Why We Are Poor and On Endless Crisis: A Theory To Ponder

The roots of crisis: A neo-colonial state preserved as a raw material economy by the geopolitical requirements of U.S. post-war imperialism; and what is to be done.

By: Alejandro Lichauco
Paper prepared for delivery before the Pilgrims for Peace scheduled October 27, 2004, Quezon City.

Introductory

Any attempt to understand the essence and roots of the nation's crisis must begin with recognition of the nature of the Philippine state. The Philippines isn't - and one must stress that - a sovereign, independent state that it is assumed to be and which its constitution claims it is.

A neocolonial state

The Philippines is a neocolonial state - which, by definition, means a state that is sovereign and independent in theory but which in fact is the colony of another, or of others. As a people, we are the classic victim of what Webster's New World Dictionary calls neocolonialism and which it defines as "the exploitation of a supposedly independent nation as by imposing a puppet government."

This has been so from the day and moment that we assumed the status of sovereign nationhood in 1946. That sovereign nationhood was pure fiction. It was pure fiction because the colonial power which supposedly returned to us the independence which it had wrested from Bonifacio's revolution never really left and never really allowed us to exist and act as a free and sovereign people.

The process by which we have been preserved as a neocolony is a story of its own, and neither time nor space allows that I deal with it in detail. It should suffice to focus on the essentials of that process. We have been preserved as a neocolonial state through the flagrant and systematic intervention of the U.S. government in our political process and in the creation of a collaborator class.

Neocolonialist intervention, of course, hasn't been confined to the political process. You see and feel the hand of that intervention in just about every aspect of Philippine society and the political economy. You see and feel it not only in government and politics but in the business community, in our schools, civil society, media and even the churches.

But the intervention has been most crucial and fatal at the level of our presidential politics. As the late and former President Diosdado Macapagal admitted in an article he wrote for the Bulletin a few years before he passed away, the U.S. government has been a decisive factor in every presidential election since 1935, and no presidential aspirant objectionable to Washington has ever been elected president. By the same token, any sitting president who manages to displease Washington invariably winds up unseated by Washington. That has been generally the fate of all incumbent presidents. They were mounted to office by Washington and eventually unseated by Washington.

That's how puppet governments are mounted and that's essentially how we have been preserved as a neocolonial state.

But that's for another paper. At the moment we are focused on the economic crisis.

The fiscal crisis as a diversionary issue

The fiscal crisis, which you invited me to discuss, is in truth only one of the many facets of the economic crisis that grips the nation. There is the crisis of the peso, the crisis of unemployment and inflation; there is the crisis of the industrial and agricultural sectors, and there is the overall crisis of underdevelopment and poverty.

There is the crisis of the very economic system by which we have lived all these years.

To be lured into a discussion of the fiscal crisis therefore is to be lured away from a discussion of the totality of the crisis and the nature as well as the root of that crisis. And that I suggest to you is exactly what the enemies of the state intend. They intend to lure us away from an examination of the total crisis and to trivialize that crisis by luring us into a discussion of what they call the "fiscal-debt crisis."

But it is the essence and root of the total economic crisis that we should focus on.

The economic crisis as the crisis of a neocolonial state

If we have a total economic crisis in our hands - a crisis whose most visible and terrifying manifestation is the mass hunger, and not only the mass poverty, that now grips the land and which government itself has acknowledged - it is because in this post-industrial age, we remain a nation of 80 million mired in the pre-industrial stage of history.

The question is: Why have we remained stuck in the pre-industrial age of history when neighbors once more impoverished and backward than we are have either graduated, or are dramatically in the process of graduating, into the age of science and industry?

And the answer is that it has been planned that way.

From the beginning, it was planned in Washington that the Philippines shall remain essentially a raw material economy in order to service the raw material requirements of an industrial Japan.

The Dodds Report and the origin of the Philippine crisis

In 1946, the Truman administration adopted the recommendation of the report which proposed that Japan be developed as the primary, if not sole, industrial powerhouse in the Asia-Pacific region and that countries like the Philippines should be preserved as raw material economies, obviously to service the requirements of Japan's factories. As the Asia-Pacific war came to a close, the U.S. obviously made a fateful decision to utilize Japan as the base from which to project U.S. military power, and that required the development of Japan as an industrial powerhouse. But since Japan is a nation bereft of natural resource, the plan obviously required that countries like the Philippines be preserved as raw material economics to ensure Japan with a continuing and permanent source of raw material.

