The Filipino nation was born, at the turn of the 20th century, in the era of capitalist expansionism. A phenomenon peculiar to capitalism is capital accumulation, or the tendency of capitalist firms to get bigger and bigger. In Britain, the United States and Europe, where the capitalist mode of production took root, the monopolies and other great corporate combines had become dominant. The home market was not large enough for them, and they were compelled to turn overseas, first to seek expanded markets for the products of their industries, and, having accumulated more funds than ever, export capital itself, to create more capital and profit. In these ventures, they had the support of their governments.
The Philippines became an appendage of the economies of these capitalist powers, especially Britain and the United States. Early into its rule, our so-called special relations with America were forged. It was a euphemism for a one-sided relationship in which the Philippines allowed the unfettered influx of US goods and business. The alienization of the Philippine economy proceeded apace as foreign interests assumed control of vital sectors of the economy.
Yet, in this environment a native entrepreneurial class was forming, and from its ranks the cause of economic nationalism grew. The first visible force in this movement was government-led industrialization. Although hesitant and weak at the beginning, the government sought to provide direction to industry and business through the establishment of government corporations that operated factories and public utilities. The second decade of US colonial rule saw the emergence of government involvement in railway lines and communication facilities, cement and coal, and the financing of sugar and coconut oil mills. The public sector became more involved during the Commonwealth regime. At its peak, there were 40 government corporations in operation which served as nerve centers for planned ventures in trade and manufacturing.
The nationalization of key sectors of the economy followed. Measures were incorporated in the 1935 Constitution reserving the country’s land and other natural resources and public utilities for nationals; after independence, nationalization was extended to the retail trade by Congress. The United States wrangled for its nationals, through treaties, equal rights with Filipinos to own land and resources and do business in the country, but these parity rights had expired.
To many nationalists, it was a long road to full control of their economic destiny. The key to national progress was seen to be in nationalist industrialization, a promotion of industry by Filipinos and for Filipinos. But the free-trade regime with the United States was hindering local manufacturing. Filipino businessmen initially addressed the problem by encouraging the local market to patronize Philippine products.
In the decade and a half that followed independence, the government itself took active steps to advance industrialization. The adoption of nationalist economic policies during the 1950s allowed local industries to proliferate in a manner unprecedented in our history. We became the fastest growing Asian economy next only to Japan.
But the glory days of Philippine economic nationalism were not meant to last. A balance of payment crisis in the late 1950s and 1960s occurred as a result of government mismanagement of the economy and election overspending, and Philippine industry was made to take the blame for the economy’s foreign exchange woes. The dismantling of nationalist economic controls over foreign trade in 1962 marked the beginning of trade liberalization in the country and the prioritization of foreign investment over emerging local industries.
The domination of foreign capital became evident from figures collated by the Board of Investments. Following the imposition of martial law, it was an open-door policy not only for Americans but other alien capitalists as well, as the government lost its lead in business, and Filipino entrepreneurs gave way to foreign cartels. Yet domestic resources were still available to continue a nationalist industrialization program. In the ’70s, Filipinos were already in basic industry, operating steel mills and starting to manufacture their own car.
Claro M. Recto, the foremost exponent of economic nationalism in the 1950s, was a firm believer in Filipinos’ capacity to propel their own industrialization. He was confident that we could rely on our own internal financing as supplemented by foreign development loans to put up factories and enterprises. We need not depend on foreign investment. In two seminal papers delivered in 1956 and 1957, he argued for a nationalist industrialization that came under the control and direction of Filipinos, and not a dependent industrialization set up for the benefit of foreign capitalists.
He saw foreign investment as the single biggest challenge to the achievement of national progress. Aside from interfering in government policies, foreign capital, once established, almost always resulted in a disinvestment to the economy. The net gains of this capital flowed out of the country instead of being kept here, and since much of the flow was from investment in mines and minerals, the country was losing its irreplaceable resources as well.
After Recto’s death, one of his contemporaries in the Senate, Lorenzo M. Tañada, continued to espouse these ideas. In an opposition to the administration’s foreign investment bill in the 1960s, Tañada revealed that the country was producing or had the capacity to produce enough savings in the economy to finance a genuine industrialization. To prove the error in our dependence on foreign investment, he cited statistics to show that US investors had taken out of the country more than 10 times their investment within the same period of time, an amount that would have contributed to local capital formation.
To both Recto and Tañada, Philippine industrialization could be attained through government espousal of nationalist policies. But they underestimated the neoliberal ethos in the advanced capitalist nations that served the interests of the global corporations. The passage of years witnessed the loss of local entrepreneurial initiative in our country due to lack of government support and the growing reliance on foreign capital for a semblance of economic growth.
Mario Guariña III is a former associate justice of the Court of Appeals.