The Philippines is reverting back to an agrarian economy thanks to COVID-19

Nothing necessarily bad about agrarian societies though these get their bad rep from their association with the Third World and “underdevelopment”. Some “economists” would measure “modernisation” in terms of the proportion of the workforce employed in agriculture. As the thinking goes, a progressive shift in the workforce from farming to manufacturing and services and, therefore, an increase in “urbanisation” as workers move to population centres where industries tend to locate are signs of a society’s march towards “modernity”. However, it is important to note that in truly progressive societies, the reduction in labour employed by agriculture is accompanied by significant gains in productivity and yield accounted for increased mechanisation and application of new agri-technologies. This means that even in industrialised societies, agriculture remains an important contributor to national economic output even as it becomes less labour-intensive. In the Philippines, there was less of that productivity gain as most farming in the Philippines remains labour-intensive at productivity levels that have not kept apace with global standards.

The interesting thing about the devastation the COVID-19 pandemic wreaked across the Philippine economy is that it highlighted what evidently persists as its strongest pillar. In his Inquirer column today, Cielito Habito painted a grim picture of how the lockdown implemented in an attempt to stem the human toll of the pandemic all but decimated once thriving industries across the board. However he points out how one stood out amidst the carnage…

As is now well known, the unexpected and pleasant surprise came from agriculture, which posted a 1.6 percent year-on-year improvement. This was propelled by stellar 7.2 and 15.6 percent growth rates posted by rice (palay) and corn, respectively, and an even more spectacular 76 percent growth in sugarcane (including muscovado) production. This is in spite of COVID-19, and in the case of rice, in spite of more open trade in the commodity since the rice tariffication law, suggesting that the industry is now adjusting to the more competitive market regime that doomsayers predicted would kill the industry.

The trouble with an agrarian society is that its economy yields only enough surplus to support the lifestyles of a small elite class and perhaps a smattering of a merchant class. The rest, would be working the land — specially in a society with a poor record of mechanising farm production.

One wonders then what the rest of the population was actually producing in tangible terms. Whereas farmers can claim to be producing food and working the land upon which they walk, much of the rest of the Philippine economy seems to be resting on more nebulous assets. Indeed, Habito listed the sectors that suffered the biggest declines as mainly ones in the service industries. He did not seem to list manufacturing as one of the top contributors to the economic contraction and even hinted at their relative health citing how “transport of cargo had to go on, even as passenger transport stopped completely” where, presumably, a significant proportion of this cargo throughput is accounted for by manufacturing.

In short, in a crisis like this, it is economic activity that involves production of something tangible that can be relied upon — manufacturing and agriculture. In a country such as the Philippines which is particularly vulnerable to the ravages of pandemic and other natural calamities thanks to its enormous population and sardine-like living conditions, it becomes readily-apparent which sectors are non-essential (e.g. luxury goods and entertainment), exist on the back of an unsustainable or risky revenue streams (e.g. OFW remittances), or harvest economic value from perception or public confidence (e.g. property and shares).

As I wrote some time back, substance matters in an economic crisis.

There is nothing in the Philippines beyond the muscle of its workers that is worth buying. When demand for labour vanishes, Filipinos are left with virtually nothing. No world-class business assets and brands to sell, no safe and pleasant (much less interesting) cities and countrysides to offer to European and Japanese backpackers, no lush forests to pitch to researchers and eco-tourists, no world-class cutting-edge indigenous technology and scientific achievement to fall back to and build upon from scratch if necessary. Nothing.

Where a substantial and stable fixed capital base is lacking (i.e. physical infrastructure, intellectual or cultural capital capital, and production capacity) such as in the case of the Philippines, rock bottom in an economic collapse comes down to the actual land people stand on. As this particular crisis demonstrates, the Philippines would not necessarily be bombed back to the stone age by COVID-19 as it has an agricultural sector that is in relatively good shape (albeit labour intensive and delivering yields not up to global standards). The question is more around the excess members of the population reliant on producing fluff or swirling money around the system without any tangible product that cannot be sustained by agriculture alone.

benign0

benign0 is the Webmaster of GetRealPhilippines.com.