Why the Philippines is poor – the empathy solution

Here’s another answer to the question.  It says we’re poor because we are “bad”:  we have no discipline, we tolerate bad leaders, etc. etc.  Therefore, to get rich we should change ourselves.

Unfortunately, it’s not quite the right answer.  We can be good, in that sense that will make Santa Claus bring us Christmas, but still we will remain poor.

Why is that?

It’s no secret that something like a small fraction of the PH population is rich; another small (but somewhat bigger) fraction is middle class; and a greater-than-majority is poor.

The question is then really why the last group, the bulk of the population, is poor.

The simplest and yet correct answer is that the poor are where they are because they have no capital, especially human capital.  To improve their lot the poor must build up human capital, i.e. get an education.  Still that may not be enough, and it takes a while to implement.  (Interestingly, the educational institutions of the Philippines, including those that cater to the rich, are not in good shape.)

Another element of the puzzle is to add something that the rich and middle class already practice, albeit somewhat reluctantly.  This is a redistribution of wealth or income to the poor.  Certainly, some of the rich give away some of their income to the poor.  Redistribution also results from the tax system, if only because certain goods like public health and education are free or subsidized. I suspect this status quo redistribution involves something like 5% of income of the rich to the poor.  It is modest and not enough since obviously the country is still poor.

If you do some simple spreadsheet math, it is possible to conclude that if we could add another 5% of income into the “twist,” it would be possible to double the income of the poor.  I believe this is enough to raise a majority of the poor above the conventional poverty line [1].  In short, if the rich were to give up just another 5% of their income, and hand it over to the poor, that would do the trick.

Then the country wouldn’t be poor anymore.

It’s neither necessary nor desirable that the redistribution be done by government.  In fact, Okun’s Leaky Bucket suggests that much of that kind of redistribution will be “stolen.”  The rich can do it privately, even anonymously, and without publicity.  The redistribution that works is not of the CSR (corporate social responsibility) type; it is also not the charity practiced by organized religion (which, I think, is subject to Okun’s Leaky Bucket) or by corrupt officials (who buy or steal the vote and then make up for it by giving pork to constituents).  The last kind is not redistribution but a cynical misuse of democracy.

So there.  This country is poor because enough of the rich like it that way, and because it’s not easy to get a good education.  The other supposed causes of poverty – corruption, bad institutions, our Hollywood/convent culture, laziness, etc. – are not as crucial, though of course they also hinder economic progress that would benefit the poor.  But a serious attempt to eliminate poverty can succeed with only a modest push of human empathy.

All this also leads to a somewhat startling conclusion.  To eliminate poverty, we need the rich!

*******

  1.  In the Philippines, the ratios of per capita incomes of the rich/middle-class/poor are perhaps something like 100/7/1.  If we assume that the rich are 10% of the population, and the poor are 70%, redistributing 10% of the income of the rich to the poor (without affecting the middle class) would more than double the poor’s per capita income.
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6 thoughts on “Why the Philippines is poor – the empathy solution

  1. The rich/the haves/ those who control resources lack education. They have the means to invest in businesses that will create jobs but they don’t know how and don’t care to learn as long as they’re comfortable. They’re not going to build car or electronics factories.

    Our elites will not and cannot industrialize this country. There are too few industrialists and too many leeches holding public office among them. That’s why we aren’t industrialized. We should set up an OFW fund for sponsoring the higher education and even internships of freeloading imbeciles among the elites in Fortune 500 companies. Their education is the key to our future.

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    1. The elite certainly have ‘education’ if by that we mean that they go to schools, etc. Why, they even have degrees from Harvard Business School! The key question is: How is it that they’re ‘comfortable’? What is in the present system that keeps them that way?

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