From Business World online - - -

Posted on January 10, 2016 08:24:00 PM

A city is not a country

Introspective

Emmanuel S. de Dios

Malaysia’s Mahathir, never known for either reticence or reverence, spoke of his old foil Lee Kuan Yew, in this way: “The fact remains that he is the mayor of Singapore. This is something that he doesn’t like. He wants to be big, you see, and he feels that we took away his opportunity to lead a real country.” (Lee, of course, passed away in March last year.)

The quote is relevant in the current presidential campaign, where leading candidates are running based explicitly and solely on the record of their local executive experience. Perhaps luckier than Lee Kuan Yew, however, as far as the surveys suggest, some of these persons may actually get a chance to lead “a real country.”

“I did this in city X,” the typical argument goes, “now let me do the same for the whole country.” That can refer to peace and order, free health care and education, and cakes on senior birthdays. But does that argument really hold? Can policies desirable and practicable for a city always be applied to an entire country? Are the leadership skills demanded of a mayor easily amplified to those required by a head of state? Maybe not so much.

As Mahathir noted, size -- whether measured by area or population -- is the biggest difference between a city and a “real country.” Size correlates with heterogeneity in the population, their activities, their environment, and therefore their needs and opinions. A city mayor needs to worry only about her direct constituents who, living in close proximity, are likely to want the same types of public goods, i.e., preventing index crimes and enforcing the law, sanitation and waste disposal, good transport and a quick commute, and a clean environment. Everything else, as they say, is icing on the cake (reference unintended).

The leader of a “real country,” however, may have to worry about somewhat more. Most important, unlike a mayor, the head of a country must usually also worry about a hinterland or countryside -- which in the Philippines is still home to more than half (52%) of the population, and certainly the bulk of the poor (some 80%). Cities and towns are by definition already huge concentrated markets, where the business sector is active: a mayor’s problem is mainly to facilitate that activity and see that it flourishes. The problem of a whole country, however, is how to create markets where none exist, and how to link lagging sectors to growing ones because connections are weak and the business is uninterested. Types of public intervention and public-goods provision are therefore unlikely to be the same for everyone, and difficult choices abound. For example, should government build more skyways in Metro Manila or more provincial highways? Are farm-to-market roads in remote areas a higher priority than irrigation in agriculturally developed areas? Should we allow more consolidation of land and relax the ceiling on agricultural land ownership to reap economies of scale in production? What regulations and taxes should be in place for mining to be permitted in indigenous people’s ancestral domains? Should the community in the vicinity of a hydroelectric facility pay the same power rates as everyone else? These are issues even Lee Kuan Yew was unlikely to face.

The narrowness and exclusivity inherent in the idea of a “city” may be seen in its origins.

Medieval towns existed because privileges were given to burghers who, within the confines of their walls, were exempt from taxes and prohibitions imposed by territorial feudal lords. Hence city-membership was necessarily restricted. Stadtluft macht frei, the old German saying went, which is why serfs sought refuge and relief within the walls of free towns. The same fact, however, showed that these privileges were limited and could not be generally extended to everyone without threatening the entire system. Among others, it would have led to congestion (it often did) in the towns and a collapse of production in the countryside.

In the modern nation-state, of course, terms have changed, especially in developing-country cities where the movement of persons cannot be stopped (hence our slums and informal settlers). It would take a whole treatise to explain the logic and political economy of Asian cities. But best practice still makes one mindful of the exclusiveness of cities. Economic models (notably Harris and Todaro’s) point to the uncomfortable but unassailable logic of restricting rural-urban migration.

In practical terms, Singapore’s stunning success is built on an advantage other cities do not possess, i.e., its ability to control and select its population, a principle that China’s draconian hukou system has sought to emulate. Even on a more trivial scale, however, one notes that not even Makati’s obvious patronage system gives free cakes to all seniors; nor does anyone who walks into a Makati hospital or school get free service. You would still need that yellow card.

In practical terms, extending such privileges not just to a city’s residents but to an entire country quickly runs up against the reality of hard budget constraints.

With national revenue effort still struggling at 15% (Kim Henares’s quixotic efforts notwithstanding), it is frankly difficult to reconcile universally free K-to-college education and free primary-to-tertiary health care with the country’s other pressing priorities, and it is disingenuous (and even cynical) to suggest this can be easily done. Even among cities and towns, very few are fortunate enough to be able to practise the Robin-Hood strategy of fleecing their rich business sector to cultivate a poor and dependent electorate. (Some towns barely even have a business sector worthy of the name.) At the national level, moreover, revenue mobilization is not as simple as “plucking the goose to obtain as many feathers with the least cackles”. Effort after all is elastic, capital unlike land is internationally mobile, and incomes and value-added are more difficult to measure than business turnover. Taxation is more of a chore, and the nature and rate of taxes one imposes take on a more delicate, more sophisticated aspect than the run-of-the mill ones at the local level.

Ultimately, there is a real danger in promoting the idea among the electorate that solving the nation’s problems is as simple as solving those of a town or a city. Even more dangerous is if, in their moment of hubris, some presidential candidates themselves sincerely believed that myth. For it is possible, in the event they won and were ultimately confronted by the complexity of problems and diversity of opinion, that they should hark back to those simpler times when city hall simply could not be fought, and simple forceful shortcuts in thought and deed were a real recourse. That would be a tragedy.

Before then, it would be more prudent instead to recall the humbler sentiment of Deng Xiaoping who after meeting Lee Kuan Yew and being impressed by Singapore, said: “If I only had Shanghai, I might be able to change Shanghai just as quickly [as Lee did Singapore]. But I have the whole of China!”

Emmanuel S. de Dios is Oscar M. Lopez professor at the University of the Philippines School of Economics and a fellow of IDEA esdedios@econ.upd.edu.ph