How have entrenched oligarchic and patrimonial systems in the Philippines prevented the creation of a truly democratic government and perpetuated unequal economic distribution? The nature of the Philippines’s political system is such that vested interests have guided policy favorable to a minority of wealthy families. As a result of political and economic exclusion of the majority of the population, there is great wealth inequality and minimal economic growth. This paper will address two primary questions: 1) How and why have oligarchy and patrimonialism become institutionalized in the Philippines’s political process? 2) What are the implications of this type of governance on the economic growth of the country and for the rural poor?
The Philippines had a fundamentally weak democracy which allowed policies of patronage and crony capitalism. Improved and more egalitarian practices in the Philippines’ government are necessary for country-wide economic development. Structures of patrimonialism in political institutions perpetuate uneven wealth distribution without increasing economic opportunity or encouraging political participation. The patronage systems of the oligarchy obstructed equitable infrastructure development and mobilization of resources. This large-scale expansion of oligarchy and patrimonialism into the national government and economy distinguishes the Philippines as a uniquely problematic case.
I will demonstrate how the Philippines superficial democracy intensified inequality first by showing how the oligarchic and patrimonial structure continued over time despite the formal installation of a democratic government. That these underlying structures persisted throughout the Philippines’s various forms of government (colonialism, democracy, authoritarianism) shows patrimonialism and oligarchy as the fundamental governing forces of the Philippines. The total collapse of democracy during the authoritarian regime of Ferdinand Marcos from 1965 to 1986 brought oligarchy and patrimonialism to its greatest fulfillment as a state practice. Second, I will explain how this type of governance excludes the masses from productive participation in the economy and in politics.
ORIGINS OF PATRIMONIAL AND OLIGARCHIC SYSTEMS IN THE PHILIPPINES
The political practices of the Philippines have never followed truly democratic or meritocratic principles, but rather oligarchic and patrimonial ones. Max Weber defines the patrimonial state as one where “practically everything depends explicitly upon personal considerations: connections, favors, privileges”. To be more specific, it is the practice of devoting functions of the state to serve private interests. These practices took such forms in the Philippines with programs of “selective expropriation, creation of export monopolies, promotion of favored associates or “cronies,” cheap credit, tax incentives, state licenses, or monopoly privileges” (Hutchcroft 1991, 416). The decisions of governance were determined by patrimonial connections, rather than merit. An oligarchy is a condition in which political and economic power is concentrated in a small elite group. The Philippines became an oligarchy from a historical experience of colonialism. Instituting a national state government was unable to detract from the power of landowning families who had governed during colonial rule. The Philippines under Spanish colonial rule was characterized by a type of feudalism where aristocrats of Spanish lineage (mestizos) controlled large sections of land (haciendas) with indigenous people as laborers. Under American rule, the Philippines first established democratic representational institutions. However, there was no alteration of power structures. Like in many other instances of colonialism, the already powerful, wealthy, and lighter skinned people were chosen to function as go-betweens for the colonizer and the colonized area. Despite these early democratic institutions, a feudalist structure remained in which mestizo legislators (backed by the Americans) controlled the employment and economic prospects of civilians. Thus, the benefits of growth and the state were seen by only few while much of the population remains in poverty (32.9% as of 2006).
SOLIDIFICATION OF OLIGARCHY AND PATRIMONIAL PRACTICES INTO THE STATE
In 1946, the Philippines won its independence and established a democratic constitutional republic modeled after the United States. Yet the system of elites and political favors remained. How were oligarchic power and patrimonial practices sustained even with the creation of a democratic national government? One explanation is that there is an innate “kinship” culture in Philippine society, in which social relations are driven by reciprocity. Such a culture is not familiar with the bureaucratic, neutral, and meritocratic aspects that characterize Western democracy. Rather, they revolve their relationships around personal and familial ties. This aspect of the Philippines’ society was extended into its governmental practice on the state level.
Wurfel (1963) explains that Filipino political behavior is determined by a kinship system in which social ties and status are expressed through money or currency. One who can distribute wealth is considered a social leader. According to Wurfel (1963), the provision of ‘material generosity’ is the duty of a leader and signals recognition as kindred, implying their political support. He states that “generosity, which fills a necessary function in the kinship system, has been elevated to one of the supreme social virtues, certainly a requirement for political leadership” (Wurfel 1963, 769). Thus, a small-scale patrimonial act by a governmental candidate such as vote-buying can be viewed as the kinship system manifesting in a governmental form. Furthermore, patrimonialism precludes the formation of government based on merit or capability. As “personal contacts become even more important for entrance into the central bureaucracy, the role of competitive examination becomes relatively marginal” (Hutchcroft 1991, 422). For example, during the 1970s Ferdinand Marcos nationalized the coconut industry and gave control of it to Eduardo Cojuangco, a friend of his son, who amassed close to a billion dollars from a Marcos decreed ‘coconut levy’ (Zich, 125) and who, according to Forbes, remains the 8th richest man in the Philippines (Nam 2011). Traditional systems of patrimonialism thwarted the development of politics based on interests other than kinship ties. As Wurfel (1963) notes “political behavior is marked by dyadic bonds, not corporate action” (770).
