How Do We Escape the Inequality Trap?

Ms. Tanja Lumba is an economic policy analyst of Action for Economic Reforms. This article was published in the Opinion Section, Yellow Pad Column of BusinessWorld, November 21, 2005 edition, page S1/5.

Inequality is one of the biggest challenges the Philippines is facing today.  Filipinos are still grappling with the same old problems of unequal access to economic opportunities, education, health, justice and political power. Aside from being detrimental to a person’s well being, unequal access to opportunities makes it difficult for the poorest in society to  participate in social and economic development, exercise their rights, and decisively intervene in politics.

The recently launched World Bank Development Report (WDR) of 2006 puts emphasis on equity considerations in the design and implementation of development policies.  Equity, as defined by the WDR, is “the pursuit of equal opportunities and the avoidance of severe deprivation.”

Equal opportunities undeniably are necessary to raise the people’s standard of living. Nevertheless, they do not by themselves guarantee an equitable society.  Many countries—the United States, perhaps being the best example—have the institutions, policies and resources for equal opportunities.  Yet, these societies are characterized by wide gaps in income and capabilities, leading to social tensions.

Yet, even in relation to the narrower definition of equity, that is, “the pursuit of equal opportunities,” our country’s performance is disappointing.

Take basic education.  Preliminary results of the 2004 Annual Poverty Indicators Survey (APIS) disclose that 90 percent of both poor and non-poor families with children 6 to 12 years of age are enrolled in elementary grades.  However, the drop-out incidence of children from poor families or those who belong to the lowest 30 percent income group is higher than that of children from non-poor families. The APIS data also reveal that only six out of 10 poor families with children 13 to 16 years old as compared to eight out of 10 non-poor families with children of these ages are enrolled in high school.

In addition to this, the quality of education has been impaired. Elementary and high school students fare badly in achievement tests.  Moreover, there is a plan to send teachers “back to school,” another reflection of the poor state of Philippine education.

The lack of resources is a principal reason that explains the deterioration of the quality of education. A 2003 UNESCO (United Nations Educational, Scientific and Cultural Organization) report revealed that the Philippines’ investments in education are smaller compared to the investments of its Asian neighbors.  While the Philippines allotted 3.5 percent of its gross domestic product (GDP) for education, Malaysia and Thailand allotted 6.2 percent and 5.4 percent of their GDP, respectively.

Access to healthcare has not been sufficient as well. The 2003 National Demographic and Health Survey (NDHS), reveals that out of 1,000 live births, 40 Filipino children will die before reaching the age of five.  On the other hand, children born in Malaysia and Thailand have better chances of survival with under-five mortality rates of only 8 and 28 per 1,000 live births, respectively.

The government’s inability to provide access to the basic necessities for a humane existence will negatively impact individual productivity and growth in the long run. The capacity of the poor in society to determine the future they choose to live is largely dependent on the choices made available to them in terms of education, healthcare, justice, political power, etc.  Availability of these choices will propel them to participate in and contribute to the process of social and economic development.

Market failures and inequalities in power and wealth lead to uneven opportunities, untapped productive potential as well as inefficient allocation of resources.  Thus the importance of establishing good and credible institutions capable of making and implementing good rules, providing macroeconomic stability, correcting market failures and providing public good.

It is not impossible to break free from the prevailing inequality. Whether this can be achieved under the current administration, which is more concerned about political survival and which has dissipated the scarce resources, is another question.

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