By Sheldon Birkett
The key question posed in this paper is if the model of economic dependency as characterized by Cardoso, can be applied to economic conditions faced by the Philippines since independence (1946)? In answering this research question it also address’s the current state of economic development in the Philippines. If shown that there is a strong correlation between economic dependency and the conditions of development in the Philippines, it will be possible to logically draw the conclusion that a rise in economic dependency results in a rise of underdevelopment.
The structure of this paper will seek to explain the relationship of economic dependency and development in the Philippines through cliental relations. The first portion of this paper will critically engage in defining dependency theory and the implication of dependency theory as proposed by Cardoso. After, grounding the theoretical implications of dependency theory, the paper will seek to explain if economic dependency leads to the rise of the populist leader Ferdinand Marcos, and the subsequent 1983 debt crisis. Lastly, the paper will examine how relations of economic dependency caused limited development and limited domestic industrial growth in the Philippines.
Dependency theory is a critical analysis of capitalism, and is an key theoretical framework for explaining the social, economic, and political relations of domination and underdevelopment. To clarify, in this paper I will mainly be focused on how relations of social and political dependency reinforce relations of economic dependency. As a result, this complicates what defines “development” as a society can be highly modernized (i.e. high standard of living) and at the same time can be dependent (Cardoso & Faletto, 10: 1979). Therefore, for simplicity of this paper I will define a developed society as one that can provide self-sustained economic growth through local capital accumulation (Cardoso & Faletto, 10:1979). Most commonly, self-sustained economic growth is achieved through a strong industrial sector.
Now if a “developed” society is not a dependent society, dependency can be viewed a hindrance to development. Therefore, dependency is relations of reinforced domination which exists internally and externally of an national economy (Cardoso, 15: 1979). Internal dependency is relations of domination between the poor and elite classes. While, external dependency is the relation of domination between external actors (i.e. nation-states, multinational corporations…etc.) and the nation. Both internal and external dependency interact in limiting development and/or causing underdevelopment. Underdevelopment, is not undeveloped as it assumes a sense of original state, while underdeveloped nations may have once been and/or have the capacity to develop (Ruccio & Simon, 1988).
The aspect of dependency theory that I will be focusing on is how cliental social structures in a society create forms of economic dependency. Mainly, I will be drawing from Fernando Cardoso conception of dependency and applying it to Ferdinand Marcos regime in the Philippines (1965-1986). In applying this specific model of dependency (to the Philippines) it is necessary to see how relations of social groups and economic relations are linked, as Fernando Cardoso stated “every economic link is, by itself, a social link” (Cardoso & Faletto, 13: 1979). An economic link is a social link, because even if you think about the relationship between an employer and an employee, a social relation can be defined by an economic relationship. Therefore, by using Cardoso’s logic it is easy to see how economic relations are defined by political behaviour of social groups. As a consequence of this relationship, the structure of social relations between groups has a direct affect upon development of those groups (Cardoso & Faletto, 16:1979). By analyzing economic dependency through political behaviour of social groups, it is possible to see how cliental relations between elite groups and the poor manifest underdevelopment. As a result, it is impossible to examine development from a strictly economic angle, as the behaviour of social groups is critical to sustained development (Cardoso & Faletto, 20: 1979).
In the aim to explain how the continued cliental relations under Marcos facilitated underdevelopment in the Philippines, it is necessary to understand the historical context of the Philippines (before I discus if the Pilipino case is a representation of dependency). The election of Ferdinand Marcos was a result of growing Pilipino nationalism, combined with anti-American sentiment due to the persists of neocolonialism (Celoza, 26:1997). The presence of anti-American sentiment, is shown through how colonialist policies of the Tydings-McDuffie Act (1935) and the Bell Trade Act (1946) reinforced dependency.
The signing of the Treaty of Manila on July 4, 1946 marked the independence of the Philippines as a colony of the United States, yet formalized the “dependence-independence” relationship with the United States (Shaffer, 237: 2012). The independence terms agreed upon between the United States and the Commonwealth of the Philippines, established the foundation for economic dependency. Much of the foundation established for economic dependency is inherent within the Tydings-McDuffie Act (1935) (Treaty of Pilipino Independence) and in the Bell Trade Act (1946) (U.S – Pilipino Trade relations post-independence). By examining the provisions within these acts it is apparent that the United States wanted to maintain nominal independence with indirect alliances with local elites in the Philippines (Shalom, 502: 1980).
