Economic Change, Social Structure and the Political System in Southeast Asia: Philippine Development Compared with the Other ASEAN Countries 9789814379038

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t:CONOMIC CHANGt:, SOCIAL STRUCTURE AND THt: POLITICAL SYSTt:M IN SOUTHt:AST ASIA Philippine Development Compared with the Other ASEAN Countries

The Souffleast Asian Studies Prog~a. (SEASP) was established in December 1976 by a group of scholars from Southeast Asia. it aims at promoting comparative research and writing on Southeast Asia by social science and humanities scholars of the region. It is directed by a committee composed of representatives of various countries in the region, but it is based at and formally affiliated with the Institute of Southeast Asian Studies. The lnstl1vte of Souffleast Asian Studies was establIshed as an autonomous organization in May 1968. It is a regional research centre tor scho I ars and other spec Ia I I sts concerned wIth modern Southeast Asia, particularly the multi-faceted problems of stabll ity and security, economic development, and poi itical and social change. The InstItute Is governed by a twenty-one member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. A ten-man Executive Committee oversees day-to-day operations; it Is chaired by the Director, the Institute's chief academic and administrative ott leer.

TEACHING AND RESEARCH EXCHANGE FELIDWSHIPS

t:CONOMIC CHANGt:, SOCIAL STKUCTURt: AND THt: POLITICAL SYSTt:M IN SOUTHt:AST ASIA Philippine Development Compared with the other ASEAN Countries

Harold Crouch

SOUTHEAST ASIAN STUDIES PROGRAM

Pub II shed by Institute of Southeast Asian Studies Hang Mul Keng Terrace Paslr Panjang SIngapore 0511 All rights reserved. No part of this publication may be reproduced, stored In a retrieval system, or transmitted In any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior consent of the Institute of Southeast Asian Studies.

© 1985 Institute of Southeast Asian Studies ISBN 9971-988-23-2 The responsibility for facts and opinions expressed In pub I I cation rests exclusively author and with the Interpretations do not necessarily reflect the views or of the Institute or Its supporters.

this his

CONTENTS

Foreword Preface

vii ix

I•

INTRODUCTION

1

I I.

TRADITIONAL POLITIES AND TRADE: PRE-NINETEENTH CENTURY SOUTHEAST ASIA

6

I I I.

ECONOMIC AND SOCIAL TRANSFORMATION: AGRICULTURAL COMMERCIALIZATION AND MINING IN THE NINETEENTH AND EARLY TWENTIETH CENTURIES

10

THE ROLE AND COMPOSITION OF THE BUSINESS CLASS

19

v.

THE GROWTH OF THE MIDDLE CLASS

30

VI.

THE LOWER CLASSES AND RADICAL POLITICS

33

VI I.

SOCIAL STRUCTURES AND POLITICAL SYSTEMS

40

VI I I.

ECONOMIC DEVELOPMENT AND THE FUTURE

50

IX.

CONCLUSION

55

IV.

Notes Bibliography About the Author

57 61 69

FOREWORD

The Southeast Asian Studies Program (SEASP) was established in 1976 in response to a need to promote comparative research and writing on Southeast Asia by scholars in the Social Sciences and Humanities. Of particular concern was the lack of appropriate tertiary level teaching and reference materials pertaining to the region and written from local, though not necessarily nationalistic, perspectives. Towards this end, SEASP initiated four activities: the first three of these focused on the preparation of a series of country-specific volumes on Politics and Government; History; and World-Views. The fourth comprised a scheme of Teaching and Research Exchange Fellowships. This scheme commenced in 1982 in response to a need for greater regional collaboration in teaching and research among and between scholars and institutions of higher learning. The Exchange Fellowships have enabled not only qualified scholars to teach and undertake research in other Southeast Asian countries but also universities to acquire the teaching and research services of scholars from other Southeast Asian countries. Moreover, each fellow has been required to complete his or her research report during the period stipulated in the award. The report that follows grows out of this process. Needless to say, this report caul d not have been completed without the co-operation of the host institution, the Department of Political Science of the University of the Philippines, and the home institution of the fellow, the Department of Political Science of the Universiti Kebangsaan Malaysia. We would also like to express our thanks to the Stiftung Volkswagenwerk for its generous financial support to the Teaching and Research Exchange Fellowships as a whole. In thanking all our benefactors and the author, as well as others who have in one way or another helped to make this

pub1ication

possib1e,

understood

that

the

THE EXECUTIVE COMMITTEE SOUTHEAST ASIAN STUDIES PROGRAM

PREFACE

The main ideas on which this study is based have been occupying my thoughts for a number of years but the usua 1 round of teaching and other academic responsibilities prevented me from doing the extensive reading necessary to give them empirical support. It was only when the Southeast Asian Studies Program at the Institute of Southeast Asian Studies in Singapore provided me with a Teaching and Research Exchange Fellowship at the University of the Philippines from November 1983 to February 1984 that I was able to devote myself to the themes of this study in a more systematic way. During my stay in the Philippines I tried to read widely on Philippine politics and history while also teaching a graduate course in the Department of Political Science at the University of the Philippines campus in Diliman. In this study I have tried to compare the socio-economic and political development of the five original member-states of the Association of Southeast Asian Nations, not as members of ASEAN as such but as nations that have undergone broadly similar hi stori ca 1 experiences and currently adopt strategies of economic development which have much in common. This study, however, should be viewed as a "research-in-progress" report rather than a finished product. One of the conditions of the Southeast Asian Studies Program award was that I prepare a paper based on my research in the Philippines within a year of returning to Malaysia and this, although a little late, is the result. Reflecting its Philippine origins, the study does not give equal weight to the five countries but pays special attention to trying to explain the similarities and differences between the I am aware that there are still Philippines and the rest. important gaps in my reading on the Philippines while my knowledge of the other countries derives from general reading in the past rather than a systematic coverage of the literature. As I said earlier, this is still a "research-in progress" report. Nevertheless, I hope it contains ideas that might be the stimulus for further research.

have been indebted to the In preparing this study Southeast Asian Studies Program for sponsoring my stay in the Philippines, the Volkswagen Foundation for providing financial support, the University of the Philippines as the host institution and my own university, the National University of Malaysia, for giving me leave. To each of these bodies I express my gratitude.

Harold Crouch

I

INTRODUCTION

Theoretical Considerations Political scientists always acknowledge the importance of history in understanding contemporary political systems. It is an unusual book on the politics of a particular country that does not open with a chapter ent it 1ed something 1 ike "The Hi stori ca 1 Background", "The Heritage of the Past" or "The Impact of Colonial Rule". But it is less common for political scientists to integrate fully the hi stori ca 1 deve 1opment of socio-economic and political structures with their analyses of present political institutions and behaviour. On the other hand, it is also not uncommon for historians to conclude studies of the colonial period with a short epilogue in which it is suggested that developments before 1900 or 1940 had a decisive impact in shaping contemporary political systems but without explaining exactly how. The tendency of social scientists, including political scientists, to give only perfunctory treatment to the past while concentrating on the present has been strongly criticized by the proponents of the radical political-economy approach to the study of the Third World as part of their general attack on the modernization theories which dominated social science in this field in the 1960s. In his path-breaking study of development in Latin America, Frank not only showed that the present cou 1d not be understood except as a continuation of the past but also argued that any study of the past in the Third World had to concentrate on the role of Western imperialism.! Unlike orthodox political scientists who often mentioned isolated benign inheritances from the colonial period, such as a well-trained bureaucracy, a 1arge poo 1 of educated personne 1 , or a well-developed economic infrastructure, Frank was concerned with imperialism as a whole and saw Western economic penetration as the basic cause of socio-economic backwardness in the Third World. The historical "underdevelopment" of the "satellite" countries was seen as determined by their forced participation in

the world capitalist economy dominated by the countries of the "metropolis ". For Frank, the development of the metropolis and the underdeve 1opment of the sate 11 i tes were "two sides of the Hi story in the satellites was not an autonomous same coin". process but a reflection of outside forces. Frank's emphasis on the determining role of the metropolis was, however, challenged by other scholars who were nevertheles s generally sympathetic to his attack on conventiona l modernizati on In a further study of development in Latin America, theory. Faletto welcomed Frank's emphasis on the central and Cardoso significanc e of Western economic penetration but also pointed out that local reactions varied from place to place according to economic Western While circumstanc es.2 local particular penetration played a crucial role everywhere, its consequence s could not be understood without also studying particular social Cardoso and Faletto structures in the individual countries. distinguish ed between two broad categories of dependency in Latin America -- enclave economies in which the modern sector was completely foreign-con trolled, and economies where a local bourgeoisie controlled a substantial part of economic activity The domination. foreign overall of context the within consequence s of the penetration of Western capitalism in Latin America differed enormously according to the nature of the local In the enclave social structure and the form of penetration . economies, foreign interests continued to extract raw materia 1 s and profits with the co-operatio n of a subservient but wellrewarded local elite while the people in general gained nothing. The result was, to use Frank's phrase, "the development of But in economies where a local bourgeoisie underdevelo pment". had somehow managed to participate in economic modernizati on, the the of growth The different. quite were consequence s bourgeoisie , the salaried and professiona l "middle class", and a working class not only indicated substantial changes in the social structure but led to basic political changes and the beginnings of industriali zation. Instead of the "developmen t of underdevelo pment", in some countries the ground was laid for "dependent developmen t".3 Like Latin America, Southeast Asia also experienced a long period of Western economic penetration and domination. Western traders established bases in Southeast Asia in the sixteenth century and soon began to exercise political power. But it was only in response to the industrial revolution in Europe beginning in the 1ate eighteenth century that the Western powers began the intensive exploitatio n of Southeast Asia as a source of agricultura l and mineral resources. The economic exploitatio n of about brought century nineteenth the in Asia Southeast which changes political and socio-econo mic far-reachin g undermined, disrupted or at least greatly modified existing virtually although process, this But structures. social universal, was far from uniform throughout Southeast Asia. 2

Although each country was responding to the same general external impulse -- the demand of industrializing Europe for Southeast Asian raw materia 1s -- the consequences for the soc i a1 structure varied from p1ace to p1ace depending on a wide range of factors such as the nature and policies of the colonial power (or its absence in one case), the nature of traditional authority and its re l at i onshi p with the colonia 1 power, the extent of the presence of "foreign" (especially Chinese) traders, the kind of raw materials exported and the technical requirements for their production, and so on. Differences of this sort produced a range of new social structures which to a considerable extent set the direction of socio-economic and political change in the twentieth century. The categories used by Cardoso and Faletto in analysing patterns of development in Latin America enclave and non-enclave -- do not appear to be adequate to take into account the Southeast Asian experience. In Southeast Asia, a local bourgeoisie was generally active in the modern economy although in a subordinate role to Western enterprise. Southeast Asian economies therefore did not really fit the enclave model. But in contrast to the non-enclave Latin American economies, this local bourgeoisie was also "foreign" in that it was made up of members of an immigrant community who were in the process of becoming domiciled in Southeast Asia. Thus, while Southeast Asian economies in general more or less fitted the enclave model to the extent that the indigenous people usually played a very limited ro 1e in the modern sector, they were not "pure" enc 1ave economies because of the fairly extensive role played by the locally-based "foreign" bourgeoisie. A crucial determinant of the course of socio-economic and political change, according to Barrington Moore, has been the reaction of land-holding elites to the prospects of agrarian commercialization. In a seminal work, Moore studied the ways in which six countries modernized or were attempting to modernize themselves -- three which evolved in the direction of capitalist democracy (England, France and the United States) and three Asian countries which had adopted different "routes to the modern world" (peasant revolution and communism in China, "revolution from above" and fascism in Japan, and somewhat uncertain democracy in India).4 Moore's central thesis was that the route taken depended essentially on how land-owning elites responded to the commercial opportunities of the growing markets for agrarian products. In England, the prototype of democracy, the feudal aristocracy turned enthusiastically to sheep and wool, which led to the gradual expulsion of much of the peasantry from the 1and and their eventual absorption into the industrial labour force, thus paving the way for industrialization and mass democracy. In Central Europe and Japan, the landed aristocracy also responded positively to the opportunities presented by an expanding market but there they concentrated on the more intensive production of 3

In contrast to England where the established grain-crops. peasantry was driven from the land, in these countries the peasants were forced to stay on the land where they were relentlessly exploited, with the result that a powerful, centralized, repressive state was required to preserve social Industrialization started much later in these countries order. and was accompanied by more severe inter-class tensions. Finally, in Russia and China the land-holding elite failed to respond positively to the opportunities of agrarian commercialization so that in the end they lacked the resources to withstand Moore argues that the the onslaught of peasant revolution. different responses of agrarian e 1 i tes to the opportunities of commercialization provides the key to understanding why different class structures evolved, thereby laying the foundations for different political systems. Looking at Southeast Asia from the perspective of today, three broad patterns of political development can be discerned. Firstly, the three countries of Indochina have undergone peasant revolutions resulting in communist regimes. Secondly, there is the case of Burma which is sui generis where a non-revolutionary military regime decided to isolate itself from the capitalist And thirdly, there are the non-communist countries, world. joined together in ASEAN, which have adopted development strategies based on integration with the world capitalist system. In terms of Barrington Moore's categories, the Indochina states clearly conform to the "peasant revolution" route while both the ASEAN states and Burma are closer to the "revolution from above" mode 1 than the "democracy" mode 1 in that economic deve 1opment historically has required a strong state to control a work-force largely engaged in the production of agricultural and mineral commodities for the domestic and international markets. But it is not possible simply to transfer Moore's categories, which were formu 1a ted to exp 1a in contrasting types of deve 1opment in the world's major states, to Southeast Asia where, as Frank has pointed out for the Third World generally, Western imperialism Nevertheless, Moore's central played such a dominating role. agricultural to responses contrasting that idea commercialization (and mining in the Southeast Asian context) have had decisive 1 ong-term consequences -- has much re 1evance for understanding Southeast Asian development. In his study, Moore took countries which had adopted very different "routes to the modern world". In this study, however, the aim will not be to explain why some Southeast Asian countries took the revo 1uti on a ry route whi 1e others did not. Rather, the focus will be on countries, which in Moore's terms and indeed in This common perception, are more or less on the same route. study is concerned with the countries which have elected to the capitalist system remain within the international Southeast Asian nations which are, or aspire to become, new be concerned, We will (NICs). countries industrializing 4

therefore, with the original five ASEAN countries -- Indonesia, Thailand, the Philippines, Malaysia and Singapore. It will be argued that the responses of these countries to the sharply rising demand for their agricultural and mineral commodities in the nineteenth century had contrasting consequences for the social structure in each country, and that these differences greatly affected their deve 1opment in the twentieth century and wi 11 cant i nue to affect their prospects for deve 1opment in the future.

