The crux of income inequality

A couple built a small business to support their family. Through the years, the business grew profitable enough to sustain their six children. Tragically, both parents died. The two eldest brothers took control of the family business. Although it earned enough to afford a middle class lifestyle, the elders would constantly declare that the business was struggling. They demand that the younger siblings live a life of austerity. The younger ones are given only enough to subsist while the elders live in luxury.

This tale of inequity is a metaphor for the Philippine situation where the narrow elite control both the political system and the economy.

Pre-pandemic data show that approximately 40 families control 76 percent of the economy or roughly P13.7 trillion worth of economic output per year. Tax records further show that 489 families have a net worth of P1.5 billion or more, many of them are political families. A total of 250 families control the political affairs of the country. On the other side of the pond, 58.4 million Filipinos are made to live on a daily income of only P779 or less. The inequality is as scandalous as it is oppressive!

At the heart of the problem is our flawed political system. Ours is one where the political elite and the economic elite are one and the same – and here lies the crux of the problem. Our system allows business moguls and their relatives to delve into politics to consolidate power. It also allows politicians to diversify into business to consolidate wealth. The powerful combination of political influence and wealth makes these families invincible.

The business and political elite, which have become one and the same in Philippine society, are able to leverage on their power to secure lucrative contracts from government; able to legitimize land grabs; able to protect their businesses from competition; able to channel development funds (pork barrel) towards their purposes, among other forms of graft.

The power and wealth of the elite accumulate over time. Meanwhile, ordinary Filipinos live from hand to mouth with little chance of breaking the glass ceiling.

Elites are a natural occurrence in any democratic, market driven economy. Nothing wrong with having them. But in more equitable countries like Japan and South Korea, the interests of the political elite and the economic elite are never made to intersect. In fact, one is made to mitigate the other.

The stronghold of the elite over the country’s wealth will not be broken unless private business interests is purged out of the political system. This is precisely why Republic Act 3019 (the Anti Graft & Corruption Practices Act) and RA 6713 (the Code of Conduct and Ethical Standards of Public Officials) expressly require public officials to totally divest their business interest.

But it has become common practice for politicians to hide their business interests in a web of dummy entities. It is an open secret that almost all are engaged in and are compliant to. No one raises a howl since all are involved in the sinister plot.

This must stop. The basis of determining whether a public servant has concealed business interests must not be from mere documentation alone. It must also be based on regular lifestyle audits, daily movements and communications surveillance and regular financial audits without the privilege of bank secrecy laws. Business conflicts must apply up to the third degree of consanguinity. And like plunder, those who conceal business interests must face criminal, non-bailable charges. This is the system adopted in South Korea to great success.

The second way to diffuse the stronghold of the elite and achieve greater income equality is through the enactment of the Anti-Dynasty Bill.

Political dynasties are more entrenched in our system than many of us realize. In the Senate, 16 out of the 24 members belong to political dynasties. 70 percent of Congress belong to political clans. 73 out of 81 provinces are controlled by political families.

The evils of political dynasties cannot be overstated. Apart from concentrating wealth and power to a few, political dynasties give priority to the preservation of power over all else. Unpopular reforms are avoided if they erode political equity and adoption of populist policies becomes the norm. Dynasties give an unfair advantage to relatives during elections. In leadership, the second generation often emulates the habits of the first. New ideas are stifled due to inbreeding of management style and bad habits are magnified.

Article II, Sec. 26 of the Constitution is clear in its intent. It states: “The state shall guarantee equal access to opportunities for public service and prohibit political dynasties.” Although expressly mandated by the Constitution, our legislators, past and present, have conspired not to enact an enabling anti-dynasty law. There have been 32 attempts but not one has passed the committee level of the lower house.

Our laws have provided mechanisms to prevent conflicts of interest in public governance. But our elected officials have colluded to render these mechanism benign. Make no mistake, until our political system is reformed, income inequality will persist and fester.

But how do we correct this if the very people who are empowered to enact the laws are the very people who have most to lose by doing so?

Our only hope is to elect a transformative leader in 2022, one who rejects the status quo and who is committed to political reform. Only the president can drive the passage of the anti dynasty bill and give teeth to RA 3019 and RA6713.

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Email: Follow him on Facebook @Andrew J. Masigan

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