By Virgil B. Vallecera
I. Introduction
The Philippine economic experience is a puzzle to many scholars.
During its 1946 independence, the Philippines had well-developed civil institutions; independent judiciary and legal system; open and vigorous press; and ample agricultural supply. From 1950s through 1960s, it had a higher income per capita than other Asian neighbors had; and had grown steadily, although not enough to keep up with other tiger economies.
Then, suddenly in the turn of the second half of the 20th century, it missed out almost completely on the Asian boom than most other Asian nations, which eventually became a major disappointment to most Filipinos.
There are some possible derivative and endogenous explanations for the “puzzles” of Philippine poor economic performance—difficult geography, macroeconomic policy failures, and corruption. Aside from these, two major exogenous influences may explain the Philippine economic phenomenon—being the only Catholic colony in Asia and being under the Americans for quite some time.
Nelson proposes that the political and economic experience in the Philippines is strikingly similar to Latin American Argentina, Mexico, and Peru. He also advances that this is rooted in the proximate histories and cultures of being former Spanish Catholic colonies, which may have endorsed cultural attitudes that block freer markets and successful political democracy.
However, these hypotheses are not absolute, as they are non-reflective to the economic history of the Philippines that set it so distinct from other Asian countries.
II. Contents
The American Years
In early 19th century, a typical Asian country had an income per capita of about 50 percent of the United States and other West countries. After the industrial revolution of the West in 1900, this fell to 10 to 20 percent. A colonial status did not seem to make a difference; all had similar economic status.
The 1902 Philippines was a period of modernization and economic boost. The Americans confiscated lands from the Catholic friar order, broke traditional political dominance of the Catholic church, redistributed lands to Filipinos, and instituted major reforms in public health, transportation and other infrastructure, administrative staffing, etc. The change from Spanish to American rule had sharp break in education. The Americans instituted every Filipino to attend school and they begun to build and staff public schools throughout the nation.
The Americans also introduced democracy earlier than any other Asian country as the Philippines. Filipinos elected the lower house of Congress in 1907 and the upper house in 1916. The US set a Commonwealth government until 1935. In terms of human development index, the Philippine population increased rapidly reflecting the improvements in public health.
In terms of geographic factors, the 19th century Philippines had similar economic trajectories as Indonesia, Malaysia, and Thailand. In 1900-1950s, the Philippines grew rapidly than the other countries.
The Philippines and Japan Before the World War 2
Philippines and Japan had proximate real wages in 1920-1930s. As for income per capita until World War 2, the Philippines was about 70 percent of the Japanese level. After the Japanese surrender in early 1940s, Japan and Philippines became the only Asian nations to experience American occupation.
The policies for both were similar—the Americans confiscated traditional power of the rural landowning aristocracy; curtailed the power of the Emperor (in Japan) and Catholic church (in Philippines); installed a democratic political system; endorsed constitutions; granted women right to suffrage; established human rights and freedoms; spread mass schooling; defused militaristic tendencies; focused modern curriculum to physical and social sciences.
In 1950, the income per capita of Japan and Philippines almost converged to a 11 to 20 percent of the United States level; almost since there was a rapid increasing separation afterwards. The 1950 Japan-Philippines proximity now stands contrast to the relatively greater subsequent economic success in 21st century Japan—indeed, an economic mystery.
The Philippines and the Rest of Asia
The 1950 Philippines exceeded income per capita of all East and Southeast Asian nations except Malaysia, Hongkong, and Singapore. It had higher level of physical and human capital. However, over the turn of the 20th century, Philippines was rapidly surpassed overtime.
Experts suggest poor quality of national institutions and governance as culprit, an unnoticed problem. “State weakness is manifest in uncollected taxes and uncontrolled crime, bloated bureaucracies, and denuded forests, low teacher salaries, and high emigration rates.” (Abinales and Amoroso)
Accordingly, Raul Fabella sees that the Philippines lacks two critical ingredients: (1) stability of the rules and (2) a secure enforcement of these rules.
However, many other Asian nations have had similar institutional deficiencies and yet have done better economically.
Corruption Puzzles
The key issue is not whether any corruption exists or not. But on the predictability and the degree to which corruption is allowed to distort government decisions from the economically rational.
In fact, corruption may be a beneficial form of income redistribution (Nelson). Rent seeking and corrupt payments can be merely the monetary side of an informal set of transactions that routinely occur in many Asian countries; hence, socially approved bribes in the market. For instance, South Korea and Indonesia are highly noted corrupt countries that have high rates of economic growth.
Hence, one must look to the specific character of corruption (good or bad) in order to identify the potential causes of national economic failure. In the Philippines, the biggest problem has been the unpredictable character of corruption, reflecting a general sense of instability and unpredictability throughout much of its political and economic life.
Philippine politics is also exceptionally particularistic, regional and fragmented; thus, creating a multiple set of independently operating corruption seekers whole collective actions may be damaging not only to the whole national economy but even to the corrupt actors themselves. (De Dios and Esfahani)
The Philippines and Mexico
Moral systems and other cultural infrastructure of a society have many practical economic consequences—they greatly influence the levels of trust and transaction costs of doing business in a nation (Nelson).
