What It Will Probably Take Part 1: Inclusion

Skyscrapers and shanties: a picture of the poverty divide

In a previous article, I said that due to certain restrictions, it is difficult for a political leader in the Philippines to institute or implement genuine ‘course changing’ measures that would bring the country out of its economic doldrums. That’s probably easy enough to say.

The real challenge of course is identifying what those measures should be.  In other words, if you are willing to accept that radical reforms make up the recipe for economic recovery, you must also be ready to justify it and THAT presupposes that you have an idea of the ingredients yourself.

We will reserve that topic for later. What seems obvious however is that whatever that menu of solutions may be, it will not work if it is not a comprehensive program that will benefit everybody, especially the poor.

A report published by the ADB in 2009 (using circa 2006  statistics from the Philippine government) suggests that while the country has experienced “modest growth” through the years, the level of inequality, measured through the Gini coefficient, has hardly changed.  In fact, World Bank Country Director for the Philippines Bert Hofman believes that the level of inequality has actually increased.   This means the gains of the recent moderate boom cycles have only benefited that sector of Philippine society which already earns high income.

At the end of the day, people will not sign on to any plan to overhaul the economy if they don’t see more food coming to their table or if the food is not coming soon enough.  This is significant because that plan may ultimately involve tough reforms that are designed to increase country competitiveness by liberalizing trade laws or lowering the cost of Filipino labor.

Right now for instance, if the country wants to take advantage of the expected decrease in Chinese productivity (due to rising labor costs in that country), it has to compete with countries like Thailand whose minimum wage is four (4) times LESS than the floor set in the Philippines.   At current levels, even China’s minimum wage values are only half those of the Philippines (see ILO Global Wage Report here).

Many of these solutions make a lot of sense on paper but their actual execution would require deft political handling and the ability to deliver results fast.  In the one example that I cited, it is probably simple enough to say that  economic development comes at a cost.  It’s a rather different proposition to explain that the cost will first have to be borne by people who can least afford it.

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