Review: The Political Economy of the Philippines: Critical Perspectives

Reviewed Work(s): Mortgaging the Future: The World Bank and the IMF in the Philippines.
by Vivencio R. Jose; Development Debacle: The World Bank in the Philippines. by Walden
Bello, David Kinley and Elaine Elinson; Studies in Philippine Political Economy. by Edberto
M. Villegas; Cronies and Enemies? The Current Philippine Scene. by Belinda A. Aquino;
Feudalism and Capitalism in the Philippines: Trends and Implications. by Temario C.
Rivera; The Lichauco Papers: Imperialism in the Philippines by Alejandro Lichauco; The
Debt Trap: The IMF and the Third World by Cheryl Payer; Mortgaging the Future by
Jose; Development Debacle by Bello
Review by: Mark M. Turner
Source: Pacific Affairs, Vol. 57, No. 3 (Autumn, 1984), pp. 462-470
Published by: Pacific Affairs, University of British Columbia
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 The Political Economy of the
Philippines: Critical Perspectives

Review Article*

JN RECENT YEARS there has been mounting interest in the mode of

incorporation of the Philippines into the world capitalist system.
Explanations of change in the Philippines, especially the change that has
occurred during the past twelve years of authoritarian rule, have been
increasingly located in analytical frameworks which stress the role of
external agents in determining the restructuring of the Philippine
political economy. Almost all authors have been highly critical of the
activities of these outside institutions and governments, and have pointed
to the inability of the Philippines to select its own developmental model
while remaining in the stranglehold of these powerful neocolonial forces.
The International Monetary Fund (IMF) and World Bank have been
identified in previous works as major agents of imperialist domination in
the Philippines.' Two of the books currently under review resume the
critical assault, arguing that the World Bank and IMF have progressively
assumed control of the Philippine economy to further the interests of the
metropolitan capitalist nations, notably the United States.2 In the volume
edited by Vivencio R. Jose, there are eight papers attesting to the anti-
Filipino ambitions of the multilaterals' policies and programs. Lichauco
maintains a fierce nationalistic stance in his condemnation of the free-
trade and foreign-capital ideology of development which has prevented
progress in Philippine industrialization. In a companion piece, Villegas

*Mortgaging the Future: The World Bank and the IMF in the Philippines. Edited by Vivencio
R. Jose. Quezon City: Foundation for Nationalist Studies. 1982. 250 pp. P 27.00.
Development Debacle: The World Bank in the Philippines. By Walden Bello, David Kinley,
and Elaine Elinson. San Francisco, California: Institute for Food and Development Policy.
1982. 256 pp. P 20.00.
Studies in Philippine Political Economy. By Edberto M. Villegas. Manila: Silangan Pub-
lishers. 1983. 186 pp. P 36.00.
Cronies and Enemies? The Current Philippine Scene. Edited by Belinda A. Aquino. Hono-
lulu: Center for Asian and Pacific Studies, University of Hawaii (Philippine Studies
Occasional Paper, no. 5). 1982. 84 pp. US$5.00.
Feudalism and Capitalism in the Philippines: Trends and Implications. By Temario C. Rivera,
et al. Quezon City: Foundation for Nationalist Studies. 1982. 106 pp. P 15.00.
' Alejandro Lichauco, The Lichauco Papers: Imperialism in the Philippines (New Yo
Monthly Review Press, 1973); and Cheryl Payer, The Debt Trap: The IMF and the Third World
(Harmondsworth, England: Penguin Books, 1974), pp. 50-74.
2Jose, ed., Mortgaging the Future; and Bello, et al., Development Debacle.

