INCLUSIVE GROWTH: Building coalitions and making growth work for the poor

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Inclusive growth has been a challenge, jobs have been a challenge, but the latest signs look very, very good. Can the Philippines sustain it? What are the reforms needed? How to make these reforms happen now?

The following is the keynote speech of Rogier Van Den Brink, World Bank Lead Economist for the Philippines, as delivered during the Kusog Mindanaw 2015 Conference in Davao City on  November 28, 2015. IAG is  the secretariat of Kusog Mindanaw, a Mindanao-wide forum that brings together political, business, religious and social leaders towards a consensus in policy and action on relevant issues for Mindanao peace and development. This year's conference is in collaboration with Philippine Center for Islam and Democracy (PCID), Notre Dame University in Cotabato City (NDU), with support from the Konrad Adenauer Stiftung and the World Bank. 






I want to talk to you about inclusive growth, and I translated it loosely as making growth work for the poor. I will argue that inclusive growth is more than just growth but it does start with growth. Fortunately as you pick up the newspaper you’ll see that on the growth box, you’ve ticked it off; you’re doing pretty well. And you also have considerable fiscal space that could help you fund the programs that you need to achieve inclusive growth. Now it’s time to tackle the more difficult reforms.


An intriguing issue when I started working on this country is that these reforms are very well-known. They’ve been known for decades. I challenge you to pick up a publication of an economist writing about the Philippines 30 years ago and take the policy recommendations at the end of the book, change the date, publish it now, and you’ll still be fine.


In my presentation I will mention a few of those. But I think it’s also important to think about why this list of reforms hasn’t really changed, why it hasn’t really moved. And what would you really do to make these reforms happen now. I will argue that coalition-building – building agreements between leaders and the people sitting here today –  that would be the key to getting this list of reforms that has been there for so long finally done. Good leadership is necessary and this run-up to the elections that is very key. But good leaders will need to lead those broad-based coalitions to get those reforms done. Good leaders understand that – that is not strong leadership which is necessary but leadership that builds, that puts people together.


I said that inclusive growth is not just growth but just starts with it. As an economist, we all know that to get growth happening you need macro-economic fundamentals to be in place. That simply means that things like per capita economic growth should be up. If we compare the decade of 1990s, the decade of the 2000s and the current period, you’ll see that on all those macro-economic fundamentals starting with per capita economic growth, you’re doing very, very well. The current account balance, the difference between export and import is positive, the inflation rate is down, debt servicing as a percentage of GDP is down, international reserves of the central bank are up. So if you’re a macro-economist working on the Philippines, you’re pretty much asleep now because there’s nothing to worry about; it all looks fine.


These macro-economic fundamentals, boring as they may be, explain why the Philippines as you all know racked up 6 percent growth in the most recent quarter. In the world that’s a very unique number. When journalists asked me, so the World Bank has downgraded the economic forecast from 6.3 to 6.1, and I said what are you worried about, there’s very few countries in the world with growth at 6 percent. By the way if you knew how the statistics gets put together, how these numbers are derived, you wouldn’t worry about differences between 6.3 and 6.1; they’re quite normal.


Again, if I started reading about the Philippines from many periods in your history, you have to worry about the fiscus; you have to worry about the budget fiscal deficit – debts. If you look at the fiscal space created since 2010, your health budget has tripled, your education budget has doubled, infrastructure has quadrupled. Those are fantastic numbers.


You have high economic growth, strong macro-economic fundamentals, and you have this fiscal space. So now it’s time to tackle these difficult structural reforms. There was a report very influentially done, I think it was 2006 or so, the World Bank and others put together a whole bunch of ministers and prime ministers and academics from countries which had really grown for a long period of time at very high rates, the real success stories in the world. They put these countries together for about a period of two years to bring some what made that happen, what made you so successful, how could you maintain that growth. And if you look at the characteristics of those countries, actually the key words, these were all countries that even when things were going well they kept on doing the difficult reforms. Because when there’s a crisis it’s easy to do the reforms, because you have to do the reforms. When things are doing well, are you done focused on your vision of reducing poverty, of liberalizing the economy, making it inclusive for everybody? These countries all had that characteristics, that they kept on reforming even when things were going very well and there wasn’t really any need to reform.


