33rd phavisminda.karl marx's social formation - r.y. rivera
TRANSCRIPT
SILLIMAN UNIVERSITY
KARL MARX’S SOCIAL FORMATION:
Philippine Social Formation, Financial Crisis and Mass-Hunger
REYNALDO Y. RIVERA, Ph.D.
5/28/2010
For the 33rd PHAVISMINDA INTERNATIONAL CONFERENCE ON CRITICAL THEORY, on May 27-29, 2010 at South Sea Resort & Hotel, Bantayan, Dumaguete City, Philippines.
Reynaldo Y. Rivera, Ph.D. 2 | P a g e
KARL MARX‟S SOCIAL FORMATION:
Philippine Social Formation, Financial Crisis and Mass-Hunger Reynaldo Y. Rivera, Ph.D.
(For the 33rd PHAVISMINDA INTERNATIONAL CONFERENCE ON CRITICAL THEORY) May 27-29, 2010
Silliman University, Dumaguete City, Philippines
In this paper, I assert that there is a notable increasing „‟pauperization”
among the Filipinos, as wealth is apparently more and more concentrated in the
hands of a few local and overseas wealthy business owners in the Philippines. In this
instance, while many Filipino Scholars still diagnose the character of the Philippine
economy as “semi-feudal,” its mode of production is already fashioned in the
capitalist exchange between the workers and the owners of capital through the
payment of wages. Given the inherent tendency of the capitalist production to
accumulate and concentrate wealth, its productive forces push the economy to
overproduce which “cannot find a buyer” (Ernst Fischer, Pelican, 1973: 112); and
thus create a crisis. My assertion is anchored on Marx‟s Law of uneven development
which is well established in his “Historical Tendency of Capitalist Accumulation.”
Marx wrote:
Along with the constantly diminishing number of the magnates of
capital, who usurp and monopolize all advantages of this
(capitalist)process of transformation, grows the mass of misery,
oppression, slavery, degradation, (and), exploitation; but with this
too grows the revolt of the working class, a class always increasing
in numbers…. [see Karl Marx and Frederick Engels in One Volume,
Moscow: Progress Publishers, 1968: 233-234).
Please allow me to point out here however, that the revolutionary tactics of
the working class may no longer be carried out by the force of violence but by
parliamentary struggle. Marx changed his view of effecting the transition and spoke
of placing the hope of the workers in a peaceful parliamentary struggle in Amsterdam
in 1872 when he said:
We know how special regard must be paid to the institutions,
customs, and traditions of various lands; and we do not deny that
there are certain countries, such as the United States and England
in which the workers may hope to achieve their ends by peaceful
means (Paul Sweezy in Leo Huberman and Paul Sweezy, 1968:83).
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This advocacy for peace is presented to disabuse the minds of many people
who believe that Marx is an advocate of violence rather than for peace.
Although admittedly many critics claim that Marx‟s prediction of wealth and
mass hunger polarization in his general theory of capitalist accumulation has never
occurred in modern-day advanced capitalist economies and thus proved him wrong
(M. Barrat-Brown in T. Shanin, 1976); but which, in his time, (was) a well founded
assumption” (Ernst Fisher, 1973:115), Marx‟s vision about labor condition still is
correct if seen in the context of a globalized economy. In fact, trade unions in the
advanced capitalist nations successfully played an important role in raising the share
of the surplus-value so that the workers of these countries enjoy a very good living
condition compared to the living condition of the workers in the colonized countries.
But what is not recognized by these critics is that the prosperous living standards of
the workers in the capitalist countries are a function of labor exploitation that
“pauperized” the workers in the colonized economies. Ernst Fischer has offered this
brilliant observation on the correctness of Marx Theory of capitalist accumulation.
Fischer observes, “… in the global sense his broad historical vision proved correct
when he pointed out that in assessing the situation of workers it was necessary to
consider the world market as a whole, and that the wages of some could rise only
because others were starving” (Ernst Fischer, 1973: 124). This thesis is shared by
dependency theorists who argue that “Marx‟s law of uneven development and
pauperization may have been wrong for the core nations, it is correct for the world as
a whole and for the peripheral nations in particular”(see Christopher Chase-Dunn,
1975:720; Theotonio dos Santos, 1970; Gunnar Myrdal, 1957).
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Furthermore, many critics of Marx again prove him wrong; they argue that the
predicted economic crisis which could transport the capitalist economy into a
socialist transformation has never actually taken place. They are correct because
Marx neither really anticipated nor factored in the development of capitalist state
regulations, such as the famous Keynesian fiscal and monetary policies, that have
been efficiently used to “pump-prime” the economy through state budget deficits and
financing gap mechanisms in order to moderate the threats of the economic cycles
from transforming capitalism into what Marx calls its inevitable collapse towards the
next stage of development.
Regardless of the arguments thus presented the “inner contradiction of the
capitalist mode of production” which Marx analyzed remains real and “political crisis
are indeed more and more catastrophic” (Ernst Fischer, 116); the apparent signs of
pauperization are sharpening the inner contradiction of the capitalist mode of
production in the “imperialized” countries, as Alejandro Lichauco (1974) puts it. In
the Philippines, according to Alejandro Lichauco, “mass hunger and fiscal-debt crisis”
are evidently and deeply felt among 80 percent of the Filipino households (Lichauco,
Today, March 27-29, 2004). Those manifestations of the inner deep contradiction of
the capitalist mode of production proves the validity of Marx‟s general theory of
Social System found in his “Preface to A Contribution to the Critique of Political
Economy,” which is then a relevant theoretical horizon for this study.
My paper will focus on the analysis of Marx‟s General Theory of Social System
and use it as the context of analyzing the Philippine social formation, Financial Crisis
and mass-hunger. The historical analysis of the Philippine Social Formation is never
the intention of this paper, so that Marx‟s General Theory of Social Formation or
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Social System is only used to provide both the empirical criterion of relevance for
factual generation and analytical integrative function of the many fragments of reality
into a coherent body of knowledge in the sense of Heraclitus‟ Hen Panta (All
Knowledge is one).
What then is the nature of Marx‟s Social Formation and what is his scientific
method of interpretation?
MARX‟S SOCIAL FORMATION AND SCIENTIFIC METHOD
The nature of Marx‟s general theory of social formation may be well
appreciated by first understanding his method of science. The general theory offers
an intellectual perspective or horizon while his method provides how the perspective
may be effected in terms of a transcendent thinking that goes beyond the
appearance of the visible relations.
The Science of Marx
In his essay, “Why Socialism?,” Albert Einstein claims that on the surface
there is no “methodological differences” between the hard sciences and the social
sciences, for both clusters of disciplines “attempt to discover laws of general
acceptability for a circumscribed group of phenomena in order to make the
interconnection of these phenomena as clearly understandable as possible.” (Albert
Einstein, 1949 as published in Leo Huberman and Paul Sweezy, 1968). However,
Einstein points out that methodological differences do really exist between the two.
In the social sciences or in the “soft” social sciences such as economics the
“discovery of general laws are difficult by the circumstance that observed economic
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phenomena are often affected by many factors (such as conquest stealing the lands
of the colonized) which are very hard to evaluate separately” (Ibid).
It is even more difficult a discipline because the whole enterprise, as Marx
does, seeks the hidden structures beyond their appearance, just like what quantum
physicist David Bohm did in locating the “implicate order” that transcends beyond
the appearance of the “explicate order” of a phenomenon. (David Bohm and David
Peats, 1986).
Such an intellectual enterprise needs a brilliant mind whose eye can
penetrate beyond the opaque “visible relations” of the Capitalist mode of production.
And this brilliant mind is Karl Marx‟s mind himself whose mode of thought overcome
the arbitrary tenets of the classical economics: it demands a distinction between that
which shows in the physical appearance of things and their essence that recurs
underneath the visible appearance of human relations. In his Capital, book III, vol. III,
Marx demands the recognition of the distinction between what we see and what we
do not see of things. Marx‟s said, “Science would be superfluous if there were no
difference between the appearance of things and their essence” (see also Maurice
Godelier in M. Lane, ed., 1978:341). In this formulation, Marx‟s admonishes us not
to be misled by the physical structures that appear before our senses, because there
are more things to discover and to learn behind what we see of phenomenon through
our naked eye. In fact, Marx‟s scientific construction is obedient to the tenets of the
Scriptures, as in I Sam. 16: 7 (RSV) that speaks: “Do not look on his appearance or
on the height of his stature, because I have rejected him; for the Lord sees not as
man sees; man looks on the outward appearance, but the Lord looks on the heart.”
Thus for Marx, in faithful obedience to this Scripture, any scientific thinking of a
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phenomenon must take the path of the Lord‟s thinking which looks into the heart of a
thing in regard to its essence. Marx then is also a fundamental ontological
philosopher in the sense of Martin Heidegger who seeks nothing beyond forms.
