Globalization, Corruption and the Structural­Historical Perspective

GEORGE BAYlON RADICS

Corruption is an insidious plaguethat has a wide range of corrosiveeffects on societies. This

evil phenomenon is found in all countries-big and small, rich and poor-but it is in the

developing world that its effects are most destructive. Corruption hurts the poordisproportionately-by diverting funds intended for development, undermininga government'sability to provide basicservices, feeding inequality and injustice, anddiscouragingforeign aidand investment. Corruption is a key element in economic underperformance, and a majorobstacle to poverty alleviation and development.

Kofi Annan, Secretary General of the United NationsSpeech on UN Convention against Corruption, 2003

Corruption is one of the most salient

issues currently affecting the Philippines.As a nation that experiences moderate

economic advance in contrast to its rapidpopulation growth, exploitation of whatlittle exist only further denigrates FilipinoIivelihood. Corruption weakens the alreadylimited capability of the bureaucracy to

perform its duties efficiently according toestablished rules, hindering the possibilityfor political, economic and social progress.It is an endemic burden for the poor who

must bear the brutal brunt of exploitationand marginalization, and provides for anunstable environment that typicallybenefits a select few while alienatingthe masses.

In the Philippines, it has been arguedthat corruption has metastasized fromMalacanang Palace down to thebarangay government.' (Coronel 1998:11) According to this view, the Philippineshas experienced total systematic afflictionwhere practically all government officesand projects are prone to corruption.Exploiting the bureaucratic procedures in

the Philippines, it is reported that underthe Ramos administration, each memberof the lower house of Congress is able to

skim Php62.5 (US$2) million per yearfrom budgets allocated for the Depart­ments of Public Works and Highways,(DPWH) Education, Culture and Sports

(DECS), Interior and Local Government

PHILIPPINE SOCIOLOGICAL REVIEW Vol. 49, Nos. 1-2 (2001): 39-58. 39

(DILG) and Health. President JosephEjercito Estrada in January 2000 wasimpeached on plunder charges forallegedly embezzling over Php4 billion,or US$80 million. In 1986, records showthat PresidentFerdinand Marcos was ableto amass over US$30 billion during histwenty years in office; these figures standin stark contrast with the reality that theaverage Filipino makes around US$500­$1,000 per year (Philippine Census 2000).

In a studyconducted by TransparencyInternational amongbusinessmen currentlyengaged in trade activities in countriesthroughout the world, the Philippinesranked 77th (with the first being theleast corrupt)." Meanwhile, in a study bythe Internet Center for CorruptionResearch on perceptions among citizensand businessmen on transparency andintegrity in public office, the Philippinesscored 92nd in a list of 133 (again withthe first being the least corrupt).' In bothinstances, the Philippines scored in thebottom quartile of the most corruptcountries on earth.

Moreover, corruption playsan import­ant role in economic growth. The Inter­national Monetary Fund (IMF), in itsstudy of growth rates in ASEAN found thatbetween 1970 and 1996, the Philippinesexperienced the lowest level of economicgrowth in the region. In fact, between1980 and 1996, this economic growthwas lower than that of Sub-SaharanAfrica (Hicklin et aI., 2003:27). Thereforein conjunction with extremely highcorruption rates relative to the rest of theworld, we also see extremely low devel­opment rates. To many, the correlationbetween the two is undeniable.

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However, to attribute all nationalproblems to political elites who benefitfrom corrupt behavior would be missingthe bigger picture. In order to understandthe current phenomenon of corruptionin the Philippines, one must first traceits roots to colonization. Without theconstruction of an entrenched politicalelite class that would constantly sidewith USpolicies during that crucial period,the American colonial experiment wouldhave failed-especially since it wasprecisely this group of elites who posedthe biggest threat to the newly formedempire. This type of relationship iscontinually sustained by global marketforces of capitalism that need allies inorder to maintain the conditions for theexpansion of the system. This isespeciallyin light of the fact that as this systemexpands, it tends to enhance poverty andinequalityinternationally. Thispaperargues,then, that corruption becomes part ofthe hegemonic global economic system,institutionalized by the history of coloni­zation and sustained by the structuralforces of capitalism.

Conveniently however, perhaps inattempts to mask this reality, currentliterature on corruption in the Philippinestends to focus on the act of the corruptionand. the 'culture of corruption.' Scholarssuchas Thompson (1995) and Hutchcroft(1998), who constitute a group of (self­described) 'talented new. generation ofscholars on Philippine politics," althoughcritical of older political models of thePhilippines such as that of the 'patron­client' model pioneered by Carl Lande inthe 1960s, tend to overlook their owncriticism and continue to employ these

models anyway. In the process, theyneglect to interrogate some of the culturalstereotypes of Filipinos embedded with­in such models that indelibly mark theFilipino as an 'other,' thereby'orientalizing'the discourse.

This paper, therefore, aims to shedIight on the issue of corruption from analternative perspective, one that positscolonialism and later, neo-colonialism asnow manifested by globalization, as themain perpetrator behind such 'corrupt'activities. The paper will first discuss thecurrent scholarship on corruption in thePhilippines from its cultural aspects tothe 'patron-client' political model. It willthen shed light on the historical back­ground to the corrupt 'patron' asa productof colonial intervention. Finally, it willlook at how, once constructed, thiscolonial legacyis nurtured and maintainedby the contemporary structural system oftransnational capitalism.

