I have always been fascinated by how our colonial masters were able to found and maintain a colony that is oceans away from them at the time that technology was not as advanced as it is today to overcome distance, demographics, and topography. The images of colonialism as something similar to the US invasion of Iraq in 2003 are not an accurate depiction of the 16th century Spanish colonization of the Philippines and 20th century US colonization of the Philippines.
Reading An Anarchy of Families: State and Family in the Philippines edited by noted American historian Alfred McCoy and Booty Capitalism: The Politics of Banking in the Philippines by Paul D. Hutchcroft affirmed my insights as to how Spain and the US were able to position themselves to be the Filipinos’ colonial masters for centuries and decades. The first book examines how some families in the Philippines were able to build their political and business empires in a manner replete with fraud, deceptions, trickery and violence. The second book is an exposition of the perils of pervasive rent-seeking behavior by entrenched economic elites which renders Philippine economy perpetually lethargic. The book is filled with details about Marcos cronies, central bank governors and business tycoons and how these personalities turned the Philippine banking system into an accomplice in maintaining a decayed political and economic structure. The two books chronicled the capture of the Philippine state and economy by a few families and elite. While not thoroughly and directly discussed in the book, the seeds of the mayhem wrought by the oligarchic elite on our political and economic life could be linked to our colonial past. Their rent-seeking behavior was emboldened, encouraged, and legitimated by the foreign colonial interests that had ruled the Philippines. Unfortunately, up to this time, the foreign and elite interests still intertwine. In instance where foreign interests were resisted, it was not due to a nationalistic fervor but largely due to threats to the elite’s vested interests.
The two books provide insights to the question of why we have failed to develop. Both the Philippine state and the market were stunted by the leadership of both political and economic elite who on one hand, failed to rise above and go beyond their familial and parochial loyalties and on the other, failed to pursue a genuine national and development agenda for the country. The “marriage” of politics and economics placed the country in a vicious trap. Those who are in power are those who control the economy.
The Philippine bureaucracy remains weak because it is populated by political appointees who are indebted to their patrons and therefore, cannot implement objectively rules and regulations. Elected officials would opt to appoint members of their “network” so the quid pro quo principle becomes handy “when the time comes”. It is not what you know that matters but who (m) you know.
National development programs contained in legislations and policies are often watered down to protect the interests of the political and economic elite. How can we expect those in power to go against their own economic interests? The elite have often behaved as if their interests approximate the national interests. Adam Smith’s invisible hand could never work in a country whose elite look at the national assets as booty to be partitioned among themselves. Political power creates access to economic opportunities which the elite monopolize. This behavior holds back genuine capitalist development in the country. Only the elite would have access to capital and information needed for business ventures.
The capture by the elite of the development tripod of market, state, and society becomes complete with the perpetuation of the “sakop” mentality among a large segment of the population.
The core of the Filipino view of social relationship is that of the kinship system which is by blood, affinity, and ritual. One’s kinship network is one’s social capital that facilitates or inhibits one’s social mobility. One’s ability to connect to the “network” or “sakop” of the elite paves the way for political and economic opportunities. The elite take it upon themselves to distribute to their “sakop” the “wealth” of the network. The members of the network support the network by contributing to the network’s leader/s their loyalty and support. This “sakop” mentality aptly explains political family feud, the need for money during elections to “support” the “hoard” working at the “grassroots”. thus our inability to develop a national consciousness. The “sakop” creates parochial expectations and obligations that prevent us from developing a national consciousness that will impel us to pursue a national development agenda.
We are indeed trapped by our past and present. The way out of this path dependency is citizenship education. It is the SOCIETY in the tripod that will help us finally transform both the Philippine state and the market. Our political and economic structures might be captured, but the dynamic spirit of the Filipino keeps the light of fire burning. There are many stories of hope that are happening around the country. All we have to do is collate them, draw lessons from them and weave a social theory that calls our attention not only on the insights produced by critical theories that underlie books such as those of McCoy and Hutchcroft by more so on the generative energy of individual and collective agency.
Saturday, December 13, 2008
Wednesday, December 10, 2008
Re-framing the Agrarian Question beyond Ideologies
James Putzel’s book, A Captive Land: the politics of agrarian reform in the Philippines and Temario Rivera’s book, Landlords & Capitalists: class, family, and state in Philippine manufacturing provide answers to two interrelated questions - is agrarian reform still a relevant requisite for Philippine development and why has the Philippines not been able to industrialize.
