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2018-00278 10/31/18
gradual fragmentation of the global economic and political order that was critically built by the
world’s political and economic superiors soon after the guns of World War II fell silent. There is
an emerging concurrence, moreover, that the current predicament faced by capitalism in most of
the countries, but prevalent in Third-world, like in the Philipiines, and ex-communist countries,
organization, is the most severe yet in its nearly 250-year history (Poblador, 2017).
Having that said, many of the people think that the aforementioned economic system is
actually defective since it causes the rising inequality in many nations (Heydarian, 2013), but
actually the problems attributed to the economic system is not inherent to it and the one that
causes troubles are the laws and policies surrounding it (De Soto, 2000) and this will be
What is Capitalism?
Adam Smith’s book “Wealth of Nations” (1776) introduces the idea of capitalism. The
book states the idea of “economic individualism” in which its basic premise is the pursuit of self-
interest and the right to own private property are morally defensible and legally legitimate while
the State has a function of protecting the individual rights. Individuals are free to decide what to
produce or sell, what prices to charge, and where to invest, in a such a way that governed by laws
and restrictions. But the actual term was coined by socialists in the mid-19th century as a form of
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disparagement and currently defined as private ownership for production and profit (Hessen,
n.d.). This form of economic system was pioneered by the Western countries during the 17th
century, at the advent of the Industrial Revolution, and eventually perfected at the time of 20 th
Economic activity takes place in markets where individuals are free to choose to greater or lesser
degree what they do, how they allocate their income and wealth and where they will work
(Friedman, 1962). Having freedom gives someone the mobility to act and also pursue his/her
own interests and that will provide him/her a sense of fulfillment (Smith, 1776). Much more in
the market economy, an individual has the ability to improve his/her state in the society.
Definitely, there is a need for government interventions for regulations and laws, and more
important for capitalists are incentives. Incentives are given by the government to the economic
participants that produced desired outcomes, and this boosts economic activity (Meltzer, 2012).
To add to that, Capitalism drives innovation for the reason of it promotes competition. Since
there’s a competition, the producers were obliged to further improve their product in accordance
to the taste of consumers. Furthermore, the consumers have freedom to choose in the market
economy as long as it benefits them, what most prefer will thrive and those who aren’t likable, or
doesn’t develop, will eventually be out of the system (Friedman, 1962). Competition also boosts
production, since many consumers need to be catered, producers need to step-up their
advancements. In accordance to economies of scale that states “reduction of costs per unit
because of increased total output”, this drives down the prices of consumer products with the
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benefit of a more innovated product (Marshall, 1890). A consumer gets more for less. Another
labor. The aforementioned economic system expands the available labor and also create new
forms of economic activity. As stated earlier, capitalism brought affordable and also innovative
products in the market, the consumer also has the chance to create his/her own economic activity
and promote an idea since he/she has a freedom in a market economy as well as remaining
income to spend. This leads to specialization of labor and greater development in the whole
economy and the nation (Smith, 1776). These are the main reasons why capitalism thrives and
remains its superiority in the economic system, albeit not perfect, but considered as less evil and
more innovative.
In the case of the Philippines, capitalism brought also benefits and certain innovations.
There is an evident modernization due to industrialization and the rise in manufacturing sector.
This was implicitly instituted by trends in globalization and also pioneered by the modernizing
sector—the self-propelling capitalist class (Raquiza, 2014). Filipino consumers get to enjoy the
products coming from the global market, and in that, we acquire the fruits of being in the
capitalist society. In addition to that, Filipinos also get to share the ideas and technological
advancements coming from the West, and we are able to adapt and integrate those in our system.
There is also a boom in infrastructure building, like malls and condominiums, and modern
facilities, like newly-built airports, that were funded by capitalists and government initiatives that
will surely enhance the standard of living of the Filipino people (Heydarian, 2016). There are
also a lot of foreign investment poured into our economy in recent years, mainly because of the
BPO industry, which amounts to more than $13 billion in the Philippine economy in 2013
(World Economic Forum, 2014). Rapid utilization of lands is also evident through developing it
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into a community with complete amenities. These things are the result of capitalism. The market
pushes innovation, development, and globalization in order to provide for the consumer and
Even though that’s the case in the Philippines, it seems like it is not felt by the masses.
There is some kind of illusion of prosperity (Heydarian, 2016). The success of capitalism in the
West, albeit not perfect, leads to modernization, but isn’t manifested here in our country. There
are sights of urbanization but no improvement in Filipino lives. Why is this happening? There
are many contributing factors, but selected ideas regarding laws and regulations will be presented
on the reason why capitalism flourished in the West and failed here in our country (De Soto,
2000).
