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Economic History of The Philippines

The Philippines was once a model of economic development in East Asia in the 1960s, producing consumer goods, processed materials, and manufactured exports. However, in the 1970s and 80s, the country declined due to corruption, cronyism, and mismanagement under Marcos, becoming one of the poorest countries in Southeast Asia. While neighbors grew rapidly, the Philippines stagnated with 2% growth. Now it struggles with a sluggish economy, large income inequality, and many citizens working abroad.

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Clint Agustin M. Robles
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67 views4 pages

Economic History of The Philippines

The Philippines was once a model of economic development in East Asia in the 1960s, producing consumer goods, processed materials, and manufactured exports. However, in the 1970s and 80s, the country declined due to corruption, cronyism, and mismanagement under Marcos, becoming one of the poorest countries in Southeast Asia. While neighbors grew rapidly, the Philippines stagnated with 2% growth. Now it struggles with a sluggish economy, large income inequality, and many citizens working abroad.

Uploaded by

Clint Agustin M. Robles
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ECONOMIC HISTORY OF THE PHILIPPINES

 The Philippines was once a model of development and second only to Japan among
east Asian economies. In the 1960s, when South Korea was a land of peasant, the
Philippines was one of Asia's industrial powerhouses. It produced consumer goods,
processed raw materials and had assembly plants for automobiles, televisions and
home appliances. Chemical plants produced drugs. Scrap metal was imported and
made into steel for ships and factories produced cement, textiles and fertilizer.

 Prior to 1970, Philippine exports consisted mainly of agricultural or mineral products in


raw or minimally processed form. In the 1970s, the country began to export
manufactured commodities, especially garments and electronic components, and the
prices of some traditional exports declined. By 1988 nontraditional exports comprised
75 percent of the total value of goods shipped abroad. *

 In the 1970s and 80s, the Philippines declined while its neighbors grew and became
one of the poorest non-Communist governments in Southeast Asia. The gains made in
the 1950s and 60s were lost to corruption, cronyism, and mismanagement during the
Marcos years and ineptitude of the Aquino years Now the Philippines is sometimes
referred to as "sick man of Asia" and a "Latin-style banana republic in the South China
Sea." Its per capita income is about one tenth of that of Taiwan. Many of its most
talented people work overseas.

 According to The Economist: “What distinguishes Manila from other South-East Asian
capitals is the ubiquitous Jeepney, the loud rickety bus used by the city's poorer
inhabitants. Once modified American Jeeps, nowadays most Jeepneys are cobbled
together from second-hand Japanese lorries. They have become a metaphor for the
Philippine economy: inefficient and easily overtaken. In the 1970s the Philippines was
richer than its neighbours. Yet while it chugged along at growth rates of around 2
percent, other countries stepped on the gas: it was passed by Singapore, Malaysia,
Thailand and, more recently, by China. A former American colony, it could have made
more of its cultural affinities with the United States, including the widespread use of
English. The incompetent and crooked rule of Ferdinand Marcos from 1965 to 1986
bears some of the blame for its failure to do so. A sluggish economy combined with a
fast-growing population has forced some 8m Filipinos—equivalent to almost a tenth of
the resident population—to seek jobs abroad.[Source: The Economist, August 16, 2007]

Economic Development in the Philippines in the Early 20th Century

 In the mid-nineteenth century, 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 these elite. [Source: Library of Congress *]

 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. *

 At the time of independence in 1946, and in the aftermath of a destructive wartime
occupation by Japan, Philippine reliance on the United States was even more apparent.
To gain access to reconstruction assistance from the United States, the Philippines
agreed to maintain its prewar exchange rate with the United States dollar and not to
restrict imports from the United States. For a while the aid inflow from the United States
offset the negative balance of trade, but by 1949, the economy had entered a crisis. The
Philippine government responded by instituting import and foreign-exchange controls
that lasted until the early 1960s. *

In 1946, our flag was raised at the Luneta to announce the formal start of
our status as an independent republic. That was 59 years ago, six decades of
independence. Our economic history presents a mirror of our growth as a
nation.
The timeline of Philippine recent economic history.

