Dilawan: Rise and Fall of the EDSA Regime - Another Aquino

“I have fought the good fight, I have finished the race, I have kept the faith.”

Those were the words of Pres. Noynoy Aquino at his valedictory State of the Nation Address to Congress in July of 2015 where he summed up his administration’s achievements and looked forward to “a new dawn of justice and opportunity” forged by “freedom from corruption” as he claimed, and I quote

My one and only interest is the well-being of my Bosses. I did all I could to forge a nation that is more just and more progressive—one that enjoys the fruits of meaningful change. I will let history decide.

And within 12 months of uttering those words, the era of the EDSA regime would draw to a close, with the rejection of Aquino’s hand-picked successor and the election of Rodrigo Duterte, whose approach to criminal justice was anathema to what the regime had stood for.

In this fourth part to the Rise and Fall of the EDSA Regime, we will look at the second Aquino presidency, its ambition, achievements and follies, and while five years is too short a time frame to have gained enough “distance” from those events, we will try to explain what led to the collapse in confidence in the yellow movement, which triggered their losses at the ballot in 2016 and since, and as to why it is unlikely that it will return any time soon. 

All that is coming up in the program.

Utopia and nostalgia

In 1986, the EDSA regime came to power after five days in February that displayed all that was noble and genuinely hopeful about the Filipino. Demonstrable proof as to why, in the words of the late Sen. Ninoy Aquino “the Filipino is worth dying for.” The events of EDSA were subsequently compared to the biblical account in Exodus of the chosen people’s flight from bondage in Egypt.

The tanks and guns that rolled in, sent to quell the revolt were muzzled by the roses and rosaries of protesters. The chariots sent to retrieve the Pharaoh’s slaves were swallowed up by the sea of people there. These seemingly miraculous events at EDSA led to the adoption of a utopian vision of the future under the yellow regime.

That utopic dream would be dashed as the first Aquino presidency was hamstrung from the outset by a neoliberal orthodoxy that saddled it with the unnecessary burden of repaying corruption-tainted loans of the previous regime. The prioritisation of bond markets over people, the idolatry of the Market as the mode for seeking deliverance from economic bondage, led to social unrest, military adventurism and resurgence of patronage politics.

It was patrimonialism which stepped in, in lieu of the state, too weak and feeble to provide for the needs of its people. Unable to fulfill the agapic plan of her late husband for the development of the Filipino’s full potential, Mrs Aquino prided herself with the restoration of democratic institutions. 

But democratic egalitarianism was paid lip-service by the caciques and their cronies. While the EDSA regime valorised the Market and espoused free market principles in both its politics and economy, in practice, the ruling class of the post-EDSA regime constricted competition and created an uneven playing field, effectively monopolising the marketplace of ideas, the marketplace that Ninoy said, would produce the clash of ideas that would result in a new, higher order thinking around our perennial problems.

The antithesis to the first Aquino administration came with the election of the second. If the first one looked forward with utopic visions of grandeur, the second looked backward with nostalgic remembrances of things past. Both forms of sensemaking obscured the regime’s ability to adapt to and shape reality.

The nostalgia of the second Aquino presidency would be exhibited by:

• False frugality when it came to public spending with its over-reliance on the market, to provide for the needs of its people, via public-private partnerships,
• False piety with the resurrection of the morality of good vs evil leading to a kind of vindictiveness or vendetta politics and purity culture, and
• False security in the way it relied on the rules-based international order set-up by the US and multilateral institutions to address challenges both internal and external.

What framed these falsities was a moralpolitik and a misplaced faith in the Market, mediated by a rules-based order of good governance, to provide economic salvation to the nation. This was encapsulated in the mantra Daang Matuwid, or The Righteous Path, a rubric that defined the moral, political and economic components of this ideology.

While this moralpolitik provided an ideal frame for how the state and economy ought to be, namely a stable democracy with an advanced economy, it didn’t have an effective, empirically proven theory for how to get there, for how we transcend our present patrimonial, post-colonial society to get to the ideal state of Western capitalism and liberal democracy.

