Political Failures of the Philippine Government

The Philippines has its shares of political problems and issues hindering it's economic development. Some blame corruption in the government, some blame the international financial institutions, some blame social unrest, but in light of all of these I would point my finger at government corruption for being the major obstacle to the growth of wealth in this country.

In a previous post I attacked the IMF and World Bank as being the bastions of neo-imperialism financed by Western countries and Japan. I think it is true that they utilize their tempting infrastructure loans as a way to open the economies of developing countries so that local firms will inevitably be outmatched by the comparative advantage of firms of the developed countries but that's not the whole story. Western governments and multinational corporations don't want to see the Philippines stay impoverished just for the sake of it. The Philippine government has set another obstacle in it's path to economic enrichment: rampant corruption. Of course my knowledge of the corruption of the Philippine government is only piecemeal and derived from articles and hearsay but I feel like I have a basic understanding of the problem.

The Philippines was under a colonial government under the Spanish and under a colonial government only Spanish administrators and Filipinos who intermingled with the Spanish had any power. The power was held by very few, while the vast majority of Filipinos lived in a state of serfdom. I have reason to believe under the American administration the Filipinos had a bit more representative government. They had elections and were more involved in policy making but of course with American government in the background. Only those that played ball with them stuck around. Following the independence of the Philippines after World War 2, the future looked bright. The Philippines was the only Asian country with a seemingly functional democracy and the economic prospects looked good. They were considered the outpost of American success in Asia but as Japan, South Korea, Taiwan, etc. began booming the Philippines fell into a state of economic stagnation. What happened?

My theory is that it was not solely Ferdinand Marcos who caused this but it was a continued complacency of corruption and poor management. The foreign debt began to accumulate before Marcos' time and he made a vow to reverse this pattern. These turned out to be empty words. Foreign debt however is not necessarily a bad thing. Like any debt, when handled responsibly it can cause great good but when handled irresponsibly, it can cause great damage. I believe there has always been a culture of corruption among the Filipino government and elite. These are vestiges of the colonial past, when what we define as corruption now was not only accepted but pretty much compulsory among government officials during the colonial period. There are two aspects of corruption which have severely hurt the Filipinos: bureaucratic corruption and crony capitalism.

As we all know, bureaucrats are a bane on society and the enemy of civilization. Whether they are printing you a new driver's license or renewing a visa, they seem never to miss an opportunity to be inefficient and irrational. In United States bureaucrats are obnoxious and add unnecessary friction to progress of the country but at least they are not corrupt (to my knowledge). Bureaucrats are bad enough but corrupt bureaucrats are exponentially worse. The problems with institutionalized bureaucratic corruption are too many to count. It is a system which natural self-perpetuates because any newcomer who demonstrates a sense of ethics will inevitably be pushed into obscurity. Institutional corruption only survives as long as everyone participates. With anti-corruption laws on the books, senior corrupt officials won't risk having a young idealistic guy in their department. This kind of corruption is extremely difficult to eliminate. Every dollar that gets sent through international donations or loans is split between the tiered institution until probably only a fraction of the money actually goes anywhere useful. I complain about the IMF but if the money was utilized well then it wouldn't be such a problem. Aside from what aid the Philippines receives from outside take a look at the Philippine government's tax-payer financed spending. Top one and two on the list are paying government employees and paying interest on their loans. Does that not point to gross mismanagement?

Crony capitalism is another major issue which I believe was not fully entrenched until Marcos. Government intervention in the markets is not always a bad thing but for the government to protect and enrich firms just because the CEO is a friend of the president is really the most vulgar form of politics. For those that believe in the free market, crony capitalism is a distortion and a parasite on the economy. Allowing monopolies to develop for those firms wealthy enough to pay off politicians will cause damage to the society as a whole. The only people who benefit from this unhealthy system are the few in the government and the business elite. They get rich off the backs of everyone else in society; just like Wall Street.

So then how is business done in the Philippine? You would think that since the Philippine government was forced fed the neo-liberal economic policies of opening up their markets and easing restrictions on trade that it would be relatively easy to do business here unlike the protectionist developed countries. In reality, the exact opposite is true. The Philippines is ranked one of the most difficult countries to do business in. I believe the reason for this lies in to the two aspects of corruption I just mentioned. When you need a business permit or a housing permit you have to work through the bureaucracy. My theory is that the chief problem with corrupt bureaucrats is that they are by nature obstructionist. They make the system complicated and hard to navigate by design so they can extract more money. It's a parasitic system that really saps this country of business opportunity. Crony capitalism is detrimental to the development of new industries for the reasons that should be obvious. There is an clear incentive for a firm that has a “government sponsored” monopoly to put the resources it can to prevent any competition. And as any economist will tell you, competition is what generates the most benefit for the economy as a whole.

