WORKING PAPER

Cronyism, Oligarchy and Governance in the Philippines: 1970s vs 2020s

Ronald U. Mendoza, PhD

School of Government, Ateneo de Manila University
Oscar Bulaong Jr., PhD
Graduate School of Business, Ateneo de Manila University
Gabrielle Ann S. Mendoza
Ateneo Policy Center, School of Government, Ateneo de Manila University

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 ATENEO SCHOOL OF GOVERNMENT WORKING PAPER SERIES

Cronyism, Oligarchy and Governance in the Philippines: 1970s vs 2020s

Ronald U. Mendoza, PhD

School of Government, Ateneo de Manila University
Oscar Bulaong Jr., PhD
Graduate School of Business, Ateneo de Manila University
Gabrielle Ann S. Mendoza
Ateneo Policy Center, School of Government, Ateneo de Manila University

February 2022

This working paper is a draft in progress that is posted online to stimulate discussion and critical comment. The
purpose is to mine the reader's additional ideas and contributions for completion of a final document.

The views expressed herein are those of the authors and do not necessarily reflect the views of Ateneo de Manila
University.

Corresponding authors:

Oscar Bulaong Jr., Graduate School of Business, Ateneo de Manila University

E-mail: obulaong@ateneo.edu

Ronald U. Mendoza, School of Government, Ateneo de Manila University

E-mail: ronmendoza@gmail.com

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 “As Marcos’ chief ideologue remarked, Marcos ‘believed he could have a vision for
society…and still loot it’.” Paul Hutchcroft (1998)

“We managed to kick out a dictator in Malacanang; but we now face many mini-dictators at the
local level in the Philippines.” Alex Lacson (2013)

ABSTRACT
Martial Law exacerbated cronyism and oligarchy by concentrating power into the hands of one
political clan. Technocratic industrial policy combined with political anti-oligarch rhetoric
spurred the rationalization and liberalization of different economic sectors, with substantial state
support and direct credit among other interventions. Business owners (including those from old
business families) that were neither friendly with nor connected to the Marcos regime were quickly
displaced by a new cohort of business leaders with family or political links to the Marcos
administration. This was the basic recipe for malgovernance and one of the deepest economic
implosions faced by the Philippines in the early-1980s that eventually led to the removal of the
dictator via the people-power revolution in 1986. Moving forward to the present, this paper
outlines some of the major progress already achieved. Yet the challenges of economic and political
governance persist, insofar as the risks of cronyism and oligarchy have merely evolved over time.
Reformists appear to have liberalized the economy and spurred economic growth, but have made
little progress to liberalize the political system. For the challenge of concentrated power remains
in the hands of political clans. This underpins the reform agenda to continue to rebalance
economic and political power in favor of inclusive economic and political institutions.

Key words: crony capitalism; political dynasty; Martial Law; rent-seeking; inequality

JEL Classification: O15, P16

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Introduction
The term cronyism often describes how capitalists gain financially lucrative rents from politicians
either legally or illegally, implying a power balance in favor of the political actor. Yet a growing
literature on the topic espouses a broader view wherein capitalists and politicians are actively
colluding for mutual gain. In this bargain, capitalists gain wealth and economic power while
politicians gain political power. Under such conditions, it is no longer clear who is the crony of
whom. The concept of crony capitalism is therefore increasingly analyzed as collusion among the
elites, often with deep economic consequences (Diwan et al. 2019; Hutchcroft 1998; Pei 2016).

In the Philippine context, cronies and oligarchs have often been used interchangeably but
these two concepts can be distinguished. As Teehankee (2020) notes, business oligarchs can be
cronies of politicians in power, but not all cronies become full-fledged business oligarchs. Some
of these business actors have demonstrated longevity across different political administrations and
reform eras. Furthermore, recent conceptions of oligarchs refer to a wealthy class–usually but
not exclusively in business–that exercise control over key parts of the economy and could exert
strong influence over the government itself (Mendoza 2016b).

In the early stages of Philippine economic development, these business oligarchs were
ensconced in traditional economic sectors such as agriculture and trade. Their resilience or
“staying power” in business was either broken or re-shaped by reform spurts, often under the
slogan of economic liberalization and structural transformation. Many long-lived family
businesses remained powerful by adapting to the changing economic and political environment--
branching out into banking, manufacturing, retail and logistics among other sectors, as the
Philippine economy began to undergo dramatic structural reforms. Such reforms were not merely
part of a technocratic process. Political leaders often turned to populist rhetoric to rally the nation
around modernizing reforms, demonizing powerful oligarchs in business, and blaming them for
holding back the nation’s development and perpetuating poverty and inequality. Yet as the
experience under Marcos’ Martial Law demonstrated, reformist eras could quickly slide into crony
capitalism, and these same so-called reformists could quickly turn around and start building their
own dynastic hold on power through the simultaneous control over political and economic
resources. Thus the staying power of business oligarchs has been increasingly matched by a similar

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longevity among political dynasties. The view of collusion among the elites can also be framed as
a constant re-balancing of economic and political power.

The collusive relationship implied by the term “crony capitalism” further evolved as the
lines between business and government actors blurred over time, notably with the emergence of
powerful political clans. Beyond ties with political donors from the business sector, some of these
clans developed extensive business interests among family members. This too is reminiscent of
Marcos’ Martial Law period, as the Marcos political clan and their close relatives and cronies
demonstrated the perverse consequences of monopolizing power with great discretion and little
accountability.1 What may be different between that period and the present lies in the somewhat
more decentralized (though no less concentrated) nature of political power in the Philippines today.
As noted reform leader Alex Lacson noted in 2013, “We managed to kick out a dictator in
Malacanang; but we now face many mini-dictators at the local level in the Philippines.”2

Whether their role is at the local or national level, these dynastic officials may face deep
conflict of interest when performing their roles in government vis-à-vis different economic sectors.
It is in this context that political dynasties—particularly those clans that have captured multiple
positions in elected office and have demonstrated staying power—can be considered as modern
day oligarchs in the Philippines. In fact, politics has become a very lucrative “family business” for
many political clans.

This article revisits the patterns of cronyism and oligarchy during the Marcos Martial Law
era (1970s), and juxtaposes these against the lingering challenges of economic and political
governance over 50 years later in the 2020s. It argues that the risks of cronyism and oligarchy were
exacerbated by Martial Law, as power became centrally concentrated into the hands of one
powerful political clan. Technocratic industrial policy combined with political anti-oligarch
rhetoric spurred the rationalization and liberalization of different economic sectors, with
substantial state support and direct credit among other interventions. Business owners (including

1
Klitgaard’s (1988) formula for corruption and impunity is monopoly of power plus discretion on how that
power is used, minus any accountability.
2
Alex Lacson made these remarks at a presentation on political dynasties and governance, organized by
the Brotherhood of Christian Businessmen and Professionals (BCBP).

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those from old business families) that were neither friendly with nor connected to the Marcos
regime were quickly displaced by a new cohort of business leaders with family or political links
to the Marcos administration (Hutchcroft, 1998). Fast-forward to the present, there are many
differences in the institutional landscape, and this paper outlines the major progress already
achieved. Yet the challenge of economic governance is an enduring one, particularly as the risks
of cronyism and oligarchy merely evolve over time.

