Wednesday, June 24, 2020

PANDEMIC COVID-19 BAILOUTS: WHO DECIDES AND GET THE MONEY? - Peter Ewart, Prince George Daily News, April 14, 2020

"today the economic system “is not classical capitalism but rather state monopoly capitalism, where giant enterprises are regularly backstopped with public funds and the boundaries between the state and the financial oligarchy are virtually non-existent." - Peter Ewart 

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However, neither the Federal Reserve nor BlackRock will be liable for any of the risk associated with the bailout loans no matter their quality.  All the risk and backstopping of corporate defaults will fall onto the U.S. Treasury and by extension the American people (1).  This is not a minor issue.  With BlackRock and other financial institutions at the helm, who is going to benefit from these bailouts to selected corporations which will amount to $4.5 trillion (or by some estimates even more)?  

  1. Will it be the highly leveraged “zombie” companies which have been bailed out before or who have connections to the Trump administration or BlackRock?  
  2. Will it be those corporations who took advantage of low interest rates to spend trillions on stock buybacks (thus enriching CEOs and shareholders) instead of investing in their workers and production facilities?  
  3. Or will it be those oligarchs who have outsourced much of their operations to other countries or have issued billions in junk bonds?  

It looks like many of these chosen entities and their CEOs stand to be rewarded handsomely, while the American people try to survive on a paltry $1,200 handout and limited EI payments..


PANDEMIC COVID-19 BAILOUTS: WHO DECIDES AND GET THE MONEY? - Peter Ewart, Prnce George Daily News, April 14, 2020

