A group of alleged farmer organizations came out with a full page advertisement earlier this month in a newspaper denouncing Senate Bill 2553, or the Farmland as Collateral Bill, and asking President Arroyo to scrap or veto the bill.

The group claims the bill will lead to the death of agrarian reform and to the reconsolidation of ownership of land by a few.

Nowhere is there a solid argument in that advertisement or in the hearings held by Congress that the bill will lead to the loss of farmers’ welfare or a loss in productivity. Instead, the group and its supporters advance what are essentially “bleeding heart” arguments. “Kawawa naman ang mga farmers” is essentially the gist of their arguments, although the scientific research and the economic logic show otherwise.

The fact is that the farmers are to be pitied now because under the present law, farmer beneficiaries aren’t allowed to mortgage their Certificate of Land Ownership Awards. They therefore have to resort to the underground, illegal credit markets and pay usurious rates.

Worse, because their CLOAs lack collateral values due to their non-mortgageability under the present law, farmers resort to “pawning” their land, according to a study by the Philippine Institute of Development Studies. This means that the farmers yield to the creditors the right to farm the land or part of it.

This is the status quo that the opponents of SB 2553 want to keep: farmer beneficiaries cut off from the formal credit markets and under the mercy of usurers.

The opponents of SB 2553 are also objecting to a provision in the bill that would allow farmer beneficiaries to sell their land. They prefer the status quo wherein ownership rights of the farmer beneficiaries are limited. Farmer beneficiaries aren’t allowed to sell their land except to the government or to other beneficiaries, effectively limiting the market, and hence, the value of their land.

These bleeding heart opponents of the Farmland as Collateral Bill don’t want to give the farmer beneficiaries the freedom to do what they want with the land. They want the farmer beneficiaries to be chained and tyrannized by government or unable to freely choose and get the highest value for his land. In other words, they want the beneficiaries to be poor farmers forever.

These bleeding heart opponents also oppose the bill because they say it would lead to the reconsolidation of land ownership by former landowners. They point to a provision lifting the limitation in the ownership of farm land to five hectares.

The PIDS study doesn’t show that former landlords are reacquiring the land that was taken from them by the government through foreclosures on unpaid loans to the farmer beneficiaries. The farmer beneficiaries are more likely to borrow or pawn their land to relatives or neighbors.

Besides, even assuming, without conceding, that former landlords are reacquiring their former lands through legitimate foreclosures or purchases, so what? The bill’s opponents have never been able to refute the Coase theorem (named after Ronald Coase, the Nobel laureate for economic science): he who values the land most will prevail.

This means that efficient farmers will always buy out the inefficient ones, which will lead to an increase in agricultural efficiency and overall increase in welfare. A farmer who can only make 10,000 pesos from his land is much better off selling his land and working for another farmer who can make 100,000 pesos from that same land. Society benefits; individual farmers benefit. Restricting the market in farm land will ensure that all farmers are condemned to perpetual poverty and inefficiency.

A progressive land tax may be desirable from a social policy point of view but it’s not an argument for not passing the bill. The bill aims to improve farmer beneficiaries’ access to the formal credit markets, to widen the market for their land, and to permit the process by which efficient farmers can buy out inefficient ones. None of these objectives can be attained by a progressive land tax.

A progressive land tax is desirable only if society believes that concentration of land ownership isn’t a desirable thing. In fact, there may be no need for a progressive land tax if protection for agricultural products is lowered. The unearned “rent” of landlords is reduced by the importation of competing agricultural goods. In reality, because of smuggling, this is happening now.

Instead of a progressive land tax, what should be passed is the removal of the restriction in foreign ownership of agricultural land. Allowing foreigners to buy agricultural land increases the universe of buyers. This will not only improve the marketability of farm lands, but also ensure that the most efficient farmers, be they native or foreign, will end up owning farm lands.

The opponents of the bill are essentially for the status quo. And what is the status quo? Small landlords, most of them middle class professionals, get targeted by CARP while the big, politically powerful landlords get away with a stock ownership scheme. Farmer beneficiaries have to borrow from the usurers. Farmer beneficiaries also can’t sell their land to anybody they want and for the highest price. Efficient farmers can’t expand.
President Arroyo, who pushed for the Farmland as Collateral bill in her State of the Nation speech, should not be swayed by the bleeding heart arguments of the status quo adherents. She should instead ensure that the bill is passed into law in the current session.

