Bureaucrat capitalism: the business of governance and the governance of business

LOS BAÑOS, Laguna – Filipino political life, it seems, isn’t complete without government corruption. According to the Philippine Institute of Development Studies, the country loses anywhere from P700 billion to P1.4 trillion annually to corruption stemming from ghost projects, anomalous procurement, bribes, smuggling, and so on.

For the general public, there is an expectation that the average politician will pull strings and grease palms to line their pockets at their constituents’ expense. But corruption is not just a thing that politicians do, but a symptom of, and the result of, social and economic factors that have existed for decades.

Corruption happens when those who hold political power have access to capital and natural resources and a lack of checks and balances against that access. This creates an incentive for them to hold on to that political power for as long as possible.

How do these bureaucrats keep the tap flowing, so to speak? There are several ways: kickbacks and the diversion of funds, liberalization of natural resources, land-grabbing and “development projects”, control of state-owned enterprises, and through defense contracts and “counter-insurgency.”

The recent flood control scandal in the Department of Public Works and Highways is a prime example of how politicians and their business associates use infrastructure projects to divert public funds. Such practice is practically embedded in the national budget as different forms of pork barrel; under Marcos’ 2026 budget, pork comes in the form of over P695.78 billion in unprogrammed appropriations, confidential funds, and other allocations and insertions.

Going beyond fund diversion, bureaucrats in government often leverage their position to secure lucrative public-private partnership contracts for themselves and their associates. Politicians often get a share in selling mining, logging, agricultural imports and other rights to foreign corporations.

A classic example is the botched NBN-ZTE project during the time of former President Gloria Macapagal-Arroyo. The telecommunications network project was overpriced by $130 million allegedly to cover kickbacks, including for Arroyo’s husband Mike Arroyo.

These same levers are often also pulled to appropriate land for so-called development projects. An infamous example, the Villar family’s combination of real estate development and political maneuvering meant that billions of pesos’ worth of infrastructure projects went through Villar-owned land, dramatically increasing its value. 

Public capital in pension funds is also a lucrative source of government corruption. Executives in various state-run enterprises earn profits by selectively awarding contracts to favored companies, issuing permits, and using company resources for personal reasons. 

Unprogrammed appropriations in the national budget, for example, are funded by surplus profit from Philhealth and other funds. The Maharlika Investment Fund, a sovereign fund implemented by the Marcos Jr. administration, has also come under fire; the latest being allegations of the fund’s links to Patrick Mahony, a fraudster convicted in connection with Malaysia’s 1MDB scandal.

Lastly, defense contracts and the decades-long armed conflict round out the last mechanism of government corruption. Critics have long questioned the Armed Forces of the Philippines’ procurement of substandard arms under its “modernization program.” Likewise, the whole-of-nation approach and its related programs like E-CLIP and the Barangay Development Program have incentivized military officers and local officials to pocket funds while proclaiming “victory” over communist forces.

All of these point to the overarching and systemic nature of corruption in the Philippine political machine. One could be forgiven in calling this an anomaly in the system, but on closer inspection, we can only conclude that government corruption is the system working as intended. It is a symptom of a larger problem: the administration of government as a business.

The business of governance

The use of government as an extension of business is known as bureaucrat capitalism. Bureaucrat capitalism emerges when political power is concentrated to a small class of economic elites, propped up by and in service to foreign interests. The Philippines, by the misfortune of its history with colonialism and imperialism, currently has a minority class of landlords and business elite who have ties to foreign corporations and monopolies.

Going back to the Spanish colonial period, political power was first concentrated in the Spanish landholding elite and the clergy. Landlords controlled taxation and reaped the benefits of agricultural production through the encomienda and hacienda systems, disenfranchising all but the smallest number of old pre-colonial elites that were given limited power.

Capitalists in the government bureaucracy would formally emerge during the American colonial period. The US would transform the old Spanish political framework while retaining some key elements of the economic structure.

Keeping land tied to a small privileged class was beneficial to US business interests. They began to favor local principalia and former Katipunan generals in an effort to secure local alliances. The US introduced programs like public education and the pensionado system to create a generation of bureaucrats instilled with “American values.” It formed the Philippine Assembly to legitimize local elites serving its interests.

