EVER since the United States surprised the world, and itself, by taking possession of the Philippines in 1898, the Islands have (among greater accomplishments) provided writers and orators with an essential article of their trade -- a dramatic symbol. Or rather, they have provided two symbols, of vice or of virtue, according to the particular angle of vision: a new empire practising enslavement, or a free nation bestowing freedom. It appeared that the latter figure of speech squared with the fact when, in December 1941, the Filipinos, in heroic friendship, fought as free men in the cause of America's freedom and their own.

The Philippine Republic, an independent nation, is truly a portent in the east, and there is no doubt that it is recognized as such. But for the purposes of appraising the concrete problems the Filipinos face today, and the relationship that exists between ourselves and our former wards, a symbolical picture must perhaps be drawn too inevitably in black and white to be useful. The problems of the new Republic are complex. Unfortunately they have, in some respects, been made sharper by ungenerous or at least ill-considered actions of our own on the eve of the formal assumption of independence. The United States may be proud of its record in the Philippines; but there are items of unfinished business we must not overlook.

Perhaps the best evidence that the job has been well done is the fact that we did not exploit the Islands for our own selfish national advantage, or permit United States citizens or capital to exploit them during almost half a century of control. William Howard Taft, the first in the line of United States Governors, coined the phrase "The Philippines for the Filipinos," and in varying degrees this has been the motto of each of our representatives. Francis Burton Harrison, appointed by President Wilson, a strong exponent of a free Philippines, probably went too far and too fast in turning out experienced American administrators and replacing them with Filipino officials. Leonard Wood, his successor, was a hard taskmaster. He did not coddle the Filipinos. He was insistent on a high standard of political and business morality, and preferred United States citizens in the higher offices until Filipinos became better qualified. But he was stern with the American community and adamant in securing economic and social justice for the people of the Islands. Not one in the list of 13 Governors-General and High Commissioners, from Taft to McNutt, promoted United States capital or business interests at the expense of the Philippines.

The proof is that, contrary to what so many people believe -- including the Marxists, whose version of imperialism seems never to be affected by any events of the real world -- American capital is not dominant in the Philippines. After almost half a century of opportunity to "exploit" the Philippines, only approximately $250,000,000 of American money is invested there. This is about one-thirtieth of the assets of the Metropolitan Life Insurance Company, for example, and one-twentieth of the assets of the Chase National Bank. Before the war, our investments in Poland or Italy were approximately the same as in the Philippines. Those in Cuba were three times greater; in South America six times greater; in the United Kingdom four times greater; and in Germany five times greater. In Canada our investments were approximately $4,400,000,000. American capital has played an important part in the development of sugar, hemp, gold, copra, the railroads and utilities in the Philippines, but the land is owned by Filipinos, and Filipinos control the industries and the natural resources. Only in Manila itself do United States and Chinese interests own a substantial portion of business property. Americans residing in the Philippines numbered only about 8,500 before the war and only about 4,000 were engaged in business, trade, or industry. There are fewer now. This is a small battalion when compared with the 18,000,000 Filipinos, or the 117,000 Chinese who largely control the retail trade of the Islands. Political, social, business, professional and economic leadership is mainly Filipino.

The United States has not only been fair to the Filipinos in economic development, but it has not discriminated against capital or citizens from other nations. The old Spanish families still have large economic interests; and they retained their high social standing and their ties with Spain during the years of the American régime. The Manila branch of the National City Bank, which does the largest volume of business in the Islands, is the only United States bank in the Philippines, though there is considerable American capital in the Peoples Bank and Trust Company, a Philippine corporation. The National City Bank is largely used as an agency for American-Philippine transactions, but is in no sense dominant and controls only a minor portion of the total business. There are eight domestic banking institutions in addition to the National City, plus five foreign banks, which are chartered in China, Japan, the Netherlands and the British Empire. The Philippine domestic banks have had more than twice the local assets of all foreign banks, including the National City. The Philippine National Bank, which is owned by the government, is perhaps the most important of them.

