Tired of being poor? Lower your standards!

The SWS reported there are less Filipino families who feel poor, a level last seen 23 years ago even as hunger remains near record high. But before anybody starts jumping up and down for joy like chimpanzees in a banana plantation, read how SWS explained the seeming contradictory findings.

The SWS explained “the reason why self-rated poverty is relatively low and at the same time hunger is relatively high is because living standards have dropped so low that many families do not rate themselves as poor even if they suffered from hunger recently.”

The SWS continued: “Of the estimated four million households reporting hunger in March 2010, only 2.6 million rated themselves as Poor.  A significant 1.4 million who suffered from hunger did not rate themselves as Poor.” In other words, the poor have changed their idea of what it is to be poor. Even if they are having more bouts of hunger than ever, they already consider it normal.

But that didn’t stop Malacañang from shamelessly claiming credit, at least for the part about less Pinoys feeling poor. Deputy presidential spokesperson Gary Olivar told BusinessWorld in a text message: “The improvement in self-rated poverty, unprecedented since the Marcos era, as well as in hunger incidence, is evidence that the spike we saw last year was actually recession-related… This is a closing legacy which the next leadership can continue to build upon if they so choose.”

Mr. Olivar should have noted it is the hunger incidence that is important and not the self rated poverty level. Hunger, you know clearly. It is a physical state your stomach alerts you to. Poverty is a state of mind… even if there is physical evidence of poverty people can be in denial for many reasons.

Being in a state of denial about her negative contribution to the country’s economy is the story of Ate Glue. She is quick to trumpet her GDP numbers even if many noted economists have also questioned the accuracy of the numbers. GDP is also not something that the masa understands or what matters to them as much as unemployment rate and prices or inflation rate.

Putting all that aside, I just received a release from a government economic think tank that asserts government emphasis had been misdirected. “Growth alone is not enough for developing Asia. We need structural change that results in the full employment of the labor force,” the report from the Philippine Institute for Development Studies (PIDS) said.

The release from PIDS is based on a book Inclusive Growth, Full Employment, and Structural Change. Implications and Policies for Developing Asia (London: Anthem Press), by Asian Development Bank Principal Economist Dr. Jesus Felipe. According to Dr. Felipe, the empirical evidence indicates that despite the fast growth achieved by many countries across developing Asia (e.g., China, India, Pakistan, Bangladesh, Indonesia, Philippines) in the past decades, the region is still home to about 500 million people who are currently unemployed and/or underemployed.

The PIDS release continues: “Unemployment and underemployment are the major cause of poverty in developing Asia. However, policymakers have not taken unemployment and underemployment as the number one problem across the region.

“In the Philippines, for example, unemployment is a “time bomb”. Between 2005 and 2030, the labor force will increase by about 50 percent, that is, the number of people looking for a job will increase from about 34 million to 52 million. The question for the Philippines is: will the economy be able to provide jobs for all these people?

“In the case of the Philippines, immediate policy priorities to achieve full employment should be population management and job guarantee programs. Industrialization policies are also crucial. Education does matter for long-term growth but it is not a key constraint now…

“For decades, growth and low inflation were thought to lead to job creation. Policymakers have been concerned with controlling inflation and the fiscal deficit which, in turn, were thought to create stability and employment. Dr. Felipe’s book argues that this approach is incorrect. Citing the Philippine situation, he emphasized that the issue is not about slashing budget deficits to control inflation. Rather, it is about redirecting fiscal and monetary policies to achieve full employment with price stability…

“In particular, the Philippines needs to address problems in the agriculture sector, where land reform is still a priority. Likewise, policies that are geared toward industrialization have to be crafted and implemented.”

Former NEDA Chief Philip Medalla however, takes issue with some of the prescriptions offered by Dr. Felipe, particularly the one on job guarantee. “Job guarantee programs that prevent firms from firing people will actually make firms hire fewer people. On other hand, if it is the government that guarantees the jobs, the fiscal costs will sink the economy, reduce expenditures on infrastructure and education, and reduce job creation.”

Dr. Medalla also observed “as the experience of the Philippines and many Latin American countries shows, industrialization polices can result in perverse incentives and the protection of the inefficient at the expense of the rest of the economy.”

Viewing it from the perspective of one who has had actual experience in government economic policymaking, Dr. Medalla shares these thoughts:

“In short, the real question is why, with a few exceptions, governments are at least as likely to do more harm than good. The answer to this question is both simple and complex.

“It is simple because we know that economies will perform poorly in places where people in power get richer and gain more power when the government does more harm than good. It is complex because we don’t even know how to begin in reforms that will change society and its institutions so that government’s batting average will improve significantly. (And we are naturally quite wary of people like Jose Ma. Sison who think they know how to do it.)”

Tackling our serious unemployment rate is indeed easier said than done. It will continue to be rather elusive whoever is elected to succeed Ate Glue. One other respected economist asks in reaction to the PIDS release: “How can we even begin to build new enterprises, hence aspire for full employment, when we face power and water shortages nationwide next year? Which sane investor will put a dollar into the Philippines? Of necessity, we must go back to basic needs.” –Boo Chanco (The Philippine Star)