Let It Be (P2)

Let It Be (P2)

The middle class’ economic strength drives progress with their large numbers and spending capacity compared to the upper class’ large spending but limited size, and the lower class’ large size but limited spending. The Administration’s good governance, specifically the responsible husbandry of our Filipino Expats’ talents and their remittances helped form an economy resistant to the Economic Meltdown’s ravages.

To some extent the Financial Crisis was exacerbated by corporations’ archaic business strategies, increasingly unfit for a market that, battered by the Subprime Crisis and skyrocketing fuel prices, virtually changed their preferences overnight. I say, either they adjust to shifting economic settings, or “let them bleed to death.”

Business is Darwinian: it’s survival of the fittest. The towering T-rex was eclipsed by smaller raptors’ speed and strategic thinking – proving that agility, not size ensures survival.

The World Bank’s 2000 estimates indicate developing countries’ middle class constituting 56% of about 430 million global middle class citizens. This however could increase to 93% by 2030 – with China and India’s middle class (growing by 732 million and 117 million respectively from 1990-2005) contributing 52% and 12% of that growth – presenting this millennium’s new economic force.

Catering to middle-class tastes and gaining their spending will ensure corporate success. Large US businesses refusing to accept this, and retain business strategies ignoring the needs of their middle class (estimated at 47%-49% of US population) will perish. The Big Three US automakers, failing to adapt rapidly to changing economic environments, experienced serious sales drops. Chrysler’s January sales plunged 55%, GMs’ 49%, and Ford’s, 42%. I say, let them die.

Dead Weight

The Big Three US Automakers now face extinction, after stubbornly retaining their “tried and tested” cash cow – the SUV – despite declining demand (as much as 28% in 2008) from the middle class’ changing behavior as oil prices rose. History will show they had lots of time and money to develop cheaper, greener alternatives (Toyota’s hybrid vehicle Prius, running up to 48 miles per gallon, debuted in 2001). They are now battling corporate death, begging cap in hand a second time for a $25-billion lifeline.

Keeping the Big Three alive only delays their demise. Their plight is apocryphal of big business in the US and the rest of the world, and bailouts like the $700 billion TARP and Obama’s $819 billion guarantee no revitalization. As for banks, either they establish a Toxic Asset bank, or write-off bad loans and let the cards fall where they may.

The New Philippine Middle Class

The Philippine middle class is being swelled by Philippine Expats. Arguably, families living below upper class standards desire to send a family member abroad as this promises an elevation of socioeconomic status. Dividing the $16.4 billion remitted in 2008 amongst the 11 million Filipino Expats would roughly indicate an incremental $1,490 (about Php71,520) annually – about Php5,960 – per household, monthly.

Acknowledging the power of Expat remittances, the Public Sector must attract more. Each Expat remitting just $10 more – equivalent to 20 $0.50 Cokes in Wal-Mart – would add $110 million in total remittances. That’s Php5.5 billion more.

From Home, with Love

Government can entice Expat remittances through programs offering them ways and means to care for their families remotely, thereby also helping assuage the guilt any provider must feel, leaving his family behind.

Simply offering savings and investment instruments would go a long way. The Land Bank of the Philippines (LBP) could offer services enabling Expats to pay their families’ household bills directly. The government could set up LBP payment centers abroad (in Philippine consulates, maybe).

Also, the GSIS could provide medical plans assuring complete medical cost reimbursements from infant immunization to elderly care, or cheap medical assistance using generic medical components. The Administration has taken the first step, offering local medicine at 50% the store price through the Botika ng Bayan.

A General Matriculation Account (GMA) could allow Expats to invest in their children’s education by say, allowing them to fund their children’s TESDA education. This would present a triple-win situation: it would increase Expat spending, and create families of Expats sending greater support (more remittances) to their relatives – overall, fortifying the national economy.

Perhaps by lowering say, minimum Treasury Bill investments based on annual household income (coupled with adjustments like lower interest rates), the Government would present a friendlier, more accessible environment for middle-class Expat families without the required Php100,000 primary investment.

The Philippines, a relatively young country, is weathering an Economic Storm crumbling World powers. For those who still can’t see it, all of the Administration’s efforts have been to elevate us to this pinnacle, with this achievement.

As for corporate dinosaurs, in times of withering middle-class demand and monies’ West-East flow, remember the Beatles song whose words, forty years after, still ring true: “Mama Mary comes to me/ Speaking words of wisdom/ Let it be…let it be…let it be…”