“We’re likely to see it with even greater ferocity in the years ahead, for as long as greed underpins our political system.”
How different are the very rich from you and me?
Well, for one thing, they have more money. More than what we ordinary mortals can probably expect to earn in an entire lifetime of working our butts off.
Some of them, however, fatten their bank accounts not through sheer hard work, but mainly by nurturing friends in high places.
That’s what certain some super-rich Russian businessmen—oligarchs, they’re often referred to in Western media—have in common with their local counterparts
In the case of the Russian oligarchs, they’ve elevated toadying up to those in high office to state-of-the-art, and look at the mega-yachts that they use to vacation in various European playgrounds. Except that now, some of these luxury yachts have been seized by some European countries as part of wide-ranging sanctions against Russia’s invasion of Ukraine since February.
But I digress. Our point here is this: for businessmen, it pays to have friends in the corridors of power, even here in this part of the Pacific. And for our politicians, it also pays to have friends in business.
It’s a symbiotic relationship, and it’s part of the phenomenon called “crony capitalism”.
Internet research yielded this much information: Crony capitalism is an economic system in which individuals and businesses with political connections and influence are favored—through tax breaks, grants, and other forms of government assistance—in ways that tend to suppress open competition in a free market.
Crony capitalism is distinct from “bureaucrat capitalism”, which is the use of public office to amass wealth over and beyond one’s legal compensation, often through shady or under-the-table deals. But the two are inextricably linked as they proceed from the same motivation, which is to amass wealth seemingly without end.
The term “crony capitalism” was actually coined by George M. Taber, then the business editor of TIME Magazine, to describe the Philippine economy under Ferdinand Marcos Sr. This, he said, was a “Philippine distortion of the capitalist system. This was not capitalism. It was a weird distortion of the free market that benefited a few and kept the masses in poverty. The cronies got richer, and the poor stayed poor.”
The downfall of the Marcos regime in 1986, in fact, was in part due to crony capitalism, with critics pointing out that certain individuals close to the occupant of Malacañan Palace were able to snag lucrative contracts for various big-ticket infrastructure projects and borrow huge sums from government-owned banks with no collateral except their closeness to the powers-that-be.
The term has stuck, with mainstream publications such as The Economist now using it to refer to a situation where favored businessmen enjoy economic benefits due to their closeness to those wielding political clout.
In fact, The Economist has come up with a Crony Capitalism Index, the latest of which showed the wealth of billionaires in the Philippines surpassing 10 percent of gross domestic product (GDP) in 2021. As a share to GDP last year, nearly a tenth were wealth generated in sectors regarded as crony-friendly.
The publication defined crony sectors as “a host of industries that are vulnerable to rent-seeking because of their proximity to the state, such as banking, casinos, defense, extractive industries and construction.”
In the Philippines, “crony sectors still account for four-fifths of total billionaire wealth,” it said.
The Philippines ranked fourth in the world in crony capitalism, just behind No. 1 Russia, and neighboring Malaysia and Singapore.
In the magazine’s previous ranking in 2016, the Philippines was in third place behind Russia and Malaysia.
Back in 2016, The Economist already warned that “supporters of Rodrigo Duterte, the front-runner to win the presidential election [that year], hope he will open up a feudal political system that has allowed cronyism to flourish.”
In the publication’s initial crony-capitalism index in 2014, the Philippines occupied fifth position, behind Malaysia, Russia, Ukraine and Singapore. In the latest 2021 index covering 22 countries, also part of the top 10 were Ukraine, Mexico, India, Indonesia, Thailand and China.
“Globally, crony wealth has declined as a share of the total, reflecting in part the surge in tech-related wealth. Nonetheless it remains entrenched in many places,” it said.
The Economist used data from the International Monetary Fund (IMF) as well as Forbes magazine’s yearly billionaires’ list as indicators of crony wealth.
“Rent-seeking entrepreneurs tend to use their relationships with the state to maximize profits. Technically speaking, an economic rent is the surplus remaining once capital and labor have been paid a market price. With perfect competition that surplus would not exist,” The Economist noted.
“But rents can be artificially elevated if firms win contracts at beneficial prices, form cartels to stitch up consumers or lobby governments for favorable rules. Most rent-seeking businesses are operating perfectly legally,” it said.
According to the magazine, rent-seeking sectors include casinos; coal, palm oil and timber; defense; deposit-taking and investment banking; infrastructure; oil, gas, chemicals and other energy; ports and airports; real estate and construction; steel, other metals, mining and commodities; and as well as utilities and telecoms services.
Sounds all-too-familiar?
Hence, rent-seeking behavior can be found in almost every sector of the economy, and that’s where the danger lies, because, as noted earlier, crony capitalism tends to make the rich richer, and the poor, even poorer.
If crony capitalism has thrived in this country in the past, we see it still in the present, and we’re likely to see it with even greater ferocity in the years ahead, for as long as greed underpins our political system.