THE OTHER SIDE OF THE COIN

Politics in the Philippines is mind blogging and really not for the faint of heart.... below are some reflections that may provide us another perspective on the Jun Lozada expose.


Political Tidbits: QUESTIONS for LOZADA, LACSON et.al.
By Belinda Olivares-Cunanan
Philippine Daily Inquirer
First Posted 23:22:00 02/20/2008

There are those who believe, after closely following the recent hearings in the Senate on the ZTE national broadband network (NBN) controversy, that there was extensive manipulation by a group of opposition leaders of chief witness Rodolfo Noel Lozada Jr. in order to bring down the government.

To these observers, his recent testimony tended to show that Lozada was not a victim of what he claims to be a kidnapping by government authorities but, on the contrary, that there was a grand design of opposition leaders, led by Senators Panfilo Lacson and Jamby Madrigal, to set up the authorities who, perhaps out of naiveté or eagerness to help the President, fell for the trap. To these observers, it was a typical Lacson maneuver, smooth and scheming, with all the angles covered.

Part of Lozada’s credibility stems from his looking helpless and guileless, a victim of persecution by the Arroyo administration for "telling the truth." But to keen observers, that impression was being blown bit by bit in the past few days, as it began to appear that he was a part of a grand design to overthrow the government and hoodwink the nation -- even as he kept seeking help from government officials for his security and financial wellbeing at the same time.

It was Environment and Natural Resources Secretary Lito Atienza who first raised in the Senate this possibility of a grand design and hinted that Lacson was the manipulator. When I heard Atienza, I began to closely follow this argument and I must say that I tend to agree.

For instance, Bro. Felipe Belleza, president of La Salle Greenhills, testified that Lozada and his family had been talking to him since early January about seeking refuge in the school. When Lozada disembarked from the plane from Hong Kong, he claimed that he was held against his will, but later in the evening he asked to be brought to La Salle and the police were surprised to see his family already there.

And yet, in the early morning of Feb. 6, as Police Senior Supt. Paul Mascariñas pointed out, even though Lozada was already with his family in the evening of Feb. 5, his wife still filed writs of habeas corpus and amparo (which the Court of Appeals threw out later). Part of the grand design to make the kidnap/cover-up angle more believable?

Lacson has a lot to explain not just to the people but to his colleagues as well. As Atienza pointed out, how come he knew ahead of everyone that Lozada was resigning, that he was not going to London but to Hong Kong, and that he was arriving on Feb. 5? And how come he was at the airport that afternoon with his men, apparently seeking to preempt the Senate sergeant-at-arms who was sent by the chamber to fetch Lozada? Did Lacson plan to brief the witness first? He said later that he was simply being enterprising. Or is it because he was manipulating the witness all along, since December, when Lozada and Romulo Neri met with Lacson and Madrigal and the latter tried to get them to turn against the government.

By their own admission, Lacson and Madrigal tried to entice Neri to jump to their side by offering to raise a "patriotic fund" of P20 million that would enable him to live comfortably if he should resign from government. Isn't this bribery? Neri, to his credit, turned that big amount down despite initial temptation to accept it (about a year after supposedly turning down Commission on Elections Chair Benjamin Abalos' promised P200 million).
The question being raised now is: If there was a "patriotic fund" for Neri, there must have been one for Lozada, to enable him to maintain his lifestyle as a high roller and one perpetually preoccupied with money (he asked the Senate to pay for what he spent in Hong Kong). How much was Lozada's "patriotic fund"? Then too, how come he disclosed only now the P500,000 that Deputy Executive Secretary Manuel Gaite "lent" him as spending money in Hong Kong?
***

PGMA's Pandora's Box

Lo and behold!

Another scandal is rocking the Arroyo Administration! It would seem that the string of controversies for this administration would never end. NBN-ZTE Deal can be compared to the Pandora’s Box, that once opened would release all the demons and skeletons from PGMA’s closet.

The key person that unlocked all this foul smelling issues is Mr. Jun Lozada… He is a commendable man for facing sure iron clad adversaries. He is not only against political giants but also against the very established and systemic bureaucratic graft and corruption.

But after listening to Mr. Lozada and all the honorable Senators at the hearings, I realize these things:

…Mr. Lozada can only share with the public a glimpse of what may be really going on in our government. Mr. Lozada admittedly had been involved in three government projects. Only three of the numerous government loan projects… only three projects and we have been hearing sky high prices for bribes ranging from 60 Million to 130 Million U.S.D.

…The revelations of Mr. Lozada are nothing new. Tell me something Jun Lozada had stated that the entire Filipino nation do not know of. What is chilling and mind boggling is that, the country is reacting very calmly about these matters. I do not know if this is a sign of political maturity on our part or had Filipinos gone so sick of the system that we just do not care any more?

…After Lozada’s initial testimony at the Senate Blue Ribbon Committee Hearing, more questions are left hanging than answers. But the worst part is, this body assembled to hear Mr. Lozada’s testimony is more like a circus at best. We can see politicians trying, trying very hard to get a piece of media exposure through this event. Its okay if they really want the truth to surface but then we ask this question “With the 2010 Presidential Elections well underway, who are really in the hearing for the people’s benefit and who are there for the free publicity?”

…The opposition, I am sure is in high spirits with the current ammunition they have for the Arroyo Government. But will they really be up to the task this time? We had seen the “Hello Garci”, “Money in the Bag” and other scandals that could have been reasons well enough to catapult the opposition and end the Arroyo administration. But at the end of the day PGMA still sits in Malacañang.

Then there are questions that I would like to raise.

…If this controversy would be in full throttle and an impeachment case would be launched again will it simply result to more expenses of public funds similar to the Hyatt 10 impeachment crisis? Let us remember that during the 8 July 2005 Hyatt 10 call for PGMA’s resignation there had been an alleged large scale DBM payola operation to Congressmen, Senators and Governors quite similar to the crude Panlilio incident. It may well be inferred that if another impeachment would be mounted public funds may be spent yet again to buy the silence and favor of these greedy legislators and local executives.

Will the Church and all other religious denomination call for her resignation, considering the closeness of Arroyo to the Cardinal of Manila and the CBCP. It is even rumored that PGMA has a Religious Affairs Operators that have the Bishops firmly in their "donation" graces, as again manifested by the quick rebuttal of the Mindanao Bishops' of the call of their fellow bishops in Luzon who where calling for the resignation of Arroyo just after Arroyo gave them a visit in Mindanao.

Will the AFP top brass, all indebted to Arroyo for their position and the perks that go with their position, demonstrate their loyalty to the people? We have seen the AFP’s twisted loyalty to PGMA with their willingness to detain, remove from the service and even shoot their own men for voicing out their legitimate concerns regarding the corruption and moral authority of their Commander in Chief. It is a sad spectacle to see the respected warriors of the Marines & Special Forces rot in jail with their ideals, while their men are dying even without receiving the measly P150 per day combat pay that was promised to them by Arroyo due to lack of funds & generals gets a gift bag similar to those given to the governors and congressmen just for having dinner with Arroyo the day after that infamous breakfast & lunch meeting where bribe money flowed scandalously free.

