SINCE the magnificent and tragic days of Bataan the emotions of every American have been charged with pride and good will toward the Filipinos. We are sincere in our pleasure at the expected establishment of the free and independent Philippine Republic. But since the war began our minds have scarcely touched the problems with which it will have to deal.

In the years before the war we knew that Philippine independence presented real questions for us and for the Filipinos. We know that the problems are still there, though we choose not to examine them. There are three such questions in particular -- one political, one military and one economic. The political question is, "Can the Filipinos maintain a stable government?" The military question is, "Can the Filipinos defend themselves?" The economic question is, "Have the Filipinos the resources to maintain a sound economy when deprived of a favored position in the American market?" The first two questions are relatively easy to answer, but the third, which provoked more and more discussion before the war as the date for the final granting of independence to the Filipinos came closer, is complex and demands careful analysis. This paper is intended chiefly to examine certain of the features of that economic problem, touching first and more briefly upon aspects of the postwar political and military situation.

II

It has been the settled policy of the United States to regard the American rôle in the Philippines as one of temporary trusteeship. At times the will-o'-the-wisp of "manifest destiny" has beckoned down the road of imperialism and permanent occupation, but such fancies never obtained a strong hold on American public opinion. It is significant that we have never seriously considered giving the Filipinos the status of American citizens, as we did the Puerto Ricans. To make the Filipinos American citizens would bring a large undigestible body into our national life, we feared, and would create an alien political bloc which, like the Irish bloc in Parliament, might even hold the balance of power at some critical time. It was equally impossible for us to imagine holding any people in permanent subjection. And we had no wish whatever to have two grades of citizens. The Negroes, who were here before our government was formed, provided one major problem of that kind, and one was enough. Such considerations reached so deeply into our subconscious fears that we even placed the same high bars against the naturalization of Filipinos as we had raised against that of other Asiatics. This was unnecessary and not altogether wise, but it reflected a deep instinct of the American people. The only attitude toward the Philippines which we found bearable was to think of ourselves as but temporarily in occupation, guardians but not rulers.

We need not be ashamed of the way in which we acquitted ourselves of this responsibility. Among those of us who migrated to the Philippines only a minor fraction were angels, but the civil government we established there put Filipino rights first with remarkable consistency. Restrictions on land ownership were applied to Americans as rigorously as to others. The conservation clauses in the present Commonwealth Constitution are direct descendants of executive orders issued here by Theodore Roosevelt. We guarded rather than exploited the Filipinos in many other particulars, frequently over the loud protest of adventurous Americans who had become accustomed to taking what they wanted from our own public land. The Filipinos now very generally acknowledge the benefits of the 40 years of American occupation; that is especially evident to anyone who has lived among them in these war years, as the writer has.

It is human nature to procrastinate about relinquishing any position of power, however. We cannot take much pride in the way the final date of our departure from the Philippines was fixed. We had set "the establishment of a stable government" as one index of the proper time for us to get out; and we apparently found it hard to convince ourselves of the fact of Philippine political stability.

When Admiral Dewey and President McKinley took us into the Philippines, political conditions there offered slight cause for optimism as to the chances of building a democracy. The Filipinos had inherited the fundamental democratic idea from their Malay ancestors, and from that fine tradition of the dignity of the individual which the Spaniards had brought to the islands. (One of the causes of the failure of the Japanese there now is that they have no realization of how deeply the Filipinos resent being slapped and ordered around. Their sense of outrage goes to the very depths of their souls.) But the old cacique system, the poverty of the people and the concentration of wealth in a comparatively few hands had put the government in the control of a selfish oligarchy. The taos, the great body of farmers and workers, had no practice in political self-government, or understanding of it, and the leaders had rarely learned the lessons of compromise so necessary to the successful working of democracy.

Under our guidance the practice of political democracy spread from the municipalities to the provinces and then to the national government. By the time the Commonwealth was established in 1935, the forms of democratic government were familiar to the great body of its citizens and the ideal of democracy was firmly fixed in the minds of the people. Leaders had been trained and had acquired experience, and a considerable body of men and women had been inducted into the civil service. Not enough experienced executives and administrators are even yet available and many minor mistakes have been made, but by 1935 a stable and reasonably competent government was in operation.

