In the late 1990s, the rather esoteric concept of rent-seeking has earned an exalted place not only in academic discourse in the Philippines but also in its political lexicon. It has invaded no less than the State of the Nation address of President Fidel Ramos and is a familiar theme in the various speeches and articles of his national security adviser, Gen. Jose G. Almonte. Rent-seeking has emerged as a staple explanation for Philippine underdevelopment, a status previously enjoyed by a more primitive but related concept–graft and corruption. Notwithstanding the concept’s currency, a more rigorous examination may be in order. In this think piece, the right, nay a privilege, to be as venturesome as possible is claimed. The intention is to offer an initial framework by which one can understand how rent-seekers in the Philippines originate, prosper, and “pass away.” Specifically, we intend to probe the question: how are rent-seekers transformed into profit-makers?
Such transformations have been going on within the Philippine economy for quite a time. Empirical studies centered on elite families since the 1960s up the present (Simbulan: 1965; McCoy: 1994) support this notion and had helped firm up the theoretical propositions that follow. Another important but related question is to investigate if the family remains the principal vehicle for either rent-seeking or profit-making. It is our initial contention that there is movement away from purely or mainly relying on the family toward mobilizing other vehicles such as the public office, the private firm, the political party, the Church, etc. Whether this movement away from the family is concurrent with, or even contingent upon the change from rent-seeking to profit-making is another matter to look into.
And lastly, another family of questions will concern the state. In so far as one recognizes the state’s central role in the creation of rents and rent-seeking opportunities, he may equally be interested in the same agency’s role in rent elimination. More particularly, we are interested in finding out which factors will move the state towards this direction.
II. Definitions and Initial Propositions
“Rent-seeking” and “profit-seeking” are theoretical constructs developed by the public choice school, i.e., that group of theorists who specialized in the study of “state failure”, as opposed to the development economic school which specialized in the analysis of “market failure”.
In its simplest formulation, “profit-seeking” is the production or reproduction of economic wealth primarily through economic, i.e., market mechanisms while “rent-seeking” involves the use of non-market, i.e., political, religious, cultural, etc., means to achieve economic ends. The existence or creation of rents is often attributed to state action that artificially restricts or eliminates competition. This action in turn stimulates private actors to attempt inducing government officials to allocate rents in their favor. When a monopoly rent exists in an economy, resources equal approximately to the monopoly rent will be wasted in directly unproductive activities (i.e., lobbying, bribery, political intimidation, etc.) that serves to capture the said monopoly rent. These resources are considered wasted because they could have been employed in more productive ventures. The time and talent that entrepreneurs use in rent-seeking also have alternative uses.
As economic actors realize that extraordinary incomes could be earned with strategic government posts, valuable resources will also be used to capture these public posts. Other social costs include the dampening of the entrepreneurial spirit and the development of a perverse “make-do” culture. Other observers also point out to the wasteful “cat-and-mice” games between rent-seekers and bureaucrats (similar to those played out between central planners and enterprise managers in Soviet-type economies). When government regulations create rents, the normal economic reaction of private actors is to use all means–legal, extra-legal, or illegal–to capture them. In response, governments will formulate and implement more complicated regulations and employ larger bureaucracies supposedly to deter private seeking. All these will simply make the rent opportunities more valuable that private actors are willing to expend more resources to obtain them.
Another inefficiency, identified by Campos (1992), results from the political instability caused by rent-seeking. If battles over capturing the rents result in frequent changes in power among elite factions, punctuated by coups and other irregular means of transferring power, the same elites develop a short-time horizon and long-term investments will be in short supply.
But even the public choice school is not entirely unequivocal about the ill effects of rent-seeking. Buchanan (1989), for instance, cautions us against a mindless worship of market efficiency. He raises the interesting point that since perfect markets are imaginary, how could economists use an alleged outcome (i.e., efficiency) of such fairy tales as evaluation criteria? Indeed, as Wade (1992) pointed out, neoclassical theory admits that even markets that operate without government interference may experience failures due to externalities, uncertain learning gains, complementarities, imperfect capital markets, and economies of scale, scope, and time.
The source of the ambiguity is the distinction made between rent-seeking in a more competitive economic environment and in the context of monopoly. As it is, competitive rent-seeking stimulates aspiring private actors to “waste” resources in bids to capture rents. This means that the more competitive the rent-seeking environment is, the more competitors there will be and the more resources will be frittered away. In an ironical twist, some economists (Vishny and Shliefer 1993) argue that a less-competitive rent-seeking environment is less wasteful. Stretching the logic to its full extent, they believe the least wasteful situation is one where an absolute dictator, who will brook no complaint, will dispense rents as he sees fit.
Consistent with the precepts of neoclassical theory, it is asserted by others that a more competitive situation will reduce the wastes normally associated with rent-seeking and lead to efficient rent-seeking. Ekelund and Tollison (1981: 18-19) acknowledged that rents in a more competitive situation provide “the incentive for resource owners to seek out more profitable (and thereby more economically efficient) allocations of their resources.” Hence, Jomo and Gomez (1995) recognize the possibility that capturing rents stimulates entrepreneurial decisions, including investment in research to cause Schumpeterian innovation.
The ambiguity surrounding the social costs of rent-seeking is stretched almost to breaking point by Baumol (n.d.). He writes about “entrepreneurial rent-seeking” and considered even the warlord as an entrepreneur, albeit of the destructive kind since “alertness to opportunities” is one of the warlord’s prime talents. Baumol correctly argues that the pursuit of profit and wealth is the primary, though not the sole, goal of the entrepreneur. Therefore, while some of his kind may resort to the more difficult route of technical innovation in either product or production process, it is rational for the entrepreneur to realize his goal through the alternative and apparently easier path of reducing competition through rent-seeking.
As formulated, these concepts have clear resonance in Marxist literature. It is quite clear, from a cursory reading of Capital, that Marx saw the transformation of feudalism and the development of capitalism in Western Europe as a movement from rent-seeking to profit-making. In fact, while he acknowledged that the putting-out merchant or even the landlord can accumulate rents and transform themselves into risk-taking capitalists, Marx noted that the really revolutionary transformation is that from master craftsman to capitalist.
Notwithstanding the aforementioned incertitude regarding the social effects of rent-seeking, however, these concepts were transformed by most neoclassical theorists into rigid criteria for evaluating the efficiency of economic institutions. Invariably, rent-seeking is seen as a social bad. Some theorists from other traditions have made use of these concepts in novel though related ways. Ferrer (1988), a major participant in the “mode of production” debate within Philippine radical circles, opined that the Philippine economy was semi-feudal semi-colonial (or non-capitalist) precisely because “the prime mechanism for the reproduction of property is a political mechanism”.