In a nutshell, the two authors suggest that the Philippines failed to develop and industrialize because we have not been able to develop a capitalist class. What we have is a landed class that has acquired political power and has wielded that power to have access to economic opportunities. It is not surprising then that those who own vast tracts of land are the same people who are lording it over in the manufacturing sector. The relative failure of the series of land and agrarian reform programs in the Philippines to substantially alter tenurial and socio-political relations in the countryside is largely due to the capture by the landed class of the machinery of the state to formulate and implement a genuine agrarian program.
The agrarian reform is tied with the industrialization program. A genuine agrarian program would have given the tenants land to till which will enable them to treat what is otherwise considered as rent on the land as an extra income which they could have used to consume goods. The landlords on the other hand would have both the capital (from the payments on their redistributed land) and the incentive to put the money in the manufacturing sector because the consumer base for manufactured products would have increased because the former tenants would now have enhanced purchasing power. Alas, this was not to be so. Aside from the agrarian program itself as being inadequate in the support facilities required to really help the farmer-owners increase their productivity and income, the rent seeking behavior of the landed class has disadvantaged the country’s industrialization program. Rather than pursuing industrialization which is capacitating the economy to manufacture machines and goods rather than being dependent on imports, the economic elite used their power to monopolize access to opportunities provided by what was initially called import substitution program and later on import-based but export oriented programs. The Philippines’ economic elite failed to develop a nationalist capitalist consciousness. Their main preoccupation is to pursue narrow class interests which are often tied with foreign vested interests. Thus, it is not surprising that we failed to industrialize. The cycle is sealed by a legitimizing ideology of neo-liberal economics’ belief in the theory of comparative advantage which relegated the Philippines to the exportation of agricultural products and raw materials and importation of manufactured goods. This strategy has caused chronic balance of trade deficit resulting to a host of adverse consequences to the economy.
The agrarian question cannot be discussed outside of the broader question of what to do with the rural economy and its attendant problems. Traditionally, in countries where there are labor surplus, widespread unemployment, high rate of population growth, and majority of people engaged in agriculture, agrarian reform is usually expected to play the roles of (1) redistributing income and wealth; (2) stimulating capital formation; and (3) improving agricultural productivity. Such reform policies are generally advocated as an effort to eradicate food insecurity and rural poverty. However, more often than not, such reforms suffer from political impossibility due mainly to its inherent paradox. The irony lies in the assumption that land confers power in agrarian systems; reform policy must then work through a system of power to overthrow its base (Herring l983: Ch 8). This is why conventional agrarian reform discourse emits an atmosphere of utter hopelessness that there ever is a political solution to the agrarian question.
After more than a decade from the publication of these two books, the agrarian question has resurfaced. Debates are ongoing whether the Comprehensive Agrarian Reform Program Law has to be extended to “complete” the task. The context and condition for the agrarian question has changed and is changing. A re-thinking is appropriate.
“The traditional economic focus on intersection of landed rights, agriculture and poverty needs broadening to incorporate technological change enabled by the biological revolution and the importance of ecological systems that support both agriculture and survival strategies of the poor”. The traditional conceptualization of agrarian reform that sees that dominance of the landed class is too limiting and does not take into account the changes in the political condition that give rise to new opportunities to re-conceptualize agrarian reform. For one, there is a declining importance of agriculture. The rapid urbanization and the growth of the service sector are contributing to this phenomenon. New alternatives other than tenancy and farming are now available to landed elites. The emerging environmental consciousness is forcing forces resistant to agrarian reform to re-think their views about land stewardship. The new discoveries in the area of bio-technology allow for new forms of ownership to arise and expand options for the small farmers making reform more politically feasible. The interface of other reform agenda such as women empowerment is broadening base for redistribution of land and agrarian reform. As asymmetry in information is bridged, the agrarian question is evolving to be an issue of efficient land use, enhanced rural economy, and expanded property rights.
In a nutshell, the two authors suggest that the Philippines failed to develop and industrialize because we have not been able to develop a capitalist class. What we have is a landed class that has acquired political power and has wielded that power to have access to economic opportunities. It is not surprising then that those who own vast tracts of land are the same people who are lording it over in the manufacturing sector. The relative failure of the series of land and agrarian reform programs in the Philippines to substantially alter tenurial and socio-political relations in the countryside is largely due to the capture by the landed class of the machinery of the state to formulate and implement a genuine agrarian program.
