Towards a new model of the Philippine political economy, Part I

Posted: January 11, 2011 in Philippine politics, Political economy

I attended a workshop on development issues in Asia yesterday at the Asian Development Bank (ADB) headquarters.  After John Nye of George Mason University presented his paper on the imperatives of institutional reform for the Philippines, the discussion turned to the nature of the Philippine political economy and where the distortions would lie.

Through this blog entry, I intend to start a multi-part presentation of a rudimentary theoretical model of the Philippine political economy.  It’s a work in progress so comments and criticisms are most welcome.


This article is a think-piece and a work-in-progress.  In this paper, I introduce a four-sector model of the Philippine political economy that only characterizes its principal features and also suggests the possibilities for future change.  The Philippine political economy is composed of four—formal, informal, criminal, and war—economies, with these categories understood as Weberian ideal types.  Qua ideal types, these economic sectors can be construed either as separate spheres of distinct economic activities or as interlocking sets of economic actors that could possibly undertake all four kinds of economic activity.  The article also inquires into the variables affecting the size of each economic sphere.  It suggests that the dynamics of the model depend largely on the strategic direction of specific economic actors. The proposed model seeks to complement and not replace existing theories on the Philippine political economy.  It is presented in its rudimentary form to solicit comments regarding its robustness and if a respectable research program can emanate from it.

Towards a four-sector model of the Philippine political economy[1]


This article is a think-piece that started as a column in the online edition of the Philippine Daily Inquirer in 2001. For this reason, I have purposely refrained from a systematic review of the relevant literature.  At best, a cursory reading of some theoretical papers was done.  This reading, however, reveals that the literature covers each of the economies (I allude to) either separately or amalgamated into a single category.  For example, there is substantial literature that consolidates the informal, criminal, and subsistence economies into a single category labelled either as informal, shadow, parallel, black, grey or underground economy (Centeno and Portes 2003; Chen nd.; Fleming, Rowan and Farrell 2000; Friedman, Johnson, Kaufmann and Zoido-Lobaton 1999; Johnson, Kaufmann and Zoido-Lobaton 1998; and Standing 2003).  On the other hand, a distinct body of literature, following the classic work of Becker (1968), focuses on the economics and political economy of crime (Andreas 2004; Block and Heineke 1975; Chambliss 1975; Cohen 1996; De Haan and Vos 2003; DiIulio 1996;  Ehrlich 1973 & 1996; Fletcher 1985; Loftin and McDowall 1982; Machin and Meghir 2004; Myers 1983; Witte 1983; ).  Murphy (2004) skilfully discussed the connection between crime, rent-seeking, and government activity.  A separate literature covers the political economy of internal or civil wars in the developing world (Bates, Greif and Singh 2002; Blomberg and Hess 2002: Carbonnier 2001; Collier 2000 & 1999; Collier and Hoeffler 1998; Gates 2002; Regan and Norton 2005; Sambanis 2002; and Snyder 2006). Sidel (1999), meanwhile, consolidates political violence, crime, and local politics to create a model of local bossism for the Philippines.  Sidel’s work offers a corrective for previous writings on Filipino political culture and patron-client relations, which have ignored the role of coercion in shaping electoral competition and social relations.

For this paper, I mined the rich literature for conceptual purposes and will sketch the rudiments of a four-sector model of the Philippine political economy that will not only characterize its principal features but also suggest the avenues and ways through which it could be transformed.  The objective is to develop a theoretical model that will be applicable to the Philippines and other similarly-situated developing states in Southeast and South Asia (such as Timor Leste, Thailand, Aceh, Sri Lanka, and Afghanistan) and elsewhere.

