• There will be sustained growth. But who benefits?

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    Marlen V. Ronquillo

    Marlen V. Ronquillo

    SOCIAL scientists unbothered by conscience have this cruel formulation. The scums of the earth that have fallen prey to Mr. Duterte’s war on drugs will help lift up the economy. Because the strain on the government’s funding for safety nets would ease. The tattooed, desperate people from the urban slums and blighted rural areas that have fallen in the anti-drug campaign were the ones accessing–-and draining–the social amelioration funds of the state. And their exit from the surly bonds of earth would be a win-win for the economy as more funds would flow into development programs.

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    That cruel formulation stands on shaky foundations.

    The credible assumption is this. Our two-shop economy is on a growth momentum because the two drivers–OFWs and BPOs–have been shrugging off the many domestic and external drags and are all set to continue on their growth momentum. The BPO roadmap drafted by the sector’s experts is an impressive read and there is very little to doubt the optimistic projections, despite Mr. Trump.

    The thesis is that BPOs are akin to hot money moving into the vast corners of the globe where there is profit to be made. If the offshoring here is cheap and good for the bottom line (which is the reality here for offshored BPO jobs), the trajectory will be skyward. The other reason is that there is a hankering for good manufacturing jobs in the US, not the dreary voice segment of the BPOs that is being done here. Nothing, not even a promise of a tax break by Mr. Trump will rein in the flow of voice segment jobs here from the US.

    (The technical side is another matter. Once the BPO number crunchers say that the tech support and network engineering side of the PH-based BPOs are getting costlier, the BPOs will just contract out these jobs to Indian companies in a jiffy. No second thoughts, no hesitation.)

    An average of six percent-plus GDP growth during the entire term of Mr. Duterte? Achieving that would be a breeze. The projection is seven percent-plus growth each year. If the hoped-for resurgence in manufacturing takes place, we might hit double-digit growth. Unless, of course, a Big One rocks Metro Manila, the real estate sector craters and we are thrown into a mini-Armageddon.

    It is in the context of sustained growth that social scientists with a conscience have to ask this question: Who benefits from sustained growth? Fair question. Mr. Duterte, in line with his election promise, should end the kind and type of growth that took place during the Aquino administration. The Top 1 percent took most of the gains, around 60 percent, and the 99 percent had to fight over the crumbs left.

    Right now, with Mr. Duterte focused on his war on drugs, there are no strong policies designed to stem the flow of all the growth gains to an elite few. There are token and symbolic programs but a strong push for pre-distribution and redistribution is yet to be undertaken. Even the proposed tax reform does not soak the rich in taxes.

    The cluelessness of what to do, even with a strong bent on the part of the Duterte administration to rein in the reckless social darwinism of his inherited policies, is rooted in the lack of clear data on how vast the divide is right now. What we have are the generalized assumptions that we live in a vastly unequal society but not in-depth and serious studies. We do not even have a group of social scientists dedicated to studying the great divide, as if that great evil in the world were non-existent. In his six years in power, Mr. Aquino never even uttered the word “inequality.”

    Even with Mr. Duterte in power, much of the goodwill and capital of his administration is directed towards maintaining the popular support for his war on drugs, not a dedicated campaign to ease poverty and ease the great divide. Dutertismo is supposed to swing to the left of the political spectrum and is supposed to tilt the major policies into the direction of the vulnerable. Yet, the socio-economic initiatives of a left-tilting Dutertismo have yet to be formulated.

    The key economists of Mr. Duterte have not been speaking like Keynes or researching like Piketty and Saez. In fact, Mr. Pernia has had a clash of opinion with Mr. Mariano on land conversion and with Mr. Pinol on what stand to take on the quantitative restriction on rice imports which will lapse next year.

    Mr. Pernia, instead of siding with KaPaeng and Manny, has taken the stand of real estate developers and rice imports, minus the QR.

    Speaking of Piketty and Saez, the French duo and Gabriel Zucman recently came out with a breakthrough paper on inequality, which the architects of Dutertismo should read. The paper, a complement to the earlier studies of Piketty and Saez on global inequality in general and inequality in the US in particular, listed down the major constraints on why inequality is barely addressed by policies, even policies coming from progressive governments.

    The first major constraint raised was the failure of macroeconomics to take into account the data sets–-household income, survey and tax data–-that should serve as basis for determining the real level of inequality. The second point was that “economists and policymakers do not have a comprehensive view on how government programs designed to ameliorate the worst effects of economic inequality actually affect inequality.”

    The result? While inequality surges, identifying the policies to check income inequality fall woefully short.

    Dutertismo, it if is indeed focused on amelioration programs on a radical scale, should start with finding out how vast the economic chasm is right now. How much of the total yearly gains are vacuumed up by the Top 1 percent and how meager are the crumbs left to the 99 percent? There is a certainty the new data set will still say that the Top 1 percent sucks up most of the gains and the 99 percent are still fighting over the crumbs.

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    4 Comments

    1. One big reason why there is a prevalence of drug usage in the country is specifically to escape from poverty. I have heard from a reliable grapevine that many poor urban and rural workers alike take “upper” drugs (not MJ as it is apparently a “downer”) so they could work longer hours. There is a chismis that farm workers still plow the fields or harvest even in the middle of the night whilst their bodies are battery-charged by these drugs. So ironically, drugs is a bane in this circumstance. Will the war against drugs actually be economically counter productive in this case?

      There are different kinds of drug users in the Philippines and I am afraid that majority belong to the one I mentioned above. So I hope this idea of the writer is taken seriously by the economic advisers of the president.

    2. The top 1% sucks up all the gains and the rest fight for the crumbs? This is a conclusion that is probably as old as mankind. Remember that Jesus said the poor will always be with us. How to reduce their number? Well, the most obvious is to stop them from breeding uncontrollably. Birth control must be promoted heavily, the Church’s objections be damned. Second, the practice of fiat money must be stopped and all money must be convertible to gold. This will put a stop to unlimited money printing, which is the main cause of wealth creation for the 1%, who are always first in line to receive the newly printed money before the resulting inflation leaves the rest of us holding the empty bag. Last but not least, all banks must be publicly owned, so that the benefits of this current monetary/financial system which is actually a ponzi scheme will redound back to the people and not instead go exclusively to the private pockets of the bank owners and the 1%. In short, all the money owed to the banks will be owed to the people, and they will also own all the assets that are currently in the banks’ balance sheets. But to accomplish all these you must overturn the world order, which means revolution. That is what is happening now with these surprising developments that the establishment finds troubling, this thing they are now calling populism. You see, economics is not as simple as 1,2,3.

    3. In general, I find columns fairly shallow and not really illuminating. This is one of the better opinion pieces I have read that is reasoned, sober and even-keeled.

      • From a distance I see that the President is leaving or delegating the other jobs, still important to his alter-egos like Sir /tugade etcetera and he is concentraing of the three main promises. He has done gret strides with of course some criticisms, me? I tried to visit a BIR office yesterday to check whether this ‘fear’ of kutong among the BIR staff is true or not, is really true. I got what I wanted, I paid only 1K as a penalty but not the 11K that was asked from my employee for the business application….you see? it will not happen to the previous administration or before that, the fear of losing their job because you will go the higher up, or perhpas to the President Office itself. This is the kind of fear that is needed so pair govt employees will serve the people, not them being served through ‘corruptions’. So I comend the Assistant Dist Officer whol helped me in 5 minutes to get what I wanted, and yet I don’t know this guy. perhaps this country will still improve and be like other improved countries i have visited.