LAST week we shared our thoughts on the potential short-term negative impacts of the closure of Boracay. We said that it is necessary to employ Cost-Benefit Analysis incorporating impacts today and as well as into the future. It is possible that because of the Tragedy of the Commons, the long-term benefits outweigh the short-term pain. Nonetheless, it is still necessary to provide cushion and safety nets to those who will be affected. As we ponder on this challenge, a student of management came to interview me regarding his research on inequality and poverty in the Philippines.
Our discussion came into the topic of human capital investments—primarily education and health. Development literature has argued that weak or failure to invest in human capital has led to slow economic growth, dragging poverty and inequality as issues over a longer period of time. Investments in human capital do not result to lower poverty and inequality now, but they will give people increased choices in the future. Again, this is not so much different from understanding what is needed now and what is needed in the future. Consider this real scenario: many under-educated and lower skilled people are applying for few jobs that require basic skills. The result is unemployment. This is happening at the same time that our technology-driven economy is unable to get qualified workers and there is actually lack of applicants. This is partly the reason why many low-skill jobs are now being outsourced because there are many people available to do this. As the economy grows and as more technology is introduced into the system, the availability of manpower will be a huge challenge.
Our colleague, Dr. Cielito Habito has been warning in our Eagle Watch briefings about the challenge of stunting. According to his research, about one-third of children today are stunted. Stunting according to the World Health Organization (WHO) is the impaired growth and development that children experience from poor nutrition, repeated infection and inadequate psychosocial stimulation. Its physical manifestation is low height compared with children of the same age. In the future, stunted children will have diminished mental activity and learning capacity leading to poor school performance and reduced earnings
in the future.
The challenge of stunting is that it is irreversible once a child reaches 2 to 3 years old. Thus, this means that the demographic dividend—meaning the time when our population has reached a point where there are more people working than dependents, will be a weak one. This is because one-third of the future work force supposed to bring the Philippines to its economic golden age are not the fully capable and dependable ones that developed countries had when they passed through their demographic transitions.
Stunting is the anti-thesis of the development of cognitive capital, which is critical in the knowledge-based economy that we have today. According to the presentation given by Michael Samson in the High Level consultation on Social Protection last week—Cognitive Capital jointly enable creativity, flexibility and ability to work collaboratively. This same capital is driving the growth in technology and the rise of artificial intelligence. This will diminish demand for low skill and repetitive work in the future. The imperative today is therefore to invest in human capital—better education and better health. China’s incredible economic growth run was accompanied by its investments in knowledge-based activities primarily through research and development. This was made possible because of its strong basic education and
health foundations.
The Philippines is currently pursuing the Conditional Cash Transfer Program, which is more accurately a human capital investment program. It is a long-term investment to give opportunities and choices to the poor families today to graduate into a better future—possibly free from stunting and able to participate in reaping the future demographic dividend. Samson argues in the same presentation, the need for the government not to work in silos but to consider putting a comprehensive investment strategy in education, health, social services and livelihood promotion. Single sector strategy in a challenge like this does not work over a macroeconomic framework. It is better to deliver programs in smaller chunks managed by local governments who understand their localities much better than the national government.
As we consider various challenges and debates on policy today, there is no argument against a scientific fact that is coming our way. We must continuously rethink how economic policy will look into the future and not just the short-term benefits or costs today. Beyond government structures and systems, there is a serious need to decide the kind of knowledge economy that the country will have by 2040. Is it one that is manned by capable, critical and creative individuals or one that is repeatedly being challenged by the need to reinvest in basic education
and health?