There was still a question whether a strong leader or party would always be content with constitutional means of opposition. A partial and reassuring answer to this question was given by the quick suppression of the Sakdalista insurrection in 1935 by the Filipino constabulary, and the resumption of harmonious relationships between the two great political leaders of the Filipinos, Quezon and Osmeña, following a political disagreement. After the recent, sad death of Señor Quezon, Señor Osmeña succeeded to the presidency in due course and without incident, in accord with regular American traditions. The social causes which led to the Sakdalista insurrection still exist in the great central plain of Luzon, with its large estates and many poor tenants. But though possible trouble cannot be entirely left out of account, it seems altogether probable that the Filipinos can and will maintain a stable government.

The problem of the military defense of the Philippines will be settled by the war, at least for as long a period as such matters seem likely to remain settled elsewhere in this world. With Japan out of the picture as an aggressive neighbor, the Filipinos feel that one generation of peace and a reasonable opportunity for economic development will make them as able to defend themselves as the people of any other small nation. Surely we cannot ask more than that. The Great Powers will certainly insure peace in the Pacific in the immediate future. The existence of the Philippine Republic will assure us of the help of a loyal friend in the Far East, one able and willing to put half a million good soldiers into the field. From our point of view, maintenance of peace in the Pacific is no longer exclusively a problem of sending American boys to the Far East. If necessary, we will fight in our own interest, but we shall have friends fighting with us in their interest. We would both be fighting also for the general good. The problem of naval and air bases will be solved very simply, since the Philippine Republic as well as ourselves will be represented on the Pacific Council which will, presumably, be the policy-forming body back of an inter-Allied staff. All such bases will be placed at the service of the combined general staff without impairment of the sovereignty of the particular country concerned.

III

The economic problems of an independent Philippine republic do not lend themselves to so quick a solution. The original economy of the islands was based upon agriculture and fishing. In pre-Spanish times, the Chinese were the chief traders and to this day they have a strong hold on the retail business of the country. Agriculture was greatly developed in the four centuries of Spanish domination, but little industrialization took place. Spain's gifts to the Philippines were chiefly spiritual. The Filipinos received their religion from Spain, and the upper classes received education and culture; the bulk of the people remained farmers, living just above the subsistence level. The visible signs of Spanish occupation of the islands are the big churches in all the cities and small villages, a few universities and schools, numerous convents and monasteries, the great stone houses of the upper classes, the walls around Manila, a few stone forts, and a very few narrow public roads and stone bridges.

The Americans brought modern industrialization, but industrial enterprises now occupy but a small sector in the Philippine economy. One of the first bureaus organized by the new Government, and one of the most effective, was the Forestry Bureau. The great national forests were placed under scientific management, sawmills were established on many of the islands, and an export lumber business developed. Sugar "centrals" were built, and the American market opened to free entry of Philippine sugar and certain other products. Leaders of the Filipinos vigorously opposed this enmeshing of Philippine economy with that of the United States, foreseeing that it would make the achievement of political independence more difficult. The American administrators, deeply impressed by the widespread poverty in the islands, saw that the standard of living could be raised only by stimulating trade and industry, and knew that the development of a democratic way of life depended upon an improvement in the economic condition of the people. A great sugar industry, with a productive capacity of a million and a half tons per year, was therefore built up. Sugar became the largest item in Philippine exports, and the industry was the chief source of revenue and one of the largest fields of employment.

A major economic problem of an independent republic will be readjustment of the sugar industry to a restricted market. Inevitably there will be a considerable shrinkage in output when free access to the American market is cut off, but progress in technology and, in a lefthanded fashion, the war, may make the adjustment easier than was expected. A number of the sugar centrals were destroyed in the earlier fighting on the islands, and others may disappear in the fighting to come. It seems taken for granted that the owners of the plants will be compensated for damage through the war insurance act. But it is probable that many of the plants will not be rebuilt, particularly those of the marginal producers. This of course will not help the planters. The sugar business everywhere seems headed for a change, however. Refining as a separate industry may shrink or even disappear, and beet sugar and corn products, and other substitutes used during the war may hold a larger place. Changes in the manufacture of sugar, faster transportation and the growth of the chain stores will make direct marketing much more possible. A large part of the sugar marketed is now consumed within a year of the time it is made, and no longer needs to be refined "hard." Its preparation is well within the capacity of a modern central. Changes in beet cultivation point the way to freedom from the necessity of "stoop labor" and all the social disadvantages which were inherent in it, and will undoubtedly stimulate sugar production in the United States. We shall have a smaller need to import sugar, but direct marketing will be advantageous to the Philippine producers who do send it to us.

