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RULE OF LAW: The True Wealth of Nations

December 5, 2007

Philippine poverty...

Philippine poverty...

AS of end-2006, the central bank reported $12.7 billion in dollar remittances of OFWs, up from $10.6 in 2005. This benefited about 12 million OFW families that year. This phenomenon shows a clear picture of the government’s high regard for good economic statistics that only yield a fleeting result and low regard for the value of its own people. As a result, industrialists are now feeling the ill effects of this trend. Some of the country’s top businessmen have complained of the sudden loss of skilled workers, especially the blue-collar workers, and blamed this on OFW craze and the prevailing education crisis.

How can we attain national development with this kind of setup? National prosperity does not only require good governance, it also demands the cooperation of its people, their skills and knowledge, which are the indispensable ingredients in nation-building.

Perhaps the Filipino has to learn from his former conqueror. The United States of America achieved economic success through the help of skilled and innovative immigrants, and William H. Gates, chairman of Microsoft Corp., acknowledges this fact. This is the reason why he proposed the abolition of America’s H1-B Visa that “doesn’t let too many smart people to come into the country.” Today most of the country’s smart people now work in the land of milk and honey.

Unstable economic and political situation, low salary and poor benefits— these are just some of the many reasons why most educated and highly skilled Filipinos prefer to work abroad. They have only one aim: to get out of poverty that continuously strangles the country today. The plight of every Filipino worker these days reflects the penalty this country has to pay for the continued disregard of the rule of law, which is indisputably the world’s priciest hidden wealth.

In her speech during the launching of the 2007 Global Millennium Development Goals Report and the Philippines Midterm Program report, Mrs. Arroyo announced that the country’s economy has attained “a new level of maturity and stability” and noted that the “rate of poverty is down”. She was “heartened that the ratio of Filipinos living in extreme poverty has been drastically cut from 20.4 percent in 1990 to 10.2 percent in 2006.” In summation, the Chief Executive declared that employment has improved— and that was on October 10, a day before the alleged distribution of cash amounting to between P200,000 to P500,000 to congressmen and local executives at the official residence of the President.

“Poverty alleviation is our overarching goal,” said Mrs. Arroyo, and vowed that it is the “goal that we will continue to focus on in the remaining years of our term.” The first step to alleviate poverty, she said, is to raise revenue. The second step is to improve social services such as health insurance subsidies for indigent patients; the third, to improve educational support by investing in better school buildings, new textbooks and teaching materials, and training programs for mentors; and the fourth— to cut red tape and to continue to purge corruption from the system.

The “most prohibitive red tape”, according to Mrs. Arroyo in her 2006 State of the Nation Address, is our outmoded Constitution and that the people need Constitutional change “to bring our rules of investment into the new millennium.” On the other hand, MTPD’s goals need sufficient funding. With limited resources and dwindling revenue, the Arroyo planners had to look for sources of income. Without money, the MTDP is just an ambitious catalog of promises and vain plans.

The lingering crisis of past injustice

Apart from issues of unconstitutionality, jueteng scandal, and corruption, the President in her early years in office was also faced with a post-millennium headache characterized by the accumulated debts in the past— the fiscal crisis.

Fiscal crisis was the upshot of government’s huge foreign debt and insufficient revenue affecting the country’s economic performance and the life of every citizen. It did not come naturally and was not directly attributable to any external tremor like the case of 1997 Asian financial crisis originated in Thailand due to the exodus of western investors, although the latter contributed much to its existence. It was internal in nature and was imputable to mismanagement, economic blunders, and bad decisions of past and present administrations. The post-millennium financial crossroad was the government’s own doing, and the only escape was to fix it up so to keep its access to international credit.

Former Budget Sec. Emilia Boncodin warned that to prevent a real crisis from occurring “as in a case where the Philippine government can no longer have access to international credit, we have to show the international community that we mean business as far as resolving our fiscal problem is concerned.” Acting Bangko Sentral ng Pilipinas Governor Amando Tetangco, on the other hand, maintained that the country was “not yet in that situation (fiscal crisis)”, because technically, it has not defaulted on payments, not lost access to the international debt market and not accumulated a budget deficit of “unmanageable” proportions.

