The Opposition continues to use the late former President Ferdinand Marcos as a scapegoat for the state of the Philippine economy. They refuse to acknowledge the validity of Marcos’s economic strategy from the beginning of his first term which was to focus on rebuilding infrastructure destroyed during World War II. After the declaration of martial law, Marcos was bent on following the South Korean model of industrialization. The Japanese were willing to invest in the Philippines through its sogo shoshas, the trading houses which served as conduits for Japan’s purchases of raw materials for its manufacturing industry.
But, in between, Marcos had to contend with the US dumping the gold standard and the oil price shocks resulting from conflicts in the Middle East. There was the Arab-Israeli War of 1973 or the Yom Kippur attack which was book-ended by Iran’s Islamic Revolution in 1979. The US was in a recession throughout the 70s and the 80s.
For a good revisit of the history behind the de-linking of the US dollar from the gold standard, read Danny Bradlow’s piece “Nixon’s decision to delink the dollar from gold still hounds the IMF, South Africa and Africa”. Bradlow writes…
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Nixon’s decision breached the US’s treaty obligations. But he had little choice.
By 1970, the rest of the industrialised world had accumulated such large dollar holdings that the US did not have sufficient gold to credibly keep its gold window open. The situation was likely to continue deteriorating because in 1971 the US experienced its first trade deficit of the Twentieth Century.
In short, the US lacked the resources to manage the Bretton Woods system on its own.
Five years after Nixon’s decision, IMF member states agreed to end gold’s monetary role and, in effect, to move to a market-based system of floating exchange rates.
What the article does not mention is the US also pulled out of the gold standard because it had run out of domestic oil supply and was now dependent on Middle East countries. The resulting rationing in the midst of the 1973 war had the US Congress enact the Strategic Petroleum reserve as a countermeasure in order to prevent the repeat of long lines at gas stations across America. The International Monetary Fund – World Bank (IMF-WB) was the primary financing institution for development funds at this time. This was a creation of the Bretton-Woods agreement as well which was the post-war structure of the international financial system. It also served to keep a record of how much Germany, France and the UK owed the US for World War I and II. In short, both the victors and the defeated came up with a cartel-like framework governing international finance.
It was plain financial hegemony because countries that availed of IMF-WB credit facilities would be at its mercy if their economies weren’t doing well. But countries had no choice. The global financial markets then weren’t as advanced as they are now where sovereign debt can be sold by multinational financial institutions such as banks, investment banks and traders. It is for this reason that the Philippines was also plunged into an economic crisis. The US recession lasted for an extended period of time. It evolved into a stagflation situation where no amount of economic stimulus could revive the economy. The US economy would only begin to recover in the early 80s after the peace accord between Israel and Egypt had been signed. Eventually the US would enjoy unprecedented growth again with the dotcom boom.
In the meantime, the US effected regime change in the Philippines with the ouster of Marcos and the installation of Cory Aquino in 1986. This did not prove cathartic for the economy as political instability prevailed evidenced by the multiple coup attempts against the Aquino administration. Cory couldn’t repudiate the debt to the IMF-WB because the US would have none of that. The First Aquino administration also owed the US a lot. This included the US Export-Import Bank loan to finance the construction and equipment purchase for the Bataan Nuclear Power Plant.
Per Herminio Disini’s personal account in his book, The Politics of Business, Marcos envisioned the construction of an additional eight power plants in the country to wean itself off dependence on oil and coal-fed power plants. Marcos ordered then Energy Minister Geronimo Velasco to continue the development of geothermal power sources which was also cheaper than coal or oil. Marcos understood that cheap and reliable power supply was a key driver of industrialization for manufacturing. Since 1986, however, the Philippines’ energy policy has been tailored to the advantage of the oligarchs who control the industry even with its supposed deregulation.
The administration President Rodrigo Duterte is about to bow out but it hasn’t come to a decision as to the disposition of the Bataan Nuclear Power Plant which continues to be maintained even if it hasn’t been commissioned since 1986. The economic managers have put into place a strategy to attract foreign direct investment but this will still be for naught if power rates continue to be the second highest in the region. It’s about time that the complete history of the Marcos administration be written so the people can judge him accordingly. The Opposition has found it convenient to omit vital information on the economic crisis which hit the country from 1981 to 1985.
Maybe it is also time for the truth about the assassination of former Senator Ninoy Aquino Jr in 1983 to come out. That singular political act was what drove the economy off the proverbial cliff. What the Opposition isn’t telling the public also is how, despite a crisis of such magnitude, the people did not suffer as much. The simple explanation was the cronies had to toe the line unlike now where the oligarchs have free rein except for the instances where they are called out by the President himself as in the case of the water concession agreements. It wasn’t all pain and suffering then. If this were the case then Marcos wouldn’t have lasted until 1986.
The US State Department and the CIA worked under the assumption that the Aquino assassination would have Marcos out within a year. That didn’t happen. It would eventually be a confluence of events beginning with a power struggle in Marcos’ camp which became the catalyst for his fall from power.
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The removal of Marcos, was the work of the Aquino Cojuanco political axis…feudal oligarchs, were afraid of the Land Reform Program. Hacienda Luisita of the Aquino Cojuancos , were at stake.
So, Marcos had to go !
Interesting subject, regarding the abandonment of the gold standard and the rise of pure fiat currency. The Philippines had huge gold reserves (I doubt we could account for every single bar though), but with the change to the US dollar as the global reserve currency, might have caught the Philippines on the back foot economically. In America, not everyone liked that the dollar was being decoupled from gold and they thought it might cause horrendous inflation. Among them were a couple of American oil magnates–the Hunt Brothers–looked for a store of value as a hedge for their wealth. What they found was silver. They bought a whole lot of silver off the futures markets and took delivery and they were planning to course some of their silver horde through Manila c/o FPres. Ferdinand Marcos. Of course, it didn’t happen since the Fed decided to crack down on the Hunt Brothers. If the silver went in though, Filipinos might be sitting on a mountain of silver today.