Blackwell Science, LtdOxford, UKAEHRAustralian Economic History Review0004-89922004 Blackwell Publishing Asia Pty Ltd and the Economic

History Society of Australia and New Zealand

November 2004443307320Original ArticleThe historical origins of the Philippine economy: a survey of recent research of the Spanish colonial eraJosep M. Fradera

Australian Economic History Review, Vol. 44, No. 3 November 2004

ISSN 0004-8992

THE HISTORICAL ORIGINS OF THE PHILIPPINE

ECONOMY: A SURVEY OF RECENT RESEARCH OF THE
SPANISH COLONIAL ERA
B J M. F
Universitat Pompeu Fabra, Spain

This article surveys recent research of the Spanish colonial era in

the Philippines since the late eighteenth century. While highlighting
imperfections in our understanding, the article establishes the
parameters with which the Philippine economy entered the twentieth
century. It outlines the intensification of Spanish colonial rule
through changes in the taxation system, particularly the expansion
of forced tobacco cultivation until its abolition in 1882. Since then,
the Spanish set out to further change and intensify colonial rule but
contradictions in the system of colonial rule caused the effort to
come to an abrupt end in 1898.

INTRODUCTION
The taking of Manila by the English in 1762 was a fundamental moment of
historical change in the archipelago of the Philippines.1 In terms of economic
growth, it is not easy to establish the true importance of the two-year British
occupation, as we are not yet in a position to measure the state of the Philippine
economy at that time. However, there is little doubt as to its impact on Spanish
imperial policy.2 The capture of Manila profoundly affected the institutional
framework in the country, particularly areas concerning military, fiscal and cus-
toms matters.
This brief essay will refer to this set of changes as a way of approaching the
origins of modern economic growth in the Philippines during the nineteenth and
early twentieth centuries. The essay seeks to establish this important point on the
basis of available studies, although it must be pointed out that this approach is
not always sufficient to resolve some of the main questions.3 In doing so, the essay
provides a brief survey of the economic historiography of the Philippines.
1 On the invasion, see Cushner, Documents.
2 Concerning the Spanish presence in the Philippines before the nineteenth century, the most
important book continues to be that of Phelan, Hispanization.
3 For an approach to Philippine historical literature, see Larkin, Perspectives.

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308 Josep M. Fradera

CHANGE IN THE LATE EIGHTEENTH CENTURY

The British invasion in 1762 was not the first foreign aggression in this remotest
of Spanish possessions. In the first half of the seventeenth century, several attacks
by the Dutch had made the Spanish aware of how difficult it was to administer
such a distant possession.4 To sustain the defence of the country, peasants in
various parts of the Philippines were forced to work for the imperial army and
navy through a system of corvée labour, which would last well into the nineteenth
century. The Dutch threat was a very serious one, since the Dutch East India
Company not only had a powerful navy, but forged alliances with the Malay
sultanates in the south of the Philippines, in Mindanao.5 The difference between
those seventeenth century attacks and the assault by the British East India Com-
pany is that the latter attack was successful in terms of both effectiveness and ease.
Moreover, it acted as a catalyst for the discontent of the social groups subjugated
by the Spanish, in particular the Chinese minority in Manila and large sectors of
the peasant population of the Tagala area and Pangasinan.6 The outcome of these
factors was an unprecedented crisis, which forced the Spaniards to radically
rethink their political and economic position in Asia. The ensuing change in their
colonial policy had great consequences, both internally and for the relationship
of the archipelago with the international economy.
The rural population in the areas controlled by the Spanish were most affected
by the change in priorities of the Spanish administration. During the rest of
the eighteenth century, the colony’s fiscal policies were drastically reformulated.
The aim was to provide resources essential to improving the fortifications and the
Spanish military organisation in the colony. To this end, the mechanism to collect
the cédula (head tax) was expanded to provinces and localities that had hitherto
been under largely nominal colonial administration, and the list of taxes was
consolidated. At the same time, a system of fiscal monopolies was established
which affected important popular objects of consumption, including local spirits
and tobacco. Particularly revenues from the tobacco monopoly increased faster
than what even the Spanish themselves had expected, as a study by De Jesús
shows.7 During 1782–1820, the fiscal monopolies developed around the capital–
port, especially on the island of Luzon, but in subsequent decades they gradually
covered the entire archipelago. The taxes on consumption demonstrated, in the
short term, a high elasticity in terms of their contribution to the colonial treasury.
Nevertheless, this greater fiscal pressure led to growing rural discontent and
significant anti-colonial uprisings, at least until the second decade of the nine-
teenth century.8

4 There is a general synthesis of all of this in Cushner, Spain in the Philippines.

5 Laarhoven, Triumph of Moro Diplomacy.
6 Routledge, Diego Silang; Cortes, Pangasinan.
7 De Jesús, Tobacco Monopoly.
8 Sturtevant, Popular Uprisings.

