Friday, November 04, 2005

A culture of savings

SOME of you may have caught the "Probe" special on Channel 5 last week entitled "Pera," focusing on Filipino problems with financial management at the individual and household levels. One of the most dramatic examples featured in the documentary was a man working as a messenger with a monthly salary of about P7,800 who had run up P80,000 in credit card debts.

On a national level, the Philippines was described as having one of the lowest savings rate in the world. In economic development terms, this means that we have very limited financial resources going into new investments that can move the country forward.

I was interviewed for that "Probe" documentary, and I shared several insights on why we have this problem, which I thought of recapping in today's column, together with some additional insights.

Nothing to save?

The usual answer to why we save so little is that, given the level of poverty in the country, most households have nothing to save. So many of our people live hand-to-mouth, their earnings not even enough to cover basic expenses.

And yet, people will point out, too, that those with very low incomes still spend on non-essential items, like buying a DVD player and TV set, or cigarettes and alcohol, or as in the case of the messenger featured in the special, P20,000 for a party to celebrate his child's first birthday!

How do we explain this? That's where we get a host of other explanations, many of which cluster around the "culture of poverty" thesis. One variation on this thesis is that when you're poor, you live for today. Without hope of a better future, you spend whatever comes your way.

One of my friends calls this the "one-day millionaire" syndrome. I've seen it so many times, the most heartbreaking examples coming with many of our overseas workers, especially those who come home after working as entertainers in Japan. They come home with lots of dollars and yen, check the whole family into a four- or five-star hotel, host several parties and, of course, give away all kinds of "pasalubong" [gifts], and in a few weeks, all there earnings are gone.

Sharing our blessings?

Ironically, such behavior may actually come from our norm of sharing good fortune. Even the idea of the "pasalubong," gifts you bring back from a trip, is a way of sharing your blessings. I recently had some debates with relatives over the lavish parties thrown for a one-year-old child and the explanation is that a child is God's blessing and we need to celebrate and share this blessing by hosting a grand affair.

I don't buy that argument completely. We all know these birthday parties are often intended more for the adults than for the child, a way of building alliances. In fact, lavish parties are the general norm, for children and for adults, and these are done more for social reasons than for anything else. We host the parties to build business and social links.

There's also something tribal in all this. In many societies, there is the "big man syndrome": a tribal leader is expected to sponsor big feasts from time to time as a way of redistributing his wealth as well as asserting his authority and influence. As cultural practices go, the "big man" and the elite get imitated by the lower strata of society and in the end, you have even the poor trying to outdo each other with extravagance. I've heard it time and time again, the concern that neighbors will talk if you hold too small a baptismal party for Junior.

Conspicuous consumption

The "big man feast" is only one of several historical hindrances that work against an ethic of saving in the Philippines. The fiesta was actually a modification of "big man feast," this time a community effort to show off a town's wealth. In the social sciences, we call this conspicuous consumption.

I've also wondered about the post-World War II era contributing to all this conspicuous consumption. Because we were wealthier that many other countries in the region, we were busy flying off to Hong Kong on weekends, holding lavish parties where champagne flowed from fountains (I am not kidding here), in other words, grand opulence. Other countries, in contrast, launched austerity campaigns, urging citizens to save and to patronize local products. We laughed at them, boasting of our imported goods.

Now, of course, those countries that practiced austerity are importing Filipinos to work for them and, in turn, our Filipino overseas workers spend their hard-earned money to buy other countries' goods.

We are now at an added disadvantage because not only did we skip an era of austerity, we leapfrogged into this 21st century of massive consumerism. We are told, "Buy! Buy! Buy!" and we are flooded with all kinds of goods, including fairly cheap ones with which to tempt the lower classes, from cell phones to DVD players. We also have liberal credit card policies, which allow even messengers to get one, and to rapidly rack up debts.

Reversing the trend

It's a dangerous situation we're in, and we better start thinking of strategies at home, in schools and in offices, to create what the Asian Development Bank calls a "culture of savings." (The ADB had a study noting how our overseas workers tend to spend their money on other countries' goods rather than plowing the money back into the Philippines for economic and social development.)

We have to start especially with children, the current crop being a generation exposed to a bewildering variety of consumer goods -- and advertising to push those goods. Schools can incorporate budgetary management into math classes. And we really should include credit card management in our college courses.

There's much we can do at home, with those children's parties, for example. I have nothing against celebrating birthdays, but let's reinvent these parties. My godchildren, Tess and Dennis Batangan, give birthday parties for their children but tell friends to bring toys to donate to indigent children.

When one of Doctors Delen and Boying de la Paz's sons asks why they can't get a newer cell phone model, they remind the kids: a cell phone is for communicating, do you really need the camera and the MP3 player?

Another couple working with me at the University of the Philippines, Zen and Leo Quintilla, tells their son that instead of spending for some non-essential item, they're putting the money into his educational plan, preparing for college.

Last Christmas, many offices canceled their Christmas parties and donated the money instead to disaster relief. These are encouraging signs that we can build a culture of savings, linked as other important social values: compassion, foresight, mutual help.

We better move fast. Already I see dangerous new cultural beliefs emerging. On the "Probe" documentary, the messenger said he doesn't save because there's a belief now that by doing so, you actually invite financial emergencies like illnesses! The distorted reasoning: don't save, and you won't have the emergencies.


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