long version

Introduction

  1. To prepare for the 2000th anniversary of our Lord’s Birth, we the Bishops of the Philippines issued last year (1997) a pastoral exhortation on Philippine Politics. The letter was meant to help renew politics, the practice of which has so degenerated as to become a main cause of our many problems as a people and as a nation.
  2. This year, 1998, we wish to reflect on our economic problems. We are aware of the different contrasting economic analyses of experts. Some draw a generally positive picture, while others do not. We wish to reflect on the same realities from an alternative angle.
  3. As Bishops our task is to use the light of our Christian faith and the social teachings of the Church in reflecting upon the economic realities and to see them, as much as is possible, from the viewpoint of the poor. Our close contact with them confirms our conviction that they are the ones who are suffering most from the economic developments of today. Our viewpoint then will be moral rather than economic, pastoral rather than theoretical.
  4. This reflection in the light of Christian faith is seriously needed. The economic problem is a human problem. It is also, therefore, an ethical problem affecting the moral and religious lives of people. Economics has to be governed by personal and social morality, if it is to work for the common good.
  5. With the fall of the value of the peso a year ago, a cloud of anxiety has descended upon our land – a cloud made darker by a lack of serious debate on issues that characterized the recent elections and the grim social and economic  uncertainties that our newly elected officials face. Nevertheless the inception of a new administration, coupled with the centenary of Philippine independence, should give us hope for a new beginning.
  6. This hope is strengthened by the anticipation of the Great Jubilee of the Son of God’s entrance into our history, a Jubilee that recalls the Hebrew practice of Jubilee by which every fifty years slaves were set free and ancestral land returned to its hereditary owners (Lev. 25:8-17).
  7. Thus the current economic crisis offers an opportunity for rethinking, abandoning our self-assurance, and returning to fundamentals – especially fundamentals of the moral order. Too often in the past when the nation and the economy have been in crisis, the whole effort has been purely of a political and economic nature – to get the economy “back on track”. It may be time to ask whether the tracks themselves have been poorly laid – and lead in the wrong direction.

PART I: THE ECONOMIC SITUATION

The Asian Economic Crisis

  1. We begin our reflection on the Asian economic crisis, the broad horizon against which we view our country’s economics. The economic turmoil that swept East Asia and Southeast Asia in 1997-98 has raised many questions about Asian economies and particularly about our own. Not the least of these is the question of morality. We begin with an analysis provided by reputable economic experts.
  2. In the beginning, some specialists explained that the crisis of 1997-98 revolved around the financial sector alone. However, it has become apparent that the credit crunch is affecting all firms, whether indebted or not. Moreover, behind the financial crisis, precipitated by the weakening of the Thai currency in July 1997 and leading to attacks on other currencies of the region, lie unhealthy banking systems that could not manage massive inflows of capital from abroad as the economies liberalized.
  3. Some wealthy individuals and corporations went on spending and borrowing sprees, spending on homes and consumer durable products, and bidding up land values in particular to unrealistic levels. As the crisis spread to Malaysia and Indonesia, with signs of serious problems in Japan and South Korea, many investors became concerned about the possible failure of major banks and other financial institutions. They lost their nerve and withdrew their investments in dollars. The value of local currencies collapsed and the serving of foreign debts and importing raw materials suddenly became prohibitively expensive.  Today in Japan economic recession has definitely set in, with increased possibilities of even greater negative impact on the rest of Asia.
  4. What is very disturbing is the knowledge that signs of economic slowdown were already evident all over East Asia since 1996. In retrospect, the occurrence of the crisis is not surprising and the impact of the crisis is disproportionately against the poor. That is a major moral aspect of the economic crisis. There is a human cost to the crisis which will be borne by the many even if the purely “financial” aspects are resolved, such as cases of unemployment, loss of incomes and diminished provisions of public services.
  5. The government has to consider seriously the criticisms of many reputable economists who say that its approach to the problem is exacerbating the human cost. Tight money policy, they say, causes high interest rates and leads to lower employment rates. High lending rates, supported by the Central Bank’s non-interventionist stance, will aggravate indebtedness causing firms to close shop and increase unemployment. Tight fiscal surplus targets cut back on social services. The much vaunted “exit” from the IMF is cosmetic, particularly during a crisis crippling all of East Asia.  However, from one angle it is a blessing in disguise that the Philippines is not as exposed to massive development assistance and cutthroat capital investments as Korea, Malaysia and Indonesia.
  6. But in all these, the poor and the marginalized are the last to be attended to. Our economy does not seem to have a human face. Let us reflect a bit more on this as we learn further about the pluses and minuses of our economy.

Reviewing the Philippine Economy 1

A Period of Moderate and Weak Growth

  1. From 1992 to 1996 the energy crisis was resolved and much needed infrastructure was put in place. Economic growth was sustained and moderate between 1993 and 1996, averaging 4.2 percent in GNP annually. Exports grew in dollar terms by an average of 15.4 percent annually in the period 1992-96. Inflation was under 10 percent and coming down. The investment rate rose over the same period and was improving. Per capita income passed $1,000 and the increase in durable sales suggested a growing middle class. Thus it seems that government policy had succeeded in promoting business activity and that this was reflected in a moderate reduction in the percentage of the population living below the poverty line, roughly from 39 to 35 percent by 1996.
  2. Yet there were weaknesses even then in “fundamentals and policies.” The GNP 4.2 percent average growth rate was well below the average for developing countries (6.3 percent) during the same period and more so for Asian developing countries (8.6 percent). This growth was not sufficient to permit people to recover their average incomes of 1981, the highest for the last two decades. Exports were becoming more concentrated in sectors that incorporate only limited domestic value added (raw materials and skills) and were being outpaced by the rising tide of imports. Saving, at 20.5 percent of GNP, was the lowest among the ASEAN member nations where the average was 30 percent or more. The manufacturing sector failed to take off. Its share in GDP had fallen from an average of 40 percent in 1980-85 to 35.7 percent in 1996 and its share of employment was down from 10.9 percent in 1980 to 10.2 percent in 1995. Moreover the short term foreign debts of the private sector had risen dramatically, amounting in June 1997 to 45 percent of total foreign liabilities. Finally, liberalized entry of foreign owned funds into our banking system made them vulnerable to capital flight.  There has been no reported hard and fast data on capital flight.  But we can reasonably presume that what has happened in other troubled Asian countries has also happened in the Philippines, aggravating the economic crisis even more.
  3. A 1998 U.S. State Department Report recognizes the disparity between the objectives of the government’s economic programs and its real effect on people’s lives. The report states:

The Government is implementing a far-reaching economic program, Philippines 2000,’ to convert its agrarian-based economy into an industrial,market-driven one and attract investment. The Government has succeeded in liberalizing the investment, trade, and foreign exchange regimes. Garments and electronics make up more than half of the merchandise export receipts and are significantly complemented by overseas workers remittances totaling over $4 billion in 1997. Gross domestic product grew at approximately 5 percent. While the government has accelerated market reforms, poverty and inequitable income distribution remain, and the Government’s ‘social reform agenda’ has made little progress. About 36 percent of the population of 70 million have difficulty meeting basic nutritional and other needs, while the richest 20 percent of families received incomes over 10 times that of the lowest 20 percent. Annual per capita national income was estimated at $1,142 for the first nine months of 1997″ (U.S. State Department, Report on Human Rights for the Philippines, 1997, January 30, 1998, p. 2).

  1. Meanwhile Government spending on the Human Priority Concerns such as basic education, basic health care and low-cost water supply averaged 10 percent of the National Budget in 1987-94, which is only half the level recommended by the United Nations Development Program (Philippine Human Development Report, 1997, pp. 45-46). Moreover, government social spending in general was both low by international standards and poorly targeted. An example would be the emphasis on college-level education while neglecting basic education. Another would be the subsidies for the price of rice, which are wasteful and do not target those most in need. Even the 20 provinces chosen for the Social Reform Agenda are not the most needy (see World Bank, A Strategy to Fight Poverty: Philippines, pp. 45-46, 57).
  2. At the same time, there has been “development aggression”` in the form of continuing destruction of our environment. Our forests are virtually gone. And now, international firms are concentrating on our mineral resources. Despite the lessons of Boac and Calancan Bay in Marinduque, the Mining Act of 1995 facilitates this aggression and is an added threat to the ancestral domain and cultures of indigenous peoples. The new Fisheries Act revises the Local Government Code by limiting even more the area available to small fisherfolk and expanding the area for big scale fishing. Such policies reinforce a widening belief that our national patrimony and sovereignty are being sold out to foreign interests. Further, we have yet to assess the full impact of the destructive El Niño phenomenon.

External Debt, OFW Remittances, and Corruption

  1. There is no doubt that one factor aggravating the financial crisis is our foreign debt. Our foreign debt in March 1997 stood at $42.6 billion – and rising2. The private sector accounted for the increase in borrowing, encouraged by the liberalization of rules in borrowing from abroad and the policy – misguided, some noted economists tell us – of fixing the nominal exchange rate. The debt service burden of U.S. $1.4 billion during the second quarter of 1997 increased by 67 percent in peso terms because of the peso devaluation. The whole idea of exiting from the IMF becomes an illusion and brings mixed blessings because of the need for emergency financing, especially during an economic crisis. Such a need ties the government’s hand vis-à-vis monetary and fiscal policies.
  2. Over the last few years, the country’s balance of payments registered a surplus but the surplus in current account has been largely due to OFW (Overseas Filipino Workers) remittances, dollar loans and speculative investments. Indeed ironic is the fact that OFW remittances, the fruit of the lack of employment opportunities in the country, would relatively provide the government with a rosy picture of the economic situation. But this is actually a symptom of a deeper economic weakness. Government has failed to provide jobs domestically and has failed to raise domestic savings, hence the foreign borrowing and the dependence on OFW remittances. The vagaries of OFW remittances, especially in the light of actual and possible loss of such revenue in the face of the Asian economic crisis, should not in any case serve as part of any permanent solution.
  3. We must also speak about the clearly moral problem of corruption. Some 11 years ago, we wrote a statement on this specific issue. We called corruption by its real name and entitled the statement: “Thou Shalt Not Steal.”
  4. Corruption is endemic. Corruption has weakened the path to economic growth. Let us take just one example of corruption. Vast amounts went to “pork barrel funding” of projects. Senators, congressmen and congresswomen chose projects often at the expense of national priorities and over-all planning. Records show that 55-56 percent of the Countryside Development Fund in 1993 and 1994 went to “economic services” such as roads and other infrastructure projects that are notoriously subject to kickbacks. Only 17-27% went to social services that directly benefit the poor.
  5. Every year mass media comes out with a listing of government offices most prone to corruption. The list does not seem to change year in and year out. Billions of pesos every year are lost through corruption.  This is especially so when the terrible vice of gambling is considered.  In its various forms, gambling fleeces the poor of hard earned money, erodes ethical values and corrupts government officials.
  6. Compounding the problem of corruption is the flagrant violation by legislators of the norms of conflict of interest and their membership on committees that deal with their own personal or family business interests. Distorted economic legislation thus weakens the whole system.
  7. Pope John Paul II himself has spoken about the evil of corruption. It undermines social and political development. It infiltrates many sectors of society and ignores the rules of justice and truth. “Courage is needed to denounce it. To eliminate it, together with the resolute determination of Authorities, the generous support of all citizens is needed, sustained by a firm moral conscience…. The fraudulent use of public monies penalizes above all the poor, who are the first to be deprived of the basic services essential for personal development” (World Day of Peace Message, January 1, 1998, no. 5).