Marx further suggests that since scientific analysis and testing in the social
sciences cannot be done by either a microscope or a chemical re-agent, social
scientists and philosophers have to depend on what Marx calls the “force of
abstraction (and) replace both” (Karl Marx in “Preface to the First German Edition of
the First Volume of Capital,” Karl Marx and Frederick Engels in One Volume, 1968:
228). As a scientist Marx is never dogmatic and, in fact, fascinated by the wealth of
facts in the British Museum; he was “determined… to begin afresh from the very
beginning and to work through the new material critically (Karl Marx, “Preface to the
Critique…,” 1968:183). He was then to recast his theoretical scaffolding in his
Grundrisse which provided “the ground plan of The Critique of Political Economy (see
Michael Barrat Brown, in T. Shanin, ed., 1972: 129). The point here is that Marx‟s
Method of Scientific Investigation resorts to the use of “the force application of
abstraction;” the starting point of his analysis is the commodity of use value and for
exchange in the market place. M. Barrat Brown explains Marx‟s Method of science in
this manner:
Marx‟s method of presentation, however, was to proceed from the
abstract to the concrete. Thus, at every stage in Capital the
analysis is presented in its bare essentials and then clothed with
factual material; and the first and most difficult theoretical chapters
of Capital precede the exposition in the last hundred pages of
Volume I.
Marx‟s abstraction neither takes the logical positivistic/pragmatic deductive
method where “theory is used to explain real-world events” nor uses theory as guide
to data-collection for theoretical validation. Also, Marx never thought of deductive
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method as a science that “links between the theory and (his) observation” (Manheim
and Rich, 1981:19). For Marx, “a scientific investigation of the Capitalist system
consists in discovering the hidden internal structure beneath its (i.e. social formation)
visible functioning” (Maurice Godelier in Michael Lane, ed., 1978:341) rather than
studying only on what can be “measured” for “precise description of an object‟ or a
thing.” (Manheim and Rich, 1981:19). Marx‟s scientific method (which is widely
shared by the Scriptures; by quantum Physicist Werner Heisenberg, 2000; by
quantum physicists David Bohm and David Peat, 1986, by Goethe, 1993; by Martin
Heidegger, 1986 and other essays) distinguishes Marx from other sociologists,
historians, and economists. Marx‟s scientific method then is a powerful abstraction
designed primarily to uncover “nothing” behind the visible social relations. Hence,
Marx‟s method of science should be understood as a complimentary tool of his
“general theory” of social system, a social system which refers to what Marx calls the
“bourgeois economics” in his “Preface to A Contribution to the Critique of Political
Economy” (K. Marx and F. Engels, 1968: 180; M.B. Brown, 1972:123)
The General Theory of Marx
Marx‟s interest in “examin(ing) the system of bourgeois economics” indicates
that his general theory of social system embodies the many layers of the capitalist
system (M.B. Brown in T. Shanin, 1972: 123). These structures themselves
differentiate “in broad outlines Asiatic, ancient, feudal, and bourgeois Modes of
production” (that) can be designated as progressive epoch in the economic formation
of society” (Marx, “Preface to A Contribution…,” 1968: 182). In each of this epoch is
an experience of a sharp contradiction for which the task of resolution is found in the
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material conditions of social life. For our appreciation, let me quote what Marx calls
his “guiding thread of study” — a guide which is concisely written in very tight
schema!
In the social production of their life, men enter into definite relation
that are indispensable and independent of their will, relations of
production which correspond to a definite stage of development of
their material productive forces. The sum total of these relations of
production constitutes the economic structure of society, the real
foundation, on which rises a legal and political superstructure and
to which correspond definite forms of social consciousness. The
mode of production of material life conditions the social, political
and intellectual life process in general. It is not the consciousness
of men that determines their being, but, on the contrary, their social
being that determines their consciousness (Karl Marx, Preface to
The Critique of Political Economy, 1968: 181).
The quoted passage which embodies the social life of Marx general theory
presents two irreducible structures on which the upper structure depends on the
base structure of the system for its continued existence. Marx‟s notion of social life
comprises two structures: “the economic structure of society” and the “legal and
political Superstructure.” The economic structure is designated as “the real
foundation” of society on which the “Superstructure” stands firm. “Corresponding” to
the development of the economic base are a “definite forms of social
consciousness,” which in turn, shape or influence the economic structure at the base
of society.
Many scholars interpret the term “correspond” to mean a deterministic
mechanical act that suggests a “unilinear” direction of the theory where awareness
of the workers is taken as a determined act of the economic base. To interpret this
term in deterministic-linguistic form will distort Marx‟s theoretical intention of a “play”
between the economic base and the Superstructure of ideological forms. For Marx,
“relations of production” are “legal expressions” of the economic base, so that Marx
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is suggesting that the Superstructure of law and state apparatuses also influence the
activities that are going on in the economic base; but for him the economic base
ultimately asserts. Frederick Engels reinforces Marx‟s advice to everyone to examine
materially all ideas and institutions from where these arise, and warned against
transforming their materialist “proposition into a meaningless, abstract, senseless
phrase” (Engels‟ Letter to Bloch, dated September 21-22, 1890). Engels wrote
Bloch about Marx and his materialist Proposition on September 21-22, 1890:
… According to the materialist conception of history, the ultimately
determining element in history is the production and reproduction
of real life. More than this neither Marx nor I have asserted. Hence
if somebody twists this into saying that the economic element is the
only determining one, he transforms that proposition into a
meaningless, abstract, senseless phrase. The economic situation is
the basis, but the various elements of the superstructure… also
exercise their influence upon the course of the historical struggles
and in many cases preponderates in determining their form (w.o.
Henderson, ed. Engels: Selected Writings, 1967:333; emphasis by
Engels).
For Engels, as for Marx, the Superstructure of “political forms of the class
struggle and its result” such as “the reflexes of all those actual struggles in the brains
of the participants, political, juristic, philosophical theories, religious views and their
further development into systems of dogmas…” exert influence and in many
instances determine the “form” of the historical life; but, Engels and Marx maintain
that the economic structure “ultimately is decisive” (Ibid). Thus, Karl Marx in the
same “Preface to A Contribution to the Critique of Political Economy” — argues of the
transformation of the whole Superstructure with the “change in the economic
foundation” of the social formation:
At a certain stage of their development, the material productive
forces of society come into conflict with the existing relations of
production or — what is but a legal expression for the same thing ―
with the properly relations within which they have at work hitherto.
From forms of development of the productive forces these relations
turn into their fetters. Then begins an epoch of social revolution.
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With the change in the economic foundation the entire immense
superstructure is more or less transformed [Karl Marx and Engels in
one volume, 1968; 181-182].
Marx clarifies that change in the economic base begins when “the material
productive forces of society come into conflict with the existing relations of
production.” The progressive development of the tools of production turns these
relations into their fetters and “an epoch of social revolution” burst into a sharp
break. With the change of the economic base the whole Superstructure of political
as well as ideological forms are transformed and a new social formation is formed.
Thus, the “playfulness” of the term “correspondence” clarifies that Marx entertains a
no unilinear materialist conception of history.
As a concretely grounded philosophy then Marx has reversed the egoistic
Cartesian “cogito, ergo sum — I think, therefore I am” into the path of Nietzsche‟s
materialist scientific guide, “vivo, cogito ergo ― I live, I am ― therefore I think” (Kurt
Reinhardt, 1964:80). For Marx then “The mode of production of material life
conditions the social, political and intellectual life process in general.” In scientific
analysis “It is not the consciousness of men that determines their being, but, on the
contrary, their social being that determines their consciousness.” Marx‟s method of
science depends on the concrete, historical material life, or the real life condition of
people; that the basis of a true scientific studies as well as the ground of the
reproduction of knowledge and ideas is the concrete material life rather than the
search of knowledge based on what one thinks of a reality.
If, as Marx emphatically claims, that the material conditions determine
consciousness, how is it possible for one to transcend into nothing behind the
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phenomena and thus be liberated from the material constraints of his model? Marx
provides his answer:
In considering (the) transformations [of the immense
superstructure] a distinction should always be made between the
material transformation of the economic conditions of production,
which can be determined with the precision of natural science, and
the legal, political, religious, aesthetic or philosophic — in short,
ideological forms in which men become conscious of this conflict
and fight it out. Just as our opinion of an individual is not based on
what he thinks of himself, so can we not judge of such a period of
transformation by its own consciousness; on the contrary, this
consciousness must be explained rather from the contradictions of
material life, from the existing conflict between the social
productive forces and the relations of production (Karl Marx, 1968:
181-182).
As to when a social formation burst into the graveyard of history, Marx
however, provides two conditions before such change could happen towards the
resolution of an existing contradiction: “No social order ever perishes before all the
productive forces for which there is room in it have developed; and no, higher
relations of production never appear before the material conditions of their existence
have matured in the womb of the old society itself” (Karl Marx, “Preface to A
Contribution to the Critique…,” 1968:182). As a scientist himself, Marx‟s science is
the application of the Darwinian adaptation principle and a Newtonian Physics. Let
me share with you this brilliant observation by Michael Barrat Brown:
In his general theory, Marx seems to be reflecting Darwin‟s thought.
Just as species cannot survive unless adapted to their environment,
so societies cannot develop without adapting the relations of
production to the forces of production. In his model of the
economic structure Marx seems to be following the Newtonian
concepts. Xxx „In the form of society now under consideration, the
behavior of men in the social process of production is purely
atomic.‟ „As heavenly bodies, once thrown into a certain definite
motion, always repeat this, so it is with social production (M.B.