What is clear is that most observers from different intellectual traditions have a largely negative view of rent-seeking. This view must be corrected if not qualified. Apart from recognizing the uncertainties regarding the social costs of rent-seeking discussed earlier, one can examine the disposition of the rents “earned.” There may be resources wasted during the competition for rents. However, the more important question is to investigate if such rents were used to finance conspicuous consumption, political ends, or capital flight; or was put to productive purposes as investment in plant and equipment, research and development, as well as human resource development.
It is argued that the “earning” of rents per se is not detrimental to economic development. In some socio-political settings, the availability of rents can accelerate the process of economic development by spurring capital accumulation and technological change. In others, rents and rent-seeking may result in tremendous wastes (from a social perspective) and discourage productive activity. Favorable conditions and state policy will encourage the transformation of rent-seekers into profit-makers. In the developing economies, the supply of potential profit-makers will most likely come from the existing pool of rent-seekers. In fact, Doner (1991) warns against sharp dichotomizing between the two economic actors. He cites research on South Korean industrialization (Amsden: 1989; Jones and Sakong: 1980; and K. D. Kim: 1976) which indicates that the large industrialists who played a great role in South Korean NIC-hood emerged from the much-maligned rent-seekers and compradors.
The South Korean experience strongly suggests that the efficacious setting is one where the authoritarian developmental state dispenses or assigns rents to favored business groups as long as the latter perform according to international, rather than domestic, market standards. The South Korean state, especially during the 19-year rule of Park Chung Hee, was not only able to discipline labor. It was likewise able to rein in the industrial capitalists through its control of credit. The crisis imperative of regime survival disciplined the Park regime and other key social actors into rallying behind a national industrialization project.
The Philippine experience offers a contrasting picture. During the pre-martial period from 1946-1972, private business groups sought and captured through plunder of the public treasury. The martial law regime of Ferdinand Marcos (1972-1986) centralized power and attempted to assign rents to selected “winners” even as some rent-seeking continued. But both pre-martial law and martial law regimes failed to enforce appropriate economic performance standards on beneficiaries of state largesse. The ‘soft-budget constraint’ that Kornai (1990; 1986) saw as the particular flaw of Soviet-type economies is thus replicated in the country. In response to this softness, Filipino businesspersons behaved in the same manner as Soviet state enterprise managers. They both drew on the state treasury as if it was a bottomless well. Nonetheless, the Soviet state exacted a modicum of discipline from enterprise managers through a perverse reward-and-punishment system imbricated in the Five-Year-Plans (Mendoza 1993).
In contrast, Filipino rent-earners responded to the soft financial constraint in a rational and predictable manner. They used state-provided resources to pursue socially detrimental but lucrative and sensible private interests and objectives, including conspicuous consumption, capital flight, and political vote-buying and coercion. At many occasions, they even manage to pass on to the public account the costs of mismanagement and plunder. The relative weakness of the Philippine state vis-a-vis private particularistic interests in both instances is the strongest reason for this failure (Hutchcroft 1998; 1993).
These qualifications are a fresh corrective to the extreme state-bashing propensities of public choice theorists. Indeed, a long line of observers from Gerschenkron (1962) to Supple (1985) have argued that for the late industrializers in Europe, non-market institutions such as the state played a key role in the needed “primitive capital accumulation” preceding industrialization. The mistaken view that the British state was largely passive or limited to a “night watch man” role is common to many theoretical traditions–from Marxist to liberal.
What led previous observers to err in this case was the clearly obvious and direct role that states played in late industrialization. Weiss and Hobson (1995) challenged this cherished notion and argued that the state played an important role even in pioneering British industrialization, albeit through “non-direct” means. First, in order to finance the military activities befitting the conqueror of the Spanish Armada, the British state borrowed heavily and initiated the ‘financial revolution’ that led to the establishment of the Bank of England and the City of London. War loans provided both the Bank and the City with much of their business during the 18th century. Private investors therefore found a ready customer in the British state and built their capitalist fortunes on national debt. In addition, the ‘blue-water’ strategy also enabled the development of the shipping industry, which in turn stimulated a whole train of other industrial sectors–coal, iron, and steel. Furthermore, Britain’s mastery of the seas helped her foreign trade as well as the City as the navy could now provide a secure environment for her commercial shipping and overseas capital investments. Lastly, government taxation policy led to an active redistribution of money from the poor and non-investing (consumer) groups to the rich and high-saving (investing) groups which in turn stimulated higher investment and economic growth rates.
But a more authoritative source for the argument that the state is necessary for capitalist development everywhere (including England) can be Weber (1968) who developed a full-blown theory of capitalist development (one that explains the emergence of capitalism) rather than a theory of capitalist dynamics (which was the central concern of Marx). Weber’s primary contribution, to highlight the institutional preconditions for capitalist development, is outlined thus: “[But] industrial capitalism must be able to count on the continuity, trustworthiness and objectivity of the legal order, and on the rational, predictable functioning of legal and administrative agencies.” (Weber: 1968, 1065)
The basic precondition for capitalist development is calculability and predictability in the political sphere. The payment of bribes and rent-seeking per se is not harmful to the capitalist entrepreneur. If bribes and rents were predictable or constant, then he will simply integrate them into his cost structure. What harms him is the unpredictability of rents and bribes. Weber reminds us that bribery and corruption have “the least serious effect” when they are calculable, and become most onerous when exactions are “highly variable” and “settled from case to case” with every individual rent-seeker.
What needs to be stressed here is that industrial transformation requires an initial fund to finance it. This accumulation process is necessary and generic regardless of the ideological preference of the change agent even as there may be different modalities for capturing rents. If we take these qualifications seriously, then we should be looking for progressive rent-seekers in the Philippine economy. Obviously, we cannot encounter “pure types” in the real world. What we may likely find are economic agents who produce or reproduce wealth and/or economic status primarily (NOT SOLELY) through market competition. These agents may have behaved differently in the past. The object of future research is to identify these agents, explain the change in their behavior, and determine if the change is irreversible.
Market and non-market rents
It is likewise important to stress that some rents are earned through market transactions. To differentiate them from rents gained through non-market mechanisms, we call the former “economic rents” and the latter “non-market rents.” A holder of any asset in scarce supply can earn economic rents if he offers the said asset either for sale or for use. The classic economic rent is the landlord’s rent. However, land is not the only asset that can command rent. It is quite clear that a brain surgeon will definitely earn rents. Michael Jackson also accumulates rents as he struts around the world. Jackson’s rents are quite permanent despite the combined efforts of all wannabe clones. As a preliminary typology, I designate Jackson’s rents as “creativity rents.”
An innovator or inventor also earns “technology rents,” another class of “economic rents.” Such rents are not permanent, however, if the new technology is open or learnable or capable of being “reverse-engineered.” Virtually, only artists, athletes, and sharp lawyers can earn “creativity rents.”