BlackRock is a global financial giant with customers in 100 countries and its tentacles in major asset classes all over the world; and it now manages the spigots to trillions of bailout dollars from the Federal Reserve. The fate of a large portion of the country’s corporations has been put in the hands of a megalithic private entity with the private capitalist mandate to make as much money as possible for its owners and investors; and that is what it has proceeded to do.
To most people, if they are familiar with it at all, BlackRock is an asset manager that helps pension funds and retirees manage their savings through “passive” investments that track the stock market. But working behind the scenes, it is much more than that. BlackRock has been called “the most powerful institution in the financial system,” “the most powerful company in the world” and the “secret power.” It is the world’s largest asset manager and “shadow bank,” larger than the world’s largest bank (which is in China), with over $7 trillion in assets under direct management and another $20 trillion managed through its Aladdin risk-monitoring software. BlackRock has also been called “the fourth branch of government” and “almost a shadow government”, but no part of it actually belongs to the government. Despite its size and global power, BlackRock is not even regulated as a “Systemically Important Financial Institution” under the Dodd-Frank Act, thanks to pressure from its CEO Larry Finkwho has long had “cozy” relationships with government officials.
BlackRock’s strategic importance and political weight were evident when four BlackRock executives, led by former Swiss National Bank head Philipp Hildebrand, presented a proposal at the annual meeting of central bankers in Jackson Hole, Wyoming, in August 2019 for an economic reset that was actually put into effect in March 2020. Acknowledging that central bankers were running out of ammunition for controlling the money supply and the economy, the BlackRock group argued that it was time for the central bank to abandon its long-vaunted independence and join monetary policy (the usual province of the central bank) with fiscal policy (the usual province of the legislature). They proposed that the central bank maintain a “Standing Emergency Fiscal Facility” that would be activated when interest rate manipulation was no longer working to avoid deflation. The Facility would be deployed by an “independent expert” appointed by the central bank.
The COVID-19 crisis presented the perfect opportunity to execute this proposal in the US, with BlackRock itself appointed to administer it. In March 2020, it was awarded a no-bid contract under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to deploy a $454 billion slush fund established by the Treasury in partnership with the Federal Reserve. This fund in turn could be leveraged to provide over $4 trillion in Federal Reserve credit. While the public was distracted with protests, riots and lockdowns, BlackRock suddenly emerged from the shadows to become the “fourth branch of government,” managing the controls to the central bank’s print-on-demand fiat money. How did that happen and what are the implications?
Rising from the Shadows
BlackRock was founded in 1988 in partnership with the Blackstone Group, a multinational private equity management firm that would become notorious after the 2008-09 banking crisis for snatching up foreclosed homes at firesale prices and renting them at inflated prices. BlackRock first grew its balance sheet in the 1990s and 2000s by promoting the mortgage-backed securities (MBS) that brought down the economy in 2008. Knowing the MBS business from the inside, it was then put in charge of the Federal Reserve’s “Maiden Lane” facilities. Called “special purpose vehicles,” these were used to buy “toxic” assets (largely unmarketable MBS) from Bear Stearns and American Insurance Group (AIG), something the Fed was not legally allowed to do itself.
BlackRock really made its fortunes, however, in “exchange traded funds” (ETFs). It gained trillions in investable assets after it acquired the iShares series of ETFs in a takeover of Barclays Global Investors in 2009. By 2020, the wildly successful iShares series included over 800 funds and $1.9 trillion in assets under management.
Exchange traded funds are bought and sold like shares but operate as index-tracking funds, passively following specific indices such as the S&P 500, the benchmark index of America’s largest corporations and the index in which most people invest. Today the fast-growing ETF sector controls nearly half of all investments in US stocks, and it is highly concentrated. The sector is dominated by just three giant American asset managers – BlackRock, Vanguard and State Street, the “Big Three” – with BlackRock the clear global leader. By 2017, the Big Three together had become the largest shareholder in almost 90% of S&P 500 firms, including Apple, Microsoft, ExxonMobil, General Electric and Coca-Cola. BlackRock also owns major interests in nearly every mega-bank and in major media.
In March 2020, based on its expertise with the Maiden Lane facilities and its sophisticated Aladdin risk-monitoring software, BlackRock got the job of dispensing Federal Reserve funds through eleven “special purpose vehicles” authorized under the CARES Act. Like the Maiden Lane facilities, these vehicles were designed to allow the Fed, which is legally limited to purchasing safe federally-guaranteed assets, to finance the purchase of riskier assets in the market.
Blackrock Bails Itself Out
The national lockdown left states, cities and local businesses in desperate need of federal government aid. But according to David Dayen in The American Prospect, as of May 30 (the Fed’s last monthly report), the only purchases made under the Fed’s new BlackRock-administered SPVs were ETFs, mainly owned by BlackRock itself. Between May 14 and May 20, about $1.58 billion in ETFs were bought through the Secondary Market Corporate Credit Facility (SMCCF), of which $746 million or about 47% came from BlackRock ETFs. The Fed continued to buy more ETFs after May 20, and investors piled in behind, resulting in huge inflows into BlackRock’s corporate bond ETFs.
