Eradicating extreme poverty in PH: Are we right on track?

A recent issue of a leading Manila daily (not this newspaper) bannered the following headline: “Philippines on track to eradicate extreme poverty by 2040.”

Obviously alluding to official government sources, the article explains its sanguine prognosis by drawing attention to the supposed beneficial effects of a number of ongoing government policy initiatives on the economic well-being of the poor in Philippine society. These projects include, among others, the Duterte administration’s “Build, Build, Build” infrastructure development program, the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the Universal Access to Quality Tertiary Education Act, and the Rice Tariffication Act.

To be sure, data released recently by the Philippine Statistics Authority show that poverty incidence in the Philippines in the first semester of 2018 declined substantially from where it stood during the corresponding period in 2015—from 27.6 percent of the population in 2015, to 21 percent in 2018. This goes to show that fewer Filipinos—roughly one out of five—lived on less than the officially set average of P10,481 monthly expenditures per person for their basic needs in 2018 than in 2015.

People mired at the subsistence level—those living on less than the threshold of P7,337 per month on food—declined from 13 percent of the population in 2015 to 8.5 percent in 2018. While this is admittedly a notable improvement in percentage terms, it remains intolerably high in terms of absolute numbers, with over 9 million souls existing under extremely miserable living conditions.

Among the millions of Filipinos who manage to survive at or below the subsistence level as officially defined by the government are a few million souls who are suffering from extreme poverty, the hapless individuals who are living at the outermost fringes of Philippine society on less than the $1.25 per day benchmark (roughly P65 at current exchange rates) set by the World Bank. The underlying rationale behind these programs insofar as they aim to alleviate poverty is known as “trickle-down economics” (aka “supply-side economics”), the theoretically and empirically unproven proposition that reducing the tax burdens on businesses and individuals tend to enhance overall economic activity and will eventually enhance everybody’s income.

The reasoning behind TRAIN’s proviso of reducing taxes on corporations and the wealthy in society is that this will stimulate short-run investment and, in the long run, improve the material well-being of all of society—the poor included. Currently available data seem to indicate otherwise.

• According to Forbes magazine, the richest 18 Filipino families with net worth of $1 billion or more totaled $66.86 billion in 2019 compared to $64.04 in 2018, an almost 4.4 percent—or a whopping PhP141 billion—increase. If anything, this seems to suggest that the windfall enjoyed by Filipino corporate magnates from their tax breaks found its way mainly into foreign currency deposits, financial assets, real property and other forms of wealth rather than in capital investment to enhance future production.

• A recent Social Weather Stations survey found that, overall, 38 percent of adult Filipinos reported in the first quarter of 2019 that their lives have improved (gainers) over the preceding 12 months, while 21 percent said that their lives have worsened (losers), for a net gainer score of +17. Well and good! However, while net gainers increased among income classes A, B, C and D, they fell among class E, the poorest among us, by 4 points (from +12 in December 2018, to +8 in March 2019).

If anything, TRAIN has only succeeded in further worsening the disparity in income and wealth between the very rich in our society and those at the bottom of the social pyramid who are suffering from severe poverty. To achieve the goal of eradicating extreme poverty and reducing income and wealth inequality in the country, the government should instead increase taxes on the very rich and spend the proceeds on health care, education and public services. INQ