A richer, more developed economy actually offers even more opportunities for collusive
rent-seeking, raising the importance of the State as a fair regulator rather than as a direct market
actor (i.e. through state owned enterprises). Hence it is incorrect to concede that “nothing has
changed since the Marcos years” and perhaps “it was even better during the Golden age of the
economy under Marcos”. The latter is easy enough to debunk given the copious literature on the
economic disaster left behind by Marcos.3 Nevertheless, the previous statement—on the exact
nature of progressive change and reform since the EDSA revolution in 1986—requires a more
nuanced explanation, particularly for succeeding generations who struggle to understand the
reform legacy in the wake of EDSA. Put simply, the long road to economic and political recovery
in the country is—unsurprisingly—not a straight path and littered with both success and failures.
The standing challenge for reformists is to continue to strengthen institutions for economic and
political inclusion (Acemoglu and Robinson 2012).4 In the modern day Philippines, far more
progress has been made in pushing for inclusive economic institutions vis-à-vis inclusive political
institutions.

In what follows, section 1 briefly reviews the dynamics of cronyism under Martial Law,
highlighting key examples of collusion involving Marcos and his cronies, and how these
contributed to debt-driven growth with deep institutional and economic damage by the time the

3
See among others De dios et al. (1984), Hutchcroft (1998) and Manapat (2020).
4
Acemoglu and Robinson (2012) observe that inclusive economic institutions include secure property
rights for the majority of the population, law and order, markets that are open to free entry of new players,
state support for markets (e.g. public goods, regulation and enforcement of contracts), and access to
education and economic opportunity for the majority of citizens. Inclusive political institutions, on the other
hand, include political institutions for broad participation by citizens, and institutions that uphold the rule
of law and place strong checks and balances to temper the excesses of political leaders who may violate the
rule of law.

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dictator was ousted in 1986. Section 2 discusses the economic recovery and reform period which
set the stage for the eventual economic renaissance that would only be stopped by the pandemic
period (2020-2022). Section 3 then describes the lingering issues of governance throughout the
post-Marcos presidential administrations. Section 4 probes into the autonomy of the political
sphere, through a systems lens, to juxtapose it with the so-called “economic politics” in an attempt
to sketch a reform agenda. The enduring challenge of institutional reforms is to adapt to the
growing economy and strike the balance in economic and political power in favor of growth and
inclusive development.

1. Marcos Industrial Policy during Martial Law

Perhaps Paul Hutchcroft (1998:115) summarizes the Marcos Martial Law experience best: “In
declaring martial law, Marcos promised to respond to the widespread disillusionment with the
political system and the major families that had presided over it. He pledged reforms that would
usher in equality of opportunity and save the country from “an oligarchy that appropriated for itself
all power and bounty”. But while Marcos did, indeed, tame selected oligarchs most threatening to
his regime, a new oligarchy (of Marcos and his relatives and cronies) achieved dominance within
many economic sectors. […] While foreign loans sustained growth in the 1970s, crony abusers
brought economic disaster in the early 1980s. Most fundamentally, martial law perpetuated
important shortcomings of Philippine capitalism, because Marcos was merely expanding on earlier
patterns of patrimonial plunder.”

Some of the country’s top economists have characterized the Marcos years as being fueled
by “debt-driven growth” (De dios et al. 1984). Clearly, debt is not necessarily detrimental to a
country’s economic growth and development, when managed well and invested judiciously—and
notably in areas that allow the country to grow faster and include more of its citizens as
beneficiaries and drivers of that inclusive growth. Indonesia and Malaysia, for example, reduced
poverty during their industrialization periods. Indonesia started with a 70% poverty incidence in
the 1970s, driving this down to a mere 15% by the 1990s and further to around 11% in 2013.
Malaysia also managed to reduce its 50% poverty incidence in the 1960s to less than 1% prior to
the COVID-19 pandemic. These economic results helped to legitimize their political regimes—a

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form of accountability that political scientists and development researchers attribute to the Asian
tiger economies (Acemoglu and Robinson 2012).

Philippine poverty, on the other hand, increased during the Marcos years, rising from 41%
poverty incidence around the time Marcos took the Presidency in the 1960s to around 60% by the
time he was kicked out by the popular people-power revolution in 1986. During this time, as much
of the country was impoverished, the country’s external debt grew by an annual average rate of
25% between 1970 and 1981. Self-rated poverty data collected by Social Weather Stations shows
that this was well over 70% during the tail-end of the Marcos administration, and this has declined
over time to about 50% (see Figure 1). Self-rated poverty even declined to about 40% during the
Duterte administration but later peaked to 54% in December 2019.

An influential think piece written in 1984 by Noel De Dios, Vic Paqueo, Solita Monsod
and other top economic minds of the country then outlined the many failures of economic
management during the Marcos years. State-run monopolies, mismanaged exchange rates,
imprudent monetary policy and debt management, all underpinned by rampant corruption and
cronyism, were among the key factors that plunged the Philippine economy into the worst
economic contraction it experienced in its entire history (pandemic of 2021-2022 included).

Figure 1. Self-Rated Poverty (Pre-COVID19).

Source: Social Weather Stations Self-Rated Poverty Ratings.

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 For a while, such was the authoritarian control of the dictator that many of the excesses in
the form of captured and corrupted state policies were unchecked. The dictatorship managed a
centralization of power that provided very little inclination to preserve the legitimacy of the regime
by reducing poverty and inequality. Far from the rhetoric to advance a developmental state, crony
capitalists, emboldened and unleashed with unchecked power under Martial Law, implemented a
systematic extraction of wealth and resources in the Philippine economy (Hau 2017; Hutchcroft
1998).

De dios et al. (1984) observed that the “[…]main characteristics distinguishing the Marcos
years from other periods of our history has been the trend towards the concentration of power in
the hands of the government, and the use of governmental functions to dispense economic
privileges to some small factions in the private sector.” Banking and finance are the key tools in
industrial policymaking, and it is unsurprising that Marcos-style cronyism took over that sector in
a big way (Table 1).

Table 1. Changing Bank Ownership under Martial Law

Distressed Bank Supported New Owner Links to Marcos
by Banking Reforms and
Directed Credit
International Corporate Bank Herminio Disini Herminio Disini’s wife, Paciencia Escolin, is a cousin of
(formerly Continental Bank) Imelda Marcos. Disini started a small company, Herdis
Management and Investment Corporation, in 1969 with
an initial bank loan of $3500 which grew to an empire
worth $200 million in the 1980’s and was ranked as the
15th top corporations by 1976. In June 2021, the
Philippine Supreme Court ruled that Disini owes the
government around Php 1.1 billion due to his role in the
Bataan Nuclear Power Plant.
Commercial Bank of Manila Herminio Disini *Same as above.
(formerly Overseas Bank of
Manila of Emerito Ramos)
Republic Planters Bank Roberto Benedicto Roberto Benedicto, former classmate and freternity
(formerly Republic Bank brother of Ferdinand Marcos, was granted monopoly
owned by Pablo Roman) control of the sugar industry. His empire included 85
corporations, 106 sugar farms. 14 agricultural estates, 17
radio stations, 16 television stations, 2
telecommunications networks, 7 buildings, 10 vessels,
and 5 aircrafts.
Traders Royal Bank (formerly Roberto Benedicto *Same as above.
Traders Commercial Bank)
Pilipinas Bank Ricardo Silverio With established ties to Marcos, Silverio benefited from
business dealings that gave the Delta Motors Corporation
exclusive rights to assemble and distribute Toyota cars

