8/14/2019 Philippines and the Race to the Bottom
1/15
Philippines and the WorldBank
The race to the bottom
8/14/2019 Philippines and the Race to the Bottom
2/15
1968 ......Marcos won his 2nd term in office but atthe cost of the nations foreign
exchange, the country is on the verge ofeconomic collapse. Marcos approachesthe World Bank for help.
8/14/2019 Philippines and the Race to the Bottom
3/15
World Bank demands60 % Devaluation of the peso
Liberalization of the Philippine MarketExport Processing Zones (EPZ)
Weaker Labor Laws (lower wages)
8/14/2019 Philippines and the Race to the Bottom
4/15
Devaluation of the PesoThe prime motivation is to make Philippine Goods globallycompetitive.
The actual result was hundreds of entrepreneurs whorequired importation of raw materials and equipment wherethrown into bankruptcy overnight.
8/14/2019 Philippines and the Race to the Bottom
5/15
LiberalizationLiberalization basically means free market, noprotectionism , reducing the size of regulation bodies andelimination of any barriers. (laisse-fair economics)
Its highly unusual for a country to develop successfullywithout some degree of protectionism
The United States itself did not practice Liberalization whenit was a small country
8/14/2019 Philippines and the Race to the Bottom
6/15
EPZsJust like the taiwan models
Actual effect : the Bataan EPZ costed the Philippines$150M
Due to special regulations the government lost more moneyas the EPZs operated
Basically the Philippines was forced to build infrastructure toloan, but to build these infrastructure we had to loan first.
8/14/2019 Philippines and the Race to the Bottom
7/15
8/14/2019 Philippines and the Race to the Bottom
8/15
It was a very nice arrangement forthe richer countries, because they
have all these poor countriesdesperately competing with eachother to see who can produce goods
most cheaply.
8/14/2019 Philippines and the Race to the Bottom
9/15
Martial Law The American Chamber of Commerce wishesyou every success in your endeavor to restorepeace and order, business confidence and
economic growth... We assure you of ourconfidence and cooperation ... We arecommunicating the feelings of our associates andaffiliates in the United States
-Telegram
The World Bank funneled $2.6B to 61 Marcos Projects
8/14/2019 Philippines and the Race to the Bottom
10/15
10% GNP growth to the crash
1973, saw the Philippines hard work could have paid offfroma $120M deficit in Agriculture to a $270M surplus. $55Million in foreign investments
1980-1981 : Australia, Canada, Europe , Japan and theUnited States set-up trade barriers against the Philippines
The World Bank just watched as the country fell into ruins.
8/14/2019 Philippines and the Race to the Bottom
11/15
8/14/2019 Philippines and the Race to the Bottom
12/15
Rural Poverty Unrest Reduction
The world bank forced farmers to adopt expensivemechanization.
The ones who truly benefited are the large landlords andcommercial farmers not the small farmers that make thebulk of the rural population
8/14/2019 Philippines and the Race to the Bottom
13/15
8/14/2019 Philippines and the Race to the Bottom
14/15
$11 B Heavy IndustriesIf the Philippines developed its own industrial base, thecountry would no longer be such a good customer for the
multinationals. What finally brought the demise of theprojects (heavy industries) was the cold shoulder given byprospective financiers who had learned of the Banks veto
8/14/2019 Philippines and the Race to the Bottom
15/15
Effects of the World Bank relationship
OFW dependent economy
Mini-Size Me
90% of budget goes to debt servicing
Privatization (Meralco, Water Services, Philippine Airlines
etc)Way behind compared to our counter-parts.