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 The historical origins of the Philippine economy: a survey of recent research of the Spanish colonial era 309

The extraordinary growth of the resources derived from personal taxes had an
impact on the peasantry and also on the organisation of the archipelago’s foreign
relations. Until the mid-eighteenth century, the main trade line that linked the
Philippines with the outside world was the official one between the capital–port
of Manila and Acapulco, in present-day Mexico and the port of Canton in China.9
It was an old transoceanic route established in 1600 and used for trading Latin
American silver from Peru and Mexico for Chinese silk and Southeast Asian
spices.10 The trans-Pacific route was in decline, even though it continued to be
important in the context of the changes that occurred in the latter half of the
eighteenth century.11 First, it played a significant role in financing Spain’s domi-
nation of the Philippines. The customs duties that entered the Manila treasury
were crucial for maintaining the military in the colony.
Second, commerce between the Philippines and China was the only area of
foreign trade in the Spanish empire in which foreign navies participated. In the
past, the merchant vessels in the trade between the Philippines and China or
Southeast Asia had been exclusively Asian, until after 1750 the navies of European
countries increased their share in the trade and Asian ships under flags of conve-
nience started to carry European goods. This helps to explain why the port of
Manila was already highly internationalised before the further liberalisation of
foreign trade of the Philippines during the nineteenth century.12 Adding to the
complex trade relationships was an attempt by the Bourbon dynasty to organise
a chartered company capable of guaranteeing direct communications between
Spain and its Asian possession via the Cape of Good Hope.13 Founded in 1785,
the Compañía de Filipinas failed in its aim to transform the economy of the Philip-
pines and guarantee a regular alternative route, but it contributed to diversify
Manila’s foreign relations.
At the beginning of the nineteenth century, the weakening relationship with
Mexico was compensated by trade with Southeast Asia, British India and China.
The relationship with China in particular became more dynamic due to its opium
trade. The existence of this multilateral foreign trade, albeit of a reduced volume,
was vital for the growth of public revenue from the colonial tax system.14 Both
personal tax collection and consumption of products from fiscal monopolies were
supported by the development of commercial agriculture, rural savings and the
opportunity to monetise the savings. The modest foreign trade surplus was vital
for ensuring a steady inflow of coins for circulation so that an increase in tax

9 Schurz, Manilla Galleon.

10 Tepaske, New world silver.
11 On the last stage of trading with Asia in these conditions, the following two articles should be
noted: Cheong, Changing the rules; Cheong, Decline of Manila.
12 Reed, Colonial Manila.
13 Díaz Trechuelo, La Real Compañía.
14 Bauzon, Deficit Government.

