checks and balances

Checks, But No Balance

With the impeachment trial winding down with all but the closing arguments and final judgement to be rendered, it is becoming clear just what is at stake.

The Senate was essentially made to referee between the bickering heads of two co-equal branches of government, the executive and the judiciary. On the one hand, the chief executive claimed that the Supreme Court was preventing him from exercising his prerogative to run after and prosecute his predecessor. On the other hand, the chief justice claimed the executive branch was weakening judicial independence through intimidation.

The two opposing camps were on a collision course ever since the ‘midnight appointment’ of the chief magistrate. The president never really acknowledged the legitimacy of it. What made matters worse were the decisions penned by the high court which tended to contain a certain slant not in favour of the administration. The politicisation of judicial appointments meant that a political process was needed in order to straighten things out and restore some form of balance to the bench.

The problem was that in going after the Arroyo appointees to the high court, the administration could not avoid coming off as vindictive. Accusations of arbitrarily using public agencies to conduct a witch hunt were inevitable. It didn’t help that the case was hurriedly built on shaky ground. Ironically, it was only with the emergence of clandestinely procured evidence that the prosecution started to gain momentum and make a serious dent in the case of the defence.

Meanwhile in the court of public opinion, both parties waged a war for our hearts and minds using the pulpits of their office as a platform for airing their views. For the last six months the campaigns have been relentless. At times senator judges were drawn into the debate. The Palace could be said to have the upper hand in this regard having at its disposal the propaganda apparatus of the state.

In a way, this forced Chief Justice Corona to take the stand. Only through his televised testimony could he address the issues posed to him both in and out of the courtroom squarely. He did so with candour, at times giving vent to his frustrations, but in the end with great humility and deference to the court.

In the end, it all boils down to whether his sin of omission, failing to declare certain assets in his public statement of net worth would be enough to convict him. Having openly declared on the one hand the full extent of his wealth and the assets in his possession while on the other laying the legal basis for not including them in his statement, the chief justice’s case now falls into the discretion of the senators acting as jury.

With neither camp being able to claim a majority of allies in the upper chamber, the decision of whether to acquit or convict now rests with the unaligned senators, a significant number of whom are up for re-election. What happens next will determine whether we will live under a tyranny of judges on the one hand or the tyranny of the majority on the other. What this means is that we will end up having a system of checks, but with no balance.

Tilting at Windmills

Just then they came in sight of thirty or forty windmills that rise from that plain. And no sooner did Don Quixote see them that he said to his squire, “Fortune is guiding our affairs better than we ourselves could have wished. Do you see over yonder, friend Sancho, thirty or forty hulking giants? I intend to do battle with them and slay them. With their spoils we shall begin to be rich for this is a righteous war and the removal of so foul a brood from off the face of the earth is a service God will bless.”

“What giants?” asked Sancho Panza.

“Those you see over there,” replied his master, “with their long arms. Some of them have arms well nigh two leagues in length.”

“Take care, sir,” cried Sancho. “Those over there are not giants but windmills. Those things that seem to be their arms are sails which, when they are whirled around by the wind, turn the millstone.”

[Excerpt from The Ingenious Knight Don Quixote of La Mancha by Miguel de Cervantes, 1604]

This week, the president’s allies in the House of Representatives numbering 188 voted to impeach Chief Justice Renato Corona. This came after a flurry of attacks against the high court launched by the president himself on numerous occasions. The ‘rap sheet’ or articles of impeachment contains allegations previously laid by him before the chief justice in a legal forum where both were present.

They include his voting record as a member of the Supreme Court that seems to favour the former president and now congresswoman Gloria Arroyo which was claimed to have been responsible for the loss of public trust in the institution he leads as shown by its extremely low rating in the SWS public opinion polls. The prefatory statement issues the charge that

Never has the position of Chief Justice, or the standing of the Supreme Court, as an institution, been so tainted with the perception of bias and partiality, as it is now.

It then proceeds to build a narrative to support its case. Beginning with his close association with the former president prior to his appointment to the Supreme Court, his voting record as member thereof before assuming his present role, followed by his acceptance of Mrs Arroyo’s ‘midnight appointment’ to be its chief, and the numerous incidents in which the court displayed its ‘bias’ towards the Arroyos. It is peppered here and there with allegations of improper use of public funds and nepotism.

On the face of it, there seems to be a strong case to be made against the Chief Justice, but whether it can be proven in such a way that would lead to a conviction is another matter altogether. The articles certainly tell a coherent story, but as any legal expert will tell you, in most matters that involve the high court, there are legal merits on both sides. In defending himself, Corona will simply have to recite the legal underpinnings of the high court’s decisions.

