October 15, 2006

Jay S. Ramos

Why does poverty persist

I would like to share some notes presented during the 2nd Research Colloquium of last month at the Mariano Marcos State University Graduate School. The discussant was Ms. Criselda Balisacan a PhD RD student and my Vice President of the Graduate School Supreme Student Council at MMSU. The topic is very timely considering the fact that the present administration is losing focus in its priorities towards economic development vis-à-vis economic growth.

The single most important policy challenge our country is facing today is addressing the widespread problem on poverty. Not only is poverty high compared with other neighboring countries in East Asia, but also that, its reduction is so slow.

There are already enormous proposals (and keep growing) peddled to address the poverty problem: proposals contending that the root of the problem is simply the lack of a respectable economic growth; and proposals asserting that poverty problem is nothing but a concrete manifestation of gross economic and social inequities. Putting the economy on a high-growth path is being prescribed by economists as all that is needed to lick the country’s problem on poverty.

Moreover, viewed as the key to winning the war against poverty is the redistribution of wealth and opportunities and a variant to such proposals holds that economic growth does not at all benefit the poor. Focusing on growth rather than on redistributive reforms is seen to exacerbate inequities, which could lead to further erosion of peace and social stability. Between these extremes are views that consider economic growth as a necessary condition for poverty reduction and recognize that reform measures have to be put in place to enhance the participation of the poor in growth processes.

But how do these proposals/views stand in relation to evidence and policy research? What are facts and what are fancies? What policy levers can be expected to generate high returns in terms of poverty reduction, given the country’s fiscal bind?

Researchers have reported that there are wide avenues for improving the response of poverty to overall income growth. Evidence suggests, for example, a strong connection running between agricultural and rural development and poverty reduction. Investments in social services, such as in basic health and education especially in rural areas, have also high payoffs in terms of poverty reduction.

The very high diversity in the Philippines is quite remarkable. In recent years some regions have done quite well in attaining high per capita income growth and reducing poverty, but others – disturbingly – have experienced falls in their average per capita income and an increase in poverty.

Viewed from an international perspective, such disparities could breed regional unrest, armed conflicts, and political upheavals, thereby undermining the progress in securing sustained economic growth and national development. There is also a serious call of attention to the need pf addressing the country’s rapid population growth, since there is a strong link between economic performance, on the one hand, and economic growth and poverty reduction, on the other.

Growth processes in recent years have allowed the lagging regions to catch up with the leading ones. Infrastructure, human capital, economic climate, trade regime, and agricultural relations are the key drivers of provincial income growth. Improvements in access to roads, electricity, and health and schooling have positive effects on provincial growth rates. Policy regimes that do not unduly reduce the profitability of agriculture relative to non-agriculture also help boost provincial income growth. Likewise, improved access to productive assets and technology (by way of Comprehensive Agrarian Reform Program – CARP) is an important source of provincial income growth.

However, what is disturbing is the finding that certain policy levers that have often been identified as tools for achieving equity objectives have no discernible direct effects on poverty reduction; the effects are felt mostly indirectly through the income growth process. In other words, even programs supposedly targeted at poverty such as CARP have actually been neutral from an income distribution viewpoint.

One interpretation of this result is that the implementation of such programs has actually been poorly targeted. There is evidence to support this proposition as regards many of the country’s direct anti-poverty programs such as food subsidies. Even more disturbing is the government’s posture with respect to the rapidly growing population. Policies and programs concerning population have remained captive to the Catholic Church’s stand on the issue. The consequence of such posture on economic growth and poverty reduction has been staggering - it has contributed to the country’s transformation to being Southeast Asia’s basket case. This stance has to change, if only to improve the country’s chances of moving the economy to a higher growth path and winning the war against poverty.

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