Hindi lumingon–a second look? The economics of the Duterte administration

May 14, 2016

by IBON Foundation

by Sonny Africa

IBON FEATURES – Presumptive president Rodrigo Duterte projected a vastly different image from the other presidential candidates and indeed from every national politician the Philippines has ever had: coarse, cussing, irreverent, misogynistic, an unrepentant human rights violator, and a self-proclaimed “Socialist” and “Leftist”. But, never mind, the strongman was effective and got things done. Filipino voters seemed to make an unorthodox choice in the May 9 general elections.

Yet just days after the elections it’s become clear that Davao City Mayor Duterte is actually not that different from the other candidates in what really matters the most. Despite his singular personality it turns out that his plans for the economy are strikingly interchangeable with the other losing candidates and even with the outgoing Aquino administration.

His transition team hurriedly presented an eight-point economic agenda to assuage elite panic. Belying Duterte’s powerful campaign theme of change, it embraces and upholds neoliberal economic policies that enrich a few but keep the national economy backward and tens of millions of Filipinos in poverty.

Learning from the past

Jose Rizal once said “Ang di lumingon sa pinanggalingan, hindi makararating sa paroroonan.” Rizal’s advice tells us that in order for the people to move on to a better future, they must learn from the past. Many believe that Duterte’s win is an affirmation of the people’s disenchantment with “daang matuwid”, the embodiment of the Aquino government’s neoliberal policies – that it is best to move forward rather than look back. But a second look at Duterte’s economic plans reveals that the failed “daang matuwid” of the past will remain a significant part of the country’s future.

The Philippines seems to be a vibrant economy that is the emergent star of Southeast Asia. There is economic growth, growing corporate profits, rising oligarch wealth, investor confidence, and international media hype. These are all true. Yet there is also a profound deterioration across a huge swathe of the economy and in its most important fundamentals.

The economy is creating less new jobs per year where the average of just 692,000 new jobs annually in 2011-2015 is much less than the 858,000 annually in 2001-2010. This has resulted in the most unemployed, underemployed, discouraged job-seekers, and overseas Filipino workers in the country’s history.

The quality of employment is dismal. Some 24.4 million working Filipinos or nearly two-thirds (63%) of total employed are non-regular, agency-hired, informal sector, or unpaid family workers. Among wage and salary workers, over two-fifths (44%) are non-regular workers. Labor productivity is increasing but the mandated minimum wage and actual daily basic pay received barely keep up with the rising prices of goods and services. Even then, nearly half (46%) of workers receive less than the minimum wage and one-fourth (25%) receive just exactly the low minimum wage.

Despite Php295 billion spent on the Pantawid Pamilyang Pilipino Program (4Ps) conditional cash transfer (CCT) program in the period 2011-2015, the number of Filipinos in extreme poverty is unchanged at some 27 million in the first half of 2015. Anywhere between 56-66 million Filipinos should really be considered poor by a reasonable standard of decent living. The number of underweight children even increased by some 203,000 and the number of children not fully immunized increased by 692,000 in 2015 from the year before.

The Philippines is rich in natural resources and raw materials. Yet agriculture and industry remain in decline. The country’s production sectors — agriculture, manufacturing, construction and mining — accounted for over 60% of the national economy, services for some 30%, and utilities for 10% until the late 1970s. Production started to collapse upon the onset of the globalization era during the Marcos regime. At some point in the mid-1990s, the economy became a service and trading economy more than a producing economy. Near the end of the outgoing Aquino administration, production was down to 39% of the economy while low-productivity services rose to over 49% in 2015.

This worsening joblessness, poverty, and economic backwardness — and ever more concentrated wealth and economic power in a few corporations and a handful of oligarchs — are the inevitable result of over 35 years of neoliberal “free market” economics. The state has been oriented to support the private profit-seeking of a few more than socioeconomic development for the majority. The economy was opened up to foreign capital, goods and services. This devastated Filipino producers and reduced domestic enterprises to subordinate, albeit profitable, partners and subcontractors. Education, health, housing, water and electricity became commodities to profit from rather than services every Filipino is entitled to.

Neoliberal insanity

“Insanity,” Albert Einstein wittily quipped, is “doing the same thing over and over again and expecting different results.” The decades of market-ledunderdevelopment are self-evident and mirror the experience in other countries.The problems faced by the majority of Filipinos are also well-known to the presidential candidates who, exploiting the yearning for change, all made sweeping promises of poverty reduction and job creation.

The Duterte camp has already articulated its eight-point economic agenda. It does not really offer anything different from the outgoing Aquino administration or from those that came before it. (The performance of the Aquino administration is assessed in more detail in IBON’s 2015 Yearend Birdtalk, “End of the Road, and a New Beginning?”)

The neoliberal emphasis on promoting private profit — even in public utilities and social services — and unqualifiedly welcoming foreign investment is largely intact. Government resources and regulatory authority will be geared to supporting corporate profits rather than ensuring national development and attending to the people’s welfare. Real asset reforms and redistributive measures that challenge elite power are avoided.

Since being the runaway frontrunner in the 2016 elections, Duterte has become systematic in articulating how his administration will be pro-business. Big corporations are assured consistency in contracts, ease of doing business, and an efficient bureaucracy. For instance his camp has declared that the “Davao City model” of expediting business licenses will be applied nationwide. A more sustained pro-people position articulating a bias for the country’s marginalized versus entrenched elites would have been much more welcome.

