The paradox of growth and persistent poverty

The Arroyo administration had been inordinately fond of citing the 10 years of economic growth during its tenure, peaking at a high 7.1 percent in 2007. And yet, in that decade of impressive growth, more Filipinos actually became poor.

In 2003, for instance, the official poverty incidence rate for all individual Filipinos was only 24.9 percent. By 2009, this had worsened to as much as 26 percent. Put another way, the number of poor Filipinos in 2003 was a mere 19.8 million. By 2009, this number had swelled to as much as 23.1 million. In reality, many of these additional 3.3 million Filipinos were in fact children who had been born into poverty.

How can a country that grows economically leave so many behind in poverty?

Why is it that, despite all the anti-poverty programs of the past decade, the poverty incidence rate in this country has not been able to break the 20-percent barrier?

Are we constrained to being a society where one out of every five Filipinos will live a life of poverty forever?

The inconvenient truth, quite simply, is that economic growth in the Philippines has not benefited the poor as much as it has benefited corporations and better-off families.

In fact, the growth elasticity of poverty incidence (how much poverty has fallen for every 1 percent of economic growth) in this country is alarmingly low. For every 1 percent growth in the economy, the poverty incidence has tended to fall by only 0.6 percent, and may in fact have fallen to less than that figure. Worse, from 2006 to 2009, while the economy grew by an average of 4.5 percent a year, the poverty incidence by families fell by only 0.9 percent over that same four-year period.

Compare this to our Asian neighbors, who have managed to significantly bring poverty down over the past decade. Over a 20-year period, Vietnam’s poverty incidence dropped from close to 65 percent to around 27 percent; Indonesia’s fell from around 55 percent to 26 percent; and China’s decreased from 44 percent to less than 15 percent.

The point is: if the fruits of our economic growth had been shared equitably, shouldn’t poverty incidence have fallen by the same 4.5 percent rate for all?

What can we conclude from this data?

First, it is clearly not enough to merely grow the economy, particularly since the disparity between rich and poor (and across regions) remains so glaring. We need economic growth and equitable sharing of that growth. Otherwise, the rich get richer and the poor remain mired in inter-generational poverty.

Second, the family size of poor families tends to be much larger, which means that the dependency on lesser incomes will ultimately translate into persistent poverty. This also means that children growing up in poverty will have less access to quality education and health care, which in turn handicaps them later in life with respect to jobs and work. When they grow up and have their own families, this inexorable pattern is likely to continue. The key, then, is providing poor children with access to education and health care in the long-term.

Third, if we spend on poverty reduction programs, we have to ensure that we are in fact building the capacity of the poor to work their way out of poverty. We don’t have the resources to “buy our way” out of poverty and will therefore have to provide the poor with access to productive resources.

What else can we do as a country to break this implacable cycle? The Aquino administration is committed to do the following:

To identify the poor by face and profile so that programs can be targeted. If we are to spend on the poor, we should understand their respective contexts and the causes of their chronic poverty.

To focus on programs that have the best chance of reducing poverty in the immediate future and in the long-term. These include: conditional cash transfers to give poor families the incentives to take their children for regular health check-ups and to keep them in school; asset reform that provides them with access to productive resources; adequate housing; a clean living environment; and access to micro-credit and micro-equity so they can finance and run their own enterprises.

To demand results for our efforts: anti-poverty programs will have to deliver on their promise and mission and not just be about generating more funds and more projects.

To build a coalition between national government, local governments, the private sector and civil society so poverty can be addressed as a major part of our national agenda.

We need to proactively address poverty so no Filipino is left behind. Robust economies and strong democracies are not built in contexts where one-fifth of a nation’s population remains poor. The opposite, in fact, is true: a society is most successful in terms of human development when a significant portion of its population consists of a productive middle- and lower middle-class. To think otherwise is to ignore one of the more compelling lessons of history.

Lila Ramos Shahani is adjunct faculty of the Center for Development Management at the Asian Institute of Management, a doctoral candidate at Oxford University and assistant secretary of the National Anti-Poverty Commission in the Office of the President.