This material originally appeared as a chapter in W. Bello and J. Chavez (eds.) State of Fragmentation: The Philippines in Transition. Bangkok: Focus on the Global South.
This entry is the first in a four-part serialization.
The past decade had been incredibly good for Filipino capitalism. In 2000, the combined profit of the thirty companies comprising the PSE composite index stood at PHP 26.1 billion. By 2010, it grew to 304.23 billion, or an increase of 635 percent in real terms. Within the same ten years, the Philippines’s gross domestic product grew by only 59 percent (see Table 1). In 2006, when Forbes began publishing an annual list of the richest Filipinos, the combined net worth of the forty wealthiest Filipinos was US$16 billion. By 2010, their fortunes were collectively worth 22.8 billion dollars, an increase of 32.3 percent in real terms. In comparison, GDP per capita increased by a mere 13 percent within the same period. Far from depending exclusively on the Philippine market, several of their conglomerates are presently embarking on ambitious foreign expansion plans. Henry Sy’s SM Prime is presently planning to open five more malls in China within the next three years; the Gokongweis’ Universal Robina is eyeing a factory in Burma, which would follow successful investments into manufacturing in Thailand, Vietnam, Malaysia, Indonesia, and China; and San Miguel Corporation, as part of its plan to bring total sales to one trillion pesos by 2013, is planning to put up plants in Burma, Cambodia, and Laos.
This was by no means an expected outcome. The 2000s was a very turbulent decade for business: it began with Philippine capitalism in serious crisis, with the economy still reeling from the Asian financial crisis of 1997-8. The initial contraction, at half a percent, was mild compared to the severe drops seen in the rest of middle-income Southeast Asia. But an anemic recovery, coupled with a hollowed-out neoliberal state unwilling and unable to either stem the outward flow of portfolio investments or to spend its way out of the crisis, prolonged the economy’s stay in the doldrums, culminating in a fiscal crisis in 2005. For much of the decade, the country was also in the grips of a political crisis. The impeachment trial of Joseph Estrada, the subsequent revolt of middle Manila, and the installation of Gloria Macapagal-Arroyo in 2001 proved to be only the beginning: as the decade wore on, Arroyo’s questionable mandate increasingly became illegitimate, and would echo throughout the decade as a rigged election, mass mobilizations, and the reanimation of an adventurist, impune military. Finally, its closing years saw the global capitalism erupt in a systemic crisis that it has yet to emerge from.
TABLE 1. The Philippine economy versus PSE Composite Index company net incomes, 2000 and 2010.
Taking a longer-term view, the success of Filipino capitalists is even more surprising considering how the established modes of building fortunes in this country have steadily been eroded over the past three decades. Cash crop export, which had been the economic bulwark of the landed cacique class, has been in terminal decline for almost forty years. Up until the seventies, the Philippines was by any measure an agrarian, rural economy. During this decade, agriculture accounted for between 27 and 31 percent of GDP, while coconut, sugar, fruit, and tobacco exports accounted for an average of 43 percent of its total exports. But beginning with the expiry of the Laurel-Langley Act in 1974, which ended the privileged access of sugar producers to the US market, a range of factors have made export-oriented agriculture an increasingly untenable capitalist modus operandi. The world market for sugar entered a prolonged period of depressed prices, which saw prices plummet from $0.67 a pound in 1974 to $0.10 in the mid-eighties. Similarly, coconut products traded at an average of 44 percent of 1974 prices from 1975 to 1985. Sugar and coconut monopolies created during the Marcos regime, created partly as responses to this crisis, were mismanaged by his cronies and ended up hastening their collapse. From 1987 to the present, the successes and failures of agrarian reform became another important factor: on one hand, it saw several large estates broken up and redistributed to the tiller; on the other, it precipitated the reclassification of land into non-agricultural uses to thwart redistribution. More recently, the crisis of export agriculture has deepened with the entry of imported produce under a liberalized trade regime, with commitments entered into by the Philippines under the World Trade Organization, as well as in bilateral and regional free trade agreements, rendering Philippine agriculture susceptible to competition from cheaper, often subsidized, agricultural imports. In comparative perspective, the value of Philippine agricultural exports from 1974 to 2010 grew by 16 percent, while that of Indonesia, Malaysia, and Thailand grew by 744, 184, and 2,652 percent, respectively. The Philippines is presently running an agricultural trade deficit with eleven out of its sixteen free trade ‘partners’, has been a net agricultural importer since the mid-nineties, and its agricultural exports have dwindled to less than 1 percent of its total exports.
