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By Juan T. Gatbonton, Editorial Consultant
Can poverty worsen in an expanding economy?
That’s what is apparently happening. Not only have everyday
Filipinos not felt the supposed growth of the economy. Between 2004
and 2006, 700,000 families (3.5 million people) have actually fallen
from the lower middleclass into downright poverty—as their incomes
failed to keep pace with living costs.
Why has this happened? Senior officials from
five past administrations who’ve banded against the Arroyo
government deny outright that the economy’s starting to do well.
They denounce government’s claims of gross domestic product (GDP)
growth in 2007 as being the “highest in 31 years” as no more
than “public relations fakery.” And they cite “unprecedented
inconsistencies in official statistics on growth, income and poverty
that raise doubts about the reliability of the economic growth
data.”
People not feeling growth
But we don’t really need to impugn the
integrity of the professionals at our statistical agencies to figure
out why ordinary people are not feeling the effects of growth.
Our economy still is as fragmented as our
geography and our politics. Virtually alone among our neighbors, we
still have two economies existing side by side—modern industries,
haciendas, plantations and mines together with a subsistence sector.
We still have a “dual economy”—a
relatively modern half based in Metro Manila and its satellite
regions, and a traditional one, based on peasant agriculture, in the
rest of the archipelago. And because there are only the weakest
linkages between the two, the industrial economy can grow without
substantially benefiting the people outside it.
In much of East Asia, rapid growth over these
past 40 years has unified dual economies left over from the colonial
period. Suharto’s Indonesia had a particularly good record in
balancing interregional development between Java and the outer
islands. But because we have been slow to ease mass poverty, we
Filipinos still are divided—like Disraeli’s England of the
1850s—into two nations, “between whom there is no intercourse
and no sympathy.”
Highly concentrated growth
On gaining independence after World War II, the
new countries sought initially to industrialize behind protective
walls, financing development through the export of agricultural
products. (Straw mushrooms had nearly as great a role for Taiwan as
the silkworm industry had for Meiji Japan.) But in our country, the
weak state lost control of the processes of the protectionist trade
regime to the political and economic elite.
Consequently, when the global economy opened up
again, it could not switch to labor-intensive exports as easily as
its neighbors were able to do—because oligarchic interests had
clustered around the protectionist strategy. Because its economy
remained closed, the Philippines missed the “East Asian economic
miracle” that set our vigorous neighbors on the road to
prosperity.
Our basic policy mistake was to carry on
import-substituting industrialization long after it had outlived its
usefulness. By so doing, we reduced the linkages between agriculture
and industry, constricted job opportunities, and concentrated the
benefits of growth on the landowning, industrial, and political
elite.
Until now, Metro Manila, Central Luzon and
Southern Tagalog account for well over half of all our manufacturing
output and three-fifths of all the growth. In 2007, they were
responsible for 61 percent of the economy’s expansion, but only 39
percent of all the jobs.
The economy’s fastest-growing
components—overseas contract work and its domestic counterpart,
business-process outsourcing (BPO)—are “enclave economies,”
without organic linkages with the domestic economy. So is
electronic-components assembly, which has become our predominant
export industry.
While agriculture still employs over a third of
all our workers, generates 15 percent of GDP—and nearly 70 percent
of all the poor—it contributes less than a 10th of yearly growth.
In 2004, the average farm household had only 1.8 hectares. It yields
an average P16,650 in income—only a fifth of what the poor family
needs to keep its head above water.
Jobs for the unemployable
Our biggest problem is how to employ 2.8 million
undereducated and largely rural young people unable to fill the jobs
the modern economy generates. Out of every 10 Filipinos who can’t
find jobs, eight are between 15 to 34 years old, and most of them
live in the countryside. Right now, their only hope lies in
“make-work” programs in government projects, which local
politicians dispense. Yet raising the poor from poverty is the only
way of incorporating their families into the modern economy.
Despite robust overall growth, manufacturing
output is actually dropping. Nor will opening up mining to foreign
investors—which the Supreme Court has made possible—generate
many low-skill jobs. Mining, too, is a capital-intensive enclave
industry.
Meanwhile, the deployment of overseas contract
workers is slowing down—although higher-skilled workers are
leaving. More and more of them are computer professionals, doctors,
nurses, engineers and architects. And already they send home the
equivalent of almost 15 percent of our entire GDP.
Tourism offers the fastest potential for
generating relatively low-skill jobs. Arrivals rose from 2.8 million
in 2006 to 3.15 million in 2007. Government expects 3.62 million
travelers in 2008—but in this sector, too, vested interests impede
an all-out effort to generate the million jobs a year we need.
Regulatory capture still hinders the efforts of economic reformers
to open Philippine skies.
(Notes and Comment appears fortnightly.)
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