Lisandro Claudio and the poverty of corruption discourse

2026-02-09 - 07:06

Lisandro Claudio’s The Profligate Colonial (Cornell University Press: 2025) arrives at just the right moment, when the country is in the midst of a wide-ranging crisis that the prevailing wisdom among the chattering classes attributes to corruption. While the author does not deny that corruption damages the social fabric, he mounts a strong challenge to the middle-class consensus that tends to regard corruption as the root of all evil and sees “good governance” as the ultimate solution to the country’s problems. In Claudio’s view, a dynamic economy is what the country really needs, one that will create jobs and reduce poverty, but while “development” is routinely rhetorically invoked as the national goal, what it will actually take to develop the country runs up against the sacred triad of promoting a strong currency, warding off inflation, and worshipping austerity that undergird orthodox economic policy making. This is the reality that corruption discourse hides in plain sight. This anti-development paradigm is not one that is of recent vintage, nor did it evolve by chance. In making his case, Claudio, one of the country’s leading historians, takes us back to the imposition of a gold-based currency at the beginning of colonial rule, discusses the demise of the Philippine National Bank in the early twenties, demystifies the powerful Central Bank Governor Miguel Cuaderno, Sr., tackles the policy contradictions of the Marcos dictatorship, and tries to unravel what he regards as the puzzling convergence of the Right and the Left on a hard currency, pro-austerity, anti-developmental paradigm. Imposing gold standard Even as American energies were focused on defeating Filipino revolutionaries at the turn of the 20th century, they did not neglect laying the economic foundations of colonial rule. One of the main problems that confronted them was what they saw as a chaotic situation when it came to the currency. Silver currencies were in circulation along with gold, and this flexible system favored the British and Anglo-Chinese interests that dominated the country’s international trade. For in the second half of the 19th century, under the rotting Spanish colonial superstructure, the islands had fallen into the sphere of British economic influence, much like the rest of East Asia. Much of the trade was with Britain and other gold standard countries, and because silver was depreciating relative to gold, this triggered an export boom that served as the economic base of a new middle class — the ilustrados that not only engaged in bourgeois lifestyles but also “imagined a nation.” According to Claudio, “it is reasonable to argue that, in fueling export wealth, currency depreciation, helped forge the Filipino nation.” The glorious mess of silver, gold, and debased silver and gold currencies in their new colony did not please the Americans. They wanted to break the British monopoly of banking and trade not only in the new colony but the rest of Asia, and gold was the solution. But long-term imperial ambition was not the only motive. There were more immediate concerns. The troops that pacified the country and the bureaucrats setting up the colonial government wanted to be paid in currency that would not depreciate once they sent their earnings back to the US. Mainland-based manufacturers exporting to the Philippines would benefit because they would be not be paid in depreciating silver, and so would most parvenu American businesses setting up shop in Manila, which were mainly interested in importing, not exporting. Must Read [In This Economy] Unpacking the link between corruption and growth in the Philippines Forgotten in all this were the interests of Filipino exporters of sugar, copra, and raw materials who had thrived owing to cheap silver. Also disregarded was the fact that, as in the US, tying the currency to gold reserves would bring the deflationary pressures of such a system to the Philippines — precisely what William Jennings Bryan and the free-silver Democrats had wanted to free the US economy from in the years leading up to the conquest. So, via the creation of a Gold Standard Fund to support the new peso and the fixing of the exchange rate at two pesos to one dollar, the motley silver currencies were squeezed out, and what one of the key designers of the new system, described as “purest gold standard the world has ever seen” came into being. To disarm the local elite, the Americans promoted a narrative that portrayed gold as “manly” and justified the use of gold-based currency and the austerity it would impose on Filipinos as necessary to reform the latter’s economic habits, which were characterized as “profligate.” Ingrained racism against non-whites was undoubtedly operative here, as well as sexism. One also senses something that Claudio does not mention, which is the prejudice of White Anglo Saxon Protestants (like the island’s monetary architects Charles Conant and Edwin Kemmerer) who had internalized what Max Weber described as the behavioral logic of capital accumulation based on deferred gratification, against what they regarded as a weak, consumption-oriented, and corrupt Hispano-Catholic civilization that they had bested in war and commerce. Saga of the Philippine National Bank To illustrate the crippling effects on growth and development of the regime of austerity imposed by the colonial regime, Claudio launches into a revisionist interpretation of the crisis of first Philippine National Bank (PNB), which went out of business in 1921. The consensus among historians, including progressive historians like our common friend Paul Hutchcroft, is that the PNB was driven to ruin by the corruption and profligacy of its Filipino managers and clientele. Claudio quotes Hutchcroft’s judgment that “the newly empowered landed oligarchs had plundered the bank so thoroughly that not only the bank but also the government and its currency were threatened by ‘utter breakdown.’” The problem with this interpretation, says Claudio, is that it is wrong on three counts. First, it is one sided. The bank was engaged in financing development within the constraints imposed by the rigid colonial framework, an activity he calls “developmental colonialism.” PNB loans, for instance, financed 18 sugar mills that increased production without adding hectarage and “allowed the sugar industry to transition from selling near-raw sugar that it could only sell domestically to refined sugar that could be sold abroad.” Second, most accounts of the PNB’s collapse rely on one tainted source: the report of the mission led by former governor general Cameron Forbes and former governor of the Moro Province Leonard Wood. Commissioned to investigate the readiness of the Philippines for independence, the mission, even before it reached the islands, shared the Republican Party’s bias against granting immediate self-rule, and it latched on to the PNB crisis, which it attributed to the profligacy of Filipinos, as prima facie evidence for withholding it. In fact, the bank’s condition was not as bad as Forbes and Wood made it out to be. Third, Claudio contends that while there were irregularities in the conduct of its business, the central factor that torpedoed the bank was the great global deflation that was triggered by the radical cutback in government spending after the First World War. Like the PNB, mainland banks saw their balance sheets slip into the red owing to