As shown by EDSA I and II, the yellow movement was only good at resisting, or scapegoating so called “evil” rulers. As was demonstrated by Aquino I and II, it still lacked a credible approach to deliver on its promises. For this reason, people keep referring to the broken promise of EDSA, the missed opportunities, the unfinished revolution. 

Correlation is not causation

Many saw in the second Aquino presidency a chance to correct the mistakes of the first one. Mrs. Aquino’s government faced the challenge of a debt-to-GDP ratio of close to 100%, following years of extractive borrowing by her predecessor. This prevented it from spending on social and economic services required to foster national development. Her son’s administration didn’t face that same challenge.

By 2010, the external debt stocks as a percentage of gross national income stood at around 25%, right about where it was when the years of debt-driven growth began in 1974. This came about thanks to the fiscal and economic reforms introduced by two female presidents Aquino and Arroyo.

Mrs. Aquino was prevented from spending on health and education because she had to service our national debt. Her son no longer faced that problem. The country had in fact exited from the IMF emergency loan program under Mrs Arroyo. She had laid the groundwork for the expansion of our basic educational system and creation of a welfare state. Noynoy continued these policies and sought to increase health spending with the proceeds of inflation-adjusted sin tax law. This was a way to prevent the resurgence of populism from the left, to prevent another Erap Estrada from arising in the person of Jojo Binay. Little did he realize that the threat would come as a result of populism from the right.

This is because the EDSA regime remained vulnerable on its right flank. When it came to infrastructure investment, Noynoy would constrain his government to using public private partnerships as the mode for financing them, rather than borrowing at a time of cheap money or raising taxes. In his first state of the nation address in 2010, he said we faced a fork in the road. 

Borrowing from biblical allegory, he told his audience that on the one hand was the destructive path trodden by the EDSA Dos apostate Gloria Arroyo. The other was the straight and narrow way of his government, daang matuwid. Unlike her government which expanded the VAT, he would not raise taxes. That was what he decided even when he was running for president, and he stood by it.

Mr Aquino had become the poster child for the augmented Washington Consensus having been endowed with a grant from the Millennium Challenge Corporation funded by the US State Department, designed to help us achieve our Millennium Development Goal of halving poverty. The MCC only awarded these grants to countries that exhibited a capacity for good governance.

Aquino’s reliance on PPP’s to fund public infrastructure was based on the neoliberal Washington Consensus creed that said we needed to get the price right. To do that we needed to be guided by the Invisible Hand of the market. But in addition to that, we also needed to get the policies right. Markets would not work without the intercession of good governance. So private players would determine which projects were right, feasible and commercially viable. This is how you stamp out corruption, while meeting the needs of your people for development, so the doctrine goes.

Good governance was good economics. This was the oft-repeated line. Based on the notion that countries that score high on the WB’s good governance indicators also ranked high in income (per capita). But correlation does not necessarily imply causation, nor does it indicate in which direction that causality is heading. The rooster crows before the sun rises. That doesn’t mean one is the cause of the other. They just happen to take place at the same time.

Kauffmann and Kraay, two senior economists at the World Bank claimed that good governance leads to good economic outcomes, because the two are correlated.

They did this by fitting a regression line onto a scatter plot of countries depicting their control of corruption on the vertical axis and their per capita incomes on the horizontal axis. It is true that when you do that, what you will get is an upward-sloping line, which indicates that both indicators are directly proportional. The higher is your control of corruption, the higher your income status as a nation. They then assumed that good governance determines economic well-being. But the direction of causality, if there was one, could easily go the other way. Governance could be improving as a result of sustained economic growth, as Mushtaq Khan, a professor at the School of the Orient and Asian Studies at the University of London, showed in a paper for the UNCTAD.

According to Khan, if you take the convergence club of developing nations that are rapidly catching up with richer ones, separately as a group, their control of corruption scores are the same or not much different on average from nations whose growth is diverging from the rest of the world. 

