Virtuous, vicious

We usually associate discussions of virtues and vices with the religious or with philosophers but it turns out economists also use “virtuous” and “vicious” to describe economic development.

I learned about this only through reading the latest Philippine Human Development Report released last Monday. The Human Development Network based at the UP School of Economics has produced seven of the PHDR (more or less once every three years), evaluating the progress of our provinces by using the Human Development Index. This HDI was first proposed by economists Malbub ul Haq and Amartya Sen, who were not satisfied with the idea of using Gross National Income as the only criterion of progress or development. Haq and Sen proposed using additional indicators, specifically life expectancy and years of schooling, to come up with an HDI. Since 1990, the UN Development Program has been coming out with annual reports ranking all countries along this HDI, together with discussions around particular development themes.

The HDI caught on, emphasizing that there’s more to development than income. For the Philippines, for example, the highest HDI has never been Metro Manila or the southern Tagalog provinces, where we think the most rapid development is going on. Benguet was No. 2 in the 2003 HDI and No. 1 in the 2006 and 2009 (the latest) HDI.

Besides incorporating a social dimension to the concept of development, the HDI highlights the need to address economic and social inequities in the system. Analysis of trends across time has become important, and there is now even a spin-off, the Gender Inequality Index.

The latest PHDR, like its earlier editions, is packed with information on development in the country, with a focus on the relationship of geography to various aspects of development. I intend to write about that geographic factor in a future column but for today, I want to zero in on development being virtuous or vicious.

These terms were coined in 2000 by economists Gustav Ranis, Frances Stewart and A. Ramirez, who described four types of development based on a combination of the HDI and income growth. The classification comes out of a recognition that income growth alone may not be enough for long-term development. In fact, in a more recent article, Ranis, Stewart and other economists are now saying human development is not just the product of, but is a “critical input” into, economic growth.

Development is “virtuous” if there is both HDI and income growth. If these decline, then we are talking about a “vicious” cycle of development. (One can argue there is in fact no development, and that we’re just talking about a vicious cycle.)

There are two other possibilities here: a country or province seeing an improvement in income but a decline in human development. This can happen for different reasons—for example, a country being very rich but lacking the capability to improve health or education. We see that in many Middle Eastern countries, rich because of oil but needing to import teachers and doctors from all over the world, including the Philippines. In the case of the Philippines, we’ve seen provinces becoming rich because of a boom in a particular sector, real estate, say, or mining. I’ve seen municipalities jump from fifth-class status to third- or even second-class status simply because of a surge in the taxes being paid, but that income growth may not be accompanied by an improvement in social services, sometimes because the place does not have the human resources, but more often because the money is squandered in useless projects (read: corruption)

Another possibility is a country or province seeing a decline in income and yet improving in human development. These are indeed virtuous governments that will not sacrifice social services even in times of economic crisis. I’m thinking of Cuba, which until recently was economically strapped but able to keep its health and education services going. (But this is changing today. Ironically, as it opens up to a market system with income growth, it’s experiencing a decline in social services.)

In the Philippines, what the Human Development Network did with the yearbook was to have a third category called “PCI-lopsided” growth, meaning a mismatch between the ranking in terms of per capita income (PCI) and the HDI.

The Human Development Network also has tables comparing provinces across time: 1997-2003, 2003-2009 and 1997-2009.  I’m going to concentrate on the longer time period of 1997-2009, which captures a long-term trend.

Let’s start with the bad news, with the provinces with vicious cycles: Agusan del Sur, Aklan, Antique, Basilan, Batanes, Batangas, Davao del Sur, Davao Oriental, Laguna, Lanao del Norte, Lanao del Sur, Maguindanao, Metro Manila (!), Misamis Occidental, Misamis Oriental, Mountain Province, Nueva Ecija, Oriental Mindoro, Palawan, Pampanga, Quezon, Rizal, Sarangani, Sultan Kudarat, Sulu, Surigao del Sur, Tawi-tawi, Zambales and Zamboanga del Norte.

Now to the virtuous provinces: Agusan del Norte, Albay, Aurora, Bataan, Benguet, Biliran, Bohol, Bukidnon, Bulacan, Cagayan, Camarines Norte, Camarines Sur, Camiguin, Capiz, Catanduanes, Cavite, Cebu, Davao del Norte, Eastern Samar, Guimaras, Ifugao, Ilocos Sur, Iloilo, Isabela, La Union, Leyte, Marinduque, Masbate, Negros Occidental, Negros Oriental, North Cotabato, Northern Samar, Nueva Vizcaya, Occidental Mindoro, Quirino, Romblon, Siquijor, Sorsogon, South Cotabato, Southern Leyte, Western Samar and Zamboanga del Sur.

There are 29 vicious provinces versus 42 virtuous ones, but I’m afraid those figures are deceptive. Metro Manila was one of the 29 areas classified as vicious, which, because of its huge population of 12 million, skews the figures, suggesting most Filipinos are living in vicious cycles of development.

Now for the PCI-lopsided provinces. Don’t worry about the word “lopsided.” These are provinces that saw declining incomes but managed to increase their HDI rank, meaning they did not sacrifice their social services even in hard times.  Applause for Abra, Apayao, Ilocos Norte, Kalinga, Pangasinan, Surigao del Norte and Tarlac.

Two provinces, Compostela Valley and Zamboanga Sibugay, were only created recently so there was data only for 2003-2009, the former classified as virtuous and the latter as vicious.

People from the provinces classified as vicious shouldn’t take this personally. After all, Metro Manila is in that category, too, so that can mean many Filipinos with very hurt egos. What we  citizens of vicious areas should be thinking of is how we can do our share to make sure our development moves from vice to virtue, and that will include our often less-than-virtuous politicians wasting precious tax money on antidevelopment projects. Let’s learn, too, from the “PCI-lopsided” provinces, and how they managed to keep up with human development even if hard-up on income.

Get a copy of the PHDR for more details, including the provinces that are able to move from virtuous to vicious and vice versa. The report includes discussions of theories on why we see these movements.

Maybe, too, for the next PHDR (I speak now as a member of the executive committee of the Human Development Network), we might want to break down Metro Manila and see how each city and municipality fares.

Visit hdn.org.ph for downloadable copies of the PHDR, including previous editions. For hard copies, call 927-8009.

(E-mail: mtan@inquirer.com.ph)