As discussed before, capitalism is naturally for the improvement of one’s lives and also
for the common good (Smith, 1776). But with no proper political and regulatory factors, this
form of economic system will be eventually be abused. Discernible from the lenses of history,
the events of Great Depression in the 1930s (Keynes, 1936) and the 2008 US recession which
told us that appropriate government intervention is essential in maintaining the stability in the
market economy. Without proper state intervention, things might go out of hand. This is
currently happening in our country, it is just that improper government intervention in the market
economy is a norm that most of the Filipinos tend to ignore about the governing laws in the
market economy. And also, we are in a third-world country, so Filipinos somehow get used to
this kind of living (Raquiza, 2014). But actually, that is unjust and it negatively affects the
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economic system. Making us, Filipinos, not getting the full potential of the capitalist society (De
Soto, 2000).
making in our country. It imposes neoliberal globalization policies on the Philippines to benefit
American corporate export and commercial interests as well as to create the kind of free market-
driven trade and investment system in the Asia-Pacific that allows it to maintain its hegemony
and dominant economic position. For example, the Partnership for Growth (PFG) program by the
U.S., at least US$739 million in funding and is the most comprehensive US intervention in
project (TAPP) which started in 2010. Still under the PFG initiative, the project is administered
by the American Chamber of Commerce and implemented with the Joint Foreign Chambers of
Commerce in the Philippines. The aforementioned project lobbies policymakers on 471 policy
recommendations and reports that, by 2015, 75% of these recommendations have been started or
already completed. It is also among the most aggressive groups seeking to change the 1987
Philippine Constitution in terms of free trade policies, removing those last legal impediments to
foreign capitalism in the country (IBON, 2016). These are the few examples of the pervasive
but with the expense of being abused by international powers. Our leaders can’t do much about
that since our nation is still developing and need of assistance of those Western nations. In turn,
Another point of view of why Capitalism failed here in the Philippines is introduced by
De Soto (2000) in his book “Mystery of Capital”. It was discussed in his book that the absence of
formal property rights, rights that aren’t just official entitlement but also can be ‘fungible’ to
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other commodities in the market economy and there’s a genuine representation which can be
recognized by the international community, here in our country contributes to not accessing the
potentiality of “capital” that can be utilized in the market. His team researched around the late
1990’s how much ‘dead capital’, the capital that cannot be utilized in the market because it is
embedded in the informal economy, is actually circulating here in the Philippines. It amounts to
US$ 132.9 billion and it is actually 4 times greater than the market value of the 216 companies
listed in the Philippine Stock Exchange (US$ 31.4 billion) at the end of 1997. As we witness,
the dead capital would be a greater boost in our economy if only it would be integrated into the
formal market economy, but since it’s embedded in the informal economy, economy that is not
regulated by state, our nation can’t use it for trading around the global market. De Soto (2000)
advocates the formulation of formal property rights in order to integrate the dead capital from the
Conclusion
I am truly admitting the fact that capitalism has lost its way in developing and ex-
communist countries. Instead of being a cause that assures opportunity for all, capitalism appears
increasingly as the theme of a self-serving club of businessmen and their technocracies. With its
triumph over communism, capitalism’s old agenda for economic progress is exhausted and
demand for a new set of commitments (De Soto, 2000). We were able to witness that improper
state intervention and regulations is one of the main reasons why capitalism failed in the
Philippines. I am not a steadfast supporter of capitalism and not a defender of status quo, but it is
the only system we know that provides us with the instruments required to create innovation and
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References
De Soto, H. (2000). The mystery of capital: Why capitalism triumphs in the West and
https://www.econlib.org/library/Enc/Capitalism.html
Heydarian, R. J. (2013, June 19). Why the Philippines Failed? Huffpost. Retrieved
philippines-faile_b_3106136.html
https://www.huffingtonpost.com/richard-javad-heydarian/philippines-shallow-
capit_b_6441868.html
Keynes, J. M. (1971). The Collected Writings of John Maynard Keynes: The general
theory and after: pt. 2, Defence and development (Vol. 14). Macmillan.
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Raquiza, A. R. (2014). Changing configuration of Philippine capitalism. Philippine
Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations: Volume
Then and now: US economic intervention in the Philippines. (2016, November 14).
intervention-in-the-philippines/