The Game of the Generals

As the nation welcomed the Year of the Rabbit with a bang, pyrotechnics were being set alight in the halls of Congress as the investigations into the Carlos Garcia plea bargain drew to a close. It now appears that Ombudsman Merceditas Gutierrez will seek the withdrawal of the deal before the Sandiganbayan graft court after she was prevailed upon by some eminent members of the august chamber of the Senate to do so.

Meanwhile Ms Heidi Mendoza, the former auditor who uncovered evidence of plunder by Garcia, is being hailed as a hero and enlisted by P-Noy for a senior appointment in the fight against corruption. Before she entered the scene, all it seemed had been lost. The Ombudsman said the evidence it had was not admissible in court making its case weak. Garcia was allowed to retain most of what was alleged he had stolen. Pleading to a lesser offense, he was allowed to post bail and was subsequently set free. Enter Heidi Mendoza, and everything changed.

It is rather ironic that Ms Mendoza, who holds a rank of lieutenant colonel as a reserve officer but normally works quietly behind a desk crunching numbers, should bring the military establishment to its knees. This is in contrast to Lt Antonio Trillanes IV who was all sound and fury. Having used the barrel of a gun (twice in fact during the Oakwood Mutiny and the Manila Pen Siege) to throw a spotlight on the condition of soldiers in the field, he and his cabal failed to effect any meaningful change save for getting himself elected Senator.

P-Noy who campaigned and got elected on a platform of anti-corruption (kung walang corrupt, walang mahirap) and prosecuting his predecessor for graft, was muddling through in this regard having a hostile Ombudsman to contend with and his Truth Commission declared unconstitutional by the Arroyo-appointed Supreme Court.

Yet when he announced his candidacy back in 2009, P-Noy who prided himself with being a trained economist demonstrated an understanding of the calculus of corruption and the tools required to counter it. The present case of corruption in the military demonstrates just how lopsided the incentives are in favor of being dishonest.

The game of the generals as I would like to call it is no different in fact from the practices of chief executives at any S&P500 corporation. Consider the manner by which AFP budget officer Lt Col George Rabusa recounted them: (1) upon assuming office, the chief of staff received a 10 million peso pasalubong or signing bonus, (2) while in office, each chief was given 5 million pesos in addition to his salary, an expense account in other words, and (3) upon retiring, a general was sent away with a 50 million peso pabaon or golden parachute.

Their method for appropriating such wealth to themselves? Creative accounting: just as chief executives cook the books in the short-term to claim bonuses and move on to a new company before auditors are able to decipher what they have done, these generals seem to have done the same using PCDA (or provision for command-directed activities) as the vehicle.

Just as in the corporate world, the only way to prevent such practices from spiraling out of control and protecting the interests of shareholders when the CEO controls the board and is in cahoots with the auditing firm is through whistle blowers from inside the company (women have been found to be more conscientious and less prone to corruption and are more likely to blow the whistle on the practices of the “bad boys” in the board room, which is the argument for appointing more women in senior positions).

To those who supported Gibo Teodoro in the last presidential derby, it must be exceedingly clear at this point why the revelations in the Senate would have never happened under his administration. In a democracy, it is always healthy for a turnover of the reins to occur from one party to the next. And so it is in our situation.

The question now is, what is likely to happen over the next five and a half years under P-Noy? Many have questioned his ability to run the government competently despite his probity. But as we have just witnessed, competence can be outsourced but not probity. P-Noy needs a few good men and women, especially women, in championing the cause of good government. Without them, he could  just be running in circles, manipulated by the masters of the game.

Erratum: the original version of this article referred to Lt Antonio Trillanes as being the 3rd instead of the 4th as it now appears in the article.

Doy Santos aka The Cusp

Doy Santos is an international development consultant who shuttles between Australia and the Philippines. He maintains a blog called The Cusp: A discussion of new thinking, new schools of thought and fresh ideas on public policy (www.thecusponline.org) and tweets as @thecusponline. He holds a Master in Development Economics from the University of the Philippines and an MS in Public Policy from Carnegie Mellon University.