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 The Political Economy of the Philippines

traces the relationship of the Philippines with the IMF and World Bank,
and asserts that the latter have aimed to maintain the primary produc-
tion orientation of the Philippine economy to suit the needs of the
United States economy. Indeed, he says, the Philippines has become a
"mere appendage to the American economy" (p. 61). On the other hand,
Magallona believes that the Philippines is now "virtually an extension of
the Japanese economy" (p. 81), producing labour-intensive goods for
export to rich countries. Ofreneo's examination of the agricultural sector
leads him to conclude that agricultural modernization is being promoted
by the World Bank in order to swell transnational corporation profits.
This is presented as the overriding objective of all agricultural pro-
grammes. Jose argues that Philippine education "is now a factory pro-
ducing individuals with the ideology and the technical skills needed by
the giant corporations and whose consumption habits are attuned to
their products" (p. 135). Bennagen offers a plea on behalf of cultural
minorities who have suffered because of development projects instigated
by the World Bank. A welcome case-study is presented by Encarnacion,
et al., who document the tortuous process of borrowing from the World
Bank for the Manila Urban Development Project. The final chapter by
Jose, which attempts an overview of IMF and World Bank operations in
the Philippines, displays an unhealthy reliance on jargon and generali-
zations for which the flimsiest of empirical evidence is presented. Mort-
gaging the Future is an uneven book which displays, on the one hand,
some genuine insights and well-substantiated allegations and, on the
other, a good deal of oversimplification, contradiction, and repetitious
political sloganeering.
The analysis offered by Walden Bello and his associates is a more
coherent, better documented, and ultimately more persuasive account of
World Bank involvement in the Philippine "development debacle." In
part, this stems from the fact that these authors are contributing to one
narrative and can maintain consistent themes, while Jose has assembled
a group of independent articles which do not share the same objectives
and conclusions. Bello, et al., argue that between 1970 and 1982 the
World Bank has assumed a "massive presence" in Philippine affairs. The
Bank has relentlessly pursued two objectives: to stabilize the political
situation; and to integrate the Philippine economy more thoroughly into
the international capitalist order. In the process, the Philippine economy
has been further subjugated to the interests of American corporations
and financial institutions.
In order to achieve political stabilization, the authors assert, the Bank
has funded rural and urban development programs whose principal
orientation is toward "counterinsurgency" and "pacification." This is a
regrettably narrow perspective, however, which overlooks some of the
other possible objectives in rural and urban development. It is also the

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 Pacific Affairs

case that rural and urban development programs in any Third World
country could be seen in terms of counterinsurgency, providing some
tangible gains to sections of the population in order to encourage their
political acquiescence. The major problem of World Bank rural-devel-
opment philosophy and practice appears to be its concentration on the
modernization of peasant agriculture, with rural development per se
relegated to a minor supporting role.3 The growing army of landless
rural Filipinos is largely ignored; migration to urban centres merely
represents a geographical transfer of the problem. If the World Bank is
to improve the welfare of this underprivileged section of the population,
it needs to adopt a more comprehensive view of the unequal relation-
ships which characterize the Philippine economy. It must reorient its
compartmentalized sectoral perspective, and formulate programs spe-
cifically aimed to meet basic needs.
Export-oriented industrialization is regarded by Bello as the policy
which does most to further the integration of the Philippine economy
into the world capitalist system. The Bank has utilized the lure of cheap
labour to bring in foreign capital to set up export industries of an
assembly nature. The results of this policy have been the repression of
labour, an absence of backward or forward linkage, and a soaring import
bill for capital goods and industrial raw materials. Also, the Bank has
attempted to wipe out the national industrialists by promoting free trade,
in order to unleash a flood of manufactured goods from the industrial
economies onto the Philippine market. As with their "counter-
insurgency" theme, there are many valid points in the authors' argu-
ments about the application of this industrialization strategy. Once
again, however, the reader is confronted by overstatement and some-
times inconclusive evidence. A "total denationalization of Philippine
industry" (p. 165) is alleged but not proven; the past and present
problems of Philippine import-substitution industrialization are hardly
mentioned; and the difficulties for backward linkage of market size,
technology, and capital intensity are brushed aside with inadequate
discussion.
In explaining the ease with which the World Bank has penetrated the
highest reaches of Philippine policy-making, the accusing finger is
pointed squarely at the government technocrats. Even Marcos's political
party, the Kilusang Bagong Lipunan (KBL), now voices similar criticisms
of the technocrats' collusion with the World Bank and IMF.4 The past
decade has witnessed the rise of these Western-trained individuals in the

