Ninang Riza of UNTV fame feels very strongly about improving the money handling skills of the needier sectors of our society: those who often find themselves in debt need to be equipped with the ability to find a way out. She thought that a sprinkling of basic economics should be part of the skills base for money-mindedness. More than a year ago, she challenged me to chat about economics in her TV program. I hesitated because beyond the challenge of squeezing the concepts into practical everyday tips and beyond explaining in a crisp 30-second sound bite, I also needed to speak in plain Taglish[i]!
She explained that it’s not as difficult as it seems and all it needs is a little creativity. She mentioned that she already spoke about GDP in her program and even differentiated it from Gross National Product or GNP. GDP means “Gawa Dito sa Pilipinas”. GNP means “Gawa Ng Pilipino”. Easy, right? That level of creativity is the Holy Grail, right there.
… Back to our topic from the last blog post
In my last blog post, I introduced the term per capita GDP as a measure of the affluence of a country’s population. We will now use this measure to establish how we, as a people, have fared through recent history.
The Good Old Days
We always hear about how the Philippines was the second wealthiest country in Asia next only to Japan. I thought that the 1930s would a good period to try to show this. The country had started to flourish after the Spanish and American wars. Old Manila was both prosperous and charming, even drawing comparisons to Paris.
The chart below traces per capita GDP back to 1934 and shows that we were close to being second after Japan and Hong Kong. There are a few ways to argue we were really second. One, Hong Kong is an autonomous territory but not a country. Another is that the population of Hong Kong is so small compared to the Philippines that our economy was far larger than Hong Kong’s back then.
A few other things need to be pointed out from the chart. The acceleration of economic growth in Hong Kong and Japan is very visible from 1954. Both countries embarked on an aggressive drive to industrialize in the early 1950s. Hong Kong’s textile industry grew, helped by a US embargo on China beginning with the Korean War. Japan had started to produce very small cars such as the Toyopet Master.
For purposes of this chart, I needed to combine the statistics for North and South Korea, which split into two separate countries in 1950.
Singapore did not become independent until 1965, when it split from Malaysia.
The Bad Old Days
Rabid Marcos fanatics glibly claim that the country was second to Japan during the Martial Law years.
In reality, comparing the Philippines versus Japan, South Korea, Hong Kong and Singapore during the Martial Law years is not even meaningful because the Philippines would merely be flat-lining at the bottom of the graph against the massive increases in affluence of those countries. A comparison of per capita GDP with the emerging tigers of that period – Thailand, Indonesia, and Malaysia – will be more instructive.
Note how all four countries were clustered closely together around the beginning of military rule. Despite the borrowing binge by Marcos at the beginning of the 1970s, the stranglehold of his cronies over the economy choked all momentum out the economy. As a result, our country could barely match the growth rates of the other countries. Further, the Philippines was the only country to lose ground during the period when the per capita GDP sank between 1980 to 1984 – bringing untold suffering on the Filipino people. By the time of the 1986 People Power Revolution, historical laggard Indonesia had caught up with our country.
A Double Dip
The last 30 years saw a growing income gap between the Philippines and its neighboring countries.
The 1997 Asian financial crisis was a mere breather for the region’s extraordinary progress, with Indonesia being the worst affected. The Philippines saw its per capita GDP dip a second time in recent history during the term of Gloria Arroyo (even after the massive election spending in 2010), allowing Indonesia to once again overtake our country. Despite that drawback, our strong economic growth during the term of Noynoy Aquino allowed the country to keep in step with the rest of the ASEAN region. At the end of his term, there is renewed hope that the Philippines may at last join the Asian community of tiger economies. President Duterte has big shoes to fill indeed.
[i] A mix of Filipino and English often spoken in the Philippine cities.