This point is made to correct errors made by early dependency theorists who believed that all feudal rents are extracted through coercive, non-market means. Again, a careful reading of Capital (Vol. III) will indicate that the extraction of ground rent through naked coercion was true only in early feudalism when the rent form was labor rent. But in subsequent rent forms–namely, rent in kind, and money rent, or even in the metayer system, coercion had receded to the background and the relationship between landowner and cultivator took on increasingly an economic (meaning voluntary exchange) character.
Rents of the decidedly non-economic kind can be earned by those with regulatory or licensing powers. As defined by Buchanan (1980, 7-8), rents are available when the state restricts “freedom of entry” into a market. For instance, the bribe paid by Westinghouse to the Marcos regime in the mid-1970s so the former can wrest a supplier’s contract away from General Electric is a non-economic rent. Thus, non-economic rents can always be earned for as long as governments exist. In the same manner, economic rents can be earned for as long as there is scarcity of assets. In this sense, one can consider all profits to be economic rents since scarcity of resources is the basic economic fact. Which brings us to the conclusion that while rents may be minimized as profit making proceeds apace, rents cannot be eliminated entirely. Even a profit-maker will not hesitate to capture available rents provided net benefits are positive.
It is also important to point out that rent-seeking is rather a pervasive phenomenon. Even relatively marginalized actors can earn rents of both kinds. In the Philippines, for example, what else would one call the incomes earned by the fixers who proliferate outside government offices? Fixers’ incomes may, in a way, be classified as economic rents, inasmuch as the fixers perform an actual service (e.g., waiting in line, getting a signature, etc.) In other cases, however, the rent is of a non-market nature. The clerk who insists on a bribe in exchange for his signature is clearly gaining rent of this nature. This is also true of the police officer who lets one off a traffic violation in exchange of the lagay (petty bribe).
Nevertheless, the existence of market-sourced rents confuses the picture. One may recall the earlier discussions regarding the ambiguities generated by the concept. For our purposes, it would be better to limit the term “rent” to non-market rents while market rents are subsumed under the term “profit.” Furthermore, it is likewise important to distinguish the two concepts further by insisting that a rent-earner simply appropriates values or wealth created by others elsewhere while the profit-earner does so through the creation of new value or wealth. For these reasons, I prefer the terms “profit-making” and “profit-maker” over the terms “profit-seeking” and “profit-seeker.”
What would be the socio-political environment that encourages rent-seeking? A dictatorship is apparently the most fecund breeding ground for rent seeking. There are no effective checks in the exercise of political power in this system. For this reason, the government can readily dispose of the economic resources under its control or could intervene in the economy with relative impunity. As Yoshihara (1988) noted, even a democracy is not entirely unfriendly to rent seekers. In democracies, politicians seek votes by making promises to supporters. If they were elected to office, these promises must be honored so the politicians can count on the same support in the next elections.
What politicians can deliver to their supporters is what they can do with their political power, e.g., a government import license, foreign exchange allocation, public works project, and the like. Being politicians, they cannot do these things by themselves; they need the cooperation of the bureaucracy. Politicians will therefore try to control the bureaucracy to suit these ends. In the process, the bureaucracy’s autonomy is seriously eroded. Appointments, promotions, and tenure in the bureaucracy become politicized and decision making within the bureaucracy becomes highly penetrated by distinct political interests.
We have to look beyond the nature of the political system to identify the features of a rent seeking society. A cursory examination of the Philippines as a rent-seeking society suggests the following features:
a. Widespread poverty, highly inequitable income distribution, and narrow markets;
b. Relative abundance in exportable natural resources;
c. Stagnant production technologies;
d. A high degree of external dependence; and
e. A “rule-prone” weak pork-barrel state.
The first factor sets the stage for the development of natural or structural monopolies that can earn economic rents. The relative abundance of natural exportables induces domestic economic elites to sell to external markets instead of broadening the internal market. The lucrative income they earn from these export products dissuades them from further processing and value-adding, encourages comprador behavior (where one seeks exclusive or monopolistic marketing arrangements), and encourages conspicuous consumption. For this reason, when these natural cash products are exhausted, the rent-seeking economy is in deep crisis. The onset of crisis meanwhile encourages capital flight by rent-seekers (which is not to say that capital flight was absent in the pre-crisis period).
On the other hand, the existence of a foreign patron, who stands ready to bail out the domestic economy for its own strategic reasons, may enable the rent-seeking elites to weather the storm. This has been the case for the Philippines while the US maintained military bases in Clark and Subic. Hutchcroft (1993: 587) suggested that the withdrawal of US strategic interests from the country in 1991 “will bring increasing pressure to re-orient the economy toward internationally competitive modes of operations.”
The obvious impact of stagnant production technologies and technological dependence on external sources is to also stimulate monopolies and deter competition. For one thing, these technologies are expensive and by themselves erect barriers to free entry. If the policy environment is biased in favor of capital imports, then capitalists will continue to operate capital-intensive industries in a labor-surplus economy. If the policy environment is further biased against agriculture and the rural areas (by way of over-valued currencies, credit and incentive biases), then rent-seeking tendencies are further stimulated.
A comment on the state in contemporary rent-seeking societies is in order. These states, in some cases through their chief executives, have gained control over substantial public resources that could be apportioned to favored parties. Hence, these societies are obsessed in trying to make sure that it would be difficult to raid the public purse. At all governmental levels, elite fractions out of power are quite anxious that the incumbents’ control of the public largesse will perpetuate the latter in power. In pursuit of this ‘noble’ objective, these states have a rule for almost everything. Ironically, the proliferation of rules offers ample opportunities for lawyering and rent-seeking. For every rule, there is an implementer, a regulator, who could be lobbied for favorable treatment. Notwithstanding the apparent proliferation of bureaucrats, there is, as Evans (1992: 176-7) reminds us, an under-, not over-, supply of a Weberian bureaucracy. There may be an abundance of regulatory or administrative organizations, “but most have neither the capability of pursuing collective goals in a predictable, coherent way.” One may argue that the states in rent-seeking societies are necessarily weakly institutionalized states. Most of the weak states in the contemporary world are those which had not been forged in the crucible of war between nations.