Will the Media stand up for their professional responsibilities? Or ill they simply wither in the torrents of cash and favors similar to how the Hyatt 10, Hello Garci crisis were killed in the media headlines and Radio& TV coverage. Although there are still a handful of Journalist with integrity, will that handful of these mavericks withstand the hordes of paid lackeys of Malacanang?

Will the Business Sector support the call to oust PGMA? When surely this move shall rock the boat of the current economic uptrend?

Can the Civil Society muster enough strength to sustain and finally succeed in outing PGMA? The Civil Society is now tired of mass actions after witnessing two failed EDSA revolutions, that Civil Society is now afflicted with a "Rally Fatigue" and cannot muster enough public outrage to denounce Arroyo's "corruption with impunity". In relation to what was said earlier, the middle class is now indifferent to the corruption that goes around them, not realizing that the middle class are the ones mainly carrying the burden of the loan payments for these corrupt deals. It would seem that the middle class are more interested to become an OFW & to leave this country leaving their family and children behind, and may not care anymore about the crimes being committed against their country by its own President.

Are the “masa”, the students, and the workers willing to take on more sacrifices just to overthrown the dark regime upon us? Or are we now too poor and impoverished to be able to afford the time to join mass actions against the abuses of the Arroyo administration, that these former vanguards of mass actions in the country are now completely dependent on financial resources of professional organizers and have turned themselves into a "Rally for hire" groups rather than a true and genuine political gathering shouting for reforms.

It is wrong for us to think and believe that we can cure corruption by simply replacing Arroyo with another person.

We have to focus also on the institutionalized nature of the source of corruption in this country. We must not espouse change for change sake but be concern to the plan on how to correct the root causes of corruption in the country.

Bringing this government down would be difficult, but establishing a new order that is a much much more difficult task.

Dictatorship of Talent

The Chinese Culture had always baffled me… arguably there are many less desirable traits from the largest country in the world. However, the drive of the Chinese people to survive and thrive during the most difficult of times can not be understated.

The article below lead me to thinking... We had always been told of the glory and benefits of democracy versus communism. We had it enshrined in our own laws the system of meritocracy and value of hard work, yet is it really working for us?

Are people in this country valued for the quality of work they do or just the right connections they have?



By DAVID BROOKS
Published: December 4, 2007


Let’s say you were born in China. You’re an only child. You have two parents and four grandparents doting on you. Sometimes they even call you a spoiled little emperor.

They instill in you the legacy of Confucianism, especially the values of hierarchy and hard work. They send you off to school. You learn that it takes phenomenal feats of memorization to learn the Chinese characters. You become shaped by China’s intense human capital policies.

You quickly understand what a visitor understands after dozens of conversations: that today’s China is a society obsessed with talent, and that the Chinese ruling elite recruits talent the way the N.B.A. does — rigorously, ruthless, in a completely elitist manner.

As you rise in school, you see that to get into an elite university, you need to ace the exams given at the end of your senior year. Chinese students have been taking exams like this for more than 1,000 years.

The exams don’t reward all mental skills. They reward the ability to work hard and memorize things. Your adolescence is oriented around those exams — the cram seminars, the hours of preparation.

Roughly nine million students take the tests each year. The top 1 percent will go to the elite universities. Some of the others will go to second-tier schools, at best. These unfortunates will find that, while their career prospects aren’t permanently foreclosed, the odds of great success are diminished. Suicide rates at these schools are high, as students come to feel they have failed their parents.

But you succeed. You ace the exams and get into Peking University. You treat your professors like gods and know that if you earn good grades you can join the Communist Party. Westerners think the Communist Party still has something to do with political ideology. You know there is no political philosophy in China except prosperity. The Communist Party is basically a gigantic Skull and Bones. It is one of the social networks its members use to build wealth together.

You are truly a golden child, because you succeed in university as well. You have a number of opportunities. You could get a job at an American multinational, learn capitalist skills and then come back and become an entrepreneur. But you decide to enter government service, which is less risky and gives you chances to get rich (under the table) and serve the nation.

In one sense, your choice doesn’t matter. Whether you are in business or government, you will be members of the same corpocracy. In the West, there are tensions between government and business elites. In China, these elites are part of the same social web, cooperating for mutual enrichment.

Your life is governed by the rules of the corpocracy. Teamwork is highly valued. There are no real ideological rivalries, but different social networks compete for power and wealth. And the system does reward talent. The wonderfully named Organization Department selects people who have proven their administrative competence. You work hard. You help administer provinces. You serve as an executive at state-owned enterprises in steel and communications. You rise quickly.

When you talk to Americans, you find that they have all these weird notions about Chinese communism. You try to tell them that China isn’t a communist country anymore. It’s got a different system: meritocratic paternalism. You joke: Imagine the Ivy League taking over the shell of the Communist Party and deciding not to change the name. Imagine the Harvard Alumni Association with an army.

This is a government of talents, you tell your American friends. It rules society the way a wise father rules the family. There is some consultation with citizens, but mostly members of the guardian class decide for themselves what will serve the greater good.

The meritocratic corpocracy absorbs rival power bases. Once it seemed that economic growth would create an independent middle class, but now it is clear that the affluent parts of society have been assimilated into the state/enterprise establishment. Once there were students lobbying for democracy, but now they are content with economic freedom and opportunity.

The corpocracy doesn’t stand still. Its members are quick to admit China’s weaknesses and quick to embrace modernizing reforms (so long as the reforms never challenge the political order).

Most of all, you believe, educated paternalism has delivered the goods. China is booming. Hundreds of millions rise out of poverty. There are malls in Shanghai richer than any American counterpart. Office towers shoot up, and the Audis clog the roads.

You feel pride in what the corpocracy has achieved and now expect it to lead China’s next stage of modernization — the transition from a manufacturing economy to a service economy. But in the back of your mind you wonder: Perhaps it’s simply impossible for a top-down memorization-based elite to organize a flexible, innovative information economy, no matter how brilliant its members are.

That’s a thought you don’t like to dwell on in the middle of the night.

Cutting Up the Philippines

This is a provoking piece... so what do you think?


By MIRIAM CORONEL FERRER


Federalism, as we noted in last week’s column, is an old debate in the Philippines. One other proponent I missed mentioning is the Cordillera People’s Liberation Army (CPLA) that was founded by the late rebel priest, Conrado Balweg. During peace talks with the Aquino government in 1986, the CPLA’s proposed a federal set-up of co-equal states with the Cordilleras making up one such state. This shows that while the federalism campaign is largely fueled by the need to address the conflict in Mindanao, other regions have also felt alienated from the national center and see common cause with the federalists in Mindanao.How might a future Federal Philippines look like?

In two House Bills filed in 2004, Luzon will have the five federal states of Metro Manila, Northern Luzon, Central Luzon, Southern Tagalog and Bicol. Visayas and Mindanao will each have three: Eastern, Western and Central Visayas; and Northern Mindanao, Southern Mindanao, and Bangsamoro Federal States. In all, 11 federal states.

