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Author(s)
Citation
Issue Date
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Rights
1980
http://hdl.handle.net/10722/28002
THE i r m s m
o r fiorG L O N G
A DISSERTATION
By
Constaxit LAM Y i p - v a i
Hoi)^ K o n g
A u g u s t 1980
my ovn work and tnat it has not nreviovinly been s::bmi tteci to
this or any other institutions in annlj.cation for a d e c r e e ,
d i p l o m a , or a n y other q u a l i f i c a t i o n .
TABLE OF CONTEIWS
PREFACE
vii
Chapter
X
Introduction
II
1
***
11
Tariff Policy
20
22
25
Trade
26
27
III
36
37
J8
42
Chapter
Internal Revenue System of the C o m m o n w e a l t h
Period 1 9 3 5 - 1 9 4 2 )
43
TV
44
48
49
51
54
60
61
64
*
*
65
&9
72
75
VI
81
".**"*****
85
La^id Policy
Limitation on Grants of Land
89
90
Chapter
Home steading
95
Land Registration
mprovemeirt of Production
95
97
98
99
100
101
102
YII
Conclusion
Sources Consulted
102
106
112
LIST O P TABLES
1#
2,
50
51
3*
67
4*
Kilometers of Roads B u i l t , 1 9 5 6 1 9 4 1
69
5*
Peso Investments in M a n u f a c t u r i n g , E x p o r t - P r o c e s s i n g
Industries and in Sugar P r o c e s s i n g , 1 9 0 2 1 9 J B .
7#
8*
B4
85
98
105
PREPACE
society
an
I t lays
vii
the Filipino elite wsus however given the power to form the
Commonwealth Government of the Philippines under the auspices
of the United States P r e s i d e n t .
The
In
As a saxrvey of the
of the country*
viii
The danger
is that the reader may lose sight of the overall view of the
whole period under consideration.
I try to bridge
this g a p b y
chapter.
F i n a l l y , to all
ix
Chapter I
Introduction
The Forniiilatlon of the iLconomic Policy in the Philippines during
the Colonial Period
The economic policy of the Philippines during the colonial
period was determined nainly by the governing political e l i t e s .
Bein^ an agrarian society, the masses in the Philippines were not
organised and for centuries they vexe denied
to participate in the political scene.
the opportunity
A3 a result, m o s t of the
in the assembly*
It is important to note that right from the beginning
of the annexation of the Philippines, many Americans opposed
this kind of outright occupation*
President H c K i n l e y s proposal
2
decision was passed with only one vote more than the n e c e s s a r y
two-third minimum n o t e s .
of
It was alleged to
In order to
secuxe chsa-psr rsiw su^jar for its cwn
of the annexation.
western Dairy man and Southern Parmers which were represented "by
the Watioiial Dairy Union and the National kilk Products Association,
the American Cordage Institute and the American Federation of
Labour,
Their voice
2
According to T . A . friend
for the land limitation law in the land policy of the Philippines
as described in Chapter 6
They thought it e s s e n t i a l in
the concentration of more power in the hands cf the GovernorGeneral rather than the Filipino dominated Philippine A s s e m b l y .
Therefore # the American Chamber of Conimerce supported Wood* s
policy in diluting the power of the Filipino political elites
during bis administration in 1?21 - 1927*
This w a s important
the
They expected a
They agreed
After-
late
inuckral:e
ma^asiries
1 m a n .
Restriction
Labour
The
In this
The
The Progressive m o v e m e n t
Wilson
also made many concession to the farming groups and the labour u n i o n s
He also carried out an active conservation programme by establishing
a federal Water Pover Commission to regulate private development
of water poyer sites.
8
The influence of the Ir^gressive Movement was also
reflected in the policy of the GovernorGeneral in the P h i l i p p i n e s ,
Harrison, the Governor-General appointed by V/ilson, was greatly
influenced by the trogressive Movement and he had supported active
government intervention into the Philippine econoirsy.