It will then appear that Congress (and the president) can impeach any member of a co-equal branch of government simply for making decisions that they find disagreeable. This means war between the executive and judiciary with each side claiming the other overstepping their boundaries and seeking to establish a dictatorship by one branch.

At the moment, the palace has the moral ascendancy. The high court is already viewed with suspicion by the public. Pursuing this case against Corona and by implication the rest of the court that he leads however could place suspicion on the president’s motives because of the Hacienda Luisita ruling which disadvantaged his clan. P-Noy by taking this bold step has highly discounted the risk of losing the moral high ground.

Secondly, most of the accusations save for the one involving Corona’s failure to file a statement of assets, liabilities and net worth (which might not be an impeachable offense based on previous court resolutions) involve decisions made by the entire bench not the chief justice alone.

The high court’s decision to exempt itself from midnight appointments, the creation of a new congressional district that became the seat for Mrs Arroyo’s son, the injunction against the lower house of Congress in hearing an impeachment complaint (its sole prerogative) against the ombudsman appointed by her, the exoneration of one of the justices for plagiarism by a committee comprised of magistrates, the injunction it issued against the secretary of justice’s hold departure order on Mrs Arroyo which it said was in effect despite the non-fulfilment of certain conditionalities were all made by a majority of the court.

Given the collegial nature of this body, the prosecution will have to prove that Corona exerted some kind of influence akin to a Jedi mind trick that forced other justices to side with him against their free will. Either that or Congress will have to impeach all the members of the majority who voted with him for showing bias. That will take some doing. Even if they (by ‘they’ I not only mean the prosecution, but the president) succeed in this (and there are already plans afoot to impeach two other justices), their side could suffer from what economists call the winner’s curse.

Having spent so much time and effort in this game to the detriment of all else (with the economy sputtering to a halt, which is what a 3.2% GDP growth figure represents), there will be hardly enough space for the government to move on policy matters as the legislative process gets tied up with the trial/s. Investor confidence could dissipate (adopting a wait and see attitude) as the country becomes wrapped up in the unfolding political saga. It seems that winning legitimately as in the case of this lawful and constitutional exercise could come at a heavy economic price for the republic.

Thirdly, while the public mood towards the Corona court is certainly non-supportive, it is quite spurious to lay the grounds for an impeachment complaint based on the fact that the accused garners very low esteem from the respondents to a survey no matter how representative it is. To begin with, let us assume for a moment that this low rating is due to the poor quality of decisions rendered by the court.

The articles of impeachment claim that this is because the court is biased in favour of Mrs Arroyo. An alternative explanation is that the justices sitting on the bench are simply not up to scratch and that their legal credentials were not properly screened. This too was asserted in the complaint. But whose job was it to screen presidential nominees to the high court anyway? Shouldn’t they bear responsibility for this outcome, not the appointees?

Also, the fact that the ‘bias’ explanation fits the narrative that the palace weaves makes it credible in the minds of the public in search of meaning behind events, but it does not necessarily make it true. Impeaching the Chief Justice based on his voting record on cases that affected Mrs Arroyo suffers from the law of small numbers. ‘How many cases does it take to prove that someone is biased?’ you might ask. Well that is precisely the problem. We cannot really use statistics to prove it one way or another. Of course an impeachment trial is more political than legal, which will make the outcome a product of naked power rather than a triumph for the rule of law.

The foregoing analysis lays down the reasons why I believe the impeachment of Renato Corona is more about the administration tilting at windmills than pursuing what it calls ‘reform’. The meaning of that word has become so mangled in its usage by the government that it has been equated to sending Mrs Arroyo to jail.

In the narrative of the palace, the president is the chivalrous knight who has come to rescue the nation, which is the helpless damsel in distress, from the villains of the republic, Mrs Arroyo and her ilk. It makes for wonderful imagery and rhetorical flourishes, and anyone or any institution that strikes a discordant note upsets the psychological balance derived from this plot and deserves to be called an Arroyo sypathiser.

Yesterday, the Chief Justice began to weave a narrative of his own. He spun it as I said above an encroachment by the executive on an independent judiciary, a creeping dictatorship through legal and constitutional means (alluding to the method used by Ferdinand Marcos). It is quite ironic that the son of the twin icons of democracy should be accused of making such an audacious attempt at witling it down.

Our minds naturally seek coherence. This makes us susceptible to several cognitive biases. This is often achieved by creating causal relationships. The entry of P-Noy into the 2010 presidential race after the death of his mother—it was all pre-ordained (based on hindsight bias). His elevation to the highest post in the land was to serve one purpose, and that is to send the villainous Mrs Arroyo to the dungeon beneath his palace (based on confirmation bias). From there, the nation will achieve its destiny of greatness (halo effect).