The Citizens’ Movement for a Federal Philippines’ draft constitution aims for 10 states, with Visayas divided into only two states: East and West. The current Western Visayas provinces of Aklan, Antique, Capiz, Guimaras, Iloilo, Negros Occidental will be boosted by the inclusion of Palawan, currently under Southern Tagalog. All the other Visayan provinces will make up Eastern Visayas. A trimmer proposal recommends only eight states – Northern Luzon (including the Cordillera), Central Luzon (including provinces in Southern Luzon and Metro Manila cities except Manila, Makati and Quezon City), a single Visayan state, Bangsa Moro, Northern Mindanao, and Southern Mindanao. In this proposal, the federal capital will be made up of Manila, Makati and Quezon City. Jose V. Abueva suggests transforming the Clark Economic Zone into the federal capital instead.

Federalist Palawenos disagree with these schemes. They want a separate federal state for Palawan. They support plans to break up Palawan into three provinces in order to qualify as a region. From an administrative region, it can then glide into becoming its own federal state. Because of oil and gas resources, Palawenos’ are very confident of their capacity to stand on their own. The redrawing of boundaries, it is hoped, will correct inefficiencies, inequities and divisiveness that plague current territorial divisions. It can make possible the re-clustering of barangays and towns into more efficient units. Cultural communities sharing the same mountain range or are on opposite sides of the same river but are artificially divided by present boundaries can be reunited. To arguments that federalism might only foster regional inequities, proponents look up to foreign models such as the federal block grant system which subsidizes lower-income regions. This is practiced in federal states like Canada.

Despite the impassioned re-imagining of a different Philippines, advocates know that federalism is not a panacea to all social ills. There is no full-proof guarantee of positive outcomes. Reforms in other areas (electoral, political, socio-economic) must also take place. Reader Cliff Richey, an American living in the country, also cautions: "I would not expect too much from federalism or even a parliamentary system. Improvement in government is mostly achieved by improvement in the quality of the politicians as well as in the populace."

One author lists three criteria to consider in cutting up the country: geographical and cultural factors; development potential; and availability and accessibility of infrastructure within each proposed state.

Along this line, I propose not to have a separate Bangsamoro state since it would end up more or less composed only of the current low-income five provinces and one city that make up the ARMM.

Instead, Sulu, Basilan, Tawi-tawi along with the Zamboanga provinces, Misamis Occidental and Lanao del Norte can make up a Western Mindanao state. Maguindanao, Lanao del Sur, Shairff Kabunsuan can join Sultan Kudarat, Lanao del Sur, North and South Cotabato, Sarangani and Davao del Sur to constitute Central Mindanao. The rest of Mindanao’s current 27 provinces can form the Eastern Mindanao state.

My proposed three-autonomous regions/states scheme for Mindanao considers all relevant factors of demography, fiscal and economic viability, historical claims, and geographic contiguity. In Central and Western Mindanao, Moros will have a fair chance to compete for government posts, exercise leadership and protect their collective interests. Both the MNLF and MILF claims for self-governance can potentially be solved, given that their respective bailiwicks coincide more or less with the two regions. Best of all, autonomy, political participation and protection of interests are enhanced for all, the Moros, the lumad and settlers. A Mindanao-wide agenda is served.

The combined low to high income class-composition of the provinces and cities enhances the viability and potential of each region. It cannot be denied however that Eastern Mindanao will have the head start in terms of economic standing, since it will constitute the biggest region and will have the most developed provinces and cities falling under it: 11 provinces and 11 cities, including four 1st income class provinces, and four 1st income class cities. Also, Eastern Mindanao will be predominantly non-Moro. The Moros in this region will be a small minority. In any case, Central and Western Mindanao Regions will also be substantially viable given the distribution/inclusion of first and second income-class provinces and cities in each. ARMM simply is not.

Actually, establishing three such autonomous regions for Mindanao, as a prelude to a transition to a federal system, can be done now even without Cha-cha. The autonomous regions can be created by law based on the constitutional provision that autonomous regions may be set up in "areas sharing common and distinctive historical and cultural heritage, economic and social structures, and other relevant characteristics." This distinct heritage across the three regions is their "tri-people" (Moro, settlers and lumad) character, even though they differ in the actual "tri-people" mix and composition.

The Central and Western Mindanao regions shall have significant Moro populations whose members can be expected to assume mayoralty posts in many municipalities, and even the governorship based on merit and electoral competition. At the same time, the autonomous regional government can adopt mechanisms that would allow proportional representation of the Moro, lumad, settler and other populations in legislative bodies, councils, etc.

Most lumad communities will be located in the proposed Eastern Mindanao and Central Mindanao regions. These regions should ensure their political participation, economic development, and the protection of their ancestral domains. Tribal federations should be incorporated in governance mechanisms and processes.

Going beyond the dominant approach of a distinct autonomous region or state for the Moros does not in any way dilute the cause of the Bangsamoro for self-governance. Bangsamoro claimants have themselves been redefining the Bangsamoro as inclusive of all the peoples of Mindanao – except that the more inclusive but also historical term Mindanao can really better capture this plural composition.

CHALLENGING ESTABLISHMENT

This is Mr. John Gokongwei's Speech at the recent 20th Ad Congress Nov 21, 2007. This is very interesting and moving coming from a man who had proven his worth and had built a business empire from scratch.

Read on and I hope you find this piece worth your while.

"Before I begin, I want to say please bear with me, an 81 year-old man who just flew in from San Francisco 36 hours ago and is still suffering from jet lag. However, I hope I will be able to say what you want to hear...

Ladies and gentlemen, good evening.

Thank you very much for having me here tonight to open the Ad Congress. I know how important this event is for our marketing and advertising colleagues. My people get very excited and go into a panic, every other year, at this time. I would like to talk about my life, entrepreneurship, and globalization.

I would like to talk about how we can become a great nation. You may wonder how one is connected to the other, but I promise that, as there is truth in advertising, the connection will come.

Let me begin with a story I have told many times. My own. I was born to a rich Chinese-Filipino family. I spent my childhood in Cebu where my father owned a chain of movie houses, including the first air-conditioned one outside Manila. I was the eldest of six children and live in a big house in Cebu's Forbes Park. A chauffeur drove me to school everyday as I went to San Carlos University, then and still one of the country's top schools. I topped my classes and had many friends. I would bring them to watch movies for free at my father's movie houses. When I was 13, my father died suddenly of complications due to typhoid.

Everything I enjoyed vanished instantly. My father's empire was built on credit. When he died, we lost everything-our big house, our cars, and our business-to the banks. I felt angry at the world for taking away my father, and for taking away all that I enjoyed before. When the free movies disappeared, I also lost half my friends. On the day I had to walk two miles to school for the very first time, I cried to my mother, a widow at 32. But she said: "You should feel lucky. Some people have no shoes to walk to school. What can you do? Your father died with 10centavos in his pocket."

So, what can I do? I worked. My mother sent my siblings to China where living standards were lower. She and I stayed in Cebu to work, and we sent them money regularly. My mother sold her jewelry. When that ran out, we sold roasted peanuts in the backyard of our much-smaller home. When that wasn't enough, I opened a small stall in a palengke. I chose one among several palengkes a few miles outside the city because there were fewer goods available for the people there.

