The causes of poverty in the Philippines

This will not be a comprehensive explanation, nor will it examine the most meta of causes.

I am not an expert.

This will be a brief look at some of the common problems ordinary Filipinos encounter when they try to improve their situation.

Note to Filipino readers: most of my information comes directly from Filipinos themselves. In fact, they often laugh when one of these comes up and say “Welcome to the Philippines!”

Let me know if I get something wrong or you can add more.

Land title

There is a lack of clear title to land. Most small lots are only registered somewhat informally with the local government, not officially with the national government. Titles are often contested by various members of an extended family. There are a lot of fake titles floating around.

Getting ‘clear title’ – registered by the national government and uncontested by other parties – is very difficult, especially (but not only) for the poor. There is a ridiculous, bureaucratic process, lawyers are involved, and if one link is missing – say, a grandma has died and no one can find her birth certificate – then the whole process can become literally impossible.

There is a huge amount of land stuck in limbo.

Without clear title, land has a much, much lower value. This means families cannot easily sell or borrow against it. Lots of people are effectively stuck on these properties doing low-value farming because there’s little else they can do. Their right to the land is mostly asserted by possession (being there).

Clear title might enable them to pay for education, start a business or something like that. They have capital but it is tied up and cannot be used.

The lack of secure title also disincentivizes investment in the land. There’s no point irrigating or building a road if some bastard’s just going to take it all off you some years down the track. This limits agricultural efficiency – the basic building block of a developing economy.

Land tenure rules also carry a moral hazard. Tenants who run animals or grow crops can become legally entitled to the land after a certain period, which makes owners less inclined to rent it out. Some land lies unused for this reason.

Land disputes are common and violent. If the courts cannot sort out the problem, a couple of armed men on a motorbike can.

The laws surrounding rights to put power lines, internet cables etc. through private land, and to access these for maintenance and repairs, are a mess. I am aware of one case where a small city was without power for a week because some rich landowners refused to allow the power company access to fallen lines.

In other cases, people cannot get internet access because the neighbours refuse to allow cables to go through their property.

Which takes us to:

Scarcity mentality

There is a lot of envy, and it can emerge in unproductive ways – especially when cooperation and good will are required due to unclear laws regarding land use and access.

I mentioned the internet issue, which unnecessarily limits productive activities that some people might otherwise engage in.

Here’s a similar, real case: a family buys a plot of land in the countryside and gets agreement from a neighbour to build an access road through her property, for a price. The new house ends up being bigger and fancier than the neighbour expected, causing her to because jealous. She changes her mind and they are not allowed to build a road there after all.

She puts a public volleyball court on the spot that was supposed to be the road in order to save face among the other neighbours.

A lot of properties are impossible to access by car for reasons like these, thus keeping their value low and limiting what can be done with them. The same applies for other services, i.e. power, water etc.

Another example: neighbours of a thriving local restaurant constantly lodge complaints with the council over anything they can think of: corona nonsense, noise, cables, anything. They burn off their rubbish at inconvenient times. They oppose any proposed improvement to the property.

The underlying cause is that they are poor so they envy their rich, new neighbours. The restaurant owners offer them free food and are ceaselessly friendly, but nothing helps.

A better approach would be to treat such successful neighbours as an opportunity. Sell them fresh eggs and coconuts. Enjoy the increased land value (if they have clear title). Set up an ice cream stall to take advantage of the increased foot traffic in the area. Offer to let them expand into their property in return for rent, or sell it to them for a good price.

It seems like a small thing but I’ve noticed that in poor countries, people tend to see wealth as a zero-sum game. In more developed societies, people understand that the cake itself can become bigger.

Corruption

Obviously this one was going to be in there.

How exactly does corruption make it hard to break out of poverty?

Imagine you are a poor, smart go-getter who studies hard at school. You do well, manage to complete a university course somehow, and wish to be certified in your chosen profession.

There may have been several layers of corruption along the way, but now you’ve reached the main one: the certifying body says you just failed the test but provides no specific feedback aside from a score.

Yup, it’s a scam. You’ll need to induce someone to get you across the line.

Corruption is as much about connections as it is about money. Maybe more so. It’s easier to pay a bribe if someone in the relevant body knows and trusts you. It often doesn’t work to go waving pesos at strangers.

It’s often helpful or even necessary to have a connection to get a job pretty much anywhere, from a government department to a Jollibee.

Corruption is not only a problem of state. It goes right through society, robbing and hindering the poor at every turn. Wages and commissions are routinely not paid, often being stolen at the branch level. Employers gradually start to withhold payments until workers give up, cut their losses and start the process anew somewhere else.

Shops sell fake phones which may or may not work. People sell cars and motorbikes with stolen engines so that they cannot be registered. Pop-ups in the mall sell fake health insurance. It goes on and on.

The dishonest are constantly taking advantage of the honest.

Even foreigners seem to be corrupted by this culture.

There is always some rationalization going on behind this. “Oh, she has a rich sister who lives in New Zealand, she doesn’t need it as much as me.” Something like that.

The good news is that it is possible to make connections. I reckon Filipinos have adapted to become some of the friendliest and most gregarious people on Earth out of this necessity. Strangers will often chat to each other because you never know who might become your best mate or just a very handy person to know.

If you have a friend whose brother’s a motor mechanic, he won’t rip you off. If your cousin is a real estate agent, she’ll check the land title properly for you.

Corruption is the glue that holds together a lot of the other causes of poverty. It is why cops may look the other way when business disputes are resolved through violence. It is why vital services such as the internet and power are so expensive and unreliable – oligarchic families pay bribes to maintain their monopolies. It’s why scams go unpunished.