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 and trucks in the country and preferential regulatiry
treatment that facilitated his contributions to Marcos’
campaigns. Eventually, the Silverio family owned 50
companies and real estate in California.
United Coconut Planters Bank Eduardo “Danding” Cojuanco is one of Marcos’ closest cronies and was the
(formerly First United Bank Cojuangco godfather of Marcos’ son and grandson, while Marcos
of Jose Cojuangco, Danding’s was the godfather of Cojuangco’s eldest son also named
uncle) Marcos. Granted with access to resources from UCPB and
coco levy funds, Cojuangco acquired business deals such
as winning over other prominent families, Zobel and
Soriano, ownership of San Miguel Corporation.
Allied Bank (formerly Lucio Tan Lucio Tan had very humble beginnings but his strong
General Bank and Trust of the connections to Marcos granted him tax breaks due to
Yujuico family) exemptions preferentially given to his businesses. His
FOrtune Tobacco Company, controlling 60% of the
country’s Php 62 billion cigarette market, is widely held
to have underpaid tax obligations. Tan is also alleged to
remit direct cash contributions to Marcos and give Marcos
shares in his companies.
Philippine Bank of Ralph Nubla Ferdinand Marcos’ main liaison to the Fil-Chi business
Communications community
Philippine Commercial and Benjamin “Kokoy” Romualdez is alleged to be Ferdinand Marcos’ favorite
Industrial Bank (formerly Romualdez brother-in-law. The Romualdez clan is prominent in Leyte
owned by Eugenio Lopez) but their family is said to be less well-off. Romualdez,
who had little accomplishments before the Marcos
regime, benefitted from several government appointments
such as Ambassadorship to the United States. Kokoy also
took over key companies previously owned by the
Lopezes such as MERALCO which he used to finance his
lavish lifestyle.
Philippine Trust Company Emilio Yap Yap, considered as a friend of the Marcos family, owned
Philtrust Bank and the Manila Bulletin newspaper. Manila
Bulletin is known to have supportive coverage of the
Marcos regime despite its excesses.
Philippine Veterans Bank Shares held in trust
by Ferdinand
Marcos
Security Bank Dewey Dee / Due to his unsecured loans, Dee, a textile typcoon and
Rolando Gapud friend of Ferdinand Marcos, fled the country with an
estimated $95 million in debt. Gapud acted as Marcos’
personal financial adviser and ran the Marcos Foundation,
a quasi-governmental foundation that absorbed funds
from corporations taken by the government during
Martial law. Dee has shared that Marcos secretly owned
the Redwood Bank of San Francisco and that he was
recruited by Gapud to be Marcos’ front in buying the bank
in 1980.
Sources: Associated Press (1986), Drogin (1986), Hutchcroft (1998:137), Lopez (2019), and Manapat
(2020:83,195,239,756).

Often seen as the heart of the East Asian tigers’ rapid industrialization during the 1970s
and 1980s, the banking system plays a singularly important role in industrial policy (Chang 2003).
This was not the case in the Philippines. The Philippine banking sector was infested with crony

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owners who took over while the government rationalized the banking sector in the guise of
modernizing and salvaging it from inefficiently managed family-ownership. Rather than enhance
the industry’s competitiveness, the crony-run banks fueled by State-backed credit lines used the
financial access to fund many bad investments along with their lavish lifestyles (Hutchcroft 1998).
Crony capital was also used to wrest control of large businesses from longstanding wealthy
families: Kokoy Romualdes took over MERALCO from the Lopezes, and Danding Cojuangco
took over San Miguel Corporation from the Zobel-Ayala families. And when the Americans had
to divest their ownership of PLDT due to the expiration of the parity agreement with the Filipinos,
Marcos successfully engineered the take-over of Ramon Cojuangco (Danding’s uncle) so that the
telcommunications company would not end up in the hands of Enrique Zobel of Ayala Corporation
(who was then partnered with Pedro Cojuangco, brother in law of Ninoy Aquino and Danding’s
cousin) (Coronel 1998). In all these machinations, the Philippines failed to modernize and instead
productive resources merely changed hands. And worse yet, an era dominated by rent extraction,
crony self-enrichment and bad investments ensued. In trying to rid itself of traditional business
oligarchs, the Philippines under Martial Law jumped out of the frying pan and into the fire.

Hutchcroft (1998:111) further observed that: “Martial law created many new opportunities
for reform, but at the same time facilitated the capture of the state by new—and more centralized—
regime interests. […] In the end, the Marcos regime’s love of looting swamped all serious efforts
at reform, and the problems of bank instability that endured (Hutchcroft 1998:111).” In addition
to controlling the financial sector, among the ways that crony capitalism could manifest itself, the
channels include subsidies, regulation, directed credit, privatization, trade policy and procurement.
In short all the tools of industrial policy may in fact be abused if and when these tools are
administered by a government that is not held accountable to deliver strong development results
which legitimizes the grant of power for strong industrial policy. To help highlight these, specific
examples are synthesized in table 2.

Table 2. Industrial Policy, Crony Links and Abuse

Tools of Industrial Examples of Abuse
Policy
Regulation Under Martial Law, uneven application of government regulations was rampant. For
example, strict regulations were imposed by the review committee of the Progressive
Car Manufacturing Program on Ford Motor Company while at the same time waiving

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 these regulations for Delta Motor Company (owned by crony Silverio). Lucio Tan also
benefitted from a variety of tax breaks preferentially assigned to his companies.
Directed credit In 1975, capitalization requirements for banks were increased to stabilize and rationalize
the banking industry. Many small banks were forced to sell or merge with crony-owned
banks which became conduits for access to state credit. Credit, however, was often
directed to unsuccessful projects or siphoned by cronies. The coco levy fund, created to
modernize the coconut industry, was directed to Danding Cojuangco, Juan Ponce Enrile,
and other cronies through the UCPB.
Privatization Marcos influenced the take-over of Ramon Cojuangco over the telecommunications
company PLDT so that it would not fall under the ownership of Enrique Zobel and the
connections of the Aquino family. President Fidel Ramos later on implemented reforms
that encouraged new players in the telecommunications sector.
Trade Policy Marcos ordered an increase in tariffs from 10% to 100% on acetate tow and other raw
materials imported by American and British-owned firms, Filtrona, in making cigarette
filters in the Philippines. Disini’s company, the Philippine Tobacco Filters Corp,
however, was exempted. A former Filtrona executive alleged that the tariff increase was
due to Filtrona rejecting Disini’s offer to buy the firm. Eventually, Filtrona exited the
Philippine market. With Disini’s firm controlling 75% of the tobacco market, Marcos
lowered tariffs on acetate tow imports.
Procurement The 60% of the construction of the Bataan Nuclear Power Plant (BNPP) was debt-
financed with the aid of the US Export-Import Bank. Westinghouse and General Electric
were the competing contractors for the project. However, Westinghouse had great
advantage as the company hired Herminio Disino, Marcos’ golfing partner and husband
to Imelda Marcos’ cousin, as their sales agent. The project was heavily criticized for
being overpriced by at least $75 million compared to other Westinghouse plants being
constructed at that time.
Sources: Coronel (1998), Manapat (2020:240,285), Mendoza and Cruz (2018:344-5).

De dios et al. (1984) observed that “[…]the bulk of construction and other capital outlays
in both the private and public sectors were not very productive and many were outrightly
wasteful.” A cabal of Marcos cronies took over major sectors of the economy fueled by state
resources, and instead of a developmental mindset, they grabbed “the opportunity to use
government activity as a vehicle for private gain, whether pecuniary or political. Examples would
be overdesigned bridges, highways, public buildings or large energy projects designed to secure a
political constituency, to get a commission, or to corner a contract.”

One example of a particularly bad investment with deep development repercussions is

worth elaborating briefly, if only to emphasize the long-lasting implications of crony capitalism,
and the time, effort and resources it takes to undo the damage. There are few more palpable and
glaring examples of the economic mismanagement of the time (with particularly adverse long term
consequences due to its substantial debt component) than the Bataan Nuclear Power Plant (BNPP)
located in Morong, Bataan. Started in the 1970s, the BNPP was supposed to boost the country’s
competitiveness by providing affordable electricity to fuel industrialization and job creation in the

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country. Far from this, the US$2.3 billion nuclear plant suffered from cost over-runs and
engineering and structural issues which eventually led to its mothballing without generating a
single watt of electricity (Mendoza et al. 2018).

