The Political Economy of Debt, Succession and Revolutionary Movements in the Philippines

David Wurfel, University of Windsor
Paper delivered at Annual Meeting of Canadian Council for SE Asian Studies, Universite Laval, Quebec, QC, November 1-3, 1985.

The Philippines today faces three simultaneous and interlocking crises, each of which makes the others more difficult to resolve. The succession crisis is caused by an ailing ruler who has so far resisted the establishment of legitimate institutions that could effectively regulate that process. The debt crisis is the consequence of both domestic and international factors and has led to unprecedented efforts by the world banking community to control Philippine economic policy. The third crisis is in the nature of elite-.mass relations, evidenced in the rapidly rising strength of a mass-based revolutionary movement. None of the three is likely to be managed without major U.S. involvement. The situation raises fundamental questions about the consequences of the collapse of institutional legitimacy, the nature of dependency, the significance of revolutionary strategy, and the prospects for renewal or destruction of a dependent elite.

Succession Crisis

A major reason that there is today no vice-president, and thus no assured mechanism for legitimate transfer of power on the demise of the president, is that Mr. Marcos fears that the office would become an instrument for increased foreign intervention. In 1983 politicians viewed as special friends of the American Embassy were pushing for the early selection of Prime Minister Virata to fill the vice-presidential election to 1987. His resistance, until late 1985, to American suggestions to move up that election to an earlier date may have been based on similar fears. His sensitivity on this issue has probably been exacerbated by his need to capitulate to WB/IMF controls on economic policy.

But any political process that lacks a well-institutionalized framework maximizes the tendency for raw power to determine outcomes. The political influence that might be acquired through economic pressures or through the political activism of the Catholic Church, which would aim to produce a particular decision within an institutional setting, is thus reduced. The role of violence or clandestine enterprise is increased. It is notable, for instance, in the last year that any attempts by the elected legislature, the Batasan, to affect the pattern of succession have been frustrated, while the use of armed violence against churchmen has increased, with the obvious intent of restricting their political activity. The Church and US backed National Movement for Free Elections has been denied a renewal of its 1984 role as semi-official election watchdog.

The chances of a coup determining which faction will control the military, and thus the character of the succession are consequently enhanced. After the acquittal of Gen. Ver in the trial of those conspiring to kill the late Sen. Aquino and Pres. Marcos’ reappointment of the exhonerated General to the post of armed forces chief-of..staff, the US might well determine that neither economic pressures nor high-profile advice could move Mr. Marcos to “reform” the military, because of his probably well.grounded fear that that too would disrupt his plans to control the succession. And the US has made it very clear for many months that without reforming the military the battle against the Communist-led insurgents could not be won, a win believed necessary for the protection of vast US bases in the Philippines. Removal of Gen. Ver and his friends through a coup, which voiced loyalty to the President, would then be popular among the Filipino public, as well as among large sectors in the military, and might be easily executed. Nevertheless the long preparations of the President and his chief-of-staff for just such an eventuality – elaborate intelligence networks, “secret” armed units deployed near the capital, etc. – might payoff, in which case a messy fight among military units would open a new ‘window of opportunity’ for the revolutionary movement. But the Americans are unlikely to support such a move without careful planning to insure quick success, precisely because they are so well aware of the consequences of failure.

The scheduled February presidential and vice-presidential election may postpone or perhaps even provide an occasion for such military intervention. Postponement would be the consequence as long as the US and their Filipino allies believed that there might be a chance for a minimally fair vote. But that is an idle dream. All signs now are that the election will be the most violent and most fraudulent, by far, of any in Philippine history, with no chance for an opposition victory, no matter how popular their candidates. In the final analysis, Marcos controls the “count” and will manufacture as many votes as he needs. Furthermore, the nomination of Arturo Tolentino as vice-presidential candidate does not necessarily presage the return to integrity that it appears to. There is a provision in the election law that would permit a last minute substitution of another candidate, most likely Imelda. Tolentino may lend legitimacy to the ticket, but is certainly not sufficiently trusted by Marcos to be allowed to be his actual successor. An obviously fraudulent victory that brought Mrs. Marcos to the vice presidency would provide ample justification for a coup.

One must conclude, therefore, that a wily ruler attempting to avoid the consequences of his dependent status by resisting the institutionalization of important political processes, using his ability to change the rules without warning as a way of decreasing opportunities for foreign intervention, based on the principle that ignorance of the way a decision is made precludes any effort to alter it—may only succeed in changing the style of that intervention. Great powers in pursuit of vital interests are not so easily turned aside.

Debt Crisis

Yet in the view of some observers the unquestioned expansion of economic influence by foreign’-especially American—bankers should make it possible for the bankers and their diplomatic cohorts, in Foggy Bottom and Kasumigaseki, to gain their desired ends without even the indirect use of force. In a curious twist of circumstance, establishment diplomats in Washington and Tokyo are inclined to share the view of diehard advocates of a dependency model that is based on a considerable degree of economic determinism: economic influence should suffice to produce the desired ends of great powers, political as well as economic.