We owe our knowledge of the Dodds Report to the late Salvador Araneta who, during his self-exile in Canada during the martial law years, uncovered the existence of the document and denounced it in his book America's Double? Cross of the Philippines.

These were Araneta's denunciatory words, as he explained the failure of the nation to industrialize: "The indifferent economic development of the country ... was due to America's policy toward Japan and the Philippines. This policy was the result of the Dodds Report which Truman accepted and which had as its objective to make Japan the industrial workshop of Asia and the Philippines a mere supplier of raw materials."

As Araneta bitterly continued: "We do not argue against the wisdom of providing Japan with the means to rehabilitate herself and allowed to become an industrial country once again, although this was contrary to the prior recommendation of a post-war planning committee headed by Secretary Morganthau, a recommendation which was in line with the prevailing sentiment at the end of the war. But certainly we can argue against a policy that would make Japan the exclusive industrialized country in the Far East, for such a policy was most detrimental to the Philippines. Indeed, the United States could not justify a policy that provided all kinds of stumbling blocks, to the industrialization of her ally (Philippines) in the war against Japan. As a result of this policy, industrialization in the Philippines suffered severe setbacks…”

It was a division of labor, or of functions, which the Dodds, Report crafted for America's allies in the Far East.

The Dodds Report explains the continuing obsession to this day of U.S. foreign policy to keep the Philippines a free and open market for imports because a liberal import policy - another name for free trade - ensures that this country will never be able to industrialize and take the same protectionist, nationalistic developmental strategy that enabled once poorer neighbors like Taiwan, Malaysia and Thailand, to transform into the newly industrialized countries that they are today.

The geopolitical plan embodied in the Dodds Report explains what the late Claro M. Recto described as "America's anti? industrialization policy for the Philippines."

Although Recto had no knowledge of the existence of the Dodds Report at the time - its existence would surface only in the '70s after Araneta exposed it - his enormous analytical power enabled him to deduce from policy statements of U.S. officials that behind U.S. policy in this country was a malevolent design to see to it that we never industrialize.

Conclusive proof of what Recto described as America's "anti-industrialization policy for the Philippines" came when Marcos formally launched an industrialization program in the late ‘70s based on 11 heavy industries led by the steel, petrochemical and engineering industries. The announcement of that plan was swiftly followed by protest from the IMF and the World Bank and the pro-American technocrats in the Marcos cabinet led by no less than his then Prime Minister. In the end, after four years of struggle with the IMF, the World Bank and his own technocrats over his industrialization plan, Marcos gave up the plan but not until after he had expressly denounced a conspiracy between his own technocrats and the IMF-WB to keep the Philippines under the heels of the industrial powers.

Soon after his election to the presidency, Joseph Estrada in an interview with Asiaweek confirmed that the U.S. has indeed sabotaged the industrialization plan of Marcos.

The U.S. anti-industrialization policy for the Philippines is what those IMF conditionalities are really about. The anti-industrialization policy has been implemented all these years through the IMF conditionalities and it isn't any coincidence that for the last forty years this country has been under the continuous economic supervision of the IMF.

There is no country in the world that can claim to be under the supervision of the IMF for even a fraction of that time. And it isn't coincidence either that this country, which has been under the continuous supervision of the IMF for 40 years, is the only country in the region that isn't making any headway toward industrialization.

When the Asean was founded in the early 160s by the Philippines, Malaysia, Thailand, Indonesia and Singapore, not a single one of them was an NIC. Today, only the Philippines remains outside the magic circle of NICs. The four other co-founders of the Asean are now acknowledged NICs.

That should explain why the Philippines has the longest and oldest communist insurgency in the region.

A nation of 80 million without even the capability to produce a decent hammer or a decent toy gun can't possibly have any future except hunger.

We are today a hungry people in a land so fertile that one can drop a seed anywhere and see it sprout into something he can eat. And we are hungry because we are a nation frozen by design in the pre-industrial age, preserved as a raw material economy.