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310 Josep M. Fradera

revenues would not substantially increase the pressure of taxation in the still
largely unmonetised economy and lead to social crises.15
The colonial restrictions and pressure on the rural areas did not prevent the
emergence of a modest agrarian middle class in the hinterland of the port of
Manila. Little is known about the mechanisms and foundation for the rise of this
class, but a few hypothetical explanations can be given. On some occasions, it was
the modest development of capitalism of a provincial nature, on other occasions
it followed essentially ethnic lines. In some cases, it was supported by mechanisms
guaranteed by the colonial power (e.g. control over rural labour and the commu-
nity funds of the municipalities), and in others, it was not like this at all. Larkin
contrasts the formation of an active agrarian middle class in Pampanga, a prov-
ince of plains, but not among the Tagalog people around Manila, an area settled
by the Spanish for the purpose of producing rice supplies for Manila.16 In the
latter case, the mix of variables in the process was complex, and all variables
interacted, both provincial and related to ethnic differentiation. In addition, in its
interior, a very dynamic mestizo population, the Chinese-Philippine segment,
asserted itself. Using the mechanisms of local power provided by the Spaniards
(the so-called principalía indígena), it had convenient and easy access to both land
and peasant labour.17 On other occasions, the State’s new fiscal policies completely
clashed with the interests of the traders of alcohol (from sugar cane) and tobacco,
who were forced to abandon those activities.
Third, there was the whole web of economic activities in the Philippines related
to the economic foundation of the imperial system itself. The first element of that
web is groups of traders in Manila with interests in the trans-Pacific system. Some
were from Acapulco or Mexico City, as a natural result of more than two centuries
of monopolistic trade. Others were Spaniards, who the state had rewarded with
boletas (licenses) which allowed them to ship cargo in authorised vessels. Some of
them worked for themselves, while many others were little more than intermedi-
aries for the institutions that provided credit, particularly the ‘sacred works’ of the
powerful Catholic church in the Philippines.
Finally, there were the alcaldes mayores (provincial mayors) or those who had held
that office (the most important of provincial offices, with an average duration of
six years). Thanks to their position, they used corvée peasant labour assigned by
the state for different economic activities and for their own personal enrichment.
The alcaldes mayores were the government’s agents in the provinces, but at the same
time they were obliged to guarantee the trade of food from the interior to Manila.
Along these different paths, without the emergence of a recognisably dominant
sector, this proto-middle class formed itself. By the mid-nineteenth century, the
seeds of a relatively powerful social sector had taken root, at a time when the
changes in the interior of the Philippines and in the country’s relationship with

15 For everything relating to Philippine foreign trade, one should consult Legarda, After the Galleons.
16 Larkin, Pampangans; Larkin, Sugar.
17 Wickberg, Chinese mestizo.

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 The historical origins of the Philippine economy: a survey of recent research of the Spanish colonial era 311

international trade gave the archipelago an important role in the region’s

economy.

IMPACT OF FISCAL MONOPOLIES IN THE NINETEENTH CENTURY

Despite the emergence of a proto-middle class, the most dynamic element in
Philippine economic and social development until the mid-nineteenth century
was the state sector. The development of its fiscal monopolies was the fundamental
condition for the continuity of Spanish colonial power in the archipelago and it
was primarily the revenues from tobacco that guaranteed the fiscal resources
necessary to sustain the Spanish presence after the transoceanic system collapsed
during 1810–15. From then until 1882, the fiscal monopolies sustained the admin-
istration of the colonial state, but now outside the imperial context in which it
had been embedded for more than two centuries.18 This fact explains the deter-
mined Spanish action to develop these monopolies, particularly the tobacco
monopoly. It also resolves an issue that has not been fully understood in the
historiography; why a fiscal arrangement with such high collection costs was at
the same time so decisive in internalising the costs of the colonisation of the
archipelago.
The expansion of the fiscal monopolies enabled the intensification of Spanish
colonial rule over the Philippines during the nineteenth century. The old borders
in the interior – in the centre of the island of Luzon and in the south of the
archipelago, in Mindanao and Sulu – receded little by little as a very elementary
colonial system, consisting of a combination of fiscal monopolies, personal taxa-
tion and military domination, expanded. The Muslim sultanates to the south lost
control over large areas, which they had since the late eighteenth century, thanks
to British protection, as British traders acquired important products from the
sultanates for the Chinese market. Their enslaving activities in the Visayas
decreased and with it the system of production that had sustained the sultanates.19
The spread of the system of fiscal monopolies to the Visayas was a key element
in the race to colonise the Philippines, which the Spaniards had postponed for
centuries due to scarce resources and priorities that had focused on guaranteeing
transoceanic trade.
The most important medium-term effect of Spanish fiscal policy was indirect
and unintentional. The growth of the fiscal monopolies (particularly tobacco and
spirits) generalised a complex system of division of labour among different prov-
inces on the island of Luzon and, after the 1850s, in the Visayas. This was the
main result of the so-called colecciones: land reserved for the production of tobacco
using compulsory labour, with peasant workers receiving payment, but at a set
rate established by the local colonial authorities. An important event was the

