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Political Economy

The Philippines emerged from the Second World War as democratic, English-speaking, and the second most developed country in Asia, following only Japan. Although the Philippines is a wealthier country today than it was sixty years ago, it has consistently lagged behind the rest of Asia in its growth trajectory. It has also displayed problems with governance under both democratic and non-democratic regimes. Although democratic elections were a constant in Philippine political life during the 20th Century, the same elite families continued to dominate governments and rural alienation from oft rapacious elite activities led repeatedly to social unrest and violence.

In the mid-nineteenth century, a Filipino landowning elite developed on the basis of the export of abaca (Manila hemp), sugar, and other agricultural products. At the onset of the United States power in the Philippines in 1898-99, this planter group was cultivated as part of the United States military and political pacification program. The democratic process imposed on the Philippines during the American colonial period remained under the control of this elite. Access to political power required an economic basis, and in turn provided the means for enhancing economic power. The landowning class was able to use its privileged position directly to further its economic interests as well as to secure a flow of resources to garner political support and ensure its position as the political elite. Otherwise, the state played a minimal role in the economy, so that no powerful bureaucratic group arose that could pursue a development program independent of the wishes of the landowning class. This situation remained basically unchanged in the early 1990s.

The rapid increase in the national population (from 7.6 million in 1905 to 16 million in 1939) put added pressure on the land, lowered the standard of living, and created a labor surplus. Closely tied to the population increase was the erosion of traditional patron-client ties. The landlord-tenant relationship was becoming more impersonal. The landlord's interest in the tenants' welfare was waning. Landlords ceased providing important services and used profits from the sale of cash crops to support their urban life-styles or to invest in other kinds of enterprises. Cultivators accused landowners of being shameless and forgetting the principle of utang na loob, demanding services from tenants without pay and giving nothing in return.

As the area under cultivation increased from 1.3 million hectares in 1903 to 4 million hectares in 1935 -- stimulated by United States demand for cash crops and by the growing population--tenancy also increased. In 1918 there were roughly 2 million farms, of which 1.5 million were operated by their owners; by 1939 these figures had declined to 1.6 million and 800,000, respectively, as individual proprietors became tenants or migrant laborers. Disparities in the distribution of wealth grew. By 1939 the wealthiest 10 percent of the population received 40 percent of the islands' income. The elite and the cultivators were separated culturally and geographically, as well as economically; as new urban centers rose, often with an Americanized culture, the elite left the countryside to become absentee landlords, leaving estate management in the hands of frequently abusive overseers. The Philippine Constabulary played a central role in suppressing anti-landlord resistance.

Philippine politics, along with other aspects of society, rely heavily on kinship and other personal relationships. To win a local election, one must assemble a coalition of families. To win a provincial election, the important families in each town must be drawn into a wider structure. To win a national election, the most prominent aristocratic clans from each region must temporarily come together. A family's power is not necessarily precisely correlated with wealth -- numbers of followers matters more -- but the middle class and the poor are sought mainly for the votes that they can deliver. Rarely will they be candidates themselves.

The old political system, with its parties, rough-and-tumble election campaigns, and a press so uninhibited in its vituperative and libelous nature that it was called "the freest in the world," had been boss-ridden and dominated by the elite since early American colonial days, if not before. The elite, however, composed of local political dynasties, had never been a homogeneous group. Its feuds and tensions, fueled as often by assaults on amor proprio (self-esteem) as by disagreement on ideology or issues, made for a pluralistic system.

When Marcos declared martial law in 1972, he confiscated the assets of newspapers owned by families not part of his coalition. From 1972 to 1986, although newspapers were not officially government-owned or government-supported, they were controlled by Marcos's relatives, friends, and cronies. After the August 1983 Aquino assassination, newspapers gradually became more politically independent. When Marcos fled in 1986, the Commission on Good Government confiscated the assets of crony-owned newspapers and the exuberant Philippine press revived quickly; in many cases newspapers were operated by the families that had controlled them prior to martial law.

The largest, most productive, and technically most advanced manufacturing enterprises were gradually brought under the control of Marcos's cronies. For example, the huge business conglomerate owned by the Lopez family, which included major newspapers, a broadcast network, and the country's largest electric power company, was broken up and distributed to Marcos loyalists including Imelda Marcos's brother, Benjamin "Kokoy" Romualdez, and another loyal crony, Roberto Benedicto. Huge monopolies and semimonopolies were established in manufacturing, construction, and financial services. When these giants proved unprofitable, the government subsidized them with allocations amounting to hundreds of millions of pesos. Philippine Airlines, the nation's international and domestic air carrier, was nationalized and turned into what one author has called a "virtual private commuter line" for Imelda Marcos and her friends on shopping excursions to New York and Europe.

Probably the most negative impact of crony capitalism, however, was felt in the traditional cash-crop sector, which employed millions of ordinary Filipinos in the rural areas. (The coconut industry alone brought income to an estimated 15 million to 18 million people.) Under Benedicto and Eduardo Cojuangco, distribution and marketing monopolies for sugar and coconuts were established. Farmers on the local level were obliged to sell only to the monopolies and received less than world prices for their crops; they also were the first to suffer when world commodity prices dropped. Millions of dollars in profits from these monopolies were diverted overseas into Swiss bank accounts, real estate deals, and purchases of art, jewelry, and antiques. On the island of Negros in the Visayas, the region developed by Nicholas Loney for the sugar industry in the nineteenth century, sugar barons continued to live lives of luxury, but the farming community suffered from degrees of malnutrition rare in other parts of Southeast Asia.

Nationally, the continued failure of the Philippine economy to attain the success achieved elsewhere in the region has turned the spotlight onto governance factors and corruption, especially after former President Estrada's downfall in 2000-01. Estimates that government spending is inflated by as much as 20 percent, or roughly $2 billion a year, due to procurement irregularities, show the very substantial scope for potential savings. The government has been working to reinvigorate its anti-corruption drive, and the Office of the Ombudsman has reported improved conviction rates. Nevertheless, its slipping anti-corruption ranking indicates that the Philippines' efforts are lagging and that more needs to be done to improve international perception of its anti-corruption campaign -- an effort that will require strong political will and significantly greater financial and human resources.



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