In fact, these ETFs needed a bailout; and BlackRock used its very favorable position with the government to get one. The complicated mechanisms and risks underlying ETFs are explained in an April 3 article by business law professor Ryan Clements, who begins his post:
“Exchange-Traded Funds (ETFs) are at the heart of the COVID-19 financial crisisOver forty percent of the trading volume during the mid-March selloff was in ETFs….”
The ETFs were trading well below the value of their underlying bonds, which were dropping like a rock. Some ETFs were failing altogether. The problem was something critics had long warned of: while ETFs are very liquid, trading on demand like stocks, the assets that make up their portfolios are not. When the market drops and investors flee, the ETFs can have trouble coming up with the funds to settle up without trading at a deep discount; and that is what was happening in March.
According to a May 3 article in The National, “The sector was ultimately saved by the US Federal Reserve’s pledge on March 23 to buy investment-grade credit and certain ETFs. This provided the liquidity needed to rescue bonds that had been floundering in a market with no buyers.”
Prof. Clements states that if the Fed had not stepped in, “a ‘doom loop’ could have materialized where continued selling pressure in the ETF market exacerbated a fire-sale in the underlying [bonds], and again vice-versa, in a procyclical pile-on with devastating consequences.” He observes:
“There’s an unsettling form of market alchemy that takes place when illiquid, over-the-counter bonds are transformed into instantly liquid ETFs. ETF “liquidity transformation” is now being supported by the government, just like liquidity transformation in mortgage backed securities and shadow banking was supported in 2008.”
Working for Whom?
BlackRock got a bailout with no debate in Congress, no “penalty” interest rate of the sort imposed on states and cities borrowing in the Fed’s Municipal Liquidity Facility, no complicated paperwork or waiting in line for scarce Small Business Administration loans, no strings attached. It just quietly bailed itself out.
It might be argued that this bailout was good and necessary, since the market was saved from a disastrous “doom loop,” and so were the pension funds and the savings of millions of investors. Although BlackRock has a controlling interest in all the major corporations in the S&P 500, it professes not to “own” the funds. It just acts as a kind of “custodian” for its investors — or so it claims. But BlackRock and the other Big 3 ETFs vote the corporations’ shares; so from the point of view of management, they are the owners. And as observed in a 2017 article from the University of Amsterdam titled “These Three Firms Own Corporate America,” they vote 90% of the time in favor of management. That means they tend to vote against shareholder initiatives, against labor, and against the public interest. BlackRock is not actually working for us, although we the American people have now become its largest client base.
In a 2018 review titled “Blackrock – The Company That Owns the World”, a multinational research group called Investigate Europe concluded that BlackRock “undermines competition through owning shares in competing companies, blurs boundaries between private capital and government affairs by working closely with regulators, and advocates for privatization of pension schemes in order to channel savings capital into its own funds.”
Daniela Gabor, Professor of Macroeconomics at the University of Western England in Bristol, concluded after following a number of regulatory debates in Brussels that it was no longer the banks that wielded the financial power; it was the asset managers. She said:
“We are often told that a manager is there to invest our money for our old age. But it’s much more than that. In my opinion, BlackRock reflects the renunciation of the welfare state. Its rise in power goes hand-in-hand with ongoing structural changes; in finance, but also in the nature of the social contract that unites the citizen and the state.”
That these structural changes are planned and deliberate is evident in BlackRock’s August 2019 white paper laying out an economic reset that has now been implemented with BlackRock at the helm.
Public policy is made today in ways that favor the stock market, which is considered the barometer of the economy, although it has little to do with the strength of the real, productive economy. Giant pension and other investment funds largely control the stock market, and the asset managers control the funds. That effectively puts BlackRock, the largest and most influential asset manager, in the driver’s seat in controlling the economy.
As Peter Ewart notes in a May 14 article on BlackRock titled “Foxes in the Henhouse,” today the economic system “is not classical capitalism but rather state monopoly capitalism, where giant enterprises are regularly backstopped with public funds and the boundaries between the state and the financial oligarchy are virtually non-existent.”
If the corporate oligarchs are too big and strategically important to be broken up under the antitrust laws, rather than bailing them out they should be nationalized and put directly into the service of the public. At the very least, BlackRock should be regulated as a too-big-to-fail Systemically Important Financial Institution. Better yet would be to regulate it as a public utility. No private, unelected entity should have the power over the economy that BlackRock has, without a legally enforceable fiduciary duty to wield it in the public interest.

