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.

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?

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.

300 Years in the Convent, 50 years in Hollywood

James is currently in the Philippines researching extractive institutions with Pablo Querubín. This is the first in a series of joint blogs by the three of us about the Philippines through the lenses of Why Nations Fail.

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Over the past 50 years one of the most extraordinary economic developments has been the rise of East Asia. This started with Japan after World War II, to be followed by the ‘Asian Tigers’ Singapore, South Korea and Taiwan, and after that Malaysia. Even Indonesia was doing well for a while, and in fact, it managed to squeeze into the World Bank’s much cited 1992 report on the East Asian Miracle.

But all East Asian economies have not been miraculous. Take North Korea for example. One of the most puzzling economic failures has been that of the Philippines since independence from the US in 1946, which also started with very similar levels of income per-capita to South Korea or Taiwan in the 1950s.

Those prone to the fallacy that particular countries leave particular immutable institutional legacies in their colonies might have thought that the Philippines had all the institutions to succeed. The US had built a democratic legislature and congress, they built schools and educated judges, and they implanted English as a national language that some social scientists have linked to economic success.

What with this and important linkages to the US market, for example a sugar quota which moved from Cuba to the Philippines after the Cuban Revolution, the country looked like it ought to have been set for success. 

Yet the Philippines was not in the World Bank’s report

Digging deeper, we will see that this is not a surprise. Though the Philippines is in East Asia, its history is very different from other East Asian countries. Reflecting on Philippine colonial history, Stanley Karnow in his book In Our Image: America’s Empire in the Philippines characterized it as being “300 years in the convent, 50 years in Hollywood.”

By this he meant to convey the impression that the Philippines had languished under colonialism, hidden in the convent and entertained by Hollywood, while the world had dramatically changed.

It was first colonized by the Spanish in 1565, though the great mariner Ferdinand Magellan had visited the islands in 1521 where he has been killed on the island of Lapu-Lapu (Mactan) near the modern city of Cebu. The key economic institutions that the Spanish used to control and exploit the indigenous peoples of the Americas, like the encomienda, were also used in the Philippines but there were important differences. For one, there were few Spanish settlers and the governance of the islands was left to the Church. Moreover, large parts of the archipelago, particularly the southern island of Mindanao, were never controlled by the Spanish until the 19^th century and maintained de facto independence.

We met Mindanao in Why Nations Fail where we showed how the expansion of the Dutch East Indies Company had reversed development among the sultanates of this island. Though in the 17^th century the Spanish ruled in Manila or Cebu, the Sultan of Maguindanao was still independent. (Such enduring independence was not unknown in colonial South America. Soon after the early conquest of Chile, the Spanish lost control of the south of the country to the warlike Araucanian and Mapuche Indians who were not conquered until the second half of the 19^th century.)

Spanish colonialism was cast off in 1898, only to be replaced by US colonialism that lasted until 1946. Like many post-colonial experiences with democracy, that in the Philippines collapsed in 1972 with President Ferdinand Marcos’ declaration of martial law. His viciously kleptocratic regime was finally forced from office by a popular revolt in 1986. Now all that most people recall of this regime is the 3,000 shoes of Marcos’ wife Imelda (800 of which are now on show at the Marikina Shoe Museum in Manila).

On the surface this seems very different from the trajectories of other East Asian countries and the obvious explanation is the different colonial history. The Philippines is just a Latin American country stuck in East Asia, with Evita replaced by Imelda. Right?

In the next few posts we will dig deeper into the roots of poverty in the Philippines and discuss some of the explanations that have been produced to account for it. 

But first it is worth noting that the fact that the Philippines was on a par in terms of income per-capita with South Korea or Taiwan in the 1950s says little about what the long-run economic prospects of the societies were. Many other countries with radically different underlying growth prospects, such as Ghana, had similar income levels. All were emerging from long periods of colonialism: South Korea and Taiwan from that of Japan, the Philippines from that of Spain, and the US and Ghana from that of Britain. In nearly every non-settler colony, colonialism had the effect at best of trapping the country in amber. There was no chance of institutional change or structural transformation. Little chance of indigenous innovation or adaptation to a changing world. At independence, living standards often bore little relation to the long-run prospects for economic growth.

But what then were these differences that led to such poor economic growth in the Philippines? And how come they got stuck with Marcos rather than President Park or Chiang Kai-Shek?

The End of 'Old Corruption' in Britain

For a good part of the last month and a half, we have been studying different forces that led to the collapse of patronage politics in different countries (see  here, here, here, and here).

Patronage was an important problem in pre-modern Britain as well. The modern British state took a long time to build and patronage politics a long time to eradicate. It was only after 1485 and the end of the Wars of the Roses that the modern state started to emerge in Tudor England (as we discussed here).

And it was only after the Glorious Revolution of 1688 when the fiscal system expanded that the government started to create a meritocratic bureaucracy to collect the excise tax (as documented by historian John Brewer in his classic The Sinews of Power). But this did not end the patronage by any means.

The continuation of patronage politics in Britain, which came to be known as ‘Old Corruption,’ became one of the prime targets of radicals vying to change the British political system, particularly at the time of the French Revolution. Starting around then, a series of measures started to be implemented to eradicate it. For example, auctions for the sale of national debt were introduced for the first time to try to eliminate favoritism in the allocation of debt.

In recent work, for example, Elites and Corruption: A Model of Endogenous Reform and a test using British data, Mircea Popa of Harvard examines the forces that led to the eradication of Old Corruption. He argues that the fundamental source of Old Corruption was the executive and the King who used it to extract rents from the political system. Even though after 1688 Parliament was dominant, the King still formed the executive and nominated the Prime Minister, though such a minister had to command majority support in Parliament. Parliament tolerated this corruption for much of the 18^th century because its worst features could be contained by threatening to reform the system if the executive was too egregious.

Popa argues that around the time of the French Revolution this implicit bargain fell apart because the conflict made the undersupply of public goods inherent in this system very costly. To expand the supply of public goods, Parliament would have had to grant the executive more tax revenue, but this made it very difficult to sustain the limited corruption equilibrium because the executive would have been tempted to grab the extra tax receipts. Thus Popa argues that the increased demand for public goods made it no longer possible to use implicit mechanisms to limit ‘Old Corruption’ and instead Parliament started to pass a series of legislative reforms which eliminated it.