A VIEW FROM THE CENTER: Shifting to a federalist economy

A VIEW FROM THE CENTER: Shifting to a federalist economy Featured


WITH about one million new entrants into the Philippine labor pool every year, our economy obviously needs to undergo fundamental restructuring, not just to absorb these new entrants but to offer hope to the tens of millions under- and un-employed Filipino labor force stuck in “endo” jobs, menial work (here and abroad), meaningless and deadend BPO jobs and extremely marginal livelihoods driving tricycles or selling in the streets and worse, blasting fishes or turning the country’s last 3 percentof natural forest into charcoal.

Inclusive growth was unreachable under the succession of government administrations, since President Cory and onwards from Arroyo to Aquino, with or without corruption at the top. It was not proven true that if the President was not corrupt, then poverty would be addressed.

What then are some of the fundamental economic shifts that can better promise a life of dignity for all Filipinos who want to improve their lives?

We do know that on the political front, a shift to federalism is being pushed; but as Centrist Democracy Political Institute president LitoLorenzana points out,“it would be a disaster to have the unitarist (opposite of federalist) perspective infect the new elected regional/state governments created under federalism”. Why? Because federalism is not about creating many mini-unitarist structures reporting to a mega unitary body (the federal government), but rather moving away from the unitarist’s trickle-down (pinatulo) economic model that has created mega elites– few in number but domineering in their share of the economic agenda and pie–towards the federalist’s “building from the bottom” (pinatubo) economic model, a balance and a congruence between the macro and micro, not by centrally planning the economy but by ensuring that the communities are nurtured where their strengths are through proper social policy that guides economic decisions, from households to corporations towards national goals but particularly of creating dignified Filipinos.

Under the unitarist model for example, it’s perfectly fine to align regulatory policies that further empower the elites in order to grow the GDP (measured from enterprise and corporate accounts) even if these will cause overconcentration of power (oligopolies) because anyway the economy will yield a surplus that can now be channeled to “conditional cash transfers, or CCTs” to help the poor. But does this add to their dignity? When their supported children go to school and graduate where will they work, either in the mega cities or abroad? So, what happens to the periphery that is neglected by unitarist economics on one hand and the outright plundering of their ecosystem resources (timber, mining, fishing rights, mangroves converted to corporate fishponds, etc.). Nothing!

A federalist economy can and should develop the “pinatubo” or “nurturing the bottom for genuine economic growth” approach and tally up the same GDP figure from the household value-added generated in a given year. Household value-added can be consolidated by barangay and upwards all the way to the town/city, province and region/state. All the way up to the nation. Immediately, disparities of income distribution become obvious and since a region would have better control over planning the government budget for the area, it would be totally unnecessary to do a “CCT” program as the economic initiatives under the region would necessarily connect opportunities to low-performing villages or towns or cities or provinces.

With the massive improvements in IT software and hardware, tracking community income statements and balance sheets, long advocated by the economist Sixto K. Roxas, can easily be done. In fact, some sub-provinces in China with a population of over 50 million people already have integrated household-based economic and accounting performance information consolidation software and hardware. Roxas has developed a modified “social accounting matrix” to take into account different income classes of households in a region/state, and environmentalists have recently added into the matrix the concept of integrating into it the bio-capacity and the ecological footprint of a region’s underlying territory where the economy and communities are superimposed.

“Local economy for local people” under federalism would be the antithesis of the unitarist’s “national economy for national and foreign elites”.

The unitarist’s economy is heavily dependent on capital to create jobs. I do not know the current figure, but if the patterns of the past have held, it would take over P200,000 in capital to create one job; thus, the dependence on the moneyed elite and foreign investors; thus, the tweaking of regulations and tax incentives to attract the capital. (Well, sometimes, it’s just plain raw political power when you see the government grant tax holidays to mining companies and coal-fired power plants when in fact they should be slapped with higher taxes due to the very high social costs of their externalities.)

The federalist’s economy should be able to create jobs at a much smaller amount and instead rely on under-utilized labor and natural resources to substitute for capital. But you cannot do that just by macro monetary and fiscal policy manipulation but rather by having an empowered regional government attuned to the component LGUs through the upward integration of the outputs of the hierarchical development councils that start from each municipality/city in the region. (See, even after 25 years of the Local Government Code, the present unitariststructure cannot even get local development councils to actually function, much less have meaningful outputs that the regional development councils can build upon.)

Is there such a model out there? Yes, and it is the German economy that adopted the “social market economy” after WWII, giving it one of the strongest, most competitive and equity-producing economies in the world. Philippine-style, with federalism, we can even improve upon Germany.

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A co-convenor of Subsidiarity Movement International and the Federalist Forum of the Philippines, the author advocates for the bottom-up development model as well as proper decentralization and the strengthening of regional governance. He served for 12 years in the Regional Development Council of Central Luzon as chair of the economic committee. He was a consultant at the Philippine Alternative Fuels Corp. (PAFC) and was on the board of trustees of the Haribon Foundation. He is currently a member of the board of advisors of Centrist Democracy Political Institute (CDPI)

Read 2473 times Last modified on Thursday, 10 November 2016 11:08
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