developmental patrimonialism

Developmental patrimonialism? The Philippine preference for pork, part 2

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Filipinos have a preference for pork. They expect their elected representatives to provide private or club goods, such as money, roads, community halls, rather than public goods like legislative scrutiny, economic policy, and the like. Yet this has not prevented their economy to grow at the same time. In this sense the Philippines might be considered a developmental patrimonial state. The following is how Tim Kelsall explains the concept based on the findings of his research

 Africa may have some of the world’s fastest-growing economies, but investment and incomes still lag far behind other regions. Conventional development wisdom lays the blame on a governance syndrome known as neo-patrimonialism, a system of personal rule held together by the distribution of economic rents to clients or cronies. But recent research … shows that neo-patrimonialism is not always as economically damaging as the development community believes…(It) may even help, the climate for business and investment (and) can be compatible with rapid, pro-poor, economic growth (emphasis added).

To paraphrase Kelsall, neo-patrimonialism comes from Max Weber’s concept of “patrimonialism”, an “ideal-type” of traditional rule in which authority is founded on ties of personal loyalty between leader/patron and subordinates/clients. The system is maintained through the distribution of perks or rents. These benefits are distributed among clients with no distinction between private and public property.

Neo-patrimonialism is a political economy in which patrimonialism is overlayed with elements of modern governance and rational-legal systems that differentiate between private and public domains on paper, but where informal practices still trump formal rules. Developmental patrimonial states according to Kelsall have exhibited these characteristics, but were also capable of long term vision and able to

distribute economic rents in a way that balanced the demands of political stability and economic growth, while facilitating investment through …‘relationship-based’ governance.

The rents being talked about here, are not just monopolistic, the sort that takes welfare from consumers and transfers it to producers. They also involve Schumpeterian rents, associated with entrepreneurial ventures and wealth creating innovation. Developmental states are able to  train resources at both kinds of rent-creation and make them serve a national development agenda. The motives behind this need not be altruistic, as higher long-run growth provides better rewards for those at the top of the patron-client network.

The findings of Kelsall are similar to the conclusions of Solon, Fabella and Capuno (2009). When they looked at the spending behaviour of provincial governors in the Philippines, they found a kind of competitive developmentalism at work along patrimonial lines as political clans sought to outdo each other to win local elections. Where rival clans have been present, the consolidation of power has not led to complacency. Instead of simply plundering all of their discretionary funds, patrons have had to ensure that a significant portion of it ends up serving their local constituents for them to survive in the political jungle.

The Philippines has been described as a patrimonial state by Hutchcroft (1998). He attributes this to the capture by local elites of the levers of the state under the American commonwealth period and beyond. The Martial Law regime centralised rent-creating and distributing capacity, an important pre-requisite for becoming a developmental patrimonial state based on Kelsall’s findings.

Although the post-EDSA era has decentralised power to local elites by restoring congress, it has kept the power of the purse with the executive branch as demonstrated by its ability to impound and re-align government spending without congressional authority. This centralisation as some have pointed out covers large lump-sums in the budget, effectively giving the office of the president immense powers to dispense patronage with minimal oversight from a complicit congress with which it shares some of the spoils through pork barrel.

But despite the opportunity for this sort of patrimonialism, and the fact that the countries’ ratings in traditional indicators of good governance have not improved much over the past decade, the Philippine economy has experienced a relatively stable and sustained period of economic growth for over a decade. It has been the fastest growing economy in the region over the last two quarters.

Becoming developmental?

Since the third quarter of 1998, the country has had 60 consecutive quarters of growth averaging 4.9 per cent year-on-year. It created about 11 million net new jobs during this period. Since 1999 the country’s capital formation has outstripped investments making it a net saving rather than a net borrowing nation, largely on the back of foreign remittances. Macroeconomic stability, that eluded the country in the 1970s to the 1990s was restored. 

