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Silicon Valley
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The Political and Economic History
of the Philippine Islands

The Philippine Islands were part of the cultural area of the Malays, but history has created a quite different culture for the Malays in the Philippine Islands than it did for the rest of the Malays. It is uncertain when the Malays migrated into the Philippines but it is certain that they were not the first. There are tribes of small, black people called Negritos who still survive in the Philippines and who were there before the Malays.

In the 1300's and 1400's Moslem traders were converting the Malays of the archipelagoes of what are now Indonesia and the Philippines to Islam. The first Spanish contact with the Philippines was with Magellan's voyage in 1521. Several unsuccessful expeditions from New Spain (Mexico) were sent but a Spanish settlement was not established in the Philippines until 1565. By that time Islamization had reached the Manila area. For the Spanish these converts were just Moros (Moors) like they had dealt with back in the Iberian Peninsula. However King Philip of Spain had insisted that the conquest of the Philippiness be carried out with as little bloodshed as possible. (The Islands were named for King Philip, but the [f] phoneme does not occur in the local language. Thus they were given a name, Filipinos, which it was difficult for them to pronounce.)

The Spanish conquistadores soon defeated the local Moslem rulers and by 1571 ruled Manila. The conquerors established their capital at Manila. The Spanish had hopes of capturing some of the spice trade but in this they were disappointed. However the location of the Philippines made it ideal for engaging in some international trade with the Chinese Empire and the Japanese Empire. The Japanese Empire soon closed off contact with the outside world so that part of the plan failed.

The trade with China was channeled through Manila and from there went to Acapulco in New Spain (Mexico). Silver from the mines in New Spain was used to pay for the purchases in China. The colonization of the Philippines involved costs greater than the revenues it brought in and for many decades the Philippine venture depended upon a subsidy from New Spain.

The Spanish administrators in the Philippines developed a system of ruling through village headmen. This role of letting the village headmen act as spokesmen for the Spanish authorities greatly increased the prestige and power of the village headmen. When the question of title to the land came up the village headmen designated themselves as the title-holders for the village lands. This maldistribution of land continues to this day. The village headmen and their descendants became a social class known as principales. The principales had special privileges from the Spanish such as exemption from taxes.

The Spanish Empire depended very heavily on the clergy of the religious orders of the Catholic Church to spread Spanish culture and influence. The Dominicans, Franciscans and Augustinians had the responsibility for the conversion of the natives to Christianity and the Jesuits had responsiblity for education.

The channeling of the trade between China and New Spain through Manila brought Chinese entrepreneurs to Manila. In the first decades after the creation of the Spanish colony in the Philippines there were more Chinese in Manila than Spanish. The Spanish severely restricted the Chinese population but ultimately had to accept them as essential to the functioning of the colonial economy. After a number of years there was a new population group in Manila, the mestizos. These were the offspring from the marriage of Chinese men and Filipino women. The mestizos could function as Filipinos and were exempt from the restrictions placed by the Spanish on Chinese businessmen and yet had the cultural ties to the Chinese community.

Geopolitics and the Spanish Philippine Colony

The power struggle between Britain and France erupted into the war known as the Seven Years' War (1756-1763) and Spain sided with France. As a result the British forces of the British East India Company attacked and captured Manila in 1762. They controlled Manila until 1764 when the Treaty of Paris ended the war and returned Manila to Spain. The Chinese community in Manila aided the British during the occupation and this worsen the relationship between the Spanish administrators and the Chinese.

The loss of prestige of Spain in the Philippines from this military defeat led to more rebellions. During this time the Spanish administrators began to make a concerted effort to improve the economic prospects for the Philippines. Export crops of sugar, indigo, opium poppies, hemp and tobacco were encouraged. The limitation of all Philippine trade to Acapulco was ended in 1815 and direct trade with Europe permitted. When New Spain rose in rebellion to Spain in 1821 and achieved independence it was fortunate for the Spanish colony in the Philippines that it was not exclusively dependent upon New Spain. In particular the rebellion of New Spain ended the subsidy that the Philippines had been receiving from New Spain.

(To be continued.)

GDP of the Philippines 1994-2000

Notes on: Kinio Yoshihara's The Rise of Ersatz Capitalism in South- East Asia, Oxford University Press, 1988.

Yoshihara characterizes the capitalism of Southeast Asia as ersatz because, at the time he is writing, it is dominated by rent-seekers. There are the subcategories of crony capitalists and bureaucratic capitalists. Such capitalist seek monopolies, subsidies and other special privileges such as loans at interest rates below the market rates. They also seek protection from competition, especially foreign competition.

(To be continued.)

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