A debt trap is like a mouse trap—once caught in it, one hardly gets out if at all. At least a mouse trap only catches mice. For people in a debt trap, it can be crippling like a terminal illness. That, my friends, is a major cause of the situation we are in.
The national debt we owe is well-known. About one third of our annual budget goes for the payment of debt including interest. Some studies show that our total repayments over time have since exceeded our total obligations. We continue to be beholden to creditors.
The funny thing is that while countries and agencies commit aid for the country’s development, the debt backdoor trap we are in takes more than what is given up front and trumpeted as partnerships. The real ties bind when a determined effort is made to cut down and finally do away with unending loan payments that ought to go to social services that develop human potential and therefore, growth and stability.
This article is about a more devilish form of debt trap. It is the debt of the worker who borrows from his next paycheck and his future bonuses to pay for present basic needs. It is a question of low wages or the high cost of utilities? It is both that contribute to low purchasing power.
No matter how much we increase salaries, it will never be enough to cope with daily realities because increasing salaries is inherently inflationary, meaning, the increase in salaries also translates to an increase in basic prices. At current levels, our minimum wage is one of the highest in the region and makes us less competitive in this aspect.
The real option is to work for efficiency in our food production from the primary producer through the distribution network to lessen spoilage and decrease food prices; to speed up transport by rationalizing the different modes from tricycles, jeepneys, buses and LRT/MRT, expanding alternative transport systems like rail and water systems, cutting down on fuel, manpower and equipment costs by improving travel times and declogging traffic by weeding out colorum and undisciplined drivers and the other initiatives by Chairman Fernando, and lowering housing costs by putting in place a land use policy and working out a tamper-proof and expedient land registration process.
Even with constant wages, the lowering of expenses necessarily increases purchasing power. A large part depends on the individual consumer. A middle class family with both husband and wife working can still be caught in the trap with multiple credit cards loaded with “utang” and amortizations on nice houses and nicer cars and all other bills tacked on to strain resources and to prevent building up of savings.
Note how the word “utang” used to carry such a high social stigma. Nobody wants to make “utang” or be an “utangero.” Nowadays, loans of every conceivable kind tempt people to acquire things deemed essential to a good life. Taking out a loan is a socially acceptable phenomenon subject to regular rantings over merienda only to end with a collective sigh.
The number of court cases involving bouncing checks, collection of accounts or estafa is an indication of the extent of the collective debt trap we are in—personal debt, household debt, corporate debt, national debt. We live with debt and die in debt.
In a capitalist society, debt has a function. It is meant to leverage assets in whatever form for future productive capacity and higher returns. In the Philippines, debt is used for consumption and that is the worst financial sin that can be committed. The first thing to do is to realize that you are in a debt trap and start really feeling bad about it for you to stand up and do something about it specifically one debt at a time. This will lead you out (and the country as well) of the debt trap and bring you to the really good life.
Don’t be a mouse, get out of the trap and start living.
