2Even for many of those who have studied the economic history of the Philippinesclosely, it remains a mystery. Two leading authorities on the Philippine economy,Arsenio Balisacan and Hal Hill, thus commented in 2003 that “the Philippines is one of the world’s major development puzzles.” At the time of its independence in 1946, thePhilippines met many of the requirements of a modern democratic state – its “civilinstitutions were comparatively well developed…. It possessed a reasonably democraticpolitical system…. Its judiciary and legal system were quite well developed andsomewhat independent. Its press was open and vigorous. Finally, while not especiallyresource-rich, the Philippines possessed ample agricultural land to sustain severaldecades of rapid agricultural growth.”
Yet, despite this promising beginning, Philippineeconomic growth over the course of the second half of the twentieth century was muchless than most other Asian nations and a major disappointment to most Filipinos.With the exceptions of Japan, Malaysia, Hong Kong and Singapore, thePhilippines in 1950 had a higher income per capita (based on the detailed world incomecalculations of Angus Maddison) than the other nations in East and Southeast Asia.
Bythe end of the twentieth century, however, Philippine income per capita exceeded onlyVietnam, Laos, Cambodia, North Korea and Myanmar (formerly Burma) – all of whichhad suffered severe national traumas in previous years. Vietnam, moreover, was rapidlyrecovering and promised soon to overtake the Philippines. From 1950 through the 1960s,the Philippine economy had grown steadily, although not enough to keep pace with itsfaster-growing Asian neighbors. Then, unexpectedly, matters became much worse. AsBalisican and Hill report, the Philippines “missed out almost completely on the Asianboom from the late 1970s until the mid-1990s.”
One Asian country after another movedpast the Philippines in income per capita. Even China, despite having suffered the majordislocations of the cultural revolution and other communist economic misfortunes, andthe need to raise the living standards collectively of more than 1 billion people, surpassedthe income per capita of the Philippines in 1992.There were some possible explanations for “the puzzles” of poor Philippineeconomic performance. One special factor was the island character of the Philippines,impeding road and railway transport, although facilitating water transport. The tropicalclimate might have negatively affected the work ethic – it was more difficult to functionoutdoors in the hot sun, even as the minimum requirements for survival were not assevere as in the colder and harsher climates of many other nations. In terms of economicvariables, the Philippines had been unable to attract the high levels of foreign directinvestment that had boosted the economies of many other Asian nations. Larger fiscaldeficits or more rapid inflation might have been a factor. To the extent, however, thatany such macroeconomic policy failures could be assigned a significant role, this beggedthe question of why the policy failures had occurred in the first place. It was difficult, inshort, to explain the relatively low economic performance of the Philippines in the secondhalf of the twentieth century. As Balisacan and Hill concluded, “we can assert withconfidence that a considerable part of the [Philippine economic] story remainsunexplained.”