Is the Philippine economy ‘backward’?

Agricultural employment edges out wholesale and retail trade in the Philippines. —PHOTO COURTESY OF

We are not a “backward” economy. It’s just that economies capable of producing sophisticated manufactures necessarily require economies that must specialize in raw material or labor exports. That’s global capitalism for you. 

Ours is a developed capitalist economy to the extent that the capitalist economic system that grips the world today is already fully mature, and that specifically in the Pacific-facing geographic region called the Philippines, it has almost completely defeated competing production arrangements.

Capitalism is an organic, totalizing system with a global division of labor. The spirit of capital that possesses the lithium mines of Salar de Uyuni is the same one that bewitches the coastal battery makers in Zhejiang. The ghost of accumulation that hijacks the body of a seafarer trained in Manila is the same one that animates a shipping CEO in Rotterdam.

Capitalism tightening its embrace over a particular society no longer necessarily translates to a commitment to improving the instruments of production. It no longer exists to allocate labor and capital to mass manufacturing, or to even secure national sovereignty (a locally dominant bourgeoisie with access to robust domestic markets does not translate to a geopolitically autonomous one).

Otherwise, we wouldn’t have witnessed the economic stagnation of Russia when the Soviet Union collapsed and capitalism invaded the whole of the Warsaw Pact, the persistence of labor-intensive sectors in the Third World despite the availability of capital goods, or even the deindustrialization patterns in capitalistic nations, core and periphery alike.

Global value chains

The improvement of the instruments of production and the allocation of the factors of production are consequences of the nation’s position in the global value chains in the worldwide division of labor—and no longer the state of capitalist development.

Hence, our relative lack of modernity: It simply has to do with the fact that capitalist forces have already selected the Philippines’ location in the chains—that in low-value-added, labor-intensive assembly. If not us, it would have been some other postcolonial nation. Just as if Taiwan didn’t exist, maybe we will all be buying our microchips from Kuala Lumpur or Chachoengsao.

Sadly, this location renders us unable to pay high wages or build an industrial base for the cheap mass manufacturing of consumer goods that the working class demands. But our bourgeois rulers do not mind, for they can generate globally comparable profit rates to support their luxurious culture just the same.

(Note: estimates the average stock market return for the Philippines from 1988 to 2021 at 9.06%. Compare this to the 9.4% average return for S&P 500 in the United States from 1972 to 2021 and 9.9% from 1992 to 2021.)


A factory worker at Subic Bay Freeport —PHOTO COURTESY OF SBMA

What kind of an economy is the Philippines? Is it agricultural, services-based, or industrial? The short answer: It depends on whose perspective.

If you’re a capitalist (foreign or domestic) choosing a sector to invest in, your interest will be the relative size of the sector, because size provides a sense of sector growth and sector rivalry. And of course, you will look at GDP data—from which you will conclude the dominance of services. In particular, wholesale and retail trade, which captures 18.71% of GDP.

But if you are a worker, the economic structure will look different. Agricultural employment (26.77% of employed) edges out wholesale and retail trade (21.73%), the subsector with the largest GDP. Break it down further and crop and animal production—basically farming (23.77%)—dominates. Retail trade (19.28%), construction workers (8.24%), and government workers (6.1%) follow.

So for the employed, it seems that there are more farmers than any other worker type. And here’s why: Farming skill among various crops is substitutable enough that farming workers can call themselves a generic “farmer.” But no one identifies as a “service worker”—one is either a driver, a cook, a teacher, a scientist, or a cashier. 

It is the same with industry employment. One is a plant worker in plastics, a semiconductor engineer, or a miner, but most workers don’t really see those as “industry work.” But farming is different; this is perhaps why people see more farmers than most worker types.

Export data

Finally, how does the rest of the global market see us? Note that they don’t care about our internal structure as much as they care about what we can export (either goods or services). So we have to look at our export data per item.

If we do so, we will see the clear dominance of semiconductor manufacturing (25.4% of exports, according to the Philippine Statistics Authority). So for the world, we are already a sophisticated economy that has assembled sufficiently adequate immobile factors so as to emerge as a thriving semiconductor manufacturer.

As far as the global market is concerned, we’re already an industrialized country, no longer dependent on agricultural exports, and with a healthy business process outsourcing sector (23.6% of exports). We even rank 28th among 133 countries in economic complexity, which is a measure of how sophisticated our exports are.

Of course, it doesn’t feel that way for everyone.

Capitalists who are here see the dominance of services, because that’s where the most value added is. Local workers see the dominance of farming, given how disparate the skill sets of service occupations are and how substitutable farming skills are for different crops. Only the supply chain sees the dominance of manufacturing.

Conclusion: One characterizes or assigns a typology to the Philippine economy based on what one is measuring, and one measures according to one’s interest. As always, all perspectives have a bit of truth. It is up to us to continue the conversation to improve our understanding.

(Simon Kuznets, the Nobel-awarded economist, once thought that there are four types of economies in the world: developed, underdeveloped, Argentina, and Japan. If he were alive today, he would have added the Philippines.)

James Matthew Miraflor is a graduate student at the College of Engineering, University of the Philippines Diliman, and an independent consulting analyst. —Ed.

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