Corruption charges were later filed by the Presidential Commission on Good Government
against Marcos crony, Herminio Disini, whose wife is the first cousin of first lady Imelda Marcos,
and whose firm ushered the BNPP deal. Westinghouse, the US company that supplied the BNPP,
later testified in a US court that they paid Disini over US$17 million to help acquire insurance,
telecommunications and civil works subcontracts for the BNPP without competitive bidding.
Disini’s cousin, Jesus Disini, also admitted to the same court that President Marcos himself
received part of this pay-off because he was co-owner of the group of companies headed by
Herminio Disini. In June 2021, the Philippine Supreme Court finally ruled that Disini should pay
the government PhP1.1 billion in damages from the botched BNPP (AP 2021).

Figure 2. BNPP Economic Costs

Source: Ateneo Policy Center calculations and Mendoza and Cruz (2018).

At its peak, the debt payments for the BNPP reached, on average, US$150,000 per day.
The country finally paid the debt for the BNPP in 2007. The resources funneled into this project
could have funded over 40,000 classrooms to educate almost 2 million Filipino children, or three
squadrons of FA-50 aircraft to help defend Philippine sovereignty, or account for half the cost of

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a high speed rail connecting Clark and Manila. This single corruption-laden project alone robbed
the country of many critically important investments (Figure 2). Worse yet, the rent-seeking and
corrupt environment that produced the BNPP and other white elephant projects during Martial
Law signaled an erosion of many key institutions that would take decades to rebuild, dragging
economic recovery with it.

2. Economic Disaster and Rebuilding Post-EDSA

The Philippine economy collapsed in the 1980s after years of debt-driven growth and bad
investments; and the recovery process took about two decades. To be more precise, the real GDP
per capita in 1983 was attained again only in 2003, almost two decades later (Figure 3).

Figure 3. Philippines Real GDP Per Capita (in 2000 Pesos).

Source: World Bank’s World Development Indicators.

The very things that signal the Philippine economy’s competitiveness today—among other
factors, an independent central bank, an effective fiscal and treasury management system,
relatively stronger checks-and-balances built into public procurement and public-private-
partnership (PPP) tenders, increased competition introduced to once-monopolized economic
sectors, stronger oversight over government-owned and -controlled corporations (GOCCs), a
competition authority to regulate possible economic concentration, among others—are the very

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areas that differentiate the Philippine economy today with the Marcos-era economy. Underpinning
many of these key accomplishments are legislative and economic governance reforms pushed by
the post-EDSA revolution Presidents.

Many of the legislative reforms focused on the political, economic, and social spheres did
respond to the mandate of the 1987 Constitution, slowly rebuilding institutions and enhancing
democratic and economic governance. A recent study by the Ateneo Policy Center consolidated
the legislative reforms as a dataset spanning all the post-EDSA Presidents. Figure 4 presents the
yearly averages of political, economic, and social legislation passed by each post-EDSA
administration. The administrations of President Ramos and President Duterte stand out in the
number of legislative reforms successfully passed.

Figure 4. Yearly Average of Political, Economic, and Social Reforms

passed post-EDSA

Source: Yusingco et al. (2021:4).

Key early reforms sought to reverse the damage done by the dictatorship, notably to the
country’s important financial institutions whose credibility was decimated by years of

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mismanagement and abuse. The New Central Bank Act (Republic Act 7653) passed by the Ramos
administration in 1993 virtually created a new central bank (Bangko Sentral) for the country with
greater independence. Republic Act No. 11211, an amendment to the New Central Bank Act, was
passed by the Duterte administration in 2019, increasing the resources of Bangko Sentral, and
expanding its supervisory powers over new emerging financial institutions due to new technology,
such as those in money service businesses, credit granting businesses, and payment system
operators.

Reforms to facilitate public private partnerships through build-operate-transfer (Republic

Act 6957 in 1990 and later amended by RA 7718 in 1993 under President Corazon Aquino’s
administration) and to enhance procedures for government procurement (Republic Act 9184 in
2002 under President Gloria Macapagal-Arroyo’s administration) also began to directly address
some of the government procurement and infrastructure investment weaknesses that were rampant
under the Marcos administration. Furthermore, President Field Ramos’ administration stepped up
deregulation and privatization reforms diverging from the history of monopolies created (or
tolerated) under the Marcos administration. While early privatization efforts were deemed
successful (e.g. in water and in telecommunications), they nevertheless encountered regulatory
challenges later on, impressing the need for a second generation of reforms.5

Under President Benigno Aquino III’s administration, key reforms included the passage of
the country’s competition law (Republic Act 10667), the sin tax reforms (Republic Act 10351) and
the reproductive health act (Republic Act 10354). These social and economic reforms, along with
an emphasis on PPPs in infrastructure, complemented the second Aquino administration’s
emphasis on human development investments while mobilizing private sector resources to boost
infrastructure investments in the country. Investment grade rating was achieved under this
administration, ushering a period of more sustained high growth. Analysts considered how the
Philippines shed its “sick man of Asia” reputation, that it was experiencing an economic

5
See Coronel (1998) for a discussion of telecommunications privatization and Torio et al. (forthcoming)
for a discussion of water privatization issues.

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renaissance.6 This was of course prior to the pandemic which would test the Philippines’ economic
and political governance again.

Recent notable economic laws passed under President Rodrigo Duterte’s administration
include reforms to the National Internal Revenue Code of 1997, notably The Tax Reform for
Acceleration and Inclusion (TRAIN) Law (Republic Act 10963) and The Corporate Recovery and
Tax Incentives for Enterprises (CREATE) Act (Republic Act 11534). In addition, the Coconut
Farmers and Industry Trust Fund Act (Republic Act 11524) returns what is left of the coco levy
funds collected during the Marcos era and plundered by his cronies to coconut farmers. More
importantly, it hopes to spur a process of re-investing in a long impoverished sector in the
Philippines. In compliance with commitments to the WTO, the Philippines also successfully
passed rice tariffication (An Act Liberalizing the Importation, Exportation and Trading of Rice,
Lifting for the Purpose the Quantitative Import Restriction on Rice or Republic Act 11203) in
order to further liberalize trade in the politically sensitive crop. (Incidentally, this is the same
highly regulated sector that created many corruption opportunities during the Marcos
administration that also lingered on into the post-EDSA period.)

Many of the economic reforms triggered liberalization and rationalization of key economic
sectors that finally began to intensify competition, reversing the trend under the Marcos years that
first created heavily regulated and protected sectors, and then doled out the resulting rents to
cronies. Nevertheless, these post-EDSA reforms also raised the challenge of boosting domestic
competitiveness capacity (for those that can adjust in a more competition rich environment) and
social safety nets for those that are less successful, as among the crucial reforms for more
competitive but also more inclusive social and economic outcomes. Along these lines, recent
reforms also include Republic Act 11310 (An Act Institutionalizing the Pantawid Pamilyang
Pilipino Program or 4Ps) and Republic Act 11223 (Universal Health Care Act or UHC law) which
begin to institutionalize and advance a stronger social protection system not just for the poor but
also the vast majority of Filipinos who escape poverty but are nevertheless vulnerable to health
shocks.

