In Marxist theory, capital and labor are opposite forces in society; two faces of one coin. One cannot exist without the other. It may also be said that the Marxist theory of develpment is based on the concept that each system carries within it the seeds of its own destruction: Slavery was followed by Serfdom in a feudal system. Feudalism then gave way to Capitalism, with Socialism emerging from the ruins of Capitalism. Communism, as capsulized in the famous maxim "From each according to his ability; to each according to his need," is supposed to arise from Socialism.

It is the thesis of this article that an Entrepreneurial Class is needed in the Philippine political economy, and is in fact, still essential to the development of the productive forces of the country.

After the Russian Revolution in October 1917, it was theorized that the proletariat - the laboring class - would be able to dictate development in alliance with the peasant masses. The premise was that the capitalist class would be liquidated after its overthrow in order to give the worker's state the required monopoly of state power to develop its resources.

The liquidation of the capitalist class, its ally the feudal oligarchy in Russia and even the rich peasants was accompanied by the suppression of rights such as free press, speech and thought. This aroused a reaction from the remaining capitalist states and was condemned as a gross violation of human rights by the world's leading capitalist power the USA.

So long as a single capitalist state existed in the world, the socialist revolution in Russia could not be safe. However, the ensuing struggle between the embryonic socialist states and capitalist powers that spanned the years between the first world war and the Vietnam War was contained by common sense. The transformation of the Cold War into a Hot War could have destroyed the world because the two sides possessed nuclear weapons.

The USA as the leading capitalist power resisted the spread of revolution all over the world by shoring up tottering feudal states in the Third World. Client states were created out of newly emerging nations such as Vietnam, the Philippines and other Asian states with capitalism making an ally of their ruling feudal and reactionary classes.

By forestalling the natural development of the national bourgeoisie in Asia and preventing the overthrow of the feudal system, mature capitalist states in Europe and the Americas further entrenched poverty, making it persist well into the 20th century. Any one can see it for himself; a tour of states such as India and Pakistan where feudal lords co-exist with capitalists will show amazing areas of extreme poverty surrounding pockets of wealth.

The US supplanted Spain as the colonial power in the Philippines and retained economic control by expanding and supporting the native bureaucrat-comprador class created by Spain. The existence of this class and its hold on state power was necessary to maintain the country's neo-colonial status.

The arrival of the US army in the Philippines and the defeat of General Aguinaldo's revolutionary forces led to the introduction of the US brand of capitalist system of production. To gain support, the US forces enticed the ruling elite of mestizo landowners to produce agricultural products for the vast US market. The Americans enriched this class and assured their continued hold on state power by providing them with educational opportunities as scholars. Selective enrichment of the heirs of the datus was applied even in the Moro areas to win them over.

The Americans in the Philippines demanded business opportunities on the argument that they alone could develop the forces of production by providing both capital and technology. Filipinos would benefit by providing their cheap labor. The landed oligarchy even legalized this obviously disadvantageous relationship in the Laurel-Langley Agreement which gave American capital further privileges in return for the continued export of agricultural products into the US market.

Although American capital gained a dominant advantage vis-a-vis Filipino capital through such agreements, not many American firms came to develop Philippine natural resources. Capital remained scarce specially after political independence in 1947, leading to high interest rates.

It now seems a misjudgment for Filipinos to rely on foreign capital and expertise to develop its natural resources. It is illogical for a capitalist state such as America to create a clone capitalist class in other states. This would naturally result in creating competition for the world's resources of raw materials and markets. This has indeed happened in the post World War II years, which saw Germany and Japan arising from the ashes to become world leaders in business and industry.

By exporting surplus capital in such quantities as to result in monopolies in its client states economies, the USA could have subjugated many countries and stifle it's demand for independence and national freedom without recourse to war.

In the case of the Philippines, the USA did not export capital to fund wholesale industrialization because that would create competition for its own manufactured products. What the USA did was to bankroll the selective production of raw materials for its home industries. American capital flowed into the country for the development of its copper, nickel and iron mines; development of the sugar industry to serve the large US market under the quota system; and development of the copra, banana, abaca (hemp) industry to serve its own needs. US capital did not go into the development of basic industries which could provide jobs and create a large proletariat.

American capital allied with the landlord class in the production of these agricultural materials. In the case of sugar, the arrangement resulted in the creation of huge haciendas (vast tracts of land), and plantations devoted to the large scale planting and harvesting of a single export crop. In the case of Negros island, the devotion of the major part of its arable land to sugar resulted in hunger and malnutrition when the price of sugar collapsed during the Marcos years.

The maintenance of an assured market and dependence on the US sugar quota system has worked against the modernization of the sugar industry, so that now Filipinos pay more for their sugar than the world, and suffers shortages from time to time.

There exists a large demand for Filipinos with the leadership skills to organize the forces of production, create entirely new products, and fill the demands of the market for quality and usable products and goods. These skills are provided by people called "entrepreneurs" or simply businessmen.

