Views on the Philippine Economy through the

Nationalist Lens: 1945-1992

Miguel Antonio JIMENEZ

Colegio de San Juan de Letran
MANILA

ABSTRACT
This paper looks into Alejandro Lichauco’s concept of economic
nationalism. Lichauco’s idea on economic nationalism centers in
finding the root cause of what he called as the Philippine Crisis
which is imperialism and neocolonialism and in the course of
solving this crisis, there is a need to de-colonize the country, and
at the same time industrialize and democratize our economy. In
analyzing the articulation of Alejandro Lichauco’s economic
nationalism from President Manuel Roxas to Corazon Aquino, this
paper used the descriptive-analytical method guided by the theory
of nationalism as power which states that are more than loving the
country, the citizens should instead find ways to empower its
nation and put the country in the pedestal of greatness and
progress.
Keywords: Power, Economic Nationalism, Imperialism, Neo-
colonization, De-colonization, Industrialization, Economic
Democratization

The Struggle for an Independent and Industrialized Economy

he Philippines is an agricultural and colonial economy, and it is

T because of the economic policies forced to be implemented by our

presidents through American Intervention. By intervening in the
political aspect of the country, the Americans were able to control
not only the head of state but also the economy of our country. As the chief
executive of the government, responsibility must be shouldered by our
president. Since our independence in 1946, the presidents became the prime
medium of our neo-colonization. Except for President Carlos P. Garcia, all of
our presidents are known to have been indebted to the United States for their
elections. Moreover, as expected, they delivered accordingly. 1

1Alejandro Lichauco, The Lichauco Paper: Imperialism in the Philippines (New York,
Monthly Review Press, c1973): 56.
Jimenez, Miguel Antonio. “Views on the Philippine Economy
through the Nationalist Lens”. TALA I:1.
(September 2018), pp 39-57.
JIMENEZ TALA 40

The Roxas Administration: Post-War Rehabilitation (1946 – 1948)

The Philippine condition was at its worst when it was granted independence
in 1946. The conclusion of the Second World War left many destroyed
infrastructure including schools and offices. Trade and commerce experienced
recession after the war burned to the ground many farms and factories. The
efficiency of the transportation system became poor due to bombed bridges and
roads. With lack of means to generate money for rehabilitation and without any
reparation aid coming from the Americans, the Philippine economy was left
paralyzed.

During the election of 1946, the Liberal Party standard bearer Manuel Roxas
won the election against Sergio Osmena, Sr. of the Nacionalista Party. The
burden of national rehabilitation fell on the shoulders of the administration of
Manuel Roxas. With the economy down and no other ways to generate income
to fund the rehabilitation program of the country, Roxas sought the help of the
Americans and asked for financial aid that would be used to rehabilitate and
reconstruct the Philippine economy. Financial aids are granted to those
countries that are in need of money to sustain their economy or in any use that
would benefit the nation. However, in the hands of international agencies
controlled by the imperialists, then it became hazardous for the country as it
develops into an instrument for exploitation. The United States offered payment
for war damages to the Philippines under the condition that the Philippine
government will approve the Bell Trade Act. The provisions of the said act set
quotas on Philippine exports to the United States, tied the peso to the dollar at
an exchange rate of 2:1 ratio, and free trade between the two countries for eight
years followed by the gradual implementation of tariffs for the next 20 years. 2
Tying the reparation payments to the Bell Trade Act ensured that President
Roxas would do everything to persuade the Congress and the Filipino people to
accept it.

The provisions of the Bell Trade Act laid the foundations of the Parity Rights
wherein there will be equal rights between the American and Filipino citizens
in the exploitation of natural resources of our country and at the same time the
ownership and operation of public utilities. The Bell Trade Act and the Parity
Rights opened the economy to the Americans and left no protection for the
rights and privileges of the Filipinos.

2 Lichauco, The Lichauco Paper, 22

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JIMENEZ TALA 41

Roxas' term was cut short due to his death in 1948 caused by a heart attack.
Then-Vice President Elpidio Quirino succeeded him.

The Quirino Administration: The Birth of Economic Controls (1948 –

1953)

The untimely rise of Quirino to presidency tackled the rough challenges left
unanswered by his predecessor. His administration has gone through a severe
financial crisis, implementation of controls, and passage of laws and agreements
that would balance the government budget.

There are many ways available to avoid the total collapse of our economy, but
the government lacked the power and will to implement those. The next
presidential election was in 1949, and Quirino knew that if the government
implements controls before the elections, then he will lose the support of the
Americans, making his presidential bid challenging to win. Therefore, the
Import and Exchange Control Act of 1948 was not fully implemented until
December of 1949, a month after Quirino won the elections. It was also during
Quirino’s term that the Congress approved, upon the recommendation of the
American financial officials, the creation of the Central Bank of the Philippines
which will be on command to control of the currency, banking, and credit of the
country.