The agrarian reform is tied with the industrialization program. A genuine agrarian program would have given the tenants land to till which will enable them to treat what is otherwise considered as rent on the land as an extra income which they could have used to consume goods. The landlords on the other hand would have both the capital (from the payments on their redistributed land) and the incentive to put the money in the manufacturing sector because the consumer base for manufactured products would have increased because the former tenants would now have enhanced purchasing power. Alas, this was not to be so. Aside from the agrarian program itself as being inadequate in the support facilities required to really help the farmer-owners increase their productivity and income, the rent seeking behavior of the landed class has disadvantaged the country’s industrialization program. Rather than pursuing industrialization which is capacitating the economy to manufacture machines and goods rather than being dependent on imports, the economic elite used their power to monopolize access to opportunities provided by what was initially called import substitution program and later on import-based but export oriented programs. The Philippines’ economic elite failed to develop a nationalist capitalist consciousness. Their main preoccupation is to pursue narrow class interests which are often tied with foreign vested interests. Thus, it is not surprising that we failed to industrialize. The cycle is sealed by a legitimizing ideology of neo-liberal economics’ belief in the theory of comparative advantage which relegated the Philippines to the exportation of agricultural products and raw materials and importation of manufactured goods. This strategy has caused chronic balance of trade deficit resulting to a host of adverse consequences to the economy.
The agrarian question cannot be discussed outside of the broader question of what to do with the rural economy and its attendant problems. Traditionally, in countries where there are labor surplus, widespread unemployment, high rate of population growth, and majority of people engaged in agriculture, agrarian reform is usually expected to play the roles of (1) redistributing income and wealth; (2) stimulating capital formation; and (3) improving agricultural productivity. Such reform policies are generally advocated as an effort to eradicate food insecurity and rural poverty. However, more often than not, such reforms suffer from political impossibility due mainly to its inherent paradox. The irony lies in the assumption that land confers power in agrarian systems; reform policy must then work through a system of power to overthrow its base (Herring l983: Ch 8). This is why conventional agrarian reform discourse emits an atmosphere of utter hopelessness that there ever is a political solution to the agrarian question.
After more than a decade from the publication of these two books, the agrarian question has resurfaced. Debates are ongoing whether the Comprehensive Agrarian Reform Program Law has to be extended to “complete” the task. The context and condition for the agrarian question has changed and is changing. A re-thinking is appropriate.
“The traditional economic focus on intersection of landed rights, agriculture and poverty needs broadening to incorporate technological change enabled by the biological revolution and the importance of ecological systems that support both agriculture and survival strategies of the poor”. The traditional conceptualization of agrarian reform that sees that dominance of the landed class is too limiting and does not take into account the changes in the political condition that give rise to new opportunities to re-conceptualize agrarian reform. For one, there is a declining importance of agriculture. The rapid urbanization and the growth of the service sector are contributing to this phenomenon. New alternatives other than tenancy and farming are now available to landed elites. The emerging environmental consciousness is forcing forces resistant to agrarian reform to re-think their views about land stewardship. The new discoveries in the area of bio-technology allow for new forms of ownership to arise and expand options for the small farmers making reform more politically feasible. The interface of other reform agenda such as women empowerment is broadening base for redistribution of land and agrarian reform. As asymmetry in information is bridged, the agrarian question is evolving to be an issue of efficient land use, enhanced rural economy, and expanded property rights.
Tuesday, December 9, 2008
Finding and Losing Keynes: A Philippine Development Story
It is widely held that the Philippines' economic performance compared to that of other countries in the region over the past three decades has been disappointing. Why does development continue to elude the Philippines?
This question is explored in the book, The Philippine economy: Development, policies, and challenges edited by ARSENTO M. BALISACAN and HAL HILL, which is an in-depth study of the Philippine economy focusing particularly on the two decades from 1980 to 2000. The Philippine development puzzle is divided into three major riddles namely:
1. What accounts for the Philippines' indifferent long-term growth record?
2. Why did it not gain a larger dividend from a process of policy reform that got under way in the late 1980s, and continued and deepened during the Ramos administration of 1992-98?
3. Why did the Philippines emerge, at least in comparison with its neighbors, relatively unscathed from the Asian financial crisis of 1997-98?