Human nature being what it is, the Americans cannot be expected to create industries in the Philippines which would compete with American ones. Experience has shown that we cannot have American entrepreneurs come to develop our resources and supply the demand of the Philippine market for products. We must develop these entrepreneurs from our ranks.

The experience of other countries indicates that it is unlikely that the leading capitalist super power would exports its entrepreneurial talents to the Third World and develop its vast resources. The Philippines will have to nurture and develop its own entrepreneurial class. Thailand is doing it as did Taiwan, Singapore, Malaysia and the other ASEAN states.

Developing more entrepreneurs should be welcome to socialist parties because it would expand its power base. There are a great many more workers than entrepreneurs, perhaps in a ratio of one to five. And, having more industrial workers will greatly increase the numbers of the working class or proletariat.

What the proletariat needs to do is forge an alliance with the entrepreneurial class in which one would guarantee the comfortable existence of the other: a living wage, cheap industrial goods and plentiful food in exchange for industrial peace. The accumulation of capital would be regulated by income tax to generate public funds for infrastructure items such as telecommunications, highways, hospitals, schools and social services.

Power would have to be shared in a coalition type of government, with not one class able to dictate to the other. Civil strife is bad for business and industrial peace would have to be achieved by negotiation of the benefits accruing from production.

Under Capitalism, the owner of the business has the sole right to the profits (revenue less labor and cost of capital = surplus value). The sole purpose of governments of capitalist states was to guarantee this. Governments suppressed labor in favor of the owners of business. However, the resistance of organized labor to exploitation resulted in a revolution - the over throw of the capitalist class, as what happened in Russia and China.

Not yet, but eventually it will become obsolete, according to Marxist theory. The world is still in the capitalist stage of development. What most new nation states require is national capitalism and the full development of its productive forces, preferably under the direction of the working class in alliance with the peasantry and all progressive classes.

Ever since we achieved formal independence in 1946, the country's political-economic system has retained the "economic sovereignty" provisions of the old 1935 constitution adopted under colonial auspices. The Philippines was not alone in reserving economic and political rights exclusively for nationals. If I recall correctly, all newly independent states after World War II reserved for their nationals, the exclusive right to develop their natural resources. This was true of Indonesia, Thailand, Malaysia and other former Southeast Asian colonies.

This "nationalist" or rather, "ethnic" right was resorted to in the presence of a large number of Chinese immigrants whom the local elites (principalia in the Philippines) were deathly afraid would dispossess them, because they were more aggressive in business.

Actually, these migrants were just more hardworking and industrious than the principalia, who owned the land and controlled local politics through their tenants. The principalia had acquired a dislike for manual labor, which they associated with the peasants, and permitted the Chinese migrants to engage in retailing, metal foundry work (light manufacturing) and other semi-industries.

The leading elements of towns and barrios who constituted at best 10% of the population reserved for themselves the right to run for local office. It is not surprising that studies of histories of towns in Luzon and the Visayas revealed a similar pattern. Only members of a handful of local families became gobernadorcillos and town councilors, with posts rotating among two or three leading families.

The economic provisions of the 1935 Constitution, which were carried over into the 1973 Marcos Constitution and the 1987 Cory Aquino Constitution, limited the land that corporations could acquire to 1000 hectares. I will list down the economic provisions in the Cory Constitution in the next article.

The philosophy behind such limitations formed the bed rock of the idea that economic and political rights are exclusively for Filipinos. Now, I wonder if this really is the limiting factor in our development.

Looking at the United Kingdom, we are aware, through readings that the British are not that nationalistic. We come across news items of British opposition to Indian nationals owning or expanding their supermarkets and other businesses. What is surprising is that, non-citizens (such as Americans or Australians) are allowed to own castles and the surrounding land, newspapers and broadcasting companies (Rupert Murdoch is one good example).

Why, for instance, is Hongkong wealthier than the Philippines on a per capita basis? As a colony peopled by refugees from China's civil wars, Hong Kong's economy was developed by the British along lines that other small countries are now asked to imitate. Notable among these were the existence of a large class of British expatriate managers and entrepreneurs who ran the finance and investment houses and brought in the capital required by business.

The Estrada Amendments pose a direct threat to the dominance of the ruling elite in almost all businesses that have to do with natural resource development. It would, of course, be useless to pass laws opening up these sectors so long as there are constitutional limitations.

It may be recalled that it took quite a lot of maneuvering to get around the constitutional provision limiting ownership of telecommunication and other utilities to Filipinos (60%) in the case of the PLDT acquisition by the Salim Group of Indonesia through proxies.

It is the scarcity of capital that is driving the Philippines nuts. The second Philippine Revolution looms over the horizon, predicated on the continued failure of the Philippine Elite to provide jobs for the people.

Former President Fidel Ramos, in an article in the Asia Week Millennium Special, wrote that the "common folk often have extravagant expectations of government. A 1993 survey found 85% of Filipino respondents saying it is the government's obligation to provide jobs for everyone; and 84% said it is the state's task to provide a decent income for all." (see Asiaweek Millenium Special)