Reducing poverty: A conceptual approach

SURELY OUR most fundamental challenge, especially for government, is the fact that poverty in the Philippines has not improved, even as our neighbors have made great strides in reducing it in the past two decades. Alarmingly, Philippine poverty even worsened in the past seven years. It shows both in government’s official poverty incidence figures and data from outside government, such as in the Social Weather Stations’ (SWS) self-rated poverty surveys. We see it in falling school enrollment rates and rising dropout rates, and in rising incidence of malnutrition and certain diseases in the majority of the country’s provinces in recent years. It is also manifested in record incidence of hunger in recent periods, as reported also by SWS. And all this while the economy saw record growth—growth that has obviously benefited too few Filipinos.

Most of us understand that poverty is much more than mere lack of income. Poverty has several dimensions, and economic poverty, while the most widely understood, is not the whole story. People can also be socially poor, environmentally poor, politically poor, culturally poor, or spiritually poor. Setting those aside, even just the economist’s view of poverty takes on several dimensions. To economists, poverty is rooted in lack of endowments, that is, lack of access to five forms of capital: financial, human, natural, physical and social.

Lack of financial capital, or simply money (income) is most familiar to all. Also well understood is human capital, primarily in the form of health and education, which are essential to a person’s ability to earn income. Natural capital refers to the gifts of nature on which most prominent income-generating activities are based: land, marine and fresh water resources, minerals, forests and biodiversity. Physical capital is the built environment that eases economic activities and life in general, referring to the physical and social infrastructure around us. And social capital pertains to the human relationships that facilitate enhancement of human welfare, seen in levels of social cohesion, community organization, and political empowerment.

Based on the above, one can see that all the various interventions being employed to reduce poverty fall neatly under three modes: (1) those that expand the poor’s endowments of these various forms of capital, either by outright redistribution or by improving access to them, (2) those that increase the benefits (income or welfare) that they derive from these assets, and (3) those that enrich or protect these asset endowments. Seen in this way, we can understand and determine where efforts may be weak and need reinforcing, or even run at cross purposes in some cases.

Included under the first mode are asset reform programs that address the poor’s access to natural capital such as farmlands under the Comprehensive Agrarian Reform Program, fishery resources under the Fisheries Code, and ancestral domains under the Indigenous People’s Rights Act. It also includes the various initiatives to improve health and education (i.e., human capital); rural infrastructure such as energy, irrigation, farm to market roads, and communication facilities (physical capital); farm credit, microfinance and microenterprise initiatives (financial capital); and participatory mechanisms such as cooperatives and local development councils (social capital).

Under the second mode of increasing the benefits derived from these assets are efforts to improve productivity through a stronger science and technology base, and expanded research and development (R&D) activities. Measures to assist farmers with improved inputs such as hybrid seeds, chemical or organic fertilizers, better pesticides and suitable farm machines likewise fulfill the same function. This may also be pursued through institutional interventions and market reforms to improve farm prices. These include fostering small and medium-scale processing of farm products, removing the National Food Authority’s monopoly on rice importation, and measures to strengthen the various commodity value chains that link production to final consumption. Also contributing to this goal are macroeconomic measures that stabilize prices (i.e., reduce inflation), foreign exchange rates and interest rates.

Forward-looking measures characterize the third mode, of enriching and/or protecting endowments in the various forms of capital. Environmental protection measures such as forest and watershed protection and coastal resources management seek to enhance and preserve the natural capital. So do climate change adaptation measures, now a prominent concern at all levels of development planning, which would protect both natural and physical capital. The controversial conditional cash transfer (CCT) program induces the poor to invest in their human capital by rewarding them for keeping children in school and availing themselves of health services, among other things. Population management and disaster management efforts similarly pursue the same goal.

There can be rhyme and reason, then, to the whole array of poverty reduction efforts contributed by various instrumentalities of government, and by private sector and non-government organizations. Perhaps where we have failed is in recognizing how all our well-meaning efforts relate to each other and how, if done right, they could actually synergize and complement one another. CCT, for example, can be used to serve natural and social capital as well. The sooner we do this, the sooner perhaps we could begin to see tangible progress in our fight to reduce poverty.

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