6
https://www.wsj.com/articles/philippines-economy-picks-up-pace-in-second-quarter-1409197042

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 In sum, all the economic and financial sector reforms across the post-EDSA
administrations translated into dramatic improvements in the country’s economic fundamentals,
in turn feeding into improved rankings in various economic competitiveness indicators and in the
all-important sovereign credit ratings. From its near debt-default situation in 1986 when the
dictatorship ended, the Philippines eventually attained investment grade credit rating in 2013
(Table 3). The latter ushered the Philippines’ strong access to international finance benefitting both
the government and private sector borrowers, further fueling growth and wealth creation, but not
necessarily strong economic and political inclusion.

Table 3. Summary of Underlying Factors behind Credit Rating Upgrades

Date Upgrade Factors Cited by Credit Rating Additional Notes on Governance and
Agencies Institutions
Fiscal consolidation under the new
administration; Sustained
15 June Ba3 to macroeconomic stability; The government doubled its efforts to go after
2011 Ba2 Strengthened position in external tax evaders and smugglers.
payments; Significant pick-up in
economic growth.
Promising economic performance
despite deteriorating global
There were noted improvements in
demand; Enhanced prospects for
29 October Ba2 to infrastructure spending. The peace agreement
growth in the medium-term;
2012 Ba1 between the government and the Moro Islamic
Stability in the financial system;
Liberation Front encouraged investments.
Continued gains from enhanced
revenue administration.
The popularity of the Aquino administration
Ba1 to
among the voters, as proven in the midterm-
Baa3 Robust economic performance;
03 October elections, translates to continued support for
(Investm Ongoing fiscal and debt
2013 the reform agenda. Improvements in third-
ent consolidation; Political stability.
party assessments of institutional quality and
Grade)
international competitiveness are pronounced.
Ongoing debt reduction and
Continued rise in cross-country rankings of
improvements in fiscal
11 competitiveness, in line with current
Baa3 to management; Stronger economic
December administration’s emphasis on good
Baa2 growth; Limited vulnerability to
2014 governance. Central bank’s strong record in
common risks currently affecting
price and financial stability.
emerging markets.
High economic strength derived
Policymakers face challenges in managing the
from a large and fast-growing
current inflationary pressures. In addition,
economy; Improving fiscal
domestic political developments and
strength based on moderate
Baa2 prospective changes to governance
20 July 2018 government debt levels and gains
“stable” frameworks, including a shift to a federal form
in debt affordability.
of government, present downside risks to the
Balanced against more negative
country's institutional and fiscal profile.
features which constrain the rating,
principally low per capita incomes

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 and, relatedly, still low revenue-
raising capacity as compared to
similarly rated peer countries.
Fortification of the government's
fiscal position provides a buffer
against a rise in public
indebtedness due to shocks such as
the ongoing global coronavirus
outbreak; track record of prudent
economic and fiscal management,
In contrast to strong policy effectiveness,
and a robust banking system,
Baa2 governance weaknesses especially with regards
16 July 2020 contribute to stable access to
“stable” to perceived constraints on civil society and
funding at moderate costs and
the judiciary, continue to weigh on the rating.
support prospects for fiscal
consolidation and debt
stabilization after the shock
subsides; Proposed legislation
aimed at facilitating the near-term
recovery from the pandemic
shock.
Despite the significant rise in debt because of
Structural credit difficulties
the pandemic shock, the Philippines has
include a low per capita income
sustained its strong debt affordability
and some constraints to political
compared with its Baa2-rated peers. However,
and legal governance, which is
elections scheduled for 2022 raise uncertainties
contrasted by strong policy
regarding the outlook for reform. A greater
effectiveness; Pandemic risks have
deterioration in fiscal and government debt
weighed on the Philippines'
Baa2 metrics relative to peers or an erosion of the
26 July 2021 economic recovery, delaying fiscal
“stable” country's external payments position that
consolidation and raising risks of
threatens liquidity conditions could lead to a
long-term economic scarring;
downgrade. The reversal of reforms that have
Despite the significant rise in debt
supported prior gains in economic and fiscal
because of the pandemic shock,
strength, as well as a substantial deterioration
the Philippines has sustained its
in institutions and governance strength would
strong debt affordability compared
also be negative.
with its Baa2-rated peers.
Sources: Excerpted from various Moody’s reports (www.moodys.com).

No single post-EDSA President had the political capital and time to put together all the
reforms all at once. Clearly, stronger economic outcomes were produced and sustained over time
often by navigating difficult reforms over several administrations. Nevertheless, one should
acknowledge here the latent impatience and growing resentment by segments of the population
that have been harmed by the reforms and/or those parts of the population that have not directly
benefited (yet) from the reform process.

From the brief summary provided here, it becomes clear that social safety nets may have
been introduced rather late, whereas economic liberalization reforms to enhance competition

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appear to have been frontloaded. This is a recipe for unequal outcomes, which when tapped by
opportunistic populists, can easily lead to backlash.

In short, a narrative of the corrupt and anti-developmental nature of the Marcos regime is
insufficient. We need to understand the context of the populist push-back and attempts to re-craft
the narrative of the Marcos era vis-à-vis the slow and uneven progress of the past three decades.
This could help reframe the development narrative away from populist rhetoric and towards a
shared sense of institutional reforms and inclusive development in the post-EDSA era. Many of
the economic reforms that would liberalize, privatize and de-regulate important sectors of the
economy also planted the seeds of inequality which lingered and now threatens the reform
narrative. Those same unequalizing forces likely reinforced some long-lived business and political
oligarchs, as well as ushered in an era of new cronies emerging (Mendoza 2020). Reformists took
steps to liberalize the economy, but managed very little progress to liberalize the political system.
The latter was quickly captured by political clans that sought to concentrate power among family
members. This political inequality created the conditions for lopsided development outcomes,
where the country began to grow with stronger wealth creation; while also managing very little
inroads in addressing social injustice and inequality. Unsurprisingly perhaps, the main threat
comes from populists who pitch the same anti-oligarch and whole-of-system reform that seduced
so many Filipinos to believe previously in Marcos’ promise of Martial Law.

3. Cronyism and Oligarchy Today

While Martial Law provided a golden opportunity to counter then long-lived business oligarchs
by introducing economic reforms, these very same reforms combined with the monopoly of power
under Martial Law easily created opportunities for crony capitalism and fattening a new set of
oligarchs. Attempting to differentiate a mere crony (who colludes with politicians who happen to
be in power) from an oligarch who may demonstrate longevity across various political
dispensations, it becomes clear that while some of the Marcos cronies eventually faded (e.g.
Herminio Disini who fled to Europe, and Dewey Dee who sought asylum in Canada), there were
those who did remain influential even throughout the post-EDSA administrations (e.g. Lucio Tan,
Danding Cojuangco). Partly because of the acknowledged failure to recover much of the ill-gotten
wealth, some of the cronies parlayed that wealth successfully into business—some of which

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continued to rent-seek, while others graduated into somewhat more competitive ventures. There
are of course the political clans themselves, many of whom have demonstrated resilience and
staying-power in a political system that is still largely underdeveloped (e.g. the Marcos political
dynasty).

Since the Marcos years, and notwithstanding the reform process, the risks of cronyism and
oligarchy did not totally disappear and only evolved over time, challenging reformists to continue
to strengthen institutions through innovations that would match the changing nature of the political
and economic landscape. It is critical to acknowledge here that these risks never totally disappear
and most developing and even modern democracies with growing economies will need to continue
the task of mitigating these risks and rebalancing power with accountability (Pei 2016; Malik et
al. 2019).