Liberalization and Deregulation

  1. Critics of government have often played up serious objections to APEC (Asia-Pacific Economic Cooperation), GATT (General Agreement on Tariffs and Trade) and the WTO (World Trade Organization). As Bishops, we are not unaware of the ideological premises of the different sides of the debate and we tread carefully. We do not take sides on the basis of ideology. We make our critique in the light of our faith.
  2. Clearly the government has aggressively promoted neo-liberal capitalism in order that Philippine products could compete at a “world class level.” Cautiously we acknowledge the economic gains of liberalization. But seeing the disparities that it brings about we must seriously question the haste with which it has been embraced as dogma and implemented as policy. The Philippines as a developing country has very little leverage against powerful economies and economic institutions such as the IMF (International Monetary Fund), WB (World Bank), and WTO. The inability of the country to play as an equal on a highly unequal economic field underscores the immediate and unfair advantage that developed countries possess, especially in the agricultural field. The imbalance of exports and imports downplay the chances of leveling the field of play.
  3. We, therefore, ask the inevitable question: have not the hasty drive towards industrialization and the liberalized entry of foreign developers and investments into the country, compounded by the liberal infusion of vast amounts of borrowed foreign funds into our developing economy exacerbated, rather than eased, the economic situation? We ask this because some economists believe that the root of the present economic crisis goes back to 1992 when capital liberalization by the government encouraged foreign borrowing as speculative inflows. They state that Government did not distinguish types of investments nor did it select the areas of liberalization that provided development opportunities while protecting the rights of the poor or providing social safety nets. The policy has resulted in an even more shabby treatment of the poor.

Globalization

  1. Liberalization, deregulation, and privatization are instruments of the phenomenon of globalization. Obviously it is yet in the process of unfolding. We see many beneficial effects in the social, economic, and cultural fields. And yet we already see likewise the very dire consequences on a developing and battered country like ours. It is true that globalization widens “international flows of trade, finance and information in a single integrated market.” Its requirement is “to liberalize national and global markets in the belief that the free flows of trade, finance and information will produce the best outcome for growth and human welfare.” Globalization “is presented with an air of inevitability and overwhelming conviction. Not since the heyday of free trade in the 19th century has economic theory elicited such widespread certainty” (United Nations Development Program, Human Development Report, 1997 [UNDP HDR], p. 82).
  2. The United Nations Development Program reported that the rules of international trade are biased against poor countries. They do not level the economic playing field. “The Uruguay Round hardly changed the picture. Developing countries, with three quarters of the world’s people, will get only a quarter to a third of the income gains generated – hardly an equitable distribution – and most of that will go to a few powerful exporters in Asia and Latin America” (UNDP HDR, p. 85). The free flow of cheap labor has also become a product of globalization. The dire consequences of globalization impelled Pope John Paul II to call for “globalization in solidarity, a globalization without marginalization. This is a clear duty in justice…” (World Day of Peace Message, ibid. no. 3).
  3. Widening free flows of exchange and negotiations and the free forces of the market system do not automatically result in equality of distribution or quality of growth. While inequality may not be inherent in globalization, still poor and developing countries and poor people too often find their interests neglected in such overarching systems. As one example: “Since investment flows are usually tied up with transfers of technology, this means huge regions of the world being left out of the technological advance” (Ibid. p. 84).
  4. Ordinary people marvel at one truly dramatic dimension of globalization, namely, the information revolution. Unfortunately, information does not automatically translate into equality of opportunity and choices. The information highway is simply beyond the reach of the poor. Nagging questions of social inequality remain.

A Question of Development Models?

  1. Economic recovery will be slow and more painful than is yet popularly perceived. Not only is this a currency and banking crisis or a property bubble that must be weathered. More profoundly, the present economic situation, replicated in many other parts of Asia, has raised serious questions about the viability of development models. Already in 1995 questions were raised in Malaysia about a so-called “Asian” development model that has as core elements high economic growth sustained indefinitely, managed and/or guided by omnipresent government officials, financed by foreign debt and implemented by cheap labor. Moreover, Westerners denounced “Asian” values that they associate today with crony capitalism, widespread corruption, banking irregularities, and lack of transparency.
  2. On the other hand, the dominant “Western” model emphasizes free trade and encourages competition, especially under the umbrella of globalization. The idea is to produce higher and better quality returns than one’s competitors, to be open to foreign investments, protect property rights, liberalize regulations, privatize government business corporations and have minimal government intervention. Unfortunately, those countries that had rushed to embrace this model have suffered most in the crisis.
  3. Yet it is clear that the best examples of the Asian model, Hong Kong and Singapore, topped the world in the 1997 Index of Economic Freedom by the Heritage Foundation and Wall Street. There is indeed an “East Asian miracle” which got the “basics” right. These include low inflation, high levels of domestic saving, heavy investment in education and openness to foreign technology. Experts tell us that East Asian economies have been mixing the formula of Asian values and market capitalism and have been reaping considerable success.
  4. Still, many economists claim that development models be they Western or Asian, with their variants and combinations, tend to produce the same inequality of income, growth disproportionately against the poor, persistence of poverty and increased possibilities of social conflict. “Trickle down economics”, another name for “growth economics” inevitably creates inequality of income and wealth. We have yet to see a version of what some economists call “trickle up economics” where the fruits of economic growth are universally and equally shared. In the final analysis present development models are based on a vision of society that remains materialistic if not consumerist.

PART II: TOWARD DEVELOPMENT WITH A HUMAN FACE –
THE SOCIAL TEACHINGS OF THE CHURCH

  1. Can there be economic development with a human face? One that takes the plight of the poor as a primary consideration, ensures that the benefits are shared equitably by all, and removes the economic gaps and imbalances of society, so that social justice may be genuinely achieved?
  2. As Bishops we cannot provide a blueprint as an answer to this overriding question. Nor can we provide technical solutions to the many complex problems of the economy. Those are not our tasks. Our task is to provide the moral principles that should be used as a framework of reflection on economic issues. These moral principles consist of the social teachings of the Church. Emerging from the Sacred Scriptures, from the religious traditions of the Church, and from the interplay of moral theological reflection and social situations, the social teachings of the Church provide “principles of reflection, criteria of judgment, and directives for action” in the social order [Paul VI, Octogesima Adveniens (1971); John Paul II, Sollicitudo Rei Socialis, 8 (1987)]. They guide us towards moral conduct.
  3. We, therefore, wish to present and apply the main elements that guide moral reflection on the economic situation.