18 Fradera, Filipinas.
19 On these political entities, see Warren, Sulu Zone; Warren, Iranun and Balangigi.

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312 Josep M. Fradera

establishment of the large colección in the Cagayan River Valley, in northeast

Luzon, after 1830.20 A political decision was made to remove subsistence produc-
tion of palay (rice) from some provinces for the production of export crops, while
others were designated to become primarily rice-growing. The expectation was
that increased export earnings would facilitate an increase in imported goods for
all. This production-integration design – or the formation of an internal market
– was only possible to the degree that the state arranged a reasonable level of
monetisation of the rural economy. In effect, without a sufficient supply of money,
the fiscal monopolies could not pay crop growers and labourers in the processing
factories in Manila, nor could markets for consumer products grow. However, the
division of peasant labour that served as their basis was viable.
In the medium term, the degree of monetisation of the inland Philippine
economy depended on the degree to which its products found international
markets. The Spanish administration was aware of the connection between fiscal
policy and its commercial and monetary implications.21 The high-ranking civil
servants in the Manila government never hid their admiration for similar formulas
in the British colonies of Australia or in colonial Java. Those were the fundamental
points of reference in the 1850s and 1860s, despite notorious differences between
the systems in both. To further the internationalisation of the archipelago’s econ-
omy, the Spanish authorities moved in two parallel directions. They almost com-
pletely liberalised Manila’s foreign trade in 1834 and in the Visayas in 1855. The
latter, particularly the island of Negros, had become a prominent sugar-producing
area by the mid-nineteenth century.22 The opening up of trade cannot be sepa-
rated from the decision to extend the tobacco monopoly to the Visayas. Nor can
it be separated from other developments: the growth of exports of agricultural
products; an increase in imports of British textiles; and the deindustrialisation of
textile production area, as McCoy showed.23 Second, the Spanish administration
organised auctions in Manila to sell monopoly tobacco destined for the interna-
tional market. The quality and price of Philippine tobacco attracted many British,
Dutch and American trading houses to the Philippine capital, with the result that
they established themselves firmly in the archipelago’s business world.

DEVELOPMENT OF AN EXPORT ECONOMY SINCE THE 1850s

In the mid-nineteenth century, the connections between the economic activities
of the state, the international trading houses, and the emerging Philippine business
groups in the provinces where export crops were grown, is the most notable result
of the nascent capitalism in the Philippines. One of the best-known cases of this
20 On the tobacco levy and the Cagayan Valley, see the brilliant studies of De Jesús, Tobacco Monopoly
and Control and compromise.
21 Fradera, Opio y negocio; Gamella and Martín, Las rentas del anfión.
22 Aguilar, Beyond inevitability.
23 McCoy, A queen dies slowly; Resnick, Decline in rural industry.

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 The historical origins of the Philippine economy: a survey of recent research of the Spanish colonial era 313

expansion is the production and export of Manila hemp, a plant fibre vital for
the merchant navies of many countries. Owen gave a very detailed description of
the characteristics of this sector and of the social groups that grew with it.24 On
many occasions, the most solid nucleus of the Philippine middle class had a very
pronounced ethnic characteristic: Chinese or Chinese-Philippine. Until the 1850s,
restrictions on the mobility and immigration of the Chinese contributed to main-
taining an important and hardly discussed role for the mestizos de Sangley minority,
the social group that would most enthusiastically claim the concept of ‘Filipino’
ethnicity for itself, as opposed to the majority of local ‘Indians’ and also the
Spanish colonisers.25 From this time on, they competed with a minority of genuine
Chinese.26 Case studies demonstrated the crucial function of both groups in the
main cities or in credit activities in rural areas, as occurred in the tobacco regions
under state control.27
The model of development described thus far, with important roles for the
colonial state and a dynamic middle class involved in export industries, contains
a contradiction that surfaced during 1875–85. In the Philippines, the Spanish had
found a successful response to the break-up of the Spanish empire: fiscal monop-
olies and the unstoppable progression of tax collection on the basis of sustained
population growth and expansion of the area where tax was collected.28 As the
fiscal monopolies taxed consumption, the development of native Filipino business
was not impeded. The problem stemmed from the fact that the Philippines were
a colony and subject to the exploitative intentions of its metropolis.
From the mid-1830s, the government in Spain sought to benefit from the
successful tobacco monopoly, based on the quality and apparent very elastic
supply of tobacco for both local and international markets. Encouraged by the
flagging public finances in the metropolis, it began to demand increasing supplies
of tobacco from the colony for sale for the benefit of the government in Spain.29
The financial burden on the colonial administration increased to the extent that
it was forced to suspend the alcohol monopoly in 1863 and pay rural tobacco
producers with paper vouchers in the absence of coins. This burden imposed by
the metropolis encouraged deep rural discontent that evolved into banditry
(tulisanismo) in some areas, and finally to the decline of income for the colonial
administration. In the 1870s, it became clear that the tobacco monopoly was
inefficient, corruption-ridden, a burden on the rural population and a source of
popular discontent.
In 1882, the tobacco monopoly was abolished and the public finances were
reorganised on the basis of customs duties and new direct taxes on industry and

