PhDPA 303 Economic Foundation of Publuc Administration

COMPARATIVE ECONOMIC SYSTEMS AND THE ECONOMIC PROVISIONS OF THE 1987 CONSTITUTION

Eda Salvacion J. PajeDoctor of Philosophy in public Administration

Atty. Danilo s. AzaaProfessor

Summer 2015Table of Contents

ChapterContentsPage

1Introduction

2Comparative Economic SystemA. CapitalismB. CommunismC. Socialism

3Economic Provision of the 1987 Constitution

4A. The Economic System in the PhilippinesB. The Ideal Economic System for the Philippines

AnnexesAttachment A.Attachment B.Attachment C.Attachment D.

Bibliography

Chapter 1Introduction

Aneconomic systemis asystemofproductionandexchangeofgoods and servicesas well asallocation of resourcesin asociety. It includes the combination of the variousinstitutions, agencies, entities (or even sectors as described by some authors) and consumers that comprise the economic structure of a given community. A related concept is themode of production.The study of economic systems includes how these various agencies and institutions are linked to one another, how information flows between them, and the social relations within the system (includingproperty rightsand the structure of management).Among existing economic systems, distinctive methods of analysis have developed, such associalist economicsandIslamic economic jurisprudence. Today the dominant form of economic organization at the global level is based on market-orientedmixed economies. Economic systemsare the category in theJournal of Economic Literatureclassification codesthat includes the study of such systems. One field that cuts across them iscomparative economic systems. Subcategories of different systems there include: planning, coordination, and reform productive enterprises; factor and product markets; prices; population public economics; financial economics national income, product, and expenditure; money; inflation international trade, finance, investment, and aid consumer economics; welfare and poverty performance and prospects natural resources; energy; environment; regional studies political economy; legal institutions; property rights. ComponentsThere are multiple components to economic systems. Decision-making structures of an economy determine the use of economic inputs (thefactors of production), distribution of output, the level of centralization in decision-making, and who makes these decisions. Decisions might be carried out byindustrial councils, by a government agency, or by private owners.In one view, every economic system represents an attempt to solve three fundamental and interdependent problems: What goods and services shall be produced, and in what quantities? How shall goods and services be produced? That is, by whom and with what resources and technologies? For whom shall goods and services be produced? That is, who is to enjoy the benefits of the goods and services and how is the total product to be distributed among individuals and groups in the society? Thus every economy is a system that allocates resources for exchange, production, distribution and consumption. The system is stabilized through a combination of threat and trust, which are the outcome of institutional arrangements.An economic system possesses the following institutions: Methods of control over the factors ormeans of production: this may include ownership of, or property rights to, the means of production and therefore may give rise to claims to the proceeds from production. The means of production may be owned privately, by the state, by those who use them or be held in common. A decision-making system: this determines who is eligible to make decisions over economic activities. Economic agents with decision-making powers can enter into binding contracts with one another. A coordination mechanism: this determines how information is obtained and used in decision-making. The two dominant forms of coordination are planning and markets; planning can be either de-centralized or centralized, and the two coordination mechanisms are not mutually exclusive and often co-exist. An incentive system: this induces and motivates economic agents to engage in productive activities. It can be based on either material reward (compensation or self-interest) or moral suasion (for instance, social prestige or through a democratic decision-making process that binds those involved). The incentive system may encourage specialization and thedivision of labour. Organizational form: there are two basic forms of organization: actors and regulators. Economic factors include households, work gangs and production teams, firms, joint-ventures and cartels. Economically regulative organizations are represented by the state and market authorities; the latter may be private or public entities. A distribution system: this allocates the proceeds from productive activity, which is distributed as income among the economic organizations, individuals and groups within society, such as property owners, workers and non-workers, or the state (from taxes). A public choice mechanism for law-making, establishing rules, norms and standards and levying taxes. Usually this is the responsibility of the state but other means of collective decision-making are possible, such as chambers of commerce or workers councils. TypesMarxist-Leninist Communist states (red) and former Communist states (orange) of the world.There are several basic questions that must be answered in order for an economy to run satisfactorily. Thescarcity problem, for example, requires answers to basic questions, such as:whatto produce,howto produce it, andwho gets what is produced. An economic system is a way of answering these basic questions, and different economic systems answer them differently. Many different objectives may be seen as desirable for an economy, likeefficiency, growth,liberty, andequality. In a capitalist economic system (capitalism) production is carried out for private profit, decisions regarding investment and the use of the means of production are determined by individuals, corporations and business owners in the marketplace. The means of production are owned primarily by private enterprises and decisions regarding production and investment determined by private owners incapital markets. Capitalist systems range from laissez-faire, with minimal government regulation and state enterprise, to regulated and social market systems, with the stated aim of ensuring "social justice" and a more equitable distribution ofwealth(seewelfare state) or ameliorating market failures (seeeconomic intervention).In socialist economic system (socialism), production is carried out to fulfil planned-economy objectives; decisions regarding the use of the means of production are adjusted to satisfy state-conceived economic demand, investment is carried out through state-guided mechanisms. The means of production are eitherpublicly owned, or are owned by the workers cooperatively. A socialist economic system that is based on the process of capital accumulation, but seeks to control or direct that process through state ownership or cooperative control to ensure stability, equality or expand decision-making power, aremarket socialist systems.

