Road sign to economic growth
My previous article regarding the potential high cost of free college education has elicited interesting reactions from readers. Some readers have argued that free college, much like free contraceptives, is a good investment by the government that would lead to economic improvement in the Philippines. In support of the argument, some have blamed the high fertility rate (especially amongst the under-educated poor which make up a significant chunk of the population) as the major culprit of the economic problem plaguing the country. While I do not contest the fact that overpopulation and under-education wreak havoc to (and are detrimental to) the Philippine economy, the question is: how do we prioritize our limited resources to improve our economic situation? Which among the 3 problems (inadequate infrastructure, under-education, overpopulation) should the government invest more on that would give us the most and immediate return on investment?
An article from the Economist shows that government intervention in population control (by itself) has not really worked. In China birth rates have been falling even before making coercive policies such as its One Child Policy. As the World Bank data shows, China’s fertility rate has already been declining even more than a decade before it’s One Child Policy was implemented (which was introduced in 1979). Professor Yong Cai from the Carolina Population Center suggests that:
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“..economic and cultural factors are critical to understand China’s low fertility, and are more important than the government’s one-child policy”.
Indeed, studies published and presented by Chinese scholars seem to indicate that market-based incentives may be more effective (than government coercion or intervention). On the home front, our country’s fertility rate has been in decline since the 1960s, even before the RH Bill became law of the land. We also have seen a trend of increasing Gross Domestic Product (except for some dips during periods of local and international economic and political crises) even before government subsidies on contraception was enacted. This may suggest that there must be other factors that contribute to the economy as oppose to mere population control.
Is education the silver bullet? It is true that education is very important because conventional belief dictates that a literate population would produce more productive citizens that would uplift and sustain the economy. However, a comparison between the Philippines (having a 95.4% literacy rate) vs. India (62.8% literacy rate) paints an inconvenient picture to this conventional belief as India ranks 9th in the world economy compared to the Philippines’ rank of 40th. From my previous article, even if we talk about specializations through college education, it has been shown that there just aren’t enough jobs in the Philippines for our college educated citizens. This seems to suggest that education (or even college education), by itself, will not uplift the economy. Even if we pour in almost all of our country’s budget into education, without enough available jobs our economic problems will still remain (and perhaps would even get worse). At some point we have to be mindful of the law of diminishing returns.
So what do we do? What do we need to do to get on path to economic recovery and prosperity?
India offers an interesting case where it’s economy has done well despite having a lower literacy rate and higher population (ranked 2nd in the world) compared to the Philippines. What was India’s success story?
According to the India Brand Equity Foundation (IBEF), infrastructure has propelled India’s overall development. Both government initiatives and foreign direct investment focused on India’s power, bridges, dams, roads and urban infrastructure development. This focus has enabled the country to jump 19 places in World Bank’s Logistics Performance Index last year. This shows that the role of state investment absolutely cannot be looked down upon in a lesser light. John Ross, a Senior Fellow at the Chongyang Institute for Financial Studies in Renmin University of China, pointed out that:
“The major economies with high growth rates of state investment (China, India) have high rates of economic growth.”
Indeed, India (and China) has achieved higher economic growth rates by increased state investment on infrastructure, contrary to western orthodoxy that private investment (not state investment) is what propels economic growth. Due to heavy investment in infrastructure, the Indian economy has become one of the most promising developing economies around. For the case of the Philippines, it’s Public-Private Partnership program may offer a promising solution. But in any case, the importance of infrastructure investment and the importance of setting up the conditions for more infrastructure projects and investment cannot be overlooked.
There is an inverse relationship between fertility and income. According to economist Dr. Guillaume Vandenbroucke, this inverse relationship has been known to economists and demographers alike. Vandenbroucke notes that:
Rich countries, such as the U.S., have experienced a remarkable decline in their fertility rate as they became rich. Also, the relationship holds at the individual level, as rich families tend to have fewer children than poor families.
