The Politics of Income Distribution in the Philippines

SOUTHEAST ASIA SERIES Vol. XXV No. 8 (Philippines)

THE POLITICS OF INCOME DISTRIBUTION IN THE PHILIPPINES

by Brewster Grace

August 1977

Introduction The critical issue in the Philippines today is This paper is an effort to assess in very general whether President Ferdinand Marcos, ruling by terms the extent to which the inequalities are being decree since martial law was declared in 1972, can reduced by current government programs and promote a dynamic development of the national policies and to what extent resistance to redistribu- economy while reducing severe economic and social tion of wealth and opportunity may provoke crises inequalities and allowing institutions which foster that are likely to be met with increasing repression. broad-based participation in national politics. For even with absolute political power, Marcos still requires general support from educated Filipinos in The Philippines in 1972 was on the brink of both public and private economic, social, and cul- anarchy. For two and a half decades, government tural spheres, and acquiescence, at least, from the by the traditional oligarchy which assumed power low income majority in villages, towns, and cities. at independence was virtually unchallenged and corruption permeated many important institutions ranging from Congress to local police forces. An Overview of the Economy Though dissatisfaction was widespread, there was little organized opposition to the oligarchs. The one The Philippines' single largest resource by far is revolutionary movement which appeared to be its people. With a population of 43 million in 1976 serious in the 1950s was weakened by factionalism and a reported annual growth rate of approxi- and succumbed lo military suppression. In the late mately 3.0 percent in 1970, there will be over 80 1960s and early 1970s, the activities and growth of million Filipinos by the year 2000. How to feed and a new radical movement, the Philippine Commu- employ these Filipinos is a problem of increasing nist Party's New People's Army, again posed a concern. To understand the problem, it is helpful threat to order and provided the justification for to view the basic patterns of economic production Marcos' retreat to authoritarianism. It, too, may and opportunity in the archipelago. now be under control.

In exchange for full power, Marcos has promised Agriculture, fishing, and forestry combined the Philippines economic growth and social and accounted for 33 percent of the Philippines' Gross political change, a "new society." But many Fili- Domestic Product (GDP) of 479,000 million in pinos bemoan the formal abandonment of demo- 1974.2 Rice normally accounts for 17 percent of the cratic processes-which had never favored the agricultural contribution and is the single most majority poor in any case but which had allowed valuable food crop, followed by corn. Over the past the burgeoning Philippine middle class ample ten years rice production has increased substan- opportunity to participate in politics. Middle tially and very recently has begun to meet domestic income groups now question whether martial law needs. In 1967, 2.8 million metric tons of milled under Marcos and the loss of basic civil rights are rice were produced and 2.92 thousand metric tons being sufficiently compensated by economic and imported. In 1976, estimates indicate that domestic social restructuring to reduce inequalities and production increased to 3.98 million metric tons promote development. and virtual self-sufficiency. In the late 1960s and

Copyright @ 1977, American Universities Field Staff, Inc. early 1970s much of this increase resulted from Timber is also included under agriculture in the widespread cultivation of new, high-yielding vari- National Economic Development Authority's eties, rather than added hectarage. In 1967, statistical reporting, and it deserves special consid- farmers planted 3.3 million hectares, in 1972 crop eration. Officially, 57 percent of the Philippines is year only 3.1 million hectares, then 3.7 million in "public forest land"; 30 percent is "productive 1975. forest" and therefore open to timber concessions. Throughout the 1973-1975 recession logs and The 1972 harvest was disastrous, however, as a timber products have been especially hard hit: result of serious typhoon flooding. Subsequently exports fell from US$415 million in 1973, most of it the government began in 1974 an extensive credit in the form of raw timber, to US$150 million in program to small farmers known as "Masagana 1975. In an effort to improve prices and promote 99." The government credits the program for the local timber processing industries, the Philippine recent production increases, and it has un- government reduced exports of unprocessed timber doubtedly contributed. As Masagana 99 reached to 25 percent of allowable cut. The strategy seems more farmers in 1975 and 1976, rice hectarage to have had only marginal success, however, be- increased 6 percent while production increased 12 cause most timber processing industries had inade- percent. quate processing facilities for responding to the increased international demand for timber The achievement is a crucial one for the nation's products. future: the Philippines has proved its capacity to achieve self-sufficiency for the present, and, Overall, Philippine agriculture has done well barring natural or national disasters and prohibi- during the past ten years. Yet, the sugar crisis has tive increases in farm costs, for the future will not had a far-reaching impact on the entire economy need to spend precious foreign exchange on rice because of the Philippines' enormous foreign debt. imports. Minerals contribute only 3 percent to national production, although copper merits special atten- This foreign exchange savings has become in- tion because it represents two-thirds of mineral creasingly precious as the price of sugar, the production by value. But sales have been radically Philippines' most valuable export crop, has taken a reduced by environmental pressures on smelting nose dive on the international market. In recent and the recession's impact in Japan, which buys years production has been high and made up 10 more than 80 percent of the Philippines' copper. In percent by value of agriculture's contribution to 1974, Japan's copper purchases amounted to GDP. In 1973, it earned the Philippines US785 US361 million, but only US176 in 1975. million at a price of US$.65 a pound. Today, the world price is nearer $.I0 and production is being Much of the modern industry in the Philippines cut back as much as 30 percent, possibly more. is based on processing of raw materials. Food Some recovery can be expected, but for the processing accounts for almost a third of total in- moment, the Philippine sugar economy is in dustrial production, followed by chemicals and trouble. petrochemicals. Almost all raw materials for the Other export crops, such as bananas and latter are imported since the Philippines has not yet coconuts, have fared better during the recession. been able to exploit any of its petroleum or gas Over 90 percent of Philippine banana production is reserves. In all, industry represented 25 percent of sold to Japan. Growth in the pesos value of banana GDP in 1974. production to meet the Japanese market has been phenomenal: from approximately US$22 million in The next two largest contributors to GDP are 1968 to US152 million in 1974. This now repre- services and commerce, accounting for 13 and 16 sents 2 percent of total agricultural production. percent respectively. Should the Philippines' efforts Coconut prices have been steadier over the same to promote tourism succeed, these two sectors will period. The Philippines' exports represent two- probably expand more rapidly. thirds of the world's copra and 70 percent of the world's coconut oil. The value of this production In 1976 the Philippines attracted 600,000 has grown considerably from 91,646 million in tourists-approximately the same number that 1973 to93,704 in 1974. arrived in Japan in 1963 and in Singapore in 1971. Promotional efforts target the Japanese first, then being share tenants who paid up to 50 percent of overseas Filipinos and others. Prior to 1975 tourist the value of their crops as rent-after deducting authorities reported only 3,500 first-class hotel harvesting and threshing costs. These high rents beds in Manila. Now there are nearly 10,000 (and a have been matched by high interest rates for in- thousand times as many fears that they will never formal credit. In 1971, for example, share tenants be filled). But if the Singapore experience is rele- received 45 percent of their loans from their land- vant, they will be; and tourism will become one of lords or from private moneylenders at an average of the most important service industries in the Philip- 30 to 40 percent interest per year. The Dcpart- pines. An enormous investment has been made and ment of Agrarian Reform estimates that in 1976 now needs effective promotion. With Hawaii tenant farmers made up about one-sixth of the saturated, Guam in decline, and Thailand polit- agricultural work force in the Philippines. Along ically insecure, the Philippines, with its martial law with landless laborers and plantation workers, they and low prices, offers the security and bargains that represent the single most important group of poor most tourists seek. in the country.