The Centrality of the Human Person and Human Solidarity

  1. The subject as well as the aim of development is the human person, an individual as well as a social being, characterized by freedom, responsibility, and human rights.  The human person is “the subject of rights which no one may violate – no individual, group, class, nation or state” (Centesimus Annus [CA], no. 44). Born into a family and innately related to society, the person is in need: of personal development, of many “common goods” (peace and order, the rule of law, educational and cultural resources, an efficient economy, a clean environment, etc.). Neither the individual nor the family can unaided provide such goods for themselves. Society and community are supportive, subsidiary entities for the individual and the family, not the arenas for struggle of all against all.
  2. What are some of the concrete implications of this moral principle regarding the centrality of the human person in economic development? In our present situation, the principle would certainly be one moral basis to denounce the threat to persons and to whole communities posed by mining explorations, dams, hydroelectric and geothermal plants, and other development projects. These are admittedly meant for the good of the people but so many cases from the experience of poor peoples inform us that only lip service is given to environmental protection and security of lands and domiciles. Invariably, the right of people to participate, or at least to be consulted, in decisions that affect their homes and their land – in sum, their lives – is ignored.
  3. On the other hand, solidarity is the key social virtue, based on human dignity and the interdependence among individuals and social groups, including nations. It is a positive answer to the question posed by Cain in the Book of Genesis, “Am I my brother’s keeper?” Through solidarity, it is possible to recognize one’s neighbor not only as “a human being with his or her own rights and a fundamental equality with everyone else.” One’s neighbor “becomes the living image of God the Father, redeemed by the blood of Jesus Christ, and placed under the permanent action of the Holy Spirit” (Sollicitudo Rei Socialis [SRS], no. 40). Solidarity “is not a feeling of vague compassion or shallow distress at the misfortunes of so many people, both near and far. On the contrary, it is a firm and persevering determination to commit oneself to the common good; that is to say to the good of all and of each individual, because we are all really responsible for all ” (SRS, no. 38). Pope John Paul applies the virtue of solidarity to the relationships between individuals, between communities, and between nations. He also applies it to the responsibility of the more powerful to assist the weaker.
  4. We extend this responsible solidarity to gender awareness.  The lack of gender awareness in development policies and in political processes means that men and women must live in an unequal world.  Society does not necessarily nor spontaneously provide equal opportunities for men and women to make choices.  The challenge is to foster gender equality and shared partnership between women and men as agents and beneficiaries of development (Philippine Human Development Report 1997). Commitment to the common good means women and men are equally responsible for their development and solidarity applies to relationships between men and women.  It is our contention that the development process will dramatically change for the better when women and men are equally represented and responsible for the common good of society.
  5. What are some concrete implications of this principle on our present situation?
    1. Because of the principle of solidarity any economic development that would widen rather than reduce the gap between rich and poor would have to be denounced.
    2. We would have to reject any form of economic “imperialism” and “neo-colonialism” by which rich and powerful countries (democratic, socialist, or totalitarian) or transnational corporations can dominate or exploit the economies of developing countries and leave them in abject dependency.
    3. The principle would call various sectors of society to respond in united solidarity action to any social, political, cultural, or economic evil.
    4. Women ought to participate more and be given equal roles in the economic and political processes.

Option for the Poor

  1. Option for the poor is one specific form of solidarity. In the Old Testament, it is manifested in the way God loved and defended the poor. It is most eminently demonstrated in the New Testament in the example of our Lord Jesus Christ, who became poor so that we might become rich with his grace and his life. In Jesus’ compassion for the poor, in announcing the Good News to them, in his life and actions for the poor, this preferential love for the poor is clearly manifest. He demands it of all his disciples. “Whatever you do to the least of my brethren, you do it to me.”
  2. Many are the concrete implications of this moral principle on our present situation.
    1. Action for the victims of drought, typhoons, earthquakes and other national disaster, active concern for the unskilled and the unlearned, creation of job opportunities for the unemployed, investments with orientation to the poor even at some sacrifice regarding profit, more liberal loan and repayment conditionalities for poor countries and poor peoples – such are some examples.
    2. An even more immediate and concrete example is option for the poor as one of the moral principles governing the issue of allowing and determining price increases of oil and basic commodities. This would mean reducing profits derived from basic commodities for the sake of the poor.
    3. In the light of the principles of human dignity, human solidarity and option for the poor, we condemn the greater marginalization of the poor those results from the phenomenon of globalization.
    4. In the case of OFWs , the same ethical principles enjoin more prosperous nations to welcome and protect foreigners in search of security and  livelihood which they cannot find in their poor countries.  Our own government would have to create safety nets due to real threats of massive job retrenchment abroad. In the meantime a more serious effort would have to be made so as to reduce or altogether prevent abuses against and exploitation of OFWs abroad.

The Universal Purpose of Created Goods and Private Property

  1. The first basic principle of property is the biblical truth that God created the earth and its natural resources for the good of all, to be fairly shared and enjoyed by all. This is the fundamental reason why the right to private property, as a natural right and an extension of human freedom, has a basic social orientation. The Church teaches that there is a “social mortgage” on property, that ownership rights are not absolute but subject to the common good (Gaudium et Spes [GS], nos. 69-71; SRS, no. 45; CA, no. 30).
  2. From this common purpose stem other principles like equitable distribution, the use of productive property for the common good, the duty to preserve the environment and responsibly use the natural resources with which the Lord has endowed us (CA., no. 37).
    1. In our Philippine situation such principles would certainly reject situations like the continuing concentration of economic power in the hands of a few, particularly oligopolies; the pervading presence of absolute poverty; the flight of financial capital especially in times of national crisis; and legislation that sacrifices the good of the many in order to preserve the vested interests of the few.
    2. The same principles would mandate the ethical directions that businesses and investments should take: Create jobs in the local market, open to the public ownership of corporations, especially those related to our natural resources, and invest in the rural and poor areas for the sake of the poor, even when profits are less.