Altering a culture takes a long time and requires conversion rather than construction. (North and Nelson)
For 330 years, the Spanish successfully established a devout Catholicism outpost in the Philippines. The evidence of Spanish Catholic roots of Philippine culture is seen in the Latin American basic similarities: large landholding and wealthy families; weak state and powerful political oligarchs; high level of inequality; high crime rates; dangerous highways for drivers and pedestrians; and general level of violence in election cycle.
Spanish culture was refracted through Mexico.
Both Mexico and Philippines fell rapidly in the 19th century. Income gap between both countries steadily narrowed and nearly equality in 1930s. Fluctuations in national economic results showed similar patterns of ebb and flow over almost two centuries. The economic histories of both countries are different from the standard Asian trajectory.
The economic trajectories of Peru, Columbia, and Brazil are also significantly similar to the Philippines.
Spanish Catholic Culture
National culture can also be an exogenous economic factor since few economic policy makers have considered it an economic variable or sought to alter a national culture for economic purposes. Thus, the level of trust, as a social capital element, affects levels of transaction costs and national income.
In the onset of 20th century, America’s Protestant individualism and personal responsibility would appear as religious commitment to the values of the free market and political democracy. While the Catholic Church’s political centralism of the Spanish monarchy had religious orthodoxy as its complement and foundation, which prevented examination and criticism.
Spain’s Counter-Reformation in defense of the Catholic culture is a titanic endeavor to arrest change and to bring change in society “forever to a halt” in order that all manner of stable, predictable, traditional arrangements can be maintained. The cultural tradition of the Spanish-speaking peoples proved unresponsive to industrial capitalism and their governments often sought to repress the market forces for change (Veliz). In turn, socialism, progressivism, and other collective ideologies were not a force for modernization, but a limitation to the rapid pace of social transformation that capitalism was bringing about in the new secular age.
The Latin Philippines
Instead of a Confucian East Asian heritage of ethical obligation to society as integral, the Philippines inherited a Latin American heritage of feudal hacienda mentality and poor leadership, reflecting a national elite more individually concerned with their own bank accounts that collective actions directed towards strengthening their nation. (Mahbubani)
Aside from Catholicism, scholars argue that the Philippine evolution since 1946 is characterized by a decay of a modern democratic government implanted by idealist Americans who came to the country on a mission of a manifest destiny (Yoshihara). When the Americans left, the Philippines then economically functioned as a Latin American country with Latin American results (Nelson).
Argentina and the Philippines
Both Argentina and the Philippines had rapid loss of economic status in the 1980s. This was characterized by wide political and economic turmoil and disappointment, which eventually made them two of the most corrupt nations in the world.
The political, cultural, and economic problems of Argentina and the Philippines reflected a Spanish Catholic personality type that was less suitable as a cultural basis for a democratic system of government and for the sustenance of market freedoms.
III. Conclusions/Comments
“The puzzle is straightforward: how could a country that was once one of the richest in the world now be placed so poorly.”
As what Nelson wanted to emphasize, in order to understand the poor Philippine economic performance, one should have a comparative analysis of the Latin American experiences rather than the East and Southeast Asian types. This is so since culturally and politically, the Philippines was significantly shaped by the 330 years of Spanish Catholic culture rather than the liberal 50 years of Protestant America.
He also contends that economists should not set aside the “unobserved economic variables” like religion, culture, and politics in order to comprehensively address economic mysteries such that of the Philippines.
Having these “unobserved variables” in mind, Nelson advances that the political and economic experience in the Philippines stands in closer proximity to those of Latin America than to Southeast Asia, and that this is rooted in their deep similarity of common Spanish Catholic colonial history and culture that bar freer markets and successful political democracy.
Corruption, macroeconomic policy failures, and difficult geography, though comprehensive in attempt to explain, still were not enough to relieve the Filipinos’ disappointment towards the wide numerical and economic gaps that spell shame from other Asian neighbors. This wide difference places the Philippines out of context of the Asian economic experience.
It is quite unfortunate; however, that Nelson is saying that the Philippines is better to be an American state rather than independent; that the Philippines is economically able under Abe’s direct watch and maneuver.
The Filipinos do have immeasurable disappointments toward the concurrent Philippine economic and political structure. But lest we forget that American wolves are still doing their manipulative games in every vein of modern Philippine affairs. In fact, they never left the Philippines in 1946 or in 1992, but they opted to stay in the guise of globalization and rules enforcements. They may have introduced democracy, but they also endorsed anarchy in covert in every way they can to make sure they have enough reason to stay.
Furthermore, there is indeed weight in the closer proximity between the Philippines and countries of Latin America in terms of economic histories and trajectories. The Spanish Catholic colonial experience is indeed plausible an explanation in treating the wide disparity of economic trend in the East. This, however, proves that the Philippines only has a transplanted Spanish culture though geographically Asian. It is quite unfortunate that it seems that the Philippines, in a sense, is a colonial clone lost in modern translation.
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