Wednesday, June 09, 2004
Our irresponsible elite
By Calixto V. Chikiamco (as published today in his Manila Times column Political Economy)
I think it was Gen. (ret) Jose Almonte, former national security chief during the presidency of former President Fidel Ramos, who said that the Philippines had the most irresponsible elite in Asia.
Indeed, “Jo-al” has not been the first and only one who has made this observation. American political scientist Paul Hutchcroft calls the Philippine elite as “booty capitalists” who prey on the weak state for its rent-extraction.
The sorry history of the Philippines since independence is a reflection of the record of our irresponsible political and economic elite. Compared to its neighbors, the Philippines is still mired in a “development bog” and unable to reduce its widespread poverty. The Philippines has earned the moniker of “sick man of Asia”—thanks to its irresponsible elite.
And it’s not the Marcos dictatorship alone that’s to blame. Nearly 20 years after Marcos fell, the elite cannot show substantial progress: the country’s institutions are weak, if not weaker; the foreign debt is ballooning and the country is falling into another debt trap; unemployment and poverty rates remain high; and the country is still racked with rebellion with one of the world’s longest-running communist insurgencies.
Why is the Philippine elite so irresponsible?
Well, compared to its Asian neighbors, the Philippine elite never felt really threatened by communism. South Korea, Taiwan, Japan, Malaysia, Singapore, Thailand and Indonesia at one time or another faced “life and death” crisis fostered by the communist threat.
South Korea, which started out more backward than the industrialized North Korea, had no choice. Its military essentially told the business elite to behave, or else all of them would be overrun by the North Korean communists.
Fleeing the communists, the Kuomintang-led Chinese government settled in Taiwan. As outsiders to the island, the Kuomintang-led government could institute land reform and the ever-present threat of a Communist invasion forced its elite to become responsible.
Singapore was a tiny island with few resources and which faced a communist insurgency. Lee Kwan Yew and Singapore’s political elite battled back by building a strong bureaucracy and adopting many socialist elements (state ownership of key enterprises, socialized housing, etc.) while embracing foreign investments and free markets.
The same story was replicated in other countries like Malaysia, Thailand and Indonesia. Their respective elites rose to the occasion and led their respective countries to wipe out poverty, strengthen public institutions and develop economically.
On the other hand, the Philippine elite became an anomaly and seemed to follow the Latin American model, unable and unwilling to lift the country out of its quagmire. Rather than acting as leaders, the Philippine elite, true to the rules of booty capitalism, acts more like pirates, preying on the state and the people.
One reason for this is that the Philippine elite felt secure under the protective umbrella of the United States. With the US bases, the Philippine elite could always count on the US military, or so it thought, to rescue it from the communist marauders.
The Laurel-Langley Agreement, which allowed US citizens to operate businesses in the Philippines as a foreign monopoly under high tariff walls, further cemented the symbiotic relationship between the US business elite and the local rent-seeking elite. The US and the Philippines became joined at the hip in weakening the state and promoting “booty capitalism.”
The need for the US to maintain its vital bases here during the Cold War made it also imperative that the Philippine elite be kept divided and unable to assert itself.
Why is it that years after the removal of the US bases and the end of the Cold War, the Philippine elite has retained its irresponsible ways? In fact, the Philippines seems to be replaying its history, with 2004 substituting for 1969. Like in 1969, right after the presidential election, the country is sitting on the edge of civil war, its public institutions are politicized, and its treasury nearly bankrupt.
One reason is what economists call the “economics of increasing returns.” Once a country is on a given path, positive feedback and increasing returns keep a country on the same path. If it’s necessary, for example, for an oligarch to bribe justices, it would be also necessary for the other oligarchs to engage in the same practice to compete, and a sort of an arms race to corrupt institutions develops.
As Hutchcroft puts it, “There has been little incentive for oligarchs themselves to press for a more predictable political order, because their major preoccupation is the need to gain or maintain favorable proximity to the political machinery. Even those oligarchs temporarily on the outs with of the regime exert far more effort in trying to get back into favor than in demanding profound structural change.”
Another reason why our elite is so irresponsible is that many of them shifted to regulated, service industries—banking, telecommunications, power, shipping, airline, etc.—in reaction to globalization. Thus, there was great incentive to the further weakening of the state and for “regulatory capture.”
The archipelagic nature of the country further insulates its elite and makes it oblivious of external threats. The communist threat from the North and competition with its old arch-rival, Japan, tempers the possible misbehavior and abuses of the South Korean elite. As for India, competition and rivalry with its neighbor Pakistan represents a motive force to develop the country.
No such rivalry or threat moderates the Philippine elite’s behavior.
Is there any hope then for the Philippines? Will the Philippine elite ever shape up?
I will attempt to answer this in a future column.