So what are the key reform areas? You need to agree apart from having growth to how the growth is distributed. To do that you really need to look at the returns to labor first, because that’s the main asset of the poor, that’s the main asset of the majority of your people. Raising the returns of labor of the poor invariably starts in agriculture. I know many people always look at modern sectors, and if you look at successful countries they have never neglected agriculture. They’ve always felt that that’s where surely starting out the majority of their people are, that even when we start growing, that’s certainly where the majority of our poor people are and so we have to take care of it. You have to work very simply at increasing the profitability of farming. Put some money in the pockets of your farmers because when that happens, they cannot only further invest in agriculture but they will invest in the health and education of their families and if then household members move to the city, they will be well-prepared and they can then find jobs in manufacturing, in services.


It also matters how resilient the growth is to shocks. You’re in a typhoon-afflicted country. You know this very well. You have to protect vulnerable households from these shocks. You have to put in place appropriate social protection scheme. Fortunately, you have a social protection scheme which is a bit of the envy of the world today. Your conditional cash transfer program (CCT) is one of the biggest in the world now and it’s pretty well run.


In a nutshell the growth challenge includes the challenge about jobs. And with jobs, I mean what we do to make a living. That includes the farmer, the businessman with his own business and it includes the way to labor. Looking at the Philippines that jobs challenge is a big challenge. If you look at the new entrants into your labor market every year, if you look at the people that are unemployed, and more importantly, if you look at the people that are underemployed and you look at all the people leaving the country every year to look for jobs abroad, then you have a fantastically huge jobs challenge. It explains why although poverty has been reduced over the decades, it has done so only very slowly. Why it has been so slow and why does the jobs challenge remain so large?


Four factors:   


Lack of competition. Complex regulations. Some people who know the system very well say they are complex on purpose, and we’ll get back to that. Insecure property ownership for the majority of the people. Even in a city like Manila, more than half of all the plots aren’t titled. In the rural areas, as you know in Mindanao especially, property rights for small holders are a real issue. And then lack of investments from both the public and private sectors. If you look at the amount of investment that both the private sector and the public sector do every year and when you compare it to some of your neighbors, you’re very much lower. So these four factors – lack of competition, complex regulations, insecure property rights, lack of investments – they have led to this low productivity in agriculture, weak manufacturing sector, informality [in] property, out-migration.  


I said that you need to look at agriculture, I’ll explain why. You’re in a region where there’s a country, China, which has reduced poverty at a rate that has never happened in world history before. China has been one of the most successful poverty reducers in recent times. It has moved 600 million people out of poverty since they started these difficult structural reforms in the mid-70s. The first phase of that transformation was purely agriculture. When Den Xiao Ping abandoned collective framing and allowed people to at least produce and then market some of their agriculture products themselves it immediately put some money in people’s pockets. Millions of peasants had more money to spend and they spent it locally, they created a basic manufacturing capacity to respond to that local demand. And when that basic manufacturing capacity then hooked up to international market, you got the second wave. That was the wave that happened in the cities, the big Chinese export machines. Don’t forget, out of the 600 million people that were lifted out of poverty, 300 million people [came from] agriculture, 300 million people manufacturing.


That’s a very important point.  Why does that happen? We did a World Development Report (we do every year) in 2008 and we looked at the role of agriculture. It just turns out that economic growth that originates in agriculture benefits the poor more than any other sector. Why is that? First of all, if you have agriculture growth, farmers have more profits, their incomes go up. That’s a very simple and direct impact, but there’s more. It raises non-farm profits, multiplies it. It means that all the people who are supplying to these farmers and the products that the farmers market and get processed and get traded, there’s a lot of jobs created there, too. And those multipliers are very high, compared to other sectors they’re higher than that: 1.5, 2 is that multiplier number. That’s just from let’s say the value chain if you call it like that. But there’s also this consumption link, the spending of millions of farmers in the local economy. Those consumption multipliers are even higher. That’s why this poverty reduction effect of simple farmers making a bit more money is so high. If they’re doing well than the price of food that actually goes down, that makes everybody better off including the poor. It also lowers the real wage in the other sectors. It makes it easier for manufacturing than to compete. Even as countries grow and become middle income status, you’ll still see that agriculture keeps on having a very important role in generating livelihoods for the poor. That’s why you see all the countries in the world where you [look] about agriculture even if there’s a very small percentage of GDP and even though there may be few people directly employed but they realized that their livelihoods related to the rural areas, agriculture is very important. You could put it like this: actually, agriculture will always set the minimum wage of your country because that’s sort of where uneducated, unskilled poor people think the only thing they can do. If you don’t raise their livelihoods, you’re basically saying we’re going to keep the minimum wage of our country at that level. As other sectors get very high, you’ll still have this problem.