Ferdinand Marcos and Martial Law

Lessons for Today

One of the reasons Navy Lt. Antonio Trillanes gave for staging the Oakwood incident was the purported plan of the Arroyo government to declare martial law.

It was an incredible charge and was accepted with much skepticism and disbelief. What did happen was the declaration of a state of rebellion in response to the Oakwood incident, which was eventually lifted after opposition from the business community.

However, one of my politically astute friends said that all this talk from high government officials about continuing plots to destabilize the administration and linking criminal incidents like kidnappings and the Citibank robbery to these plots is pretty ominous. It would seem as if they are preparing the justification for a declaration of martial law.

I assured my friend that in the unlikely event that it does happen, it’s not going to last. However, I will concede that the situation today reminds me is of the situation prior to Marcos’ declaration of martial law in 1972.

Prior to 1972, the split between the factions in the political establishment became irreconcilable. Perhaps it was because of Marcos’ stealing of the election in 1969 to become the first ever Philippine president to be re-elected. Marcos stole the election through unabashed use of the Central Bank to print money and through the more than usual guns, goons, and gold. But by stealing the election in 1969 to become the first president to be re-elected, he upset the usual pattern in which alternating factions controlled Malacanang.

Marcos decided to eliminate the other faction permanently by declaring martial law in 1972. The economic crisis that he himself was responsible for, by printing money during the 1969 elections, brought the students and leftists out into the streets. He suspected that his political opponents like Aquino would connive with the leftists to drive him out of Malacañang.

Marcos then used the military to eliminate what he called the “oligarchy” and communist insurgency. Actually, he used the military to eliminate the opposing faction and he monopolized rent-seeking political power.

That same situation - factions in the political establishment in an irreconcilable course - prevails today. What’s also clear is that like in 1972, what tips the balance in the struggle of the two factions is the role of the military. It was really the decision of former Defense Secretary Angelo Reyes to change his allegiance that sealed the fate of former President Estrada. People power was a component but the most important variable was the political role played by the military. The military controls the “tipping point.”

This lesson wasn’t lost on the Estrada camp, which may have played a role in the Oakwood mutiny. This lesson isn’t lost to Malacañang either.

The irreconcilability of the factions in our political establishment and the decisive role played by the military in the struggle between those factions don’t augur well for the future of this country. What this means is that both factions will try to politicize the military for their own ends. This is why the declaration of martial law isn’t as improbable as it may sound: the faction in power may decide to eliminate the other faction permanently, as in 1972, by using the military ostensibly to defend the republic.

It’s also possible that the military brass may decide that it has had enough of being used by either faction and take power themselves.

The 2004 elections may reduce or heighten the risk of a military takeover. If elections are clean and credible, it’s likely that the struggle between the factions will stay in the legal arena. If not, it could set the stage for a heightened role for the military.

Despite conditions eerily similar prior to 1972, President Arroyo lacks the capability and wherewithal to declare and sustain martial law.

Despite claims of being a “strong republic,” the Arroyo government is a very soft one, judging from the state of its finances. It’s surviving purely by borrowing. It’s therefore very vulnerable to the harsh judgments in the debt market. If the Arroyo government decides to declare martial law, a refusal of creditors to renew bank lines or buy Philippine bonds will quickly bring the government to its knees.

In contrast, the Marcos government prior to 1972 wasn’t as similarly indebted. Furthermore, the Marcos government got a lucky break when the Yom Kippor war broke out in 1973. That war between Israel and the Arab world resulted in the tripling of oil prices and the resulting petrodollars became available to debt-hungry governments like the Philippines under Marcos. The recycling of oil money to finance developing countries enabled the Marcos dictatorship to last as long as it did.

The moral authority of the Arroyo government to declare martial law may also have been compromised by the Jose Pidal revelations. Civil liberties are usually exchanged for better governance. But it would not be possible for President Arroyo to conduct lifestyle checks on lowly Customs officials when her own brother-in-law admitted owning a building in San Francisco while paying a paltry sum in income taxes. She would not be able to ask businessmen not to hoard dollars if martial law is declared when her brother-in-law admitted to having huge dollar accounts in Morgan Stanley.

It’s likely that a member of her faction may push her aside (Vice-president Teofisto Guingona is already trying) should she display weakness in the struggle against the opposition.

While there are strong similarities between the period prior to the declaration of martial law in 1972 and today, it is by no means inevitable that history will be repeated. Nonetheless, the escalation of the struggle between factions of our rent-seeking elite would suggest that the politicization of our armed forces and police agencies will intensify. It’s a rocky road ahead.