The past three decades had been equally devastating for domestic manufacturing. The tariff- and quota-based based protection schemes erected to develop a domestic industrial capability, upon which the taipan class had built its wealth, have been effectively dismantled by three decades’ worth of neoliberalization. Re-reading older accounts of Filipino capitalism, such as Kunio Yoshihara’s catalogue of Southeast Asian capitalists in the 1980s, and Temario Rivera’s account of the landlords-cum-import substitution industrialists, reveals the extent to which domestic manufacturing capital has been devastated: the majority of the families, companies and industries which defined ‘ersatz capitalism’ in the Philippines in the early eighties have been consigned to the dustbin of history. In the automotive industry, the niche for domestic assemblers created by import substitution policies no longer exists. Companies such as Delta Motors and Yutivo Hardware, which respectively assembled Toyota and General Motors products for the local market, were among the first casualties of the political and economic crises during the closing years of the Marcos regime. The textiles industry, which built the wealth of a number of Chinese-Filipino capitalists and was once considered a cornerstone of Philippine industrialization, had collapsed from a combination of structural adjustment and competition from textiles smuggled out of export processing zones. By the World Bank’s own estimates, 100,000 workers were laid off in the garments and textile industries alone as a direct consequence of structural adjustment, which was equivalent to 5 percent of total industrial employment in the early eighties. During the height of the Asian financial crisis, the entire cement industry was taken over and remade into subsidiaries of large transnational companies like Holcim, Cemex, and Lafarge. With domestic content laws and tariff barriers either reduced or removed, factories built by multinational companies for the Philippine market ceased to have a reason to exist, and production for the Philippine market has since been relocated elsewhere to factories in ASEAN and in China. The most recent example of this trend is Goodyear, which closed its Las Piñas factory in 2009 after 53 years of operating in the country. Meanwhile, the entry of foreign competitors in the once-protected domestic market has proven ruinous for entire industries, such as the shoe and domestic appliances industries. From 1980 to 2010, imports per capita rose by 134 percent, while GDP per capita merely rose by 26 percent. Finally, state-owned enterprises set up as nuclei for Philippine industrialization have been privatized without even fulfilling their original mandate. National Steel Corporation was snapped up in 2004 by Pramod Mittal, the younger brother of Lakshmi Mittal of the ArcelorMittal Group, but has since folded up. Petron changed hands several times, with majority ownership passing from PNOC, to Saudi Aramco, then to the Ashmore Group, before being acquired by San Miguel Corporation at the end of 2008. These factors, combined with the failure of the country to attract Japanese capital in the wake of the Plaza accord, has meant that the Philippines had deindustrialized in relative terms just as its neighbors embarked on rapid and thorough export-oriented industrial development. At the beginning of the 1970s, the Philippines had the most-industrialized economy among the middle-income ASEAN countries; at its peak in 1983, industry contributed 39 percent of GDP and employed 14 percent of the Filipino workforce. By 2010, however, the Philippines had the lowest level of industrialization among these four countries, contributing only 30 percent of total GDP, while its share in total employment had barely budged and is presently at a little less than 15 percent. What little growth in manufacturing that did take place over the past two decades was in foreign investment-fueled, export-oriented industries located in export processing zones, in which Philippine capitalists have a rather limited involvement.