Reflections on a corruption expose’ epidemic since mid-2001 up to the third quarter of 2003—alleging the involvement of the First Gentleman, ‘Big’ Mike Arroyo, in several shady deals; participation of senior police officials in the illegal drug trade; and the reported collusion of army officers with the criminal Abu Sayyaf Group[2]—first led me to develop the notion of a three-sector Philippine political economy model composed of the formal, informal and criminal economic realms.  Of course, an earlier realization of the criminalization of the state apparatus during the aborted presidency of Joseph Estrada also contributed to its development.  However, further reflections on the matter up to July 2006, after a flurry of news reports on ‘revolutionary taxation’ by elements of the communist-led New People’s Army (NPA) led to the inclusion of a fourth economic sector—the internal war economy—to the rudimentary model.

As I see it, the Philippine economy is actually a complex composed of four—formal, informal, criminal, and internal war or war-related—economies.  These categories are to be construed as Weberian ideal types.  They could be understood in two ways.  First as spheres of economic activities, that is, activities pursued for gain or accumulation of wealth.[3] As economic activities, these sectors are distinct from each other.  Secondly, these categories can be seen as sets of economic actors, that is, agents who undertake economic activity.  As sets of actors, these economies are not hermetically sealed from each other and, in fact, interact with each other.  This is so since a given economic actor can (theoretically and in practice) engage in all four—formal, informal, criminal and war-related—types of economic activity.  To the extent, however, that an economic actor is predominantly engaged in or derives the greater bulk of her income from a particular type of economic activity, she may be referred to as a formal, criminal, informal, or a warrior.

The rudimentary model can be graphically represented in two Venn diagrams.  In the first diagram, the universal set U, that is, the Philippine political economy is represented by an enclosing rectangle.  Inside the rectangle, we find four circles that are apart from or do not intersect each other.  Each of these enclosed circles represents a distinct sphere of economic activities.  Expressed in set theory language, these circles, as they represent distinct economic activities, are independent sets since they do not share identical elements (see Figure 1a).  In contrast, the second Venn diagram for these categories, understood as ensembles of economic actors, consists of four circles (or sets) that intersect with each other (see Figure 1b).  In this diagram, one can see the intersection of any two of the circles as well as the intersection of all four circles.  These intersections represent economic actors that engage in more than one type of economic activity.  Again in set theory language, an intersection between two (or three or four) sets corresponds to the elements common to the sets in question.

In both Venn diagrams, not all of the rectangle’s area is covered or accounted for by the circles.  This means that not all of the economic activities or economic actors within the Philippine economy are contained within the four sectors.  These residuals include household and/or subsistence work.  These residuals exist because there are two kinds of productive activity: gainful or for-gain activity; and non-gainful activity, that is, productive activity not directed toward earning a gain. Household and subsistence work are instances of non-gainful productive activity.  As explained in subsequent sections of this paper, the four-sector model is concerned with gainful productive activity, economic activity.  For this reason, household and subsistence work are excluded from the model’s coverage.

NOTE: I know, I forgot to include the Venn diagrams. I will have to ask my son to help me paste them unto this blog entry. Patience……..

[1] This paper is a revised version of an earlier paper entitled ‘The tri-sectoral model of the Philippine political economy’ presented at the 2003 annual meeting of the Philippine Political Science Association and the Centre for East and Southeast Asian Studies, Lund University, Sweden in March 2007. Comments are welcome and could be forwarded to or

[2] The Abu Sayyaf Group or al-Harakat Islamiyah started as a radical Islamic fundamentalist group in the early 1990s but soon degenerated into a criminal gang that attained international notoriety in 2000 when they kidnapped a number of European tourists for millions of dollars ransom. Some Manila analysts believe that group was a ‘project’ of the Philippine army to serve as counterpoint to the more established Moro secessionist movements—the Moro National Liberation Front (MNLF) and the Moro Islamic Liberation Front (MILF).

[3] This is a definition that may be disputed by the proponents of ‘living economics’ or the ‘economics that really matters’ since I have excluded subsistence activity.  The explanation for this limited definition is provided later in the paper.

  1. bongmendoza says:

    Reblogged this on bong mendoza's blog.

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