The Asian Economic Setting, Analyzed
[The author is Managing Director, Insstrats
(Institute for Strategic Social Initiatives) and currently visiting
research scholar and Interim Chief of Staff & Consultant for
Special Projects to the Director, Social Research Center, Pontifical
and Royal University of Sto. Tomas, Manila. Prepared 2001]
This summary is not a mere condensation of a 52-page
paper, exclusive of ten pages of appendices, but a radical
restructuring of the presentation so that the ideas could be kept
and presented in one coherent piece. The efforts to simplify may be
at the cost of elegance; but what is paramount is clarity.
With funding from the Volkswagen Foundation, the Club of Rome in 1970
commissioned a team from the Massachusetts Institute of Technology to
conduct an investigation into "the world's
problematique." In its report entitled, The Limits to
Growth, the team identified the world's basic problem, as
The team has examined the five basic factors that determine, and,
therefore, ultimately limit growth on this planet- population,
agricultural production, natural resources, industrial production, and
The report appears to have revalidated the Malthusian Scare of a
standing-room-only planet rendered nightmarish by the "positive
checks," i.e., plagues, wars, or anarchy, and famines, unless the
"prudential check," i.e., sexual abstinence, or the various
contraceptives, or the ancient horror of infanticide, were to be
applied. With Limits to Growth and other literature propelling
economic superstitions, the populationists appear to have gotten the
upper hand in teeming Asia.
The common belief that poverty results from overpopulation is what
gives a seemingly invulnerable stability to the stand of the
Malthusians. If, therefore, it were proved that it is overpopulation
that results from poverty, the Malthusians would have no leg to stand
on. Chapter III of The Limits to Growth itself makes the
The relationship between crude birth rates and GNP per capita of
all nations in the world follows a surprisingly regular pattern. In
general, as GNP rises, the birth rate falls. This appears to be true,
despite differences in religious, cultural, or political factors.
Of course, we cannot conclude from this figure that a rising GNP per
capita directly causes a lower birth rate. Apparently, however, a
number of social and educational changes that ultimately lower the
birth rate are associated with increasing industrialization. These
social changes typically occur only after a rather long delay.
Or, plainly, the richer people get to be, the lesser their tendency
to over-reproduce; and the poorer they get to be, the more their
tendency to over-reproduce. Such tendencies, now proven factual as
confirmed in The Limits to Growth itself, are precisely what
the Malthusian Theory is denying.
That overpopulation results in poverty, thus misidentifies the effect
for being the cause, and the cause for being the effect.
In the insect world, as observed by entomologists, an automatic
population control referred to as "homeostatic population
control," seem to operate to lower the reproduction rate whenever
the insect population has reached optimum limits. Perhaps, this is
true throughout the lower forms of life that operate by instincts and
that are thus saved from being travailed by the "positive checks."
Humans, however, are not supposed to operate purely by instincts, but
basically by the mind. Thus, among humans, a natural check to
population is possible only after the attainment of a certain
intellectual level that enables them to control the instincts or
rationalize the expressions thereof. It should not surprise
anyone, then, that economic progress itself, which makes the
attainment of an adequate level of education by a critical mass, such
as in the Scandinavian countries, or in Singapore, is the most
effective preventive to over-population. Poverty, however,
specially "extreme poverty," damages the mind and,
therefore, the ability to control instinctive drives. In general, the
more developed a man is, the more is he inclined to sublimate his
beastly instincts towards higher and nobler pursuits that serve to
spiritually edify. Poverty is thus described in the editorial summary
of the two-volume research report as "the perfect incubator for
dehumanization, the perfect environment for the beastification of man."
Poverty cannot also be attributed to dwindling resources. Except for
the debris of rocket experiments forever lost to Outer Space, man
cannot exhaust the resources of this planet. He brings nothing into it
with his birth; and at his death he brings out nothing from it. In the
final analysis, the resources of the planet, after their being used,
are simply recycled back into it. Humans consume by using up energy,
as in food. Energy, however, cannot be destroyed. It is merely
It is also not true that under-productivity is the cause of massive
poverty. Francis Trevelyan Miller who wrote an admirable volume on
World War II has pointed out that the total costs of that war to all
the combatants in terms of destruction and the things that were made
for the purpose of destruction would have been more than enough to
feed, clothe, house, and educate up to university level everyone born
on this planet since the birth of Christ up to the end of the war.
