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Marcos plundered to 'protect' the economy? Makes no economic sense

Let’s not sugarcoat it: what the Marcoses did was quite possibly the biggest presidential plunder in history

JC Punongbayan
Published 11:00 AM, September 11, 2017
Updated 11:47 AM, September 11, 2017
   

Two weeks before Ferdinand Marcos’ hundredth birth anniversary, President Rodrigo Duterte revived public discussions about the Marcoses’ wealth.

In a speech before new appointees, the President said that a “spokesman” of the Marcoses intimated they might soon “return” some of their wealth – including “a few gold bars” – to help the government tide over its larger budget deficit this year.

But what struck me the most was the claim that President Marcos “hid” the money to “protect the economy.” The President said he accepted this explanation by the spokesman.

This statement is wrong on two accounts: First, the Marcoses did not “hide” money; they plundered from the Filipino people. Second, plundering to “protect” the economy makes no economic sense at all.

In the early 1980s the country was gripped by a severe debt crisis where we direly needed funds to repay our oversized debts. Offshoring vast sums of money in these circumstances did not “protect” the economy. In fact, it exacerbated capital flight and helped bring about the country’s deepest postwar recession.

I’ve written about the Marcosian economy before (READ: Marcos years marked ‘golden age’ of the PH economy? Look at the data). But in this article I take a closer look at the country’s debt crisis, and why it matters in the revived talks about the Marcoses’ wealth.

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Figure 1 shows the dramatic rise of the country’s external debt in the late 1970s and early 1980s, as manifested by various indicators. In just 5 years (1977 to 1982), the country’s debt grew by a whopping $16 billion.

Several factors led to this exponential increase in our external debt. First, Marcos needed funds to finance his huge infrastructure spending spree – a progenitor of “Build, Build, Build” – and pursue 11 major industrial projects that were meant to boost industrialization.

At the same time, international capital markets were awash with “petrodollars” we could borrow. Twin oil price shocks in the 1970s resulted in significant windfalls for oil producing countries, and they used their new funds to invest worldwide, including countries like the Philippines.

But a series of unfortunate events in the late 1970s and early 1980s – tighter money supply in the US that led to higher world interest rates; the Philippines’ greater reliance on loans with floating rates; successive current account deficits; and the peso’s depreciation against the dollar – led to an unprecedented growth of our foreign debts.

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Marcos plundered to 'protect' the economy? Then beware, ordinary folk who cannot afford to open a bank account; it is now a crime to be penniless. tokhang is coming your way.

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