Having outlined the types of rents and the essential features of the rent-seeking environment, we can now profile the typical rent-seeker. Drawing from his work in Thailand, Turton (1989: 82-3) offers the following portrait of the typical rent-seekers in rural areas:
At the village level they include–and often in the same person, certainly family–larger landowners, commodity dealers, shopkeepers, village officials, some teachers, rice millers, money lenders, owners of small-scale transport and machinery, large-scale employers of wage labor, etc. They derive advantage from their external connections and alliances and from their roles in `linking’ the majority of villagers with state and market structures, above all through relations which enable them to accumulate (or be the first stage in the accumulation of) village surplus through wages, commodity dealing, retail prices, rent and interest. In this they are critically dependent both on the external capitalist sector and on the state-bureaucratic sector. In relation to the latter they are the beneficiaries of various forms of state patronage. Economically this includes not only access to credit, agricultural inputs, and quotas, as mentioned, but also salaries, fees, stipends, per diem allowances for attending meetings, proportions of official budgets, political handouts, strategic economic information, and preferential access to education and health services. In a more political sense they receive offices (which in turn allow for all sorts of nonofficial remunerative opportunities); access to higher-level power holders and the coercive apparatuses of the state, the right to possess weapons; state-backed authority, legitimacy, and prestige; and support for judicial and extrajudicial decisions and actions.
Within the village they are thereby enabled effectively to control and monopolize state-initiated committees, associations, development projects, and so on. Concurrently they can reinforce their politically and economically dominant positions through various forms of noneconomic patronage (social, religious, etc.) which allows them to benefit from association with more traditional and village-derived forms of relationship and legitimacy, and in ways which are often no longer reciprocal, or not to the same extent as formerly, and yet can have the ideological effect of mitigating or concealing the extent of differentiation and contradiction.
Another work on rural Thailand (Turton: 1984, 32) offered the following composite profile of a higher-level rural rent-seeker:
He is a provincial assembly elected representative, owns a transport company, and is involved in sales of agricultural inputs, owns some upland land currently being developed, and is engaged in construction work of all kinds (feeder roads, school buildings, police stations, rest houses, public meeting halls, small bridges, small dams, etc.). He has various district and subdistrict officials “in his pocket.” He receives some provincial funds for his “territory,” from which he may take a percentage before passing it on and subsequently also profiting from contracts. He is a member of the local branch of Rotary (or Lions, Jaycees, etc.). He is also chairman of the local Village Scouts and a generous provider of funds for weapons for the local volunteer forces. He, and perhaps his wife, may also donate to local charities and royally sponsored projects (hospitals for example) for which they may hope to receive state honorifics. He, or more probably his subordinates, may likely call on “gun hands” to do their dirty work for them. So he is involved in both capitalist activity and primitive accumulation, with much use of extra-economic coercion.
While Turton’s portraiture is excellent and accurate even for the Philippines (simply exchange “Civilian Home Defense Force” for “Village Scouts” and “projects of the First Lady” for “royally-sponsored projects”), the typical urban rent-seeker has yet to be profiled.
At the metropolitan apex, McCoy (1994a and 1994b) proposed an exchange model for the Philippines. Provincial warlords deliver their vote banks to rent dispensers in the metropolis while the latter assiduously courts the former to ensure their hold on the central state apparatus and treasury. As explained elsewhere by Sidel (1990: 13), “[T]hese local bosses guarantee local stability and deliver votes to state leaders and national-level politicians in exchange for implicit consent not to contest their local control as well as such resources as access to bank credit, business contracts, protection for vulnerable business enterprises, tax exemptions, public works projects and other pork-barrel funds, and support in election years.”
This model will be accurate only if Philippine electoral politics remain unchanged. The suspension of elections in the first six years of martial rule (1972-1978) introduced some difficulties for it. In addition, developments in the post-Marcos period, especially the 1992 elections, suggest changing electoral trends. These changed trends indicate that the power of provincial vote gatherers may have diminished significantly.
Insofar as rent-dispensing has been decentralized by the 1991 Local Government Code (LGC), the exchange model must likewise be revised. In response to this new policy environment, we suggest that rent-seeking hierarchies be delineated. Under the provisions of the Code, a provincial rent-seeker (vis-à-vis the chief rent dispensers in the metropolis) may himself be a source of rent within his jurisdiction. Among the new powers of local executives provided by the 1991 Code include expanded taxation, borrowing, and licensing powers–all possible sources or rents to be dispensed to favorites.
In addition, the modalities of the post-Marcos pork-barrel system must also be incorporated. As institutionalized in the Countrywide Development Fund (CDF) system, members of Congress (both chambers) gain access to sizable funds (a minimum of P 3.0 billion annually) that could be used with a great degree of flexibility. Invariably, these funds are spent to ensure the solons’ re-election.
Lastly, the revised model must also incorporate the phenomenon of “criminal rents”–benefices granted by the powers-that-be to operate or maintain gambling, prostitution, and other illegal businesses without fear of prosecution. Antonio Sanchez, the sentenced mayor of Calauan, Laguna appears to be a beneficiary of such a right and has apparently disposed of his rents in conspicuous consumption, patronage, and payoffs to appropriate patrons.
Sidel (1995: 20) warned against the inadequacies not only of the older patron-client framework of Philippine politics but also of the newer strong society-weak state thesis. These two distinct frameworks “downplay the role of state structures and institutions in shaping both the ends and the means of political competition, economic accumulation, and social relations” in the country. In addition, Sidel argued that clientelism and Migdalism likewise underestimate and misunderstand the role of violence and coercion in the country’s socio-political processes.
III. The Rudimentary Model
In this section, a rudimentary model is sketched by way of several propositions. This rough model of rent-seeking dynamics draws from various intellectual traditions including neoclassical economics and Marxist political economy.
Proposition 1. The rent-seeking agent is, in the main, a rational agent. As such, he is goal-oriented and will be indifferent to the means used to achieve the same.
Proposition 2. However, he is not purely neoclassically-rational. The rent-seeking agent is not simply or purely a profit-maximizer. He may be that given certain conditions; under real-world conditions, however, he is less-than neoclassically-rational. This means that he may be simply satisficing or he could also be motivated by non-economic considerations such as prestige, etc.
Proposition 3. The rent-seeking agent operates in the imperfect real world where transaction costs are not zero, where non-economic actors such as the state and other institutions operate, and where uncertainty is a certainty (since information itself is a commodity and information-gathering incurs real costs). For that matter, rent-seeking may not be seen purely as a preferred behavior but a ‘rational’ mode of existence indicated by the constraints faced by the rent-seeker.
Notwithstanding the anticipated objections of some Marxists, I will argue that the last statement made above has solid Marxist credentials. Nobody is a free agent; everybody has to operate within material as well as cultural constraints. A capitalist has to exploit his workers, not because he has a perverse desire to do so, but because, as Marx has pointed out, he has to do so in order to reproduce himself as capitalist!