Indeed, man's amazing productiveness is shown by his fantastic
destructiveness in the ultimate expression of his despair, war.
Productivity, therefore, is not the problem. In fact, the problem,
specifically in the economically advanced societies, is
over-productivity. It is this over-productivity, unmatched by a
corresponding enhancement of purchasing power in such economies that
is forcing their economic managers to remain protectionists at home
and imperialists abroad. The reason for this phenomenon is the
tendency of the production of an economy to be funneled into the
ownership of a few who thereby become richer and richer, while the
many, as a result, become poorer and poorer. The few who become richer
and richer, according to John Maynard Keynes in The General Theory
published in the 1936 have a very low marginal propensity to consume,
though they get to own a big chunk of the purchasing power. On the
other hand, the many who have a high propensity to consume, do not get
to have a matching purchasing power since they had been impoverished
by the inequitable distribution of what is produced by the economy.
Many years ago, the UNESCO reported that even in the economically
developed societies of the so-called North, no less than eighty
million people were groveling below the poverty line. There has been
no report that this number has declined. The probability is that it
has increased. Relative to productive capacity, the result is also a
correspondingly low aggregate demand, resulting in a relatively low
employment level, keeping a lot of the labor force jobless. Underlying
this phenomenon is the economic principle that says, The demand
for consumption determines the direction [and quantity] of the
investment of capital and the employment of labor. Supportive of
this principle are the notorious facts that where there is widespread
poverty there is also massive unemployment and a low capital inventory
that is often mistakenly referred to as "lack of capital."
That is why despite the seeming paeans for free trade, the highly
industrialized countries remain protectionists in their manoeuvres.
This is the truth behind the collapse of the Cancun Conference last
Before further analyzing the poverty in Asia, first let us present
Poverty in Asia is not recent but ancient. So it
could not be due to Globalization. Globalization has functioned
simply to aggravate the situation. What happened here was that
after World War II, on the basis of the false premise that poverty was
due to unemployment, what were then referred to as undeveloped
countries went all out for industrialization. Except, however, for
such Asian countries as Taiwan, South Korea, and Singapore, the
efforts to industrialize were mostly looking inward to domestic
markets that were invariably impoverished and, therefore, very
limited. As a result, such newly established industries could subsist
only by further leeching the poor through high tariff protections.
Their owners justified such leeching by describing their enterprises
as "infant industries" to be babied by everybody. After
fifty years, these have remained infants, mostly; some have indeed
become infantile, having failed to establish themselves in the global
market. Examples of such industries in the Philippines are the
flourmills and the lone sheet glass manufacturing company,
Republic-Asahi, whose request for more tariff protection is currently
the subject of complaints from downstream manufacturers using sheet
FIGURES (THE RELEVANT FACTS)
||Average for Asia (1999)
||For the Philippines (1999)
||3.2 billion 
|Per capita/day poverty lines
|* Implied IBRD poverty line
|Explicit IBRD "extreme poverty" line
|Per Capita Income/Day
|* Upper 20% of population
|Middle 60% of Population
|Lower 20% of Population
|Income Ratio of Upper/Lower 20% of Population
Among the immediate results of high poverty incidence in
Asia are high rates of secular unemployment and underemployment,
unemployment being an excess productive capacity that cannot be
utilized due to a constricted or impoverished market. Since employment
for most is the only way to acquire shares in economic production,
this has become the most sensitive area in the Globalization imbroglio.
Thus, generally misguided, organized labor is now in a strange
alliance against Globalization with its old tormentors, the local
industrialists who pay low wages, incapable of competing in a
borderless market, and who must therefore depend on the maintenance of
Another popular superstition is that corruption in government causes
poverty. But while corruption causes a terrible rage, like
Globalization, it merely aggravates poverty but is not its ultimate
causes. The poor are easily corrupted because of material need that,
under the stringent economic conditions, cannot anymore be supplied
through honorable means. The rich, on the hand, get corrupted because,
seeing the dire situation of the poor, they are afraid to fall into
the abyss of poverty.
Thus, the problem of poverty is two-edged, poverty itself and the
fear of poverty.