5

II

TRADITIONAL POliTIES AND TRADE: PRE-NINETEENTH CENTURY SOUTHEAST ASIA

Southeast Asia had been involved in international trade from the earliest of times. Arab, Persian, Indian, Chinese and Japanese traders were all engaged in Southeast Asian commerce before European traders appeared on the scene. The main initial result of the intrusion of European traders from the sixteenth century onwards was that Southeast Asian trade became even more cosmopolitan than it had been earlier. The Europeans, interested mainly in spices, made arrangements with local rulers, established trading bases and expanded their trade. The arrival of the Portuguese was followed by the Spaniards and the Dutch and then the British and French. But the first two centuries of European "colonialism" in Southeast Asia did not, on the whole, bring about drastic changes in the traditional economy of the region. The Europeans came to Southeast Asia to trade. They wanted to acquire exotic oriental products, especially spices, which fetched high prices on the European market. Their pri rna ry goal was not to govern although they soon found it necessary to establish fortified trading bases and eventually to extend the territory under their contra l in order to protect and advance their trading interests. They often made alliances with local rulers which then led to de facto European domination and eventual incorporation. But in general, the governing role of the Europeans was limited. Thailand remained under the rule of Thai kings who controlled its trade with foreigners. The states of the Malay Peninsula continued to be ruled by their Malay sultans despite the capture of Mal acca by the Portugese early in the sixteenth century, its acquisition by the Dutch in the seventeenth century and the ceding of Penang to the British towards the end of the eighteenth century. In Indonesia, Dutch domination became more extensive but it too remained limited. The Dutch base at Batavia was founded at the beginning of the seventeenth century but Dutch rule expanded only gradually. Through a series of treaties with local rulers the Dutch increased the area within their sphere of interest but in

6

practice sultans.

government

remained

largely

in

the

hands

of

local

It was only in the Philippines that a European colonial power established a colonial system based on direct rule during this period.5 After arriving in Cebu in 1565, the Spanish soon moved to Manila in 1571 from where they quickly spread their rule throughout the archipelago . Although the Spanish forces numbered only a few hundred, they met with little serious resistance. The superirity of Spanish arms was one reason why the conquest was so easy but a more important explanation lay in the nature of Philippine society and its political organizatio n. In other parts of Southeast Asia the colonial intruders had been confronted with established kingdoms and sultanates able to organize military resistance on a substantial scale. But the Philippines consisted of village settlements without supra-villa ge organizatio n except in the Muslim areas of the south. The Spaniards were able to advance from village to village exploiting both the military weakness of village-size d political units and the mutual hostility which often existed between them. By the end of the sixteenth century, Spain was in effective control of the archipelago and whatever resistance it faced during the next three centuries until the revolution at the close of the nineteenth century was always confined to particular localities and could be put down with the assistance of indigenous troops drawn from other localities. Direct col on i a l ru 1e had important consequence s for the Philippines which were not experienced by the Southeast Asian polities which either remained independent or were subjected to indirect colonial domination. In the Philippines , a centralized bureaucracy was not able to grow naturally from within with the result that no indigenous aristocratic -bureaucra tic class emerged. Instead, the centralized bureaucracy was created and staffed by foreigners. But the Spanish regime in fact shared many of the patrimonial characteris tics of contemporar y indigenous regimes in Southeast Asia. Apart from defending its territory and maintaining political order, the main function of the bureaucracy was to raise taxes. In typical patrimonial style, the tributes extracted from the people were only partly used to meet the needs of the state machinery while the rest went to enrich members of the bureaucracy from the governor-ge nera 1 down. Tribute collection was initially carried out under the encomienda system but later, primary responsibil ity was transferred to the regional governors (alcaldes mayores). Like their indigenous and Dutch counterpart s e 1sewhere in Southeast Asia, the Spanish bureaucrats used the state to enrich themselves but unlike the other polities there was no indigenous bureaucrati c class to share in the bounty. Spanish rule had a significant impact on rural Filipino society. The majority of Filipinos were soon converted to 7

Catholicism and Spanish priests exercised great influence in 1oca 1 communities. The church was the driving force behind a programme to resettle isolated rural communities in order to make them more accessible to the priests. The ordinary people were also affected by the Spanish-imposed taxation system and its abuses i nvo 1vi ng tributes, corvee 1abour and the forced sa 1e of certain products. In addition, Spain introduced the concept of private ownership of land and the government made substantial land grants to favoured Spaniards although within a short time most agricultural land held by the Spaniards had fallen into the hands of the church. Despite these undoubtedly important changes, historians seem to agree that the impact of Spanish ru 1e on the structure of rural Philippine society was limited. During this period, Spaniards in the Philippines numbered no more than a few thousand, most of whom were soldiers or priests. The Philippines was far from Spain and the small Spanish business community was completely absorbed in the lucrative galleon trade in which Manila served as the entrep6t in the exchange of Chinese fabrics and other products for Me xi can s i 1ve r. The resu 1t was that the small population of Spaniards was concentrated in Manila so that virtually the only Spaniards living outside the capital, apart from the regional governors and a handful of officials and soldiers, were a few hundred priests. Indeed, for much of the period private Spaniards were actually prohibited from living in the provinces. The absence of Spanish economic activity outside Manila meant that the structure of indigenous society underwent very little change as a result of Spanish rule.6 In pre-Hispanic times villages were headed by datus whose power rested on the control of manpower rather than land. Agricultural land was held communally and usufruct rights were allocated by the datu. At the bottom of the social structure was a class wnrcn was identified by the Spaniards as slaves but who were really debt peons. Under Spain, the datus were converted to Catholicism and appointed as village and township heads (cabeza de barangay and gobernadorcillo) who were in practice subject to the authority of the Spanish parish priest. The village elite, known as the principalia, was integrated into the system of tribute collection and corvee administration and were thus able to add to their own wealth. They were also able to use their knowledge of the Spanish legal and administrative system to convert communal land controlled by their forebears into private property. The local power of the principalia class was thus buttressed by Spanish rule. Ensconced in the local administration and controlling agricultural land, they continued to dominate the descendants of the debt peons who were gradually converted into sharecroppers. the

Two centuries of Spanish rule, therefore, did not transform Philippines to a point where it was markedly different

compared to the rest of Southeast Asia at the end of the eighteenth century. During this period, Spanish governors-genera 1 , Javanese sultans and Thai kings presided over essentially patrimonial polities in which the acquisition of wealth depended on political power.? The economic elite did not derive its wealth from production but from taxation and trading monopolies. Such a system provided little incentive to those outside the political elite to innovate in the economic field because the rewards of their endeavours would be seized by the power-ho 1ders in the state. Thus, 1a rge-sca 1e trade independent of the state could not develop and traditional subsistence agriculture remained largely undisturbed.

9

III

ECONOMIC AND SOCIAL TRANSFORMATION: AGRICULTURAL COMMERCIALIZATION AND MINING IN THE NINETEENTH AND EARLY TWENTIETH CENTURIES

It was during the nineteenth century that the countries of Southeast Asia experienced far-reaching internal changes as a result of the Western imperial presence. Just as indigenous social structures did not greatly change in the pre-nineteenth century period no matter whether the area was colonized directly, indirectly or not at all, so in the nineteenth century all the countries of the region experienced important changes, the uncolonized as well as the colonized. The driving force behind the economic and social changes in Southeast Asia was the economic transformation being experienced by Europe and the sharply increasing demand for raw materials and food produced in the Orient. Unlike the earlier period when trade was largely 1 imited to spices, fine fabrics, precious stones and the 1 ike which had always been the main items of Southeast Asian trade, in the nineteenth century the demand was for agricultural and mineral products which had not, on the whole, been traded in large quantities in the past. The production of these commodities meant that 1and and 1abour had to be diverted from old to new pursuits thereby bringing about, in many cases, serious dislocation in the old social orders and leading to the emergence of new social structures. Although the external impulse for these changes was the same for all of Southeast Asia, as it was indeed for most of the non-European world, the social and economic consequences varied from country to country. The di st i net i ve feature of the Philippines' response to the expanding demand of the world market was the creation of a substantial indigenous land-owning class. Unlike the other states of Southeast Asia where agricultural export crops were grown on land owned by foreign companies, aristocrat-bureaucrats or small peasants, the commercial revolution in Philippine agriculture gave rise to a new class of commercially oriented landowners who were quite separate from the bureaucracy. It was from the ranks of this class that a new political elite emerged in the late nineteenth century and later, in the twentieth century, a commercial and industrial elite. 10

The initial steps towards the commercialization of agriculture in the Philippines in fact began in the eighteenth century, pre-dating the Industrial Revolution in Europe.8 Political changes in Spain led to a new outlook on the colonies. Despite the profitability of the Manila gall eon trade for those directly involved in it, the Philippines had never been a paying proposition for Spain which had to provide the Philippines government with an annual subsidy from Mexico. In the new atmosphere of the eighteenth century the Spanish government began to look for ways to make the Philippines self-financing. In the late eighteenth century, encouragement was given to pioneers in agriculture and mining, and the government itself set up a tobacco monopoly as a revenue-raising device. The new policies, apart from the tobacco monopoly, did not bear much fruit until the Philippines was opened to foreign shipping and foreign businessmen. In order to protect the galleon trade, the Philippines had been closed to foreign shipping although in fact foreign ships engaged in intra-Asian trade had been calling illegally at Manila. To stimulate trade the ban on foreign ships calling at Manila was lifted in 1789 for ships carrying Asian goods but it seems that in practice they soon carried on general trade. Meanwhile, foreign merchants came to Manila and in 1809 the first British commercial house was established, soon to be followed by commercial houses of other nationalities. When the Manila galleon trade finally collapsed in the 1810s the role of foreign merchants ar:d ships increased although it was not until 1834 that the law caught up with the practice and all restrictions on foreign ships calling at Manila were dropped.9 The full impact of Manila's entry into world commerce was only felt after 1820. The main crops affected by commercialization were sugar, abaca (hemp), tobacco and rice. Sugar exports to China and India had gradually increased from the beginning of the eighteenth century while by the late eighteenth century the government had encouraged tobacco production under a revenue-raising monopoly. But after 1820 Europe and the United States became the main markets for Philippine commodity exports which grew rapidly. Between 1831 and 1854 sugar production tripled10 and in 1854 sugar made up 33 per cent of exports, hemp 27 per cent, and tobacco 13 per cent.11 By 1870 only 50 per cent of cultivated land was devoted to rice12 which meant that rice production also became commercialized in order to feed the agricultural population engaged in growing other crops. The opening of three provincial ports to foreign shipping in 1855 further stimulated agricultural commercialization, particularly in Neg ros which soon rivalled and then out stripped Luzon as the main producer of sugar. Among the main areas affected by agricultural commercialization were Central Luzon (sugar and rice), southern Luzon (sugar and abaca), Negros (sugar) and northern Luzon (tobacco). The commercial

revolution in agriculture, however, was not 11

pioneered primarily by Spaniards. The number of Spaniards in the Philippines remained small and most preferred employment in the bureaucracy which offered both prestige and opportunities for corruption.l3 Instead, the group that was most active in moving into commercial agriculture in the nineteenth century was the Chinese merchants were already Chinese mestizo community.l4 trad i ng in Manila at the time of the Spanish conquest and, despite severa 1 anti -Chinese massacres and expu 1 si on s during the seventeenth century, they continued to play a very important role in both domestic and Asian regional trade. During this time, the Spanish encouraged them to marry Filipinas and to embrace Catholicism, which many did. The Chinese domination of domestic retail trade, however, was a cause of concern for the government. In 1741 the Chinese were prohibited from both engaging in agriculture and travelling in the provinces without permission, and in 1755 an expulsion order was issued which reduced the number of Chinese to about five to ten thousand, most of whom Another expulsion order followed in were in the Manila area. 1766 in retaliation for Chinese sympathy for the British who occupied Manila in 1762-64. Meanwhile, the Chinese mestizos had been recognized as a separate community in 1741 and had been exempted from the restrictions placed on the Chinese so that the final removal of the latter from provincial retailing allowed the mestizos to In the absence of both establish themse 1 ves in their place. Chinese and European competition, the mestizo Chinese, who numbered about 120,000 out of a population of 2! million in 1810,15 were in an excellent position to benefit from the expansion of trade in agricultural commodities in the nineteenth Acting as retail traders and agents for the European century. commercial houses in Manila they became increasingly wealthy and The movement of the mestizos into began to invest in land. agriculture received further impetus after 1850 when the Spanish government reversed its policy on Chinese immigration with the result that Chinese merchants soon regained a dominant pas it ion in domestic retail trade and as agents for the Europeans. Rather than compete with the Chinese newcomers, the mestizos preferred landownership. Catholic by religion and Hispanicized by culture, the with intermarried increasingly mestizos Chinese the indigenous landowning elite, the principalia, so that during the nineteenth century the two groups virtually merged.l6 The result was that in contrast to similar communities in other parts of Southeast Asia, "the Chinese mestizo in the Philippines was not a He was a special kind of special kind of local Chinese. Filipino".l7 The commercialization of agriculture did not, however lead to the formation of huge plantations employing wage labour.18 In the sugar and rice-growing areas the new landowners had ori gina lly been sma 11 traders and at first lacked the capital to As they grew in wealth they acquire large tracts of land. 12

purchased land from indigenous landowners and also acquired the land of defaulting debtors. They also purchased virgin land from the crown as the frontier extended into the interior of Centra 1 Luzon and other islands. In addition, much "land grabbing" took place in which peasants, ignorant of the land laws, cleared land which was then legally claimed by wealthy landowners who both understood the legal system and had the means to bribe judges and However, individual landowners rarely acquired more officials. than 1,000 hectares which was sti 11 much less than required to run an efficient large plantation with wage labour. The typical A "big" landowner usually had between 200 and 500 hectares. major factor inhibiting the expansion of holdings was a labour shortage combined with the existence of unoccupied virgin 1and. Landowners, therefore, usually did not attempt to gain the efficiencies of sea 1e associ a ted with the p1antat ion system but preferred the hacienda system in which land was parcelled out to small peasant tenants rather than run as a single plantation unit because wage 1abourers were more 1 ike ly to 1eave than tenants In the case of many landowners, with their own plot of land. however, the choice between tenants and wage labour did not arise because their land was in "scattered holdings" in which a total holding of, say, 200 hectares consisted of 30-40 separate plots which had been acquired at different times by various means, Neverthe 1ess, there were some usually from defau 1t i ng debtors. large estates, especially in Negros, which employed wage labour under a plantation system but these were not typical.19 Unlike sugar and rice, abaca remained a smallholders' crop while the government tobacco monopoly was a disincentive to acquiring tobacco land. The trends of the nineteenth century under Spanish rule continued in the twentieth century under the Americans. The new landholding class continued to acquire land both from the public domain and from smallholders.20 At the same time, the Americans introduced land laws which had the effect of protecting the Philippine landowning class from possible competition from Largely in response to pressure from foreign plantations. sugar interests, who feared the growth of big American plantations in the Philippines, the government introduced a ceiling of 1,034 hectares on land alienated from the public domain. As this amount of land was too small to attract foreign plantations, sugar-growing remained predominantly in Filipino hands. The law applied only to new alienation of land from the public domain but did not restrict the size of existing holdings nor limit expansion through private purchase. One hacienda in Luzon grew to 7,200 hectares21 and in 1953 there were 221 estates There were another 423 estates of of over 1,000 hectares. 501-1,000 hectares and 1,445 of 201-500 hectares.22 Thus, the landinitially-Chinese-mestizo-bu t-now-recognized-as-indige nous owning class became established as the economic elite. In the absence of an indigenous aristocracy and bureaucracy, 13

