JUNEAU, Alaska — Many Asian countries made great leaps forward in economic and individual well-being during the late 20th century, but the Philippines stagnated. Today, agricultural productivity is low. The manufacturing industry is in tatters, and service jobs dominate the labor market. Why did the nation fail to develop alongside its neighbors? The reason why prosperity eludes the Philippines has a lot to do with Spanish and American colonialism.
The Colonial Days
In 1521, the famous explorer Ferdinand Magellan landed on a large collection of tropical islands in the South Pacific. The Spanish empire subsumed those islands — thereafter known as the Philippines — and settlers occupied them soon after.
Upon arrival, colonists established sprawling estates called “haciendas.” They were quite similar to Central and South American plantations in that landowners recruited cheap labor by loaning money to native Filipinos, requiring them to work off the debt. This exploitative system was called “enganche” — or “the hook” — in Mexico, Bolivia, Colombia and Peru. Because repayment amounts were ambiguous and ever-increasing, landowners exploited labor from an indebted individual indefinitely.
The Turning Point
José Rizal was the figurehead of the reform movement in the Philippines of the late 19th century. Rizal published “Noli me Tangere” (“The Social Cancer”) and “El Filibusterismo” (“The Reign of Greed”), both impassioned critiques of life under Spanish colonial rule.
Rizal called for representation of the Philippines in the Spanish parliament, stressing the need for Filipinos and Spaniards alike to have equal treatment under the law. Although colonial authorities eventually executed him, Rizal’s political treatises provided the backbone for what would become the Philippine Revolution. In July 1898, revolutionaries proclaimed independence from Spain, thereby inaugurating the Philippine Republic with young general Emilio Aguinaldo at the helm.
The American Setback
Later that summer, American forces defeated the Spanish armada in Manila Bay, thus concluding the Spanish-American War. Both nations signed the Treaty of Paris, decreeing that — among other concessions — the Philippines was to become an American colony.
Aguinaldo issued a proclamation of war against the U.S., and what ensued was a costly struggle between revolutionary guerrillas and American military operatives. More than 20,000 Filipino soldiers died in combat while “more than 200,000 civilians perished as a result of combat, hunger or disease.” The U.S. captured Aguinaldo in 1901, but small insurgences continued until 1913. The Philippines would not be liberated from American colonial rule until 1946.
Daron Acemoglu and James Robinson, the authors of “Why Nations Fail,” point out that countries with colonial backgrounds often suffer from endemic corruption, feeble property rights and unstable governance. This is just what one may find in the Philippines where colonialism weakened culture, laws and institutions — also known as “social infrastructure.”
Herein lies the answer to why prosperity eludes the Philippines: While strong social infrastructure promotes interpersonal trust, stimulates wealth accumulation and fosters innovation, frail social infrastructure does precisely the opposite; it encourages dishonesty, dispossession and theft. The Philippines undeniably has a frail social infrastructure. Yet, there are several reforms that might address this issue.
The public education system needs retooling so the Philippines will have an internationally marketable workforce. The poor quality of the current system certainly explains the preponderance of low-skilled service jobs in the labor market. Fewer than 70% of students finished elementary school in 2005.
A 2008 UNESCO report found that deficiencies in public teaching curriculums were responsible for bad performance in science, technology and mathematics. Because sustained economic growth is reliant on the ability of the workforce to keep pace with the leading wave of technological innovation, the Philippines’ public education system must correct these systemic deficiencies and churn out graduates who are proficient in STEM.
The government must strengthen property rights so the poor are not victimized, according to the Asia Foundation. More than “12 million Filipinos do not own the rights to their own homes.” The costs associated with obtaining the proper documentation are simply too high. This unfortunate fact renders poor individuals susceptible to wealthy agriculturalists, real estate developers and government officials who stand to gain from property seizures.
Filipinos need a sure framework of property certification and reclamation should their rights be violated. Thankfully, modern technologies are making such a framework more attainable — the Philippines, for example, recently became the first country to incorporate drones into land-titling efforts.
Closed for Business
Market competition must improve so economic growth benefits all people, according to World Bank. The Philippine economy is monopolistic due to longstanding political arrangements between policymakers and financial elites that favor certain corporations. As a result, labor freedom is very low and the archipelago remains one of the toughest places in Asia to start a business.
“Antonio Flores, a spokesperson for farmers group Kilusang Magbubukid ng Pilipinas,” wants to see monopolies dismantled with land reform bills and other measures. The passage of the Philippine Competition Act in 2015 could certainly be seen as a step in the right direction.
The government must address corruption, which is arguably the chief factor in explaining why prosperity eludes the Philippines, so politicians are not diverting resources and capital. Research indicates corruption forces economic growth to lose ground. These corrupt activities paralyze the economy and prevent necessary development from occurring. This has much to do with corruption’s effect on government projects and expenditures.
Brando Araneta, a small-town legislator from the northern Philippines, spoke with The Borgen Project in an interview. “If we are building a road, more than half the funds in the budget are stolen and then we can only afford to purchase cheap materials. the end result is bad roads and rich politicians.”
Unfortunately, corruption remains notoriously difficult to combat. Several developing governments around the world have implemented public blockchain registries tracking all government expenditures and transactions. Because that makes it hard to conceal illicit activities, many believe the Philippines should consider adopting such a system.
How to Help
Many Asian economies boomed during the late 20th century, but the Philippines was not so lucky. Thanks to the Quezon City-based non-profit WorldVision, international donors can assist by putting Filipino children through school with small monthly donations either to WorldVision or to a similar non-governmental organization.
– Thomas Willhoite