Poverty Corruption, the ties that bind
Publish Date : 10/7/2004 8:05:00 AM Source : Asia Times
MANILA - Smoky Mountain, in the Tondo neighborhood across Manila harbor, is a Dantesque vision from hell turned postcard of global poverty. Smoky Mountain is a 40-year-old mountain of garbage. The locals literally live off it - they search it, burn it, separate it in plastic bags, recycle it, sell it to junk shops, even eat some of the remains.
Eighty percent of the children of the estimated 30,000 people living in the area don't go to school - although there are a kindergarten and an elementary school in the surroundings. Some of the locals set up food stalls at the harbor, some are cargadores (porters), some are pedicab drivers, but most live off the garbage. Under a bridge by the Pasig River rattled by the non-stop traffic of container trucks, stuck under the pollution, haze and that unbearable smell, a teenager beams: "It's good to make money here. Three hundred pesos a day [a little more than US$5] if you work hard." In the May presidential election, he voted for action star Fernando Poe Jr, a close friend of ousted-in-disgrace former president Joseph Estrada (Poe won in Manila but lost overall to incumbent Gloria Macapagal-Arroyo). He believes the elections were stolen, as do 55% of Filipinos. And he wouldn't leave Smoky Mountain for anything. "There are no jobs out there," he says, pointing toward Metro Manila.
The notoriously corrupt Metro Manila Development Authority (MMDA) - which also indulges in a quirky form of performance art, tagging colored walls around town with its acronym - keeps a sinister top-10 list of the dirtiest barangays (districts) in town. Just for the record, Smoky Mountain is not even close to No 1; that honor belongs to Barangay 145, Zone 16 in Pasay City - notified 225 times (and counting) as having mountains of uncollected garbage.
It didn't have to be this way. Filipinos, rich and poor alike, often look in awe at the so-called newly industrialized countries (NICs) ofNortheast Asia and ask themselves: Why haven't we accomplished anything similar? The main reason may be the absence of a real agrarian reform (see Part 2 of this series) - an absolute precondition for the economic miracle in Taiwan and South Korea. Land reform created an egalitarian distribution of income, ignited domestic demand, and the whole thing drove an industrialization drive in the 1950s and '60s.
Meanwhile, in the Philippines, few were paying attention: after all, the country was growing at rates from 6-10% a year, fueled by its own brand of import-substitution industrialization. But in the late 1960s, the turbo-jeepney came to a halt, because of a structural problem still not solved in 2004: the Philippines was and remains a small market, chiefly because of its tremendous income inequality.
With no land reform and anemic exports, the dictatorship of Ferdinand Marcos came up with what might have been a great coup: exporting the country's labor force. Economists in Manila say this was supposed to be a temporary measure. It turned out to be the ultimate lifeline to the Philippine economy - with remittances even helping to prevent the peso from spiraling into total disaster after the 1997 Asian financial crisis. No wonder: when the internal market remains small and jobs are scarce, the only way, if you don't want to recycle garbage, is out - often by a one-way ticket departing from the ghastly Ninoy Aquino International Airport in Manila. According to labor-export specialist Jorge Tigno, almost 10% of the country's population are now OFWs (Overseas Filipino Workers). In Metro Manila, at least one in every three households has a member who was or still is an OFW.
Where is our sushi?
The Anti-Development State: The Political Economy of Permanent Crisis in the Philippines, a recent joint publication by the Universityof the Philippines and the non-governmental organization (NGO) Focus on the Global South, written by respected activist Walden Bello and co-authored by Herbert Docena, Marissa de Guzman and Marylou Malig, spells out a devastating case on all the reasons for a crisis that's been going on for four decades. It's unlikely to find readers in Malacanang, the presidential palace. Absence of meaningful land reform certainly is one of the reasons for the crisis. But another, almost as compelling, has been the absence of Japanese capital.
