On the eve of the bilateral strategic dialogue between the Philippines and United States on April 30, Bert Hofman, Chief Economist for the East Asia and Pacific Region at the World Bank, John Nye, Frederic Bastiat Chair in Political Economy at the Mercatus Center at George Mason University, and Steven Rood, Country Representative for the Philippines and Pacific Island Nations at the Asia Foundation, joined Carnegie’s Vikram Nehru to discuss the economic and political prospects and challenges facing the Philippines.
A System Designed Against Development
Lagging growth has its roots in regulations and distortions that drive a wedge between the productive and unproductive sectors of the economy, largely to the benefit of elites, Nye argued. * Structural Problems: The roots of underdevelopment lie in the underlying structure of the Philippines’ economy, which is mostly rural, agricultural, and suffers from low productivity, Nye said. He added that China, the greatest developmental success story in recent decades, owes much of its growth to the migration of rural workers from the rural inland to highly productive coastal regions.
* Regulations: Commercial, regulatory, and labor market distortions have prevented a similar transition from taking place in the Philippines, Nye argued. High minimum wages and “regularization” policies that prevent companies from firing employees apply only to the formal commercial sector, hobbling its growth. The result has been two classes of workers—the privileged few who can enjoy the benefits of these