There’s a new theory in economics that in every catastrophe, there’s opportunity. Since the crisis meant the government was temporarily suspended from obtaining international credit, it had no choice but to turn to the Filipino taxpayers. As a result, the government passed on the burden to the people, with increases in taxes and prices like those for petroleum and electric power.

As of end-2003, the government debt, including obligations by the national government, plus those assumed from failing

Can the government solve corruption?

Can the government solve corruption?

government corporations, rose to P3.36 trillion, equivalent to 130 percent of gross domestic product. Among all Philippine presidents, Mrs. Arroyo was the biggest borrower, with her borrowing bout more than the combined borrowings of Presidents Ramos and Estrada for eight years.

The fiscal crisis ended by year 2005, but its residual effects goaded the extreme poverty being suffered by over ten million Filipinos today. According to International Food Policy Research Institute (IFPRI), out of one billion people who live in extreme poverty today, about 11 million Filipinos rated themselves as absolutely poor, living only on less than 1 dollar a day.

The figure, however, elated the President, saying her economic reforms are bearing fruit. “The common people are now feeling the benefits of a growing economy,” she said, allocating another one billion pesos for “hunger mitigation programs.”

But throwing money at the problem is not enough to contain the ill effects of poverty. Destitution and hunger always go altogether. The first, which sprang from unemployment, discrimination, lack of education, mismanagement and graft and corruption, is the end result of social injustice, while the second is a faithful ally of poverty. Impoverishment and hunger are just two of the best recruiters of crimes and all social crises that confront the world today.

Like graft and corruption, poverty is also a big social burden. The first pertains to official larceny, to the loss of public funds where the perpetrator is determinable, while the second— like a bromide— pertains to social malady that drains the spirit, morale and values of man and makes men prey to his fellowmen, a situation where those affected are susceptible of being corrupted and pushed by their own misfortune to commit crimes.

The intangible evil

Poverty is not just about the absence of bread on the table, but also about the inability of parents to send their children to school. Lack of education is one of the reasons why out-of-school youth in the provinces join the Left. It’s the best recruiter of terrorism in the world. Instead of going to school and learn how to improve their lives, some young men in the provinces were recruited to either join the Left or the so-called terrorist groups and learn the ways of their comrades or commanders.

Poverty also makes the poor prone to social injustice and human rights violations, because their lowly economic condition bars them from hospital doors for having no money to pay for hospital bills and renders them vulnerable before the court of justice whose justice system usually moves in slow motion and whose rudders have to be greased with money.

The war on poverty must be based on principle and driven by political will. Mandelan concept suggests that poverty is the result of social injustice, failed governance and mangled rule of law. Under this theory, justice plays a very important rule in national development since poverty is the corollary of rotten economic polices, corruption, weak governance, failed decisions, lack of vision, and political wrangling. Relying on African experience, Nelson Mandela said that “overcoming poverty is not a gesture of charity. It is an act of justice. It is the protection of a fundamental human right, the right to dignity and a decent life.”

He introduced the concept of trade justice guaranteed and covered by the 1987 Constitution. Trade justice gives everybody the opportunity to grow without undue state intervention and without the state favoring preferred companies and social groups. This concept operates under the system of Laissez-faire or free-market society and it pertains to fair and mutual relations between and among states and to economic ties between developed nations and third world countries.

“Trade justice for the developing world and for this generation is a truly significant way for the developed countries to show commitment to bringing about an end to global poverty,” said Mandela. This kind of justice also demands that trade be done through man’s competence and ability to grow his business and not by means of favor; that it be performed in good faith and not under the grease of bribery, irregularities and under-the-table modes of transaction; and that it be guided by the principle of free and fair competition without the government acting as an arbitrary meddler or interested broker.

Check Overdrawn

National development demands the faithful recollection and understanding of the past. Otherwise, any effort to push a nation towards the path of prosperity is an exercise in futility, like a check overdrawn that collects nothing at the date of maturity.

