Duterte, a social democrat

A few days before the May 9 elections, I met Carlos (Sonny) Dominguez, one of the closest economic advisers of presumptive President-elect Rody Duterte, at a board meeting of a conglomerate in which both of us are independent directors.

I told Sonny that I was about to brief some business people on the country’s postelection economic prospects, and that it was difficult for me to be optimistic because his candidate had shocked members of the Makati Business Club with a rambling speech replete with expletives but with no content on the economic policy that he would follow if he were elected president. Sonny said I should tell my friends in the business community to focus on Duterte’s accomplishments when he was mayor of Davao City for some 20 years.

With that advice, I recalled what members of the Davao Chamber of Commerce and Industry told me two weeks earlier, when I visited their city. Davao entrepreneurs were literally waxing lyrical about how business-friendly their mayor had been. He not only transformed one of the most violence-torn cities in the country to a very peaceful community with a low crime rate; he also significantly improved the business climate by shortening the time for securing all types of business permits, getting rid of corruption in the city’s offices, and significantly improving its infrastructures. His long years of experience of respecting market forces and the human rights of individual economic initiatives contrast markedly with his constant reference to himself as a “socialist.”

In fact, what I told the business audience that I briefed after my conversation with Sonny was that Duterte was in truth and in deed not a socialist but a social democrat along the lines of the social market economy of the Federal Republic of Germany.  After listening to the same Sonny Dominguez, the presumptive finance secretary under the incoming administration, announcing his principal’s eight-point economic agenda, I am even more convinced that Duterte is far from being a socialist.

He has no intention to nationalize strategic industries, distribute more private lands to small farmers, or increase both the fiscal deficit and national debt of the government, as did the most recent socialist leaders of Greece, Venezuela, Brazil and, up to recently, Argentina, bankrupting their nations and drastically increasing the number and the misery of the poor in their respective countries. On the contrary, he wants to continue and maintain the very prudent macroeconomic policies of the Aquino administration, which leftists refer to derisively as “neoliberal.” He wants to remove the restrictive economic provisions in the 1987 Constitution in order to attract more foreign direct investments. He wants to involve more private participation in the construction of infrastructure projects by addressing bottlenecks in the implementation of the public-private partnership program. These are all market-friendly policies that have made the leftists (especially the National Democratic Front leaders) literally see red!

Duterte, however, does not believe in the absolute monopoly of the market (to quote Pope Francis). Very faithful to the principles of a social market economy, he firmly believes that the government has to be strongly interventionist in areas where markets fail. Actually, he is just reminding all of us of what Adam Smith, the father of free enterprise, pointed out more than 200 years ago: that the state has some indispensable roles to play in society. The state must be responsible for keeping peace and order, administering justice, constructing public works, and delivering social services especially to the poor.

That is why Duterte wants to pursue a genuine agricultural development strategy that will depart from the simplistic approach of land redistribution. He wants to focus on providing support services to the small farmers who have been the beneficiaries of the first phase of agrarian reform. He wants to address bottlenecks in land administration and management systems. I interpret this as a desire to enable small farmers to either lease their farms or even sell them outright to those who can make more productive use of them (whether corporations or cooperatives). He intends to improve the income tax system to make it progressive. I read this as a plan to lower the taxes for the most harassed taxpayers, the middle class, or those who are earning less than P200,000 annually.

Because of his genuine concern for the poorest of the poor, Duterte will not hesitate to continue a program that dates back to the Arroyo administration: the conditional cash transfer program, which he intends to expand and improve as an instrument to keep children, especially in the rural areas, longer in the school system. He acknowledges that the best service the government can give to the poorest of the poor is to provide their children with free access to quality basic education and to tertiary education that is relevant to private employers’ needs.

As someone who “has been copying since he was in grade school” (to quote one of his many jokes during the election campaign), the presumptive President-elect is doing very well copying the examples of the tiger economies of the last century—i.e, Singapore, Taiwan, Hong Kong and South Korea. The GDPs of these economies grew at 12 percent annually for more than a decade because they allowed market forces to operate side by side with strong government intervention.

As far as ideology is concerned, I would put Rody Duterte in the same class as Angela Merkel of Germany rather than Hugo Chavez of Venezuela.

Bernardo M. Villegas (bernardo.villegas@uap. asia) is senior vice president of the University of Asia and the Pacific.