Getting the process right from agriculture to manufacturing and then later on to services, debts, is very important. But if you look at the Philippines, that never really happened. Growth in agriculture has always been very slow. Manufacturing never really took off. At the end of the day, many people either stayed in the rural areas or fled to the cities and ended up in very low-skill, low-wage informal jobs. That’s not the movement I’m talking about. That’s not a movement from agriculture to higher value-added manufacturing, to higher value-added services. That’s from low productivity agriculture to low productivity services. So if you look at it in a very simple way, oh, the service sector in the Philippines is huge you must have structurally transformed very well. No. You just move people around from low-wage, low skill sector one to low wage, low-skill sector two.


In this process of structural transformation, you could talk about farmers as small businessmen but also small businessmen in other sectors, and they’re also important for inclusive growth. Even in modern economies, in Germany, in my country Holland, in the US, most of the jobs are actually created by small and medium scale businesses. Big firms are very important. They know how to access the big markets, even the technology, but it’s all the suppliers to these firms and people who work with these firms and are linked to these firms, that’s where all the jobs are created. But if you look at the Philippines, there’s a lot of SMEs, but there’s very few that actually grow, accumulate wealth and get richer. The environment for SMEs in the Philippines is very, very difficult.  Maybe you’ve read the newspaper in the last week, there was a bit of a discussion between the secretary of finance and the World Bank about our latest doing business report and we had difference about methodology but nobody disagreed with the conclusion that at the end of the day, it’s very difficult for small and medium-scale enterprises to do business in the Philippines.


It sounds so simple: the farmer, putting some more money in his pocket, but he needs secure property rights. He needs to know that if he invests in his farm, that the fruits of his labor are his or hers. You look at the Philippines and that’s a big issue, and you notice in Mindanao also. I’ve been to many countries and when I drove through areas in Mindanao through these low, flat, valley bottom lands, I would expect to see very intensive agriculture, very intensive paddy farms or vegetables. And many of them were abandoned, derelict, and I ask, why it is. Oh, people are fighting over the land, people are... that’s a very essential thing without which nothing will happen. If farmers don’t know that what they invest in, what they put their hard labor or sweat in, they don’t know if they can reap the fruits of that labor then you’re not going to go anywhere. There’s a considerable uncertainty of that very basic property right, not just for small holders in agriculture, and that includes the 4 million small holders that benefitted from agrarian reform in the last three decades. Many of them don’t know what their property rights are. They’re in a collective title; they don’t know who else is on the title, whether they can subdivide. When we asked the secretary of agrarian reform, what’s the main concern of agrarian reform beneficiaries today, whether they could bequeath these to their sons... So if you’re uncertain about whether you can give your plot in inheritance to your children, that’s a huge insecurity.


For decades now, it’s very difficult for small businesses just to register, to set up, to keep up-to-date with the avalanche of licenses. You know, you [enter] a restaurant somewhere and proudly on the wall are like a dozen licenses that have to be renewed every year, and you can just imagine what these poor people have to go through every year to get all those licenses, certificates renewed.


Then I’m asking, how is this possible because these are quite basic things. Is it lack of know-how? It’s of course not. Filipinos the world over are very well-known for their passion for work and for their ability to solve problems everywhere in the world. When I joined the World Bank in 1992, and I had to sort of choose what my secretary would be, everybody said, take a Filipina because then you have the world’s best. Filipinos now in the IMF and the World Bank, they’re all senior managers, very well-liked. You know this. Half of your college graduates leave the country every year to hook up with firms all over the world to help them solve problems. So how is it possible that you couldn’t solve simple issues like securing property rights for farmers, like helping small businesses set up, pay taxes. It has nothing to with the capacity or know-how. It’s there.


I’ve worked in Africa for a long time and it was difficult for Africans to point examples in Africa of countries which are more or less like them and which have done well. You have all these examples around you, of people who are just like you, and who have made it. There’s something else going on that has nothing to do with Filipinos. Let me put it this way.


First, you need to look at agriculture, small businesses and do the basic stuff. Apparently, it’s not that easy to do, but know that it could be done.