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of thirteen books including Web of Debt and The Public Bank Solution. Her latest book is Banking on the People: Democratizing Money in the Digital Age, published by the Democracy Collaborative. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 300+ blog articles are posted at
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Saturday, June 20, 2020

A REQUIEM FOR THE EDSA SYSTEM? Part 1 of 2 - Walden Bello

To be persuasive we must be believable; to be believable we must be credible; credible we must be truthful." - Edward R. Murrow (1908-1965)
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The history of the last 18 years has been a dreary one for most Filipinos.  The promise of political liberation and economic and social progress that accompanied the overthrow of the Marcos dictatorship in February 1986 remained just that: a promise.
As the campaign for the presidential elections of May 2004 unfolds, there is a sense in the air that the “EDSA system” may be on its last legs.  The administration and the opposition slates are made up of candidates pirated from one another’s ranks; yesterday’s enemies are today’s comrades.  The overwhelming need is for a program for economic growth that will address the country’s gaping social inequalities, yet it is a topic studiously avoided by the leading candidates—the administration because it has led the country to its worse fiscal crisis, the opposition because its presidential candidate does not have a grasp of basic economics.
A carbon copy of the electoral democracy that was the country’s system of governance before it was destroyed by Ferdinand Marcos in September 1972, EDSA has reproduced most of its faults of the former:  it has encouraged maximum factional competition among the elite while allowing them to maintain a united front against any change in the system of social and economic inequality.

Two Sides of the EDSA System

The staying power of the EDSA system is that, in contrast to the Marcos regime, it is democratic.  Yet it is democratic in the narrow sense of making elections the arbiter of political succession.  In the principle of one man or woman, one vote, there is formal equality.  Yet this formal equality exists cannot but be subverted by its being embedded in a social and economic system marked by great disparities of wealth and income.  Like the American political system on which it is modeled, the genius of the EDSA system, from the perspective of the Philippine elite, is the way it harnesses elections to socially conservative ends.   

Running for office at any level of government is prohibitively expensive, so that only the wealthy or those backed by wealth can usually think about standing for elections. Thus the masses do choose their representatives, but they choose from a limited pool of people of means that may belong to different factions—those “in” and those “out” of power—but are not different ideologically.  The beauty of the system is that by periodically engaging the people in an exercise to choose among different members of the elite, elections make voters active participants in legitimizing the social and economic status quo.  Thus has emerged the great Philippine paradox: an extremely lively play of electoral politics unfolding above an immobile class structure that is one of the worst in Asia.
Throughout the EDSA years, the Filipino masses were largely a force that was manipulated electorally to achieve the political ends of competing elite alliances.  Yet coexisting with the electoral tradition of the EDSA system is another one–an insurrectionary dimension that derives its legitimacy from the manner in which Ferdinand Marcos was ousted from power.  In the last 18 years, it was through an appeal to this insurrectionary tradition that the masses occasionally erupted on the national scene, bursting the electoral parameters to which the elite wanted to confine them. 

In January 2001, the middle class, driven by anti-corruption sentiment, served as the base for the extra-constitutional removal of Joseph Estrada from the presidency in what is now known as EDSA II.  Then three months later, in what is now known as EDSA III, the lower classes, particularly the urban poor, came together in a mass uprising that was only dispersed by the military at the gates of Malacanang. 
Especially in the case of EDSA III, elite personalities were only nominally at the head of an angry class-based urban insurgency that took the form of a movement to restore to power a defrocked leader who, despite a record of corruption, was seen as a man of the masses.  After each insurgency, however, politics settled down to a normal electoral competition managed by elite politicians.

The Anti-Developmental State

While entrenched corruption is the feature of the EDSA system that has elicited loud protest from the middle classes, it has been the utter failure of the system to deliver economic prosperity and reduce inequality that is the greatest source of mass alienation.  Close to 10 per cent of the Filipino nation, or over seven million Filipinos, now work or live abroad, and, according to recent surveys, one out of five Filipinos wants to migrate.  The sense of frustration is deepened by the widespread sense that our neighbors in Southeast Asia were achieving “economic miracles” while we were paralyzed by factional politics and mistaken policies.  However much we may decry its authoritarian policies, it is hard to deny that Singapore, with its controlled competition, prosperity, and security, has become to many Filipinos the ideal polity, the anti-thesis of an EDSA system that has become deeply dysfunctional.
Economic stagnation, according to some analysts, may be related to the political system’s focus on elite representation and the parliamentary mechanisms to assure this rather than on the development of a strong central bureaucracy that is relatively autonomous from the private sector.   The influence of the pre-1930’s American model of governance that guided the formation of the colonial and post-colonial state in the Philippines is again evident here. 

