UNLIKE rich oligarchs, who can afford to hire the best minds to run profitable businesses for them, the poor are left to fend for themselves, even forced to fight each other in the Darwinian “survival of the fittest” free market law of the jungle, which leads us to the need of building an army of “economic cadres” to help empower the poor, not through cash dole-outs, but to develop their capacity to compete fair and square.
• Talent within reach by the rich. Some oligarchs are merely grade school or high-school graduates but with deep experiences in life and business. They are partly successful with the help of financial wizards, legal luminaries, technical innovators and marketing geniuses, who are graduates of top universities.
They even contribute in influencing policies that favor these oligarchs, which economists call “rent income” and their indecent moniker “rentiers.” Some of them evolve into cartels and oligopolies.
In fairness, many oligarchs do laudable projects like supporting scholars among the brightest, whose futures are secured with assured jobs. Big businesses also enjoy the advantage of easy access to credit, without the need for collaterals, as their names and faces alone are enough to back-up debts.
• Learning from advanced countries. In contrast, the poor are disorganized, incapable of mustering economies of scale and not credit-worthy or bankable. It is great to learn from advanced countries, where farmers are wealthy enough with their consolidated numbers into cooperatives and banks like France’s Credit Agricole, Netherlands’ Rabobank, Canada’s mutual cooperatives and the agri co-ops of Japan and South Korea.
Farmers run their own farms and factories managed by university graduates, who know finance, management and marketing, and become both employees and manager-bosses of farmers, thus creating a peculiar partnership between old versus young, learned versus less-schooled, traditional practices versus new systems, etc.
Locally, we have some successful cooperatives, mostly credit cooperatives that have ballooned in size from the blood and sweat of the usurious loans to their members, many of whom remain poor. These cooperatives must integrate to meet their needs by creating new economic pies or physical wealth, rather than lending loans paid from tight individual income sources.
• Disorganized, banks and business shy away. Disorganized as individuals, farmers cannot gain economies of scale and become bankable, thus explaining why businesses shy away from farmers.
Neither are banks comfortable lending to risky farmers in the absence of collaterals and their vulnerabilities to vagaries of nature like typhoons. This affects the viability of many small banks, thus the Philippine Deposit Insurance Corp. allowed the closure of 325 banks from 2000 to August 2018 or close to 20 banks padlocked every year, although there are other reasons for their closure, but this means lower lending to farmers. Amid market imperfections, unscrupulous traders and loan sharks tend to proliferate as markets allow them to exploit farmers and consumers legitimately.
After all, traders have no loyalty to production as their prophet is profit. They prefer to earn on margins than on volume production. If it is cheaper to import than procure from farmers, they won’t hesitate. Conversely, farmers want to produce more, which lowers prices benefiting consumers, thus farmers and consumers have this symbiotic relationship. It is the middleman-trader who meddles with this relationship.
• Govt affects only top 20 percent farmers? The government’s presence is neither encouraging as its programs only reach effectively the first 1 million farmers. More so, if projects start as mere pilots and are unexpanded. This leaves the remaining over 80 percent unattended, says a study by Rodolfo “RV” Vicerra, former director general of the Congressional Planning and Budget Office. In his simulation studies, he noted that “no matter how good the performance of the first million producers [say 7 to 10 percent], low growth of the next 4.5 million small farmers pulls down the combined average growth.”
Palay procurement, for instance, was only 0.8 percent of palay production from 2013-2017, which cannot influence farm prices upward. In fact, traders buy at P19-25/kilo, higher than government’s P17/kilo support price. Increasing the National Food Authority’s budget for procurement will only mean more losses, so it’s time to explore alternatives.
When we brag of inclusivity but allow agriculture to underperform, we are kidding ourselves. We can neither blame the Department of Agriculture as it could only do so much as society has not given agriculture and farmers their due importance.
• Institutionalize organized partnerships. There is no way the poor can break the vicious cycle of poverty, left alone in a free market, where Adam Smith’s invisible hands freely steal his pockets legally.
Instead, develop institutionalized tie-ups with the Tesda, state universities and colleges, big co-ops and nongovernment organizations into helping organize the poor into power production and marketing ventures with strong linkages with agriculture, where two-thirds living in poverty reside. Invest where it will count most, not in price support, but equipping farmers with postharvest equipment, trucking, logistics through their organizations.
Another strategy is mobilizing rural folks through their organizations to build hundreds of thousands of catch-basins or swimming-pool-sized mini dams, employing millions in a construction frenzy even using picks and shovels. These dams can harness rain, prevent soil erosion and downstream floods, serve as an effective climate-change adaptation strategy, but provide upland irrigation, agro-forestry development, source of water and fishpond development.
E-mail: mikealunan@yahoo.com