Another neoliberal policy, financial liberalization, crushed this early promise. The elimination of foreign exchange controls and speculative investment restrictions attracted billions of dollars from But this also meant that when panic hit Asian foreign investors in summer , the same lack of capital controls facilitated the stampede of billions of dollars from the country in a few short weeks.
This capital flight pushed the economy into recession and stagnation in the next few years. The administration of the next president, Joseph Estrada, did not reverse course, and under the presidency of Gloria Macapagal Arroyo, neoliberal policies continued to reign.
Over the next few years, the Philippine government instituted new liberalization measures on the trade front, entering into free-trade agreements with Japan and China despite clear evidence that trade liberalization was destroying the two pillars of the economy: industry and agriculture.
Radical unilateral trade liberalization severely destabilized the Philippine manufacturing sector. The number of textile and garments firms, for instance, drastically reduced from in to 10 in recent years.
As one of Arroyo's finance secretaries admitted, "There's an uneven implementation of trade liberalization, which was to our disadvantage. During the long Arroyo reign, the debt-repayment-oriented macroeconomic management policy that came with structural adjustment stifled the economy. With percent of the national budget reserved for debt service payments because of the draconian Automatic Appropriations Law, government finances were in a state of permanent and widening deficit, which the administration tried to solve by contracting more loans.
Indeed, the Arroyo administration contracted more loans than the previous three administrations combined. When the deficit reached gargantuan proportions, the government refused to declare a debt moratorium or at least renegotiate debt repayment terms to make them less punitive. At the same time, the administration did not have the political will to force the rich to take the brunt of bridging the deficit, by increasing taxes on their income and improving revenue collection.
Under pressure from the IMF, the government levied this burden on the poor and the middle class by adopting an expanded value added tax EVAT of 12 percent on purchases. Commercial establishments passed on this tax to poor and middle-class consumers, forcing them to cut back on consumption.
This then boomeranged back on small merchants and entrepreneurs in the form of reduced profits, forcing many out of business. The straitjacket of conservative macroeconomic management, trade and financial liberalization, as well as a subservient debt policy, kept the economy from expanding significantly. As a result, the percentage of the population living in poverty increased from 30 to 33 percent between and , according to World Bank figures.
By , there were more poor people in the Philippines than at any other time in the country's history. Many countries in Latin America, Africa, and Asia saw the same story unfold. Taking advantage of the Third World debt crisis, the IMF and the World Bank imposed structural adjustment in over 70 developing countries in the course of the s.
Trade liberalization followed adjustment in the s as the WTO, and later rich countries, dragooned developing countries into free-trade agreements. Because of this trade liberalization, gains in economic growth and poverty reduction posted by developing countries in the s and s had disappeared by the s and s. As government revenues decline through leakage brought on by corruption, public funds for poverty programs and programs to stimulate growth also become more scarce.
Gupta et al. Countries with higher corruption tend to have lower levels of social spending, regardless of level of development. Corruption lowers tax revenues, increases government operating costs, increases government spending for wages and reduces spending on operations and maintenance, and often biases government toward spending on higher education and tertiary health care rather than basic education and primary health care.
Adverse Effects Of Corruption Petty corruption for the provision of public services is an experience of everyday life: the money slipped to the bureaucrat for the issuance of a new identity card, the unofficial payment to get the family planning pills which should be distributed free of charge at the hospital, or the occasional bribe to the policeman to avoid harassment.
While this sort of corruption affects society as a whole it is the poor who suffer from it most. Corruption eats into an already tight budget and extra expenditures mean cuts in other basic needs areas. Empirical analysis has shown that the poor pay a higher share of their income on bribes than the rich.
The burden corruption places on the poor gets aggravated by the fact that they are more dependent upon public services than the rich.
The effects of the various faces of corruption are not merely financial. They may also be profoundly economic, moral, and social. If a policeman or teacher takes advantage of his position to extract bribes it harms their reputation and relationship of trust, destroying social capital and decreasing moral standards. Over time, people become lazy in following correct procedures, too many things are solved by bribing. Property rights are often not well established and access to courts depends on the power of the purse.