With the rationale of discouraging tyranny, the American pattern of a weak central authority coexisting with a powerful upper class social organization (“civil society,” in today’s parlance) was reproduced in the Philippines, creating a weak state that was constantly captured by upper class interests and preventing the emergence of the activist “developmental” state that disciplined the private sector in other societies in post-war Asia.    
In his influential book on contemporary politics in the US, Daniel Lazare says, “Government in America doesn’t work because it’s not supposed to work.”   For much the same reason, the subversion of the democratic potential of the masses by the realities of concentrated wealth and power, one can say the same thing of the Philippines. 
How long such a state of affairs can persist is anybody’s guess.  But the really deep sense of frustration, bitter electoral competition, and EDSA’s insurrectionary tradition can interact in volatile ways.  EDSA III showed how this mix can produce a lower-class insurgency, something that can be set off by a concatenation of events.  

To many observers, the question is not if EDSA III can happen again but when.


To be persuasive we must be believable; to be believable we must be credible; credible we must be truthful." - Edward R. Murrow (1908-1965)

NOTES: Colored and/or underlined words are HTML links. Click on them to see the linked posts/articles. Forwarding this and other posts to relatives and friends, especially those in the homeland, is greatly appreciated). To share, use allsocial media tools: email, blog, Google+, Tumblr,Twitter,Facebook, etc. THANKS!!

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(Delivered at Coalesce Conference, sponsored by Ateneo Lex, Ateneo de Manila, March 18, 2017.)

Most of you had not yet seen the light of day when the EDSA Uprising took place in February 1986. To my generation, this event was a memorable step in the Philippines struggle for democracy. The three decades that followed were marked by the reign of liberal democracy as the country’s political regime. Those thirty years coincided with the rise and dominance of neoliberalism as an economic ideology and globalization as an economic trend.
It is now clear that those three decades constituted a lost opportunity for the Filipino people, that the promise of the EDSA Republic was subverted by the neoliberal and pro-globalization policies that were adopted by the administrations that reigned between 1986 and 2016. It is also evident from the tumultuous events of the last year that what we now call Dutertismo is to a great extent an angry and resentful reaction to the EDSA Republic’s failure to live up to the promise that accompanied its birth.
My focus in this talk will be on how neoliberalism and globalization combined with the continuing gross inequality in the distribution of income and wealth to subvert the promise of EDSA. I would like begin, however, by briefly discussing the failure of EDSA to deliver on the political front.

Unhealthy Birthmarks

There were three unhealthy birthmarks that marred the EDSA Republic: the role of the military, the intervention of the United States, and the leadership of the elite.
The prominent role of the military rebels in triggering the insurrection gave them a sense of having a special role in the post-Marcos dispensation. Only after seven failed coups was civilian constitutional role stabilized. But, in retrospect, military discontent was not as damaging to the EDSA Republic as US patronage and elite hegemony.
The US was not only a player; it was a decisive player. Even before the Aquino assassination in 1983, Washington sought to nudge Marcos and the elite opposition to arrive at some compromise. These pressures escalated in 1985, resulting in Marcos’ calling for the snap elections that became the vehicle for the mobilization of the middle class and some of the popular sectors against the regime and paving the way for the military mutiny. At that point powerful forces in Washington overcame President Ronald Reagan’s reluctance to cut Marcos loose and moved to directly remove the dictator from the scene. At an off-the-record briefing at the State Department on April 23, 1986, to which I was mistakenly invited, Undersecretary of State Michael Armacost openly boasted of how the US moved during Marcos’ last months in power: “Our objective was to capture… to encourage the democratic forces of the center, then consolidate control by the middle and also win away the soft support of the NPA [New People’s Army]. So far, so good.”
The US role in serving as midwife led it to consider the EDSA regime as a protectorate. While the opposition of the Senate majority to the new bases treaty was disconcerting to Washington, it got what it wanted from the government in virtually all other areas. It got Cory Aquino to make repayment of the foreign debt–especially that owed to US banks–the top priority of the new government. And it eventually brought its overwhelming military presence back with the Enhanced Defense Cooperation Agreement (EDCA), where Cory’s son, President Benigno Aquino III, agreed to allow Washington to set up US bases in nominally Philippine bases.
The third flaw of the EDSA Revolution is that it was an uprising whose direction was set by the anti-Marcos factions of the elite. Their aim was to restore competition among the elites while containing pressures for structural change. The 1987 Constitution enshrined the rhetoric of democracy, human rights, due process, and social justice, but these aspirations were frozen in amber owing to the dearth of implementing laws and actions that would translate them into reality. Via periodic electoral exercises the factional monopoly of power under Marcos became a class monopoly, open to intra-elite competition for the most important national, regional, and local offices but virtually closed to the lower orders as money politics became the order of the day.

