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Wednesday
Jan022013

Marcos versus Park  

As we noted in our last post, there is a far more charitable account of the Marcos dictatorship after 1972 in the Philippines than brought to mind by Imelda’s 3,000 pairs of shoes. 

Marcos himself argued that the move to autocracy was needed to discipline the oligarchs and discipline them he did.

The Lopez family was one of these. Before martial law Marcos had Fernando Lopez as his vice president as part of a strategy to co-opt the oligarchs. But after 1972 Marcos discarded him and expropriated his assets, sugar estates, media empire and power generating plants. He cowed the rest of the sugar oligarchs into submission. He also centralized the state and embarked on an attempt to promote industrial exports.

In these strategies and aspirations Marcos was quite similar to Park Chung-Hee in South Korea. Park rose to power in a coup in 1961 and one of his first acts was to arrest and lock up business oligarchs on the grounds that they were “illicit profiteers”. Park similarly abandoned the attempt to keep himself in power through elections in 1972, just as Marcos did. He also famously launched an ambitious export-driven industrialization plan.

The difference between the Marcos and the Park experiences, however, is that while the latter was a huge economic success, the first collapsed into an orgy of rent seeking and looting of the state. Why the difference?

This takes us back to the history and in particular the history of the construction of the state. As we saw in our previous post, the state in the Philippines was built from the bottom up in a way which facilitated its capture by the oligarchy. This captured state was highly patrimonial, largely lacking meritocratic recruitment and promotion of the bureaucracy for example. Appointments were made on the basis of political criteria, for example, ability to help win elections.

The history of the state in South Korea was very different. As Peter Evans pointed out in his seminal book on comparative economic development, Embedded Autonomy, the Korean state developed by Park was able to tap into a rich history of meritocracy dating back to an examination system which the pre-colonial Korean state had adopted from imperial China. Both Park and Marcos tried to build the state, but they worked in the context of very different historical legacies and contemporary politics. In Korea, land reform had obliterated much of the traditional elites.

Ultimately, both Park and Marcos attempted to launch what we call “extractive growth” in Why Nations Fail. This was a success in Korea but not in the Philippines because Marcos did not have the type of state that was capable for generating economic growth from above. In Korea, Park was able to create hard budget constraints, and credible rewards and punishments for economic success and failure. Marcos had no such option with his captured patrimonial state. Perhaps the looting started because he realized that Korean style industrialization was not an option in the Philippines (though in fact there is evidence that it dates back to the 1960s).

All that being said, as we also point out in Why Nations Fail, even Korean growth could not have been sustained without the transition to inclusive political institutions and away from Park’s authoritarian regime.

But equally importantly, the Philippines experience also suggests that extractive growth is not even a transitory option for countries lacking the type of centralized state that Park inherited and strengthened.

Wednesday
Dec262012

Cacique Democracy  

Let’s set aside culture and return to the colonial history of the Philippines and how it influenced institutions. One of the most influential analyses of this is due to the political scientist Benedict Anderson, whose 1988 article in the New Left Review “Cacique Democracy in the Philippines: Origins and Dreams” laid out a theory of the political economy of the Philippines. Like Fallows’s article (which we discussed here) , Anderson’s was written in the wake of the People’s Power Movement that had ousted Ferdinand Marcos. Everyone was trying to come up with forecasts for where the Philippines was going. Fallows’s answer was: nowhere, because, he argued, the real problem was not Marcos but Filipino culture. Anderson’s answer was also nowhere, but from a very different perspective.

As we noted in our first post on the Philippines, though the country was a Spanish colony and even shared the same specific institutions as Spain’s American colonies, there were important differences. There was little settlement by Spaniards, and as a result the Church essentially ran the colony. They invested little in education, and at the time of US occupation probably no more than 5% of the population spoke Spanish. In the 19th century after the collapse of the Spanish empire in the Americas, commercial restrictions were gradually lifted on the Philippines and a non-Spanish economic elite, often of Chinese descent, emerged. They gradually acquired education and spearheaded the nationalist movement that ousted the Spanish shortly before the US invasion. Yet the behavior of the US administration was to turn this elite into a real oligarchy.

First, they expropriated about 400,000 acres of land that had been church estates and auctioned it off. It was the elite that had money to buy this land.

Second, right from the beginning they staffed the administration with locals, but these were positions that the educated elite was best placed to fill. In addition, meritocratic criteria were not applied for recruitment into this administration, so the oligarchy could easily dominate them, as Anderson puts it:

Here is the origin of the ‘political dynasties’ —among them the Aquinos and Cojuangcos—which make Filipino politics so spectacularly different from those of any other country in Southeast Asia.

Third, they introduced elections first at the local level for provincial governors in 1902, then for the lower house of the legislature in 1907, then a bicameral assembly in 1916, and finally for the executive in 1935. Though this sequencing of elections, with local ones coming first appears like a good idea in the abstract, in practice it allowed the newly entrenched oligarchy to dominate local politics and then to build on the skills they honed at this level to capture the successive democratic institutions that were opened up (albeit with a very restrictive property franchise).

