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The FDR Tradition in Philippines

The FDR Tradition in Philippines


Originally published by the Schiller Institute with the page title Salvador Araneta.

“ The following article was left unpublished when the author, John Morris (b. June 7, 1960), was tragically killed in an automobile accident on June 16, 2008. While John intended to add a few finishing touches, the conceptual framework was complete. I have added a few sentences to the last draft left by John, for clarity, without changing the content.

John is well known, including within the Philippines (see the obituary by the head of the Philippines LaRouche Movement Butch Valdes), for his groundbreaking essay on the founding father of the Philippines nation, Jose Rizal, focused on Rizal’s collaboration with Renaissance circles in Europe. John intended to follow this work with a study of another great leader in the republican tradition in post-World War II Philippines, Claro Recto. That study will have to be taken up by another, but the impulse and the intention is provided in this report.

The intense battle waged by the protagonist in this article, Philippine nationalist economist Salvador Araneta, against the ravages of neo-colonial “free trade” policies, are of singular importance today, as the free-trade ideologues of the British Imperial system have now succeeded in imposing their will upon the world under the guise of “globalization.” Araneta saw his nation, and the world, being dragged into hell by the globalizers of his day, and fought to revive the American System designed by Alexander Hamilton — which also guided the policies of President Franklin Roosevelt — as the only means to gain full independence for his nation, and establish productive relations with truly sovereign nations everywhere. Nothing less than such a dedication is required in the collapse of the world financial and strategic system facing us today. ”
—Mike Billington


The FDR Tradition in Philippines
by John D. Morris
June 2009


On July 4, 1946, in the immediate months following the defeat of the Japanese in the Pacific, the long awaited declaration of Philippine Independence was made. Nearly half a century of American government oversight and control was nominally coming to an end, fulfilling the dream of the Philippine people for nationial sovereignty. This historic event had also long been the personal concern of President Franklin D. Roosevelt, dating from at least the time in 1901, as a senior at Groton School in Massachussetts, when he argued in a public affairs debate that the Philippines, then under U.S. military government, should be given independence.
FDR’s life encompassed the era in which the United States confronted the role that it would play as a world power. Even before the Second World War, Roosevelt’s foreign policy as President was not isolationist, nor was it imperialist, but rather the anti-colonial orientation of the American system, as opposed to the British System of free trade, cheap labor and natural resource control. In the minds of Philippine patriots, FDR’s legacy lived on after his passing in their effort to fulfill his intention for Philippine independence. However, they learned quickly that national sovereignty and economic development do not come without a price.
Foremost among those Philippine patriots who understood and embraced the American System tradition represented by Franklin Roosevelt was Salvador Araneta. This report will trace Araneta’s fight for Philippine independence and for the adoption of the American System of Political Economy — but it will also show that Araneta recognized that American policy, especially after the death of FDR, was often the opposite of the American System — in fact, it was often closer to the British system of colonialism which FDR was committed to abolishing forever.
Roosevelt’s vision of an end to colonialism

