By the time of its independence and for at least the next 10 years the Philippines had a high growth rate of GDP and one of the highest per-capita incomes in Asia. The 9% aggregate annual growth rate of the 1950s declined to 5% in the 1960s, briefly increased 6.8% in 1973–1979, hovered around zero till the end of the Marcos era in 1985, peaked briefly at 5.8% in the early Aquino period, and has stagnated since 1990 (Table 10.1). Considering the sizeable rate of population growth of 2.7%, this aggregate growth record produced an annual growth rate of 1.3% on a per-capita basis for the period 1965–1990. Incomes are only the tip of the iceberg. In fact, the economy has unravelled so rapidly since the 1960s that today the Philippines is considered a distinct development failure.

The development play of the Philippines was enacted on a stage of some enduring institutional features and in the shifting setting of various policy regimes. The stage and the setting are discussed in the next section. They are followed by a more detailed analysis of various policy initiatives and of the development outcomes.

The stage and the setting

Land concentration and land reform

The Spanish colonial period bequeathed the Philippines the legacy of large agricultural estates run by landlord elites. The U.S., which succeeded Spain as colonial master at the beginning of the 20th century, was primarily interested in the Philippine cash-crop exports and in placing American consumer goods in the local market. This led to a long period of a dualistic economic and agrarian structure and to the neglect of subsistence agriculture (Ranis and Stewart, 1993).