What does this mean? Countries whose economies are developing rapidly like China, South Korea, Malaysia, Thailand, and Indonesia are no less corrupt on average than the ones where growth has stagnated or sputtered in the time being considered.

History tells us that the East Asian growth model was not based on the neoliberal blueprint. Forcing nations to adopt a one size fits all, gold plated governance standard can be quite difficult and expensive. As Merilee Grindle pointed out, countries need to find ways to improve governance within their context. She termed it good enough governance, an approximation of the kinds of institutions needed to foster a virtuous cycle of growth that leads to development. 

The Chinese called it crossing the river by “feeling for stones”. It’s how they secured property rights without having formal ownership of land or rule of law as pointed out by Dani Rodrik, or fostered healthy competition and accountability within a one party state, as pointed out by Yuen Yuen Ang. As Deng Xiaoping once said, it matters not whether a cat is black or white, so long as it catches mice.

In other words the WB GG indicators represent the ideal state at the end of this process of development, not the path towards that end. If we try to achieve a high income status by seeking to develop GG first, we are not going to get there. No country in the world, in history has done it that way. Western capitalist civilization achieved it through hundreds of years of toil in which human welfare of workers got worse before getting better. Political and economic liberties only arose at the end of this process, as an educated middle class arose. 

The few nations that have grown from poor to rich in the last century didn’t do so by competing on equal footing with the rest of the world. They used heterodox industrial policies to achieve their goals. Khan calls them growth-enhancing governance capabilities in contrast to market-enhancing governance, which is what the WB indicators measure. Growth-enhancing governance seeks to foster a continual adoption of new technologies in developing nations, with quasi-market or non-market tools.

Even the US which is the paragon of laissez-faire economics, whose politicians profess Jefferson’s philosophy that the state that governs least, governs best, in practice follows Hamilton’s doctrine of developing native industries through state-led development in new and emerging industries, as pointed out by Mariana Mazzucato, who sits on the council of economic advisers in the UK.

Embedded autonomy a term coined by Paul Evans to denote the ability of state actors to be embedded within the business community to understand their constraints and requirements for growth, but retaining their autonomy to set policy and evade capture by rent-seekers, is a key growth enhancing governance capability. 

The size of economic services as a share of the national budget is a clear indicator of the emergence of a developmental state that has this ability. Tim Kelsall points out that regimes with the ability to sustain high growth for longer periods, have the ability to manage succession and continuity either through a professional economic bureaucracy or strong political parties.  

“Successful failure”

Noynoy Aquino’s good governance agenda suffered what Lant Pritchett called the “state development trap”. Trying to mimic rich nations’ institutions was a form of agenda conformity. But taking on the appearance of a rich nation’s governance systems does not necessarily mean you are better at governing. “Looks like” cannot substitute for “does”. This was a kind of modal confusion on his government’s part. 

It’s an evolutionary strategy called isomorphic mimicry. In nature, a non-venomous species of snake might take on the stripes and colors of a venomous one to put-off would be predators. In Silicon Valley, DiMaggio and Powell found that startups would try to convince venture capitalists that they were the next Apple, by adopting the same set of practices applied by Steve Jobs. As they say, you can fool some people, some of the time, using this strategy, but ultimately, if you don’t deliver, you will eventually be found out.

This was no better than Imelda’s adoption of Plato’s ideal forms - of the True, the Good and the Beautiful. Here we have an ideal form of society - Western capitalist civilization. Let’s mimic it by dressing the part. This led to modal confusion. Constructing palatial buildings with borrowed money does not make a nation rich. Similarly, under PNoy, adopting the stripes and colors of Western-style institutions did not make his government any more capable of running its affairs effectively.

This became evident when the PPPs failed to materialise. When the MRT broke down and got derailed on EDSA, injuring passengers, the best metaphor for his government, if ever there was one. Emblematic also was when the promised expansion of the LRT into Cavite did not happen, despite Aquino’s seemingly iron-clad guarantee that it would take place within his administration, or else he’d let himself be run over by a train. 