the landowning class also became the base of the political elite. The growing wealth of landowners in the nineteenth century a 11 owed them to send their children to schoo 1 in Manila and even to Spain where they obtained professional qualifications and It was the brighter sons of often liberal political leanings. landowners who attained prominence as i l ustrados and leaders of the nationalist movement against Spain at the end of the The collapse of the international sugar nineteenth century. market in the 1880s brought sudden hardship to their fathers and brothers on the land and provided a discontented rural base for But the eventual the revolution which broke out in 1898.23 defeat of the revolution by the intervening Americans did not destroy the political influence of the ilustrados and landowners. The Americans, like the Spaniards before them, did not regard the Philippines as a great source of economic wealth. Moreover, the Americans lacked an imperial tradition and felt uneasy as They soon gave wide scope to Filipino colonial masters. participation in their administration and encouraged the growth of electoral politics. These policies fitted the interests of the educated and landowning classes perfectly. They dominated the political parties and legislative institutions founded during the American period and continued to contra 1 the state administration after independence.2 4 The commercializa tion of agriculture during the nineteenth soc i a 1 had different consequences for the local century structures in other parts of Southeast Asia. In Indonesia, Dutch commercial activity and political control were concentrated on Unlike the Philippines which had been a the island of Java. distant outpost of an empire that was already crumbling during the nineteenth century, Java was the centre-piece of the Dutch empire. While the Philippines barely paid for itself, Java was expected to be not only self-financing but also a vital source of capital for the Netherlands' economy itself. In contrast to the Philippines where agricultural commercializa tion was largely left to the new mestizo landowning class, the Dutch government itself Javanese of commercializa tion the organized initially agriculture.25 Much of the ag r icultural land of Java was already occupied and used for rice-growing, in contrast to the virgin land of Luzon with its labour shortages, so the Dutch devised a existing with in fitted that of commercializa tion form agricultural patterns. Under the cultivation system adopted in 1830, villages were compelled to set aside part of their land for for and indigo, coffee, especially sugar, export crops, compulsory sale to the government at fixed prices. In the case of sugar, the most important crop, European private contractors co-operated with local aristocrats for the supply of labour and collected and processed the sugar which was then exported by the government. The result was that there was no incentive for the better-off peasants to try to convert themselves into a landowning class. The profits from sugar and other commercial crops were made not by the growers but by the European 14

contractors, the local aristocrats who supplied labour, and, of course, the government. The cultivation system was gradually dismantled during the second half of the nineteenth century and replaced by estate agriculture in which European, mainly Dutch, planters and companies leased land from either the state or native aristocrats. Sugar, coffee, tea, tobacco and, in the twentieth century, rubber, were the main estate crops although Indonesian smallholders, in the outer islands rather than in Java, were also active in growing commercial crops for export. Dutch rule and agricultural commercialization thus helped to entrench the existing class structure. The native aristocracy had been associated with, and eventually absorbed into, the Dutch bureaucracy. Insofar as the aristocrats were involved in agriculture it was through leasing land to the European estates. In Java, where two-thirds of the population lived, first the cultivation system and then the formation of big European estates prevented the development of an indigenous landowning class with the result that peasant holdings remained small and devoted mainly to rice-growing. In the other islands, European estate agriculture was dominant but there was some room for the development of an indigenous smallholding sector growing commercial export crops. This smallholding sector, however, although significant in the regions where it emerged, remained small in the context of the nation as a whole. The consequences of agricultural commercialization in Java especially and in Indonesia generally were strikingly different to what was experienced in the Philippines. The contrast between Java and Luzon is particularly striking because commercialization in both places was in response to growing world demand for the same product at the same time. Yet, the rapid expansion of sugar production for the world market led to the emergence of a landowning class with holdings ranging from 50 to 5,000 hectares in Luzon, and later Negros, while its legacy in Java was a rice-growing peasantry in which the owner of 5 hectares was regarded as a "big" landlord.26 In the Philippines, the independent landowning class became the indigenous elite and provided a social base for nationalist opposition to colonial rule at the end of the nineteenth century, especially when sugar prices collapsed, while the aristocratic-bureaucratic Indonesian elite was tied to the Dutch colonial regime and it was only Dutch planters who expressed their grievances when sugar-growing ceased to be profitable during the last two decades of the century. The consequences of agricultural commercialization were less far-reaching in Thailand compared with the Philippines and Indonesia although, like in Indonesia, it tended to strengthen the existing social order. Thailand is often seen as quite different to the other states of Southeast Asia because it was 15

never colonized by the West but, in fact, it too was drawn into the world economy during the second half of the nineteenth century. Thailand had been largely self-sufficient until the Bowring Treaty of 1855 which limited the right of the Thai government to impose export and import duties on British trade. During the next few decades similar treaties were made with fourteen more countries. Thailand thus became a market for Western manufactures and a producer of agricultural exports like the colonies. But, in the case of Thailand, the crop which became commercialized was the traditional, subsistence staple, rice, which was not exported to Europe but to Europe's Southeast Asian colonies which had moved to other commercial crops. During the century after 1850 rice exports increased twenty-fivefold but there was little change in the technique of production.27 In 1850, Thailand's population was probably about 5-6 million so there was no shortage of agricultural land. As the population grew, new land was cleared by peasants to whom the king granted usufruct holdings of 25 rai (about 4 hectares).28 Although some large land grants of up to 10,000 rai were made to members of the nobility, rice cultivation was basically a small-peasant activity. The existence of plentiful and accessible virgin land meant that there was little incentive for a landlord class to develop because peasants without land in their own village preferred to open up new land rather than become tenants. The aristocracy also had little incentive to engage in large-scale commercial agriculture because they would have difficulty in getting labour and in any case they were well satisfied with revenues obtained from land and rice-trade taxes. The Thai social structure thus remained essentially as it had been -- an aristocratic-burea ucratic elite ruled over a small-peasant population. The other important agricultural export commodity, rubber, which was introduced in the twentieth century, was grown mainly by Chinese smallholders in southern Thailand but the same disincentives to large landholding applied there as well. The absence of a strong, independent landowning class meant that there was no social base for a significant challenge to the political o rder. The "revolution" of 1932 simply displaced the royal segment in the aristocraticbureaucratic elite but had no effect on the social structure as a whole. In Malaya, the most important commodity exported to Europe in the nineteenth century was not agricultural but mineral. The Malay Peninsula was sparsely populated and divided politically into a number of small independent or semi-independent states ruled by sultans. The Malay population was largely engaged in rice-growing and fishing as well as limited trade in jungle products. Although tin had been mined for centuries, its discovery in large quantity after the 1840s brought about a transformation of Malayan society. In general, Malay peasants and fishermen were not attracted to the rigours of tin-mining so

16

the sultans and other aristocrats made arrangements with Chinese merchants from the British-ruled Straits Settlements (Singapore, Malacca and Penang) to work the mines with imported Chinese labour. As the tin-mining industry expanded so did the number of Chinese immigrants and by the time of British "intervention" in 1874 the Chinese were completely dominant in that field.29 At the same time, the Chinese had also been involved in commercial agriculture, growing at various times pepper, tapioca and By the late nineteenth century, Chinese immigrants sugar.30 by affected areas many in Malays the outnumbered commercialization, especially the tin areas. It was only in the twentieth century that the British themselves became directly involved in producing mineral and Technological agricultural commodities for the world market. advances in the tin industry requiring larger capital commitments opened the way for British companies to rep 1ace the Chinese as the dominant force in the tin industry while the introduction of rubber was followed by the establishment of large, British-owned plantations, usually employing Indian labour. The result in the twentieth century of Malaya's entry into the wor 1d economy under British co 1on i a 1 ru 1e was that British and other European enterprises owned the large-scale tin mines and the large rubber plantations while the Chinese were predominant in the smaller mines and smaller plantations.31 Malay society, on the other hand, retained much of its original contours. The Malay aristocracy, which had in the past derived its wealth from the extraction of tributes rather than landownership, was absorbed into the British administration32 while the peasantry remained as small agriculturalists growing Although there is either rice or rubber on smallholdings. evidence to show that a landlord class developed, the holding of a typical landlord was small.33 Agricultural commercialization, therefore, did not produce a new class of large-scale indigenous landowners capable of challenging the old Malay elite. Malay society remained loyal, on the whole, to the sultans and the aristocratic-burea ucratic elite which was closely tied to British rule. The consequences of colonial rule and commercialization in Malaya, however, were unique in Southeast Asia because the unwillingness of the indigenous population to engage in mining and commercial agriculture had necessitated the importation of In mainly Chinese but also Indian. labour from abroad contrast to other parts of Southeast Asia where the Chinese formed a small commercial minority dependent on ties with the governing elite, the numbers of the Chinese in Malaya were so large in relation to the indigenous population that they became a po 1 it i ca 1 force to be reckoned with in their own right. 34 Thus, although commercialization did not produce an indigenous landowning class to rival the traditional elite, it did 17

contribute to the formation of a strong immigrant business class with a political base of its own and the capacity to act independently in its own interests in a way that was impossible for the small and dependent Chinese business minorities elsewhere in Southeast Asia. During the nineteenth century and the first part of the twentieth century, therefore, the economies of a 11 the states of Southeast Asia were drawn into the wor 1d economy as supp 1 i ers of agricultural and mineral commodities to meet the demand of industrializing Europe and America, or, in the case of Thailand, to meet the food needs of other Southeast Asian states which had trans fer red resources from food production to export crops. But the consequences for domestic social structures had been far from uniform. In Thailand, the commercialization of a traditional crop had strengthened the existing social structure which consisted essentially of an aristocratic-bureaucratic elite and a smallholding peasantry. In Indonesia, the traditional aristocratic-bureaucratic elite had lost its independence and was absorbed into the co 1on i a 1 admi ni strati on whi 1e the Dutch monopolized the profits arising from commercialization so that the peasantry remained as smallholders or tenants when they did not join the plantation work-force. In Malaya, also, the aristocratic-bureaucratic elite was absorbed into the colonial administration while the peasantry remained in small-scale agriculture, but the presence of a huge number of Chinese immigrants transformed Malayan society. Chinese involvement in commercial agriculture and especially tin-mining was the basis for the emergence of a Chinese business elite with the potential to rival the traditional Malay elite. Finally, in the Philippines, agricultural commercialization resulted in the creation of a new landowning class which became the indigenous political elite by default in the absence of a traditional aristocracy.

18

IV THE ROLE AND COMPOSITION OF THE BUSINESS CLASS

Colonialism had two major economic consequences for the colonies, one positive and the other negative. As we have seen, colonial rule brought about an agricultural and mining revolution as colonial economies were transformed to meet the needs of industrializing Europe and America. But colonialism was also important for what it did not do. Unlike in Europe, the agricultural revolution was not followed by an industrial revolution. On the contrary, the integration of the colonial economies with those of the industrial countries blocked the possibility of industrial development in the colonies, while traditional cottage industries succumbed as cheap manufactures flowed into the region unimpeded by import duties. Thus, classical colonial economies were formed in which the colony became a source of raw materia 1s and a rna rket for manufactures. The industries which appeared in the colonies were limited to products which enjoyed some measure of natural protection or advantage such as food processing, beverages, sawmilling, furniture-making and building materials. The absence of "real" industrialization meant that business was largely limited to trade and finance. Although international, regional and local trade had flourished before the colonial era, the Europeans gradually became the dominant element and during the nineteenth century it was European enterprises which controlled the export of new agricultural and mineral products to the West and the import of manufactures. At the same time, European banks established themselves as the dominant force in finance. While the dominance of European enterprise in export-import trade and finance was never challenged during the colonial era, domestic trade was largely controlled by the Chinese who collected agricultural and mineral products, distributed imports and channelled credit into the domestic economy. However, the precise ro 1e of Chinese merchants and money-1 enders varied from place to place. 19

In Thailand, as we have seen, the commercialization of agriculture in the nineteenth and twentieth centuries tended to strengthen the existing political and social order consisting of aristocrat-bureaucrats and small peasants. The aristocraticbureaucratic elite was able to enrich itself by extracting tributes on agricultural production and trade, and thus had no interest in engaging directly in trade itself while peasant holdings were too small for the peasants to raise the capital needed to go into trade on anything but a very small sea 1e. In these circumstances, domestic trade became dominated by the Chinese. Chinese merchants had co-operated with the Thai aristocracy in traditional foreign trade and in the nineteenth century many became tax farmers for the government. As rice became a commercial crop in the second half of the century the Chinese dominated domestic rice trading and milling, and they also engaged in the production of other exports such as rubber, teak, and tin.35 In addition, there was a large influx of Chinese artisans and coolies to work on construction projects which were unattractive to Thai peasants. Many of the descendants of these immigrants 1ater became petty traders and sometimes even big businessmen. Apart from European enterprise, business in Thailand was dominated by the Chinese.36 However, by the mid-twentieth century they made up no more than 10 per cent of the popu 1at ion and thus 1a eked po 1 it i ca 1 weight to match their economic domination. The Chinese businessmen, therefore, were at the mercy of the Thai bureaucrats for the licences, approvals, contracts and credits that they needed to carry out their enterprises. The traditional symbolic relationship between aristocrats and merchants reappeared in new form in what has been called the "bureaucratic polity" where the Chinese businessmen were forced to give a share in the profits of their enterprises to the bureaucrats who furnished them with the commercial fac i 1 it i es that they required. 37 When foreign investment increased rapidly in the 1960s and 1970s, it had to fit into the established system and this usually took the form of joint ventures with local companies in which both indigenous Thai bureaucrats and Chinese businessmen were represented. There was, therefore, no strong business c 1ass independent of the bureaucracy capable of standing on its own feet in its dealings with the administration. Capitalists worked within an environment determined by the bureaucrats rather than the other way around. In Indonesia, too, the traditional social order had been reinforced by colonial rule despite the far-reaching economic changes initiated by the Dutch. As in Thailand, the traditional aristocratic-bureaucratic elite retained its position in the bureaucracy although in Indonesia this bureaucracy was controlled by the Dutch. As in Thailand, also, the peasantry, especially in Java, remained on their tiny plots growing rice although rural 20

society in Java had been far more disrupted than in Thailand by the introduction of cash crops. As in Thai 1and, the aristocratic-bureaucratic E!lite was well rewarded and therefore was not particularly attracted to direct involvement in commerce while the holdings of peasants were too small to serve as a base for entry into trade. It was only in Sumatra and the outer islands that commercialization of agriculture had produced a class of relatively well-off smallholders growing cash crops for export38 and it was from this class that an indigenous local trading class emerged. In general, however, it was the Chinese traders, as in Thailand, who dominated domestic commerce, virtually unchallenged in Java and to a high degree in Sumatra and the other islands. After independence, the government attempted to promote the growth of an indigenous commercial class by providing special facilities and privileges for indigenous businessmen. Facilities were generally provided for "businessmen" who enjoyed close ties with politicians and bureaucrats, and had arrangements with Chinese businessmen in so-called "Ali-Baba" enterprises where the Chinese "Baba" in fact supplied the capital and business skills whi 1e the indigenous "A 1 i" was no more than a front man whose function ended with the securing of the licence, credit and other privileged amenities. 39 The take-over of Dutch enterprises and the expulsion of Dutch nationals in 1957 promised new opportunities for Chinese businessmen in association with the mi 1 i tary and ci vi 1 ian bureaucrats who managed the former Dutch enterprises. But the full exp 1oi tat ion of these opportunities was delayed by the uncertainties and upheaval of President Soekarno's Guided Democracy. It was only after the collapse of Guided Democracy in 1965 and the establishment of military rule that a "bureaucratic polity" similar to that in Thailand emerged in Indonesia. Under the New Order of Genera 1 Suharto the government and bureaucracy were dominated by military officers who cant rolled access to the facilities that the Chinese businessmen needed. As in Thailand, military bureaucrats and Chinese businessmen worked together c 1ose ly to their mutua 1 benefit, with the military bureaucrats pro vi ding the necessary government facilities in exchange for a share in the profits of the Chinese enterprises.40 The big influx of foreign investment in the 1970s strengthened the military-Chinese business partnership further because foreign investors naturally attached themse 1ves to these enterprises in joint-venture arrangements. The few indigenous enterprises that had their origins in the commercialized areas of Sumatra and other outer islands had great difficulty in surviving without developing their own 1 inks with the military-dominated patronage machine. As in Thailand, business was dependent on the bureaucracy and independent enterprises had little hope of success.

