Selfish

It is a rather telling event that the Province of Palawan wants to be a federal unit all unto itself should we decide to shift to a federalist system in the event a new Constitution is adopted.

One of the very first resolutions submitted before the Consultative Commission called for Palawan to be declared a federal "state." The motive for this is not hard to see. The province wants to have exclusive share of the revenues from the Malampaya oil and gas fields, leaving none to be enjoyed by the poorer provinces.

That is a selfish motive. But it is characteristic of all the arguments advanced by those advocating a shift to a federal form of government.

Beneath all the emotional rhetoric about "Imperial Manila" and the usual victimhood formulations that say, basically, that some regions are poor because they have been given an inadequate share by the richer regions, the real driving force behind the demand for the adoption of a federal structure is selfishness. It will be selfishness at the expense of nationhood and at the cost of inter-regional equity.

Only one thing distinguishes the demand for federalism from the existing process of devolving power to the local government units: the federal unit retains a major portion of the revenue it collects and leaves the national government with the crumbs.

While the federal units retain the lions share of the revenues, the national government will be left shouldering the outstanding debt burden along with the other big ticket expenditure items like national defense, diplomacy, the major infrastructure costs and the bloated national bureaucracy.

The most fanatical proponents of federalism peddle this idea as some sort of snake oil that will cure all ills. And yet they provide not a single study of the fiscal consequences of such a move nor a political economy analysis of its strategic repercussions.

However, in the modern world we live in, the market will immediately penalize a wrong social and political experiment long before whatever positive outcome of that experiment could be realized.

Concretely, for instance, once we signal we are moving into a federal arrangement where the regional units will hold on to the revenue collections and give the sovereign national state only what is convenient for them to surrender, the international financial community will immediately slap a big question mark on our ability to service the outstanding debt.

On the day a federal constitution is ratified, our credit ratings will probably fall through the floor and interest rates charged for our borrowings will shoot through the ceiling. We will immediately fall into a financial crisis, unable to borrow to meet our needs at rates that will allow us to progress.

The day we tell the world we will shift to federalism, we will suffer a fiscal meltdown.

I could not imagine what gains federalism will bring our people under conditions of a fiscal meltdown. The nation-state cannot borrow from the international market to finance development. The small federal units, especially those composed of the country’s poorest regions, will not be bankable enough to enable them to source funds.

With a smaller share of the revenues, the national government cannot subsidize the development of the poorer regions. Disparities in income will widen. The rich regions will be richer; the poor regions will be immensely poorer.

Take the case of the ARMM, currently our poorest region and one where the opiate of federalism is strongest as some delusory cure-all for the complex problems afflicting the regional community.

The revenue generated from the ARMM amounts to something like 4 percent of what it needs just to maintain a barely functional administrative apparatus. It is, like most of the regions of the country, "revenue-negative." It will be worst victim of the delusion of the false promises of federalism.

In a federal arrangement, the national state will not have enough revenues to subsidize the administrative costs of this region, much less the large expenditure in social services, education institutions and health care that this region so desperately needs. That region will quickly descend into a little Somalia – a failed state with no capacity to maintain order, provide public services and resist the propensity to break up into little warlord turfs.

In the meantime, holding on to their lion’s share of the revenues, Cebu, Central Luzon, Southern Tagalog and the NCR will quickly advance to the level of Malaysia because they do not have to care for their poorer cousins in Bicol, Samar-Leyte and the Cordilleras. As regional disparities in income quickly widen, we lose all sense of nationhood.

I briefed economist Philip Medalla, whose insights always impress me, on the state of the debate at the ConCom regarding federalism. He concluded that this is really a ploy of the other regions to slip our of the circle of common responsibility for the public debt. By federalizing, the other various regions simply wash their hands of any responsibility for the debt. That responsibility will be passed on to what remains of the nation-state which will have a lesser share of revenues. This is a sure formula for financial collapse.

Put aside all the deceptive (although also seductive) "victimhood" demagoguery that pins the blame on an "unresponsive" central government. That is simply a new mutation of the old method of shifting blame to outsiders.

Remember how, for decades, we blamed foreigners for our miseries rather than analyze our own inadequacies with a view to correcting them? That is the same syndrome driving the federalist delusion: blame "Imperial Manila" rather than investigate where local governance failed.

Yet, if we look closely at the plight of our poorest regions, it is not difficult to see the clear correlation between inferior local governance and poverty. The better-managed provinces are growing quite well. The provinces ruled by the traditional elites and corrupt warlords are dirt poor.

Federalism will not reverse that phenomenon. It will aggravate it.

Driven by short-sighted selfishness, the federalist movement will invite greater harm to the already vulnerable.