Proposition 4. The policy environment (a.k.a. the Marxist superstructure) in the Philippines is one that stimulates and abets rent-seeking. Conversely, Filipino rent-seekers seek to maintain such a policy environment. Unless there are countervailing forces (whether endogenous or exogenous) strong enough to offset this dynamic, rent-seeking in the Philippines could be maintained indefinitely. This seems to be suggested by Rivera (1992) who pins much hope for transformation on a “modernizing social coalition.” On the other hand, I am more sanguine regarding sources of change elsewhere even as I do not discount the development of a modernizing social coalition at the appropriate time. It may indeed be the case that a “modernizing social coalition” assumes state power and creates a policy environment that is hospitable to enterprise.
Proposition 5. For that matter, I believe the behavior of the rent-seeking agent is not shaped by the policy environment alone. There are factors in the economic ‘base’ that can influence and even induce changes in his behavior. Among these factors include urbanization, population growth, exhaustion of natural resources, greater integration into the global market, and technological change. ‘Cultural shifts’ (a.k.a. new thinking) or cultural factors, as a whole, may also play an important role. The apparent theoretical progenitor of cultural theories of enterprise is Max Weber’s Protestant Ethic. While earlier theorists held the United States and Protestant Europe as models for entrepreneurial societies, recent works focused on the East Asian NICs and their Confucianist culture. While individualism was earlier extolled as the sine qua non of entrepreneurial culture, recent theorists consider it an impediment and extol group spirit instead.
At this point, it is sufficient to note that these factors may either impinge on the policy environment to either induce changes which will penalize (economically and otherwise) rent-seeking behavior or create a material environment which frustrates or discourages rent-seeking (since the rent-seeker’s goals are either not met or are not met satisfactorily).
For instance, a combination of factors may diversify sources of rural incomes, raise rural consciousness, and enlarge electoral bases. In response to this situation, the rent-seeker (esp. one who reproduces himself through the control of public office) may seek to earn non-rent incomes as insurance in cases of electoral defeat. The case studies of Sidel (1994) on Montaño, Mojares (1994) on the Osmeñas, and McCoy (1994b) on the Lopezes all strongly suggest the following sub-propositions:
A. A sub-national rent-seeker who has not diversified into profit-making runs the risk of non-reproduction. In fact, such a rent-seeker must not antagonize the chief rent-dispenser in Malacanang if he wants to retain his local monopoly. This was true in case of then Cavite strong man Justiniano Montaño who annoyed President Marcos; there seems to be a repeat in Remulla’s case.
B. The transformation of a rent-seeker to a respectable profit-maker is not complete. For as long as monopoly rents are available, even a profit maker will try to capture it (as illustrated in the case of the Lopezes during the Aquino presidency). This is true since the primary goal is acquisition of profit and wealth, as Baumol had pointed out.
C. Rent-seeking may involve access to instruments of violence. Competition for rents is inherently violent (since it is a zero-sum game) and competing rent-seekers may try to ensure their success even up to the extent of employing criminal means. For this matter, political corruption and intimidation belong to same family of means employed by the rent-seeker.
D. The agent matters. There is obviously a difference between a Montaño and a Lopez. Apart from noting the difference in the material environment of both personalities, it is surmised that a difference in the risk taking behavior of both actors also helps explain Lopez’ relative success and longevity.
Proposition 6. Fractionalization of elites along various lines and elite transformation and reconstitution can also lead to changes in the policy environment that could likewise induce changes in rent-seeking behavior. The initial reformist noises made by the Ramos administration (an administration which does not owe its victory to local bosses and warlords) and its relative retreat from reform following the formation of the de Venecia “rainbow coalition” will serve as an interesting case study by itself. However, to make it manageable, one should study a particular sector such as telecommunications, banking, or inter-island shipping.
Proposition 7. External (meaning foreign) agents can likewise offer (or withhold) resources that may either stimulate or discourage rent-seeking. For quite a time, resources from international agencies have enabled local elites to stimulate growth without reforming the basic political economy. This is especially true during the Marcos years but was also evident during the Aquino years. The compradors in Cory’s cabinet will mouth free market rhetoric to ensure the approval of IMF loans. Once these critically-needed loans were approved, they will turn to their retainers in Congress to maintain protectionist tariff barriers.
In the current period, an examination of the critical impact of foreign agents (including non-traditional investors–Koreans, Taiwanese, etc.) in the economic development of the so-called growth corridors or alternative metropolises such as General Santos, Davao City, Baguio-La Union, and Olongapo may prove to be instructive.
These studies must likewise be conducted with due consideration of the phenomenon of supra-national economic zones. For instance, one may ask how impulses generated by South China-Taiwan-Hongkong growth polygon affect economic activity in such places as Olongapo or Baguio. Another question: why are the Americans inordinately interested in General Santos?
Proposition 8. Movement from the family as the primary wealth-producing institution will be done only when it is no longer able to meet the imperatives of a changed policy or material environment. For instance, in more competitive settings (especially where new policies allowed the entry of bigger foreign actors) or in capital-intensive ventures, the limited capability of families to mobilize resources may force “entrepreneurs” to use non-family institutions such as the business firm (even if we acknowledge the existence of family-controlled firms). Towards this end, a case of a family-firm that had to go public may likewise be fruitful.
Social network analysis
Though traceable to Weber, a possible line of attack is promised by “social network analysis”, the newest intersection between economics and sociology, as well as “social exchange theory,” one of the former’s theoretical foundations. According to contemporary observers, social network analysts reformulate economic theories by supplanting atomistic notions of information and action with tangible network structures of social relations. Information, seen by economists as products, is considered by sociologists as often unintended products of social relations. Therefore, it is not possible “to decouple the information from its social structural base” nor would be safe to conclude that information will be available to actors “regardless of their level of investment or search, absent the social connections that provide access to the information in the first place.”
Social exchange theory is simply the economic analysis of noneconomic social situations. However, social exchange theorists argue that, instead of using individuals as key units in analyzing social and exchanges, the appropriate units of analyses are social relations, involving “a continuing series of opportunities, initiations, and transactions” among actors. They have likewise broadened the set of social relations to be studied beyond commodity exchanges and argued that just as market forces (of supply and demand) set commodity prices, scarcity and dependence influence power, status, and other allocations in social exchanges.
This theory seems to better explain apparently non-rational or irrational (from a neoclassical standpoint) transactions by focusing on the “social and historical embeddedness” of economic activity, i.e., by documenting how social forces influence the orientations and options available to rational transactors as well as highlighting their different underlying social logics. Admittedly, what may seem to neoclassical economists as the irrational use of resources by rent-seekers is perfectly logical within the context of the rent-seekers’ social logic. A neoclassical analyst may fail to appreciate the extra-ordinary lengths a rent-seeker may go to in order to cement social ties with his patrons and clients by way of compadrazgo, utang ng loob (debt of gratitude), and other social devices. For a social exchange analyst, however, these efforts make good sense.
