Inequality, the Counterpoint to Globalization

All week, I’d been mulling over the Pope’s observations about the “scandalous” inequality in the Philippines. How had Mahatma Gandhi once put it? The “earth provides enough to satisfy every man's needs, but not every man's greed.”To be sure, the growing concentrations in the hands of the few at the expense of the many make for conditions of mounting injustice and social upheaval. For some time now, the IMF’s Christine Lagarde has been issuing dire warnings against the rising tide of global inequality. Indeed, Thomas Piketty’s ground-breaking book “Capital” painstakingly demonstrates how unequal distributions of wealth cause social and economic instability. Last Tuesday, Barack Obama’s State of the Union address also stressed the urgent issue of income inequality.

And days ahead of the recent World Economic Forum at Davos last week, a new Oxfam report came with stunning figures regarding the widening global inequality gap. It noted that — on current trends — by next year, 1% of the world’s population will own more wealth than the rest of the 99%.

The charity’s research, published last Monday, shows that the share of the world’s wealth owned by the wealthiest 1% increased to 48% in 2014, while the rest of the 80% owned a mere 5.5%.By 2016, Oxfam projects that the richest 1% will own more than 50% of the world’s wealth.

Last year, Oxfam made headlines at Davos with a study demonstrating that the 85 richest people on the planet have the same wealth as the poorest 50% (3.5 billion people).

Attempting to correct the situation in the US, Obama recently presented a redistributive tax plan that will extract more than $300 billion in extra taxes from the 1% of rich earners in order to fund benefits specifically targeted at working families.

However, given the Republicans’ hold on both chambers, the odds of a White House success are slim to none. But Obama’s “middle-class economics” (as distinct from the Republican “trickle down”) remains a central issue in the 2016 campaign.

In Asia, the region has seen sustained economic growth since the 1990s. But its successes have come at an enormous cost. According to Oxfam, “an estimated 500 million people remain trapped in extreme poverty, forced by discrimination and closed political systems into lives of poverty and insecurity.”

In the Philippines, poverty incidence stands at a high 27.9%. The Gini coefficient — which represents income inequality in a nation — is one of the highest in the region. The growth elasticity of poverty incidence in the country is also alarmingly low: for every 1 percent growth in the economy, the poverty incidence has tended to fall by only 0.6%.

The private sector — 86% of the entire economy! — has focused primarily on luxury real estate and elite consumption, rather than on manufacturing that could create jobs for the middle and lower classes, which is what has worked elsewhere to spur growth.

The implementation of asset (urban land and agrarian) reform programs remain slow, given the resistance of landowners in both the House and Senate.

Despite promising peace agreements, ongoing insurgencies have left significant portions of the country — primarily Muslim Mindanao, where the Human Development Index is particularly low — outside of the scope of national development efforts.

What solutions are there to this seemingly permanent imbalance?

Since job-creation is crucial, the government has been strongly encouraging domestic industries and the manufacturing sector as a whole, although Public-Private Partnerships arguably remain sluggish.

Reforming the tax system is also vital. But first, it would help if people would actually pay their taxes, rather than routinely evade them. After all, the Senate Blue Ribbon Committee cannot forever be investigating tax evaders ad nauseam. At a structural level, the country needs P700 billion more in revenue to help the poor, according to the World Bank. This can be achieved through “vertical equity,” where the rich are taxed more (e.g., through capital gains tax) and the poor less. “Horizontal equity” can be applied to those receiving the same income so their taxes are of the same level. Ideally, the revenues generated from these taxes would be used for infrastructural development, health and education, which in turn can help reduce poverty. Other instruments for raising revenue are progressive land tax and idle land tax.

Urban land reform (permanent housing for informal settlers and those displaced due to disasters) and agrarian reform (agricultural lands and capital for landless farmers) -- which worked to great success in countries like Taiwan,Japan and South Korea -- are equally important. 

And Conditional Cash Transfers (CCTs) for the poorest of the poor remain the cornerstone of the government’s social protection efforts: this means giving around P1,400 per month for every eligible family provided they avail of medical care and go to school. This in turn targets literacy rates, as well as maternal mortality and neonatal mortality rates.

Finally, the RH bill is a critical intervention, not that I necessarily want to get into the “rabbit” debate, mind you. It suffices that the Pope has batted for responsible parenthood in his own way. Today, we have one of the highest birth rates in Asia, the worst poverty situation in the ASEAN 4 region, and are the 12th most populous country in the world. This year, the population is expected to burgeon to 103 million, and we lack the environmental resources to contain much more without facing worrisome levels of scarcity.

There are many important things the government and the private sector can do to alleviate conditions that reproduce and intensify poverty. But, in the end, none of these programs would work if they did not enjoin the cooperation of the poor themselves. All-too-often, anti-poverty programs are constructed from above and administered through local government and NGOs. Rarely are poor people themselves allowed to participate in the diagnosis and definition of their problems, much less participate in the design of their own solutions. All-too-often, they end up being mere recipients of whatever those from above decide to give them. Like charity cases in hospitals or beggars in the street, they remain at the mercy of those above. There is a way, then, that anti-poverty programs can often seem like acts of philanthropy, encouraging dependency rather than independence. They tend to ignore the agency of the poor themselves. Ironically then, anti-poverty programs can also be anti-democratic, excluding the poor from deciding on the very means of their emancipation.

The challenge, then, is not simply to craft policies and administer programs that will address inequality and poverty. It is also a matter of promoting social justice in and through the expansion of democracy, which, in this case, means encouraging the broad participation and initiative of the poor themselves in figuring out sustainable solutions appropriate to their specific conditions. In this sense, the administration’s “Bottom Up Budgeting,” is a crucial innovation: believing that people on the ground can often have more nuanced diagnoses of their problems, the Human Development and Poverty Reduction Cabinet Cluster (which consists of 26 government agencies dealing with poverty and development) has embarked on the bottom-up planning and budgeting of over a thousand focus municipalities. These poorest municipalities have been asked for solutions to their specific problems -- many of which revolve around underemployment and hunger -- and will be supported by the entire Cluster in their respective anti-poverty plans.

And, finally, what of the richest of the rich among our economic elite on the Forbes list? More than anyone else, they have reaped enormous profits from the economic boom of recent years. Surely, it behooves them to be more proactive in sharing some of these profits to help those with fewer resources. They could, for example, learn a thing or two from philanthropes like Warren Buffett, as well as Bill and Melinda Gates, who have done tremendous work not only in terms of health and education, but also extreme poverty; this, too, in a context of corporate transparency that puts many in this country to shame. Of course, none of this giving is totally disinterested, inasmuch as billionaires like Buffett and Gates derive huge tax and public relations benefits from their philanthropy, as this instructive video by the philosopher Slavoj Žižek demonstrates: https://www.youtube.com/watch?v=hpAMbpQ8J7g

Still, we cannot hope to address unjust conditions that constitute poverty without the commitment of all, rich and poor alike. Short of a social revolution, the redistribution of wealth will require democratically-conceived policies not only from government but from all sectors of society. Perhaps generosity and fair play can, in fact, trump greed and indifference. In the end, the choice is up to us.