Work, Productivity, and Productive Efficiency

  1. The human person has received from God the vocation to work. Through human work the person shares in God’s productive activity, makes of the world a true home for humanity. By work the person aims at perfection and becomes “more a human being” (Laborem Exercens [LE], no. 9). Work includes today the “ability to foresee both the needs of others and the combinations of productive factors most adapted to satisfying these needs” (Centesimus Annus [CA], no. 32).
  2. This means know-how, technology and skills. On the possession of knowledge, technology and skill, productive efficiency depends. Modern economies are based much more on these than material resources3.
  3. Precisely because of the nature of work, a new kind of poverty has emerged: the lack of know-how, technology and skill, including entrepreneurial skills. As Pope John Paul II has observed:

The fact is that many people, perhaps the majority today, do not have the means which would enable them to take their place in an effective and humanly dignified way within a productive system in which work is truly central. They have no possibility of acquiring the basic knowledge that would enable them to express their creativity and develop their potential. They have no way of entering the network of knowledge and intercommunication that would enable them to see their qualities appreciated and utilized. Thus, if not actually exploited, they are to a great extent marginalized; economic development takes place over their heads. They are unable to compete against the goods which are produced in ways which are new and which properly respond to need, needs which they had previously been accustomed to meeting through traditional forms of organizations (CA, no. 33).

  1. At this point, we need to highlight and denounce the exploitation of children in the labor field.  Forced by poverty to abandon schooling, they are pressured to help support their families through various forms of work, in workshops and on the streets, work that is beyond their years, exploits them for cheap labor and inhibits their normal growth as persons.
  2. These observations on work, production and productive efficiency have significant implications on development priorities. Three clear examples arise.
    1. Budgets for education should not be sacrificed for other services. The government must help struggling private non-stock and non-profit educational entities that are rendering good education. Based on an integral understanding of reality, education should emphasize a personal development that is functional and relevant to the increasing demands of know-how, technology and skills.
    2. On the other hand, rural development must not be sacrificed for nor play second fiddle to industrial development. We have yet to see a government that will balance the urban and rural development scheme.
    3. The laws on the rights of children and on child labor must be improved and forcefully implemented.

Land and Agrarian Reform

  1. It is often said that agrarian reform is the centerpiece of the government’s development plan. Such intent commendably conforms to the social teachings of the church on land and agrarian reform. While in industrializing countries, the ownership of knowledge, technology and skill is becoming more important than land, for most of the developing countries land is still central. Unfortunately, in many cases “those who cultivate it are excluded from ownership and are reduced to a state of quasi-servitude” (CA, no. 33).
  2. The fundamental principles governing land are the principles of the universal purpose of created goods and the right to private property, understood especially in its social dimension. The church strongly criticizes the two-tiered system of land distribution that prevails in many developing countries, with a “small number of large landowners possessing most of the arable land, while vast numbers of very small owners, tenants and settlers farm the remaining land, which is often of inferior quality” (Pontifical Council for Justice and Peace, “Toward a Better Distribution of Land”, Rome, 1997, no. 4; the same document goes on to analyze both the dynamics that have crated this situation and its negative impact on development efforts, nos. 6-21).
  3. In the Philippines, it is most unfortunate that the Comprehensive Agrarian Reform Program (CARP) has been watered down from the beginning, e.g., as to retention limits and exemptions, because government, dominated as it is by landowners, lacked the political will to pass a law that would be truly meaningful to tenants long in bondage. The recent amendments to the Agrarian Reform Program reflects the slowness to implement even the watered down version because of landowners’ resistance. The interests and welfare of the poor continue to take the last seat.
    1. The above moral principles lead us to denounce the concentration of land ownership in the hands of a few and the ownership of excessively large estates.
    2. We also strongly urge and support a more genuine redistribution of land and a truly comprehensive reform program with the necessary support services for new farmer owners.
    3. We support all NGOs and farmers’ groups that press the government for a more genuine agrarian reform in accord with the Church’s social teachings.

Priority of Labor over Capital, Workers Rights over Profit.

  1. Pope John Paul II emphasized one of the most significant social teachings of the Church in his 1981 social encyclical, Laborem Exercens:

“…we must first of all recall a principle that has always been taught by the Church: the principle of the priority of labor over capital. This principle directly concerns the process of production: in this process labor is always a primary efficient cause, while capital, the whole collection of means of production, remains a mere instrument or instrumental cause. This principle is an evident truth that emerges from the whole of man’s historical experience” (LE, 12).

  1. Capital then is only an instrument in the hand of the person who works. As an instrument it must serve the common good. The great “workbench” that we call capital is itself the product of the natural resources created by God and given for the use of all and transformed by human labor. The worker receives a double inheritance: from the Creator and from workers who have gone before. Capital is the heritage of all who work; hence neither the master of “labor” nor its opponent but its servant (see LE, 13).
  2. A necessary corollary to this social teaching is the truth that the means of production “cannot be possessed against labor.” The “only legitimate title” to the private and collective possession of the means of production is “that they should serve labor.” By serving labor, the means of production would thus comply with the first principle on the universal destination of goods and the right to the common use of them” (LE, no. 14).
  3. As a consequence, maximum profit must not be the chief motive of the economic enterprise. The legitimate role of profit is recognized; it is a sign of the health of a business. But it is not the only sign. “It is possible for the financial account to be in order and yet for the people – who make up the firm’s most valuable asset – to be humiliated and their dignity offended.” In fact the purpose of the firm is not simply to make a profit but to serve the community of persons that it should be and serve the whole of society (CA, no. 35). Further, the respect for the objective rights of workers “must constitute the adequate and fundamental criterion for shaping the whole economy” (LE, no. 17). This is why “in every case, a just wage is the concrete means of verifying the justice of the whole socioeconomic system and, in any case, of checking that it is functioning justly” (LE, no. 19).
  4. In the light of the above, serious questions have to be raised on the basic attitudes of businesses regarding labor unions, collective bargaining and just wages in terms of “family living wage,” working conditions and retrenchment of workers, to name a few. The first community of persons that the firm must serve should be its own workers – from its executives down to the line production laborers. If so, then why must the just wage be so sensitive an issue? Like company executives, are not laborers entitled to wages commensurate to their work that includes benefits for those with families?
  5. It has been a consistent teaching of the Church that workers should share in the profits of the corporation where they work and be given opportunities for participation in ownership. This is so because they work towards the accumulation of more capital for the corporation. Hence, they need to share in the profit of the firm as owners themselves. The sad part is that foreigners with their capital in the form of cash outlays or borrowings are entitled to ownership while the Filipino laborers with their human labor at hand and the cash they receive in wages are relegated to cheap labor.
    1. In the light of the above principles, labor and capital must work in solidarity toward creating a real “community of persons” rather than be adversaries in the achievement of their respective welfare and of the common good.
    2. We reiterate what we have already said often in the past that it is a fundamental and serious injustice for management to stifle the right of workers to organize themselves into unions. On the other hand, unions should not simply be inward looking, defending their own interests even at the expense of the common good.
    3. We urge business firms to implement some form of profit sharing with their workers. Members of the Bishops-Businessmen’s Conference should take a leading part in implementing this social teaching of the Church.
    4. Likewise our own church institutions must ensure that church workers receive just wages.

