Good idea

And like many good ideas, this one will probably wilt on the vine in the arid terrain of realpolitik and the harsh climate of militant self-interest.

Property developer Oscar Violago wrote me the other day with what he calls "unsolicited advice" about how to best deploy the money government won by means of two court decisions last week. The large sum is composed of the P100 billion coco levy fund and the US$673 million from the Marcos escrow account.

Violago supports an earlier proposal by Speaker Jose de Venecia to use the windfall as our counterpart to the clogged ODA funds. Hundreds of millions worth of ODA-assisted projects are stalled in the pipeline because government is too cash-strapped to provide the required counterpart funding.

If the money is used in this way, the windfall’s potential benefit could be multiplied to the advantage of millions of poor Filipinos. If the fund is subdivided and redistributed now, there might be instant gratification. But that will come at great opportunity cost, considering other means by which the fund could be deployed.

The arithmetic is fairly simple.

We are generally required to put up 10 percent counterpart funding for ODA-assisted projects. If the windfall is used to counterpart ODA projects already in the pipeline, the final benefit to the economy in the near term would be about $7 billion for the Marcos money and P1 trillion for the coco levy funds.

Taken together, that will be approximately the equivalent of two annual national budgets.

Using the multipliers offered by alternative deployment of the windfall, we could provide our national economy a boost for take-off. That will benefit not only the several thousand human rights victims or the several thousand farmers wanting to cut up agricultural land to unsustainably small-scale production. That will benefit the entire Filipino population.

Violago offers yet another method for multiplying the benefit from this windfall. The money could be used for a massive housing program to close the housing gap which now stands at about 3 million units.

Housing, we all know, has the greatest multiplier effect on the economy. The commonly accepted multiplier for investments in housing is 32 times. This means that for every P1 million sunk into housing development, the entire economy is eventually boosted by P32 million.

The windfall may be sued simultaneously for housing and ODA-assisted infrastructure development. This means we can build homes for the homeless, schoolhouses for our children, bridges, ports, airports, roll-on roll-off (ro-ro) transport, irrigation systems and so forth.

This will mean a major pump-priming of our economy. It will open millions of job opportunities, attracts external investments, improve productivity and raise incomes for everybody. We will finally be able to correct the general damage to our economy development wrought by the unbridled crony capitalism during the years of dictatorship.

In the end, with an expanded economy, government may find the means to compensate the human rights victims from added revenues and fund the sunset land reform program if we still want to do that.

Economic logic, however, demonstrates that if we continue cutting up agricultural land, we might be meeting social justice expectations inherited from the last century. But we will also be undermining our own economic productivity by encouraging inefficient production on our scarcest resource: land. We will also be keeping large sections of our peasantry in a poverty trap, tilling limited amounts of land for subsistence produce rather than for high-value crops.

Political correctness, however, militates against economic logic.

By law, we are required to direct all funds recovered from plundered wealth to fund the land reform program. This program might have been correct in the 1950s, when we had a population less that half what he have now and when benchmarks for agricultural productivity were significantly more lenient.

And so it is likely that we will give away the money for a one-time, low intensity boost for our economy. The militant farmers are insisting on the letter of the law, the coconut farmers are demanding programs that will directly benefit the actual contributors to the coco funds and the human rights victims (or at least their lawyers, who stand to benefit from a windfall themselves) will insist on having their claims treated with priority over other options that might have greater benefits for all.

I have nothing against the farmers expecting land redistribution. They have legitimate social justice claims. My problem is that, on the aggregate and over the long term, the land redistribution program will be injurious to the modernization of our agriculture and keep us dependent on imports of food produced more efficiently elsewhere.

I have nothing against the human rights claimants. In fact, I used to be a human rights claimant myself. I publicly renounced my claim after the lawyers representing human rights victims squabbled with government’s own claims to the Marcos loot before an American court. As a political scientist, my profession dictates that I submit to the prior right of the state before private claimants.

All of us who suffered human rights abuses during the period of dictatorship knew there were risks to standing up to a tyranny. All the plunder that happened during that dark phase injured all Filipinos – including those who think they might have benefited from the corruption and the dole-outs that were in both in abundance during that period.

What bothers me is this rush for instant gratification, this sense that if people get paid then justice would have been served.

In the face of that rush, then perfectly workable economic options such as those advanced by Jose de Venecia and Oscar Violago get trampled upon. The rush makes it unpopular to advance options that will serve the whole society rather than parts of it, the whole economy in a sustainable way rather than individuals in an unsustainable manner.

It always seems more popular to spread the crumbs rather than establish a bakery.

So it is more likely that the strategic benefits to the whole nation that could be acquired by using the windfall to fund projects with greater multiplier effects would be foregone. A great opportunity for properly calibrated pump priming of our economy will be allowed to pass.

It is tough to argue against a victim of torture or a landless farmer insisting that his right takes precedence over other claims. A very good idea, in these circumstances, is impaired by its own vulnerability to the (false) impression that it is heartless, politically incorrect and thoroughly technocratic.