I woke up at five o'clock every morning for the long bicycle ride to the palengke with my basket of goods. There, I set up a table about three feet by two feet in size. I laid out my goods-soap, candles, and thread-and kept selling until everything was bought. Why these goods? Because these were hard times and this was a poor village, so people wanted and needed the basics-soap to keep them clean, candles to light the night, and thread to sew their clothes. I was surrounded by other vendors, all of them much older. Many of them could be my grandparents. And they knew the ways of the palengke far more than a boy of 15, especially one who had never worked before.

But being young had its advantages. I did not tire as easily, and I moved more quickly. I was also more aggressive. After each day, I would make about 20 pesos in profit! There was enough to feed my siblings and still enough to pour back into the business. The pesos I made in the palengke were the pesos that went into building the business I have today. After this experience, I told myself, "If I can compete with people so much older than me, if I can support my whole family at 15, I can do anything!"

Looking back, I wonder, what would have happened if my father had not left my family with nothing? Would I have become the man I am? Who knows?
The important thing to know is that life will always deal us a few bad cards. But we have to play those cards the best we can. And WE can play to win! This was one lesson I picked up when I was a teenager. It has been my guiding principle ever since. And I have had 66 years to practice self-determination.

When I wanted something, the best person to depend on was myself. And so I continued to work. In 1943, I expanded and began trading goods between Cebu and Manila. From Cebu, I would transport tires on a small boat called a batel. After traveling for five days to Lucena, I would load them into a truck for the six- hour trip to Manila. I would end up sitting on top of my goods so they would not be stolen! In Manila, I would then purchase other goods from the earnings I made from the tires, to sell in Cebu.

Then, when WWII ended, I saw the opportunity for trading goods in post-war Philippines. I was 20 years old. With my brother Henry, I put up Amasia Trading which imported onions, flour, used clothing, old newspapers and magazines, and fruits from the United States. In 1948, my mother and I got my siblings back from China. I also converted a two-story building in Cebu to serve as our home, office, and warehouse all at the same time. The whole family began helping out with the business.

In 1957, at age 31, I spotted an opportunity in corn-starch manufacturing. But I was going to compete with Ludo and Luym, the richest group in Cebu and the biggest cornstarch manufacturers. I borrowed money to finance the project. The first bank I approached made me wait for two hours, only to refuse my loan. The second one, China Bank, approved a P500, 000-peso clean loan for me. Years later, the banker who extended that loan, Dr. Albino Sycip said that he saw something special in me.

Today, I still wonder what that was, but I still thank Dr. Sycip to this day. Upon launching our first product, Panda corn starch, a price war ensued. After the smoke cleared, Universal Corn Products was still left standing. It is the foundation upon which JG Summit Holdings now stands.

Interestingly, the price war also forced the closure of a third cornstarch company, and one of their chemists was Lucio Tan, who always kids me that I caused him to lose his job. I always reply that if it were not for me, he will not be one of the richest men in the Philippines today.

When my business grew, and it was time for me to bring in more people-my family, the professionals, the consultants, and more employees-I knew that I had to be there to teach them what I knew. When dad died at age 34, he did not leave a succession plan. From that, I learned that one must teach people to take over a business at any time.

The values of hard work that I learned from my father, I taught to my children. They started doing jobs here and there even when they were still in high school. Six years ago, I announced my retirement and handed the reins to my youngest brother James and only son Lance.

But my children tease me because I still go to the office every day and make myself useful. I just hired my first Executive Assistant and moved into a bigger and nicer office. Building a business to the size of JG Summit was not easy. Many challenges were thrown my way. I could have walked away from them, keeping the business small, but safe. Instead, I chose to fight. But this did not mean I won each time.

By 1976, at age 50, we had built significant businesses in food products anchored by a branded coffee called Blend 45, and agro-industrial products under the Robina Farms brand. That year, I faced one of my biggest challenges, and lost. And my loss was highly publicized, too. But I still believe that this was one of my defining moments.

In that decade, not many business opportunities were available due to the political and economic environment. Many Filipinos were already sending their money out of the country. As a Filipino, I felt that our money must be invested here. I decided to purchase shares in San Miguel, then one of the Philippines' biggest corporations. By 1976, I had acquired enough shares to sit on its board. The media called me an upstart. "Who is Gokongwei and why is he doing all those terrible things to San Miguel?" ran one headline of the day. In another article, I was described as a pygmy going up against the powers-that- be. The San Miguel board of directors itself even aid for an ad in all the country’s top newspapers telling the public why I should not be on the board.

On the day of reckoning, shareholders quickly filled up the auditorium to witness the battle. My brother James and I had prepared for many hours for this debate. We were nervous and excited at the same time. In the end, I did not get the board seat because of the Supreme Court Ruling. But I was able to prove to others-and to myself-that I was willing to put up a fight. I succeeded because I overcame my fear, and tried. I believe this battle helped define who I am today.

In a twist to this story, I was invited to sit on the board of Anscor and San Miguel Hong Kong 5 years later. Lose some, win some. Since then, I've become known as a serious player in the business world, but the challenges haven't stopped coming. Let me tell you about the three most recent challenges. In all three, conventional wisdom bet against us.

See, we set up businesses against market Goliaths in very high-capital industries: airline, telecoms, and beverage.

Challenge No. 1: In 1996, we decided to start an airline. At the time, the dominant airline in the country was PAL, and if you wanted to travel cheaply, you did not fly. You went by sea or by land.

However, my son Lance and I had a vision for Cebu Pacific: We wanted every Filipino to fly. Inspired by the low-cost carrier models in the United States, we believed that an airline based on the no-frills concept would work here. No hot meals. No newspaper. Mono-class seating. Operating with a single aircraft type. Faster turn around time. It all worked, thus enabling Cebu Pacific to pass on savings to the consumer. How did we do this?

By sticking to our philosophy of "low cost, great value." And we stick to that philosophy to this day. Cebu Pacific offers incentives. Customers can avail themselves of a tiered pricing scheme, with promotional seats for as low a P1. The earlier you book, the cheaper your ticket. Cebu Pacific also made it convenient for passengers by making online booking available.

This year, 1.25 million flights will be booked through our website. This reduced our distribution costs dramatically. Low cost. Great value. When we started 11 years ago, Cebu Pacific flew only 360,000 passengers, with 24 daily flights to 3 destinations. This year, we expect to fly more than five million passengers, with over 120 daily flights to 20 local destinations and 12 Asian cities.

Today, we are the largest in terms of domestic flights, routes and destinations. We also have the youngest fleet in the region after acquiring new Airbus 319s and 320s. In January, new ATR planes will arrive. These are smaller planes that can land on smaller air strips like those in Palawan and Caticlan.

Now you don't have to take a two-hour ride by mini-bus to get to the beach. Largely because of Cebu Pacific, the average Filipino can now afford to fly. In 2005, 1 out of 12 Filipinos flew within a year. In 2012, by continuing to offer low fares, we hope to reduce that ratio to 1 out of 6. We want to see more and more Filipinos see their country and the world!

Challenge No. 2: In 2003, we established Digitel Mobile Philippines, Inc. and developed a brand for the mobile phone business called Sun Cellular. Prior to the launch of the brand, we were actually involved in a transaction to purchase PLDT shares of the majority shareholder. The question in everyone's mind was how we could measure up to the two telecom giants. They were entrenched and we were late by eight years! PLDT held the landline monopoly for quite a while, and was first in the mobile phone industry. Globe was a younger company, but it launched digital mobile technology here.