Coconut growing is one of the most widespread industries in the Philippines. Nearly every farmer has a few trees, and there are whole districts where the nuts are the chief crop. With the American occupation, oil pressing and refining mills were built, coco butter and coco honey were manufactured on a commercial scale, soap making and preparation of dried coconut were undertaken. Many of the new plants erected for these industries were established by American companies as branch factories; others were put up by local residents, American, Filipino, or Spanish. The restriction on imports of coconut products to the United States fell like a blight on whole areas, and it is commonly believed that the restrictions to come will all but extinguish the new industries and drive the farmers back to the ancient industry of the Pacific islands, that of making copra only.

A third great industry based on agriculture is pineapple growing and canning, built up under the leadership of the California-Hawaiian financial group. With scientific management, a quota in the international market, and adequate financial backing, the Del Monte pineapple plantation in Mindanao expected to harvest 30,000,000 plants in 1942. Its output occupied fourth place among Philippine exports. Similar large-scale production of other fruits and vegetables in the islands might be organized. An excellent rubber industry has been established which now supplies local demand and has started a trickle of exports. Benefiting by a knowledge of what has been done in Malaya, the Netherlands East Indies and elsewhere, and with high-grade technical management, local plantations have developed therms and nursery stock which, they believe, will enable them to meet the competition of rubber growers anywhere in the world.

The Philippines have a natural monopoly of abaca, or Manila hemp. Growing and preparing it was an ancient small-scale industry. This has been transformed into a modern business, mainly, it must be confessed, as a result of the excellent technical work and good management of the Japanese. The social and political results of Japanese initiative have not been so satisfactory. Davao, the abaca center, has become a little Tokyo, and a distinctly alien and unassimilated element has been introduced into the population. While wartime substitutes for Manila hemp will probably retain part of the field after the war, the abaca industry should continue to flourish, because of the unique properties of the rope made from it.

There is little reason to doubt that the Philippine farms, forests and fisheries will, as time goes on, contribute more importantly to both domestic and export markets. Experimental work on quinine production has been started, under direction of the Forestry Bureau. The National Development Company, a government-owned corporation, has taken the lead in establishing canning plants for fruit, vegetables, fish and other products. This modernization of ancient local industries is perhaps the most hopeful field for development of an economy yielding a richer life for the people. There are great areas available, including a considerable acreage of excellent land which will be ready for new crops as the sugar industry is contracted. Good soil, abundant labor which likes to farm, adequate rainfall, and a suitable climate all favor larger development of agriculture. The population must be better distributed, and there must be changes in land ownership and crop financing; but these, being systems made by man, can be changed by man.

IV

The Philippines have important and varied mineral deposits on which to base industry. Gold mining has grown apace in the past ten years and production amounted to more than $40,000,000 in the last year before the war. Gold ranked third among exports and one year's output was, in fact, about equal to the total public debt of the country. Production had started its sensational climb before the American increase in the price of gold and some gold mining would continue if the price were reduced to the old figure.

There is a well-established Portland cement manufacturing business in the hands of one government owned and one privately owned plant. There is a beginning of a modern ceramic industry. Asbestos, sulphur and other industrial minerals occur, although whether they are present in commercial quantities remains to be demonstrated. Limestone and solar salt are abundant and, with charcoal, afford a sound basis for chemical industries.

Of the metallic minerals other than gold which are present and are now being mined, the usual sulphides of copper, lead and zinc seem to be of limited extent. There is one copper mine, now being vigorously exploited by the Japanese, which will probably prove of increasing importance. Other copper-bearing ore bodies are known but have not as yet proved to be of size and grade to warrant extensive development. Lead and zinc are known only as accessory minerals in the gold mines.

