The Fall of Marcos: A Problem in US Foreign Policymaking

William E. Kline
January 1, 1992

(The following is an excerpt from the book, page 3-4)

The Philippine economy deteriorated rapidly after the Aquino assassination, as the political uncertainty that ensued provoked massive capital flight. In October the peso was devalued 21 percent against the dollar, and in June 1984 ut was devalued a further 22 percent. In late 1983, the Philippine government was forced to suspend principal payments on its foreign debt of more than $25 billion. Also in late 1993, the Philippine Central Bank was discoverd to have been falsifying foreign exchange reserve figures, which caused a loss of confidence in the Central Bank. In 1984 and 1985, there was negative economic growth of 5.5 and 4 percent, respectively. Real per capita gross national product (GNP) is estimated to have declined more than 15 percent in those two years. Neighboring countries in the Pacific experienced substantial economic growth during this period.

Political uncertainty was not the only cause of the economic deterioration. Some of it was a direct result of Marcos’ policies. After the imposition of martial law in 1972, Marcos centralized both political and economic decision making8. Sectors of the economy were given out piecemeal to political loyalists in much the same way that Spanish families were given huge land tracts during the Spanish colonial period. That destroyed incentive and led to a decrease in productivity, which in turn led to fewer job and lower wages. Along with centralization of economic power, corruption was rife. Moreover, capital continued to flow out of the Philippines, as even Marcos himself deposited huge sums in foreign banks, where it was easier to hide his wealth and where interest rates were higher.

(You can download the rest of the book for free here:,d.dGI)

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