As a result of all of this, from the start the Philippines was a captured democracy, even if the elites who were doing the capturing were different from the elites of Latin America — they owed their power more to the way the US had structured their colony.

Nevertheless, elite dominance had the same effects in the Philippines as in Latin America — most notably extractive economic institutions and poor economic growth. After independence in 1945 they maintained this dominance. Indeed, the first serious attempt to break it was by, none other than, Ferdinand Marcos who after his election in 1965 introduced marshal law and suspended the constitution in 1972. He then ruled in this fashion until ousted in 1986 by Corazon Aquino and People’s Power.

Marcos went down in history as a run-of-the-mill kleptocratic dictator, but actually there was more to it than that. If you read his 1974 book Notes on the New Society of the Philippines you’ll see that his diagnosis of the root cause of the problems of the Philippines is precisely that it is dominated by an oligarchy. So, Marcos justified his policies by the attempt to break the oligarchy’s control over the economy and the polity!

And why was Anderson so pessimistic in 1988 about the future of the Philippines?

Precisely because, though he did not consider the Marcos dictatorship a success, it was followed after 1986 by the return of the oligarchy. So Anderson argues:

the truth is that the President, born Corazon Cojuangco, is a member of one of the wealthiest and most powerful dynasties within the Filipino oligarchy… Her marriage to Benigno Aquino, Jr., at various periods Governor of Tarlac and Senator, linked her to another key dynasty of Central Luzon.

So People’s Power overthrew the dictator Marcos in order to reinstate the oligarchy….

Thursday
Dec202012

The Politics of Utang na Loob  

We ended our last post by casually remarking that rather than having a “bad culture”, perhaps the Filipinos had too much of a good culture that interacted in a perverse way with weak institutions, allowing for vote buying. In fact, though the example we gave there was from Paraguay, there is quite a bit of evidence that some patterns of behavior are of this type in the Philippines. In the Philippines there is the concept of Utang na Loob which can be translated from the Tagalog as “debt of inside” or as “debt of gratitude,” and is closely related to the reciprocity we were talking about in our last post. Quite a few students of Philippine politics see this as an important concept to help understand various facets of who runs for and who wins elections (on this, see this blog post).

How such cultural practices and social norms interact with other institutions is an important area for research and at the moment is little understood.

Our only point here is that, like most other social norms, Utang na Loob fundamentally interacts with institutions and politics. On its own, it could be a positive behavioral pattern, facilitating trust, cooperation and exchange. But in the electoral and institutional world of the Philippines, it seems to produce the same sort of perverse outcomes that reciprocity and vote buying networks produce in Paraguay.

And if one wants to change politics in the Philippines, it makes sense to focus not on cultural change so as to undermine Utang na Loob, but rather on institutional reform and political change.

Tuesday
Dec182012

Good Culture? On Vote Buying and Reciprocity  

In our last post, we discussed a famous cultural hypothesis about the Philippines which suggested that its bad culture was at the root of its poverty. As we pointed out, the particular cultural hypothesis that James Fallows proposed was a bit vague, however.

Culture is complex and no doubt made up of many different practices and beliefs. For instance, cultural anthropologists would see reciprocity as being a fundamental human cultural process and essential to a well-functioning society. Reciprocity means that if somebody gives something to you or does something for you, you tend to do likewise — i.e., reciprocate.

Social scientists have devised games for testing how reciprocal are and you might well argue that being reciprocal is critical for building cooperation, trust and a well-functioning society. Could it be that the Filipinos are just insufficiently reciprocal?

But as the paper by Fred Finan and Laura Schechter shows, reciprocity can be a double-edged sword in the presence of weak institutions. As we’ll see coming up, politics in the Philippines is endemically clientelistic. There are many ways of engaging in clientelism but a simple one is vote buying. A politician gives you money and you vote for him.

Finan and Schechter start with the puzzle of how clientelistic practices can persist if there is a secret ballot. The politician comes to buy your vote, but how is he going to be sure that you kept your end of the bargain after getting the money and voted for him?

Finan and Schechter argue that one potential way that this problem can be solved for clientelistic politicians is if they are able to identify people in the community who are intrinsically “reciprocal”. Such people are just culturally disposed to reciprocate when someone does something for them. If there is an effective secret ballot, they may be able to cheat, but they just won’t. Then using data they collected in Paraguay from surveys and games to identify how reciprocal people are, Finan and Schechter show that it is people who are more reciprocal who are likely to have their vote bought, and politicians use intermediaries and community leaders to identify such people.

What looks like “good culture” in the abstract turns out to support clientelism, a political strategy associated with the mass under-provision of public goods.

Hmm, so maybe Filipinos are too reciprocal?

Thursday
Dec132012

A Damaged Culture?  

