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April 27, 2008

Why are we poor? Walden Bello offers a very convincing explanation: In The Shadow of Debt.

Main points:

  • The 7.3% growth in GDP is a fluke. It is accounted for by a decrease in imports– a warning sign of a deteriorating economy, not improving.
  • Poverty incidence is rising.
  • GMA is not the problem. She’s just a part of it.
  • From 1990 to 2005, the Philippines registered the worst growth figures in Southeast Asia. Vietnam, Laos, Cambodia and Myanmar are doing much better.
  • Don’t blame population. Researches show population growth slows down as economy expands.
  • Don’t blame corruption either. Endemic corruption accompanied rapid growth in many societies including the US and Europe.
  • Investment level is just too low, that’s why.
  • Indiscriminate trade liberalization has but swamped our industries leading to bankruptcies and massive layoffs. Countries which pursued strategic protectionism are faring better.
  • Lost revenue from tariff due to trade liberalization worsened fiscal deficit. The government had to scour somewhere else. Result: more taxes. Then, because most of the national budget goes to paying our debt. we could not spend more on vital infrastructure.

If the hemorrhage of payments on the foreign debt blew a hole on the expenditure side, trade liberalization, by reducing a very critical source of government revenues blew a hole on the revenue side.

  • Investors are turned off by decaying infrastructure. So they go elsewhere— to the competition.

Less the economese, it’s kind of a no-brainer, really.

…it requires no special intelligence to realize that the massive amounts of money that have gone to paying our creditors to service our constantly mounting external debt was money that could not go to development. It cannot be otherwise given that resources are finite.

Why are we poor? Because there are no jobs. How do you create jobs? Investment: no new investment, no new jobs; more investment, more jobs. Simple.

Why are investments low? Because investors are turned off by our inferior, deteriorating, insufficient infrastructure. Why deteriorating and insufficient. Because we have no money to invest there; most go to paying off our debt. Simple.

I disagree on some minor points but I’ll say my piece another time.

2 Comments leave one →
  1. April 28, 2008 8:49 am

    I read Mr. Bello’s article through your link. It is a cycle isn’t it? Wish we can just stop paying our debts. Being poor sucks!

  2. April 28, 2008 10:56 am

    My position re national debt is reschedule/renegotiate. I wonder why every time the matter is brought up, it’s like the coming of the apocalypse for our finance people. It’s not like we’re running away from our obligations. We need a breather. It’s unconscionable to see so much poverty stalking the land…

    Thanks for the visit, Joe.

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