The Neoliberal Debacle

Despite its political shortcomings, the EDSA regime would probably have retained a significant amount of support had it delivered on the economic front. Indeed, it would be an understatement to say that the EDSA system failed to translate its promise of delivering less poverty, more equality, and more social justice into reality.
Perhaps the key tragedy of the EDSA Republic was that it came into being right at the time that neoliberalism was on the ascendant as an ideology and globalization became the flavor of the month for capitalism. Even before the February 1986 uprising, the Philippines had become one of four guinea pigs of the new structural adjustment program unveiled by the World Bank, which aimed to bring down tariffs, deregulate the economy, and privatize government enterprises.
As noted above, under the administration of Corazon Aquino, pressure from the International Monetary Fund and US banks made repayment of the foreign debt the top national economic priority, and Washington and the IMF ensured that succeeding administrations would follow suit by having Congress adopt the automatic appropriations law that made repayment of the state’s debt the first cut in the national budget. Over the next three decades, debt servicing would take up to 20 to 45% of the annual government budget, crippling the government’s capacity to invest and stimulate economic growth and provide essential social services.
With the 1992-98 administration of Fidel Ramos, neoliberalism reached its apogee: tariffs were radically cut to zero-to-five percent, deregulation and privatization were sped up, and the Philippines joined the World Trade Organization (WTO) — to “benefit”, it was said, from the tide of corporate-driven globalization. Under Ramos and later administrations, the contours of the EDSA political economy were firmed up: pro-market policies, relentless privatization, export-oriented development, export of labor, low wages to attract foreign investors, and conservative monetary and fiscal management. As the Philippines’ neighbors retained high levels of economic protection, neoliberal policies contributed to the Philippines’ having the second lowest yearly average growth rate in Southeast Asia from 1990 to 2010. Even the second-tier ASEAN economies of Vietnam, Cambodia, Laos, and Burma outstripped it.
The sad reality is that liberalization was a program of unilateral disarmament that resulted in the destabilization of almost all sectors of manufacturing, resulting in de-industrialization. Let me cite the sad plight of our once world-class shoe industry. In the 1960’s and 1970’s, our shoe industry based in Marikina was very dynamic, with some 2000 factories. Owing to liberalization and smuggling, there are only some 100 factories left today. And with the demise of the industry, the leather and tanning industry that serviced the shoe industry whose center was Maycawayan, Bulacan, also virtually disappeared.
Let us briefly touch on our agriculture. Before we joined the World Trade Organization in 1995, we were a net agricultural exporting country. Free trade turned us into a net agricultural importing country, with cheap imports eroding all sectors of the industry from vegetables to grain to poultry and meat. The crisis of our farmers stems not only from the continuing unequal distribution of land but also from the de-protectionization of our agricultural economy.
De-industrialization and agro-destabilization were one face of globalization. The other was our conversion into a remittance dependent economy as we were pushed into an international division of labor in which we became a prime exporter of cheap labor to the global economy. In short, globalization involved the disintegration of our domestic economy and our integration into the global economy as a provider of low-wage unskilled and semi-skilled labor. To a great extent, education has become a process of preparing workers for export abroad. As the former chairman of the House of Representatives Committee on Overseas Workers, who witnessed first hand the tremendous insecurity of our migrant workers, I can tell you that this was a bad bargain.
Let me continue. Although the economy registered 6-7% growth rates from 2012 to 2015, there was no “trickle down” to counter the legacy of stagnation bequeathed by neoliberal policies. At nearly 25% of the population, the percentage living in poverty in 2015 was practically the same as in 2003. The gini coefficient, the best summary measure of inequality, jumped from 0.438 in 1991 to 0.506 in 2009, among the highest in the world. For many Filipinos, the statistics were superfluous. Extreme poverty was so wretchedly visible in the big urban poor clusters within and surrounding Metro Manila and in depressed rural communities throughout the country.