24 Owen, Prosperity without Progress.

25 Anderson, Cacique democracy.
26 Wickberg, Chinese in Philippine Life.
27 Fenner, Cebu under the Spanish Flag, studied the case of Cebu in depth. See also Cullinane, Changing
nature.
28 Doeppers and Xenos, Population and History; Owen, Paradox.
29 Fradera, El estanco del tabaco.

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314 Josep M. Fradera

commerce.30 However, this change revealed the weaknesses and contradictions of

the Spanish presence in the remote Asian possession. The Spanish private sector
had only a weak basis in the colony and Spanish public finance was insufficient
to assist in making the Philippines more attractive for investment. This crisis in
the colonial model coincided with an end to almost a century of political stability
in Spain in 1868. The period 1868–1882 marked a time of fundamental change
in the relations between Philippine society and the Spanish colonial dominion.
The most notable aspect of the change was the increase of competition between
Spanish private enterprise in the colony and Filipino and Chinese mestizo busi-
ness interests, at a time when the colonial administration attempted to interest
Spanish industrialists, shipowners and traders in establishing business operations
in the archipelago. This tension between autochthonous entrepreneurship and
Spanish business cannot be simplified in any way, since the relationships between
both were close on occasion, as was the connivance of the colonial government
with one and the other.
During 1882–91, the metropolis made a substantial effort to more effectively
‘recolonise’ the archipelago. In this process, the state ceded an essential part of
its previous economic role, particularly those related to its fiscal role. The first and
most important change was the conversion of part of the state’s tobacco revenue
system into the assets of an important Spanish company, the Compañía General de
Tabacos de Filipinas, also known as Tabacos de Filipinas. The company was established
in Barcelona in 1881 with French and Spanish stockholders, and was directed by
a wealthy shipowning and financial family, the Marquises of Comillas.31
Tabacos de Filipinas soon played a major role in the Philippines. It maintained
interests in tobacco production in the provinces of Cagayan and Isabela, and at
the request of the Spanish government, it became equally involved in sugar
production and in cabotage. The Comillas business group controlled long-
distance shipping between Spain and the Philippines after the opening of the Suez
Canal in 1869, and used this position to build a conglomerate of colonial business
interests during the last decades of Spanish rule in the Philippines.32 It adapted
perfectly to the changeover to American colonial rule, to the extent that it
achieved exceptionally good business results during the first decade of the twen-
tieth century.33
During 1880–98 a good number of other companies also began activities in
the Philippines, in agricultural production for export in Visayas or as wholesale
traders in the main cities of the archipelago. It was a short but intense episode of
business development, which has yet to be fully assessed by economic historians.
Second, the state facilitated the proliferation of new Spanish economic interests
in the Philippines as much as possible. Business interests benefited not only from

30 This change in fiscal policy can be seen in its results in Roldán de Montaud, La hacienda pública
filipina.
31 Giralt Raventós, Compañía General de Tabacos; Izard, Dependencia y colonialismo.
32 Rodrigo Alharilla, Línea de vapores-correo.
33 Delgado, Bajo dos banderas.

