The Garcia Administration: The Filipino First Policy and the Austerity Program (1957-1961)

The period spanning 1957 to 1961 in Philippine History is inextricably linked to the presidency of Carlos P. Garcia. Thrust into office following the tragic death of the immensely popular Ramon Magsaysay, Garcia inherited a nation grappling with the complexities of post-war reconstruction, economic dependency, and burgeoning national identity. His administration became synonymous with two major policy initiatives: the Filipino First Policy and the Austerity Program. These policies, while aiming to chart a more independent and responsible course for the nation, ignited considerable debate and left a lasting, albeit complicated, legacy on the Philippine economy 1950s and its political landscape.

This article delves deep into the Garcia Administration, exploring the genesis, implementation, impact, and eventual outcomes of both the Filipino First Policy and the Austerity Program. We will examine the historical context that necessitated these measures, the specific actions taken, the challenges encountered, and their significance within the broader narrative of economic nationalism Philippines and the evolving relationship between the Philippines and foreign economic interests, particularly those of the United States.

The Unexpected Ascension of Carlos P. Garcia

Carlos P. Garcia assumed the presidency under somber circumstances. He was serving as Vice President when President Ramon Magsaysay perished in a plane crash on March 17, 1957. Garcia, a veteran politician from Bohol known for his integrity and statesmanship, completed Magsaysay’s term and subsequently won his own four-year mandate in the presidential election later that year, defeating Jose Yulo.

Garcia’s background was steeped in Philippine politics. He had served as a representative, governor, and senator before becoming Vice President. His political philosophy, while often overshadowed by Magsaysay’s populist appeal, was rooted in a deep sense of nationalism and a desire to see Filipinos gain greater control over their economic destiny. The sudden transition in leadership meant Garcia inherited the challenges and expectations that came with the end of the dynamic Magsaysay era, including issues related to the Ramon Magsaysay legacy, particularly agrarian reform and rural development, which Garcia would continue to address while shifting focus to broader economic policies.

The Filipino First Policy: Asserting Economic Sovereignty

The Filipino First Policy stands as the most prominent and defining initiative of the Garcia Administration. Officially promulgated through a resolution by the National Economic Council (NEC) in August 1958 (NEC Resolution No. 204), this policy aimed to give preferential treatment to Filipino citizens and domestic entities in all aspects of economic life, particularly in areas previously dominated by foreign, primarily American and Chinese, businesses.

Genesis and Objectives of Filipino First

The policy was a direct manifestation of growing economic nationalism Philippines in the post-war period. While political independence had been granted in 1946, key sectors of the Philippine economy 1950s remained heavily influenced, if not controlled, by foreign capital. This dependency was viewed by many Filipino leaders and entrepreneurs as an impediment to genuine national development and self-sufficiency.

The roots of this nationalist sentiment can be traced back to earlier movements, including the National Economy Protectionism Association (NEPA) founded in the 1930s, which advocated for the patronage of local industries and products. The post-war context, marked by reconstruction efforts and the unique economic relationship with the United States defined by agreements like the Laurel-Langley Agreement (which granted parity rights to US citizens and businesses), further fueled the desire for Filipinos to assert their economic rights.

The primary objectives of the Filipino First Policy included:

Promoting Filipino participation: To increase the ownership, control, and management of key industries and enterprises by Filipino nationals.
Conserving foreign exchange: By prioritizing Filipino businesses, which were expected to reinvest profits domestically, reducing capital flight.
Stimulating local industries: Encouraging the growth of Filipino-owned manufacturing and production sectors through policies like import substitution Philippines.
Strengthening national identity: Fostering a sense of pride and self-reliance in the Filipino people by demonstrating their capacity to manage their own economy.

Garcia himself articulated the philosophy behind the policy, emphasizing that while foreign investment was welcome, it should not come at the expense of Filipino interests. The policy was seen as a necessary corrective to the perceived imbalances created by historical colonial ties and post-independence economic arrangements.