The Market System and Some Specific Tasks of the State

  1. After the collapse of socialism in Eastern Europe many began to believe that the capitalism of the West with its free market system has finally emerged totally victorious. This is not the thought of the Church. The Church continues to speak of the dangers of a “radical capitalist ideology” that is “unconcerned about marginalization and the exploitation of the weak” (CA, no. 42). Pope John Paul II speaks of situations in the developing nations “in which the rules of the earliest period of capitalism still flourish in conditions of ‘ruthlessness’ in no way inferior to the darkest moments of the first phase of industrialization” (CA, no.33; interestingly, see in this regard, UNDP, HDR 1997, p. 8).
  2. The truth is that the Pope’s words regarding the free market are cautious: “It would appear that, on the level of individual nations and of international relations, the free market is the most efficient instrument for utilizing resources and effectively responding to needs” (CA, no. 34). Yet he goes on to say: “But there are many human needs that find no place on the market. It is a strict duty of justice and truth not to allow fundamental human needs to remain unsatisfied and not to allow those burdened by such needs to perish (Loc. cit.).
  3. The social teaching on the inadequacies and limits of the free market calls into question the imposition of a predominant neo-liberal capitalism on the countries of the world in the name of globalization. Developing countries like the Philippines do not have much choice but to give in hastily to liberalization and deregulation when faced by possible sanctions from economic superpowers. But precisely in such situations is the role of the State so necessary. As Pope John Paul II has pointed out: Capitalism must be “circumscribed with a strong juridical framework which places it at the service of human freedom in its totality and which sees it as a particular aspect of that freedom, the core of which is ethical and religious” (CA, no. 45). The Pope refers particularly to the marginalization and exploitation of the poor that result from the unbridled operations of the free market.
  4. In our present situation, the following tasks of the State are urgent:
    1. To guarantee individual freedom and private property, as well as a stable currency and efficient public services. The absence of such stability as well as the corruption of public officials and the possibility of easy profits from illegal and purely speculative activities are major obstacles to development;
    2. To sustain business activity by creating conditions that will ensure job opportunities, without regulating all of economic life and restricting human freedom and initiative unduly;
    3. To intervene when particular monopolies create delays or obstacles to development and to take over, temporarily, activities that the private sector is not yet ready to handle competently, as the principle of subsidiarity would enjoin;
    4. To act with special consideration for the poor by placing certain limits on the autonomy of the parties who determine working conditions and by ensuring in every case the necessary minimum support for the unemployed worker (see CA, no. 15).
  5. The clamor today for the government to dismantle all kinds of cartel, to prevent price increases, to enact laws that are truly for the common good, to establish safety nets, to create job opportunities, to set up safeguards for OFWs, to stabilize the currency and act against currency speculators are clear signs of public perception that the government may not be doing its job well in overseeing the processes of liberalization and deregulation.

The Role of International Agencies

  1. The UNDP Human Development Report of 1997 has indicated that the marginalization of poor nations because of the increased internationalization of the economy has taken place. The economic benefits promised to the poor by globalization are real in many instances. But the Report observed that liberalization “has been accompanied by greater inequality, with a falling share of income for the poorest 20 percent as in several Latin American countries” (UNDP HDR, p. 89). Further, the Report states: “Even less certain than globalization’s benefits for poor countries are its benefits for poor people within countries” (ibid., p. 87).
  2. While the immediate responsibility to prevent catastrophe from taking place in the Philippines rests with the government, international agencies must play an effective and significant role. In many circles of the developing world, the World Bank, International Monetary Fund, and World Trade Organization are increasingly being criticized as instruments of economic domination by superpowers. While not all criticisms may be valid, the dominant influence of such international agencies not only in the economic but also in the political order should require them to level the playing field for all and guarantee fairness and equity in the rules of the game, with option for the poor as a deciding factor. At present this is not the case. Already in 1991, Pope John Paul II recommended that:
    1. The interests of the whole human family be represented in international agencies that oversee and direct the economy to the common good;
    2. “It is also necessary that in evaluating the consequences of their decisions, these agencies always give sufficient consideration to peoples and countries that have little weight in the international market but which are burdened by the most acute and desperate needs and are thus more dependent on support for their development” (CA, no. 58).
  3. It is in the light of the above and in the light of the Asian economic crisis that we likewise need to re-examine the role of ASEAN and APEC, as they impact on the lives of the poor.