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 The historical origins of the Philippine economy: a survey of recent research of the Spanish colonial era 315

changes in the fiscal regime during 1882–1883, but also from other forms of
support. The main reason was that Spain perceived the Philippines as the basis
for the colonial future of the country, even though the unfolding crisis in Cuba
foretold a conflict with the US and end to Spain’s colonial ambitions. After the
1885 Berlin Congress, the effective colonisation of the Philippines became a
fundamental element of Spanish foreign policy.34 In that context, the Spanish
government organised a large Philippines exhibition in Madrid in 1887 and a
smaller one in Barcelona in 1888.35
The key figure driving this development in Spanish policy was Victor Balaguer,
a liberal Catalan politician, who propagated the retreat of the state as an eco-
nomic force in the Philippine archipelago.36 These initiatives were part of the
effort to entice Spanish investors. At the same time, they reinforced the state’s
authority in the colony. Young Filipino students attending the exhibitions in
Madrid or Barcelona were incensed by ethnographic presentations of the different
ethnic groups in the archipelago. They emphasised the archipelago’s internal
differences and its cultural backwardness relative to the metropolis: a clear dem-
onstration of Spain’s intention to recolonise the Philippines.
Spain’s economic intentions toward the colony became increasingly clear. A
striking aspect was the tariff policy of the 1880s, which culminated in the 1891
Trade Relations Law, which was protectionist in favour of Spain and the Philip-
pines.37 Spain lowered duties on the importation of sugar, tobacco, coffee and
some other products, of obvious importance in the case of the Philippines. This
tariff revision had a considerable impact on Philippine foreign trade. In effect, it
was an important stimulus for Spanish companies and their subsidiaries in the
colony. Spain’s exports to the Philippines increased. In contrast, Philippine exports
to Spain remained at modest levels, with the exception of leaf tobacco traded by
Tabacos de Filipinas and other Spanish and foreign companies established in the
Philippines.38
Until the end of Spanish colonial rule in 1898 exports of textiles and foodstuffs
from Spain to the Philippines increased quickly, displacing Spanish exports to
other European countries.39 During the 1880s, the share of Spanish textiles in
Philippine imports reached levels between 26 and 42 per cent, In terms of
quantity, Spain’s exports of textiles increased from an annual average of 826 tons
during 1880–84, to 6891 tons during 1895–99.40 Despite protection of Spanish
trade interests, the trade policies of the Philippines were more liberal than they
had been before. Consequently, Philippines exports increased significantly, par-

34 On this change in the political situation and its impact on the Philippines and the small Spanish
enclaves in the Pacific, see Elizalde Pérez-Grueso, España en el Pacífico.
35 Sánchez Gómez, Un Imperio en la Vitrina.
36 Palomas Moncholí, Víctor Balaguer, pp. 561–84.
37 Legarda, After the Gallions, pp. 202–4.
38 An excellent example of this can be found in Salazar, Baer and Co.
39 For the analysis of the evolution of Spanish textile exports, see Sudrià, Exportación en el
desarrollo.
40 Sudrià, Exportación en el desarrollo, p. 156.

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316 Josep M. Fradera

ticularly exports of Manila hemp and sugar. The aftermath of the 1895 Philippine
revolution abruptly ended the growth of Philippine exports in general and of
imports of manufactures from Spain.

THE END OF SPANISH COLONIAL RULE

The change in the composition of foreign trade is indicative of Spain’s desire to
update an obsolete but stable colonial model. Although this development has not
been fully studied, it is probable that it came at a cost of reduced imports from
the rest of the world and increasing rivalry in the local business world between
Spanish import firms and firms that imported from other parts of the world. At
the same time, the Philippine elites saw that Spain intended to continue a colonial
policy that allowed political reforms in Cuba and Puerto Rico, while it contem-
plated only minor administrative changes in the Philippines.41 This discontent
strengthened the nationalist-separatist cause that took shape after the 1872 exe-
cution of three Filipino priests that sparked the ‘Cavite crisis’.42 Proto-nationalist
consciousness grew among parts of the urban population, the groups known as
ilustrados or ‘enlightened ones’, composed of educated youths, admirers of Europe,
the US or Japan, the nationalist sectors of the Catholic church in the Philippines,
and the katipuneros (groups of workers who started the fight for independence in
1896).43 A complex set of problems related mainly to access to land and rural
poverty, catalysed grave tensions that supported the revolutionary mobilisation
against Spain during 1895–98 and against the US in the following years.44
Unfortunately, available research has not yet provided us with a good impres-
sion of the problems that existed in the rural areas of the Philippines during
the last few decades of the nineteenth century, nor of the tensions between the
different groups that vied for control over agrarian income. It is known that the
institutions that regulated access to land increased rural tensions. For example,
the system of kasama (sharecropping) was expensive for the small grower as it
allowed landlords to appropriate significant parts of the harvest.45 It is also clear
that strong population growth made access to land increasingly difficult in parts
of Luzon and the Visayas.46 Both factors affected the stability of the rural family
and obstructed the intergenerational transfer of accumulated social savings.
Aggravating the falling returns from agricultural production, the colonial govern-
ment continued to demand corvée labour, which was a significant burden on the

