Booty Capitalism

BOOTY CAPITALISM

What is booty capitalism?

Paul D. Hutchcroft attributed the Philippines’ longstanding “development bog” to the country's system of booty capitalism, which he examined in the particular area of private commercial banking. He explained further that “booty capitalism emerged from relations between a patrimonial state and a predatory oligarchy.” In essence, “booty” or “crony” capitalism means that private interests are pursued using public resources and in which economic and political oligarchs abuse the apparatus of the state.

What was the effect of booty capitalism on the Philippine political economy?

Philippine economic growth was second only to Japan’s in the 1960s. Unfortunately, the Philippines at present is viewed as one of the sick men of Asia. Hutchcroft explained the stagnation of the Philippine economy in the 1970s and 1980s compared to what is otherwise distinguished as a comparative Asian miracle in surrounding countries. He used the banking system as a prism for his empirical analysis of the state and various economic agents. According to Hutchcroft, the main problem of the Philippines is a lack of a strong, reliable State apparatus to direct economic transformation or to even carry out minimally defined socio-economic functions. The economy is presented as made up of agents whose entire economic existence is based on a rent seeking quest. The oligarchs, according to Hutchcroft, have been, and still are, plundering the State apparatus for their own particularistic advantage.

The Philippine experience highlights the importance of moving beyond the blind state-bashing of neoliberal ideology. It also requires recognizing the damage done to the economy given an oligarchy, assisted under American rule, to consolidate its control over a weak central state. Without a state that is able to provide more predictability in its adjudication and administration, Hutchcroft remains pessimistic about the future of the people of the Philippines.

Does the present law in the banking system address the inadequacies of Philippine financial system?

The New Central Banking Act (RA 7653) states that the Bangko Sentral has supervision over the operations of banks and exercises such regulatory powers over the operations of finance companies and non-bank financial institutions performing quasi-banking functions. As such, I am optimistic that oligarch capitalism can be regulated to ensure an efficient bureaucratic apparatus. I honestly believe that the Philippines is faced with the gigantic task of reforming the bureaucracy, which requires the implementation of a merit-based recruitment system and a clear-cut career incentive scheme to attract and sustain the best and brightest into the civil service. To overcome these challenges, there is a need to continue formulating a series of reform packages to strengthen the Philippine state and its institutions of governance.