All told, it is now structurally impossible to amass incredible wealth on either the backs of peasant labor or from a protected domestic market. This situation stands in stark contrast to the 1950s and 1960s, when the wealthiest Filipinos were almost invariably sugar barons, and when the upper echelons of Philippine politics were drawn from their ranks. It is also markedly different from the seventies and early eighties, when an ersatz industrial capitalist class propped up by the Marcos regime dominated the economy. Today, none of the wealthiest Filipinos have significant holdings in cash crops, and although a number of prominent political figures descend from hacendero families, cash crop agriculture is no longer the dominant economic interest among Congressmen and women. With some notable exceptions, the crony capitalists tasked with running the national industries of the Marcos era have been unable to leverage the considerable wealth they amassed into lasting dominance in the economy. More crucially, virtually none of the capitalists from neither of the landowning cacique class nor the taipan class had mobilized their wealth to transition into export-oriented manufacturing, which was a key component of the capitalist transformations in the high-growth economies of East and Southeast Asia.
Looking back, it is easy to see why there was talk among critical circles of the death of oligarchic capitalism at the turn of the century. It was almost a foregone conclusion that the Asian financial crisis and the rescue packages put together by the IMF in its aftermath would be the final blow for the domestic capitalist classes in Southeast Asia: that it would forcibly pry open their home markets for their transnational counterparts. The events of the past decade, however, reveal that this had not been the case for the Philippines and its capitalists. Instead, what has taken place is a reinvention and resurgence of domestic capitalist class power which had taken place despite an erosion of their traditional bases of accumulation, despite a failure to transition into export-oriented manufacturing, and despite conditions of permanent crisis.
How and why have Philippine capitalists been able to flourish over the past decade? How is it possible that despite unfavorable conditions for accumulation in their home market, they are now on the cusp of joining the transnational capitalist class? It is tempting to repeat Andrew Mellon’s observation from 1929, which during the present global economic crisis has taken on the quality of a refrain: that during crises, assets return to their rightful owners. But this opens up even more questions: what is the crisis? Who and what are the ‘rightful owners’, and what were the processes through which assets have ‘returned’ to them?
 Data on the richest Filipinos derived from Doebele, J., Vorasarun, C., Ramakrishnan, J., and Nam, S. (2006). “Philippines 40 richest.” Forbes, 25 December 2006. Retrieved 3 May 2013 from http://www.forbes.com/global/2006/1225/039.html, and Nam, S. (2010) “Special Report: The Philippines’ Wealthiest.” Forbes, 7 July 2010. Retrieved 3 May 2013 from http://www.forbes.com/lists/2010/86/philippines-10_The-Philippines-40-Richest_Networth.html. Data on the Philippine economy derived from The World Bank (2012). World Development Indicators and Global Development Finance. Washington, D.C. Retrieved 20 February 2013 from http://databank.worldbank.org/ddp/home.do.
 Sayson, I.C. (2012) “Billionaire Sy Plans $1.5 Billion Mall Expansion: Southeast Asia.” Bloomberg, 2 August 2012. Retrieved 19 February 2013 from http://www.bloomberg.com/news/2012-08-01/billionaire-sy-plans-1-5-billion-mall-expansion-southeast-asia.html
 Dumlao, D.C. (2012) “URC to open biofuel plant in PH, factory in Burma.” Philippine Daily Inquirer, 19 April 2012. Retrieved 19 February 2013 from http://business.inquirer.net/54581/urc-to-open-biofuel-plant-in-ph-factory-in-burma
 De la Fuente, F.G. (2012) “Beverage bigwigs keen to set up more factories.” Business World, 29 May 2013. Retrieved 19 February 2013 from http://www.bworldonline.com/content.php?section=Corporate&title=Beverage-bigwigs-keen-to-set-up-more-factories-&id=52563
 Data sourced from The World Bank (2012) World Development Indicators and Global Development Finance. Washington, D.C. Retrieved 20 February 2013 from http://databank.worldbank.org/ddp/home.do. The PSE Composite Index is composed of the thirty largest and most-actively traded stocks on the Philippine Stock Exchange, and is revised twice yearly. Data on net income derived from Philippine Business Profiles & Perspectives, Inc. (2001). Business Profiles 2002-2003: Top 7000 Corporations. Pasig City: Philippine Business Profiles & Perspectives and the annual reports of these corporations.
