Booty Capitalism: The Politics of Banking in the Philippines

Booty Capitalism: The Politics of Banking in the Philippines by Paul D. Hutchcroft. Ithaca, N.Y.: Cornell University Press, 1998. xiv, 278 pp. $39.95 (cloth).
Reviewed in Journal of Asian Studies, 58:3 (August 1999), 892-3.

This is a well-researched, sophisticated analysis of policies and politics in an important segment of the Philippine economy. But it is more; the author tries to put the Philippine political economy in comparative perspective to explain its relatively poor performance.

The conclusion is convincing, but not new among recent studies of Asian problems: state capacity to regulate is essential, even for the success of free market economies. And in the Philippines “the highest monetary policy making body of the land is a toothless tiger” (quoted on p. 221). What is new is the detailed account of how patrimonialism disrupted rational policy toward the banking sector. Furthermore, the account and the analysis, firmly grounded in the writings of Max Weber and based on extensive field research, are more sensitive to historical and cultural contexts than are the great majority of political economy studies. This work should be a valuable contribution to the literature trying to fathom the causes of the “Asian financial crisis,” as it was first called.

Booty Capitalism is very up-to-date as of the completion of its writing in 1996, but like so many attempts by social scientists to deal with current issues-without doubt part of our profession’s responsibility—the analysis has, to some extent, been overtaken by events. For instance, pages 244 and 245 emphasize the impact of the withdrawal of U.S. bases, which the author saw as a positive influence, forcing Filipinos to become more independent of foreign aid and reducing foreign backing for the position of the oligarchy. On this point, an analysis which some may fault for its pessimism may not have been pessimistic enough. The IMF, World Bank, Japan, and private investors have more than made up for any slack in U.S. aid. And with renewed signs of Chinese expansionism on Mischief Reef-amidst the debate over ratification of a new Status of Forces Agreement with the U.S.-the Philippines is again seeking expanded American assistance. A new president, who had once opposed the bases, now campaigns in support of the SFA. Old patterns have not changed as much as expected.

More fundamental to the author’s analysis, however, and more difficult in light of recent events, is his comparison with Thailand and Indonesia. These two countries, as of 1996 with far more impressive economic growth rates than the Philippines, are classified as having a different type of patrimonialism because of greater bureaucratic capacity than the Philippines. This capacity is then said to help explain their economic progress. But by 1998 the Philippine economy had weathered the recent financial and other economic storms more successfully than their neighbors! This does not lead to the conclusion that effective financial regulation is unimportant for economic stability and growth. Thai analysts would insist that it is crucial, but it does suggest that other factors must be included in a comprehensive comparison. One should also point out that Thailand and the Philippines are not as different as the author contends. There are even indications now that the two political economies are converging-with Thai elections and political parties, for instance, becoming more like their Philippine counterparts-in turn affecting the role of private Interests in state decisions on the economy, and thus reducing the strength of the bureaucracy. Does that spell poorer economic prospects for Thailand, or greater for the Philippines? Further analysis is surely needed. Some commentators have suggested that the Philippines learned from banking crises in the 1980s and thus avoided the worst pitfalls of the 1990s, but Paul Hutchcroft’s account (p. 230) would not seem to give this credence.

In any case, the author’s attempt to learn through comparison stands him in good stead to deal with the new phenomena of the late 1990s. A carefully argued and welldocumented thesis, even though proven inadequate by events, is a contribution to the construction of more useful analytic frameworks in the future.

Categories Philippines, General politics