But being a late player had its advantages. We could now build our platform from a broader perspective. We worked with more advanced technologies and intelligent systems not available ten years ago. We chose our suppliers based on the most cost-efficient hardware and software. Being a Johnny-come- lately allowed us to create and launch more innovative products, more quickly. All these provided us with the opportunity to give the consumers a choice that would rock their world.

The concept was simple. We would offer Filipinos to call and text as much as they want for a fixed monthly fee. For P250 a month, they could get in touch with anyone within the Sun network at any time. This means great savings of as much as 2/3 of their regular phone bill!

Suddenly, we gained traction. Within one year of its introduction, Sun hit one million customers. Once again, the paradigm shifts - this time in the telecom industry. Sun's 24/7 Call and Text unlimited changed the landscape of mobile-phone usage. Today, we have over 4 million subscribers and 2000 cell sites around the archipelago. In a country where 97% of the market is pre-paid, we believe we have hit on the right strategy. Sun Cellular is a Johnny-come- lately, but it's doing all right. It is a third player, but a significant one, in an industry where Cassandras believed a third player would perish. And as we have done in the realm of air travel, so have we done in the telecom world:

We have changed the marketplace. In the end, it is all about making life better for the consumer by giving them choices.

Challenge No. 3: In 2004, we launched C2, the green tea drink that would change the face of the local beverage industry - then, a playground of cola companies. Iced tea was just a sugary brown drink served bottomless in restaurants.
For many years, hardly was there any significant product innovation in the beverage business. Admittedly, we had little experience in this area. Universal Robina Corporation is the leader in snack foods but our only background in beverage was instant coffee. Moreover, we would be entering the playground of huge multinationals. We decided to play anyway.

It all began when I was in China in 2003 and noticed the immense popularity of bottled iced tea. I thought that this product would have huge potential here. We knew that the Philippines was not a traditional tea-drinking country since more familiar to consumers were colas in returnable glass bottles.

But precisely, this made the market ready for a different kind of beverage. One that refreshes yet gives the health benefits of green tea. We positioned it as a "spa" in a bottle. A drink that cools and cleans...thus, C2 was born. C2 immediately caught on with consumers.

When we launched C2 in 2004, we sold 100,000 bottles in the first month. Three years later, Filipinos drink around 30 million bottles of C2 per month. Indeed, C2 is in a good place. With Cebu Pacific, Sun Cellular, and C2, the JG Summit team took control of its destiny. And we did so in industries where old giants had set the rules of the game. It's not that we did not fear the giants. We knew we could have been crushed at the word go. So we just made sure we came prepared with great products and great strategies. We ended up changing the rules of the game instead. There goes the principle of self-determination, again. I tell you, it works for individuals as it does for companies. And as I firmly believe, it works for nations.

I have always wondered, like many of us, why we Filipinos have not lived up to our potential. We have proven we can. Manny Pacquiao and Efren Bata Reyes in sports. Lea Salonga and the UP Madrigal Singers in performing arts. Monique Lhuillier and Rafe Totenco in fashion. And these are just the names made famous by the media. There are many more who may not be celebrities but who have gained respect on the world stage. But to be a truly great nation, we must also excel as entrepreneurs before the world.

We must create Filipino brands for the global market place. If we want to be philosophical, we can say that, with a world-class brand, we create pride for our nation. If we want to be practical, we can say that, with brands that succeed in the world, we create more jobs for our people, right here. Then, we are able to take part in what's really important-giving our people a big opportunity to raise their standards of living, giving them a real chance to improve their lives. We can do it.
Our neighbors have done it. So can we. In the last 54 years, Korea worked hard to rebuild itself after a world war and a civil war destroyed it. From an agricultural economy in 1945, it shifted to light industry, consumer products, and heavy industry in the '80s. At the turn of the 21st century, the Korean government focused on making Korea the world's leading IT nation. It did this by grabbing market share in key sectors like semiconductors, robotics, and biotechnology. Today, one remarkable Korean brand has made it to the list of Top 100 Global Brands: Samsung. Less then a decade ago, Samsung meant nothing to consumers. By focusing on quality, design, and innovation, Samsung improved its products and its image. Today, it has surpassed the Japanese brand Sony. Now another Korean brand, LG Collins, is following in the footsteps of Samsung. It has also broken into the Top 100 Global Brands list.

What about China? Who would have thought that only 30 years after opening itself up to a market economy, China would become the world's fourth largest economy? Goods made in China are still thought of as cheap. Yet many brands around the world outsource their manufacturing to this country. China's own brands-like Lenovo, Haier, Chery QQ, and Huawei-are fast gaining ground as well. I have no doubt they will be the next big electronics, technology and car brands in the world.

Lee Kwan Yu's book "From Third World to First" captures Singapore's aspiration to join the First World. According to the book, Singapore was a trading post that the British developed as a nodal point in its maritime empire. The racial riots there made its officials determined to build a "multiracial society that would give equality to all citizens, regardless of race, language or religion." When Singapore was asked to leave the Malaysian Federation of States in 1965, Lee Kwan Yew developed strategies that he executed with single-mindedness despite their being unpopular. He and his cabinet started to build a nation by establishing the basics: building infrastructure, establishing an army, weeding out corruption, providing mass housing, building a financial center.

Forty short years after, Singapore has been transformed into the richest South East Asian country today, with a per capita income ofUS$32,000. These days, Singapore is transforming itself once more. This time it wants to be the creative hub in Asia, maybe even the world. More and more, it is attracting the best minds from all over the world in filmmaking, biotechnology, media, and finance. Meantime, Singaporeans have also created world-class brands: Banyan Tree in the hospitality industry, Singapore Airlines in the Airline industry and Singapore Telecoms in the Telco industry.

I often wonder: Why can't the Philippines, or a Filipino, do this? Fifty years after independence, we have yet to create a truly global brand. We cannot say the Philippines is too small because it has 86 million people. Switzerland, with 9 million people, created Nestle. Sweden, also with 9 million people, created Ericsson. Finland, even smaller with five million people, created Nokia. All three are major global brands, among others. Yes, our country is well-known for its labor, as we continue to export people around the world. And after India, we are grabbing a bigger chunk of the pie in the call-center and business-process- outsourcing industries. But by and large, the Philippines has no big industrial base, and Filipinos do not create world-class products. We should not be afraid to try-even if we are laughed at. Japan, laughed at for its cars, produced Toyota. Korea, for its electronics, produced Samsung. Meanwhile, the Philippines' biggest companies 50 years ago-majority of which are multinational corporations such as Coca-Cola, Procter and Gamble, and Unilever Philippines, for example-are still the biggest companies today.

There are very few big, local challengers. But already, hats off to Filipino entrepreneurs making strides to globalize their brands. Goldilocks has had much success in the Unites States and Canada, where half of its customers are non-Filipinos. Coffee-chain Figaro may be a small player in the coffee world today, but it is making the leap to the big time. Two Filipinas, Bea Valdez and Tina Ocampo, are now selling their Philippine-made jewelry and bags all over the world. Their labels are now at Barney's and Bergdorf's in the U.S. and in many other high-end shops in Asia, Europe, and the Middle East. When we started our own foray outside the Philippines 30 years ago, it wasn't a walk in the park. We set up a small factory in Hong Kong to manufacture Jack and Jill potato chips there.