In his provocative piece, Baumol raised the rhetorical point that if productive entrepreneurship was determined exclusively by history, tradition or social psychological circumstances, then the policy maker is most likely to be powerless to do much about it. However, if a society’s structure of incentives and pay-offs plays an important if not crucial role, then there is room for policy. What he is referring to is the ‘rules of the game’ that determine earnings of different economic actors. At different times and different places, the relative payoffs to profit makers and rent seekers differ significantly. While these rules may change sometimes by happenstance (or by factors considered exogenous or accidental), in other cases they are changed by policy.
A society’s payoff structure–the opportunities for either rent-seeking or profit making–depends largely on the policy environment created by the state. Then the next order of business is to inquire into the factors that could lead to policy changes. In truth, a dynamic model which draws inspiration from Max Weber and more contemporary theorists on the Third World state (Evans: 1992 and Brett: 1988) and the recent experience of Thailand and Indonesia is proposed by Hutchcroft (1993: 92-93). The elements of this model are:
(1) there is substantial economic growth, fueled to a large extent by foreign capital and aid, or (in special cases, booming strategic exports such as oil);
(2) a more assertive business class emerges; and
(3) this business class, with the assistance of foreign capital (and international aid institutions) demands the regularization of relations between the government and business interests–which leads to
(4) the erosion of the hegemony of the existing elites; and
(5) the gradual and fitful creation of a political environment that provides a more congenial foundation to the development of advanced forms of capitalist accumulation.
In agreement with the Rivera thesis mentioned earlier, Hutchcroft is pessimistic that this will happen in the Philippine case where private oligarchic interests plunder the public treasury. The difference between the Philippines, on one hand, and Thailand and Indonesia, on the other, is that bureaucratic military elites are in power in the latter countries. These elites, which are based firmly in public apparatuses, have been able to accumulate rents at expense of private vested interests as well as build stronger states. For this reason, Hutchcroft (1993: 110) believes that in the Philippines, “the emergence of modern rational capitalism will likely depend on the prolonged, turbulent process of breaking down the oligarchy’s domination of the state apparatus, and building up a state that is able to provide some greater measure of calculable adjudication and administration.”
The starting point of the dynamic model sketched above, economic growth, has not led to creation of new social forces that could provide, as in the case of Thailand or possibly in Indonesia, a clear basis for social conflict that could lead to major political changes. Hutchcroft believes that given the diversification of interests of the Philippine rent-seeking oligarchy enables it to capture fully the benefits of economic growth and prevent any split within its ranks that could lead to policy changes. For this reason, he pines for (like Rivera) a political solution, a new, strong Philippine state. But he fails to tell us how this state could be built. He obviously has given up on the revolutionary forces in the country. He also qualified his earlier analysis of the possible effect of US withdrawal.
This last point is one which I wish to subject to critical investigation. Is it true that the rent-seeking elites are the sole beneficiaries of economic growth? Is it likewise true that these elites are the only poles of accumulation in the country? Or are there other significant avenues for wealth accumulation which in turn will create new elites that will provoke changes in policy to create the Weberian state and bureaucracy in the Philippines? What will be the cumulative impact of the country’s greater integration into the global economy (following the new Uruguay Round treaty) and the world’s financial markets; the relative exhaustion of the country’s natural resource base (and the accruing environmental crisis); the further development of knowledge- and technology-based wealth-creating activities; and the reconstitution of Philippine society through population growth, increased urbanization, and labor mobility?
I do believe that rule of law by a strong state (aided by an able bureaucracy) will stimulate sustainable economic development and change in the Philippines. However, I will argue that changes in the economy, in the ways by which wealth is produced and appropriated, will be a stronger basis for the political struggles that will lead to the creation of that same state.
I hypothesize that the critical elements I identified above (greater integration with global economies, new technologies, natural resource depletion, and changed demographics) will inexorably erode rent-seeking opportunities and force sections of the current rent-seeking oligarchy to turn to profit making. In contrast to Rivera and Hutchcroft, I place more premium and hope on the effects of factors that will impinge upon the state rather than on the state itself. The recourse to neoliberal solutions is necessarily resorted to given the current weakness and incompetence of the Philippine state apparatus. The North East Asian formula–where a state disciplines business groups in pursuit of national development goals—may not replicable here. Hopes are better pinned on the international market and its competitive pressures to discipline both public and private actors in the Philippine economy. While this solution may have theoretical support from such venerables as Smith, Montesquieu and Hume, there are obvious limits to what can be done without a substantial increase in state capacity.
What is hypothesized is that continued differentiation within the entrepreneurial elite will result from the economy’s increasing integration into the global economy. It could lead to the profit-makers gaining the upper hand vis-a-vis rent-seekers; the development of a “growth coalition” composed of entrepreneurial profit-makers, state-based technocrats, and middle classes; and the building of a more appropriate institutional and policy environment more conducive to profit making. In short: a relatively weak state adopts neoliberal policy which strengthens the profit-making sections of the entrepreneurial elite and stimulates economic growth that is shared with the country’s middle class. The beneficiaries of growth in turn create a stronger state that is hostile to rent-seeking and therefore promotive of profit-making. Obviously, the creation of the Weberian state is not inevitable; it will still depend upon the strengths and the creative skills of the contending parties. However, the erosion of rent-seeking opportunities will go a long way in tilting the balance of forces in favor of change.
The researcher’s task therefore is to establish if such erosion is indeed taking place.
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Toward a More Complete Theory of Rents and Rent-Seeking
A. Rents, as a construct in political economy, are usually associated with monopolies and imperfect competition and markets. In the literature, rents always never represented value created in production but represented a portion of the created value captured during the distribution process. In short, rents are not created values but captured values. In this sense, rents represent pure transfer of resources from one economic actor to another; the transfers are mediated either through the market, the state, or non-market, non-state mechanisms or institutions. The economic actors may either be private agents or institutions or public entities.
But all general statements will have to be qualified. Consider Tullock’s (1988: 51) example: the person who invents and patents a cure to cancer (or AIDS) will be considered a public benefactor even if he became extremely wealthy by claiming monopoly rents on the patent.
B. In the main, there are three types of rent differentiated according to mode of “creation” and disposition: market rents, public choice rents, and non-market, non-state rents. Market rents (or Rent I) are rents created by natural or structural market imperfections or market power. When we say natural market imperfections, we mean market imperfections that are not caused by state action such as licenses or tariffs. If a public utility monopoly endures because huge capital requirements deter the entry of others, then we have a natural or structural market imperfection. The structural monopoly earns monopoly rents. The best example of a market rent is the classic landlord rent.