The answers to these riddles are embedded narrowly in economic and broadly in political, historical, and institutional factors. The book posits the following answers:
The reform process that was implemented during the late 80’s and Ramos administration did not translate into substantial dividends because government spending on infrastructure and social goods was politicized, priorities were skewed to favor vested interests, and there was uncertainty over long term development goals due to personalistic politics which renders it difficult to shield economic policy making. Attempts at good economic policy making have been spoiled by the prevailing oligarchic social structures and ineffective political institutions.
Moreover, there are significant barriers to long term growth. We have been handicapped by our rapid population growth, neglected state of physical infrastructure, and declining quality of public education system. We have not been able to seize the opportunities present in Mindanao which has for centuries been besieged by peace and development issues.
The Philippines was not badly hit by the 1997 crisis. This was not due to good economics, though. Since investors approached the Philippine economy with caution hence, it did not receive the large private short term capital flows that went into neighboring high growth economies. These investments resulted to availability in these countries of large quantities of credit which in turn generated a highly-leveraged economic climate that pushed up asset prices to an unsustainable level resulting to individuals and companies defaulting on debt obligations. The ensuing panic among lenders led to a large withdrawal of credit from the crisis countries, causing a credit crunch and further bankruptcies. What worked to our favor however, was the relative healthier shape of the Philippine financial sector due to a stronger banking regulation and more conservative portfolios.
In summary, the book identifies three reasons to explain the Philippine development puzzle. These are conventional growth explanations, bad luck, and political and institutional barriers to good policy. What these imply is the growing recognition of the political and institutional requirements for economic growth. It is essential then to improve the overall performance of government, insulate it from the plunder of oligarchic groups, and promote new types of private sector initiative.
The current world economic crisis is forcing us to re-visit and re-think our basic understanding of economics. The fall of socialist regimes in the early 1990’s inspired Francis Fukuyama to declare the end of history because capitalism emerged victorious. Free market is and has always been presented as the panacea to underdevelopment. In the Philippines, this “spirit” was translated into instituting a “process that included the lowering of trade barriers, liberalization of foreign investment, deregulation of financial and foreign exchange markets, an improved tax effort and the establishment of a new, more independent central bank focused on inflation targeting in the context of a more flexible exchange rate. Yet, it was by no means clear that the reforms had achieved any substantial success in shifting the Philippine economy to a rapid, equitable and sustainable growth trajectory”.
Twenty or more years later, the world is witnessing the unraveling of what potentially is a deep recession resembling that of the depression of the 1930’s. Surprisingly, free market pundits are scampering for governments to intervene to save the collapsing world economy. This has shaken the free market orthodoxy. Is this signaling the end of capitalism?
Many of the major political debates for decades have centered around one key issue: "the efficiency of the market economy", and the appropriate relationship between the market and the government. On one side is the belief that for the market to be efficient, the government should keep its hands off the market to allow for the “invisible hand” to find the equilibrium. On the other, is the belief that there is no invisible hand in the first place. The government is the best regulator of the excesses of the market or the best stimulator of an underperforming market.
The Philippine development story is the story of finding and losing John Maynard Keynes, the British economist who introduced the notion that the state should stimulate economic growth and improve stability in the private sector - through, for example, interest rates, taxation and public projects. This has always been the role the Philippine government played. However, the government’s track record has been that of misusing the power to intervene in the economy to make policy decisions that benefit oligarchies that have captured the state and the bureaucracy. The degree to which the government intervenes in the market is merely a secondary issue to the the real challenge of whether the government will spend it wisely — avoiding special-interest pleadings and pork projects such as bridges to nowhere. We’ll need a true capital budget that lays out the nation’s priorities rather than the priorities of powerful oligarchic interests. The question of whether we need more or less of Keynes or more or less of Adam Smith is immaterial if the government that makes such policy decision does so on the basis of the interests of the few who have historically captured political and economic power in the country rather than on an articulated national development agenda that majority of the people support and aspire for. In the end, it is not economics that is the problem but politics. Reform the politics, the market will follow.
This question is explored in the book, The Philippine economy: Development, policies, and challenges edited by ARSENTO M. BALISACAN and HAL HILL, which is an in-depth study of the Philippine economy focusing particularly on the two decades from 1980 to 2000. The Philippine development puzzle is divided into three major riddles namely:
1. What accounts for the Philippines' indifferent long-term growth record?
2. Why did it not gain a larger dividend from a process of policy reform that got under way in the late 1980s, and continued and deepened during the Ramos administration of 1992-98?