CURRENT SCHOLARSHIP ONCORRUPTION IN THE PHILIPPINES

Literature on the Philippines has a longhistory: from early works by colonialadministrators, to 'nationalist' Filipino re­interpretationsof Philippine-US relations.'An excellent example of work from theformer category is that of David JoelSteinberg in his notable book, ThePhilippines: A Singularand Plural Place.In this work, Steinberg documents manyof the peculiar habits of Filipinos,particularly with regard to cultural norms.Once such observation was the kinshipand fictive kinship relations which tendto dominate social relations inthePhilippines:

Relationships in the Philippines are

defined in a 'we-they' framework to a

greater degree than in the West. The

web of kinship and fictive kinship

creates the social environment ...

extending beyond real and fictive

family are bonds that tie an individual

to others of the same town and

province, linguistic group, and geo­

graphic area of the country (Steinberg

1990:2-4).

What is notable from this passage isthat the analysis of this and many otherearly American authors on the Philippinesdemonstrates that these authors con­ducted their research in a manner whichinextricably painted the Filipino as theindelible 'other'. Contrasting Filipinonorms with those of 'the West,' theyexplore how and why Filipinos weredifferent from Americans, and ultimately,how and why institutions set in placeby the Americans eventually failed.

Another example of 'flawed' Filipinovalues that help contribute to the failureof some of these institutions is 'utang naloob.' Literally translated to 'debt of theinside', the term is used to describe arelationship based on a debt of gratitude.When an individual provides services orany type of commendable act for another,the other is immediately placed in arelationship in which he or she mustrepay the act of kindness. According toSteinberg, "Filipinos are acutely sensitiveto the burden of paying back those favorsdone for them by others. The accusationthat an individual is insensitive andthoughtless is damning" (Steinberg 1990:4). However, this cultural practice does

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not simply manifest itself into socialrelationships. As Steinberg argues, it canbe realized in international and bilateralarrangements as well:

TheFilipinos felt that the United Statesowed them a massive amount of post­war support not merely because theyhad been allies but more essentiallybecause they hadfulfilled handsomelythe obligations that cemented the'special relationship'... Filipinos werecrushed to discover that Americaseemed preoccupied and insensitive(Steinberg 1972:187).

Scholars on Philippine politicalscience picked up where many of theseearly scholars left off by integrating theseideas about Filipino culture into theiranalyses of politics. According to Lande,a Yale University trained scholar,

Rural Filipinos, andto a certain extent,urban Filipinos as well, rely moreheavily upon the help of their kinsmenin their various activitiesand less uponthecooperation of nonkinsmen than doinhabitants of modern Westerncountries... a majorconsequence of thisPhilippine kinship is that the typicalFilipino community does not segmentbyvertical lines of cleavage intoaseriesof discrete Iineages...instead, [we see]an uninterrupted web of interwovenand overlapping kinship ties whichdirectly or indirectly connect most orall of its inhabitants with one another(Lande 1965:16-18).

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Therefore, Filipino social lives becomedominated by a complex web of relationsthat are based on the cultural ideas ofkinship and bonds of utang na loob.Furthermore, these 'web-like' associationsbecome characterized by a 'patron-client'relationship where the rich tend to dishout favors to the poor who in returnprovide them with patronage. As a result,factions basedon this patron-client modelare often formed at the local level. Thesefactions often take on the shape of familyor regional rivalries. Ultimately, from theseemerge national pol itics, wh ich areplagued with acute infighting found atthe local level.

According to Lande, this becomes aproblem when local politics tends tocreate amorphous party lines at thenational level. Because parties in thePhilippines emerge from the bottom upinstead of top down, politics is oftenguided more by personal relationshiprather than national pol itical directorates.In the Philippines, if a political partyrefuses to endorse a candidate that isbacked by a powerful provincial leader,local factions can switch sides or formtheir own political party to challenge theoriginal party. In order to reconci Ie for this,many parties are forced to enact 'freezone' rules, which allow for multiplecandidates to run on one slate, thereforealleviating the problem of party switching(Lande 1965:56-58). Therefore, as localpolitics based on flawed Filipino cultureinfiltrates national politics, institutionalproblems become grounded in culturalexplanations.

Mark R. Thompson in The Anti­Marcos Struggle: Personalistic Rule andDemocratic Transition takes this argumenteven further by arguing that as thesepatron-client relations become intense,they begin to take the form of a singular'patron' who then begins to dominate allinstitutions. As a result, we begin to seemassive plundering of national assets.Thompson of Yale University drew veryheavily from his supervisor's work on'Sultanisrn." Portraying Marcos as theultimate 'Sultan,' he demonstrates howMarcos and many of his 'cronies' wereable to take advantage of their position ingovernment to dole out favorsand rewardsto those who sided with the Marcosadministration.

Marcos' financial reach was extendedfurthest through 'crony capitalism,' a kindof subcontracting to his close friendsimportant areas of the economy forplundering. Though production remainedprivately owned, Marcos allowed croniesto monopolize key commodities throughspecial taxes, production privileges, orimport-export licenses...even Marcos'elderly mother had her sphere of influencein the Rice and Corn Administration(Thompson 1995:53).

Therefore, as a result of patron-clientrelations, we see the emergenceof'crony­capital ism,' a concept that has been usedto characterize the corrupt nature of manythird world nations. As friends and familiessubmit their support to the Marcos regime,they in return receive favors that expandtheir realm of control-all the whilereiterating the centralized power of themain patron. Following the logic of Lande,

this interpretation of the Marcos regimereflects the underlying notion that politicsin the Philippines is truly guided by apatron-client relationship, one that tracesits roots to the Filipino value of kinshipand utang na loob.

