Inflation, growth, pain, and gain | Inquirer Opinion

Inflation, growth, pain, and gain

12:30 AM November 18, 2022

I was pleasantly surprised with the sustained GDP performance of the new administration. Perhaps, it has been the crippling inflation that has ravaged the purchasing power of most people, at least 80% of Filipinos feeling it from badly to terribly, that primed me to be pessimistic. Or the natural disasters that have battered us these last few months. Possibly both. Still, GDP growth is positive and noteworthy.

A 7.7% inflation, though, is a real killer for people whose incomes cannot catch up. GDPs become irrelevant for families who have to live with less goods and services, basically food, transportation, and utilities. Growth rates can be truly deceptive. It is not that there is no real growth, but that growth can benefit a minority and devastate the majority. It only needs for a high inflation rate to make that happen.


More than 50 years ago, taking up some economic subjects in college, I heard some of the principles that are so impactful today, both good and bad. So, a 7.6% growth in GDP is positive and an accompanying inflation of 7.7% is negative. Overall, it is a net negative for Filipinos because the vast majority have little or no assets that can rise in value with inflation.

The rich and the very rich do, and, in fact, benefit more than not. After all, how much negative impact can price increases in food, transportation and utilities really for those who can easily afford them. And we have no idea how much more their assets increase in value.


To better understand the economic dynamics around inflation, basically how it creates more money for the rich while it hurts the stomachs of the poor, I read up on more current articles that focus on this. It is a catch-up thing because my college professors on economics never managed to inspire me to be more attentive.

I did develop a working knowledge of economics by co-managing a household, my years as an employee and executive for a large company, and being an anti-poverty NGO worker these past twenty years. I now understand more intuitively and intimately how economics truly dominates most of our material lives, especially the victims of poverty.

The rich, of course, have much more freedom. They have most of everybody’s money and everybody’s options. No judgment here, just stating facts. But when I understood what inflation does in tandem with GDP growth, I had to absorb the absurd. It seems grotesque that what kills the purchasing power of the ordinary and the poor actually keeps building the financial empires of the few.

Mind you, all these are happening in the context of what is legal. It matters little if there is malice or none in the mechanics of the economy when it comes to inflation and GDP growth. The formula simply follows the principle that inflation makes the rich richer and the poor poorer. There are few exceptions, of course, but the principle will not work when the results are erratic.

This is now where government has to step in with urgency and political will. The majority of Filipinos are not secured with little or no savings. The government cannot afford to hold back economic growth because employment must keep providing income to workers and sustain the gray market. Even if inflation goes higher, growth must be pushed, businesses must stay open and hopefully expand, new investments welcomed.

Meanwhile, intervention of government and politicians naturally translates to subsidies and massive cash support to the needy. Until manufacturing, tourism, and higher productivity kick in to bring more taxes and profits, government must borrow. It cannot stop the subsidies when a huge sector becomes more fearful and discontented. The political fallout is too much for our politicians. They have too many reasons to want to maintain their positions. Spending our money is definitely an easy way out. Ultimately, we and our children pay; they do not.

Because there is a good growth rate, there is money and economic activity at the same high gear. The suffering of the majority does not erase the financial profits enjoyed by the minority. There is not only balance in the economic context, there may be, in fact, an overall gain. Except that only one small sector gains, not the majority.


Government believes it still can get money. As of today, the debt-to-GDP ratio is high, due to the 13 trillion government debt, the most lasting inimical legacy of the last administration. It borrowed 7 trillion when our government debt’s running total was only 6 trillion. Finance officers of government say that it can still borrow with relative ease – and it will.

Yet, the financial gains of the rich, even just in the value of their assets, are another source of funds that can ease the burden of the majority. The collective balance sheet is not in a mess, only its internal balance. There is only a point when a few can enjoy while the rest are in pain. Progressive intervention by the private sector, especially big business, can complement social programs of government.

A free market can only stay free when there is no political instability, especially when there is an economic slowdown or recession. Stability is what government and the upper strata of society must strive to achieve. Because the 80% of the Filipino population have no other productive options under the present set of circumstances.

Overall, we are not yet in the stage that is considered politically and socially fragile. It does not mean that the poorest are not in deep pain; they are. But the straw that will break the camel’s back does not seem to be around the corner – not yet. Before that can happen, though, kindness and generosity can be the balancing factors that not only buys us time but sets the foundation for future growth surges.

We have an economic balance sheet that is cold and unfeeling. What about setting up an emotional balance sheet, too?

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