Today, we are all over Asia. We have the number-one-potato- chips brand in Malaysia and Singapore. We are the leading biscuit manufacturer in Thailand, and a significant player in the candy market in Indonesia. Our Aces cereal brand is a market leader in many parts of China. C2 is now doing very well in Vietnam, selling over 3 million bottles a month there, after only 6 months in the market. Soon, we will launch C2 in other South East Asian markets. I am 81 today. But I do not forget the little boy that I was in the palengke in Cebu. I still believe in family. I still want to make good. I still don't mind going up against those older and better than me. I still believe hard work will not fail me.

And I still believe in people willing to think the same way. Through the years, the market place has expanded: between cities, between countries, between continents. I want to urge you all here to think bigger. Why serve 86 million when you can sell to four billion Asians? And that's just to start you off. Because there is still the world beyond Asia... When you go back to your offices, think of ways to sell and market your products and services to the world. Create world-class brands. You can if you really tried. I did. As a boy, I sold peanuts from my backyard. Today, I sell snacks to the world. I want to see other Filipinos do the same. Thank you and good evening once again.

Teacher's Child

In consideration with the holiday season and to prevent further nosebleed (Hehehe), hope you all enjoy this post!

Kudos to Prof. Jan Argy Tolentino who was recently elected as Vice President to the IFLRY in a historical manner and from whom this post originated!

Happy Holidays!!!!

“There is a difference between education and experience. Education is what you get from reading the small print. Experience is what you get from not reading it!"

But isn’t it true that great learning comes from both education and experience? Let me tell you a parable:

A young school teacher had a dream that an angel appeared to him and said, “You will be given a child who will grow up to become a world leader. How will you prepare the child so that he/she will realize his/her intelligence, grow in confidence, develop both assertiveness and sensitivity, open-mindedness, yet strong in character? In short, what kind of education will you provide that child can become one of the world’s truly GREAT leaders?”

The young teacher awoke in a cold sweat. It had never occurred to him before—any ONE of his present or future students could be the person described in his dream. Was he preparing them to rise to ANY POSITION to which they may aspire? He thought, ‘How might my teaching change if I KNEW that one of my students were this person?’ He gradually began to formulate a plan in his mind.

This student would need experience as well as instruction. That student would need to know how to solve problems of various kinds. That child would need to grow in character as well as knowledge. The child would need self-assurance as well as the ability to listen well and work with others. He or she would need to understand and appreciate the past, yet feel optimistic about the future. The student would need to know the value of lifelong learning in order to keep a curious and active mind. He or she would need to grow in understanding of others and become a student of the spirit. That child would need to set high standards for himself/herself and learn self discipline, yet would also need love and encouragement, that he or she might be filled with love and goodness.

His teaching changed. Every young person who walked through his classroom became, for him, a future world leader. He saw each one, not as they were, but as they could be. He expected the best from his students, yet tempered it with compassion. He taught each one as if the future of the world depended on his instruction.After many years, a woman he knew rose to a position of world prominence. He realized that she must surely have been the girl described in his dream. Only she was not one of his students, but rather his daughter. For of all the various teachers in her life, her father was the best.

I’ve heard it said that “Children are living messages we send to a time and place we will never see.” But this isn’t simply a parable about an unnamed school teacher. It is a parable about you and me — whether or not we are parents or even teachers. And the story, OUR story, actually begins like this:“You will be given a child who will grow up to become….” You finish the sentence. If not a world leader, then a superb father? An excellent teacher? A gifted healer? An innovative problem solver? An inspiring artist? A generous philanthropist?

Where and how you will encounter this child is a mystery. But believe that one child’s future may depend upon influence only you can provide, and something remarkable will happen. For no young person will ever be ordinary to you again. And you will never be the same.

The Weak Case for Government Schooling

This piece is by David Friedman. It was delivered as a paper on 7 July 1993 at a regional meeting of the Mont Pelerin Society and later published in Liberty. This paper was one of the many reading provided for in an on-line seminar sponsored by the Friedrich Naumann Foundation in 2006.

It is often said that Adam Smith, despite his general belief in laissez-faire, made an exception for education. That is not entirely true. In the course of a lengthy and interesting discussion, Smith argues both that education is a legitimate government function, at least in some societies, and that it is a function which governments perform very badly. His conclusion is that while it is legitimate for government to subsidize education, it may be more prudent to leave education entirely private.

My purpose in this essay is to argue that Smith’s conjecture was correct. While government schooling, free and compulsory, is at present nearly universal in developed societies, the case for it is unconvincing. There are arguments for government provision of schooling, as there are arguments for government provision of any good or service, but the arguments in favor are weaker, and the arguments against stronger, than the corresponding arguments for other goods and services that we routinely leave to the private market.

The Arguments In Favor of Government Schooling

The arguments in favor of government involvement in schooling can be roughly divided into four groups: Externality arguments, information arguments, capital market failure arguments, and egalitarian arguments. I will deal with them in that order.

Externality Arguments

The most common arguments for government schooling involve the claim that it produces large positive externalities, that by schooling my children I greatly benefit society as a whole, and that it is therefore inappropriate to leave either the decision of how to school them or the cost of doing so entirely to me. On further analysis, this claim divides into three variants, one wrong and two dubious.

The simplest version is the one that is wrong. It is said that since education increases human productivity, by educating my child I increase the wealth of the whole society, making all of us better off. One obvious problem with this argument is that, if correct, it applies to a lot of things other than education. Physical capital also increases productivity; does it follow that all investments ought to be subsidized? Better transportation allows workers to spend more time working and less time commuting; should we subsidize the production of cars?

The argument suggests that everything worth doing ought to be subsidized—leaving us with the puzzle of what we are to tax in order to raise the money for the subsidies. What is wrong with this argument is that it misses is the way in which the price system already allocates “social benefits” to those who produce them. Building a factory may increase the wealth of my society—but most (in the limit of perfect competition, all) of the increase goes to the investors whose capital paid for the factory. If I use a car instead of a bus to commute, the savings in time is added either to my leisure or my income. If education makes me a more productive worker, my income will be higher as a result..

Schooling—like a new car—produces non-market benefits as well. But these too go mostly to the student, enabled by education to appreciate more of the riches of the culture he lives in. There may be effects on other people as well, but they are typically small compared to the benefits to the student, and their sign is not always clear.

When my child becomes an expert in Shakespeare and quantum mechanics one result may be to enlighten and entertain her friends, but another may be to make them feel stupid. In just the same way, the beauty of my new car may produce the pleasures of aesthetic appreciation or the pains of envy in those who watch me drive it down the street. To base the design of our institutions for schooling on the uncertain effect on such third parties rather than the direct effect on the schooled makes no more sense than to base the design of cars on their value to everyone except the owner.

