Last Friday, I attended a symposium entitled ‘Will Elites Allow Reform: Property Rights Issues in the Philippines’ at the UP School of Economics. One of the speakers, Prof. John Nye of the George Mason University, argued that a necessary condition for economic growth is ending the vicious cycle of vindictiveness amongst the elite fractions in the country. He said that if those in power are (deadly) sure of being punished by incoming elites, the latter will cling to power by all means. In the end, these elite struggles will harm the prospects of economic growth.

UP SE dean Noel de Dios invited me to join John and others to dinner after the symposium. On our way to Trinoma, we mulled on the possibility of ending vindictiveness amongst elites and concluded that it was a problem of ‘credible commitment’. Absent a third party enforcer, how will the ‘ins’ be assured that the ‘outs’ will not punish them when the former were the new ‘outs’? Which led us to property rights issues.

The property rights system of the country is a product both of its colonial history and developments over the past few decades. The Spanish colonial state sought to impose property rights regimes that were alien to those previously instituted by the indigenous peoples of the archipelago, which included stewardship, usufruct, and communal ownership. In the process, massive asset theft typical of all colonial ventures occurred in the country. The main object of theft and ownership then was arable land. While resolving the ownership of the so-called ‘friar estates’, the American colonial state also introduced the distinction between public and inalienable land and privately-owned and alienable real estate. This had the further effect of legally disenfranchising indigenous peoples from their land. The 1946-1972 post-colonial state continued these Western-originated property regimes even as the asset structure diversified over time. In general, access to political power guaranteed security of property rights and elites at various levels consolidated their political and economic positions.

Up to the eve of the declaration of martial law in September 1972, the property rights of rival elite factions were generally secure regardless of the political cycle’s outcome. Ownership rights were not extinguished by an electoral loss. The elites were organized into two political parties that alternated in power at the national level. These parties were roughly at par with each other in terms of power and resources. The ability of an elite faction to regain power in the next election deterred the faction in power from erasing the property rights of the ‘outs.’ Elite factions, therefore, were prevented by the possibility of electoral defeat from disrespecting the property rights of their rivals. The default behaviour was for the ‘ins’ to plunder the state treasury and cash in on the ‘economic rents’ created during incumbency instead of confiscating the property of the ‘outs.’ Notwithstanding a constitutional provision for two presidential terms, no president has been able to win re-election until 1969 when Ferdinand Marcos won an unprecedented second term.

The balance of power between the rival elite factions shifted decisively in favour of his faction after Marcos’ unprecedented re-election in 1969. He monopolized political power through the declaration of martial law in September 1972 and proceeded to violate the property rights of his political opponents. The demise of the dictatorship in February 1986 saw the post-Marcos elites attempting a restoration of pre-martial law arrangements with respect to property rights and access to political power. The properties of the anti-Marcos elites (such as the Lopez, Lopa, and Jacinto families) were returned to their former owners while a new constitution adopted in 1987 provided the ground rules for political contestation and all but forestalled the possibility of new dictatorships. After an initial lock-out period, even the Marcoses were allowed back into the country and managed to win electoral posts or stand for elections. Despite the formation of a presidential commission mandated to recover the so-called ill-gotten wealth of the Marcoses and their cronies, these properties got entangled in a quagmire of unresolved law suits filed within and without the country.

The violation of elite property rights by Marcos during the dictatorship’s heyday is like a genie let out of the bottle. Despite all efforts to date, the mess created by the initial massive cancellation of property rights has not been sorted out to satisfaction. The ownership of substantial portions of major Philippine corporations (including the top-ranked San Miguel Corporation and the Philippine Long Distance Telephone Company) remains contested. The fall of the dictatorship also led to the recognition of new asset claimants—the thousands of human rights victims who were tortured or murdered by Marcos’ security forces and the coconut farmers disenfranchised by the so-called coconut levy. The claims of the human rights victims against the Marcos estate had been repeatedly recognized by US courts while the Philippine Supreme Court had frequently ruled that the coconut levy was a public fund and must be taken from the control of businessman Eduardo Cojuangco, who used the money to wrest control of the country’s premier business firm—the San Miguel Corporation (SMC). To date, however, none of these judicial decisions have been enforced since rival claimants have managed to secure restraining orders against them.

The discussion so far indicates that from 1946 to 1972, there was an institutional mechanism that ‘tamed’ the relations between rival elite fractions in the Philippines. We have shown how such a mechanism was shattered by Marcos. We pointed to the difficulty of repairing the ‘property rights mess’ of the martial law period even after the dictatorship’s demise. In my next blog, I will discuss why the cycle of vindictiveness amongst Filipino elites seems to be more intractable during the post-Marcos period. However, I also promise to answer the questions raised by Raul Pangalangan and Rex Ubac re my blog on GMA’s supposedly last SONA. Patience!

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