Martial law and authoritarianism, a question of inflation

Published September 22, 2022, 12:02 AM

by Diwa C. Guinigundo


Diwa C. Guinigundo

Some 14 years ago, Daron Acemoglu, Davide Ticchi and Andrea Vindigni argued in a National Bureau of Economic Research working paper (‘A Theory of Military Dictatorships’) that one, the elite who wish to maintain their political power motivate a powerful military; two, a powerful military prevents transition to democracy; and three, a powerful military “necessitates either greater concessions from the elite or an increased risk of a military take-over.”

This duality of the military requires reiteration that the civilian is supreme, and that political power derives from the people. Otherwise, society risks lapsing into military dictatorship “because the military retains some of its power during transitional democracy and can attempt a successful coup against democracy.”

In the Philippines, we just have to cite our experience with martial law starting 1972 to validate this argument. After 50 years, does it look clearer today that increased concessions to those in uniform allowed martial law to thrive for 10 years? Did we flirt with martial law, or did we actually sleep with it? Was it true that what abetted our version of military dictatorship, as the authors’ model suggested, was “greater inequality?”

Acemoglu, et al., also made an interesting point that repression after the conclusion of martial rule would have scarring effects on the economic and political success of a later democratic regime. One year after the 1986 EDSA people power, we saw a series of military coup attempts against the fledgling democracy. Some 17 years later, in 2003, another military mutiny occurred in the central business district of Makati. The point is that the military could be so emboldened by past concessions to attempt a take-over. This could trigger a series of destabilizing coups.

And what do we have to show from 10 years of martial law? Or even the extended period of Marcos’ rule to 1986?

In an interesting UP discussion paper of November 2021, Emmanuel S. de Dios, Socorro Gochoco-Bautista and Jan Carlo Punungbayan also made a similar point that in 1972-1985, described as the period of authoritarianism, the failure to transition the economy into a more sustainable path may be explained in the context of its bigger scheme of “holding on to power and seeking rents.”

The authors documented the sad fact that the Marcos rule’s best growth performance between 1972-1980 proved “unremarkable” when compared with our neighbors in the ASEAN. The best economic performance of the repressed years at 5.98 percent was not even materially different from our more recent output growth of 2009-2017 at 5.76 percent minus the military trappings. On a per capita basis, the democratic dispensation produced superior results.

One who is old enough to have gone through the economic woes of the 1970s and 1980s could say that if ever there was respectable growth during this period, it must be due to heavy borrowings. Macroeconomic imbalances and large external payments deficits persisted without immediate backlash because debt propped up the economy. Debt was cheap during this period because the global capital markets were awash with recycled petrodollars resulting from the windfalls from two oil crises in the 1970s. Debt became costly in the 1980s when central banks began to exit from easy monetary policy and tightened liquidity in the face of galloping inflation.

What is most incredible is that between 1972 and 1985, as the UP economists claimed, external debt alone bloated by $27.4 billion even as the cumulative current account deficit stood at only $16.3 billion. The difference could have likely financed capital flight and possibly, other non-legal transactions resulting from what came to be known as crony capitalism and unscrupulous investments.

De Dios, Bautista and Punungbayan were correct to observe that it is possible that confusion might have been triggered by disinformation in social media, or what psychologists would call, false memory syndrome. This is a condition in which a person’s perceptions are affected by false memories, recollections that are factually false yet strongly believed. The confusion is dominant among a whole generation of Filipinos who subscribe to the idea that the martial law years were the “golden years” of the Philippine economy.

We would prefer to frame this phenomenon as a question of inflation, not the kind that central banks around the world including the Philippines’ Bangko Sentral ng Pilipinas, are all trying to tame by aggressive monetary policy.

Péter Krekó, director of the Political Capital Institute, in Foreign Policy of Aug. 15 last year, wrote a very interesting paper aptly entitled “Welcome to the Era of Dictator Inflation.”

His version is not economic but geopolitical. “Russia, China and other authoritarian powers have grown increasingly skillful at puffing themselves up to look economically, politically and militarily powerful than they are.” These authoritarian regimes were observed to have managed well in exaggerating their roles in other countries’ affairs than their liberal-democratic counterparts. Thus, the term “authoritarian inflation.”

Krekó cited China’s much vaunted success in pandemic management against the so-called US’ “catastrophic” public health mitigation. He claimed that Wuhan super-hospital reportedly built within 16 hours after Covid-19 outbreaks was a myth, but nonetheless creating an image of super success. Russia’s Sputnik vaccines were claimed as a great breakthrough, a world savior, while Russia’s healthcare system was collapsing with increasing mortalities. The impact of both China and Russia’s health outreaches was, according to Krekó, grossly exaggerated, inflationary.

The recommended response to this type of inflation is a “nuanced and careful message,” a response that squarely tackles the challenges of authoritarianism and for this column, incompetence, without feeding their enablers’ penchant for disinformation and myth-making activities. It should be no different from managing real inflation, that appropriately tight monetary policy starves the system of excess demand.