Shortly after assuming the Presidency in 1933, Roosevelt appointed the Mayor of Detroit, Frank Murphy, a close collaborator in the New Deal struggle against depression conditions in the U.S., to be the Governor General of the Philippines. Reversing years of stagnation in U.S.-Philippine affairs during Republican administrations, Roosevelt and his allies in Congress organized the Hawes-Cutting Act to address the issue of Philippine independence. This was initially opposed by Philippine Nationalist Party leader, Manuel Queson, on the issues of the continued basing of U.S. forces and unjust tariffs, and was voted down by the Philippine Legislature.
On March 2, 1934, President Roosevelt communicated to Congress a request that the Hawes-Cutting Act be amended. His message characterized the history of U.S.-Philippine relations, and his perspective for the future.
“Over a third of a century ago, the United States, as a result of a war which had its origin in the Caribbean Sea, acquired sovereignty over the Philippine Islands, which lie many thousands of miles from our shores across the widest of oceans. Our Nation covets no territory; it desires to hold no people against their will over whom it has gained sovereignty through war.
“In keeping with the principles of justice and in keeping with our traditions and aims, our Government for many years has been committed by law to ultimate independence for the people of the Philippine Islands whenever they should establish a suitable Government capable of maintaining that independence among the Nations of the world. We believe that the time for such independence is at hand.
“A law passed by the seventy-second Congress over a year ago was the initial step, providing the methods, conditions and circumstances under which our promise was to be fulfilled. That Act provided that the United States would retain the option of keeping certain military and naval bases in the Islands after actual independence had been accomplished.
“As to the military bases, I recommend that this provision be eliminated from the law and that these bases be relinquished simultaneously with the accomplishment of final Philippine independence.
“As to the naval bases, I recommend that the law be so amended as to provide for the ultimate settlement of this matter on terms satisfactory to our own Government and that of the Philippine Islands.
“I do not believe that other provisions of the original law need be changed at this time. Where imperfections or inequalities exist, I am confident that they can be corrected after proper hearing and in fairness to both peoples.”
The U.S. Congress then successfully passed the Tydings-McDuffie Act, in March 1934 (known as the Philippine Independence Act), establishing a ten-year transition period beginning in 1936, with independence to be established in 1946. US naval bases were to be permitted only through 1947. The bill found favor among the Philippine leadership.
On Dec. 9, 1935, the University of Notre Dame sponsored a special convocation in honor of the new Commonwealth of the Philippines, and awarded President Roosevelt an honorary degree. During his acceptance speech, Roosevelt stated that America had “chosen the right course with respect to the Philippine Islands. Through our power we have not sought more power. Through our power we have sought to benefit others.”
War, Truman, and the Curse of British Colonial Thinking

