A plutarchy with populist tendencies

The title of this piece is inspired by Prof. Yuen Yuen Ang’s take on how China escaped the poverty trap. Ang argues that despite one party rule, China was able to forge merit-based mechanisms of accountability that led to its development. She describes it as an “autocracy with democratic characteristics”.

The Beijing Consensus refers to the political economy instituted by the People’s Republic under Deng Xiaoping, after Mao’s death in 1976. It is an alternate path to development, sitting in contrast to the failed Russian Soviet experiment with a command economy and all its inherent inefficiency, unwieldiness and poor incentives.

Under the China model, Beijing sets national economic policy through its five year plans. It then assigns to regional counterparts the task of meeting these targets through a “franchise-like” system. Each local government uses its own connections (“guanxi”) to attract investment to contribute to the the national goal under a process of “directed improvisation”.

Promotion within Communist party is based on performing well against official targets, relative to peers. Individuals rising to the highest policy-making body, the Politburo standing committee, prove themselves in towns and villages first, then at cities and regional levels.

The central government, in giving agency to regional executives, is able to keep its “distance” from local politics and avoid blame when their administration fails, due to ineptitude or corruption. It can overrule or interfere with local affairs, if public outcry reaches the capital. This is what gives the autocratic state some form of democratic accountability.

Beijing adapted local customs to mimic Western institutions that foster open competition within a marketplace of ideas. Instead of inter-party competition, the Chinese have created internal tournaments within the ruling party. They follow through on long-range plans, without disruption from corruptible, short-term election cycles that occur in developing states.

The Philippines has been characterised as a cacique democracy, from its inception in the 1890s with local and national politics dominated by a small set of wealthy, well-connected families. Even with American “tutelage” in democracy, participation in politics was largely confined to those with political pedigree and deep pockets.

A lack of policy consensus after independence from the 1950s to 1970s ensued leading to boom and bust cycles. Since EDSA ‘86, multiparty democracy is seen as chaotic, with limited participation and increasing concentration of power even within the partylist system.

But there has been considerable policy continuity in economic affairs since EDSA. This has led to increased rates of economic growth with greater capacity to handle internal contradictions of a market-based system, namely the disparity by which its spoils are shared.

Developmental spending enables political families to retain legitimacy. They are slowly moving away from direct forms of patronage to programmatic, institutional responses to poverty and other challenges. The evidence? … Free college, universal health care coverage and public school feeding programs, cash transfers to poor families, senior citizen benefits, among others.

Rivalry among political families has created conditions that mimic democratic accountability, stealing the thunder from progressive movements. Chief executives act as family figures making government seem near and personal.

Apo Marcos, Tita Cory, Steady Eddie, Pareng Erap, Ate Glo, PNoy and Tatay Digong were personages meant to instill a sense of filial piety in the nation through pakikisama and bayanihan, the illusion that we are all part of an “imagined community” despite our regional, ethnic differences.

The Philippines may thus be regarded as a plutarchy with populist tendencies. The adoption of democratic forms of governance without the institutions performing their function, has given rise to political dynasties. Through local customs, the Philippines has begun to develop a consensus for economic growth and development under a market-based system.

This has led to increased concentration of economic and political capital. To retain legitimacy, actors voluntarily initiate populist programs that increasingly rely on fiscal space afforded by growth to fund them, sustainably. This constitutes an alternate path to development, which might be dubbed the Manila Consensus. 

Of Wedding Feasts and Famines

In the media-driven frenzy of royal-watching, the wedding between Kate and Wills harks back to a time when the pomp and pageantry of the monarchy provided a diversion from the daily struggles of their subjects. In England, as late as the 1930s, poor families struggled with the problem of hunger. Yet as George Orwell wrote, 

The basis of their diet, therefore, is white bread and margarine, corned beef, sugared tea and potatoes -- an appalling diet. Would it not be better if they spent more money on wholesome things like oranges and wholemeal bread or if they even, like the writer of the letter to the New Statesman, saved on fuel and ate their carrots raw? Yes, it would, but the point is that no ordinary human being is ever going to do such a thing. The ordinary human being would sooner starve than live on brown bread and raw carrots.

The May/June 2011 online version of the magazine Foreign Policy is devoted to the problems associated with food price inflation and the impact this would have on poverty and hunger. The development aid community has flagged this as a potential cause for dragging many in the middle to low income countries into poverty.

Calls have been issued to address this pressing problem. But in a piece written by Abhijit Banerjee and Esther Duflo, the general consensus regarding the issue is challenged. What if the experts are wrong, they ask.What if the problem of hunger is not caused by the lack of affordable food? Nobel Prize winning economist Amartya Sen has famously pointed to the fact that famines have only occurred in recent times in countries that lacked democratic institutions of accountability. Poor governance rather than a lack of food supply creates extreme hunger.

In India where Sen is from, despite the rise in per capita income, per capita caloric intake has declined. The piece points out that

(t)he change is not driven by declining incomes; by all accounts, Indians are making more money than ever before. Nor is it because of rising food prices -- between the early 1980s and 2005, food prices declined relative to the prices of other things, both in rural and urban India. Although food prices have increased again since 2005, Indians began eating less precisely when the price of food was going down.

What if the problem of hunger is not driven by a lack of affordable food, but the fact that the poor demand a different variety of food? They use one example to bear this out:

Using price data from the Philippines, we calculated the cost of the cheapest diet sufficient to give 2,400 calories. It would cost only about 21 cents a day, very affordable even for the very poor (the worldwide poverty line is set at roughly a dollar per day). The catch is, it would involve eating only bananas and eggs, something no one would like to do day in, day out. But so long as people are prepared to eat bananas and eggs when they need to, we should find very few people stuck in poverty because they do not get enough to eat.

To provide more evidence of this, they cite a study conducted in two regions of China where researchers offered randomly selected poor households a large subsidy on the price of basic staples believing this would result in greater consumption of food. Instead they found that:

(o)verall, the caloric intake of those who received the subsidy did not increase (and may even have decreased), despite the fact that their purchasing power had increased. Nor did the nutritional content improve in any other sense. The likely reason is that because the rice and wheat noodles were cheap but not particularly tasty, feeling richer might actually have made them consume less of those staples. 

They go on to point out the possible reasons why the poor might be eating less. Better water and sanitation for instance may lead to a lower incidence of nutrition depleting diseases. Women in rural villages which now have access to water no longer need to spend a good deal of effort fetching water to and from rivers. Aside from that is the penchant of the poor to spend on non-essentials like vices and other forms of entertainment (televisions, DVDs, mobile phones, movies, etc).

Many programs aimed at boosting protein and iodized salt intake have been met with a dismal response from poor households. It seems that when it comes to deciding what to spend their income on, they seem to have other priorities.