21

Developments in Malaya bore some resemblance to what had happened in Thailand and Indonesia but there were also fundamental differences. As in Thailand and Indonesia, the indigenous aristocratic-bureaucratic elite continued to make up the modern bureaucracy while the peasants remained in small-scale agriculture. Domestic trade was quickly dominated by the Chinese, both the descendants of merchants who had established themselves as early as the period of the Mal acca sultanate and more recent immigrants. 41 But the position of the Chinese in Malaya was unique in two crucial respects. Firstly, the Chinese in Malaya were not limited to trade and commerce but had a strong economic base in the production of agricultural and especially mineral commodities. During the nineteenth century the big Chinese merchants in the Straits Settlements had financed Chinese commercial agriculture and tinmining. Chinese agriculturalists had grown a succession of crops such as pepper, tapioca, and sugar during the nineteenth century and during the twentieth century they also owned rubber plantations, although these were usually much smaller than the European plantations. Of greatest importance, however, was their involvement in tin-mining. During the nineteenth century tinmining was almost exclusively a Chinese preserve and it was not until early in the next century that the introduction of capital-intensive dredge mining allowed European companies to gradually gain a dominant position. Even so, Chinese miners continued to produce a substantial proportion of Malaya's tin. Unlike the Dutch in Indonesia who had monopolized tin-mining in the hands of two big Dutch companies, the British had given the Chinese a free hand, with the result that hundreds of Chinese miners, as well as the merchants from the Straits Settlements who financed them, were able to lay the foundations of their family fortunes with tin.42 The economic position of Chinese business in Malaya had a more secure base than elsewhere and, during the colonial period at least, was not overly dependent on the favours of Malay bureaucrats. Secondly, in the twentieth century, large-scale immigration of Chinese, as well as Indians, meant that the immigrant communities made up about half of the peninsular population, and a majority if Singapore is included. The Chinese in Malaya could not be treated as a small commercial minority but constituted a major segment of the population in which businessmen and traders were themselves outnumbered by a large Chinese working class. After independence in 1957, a "bureaucratic polity" of the Thai or Indonesian type did not emerge in Malaysia. In the first place, foreign business continued to maintain its dominant position. Unlike Thailand which had never been opened to foreign plantations and mines, and Indonesia where the dominant Dutch sector had been nationalized in the late 1950s, foreign, mainly British, business continued to own a large share of the nation's 22

plantations, mines, banks and big trading concerns which were not dependent on any special consideration from the Malay bureaucrats. Secondly, Chinese business, although less insulated from the bureaucracy than European business, had a far stronger economic base than in Thailand and Indonesia and was, therefore, better able to protect its own interests in its dealings with the Malay political elite and bureaucracy. And finally, the Chinese in Malaya were a major political force whose votes could determine the outcome of elections. Through the Malaysian Chinese Association the Chinese community had an important voice in the government while Chinese interests were also pursued by various opposition parties. Business in Malaysia, including Chinese business, was therefore far less subject to the arbitrary whims of indigenous bureaucrats compared to the situation in Thailand and Indonesia. During the 1970s, the pattern of government-business relationships underwent substantial change as a result of the New Economic Policy which the Malay-dominated government launched in response to Malay demands for a role in business and the modern sector of the economy generally. In 1970, official statistics showed that more than 60 per cent of the corporate sector was owned by foreigners with non-Malays, especially the Chinese, owning most of the rest while Malay participation in the corporate sector and business in general was minimal. The New Economic Policy sought to raise Malay participation in the corporate sector to 30 per cent by 1990 while the foreign sector was to be halved to 30 per cent. In the post-1970 period the role of state corporations grew rapidly, both through taking over, or buying into, established foreign companies in plantations, mining and banking, and by forming joint ventures with new foreign investors in industry. At the same time, special facilities were offered to an emerging class of Malay businessmen who usually lacked a commercial background but had ties with the dominant Malay political party, the United Malays National Organization. Established foreign and Chinese enterprises were forced to "restructure" by taking in Malay partners whose shares were normally issued at discount prices. By the 1980s, therefore, the direct role of the state in the economy had expanded greatly and a small class of Malay businessmen heavily dependent on political and bureaucratic patronage had appeared.43 Foreign and Chinese businessmen, who previously had been relatively independent of the bureaucracy, had become more integrated with, and dependent on, the state but they still retained their strong economic bases. They were still in a position to bargain with the Malay political and bureaucratic elite which needed their co-operation so they did not become almost wholly dependent on the allocation of bureaucratic patronage as in Thailand and Indonesia. Singapore, which separated from Malaysia in 1965, offers an interesting contrast where the state and business have remained

23

relatively distinct despite the substantial role of state corporations in the economy. The original Singapore political elite-- the politicians of the People's Action Party (PAP)-were not descended from a traditional aristocracy but consisted of lawyers, other professionals and trade unionists who espoused a socialist ideology. On the other hand, the Singapore business elite was simply part of the established Malaysian Chinese business class with its origins among the merchants of the Straits Settlements and the tin miners of the peninsula. In addition, British and other foreign companies were strongly represented in trade and finance. The Singapore political elite, therefore, soon found, despite their anti-business ideology, that they were more dependent on business than business was on them. The PAP government, which became increasingly identified with the bureaucracy, launched a programme of export-oriented industrialization which depended heavily on foreign investment and technology as well as access to foreign rna rkets, with the result that the economy became even more foreign-dominated with as much as 80-90 per cent of new investment each year coming from abroad. The Singapore government, therefore, has concentrated on creating an environment conducive to business activity in general and does not permit individual politicians or bureaucrats to distribute particular favours to particular firms. As in the other countries of Southeast Asia, foreign and Chinese enterprises played a big role in the Philippines too but, in contrast to elsewhere, native Filipinos were not excluded. Mestizos, both Spanish and Chinese, established commercial enterprises in the nineteenth century and members of the land-owning class were active in the processing of agricultural products for export in the twentieth century. By the time the Philippines embarked on import-substitution industrialization in the 1950s there was already a pool of Filipinos ready to take advantage of new business opportunities. Some were already involved in business, others came from the urban middle class while there were also businessmen whose wealth was still based in agriculture. Foreigners, as everywhere, dominated the Philippine economy during the colonial period. During the late Spanish period the export-import trade and finance were controlled by European, especially British, firms45 while during the American period American business naturally became predominant. However, American investment in the Philippines remained relatively limited. The Philippines was of marginal importance to the American economy while the unsettled conditions following the revolution, the growth of nationalist sentiment and the uncertainty of continued American rule did little to encourage large-scale investment. By 1935 the total U.S. investment in the Philippines was only about $200 million of which about 20 per cent was in bonds -- government,.. private and re 1 i gi ous -- and 10 per cent in public utilities.4o Apart from commerce, there was 24

some American investment in the processing of sugar and other agricultural commodities, and in sawmilling and gold mining as well as in a small number of sugar and pineapple plantations. There was also limited investment from the European countries and Japan. Retail trade during the American period continued to be dominated by the Chinese who, according to one authoritative estimate, controlled as much as 70-80 per cent.47 However, the Chinese potential for expanding their economic role was limited by their small numbers. Chinese immigration had increased sharply after the Spaniards removed restrictions in the mid-nineteenth century but the Americans reimposed controls through the Chinese Exclusion Act which was applied shortly after they took over the colony. The American policy was intended partly to protect Filipinos in their own land but was also inspired by the fear that the Chinese would use the Philippines as a stepping-stone on their way to the United States. The result was that the Chinese minority in the Philippines made up only about 1 per cent of the population after independence, the smallest in Southeast Asia. The relatively restricted role of foreign, especially American, investment during the colonial period and limited Chinese i mmi grat ion meant that there was more scope for native participation in business compared with the other countries of Southeast Asia. Although Filipino investments outside agriculture were not extensive, by 1935 they provided 43 per cent of the capital for sugar centrals, owned one of the eight large coconut-oil plants and controlled 40 per cent of the spindle capacity in the manufacture of Manila hemp.48 Business opportunities expanded rapidly in the Philippines after independence. The initial terms for independence involved the continuation of the colonial free-trade relationship with the United States which would have entrenched the Philippine economy in its role as exporter of raw materials and importer of manufactures. But a foreign exchange crisis which reached its peak in 1949 forced the government to introduce import and foreign exchange control which provided the protection needed for the growth of domestic industry. During the decade of the 1950s the contribution of manufacturing to the gross domestic product rose from less than 10 per cent in 1950 to 20 per cent in 1960, much higher than the other countries of Southeast Asia at that time.49 During this period, foreign, especially American, investment in manufacturing increased rapidly. Much of the investment was in light packaging and assembling but also included petroleum refining and, in the 1960s, motor-car assembly. The domestic Chinese also took advantage of importsubstitution opportunities especially after the passage of the Nationalization of the Retail Trade Act in 1954 which phased out participation of non-citizens in retail trade over a ten-year 25

period.50 Almost all background in trade.51

the

new

Chinese

manufacturers

had

a

The industrial and commercial expansion after 1950 also opened up opportunities for Filipino businessmen. The Filipino business community came from several backgrounds.52 Some Spanish mestizo families had already laid the foundations of later commercial empires in the late Spanish and early American periods, such as Elizalde in liquor and rope manufacturing, Ayala in distilling, Madrigal in coconut-oil refining, and Soriano in beer production. Other families such as Tuason, Coj uangco and Lopez launched their commercial and industrial enterprises from a base in agriculture. More entrepreneurs came from the ranks of the growing middle class in Manila, including employees in existing commercial enterprises and members of the professions. Many of the Manila middle class were in fact descendants of lesser land-owning families who had been sent to Manila or abroad for education and then preferred to sett 1e in Mani 1a rather than return to the land. One survey of 92 successful entrepreneurs in the early 1960s showed that although only 28 per cent had fathers engaged in agriculture, 68 per cent had paternal grandfathers who had been engaged in agriculture -- presumably in most cases prosperous land-owners rather than poor peasants.53 The existence of a significant class of established as well as potential businessmen provided a social base for nationalist demands for special help for Filipinos in business. One expression of this sentiment was the Nationalization of the Retail Act of 1954 which was directed against Chinese domination of domestic trade while in the late 1950s President Garcia popularized the "Filipino First" slogan. The special encouragement given to Filipinos facilitated the growth of Filipino enterprise to a point where it had a substantia 1 share in the modern economy. A survey of the 250 largest manufacturing enterprises in the early 1970s showed that about one-third were owned by Filipinos, one-third by domestic Chinese and one-third by foreign companies.54 A later survey of the 259 largest companies in 1980, covering all, including non-manufacturing, enterprises, showed that Filipino companies made up 43 per cent of the tota].55 Although many Filipino enterprises in fact had licensing, agency or other arrangements with foreign companies, their role was still substantial compared with other Southeast Asian countries. The sudden growth of manufacturing in the Phi 1ippines had taken place as a direct result of government-imposed controls and thus made business very dependent on the state. The controlled allocation of foreign exchange, in particular, meant that businessmen had to cultivate the goodwill of politicians and bureaucrats. Foreign exchange and other facilities were provided to enterprises with which politicians and bureaucrats were associated or which promised to contribute funds for political 26

purposes. Corruption permeated the whole system and allowed many Filipinos to acquire great wealth. Although the system in some respects resembled the bureaucratic-polity model in that businessmen depended on the favours of politicians and bureaucrats, there were major differences. For the Chinese one-third of the business community, their relationship with the bureaucracy more or less conformed to the bureaucratic-polity model but the position of Filipino businessmen was different in that they were in fact part of the same social group as the politicians and bureaucrats themselves. Moreover, many already had strong economic bases in the agricultural sector or had become wealthy through involvement in commerce or industry during the colonial era. Furthermore, the relationship between business and the state developed in the context of a democratic political system which saw the regular defeat of incumbent office-holders, from the President down, in successive elections so that there was not enough time to build up the semi-permanent relationships characteristic of pre-1973 Thailand and post-1966 Indonesia. Business enterprises had to learn, to some extent at least, to stand on their own feet rather than attach themselves to power-holders because the grip of the politicians on their offices was always tenuous. The imposition of martial law by President Marcos in 1972, however, eliminated much of this uncertainty and resulted in the emergence of a new commercial and industrial "super-elite" consisting of businessmen who enjoyed close links with the President and his wife.56 While some of the so-called "cronies" came from families already well established in the economic elite, such as Benedi cto and Coj uangco, others rose to business prominence largely through favours from their political benefactor. The preferential treatment meted out to "crony" enterprises was naturally resented by the rest of the business community. But unlike in Indonesia and Thailand, for example, where domestic businessmen were almost all Chinese and completely dependent on government patronage, the non-"crony" business class in the Philippines had already created a relatively strong economic base of its own and could not be simply pushed aside by the government. Following the assassination of the opposition leader, Benigno Aquino, in 1983, the dissident section of the business community emerged as a major component of the political opposition to the regime in a way that could not be imagined elsewhere in Southeast Asia. Business classes developed, therefore, in quite different circumstances and with different con sequences in the different countries. In all the four countries discussed here foreign enterprises tended to dominate the most profitable areas of investment but there were considerable differences in the degree of foreign presence. The resources of Indonesia and Malaya had attracted substantial business interest on the part of the Dutch and British respectively in contrast to the Philippines which had 27