3 See Eric jacoby, "World Bank Policy and the Peasant in the Third World," Development
and Change, vol. 10, no. 3 (1979), pp. 489-94.
4 Philip Bowring and Guy Sacerdoti, "Time for a Real Debate," Far Eastern Economic
Review, June 9, 1983, pp. 54-5.

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 The Political Economy of the Philippines

government and they have been the willing facilitators of Bank policy.
While there is undoubtedly some degree of collusion between Bank
officials and government technocrats, it is questionable how far the latter
have succeeded in eclipsing the other elite factions. There is evidence to
suggest that the technocrats have not attained and consolidated the
preeminence in economic policy-making claimed by Bello.5
It is one thing to assert that the World Bank and IMF wield consid-
erable influence in Philippine economic policy; it is quite another to
suggest (as both books do) that Philippine sovereignty has been handed
over to the multilaterals. Philippine elites and Marcos himself do make
significant contributions to economic policy, while the technocrats may
not always act as World Bank automatons. The domestic power structure
should not be regarded as a dependent phenomenon totally subjugated
by imperialist forces. More attention to the intricacies of power-holding
within the Philippines would have strengthened both volumes and
avoided the presentation of a conspiracy theory of alarming simplicity.6
There is an urgent requirement for detailed studies of the operations of
transnational corporations in the Philippines, instead of the fragmentary
information which is currently available. Also, it is worth considering
whether a certain type of economic ideology requires political coercion.
If so, we should be examining the precise nature of the linkages between
the authoritarian political structure and the economic practice of the
Marcos regime.7
A further problem with both books is that, by keeping the target
(World Bank and IMF) constantly in their sights, they give insufficient
emphasis to the surrounding economic, social, and political terrain. For
example, scant attention is paid to the crippling costs of importing oil,
while the problems generated by rapid population growth are never
mentioned. Also, the Philippine economy is certainly not wide open to
imports, while the government is pursuing a heavy-industry program
despite World Bank pressures.8 And the question arises: if the multi-
laterals are such expert agents of transnational capital, why has their

5 Guy Sacerdoti, "Favouritism Still in Favour," Far Eastern Economic Review, June 30,
1983, pp. 50-1; and John Doherty, "Who Controls the Philippine Economy: Some Need
Not Try as Hard as Others," in Aquino, Cronies and Enemies?, p. 32.
6 Several alternative scenarios are sketched in Carl H. Lande, "Authoritarian Rule in
the Philippines: Some Critical Views," Pacific Affairs, vol. 55, no. 1 (1983), pp. 87-8.
7 See David Pion-Berlin, "Political Repression and Economic Doctrines: The Case of
Argentina," Comparative Political Studies, vol. 16, no. 1 (1983), pp. 37-66.
8 For a short (but unduly optimistic) account of the Philippine economy, see Hal Hill,
"The Philippine Economy Under Marcos: A Balance Sheet," Australian Outlook, vol. 36, no.
3 (1982), pp. 32-9. Another brief but useful macroeconomic profile of the Philippines is
Frank H. Golay, "Economic Challenges Facing the Philippines," Journal of Southeast Asian
Studies, vol. 14, no. 2 (1982), pp. 254-61. See, also, John Wong, ASEAN Economies in
Perspective (Philadelphia: Institute for the Study of Human Issues, 1979).