"In the period 1985-93, some $51 billion worth of Japanese investment swirled though the Asia-Pacific in one of the most rapid and massive outflows of foreign capital toward the developing world in recent history," the publication states. Thailand, Malaysia and Indonesia could not but grow at dizzying rates - while the Philippines was almost totally bypassed. According to Japanese figures, from 1987-91 Thailand benefited from $24 billion in Japanese, Hong Kong and Taiwanese investments. The Philippines, on the other hand, got only $1.6 billion.
The authors speculate: were the Japanese put off by Philippine corruption? Not really, because South Korea was as corrupt, and Indonesia under Suharto infinitely more corrupt. The answer, once again, refers to the anemic size of the Philippine market. "Japaneseinvestors are strategic investors - that is, they invest if there is the prospect of a growing market ... In the late 1980s, the Philippines was simply not attractive since development, expansion of the market, reducing poverty to create more purchasing power were all being sacrificed to the national priority of repaying the foreign debt - a goal forced on the country by the IMF [International Monetary Fund] and the World Bank acting on behalf of the country's foreign lenders."
So the Philippines under president Cory Aquino was basically servicing the huge debt incurred by the Marcos dictatorship. The country's physical, technical and educational infrastructure was left to rot - as it is still. Aquino sank the country further into debt - to pay for the past pile of debt. When Japanese executives examined this situation, they identified nothing else than a strategically depressed market.
As for the poor Filipino taxpayer, he will keep paying for Marcos' debts until at least 2025, according to a recent report by the Ibon Foundation. The foundation reminds everyone that "before Marcos became president in 1966, the country's foreign debt was only $599 million. When he fled Malacanang 20 years later, the foreign debt had already ballooned to $28 billion. Most of the debts were incurred during martial law, when foreign debt grew by 27% per year from 1973 to 1982."
In his monumental Crime of Empire, Filipino economist Ricco Alejandro Santos estimates that the Marcoses, Ferdinand and Imelda, "have looted $10 billion in the course of 20 years". As for his American business and government patrons, they certainly were not innocent bystanders: "They were the first to know about this, before most Filipinos would." The US Central Intelligence Agency knew about it as early as 1969. "And yet American foreign investors and government, then under presidents [Richard] Nixon, [Jimmy] Carter and [Ronald] Reagan, would be Marcos' prime backers and patrons until his ouster and exile."
Arroyo inherited this giant bitter pineapple from Marcos and subsequently Aquino, Fidel Ramos and Estrada in early 2001. But according to many a Manila businessman, she came up with no development strategy whatsoever. Not that Estrada, her predecessor, had any. The authors of The Anti-Development State ram the point home: the only "strategy" by Arroyo was to attach the Philippine jeepney to Washington's B-52s after the attacks on the United States on September 11, 2001. "Massive economic aid and investment from US business was at the top of President Arroyo's concerns when she reversed 10 years of an increasingly independent foreign policy followed by the country since the expulsion of the US bases in 1992. 'It's $4.2 billion and counting,' she gushed during her state visit to Washington in October 2001, calculating the sums of aid and capital promised by President George W Bush."
The problem is that most of the money - like the billions promised to Afghanistan - never materialized. And it won't: Washington is still obsessed with Iraq. So throughout 2002 and 2003 the Philippine fiscal crisis spiraled out of control, leading to the current climate of panic and hastily arranged austerity measures in Malacanang (see Part 1 of this series).
Ruling elites in perpetual war
The greatest merit of The Anti-Development State is the powerful case it makes in puncturing a pervasive myth not only in the Philippines but found with minute variations all over the developing world: the myth that a country is poor because its leaders are corrupt. The authors of the book get very close to the heart of thematter when they write, about the Filipino case: "A more adequate explanation lies in the state being subjugated by a succession of ruling elite factions to serve narrow interests instead of the larger goals of sustainable development and social justice."
Most Filipinos have no reason to doubt that sleazy Estrada and his cronies "represent what is so wrong with the Philippines and so many other poor countries - the rampant bribery and fraud, the unbridled rent-seeking, the brazen patronage politics, the flagrant abuse of public resources for private gain, and the widespread clientelism".
