The ‘lost decade’ of the 2000s

Newly appointed Socioeconomic Planning Secretary Arsenio Balisacan decried the “lost decade” of the 2000s—when poverty stayed flat despite rapid growth in gross domestic product—at the very start of his speech to the general assembly of the Bishops-Businessmen’s Conference for Human Development last Monday, to give the government’s perspective on the conference theme “Inclusive growth: socioeconomic development for all.”

Based on his own analysis of the triennial Family Income and Expenditure Surveys (FIES), the former dean of the UP School of Economics estimated the national incidence of poverty at 36 percent in 1991, dropping to about 27 percent by 1997, then staying more or less flat afterwards, and winding up at 26 percent in 2009. (The percentages are either of households or of the population; I forgot to ask which. They are my readings of the points on his PowerPoint chart, rather than exact numbers.)

The Millennium Development Goal is to cut the poverty rate by half over the 25-year period 1990-2015. In terms of Dr. Balisacan’s metric, that means aiming to cut it to only 18 percent within the next three years. It’s a very tall order, but borders on the possible, since it requires that the heady 9-point drop from 1991 to 1997 be repeated from 2009 to 2015.

Lessons must be learned from the low-but-inclusive growth of the 1990s, as well as the high-but-exclusive growth of the 2000s. The starting point is recognition of the “lost decade” as a scientific fact.

The fact has been plain to see for a long time. In “Six years of unshared growth” (Inquirer, 12/4/2010), I discussed the fresh November 2010 release by the National Statistical Coordination Board (NSCB) of the results of the 2009 FIES. Compared to the two previous FIES rounds of 2006 and 2003, the average income and expenditure per family (in thousands of pesos per year per family, in year 2000 prices) were:

2009       2006        2003

Ave. family income      129         125         130

Ave. family expenditure  110        107         109

Thus the averages dipped from 2003 to 2006, and by 2009 had merely recovered to their levels of 2003. The flatness of family income and expenditure over 2003, 2006 and 2009 contrasted to the growth of real Gross National Product per capita by 24 percent, and real Personal Consumption Expenditures per capita by 20 percent, based on annual data over 2003-2009, in a separate NSCB release of November 2010.

The picture of flat poverty in the 2000s does not depend on the system used to measure poverty.  It was equally seen (but seen much more quickly) in the quarterly SWS surveys of self-rated poverty. The only difference is in the calibration of poverty. Because the people’s own boundaries for poverty are not as stingy as the official poverty line, the percentage that considers their households as mahirap or poor is much larger than the official percentage.

From 1992 up to the middle of 2012, there have been 50 quarterly surveys of self-rated poverty so far. In “Terraces of poverty” (Inquirer, 11/19/2011), I pointed out that “In fact, poverty has been flat at about 51 percent since 2004…. Before that, poverty was flat at about 61 percent in 1995-2003…. And before that, poverty was flat at about 66 percent in 1988-1994.”  Thus poverty does not decline steadily, in pace with aggregate production growth; when poverty stays flat for several years, then the growth is noninclusive.

If self-rated poverty falls to 33 percent by 2015, it would have been halved in 25 years, and the MDG would have been achieved. This is a tall order, since the second quarter 2012 rate was still 51 percent—i.e., the current terrace of poverty has lasted for eight years already.

With 2012 being an FIES year, one may expect the official statistics on 2012 family income and expenditure by November 2013, and the next official estimate of 2012 poverty by February 2014. If the NSCB follows its usual timetable, then its report about 2012 would be the one and only official estimate of the progress in poverty that President Noynoy Aquino will be able to see concerning his own watch. Whatever P-Noy can accomplish in poverty reduction between 2012 and 2015 (the next FIES year) is not scheduled for reporting until early 2017, under the next President.

Thus I have been recommending, as far back as President Cory’s time, that the FIES be done annually. The way to do this without increasing the survey cost is to use only one-third of the current sample size, sacrificing provincial detail for the sake of greater national and regional frequency.

An annual FIES could even produce two reports per year, or six reports in three years. An FIES actually takes two interviews, one after midyear, asking about the family’s income/expenditure of the first semester, and another early the next year, asking about the second semester.  The NSCB’s practice has been to add up the two semesters to make up the full year; but it would be more informative to report each semester separately.

In concluding his talk, Secretary Balisacan called upon BBC to be a partner in development, by investing in generating and spreading knowledge on “what works and what does not” for poverty reduction.

The way to obtain such knowledge is to watch poverty constantly, and to be open to all possible means of doing so.  Failure to regularly appreciate the state of poverty was surely part of what led to the “lost decade.”

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Contact SWS: www.sws.org.ph or mahar.mangahas@sws.org.ph.