As regards the Philippines, the road to economic and institutional recovery has not been a
smooth one. The removal of the dictator left behind a governance infrastructure that needed (and
still needs) to recover from a deep culture of corruption and rent-seeking. Reformists have been
trying to overcome this with institutional reforms during the post-EDSA period, but corrupt
political leaders and predatory bureaucrats continued to try to capture and undermine institutions.
Table 4 briefly outlines examples of cronyism and corruption cases that help to illustrate how
political connections continued to drive collusive rent-seeking activities even after the dictatorship
ended. Examples include a privatization scandal that took place during the Ramos administration,
a high-level bribery case under the Estrada administration, an over-priced telecommunications
infrastructure project under the Macapagal-Arroyo administration, a pork-barrel embezzlement
scandal involving several Senators that took place under the second Aquino administration and
most recently, over-priced procurement deals done as part of the Philippines pandemic response.
It is important to qualify here that while corruption opportunities persisted across the post-EDSA
administrations, some administrations did manage to signal a level of good governance that
emanated from the top political leadership: President Corazon Aquino, President Fidel Ramos and
President Benigno Aquino III, in particular.

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 The recurring theme of government contracts in infrastructure and procurement, despite
numerous legislative and institutional reforms in this area, simply emphasizes how cronyism
adapts and corruption risks tend to evolve. These examples are not exhaustive. Yet, arguably, these
examples of crony capitalism have fortunately not reached the near system-wide crony capitalism
level practiced under Martial Law. That level of cronyism was so extensive that it nearly
bankrupted the Philippine government and led to a debt and economic crisis. Healthy macro-
fundamentals and sustainable debt management (at least pre-pandemic) appears to be among the
major reform accomplishments successfully sustained, as noted earlier.

As noted in the previous section, risks of a system-wide state capture are likely far reduced
by the reforms of the post-EDSA period—for so long as the conditions of centralized political and
economic power are not returned under a Martial Law and dictatorship scenario. Nevertheless
these cases illustrated in table 4 are sufficient in number and importance that they can easily erode
the public’s appreciation of progress in re-building and strengthening economic and political
institutions. Unsurprisingly, perhaps, this also opens the door to critique the post-EDSA track
record and reintroduce (and re-craft) the narrative of the Marcos dictatorship.

Table 4. Examples of Cronyism and Corruption in the Post-EDSA Period

Corruption Administration Details
Case
Amari Scandal Ramos In April 1995, a controversial deal awarded Amari what was then the
Administration country’s biggest real estate project, involving the acquisition of 158
hectares of reclaimed land to be converted into ‘Freedom Islands’, as part
of the Ramos administration’s Manila Bay Master Development Plan
(MBMDP). A year later, a publicly listed company Centennial City
assumed complete control and ownership of Amari through a stock swap
and later on profited from stocks by selling the idea of a highly progressive
new city in Manila Bay with skyscrapers, a golf course, and casinos.
Investigations in the Senate concluded that the government was defrauded
of billions of pesos in the deal. George Triviño, a convicted smuggler, and
some of the top leaders in the ruling LAKAS-NUCD coalition were
allegedly involved in the deal.
Estrada Plunder Estrada After he was ousted from presidency, Estrada was charged at the
Case Administration Sandiganbayan for plunder and perjury. The plunder case consisted of
four separate charges: the acceptance of Php 545 million from jueteng, the
misappropriation of Php 130 million in excise taxes from tobacco,
receiving a Php 189.7 million commission from the sale of shares of Belle
Corporation, and owning around Php 3.2 billion in a bank account under
the name Jose Valerde. In September 2007, Estrada was acquitted of
perjury but was found guilty for plunder. He was sentenced to reclusion
perpetua with the penalties of perpetual disqualification from public office

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 and forfeiture of ill-gotten wealth. In October of the same year, President
Gloria Macapagal Arroyo granted executive clemency to Estrada. Estrada
continued to run for government positions and even served as Manila
mayor for two consecutive terms.
NBN-ZTE Case Macapagal- In April 2007, former President Macapagal-Arroyo approved the
Arroyo development of the National Broadband Network (NBN) project through
Administration loans amounting to $329 million from China. Later on, it was revealed
that Commission of Elections (Comelec) chairman Benjamin Abalos was
involved in brokering the overpriced project. After a Senate investigation,
President Macapagal-Arroyo suspended the NBN project and canceled it
during her state visit to China.
Pork-barrel Aquino2 In July 2013, the Philippine Daily Inquirer released an exposé on an
Scandal Administration alleged Php 10-billion scam engineered by Janet Napoles that swindled
billions of government funds through more than 20 dummy non-
governmental organizations made to appear as recipients of the PDAF. A
month after, the Commission on Audit released a report stating that at least
Php 6 billion were released to dubious NGOs, and that nearly 200
lawmakers were involved. In September, the Department of Justice filed
plunder, graft and corrupt practices, malversation, and bribery charges
against former Senators Ramon Sevilla Jr., Juan Ponce Enrile, and
Jinggoy Estrada; Napoles; and over 30 others for their involvement. A
year after, the Ombudsman also filed separate plunder charges against
Napoles and the three senators. Arrest warrants were issued for Revilla,
Enrile, and Estrada and they surrendered to authorities. Nearly eight years
since, the issue has not yet been laid to rest. With multiple more cases
pending in court, principal suspect Janet Lim Napoles made headlines
after she was handed another guilty verdict in relation to the scam in early
February 2021. Meanwhile, all three senators have been released and have
continued to run for government positions.

PhilWeb Case Duterte Shortly after he took office in mid 2016, President Duterte went on a tirade
Administration against oligarchs in general and Roberto Ongpin in particular, generating
a swift response from the financial market. Following the President's
comments on the ills of online gambling in early August 2016, and given
the subsequent non-renewal of its franchise, the share prices of PhilWeb
(Ongpin’s online gaming company) plunged resulting in paper losses of
about Php 14 billion by late August. In October, Roberto Ongpin sold his
53.76 percent stake in gaming technology provider Philweb Corp. to
Gregorio Araneta (husband of Irene Marcos, daughter of former President
Ferdinand Marcos) for P2 billion. Afterwards, PhilWeb’s franchise was
renewed in turn resulting in significant profits for the new owner. The
Marcoses were seen to have supported President Duterte’s campaign.
Manila Water Duterte President Duterte again went on a tirade in late 2019 against Manila’s
Case Administration main water concessionaires. This was after a recent decision by an
international arbitration tribunal that the government should pay Manila
Water and Maynilad for the losses they incurred when they were
prevented from raising water rates in the past. At least one private sector
official has stated that the decision to waive the ruling was a direct result
of the President’s public statements. This sent the private sector into panic.
During the week of Duterte’s tirade, the Philippine stock market lost
almost Php 130 billion. Eventually, Philwater Holdings Company sold its
preferred shares in Manila Water to Trident Water Co. Holdings, Inc.
Trident Water Co. Holdings, Inc. is owned by Enrique K. Razon who is a
close ally of the Duterte administration.
Pharmally Duterte Pharmally, a company registered in late 2019 with Php 625,000 in
Plundemic Case Administration capitalization, edged out other suppliers for contracts amounting to Php

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 8.7 billion funded by the Bayanihan 1 and 2 laws which granted President
Duterte emergency powers to respond to the pandemic. It was the biggest
amount of contracts awarded and a Senate investigation later revealed that
key actors in the Pharmally deal are supporters of the Duterte
administration.
Excerpted from the following sources: Coronel and Tordesillas (1998); Perez (undated); Llanto and Chavez
(2008);Limpot (2021); Mendoza (2016b; 2019); Ochave (2021); Buan (2021).

Fifty years after Marcos’ Martial Law, historical revisionists are trying to re-shape the
narrative to paint the picture that those years of crony capitalism in the 1970s and 1980s were
actually the “golden age” of the Philippine economy. Part of their success appears to tap into the
still simmering disappointment that cronyism and oligarchy continues to thrive, shaping both the
economic and political future of the country. A closer look at the evidence requires a more nuanced
interpretation of the economic governance reform history.