Unfortunately, reality is not quite as neat. The real world is much more complex and random as our minds would wish it to be. The successful prosecution of Mrs Arroyo and her minions by itself will not move us any closer to the rule of law or to economic deliverance. These things are achieved through actual hard work and good fortune. In fact, the real reforms that could move the country closer to these ideals can be achieved in spite of Mrs Arroyo and the high court.

The fact that many of them will now be delayed due to the impeachment trial means that we are actually farther away from achieving our potential than we were before. The words ‘downgrade’ and ‘catch-up’ are once again on the lips of credit rating agencies. As it turns out, the very windmills that the government seeks to joust with in its anti-corruption drive are the very mechanics of government that help deliver bounty to the nation.

Unfortunately, P-Noy and his allies have made up their minds. This court which has upset them once too often in their ‘quest’ can do no right, just as the knight leading the charge against it can do no wrong. The same goes for Renato Corona and his sympathisers. They believe the president is out to get them, and that this impeachment trial is a vendetta masquerading as a crusade against injustice by the high court.

How much longer will the nation be captivated and spellbound by the romance of these cognitive illusions? How much longer will people ‘dream the impossible dream’ as the country languishes at the bottom of the heap? Someone has to play the role of Sancho Panza and unmask the romanticism woven by both sides for what it really is: a farce.

Occupied

Restoring a meritocratic society is the goal of the 99 movement in America. Establishing it for once in the Philippines should be our national ambition.

The Nobel winning economist, Gary Becker, whose work on human capital I deeply admire wrote a piece called Deserving and Undeserving Inequality in the blog which he shares with Richard Posner. In it he distinguishes between good inequality (deserved) and bad inequality (undeserved) saying

The great majority of people in different cultures do not object to someone who has made lots of money when they have superior abilities and talents, and they work hard at producing what are considered useful goods or services.

The meritocratic society with upward and downward social mobility would be in Becker’s view the most acceptable form. In this just society, the cream always rises to the top. He cites actors like Tom Hanks and Jennifer Anniston, entrepreneurs like Bill Gates and Steve Jobs, and skilled professionals like transplant surgeons who have grown rich by applying their exemplary talents and skills.

In contrast, Becker poses the problem society seems to have with hedge fund managers who make use of arbitrage (momentary bargains unnoticed by the market) to make huge sums of money. He lumps them together with speculators, Russian oligarchs and monopolists who enrich themselves through unfair, uncompetitive means (the latter two through government fiat).

Becker of course uses human capital theory as his framework for addressing this issue. Under its framework, individuals who acquire knowledge and skill through education and training (one cannot gain it any other way as it cannot be inherited or passed on) deservedly earn private returns in the form of higher incomes over the remainder of their working lives.

A meritocratic society should in Becker’s view reward the investments made by individuals in themselves and not rely on some other criteria. Elitism, the polar opposite of meritocracy rewards individuals for investing in other things (political patronage, social standing or being raised on the right side of the tracks, marrying into the right family, etc). It all sounds rational and justified, which is why Becker says “the great majority of people in different cultures” accept the legitimacy of a certain form of inequality (I have some reservations which I expressed here).

The Occupy Wall Street protests that have spread all around the world is comprised of a disparate set of individuals, but at its core, it is a protest against what is seen as an illegitimate form of social structure perpetuated by a weak central government unable to constrain the greed of corporate elites.

The breakdown of social cohesion has occurred because of what is perceived to be the breakdown of a meritocratic society where one rule seems to apply to the rich who are becoming a new aristocracy while another set of rules applies to the rest.

The teapartiers detest the privilege accorded to the global capitalists/Wall Street at the expense of local merchants and tradesmen/main street, while OWS expresses their distaste mathematically by stating they represent the 99% who play by the rules but have to bailout the 1% who don’t.

It is curious to see how the OWS protest that began in NY mutates as it travels to each city throughout the world deriving a local “strain” in each place. In the Philippines, which has witnessed a high level of social inequality, there has not been a similar groundswell of support outside the usual suspects of BAYAN MUNA and other groups who coalesce under anti-American imperialist banners.

The reason being I think that the broad sections of our society by and large aspire towards a meritocracy and see their lack of social mobility as either the result of divine providence or misfortune. The masses have not coalesced around a universal sense of rights and entitlements that has taken hold in the West perhaps because they still depend on ties of patronage from local elites.