Why is fertility so much higher in poor countries? There are several possible reasons:
•Time is relatively cheap in poor countries, so spending time away from work to take care of a child is not as costly as in a rich country. If this effect is strong enough, it can (and probably does) offset the fact that it is difficult to afford a child on a low income.
•A child may require more education to be successful in a rich country. Thus, a child may be more costly there, so families may opt to have fewer, more educated children.
•Infant mortality can play a role. More births might be needed to achieve a desired number of surviving children when infant mortality is high, as it tends to be in poor countries.
•Children can take care of their parents when they are old. However, this is not necessary in rich countries with a well-developed social security system and functioning financial markets.
While education and population control certainly play a significant role in a country’s economic development and sustainability, given the facts and arguments it may be suggested that investment in economic infrastructure ought to take priority. Adequate infrastructure results in conditions conducive to more investment and business growth. When the economy takes off more people would get access to more gainful employment. With more gainful employment comes increased income and with increased income a decrease in population may then follow. However, we should still be mindful of the fact that at some point population replenishment is needed to sustain economic prosperity and prevent economic loss due to an over-shrinking population. Such a problem is evident with advanced economies like Japan. It is a tricky balance but at this point the Philippines needs to get its priorities straight first.
(Image taken from real-if.com)
Calling a spade, a spade…
Well, I must say it’s nice to see a bunch of good meaty articles these last few days. Something interesting to talk about other than “Dutertetards”, “Marcostards”, etc etc etc.
Personally, I’d say “none of the above”, for two reasons:
1) The Philippine state doesn’t have any money to spend, largely because it’s all been stolen. Even if it DID have money to spend, it can’t be trusted to spend it wisely.
2) One should be very careful about drawing correlations between event A and “result” B. Sometimes two things occur together simply because they have to, rather than because one thing causes the other. Take roads. Building roads doesn’t magically cause growth unless lots of other things are in place: honest, educated, and ambitious people, for example, and a State that allows such people to create wealth.
In a backward country like the Philippines, roads are used for three things:
1) A channel for graft. Roadbuilding is a primary mechanism for shuffling tax money into the Swiss bank accounts of the well-connected.
2) A means of getting the country’s valuable raw materials out of the country and into the hands of foreign rich people.
3) A means of creating lots of air pollution and noise, with no apparent purpose.
Roads are incredibly expensive. The world average works out around P$50m per kilometer, all things considered. In the Philippines, P$50m is duly budgeted, P$30m disappears, and P$20m gets spent on roadbuilding. Hence the common sight of sandalled laborers building roads with substandard materials, buckets, and the Pinoy hammer (a stick with a nail in the end), instead of state-of-the-art machinery. Do Filipino roads create value to the tune of P$50m per mile? I doubt it. In which case, they’re just a money-sink, not an investment that will pay back over time.
So what’s the first thing the country needs? I would suggest:
– A system of laws that aren’t completely illogical;
– A judiciary that isn’t corrupt and lazy;
– A police force that isn’t composed largely of criminals; and
– A population with some morals.
How that’s going to happen is anybody’s guess.
Marius, of course your absolutely right, but no one here will ever admit to that. From the comments I’ve read on this blog recently it’s abundantly clear our people will put more effort into defending the indefensible than working towards a better & positive future.
We’re so obsessively stuck in our abysmal past and desperate to defend this inexcusable, rats ass of a present we seem to have no interest in creating a better future for our coming generations (those fat kids in Jollibee). But that takes effort and we don’t do effort – mentally (lol) or physically. That’s how we are I guess, the end of our nose is as far as our imagination can go!
Graft and corruption is eating our country……we spend too much time in politics, than improving our country… Good leaders are needed, not political opportunists…
I believe that investment in infrastructures, like : irrigation system, roads, bridges, community development programs, agriculture, aquaculture, horticulture, etc..can be the priority.
The Oligarchy is too powerful in our country. They monopolize businesses. Anti Trust Laws are needed to give small entrepreneurs chances. Feudalism is still with us. A good implementation of the Land Reform Program is needed.