The really important deposits of metal-bearing ores are those which yield iron and the ferro-alloys -- chromite and manganese. Iron ore is widespread. Though most of the deposits are small and inaccessible, there are three exceptions, one of them extremely important. Two sizeable deposits, situated near the sea, are those of the Larup mine of the Philippine Iron Mining Company on the east coast of Luzon which shipped nearly a million tons in a single year and has satisfactory though not enormous reserves, and of the Samar Mining Company which has a small but well-equipped harbor on the island from which the company takes its name. Its output was about 200,000 tons per year. Both mines were developed by local capital and both shipped to Japan, the only market in the Far East for iron ore. A third and much larger deposit of iron ore is present within a government reservation along the northeast coast of Mindanao and on adjacent islands. Here something more than a billion tons of ore is spread out and can be cheaply mined and delivered to an excellent harbor.

Unfortunately, exhaustive studies of Philippine coalfields show that there is no local source of fuel adequate to work up such a large body of iron. The development of this Surigao deposit, as it is called, has also been blocked by the fact that the ore is contaminated by the presence of small percentages of nickel and chrome. In themselves these are valuable alloys, but they occur in this ore in such proportions as to detract from the quality of the steel, if the standard methods of manufacture be used. Known methods of eliminating them are expensive, but extensive research is under way in various parts of the world directed toward finding a cheaper way of removing them and of obtaining important revenue from them on their own account. Whatever may come out of this research, there can be little doubt that the Surigao iron ore deposit is destined to play an important part in the economy of the Far East and that it is one of the great natural resources of the Philippines.

The chromite and manganese deposits are already under exploitation. Both are essential to any large steel industry and both are minerals which the United States must import. Two grades of chromite are shipped from the Philippines. The Masinloc deposit, one of the large ones of the world, sends out refractory ore only, but refractories are as badly needed in metallurgy as is fuel or the ore to be smelted. The other grade is adapted to use in metallurgy itself or in the chemical industries. Two large and rich mines of this grade of ore are present near the Masinloc in Zambales province of Luzon, and other important deposits have been opened up in both eastern and western Mindanao. Manganese is known in a number of the provinces but has been mined so far chiefly in the Visayan or middle belt of islands. How important the mines will prove to be cannot now be foretold.

As has already been stated, coal is scarce in the Philippines and a big coal mining industry is not to be anticipated. Wood and charcoal are used for household purposes and locally mined coal is supplemented by imports for locomotives, steamers, making of gas and cement, and in power plants. Formerly 500,000 tons or more of coal were imported, but the use of petroleum, particularly on steamers and in isolated power plants which have adopted Diesel engines, has cut this figure to about 300,000 tons.

The shortage of coal has spurred efforts to find petroleum fields and to develop hydroelectric power. A comprehensive petroleum survey of the islands was completed by the Bureau of Mines and the National Development Company in 1941. The results were felt to be so encouraging that exploratory drilling was begun, and at the time the Japanese occupied the country two wells were being put down on the island of Cebu, one for the government and the other by a Philippine company in which there is an American interest. The prospects already seemed most hopeful in one of them.

A beginning has been made in the development of hydroelectric power. What power Manila gets at present comes from the new Caloraya plant, and there is another small plant near Baguio. A general grid covering any large area is unlikely, however, since transmission of current from one island to another is not commercially feasible. Fortunately, the largest potential power center is on the largest island, Mindanao. Here the big central upland drains into Lake Lanao, which finds outlet to the sea through a short river broken by numerous rapids, which finally plunges over the cliff in the great Maria Christina falls. The situation is almost ideal for the development and use of power. Good harbors are available nearby, and on the flat land between falls and sea there is ample space for factory sites to which power can be delivered at switchboard costs lower than at Niagara. A helpful consideration is that while the amount of potential power is large, all of it need not be developed at once in order to get it at a low cost. This industrial center can grow naturally as markets are found for its manufactured products. The whole project has been surveyed by the Water Power Commission and it is only a matter of time until a beginning in developing it is made.

