Philippine Politics: Systemic Defects of the Pork Barrel Political Economy

``We are taught, from a very early age, to believe in that which is unreal - known in street parlance as B.S. It becomes so ingrained in us that we jeer those who try to talk straight. Nothing can make a person more unpopular more quickly than daring to be truthful - especially when the truth threatens the instant gratification of others. "Woe to him," cautioned Will Durant, "who teaches men faster than they can learn.”-Robert Ringer

Personality based politics is once again the order of the day. Given today’s highly charged atmosphere, mainly juiced up by mainstream media, many people have been impassioned in the belief that we are in desperate times that requires drastic measures.

Amidst the hullabaloo of the unraveling episodes of scandals, exposés and titillating controversies, the basic premise has been this: The incumbent leadership is so morally BANKRUPT that the ONLY RECOURSE to the nation’s salvation is to UNSEAT THEM (by extra legal means).

While we do not disagree with initial premise, what seems to confuse the public is the distinction between the means to an end and the end itself, where a complex problem is reduced to simplicity with a corresponding “simplified” solution.

Hence, the conundrum of “People Power Fatigue” or the seeming irresponsiveness by the general public to calls from certain quarters to undertake the street politics of the past.

We Get What We Deserve

We have to understand we live in a “democracy”. The nation’s leadership did not pop up from nowhere, we PUT them where they are today (by both the extra legal and electoral process).

One may argue that the incumbent may have cheated themselves into the present position, but what is missed is that cheating comes in a tightly contested race (e.g. Erap’s landslide victory in 1998 did not give the FVR administration the opportunity to cheat-yet it was a political statement against FVR too) and next, the alternative or rival candidate was no guarantee of a “moral” leadership (yes, a highly popular but surrounded by traditional politicians, and political interest associated with the deposed president).

What I’d like to point out is that the Filipinos are simply reaping from the sets of leaders we chose from.

Take the 2007 senate elections. As we pointed out in our May 28 to June 1 2007 edition, [see Philippine Elections Determined by The Contrast Principle!], the outcome of the elections, where the opposition trumped the administration bets, was clearly based on sentiment meant to drive a political statement against the administration.

I wrote then ``As Franklin Pierce Adams (1881-1960) American Journalist wrote, ``Elections are won by men and women chiefly because most people vote against somebody rather than for somebody.” And Mr. Adams’ aphorism echoes loudly in today’s vote; it was a vote AGAINST somebody rather than for somebody (-ies).”

For as long as the candidates were deemed to be winnable and strongly biased against the administration, regardless of the past performance they were voted upon by the public into office. One even spearheaded the ouster of the previous president via congressional impeachment yet ironically had to seek the latter’s endorsement-it’s a curiosity how it seems like a norm for the public to simply accept political “turncoatism” or “butterflies”.

In the context of the contrast principle or (changingminds.com) the difference between “things” and not absolute measures, this means that the limited options reduce the chances of highly qualified set of leaders being voted into office. In politics it could mean a choice between the proverbial “pot” and the “kettle” where both have been calling each other black!

The lesson here is we do not elect our leaders based on integrity, ideology, platform, performance track record or other quality measures of meritocracy but on superficial traits as winnability, personal familiarity or association or network, sentiment, popularity, machinery or faddish themes, regardless of political baggages.

Thus, we get what we deserve.

This also means that for us to attain our desired “moral” leadership we need to RADICALLY IMPROVE THE MANNER FROM WHICH WE SELECT OUR LEADERS. Otherwise all this political exercise for “change” can easily be labeled as mere blarney.

Abstractions, Value Judgments and Getting Fooled Over and Over

This leads us to the next item. The public seems to have a short memory. Philosopher George Santayana’s famous axiom, ``Those who cannot remember the past are condemned to repeat it” seems so fitting. Or how about this anonymous quote ``Fool me once shame on you fool me twice shame on me.”

