THE BLOG

Philippines' City of Illusions: Time for an Economic 'EDSA Revolution'

03/16/2015 03:51 pm ET | Updated May 16, 2015

Earlier this year, I was astonished by a commercial, which features no less than Leonardo Di Caprio, Robert De Niro and Martin Scorsese, who playfully endorse a luxurious and lavish new casino and integrated resort in the Philippines, City of Dreams Manila. By all means, both the glossy commercial as well as the casino itself is impressive, if not obscenely ostentatious. One could witness the City of Dreams' captivating exterior after passing by a nearby competitor, the Solaire Resort and Casino, which stands as a worthy rival to the new kid in town.

In recent years, the Philippines has been building up itself as the next big thing in the Asian gambling industry, aiming to compete with (and eventually outrun) the likes of Macau and Singapore. And thanks to a number of high-profile projects such as Solaire and City of Dreams, Manila may have a shot at reclaiming its long-forgotten status as a top tourist destination in the region. And there are reasons to be optimistic. The Philippines, as Asia's newest emerging market, is perhaps following in the footsteps of the likes of Kuala Lumpur and Dubai, which managed to place themselves on the global radar by building architectural wonders.

Foreign observers such as Daniel Wagner have correctly highlighted the economic achievements of the country in recent years, particularly under the Aquino administration: Annual Gross Domestic Product (GDP) growth rates have averaged at around 6%, foreign exchange reserves (minus gold) have doubled, and the GDP in purchasing power parity has expanded by almost 23%. Under Aquino, the Philippines managed to receive "investment grade" credit rating status for the first time in its history. And the country's competitiveness rankings have climbed significantly. The Philippines stands as among Asia's fastest growing economies, sprinting side-by-side the likes of China and India.

Upon closer inspection, however, one realizes that there is something peculiarly revolting vis-à-vis the ongoing boom in the high-end tourism and hospitality sector in the Philippines. Just like the Philippines' illusory prosperity in the 1950s, there is a tremendous amount of shallowness to the economic growth of recent years. A simplistic, quantitative overview of the Philippines' macroeconomic health tends to come at the expense of a qualitative assessment of the living standards of ordinary Filipinos.

What the Philippines needs more than ever is a true economic revolution, one that ensures the Philippines is not only a democracy in formal-political terms, but instead founded upon the principle of éga-liberté: Political freedom built upon an egalitarian economic system.

The Historical Burden

In the 1950s, Manila proudly stood as a center of fashion, culture and business in Southeast Asia, relishing the hugely positive infrastructural and educational legacy of the American colonial era. What is astonishing is that Manila managed to stay ahead of the curve despite featuring among the most devastated cities during the Second World War. Resilience is a cornerstone of the Filipino spirit.

Soon, however, it became clear that the Philippines' brief tenure in the limelight was hardly more than a chimera, build upon unsustainable levels of importation, monopolistic industries, overvalued currency and uncontrolled population growth. By the 1960s, the Philippines was confronting a currency crisis, acute budget deficit and political instability, paving the way for an ambitious young man, Ferdinand Marcos, to capture the state apparatus and establish a decades-long dictatorship well into the mid-1980s.

After a few years of impressive economic growth, embellished by large-scale infrastructure projects, Marcos' one-man-rule transformed into a colossal economic failure, anchored by runaway levels of foreign debt and American strategic aid amidst the intensifying Cold War in East Asia. The economic legacy of the Marcos regime would burden the Filipino population for generations to come.

In 1966, the Philippines' foreign debt amounted to a less than a $1 billion. By 1986, when the EDSA People Power Revolution brought a new regime into force, the Philippines' foreign debt stood at $28 billion. By some estimates, the Filipino people will manage to pay back that debt by the first quarter of the 21st century. The Philippine peso also suffered its steepest decline under Marcos' watch. Along Latin American countries such as Mexico and Brazil, the Philippines was among the biggest victims of the "debt crisis" in the 1980s.