But dependency theorists, and some of their more conservative friends, tend to assume economic rationality among top decision-makers as well as substantial unity between economic and political elites. Neither exists in the Philippines. The aura of economic rationality was indeed projected by the Marcos regime in the first few years after the declaration of martial law. Technocrats devoted to the national interest seemed to be in control of policy.-making. But in time the appearance proved to be without substance. The “cronies”, friends and relations of Mr. and Mrs. Marcos who benefitted from untold financial opportunities, seemed to be able to overrule the technocrats with increasing frequency. The use of billions of pesos of credit from government banks to bailout the ailing cronies in the early 1980s was perhaps the lowpoint of technocratic decision—making. (It was rational, of course, in terms of the fortunes of favored persons, but not in terms of the national economy).

But even after the debt crisis broke so suddenly and devastatingly on the Philippine scene in 1983, provoking a series of moratoria on payments of principle, the private interests of the Marcos patrimonial empire, including, of course, that of the cronies, took precedence over the national interest. And those patrimonial interests, whatever the short—term economic situation, demanded the preservation of the regime’s political power. Thus, for instance, even after there was tentative commitment from the WB/IMF for restructuring of the Philippine foreign debt of more than $26 billion, plus promises of more than $3 billion in new money, in return for restrictive monetary policy in the Philippines, the government printed billions of new pesos in early 1984 to facilitate the ‘winning’ (through buying) of the May parliamentary elections. The bankers were outraged, but their decision to proceed with new loans in any case was a measure of how weak their leverage actually was. They could not long withold aid without scuttling the economy and further jeopardizing repayment of past loans. Thus in pursuit of his own interests, Mr. Marcos was probably correct in his priorities.

Daily monitoring of Philippine policy by resident IMF representatives, alone with the threat of witheld loans for non-performance of fiscal, monetary and other economic targets, was largely successful in ensuring adherence to IMF guidelines in 1985, but still failed to get the desired dismantling of the sugar and coconut monopolies. Presidential decrees were issued, but the moves were cosmetic, and in the meantime the government media made it appear that sugar and coconut planters did not want to see the return of market competition anyway. Far from retiring in the face of WB/IMF criticism, coconut king Eduardo Cojuangco appeared to expand both his economic and political power in 1984-85, becoming perhaps the President’s most potent lieutenant. Clearly the melding of state and private enterprise, which characterizes the patrimonial system, tends to raise political over economic considerations. Only economic changes that did not threaten the patrimony were acceptable. And as long as the cronies were protected, the political motivation at the top for general concern about the condition of the whole economy was slight.

Before martial law there was extensive influence by members of the economic elite over economic policy and its implementation. Not only did they have access to the President, but they were often directly represented in the cabinet and the Congress, especially the Senate. But the ‘oligarchy’ become the whipping boy of the New Society; the super-..wealthy Lopez fami ly got special attention, partial expropriation. After the ‘oligarchs’ had been properly frightened, however, to accept a subordinate position to the holders of political power, by the late 1970s, when there were cautious steps toward political normalization, they were sometimes wooed by the regime, even asked for their opinion on policy. In early 1983 Marcos sought to counteract dissatisfaction in the old economic elite with his favors to cronies in two dramatic ways: he married his daughter to a young blade of the prestigious Araneta family, and authorized Cojuangco to buy a controlling interest in the Philippines’ largest corporation, the central bastion of the old elite, San Miguel. But this was insufficient. After the uproar over the assassination of Aquino, the break between old economic elite and the regime widened, with many corporate officers bringing their criticism of the President into the open for the first time.

In sum, though the debt crisis created unprecedented economic dependence on centers of world political and financial power, and unique intervention into the Philippine economic policy process, determining tariffs, taxation, monetary issue and credit, this spectacular economic leverage could not produce the political outcomes favored by foreign creditors.

Consequently, because of the primacy of politics in the total Philippine economic picture, it was most unlikely that even a return to economic growth could soon be achieved. Thus the prolonged debt crisis contributed to the explosiveness of the third crisis mentioned.


Concern for the succession struggle, which so often caused the President and his First Lady to disregard foreign economic advice, also contributed to the third crisis in elite-..mass relations, evidenced most dramatically by a growing insurgency. The spector of the succession has always seemed to cause Mr. Marcos to hang onto power even more fiercely, and in a sense it began in 1972. Martial law postponed the succession. It also ended sixty years of relatively free elections, in which Filipinos had become accustomed to participate. When elections stopped, they found officials less responsive. And along with elections opportunity for legitimate dissent also ended. Thus as economic conditions deteriorated, those political groups which prospered were those already committed to clandestine political action and armed resistance in order to voice discontent, most notably the Communist Party.

The Party benefited as well from economic policies designed by both cronies and technocrats. The commercialization of agriculture, most particularly the expansion of large plantations, usually disrupted the patron-client system, which had been the key social mechanism for delaying the growth of class consciousness and diffusing class conflict. Land reform and the policies associated with the Green Revolution also sharpened differences between clients, the small farmers, and their local patrons, just as the end of competitive elections had made such clients politically expendable. Policies designed to depress urban wages, e.g. putting an end to free trade unionism, also produced unrest.