Second, you need competition and openness to markets. I don’t need to explain to you as soon as somebody talks about increasing competition, opening up the market, the vested interests will say, halt, stop it. That’s normal. People also make these arguments that it’s better to wait, that we have to be careful. This is my twelfth country. I know the stories. But you look at the Philippines, you have so many good stories to tell about what happened when you opened up markets. Take telecoms. I’m told that when this was being opened up under Ramos, I guess the poor man had to go through the Supreme Court three or four times or something like that... Look at [it] now, how many jobs did that liberalization produce? It’s huge. Airlines the same thing. Now you look back, airlines, telecoms, banking, five million jobs created by reforms which were contested at every step of the way until the Supreme Court.  And fondly enough, the same firms that opposed it at that time, I’m told, are now richer than ever. That’s the point. If you open up, everybody benefits. Yes, it’s tough in the beginning, people have to adjust, ratchet up, but then more people enter the market, more things get sold, more opportunity and everybody gets better off. If you hadn’t opened up your telecommunications in the 90s, you wouldn’t have this business process outsourcing industry today which is in the top two in the world.


Let me turn to another competition issue: shipping, shipping costs in Mindanao. Now there’s a cabotage law in the Philippines. Simply put, it means foreign shipping is for foreign ships and domestic shipping is for domestic ships. So if a foreign ship enters a harbor in Manila – a foreign harbor – all these things have to be offloaded and put on to trucks and these trucks have to drive to another port that it can go to domestic shipper and it can get distributed in the Philippines. That sounds like a very inefficient system because what if you allow that foreign ship to unload what it needs to unload in Manila, then it can continue to Cebu and offload something there and continue to Cagayan de Oro and offload the last part there. That system has been in place for decades and has increased shipping costs for areas like Mindanao a lot. Now, something good has happened. At least, these foreign ships will now be allowed by law to do this but only for international goods. One step, fine. Implementation, rules and regulations still have to be set up because the law was passed a month ago. People are working on it. But it has happened. It’s in the right direction but it is not nearly enough because we think that a lot of domestic firms could actually withstand the competition with the international markets very well just like your other firms have shown, your airlines have shown, and Jollibee has shown.


Why do I say that domestic shipping has the potential to do a lot better and be a regional force? If you look at the international fleets in the world today, a quarter of that fleet is operated by Filipinos. A quarter of the seafarers in the world are from the Philippines and it’s not just the basic labor, it’s also the engineers. If you look at the increase of your export of skilled marine engineers, it’s going up. The interesting thing also, in the last years you’re also entering the international shipbuilding market. Apart from the big three, you’re doing a lot better than many other countries, your construction of international ships is going up. You have the people, you actually build the ships, but you’re not ready for competition? I’m not going to answer that question. Of course, you are, but vested interests say no. Actually, I’ve heard there are domestic shipping firms who are railing against opening up for competition but they also have firms that train seafarers to be exported. Their firms actually have the best of all worlds.


That’s the competition issue. I’m telling the story because you see if you look at it, you take a step back, it makes so much sense for everybody to open that up. But the issue gets raised and you get this very targeted opposition to it and things like cabotage liberalization which has only just been done is done only halfway because there’s a compromise that’s there’s not equally ended.


Rice trade is another issue. I’m an agriculture economist and agriculture sociologist. You’ve just heard me talk about agriculture. You are bucking international trade in rice. Essentially the purpose is you want to protect your rice farmers and you want to be food self-sufficient. As an agriculture specialist, I will tell you, you can be all that. You can be completely rice self-sufficient even without the big plains of Thailand and Vietnam; you can still do it. But the way you’re going about it is not working. What all agriculture specialists would say what you need to do to get rice farmers grow better rice: agricultural extension, research and development, irrigation, health, education, as a matter of fact people have been doing these for decades; it’s simple. But in the least it’s not block international trade so that basically a lot of other people have to suffer. Filipinos pay two or three times for their rice than their neighbors in Thailand and Vietnam. Think about it: the poor spend 40 percent of their income on food, 20 percent on rice. So if you would allow the international market to work on rice, you would halve that expenditure on rice by the poor by 10 percent – poverty reduction of 10 percent. I should do the Math one day. But that would be a huge stroke-of-the-pen reduction on poverty. And it wouldn’t just benefit the poor and the majority of the poor Filipinos, it would help industry also because real wages go down actually, and a lot of rice farmers are net consumers of rice so even they would benefit. You could have a reform package in which you start out by supporting rice farmers the right way as you open up this market. That should be a reform package that people should think [like], I can see how this can work and everybody will be better off. But so far it hasn’t happened.


We did a report on jobs, Philippine development report, where we listed all these recommendations that have been there for so long – I think there are 72 of them. You can look it up, but the point is not what is reform but how to think about how to get this done.