Implementation and Measures

The implementation of the Filipino First Policy involved a range of administrative measures rather than specific legislative acts (though supporting legislation was pursued). Key actions included:

Preference in Dollar Allocations: During the period of foreign exchange controls, Filipino businesses were given priority in the allocation of dollars for imports and other transactions. This was a significant advantage, as access to foreign currency was crucial for businesses reliant on imported raw materials or machinery.
Preference in Government Procurement: Government agencies were directed to prioritize purchasing goods and services from Filipino-owned companies.
Incentives for Filipino Entrepreneurs: While not solely under Filipino First, existing and new incentives aimed at industrialization often favored or were designed with Filipino entrepreneurs in mind.
Moral Suasion and Public Campaigns: The government actively promoted the “Buy Filipino” campaign, encouraging consumers to support local products.

The policy had a tangible impact on sectors like import-export trade, retail, and certain manufacturing industries. Filipino businessmen, who had previously struggled to compete with established foreign firms enjoying preferential treatment, saw new opportunities arise. Figures like Leonides S. Virata, a prominent economist and later official, were influential in shaping the policy’s economic rationale.

Challenges and Criticisms of Filipino First

Despite its nationalistic appeal, the Filipino First Policy faced significant challenges and drew considerable criticism:

Retaliation and Reduced Foreign Investment: Foreign businesses, particularly American and Chinese, felt discriminated against. Concerns were raised about the unpredictability and fairness of the implementation, potentially deterring much-needed foreign direct investment.
Economic Inefficiency: Critics argued that prioritizing Filipino ownership over efficiency or capability could lead to the support of less competitive enterprises, potentially harming the overall Philippine economy 1950s.
Abuse of Controls: The system of prioritizing dollar allocations became susceptible to abuse and corruption, as access to dollars was a valuable commodity. This inadvertently fueled issues related to corruption Philippines.
Impact on Consumers: Protectionist measures under the umbrella of import substitution Philippines and Filipino First could lead to higher prices for consumers due to reduced competition and limited availability of imported goods.
“Brown Americanism” Critique: Some critics argued that the policy, while ostensibly nationalist, merely replaced foreign elites with a Filipino economic elite (“brown Americans”) who might not necessarily serve the broader interests of the Filipino masses.

The policy also created diplomatic friction, particularly with the United States, which viewed it as a violation of the spirit, if not the letter, of agreements like the Laurel-Langley Agreement.

The Austerity Program: Addressing Fiscal Challenges

Simultaneously with the push for Filipino First, the Garcia Administration also implemented the Austerity Program. This policy was born out of pressing fiscal and economic realities facing the Philippines in the late 1950s.

The Economic Context Requiring Austerity

The post-war Philippine economy, while showing signs of growth, was characterized by structural weaknesses. A persistent trade deficit, dwindling international reserves, inflationary pressures, and what many perceived as excessive government spending necessitated corrective measures. The system of import and exchange controls, while intended to protect local industries and conserve dollars, had also created distortions and opportunities for graft.

Magsaysay’s administration had focused heavily on rural development and infrastructure, leading to increased government expenditures. While popular, this spending, combined with the structural issues and the functioning of the controlled economy, contributed to the fiscal challenges inherited by Garcia. The Austerity Program was designed to bring fiscal discipline and stability to the national economy.

Key Measures of the Austerity Program

The core tenets of the Austerity Program were:

Reduced Government Spending: The government aimed to cut down on non-essential expenditures and prioritize spending on productive projects.
Increased Tax Collections: Efforts were made to improve tax collection efficiency and broaden the tax base to increase government revenue.
Anti-Graft and Corruption Drive: Recognizing that corruption drained public resources and undermined economic stability, a significant component of the program was an intensified campaign against anti-graft and corruption. Garcia himself was known for his personal integrity, and his administration initiated investigations and prosecutions.
Fiscal Discipline: Promoting prudence and responsibility in managing public funds and resources.

Garcia framed the program as a moral imperative, urging government officials and the public alike to embrace simplicity and honesty. He famously stated, “We need to live within our means.”

