The ‘inclusive growth’ buzzword

“Inclusive growth” is the current buzzword or fashion statement among those economists and development biz types who insist that macro growth is the key to success, yet grudgingly concede that it hasn’t delivered on promises to uplift the masses.

“In pursuit of inclusive growth” is Chapter 1 of the Philippine Development Plan 2011-2016, released last May 30th.  It says: “Inclusive growth means, first of all, growth that is rapid enough to matter, given the country’s population, geographical differences, and social  complexity.  It is sustained growth that creates jobs, draws the majority into the economic and social mainstream, and continuously reduces mass poverty.  This is an ideal which the country has perennially fallen short of …” (p.18)

The Plan admits: “While poverty incidence did decline between 1991 and 2009, the rate of decline has been exceedingly slow. Indeed, there have been periods, such as between 2003 and 2006, when the poverty incidence actually increased despite above-average economic growth” (p. 20).

However, it is mistaken in saying: “For every percentage-point increase in income-growth in the Philippines, poverty incidence falls by about 1.5 percentage points compared with the range of 2.9 to 3.5 for high-performing economies … and the 2.5 average for a set of 47 developing countries” (pp.20-21).  The coefficient of 1.5 for the Philippines is an overestimate, since it is based on a study using poverty data up to 2003.  When post-2003 data are considered, the estimated elasticity of reduction in poverty to income growth will fall below 1.5.

The Plan shows in a bar chart (Figure 1.2, p. 20), that official poverty in 2009 was no better than in 2006, i.e. there was no poverty reduction during 2003-2009.  I had pointed this out in my Dec. 4, 2010 column, “Six years of unshared growth,” by perusal of the income survey data released by the National Statistics Office.  The National Statistical Coordination Board’s official poverty estimate confirmed it on Feb. 8, 2011.

(Note: the NSO does the income survey, while the NSCB decides on the official poverty line and applies it to the NSO data.  My Feb. 12, 2011 column, “The lowering of the official poverty line,” said: “For either new or old methodology, the new NSCB report amounts to an official admission that poverty was flat over 2003-2009.  There is no escaping the conclusion that the substantial growth in 2003-2009 of real GNP per capita by 24 percent, and of real Personal Consumption Expenditures by 20 percent, had no effect on poverty.”)

“How shall we monitor progress towards inclusive growth?” asks the Plan at the end of Chapter 1.  Its answer is (p.32): “As productive employment raises incomes, cash-transfer programs are sustained and access to health and education improved, the incidence of poverty among the population should decline from 33.1 percent in 1991 to 16.6 percent by 2015 or less, in line with the country’s MDG commitment”—which tells us there is a target, not how it shall be monitored.

The targeted improvement is from 26.5 percent (of population; p.19) in 2009 to 16.6 percent in 2015.  The total decrease of 9.9 points in six years implies a reduction of 1.65 points per year, if measured yearly.  If the NSCB stubbornly maintains its practice of monitoring poverty only every three years, it means targetting a reduction by 4.95 points between 2009 and 2012, and then by another 4.95 points between 2009 and 2015.

Is it doable to reduce Philippine poverty by nearly 10 points in six years (of which a year and six months are now already over)?

My first comment is that it has never been done before.

The NSCB’s 2011 “refinements” resulted in re-setting the poverty percentages to 33.1 in 1991 and 24.9 in 2003, i.e. a decline by only 8.2 points in the 12 years when poverty was declining.  Given that by 2009 the official incidence was back up to 26.5, then the cumulated decline from 1991 was only 6.6 points in 18 years!

My second comment is that the leadership might not recognize the poverty trend until it’s too late.

Bear in mind that the NSCB, per its track record, will submit its 2012 poverty estimate only in February 2014.  It will be the one and only NSCB figure on poverty during President Noynoy Aquino’s watch that he will receive.  The NSCB will submit its 2015 figure, the one that officially determines if the MDG was reached or not, only in February 2017, to the next president!

The Plan’s other chapters are on “macroeconomic policy,” “competitive industry and services sectors,” “competitive and sustainable agriculture and fisheries sector,” “accelerating infrastructure development,” “towards a resilient and inclusive financial sector,” “good governance and the rule of law,” “social development,” “peace and security,” “conservation, protection and rehabilitation of the environment and natural resources.”  With conditional cash transfers, health, and education mentioned only in passing, and undeserving of even a sub-chapter, this Plan isn’t too focused on “inclusive growth.”

To cut poverty by 10 points in six years requires more than new buzzwords.

I, for one, am willing for the government to focus almost solely on anti-poverty programs, and let growth take care of itself. The government needs regular guidance from its own system of tracking poverty at least annually.  What counts should not only be counted, but counted not so seldom as to be mere decoration.

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