The epic fail of inclusive prosperity
Credit to Author: MARLEN V. RONQUILLO| Date: Tue, 12 Mar 2019 16:41:01 +0000
WHICH of these two year-end reports should a Philippine president deliver on the first week of the new year?
First report. A GDP growth of 6.5 percent. Roughly 60 percent of the income gains went to the Top 1 percent of the population, who happened to be the prime beneficiaries of an environment that nurtured capitalism gone berserk. Without the constraints of pre-redistribution regulations, the moneyed class wheeled and dealt. The concessions and laxity toward the capitalist class were made on the simplistic assumption that the moneyed beneficiaries would use their gains and proceeds to validate the tired dogma that a “rising tide lifts all boats.” But, as Pope Francis said, the trickle-down principle is “bunk.”
Second report. GDP growth was a decent 3 percent to 4 percent. But income gains were broadly spread, with share of the Top 10 percent of the population at 40 percent, and 60 percent delivered to the 90 percent below. While the share of gains was still skewed in favor of the Top 10 percent, there was nonetheless a dynamism in the wage market, with workers leveraging their newfound trade union power into decent collective bargaining agreements. Where workers are unionized and have bargaining power, life is generally fairer for everybody.
An impressive growth in which gains had been sucked up by a few? Or, a moderate growth but with the gains broadly shared? Which is which? The first one is a case of growth for growth’s sake. The second one is growth with a social conscience.
The first one, sadly, has been the state of growth over the past three years. While the administration of Mr. Duterte is not a slacker in the critical area of generating growth, the gainers from three years of sustained growth have been the same gainers during the six years of Mr. Aquino. And Mr. Duterte campaigned precisely on the theme of lifting into the economic mainstream the marginal sectors rendered invisible by Mr. Aquino. He rose to power on the promise that he will be the exact opposite of Aquino, the unapologetic social darwinist. Yet, nothing has changed under Mr. Duterte.
The failure to put in place the foundations for a broadly shared prosperity, to put in place inclusive prosperity, is the biggest failure of the Duterte administration, not the failure to rein in the Metro Manila traffic gridlocks. A mere fulfilment of his campaign promise, which was to figuratively “burn those cars” would ease the traffic gridlocks overnight as cars and other private vehicles make up 75 percent of all EDSA traffic, with PUVs – the efficient mass carriers – having a negligible share of 25 percent.
Mr. Duterte just failed to muster the political will to rein in the use of cars and other private vehicles.
The next three years of the Duterte administration, unless he orders an overhaul of the policy priorities, will be more of the same. Or worse.
The second phase of the tax reform package being pushed by the Duterte administration will be another gift to powerful corporate interests. The reduction of the corporate income tax to a low 20 percent will just be a reprise of what happened in the US recently, which cut taxes on the rich with the hope that the proceeds from the tax cuts would be reinvested. And that wages will rise as a result of the tax cuts. The two did not happen. Wages of workers remained stagnant. The proceeds from the tax cuts were used by the American corporate interests for massive rounds of share buybacks, and not on inspired investments. Some of the beneficiaries acquired, at record-breaking prices, pricey Manhattan penthouses.
The P8 trillion or so “Build, Build, Build” program of the Duterte administration, which implementation would be fast-tracked in the next three years, has been called the “Golden Age of Infrastructure.” That may be partly true. But what is truer is the fact that the public-private partnership (PPP) model being used to carry out the infrastructure program is another giveaway to the Top 1 percent.
Public records will show that only the top conglomerates that have a stranglehold on very important segments of the Philippine economy, from power to banking to utilities to real estate and retail, are the same infrastructure giants involved in the PPP.
Toll roads will go to them. Franchises to operate water and power and grids for 25 years renewable for another 25 years will go to them. Count them and they do not even exceed 25 big players, often with interlocking ownerships. The reason why the PPP model is shunned by many OCED countries is that PPPs are mostly offerings to plutocrats, with guarantees from government in case of failure.
Throughout history, the most ambitious — and most successful — infrastructure programs have been the ones whose financing and construction have been overseen by the state. The mode of development found more costly and with the least social advantage are those pursued via the PPP model.
The Duterte administration’s sheer faith in orthodox neoliberalism is rooted in the tired orthodoxy of his economic team. Deregulate, privatize, liberalize.
Small farmers, I am one of them, are now into our inexorable march to extinction due to a rice import liberalization policy done without legitimate safety nets for the 3 million small rice farmers. Importation is now the anchor of the country’s food security policy.
The economic team chooses the winners and losers. And woe to the voiceless and the faceless, the economic team has not read the Sermon on the Mount.
And the super-rich Mr. Duterte may not be interested in data but the truth is their incomes might even be growing faster than our own economy. And he seems not to be bothered by that distortion.
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