Thursday, April 08, 2010

The Philippines, the World Bank and the Race to the Bottom -- Part 2 of 4

"The chief business of America is business" - President Calvin Coolidge, 1925

"What else do bankers do -- walk-in and turn-off the lights in the country." - William Slee, 1978

To read Part 1 of 4, click: Race to the Bottom_Part 1 
To read Part 3 of 4, click:( later)
To read Part 4 of 4: click: (later)

Throughout the years and especially come national election time, we Filipinos spend more time and energy on politics i.e. political criticismAt best and rarely, on matters and issues of political independence; at worst, oftentimes and more predominantly, on personalities of our politicians at the national or local level. 

I say these not to belittle the role of the enraging personal characters and public actions of many -if not most- of our politicians, local and national, since in our homeland these considerations have significantly contributed to the ever-deepening poverty with extremely dire consequences to our native citizenry, society and homeland. However...

We do not seem to appreciate the fact that economics: national economic development (political economy) is also extremely important and at this point in our history, requires equal, if not more, attention from the native citizenry. For without national economic independence, political independence becomes ineffective and meaningless. 

Just like an individual with nothing except debt, who therefore effectively becomes a person with no voice, does not count and is thus ignored. So we as a people, in our homeland and the world, are not in the radar of our native rulers and of many nations/peoples of the world.

Below piece (Part 2 of 4) came from a recent book written by former economic hit men/EHMindividuals who worked for years representing the largest American banks as loan officers to Third World countries like our homeland. These few EHM individuals later realized that they were tools of their financial institutions (multinational banks) by their work in arranging foreign loans to poor countries, including our homeland; giving loans that made them poorer. Their consciences made them tell us the tricks of their trade.

With our homeland as a primary example for the Foreign Debt Trap and as poster boy for the Third World, these EHM provide us insight on who they were, their background, how they did their transactions, whom they dealt with, the milieu they had, etc. Their works can only be summed up as the secretive modus operandi of creditors (multinational banks) and debtors (our homeland represented by our native and unelected, but wittingly or unwittingly-traitorous technocrats, chosen by each past and current ruling regimes) and how all of their subtle businesses led only to our continuing, decades-old and present national predicaments; characterized by deepening and expanding mass poverty, with all its adverse socioeconomic and political consequences.

By making the country (such as our homeland) as the main and only debtor (rather than lending directly to the private businesses who needed capital), the creditor banks via the IMF and WB tandem were able/can enforce payments, dictate to our subservient rulers all their desired changes in our government policies which greatly profit them; and conversely led to our national predicament. 

In the long run, as we now see or not still see, changes that negatively and gravely impact our domestic institutions/social services (health, education, infrastructure, etc.) national economy and patrimony, national sovereignty, destroy/discourage native entrepreneurship, etc. and further facilitated the penetration and dominance in our society by economic via transnationals and cultural globalization via the dominant foreign media --even before the term globalization aka neoliberalism became common currency.

All these to our national perdition.

- Bert

PS. I highly recommend the purchase of this very factual and enlightening book (readings): "A Game As Old As Empire - The Secret World of Economic Hit Men and the Web of Global Corruption", edited by Steven Hiatt, Berrett-Koehler Publishers, 2007; [Some of the economic data are old; but the trend for newer ones are worsening - the only direction we have been heading from the time of the Marcos Dictatorship to the present and predictably in the next generation or so, given our lack of nationalism, selfishness and cowardice as the so-called educated, who ought to know better.]

"I either want less corruption, or more chance to participate in it." - Ashleigh Brilliant, 1933

"The accomplish to the crime of corruption is frequently our own indifference." - Bess Myerson, 1924-present

"Corruption is worse than prostitution. The latter might endanger the morals of an individual; the former invariably endangers the morals of the entire country." - Karl Kraus, 1874-1936.

The World Bank made the Philippines a test case in its loan-based, export led development strategy --and the results were dictatorship, poverty and a crushing debt burden.

The Philippines, the World Bank and the Race to the Bottom
- Ellen Augustine

The Dark Side of Globalization
For those who work in the export industry, conditions are brutal:
  • Workers in the electronic industry tend to suffer from eye defects after 3 years of employment. Others complain of acid burns, skin rashes from epoxy resins, and other reactions due to solvents like trichloroethylene. Even if they are given gloves and masks, they do not use them because that slows them down and makes it difficult to reach their quota. They are not required by the company to use them, and, in fact, are not taught about the need for protective devices(10). 
  • In the tuna canning industry, 95% work under temporary contracts and 85% are women. when orders are high, workers are forced to work 12 hour-days; when demand is low, they get a few hours work. work is very tightly controlled. Workers are not allowed to speak to each other during work hours, they are not provided with drinking water, they do not receive sick or holiday pay, and wages are very low (11).