In the life insurance field, American companies have so far played a minor rôle. The Sun Life of Canada and the Insular Life, a local Philippine company, have the largest number of policyholders, by a wide margin. There are a number of strong United States companies in the fire insurance, casualty and marine insurance lines, but the business of each is comparatively small. The British and Canadian companies are more numerous than those of the United States and do a much larger volume of business. Dutch, French, Swiss, Japanese, Indian, German, Italian, British, Chinese and American companies compete for the Philippine business on equal terms. Local insurance companies largely owned by the Filipinos themselves learned the business from their American and foreign competitors and are rapidly increasing in strength and volume. Charges that the Philippines have been administered for the benefit of American "monopoly capitalism" are unwarranted. Of course we have made mistakes; but our record, on the whole, is good.


What of the criticism of our more recent acts? Some American writers, and some writers in the Philippine press, called the promulgation of the Republic on July 4, 1946, a "phoney" independence. It is true that there are serious faults in the legislation which Congress enacted to implement the American determination to grant independence. The Philippine Republic is not as free as Canada, Australia or South Africa. But though some criticism is justifiable, in view of the economic and military restrictions which have been placed upon the new nation, the use of the word "phoney" is not. The establishment of the Republic places the destiny of the Filipino people in their own hands and permits them to work out the future. Independence, rightly enough, was achieved by gradual steps. The first Island legislature met in 1916. Since the enactment of the Constitution and the organization of the Commonwealth Government in 1935, the Philippines have managed their own affairs, except in foreign relations, currency and finance. There has been little interference from Washington in the ordinary affairs of the Islands. The Philippine Constitution, which was framed by the Philippine people, establishes self-government on the lines of our own -- with a strong Bill of Rights, but with larger powers vested in the Presidency than under our Constitution.

Both in the United States and in the Philippines, some criticisms take the form of saying, in effect, that we have turned the Islands over to a small governing class whose aim is Fascism and economic exploitation. There is some factual basis for the charge, but not in such sweeping form. In the Philippines, as in most oriental countries, a comparatively small privileged class largely controls social, political, business and financial life. The great mass of the people are poor, closely bound to the land and with little direct influence in public affairs. Patriotism will be required, as well as statesmanship of high order, in order to develop the social and economic welfare of the large underprivileged majority and to spread political power more equitably. But such class divisions go back far beyond the period of our control; the extremes of richness and poverty, ignorance and cultivation, are less sharp than in earlier days. And in any event, the point is that the Filipinos of all classes wish to be free now from further tutelage.

But the United States Congress, despite its obvious desire to carry out our pledges for independence, is guilty of some un-statesmanlike acts which will come back to plague us. First, we required the new Republic to guarantee to our government its possession of property, i.e. bases, now held or to be acquired for the Army, Navy and other government agencies. Many Filipinos have no objection to the bases, seeing in them protection against aggression from Oriental neighbors as well as a source of employment and revenue. President Roxas has pointed out that our military strength in the Islands will make it unnecessary for the Philippines to engage in large military expenditures. On the other hand, if there should be another war, these islands may again be a battleground and the United States will need to use them for offensive and defensive purposes. The cities would again be ruined -- even more thoroughly -- and the country's economy disrupted.

There is undoubtedly a large body of thoughtful people in the United States and in the Philippines who would like to see those bases handed over to the United Nations. If we are concerned with the lasting good will of the Orient and with fundamental rather than technical security, we should turn these bases over to the United Nations. If that is not possible now, then we should negotiate with the Republic as we did with Iceland, as an equal. To require that the Philippines guarantee the title of the United States to these properties, as a condition of independence, was ungracious and unjustified. Arrangements could be reached with the Republic for the retention of such bases as we may need without such a show of force.

The difficulty of maintaining a large number of our military forces in a friendly foreign country without bickering and increasing tension is most delicate. The control of Filipinos within the base areas, and the control of our armed forces by military police when they are off duty, are apt to lead to misunderstanding and even graver consequences through the years. Already tension has developed, and in some quarters our undisciplined young soldiers are called "ambassadors of ill will."

