A Deep Divide

In reading Jessica Zafra’s blog entry “A Condensed History of the Rich”, Zafra contends that the oligarchic tendency of the Philippine social structure as well as its penchant for bossism and nepotism ultimately contribute to the cycle of poverty. The end result is a wide and deep income inequality. That is to say, that those at the top earn disproportionately more compared to those at the bottom of the economic barrel. This inequality cycles itself therefore not allowing the country to prosper as a whole.

Got that?

This can certainly be seen in the case of many industrialized nations. For instance, look at the United States. A strong middle class brought about by the industrial revolution allowed the country to prosper. But this was not always the case. So-called robber barons of the late 1800’s dominated America’s industries. Then the income tax came about. The progressive income tax is seen as a leveler of inequality. Tax the rich more than the poor. After all, they can afford. Furthermore taxes such as the Inheritance or Estate Tax ensured that family wealth would not stay “in the family” for generations to come. In this way oligarchies were broken. New entrepreneurs were encouraged and the country benefited as a whole.

If income inequality is the root of the problem, then government has the power to fix it through a progressive income tax rather than the regressive consumption tax known as the VAT. It is unconscionable that the Philippine government tax the poor at the same rate as the rich.

How is this possible you ask?

Let’s say there is 1 peso a tax on sardines. Since the poor would essentially consume the same number of cans of sardines as the rich (theoretically), then the same tax rate of 1 peso per can of sardines would apply to both of them. Proportionately, the 1 peso tax would hurt the poor man more since…well…he’s poor.

Then why oh why is GMA proclaiming that the RP will be a first world nation within a generation? It’s an estimate that is premature and certainly unrealistic given the current situation. The GDP did grow 7 percent, yet most of the gains were garnered by the rich and the poor felt little. Trickle down economics has not worked. A lot of work needs to be done before anyone can proclaim the Philippines as first world. Open your eyes and see the poor in Baseco, Tondo, Payatas, and a myriad of other “informal settlements”. Look at those living beside the antiquated railway.

It’s time for a revolution. The patchwork solutions of former administrations have not worked. Wake up and smell the stench from the Pasig River running right through your backyard.