never been of gr'eat economic interest to either Spain or the United States, and Thailand where foreign interest was even less. The presence of foreign business as an obstacle to the emergence of local entrepreneurs, therefore, was felt most strongly in Indonesia and Malaya while it was less overbearing in the Philippines and even weaker in Thailand. The position of local enterprise, however, also depended on the strength of the domestic Chinese businessmen. In all four countries the domestic Chinese played a major role in whatever business activities were left over by the foreigners. The Chinese controlled local trade in each country but it was only in Malaya, despite the strong British presence, that Chinese business became a relatively independent economic force. This was partly due to their role in establishing the tin industry in the nineteenth century which laid the foundation for later expansion into other areas, and partly to the large size of the Chinese community in Malaya which gave its leaders political weight. Elsewhere Chinese business lacked both a strong economic base outside trade and pol it i ca 1 influence so that the businessmen had little bargaining strength in their relationship with the indigenous bureaucracy on which they so heavily depended. A factor of no 1ess importance than the presence of foreign and domestic Chinese business in determining the character of the business community in the twentieth century, however, was the form of agricultural commercialization in the nineteenth century. In Thailand and Indonesia, agricultural commercialization had, in very different ways, the effect of strengthening the existing social structure in which an elite of aristocrats and bureaucrats had little interest or incentive to go into business while the mass of the people were small peasants. A similar class structure was consolidated in Malaya in the case of the indigenous half of the population. In the Philippines, on the other hand, there was no indigenous aristocratic-bureaucratic elite while a wealthy Filipino land-owning class had been formed as a result of agricultural commercialization. It was from this land-owning elite that the native Filipino business class emerged -- either directly from the land-owning families or indirectly from the Manila middle class which itself derived from the land-owning class. The emergence of a native business class in the Philippines was facilitated by the relative lack of interest on the part of investors from the colonial power and severe restrictions on Chinese immigration. Its growth was further facilitated by the fortuitous economic crisis of the late 1940s which forced the Philippines to embark on import-substitution industrialization much earlier than its neighbours. The contrasts in the role and composition of the business class had different implications for the relationship between business and government. The failure of indigenous commercial

28

classes to develop in Thailand, Indonesia and Malaysia meant that the domestic business community was dominated by the Chinese minorities while the bureaucracy remained in indigenous hands. In Thailand and Indonesia, the Chinese minority lacked both a strong economic base outside trade and the numbers needed for political influence while foreign capital remained fairly limited in Thailand until the 1960s; in the case of the Dutch and several other nationalities, they were expelled from Indonesia during the 1ate 1950s and early 1960s. In these circumstances, the ba 1ance of power between the bureaucrats and business favoured the former. The domestic Chinese depended heavily on the goodwill of the bureaucrats who used their powers to acquire a share in the profits of the businessmen. When foreign investment expanded in Thailand and returned in Indonesia in the 1960s, it had to fit into an estab 1 i shed system of the bureaucrat i c-po 1 ity type. In Malaysia, however, the balance between business and bureaucracy was more even and, before the 1970s at least, probably favoured business. Long-established foreign investment continued to dominate the economy while Chinese business had a strong economic base and political influence. During the 1970s, rising Malay political assertiveness strengthened the bureaucratic side of the equation but Chinese business continued to enjoy considerable independence unlike the case of Thailand and Indonesia. Singapore, of course, represents a very special case in which the bureaucracy has to meet the needs of business in general and there is very little scope for private arrangements between individual bureaucrats and businessmen. In the Philippines, the relationship between government and business was different. Although business was dependent on favours from the politicians and bureaucrats, the business community in the Philippines was unique in that a substantial part of it was made up of Filipinos. While some Filipino businessmen already had strong economic bases in agriculture, most not only had very good ties with politicians and bureaucrats but actually came from the same social group as the politicians and bureaucrats themselves. Moreover, the pre-1972 political system was such that no single set of politicians could gain long-term control of the bureaucracy. Thus, although political patronage played a big part in business success, at the same time businessmen could not rely on patronage alone and the business community increasingly learned to stand on its own feet. Even when martial law saw the rise of a new group of specially favoured businessmen, much of the rest of the business community was sufficiently deeply entrenched not only to survive but to align itself with the political opposition to the regime.

29

v THE GROWTH OF THE MIDDLE CLASS

Economic development and modernization are always accompanied by the emergence of a middle class consisting of middle-level bureaucrats, administrative and clerical employees in commercial and industrial enterprises, professionals such as doctors and 1awyers, university i nte ll ectua 1s, schoo 1-teachers, and journalists as well as middle and small businessmen, technicians, and so forth. Members of the middle class are generally well educated, live in urban areas, and are economically better off than the masses. As beneficiaries of the process of economic deve 1opment, they have reason to support the estab 1i shed political order but their education tends to make them more ready to evaluate government actions and their relative economic security makes them more confident in criticizing government 1eaders. Economic development and modernization in Southeast Asia, however, have produced middle classes of different sizes and compositions. In Thailand, Indonesia and Malaysia the indigenous middle class was very small during the colonial era and consisted almost entirely of government employees. The basic explanation for the insignificant size of the indigenous middle class and its virtual restriction to government employment lay in the absence of prosperous agricultural classes which could afford to send their children to the towns for Western-style education. In the Philippines, on the other hand, such a class existed. This class was not just a prosperous peasantry but a fully fledged land-owning class that sent its children not just to Manila for their education but sometimes to Spain itself. During the American period, the new colonial power, in contrast to the Dutch and the British, emphasized popular education so that the prospect of upward mobility into the middle class was spread more widely in society. The result was that by the end of the colonial era the educated, urban middle class was much larger and less concentrated in government employment in the Philippines than in Thailand or Indonesia while the Filipino component was much larger than the Malay element in Malaya. In Thailand, 30

Indonesia and Malaya, the Chinese were disproportionately represented in middle class occupations outside government employment but it was only in Malaya, where the Chinese and other non-Malays made up such a large proportion of the population, that heavy non-Malay representation in the middle class meant that the middle class itself as a whole was of significant size. Like the Filipino middle class with its roots in commercial agriculture, the Chinese middle class in Malaya grew out of the prosperity of an earlier generation of miners and merchants. After independence, economic development and expanding opportunities for education brought about steady growth in the size of the urban middle class in all the countries of Southeast Asia. In Thailand, the middle class grew rapidly in the 1960s under a stable military regime which achieved a high rate of economic growth and rapid expansion of tertiary education.57 Similarly, in Indonesia in the 1970s another stable military regime achieved rapid economic growth which resulted in the expansion of the middle class. In Malaysia, where the non-Malay component of the middle class had continued to grow as a result of economic development si nee independence, it was only in the 1970s that Malay representation in the middle class rose sharply following the introduction of the New Economic Policy which gave Malays preferential access to both economic and educational opportunities. In the Philippines, where the middle class was already quite significant, it continued to grow after independence while Singapore, as a city-state, already had a substantial middle class at the time of its formation as an independent state in 1965. Despite the growth in each country, there were still big differences between them reflecting different starting points. If the professional and technical, and administrative, executive and managerial occupational categories are taken to constitute a rough indicator of the "solid" middle class, this class in Singapore made up 13.6 per cent of the work-force in 1980 compared to 7 per cent in Peninsular Malaysia, 6.7 per cent in the Philippines, 4.4 per cent in Thailand and 3.2 per cent in Indonesia. If the somewhat ambiguous clerical and sales categories are added, the figures become 41 per cent for Singapore, 24 per cent for Malaysia, 21 per cent for the Philippines, 13 per cent for Thailand and 19 per cent for Indonesia. However, in the latter three countries the sales category especially includes many who by no means enjoy a middle-class style of life. Another indicator that suggests the size of the middle class is motor-car ownership. In 1980, the percentage of motor-cars to households was 30 per cent in Singapore and 33 per cent in Peninsula Malaysia but was only 6 per cent in the Philippines, 4 per cent in Thailand and 2 per cent in Indonesia.58 The urban middle class, therefore, clearly made up a large 31

part of Singapore's population and was substantial and prosperous in Malaysia. In the Philippines, that part of the population enjoying middle-class status in terms of employment and educational attainment was not much smaller than in Malaysia but it was far less prosperous. Finally, the middle class was still very small by any criterion in Thailand and Indonesia.

32

VI THE LOWER CLASSES AND RADICAL POLITICS

The most important long-term consequence of foreign economic domination in colonial and semi-colonial countries was the blocking of the possibility of industrialization. The colonial powers imposed a policy of virtual free trade within their respective empires which meant that manufactured goods produced in the factories of the colonial powers had easy access to markets in the colonies and semi-colonies. The manufactured imports were both cheaper and of better quality than the products of traditional cottage industries so that there was little prospect for the emergence of modern factories in the colonies as long as their products were not protected by import duties. The absence of industria 1i zat ion meant that the popu 1at ions of the colonies remained overwhelmingly agricultural. Another consequence of colonial rule was population growth due to the introduction of improved health services and the colonial power's success in suppressing warfare. As long as there was unoccupied land suitable for agriculture, new farms could be opened so that the rapidly growing rural population could be absorbed in agriculture without experiencing a drastic decline in welfare. Once the limit imposed by the availability of suitable unoccupied land was reached, however, the absorption of surplus labour in agriculture inevitably led to a fall in levels of welfare. The land problem was aggravated by the introduction of plantation agriculture which at the least removed land from potential occupation by peasants even when it did not actually force the peasants off their land. Thus, more and more peasants worked the same amount of land with the result that either holdings Eventually, decreased in size or tenancy rates increased. landlessness also increased. The trend towards rural impoverishment, however, was not uniform in Southeast Asia. The worst affected area was the island of Java where unoccupied land suitable for agriculture had all been brought under cultivation by the beginning of the twentieth century. Despite Dutch attempts to transmigrate 33

surplus Javanese to the outer islands, the growing rural population, which had no alternative to agricultural employment, became steadily poorer as they occupied smaller and smaller plots of land in a process that has been termed "agricultural involvition",59 By 1973, 57 per cent of farm holdings in Java were no larger than a quarter hectare while another 25 per cent were between a quarter and one hectare. Only 1 per cent of holdings were of more than five hectares.60 By contrast, the other islands did not experience the same type of impoverishment because, despite the opening of large plantations by the Dutch and other foreigners, there was still enough unoccupied land to absorb the growing population on holdings of more-or-less adequate size. In the Philippines, virgin land continued to be available in the central plain on the island of Luzon until about the 1920s or 1930s. In contrast to Java where the process of impoverishment resulted in a land tenure system characterized by tiny peasant holdings, in Central Luzon land had already been acquired by large land-owners. In Luzon, therefore, increasing poverty was indicated by rates of tenancy which rose, in the central plain, from 38 per cent in 1903 to 54 per cent before World War II and 60 per cent in 1948. In the province of Pampanga in 1948, 86 per cent of the farms were under tenancy.51 Elsewhere in the Philippines, like the outer islands of Indonesia, there was still plenty of unoccupied land so that tenancy rates were much lower. Pressure on land was far less severe in Thailand and Malaysia. In Thailand, land was traditionally granted by the authorities in four-hectare p1ots to anyone who was prepared to clear and work it. The availability of vacant land not only provided opportunity for those who were willing to take it but also strengthened the bargaining position of those who became tenants. It was only in the 1960s that the supply of new land dried up with the result that tenancy became more common, especially in the central region. By the end of the 1960s the tenancy rate in the central region had risen to about 40 per cent but it still remained at 1ess than 20 per cent in the northern and southern regions and as low as 3 per cent in the northeast.62 In Malaysia, too, the presence of unoccupied land gave the Malay peasant~ the possibility of acquiring their own land while prevent1 ng the terms imposed by 1andl ords on their tenants from becoming too onerous. . The causes .of the emergence of radical political movements 1n s.outheast. As1a are, of course, multifarious and affected by par~1cular ~1~cumstances in particular countries. In general, ~ad1cal pol1t1cal movements have been led by disaffected urban lntellectuals . prod~ced b~ the colonial education system. Although Marx1st-~r1ented 1ntellectual groups appeared in one form or ~nother 1~ .all the countries of Southeast Asia, their success 1n organ1z1ng mass-based political movements varied enormously. Peasants are never attracted to communist parties on 34

the basis of ideological convictions but because the urban intellectual leaders of such parties are able to provide organizational protection and backing for peasant demands.63 In Southeast Asia, the communist parties attracted peasant support not so much in places that were poor due to neglect but in areas that had been impoverished by a combination of agricultural commercialization in a form that did not benefit the peasantry, and rapid population growth in a context of land shortage and lack of industrial employment opportunities. Thus, in the period before the 1970s, it was in such areas that two of the three major communist movements in the region -- in Indonesia and the Philippines -- had their mass bases while the third major movement -- in Malaysia -- was an exception that did not disprove the rule. The Communist Party of Indonesia (PKI) had its main base of support in rural Central and East Java -- the regions that had been most disturbed by the Dutch cultivation system in the nineteenth century and where rapid population growth had resulted in the occupation of virtually all suitable agricultural land by the beginning of the twentieth century. Increasing impoverishment had led to numerous small-scale, localized, often millenarian, peasant revolts during the Dutch period,64 and provided the PKI with a ready base of support after independence. The PKI, however, was never able to build up strong support in the regions outside Java where agricultural commercialization had generally been less disruptive and where the man-land ratio remained relatively favourable. The rise and ultimate fall of the PKI cannot, of course, be explained in terms of the nature of the peasantry's relationship with the land alone but was also determined by such factors as the party's inability to win Muslim support both in the predominantly Muslim outer islands and in Java itself, the anti-communist stance of the predominantly Javanese bureaucracy and mi 1itary, and the speci a 1 character of Indonesian politics under Soekarno's Guided Democracy. Nevertheless, it is clear that rural conditions in Java were especially favourable for a radical party which sought peasant support.6~