In the case of the Philippines, its present and future are chained to the past, a situation not good to a nation that aspires for speedy economic recovery. The whooping three trillion-peso debt of the country reminds the Filipino of the failure of his past public servants. Still, the Filipino is sitting on the thin ice of economic crisis characterized by budget deficit and huge national debt, with government spending more than its revenues owing to its heavy debt servicing as well as the ongoing political crisis. The only good news is that the Arroyo government was able to cut the country’s total debt by one percent, as domestic debt fell by P30 billion to P2.118 trillion in June, and foreign debt fell by P8 billion to P1.663 trillion. But certainly this is not enough.

The history of our national debt can be traced as far back to American occupation when the Philippines was heavily dependent on loans and investment. There were, however, conditions attached to this American brand of benevolence since the country was left without a choice but to enter into agreements and abide by treaties like Parity Rights lopsidedly in favor of the superpower nation and its allied multi-national companies.

One example of the country’s blind deference to the foreign power is the Presidential Decree 1177, which provides for the automatic appropriation for debt servicing. This results in the annual parody of prioritizing the heavy burden of the past more than the nagging demand and exigency of the present. The onerous law enacted during the time of late strongman Ferdinand Marcos guarantees repayment of loans and thereby turns the country into a desirable client to international creditors notwithstanding the viability of the project to be funded or the risk of fraud and corruption. Other laws that drew the fate of the country were the Bell Trade in 1949, the 1962 Decontrol Law which led to the devaluation of peso for the first time, the Investment Incentive Act of 1967, and the P.D. 1034 that allowed banking units in the country.

No, she cant...

No, she can't...

During the time of Marcos, the country incurred a total debt of $27.8 billion, plus the onerous $2.3 billion borrowed for the abandoned Bataan Nuclear Power Plant that produced not even a single watt of electricity. Many loans were obtained to support most of the country’s abandoned and failed projects and impracticable programs, while some lost to corruption. How many billions of pesos now part of the national debt have been lost to sham projects already eaten by rust and time?— to useless infrastructures that benefited not even a single soul?— to the looters-by rights and moochers-by-affiliation?

Similar to that gigantic disaster Bataan Power Plant, Napocor also siphoned huge and questionable debts from the time of former President Fidel Ramos up to the term of Mrs. Arroyo. Even up to these days, Napocor is like an inexhaustible milking cow to independent power producers (IPP) who continuously extract millions of dollars from the state-run corporation.

In 1990s, grave electricity crisis sent extreme pressure on government negotiators to establish an IPP sector in the Philippines. The chronic blackouts of that time rushed the arrival of private investment. Pressed by the need to dig into looming power shortages, President Aquino issued an executive order that legalized the entry of the IPPs into the Philippines market in 1988. The presence of IPP and the passage of the 1993 Electric Power Crisis Act addressed the power crisis, but here’s the market risk: the take-or-pay provision, which usually set the minimum energy offtake in the 70-85% range, authorizes the NPC to pass on the burden to consumers.

Again, where there’s devastation, there’s business opportunity. NPC is still obliged to pay the IPPs even if the surplus electric supply is not used. The real test came in 1997 when Asian Financial Crisis hit southeast Asian region that led to the dramatic explosion of the cost of electricity “due to a combination of the high fixed cost of the IPPs (capacity payments or minimum offtake) and the escalating foreign exchange liability stemming from deep reliance on foreign capital” (The IPP Experience in the Philippines by Eric J. Woodhouse.)

In 2001, Congress enacted EPIRA law which provides for the “review the unbundling of business activities of IPPs.”

The Four Horses of poverty

It is important to identify what causes impoverishment in the Philippines. While it is implied above that poverty was somehow triggered by the dark lords of the past (the three superpower countries that invaded and ruled this land), there are, however, internal factors that somehow aggravated or tightened this rope of damnation around the neck of Juan de la Cruz.

There are four factors that drove intensely the already awful level of poverty to indescribable proportions. They are (1) culture of corruption and impunity, (2) bad governance, (3) undermined rule of law, and (4) the continuing enmity characterized by the government’s war on insurgency and the so-called ‘enemies of the state’. These four causes of poverty, which can be likened to the four horses of the Apocalypse, are the main exponent of the numerous problems this nation is facing these days.