The interval that followed the Tydings-McDuffie Act was meant to strengthen the institutions of government. “The prewar period was characterized by an effort to free ourselves from foreign domination, during which was born the Philippine National Bank that freed us from the dominance of such foreign banks as Bank of America, National City Bank and Hong Kong Shanghai Bank. Every effort was made to be economically self sufficient with the birth of the National Development Company and its subsidiaries — National Coconut Corp., National Food Corp., National Textile Corp., Rice and Corn administration, among others, liberating us from the monopoly of Proctor and Gamble, Unilever, and importers of food and clothing.” (Araneta)
Sadly, the clouds of war intervened. General Douglas MacArthur had been deployed to organize the defense of the islands, but only days after the Japanese attack on Pearl Harbor, Manila was under air attack, and shortly thereafter the Japanese invaded, and the Philippines were overrun.
On December 28, 1941, Franklin Roosevelt made a radio broadcast to the Filipino population:
“I give to the people of the Philippines my solemn pledge that their freedom will be redeemed and their independence established and protected. The entire resources, in men and in material, of the United States stand behind that pledge. It is not for me or for the people of this country to tell you where your duty lies. We are engaged in a great and common cause. I count on every Philippine man, woman, and child to do his duty. We will do ours.”
American and Philippine forces united over the next five years. Guerrilla forces from among the Filipinos under occupation resisted the Japanese and prepared for liberation. When the Allied military forces commanded by MacArthur returned to drive the Japanese out of the islands, the date for independence was quickly set. But, on April 12, 1945, Roosevelt died, replaced by Harry S Truman. Filipinos had good reason to be concerned that their independence would be in name only.
As Lyndon LaRouche has repeatedly stressed, FDR’s policies began to be reversed before his body was cold. While FDR had told Winston Churchill to his face that the US was not fighting the war to preserve the British Empire, and that the post war period would see sovereign states and US-led economic development in the former European colonies, Truman proved to be an asset of the Empire, helping the British, French, Dutch and Portugese colonial forces reassert their control over their former colonies in Asia and Africa.
With respect to the Philippines, Truman appointed Paul V. McNutt to take up the position that he had held before the war as U.S. High Commissioner to the Philippines. Many Filipinos questioned the wisdom of a new High Commissioner so near to the date of independence, especially McNutt, a factional adversary to Roosevelt and someone well known to be backed by American commercial interests in the Philippines.
The Truman Administration quickly set the stage for chaos with a series of official directives concerning the Philippines, intended to outline the conditions for aid and assistance to the American protectorate. The two most controversial of them related to agrarian unrest and collaboration with the Japanese during the war. “Agrarian unrest” was a reference to the indigenous guerrilla formation that fought the Japanese known as the Hukbalahap1. The Huks were based in the countryside and, along with other representatives of the rural populations, became effective advocates for the poor and disenfranchised.
The Truman directive stated: “During the war the tenants organized a guerrilla army which reportedly did good work against the enemy. After the enemy was defeated on their localities, they did not disband and today constitute a special problem which threatens the stability of government. On the other hand their legitimate claim to fair treatment and the assistance they rendered in the resistance to the enemy require that they be not dealt with in a ruthless manner.”
The preparations for the first post-war elections to be held in 1946 were seriously confused by the issue of rehabilitating Filipino leaders who had held positions in the Japanese occupation government. Both Roosevelt and Truman had made clear to Sergio Osmena, the successor to the deceased Manuel Queson as head of the exile Philippine government, that those persons shown to have aided the Japanese must not hold positions in the newly independent Philippines. However, the process by which collaboration was to be determined was contentious, especially because one of those under suspicion was Manuel Roxas, the leading candidate challenging Osmena in the race for president. Roxas had been involved with the Occupation government, but was unilaterally exculpated by General Douglas MacArthur when the Allied Forces regained control of the Philippines in 1945. This case created the legal ambiguity whereby the collaboration issue remained unresolved. Roxas went on to win the presidential elections, and become the first president of the new Philippine Republic.
Further policy problems were documented in a 1987 book length study by the Analysis Branch of the U.S. Army Center for Military History on counter-insurgency operations against Huk guerrillas in post-war Philippines:
“American insensitivity to internal Philippine problems continued into 1946 when the U.S. Congress passed two measures that strained Philippine relations and fueled Huk propaganda fires. In February, the Congress addressed the issue of Filipino veteran rights. In a move that shocked people across the Philippines, Congress, initially at least, denied them GI Bill benefits, breaking a promise made to them by General MacArthur as he retreated from Bataan. The American decision also denied back-pay, hospitalization, mustering-out pay, and burial benefits. In the Philippines, this decision met widespread opposition and anger. The U.S. Congress readdressed the veteran issue over the following five years, finally approving money for Philippine veteran hospitals in 1948, burial benefits in 1951, and later paid some Filipino veterans $473 million in backpay and allowances.” [note: Several categories of veterans were denied their promised benefits, however, and the battle to gain those benefits rages still today.2
“A second action that inadvertently aided Huk calls for a Philippines free of U.S. domination was the Philippine Trade Act (or Bell Act) of 1946. Introduced by Missouri Representative C. Jasper Bell in September 1945, the highly controversial act underwent five revisions before being passed in April 1946. Designed to stabilize economic ties with the United States and help Philippine recovery, the act formalized pre-war economic trading patterns and ensured U.S. economic hegemony over the country. Provisions of the 1946 act fixed the Philippine peso to the dollar and prevented the Philippine government from changing the value of the peso without U.S. consent. As a final insult, the act legislated a twenty-eight year extension for duty-free trade between the nations and mandated equal and free access to Philippine markets by American businessmen and companies. The Trade Act was the subject of hot debate in the Philippine legislature before being ratified on 18 September 1946, primarily due to the efforts of a coalition of local merchants, businessmen, and politicians (those most likely to benefit from a return to the old status quo). Huks seized upon this legislation as just another example of the United States acting through the Philippine government to maintain a neo-colonial relationship for the benefit of Filipino landlords, rich businessmen, and corrupt government officials.”
The Bell Trade reconfirmed the former relations between the two countries, under which independence would mean next to nothing. This was emphasized by the testimony of Assistant Secretary of State Will Clayton testifying in front of the Senate Finance Committee on April 5, 1946:
“Those provisions (on equal rights and others) are not reciprocal. We cannot give the same rights to the Filipinos. The Bell Bill would require that the Philippines permit Americans free access to enterprises. It would permit them to engage in many activities in the Philipine Islands from which Filipinos, as aliens, would be barred in the United States.”
Economic crisis came quickly to post-war Philippines. Earnings from exports of raw materials to the United States, along with modest development assistance and reparations for war damages did not provide enough capital for needed government operations, let alone investments to rebuild the war torn country. In the midst of this crisis, a public debate over the Bell Trade Act ensued that would capture the imaginations of postwar Filipinos, and rally the population toward a revival of President Franklin Roosevelt’s pro-growth, anti-colonial, nation building policies.
Salvador Araneta – Protectionist