However, there was still a condition before the controls were to be

implemented. According to the Bell Trade Act, all policies concerning foreign
exchange needed the approval of the President of the United States of America.
President Harry S. Truman approved the implementation of controls provided
that the Philippines must agree by an all-American economic mission which is
later on known as the Bell Mission.3 Led by Daniel Bell, the said mission arrived
in July 1950 and started to survey the economic conditions of our country. The
findings of the mission saw the harsh condition of the economy and
recommended measures that will promote its development. These led to the
signing of two agreements in 1950. These are the Romulo-Snyder Agreement
and the Quirino-Foster Agreement.

The Romulo-Snyder Agreement acts as the approval of the $70 million loans
appealed by then Central Bank Governor Miguel Cuaderno to the United States.
The agreement was signed by Ambassador Carlos Romulo who was appointed
by Miguel Cuaderno to be the official representative of the Philippines and US

3 Bob Corcuera, The Economic Nationalism of Claro M. Recto (N.p.: N.p.,2015): 23.
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JIMENEZ TALA 42

Secretary of Treasury John Snyder. On the other hand, the Quirino-Foster

Agreement was signed on November 14, 1950, by then President Elpidio
Quirino and William Foster, Administrator of Economic Cooperation
Administration of the United States. The agreement implemented the economic
measures recommended by the Bell Mission Report which was published in
October of the same year. Its provisions stated that the United States would
provide an amount of $250 million in 5 years that will be utilized for the
economic development of the Philippines mainly in the agricultural sector and
infrastructure.

On the other hand, the agreement urged the renegotiations of the Bell Trade
Agreement and the signing of the Treaty of Friendship, Commerce, and
Navigation that will formally United States’ recognition of the political
independence of the Philippines. However, this was described by Senator Recto
as a “mendicant foreign policy” 4 for the said agreement gave the United States
the power to send advisors to different government offices which eventually
became the basis of the official intervention of the American in our government
and economy.

Another reason why the United States agreed to implement import and
foreign exchange control in the Philippines was that of the threat of Communist
takeover.5 Allowing the Philippines to go bankrupt, without any cash to buy
commodities and to pay employees and soldiers would possibly lead to the
conversion of the Filipinos to Communism, and if such thing will happen, then
American businesses would be lost on the archipelago. While the Americans are
experiencing setbacks due to the implementation of the control program, there
are some excellent results for the part of the Filipinos. Under the impact of
these rigid controls, there was a growth in import-substitution industries and
the stimulation of a native industrial sector. 6

In the last years of his term as president, Quirino started to assume an

independent posture, which is the possible reason why he lost the confidence of
the United States thus giving their support to Ramon Magsaysay, who was then
his Defense Secretary.

4 Alejandro Lichauco. The Lichauco Paper: Imperialism in the Philippines (New York,
Monthly Review Press, c1973): 57.
5 Pedro V. Salgado, OP. Philippine Economy, History and Analysis (Quezon City: R.P. Garcia

Publishing Co. Inc., 1985): 38.

6 Alejandro Lichauco, The Lichauco Paper: Imperialism in the Philippines (New York,

Monthly Review Press, c1973): 23.

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The Magsaysay Administration: On the Threshold of Industrialization

(1953 – 1957)

The election of 1953 saw an open intervention of the Americans and their
manipulation of the election process of the Philippines. Ramon Magsaysay won
over his counterpart, Elpidio Quirino with the help of the Americans and the
Central Intelligence Agency or known as the CIA, the civilian foreign
intelligence service of the United States Government.

There was a high expectation when Magsaysay was elected president that he
would be able to solve the Huk problem which was responsible for the
deteriorating economic and social conditions in many rural areas of the
country.7Considerable parts in Central Luzon were not being cultivated because
of the threat of the Huk.

The administration of Magsaysay saw the beginning of industrial

development brought about by the imposition of controls during Quirino’s
tenure. The strict restriction on importation and shelling out dollar reserves
created import-substitute industries which caused for products imported from
the United States to be manufactured in the Philippines.

Under Magsaysay’s leadership, the nationalists raised the issues of the killing
of Filipinos who were crossing the perimeter of American military bases and the
growing resentment of the Filipinos against the unequal provisions of the Bell
Trade Act and the Parity. Negotiations were held to discuss the criminal
jurisdiction of the military bases agreement and the one-sided provisions of the
trade act. Thus, to keep the balance between the Filipinos and the Americans;
these agreements were revised and became what is known as the Laurel-
Langley Agreement. This was signed on December of 1954 by Senator Jose P.
Laurel and James Langley. The agreement ceased the control of the Americans
over the Philippine currency and flight of dollars. Also, it extended the parity
to cover all forms of business activities, thus, opening the United States to
Filipino businessmen.