The top ally of poverty is the culture of corruption and impunity. The first is the clear manifestation of what most of our government leaders, police authorities and the law enforcement mechanisms have become, robbing the public of both its treasure and soul, while the second is the appalling guarantor of the former, similar to a cordon sanitaire that seeks to ensure that public accountability is effectively derailed.

There are two kinds of corruption – the physical corruption, which is the brazen embezzlement of public wealth, and the moral corruption, which is the worst of all burglaries known to man, because it destroys the very foundation upon which the concept of state, or nation, is established— that Aristotelian concept heralding that a state must be most concerned with virtue: “for where this concern is lacking, a political community degenerates into a mere alliance, differing only in spatial extent from those alliances whose members live apart; while law degenerates into a mere compact – ‘a guarantor of mutual rights,’ without any power to produce goodness and justice in its citizens.”

It is important to distinguish the form, source, extent and effects of these two existing forms of corruption. The bold dishonesty of our public officials resulted in the accumulated ill-gotten wealth as in the case of Marcos and the unexplained wealth of most of our public officials, past and present, which, if properly accounted for, would amount to unimaginable proportions. Reports said that from the time of Marcos up to the incumbent administration, the price of unaccounted official deceit would not fall below one trillion pesos.

Imagine if this huge amount of money were rather devoted to the creation of livelihood programs and other endeavors that would somehow give the jobless not ‘bread” but ‘fishing rod’ to catch fish. Imagine if part of this P1 trillion were used for services, infrastructure developments and agricultural reforms and projects like irrigation system that would benefit farmers. Just imagine if crumbs of this embezzled money went to education, which, according to the government is “now declining continuously”, to solve the country’s education crisis. That stolen public money could have been used for the improvement of our justice system and court rooms, so that that constitutional mandate of ‘speedy trial’ and ‘justice for all’ were religiously followed.

But if our soul, our morals, were stolen from us, that would be the worst of all tragedies. If people’s morals were corrupted, they would be reduced to living dead, unable to determine right from wrong— unable to feel and to see evil— because that very fountainhead of man’s morals and virtue has been despoiled— conscience.

One good example of this is the recent bribery at the Malacanang Palace wherein 190 representatives and a good number of local executives allegedly received “paper bags” stuffed with cash. Even a grade three pupil would think there’s something wrong with the dole out, not only because our officials are unable to explain the source of the money, but also because it was done right in the official residence of the president, or right under her nose, so to speak.

What was looted here was the money that was supposed to be channeled to its rightful beneficiaries. But there is something that officials at the Malacanang palace wanted to take from their people – their conscience. They wanted their subjects to believe that there was nothing wrong with the dole out because it was intended for good use, and they have made desperate justifications to show that the “gift-giving” was done in good faith. Other officials tried to convince the public that it was part of government’s tradition as it was also practiced by past administrations. Have they forgotten that man’s law is based on natural law?—that it is based on reason? Tradition, however ancient it is and its intention noble, cannot run roughshod over reason. The first is made by men, mostly by a collective block masquerading as public servants, while the second is man’s only absolute. Rational law cannot be made to kneel in prostration to man’s deceitful wits, whims and caprices.

Rule of law demands that justice be done to this culture of corruption and impunity now deeply entrenched in our system of government. This is to end that farcical scheme that reduces this country to a mere subject of robbery— by looters-by-law and moochers-by-affiliation. As what Aristotle pointed out: “The state exists, however, not merely that men may live but that they may live well.”

On the other hand, bad governance refers to both mismanagement and mishandling of the country’s political and economic affairs. The Filipino has heard a great deal about bad decisions and faulty visions of his past leaders. These national schemes had turned into a tragedy owing to the abuse of the rule of law.

Rule of law as national guidepost

The rule of law is the fountainhead of all laws and rules enacted, created, and conceptualized for the protection of man— his life, liberty and property as guaranteed by our 1987 Constitution. It is based on both natural and moral law, simply because man, according to John Locke, has the natural right to the God-given rights of life, liberty and property, and that his rights are based on what is right and what is essential to his interests and his pursuit of happiness.