Brown, 1972: 127).
We are certain that the validity of Marx scientific theory rests on the fact that
his scientific principles are well founded in well known theories in Biology, Newtonian
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physics and quantum dynamics — a validity which assures us of its universal
application when used to analyze and to understand the Philippine social formation
in terms of the “infrastructure” and the Superstructure.”
The Superstructure
Grounded on the wealth of historical records in the British Museum, the main
points of Marx in his concisely written general schema are converging on the
economic base on which the State Apparatuses — as Louis Althuser describes them
— arise, and which, in turn, exert influence on the form of activities happening in the
economic base. For Engels, the elements of the state apparatuses constitute the
“political forms of the class struggle and its results.” (W.O. Henderson, 1967:333).
These results embody the various “constitutions” the “juridical forms,” “the reflexes
of all these actual struggles in the brains of the participants,” “philosophic theories,”
“religious views,” and “systems of dogmas” (W.O. Henderson, 1967: 333). Recall
again that all those political and Ideological forms are instruments available at the
disposal of the ruling capitalist class intended to contain, if not eliminate, potential
and real conflicts that threaten the continued existence of the economic base.
Overwhelmed by both the persuasive and coercive state apparatuses of the
Superstructure, the poor worker neither has the strength to repeal nor has the power
to overturn them, unless they organize themselves into a direct and indirect
countervailing force. The attack on the helpless poor workers and job-seekers is
ensured by what Leo Huberman calls “the class that ruled economically (who) “also
ruled politically” (Huberman, 1950; 91). In the U.S., for example, President Wilson
writes in his book, The New Freedom (1913: 57) that “the masters of the
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Government… are the combined capitalists and manufacturers of the United States”
(see also Leo Huberman, 1950: 91). Putting it in question form, an American
minister and Congressman — Samuel C. Allen — bitingly asserts of what he sees of
the constitution of the Superstructure of American government: “‟What have
governments been, and what are they now, but the combinations of the rich and the
powerful to increase their riches and extend their power?‟” (see Leo Huberman,
1950:87-88). Then Allen concludes: “‟It is in the nature of things that government
will always adapt its policy, be theory of its constitution what it may, to the interests
and aims of the predominating class.” (Huberman, 1950:88).
Another American thinker, a sociologist, hurled the same observation and
conclusion about the American government in his The Power Elite (1956), C.W. Mills
shows that the American government is effectively controlled by the three thin layers
of elites — Key members of the executive branch, top corporate officials and top
brass in the military — who make major decisions and enforce them through their
“intermediaries.” By virtue of their distinctive and common interest they conspire to
write those laws that influence the everyday life of the American people (see also J.
Victor Baldridge, 1975: 263-64). The tremendous power that this ruling class
maintains in their possession is clustered in the superstructure of “Ideological State
Apparatus” (ISA) and the “Repressive State Apparatus”(RSA) (Louis Althuser,
1971:143; 148-150). The ISA constitutes the religious, the public and private
education, the family, the legal, the political systems and political parties, trade-
unions, the press, radio, television and digital communication channels as well as the
cultural ISA like Literature, the Arts, sports, etc. (Althuser, 1971: 143). All these
elements contribute to the reproduction of what Marx “calls relations of production”
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or what Althuser calls “relations of exploitation” in capitalist social formation. The ISA
differs from the Repressive State Apparatus (RSA) in content and domination.
The RSA constitutes a unified public domain which functions “‟by violence‟”
and by ideological or by persuasion (Althuser, 1971:143-148). It is a dominant force
of state apparatuses such as the government itself, the courts, the laws, the police,
the entire defense system and the prison cells; they impose physical violence on the
working class for the continued reproduction of “relations of exploitation.” Hence for
Marx the state apparatus is a “ „machine‟ of repression, which enables the ruling
classes… to ensure the domination over the working class, thus enabling the former
to subject the latter to the process of surplus-value extortion (i.e., to Capitalist
exploitation)” (Althuser, 1971: 137). As a force of violence, Marx sees the state
apparatus as the organ of domination and of oppression of the state over another
class. Lenin, citing Marx, explains the RSA in this manner: “According to Marx, the
state is an organ of class domination, an organ of oppression of one class by
another; its aim is the creation of „order‟ which legalizes and perpetuates this
oppression by moderating the collisions between the classes” (Lenin, 1943:9). Even
the acknowledged father of capitalism admits of governments as the guardian of
property rights against those who do not own the productive forces of production.
Adam Smith writes:
Civil government, so far as it is instituted for the security of
property, is in reality instituted for the defense of the rich against
the poor, or of those who have some property against those who
have none at all.
In the same fashion as Adam Smith, Marx has demonstrated that Civil
government or the whole edifice of the superstructure are intended to preserve the
property relations in the whole mode of production in favor of the capitalist class.
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The Mode of Production
For Marx, any capitalist system must engage in the production and
distribution of goods and services. For the capitalist system to perform this twin
economic functions, it must have tools of production or the productive forces such as
land, machines, raw materials, factories, transport system, digital or IT data-system
and other tools of production; it must possess the competence and character to
manage the distribution functions and channels of distribution through its outlets in
the market place. The means of production and labor relations in regard to the
production process comprise what Marx calls the “Mode of Production of material life
(that) conditions the social, political and intellectual life process in general” (Karl
Marx, “Preface to A Contribution…,” 1968:181).
In the “Preface,” Marx asserts that the productive forces must “correspond to”
to the relations of production, for the failure of the relations of production to conform
to the state of development of the productive forces will result in a sharp
contradiction. For Marx, it is these relations of production that determine the “class”
position or the “class” status of people in society. If one is the owner of the means of
production, then he/she is the capitalist who belongs to the “bourgeois” class, or if
one is the non-owner, then s/he is the worker who belongs of the “proletarian class.”
Those two classes are in perpetual conflict in the economic base over the question of
wage and surplus value. For Marx then the term class must be understood in regard
to the relations of production rather than in terms of the Parsonian income
categories. Thus, Marx provides two simple formulas for the capitalist class and for
the working class:
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1. The labourer must sell his labour or some other commodity to get Money to
buy Commodities with which to live, i.e., C-M-C.
2. The capitalist uses his money to buy commodities, including labour to make
more money, i.e. M-C-M (see Michael Barrat Brown, 1972: 130).
Because the Capitalist is driven by the desire to sell or make a profit, s/he
tends to expand his/her market and reduce cost by the effective application of
modern technology, overtime arrangement, and improvising on the productive
capacity of labor. The capitalist can neither reduce the wage of the workers nor can
he sell at higher prices, or both workers and buyers will leave his business. Brown
summarizes some important points in regard to the capitalist drive for a sustained
profit over a long period of time:
Each capitalist must make sure that his products sell and sell at a
profit. Each will try to widen his market and reduce his costs. Xxx
what he cannot do in a competitive system is to pass on his losses,
by raising prices as a merchant may, or by lowering his payments to
labour beyond a certain point or he will loss his customers in the
first case and his labour in the second. He is thus driven to reduce
cost by improving his machinery and widening the market for his
product (M.B. Brown, 1972: 130).
Driven by his desire to maximize profit beyond the regulated minimum wage
scheme, Marx identified two important mechanism to improve surplus value in Book
1 of Capital: (a) “absolute surplus value (which is obtained by an increase in working
hours, without a corresponding increase in wages) and (b) relative surplus value
which is obtained by a decrease in the cost of upkeep of the workers brought about
by an increase in the productivity of labour in those branches of industry which
produce the means of subsistence for the worker and his family” (Maurice Godelier,
1978: 348 emphasis mine). The first surplus value expansion is also obtained by
“sub-contracting” a labour agency to skirt welfare benefits and other leave and
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economic privileges that go with maintaining a regular employee. The second
approach to surplus value reproduction is obtained by “investing for the future” in
what Kaplan and Norton (1996:127-146) calls the “three categories for the learning
and growth perspective: employee capabilities, information systems capabilities, and
motivation, empowerment, and alignment” because these are the perceived
strategies of the capitalist to “deliver the desired long-term economic performance.”
But how is the “production of surplus value” or the “unpaid labour” determined?
Production of Surplus Value
For Marx, Capitalist and government conspire in making the people believe
that workers are paid by wages as the price of labour rendered in the production of a
commodity, whereas profit is a product of the money they invested in production.
Marx calls this a conspiracy in the reproduction of “false appearance.” Marcuse calls
this the reproduction of “false reality.” For Marx, both wages and surplus value are
“the value of the labouring power (that) is determined by the quantity of labour
necessary to maintain or reproduce it, but the use of that labouring power is only
limited by the active energies and physical strength of the labourer” (Karl Marx,
“Wages, Price, and Profit,” 1968: 209). Wage then is the value of labour spent in the
production of a commodity but which is realized in the first six hours of the 12-hour-
day of work while surplus value is the unpaid labour that goes to profit for the
capitalist; this surplus labour is realized for working in the second half of the twelve-
hour-day of work. Wage is the price that is paid to labour expressed in money,
equivalent to 50 percent of the 12 hours day of work (Ibid).