We are losing our brains thru the OFW programs. Brain Drain in the country cannot be stopped, because there are no available jobs, for college graduates…
Innovators are the key to a country’s success. People like Bill Gates, Amazon’s Bezos, Henry Ford, etc…we have to industrialize to take care of our needs, and earn foreign income…
Desires dictate our priorities, priorities shape our choices, and choices determine our actions.
@JJ: the question remains, then: what do you intend to do about it? Are you content to wallow in your own ineptitude? If so, the Filipino can hardly complain about the ridicule and disrespect that’s heaped upon him. Personally, I think there are many things that the ordinary man could do. Simple things; things that don’t even cost money.
Development is mainly about IDEAS, not cash. Most third-world countries think they can spend spend spend and they’ll magically become like America. This is completely stupid, not least because American society is very inefficient. It only keeps going because it sucks wealth out of the rest of the world. There are far more efficient ways to live these days, but “National Pride” and wilful ignorance prevents most countries (including the Philippines) from paying attention to such ideas.
Development is in your head, not in your wallet. It’s not throwing your trash on the ground. It’s not annoying your neighbors just because you can. It’s not abusing or neglecting your kids. It’s not stealing stuff that isn’t yours, whether that’s your neighbor’s property or the country’s. The material things spring naturally from the ideas.
The Philippines root problem can be summed up pretty easily…
“We don’t make enough stuff…. We want to use/have stuff we don’t make…. And we trade low level commodities and services for these stuff ”
(You can go through your daily consumption and see how many of the things we own are pinoy made)
Population: Only a problem as the portion of the population that is increasing is incredibly unproductive.
Education: Pointless because much of the education system is geared toward Theology/Philosophy. A typical university student here in the Philippines would have more units in theo/philo than his actual field of study. (Not to mention the horridly outdated curriculum).
Infrastructure: Would be helpful if it increases productivity. There was a study by JICA that billions are lost daily on Metro Manila traffic alone.
On the issue of corruption. Corruption is present in every country. Even China and India have high levels of corruption. However , corruption is only an issue if it hampers production and directly harms the population. You can literally pay a billion pesos to whichever politician to “solve” the Metro Manila traffic problem. Net-net you’d still be ahead.
I think the root of all the problems the Philippines is facing is our history. The colonization shaped our culture, values and philosophies. The Spaniards brought social hierarchy where the ‘whites’ are superior. They brought feudal societies, ethnic pride and regionalism, oligarchy, etc. while the Americans brought an enginered educational system designed for their own good only and they knew that the Filipinos were deprived of education. Creating an illusion trough education really controls someone who’s new to it. They try to Americanized us, introduce democracy (although I think it was more like a faux) and introduced their propagandas with the hidden idea of Imperialism. Now, as this things was learned and absorbed by the Filipino trough all of this years it became a deadly concoction of Failure (our experiences is more like in Latin America, struggle from the order and same values with ours). I think all we need to do is to junk what’s not useful, retain whats needed. We should also remember that we should just be ourselves, create something that everyone of us benefits and not mimic what we think was the standard (western culture, japanese technologies etc.) which were not. The Philippines had a different experience in history so as the other countries what we need is something that is for Filipino not from others. We can derive this from our experiences not from others, this is phenomenology. Embrace/Accept our past so that it will mot hunt us in tge future.
CONTROL POPULATION !!!
Nope! You cannot control population in the Philippines !!! It is the laity that can control population !!!
If government control population there will be war between the Pope and the Philippine Government !!!
Filipinos have to chose between going to hell-by-controlled-pregnancy or going to heaven by un-controlled pregnancy.
But, controlling pregnancy makes a better Philippines, ergo, those birth-controls make Philippines a heavenly place to live.
Do Filipinos wanted to live in hell now for heaven tomorrow? Or heaven today hell tomorrow !!!
It all boils down to are you atheist or religious ?
I AM RELIGIOUS. I control when I come and where I come. IF I CAN CONTROL SO CAN YOU. Mind where you come: INSIDE or OUTSIDE ?
If education is a privilege then it’s not surprising why it ranks low in the order of priorities. The notion of its importance are just paper proclamations. Evidence is in plain sight.