The Huk revolt in the Philippines was centred in the Central Luzon plain which was also the area most disrupted by nineteenth century agricultural commercialization and where the man-land ratio was most unfavourable. As in Java, peasant resentment against colonial rule and exploitation gave rise to a series of 1oca 1 militant movements. At the end of the nineteenth and the beginning of the twentieth centuries, peasants, especially in the Tagalog-speaking areas of Luzon, had been mobilized against first Spanish and then American ru 1e, and in the mi d-1930s another peasant revolt broke out in the Tagalog areas.66 The Japanese occupation gave the Philippine Communist Party (PKP) the opportunity to organize the main resistance force in Central Luzon, the Huk movement, and after a period of uncertainty 35

following the end of the war, a full-scale peasant revolution was launched. Like the PKI in Indonesia, the Huks' strength was largely limited to one region and by the early 1950s a combination of reforms promised by the government and American-backed military repression had broken the back of the movement. The rise and fall of the Huk movement, too, was affected by many factors but, as in Java, it appears that the particular rural conditions of Central Luzon were very important in stimulating peasant radicalism.67 Strong peasant-based communist movements appeared in both Java and Central Luzon but their political strategies were quite different. In Java, the PKI opted for peaceful struggle while in Luzon the Huks turned to armed revolution. Whether a particular communist party adopts peaceful or violent methods depends on a wide range of factors specific to the circumstances in which the party finds itself at a particular time -- the party's assessment of its own strength and the strength of the government, the government's likely attitude to a legalized communist party, the party's international connections, as well as the historical context and geograph i ca 1 environment. It a 1so appears that the rural class structure of Java made it difficult for the PKI to mount an armed revolution while the land tenure system in Central Luzon tended to stimulate revolutionary consciousness among the peasantry. Rural conditions in Java, while conducive to peasant support for a radical party, were not favourable for peasant revolution. In Java, there was no big landlord class, as only one per cent of land-owners had more than five hectares. While a social gap certainly existed between the vi 11 age e1 i te on the one hand and the poor peasants, tenants and 1 andl ess 1abou rers on the other, it was relatively narrow -- so narrow in fact that it was not uncommon for small landlords themselves to join the PKI. It was therefore di ffi cult for the party to mobi 1 i ze the masses for a revolution in circumstances where class distinctions were far from clear-cut. The most radical action taken by the PKI in the rural areas was its "unilateral action" campaign in the early 1960s involving the forced occupation of surplus lands in order to implement the government's own land reform programme. In Central Luzon, however, landlords and tenants lived in different worlds so that there existed tangible targets against which to mobilize peasant indignation. However, the most important cause of peasant revolution, it has been argued, was not the great gap between landlord and tenant in itself but changes in the landlord-tenant relationship over time.68 Popu 1at ion growth and the 1ack of new agri cu ltura 1 land combined with an increasingly business-minded orientation on the part of the landlords brought about a change in the balance between landlord and tenant interests which shifted drastically in favour of the landlords. The peasants' share in production declined

36

whi 1e 1andl ords were 1ess prepared to pro vi de credit and other he 1p, and more willing to rep 1ace tenants who stood up for what they considered to be their rights. It has been argued that it is not the exp 1oitat ion of the tenant as such that 1eads to revolt but the violation of the peasant's sense of justice.69 The absence of big landlords and clear-cut social differentiation in Java meant that changes in the landlord-tenant relationship were less drastic and less likely to lead to widespread increases in peasant indignation while in Luzon it was the unilateral restriction of the 1andl ords' res pons i bi 1it i es to their tenants that sharpened class polarization and made the peasants ready to join a communist-led revolutionary movement. The challenge of peasant radicalism to the established political and social order in Indonesia was settled with the massacres of 1965-66 which took as many as half a million lives and were accompanied by the detention of another half million supporters and sympathizers of the PKI. A1though ru ra 1 conditions had not improved for the poor, and may well have deteriorated, the experience of 1965-66 and continued military vigilance since then made the re-emergence of the PKI or a similar radical movement among the peasantry unlikely for some time to come. In the Philippines, however, the Huk movement was not e 1i mi nated but only subdued. Agrarian reforms promised by the government proved insignificant but the Huk revolt itself seems to have convinced landlords of the need to meet some peasant demands in order to wean them away from the revolutionaries.70 By the late 1960s, largely unchanged rural conditions had produced a successor to the Huks, the New People's Army (NPA). The threat posed by the NPA, however, was met by President Marcos's declaration of martial law in 1972 which led to both increased military action and a land reform which eliminated big landlords holding more than seven hectares in the rice and corn areas although not in areas producing sugar and other export crops. The 1and reform did not in fact bring great benefits to the majority of the rural poor but in Central Luzon it removed the big landlords growing rice although sugar-growing landlords were left untouched.ll Military surveillance and limited land reform enabled the government to control the rise in NPA activity in Central Luzon but during the 1970s the NPA's influence spread rapidly to other regions such as the tribal areas of North Luzon, the neglected island of Samar, and Mindanao where commercial agriculture in the form of foreign-owned agribusiness was expanding. The receptivity of peasants and others to the NPA in these regions depended on part i cu 1ar 1oca 1 circumstances but in Mindanao, at least, the resentment felt by the small peasants towards modern agribusiness seems to have been important. The third major communist movement among the Southeast Asian countries covered in this study appeared in Malaysia. Here, 37

rural socio-economic conditions were quite different to those in Java and Central Luzon. Agricultural commercialization had not greatly disturbed the traditional rural social structure although Malay small-holders had moved from subsistence agriculture to growing rice and rubber for the rna rket. The growing popu 1at ion in some areas led to pressure on land and the emergence of small landlords but in the final analysis, tenants always had the option of opening up new land elsewhere. The Malay peasantry, therefore, never experienced the desperation that pushed the Javanese and Fi 1i pi no peasants towards the communist party. A further reason why the Ma 1ays were not attracted to radi ca 1 ism lay in the fact that the leftist political movements were largely dominated by the non-Malays, especially the Chinese. The communist revolt in Malaya that started in 1948 was basically a Chinese affair, despite peripheral Malay participation. Led by urban intellectuals, the Communist Party of Malaya (CPM) got its main support from Chinese "squatters" in the rural areas who were, in fact, not "real" peasants. They were mainly urban and other non-agricultural workers who had illegally occupied small plots on the fringes of the jungle in order to survive the hardships of the depression in the 1930s and the Japanese occupation. The Chinese squatters had become the backbone of the CPM's resistance to the Japanese occupation and they continued to support the party after 1948. The CPM, however, was never able to win over the Chinese upper and middle classes and it failed completely to establish any stronghold among the Malay peasantry.72 Rural conditions in Malaysia did not push the peasants into revolution, although one can speculate on whether a significant Malay radical party might not have emerged in the absence of a large non-Malay community. It was only in Thailand that a strong communist movement failed to develop. Agricultural commercialization had been least disruptive of traditional patterns in Thailand because the agricultural commodity produced was rice. Moreover, new land had been available and accessible to the peasantry until as late as the 1960s. Although radical intellectuals had formed the Communist Party of Thailand (CPT) in the early 1940s it did not begin to attract peasant support until the 1960s. Earlier, various leftist parties had won seats in parliament representing the northeastern region which was poor as the result of neglect and an unfavourable environment rather than the negative effects of commercialization and over-population, and whose people had cultural affinities with Laos. When the CPT launched its revolution in 1965 its base was in the northeast but it was also active among the hi 11-tri bes of the north and part of the south while it lacked support in the relatively more commercialized central region where the tenancy rate was much higher.73 The absence of severe disruption associated with commercialization and the still relatively favourable man-land ratio meant that the central region of Thailand had yet to experience the conditions that had brought about peasant radicalism elsewhere. Even in the 38

areas where the CPT attracted support its influence remained 1i mi ted and in the 1980s the movement showed signs of disintegration. The failure of the CPT in Thailand could be explained in terms of factors ranging from the nature of Thai culture to the changing attitude of China but one important cause was the relative stability of Thailand's rural social structure. The factors determining whether radical political movements led by urban intellectuals can attract mass support from the peasantry vary from country to country but the rural social structure is always important. Apart from the special case of the insurrection in Malaya, communist movements have only become strong in regions such as Java and Central Luzon, which have been severely disrupted by agricultural commercialization and where population pressure on land has caused gradual impoverishment for a substantial part of the peasantry. In Malaysia and Thailand where agricultural commercialization was less disruptive and population pressure hardly present or only beginning to be felt, peasants were, on the whole, not attracted to radical political movements. A major reason for the failure of the communist movements in Indonesia and the Philippines was their inability to win substantial support in regions where social conditions were less oppressive for the peasantry than in Central Luzon and Central and East Java. The presence of a strong communist movement, however, does not necessarily lead to revolt or revolution. Increasing population pressure on land in the absence of alternative employment opportunities must lead to increasing impoverishment but this can take two forms. In the case of Java it led to a steady decrease in the size of peasant holdings without the emergence of a big land-owning class while in Central Luzon it saw the transformation of sma 11 peasants into tenants and labourers. Clearcut polarization between landlords and tenants seems to be a pre-condition for peasant revolt but the factor which turned peasants into revolutionaries was the changing nature of 1andl ord-tenant re 1at ions as the strengthening of the position of the landlords made peasants no longer view them as patrons but as oppressors.

39

VII SOCIAL STRUCTURES AND POLITICAL SYSTEMS

Different class structures evolved in the countries of Southeast Asia in response to different forms of agricultural commercialization and mining during the colonial period and the beginnings It cannot be said, of industrialization after independence. however, that the class structure of a particular society "determines" the nature of its political system in the sense that certain political systems emerge automatically from particular class structures or even that the class structure is necessarily the primary factor causing the appearance of a particular The nature of the political system in a political system. particular country is affected by such variables as the personal characteristics of important leaders, the political culture of the people, ideological inheritances from the colonial period, the nature of institutional development and particular political Major changes in the events, both i nte rna l and external • political systems can therefore take place without changes in the Nevertheless, the nature of the underlying class structure. class structure imposes limits on the possible forms that the political system might take. In other words, the class structure does not determine the precise form of the political system but it determines what forms it cannot take. The five countries covered in this study have all experimented at one time or another with more-or-1 ess democratic political systems characterized by elections, competing political parties, a relatively free press and open discussion of controversial issues although at the same time governments also used emergency powers and often banned particular parties and Democratic constitutions were promulgated for a organizations. The acceptance by part of the elite of variety of reasons. of establishment the and values political Western proto-democratic institutions during the colonial period were important factors in the ex-colonies while the presence of sharp rivalries within the political elite seems to have been a pre-condition everywhere. Democracy in Southeast Asia, however, did not usually promote the active participation of the masses in 40

politics. The political process continued to be dominated by the elite with its origins in the bureaucracy, the new middle class or the land-owning class who were able to gain electoral support not by promoting lower class interests but by exploiting patron-client ties and primordial sentiments. Liberal-democratic political systems did not last long in Southeast Asia. In some countries democratic constitutions were simply abandoned. In Indonesia, coalition governments consisting of constantly bickering parties rose and fell in quick succession until the system collapsed in the face of regional rebellion in 1957. In the Philippines, a democratic constitution based on American-style institutions and a two-party system lasted until 1972 when it succumbed to rising mass discontent and the desire of an incumbent president to retain his office. In Thailand, which did not have democratic institutions imposed on it by a withdrawing colonial power, democracy failed because it could not accommodate the military's conviction that it should play a dominant role in the government. A more-or-less democratic system established towards the end of World War II was soon displaced by a military coup while an attempt to re-establish democracy in 1973 met with the same fate in 1976. In Malaysia and Singapore, by contrast, democratic constitutions were not abandoned but modified. The 1969 racial riots in Malaysia did not lead to the abrogation of the old constitution but to the introduction of provisions which restricted political competition and open debate while Singapore imposed strict controls on political opposition following its separation from Malaysia and the launching of its industrialization programme in the mid-1960s. The immediate causes of the failure of democratic systems varied from country to country but in some the nature of the social structure made it almost inevitable that liberal democracy would not last long. In others, however, the social structure supported the retention of at least some democratic features. A basic structural requirement for democracy is the existence of more-or-less independent, countervailing social forces outside the regime itself whose political strength is such that their wishes and interests must be taken into account by the government. The power of the regime is thus limited and subjected to checks and balances, not just within the structure of government itself, but within society. The existence of powerfu 1 soc i a 1 forces independent of the regime 1i mi ts the government's power and thus creates an environment within which other less powerful groups can also grow and participate in the political process. In Europe, historically, it was the emergence of an independent business class, then the middle class and finally the working class that laid the social foundations for democracy. In Thailand, the social

structure was very unfavourable for 41

a democratic political system. Economic change had preserved a society in which the power of the state, now represented by the mi 1 itary and the bureaucracy, was largely unchallenged by other social forces. Agricultural commercialization had strengthened a rice-growing small peasantry but had not produced a large land-owning class capable of standing up to the government. On the other hand, the business community, which was small, 'based on trade, and almost entirely Chinese, had no independent political power. Although industrial growth since the 1960s has given the expanding business class a stronger economic base, it is still 1a rge ly subservient to, and dependent on, the bureaucracy. Furthermore, there was no substantial urban middle class. Such a social structure does not provide a firm base for the emergence of effective political opposition to the regime. The short periods of democratic or semi-democratic rule were the results of splits within the military-bureaucratic elite rather than challenges from other classes and did not, therefore, rest on solid social foundations.74 Indonesia's social structure, too, did not provide adequate underpinnings for democracy. As in Thailand, the bureaucracy was the dominant social force. Colonialism had left Indonesia with neither an indigenous business class nor a class of big land-owners capable of balancing the power of the bureaucracy. But in contrast to Thailand, the power of the central government and the bureaucracy was very limited in the years immediately after the departure of the Dutch. On the one hand, the political elite in the central government was unable to assert itself because it was sharply divided along ideological and primordial lines while, on the other hand, the central government's authority was challenged by regional elites. In contrast to a situation where the power of the government is ba 1anced by the emergence of strong and independent social classes within a common political arena, the dispersal of power in Indonesia encouraged provincialism and separatism, and it ~1as the failure of the democratic governments to overcome regional rebellion that dealt the final blow to the system.75 The re-establishment of the centra 1 government's authority under the system of Guided Democracy and its consolidation under the New Order were achieved by successive regimes which had become progressively more authoritarian and in which the military played an increasing role.76 Meanwhile, the challenge posed by the left with its base among the small peasants of Java was eliminated by the massacres of 1965-66 leaving a regime in which the military-controlled bureaucracy became comp 1ete ly dominant in the absence of significant social forces independent of the regime.77 The social structure, which lacked a strong indigenous business class, large land-owners and a substantial urban middle class, permitted the estab 1 i shment and con so 1 i dati on of an authoritarian, military-dominated regime. The