3. Why did the Philippines emerge, at least in comparison with its neighbors, relatively unscathed from the Asian financial crisis of 1997-98?
The answers to these riddles are embedded narrowly in economic and broadly in political, historical, and institutional factors. The book posits the following answers:
The reform process that was implemented during the late 80’s and Ramos administration did not translate into substantial dividends because government spending on infrastructure and social goods was politicized, priorities were skewed to favor vested interests, and there was uncertainty over long term development goals due to personalistic politics which renders it difficult to shield economic policy making. Attempts at good economic policy making have been spoiled by the prevailing oligarchic social structures and ineffective political institutions.
Moreover, there are significant barriers to long term growth. We have been handicapped by our rapid population growth, neglected state of physical infrastructure, and declining quality of public education system. We have not been able to seize the opportunities present in Mindanao which has for centuries been besieged by peace and development issues.
The Philippines was not badly hit by the 1997 crisis. This was not due to good economics, though. Since investors approached the Philippine economy with caution hence, it did not receive the large private short term capital flows that went into neighboring high growth economies. These investments resulted to availability in these countries of large quantities of credit which in turn generated a highly-leveraged economic climate that pushed up asset prices to an unsustainable level resulting to individuals and companies defaulting on debt obligations. The ensuing panic among lenders led to a large withdrawal of credit from the crisis countries, causing a credit crunch and further bankruptcies. What worked to our favor however, was the relative healthier shape of the Philippine financial sector due to a stronger banking regulation and more conservative portfolios.
In summary, the book identifies three reasons to explain the Philippine development puzzle. These are conventional growth explanations, bad luck, and political and institutional barriers to good policy. What these imply is the growing recognition of the political and institutional requirements for economic growth. It is essential then to improve the overall performance of government, insulate it from the plunder of oligarchic groups, and promote new types of private sector initiative.
The current world economic crisis is forcing us to re-visit and re-think our basic understanding of economics. The fall of socialist regimes in the early 1990’s inspired Francis Fukuyama to declare the end of history because capitalism emerged victorious. Free market is and has always been presented as the panacea to underdevelopment. In the Philippines, this “spirit” was translated into instituting a “process that included the lowering of trade barriers, liberalization of foreign investment, deregulation of financial and foreign exchange markets, an improved tax effort and the establishment of a new, more independent central bank focused on inflation targeting in the context of a more flexible exchange rate. Yet, it was by no means clear that the reforms had achieved any substantial success in shifting the Philippine economy to a rapid, equitable and sustainable growth trajectory”.
Twenty or more years later, the world is witnessing the unraveling of what potentially is a deep recession resembling that of the depression of the 1930’s. Surprisingly, free market pundits are scampering for governments to intervene to save the collapsing world economy. This has shaken the free market orthodoxy. Is this signaling the end of capitalism?
Many of the major political debates for decades have centered around one key issue: "the efficiency of the market economy", and the appropriate relationship between the market and the government. On one side is the belief that for the market to be efficient, the government should keep its hands off the market to allow for the “invisible hand” to find the equilibrium. On the other, is the belief that there is no invisible hand in the first place. The government is the best regulator of the excesses of the market or the best stimulator of an underperforming market.
The Philippine development story is the story of finding and losing John Maynard Keynes, the British economist who introduced the notion that the state should stimulate economic growth and improve stability in the private sector - through, for example, interest rates, taxation and public projects. This has always been the role the Philippine government played. However, the government’s track record has been that of misusing the power to intervene in the economy to make policy decisions that benefit oligarchies that have captured the state and the bureaucracy. The degree to which the government intervenes in the market is merely a secondary issue to the the real challenge of whether the government will spend it wisely — avoiding special-interest pleadings and pork projects such as bridges to nowhere. We’ll need a true capital budget that lays out the nation’s priorities rather than the priorities of powerful oligarchic interests. The question of whether we need more or less of Keynes or more or less of Adam Smith is immaterial if the government that makes such policy decision does so on the basis of the interests of the few who have historically captured political and economic power in the country rather than on an articulated national development agenda that majority of the people support and aspire for. In the end, it is not economics that is the problem but politics. Reform the politics, the market will follow.
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