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 Pacific Affairs

period of ascendancy coincided with the Philippines' achieving the worst

economic growth rates in Southeast Asia?9
It is obvious from both books that the World Bank and IMF have
undistinguished records in the Philippines, but it is disappointing that
neither volume presents any substantial discussion about alternative
development strategies. In their critical fervour, the authors attempt to
demolish every development strategy that has been applied to the
Philippines, and at times one wonders what else is left to try. The
occasional suggestions for future policy directions are typically vague,
while the precise manner in which these solutions could be implemented
remains largely undisclosed. Jose places faith in the "onrushing tide of
popular history" (p. 232), which must eventually result in "the mobi-
lization of [the people's] collective creative power, scientifically guided
and then strongly led" (p. 239). Villegas sees as the only alternative the
repudiation of all debts to exploitative foreign creditors, followed by "a
national policy of self-reliance" (pp. 62-3).
Bello and his co-authors regard both the international and national
redistribution of power and wealth as the crucial elements for promoting
true development (p. 204). As they so correctly emphasize throughout
their book, the existence of mass poverty has not been alleviated by
recent development initiatives. World Bank slogans advocating redistri-
bution with growth have a particularly hollow ring when applied to the
Philippines. Every survey reveals the painful facts that real income for
the majority of Filipinos has been declining during the period of au-
thoritarian rule, and that poverty has become the unpleasant lot for
increasing numbers of people. Obviously, the authors of both books did
not set out to map a new development strategy for the Philippines, but
perhaps they or others might now commence work on practical plans for
redistribution and equitable development. Awaiting some inevitable
millenium at an indeterminate future date should not be the fate of the
millions of Filipinos who daily face the harsh realities of poverty and
deprivation.
Many of the issues raised in the two critiques of the IMF and World
Bank recur in Edberto Villegas' Studies in Philippine Political Economy, a
collection of essays previously published by the Third World Studies
Program at the University of the Philippines. For Villegas, American
capitalism is undoubtedly the Philippines' public enemy number one.
U.S. multinationals appear to be the devil incarnate, while the IMF and
the World Bank are the loyal lieutenants who relentlessly promote
policies in the Philippines which work to the advantage of the multi-
nationals and to the disadvantage of the Philippine people. Villegas

9 For comparative economic growth rates, see Hal Hill, "The Philippine Economy,"
p. 33.

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 The Political Economy of the Philippines

ranges widely in his writing and makes many allegations. The multi-
nationals have failed to provide large amounts of investment capital, they
have transferred little technology, and they have made a minimal con-
tribution to alleviating unemployment.'0 The oil companies collude with
the government oil corporation to obtain high profits, while Filipinos
bear the intolerable burden of increased oil-product prices-a massive
1,286 per cent between 1971 and 1980. Reorganization of the Philippine
financial system has been enforced by the IMF and World Bank to
facilitate the access of U.S. capitalists to Philippine capital. Finally, the
Labor Code of 1974 has consistently worked against the interests of the
wage earner whose industrial rights have been eroded and whose income
has experienced a significant decline in real terms during the Marcos era.
There are problems with the analysis, however. Every economic
difficulty besetting the Philippines is portrayed as the direct result of
American actions, and every economic policy is viewed as a multinational
promotion. As relations between the United States and the Philippines
become the overriding explanatory variable, other important items are
overlooked. While Villegas furnishes the data to support many of his
claims, his one-dimensional approach is inadequate in other instances.
The complexity of the Philippine political economy is transformed into
a model of astonishing simplicity where conclusions can sometimes
precede the analysis and causal linkage is often tenuous. The thesis does
not have a strong theoretical base and can best be seen as resting on
essentially nationalist foundations. The inescapable conclusion of this
forceful brand of nationalism is that all external relations of the Phil-
ippines are harmful to the nation. The implications are that an autarkic
development strategy is necessary. It is highly dubious whether the
Philippines could embark upon such a path, even if the political will were
present.
The slim volume edited by Belinda Aquino represents an excellent
contribution to our comprehension of the current Philippine political
economy. John Doherty poses the simple question as to "who controls
the Philippine economy," and proceeds to furnish an answer through
empirical research. His major finding is that the economy is, in fact,
controlled by eighty-one families spread among ten banking groups.
Interlocking directorships enable these families to concentrate economic
power and wealth and to minimize the competition normally associated
with market economies. They are heavily involved with foreign firms and
appear to undertake many "comprador" functions on their behalf. Most
corporations are not public, so that "any talk of social responsibility or

