New Departures

This examination of external influences on Philippine policy-making was not guided by the rich experience of other researchers, for few have ventured into this policy process. The institutional means by which the Bank and the Fund (either singly or collectively) have assumed key influence in LDC policy-making and implementation have been largely ignored, both in academic and nonacademic literature. But certain traditions within two bodies of literature have laid the foundation on which this work is built: literature on the World Bank or the IMF; and literature on interactions between and within certain of the five sets of institutions presented in Figure 1.

Within the broad-ranging literature dealing explicitly with the World Bank and the IMF, one school consists of traditional or neoclassical analyses. These have brought forward the salient technical features of how multilateral institutions perform their narrowly defined role of fostering longer-run growth and development (for the Bank) or short-run stabilization (for the Fund). Centering their analyses on economic variables, these economists have largely divorced the Bank and the Fund from the realm of political economy in which they function.^[10]

Since the 1950s, it has been common parlance within the Bank and the Fund to discuss the institutions' exercise of "leverage" or "conditionality" at a given moment in a given country.^[11] In more recent years, a major debate emerged in Fund and academic economic circles concerning what degree of conditionality (none, low, high) should be attached to the various species of loans for different countries.^[12] The debate developed in response both to critics from the left and from developing countries attacking the principle of conditionality^[13] and to the question of why relatively few LDCs were using Fund facilities. In the context of the Funds stated objectives, economists John Williamson (of the Institute for International Economics), Sidney Dell (of the United Nations), Bahram Nowzad (of the Fund), and others presented economic rationales behind various interpretations of conditionality. However, although Williamson noted the Fund's role as "giver of policy advice" and Nowzad mentioned its role "of persuading governments of the need for adjustment,"^[14] their debate did not touch on the dynamics of policy-making, that is, how the IMF interacts with LDC policymakers to translate conditions into policy. Thus, while the debate offered valuable historical interpretations of the IMF's

evolution toward conditionality,^[15] it maintained the charade that international economic institutions are somehow divorced from the world of politics and policy-making.

More relevant is a second group of more radical critics of foreign aid. Path-breaking works include books by Teresa Hayter and Cheryl Payer.^[16] Piecing together how "multinational corporations and capitalist governments" have historically been the beneficiaries of Bank and Fund advice to LDC governments,^[17] Hayter and Payer analyzed the political and economic context in which multilateral institutions operated.

Yet, by concentrating on "the fate of the external economic relations of countries which provide . . . case studies,"^[18] these authors bypassed another facet of the larger picture. As Payer acknowledged, what was lost was "a comprehensive picture of a [developing] nation's politics. In such a brief survey the internal factors have to be ignored or slighted."^[19] Instead, Payer and Hayter brought the collaborative linkages among the three international sets of institutions to centerstage.

This focus led these radical critics, as a group, to project a black-box analysis of Bank and Fund dealings with LDCs. In a global system structured inequitably, they argued, the Bank and the Fund had the power to influence LDC development paths and did so to the detriment of the LDC populace at large. But exactly what transpired in that black box of interactions could not be revealed by researchers based in developed countries and working predominantly from written materials (published or unpublished), or even by LDC-based researchers who did not have access to top policymakers.^[20] Although the omission was therefore understandable and their work nonetheless an important milestone, it tended to reduce policy-making influence to the level of dictates, leaving readers with a somewhat simplistic vision of LDC states uniformly marching to Bank or Fund orders.

Ever since Lenin put forward his thesis of "solid bonds, existing between global capital and LDC bourgeoisies,^[21] a vast literature has been built on the relationships between international and national institutions, of which the dependency school is best known within the tradition of looking at the international or external influence on LDC development paths.^[22] For the most part situating their analyses in Latin America, dependentistas attempted to uncover the historical roots of the region's continuing "underdevelopment." For them, the critical analytical framework be-

came the distinction between center and periphery. In general terms, dependentistas amalgamated the three rays of influence radiating from the international to the national (Figure 1) into one all-powerful, deterministic ray of influence. Thus dependency was presented as lack of autonomy for the periphery.

A major analytical weakness of this school of thought was the derivative position in which it placed the LDC state. In the early work of André Gunder Frank, the fundamental characteristics of Underdevelopment induced by external control included the concept of a weak state with no power over the rate or shape of accumulation.^[23] In this framework, Frank and other dependentistas tended to reduce the relationships between international institutions and the LDC nation as a whole to a mechanistic level, ignoring the growing sophistication of, and divisions within, LDC states and private capital as certain LDCs turned to export-oriented industrialization.