On the other hand, the revised agreement also had deficiencies. The Laurel-
Langley Agreement opened the economy to all American capitalists reviving
the competition and creating large deficits between the foreign and local
products. It was also used by the Americans to exempt themselves from the
Retail Trade Nationalization law and other Filipinization procedures. It was

7 Miguel Cuaderno, Sr. Problems of Economic Development (Manila: N.p., 1964): 40.
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JIMENEZ TALA 44

Recto who exposed the folly of the Laurel-Langley Agreement and after that
led a one-man crusade against Magsaysay which later on became the reason for
him to be expelled from the Nacionalista Party. 8

Magsaysay was not able to finish his presidency due to his untimely death on
March 1957 caused by a plane crash and was succeeded by Carlos P. Garcia.

The Garcia Administration: Nationalism as Economic Policy (1957-1961)

Carlos P. Garcia is known for his Filipino First Policy. The objective of the
said policy was to make sure that the growing industrialization of the economy
worked to benefit Filipinos first and primarily.9 During the tenure of President
Garcia, import and foreign controls were utilized not only as a policy weapon
with which to induce industrialization but as a policy weapon with which to
place Filipinos in control of both the industry and the economy.

The 50’s saw the rise of the pioneers of industrialization in the country.
Among those were Salvador Araneta, who first built the flour and engine
industries; Hilarion Henares, Jr. founder of the industry of chemicals and school
supplies; Filemon Rodriguez who co-founded FILOIL, the first oil refining
company owned by the Filipinos; Severo Santiago who started the production
of telecommunications equipment; and The Marcelo, Martel, and Jacinto
families who pioneered the steel industry. It was a decade of the brilliance of the
Filipinos in utilizing their resources and organizing productive enterprises.
This process of industrialization, triggered by protectionism eventually gave
birth to two critical social classes in the Philippines, One was the class of
nationalist entrepreneurs, and the other was the industrial working class with a
nationalist leadership.10 These social classes pushed for the increased
introduction of machine and machine technology to the economy for their lives
depend on these. If there will be an increment in the industries, then profits, as
well as employment opportunities, will also expand.

The American businesses could no longer freely export their products in the
Philippine market and at the same time repatriate their profits entirely because
of the ongoing implementation of the exchange control. This steered the

8 Alejandro Lichauco. The Lichauco Paper: Imperialism in the Philippines (New York,
Monthly Review Press, c1973): 57-58
9 Alejandro Lichauco, Hunger, Corruption, and Betrayal: A Primer on U.S. neocolonialism and

the Philippine Crisis (N.p.: Citizens' Committee on the National Crisis, 2005): 59.
10 Alejandro Lichauco, Nationalist Economics (Quezon City, Institute for Rural

Industrialization, Inc., 1988): 151.

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American businessmen, with the protection and assistance of the United States
government, to appeal to open once again our country to free trade.

As early as 1957, pressures were applied to the Philippine government to

dismantle the controls. One of which is the International Monetary Fund who
gave the condition that unless our government lifted the controls, there would
be no loans to be approved. In one of Miguel Cuaderno’s book, he reiterates how
the Americans rejected their application for a $25 million stabilization loan
because they disagreed to the demands of the Americans. These are (1) To open
the economy to imports which means there will be minimal or if possible,
absence of tariffs; (2) create a foreign exchange policy that is free from any
restrictions which mean there will be no control over the transactions involving
the use of dollars or other foreign currency; (3) the value of peso should be
devaluated; and (4) to implement a strict fiscal and monetary policy which is
austere with welfare projects and social services and maintain a highest interest
rate policy.11

Between 1949 and 1960 the manufacturing sector grew at a rate of 29% a
year. Relatively, it moved faster than any other sectors accounting only 8.1% in
1949 and rose to 17.7% in 1960, and it is because of the quantitative restrictions
which serve as a protection and catalyst for domestic industrialization.