10 A useful overview of research into foreign direct investment in the Philippines is

Charles W. Lindsey and Ernesto M. Valencia, "Foreign Direct Investment in the Philip-
pines: A Review of the Literature," in Survey of Philippine Development Research II (Manila:
Philippine Institute for Development Studies, 1982), pp. 153-232.

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 Pacific Affairs

responsible management is treated with disdain" (p. 28). The govern-

ment cooperates by providing infrastructure and other incentives, while
failing to introduce "tax reforms that would put the excessive profits of
private individuals to productive use" (p. 28). Doherty also notes how the
so-called "rationalization" of industry "has meant little more than greater
monopolization for the benefits of the favored few" (p. 29). Finally, he
argues that the technocrats have not exercised the control over the
economy that many have alleged. It is a depressing picture which, once
again, leads back to the central issue of the gross economic and social
inequalities which characterize Philippine society. As Doherty observes,
it is up to the government to recognize its obligations to serve the people
and not to cater exclusively to the needs of the favoured few who control
the national economy.
In his introduction to Feudalism and Capitalism in the Philippines,
Renato Constantino observes that discussions on the nature of Philippine
reality have often focussed on the question of the predominant mode of
production, but that factional and sectarian debates on the matter have
resulted in poor analysis and confusion. The various contributions to this
volume represent an effort to clarify the issue. Unfortunately, there is
little clarification, and much confusion remains. Terminological vague-
ness abounds. It is not so much that the authors are using highly complex
notions; rather, they have contrived to make their analytic tools, con-
ceptual categories, and sentence structures more complex than is nec-
essary. The reader is often confronted with impenetrable prose and the
"smoke screen of jargon" instead of clear expositions on Philippine
history and political economy. Valencia's paper is the exception (pp.
60-86). He presents a concise account of the scope, process, and results
of land reform since the advent of martial law. His analysis adds further
weight to the critical literature on Philippine land reform," and dem-
onstrates that land transfer includes only a small percentage of all
Filipino farmers and that the program involves no wealth redistribution
away from landlords. Indeed, the supposed beneficiaries are overpaying
for their newly acquired land, and the majority are in arrears with their
loan repayments.
The other papers examine the imposition of alien modes of produc-
tion on the Philippines by colonial and imperialist powers. Further
concerns are the relations among the different modes, and the nature of
Philippine integration into the world capitalist system. While there is
broad agreement that the capitalist mode is currently displacing the

" See, especially, David Wurfel, Philippine Agrarian Policy Today: Implementation
Political Impact (Singapore: Institute of Southeast Asian Studies, 1977); and Benedict J.
Kerkvliet, "Land Reform: Emancipation or Counterinsurgency?" in David A. Rosenberg,
ed., Marcos and Martial Law in the Philippines (Ithaca, New York: Cornell University Press,
1979), pp. 113-44.

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 The Political Economy of the Philippines