Many have been calling for another People Power. The underlying belief is a swift resolution in response to a “simplified” problem. The unfortunate part is that we keep on repeating what philosopher Santayana keeps warning us about: WE NEVER SEEM TO LEARN FROM THE PAST. Or applied to the present situation, we seem to keep on fooling ourselves over and over. The unanswered question is why?

We have seen this script before in 1986 and in 2001. While the difference maybe in the characters and circumstances involved or how these events played out, the patterns and the alleged sins have basically been the same: Abuse of authority and corruption.

For starters, the fanfare about political change is mostly anchored on abstraction. As self-development Robert Ringer defines (highlight mine),

``An abstraction is theoretical in nature - i.e., it is not a tangible reality. It has no form or substance. Examples of abstractions include such concepts as time, infinity, negative numbers, zero, gravity, motivation, resourcefulness, love, justice, fairness, dreams, intuition, common sense, conceptualization, and axioms…What I'm driving at here is that we live in an abstract world, a world filled with abstract thought, existence, and causality. A world where time, being, and substance are not provable. ”

Let me give you an example.

A terminally ill father is supported by his children. The eldest child gives out a portion of his income as contribution. The second child gives out all of his income, while the third child even borrows aside from shelling out his entire earnings to sustain their father. The youngest child does not contribute because he is unemployed. So which among the children serves best their father?

You see the problem here is one of opportunity costs. It is a problem based on a trade off between the available resources (by the children) and the life of their father. People are likely to have different responses with respect to this dilemma based on their perceived “value”. In other words, the above case represents a mundane abstraction based on value judgments.

Where value judgments, according to wikipedia.org, ``is a judgment of the rightness or wrongness of something, or of the usefulness of something, based on a narrow personal view. As a generalization, a value judgment can refer to a judgment based upon a particular set of values or on a particular value system. A related meaning of value judgment is an expedient evaluation based upon limited information at hand, an evaluation undertaken because a decision must be made.” (highlight mine)

The point is what you may define as “morality” or how you perceive the world (or government) should function maybe different from what I or others may perceive as “moral”. While we may share the same definition for a particular abstraction (e.g. altruism or honesty), the degree of application of value judgments is likely to vary according to the existing conditions when the problem is presented.

Example, if I decided to donate to some spare money to some street children of Mandaluyong, then what I give to them means that I don’t give to the street children of Manila, San Juan or to street children of other places or to orphans or to handicapped children or to delinquent juveniles or to abused children or other underprivileged class. Does that make me any less charitable?

Or if you happen to see a Php 1,000 bill on the floor right in front of the ATM, with nobody near the premises…do you ignore the bill or do you get the bill and give it to the bank branch manager or surrender it to the police headquarters or donate it to the beggar at the street corner or keep the money for yourself? If you decide on the latter, does it make you any less honest?

Yet the problem is, media portrays the present political predicament as something clear cut; a choice between black and white, or good or evil. Remember, wrong diagnosis leads to the wrong treatment.

In the same plane, in economics, a free market laissez faire advocate, a Keynesian, a Supply Sider, a monetarist or communist while exposed to a similar problem would apply different solutions according to their value judgments.

In politics, we see the same, where you see some leaders call for moral upheaval the unfortunate part is that many of those who were previously privileged have not shown satisfactory performances to validate their claims. Again English Author Samuel Johnson maxim is a perfect working example in Philippine politics ``Patriotism is the last refuge of a scoundrel." In essence morality is term conventionally used for political convenience.

Lets us change the equation from the above example.

Suppose the four children died and you would be asked to regularly give, donate or sustain the terminally ill man, would you do so?

Essentially you probably won’t, if you don’t know the person or his family. You probably would-only if it falls under certain circumstances, e.g. part of the project of your socio-civic group…but perhaps not regularly and perhaps under a limited sum in proportion to your surplus resources.

But this is how exactly government functions, it forces you to do so-it is a coercive redistribution of resources-by taxing you and me-and giving it to the “underprivileged”. It transfers resources from the productive sectors of the economy to the non-productive sources.