Challenges and Outcomes of the Austerity Program

Like Filipino First, the Austerity Program faced significant hurdles and its success was limited:

Difficulty in Implementation: Cutting government spending is politically challenging, often facing resistance from various sectors benefiting from expenditures.
Persistence of Corruption: Despite the declared drive against anti-graft and corruption, instances of malfeasance continued, often fueled by the very controls (like dollar allocations) that the government managed. The perception, whether entirely fair or not, grew that corruption remained a significant problem during his term, undermining the credibility of the austerity drive.
Impact on Public Services: Deep cuts could potentially affect the delivery of essential public services.
Political Opposition: Opposition parties and vested interests often criticized the program, sometimes portraying it as detrimental to growth or welfare.

While the Austerity Program highlighted the fiscal challenges and the need for responsible governance, it did not entirely resolve the structural economic problems or eradicate corruption. Its impact was arguably less visible and less celebrated than the more ideologically appealing Filipino First Policy.

The Interplay of Filipino First and Austerity

The Garcia Administration is unique for pursuing these two major, seemingly distinct, policies simultaneously. How did the Filipino First Policy and the Austerity Program interact?

Ideally, they were meant to be complementary. The Filipino First Policy, by aiming to strengthen Filipino businesses, was intended to build a more self-reliant economy, which in turn should lead to greater national wealth and potentially ease fiscal pressures in the long run. A stronger Filipino business sector could contribute more taxes and reduce the need for certain imports.

Conversely, the Austerity Program’s emphasis on fiscal discipline and anti-graft and corruption was meant to create a more stable and ethical environment within which Filipino businesses could thrive, free from unfair competition or undue influence. By conserving government funds and foreign exchange, austerity could theoretically make more resources available for priority areas, including support for Filipino enterprises.

However, in practice, the policies often faced conflicting pressures:

The system of allocating limited dollars preferentially to Filipino businesses under Filipino First could exacerbate opportunities for corruption, directly contradicting the goals of the Austerity Program.
The focus on import substitution Philippines, while part of Filipino First, sometimes required continued access to imported machinery and raw materials, creating demand for dollars that austerity sought to conserve.
Efforts to cut government spending under austerity could potentially reduce support or incentives that might otherwise be offered to nascent Filipino industries promoted by Filipino First.

The success of one policy was often hindered by the challenges faced by the other, creating a complex and sometimes contradictory policy environment within the Garcia Administration.

Socio-Economic and Political Impact

The combined impact of the Filipino First Policy and the Austerity Program on the Philippine economy 1950s and society was multifaceted:

Rise of Filipino Entrepreneurship: The Filipino First Policy undeniably spurred the growth of a Filipino entrepreneurial class in sectors previously dominated by foreign capital. Many prominent Filipino businesses trace their origins or significant expansion to this era.
Mixed Economic Performance: While some sectors benefited, the overall economic growth during the Garcia Administration was moderate compared to the Magsaysay years. Challenges like inflation, unemployment, and income inequality persisted.
Strained Foreign Relations: The Filipino First Policy created tensions with key trading partners, particularly the United States. Discussions around the Laurel-Langley Agreement and military base issues under the Bohlen–Serrano Agreement (signed during the Magsaysay administration but effective during Garcia’s term regarding military bases lease duration) were influenced by the economic nationalism of the period.
Political Landscape: The administration faced significant political challenges, including persistent accusations of corruption that tarnished the image of the Austerity Program. This contributed to a decline in public trust and ultimately played a role in Garcia’s defeat in the 1961 presidential election to Diosdado Macapagal.

The period represented a crucial phase in the economic development Philippines, marking a conscious effort by the state to steer the economy towards greater national control, even if the implementation proved difficult and the results mixed.

Criticisms and Controversies

The Garcia Administration was not without its share of controversies. Beyond the implementation challenges of its core policies, several issues drew criticism:

Graft and Corruption: Despite the Austerity Program and Garcia’s personal reputation, the administration struggled to shake off perceptions of widespread corruption Philippines. Allegations ranged from influence peddling to irregularities in dollar allocations. This significantly eroded public confidence.
Poverty and Inequality: While focusing on national economic control, critics argued that the administration did not sufficiently address the pressing issues of poverty and income inequality affecting the majority of the population. The benefits of Filipino First seemed to accrue more to a select group of Filipino businessmen.
Handling of Economic Crises: The administration faced economic difficulties, and the effectiveness of its responses was debated. The controlled economy system, with its inherent distortions and potential for abuse, was increasingly seen as unsustainable.