His policies
According to C w e n 3 , they
They
10
Philippines which
Politically,
This restriction was not lifted until the passage of the Jones
Act which broadened the suffrage by cancelling "the additional
requirements for a rrale voter*
commercial and
M o r e o v e r , the ilustrado
11
Independence
to
The Schuxman
12
M
the
Duxing
Taft s rule, the Spooner Act was passed giving the President of
the United States the power of appointing administrators to the
Philippines to form the governonent.
firm hold of the Assembly and this continued to the end of the
American r u l e .
T a f t , being the son of the Secretary of W a r in President
Grant * s cabinet, had a brother working as lawyer for the J . P ,
Morgan "banking group,
of
He maintained :
13
r
He also p r o p o s e d to raise
investments.
Moreover^
Cameron P o r b e s .
A g a i n , he did n o t alter m u c h
predecessors.
U n d e r tfilson,
The
of liepre sent at iv e s *
in Chapter 5_
When the Republican party won the presidency election
again under the term of Warren G* Haxding and Calvin Co olidge
in 19215 and 192J-9 respectively, they changed a^ain the policy
of the Democratic Party.
Democrat s
decision of giving
The
6
T
Hawes Cutting Act vas passed and later replaced by the Tydings-
McSuffie
It stated
Nevertheless
Dwight
He
17
Frank Murphy (1933-5) did not introduce any nev idea on the
economic development of the Philippines.
This brought a
Unfort-unately r
It is
Chapter II
Tariff Policy
under study # the tariff system was under the strictest control of
the United States goveimment, namely in the hands of the Congress
and the President of the United States.
19
liad always supported a Open Door Policy for China and this
attitude was logically expected also in the Philippines*
In discussing the tariff policy of ho Philippine
islands, American-Philippines tariff policy was of paramomit
importance especially after 1913 when the United StatesPhilippine trade was over 60 percent of all Philippine foreign
trade.
At
the several
j
Alfonsof Oscar, M* Theodore Roosevelt and the
Philippines 1897-1909- Quezon City : University of Philippines
Press, 1970, p-132,
20
20,
1909 to Ocrtoter
1913.
4* Complete free t r a d e ~ Oci;ober 3 1913 to November
19355- Ths Commonwealth November 15, 1935*
specific
In addition there w a ^ a
21
The
22
in the
H o w e v e r , the
United S t a t e s .
It also a i m a d
levying less
Furthermore,
The f i r s t of
Th5 was also applicable to the United States where taxes and
duties collected on Philippine imports should "be refunded to
the Philippines Treasury some time in the future.
T h i r d l y , the
Up
to the end of the Colonial rule this law was never exercised
in the Philippines.
As a preliminary observation, The Philippine Tariff
Act and the Congress decision removed the fear of m a n y local
sugar and tobacco farmers on the competition of imported cheap
Philippine sugar and tobacco as the Dingley rate effectively
barred the entry of a large volume of Philippine sugax and
tobacco.
24
At
"the time when this law was passed the refunded duty collected
b y the Philippine Government was very small as the import of
sugar and tobacco to the United States was not great in amount*
H o w e v e r , the refund system of duties collected for U n i t e d
States' products trou^ht loss to the revenue of the Philippine
Government *
The
This
the Philippines*
The Philippine section of the Payiie-Aldrich law
sanctioned the principle of free trade between the TTnited
States and the Philippines with the following qualifications
1* Sice was not on the free trade list*
2* Annual quotas ware limited on
cxgaxs
150>000,000
1,000,000 lbs,
^ Castro t loc^cit., p p . 29 - 56
26
from other countries was thus charged on the new rate in the
Philippine Tariff Act of 1?09.
A moderate tariff w a s
Sbcport of hemp c o p r a ,
27
It is worthwhile to
note that this Act was passed when Vilson, a Democrat, gained h i s
hold, of the White H o u s e .
Underwood Tariff Act stipulated further that r i c e
should be put in the free list.