The reason why I was thinking about this is that just last Saturday I visited Tondo and Smokey Mountain. For those that don't know, Tondo is one of the poorest neighborhoods in Manila and Smokey Mountain is a massive trash dump where about 3,000 people live. The basic means of survival there is scavenging through trash for things to sell or food to eat. I always enjoy my time in Tondo, it really fascinates me. That area used to be a reasonably nice fishing village before the government decided to turn it into a dump site. The pollution killed of all of the fish and the select few that didn't leave begun their new life as scavengers through garbage. It is really interesting to see how creative people can be with limited resources. Aside from garbage the people are always very dependent on NGOs and international organizations that offer some medical services or livelihood programs. According to some of the locals the only time the government showed an interest in the place was when they built a few subsidized apartment buildings in the area almost 20 years ago. With exception of that, the government is mainly involved with bulldozing peoples' houses down when they become too unsightly or interfere with a coastal development plan. Of course politicians campaign in this area. Every vote counts. But they don't have to promise anything substantial like medical services or clean water, they can just promise that these slums won't be torn down in the near future. Housing security is a big issue and I met a girl who explained how terrible it is when your homes are destroyed without notice, sometimes in the middle of the night. Unfortunately this is a common practice and happens quite regularly.

I went with a group of students who like all students would, question the status-quo. What is the government doing to help these people? If you ask this question to most locals I think they will shrug their shoulders. The only thing the government tried to do in 90s was cover up the problem by building some cheap apartment buildings but that's obviously not going to solve the problem. While citizens of the Philippines are completely dependent on foreign charity what does the government do? Does Mr. Noynoy Aquino have any ideas? His campaign slogan was “Kung walang corruption, walang mahirap” which means “If there is no corruption, there is no poor.” He has paid lip-service to the idea that fighting corruption might be in the nation's interests but has he made a major difference? I am not completely informed on this and I have heard mixed reviews about him but it's not completely his fault since he has only been in office for a couple years and it isn't as if these problems can be solved over night. But I wonder while he is driving from the presidential palace in his Porsche if he cares about the obscene number of Filipinos in poverty.

I asked my co-worker once why Filipino's don't care about politics. I told her that maybe if Filipinos were more involved they could improve the situation. She told me that politics is the dirtiest thing and Filipinos usually keep as much distant from it as possible. It's interesting because I share her cynicism about the Filipino government as well as in the United States but the Filipinos react differently than I would. I try to follow every political issue and am continually dismayed. Filipinos on the other hand seemed to have given up on national politics a long time ago and have adopted a bottom-up political identity. Local elections are huge events here for even something like baranguay captain (for those who don't know what a baranguay is, it is a small neighborhood and all Filipino cities are divided in to numerous baranguay). The philosophy follows, that at least the local politicians can be held accountable. You can literally walk and bang on his door if he screws up. Filipinos seem naturally imbued with a Rousseau-esque appreciation of democracy. In their minds they follow the Swiss approach which is a focus on the local government first and less of an interest to what the federal government does. The problem is that in Switzerland the national government is largely ineffectual and the local governments do receive the largest proportion of tax revenue. The Philippine tax model follows the same pattern as the United States, with the majority of the money going to the federal government. It's like the American political system was imposed on a people with a strong community orientation and lackluster interest in the federal government.

As those in the government continue to enrich themselves the average Filipino is overworked and underpaid and paying a disproportionate amount of tax. The system is not sustainable but I don't think Filipinos should look to the government for solutions. Of course if the government was less corrupt it would make a big difference but, as has been proved in history, economic development is not driven by the public sector. I have had this discussion many times with lots of different people. The government is important and international charity can help alleviate some problems (It can also be destructive such as the “Food for Peace” program when free US food was pumped into a poor African country and completely undermined the local agricultural business.), but at the end of the day development must come from within. The Filipinos have the cards stacked against them but that doesn't mean it is impossible. The Philippines is a perfect example of how phenomenon known as nationalism and a federal government is by nature a parasite on society. A necessary evil but evil nonetheless. If it wasn't for the natural good nature and superhuman tolerance of the Filipino people this country would be a failed-state by now. In light of all that I am optimistic about the Philippines. They are more evolved than Americans and Europeans who still believe in the myths propagated by history and politicians today. World politics must be looked at with a good dose of cynicism otherwise you will be delusional and unable to enjoy life.