Some type I rents attract “good” rent-seeking, the latter concept defined as the expenditure of resources towards the capture of rent. An example is the cancer cure patent mentioned earlier. To the extent that the rent is successfully captured, i.e., the invented cure was successful and could be patented, the resources expended to capture the rents from the patent could not be considered to be deployed wastefully. In contrast, the use of resources to capture ownership of a choice piece of real estate is not only wasteful but also criminal.
Public choice rents (or Rent II) are the rents created by the state when it restricts entry to the market. This rent type attracts wasteful rent-seeking; the “right” to capture the rent may be sold to the highest bidder. However, it could be also be dispensed or deployed by the state to favored parties. If the state restricts market entry or competition, the actor who captures public choice rents also earns monopoly rents. The distinction between rent-seeking and rent-dispensing is an important one and will surface in the subsequent discussion on rents and development.
The third type (or Rent III) is rents created by non-economic, non-state bodies (including churches, mass media, and political parties) but is sought and could be captured by anybody–businessmen, state officials, politicians, or private citizens. While these bodies are not strictly state or market (for profit) agencies, they can create rents because they also enjoy monopoly power of sorts. Religions monopolize the supply of spiritual goods while mass media may monopolize information. In this sense, the rents that they can earn are quite similar to market or monopoly rents. This rent type may also attract rent-seeking, albeit of a kind quite different from public choice rent-seeking. Let us illustrate this last point with the Iglesia Ni Kristo (INK) in the Philippines. The INK is obviously a newer and smaller religious organization than the Catholic Church. But it is considered to have a stronger political clout than the latter; INK members supposedly vote as a single bloc according to the dictates of their Church leaders. For this reason, INK leaders are wooed every which way by politicians and their brokers for electoral support. In return, the INK supposedly gets material and non-material rewards from their clients. Other examples are supplied by Hutchcroft (1996): the AC-DC (attack and collect-defend and collect) politician and journalist.
The fourth type of rent (Rent IV) is “criminal rents” earned from benefices granted by the powers-that-be to operate or maintain gambling, prostitution, gun-running, illegal drugs, and other illegal businesses without fear of persecution or harassment in exchange for a cut of the proceeds. Antonio Sanchez, the recently-sentenced mayor of Calauan, Laguna (for rape and murder) appears to be a beneficiary of such a right and has apparently disposed of his rents in conspicuous consumption, patronage, pay-offs to appropriate patrons. This rent type is usually associated with means of coercion and violence.
One can still identify a fifth type of rents (Rent V) if the state itself is construed as a rent-seeking agent vis-a-vis other states and other international actors, which are rent-assignors. Official development assistance and military credits are examples of this rent type and are actively sought after by many states in the developing world, including the Philippines. This type of rent is often associated with the development of clientelistic relations between the donor-state and the recipient-state.
C. Depending upon the active agent, it is also important to distinguish between private rent-seeking and public rent-seeking. Murphy, Shleifer and Vishny (1993: 412) define private rent seeking as taking the form of “theft, piracy, litigation, and other forms of transfer between private parties” while public rent-seeking is “either redistribution from the private sector to the state, such as taxation, or alternatively from the private sector to the government bureaucrats” taking the form of lobbying, corruption, and the like. While we may or may not fully subscribe to the notion that taxation is rent-seeking, public rent-seeking provides the bridge between rent-seeking and the much older concept of corruption.
How do we relate rent-seeking and corruption? In a situation where the state (or a state agency) creates rents, the normal economic reaction of private actors is to use all means–legal, extra-legal, and illegal–to capture them. Lobbying government officials is a legal way while bribery is an illegal way of capturing rents. The bribe can be seen as the purchase price of a good or a service that the state officially owns but is now appropriated privately and personally by government officials. In so far as officials have discretion over the provision of these goods, they can collect bribes from private agents (Shleifer and Vishny 1993: 599).
D. A key flaw of much of the rent-seeking literature (of the public choice school) must be fully elucidated. Rents and rent-seeking, especially in their pejorative sense, are concepts that had been defined with reference to a fairy tale–that of perfect competition. To the extent that competition and markets are imperfect, then rents will always be available for capture.
It is true that the public choice literature had fired its strongest guns against state-created rents (or Rent II). But as we have pointed out, not all rents are created by the state nor do all rents attract wasteful rent-seeking. A whole category of rents will exist and continue to exist because certain economic assets will remain scarce relative to demand. Type II rents will disappear only if the state disappears. And lastly, one can raise the valid question whether all rent-seeking efforts are necessarily wasteful?
E. Among other reasons, the competition amongst rent-seekers is considered by public choice literature to be wasteful. The resources expended by rent-seekers are resources that could have been used for more productive purposes. In an ironic twist to neoclassical logic, it is suggested that restricting the competition for rents may reduce wasteful rent-seeking. If one follows this line of reasoning, the least wasteful situation is one where an absolute dictator, who will brook no complaint, will dispense rents as he sees fit.
It could be shown however that competitive rent-seeking can flourish in the most authoritarian political setting simply because the dictator cannot make all decisions. Below the apex of power, there will be many decision-makers at all possible levels who could compete with each other for the rents or for the power to dispense the rents according to the their competencies. The existence of these officials will similarly attract wasteful rent-seeking. It is true of course that the competition for rents is not fully open even in democracies. The costs or wastes associated with rent-seeking are thus limited, as Jomo and Gomez (1995) explain.
An opposite scenario, which is consistent with neoclassical economics, may develop with respect to public rent-seeking, or at least, in the case of bribes. If producer A can buy a government good more cheaply than producer B, then he can outcompete the former in the product market. The cheapest way to purchase a government good is to bribe a government official at a rate lower than the official level–a transaction labeled as corruption with theft by Shleifer and Vishny (1993). So if producer A bribes an official to reduce his costs, his competitors must do so also. Competition between buyers of government goods will spread cost-reducing corruption, i.e., corruption with theft, across the economy. But the greater demand for cheaper government goods (meaning a greater supply of bribes) will boost bribe rates to just a shade lower than the official prices. Downward pressure on the bribes could come from the competition among bribable government officials. However, it would be easier for them to collude to keep bribe rates up than for consumers to unite for lower rates.
F. Finally, it is likewise useful to distinguish between rent-seeking, the expenditure of resources to capture rents created by the state; and rent-assigning, the granting by the state, or by any of its officials or agencies, of rents or of opportunities to capture rents to selected private or public actors. These processes need not be mutually exclusive in the sense that some private actors may still seek rents even as the state assigns them. Nonetheless, one can say that the more rents are assigned and are known to be assigned by the state or its leaders and officials, the less the rent-seeking will be.
References to Appendix
Hutchcroft, Paul (1996). “Corruption’s Obstructions: Assessing the Impact of Rents, Corruption, and Clientelism on Capitalist Development in the Philippines.” Paper read at the annual meeting of the Association for Asian Studies, Honolulu, Hawaii.
