The Economics of Philippine Election Spending

``The bottom line is that political campaigns are really good for the bottom line, especially the bottom line of media outlets. They are also great news for fans of wealth redistribution: campaigns take money from wealthy contributors and spread it around to everyone else.”-Stephen Dubner, Freaknomics

In a recent social gathering I attended, the topic of election spending was raised where it was attributed as an important contributor in today’s systemic “corruption”.

The commonly held view is that since the costs of getting elected continues to rise with each political exercise, any seeker of a public office would naturally attempt to recover from the attendant expenses incurred during the campaign and possibly profit from the position, mainly through from kickbacks via the Pork barrel or through other illegal or covert activities.

While of course, we do not dispute the inferences of causality that “expensive” elections most likely leads to corruption, what we believe is thoroughly missed by such argument is the economic dimension from which the whole cycle was brought upon in the first place. In our view, such exposition deals with only the symptoms but glosses over the genuine causes.

So why would any politician be so intensely keen with the so-called Pork Barrel? Dealing with basics is paramount for our wider understanding, from which we ask…what then is a Pork Barrel? According to Encarta Dictionary, it is ``government projects affording political opportunism: government-funded projects that bring jobs and other benefits to an area and give its political representative the opportunity to award favors and reap the ensuing prestige” (highlight mine). Thus, Pork barrel is nothing more than Spending of Other Peoples Money (SOPM) at the discretion of an “elected” political representative.

In other words, Pork barrels are essentially meant as political financed solutions to the social problems (mostly economic) within the jurisdiction of a political representative. This also means that such power to redistribute wealth is “ideally” intended to address the needs or concerns of their constituents but, as Encarta describes, ends up serving other (self serving) purposes than originally intended.

Since the “cost” of getting elected has become pricier, then naturally such premise implies the basic economic concept of demand and supply at work.

The economic framework: Since the demand for political solutions to the nation’s social problems increases, then the functions of political wealth redistribution has to be accompanied with necessary increases in funding (print money, borrow or tax) and logistics via more bureaucracy (more personnel, police power, office equipments etc…). Remember, fundamentally each enacted law corresponds to additional costs. Why do you think the Philippines’ fiscal budget for 2008 has now ballooned to P 1.227 trillion, a 9% increase from last year? And since the supply for public positions that are bestowed with the power to redistribute wealth are limited then naturally the price of getting elected over such political jurisdiction increases!

Plainly said, when we demand for more social spending or welfare based programs to resolve our problems then we increase the funds allocated to politicians for their dispensation. Essentially, Pork Barrels signify our excessive dependence on government where the correlation of government spending and the price of getting elected are direct.

Now whether or not politicians “honestly” fulfill their missions, the main problem is that most redistributive wealth “subsidies” programs are inherently non productive and capital consuming, (e.g. massive “pump priming” by Japan in the late 90s failed to lift its economy out of the “lost decade” rut which instead resulted to a 160% public debt to GDP whose credit rating is now even lower than Africa’s Botswana! Talk about the theoretical feasibility of pump priming and its multiplier effects, duh!), which leads to more distortions in the economy, lower competitiveness, lack of investments, greater inequality, and therefore a more vicious inflationary cycle, which will be eventually felt through a higher cost of living in the future.

Is there any incentive for the incumbent politicians to reduce this? The answer based on cost benefit analysis is most likely a NO. Why? Because for most of the politicians, more power means more control over the system and its constituents which translates to more PERSONAL benefits, either economically or egotistically. Why should the politician give up on these all benefits? Think reduced bodyguards, diminished social status or privileges, as cars, overseas trip etc... Instead, the logical direction is to even look for more social programs or for more social dependence on them that would justify increased funding and the coincident discretionary spending power that comes with it. And social welfare dependency is what mainstream media promptly emphasizes. In short, we solve inflation with even more inflation!

So when we blame politicians for being “corrupt”, we are thus implicitly blaming ourselves simply because we empower them to do so by the provision of the disproportionate power over our resources and to our actions, as well as the opportunities to “corrupt”, in the name of public weal or in solving each and every aspect of our daily problems, when in most instances these politicians are reactive (policies based on popular short-term demands), biased (penchant to favor the interest or interest groups whom they understand more or are familiar with) and most importantly unmindful of the unintended consequences of their actions (who pays for policy mistakes? Not them but the people). As Ludwig von Mises wrote in Economic Policy ```Once you begin to admit that it is the duty of the government to control your consumption of alcohol, what can you reply to those who say the control of books and ideas is much more important?”

In effect, the Philippine political system which institutionalizes the Pork Barrel as a political “social” solution is in itself institutionalizing the venal patron-client or the patronage system which continues to serve as a major hindrance to our development. We tend to always look at personalities or at superficialities mostly fed by mainstream media when the problem is the system. That’s why personality based solutions are most likely to fail, since we do not deal with the causes but only with the symptoms and thus end up perpetuating the game of musical chairs. Again, we never learn.