The basic and general economic systems are: Market economy("hands off" systems, such aslaissez-fairecapitalism) Mixed economy(a hybrid that blends some aspects of both market and planned economies) Planned economy("hands on" systems, such asstate socialismorcommunism, also known as "command economy") Traditional economy(a generic term for older economic systems) Participatory economics(a system where the production and distribution of goods is guided bypublic participation) Gift economy(where an exchange is made without any explicit agreement for immediate or future rewards) Barter economy(where goods and services are directly exchanged for other goods or services)

Various strains ofanarchismadvocate different economy systems, all of which have very small or no government involvement. These include:

Right wing Anarcho-capitalism Anarcho-fascism

Left wing Anarcho-communism Anarcho-syndicalism Anarcho-socialism

Libertarianismalso advocates a minimal role for government, including economic systems like: Libertarian communism Libertarian socialism Syndicalism

Communism A socioeconomic order structured upon thecommon ownershipof themeans of productionand characterized by the absence ofsocial classes,money,and thestate, as well as a social, political, and economic ideology and movement that aims to establish this social order.Communism includes a variety of schools of thought, which broadly includeMarxism,anarchism(anarchist communism) and the political ideologies grouped around both. All these hold in common the analysis that the current order of society stems from its economic system,capitalism, that in this system, there are two major social classes: theworking class who must work to survive, and who make up a majority of society and thecapitalist class a minority who derive profit from employing the proletariat, through private ownership of themeans of production(the physical and institutional means with which commodities are produced and distributed), and that political, social and economicconflict between these two classeswill trigger a fundamental change in the economic system, and by extension a wide-ranging transformation of society. The primary element which will enable this transformation, according to this analysis, is thesocial ownershipof the means of production.

CapitalismCapitalismgenerally features the private ownership of the means of production (capital), and amarket economyfor coordination.Corporate capitalismrefers to a capitalist marketplace characterized by the dominance ofhierarchical,bureaucraticcorporations.Mercantilismwas the dominant model in Western Europe from the 16th to 18th century. This encouragedimperialismandcolonialismuntil economic and political changes resulted in globaldecolonization. Modern capitalism has favouredfree tradeto take advantages of increased efficiencies due to nationalcomparative advantageandeconomies of scalein a larger, more universal market. Some criticshave applied the termneo-colonialismto the power imbalance between multi-national corporations operating in a free market vs. seemingly impoverished people in developing countries.

SocialismSocialist economic systems (all of which featuresocial ownershipof the means of production) can be subdivided by their coordinating mechanism (planning and markets) into planned socialistandmarket socialistsystems. Additionally, socialism can be divided based on their property structures between those that are based onpublic ownership, worker or consumercooperativesandcommon ownership(i.e., non-ownership).Communismis a hypothetical stage of Socialist development articulated by Marx as "second stage Socialism" inCritique of the Gotha Program, whereby economic output is distributed based on need and not simply on the basis of labour contribution.The original conception of socialism involved the substitution of money as a unit of calculation and monetary prices as a whole withcalculation in kind(or valuation based on natural units), with business and financial decisions replaced by engineering and technical criteria for managing the economy. Fundamentally, this meant that socialism would operate under different economic dynamics than those of capitalism and the price system.Later models of socialism developed by neoclassical economists (most notablyOskar LangeandAbba Lerner) were based on the use of notional prices derived from a trial-and-error approach to achieve market clearing prices on the part of a planning agency. These models of socialism were called "market socialism" because they included a role for markets, money and prices.The primary emphasis of socialist planned economies is to coordinate production is to produce economic output to directly satisfy economic demand as opposed to the indirect mechanism of the profit system where satisfying needs is subordinate to the pursuit of profit; to advance theproductive forcesof the economy in a more efficient manner while being immune to the perceived systemic inefficiencies (cyclical processes) and crisis ofoverproductionso that production would be subject to the needs of society as opposed to being ordered aroundcapital accumulation.