Jomo, K. S. and Edmund Terence Gomez (1995). “Rents, Rent-Seeking and Rent Deployment in Malaysia.” (Typewritten.)
Murphy, Kevin, Andrei Shleifer and Robert Vishny (1993). “Why is Rent-Seeking So Costly to Growth?” American Economic Review Papers and Proceedings 83(2): 409-414.
Shleifer, Andrei and Robert Vishny (1993). “Corruption.” Quarterly Journal of Economics 108(3): 599-617.
Tullock, Gordon (1988). “Rents and Rent-Seeking.” In The Political Economy of Rent-Seeking, pp. 51-62. Edited by Charles Rowley, Robert Tollison, and Gordon Tullock. Boston: Kluwer Academic Publishers.
 Montes (1988) defined these concepts as they apply to the Philippine setting.
 This is obviously another fairy tale; even the absolute dictator will have to delegate some decision-making powers to his subalterns since it is physically impossible and administratively foolish for him to make all the necessary decisions. To the extent that decision-making is decentralized, competitive rent-seeking can still occur in dictatorial settings.
 I prefer the term “profit-making” because it better communicates the notions of market competition and process better than “profit-seeking”. The basic idea here is that when one “earns” rents, he is merely appropriating wealth created elsewhere. In the case of profit, however, one who earns profits does so by creating new wealth. But others may simply see this as an idiosyncrasy. However, the distinction between “new value” and “old value” was the concern of political economists. This was specially true of the Physiocrats (with their produit net) of late 18th century France. Unfortunately, the Physiocrats misused the concepts to conclude that agriculture was the only productive economic activity since agricultural output is clearly (or physically) greater than input.
Adam Smith and the other classical economists (including Marx) responded to the Physiocrats by maintaining the distinction between “productive labor” and “unproductive labor.” Through these concepts, all services were considered “unproductive labor” since they did not produce tangible outputs. The limitations of these time- and place-bound concepts are most apparent in the contemporary post-industrial economies where the services, particularly knowledge-based, have emerged as the most dynamic sector.
For a fuller discussion of the changes in late 20th century economies, see Drucker (1993). He argues that the basic economic resource is no longer capital, nor natural resources nor labor but is and will be knowledge.
 The point that rent-seeking is wasteful only from a social viewpoint is an important one. In contrast, it is not considered totally wasteful from an individual perspective. While an unsuccessful rent-seeker may rue the “loss” of resources, these same resources were not destroyed in the process but got transferred as incomes of other individuals. On the other hand, the successful rent-seeker will consider his costs as a wise investment.
 Lee (1992: 193) stresses the importance of having externally determined world prices as the disciplining parameter. A government therefore cannot arbitrarily change prices to cover “the consequences of an inefficient allocation of credit”. World prices therefore serve as an impartial jury to determine whether the state indeed picked winners or simply threw away good money at non-competitive or inefficient firms.
 Filipino politicians normally resort to vote-buying and/or intimidation of voters to ensure their election. According to De Dios (1990), vote-buying and political violence may be viewed as one form of investment. The elected official uses the public office to exact returns on this investment.
 In reaction to the massive state bailouts of crony firms which went under due to the 1981 Dewey Dee financial crisis, Jaime Ongpin quipped that the acronym CDCP actually meant “Capitalism Daw, Cronyism Pala”. The Construction and Development Corporation of the Philippines (CDCP) is one of the largest crony conglomerates established during the martial law period and was rescued from financial ruin by Marcos with public funds. The infusion did not alter the situation such that CDCP ended up as a public corporation with all the previous private liabilities transferred to the books of public financial institutions.
 This probably led to the following cynical comments by Marx in Capital III: “Public credit becomes the credo of capital … The public debt becomes one of the most powerful levers of primitive accumulation.” (Marx 1867: 706).
 According to many local economists, the policy environment is biased because: “(1) it penalizes exports relative to import subsidies; (2) it encumbers non-manufacturing sectors relative to manufacturing sectors; (3) it discourages a more even dispersal of industries across regions because protected finished goods tend to cater to the needs of urban populations and because of the heavy dependence of the same on imported inputs that can only be accessed through the ports that tend to be concentrated; and (4) it impedes the development of small/medium industry because of the inherent advantage of large enterprises in successfully securing favorable tariff rates.” (Manasan: 1994, pp. 3-4.)
A careful examination of the above-mentioned biases indicate that relatively large-scale, capital-intensive, low value-adding, inward-looking, urban-oriented enterprises are encouraged by the post-war Philippine economic policy regime. In effect, monopolies and rent-seeking in the Philippines are clearly policy-induced market distortions. However, I do not subscribe to the idea that changes in policy, while necessary, are sufficient by themselves to discourage rent-seeking. There are obvious institutional and market-based sources for rent-seeking stimuli.
 Through the exercise of “congressional initiatives” and “insertions,” a solon can access funds exceeding the normal annual allocation of P 6.0 million for a representative and P 20 million for a senator. For instance, a favored representative from Quezon City gained access to an average of P 300 million annually during the 1992-1995 span.
 A well-placed source informed me that Sanchez was the chief maintainer of jueteng in Southern Luzon and was grossing an average of P 350 million daily. In his pay-off list are national-level officials and politicians, high-ranking military and police officials, down to the lowly barangay-tanod (village guard).
 Billig (1994), p. 659. Billig complains against the renewed interest of many observers in the role of culture in economic development: “their reasoning is typically post hoc in that they generate positive cultural scenarios about those societies that have achieved material success and negative scenarios about those that have not.” He noted that Weber himself believed that Confucianism was an anti-enterprise thought system while recent writers consider it to be pro-enterprise.
 In the May 1995 polls, Juan Remulla was defeated as governor of the province of Cavite by a candidate supported by President Fidel Ramos, ex-director of the National Bureau of Investigation (NBI), Epimaco Velasco. But the fortunes of the Remulla family seemed to have shifted under President Joseph Estrada.
 The irrepressible Albert Hirschman reminds us of this point. See Hirschman (1977). “Exit, Voice and the State,” in A. Hirschman Essays in Trespassing: Economics to Politics and Beyond (Cambridge University Press: 1981): 246-265. In The Wealth of Nations, for instance, Smith wrote:
The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country. He would be apt to abandon the country in which he was exposed to a vexatious inquisition, in order to be assessed to a burdensome tax, and would remove his stock to some other country where he could either carry on his business, or enjoy his fortune more at his ease. (Modern Library edn., p. 800)
 In the case of corruption without theft, the government official charges an amount (the bribe)on top of the official price of the good. He turns over to the government treasury the amount corresponding to the official price and pockets the bribe. In the case with theft, the official charges a bribe lower than the official price and does not turn in anything to government.