Persistent poverty and high inequality, along with the rise of many “mini-dictatorships” by
political families across the archipelago provide a strong reminder that the economic and political
reform agenda is not yet complete. Hutchcroft (1998:22) observes that “We find in the Philippines
not a fixed aristocracy, but rather a social group that is based on wealth and that changes over time.
[…] Unlike an aristocracy, an oligarchy has little stability in its composition; there is a constant
stream of new entrants as new wealth is created. As a system of government, oligarchy is rule ‘for
the benefit of the men of means’ not rule for the ‘common good’.”

While legislative and institutional reforms have helped to improve economic governance—
notably in debt management, procurement and monetary policy—the threats to regulatory capture
are still present, and new forms of rent are emerging for a fast-growing (at least pre-pandemic)
emerging market economy like the Philippines. The geo-political landscape is changing as well.
Even as Marcos sought to take advantage of Western banks trying to recycle petro-dollars, a similar
recycling of Chinese financial resources could offer present day Philippine leaders lucrative
opportunities for development investments and even personal gain (Table 5).

Table 5. International Economic Environment, 1970s vs 2020s

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 Source: Mendoza and Cruz (2017).

In addition, globalization, rapid advancements in technology and the effects of aggregate

shocks (like the COVID-19 pandemic that erupted in early 2020) are all likely to exacerbate
longstanding challenges in inequality. The latter, in turn, proves to be an enduring factor behind
the struggles of oligarchic societies. Ultimately the oligarchy is both a cause and effect of the
structural inequality in the Philippines (Rivera 1994). It is critical to tackle the issue of inequality
and oligarchy as these are tied to the same governance malaise.

As elaborated by a growing number of studies,7 inequality in its different forms (most

notably in the political sphere and in the form of political dynasties) could derail economic growth
and development by creating the conditions for impunity (with weaker checks and balances) and
severe political instability. Political dynasties have proliferated in the post-Marcos era, perhaps
because economic liberalization reforms were not matched by political liberalization (Mendoza
2020; Teehankee 2011; see also Table 6). The inequality in political power is particularly
pernicious—as demonstrated by Marcos’ Martial Law, the concentration of power in the hands of
one political family and their cronies could undermine governance and development. The
empirical evidence suggests this is true at the national as well as the local levels (Mendoza 2012;
Mendoza et al. 2016).

7
See for instance Balisacan and Fuwa (2004), Dulay and Go (2021), Hollnsteiner (1963), McCoy (1994),
Mendoza et al. (2016), Querubin (2016), Rivera (1994) and Teehankee (2001).

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 Table 6. Fat Dynasties in the Philippines from 2004 to 2019.

Source: Ateneo Policy Center Dynasties Dataset.

As a rejoinder, there are several crucial final points to convey here. First, economic and
political institutional reforms have been progressing in the post-EDSA period; and in fact investors
have begun to change their perception of the Philippine economy and the state of economic
governance resulting in the credit upgrades. This is already an important—but still incomplete—
victory. Relative success in terms of resuscitating the Philippine economy and recovery from the
debt-fueled crisis of the Marcos years; and yet still wanting because poverty and inequality
reduction as well as true “people empowerment” for the vast majority of Filipinos in the political
and economic senses remains elusive. Populists can prey on this latent demand for fairness and
inclusion, as the country continued to grow in wealth (though perhaps sidetracked temporarily by
the pandemic) a vast majority of Filipinos were emancipated from poverty but not from continued
vulnerability to shocks and crises.

Second, advancing inclusive economic and political institutions (ala Acemoglu and
Robinson) is consistent with the reform agenda set forth by the 1987 Constitution. The challenge
seems to be that political reforms need to catch up with the economic reform agenda that appears
to have taken precedence in the past three decades or so (Yusingco et al. 2021). Relative progress
in economic reforms coupled with a deep lag in political reforms could be part of the reason why
political and economic inequality may have been tolerated and left to fester in the post-EDSA
period (Mendoza 2020). The wheels of justice and accountability also grind very slowly, as the

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government admits it was only able to recover a mere fraction of the estimated wealth stolen by
the Marcoses and their cronies. One should note recent progress, however, including the June 2021
decision of the Supreme Court ruling that Disini owes the government PhP 1.1 billion in damage
due to the BNPP (AP 2021), and the September 2021 ruling of the Sandiganbayan for Traders
Royal Bank (now Royal Traders Holding Co., Inc.) to pay the government roughly US$25 million
in ill-gotten wealth (Navallo 2021). Unfortunately, and as argued in this paper, this protracted
delay in actual accountability (e.g. decisions on corruption cases) and in setting up systems of
accountability (e.g. political reforms) likely set the stage for the populist push-back on this same
post-EDSA progress. At its extreme, there could be a reframing of the Martial Law years that could
revive authoritarian tendencies, once again seducing a population disgusted with the slow progress
against inequality and social injustice in Philippine society.

And finally, it is critically important to impress upon the public and notably the youth that
any lingering weaknesses in economic and political governance will require continued institutional
reforms—and any historically revisionist ideas to bring back the Martial Law years fly in the face
of lessons learned and what needs to be done as far as inclusive economic and political institutional
reforms. Well over 35 years after the EDSA revolution, one can understand why many Filipinos
may be losing patience with the reform narrative that was developed as part of that pro-democracy
revolution. Slow reduction in poverty, festering inequality and chronic vulnerability to crises
(including the 2020-2022 COVID-19 pandemic) all set the stage for opportunistic historical
revisionism.

4. Some Notes on a Reform Agenda

Thus far we have reviewed the dynamics of cronyism under Martial Law, described the post-
Martial Law economic reform period, and discussed the lingering governance issues that pervades
the post-Marcos presidential administrations. What insights can we obtain from these discussions,
to help us sketch a reform agenda that can have a decisive social impact? We can view cronyism
through a systems lens, by uncovering its dynamics in the context of the distinction between the
economic and political spheres. This uncovering may help us begin a discussion on the possibility
of systemic interventions that can address the vulnerability of the worse-off to populist rhetoric,

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as it is embedded in the so-called historical revisionism of the Marcos Martial Law years. How
can we view cronyism through a systems lens?

Every system has a purpose, a goal for and around which it self-organizes. This means we
can explain and analyze a system according to its end or final aim, a kind of “teleology” of systems.
This is helpful when we examine the purpose of a variety of systems, from bodily (cardiovascular,
nervous, musko-skeletal), to organizational (finance, marketing, operations departments), to global
(national and transnational agents, environmental, especially ideological) systems. Often the key
to understanding the myriad elements of a system, as well as its functional parameters, input and
output flows, feedback loops, and self-organizing and -adapting routines, is by identifying its
purpose, its ultimate aim, for which it maintains its stability in self-perpetuation.

However, in the context of examining the teleology of systems, Stroh (2015) asserts that
in most cases, a system’s “purpose is often not the one we want the system to achieve”. This means
that systems have a stated or intended purpose, but often, its actual outcome is otherwise. What
we claim a system is intended to accomplish is not always what it actually accomplishes. This is
associated with the often-cited “unintended consequences” of systems. By first stating the value
of identifying the purpose or goal of a system in order to understand it better, and yet pointing out
the phenomenon of how systems are often entangled in the dichotomy of appearance and reality,
how can we come to terms with cronyism in our recent history?

In an interesting reversal of Marx’s critique of the so-called “political economy”, there is

a growing scholarly interest in what has been perceived as an “economic politics” (Pinzani, 2005).
This perception begins when scholars consider the two spheres of politics and economics as
discrete and thus independent, or at least “independent” in their exercise of power.