In sum, economic growth in the Philippines has Income statistics from Nueva Ecija, in Luzon, been respectable by world standards, especially lend perspective. Nueva Ecija enjoys optimal con- during the "recession years" between 1973 and ditions for rice cultivation and is a major rice- 1975. The average annual rate of real growth over growing province. Yet its share tenants have the the past ten years has been over 6 percent: the lowest average income per household (see Table I). lowest was 4.5 percent in 1972, and the highest 9.8 Tenant incomes can be presumed to be lower in percent in 1974. other regions of the country. (Information on the number of sharecroppers or wage laborers in Nueva Distribution of Income--Low Income Groups Ecija is not available.) The Philippines has traditionally been an agri- The 10 percent of the labor force living from cultural society, but employment in the agricultural agricultural wages, fishing, and coconut produc- sector is declining as a proportion of the total. In tion, may be among the poorest of the poor, 1960, 61.2 percent of employment was in agricul- although not the largest group of poor. The mini- ture, in 1971 only 50.4 percent. In 1971, most mum farm wage as of 1970 was 94.75 per day; but working Filipinos derived their cash income either even government officials observe that compliance as farmers (35.4%)) agricultural wage earners is erratic and difficult to enforce. Sugar plantation (10.7%), or fishermen (4.3%). During the same time workers are reported to earn as little as92 per day period commerce and services increased their share since the recent collapse of the international sugar of the labor force from 8.8 to 12.4 percent and 11.5 market. The vast majority of this 10 percent are to 17.2 percent. Employment in manufacturing, on sugar plantation workers in the western Visayas the other hand, decreased from 12.1 to 11.5 and parts of Luzon and coconut farmers percent. throughout the country. In the sugar regions vast estates are still intact and employ seasonally at Philippine rice farmers, at least until very least 500,000 workers. The recent collapse of the recently, have achieved relatively low yields. international market price, as noted above, has Average yields in the Philippines in 1970 were 1.72 resulted in the partial layoff of approximately tons per hectare, compared with 2.14 in Indonesia 175,000 workers.4 and 5.64 in Japan. Increased use of modern technology-especially irrigation-has markedly im- Statistically, the severest poverty in the Philip- proved yields among adopters, but productivity- pines is in western Visayas-primarily the islands for corn as well as rice-still ranks among the of Panay and Negros-where 13 percent of all fam- lowest in Asia. Some of this relatively low yield can ilies earn less than 9500 per year and 19 percent be accounted for by the substantial percentage of earn between 9500 and 2999.5 In Luzon, where rainfed upland rice lands. rice cultivation predominates, 5.5 percent of the In 1960, 40 percent of rice farmers and 50 families have incomes of less than 2500 and 18.8 percent of corn farmers were tenants, the majority percent receive between 9500 and 2999 per year. TABLE I

Average Household Income in Pesos, by Crop, Season, and Income Group (Nueva Ecija, Crop Year 1972-73)

Mean gross income per hectare (in pesos) from palay production, by crop semester and tenure group (Nueva Ecija, Crop Years 1969 to 1971)

Crop Owners Lessees Share Semester Tenants January-June 1971

January-June 1970

July-December 1971

July-December 1970

July-December 1969

Source: Integrated Agricultural Survey of June 1970, January and June 1971, and January 1972, Bureau of Agri- cultural Economics.