Confidential documents show that the world bank steadfastly propounded that the "comparative advantage of the Philippines lies in the utilization of skilled, low-wage labor (12)." Bending to Bank pressure to keep wages low, Marcos instituted a new Labor Code that allowed employers to pay new employees only 75% of the minimum wage during a 6-month probationary period. It is therefore a common practice for employers to fire workers just before the end of their probation (13)

By keeping employees on short contracts rather than permanent employees, employers avoid paying legislated benefits such as health care and pensions (14). According to the World Bank's own report, from 1972 to 1978 the real wages of unskilled workers declined by 30% and those of skilled workers by 25% (15).

Martial Law: Good for whom?
In addition to the economic turmoil caused by liberalization and wage repression, the Philippines was rocked by massive middle-and lower-class demonstrations, strikes, and rallies against Marcos and his elites and against US domination (16). Marcos' response was to declare a state of martial law in September 1972. US business gave its stamp of approval in the form of a congratulatory telegram: "The American Chamber of Commerce wishes you every success in your endeavor to restore peace and order, business confidence and cooperation..We are communicating the feelings of our associates and affiliates in the United States (17)."

The American public did not share the sentiment. Polls in the early 1970s showed 87% in favor of cutting aid to repressive regimes (18). But Marcos' authoritarian rule suited American foreign policy interests, and, exerting its controlling interest, the World Bank supported Marcos. As US government aid dropped (reflecting public sentiment) from $125M in 1972 to $72M in 1979 (19), confidential Bank statistics show that the Bank funneled $2.6B into 61 projects between 1983 and 1981 (20). This massive inflow allowed Marcos to shift domestic resources to more than triple his defense budget (21). Repressive measures increased bothy at home and abroad, particularly in the united States --including the assassination of anti-Marcos activists Silme Domingo and Gene Viernes in Seattle (22).

The early martial law years brought accomplishments that impressed Bank bureaucrats. GNP rose by 10% in 1973. Major efforts by government to attract foreign investments brought in $55M. High prices for agricultural exports shifted a $120M trade deficit in 1972 to a $270M surplus in 1973. Over the next 3 years economic growth leveled off however, and during 1977 to 1981 "the program began to unravel in spectacular fashion. (23)" A major reason for the decline was protectionist barriers put up by Canada, Europe, Japan and the United States. In two years alone, from 1978 to 1980, 33 barriers were erected to Philippine exports (24). Did the World Bank assess this trend and stop promoting export-led development to poor countries? Not at all. Did the Bank pressure developed countries to drop their barriers to Philippine goods? Of course not.

A Billion Here, A Billion There...
As the economy plummeted, the country's foreign debt skyrocketed. But, life was becoming more difficult for poor and middle-class Filipinos. Ferdinand Marcos and his wife, Imelda,were siphoning off billions from development projects. The amount they stole is not known precisely because of banking secrecy laws in the countries where they hid the money, but most accept the $10B estimate by the commission on Good Government, established to recoup the losses. In 1966, when Marcos came to power, Philippine foreign debt was $1B, at the time of his ouster twenty years later, it was $28B (25). The Marcos legacy lives on: Filipinos are still struggling to pay off many of these loans. [The Philippine government will pay $5.17 billion foreign debt service this year 2010, higher compared to 2009’s $4.34 billion. The country's outstanding foreign debt is $53.3 billion at end-December 2009, according to the Bangko Sentral ng Pilipinas (BSP). - Bert]

The Marcos clan used every possible avenue to amass wealth. Cronies wereinstalled at the highest level of government to broker deals. One particularly egregious deal, the Bataan Nuclear Power Plant, was handled by Marcos' buddy Herminio Disini, a regular golfing partner of Marcos' claimed that "he had the authority to arrange the deal in any way he wished." This nuclear plant was to be sited at the base of a volcano on an active earthquake fault. Marcos chose Westinghouse to build the reactor, even though its plan was nearly twice as expensive as General Electric's. 

Disini then collected $80M from Westinghouse for "assistance in obtaining the contract and for implementation services (26)." He passed on 95% of the fee to Marcos(27). The Philippine Atomic Energy Commission refused to give a permit until the plant was already under construction. 

At the point, Commissioner Librado Ibe issued the permit and then moved to the United States. As he later told Fortune Magazine, it was unsafe to resist Marcos' lieutenants for too long(28).

Imelda meanwhile was in charge of development in the Greater Manila area, the locus of most foreign investment. So pervasive was the corruption that she was nicknamed "Mrs. 10%" for the cut she allegedly took off the top of government contracts. As minister of human settlements, she administered vast sums, including aid from the US Agency for International Development (USAID).

"Those who profess to favor freedomand yet deprecate agitation
are men who want crops without plowing up the ground;
they want rain without thunder and
They want the ocean without the
awful roar of its waters.
This struggle may be a moral one
or it may be a physical one
or it may be both moral and physical
but it must be a struggle.
Power concedes nothing without a
It never did, and never will."
- - Frederick Douglass, Abolitionist, Author, Slave (1817-1895)
(from Fr. Pedro V. Salgado, O.P.,The Philippine Economy: History and Analysis, 1985)

"If the people are not completely free and happy, the fault will be entirely their own." - George Washington, shortly after the end of the American Revolution be continued.

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