As Patti Baran first tried to turn Marxists' attention from developed countries' class relations to those within LDCs,^[24] so too a small group of writers sought to refocus dependentistas toward distinctions in the political economy of LDCs that "would condition different responses to the world capitalist system."^[25] Often incorrectly grouped within the relatively mechanistic dependency tradition, these theorists have been more accurately labeled the "new dependency" school by one Brazilian economist.^[26] Key works here are few: the studies on Brazil by Peter Evans and by Fernando Henrique Cardoso and Enzo Faletto, and on South Korea by Hyan-Chin Lim.^[27]

While not pursuing the world-systems level of analysis pioneered by Immanuel Wallerstein,^[28] this school built on his distinctions among the different states of LDC dependence or underdevelopment. In particular, they focused on Wallerstein's theoretical construct of the semi-periphery,^[29] which could be defined conceptually as those LDCs that have undergone more than minimal industrialization and have in the process gained some control over the surplus created. In this view, the "semi-periphery" would consist of the NICs. Evans, Cardoso, Faletto, and Lim took two of these, Brazil and South Korea, and demonstrated how an LDC within the semi-periphery could achieve levels of industrialization precluded by dependentistas and still be termed dependent on core institutions.^[30] Cardoso termed

this "associated dependent development"; Evans simply called it "dependent development."^[31]

In this framework; alliances were central to dependency. Cardoso and Faletto explained:

Some local classes or groups sustain dependency ties, enforcing foreign economic and political interests. Others are opposed to the maintenance of a given pattern of dependency. Dependence thus finds not only internal "expression," but also its true character as implying a situation that structurally entails a link with the outside in such a way that what happens "internally" in a dependent country cannot be fully explained without taking into consideration the links that internal social groups have with external ones.^[32]

Cardoso and Faletto's associated dependent development involved the structuring of a "system of alliances," or links, among "a new kind of oligarchy" of elite representatives from three sectors: local capital, the LDC state, and foreign capital.^[33] This represented a significant step forward from earlier dependency theorists' presentation of the LDC state and its dependency. As Cardoso and Faletto stressed: "There is no such thing as a metaphysical relation of dependency between one nation and another, one state and another. Such relations are made concrete possibilities through the existence of a network of interests and interactions."^[34]

Peter Evans took Cardoso and Faletto's structure and built on it a ground-breaking work that analyzed in detail "the bases for conflict and cooperation among representatives of international capital, owners of local capital, and the top echelons of the state apparatus" in Brazil.^[35] These three interacted to form a "triple alliance,"^[36] cemented through overlapping self-interests. Each of the trio was presented as strong enough to strive constantly for a dominant position within the alliance. Evans's work added dynamics to the interactions and brought it far from the dependentistas ' static world.

Hyan-Chin Lim's work is noteworthy for its attempt to extend the relevance and validity of Evans's "triple alliance" to Asia. One of Lim's main purposes was "to examine the mechanisms of dependent development [in South Korea], with emphasis on the close interplay of the state, foreign capital, and local capitalists under the U.S. security umbrella."^[37] Although Lim could be criticized as overreacting to dependentistas ' weak states by characterizing the South Korean state as enormously powerful,^[38] his work

nonetheless indicated that concepts developed by Evans and Cardoso had relevance for NICs besides Brazil.

Evans's and Lim's concern for alliances between sets of institutions, however, did not lead to deep analysis of how factions within each set of LDC institutions interact. Both did understand the analytical usefulness and validity of splitting institutions into "class segments" or factions.^[39] Indeed, a steady undercurrent in each work traces the existence of what Oswaldo Sunkel has dubbed the elite's "transnational kernel." By that Sunkel meant "a complex of activities, social groups and regions in different countries which conform to the developed part of the global system and which are closely linked transnationally through many concrete interests as well as by similar styles, ways and levels of living and cultural affinities."^[40]

With regard to LDC private institutions, the new dependentistas built on Baran's concept of a "comprador element of the native bourgeoisie,"^[41] or what was later called the collaborating elite. Cardoso and Faletto clearly saw the distinctions between the "national and internationalized bourgeoisie."^[42] Evans understood that "local capital cannot be analyzed as a single homogeneous entity.... The split between the incorporated elite and the rest of the local bourgeoisie facilitates the functioning of the triple alliance."^[43] Yet, overall, the institutional perspective overshadowed the dynamics of conflict as these different factions strove for a hegemonic role.^[44]

The present work builds on the work of Cardoso, Faletto, Evans, and Lim, and in particular on their analyses of the alliances that form the basis of LDC policy-making. Had not the new dependentistas carefully diagnosed the structural alliances that came with dependent development in the semi-periphery, the analysis of the political economy of policy-making suggested by Figure 1 would not be possible.

Thus, this work attempts to delineate the mechanisms by which the alliance of transnationalist factions in LDC states and bourgeoisies with multilateral institutions helped propel those factions into positions of authority. At the same time, in pushing beyond the dependent development engendered during NIC industrialization, this book seeks to extend the study of dependent development and the alliances it entails for policy-making to the would-be NICs, the group of twenty to thirty LDCs entering stages of export-led light industrialization, and particularly to the Philippines. What emerges is more than a black box of exploitation and

coercion. Rather, policy formulation is viewed as emanating from the interaction of interests of local transnationalist classes and international institutions, challenged, with varying degrees of success, by nationalist factions.

The chapters that follow contain three dynamics of action. On one level, this book is a study of the World Bank and the IMF: individually, their mechanisms for influencing LDC policy-making; Collectively, their collaboration that enhances the influence. A second dynamic lies in understanding the emergence and direction of the key component of the newest international division of labor, the would-be NICs. On the third and most specific level, the book is a case study of the Philippines, tracing both how it was restructured into a would-be NIC and what maldevelopment has resulted. As this introductory chapter illustrates, these three concerns are linked.

Although most of the events central to the Philippine story. fall within the last two decades, the roots of Bank and Fund influence on developing-country policy-making extend from the middle of this century. The next chapter traces that history, from the institutions' founding in the waning years of the Second World War through the present international crisis.