As given in Mangahas, Miralao, and de 10s Reyes, Tenants, Lessees, 0 wners: Welfare Implications of Tenure Change. (Alteneo de Manila University Press,Quezon City, 1976), p. 115.

The economic situation of new settlers in the mainder relocated on their own initiative, often northern regions of Luzon and the southern island without title to the land. An unknown number, of Mindanao lies somewhere between plantation perhaps several hundred thousand, have migrated workers and traditional rice farmers. Since the to these regions and have "unofficially" settled on mid-1950s the government has attempted to traditional tribal lands as squatters. resettle tenant farmers from saturated regions of Luzon and the Visayas on relatively uncultivated lands in these far northern and southern regions. Why has resettlement failed so far to improve By 1973, 44,000 people had settled on government opportunities for increasing settler incomes? First, reserved land. However, only 9.500 of these were the policy was conceived chiefly as a means of re- officially resettled by the government;6 the re- lieving tenancy problems in Luzon, and insufficient attention was given to aiding the settlers. (Some consequence, it appears, of the capital-intensive noticeable exceptions have been where private nature of the Philippine industrial growth in the Christian organizations have assisted individual 1950s and 1960s. settlers' communities.) Second, conflicting economic interests have complicated conditions in the Most of the percentage growth in employment in resettlement areas. Conditions in Mindanao are services, transport, and commerce points to illustrative of the types of problems settlers increasing under- and unemployment, particularly confront. Legal title, for example, had been secured in urban areas. Unable to find jobs in agriculture for only 4 percent of settler holdings as of 1974. and industry, work-age Filipinos have joined a Irrigation-the key to rice productivity in Min- growing labor force of self-employed street vendors danao-is available on only 2 percent of resettle- and scavengers. The problem is also reflected in the ment lands. Finally, large-scale agribusinesses, increasing number of squatters in Manila over the such as banana and coffee plantations, have past 20 years. Estimates of the number of squatters expanded in the resettlement areas, especially in range from one-quarter to one-third of all house- central Mindanao. Without clear title, many holds. Physical conditions are visibly bad. Perhaps settlers lost land claims based on usage and became half of the squatters earn less than the minimum plantation laborers. The numbers affected are wage.8 unknown, yet the process seemed common in the late 1960s and it may have intensified under In recent years, inflation has ravaged wages martial law and Marcos' promotion of corporate despite increases in the minimum rate. Wage rates farming. Of course, the extent to which the overall for skilled and unskilled laborers in Manila economic welfare of the small farmer is improved increased about 20 percent between 1973 and 1976, or worsened in the shift to plantation worker is yet real wage rates actually decreased by more than debatable, but many farmers have attempted to 25 percent in the same period. Obviously, resist. minimum wages do not apply to self-employed workers; where they do apply, they are hard to Resettlement has run into other problems as enforce. well. The cultural minorities who lived in relative isolation in the far north of Luzon and in southern It is impossible to state precisely the degree of and western Mindanao have resented the intruder. unemployment and underemployment. According While tensions have surfaced in both areas, the to official government statistics, 10.8 percent of the "Christian" settlement in Muslim areas of urban work force is looking for jobs (as opposed to southern Mindanao has led to violent, armed revolt 4 percent in rural areas). ILO and others suggest and demands for local autonomy and protection of that 25 percent of the population is without "suf- land rights by Muslims. ficient" work (presumably to meet basic consump- tion needs). In any event, the statistics appear to err Since 1960 the national work force has been in favor of underreporting of unemployment. The growing at a rate of 2.6 percent a year overall, but countryside, to seasoned observers, gives the only 1 percent in agriculture. On the other hand, 77 impression of serious under- and unemployment. percent of the population is classified as rural. This means that currently there are some 500,000 new The data on employment are weak and subject to job seekers each year, most of them ruralites, and different interpretations. But together with statis- only about 77,000 are being absorbed in the agri- tics on changes in income distribution in both rural cultural sector. The remainder, it appears, are and urban areas, they indicate that inequalities are entering urban sectors, as Table I1 indicates, or re- increasing to a point of critical concern. maining in rural areas without work. Many of the latter are youth. As the figures in Table I11 reveal, the relative economic deterioration of the lower 40 percent in Much of the labor surplus which agriculture does rural areas is serious, although other evidence sug- not absorb ideally should be transferred to manu- gests that extreme low incomes are markedly facturing. But there has also been a percentage regional. For example, in the mountainous Ilocos decrease in manufacturing employment, as a region and the Cagayan Valley region of northern TABLE I1 Aggregate Trends in Sectoral Net Value Added and Employment, 1960-1971

Sectors Shares in net value added and employment 1960 1971

Net value Employ- Relative Net value Employ- Relative added ment value added ment value (1960 added per (1971 added per prices) employee prices) employee

Agriculture Mining Manufac- turing Construc- tion Transport, utilities Commerce Services

Sources: National accounts data and labour force surveys for October 1960 and November 1971. Accounts data exclude imputed rents on owner-occupied dwellings; employment in October 1960 is adjusted for under-enumeration.