Another serious mistake on the part of Congress is the requirement, as a condition of independence, that the Philippine Constitution be amended to provide special privileges for American citizens and American capital. The Philippine Constitution now provides that the development and utilization of the public domain, natural resources, and public utilities be confined to citizens of the Philippines and to corporations which are at least 60 percent owned by Philippine citizens. There are legitimate objections to such restrictions; they are "isolationist," and they are difficult to enforce, as has been proven in the case of the Chinese and Japanese in the Islands. Nonetheless, this question of policy is for the Filipinos to decide. They decided it when they adopted their Constitution, while we were in control of the Islands, and we did not object. Now we insist that during the 28 years of the trade act, United States citizens and corporations enjoy the same privileges that the Filipinos possess. This mischievous demand is contrary to the spirit of our whole previous administration of the Islands. It is in derogation of the legislative power of the Philippine Government. If abused, it might lead to wrongful exploitation of the mineral rights, power, public utilities and land of the Philippines by over-ambitious citizens of the United States.

It is true that we have not exploited the Philippines in the past, when we had every opportunity to do so. It is also true that, if American public opinion gives thought to the matter, it will not countenance exploitation in the future. In view of the many uncertainties in the Orient and in the Philippines, there is little likelihood, in fact, that a large volume of additional American capital will be invested, and the danger of improper exploitation is more theoretical than real. Nonetheless, in demanding this special status for Americans we have opened the way for abuses. The various detractors of the United States may be counted upon to point out the fact to the Filipinos. José P. Laurel, President of the puppet republic under the Japanese, has already found that attacks on the United States, based on this legislation, are a means to new popularity. The requirement that favoritism be extended to the citizens and capital of a particular country is just the treatment which occidental nations have taught oriental nations to expect.

Our State Department objected to the demand for a preferred position for our nationals at the hearing before the Congressional Committee. As Under Secretary Clayton put it, other nations will say, "You have taken advantage of the position here with the Philippines in this Bill to demand for yourself preferential treatment as against us, and we do not like it." It is obviously in flat contradiction to our protests against special preferences elsewhere. It will certainly place difficulties in the way of our efforts to secure equal trade opportunities for all nations in all parts of the world.

President Roxas made the best of the trade act in his special message to the Philippine Congress of June 21, 1946. He said that had he been in Washington he would have vigorously protested against the clause; but he advocated its acceptance as a practical necessity in order to secure the legislation for independence. He pointed out that the Philippines are very much in need of reconstruction and development and do not have the capital for it. He said that the provision will reassure potential investors against discrimination during the life of the trade treaty, and added: "Our rehabilitation would be impossible without such assistance."

A particular instance of American enterprise has recently aroused considerable concern and comment in the Philippines. Brigadier-General Ernest H. Burt, retired, formerly on Commissioner McNutt's staff, has arranged to purchase two large estates, comprising more than 840,000 acres, as a real estate development. These lands are owned by Catholic institutions as part of the immense land holdings which the Church still controls. The land is to be subdivided and sold in small parcels to those who need it, and according to General Burt, the project will benefit the Philippine people. But it is the kind of thing which arouses fear of exploitation, and may endanger the friendly relations which exist between the United States and the new Republic.

Even more essential to the new Republic than financial assistance from the United States is a trade arrangement which will enable the Islands to rebuild their agriculture and industries. The Philippines have enjoyed a large measure of free trade with the United States, though in recent years quotas have been placed upon such basic industries as coconut products and sugar. The new trade act is a compromise. It provides free trade, subject to definite quotas on basic agricultural industries, for a period of eight years. During the subsequent 20 years, duties are to be imposed gradually at the rate of 5 percent each year until 1974, when tariff preferences end. The obvious purpose of the act is to stimulate the rehabilitation of the basic industries upon which the Islands depend for their economic support, and at the same time gradually to eliminate these preferences. In other words, after 28 years, the Philippines will be subject to our full tariff requirements, as is every other nation.

This expedient of a gradual imposition of tariffs has been generally accepted both in the Philippines and in the United States. But it is hard not to view it as a lost opportunity for moving toward the goal of freer trade throughout the world. The Philippines and the United States by and large supplement one another economically. It would undoubtedly be in the interest of both if the rapidly expanding Philippine market were opened to our industries, which supply the wide variety of manufactures needed in the Islands, and the Philippines were enabled to dispose of their sugar, coconut products, hemp, tobacco and gold without undue restrictions. The Philippine standard of living is low by our standards, but higher than that of most other Oriental peoples, because of the free trade relationship of the past with the United States. We are making great efforts to promote multilateral trade and remove many of the arbitrary restrictions and nationalistic barriers which have been raised against trade all over the world. With the birth of this new nation there was an opportunity to create an ideal trade arrangement.

