Okay, back to the boom-bust topic: The bad thing about the "boom-bust" of the business cycle is, obviously, the bust. One may think more deeply about this in terms of actual GDP versus trend GDP. When trend GDP is growing flatly (say by 2.5% per year, around the population growth rate), then any boom above trend (say 5% growth) must eventually hit a bust (say zero or even negative growth). Of course policymakers can try to stabilize around a low trend - but this is not really exciting, is it?
However suppose it is possible to lift a low trend growth up to a high level, say from 2.5% to 7.5%. (Wow!) One can still have a business cycle, but at a higher level. (Kinda like China, which experiences a growth "slowdown" at 6% GDP growth!) Still business cycle stabilization is important, but that shift in GDP trend growth is by far the more interesting issue.
So I think the term "escaping the boom-bust cycle" is a misnomer - one should actually talk about "take-off", which is a picturesque way of talking about a sudden increase in the trend GDP growth. (Which President GMA highlighted several times in her last SONA). That means in real time, in a span of a decade or less, GDP reaches a dramatically higher trajectory, which has all the appearance of being sustainable. This has happened to several Newly Industrializing Economics (NIEs) in East and Southeast Asia - Japan, South Korea, Taiwan, Malaysia, Thailand, Hong Kong, Singapore, mainland China. Within the region, only two countries stand out as missing the plane entirely - the Philippines and Indonesia. The former kept a boom-bust cycle around a relatively low trend GDP; the latter appeared to coast along in a high trend GDP, but the 1997 financial crisis exposed the vulnerabilities that prevented sustained growth.
What is the secret of economic growth? The idea of "take-off" suggests that some degree of dramatic exertion affecting the whole (the airplane analogy), which suggests the need for a Big Push - some coordinated expansion across a wide array of economic sectors. Such coordinated expansion is necessary because one cannot achieve sustained growth by gradual increments. Furthermore, this coordinated expansion requires aggressive government intervention in the economy, combined with generous doses of external financing, i.e. foreign aid.
This ideas was very popular in the 1950s, fell into disrepute, but has lately become fashionable again. Is there any merit in this idea? Should a country like the Philippines undertake a Big Push to achieve "take-off"?