life satisfaction

Learned Optimism

Reality checks are always needed by over-confident governments.

Martin Seligman the founder of positive psychology uncovered a pattern of behavior that he believes is responsible for greater resilience and happiness among born optimists. Whenever something good happens to the subject, that person will often attribute it to him- or herself, will tend to view the outcome as something that was within his or her control, and will regard the event as part of an ongoing streak of success.

The reverse happens when something bad happens. The subject will explain it as resulting from a specific, temporary event, and won’t regard it as part of an ongoing chain of similar defeats. This way of explaining things allows individuals to persist when others would have given up and allows them to remain confident in their abilities despite facing rejection or failure.

There are advantages to having such a positive mental attitude. CEO’s take their companies to new heights, salespeople persist despite facing rejection and eventually make their quota, and athletes remain motivated to train despite facing physical and mental challenges.

Filipinos seem to be a very optimistic lot. They tend to report higher levels of life satisfaction in surveys, higher than their income per capita warrants. Regardless of how terrible the past year might have been, they will often express hope and hold a view that things will be better in the coming one. The tagline, ‘It’s more fun in the Philippines’ seems to express this innate optimism.

Such a positive view becomes quite useful for the government which will often claim credit for successes that come as a result of good fortune and blame other factors outside its control whenever things turn sour. They say every cloud has a silver lining. Despite the economic storm clouds that engulf the nation, there are many positives that may be gleaned.

The business community remains quite bullish despite the slowdown in the pace of the economy last year. The flipside of weaker growth is lower inflation, which is providing the Bangko Sentral with enough elbow room to maneuver. The expected easing of interest rates is already fuelling a spike in the local bourse.

Expect the government to claim credit for engineering this by not spending the allotted budget last year. The contraction in fiscal spending allowing for policy space for monetary authorities will be spun as a stroke of genius on the part of this government despite the fact that it was unplanned.

Similarly as our exports decline owing to weaker demand from a troubled Europe and North America, as legislative proposals in the United States threaten our budding business process outsourcing industry, and as the Iran nuclear standoff dampens tourism because of higher fuel costs, expect the government to fall back on consumer-led growth propped up by overseas remittances.

Indeed as investors seek to put their money in developing countries with internally driven domestic economies, the Philippines has been deemed ‘the economy to watch in 2012’ having weaned itself off the need to propel itself through exports or direct foreign investments, unlike China which is still managing that transition.

You can see this when you visit places like Subic Bay Freeport as I have during a recent trip. In its efforts to stamp out illegal smuggling outside of the Freeport of liquor and automobiles entering the port duty free for repackaging or re-assembly and shipping to the rest of ASEAN, the government has resorted to taxing everything that has gone in and given rebates to products moving out of the port. As a result, bottling and car assembling activities have left.

The ACER laptop plant, the main operator in the Taiwan Industrial Estate, closed shop and moved to Mexico, while Federal Express relocated its logistics hub to Mainland China. It was the main user of the airport which is now open only to chartered flights as international and domestic flights have been re-routed to the Diosdado Macapagal International Airport due to low traffic volumes. Similarly the port is below its capacity owing to the fact that most shipments still go through Manila.

Only a few positive stories remain like the Japanese pinewood fabricating plant that I saw which ships in timber from New Zealand and re-exports them as processed wood to Japan (which has a ban on logging), the Korean shipbuilder Hanjin (shipbuilding being the only heavy industry left apart from oil refining which could I am told suffer a similar fate as the bottling and car assembling), and the dock where Brazilian ships split up their cargo of iron ore into smaller vessels that then deliver these to China. As a result of the thinning industrial base, the industrial estates barely break even.

The only thriving and growing sectors seem to be in hospitality, retail and healthcare. As a source of mine who now serves in a sensitive post in Subic Bay and I reflected on this situation, we pondered how much more output a worker in the shipbuilding industry makes and earns for the country as opposed to a staff member at an espresso bar where we had convened. This is why manufacturing is much preferred as an engine of growth compared to services.

But it seems the government is no longer in the habit of picking winners. It is more focused on bringing erring justices and former presidents to trial, which brings me back to the topic at hand, of learned optimism. Despite the biological advantages of being an optimist (it is related to longer life and happiness), there are still some evolutionary reasons why pessimism as a trait still remains.

It is often the role of pessimists to protect their tribe from irrational exuberance. CEOs without the restraints of prudent accountants and risk managers could run their companies into the ground with grand visions and plans. Rogue traders with unbridled confidence in their own abilities could bankrupt centuries’ old institutions. Governments run by wide-eyed idealists could implement unrealistic policies ill-suited for local conditions.

This is perhaps one of the dangers facing this young administration as it seeks to work out its priorities in the coming year.