The { C o p ^ n w e a l t h Tariff
She Great Depression in the United States d u r i n g the
thirties caused quite a lot of hardship in the agricultural
sector*
Castro* l o c j c i t , , p* 40*
28
passed in December,
Upon
5,000,000 pounds.
29
Costigan Act passed in May, 1934 stated that sugar imports into
the United States were placed under a system of quotas to be set
by the Secretary of Agriculture*
Philippine people.
This could
Percentages
Period
1889 - 1908
1916 - 1925
Total
Trade
Year
Exports
Imports
23.7
1889
26
1902
40
12
1908
52
62.8
(1910)
1926 - 1955
71-4
1923-28
72.9
1930-55
17
(40)
75
(62)
(1929)
1956 - 1940
83
65
In
TT7
in 1935.
share of total trade which was only 25.7 in 1889-1908 bat jumped
to 72.9 during 1936-1940.
*Phe special tariff relationship with the United States
also "brou^it a stimulus to a number of primary products which
were in great demsind in the American market. These were sugar,
abaca^
PercentaRea
Coconut
Oil
Tobacco
Products
Period
Sugar
Abaca
Copra
Total
1699
25.3^
53.8?
4.
1900-05
10.7
64.55
10.40
6.25
91.88
1904-09
14*35
59.25
14.1$
3.45
91 .20
1910-15
18.75
59.35
25.25
9.80
93.15
19H-20
20.12
36.64
942
14-62^
9-17
89.97
1921-25
29.21
19.76
13.74
14.70
9.07
86.48
1928-50
54.10
16.06
11.56
12.40
2.70
76.62
1951-34
56.57
6.89
7.45
9.16
5.25
83.10
1955-57
38.20
12.63
10.76
11.93
4-0
77.52
88.375S
The peak of
It w a s mainly a response to
All
11
Owen, Ibid,
5
3
In 1900
This
3
4
It is a cliche
When compared w i t h C u b a ,
12
O w e n t op. cit*t
p.110
Chapter III
running
it economically self-sufficient.
trators should run the government with the smallest possible sum
of revenue and it would be most desirable if "the Philippine
Commission could create some surplus in the "budget.
Broadly
This would
from the Internal revenue system designed for them b y the former
colonial power.
37
majority of the population.
These
The
most important indirect taxes were receipts from the opium contract
and the lotteries * Th^e provided 16*9 percent of all internal revenue
tax r e c e i p t s ?
The cedula was a charge made for certificates of identity*
A l l persons over the age of eighteen, male and female, were required
to pay for these certificates*
I t was generally
Agricultural
Laton
"American Internal Revenue Policy in the
Philippines to 1916" in Norman G . Owen (ed.),
c d t p. 134.
3
The other major forms of indirect tax came from
"the sale of
a/
According to Bonifacio
Salamanca
2
(
in 1905 the
40
weighed in advance f and had been f o u n d ,
w a n t i n g , by those interests it affected
These
included a provision for a tax upon corporations and a n o t h e r for an inheritance tax*
d o
class.
1905.
totaoco products
3.
4*
5*
The Cedula
7*
6,
Mining concessions
Tax on business and manufacturing
10.
Occupational licenses
It was a l s o guided a t
41
It vas assigned that only the more vell-to-do could afford to
buy liquors and tobacco and therefore heavier tsoc on these
items would not affect the poor.
This w a s
42
a tax was set roughly equal to its profitability*
The new A c t
The tax
rate was one peso on each 300 pesos worth of sales and it was
assumed by the administrators that small merchants would pay
less as his volume of business was limited and the system vould
therefore be more fair and just.
Modifications after the Internal Revenue^ l^r o f J 9 0 4
During the passage of the Underwood Tariff A c t of
1915, there m s an expectedly sharp reduction
.n the revenue
Governor-
an increase
M i n o r changes
finally, in
tax system was not really equitable as the burden of the tax fell
more heavily on the poor.
This forced the national political elites to introduce
measures and new legislations to make the taxation system of the
CoEimonwealth to appear to be more equitable.