Indirect Effects Of Corruption Corruption and poverty are linked through many indirect channels. Consequently, since corruption negatively affects economic growth, higher growth in corruption is associated with lower income growth of the poor.
Corruption also affects the way money is allocated within the state budget, diverting expenditures away from less lucrative sectors such as health and education to high kickback areas such as construction. Spending on operations and maintenance may also be squeezed out in favor of new projects, leaving existing roads, hospitals and other public infrastructure to decay. Lack of precision in public expenditure planning can create opportunities for corruption and diversion of funds.
At the same time, clearly allocated expenditures may never reach the intended recipients — a major source of deprivation to poor people. While this corruption hurts society in general it hurts the poor most since they are more vulnerable and dependent on the quality of governance and state support. Corruption also feeds inequality. Inversely, empirical analysis suggests that good governance reduces poverty while improving or, at a minimum, not worsening inequality. Corruption on the part of public and private sector actors facilitates market failures, which can generate and perpetuate income equalities.
Most countries in Latin America, Southeast Asia and Sub-Saharan Africa present highly unequal income distributions along with elevated levels of corruption. When corruption occurs in the economy, breakdowns and abuses are often attributable to the inadequate regulatory and anti-corruption frameworks used by governments and companies. In addition, tackling corruption where it begins — prior to elections, after public officials have just taken office and when policies are conceived and planned — increases the effectiveness of interventions.
The marginalisation of groups of citizens from society is contrary to the concept of good governance and theoretically has no place in democratic societies. It leads to rules that are applied with a double-standard, even if countries claim to embrace democratic equality. Cleavages arise and the social fabric of society is threatened. They can help to include the perspectives of the poor in determining key integrity cracks and in formulating anticorruption initiatives that are integrated into the national development strategy.
Participatory policy and budgeting exercises are one option for ensuring pledges are funded and that poor citizens have a seat at the planning table. Many examples, including community councils, exist for how institutional arrangements can be made more accountable to citizens. Each step of the process could promote their engagement and community involvement. Community action at the local level could be used to demonstrate the power of and need for collective citizen action.
Conclusion There are many myths about corruption which have to be exploded if we really want to combat it. Some of these myths are: corruption has become a way of life and nothing can be done about it; or that corruption is a post-independence phenomenon and it is the result of giving too much freedom and licence to the people in democracy; or that the poor people of underdeveloped countries are generally dishonest and untrustworthy by nature and easily tempted, while people of the developed countries are less prone to corruption; or that corruption exists only at the lower and the subordinate levels; or that corruption is found more among the illiterate than the educated people; or that corruption spreads mainly because of politicians.
All these fallacies are too crude and we have to guard against them while planning measures to contain corruption. So to summarize my understanding of the simplest way to describe the causes of inequality are; rent-seeking activity and the rise of The Predator State, then tax policy, macroeconomic policy, corporate governance and regulation, or lack thereof, decline in unionization, globalization, technological change, and finally, education. These are all due to the failure of government to regulate capitalism.
And because of this we have a super wealthy upper. All of these forms of poverty have significant effects on education, child development, and crime rates. Situational poverty is generally caused by a sudden event that is temporary. Causes of situational poverty include environmental disasters, divorce, or health issues.
Generational poverty occurs when two or more generations have lived in poverty. These families are often not equipped with the resources to break the cycle of poverty. Firstly, corruption reduces the overall wealth in the country which may lead to the deterrence for the potential investors.
In other words, it hurts the most vulnerable people. Finally, corruption undermines trust in government, which has a negative impact on society. Another aspect to consider is how corruption is measured. However, the degree of leverage the wealthy truly have against the majority is a point of criticism. However, this argument presumes equal electoral engagement, and the effect of income inequality on this engagement is under considerable debate.
Some theorists believe that the deep cleavage of inequality suppresses political engagement, especially amongst the poorest of society Dahl Other political scientists argue that greater inequality results in more political engagement Brady.
Government officials may use their authority for private gain in designing and implementing public policies Gupta S, Davoodi H and Terme RA, This is defined as corruption. Corruption will lead to both poverty and inequality. Poverty is defined as needs of essential assets and opportunities that every human is entitled Webster N, There are two types of poverty, absolute poverty and relative poverty.
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