A Coalition Against Corruption led by business groups, NGOs and the Catholic Church has just been launched in Manila. Former president Cory Aquino, delivering the keynote address, said that everyone had to pay his due taxes and so exercise his moral right to "demand from government transparency, accountability and the political will to prosecute tax evaders, smugglers and those who disgrace public service". Lofty rhetoric apart, the results remain to be seen.
Corruption, embodied in "crony capitalism" - as ATol readers will remember - also was pinpointed by the US establishment, from treasury secretaries Robert Rubin and Lawrence Summers on down, as the main reason for the 1997 Asian financial crisis, implying it was all Asian governments' fault. But then the assumption can be turned on its head: "If corruption is the reason the Philippines is poor, why are so many rich countries also corrupt?"
The definitive comparison is between the Philippines and South Korea, as argued by the authors of The Anti-Development State with substantial help from Crony Capitalism: Corruption and Development in South Korea and the Philippines, by David Kang of Dartmouth College in the United States. Kang poses the million-dollar question: "If both Korea and the Philippines experienced extensive corruption, why did Korea grow much faster than the Philippines?"
Filipinos watch while Koreans act
These are the main points. Both countries started at the same level; the average Filipino even earned slightly more than a South Korean in the mid-1950s. In 50 years, the South Korean economy has grown by more than 10 times, while the Philippines' has only doubled. South Korea is a more egalitarian society: the richest 20% are only five times as wealthy as the poorest 20% (in the Philippines they are 13 times as wealthy); and only 7% of South Koreans are poor, while two in five Filipinos live below the poverty line.
Then there's the United States, considered by Blowback author Chalmers Johnson as "the most legally corrupt political system in the world today". The Enron debacle and the Halliburton and Bechtel bonanza in Iraq dwarf anything perpetrated by Estrada or his cronies Lucio Tan and Danding Cojuangco. Economist Paul Krugman was once hired as a consultant by the Philippines, and often joked while comparing George W Bush to Ferdinand Marcos in the cronyism stakes. Economist Jeffrey Sachs insists, "America has shown itself to be second to none in practicing cronyism, first with its rotten corporate scandals of recent years, and now in Iraq."
The authors of The Anti-Development State stress instead how the Philippine state has been "successfully taken over by one faction [of the ruling elite] in order to dominate the other factions". So the big difference, compared with South Korea - or Thailand, Indonesia and Malaysia, for that matter - lies "not in the extent of corruption but the balance of power among ruling elites as well as the balance of power between these elites and the state".
In South Korea the elites were balanced, and disciplined by a very strict central state. In the Philippines, on the other hand, it has always been open war, with the state as the ultimate prize. So corruption, as Kang puts it, "swung like a pendulum. As one group or the other gained predominant power, it would busily set about lining its own pockets, aware that in the next round its fortunes might well be reversed." The crucial point, then, is that in the Philippines "the state has traditionally been hijacked at all levels by private interests, making it an ineffective instrument of national development".
The reasons, of course, are steeped in Philippine history. For 330 years, Spanish colonizers never bothered to establish an effective, competent state administration machine. And during the 50-yearPentagon/Hollywood phase, US colonialism only cared about oligarchy-building, not state-building. In Thailand, by comparison, a great deal of the elite come from the state-administration machine. Today, while the Philippines is a disaster area, Thai officials talk of their country rising to the rank of a developed nation by 2010, while they frantically sell Thailand as the perfect investor destination if one wants to diversify from China and India: "Lower costs than Singapore yet a larger market than Malaysia."
For Filipinos, the conclusions of The Anti-Development State represent a rude blow: "The country has failed to develop and so many of its people are mired in poverty because the state, strangled as it is by competing factions' demands, has been rendered too powerless to even chart the country's direction, much less subordinate ruling elites under its control. Further sapping the state's potential to act according to democratic and developmental lines have been external interests constraining its range of allowable actions in the larger context of the North's persistent and often successful efforts to subordinate the South."
Now tell that to the people of Smoky Mountain - not to mention the absolute majority of 84 million Filipinos.
Tomorrow - Part 4: The last one leaving please turn off the lights
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