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One single dogma in capitalism is that “The prices of commodities are
determined or regulated by wages.” For Marx, wage is the price of labour; hence,
prices are “formed first by wages.” Since wage is the price paid for the price of
labour, then, as Marx points out, “the prices of commodities are regulated by the
price of labour” (Marx, “Wages, Price, and Profit,” 1968: 199). Marx maintains that
as price is an exchangeable value expressed in money, “‟then value of commodity is
determined by the value of labour,‟ or that “ „the value of labour is the general
measure of value‟.” The question is how is the value of labour determined? For
Marx, “… the value of labouring power is determined by the value of the necessaries
required to produce, develop, maintain, and perpetuate the labouring power.” For
example, Marx holds that if “the average amount of the daily necessaries of a
labouring man require six hours of average labour for their production,” and if he is
paid 3s for “six hours of average labour to realize a quantity of gold,” then “3s would
be the price or the monetary expression of the Daily Value of that man‟s Labouring
Power”(“Wage, Price, and Profit,” 1968:209). In this case, no surplus value or
surplus produce would go to the capitalist in the first six hours of a day of work.
Because the capitalist pays the worker for the twelve-hour-day of work and because
the labour would get another 3s for the other six hours, then the surplus value or the
surplus produce equivalent to 3s that is realized in another six hours of work will go
to the Capitalist (Karl Marx, “Wage, Price, and Profit,” 1968:211).
When, according to Marx, “even the unpaid labour seems to be paid labour”
for the total aggregate labour of twelve hours of work, there is then the “false
appearance” of paid labour (Ibid). In reality, Marx explains that unpaid portion of
labour “constitutes exactly the fund out of which surplus value or profit is formed.”
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Thus, Marx concludes that “The rate of surplus value… will depend on the proportion
between that part of the working day necessary to produce the value of the labouring
power and the surplus time on surplus labour performed for the capitalist” (Karl
Marx, “Wage, Price, and Profit,” 1968:210). Since as to profit “there is no law which
determines their minimum,” we can only say that “the maximum profit correspond to
the physical minimum of wages.” Finally, Marx sees the continuing struggle between
“the capitalist tending constantly to reduce wages to their physical minimum, and to
extend the working day its physical maximum, while the working men constantly
presses in the opposite direction” (Karl Marx, “Wages, Price, and Profit,” 1968:223).
Such is the source of an evolving contradiction which workers will fight it out for their
own liberation from surplus exploitation.
Karl Marx came up with the conclusion toward proposing the following
resolution:
1. “A general rise in the rate of wages would result in a fall of the general rate of
profit, but, broadly speaking, not affect the prices of commodities;”
2. “The general tendency of the capitalist production is not to raise, but to sink
the average standard of wages;” and
3. “Trade Unions work well as centers of resistance against the encroachments
of capital, … using their organized forces as a lever for the final emancipation
of the working class, that is to say, the ultimate abolition of wage system”
(Karl Marx, “Wages, Price, and Profit,” 1968:225) — a prediction that has not
taken place in modern — day advance capitalist countries.
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This conclusion tells us that the first prediction has led rich countries to export
capital by colonizing other countries and exploit them. The second prediction may
have failed in advanced countries but true in the Third World economies, and the
third prediction is a true and false reality. It is true because Trade Unions manage to
improve the share of the labour created surplus value; this results in the falling rate
of profit in modern capitalist countries; it is false because Trade Unions have never
successfully removed the wage system. What is more true is that according to Marx
the improved living conditions of workers in the rich countries is the cost of worker
starvation in the imperialized countries. And this starvation may be worsened when,
as Marx predicted in his Notes on Machines, the Capitalist will apply high technology
and science for mass production; few workers are absorbed as mere button
regulators while many are thrown out of jobs (Fisher, 1970:106,fn).
The whole intellectual exercise accounts for the broad stroke of Marx‟s
general theory and the science of it. My next task is to account for the mass
“pauperization” in the Philippine social formation.
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PHILIPPINE SOCIAL FORMATION
Introduction
The Philippine social formation has its historical origin in communal times,
i.e., before the conquest, when the community owns the basic tools of production
and when production for “use value” was still the collective endeavor (Agoncillo,
1990:22). The chieftain had to produce his own food, clothing and shelter. This
system was transformed into a feudal structure with the introduction of the
encomiendas by the Spanish colonizers, and at the same time were made to produce
crops for exports through the Galleon trade. In some parts of the archipelago,
“serfdom” and surplus labor exploitation through corvee labor was applied on our
ancestors, to whom wealth extraction by exploitation and control by tyranny and
Spanish religious damnation were used to hold our fore-parents by their noses for
fear of banishment and physical extinction. Surplus labor and surplus product
sparked the long years of resistance from a “campaign for reforms” to rebellion and
revolts in many places, punctuated by the sharp contradiction as manifested in the
Philippine Revolution towards the end of 1800 (see Agoncillo, 1990).
Then came another imperial American occupation in the Island. The
encomiendas were converted into haciendas for large-scale economies of fruit
production, sugar cane and tobacco plantations or the production of other crops for
exports. All were produced for “exchange value,” as rice and corn lands were placed
in the hands of the few middle class under a tenant-landlord and patron-client
relations both for “use-value” and for “exchange value.” A civilian government was
instituted beginning in 1903 with William Howard Taft as the appointed first Governor
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General of the Island. The aim of this Civil government was to maintain peace and
order, to collect taxes, and to exercise the power of eminent domain by the
application of the combined repressive organs of the state (such as the militarization
program of Gen. Otis, the promulgation and enforcement of the Sedition Law of 1901
and the Flag law of 1907, etc.) and by the adoption of the ideological-political state
apparatus of the state (such as the guarantees of individual freedoms, the concepts
of “benevolent assimilation,” democracy and electoral processes, the Payne Aldrich
Act of 1909, etc) in order to covertly produce and reproduce the existing relations of
production dominated by the American occupants.
A democratic-republican form of government based on the free-market
economic system was introduced through the Payne Aldrich Act (Free Trade Law), the
1935 Philippine Constitution, the Bell Trade Act of 1946, the Parity Rights Law, the
Laurel-Langley Agreement in 1954, the Macapagal Decontrol Law of 1962, the
Omnibus Investment Incentives Act for multiple tax exemptions granted to foreign
investors, the Import Liberalization Law, VAT, etc.). All these state organs were and
are designed to sustain the relations of production within the purview of the
American free-market framework, which nature, according to Marx, is to push wages
low to correspondingly raise profit for wealth accumulation. The process of capital
accumulation is aggressively pursued through “… the application of… science to
production” and force “the surplus labour of the masses (to) cease to be the
condition for the development of the general wealth….” [Karl Marx, Notes on
Machines in footnote of Ernst Fischer, 1970: 106). Together with the unregulated
flow of capital in and out of the country, the general capital accumulation in the
Philippines has resulted in the financial crisis of the 1980‟s and in the late 1990‟s.
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Politico-Ideological Forms
Karl Marx describes the politico-ideological forms collectively as the
“Superstructure” or “an organ of domination” and “oppression of one class by
another” for “the creation of „order‟” (Marx, “Preface…,” p. 182; see also Lenin, 1932
and 1943, p.9). American Sociologist C.W. Mills describes it as the “Power-Elite”
structure which composes the “small groups of elites (who) control most of the
governmental decisions that influence national policies (and who come from)… the
heads of giant corporations, top officials in the government, and key military
personnel” [Mills, The Power Elite (1956) as summarized in J. Victor Baldridge, 1975:
263]. Below these major elites are their “intermediaries” or as Baldridge points out
the “middle-range elites” (e.g. Congressmen, local government officials, and lower
members of the military) who “…carry out the orders of the power elites” (p.263).
In political science terminology, they (the major and the intermediary elites)
are called the “Government (or) persons in governmental elite and non-elite roles”
who “exercise” legitimate power, authority and influence in order to carry out the
state functions (Reece Mc Gee, et al, 1971: 471-472). However, some powerful
business organizations found outside of the government elite roles carry out their
“distinctive interests which may or may not coincide with the tasks and functions of
formal government” by exercising their “illegitimate power, authority and influence on
persons in governmental elite and non elite roles” (Mc Gee, 1971:472). They use the
Government superstructure to intensify wealth accumulation.
We now can see how the Philippine “Superstructure” just exactly reflects what
Marx or Mills or Mc Gee has observed of the political processes during their times.
The composition of the Arroyo Government has shown that it is a composite of three
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small groups of people who are Presidents and CEOs of big businesses in the
Philippines, top official of the government and key military personnel (see cabinet
members of the Philippines). They operate with the “middle-range elites” in Congress
who implement their decisions through the local government elites who comprise the
political machineries at the precinct level.
The present Secretary of the Department of Interior and Local Government
(DILG) was chair of Pacific Sunrise Int‟l. Holdings, Inc. and Chair of the Board of his
family business — North River Mount Ranch in Virginia, U.S.A. The Secretary of
Finance was Chairman and CEO of the Economic Forecasting Agency Think Tank, Inc.
and member of the powerful Makati Business Club.
