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ANALYSIS
Yellow Paper 2: A Second Round of Catharsis

A “Yellow Paper 2” was presented last week in the multisectoral forum “Beyond Edsa: A Post-Estrada Reform Agenda.” But as is often the case with these kinds of policy advisories, it deftly avoids addressing long-standing inequities in political and economic power. Or if anything, it takes these inequities as given and ever so politely comes up with ways to make the situation a little bit more tolerable while leaving the basic structures essentially untouched. In the end, little will come of it.

BY SANDRA NICOLAS
Bulatlat.com

The broad strokes of a “Yellow Paper 2” were presented in the multisectoral forum “Beyond Edsa: A Post-Estrada Reform Agenda” held on July 2 at posh Galleria Suites. The forum was sponsored by the Action for Economic Reforms (AER), co-sponsored by six other Philippine private institutions, and participated in by the Stanford-based Initiative for Policy Development (IPD).

The reform agenda acknowledges the unstable political situation and the adverse external economic environment as matters of concern but it identifies the main danger as “the loss of tempo and will for economic and political reform.” As things stand, it foresees a scenario of “weak growth and limited reforms.” Proposing a focus on reducing poverty and on good governance, it then provides a corresponding list of priorities.

To reduce poverty it suggests the revival of agriculture, diversification of rural economies, protecting employment, halting “jobless growth,” housing and transport for the poor, social insurance, and safety nets.

For good governance it suggest effective delivery of basic goods and services, fair application of the law, top-level attention to corruption, stronger regulatory capabilities, ensuring competition in liberalized sectors, and peace and order.

A disappointment in the making

Dubbed a “work in progress” by the main presenter, Prof. Emmanuel de Dios of the University of the Philippines School of Economics, the reform agenda could attract many adherents. Unfortunately among those adherents might be the very private and bureaucrat capitalist interests the agenda, implicitly, professes to change for the better!

The reform agenda is well-meaning and seemingly pragmatic. But as is often the case with these kinds of policy advisories, it ever so deftly avoids addressing long-standing inequities in political and economic power. Or if anything, it takes these inequities as given and ever so politely comes up with ways to make the situation a little bit more tolerable while leaving the basic structures essentially untouched.

Whether any policy change or measure will be implemented or not in the country depends on how the various interested parties will react to it. Big business, landlords, foreign and domestic capital, workers, peasants, and fisherfolk, among others, will support, acquiesce or resist according to where their interests lie. And in the end things will turn out depending on who’s more powerful than whom.

That the reform agenda skirts this issue is at the core of whatever appeal it might, for some, have. Unfortunately this is also the reason why it will ultimately do little for the country. On one hand, the basic structural problems that plague Philippine society and cause such wretched poverty will remain. On the other, by being so polite, it won’t even be able to deliver the limited improvements it proposes.

A few years down the line expect the drafters of the “Yellow Paper 2” to lament how “politics” got in the way of the implementation of well-intentioned policy advice.

Dissembling approach

The agenda is in some respects “progressive,” particularly in its more tempered enthusiasm for globalization and the free market agenda of trade and investment liberalization, privatization and deregulation.

Nonetheless it still basically remains within the bounds of current development orthodoxy. The market is still seen as the best way of organizing economic activity in society. The state’s only role, by this view, is to create the conditions where market activity can flourish—i.e. by ensuring competition, enforcing contracts, delivering some public services, and remaining unobtrusive in the goods and capital markets.

(The presence and luncheon talk of IPD’s Joseph Stiglitz, former World Bank chief economist, is notable. Stiglitz is a leading theoretician of the “market failures’ approach to economics which is apparently a strong influence on the Yellow Paper 2.)

The proposed agenda is thus an “alternative” to the current state of affairs in only one respect: it desires that the pace of globalization be slowed down while the requisites for unleashing the virtues of the market are set in place. It is a dissembling tack. According to this view, globalization in recent years has been bad not because it is intrinsically anti-people but because it has been implemented too quickly.

The agenda runs through the economy’s supposed main weaknesses. Agricultural production is not modern enough. Peasants don’t have access to capital or, almost as an afterthought, land. The labor force still doesn’t have the skills to be “competitive.” The physical and human infrastructure to attract direct foreign investments isn’t in place yet.

Riding on the hot development issue worldwide of the late 1990s, it says governance hasn’t been “good” enough. Corruption is still too widespread and transparency and accountability too lacking. Along with a perpetual peace and order problem, the agenda must bewail, capitalist economic activity is fettered by the atmosphere of uncertainty and instability.