It should be noted that althoughThompson uses the patron-client modelto understand Filipino politics, he alsorecognizes several failings of the modelbased on 'flawed' Filipino values. Heargues "c1ientelist theory simplifies themessy real ity of pre-martial law politicsin the Philippines characterized by thenear breakdown of Philippine democracybetween 1949 and 1953 ... [Furthermoreit] also overlooks the violence of pre­martial law elections." However, he adds,"like anomalies during normal science,these political phenomena do not severelyundermine the c1ientelism's analyticaleffectiveness" (Thompson 1995: 16).Finally, as politics become dominated byFilipino culture, it becomesinevitable thenthat the Philippine economy begins tosuffer as well.

Paul Hutchcroft is another contem­porary scholar who analyzes Philippinepolitical issues through the use of thepatron-client model. Instead of looking atthe direct implication of the model onpolitical relationships however, he appliesthis framework to the political backdropbehind the financial sector. Initiallycharacterizing the Philippines as patri­monial oligarchic state, he makes thecase that instead of the political factionswithin the government directing nationaldevelopment, it is the large 'oligarchic'business class, grounded in the local

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familial dynasties that dictate matters ofthe state. This, he argues, differentiates thePhilippines from countries like Thailandand Indonesia which can be characterizedasbureaucratic capitalist states dominatedby makers in the government as opposedto emerging from a powerful businessclass (Hutchcroft 1998:46-55).

This type of relationship applies thepatron-client model by analyzing theinternal processes behind the selection ofcertain banks that receive governmentalsubsidies and support to evade bank­ruptcy. This can be seen in the bankingindustry where many of the reforms thatwere implemented precisely to address theimpending liquidation of many banksselectively benefited those with closerelations with the men in power, who, inturn, often a vested interest in, if notowned, the banks that were able to availof government support. One such manwas Jose 'lobo' Fernandez, a Harvard­trained businessman who made hisclaim to fame by establishing one of thenation largest private banks, Far EastBank. Hutchcroft showed how, uponFernandez's arrival as the new head ofthe Philippine Central Banking Authority(as the Central Bank is officially referredto), and in the process of "cleaning up"the failing bank industry the three mainbanks that were selectively attacked forpoor misconduct were those of his andhis family's political rivals. Moreover,when time came to sell the shares of thesenew governmentally-acquired banks, theprivate bank which consistently made themost appropriate proposal was FarEastBank (Hutchcroft 1998:173-177).

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From the works of Lande, Thompsonand Hutchcroft, one can immediatelyrecognize the prevailing political sciencemodel of the 'patron-client.' But asdiscussed earlier, part of the patron-clientmodel is the entrenchment of essential­ized notion of Filipino culture. As oneproceeds through the development of thepopular political science model, one findsthat what the scholars either implicitly orexplicitly argue is that Filipino values areat the core of some many of thePhilippines' political and financial woes.According to Hutchcroft,

The case of the Philippines highlightsimportant political underpinnings to thedevelopment of more advanced formsof capitalism. Not only isthe Philippinestate incapable of guiding the processas of late, it is even more fundament­ally incapable of providing theadministrative and legal apparatusnecessary for the developmentof free­market capitalism. Without greaterdevelopment of the state, oligarchicdominated booty capitalism willcontinue to stunt the development ofthe Philippine economy (Hutchcraft1998:22-23).

From the cultural point of view,according to Steinberg:

Corruption, if that is the appropriateterm, is endemic. But from theindividual Filipino's point of view, it isthe means by which an individual canwork hisway throughthe complexitiesof modern society. It is a system easily

abused. A near-sighted driver who hashad his eye test fixed is a menace onthe roads. A real estate developer whobribes the building inspector in orderto use cheap cement puts his tenantsat riskatthenextearthquake. Adefenseattorney who buys a judge destroysjustice, asense of fairness in thesystem,and theintegrity ofthe courts (Steinberg1990:6-7).

Thus, at the core of some of theinstitutional problems of the Philippinesare the flawed cultural values, some ofwhich can be squarely accused ofproviding the foundation to some of thelarger problems that persist today. Theproblem with these arguments, however,is that they are largely ahistorical and theyoften overlook, if not dismiss altogether,some of the prevailing structuralcircumstances that precede and maintainsuch problems. With this in mind, thepaper can now proceed to shed light onsome of the historical circumstances ofcolonialism that have contributed to thebirth of such problems. It intends to lookat some of the structural issues that makethe historical legacy of colonialism persistto this day.

CHINESE MESTIZOS, THE RISE OF THEFILIPINOIDENTITYAND COLONIALISM

Owing to the Spanish colonial policyof simply using the Philippines as a portof transfer between China and Mexico asopposed to a colony from which it couldexploit massiveamounts of resources, the

Spanish engaged in a different type ofcolonial policy in the Philippines thanhad been seen in other partsof the Spanishempire. Whereas in Latin America manyof the indigenous people were forced tolearn Spanish to facilitate the utilizationof labor necessary to grow crops or mineprecious minerals, in the Philippines, mostFilipinos, (sincethis was never necessary),were able retain their native dialect(Anderson 1988:5). Because the Spanishgovernment never fully developed thePhilippine economy to one that would beeconomically self-sustaining, the Spanishcolonial government had to rely onChinese merchantsand tradersto maintainthe necessary ties to the Chinese marketas well as to continue benefiting from thetrade that brought in some of the basicdaily necessities that could not be foundon the islands (Wickberg 1964:67-68).