These criticisms, amplified by political opponents, contributed to the narrative that the Garcia Administration, despite its noble intentions with Filipino First and Austerity Program, fell short in delivering broad-based prosperity and clean governance.

Markdown Table: Comparing Filipino First and Austerity

To better understand the nature and objectives of these two key policies, let’s compare them:

Feature	Filipino First Policy	Austerity Program
Primary Goal	Promote Filipino ownership/control of economy	Fiscal discipline, reduce spending, fight graft
Focus	Economic nationalism, business preference	Government finance, public sector ethics
Key Mechanism	Preferential dollar/import allocations, buy local campaigns	Spending cuts, improved tax collection, anti-corruption drive
Target Beneficiary	Filipino entrepreneurs and businesses	The national treasury, potentially the public through stable finances
Economic Theory Link	Economic Nationalism, Import Substitution	Fiscal Conservatism, Anti-Corruption
Perceived Outcome	Boosted Filipino business sector, but limited overall impact, prone to abuse	Highlighted fiscal issues, limited success in full implementation, perception of ongoing corruption

Export to Sheets

Timeline of Key Events (1957-1961)

March 17, 1957: President Ramon Magsaysay dies; Vice President Carlos P. Garcia becomes President.
November 1957: Carlos P. Garcia wins the presidential election for his own term.
August 1958: National Economic Council (NEC) Resolution No. 204 formally adopts the Filipino First Policy.
Late 1958 – Early 1959: Implementation of the Austerity Program measures begins.
1959-1961: Ongoing debates and challenges regarding the implementation of both policies, coupled with persistent issues of corruption Philippines.
November 1961: Presidential election; Garcia loses to Diosdado Macapagal, who campaigned on a platform of economic liberalization and anti-corruption.

Key Takeaways:

The Garcia Administration (1957-1961) is defined by the Filipino First Policy and the Austerity Program.
Filipino First was a key expression of post-war economic nationalism Philippines, aiming to prioritize Filipino control over the economy through measures like preferential dollar allocation and promoting local products via import substitution Philippines.
The Austerity Program sought fiscal discipline, reduced government spending, and an anti-graft and corruption drive to address the nation’s economic challenges.
While Filipino First fostered the growth of Filipino businesses, both policies faced significant implementation difficulties, criticism regarding fairness, and were intertwined with persistent issues of corruption Philippines.
The period highlights the tension between nationalist economic aspirations and the practical challenges of governance, fiscal management, and foreign economic relations in the post-war Philippines.
The legacy of the Garcia Administration is complex, marked by significant policy initiatives that aimed for greater self-reliance but faced considerable hurdles and mixed results, paving the way for the economic reforms of the subsequent Macapagal administration.

Conclusion

The Garcia Administration from 1957 to 1961 represents a pivotal, albeit challenging, era in Philippine History. President Carlos P. Garcia, inheriting the reins from a national icon, sought to steer the nation towards economic self-determination through the bold Filipino First Policy and fiscal responsibility through the Austerity Program. These initiatives were rooted in the genuine desire to strengthen the Philippine economy 1950s and ensure that Filipinos had a greater stake in their own country’s wealth.

The Filipino First Policy undeniably spurred the growth of the Filipino business sector and instilled a sense of national pride. It was a significant step in articulating economic nationalism Philippines as a core principle of governance. The Austerity Program, meanwhile, correctly identified the critical need for fiscal discipline and a serious approach to anti-graft and corruption, issues that continued to plague the nation.

However, the implementation of both policies proved fraught with difficulties. The complexities of managing foreign exchange controls and preferential treatment created opportunities for corruption Philippines, undermining the very integrity the Austerity Program sought to uphold. Furthermore, the policies faced resistance from both foreign interests and domestic critics who questioned their effectiveness and fairness.

