Butch Abad and Reform Continuity

Those who seek a continuation of the PNOY reform agenda after 2016 have to seek a PNOY clone to run for President.

The more clones the better. The more diversified the pool, the wider the options to select the candidate most able to consolidate and extend PNOY’s reforms.

Butch Abad is someone close to PNOY in terms of ideology, politics, and ethic. And even in the physical realm, they have the common feature of having a bald patch.

Still, what matters is not the individual; it is about the party and values that he represents. But I am getting ahead of my story.

On 7 March 2013, the Ateneo de Manila’s School of Governance and Department of Political Science awarded the Metrobank Professorial Chair for Public Service and Governance to Budget Secretary Abad.

Abad deserves an award or honor beyond his achievements as the Budget Secretary, like the public expenditure management reform and the open government program.

Abad’s role has been much bigger than being the Budget Secretary. He has been a key figure in other important and in fact harder reforms. He was instrumental in the passage of the sin taxes, for example, arguably a most difficult reform to pass.

The stellar roles of the sin tax government champions led by no less than the President together with Secretary Cesar Purisima, Secretary Ike Ona, Bureau of Internal Revenue Commissioner Kim Henares, Undersecretary Jun Paul, Senator Frank Drilon, Representative Sid Ungab, and Representative Dina Abad are not diminished in any way even as we acknowledge the behind-the-scenes work of Secretary Abad. This is a story that at this time can only be written in a personal diary.

Abad’s professorial chair lecture corroborates our reckoning that the Budget Secretary’s concerns are not confined to public spending or for that matter fiscal policy. He identifies “two critical changes” in the second half of the Aquino administration, namely 1) how to make growth sustainable and inclusive and 2) how to prevent policy reversal.

The first question is an old one, but the appropriate answers elude policymakers. The goal is to revive a weak manufacturing; diversify and deepen it to get productive investments and create jobs. In this regard, industrial policy, promoted by the most notable economists, is regaining interest.

One reason that accounts for the weakness of industry is the non-competitiveness of the exchange rate, as the peso continues to strengthen. The Bangko Sentral ng Pilipinas (BSP) has adopted measures to stem the peso appreciation. The situation nonetheless requires bolder measures and stronger coordination between the BSP and the national government.

In gist, the answers to the tough question of how to make growth sustainable and inclusive deviate from standard economics.

Someone in the mold of Butch Abad, an unconventional guy even before he joined government (once a long-haired hippie and activist), is most open to trying bold heterodox approaches to development.

And this hippie is perhaps now losing hair because of the challenge he and the administration reformers confront: how to grapple with policy reversal once PNOY leaves office.

Unconventional views can guide us in seeking answers to sustained inclusive growth and prevention of policy reversal.

But Abad is not the starry- eyed reformer. He is a pragmatic politician, having learned the painful lessons when he was a young idealist member of Corazon Aquino’s cabinet.

That Abad is unconventional and politically pragmatic can make him appreciate the startling evidence as to what explains the economic success of many developing countries especially in East Asia. Alas, success is not predicated on good governance, which has been the anchor of PNOY administration’s gains, including Abad’s public expenditure reforms.

The Kuomintang, the Chinese Communist Party of China, the Communist Party of Vietnam, or the United Malays National Organisation cannot in any way be described as the paragon of good governance.

In a recent paper, Philip Keefer, a lead research economist in the World Bank, concludes that the sustained growth in developing countries, especially in East Asia, is best explained by resolving the collective action problem through the political party. Here, unfortunately, so-called good governance (like having competitive elections) has not been a predictor. Rather, the institutionalization or endurance of a political party (that is, a disciplined one with a program or vision even if the party is corrupt) predicts investments and delivery of public goods.

In the introduction of Keefer’s paper titled Collective Action, Political Parties, and Pro-Development Public Policy (2011), he argued: “The very fast growing non-democratic countries of the region—and the slowest growing democracies—signal that democratic institutions are essential neither to persuade political decision makers to pursue growth nor to convince investors that government will not expropriate them.”

Keefer’s main arguments are: competitive elections and having a democratic leader are insufficient; and political parties are crucial.

For developing countries, it turns out elections are not associated with development and investment outcomes. Perhaps, winning elections in some developing countries does not necessitate a strong, disciplined organization. But this creates free-rider problems and weakens collective action.

Political parties on the other hand address the collective action problem, for their leaders and members can make credible commitments.

Worth exploring then is having a dynasty of a disciplined, programmatic political party so long as the party is elected in honest and fair elections.

The approach now is to institutionalize the reforms to prevent policy reversal. But a bad president a la Marcos or Arroyo can destroy the reforms. If we want enduring reforms, if we want policy continuity, then build programmatic political parties, and put one into power.

We nevertheless persevere to make the model of good governance work in the context of what Douglass North calls “limited-access order.” This is a distinct model that PNOY, Butch Abad, and fresh stalwarts like Jun Abaya, Kim Henares, and Sid Ungab can contribute to real-world development.

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