Unable to lift the controls through pressures because of President Garcia’s

solid stand on pro-control and pro-Filipino economic policy, the CIA intervened
to topple him down and to replace him with a president who is pro-foreign and
pro-free trade candidate. The CIA made use of black propaganda and electoral
manipulation to unseat President Garcia. The Americans accused Garcia’s
administration of corruption and blamed the control program as the reason why
corruption became rampant in the government. The election was also utilized
as a weapon by the Americans against Garcia. The first one was during the 1959
senatorial elections to drive away Garcia’s men and second, in 1961 presidential
elections to hinder the possible extension of Garcia’s presidency.12

The Macapagal Administration: The Death of Controls (1961-1965)

When Diosdado Macapagal rose to power in 1962, he outlined the objectives

of his socio-economic program as immediate restoration of economic stability,

11 Alejandro Lichauco, Hunger, Corruption, and Betrayal: A Primer on U.S. neocolonialism and
the Philippine Crisis (N.p.: Citizens' Committee on the National Crisis, 2005): 63-64.
12 Pedro V. Salgado, OP. Philippine Economy, History and Analysis (Quezon City: R.P. Garcia

Publishing Co. Inc., 1985): 41.

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the alleviation of the common man’s plight, and the establishment of a “dynamic
basis for future growth.”13 His administration would like to focus more on the
expansion of the agricultural sector mainly rice and maize which are the staple
food of the country. On August 8, 1963, the Congress passed the bill which
became the Republic Act No. 3844 or known as the Land Reform Code. The law
aimed the expansion of the agricultural sector through promoting higher
productivity or output and producing greater farm incomes. At the same time,
the law gave the farmers the opportunity to become independent. Under the
provisions of the Land Reform Code, the old tenancy system was replaced by
the agricultural leasehold system. The implementation of land reforms which
was mostly in provinces located in Central Luzon produced good results such
as improvement in the living condition of the farmers making them independent
and growth in their production. While the agricultural sector experienced
positive results under the reform programs instigated by the Macapagal
administration, the industrial sector started to wound up, slowing once again
the industrialization of our country.

President Macapagal discontinued the Filipino First Policy of his predecessor

which at the same time wiped away all the gains generated by the Filipino
entrepreneurial community during the 50’s. It was during the term of
Macapagal that the import and foreign exchange control was lifted or popularly
known as the Decontrol program merely three weeks after his inauguration as
president of the republic. On January 21, 1962, Macapagal signed Central Bank
Circular No. 133 which dismantled the exchange controls, permitted the peso
to seek its real level of value, and allowed full convertibility with the Central
Bank retaining only 20% of the dollar proceeds from export. Later on, he
revealed in his National Address the reason for implementing the decontrol
program had the previous approval of the International Monetary Fund, World
Bank, and the US State and Treasury Departments.14

However, President Macapagal wrote in his memoirs that he had no plans to

dismantle the controls but because of the millions of dollar loans promised by
the United States, with the pledge of US President John Kennedy to provide
more millions in case the Philippines needed it. Macapagal proudly enumerated
these loans in his State of the Nation Address in 1962 wherein he stated that the
Philippines obtained $300 million from the United States; an additional $55
million from the International Monetary Fund; $93.7 million worth for

13 Teodoro Agoncillo, History of the Filipino People, (Quezon City: Garotech Publishing,
1990): 473.
14 Pedro V. Salgado, OP. Philippine Economy, History and Analysis (Quezon City: R.P. Garcia

Publishing Co. Inc., 1985): 42-43.

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commodity and accommodations from United States law 480; and $73 million
as additional war damage payments.15

Macapagal lost the presidency to the Nacionalista candidate, Ferdinand

Marcos during the 1965 elections.

The Marcos Administration: The Struggle for a Truly Independent State

(1965-1986)

When President Marcos took over as President, he inherited the problems

that the decontrol program has made. The Philippines was put in a dangerous
situation wherein thousands of Filipino firms were in peril of shutting down
that may cause a significant rise in the unemployment rate.

The decontrol program caused the devaluation of the peso to almost 100
percent which made imports more expensive to the Filipinos. Imported raw
materials used by the Filipino industries were now costlier so as the machines
and spare parts for repairs and at the same time increased the purchasing power
of the dollar in the Philippines. Also, decontrol credit was tightened which
means the government will be strict in granting loans to the local businessmen
who, during that time, were in need of more money to cover up the higher
operating cost produced by the devaluation of our currency. Import
liberalization was once more implemented flooding the market again with
imported goods and reviving competition between Filipino and Multinational
Firms. Despite the reentrance of unlimited flight of imported products in the
market, the government still imposed high tariffs on foreign goods which served
as protection to the Filipino firms.

In his first and second term as president, Marcos continued its

implementation even if he knows the evil effects of decontrol and devaluation.
He directly gave the reason in his speeches wherein he exposed the role of the
United States, International Monetary Fund, and World Bank in pressuring our
country. Added to it was the rise of a group of people called as "technocrats."

