Rent-Seeking Has Hindered Philippine Growth, Economist Calixto Chikiamco Says
Key Takeaways
- •Calixto V. Chikiamco, president and co-founder of the Foundation for Economic Freedom, argued at the 25th Jaime V. Ongpin Memorial Lecture that rent-seeking capitalism has produced weak economic growth in the Philippines.
- •He characterized rent-seeking as wealth accumulation through rule manipulation rather than productive activity, saying the Philippines in the 1950s built extractive institutions instead of dynamic capitalism.
- •He identified path dependence as the reason power, wealth, and resources have stayed concentrated in the hands of an elite few across successive administrations.
- •He traced the rent-seeking framework to the US colonial period, labeling the 1946 Bell Trade Act the nation's 'original sin,' and said the Marcos era, 'EDSA economics,' and Dutertismo carried it forward.
- •He called for constitutional reforms opening the economy, education to advance social justice, and stronger agriculture and industry, arguing that growth driven by services alone cannot be inclusive.
The Philippines' long history of rent-seeking — the practice of increasing wealth without creating any new social productivity — has left the country with weak economic growth, according to Calixto V. Chikiamco, president and co-founder of the Foundation for Economic Freedom, a Philippine economic policy advocacy organization.
"Rent-seeking capitalism… manipulates rules as to extract profit, so it's non-productive," Mr. Chikiamco said on Thursday during his keynote speech at the 25th Jaime V. Ongpin Memorial Lecture at the Ateneo de Manila University. The lecture series honors the late finance secretary who served in the administration that succeeded the Marcos regime.
"So what we had [in the 1950s] was not really dynamic capitalism but rent-seeking capitalism and we developed extractive institutions," he said.
Across administrations and changing eras, Mr. Chikiamco argued, Philippine power, wealth, and resources have remained concentrated in the hands of an elite few because of path dependence — a dynamic in which history makes it difficult for a nation to change directions.
He traced the country's rent-seeking capitalist framework back to the US colonial period, calling the 1946 Bell Trade Act the nation's "original sin." The act set the terms of trade between the newly independent Philippines and the United States. Later historical episodes — the rule of the late former President Ferdinand E. Marcos, Sr., "EDSA economics," and the rise of Dutertismo — carried the same rent-seeking economics forward, he said.
Describing today's economy as the "past continued," Mr. Chikiamco asserted that the Philippines must repudiate its past through outward-looking constitutional reforms, create social justice through education, and upscale agriculture and industrialization. The stakes, in his telling, rest on a question that has shadowed Philippine policymaking: whether growth driven by services can ever be broad-based without a stronger industrial and agricultural base.
"I think crisis will force us to make those changes and, right now, I am not very optimistic that the economy is going to improve," he said. "Even if it improves, it won't be inclusive… we need an agro-industrial evolution. We cannot run our economy on services alone." In his framing, reform arrives under pressure rather than by design, leaving the pace of constitutional, educational, and agro-industrial change tied to how the economy itself performs.
Source: BusinessWorld; original report by F. S. Abalos.
