Political Economy Framework of the

Philippines

Political outline:
Executive power
Exercised by the government under the leadership of the President presides over
and appoints the cabinet members. He also holds the implementation of the Law
of the country and running the day-to-day affairs. The President is also the
commander in chief of the armed forces of the Philippines. It is explicitly assigned
by the Constitution.

Legislative Power
In the government legislative power is vested in the Congress. This branch is
authorized to make Laws, alter, and repeal them. It is divided into the Senate and
House of the Representative.

Main Political Parties

Our country has a multi-party system and political parties usually have diverse
ideologies. Parties generally work to form coalition Government.

Economic Indicators
It is a statistic used to gauge future trends in a nation’s economy.

Types of Indicators:
Leading Indicators – those indicators due to operation of which, change in the
business cycle happen. Eg. CPI

Coincident Indicators – those indicators where in the changes in the indicators simultaneously
bring changes in business cycle. Eg. GDP
Lagging indicators – those indicators where in there is a time lag between
indicators changes and business cycle change.
 Main Sector of Industry

Agricultural Sector – employs 27% of the labour forces but

contribute only 9% of the GDP. Philippines is the second producers of
coconuts. Fishing contributes 1.5% of the GDP. The Philippines is one of
the richest country of the world in terms of minerals, copper, gold, and
zinc. This wealth estimated more than USD 840 billion.

Industry Sector – it contributes 33% of the GDP, employs 16% of

population. Industrial food processing is one of the main manufacturing
activities. The big industry are dominated by the production of cement,
glass, chemicals, fertilizers, iron, steel, refined oil products.

Tertiary/Sector services – represents almost 58% of the GDP and

employs more than half of the country’s work force. And it has
developed substantially especial in the field of telecommunication, call
centers, finance.
 Two ideal type political economies

 An ideal-type is what a certain economy might be like in its pure form

 An ideal-type is illustrative but it does not necessarily correspond to any real world example.
 The two ideal-type political economies are:
 The market economy (also called price system).
 The command economy (also called command system).

The market economy

 Factors of production – Labor: The worker decides who he/she will offer
his/her work and the compensation he/she will receive – Land and
Capital: The owner will decide the condition the resources will be
employed.
 Goods Produced – profit maximizing behavior of the firm determines
what resources to acquire and what goods to produce – Adam Smith’s
(1723-1790) “invisible hand”
 Production is guided by the “invisible hand” – in terms of demand and
supply, this system is demand oriented
 The firm attempt to assess the demand for various goods in the market
and then to the Market Economy.
 Price of Resources and Goods – The market forces of demand and supply
guided by the “invisible hand” – Nothing has value except to the extent
that someone will exchange resources for it. In the most circumstances,
many producers offer similar resources and goods that result in vigorous
competition. A basic economics assumption in the market economy is the
continuous adjustment towards an equilibrium point.
 Quantity demanded = Quantity supplied
 Distribution of resources and goods – The invisible hand of the market –
Market participant pursue their own self –interest in the market
economy.
 Government Role – Government intervention is minimal. Prevent market
participants from doing violence to each other. Protects its citizens from
the external environment. Preventing violation of its sovereignty or its
citizens rights by the external environment. In meeting in these
responsibilities the government may participate in the market, decrease
or increase taxes, implement trade incentives or restrictions, etc.
The command economy (government control)

 Factors of Production- In a pure command economy, the government controls/determines

how the factors of production will be utilized.
 The Government owns the land, the natural resources, the factories, the machines, and so on.
 The Government also controls labor.
 It decides the conditions and purposes for which individual will offer his/her labor.
 Goods Produced- The Government is in a sense the one firm that produces all major goods in
the system.
 The Government prepares an economic plan that specifies how and how much will be
produced.
 In terms of demand and supply, this system is supply-oriented.
 The Governments attempts to make the best use of the resources and transform them into as
many appropriate goods available for the consumer.
 Inequalities of wealth, power, and status.
 Conflict between rich and poor production for profit.
 Proliferation of goods that are profitable and scarcity of goods that is not profitable.
 Wasteful competition among firms if consumers are uneducated Economic Cycles.
 Economy experiences cycle (scarcity and inflation, surpluses and deflation, boom and growth,
recession or depression) Command Economies Limited incentives for Efficiency.
 No initiative to produce high quality goods.
 Poor quality goods.
 Access to existing goods.
 No incentive for hard work.
 Workers become conservation and lazy Unresponsive production.
 Production of goods that is not directly reflective of consumer demand.
 Central planners decide what people will have.
 Severe shortage of some goods over centralization and Inflexibility.
 Central planners usually do not receive and react effectively to information regarding
miscalculations and mistakes in the development or implementation of the state planfactors
of production into goods that will maximize profits.