The two main provisions in the Tydings-McDuffie Act (1935) that enforced a neocolonial rule are U.S property rights and immigration provisions. Under Section 2(a)(12) stated that under this act the Pilipino islands recognize the right of the U.S to expropriate property for public uses, to maintain military and other reservations of armed forces in the Philippines (United States Congress, 1935). Under Section 8(1) the Tydings act states that citizens of the Philippine islands who are not citizens of the United States shall be considered as if they were aliens, and set a quota limit of fifty immigrants to the United States per year (United States Congress, 1935). Although the previsions of the Tydings-McDuffie Act (1935) set a ten-year progression to Pilipino independence, it is clear that strict limitations upon Pilipino sovereignty was enforced during this period (1935-1946).
The provisions within the Tydings-McDuffie Act (1935) instilled American presence within the Philippines, the Bell Trade Act (1946) set the precedent for economic dependency. The Bell Act (1946) instituted quotas imposed on exports to the U.S, but allowed no tariffs or quotas on Pilipino imports from the United States (Shalom, 500:1980). As a result, the limitation of the Philippines to put tariffs/quotas on imports from the United States, did not permit the Philippines to establish a domestic “exporting” economy after the independence of 1946. This later led to the development of a large current account trade deficit under Ferdinand Marcos populist regime. The Bell Act (1946) also included provision of the Pilipino government not allowed to alter the Pilipino exchange rate without U.S presidential approval. Also, the Bell Act included a “parity clause” which gave United States citizens equal right in the Philippines in utilizing and owning natural resources, and in operating public utilities (Shalom, 500:1980). The implementation of the Bell Act on July 2, 1946 (two days before Pilipino independence was enacted), and the subsequent election of Manuel Roxas as strong supporter of the U.S “parity clause”, shows the nature of “disguised imperialism” in the Philippines (Shaffer, 240: 2012).
Although, United States – Philippine relations reflect much of the “core-periphery” model of dependency, it is necessary to contextualize “patron-client” dependency within a “core-periphery” context. As, without the establishment of a “patron-client” dependency, the continued progression of an dependency of “core-periphery” would not have existed or been as effective. Without the formation of an compadres (elite establishing networks of alliances with American governors) economic dependency would have been a limited progression in the Philippines (Celoza, 16:1997).
Now, with a general understanding of how relations of international economic dependency (core-periphery) were facilitated through “patron-client” relations in the Philippines, it is now possible to examine Ferdinand Marcos regime in the progression of “patron-client” dependency. It is also key to keep in mind that “patron-client” dependency acts as a mechanism of reinforcing “core-periphery” dependency, since an social structure is defined by an economic structure (Cardoso & Faletto, 13: 1979). In this next section I will show how the specifics aspects of Marcos regime reflected relations of “patron-client” dependency in reinforcing “core-periphery” dependency. The two major actions by the Marcos regime in order to maintain dependency was done through constitutional reform and the imposition of martial law.
The election of Ferdinand Marcos in 1965 was achieved through his ability to appeal to the nationalist sentiments of the Pilipino people and business elite. As Marcos utilized business elite such as Fernando Lopez who was a prominent owner of sugar plantations in the south, who supported to publicize Marcos campaign. Marcos principally appealed to the Pilipino population through national sentiment, through his campaign slogans such as “This nation can be great again” (Celoza, 24:1997). Similarly, in the 1969 campaign Macros used nationalist sentiment in order to defeat his opponent Sergio Osmeña. Once in power, Marcos wanted to actively maintain his position of power through domestic and foreign rent seeking. Elite businessmen such as Ricardo Silverio contributed $20 million dollars to his 1969 re-election campaign, similarly Eduardo Cojuangco who was the owner of the largest sugar plantations in the Philippines supported Macro. Business elite such as Silverio and Cojuangco provided the Marcos regime with an network of support in return for government bailouts when their business was not creating substantial profit (Celoza, 98:1997). As Macros patronage system of “crony capitalism” persisted under his regime it created a self-fulfilling prophecy of internal dependency. This form of internal dependency generated a low level of domestic savings and a weak export program through the 1970’s until the 1980’s, resulting in an overall reliance on foreign borrowing (Ofrena, 161:1985). As a build-up to the 1983 Pilipino debt crisis, external (foreign) dependency ensured that internal patronage dependency of the business elite was maintained.
