• Understanding the problem, but solving it the wrong way


    Ben D. Kritz

    PRESIDENT Rodrigo Duterte’s appeal to the Filipino electorate who catapulted him into office was the perception that he is able to efficiently implement “quality of life” policies, based on the evidence from his nearly three decades in power in Davao City. Relative to other Philippine cities, Davao is clean and generally well-behaved; government services are for the most part delivered effectively, and without the deeply-ingrained corruption found in most other parts of the country.

    It’s not a perfect place, but yes, if the entire Philippines were run with the same attitude that seems to prevail in Davao, the country would significantly improve in many areas.

    The improvements Duterte made in his home city are “quality of life” improvements, because they seem to affect people on an individual level. Reduced crime makes everyone personally feel more secure; enforcing traffic laws helps everyone move around faster and more safely; banning annoyances like firecrackers and late-night karaoke makes everyone feel more comfortable, and so on.

    What his legacy in Davao reveals about Rodrigo Duterte is that he has a deep understanding of the function and importance of institutions, and in that respect he may be unique among Filipino leaders in the post-Marcos era.

    “Institutions” in a social and economic context are not the same thing as “organizations,” but are rather a set of norms. They could be formal, such as actual laws and regulations, but are just as often organic, formed from society’s collective ideals and values. Formal institutions can develop from informal ones and vice versa; in societies that function well, institutions always have characteristics of both.

    Duterte obviously gets that “institutions,” in the sense that institutions describe collective behavior of a society, are the key to productivity. What he does not seem to understand, however, is that building institutions such as a “drug-free society” or a “government free from corruption” cannot be done effectively by bypassing or undercutting other existing institutions such as “respect for the law” or “democratic process.”

    The “drug war”—and now, possibly a similar “war” against the Indian “5-6” lenders—is a perfect example of good intentions being ruined by bad execution. One way to curb the drug business is to drastically reduce consumer demand for it. Thus, the police focus on small-time dealers and users, which leads to many fatal encounters; the takeaway for others on the demand side of the equation is that using or peddling drugs is probably mortally risky, which in turn encourages them to avoid drugs. An “institution” is, thus, created because the behavior changes out of fear—brutal, but effective.

    But encouraging vigilante-style killings with a wink and a nod sabotages the very peace-and-order institution Duterte is trying to create because it undermines another—the sole authority of the government, through its police and judicial, to enforce the laws. What the longer-term implications of letting the culture of vigilantism flourish are hard to predict, but there does not seem to be anything positive in it. In fact, it may be spreading: On Monday, less than a week after Duterte’s outburst against the “Bombays,” an Indian national engaged in 5-6 lending was shot to death by the ubiquitous “unknown assailants” in Albay.

    When analysts inside and outside the Philippines express concerns about “political stability” having a negative effect on the country’s economic well-being and growth, it is this growing problem rather than broader economic, trade, or foreign policy that worries them. The country for years has had a deserved reputation as a place where institutions that investors expect to be in place—enforcement of contracts, consistent application of other laws and regulations, consistent processes in areas like tax administration or bankruptcy—are either wholly lacking or completely inadequate. The “drug war” may not bother many investors but applying the same approach—encouraging, if only implicitly, the public to carry out government policy aims by murdering those perceived to be the cause of the problem—to other issues such as informal lending signals that a very destructive institution is being created.

    That doesn’t encourage optimism that other business environment issues will get the critical attention they deserve, and for some, may create fear that basic physical safety is at risk as well. Duterte let this genie out of the bottle, and it’s doubtful even if he can put it back. If he doesn’t want the Philippines to slip backward from the “up-and-coming economy” status it has finally achieved and once again become another banana republic, however, he should at least try.



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