Price of Resources and Goods

o Since the Government controls all factors of production (Monopsony) and is the firm
producing all goods (Monopoly), it is able to set the prices.
o The Government tells farmers how much to produce and also sets the prices.
o The Government will determine who will produce and the wages and benefits they will
receive
o Distribution of Resources and Goods.
o The Governments’ economic plan determines who will receive which goods which goods and
how much
 For Example: Farmer X will receive 30,000 corn seeds per acre.
 For Example: 1 pound of rice per family per week in city X

Command economies aim to distributing necessary goods, (especially food, shelter, education,
health care) to every person on an equal basis. – However, the crucial decisions about the
distribution of goods are made by those with power in the political system.

 Government role- Dominant and Overwhelming role – Controls, plans, set prices, and
distribute all resources and goods – Any surplus belongs to the state and will be used to serve
the objectives of the state.
10 Benefits and Problems of Market and Command
Economies Benefits Market Economy

 Decentralized (no central plan)

 Economic cycles (boom, bust, inflation and deflation, and growth and
recession)
 Demand Oriented
 Goods’ quality and prices reflect consumers’ desires
 Goods are reflective of consumers’ desire may make inappropriate use of
societal resources
 Competition
 Energetic and efficient
 Inequalities in wealth and resources Command Economy
 Centralized (central plan)
 State plan use of societal resources
 Over centralized control; limited innovation; lack of change
 Supply Oriented
 Production and Distribution of social and individual needs
 Surpluses and shortages; lack of coordination
 No Competition
 Work for common good; relative equality of wealth and income
 Little initiative; shoddy products; low productivity critics market
economies resources inequality
 Rich get richer
 Those with few resources tend to lose market power
 Some people may lack resources to meet the standards of living
 Mixed economy
An economy system in which both the private enterprise and a degree
of state monopoly (usually in public services, defense, infrastructure,
and basic industries) coexist. All modern economies are mixed where
the means of production are shared between the private and public
sector. Also called dual economy.
What is a ‘Mixed Economy System’
A mixed economy system is a system that combines aspects of both
capitalism and socialism. A mixed economy system protects private
property and allows a level of economic freedom in the use of capital,
but also allows for government to interfere in economic activities in
order to achieve social aims. According to neoclassical theory, mixed
economy are less efficient than pure free markets, but proponent of
government intervention s argue that the base conditions such as equal
information and rational market participants cannot be achieved in
practical application.
A mixed economy consist of both private and government/state-owned
entities that share control of owning, making, selling, and exchanging
good in the country. Two example of mixed economy are the U.S. and
FRANCE. A mixed economy monitor the power of monopolies.
What is an example of a country with a mixed economy?
A mixed economy is one where there are both government-owned
business and private-owned business. There are many mixed
economies in the world. In fact, majority of the countries are mixed
economies. Some, examples are India, USA, England, and Canada.
What is an example of a traditional economy?
Countries that used this type of economic system are often rural and
farm-based. Also known as a subsistence economy, a traditional
economy is defined by bartering and trading…examples of these
traditional economies include those of the Inuit or those plantations in
South India.
Market economy – in a free market economy, the Law of supply and
demand, rather than a central government, regulates production and
labor.
What country is an example of a market economy?
Countries that have a market economy are Mexico, United State,
United Kingdom, Germany, and Canada. These countries have a market
economy because the prices of goods and services are set by supply
and demand.
Mixed economy in the Philippines
The Philippines has a mixed economic system which includes a variety
of private freedom, combined w/ centralized economic planning and
government regulations
 ISMS in Political Economy

(Information.Security.Management.System) ISMS – is a set off policies

and procedures for systematically managing an organizations sensitive
data. The goal of ISMS is to minimize the risk and ensure business
continuity by pro-actively limiting the impact of a security breach.
ISMS – help for further understanding about the political economy.

An economic and political system where a country’s trade and industry

are controlled by private owners for profit rather than by the state.

Sets of ISMS;

Capitalism – is an economic system in which the means of production

and distribution are cooperate and privately owned. Operations are
funded by profits, and no controlled by a state government individual
rights rule the capitalistic ideal and implementation.

Communism – is a political and economic system in which the major

productive resources in a society such as mines, factories, and farms
are owned by the public or the state, and wealth is divided among
citizen equally or according to individual needs.

Socialism – economy is state run and it lacks a stock exchange health

care and education are all completely managed and administered by
the government.

Anarchism – is not only about a future society. It is also about the social
struggle happening today it is not a condition but a process, which we
create by our self-activity and self-liberation.