Source: International Labor Office, Sharing in Development, A Program of Employment Equity, and Growth for the Philippines (ILO, Geneva, 19741, p. 12.

Luzon and the western Visayan islands of Panay It may be reasonable, therefore, to assume a and Negros, 42.78, 44.61, and 45.71 percent of marked deterioration of equality in rural areas and, family incomes, respectively, are less than 21,500 a at best, no or slight changes in urban distribution. year. The fertile rice and corn growing regions of central and southern Luzon, however, show only 22.10 and 23.70 percent for the same low income. Upper Income Groups

Despite the tightening labor market described Concentrated ownership of natural resources- above, Table I11 indicates a more encouraging especially land-has provided the top 20 percent of prospect for achieving greater equality in urban income earners 51 percent of all rural income incomes, although statistical inaccuracy appears to (Table 111). The World Bank reported in 1960 that be a more plausible explanation. As the ILO report 5.6 percent of farms were over 25 hectares, and points out, "...for the top 10 percent of urban made up to 25.3 percent of cultivated area, while families, the data imply a fall of almost one-third in 41.1 percent were less than 2 hectares and made up real income from 1965 to 1971, which is surely im- only 11.8 percent of cultivated areas. 18.4 percent plausible." of all farms were between 5 and 25 hectares.1° TABLE I11 Indicators of Income Distribution Total, Rural and Urban, 1956,1%1,1%5, and 1971

Indicator 1961 1965 1971

Total Rural Urban Total Rural Urban Total Rural Urban Total Rural Urban

Quintile offamilies (percentage of total family income)

Lowest 20 percent 4.5 7.0 4.5 Second 20 percent 8.1 1.1 8.0 Third 20 percent 12.4 14.7 12.2 Fourth 20 Percent 19.8 21.1 20.0 Top20percent 55.1 46.1 55.3 TOP10 Percent 39.4 30.1 39.6

Source: International Labor Office, Sharing in Development, A Program of Employment, Equity, and Growth for the Philippines (ILO, Geneva, 1974), p. 10.

Amado Guerrerethe nom de plume of one of Department of Agrarian Reform survey that 88.6 the leaders of the Maoist New People's Army- percent of "small land" owners (24 hectares or less) asserts in his radical analysis of the Philippines that were absentee and not cultivating their own land. A ownership and control of wealth is even more con- few were government officials and armed services centrated!' He gives figures-the source of which personnel. Many of the rest were retired, in other he claims are lists by provincial assessors-sug- occupations in small towns, had immigrated to the gesting as much as 3 million hectares, about 40 United States, or were holding family plots culti- percent of all cultivated land, are in holdings of 50 vated by relatives. About 90 percent owned less hectares or more, ownings between 50 and 1,000 than 7 hectares. The critical point here is that most hectares in 1968, 204 above 1,000 hectares and of these small and medium-sized absentee land- 8,914 between 50 and 199 hectares. His figures- owners earn nearly 75 percent of their income the sources for which he does not cite-would place (averaging over 93,000 per year) from their land. as much as 3 million hectares, about 40 percent of To confiscate their land would affect, in President all cultivated land, in holdings of 50 hectares or Marcos' words, " . . . part of the economic middle more. class we are trying to build.. . . " l2