Having disposed of all the false reasons for involuntary poverty, we
focus now on its real cause: the institutionalization of private
property over land, which results in landlordism. As early as during
his time, Nicolai Lenin observed that "landlordism is the
fundamental disease of Asia." It has remained so up to this time
- in a more socially debilitating intensity, as indicated by
astronomically escalating land prices. Along Legaspi Street in Makati
City the price of land can be as high as P500,000 per square meter! In
a poblacion of a Third Class municipality, the price goes
as high as P2,000 per square meter! The price of an irrigated rice
land situated along the highway in such a municipality can be as high
It's the commercialization of land as a direct consequence of private
landownership that is making people landless in their very own
Yet even the landless may be conscripted into the Armed Forces, in
order to fight and die for a country they have no stake on!
To perceive the atrocity in such a situation, it needs to be pointed
out that there are only two - and only two - things in the material
world, God-given and man-made, out of God-given materials. The latter
is what we call wealth, or materials things produced by man to satisfy
human desires and having values in exchange. The former is what is
referred as "land," the material universe outside of man and
his products. Technically speaking, therefore, the economic concept of
land, is all-embracive, as it would include everything God-given,
including not just the ground that constitutes the planets and stars
but also wild flora and fauna. The right to private property
should be applied only to wealth, or man-made objects; whereas, land
should remain as the "common field of human endeavor," as
John Locke pointed out in the 1600s. The insight that the material
world can be dichotomized only into God-given and man-made has led us
to this important proposition that is neither communistic, since it
respects private property in wealth, nor violative of any of the
advocacies in Papal encyclicals. The proposition is thoroughly just,
since, as Socrates put it, "Justice is the having and doing what
is one's own." And what is "one's own," according to
Locke, is what a man has produced through the application of his
natural powers, mental and physical, and which he had, by his efforts,
separated from what is God-given and, therefore, an extension of his
personality. Confecting from Lock and Socrates, we have a modern
definition of social justice: The rule in social relationship that
provides that whoever produces owns the products. Or: To the
producer belong the products. This is the implacable mandate of social
Two centuries ago, David Ricardo rhetorically asked, "So you
think that the economic problem is a problem of production?" "No,
sir," he answered, "the economic problem is a distribution
The failure to realize that the economic problem is a distribution
problem and the wrong focus on production; have led to thinking in
circles, to an stultifying and tiresome monotony of societal
imbecilities that get recycled election after election.
The distribution problem, however, the problem of the division of
wealth among the factors of production, is specifically a moral
problem, a problem of justice. Therefore, contrary to those fools who
tell us that justice, being normative, has nothing to do with
economics as a positive science, justice is, in fact, central to the
economic problematique. For without justice, no one could
expect any productive, peaceful, and happy cooperation among human
The institutionalization of private property over land has
artificially and prematurely marginalized brawn labor towards areas
that could support human life only at subsistence level, by operation
of a natural law known as Ricardo's Law of Rent. Since marginalized
brawn labor is the basis of all wages (including executive salaries)
in any economy with pretensions to free enterprise, a landlordist
economy is characterized by a low general level of real wages. This is
the real cause of the "world's problematique." By
enriching a few and impoverishing the many, it constricts aggregate
The Ricardian Rent is stated, as follows: The rent of land is
determined by the excess of its produce over that which the same
application of labor can secure from the least productive land in use.
In accordance with this law, the rent of land is determined by its
productivity or yield minus the yield that can be obtained from the
least productive land in use, the "margin of production,"
using the same quantity of labor. Thus land yielding a quantity of
1,000 would have a rent of 300 if the margin of production yields 700,
500 if the latter yields 500, and 900 if the latter yields only 100.
The margin itself has no rent, since its yield minus its own yield, as
the least productive land in use, is zero.
The institutionalization of private property over land unduly presses
the margin of production to lower and lower levels of productivity
until bare subsistence level is reached, thus impoverishing the
masses, while enriching the landed class.
Land being a fixed resource, landownership is by nature a monopoly
over a specific part of the planet. The result is the economic
disenfranchisement of the masses that leads to other monopolies.
Winston Churchill thus describes monopoly in land as "the mother
of all monopolies."
Since production is not possible without land, the rent of land is a
priority claim on production. What is left after rent has been paid is
what is to be divided between the two other factors of production,
labor and capital. In other words, the Law of Wages and the Law of
Interests, which determine the rewards to labor and capital,
respectively, are mere corollaries to the Law of Rent, which
determines payment for the use of land, of bare land, that is, of land
exclusive of anything man-made on it. Thus, we can now state the Laws
of Distribution, as follows, by first restating the Ricardian Rent.
