goods and raw materials were consumed in projects that yielded no additional output of final goods.
The Great Leap Forward was officially halted in Jan. 1961 after three brutal years of death and destruction.
What Was the Purpose of the Great Leap Forward Program?
The Great Leap Forward was a relatively short-lived effort by the communist regime of China to modernize its rural and agricultural sectors through collectivism and industrialization.
What Happened in the Great Leap Forward?
Rather than stimulating the economy, the measures undertaken by the Great Leap Forward resulted in massive food shortages, leading to famine and starvation—ultimately, tens of millions of Chinese citizens died as a result.
How Did the Great Leap Forward Cause Famine?
The failure of this program was due to the confluence of several factors. Efforts to kill off birds increased insect populations that ruined crops. The communal farms set up by the Great Leap Forward were beset by inadequate food distribution throughout the country given China's relatively primitive infrastructure at the time.
At the same time, there was an overproduction of grain, much of which rotted before being able to be transported. In addition, there was a bias to feed residents of urban centers rather than to peasants across the countryside, leading to higher death rates among rural communities than in cities.
Are these just "isolated results" or maybe results of US economic sanctions? On the contrary, these are a result of Mao's isolationist policies. I could think about how the policies of Mao were heavily misguided. Mao chose to keep China isolated in the name of nationalism. Mao's other movement was that choosing to try and do everything themselves only resulted in the great economic collapse. If Mao chose to import materials and businesses--he would've probably really brought China to a whole new level. Mao could've imported iron to make quality steel, allowed FDIs to buy Chinese grain, given a decentralized means of production (and Deng Xiaoping returned the lands to the farmers), and followed anything that first-world countries had. Instead, Mao's pride was really so high that the fall was so low. Pride comes before the fall, right?
China isn't an isolated example as other countries using protectionism suffered as well
A serious shortage of fertilisers
One of the lesser-known problems for North Korea's agricultural sector is its difficulties getting sufficient fertiliser to improve crop yields.A letter from Kim Jong-un in 2014 reminded leaders of the agricultural sector that they should find alternative easily-available sources of fertiliser."Use all sources of manure such as domestic animal excrement, night soil [human excrement], compost and ditch-bed soil [extracted from below the surface]" he wrote in the letter published by state news agency KCNA.The country is not self-sufficient in fertiliser production, and according to Nikkei Asia in February, one of its major factories producing (among other things) fertiliser had to shut down due to a lack of spare parts.That has been blamed on the closure of the border with its largest trading partner China in January 2020, because of the Covid pandemic.Trade is severely limited by sanctions
International economic sanctions means trade with other countries is already extremely limited.Total Chinese exports to North Korea have ranged from about $2.5bn to $3.5bn in recent years. But last year the figure was less than $500m, according to Chinese official customs data.It provides evidence to show the border has probably been closed to trade, according to a report by the Centre for Strategic and International Studies (CSIS).The researchers counted more than 100 vehicles in customs areas in September 2019 - but only 15 in March 2021.However, more rail carriages were sighted in March compared to photos of the same location in the past two years. which has led observers to believe more trade might resume.Since then, there's been no indication the border will open properly any time soon, according to North Korea watchers.Food aid problems
Closed borders have also made it difficult for North Korea to get food aid, which is exempt from the sanctions.The country's biggest donor is China, and its food exports to North Korea have fallen by 80% since the start of the pandemic.Aid flows into the country from donor nations have been inadequate for the last decade, the UN says.And most international food aid organisations are currently unable to work in North Korea, with Covid restrictions making operations more difficult than normal.Kun Li of the World Food Programme told the BBC that the WFP hasn't been able to conduct household food surveys since before the pandemic."Despite the challenges, in 2020, WFP brought in limited supplies and reached nearly 730,000 people... with food and nutrition assistance," she said.North Korea has a food shortage equivalent to about two or three months' supplies, according to a UN Food and Agriculture Organisation report."If this gap is not adequately covered through commercial imports and/or food aid, households could experience a harsh lean period between August and October 2021."
I was thinking about the sanctions against North Korea. This just reminds me of the Great Depression of 1929 caused by economic sanctions. The United States of America (USA) had its protectionist freak legislators implementing heavy tariffs to protect the local industries.
Besides, Venezuela is also suffering from a similar problem. Protectionism didn't even help Venezuela. BBC News also talks about Venezuela's farming crisis. Although it's taken from five years ago--I still want to share it to stress a point that protectionism helped cause Venezuela's crisis:
Nationalisation drive
In 2010, the government nationalised the farm supply business. Agropatria is now responsible for supplying farmers with everything from seeds to pesticides.
Timing is crucial and producers say the government is not delivering.
This year, Ronald did not get fertiliser in time for his corn crop, so it suffered.
The corn he does grow he has to sell at regulated prices because it is a government staple. He can only just keep the farm afloat.
"We have to go it alone to try and make things better but the situation is so bad," he says.
"The country's financial situation and what we have now is tough."
Broken machinery
The problem is compounded by hyperinflation.
Venezuela's currency gets weaker every day so the cost of his materials, which are mostly imported, keeps rising.
In just two weeks, the price of a tractor tyre has doubled.
