President B.S. Aquino 3rd’s fifth State of the Nation Address on Monday afternoon (we know it was the fifth one, because for the second year running he helpfully remembered to begin the speech by telling us what number in the series it was), was an eye-opener in several respects.
From my own point of view, I was struck by its exceptionalism, which I wrote about earlier this week; Aquino seems to honestly believe he was elected king, and to underscore the notion, for the second time in two weeks referred to himself as “the father of the nation.”
Not even Ferdinand Marcos ever stooped to that level of impertinence; although, I am told, the same could not be said of his wife. You can decide for yourselves whether the fact that Noynoy Aquino and Imelda Marcos have social perspectives that are fundamentally similar is weirdly unsettling, or just plain ironic.
While I do assume that, to the extent he thinks on a broad scale at all, Noynoy Aquino does have positive aspirations for the country—even if he hasn’t learned yet that almost none of them can be achieved by his simply wishing it—the emphasis on the importance of personae over systems leaves a bad taste in one’s mouth, particularly when it is coming from a democratically-elected leader who owes his position to a pluralistic electoral flaw that allowed him to come up four million votes short of a majority and still claim victory.
Be that as it may, it does not make Aquino uniquely bad, or even just unique, as Philippine politicians go. Throughout this past week, I have been immersed in all things political economy, much of which has manifested itself in our three-part Mid-year Economic Review published on Monday, Wednesday, and Friday. If you haven’t read it, I’d be obliged if you go do that now. Go ahead, I’ll wait.
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Good stuff, no? There are a couple of key takeaways from our assessment of the Philippine economy. The first one is that, without disregarding or downplaying obvious critical problems such as the tragic extent of poverty in this country, persistent unemployment, and the severe under-development of many vital economic and social sectors, at a very basic—and very important, if this country is to have any sort of future worth living—level, the economy is very strong.
The second important takeaway is that most of this strength, except for the input of one critical institution, which I’ll get to in a moment, has developed organically; the fact that it has grown under the watch of Noynoy Aquino is almost entirely coincidental, and in certain respects, has happened in spite of him. Some of our analysts (who are owed a sincere “thank you” for their thought-provoking insights) have politely credited Aquino with ‘creating a positive atmosphere’ for economic growth, but none have been able to point to specific policies or decisions responsible for it; observations like, “Aquino has fostered good governance,” are not only unoriginal, they sound a bit silly in light of recent political turmoil.
What all this paints a picture of is a political economy that should have three strong legs, but is somehow managing to keep its balance on just two.
The post-Marcos Philippines is an example of what we generally refer to as a neoliberal economy, variants of which have become common to many countries in the post-Communist era. The modern form of neoliberalism is, unfortunately, a bastardization of what the term originally meant, but it still retains some of the core principles. The authentic form of neoliberalism is a German concept, and is otherwise known as “ordo-liberalism (“Ordo” is the name of an academic journal of economics, the alternative being preferred by the scholars credited with the theory’s development because they didn’t like the term “neo-liberal”) or the “Freiburg School” of economic thought. It was developed in the middle of the last century, although it can trace its philosophical roots to labor reforms instituted in the German Empire under Otto von Bismarck in the 1870s; it is the basis of the post-World War II “German Model” economy, and to some extent, the social market economy models throughout Western Europe.
Neoliberalism provides a strong role for the state to create an economic environment wherein free market principles can be maximized, which means exercising controls to encourage and maintain competition, but not directing economic processes; this also confers on the state the responsibility to provide strong social safety nets, since these indirectly support competition by improving the quality of consumer markets. The operational principle of neo-liberalism is that economic management is carried out by a clearly-defined trinity: Monetary policy, or the determination of the amount and value of money available to the financial system, is the responsibility of an independent central bank; fiscal policy, or the balancing of government revenue and expenditures in support of its market oversight and social protection responsibilities, is left to the central government; and macroeconomic policy, or the determination of the direction of economic growth as a function of economic output, is the responsibility of employers and trade unions, the productive class of society.
Here in the Philippines, as we have seen from our special reports this week, the strongest leg of the tripod is the central bank; although its effectiveness is probably not constant (which is realistically an unattainable ideal, anyway), the BSP does carry out a sound monetary policy. The second strong leg of the tripod is the productive class; the country’s businesses—i.e., the employers—are robust, and that condition is illustrated by the healthy, domestically-driven stock market.
But this second leg of the tripod is strong for the wrong reasons, because the third leg—a central government carrying out efficient fiscal policy, and maintaining a productive free market by ensuring both competition and consumer strength—is for all intents and purposes, missing. Absent the central government to check and balance the other two, and especially the productive class, an oligopoly quickly emerges and its economic power becomes political power. You might recall a couple of months ago that an executive from Ayala Land made the controversial statement that within the company’s land developments, “we are the government.”
That statement may have been a little impolite, may have made the people in Ayala’s public relations office cringe a little, but it was an entirely honest and completely accurate description of the entire political economy.
And it happens to be exactly the situation that both the founders of neoliberal theory and its critics recognized as both the likeliest and most serious risk to the model, the one set of circumstances that would almost certainly lead to calamitous results.
That is the basis for criticism of this President: By not doing his job to lead the government to do its job to take its proper place as the third leg of the tripod, he is not just “not helping” the country, he is driving it down a dangerous path, one that is as straight as any that exists in his fevered imagination. As a socioeconomic experiment it might be interesting to see where it actually leads, but there are 100 million test subjects who never asked to be lab rats, and would probably understandably refuse if they were. It’s time to find a different way.