The Prophetic Role of the Church vis-à-vis Globalization

  1. It has always been the role of the Church to be a prophet, announcing and teaching the message of God, a message that is primarily religious and ethical, but with profound cultural, political, social and economic implications.
  2. When Pope John Paul II spoke in 1991 of a “radical capitalist ideology,” unconcerned about marginalization and exploitation of the weak, he could well have been anticipating the current situation in the Third World and in the Philippines.
  3. The realization of the Pope’s prophetic words is found in the UNDP Human Development Report of 1996. It speaks of: jobless growth, without new opportunities for employment; ruthless growth, benefiting mainly the wealthy; voiceless growth, without extension of democracy or empowerment; rootless growth that causes cultural identities to wither; futureless growth that destroys the environment. All of this quite contrary to the experience of countries which have rapidly reduced the percentage of poor in their population by focusing on improving the health and skills of the poor and promoting a type of development which utilizes their most abundant asset, i.e., their labor, and this particularly in the rural areas where most of the poor are, and at the same time reduces inequality of income (see UNDP HDR, 1996, pp. 6-7).
  4. The prophetic call of the Church is: “Globalization without marginalization; globalization in solidarity” (cf. Pope John Paul II, Message on World Day of Peace, January 1, 1998). It is a call for the defense of the weak in the Third World in the face of a global process, seemingly unrestrained by any other rules than those of the market, and attracting unscrupulous devastating speculative attacks on weak currencies in the name of profit. With the WTO acting as worldwide extension of “free market” we are presently witnessing the uncontrolled power of the multinational corporations, the fund managers, the global market and stock exchanges. It is reported that daily foreign exchange flows amount to around one trillion dollars . These do not have much relationship to services or investments. In fact the global market has become a global arena for unconscionable currency speculation, whose destructive effects the Philippines is now suffering. Sadly, governments profess relative inability to control these movements.
  5. In a word, freedom in the economic sector is not, in our experience “circumscribed within a strong juridical framework which places it at the service of human freedom in its totality…” (CA, no. 42). Neither is the principle respected that private property is secondary to the universal destiny of created goods, and surely not the priority of labor over capital, or of workers’ rights over profits. Even less considered is the virtue of solidarity with special preference for the poor. Our concern for NIC-hood has been allowed to override all other considerations.
  6. At a deeper level, we see a problem that seems to be inherent in globalization. Globalization is essentially an economic ideology with a set of policies and practices that intends to create global economic interdependence. At the present time its direction seems to be unadulterated laissez-faire capitalism, with the underpinning principle, rather deterministic, that market forces if left to themselves will automatically work for the good of humanity. In practice the concrete implication and result are a reversal of the ethical order of reality, the subjection and subordination of the human person to market forces and objectives. This we must prophetically denounce in the light of the social teachings of the Church.
  7. Hence the Church must play a prophetic role in the economic order. The Church must not be unaware of the vast potential for good that a redirected globalization carries, but not blind either to its ideological materialistic underpinnings and its dire consequences on peoples and their cultures.

A Caring Economy – Development with a Human Face

  1. For the Church, socialism and capitalism are not the only alternatives. In the struggle against an economic system understood as “a method of upholding the absolute predominance of capital, the possession of the means of production and of the land in contrast to the free and personal nature of human work,” the church offers a vision of “a society of free work, of enterprise and of participation.” Such a society “demands that the market be appropriately controlled by the forces of society and by the State so as to guarantee that the basic needs of the whole society are satisfied” (CA, no. 35).
  2. Admittedly this vision is not at all a concrete economic model. It is simply the ideal orientation expressed in the Church’s social teachings for the reconstruction of the social order (CA, no. 43). We might call the economy and the development that such a vision requires as a caring economy and development with a human face.
  3. Does this vision, based on the social teachings of the Church, point to an alternative model of development? Certainly it does, since present models of development, be it socialist or capitalist, are materialistic. Some alternative directions would be the following: both access to and ownership of economic capital and production have to be dispersed and should not entirely remain in favor of the owners of monetary institutions, well-established landlords and politicians. A key concern is to be responsible for the natural resources and economic means of production and to have the leadership qualities to exercise this responsibility. Ownership of land and other means of production would have to be a shared responsibility for the common good. Such an idea is nothing else but what the church calls responsible stewardship of the goods God himself has given.
  4. This thinking on an alternative model has already been brought forward through such instruments as the Human Development Index of the United Nations Development Program. The focus is on meeting basic needs and having human measurements and standards as a basis of judging growth. The human person – the subject and aim of development – really becomes central in such reckoning. Fortunately NGOs in the Philippines such as the Philippine Human Development Network (PHDN) are rethinking development models along the same lines. Other NGOs have helped develop an alternative development program, “The Philippine Agenda of Development for the 21st Century.” Such efforts towards “a caring economy and development with a human face” should be encouraged and supported by other members of civil society as well as by the government.

The Prophetic Role of the Laity in the Economic Order

  1. While the entire Church (clergy, religious, and laity) has the mission to renew every aspect of human life in accordance with the Gospel, it is the specific vocation of lay people to renew the temporal order, including economics. “By reason of their special vocation it belongs to the laity to seek the kingdom of God by engaging in temporal affairs and directing them to God’s will…” (Lumen Gentium , no. 31). Hence they have to renew economic life with the values of the Gospel and of the Kingdom of God, which are authentically human values, such as integrity, justice, equity, service, preferential option for the poor, responsible stewardship.
  2. They fulfill their vocation best by assuming a prophetic role in word and deed. In word, for example by encouraging business leaders to adhere to the principles that truly promote the economic good of all (such as those that we have explained above); in deed, by faithfully practicing in their own business life those same principles, courageously resisting the pressures of an unbalanced economic structure to succumb to its evil demands.
  3. Most business people, politicians, landlords and other power-wielders are Christians, even Catholics. Some breast-beating is necessary for all of us to acknowledge our own failures in bringing our economy down to what it is today with all its “structures of injustice.” But we do have the power of our faith to help renew not only our own economic life but also the structures that we have built. Once again, lay people have the all-important task of leading society and the Church in this mission of renewal.
  4. We emphasize the fact that the prophetic word of the Church to the economic order is not merely about economic production or juridical or social organization. It is about solutions that call for “ethical and religious values, as well as changes of mentality, behavior, and structures” (see CA, no. 60).

