Structural Inequality in the Philippines: Oligarchy, (Im)mobility and EconomicTransformation.

• Jurisdiction: Singapore
• Date: 01 December 2019
• Author: Tuano, Philip Arnold

1. Introduction

   The recent performance of the Philippine economy poses a number of conundrums for analysts of growth and development. Long regarded as the "sick man of Asia" since its mid-1980s debt crisis (Balisacan 2015), the country's economic prospects have dramatically improved over the past decade, catapulting the economy to the ranks of Asia's leading growth performers, as well as onto several lists of promising emerging economies, such as Goldman Sachs's "Next-Eleven", Turner Investment Partners' "TIMPs" (Turkey, Indonesia, Malaysia, Philippines), and Time Magazine's "PINEs" (Philippines, Indonesia, Nigeria, and Ethiopia). Nevertheless, in parallel to this economic resurgence, deep-seated challenges of structural poverty and marginalization have persisted, with the country's record in reducing poverty and inequality, as well as in generating quality employment and promoting social mobility, having been disappointing. More troublingly, there is increasing evidence that wealth inequality has risen, even while the social mobility prospects of most of the population has been hampered by entrenched forms of social and economic insecurity. These, in turn, have elicited increasing concern from observers about the "exclusive" and even "oligarchic" character of the Philippine economy and its growth patterns, which have yet to be decisively and effectively tackled by policymakers and the country's political leadership (Habito 2012; Teehankee 2017).

   In line with concerns on rising inequalities in the country as well as entrenched obstacles towards achieving inclusive growth (Albert, Dumagan, and Martinez 2015; Albert and Raymundo 2015), this article aims to situate inequality trends in the country amidst transformations in the Philippines' political economy since the return to democracy in the mid-1980s--focusing on the contribution of structural and institutional changes on wealth and income distribution, as well as social mobility. Starting with an overview of these transformations in the next section, the article surveys more specific trends in inequality and exclusion, and examines the factors that have driven such processes. The conclusion again stresses the underlying political economy constraints that have impeded significant advances in the Philippines' efforts to address inequality and exclusion, as well as the importance of recalibrating such efforts amidst intensifying populist sentiments among the vulnerable and middle classes.

2. Overview of the Philippine Political Economy since the 1980s

   Once regarded as a leading Asian example of the "third wave" of democratization (Huntington 1991), the Philippines has witnessed a series of sea-changes in its political and economic landscape. In the aftermath of the 1986 People Power Revolution, which ended the twenty-one-year regime of Ferdinand Marcos, elites alienated by the dictatorship reinstalled a political system highly reminiscent of pre-Marcos liberal democracy: competitive elections and civil liberties were restored, while substantial powers and privileges were retained in the institution of the presidency (e.g., budgetary and appointment powers). Meanwhile, through the passage of the 1991 Local Government Code, an entire continuum of governance functions, including in local administration, planning, revenue-raising and development promotion were downscaled from the national towards provincial, municipal/city, and village levels (Porio 2012), even as one of the most active and expansive civil society sectors in the Asia-Pacific was able to secure greater policymaking influence through notable innovations in participatory and accountable governance, including the adoption of a "party-list" system of proportional representation for marginalized and under-represented sectors (Clarke 1998; Magadia 2003; Quimpo 2008).

   More than thirty years onwards, however, the pursuit of more substantive political empowerment has proven elusive. In the absence of an effective political party system, the return to electoral democracy has mostly seen the re-emergence of family-based, rentierist competition for public office, oriented towards an "anarchy of particularistic demands and particularistic actions" (Hutchcroft 1998; McCoy 2009). Labelled variously as "elite democracy" (Bello and Gershman 1990; Timberman 1991; Quimpo 2008) and "oligarchical democracy" (Hutchison 1993; Sidel 2014), the political landscape has experienced a disproportionate concentration of elected political offices in less than 200 families--reportedly one of the highest levels of dynastic concentration among functioning democracies worldwide (Rivera 2016).