The Secretary of the Department of Trade and Industry (DTI) was Top
Professional manager of Manufacturing Financial Services and Int‟l. Trade, Chief
Finance Officer (CFO) of the Ramcar Group, and Auditor of a giant accounting firm,
SGV and Co. The Press Secretary was consultant to the publisher and became editor-
in-chief of the Manila Bulletin. The secretary of the Department of Environment and
Natural Resources (DENR) was manager of Market Place Philippines and
Wunderworld Services, Inc. and founder of his own business, EPO Market Movers; he
has links with the World Bank for having been elected Chair of the Host Country
Committee by the General Assembly of the World Bank‟s Carbon Finance Unit in
2008 in Germany. The former Secretary of the Department of Public Works and
Highways (DPWH) established his own San Gerardo Green Meadows Realty
Corporation and became its President and CEO. The Chairman of the Commission on
Filipinos Overseas (CFO) bought the prestigious newspaper, The Manila Times and
organized many businesses related to printing, real-estate, farming, trading and
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became a “big-time publishing” entrepreneur. “In 2002, he became Chairman of a
thrift bank."
The same Arroyo Government is ruled by a few people who come from top
officials in the government. President Arroyo was Vice-President who became
President by a “people power” elite brokers; imprisoned her political elite rival and
years later released “not guilty” as charged. The Secretary of the Department of
Foreign Affairs (DFA) was former President Aquino‟s Secretary of Budget and
Management (DBM). He was Chairman of the powerful Development Budget
Coordinating Committee (DBCC), member of the Monetary Board, and Chair of the
Cabinet Oversight Committee and International Security (COC-IS); he was a Senate
Majority Leader, too.
The last of the three small groups that comprises the Arroyo Government
comes from the Key elements of the military. A graduate of the prestigious Philippine
Military Academy (PMA), the present Executive Secretary was former METROCOM
Commanding Officer, former provincial police Chief, PNP Director General and later
became PNP Chief before he became the former Secretary of the Department of
Transportation and Communication [DOTC]. The Secretary of Energy was Chief of
Staff of the Armed Forces of the Philippines and became the Secretary of National
Defense, and the immediate past Executive Secretary. DPWH Secretary Hermogenes
E. Ebdane, Jr. is a retired General, a former National Security Adviser and a former
Chief of the Philippine National Police (PNP). Executive Secretary Eduardo Ramos
Ermita was former Deputy Chief of Staff of the Armed Forces of the Philippines, and
former Undersecretary of National Defense. They form a cohesive Elite
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superstructure who may not necessarily conspire but act concertedly towards a
power bloc preservation.
We see that these elites circulate from one cabinet position to another with
some interlocking elite roles and with distinctive common interests which may or may
not coincide with the formal functions of governance. Together, they compose the
Arroyo Government Elite structure which makes national economic policies that. in
turn, shape the structure of the economy and the life of the people.
Among the “intermediary elites” in Congress, we have key people whose
distinctive interests are tied to logging and mining businesses, real-estate firms,
banking and finance, and big landed estates either as owners or scions of big land
owners in the provinces. Most of these interests are obstructing the realization of a
genuine comprehensive Land Reform Law in the Philippines. For instance, Business
World columnist Oscar Lagman, Jr. identified about nineteen major provincial
landowners who inhabit the lower House of Congress (Lagman, Business World,
March 30, 2010). With this powerful landed bloc in the Lower House, how is it
possible to legislate a genuine comprehensive land reform program that will
redistribute the source of their wealth accumulation in order to improve the income
of the farmers in their respective political subdivisions?
Others in the “middle-range elite roles” use their positions in the Lower House
of Congress to formulate laws that will secure access of their real-estate and banking
businesses‟ to government funds. According to UP economist Solita C. Monsod,
although the Constitution prohibits government-owned or controlled bank or financial
institution to extend “‟loan, guarantee, or other form of financial accommodation for
any business purposes… to the President… members of the Congress… or to any firm
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or entity in which they have controlling interest, during their tenure,‟” real estate
companies owned by the former speaker of Congress were “given financial
accommodations by PAG IBIG, National House Mortgage Finance Corp., among
others, during Villar‟s term as representative from 1992 to 1998 to finance their
business purposes.” (Solita C. Monsod, Business World, Feb. 4, 2010).
According to Monsod, “Villar‟s bank, Capitol Bank, which he controls and in
which his wife is the chief executive officer, „received loans, financial
accommodations, and guarantees from the Bangko Sentral ng Pilipinas‟, also
between 1992 and the present (1998)” (Ibid). Furthermore, “Manuela Corp., a
housing and realty Corporation owned by the family of the wife of speaker Villar, was
granted loan of Php 1 billion by the SSS, with another Php 2 billion loan syndicated
with GSIS (for a total exposure by these two institutions to Manuela of Php 3 billion)
— an indirect financial accommodation…” (S.C. Monsod, Business World, February 4,
2010, p.4). The Speaker got all these accommodation despite violation of RA 6713
— Code of Conduct and Ethical Standards for Public Officials…” and RA 3019 — Anti-
Graft and Corrupt practices Act…” (Ibid,, p. S1/5). Villar was able to violate those
laws because he was able to enact and to incorporate “the recapitalization of the
National Home Mortgage and Finance Corporation‟” to the landmark Comprehensive
and Integrated Shelter Finance Act, RA 7855 and “‟the amendment to the Anti-Agra
Law to include housing investment‟” (Ibid.). Both laws provide financial and
economic guarantees or favors and advantages to real estate and bank owners by
members of the power elite structure in the Arroyo Government. This power block is
enough to confirm US President Woodrow Wilson‟s thesis in his book The New
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Freedom that the combined captain of businesses are the captains of the state
apparatuses that „dominate” what Marx claims “one class by another.”
But immediately below the thin layers of state power structure is the country‟s
machine politics which compose the “private armies” and the LGU politicians
operating at the precinct, city, town and provincial levels; they are organized in what
Robert B. Stauffer calls “corporatist organization.” Political machines are operators of
power preservation of the superstructure at the village level of the country. These are
well maintained through patronage funds and well armed private armies nationwide.
Machine Politics
The term machine politics suggests a reliable and repetitive control of
barangay voters within a particular jurisdiction. The structure is hierarchically ordered
patterns of elite-voter relationships that suggest how material rewards and incentives
are distributed (Rivera,1985). Michael Johnston (1979) describes this relationship
as “a well ordered, smoothly working patron-client organization,” characterized by
factions in small groups of barangay and precinct leaders actively working for the
elite structure of the ruling class that “converts the products of public authority into
rewards for the faithful” (Ibid). In turn, these faithful groups turn out the votes and
other forms of political support to their patrons in the superstructure to legitimize
their positions in the central government. Thus, one notable feature of machine
politics, according to James Scott (December, 1965), is that it is “blatantly corrupt,
costly, and encourages petty graft, which, in turn, exemplifies the effects of machine
pressures in road building and other developmental schemes among developing
nations.”
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The Philippine government is founded on the principles of republicanism and
democracy. Both principles demand accountability and the rule of law. Accountability
and the rule of law are twin mechanisms of democracy. Today, these principles are
at odds with the eco-political reality. The perceived corruption in the Superstructure
of governance involving high officials corresponds to the public perception of the
erosion of accountability in governance. For instance, the top thin layer of elites in
our society, which Sec. Romulo Neri describes as the “Filipino Oligarchs,” is involved
in multimillion graft and corruption at the average of “20% kickbacks on all
government projects,” according to the World Bank Study in 2000 and in SWS Survey
in 2004 (Business World, February 11, 2008). At 20% kickbacks on all projects, the
Makati Business Club estimated a “Php 30 billion leakage to graft and corruption” in
year 2008 (Business World, Feb. 11, 2008).
In regard to the rule of law, the present government puts together “Php 4
billion unauthorized spending authority broken down as follows: Pantawid Kuryente
Program Php 2 billion, Pantawid sa Edukasyon worth Php 1 billion and another Php 1
billion for loans available to public transport owners for engine conversion from
gasoline or diesel to LPG” from VAT (B. Diokno, Business World, June 18, 2008). Also
major projects such as Cyber Education Program, graft ridden National Broadband
Network, Southrail and Northrail projects were exempted from Republic Act 9184
(Government Procurement Act) and these big projects were placed outside of the law
(Business World, February 21, 2008). These soaring practices of graft and
corruption in “conspiracy” with foreign big business corporations, in addition to
placing major projects outside of Procurement Law processes are a mockery to
people‟s trust on the Philippine elite structure and law which only work for more
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wealth accumulation of the dominating class against the mass-starving Filipino
households.
Political machines are also maintained by well armed private armies who
terrorize the countryside and ensure the required political support in terms of votes
that legitimize their seat in power. In 1993, The Economist, according to UP
Professor Solita Monsod, reported the police account of “ „562 private armies [that]
terrorize the countryside with almost 24,000 men and 11,000 guns‟ ” (Solita
Monsod, “Private Armies,” Business World, January 28, 2010). Monsod calculated
about “43 men per army.” Monsod writes that the police statistics “… would come
out to an average of more than three private armies for every city and province
existing at the time, and an average of about 43 men per army” (S.C. Monsod,
Business World, January 28, 2010). Although Monsod found Defense Secretary
Norberto Gonzalez‟ report of reduction in number of private armies from 562 to132
private militias with 10,000 men “mysterious,” the fact remains that the Philippine
National Police is one “”in agreeing that there are 170 private armies operating
across the country …” (Monsod, Business World, January 28, 2010 S1/4).
