IN a recent article timed for the commemoration of the February 25 Edsa Revolt, President Cory’s finance officers—DOF Secretary Jesus Estanislao and Central Bank Governor Jose Cuisia —claimed that they “undid Marcos economy.” They described the Marcos economy as one characterized by inefficiency and where one had a hard time getting a phone, water from the tap and dollars for travel. But due to the twin programs of “economic liberalization” and “deregulation” since 1986, the consumer horror stories on phone, water and dollars are no more. Accordingly, the economy has been moving forward and upward. They credit such progress to the support extended to the post-Edsa governments by the World Bank, IMF, ADB and other creditor institutions. Hence, their plea: “Let’s not go back.”
But have we really left the Marcos economy? What exactly was the nature of the economy in place in the authoritarian decade of the 1970s and the crisis decade of the 1980s? And have we really progressed due to economic liberalization and deregulation?
On the last question, Secretary Estanislao and Governor Cuisia should sit down with the leaders of the 100 plus farmer organizations and 200 plus organic-producing municipalities who have succeeded in asking the Senate to defer the ratification decision on the Regional Comprehensive Economic Partnership (RCEP). The farmer leaders and mayors have a different take on economic liberalization and deregulation based on their collective painful experience under the trade liberalization program of the World Trade Organization (WTO), which was ratified by the Senate in 1994. Also, more recently, they saw the horrible impact on rice farmers of the 2019 Rice Tariffication Act, which is essentially a rice trade liberalization program. Overall, it is difficult to find a farmer constituency for economic liberalization and deregulation.
Incidentally, the implementation of the twin programs of economic liberalization and deregulation began in 1980-1982, as part of the “structural adjustment program” developed by the IMF and the World Bank for the Philippines and other heavily-indebted countries such as Argentina. The SAP program carried a long list of “policy conditionalities” such as removal of support for domestic industrial and agricultural producers, including “restraint” on the wage increase demand of the workers. The overall SAP thrust was the general opening up of the economy through trade/investment liberalization, economic deregulation and privatization, and the “chopping off of the visible hand of government.” This free-trade SAP framework became popularly known as the “Washington Consensus,” largely due to the global advocacy for free trade and privatization by US President Ronald Reagan and UK Prime Minister Margaret Thatcher.
In the early 1980s, SAP was grudgingly accepted by the beleaguered Marcos regime, which saw the SAP’s adverse impact on Marcos cronies and their businesses. However, the Corazon Aquino administration had no problem accepting and even deepening the SAP’s implementation for, after all, the Marcos cronies were the ones who stood to lose most in the early post-Edsa years.
The trouble is that SAP did not only hit the Marcos cronies. It devastated the real or productive sectors of the economy, specifically domestic manufacturing and domestic agriculture. The head of the national industry association, Fred Elizalde, openly complained about the harshness of the SAP’s austerity and interest deregulation programs. DA Secretary Arturo Tanco also expressed deep reservations because the SAP’s “agricultural deregulation” program posed a direct threat to the DA’s “Masagana 99” and other crop production programs.
The point is that the economy in the authoritarian decade of the 1970s was a complex one. It is way too easy to say that it was a “Marcos economy” and that the twin programs of economic liberalization and deregulation swept this economy away. The reality is that the economy did grow in the 1970s and this was due largely to several factors, foremost of which were the following: 1) continuing expansion of the import-substituting industrial (ISI) sector, which started in the post-war decades of the 1950s and 1960s, 2) debt-driven infrastructure development similar to the build-build-build program of President Duterte, and 3) growth of the agricultural sector.
On debt-driven infra development, this was the main reason for the country’s rapid accumulation of debt in the 1970s. Debt rose from $2 billion to over $20 billion in a decade. Shortly after the imposition by President Marcos of martial law in September 1972, the World Bank declared the Philippines as “an area of concentration.” Subsequently, the World Bank and the IMF formed the Consultative Group of Creditor for the Philippines (CGCP), which coordinated the lending programs for the country involving the bilateral, multilateral and even private international creditors.
A major area of World Bank intervention in the 1970s was the propagation of the Green Revolution technology developed by the IRRI based in Los Baños. All-out support was given to the efforts of the martial-law government in the distribution of high-yielding IRRI seeds, irrigation development and so. But in the SAP decade of the 1980s, support to the Masagana 99 farmers was suddenly withdrawn, leading to widespread bankruptcies in the farm sector.
Another contributor to the growth process was the export-oriented industrial (EOI) sector, which the Marcos western-educated economic technocrats, Gerardo Sicat et al., tried hard to promote through various incentives such as income tax holiday, duty-free raw material importation and development of special economic manufacturing zones, e.g., Bataan export processing zone. Electronics assembly and sewn garments production prospered.
As to the Marcos cronies, their businesses indeed expanded tremendously in the martial law years. Their acquisition appetites are well documented in the books of Ricardo Manapat (Some Smarter Than Others, Alethia Publications, New York,1991), Primitivo Mijares (The Conjugal Dictatorship, reprinted by Ateneo de Manila U) and a number of scholars. The Marcos cronies feasted in acquiring assets in the power, telecom, plantation, cigarette, construction, auto and other sectors.
The problem is that over time, after the Edsa Power Revolt, the Marcos cronies have been replaced or eclipsed by the cronies of the post-Edsa administrations—the so-called KKK tribe “kabarkada, kamag-anak at kabarilan.” The new cronies have discovered that there are new business empires to be built on deregulated and privatized power, telecom, water, construction and other sectors.
Meantime, the country experienced severe de-industrialization and de-agricultural development under SAP in the 1980s-2000s. As documented by the Fair Trade Alliance and the Federation of Philippines Industries, a large number of industrial enterprises collapsed. These include those in the textile, pulp and paper, wood-based, steel, rubber and tire, shoe, tile, battery, pharmaceutical, cement, plastic and petrochemical industries. On the other hand, the EOI manufacturing has remained an enclave, dominated by electronics doing low or middle assembly work for the global value chains of multinationals. The EOI’s garments sector, which was once upon a time a big employer, wilted at the turn of the millennium.
As to the agricultural sector, this was hit by three waves of agri trade liberalization sans any accompanying or supporting agricultural modernization program. The three waves: “agricultural deregulation” in the 1980s, WTO tariffication in the 1990s and rice tariffication/import liberalization at present.
Given the foregoing phenomena of de-industrialization and de-agricultural development, the Philippines, number two to Japan in the 1960s, was left behind by its Asian neighbors (South Korea, Taiwan, Singapore, Malaysia, Thailand, Indonesia and now Vietnam) in the SAP decades of the 1980s-1990s-2000s. Thus, for Secretary Estanislao and Governor Cuisia to write that the Philippine economy today is much healthier and that the Filipino people today are much better off because of economic liberalization and deregulation clearly defies logic.
And we are not talking yet of the high, very high cost of servicing the debt left behind by the Marcos regime. In her address to the Joint Session of the US Congress in 1986, Madame Corazon Aquino declared that she was “honoring” the entire debt. Today, after four decades of back-breaking servicing of this debt, the country is facing once more the possibility of another debt crisis similar to what flattened the country in the mid-1980s.
To the presidentiables: Saan na po tayo pupulutin?
Dr. Rene E. Ofreneo is a Professor Emeritus of the University of the Philippines. For comments, please write to reneofreneo@gmail.com.