The result was a form of pseudo-democratic governance built on the control of land and other natural resources, supported by political patronage. The landed and business elite’s access to natural resources and capital allowed them to uniquely hold political power, which they leveraged to further their economic control. 

Under such a system, economic power made political power. These prominent ruling families became political dynasties, with government service becoming an extension of their capital acquisition; a feature of the Philippine political anatomy that exists to this day.

According to the Philippine Center for Investigative Journalism, 216 out of the country’s 253 legislative districts were held by political dynasties in the lead-up to the 2025 midterm elections. Two hundred nine (209) of those seats were contested by political families, either as reelectionists or to switch with other family members. Seventy-one out of the country’s 82 provinces are likewise held by political dynasties.

Dynastic rule often overlaps with business ownership. Most dynasties have their business interests in construction, agriculture, wholesale trade and retail, accommodation and food services, and real estate. A paper published in the Ateneo Journal of Government and Economics noted that “when political power is rewarding and leads to exclusive access to natural resources and/or similar rent-seeking activities, there are more incentives for elites to hold on to power. As such, improvements in welfare and the economy are not prioritized as these can ultimately diminish access to rent-seeking opportunities.”

Capitalists in the bureaucracy form a web of political actors that seek to drain as much wealth as possible through the state apparatus. However, this web cannot exist without the existence of the current economic system: backwards, de-industrialized, and concentrated on a small class of economic elite. This same web also continues to exist as long as it favors transnational and multinational business, foreign interest, and monopoly capitalism.

The cost of doing government business

In the game of bureaucrat capitalism, the biggest losers are the Filipino people. The Ateneo paper concluded that the “longstanding observation that political dynasties deter development” remained valid, but also noted that in cases where business ownership does not fully overlap with political office, there is greater pressure to spur economic growth, but not enough to “make sure economic benefits spill over to the rest of the province.”

The lack of economic development means that most Filipinos are stuck with a backward economy, working jobs in the informal sector, for subsistence wages. In the countryside, agricultural production loses out to massive imports and a lack of support for farm inputs. Budgets for social services like healthcare and education are slashed to make way for spurious construction projects.

All of these result in the all-too familiar government inefficiency and uselessness that Filipinos grapple with on a daily basis. Millions of Filipinos lose out on jobs, land, education, social services and other basic rights due to the predatory practices of political dynasts and capitalists in the bureaucracy.

The elites’ entrenchment in government bureaucracy also means that the state machinery is used to their benefit. Entire laws are crafted to allow for easier access to natural resources or with glaring loopholes left in place to allow businesses to consolidate themselves more easily. Institutions like the police, military, courts, and government agencies become extensions of corporate agency, propped up to serve and protect business interests.

Closing shop

Despite its prevalence, the recent upsurge against corruption proves that the Filipino people remain disgusted by bureaucrat capitalism. The crucial question now is how to decisively defeat capitalism in the bureaucracy, and with it, corruption in government.

Because bureaucrat capitalism is systemic in nature, it only follows that to defeat it, the system must also be changed. Investigations, transparency, and accountability, though massively important in exposing the most corrupt elements in government, are ultimately limited in that they continue to play by the rules of the game set up by the corrupt officials themselves.

This means that to dismantle bureaucrat capitalism, we must dismantle the present system and establish a genuinely democratic one that represents the interests of the Filipino people. It means that the movement against corruption must necessarily be a movement for genuine democracy, against foreign exploitation, against the economic elite, and for the people’s civil and political rights.

With the government remaining complicit in corruption, we can expect public outrage to continue. When the Marcos Jr. administration first revealed that there were anomalous flood control projects, it hardly expected public outrage to connect the dots and conclude that the President himself must have had a hand in the anomalies. The government is thus keenly aware that rocking the boat might expose more holes and create greater blowback.

Already, there are calls for corrupt officials to step down or be brought down. The rising tide of protest calls also mean that more Filipinos will not wait for the 2028 elections to replace the current crop of corrupt officials. Depending on how the protest movement continues, sharper calls like an ouster movement might emerge. Ideas like transition councils might even be floated should the anti-corruption forces reach such a momentum.

Ultimately, the question of corruption can only be dealt with by attacking the core of bureaucrat capitalism. It is an extraordinary task that requires an extraordinary movement, but it is not impossible. Our history of struggle has also shown us that in times of great crisis, the people can unite to defeat the great evils of our time. (RVO)

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