That’s what James Fallows said in his 1987 article in The Atlantic was the problem with the Philippines. According to this hypothesis the difference between the Philippines and South Korea in 1960, say, was that the former had a bad culture, while the latter had a good one, or at least one that was consistent with economic growth. For every country that is poor, there is normally a commonly cited cultural explanation of why it is poor, resting on some dysfunctional aspect of national character or religion, and Philippines is no exception to the rule. Therefore, let’s take the bull by the horns and get this explanation out of the way.

Fallows starts his argument by stating:

The countries that surround the Philippines have become the world’s most famous showcases for the impact of culture on economic development. Japan, Korea, Taiwan, Hong Kong, Singapore—all are short on natural resources, but all (as their officials never stop telling you) have clawed their way up through hard study and hard work. Unfortunately for its people, the Philippines illustrates the contrary: that culture can make a naturally rich country poor.

Yes it is right that people in Japan, for example, study and work hard. But the economic growth of Japan was certainly not due to culture. As we note in Why Nations Fail, Japan was a very poor feudal society lacking a modern state until the 1860s when a political revolution created new institutions that set it on the path to modern economic growth.

This growth was in fact relatively modest until after World War II. Then in the wake of military defeat and the US occupation, Japanese society shifted in a radically more inclusive direction. There was agrarian reform and the break up of the big industrial cartels, the Zaibatsus, and there was a new constitution that helped to create a much more inclusive political system. A broader distribution of political rights went along with a powerful central state whose famous agency, the MITI, played an important role in encouraging investment and steering the post war economic growth. Where is Japanese culture here?

Having asserted that East Asian success is due to good culture, Fallows goes on to argue:

It seems to me that the prospects for the Philippines are about as dismal as those for, say, South Korea are bright. In each case the basic explanation seems to be culture: in the one case a culture that brings out the productive best in the Koreans (or the Japanese, or now even the Thais), and in the other a culture that pulls many Filipinos toward their most self-destructive, self-defeating worst.

But have the prospects of South Korea always been bright as Fallows claims ? Were the economic prospects of North Korea, which shares the same Korean culture of course, not just as bright until the economy became enmeshed in collective ownership and central planning which destroyed incentives and opportunities? As we discuss in Why Nations Fail, this example is telling. North and South Korea had the same culture when they were divided but very different institutional structures were created in the South. It is of course not culture that explains South Korea’s success but institutions.

Fallows does approvingly quote the analysis of Benigno Aquino, whose assassination launched the People’s Power Movement in the 1980s which finally ousted Ferdinand Marcos in 1986 and whose son is the current president. It goes like this:

Here is a land in which a few are spectacularly rich while the masses remain abjectly poor… . Here is a land consecrated to democracy but run by an entrenched plutocracy. Here, too, are a people whose ambitions run high, but whose fulfillment is low and mainly restricted to the self-perpetuating elite.

This description of the problems of the Philippines could apply to any run-of-the-mill Latin American country, but how does culture come into the picture exactly?

In the end Fallows’ argument boils down to something remarkably like that proposed by Edward Banfield in his famous book about the south of Italy The Moral Basis of a Backward Society, which we briefly discussed in this post. Here is Fallows’ version:

Filipinos pride themselves on their lifelong loyalty to family, schoolmates, compadres, members of the same tribe, residents of the same barangay. … But when observing Filipino friendships I thought often of the Mafia families portrayed in The Godfather: total devotion to those within the circle, total war on those outside. Because the boundaries of decedent treatment are limited to the family or tribe, they exclude at least 90 percent of the people in the country. And because of this fragmentation—this lack of nationalism—people treat each other worse in the Philippines than in any other Asian country I have seen.

He goes on to give examples of how Filipinos fail to care about any public goods, throw their food wrappers in the street and refuse to cooperate to the benefit of society.

It is a bit hard for us, though, to see how this adds up to a cultural theory of what Benigno Aquino was pointing out.

Fallows does argue that these cultural traits were intensified by Spanish and US colonial rule, and the sense of “dependency” and passivity that they inculcated. Yet it is a bit of a mystery how exactly dependence is related to the family-centric behavior he noted above.

In reality everyone in every country of the world trusts their family more than people outside their family. As Victor Nee and Sonja Opper show in their recent book Capitalism from Below, the great manufacturing boom that started in China in the 1980s was primarily driven by the private sector. The Communist Party did not provide institutions, so Chinese entrepreneurs built them themselves, for example by using reputation and existing trust relationships to enforce contracts. But contracts are easier to enforce with your kin and it is easier to lend money and be sure you’ll get it back if you lend to kin. Thus strong kin relations did not inhibit this crucial stage of Chinese capitalism, they facilitated it.

As for littering, standard economics suggests that individuals are very bad at efficiently dealing with public goods or public bads, which is where the state comes in. The Philippines certainly has had a very different state than Japan and South Korea, and as we will argue in our next post, this seems a much more plausible part of a convincing story of the path of economic development in the Philippines than building it all (or attempting to   build it all) on culture.

There undoubtedly are cultural differences between the Filipinos and the Japanese, for instance. But the striking thing about Japan is how it modernized while preserving its rich and unique culture. Our guess is that the Philippines can do the same.