Nostalgia has its place, but not as economic doctrine. This is a lesson lost on Donald Trump, who is hellbent on dragging America back to the 1980s, a supposedly Golden Age for the U.S. economy.
An unhealthy fondness for the past is also showing up in Asia and nowhere more than in the Philippines. President Rodrigo Duterte's bloody war on drugs, martial law threats, and paranoia about coups echo the bad old 1980s days of then-president Ferdinand Marcos. Duterte is even determined to install Marcos' son Ferdinand Jr. as vice president.
Bruising for Philippine democracy, Duterte's 26 months in office have been even more brutal for the economy. The peso's 8.4% plunge this year tells the story.
To be sure, Manila has plenty of company, with the Indonesian rupiah and India rupee registering big losses. The difference is where the Philippines stood when Duterte arrived in the presidential palace on June 30, 2016. Even self-described reformers Joko Widodo of Indonesia and Narendra Modi of India have never achieved transformation on the scale brought about by Duterte's predecessor.
Benigno Aquino took office in 2010 with his own bag of nostalgia. His father was assassinated in 1983 as he arrived in Manila aiming to challenge then-president Marcos at the polls. Marcos grabbed power in 1965 with the Philippines tipped to be the Japan of Southeast Asia. Over the next 21 years, he turned a resource-rich, English-proficient nation into a kleptocratic wreck.
In 2010, the idea that the son of a man who died fighting the Marcos machine would right the economy smacked of poetic justice. Over six years, Aquino attacked graft, increased transparency and strengthened Manila's balance sheet. He took on the powerful Catholic Church, imposing population control to curb poverty. Aquino's government held predecessor Gloria Arroyo accountable for election fraud (she was arrested in 2011).
When Aquino left office, he bequeathed Duterte an investment-grade economy on the ascendancy. The mandate was to accelerate the renaissance. Instead, Duterte switched to waging war against the drug trade, drawing rebukes from human rights groups. Lost in all the gunfire is progress strengthening human capital, boosting productivity and championing sustainable infrastructure.
Even his perceived successes are troubling. Duterte came to prominence after 22 years ruling the southern city of Davao. There, he generated growth above the national average by cutting red tape. In Manila, Duterte fast-tracked road, bridge and port projects, bypassing checks and balances and environmental reviews. The result, though, may be increased corruption and higher public debt.
The costs of Duterte's distraction are rising. Inflation, for example, jumped to 6.4% in August, far exceeding the rest of Asia. The media is filled with stories about hours-long queues for government-subsidized rice, families skipping meals and social media is showing a backlash against the government.
The weak peso is exacerbating the risk of inflation. Consumer confidence is contracting for the first time in more than two years. It is an ominous sign in a nation where 70% of gross domestic product relies on private consumption. The central bank has increased interest rates 100 basis points since May, signaling more rises to come.
To regain political momentum, Duterte is turning to the failed leaders of yesterday. He has courted the support of the Marcos clan, including Ferdinand's widow Imelda, notorious for the collection of 1,001 pairs of shoes she accumulated during her husband's time as president. Imelda is a congresswoman in Ilocos Norte province, where her daughter Imee is governor. Ferdinand Marcos Jr., known as "Bongbong," is a former senator angling for a return to power.
Duterte is cozying up to Arroyo, who in July grabbed, implausibly, the speakership of the House of Representatives. Arroyo has since become Duterte's informal consigliere on economic affairs.
That might sound fine on paper. Arroyo is a Western-trained economist and a schoolmate of former U.S. President Bill Clinton. She also has sat in Duterte's chair as president. That would be fine, were it not for her post-presidency arrest and detention on charges of electoral fraud and misuse of state lottery funds. Her acquittal in July 2016 by the Supreme Court in a majority verdict weeks after Duterte took power prompted many questions.
The peso's troubles bear her fingerprints. It was during her 2001-2010 presidency that the main Philippine export became people. The remittances they send home - more than 10% of GDP - boost consumption. But sending so many of the best and brightest citizens abroad creates a brain drain that weakens the labor pool. Because the Philippines has not become a major goods exporter, it runs a chronic current account deficit that undermines the currency.
This ghosts-of-indictments-past cycle is hardly serving 103 million Filipinos well. Take Arroyo's predecessor, Joseph Estrada, who was arrested for stealing millions from the government. After being pardoned by Arroyo, Estrada became mayor of Manila in 2013, a job he still holds.
But Duterte's nostalgia economics is imperiling the future at the worst possible moment. China's rise is an unprecedented threat to complacent economies. And U.S. President Donald Trump's trade war has investors again labeling the Philippines a weak link in the Asian supply chain.
While growth is 6%, the rate marks a three-year low. The peso is the weakest since 2005 during Arroyo's tenure. The way to higher living standards and more efficient governance is forward, not back to the strongman days of the 1980s. Duterte needs to get the government out of the private sector, reduce graft and incentivize innovation, not tighten the leash. Manila needs a reformer, not another strongman, if it is to persuade Standard & Poor's, Moody's and Fitch to keep Manila's investment-grade status.
Duterte's talk of shadowy plots to unseat him sounds Trumpian. So does his chipping away at the judiciary, legislature, media - any institution that might check him. He reportedly wants to imprison his chief opposition critic, ex-soldier Senator Antonio Trillanes.
All this speaks to the array of self-inflicted wounds preventing Manila from raising its game. Duterte's garish drug war risks hurting the economy by repelling foreign investment. So does welcoming back into power family dynasties that wounded the nation in the past.
Sadly, the case study coming out of the Philippines is how to go from emerging-market hero back to cautionary tale in just 809 days. If investors should be nostalgic about anything it is the pre-Duterte days when the Philippines was going places.
William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades." He won the 2018 prize for excellence in opinion writing from the Society of Publishers in Asia for his work for the Nikkei Asian Review.