In the mid-sixties, beginning with the administration of Marcos, a class of

economic functionaries emerged who served as proxies of the IMF and World
Bank. They became known as technocrats and were put in charge of policy
making and implementing bodies and have come to dictate the economic policies

15 Salgado, Philippine Economy, History and Analysis, 43.

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of the nation in the coming years.16 Being proxies’ mean that they echo economic
ideology and policies which the IMF and World Bank would want our
government to adopt. It is through the technocrats that these two international
institutions that forced our nation to accept these programs and policies that
have hindered the industrialization of the economy and blocked the Philippines
from becoming one of Asian Newly Industrialized Country were responsible for
our continuing colonization.17

In 1965, the country already had a debt amounting to $600 million and
Marcos during that time needed even more to finance the massive amount of
deficits and other projects the government had in mind. This is the reason why
Marcos continued the decontrol program, and in return, he was granted with
more loans. The Philippines received so much money in forms of loans from
different monetary agencies and the United States that the total debt of our
country swollen from $600 million in 1965 to $1.9 billion by the end of 1969.

Together with the decontrol and the increasing national debt, the devaluation
through the floating rate significantly hampered our economy. Devaluation, as
explained by Lichauco: “…was accomplished by depriving the peso of its
officially-supported rate and allowing its dollar value to be determined by
market transactions.”18

The devaluation of our currency led to inflation or the rise in the price of
goods and at the same time, the decline in the real wages of the workers between
1960 and 1975. The increasing prices plus the decline of wages resulted in a rise
in the rate of poverty in our country.

With the continued implementation of the decontrol and devaluation of the

peso, President Marcos passed laws that gave tax privileges and incentives to
both local and foreign investors through the Investment Incentives Act of 1967
and the Export Incentives Act of 1970. These acts were enacted to attract
foreign people in business to invest in our country, but the Filipino legislators
reacted that if the government should pass laws to give privileges to the
investors, then it should be given more to the natives, not the aliens. As stated
by Gerardo P. Sicat,

16 Alejandro Lichauco, Hunger, corruption, and betrayal: a primer on U.S. neocolonialism and
the Philippine crisis (N.p.: Citizens' Committee on the National Crisis, 2005): 64.
17 Lichauco, Hunger, corruption, and betrayal, 65.
18Alejandro Lichauco, Nationalist Economics(Quezon City: Institute for Rural
Industrialization, Inc., 1988): 189.
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“The Investment Incentive Act evolved from a series of

bills designed to attract foreign investments. These bills
had been filed year after year in Congress without any
result.”19

Despite experiencing a surging number of imports, uncontrolled repatriation

of foreign profits, ballooning national debt, inflation due to devaluation, and
increasing rate of poverty, the Marcos government saw a climb to both input
and output of the agriculture sector together with the expansion of mining
industry. Capitalists entered the sale of agricultural inputs such as fertilizers,
pesticides, power tillers, tractors, threshers, and the like but were dominantly
foreign-owned, generally by the Americans. This increase in agricultural inputs
was because of the combined promotional efforts of American capitalists and
government officials. The increment in the use of agricultural inputs resulted in
the rise of agricultural outputs of the Philippines namely coconut, sugar,
pineapple, banana, and timber.

The mining industry also expanded during this period. Of the P5.3 billion
total investments from 1968 to 1974, mining got the largest share of P1.9 billion
or 36.2%. This was also reflected in the 1960 export statistic of the country as
copper, our country’s top mining product, ranked 5th in the top export list of the
Philippines with a total sales amounting to $29.6 billion and in 1966 and 1971,
it went up as 4th with $74.6 million and $185.9 million sales respectively.

On September 21, 1972, President Marcos declared martial law. Marcos

pointed out two main reasons for the implementation of the martial rule in the
country. First was the rising power of the communist party and second, the
violence of the demonstrations and its frequency of occurrence. In contrast,
according to Alejandro Lichauco, the Martial Law served two purposes which
Marcos wanted to happen. One is to ensure the indefinite rule of Marcos whose
term of office was to expire in 1974 and the other was to ensure the safety of
foreign investment and the permanence of free trade as the cornerstone of the
nation's economic program.20 The martial rule suppressed economic nationalism
through the abolition of Congress, giving the technocrats full control of the
economy, and junking the provisions of the Magna Carta which decreed the
establishment of primary and heavy industries, the reinstitution of economic
protectionism, and the Filipinization of the economy. The United States

19 Pedro V. Salgado, OP. Philippine Economy, History and Analysis (Quezon City: R.P. Garcia
Publishing Co. Inc., 1985): 47.
20Alejandro Lichauco, Nationalist Economics (Quezon City: Institute for Rural

Industrialization, Inc., 1988): 202.