In a pure socialist planned economy that involves different processes of resource allocation, production and means of quantifying value, the use of money would be replaced with a different measure of value and accounting tool that would embody more accurate information about an object or resource.In practice, the economic system of the formerSoviet UnionandEastern blocoperated as a command economy, featuring a combination of state owned enterprises and central planning using thematerial balancesmethod. The extent to which these economic systems achieved socialism or represented a viable alternative to capitalism is subject to debate. Inorthodox Marxism, themode of productionis tantamount to the subject of this article,determining with a superstructure of relationsthe entirety of a given culture or stage of human development.

Chapter 2Comparative Economic SystemDifference between Communism and Capitalism

Capitalism and communism are different in their political and economic ideologies. Capitalism and Communism never go together.One of the major differences between capitalism and communism is with regard to the resources or the means of production. In Communism, the community or society solely owns the resources or the means of production. On the other hand, in capitalism, the resources or the means of production lies with a private owner.While the profit of any enterprise is equally shared by all the people in communism, the profit in a capitalist structure belong to the private owner only. While the private party controls the resources in capitalism, it is the society that controls the whole means of production in communism. For Communists, the society is above individuals. But for capitalists, individual freedom is above the state or society. While capitalism is a self regulated economic system, communism is a government run economy. In capitalism, the individual has full control over production and decides on the price structure. Contrary to this, it is the society or the government that determines the price structure in communism.Communism stands for equal sharing of work, according to the benefits and ability. But in capitalism, an individual is responsible for his works and if he wants to raise the ladder, he has to work hard.While communism stands for absorbing private property, Capitalism stands for private property.Moreover, communism stands for a class less society, which doesnt see any difference between the rich and the poor. On the other hand, Capitalism divides the society into rich and poor. Capitalism can be said to be the exploitation of the individual. While everyone is equal in communism, there is a great divide in the class in Capitalism.

Difference between Socialism and CommunismCommunism and socialism are ideological principles with many similarities and differences. It is little complicated to differentiate these two doctrines. Socialism generally refers to an economic system and communism means to both an economic and a political system.Socialism manages theeconomythrough planned collective social control, while communism tend to manage both the society and the economy by making sure that the properties are owned by the centralized organization to gain classlessness and statelessness. Both communism and socialism tend to prevent the effects of capitalism.Both principles are focused on the centralized organization where the goods and services are produced, owned and controlled publicly. But socialism focused more on the distribution that take place on the amount of individuals production of hard work, whereas communism emphasizes that the distribution of goods and services among the public should happen based on the individuals needs.The Communist assert that both Capitalism and private ownership of means of production must be done away to make sure a classless society. However, socialist view capitalism as a possible part of the ideal state and perceive that socialism can exist in a capitalist society.Differences also exist on who controls the structure of the economy. The socialism normally intend to have as many people as possible in order to influence the economy, while communism concentrate on small amount of peopleDifference between Socialism and CapitalismSocialism is a form of economy that works for equality among the members of society by pooling the resources of the people to be collectively controlled by thestateor the public through communes or councils. There is no market in a socialist economy and therefore, there is no competition. The quantity of products produced and distributed is regulated, including the price that the consumer will pay for the products.Capitalism, on the other hand, is an economic and political system that is based on the principle of individual rights. It believes that it is inequality that will drive the people to be more innovative and productive. Resources in a capitalistic society are privately owned by individuals or groups of individuals. These individuals or groups of individuals freely trade in a market that has a level playing field. The government stays in the background and allows the forces of supply and demand to freely operate with the guidance of laws and regulations. The law of supply and demand provides that if the supply is greater than the demand for a particular commodity, the price of that particular commodity will go down. Conversely the price of a commodity goes up if there is less supply than the demand.In socialism, the wealth or thegoodsandservicesare distributed to the people based on the work contribution of an individual to produce such wealth. Socialists believe that if individuals work for the sake of everyone in society and receive all the goods and services, workethicswill be heightened.

People on the other hand, are given equal opportunity to work for their own individual wealth in a capitalist society. Individuals are presumed to be naturally competitive. It is their competitiveness that will drive them to improve. Individuals or groups of individuals in a capitalist society decide on the quantity, quality and price of goods they will produce and sell in a competitive market in order to g et the amount of wealth they want. No limits are set to what an individual can earn. This results in people having different social status based on the wealth they have accumulated. Thus, there are rich and poor people in one society. Advocates of socialism believe that this is dangerous because the accumulation of wealth by a certain few gives rise to dominance that could lead to the exploitation of people with lesser wealth.

