Martial law and the Philippine economy

Last week was the 48th anniversary of the declaration of martial law in the Philippines that lasted for 14 years. It ended with the ouster of Marcos in a People Power Revolution in 1986 that restored a democratic government, and installed Cory Aquino as the legitimately elected president. The social and political tales that happened during this stretch of Philippine history, including the personal accounts of many people are heroic, amazing and worthy of history and constant retelling. For this column, we will concentrate on the performance of the economy during these martial law years. The social, political and cultural aspects that we touch on are due to its impact on the economy. There are deliberate initiatives by some sectors to revise the facts and events during the Philippine martial law years, and it is just right to put the actual facts and figures in order, and put them in proper perspective.

Aside from the personal political motive of Marcos to stay in power beyond his two-term limit as president, the economic justification for declaring martial law was to promote faster economic progress through the discipline of martial law. From 1961 to 1964, the years before Marcos was first elected president, the Philippine annual economic growth as measured by the Gross Domestic Product (GDP) ranged from 3.55% to 7.06%. In 1964 in Asia, the Philippine economy was 2nd to Japan, much bigger than that of South Korea, Malaysia, Thailand, and Indonesia. From 1965 to 1972, in the first and second term of Marcos but before martial law, the economy was moving in the same trajectory with GDP growing annually in the 3.76% to 5.45% range. These growth rates were not spectacular but were also not bad as the world economy were still recovering from the WWII and the Korean Wars.

1973 to 1986 were the martial law years and the Philippine economic growth rates were erratic. The initial euphoria of a more disciplined economy that posted a high 8.92% growth in 1973 tumbled in 1974 to 3.56% , then from a high of 8.8% in 1976, it progressively decreased to 5% up to 1980, then to 3% to 2% up to 1983, then to a negative/minus 7.3% in 1984 and 1985, or two full years of recessions going into a full-blown depression. This was after the assassination of Ninoy Aquino. Then in 1986, the People Power Revolution deposed Marcos.

There were many causes/reasons for the behavior of the Philippine economy during the martial law years, some of them global and beyond the control of national governments, like the oil price increases and drop in commodity prices. But it is the task and responsibility of governments to minimize/mitigate the impact of these factors on their national economy. There were many competent and well-meaning technocrats during the Marcos regime but many drifted away as political pressure force decisions away from sensible economic policies. The excessive spending and fiscal deficit for the 1969 reelection led to a massive double-digit inflation and Balance of Payments problems. The government investments and projects were all funded by foreign borrowings and many were ill conceived, untimely, mismanaged and unproductive. Foreign debt ballooned to $29.4 billion in 1882 from $4.1 billion in 1975.

By this time, the social and political repressions were also increasingly sapping the economy. The confiscation/nationalization of the media companies, the utility companies and the control of the major sectors of the economy by designated cronies, dampened private sector investments and initiatives. The graft and corruption in the government, the extravagance and impunity led to capital flight to other countries that even included the relatives and cronies of Marcos. This hopelessness led to the Revolution. This is the short story of the Philippine economy during martial law, and it was not a rose garden.