PART III: RECOMMENDATIONS FOR CONFRONTING THE SITUATION

  1. The analysis that we presented in Part I indicated that the current crisis has its roots in our financial institutions, whence it has spread to other aspects of the economy. At the same time, it indicated that the economy as a whole had long suffered from orientations and policies that enhanced the welfare of the wealthy at the expense of the poor.
  2. While leaving the technical solutions and the management of the financial crisis to experts, we as Bishops call for a reorientation of general economic policy in favor of the poor, in other words that we do more than get the economy back onto the same old tracks. Despite the defects of our political system, experience indicates that it is permeable; when civil society and public opinion carefully work out their proposals and push them with persistence, they can effectively influence government policies. We, therefore, emphasize here some of the doables.
    1. We reiterate one of the important decrees of the second Plenary Council of the Philippines. It is the task of social action to “set up special programs to address such crucial issues as peace and economy, agrarian and industrialization concerns, the exploitation of women and minors and overseas workers, children and youth, and intensify the organization of the grassroots people or empowerment and self-reliance through cooperatives and livelihood programs and projects” (PCP-II, Art. 23, #1).
    2. We should facilitate domestic saving and increase access to credit by supporting the microsaving and microfinance activities of the poor and by linking them to formal savings and credit institutions (see World Bank, SFPP, Annex B, “Microfinance in the Philippines,” pp. 62-65).  Such access to credit by the poor should be facilitated by interest rates within their reach.
    3. In the light of the principle of subsidiarity, the government should support, rather than penalize, the informal economy of small independent producers and sellers; this is the real safety net of the poor. It not only provides livelihood but also contributes substantially to the GDP.
    4. Safety nets should be well targeted on the most vulnerable groups; likewise the Social Reform Agenda must be better targeted.
    5. Increase rather than reduce investment in human development – health and education; evaluate the privatization of health and welfare services before going further; focus on public education resources on improving grade-school education, rather than on turning out more law and commerce graduates.
    6. Rural development and food security must be ensured as further industrialization is promoted. Genuine cooperativism and the establishment of cooperatives among the poor should be encouraged and supported without any political patronage so that efficiency, productivity, and self-reliance at the grassroots level could be achieved.  Agrarian Reform must be pushed forward resolutely, decisively, and rapidly.
    7. In line with the example of the early Christian communities, widespread sharing of resources must be practiced, as in the program of Alay Kapwa, in small communities, and at the level of parishes and dioceses.
    8. As a sign of goodwill, legislators must give up their Countryside Development Funds and their membership in legislative committees that involve conflict of interest on their part.
    9. Monopolies and control of business through franchises and control of choke points should be eliminated.
    10. Revise the tax system, particularly the assessment of land taxes. Low taxes on land, particularly underdeveloped land, encourage speculation and push prices out of the reach of the poor. Check the discretion of land assessors and eliminate alleged corruption in the Bureau of Internal Revenue.
    11. Restore people’s confidence in the system by greater transparency.
    12. Equal opportunities, responsibilities and participation in development must be given to women.
    13. R.A. 8042 on OFWs should be fully implemented; the government should create a fast and effective mechanism for OFWs to invest in the Philippines, thus generating more development for the country and creating domestic alternatives to migration.
    14. Encourage a culture and work ethic that prizes competence, efficiency, and production as the key to success, and support this with appropriate reward structures.
    15. Partnerships for change among all agents of society should be established – trade unions, the media, community groups, private companies, political parties, academic institutions, professional associations – the groups which Catholic social thought has long insisted on as “intermediary groups” (e.g., CA, no. 13). Pope John Paul II called for a “social pact” among such groups (Message to the Philippine Ambassador to the Holy See, 1990). Finally, the UNDP HDR, 1997, points to the need for ” an enabling and responsive state” which will promote participation and encourage public-private partnerships while itself being transparent and accountable and resisting pressures from the economically powerful (HDR, p. 94).
    16. Work at the international level for the establishment of a rule of law there which goes beyond the rules of the market place and protects the poor and the weak – as progressive nations have already done with their domestic economies.
    17. Work at the international level for the reduction or even cancellation of external debts in accord with the Jubilee norms of Leviticus, as suggested by the Apostolic Letter of Pope John Paul II, Tertio Millennio Adveniente, no. 51; this idea is also being followed up at the international level by the Pontifical Council for Justice and Peace, Rome.
    18. Finally a deep and participatory assessment of and investigation into the type or model of development the government wants to pursue should be conducted, particularly as it impacts on the poor. This includes, in particular, economic policies on liberalization and deregulation, relationships with the WTO, IMF, and World Bank. The efforts of various NGOs in search of a more caring development model should be encouraged and supported.

Conclusion

  1. Economically the next few years will still be very rough for countries like the Philippines. There does not seem to be any economic miracle in sight. Even now the more the powerful Asian economies, like Japan and China, are faltering – with dire consequences for our country. The time for economic austerity is long overdue. The celebration this year of the centennial of our political independence from Spain surely means for us more than just a patriotic look at the past. It must impel us to have a vision of the future, a vision of genuine political and economic independence, even in an economic global village.
  2. The message that we wish to give in this critical look at our economy is this: only when economic relationships, policies,  programs, and structures are thoroughly infused with moral principles that put the face of God and the many faces of the poor into the picture,  only when we as a nation shall do away with greed, selfishness,  unhealthy competition, and the concentration of power and wealth in the hands of the few  will true economic development take place. This should be development with a human face.
  3. For this to be realized, solidarity must be forged among ourselves, but especially with the poor. Such solidarity must likewise be international, among First World and Third World countries. We need to recognize what globalization with solidarity ultimately means, namely, the unity under God of the one human family where there should be no exploitation,  no impoverishment, and no injustice; where the goods of the earth and the benefits of development are fairly distributed. This vision is nurtured by Christian hope, which assures us that in the end good will triumph over evil, life over death, love over hatred, generosity over greed.
  4. It is also Christian hope that convinces us that, though the years ahead will be years of the Cross, years of struggle and sacrifice, with the grace of God the Filipino shall prevail.

For the Catholic Bishops’ Conference of the Philippines:
+Oscar V. Cruz, D.D.
President

July 10, 1998

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