At the beginning of this paper, we identified cronyism with collusion, that the capitalist
and the politician bargain for mutual benefit, to gain wealth and political power, respectively. As
shown in sections 2 and 3 above, the staying power of business oligarchs has been matched by the

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similar longevity of political dynasties. Thus we framed the collusion between the two spheres as
a constant re-balancing of their respective deployments of power.8

In contrast to this framing of the collusion, certain scholars in a variety of fields

(economics, international relations, global justice) have made the observation that the two spheres
are, in fact, melding. In this view, the independence of political power is undermined, to reveal
that there is no de facto interaction between the exercise of economic and political power, as if the
two were separate and could interfere with each other, in a balancing of power between the
capitalist and the politician. This view does not even settle on the claim that politicians have
become complicit to the economic interests of capitalists. Economic politics goes beyond the
idiom, “he who pays the piper calls the tune”, as if the subordination of government policy- and
decision-making to capitalist interest could adequately explain the “decline of any autonomous
political sphere” (Hardt and Negri, 2000). Thus Pinzani (2005) cites Habermas “to show [that]
capitalism tends by its very nature to submit every other power (political power, communicative
power, etc.) to economic power, not in the sense that politicians become controlled by executives
(conspiracy theory), but in the sense that politicians start thinking like executives and not like
politicians. It is not just economic interests that take over, rather it is an economic vision of things
(of individual life, of Nature, of international relationships, etc.) that becomes predominant over
other possible perspectives” (Pinzani, 2005).

In this context, there is little collusion that occurs between capitalists and politicians. Or at
least, we can claim that whatever collusion happens can be accounted for by politicians who think
like capitalists, to embody an all-encompassing “economic vision of things.” According to Pinzani
(2005), “one can no longer speak of a separate political sphere since politicians, statesmen and
officials are nothing but administrators following the commands of the economy” [so much so

8
There is a distinction between economic and political power that Norberto Bobbio (as cited by Pinzani, 2005)
offered: (1) economic power is the possession of scarce resources so that others who do not have them are
compelled to behave in a certain way, and (2) political power is the supreme power that can coerce others, often
using physical force (detainment or arrest, military deployment, among others), to behave in a certain way. Unlike
economic, ideological or religious power (influence and control of knowledge that is normatively deployed),
political power is purely instrumental, and thus subject to absorption by the other kinds of power, which have
objects or ends outside of themselves (such as scarce resources, ideological ends, et cetera). While all these
deployments are, by their nature as systemic, self-perpetuating, it is political power that is especially susceptible to
being co-opted by the other kinds of power.

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that] “States conceive their own task exclusively in doing everything to promote the economic
growth of the country and to attract foreign investors—which is true not only for economically
developing countries but also for industrialized ones” (Pinzani 2005). There is an important case
to be made here, when we associate post-Martial Law economic policy reform with the general
claim that national governments, especially their economic managers, have been largely pre-
occupied—especially in the era of globalization—with economic growth and foreign investments,
as far as we have shown the evidence above.

Returning to a systems lens, we can parse the dichotomy of the political sphere to show
that its explicit intention, insofar as the legitimacy of politics and its legal structures are conceived
of in terms of promoting the “public good”, is not the same as its actual deployment, which springs
from an economic politics, which is the perpetuation of capitalist interests. It is, of course, subject
to debate whether or not economic politics could, after all, be “good” for the public good, but that
discussion requires another set of data, to elaborate on and analyze. For our purposes in viewing
cronyism systemically, however, we have an adequate explanation for the longevity of both
business oligarchs and political dynasties: the Philippine economic and political systems—in
whichever variation of the melding that embodies an economic politics—perpetuates oligarchies
and dynasties, to account for how cronyism adapts and corruption risks evolve across the post-
Martial Law administrations. While Marcos displaced long-standing oligarchs and systematically
established his own set of crony capitalists, we could argue that post-Martial Law administrations
allowed a systemic entrenchment of capitalist interest, with the economic worldview that
diminishes the political sphere.

If we agree, at least to the claim that the political sphere has been co-opted for economic
purposes, then we can offer a systemic account for the persistence of poverty and high inequality
in the Philippines. Table 3 above showed evidence for the strong economic outcomes that were
produced and sustained over time by post-Martial Law administrations. But political reforms,
especially the kind that has emancipatory impact on the worse-off in Philippine society, have
lagged, not because economic reforms have been prioritized in the interim for recovery purposes,
but because there is no genuine incentive in the Philippine economic and political governance
system to undertake social reform in an economic politics.

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 This becomes clear when we use Robert Klitgaard’s (1988) formula on combatting
corruption and promoting better governance. He argued that corruption and impunity likely takes
place under a 1) monopoly of power, and 2) extensive discretion on how to use that power, as well
as 3) weak accountability mechanisms. Martial Law was an amplification of this formula since the
dictatorship did not simply centralize power to the President and his cronies, it also gave enough
leeway for ad hoc decisions on how it could be used in favor of those cronies (in the guise of
industrial policy). The shutdown of major institutions of accountability such as the Philippine
Senate and corruption in elections reflected the last deteriorating variable. Intersecting then, these
very same areas were strengthened in the post-EDSA period, as reviewed in this paper. A reformist
then has to reconcile with the irony that Klitgaard’s formula uncovers: a co-opted deployment of
political power for economic interests that will perpetuate itself as the impunity of cronyism, and
thus will resist (or at most will only pay lip service to) the accountability mechanisms that it is
supposed to endorse and strengthen.

Several recent reform assessments (e.g. Atienza and Cats-Baril 2020; Mendoza and
Olfindo 2018; Yusingco et al. 2021), note how the reform agenda underpinned by the 1987
Constitution is not yet completed. Key political and governance reforms that have been
longstanding and should therefore be prioritized include political party reform, freedom of
information and dynasty regulation, all of which help to rebalance political power away from the
monopoly of political clans (Table 7).

Table 7. Legislative Reforms Deemed Critical and their Status as of 2021.

Reforms Area of the Status First Filed in Congress
Constitution
Supported
Political Party Real competition Filed by the 17th First filed during the 12th
Reform Law among parties, Congress but not yet Congress (2002)
representation of passed
national interest
Freedom of Accountability, Filed by the 18th First filed during the 14th
Information Law minimizing Congress but not yet Congress (2010)
corruption, right to passed
information public
concerns
Anti-Political Equal access to Filed by the 18th First filed during the 8th
Dynasty Law opportunities for Congress but not yet Congress (1987)
public service and passed

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 prohibition of
political dynasties
Source: Yusingco et al. (2021:9-10).

To conclude, Acemoglu and Robinson (2012) argue that “Inclusive economic and political
institutions … are often the outcome of significant conflict between elites resisting economic
growth and political change and those wishing to limit the economic and political power of existing
elites.” Reformists therefore face a constant struggle to rebalance power in favor of economic
growth that is inclusive. Though the Philippines of today is far from the “sick man of Asia” and
economic basket-case left behind in the wake of the Marcos dictatorship, reformists must continue
to redefine that balance of economic and political power among the country’s elites. This begins
by sketching a reform agenda that comes to terms with the insight that the traditional distinction
between economic and political spheres has become an inadequate starting point for explaining
the perpetuation of power, which is at the heart of cronyism. Arguably, with certain exceptions,
the Philippines has not had a genuine statesman or stateswoman in the classical Greek sense, a
politician who, among other characteristics, governs for the public good. On the one hand,
Returning to the powerful elite during the Martial Law years—notably the Marcoses themselves—
would seem an odd choice to look for this statesperson. On the other, one can understand the
growing disenchantment of the population if the post-EDSA period continues to produce flawed
leadership options as the economic and political spheres meld, bringing the nation’s elite further
away from the work of the public good.

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