Chapter 3Economic Provisions of the 1987 Constitution

The current 1987 Constitution unfortunately sets so many restrictions on economic activities, setting up protectionist provisions that limit businesses in the Philippines to a minimum of at least 60% ownership by local Filipinos, and a maximum of 40% by foreign investors. For advertising companies, it limits ownership to a minimum of 70% by local Filipinos and at most 30% by foreigners. Media companies must be owned 100% by local Filipinos.

As such, unlike in other countries that do not have such restrictions on foreign investment thus making those countries viable and attractive destinations for Foreign Direct Investment, the Philippines has great difficulty in bringing in foreign investors who often are capable of creating lots of jobs and are often able to provide high quality skills training and provide Filipinos with exposure to higher standards of operation and business systems.

Job creation is thus much faster and on a larger scale in countries that allow easy-entry of Foreign Direct Investment. Since there are not that many local Filipino entrepreneurs creating many jobs coupled with the dearth of foreign investments due to the protectionist economic provisions in the Constitution, unemployment is extremely high in the Philippines, forcing Filipinos to leave their families, loved ones, and children behind while seeking basic employment in other countries. By removing all economic restrictions and protectionist provisions in the 1987 Constitution, it will become much easier for the Philippines to be able to more readily attract foreign investors and multinational companies to invest in the Philippines and help create jobs for locally-based Filipinos. As a result, Filipinos will have less need to pack their bags and leave their families to work as overseas workers in faraway lands.What Has Been the Effect of the Economic Nationalism Provision of the 1987 Philippine Constitution?

The provisions of the 1987 Philippine constitution are supposed to bear improvement to the economy and welfare of Filipinos. And in terms of boosting nationalism, the people who drafted the 1987 constitution used the economy as a tool. Yet while the economic nationalism provision has its advantages, there are also disadvantages that seem to bring down the Philippine economy and the welfare of citizens even more. Below are some of the negative effects of the provision.

Discouraged foreign investmentOne of the effects of the 1987 Philippine constitutions economic nationalism is limited foreign investment. In fact, the country has one of the lowest levels of foreign direct investments in Southeast and East Asia. Naturally, this effect is expected considering foreign investors are allowed to own only a limited percentage of local companies and considering consumers are urged to support and purchase Philippine products.Encouraged monopolies leading to higher prices, limited selection, and lower quality products and servicesWhile patronizing Philippine goods and services is advisable to promote a love for the country, limiting the room for foreign investment encourages monopolies and hinders healthy competition. Monopolies exist when one major company has enough power to dictate the prices, quality, and selection of products and services. Monopolies become very powerful because competitions are not big enough to threaten them.Without foreign investments that are capable of introducing competition in the Philippine market, monopolies become lax in providing a wide range and continuously improved products for Filipino consumers. In addition, because consumers have no other product choices, monopolies can increase or decrease prices at will. In the end, the people who suffer big price increases are those who have low-paying jobs or are minimum wage earners.

Lowered the rate of job growth and depressed wagesA third effect of limited foreign investment brought about by the economic nationalism provision is a decreased rate of employment. Similarly, wages are tied to specific levels and are increased only limitedly. Why these effects occur is because local businesses have minimal funds to fuel operations and to pay workers. Foreign Investment in the country can only amount to so much that business fail to run as efficiently as they should. This subpar performance leads to insufficient output and funds, so, local companies hire only a few and often, the best workers. In addition to those who possess few job-essential skills do not have a chance to work and improve their lives.