The Maguindanao massacre in November 2009 was the most bloody killing
ever inflicted against the 57 civilians and journalists by a well funded and well armed
private army which is working for the elites in the Philippine Superstructure. The
same militia was alleged to have engineered an electoral fraud that delivered an
almost 100% Maguindanao votes to President Arroyo against Fernando Poe Jr. in the
2004 Presidential election. This incident reflects not only how powerful political
machineries are in the country, it also shows how deep and expensive does the
superstructure maintain itself up to the barangay level. These political machineries
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do not only “encourage petty graft” which, in turn, exert “pressure on road building
and other developmental schemes” such as the fertilizer program to boast
agricultural productivity, it is also an institutional expression of the superstructure to
preserve itself via the preservation of the existing relations of production in the
economic base.
The Philippine Economy and Financial Crisis
Basically, the Philippine economy is a product of American direct and indirect
colonial administration. This economic structure was historically intended to convert
the Filipino economy into the “backyard garden” of the American economy for a
perpetual source of “surplus value.” As a “periphery,” the Philippine economy suffers
from three major American colonial strategies for its “persistent under-development”:
(a) “exploitation of the periphery by the core,” (b) “structural distortion,” and (c)
“suppression of autonomous policies” (Chase-Dunn,1975:722-724; Theotonio Dos
Santos, 1970). These strategies sustain the American “surplus value extraction”
from the Philippines through foreign investment and thus create the condition for
what Gunnar Myrdal calls the “backwash effect” in the Philippines that leads to what
Gunder Frank calls the “development of underdevelopment” (see Dunn, 1975:722).
Suppression of autonomous policies. The first act of American colonization
and neo-colonization to subordinate the Philippine economy into a source of
American wealth accumulation is the “suppression of autonomous policies” in
government and business to prevent them from mobilizing their resources towards
what Johnson (1972) calls a “balanced development” (Dunn, 1975:724). The
Howard Taft Civil Government was instituted to prepare for the neo-colonization of
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the Philippines through which the U.S. Government can rule the natives through the
Filipino “elite proxies” in the Civilian Government. Sedition Law and Flag Law were
promulgated in 1907 to check on autonomous movement in the country; the Payne
Aldrich Act was also introduced in 1909 and the Bell Trade Act in 1946 to
indoctrinate the local elites into free-trade and “politically prevent the introduction of
tariffs which would protect infant industries against the competition of already
developed producers in the (U.S.)” (Dunn, 1975:724). Floating rate policy binds the
peso to the US dollar in 1950, beginning with the exchange rate of $1.00: Php 2.00
(Lichauco, 1988: 162). President Diosdado Macapagal introduced the Decontrol
Law in exchange for a $300 M dollar loan from the U.S. and the IMF-World bank
group to “… remove the system of control … involving the use of foreign currency”
such as import transactions, royalty payments, remittances of profits, earnings and
dividends by foreign companies from their Philippine operations…” (Lichauco, 1988:
140). Through the “Decontrol Law,” the nation lost US $ 1B in trade deficit and
another US $ 1B in capital flight, or a total decapitalization of US $ 2B in just one
year of implementation (Lichauco, 1974: 24).
Together with the Foreign exchange policy, the Decontrol Law that
decapitalizes the Philippines provides the ground for peso devaluation in favor of the
US dollar through the policy of “floating rate.” This devaluation increases our foreign
borrowing without necessarily obtaining the actual loan. The Manila Times (May 29,
1989) demonstrates the raw truth of devaluation, according to the NMCL Bulletin
(v.2, n. 23, 1989):
Assuming our foreign debt is $27.8B, our debt burden will increase
by Php 278M for every centavo devaluation of the peso. In terms of
export, “we must export Php 278M more worth of goods to pay the
old amount in dollars to cover Php 0.01 devaluation.”
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This debt burden and our Decontrol Law that spirals decapitalization of the economy
devalues our peso further to prevent the nation from industrializing.
The clear post World War II mandate to convert the Philippines into a
“peripheral area” of the American economy — that manifests intention to suppress
autonomous policies in the Philippine — started with what 1973 Constitution
delegate Alejandro Lichauco describes as the “conspiracy between elements in
Washington power structure and elements in Philippine society which pass
themselves off as the „nation‟s elite‟ “ (Lichauco, Today, July 23, 2001). The
“conspiracy” has its origin to the post-war “Dodds Report which then President
Truman approved as a basis for America‟s post-war policy in Asia” (Lichauco, Today,
July 23, 2001). Citing 1935 and 1971 Constitutional Convention member, Dr.
Salvador Araneta, Lichauco asserts that “the strategic concept of the Dodds Report
was „to make Japan the industrial workshop of Asia and the Philippines a mere
supplier at raw materials‟ “ (Lichauco, Today, July 23, 2001). Clearly, the U.S.
Government allowed Japan to pursue an autonomous industrial program in
accordance with the Report, making Japan an American ally in Asia, while the U.S.
Government Suppressed the Philippine autonomous policies and nationalist
industrial programs in order to force the Philippines to specialize in agriculture and
the production of raw materials for exports. This U.S. effort to suppress the
Philippine nationalist policies became the foundation of structural distortion, too.
Structural distortion. Samir Amin (1974) describes structural distortion as an
obstacle to national development (Dunn, 1975:723). It is characterized by an
outward oriented economy whereby the “peripheral area” such as the Philippines is
reduced to a mere exporter of raw materials while the “core”” such as Japan and
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America are designated as the “workshop for industrialization.” Such vision was well
articulated by Albert J. Beveridge on January 4, 1900 in the American Senate when
he argued:
“The riches of the Philippines have hardly been touched by the
finger tips of modern method. And they produce what we consume,
and consume what we produce — the very predestination of
reciprocity — a reciprocity not made with hands, eternal in the
heavens.”
“They sell hemp, sugar, coconuts, fruits of the tropics, timbers of
price like mahogany; they buy flour, clothing, tools implements,
machinery and all that we can raise and make. Their trade will be
ours in time” (Reproduced in Bourstin, An American Primer,” New
American Library,1966, quoted by Lichauco, Towards A New
Economic Order and The Conquest of Mass Poverty, July 4,
1986:38).
This vision of core-periphery relationship between the U.S.A. and the
Philippines was later on tied to the Payne-Aldrich Act of 1909 known as the Free
Trade Law. This was enacted by the U.S. Congress in 1909 and “was made the basis
of Philippine-American economic relations (Lichauco, 1986:40). The U.S. Congress
enacted on the eve of Philippine Independence the Bell Trade Act of 1946 which
“required the Philippines to continue and extend the Free Trade relation in exchange
for post-war financial and economic assistance from the U.S. government” (Ibid., p.
41 underscoring mine). The Bell Trade Act then “condemned the Philippines,”
according to political economist Salvador Araneta, “to a „colonial economy‟” (Ibid).
To ensure the vision for structural distortion in the Philippines, U.S.
Government and the IMF-WB Group enticed then President Diosdado Macapagal with
a “stabilization loan of $300 million in exchange” for the Government‟s submission”
to the IMF Charter prohibiting the application of controls on imports and all foreign
exchange transactions” (Ibid., p.42). President Macapagal formalized this
“submission” to Free Trade in his Decontrol Program of 1962. Lichauco points out
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that “under the program we (are) required to eliminate the system of import and
foreign exchange controls which had been in force during the period 1950-1961”
(Ibid., p.42). The Decontrol program then, according to political economist Lichauco,
“… not only reiterated Philippine commitment to a policy of unrestricted importations
but also marked the beginning of the IMF‟s direct involvement in our policy
processes, and the rise of a Filipino technocratic class which would defend and
speak for IMF sponsored programmes” (Lichauco, 1986:42). The condemnation of
the Philippine economy to currency devaluation and the adoption of the floating rate”
in 1969 would make progressively cheaper for foreign investments to buy into the
Philippine economy (Ibid., p.43). According to Lichauco (1986:44-47) “the Labor-
Intensive Export-Oriented development strategy of the Martial Law Government,” our
accession to membership in the GATT, the “Virata 1976 Letter of Commitment to the
IMF as a means of protecting domestic industries” already completed the American
design for structural distortion to prevent the Philippines from developing an
integrated differentiated internal structures to advance the country into becoming
the “workshop of Industrialization.” Under this structural arrangements and policy re-
orientation towards the world market, highly industrialized countries now enjoy
unrestrained exploitation of surplus value from the Philippines. Infrastructure
projects, railways, electrification, processing zones, including tax exemptions are
placed in areas were foreign investments are located so that other sectors in the
economy are never integrated evenly for internal development.
Suppression of autonomous policies. Karl Marx posits another thesis saying
that “… in assessing the situation of workers it was necessary to consider the market
as a whole and that wages of some could rise only because others were starving
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(Ernst Fisher, 1993:124). In a globalized context, Marx still sees the uneven
development among workers through what Emmanuel (1972) calls the “unequal
exchange” of commodities between countries, considering that the two countries
have two different wage structures (Dunn, !975: 722). Another basic argument in
Marx‟s thinking is posited in Frank‟s (1969) thought which holds that “… foreign
investments drain surplus from the periphery (i.e., the Philippines) to the core (i.e.,
U.S.A., Japan, etc.) through the repatriation of profits and interests” (Dunn,
1975:722). The effect is decapitalization in the periphery. In a global context then,
the Philippines is suffering from “exploitation by the core” countries, and with it, as
Marx claims, the rise of wages among workers in the advanced countries
corresponds to starvation in others.