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supported the declaration of the martial law because Marcos pledged to save the
American interest from the rise of nationalism in the country.21

Upon the declaration of martial law, it was followed by the implementation

of a development strategy called "labor-intensive and export-oriented" or
referred to as LIEO. This strategy aims to float the value of peso which in turn
stimulates exports for the price will become cheaper and more foreign countries
will buy our products. Also, it is focused more on labor-intensive industries that
are export-oriented and hindered our country from investing in capital-
intensive industries. Along with this was the accession of membership to
General Agreement on Tariffs and Trade or GATT in 1975. There would be a
progressive dismantling of tariffs and restriction from implementing import
control measures thus our country was put on the threshold of a new age with
is globalization.

In this period, the IMF-WB intervention in our economy intensified and

became more evident. These institutions demanded our country should open its
economy to foreign investments and be given with incentives. Without any
hesitation, Marcos passed laws that opened up the entire Philippine economy.
One of which was the Presidential Decrees No. 92 and 485 which expanded the
privileges of the foreigners stated in the Investment Incentives Act of 1967 and
the Export Incentives Act of 1970. Other laws were passed to facilitate foreign
investments in the particular field. Some of which were the Agricultural
Incentives Decree which gives foreign investors the privilege to exploit in the
agro-industrial field and the Foreign Business Regulation Act which opened the
country’s geothermal, geological, and mineral resources to the exploitation of
the foreigners.22 On the other hand, Marcos imposed the system of selective
import controls to protect specific local industries from imports.

Tourism was promoted during the martial law regime. The number of tourist
arrivals increased from 570, 417 in 1975 to 1, 008, 159 in 1980. Because of this,
the foreign exchange earnings of the country. From 1976 to 1981, it grew an
average annual rate of 31 percent covering the 15.8% of the total earnings from
non-merchandise trade. Same as the other industries, tourism is also under the
control of the foreign business. They control the airlines, hotel chains, credit
card companies, advertising agencies, banks, travel agencies, and the like.23

21 Alejandro Lichauco, Hunger, corruption, and betrayal: a primer on U.S. neocolonialism and
the Philippine crisis (N.p.: Citizens' Committee on the National Crisis, 2005): 101.
22 Pedro V. Salgado, OP. Philippine Economy, History and Analysis (Quezon City: R.P. Garcia

Publishing Co. Inc., 1985): 62.

23 Salgado, Philippine Economy, History and Analysis, 125.

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In the latter part of his term, Marcos realized that although the economy
under his rule was growing at an annual average rate of 6 percent, it was not
enough to solve the issues of underdevelopment and poverty. Also, the
Philippine economy was far left behind from its neighbors which became part of
the Newly Industrialized Countries like South Korea and Taiwan who in the
process of industrialization established capital industries and implemented
controls to protect its economy.

Throughout the martial law, Marcos implemented selective import controls

which breached the condition of the International Monetary Fund and started
making the government involved in the economy. This led to the formation of
the national oil company which became Petron and nationalization of different
industries including the National Steel Corporation which is the largest
producer of steel products in the country. Marcos wanted a program of
industrialization based on heavy industries but was not successful in doing so
because of American intervention through the presence of the technocrats in his
administration. Because of this, the American saw Marcos as a target for his
"anti-capitalist" and "anti-free market" economic campaign.

Political crisis had troubled the Philippines since August 21, 1983, when
Benigno Aquino, Jr. was assassinated after his arrival from exile in the United
States. Series of demonstrations have happened to show protest against the
authoritarian rule of Marcos, and on February of 1986, the First People Power
ousted Ferdinand Marcos from the presidency and was replaced by Corazon
Aquino.

The Aquino Administration: the Philippines on the Verge of Globalization

(1986-1992)

Aquino's early years of leadership was all about political and economic
reconstruction and rejuvenation. She dismantled the political structures that
Marcos created by dissolving the Marcos-controlled legislature and replaced
numbers of local government officials with officers-in-charge until elections.
Also, Aquino formed the Presidential Commission on Good Governance and
tasked them to pursue legal actions against Marcos and his cronies and at the
same time identify and sequester their assets in the Philippines. Next was the
necessity of a new legal framework for the government and rebuild the
institutions which deteriorated during the Marcos regime. In 1986, Aquino
declared a Freedom Constitution, giving her decree-making powers for a limited
period while the drafting of a new constitution was on process. The new

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constitution was approved and signed in 1987 and was followed by the elections
of local government officials in 1988.