If there’s not a fair system, it’s hard for a decent and hard-working person to get ahead.

Having said that, the government has made some serious efforts to reduce corruption. Some government services require prepayment at a 7-11 so that no money is exchanged in government offices, etc.

I wouldn’t say that corruption is ubiquitous. My local immigration office was famous for being squeaky clean. In fact, if you want to get a dodgy missionary visa through a corrupt priest, the best time to do it is boss’s day off. Between us.

Bureaucracy

The state itself is a drain on the nation.

Many Third World nations fall into the trap of thinking that they can bootlace their way into prosperity by offering many high-paying public sector jobs.

In fact, this is a double-whammy against development as a whole – it sucks money out of the private sector in the form of taxes while also slowing down those trying to get anything done with piles of red tape.

Tiny corner stores each have a wall full of various local and national permits required to sell Nova chips and instant noodles. This is the pattern no matter what you’re trying to do. Assassinations almost always go unsolved but try opening an illegal sari sari store and see how many minutes pass until you’re closed down and fined.

This system privileges the rich and connected who can pay for lawyers or bribes to get things done quickly.

For this reason, it is often much easier to do business in more developed countries, even though poorer countries seem like the Wild West where anything goes.

Trade restrictions

Another trap that many poor countries fall into is setting high tariffs on imports. This gives the government a quick, apparently painless cash injection while protecting local industries.

However, there are hidden costs. It can be hard for consumers to buy cheap, high-quality goods, meaning that their already low wages don’t go as far.

Businesses may find it difficult to import or pay for the equipment that they need, especially (once again) poorer and less well-connected small businesses.

Also, reciprocal trade barriers may limit export opportunities.

This is not necessarily an argument for completely free trade. Rather, these things are complicated and sometimes the easiest path for governments is not the one that is best for their populations. Many developed countries are more open to imports than Third World countries, and it’s easier to buy good stuff there.

The gap years

This is a weird one.

Until recently, formal education ended at about age 16. Kids are not allowed to take on formal work until 18. Thus, they mess around for two years and learn terrible habits, becoming lazy and unreliable once they are finally old enough for a career.

The education system now supposedly runs through to age 18, which ought to have solved this problem. However, (a) I think plenty are still dropping out even though K-12 is supposed to be compulsory, and (b) the coronavirus closed schools for almost three years anyway.

There still seem to be plenty of kids drifting around in limbo. I’m not sure this problem’s really been fixed.

Other

Various official sources list other causes of poverty.

Most of these are tautological, for example the lack of good jobs.

Some don’t really make sense, such as the fact that the Philippines is a broad island chain subject to many natural disasters. So is Japan.

Further, you blame everything on colonialism. It did set up the current oligarchic system of wealthy Spanish and Chinese families who control the whole country and its resources, but many other countries have managed to resolve or sidestep issues like that.

Further, rich countries are not primarily responsible for poor countries being poor. Fairer trade rules certainly help, but restrictions on trade and investment are largely initiated by the Philippines itself – often for the benefit of, yet again, local oligarchs.

Some blame the high birth rate, but that’s a mixed picture:

1. The overall fertility rate just dropped to 1.9. The population is very young on average, so maintaining a fertility rate around there would be ideal. Realistically it will probably fall further though, because that’s what happens everywhere.

2. Poor families tend to have more children. However, cause and effect can be murky here. Some poor families are poor because they are stuck on informally-owned land, as discussed, and need children to help on the farm. If a handful of those kids can end up getting some sort of education and work abroad, that that actually improve the fortunes of the whole family.

Other kids turn out to be a drain on resources, though. There is a Third World equivalent of the dole bludger who scabs off his family instead of the government.

3. The crab bucket. People who ‘make it’ or come into a windfall are expected to help out their large, extended family, which limits their ability to build and invest.

4. Out-of-wedlock births. These constitute about half of all births and are indeed a cause of poverty for obvious reasons. Maybe it’s not obvious so I will explain further: poor young men usually shoot through after knocking girls up because they don’t think they can support them.

Finally there is the issue of government programs to directly help the poor – public pensions and so on. Duterte started some basic welfare programs, but my observation is that a lot of the money is pinched before it reaches the poor, and the programs seem unfunded and therefore unsustainable anyway. We’ll see.

Conclusion

For most Filipinos, the problems described (and no doubt others) make it very difficult to get ahead while remaining in the Philippines. Opportunities are hard to find without the right connections, wages are shockingly low and running a business is fraught with uncertainty and injustice.

That’s why around 10% of the population is working overseas. Most plan to spend many years abroad, save money, and finally come back and build a house and/or set up a small business.

Remissions to family members are a godsend for many and without them the Philippines would be much poorer than it is.

Overseas Filipino Workers (OFLs) are a double-edged sword, however. They cause a brain-drain. It can be hard to find the skilled workers needed within the country because all the best doctors, nurses, teachers, builders, engineers, electricians etc. etc. have gone somewhere else.

It is important to note that the Philippines is not a complete basket-case, except for the blip in 2020-21. It has been gradually developing despite the hurdles described, and life is definitely better than it was before.

Compared to some parts of Africa, it’s prosperous.

However, it is lagging behind peers like Indonesia, Vietnam and Thailand in terms of GDP per capita, PPP adjusted (the best measure of national wealth).

There’s no reason why the Philippines can’t do about as well as those countries.

The Philippines is not alone in having solvable problems that are never solved. Every country seems to have at least one. It’s a puzzling issue which will be the focus of next week’s post.