Unraveling a rent-seeking economy

The GSIS-Meralco squabble may just be a small event in the big picture. That big picture is about political and economic reforms long sought to modernize the Philippines by putting an end to one of the more intractable problems — rent-seeking. This is a pervasive practice of oligarchic interests who use politics and government to enlarge and protect their private interests either through bribery or funding of political campaigns. The finger pointing, the accusations of bribery from both sides have finally put a corrupt justice system in the open. The corruption has flourished because it was accepted that nothing could be done about it by long-suffering Filipinos. But with the issue out in the open it will have far reaching consequences not limited to the battle between GSIS and Meralco. We may finally have a justice system that works.

Without such powerful protagonists and high stakes involved, our flawed justice system might never have been as openly discussed as it is now. I am sure that many who have suffered in silence because of how the justice system works can only be grateful for developing events. Filipinos look forward to see how the Supreme Court would act on the ‘propriety of certain justices’ in the case between Meralco and GSIS. Who knows what else will be brought out in the can of worms? It can be the start of the unraveling of our rent-seeking system that gives an undue advantage to the rich and powerful.

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I can understand why Oscar Lopez should be offended at recent events that put Meralco under a bad light. The Lopezes are not used to being told what to do. They do the telling through their vast network of political connections and media power. This is well known and something the Lopezes would be hard put to deny. Indeed countless articles have been written on how they were returned to wealth and power after the downfall of the Marcos dictatorship by rent-seeking. Alfred McCoy who wrote the classic An Anarchy of Families  defines rent-seeking as “the political manipulation of the regulatory powers of the state over businesses to favor a few, paving the way for installation of business empires.”

The combination of owning ABS-CBN and Meralco is the symbiotic source of their power. When Oscar Lopez rails against the government and says it is after ABS-CBN and that it was no different from the time of Marcos, he is telling only part of the truth. He blames politicians who tend to hit his family like a reflex action after they “get themselves into trouble and said  this was true during the term of Marcos as President and later as dictator.” It is happening again today, as officials of both the executive and legislative branches of government are ganging up on the Lopez management in Meralco when their real gripe is with the family’s ABS-CBN,” he said.” What he did not say is how the same media that rails against government is also useful to their business interests. Unfortunately their business, in this case, Manila Electric Company, although privately owned is a public utility and it remains within the remit of government to regulate. It is this overlapping of ownership and government regulation that is problematic. Unless of course its owners think Meralco is above the law.

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I do not know that Winston Garcia, president and general manager of the Government Service Insurance System, is behind a government move to take over Meralco in a “reverse privatization.” From what I read in the newspapers, he has made very specific charges that have to be answered and these have reached the courts and therefore should be answered in the courts. The Lopezes should answer accusations that Meralco had been overcharging its customers. But with this new development questioning the ‘propriety of justices’, how is this question to be resolved? The Lopezes should face the issue squarely. Why is Meralco’s rates 20 to 30 percent higher than most?

Perhaps, the answer to Oscar Lopez’s accusation that the government is merely using gripes against Meralco because ABS-CBN is critical of government is better answered by the history of the family’s business empire. In the classic “Anarchy of Families” the author, Alfred McCoy spelled it out simply: the business empire was built with Eugenio as media mogul and Fernando as politician. “The brothers used ABS-CBN and Manila Chronicle to their advantage. They either took over or established several profitable ventures, one of which is Meralco.” It has continued to the present generation.

If as Oscar Lopez complains that government is after them again as it was it the time of Marcos, it may be because they are back with their rent-seeking in a country that is now turning around for a more modern and equitable basis for doing business than paying politicians or justices. “Such practices weaken the state and empower elite families, ultimately limiting the capacity of the bureaucracy to direct entrepreneurs and lead the country’s development” concludes McCoy.

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MISCELLANY: I would like to acknowledge invitations that have been sent to Philippine STAR in the past month. I would be grateful if these are faxed instead to 02 8505101 otherwise I do not receive them on time to be able to respond.

Thanks to The Embassy of the Kingdom of the Netherlands for an invitation to the formal opening of the 2008 World Press Photo Exhibition Friday at 6 p.m. at the Podium Mall in Ortigas Center.

I received an invitation on the occasion of the 81st founding anniversary of the Chinese People’s Liberation Army from Senior Col. Liu Zhongxiang, Military Attache of the Chinese Embassy last Wednesday, 30th of July at Manila Hotel but was not able to respond. Congratulations and regrets that I was unable to attend.

I would have wanted to go to the 2nd Regular Session of the 14th Congress to listen to the President’s State of the Nation address but I didn’t know I had an invitation in my pigeon hole at The STAR until it was too late.