In Development Debacle (1982) and The Anti-Development State (2005), Walden Bello, a leading Filipino scholar, persuasively shows how the main folly of the Marcos economic policy was its misguided reliance on predatory cronies and an untimely focus on low-value-added export-oriented industries amid a looming recession in center-economies. Marcos sought to replicate the economic success of Asian tigers by relying on the wrong people in the wrong time. It was not until the 1990s, under the Ramos administration, that the Philippines began to knock on the door of prosperity, trying to claim a seat among Asia's economic stars.

Besides the 1997 Asian Financial Crisis (AFC), what truly undermined the Philippines' economic take-off was the tremendously imbalanced and misguided nature of economic liberation schemes in the 1990s. By aggressively privatizing the Philippines' utility, infrastructure, and energy sectors, a number of well-connected, family-dominated conglomerates came to relish an unprecedented era of oligopolistic profits in strategic sectors of the economy. Soon, the Philippines would become a victim of one of the most expensive electricity rates in Asia, a highly deregulated energy market, and minimal improvement in the nation-wide infrastructure landscape.

Both the Marcos' dirigiste economics as well as the subsequent economic liberalization in post-EDSA Philippines were a major development failure.

Shallow Capitalism Redux

This year's celebration of EDSA People Power Revolution was marked by an unprecedented traffic, unending complaints by commuters, and a whiff of political apathy among certain circles. Almost three decades after the Filipino people valiantly deposed a tired but stubborn autocrat, many people, quite rightfully, ask whether there has been a significant improvement in the lives of ordinary citizens since the restoration of electoral democracy in the country.

True, the economy has been growing at above average rates. Yes, Manila hosts among the world's biggest shopping malls. Yes, the Italian-American trio of Di Caprio, De Niro, and Scorsese seemed convincingly amazed (they are top-level actors/director after all!) by the Philippines' new flashy resort and casino. But all important development indicators are far from impressive: Staggering rates of underemployment, poverty, and inequality haven't changed at all, if not deteriorated in recent years, while the Philippine political system is still dominated by a dynastic-celebrity-media complex.

One genuinely doubts whether someone like Indonesia's President "Jokowi" -- a quintessential political outsider, with progressive views and from a very humble background -- could have ever made it in the Philippines' oligarchic political system. (Although, Indonesia itself has a long way to go before becoming a full-fledged democracy.)

No wonder, it is difficult to avoid expressions of "autocratic nostalgia" among the older generation. Many young people, with minimal knowledge of the past, tend to fall for more-fiction-than-facts narratives on how things were supposedly better in the old days. Time and again, one could come across people, who, with utmost conviction, try to (unpersuasively) portray the Marcos' years as an era of prosperity and stability. Some push back a little bit further into the past, reciting the Philippines' days of glory in the 1950s and 1960s, with teary eyes and trembling voice.

But instead of constantly looking into the past -- based on facts or fictions or a combination of the two -- or being naively swayed by the smoke and mirrors of flashy new establishments across the country, it is high time to focus on the right question: How to overhaul the Philippines' economic system, so that, to paraphrase French Philosopher Jean-Jacques Rousseau, no man is poor enough to sell his votes and no one is rich enough to hijack the political system. Formal political equality amid mind-boggling poverty and inequality is nothing but an illusion of democracy.

It is high time to engage in a robust debate on how to transform the Philippine economy, so that it finally produces inclusive growth, lifts the majority of the population out of poverty, and provides well-paying jobs to even the low-to-medium skilled citizens. As things stand, the recent economic boom has been exclusively the story of the Filipino elite -- and some members the aspirational middle class.

The Philippines has come a long way under Aquino, and we must credit him for the good things he has done. Yet, the country has even a longer way to go before finding the right path to éga-liberté. A true revolution should change the material conditions of the average citizens. Anything short of that is cosmetic change, if not a glorified restoration of an old order. This is why the Philippines needs (genuine) democracy more than ever and an economic version of the 1986 EDSA People Power Revolution.