Corruption and Class

The neoliberal paradigm was not, however, the only cause of the EDSA regime’s failure to address the deepening social crisis. Corruption was a problem, as it was in the Philippines’ neighbors. The administrations of Joseph Estrada and Gloria Macapagal Arroyo became synonymous with unbridled corruption.
But even more consequential than corruption was class. Just as they had forced Marcos to halt his land reform program in the 1970s, the landed class successfully resisted the implementation of Republic Act 6657, Cory Aquino’s already watered-down land reform program. A civil society push to re-energize the program, which was passed in 2009, bogged down under the Benigno Aquino III administration owing to lack of political will and presidential indifference. By the end of the Comprehensive Agrarian Reform Program with Extension Law (CARPER) in 2014, about 700,000 hectares of the best private land in the country remained in the hands of landlords, violence against land reform beneficiaries was common, and rural poverty remained stubbornly high.
Unaccompanied by structural reforms, the World Bank-supported Conditional Cash Transfer (CCT) anti-poverty program of the Aquino administration, though it eventually covered some 4.4 million families, or nearly one-fifth of the population, could barely make a dent on poverty and inequality.

Over the Cliff

Class callousness, double standards, and inept governance finally drove the EDSA Republic to the edge of the cliff during the Aquino III period. Popular support had steadied the EDSA Republic when it was challenged by military coups in the late eighties. By 2016, however, three decades of disillusionment had made it a tired, discredited system waiting to be pushed over the cliff, and it was, by the electoral insurgency that brought Duterte to power and provided legitimacy to his brazen moves toward fascism. Dutertismo is EDSA’s vengeful offspring even as the administration has not broken with the EDSA Republic’s failed economic policies. That is, however, another story.
So let me just end by saying that neoliberalism and globalization have been discredited globally, especially after the 2008 global financial crisis. Our experience is not unique. And the response has been, as in the Philippines, a turn towards fascist or authoritarian populist solutions
The challenge to us at this point is to break with this failed economic model and junk the old mantras about the so-called benefits of globalization. That won’t be easy, but we have no choice.
Thank you.

Thursday, May 14, 2020


A Collaborative Philippine Leadership
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"For a people to be without history, or to be ignorant of its history, is as for a man to be without memory - condemned forever to make the same discoveries that have been made in the past, invent the same techniques, wrestle with the same problems, commit the same errors; and condemned, too, to forfeit the rich pleasures of recollection. Indeed, just as it is difficult to imagine history without civilization, so it is difficult to imagine civilization without history." - American historian Henry Steele Commager (1965)

The most important step in establishing a new political system was the successful cooptation of the Filipino elite--called the "policy of attraction." Wealthy and conservative ilustrados, the self-described "oligarchy of intelligence," had been from the outset reluctant revolutionaries, suspicious of the Katipunan and willing to negotiate with either Spain or the United States. 

Trinidad H. Pardo de Tavera, a descendant of Spanish nobility, and Benito Legarda, a rich landowner and capitalist, had quit Aguinaldo's government in 1898 as a result of disagreements with Mabini. Subsequently, they worked closely with the Schurman and Taft commissions, advocating acceptance of United States rule.

In December 1900, de Tavera and Legarda established the Federalista Party, advocating statehood for the islands. In the following year they were appointed the first Filipino members of the Philippine Commission of the legislature. In such an advantageous position, they were able to bring influence to bear to achieve the appointment of Federalistas to provincial governorships, the Supreme Court, and top positions in the civil service. 

