In the midst of the continuing jousting among economists as to the likely growth of the Philippine economy in 2019, I am reminded of central thesis of MIT (Massachusetts Institute of Technology) economics professor W. W. Rostow in his much-acclaimed 1960s book “The Stages of Growth.”
Professor Rostow’s central thesis was that the road to full economic development—road from the Third World to th ae First World—requires sustained high performance and that a country must achieve at least 7-percent GDP (gross domestic product) growth every year for at least 14 years if it is to attain developed-country status.
Before “The Stages of Growth” came along, economic development theorists had simply postulated that by steadily pursuing sound monetary, fiscal and trade policies developing countries could attain First World status. Rostow was the first economist to put numbers to the theory of economic development.
Seen against Prof. Rostow’s theory on the growth requirement of economic development, the ongoing debate as to the Philippine economy’s 2019 growth rate misses the point. The missed point is not whether 6-7 percent has become the ‘new normal’ of Philippine GDP growth or whether the economy will recover sufficiently strongly from the growth drop to 5.6 percent in 2019’s first quarter or whether the economy’s entire-2019 growth rate will be higher than 2018’s 6.2 percent. The real point is that the Philippine economy thus far has not achieved annual GDP growth of 7 percent or more.
What I’m driving at is that everyone interested in the rate of growth of the Philippine economy—economists from both the government and the private sector—should focus on the number 7 and 8 and not quibble over the fraction of 1 percent that follows the number 6. In other words, instead of speculating whether the economy’s annual growth rate will be 6.1 percent or 6.3 percent or 6.5 percent, they should be looking to annual GDP increases of 7 percent or more.
Looking to, and engaging in debates about, growth rates lower than 7 percent is a case of setting one’s sights low. After all, the official annual growth target is 7-8 percent. Those numbers should be the goal of all economic activity in this country, not numbers lower, than 7.
The government’s Ambisyon 2040 plan aims to have the Philippines graduating to the First World 21 years from today. That target is not going to be achieved if this country’s development planners pay little or no attention to Prof. Rostow’s formula for the attainment of developed-country status.