Second of two parts
(We conclude today Reader Hector’s analysis of the Philippines today, “The Philippines is an Onion,” which as I expected has generated much interest and discomfited not a few members of the Philippine establishment. It’s not lost on me that in yielding my space to Hector, I am taking the equivalent of a professor’s sabbatical. I thank him for affording me this break. I will resume my own reflections and analysis of national affairs on Saturday.)
If real growth really was 6%, then income levels would have increased significantly, particularly over the past 5 years, and poverty reduction would have been a natural consequence. Clearly something is out of sync, or someone is not telling the whole truth.
The fact that all other Asean countries have reduced poverty levels by 15% – 40% in the past 5 years, even with lower headline GDP growth figures, only underscores the fact that the Philippines is on the wrong path. No one in government seems prepared to answer the questions; Congress members busy themselves with minutiae; and few in media seem enthusiastic to ask the obvious.
The GDP figures are also inflated by OFW remittances, short-term money flows, hot money, and financial speculators. they add up to a flurry of activity, but one which has little basis in sustainable growth, in benefits to the manufacturing and agricultural sectors, which account for 70% of jobs, or in benefits to the general population.
It is also important to differentiate between short-term speculators and long-term investors. The Philippines has speculators who are happy to talk up the market and take profit. Investors on the other hand look to the underlying fundamentals and are not convinced, as highlighted by the poor flow of Foreign Direct Investments (FDI).
Stock-market activity alone is meaningless to the Philippines, particularly in a small, and sometimes questionable, exchange. The country does not want profit takers; it needs innovators and investors committed to the long haul.
For PNoy Aquino to simply trumpet headline GDP growth in isolation is like a basketball coach proudly saying that his team had twice the number of goal attempts as the opposition, but conveniently avoiding the fact that the team lost.
A few families vacuum up all the gains
The reason for no change in poverty levels is relatively simple. The consolidation of economic power in the past 5 years in a handful of people/families, vacuums up all the gains, and at the same time stifles any potential benefits for the wider economy, thwarts innovation, reduces tax collection, and impedes national competitiveness.
Income inequality is the inevitable outcome, and the wealth gap has now become a chasm. While the oligarchs enjoy excess profits through their monopoly positions, there is a wage freeze for the vast majority, made worse by rising commodity prices.
The elusive goal of poverty reduction is directly linked to income inequality — the higher the income inequality, the less impact any growth will have on poverty reduction. It is known as the Growth Elasticity of Poverty (GEP). Not surprisingly, The Philippines has the worst GEP in Asia, and one of the worst in the world.
The combination of high income inequality, wealth concentration, overseas remittances, personal borrowing, and jobless growth is a perfect storm for a poverty tsunami.
Snapshot of incompetent administration
We get a snapshot of how the Philippines is failing by reviewing a few figures.
Wealth of top 10 oligarchs
2009 – $11.1 Billion
2014 – $50.6 Billion
Increase = $39.5 Billion
2009 – $168.3 Billion
2014 – $284.5
Increase = $116.2 Billion
Tax of top 10 oligarchs
2009 – 2014 = only $2 Billion
Only 25 of top 50 oligarchs in top 500 taxpayers!
Wealth of top 10 individuals as % of national GDP in selected countries
(All have the same number of billionaires)
Saudi Arabia – 6.9% of national GDP
Norway – 4.9% of GDP
Australia – 3.0% of GDP
S. Korea – 3.0% of GDP
Philippines – 17.0% of GDP
(increased from 15% in 2012)
The figures speak for themselves, and are damning evidence of failed strategies and an incompetent administration. They also represent a situation which has no parallel anywhere else in the world. It is not the personal wealth per se but the fact that a small group has dominant control of all key industries/sectors, and therefore control of the system itself. They decide the pace and direction, and just as easily could hold the country to ransom.
No vision, just opportunists
I think the Philippines is not “a flawed democracy” but “a constitutional oligarchy.”
Also the fact that many of the 1st generation still cling on to power past their sell-by date and into their 70’s makes evolutionary progress painfully slow, particularly in a system where the baton is passed on to an indolent relative, rather than to the best runner. The “system” does not cultivate good future leaders, but consciously freezes them out.
Without new blood and new thinking to raise the bar and develop political maturity it will be a struggle to move to the next stage in development, and one step up the inclusivity ladder, but it is inevitable, one way or another.
The oligarchs are not only playing the corruption game, they are the main facilitators and perpetuators of the system, as long as it benefits them.
When oligarchs combine with the 75% of lawmakers coming from dynastic families, together they have a stranglehold to keep themselves in power and the nation in poverty.
Instead of moving towards an innovation economy, revitalizing agriculture, and investing in manufacturing, the country becomes asphyxiated by the death grip of the oligarchs.
The oligarchs are only on the second course of an “all you can eat” banquet, and are relying on a number of factors to keep the table constantly replenished, and their plates stacked high.
One of these factors is the election in 2016 of LP candidates for President and Congress, or “more of the same’.
Mar Roxas will incarnate Aquino 3.0 (after Cory and BS Aquino); Congress will remain a rubber stamp and block constitutional reform.
Distorted economics, perverted politics
Only oligarchs like to win fixed races, or ones where they are the only competitor. True businessmen, like genuine sportsmen, relish fair competition. Oligarchs breed corruption, they make it their primary modus operandi, and embed it within the system to their advantage. No oligarchs, no corruption.
But the new normal is a distorted model of economics, and a perverted approach to politics.
It is also reflected in the abomination of selective injustice, the sheer volume of political prisoners quietly incarcerated without trial, and a judiciary without integrity.
The Philippines, as I’ve said, is not at all “a flawed democracy” but a “constitutional oligarchy.”
30 years ago, in 1986, the Philippines was given an opportunity to build a new society, but the greed of the few squandered an opportunity for the many, and now the country trails the rest of Asean. That is an indictment of all the politicians who put self-interest before national interest, and bribes before integrity. They have been the architects of the country’s downward path.
While the older generation of leaders hold on with the frailty of old age to the past, a new generation needs to seize the moment.
Six more years of widening inequality and a greater accumulation of wealth by the top 10 oligarchs and power by the top 10 dynasties will create an untouchable and unassailable dictatorship. The tipping point will be passed, if it has not been already.
The “system” does not cultivate good future leaders, but consciously freezes them out.
Without new blood and new thinking to raise the bar and develop political maturity, it will be a struggle to move to the next stage in development, and one step up the inclusivity ladder, but it is inevitable, one way or another.
The Philippines needs strong, new leadership that will break the system, and not pander to, or be obligated to, the oligarchs.
God help The Philippines. 2016 will be a bumpy ride.