The economic ruins of martial law

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eagle-watchTHE persisting agony faced by President Ferdinand E. Marcos during martial law was the legitimacy of his brutal and corrupt regime. In the process, a number of legal measures were established, including the formation of local community units, later called barangays, which became the venue of the ratification of his self-serving 1972 Philippine Constitution. However, as Marcos very well knew, the only justification for the imposition of martial law was the success of the economy. Indeed, he was trading off basic human rights for economic gains in order to justify his hold on power.

For instance, in the labor sector, Marcos decreed the “restructuring” of all unions on an industry-specific basis, and then affiliated these to a single national trade-union confederation. Consequently, the martial-law regime prohibited strikes in so-called vital industries, such as public utilities, transportation, communication, oil refining and distribution, banking, hospitals, schools, and vaguely defined “companies engaged in the production or processing of essential commodities for export.” In November 1975 Marcos decided to pursue further the emasculation of labor unions by preventing strikes altogether “during the period of national emergency.”

In agriculture, a massive distribution of government funds for agricultural credit (a program called Masagana 99) was established to promote the planting of high-yielding rice varieties and to support land reform by providing substitutes for landlord-credit sources. More than P1 billion in loans had been disbursed by the end of 1974 through rural banks and the Philippine National Bank. But, despite some initial success, the program failed due to a rapid rise in delinquent borrowers. This was attributed to an inability to pay on the part of many farmers and some resistance on the part of others, compounded by inefficient and sometimes dishonest administration. By 1976 the nonrepayment had become so serious as to threaten the stability of nearly half of the rural banks. In the end, the courts, the police and the military were used with to coerce and force farmers to pay.

Despite all of the posturing on discipline and strong leadership, the Marcos era was an economic failure. The Philippines, during the period, became one of the heaviest borrower-countries in the world. Much of the money was spent on pump-priming to improve infrastructure and promote tourism. Yet, the Philippines lagged behind its Southeast Asian counterparts in gross domestic product growth- rate per capita. While the country, from 1970 to 1980, registered an average 3.4-percent growth; Thailand, Malaysia, Singapore and Indonesia recorded higher growth rates with a mean of 5.4 percent. Even with its lack of discipline and limited “powers,” administrations after martial law clearly registered better economic performances. The current Aquino administration, for one, has managed one of the highest growth rates in Asia today at roughly 6 percent.

Furthermore, the unemployment rate rose from 5.2 percent to 5.9 percent from 1978 to 1983, while underemployment was an even larger problem, tripling, in the same time period, from 10.2 percent to 29.0 percent. With a greater labor force, the country today has an unemployment rate of around 7 percent, but the quality of jobs is better, with underemployment down to 18 percent.

The transition to a centralized government with the imposition of martial law in 1972 made it easier for the government to spend for capital outlays using foreign money. During this period, foreign borrowing was the main mode of financing public investment. Because of this, the decade of the 1970s was described as the period of “debt-driven growth.” The debts were not only derived from multilateral sources but, starting in the middle of the decade, from foreign banks awash with “petrodollars” incurred not only by central government, but also public and private corporations run by people close to Marcos.

With the increasing debts, more funds were placed in low-productivity investment and “white elephants,” as limited structural transformation took place. In the 1970s one sees an inconsistent implementation of an outward-looking strategy, combining export promotion with the protection of economic sectors run by Marcos associates. In fact, cronies close to the Marcos regime obtained significant incentives and favors but were not subject to any sort of discipline and threat of punishment. Thus, income inequality grew during the era of martial law, as the poorest 60 percent of the nation were able to receive only 22.5 percent of the income in 1980, down from 25.0 percent in 1970. The richest 10 percent, meanwhile, took a larger share of the income at 41.7 percent in 1980, up from 37.1 percent in 1970.

The common thread underlying the policies on agriculture, labor and finance is the false belief that individual welfare can be sacrificed in favor of what Marcos saw was the social good, i.e., the economy. The trampling of human rights in the political arena was very consistent with this economic strategy. As evidenced in the martial-law period, such a strategy is not sustainable and is clearly just a camouflage to the widespread looting that occurred at the top.

Of course, it is more than just economics. The psychological trauma of the families who suffered under martial law continues to this day, and people associated with Marcos or adhere to his principles remain in power. As we struggle to mold and nourish our democracy, we should continue to speak for the truth about martial law that harshly snatched democracy away from us. As we progress, we must remember the men and women who offered their lives so that we can recover it. In this way, we can actively censure these criminal transgressions committed purportedly in the name of economic prosperity. We can then truthfully commit to protect the rights and interests of the individual.