Let me mention the last one that’s also a sensitive issue but a good one: labor market reform. You have a labor law which protects permanent formal workers very well, so well that firms have found ways around it. Instead of hiring somebody as a permanent worker, they hire him as six-month temporary worker. After six months they have a cooling off period and then they get moved around. That’s clearly in nobody’s interest because the firms don’t invest in this labor because after six months it’s with another agency. Maybe the people with permanent jobs are very happy, but it really punishes the rest of the labor market to find out all these tricks to get around it. Remember that markets will find tricks to get around it.  When I was in Holland, when I grew up in Holland, I went in college, we had a similar system – very well protected formal labor market, lots of taxes, lots of social security and the truth was that I went to college operating in what we call the black market, I cleaned construction sites and the official minimum wage was like 5 dollars for hour, and what I was making on this black market was 15 dollars. So market even in highly formalized, rule of law economy like Holland had found ways around this system and created this black market which is in nobody’s interest because I wasn’t being insured, and of course, I was taking jobs away from others. During a crisis period, these labor and business and government got together and we formed these laws and so now we have a very flexible labor market, with lots of part-time work, etc. You see this in Europe very, very strongly. The stronger the protection of permanent jobs, the more there’s an informal market, and the countries that have sort of moved along in a system where there’s more flexibility, legitimate, flexible labor contracts like Holland have much better jobs outcomes.


Those are some examples of reforms where you can immediately see there’s a political economy behind it. If only we could take a step back as a group and look at this, and say, can we not find a package of reforms in which we can all be better off?


Finally, I’ve said that you have ramped up investments in health and education and infrastructure, but it’s still not good enough. You come from a very low base, you’ve ramped it up considerably, but you need more. If you want to ramp it more to the level of GDP, it needs to be funded, so you need to pay taxes. If you ask your citizens to pay taxes, you better explain how you use it because again, like the labor market, if people don’t think that their taxes are being well used, they’re going to find ways around it, or if they know that they can strike a deal with the tax collector not to pay their taxes, also that thing is possible. For example, your corporate taxes are the highest in the region but your corporate tax collection is the lowest in the region. On paper, lots of corporate taxes, in practice people have found a way around it: exemptions, deferments, etc.


Transparency is very important. I was just struck by the fact that this is the first administration which actually passed a budget every year, publish a budget. Think of what happened when the government did that, actually publishing the budget information. We got this PDAF ruling of the Supreme Court – and I think it’s a fantastic ruling – but remember the Supreme Court could only rule on this thing because this data was now there. Had poor Butch Abad not published this, nobody will say anything. That transparency has just started but it’s very important because you need to know where your taxes go. With new technology, a lot is possible now. This government has put over 600 data sets which were hidden before, put it on the web. You can go there, it’s not perfect, you have to probably ask questions, but it’s there now and you need to access it and use it. We had yesterday a conference with DBM and DOF and the Philippine Center of Investigative Journalism. This is a training program we have started with them six months ago with the government officials and the journalists looking at those data. Six months ago we’ve started this and now various newspapers and journalists have started writing critical articles about those data that are out there – from the budget to BUB, to whatever. Yesterday, for the first time, this hundred journalists told their stories and it was interesting that they have this coalition between these reformers in government who put these data out there which can sometimes be very painful for them because you’re exposing your weakness and sitting there with these journalists and realizing we’re on the same side here we just have to find a way to work together and get this happened.


Procurement. The World Bank publishes procurement contracts above 250,000. When the contract is worth 250,000 and up, we publish it on the web. You publish every contract […] Philippine government electronic procurement system has released seven million records and some of those – we are working with some of the agencies – are geotagged, which means that you can click on that contract and use Google Earth and you can zoom in to the school repair or the road, or whatever, and just follow the whole thing. All these data are there but you need to use it, and try and make sense of it because this is the beginning, this is not going to be perfect. But instead of telling the government it’s not perfect tell them what it is that you would like to see, work with them, and make it work better. The technology today really exists to unleash a huge amount of transparency.


I said that inclusive growth has been a challenge, jobs have been a challenge, but the latest signs look very, very good. We look at underemployment, it’s going down; formal wage jobs as a share of employment is going up. Poverty is going down slowly. By the way, one of the mishaps that happened is in 2014 when rice prices were shooting up and they were shooting up because you were blocking trade. So as rice prices internationally were going down, in the Philippines they zoomed up because basically the state decided not to import rice. Remember rice – we call rice as economists – inelastic good, meaning, if there’s a little difference between supply and demand, the price shoots up because people have to eat. Think about the state trying to manage that fine balance is very risky business and if you get it a little bit wrong, the price will shoot up because people have to eat and that would be very hurtful.


