34 years later

It has been 34 years since Benigno “Ninoy” Aquino Jr. was killed upon his return from exile in the United States, and many still cite his murder as the last straw that precipitated the economic collapse of Ferdinand Marcos’ dictatorship.

The reality was that failed economic programs financed by huge foreign loans combined with cronyism to ensure the worst economic crisis in postwar Philippine history.

In summary, the Marcos regime embarked on an import-substitution policy, offering tax incentives to attract investment in industries and protecting locals from foreign competition. What it should have done was to adopt at the same time an export-oriented strategy to make local industries competitive in foreign markets, as what was done by other countries like Singapore and Malaysia.

At about the same time, the oil boom in the 1970s provided the Marcos regime with low-interest “petrodollar” loans to finance an ambitious industrialization program centered on 11 major projects that included the Bataan nuclear power plant. This was aside from the billions of pesos spent on roads, bridges, irrigation, dams and power plants, with financing coming mainly from foreign loans.

The results were devastating. The Philippines’ foreign debt burden rose from $2 billion in 1970 to about $4 billion in 1975 and on to almost $13 billion in 1980. In 1983, when much capital had fled the country due to economic and political uncertainties, an official accounting showed that the total debt had swelled to nearly $30 billion.

Aside from the foreign debt issue, the state of martial law since 1972 led to monopolies controlled by and behest loans given to persons closely associated with Marcos. This has been referred to as “crony capitalism,” with the dictator’s associates and friends—the likes of the Benedictos, the Cojuangcos, the Disinis, the Cuencas — controlling key industries like coconut, sugar, mining and telecommunications.

At the start of the 1980s, an international oil crisis — which saw crude oil prices skyrocketing following tensions in the Middle East — led to soaring import costs, higher inflation and a surge in bank interest rates. The difficult economic times saw increased protectionism in major international markets like the United States.

This affected the Philippine economy, which relied on raw commodities like sugar, coconut and mineral ore for its exports.

The assassination of Ninoy Aquino on Aug. 21, 1983, simply quickened the economic downfall of the Philippines under Marcos. Political uncertainty triggered capital flight, and when foreign banks stopped lending to the Philippines, businesses had to turn to the black market to pay for their imports, weakening the value of the peso in the process. In October of that year, the Marcos regime was forced to declare a debt moratorium.

The resulting numbers were disheartening. The economy contracted from 1983 to 1985 (gross domestic product fell by 6.8 percent in 1984 and 3.8 percent in 1985), inflation was at 50 percent, factories went idle, and the unemployment rate shot up. Local and international pressure on Marcos eventually led to his declaration of a snap election in February 1986, pitting the dictator against Ninoy Aquino’s widow, Corazon Aquino. The rest, as they say, is history.

Thirty-four years and five administrations later, it’s a different story. The government reported last week that economic growth was sustained in the second quarter of 2017, coming in at a respectable 6.5 percent.
Compare this with the average GDP growth rate from 1972 to 1985 of 3.4 percent a year — hardly the “golden age” touted by the Marcos heirs. The Philippines has come a very long way since the economic crisis of the early 1980s.

The lesson to be learned from all this is clear: Politics should never interfere with a country’s economic affairs.

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