Another version of the externality arguments locates the externality not in the increased economic productivity of educated people but in their increased virtue. Both religious and utilitarian variants of this justification for government schooling were popular in the nineteenth century. Conservatives wanted to use publicly controlled education to teach the masses religious virtue. Many utilitarians, including Bentham himself, believed that while freedom was a good thing in most contexts, it was necessary first to teach people how to use their freedom — which is to say, to teach them utilitarianism. A form of this argument which still remains popular holds that uneducated people are particularly likely to become criminals, justifying government schooling as a form of crime control.

The thesis has two versions—education and indoctrination. The first assumes that crime and sin are the result of ignorance rather than rational choice. The evidence for this thesis is far from clear.

The indoctrination version of the argument may make somewhat more sense. In a private system, children will be taught what their parents want them to know. In a government system, children will be taught what the state wants them to know.

So the government system provides an opportunity for the state to indoctrinate children in beliefs that it is not in their interest, or their parents’ interest, for them to hold. Insofar as some virtues require one to act against one’s own interest—for instance, by not stealing something even when nobody is watching—that is an opportunity to indoctrinate children in virtue.

One good reply to this argument was made by William Godwin, who, in 1796, expressed his hope “that mankind will never have to learn so important a lesson through so corrupt a channel.” To put the argument in more modern language, government schooling does indeed provide the state with an opportunity to indoctrinate children—but there is no good reason to believe that it will be in the interest of the state to indoctrinate them in beliefs that it is in the interest of the rest of us for them to hold.

One final version of the externality argument is the claim that my education provides benefits to others because it makes me a more rational voter. While the argument is logically correct, its implications are limited. It is perhaps best understood as an argument for subsidy, not control. It is in my private interest to have a correct understanding of the world around me, and such an understanding will make me more able to evaluate government policy as well as more able to make private decisions. The only argument for government control is that it can force me to learn more about issues relevant to voting, instead of issues relevant to private choice. The problem with this is that the agency that does the controlling has its own interest with regard to how I vote—which brings us back to the indoctrination argument.

What negative externalities might result from schooling? One I have just mentioned—you may use your improved education to more effectively pressure the government to benefit you at my expense. A similar possibility exists for private transfers. Ignorance may perhaps produce crime—but education produces more competent criminals.

Another possibility is that schooling may produce negative externalities because it is used in the competitive pursuit of status. Consumption bundles of physical goods and services are not the only thing that individuals care about. If one reason I wish more schooling for myself or my children is so that I or they will have more income or more degrees than my neighbor or his children, and if my neighbor has similar tastes, then the gains of each come at the other’s expense.

I conclude that externality arguments provide little independent support for government schooling. At most they suggest that private schooling ought to receive some subsidy—and even that conclusion is an uncertain one, given both the weaknesses of the arguments for the existence of net positive externalities and the difficulty of separating subsidy from control.

Information Arguments

Another argument is that government schooling is necessary because parents, being themselves inadequately educated, are incompetent to choose schooling for their children.

As John Stuart Mill put it, “The uncultivated cannot be competent judges of cultivation.” This argument concedes that government schools will teach what the state wants children to learn instead of what their parents want them to learn, but views that as an advantage of the government system.

This argument seems to justify at most one generation of government schooling. Once we educate the first generation, they should then be competent to choose an education for their children. The U.S. and Britain have now had universal government schooling for at least five or six generations. If it has done a good job of educating students it should now be unnecessary, and if it has done a bad job perhaps we should try something else.

A further problem with the argument is that most of what the government schools actually teach—or, too often, fail to teach—is well within the comprehension of virtually all parents. Insofar as the main business of the schools is to teach children the basic skills needed to function in our society, the children’s parents are usually competent to judge how good a job is being done. Even a parent who cannot read can still tell whether his child can. And, while a few educational issues may go beyond the parents’ competence to judge, parents qua parents, like parents qua taxpayers, have the option of making use of other people’s expert opinion. The crucial difference between the two roles is that a parent deciding what school his child shall go to has a far stronger incentive to form as accurate an opinion as possible, than does a parent deciding how to vote.

Parents have one other advantage over educational administrators—a flood of detailed free information. By observing their children, and by listening to them, parents can learn a great deal about how well they are being schooled. As West put it, describing the situation in England in the 19th century, “Parents were their own inspectors and, compared with official ones, they were not only much more numerous but exercised continuous rather than periodic check.”

Parental preferences have often clashed with “expert educational opinion,” but it has not always been the parents who turned out to be in the wrong. Thus in Scotland, around 1800, parents “Increasingly resisted traditional parochial school emphasis on classical languages and Religion ... Parents complained that their children did not get their due in the school ‘By not having been teached writing.’” Modern examples might include the controversies associated with the shift away from phonics and towards the look-see approach to teaching literacy and the introduction of the “new math” somewhat later—both arguably among the causes of the massive decline in the output of the American school system from 1960 to 1980. Parents have to live with the results of educational experiments; the educators can always go on to a new generation of experimental subjects.

Capital Market Failure

The special problems of investing in human capital are sometimes offered as an argument for government intervention in schooling. If I wish to borrow money to pay for a profitable investment in building a factory, I can offer the factory as collateral. If I wish to make a profitable investment in my own education, I have no similar option.

How important this argument is depends on whether the unit of analysis is the individual or the family. If it is the family, then the argument applies to only a small fraction of the population. Most families can pay the cost of schooling their children out of current income.

Indeed, most families do pay the cost of schooling their children out of current income—in the form of taxes to support government schools. Such expenditures might be harder for those with large families and low incomes than they are now and easier for those with small families and high incomes. On the other hand, there is evidence that private schools provide a given level of education at a considerably lower cost than government schools. If so, most parents would face a lower burden under a completely private system. The market failure argument would then apply only to a small fraction of families at the bottom of the income distribution.

So far as that part of the population is concerned, several points are worth noting. The first is that it makes very little sense to construct a government school system for everyone in order to subsidize investments in human capital for a few percent of the population. The second is that the present system does a very bad job of educating just those people who would have the hardest time educating themselves, which casts some doubt on the idea that it is, for them, an improvement on a purely private system. The third is that the evidence of the nineteenth century suggests that even quite poor people are able to provide their children at least a minimal education. British workers of the early nineteenth century were very much poorer than the inhabitants of America’s inner cities at present.

Yet the evidence suggests that most were able, without government help, to buy enough education for their children to provide at least minimal literacy—more than many inner city children get now. Additional issues arise if we consider the problem from the standpoint of the child rather than the family. Most families can afford to pay for schooling their children, but very few children can afford to pay for schooling themselves. A private system depends, for almost all children, on parents caring enough about the welfare of their children to be willing to pay the cost of their education.

Most parents, in most societies, do care for the welfare of their children.

The alternative to allowing parents to make decisions for their children is not, as a general rule, having the decisions made by the children—five year olds lack not only income, but information and political power as well. The alternative to having a child’s parents make decisions for him is having other adults—school administrators, politicians, voters—make those decisions. Parents may not always be altruistic towards their children, but a child’s parents are, of all adults, the ones most likely to be. The argument against letting the parents make the decision is even stronger arguments against letting anyone else make it instead.