Although the Spanish could not livewithout the Chinese, they could also notlive with them. As these Chinese tradersbegan to profit from the relationshipbetween themselves, the Spanish and thelocals, their population began to growboth physically and economically. Giventhat the Spanish population was compa­ratively much smaller to the burgeoningChinese trader community, in addition tothe fact that this community was becominghighly dependent on the Chinese, theSpanish colonial government began toenact highly restrictive measures tocurtail the growth of the Chinese com­munity, which was perceived asa growingthreat. The colonial government enactedextremely restraining geographic mobility

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rights on Chinese communities, oftensequesteringChinese merchants to certaincommunities within the immediatecontrol of colonial authorities. Chinesemerchants were unable to purchase andown land as a direct consequence of thisrestricted mobility. Lastly, in order to limitthe realm of power to which these tradershad access, the Chinese were refused theright to transform their economic powerinto political power and were deniedparticipation in any part of the government(Wickberg 1964:70-75).

Coupled with anti-Chinese racial riots,these discriminatory practices made thesituation for Chinese merchants in thePhilippines far from an ideal situation.Therefore in 1762, when the Britishinvaded the Philippines in response to theSpanish involvement in the Seven YearsWar, many of the local Chinese merchantsimmediately sided with the new colonialoccupants. When the Spanish returnedtwo years later, it was resolved that theChinese were not to return to thePhilippines given their potential to betraythe Spanish if given the chance (Anderson1988: 7). Consequently, after 1762,Spanish colonial policy with regard theChinese could be viewed as forcedassimilation. Given the outright ban ofChinese immigration to the island alongwith the continuing necessity to maintainmany of these traders to sustain the localeconomy, the Spanish colonial govern­ment, as a response, increased thepressureto have theseChinese merchantsassimilated into the local culture. This wasdone through conversion to Catholicismand intermarriage. As a result of the lattersolution to the Chinese problem, we begin

46

to see the meteoric rise of the Chinesemestizo (Anderson 1988:7-9, Wickberg1964:71-75, Cullinane 1982:257-271).

With the ability to take advantage oftheir fathers' financial network and theability to navigate local social relations,'these Chinese mestizos, now withoutlegal restriction, were able to amass asubstantialamount of wealth. In Cebu' forinstance, it was argued, "the wealthiest ofthese Chinese mestizos probably exertedmore influence over the urban area thandid any of the colonial authorities"(Cullinance 1983:257). In addition, manyof these wealthy Chinese mestizos beganto receive an education abroad, contri­buting to the argument that the existenceof these elites.eventually led to the emer­gence of an 'indigenous intelligentsia(Anderson 1988:8-9).

THE RISE OF THE 'FILIPINO IDENTITY'AND RESISTANCE

It was from this intelligentsia that webegin to seeresistanceto Spanishcolonialrule. As many Chinese mestizos becamelanded property owners or members ofthe social elite in the Philippines, and astheir children became educated in someof the finest schools in Europe, it becamevery difficult for members of this elitegroup to accept their position as secondclasscitizens within their own country. Aresult of this emerging identity was the'PropagandaMovement? of elite Chinesemestizo children studying in Spain. Whilemany of these students pursued profes­sional careers, they noticed that despitetheir ascendant status, they remainedvulnerable to harassment and unequal

treatment in the Philippines. In response,they began to publish articles and bookscriticizing the colonial administration forthe injustices it represented. One suchChinese mestizo was jose Rizal who in aletter to a friend talks about his and hisfriends' engagement in the movement asfollows:

I have tried to do what no one else has

been willing to do. I have tried to reply

to the calumnies which for centuries

has been heaped upon us and our

country; I have unmasked the state of

our society, our life, our beliefs, our

hopes,our desires, our lamentsand our

grievances; I have unmasked the

hypocrisy, which, under the cloak of

religion, came among usto impoverish

us,to brutalize us. I haveunveiled what

lay hidden behind the deceptive and

brilliant words of our government. The

facts that I have related are all true and

real; I can give proof of them

(Schumacher 1973:75).

It was precisely this type of sentimentthat gave rise to the Filipino identity thatonce developed, servedasacounterpointto the colonial government. Much likeAfrican Americans who developed a'double consciousness' when theyrealized asa slave that no matter how farthey had moved up, they would neverattain the status of a master; or with Fanon,the realization that upon arrival in the'civilized world' the color of one's skinwould always render him as less of anequal, these moments of realization thenbecome transformed into examples ofcognitive liberatlon," Accordingto Mignolo,

"the post-colonial begins when the thirdworld intellectuals arrived in the firstworld academy" (Mignolo 1999: 113­116). In understanding the politics ofidentity, Mignolo argued, the process ofexploring such a topic usually involvedthose who had a vested interest in under­standing its significance-namely, themarginal ized themselves. An excellentexample that Mignolo uses is the rise ofthe Frankfurt School of Critical Theory, atheoretical school dominated and initiatedmainly by jews.