Although the party boasted a membership of 200,000 by May 1901, its proposal to gain statehood had limited appeal, both in the islands and in the United States, and the party was widely regarded as being opportunistic. In 1905 the party revised its program over the objections of its leaders, calling for "ultimate independence" and changing its name to the National Progressive Party (Partido Nacional Progresista).

The Nacionalista Party, established in 1907, dominated the Philippine political process until after World War II. It was led by a new generation of politicians, although they were not ilustrados and were by no means radical. One of the leaders, Manuel Quezon, came from a family of moderate wealth. An officer in Aguinaldo's army, he studied law, passed his bar examination in 1903, and entered provincial politics, becoming governor of Tayabas in 1906 before being elected to the Philippine Assembly the following year. His success at an early age was attributable to consummate political skills and the support of influential Americans. 

His Nacionalista Party associate and sometime rival was Sergio Osmeña, the college-educated son of a shopkeeper, who had worked as a journalist. The former journalist's thoroughness and command of detail made him a perfect complement to Quezon. Like Quezon, Osmeña had served as a provincial governor (in his home province of Cebu) before being elected in 1907 to the assembly and, at age twenty-nine, selected as its first speaker.

Although the Nacionalista Party's platform at its founding called for "immediate independence," American observers believed that Osmeña and Quezon used this appeal only to get votes. In fact, their policy toward the Americans was highly accommodating. In 1907 an understanding was reached with an American official that the two leaders would block any attempt by the Philippine Assembly to demand independence. Osmeña and Quezon, who were the dominant political figures in the islands up to World War II, were genuinely committed to independence. The failure of Aguinaldo's revolutionary movement, however, had taught them the pragmatism of adopting a conciliatory policy.

The appearance of the Nacionalista Party in 1907 marked the emergence of the party system, although the party was without an effective rival from 1916 for most of the period until the emergence of the Liberal Party in 1946. Much of the system's success (or, rather, the success of the Nacionalistas) depended on the linkage of modern political institutions with traditional social structures and practices. Most significantly, it involved the integration of local-level elite groups into the new political system. 

Philippine parties have been described by political scientist Carl Landé as organized "upward" rather than "downward." That is, national followings were put together by party leaders who worked in conjunction with local elite groups--in many cases the descendants of the principalía of Spanish times--who controlled constituencies tied to them in patron-client relationships. The issue of independence, and the conditions and timing under which it would be granted, generated considerable passion in the national political arena. According to Landé, however, the decisive factors in terms of popular support were more often local and particularistic issues rather than national or ideological concerns. Filipino political associations depended on intricate networks of personalistic ties, directed upward to Manila and the national legislature.

The linchpins of the system created under United States tutelage were the village- and province-level notables--often labeled bosses or caciques by colonial administrators--who garnered support by exchanging specific favors for votes. Reciprocal relations between inferior and superior (most often tenants or sharecroppers with large landholders) usually involved the concept of utang na loob (repayment of debts) or kinship ties, and they formed the basis of support for village-level factions led by the notables. These factions decided political party allegiance. 

The extension of voting rights to all literate males in 1916, the growth of literacy, and the granting of women's suffrage in 1938 increased the electorate considerably. The elite, however, was largely successful in monopolizing the support of the newly enfranchised, and a genuinely populist alternative to the status quo was never really established. The policy of attraction ensured the success of what colonial administrators called the political education of the Filipinos. It was, however, also the cause of its greatest failure. 

Osmeña and Quezon, as the acknowledged representatives, were not genuinely interested in social reform, and serious problems involving land ownership, tenancy, and the highly unequal distribution of wealth were largely ignored. 

The growing power of the Nacionalista Party, particularly in the period after 1916 when it gained almost complete control of a bicameral Philippine legislature, barred the effective inclusion of non-elite interests in the political system. Not only revolution but also moderate reform of the social and economic systems were precluded. Discussions of policy alternatives became less salient to the political process than the dynamics of personalism and the ethic of give and take.