A principal protagonist in this debate would be Salvador Araneta. He was the son of a Philippine founding father, Gregorio Araneta, and educated both in the Philippines (Ateneo, Santo Tomas) and in the United States (Harvard). Araneta’s political career began as an elected delegate to the convention that produced the 1935 Commonwealth Constitution. He was instrumental in organizing many governmental institutions in conjunction with circles that had grown up around the National Economic Council, an economic coordinating body established in the wake of the 1935 Commonwealth Constitution.
The mobilization against the Bell Trade Act was the beginning of Araneta’s clash with the financial establishment, those persons who had come under the influence of American vested interests in the Philippines, centered chiefly around the sugar industry. Araneta polemisized against the subserviant status in which the Bell Trade Act kept his country, while he advanced an aggressive program for the industrialization of the Philippines. The issue was Philippine sovereignty; the right to tariff protection, currency autonomy and taxing authority. This position placed Araneta in direct opposition to the newly elected President of the Philippines, Manuel Roxas.
In a study published in 1948, entitled, ‘Basic Problems of Philippine Economic Development’, Araneta is blunt in his assessment of Roxas. “On his election to the Philippine Presidency in April 1946, the late Manuel Roxas had to act one way or another in respect of the Trade Act. Partly because of pressure from the Island’s sugar interests, which saw in the Act their economic salvation, and partly because he wished both to obtain American financial assistance for his government and to retain the friendship of American officials who had helped to whitewash him of charges of wartime collaboration with the Japanese, President Roxas became the foremost Filipino champion of the Act.”
Araneta described the political environment of that period in a 1953 speech. “For my views on the Trade Agreement, I was referred to by Pres. Roxas as a prophet of disaster, and you well know how many of my American friends were rather disappointed at the attitude that I had taken…… To advocate then, a policy of protection for local production even as against imported American goods was anathema, was un-patriotic, was anti-American.”
But Salvador Araneta was far from being anti-American. In a speech before the Manila Rotary Club in January, 1947, entitled ‘Precepts We Can Not Surrender,’ he laid out a detailed critique of free trade, taking a few pages from U.S. history.
“There is no country (with the exception of England which was the first to turn to industrialization) which has been able to become industrialized without having had to protect its industries. The United States, with all its natural resources, had to protect its industries with high tariff barriers. From the time of its first Secretary of Treasury, the great Alexander Hamilton, to the present time, the United States has in fact consistently been a highly protectionist country.”
On the subject of National Banking. “In this connection, it will be interesting to note, that the financial problems that the United states of America had to face during the first years of its independence were quite similar to those of our present government. And to solve them, Alexander Hamilton created a National Bank, with a capital of $10,000,000….”
Araneta’s arguments were comprehensive and, in the end, he refers, as he does in many other speeches, to the ‘high ideals of President Roosevelt,’ by revisiting the famous passage from Eliot Roosevelt’s wartime memoir, “As He Saw It:”
“In the conversation between Roosevelt and Churchill that gave rise to the Atlantic Charter, Roosevelt indicted the colonial policies of the British Empire. He said: ‘Those Empire trade agreements are a case in point. It is because of them that the people of India and Africa, of all the colonial Near East and Far East, are still as backward as they are……’ Will America permit that the high ideals of President Roosevelt should be scuttled; that India should attain a more complete independence than the Philippines?“
Araneta’s courage and optimism were also clear in another 1947 address to visiting American Publishers. “The Filipino people have to be emancipated from the strait-jacket of colonial economy. The fetters and inhibitions to our industrialization programme must be removed, so that we may rapidly increase our national production, our per capita income, and thereby in the long run become among the best customers of the United States, to rank perhaps with Canada, a highly industrialized country, which is today America’s best customer. The economic problems of the world at this time will not be solved by the universal application of the formula of free trade, but through the application of a formula of diminishing protection for the industries of a country in proportion to her industrial development.”
“We hate to have to talk this language of the competitive man. We would rather prefer to talk the language of the cooperative international man, nay the language of the cooperative world citizen.”
“We expect that the United States, who ushered on August 6, 1945, the new atomic age, will soon harness its fabulous power for human progress and plenty, on a world scale, and that the clouds threatening a new world war, brought about by the fear of possible annihilation under an atomic bomb, will disappear once man discovers the fact that the atom power is humanity’s liberation from the fear of want, the fear of unequal competition, and the fear of war.”
Although there was decisive political opposition to the Bell Trade Act, it was ratified nonetheless under very disturbing circumstances. In the elections of 1947, a coalition known as the Democratic Alliance, which included leaders and supporters of the Hukbalahap, were elected to the Senate and the Legislature. They held the balance which would have prevented passage of the Trade Act. Brutal intervention was made by the newly elected President Roxas, with General MacArthur and Ambassador McNutt lending tacit support, to challenge the validity of the election of three senators and nine congressmen who rejected ratification. Criminial indictments claiming they had gained election through the intimidation of voters prevented the seating of these senators and congressmen long enough for the Act to be pushed through.
Public Credit

