Bottled up

Much has been made about Gov. Joey Salceda’s remarks about the poverty rate earlier this week. Those who made much about it laced the remarks with undue political speculation.

In a speech last Monday, Salceda expressed disappointment over the fact that, despite uninterrupted economic expansion through the past nine years, chronic poverty remained a problem. There are two components in that statement: first, the fact that the period of uninterrupted growth is unprecedented; second, the growth has not significantly soaked up poverty.

Salceda, economic adviser to President Arroyo, might have preferred the first component to be emphasized. After decades of short boom-and-bust cycles, the Philippine economy appears to have finally stepped off the rollercoaster. Nine years of sustained growth is not something to sneeze at. It has never happened before.

The prophets of doom and gloom, on the other hand, preferred to focus on the second component: the fact that so many remain poor. This is not news. Every piece of economic information demonstrates that. All anecdotal evidence confirms it.

The question, for process journalism (if that is at all possible in our politically charged environment), is this: What could be done to break the cycle of chronic poverty?

Once we have answered that question adequately, there are others we have to deal with. Do we, as a nation, have the capacity to devise a viable strategy? Do we have the institutions capable of making a dent on poverty?

Poverty is ultimately a political question. Populist politicians may promise minor relief from its symptoms. Great statesmanship is required to break the cycle.

Poverty is only marginally a distribution question. Unless the economy is more efficient at wealth creation, any focus on the distribution side can only produce wrong-headed strategies that distribute poverty instead of prosperity. We have seen that happen elsewhere, particularly in the various experimentations with socialism: people ended up equally poor rather than equally prosperous.

Poverty in the Philippines is as much the outcome of conventional wisdom as it is of bad distribution. A lot of our economic failure may be blamed on policies that enjoy wide support.

In an age where growth is the result of free movement of investments across borders to areas of greatest efficiency, we have restricted investments. A native oligarchy has used economic nationalism to inhibit trade and prevent investors to come in and compete. The oligarchy, ironically, enjoys ideological support from the political Left which is hopelessly trapped in a 19th century view of economic processes.

With the amount of land fixed, the only way to improve wealth creation in the rural areas is to capitalize agriculture. But, on this aspect, we are moving in the opposite direction: fragmenting land production in the name of “agrarian reform” and restricting the use of land as collateral for making agriculture more efficient.

While the world makes progress on the back of rising levels of trade, we have maintained both a policy architecture and a bureaucratic setup that inhibits trade and investment flows. We are the only nation in the world with a negative investments list actually written into the Constitution.

Much of our poverty is the direct consequence of high population growth. Without much improvement in our capacity for wealth-creation and with diminishing natural resources, continuous population growth can only mean greater poverty. Unless something truly revolutionary is done soon, increasing scarcity will mean more poverty.

Our waters are overfished. Our land is exhausted. Our fresh water sources are strained. Settlements have crept perilously up steep slopes and vulnerable flood plains. Population growth has long outstripped our available resources for public education and public health care.

Considering all that, it is hard to even imagine population is not a problem contributing to large-scale poverty. Yet the bishops continue to oppose population management policies.

Any viable strategy to bring down poverty levels must include components that are either unpopular or contrary to the interests of powerful oligarchic factions. A great deal of visionary statesmanship is required to propose such a strategy.

We will have to begin with a no-nonsense population management program. We will have to withdraw subsidies in a wide range of areas — most notoriously, from rice and energy prices — so that we can fund education as a means of building up our human capital.

We should liberalize trade, including trade in agricultural produce, to force competitiveness in all domestic sectors. In the transition to competitiveness, many enterprises might be forced to shut down and some obsolete jobs lost. There will be enough constituencies that will oppose programs anchored on competitiveness. Among the loudest are those that have kept us trapped in an expensive food regime.

We can no longer imagine our economic development in the same terms as our neighbors have developed — building heavy industrial bases and relying on mass production of goods. Technologies, global competition and returns on investment patterns all militate against repeating the experiences of other countries at other times.

We have to begin imagining our development in terms of building on our comparative advantages. If we do so, our best option lies in building up our services sectors.

Most important, unless we have bold and decisive leadership we cannot realign our policies and reorient our development. This should be at the core of any discussion of reform. –Alex Magno (The Philippine Star)