Foreign dependency provided by the United States was key to the establishment of the Marcos regime, because as long as Marcos provided the political and military support that the United State needed in South East Asia (in the fight against communism) Marcos actions were unquestionably overlooked by the United States (Celoza, 100:1997). The key reason for Marcos dependence on the United States was for national security and liberalized trade relations. As a continuation of the Tydings-McDuffie Act and Bell Trade Act, Marcos regime also actively supported the U.S involvement in Vietnam. Marcos appropriated $9 million through the 1966 Vietnam-aid bill in order to increase Pilipino economic and technical assistance to Vietnam (Celoza, 100:1997). In return, the United States spent $38 million in the support of Marcos Philippine Civic Action Group (Philcag) (a battalion of military support for the Vietnam war efforts) through the U.S military assistance program (Celoza, 102:1997). It is important to keep in mind that the financing of the Philcag battalion in Vietnam was also strictly political. The Philcag was political in an effort to create an “impression” that United States Asian allies supported the United States involvement in Vietnam, it was critical for the United states to fund the Philippines through Marcos Philcag battalion in order to gain support from the Philippines in the fight against communism (Celoza, 104:1997). Therefore, United States-Philippine relations main objective was to create a relation of disparity without hindering United States national security, as American influence in the Philippines was “…absolutely vital to our [American] security.”(Celoza,107:1997). The close relationship of external dependency benefited both the United States and Marcos regime. Yet, excessive spending and growing global resentment against U.S involvement in South East Asia, implied Marcos could not rely on external dependency in order to sustain his rule. Instead, Marcos revered to constitutional reform in order to maintain his patronage system of dependency.
Marcos constitutional reform and declaration of Martial law are key to highlighting the nature of political/economic dependency. So far, I have outlined United States-Philippine (“core-periphery”) relations of dependency of pre-independence and post-independence of 1946, and the nature of internal versus external dependency within Philippines before 1983. For the next section of this paper I am going to apply Marcos constitutional convention of 1971 and his later imposition of martial law to Cardoso’s conceptualization of dependency. In the aim to show if Pilipino dependency reflects Cardoso’s dependency. As well as to show if Cardoso’s patronage relations of dependency reinforces “core-periphery” relations of dependency (as shown between the U.S and Philippines), as discussed earlier.
In an attempt of Marcos to extend his Presidency Marcos enacted the Constitutional Convention of 1971. Marcos presented the need for a constitutional reform in order to signify the Philippines as an sovereign nation, as promoted through his 1969 nationalistic campaign (Celoza, 44:1997). Although, the nationalistic line of reasoning for constitutional reform was accepted by many Filipino’s, in reality, Marcos 1971 constitutional reform was a successful attempt at reinforcing internal and external dependency. Marcos 1971 constitutional reform had the end goal of extending his presidency and latter declaring martial law in 1972 in order to perpetuate dependency through governance of “constitutional authoritarianism” (Dohner & Intal, 386:1989). Roughly two months after Marcos declared martial law the constitution declared by Marcos in 1971 was implemented in November, 1972. Marco reformed the constitution in order to achieve total political control over the Pilipino state. The achievement of total political control over the Pilipino state resulted in a transformation of the political structure in the Philippines. This allowed Marcos to establish his own power and family patronage throughout the Philippines (Dohner & Intal, 387:1989). The entrenchment of Marcos power is explicitly shown under Article XVII, section (3) in the Pilipino constitution:
- The incumbent President of the Philippines shall initially convene the Interim National Assembly and shall preside over its sessions until the interim Speaker shall have been elected. He shall continue to exercise his powers and prerogatives under the nineteen hundred and thirty-five Constitution and the powers vested in the President and the Prime Minister under this Constitution until he calls upon the Interim National Assembly to elect the interim President and interim Prime Minister who shall then exercise their respective powers vested by this Constitution.
- All proclamations, orders, decrees, instructions, and acts promulgated, issued, or done by the incumbent President shall be part of the law of the land, and shall remain valid, legal, binding, and effective even after the lifting of the Martial Law or the ratification of this Constitution unless modified, revoked, or superseded by subsequent proclamations, orders, decrees, instructions, or unless expressly or implicitly modified or repealed by the regular National Assembly. (Republic of the Philippines, 1971).
