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Economics of martial law and people power

Every year in September, in a ritualistic way the tale is told: A Dark Lord imposed his will on a hapless people, but then a messiah sacrificed his life to embolden Filipinos to topple the regime in 1986.

That’s a fairy tale, its old, overused storyline that of a Lord-of-the-Rings kind of entertainment, enough for medieval men, and for small minds today to explain the past. But reality is always, and in all ways, complex.

To artificially create a revolutionary flow, and provoke the ruling class to internecine strife, the fledgling Communist Party bombed the Liberal Party’s miting de avance in August 1971—just before its superstar Ninoy Aquino arrived—and blamed it on Ferdinand Marcos. But that only gave Marcos the justification to impose martial law, after a year of meticulous preparation.

The communists had not foreseen, though, that a surging economy would allow Marcos to crush his enemies, and rule for so many years.

Most Filipinos acquiesced to martial law since the economy surged from 1972 to 1980 at an average annual growth rate of 6 percent. The growth rate for 1973, the first full year of martial law, as well as for 1976, was 9 percent, an astounding pace never since posted. We, those jailed for fighting to overthrow the dictator by force of arms, and those who were killed or tortured for that, were unpersons.

Ethnic Chinese businessmen loved Marcos, among other things because he decreed their mass naturalization, allowing the rise of the new generation of Filipino taipan such as William Gatchalian and Andrew Tan. So did the Spanish elite, with the Ayalas and Sorianos happy with their beer-monopoly San Miguel Corp. The South Luzon Expressway, made rice fields like Alabang near the metropolis into prime properties. The Ayalas’ Makati became the premier business district during martial law. A shoe merchant built his first department stores in the 1970s, the prototype for his huge malls: Henry Sy.

Whether it was because of Marcos’ “Green Revolution” or simply because the International Rice Research Institute was luckily located in the country, production of its high-yielding Masagana 99 rice zoomed during martial law that prices of the staple fell, the most important factor for an acquiescent populace.

Marcos’ regime unraveled because of a conjuncture of factors, the economy the most important.

After the Arabs took back the oil fields from the Western “imperialists” in the early 1970s, they found themselves awash in what would be dubbed “petrodollars.” Western bankers recycled these as loans lent quickly and cheaply to Third World countries. For the first time, poor countries such as those in Latin America and in Asia (us) were deluged with cheap loans purportedly needed to finance their development.

But then, the Iranian Revolution broke out in 1979 and the Iran-Iraq War in 1980. These triggered an oil crisis that pushed up global interest rates, even as the enterprises the petrodollar loans funded had just started, were white elephants, or were cronies’ milking cows. Marcos’ Swiss accounts were probably mostly payoffs from members of the elite who got the state-guaranteed foreign loans. Countries including ours had to take out new loans just to pay interest on their old loans, thus falling deeper and deeper into debt. In 1982, Mexico and several other Latin American countries defaulted on their loans, creating the global debt crisis.

Aquino’s return in August 1983 to the Philippines couldn’t have been made at a worse time. Interest rates were going through the roof, eating at our dollar reserves so fast that the central bank falsified data on its level.

The political instability in the wake of Aquino’s assassination accelerated the economy’s collapse. In October 1983 the country ran out of dollars to service its loans, and defaulted on its debts, financially isolating it from the world. The GDP collapsed by an unprecedented 7 percent in 1984, and in 1985, the peso’s value crumbled from P9 to P20 to the dollar, and inflation surged by a riot-in-the-streets rate of 50 percent in 1984.  No president could have survived such an economic catastrophe.

The elite suddenly became freedom-lovers, donning yellow Lacoste shirts and joining street protests, to demand that Marcos step down. People power was based on a bad economy’s power to make people want to overthrow their government.

We study the past to understand the present. Joseph Estrada fell because the economy was starting to collapse in 2000, due to the damage done by the 1997-98 Asian financial crisis and massive smuggling that reduced state revenues to a fiscal-crisis level. The political crisis triggered by his impeachment scared off investments.

Despite the attempts to overthrow her, President Gloria Macapagal-Arroyo completed her term because of the strong 5 percent annual average GDP growth rate under her watch. Even at the height of the attacks against her in 2006 and 2007, it surged 5 percent and 7 percent, respectively. Arroyo steered the economy through the global financial crisis that started in 2008, making it the only one in Asia to avoid recession—the biggest reason why investors have been so confident over it in the past two years.

A mainstream media biased for a president as never before to a great extent explains President Aquino’s popularity. Where else do people get their info on current events? But it is also due to the economy’s health, thanks to his persecuted predecessor’s economic reforms and management.

As a surging economy made Filipinos embrace martial law, a healthy one has made many acquiesce to Aquino’s near-usurpation of Congress and the Supreme Court and his persecution of scapegoats. He has been fixated on anticorruption rhetoric to the neglect of economic reforms, so that the economy isn’t looking good down the road.