MAP Insights

Many of us will long remember how mean and wicked COVID-19 is.

For one, it is insidious. Except for a few who acted with alacrity, most nations were caught with their pants down — blissfully unaware of the serious situation in Wuhan where it all began, they did not immediately test, contact trace, and isolate the infected. Consequently, they suffered exponential contamination and overwhelmed their healthcare capability.

For another, it continues to baffle experts. Most of those infected developed mild to moderate illness and recovered without hospitalization, especially children, and women and men below 40 years old. Older men, especially those with pre-existing conditions, are more vulnerable and with higher mortality rates. Experts think the infected may have developed some immunity, but do not know how strong and for how long. Therapeutics and vaccines, which normally take years to develop, appear to be in sight before the end of the year. While there is no vaccine and herd immunity has not been achieved, the virus will not go away and we just have to adjust to the new normal.

Finally, in the words of Paul Krugman, a Nobel Laureate economist, it has brought most economies into a “coma.” Unemployment has reached unprecedented levels. Most businesses have been shut down, some bankruptcies declared, and many wonder whether they can weather the storm or not. Trillions of dollars are being spent by governments to provide liquidity to the system, as well as stimulus to revive their economies.

But we will not forget how COVID-19 has exposed global social injustice, despite human progress in recent decades.

Hardest hit by the virus are the millions who are poor, colored, or ethnic minorities, the handicapped, the elderly, and those who live in squalor in congested shanties, some homeless, and many dependent on dole-outs, with hardly any healthcare or social insurance, and no hope of getting out of the vicious cycle of poverty.

Pope Francis called for action to end the “pandemic of poverty in the world,” emphasizing, “All the suffering will be of no use if we do not build together a more just, more equitable, more Christian society, not in name, but in reality.”

Meanwhile, at least 75 cities across America and some parts of the world have seen protests against racism over the past several weeks, some with violence or looting.

Humanity, of course, has made significant progress in recent decades.

In his 2015 book, The Great Surge, Professor Steven Radelet described “the greatest development progress among the global poor in the history of the world.”

He reported that since 1990, “millions have been lifted from extreme poverty to modestly higher standard of living, the income gaps between the wealthiest countries and the poorest countries are beginning to close, most children from developing countries will live longer, healthier, and better-educated lives, and democracy will be the new norm.”

He attributed this transformation to three major catalysts: “1.) major geopolitical shifts that created favorable conditions conducive to development, such as the end of the cold war and a new consensus around a more market-based economic system; 2.) globalization and new technologies that provided opportunities through which people begin to move toward prosperity; and, 3.) right skills and capabilities, and in particular, the required leadership to begin to bring about institutional transformation.”

Despite this “great surge” in human progress, poverty and racial discrimination persist.

In my opinion, there are two major causes of poverty, namely, unbridled capitalism and governance failure.

Unbridled capitalism can probably be described by Adam Smith’s theory that every individual acts out of self-interest, other self-interested people provide competition, and the invisible hand of the market brings order to the system. Smith also believed in “laissez faire,” or that economies function best when there is no interference by the government. Self-interest presupposes that enterprises compete where the rule is survival of the fittest and that corporations must achieve the highest returns for their shareholders.

This unbridled capitalism has resulted in the “rich getting richer and the poor getting poorer.” CNBC reported in 2015 that “the richest 1% now own half of the world’s wealth.”

Governance failure is best described by Professor Jeffrey Sachs in his 2005 book, The End of Poverty. He posited, “Economic development requires a government oriented toward development. It must provide the needed infrastructure and social services available to the whole population and an environment conducive to investments by private businesses. It must exercise self-restraint in demanding bribes or side payments. It must maintain peace and safety and judicial systems that can define property rights and enforce contracts. It must defend the national territory to keep it safe from invasion. When governments fail in any of these tasks — leaving huge gaps in infrastructure, or raising corruption to levels that would impair economic activity, or failing to ensure domestic peace, then the economy is sure to fail and fail badly.”

Corruption is simply defined as the use of public funds for private gain. Resources, which otherwise should provide healthcare, education and other social services to many, go instead to line the pockets of a few. The higher the level of corruption, the higher the level of poverty.

The world needs more humane capitalism — where the corporation’s raison d’etre is to serve not only its shareholders but its stakeholders — its people, partners, regulators, and community. Profit should not be the end all and be all of a corporation; rather, it should be its sine qua non.

Moreover, states should provide better governance — where it is truly a government of the people, by the people, and for the people. It must be inclusive, not exclusive. Its focus should be on the small and medium enterprises, not the big companies which can flourish on their own. Finally, it should serve the common good.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP.


Renato “Rene” C. Valencia is the Chair of the Omnipay, Inc., a graduate of the Philippine Military Academy, and formerly the president and CEO of the Social Security System (SSS).