When Cory Aquino assumed the presidency, the Philippine economy was in
bad shape for it was at the brink of bankruptcy and added to it was a large
amount of foreign debt due to the continuous borrowing of Marcos from the
International Monetary Agencies and the United States. Investment dropped
mainly because of political and economic uncertainty, so the government drafted
a plan of increasing public expenditures to give a boost to the economy through
a labor-intensive program called Community Employment and Development
Program. One of the priorities of the Aquino administration was to increase the
participation of private sectors in the economy thus, the establishment of the
Committee on Privatization. Aquino also promised to return the corporations
acquired by the government and to sell other government corporations which
will undoubtedly increase private sector activities. With the privatization
policy, the government weakens their capacity and power to intervene and let
the private capitals dominate the economy.

The Aquino government also pushed for the liberalization of imports. Import
liberalization would mean an unlimited flight of foreign goods entering and
circulating the economy in lower prices which led to the killing of local
industries such as Caltex Refining, Matsushita Electric Philippine Corporation,
and National Steel Corporation. With the closures of different local corporations
and industries was followed by the marginalization of agriculture. Farmers
found it difficult to compete with imported, cheap, and subsidized agricultural
products. In the process of dismantling the tariff and selective import control
system, the government incapacitated the economy by paralyzing its two legs
of production namely, agricultural and manufacturing sectors.24 Together with
import liberalization was the devaluation of the peso and it was used as an
instrument to promote exports making them cheap in the market, but such kind
of policy is only useful if a country has a broad range of goods-particularly
industrial goods to be exported. By devaluating further our currency, it became
easier for foreign capital to enter and control the economy because of the
sizeable dollar-peso exchange rate.

“The theory of NEDA was that it would simulate our

domestic industries into global competitiveness when

Alejandro Lichauco, Hunger, Corruption, and Betrayal in the Philippines (N.p.: Citizens'
24

Committee on the National Crisis, 2005): 12.

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what it did was to kill the local industries, including

agriculture.”25

These are the economic conditions of the Philippines, an economy struggling

to become free from American imperialism and assert its power to satisfy the
needs of his country. Our country may have experienced growth and
development especially during Garcia's tenure where nationalism was the focal
point of its economic policies. However, the Americans, through its intervention
and influence, were successful in seizing the control of the economy and hindered
our country to undergo full industrialization for it is the imperialist mission to
ground its colony to agriculture and make it only as a source of raw materials to
sustain its industries.

Reaction and Recommendations

The discussion above indicates the economic situation of the Philippines and
how the different presidents responded to the challenges that hampered the
economy. Recto pointed out that cause of this economic crisis was the failure to
industrialize our country, but the question is what prevented the
industrialization process? It is clear from the previous chapter that the
presidents exerted efforts to industrialize our country by implementing reforms,
amending laws, and employing stricter policies on tariffs and trade but still
ended up losing the fight. Through this, Lichauco presented to us the real cause
of the Philippine Crisis and what possible solutions must be done to solve this
issue.

Neocolonialism and Imperialism: The Cause of the Philippine Crisis

Neocolonialism, as defined by Lichauco, is the exploitation of a supposedly

independent region (or nation), as by imposing a puppet government.26 In other
books, Lichauco used the term “imperialism” which he defined as the policy that
aims to establish control over people who are unwilling to accept to become
subordinate to it.27

If the goal of imperialism is to exploit its victim, then its strategic policy is to
prevent the underdeveloped countries from achieving full and real
industrialization. This is made possible through different modes of

25 Lichauco, Hunger, Corruption, and Betrayal, 22.

26 Lichauco, Hunger, Corruption, and Betrayal, 41.
27 Alejandro Lichauco, The Lichauco Paper: Imperialism in the Philippines (New York:

Monthly Review Press, 1973): 100-101.

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interventionism in the affairs of the subordinate country, and its first step is to
intervene in the election process of the nation in order to manipulate the
outcome and elect a government which will serve as a puppet for them. This
establishes the relationship between the neocolony and the neocolonial power.

Bell Trade Act and Parity Rights

Before he was elected as president, Roxas was known as the founder of the
Liberal Party and campaigned against the then incumbent President Sergio
Osmeña Sr., who, to his credit, along with the Nacionalista Party which he had
founded, opposed the parity. On the other hand, Roxas campaigned as the pro-
American candidate and promised to deliver parity, which was passed during
his tenure.28 The United States made sure the Philippines will accept their
proposal together with independence and to become successful they made use
of blackmail together with a president who is known to be a pro-American. 29

With all the provisions that were part of the Bell Act, It is the freedom that
caused economic disaster and impeded Philippine industrialization. Free trade
hindered the establishment of factories with an uncontrolled inflow of imported
processed products in the market. The low price of these products is free from
tax killed the competition with the locally made goods. Another reason is that
free trade forced the Philippines to shell out its dollar reserves to pay for the
almost unlimited flight of imports that circulates in the market. This situation
was further intensified by free foreign exchange, private remittances of foreign-
owned firms and by capital flight abroad.