It also became apparent when the DAP-Napoles scandal was exposed. When laglag bala terrorized departing passengers at NAIA. When balikbayan boxes were taxed by customs. When the Philippines lost control of Scarborough Shoal to China, due to its false sense of security by relying on the US and the rules based international order. When the Typhoon Yolanda disaster response left millions of Filipinos high and dry. With the Mamasapano massacre. And finally with the Dengvaxia disaster.

All of this can be summed up in one word: incompetence. Daang matuwid’s good intentions were not enough. Its isomorphic mimicry did not prevent it from keeping its people safe or protected from predators and the ravages of nature. The white cat could not catch mice.

In terms of taking the right path, the yellow movement took a wrong turn when it adopted the standard neoliberal argument that to become prosperous, market enhancing governance capacities were required.

The one saving grace in all this, was that Noynoy’s government did not wreck the economy that his predecessor Gloria Macapagal-Arroyo bequeathed to him. He nearly did though, despite the historic advantages handed to him - benign inflation, historic low interest rates, which was the result of global forces at play with Quantitative Easing by the US Federal Reserve lowering the cost of money, a healthy fiscal position, thanks to the reforms passed by Mrs. Arroyo, a robust economy which grew at 7% when he assumed office.

His anti-corruption campaign and false frugality slowed that growth to half its rate in his first year, as public spending contracted, pulling the overall rate of growth down. To be fair, health and education spending recovered, as did social welfare spending. Thanks to the continuity of GMA’s policies. But her medium term infrastructure plan was halted, as Aquino chose to rely on the “magic of the market” to meet the country’s needs in this area. As a result, bottlenecks within the robust economy began to build up again.

What saved Aquino’s economy were the economic managers in a web of agencies, DOF, NEDA, DBM who were starting to coordinate economic and fiscal policy development both in the executive and legislative. The indexation of sin taxes was a litmus test. It was more than twenty years in the making. The economic bureaucracy was showing signs of getting their act together, of standing up to the tobacco lobby. They branded it under the government’s rubric of daang matuwid. They found a way to use moralpolitik to work in their favor. The false piety of living within your means was overturned.

This same template would be later applied under Duterte with the TRAIN law, which expanded the fiscal space to afford greater infrastructure spending as a share of the economy, without compromising fiscal sustainability. It also allowed universal tertiary education and healthcare for all. The vision of Ninoy for the agapic development of human potential was getting closer.

To the competent web of economic agencies would be added DOTr, DPWH and CDC, which under Duterte is implementing the Buildx3 program. When the neoliberal blinkers of the EDSA regime came off, what we found was that the only thing preventing the Philippine state from handling its role were the self-imposed restraints put on it by the EDSA regime.

These were like scales that fell from the eyes of the broad populace in the lead up to the 2016 presidential election. The nation had experienced the cognitive dissonance of being promised one thing from daang matuwid, and getting something completely different. This is what led voters to seek a doer, rather than a pretender. 

After thirty years of living under the current 1987 constitution, book-ended by two Aquino presidencies, the public now wanted to break-out of that mould. Noynoy Aquino had been a “successful failure”. He had remained highly popular all the way to the end of his presidency, something that no post-EDSA president had done.

The economy kept chugging along despite his policies to constrain it, but bottlenecks were clearly building up. We couldn’t call this benign neglect anymore. People and businesses were feeling the pinch. The political pendulum would swing. From a mild and timid person, who fed you the right lines, the orthodox line, the public now looked for someone more bold and daring, who was willing to step out of line, speak plainly. Say that the emperor had no clothes. That person was Rodrigo Duterte.

Next time we will look at the administration of Duterte up to the midterms election and look beyond to what the next chapter might be. Where to, from here? What might happen in 2022? Will the EDSA regime come roaring back, or will it fade into the distance? What happens then, in a post-EDSA world? If the scales have fallen off, the cultural blinkers that the EDSA regime imposed on us, what now? 

All that is coming up in the next episode on the Rise and Fall of the EDSA Regime. Thank you for your attention today. This has been Doy Santos. Hope to see you next time, on another edition of The Cusp.