There can be no nation without rule of law. Otherwise right and rights no longer exist, a situation where only those who control state’s repressive apparatuses can only dictate what is right or legal, legitimate or illegitimate, moral or immoral. If this basis of proper laws, tenets and canons were rooted out by a tyrant who has no authority to govern, then all powers would fall into the hands of looters-by-law and criminals-by-right at the expense of the inalienable rights of the people.

It is important to examine the past, to see where we failed and— to identify the real enemy of the state. Contrary to the assumption of the government that the enemies of the state are the established institutions like press and some mainstream churches, it is now time to admit that Juan de la Cruz’s number 1 enemy is not just poverty, but the continued disregard of the law of law.

Rule of law is not just about justice and justice system, it is the alpha and omega of this nation. It is the most priced yet ignored capital by most of our politicians and businessmen, who naively put much premium on economy without even knowing what lies behind the figures and statistics reflected by the latter. How many onerous contracts with foreign countries/entities, ambitious projects backed by multi-billion loans and one-sided bi-lateral treaties only favorable to a partner-country, have been entered into by the government beyond the ambit of rule of law? The Bataan Power Plant died and perished with Marcos without even producing a single watt of electricity. What is more disappointing is that the government failed to ask the right question. Were the monies borrowed that financed this colossal failure inimical to interest of the Filipino people?

The Aquino administration could have long repudiated some of the immoral and illegitimate loans incurred by her predecessor if she chose to do so. In the name of altruism, she decided to make a supreme sacrifice by recognizing these immoral debts. She had the right to do so— to disclaim those debts— being a leader installed through people’s revolt. The former president could have brought back justice to the people by bowing to the rule of law and not to the rule of men.

Dr. Hertz, in her thought-provoking book, “The Debt Threat”, said that illegitimate debts should not be paid. She proposed three conditions which determine whether a debt is illegitimate: viz: (1) the government that incurred the debt lacked democratic consent; (2) the loans were used in ways that were inimical to the interests of the people; and (3) the creditor was aware that the loans would be used in such manner.

There is high economic penalty for every disregard of the rule of law. When a government enters into a contract with another country or any foreign entity, it has to observe the rule of law by considering national interest and the interests of the people. Today the government has entered into a number of economic undertakings not favorable to the nation and the people. One of them is the National Broadband deal allegedly attended by corruption and bribery, which could bilk the people out of millions of dollars in taxes. Another is the North Railway project allegedly marred by corruption and unfair provisions.

There’s also high political price for blatant contempt of the rule of law. The Hello, Garci controversy has cost the President a smooth sailing administration, thus depriving the people of not only competent and good leadership but of their true leader(s) as well. The election scandal has been the source of all constitutional violations committed by the Arroyo regime. To maintain her strong grip on power, the President let those accountable like former Agriculture secretary Joc-joc Bolante and former Comelec (Commission on Election) Commissioner Virgilio Garcillano escape from inevitable investigation and possible conviction; gagged her trusted men from appearing on any inquiry by issuing Executive Order 464; gave the police authorities maximum tolerance in dealing with protesters via her calibrated preemptive response; put the entire country under state of emergency through Presidential Proclamation 1017; and signed a vague and ambiguous anti-terror bill that is detrimental to the rights of every suspected terrorist.

War, on the other hand, has both high human and economic cost. President Arroyo waged war on insurgency at the height of the Hello, Garci scandal and vowed to end it by 2010. Others called it diversionary tactic to deviate the attention of the public from the 2004 election scandal. A military document revealed the regime’s bellicose scheme to neutralize the Left by starting with partylist Bayan Muna. Another document entitled, “Know They Enemy”, also includes press people, churchmen, peasants, labor groups, and terrorist groups as enemies of the state.