The essence and root of our crisis, to stress, are to be found in the nature of the Philippines as a neocolonial state preserved by U.S. post-war imperialism as a raw material economy to service the raw material requirements of an industrial Japan.

The treason of the Edsa Constitution: Art. X1 1, sec. 1, par 2 and the constitutionalization of the formula for underdevelopment and poverty

The ultimate tragedy of a neocolonial state is that even its own Constitution becomes an instrument of its own and perpetual enslavement.

And the Philippine case is a classic illustration.

I invite your attention to Art. XII, Sec. 1, par. 2 of the Constitution which reads as follows: "The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices.”

That provision you will note automatically prohibits an industrial policy based on the heavy industries and the application of protectionist measures against foreign competition, whether fair or unfair. While the provision stipulates that the "State shall promote industrialization" it simultaneously qualifies that constitutional directive with an entire complex of conditions and limiting reservations which makes it impossible for the State to adopt any industrialization strategy other than one that is specifically and exclusively based on "sound agricultural development and agrarian reform" whatever that means. For example, the provision literally prohibits an industrialization strategy based on the heavy industries, like steel, chemicals, machine tools and machine production.

But that's precisely the kind of strategy that made NICS of our neighbors. Our neighbors - particularly South Korea and Taiwan - didn't transform into newly industrialized countries through the industrialization strategy explicitly mandated by the above-cited provision of our Constitution. Those countries, imitating Japan, pursued an industrialization strategy anchored on the development of industries based on and moved by machine power rather than on "sound agricultural development and agrarian reform."

A real industrialization program is one that is based on what is known as the capital goods industry - industries based on machine power and the production of what is known as the means of production. Any other industrialization program can only be a program based on light consumer industries that are totally dependent on industrial raw material and industrial machines produced by the industrialized countries.

You will further note that the constitutional provision insists that industries should be competitive in both the domestic and foreign markets. With that provision, there is hardly any industry that can qualify for government support and protection, and that is precisely what the provision intends. That provision serves as justification for our reckless entry into GATT and the equally reckless accelerated tariff reduction program of the government - programs which have contributed heavily to the bankruptcy of National Steel Corporation, the closure of Caltex refinery and the financial problems of an enterprise like Hacienda Luisita, all of whom have attributed their crisis to the flood of imports unleashed by the government's commitments to the WTO.

No country rose from rags to riches through industrialization by exposing its industries to foreign competition the way we have done.

Examine the industrial policies of the Asian NICs and you will see how protective those policies are of their basic industries, even if these are not competitive in the foreign markets. While the constitutional provision does provide that the State shall protect Filipino enterprises against unfair foreign competition, it doesn't define what unfair foreign competition means. For example, we have exposed our agricultural sector to competition from subsidized agricultural imports, but the authorities don't consider that a contravention of the Constitution. The result is that even the agricultural sector has been marginalized. Apparently, the authorities see nothing wrong with pitting our farmers, most of whom hardly made it to sixth grade, with the corporate farmers of the industrial countries, who do their farming with the aid of satellites.

The authorities must be reminded that any underdeveloped economy struggling to industrialize would have to protect its basic industries from foreign competition, whether fair or unfair. To insist that even infant industries should be competitive in the foreign markets would be tantamount to killing these infant industries from the start.

he question is: Why did the authors of the present Constitution feel it necessary to qualify the industrialization mandate with the kind of restrictions they placed on it?

And the answer is that the authors of the cited provision were the very elements who had opposed the heavy industrialization program launched by Ferdinand Marcos in 1979. The Marcos industrial program was based the establishment of industries driven by machine power and not - repeat, not - by "sound agricultural development and agrarian reform" as stipulated by the present Constitution.

In brief, no less than the Constitution has become the barrier to the real industrialization of our economy. Under the "industrialization" provision of the Charter there isn't any way that this country can transform into a newly industrialized country or NIC.

Which means that there isn't any way we can get out of the poverty trap which has now mutated into a hunger crisis.

ARTICLE XII, SEC. I PAR. 2 OF THE CONSTITUTION IS THE BEST EVIDENCE OF OUR STATUS AS NEOCOLONIAL STATE. IT IS ALSO THE ULTIMATE WEAPON WHICH ENSURES THAT THE ANTI-INDUSTRIALIZATION AGENDA OF THE DODDS REPORT WILL REMAIN UNCHALLENGED BY ANY GOVERNMENT ELECTED UNDER THE PRESENT CHARTER.

