My previous article regarding the potential high cost of free college education has elicited interesting reactions from readers. Some readers have argued that free college, much like free contraceptives, is a good investment by the government that would lead to economic improvement in the Philippines. In support of the argument, some have blamed the high fertility rate (especially amongst the under-educated poor which make up a significant chunk of the population) as the major culprit of the economic problem plaguing the country. While I do not contest the fact that overpopulation and under-education wreak havoc to (and are detrimental to) the Philippine economy, the question is: how do we prioritize our limited resources to improve our economic situation? Which among the 3 problems (inadequate infrastructure, under-education, overpopulation) should the government invest more on that would give us the most and immediate return on investment?
An article from the Economist shows that government intervention in population control (by itself) has not really worked. In China birth rates have been falling even before making coercive policies such as its One Child Policy. As the World Bank data shows, China’s fertility rate has already been declining even more than a decade before it’s One Child Policy was implemented (which was introduced in 1979). Professor Yong Cai from the Carolina Population Center suggests that:
“..economic and cultural factors are critical to understand China’s low fertility, and are more important than the government’s one-child policy”.
Indeed, studies published and presented by Chinese scholars seem to indicate that market-based incentives may be more effective (than government coercion or intervention). On the home front, our country’s fertility rate has been in decline since the 1960s, even before the RH Bill became law of the land. We also have seen a trend of increasing Gross Domestic Product (except for some dips during periods of local and international economic and political crises) even before government subsidies on contraception was enacted. This may suggest that there must be other factors that contribute to the economy as oppose to mere population control.
Is education the silver bullet? It is true that education is very important because conventional belief dictates that a literate population would produce more productive citizens that would uplift and sustain the economy. However, a comparison between the Philippines (having a 95.4% literacy rate) vs. India (62.8% literacy rate) paints an inconvenient picture to this conventional belief as India ranks 9th in the world economy compared to the Philippines’ rank of 40th. From my previous article, even if we talk about specializations through college education, it has been shown that there just aren’t enough jobs in the Philippines for our college educated citizens. This seems to suggest that education (or even college education), by itself, will not uplift the economy. Even if we pour in almost all of our country’s budget into education, without enough available jobs our economic problems will still remain (and perhaps would even get worse). At some point we have to be mindful of the law of diminishing returns.
So what do we do? What do we need to do to get on path to economic recovery and prosperity?
India offers an interesting case where it’s economy has done well despite having a lower literacy rate and higher population (ranked 2nd in the world) compared to the Philippines. What was India’s success story?
According to the India Brand Equity Foundation (IBEF), infrastructure has propelled India’s overall development. Both government initiatives and foreign direct investment focused on India’s power, bridges, dams, roads and urban infrastructure development. This focus has enabled the country to jump 19 places in World Bank’s Logistics Performance Index last year. This shows that the role of state investment absolutely cannot be looked down upon in a lesser light. John Ross, a Senior Fellow at the Chongyang Institute for Financial Studies in Renmin University of China, pointed out that:
“The major economies with high growth rates of state investment (China, India) have high rates of economic growth.”
Indeed, India (and China) has achieved higher economic growth rates by increased state investment on infrastructure, contrary to western orthodoxy that private investment (not state investment) is what propels economic growth. Due to heavy investment in infrastructure, the Indian economy has become one of the most promising developing economies around. For the case of the Philippines, it’s Public-Private Partnership program may offer a promising solution. But in any case, the importance of infrastructure investment and the importance of setting up the conditions for more infrastructure projects and investment cannot be overlooked.
There is an inverse relationship between fertility and income. According to economist Dr. Guillaume Vandenbroucke, this inverse relationship has been known to economists and demographers alike. Vandenbroucke notes that:
Rich countries, such as the U.S., have experienced a remarkable decline in their fertility rate as they became rich. Also, the relationship holds at the individual level, as rich families tend to have fewer children than poor families.
Why is fertility so much higher in poor countries? There are several possible reasons:
•Time is relatively cheap in poor countries, so spending time away from work to take care of a child is not as costly as in a rich country. If this effect is strong enough, it can (and probably does) offset the fact that it is difficult to afford a child on a low income.
•A child may require more education to be successful in a rich country. Thus, a child may be more costly there, so families may opt to have fewer, more educated children.
•Infant mortality can play a role. More births might be needed to achieve a desired number of surviving children when infant mortality is high, as it tends to be in poor countries.
•Children can take care of their parents when they are old. However, this is not necessary in rich countries with a well-developed social security system and functioning financial markets.
While education and population control certainly play a significant role in a country’s economic development and sustainability, given the facts and arguments it may be suggested that investment in economic infrastructure ought to take priority. Adequate infrastructure results in conditions conducive to more investment and business growth. When the economy takes off more people would get access to more gainful employment. With more gainful employment comes increased income and with increased income a decrease in population may then follow. However, we should still be mindful of the fact that at some point population replenishment is needed to sustain economic prosperity and prevent economic loss due to an over-shrinking population. Such a problem is evident with advanced economies like Japan. It is a tricky balance but at this point the Philippines needs to get its priorities straight first.
(Image taken from real-if.com)
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