Arroyo’s war on the “enemies of the state”, which is technically ongoing, was anchored on the United States’ global war on terror that altered the face of international law. The government would like to paint a picture that this country is under siege and that it has to fight its so-called enemies at the expense of the rights of the people and the lives of those marines and their counterparts killed in action in Basilan, including those of innocent civilians. The human cost of this ongoing war is really disheartening to mull over, and it doesn’t matter whether if it’s not real or if it is, because victory is not possible. This armed struggle, based on Orwellian concept, is not meant to be won; it is meant to be continuous. The politics of this government-waged internal strife is self-preservation, that is, to keep the very structure of Philippine society intact.

The key to national development

With the present political system, it is hard to reach, or even achieve, national development. First, what is needed is to arrive at national recovery by engaging in moral reform and moral recovery, and by bringing the entire government at the altar of the rule of law. National development will just remain a patriotic rubric without absorbing the lessons of the past.

What have we learned? This must be the focal query that should be put on top of our struggle, the beacon that should guide this nation through national prosperity. But first, development should mean maturity, politically and historically.

Any attempt to bring this country at the shore of opulence is futile without the sheer cooperation and conscious effort of the people who are considered as the base of the nation. This concept springs from that republican principle upon which this nation is built: “Sovereignty resides in the people and all government authority emanates from them.” To go beyond this democratic parameter would result in either tyranny or anarchy. Is this the whole picture of our society today? Do we have a government acting on behalf of and for the people? Do we have a strong republic characterized by sovereign people?

The Arroyo administration’s desperate effort to counter poverty and hunger by means of feeding programs and by means of raising [value added and sin] taxes, etc., unleashes the very system that reigns today. We are now in the era of collectivism under the rule of the so-called ‘majority’, otherwise known as the ‘tyranny of majority.’

The neutralization of the Left and the identification of the purported enemies of the state seek to realize one purpose: to unify all political and social structures in favor of the ruling collective. This way, the ruling collective will be able to perpetuate its grip on power through the force of majority in Congress, through the overwhelming support of local executives, and through the assured protection of the military. What is functioning under this system is no longer the rule of law— but the rule of men.

The passage of Republic Act 9372 (or an Act to Secure the State and Protect our People from Terrorism) put in place the road map of this political goal. The controversial law seeks to sort out the ‘enemies of the state’ and gives tremendous authority to that powerful collective unit called the Anti-Terrorism Council.

Ayn Rand, Russian-born American philosopher who conceptualized Objectivism, once said that collectivism is the subjugation of the individual to a group— whether to a race, class or state does not matter. According to her, “Collectivism holds that man must be chained to collective action and collective thought for the sake of what is called `the common good.’ Throughout history, no tyrant ever rose to power except on the claim of representing the common good.” Press Secretary Ignacio Bunye said there’s nothing wrong with the dole out so long as they are intended for good cause. “Common good” was the argument Bunye tried to adduce in coming up with that concave statement. The government’s answer to hunger and poverty is also misplaced: throw money at the problem. Officials also defended the controversial NBN deal by saying that the contract was entered into for the “common good” and national interest.

To explain this theory, F.A. Hayek also pointed out the flaws in collectivism. Hayek said that “any collectivist system necessarily depends on one individual (or small group) to make key social and economic decisions.” The first casualty of this collectivist trend is none other than the rule of law, because under this system the whims and caprices of the people in power form part the law of the land more than the will of the people. To wit, Hayek said: “The great aim of the struggle for liberty has been equality before the law.” That no one— the even the highest official of the land— is above the law.

But how can we attain national development with bribery as the rule of the game in both political and corporate arena?— with extrajudicial killings and enforced disappearances as the ultimate procedures to avoid investigation and possible conviction? As to the extralegal killings and rising cases of desaparecidos— what is the accountability of the President being the commander-in-chief? And as to the alleged bribery in Malacanang— what did the President know, and when?

Trading is done nowadays, not by consent and fair competition, but by compulsion and bribery. Money is now flowing to those who deal and broker, not in goods, but in favors. Men now get richer by graft and corruption and by pull than by work, and the law is silent as to the perpetrators but harsh as to the innocent. We have a system where corruption and dishonesty were being rewarded and honesty becoming self-sacrifice— this scheme will certainly not permit a country to survive as half-property, half-loot.