During the campaign period, Duterte avoided declaring open support for public-private partnerships (PPP) whose flaws are already well-known to the public. His camp however finally declared open support for it right after the elections as well as targeted the equivalent of 5% of gross domestic product (GDP) for infrastructure spending. This is not surprising given the likelihood of the Duterte camp courting the support, if it does not already have it, of Filipino oligarchs in construction, agri-business, mining and other businesses. Expanding transport infrastructure gives lucrative contracts to build and operate as well as eventually makes doing business easier and more profitable.

Duterte’s camp has proposed reducing taxes among lower personal income tax brackets which may be a way of making reduction of tax burdens on the rich more palatable. Many of the other presidential candidates were conspicuously in favor of, or at least open to, lowering corporate income tax rates. Yet Duterte is apparently not bold enough to pursue the more rational option of a progressive tax system that increases direct taxes on the rich and relieves the poor of regressive indirect taxes (his spokesperson apparently misunderstands what a “progressive tax system” means). This would increase government revenues for national development, if it were so inclined, as well as erode the economic base and power of elites.

Duterte’s first economic policy statement after the elections was on changing the 1987 Constitution to ease restrictions on foreign investment. He has become even more active in courting foreign investors. Duterte said that he would immediately call for a constitutional convention to, among others, remove the nationalist economic provisions of the Charter that foreign capital complains about. He has not yet announced pursuing more free trade agreements (FTAs), presumably including the United States (US)-centered Trans-Pacific Partnership (TPP) agreement, but given the thrusts of his eight-point economic agenda this may just be a matter of time.

Duterte had previously declared support for manufacturing although he did not say if by this he means Filipino-driven manufacturing and industrialization. He did say that he would strengthen basic industries and gave the steel industry as an example. The announced economic agenda also promotes the pseudo-industry of tourism as part of a “rural development strategy” to help the vast rural poor.

Like virtually every presidential candidate the country has ever had, Duterte proclaims support for agriculture. He has promised to prioritize, strengthen or revitalize the sector by providing irrigation, post-harvest facilities, support services and agricultural credit.

However the historical record of candidates in keeping such promises is not reassuring. The agricultural sector has for decades taken up barely 5% of the national budget, on average, and this is even down to just 4% under Aquino in 2016. On the other hand Duterte’s promises to promote agri-business and corporate farming, and to let foreigners lease land longer are more likely to materialize. Despite widespread landlessness, Duterte has not been bold enough to say that he will distribute land to farmers for free.

Duterte declares support for education. While he said that K to 12 implementation has to be improved he says nothing about addressing its retrogressive orientation of merely producing a cheap and docile labor force for corporations in the country or for export. His camp only announced giving scholarships for tertiary education that will likely go mainly to private schools. Duterte also declared support for health care and in particular for expanding PhilHealth coverage and benefits. Yet he says nothing about addressing the underlying privatization of health and hospitals that drives up the cost of medical care and makes this inaccessible to begin with.

Finally, like all the candidates Duterte makes grand promises to expand the conditional cash transfer program and to index payments to inflation. In the absence of a real long-term program to create jobs and develop the economy, the promise of cash dole-outs for tens of millions of poor and undoubtedly needy Filipinos bordered on post-paid vote buying using government funds. In contrast, he does not commit to distribute land for free to landless farmers. Nor does he give convincing guarantees of meaningfully higher wages or ending contractualization that assert workers’ rights over capitalist profits.

People elect, elites choose

But then attributing the incoming Duterte administration’s old, failed and stale neoliberal economic policies merely to failing to learn from the past may actually be too generous. More fundamentally, its policies reflect the deeply undemocratic imbalance of power in the country.

Even with supposedly free elections, the majority of poor Filipinos are systematically marginalized from political power — often violently. The general population elects its leaders in periodic elections but they do not actually choose or, at best, only choose from the restricted choices the political system allows. The real choices are made by the concentrated core of elite families that has dominated Philippine economic and political life throughout its modern history. This core is hardly changed by how some enter or exit as new fortunes are built or old ones lost.

But, powerful as it is, even this domestic elite is constrained in its behavior. Global monopoly capital has asserted its ultimate control over the country since the US colonial period, despite formal independence in 1946, and throughout the neocolonial era until today. The US has the longest record of self-serving imperialist intervention using scores of direct, indirect, formal and informal levers — treaties, trade and investment agreements, international financial institutions, so-called development aid, policy conditionalities, diplomatic pressure, lobbying, back-room manipulation, and even military interference.

The presumptive president’s personal, professional and class background certainly predisposes him to neoliberal policies. But, more to the point, he became the leading candidate because his upholding neoliberal policies makes him acceptable to domestic elites and foreign monopoly capital. In practical terms this means campaign funding and political support. The in-fighting, personality differences, or variations in style between candidates can get colorful but do not really mean any substantive policy divergence among them.

Unfortunately, the marginalized majority remain unable to challenge elite capture of the electoral system and, indeed, are even cynically manipulated into supporting this. Even with a month-and-a-half before the next administration, neoliberal socioeconomic outcomes are already preordained.

Fortunately, the efforts to increase the people’s influence on governance goes far beyond the moment of seemingly active citizenship the elections provide. As ever, the daily organized struggles of the country’s farmers, fisherfolk, workers, informal sectors, indigenous peoples, women, youth, and others in the mass movement remain the most potent forces for real democracy and radical development in the country. ###