 GDP data drawn from the World Bank (2012), World Development Indicators. Exports data drawn from the National Statistics Office (1997-2010). Philippine Statistical Yearbook..
 Larkin, J.A. (1993). Sugar and the Origins of Modern Philippine Society. Berkeley: University of California Press.
 Borras, S. (2001). “State-Society Relations in Land Reform Implementation in the Philippines.” Development and Change , 32, 545-575; Kelly, P. (2003). “Urbanization and the Politics of Land in the Manila Region.” The Annals of the American Academy of Political and Social Science , 170-187.
 Bernabe, R. (2007). “Bilateral and Regional Free Trade Agreements: Potential Impact on Philippine Agriculture.” Rural Development Review. 1(2).
 Bernabe, R. (2007). “Bilateral and Regional Free Trade Agreements: Potential Impact on Philippine Agriculture.” Rural Development Review. 1(2).
 Borras, S. (2001). “State-Society Relations in Land Reform Implementation in the Philippines.” Development and Change , 32, 545-575.
 Data drawn from National Statistics Office (1977-2010). Philippine Statistical Yearbook.
 For an account of the dominant players in Philippine ersatz capitalism in the early 1980s, see appendices in Yoshihara, K. (1988). The Rise of Ersatz Capitalism in South-East Asia. Quezon City: Ateneo de Manila University Press.
 GM withdrew from the Philippine market in 1985, while Delta Motors closed in 1982; see Yoshihara, 1998:162, 191.
 Ofreneo, R. (2006). “Development Choices for Philippine Textiles and Garments in the Post-MFA Era.” Journal of Contemporary Asia, 39(4):543-561.
 Bello, W., Kinley, D., & Elinson, E. (1982). Development Debacle: the World Bank in the Philippines. San Francisco: Institute for Food and Development Policy and the Philippine Solidarity Network, p. 170.
 Bello, W., de Guzman, M., Docena, H., & Malig, M. (2004). The Anti-Development State: The Political Economy of Permanent Crisis in the Philippines. Quezon City: University of the Philippines Press, p.115.
 Goodyear Corporate website (n.d.) “Goodyear to Close Philippines Tire Plant.” Retrieved 18 February 2013 from http://www.goodyear.com/cfmx/web/corporate/media/news/story.cfm?a_id=20
 Cahiles-Magkilat, B. (2011). “GSPI promises $1-billion new capital but BoI is wary.” Manila Bulletin, 17 November 2011. Retrieved 18 February 2013 fromhttp://mb.com.ph/node/341724/g; Rimando, L. (2012). Philippine loses arbitration case vs Indian-run steel firm.” Rappler, 18 May 2012. Retrieved 18 February 2013 from http://www.rappler.com/business/5579-philippines-loses-arbitration-case-vs-indian-run-steel-firm
 Bello, W., de Guzman, M., Docena, H., & Malig, M. (2004). The Anti-Development State: The Political Economy of Permanent Crisis in the Philippines. Quezon City: University of the Philippines Press, pp. 19-20
 Kelly, P.F. (2000). Landscapes of Globalization: Human Geographies of Economic Change in the Philippines. London: Routledge, p. 54; McKay, S.C. (2006). Satanic Mills or Silicon Islands? The Politics of High-Tech Production in the Philippines. Ithaca: Cornell University Press, pp. 48-50.
 Rivera, T. (1994). Landlords and Capitalists: Class, Family, and State in Philippine Manufacturing. Quezon City: University of the Philippines Press, pp. 50-53.
 Yoshihara, K. (1988). The Rise of Ersatz Capitalism in South-East Asia. Quezon City: Ateneo de Manila University Press.
 Robinson, R., Beeson, M., Jayasuriya, K., and Kim, H., eds. (2000). Politics and markets in the wake of the Asian crisis. London: Routledge: 172-261.