Section (a) defines that the elected national assembly shall act as the intern national assembly until a regular national assembly is elected. Section (b) explicitly asserts that the President during the intern period shall possess both the powers of the president and the prime minister, until reform form a presidential to a parliamentary government is complete. Marcos main reasoning to transform the Pilipino government from a presidential to a parliamentary system was to extended his term in office past the two term limit. As a nationalistic political force, constitutional reform permitted the centralization of political power, that resulted in national underdevelopment. National underdevelopment is a concentration of political power permitted by economic subordination to maintain the “national interest” of the political elite (Cardoso & Faletto, 21:1979). The process of national underdevelopment was accelerated under Marco’s martial law, and was key to the Marco regime sustaining rule by means of dependency.
The enforcement of dependency was explicitly enacted under Martial Law. The decree of Martial Law on September 23, 1972 was implemented for principal reason of Marcos to attain political hegemony. Although, the government enacted martial law for “national security reasons” due to the bombing of the opposition party at Plaza Miranda, which occurred a year earlier in 1971 (Celoza, 46:1997). Other reasons the government enacted Martial Law in 1972 was due to the fighting in Mindanao between the Christians and Muslims, the presence of the leftist New People’s Army, and a supposed arm-shipment to eastern Philippines by the Russians (Celoza, 47:1997). The reason for enacting Martial Law due to “national security” seemed unlikely. Firstly, internal fighting in Mindanao has occurred since Spanish colonialism, and if the Mindanao conflict was the reason the Philippine government enacted martial law it would have been enacted much earlier. Secondly, although the New People’s Army was present the communist insurgency by the Huk’s was ultimately crushed in the 1950’s. Thirdly, there was no records of an arm-shipment to eastern Philippines by the communists (Celoza, 47:1997). Ultimately, the Marcos regime used these listed “security” reasons in order to claim political power in an effort to sustain the reproduction of dependency.
Although Marco’s regime did attain political hegemony in the Philippines, it is not the goal of this paper to outline achievement of political hegemony by Marco’s, instead it is necessary to show the relation between Marco’s regime and the development of dependency in the Philippines. This next section will critically examine the action of Marco in the development and reproduction of dependency in the Philippines, and show if Marco’s regime was a system of dependency.
There are three key characteristic of (Cardoso’s) dependency in which I will apply to the Marcos regime. Firstly, the structure of “dualistic economic structures” due to the divide between traditional and modern societies within a developing nation. I will examine how the development of this societal divided leads to the persistence of dependency in the Philippines. Secondly, the effect of social change and how the patronage system in the Philippines resulted in the persistence of the “demonstration effect”. Thirdly, how the development of the internal patronage system of dependency in the Philippines facilitated the subordination of the national economy with in the global market (“core-periphery”). To conclude the analysis section of this paper I will relate how these three key characteristics of dependency facilitated “national underdevelopment” in the Philippines.
Development of dualistic social structures in the Philippines is explicit, therefore by analyzing such social structures form an angle of dependency, it is apparent that social structures are a result of economic structures. Dualistic social structures are a result of the Philippines being deeply integrated within colonial economic framework, that established a fragmented internal economy. The Pilipino economy was fragmented because economic activities only made sense to the extent that they were tied up in foreign markets (Montes, 111:1989). With majority of Pilipino economic activities being tied up in foreign markets the domestic economy was highly susceptible to financial fluctuations and capital flight. As a result of deeply integrated international economic ties the Philippines experienced periods of growth and stagnation, that did not provide sustained growth for the domestic economy (Montes, 112:1989). Such periods of growth and stagnation, due to relying on foreign imports for domestic production, has created financial insecurity. As a consequence of the Pilipino economic structure of reliance on either foreign import of machinery for domestic production, or primary goods export model, it has created a social structure in which elites benefit off of the economic insecurity of the working class. Therefore, dependency upon foreign markets for imports created an unstable economic model due to a lack of domestic market diversification. Such policies of foreign borrowing where continued under Marcos resulting in a trade deficit of $418 million in 1974 to $2.2 billion in 1981 (Ofreno, 164: 1985). Marcos continued borrowing policies as a result of the highly centralized structure of governance, in an effort to maintain political power at the expense of sustainable economic development.
