Marcos plundered to ‘protect’ the economy? Makes no economic sense

JC Punongbayan

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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

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.

1) Too much debt, too fast

Figure 1. Sources: World Bank, BSP, Dohner & Intal Jr. [1989].

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.

2) Unsustainable debt

In principle, increasing debt should have been manageable so long as its growth didn’t exceed that of the economy in general, or exports (which earned dollars) in particular.

But Figure 2 shows that from 1972 to 1981 the growth rate of debt exceeded GDP growth by a factor of 3.4, and exceeded export growth by a factor of 2 (on average).

Figure 2. Sources: PSA, Dohner & Intal Jr. [1989].

Ballooning debt should also have been manageable if only the new funds went to productive, high-return investments that could pay for themselves.

But in a famous 1984 “white paper,” Dr Emmanuel de Dios and other professors at the UP School of Economics found that “the bulk of construction and other capital outlays in both the private and public sectors were not very productive and many were outright wasteful.”

For instance, funds went into the construction of “overdesigned” bridges, highways, and public buildings, as well “white elephants” like the Bataan Nuclear Power Plant, which took us 3 decades to pay, yet did not generate a single kilowatt of power.

3) Amid huge debts, capital fled the country

Rapidly accumulating debts could have been counteracted by a concurrent accumulation of capital – whether in the form of foreign direct investments (equipment and structures) or portfolio investments (stocks and bonds).

But in the early 1980s, capital fled the country in droves. Figure 3 shows that in just 12 years (1971 to 1982) almost $8 billion worth of capital had left the country. This exodus of capital – although not unique at that time – accounted for 37% of debt accumulation in the Philippines over that period.

Figure 3. Source: Dohner & Intal Jr. [1989]. Negative capital inflow means capital outflow. BOP errors and omissions – an alternative (and narrower) measure of capital flight – refers to increases in central bank reserves and banking system foreign assets, less net inflow of foreign direct investment.

There were many reasons for this capital flight: the early 1980s was rocked by political instability, what with questions about Marcos’ legitimacy and health, as well as the strengthening of the communist insurgents. The economic climate was also made unattractive by Marcos’ crony capitalism, as well as a spike in global interest rates. All these factors induced investors to migrate their funds and do business elsewhere.

Years of capital flight pushed the country into a full-blown debt crisis. In 1983 we had to declare a debt moratorium, where we basically told the world we couldn’t pay our debts anymore.

After that, we lost international standing. We were cut off from foreign credit and investment. Domestic production stalled. With depleted foreign currency reserves, we also couldn’t import the goods we needed to get by.

All these events led to the severest economic contraction of the Philippine economy in 1984 and 1985 – the worst since World War II.

4) The Marcoses’ plunder worsened capital flight

Against this grim economic backdrop, the Marcoses exacerbated capital flight by siphoning huge sums off the public and private sectors throughout their stay in Malacañang.

To a large extent, their accumulation of ill-gotten wealth was made possible by the fact that a significant chunk of the country’s new borrowings was funneled through the public sector. The data show that the public sector accounted for less than 50% of all non-monetary debt in 1970, but more than 80% by 1985.

But the extent of the Marcoses’ plunder went well beyond the public sector. 

The late statesman and Presidential Commission on Good Government (PCGG) chairman Jovito Salonga, in his book entitled Presidential Plunder (2000), listed down the many different “techniques” that the former president employed to acquire ill-gotten wealth, including:

  • The creation of monopolies in vital industries placed under the control of his relatives and cronies
  • The takeover of large public and private enterprises
  • The raiding of the public treasury and government financial institutions
  • The corruption of foreign aid and other forms of international assistance
  • The use of shell and dummy corporations, foreign bank accounts, and pseudonyms to launder money

At the height of their power, the Marcoses wielded a staggering (even frightening) degree of influence and control throughout the Philippine economy.

At one point, Imelda Marcos was even quoted as saying: “We practically own everything in the Philippines, from electricity, telecommunications, airlines, banking, beer and tobacco, newspaper publishing, television stations, shipping, oil and mining, hotels and beach resorts, down to coconut milling, small farms, real estate and insurance.”

No wonder the Marcoses’ ill-gotten wealth reached an estimated $5 billion to $10 billion – the “Greatest Robbery of a Government” according to the Guinness World Records.

From 1987 to 2014, the PCGG – which President Duterte plans to abolish – already recovered $4 billion worth of such ill-gotten wealth. This is but a partial sum – the PCGG’s work is far from finished – yet this already amounts to half the capital that legally fled the country from 1971 to 1982.

Hence, one could say that the Marcoses bled the country of billions of dollars, at the time the country needed money the most.

The Marcoses’ plunder did not protect the economy

That billions of dollars worth of Filipinos’ money benefited a single family is already outrageous in itself.

But the fact that the Marcoses siphoned such money at the time the country desperately needed it – to pay for our huge external debt and to finance our economic development – is just cruel and depraved. It’s like stabbing the back of a person who was already suffering from a severe hemorrhage.

That’s why it’s difficult to swallow the explanation that the Marcoses “hid” money to “protect” the Philippine economy. Anybody who believes it – including the President – is complicit in efforts to revise history and gaslight the Filipino people to cast the Marcoses in a better, undeserved light.

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

And this act of economic treachery – which brought the Philippine economy to its knees and caused innumerable hardships for generations of Filipinos – does not merit any kind of deal or compromise between the government and the Marcoses.

If the Marcoses do return some of their wealth, we owe them nothing, not even our thanks. Instead, they owe the Filipino people the unconditional surrender of everything else that they plundered.

Finally, with all the bad things Ferdinand Marcos has done to this country, there’s hardly any reason to celebrate his birth centennial.

Instead, we might better use this occasion to remind ourselves of how one family singlehandedly changed the course of Philippine development – for the worse. –


The author is a PhD candidate at the UP School of Economics. His views are independent of the views of his affiliations. Thanks to Miharu Kimwell (PhD candidate at the UP School of Economics) and Kevin Mandrilla (UP Asian Center) for valuable comments and suggestions. Follow JC on Twitter: @jcpunongbayan. 

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JC Punongbayan

Jan Carlo “JC” Punongbayan, PhD is an assistant professor at the University of the Philippines School of Economics (UPSE). His professional experience includes the Securities and Exchange Commission, the World Bank Office in Manila, the Far Eastern University Public Policy Center, and the National Economic and Development Authority. JC writes a weekly economics column for He is also co-founder of and co-host of Usapang Econ Podcast.