In the Philippines, Edberto Villegas (rev. ed 1983:8-21) documented some
growth of investments since 1946. And what goes with it is the increasing
decapitalization. According to this study, there are 743 fully foreign owned
corporations in the Philippines; they are “incorporated abroad but acquired licenses
here:” 244 were established between 1967 and 1977: of the 244, 144 entered
during martial law (Villegas, 1983:9). Again Villegas (1983) noted in his study that
there are 3,840 domestic corporations registered in SEC since 1946 but 63 percent
of them were incorporated during martial law years. Although Villegas noted that
these companies “have foreign equity, many are 100 percent foreign owned and/or
affiliates of multinational companies (Ibid.).
The U.P. Law Center claims that “for every dollar directly invested by American
corporations in the Philippines from 1946 to 1976, the net profit was $3.58” (R.
Constantino. 1979:38 underscoring mine). The same document discloses that of
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this net profit, $2.00 was repatriated to the home country and $1.58 (is) reinvested
here” (Ibid.). Thus, Constantino concludes that “foreign investors take out more
dollars than they bring through repatriation of profits” so that “during the 30 years
period, U.S. firms „decapitalized‟ the Philippines by $398 million” (Ibid.). In terms of
local use of capital, Villegas cited the Limjoco paper showing that foreign companies
borrowed $100.00 from local commercial banks for every $0.41 they brought into
the country (Villegas, 1983:9). Citing Central Bank Department of Economic
Research(l976), his documentation also shows that from 1972 to 1976, direct
foreign investment had brought into the country a total of $485.1 million but local
borrowing of foreign investors for the same period amounted to $12,433.42 or at a
borrowing ratio of $1.00 is to $25.00 (Villegas,1983). In terms of direct withdrawal of
capital covering profits, earnings and dividends (PED), foreign companies had
repatriated a total of $483.43 million (consisting of $313.26 in PED and $170.12 in
withdrawals from foreign investment between 1972 and 1976 (Ibid., p.10). Thus,
within a period of five years, foreign companies had decapitalized the Philippines by
a total of $483.43 million.
In a globalized context, foreign investment penetration in the Philippine
economy through the free-trade arrangement has drained surplus value from the
Philippines expressed in hard dollars of foreign exchange capital. For example, UP
Law Center‟s Merlin Magallona argued that Philippine trade policy is a “hemorrhaging
policy” (Magallona, Daily Globe, May 29, 1992:5). Citing the UN International Trade
Statistical Yearbook (1991, vol.1). Magallona showed that the Philippines had
incurred an “unbroken trade deficit from 1975 to1989” (Ibid.). In five years then,
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average Philippine annual decapitalization in trade deficits amounted to $1,900
billion for the period.
The country‟s option for agriculture and export oriented economy therefore
made the Philippines economically backward, experiencing what dependency
theorists call the “suppression of autonomous policies,” “structural distortion,” and
“surplus-draining from the periphery to the core.
Furthermore, the Philippines has been experiencing the “hidden exploitation
in the prices at which commodities from the periphery (i.e., Philippines) are
exchanged for commodities from the core (i.e., the U.S. and Japan, for example)
[Dunn, 1975:722]. In the absence of current data, and if we use the U.S.
Congressional Record of November 9,1973 as cited in Renato Constantino(1979:29)
for purposes of estimation, this “unequal exchange” becomes visible if we trade Del
Monte Canned products from Hawaii with the Del Monte Canned products in the
Philippines. The Report shows:
While Hawaiian plantation workers earn $2.64 an hour, Del Monte
pays its Philippine plantation workers 15 cents an hour. Hawaiian
cannery workers get paid $2.69 an hour compared to the 20 cents
an hour Del Monte pays Philippine workers for the same job (see R.
Constantino, 1979:29).
The data show that according to Marx‟s concept of surplus value, the cost of
necessary labor time spent in the production of a canned product in Hawaii, as
expressed in U.S. dollars, is $5.33 while the necessary labor time spent in the
production of the same canned product in the Philippines is only 35 cents. If these
two commodities are traded in this “unequal exchange” process, Del Monte has
extracted $4.98 more in surplus value from the Filipino worker on a per hour basis
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compared to Del Monte‟s surplus value extraction from the Hawaiian workers in the
same unit of time.
In other words, by transferring the American Capital from Hawaii to the
Philippines, Del Monte is able to rake tremendous profits per hour on a per unit of
labor power spent in production compared to retaining their capital in Hawaii at the
cost of experiencing what Marx calls the fate of the “falling rate of profit.” In this
sense, according to Marx, the relatively high wage cost for a Hawaii worker is a
function of starvation of a Filipino worker on a per hour basis in the same production
process. Hence, in a globalized setting, the situations of labor between the two
modes of production are different: while the mode of production in the core
countries can offer better wages to its worker on a per hour basis, the mode of
production in the periphery provides starvation wages on a per hour basis. Finally,
under this unequal exchange, there is an evolving sharp contradiction growing in
capitalism, and this contradiction is getting catastrophic as shown in the financial
melt-down being experienced in the U.S. and in the European Union. The debt-trap
experience in Greece and maybe in Portugal has become increasingly catastrophic,
unless a Marxist fiscal approach through state intervention is used to pump-prime
the Greek economy in order to mitigate the fiscal crisis.
Free Trade and Financial Crisis
Free Trade and Floating Rate policies are twin Ideological State Apparatuses
instituted by the U.S. Government in the Philippine Superstructure through the
mechanisms of colonization, bilateral arrangements, missions, and the assistance of
Filipino western-oriented technocrats and academics. As political-legal expressions,
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they shape the Philippine mode of production into an open, export-oriented economy
dominated by the U.S. transnational companies.
The Philippines had its own import and exchange control of the 1950‟s.
Imports were banned to protect the local industries and we produced for internal
consumption (Former Deputy Labor Secretary Amado Inciong, Today, August 25,
2001). Employment opportunities expanded as businesses and enterprises began to
flourish. The Philippines then experienced the development of “new industrial
enterprises” (Letezia R. Constantino, 1984:1). Constantino writes:
By 1960, Filipino businessmen were doing well in food, wood,
pharmaceutical, cement, flour, textile, paint, paper, glass, chemical,
fertilizer, appliances, electronics, plastic, fuel refinery, intermediate
steel, ship-building, motor vehicle, machine parts, engineering and
other industries. We were starting our own modest industrialization.
Even though some of these industries were only assembly plants for
imported parts, at least the ownership was Filipino and it was a
good beginning.
Efforts to establish an industrial steel in the Philippines were made. President
Macapagal and his economic team exerted efforts to “actively assist the Jacinto
family in putting up (the Integrated steel mill) successfully” by “obtaining a loan of
$62.3 million from the Exlm Bank (of the U.S.)” [Lichauco, Today, August 28, 2004].
However, Pres. Macapagal sensed some forces (notably the U.S. government in
collaboration with the American educated and western-oriented Filipino economists)
who work for the derailment of the project (Ibid.).
By 1962, the Macapagal Administration was led into signing the Decontrol
Law which crumbled the protective measures instituted in the 1950s. Previous
foreign exchanged capital freely moved out of the country at will which, in one year of
Decontrol of decapitalize the country by over $2 billion deficits and capital flights
representing “profit remittances, capital withdrawals, and investments by Filipino
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overseas” (Lichauco, 1973:23-24). The Minimum Wage Law also collapsed by then.
Former Deputy Labor Sec. Inciong correctly said it: “The political, economic and social
reality in which the minimum wage law worked began crumbling in 1962” (Amado
Inciong, Today, August 25, 2001). The Decontrol program flooded the country with
cheap imported goods and destroyed our local industries and thrown workers out of
jobs.
At any rate the first Filipino financial crisis was set in motion when trade
deficits and continuing unrestricted capital flight began to play with the Decontrol
program. It also started to drive the Filipinos into the phenomenon of mass-hunger,
which became really the drive “behind the fiscal debt-crisis in the Philippines”
Lichauco, Today, August 27, 2004).
The Structures for converting the Philippine economy into “outward” looking
was engineered by the U.S. Ranis Mission headed by Yale University Professor
Gustav Ranis during the early 1970s. Ranis then provided “the ideological base to
the export-oriented development strategy” and the hidden philosophy of Filipino
mass-hunger that went with it. In 1969, the Philippine government suffered another
“foreign exchange crisis” (Financial Crisis) which started with an IMF loan of $300
million in exchange for the Decontrol Law; three years after the Decontrol, foreign
debt doubled to $600 million (Lichauco, 1986:42). Today our foreign debt amounts
to Php 443 trillion equivalent to US $8.6 billion. This spiraling national debt has been
used to stabilize the country‟s economy due to massive decapitalization and capital
flight. This paves the way to floating the Philippine currency with the U.S. dollar. The
“Floating Rate” policy finally devalued the peso as well as provided the condition for
dismantling the once flourishing Philippine industries. Job opportunities for the
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Filipino workers collapsed and delivered them out of jobs. Importation of capital and
consumption goods took over and thus provide more job opportunities to the workers
in the industrialized nations.
