KEY QUESTIONS: - Frugal and anti-inflationary rhetoric had limited effect to

fiscal policy (CONTSTANLY RUBBING AGAINTS THE

- To what extent can we blame Cuaderno’s insistence on a
strong peso for the maladies that behest the Philippine
economy during and after the period of 1950’s
1950’s
- An era of low inflation and even deflation
- Pederanga’s two part of the decade
o First half: Increase in GDP despite deflation because
of stable demand of Philippine products with the
Korean War
o Second half: decrease in GDP with weakening copra
prices, and threats on sugar earnings (with
inhibitions of US)
 Had growing trade deficit
- 50’s still had colonial control on tariff policies
- Only by 1955 that colonial currency policies were ended
CUADERNO AND THE CENTRAL BANK
ECONOMIC NEEDS OF THE POSTCOLONIAL STATE).
o For such that Congress set the budget and the
president spending the budget
- Cuaderno and Malacanang
o Cuaderno advocating for certain anti-inflationary
fiscal policies
o Central Bank extending credit to Malacanang
- Burden on government coffers
o Needs of newly independent economy not
benefitting from reconstruction program
 Rehabilitation and development projects
 Paying up foreign debts
 Bureaucratic expansion
- LIQUIDITY
o Magsaysay increased money supply by 9.2 percent
o Overvalued peso (seen on black market exchange of
dollar and peso; the 1USD to 2Pesos is exchanged
up to 2.5 to 2.8 pesos for the dollar)

- From 1949; first Governor

- Initiated period of import substitution CUADERNO’S AUSTERITY
o Allocated limited US dollars to businesses that it
- By 1957, credit tightening was seen with rate increase from
believed could spur domestic manufacturing
1.5 to 2 in March and 4.5 in September
 Eventually became an ossified (unable to
change) system of “controls”
 Manufacturing sector was superficial as
they relied on imported inputs
o Response to dwindling dollar supplies (increase in
export would cause inflow of dollars)
CRITICS:
Salvador Araneta
- Forwarded proposals to depreciate the peso, expand the
money supply, increase state spending, and move toward
full employment
Frank Golay
- Phil. Central Bank exaggerated the threat of inflation
- As to Cuaderno’s limited portrayal of conservative policy as
responsible and passing his critics as reckless spenders
o Golay: “Advocates of conservative economic
policies, by identifying themselves as proponents of
the ‘sound peso,’ introduced a shibboleth (repeated
but old fashioned) which severely circumscribed the
debate.”
Gerardo Sicat
- Traced the consequences of the 1950’s era of import-
substitution strategy on the recurrence of balance of
payments difficulties
o “the act of delayed adjustments in the value of the
peso [,] the most serious economic policy error of
our independence.”
 Autocratic central bank “failed to expand
export opportunities because of a
sentimental attachment to the peso’s
prewar parity with the US dollar.”
Pederanga
- Central bank in the 1950’s was so “bent on maintaining a
particular exchange rate” through “the maintenance of very
tight monetary and fiscal policies” that “it was willing to
sacrifice growth.”
Raul Fabella
- 1950’s and 1960’s had “cheap prop for the ‘beauty parlor
industrialization policy’ saw the assembly plants… depended
on artificial cheap imported inputs.” (MISSING MIDDLE
PROBLEM: the intermediate inputs industry never
developed)
- “because of a strong peso, Filipino manufacturers merely
borrowed foreign technology, imported raw materials and
capital goods mainly from the United States and produced
imitations of American goods.”
Bangko Sentral
- Founder policies as misguided
- The overly expensive peso led to unfavorable export prices
which ensured that imports kept outstripping export
receipts.”
o Imports at 81%
o Export at 66%