The pandemic will have lingering social and economic effects long after it dissipates, much like the virus leaves symptoms on infected persons long after they have recovered.
Even if the infection rate is fully controlled tomorrow, the effects on the economy will linger on for a few more years. The interruption in the education of our young is an example that quickly jumps to mind. Preliminary studies indicate that primary students kept from schooling the past few months are quickly falling behind in the competencies they should have acquired had the interruption not happened.
However successful our experiments with “blended learning” might be, it is doubtful our present crop of primary and secondary students could be pulled up to par. It will take many more years for the educational process to fully recuperate.
The larger economy, too, will suffer from this pandemic shock. The symptoms will remain for many years, most significantly in higher poverty incidence and chronically high unemployment.
Socioeconomic Planning Secretary Karl Chua reported the other day that poverty incidence could spike to 17.5 percent next year. When President Duterte assumed office in 2016, poverty incidence was at about 23 percent. That was quickly brought down to 16.7 percent by the end of 2018. The economy was well on track to bring down poverty incidence to just 14 percent by 2022 before the pandemic struck.
Our economic planners do not expect a worsening of rural poverty next year. Whatever spike in poverty incidence there might be will largely occur in the urban areas. This expectation is significant.
In the first semester of this year, as we battled the pandemic, every section of the domestic economy, with the exception of agriculture and fisheries, contracted sharply. Our agriculture, long the laggard sector, actually expanded while the rest of the economy shrunk. For the second quarter, agriculture, forestry and fisheries posted a growth rate of 1.6 percent against the 16.5 percent contraction of the domestic economy.
The resiliency of our agriculture is most obviously due to inelasticity of the demand for food. Happy or unhappy, sick or healthy, our people need to eat. It is access to enough food, at various price points, that is problematic.
If food is produced and distributed more efficiently, our consumers will have better access to nutrition. If food is produced inefficiently and distributed badly, there will be widespread malnutrition.
Food security is all about affordable nutrition. Yet that has not always been the guiding principle of our agricultural policy.
For too long, for instance, we made land ownership rather than efficient farm systems the cornerstone of our agricultural policy. That turned out badly. The small parcels of land distributed to subsistence farmers in the name of social justice created poverty traps that deepened rural poverty. It produced expensive food that was at times in short supply. Consumers were penalized.
For too long, government’s role was understood as distributor of subsidies to the farm sector. Procurement of staple grains, milling, storage and distribution were all passed on to the taxpayer. Meanwhile, our poor logistics system caused high levels of spoilage and spillage.
Fortunately, we began moving away from the old orthodoxies that inflicted on our agricultural productivity and reproduced rural poverty. The Department of Agriculture has now become a more forward-looking organization.
In a truly revolutionary way, we shifted rice trading to a tariff regime. The recurring tariffs collected from rice trading were put into a fund to help modernize our farm sector.
Although conservatives railed against the shift from total government control over the rice trade, the shift produced pretty dramatic results in just over a year. Consumers enjoyed declining rice prices. Farmers benefitted from the modernization fund.
Cheaper farm products are the main reason we have kept our inflation rate low despite the exigencies of the pandemic. Proposed amendments to the old Agri-Agra Law should help redirect bank financing to agri-industry and agribusinesses. These are the weakest links, explaining the backwardness of our farm sector.
The Department of Agriculture, supported by the World Bank, just released a comprehensive report covering strategies to expand economic opportunities in agriculture and fisheries to promote a more inclusive development of these sectors.
Among the key recommendations of the report are: 1) diversification of products; 2) change in the modalities of government intervention from price supports and input subsidies to investment in research and development, infrastructure, innovation, market information and biosecurity systems; evidence-based decision-making in policy formulations and implementation; and 4) subsectoral and thematic interventions such as land consolidation, modernization and industrialization.
Many of the report’s recommendations might seem commonsensical. But the power of dead orthodoxies kept us from doing the necessary reforms in any comprehensive way. The most militant farmers groups allied with the most indolent landowners to keep us trapped in subsistence mode.
In a more encompassing report earlier, it was pointed out that concentration of production in single staple crops is the main reason farm systems everywhere lack resilience and result in suboptimal use of the land. This is true in the case of our areas exclusively devoted to rice production.
As we emerge from this pandemic-induced economic crisis, we should focus on our areas of strength. Agriculture has to be one of them. If we rapidly reform our agriculture policies, introducing digital information systems to directly link producers and consumers, this sector could power revival of domestic demand.
Then we need to introduce revolutionary market-driven reforms in our stagnating plantation sectors. Our sugar industry, for instance, has a cost of production double the world price for its product. It badly needs reinvention.