Thursday, 9 December 2010

Is the Philippines still a Third World country?

John Mangun
Outside the Box
Business Mirror

‘Is the Philippines still a Third World country?” my son asked me the other day.

It is remarkable to me that within the lifetime of our fathers or grandfathers depending on your age, the world was fundamentally divided into nations that were colonies and the colonizing “mother countries.”

It may be hard to believe, but in 1910, the British Empire consisted of more than 100 colonies that now are all independent nations or have joined with other independent nations. France held 20 countries as colonies, with other European nations holding nearly 50 more at the time.

This global colonial structure was founded on a simple but important economic principle. The colonies supplied the raw materials that were shipped back to the Motherland, to be manufactured into value-added goods, providing domestic employment and goods for local consumption and for export. The colonies also provided a ready market for the manufactured products.

The British would bring in cotton from their colonies of Egypt and India to their industrialized textile mills and sell the cloth locally, export to other nations and also back to Egypt and India, for example.

One of the reasons America was never really in the colony business was that it had the ability to produce more cost effectively all the raw materials that it needed. There was no significant economic benefit to the US in having colonies. In fact, the only major war the US fought over the control of raw materials was its civil war between the industrialized north and the agricultural south.

World War II marked the death knell for the colonial empires. One by one, these colonies became independent as it was no longer economically efficient to have a colonial empire. The colonial powers still had access to the raw materials as the ex-colonies still depended on their former colonial rulers for business. “Third World” countries were those that did not have the manufacturing capability, the industrialization to turn their raw materials into value-added products. And they still depended on the “First World” nations for their manufactured goods.

Eventually and, actually, rather quickly, some of these former colonies became “Second World” countries. They now had the ability to manufacture some goods for local consumption and a little export. “Third World” nations were those that appeared unlikely to ever create the capability to produce value-added products in any substantial quantity. Through the 1960s, the idea of the First, Second and Third worlds probably reached its peak.

Into the late 1970s and ’90s, the classification changed a bit to “Developed,” “Developing” and “Underdeveloped,” which was probably just a more pleasant way to say First, Second and Third World (FSTW).

However, this period also saw a change in the global economic model. To a large extent, no longer were many particular countries able to boast of being a major provider of a particular raw material that the world needed. In the 1940s Japan wanted the area that is now Malaysia because it supplied a large portion of the world’s raw material for rubber, for example

The last 40 years have seen a fundamental shift for the global economic system in what is considered vital raw materials for the global and for most all nations’ economies. In 1870, if the textile mills of England had not had access to the raw material of cotton, thousands would have been unemployed, and the finished manufactured goods would simply have not been available. Cotton was a vital raw material and it was needed in dependable quantity and at a comparatively (to the final cost of the cloth) low price.

Now the vital raw materials are oil, labor and creative knowledge.

There are more cell phones in use than there are people on the planet. What are the three raw materials that go into manufacturing your cell phone that are needed in dependable quantity and at a comparatively low price? They are the engineering expertise to design it; the oil to make many of the major components (plastic, fiberglass, phenolic resin, epoxy resin); and the labor to assemble it. The “brains” of your phone, the microchip, is made of sand or silicon, high-tech design and machinery (creative knowledge) and skilled but readily available relatively low-cost labor.

Nearly everything we wear is made from byproducts of oil, those byproducts invented from creative knowledge, and manufactured by dependable and low-cost labor.

The “FSTW” concept also considered the purchasing power of a country. Obviously, the “Firsts” had the ability to buy more stuff. They made more and they bought more. But as nations could no longer control the supply of vital raw materials as the definition changed, the idea of “FSTW” has nearly disappeared. Now there are “developed” nations and “developing” nations.

Most all, nations now have the capability of developing because of that critical raw material, labor, being available every place. In 1993 the first text message was sent. Because labor is the critical raw material of the cell phone, within 10 years, a “Third World” country like the Philippines could become the text-messaging capital of the world. India, a major global producer of cotton for literally 7,000 years, only became a major global textile manufacturer since the early 1990s and not because of their homegrown cotton but because they have an even more important raw material—labor.

Too often we hear the “experts” speak of the Philippine labor force as skilled and how lucky the Philippines is to have the Filipino worker. But underneath is an elitism that says our employment pool is all we have. In fact, the Philippines has one of the most valuable raw materials in the 21st-century world. Without the Filipino worker, the global shipping industry, as well as the health-care sector, would crumble. There would not be any customer service to the English-speaking world. And if your cell phone has a camera, the chip the runs the camera was probably made in the Philippines.

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  1. okay.. there was more history on the "colonies" than any explanation on whether the Philippines is still a third world country.Not a very useful article,except maybe to defend wounded pride. Facts on what is happening in the Philippines that prove it is advancing in global status would have been relevant.

  2. This article is quite informative. Thanks for the info. It may not have been helpful to some but we should at least show gratitude to the facts presented here and the effort, of course. Nice one buddy.