The state has had a long history of either colluding with or acceeding to our elites. They have given concessions to the “peasantry” whenever popular movements have challenged their ascendancy but withdrawn them when the threats have passed. Charismatic populist leaders like Ramon Magsaysay and Joseph Estrada sought to appease them, not undertake reforms aimed at genuine social restructuring.

The only time when the state sought to weaken the landed elite by expropriating their assets was under Martial Law. Even then there were limits to what it could do as it sought to make its authority legally and constitutionally binding in the eyes of the world. The problem was that once it had weakened any challenge to its authority, nothing prevented the regime from plundering as well.

The lack of accountability under Martial Law made the state susceptible to a new form of super-sized impunity. This was not inevitable though as in the case of East Asia with their benevolent dictators. Had Mr Marcos fostered a new meritocracy in both the bureaucracy and the wider economy, things might have been different.

His wife Imelda widely reviled for her pompous display of wealth had actually promoted a meritocracy in the arts. Through her sponsorship of young scholars and aspiring artists through competitions and venues for the demonstration of their capabilities, she enabled a flowering of talent that was not based on birth or privilege. This is the one legacy for which she can be rightly credited.

If only the same thing had happened in the technology sector where innovation and risk-taking could have been encouraged, instead of the crony capitalism that created a new elite not based on productive but predatory activity, the Marcos years might have come out smelling a bit better.

Contemporaneous with the Marcos era, during the 1970s and 1980s, Brazil and India embarked on a policy of giving birth to technology firms. The state agencies that were engaged in this “midwifery” role were not perfect, but as discussed by Peter Evans in his book Embedded Autonomy, despite their imperfections, at the end of the 1980s they still had something to show for it.

After seeing efforts at producing local operating systems and PC clones flounder, Brazil’s IT sector survived by specializing in financial automation for their banking sector (emblematic of this were companies like Itautec of the Itau Banking group). In India, state investments in skills produced manpower to work in systems integration services combining hardware and software engineering which became their strength. Today some of these Indian firms have successfully expanded their operations overseas (Mahindra Satyam and Tata Consulting Services are prime examples).

Korea which was most successful in fostering growth of this sector focused on the assembly of computers, consumer electronics and semiconductors through concessionary loans and state sponsored and financed research and development. In 1989 Samsung and IBM signed a co-licensing deal allowing them to tap into each other’s portfolio of patents. Today IBM no longer makes PCs, but Samsung is challenging Apple for the handheld tablet market.

Brazil of course was under a military dictatorship during this period. India was except for a brief period in the 70s a rambunctuous democracy like the Philippines is now. Korea was still being ruled by an autocratic president. In other words, the type of political system did not prevent the sorts of policies needed for promoting a meritocracy from emerging in productive sectors.

This was Pres Marcos’s greatest moral failing: neglecting the national development project and engaging in pure predatory behavior. The “Freedom Constitution” that followed his fall sought to put a system of checks and balances in place to restrain the executive has unfortunately not produced a meritocracy either. It simply revived the old aristocracy to power which has picked up where it left off prior to Martial Law by engaging in booty capitalism.

The weakness of the judicial system has served to deny a system of justice to the dispossessed and the poor. So unlike the Occupy Wall Street protesters who camp outside the headquarters of the global elite, our own version of the downtrodden live in slums outside the gated communities of local elites. They are forced to work in the informal sector without legal entitlements such as social security, healthcare or retirement funds, for the most part having acquired very little in the form of human capital.

The present dispensation is beset with many challenges all around which include fostering good governance and promoting economic growth. These projects will take time to bear fruit. While it is seeking to free the poor from local patron-client relationships through social insurance programs, it eventually needs to buckle down to the difficult task of generating employment through industrial promotion strategies and policies.

Having fostered the emergence of the electronics and business process outsourcing industries in the interim, the government faces the more difficult task of expanding the scope of these industries in the international division of labor (what Evans terms the role of “husbandry”) into more value added activities.

It would be good if aside from producing the domestic equivalents of Tom Hanks and Jennifer Anniston (a legacy of our showbiz, pop mentality from the Imeldific years) we could also foster the development of our own Bill Gates or Steve Jobs (the burgeoning industries out of Silicon Valley of course received tremendous government support through the defense industry).

Globalization was meant to usher in a kind of meritocracy among nations in the division of labor. What the experience of emerging countries has shown is that to rise to the top, state involvement in the development of industries is necessary. The ultimate goal should not be to one day attract a greater share of foreign companies to our shores; the national ambition should be to one day join our brothers in emerging markets in buying out foreign companies within their own shores.

Perhaps it is this vision that should occupy our hearts and minds as we look to the future.

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