The World Bank's report, more than Guerrero's, Certain patron-client relationships are institu- suggests two kinds of rural "haves": a very wealthy tionalized in the rural sector. In return for collect- landowner class and a middle income farmer. The ing a percentage of harvests from tenants, and former represents inherited wealth from the haci- extending credit at high interest rates, landlords endas formed during Spanish colonial rule. The perform a variety of patronage functions. The latter appears to reflect substantial, systematic tenant is provided some rice or corn to see the investment in small and medium-sized farms. The family through lean periods just prior to harvests. importance of the middle-income farm group has Landlords also help to cover extraordinary medical become apparent in the process of implementing expenses, intervene with local government officials the current land reform. It was discovered in a in dealing with legalities, and provide free use of vehicles for emergencies. Usually, however, the validity of our studies and practically telling tenant is not provided with a home lot or vegetable us to approve their projects," he said. plot. This last point has become a problem in implementing the land reform. Don't they know that the industry is crowded and therefore their proposals are Such patron-client relationships do not exist in not profitable? the highly commercialized economy of the sugar plantations, where farm labor is on a wage basis A ranking leader of the cement industry rather than share tenancy. had a very frank answer: They are interested only in kickbacks arising from the overprice The obverse side of the patronage network is the in the purchase of cement plants. accumulation of power by the estate owners and even middle-range farm owners. By virtue of their He said the average cost of Peso 12 mil- domination of local social relationships, local gov- lion per plant is invariably raised to Peso 18 ernment, and constabulary forces, landlords in the million or a kickback of Peso 6 million. past could provide votes for whatever candidate With a Peso 6 million "profit," some plants provided the promise of future favors. Often these do not care even if the DBP seizes the favors were special credit facilities for large indus- collateral.. . . tries or import licenses for capital goods. Throughout the 1950s and 1960s the Philippines The "raid" on DBP funds happens every pursued a policy of import substitution through four years, or every presidential election import controls and other measures to protect local year. A juriior DBP executive said that industries producing for local markets. Thus during national election years all sorts of import facilities for capital goods could become are presented for financing to the political favors. As a result, much Philippine indus- DBP. trialization took the form of "political" industries which served the economic interests of traditional The projects are almost always poorly elites. The cement industry, as George Rosen docu- studied and overpriced, resulting in their ments in his analysis of premartial law Philippines, failures, he said. 13 is one example: Even if such industrialization were not entirely As early as 1967 when there were already efficient, it produced, along with widespread nine cement factories, a DBP [Development American-style education, a growing coterie of Bank of the Philippines] official already technicians and managers, energetic and ambitious recommended that the bank stop buying men who proliferated in middle management and equity and guaranteeing the purchase of government bureaucracy. Some of them may now cement plants. That recommendation, decry the inefficiency of former industrial efforts, which was based on serious market studies, others simply demand more opportunity through was thrown to the winds. Since then, five greater laissez-faire and rationalist economic more cement factories were supported by policies. In any event, in recent years they have the DBP.. . . Now the cement industry is worked hard and have done well. They may well hopelessly overcrowded. [It] is threatening account for much of the increase of income in the to raise the price to Pesos 6.50 per bag in the "fourth 20 percent," from 18.7 to 21.0 percent face of a glut if only to raise funds to meet (Table III), in the urban sector between 1965 and maturing and past due obligations with the 1971. Although they exist primarily in urban areas, DBP.. . . they are new and represent a break in the old patron-client and plantation owner-farm laborer Why did the DBP allow the establishment syndromes of the traditional Philippine economy. of more plants? Today, many of these middle- and upper-income "We are helpless," a spokesman said. groups have been threatened by martial law. We "Politicians come to us contesting the have already noted the effect land reform can have on middle and large rural landholdings. In urban answered. Several land reforms were attempted but areas, the concentration of power in the central implementation was incomplete. Moreover, peasant administration and the strong personal financial movements based on economic grievances surfaced interests of the Marcos and Romualdez (Mrs. from time to time but were ill organized. Organized Marcos) families equally threaten interests of labor suffered equally from poor organization. middle- and upper-income groups. Bureaucrats, Only one, the Hukbalahap or anti-Japanese businessmen, and professionals-many liberal, peasant army which flourished in the 1950s, ever bourgeois, enterprising, and educated-are weary became even a mildly serious threat to regional of arbitrary rule under martial law and chafe as the political elites in Luzon. Marcos and Romualdez family fortunes go on growing. They long for the comfort of former By the late 1960s what little stability the "democratic" practices-with all their imperfec- Magsaysay government had achieved through the tions-of habeas corpus and elections. collapse of the Huk rebellion was lost. At least three factors were at play: political squabbles for Another elite deserving mention, of course, is power within the oligarchy on such sharp issues as composed of Americans. Under colonialism and American "neocolonialism"; deterioration of law subsequent treaty agreements between the United and order to the point where private