The creation of a national state merely expanded and centralized the opportunities for patrimonial practices. Pre-1946, when land in the Philippines was divided into feudalistic haciendas, resources for kinship distribution had been derived from the land. However, as the nation-state and government were established, resources could be derived from state capacities (such as tax collection, enactment of large-scale industries, manufacturing). A modernized state also brings with it enterprises beyond feudalist agricultural activities, including commerce, manufacturing, and finance that made “access to the state machinery more important than ever for the creation of wealth” (Hutchcroft 1991, 423).
Another factor that perpetuated the system of patrimonialism and oligarchy into the political system is external support. Patrimonial redistribution was necessary to sustain political power but there was no effort for sustainable growth in the economy. “Rent-seeking” from the government was how economic leaders profited from business enterprises rather than by innovation, increasing inputs, or improving “internal efficiencies and investments” (Hutchcroft 1991, 423). This system of patrimonialism put distribution pressure on politicians and removed the incentive for growth. The state suffered from the inability or unwillingness of the oligarchy to create sustainable revenue. Additionally, an inefficient national tax collection concentrated this dependence on patrimonialism. Hutchcroft (1991) writes “real property and personal income tax rates remained low, and indirect taxes continued to supply 70-80 percent of total tax revenue for the state” (445). Tax exemption is one tool of patrimonial states use to reward clients, thus the creation of efficient tax revenue would undermine support for the government. Thus foreign aid, primarily from ex-colonizer the United States, was imperative to sustain the oligarchy. “Three years after independence the Philippine state nearly collapsed, in large part because of its lack of tariff autonomy vis-à-vis the former colonial power (U.S.) and its inability to extract revenue from the oligarchy” (Hutchcroft 1991, 421). Especially during the Cold War years, the United States provided aid to many third world countries in order to guarantee their loyalty to Western nations, despite the dictatorial or repressive nature of these governments. In the Philippines, in return for military access and bases, the United States gave hundreds of millions to Ferdinand Marcos and counterinsurgency assistance, which prolonged his inefficient and corrupt regime. Whatever growth the Philippines experienced during these years was largely a result of foreign inflow, which went into the pockets of Marcos and his patrimonial obligations rather than developmental state-building enterprises. Foreign aid allowed patrimonialism to continue despite its unsustainability and reduced the incentive to engender real economic development.
Thus despite a façade of democracy (elections, constitutions, etc.), political policies narrowly served the interests of the oligarchy and their supporters and excluded the masses. Meaningful democracy had barely even had a chance to develop when Marcos established his authoritarian regime. The introduction of modern western governmental institutions without first addressing this entrenched system of patrimonialism explains why the Philippines have a government characterized by vested interests and cronyism. And why, as the Philippines grew larger, this system exacerbated oligarchy and inequality of wealth.
POLITICAL AND ECONOMIC EXCLUSION AND UNDERDEVELOPMENT
Political and economic exclusion for the majority of the population resulted from the domination of the government by oligarchy. Wealth requirements for political office, the distributional duties of elected politicians, and economic policies that reinforced elite interests all created a political system controlled by and for the oligarchy.
Oeschlin (2009) explains the detrimental effects of oligarchy on the economy. He states “provided that the established producers hold political power, less-advanced economies will adopt elite-protecting institutions, preventing the economy from advancing” (Oeschlin 2009, 314). He argues that in lower developed economies, oligarchs create policies that protect their industries from competition at the expense of productivity, eventually slowing down aggregate capital accumulation and minimizing economic growth. Workers experience a reduced incentive to save because they are unable to engage in entrepreneurial activities due to high startup costs and their small savings see small returns while elites have a greater incentive to participate in the economy. He claims that “if the elite is politically powerful, a country at the onset of the accumulation process is likely to adopt such a combination of distortions” and “if oligarch’s political clout rests on their high relative wealth, they might prefer to maintain the elite-protecting environment to secure political power” (Oeschlin 2009, 333). Thus, wealth is concentrated in the hands of the oligarchy, while the overall economy is minimally developed.