This
H o w e v e r , in
1940, another tax called residence tax was imposed o n every inhabitant
of the Philippines over 18 years of age and also o n every corporation*
Though this tax was graduated according to the ability of the person
to pay, it was in fact a minor modification o f the Ceduia rather
than a radical departure from the inequitable old system*
The more important and far reaching change o f the taxation
system of the Philippines occured i n 1959.
The
44
The normal tax of 3 percent and the
surtax on income was replaced by a
single tax at progressive rate
2.
3*
4.
5*
6*
7*
the revenue was indeed taxed from indirect sources and therefore it was less fair for the poor.
The
However t
110 evidence clearly confirms that the poorer sector does not
drink wine and smoke.
and tobacco need not increase with income and therefore the
well-to-do need not carry a heavier tax burden on these items*
Some vriters believed that the 1939 National Internal
Hevenue Code vas a marked move towards progressive taxation.
The new income taz systen vas cited as an example as it increased
the ratio of tax to higher income groups than the pre-1959
period.
code a new rate of 0.5 percent was levied on those who earned
a net income of less than 2,000 pesos.
46
the t a x
I n addition,
period*
A s Luton remarked
Nor
47
Basically* the land-owning class was favoured by this tax
system*
W h e n the
Chapter IV
48
C . A . Conant, a n expert
The Congress
This was
On the other
As a
This
currencies.
51
This made
Advocate General
1
f
According to
This vas
op#
L u t h r i n g e r t op* c i t " p- 4 2 .
c i t " p . 110*
This chain
The
It was
5
5
time,
On the
It
and u s e d i t
7
5
Con-
The
of the board,
58
A t the end of the Harrison*s administration, the
insular c-urrency was no longer backed lay gold.
A s already
Wood
He ended a l l requirements
The government
9
5
the loank.
The redemption
All
Thus
the Treasury Certificate Fund had taken the place o f the Gold
Standard Fund*
continued*
Perhaps
61
of small tenants.
The
These incliided
The
the public.
Impact of the Monetary and Finance Policy on the Fhlli-ppinea
From the a>1ive discussion of the monetary and finance
policy of the Philippines, it could "be seen that the Philippine
did not consciously manipulate monetary policy to facilitate
the economic development of the Islands.
62
The
period, subsequent
63
t m a n c i n ^ the industrial
Chapter 71
Moreover,
could be epitomised by the two different views of GovernorGeneral Harrison ( 1 9 1 5 1 9 2 1 ) and Governor-General Vood (1921
1927).
movement in
64
of the Philippines*
This represented a
During
this period, the building of roads was not subject to longterm and systematic planning.
W h e n Fortes became a member of the Philippine
Coinmission in 1905, he began to pay more attention to
The
A resolution w a s passed
67
requiring the employment of one caminero for each two kilometers
of first class roads at normal times.
Apart from the emphasis on the maintainence of the
roads in the Philippines which were partieularl,susceptible to
:ropical weather erosion, Forbes insisted on the use of permanent material to build bridges and culverts.
Concrete was
When Leonard W o o d
Year
1907
503
1910
764
1915
1 ,yo6
1920
2,920
1925
5520
68
Kot all of the funds for road building were tised for
building roads which had helped in economic development.
building of the Benguet road to Baguio is an e x a m p l e .
of Ba^uio was a complete invention by the A m e r i c a n s .
The
The city
This "was
In
Table 4
Kilometers of Roads Built 1 9 5 6 1 9 4 1
Year
1st class
2nd class
3rd^class
1956
271.8
523.6
443.5
1957
517.5
405.0
no data
1958
527.0
321.0
705.0
1959
208.3
878.9
85L4
1940
155.1
538.8
150.0
1941
703.2
405.4
592.0
Railroads
The Americans vere not so successful in introducing
railroad transport as a means of transport*
the islands.
UnforttHiately, in
Free
concession to the land required for the railroad was also granted.
