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Philippines: Politics or Economics - Which is Stronger

John Mangun - 1/23/2006

Every time a politician talks about economics, I think there is reason to tremble. Of course, every time an economist talks about politics, you should have the same reaction. There seems to be a constant and continuing commentary how politics is the driving force behind economics and the economy. I will grant that government policies can help or hinder economic growth, but what I am talking about here is something a little more basic. Is the driving force in a society what happens in the political arena or what happens in the economy of a country?

If you look at the revolutions of different countries throughout history, on the surface they all seemed to be political in nature. However, the ‘political’ conditions that supposedly lead to the revolution existed for a long time before the people took direct action against the government.

Although those who study political science or economics might not agree, examining the great social upheavals across time would point to economic conditions creating the focal point for great political change.

The revolution in the colonies of the new world against England was not triggered by any significant resentment against the British monarchy. The spark of that revolution was a heavy-handed tax that would cut into the profits of colonial businessmen.

The French revolution was not necessarily about democracy and a hated king and queen. The public went to the streets when a popular finance advisor to the throne, who tried to stabilize the currency, was removed from power. The rest is history.

Czar Nicholas had a multitude of on-going problems, even reaching back through other rulers of the Romanov dynasty. Yet, here too the trigger was the very bad economic conditions during World War II. In fact, he was an enlightened ruler, having taken land from the ruling class to distribute to the peasants. And let us be honest; the Soviet Union fell from the push of long standing economic failure and chaos, not a cry for the freedom of democratic rule. In fact, since then, the people have often talked nostalgically about communist rule when frequent difficult economic times have hit.

The question rises of the Philippines then, was EDSA I triggered by Aquino’s assignation or merely by the economic results of his murder? Of course, it is barely whispered if Estrada fell because of his personal character or because rice and corn production fell by almost 80% during the last year of his Presidency.

If the economic conditions can lead to great fundamental changes in a country’s government, even the type of government, can a variation of that be true also? That is, does a government perhaps reflect the prevailing economic condition even more so than the economy reflect the government? Which comes first, the chicken or the egg? Which causes the creation of the other? Does politics create the economic situation or does the state of the economy create the type, style, and personality of the existing government?

What does the Philippine economy look like right now? I cannot describe any other way except that it has a very self-centered climate currently. People are making the decision to emigrate without any thought to the nation’s welfare, unlike in the past. I see upper middle class families going abroad with no intention of returning or any feeling of loss. Companies are pursuing business interests that are absolutely against the best interests of the nation, smuggling and reckless importation of consumer goods being the prime examples.

Administration or oppositionist does not accurately describe the average member of the public. There is no street talk of loyalty to either side. It is every man for himself. When that attitude prevails, there is a constant blame-game exercise. The world is facing a major crisis over Iran’s decision to pursue an aggressive nuclear policy that, depending on the reaction of the USA and Europe could lead to crude oil easily and soon reaching US$100 or more a barrel. No one seems to care except to make sure their tanks are full, while blaming the broadly defined “government”.

Many major corporations are still following long-term programs and plans set months or even years ago. The acquisition binge of the Shoemart empire is an indication of that truth. The small and medium size firm is lucky to have strategies that extend beyond the next quarter. The six-month growth in the value of the Peso should have created numerous millionaires. In the past, a sustained appreciation in the Peso such as we have witnessed would have been like hitting the lotto repeatedly for many people. Filipinos know and follow currency movements unlike most in the world. Yet, everyone seems to have been caught be surprised and did not profit from the appreciation.

This is becoming a hand-to-mouth economy with little thought to how the individual fits into the overall picture. It is an economy that is looking forward only as far as the next deal without any long-term vision. An economy is distrustful of making plans and building for the future.

The Philippines’ economy and the attitudes in the economy, the way it is run and the economy’s future is created by tens of million of Filipinos and not by one administration. So again I ask, does an economy reflect a government or does a government reflect an economy?