In his Republic, Plato says tyranny “is not a matter of minor theft and violence, but of wholesale plunder…” He says that “when a man succeeds in robbing the whole body of citizens and reducing them to slavery, they forget these ugly names and call him happy and fortunate, as do all others who hear of his unmitigated wrongdoing.”

By the face of it, the current administration appears to be so serious in dealing with anyone who stands in the way of what it calls “national development.” The only governmental institutions left unfazed are the Senate and the Judiciary, the latter being more credible than the former. The Senate stubbornly goes on with its investigation, while the Judiciary made several developments in protecting the rights of the people. To understand the depth and ill effects of extrajudicial killing and enforced disappearances, the Supreme Court led by Chief Justice Reynato S. Puno held a historic summit devoted to the two nagging issues. It was then followed by the creation of the Court’s new ally in the protection of human rights – the writ of amparo, which “will bar military officers in judicial proceedings to issue denial answers regarding petitions on disappearances or extrajudicial executions, which were legally permitted in Habeas corpus proceedings.” There are now more than 800 cases of extrajudicial killings documented by Karapatan and several cases of enforced disappearances, which include that of Jonas Burgos and two University of the Philippines students.

Asian Human Rights Commission once pointed out that in most Southeast Asian nations, the basic rule of law mechanisms such as proper policing, impartial prosecution and an independent judiciary do not exist or do not function well. This is because the rule of law mechanisms “have been deliberately manipulated, abused, subverted in such a way as to prevent those whose rights have been violated from attaining any justice or misused by those in power, in order to protect those who have violated the rights of others.”

From the outset, the government’s portfolio of economic prosperity consists of higher taxes and their efficient collection, more dollar remittances, more foreign investment and more exports.

But what is the real wealth of nations? This query literally moved the motor of the world when answered by a group of World Bank environmental economists. In their extraordinary but widely underappreciated report, Where Is The Wealth Of Nations: Measuring Capital for the 21st Century, Kirk Hamilton and his team found that “human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries.” Their study concludes that there are three kinds of capital: (1) the natural capital (e.g. cropland, pastureland, etc.); (2) the produced capital (e.g. capital, machinery, etc.); and (3) the intangible capital, which “encompasses raw labor; human capital, which includes the sum of a population’s knowledge and skills; and the level of trust in a society and the quality of its formal and informal institutions.”

Hamilton said that the shares of intangible capital across income classes go about 60 percent in low-income countries to 80 percent in high-income countries. “That accords very much with that notion that what really makes countries wealthy is not the bits and pieces, it’s the brainpower and the institutions that harness that brainpower.” The study also found that “an economy with a very efficient judicial system, clear and enforceable property rights, and an effective and uncorrupt government will produce higher total wealth.” He opined that the rule of law is “partly a question” of efficient legal system, lack of corruption and a degree of transparency.

It is therefore safe to conclude that the economic barometers being used by the Arroyo economic planners are already obsolete and out-of-date. What the government needs is a keen eye to know the real demand of the country and the true will of the people. The system of education must be anchored on what this country really needs and focused on what the Filipino does best. A sincere moral revolution is what is needed more than charter change masquerading as political reforms. But the most important of all is the protection of the rule of law which is the fountainhead of all national wealth. As what Hayek pointed out, “a law should not grant a privilege to a group or person nor should a law discriminate against a group or person.”

National development is only possible if the rule of law is observed, that is, when legislation is passed using the rule of law test; when trades, transactions and contracts are done in good faith and obtained only by consent and not by favors and bribery; when justice and education system pertain to the interest of both the nation and the people; when the government sustains free-trade and fair competition without favoring any business entity over another.

Respect for the rule of law, a philosophical foundation on which a free society is based, is the only key to national development. Poverty—the product of this disrespect— is not to be pointed only to our “heartless” politicians, but to the heartless aim of this nation as well.

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5 Comments leave one →
  1. October 3, 2009 3:38

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  2. October 7, 2009 3:38

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  3. October 10, 2009 3:38

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  4. October 11, 2009 3:38

    Thanks alot for the great read.

  5. October 31, 2009 3:38

    Thanks alot for the great read.

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