Economic growth for all

News of the economy’s first quarter growth of 6.4 percent was widely welcomed when it was announced recently, especially because hardly anyone expected it to be that high. It was also the fastest growth in Asia next only to China. Then came the news from Forbes Asia last week that the 40 richest Filipinos, led by mall tycoon Henry Sy, saw their collective wealth rise $13 billion over the past year to $47.4 billion, a 37.8-percent jump.

Meanwhile, our gross domestic product (GDP)—or total income earned domestically—went up by P732 billion, or $17 billion, in 2011. Thus, the increased wealth of our richest 40 individuals alone is already equivalent to the bulk—76.5 percent, or more than three-fourths—of the country’s overall increase in income last year! For comparison, the wealth of the 40 richest people in Japan rose by $10.7 billion, a mere 2.8 percent of the economy-wide increase in income (GDP) of $381 billion. Closer to home, Thailand’s 40 richest increased their fortunes by $9 billion to $45 billion (a 25-percent increase), with the rise equivalent to 33.7 percent or one-third of their overall income growth. Malaysia’s top 40 got richer by $2.3 billion (to $64.4 billion), a 3.7-percent rise (a measly one-tenth of the rate at which our own billionaires’ fortunes grew).  This is equivalent to a mere 5.6 percent of the total increase in the Malaysians’ incomes in 2011.

These comparisons tell us there is something glaringly peculiar about the Philippine economy, at least in our part of the world. It further confirms what many of us have been lamenting time and again: that we have an “oligarchic” economy where the bulk of the nation’s wealth and income is in the hands of a few. Hence, it should be no surprise that an otherwise impressive 6.4-percent growth in the economy did not get ordinary Filipinos jumping for joy. The Social Weather Stations’ self-rated poverty data actually showed the number of poor Filipino families rising by 2 million (from 9.1 to 11.1 million), or 10 percentage points from 45 last December to 55 percent.  Whatever brisk growth the Philippine economy enjoyed in the first quarter seems to have failed to translate to a better life for those who needed such improvement most.

Don’t get me wrong: I do not mean to fault or blame those fabulously rich Filipinos in the Forbes list. I surmise that for most of them, their great wealth and its continued growth must be attributable to years of hard work and/or superior business acumen; a number of them in fact literally rose from rags to riches. (This is not to dispel the likelihood that some were probably helped along by political connections, exploitative business practices, or what economists generally call rent-seeking behavior.) Nor am I heaping blame on the government, particularly of President Aquino, whose crusade against corruption has lately been translating to an undeniable surge in business confidence. If our economic growth has not been a “rising tide that lifts all boats,” it is because of a long economic history replete with misdirected policies, weak institutions, and misguided or ill-motivated public servants. Consequently, opportunities in our society are far more lopsided than appears to have been the case in most of our Asian neighbors. Hence, far too many Filipinos have ended up not even having a “boat” to be lifted in.

With our 40 richest families apparently accounting for the bulk of the growth in our national income, the Philippines has become a poster case for the now common call among development institutions for “inclusive growth.” How do we avoid growth that enriches the few, but excludes the many? How do we pursue growth that actually benefits the poor, rather than merely trickling down to them?

One thing to me is clear: We need to start with good governance. In an analysis I did in my sabbatical research at the Asian Development Bank Institute a few years ago, I examined the factors that influenced the rate at which economic growth had been accompanied by poverty reduction across Asian countries. Quality of governance (measured using the World Governance Indicators of the World Bank) came out to be the strongest determinant. Also significant was the level of public spending on education, health and housing, which reflects on the priorities of government, hence quality of governance as well. In the face of heckles and valid criticisms on the progress of President Aquino’s “no wang-wang” policy and call for “daang matuwid,” few would deny that palpable gains are being made in his crusade for good governance. He must sustain the momentum and accelerate the pace of achievement as a basic prerequisite if we are to achieve more inclusive growth.

Given that, other imperatives should more easily fall into place: vigorous promotion and development of small and medium enterprises; a competition policy that equalizes business and economic opportunities; and effective asset reform focused on leveling people’s access to opportunities to enrich their human, natural, physical, social and financial capital. Space prevents me from elaborating further, but many of my past articles have dealt on how these ought to be done.

But government alone cannot deliver inclusive growth. Our 40 richest and all those among us who are well-endowed must do their part in making broad-based growth come about. There are various ways they can do so, and surely, the same brains that helped them grow their fortunes could guide them on how. But more than brains, it takes a lot of heart as well—and one hopes that they are rich in this too.

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