The period ultimately underscores the inherent challenges of pursuing ambitious economic transformation in a developing nation grappling with historical dependencies and internal governance issues. While the immediate outcomes were mixed and the administration faced significant political headwinds leading to Garcia’s electoral defeat, the principles behind Filipino First continued to resonate in later policy discussions about economic development Philippines. The Garcia Administration, with its landmark policies, remains a crucial case study in the complex interplay of nationalism, economic policy, and political realities in the post-war Philippines.

Frequently Asked Questions (FAQ):

Q1: What was the main goal of the Filipino First Policy? A1: The main goal was to give preferential treatment to Filipino citizens and domestic businesses in economic activities, particularly in areas like trade, industry, and resource control, to promote economic nationalism Philippines and increase Filipino participation in the Philippine economy 1950s.

Q2: Why was the Austerity Program necessary? A2: The Austerity Program was needed to address the Philippines’ fiscal challenges in the late 1950s, including a trade deficit, dwindling reserves, and inflationary pressures. It aimed to promote fiscal discipline, reduce government spending, and combat anti-graft and corruption.

Q3: How did the death of Ramon Magsaysay impact the Garcia Administration? A3: Carlos P. Garcia unexpectedly became president after Magsaysay’s death. He inherited the economic and political landscape left by Magsaysay but shifted the focus towards his own distinct policies like Filipino First and Austerity Program, moving away slightly from Magsaysay’s strong focus on rural development, though still acknowledging the Ramon Magsaysay legacy.

Q4: What were some criticisms of the Filipino First Policy? A4: Critics argued it deterred foreign investment, could lead to economic inefficiency by favoring less competitive Filipino firms, and was susceptible to abuse through the control of foreign exchange controls.

Q5: Was the Austerity Program successful in eliminating corruption? A5: While the Austerity Program aimed to combat corruption Philippines and the administration initiated anti-graft efforts, the perception and occurrence of corruption persisted, particularly linked to the control systems in place, limiting the program’s overall success in this area.

Q6: How did the Laurel-Langley Agreement relate to the Filipino First Policy? A6: The Laurel-Langley Agreement granted certain parity rights to US citizens and businesses in the Philippines, which many proponents of Filipino First viewed as a hindrance to Filipino economic control. The policy was partly a reaction against the economic imbalances perceived under this agreement.

Q7: What was the long-term legacy of the Garcia Administration’s economic policies? A7: The Garcia Administration solidified economic nationalism Philippines as a significant force in policy-making. While the immediate outcomes of Filipino First and Austerity Program were debated, the principles of prioritizing national interests in economic development and the need for fiscal responsibility remained relevant in subsequent administrations’ approaches to the economic development Philippines. The issues of corruption Philippines also remained a persistent challenge.

Sources:

Corpuz, O. D. (1989). The Roots of the Filipino Nation (2 vols.). AKLAHI Foundation, Inc. (Provides extensive historical context on Philippine nationalism and economic history).
Jose, F. S. (1999). Philippine History. (A general overview of Philippine history, including the post-war period).
Constantino, R. (1975). The Philippines: A Past Revisited. Tala Publishing Services. (Offers a nationalist perspective on Philippine history, including critiques of post-war economic policies).
Manufacturers Bank and Trust Company. (1961). Philippine business review. (Contemporary economic reviews from the period can offer insights into the economic climate).
Golay, F. H. (1961). The Philippines: Public Policy and National Economic Development. Cornell University Press. (An academic analysis of Philippine economic policies in the post-war era, including the Garcia period).
National Economic Council. (1958). NEC Resolution No. 204. (The primary document formalizing the Filipino First Policy).
Official Gazette of the Republic of the Philippines. (Provides access to official government documents, speeches, and records from the Garcia administration, including details on the Austerity Program and anti-graft and corruption efforts). https://www.officialgazette.gov.ph/ (Specific articles or records may require deeper search within the site).
Reid, E. P. (1962). Rural Development in the Philippines: The Role of the National Government. Philippine Studies, 10(2), 196-211. (While focused on rural development, provides context on government spending priorities inherited by Garcia).

(Note: Specific links to primary source documents like NEC Resolution 204 or detailed government reports from the period are often found within academic databases or archives, and direct public web links may be scarce. The Official Gazette link provides a starting point for official records.)

Category: Third Republic (1946-1972)