The Syndicate was incorporated into the Philippine Railway
p- 77
Company,
The
When
the United States and was entirely owned by the Manila RailwayCompany Ltd* of Great Britain.
71
of F o r b e s .
Harrison "believed
in 1 9 1 T .
During the Commonwealth period, in 1935 "the Govermieiit
provided further funds to be loaned to the Manila Railroad
Company.
took over and operated the Cebu and Panay railroad because the
Visayan Syndicate failed to pay its bonds when they were d u e .
1
P o r t
the Manila haxlaour which was the major link between the United States and
the Philippines.
Thsice was
work was carried out in the ports of Oebu City and lloilo.
1905 the Commission initiated a anrvey
harbours in the Philippines.
In
According to Giesecke^
O n the average f however, slightly less than
one million pesos were appropriated for port improvements
in Manila, and almost
all the rest was devoted to w o r k in
6
Cebu and Iloilo.
3
7
some attention
the
However t
This
74
opened for bidding.
to
private
TrSz
more
the
Harrison
1
A t the end
However,
to sell the plant until 1914 when the new Democratic a d m i n i s t r a tion stopped i t #
Another venture in early A m e r i c a n occupation was the
operation of the Manila H o t e l .
their
76
iDOUght CMTt the other ctockbolders and became the owner of the
hotel*
already
Hotel.
to
appropriations
For example,
In
the Assembly
This pushed
77
t h e
V n i t e &
S t a t e s
78
investment in new industries in the islands.
These develcpm-nt
operation in 1921
A t first it suffered
circumscribed*
It bought estates
to reselliAemto farmers
in small lots
79
Petroleum Company.
and C o m Fund of p1,000,000 was set up to open neu lands xor corn
and rice*
Harrison in
previous chapter.
It
consisted
In vigw of this)
the Commission recommended that the Philippines was not ripe for
independence.
Vood was appointed as the Governor-General of the
Philippines in 1921
so
.
the Government should be gotten out of
as rapidly as sound business methods permit, for
experience of the World Max has demonstrated any
more clearly than another, it is that government
s u c c e s s f u l l y or advantageously conduct b u s i n e s s .
business
if the
one t h i n g
cannot
It
the B o a r d in 1 9 2 7 .
The Governor-Generals after Wood generally were n o t
so hostile to the government owned enterprises
A l l of them
81
supportive of
the nevly
The Council
82
Furthermore,
10
S t i n e , o p . cit. t p . 7 0 .
The full
Trom
They
was
They w e r e
No
84
Table 5
Peso Investments in Manufacturing, Export-Processing
Industries and in Sugar Processing,
Period
nves merit
i n
ManuXacturiTiff
A
1902
53,784,386
1918
22^,47^^92.8
Investment
in Export
Processing
Industries
B
21,671,146
115,895,251,19
Percent
B/A
19021903
Investment
in Sugar
Processing
Percent
40
16,953,495
31
52
52,407,5U.1
25
This economic p o l i c y
p-jriod^
Dictated
processing
In 1955* h o w e v e r , the
1:
American investment in m a n u f a c t u r i n g
V _ B op*
Quoted from Y a l d e p e n a s ,
the Philippines.
6 '
191858
0.5
4.7
66
190218
191838
Commerce
2.9
-0.1
Electric Power
9.3
6.4
23.7
15.8
Transportation/
Communication
15.1
9.6
4.4
1.8
A l l industries
Chapter 71
Land Policy
The
Slash-and-burn
The Spaniards
his pan! zed the land system of the Philippines t y creating -the
permeinent Pueblos settlement pattern.
87
88
the
linearly Spanish period, a system called encomienda
was established to administer the pacified a r e a s .
In this
Some SpaJiisxds
Another
In these few
Sharecropping seemed to
89
this system.
2
According to Grnnder and Livezey the public
domain in the Philippines when the Americans acquired the
Philippines was estimated to be about 60,000,000 acresA s mentioned beforer the sugar interests in the United
States were highly perplexed by the acquisition of the
Philippines as they perceived the colony as a potential
competitor in sugar production*
people.
cit
90
holdings.