remaining non-capitalist modes, there are differences of opinion as to the

precise nature of current and past transformations. However, there is no
attempt to define and describe what Philippine feudalism actually was or
is. Despite the Marxist commitment of the authors, the Asiatic mode of
production is not discussed; while the meaning and relevance of "mode
of production" are not raised, even though they have been the subjects
of fierce debate among rival Marxists. Stauffer's provocative application
of the notion of "refeudalization" to the Philippines is likewise ignored,'2
as is work on the "moral economy" of the peasant.'3 Comparative
materials from the Latin American literature on feudalism and capital-
ism are never consulted,'4 while the book sadly lacks contributions from
anthropologists and historians-the people best equipped to construct
detailed models of specific modes of production and their interrelation-
ships in the Philippines. One wishes that the other authors have taken
Valencia's advice and adopted an approach "less concerned with being
axiomatically consistent with predefined laws and ... more concerned
with drawing out testable propositions from a logical analysis of facts" (p.
69). Those wishing to understand the differential impact of international
capitalism on the Philippines in the nineteenth and twentieth centuries
would be better advised to read the recently published volume edited by
Alfred McCoy and Ed. C. de Jesus, which combines theoretical insight
and detailed case-studies with telling effect. '
An anti-imperialist pro-nationalist stance is evident in all of the works
under review.'6 There is a consensus that the external links which bind
the Philippines to the rich nations of the world have consistently worked
to the disadvantage of the Philippines. In recent years, foreign govern-
ments (notably that of the United States),'7 the IMF and World Bank,
and the multinational corporations have taken the lead in exploiting the
Philippines and have ensured that "true development" would not occur.
While some of the authors overstate their arguments and fail to sub-
stantiate some of their wilder accusations, ample evidence has been

12 Robert B. Stauffer, "The Political Economy of Refeudalization," in Rosenb

Marcos and Martial Law, pp. 180-218.
'3James C. Scott and Benedict J. Kerkvliet, "How Traditional Rural Patrons Lose
Legitimacy: A Theory with Special Reference to Southeast Asia," Cultures et de'veloppement,
vol. 5, no. 3 (1973), pp. 501-40; and James C. S~cott, The Moral Economy of Peasant Rebellion
and Subsistence in Southeast Asia (New Haven, Connecticut: Yale University Press, 1976).
14 The major omission is Ernesto Laclau, "Feudalism and Capitalism in Latin America,
New Left Review, no. 67 (1971), pp. 19-38.
15 Alfred W. McCoy and Ed. C. de Jesus, eds., Philippine Social History: Global Trade and
Local Transformations (Quezon City: Ateneo de Manila Press, 1982).
'6John Doherty's article ("Who Controls the Philippine Economy?") is a partial excep-
tion, as it mentions but does not develop the theme of "comprador" linkages between
Philippine capitalists and foreign companies.
17 A well-documented critique of post-1945 U.S. government policy towards the Phil-
ippines is Stephen R. Shalom, The United States and the Philippines: A Study of Neocolonialism
(Philadelphia: Institute for the Study of Human Issues, 1981).

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 Pacific Affairs

gathered to prove that the Philippines has paid a high price for its
external linkages and that millions of Filipinos have suffered un-
necessary hardships because of them. One logical conclusion to be drawn
from the radical analyses under review is that delinking from inter-
national capitalism is a prerequisite for national development. But what
is achieved by such drastic action? None of the authors directly addresses
this problem, and one is left wondering how delinking will improve the
material conditions of the mass of the population or alter the relation-
ship between the powerful and the powerless. The nightmare of Kam-
puchea is an ugly example of what can happen. If delinking is "an empty
box ... containing no practical detailed, specific short, medium and
long-term objectives concerning either the structure of the economy or
the forms of social and political organisation governing control, democ-
racy and accountability,"'8 then what is to be done in the Philippines?
The current acquiescence to rich-country hegemony cannot be tolerated.
The requirement, therefore, is to achieve the right balance between exit
and entry in the international system-what Mazrui refers to as "selective
entry."'9 But a restructuring of Philippine relations with the industri-
alized countries must be accompanied by a domestic commitment to
development for and with the mass of the population. There is no reason
to believe that a highly inequitable structure of domestic social, political,
and economic relations will magically disappear through international
restructuring. The battle for development must be fought on two fronts.

Administrative College of Papua New Guinea

March 1984 MARK M. TURNER

18 Sheila Smith and John Sender, "

vol. 5, no. 3 (1983), p. 655.
'9 Ali A. Mazrui, "Exit Visa from the World System: Dilemmas of Cultural and
Economic Disengagement," Third World Quarterly, vol. 3, no. 1 (1981), pp. 62-76.

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