armies and States and the Philippines, Americans have enjoyed corrupt local police brought terror wherever and parity rights in the Philippines' economy. As a whenever local power elites thought advantageous; result American entrepreneurs have developed sub- and the emergence of a more highly organized stantial interests in the economy, although many of Communist Party of the Philippines, with its New these were devolved with the lapse of parity rights People's Army, simultaneously with an array of in 1973. Former controlling interests in large left-of-center political and labor movements. By the mining and refining industries have been replaced end of the '60s, conditions were chaotic: strikes, with Philippine majority interests. Overall, how- assassinations, revolutionary struggles, corruption, ever, American direct investments have continued and seizures-all contributed to the growing crisis. to increase in line with Philippine government American cruise ships even stopped calling in investment regulations and incentives, and their Manila. Under such conditions either martial law, presence remains strong. "Old-timers" are anarchy, or a widespread and violent revolutionary nostalgic for the "good old days" of parity. New struggle seemed inevitable. Corruption and decay American managers respect the growing ability of had ravished virtually all political institutions- Philippine government experts on the Board of democratic and oligarchic. Investment to administer other incentives. Martial Law and Political Change Politics of the Distribution of Income Martial law came first. In invoking constitutional The failure of politically democratic regimes provisions allowing a Proclamation of Martial Law, since independence to cope effectively with eco- Marcos established both personal arbitrary rule by nomic inequalities was inevitable, for "politics" decree and promised major social reforms in his was ultimately neither national nor democratic. "new society." In 1973, he wrote "That society will Regional and local power bases-built largely on endure whose members enjoy social equality-in landed wealth-were blocks in a political pyramid. other words, a society which has eliminated eco- Votes were bought and sold and voting was con- nomic inequality." trolled either by patron-client bonds or heavy- handed police interference in vote casting or One of Marcos' first political initiatives under counting. In many regimes, the politician capable martial law was to remove important opposition, of constructing a patronage network and buying both oligarchic and liberal, from national politics. enough regional oligarchs won national "elec- For many this meant political detention-as in the tions." Within such a framework, where money, cases of Benigno Aquino, Eugenio Lopez, Jr., and land, and political interests exercised power, Sergio Osmena, Jr. All three were accused of sub- demands for reform-particularly from the middle version (the last two of attempts to assassinate class-could be heard but were never fully Marcos); all were members of wealthy families but enjoyed liberal support; and all had opposed To the extent that martial law has given Marcos Marcos at one time or another. But all represented power to control his immediate enemies, it has also party politics and have now become, in the eyes of given him time to formulate and implement the politically active and educated middle-income economic policies of his "new society." Ultimately, groups, martyrs of Marcos' martial law. Marcos' fate rests not on the short-term political expedients which are facilitated not by martial law Marcos subsequently created "people's assem- but rather on the impact and success of his eco- blies" through which he now conducts national nomic policies. referendums for general expression of public support for his policies. He has used the assemblies on New Society programs to create greater equality several occasions-once to demonstrate public in income and reduce poverty run a gamut from support for continuation of martial law. Votes in land reform to squatter resettlement in Manila, the assemblies are hand cast publicly. Marcos cites from encouraging foreign investment in labor in- the referendums to establish legitimacy for his rule; tensive industries to organizing government agri- however, with 90 percent of all votes cast in favor of cultural cooperatives, from subsidizing production whatever it is Marcos seeks, questions are raised credit for small farmers (Masagana 99) to creating about the validity of the count and the atmosphere village marketing organizations. But no one of of coercion. These exercises in political participa- these has the same immediate potential redistribu- tion have certainly not convinced peasants organ- tive effect as land reform. Some, such as urban ized by the New People's Army or the politically squatter resettlement, are being heatedly contested astute middle class. by any of the intended beneficiaries. Others- Masagana 99, for example-are proving difficult to administer. Masagana 99 is already9646 million in Marcos has enhanced military and police effec- arrears-about 24 percent of the total credit of tiveness as instruments of national power in a 42.6 billion extended by the program. The govern- number of important ways. The military has been ment cooperative movement, intended to assist substantially re-equipped through nearly a three- farmers in savings and support land reform, has fold increase in defense budget allocations over the run into a host of problems, perhaps the most past three years. Furthermore, control of police important being excessive dependence on a cen- forces has been removed from local political influ- trally administered bureaucracy. Indeed, the expe- ence by creation of an integrated national police rience of the cooperative movement may well reveal and a civilian "home defense" force under provin- a major dilemma of the Marcos government. cial commands. The latter move is recent, is costing Martial law has so centralized political and admin- nearly9600 million in 1977 (or 12 percent of total istrative power that many low income economic defense allocations), threatens privately controlled and social groups feel their vital interests are either police forces, and to undermine the private armies. unrepresented or are abused. The Critical Test of Land Reform

