Economic Growth, The Wealth Gap And Federalism: Duterte’s Plan to Make The Philippines Work For All

Under President Rodrigo Duterte, the Philippine economy continues to grow robustly and in the most crucial sectors as explained in the full report that can be read here. Likewise, a low valued Peso is the result of traditional Keynesian cycles whereby inflation naturally spikes during periods of intense productivity and rising employment. Furthermore, the strength of the US Dollar has a seen a drop in global currencies in many nations including China, India and Turkey – The Philippines is therefore not unique in this sense.

But while the naysayers and ill-informed continue to criticise Duterte’s growth and development model in the most simplistic terms imaginable, they have neglected to shine light on the real problem with economic development in The Philippines – the wealth gap.

At present, while the Philippine economy continues to grow, nearly 50% of the wealth of the entire nation remains in the Metro Manila area – just as it was prior to Duterte’s leadership. When Metro Manila is combined with wealthy regions of Luzon, one finds that this accounts for over 70% of the nation’s wealth, thus leaving Visayas and Mindanao without the opportunity to accrue the benefits of overall economic growth.

 

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This is a problem known as the wealth gap – an economic phenomenon that can express itself in a variety of forms. Crucially, the wealth gap is an area where statistics only tell a partial story. While a classic wealth gap where an aspiring class of businessmen and entrepreneurs grow exceedingly wealthy while the poor remain as poor as always due to poor central planning, local corruption and an ineffective taxation and distribution network is visible in today’s unevenly developing India, not every case is as simple as this.

In ideal situation, a low wealth gap will mean that the majority of a popular are collectively comfortable in terms of their material wealth. Countries like Norway and Finland are often listed in such a category. However, on the other end of the spectrum, one can retain a small wealth gap due to the equal levels of extreme poverty.

Then there are examples where the realities on the ground diverge from that which is easily quantifiable. The United States has a statistically high wealth gap but this is not due to widespread poverty. Instead this statistic has been reached because of America’s world famous class of billionaires, many of whom are celebrities in their own right have spiked statistics in one direction, while on the other end of the spectrum the US has isolated yet worrying pockets of extreme poverty in some inner-cities, some rural areas (the Ozarks for example) and some depressed suburban areas of the southern states that have spiked the statistics in the other direction. The result is that in a nation where most people do in fact live comfortably by any international standard, there is nevertheless a statistically high wealth gap. This does not mean a majority of Americans are poor, but it does mean that due to poor wealth distribution management, poor education, racial issues and an uncontrolled drug epidemic, isolated pockets of deep depression have emerged.

 

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The statistics on China are even less telling of the realities on the ground than those relating to the US. As recently as the early 1980s, the wealth gap in China was rather small because over 88% of the population lived in poverty. Today the wealth gap has increased, yet only 2% of Chinese live in poverty while under President Xi Jinping’s plans to develop a moderately prosperous society, poverty will be totally eliminated by the end of 2020 – an entirely doable task given the record of China having lifted more people out of poverty than any nation in history and having done so in a matter of less than 30 years.

So while the Philippines luckily does not have a systematic wealth gap as India increasingly does today or as Russia did in the 1990s, the Philippines does have a regionally based wealth gap, something which is visible in both developed and developing countries. In Brazil the regional wealth gap is such that even within parts of major cities, rancid slums known as favelas are often located next to some of the most wealthy urban centres in all of the Americans. Even in a country that has long been classed as developed like the UK, the gap between incomes and wealth in London and surrounding suburbs versus the rest of the country is staggering.

Therefore, The Philippines must concentrate on the best solution to the clear ‘Imperial Manila’ problem. Federalism can help to dramatically reduce the regional wealth gap in The Philippines which has resulted in parts of Metro Manila looking as pristine as Singapore while in other parts of the country, children are left without food. By empowering regions to take on their own financial responsibilities while simultaneously retaining much of the wealth produced locally, one will end the cycle of ‘trickle up economics’ where only one part of the country is becoming wealthy based on the collective wealth of a national economy.

Finally, when one excludes the international superpowers which themselves have highly unique histories and social dynamics, the countries in the world that tend to rank highest on the human development index have strong parliamentary rather than strong presidential systems. According to the United Nations Development Program, the top 10 countries (the presidential US and parliamentary Canada are tied at 10th) in terms of the human development rating are all governed by parliamentary systems.

 

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What this demonstrates is that the meritocratic tendencies, transparency and malleability of a parliamentary system has a clear record of success in both continuing to elevate standards in developed countries while in Singapore in particular, such a system transformed a country with no natural resources from third to first world status in around 15 years.

Taken in totality, if a federal system designed to ease profound regional inequalities was combined with a parliamentary style of government to help end a system designed to create deadlock and replace it with a system that can get things accomplished in a more expedited fashion, The Philippines stands a real chance of accelerating its already strong economic growth on a sustainable long term model, while insuring that the wealth does not get clogged in one particularly area either due to poor governmental management or due to poorer regions lacking the political infrastructure necessary to develop a strong economic infrastructure.

 

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