If the economy as represented by the Gross Domestic Product (GDP) is growing, why are the poor people in our society remaining poor? Why do low income groups continue to languish in deprivation? How come they do not feel the new prosperity?
These are questions being raised by some observers following the report of the National Economic Development Authority (NEDA) citing figures of the National Statistical Coordination Board (NSCB) that the country's GDP grew, for the first time in 30 years, by 7 percent in 2007.
The thing to do to discuss the matter intelligently, removed from the realm of partisan politics, is to distinguish between production and distribution. The growth of GDP refers to the increased production of goods (such as rice, meat, poultry, vegetables, clothes, shoes, building materials) and services (such as medical, legal, engineering, hair dressing, tailoring, housekeeping, gardening) in our economy. The observation, true or not, that this growth does not "trickle" down to the poor people refers to the distribution of these goods and services to the population.
Production involves the mobilization of labor, capital, and resources. Those who contribute more of their labor, or capital, or resources, to production receive more wages and salaries and profits than those who contribute less. In the nature of things, individuals and families earning more have a greater spending capacity and thus have a wider access to the products and services in our economy than individuals and families earning less. Distribution, in other words, is skewed in favor of higher income groups as against lower income groups.
If this is how distribution works, one would think that the basis of differential access to the products of the economy is participation in production. That is a partial truth. The more complete truth is that participation in production is determined by the extent of ownership of productive resources. Those who own only their labor power have less opportunities to join in productive work than those who own, in addition to their labor power, capital and other material resources as well.
Right now we have in the Philippines a lop-sided social structure, characterized by a few rich owning vast resources, a small middle class owning about their "fair" share of the population's physical wealth, and a large low income class owning only their labor power. Sadly, the distribution of GDP to our people is effectively governed by the configuration of the social structure.
To ensure that everybody receives more or less equal amounts of goods and services from our economy we must revamp our social structure. The communists want to do this through a bloody revolution, getting rid of the "exploiters" and establishing a government of the "exploited".
In free-market societies, governments pursue social change through peaceful non-disruptive ways: for instance:
· Through the budget, by collecting higher taxes from the rich (higher income taxes, levies on cars, inheritance taxes, etc.) and spending public revenue heavily in favor of the poor (free education, to the poor to raise the quality of their labor power and thus enable them to increase their income-earning capacity, free medical services, to enhance their health so that they can actively participate in productive activities, subsidized cost of transport, so that they can access their place of work without too much expense, etc.).
· Through direct financial assistance to small and medium-scale industries most of which are owned and managed by lower-income members of our society.
· Through laws prohibiting the exploitation of labor; etc.
In general, accelerating the growth of the economy, as difficult and daunting as it is, is "easier" than reshaping the social structure. The government is doing well in the first task; it can do better in the second.
These are questions being raised by some observers following the report of the National Economic Development Authority (NEDA) citing figures of the National Statistical Coordination Board (NSCB) that the country's GDP grew, for the first time in 30 years, by 7 percent in 2007.
The thing to do to discuss the matter intelligently, removed from the realm of partisan politics, is to distinguish between production and distribution. The growth of GDP refers to the increased production of goods (such as rice, meat, poultry, vegetables, clothes, shoes, building materials) and services (such as medical, legal, engineering, hair dressing, tailoring, housekeeping, gardening) in our economy. The observation, true or not, that this growth does not "trickle" down to the poor people refers to the distribution of these goods and services to the population.
Production involves the mobilization of labor, capital, and resources. Those who contribute more of their labor, or capital, or resources, to production receive more wages and salaries and profits than those who contribute less. In the nature of things, individuals and families earning more have a greater spending capacity and thus have a wider access to the products and services in our economy than individuals and families earning less. Distribution, in other words, is skewed in favor of higher income groups as against lower income groups.
If this is how distribution works, one would think that the basis of differential access to the products of the economy is participation in production. That is a partial truth. The more complete truth is that participation in production is determined by the extent of ownership of productive resources. Those who own only their labor power have less opportunities to join in productive work than those who own, in addition to their labor power, capital and other material resources as well.
Right now we have in the Philippines a lop-sided social structure, characterized by a few rich owning vast resources, a small middle class owning about their "fair" share of the population's physical wealth, and a large low income class owning only their labor power. Sadly, the distribution of GDP to our people is effectively governed by the configuration of the social structure.
To ensure that everybody receives more or less equal amounts of goods and services from our economy we must revamp our social structure. The communists want to do this through a bloody revolution, getting rid of the "exploiters" and establishing a government of the "exploited".
In free-market societies, governments pursue social change through peaceful non-disruptive ways: for instance:
· Through the budget, by collecting higher taxes from the rich (higher income taxes, levies on cars, inheritance taxes, etc.) and spending public revenue heavily in favor of the poor (free education, to the poor to raise the quality of their labor power and thus enable them to increase their income-earning capacity, free medical services, to enhance their health so that they can actively participate in productive activities, subsidized cost of transport, so that they can access their place of work without too much expense, etc.).
· Through direct financial assistance to small and medium-scale industries most of which are owned and managed by lower-income members of our society.
· Through laws prohibiting the exploitation of labor; etc.
In general, accelerating the growth of the economy, as difficult and daunting as it is, is "easier" than reshaping the social structure. The government is doing well in the first task; it can do better in the second.
1 comment:
Hi Dad! Congratulations on your new blog. Hope to see more articles from you!
Missy
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