When we look at incomes from 2012 to 2014, a very recent, very small period but the growth looks pro-poor, the bottom 10, 20 percent is growing faster than the rest. Part of that is the conditional cash transfer, so those transfers are definitely reaching the bottom 20 percent, but part of it is also jobs. More jobs are being created and they look to be better jobs. But to look at two years worth of data and say, this is a trend, no, but it shows that this direction is there, now push it, put it in the net. If this continues, you will eradicate poverty within a generation easily.


Think of it: six percent growth. If you sustain six percent growth a year you will double per capita income in a decade; you will raise it five times in 20 years and 11 times in 30 years, just [by] remaining at six percent. And if you then get these other things right – agriculture, security, property rights, competition, health – you’re done.  But it needs to be happening. And how it can happen? For people to work together.


It’s difficult because it’s a democracy. Democracy is messy. You need good leaders, good leaders that put leaders together, that put ambitious reform packages up and realize that if they go at it one by one, it will be very difficult. In this particular economy, if you go as a leader with single reforms as a sequence, you will not get a lot done.


I give you the example of the sin tax. When I came three years ago to the Philippines, Secretary Purisima asked us, can you help us with the sin tax? This is basically raising taxes on alcohol and tobacco. I studied it and I said, Caesar, easy, because one, it will save lives, who would argue against that. Two, it will raise the revenues you need to double your health spending, education. You need the money and everybody knows that, so that’s easy. Parliament will back you up. And three, it levels the playing field with the private sector. Maybe you know this, but this was one firm who had a lot lower taxes on alcohol and tobacco than everybody else. And so I thought the private sector will be divided over this. When the secretary comes with a fair playing field story, the private sector will control itself and say, hey, that’s good because this guy is getting a break and we’re hurt by this. Little bit I know, that what I though was easy reform became a one-and-a-half-year man-to-man day battle with multinationals [computing] their general equilibrium models about revenue projection with foreign chambers of business taking out axe in the local newspapers against this. This is unbelievable. In the end this very eminently logical reform which saves the lives, brings in revenues, and levels the playing field, passed by one vote in the bicameral. We’re laughing and crying at the same time. That could have easily been lost.


The one tax reform that Aquino had done nearly didn’t happen because of vested interest.


If any leader thinks this is the way to do business in the Philippines, that’s not. You need to put up a package of reforms where people can find themselves. Don’t just take the rice trade alone, have something for the farmers. Don’t just tackle the labor issue alone, have something about competition and about small business. People need to feel that they are part of the package in which they can see how in the end they will all benefit. That sounds like a romantic story. I’m from Holland, we’re not romantics. I grew up with a Dutch disease. You might have heard about this story. It was a big economic crisis. And we got out of it through a coalition – a coalition between hard-nosed labor unions, self-interested businessmen and formalistic civil servants. We got it done means [closed it, pacts,] so we have to got it done. That’s my own country, and like what I said, we’re not idealists, we’re not romantic, we’re practical. If you realize that to get things done you have to close the deal, you will close the deal.


The other story that I told yesterday to the journalists – I compared the Philippines to another country, a country that was rife with vote-buying, jobs for the boys, and corruption. That country was the United States at the end of the 19th century. And then people like you started to get together. There was growth; the industrial revolution was taking place. There were bad things happening – child labor, corruption in customs, monopolies everywhere. Small farmers were hurt by the monopolies in the railroads. There were lots of bad things happening, but then people slowly started, one by one, taking on these reforms and at some point they were saying, hey, we’re on the same side here. We might come from different political parties, different religions, but we’re all interested in this inclusive growth and making American growth benefit everybody. That was called the Progressive Era, and in about 40 years, America has changed, form a highly corrupt system, which is not responsive to its citizens to one that is doing well.


When I told the story to Leni Robredo, she said, so we’re a hundred years behind? I said, no, don’t look at it like that. That was late 19th century to 1920, and this is all to get the story out, to get people understand what was going on. The technology to do so was very limited. One technological advancement which was there that confronted the people with the ills of society was flash photography – magnesium flash photography. With that, journalists could go into poor neighborhoods at night and take pictures of how people were living. When those pictures were published, it caused uproar.


That was the turn of the century. Now you have the internet; you have technology. You have this change in making people aware about what’s happening so much faster. You can do this much faster. You could do this, like I said, within a generation. 

Source: Institute for Autonomy and Governance