Business World, 8 September 2019


The recent alarm over falling rice prices after import-quotas were replaced by tariffs points up a larger problem that will increasingly confront Philippine society — the conflict between the interests of a growing middle class and poorer minorities. On the one hand, the historic measure produced its intended effect: it has lowered rice prices, bringing relief to the large, mostly urban rice-consuming public. (After the avoidable fiasco of 2018, inflation is now a record low of 1.7%.) On the other hand, the same measure has wreaked havoc on the livelihood of rice farmers and landless farm workers, who count as some of the poorest Filipinos. To be sure, the government purports to ameliorate the damage. But the one-time loan it offers to rice farmers is obviously not enough to facilitate the permanent shift — in crops, technologies, mindsets, and occupations — that the new trade-regime imposes.

Still, the rice issue is only the latest in a lengthening series of instances where middle- and upper-class interests are enhanced while those of a less numerous, less privileged minority are demoted or ignored. The tax reform under TRAIN, for example, provided relief (surely well-justified) to middle-class income earners by lowering income tax rates. But the lost revenues were recouped through indirect taxes (e.g., on petroleum, sugary drinks) that penalized the poor, many of whom do not earn compensation incomes (farmers and fisherfolk, for example).

The law providing free tuition in state universities is another case in point. It alleviates the burden for middle class families for whom college education is a real option — but does nothing for the majority of the poor and vulnerable for whom even completing high school is a major hurdle. The same is true of the recent measure providing free MRT rides to students: it benefits mostly commuting urban college students and does nothing for elementary and high school pupils who attend local schools in their communities. It is even more irrelevant to those pupils in the hinterlands who must walk kilometers daily to go to school. Other examples of measures that similarly favor the nonpoor include the successive salary increases given to government employees, the various benefits given to police and enlisted men — and, yes, even the senior citizens’ discounts on medicines (whose benefits we enjoy with a guilty conscience, knowing their regressive incidence).

Then finally, of course, there is Duterte’s deadly war on drugs — which is noticeably applauded by a middle class that demands law and order by any means, notwithstanding the mounting body count of mostly poor drug addicts and the collateral casualties among their family members and communities.

By contrast, the same solicitousness and generosity is nowhere to be seen when it comes to the marginalized — the laylayan. Consider for example the casual insensitivity when it comes to the rehabilitation of a ravaged Marawi: “I don’t think that I should be spending for their buildings… Hindi ako maggagasta ng ano. Maraming pera ang mga tao diyan… Kasali na ’yung shabu.” (I will not spend. The people there have alot of money… Included there is shabu.) Or again, take the inadequate compensatory amounts to relieve the TRAIN law’s effects. Or even the laughable one-off loan of P15,000 the government offers to offset the impact of rice-tariffication especially among small farmers.

None of this is surprising, however, if we consider the elephant in the room: the Philippines will soon be (if it is not already) a mainly middle-class society where the poor are in the minority. The Human Development Network estimates there were more households (36%) that were middle-class or better in 2015 compared to households that were considered poor (32%). (The balance were considered nonpoor although “vulnerable”). Official statistics are even kinder, if not necessarily more credible, with only 16% of families considered poor in the first semester of 2018.

There is also an argument for efficiency from old-style welfare economics. Known as the “Compensation Principle” and credited to V. Pareto, it says that regardless of the numbers involved, a policy is desirable and should be undertaken if the potential winners from it can compensate the losers. If rice buyers benefit so much from tariffication that they can afford to pay off rice producers to make them “whole,” then tariffication should definitely be on the agenda. Around the 1950s, however, a weaker (some say more cynical) version of this principle was suggested by J.R. Hicks and N. Kaldor and has become an implicit guide to many policy-makers: if the gainers from a policy could hypothetically compensate the losers from it, then the policy should be implemented anyway, even if no compensation is actually made. That is, economists should worry about the size of the efficiency gains, not their distribution.

Hence, if Marawi’s destruction yielded benefits to the majority that were substantial enough to compensate its residents for their grief and pain, then indeed its devastation was justified. And when the time subsequently came to compensate the Maranaos for their losses and suffering, well, maybe… or then maybe not. Either way unleashing hell was justified. Under the same principle, we would be justified in ignoring the Agtas’ objections to the Kaliwa Dam, or the environmental concerns of communities affected by mining. And if compensation for the effects of rice tariffication or indirect taxes under TRAIN was inadequate, well then, tough luck. Mabuti nga meron, e. As for tokhang, well, there’s this benefit to the majority… you see where all this is headed. It allows one to do almost anything — always in the name of a majority, of course.

In the past, unbridled ethical abuse of that principle was held in check by a combination of politics, law, solidarity, and religion. Where the affected poor were a significant number, actual and full compensation (as Pareto himself demanded) would be enforced through a political process. Even absent the numbers, the law might still protect minorities from the tyranny of the majority through rights and claims enforced by the courts. Or then again solidarity and a sense of social justice, often fostered by religion or social ideology, would cause the majority to look beyond their plates and empathize with the less fortunate.

But many of these old forces are weaker now, and not just because of Duterte. The poor are in the minority. Rights are under attack; the law is perverted and weaponized. Grand ideologies are out of fashion. Religion is on its back foot.

In this brave new world, the middle classes — the new majority — must stand alone and confront themselves in the mirror. Will they remain the timid and self-satisfied creatures of Hobbiton? Or are they up to defining a new and just future not only for themselves but the whole country and society?