41 Fradera, Ciudadanía.
42 I will just refer to the studies of Ileto, Pasyon and Revolutions and Filipinos and their Revolution.
43 For some aspects of interest related to all of this, see the classic study Schumacher, Propaganda
Movement, and essays of the same author in Making of a Nation.
44 For information on how the certain groups in the rural society used the mechanisms of power
institutionalized by the State in the colony, see Guerrero, Provincial and municipal elites.
45 There are some indications in McLennan, Changing human ecology.
46 There are some glimpses in Fegan, Social history.

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 The historical origins of the Philippine economy: a survey of recent research of the Spanish colonial era 317

Philippine population. The combination of both elements is likely to have

reinforced the potential for conflict in the rural areas and the phenomenon of
tulisanismo.
This rural instability not only affected the lower strata of the population. The
agrarian crisis sparked a battle between large Spanish landowners – among them
the Spanish religious orders – and the large and medium-sized Philippine tenant
farmers.47 When the Americans took control of the archipelago in 1901, the
religious orders controlled some 400,000 acres of land, of which some 250,000
were located around Manila.48 The socially and regionally uneven distribution of
land ownership was one of the biggest problems in the Philippines in the closing
years of Spanish rule.49 The conflict between the family of revolutionary hero José
Rizal and the Augustinians, who owned the Calamba hacienda, is an example of
this and reveals the factors that pushed nationalist radicalisation in the Philippines,
even though agrarian social relations in the archipelago as a whole were varied
and complex.

CONCLUSION
At the start of the twentieth century, the Philippines had several important eco-
nomic assets: the formation of a native elite; an important process of economic
integration between the different provinces; links with international capital mar-
kets; a significant development of export-orientated agriculture consisting of both
plantations and smallholders; and, finally, a large degree of openness of its econ-
omy to international trade. On the other hand, the Philippine economy was
forced to endure economic distortions caused by a new system of colonial rule
until the establishment of Japanese rule in 1942.50 Still, there was continuity across
the Spanish and American years. Most relevant was the continued inequality in
access to land. The American administration promised agrarian reform in 1901.
However, the reforms in effect reinforced the position of a ruling class that was
friendly to the American colonial government and failed to resolve the endemic
problem of the concentration of land ownership.51
This brief survey elaborated some hypotheses about the first stage of Philippine
economic development on the basis of recent studies. What may appear to have
been an autonomous development of native Philippine rural capitalism and of a
stratum of medium-sized traders since the end of the eighteenth century, was

47 Delgado, Menos se perdió. On the origin of the privileged position of the Church in the
Philippines in relation to land ownership, see Cushner, Landed Estates and Roth, Friar Estates.
48 Taylor, Philippine Insurrection.
49 For a comparison of agricultural development in the Philippines, Thailand and Indonesia, which
in large part overestimates the development of the plantation during the Spanish colonial and
American periods, see Hayami, Ecology, history, and development.
50 McCoy, An Anarchy of Families; Hutchcroft, Booty Capitalism.
51 Some insights of this crucial problem in Riedinger, Agrarian Reform.

© Blackwell Publishing Asia Pty Ltd and the Economic History Society of Australia and New Zealand 2004
318 Josep M. Fradera

actually influenced by Spanish colonial policy. Two influences seem to be of prime

importance: the formation of a peculiar internal market as a consequence of the
state’s involvement in the economy; and the opening up of foreign trade and of
Manila as a capital market to foreign, but not necessarily Spanish, firms. At the
same time, the state guaranteed some mechanisms (very oppressive ones,
undoubtedly) that allowed the provincial elites to have access to peasant labour
in the form of forced corvée labour, at arbitrary, possibly below-market prices.
The change in Spanish colonial policy in the 1880s aimed to take advantage
of the development of an important agrarian economy. At the same time, it
favoured the position of Spanish traders in the archipelago. Although these
changes may have had some positive consequences for the development of the
Philippine economy, it is important to acknowledge that the changes were the
result of pressure exerted by the government in Spain through its demands for
Philippine tobacco at a low cost.

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