If the redistribution process grows more than the required rate of capital investment then the economy suffers. Government would resort to borrowing money (deficit spending), inflating the money supply which eventually leads to a litany of ills- higher taxes, high cost of doing business, a depreciating currency, reduced purchasing power via higher cost of living, capital flight, higher interest rates and social inequality.

Meanwhile, the social costs are deeply rooted sense of entitlement and the dependency culture. Yes, why work or take risks when government pays anyway.

The important point as elucidated by Ludwig von Mises in his magnum opus Human Action, `` There is need to emphasize the truism that a government can spend or invest only what it takes away from its citizens and that its additional spending and investment curtails the citizens' spending and investment to the full extent of its quantity.”

Figure 1 ADB: Comparison of Investment Rates as % of GDP

Yet, to attract capital investments you would need to have a competitive hurdle rate or (wikipedia.org) ``minimum rate of return that must be met for a company to undertake a particular project” relative to other investment alternatives as our neighbors. As you can see in Figure 1 from Asian Development Bank, the Philippines has the least investment rate among its neighbors.

ADB imputes this partially to hefty growth in service sector (which is not capital intensive), excess capacity and low domestic savings, and weighted towards infrastructure inefficiencies (e.g. expensive and unreliable electricity and transport networks), high taxes, cumbersome business procedure and overregulation, aside from fiscal deficits, poor governance and small and narrow industrial base. The reason for the highlight is to show you the congruence between my observation and that from ADB.

The Pork Barrel Political Economy

Come to think of it given the way “morality”-honesty, compassion and fairness is tossed about in the media, it would seem to allude of our poor as a “privileged class” since many politicians and experts seem to use them so often and throw in every interventionist “kitchen sink” solution to our problem of more than 45 years! Yet the paradox is while they (experts and politicos) have been in and out of power, the Poor unfortunately remain POOR!

As evidence, our “moralistic” political economy has seen the government intervene in almost every sector or industry such that many state owned enterprises (Government Owned Corporations or Controlled Corporations) are still being subsidized by national government which continues to be a drain and a drag to country’s fiscal conditions (thus constitutes a major growth constraint cited by ADB).

Or take a look at the Pork Barrel system as discussed in our November 12 to 16 edition, [see The Economics of Philippine Election Spending], the purpose of the Pork is to provide benefits and jobs to the local constituents. The idea is-since local elected officials should know more and are “sensitive” to the needs of its constituents, these taxpayer funds are meant to be “moralistically” reallocated according to the discretion of elected authority’s “value judgments”. The problem is where has all the money gone?

If our elected officials have been “efficient” in allocating or dispensing of such funds “productively” then probably ADB won’t be citing much of our infrastructure inefficiencies as another constraint to growth.

On the other hand, who among the elected officials have not encountered requests for special personal favors from one’s political jurisdiction?

Special personal favors such as burial expenses, to medicines, to jobs to tuition fee subsidizes, to loans, to basketball t-shirts to trophies, etc…, yet given the low and limited pay of our officials, they have allegedly been impelled to use the Pork Barrel projects as a source (via SOP – euphemism for kickbacks) for accommodating these personal requests.

So essentially, the Pork Barrel culture reinforces the patron-client relations from which the Patron (politicos) delivers doleouts and subsidies, which is squeezed from the Pork Barrel projects, to the clients who deliver the votes and keeps the former in power. Hence, the Pork Barrel system is essentially a legitimized source of corruption and abuse of power seen from almost every level of the nation’s political structure, an oxymoron from its original “moralistic” intent (unintended consequences). As the saying goes “the road to hell is paved with good intentions”.

As we previously noted, ``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.”

Oligarchy, Crony Capitalism and Conflict of Interests

More proof? Look at the recent “oligarchic system” floated in the papers or in speeches by some officials. In my recent post It’s Less About Oligarchy and More About Bureaucratic Crony Capitalism, I demonstrated how the proffered “present ills” of the society is less about oligarchy but more about cronyism. Since the names of the alleged oligarchs seem relatively new (except for one) this does not qualify them under such definition. Oligarchs are those who command powerful economic means to allow them to shape the nation’s political structure to their auspices, hence they are likely to be longstanding well entrenched “oligarchs”.

