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Philippines Rice Prices: Poor Against the Poor

John Mangun - 4/18/2008

In the United States, the greatest social divide began in the 1930’s during severe economic times. That divide was not based on education, race, or even economic status. The Great Depression took root with a meltdown of the financial system but was fueled and exacerbated by the Dust Bowl drought that hit the heart of America’s farmland between 1930 and 1936.

Literally millions of people moved from the farms to the city looking for jobs and economic security and the face of American society changed forever.

No matter what is said or done, the needs and lifestyle of rural areas are different from the urban centers.

Virtually every country experiences this same divide. For example, China ’s richer coastal areas are resented by poorer, rural Western China. Around the world, the rural area citizens are less affluent than the metro dwellers. The same is true in the Philippines.

We are constantly told about the numbers of poor in the Philippines. But not all poor Filipinos are the same. They do not live the same. They do not think the same. Even the definition of ‘poor’ differs between the urban and rural poor.

Of the urban poor, 80% live in Luzon, primarily Metro Manila. Of the rural poor, 80% live in the Visayas and Mindanao, outside of the larger cities.

Almost two-thirds of the poor are engaged in the agriculture, fishery, and forestry sectors and the depth of poverty is more than twice as great in rural areas than in urban areas. However, even this idea of ‘depth of poverty’ is ambiguous. In the last decade, the disparity between the income of the urban poor and the rural poor has narrowed significantly. While some of the urban poor have regular minimum wage jobs, the cost of living uses all their income and they are therefore considered ‘poor’. The rural poor are ‘poor’ because their agricultural or fishery livelihood provides only enough income to feed the family and little else.

The man who lives along the railroad tracks in Taguig and works as a messenger in the financial district of Ortigas, worries about relocating to government housing communities in Muntinlupa as being too far from his job, cutting into his income. The fisherman in Misamis Oriental worries about being dislocated because of insurgent and counter-insurgent operations, disrupting his livelihood.

They both worry about the cost of fuel. The urban poor because of rising transportation costs; the rural fisherman because kerosene prices are up. They worry about the cost of trying to educate their children. They worry about peace and order. They worry about how they might both eventually get a little ahead. They worry about growing old and still being poor.

Nevertheless, the urban poor and the rural poor are not the same. And the price of rice may illustrate that fact most simplistically.

The urban poor are consumers and worry about the price they pay for rice.

The rural poor are producers and worry about the price they receive for rice.

There are two ‘poor’, each with a different perspective and objective regarding the price of rice.

The government through the National Food Authority (NFA) increased the buying price of rice from P12 to P17 pesos. One international newspaper interviewed a rural poor farmer who said that he would make more money this year than ever before from the NFA.

The government increased the selling price of NFA rice by P1.00. A local television station interviewed a member of the urban poor who said he does not know how he can now feed his family.

Two poor. Two perspectives.

That is what happens when government interferes in the free market by setting any prices; “Damned if you do, Dammed if you don’t”.

Then some cry in anguish; “But this is wrong! The government is not a business”. Actually it is, to the extent that money comes into the government through various revenue schemes and goes out through various spending schemes. No money in means no money can be spent. Sure, it would be wonderful to pay the farmers P100 a kilo for rice and sell it for P1. But how could that work?

Any time government steps into the free market, imbalances occur. When government steps into the business arena, then it is held to most of the same economic rules as a private business.

So which ‘poor’ should the government subsidize; the urban rice-consuming poor or the rural rice-producing poor? To be successful, a choice must be made. Both cannot be done effectively.

The socialists and leftists would argue that all that needs to be done is to tax the wealthy more. Wealth redistribution through increased taxation is a fake. All it does is limit wealth creation which hurts all economic classes. And the next logical step of this kind of government action is to force the urban poor back to the rice fields. But that is a discussion for another time.

An interesting aside to that interview with the poor farmer was when he said he prefers not to sell to the NFA because he can get a higher price selling in the open market. And that may be the whole point.