The increasing trade deficit as a result of “dualistic economic structures” resulted in the development of the “demonstration effect”. Cardoso, defined the “demonstration effect” as a society modernizes through consumption it will deviate from the normal “stages” of industrialization (Cardoso & Faletto, 12: 1979). An important feature of the “demonstration effect” is that in order to work properly the economy would need a large surplus in domestic savings, because in order to spend fiscal capital you need fiscal savings. When you apply the demonstration effect to the Philippines it is apparent that practices of domestic spending/investment resulted in a large trade deficit due to inadequate savings/surplus in trade. Inadequate savings can be seen as a result of Marcos policies to sustain a “dualistic economic structure” in order to maintain his political position of power. This is explicitly present under Marcos Martial Law in which a complete governmental control of the Pilipino state was initiated in order for Marco to extend his term of presidency through constitutional reform. Therefore, the need for Marcos to extend his patronage position of power affected the economic system of dependency.
Lastly, the patronage system of dependency in the Philippines is reinforced through an international “core-periphery” structure of dependency. The Philippine dependency model (patronage maintain “core-periphery” relations) goes against Cardoso conception of dependency. Cardoso primarily asserted that it is internal forces that give socio-political scope to the diversification of the economy (Cardoso, 20:1979). While in the Philippines it was external (international) factors, such as colonialism, that shaped the internal structure of dependency under Marcos. A good example of external dependency that shaped the internal social structure in the Philippines was American-Pilipino relations post-independence. This type of dependency was expressed through the Tydings-McDuffie Act (1935), under the right of the U.S to expropriate Pilipino property (United States Congress, 1935). As well as in the Bell Trade Act (1946) in which there were no quotas imposed on exports form the U.S to the Philippines (resulting in a large trade deficit, and slow domestic economic growth), and the inclusion of the “parity clause” giving the U.S to have an equal right in utilizing natural resources (Shalom, 500:1980). As well, Manuel Roxas support for the U.S “parity clause” won him the 1946 election against the nationalist Osemña, despite the rise of “anti-American” sentiments among the general population (Shalom, 504:1980). Lastly, the relation between the Philippine political elites and the United States was sustained throughout the Marcos regime. Most notably shown under the American support for the Philcag battalion, and later misappropriation of funds by the Marcos government (Celoza, 106:1997). Therefore, Cardoso was correct in addressing that internal systems of political alliances are often modified by international alliances, as presented in the Philippines. Cardoso’s model asserted that it is primarily internal forces which give socio-political control over the domestic economy, does not adequately apply to the Philippines model (Cardoso & Faletto, 20:1979). Although, internal socio-political structures within the Philippines has greatly shaped the structure of external dependency, it has not been the primary driver of dependency in the Philippines because of colonial influence by the United States.
It is apparent that the dualistic economic structure, results of the demonstration effect, and national economic subordination in the global market greatly facilitated national underdevelopment in the Philippines. As discussed earlier national underdevelopment is a situation of objective economic subordination while there are partial political “national interests” (Cardoso & Faletto, 21:1979). It is apparent that the Marcos regime is a representation of “national underdevelopment”. While the Marcos regime want to establish a highly centralized state through “constitutional authoritarianism” it is apparent that dependency on the United States for economic and political support limited Marcos from establishing a non-dependent Philippine state. Therefore, relations of internal and external dependency between 1946-1983 made the Philippines a key political/economic player in south east Asia, while at the same time severely limited the ability for the Philippines to develop domestically.
While this paper examined some of the critical aspects of the development of dependency (both internal and external) in the Philippines, it is necessary to carry out further research. Further research will need to be empirically conducted onto what extent Cardoso conception of dependency is applicable to the Marcos regime. Specifically, finding out to “what degree” did the actions of Ferdinand Marcos further promoted internal and external structures of dependency. In order to determine, “to what extent” dependency is manifested domestically versus internationally. While further research will need to be conducted in analyzing the degree of dependency, it as apparent (as presented in this paper) that Cardoso conception of social/patronage dependency can be applied to the Marcos regime and to the Philippines. Therefore, Pilipino dependency is not just a result of American “partly disguised imperialism”, but is a result internal socio-economic relations of patronage (Shaffer, 235:2012).
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Image. Retrieved From, https://www.britannica.com/biography/Ferdinand-E-Marcos