02 July 2001




Twilight of the Oligarchs


Victor S. Limlingan


Asian Institute of Management




          The Philippines is always an interesting case study for policy makers and advisers in development. Here is a country rich in natural resources and populated by talented and educated people. Here is a country with a government run by savvy bureaucrats, a private sector bristling with professional managers and a civil society drawn from a dedicated citizenry.


                And yet, judging from the results, the Philippines has been the laggard of Asia, posting the lowest growth rate and the highest level of poverty. Just recently the Philippines has been downgraded in its competitiveness ranking from 29 in 1997 to 40 in 2001.


          Several explanations have been offered for this unusual case. They ranged from a “damaged culture” to the wrong development strategy (import-substitution rather than export promotion) to a highly centralized bureaucracy.


          And yet when the Philippines shifted to an export-promotion strategy and devolved authority to the local government units, no dramatic improvements occurred.


          And now the latest panacea is good governance. Under this nostrum, directors of corporations, both public and private are supposed to be tutored in transparency, accountability and respect for the rights of the minority stockholders and of the consumers. Being thus schooled in good governance they will then do their duty and all will be well.


But that is placing too much faith in the transforming power of education and too little wariness of the pervading presence of self-interest. For under this approach, we are asking the politicians and the business families to act contrary to their self-interest. We are presuming that goodwill will prevail over greed when we know that it is usually greed that prevails over goodwill.


We subscribe to the view espoused by Professor Romulo L. Neri of the Congressional Planning and Budget Office that the causes of poverty and bad governance are rooted in the oligarchic domination of the Philippine political economy. According to Professor Neri, the historical domination of the Philippines by the oligarchic elite has allowed it to distort government policies and keep its institutions weak. The ability of the oligarchy to distort government policy is exercised through political influence and through appointments of proteges in the state bureaucracy.


While most will agree with the diagnosis of Professor Neri, others are skeptical that his prescription (CPBO Report: Towards a Decade of Sustained Growth) will work. They consider the  CPBO Report an excellent compendium of the distorted public policies that must be corrected. But they do not see any proposal on how the government will prevent the oligarchy from frustrating its efforts to correct the public policy distortions.


Professor Neri acknowledges that the CPBO program will meet stiff opposition from the oligarchs.  But he argues, that the time is now appropriate given that the oligarchs have been greatly weakened by the  First Asian Crisis.


We agree that the First Asian Crisis did weaken the oligarchs. But we have always held that the power of the oligarchy derives not from its shrewd use of its power and influence but from the fatal misperception of significant sectors of society as to their true self-interest.


This point could best be illustrated by a famous incident related by a sociologist. This sociologist wrote that he was invited to a party in an exclusive subdivision. The residence of the host was so vast; it included a cockfight arena. At this party, even a cockfight was staged, with the host pitting his fighting cock against those of his equally prepared guests.


The fighting was, of course accompanied by heavy betting among the rich spectators. By chance, the sociologist noticed a group of drivers avidly watching the fight. Here was groups watching their masters easily lose in one bet, their entire yearly wage. Surely, thought the sociologist, they would be highly resentful of their masters who probably pampered their fighting cocks more than their drivers.


Much to his surprise, he  found the drivers enthusiastically rooting for their masters. There were no traces of resentment, simply of pride and admiration for their masters. For this commitment to their masters’ interest, their only expectation is that crumbs  (balato) will be thrown their way.


The sociologist termed this phenomenon  “vertical identification”.  As opposed to “horizontal identification” where the drivers would identify with their fellow drivers or with the lower class, they, the lower class identified with the upper class.


We would argue that the tenacious hold of the oligarchs is rooted in the vertical identification of the lower and middle classes with the upper classes. Moreover, the leaders of the lower class, the labor leaders and of the middle class the ideologues also identified their interests with those of the upper class despite the compelling evidence to the contrary.


But that is now changing. In our view, the First Asian Crisis has become the psychological trauma that has shocked the different sectors of society to the realization that their self-interest did not coincide with those of the oligarchy.


When the crisis struck and the corporate ships started sinking, there was a mad scramble for lifeboats. Much to their chagrin, the poor and the middle class realized that there was just enough room in the lifeboats for the oligarchs. The labor force was laid off and the management was downsized. The savings of the middle class lodged in bank deposits, commercial papers and stocks were wiped out while leaving the majority stockholders enjoying the same lifestyle as before the crisis.


This bitter realization found its political expression in the Puersa ng Masa. Through former President Joseph Estrada and his surrogates, the poor were reminded of their dire error in confusing the interest of the rich with their own interest. No more would they accept that price hikes in food, in energy, in water and in housing are necessary and for the good of all.


The political leaders presented with this new political reality are forgetting their political debts and remembering their political priority, popularity. Out of political necessity, they have denied applications for rate increases no matter how justified or tempting.


While the poor have been figuratively cast into the open seas of poverty to fend for themselves, the middle class have a more viable option of swimming to other more hospital shores. They are taking the option of emigration. Driven by their concern that a society composed of an unenlightened upper class and a desperate lower class will not provide a bright future for their children, they have decided to emigrate.


Ironically, the last holdouts to the misperception that the interest of the oligarchs and the rest of society are one are the labor leaders and the ideologues.


Our labor leaders presented the incongruous  sight of making common cause with the American labor unions in Seattle. The American labor unions were protesting against globalization as this would result in American jobs being lost to developing countries like the Philippines. Instead of seeing the additional jobs for the Philippines that would result from such exodus, the Filipino labor leaders chose to see this as the unwelcome entry of the American multinationals that would overwhelm the Filipino corporations. This preference for Filipino to multinational corporations persists despite the overwhelming evidence that multinationals treat their labor force better than the local firms do.


The ideologues are in a greater quandary. Schooled in the inevitability of class struggle, they must have been dismayed that an unschooled and corrupt politician and not them could gain the confidence and command the allegiance of the masses. Left out by the EDSA I revolution, they vowed not to be left out of EDSA II . And so, they are now in the uneasy position of being junior partners in political institutions dominated by the oligarchy.


Moreover, they must be troubled that the oligarchs are using their slogans and their banners to repel the tide of globalization. As one oligarch has noted, no other group is as dedicated, as articulate and as cheap as these unwitting shock troops of the oligarchy.


But we submit, we are seeing the twilight of the oligarchs. The First Asian crisis has revealed their financial vulnerability and more importantly their isolation from the rest of society. When the Second Asian Crisis comes, we shall see their replacement by the multinationals.


How we shall cope with the Second Asian Crisis and the new reality that will emerge should be pith and core of the discussions of our policy analysts and advocates.

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