This newfound consciousness thatthe Chinese mestizo experienced trans­lated into what can now be consideredthe 'Filipino' identity (Anderson 1988:7­8). These nationalistic Filipinos helped fuelthe revolution againstthe Spanish in manyways. Firstly, it was through the originalworks of the 'propagandists' such as NoliMe Tangere by jose Rizal that helpedtrigger nationalist sentiment that served asthe common bond that united theresistance effort'? (Schumacher 1973:73­96). Secondly, many of theseelite Chinesemestizos helped fuel the revolution byproviding the necessary economic base.Thirdly, it was amongst this group ofFilipinos that we see the riseof the leader­ship to the resistance effort (Hunt 1979:536-540). In fact, according to MichaelHunt, "the primary impetus for theresistance effort came from the elite, andwithout their active participation, therewould been relatively little oppositionto the American occupation" (Hunt1979:539).

Therefore, contrary to the idea thatmany of these elites served as 'patrons,'or central figures whose self-interest

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made ill practices and corruption runrampant, many of this class played animportant role in the resistance effort notjust for themselves but also for theircountry. It was through their cognitiveliberation, financial base, and leadershipthat a viable resistance movement wasable to pressure the Spanish governmentto relinquish its control over thearchipelago and eventually sell the islandto the US. Ironically, it was during theAmerican occupation that we begin tosee a dramatic turn in terms of the rolethese elites played in society.

US COLONIZATION AND THE'POLICY OF ATTRACTION'

After the United States forcefullygained control of the islands andslaughteringnearly 1/6 of the population,'!the US government embarked upon acampaign to win the 'hearts and minds'of the population by enacting a 'policyof attraction."? An obvious attempt towin over the hostile Filipinos was bypronouncing 'benevolent assimilation' asthe intent of the US colonial adventure.According to then US PresidentMcKinley,

It will bethedutyof thecommander ofthe forces of occupation to announceand proclaim in the most publicmanner that we come not as invadersof conquerors, butas friends, to protectthe natives in their homes, in theiremployment and in their personalreligious rights. All people who, eitherby activeaid or by honest submission,cooperate with the government of theUnited States to give effect the

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beneficent purposes will receive thereward of itssupport andprotection...13

As a product of this 'benevolence,' theAmericans engaged upon one of thelargest infrastructure projects in the region,building roads, schools and institutionssuch aspost offices and telegraph services.One of the most important projects theAmerican colonialists embarked on wasland reform.

When the Americans arrived in thePhilippines they encountered two majorissues, 1) the unequal distribution of landdue to Spanish concentration of landwithin the church and 2) a hostile andscheming elite classthat had the potentialto destabilize the newly forming colony.In order to address both issues, the UScolonial administration transferred nearly400,000 acres of land from the churchesto the elites. By doing so, not only didthe colonial government address thelarge plots of idle lands under the oldsetup of the church, but also placated thegroup of individuals that posed thegreatest threat to the administration.Secondly, in order to provide theseFilipino elites with some incentive todevelop these large tracts of land, thePayne Aldrich Act was passed in 1909 toallow these Filipino elites free anduntaxed access to the US market, one ofthe largest markets of the world at thattime (Anderson 1988:8-9).

A second pol icy that pacifiedpotentially hostile elites was theconstruction of a liberal democracy.Unlike other colonies throughout theworld such as in Hong Kong or Singapore,nearly 99 percent of the colonial adrnin-

istration in the Philippines was run by thecolonial subjects themselves (Anderson1988:9-10). This served as a perfectopportunity not only to provide theseelites with economic benefits but alsowith political power since according tothe law, only those who owned propertyand were educated were able to vote(Thompson 1995:15-32, Hutchcroft1998:13-21, Anderson 1988:10). Providingthe elites with even more benefits, thisAct also made it so that for the firsttime in the history of the Philippines wesee the rise of a 'national oligarchy.'According to Anderson,

There more than at any previous time,

they got to know one another well in a

civilized "ring" sternly refereed by the

Americans. They might dislike one

another, but they went to the same

receptions, attended the same

churches, lived in the same residential

areas, shopped on the samefashionable

streets, had affairs with each other's

wives, and arranged marriagesbetween

each other's children. They were for the

first time forming a self-conscious rulingclass (Anderson 1988:9).

Lastly, it should not be ignored thatmain flaws inherent to the Philippinesdemocratic system were in fact importedfrom the United States. Instances ofelection fraud, according to NakanoSatoshi, "could simply-be explained asanoutgrowth of the Americanization ofpolitical institutions rather than stemmingfrom indigenous culture or Spanishinfluence" (Nakano 2003: 10). In hisrevealing essay entitled A Tale of Two

Democracies: Scenes from BilateralPhilippines-US History of ElectoralDemocracy, Nakano argues that it wasprecisely this 'policy of accommodation'that left lasting effects onto the practiceof politics in the Philippine context. Oneis the legacyof the elites which the UnitedStates both nurtured and exploited fortheir compliance with American policies(Nakano 2003:2). Secondly, Nakanoargues that many of the electoralproblems that persist to this day in thePhilippines can be traced to similarproblems in the West when democracywas constructed in the Philippines. Anexample of this is the fact that while theUS sponsored and supported candidatesthey believed represented their bestinterests, much of the fraud that accorn­panied their ascension to power reflectedthe same type of fraud that existed in theWest at that time. Therefore, if the USimplanted the systemof democracy, howcan it be that the flaws of this implantedsystem be solely attributed to those whoavailed of it?

As seen in the preceding section, ifit were not for US colonial interventionin the Philippines, many of the 'patron­client' issues American scholars tend toanalyze may never have existed. Historyhas shown how US colonial policiestook what had originally been a class ofliberated Filipinos whose sole purposewas to release the islands from theSpanish colonial stronghold and trans­formed it into an oligarchic class ofleaders who used their position insociety to aggrandize both their politicaland economic supremacy. The remainingsection of the paper looks at how

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relationships that exist as legacies of thePhilippines' colonial past becameintegrated and maintained by currentcapitalist structures.