One sees this pattern with the Philippines’ oligarchy, which controls both economies and politics. Under Oeschlin’s theory the Philippines should produce elite-protecting policies in the Philippines that reduced aggregate savings, prevented competition, and concentrated wealth unevenly. Indeed, distributional policies over time have been largely to the benefit of oligarchs. There were monopolies, tax breaks, and subsidies characterizing oligarchic agricultural industries. Land reform efforts were neither substantial nor enforced. In the 1970s, Ferdinand Marcos claimed he would create a “New Society” by breaking up traditional haciendas and redistributing them to the tenant workers. However, only 8% of five million landless peasants were eligible for land redistribution acts and the largest industries, sugar and coconut (which employed 1/3 of all Filipinos), were exempt (Zich 1986, 123). Additionally, despite GNP indicators of growth, the majority of people did not see these benefits. During Marcos regime, growth was measured as 6% (Muego 1979, 227). Yet, minimum wage for urban workers remained at 11 pesos, while commodity prices increased (Muego 1979, 228). Thus, workers were essentially at subsistence levels and prevented from accumulating enough savings that would allow them to engage in entrepreneurial activities or see investment returns.
The historical oligarchy in the Philippines’s history was a burden on the development of democracy. Since political leaders require vast reserves of wealth to participate in elections, it inevitably results that only the rich can run for office. Therefore, political power (first bestowed on members of the historical oligarchy) is retained and rotated within the Philippines’ elites because patrimonial practices are extended to electoral systems. To illustrate, in the 1960s, national election candidates’ expenditures were equivalent to 13% of the budget (the highest ratio of campaign cost : budget in the world at the time) and half of all campaign expenses were payments to local groups, individuals, and leaders (Wurfel 1963, 764). This vast spending indicates the wealth required to be a viable candidate, and also the patrimonial manner in which it is spent. There have been some but negligible efforts in meaningful campaign reform. For example, the Republic Act No. 7166 in 1991 was meant to curb campaign expenditures. Candidates are supposed to spend maximum 10 pesos for every voter. According to Pera’t Pulitika (2008), an election monitoring group in the Philippines, in 2007 it cost 5 billion pesos to finance a campaign, vastly exceeding what the Act’s limit states should be about 450 million. It was also roughly 3% of the GDP in 2007. In addition, there are no laws restricting the amount of campaign contributions, thereby giving wealthy special interests an advantage in producing a candidate. Thus, the wealthy oligarchy assumed and reinforced political control because of already existing perceptions as leaders and also with political practices that required vast sums of money to campaign with and distribute to supporters. Another effect that patrimonialism has on governance is inconsistency. Government jobs are another source of patrimony, and these will shift as new presidents are elected. Balicasan (2002) states that the ‘personalistic’ political system reduces policy consistency. This deters investments because of risk uncertainty and since public service jobs are subject to turnover, it is “difficult to deeply entrench pro-reform lobbies” (Balicasan 2002, 244). Thus the patrimonialist state reinforces itself, while weakening legitimate governance and government capability.
To sum, the powerful and historically entrenched oligarchy of the Philippines shaped the government to serve their own interests. A structure of patrimonialism led to a superficial democracy in which the interests of neither the country as a whole nor the masses were considered. Governance was characterized by political favors in exchange for support. This system was sustained by an entrenched kinship system and external aid. Patrimonial interests prevent the establishment of a strong central state with efficient tax collection systems and the ability to enact reforms that go against oligarchic interests. Patrimonialism and oligarchy in themselves do not necessarily create conditions of political and economic exclusion. But in the Philippines, the extent that these two elements worked to reinforce structures that were non-productive and unsustainable (monopoly of land, industry, political power and wealth into an oligarchic elite) created a very inequitable distribution of wealth and opportunity. Other similar Southeast Asian nations, despite authoritarian regimes, took steps that advanced a more equitable society such as agrarian reform (Thailand) or pro-poor/rural leadership (Malaysia and Indonesia) (Balicasan 2002, 247). Thailand has a patrimonial structure, but in this case, the governmental state dominates the oligarchy whereas in the Philippines, the oligarchy dominates the state (Hutchcraft 1991, 449). A government which promoted the interests of the nation as a whole could do more to alleviate poverty in the Philippines.
Balicasan, Arsenio, and Hal Hill. 2002. “The Philippine Development Puzzle” Southeast Asian Affairs: 237-252.
Hutchcroft, Paul D. 1991. “Oligarchs and Cronies in the Philippine State: The Politics of Patrimonial Plunder” World Politics 43.3 (April): 414-450.
Muego, Benjamin. 1979. “The Philippines: From Martial Law to Crisis Government.” Southeast Asian Affairs: 223-232.
Nam, Suzy. 2011. “The Philippines’ Richest.” Forbes Magazine.
Oechslin, Manuel. 2009. “Creditor Protection and the Dynamics of the Distribution in Oligarchic Societies.” Journal of Economic Growth: 313-344.
Pera’t Pulitika. 2008. “Developing Baseline Data on Campaign Spending in the Philippines.” Transparency and Accountability Network.
Wurfel, David. 1963. “The Philippines.” Cambridge University Press (November): 757-773.
Zich, Arthur. 1986. “The Marcos Era.” The Wilson Quarterly (Summer): 116-129.