Why nations succeed

The book “Why Nations Fail: The Origins of Power, Prosperity and Poverty” may offer us a logical explanation why President Aquino’s net satisfaction ratings continue to slide despite a palpable economic growth of 6.4 percent in the first quarter.

Authored by Massachusetts Institute of Technology developmental economist Daron Acemoglu and Harvard University political scientist James A. Robinson, the book argues that the key differentiator between countries is “institutions.” Nations thrive when they develop “inclusive” political and economic institutions, and they fail when those institutions become “extractive.”

“Inclusive economic institutions that enforce property rights, create a level playing field, and encourage investments in new technologies and skills are more conducive to economic growth than extractive economic institutions that are structured to extract resources from the many by the few,” the authors write.

They add: “Inclusive economic institutions are in turn supported by, and support, inclusive political institutions,” which “distribute political power widely in a pluralistic manner and are able to achieve some amount of political centralization so as to establish law and order, the foundations of secure property rights, and an inclusive market economy.” Conversely, extractive political institutions that concentrate power in the hands of a few reinforce extractive economic institutions to hold power.

The lesson of history is that you can’t get your economics right if you don’t first get your politics right, the authors say, which is why they don’t buy the popular idea that China has found the right formula for combining political control and economic growth.

“Sustained economic growth requires innovation,” the authors write, “and innovation cannot be decoupled from creative destruction, which replaces the old with the new in the economic realm and also destabilizes established power relations in politics.”

The President’s popularity ratings continue to go down. Palace supporters reflexively dismiss the drop in national net satisfaction ratings as “seasonal.” Another favorite explanation is that ratings “come and go” and are mere “snapshots” of the nation’s mood at a particular season.

The deterioration of Mr. Aquino’s popularity is happening for the second quarter. That it does so after the economy bounced back to a 6.4-percent GDP growth in the first quarter should give thoughtful technocrats pause. The numbers do not seem to jibe—one set must be wrong. But first, let’s look at the satisfaction ratings.

According to the Social Weather Stations (SWS) in a new report, the President’s net satisfaction rating has dropped to its lowest since he assumed office in 2010, although most Filipinos still hold a favorable view of his performance.

Public satisfaction with Mr. Aquino remained in “good” territory in the May 24-27 survey, but his net score was down seven points to +42 (63 percent satisfied minus the 21 percent dissatisfied) from March’s +49 (68 percent satisfied, 19 percent dissatisfied).

The second-quarter result was a record low for Mr. Aquino, who received an “excellent” +64 net rating in November 2010. His net ratings fell in all geographic areas but one, and among all socioeconomic classes. The most notable drops were recorded in Metro Manila and in the ABC class, which dipped to “moderate” from “good.”

In Metro Manila, the score plunged 34 points to +18 (+48 percent satisfied, 30 percent dissatisfied) from +52 (+72 percent satisfied, 20 percent dissatisfied). A larger 35-point dive was seen among the ABC class to +25 (54 percent satisfied, 29 percent dissatisfied) from March’s +62 (79 percent satisfied, 16 percent dissatisfied).

Mr. Aquino’s numbers gained only in Mindanao, where his net satisfaction ratings rose to eight points to +61 from +53, staying in “very good” territory. He lost ground in the Visayas, dropping to a “good” +41 from the “very good” +50 previously, and maintained his “good” score in Balance Luzon, although down four points to +41.

Rural satisfaction was almost unchanged at +51 from +52, still “very good,” while urban satisfaction fell to +35, still “good,” from +45.

By socioeconomic class, Mr. Aquino’s net rating remained “good” among the class D or masa at +41, slightly lower than the previous survey’s +46. Those in class E allowed him to maintain his “very good” ratings, although down two points to +50.

Political analyst Ramon Casiple said the Metro Manila plunge was “related to rising prices…”

Another political analyst, Benito Lim, said that while inflation dropped to 2.9 percent in May from 3 percent in April, many “did not feel that prices of commodities are lower.”

“The results show that the people feel that economic issues are not being addressed, but [the ‘good’ overall rating] shows the people are still hopeful [Mr. Aquino] will do something soon,” Lim said.

Secretary Herminio Coloma Jr. of the Presidential Communications Operations Office said the administration would “not be deterred by seasonal fluctuations in levels of public perception” and would “remain focused on creating more job opportunities, reducing poverty and instituting meaningful reforms that will institutionalize good governance.”

A very good answer—right down the path taken by “Why Nations Fail.” The thing now is to translate the first-quarter growth to economic policies that will include the segments of the population that need help most.

Winston A. Marbella is president of a think tank that transforms social, political and economic trends into public policy and business strategy. E-mail [email protected].