On the fiscal side, the government was able to tame its budget deficits. From 2001 to 2011, the government’s net borrowing averaged a mere 1.98 per cent of GDP per annum based on IMF figures. Debt as a percentage of GDP fell from a peak of 68% in 2003 to 42% in 2011, and it is projected to fall to 33% by 2018. The orderly transition from Arroyo to Aquino, and the continuity of policies have, despite the political recriminations and legal prosecutions that followed, made this sustained performance possible.

Fiscal consolidation and resilient growth has led the three most prominent credit rating agencies to upgrade the country to investment status. This has given the Aquino administration fiscal space to focus on social and economic programs. These include expanding the conditional cash transfers program, which began under its predecessor. In 2014, the government will boost funding for this to Php 40 billion covering in full the four million estimated poorest households nationwide.

In the past, such a large program would have presented opportunities for waste, political interference and corruption, resulting in policy failure. That has not been the case here. A recent impact evaluation of the program conducted by the World Bank has concluded that it has been effective in fulfilling its desired outcomes–school enrollments and attendance rates are up, while malnourishment is down among children of households that are participating.

Between 2012 and 2013, social and economic services received the lion’s share of increased fiscal spending growing from a combined total of P1.05 trillion to P1.2 trillion. The 2014 budget increases this to P1.4 trillion. Included in this is the closing of the school building deficit and increased public works expenditures. The government aims to spend 5% of GDP on public infrastructure by the end of its term in 2016.

Increased spending on education and health to develop human capabilities will be an important determinant of future growth in a world where human capital counts more than physical capital, as Peter Evans suggests. The 21st developmental state will need to develop the kind of institutions that foster this kind of investment.It will require a political consensus to support it in a sustained manner. In a country with large social disparities, that can only be achieved through some sort of rent management.

What PDAF and DAP represent

PDAF and DAP have caught the ire of the middle and upper classes in urban centres who regard these as pork barrel. To them this type of spending represents patrimonial plunder and a hindrance to development. PDAF has accounted for 1.2-1.3% of the General Appropriations in the last three years. DAP amounted to 5.3% of the budget in 2011 and 3.2% in 2012, of which only 9% went to projects identified by members of congress. In 2013, about 0.8% of the budget has been approved under the program.

What PDAF and DAP represent from a neopatrimonialist point of view is an investment in political stability. Compensating powerful elements of society with such rents, buys support for inclusive development spending to provide a social safety net for the marginalised sectors of society. Without such an “investment” the country would have slipt into political chaos during the Arroyo administration. This would have disrupted economic growth and hindered the country’s fiscal capacity for investing in social development as what happened in the 1980s following the assassination of Benigno Aquino, Jr.

The question now is whether such a set-up needs to continue beyond the present administration’s term of office. As Kelsall points out,

Developmental patrimonialism has a limited shelf life and will not be appropriate everywhere.

What the recent Pulse Asia survey on the pork barrel reveals is that people are still unwilling to change things dramatically. They will still allow for clientelist side payments to be made, with some caveats or none at all, to facilitate local development spending.

As the Philippines enters middle-income country status where the pace of growth is providing increased fiscal capacity to deal with the requirements of social and economic development, it is possible for the illegal practices associated with pork barrel to be legitimised through some new formal compensation and benefits arrangements for elected officials and other mechanisms such as state-subsidised political party campaigns, or a combination of both.

Whether this happens or not depends on the political pulse of the country, and what the ruling elite perceive is in their best interest. Other factors may come into play, such as the Supreme Court ruling on the constitutionality of PDAF and DAP, the actions of prominent leaders and mobilisation by civil society groups.

Given the public approval for the president’s handling of the situation (as borne out by the Pulse Asia survey), much will also depends on what the administration perceives it can and should change, and the capacity it retains after all the dust has settled to set the agenda for the remainder of its term.

Regardless of what happens though, it is important for the policies that foster growth and social equity to be preserved as President Aquino hands over the reins to his successor in 2016. Only sustained growth holds the possibility for improved governance down the track.