Capitalism will save Philippine democracy
I was struck by the perilous state of democracy in the United States, as described by Harvard professors Steven Levitsky and Daniel Ziblatt in their bestselling book, How democracies die, and by the way a similar situation is unfolding in many countries, from Hungary to the Philippines, but also by the way the solution will be different for our own country.
The basic thesis of the book is this: the United States is not unique insofar as democracy in America is not in jeopardy. As in other parts of the world where authoritarianism has taken hold, American politicians demonize the opposition, scold and intimidate the press, denounce the election results and seek to overthrow them. This erosion of democratic norms has become common with Trumpism. Social, racial and class polarization, group resentments, racial and cultural differences and strong income inequalities have led this movement to weaken democracy and delegitimize institutions. Something must be done to save democracy, but how?
The authors propose a social market model to tackle growing income inequalities and class resentments, which are at the root of growing polarization and policies that undermine democracy. They postulate that social policy in America relies heavily on means testing, available only to those who fall within a certain income threshold. And because race and poverty overlap in the United States, these programs are stigmatized as being given to the undeserving, and the middle class feels left out of social policy.
Instead, Levitsky and Ziblatt propose universalist social policies or ones that benefit everyone. “Social policies that benefit everyone – Social Security and Medicare are prime examples – could help lessen resentment, build bridges between large sections of the American electorate and places social support for more sustainable policies aimed at reducing income inequalities – without providing the raw materials for racially motivated reaction.
This is exactly what US President Joe Biden is trying to do now – if the US Congress allows it. His $ 2.2 trillion stimulus package, $ 1.9 trillion infrastructure plan, and $ 1.8 trillion family plan represent the kind of universalist social policies Levitsky and Ziblatt talk about. Judging by the scale and size of Biden’s plans, we can describe them as big government social engineering on a grand scale.
In the Philippines, as in other countries, a similar dynamic of growing authoritarianism and democratic decadence is occurring under President Duterte. He has attacked mass media and armed social media, militarized bureaucracy, expressed contempt for human and civil rights in his war on drugs, demonized his political opponents and strengthened his grip on the justice system.
High income inequality, widespread poverty, failure of previous governments to improve the lives of the masses, resentment against an elite based in Metro Manila, forced separation of families due to the need to seek greener pastures abroad, widespread criminality fueled by drugs affect the poor – all of which may explain the president’s enduring popularity despite – or is it because of – his attacks on democratic institutions. Elite liberal democracy has not served the people well, so why not populist Duterte democracy?
The fact that these inequalities, these institutional failures and these resentments exist tells us that democratic decadence and the drift towards authoritarianism will not be stopped once Duterte comes out of power.
So, how to save the Philippine democracy?
Not by a turn towards socialism or a social market economy, but by capitalism. Capitalism will save Philippine democracy. Why and how?
There is an absence of capitalism in the Philippines. Instead, here we have rentier capitalism and economic statism.
Rentier capitalism (or rent-seeking capitalism) is a system in which monopoly control leads to extraordinary profits or “super-profits” for a few without the system providing increased value or contribution to society. . It is also the non-market extraction of the surplus – that is, political relations, legal barriers to competition, privileges granted by government and captured regulators – that forms the basis of economic profit rather than innovation at the service of the customer. It is to create wealth for the capitalist rentier without creating wealth for society.
Such a system is predominant in the Philippines, which is Asia’s most concentrated economy with monopolies and duopolies controlling strategic sectors of the economy, and where political connection or “entering the state” is the basis of the economy. profit. False nationalism, characterized by protectionism, is used to solidify monopoly control.
Rentier or rent-seeking capitalism explains the country’s high income inequality, deep resentment against “Imperial Manila”, regionalism and tribalism, and even the absence of the rule of law. Since monopoly power and political relations are the basis of profit, it is a system, as my friend Dr Raul Fabella says, where the rules themselves are for sale, leading to bad governance, economic chaos, investment uncertainty and widespread corruption.
True capitalism, on the other hand, is a system where profit is made from innovation (say, with a better product, like a meatless burger; a distribution system, like online shopping; technology, like the cloud computing, etc.) and the capitalist constantly reinvests profit in order to innovate in order to capture “extraordinary profit”. The result is economic dynamism, or “creative destruction” in the words of economist Joseph Schumpeter.
Unlike rentier capitalism, real capitalism thrives on the back of a “level playing field” or the rule of law.
Capitalism oriented towards the world market is particularly dynamic, because the competition is fierce. Monopoly privileges are difficult (perhaps only with a patent or copyright) if not impossible to achieve.
True capitalism is also absent in the countryside. Instead, we have statism, that is, excessive centralization and state control in economic affairs. Farmers are not allowed to expand beyond five hectares. Land reform beneficiaries are not allowed to rent or sell their land within 10 years of granting or when they have outstanding amortizations (most have not paid because these same restrictions have eroded the value of their land. land). To lease your land, you need government approval. Beneficiaries of land reform can only sell to other ARBs designated by the central government. Many of them still have collective titles issued by the government, depriving farmers of any incentive to improve their land.
Statism explains why there is a lack of capitalism in the countryside – the lack of agro-entrepreneurs who will use management, science and technology to increase productivity and, therefore, improve the lives of farming communities.
Statism replaced feudalism in the countryside and worsened the situation of farmers. An incompetent, inefficient and corrupt state has replaced the owner.
Statism explains the lack of economic dynamism, low productivity and widespread poverty in the countryside and all the social and political ills they generate. The result is income inequality, lack of economic opportunity, widespread desperation, drug addiction and rural insurgency, all of which fuel a thirst for populist authoritarianism. The lack of rural capitalists means the absence of a strong middle class, which could act as a brake on political dynasties.
We are told that simply changing those in power with distinguished leaders will save Filipino democracy. It is misleading and false. In the Philippines, populist authoritarianism is the result of a system of rentier capitalism and statism.
Democracy is threatened everywhere, even in the United States. However, in the Philippines, the solution to democratic retreat is different. It is not a social market economy, but capitalism that will save the Philippine democracy.
Calixto V. Chikiamco is a member of the board of directors of the Institute for Development and Econometric Analysis.