Exactly because of his outspoken views, Araneta was appointed as Secretary for Economic Coordination in the Cabinet of President Elpidio Quirino, who came to power with the death of Manuel Roxas. From this position, Araneta would be a visionary and prophetic voice for an FDR-style New Deal in the Philippines.
In 1950, he wrote a detailed study submitted to the annual meeting of the Philippine Economic Association entitled, ‘A Development and Financing Program For Our Total Economic Mobilization,’ in which he concluded, “…..To make rapid development possible through full employment, we need funds and credit, we need the invigorating effect of a generous blood transfusion of public credit to flow into the veins of our economic system, and we need new instrumentalities comparable in daring to the New Deal measures conceived and implemented during the so-called Third American Revolution under the great American President Franklin Delano Roosevelt.”
‘Total Economic Mobilization’ became the slogan of the Quirino Government, and Salvador Araneta worked tirelessly to educate and inform his fellow citizens about the principles of political economy so that this program might have a chance to be more than just a slogan.
As financial conditions worsened, Araneta faced strong resistance to his policies. His toughest critics were within the Quirino Cabinet itself, specifically Miguel Cuaderno, the Secretary of Finance, and later the Governor of the Philippine Central Bank. Both men had worked together to successfully organize the U.S. Truman administration to accept import controls, the establishment of a Central Bank, and for the application of a tax on foreign currency transactions. These measures did prevent chaos, but as Araneta made clear, they did not slow the growth of unemployment, nor meet the needs of a growing population.
Araneta and Cuaderno clashed over the methods by which to address the crisis, and thus revived the public war of ideas as to which direction the Philippine economy should take. Cuaderno, the central banker, preached conservative monetarist theory, and a limited role of government. His relationships with European and New York banking interests helped to advance the Philippines standing as a new nation, yet strengthened the international private financial institutions which sought to administer the Philippines economy.
In late 1950, the Bell Trade Mission issued a progress report, meant to redress the grievances unresolved from the Bell Trade Act of 1946. Araneta recieved the report favorably, but in a speech in January 1951 in front of the Economics Club of the University of the East, he appealed for effective and timely implementation:
“At this time, it is enough for me to say that if something along the lines of the two bills above-mentioned is enacted, we will be making a great headway in the solution of our age-old problem of lack of credit for the economic development of our country.
“…..My friends, we are indeed facing a grave crisis, although many of us do not seem to realize it. This crisis could only be solved by bold measures and great sacrifices. I fully agree with the Bell Mission when it counsels that positive measures must be undertaken ‘promptly’. This we have failed to do. This is no time for mutual recriminations. We are all guilty in this regard, both the people and the Governments of the Philippines and the United States.”
Araneta resigned from the Quirino Cabinet on January 18, 1952, primarily over disagreements with the administration’s sugar policy after Philippine sugar was sold to Japan despite his protests. Now free to voice his views as a private citizen again, Araneta lost no time in publicly confronting his philosophical adversary, Miguel Cuaderno, on the subject of the monetary, gold and foreign exchange policies of the Philippine Central Bank. In a series of articles in the Manila Times in late 1953, Araneta challenged Cuaderno to respond to his programatic alternatives. Cuaderno stated his objections in a lengthy written response, part of which follows:
“Mr. Araneta’s proposals, while they appear attractive, particularly to specific sectors which will benefit therefrom, are bound to lead the economy to a disastrous condition of inflation, high cost of living and speculative activities, and ultimately the total breakdown of our currency, and thus the cessation of all productive activities. This indictment holds true for all his proposals: deficit spending, multiple currency rates, dollar retention system, and the purchase of gold at premium prices. Although apparently different measures, there is one unifying principle behind all, viz., the progressive cheapening of the currency, and conversely, the spiraling of prices. Such a condition would give the illusion of progress, as witness the feverish commercial activity during the Japanese occupation, when it was not worth one’s while to hold his money even for one day. This may be desirable for speculators and profiteers, but never for genuine producers who need to plan their output, or for the masses of consumers whose incomes cannot keep pace with the mounting costs which cheap money policies inevitably generate.”