Though Philippine independence begins in 1946, it is important to move


the timeline back to the mid-1930s.
That was when the country achieved victory in its fight for independence
through legislative efforts in the US Congress. Finally, Philippine political
independence was foreseen with the passage of the Tydings-McDuffie law.
I start with a capsule economic history. In the coming months, I shall
complete this story in between my normal commentaries on economic and
business affairs in this column. (Every time I deal with economic history, I
will mark it as such.)
The period I would call immediate colonial legacy begins with the defining
moment when restrictive economic provisions to foreign capital were
introduced in the Philippine Constitution. Afterwards, efforts were
undertaken to understand the nature of the post-colonial relationships.
This important transition period was interrupted by the Japanese invasion
of the nation during World War II. That experience brought large problems
of its own: the wartime destruction of output and of industries, social
dislocations, and a drastic fall of GDP.
1946 to 1949: post-war rehabilitation and growth. This period marked the
early years of independence after emerging from the Second World War.
With political independence achieved, rapid rehabilitation would be
financed by extraordinary post-war US military expenditures in the
country, war damage payments and a bilateral trade agreement with the
former colonial master.
1950s to the 1960s: import substitution and exclusivistic economic
nationalism. Even these developments could not forestall balance of
payments problems that would lead to import and exchange controls. These
controls would introduce and perpetuate incentives for inward-looking
development. They would create and strengthen incentives for more
protection despite persistent BOP problems being promoted.
The succession of presidencies of Elpidio Quirino (who succeeded the first
president, Manuel Roxas), Ramon Magsaysay, Carlos Garcia and Diosdado
Macapagal (and even beyond) would administer and embellish this period
of inward-looking import substitution. During this time, the growth of
import substitution would also see the rise of exclusivistic economic
nationalism in which efforts were made to displace or minimize foreign
participation in the economy.
1970s to the mid1980s: martial law reforms and crisis. The mid 1960s saw
the emergence of Ferdinand Marcos as president. After almost eight years
of rule as president, Marcos declared martial law.
This enabled Marcos to continue to rule the country as dictator, during
which he oversaw major gains being made in economic and social reforms
and redirected the nation’s political construction. At no time in the
country’s history was the pre-occupation with infrastructure investments
undertaken as a component of the economic development program.
Dissatisfaction with the strong man rule became strong after the
assassination of Benigno Aquino Jr., the returning political oppositionist.
This would lead to the loss of international support for Marcos’s
government especially in financial affairs, plunge the country into a serious
double crisis — economic and political – and finally cause his overthrow
and exile during the EDSA revolution.
Restoration of political institutions and economic liberalization. Corazon
Aquino restored political institutions to pre-martial law framework through
the adoption of the 1987 political Constitution. However, her naivete in
many aspects of leadership led her to commit major mistakes.
Foremost among these was the neglect of energy and the failure to properly
mobilize her political capital to restore public spending with the sustenance
of international financial flows. This came about when she mulled radical
solutions concerning the country’s debt obligations.
The outcome was political instability with periodic threats of military
coups, the running down of the country’s infrastructure investments
without maintenance and the setback to long term growth, as energy
capacity and infrastructure inadequacy plagued the nation.
Though economic growth had been restored after the economic collapse
following the Marcos crisis years, the new government failed to take
advantage of the opportunities for the future that the immediate legacy of
Marcos in terms of energy and infrastructure construction handed over to
the next government.
The Cory Aquino years ran down the infrastructure investments without
any future investment and caused a crisis in energy that would set back
growth for years.
Nevertheless, Mrs. Aquino continued the reforms in industry and trade that
helped to open the country’s economy to the world. Fidel Ramos, her
successor to the presidency, advanced further the economic liberalization of
the economy and introduced privatization of key government corporations.
These economic efforts were advanced through the Estrada and Gloria
Macapagal Arroyo presidencies.
It would take a second Aquino presidency, that of Noynoy Aquino, the son,
to live up to some of the reforms in governance that the first Aquino
presidency tried to bring to the nation. By this time, too, the benefits of the
opening to the world economy would support economic progress.

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