Economic history of the Philippines (1965–1986)

[1][5][6] The dramatic rise and fall of the Philippine economy during this period is attributed to the Marcos administration's use of foreign loans (debt-driven as opposed to productivity-driven growth).

[4]: 123 [25][26] Within this sociopolitical climate, Ferdinand Marcos was able to position himself as an outsider,[4]: 124  using his oratorical skills to promise what one historian would describe as "dazzling visions of rapid growth, impending development, and the alleviation of poverty".

[4]: 123 By picking Fernando Lopez as his running mate, gaining support from the Iglesia ni Cristo voting bloc, and drawing on his wife Imelda, who charmed the vote-rich provinces of her native Visayas, Marcos won the 1965 Philippine presidential election against incumbent Diosdado Macapagal and independent challenger Raul Manglapus.

Marcos had inherited an economy was growing at a steady pace, but he gave the impression of even quicker results by using foreign loans to fund projects.

[4]: 123  Marcos sought to also reshape the private sector by taking advantage of the then-highly regulated economy to favor a select group of loyal businessmen and industrialists.

[4]: 123 With strategic appointments and the systematic use of "behest loans", he elevated the influence of a favored group of industrialists and entrepreneurs[4] : 127  such as Roberto Benedicto, who was put in charge of the then-government-owned Philippine National Bank,[28] and Rodolfo Cuenca, whose Cuenca Construction Company expanded into what became the Construction and Development Corporation of the Philippines in 1966.

Among these technocrats were Vicente Paterno, Rafael Salas, Alejandro Melchor, Onofre D. Corpuz, Cesar Virata, and Gerardo Sicat, who became the intellectual core of Marcos’ cabinet.

[36] This borrowing caused a balance of payments crisis, compelling the government to seek to reschedule debt with the International Monetary Fund.

The balance of payments crisis quickly led to social unrest – so much so that Marcos went from a landslide victory in November 1969 to protesters burning his effigy in January 1970.

[4][27] Despite the crisis, the administration continued its strategy of using foreign loans to fund infrastructure, encouraged by low interest rates in international capital markets.

[4][27] By the time he gave his fifth State of the Nation Address on 26 January 1970, he was already beset by multi-sectoral protests that included the "radicals" of the left and the "moderates", civil libertarians and some religious leaders.

[4][27] Marcos increasingly blamed this unrest on the still-new Communist Party of the Philippines, born the year before, after splitting from the dying Partido Komunista ng Pilipinas,[38][39] and its armed wing, the New People’s Army (CPP-NPA).

[40] : 43  The Philippine National Security Council did not initially consider the CPP-NPA a major threat,[41][42] but Marcos used it as a bogeyman, reminding Filipinos of the bloody Huk encounters of the 1950s, and courting the US Johnson administration's political support.

[27] Despite the economic crisis, Marcos continued its strategy of loan-funded infrastructure and industrial projects aided by the flood of "petrodollars" in capital markets.

[1] Loans funded the 11 major industrial projects Marcos announced in his 1970 State of the Nation Address, as well as roads, bridges, dams, irrigation systems, communications infrastructure, power plants, and electrical transmission facilities.

[4][27][41] When a political rally of the Liberal Party at Plaza Miranda was attacked with grenades, Marcos accused the CPP and suspended the writ of Habeas Corpus in a supposed bid to apprehend the assailants.

The military rounded up journalists, political leaders, opposition figures, and some delegates to the constitutional convention – anyone who could challenge Marcos' control.

Then Defense Secretary and later Minister Juan Ponce Enrile, who was in charge of the arrests, later recounted that they had to "emasculate the leaders" to achieve total control.

[45] Although he originally justified it on the basis of threats to the government,[15] Marcos soon framed the declaration as an effort to create a "New Society",[15] promising economic growth and increased acceptance by the business and international community.

[15][2] Although security threats, some real and some faked, provided the rationale for declaring martial law, the justification for maintaining it quickly became the promise of higher economic growth and greater equality.

[7]Martial law allowed Marcos to take control of firms such as Meralco, PLDT, and the three then-existing Philippine airline services.

[5][14] The Philippines' exports income had begun growing in the early 1970s due to an increased global demand for raw materials, including coconut and sugar,[1][15] and the increase in global market prices for these commodities coincided with the declaration of martial law, allowing GDP growth to peak at nearly 9 percent in the years immediately after the declaration – in 1973 and 1976.

[15] The Marcos administration continued its strategy of relying on international loans to fund the projects that would support the booming economy, prompting later economists to label this a period of "debt driven" growth.

[14] Marcos used government-owned financial institutions such as the Philippine National Bank to bail out many these crony-owned firms, compounding the country's economic difficulties.

[15] The late 1970s also saw the rise of capital flight linked to corruption, as funds funneled from government projects were stashed in overseas bank accounts in Switzerland, the US, and the Netherlands Antilles among others.

Marcos' immediate family – particularly Imelda, Imee, and Bongbong – would later be accused of participating in the plunder of the Philippine economy, with some estimates placing their "unexplained wealth" at US$10 billion.

The end of the petro-dollar glut led financing institutions to begin tightening credit, forcing the government to resort to short-term loans with higher interest rates to service debts and to import goods.

Marcos ordered a cut in government expenditures and used a portion of the savings to finance Sariling Sikap (Self-Reliance), a livelihood program he established in 1984.

[1] Data from the Philippine Statistics Authority for 1985 showed that poverty incidence in families was at 44.2%—4.3 percentage points higher than in 1991 during the presidency of Corazon Aquino.