Introduction to a Series of Essays

I am in my final month here, coming to the end of my road after a long trip.  I spent 7 months in the Philippines, two weeks each in Cambodia, Thailand, and Burma, a week in Vietnam, four days in Hong Kong, and an afternoon in Japan.  I am taking time to reflect on my time here and pull together everything I have learned into a set of coherent ideas of what it all means. I arrived in December of 2009 knowing next to nothing about microfinance, economic development, or the issue of poverty in developing countries.  I understood these things on a conceptual level, but, as faithful readers of this journal know, my views on what it is and what it does have changed with time.

I have come to the conclusion that poverty is a limitlessly nuanced and complex topic that only becomes more confusing as your understanding of its causes deepen.  It is the product of an interrelated confluence of factors that enable and exacerbate one another.  Everything is a chicken-egg situation.  Because there are no levers to pulls, there is no such thing as a silver bullet to end poverty, despite what some might have you believe.  Microfinance addresses a specific deficiency by increasing access to financial services for the poor.  Microfinance institutions use their position and reach to offer other services – healthcare, education, energy, etc. – but are limited in their ability to really make an impact in these areas.  That is because these services are the province of the state, and their deficiency is due to the failings of the government, whose politicians are democratically elected, but neglect to fulfill their promises of reform and development in the face of the promise of wealth.  Corruption is so deeply entrenched in the bureaucracy that it is immutable in the status quo.

The most important tool in alleviating poverty – macroeconomic policy – is also the topic I understand least.  Microfinance can’t create the jobs brought in by foreign direct investment and industrialization.  When the majority of the poor lives in the rural areas and engages in farming, the best way to bring reduce is to create jobs is to consolidate commercial farming to leverage economies of scale and improve agricultural productivity, and create more jobs in the non-farm sector to employ the displaced small farmers struggling in the current environment.  But creating an industrial economy requires either adequate domestic demand to sustain a manufacturing sector or a suite of products for export.  An agrarian developing country has difficulty meeting the first requirement because the buying power of consumers from the agriculture sector – more than half the country – is low and can’t supply the market.  To develop an export economy, the country needs to leverage its comparative advantage (in the case of the Philippines, low-cost labor and English skills), which it shares with other Southeast Asian countries, like Indonesia, Thailand, and Vietnam.  The Philippines is fast approaching 100 million people and has one of the lowest average wages in the world.  Why, then, are Vietnam and Thailand the preferred destinations for outsourced textile manufacturing?  Because of the efforts of former trade minister and vice-presidential candidate, Mar Roxas, the country has become a major player in business process and call center outsourcing, a development that could ultimately branch out into accounting, computer programming, and other services, but whether it will become the next India – a country with its own share of problems with poverty – remains to be seen.

There is also the issue of colonialism.  A country is largely defined by its past.  In 1884, Europe divided up Africa during the Berlin Conference based on arbitrary geographical boundaries with no regard for the demographics of the countries, laying the groundwork for the dozens of ethnic conflicts that have occurred over the last fifty years.  Up until the end of World War II, the Philippines remained under the control of various countries, including Spain, the United States, and Japan.  Only one region – Mindanao – remained independent, and it also happens to be the most impoverished region of the country. The country has a democracy patterned after the U.S., but, given that it is the second most corrupt Asian nation behind Indonesia and is one considered one of the most dangerous places in the world for journalists, it isn’t exactly a beacon of democratic virtues. There are several languages, with Tagalog as the national language and English the language of education.  In my province, the language is Ilonggo.  In the neighboring island of Cebu, it is Cebuano.  The country has a reasonably strong national identity based on unity, but it is still a nation of 7,000 islands and, given it’s colonial past, what it means to Filipino is not always clear.

It is impossible to come up with solutions without first understand the nature of the problem.  To close out my stint in the South Pacific, I am going to write a series of essays on each of the major topics discussed in Develop Economies – microfinance, development, poverty, and the Philippines.  In between wreck dives and island hopping, I plan on penning these thought syntheses on my balcony overlooking the Sulu Sea on the island of Coron in Palawan, otherwise known as the inspiration for the book, The Beach, and the movie of the same name.  Hope to get the first one up in the next few days.

The view from the bar at Sea Dive Resort in Coron. Where serious writers come to write.

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