By 1995, the Philippines entered into full globalization when President Fidel V.
Ramos followed or acceded to the World Trade Organization for “a miracle” — a
dream for a miracle that “turned out to be a bubble blown into Smithereens by the
globalization-driven Asian economic crisis of 1997” (Amado Inciong, August 25,
2001). Clearly now, the Philippine financial crisis is driven by the Payne Aldrich Act
Free Trade of 1909, the Bell Trade Act of 1946, the Dodd Report of the 1950s,
President Macapagal‟s Decontrol program of 1962, President Marcos‟ Ranis ideology
of export-oriented economy of the 1970s, Virata‟s IMF driven “Floating Rate” and
Devaluation, and then by Ramos and Arroyo‟s full globalization scheme.
All these programs of economic deregulation being institutionalized in the
Philippine Superstructure dismantled the Philippine nationalist protective economic
programs that once induced the Philippines to industrialization for job opportunities
expansion and internal consumption first. They transform the Philippine economy
into an export oriented system through liberalization that “lets transnational giants,
together with their capital goods, in and out of our economy at will; deregulating of
the economy (that) inhibits our government from regulating businesses in the public
interest; and privatization limiting the ownership, control and operation of businesses
to the private sector … dominated by transnational giants” (Inciong, August 25,
2001) at the expense of creating the conditions for backwardness and mass-hunger
in the Philippines.
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SOCIAL FORMATION: BACKWARDNESS, ECONOMIC SLOWDOWN AND MASS -
HUNGER: CONCLUDING REMARKS
Karl Marx‟s General Theory of Social Formation offers a comprehensive
theoretical guide to analyze social systems. This perspective offers a horizon through
which the invisible structure of capitalist system is unfolded from behind the visible
relations. This is consistent with Marx‟s scientific approach demanding distinction
between “the appearance of things and their essence.” As a theory of social system,
Marx saw two irreducible structures: the politico-ideological Superstructures and the
economic base on which the former arises. Although Marx and Engels assert that the
Superstructure influences the forms in the economic base, ultimately the
infrastructure is decisive. For Marx and Engels, all consciousness or ideological
forms, which they said cannot be measured by the precision of the natural science,
and through which we become aware of the ongoing contradiction in the economic
base, are “determined” by the latter — the economic base which can be measured by
the precision of science. This consciousness, according to Marx, must be “explained
from the contradictions of material life: ((M.B. Brown, p.126). Change taking place in
the economic base more or less transforms the whole immense Superstructure.
In the Philippines, the mode of production is a product of colonial impositions
that turns it from a protective inward looking economy producing for consumption
into an open, export-oriented economy dominated by transnational companies. Free
Trade, Floating Rate, Devaluation of Philippine Currency, IMF-Investigated Value
Added Tax, Import-liberalization and economic deregulation, Investment Incentives
Act which hoped for a miracle and turned this hope into economic backwardness,
serious financial crises, joblessness and mass-hunger are ideological legal forms in
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the Superstructure. In the sense of Marx, the economic contradiction of the forces
and the relations of production in the economic base explain the entire immense
political- ideological forms, which, in turn, are nothing but legal expressions of the
productive forces in the Philippine Mode of production. In the context of globalization,
the Philippine economic backwardness explains the situation of Filipino workers in
mass-hunger only because workers in the core countries enjoy the luxury of high
wages. According to Marx, “the wages of some (i.e., workers in rich countries) could
rise only because others (Filipino workers) were starving” (Ernst Fischer, 1973:124).
Backwardness and Mass Hunger
There are a number of socio-economic and political challenges burning right
under our noses. The most basic of these challenges is our incapacity to produce the
most basic tools in order to carry out even the most ordinary economic activities in
the country such as gardening, sewing, making of bolts and nuts, wire brushes, wood
screws, electrical wiring accessories, electrical light fittings, plumbing accessories
and fittings, or even leather footwear, and etc. In other words, we failed our country
to industrialize and our policies have opted to pursue “import liberalization” and
“export agriculture” which enable giant multinational companies, cronies in sugar,
coconut and bananas to “extract billions of pesos from Philippine export agriculture”
(PDI, April 29, 1995:4) and take the path of impoverished economies of an agrarian
society. Nobel prize winner — Gunnar Myrdal — had described this situation in his
book Asian Drama as the phenomenon of “backwardness.” The abysmal failure of
our program for poverty reduction speaks well of our economic “backwardness”
where, according to the FNRI-DOST research report on November 2, 2003 issue of
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Today, “8 out of 10 households are hungry” and this translates to 80% of our Filipino
households who are suffering from mass hunger. This poverty condition has
worsened as a consequence of the present crisis. Cielito Habito describes this crisis
as “slowing economies” of surging prices and slowing down of production and job
growth (Cielitio Habito, Philippine Daily Inquirer, June 8, 2008). In April this year the
government reported” some 2.9 million Filipinos (who) found themselves jobless.”
Our unemployment rate of 8% this year compared to last year‟s 7.4% (Business
World, June 18, 2008:1) indicates an increase in mass hunger. This tradition of
mass hunger signals the real “backwardness” of our Philippine Economy.
In the Philippines, we failed to consider these hard facts of patriotism to
protect our domestic market and instead embraced the free-market system since
1909 through 1962. And it is this free market system and economic deregulation
that created the recurrent economic “slowing down” and mass hunger throughout
the land: the serious capital flight in 1963, the economic slowdown during the
Marcos era, the 1992 economic and political uncertainties, the Asian Crisis in 1998
(which hit the Philippine economy), the Philippine “fiscal-debt crisis” in 2004, and
economic slow down, political disorder and safety in 2008.
Slowing Economies and Mass Hunger
The economic uncertainties and mass-hunger brought about by the slowing
economies are consequences of “surging prices, production and jobs growth”
(Habito, PDI, June 8, 2008). At the base of these uncertainties is our backwardness,
because even before this economic crisis, mass-hunger had already recurred in the
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country. Economic slow down has only worsened the phenomenon of mass-hunger in
the Philippines.
The possibility of double-digit-inflation rates force consumer purchases of
goods and services to slow down and thus immobilize the single biggest impetus —
consisting of 70% of total demand — for production in the economy (Habito, PDI, June
8, 2008; B. Diokno, Business World, June 4, 2008:4). Inflation rate drivers such as
oil price hike and higher food prices remain unabated and these drivers pressure
inflation rates to go up in the coming year. In April, 2008, food inflation statistics was
recorded at 12% and rice inflation of 25% (Business World, May, 2008). Thus, our
almost unbroken trade deficits in the past 25 years (NSO), our „waning
competitiveness of exports,” and the BSP‟s failure in “taming inflation” make the
Philippines “most vulnerable economy in Asia, next to Vietnam, “according HSBC‟S
Chief economist (Business World, June 27-28, 2008).
The Philippine economy has been dependent on the American economy for
years. Contrary to expectations of government authorities for a quick turn around in
the economy with higher growth, higher inflation rates will still be with us (M. Teves,
Business World, June 17, 2008) for another year, as “U.S. economy likely won‟t
improve until summer 2009, with more layoffs and higher inflation looming…”
(CNNMoney.com, “Economic rebound at least a year away”). As inflation rates go up,
workers will likely press for higher wages and, in turn, businesses cannot resist the
demand for another wage hike. Higher production costs follow and force businesses
to cutbacks in both their outputs and workforce (Habito, PDI, June 8, 2008). Cutting
the business work force increases mass-layoffs and mass-hunger.
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This leads to another economic problem — high interest rates. As inflation
rates increase, the Bangko Sentral responds by “tightening money supply and raising
interest rates” so that investments are curtailed and production growth dampened
(Habito, PDI, June 8, 2008). The ultimate recipients of these three “downside risks”
are the ordinary people who have nothing to fill in their turbulent, empty stomachs.
This economic situation has led to the growing “pessimism” among the Filipinos. The
SWS Survey showed that 23% are pessimistic that their “personal quality of life
would get worse, a plunge from 16% previously,” while “pessimism about the
Philippine economy… worsened to 45% from 37% previously… (Business World, June
10, 2008:1). The economic slow down and the people‟s pessimism on the ability of
the government to provide livelihood services to improve their quality of life put
pressures on the environment. The people tend to over exploit the environment
because of the country‟s paucity of livelihood opportunities.
Our economic backwardness, financial crisis, slowing economies and mass-
hunger are manifestations of catastrophic contradiction of the Philippine material life
process. While they express the consequences of politico-ideological and legal
expressions in the Philippine economic base, the opening of the Philippine economy
to foreign investment, as well as containing the development of our industrial
capability through free made, export-oriented and floating the Philippine currency to
the US dollar will continue to devalue the peso only to increase the wages of workers
in the “core” countries. Our Filipino workers are thrown out of jobs and to suffer
mass-hunger along with the death of our industries. Therefore, our leaders‟
shortsightedness and lack of patriotism to resist western politico-ideological and
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legal impositions have brought us into this social formation sitting on a catastrophic
contradiction.