Opportunity to reform market economy

Published August 10, 2020, 10:00 PM

by Dr. Bernardo M. Villegas

Part 2


A needed structural change that will lead to more inclusive growth is a more determined program of our government to increase the productivity in the growing of our major crops, i.e. rice, corn, sugar and coconut.  In addition to shifting more of our infrastructure budgets to the countryside (instead of urban areas like Metro Manila and Cebu), there should be more creative solutions to addressing the fragmentation of farms, especially in the coconut regions, so that through cooperatives or “corporatives,” larger units can be consolidated and mechanized so that, in tandem with corporate investors, the coconut farmers can derive more value from their products by diversifying out of copra and coconut oil to such other products as coconut water, coconut milk, nata de coco, coconut coir, and others that enjoy high demand in the Asia Pacific region, especially China, Japan, Taiwan and South Korea.  The same can be said about the sugar industry in which there should be more consolidation of small farms so that mechanization will enable our sugar producers to compete with countries like Thailand and Australia. 

 Given the focus of the State on helping farmers to achieve higher incomes and productivity in the rural areas, there can also be a structural change in  our financial sector that can finally lend more heavily to agri-agra projects.  In the past, most banks were content with paying huge penalties for not making the required investments in agri-agra projects because they  considered the risks in lending to these projects too high for comfort.  Once these risks are reduced through more appropriate investments by the government in rural infrastructures and services, there can be a significant increase in capital flowing to the rural areas.  Since agribusiness goes beyond farming and encompasses the whole

value chain of food production (which includes post-harvest facilities, cold storage, processing, marketing and retailing), there will also be an increase in lending to the numerous small and medium-scale enterprises that are part of the agribusiness value chain.  Next to helping farmers and others in the agricultural sector, a most effective means of reducing poverty is to stimulate a buoyant SME sector which is predominantly made up of food-related ventures, from small-scale urban gardening of high-value crops, food processing ventures, businesses involved in food delivery, restaurant and even the micro enterprises  “jolly jeeps.”

In addition to higher government investments in improving agricultural productivity, another obvious structural change that has been made necessary by the pandemic is the need for the State to allocate a greater percentage of both its operating and capital budgets to both health and education, particularly for the welfare of the lower-income groups.  Most medical experts are of the opinion that the COVID-19 virus will continue to be a threat to public health for a long time to come, even if a vaccine is discovered. As Dr. Anthony Fauci, a US top infection disease expert,  recently reminded the public, age-old diseases like chickenpox, herpes, and HIV have lifelong impact on our health and never really leave our bodies.  In his words, “Now with COVID-19, we have a novel virus that spread rapidly and easily.  The full spectrum of symptoms and health effects is only just beginning to be cataloged, much less understood.”  Prudence dictates that the Government should be prepared to spend public funds to protect the health especially of the most vulnerable members of society.  This necessary expenditure on public health will be a way to redistribute the income and wealth of our society, in favor of the  needy.  This is one instance when it is clear that we cannot depend on the so-called trickle down effect of the market economy.  Funds must be directly budgeted to safeguard and promote the health of the lower-income groups.

The same can be said about a higher percentage of the budget that must be allocated to public education.  Already, we are witnessing a massive shift of enrolment from private schools to public schools at all levels of education, especially at the elementary and secondary levels.  Education cannot be left to free market forces.  It is the responsibility of the State to provide quality basic  education to millions of school children more than even before the pandemic destabilized the educational sector.  The increasing shift to blended  learning  made necessary by the health risks posed by in-person instruction will require higher spending of the government in the retraining of public school teachers in the ability to impart online instruction; in more physical resources—whether digital or other means of achieving blended learning, considering that low-income families do not have access to internet connections—; and increasing the number of teachers in public schools as more families cannot afford to send their children to private institutions.  In addition, the Government has to maintain its commendable achievement of paying public school teachers above-average salaries compared to the majority of private educational institutions.  Once again, this transformation that has been a result of the pandemic will lead to a healthy structural change through which taxes from the top income tiers of society will be used to provide the public with quality education, one of the most effective means of redistributing income. Note: Part 1 of this series was posted online on August 4, 2020. (To be continued).