(DP 2005-11) A Federal Structure Is Costly and Does Not Guarantee Progress

Gerardo P. Sicat

Abstract


The paper discusses the suitability of the federal form of government as a replacement for the centralized structure of government in the context of Philippine economic and political conditions. The answer is depicted in the title of the essay. In providing a review of the main question, different countries in East Asia and countries are assessed. In all of them, economic performance is not due to the form of their government but to the use of correct economic policies. The federalist program proposes seeks to divide the Philippines into separate states to form a federal union. This is contrary to the historical experience of modern and successful federal states where the separate states first evolved as self-governing regions before they decided to form a federation. There are many disadvantages of the federalist proposal in the context of existing Philippine conditions. Changing to a federal structure does not promote international competitiveness since the restrictions on the movement of specific factors of production – foreign direct investment in some sectors in this case – will continue to exist without an amendment of the economic provisions that is not in the federalist agenda. A federation will strengthen the power and political hold of local political dynasties and warlords and this can result in the incidence of monopolies. A federal form of government can create the basis for balkanization of an increasingly divided nation. The nature of central -local government sharing of burdens and resources is a continuing agenda whether in a unitary or federal government. Even in a federation, these problems will not go away. The condition of an impoverished central government is due to the inability to improve the economy’s performance. In the Philippine context, this is due to the restrictive economic provisions of the Philippine Constitution.

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