Great Leap Forward, Filipino-Style?

China Mike

Today is Sergio Osmeña Day, but it is also Mao Zedong's death anniversary. Mao made his most important contribution to history--he finally died. However, Mao's ideas still live on, and he was a propagator of several foolish ideas. The man had military knowledge but may have lacked fundamental economic knowledge. August may be over, meaning Buwan ng Wika (Month of the Language) is over, but Pinoy Pride Economics, aka Filipino First Policy, knows no season. In fact, I want to talk about one of Mao Zedong's incredibly stupid ideas, namely the Great Leap Forward. As I was navigating Facebook, it's easy to see some people (some are probably stubborn boomers) who still believe that the Philippines must "self-industrialize" through ideas like this on Facebook, of all places:

Instead na umasa sa foreign investments bakit di gumawa ng sariling trabaho na atin (Instead of relying on foreign investment, why don't we make our own jobs)?  Let's start building our own warships, planes etc. Yung mga minimina sa semirara (what's being mined at Semirara) and all other mining sites we stop exporting and put up our own steel mill. Instead of buying let's start producing our own to produce jobs. Maraming magagaling na engineers na pilipino (There are many great Filipino engineers).

To make things funnier, for all we know, this guy (who I'll call Marooned Abobojo) was probably using an iPhone when he wrote that argument on Facebook. Please don't repeat the same comment that says, "But foreigners unfairly own the means of production."

As I was looking into this, I wanted to write this post. I was thinking about this statement from the Investopedia research site on how the Great Leap Forward tried to rely on autarky or Chinese Pride:

Industrialization Efforts and Challenges During the Great Leap Forward

Large-scale state projects to increase industrial production were introduced in urban areas, and backyard steel furnaces were built on farms and in urban neighborhoods. Steel production was targeted to double in the first year of the Great Leap Forward, and Mao forecast that Chinese industrial output would exceed Britain’s within 15 years. The backyard steel industry produced largely useless, low-quality pig iron. Existing metal equipment, tools, and household goods were confiscated and melted down to fuel additional production.

Due to the failures in planning and coordination, and resulting materials shortages, which are common to central economic planning, the massive increase in industrial investment and reallocation of resources resulted in no corresponding increase in manufacturing output.

Millions of “surplus” laborers were moved from farms to steel making. Most were men, breaking up families and leaving the forced agricultural labor force for the collective farms consisting of mostly women, children, and older adults. The increase in urban populations placed additional strain on the food distribution system and demand on collective farms to increase grain production for urban consumption. Collective farm officials falsified harvest figures, resulting in much of what grain was produced being shipped to the cities as requisitions were based on the official figures.

The Great Leap Forward, Filipino style, is ultimately unsustainable based on practical business and economics

The idea that Filipinos should cease relying on foreign investments in favor of creating jobs on their own, to use what was mined to set up purely Filipino steel, produce everything on our own to produce jobs, and rely on purely Filipino engineers borders on fantasy. To address the hurdles, let me raise some common-sense arguments here to counter Marooned's arguments: 

1. It would be important to address that this guy's idea that the Philippines must produce its own businesses is an obsolete idea. The late Lee Kuan Yew stressed in his book From Third World to First that if Singapore had waited, it would've started. Eventually, Singapore established its own businesses. In fact, LKY met both Do Muoi and Deng Xiaoping on two different dates, giving to Communist thought leaders what they needed to make their nations successful. 
2. How do we even begin to produce "purely Filipino steel" when the reality is that we can barely produce our own equipment? He mentioned engineers, but how long will it take before Filipinos can even produce our own 100% Filipino steel-smelting equipment? We need to smelt steel and create it as soon as possible, which would make it more practical to buy imported steel-smelting equipment, as local steel manufacturers use imported equipment. 
3. We need to think about this reality. How many Filipinos, anyway, are truly business-savvy and able to start their own business? Doing entrepreneurship isn't meant for everyone. Sure, some people have rags-to-riches stories, like a garbage collector who founded his own waste disposal company or a janitor who became the founder of his company. However, not all stories of people rising up from poverty become businessmen. Having MNCs fills that gap.
4. The move to stop the exportation of minerals entirely is an income killer. It would be more useful to have the minerals exported than to have them wasted in several failed attempts to produce "pure Filipino steel". But as said, it's regulation, as we don't want to do too much mining, as the land needs to rest. All economic restrictions must be done as a legislative move.
5. Not to mention, the many great Filipino engineers that Marooned may be talking about end up becoming OFWs. There's a desire for greener pastures abroad because the Philippines lacks them. That means that Abobojo's dream of creating our own warships, planes, etc. is further put on a grinding halt.

Instead, the reality was that Deng created a great leap forward that really worked. Deng changed course because Mao's revolution was a failure. To close, I would like to mention that a fellow Filipino from the Philippine Star also reveals that Marcos' government tried the same approach and failed. However, I'll quote something that would put Marooned's arguments out of the question, even if Maroon chooses to cling to his precious beliefs:

The problem is, Philippine conglomerates prefer safe domestic rent-seeking investments over risky global competition.

The traditional focus of our economic elite is on non-tradable, domestic sectors such as retail, property development, banking and utilities. They have shown no interest in high-tech manufacturing for export.

None of the top 10 Filipino billionaires manufacture or export the high-tech electronics and consumer tech products that transformed Vietnam into a global export powerhouse.

Building high-tech factories requires immense upfront capital, rapid innovation cycles and navigating cutthroat global competition.

By contrast, sectors like real estate, shopping malls, banking and telecom offer shorter return-on-investment timelines and significantly lower risk profiles compared to global technology manufacturing. It is easier to tap into a captive, consumption-driven domestic market fueled by steady OFW remittances and a BPO-driven middle class.

Because of timid domestic capital, FDI is needed. Besides, domestic capital alone cannot buy the global supply chain networks, proprietary technologies and management systems that multinational corporations bring.

What's it going to be then? Are we going to swallow our pride and change course, or are we going to keep well, wallowing in Pinoy Pride? That's what many Filipinos need to think about if Pinoy Pride Economics has truly helped the Philippines.