Sta. Ana coordinates Action for Economic Reforms. This piece was published in the September 13, 2010 edition of the BusinessWorld, pages S1/4 to S1/5.

Jueteng once again is headline news. Will the P-Noy administration be shaken anew, with the political effects of the hostage crisis still lingering, in light of the statement of retired Archbishop Oscar Cruz that two of P-Noy’s trusted high-level officials are receiving jueteng bribes?

The answer for the time being is no. The retired archbishop’s information needs verification, and that’s why he can’t even name these two officials who are allegedly on the take. It remains hearsay, and we must take to task the Philippine Daily Inquirer for making unverified information headline news.

Be that as it may, if proven true, P-Noy said: “Regardless who they are, if there is proof they will pay.”

That public officials are corrupted by jueteng money is unsurprising at all as long as jueteng is illegal.

Here’s a real-world story. A relatively honest police officer, with the rank of colonel and whose jurisdiction covered a province, had no choice but accept the jueteng bribe from the gambling lords. If he didn’t accept the money, that meant he wasn’t cooperating with the rest of the bureaucracy—especially the police hierarchy, the local governments, and their principals in national government. By not cooperating with the whole caboodle, he would have been punished—demoted or reassigned elsewhere in a hardship post. It was his calculation that it was better to accept the money, albeit unwillingly, because by his lonesome, he couldn’t have changed the rotten system.

But unlike the incorrigibly corrupt, he used the jueteng money not to enrich himself and live a comfortable life but to finance the under-budgeted operations of his unit like gasoline for the mobility of his troops, maintenance of equipment, and food for the underpaid soldiers. In this sense, the jueteng money improved welfare.

But then, we also have local public officials who are able to resist bribes and fight jueteng. I recall the story of Eddie Dorotan, three-time mayor of the small town of Irosin in Sorsogon and now the executive director of Galing Pook (a non-governmental organization that promotes good local governance). Irosin, during Eddie’s term, was a model town. He implemented comprehensive agrarian reform, which delivered social justice and resulted in income gains for poor farmers. He increased spending for basic services, especially ensuring that children were enrolled in elementary and secondary schools and that families availed themselves of free preventive health care. He made his town a peace zone, getting the cooperation of the Armed Forces and the local police, on the one hand, and the communists and their New People’s Army, on the other hand. And he was able to convince the town, including the gambling lords and gamblers, to stop jueteng operations.

But here’s the rub. The gains were temporary. When Eddie’s term ended, the old, corrupt system of politics resurfaced. And jueteng returned with renewed vigor.

A lesson learned here is that even the most honest, well-intentioned reformer cannot stamp out jueteng permanently. The best practice in one town could not be sustained for the long term. Moreover, such best practice could not be replicated all over the country. After, all the Eddie Dorotans in the Philippines are rare.

In addition, local executives confront a myriad of development problems, and jueteng is not even on top of the list of constraints. A focus on stopping jueteng will drain the resources and energies of local government officials, hindering them from pursuing more important matters like the delivery of health, education and rural infrastructure services. And for the more innovative reformers, jueteng, if legalized, could serve to finance development objectives. (After all, how different is jueteng from the activities of the Philippine Charity Sweepstakes Office and the Philippine Amusement and Gaming Corporation?)

My colleague Mike Alba has this out-of-the-box proposal to mobilize savings and allocate credit for development projects by using the surplus from jueteng. In this manner, even the kubradors become agents of change. Come to think of it, legalizing jueteng also generates revenues for government. Together with the reform of the sin taxes on tobacco and alcohol, taxes from jueteng will help boost the tax effort and thus prevent a fiscal crisis.

We should have learned our lesson from the Prohibition in the United States. Illegalizing demerit goods (in the case of the US, the banning of alcohol consumption in the 1920s and early 1930s) just doesn’t work. The illegal activity will continue to thrive and will be more difficult to control because it has been driven underground. Worse, the illegalization of “sin activities” like gambling, prostitution, and alcohol has the unintended consequence of destroying society’s institutions. For those engaged in these activities will now resort to the use of rules outside the law, thus abetting corruption and other criminal activities.

The moralists argue that jueteng destroys society and impoverishes the poor. This is inaccurate. It is the criminalization of jueteng that contributes to the corruption of our institutions, and bad institutions in turn hinder development and perpetuate poverty.