The Philippine economic mystery

The poor economic performance of the Philippines over the long term is a puzzle and an apparent anomaly for the region. The decline in the Philippines' global position from the first part of the 20th century is particularly striking when viewed against the backrdrop of rapid income gains in countries of East and Southeast Asia, countries the Philippines used to surpass in terms of physical and human capital. While there have been a number of attempts to explain the puzzle—difficult geography, macroeconomic policy failures, and corruption—none are completely convincing either because there are counterexamples or the factors cited are endogenous and derivative. On the other hand, the long-term economic record of the Philippines is strikingly similar to those of some Latin American countries, such as Argentina, Mexico, and Peru. This paper advances the hypothesis that the political and economic experience in the Philippines stands in closer proximity to those of countries in Latin America than in Southeast Asia, and that this is rooted in their deep similarity of histories and cultures. In particular, the common Spanish and Catholic colonial history may have given rise to cultural attitudes that now stand in the way of freer markets and a more successful political democracy.