Here again, the empirical evidence is striking. Under circumstances of poverty difficult for most of us to imagine, British parents of the early 19th century managed to send almost all of their children to school—not for as long as our children go to school, but for long enough to acquire at least minimal skills. In this country a century later, immigrant parents routinely sacrificed themselves to promote the education of their children. We have yet to see any similar level of altruism on the part of those who control the government schools—say a teacher strike aimed at lowering teacher wages in order to leave more money to pay for books.

The Egalitarian Argument

A final, and powerful, argument against an entirely private system of schooling is that it promotes and perpetuates inequality. Wealthier parents will spend more on their children, making those children in turn better educated, more successful, and wealthier.

In order to give a child from a poor and badly educated family as a good an education as a child from a rich and well educated family, it would, on average, be necessary to spend substantially more on the former.

There are at least two possible replies to that argument. One is that our objective ought to be education, not equality. If shifting to an entirely private system improves the education of the bottom half of the income distribution a little and the education of the top half a lot, both groups are better off. Pursuing that line of argument would take me farther a field than I intend to go in this essay.

A second reply is that while a completely private system would indeed result in unequal educational accomplishment, so does our present government system—and it is far from obvious which leads to more inequality. At present, the quality of government schools varies enormously and non-randomly from place to place.

One reason is that high income suburbs, on average, can and do spend more on their schools than low income inner cities, although in the U.S. this difference has probably decreased in recent years as a result of legal pressures. A second reason is that the children of affluent and well educated parents are, on the whole, easier to educate and to be educated with than the children of the inner city poor. A third may well be that affluent suburbanites are better than the inner city poor at getting political institutions to act in their interest.

The first two effects would still exist in an entirely private system, but several factors might reduce the inequality they now produce. A private system would be less rigidly geographical than the present government system. Poor parents with bright children who were willing to sacrifice for them, as many have been in the past, would have the option of sending them to better schools instead of being limited to the school district where they happened to live.

Such arrangements are technically possible in a government system as well, and occasionally permitted, but not often—perhaps because they transfer power from the schooling bureaucracy to parents.

Another advantage of the private system, from the standpoint of poor parents, is that parents could control what they got without having to acquire political power—which poor people, as a rule, have very little of. Subject to the limits of their income, poor people have the same economic power as anyone else—the ability to choose whom they buy from.

A final advantage is that a private system might actually provide poor children with some education. Under our present system, the largest determinant of educational output is family background. One explanation of that is that parents are a major part of their children’s environment and thus a major source of their education. But a second explanation may be that our schools do not do a very good job of teaching, making children more dependent than they need be on the education they get from those around them. If so, poor children, who are in more need than rich children of things they cannot get from their parents, might well benefit more from a general improvement in the schools.

History

In many areas of human activity there are two histories—the popular history, mostly mythological, and the real history. In education, quite a lot of the real history has been provided by E. G. West. In examining the history of the rise of government schooling in Britain and the U.S., he has established several important points which go far to refute the popular idea that mass education can exist only through the intervention of the state. They are:

1. Schooling expenditure in Britain represented about the same fraction of national income prior to government intervention and compulsory schooling laws as it did after both were introduced.

2. Prior to government involvement, almost all children were going to school.

3. Attempts to measure educational output in the form of literacy, using both a variety of studies at particular times and a crude measure (percentage of grooms who signed their names when they got married) that is available over a long time period, show no significant effect of government intervention. So far as one can tell by the (very imperfect) evidence, literacy was already rising rapidly prior to the beginning of government subsidy. Most of the measured increase in literacy had already occurred by the time a nationwide system of government schools and compulsory attendance was established.

4. The eventual expansion of the government school system was in large part the result of efforts by the people running it, plausibly explained by their own self-interest. Its main effect was to replace, not to supplement, the pre-existing private system.

The Voucher Alternative

I have been considering two alternatives—government and private schooling. Another alternative, in some ways intermediate between the two, is for the state to provide a fixed amount per pupil per year, which may be used to buy schooling from any of a variety of private providers. How well does such a system deal with the problems we have discussed?

A voucher system solves some of the problems associated with market failure on the human capital market. Families that are too poor to pay to send their children to school will be able to use the voucher to pay for schooling. Parents who do not care enough for their children to be willing to pay for their schooling will be able to use vouchers to provide schooling for their children at no cost to themselves. A voucher system might also reduce educational inequality, relative to both government and private systems. It would not, however, eliminate inequality, both because parents would be free to supplement the voucher and because the parents themselves are a major input to the child’s education.

Whether a voucher answers the arguments of those who believe that parents are incompetent to control their children’s schooling, either because they have the wrong objectives or because they have the right objectives but not enough knowledge to achieve them, depends on how much control the state exercises over schools that accept vouchers.

This suggests an important disadvantage of vouchers. If the government is paying the piper, it may well choose to call the tune. If it is giving vouchers to pay for education, it will probably want to determine what counts as education. Thus a voucher system, like a government school system, has the potential to be used either to encourage indoctrination or to redirect “educational expenditure” to benefit politically well organized groups such as school teachers and administrators. While one could design a voucher system to minimize such problems, perhaps by permitting schools to qualify if the mean performance of their students on objective exams matched the mean performance of students at government run schools, it is far from clear that such a system could be either passed or maintained.

Conclusion

There are arguments in favor of having government pay for and produce schooling, as there are arguments in favor of having government pay for and produce practically any good or service. I have tried to show that the arguments in the case of schooling are not very strong.

There are also arguments against having government produce and pay for any good—the arguments for political failure combined with the general economic argument that private markets tend, at least in some approximation, to produce the optimal output at the minimal cost. In the case of schooling, there are additional and very powerful arguments against government control. One of the most important is its potential use to indoctrinate the population in views that the government, or the schooling bureaucracy, or powerful lobbying groups, wish people to hold.

In this regard, one of the great disadvantages of government schooling is its uniformity. Any education can be viewed as indoctrination from the standpoint of those who do not believe what is being taught. Under a private system, however, there is no single orthodoxy.

Different children are taught different things, reflecting the differing preferences of their parents and, to a lesser degree, the beliefs of teachers, textbook authors, and other contributors to the educational process. As adults, the graduates of such schools have the opportunity to correct the deficiencies in their education by interacting with the graduates of other schools who have been taught very different things. Under a government system, there is a serious risk that one official orthodoxy will be taught to all.

A further disadvantage to state education, especially in a diverse society, is that it inevitably involves a state religion. One cannot educate children without talking about issues on which religions differ. The pretence of a religiously neutral education, at least in the U.S., is maintained mainly by the tendency of teachers, like other people, to regard what they believe in as fact and only what other people believe in as religion. A government school system in a diverse society is thus deeply divisive, since it means that some people’s children are being indoctrinated with other people’s religion.

Many of the disadvantages of government schooling could be eliminated, or at least reduced, by a voucher system. While such a system would be a great improvement over government schooling, there seems little reason to believe that it would be superior to an entirely private system. The great argument against it is that a voucher system must include some definition of what is or is not schooling, in order to determine what can be paid for with the voucher. Imposing such a definition on private schools implies the same sorts of problems of government control that would arise with a government school system, although possibly to a much reduced degree.

I conclude that Adam Smith was correct in his suggestion. Whether or not it is proper to have a government system of schooling, it is prudent not to.