By so centralizing political and military power, It is impossible in a paper of this type to describe Marcos has been able to move against his oli- in detail efforts to alter the economic disparities we garchic and liberal oppositions, and the political have identified in Part I1 that stem from land left as well. The New People's Army, while not tenure patterns. Nonetheless, a few salient features defeated, is in a defensive position. A number of its of the land reform can give some indication of its leaders have been captured. Definitive estimates of problems and prospects for economic reforms. It is its current strength are impossible, as the Marcos the critical test for the nearly one million poor regime variously overestimates its strengths as a tenant farmers promised land under the reform. warning to Filipinos, or overestimates its weakness as a show of the regime's strength. He has also The land reform stipulates that all privately arrested over 1,000 political leftists and labor owned rice and corn landholdings in excess of seven activists. For the moment, at least, most labor and hectares will be distributed to those farmers who farmer organizations have assumed more polit- cultivate it-up to three hectares of irrigated land ically docile positions. and five hectares of unirrigated land per cultivating tenant. Absentee landlords can lose all their land if to remain a tenant than become an owner. it can be proved that they have other major sources S0metim.e~the tenant balks when it comes time to of income. Compensation to the landlords-value sign the amortizing agreement with the Land Bank. is determined by a village committee consisting of This has happened on several occasions when the landlords, tenants, and village officials-is equal to tenant finds that his home lot has not been two and a half times the value of the previous three- included in the holding or when the tenant thinks a year average production of the land. better deal can be struck by holding out. In other words, tough bargaining occurs and administrative The scope of the reform as projected by the De- enforcement of the operation is too weak to push all partment of Agrarian Reform is enormous, and the parties into agreement. number of people to be affected escalates as field It is still too early to declare the reform a success surveys discover more tenants and landowners. As or a failure. If it is successful it will have created a of January 1977, the department had identified new class of lower middle-income farmers and, 914,914 official tenants deserving the 1,422,988 assunring landlords lose local political influence hectares of land they tilled. This accounts for 23 and power in the process, a new political group percent of all rice and corn lands in 1974, and per- with a solid economic base. If it fails because of haps as much as 17 percent of all rice and corn intransigence, obstruction, and poor enforcement, farmers. l4 whatever traditional stability that existed between landlord and tenant on the basis of patron-client Actual transfers are proceeding slowly and en- bonds will be further shaken. The Philippines countering a number of obstacles. The first step to countryside will then be extremely volatile. transfer of ownership is the issuance of a certificate of land transfer to the tenant. So far, only 164,700 Resistance, Participation, and Reform certificates have been distributed to tenants although over 300,000 have been printed. The dis- Martial law as a force for implementing the eco- crepancy is due to a number of causes: landlords nomic growth, reforms, and equity goals of the taking legal action against claims on their land; "new society" will be severely tested in the coming tenants not being members of the government- years. If the "new society" is to succeed, politics sponsored cooperative movement-a prerequisite must reconcile the inherent contradictions of three for issuance of the certificate; and landlords traditions within Philippine society and respond to mortgaging land to avoid detection. But even with the resistance they offer: its conservative the certificate the tenant still has to negotiate the Catholicism dating from the Spanish colonial rule; value of the land with the landlord before compen- the democratic tradition (albeit abused) of free sation can begin. Compensation requires 10 to 20 economic and political association; and the corrup- percent cash payment and issuance of Land Bank tion and exploitation of the traditional patronage bonds to the landlord. Once this is accomplished system based on entrenched economic interests. the landlord-tenant relationship ceases and the tenant receives full title upon amortization of his First, the Catholic Church has changed con- debt to the Land Bank. siderably in many instances over the past few years within the Philippines and throughout the world. As of June 30, 1976, the Land Bank had com- But traditions do not easily change, especially in a pensated less than 6 percent of the designated country with 85 percent of its population Christian. landlords on behalf of 26,100 tenants. The Thus the "new society," with its emphasis on regu- problems behind this low figure are complex. Most lating population growth, runs into resistance from farms targeted for reform have been large, over 24 conservative elements of the Church on basic policy hectares; and many of their owners have diversified issues.While their concern for poverty is real, the into other field crops exempted from the reform. solutions they offer are not always in accord with Sometimes the landlord refuses to cooperate with the "new society" programs. For example, on the village committee responsible for land valua- population growth: tion, thus delaying the whole process. In some instances, landlords have offered tenants better crop . . .When it is attacked by pushing the pill, sharing terms and convinced them that it is better encouraging vasectomy and campaigning for divorce and abortion, we can undermine these schemes can be stretched way beyond the moral fibre of the nation. Undermine the nation's financial capacity and patience. this, stress pleasure and convenience as the But the reason why they are so stretched lies passports to happiness; forget the need for in the basically statist approach, where the sacrifice and discipline-and we will surely government does most of anything, while be destroying the drive to work, the push for everyone else gapes and wonders over the productivity, the awakening of a general instant results produced.16 social consciousness.15 Second, other Catholic groups do "push the Third, new political patronage and entrenched pill." And many of these same groups have been in interest will have to be confronted. This will be a the forefront of economic and political association particularly difficult problem for at least two through organization of farmers and workers. reasons: first, Marcos and his wife, Imelda, on too Branches of the Federation of Free Farmers-per- vany occasions have pursued personal economic haps the largest nongovernment farmers' organiza- interests and patronage contrary to the equity tion-were developed in Mindanao and the Visayas objectives of the "new society." Second, there are with the strong support of Maryknoll and Carmelite still many instances where the police are under the priests. Their political activism set them apart from control of local economic interests. the mainstream of the Federation and they were purged in 1973, with the help of martial law detention powers; this left wing of the Church never- Conclusions theless continues to push for greater participation by all rural and urban low-income groups. Their It is hard to draw conclusions at this stage. resistance to martial law has become a critical issue Martial law, it will be recalled, was one of three in Church-State politics because several foreign possible alternatives in 1972-the others being priests have been deported and two Filipino priests anarchy or violent revolution. have been arrested for "subversive" activities. More secular efforts to promote participation in If the "new society" programs do not succeed in economic policy by liberal party activists and their their basic objectives, the other alternatives become supporters, by unions, squatter movements, and increasingly probable. Anarchy would in essence farmer organizations have also offered resistance to mean civil war: military and police factions would "new society" programs. The small private cooper- again be used to protect the entrenched interests ative movement has very much felt itself pushed the "new society" failed to ameliorate and reconcile aside by the government cooperative movement. with its goals. More likely, however, would be in- Similarly, the middle class-most notably creased support for revolutionary violence by low academics and private businessmen-has felt its economic groups frustrated by the failure of the role inhibited by increased bureaucratic involve- "new society." ment and Marcos/Romualdez economic interests in what it feels should be private sector initiative, as Neither of these alternatives is pleasant and both the following statement reveals: may be avoided. But it will require greater opportunity for participation than martial law currently The solutions proposed are all very good. No permits (and consequently less resistance) and one should quarrel with rural development, much more reform. It will require, in effect, an end the encouragement of small- and medium- to martial law and far greater responsible, par- scale industries, particularly those that use ticipatory politics than were known even prior to appropriate technology to process appro- 1972. Political leaders now in prison, underground, priate products. But governmental schemes or merely intimidated must once again be allowed to push these objectives can be very expen- to organize reformist political movements with sive. The cost and time involved in pursuing broad-based participation. NOTES