class

structure

produced 42

by

colonialism

in

the

Philippines was, however, quite different. Unlike Thailand, Indonesia and Malaysia, where the traditional indigenous aristocracy had formed the core of the bureaucracy, there had never been an indigenous aristocracy in the Philippines while the bureaucracy had been almost entirely staffed by Spaniards during the Spanish period and had been penetrated by politicians, in the American style, during the American period. In the Philippines, the dominant social class was not a centralized bureaucracy but a decentralized land-owning class dispersed throughout the archipelago. But unlike Indonesia where the geographical dispersal of power strengthened regional bureaucracies which were rep 1i cas of the centra 1 bureaucracy with a potentia 1 capacity to stand alone, the Philippine land-owning class at the provincial level consisted of rival families which were linked to other land-owning families in other provinces through the party system. The region a 1 di spersa 1 of power in the Philippines, therefore, did not lead to separatism. Instead, the dispersed power structure of the Phi 1 i ppi nes, in contrast to centra 1 i zed bureaucratic domination, provided a favourable setting for the introduction of proto-democratic institutions during the American period. The Americans held elections for a national assembly during the first decade of their ru 1e and encouraged the growth of local participation in government to a far greater extent than the other colonial powers in Southeast Asia.78 Political parties, with their bases among the land-owning class, were formed and one of them, the Nacionalista Party, became dominant until it split in two immediately after independence in 1946. After ga 1 n1 ng independence the Philippines adopted a democratic system based on the American congressional model. However, under that system the political process was in practice dominated by about 300-400 1and-owning "o 1i ga rch" families with provincial bases of political support. The government was controlled not so much by a national elite as by shifting coalitions of provincial elites. Elections produced a succession of presidents who often lacked control of the congress and were faced with independent-minded provincial governors whose power rested on strong 1oca 1 bases of support. The checks and ba 1ances of the congressional system of government were supported by checks and balances in society itself so that the central government had to be responsive to the demands of po 1it i ca 1 and social forces outside itself.79 The import-substitution industrialization that began in the 1950s produced another characteristic of the Philippine class structure which was not found in other Southeast Asian states -an indigenous business class. Unlike the entrepreneurial classes of Europe which flourished in an atmosphere of laissez-faire liberalism, the Philippine business class developed as a direct result of the imposition of government controls in the context of import-substitution policies. Aspiring businessmen could only acquire the licences, credit, access to foreign exchange and 43

other favours that they needed by cultivating political friends while politicians and bureaucrats used their powers over the distribution of these facilities to reward political supporters. The system thus acquired some of the features of a bureaucratic polity but, as has been pointed out earlier, there were still very big differences compared to Thailand and Indonesia. In the first place, the politicians and bureaucrats on one hand and most of the businessmen and aspiring businessmen on the other were Filipinos and essentially all part of the same social class. Secondly, the fluidity of office-holding under the democratic system meant that alliances between particular officials and particular businessmen could not become semi-permanent as there was every possibility that the official would lose his office in the next election. The emerging business class, therefore, was able to develop as a relatively independent political force compared to Thailand and Indonesia where the businessmen were almost all Chinese and dependent on long-term ties with the bureaucratic elite. During the 1950s and 1960s the commercial and industrial sectors of the economy expanded rapidly with the result that the growing urban business class tended to become more distinguishable from the hitherto dominant land-owning "oligarchy".80 Alongside the traditional agrarian interests represented in the congress, such as the "sugar bloc" and the "tobacco b1oc", commerce and industry a 1 so sought to influence the political process -- often backed by American and other foreign enterprises which had also invested in the growing industrial and commercial sector. In the long-term, the emergence of a new social force with a relatively independent economic base might have been expected to strengthen the system of checks and balances conducive to democracy. But in the short term, the rise of a business class based in Manila challenged the previous dominance of the rural oligarchs and introduced new tensions into the polity. It could be hypothesized that the business elite, with nation-wide business interests, would be inclined to prefer a more centralized political system to create an integrated national market in contrast to the provincial agrarian elites whose primary concern was with the international market for their own products. There was no sign by the early 1970s, however, that the incipient clash between agrarian and commercial-industrial interests had reached a degree of intensity that it threatened to bring down the entire system. Rather, the threat to the system appears to have come mainly from below as a consequence of increasing mass awareness that the existing order had brought few benefits for them. In Central Luzon, the New People's Army was attracting support from the peasantry while the working class was responding to the appeals of radical trade union leaders. At the same time, nationalist and leftist ideas were becoming widespread among students and the i nte 11 i gents i a, and part of the business 44

class was protesting against growing foreign participation in industry and commerce. As the signs of an impending crisis became more evident President Marcos decided to act earlier rather than later and in 1972 introduced martial law which effectively abolished the democratic system. It was argued that an authoritarian martial-law government would enable the regime to stem the rise of mass discontent by carrying out reforms that had been impossible under the democratic system. The most important was land reform which in the past had always been blocked by the landlord-dominated congress. Martial law also enabled President Marcos to avoid the provisions of the old constitution which obliged him not to seek re-election on the completion of his second term of office in 1973. The martial-law period marked the end of the political domination of the old decentralized land-owning class and the emergence of a centralized regime based on an alliance between the bureaucracy (including politicians and the military) and part of the new business elite. 81 The rna rt i a l-1 aw government abolished the old congress through which the landlord-dominated parties had expressed their power, outlawed o l i ga rch-cont rolled "private armies", and centralized the police, which at the local level had often been used in practice as private forces by locally dominant families. Oligarch-controlled newspapers and radio-TV stations were taken over and some oligarch-owned industries were nationalized, while prominent opposition politicians were arrested. The land reform in the rice and corn-growing areas dealt a further blow to the land-owning class while government-backed, "crony"-controlled, monopolies in coconut and sugar trading hurt big coconut and, especially, sugar growers. In place of the agrarian oligarchy, the new economic elite was made up of businessmen who, with the assistance of special privileges and facilities from the government, invested in 1arge-sca 1e canst ruction and industria 1 projects in association with foreign partners. The authoritarian regime of President Marcos, however, rested on uncomfortable foundations. The checks on government power provided by the class structure had not been strong enough to preserve the democratic system but they had not been eliminated either. The power of the old land-owning class had been reduced but it sti 11 existed while the growth of commerce and industry had created an indigenous business class which was not as heavily dependent on government patronage as in Thailand and Indonesia. Moreover, a substantial urban middle class had continued to grow. During the martial law period President Marcos had repressed political opposition but he was unable to eliminate the social base of that opposition. Opposition groups, financed in large part by land-owning and non-"crony" business interests, continued to operate and suddenly re-emerged in full force after the Aquino assassination in 1983. Unlike the periodic outbursts of popular opposition in Thailand and 45

Indonesia, political opposition in the Philippines rested on a solid social foundation and could not be s1mply brushed aside. Malaysia's social structure also contained elements favourable for a democratic system. The power of the predominantly Malay bureaucracy was balanced by a substantial class of Chinese merchants and miners, and a mainly non-Malay urban middle class. The checks on the government's power produced by the c 1ass structure were reinforced by the communal make-up of the population. The Malay elite was thus confronted not only by a relatively independent business class and a middle class but by the non-Malay half of the population. In these circumstances the Malay elite, with its base in the bureaucracy, had little alternative but to open the government up to representatives of the business and middle classes who were also non-Malays. Based on a coalition of upper-class interests, the Malaysian government lacked the unity of purpose needed to establish a truly authoritarian regime. Despite the emergency powers which carried over from the period of communist rebellion, the Malaysian political system after independence was characterized by regular elections in which opposition parties not only won seats in the national parliament but were sometimes able to capture control of state governments.82 The racial composition of Malaysia's population, however, was a two-edged sword. On one hand it provided a natural check on governmenta 1 power but on the other hand communa 1 ri va 1 ri es always threatened to boil over into racial conflict. The concentration of non-Malays in the modern sectors of the economy, within the over a l1 context of foreign domination, gave rise to Malay envy and demands for better opportunities. A growing sense of frustration among the Malays lay behind the 1969 racial riot. In response, the government took steps to restrict political competition and the scope of public debate while at the same time it launched a far-reaching programme to increase Malay participation in modern economic activities.83 The Malays were given special privileges in business, education and employment. While the government's long-term goal was to remove a major cause of rae i a l conflict, its po 1 i c i es themselves cant ri buted to increased tension in the short term. The political changes of the 1970s restricted the role and prospects of political opposition but it sti 11 left the basic structure of government more or less intact. The Malay-dominated government, despite restrictions on democratic freedoms, continued to be responsive to business and middle-class pressures and to take account of non-Malay interests. Finally, the case of Singapore is quite different. The Singapore social structure was characterized by independent business groups -- both foreign and domestic -- a growing middle class and a large working class. The existence of strong social forces outside the government imposed checks on its power. 46

Foreign businessmen did not depend on special favours from the government while domestic businessmen, having descended from the merchants and miners of British Malaya, did not owe their wealth to Lee Kuan Yew and the PAP government. Moreover, the educated middle class made up a large proportion of the population and there was a substantial, politically aware, working class. Elections during the late colonial period saw the defeats of successive governments and it appeared that it was only Singapore's entry into Malaysia in 1963 and the operation of Malaysia's internal security laws that saved Lee Kuan Yew from the fate of his predecessors. After Singapore's expu 1s ion from Malaysia in 1965, however, the newly independent regime became increasingly authoritarian despite the existence of countervailing forces in society,84 Faced with an enormous economic crisis, the government changed its economic strategy. With only a tiny market of its own and now denied access to Ma 1aysi a's, Singapore abandoned import substitution and 1aunched a programme of export-oriented industrialization. This strategy required low wages and strict labour discipline which could only be imposed by authoritarian means. Severe measures continued to be taken against the left-wing opposition and trade unions. But repression of the working class was not accompanied by equally severe treatment of the middle class and the government in fact remained fairly responsive to business and middle class demands. Unfettered liberal democracy, therefore, survived nowhere in Southeast Asia but there were big differences between successor regimes. The absence of strong countervailing forces in Thailand and Indonesia permitted the emergence of authoritarian, bureaucracy-based regimes. In the Philippines, countervailing forces existed but they proved too weak to prevent the establishment of an authoritarian regime in 1972. Nevertheless, the continued existence of relatively independent business, big 1and-owners and a re 1at i ve ly 1arge educated middle c 1ass posed a constant challenge to the authoritarian government. In Malaysia, soc i a 1 forces more or 1ess separate from the government remained fairly strong. Although authoritarian measures were introduced to deal with the 1969 crisis and the tensions associated with the implementation of the New Economic Policy, the government continued to be fairly responsive to extra-bureaucratic pressures. In Singapore, too, authoritarianism was implemented within a democratic constitutional framework. Although the working class suffered political repression, the government remained sensitive to business and middle-class interests. Different degrees of responsiveness to extra-bureaucratic pressures have important implications for the way in which the government works.85 In Singapore, which lacks an agricultural and mining hinterland, the government has no choice but to be responsive to the demands of the independent business class -both foreign and domestic. As the economy needs continued industrial and commercial investment the government must ensure 47

that the environment for business is favourable. It therefore stresses free competition and avoids favouritism towards, or discrimination against, particular enterprises. The bureaucracy is efficient, based on merit and virtually corruption-free. These values are reinforced by the expectations of a large, politically important middle class which would be alienated by inefficiency, nepotism and corruption. The pressures toward efficient, non-discriminatory and corruption-free administration are less compelling in Malaysia but still significant. The Malaysian economy still relies to a considerable degree on raw material commodity exports and the government is committed to a programme of promoting the interests of the Malays in the economy. Nevertheless, the business community, both foreign and Chinese, enjoys considerable political weight and the bureaucracy responds to its demands for a general economic environment conducive to investment. While the government, in its efforts to pro vi de opportunities for the Malays in business, often gives special facilities to particular Malay enterprises, it also tries to maintain an environment attractive to business in general. As in Singapore, the expectations of a substantial, politically significant, middle class serve at least to check gross inefficiency and blatant corruption. The quality of administration and the environment for business in the other three countries are quite different. In all three countries business success depends on political influence. In Thailand and Indonesia, the small Chinese business community has attached itself to the office-holders in the regime while in the Philippines the elite of the business community consists of the so-called "cronies" of the President. The leading figures of the business community are thus not interested in the creation of a favourable environment for business in general but the protection and preservation of their own privileged access to the government. In these circumstances it is difficult for an independent business class to emerge or, in the Philippines case, for an already existing semi-independent business class to prosper. The symbiotic relationship between business and regime is easier to maintain in an economy where the modern industrial and commercial sectors are still not large and the economy relies on primary exports in which investment is less sensitive to bureaucratic favouritism and corruption. Furthermore, such a system is less likely to be seriously challenged when the educated middle class is small and without political weight. The possible transformation of dependent businessmen into an independent capitalist c 1ass capab 1e of imposing its will on the regime has been a subject of speculation. It is argued that as time passes by the dependent merchants who ori gina lly attached themselves to political power-holders will eventually branch out

48

into industry and modern finance. As the business community grows and the economy becomes more modern, a point will be reached when the government and the bureaucracy has to respond to the general demands of business rather than dispense favours to particular businessmen. An extended period of political stability will, it is argued, permit the growth of a capitalist class which will become increasingly independent of its original patrons so that eventually the "Indonesia model" will give way to the "Singapore model". It has been suggested that signs of this type of development are already appearing in Indonesia where some of President Suharto's "cukongs" now control enormous business empires which will not simply collapse with the eventual passing of their pat ron. 86 In Thailand, too, it has been noted that the fluidity of the political situation since 1973 has meant that patrons are no longer permanent so that business has been forced to stand more on its own feet while in the Philippines the non-"crony" business community waits on the wings ready to move to centre-stage. Despite these signs, however, the business communities of Indonesia, Thailand and the Philippines at present are still closely tied to political power-holders and are more dependent on official patronage than those of Malaysia and especially Singapore. It remains an open question whether they will ever become fully independent.

