Inclusive democracy, upward mobility will address inequality in PH, says study

Inequality in the Philippines has complex roots and various facets. Narrowing the gap entails building a more inclusive democratic society and enabling upward mobility among the people.

This is the main thesis of Ateneo School of Government dean Ronald Mendoza in his paper, “Reducing Inequality in the Philippines: Rationale and Reforms,” launched during a virtual town hall discussion held recently and organized by leading think-tank Stratbase ADR Institute.

Mendoza said there are three facets of inequality in the Philippines, namely weak upward mobility in the economy, vulnerability to disaster, and the concentration of power among just a few political clans.

“All these affect our people in a deep way,” he said. “It’s not very surprising that we are divided because we are very unequal as a country right now. Inequality is self-reinforcing. We need to break free from this anti-democratic, anti-inclusive growth trap. We managed to liberalize the economy, but we failed miserably to liberalize our politics. Eventually, even if you liberalize your economy, you will still hit a ceiling because of bad governance and because of that failure to liberalize politics.”

‘There’s too much focus on diplomas instead of the skills needed by employers.’ 

The Covid-19 pandemic, according to Mendoza, has widened the gaps that gave rise to crises that turned into “inequality machines.”

“Under lockdown, there is a deep divide between the technology ‘haves’ and ‘have-nots,’ creating a demarcation in resilience and crisis coping across students, workers, firms, and communities. Just to illustrate, several million students may be unable to enroll during the lockdown, due to factors such as lack of connectivity,” said Mendoza in his paper. “Inequality is of interest not merely because of a desire for a more equal distribution of wealth.” 

Inequality itself can derail economic growth, breed populism, and weaken social cohesion. For these reasons, the challenge of our generation is no longer simply about reducing poverty. Reducing inequality is the key to political stability, crisis resilience, and sustained economic development.

But Mendoza points out that the inequality trap scenario, on the other hand, is also mutually reinforcing—a spiral of citizens’ empowerment along with the social, economic, and political spheres that tends to support sustained and inclusive economic growth and development.

Mendoza believes there has to be a resurgence of genuine competition in the market economy and a level playing field where abuses of market power and other anti-competitive behaviors are prevented.

A key institutional innovation that could encourage this is the creation of a strong and independent competition authority, as Mendoza suggests.

In his remarks in the forum, Prof. Victor Andres “Dindo” Manhit, president, Stratbase ADR Institute, described the problem of inequality in the country as “crippling.”

“Inequality requires a multi-stakeholder strategy,” he said. “We need public-private partnerships, investments by the private sector, and a better environment for investment by the incoming administration by June 30, 2022, with the hope that it can provide jobs, livelihood, income, and a comfortable life for many Filipinos in the long run.” 

He underscored the importance of a conducive environment, created by the government, for the private sector to thrive.

“The country’s next administration would need to exert a holistic effort for these challenges to be significantly addressed. We need a leader who acknowledges the important role that the private sector plays in development, especially through their investments across a wide range of sectors,” Manhit said.

For Christopher Tan, chief operating officer of PHINMA Education and board member of the Philippine Association of Colleges and Universities, the country needs to address the issues of access, completion, and employment to be able to tackle inequality.

“For access, the core market failure in the Philippine educational sector is the lack of supply of high-quality, low-cost education,” Tan said. “There’s too much focus on diplomas instead of the skills needed by employers. The world of work is changing. More and more businesses operate through discrete projects and are less likely to provide employee tenure. Hence, they are looking at more specific skills rather than degrees.”

Other speakers in the forum were Dr. Charlotte Justine Diokno-Sicat, research fellow, Philippine Institute for Development Studies (PIDS) and vice president of the Philippine Economic Society (PES); Dr. Carlos Primo David, Stratbase ADR Institute trustee and convenor of the Philippine Business for Environmental Stewardship (PBEST); and Francisco del Rosario Jr., chairman of the Institute for Solidarity in Asia.