STRUCTURAL FORCES:TRANSNATIONAL CAPITALISM

According to Robin Broad (1988), theWorld Bank and the IMF emerged duringthe 1950s in response to two importantfactors. Firstly, with the decolonization ofthe world, and as bi lateral ties betweencountries became severed, the IMF andthe World Bank emerged as multi­lateral lenders-institutions that did notrepresent any type of direct colonialobligation between countries as had beenexperienced in the past. Secondly, asmany countries of Western Europe beganto experience economic growth, theUnited States was able to engage itsformer aid recipients, such as those whobenefited from the Martial Plan, tocontribute to the development of manyof these newly independent nations(Broad 1988 30-35). It was throughthese two conditions that w.e see theemergence of multilateralism overbilateralism.

By the 1970s, two other conditionshelped thrust the IMF and the WorldBank into further prominence. The first ofthese conditions was the decline of USsupremacy, witnessed worldwide by itsfailure to contain Vietnamese nationalistsentiment. After close to a decade ofunrestrained military spending, the USdollar was struck by its first devaluationin 1971. Coupled with the psychologicaleffects of a drawn-out battle and

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eventual loss in Vietnam, the USstepped down from being the world'sstrongest economic powerhouse toone at par with its allied competitorsJapan andWestern Europe. Secondly, withthe rise of alternative fronts such asOPEC, the US could no longer uni­laterally determine the direction of inter­national markets. These alternative frontsdemanded a reorganization of the inter­national economic order that had oncebeen dominated by the US. Therefore,these two added conditions helpedcontribute to the recasting of the policyrole taken by the IMF and the WorldBank in its relations with member andborrowing states (Broad 1988:37-41).Whereas in the past, the US had directpower to pressure states to adoptpositions in line with its interests, becauseof these two factors, the World Bankand the IMF had to assume these newroles.

With this new role in place, the WorldBank and the IMF began to push for"Structural Adjustment Programs" orSAPs along with the loans it disbursed.The adjustment programs were meant topressure many of the newly emergingeconomies to adopt policies in tangentwith the needs of the internationalcapitalist system (Bello 1994:27-29,Broad 1988:50-51). The purpose of thisincreased role was to ensure that policiesthat facilitated the international transferofgoods and services across boundarieswere unrestricted-thereby posinga threatto nations espousing nationalistic orcommunist leanings. Although both theWorld Bankand the IMFdeny the politicalnature of their programs, according to

Stephen Shalom "the World Bank, asalready noted, refuses to make fundsavailable to countries that nationalizeforeign assets without compensation"(Shalom 1986: 141). Reverberating thissentiment is Joseph Stiglitz, former Chiefeconomist of the IMF and former memberof the Council of Economic Advisorsunder the Clinton Administration, who, inthe preface to his book Globalizationand its Discontents says "ideology guidedpolicy prescription and countries wereexpected to follow the IMF guidelineswithout debate" (Stiglitz 2002: 14). As theIMF and the World Bank gained a largerrole in policy decision-making withregard to the adjustment policies thataccompanied its loans, this role reflectedthe interests of beneficiaries of thetransnational capital ist system.

In order to play to the needs of theinternational economic system, the pol iticsof these adjustment programs rarelydeviated from the three-point policyprescriptions required by all loan parti­cipants. The lowering of tariffs was thefi rst of these pol icy prescriptions. Therationale behind such a recommendationwas that through the influx of inter­national competition, many of the poorlyperforming national industries would beforced to reform their inept and inefficientbusiness habits to adjust to the morecompetitive environment (Broad 1988:67). In order to address the problem of anovervalued, protected currency rate, asecond policy prescription was removingcontrols on the currency, therebydevaluing its parity. By doing so, the localcurrency becomes attractive to foreigninvestment searching for cheaper

production costs. The higher purchasingparity promotes foreign investment andrapid industrial growth (Broad 1988:69).Thirdly, by promoting a policy of exportpromotion, state-led 'export processingzones' provided foreign investors withsubsidized sites for labor-intensiveactivities. With factories equipped forlabor-intensive industries in addition tothe lax tariff restriction on imports, thedevalued local currency and subsidizedsites of export production, according tothe Philippine Trade Ministry, under theadvice of the IMF,"if thisworks, we'll haveforeign exporters knocking on our doors'(Broad 1988:95).

In contrast to such hopeful statementsby the IMF and their representatives, thesituation deteriorated very quickly undersuch conditions. While many of thelarger Filipino-owned corporations wereable to withstand the changes in thedomestic market, many of the small-scalenational industries were faced with thedilemma of competing against an everstrengthening local competition andgrowing multi-national corporationintervention.

According to Broad,

As far as the national entrepreneurs

were concerned, the World Bank's

power to influence economic policies

that in the end effected their survival

was ominous. Shattering national

entrepreneurs' dreams of domestically­

owned and oriented basic industries in

the face of exigencies of a government

that needed the Bank's sealof approval

was only a first step. It coincided with

51

increasing numbers of national entre­

preneurs falling into bankruptcy as a

result of Bank-prompted reforms that

opened the door to foreign investment

and goods (Broad 1988: 111).

