We undid Marcos economy, let’s not go back

By: Jesus P. Estanislao, Jose L. Cuisia - @inquirerdotnet - Columnists/Philippine Daily Inquirer | February 12,2022 - 08:00 AM

How we undid the Marcos economy

On Feb. 25, we shall be observing the 36th anniversary of our people power revolution. Those who are much younger to have been involved in the events at Edsa in 1986 have often asked: “what difference did it really make?” and “did it deliver a real change?”

One real difference between then and now has been brought about by our current Constitution. A few people may try to run circles around some of its provisions, but the term limits it has imposed on public officials have been respected. In 1986, we had a dictator, with all the power to continue in office: after him, his wife was to take over, as though the presidency were an heirloom to be kept within the family. Out of sheer hubris, and convinced that he could win any electoral contest, through whatever means, he called a snap election, and then had to flee. Today, despite all the previous talk about “no-el,” we are gearing up for a constitutionally mandated election on May 9, 2022: term limits for president and other public officials are respected. The same holds true within the military and national police: in 1986, we had several top-ranking generals staying on and on. Today, when any military or police officer turns 56 years old, that officer must retire, no ifs and buts, with due respect for the law under our Constitution.

Those too young to have endured life before 1986 may never know how difficult it was to get a telephone line, and if you got one, you had to suffer the inconvenience of having a “party line” (translation: another party sharing the same telephone line with you). They may never have to hustle to get limited travel dollars each time they fly abroad: foreign exchange was under a controlled regime. They may never have difficulty getting an airline seat now. But PAL was then a government monopoly. It had limited capacity on many routes and it had to ration seats. Under such a regime—with quantitative restrictions or even a total ban—many of the consumer items they take for granted as being readily available through an open market were not within easy reach. Such ordinary fruits as apples, oranges, and grapes were allowed in only during the Christmas season. Water was not available in many parts of Metro Manila: people had to find creative and expensive ways to get water for their basic needs. And even where there was supposed to be water service, it was irregular, spotty, and unreliable. This list can go on and on, because under a “control environment” within an authoritarian dictatorship, restrictions were the norm. Inconvenience for the ordinary people was the normal fact of life.

It took considerable homework to manage the transition from a dictatorship to a democracy. We were involved in the initial phases of the economic and financial dimensions of that homework. The program of economic liberalization and deregulation included many aspects; it eventually led to the opening of telephone and water service as well as the privatization of PAL, now subject to competition. The efforts at negotiating the terms for a responsible and reasonable payment of our foreign debt were painful, almost endless, and unpopular (at least in some quarters here). But those efforts enabled us to introduce various reforms with full support and financial assistance from multilateral agencies like the World Bank, IMF, ADB, and others; from friendly allies such as the US and Japan with their aid money, and critically from our foreign creditors themselves. Those reforms allowed us to lift restrictions and controls in our foreign exchange market. They allowed the freer inflow of vital goods and supplies that the open market demanded. In the end, we managed to get our fiscal house in order: we posted occasional fiscal surpluses, as public debt (as a percentage of our GDP) was brought down considerably. And of great importance, we managed to secure the independence of our Central Bank. It now could focus on its major task of inflation targeting, instead of trying to meet the demands and whims of the government for control of the dollar-peso exchange rate and to finance the fiscal deficit.

In the end, did all this homework make any difference, and did it deliver any real change? A recent paper by Dr. Bong Montes, with a genuine and properly certified Ph.D. degree from the Wharton School of the University of Pennsylvania, looked at the long-term growth and development of the Philippines from 1946 to 2021. He presents the long-term growth trend of our real GDP; and he finds that it was going downward and unstable until 1986; and it has been going upward, and consistently so, since 1986. Of great importance for our respectability as an economy and our ability to withstand a crisis: our foreign exchange reserves hit bottom by 1986. Since then, they have been moving up to relatively high, respectable levels: they have been rising steadily hitting record levels of over $100 billion. He attributes these to the reform policies introduced initially when the country moved from an authoritarian dictatorship to a democracy. All these may not mean much for the ordinary persons in the street, unless they are reminded that now we can more easily get a phone; we have water from the tap; we can get the travel dollars that we have pesos for; ordinary travelers can buy cheaper tickets from competing budget airlines, and we can get the consumer items we want and need any time of the year.

Nonetheless, the poor are still with us. We should note, however, that poverty incidence was much higher in the decade leading up to 1986 and it was brought down to lower percentages in the decade after 1986. The national poverty rate which was 49 percent in 1985 had dropped to 17 percent by 2018. There is still considerable homework we need to do to get our poverty incidence rates below 10 percent and as close to zero as possible.

We should not disregard the gains we have made since 1986. Instead, we should build on them as we move forward in the next 30 years. This is no time for going back to a golden past before 1986. That never existed except in the propaganda of a regime that we happily ended back in 1986.


Jesus P. Estanislao is former finance secretary (1990-1992). Jose L. Cuisia, Jr. is former Central Bank governor (1990-1993).

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