How the poor will bring the country up or down
HIGH GROUND By William M. Esposo 2006-10-23
SANS the jargon that we usually hear from economists and government technocrats, the fight to eradicate poverty is more of transformation through education and values formation and less of dole outs. Most people tend to associate poverty alleviation with the mere provision of better paying jobs to the needy, a matter of putting more pesos and centavos in the pockets of the poor.

It is not. Put more money in the hands of the poor without first addressing the lack of education and values that make them poor and there is the greater probability that they will not exit their family’s generation after generation cycle of poverty. What separates the rich from the poor is what they know and how they react to situations in life. The gold in the bank vaults of the rich and the coins in the pockets of the poor are mere manifestations of that variance in knowledge and attitude.

What many Filipinos also do not realize is that the alleviation of poverty in our country is the key to spurring the economy to grow and deliver a better standard of living to more people. Most people think that getting a lot of foreign investors into the country to put up businesses and create jobs is the solution to the problem of reviving a sinking or stagnant economy.

The truth is investments are only the second phase of the solution. The first and most important phase is to transform the poor who are many into productive consumers, meaning develop the poor to form a substantial market which then will convince investors to put their money in Philippine ventures.

Of the 84 million or so Filipinos, easily 40 million are living below the poverty line. Some say that there may even be more now. That means that about 40 million Filipinos cannot afford 80% of the products that middle class and lower middle class household members can buy.

That is a lot of market that is undeveloped and untapped—food, durable goods, services, housing, construction and so forth. That is a lot of manufacturing that can be setup if those 40 million can only afford to buy more products. If we have 84 million Filipinos who can each afford to purchase about P25, 000 worth of products a year—that would be the best incentive to foreign investors.

Instead, what is happening is that we have less and less purchasing power to offer an investor because of the way our economy continues to deteriorate.

Because over 40 million of Filipinos cannot even afford the basic necessities in life, it also follows that over 40 million Filipinos also are unable to share in the national tax burden. We enter a vicious cycle—the few who can pay taxes have to pay more so that government can function and allow basic services to be maintained. This opens us up to a situation that discourages foreign investments.

Foreign investors go to a country to sell goods or services, not to pay high taxes. In fact, countries who are wooing foreign investors are offering tax incentives as one of their biggest come-ons.

The biggest problem that our poverty situation creates is the prospect of a social explosion. History tells us that when too many people are brutalized and de-humanized by poverty, the country encounters periods of instability and disorder. The French, Russian and Chinese Revolutions were all provoked by massive poverty.

These days we are already witness to an unprecedented high incidence of crimes against property—burglaries, robberies, snatchings which occasionally result in homicide. If the misery level continues, it will just be a matter of time that these individual acts of violence imposed by the poor on the rich will develop into organized revolt.

One of the main reasons why foreign investors shy away from the Philippines is our socio-economic imbalance. The higher your country rates in political risk, the lesser your chances of getting foreign investments. Investors are characterized as the easiest people to scare.

Therefore, the thinking that foreign investments will alleviate poverty in our country is fallacious. It is fallacious because the high incidence of poverty in our country is what discourages foreign investors from coming here to set up shop. Reduce the poverty first and the investments will come next. Investors do not come to our shores with the objective of eradicating poverty—that is only in their public relations mission statement—but with the objective of selling their goods and make a profit.

The solution therefore is to first reduce significantly the poverty situation in the country thereby expanding our base of consumers. Only after we do that can we then attract foreign investors. Otherwise the approach—trying to attract investors to alleviate poverty—is tantamount to putting the cart before the horse.

That means that those who have the lion’s share of the wealth in our country must strive to bridge the wealth gap. But to be able to effectively do that, it will entail the bridging of three other gaps that sum up to the wealth gap—the information gap, the education gap and the opportunity gap.

The information, education, opportunity and the resultant wealth gap are the fruits of the culture of predation that has characterized Philippine society. What we have is an imbalance where a few members of society have too much while so many have very little—over 40 million Filipinos do not even have enough to afford them three sufficiently nutritious meals a day.

Our poverty situation has gotten so bad that our poor are now in such a pitiful state where they cannot even qualify for opportunities when these are made available. In developed countries, people may encounter poverty during an economic slowdown as what happened in the United States during the Great Depression. But when jobs are made available again, as when the New Deal in the US spurred the depressed economy, the impoverished folks are able to exit poverty because they are qualified to fill the newly-created jobs.

Our poor (class E citizens) do not qualify for jobs overseas or for those openings in call centers. Even if we bring in a lot of investments to perk up our manufacturing sector, most of the jobs that will be generated are not accessible to them simply because they do not have the skills for those jobs.

We are now paying the price for the neglect of the least of our brethren. People accept the reality that if we abuse and degrade the environment—we will create an ecological imbalance where we ourselves will also become the victims who will pay the stiff price. How come that when it comes to a socio-economic imbalance like the wealth gap, we are not as readily inclined to accept the reality of its consequences and do something about it while we still can?

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