Inclusive growth has ended

Some very disappointing economic news came out this week: “Third Quarter 2018 Social Weather Survey: Net Gainers falls to negative -2,” posted on www.sws.org.ph on 10/3/18. It means that more Filipinos got worse off in the past year than got better off, and that the margin was 2 percentage points. (This SWS survey was fielded on Sept. 15-23. Given its population base of 64 million adults, 1 point is 640,000 persons.)

The new number of -2 is due to 28 percent being Gainers, compared to 30 percent being Losers. Net Gainers has just become negative again, for the first time since 2014.

But it was positive throughout 2015, 2016, 2017 and half of 2018, or a total of 14 consecutive quarters. The last three and a half years, up to mid-2018, constituted an unprecedentedly long episode of inclusive economic growth.

Historically, economic inclusivity has been rare. In the SWS archives of 116 national surveys from 1983 to 2014, Gainers had exceeded Losers only twice—once apiece in 1986 and 1987—despite the ever-growing GNP per capita.

So it was a very welcome surprise to find Gainers dominant all during the last six quarters of the Noynoy Aquino period. Then, entering the Duterte period, it was a pleasure to see Net Gainers going into double-digits, and eventually peaking at +23 last December, from 41 percent Gainers and 18 percent Losers.

It was still a fine +20 last March. But then it fell drastically, to only +5 in June (from 32 percent Gainers minus 27 percent Losers; see “Inclusivity has suddenly dropped,” Opinion, 8/18/18).

And now we can see that the unfavorable trend continued to September. Accepting the truth of the trend is primary, and learning the reasons behind it is secondary. Perhaps, the main explanatory factor is the surge in the cost of living; ascertaining the factors is a task for econometric research.

The shift in Net Gainers from positive to negative was anticipated by the Bangko Sentral’s Consumer Outlook Survey for the Third Quarter, done July 1-14, 2018 (www.bsp.gov.ph, 9/7/18); see “BSP confirms drop in inclusivity,” 9/15/18.

The National Capital Region (NCR) has the lowest September score. The new national Net Gainers score of -2 is made up of -4 in NCR, -3 in the Balance of Luzon, and zero in both Visayas and Mindanao.

Last June’s national score of +5 was due to area-scores of +1 in NCR, +9 in Balance Luzon, -11 in Visayas, and +14 in Mindanao. Thus, from June to September, Net Gainers dropped by 5 points in NCR, by 12 points in Balance Luzon, and by 14 points in Mindanao. But it recovered by 11 points in Visayas, to reach its current zero.

The negative trend from the past translates into weakened optimism for the future. For the coming year, those expecting a betterment of their personal lives have become 36 percent, and those expecting a worsening are 9 percent. This gives a Net Optimists score of +27 in September, a far cry from its +44 last June. Personal optimism is now at its lowest since August 2012, when it was also +27.

Net Gainers is a democratically-based indicator. It uses simple head counts of people who say that their quality of life has gotten better, or else worse, without trying to quantify the extent of betterment or worsening. What only matters is the gainers’ plurality over the losers.

Net Gainers is superior to per capita Gross National Income (GNI), which uses the average potential income per person. GNI allows the gains in incomes of some people to outweigh the drops in incomes of others, and leads to wrong signals about changes in the people’s wellbeing.

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