RESTRICTIVE ECONOMIC PROVISIONS OFTHE CONSTITUTION ONCE AGAINbyGerardo P SicatonJul 14, 2012Crossroads(Toward Philippine Economic and Social Development)Philippine Star, 11 July 2012The report that Speaker Feliciano Belmonte of the House and Senate President Juan Ponce Enrile will revive discussions to amend the restrictive economic provisions of the Constitution brings back to life an important issue of economic policy. It had been completely eclipsed when political theatre got dominated by the impeachment of the Chief Justice.Such an initiative will gain force if embraced further by a popular president. The amendment of restrictive economic provisions could be a manageable change agenda so long as it is not complicated by broader political questions.Additional arguments in favor of amending the restrictive economic provisions. This column has devoted space on the subject because of its importance in tilting the nations potential for economic growth. The reader can consult the archives of The Philippine Star. (For those using the internet, go to:GERARDO P. SICAT Articles|philstar.com).Below are additional arguments that I offer to persuade President Aquino to include such reforms in his agenda so that he can move camp and give the marching orders to the legislative leaders: The right time to undertake reforms is when economic expectations are low; The nations mindset should gear toward regional rather than insular economic outlook; The advantages offered by the TPP (Trans Pacific Partnership) within the Asia-Pacific network of economic cooperation in trade could be lost by default without constitutional amendments; and The restrictive nationalism indicated by the constitutional provisions has encouraged extractive economic institutions to dominate the countrys development effort and do not encourage inclusive economic development prospects.The right time for reform. World economic conditions are relatively difficult at the moment. Expectations are low. The economies of the United States, Europe, and Japan three important regional engines of world economic growth are still in a troublesome state.The right time to undertake reforms is when expectations are low.When the prospects turn brighter, the proper policies are already in place and the country can reap the benefits. Thus, we do not miss the boat.Moreover, even as Philippine economic assessments have improved, which give the country much notice as a comeback and rising economy, undertaking the reforms will add more positive factors. This will create more momentum for economic growth.The change in mindset from domestic to regional and international.Its time to change the nations mindset and those of the countrys business leaders. They should now be encouraged to view the domestic market as something beyond that the Philippine market. It adds the potential market of the other ASEAN member countries.The ASEAN Free Trade Area widens the boundaries of our national market. Thus, our outlook as a nation should embrace a larger economic market and business plans of our larger enterprises should be encouraged to widen their outlooks.So should our domestic policies in encouraging economic growth. This should make us more into a regional and international competitor rather than an insular market that is concerned alone with a limited economic market.Our high-growth neighbours think regional and their economies are further outward looking. That makes their enterprises competitive regionally and internationally.Foreign direct investments located in our country have long adjusted their economies on a regional footing. When they make investment plans, they factor in regional considerations within the ASEAN. A recent example of this was the Ford closure of its manufacturing plant in the country (which I discussed recently in this column).If we change our mindset as a nation, we can adjust more quickly to our needs to stay highly competitive. We will then be able to rearrange our investment incentives pattern so that we do not simply direct them toward developing the domestic market for local businesses.Incidentally, the old mindset is still behind the investment incentives laws under the Board of Investments. Yet our export incentives under the PEZA are geared toward international markets.There is a link that is missing in these two incentives laws. The supply networks essential to support the industrial supply base of our export manufacturers in the PEZA do not exist within our boundaries as a result. The reason is that the domestic market has been nurtured by restrictive economic policies.The opportunities to move to higher trade agreements are beneficial. The constitutional provisions on restrictions extend to prohibitions on the practice of the professions by foreigners.Our human resources professionals and skilled labor have roamed the world for a living. At home, we practice protectionism that would have blocked such sources of livelihood for our OFW citizens who work abroad.The TPP (Trans Pacific Partnership) agreement is emerging as a comprehensive free trade arrangement that includes all the major countries of the Asia-Pacific Region and a few developing countries. (Remember how South Korea and Taiwan in decades past have reaped the benefits of their rapid economic growth by tapping onto the US market?)The agreement covers freer trade in goods and services, affecting rules of origin, trade remedies, barriers to trade, intellectual agreement, and government procurement and competition policy. In all negotiations, there are gives and takes. However, the benefits for membership of the few developing countries that are likely to be part of this pact are expected to be enormous.TPP began as an agreement among four small Asia-Pacific countries (Brunei, Chile, New Zealand and Singapore) in 2005. As of June 2012, the following countries are now part of this agreement and they are negotiating the master agreement among themselves before closure: Australia, Malaysia, Peru, Japan, United States, Vietnam, Canada, and Mexico.It will be a great pity if the Philippines were to miss out during the formative stage of this new international arrangement. Yet Philippine protective policies on a number of critical economic issues are precisely the factors that prevent us from entering this new club.Thus, our country is not even yet likely to become a member of this negotiating agreement because of its constitutional situation.Move from extractive to inclusive nationalism. The final argument is related to the notion of nationalism which is often used as the argument for protection. These policies have favored producers at the expense of consumers who have been forced to buy the produce at higher prices. Moreover, the limited impact on economic growth has led to small employment effect that we now know to have happened.It will take more space to explain why the high objectives of promoting a wrong brand of nationalism in our laws have only led us astray in economic accomplishments. This is an indication of national frustration, that today our economic development has been eclipsed by the accomplishment of neighbours that used to look up to us as a model nation.

