Inescapable reality


For sure, President Benigno Aquino III would be boasting about the 6.8 percent growth in the Gross Domestic Product (GDP) last year and the 7.8 percent growth during the first quarter of 2013 when he delivers his fourth state of the nation address on July 22 Monday. He would be attributing this to the ‘changes’ his government has made, specifically in terms of good governance, and would be projecting that the country would be on the road to becoming an economic powerhouse in the near future.

However, what the glowing statistics could not hide is the fact that the gap between the rich and the poor is widening or to put it more bluntly, social inequality is worsening. Data from the government’s National Statistical Coordination Board (NSCB) shows that the “high income class,” which accounts for a mere 15.1 to 15.9 percent of the population, enjoyed a 10.4 percent growth in income in 2011; that of the ‘middle-income’ group grew by only 4.3 percent and the ‘low-income’ group by 8.2 percent.

Data from the NSCB also revealed that the high-income class accounted for 60 percent of the economy’s income while less than half or 40 percent was divided among the remaining 84 percent of the population.

The government’s officially declared data on the worsening social inequality is even understated. Why?

The NSCB defined the middle-income group as those belonging to households earning from twice to up to 10 times the poverty line, which is P7,821 ( $181) a month for a family of five. It classified low-income groups as those earning twice the poverty line or less. How many households earn P15, 642 ($363) a month? This amount is already the starting salary for a call center agent, one of the professions regarded as relatively higher paying.

Minimum wage earners, who now constitute the minority among wage and salary workers because of the prevalent practice of contractual employment, could not earn that much. Contractual workers, who now constitute the majority, earn way much less.

Farmers, who, according to the Bureau of Agricultural Statistics, comprise 33 percent of the labor force, earn even less. Worse off are landless farmers, who, according to the Kilusang Magbubukid sa Pilipinas (KMP), comprise seven to eight for every ten farmers.

According to Ibon Foundation, in 2009, 70 percent of the estimated 92 million Philippine population earn P104 ($2.40) or less a day or P2,704 ($62) a month.

That is merely one third of the P7,821 ($181) a month poverty threshold set by the NSCB. Considering that the Aquino government, the NSCB, and the IMF-WB admitted that the gap between the rich and poor widened further, this means that the 70 percent poverty rate cited by Ibon Foundation could even be worse now.

Is the Aquino government anywhere near narrowing the worsening social inequality?

Consider this data from Ibon Foundation:

The combined net incomes of listed firms under the Securities and Exchange Commission increased to P377.12 billion ($8.77 billion) or 18 percent from January to September 2012 from P319.97 billion ($7.44 billion) in the same period the previous year.

The top 1,000 corporations gained an average annual income of P780.02 billion ($18.14 billion) from 2010-2011 compared to an average of P421 billion ($9.79 billion) annually during the previous administration. The profitability of big business, averaging 11 percent annually, is higher under the Aquino administration.

At same time, the International Labor Organization said the average monthly wages in the Philippines is the third lowest among 72 countries in the world.

Such is the thrust of the Aquino government. To attract foreign and local investments, it keeps wages and labor costs low.

Even then, unemployment remains at a high 10.9 percent affecting 6.012 million Filipinos, including those who have been discouraged from looking for jobs during the time of the government’s survey and were stricken off the number of unemployed. Youth unemployment is a high 15.4 percent. Underemployment is still at a high 19 percent, affecting 7.16 million people.

As for the peasantry, according to the Kilusang Magbubukid ng Pilipinas, the Aquino government has still to distribute 1.2 million hectares of land to complete its target for its Comprehensive Agrarian Reform Program Extension with Reforms (CARPER). And it has barely touched private lands because most of the lands it has distributed are government lands.

Among the lands it has distributed, the government has no data how many have been reclassified or converted to other uses, thereby negating the distribution. The Department of Agrarian Reform, according to KMP, estimated that only 15 percent were able to pay their monthly amortizations at least once. However, not being able to pay the monthly amortizations for a certain period of time, e.g. three years, would forfeit any payments made, thus forcing peasants to resell their rights to the land back to landlords. In Nueva Ecija, only four percent of farmer beneficiaries were able to complete their payments.

So how could social inequalities be solved if the Aquino government pursues the same neoliberal economic program?

The World Bank and the Asian Development Bank added another dimension to its neoliberal paradigm: inclusive growth. And this concept is very much part of the language of the Aquino government. The main features of ‘inclusive growth’ are:

1. high, sustainable growth to create and expand economic opportunities,

2. broader access to these opportunities to ensure that members of society can participate and benefit from growth, and

3. social safety nets to prevent extreme deprivation.

The social safety net being referred to is the Conditional Cash Transfer program (CCT), locally called as Pantawid Pamilya Program (PPP).

To achieve the second component – access to opportunities – the government must invest in generating productive employment. For this to happen, the Aquino government has implemented the K + 12 curriculum for basic education to provide secondary school graduates with the technical/vocational skills to be employed. It is also investing in tourism projects. The Aquino government is also supposed to invest in rural development to generate employment for the rural poor.

However, all of these efforts at ‘preparing’ the population for productive employment are dependent on the inflow of foreign direct investments. Tourism both local and foreign, on the other hand, is dependent on the growth in the disposable income of potential local and foreign tourists. As for investments in generating employment for the rural poor, how could it be possible without a genuine agrarian reform program?

An Agence France-Presse June 4, 2013 article quoted the International Labor Organization’s (ILO) World of Work Report 2013, which was presented by Raymond Torres, director of ILO’s Institute of Labor Studies, saying that world inequality is worsening in 14 of 26 countries.

“In the United States, for instance, the richest seven percent of the population saw their average net worth swell from 56 percent in 2009 to 63 percent in 2011. The remaining 93 percent of Americans saw their net worth decline,” the ILO said.

“…although large companies in developed countries have seen their profits bounce back, the story there is quite different: investments are slumping and inequalities are growing,” the AFP article read.

“In a world where some 200 million people are out of work—a number set to rise to 8 million by 2015—large firms in advanced economies now enjoy profit margins similar to those attained between 2004 and 2007, according to the 117-page report “Repairing the economic and social fabric”.

However, instead of plowing back their increased profits to productive investments thereby expanding employment opportunities, the report said big companies have merely increased their cash holdings.

Investments in the world’s advanced capitalist countries fell from 21.6 percent of GDP in 2007 to 18.5 percent of GDP. But their cash holdings increased from 11.8 percent of total assets in 2008 to 12.4 percent in 2011. The report added, publicly listed companies increased their cash holdings from $2.3 trillion in 2000 to $5.2 trillion in 2008 to $6.5 trillion in 2011.

These cash holdings are not merely sitting in banks. This is the money capital that is flowing toward portfolio investments such as stocks, bonds, commodity futures, options, money market, foreign exchange, derivatives, among others. This is why portfolio investments, sometimes called as ‘hot money’, increased in recent years while there are no significant increases in foreign direct investments. In January, foreign direct investments registered a net inflow of $576 million, down by nearly half from $1.05 billion posted in January last year.

This speculative money capital caused the gains in the Philippine stock market last year to the early part of this year, before going down recently. The inflow of portfolio investments is also what propped up the country’s dollar reserves and the value of the peso.

Why are they not investing in production? Would capitalists invest in production when there is a glut in commodities and a tightening in credit?

So the question is: How would the Aquino government be able to gather enough foreign investments to sustain the so-called economic growth and generate more jobs for ‘inclusive growth’? At the end of the day, what would be left is the CCT or PPP; and even this is bound to dry up as it is being financed by loans. And majority of the Filipino people would be worse off than before. (

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