Economic growth—left to itself accelerates income inequality. Growth benefits most of all those best equipped with the education, the skills, and the capital to take advantage of the opportunities the expanding economy offers. Governments must make growth work deliberately for the poor.
But how is this to be done? Most everywhere, governments hand out public money on populist programs without adequate supervision and control.
In our own country, the Arroyo Administration between 2005 and 2010 ran two programs to ease hunger among the poor.
A “Food-for-School” Program paid one kilo of rice for every day a child from a poor family attended a public day-care center, pre-school, or Grade One class. Another program sold socially priced rice and noodles. Between them, the two programs cost P2.9 billion yearly.
In addition, Government began subsidizing small electricity consumers (P2 billion); awarding scholarships and student loans (P1 billion); and encouraging operators of buses, taxis, and jeepneys to convert to natural gas fuel (P1 billion). It also started off subsidies for the elderly and micro-finance programs for women.
The World Bank estimated the leakage from Mrs. Arroyo’s Food-for-School program alone at 40 percent. Meanwhile, officials may have siphoned off as much as 60 percent of the value of the subsidized food grain, fuel and other commodities.
Even in stronger states, the costs of delivering welfare subsidies can add up. In the United States, they typically exceed 17 percent of total program costs. By their very nature, subsidies are also hard to monitor.
Poster child of neglect
The economic upturn makes now a good time to start up longer-term programs to raise the poorest provinces closer to the level of the richer provinces. The World Bank currently ranks our country as having the most unequal incomes in East Asia.
Regions and island groups in our archipelago vary greatly in their access to infrastructure and social services. The mean income in Metro Manila is at least thrice the mean income in the Autonomous Region of Muslim Mindanao (ARMM)—the poorest of our 16 administrative regions.
Indeed the ARMM is the poster child of Government’s neglect. Just how deprived it has been was documented by the Philippine Business for Social Progress (PBSP) in 1997-2000:
—In 2000, when poverty incidence averaged 34.2 percent nationally, in the ARMM it was 68.8 percent,
—Functional literacy was 87.8 percent nationally: in the ARMM it was only 61.19 percent.
—Nationally, 76.9 percent of all Filipinos had access to drinkable water: less than a third of all ARMM residents did.
—Infant and maternal mortality rates in the ARMM were almost double what they were nationally.
—Life expectancy in the ARMM was fully 13.5 years shorter than the national average (then 68 years).
Growth is not enough
The situation in the ARMM and in other regions outside the scope of Metro Manila tells us growth by itself never suffices. Growth must be accompanied by social safety nets and redistributive policies—to ensure it leaves no sector behind.
Our lack of these instruments has restricted the poverty-reducing effects of growth. Policymakers have made a mockery of land reform. Industrial wages continue to shrink in real terms. And our social spending is the lowest among the original Asean five.
For every public school child, we spend $138 every year. Thailand spends $853 (six times more), 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.
We need to take more active measures to incorporate the poorest of our poor into our social community.
By now, countries as far apart as Brazil, Britain, Israel, Malaysia, New Zealand, and South Africa have developed standard practices to award preferential treatment to groups or regions in national society disadvantaged by official neglect and cultural, ethnic, or gender discrimination.
In the United States—since the 1960s—“affirmative action” has lifted up the lives of women, African Americans, and other minorities through programs of “positive discrimination,” particularly in university admissions, jobs, housing.
Similarly, we must shift the bulk of our investments in human capital to our most disadvantaged regions.
Certainly Muslim Mindanao, the Cordillera ethnic communities, and the poorest administrative regions—Bicol and the Cagayan Valley, Caraga, Western and Central Mindanao, Central and Eastern Visayas—can reasonably claim preference in national budget allocations for infrastructure, primary health care, and basic education.
And, in my view, the best way to satisfy their claims is through a time-bound “affirmative action” program to increase the availability of these social services in these poorest regions to the level of the average administrative region within (say) 7-10 years.
Easy to measure, easy to manage
An “affirmative action” program is easy to measure, easy to manage, easy to check. Because it is time-bound, it will also be stable—unlike subsidy programs that expire as administrations change.
How would it work? During the time frame agreed on, Bicol (say) would be awarded—over and above its normal allocation of funds for public works, health centers, hospitals, schools and classrooms, teaching staff, and so forth—additional public moneys to acquire an increment of these basic social services, so that, by the time the program ends, Bicol’s supply of these facilities would approximate the number and quality of these facilities in (say) Southern Tagalog.
Already President Aquino devotes more than a third of public spending to social services. The education budget he has raised by 18.4 percent—to build more classrooms and create more teaching jobs. He is also committed to adding two years to the basic education cycle—to bring it up to the global norm.
Conditional cash transfers
“Conditional Cash Transfers” (CCTs) he has more than doubled—so that their coverage could expand from 1 million households to 2.3 million.
CCTs are periodic direct grants to the poorest families sufficient to relieve their most urgent wants. In our country, the maximum grant is P1400 monthly. As in Mexico—where the program meant to break down intergenerational poverty began in 1997—this money is paid to the mother. Families that receive CCTs must keep their children in school and present them for periodic health check-ups.
Keeping children in school—to keep down inter-generational poverty—is the key condition. In our poorest provinces, dropout rates are so high—about 25 percent in Grades One and Two—that a fourth of all children get no formal education at all.
If we are to redress the balance of our lopsided economy, we must also make countryside development a centerpiece of public policy. Not only must we strive to modernize our agriculture. We must empower the people of our countryside by enabling them to gain a sense of individual mastery over their lives that preserves their dignity and self-respect.