THE RISKS OF A RISING PESObyBenjamin E DioknoonMay 1, 2015Core Business World, 28 April 2015

Recent data show that the United States economic recovery remains tentative. These lead to fresh speculation that the peso will start to appreciate. But a strong peso, say P42 to US$1, does not necessarily mean that the Philippine economy is weak, but that the US economy is weak. In fact, a strong peso is not necessarily good for most Filipinos and the economy.A weak US economy means the Fed, the monetary policy-making body, would delay raising interest rates. That would make the US less of a magnet for portfolio investors. Low US interest rates will drive portfolio investors to look for lucrative places where they can park their footloose capital.Thats why the local stock traders are happy that the Philippine Stock Exchange (PSE) might continue to soar for just a little bit more. That assumes, of course, that the PSE will be more attractive than the other stock markets in the world.Heres a warning for policy makers: the short-term gains from the entry of hot money into the country should be weighed against the adverse, usually painful, consequences as it exits when the economic sentiment changes. The PSEs gain could be the economys loss.Other than the state of the US economy, there are other factors that might affect the peso-dollar exchange rate.On the supply demand, overseas workers remittances continue to increase but at a decelerating rate. The peso appreciates as these remittances rise.However, while remittances continue to expand, the rate at which they are growing has slowed in recent years. In 2013 the remittances grew by 7.2%. In 2014 they inched up by 5.6%, and for the first two months of the year, remittances further slowed down to 2.4%. Remember that remittances used to grow at double-digit rates.The slowing growth of remittances may be attributed to the ongoing wars in the Middle East and the African continent. It is also due to the still fragile world economic recovery. Unemployment remains high in Europe. And because of falling oil prices, joblessness has turned for the worse in oil-producing economies.Unless Filipino policy makers understand that a strong peso is not necessarily good for the Filipino people and the economy, they might unwittingly contribute to the peso appreciation. The policy of borrowing from abroad to finance the budget will definitely cause the peso to appreciate. But it would be unwise to borrow money from abroad at a time when the local economy is awash with both dollars and pesos.On the demand side, the peso depreciates when imports are high, which happens when the domestic economy is expanding rapidly. Faster construction activity means higher imports, as the sector has high imports content, in the nature of construction equipment and other inputs.The peso might depreciate (appreciate) when imports rise (fall) due to faster (slower) implementation of public infrastructure projects. The poor completion of government projects is epic. Financing is the least of the governments problems since it is way below its expenditure program.On the other hand, the sharp fall in oil prices has dampened the demand for dollars. In 2014, the forecast was that imports would grow by 14%; it actually grew by only 9%.In January this year, as a consequence of plunging oil prices, imports of mineral fuels, lubricants and related projects fell by a whopping 43.4% from $1.279 billion in January 2014 to $723 million in January 2015.Overall, there is a strong likelihood that the peso-dollar exchange rate would be between P44 to P45 per US dollar in the near term. This narrow range is not only likely; it is desirable. It addresses the welfare of overseas Filipino workers, the demand of a growing economy, and the desire of monetary authorities to keep their finances healthy.

Chapter 4A. The Economic System in the Philippines

TheEconomy of thePhilippinesis the39th largest in the world, according to 2013World Bankstatistics, and is also one of the emerging markets.[24]The Philippines is considered as anewly industrialized country, which has been transitioning from being one based on agriculture to one based more on services and manufacturing. According to theInternational Monetary Fundestimates, the 2015 GDP (purchasing power parity) is $751.770 billion.[25]Goldman Sachsestimates that by the year 2050, the Philippines will be the14thlargest economy in the world,Goldman Sachsalso included thePhilippinesin its list of theNext Eleveneconomies. In 2014, the Philippines was Asia's second-fastest growing economy next only to China.[26]According toHSBC, the Philippine economy will become the 16th largest economy in the world, 5th largest economy inAsiaand the largest economy in theSoutheast Asianregion by 2050.[27]Primary exports include semiconductors and electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, and fruits. Major trading partners include theUnited States,Japan,China,Singapore,South Korea, the Netherlands,Hong Kong,Germany,Taiwan, andThailand. The Philippines has been named as one of theTiger Cub Economies together withIndonesia, andThailand. It is currently one of Asia's fastest growing economies. However, major problems remain, mainly having to do with alleviating the wide income and growth disparities between the country's different regions and socioeconomic classes, reducing corruption, and investing in the infrastructure necessary to ensure future growth.Economic Indicators and International Rankings OrganizationTitleAs ofChange from previousRanking

Central Intelligence AgencyLiteracy Rate2014108th out of 194nd[82]

Fraser InstituteEconomic Freedom of the World2013(5)56 out of 144[87]

Heritage Foundation/The Wall Street JournalIndex of Economic Freedom2014(8)89 out of 178[93]

International Monetary FundGross Domestic Product (PPP)2013()30th[73]

International Monetary FundGross Domestic Product (nominal)2013()39th[74]

International Monetary FundGDP per Capita (PPP)2013(6)120th[75]

