Philippine politics is driven by the factional struggles over its rent-seeking system.
Rent-seeking is the non-market (primarily politically derived) extraction of surplus or profit. Economic Rent or unearned profit is generated from government-granted concessions, monopolistic privileges, quotas, political favors, outright extortion, etc. Income is unearned because economic activity from rent-seeking doesn’t enhance economic welfare or give value to consumers.
Post-independence, pre-Martial politics was characterized by alternating factions (primarily Liberal and Nacionalista Parties) competing peacefully via elections to control the system. Extraction took many forms, including foreign exchange allocation, favors and protection for industries and agricultural trade, awarding of mining and logging concessions, getting behest loans, and import quotas in various forms, etc.
MARCOS DICTATORSHIP DIDN’T CREATE A NEW SOCIETY
Former President Marcos, however, unilaterally changed the elite political settlement of peaceful competition for control of the rent-seeking system by declaring Martial Law in 1972. He did this because the struggle between the factions intensified after the presidential elections of 1969, when he precipitated a severe economic and political crisis. He caused the economic and political crisis because he printed money and won reelection (the first Philippine president to do so) with the help of “guns, goons, and gold.”
(For a more thorough discussion of Philippine path dependence toward rent-seeking, the reader can refer to my essay, “The Political Economy of Martial Law” in the book, Not on Our Watch: Martial Law Really Happened: We Were There, available in select Fully Booked stores. )
By launching a so-called New Society Revolution with the declaration of Martial Law, former President Marcos legitimized and disguised the monopolization of political power by his faction. The New Society was supposedly going to get rid of political warlords, eradicate the oligarchy, defeat Communist rebels, and instill discipline in society. To show he meant business, the first execution he made after Proclamation 1081 or declaration of one-man rule was the execution of Lim Seng, a notorious drug lord. He jailed the opposition’s main leader (Benigno S. Aquino, Jr.) and the leader of the anti-Marcos oligarchy (Geny Lopez).
His dictatorship, however, was no New Society.
It was marked by political oppression and abuse of human rights as his faction, unchecked by any political opposition, practiced rampant “crony capitalism.” Rent-seeking then reached new heights.
Marcos financed his regime from the foreign borrowings made possible by recycled oil money. (Marcos was lucky. He declared Martial Law in 1972. The Yom Kippur War erupted in 1973, which resulted in higher oil prices and the recycling of oil money by money center banks to developing countries. Foreign borrowings enabled him to prolong his one-man rule.)
However, the 1979 Iranian oil crisis exposed the weaknesses of the debt-financed economic system. Most of the foreign debt were frittered away by inefficient, corruption-riddled projects, inefficient monopolies enjoying various kinds of protection, or outright stealing. By 1981, the system was spent, a full-blown foreign exchange crisis erupted, and it was only a matter of time before the Marcos dictatorship fell.
EDSA 1 WASN’T EXACTLY A REVOLUTION EITHER
Then, the People Power Revolution led by Cory Aquino, the widow of Marcos’s erstwhile nemesis, happened in 1986. While it was a genuine anti-dictatorship revolution, expanding the democratic space and ending the political monopoly of the Marcos faction, it was also not a revolution in the classic sense because it restored the pre-Martial Law oligarchy to power and protected them with the protectionist, anti-FDI provisions in the 1987 Constitution.
However, the post-dictatorship regime of former President Cory Aquino was characterized by numerous coups and political threats. The stability of elite-dominated politics required the presence of the opposing factions for electoral competition for power. Hence, former President Aquino allowed both Imelda Marcos and Eduardo Cojuangco, Jr. to return from exile abroad. It was also a smart move as the two divided the loyalist votes between them in the 1992 presidential elections, and led to the election of Aquino’s anointed one, former President Fidel Ramos.
By 2016, however, it was clear that the post-dictatorship system enshrined in the 1987 Constitution was clearly spent.
After 28 years, there had been no inclusive growth, particularly in the countryside. (Although CARP, the signature legislation of former President Aquino, did not increase productivity, it was a success as an anti-insurgency measure. The Communist threat subsided but is still present because landless peasants just became poor landowners.) Monopolies in strategic industries, protected by the 1987 Constitution, gave poor service and charged high prices. In politics, family dynasties dominated.
IS CHANGE REALLY COMING UNDER DUTERTE?
Comes now Davao Mayor Duterte, and his band of fanatical followers, promising a revolution in the last presidential elections. The theme was “change is coming.”
Has change come? Or is it the same story of factional struggle disguised as a revolution?
