From the farms to the slums

"From the farms to the slums “Migration can be a climb up the income ladder for well-prepared, skilled workers, or it can be a simple displacement of poverty to the urban environment for others.”—World Development Report 2008, the World Bank

MIGRATION to the city, or even to other countries for work, says the latest report from the World Bank, is no way out for the rural poor. Not all the time, anyway, and still the best way to solve rural poverty is directly addressing rural folks’ problems right where they are.

We couldn’t agree more with the World Bank, especially in the context of the Philippines where the government seems to have abandoned the rural sector right after legislators passed the Agricultural and Fisheries Modernization Act (Afma) in 1998, supposedly to boost the competitiveness of the farm sector following the country’s joining the World Trade Organization.

The idea that urbanization could solve everything stems from the stylized view that countries with higher rates of urbanization are usually richer and, therefore, with lower poverty ratios, either rural or urban. This is correct, especially as regards the experience of most developed countries like Western Europe, the United States and Japan, where industrialization came as a flipside to urbanization.

In theory, investors usually set up factories close to the city, especially port cities, where they could hire workers to operate the machines, bring in raw materials either through the ports or rail systems, send the finished products through the same transport networks, and where overall costs are lower due to the availability of other support or ancillary industries and services like banks, insurance firms and accounting services, among others. That process, in turn, attracts workers from the countryside, extra hands that were made redundant by the increasing mechanization of farming and other technological innovations. The end result is a competitive industry and services sectors growing fast side-by-side an equally vibrant farm sector, a wonderfully dynamic process that soaks up joblessness and ultimately addresses poverty.

The presumption here, certainly, is that government has invested massively in infrastructure development, thus facilitating an economic interaction between the farms and industry, as well as the rural areas to the urban areas. This is one variable that has always been lacking in development strategies of most developing economies, leading to what development economies call “premature urbanization.”

Premature urbanization suggests that desperate rural folks—lacking the means to make a decent living in the farms due to lack of good infrastructure, health services, land tenure, credit, and market information, among other things—migrate in mass to the cities, hoping against hope to get a better deal for them and their families. In most cases, however, most of them end up in the slums doing all sorts of odd jobs and putting pressure on limited social services. There are simply not enough factories to work in. And if there are, rural folks are the last ones to get hired for lack of skills and urbane social graces.

Despite these drawbacks of premature urbanization, policymakers continue to stick with urban-oriented growth strategies, apparently for political reasons. Urban areas are where the influential economic elite and noisy middle class live, and it’s convenient for the state to forego public investments in rural areas when funds are limited due to failure to collect taxes from these elites. This was clearly manifested at the height of the fiscal crisis in the early 2000s, when the government practically stopped investments in health, education and rural infrastructure in the hope of achieving “fiscal consolidation” and getting into the good graces of the International Monetary Fund.

With higher charges collected from the people through the expanded value-added tax, the government now has supposedly some resources for rural development. And yet, we could hardly see any definite thrust toward this end. Whatever initiative the government had was just a pretext for a scam (the Joc-joc Bolante caper). It was convenient to ignore the countryside because the economy has been growing courtesy of outsourcing, electronics and the recovery of construction, which are urban-oriented. The idea now seems to be that eventually, economic growth will outgrow problems like joblessness and, later down the road, rural poverty.

This is a misplaced assumption, essentially because the way we are growing right now, economic growth might not be sustainable. An urban-oriented growth is inherently inequitable and is prone to accentuate not only the urban-rural divide but also the gulf between the haves and the have-nots. The latest study by Dr. Romulo Virola and his team from the National Statistical Coordination Board, saying the ranks of the middle class have been shrinking, seems to prove this point.

It will never be sustainable because such type of growth would produce a revolution of rising expectations that may, in its bizarre forms, manifestrising criminality (a form of income redistribution), and the continuing lack of political stability. The continuing threats from terrorism being seeded in a perennially undeveloped south, the persistent menace of communist ambushes and “revolutionary taxation,” and the disillusionment of the country’s professional classes that are driving them to leave for foreign shores, are just among the bad signs. (Note: drafted as editorial for BusinessMirror, 6 Nov 2007)