49

VIII ECONOMIC DEVELOPMENT AND THE FUTURE

In colonial territories and other countries which fell under imperial sway, capitalism did not develop as it did in the West In the countries where capitalist development took and Japan. place more or less autonomously, the increased agricultural productivity associated with "agricultural revolutions" facilitated "industrial revolutions" in three ways. Firstly, increased productivity led to commercialization and increased profitability which enabled the agri cu ltu ra l sector to pro vi de an economic surplus for investment in industry. Secondly, increased productivity meant that agricultural production requirements could be met with less labour so that there was a manpower surplus available for employment in industry. And finally, increased productivity combined with a declining rural labour force meant that there was a prosperous rural market for the products of industry. Thus, agrarian prosperity stimulated the development of industry by providing industrial entrepreneurs with capital, labour, and a domestic market. In the colonies, however, there was virtually no scope for the development of industry because of the free import from the already industrializing countries of manufactured goods which were both cheaper and of better quality. Colonialism thus blocked industrialization in the colonies. In contrast to the developed capitalist countries where agricultural profits had financed industrial investment, in the colonies, where the agricultural revolution usually (but not always as the Philippine case shows) took place under foreign auspices, profits were repatriated to the home country. In further contrast to the developed capitalist countries where the expansion of industry absorbed surplus labour from the agricultural sector, the absence of industry meant that labour remained in the rural sector. And thirdly, the continued growth of the rural population meant that sooner or later a point was reached where no more land was available for agriculture with the result that peasant holdings declined in size or tenancy and landlessness increased. Consequently, rural welfare declined and 50

the rural population could not become the domestic market for industrial goods as it had been in the West and Japan. Despite the attainment of po 1it i ca 1 independence after Wor 1d War II, the economies of the former colonies often remained in a neo-colonial relationship with the former colonial power. Plantations, mines, banks, commercial houses and shipping lines were still owned by citizens of the ex-colonial power and a large part of international trade continued to be conducted with the old mother-country. The Philippines remained an economic satellite of the United States, Malaya and later Singapore continued to be under British economic domination and even Indonesia, which conducted a successful revolution against the Dutch, permitted Dutch enterprises to retain their economic supremacy unt i 1 the political upheaval of the late 1950s. Only in Thailand did Western enterprises play a relatively limited role. Po 1it i ca 1 independence, however, eventually brought about a significant change in the economic relationship with the ex-colonial powers. It was only in Indonesia that the economic grip of the ex-colonial power was broken through a full-scale nationalization programme in the late 1950s but even in the countries where foreign capita 1 remained dominant (and Indonesia again after the re-opening to foreign investment in 1967), attempts were made to promote the industrialization that had been obstructed by colonialism. Whether in response to an immediate foreign-exchange crisis as in the Philippines, inadvertently as a revenue-raising measure in Malaysia, or as a conscious industrializing policy, the countries of Southeast Asia began to impose tariffs on manufactured imports. Beginning with the Philippines in the 1950s and followed by the others during the next two decades, the countries of Southeast Asia adopted import substitution as a means of carrying out the industrialization that had been delayed by the colonial era. Import substitution in itself did not reduce the foreign economic role but it did force foreign capital to move into industry instead of remaining in the traditional fields of agriculture and mining. At the same time, foreign investors in industry were often required, or at least found it to be in their interest, to set up joint ventures with local partners --either private or public. However, the limits of import substitution were soon reached or approached. The domestic markets of the Southeast Asian countries were too small to support large-scale industrialization either because of small populations in the cases of Singapore and Malaysia or small effective markets due to massive rural poverty in Indonesia, the Philippines and, to a lesser extent, Thailand. The countries of Southeast Asia therefore turned increasingly to an export-oriented strategy of industrialization in which cheap and plentiful labour could be utilized to produce 1abour-i ntens i ve products, such as textiles, c 1oth i ng, shoes and electronic goods, for the international market. 51

By far the most successful country in pursuing this strategy was Singapore where manufactured exports as a proportion of total exports rose from 26 per cent in 1960 to 51 per cent in 1979,87 Rapid industrial expansion to meet the demand of the foreign market pushed Singapore's economic growth rate up to 14 per cent during the early 1970s and an average of 10 per cent for the decade as a who 1 e. Not only was the unemp 1oyment of the 1960s eliminated but Singapore began to experience a labour shortage which it alleviated initially by importing less-skilled labour from the neighbouring countries and later by encouraging the growth of capital-intensive, high-technology industry. Other countries also expanded their manufacturing sectors through export-oriented policies. In Malaysia, the contribution of manufacturing to gross domestic product (GOP) rose from 9 per cent in 1960 to 23 per cent in 1980 while manufactured exports rose from 6 per cent to 18 per cent of tot a 1 exports. However, the percentage figures in Malaysia's case tend to understate the growth of manufactured exports because Malaysia became an oil exporter during this period. In the Philippines where import-substitution during the 1950s had already created a manufacturing sector contributing 20 per cent of GOP by 1960, the share of manufacturing rose to only 26 per cent in 1980 but manufactured exports rose rapidly from 4 per cent to 37 per cent. In Thailand, the share of manufacturing to GOP rose from 13 per cent in 1960 to 20 per cent in 1980 while manufactured exports rose from 2 per cent to 25 per cent. Only in Indonesia did the contribution of manufacturing to GOP remain small, rising from 8 per cent in 1960 to 9 per cent in 1980 while manufactured exports grew from virtually nothing to 3 per cent. Indonesia, which was still in the import-substitution stage, in fact experienced rapid industrial growth during the 1970s but from a very small base and, like Malaysia, this was partly disguised in percentage figures because of the huge increase in oil income. The long-term prospects offered by export-oriented industria 1i zat ion as a strategy of economic deve 1opment depends heavily, of course, on the continued expansion of international markets. The prolonged world recession of the early 1980s, increased protectionism in the industrially advanced countries, and the entry of China as a competitor on the world market have all contributed to a changing outlook for potential new industrializing countries after the optimism of the 1970s. The less favourable international conditions of the first half of the 1980s have made it much more difficult for the other Southeast Asian nations to follow in Singapore's steps and even Singapore itself is being forced to adjust to relatively low rates of growth compared to the past. Apart from the i nternat ion a 1 rna rket, domestic factors also affect the prospects of export-oriented industrialization. Un 1 ike import substitution where protection a 11 ows inexperienced

52

manufacturers to survive despite their inefficiency, export orientation requires international competitiveness. Among the many domestic factors which contribute to industrial efficiency, two are related to the questions discussed in this study. Firstly, it seems 1 i kely that a country which already has a large and experienced entrepreneurial class used to standing on its own feet rather than relying on favours dispensed by bureaucrats will be in a much better position to take advantage of the opportunities presented by the world market. On the other hand, in countries where the business class is small and dependent on special relationships with the bureaucrats, the industrialists will tend to prefer the guaranteed profits of import substitution rather than the risks of exporting. Singapore's success has been partly due, of course, to its reliance on foreign entrepreneurs anyway but it also has its own vigorous and independent business class. Similarly, Malaysia has a long-established Chinese business class although the government is now trying to foster the emergence of Malay businessmen. The Philippines also has a substantial business class but one which still depends to a considerable degree on protection and special favours. The business class in Thailand is far less independent while the Indonesian business class is hardly separate from the government itself. Secondly, industrial efficiency is likely to be promoted in a political environment in which the government is responsive to the demands and expectations of the business community as a class rather than the requests of particular businessmen. While individual businessmen will always try to win special favours for their own enterprises, it is in the interest of the business community as a class for rules and regulations to be applied without discrimination. An environment in which special privileges are awarded to businessmen with the best political connections tends to make efficiency irrelevant to business success while genuinely efficient entrepreneurs are penalized. Again, it is Singapore, of the five countries covered in this study, which has the political environment which is most encouraging to business efficiency. In Malaysia, the government also responds to the wishes of business as a class although its goal of creating a Malay entrepreneurial class inevitably reduces economic efficiency. In the other three countries, however, businessmen depend heavily on political and bureaucratic favours so that politics usually takes precedence over efficiency. The rapid economic growth achieved by Singapore and Malaysia has had important consequences for the social structure and political stability of the two countries. In both, the middle class has grown to a substantial size and has become a major base of support for the government. The expansion of the middle class as educated children from lower class families gain white-co11ar employment, move to modern housing estates and acquire motor-cars

53

has dampened whatever political dissatisfactions might be felt. The lower classes have also benefited. In Singapore, rapid industrial growth has not only eliminated unemployment but labour shortages have pushed up wage levels to the benefit of the working class. In Malaysia too, industrialization and the expansion of urban employment have attracted labour from the rural areas thus relieving population pressure on the land. In some states there have even been reports of 1abour shortages on plantations and agricultural land being left untilled as rural youths seek more lucrative employment in the towns. Economic development in Singapore and Malaysia has by no means eliminated poverty but it has created solid foundations for political stability. Economic growth has also been rapid in the other three countries during the last two or three decades but it has not been able to neutralize major potential sources of political opposition. In all three countries the middle class remains small while many of its members do not enjoy the prosperity experienced by their counterparts in Singapore and Malaysia. At the same time, industrial growth has not been fast enough to absorb the growing labour force produced by population growth and limited employment opportunities in agriculture. The result has been not only over-population in the rural areas but also a swelling lumpenproletariat in the cities. The combination of dissatisfactions among sections of the educated middle class with large-scale urban unemployment and rural poverty does not provide a solid social foundation for political stability with the result that the poss i bi 1ity of vi o1ent cha 11 enge to the government in the form of urban rioting or rural insurrection is ever-present.

54

IX

CONCLUSION

The countries of Southeast Asia all came under the sway of Western imperialism which decisively shaped their future development. Despite this broadly common experience, however, each country has retained its own distinctive character. Thus, in attempting to explain the politics of particular countries political scientists emphasize, for example, the importance of Catholicism in the Philippines, traditional Javanese conceptions of power in Indonesia, the unique role of the monarchy in Thailand, communa 1ism in Ma 1ays i a and perhaps the modern version of Confucianism found in Singapore. It is not the intention of this study to deny the importance of factors such as these but to draw attention to the no less important changes in the social structures of the Southeast Asian countries which began in the nineteenth century and continue to define limits to political and economic development in the late twentieth century. The first two centuries of Western presence in Southeast Asia did not greatly affect the structure of indigenous society. It was only after the co 1ani a 1 powers 1coked to Southeast Asia as a source of raw materials and a market for manufactured goods in the nineteenth century that Southeast Asian societies began to undergo irreversible changes. But these changes were by no means uniform. The eventual result in Thailand and Indonesia was the creation of regime-dominated societies which lacked countervailing political forces such as independent businessmen, a strong middle class and big land-owners. In the Philippines, however, agricultural commercialization produced a class of big land-owners from whom emerged an urban middle class and finally a fledgeling business community. In Malaysia, too, countervailing forces appeared in the form of a non-indigenous business c1ass and then a substantial middle class while Singapore was formed as an independent state in 1965 by hiving off part of Malaysia's business and middle classes as well as its working class. These contrasting socio-economic structures have had important political consequences. The social structures of 55

Thailand and Indonesia have favoured authoritarian rule although sharp divisions within the elite, rather than countervailing forces in society, have resulted in the continuation of In the Philippines, semi-democratic features in Thailand. countervailing forces proved too weak to prevent the estab 1 i shment of authoritarian ru 1e in 1972 but too strong for the regime to eliminate them so that the authoritarian government in the Philippines faces opposition with a much more solid social base than opposition groups in Thai 1and or Indonesia. On the other hand, the governments of Malaysia and Singapore, despite restrictions on democratic practices, continue to be responsive to important political pressures outside the government such as from business and the middle class. The long-term viability of present political regimes in Southeast Asia wi 11 depend on the extent of their success in promoting economic development, especially industrialization. The ASEAN countries have opted for industrialization strategies based on close economic ties with the capitalist West and Japan. Export-oriented industrialization requires the creation of efficient industries capable of competing on the world market. It has been suggested in this study that this strategy is more likely to be successful in countries which already have established business classes whose position depends more on economic achievement than political influence. Secondly, this strategy requires a political environment in which the government is more responsive to the demands and expectations of business as a whole rather than the particular requests of individual businessmen for special treatment.

56

NOTES

1.

Frank (19711.

2.

Cardoso and Faletto (1979).

3.

Evans (1979).

4.

Moore (1969).

5.

See Phelan (1959), and Cushner (1971).

6.

See Larkin (1972), ch. 2.

7.

For "patrlmonialism" see Weber (1978), chs. 12, 13.

8.

See the series of articles by Dlaz-Trechuelo (1963-66).

9.

See Legarda ( 1955).

10.

Cushner (1971), p. 201.

11.

Fast and Richardson (1979), p. 27.

12.

Ibid., p. 40.

13.

See Corpuz (1957), and Robles (1969).

14.

See Wickberg (1965).

15.

Ibid., p. 25.

16.

See Larkin (1972), chs. 3, 4.

17.

Wlckberg (1965), p. 31.

18.

See Bauzon (1975), Mclennan (1973), Mclennan (1980), and Larkin (1972).

19.

See Nagono (1982).

20.

See Douglas (1970), Bauzon (1975), and Endriga (1970).

21.

Mclennan (1980), p. 96.

22.

Sorongan (1955), p. 5.

23.

See Fast and Richardson (1979), ch. 6.

24.

See Simbulon (1965).

25.

See Rickleffs (1981), Part Ill.

57

26.

See Pelzer (1963).

27.

Ingram (1971), p. 37.

28.

Ibid., ch. 1.

29.

Wong Lin Ken (1965).

30.

Jackson (1968).

31.

See Puthucheary (1979).

32.

Khasnor Johan (1984).

33.

Sundaram (1977), part B.

34.

See Purcell (1948).

35.

See Ell lott (1978), ch. 2.

36.

Krlrkklat and Yoshihara (1983).

37.

See Riggs Cl966J.

38.

See Pelzer (1963).

39.

See Golay et al. (1969), ch. 3.

40.

See Jackson (1978), Crouch (1978), and Robison (1977).

41.

See Tan (1982), pp. 292-98.

42.

Allen and Oonnlthorne (1956), chs. 8, 9.

43.

See Tan (1982), pp. 281-92.

44.

See Crouch (1984), ch. 2.

45.

See Legarda (1955).

46.

Hartendorp Cl958l, p. 54.

47.

Agpalo (1962), p. 58 quoting J.R. Hayden, The Phi I lpplnes: National Development (1942), pp. 697-98.

48.

Hartendorp (1958), pp. 31-32.

49.

World Bank (1982), Table 3.

50.

Agpalo (1962).

51.

Yoshlhara (1982), ch. 5.

A Study of

52.

Ibid., ch. 6.

53.

Carroll ( 1965).

54.

Yoshlhara (1971).

55.

Hicks and Redding (1982).

56.

Bello et al. ( 1982), ch. 7.

57.

See Anderson (1977).

58.

Crouch (1984), pp. 12, 25, 41-42, 61-62, 77.

59.

See Geertz (1963).

60.

See Booth and Sundrum (1981).

61.

Lachica ( 1971l, ch. 3.

62.

Turton ( 1978). p. 112.

63.

See Miguel ( 1974).

64.

1973). See Sartono ( ,.

65.

See Mortimer (1974), and Hind I ey ( 1966).

66.

See Sturtevant ( 1976). and lleto ( 1979).

67.

See Lachica (1971l.

68.

See Kerkvllet (1977).

69.

See Scott (1976).

70.

Richardson (1972).

71.

See Kerkvllet (1979), Wurtel ( 1977), and Sodusta (1981).

72.

See Stenson ( 1974).

73.

See Girllng ( 1981).

74.

See I bid. and Morell and Chal-anan (1981).

75.

See Feith ( 1962).

76.

See Crouch ( 1979).

77.

See Crouch ( 1978).

59

78,

See Grunder and Livezey (1951),

79,

See Wurfel (1964), Lande (1965), and Grossholtz (1964),

80,

See Wurfel ( 1979),

81,

See Abueva (1979), Stauffer (1979), and Race (1975),

82,

See Milne and Mauzey (1979), Means (1976), and Bedlington (1978),

83,

See Von Vorys (1976),

84.

See Chan Hang Chee (1976>, and Bedlington (1978),

85,

See Crouch (1984),

86,

See Richard Robison, Indonesia:

87,

Statistics In this and the next paragraph are taken from World Bank (1982),

The Rise of Capital (forthcoming),

60

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THE AUTHOR Harold Crouch is a Senior Research Fellow in the Department of

Political and Social Change, Austral ian National University. He is the author of Trade Unions and Politics in India (1966), and The Army and Pol1t1cs 1n Indones1a (1978), and co-editor of Mala{s1an Pollt1cs and the 1978 Election (1980) and MilitaryClvl 1an Relat1ons 1n Southeast As1a (1985). He has taught at the Nat10nal Un1Vers1ty of Maiays1a, the University of Malaya, the University of Indonesia, and the University of the Philippines.