In seeking to rehabilitate and perhaps restore the Marcos faction to power and in marginalizing Vice-President Robredo, President Duterte may have revealed that he is engaged in the familiar factional struggle for the control of the rent-seeking system. And because his is a narrow faction, he forged an alliance with the anti-Yellow factions of former President Arroyo and Bongbong Marcos. At the same time, he’s building his own political movement through the Kilusang Pagbabago under Cabinet Secretary Jun Evasco.
Viewed then from this prism that Duterte, in fact, is part of an Arroyo and Marcos alliance and is engaged in a factional (not a revolutionary) struggle against the Yellow faction (Aquino and allies), the political situation is much easier to read.
For example, if indeed Senator Leila de Lima raised money from drug sources to finance her election, why is the focus on her public humiliation, rather than on crafting solutions, such as the public financing of political campaigns so candidates will not to be tempted to raise money from illegal sources, whether drugs, jueteng, or the oligarchy? A genuine movement for change would focus on campaign finance reform to strengthen political institutions, rather than on political persecution.
Why, some of Duterte die-hards will ask, isn’t Duterte’s promise to liberalize the anti-FDI restrictions in the Constitution a “revolutionary act” or a “fundamental change” — one that the Aquino administration failed to do?
The Marcos faction has always targeted these protectionist provisions in the 1987 Constitution because it perceives those provisions as only protecting “yellow” or pro-Aquino businessmen. To recall, former President Estrada, who may be described as part of the Marcos faction, tried to remove those restrictions but was thwarted by the Yellow forces.
POLITICAL ECONOMY HAS CHANGED
However, more recently, the political economy has changed.
Both the change in control of telecommunications and power distribution to foreign companies plus the technological changes in media with the rise of the Internet, have led to a consensus among the elite of the need to remove those restrictions.
Thus, a “Yellow,” former Liberal Party President and Speaker Feliciano Belmonte, spearheaded a move to lift those restrictions, only to be thwarted at the last minute by former President Noynoy Aquino, a reactionary who didn’t want to touch his mother’s Constitution.
In fact, President Duterte seems reluctant to confront the oligarchy (except for the unfortunate Bobby Ongpin, whose misfortune was turned into a fortune by Greggy Araneta). He placed a former Globe executive, Rodolfo Salalima in charge of the Department of Information and Communications Technology. He said that he would walk back on his promise to liberalize the sector if the telcos would reduce telephone rates (which they did, but people aren’t using voice calls anymore, but are instead using data to make calls. Data pricing and service quality remain crappy). His government hasn’t given moral or political support to the Philippine Competition Commission, which is trying to oppose the purchase of the SMC-owned spectrum by the telco duopoly.
FEDERALISM WILL BENEFIT POLITICAL DYNASTIES
The change of the form of government from unitary to federal, however, may be a different matter where there is no elite consensus. The goal of the change in the form of government may not really be to address the fundamental problems of the Filipino people (which is widespread poverty) and the disempowerment of the outlying regions, but to reorder the political system for the benefit of various factions and family dynasties in the regions. In other words, it’s about how to cut up the pie to accommodate the demands of the various factions in a rent-seeking system.
Proof of this is that the nostrum of federalism isn’t accompanied by a true rural development strategy to tackle poverty in the countryside. President Duterte’s agricultural policy consists of more of the same policy of simply throwing government money into the agricultural sector, which is a recipe for failure.
(In my mind, a genuine revolution must tackle the problem of rural poverty.)
Because President Duterte has politicized the situation by trying to isolate the anti-Marcos and Yellow forces, the new Constitution may be seen as a backdoor through which Arroyo and or Marcos can regain political power and therefore will be opposed by them on those grounds. (There is talk that either former President Arroyo or Bongbong Marcos will become prime minister under the new Federal-Parliamentary system.) Irrespective of the merits and demerits of a federal system, the anti-Marcos and Yellow forces may campaign against the ratification of the new Constitution as a way to repudiate President Duterte and his political allies.
FACTIONAL STRUGGLES IN THE DUTERTE CABINET
President Duterte’s positions on foreign policy can also be understood using this prism of factional struggle. The Yellow or Aquino faction is strongly pro-American, perhaps due to the perception that the US helped usher Marcos out of power.
On the other hand, the Duterte-Arroyo-Marcos alliance may be seen as anti-American in various shades, with Duterte being the most extreme. The Marcos faction is anti-American because the camp of the former strongman sees the US as the mastermind of former President Marcos’s forced exile to Hawaii. Arroyo, on the other hand, tilted to China after leaving the coalition of the willing in Iraq and getting the ire of the US.
