seven - Rebuilding the Economy

Summary

Economic reform in the Philippines has been a particularly contentious and protracted process. In the 1950s and up to the early sixties, economic growth took place under a protectionist regime of exchange controls and import-substitution. However, after this initial spurt of manufacturing activity, industrial growth began to stagnate. Between 1961 and 1987, the proportion of total employment in manufacturing dropped from 12 to 10 per cent. In addition, between 1972 and 1988, the manufacturing sector's share in gross domestic product (GDP) barely moved: 24 per cent in 1972 and 25 per cent in 1988.

Under the authoritarian regime of Marcos (1972-86), the administration tried to pursue a policy of greater export-orientation and liberalization under pressure from the World Bank and the International Monetary Fund. These policy shifts were deflected, however, by the availability of cheap foreign loans in the international capital markets, which Marcos used to fuel a “debt-powered” strategy of growth Moreover, these policies towards greater liberalization and export-orientation could not be pursued vigorously during the authoritarian rule of Marcos because of the continuing resistance from a constituency of local industrial monopolists and oligopolists. Many of them were cronies of Marcos who had traditionally prospered under a protected trading regime serving the local market. By 1983, a balance of payments crisis led to the suspension of the trade liberalization programme initiated by Marcos.

With the decline and stagnation of industrial growth that followed the “easy phase” of import-substitution, one option for sustaining and deepening industrialization in the country would have been a redistribution of assets and resources primarily through agrarian reform to build a dynamic internal market to sustain growth and development. This option was effectively foreclosed, however by the power of the landed capitalist class which continued to control the legislature in the country.

A second option for industrial deepening would have been a carefully managed integration of a protected home market with vigorous export orientation in selected industries along the model of the East Asian newly industrializing economies (NIEs).