In the economic poor house

I was scarfing lunch at my favorite place to get chicken (Jollibee), reading about my my favorite topic (economics) in my favorite paper (the Tribune), when I noted that Charles Reyes Jr. had crafted a column on the Philippine economy.

Meanwhile, about a zillion kids were swarming all around me in that Jollibee, and I resolved to look up the fertility rate of the Philippines, and to take a fresh look at some of its economic data, having been inspired by Reyes’ thought provoking article.

Meanwhile, President Estrada’s woes hit the international papers. His plans to rejigger the economy fell flat, the swarm of corruption and of allegations thereof continues unabated, and, well, it’s basically business as usual.

Although Asia got knocked into the dirt a couple of years ago, most of it is crawling from the financial ditch, dusting itself off, and getting back on its feet. What’s notable about the Philippine economy is that it never was on its feet to begin with.

What the Philippines is up against is this:

(1) an inefficient economy that discourages capital investment and accumulation, which results in–

(2) a stagnation in the productivity of labor (which is a function of the amount of capital in an economy), which brings us–

(3) little, if any, increase in household incomes over the years, which, combined with–

(4) high birth rates,
is going to result in–

(5) even lower economic growth on a per-person basis.

In other words, the average kababayan won’t be getting much richer as the years roll by, as the size of the overall economic pie doesn’t grow much, and the number of mouths it must feed continues to increase.

And, eventually, the increase in population is going to be a very big deal over there. With a population increase of 2.3 percent a year, the Philippines certainly outpaces the economic giants such as the U.S. (1 percent growth), Japan (0.3 percent growth), as well as the Asian tigers such as Thailand (1.5 percent growth) and
Singapore (0.7 percent). Malaysia, by the way, comes in at 2.4 percent, slightly higher than the Philippines, but the average Malaysian enjoys over three times as much economic productivity (and, hence, income) as his or her counterpart in the Philippines.

The latest estimates of economic growth in the Philippines come in at about 3.1 percent a year. If we subtract the population growth rate from this, we get a measly rate of 0.8 percent economic growth per person for the coming year.

Asia is a microcosm of the global situation in which economies are polarized based on how productive their labor is.

Some economies have figured out that the key to productivity is increasing the amount of capital in the economy (hello, Japan, and South Korea, and Hong Kong, and Singapore, and Taiwan).

Some economies haven’t learned that lesson, and are clinging to the agrarian outlook in which the same economic turf is merely hoed over and over again and again by more and more hands that are chasing slimmer and slimmer improvement in yields.

Economic futures are notoriously difficult to predict, but, based on the fundamentals, it’s safe to say that the Philippines isn’t going to leave the poor house any time soon.