If by some miracle we should have a government tomorrow bent on industrializing the economy by adopting the same industrial policies that have made industrialized countries of our neighbors, such a government would run afoul of the Constitution.

WHAT THEN IS TO BE DONE?

Complete the unfinished nationalist revolution of Bonifacio. What needs to be done is clearly to forge a national coalition of forces committed to recovering the sovereignty which American imperialism wrested from Bonifacio's revolution and to transform the Philippines from the neocolonial state that it is to the truly sovereign and independent state that it claims to be and should be.

Only when the Philippines becomes a truly sovereign and independent state can it then proceed to pursue the kind of developmental policies necessary to lift the economy out of the pre-industrial age of history and to catapult it to the ranks of newly industrialized countries.

Three processes that should be unleashed if social peace is to be achieved. Such a coalition could be forged on the basis of a program that would unleash three vital processes, namely: The process of decolonization, the process of industrialization and the process of economic democratization.

Only when these three processes are unleashed simultaneously, through a program of government crafted specifically for that purpose, can the nation begin the journey towards social peace. The reason is that social peace can only come with social justice and economic democracy.

But social justice and economic democracy can come about only if there is economic development, and economic development can come about only with an industrial revolution which in turn can come about only with national independence. I propose accordingly that no time be lost organizing a national coalition based on a program that would unleash the three processes of de-colonization, industrialization and economic democratization.

In 1986, I proposed such a program to the then ongoing Constitutional Commission - which that body completely ignored. I now propose that that program be adopted as a working basis of dialogue among all elements in Philippine society determined to transform the Philippines into a truly sovereign and independent state so that it may proceed with the war on mass poverty and thereby pave the way for the much longed social peace which has long eluded us. That program is embodied in a slim volume I authored titled Towards a New Economic Order and the Conquest of Mass Poverty, and which I incorporate by reference in this paper. That program, incidentally, is a synthesis of the basic principles found in the program of the Movement for the Advancement of Nationalism and the Vatican encyclicals which condemn laissez-faire capitalism and justify on moral grounds the principle of state activism in the economy.

Along with the program outlined in Towards a New Economic Order and the Conquest of Mass Poverty, I recommend the adoption, as a working basis of dialogue, an emergency program of government proposed by the Citizens Committee on the National Crisis last January, which I also incorporate by way of reference.

We must complete Bonifacio's unfinished revolution if we are to face up to the crisis that has made this only Christian nation in Asia a humanitarian disaster, where 80 percent of Filipino households live under hunger conditions.

The imperatives of national survival and the revolution against hunger which has now overtaken us call for nothing less than the revolutionary nationalism which forged Filipinos into one nation.

Only when the country commits itself to a program of government that would unleash the three processes of de-colonization, industrialization and economic democratization can it begin the march toward social peace because only a government committed to the unleashing of those three processes would have the credibility to deal with the insurgents and the secessionists. That is one way of saying that the road to social peace begins with the struggle to regain the sovereignty and independence which U.S. imperialism stole from Bonifacio's revolution.

That sovereignty and independence should be recovered at all cost if we are to survive as a viable society.

One final and concluding note: Debt repudiation

There isn't any way we can proceed to retrieve our sovereignty and independence unless we first repudiate the foreign debt. The repudiation of that debt should be the starting point of any genuine effort at national independence and sovereignty.

I have written the Senate a letter-memorandum outlining the case for unconditional debt repudiation and I incorporate that letter-memorandum to this paper by way of reference. I suggest that the Pilgrims for Peace initiate a signature campaign urging the Senate to adopt the letter-memorandum for debt repudiation.

Such a campaign could well serve as the catalyst for a nationwide coalition that would complete the unfinished revolution.

The principal contradiction

The contradiction between colonialism and nationalism remains the principal contradiction of Philippine society. To the resolution of that contradiction all other contradictions should be subordinated. The road to peace starts with that. It starts with the drive to eliminate colonialism in all its forms and from whatever source.

Recto, the consummate Filipino nationalist and Mao, the consummate Chinese Communist, will shake hands on that.