International Monetary FundGDP per Capita (nominal)2013()124th[76]

International Monetary FundForeign Reserves2014(1)26th[77]

Population CommissionPopulation Density201440th out of 242th[80]

Reporters Without BordersPress Freedom Index2013(7)147 out of 178[95]

The Economist Intelligence UnitGlobal Peace Index2013(4)129 out of 158[94]

The World FactbookExternal Debt201354th[83]

Transparency InternationalCorruption Perceptions Index2013(11)94 out of 177[92]

United NationsPopulation2013()12th[78]

United NationsArea2013()73rd[79]

United NationsHuman Development Index2014(1)117 out of 187[85]

World BankEase of Doing Business2013(30)108 out of 183[91]

World Economic ForumGlobal Competitiveness2014(6)52 out of 148[86]

World Economic ForumGlobal Gender Gap Report2013(3)5 out of 136[88]

World Economic ForumTravel and Tourism Competitiveness2013(12)82 out of 140[89]

World Economic ForumGlobal Enabling Trade Report2014(8)64 out of 138[90]

World Economic ForumFinancial Development Index2012(5)49 out of 60[96]

World Health OrganizationLife Expectancy2014112th out of 193st[81]

World Tourism OrganizationTourist Arrival2010(1)52 out of 198[84]

Based on the data above it is evident that the Philippines has a Capitalist System of Economy. To shed more light on how the Philippine Economy works. The following definition, characteristics, advantages and disadvantages are hereby offered.

Definitions of Capitalism G.D.H. Cole has defined capitalism as a system of production for profit under which instruments and materials of production are privately owned and the work is done mainly by hired labour, the product belonging to the capitalist owner or owners In the words of Loucks, Capitalism is a system of economic organization featured by the private ownership and use for private profit for man-made and nature-made capital Without critically going into the merits of these definitions, we may say that capitalism is an economic system in which land and other productive resources are mostly owned by the private individuals and are operated to earn profit, in which in spite of a degree of State intervention, economic activities are mostly unplanned and uncoordinated.

Private Property and its Functions 1. Gross has observed, Private enrichment has a social function, it is the incentive for productive activity. To discourage it unduly is to undermine the economic order. 2. The second function that private property performs in a capitalist economy is to promote saving and capital formation.3. The third function of the right to property is to ensure liberty.4. Gross has observed, Private enrichment has a social function, it is the incentive for productive activity. To discourage it unduly is to undermine the economic order. 5. The second function that private property performs in a capitalist economy is to promote saving and capital formation.6. The third function of the right to property is to ensure liberty.

Disadvantages of Private Property First, the unit of ownership may be too small. Secondly, the private owner holds the future at a discount. Thirdly, Grossman remarks, It creates powerful vested interests that are at times hard to control and regulate by democratic processes even if the general welfare would seem to require. Fourthly, private production has a bias in favour of the production of private goods rather than public services. This does not promote the general social welfare.If you remember the issues about Maynilad in Metro Manila, Meralco, Aleco, (now APEC) and other government owned service providers that were sold to the Private Institutions. You will realize that the concept of Capitalism has been reversed in the Philippines. Ideally, it should be the government that should take over when a private institution that provides basic services fails to do so. Ironically this is happening the other way around in the Philippines. It is those Private Institutions that buy out and takes over any Government Institutions that provides these basic services like water, electricity, health and livelihood.

The Right of Inheritance Loucks, however, is of the view that the institution of inheritance is separate from the institution of private property. Social restriction of the one does not necessarily imply the restriction of the one does not necessarily imply the restriction of the other.

Competition Competition is one of the vital pillars of capitalism. In a capitalist system competition means economic rivalry.

Advantages of Competition Competition under capitalism has certain special functions and advantages as well as disadvantages.Completion tends to promote economic efficiency and economic progress. Competition tends to assure that goods and services will be produced at the lowest possible cost of production. As Seligman pointed out long ago, if completion in biology leads only indirectly progress, competition in economics is the very secret of progress. Competition is said to be the indispensable displinarian of the market economy. Under competitive conditions only efficient firms will remain in the line, others would be automatically eliminated. Competition compels the firms to use the least cost combination of factors. They must use the most efficient productive technology. Competition promotes scientific research and inventions.