Yet people look at the surface without parsing through the casual structures; both of these political structures operate on common grounds, Oligarchy and Cronyism essentially signifies overregulated economies.

Oligarchs thrive on regulations that keep away competition (hence, exerting control via “king makers” role) while cronyism makes use of high political connection which takes advantage of the "web" of regulations in order to benefit financially.

In a market economy, capital investment allocation is determined by market forces competing to win the consumer’s vote. Wealth is determined by satisfying the consumers. Regulation is kept at a minimum: mainly to uphold contracts and property rights. Taxpayer burden is thus, marginal.

In overregulated economies, the privileged class is sustained by a wall of regulation and close political ties and not by a level playing field. Wealth comes from getting the right political connections than risk undertakings.

So aside from the benefits of spending other peoples’ money (SPOM) through the Pork Barrel system, today’s struggle for power is also about economic dominance-consorting with the privileged class.

Finally is the issue of conflict of interest. Ex-US President Thomas Jefferson once said, ``The man who reads nothing at all is better educated than the man who reads nothing but newspapers."

In this case, I would agree with Ex-US President Thomas Jefferson, the obsession with political drama is derived from media’s propensity to paint the proverbial “mountains out of molehill” or to create a crisis of monumental proportions when the problem is all about “personality based” politics and the proclivity for drama and controversies.

Remember, media’s incentive is to sell news. And bad news sells; the more the controversial, the more the sensational, the more sales and advertising revenues for the media outfits. It is the incentive for media to sensationalize bad news. Yet, many believe media as some sort of “gospel wisdom”.

We see the same predicament with the church. The church appears to know how the government should be run and where the economy ought to be steered into. They should be allowed to turn this self-righteous attitude into real politics, let one of their representatives run for the top spot in 2010. Maybe they can clean the proverbial Aegean Stables.

Yet, the problem of the church is one of incentives and not of direct taxes. When the church advocates for more welfare spending to signify “compassionate governance”, it means more burden for the taxpayers. Again where do you get the money to spend for do goodies for the underprivileged (remember the example of the terminally ill father)? Unfortunately, it is us and not them.

Since they do not pay direct taxes (which according to them is not a privilege), taxpayers would shoulder any direct weight of additional social spending, so it is easy for them to tell us where to spend government money because the burden falls squarely on our shoulders.

As for the argument of indirect taxes, according to them while they don’t pay direct taxes they pay indirect taxes. Following such premise we get a double whammy: we pay both direct and indirect taxes. Woe again to us the taxpayers.

Conclusion

All these tells me that this is LESS of a problem about morality, but more of a SYSTEMIC DEFECT which skews on the incentives for the politicians, the investors/capitalists and the voting populace arising from TOO MUCH dependence on government sustained by a pork barrel culture and the defense of the privileged class.

It is my sincere hope that people would start looking at the roots of the problem, rather than deal with superficialities and learn by the lessons of the past as philosopher Santayana warns.

It is easy to make a prediction. 2-3 years after the assumption of a new administration, be it through extra legal change or via elections proper in 2010, we will most likely see similar scandals, but at a varying degree over and over again.

Why? For as long as we don’t change the way we choose our leaders, for as long we depend on the Pork Barrel system of governance and hide behind the walls of regulations to uphold the privileged class, the system remains greatly vulnerable to the abuse of power and its offshoot-corruption.

Moreover, our inherent penchant for melodrama as well as advances in technology-cellphones, the web, would allow us to witness and share more of such controversies.

But all is not without hope though. Happiness is not only measured by money, a recent study by Freakonomics’ Justin Wolfers (posted in our blog) indicates that the Philippines is probably the most conducive place for love. Maybe when we are not busy playing acrimonious politics we fall in love.