The social critic Solita Collas-Monsod has done us all a service. She has summed up in her Inquirer column how generations of our political leadership have devastated our country by leading it through a succession of policy mishaps, mistakes and failures during these last 50 years—the half-century from 1960 until 2009.
Ms Monsod doesn’t even argue. All she does—because it’s all she needed to do—is to compare our economy’s rate of growth in individual incomes with those of the group of East Asian states the World Bank dubbed the “miracle” countries when their economies began to grow at a rate the world hadn’t seen before.
Starting out ahead
Ironically, the record shows our country starting out ahead of the pack. In 1960, every one, except South Korea, apparently had individual incomes (accounting for population growth) lower than ours. China’s $403 was less than a third of our initial $1,313. So, what went wrong for our country?
If our individual incomes had grown at Thailand’s moderate pace (4.4 percent), Ms. Monsod says, we would have ended the 50-year cycle with $10,635 in 2009.
Even if we had done no more than match India’s even more modest 3.14percent, our individual incomes would still have reached $5,477.
But throughout those 50 years, our economy had lurched forward at an average 1.58 percent—giving us a 2009 total of only $2,838.The half-century had begun with the Thais poorer than we were. It ended with them being at least three times richer.
At the height of the “miracle” decades, Filipino incomes were falling by 5.3 percent year after year behind those of the East Asian “tigers”—South Korea, Taiwan, Hong Kong and Singapore. Compared to the tigers’ slower fellows—Indonesia, Thailand, Malaysia; and late-comer China—our incomes were falling behind by 3.3 percent.
Why does our country’s poverty persist?
The short answer—in this layman’s view—is that public policy is failing to combine the rural and urban sectors of our economy into one modern whole.
Like other late modernizers, we began independent life with a “dual economy”—one separated into a subsistence sector and a colonial-era export sector.
Not only are we failing to integrate these two sectors; we can’t even seem to prevent them from separating, like nineteenth-century England, into “Two Nations.”
Yet bringing them together is the end-object of late industrialization. And getting there hasn’t been easy, even for Japan. Until now, Tokyo’s world-beating exporters coexist with non-competitive industries and services catering to a home market protected lavishly by both social policy and oligarchic lobbies.
Protected sari-sari stores
Japanese agriculture is protected by both tariffs and subsidies. Japan’s rural vote is weighted in the allocation of parliament seats. Even Japan’s “sari-sari” stores are shielded from competition by Walmart’s.
The danger in a weak state’s depending overly on protectionist policies lies in special interests coalescing around these policies—and so preventing the obligatory deregulation that would re-start the economy as it matures. This is what happened to our country during its first decades of self-rule; and what seems to be happening in Japan now.
Import and exchange controls, as well as incentives for import-substituting industries, favored the politically well-connected and generated crony capitalism—even as our neighbor-economies were exporting their way to “NIC” (new-industrial-country) rank. Because of their power to monopolize markets, our elites have little incentive to compete and innovate.
Special interests rule
Until now, our efforts at development are handicapped by the weakness of our representative institutions. Special interests impervious to regime changes have had their way with us for so long we’ve become accustomed to the burden. “Economic results are heavily conditioned by narrower interests, to the detriment of national welfare,” says the UP economist, Emmanuel S. de Dios.
In the current Congress, Speaker Belmonte and Senate President Drilon count 186 laws that offer “redundant and overlapping” incentives to favored industries.
Again and again our country has experienced episodes of what the scholar Norman G. Owen calls “prosperity without progress,” as regional industries founded on natural resources, cheap labor and fleeting foreign demand—for abaca in Bicol, sugar in Pampanga and Negros—flourished and faded without lasting benefits to the economy.
Nearly 70 percent of all our poor live in rural areas. In 2004, the average farm household had only 1.8 hectares. It yielded an average P16,650 in yearly income—only a fifth of what the poorest family needs to keep its head above water.
The agricultural-policy militant, Ernesto M. Ordonez, notes that Philippine rural poverty as 2.4 times that of Vietnam’s; 2.9 times that of both Thailand‘s and Indonesia’s; and five times Malaysia’s.
Metro Manila and its satellite regions generate two-thirds of all we produce. But the lack of transport and health and education networks still restricts their benefits from trickling down through the archipelago.
To the contrary, Metro Manila’s growth disadvantages peripheral regions—by sucking away their stores of capital and most venturesome people.
What measures should we take to integrate our dual economy?
Public policy seems to depend only on “trickle-down” to generate “inclusive growth” and reduce horrific social and income inequality. But, of course, growth trickles down only where there already is a measure of equality—where (as the Nobelist Joseph Stiglitz says) “every individual, every family, has the basic education and the good health enough to take advantage of the opportunities the expanding economy offers.”
The emphasis of public policy we must shift from the modern to the traditional sector. I don’t think we can escape adopting a time-bound “affirmative action” program for our poorest provinces. Nor can we continue to postpone a reformation of the civil service—perhaps on the Latin-American “pockets of efficiency” model.
Stepchild of development
Certainly we can’t continue treating agriculture as the stepchild of development. Attempts at land reform, starting with American efforts to redistribute the friar lands (1903), have all fizzled out from landlord opposition and lack of legislative support.
Scattered peasants may have few outlets for venting their dissatisfaction with things as they are—but these outlets, once resorted to, can be costly for society.
Even agricultural services such as irrigation are extremely biased toward Central and Northern Luzon, leaving Central and Eastern Visayas as well as Bicol and the ARMM deprived. As one result, agriculture isn’t pulling its weight. Though it employs some 30 percent of all our workpeople, it produces only 10 percent of our national product.
What are we to do?
The experts see agriculture and agri-business as our best hope for inclusive growth. But for as long as agriculture—where most of our poor work— doesn’t produce to its potential, millions of our young people will lack liveable futures—no matter how well manufacturing, industry and services work.
The agricultural economist Cielito Habito agrees with Ordoñez that the agriculture department’s bureaucracy needs radical reform and leadership willing to undertake drastic measures. The two also agree on the need to loosen up the regulatory environment. Toward this end, our country’s membership in free-trade agreements will help.