Class, Family, and State in Philippine Manufacturing

Landlords and Capitalists

“…presents a systematic interpretation of the social and political basis for the failure of Philippine industrialization”

“Why has the process of industrialization been such a protracted and

problematic one for the Philippines when the country seemed to have enjoyed and

initial edge in this route to modernity compared with most of its Asian neighbors in

the postwar years?” (p. Preface book)

During the decade right after World War II, the Philippines

had the most promising record of economic growth in

Southeast Asia. More than four

decades later, the country has

become the laggard in a

growth region, “a deviant case” to the newly industrializing economies (NIEs) of

Asia.

From 1950 to 1962 the state nurtured a

number of Import-Substitution Industrialization (ISI) industries

that contributed to industrial growth.

What went

wrong?

Import substitution industrialization (ISI) is a trade and economic policy

that advocates replacing foreign imports with domestic production. ISI is based on the premise that a

country should attempt to reduce its foreign dependency through the local production of industrialized products.

What is ISI?

ISI policies were enacted by countries in the Global South with the intention of

producing development and self-sufficiency through the creation of an

internal market. ISI works by

having the state lead economic development

through nationalization, subsidization of vital industries

(including agriculture, power generation, etc.), increased

taxation, and highly protectionist trade

policies

Import substitution industrialization (ISI)

Why has the Philippines FAILED to Industrialize?

• Landed Capitalists-more on the foreign connections (Zobels, Ayala)

• Non-Landed Landed-the cronies (Durano, Enrile)

• Chinese Filipino Capitalists-Chinese -traders who do not remit tax (Lim)

EMERGENCE OF LOCAL MANUFACTURING ELITES

Weak captive stateContradictory interest of the

bourgeoisieISI dependent on foreign inputs

Absence of strong state.

Elite domination

Reasons of the Failure to Industrialization

“enjoying little autonomy from dominant social classes and entrenched particularistic groups, the

state is captured by … competing societal interests.”

The ISI bourgeoisie was dominated by major landed elite families and merchant capitalists who diversified into manufacturing during the 1950s and 1960s. However, their diversification into import-substituting manufacturing did not result in a class transformation strong enough to drive industrial growth and development.

Weak Captive State

Consequently, the domination of the manufacturing sector by the landed

classes, in conjunction with a weak captive state, reflected a structural constrain that made it difficult to sustain industrial

growth in the country. In the long run, the domination of the ISI manufacturers by the landed capitalists further foreclosed one option for the deepening of industrial

growth that started with the ISI program.

The persistence of a weak Philippine state has made it difficult

for its various apparatuses to formulate and

implement policies independently of the powerful vested

interest groups in society. With the preservation of the economic power of the landlord class,

the state, in effect, allowed the persistence of a class structure that

proved inimical to industrial growth and development. 

Moreover, with the continuing capture by powerful elites of various sites of formal

governmental power, the state was in no position to nurture an effective social coalition that could underpin

sustainable industrial growth and development.

The landed ‘oligarchy’ and the ‘progressive’ national bourgeoisie’

constitute separate and contending classes and that national and foreign capital are structurally

autonomous; that the relationship between them is ‘external’

and their concrete interests contradictory; and that, in

consequence they are driven into conflict over the nation’s development”

As the dominant segment of the ISI bourgeoisie, the

landed-capitalist families confronted an inherently self-contradiction set of interests forced upon them in their situation as both landlords and

capitalists. 

Contradictory Interest of the Bourgeoisie

The ISI industries developed into an

oligopolized sector heavily

dependent on foreign inputs with little dynamism for growth and innovation and

engaged in pervasive rent-seeking activities. The pervasiveness of foreign linkages with

leading domestic-oriented manufacturing firms nurtured an ISI

constituency strong enough to resist the state’s indecisive efforts toward greater export

orientation. 

ISI dependent of Foreign Inputs

The forging of extensive and varied linkages

with foreign investors by the leading ISI manufacturers during the era of

protectionism perpetuated a domestic

orientation by oligopolistic firms that

made the later shift to more export-orientation a particularly difficult and contested process.

Considering the failure of land reform and the absence of manifestations of an ideal relatively independent developmental

state, there was also the absence of a dominating institution that could rationally

manage and prudentially direct the transformation of land-based wealth into

industrial capital.

Absence of strong state 

The ISI bourgeoisie was dominated by

major landed elite families and merchant capitalists who diversified into manufacturing during the 1950s and 1960s. However, their diversification into import-substituting manufacturing did not

result in a class transformation strong enough to drive industrial growth and development.

ELITE DOMINATION

The domination of the manufacturing sector by the landed classes, in conjunction

with a weak captive state, reflected a

structural constraint that made it difficult to sustain industrial growth in the country.

In understanding the reality of economic and political power in

the country and the practices that

reproduce these relationships, elite families and “kinship

networks” continue to play major roles.

Hence,

It is for this reason that much of class and state power in the

Philippines are better understood

and mediated through the reality of dominant families, clans and

kinship networks.