Ronald shows me around his John Deere harvester.
He needs a replacement part but there is no longer a local supplies store in town so he has to get it shipped from the US.
That means saving up for the part and depositing the money in dollars. The shipment can take months to arrive.
Insecurity in the fields
Ronald's problems do not end there. In the farmyard is a half-built house meant for his mother.
He could not get hold of cement at a decent price so he stopped work.
The only residents are his flock of sheep. The number has dwindled in recent months as he had to sell some.
Some hungry Venezuelans in search of some protein stole a couple too.
Insecurity in this part of the world is rising.
The Marketplace may also help explain why the sanction hit North Korea and Venezuela (which are already very isolated places, to begin with):
When bad economics happens to good intentions
So Smoot, along with his House cohort Hawley, began crafting a tariff bill in Washington, which made for very good politics and very bad economics. American farmers in 1929 were struggling, but the problem was not foreign competition; it was depressed agriculture prices. Tariffs would not solve this, yet farmers still wanted relief. And politicians still wanted to help — or appear to be helping.
“They had a lot of debt as a result of World War I,” author Irwin said. “Crop prices were lower after the war, and they tried initially to help farmers through price supports. But that was considered a new idea. So they came to the tariff as sort of an indirect way of helping out farmers by stopping imports of farm goods.”
The Republican party at the time controlled both chambers of Congress and the White House, and was concerned about winning the Midwestern farm vote in the next election.
“I think it was more of a signaling thing,” Irwin said. “They didn’t think it was going to be a big deal when they proposed it.”
But it turned into a big deal, a protectionist feeding frenzy, in fact. Congress started holding hearings on tariffs in 1929, at which point all kinds of lobbyist and industry groups showed up to piggyback on the farm tariffs. Ball bearings, steel, textiles, shoes, bricks, collapsible tubs, bottle caps, sprinkler tops, you name it. Even the goldfish industry joined the protectionist exuberance.
Even worse, the same article shared earlier from The Marketplace also shares this very important detail:
These kind of trade walls went up all across Europe as well, affecting all manner of U.S. producers. This confirmed what some call the Golden Rule of Protectionism: Tariff unto others as you would have others tariff unto you.
“It’s not just tariffs are harmful for the world economy,” Irwin said. “It’s that they really breed ill will among nations.”
So, what exactly was the damage from Smoot and Hawley’s big adventure?
The answer is, it’s complicated. Economists pretty much agree now that Smoot and Hawley’s handiwork didn’t tip us into the Depression. We were in the soup already by 1930. But it certainly didn’t relieve unemployment, like protectionists promised. And it probably helped deepen the Depression since it shattered world trade.
“The general contraction of trade led by trade barriers did harm the world economy and probably made the Great Depression worse,” Irwin said.
Instead, we can focus on how FDI can help in farming as long as there are reasonable restrictions to follow
President Rodrigo Roa Duterte on Monday signed into law a measure amending the Public Service Act (PSA), allowing up to 100 percent foreign ownership of public services in the country.Republic Act (RA) No. 11659 or "An Act Amending Commonwealth Act No. 146 otherwise known as the Public Service Act” as amended was signed by Duterte in a ceremony at the Rizal Hall, Malacañan Palace in the presence of lawmakers and other officials.Under the amended PSA, the telecommunications, railways, expressways, airports, and shipping industries will be considered public services, allowing up to 100 percent foreign ownership in these sectors.Duterte also led the ceremonial presentation of newly enacted laws namely RA 11647 which amends the Foreign Investments Act; RA 11650, which ensures inclusive education for learners with disabilities; and RA 11648, which increases the age for determining statutory rape from 12 to 16-years-old.
Under the new amendment, FDIs can start to develop better telecommunications, transportation, railways, expressways, and shipping across the Philippines. This will also help develop rural areas though we need to always follow Singapore's green policy. Singapore has allowed industrialization with caution which prevented it from reaching China's deadly levels for some time. The industrialization that focuses on sustainability can help the Philippines. This means that farmers can slowly start to focus on better communications (Internet in far-flung areas), better means to transport and ship their wares as to decrease chances of damaged inventory, and easier delivery, and you can imagine how this PSA would benefit farmers.
If there were more FDIs that could focus on manufacturing farming equipment and supplies then farmers can start to use them. Local businesses can also benefit such as those that sell seeds, fertilizers, and other farming wares. Just imagine if there will be better ways to transport farming supplies to the farmers both faster and safer. It would be beneficial if both speed and accuracy were developed at the same time instead of compromising one over the other. It's like how mathematics requires both speed and accuracy to be mastered over time. Filipino farmers could benefit from FDI to bring their supplies in.
Then think about the raw material purchases. FDIs would want to buy what's locally available. For example, the sugarcane in Bacolod is just one (read here). I wrote about it as a massive business opportunity. Bicol is also a producer of chili and turmeric which Arabian and Indian traders could use to get fresh supplies for their food products. A lot of locally-grown crops can now help supply the demand for raw materials. This, of course, should be maintained by environmentally friendly farming and healthy competition. With this, FDIs can also help in strengthening local Philippine agriculture.