1. Data for this section have been taken largely from two active organizers and also to attention farmers received sources: National Economic Development Authority: Statis- from FFF lawyers in land claim cases. tical Yearbook of the Philippines: 1976. (Manila, NEDA, 1976) and Central Bank of the Philippines: Statistical Bulk- 8. Harkin, Dunkin, "The Philippine Land Reform," in Land tin; Vol. XXVII, December 1975 (Manila: Department of Tenure CenterNewsletter, No. 48, April-June 1975, p. 11. Economic Research, Central Bank of the Philippines; 1976). 9. ILO, Sharing in Development: A Program of Employ- 2. U.S.$I.OO currently equals f 7.40. In 1914 US$1.00 ment Equity and Growth for the Philippines. (Geneva, LO, equaled approximately 96.80. 1974),p. 9.

3. This estimate may be low as it is based on the Depart- 10. As quoted by Rocamora and Panganiban, p. 131. ment of Agrarian Reform's field surveys of tenants eligible for the current land reform. Other estimates run as high as 11. Guerrero, Amado; Philippine Society and Revolution. 25 percent. No thorough analysis of land tenancy was avail- (Hong Kong, Ta Kung Pao Press, 1971), p. 185. able to me in writing this report. 12. Rocamora and Panganiban, p. 64. 4. From unpublished data provided by the Center for Research and Communications, Manila. 13. Rosen, George, Peasant Society in a Changing Economy. (Urbana: University of Illinois Press, 1975),pp.69-70. 5. See Republic of Philippines, Department of Labor, "Con- ference on Sugar Crisis," mimeographed press release, undated. 14. See David Wurfel, "Philippine Agrarian Policy Today: Implementation and Political Impact," unpublished manu- 6. As cited by Rocamora and Panganiban, Rural Develop- script. ment Strategies: The Philippine Case. (Ateneo de Manila University, Institute of Philippine Culture, Quezon City, 15. Estanislao, Jesus and Edgardo Garcia, "Poverty in the 19751, p. 70. Philippines," a monograph published by the Center for Research and Communication, Manila, 1976, p. 7. 7. The phenomenal growth of the Federation of Free Farmers on Mindanao during the late 1960s was due to 16. Ibid.

NOTES ON THE DISCUSSION, MARCH 16,1977 by Brewster Grace

The discussion centered on several specific and being the largest. Mrs. Imelda Romualdez Marcos general questions and issues: is mayor. The key problem, obviously, is poverty arising from unemployment. The critical issue is 1. Why have urban areas, most notably the whether current development strategies which serve sprawling Metro Manila region, been relatively overall growth objectives can in any way contribute neglected in economic planning; to easing its economic stress. Emphasis on 2. What are the origins and roles of the Philip- agribusiness or even diversification away from pine middle class; small-scale subsistence production, while serving economic growth, is failing to create enough jobs in 3. What are the prospects for the land reform the rural sector to reduce the flow of job-seekers to and what are some of its current problems; and Metro Manila. On the other hand, it may be sufficiently destructive of traditional values to rend the 4. What are the key strengths and weaknesses of rural social fabric, leaving people without the cus- Marcos' martial law administration? tomary support of family members or a patron. This is a universal phenomenon and dilemma The Metro Manila urban complex, which which the study group felt that the paper should sprawls around Manila Bay, contains over five examine in more detail in order to portray the very million persons and several major cities-Manila pressing problem of Philippine urban poverty. The study group also felt that the paper failed to meeting broad public need. Many members of the describe adequately the Philippine middle class, study group believed that the extensive Marcos- although it is among the most significant in South- Romualdez financial interests compounded this east Asia. The importance of Philippine entrepre- problem and generally reduced the credibility of neurs cannot be overstated. Extensive education, the administration. large bureaucracies, and liberal capital traditions have given this class enormous social and political In defense of the Marcos administration, argu- importance. Their impact on and their reactions to ments were made that labor-intensive industries current politics need to be more fully described and are hard to establish overnight; especially given the analyzed. In particular, we need to investigate the history of the corporate agriculture's expansion degree of compatibility existing between middle without concern for social consequences. Second, it class economic and social demands and Marcos' was argued that martial law had at least brought political ambitions, and between each of these and competent technocrats into top administrative the needs of the very large numbers of urban and positions and their careers depend on delivering the rural poor. (development) goods. Some of their accomplish- ments are more than token-e.g., there has been The paper pointed to the land reform as one considerable development of roads, electrification, critical strategy where these various needs and schools, and health centers. demands intersect and possibly conflict. While the study group acknowledged the importance of the When Marcos imposed martial law in 1972, reform to rural stability as well as economic there was general agreement that the move would development, several members expressed the help re-establish order and create an atmosphere of opinion that it was, in essence, a political gimmick stability in which economic growth could take since it ultimately effected only a small percentage place. Despite this initial consensus, martial law of the rural poor. They also pointed to some major government has failed, in the study group's contradictions in the land reform policy, such as opinion, to achieve such stability, and for a number applying the reform to small, middle-income land- of reasons. First, under martial law, such private owners, yet needing to develop middle-class groups as student organizations, church social- political support. Finally, serious doubts were action programs, and farmers' organizations have expressed concerning the ability of a highly cen- been restricted,and where they have not been, as in tralized yet factionalized bureaucracy to carry out the case of Religious Superiors, they have been seen the "New Society's" distributional reforms. as a threat. Second, and consequently, Marcos increasingly relies on his technocrats, who are often Indeed, this centralization and factionalization regarded with suspicion. Finally, some members of the administration was seen as one of the deeper expressed concern about the emerging importance problems confronting the Marcos regime. As a of the military and police as a component of corollary, many members of the group agreed with Marcos' strength. the paper's thesis that the ever-expanding influence of the government was both stifling private initia- In sum, the discussion recognized the enormous tive while failing to generate effective public sector economic potential of the Philippines now activity. The group noted that coordination of eco- enhanced by promises of a new and stable society. nomic planning and investment was seriously It expressed concern, however, that martial law lacking and that much investment was going to the may have created new political interests, new social wrong places. The hotel construction boom re- discord, and disoriented economic planning to the flected this-those who control credit dictate point of threatening those reform efforts designed investment policies which are not necessarily to bring about greater equality.