Advantages of Competition Salvadori has quoted certain other advantages of competition.1. Competition tends to assure that profits will be held to the minimum, because prices have to be kept down:2. Tends to assure that the energy and raw materials and productive capacity of the nations will be used for providing those goods and services which public wants and in proportion to the relative demands of the public as reflected in the market place;3. Tends to assure that each factor of production will be paid through wages, rent, interest or profits in harmony with the public estimate of the contribution it makes;4. Assure that a constant effort will be made to widen the choice of goods and services offered for sale.5. Assure that a constant effort will be made to improve the attractiveness of goods offered for sale.5. Assure freedom of opportunity, by making it possible for any one at any time, to enter any line of business he desires, for which he has the necessary capital, and6. Assure free and continuous progress and a gradually improving scale of living, through the production of more and more kinds of goods, of better and better quality, at prices which a larger proportion of the public can afford to pay.To summarize the benefits of competition to the capitalistic society, Salvadori again observes, In a word, from the point of the public welfare, completion serves as a regulator and reducer of prices, an incentive to improved production efficiency, as a guarantor that we shall get what we want, and protector of the freedom of opportunity.

Disadvantages of Competition 1. Extreme competition makes the sellers depreciate the quality of the products. It is done in such a subtle and clever way that the consumers cannot easily recognize it. By reducing the quality of the product the producers may reduce the cost of production of the product and sell it at a competitive price no doubt. But the consumers get an inferior article without realizing it.2. Competition may lead to overcrowding in an industry than what can be profitably supported by the existing demand conditions. This led Prof. Ely to remark, Competition is wasteful. This ultimately paves the way for the growth of monopoly.3. Sometimes fierce competition leads to deliberate obsolescence of commodities. For example, in the U.S. an endless stream of revolutionary improvement is advertised in an effort to persuade the customer discard his current motor car. To present a more prosperous appearance to the world the consumers opt for the latest model. Although these so called changes may be meaningless or at best superficial, such changes involve staggering expenses and constitute an waste from the social point of view. 4. Competition also leads to maintenance of secrecy in matter relating to production process etc. this leads to duplication of energy in research and waste of resource.5. Sometime due to cut-throat competition the firm may offer the wholesalers and the middlemen higher margins of profit, so that they would be interested to push the sale of that particular brand over the others. This will have a tendency to push up the prices. 6. Competition sometimes compels the competing firms to resort to competitive advertisement. This is a social waste.7. Due to severe competition some inefficient firms will have to close down. This will lead to unemployment of the workers who were working therein. This will lead to distress and misery on the port of the unemployed workers at least temporarily.8. A large number of small firms are not suitable to promote research and technological development. Modern research is highly expensive. A large firm with adequate resources is in a position to finance research expenditure. This progressiveness of pure competition has been a matter of long debate 9. Normally by competition we understand fair competition. But if the businessmen are corrupt, dishonest and unscrupulous, this spirit of fair competition may be absent. Hence vicious, unethical methods may be adopted to curse ones rival in a ruthless manner. Here competition becomes undignified and unethical.10. So far we have discussed completion in the traditional sense. But with the technological growth I the U.S.A. another type of competition arose. This was within a few. The big firms very often overbuilt. Competition not only became severe buts also proved expensive. There was competition among the giants in each field. But such cut-throat competition although for some time was favorable to the consumers, yet, as Heilbroner say, it led to bankruptcy on a multimillion dollar scale.11. Besides, as pointed out be Bye and Hewitt, free competition is not necessarily equal completion. Under capitalism a person with wealth, proper education and right connections is definitely in a better position than his unfortunate counterpart. Obviously, he has greater chances to come out victorious in the race of competition. Competition bestows its prices upon the strong and luck at the expense of the weak and unlucky. Under pure capitalism competition is the touchstone, the regulator, the mechanism by means of which maximization of national income and public welfare is brought. From the point of view of public welfare, competition serves as a regulator of prices, as an incentive to improved productive efficiency.

http://en.wikipedia.org/wiki/Economic_system Read more:Difference Between Communism and Capitalism | Difference Between | Communism vs Capitalismhttp://www.differencebetween.net/miscellaneous/difference-between-communism-and-capitalism/#ixzz3Z8uZ5NTc Difference Between Socialism and Communism | Difference Between | Socialism vs Communismhttp://www.differencebetween.net/miscellaneous/difference-between-socialism-and-communism/#ixzz3Z8uj0Z5h Difference Between Socialism and Capitalism | Difference Between | Socialism vs Capitalismhttp://www.differencebetween.net/miscellaneous/politics/difference-between-socialism-and-capitalism/#ixzz3Z8vHS2CX https://correctphilippines.org/economic_liberalization/ http://www.forumcash.com/wordpress/what-has-been-the-effect-of-the-%E2%80%9Ceconomic-nationalism%E2%80%9D-provision-of-the-1987-philippine-constitution/ http://en.wikipedia.org/wiki/Economy_of_the_Philippines#Economic_indicators_and_international_rankings