Ending Poverty (Fourth of Series)

BIMBO CABIDOG

Product and manifestation of the failure of the economy to grow

Mass poverty is by and large an ill of developing countries. The biggest number of people victimized by extreme deprivations is from them, as shown by the Human Development Report (First of Series).

The fact that about four billion folks living only on $2 and below a day come from the Third World shows that the general problem of underdevelopment has got to do with poverty on a very wide scale.  It is the offshoot of the failure of national economies to grow.

The Philippines belongs to the underdeveloped or Third World countries. More than half the people here rate themselves poor. The country’s per capita GDP (gross domestic product) is one of the lowest in the world. Agriculture, which continues to be the basis of its economic viability, is stuck up in an age-old mode of production characterized by backward underproductive tillage, and single planting of low-value crops for export.

Eastern Visayas is one of the country’s poorest regions. Poverty incidence here has been officially recorded at 48.5 percent. But with how its economy has been performing, the data may still be understated. Below is a case in point.

In 2008, the Eastern Visayas had a Gross Regional Domestic Product of P28,997,747,000. Its annual per capita income was P7,020. This means each person in the region had only a theoretical income of P585 per month or P20 per day. The term theoretical is used, because such is if the output is distributed evenly on the whole population. Of course, it is not.

The impoverishment of a large number of the population constrains economic growth. It emaciates labor power, preventing it from creating greater wealth. Marginalized workers are condemned to a fate of expending energy in labor without proper replenishment, because they barely have food on the table, or sometimes forgo with it at all.

The situation either discourages workforces from engaging in production or constricts productivity. Misery demoralizes labor. The inability of a worker’s earning to support even his/her bare existence discourages work, because what labor offers is only slow death.

Meanwhile, because labor gets only a tiny share of the value it produces, the capacity of the working class and the rest at the lower strata of society to purchase the goods and services in the market is diminished. Demand tends to fall short of supply. Industries pile up commodities that are not bought and become moribund surpluses.

Progress is thrown back by failing markets, and neither does it happen at all with sluggish markets, for there is no reason or motivation to produce goods in high quantities if they cannot be sold.

But large production and economies of scale is what drives spiraling economic growth. They not only fuel material prosperity by increasing the social output, they employ the vast reserves of industrial labor and put money in their pockets. In the final analysis, by increasing the purchasing power of the general populace, they buy themselves the products that they send to the market.

Nothing of these happens when millions of people agonize below the poverty line. With very little to satisfy their basic needs, they also have very little energy and motivation to intensify labor and boost production. The condition turns the cycle of poverty and underdevelopment.

On the one hand, underdevelopment causes poverty and folks hardly subsisting. The economy fails to grow. Agriculture stagnates. Industry could not take off. More than half of the population depends on farming to live. But even the farmers who produce food have no food security. The result is the impoverishment of huge segments of the population.

On the other hand, poverty perpetuates underdevelopment. The penury of the masses discourages increased large-scale production, or modern industrial production, because the population doesn’t have the capacity to buy its output. Mass indigence therefore itself stymies progress.  

Import-dependent export-oriented economy

With a sluggish domestic market, manufacturing naturally depends on export. But in producing for export, it competes against an advantage exclusive to the developed countries where it destines its products: industrial might. Besides the built-in competitive disadvantage, it often has to deal with onerous terms, vagaries of the market, and price uncertainties. It only hopes to offset these by one factor: lower priced commodity made possible by cheapened labor power.

Export-oriented manufacturing can only succeed by perpetuating poverty. This is by paying the lowest minimum wage for labor.

Dependence on foreign market is inherent in continuously underdeveloped societies. The reason is that the domestic market cannot yet fully support manufacturing.  Thus, the tendency not to produce what the people need, but what other countries need. Export-oriented production is indeed ironical for a country with a high number of people unable to meet their basic needs?

Because of the virtual absence of industrialization, the country must get so many of the goods it needs from outside. It must import not only consumer goods, but inputs to the making of such products as pins, clothing, milk, chicken, household appliances, personal gadgetry, etc.

Here is where the bind comes in. Imports need international currency. And foreign exchange may only be provided either by overseas Filipino labor or foreign trade. Exporting goods again cannot be avoided, because of another imperative: getting dollars to buy imports.

Such a mode of existence ends up reproducing underdevelopment and the inter-generational cycle of poverty. For the country to develop, it must embark on full industrialization. But this cannot proceed purely reliant and attuned to foreign markets. Industrialization can only take off on the assurance of a robust domestic market.

Import-dependence in goods and export-reliance in production constitute a sure-fire formula for perpetuating the country’s Third World status. This is one big reason why the curse of mass poverty with all the ills it spawns stays.