V

Sufficient has been said, I believe, to justify a plain answer to the question with which this analysis began. The Philippine Republic can stand on its own feet. The Philippine Islands contain natural resources sufficient to sustain an independent and balanced economy, so far, of course, as that is a possibility for any nation in the modern world. Perhaps it is pertinent to add that, through the depression years when many other governments were depending on deficit spending, the Commonwealth of the Philippines lived within its income, had a surplus each year and steadily decreased its public debt. During this period the Commonwealth expanded its school and road systems and began to build a national defense system. Despite the admittedly grave problems still to be met, there seems no reason for pessimism about the future of the Philippine Republic. No little economic readjustment will be needed, and its hardship can be lessened only by the sympathetic interest of the United States. The ten-year period allowed for readjustment was plainly too short, and even that period has been grievously cut into by the war. Likewise it was unfair to expect the Commonwealth to transfer its foreign trade from American markets to others when it had no power to negotiate or even to be represented in foreign countries. As things now go, government must play a considerable part in such matters, and the Philippine Government was forbidden even to raise its voice. Time and patient negotiation will be required to effect the changes, wise or foolish as they may be, called for by the Independence Act.

In 1937 a joint Preparatory Commission studied these matters and recommended a period of adjustment extending to 1960. Congress refused to grant this, but softened the immediate hardships by substituting a decreasing quota system for the increasing tax. This had the effect of permitting trade to be profitable when it survived at all, but it nonetheless insisted upon the impossibly quick final adjustment. It was an ungenerous solution of the difficulty; surely a better one can be found. Congress recently made possible a new approach to the problem by passing a Joint Resolution and an Act under which the date of independence is moved forward and made to depend upon the effective recovery of the islands from Japanese depredations. Generous provision is made for recompense for the actual losses of the war and a new commission is established to recommend adjustments of trade and other economic relations between the two countries.

The new commission consists of three Senators, three members of the House and three Presidential appointees. The men selected are in each case especially well chosen. An equal number of Filipinos serve on the commission under the able chairmanship of the new President of the Commonwealth, Serge Osmeña. Two vacancies have been left to be filled by men not now available.

An attempt to forecast the decisions of this commission would be unwarranted, but a few possible actions to ameliorate the situation may be mentioned. For one thing a moratorium might be declared on further changes in quota of free shipments into the United States, for a reasonable period though not necessarily a protracted one. The war has disturbed the whole world so profoundly that a breathing spell would seem to be warranted in this matter as in others. The major difficulty in the past was the sugar quota. The Filipinos feel, rightly or wrongly, that their interests were sacrificed to the interests of Cuba and those who had made investments there. And it seems reasonable to believe that we ourselves have acquired a new point of view about this, in the light of Filipino loyalty and bravery. A satisfactory solution may be expected. Meanwhile, if the present quota of 850,000 tons or even less can be maintained, it will help mightily.

The second field in which particular hardship has occurred and in which more impends is that of coconut products. Grayson Kirk has shown how false the premises were on which Congress was induced to place severe restrictions on the entry of these products and how badly the American farmer was misled into supporting this action.[i] Why, for example, was it necessary to kill the dried coconut industry? In some of these actions we seem to have cut off our noses to spite our own faces. The powers of the new commission and action within the broad limits of the Trade Agreements Act seem to offer possibilities for a much better adjustment. In the long run the Philippine coconut industry will probably find its salvation in making and supplying much more soap and coco butter to the peoples of the Far East. There is an unlimited need for the one and no prejudice against the other, since eastern peoples are accustomed to use vegetable fats and not meat products.

There is one American interest that is fundamental in all these details of our relationship with the Islands: it is to our advantage that the Philippine Republic be a success. A strong and sturdy Republic will be a bulwark of peace and stability in the Far East. It will likewise be the most conspicuous contribution we can make to the idea that the democratic American way of life is a sound one for all peoples.

[i] Cf. "Philippine Independence," by Grayson Kirk. New York: Farrar & Rinehart, 1936.

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  • H. FOSTER BAIN, recently Adviser on Mines to the Philippine Government; interned at Santo Tomas in Manila and returned on the Gripsholm in December 1943; formerly Secretary of the American Institute of Mining and Metallurgical Engineers; author of "Ores and Industry in the Far East" and other works
  • More By H. Foster Bain