With regard the textile industry, oneof the Philippines' strongest industries inthe past, "no one denied that therestructuring was intended to buttressthe handful of the largest, most modernmills and to weed out the rest quickly"(Broad 1988: 113). Secondly, Shalomcontends that with the devaluation ofthe local currency, "81 percent of thepopulation suffered hardship as a result"(Shalom 1986:143). He argued thiswas because real wage rates in theindustrial establishments throughout thecountry declined by 19 percent forski lied workers and 13 percent forunskilled workers. In addition, due to thedevaluation of the local currency, theexternal debt increased 2.5 times itsoriginal figure within a spanof five years.It was stressed that with the imple­mentation of such policies, "sufficienteconomic growth increases the demandfor labor and ultimately to raise realincomes" (Broad 1988:121). In reality, thisnever took place. As real wagesdeclined,so did the capacity of the average Filipinoto meet daily subsistence levels.According to a social worker in Manila,

Right now its questionable whether

low-skilled industrial workers' wages

are even up to the Marxian level of

"self-reproduction." Look at the

workers in the export processing

zones...we're seeing lots more protein

52

deficiency...malnutrition among these

families. What food they can buy with

their daily wage keeps shrinking...

Stomachs areno longer full ...And we're

very afraid of the mental capacity of the

next generation...We just can't live and

reproduce at thesewages levels (Broad

1988: 122).

The question is how and why suchdismal situations, widely acknowledgedto be a product of the policy prescriptions,can be perpetuated and accepted by theFilipino government. Surely, the nation'sleaders can witness the detrimentaleffects of such policies, not just locallybut worldwide. According to Filipinosociologist Walden Bello, among 24countries that underwent stabilizationand adjustment programs, capital accu­mulation slowed in 20 countries, theshare of manufacturing in the G DPdeclined in 18 countries and exportvolumes decreased in 13 countries whilecountries which underwent export volumeincreases also experience 'negligible'balance of payments (Bello 1994:33).Oxford's specialist in structural adjust­ment Frances Stewart, observed, "thestabilization and adjustment policiesadvocated by the IMF and the WorldBank and widely adopted in Africa havenot succeeded in restoring growth inmost countries; indeed, they have oftenbeen accompanied by continuedeconomic deterioration" (Bello 1994:26).Therefore, ascan be witnessed inside andoutside the Philippines, structural adjust­ment programs have caused more harmthan good; yet how can they continue tobe included as part of national devel-

opment plans? Why are these IMF andWorld Bank loans not outrightly rejected?

STRUCTURALMAINTENANCEOF COLONIAL RELATIONSHIPS

Beyond the si mple real ity thatcountries entrenched in debt are nowcaught in a situation where they havebecome dependent on these loans, is thefact that local actors often benefit fromthe implementation of such policies.Furthermore, it cannot be denied thatmany times there are nationalist leaderswho do resist the imposition of suchpolicies. In addressing both these issues,Broad has constructed the conceptualrelationship of the triple all ianceto discusshow these nationalist leaders are sub­verted and why local leaderswho benefitfrom the relationship of the World Bankcontinue to advocate for such policies(Broad 1988:172-177).

As demonstrated in the precedingsection in which the US colonial govern­ment constructed and nurtured an eliteclass of individuals to facilitate theimplementation of a colonial government,we again see this with the IMF and theWorld Bank in their attempts to aid thedevelopment of the global capitalistsystem. For instance, as seen in the firstpolicy recommendation of the structuraladjustment program, not all nationalindustries were liquidated. Corporationsthat had enough economic and politicalpower to dominate the market actuallybenefited from the lowering of tariffs. Indiscussingthe distributive effects of policy,Broad uses the idea of "separatingthe menfrom the boys" to highlight the unequal

benefits from such a policy (Broad1988: 163-167). Using the financialsector to highlight this phenomenon,Broad found that of the 2,653 financialinstitutions existing prior to the structuraladjustment, only the tiny rural banks, thriftbanks and investment houses facedliquidation while the leading 31 banks(which accounted for nearly 72% of thetotal financial assets) emerged unscathedand stronger (Broad 1988:165). One ofthe major benefits of such a pol icy wasthe effective liquidation of competition towhat could have been considered theeconomically (and perhaps politically)elite.

Through the implementation of suchpolicies, domestic banks that couldwithstand the fluctuations of the marketwere able to pair up with foreign partners.An influx offoreign partnersexpanded therealm of services these banks could offer,thereby also increasing their strength andcompetitiveness against their local rivals.Furthermore, as these banks grew in sizeand stature, they also began to limit theirclientele. By 1980, after nearly a decadeof such reforms, three-quarters of the loansmade by these banks were distributed totransnational corporations and not tosmall-time local entrepreneurs.Moreover,this partnership was not identified solelyin the financial sector but also in the foodand agribusiness sector as well. Forinstance, as the case with some of thelarger banks, some of the larger fooddistributors such as San Miguel Beerpaired up with transnational corporationssuch as Coca-Cola to expand productdistribution and reach. In both cases, suchpolicies benefited the local economic

53

elites, the transnational corporation andobviously the state, which is now caughtin a desperate predicament where theloans become central to its survival.

CONCLUSION

Therefore, as seen in past colonialpolicies that had helped construct andbenefit off a group of elites, the structuralforces of transnational capitalism make itso that these historical relationshipsbecome indispensable. Whereas in thepast, bilateral relations between the USand the Philippines was fairly direct, thisrelationship has currently become morecomplex as demonstrated by the triplealliance of transnational corporations, thestateand the local elites. A simple bilateralrelationship has become multilateralwhile benefits to the local elites trans­cend direct access to the US market toglobal cooperation. .