Even the reorientation of Philippine foreign relations in the 1970s, designed to create the appearanyears off, appears less urgent. The State Department though one sometimes ce of greater autonomy, and thus obscure greater debt dependency, unintentionally benefited the Communists. Opening diplomatic relations with Peking was early regarded by the regime as a great coup, for it elicited a Chinese promise not to aid the NPA, which they have kept. But while it meant a temporary set back, in the longer run the Communists were freed of their earlier, quite devastating image as “foreign agents”. They became more self-reliant both materially and ideologically, thus widening their popular appeal.

Now the revolutionary movement is increasingly benefited by the impasse in the AFP between the Ver faction, primarily concerned with maintaining loyalty to Marcos and control over the succession process, and the supporters of Gen. Ramos, who shares with his American friends a priority for military reform so as to be able to halt an insurgency which threatens US bases. It is clearly a case in which the interests of a great power and the leader of its supposed dependency do not coincide. Marcos priority to the succession crisis inhibits military effectiveness in dealing with insurgency at the same time it slows economic recovery, thus deepening social unrest.

While there is increasing evidence that both Marcos and his American supporters have come to accept the political dimensions of crisis as being more urgent than the economic, each concentrate on a different political threat. Mr. Marcos is most worried about the intra—elite intrigue, in both regime and opposition, triggered by his declining health. Elite factions with American backing he regards as most dangerous. Insofar as he is committed to the maintenance of family power, even after he passes, it is understandable that the future threat of rural insurgents, for whom victory is at best five wonders about the White House-.-recognizes, on the other hand, that most any of Marcos’ elite rivals would pursue policies not fundamentally incompatible with US interests, which could not be said for the NPA.

A fascinating question now is whether the US, with all the economic and military power at its disposal, can implement policies which serve its interests, in the face of a persistently different perspective by Pres. Marcos. He is behaving less like a client than the dependency school would have us expect. Nor is the situation entirely different from that in Vietnam of the 1960s and ’70s. The US has the power to destroy an errant client, as it did Diem, for instance, but does it have the ability to create a ‘satisfactory’ alternative? If not, is it because dependent regimes are destined to self-destruct? Or is this a prospect only when a potent military dimension is inserted into an economic and political relationship?

The presence of military bases and the prospect of intervention through military channels does sharpen political polarization. A dilemma is created for the non—Communist opposition, most of whom would earlier have tolerated U.S. bases. In a rising tide of nationalism they are forced to choose whether their opposition to Marcos will be combined with support for or antipathy to a continued American military role. American backing, which might be materially rewarding, requires of them the former attitude, but it might also be politically awkward. Those who choose antipathy are more easily wooed by the Communist Party-led united front. And the longer the US backs Marcos, the more chose antipathy.

But revolutionary movements will facilitate polarization only if they are skillful in capturing the center by building united fronts. The reported Communist Party decision to boycott the February election is one which could weaken their alliances, and certainly reveals a lack of confidence in Marcos’ ability to defeat the non—.Communist opposition, and thus contribute to the polarization they seek.

However, there is a deterrent in the Philippines to the process of polarization, which destroyed the Third Force in Vietnam. Aside from smaller US military involvement, a large, politically active entrepreneurial class, composed of professionals as well as businessmen, has reacquired its political voice in the last two years and is usually opposed to both political extremes, either military-backed authoritaianism or revolutionary tendencies. It is in their interest to denounce Marcos and US support for him at the same time they resist participation in Left.leaning coalitions. They could play an important role in a revamped political elite after the removal of Gen. Ver and Madame Marcos from the succession struggle. With the reinstitution of free elections they could reactivate patron’client networks in many areas. There are some in such a future ruling group who would in fact, be content with the restoration of a rather dependent anti-Communist elite, ruling as an alliance of new patrons, somewhat along pre-1972 lines. But is that possible? Dependency builds its own antibodies, in elite as well as mass. Nationalism could prevent that outcome.

Opposition to the depradations of TNCs, Japanese as well as Americans, is now informed by more experience than during the economic nationalism of the 1960s; it is reemerging. Nor is the prolonged American backing for Marcos likely to permit a return to the familiar cordiality of Philippine-American relations of pre-martial law days. Neither will1 continued compliance with WB/IMF economic policy guidelines permit recovery fast enough to dampen mass unrest in the near future. Those guidelines are, in any case, conducive to increased inequality of income distribution when the reverse is being demanded. Furthermore, there are many areas where mass political mobilization, either by the Left or by the Church, will not permit restoration of old patron-client ties. Delivery on reform will increasingly be required of a new elite. And if it does not deliver the prospects are not good it will again face the competition of a revolutionary movement.

The United States is fortunate that there are both cultural and socio-economic patterns in the Phi lippines which may permit the luxury of more mistakes before the utter failure of its policy is assured. But whether the US fails or succeeds, we will certainly learn more from Philippines experience in the next few years about the consequences of institutional collapse, the real character of dependency, the impact of elite intransigence, and the diverse dynamics of nationalism and revolution.

Categories Philippines, General politics