Manila, 1981.A chauffeur-driven white Mercedes weaves in and out of the traffic backed up along what could well be a street in downtown Manhattan. This is Makati, its modern skyscrapers housing the business and financial elite of the Philippines. In the back seat sits a well-dressed Filipino businessman whose fortune has been amassed over the decades through production of goods for the domestic market. This man has earned the epithet of economic “nationalist” by keeping his hands fairly clean of involvement with foreign corporations and foreign markets. But times are changing. “Export or perish,” he repeats several times. First...

Neither the Bank nor the Fund was created to be a macroeconomic policy institution. Neither became a policy institution overnight. Their pivotal roles in the late 1970s Philippines were the result of sweeping revisions of the two institutions’ powers and positions in the global economy over the three decades following the Second World War.¹ To review the key historic junctures in these institutions’ development opens new avenues for understanding the Philippine economic revolution from 1979 to the present.

Those three decades of the Bank and the Fund can be split into three distinct periods:

1. The founding years of the...

Over the three-decade span between 1944 and the mid-1970s, the roles of the World Bank and the IMF in LDC economic policy-making evolved slowly, though consistently, in the direction of greater involvement. Since the mid-1970s, their roles have expanded far more rapidly, and the Bank’s has undergone a qualitative change. The IMF’s relative effectiveness in influencing LDC economic policies had been definitively established in the 1960s, but the Bank’s capacity in this regard was realized only from the late 1970s onward. At that point the Bank changed from an institution dispensing funds largely through individual project loans to one targeting...

Over the decades, it has become established procedure for the IMF and the World Bank each to deal principally with one of two select and nearly mutually exclusive groups of LDC ministries (Figure 2).¹ Whereas IMF loans, including the extended fund facility, are negotiated and implemented primarily through central banks, the World Bank often spreads responsibilities across a broad range of ministries. In addition to its primary contact with planning agencies, the Bank can also work through finance, trade, industry, agriculture, and other ministries responsible for sectors receiving specific loans. In these interactions, Bank and Fund interests usually become inter-reinforcing...

With the signing of the SAL, claimed the Bank news release on the loan, came “the implementation of a comprehensive development program designed to accelerate industrial growth, expand employment and maintain the rapid growth of nontraditional exports. . . .”¹ The implementation is a study in World Bank—LDC transnationalist collaboration at its best.

Of all the policy changes linked to the industrial SAL, indicated high-level Philippine technocrats deeply involved in the broad interagency discussions, tariff reform and its accompanying import liberalization captured the Bank’s primary interest.² Indeed, they stood as the cornerstone of the Philippines’ new industrial-development designs. This...

Just as different alliances of international and domestic public and private forces coalesced to determine LDC aggregate economic policies, so were these and other sets of actors affected in different ways when the policies were implemented. It is already clear that technocratic elements in the Philippine government were strengthened during the late 1970s shift in export-led growth from primary commodities to light manufactures. They were but the beginning of a long list of gainers and losers.

“Unquestionably, the impact of the policy reforms is far more important than the benefits of direct resource transfer,” commented a World Bank assessment of...

Shifting the Philippines to export-oriented light manufacturing had to extend beyond the confines of industry to be successful. It required effective mobilization of domestic and international finance, and hence a transformation of the Philippine financial sector. Unavoidably, this involved extensive dealings with the locus of nationalist power in the Philippine government: the Central Bank.

That such radical restructuring was well underway by the early 1980s is evidence of the World Bank’s skill, as well as the experience gained in the SAL negotiations. Aided by constant advice from the IMF, the World Bank injected a tight cell of technocratic transnationalists into...

Like the SAL, the apex loan and its concomitant reforms wrought far-reaching changes in certain institutions and social groups. The financial reforms reinforced the industrial restructuring’s squeeze on national entrepreneurs and industrial labor. But the ramifications of the financial reforms did not stop there. More than had the SAL, the apex loan precipitated a reshaping of the entire Philippine political economy and of the ways major institutions and social groups within it meshed. By the early 1980s, the potency of the financial reforms could be clearly seen in the enhanced concentration within and interactions among institutions of finance, industry, and...

From the early 1960s to the mid-1970s, the Philippine economy could have been characterized as an open dual economy, with a large rural sector engaged in traditional agriculture and a “modern” export-oriented sector based on agricultural exports (coconuts, sugar, bananas) and extractive industries (copper, logs). From the mid-1970s onward, the World Bank and the IMF contributed—through loans, training, institution-building, and their close ties to TNCs and TNBs—to creating a far more sophisticated dual economy, with the modern sector consisting of both an agricultural/extractive component and an equally important lightmanufacturing component.

This chapter speaks to the wisdom of such...

The prolonged postwar economic boom had suffered downturns before. But these had always been short, and upturns had always followed. In 1982, debt crises erupted across the Third World in rapid succession. This time, the world economy, in a downturn since 1980, did not bounce back. Crisis followed upon crisis. The cycle seemed to have been broken. By 1986, still no upswing appeared and economies that were heavily dependent on the world economy—including even the “miracle” NICs—were in various states of recession or ruin.

As opportunities for profit in the Third World dwindled, transnational banks and corporations refocused...