CAN POVERTY PERSIST IN A GROWING ECONOMY? Yes, it can, in a country of great inequality

SO

resistant has Philippine poverty been to the modernizing effects of growth that—during these last 50 years— our country has become the poorest and

most unequal among comparable East Asian economies.

From 1994 until 1997, and then again from 2002 until 2010, GDP growth has been continuous. In the latter year, growth reached 7.3 percent— a peak the economy hadn’t achieved in 30 years. The 2012 figure, too, was respectable (6.5 percent), and 2013 is expected to ex- ceed 7 percent.

But not only have far too many Filipinos failed to experience this growth in their own lives. They have also continued to increase in their numbers and existential hardships. Despite economic growth, poverty incidence has remained unchanged.

Will the poor always be with us?

The poor made up 26.5 percent of all of us in 2009, up from 24.9 percent in 2003. The experts do not expect the 2012 family income and expenditures figures, due presently, to vary appreciably.

The World Bank translates these percentages to a 2009 “poverty headcount [of] 23.1 million.” In addition, an abnormally large proportion of Filipinos subsists just above the poverty line—hostages to inflation, the loss of jobs, illnesses and deaths, and other life misfortunes.

Pulse Asia estimates this mass of the vulnerable non-poor at 67 percent of all our people.

In December 2010, the quarterly Social Weather Stations (SWS) survey found 4.4 million households saying “they experienced hunger at least once in the past three months”; 4.7 percent of these households said they were hungry “often” or “always.”

East Asia’s poorest, most unequal economy

In 1960, according to the NEDA think tank PIDS, our individual incomes had been almost twice as large as those of the Thais, and thrice those of the Indonesians. But, by 1984, Thai individual incomes were more than double ours. Meanwhile Indonesia, whose population is more than twice as large as ours, had nearly caught up.

In 2009, 13.2 percent of all Filipinos still lived on the equivalent of one US dollar a day—the United Nations’s definition of

absolute poverty. This was higher than Indonesia’s 7.7 percent and Vietnam’s 8.40 percent. By then, Malaysia and Thailand had virtually wiped out absolute poverty from among their peoples.

Why is this happening to us; and what can we do to stop it?

Growth by itself is never enough

By itself, growth is never enough. It must be accompanied by social “safety nets” and redistributive policies to ensure growth is spread as widely as possible. Our lack of these instruments has restricted growth’s poverty-reducing effects in national society.

Land reform we have yet to complete; and our social spending is the lowest among the original Asean five: one consequence of our poor tax effort (13 percent of GDP.)

In education, for instance, we spend $138 for every public school student every year. Thailand spends $853 (more than six times), and Singapore $1,800 (13 times more).

To close the income gap, public policy has been depending on “trickle-down”—the proposition that even the poorest will gradually benefit from the increasing wealth of the richest.

But trickle down works slowly at best—and (as the Nobel laureate Joseph Stiglitz asserts) only when “every individual, every family, has the basic education and the good health enough to take advantage of the opportunities the expanding economy offers.”

Forty families dominate economy

In any case, the last laissez faire economies, such as the United States, Hong Kong and our own country— are suffering record levels of inequality.

In the United States, the typical individual in the top 1 percent of the population receives 440 times more income than the average person in the bottom half.

Meanwhile, Hong Kong, awash in entrepreneurial wealth, has just discovered, to its embarrassment, that a fifth (19.6 percent) of its people fall below its own poverty level.

In 2011, the 40 richest Philippine families on the Forbes

Magazine Wealth List apparently accounted for 76 percent of the country’s gross national income—the highest percentage of national inequality in Asia.

What is worse (as PIDS researchers have noted) is that “there is reason to believe that firms have not plowed back their stable— and lavish— profit streams into investments that benefit a broader national base.”

Not just foreign but domestic capital as well has been fleeing our unstable investment climate.

We still have a dual economy

Episodes of regional prosperity—set off, beginning in the nineteenth century, by foreign demand for our agricultural products—have grown a modern economy alongside the traditional one, but with little interaction between them.

Industrial activity is concentrated (68 percent) in Metro Manila and its satellite regions. So that while the NCR may be generating “spread effects” to Southern Tagalog and Central Luzon, those regions more distant are experiencing “backwash,” as the modern economy sucks away both their capital and their most vigorous inhabitants.

Our economy’s fastest-growing components— overseas contract work and its national counterpart, business-process outsourcing (BPO)—have very few organic linkages with the home economy. The assembly of electronics components generates limited value-added.

The working poor are confined to agriculture, being unable to fill the jobs the modern economy offers. Due to high dropout rates, a fourth of children in the 26 poorest provinces get no formal education at all.

Joblessness is highest among college dropouts (32 percent) and college graduates (22 percent): an early warning (from SWS) that should disturb our policymakers.

The Jesuit sociologist John J. Carroll fears that interest groups have influenced public policymaking for so long that inequality has become embedded in the whole of national society.

We need to build a civic state

East Asia’s miracle of development teaches us that, in the late industrializing country, modernization

must become the collaborative effort of both free entrepreneurs and the developmental state.

Our economic problems have political origins and they require political solutions. Our lack of effective political institutions must become our key concern.

The weak capacity of our political institutions explains not only our country’s poverty and our inability to compete in industrial markets. It also accounts for the high crime rate and the endemic violation of citizens’ rights; the incompleteness of civilian supremacy over the military; the

uneven enforcement of the law, and poorly developed patterns of political representation.

Until now, nation building is a work in progress. Our dysfunctional bureaucracy mocks our need for strong central authority; and the fragmentation of political power has made democracy merely the default

option for national politics. We need to build for ourselves a national community capable of thinking about the common good, and not just its pots and pans. As the Czech poet-statesman Vaclav Havel says, politics can also be the art of the impossible: the art of making both ourselves and our nation better.