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By Juan T. Gatbonton, Editorial Consultant
People believe widely that corruption hampers economic growth. But
in East Asia the experts have noted the seeming paradox of high
corruption and high growth occurring together. And they conclude
that corruption in weak and still unformed states—for as long as
it is predictable, moderated and controlled—has its uses, since it
substitutes for the legalities that in the mature countries ensure
the stability of investments and the inviolability of property
rights.
Only in our country has corruption failed to
produce this East Asian paradox.
Making
corruption work
In the course of their drive for development
(1960 to 1990), East Asian leaders apparently recognized the
inevitability of corruption in office and accounted for it in their
economic strategies.
Except in the city-state of Singapore, the
region’s developmentalist authoritarians did not abolish
corruption. But they made sure investors were safeguarded from
independent, uncoordinated demands for bribes in exchange for favors
from government. They ensured investors that the state would keep
every agreement it made with them—in effect, that the officials
and politicians they bought would stay bought.
In Korea, the personally austere Park Chung Hee
distributed lavishly capital from nationalized banks to state
corporations and crony capitalists, provided they brought in foreign
technology and shipped out exports —or else.
In Suharto’s Indonesia, the ruling clan
controlled the bulk of “rents” generated by state policy. Hence
self-interest impelled Suharto to moderate the greed of his extended
family, hand over to technocrats the management of the economy, and
so keep investors happy.
In Thailand, between 1980 and 1988, General Prem
Tinsulanonda abandoned the pork-barrel-rich line ministries to the
politicians, in exchange for their non-interference in economic
policymaking. This Faustian bargain enabled the kingdom to grow at
the world’s fastest rate (13.2 percent in 1988) during that
period.
The Philippine exception
In our country, Marcos’s authoritarian
experiment failed—both from the historical weakness of the state
apparatus and from the resistance of peasant-labor and ethnic
dissidents, the elite families he dispossessed, and (after the
assassination of Ninoy Aquino) an aroused middleclass. Marcos was
never able to impose stability long enough to make “constitutional
authoritarianism” work.
Procedural democratization over 70 years had
distributed political power and influence widely, multiplying the
“veto points” in the policy-making process—as well as the
opportunities for “freelance” as well as for “syndicated”
corruption.
The strongman gone, the system reverted quickly
to the old checks and balances—with its independent units often
working at cross-purposes and with corruption unbridled. As one
result, our country has fallen to the bottom of the World Bank’s
ranking of the East Asian states by their degree of corruption. The
bank estimates the Philippine state is able to control only 22
percent of corruption in the country.
What is worse—as the National Broadband
Network-ZTE and older scandals show—government cannot even
guarantee the commitments it makes to potential investors. No
wonder, then, that Philippine firms have the shortest planning
horizons among East Asian corporations.
So what do we need to do?
Nowadays even people who should know better say
a spell of authoritarianism would be good for our country. But
experience suggests such a prescription would have to be imposed
through a great deal of violence and bloodshed—and very likely
without ever producing the stability and growth we wish to have.
I myself feel we have no choice but to live with
what Washington SyCip calls our “premature democracy.” The
University of the Philippines economist Emmanuel de Dios suggests
that we would be better off if we worked generally to reduce the
scope of discretionary behavior of officials, cut down the
presidency’s dominance over the whole of government, and set
larger roles and broader powers for local government units, as well
as for the legislature and even for the free market.
In de Dios’s view, even foreign
commitments—such as our membership in Asean, APEC and the World
Trade Organization—will reduce corruption, by binding the
Philippine state to international standards of economic and
contractual behavior.
A generation of growth
In sum, because corruption in our country has
been unpredictable, immoderate and uncontrolled, we’ve been unable
to use it as our neighbors have done—as an aid in stabilizing
investment and ensuring the security of contracts. As a result, our
periods of growth have been both short and low—while our neighbors
have been able to sustain high growth for long periods.
Between 1980 and 1995, a 15-year period,
Thailand averaged 7.86 percent growth and Indonesia managed 6.60
percent. Our own most recent burst of growth—between 2004 and
2008, which hit a peak of 7.3 percent in 2007—was fuelled by
private consumption fed by strong OFW remittances. But in late 2008,
it was aborted by the Wall Street meltdown, which was compounded by
rising prices of oil and food.
The World Bank estimates we would need to
sustain that level of growth for at least a generation—if we are
to become a mature nation with individual incomes approximating
First-World levels. How we are to organize that generation of growth
is the question we all must figure out.
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