   Among all Congresses elected since 1987 (see Table 1), no Lower Houses elected have had less than six in ten officials from political dynasties, though by the seventeenth Congress in 2016, this percentage had risen to 78 per cent of district legislators. These challenges have been even more pronounced among local government units (LGUs), where electoral competition can be less than nationally, and where issues of poor public service delivery, corruption, coordination failures, low implementation capacity, and lacklustre development outcomes are especially entrenched (ADB 2007a; ADB 2009). According to recent figures, for instance, 81 per cent of provincial governors and 69 per cent of mayors elected across the country in 2016 were from such political families (Mendoza 2018).

   This checkered record in the political order has been accompanied by similar advances and difficulties in the economy. Burdened by a cronyism-ridden, mismanaged economy that had been ravaged by its worst recession in the post-war era (Dohner and Intal 1989), successive administrations have facilitated a tectonic shift away from the opportunistic interventionism of the Marcos years. Indeed, since the country's debt crisis, which made the Philippines among the first recipients of the World Bank's structural adjustment programmes (Broad 1981), the country undertook the most ambitious tariff reductions among ASEAN member states from 1978 to 1996 (1) (Paderon 2017). It embarked on some of the most ambitious privatization ventures in the world in the 1990s (Bello et al. 2005), opened several sectors once reserved for government for private sector participation (including in air transport, water services, telecommunications, and power), and figured among the global pioneers of the private sector-led development of special economic zones and free trade zones (McKay 2006). All told, from the patrimonialism and "immiserating growth" patterns of the Marcos regime (Boyce 1993), the country now boasts an economic policy paradigm that is among the most market-oriented within the region (Bello et al. 2014; Montes and Cruz 2019). While such market reforms offered one pathway for the Philippine economy to end its post-dictatorship stagnation in the late 1980s and 1990s, the country today still grapples with the long-term implications of adjustment, ranging from issues related to the economy's "premature de-industrialization" (Rodrik 2015; Daway and Fabella 2015), as well as the prominence of family-linked conglomerates over the commanding heights of its economy.

   Figure 1 presents the broad contours of the economy's structural transformation. From being one of the more industry-focused economies in the region in the 1980s, the Philippines in 2015 has transitioned into a low-end services economy, buoyed by the dramatic expansion of its retail, leisure, property development, utilities, and social services subsectors--which has, in turn, been driven by a striking increase in remittances from overseas Filipino workers (i.e., a significant increase in the Net Primary Income from Abroad account) (Action for Economic Reforms 2014; Raquiza 2018). More recently, the tradein-services sector has also become a major contributor to growth, driven by the information technology business process outsourcing (IT-BPO) revolution of the 2000s as well as the sustained expansion of the tourism economy (Mitra 2013). By contrast, industry and agriculture have substantially declined in terms of their GDP shares in the intervening years, with agriculture contributing less than 10 per cent to GDP by 2015.

   The focus of Philippine big businesses' activities has reflected these broader structural trends (see Figure 2): while large family-owned companies in Indonesia, Malaysia and Thailand were also more concentrated in the services sector than in industry, Philippine conglomerates featured the most pronounced case of this trend in the ASEAN region. In 2016, 61.9 per cent of the market capitalization of three of the largest Philippine business groups (the Ayala, Gokongwei, and the Sy groups) were concentrated in the services sector, compared to only 37.8 per cent for industry. Rather than the historical norm of manufacturing and export agriculture until the 1980s, the largest conglomerates in the country are now primarily engaged in the construction, energy and power generation, education and healthcare, retail, real estate, utilities, BPO (especially through IT centre creation), gaming and tourism, and financial services sectors (Raquiza 2014; Mendoza, Arbo, and Cruz 2018). Comparably, the business interests of many politicians in the country have shifted to urban property development, rather than large-scale rural landownership and export agriculture, which was arguably the leading wealth accumulation strategy among political elites until the adjustment period (Krinks 2002; Bello et al. 2014). From the "landlorddominated" legislatures of the late 1980s and early 1990s, more than half of all congresspersons were found to have had substantial interests in construction and real estate by the twelfth Congress in 2001, though accounting for dummy companies and nominee accounts has been found to bump the share of such legislators up to 70 per cent (Coronel et al. 2007; Clarke 2013).

   FIGURE 2 Market...