Legitimacy

The resurgence of old school economic nationalism in the face of great economic challenges facing our people is more than just intellectual fashion or political posturing. It poses a serious legitimacy challenge on the Arroyo administration.

This is not anything unique. The legitimacy of all modern governments rests on their ability to deliver a better life for their people.

Success in bringing forth a better life for the ordinary citizen validates the economic program adopted by modern statesmen. Failure in doing so undermines popular acceptability of the prevailing leadership.

Consequently, all who challenge the political faction in place need a convincing economic program to win public support. Gone are the days when counter-elites built their political base of support on religious creed or on some notion of ethnic supremacy. Modern citizens fret mostly about the quality of their lives.

Recall that when the so-called "tiger economies" in East Asia were roaring, few questioned the antiquated forms of political rule that presided over impressive economic growth rates. The Suharto government was firmly in place. The Kuomintang’s grip on Taiwanese politics seemed beyond challenge. Lee Kuan Yew was never challenged in Singapore.

When the Asian financial crisis struck, the consensus on economic strategy cracked and the ruling regimes came under great political pressure.

The LDP, which ruled Japan for decades until that country’s economy became hobbled, lost power briefly. The Suharto regime in Indonesia and Kuomintang rule in Taiwan were dislodged. South Korea drifted into democratization with more definitiveness.

The Asian financial tsunami hit Philippine shores on the eve of crucial presidential elections in 1998. The crisis undermined public faith in the strategy of market-opening pursued during the Ramos years – a presidency that talked about "leap-frogging" to tigerhood status and briefly produced solid economic expansion.

With faith in educated economic management undermined by the confusion and anxiety generated by the collapse of our currency, the door was opened for a populist leader like Joseph Estrada whose "pro-poor" rhetoric and patriarchal understanding of government resonated among a beleaguered population.

Although, under excellent advice, Estrada turned out to be a fiscal conservative, he projected a stereotypical populist persona. Early on in his presidency, he promised to give away irrigation to the farmers – a move that nearly caused our irrigation program to unravel. His economic managers deftly pulled him back from that disastrous populist course.

Today, the population is again in economic distress. The opinion polls show a dramatic rise in economic pessimism, a sense that our people’s economic well-being in under siege. That, in turn, translates into a dramatic plunge in the job approval ratings of the present political leadership.

It is understandable that in these circumstances, those who challenge the present leadership would try and raise old economic notions from the grave.

The validity of those notions matter very little. Nor does it matter that these notions failed everywhere they were tried, including past periods in our own economic history.

What matters is that they resonate well in the minds of a desperate people – especially a people reared in the idea that government plays a patriarchal role in our lives, absolving our failings and compensating failure with subsidies.

We went through a long period of protectionism where, with policies shaped by the interest of the domestic oligarchy, we insulated our industries from competition. That caused our industries to be inefficient, penalizing Filipino consumers with substandard but overpriced commodities.

In order to raise the foreign currency to buy products we do not produce, such as capital equipment and oil, we ravaged our natural resources. During the fifties and the sixties, we prided ourselves in being the world’s biggest timber exporter – a feat we now regret and must pay for dearly.

For too long we regulated the oil industry and kept a public monopoly on power generation. That politicized the price of these commodities and caused government to subsidize them heavily. The subsidies took a huge toll on our fiscal stability and forced us to borrow money heavily, leading to the unsustainable debt situation we must now untangle with great pain.

The liberalization program, on the other hand, brought immense benefits. Most visible in the liberalization of telecoms and banking. The deregulation of the oil industry brought new players – although that is not enough, of course, to mitigate the global rise in oil prices due to global demand fast outstripping global supply.

Trade liberalization opened new economic sectors that paid better wages and brought new skills – although that is not enough to compensate for the death of our outdated plantation sectors that created rural poverty and high unemployment. The same policy caused competition that increased efficiency and brought down the prices of goods, a factor that helped ease inflation.

By applying global benchmarks in fiscal and financial management, we have finally brought some stability to our currency, a reliable financial system and relatively low inflation. But the false prophets who want to return old policies that repeatedly failed us want to unravel that as well by rash and unwise moves such as debt repudiation.

The attractiveness of unworkable economic formulas cannot be underestimated, however. They offer, although falsely, promises of relief that the existing economic model seems unable to offer.

Here lies the challenge.

The old orthodoxies being raised from the grave are being mustered to undermine the legitimacy of the present leadership. The political debate necessarily becomes a debate on economic policy directions.

This is the line of battle. This is where the present leadership must wage the fight to conserve its legitimacy not only by demonstrating that the present economic course will deliver better results but also by demonstrating that the old formulas will bring us economic doom.