Perhaps the most vulnerable provision of the trade act is the creation of absolute quotas on sugar, cordage, rice, tobacco, coconuts and some other products. These quotas set limits to the growth of these industries in the Philippines and discourage the continued improvement of the standard of living which a growing volume of trade would stimulate. Even more serious is the requirement that the quotas be allocated to those who produced these products in 1940 and exported them to the United States during that year. Such an allocation of quotas creates a favored class which has a monopoly of trade with the United States, and will effectively discourage the development of new industries and the investment of new capital. Still other quotas are provided for, if it can be shown that the cost of production is 20 percent below the cost of similar articles in the United States.

The State Department opposed these absolute quotas. In his appearance before the Committee on Finance of the Senate, Mr. Clayton said that quotas are one of the most vicious trade restrictions, and that their use by other governments has been highly detrimental to American exports. It is certainly inconsistent for the United States to urge other nations to forego quotas and other restrictive barriers in their arrangements with us, and at the same time to impose a restrictive quota system on the Philippine Republic. The trade legislation puts American and Philippine commerce in a strait jacket for 28 years. It does not permit the writing of a more desirable trade treaty which will embody the progressive measures which the United States is trying to work out with other nations or allow for changed conditions.

In order to obtain the benefits of the trade act, the Philippine Republic must amend the Constitution to provide the preferences for United States citizens and capital mentioned above. According to the Constitution, amendments may be proposed by a three-fourths vote of all of the members of the Philippine Congress and submitted to the people for ratification by a majority vote. Congress has already voted to submit the amendment to the people, but with only two votes over the three-fourths required. Many of those who voted for the submission of the amendment did so without committing themselves as to the desirability of the amendment itself, stating that they thought such a change so important that the people should decide it. Generally speaking, the dissatisfied and radical elements in the Philippines will do their utmost to prevent its adoption, while the commercial and business people will be for it. But, beyond that, the amendment offends national pride. There is no certainty that it will be adopted.

The decision which the new nation has to make is grave. For the immediate future, stable and preferential trade relations with the United States are urgently in the interest of the Philippines. If the amendment is defeated, the American Congress will be annoyed and future aid which is necessary for the rehabilitation of the Philippines will be imperilled. The Filipinos must weigh present advantage against the development of a long-range international trade and financial policy -- one of the most difficult tasks imaginable for an electorate.


The legislation which has been enacted by the United States Congress makes the reasonable, though not generous, appropriation of $400,000,000 for reconstruction of buildings and their contents, both private and public. Surplus property of the United States in the Islands, to the value of $100,000,000, is being turned over for use in repairing buildings and essential services, including hospitals, educational and charitable institutions. Another $120,000,000 is provided for training Filipinos in engineering, health, and commercial activities, and restoring roads, interisland commerce, fisheries, port and harbor facilities. The amount allocated for war damages is considerably less than the estimate of $800,000,000 made by American experts sent over by the War Damage Corporation. That estimate, moreover, was based upon 1941 prices, and is therefore very conservative today. The provision that the Philippines may recoup from Japanese indemnities their losses not paid for by the United States is of doubtful worth.

The mere list of problems which face the Philippine Republic seems almost endless. Fifty percent of Manila was destroyed, 70 percent of Cebu, 75 percent of Iloilo, 35 percent of Bacolod and 90 percent of Zamboanga. Only a few important buildings in Manila have been made fit for use; rehabilitation in any real sense has not yet begun. None of the appropriations for war damages has as yet been paid over, though surplus goods are being used. The tax system has been deranged; people are seeking assistance from the government rather than paying taxes. It will take years to secure an adequate income from taxable sources, for the daily operation of the government. Basic industry is still at a standstill, except for some activity in hemp, copra and tobacco, and agriculture has been seriously impaired. There is a shortage of the faithful and picturesque carabaos used for so many purposes, and of other farm animals and farm machinery.