In the struggle between the factions, where is the Communist Left in all these? Clearly, the CPP-NPA are opportunists, seeking to make tactical gains from the peace talks. Duterte, on the other hand, sees the peace talks and inviting leftists to his Cabinet as a way to isolate his main political enemy, the Yellow faction. However, despite a deep-seated enmity between the Marcos faction and the Communist Left, President Duterte is gambling that the Left needs him more than he needs the Left.
Furthermore, because of the rising opposition by anti-Marcos forces, Duterte, conscious of the need to keep the military to his side, has walked back on his promise to the Left to free all political prisoners. The Left, therefore, is on the horns of a dilemma: continue with its dalliance with President Duterte and gain tactical benefits, or see the Marcos faction, which inflicted the most suffering on its cadres, strengthen and perhaps return to power. (It’s more likely that the Communist Left will swallow its principles because it sees Duterte as a Sukarno whom they can use to infiltrate and control government without a revolution. Already, the Leftist Cabinet members insist on clinging to their posts, despite the administration’s attempt to rehabilitate Marcos and return his faction to power.)
WELFARE PROGRAMS TO INCUR RISKS, CORRUPTION
In his struggle with the Yellow faction, President Duterte is hoping to win public support, consolidate and expand his political power, and isolate the Yellow forces with various programs. These programs, however, are not without risks.
One is the tried and true formula of Philippine demagogic traditional politicians — populist solutions. He has promised to end “endo,” designed to generate populist applause among noisy labor unions and the Left.
The so-called “win-win” compromise formula is a win-win for Big Business monopolists and labor, but not for small and medium-sized business (SMEs) which will bear the brunt of the additional cost.
He has also announced giving away one cavan of rice per Conditional Cash Transfer family through LGUs. However, the program would most probably be marked by political favoritism and corruption.
He has approved a monthly pension increase of P1,000, but to be accompanied by an increase of contribution rates. This so-called compromise will still accelerate the depletion of SSS finances, risking a possible ratings downgrade, especially if collection falls short of targets or the legality of the contribution increase is challenged. Furthermore, the increased contribution will fall heaviest on SMEs.
He’s also going to give away irrigation for free, which will ensure that water, a scarce resource, will be wasted.
TWO IS THE DRUG WAR.
He’s hoping that drug-infested communities will give him public support if they are rid of drug addicts and dealers. However, his method may also be scaring those very same communities. Recent polls show that about 78% of the public express anxiety and worry over the so-called EJK or extrajudicial killings. Also, by encouraging a culture of impunity among the police, he may be empowering them to intensify their nefarious activities.
The third, and to me the most decisive, would be his infrastructure program or as his own people put it, “build, build, build.” It would be the most decisive because Big Business and foreign investors will see whether contracts will be awarded in an open, transparent, and fair way.
However, we are already seeing that Transportation Secretary Art Tugade is being undermined by Duterte’s own political allies. Tugade may yet end up like former DoTC Secretary Ping de Jesus who was replaced by Mar Roxas when political considerations became paramount. The corruption and nonperformance of the DoTC during the time of Mar Roxas and Abaya then contributed to the negative perceptions of the Aquino administration.
PHILIPPINES REMAINS PRONE TO RENT-SEEKING
Despite the rhetoric of President Duterte, the Philippine state remains corrupt and prone to rent-seeking. Were it not for the presence of CCTVs in the hotel, the extortion of P50 million from Jack Lam by Bureau of Immigration Commissioners (Duterte’s own fratmates from San Beda) would have gone unreported. Factional struggles are about this kind of rent-seeking. With big money at stake in the infrastructure program, I wouldn’t be surprised if the rent-seeking intensifies.
The rise in global interest rates and failure to pass the revenue-raising tax measures in toto could also derail President Duterte’s bold infrastructure program. Political posturing may mean that only revenue-losing measures are passed while painful revenue raising measures are not. Bureaucratic capacity to properly implement huge infrastructure projects poses another constraint.
With President Duterte, I had hoped that we would have a Teddy Roosevelt and the start of the Progressive Era. (In the US, Teddy Roosevelt ushered in trust-busting and the passage of progressive laws between 1890 to 1920, known as the Progressive Era).
I guess this is not to be. There is no revolution. We may be just replaying the same old story of factional struggles.
The fate of the Philippines seems to be that it will have no visionary leader like Lee Kuan Yew or Deng Shao Ping.
As I said before, change in the Philippines will be bottom up. Change will come, but it will be painful step by painful step, and not be led from the top. n
Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.