Philippines

PHILIPPINES

  • Philippines became independent in 1946, after 47 years of American colonial rule and more than 300 years of Spanish rule.
  • The US granted the Philippines independence in exchange for its acceptance of several conditions:
    • a fixed exchange rate between the Philippine peso and the American dollar, to protect US companies against the effects of devaluation
    • free-trade agreements
  • The Philippine government could implement independent policies that fostered the country’s economic development.

 

  • In 1949 the flow of US dollars slowed down dramatically. The Philippine government established strict exchange controls to avoid a heavy drain on the currency. Private companies were forbidden to borrow money from foreign investors.
  • During the 1950s, the manufacturing sector grew annually from 10 to 12%, the annual inflation rate was kept below 2%, foreign-exchange reserves were strong, and the external debt was extremely low.
  • Foreign companies had to reinvest all their profits in the country’s economy. Capitalist export firms complained as they were forced to deposit their hard-currency earnings in the Central Bank, which returned them in pesos at an unfavorable rate. This was a source of enormous revenue for the Philippine state.
  • It also triggered a united offensive led by the US, the International Monetary Fund (IMF) and the World Bank — together with the most conservative sectors of the Philippine ruling classes — aimed at putting an end to these policies.
  • The elimination of controls led to massive capital flight towards foreign countries. Government deficits were financed by loans from the US and the IMF. The external debt increased sevenfold between 1962 and 1969 — from 275 million to 1.88 billion dollars!
    • Transnational corporations and Philippine exporters of agricultural products and raw materials rejoiced as their profits jumped.
    • The manufacturing sector oriented toward the domestic market rapidly declined.
    • In 1970, the peso had to be sharply devalued.
    • The incomes and earnings of small producers slumped.
    • Inequality in the society massive and people were suffering.

 

  • It was in this context of crisis that Ferdinand Marcos set up a dictatorship and declared martial law in 1972. His objective was to consolidate neoliberal policies through force.
  • The World Bank and the IMF publicly supported the dictatorship, which pursued policies very much in line with their expectations.
  • Although the World Bank did not criticize in the slightest the regime’s repressive measures, it was concerned about the slowness with which structural reforms were being implemented.
    • To exert greater influence on the Filipino government, the Bank decided to grant two huge structural-adjustment loans in 1981 and 1983, aimed at export-promotion.
    • Most of these funds ended up in the bank accounts of Marcos and his generals but the Bank considered it worthwhile to pay off members of the ruling clique in exchange for an acceleration of the neoliberal counter-reform.
  • In 1981, a banking crisis broke out in the Philippines due to a huge case of corruption involving the capitalists and sections of the state bureaucracy. The crisis spread gradually to the whole financial system, threatening the two largest public banks with bankruptcy.
  • Popular discontent within the population rose sharply, including within key sectors of the ruling classes who clashed with the Marcos regime.
  • In spite of the growing opposition to Marcos, the World Bank opted to stand behind the dictator. Departing from its plans, it massively boosted its loans to the Philippines: 600 million dollars in 1983, or more than double the previous year’s loans of 251 million dollars.
  • Popular mobilizations became more radical until what is referred to as the People Power Revolution successfully ousted him from power.

 

  • Marco was replaced by Corazon Aquino in 1986. She was the leader of the democratic opposition but was also closely connected to the plantation owners. She continued to carry out neoliberal economic policies.
  • The World Bank, the IMF and the US backed President Corazon Aquino since she had made a commitment to deepen the neoliberal reforms. The World Bank lent 300 million dollars in 1987 and 200 million in 1988: all to accelerate the privatization of state-owned firms.