Inflation grew to huge proportions during the Japanese invasion. It has abated, but is still prevalent, due to the scarcity of goods. Even more serious is the disorganization of finances, and of the economic system as a whole, caused by the use of large quantities of now worthless Japanese military notes during the occupation. Aside from an abortive attempt to legalize Japanese transactions, accepted by President Osmena but vetoed by President Truman, the Philippine Congress has so far failed to enact a sound debtor and creditor law which would allay the financial unrest which results from the uncertainty about obligations contracted under the Japanese.

Health, never good in the Philippines, has declined appreciably, and tuberculosis and many other diseases have increased rapidly and are a source of grave concern. Sanitation is sometimes non-existent. Water and soil are contaminated in many neighborhoods. Many hospitals were destroyed during the war, and the United States Army is still in possession of many privately owned and public buildings required for local purposes. The health and morale of the people need immediate attention. The nervous tension of the three years of Japanese occupation, the suffering and death of so many people in so many families, the atrocities and the bombings and burnings, all have left their marks.

The mass of the people are poor, and are attached to the land. There has been little industrial development in the Philippines as yet, and the middle class is small. (Through the National Development Company which it owns, the Government has gone into several business ventures in order to stimulate industrial employment; but with doubtful success.) The unrest in the rice fields has received much publicity recently and undoubtedly is serious. The Hukbalahaps furnished many guerillas and did effective work against the Japanese, but they are still armed, and many of them are convinced that only by revolt can they obtain economic justice. The Huks represent the poverty-stricken small tenant who shares his crops with the landlord. They have been called Communists, but genuine Communists are few in number and without any significant following in the Philippines, where more than 90 percent of the people are Catholics; to the degree that the Huks are Communists, they are akin to the Chinese Communists rather than the Russian.

The movement for lower taxes and rents, fixity of tenure, and improved living and economic conditions is strong in central Luzon. Since the election in 1946, violence has been intensified, with riots and some loss of life. The problem is not a new one. When the Philippine Commonwealth was established in 1935, there were similar disorders in these areas. Local government was overthrown in several communities and some 60 people were killed by Sakdalistas, as they were then called. President Quezon faced the same problem which now confronts President Roxas. It can be solved only by improved agrarian conditions, which means a more equitable land system and the opening up of large estates for small farmers. In the period of his governorship, William Howard Taft went to Rome and purchased large areas from the Church, subdividing them among the people. That did not work out as well as was expected, since many Filipinos sold or abandoned the land thus acquired. Nonetheless, splitting up the large estates is an important part of any lasting reform. A policy of firmness in demanding the surrender of arms is an obvious requirement of the moment.


The United States has by no means discharged its full duty by granting political freedom to the Philippines. That action must be followed by financial and economic assistance which will enable the new Republic to restore the buildings and public works destroyed by war, resume its governmental functions and promote an improved standard of living. We must provide not only funds for restoration and reconstruction, but loans to tide over the first difficult years. The Filipinos are a fine, kindly and intelligent people. They are capable politicians, but they lack administrative experience. Our public health service, educational and economic agencies must extend them every possible material aid; and we must be prepared also to supply trained and experienced administrators, if requested.

The Philippine Republic has come of age and must work out its own problems. But it is still entitled to our understanding and our help. We are proud that the new Republic has taken its place among the nations. We cannot afford to have it fail. Many of the mistakes in the legislation arranging for independence can be and must be adjusted. The financial aid which we have already arranged will have to be supplemented from time to time, for though the Philippine Islands are potentially wealthy, they are "money poor" and have few immediate resources of capital.

Aid to the Philippine Republic is by no means a one-way street. The Philippines can do much for the United States. They can and should, in their own interest, provide an expanding market for United States goods and products. But even more important, this young and enthusiastic people can be our spokesman in the Orient. It can help us bring home to China, India, Russia, the East Indies and the new Japan, our desire, not for aggrandizement in the east but for industrialization there, for open markets, and for equal opportunities for all nations to join in multilateral trade -- in other words, that we stand for a rising level of living for all.

The Philippine people, who are friendly to the United States and appreciate the benefits which we have provided, can help us most by acting as our salesmen, not so much for goods and merchandise, as for our democratic ideas -- specifically, the idea of the extension of self-government to backward people, and the policy of nonaggression. They can help us achieve a coöperative world society which recognizes the rights not only of nations but of human beings wherever they may be.

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