Oligarchy

Since Rep. Mike Defensor used the term “oligarchy” as he summarized his position against granting media giant ABS-CBN a franchise, there has been immense interest in what the concept means.

The dictionary definition tells us an “oligarchy” is rule by a few. That does not quite capture the many nuances of the concept in its modern usage.

“Oligarchy” is not alien to Filipino political discourse – except that we have used other words for roughly the same phenomenon.

The most usual term we have used is “cronyism.” This is a term used almost specifically to describe a phenomenon where sections of the economy were almost entirely administered by politically designated overlords. This was a phenomenon almost unique to the Marcos dictatorship where he assigned close allies control of key economic sectors ostensibly to oversee their modernization: Roberto Benedicto for the sugar industry, Eduardo Cojuangco for the coconut industry, and so on.

As a development model, this strategy proved to be a failure – although it provided the means for the cronies to raise capital and invest in sunrise sectors. The plantation sector declined.

In the Maoist-inspired section of the local communist movement, the term used for the symbiosis of power and wealth is “bureaucrat-capitalism.” It is designated as one of the “basic ills” afflicting Philippine society, along with “imperialism” and “feudalism.” Those leftist leaders vociferous in their support for granting ABS-CBN a franchise should review the party literature on this concept.

This rather cumbersome term is drawn from China’s imperial past where the emperor assigned trusted Mandarins monopoly over certain enterprises.  The arrangement made the trustees very rich indeed.

It might indeed be more useful to use the term “oligarchy” as it is used in current political science literature to describe the peculiar characteristics of continuing elite dominance over Philippine society. In the literature, “oligarchy” refers to the capacity of elites to undermine the state by carving out sections of the bureaucracy and putting these under their control.

“Regulatory capture” is the phrase most often used to describe the elites’ ability to dictate policy to discourage competition, enable profiteering and stall modernization. With sections of the state’s regulatory apparatus captured by the very same interests they are supposed to regulate brings about a “permeable state.”

A “permeable” state cannot serve the national interest. It cannot assemble a coherent and progressive policy architecture that brings progress for the greatest number. It cannot set out on a path to progress from the “commanding heights” of state authority.

A “permeable” state, in sum, cannot serve the people.

When vested interests are able to shape regulatory policies to their specific advantage, they make profits for their enterprises by discouraging possibly more competitive rivals from even entering the game. These vested interests become “rent collectors,” making tremendous profits from policies crafted to their advantage. The entire economy is penalized because, when competition is discouraged, the sphere available for new investments and new opportunities is reduced. The majority of the people are trapped in economic stagnation even as the oligarchs wallow in unjustly acquired wealth.

The antithesis to the “permeable” state, in political science literature, is the “strong” state.

A “strong” state is not necessarily an authoritarian one. It is basically a state able to assemble a set of regulatory institutions capable of resisting vested interests and standing for the larger social good. When the traditional elites are so deeply entrenched, however, achieving a “strong” state often requires an authoritarian interregnum.

The most progressive economies are those whose regulatory institutions are insulated from vested interests. Because of that, they are able to fashion far-sighted policies and efficient economies.

The consensus among development theorists is that the Philippines lagged behind its dynamic neighbors in the region because it remained a “weak” state for too long. Policies served particularistic interests rather than the general good. The constantly shifting policy framework, under the grip of specific powerbrokers, discouraged long-term investments and encouraged only carpetbaggers who came in for quick profits and left when other markets offered better returns.

Dismantling the oligarchy is the true revolutionary agenda of this time. But what that requires is building regulatory institutions that apply global best practices in the rules of the game. By constantly benchmarking our regulatory policies against global best practices, we will be able to build a strong state.

I will beg to disagree with economist and national scientist Raul Fabella, who I deeply respect, when he said the oligarchy would always be with us. True, we cannot completely banish those who will try to distort our policy architecture to their advantage. True, the battle is not won just by the cancellation of one franchise. But by strengthening our regulatory infrastructure, we can diminish oligarchic influence dramatically. This will have to be a continuing effort. The inclusive development of our society is at stake here.

Among the most salient paradoxes of well-functioning modern economies is that the free market is made possible by strong regulatory institutions. We have to grasp the beauty of that paradox well.

I recall Fidel V. Ramos, when he was president, telling us that bureaucratic reform is the most difficult of all areas of reform. This is because here we will be fighting our own army of bureaucrats.

It is always easy to pass the most visionary economic reform legislation through Congress. But they are eventually emasculated in the implementing rules and regulations.

I hope that Mike Defensor, since he seems to have assumed the role of stalwart against the oligarchy, fully grasps the reform agenda this entails.