  • I am a pragmatic believer of efficient market hypothesis. Use market mechanisms to effect political change. There is no groundswell in this country for country based economic and political self interest. Hence the idea of nationhood is superficial. The wrong headed notion that government is bad is too deeply entrenched in this country. It will take too much time for the government to regain credibility when it never had it. EMH is a very effective tool.

    I believe in abolishing the price control mechanism in setting the price of credit in this country.

    Combined with abolishing all controls on foreign exchange trading and make the peso fully convertible on international markets.

    Also abolish the government guaranteed insurance on all bank accounts.

    That is what EMH is all about. Let the market decide on valuations.

    That is when people will be educated on their property rights. (savings)

    The power to create new money (credit) is in the hands of private bankers almost exclusively. With the BSP they become quasi-public companies with an implicit state guarantee.

    That creates a moral hazard. The Too Big Too Fail universal banks know they will always be rescued.

    Only four to five banks in the country control over 80% of all deposits. Apart from the foreign bank they are owned by the landed/merchant families.

    Remove the safety net for the owners of banks and let them sink or swim in a completely open market place.

    Open up and liberalize completely formation of banks. Ne need even to set capital requirements. Leave it to depositors to decide where to put their money.

    Banks sell deposits and buy loans. Since they are managing mostly other peoples assets, banks then will have to be open and transparent with their deposits on where these deposits are being used.

    Also the actual printing of cash can be monitored and bank secrecy which actually acts as an incentive for illegal activities will be a thing of the past.

    Government will simply monitor names of depositors and to whom loans are given.

    This actually already is part and parcel of more modern societies.

    I sometimes make extra money advising people on
    how to move their money outside the formal banking circles in this country. I reserve this exclusively for families who I now off personally only who wish to move abroad and liquidate their holdings in the country.

    No Garcias and Ligots allowed. Though there are many others who have no qualms on doing this for other people.

    Rules on moving foreign currency abroad legally are limited to $30m a year through formal channels.

    Moving local currency is banned.

  • jun salipsip

    So, if the cause of our problems today is the feudal nature of the country’s history, what would be the solution?

  • J_ag

    There is no doubt that Pinoy is a gentrified son of the established landed class of the country.

    Brought up in the tradition of the upper class where probity was inculcated.

    However what is missing from him, his ilk and all the other Presidents before him was the fact that the hard wiring of nationhood was never part of the parochial feudal nature of the country’s history.

    The hard-wiring or hardware of nationhood is missing from the country’s discourse. Hence the software of policies and then programs of a country’s societal development are confused and misdirected. Freedom and not democracy are universal values. Democracy is the best mechanism. Just like the Market is the best mechanism for creating wealth. It is a tool or means to an end.

    However the end and the means must conform directed by the selfish interest of families, communities and nation state managed by men who are hard wired for nation building.

    The neo-colonial mindset however still prevails due to the historical basis of integration with the outside world before the proper integration of an archipelagic country tool place. Hence the ruling classes are more comfortable being identified with or as citizens of the more advanced economies while keeping one foot in the country that provides them their economic power.

    Hence economic governance is perverted to dependence on external demand instead of developing internal demand. The stranglehold of this moribund class structure gives rise to economic activities that are narrowed to trade, banking and employment generation based on external demand. Slogans are sued to justify this exercise. How many Pinoys understand that economic governance as the integral part of political governance.

    Even the CPI which is a representative basket used in determining the inflation rate is proof positive that monetary policy is useless in the context of inflation fighting. Food basket comprises 50% of the chain weighted index. The reality is that many in the country are people whose food budget eat up up to 80% of their make believe basket of goods.

    For the rich whose food basket is between 20-30% higher food prices barely affect them.

    Stealing to put food on the table is not a crime. However the value system of probity can be degraded by the constant struggle for physical survival. The unethical becomes the ethical.

    The next five years is going to a new phase in the struggle.

    The myth of the Aquino magic cannot multiply the loaves of bread. There may no more time for talking. “The road to hell is paved with good intentions.”

    Pray if you believe in God and make sure to protect your individual households. The State is tottering.

    The door has been opened for fascists to take hold.

    • Bert

      You missed the train, J_AG. The platform for this statement of yours is during the reign of Gloria, :).