BusinessWorld Online Edition |The collective action problem
The Collective Action Problem
By Calixto V. Chikiamco
What is the collective action problem?
It’s the problem that arises when individuals, acting as a group, would be much better off taking a projected action but do not do so because the costs of acting collectively makes individuals rationally choose non-action.
For example, parents would be better off if they could have the schools publish objective outcomes of performance (say, passing rate in the nursing exams) to guide them on where to invest on their children’s education. But the costs of associating, negotiating, demanding, meeting, etc. with all the schools would be too much for individuals to bear, plus the fact that some individuals will “free ride” on the issue. Hence, the action is not done.
Enter the government. In some ways, the rational for government is that public goods would not otherwise be provided if left to individual rational choice alone. Government can simply mandate that all schools, in order to renew their license, must publish objective outcomes of performance. It’s more efficient for government to mandate an action that would lead to society being better off because millions of individuals acting rationally would not undertake the action. (The fact that a number of schools are owned by politicians and resist government-mandated disclosures is another issue altogether.)
What’s the relationship between collective action and development?
We now know that development is not simply a matter of “getting prices right.” The market fundamentalist assumptions behind the Washington Consensus (stabilize, privatize, liberalize) proved to be a bust. Emerging economies who adopted the Washington Consensus formula did not come out better off, and in some cases, even worse off as they experienced crises and corruption. China, the star of development in the modern times, adopted economic policies, such capital controls, state-owned banks and enterprises, and managed exchange rate, that are contrary to a totally free market model.
We know that development is also a question of national will. The East Asian miracle – the story of the post World War II development successes in Japan, Taiwan, Hong Kong, Singapore, South Korea, Thailand, Malaysia, and Indonesia – was less about getting prices right, but more about political will, or the mobilization of national institutions toward growth and national development.
A characteristic of these East Asian miracle countries is that there was a single party or institution that embraced a developmental vision and then “forced marched” their respective countries to growth and development. Koumintang in Taiwan, LDP in Japan, Communist Party in China, the military in South Korea, Golkar in Indonesia, PAP in Singapore, UMNO in Malaysia – all played vital roles in mobilizing their respective nations toward development. Their collective action problem was solved by development-oriented political parties or institutions.
Obviously, this is a problem in the Philippines, where there are no genuine political parties infused with a development vision to speak of. The result is development incoherence, of the country “muddling through,” rather than marching toward development.
The Aquino administration’s developmental vision consists entirely of eliminating corruption – walang korrupt, walang mahirap – but can President Aquino by his lonesome self change the culture of corruption, and can eliminating corruption really lead to progress and economic development? The experiences of other countries – corruption scandals have been associated with the UMNO in Malaysia, LDP in Japan, Golkar in Indonesia, to name a few – show otherwise: eliminating corruption is neither a necessary nor sufficient condition for development.
The collective action problem is the reason why political reform as much as economic reform must be in the development agenda. We need to fix our political system as much as we need to do economic reform. At the very least, we need to fix our political party system, because the people’s collective needs, desires, and aspirations are best expressed politically through parties, but how?
One idea is public financing of political parties. A bill along these lines together with public financing of political campaigns was filed in the last Congress, but it died because it didn’t get any support from Malacanang. I’m not a political scientist and I do not know if this is feasible, but public financing may help deter party-switching and strengthen programmatic or ideological parties. The present patronage system encourages corruption and party-switching.
Another idea is to remove the 20 percent cap on the party list representatives. However, both the Comelec and the Supreme Court have been complicit in corrupting the process because just about any so-called marginal group, whether security guards or cockfighting afiocionados, are represented by tradpols. Besides, these so-called parties are bereft of any developmental vision.
It has been suggested that if the government is too weak to undertake collective action to confront development challenges, Philippine-conglomerates, such as San Miguel, Ayala, or PLDT-First Pacific, will step into the breach. After all, domestic conglomerates like keiretsus in Japan and chaebols in South Korea played outsized roles in their respective countries’ development push.
This is the benign view. In those countries, where conglomerates played a successful role, their tendency to commit abuses was curbed by a need to compete in the global market and by accountability to a strong political authority. On the other hand, in the Philippines, almost all the conglomerates are into regulated, non-tradable industries, are inward-looking, and confront a weak state with little capacity for collective action. It’s more likely that whatever collective action local conglomerates undertake, it would be for their shareholders and narrow self-interest.
Apart from the anti-corruption crusade, the Aquino administration seems bereft of any deep reflection about the real causes of Philippine underdevelopment. Perhaps it is indeed time for Constitutional change, if only to spark debate on how our political institutions can be shaped to better meet the challenges of development.
Institutions matter. Politics matter. Collective action matters. These are true and must be taken to heart if we are to catch up with our more dynamic Asian neighbors.