THE ECONOMIC CRISIS BEFORE EDSA PEOPLE POWER REVOLUTION

By Philip M. Lustre Jr.

All claims that the Philippines had its “golden years” during Ferdinand Marcos’s 20-year rule (13 years of which, under a dictatorship) are plain hogwash. On the contrary, the Philippines had its worst postwar economic recession during the last three years of the Marcos dictatorship.

Official data showed the national economy posting a steep economic decline in 1983, or the year Marcos minions murdered top opposition leader Benigno Aquino Jr. on the tarmac of what is now known Ninoy Aquino International Airport.

The next two years saw the national economy plunging into a recession of unimaginable proportions. Industries grounded to a halt, tens of thousands workers were laid off, and economic uncertainty loomed. It was an economic recession, plain and simple.

Official data showed that the Philippine economy posted a decline in its Gross Domestic Product (GDP, or sum total of all goods and services produced in the given period minus foreign remittances) to 1.87 percent in 1983 from a moderate 3.62 percent in 1982.

In 1984, the Philippine economy stumbled to post a GDP growth rate of -7.47 percent, the first ever it went negative since 1946. The economic recession exacerbated, as the national economy posted a negative GDP growth of -7.31 percent in 1985.

The sharp GDP growth decline in 1983 and the negative growth rates in 1984 and 1985 meant that the Philippine economy hardly expanded during the three year period before the historic 1986 EDSA People Power Revolution. On the contrary, the national economy constricted – or shrank - to unprecedented levels. There was no denying that the Marcos dictatorship mismanaged the Philippine economy.

Economists earlier estimated that a one percent GDP growth rate could mean the generation of nearly a million jobs for the national economy. It could be surmised that the economy lost hundreds of thousands – or even millions – of jobs during the pivotal three-year period.

It would be wrong to believe that the treacherous murder of Sen. Benigno Aquino Jr. solely caused the economic downfall during those years. But it would be correct to think it was one of the major contributory factors.

By killing Aquino in broad daylight, Marcos suffered the infamous perception that he would do everything to keep himself in power. Aquino’s murder triggered the isolation of the Marcos dictatorship in the international community. Major democracies viewed Marcos as a criminal.

The economic crisis of those days was triggered by the collapse of the global financial system, where major debtor countries defaulted repayment of their maturing debts and unilaterally declared a moratorium in the repayment of their maturing multibillion dollar foreign debts.

By the fourth quarter of 1983, major debtor nations like Mexico, Brazil and Argentina said they could no longer pay their foreign debts. They declared they would seek a moratorium, or suspension, of their debt repayments until their respective economies recovered.

By October, 1983, or weeks after the Aquino murder, Prime Minister Cesar Virata, the concurrent finance minister, announced the Philippines would default on its loan obligations and follow the examples set by the three Latin American countries. Virata said the Philippines was seeking a similar moratorium on the repayment of its maturing debt obligations.

By that time, the Philippines had a foreign debt of about $26 billion, a big part of which were commercial debts obtained from foreign private commercial banks worldwide. The Marcos dictatorship had to negotiate its foreign debts with a committee of foreign commercial banks, which had the biggest loan exposure to the country. 

The Marcos dictatorship took advantage of the petrodollars which these banks had generated from oil producing countries after the oil cartel unilaterally raised the world prices of crude oil in three successive global oil shocks. But the dictator was more preoccupied of stealing a big part of those loans.  

Since the commercial credits were not concessional credits that carried longer repayment period (30 years repayment period with a ten year grace period) and lower annual interest rates (usually pegged at 2 percent), the Philippines had a hard time paying its debts.

Virata, the chief economic manager during those days, explained that the Philippines had to roll over those commercial credits, creating big piles of unpaid commercial credits. This debt rollover strategy was the usual economic strategy of the Marcos dictatorship.

The declaration of a moratorium on the repayment of the country’s foreign debts had caused a subsequent overnight balance of payments crisis, where the foreign exchange (or dollar) outflows greatly surpassed the inflows.

Foreign banks would not provide external finance contracts, essentially in the form of letters of credit (LCs), to domestic firms, effectively stopping importations of the needed production inputs.

The moratorium was widely felt, as the Marcos dictatorship did not have much choice but to cut its public expenditures. What followed next was a complete economic nightmare.

Millions became unemployed; executives in Makati sold copies of encyclopedia and insurance policies to eke out a living. The informal economy, or underground economy, grew to provide economic sanctuary for the displaced and dispossessed.

A parallel foreign exchange market, infamously called “Binondo Central Bank,” suddenly appeared to provide a black market for foreign exchange transactions for dollar-strapped firms and individuals.

But it was the political consequences of the economic crisis that triggered the downfall of the Marcos dictatorship. 

Overnight, displaced executives and workers laid the blame squarely on the Marcos authoritarian rule for the economic mismanagement and collapse, as they joined the massive anti-dictatorship protest movement.

They led the so-called “confetti revolution” in the Ayala business district of the heartland of Philippine business and manned various barricades. They also formed the nucleus of the widespread calls for an end to the Marcos dictatorship and the restoration of democracy.

Their participation in the anti-dictatorship culminated in the EDSA People Power Revolution. The near bloodless political cataclysm was ignited by their collective desire to restore democracy.

By end-1986, the national economy improved its performance, as it posted a GDP growth rate of 3.42 percent. Finally, the country had a modest but positive growth rate after three years of steep economic decline. 

Economic recovery was the first order of the day in the post-Marcos era.