The Bell Trade Act continued for eight years, and after that span of time the
Philippines was expected to have the capacity to protect its industries and
economy gradually, but we cannot deny the fact that for eight years, we delayed
our industrialization program. Within three years after the passage of the Bell
Trade Act, the country had grounded to halt. All the dollars that were granted
as rehabilitation assistance had extinguished by 1949 squandered on imports of
non-essentials, travel and capital flight which our government cannot restrain.30

28 Lichauco, The Lichauco Paper, 57.

29 Pedro V. Salgado, OP. Philippine Economy, History and Analysis (Quezon City: R.P. Garcia
Publishing Co. Inc., 1985): 34.
30 Alejandro Lichauco, Hunger, corruption, and betrayal: a primer on U.S. neocolonialism and

the Philippine crisis (N.p.: Citizens' Committee on the National Crisis, 2005): 56
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The Bell Act is a betrayal of the American promise to genuine independence,

politically and economically.31

Decontrol Program of 1962

The decontrol program was a manifestation of intervention by international

monetary agencies in our economy. This program was the product of the
condition of the International Monetary Fund in exchange for the $300 million
stabilization loan applied by President Macapagal. It was in the administration
of Carlos Garcia that the Philippines first applied for this kind of loan. However,
it was not granted because Garcia resisted and disagreed with the conditions of
the IMF.

The Decontrol Program dismantled the import control system which was
implemented in the ‘50s and devalued the peso. Dismantling controls would put
the dollar reserves of the country in danger because everyone would be able to
exchange his or her pesos for dollars without any limit. Also, products whose
importation had been banned during the time of controls to protect domestic
industries were allowed entry provided the tariffs on them be paid which
introduced us to a form Import Liberalization called Tariffication which is a less
effective method than import and foreign currency controls to protect domestic
industries from foreign goods. 32

Foreign Loans

After the implementation of the decontrol program, our foreign debt

quadrupled from $150 million in 1961 to $600 million in 1965. It is through the
decontrol program that the Philippines first experienced the deadly mix of
import liberalization and devaluation.

It is necessary for the government, through the Central Bank, to control the
flow of dollars because it is essential in the world market. The dollar is the
currency used to pay different transactions done abroad such as importation of
goods and buying machinery to sustain the manufacturing sector. With the
dismantling of controls over foreign currency, the dollar reserve of the country
became vulnerable to everyone. As the central bank continues to shell out its

31 Salvador Araneta. Economic Re-Examination of the Philippines, a review of economic policies

dictated by Washington (Rizal: The AIA Printing Press, 1954): 144.
32 Alejandro Lichauco, Hunger, Corruption, and Betrayal: A Primer on U.S. neocolonialism and

the Philippine Crisis (N.p.: Citizens' Committee on the National Crisis, 2005): 50.
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dollars, the government, therefore, loses funds to finance the importations, and
other transactions and the only way the government saw to solve this problem
is through borrowing money from other countries and International Agencies
like the World Bank and the International Monetary Fund.

Foreign Investment

Foreign investments have both positive and negative impact on our economy.
The presence of these multinational capitals in the country may have opened
employment opportunities to the Filipinos and contributed to our dollar
reserves. However, their operations also impeded the capital formation and the
process of industrialization of our country. We cannot deny the fact that these
foreign capitalists dominate and control our economy. American investment has
been estimated by the embassy to be in the vicinity of $1 billion.33 Such kind of
amount is worth more than the number of the peso in the circulation or the
entire money supply. This is just American investment alone and not to mention
other alien businessmen like the Japanese, Chinese, and the British. The increase
in foreign investments also was the reason for local industries to shut down
because of the lop-sided competition that is happening in the market.

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Publishing Co.
Agoncillo, T. (1974). Filipino nationalism: 1872 – 1970. Quezon City: R.P. Garcia
Publishing Co.
Araneta, S. (1954). Economic Re-Examination of the Philippines, A Review of
Economic Policies Dictated by Washington. Rizal: The AIA Printing Press.
Corcuerra, B. (2015). The Economic Nationalism of Claro M. Recto. N.p:N.p.
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Alejandro Lichauco, The Lichauco Paper: Imperialism in the Philippines (New York:
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Monthly Review Press, 1973): 101.

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Lichauco, A. (1986). Towards a New Economic Order and the Conquest of Mass
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Lichauco, A. (1973). The Lichauco Paper. New York: Monthly Review Press
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