At this point it should be clear thatwhile much of the work of contemporaryscholars on Philippine politics largelyignore some very important issues in theiranalysis, the intent of the paper is not todiscredit their work. In fact, the scholarlywork that emerged from the Yale schoolof political science demonstrate some ofthe most complex and sophisticatedanalysis of Philippine political science,and has been described as contributingto the "new generation of scholars onPhilippine politics." Many of the inter­views conducted and primary datagathered by the scholars from this schoolare out of reach to most researchers. Assophisticated and important as their

54

research is, however, these scholarscontribute to two very important prevail­ing problems. Firstly, they tend to 'orient­alize' or construct an 'other' inextricablydifferent from themselves. As a result, asecond problem arises, which is thetendency to blame many of the structuralfaults on the actors themselves ratherthan the structural problems that under­lie many of these prevailing issues. In theprocess, knowingly or unknowingly, theirresearch then tends to mask some of thenegative implications of the capitalistsystem. According to Hutchcroft,

In conclusion, it is interesting to notethat both the World Bank and the IMFandtheir strongest critics hadonethingin common: they did not fullyappreciate the deeply familial basis ofthe political economy, and as a resulttheir analysis went astray...it is thefamilial structure that undermined theintent of reforms and ensured that thebanks neither took advantage of theirnew power nor merged in anysystematic way (Hutchcraft1998:160).

As seen throughout the world, thepolicy recommendations of the IMF andthe World Bank has failed miserably. Ifthis is the case, perhaps we need a hugecontingent of Yale scholars to interrogatethe 'internal' issues of every state inwhich these policy recommendationshave failed to justify their failure. Was itflawed kinship and utang na loobval ues that led to the problems of theprivatization campaigns of the FormerSoviet Union or the debt default of

IMF's star pupil Argentina in 2001?According to Thompson, in reference toHutchcroft's work,

Under Martial Law, several ministrieswere run by so-called technocratswhose expertise and integrity woninternational respect for the regime;however, the thesis that the tech­nocrats, in alliance with the Inter­national Monetary fund (IMF) and theWorld Bank, dominated policymakinghas been discredited (Hutchcroft1985:55).

Therefore, not only are the countriessuffering under these policies to blame,the relationship between these policiesand this suffering is largely 'discredited.'Perhaps this new generation of scholarsare a 'web-like' society of cronies who

merely support and reproduce similararguments.

The purpose of this paper, therefore,was to illustrate how corruption playedan important role in perpetuating andexpanding the global capitalist system.Through the US colonial 'pol icy ofattraction' to the existence of a triplealliance, works such as those ofHutchcroft and Thompson, althoughimportant, help mystify the larger issuesand effectively place the blame forstructural problems such as poverty andstagnant growth rates on the victimsthemselves. Much like with every picture,both sides of the coin must be presented.If works such asthose of the 'patron-clientcronies' begin to dominate the literature,the only coin that will exist is the cointhat sits squarely in the capitalist'spocket.

55

NOTES

'The lowest branch of the governmentin Philippines

2http:Uwww.transparency.org/cpi/2002Icpi2002.en.html

3http://wwwuser.gwdg.de/- uwvw/corruption.cpi 2003 data.html

"See the preface of Mark Thompson'sThe Anti Marcos Struggle: PersonalisticRule and Democratic Transition in the

Philippines, pp. xi-xii.

"Ihis is particularly the case inMindanao, where many colonialadministrators were sent with the specificpurpose of understanding and document­ing the activities of the people they ruledover. See the works of Najeeb Saleebyand Edward Kuder. With regards to'nationalist' Filipinos, see the works ofTeodoro Agoncillo and RenatoConstantino.

6See juan j. l.inz, Sultanistic Regimes.

Baltimore, london: johns HopkinsUniversity Press, pp. 3-25.

'Cebu is an island located in thecentral region of the Philippines. It is inthe island grouping called the Visayas.This island served as an entrepot andcenter for trade and development in theregion south of Manila.

8See The Propaganda Movement:

1880-1895 by john N. Schumaker.

56

9See The Souls of Black Folk by W.E.Dubois or Black Skin White Masks byFranz Fanon.

10lt should be noted that this is ageneralized statement because in factthere was a diversity of opinion andresponse to the Spanish and US colonialrule. The role of the elite in resistancewas most strongly felt in luzon andcertai n regions of the Visayas but notnecessarily the whole archipelago. See"Resistance and Collaboration in theAmerican Empire" by Michael Hunt and"Filipino Resistance to AmericanOccupation: Batangas 1899-1902" bothin the November 1979 issue of PacificHistorical Review. Also look at "TheProvincial and Municipal Elites of luzonDuring the Revolution" by MilagrosGuerrero and "The Changing Nature ofthe Cebu Urban Elite in the 19th Century"by Michael Cullinane, both in PhilippineSocial History: Global Trade and LocalTransformations.

"This percentage is highly disputed.The damagehowever, is undeniable. Thedamage caused during this first phase ofAmerican colonization was dubbed "thefirst Vietnam war" by several scholars.

12See The u'S. Army and Counter­

Insurgency and Contingency OperationsDoctrine 1860-1941 by Andrew Birtle.

13"Benevolent Assimilation Procla­mation" by President William McKinley,December 21, 1898.

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