Araneta replied to Cuaderno’s letter in the form of a printed monograph which starkly presents the nature of the American System of protection and public credit against British free trade monetarism:
“These proposals of mine, have been branded by Gov. Cuaderno, as being at variance with the opinion of most monetary and economic authorities ‘as dangerous and irresponsible experimentations on the people’s livelihood…..’ It is true that there is one unifying principle behind my proposals. But Gov. Cuaderno is mistaken when he believes that they will lead to ‘the progressive cheapening of the currency,’ ‘the spiraling of prices,’ ‘to disastrous conditions of inflation, high cost of living and speculative activities,’ ‘the total breakdown of our economy, and thus the cessation of all productive activities.’
“My proposals may be ‘undesirable in principle’ much as protectionism is undesirable in principle to free traders. But protectionism and multiple rates are being practiced today by force of necessity, and the sooner we ceased dillydallying on this matter, and implement a genuine protectionist policy- protecting producers, with due regard for the needs of the public for essential commodities, the sooner we will be on the road to full employment, and higher standards of living.
“As long as we have a black market and an unconvertible currency, it is much too boastful to claim that we have a stable currency. A stable currency does not need exchange restrictions and can stand its own ground. It may be a long way before we achieve a balance of payments, without the help of restrictions and controls. But controls and restrictions alone and by themselves cannot attain it. In our case what we need, is the protection and the incentives of a selective devaluation of our currency, a more liberal credit policy, and great and wise leadership in the government to stimulate production, and more production and more production.”
To his credit, Miguel Cuaderno resisted pressure by New York and London interests to decontrol Philippine currency and financial markets in exchange for International Monetary Fund loans. Even more important, when the vice president of the Philippine National Bank Leon Fernandez brought the notorious former Nazi finance minister and Bank of England asset, Hjalmar Schacht, to advise Cuaderno, the Central Bank head firmly rebuffed Schacht, stating that his monetary schemes were hardly appropriate for an economy needing capital investment in basic industry and infrastructure.
Salvador Araneta went on to be the Secretary of Agriculture and Natural Resources for the Magsaysay Administration in 1953. He and a circle of government and business leaders, especially Alexander Lichauco and Hilarion Henares who associated with him, fought to gain momentum for Philippine industry and agriculture despite crippling trade and currency policies. These leaders continued to outline protectionist policies and deconstruct the free traders, referencing capital budgeting and the urgent need for productive economy vs. consumer society. Araneta castigated the naysayers and the self-appointed advisors amoung the high and mighty. His New Deal vision and planning is an indispensible insight into the mind of a Filipino patriot inspired by the global impact of Franklin Roosevelt’s leadership.
Jose Rizal
Philippine LaRouche Society
1. The Hukbalahap Insurrection: A Case Study of a Successful Anti-Insurgency Operation in the Philippines, 1946-1955. by Major Lawrence M. Greenberg. Analysis Branch, U.S. Army Center of Military History. Washington, D.C., 1987
2. The battle to get the US Congress to live up to President Roosevelt’s pledge to Philippione soldiers who responded to his call to arms in 1941 is not over. Roosevelt issued his executive order on July 26, 1941, bringing the Philippine Commonwealth Army into the service of the United States Armed Forces of the Far East under the command of Lieutenant General Douglas MacArthur; with Filipino soldiers toserve uner the US flag, entitled to full soldier and veterans benefits. A bill before the US Congress in July 2008, sponsored by Democrat Filner and Republican Issa, to finally live up to that pledge, is being undermined by Republican minority leader Boehner, and by sophistry from Democratic Leader Pelosi. The number of surviving Filipino veterans is dropping rapidly, to the disgrace of US. [MOB]

For Further Research:
‘Economic Re-Examination of the Philippines. A Collection of Speeches and Studies on the Subject 1947-1953’ By Salvador Araneta

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