And of course there is mention, though again almost like an afterthought, of the need for social benefits. Yet even here the market is supreme: the proposal is for insurance and health packages and safety nets, not the direct provision of services. Also—and somewhat oddly considering the repeated mention of skills-training to be “competitive”—the reform agenda says nothing about the dismal state of education in the country.

Missing the point

What has happened is that the limitations of the agenda’s polite framework pervades. By not addressing the central and prior problem of unjust and inequitable power structures, it jumps to only proposing just corollary (or outrightly inappropriate) measures.

For instance there is no arguing with making peasants productive by providing irrigation, technology and extension services, finances and the like. But these are all corollary measures. The prior issue is to first overhaul rural power structures by genuinely redistributing the productive resources in the countryside, the most important of which is land.

This can’t happen if, as the agenda implies, the land transfer process is done on market-based terms. First, because there will never be enough money to buy off all the landlords’ land at market rates and, secondly, because that would in any case just change the form of landlord’s economic (and power) base from land to money. And to implement all the corollary measures before such genuine redistribution would result in any benefits accruing mainly to those who are already in a position to so benefit: the rural elites and not the landless peasants.

Likewise, what’s there to argue with making the labor force more skilled? But then, is that the central problem? Last year, over 10.3 million Filipinos were either without jobs or not earning enough from their jobs for decent living. If we add the between 9-11 million Filipinos forced to go overseas for work, as many as 21.3 million Filipinos apparently cannot find decent livelihoods in the country.

It is a far stretch of the imagination that the main problem is an unskilled labor force. The central problem is that there are no jobs to be had, primarily because the country lacks the only real significant source of jobs there can be: a vibrant national industry.

And the reason for the stunting of domestic industry lies in how the country’s industrial development has been tied for decades to being export-oriented and import-dependent. Domestic industry can only be developed by building on an expanding domestic market and letting foreign investments in only if it benefits us. Unfortunately these impinge on the interests of foreign monopoly capital whom past governments have been more than happy to kowtow to.

Society’s resources

Graft and corruption also is certainly a widespread problem which must be addressed. Obscene amounts of public resources end up in private pockets. Even the some US$50 billion estimated by the World Bank to have been lost to corruption in the past three decades must be an underestimate.

But the reform agenda should also perhaps pay more attention to how so much of society’s resources also end up in private pockets. Capitalists grossly underpay workers and landlords, traders and usurers take disproportionately large shares of peasants’ produce.

With national economic output yearly amounting to some US$78 billion, so little goes to society’s real producers. In 1997 for instance, the top 20 percent of the population cornered 56 percent of national income while the bottom 60 percent made do with just 24 percent.

Bordering on deceit

The agenda even obfuscates some key development issues, providing substitutes which only distract from more important problems

One example is on the workers’ just demand for decent wages. The reform agenda proposes to keep the country a cheap labor haven for foreign capital. It advances the illusory “[protection of] the purchasing power of working people’s wages” through cheaper food, transport and housing in an attempt to entirely set aside the demand for an increase in wages. As if this cheap food, transport and housing are even possible in a profit-driven economic system.

Another example is the demand for “strengthening regulation in liberalized industries” including water, power, petroleum, telecommunications and those to come. While the agenda acknowledges that the people are at the losing end of this leap towards the market, the idea is for a stronger state to come in as an arbiter in the people’s favor. Better probably to recognize that the failure is inherent in how private profit-seeking interests dominate in these economic activities and that they will continue to do so whether through the state or outside it.

An alternative it isn’t

The theoretical anchor of the proposed reform agenda is clear: let the market work. The policy parameters are also clear: do not alter the distribution of productive resources in the country; continue to attract foreign investments (and naturally avoid policies which might discourage them); undertake showcase social reform measures.

However by not addressing the key problems of the economy—primarily rooted in the inequitable distribution of productive resources and political power—the agenda won’t be creating the social environment where the measures it proposes will be meaningful. For many of the measures proposed are merely corollary to the more basic reforms needed.

The agenda certainly has a pragmatic gloss, a “do-able” flavor. But sidestepping the issue of unjust power structures doesn’t solve the problem. Even on its own terms the proposed reform agenda will probably fail; it is unlikely that the resources needed to make the priorities concrete will be forthcoming.

Because there is a charming naïveté to the Yellow Paper 2, as if all the country needed was someone articulating the priorities needed and then the good and the just outcome would naturally follow. Well if the country were full of benevolent people then the Yellow Paper 2 might actually work. (Though, in the first place, the reform agenda would not have needed to be drafted at all.)

As it is, the country isn’t full of benevolent people—many are just after their own interests. Thus, the Yellow Paper 2, like its predecessor, will probably be a cathartic exercise more than anything else. Bulatlat.com

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