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Why President Duterte’s senate bets won

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Calixto V. Chikiamco-125

Introspective

Why did President Duterte’s Senate bets win?

The standard answer is that he’s popular. However, that begs the question: why is he popular in the first place?

Some say it’s because of the improvement of peace and order in general, and the popularity of President Duterte’s drug war in particular. Perhaps. However, President Duterte has been waging his drug war since he took office, but his popularity had waxed and waned without regard to the drug war. Nor did the Hugpong ng Pagbabago bets run on President Duterte’s drug war. Besides, the fourth quarter 2018 SWS survey shows an increase in people reporting themselves as victims of common crimes, so peace and order issues may not have been a factor in the May electoral outcome.

However, as an economist, I say that it’s President Duterte’s decisive war on inflation, especially food price inflation which was the key to his Senate bets’ electoral victory. The falling inflation rate, from 6.7% in October 2018 to 3.0% in April 2019 certainly created a favorable climate for his endorsement power. The falling inflation rate helped people become more optimistic about the future, as borne by SWS surveys, and may have been a reason why they voted for the likes of Bong Go, Bato dela Rosa, and Francis Tolentino, whom President Duterte heartily and constantly endorsed.

What’s more striking is the fall in food price inflation, which mainly affects the C ,D, and E classes that constitute the majority of the voting population. (See graph). Due to the timely passage of the Rice Tariffication Law and rice import liberalization, rice prices — certainly for certain classes of rice consumed by the lower classes — actually fell from around P40 per kilo to around P30 per kilo. Meat prices fell, too, because in the face of rising inflation in October last year that threatened the electoral prospects of administration bets, the administration aggressively opened up the economy to meat imports. Consumers could feel the benign inflation climate in May even if rice and meat producers yelped.

The lesson here is that market-friendly measures (e.g. rice and meat liberalization) are good for politics. That’s not the conventional wisdom. In fact, the protectionists (and NFA monopolists) have threatened politicians in the past by saying that they (the politicians) will suffer in the polls due to the plight of rice farmers. Those threats have proven to be hollow. The syndicates in the National Food Authority and their favored traders were really the ones who had most to lose in the liberalization of the rice sector.

The takeaway then is that politicians should promote policies that promote competition, dismantle monopolies, lower prices, and improve consumer choice because these are political winners. It used to be that raising campaign funds from monopolists or protecting vested interests triumphed over protecting consumer interests, but that’s a losing political strategy.

In contrast, former President Noynoy Aquino extended the NFA’s rice import monopoly and exemption from WTO liberalization, refused to privatize MRT but let his Liberal Party cohorts run it, and vetoed efforts to liberalize the foreign ownership restrictions in the Constitution (which could have led to lower telco and broadband prices). He succeeded in tarnishing the Aquino brand so much so that his own nephew and namesake, Bam Aquino, failed to make it to the “Magic 12” and his Otso Diretso bets met political disaster.

Another factor that has contributed to President Duterte’s popularity is his willingness to be decisive. For many Filipinos who are used to politicians dribbling the ball or allowing subordinates to delay, his decisiveness, even if expressed unconventionally, represents refreshing change. One example of this is his willingness to shut down Boracay to clean it up. Another is his threats to go to war against Canada over garbage. Cunning as a politician he is, he knows that posturing against Canada has limited negative consequences with much political upside against say, saying the same thing against China over its occupation of the South China Sea.

What’s less certain is the role of populism in the last elections and in the popularity of President Duterte. It’s true that President Duterte has adopted populist policies (free irrigation, increasing SSS pensions, increasing salaries of teachers, policemen and soldiers, ending “Endo”) following a global political trend of leaders campaigning with populist promises, such as Modi in India, Widodo in Indonesia, and Salvini in Italy.

I’m not sure though if populist policies are a key to Duterte’s political popularity. Look at losing senatorial bets, Senator Bam Aquino and Senator JV Ejercito. Senator Bam Aquino ran on his Universal Access to Quality Tertiary Education Act or Free College Tuition Law, which he sponsored. (It’s a bad law, by the way, since it subsidizes rich and poor students alike. It targets the school, rather than individual poor students who could have been given scholarships instead. Therefore, rich students, say in UP, don’t pay tuition instead of paying under a socialized tuition scheme.) However, Senator Bam Aquino lost anyway.

The same thing goes for Senator JV Ejercito, who, like Senator Bam Aquino, was an incumbent and had name recognition. JV ran on the Universal Health Care Law which he sponsored. It’s a good law since it focuses on primary care if it can be financed properly with the right rate for sin taxes. However, JV barely made it, landing 13th, just outside the Magic 12. It could be, though, that his feud with his brother Jinggoy could have contributed to his loss.

Therefore, it’s debatable whether populism is a winning political strategy. Our politicians have recently been on a rampage of socially progressive, if populist policies (105 Maternity Day Leave Law, Universal Health Care, Security of Tenure bill, free College Tuition Act, Telecommuting Act, more official non-working holidays, increases in teachers’ pay, etc.)

While some of these laws are investments in human resources and will lead to increased productivity in the long-term and perhaps fight insurgency, there’s a risk that ever increasing social largesse will outstrip increases in productivity and lead to economic stagnation in the future. Here, the example of Brazil is a cautionary tale. When commodity prices were high and economic growth was booming, Brazil under Lula went on a social spending spree, even earning high marks from the World Bank in improvements in child mortality, poverty, etc. However, when Brazil’s economy went south after commodity prices dived, government revenues fell and deficits widened, its economy stagnated, endangering the generous social programs started when times were good.

What’s next for President Duterte after the elections? What should he do in the last three years of his presidency to cement his legacy, enhance and perpetuate his brand, and give his winning bets political momentum going into their six-year term?

The last elections pointed to the importance of food and food inflation. This means that President Duterte must turn his attention to agriculture. His Agriculture Secretary Manny Piñol has been underachieving, consistently posting growth rates in his sector below population growth. Also, the time for land distribution as a cure-all to rural poverty is past. Free irrigation and other populist tricks also don’t work. The Duterte administration must adopt bold new policies that will focus on improving agricultural productivity and modernization, rather than land distribution.

The last elections also showed the importance of curbing monopolies, promoting competition and consumer choice, improving public services, and enhancing consumer welfare.

Duterte’s attempts to bring in a third telco player, therefore, is a laudable, if winning political move. He should go further by pushing for the Public Service Act (PSA) Amendment in the 18th Congress in order to bring in more competition, better prices and services in the telecommunications and transport sectors. Although he certified the PSA bill as urgent, it came too late, just before the Senate adjourned sine die as the 17th Congress.

Another miss is the Open Access in Data Transmission Act, which could have resulted in more players, and therefore, more innovations, better service, and lower prices in the broadband space. It failed to be taken up in the Senate. Too bad, because that Act, had it become law, would have had an impact on broadband-using young voters, who constitute the voting majority.

In sum, President Duterte’s endorsement power would probably be greater and matter more in the 2022 elections if he focuses on agriculture and improving transport and telecom services in the next three years.

 

Calixto V. Chikiamco is a board director of the Institute for Development and Econometric Analysis.

idea.introspectiv@gmail.com

www.idea.org.ph





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