91
to confiscate iriar lands and s e p a r a t e the power of the
church from the state.
The Schurman Conunission a n d other A m e r i c a n s saw
the settlement of he friar land i s s u e as essential in
pacilying the Filipinos.
I n the same y e a r f
the
92
parties-
of the land *
The tract
The
In 1910, this
93
this was against the interest of the Filipinos.
As a side point, the selling of this remaining unoccupied
friar lands was not without prololems.
for himself.
The Americans did not purchase all of the friar lands *
and there was no obtainable information on the total acres of
land still under Church control at this period*
Nevertheless *
American adminis-
major failure *
than
As a result
They
As a
95
Between 1904 aJid 1934
the islands > they found the land title system incoherent and
confusing.
the holder of the land and his right to hold this piece of
land until claim was niade*
96
insurance fund to indemnify anyone who might lose his land
irnder the system.
However* in
97
Improvemeni: of Production
The Bureau of Agriculture was created in 1902 to
look into general agricultural matters of the Philippines,
The major efforts of the bureau vena spent on pest control
methods
Agricultural
98
Little progress was made in enhancing production
even by the Commonwealth Government.
Agricultural production
Country
_(1933--1939)
Japan
75.4
50.3
United States
49.8
Thailand
30.1
Burma
27-8
India
26.5
Indo-China
22.1
Philippines
21.5
in the
The A c t ' s m a i n
provisions included:
1*
2.
9
9
4*
5*
6*
As
Even
towards the end of the colonial occupation, this Act was not
enforced.
Commonwealth Land and Agricultiire Policy 1 9 3 5 1 9 4 2 )
During the Commonwealth period not many measures
were taken to bring about any drastic changes in the agricultural sector*
100
revolt in M a y , 1935*
recommended a
fixecD
the legitimate
It
101
tht
it and reselling it to the occupants,
In^early Commonwealth
102
A total
place in 1941 *
Impact of the a Land and, Agricultural Policy on the PhilipTJines
When we look at the situation of the rural sector of
the Philippines in 1898 and 1942 one striking fact is the
little difference In the rural landscape.
Most of the m o n e y
112
Their conclusion
in
Owner
60
Part Owner
1118
1959
77-7^
49
Tenant
19,2
15.6
22.0
55,1
However, Owen
in
O v e n , N . G - , op* c i t p . 1 1 6 1 1 8 ,
12,
Ibid
104
It was
the tenant farmers Were generally lower than the owner farmers.
r
Many
In Nueva
105
to the end of the colonial rule, land reform was never mentioned
and carried out by the administrators *
whole ilustrado
benefit
from the
Chapter 711
Conclusion
Indeed,
D u r i n g the
106
107
to the provision of infra-structure for the development of the
export primary industries.
Under the broad ftamevork of economic liberalism,
there were some deviations*
The influence of
108
over
Though economic liberalism prevailedthe w h o l e
period u n d e r review, it was interesting to note that A m e r i c a n
policies w e r e benevolent rather than exploitative. ^ I n the
first p l a c e , the occupation of the Philippines somehow cast
doubt oil the original moralistic righteousness of the Americans
in f i g h t i n g S p a i n .
P r e s i d e n t M c K i n l e y to declare
n i s s i o n in the
Americans
The
118
The
The conservative
Under the
B y opposing
110
c 1 e l s s
The
'
The ilustrado
Just
o
Only ten
Out of these
111
depended on /
public
Only
Most of
There vas
Industrialisation
A l l theeo symptoms of
duxing
study,
Sources Cons-ulted
Books
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112
3
1
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Golay P r a n k , H* (ed,), Underdeyelopment and Economic
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u
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K a s s e , Eugene H . Francis Burton Harrison, Governor General o f the
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Jose, F. Sionil. "The Ilustrado-American Collaboration."
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Jose, F . Sionil. "American and the Filipino Revolution.
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,
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