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Peter Binns

The Lichauco Paper

(October 1974)

From International Socialism (1st series), No.72, October 1974, pp.30-31.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The Lichauco Paper
Alejandro Lichauco
Monthly Review Press, £2.70

WE OFTEN think of Latin America as the land of the banana republic, of the place where American imperialism exists in its most blatant and exploitative form. But in fact nowhere is the exploitation greater than in Asia, and nowhere in Asia is there a better example of US-enforced rural underdevelopment than in the Philippines.

Thus for every dollar invested or given in ‘aid’ in Asia, American capitalists extracted four dollars of net capital outflow from Asia during the 1960s – much worse than their already bad record in Latin America. Yet in the Philippines the situation was worse – even by Asian standards, for there American capitalists were able to loot seven dollars in net capital outflow from the country for every one they invested, and all the signs are of this ratio increasing still further.

How was this superimperialism possible? Looking at the sources for these profits reveals that they came in the main from subsidiaries of US-based international corporations. However these American firms got only 16 per cent of their finance for capital investment from outside the Philippines, the rest came from Filipino banks, insurance companies and state credit institutions. In other words, American imperialism did not even finance more than a sixth of their own exploitative operations. Filipinos were thus not only cruelly exploited by imperialism, but were even the major contributors to the finance of these exploitative operations.

Such an abject surrender to the interests of imperialism is only explainable by the fact that the Philippine bourgeoisie is merely a client class for foreign imperialist interests. The vast majority of politicians, businessmen and bankers depend for their existence on the American connection and would fall without it Only one Philippine President since independence (1946) has been elected against the machinations of the CIA, and the whole pattern of legislation and economic life since then has effectively prevented the rise of a national bourgeoisie with an identity and a coherence defined in opposition to US imperialism.

From the outset, the Bell Trade Act of 1946 established the neo-colonial pattern, and prevented the emergence of such a national bourgeoisie. It enforced free trade which prevented the growth of domestically owned industry within tariff walls. It granted American nationals parity rights with Filipino citizens in all financial matters, and it ceded sovereignty over foreign exchange transactions to the United States.

As with most Asian victims of imperialism, the Philippines has been forcibly underdeveloped to such an extent that the development of a native capitalism is ruled out by the objective conditions rather than the political failure of its leaders. Garcia, the only president elected against US pressure, tried during his period of office (1957-61) to create such a national capitalism, but with disastrous results.

Philippine domestic capitalism was defeated in this period by the familiar tools of international capitalism. In general two methods were used The first is exemplified by the fate of Filoil, the Philippine oil company set up to offset the domination of the oil industry by the multinationals. The fierce competition which ensued cut the profit margins of Filoil to the bone. It was unable to finance its continuing investment out of these margins and so it turned to the banks. But financial austerity at home, necessary for the balance of payments and for stabilising conditions for domestic capitalism, meant that no such credit was forthcoming. The Filoil bosses had no option but to sell out to Gulf Oil.

Secondly, mere is the case of Iligan Steel, the cornerstone of the attempt to create domestic industry in the Philippines. There the huge size of the capital needed (more than a billion dollars) meant vast loans from the World Bank and elsewhere. Devaluation of the peso made the Philippines quite incapable of meeting the repayments, and so this too went bust in 1972.

Quite simply, therefore, there is no national capitalist solution to the problem of the Philippines’ underdevelopment and poverty. No section of the bourgeoisie is capable of smashing the imperialist stranglehold. Only an anti-imperialist movement led by the working class and opposed to all forms of capitalist exploitation can possibly solve these problems. Yet is is precisely the national capitalist solution which Alejandro Lichauco defends in The Lichauco Paper against all the facts to the contrary. He argues for the need to build up domestic Philippine industry, and asserts that rich enough pickings are to be had from exporting manufactures based on cheap Filipino labour to pay for imported food – chiefly American wheat.

He has only two reasons for this view. Firstly, he says (and he is writing in 1972), wheat is cheap and is likely to remain so. Secondly a vigorously anti-imperialist line can work – the IMF was after all, he says persuaded to give Allende’s Chile a 40 million dollar loan.

Since then world grain prices have increased several hundred per cent, and those 40 million dollars were used by General Pinochet’s murdering gang to smash the Allende regime. Enough said.

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Last updated: 13.3.2008