The Law of Rent. - Rent is determined by the margin of
production, rising as it falls and falling as it rises.
The Law of Wages. - Wages are determined by the margin of
production, falling as it falls and rising as it rises.
The Law of lnterests. - Interests are determined by the margin
of production, falling as it falls and rising as it rises.
It can be seen that these laws are correlatives and have a tight,
unmistakable logic. They are irrefragable laws of nature. They are
The idea propounded in textbooks, such as Paul Samuelson's, that the
rent of land is determined by the Law of Supply and Demand, instead of
by the Law of Rent, is among those that have converted economics into
a veritable forum of fools.
And if land rent is determined by the Law of Rent, then its
corollaries, wages and interests, are also being foreclosed from being
determined by the Law of Supply and Demand.
The Laws of Distribution, being component laws, are, therefore, not
laws of quantities but laws of proportion. Thus, although
quantitatively wages in economically advanced countries, such as the
United States, are high, they are also extremely low as a proportion
relative to production. As a result, as already pointed out earlier,
their economic managers, abetted by economically ignorant organized
labor, are forced to become protectionists at home market and
imperialists abroad to be able to sell excess productivity.
It is conclusive that the rise in land rents is responsible for the
depression of real wages and real interests, wages and interests being
mere corollaries to rent. The result is widespread poverty and the
concomitant social problems humanity faces today, no matter how many
times - a hundred times or a million times - have science and
technology increased the productivity of the economy, as indicated by
Trevelyan Miller's estimate of the cost of World War II.
The capitalists, however, are being protected from the impact of
rising rents on interests, since, generally, the capitalists also
happen to be the landlords in Asia. Their surpluses as landlords were
what enabled them to become capitalists, in the first place.
Thus only laborers, who constitute the preponderant class of
humanity, sink into want and degradation. The intensity of such
problems poses a danger to civilization and the very survival of man
himself on this planet.
If the privatization of land is the cause of the human predicament,
then its abolition is what is clearly indicated by our analysis.
Since the motive for private landownership is the collection of the
economic rent, which, by commutation, is transformed into the selling
price of land, it is recommended (1)) that this rent be fully taxed
away and (2) that the revenues so collected be used to reduce all
taxes that now fall on productive enterprise and labor, on the
exercise of professions and on consumption. Full collection as a tax
of this economic rent will be indicated by the collapse of the price
of even the most expensive land to zero. Because the earnings of both
labor and capital are but corollaries to the rent of land, such a
fiscal measure would put an end to the poverty of the Asian family
by reversing the marginalization trend.
A simultaneous dismantling of private landownership in North and
South is not a precondition. A political will to unilaterally
dismantle such an iniquitous institution in Asia will be enough, as
sine qua non, to make the Asians ready for Globalization to
reap the benefits of comparative advantage. Thus, the paper concludes
with this admonition,
"Before the gifts of science and technology could be generally
enjoyed by an increasing number of humanity, the Industrial Revolution
required and forced new and humane configurations in social
relationships. The changes, achieved through various social
legislations, were, of course, grudgingly accepted by the vested
interests. Today integration through Globalization mandates,
ineluctably and irresistibly, a global "paradigm shift" in
social relationships within both North and South, within both
developed and undeveloped economies. Only such a shift can calm down
misplaced anxieties and silence the strident debates between
globaphobes and globaphiles that threaten to bring about another
enervating, even deadly, episode of polarization, such as the Cold War
in recent history."
- "The Asian Economic Setting, Analyzed"
is a 52-page disquisition, plus ten pages of appendices comprised
of Basic Economic Axioms and Definitions, Comparative Ideology,
and a Legislative Proposal.
- Excludes rich Asian countries, Japan, South
Korea, Taiwan, Malaysia, Singapore and Brunei.
- Includes all ADB DMCs (Developing Member
Countries). Whole world: Six billion.
- Excludes rich Asian countries and those
without reports, Cambodia and Myanmar.
- Excludes rich countries and those without
reports, namely, Vietnam, India, and Nepal. Employment reporting
is seldom truthful in backward countries, esp. with respect to
underemployment, which is partial unemployment. There appears a
tendency to hide unpleasant facts; esp. in countries ran by
- The expression was originated by Thomas Kuhn
in a landmark dissertation, The Structure of Scientific