In the heart of middle-class communities across the Philippines, one unexpected topic has captured attention in recent months: a bond offering from a property developer promising an 8-percent return. It’s not a conversation about politics, sports, or entertainment, but rather a financial topic that’s stirring excitement among retirees and small-time investors alike.
The scenario I encountered in early October, with an overseas Filipino worker (OFW) couple excitedly discussing this bond, highlights an important trend. These bonds, typically offering returns of 3-4 percent, are suddenly being overshadowed by this high-yield investment, creating a buzz among the usually passive investment communities.
But what does this all mean? How are these small-time investors, the middle class, helping fuel the wealth of the superrich? In this post, we’ll delve into how bond investments and tax cuts serve to support the billionaires and corporate giants of the Philippines. And we’ll uncover the broader economic implications of this cycle.
The Bond Market: Fueling the Superrich
When the OFW couple discussed the 8-percent return, it wasn’t just about making money—it was about playing a part in a larger, often unseen, economic mechanism.
Bond investments are a primary tool for corporations to raise capital. By offering bonds, companies tap into the middle class, convincing small investors to prop up their corporate expansions. These bonds are primarily targeted at retirees, small business owners, professionals, and ex-OFWs, who are seeking safe investments with returns that outpace inflation.
Despite their best intentions, these middle-class investors are indirectly supporting the superrich class of corporate giants. These corporations, in turn, enjoy massive gains, which ultimately benefit their owners—those with the most wealth and control over the country’s economy.
Why the Middle Class Turns to Bonds
In a nation driven by consumer spending, especially from OFWs and the BPO sector, the middle class looks for safe, predictable ways to grow their savings. Bonds offer just that—minimal risk with a guaranteed return. However, the return is usually modest. For many, an annual return of 3-4 percent is standard. But when a bond comes offering 8 percent, it quickly stands out.
For small-time investors, like the retired OFW couple, the higher yield seems like a golden opportunity. But the reality is that the money they invest doesn’t just benefit them. Corporate giants who issue these bonds are able to secure capital for their expansion projects—projects that often lead to even greater profits for the wealthiest members of society. In other words, their investments are making the superrich richer.
How the Superrich Capitalise on the Middle Class’s Investments
The bond market is one of the easiest ways for corporations to raise funds without the scrutiny or conditions that come with traditional bank loans. With an oversubscription of bonds, these companies can be assured of an influx of cash—often from middle-class investors looking to secure their financial futures.
The cycle works like this:
- Middle-class investors seek safe returns.
- They buy corporate bonds, with modest returns, sometimes up to 8 percent.
- The money raised through these bonds allows corporations to expand, create more wealth, and often pay dividends to their largest stakeholders.
- The superrich class—who owns or controls these corporations—reaps the rewards, while the middle class gets a small portion of the pie.
Thus, even though the middle class is striving to make the most of their investments, it is often the corporate giants and billionaires who see the biggest profits.
The Role of Government in Protecting the Superrich
It’s not just the bond market that favours the wealthy. The government’s fiscal policies also play a significant role in preserving the wealth of the superrich.
One such policy was the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE law, passed under former President Rodrigo Duterte. This law slashed the corporate income tax (CIT) rate, reducing it from 30 percent to 25 percent. In a bid to attract more investment, the law was aimed at encouraging corporate expansion.
Under the current administration of Ferdinand Marcos Jr., the tax cuts have continued, with the CIT dropping further to 20 percent. But is this really helping the economy? Tax cuts for corporations are often touted as a way to stimulate growth, but there is little evidence that they result in reinvestment. Instead, they often lead to share buybacks and increased wealth for corporate shareholders—who are primarily the superrich.
The Cycle of Inequality: How the Middle Class Keeps the Rich Rich
The story of the superrich in the Philippines isn’t just one of individual success—it’s a story of systems designed to keep them wealthy. Middle-class spending powers the consumer economy, with huge amounts of money flowing into retail giants and mall owners, many of whom belong to the superrich.
Take, for instance, the sprawling malls owned by the wealthiest families in the Philippines. These malls thrive on the everyday spending of ordinary Filipinos—OFWs, retirees, small business owners, and professionals—many of whom are also driving corporate profits by investing in bonds. The reality is that consumer spending and middle-class investments are what keep these malls profitable, and it’s the superrich who own them that benefit the most.
What Can Be Done?
The system isn’t inherently broken; it’s just built to favour the few at the top. But here’s the thing: the middle class is the key to a more equitable society. By realigning economic policies, pushing for higher wages, and making corporate taxation more balanced, the government could create a system that better benefits the majority. However, as it stands, the superrich are the ones who continue to profit the most.
