In our image, p.39
In Our Image, page 39
Taft had also expected liberal incentives to induce U.S. companies to put capital and technical skill into Philippine mining, logging and agriculture. Everyone would presumably benefit—the American firms from the return on their investments, the Filipinos from the “trickle down” effect of American profits. Again, the experience would duplicate the successes at home, where Americans derived their prosperity from bold entrepreneurship. All hinged on granting American investors in the Philippines generous concessions to justify, among other things, their “expenditure of large amounts for expensive machinery and equipment.” Early in 1902, during his Washington visit, Taft laid his plans before Congress—which proceeded to nibble them to shreds.
Fired by his own enthusiasm, Taft imagined dynamic U.S. companies tapping the “magnificent mineral possibilities” of the archipelago: gold, copper, iron and coal deposits long neglected by the Spanish. But Congress regarded the giant U.S. mining corporations to be as rapacious as the railway trusts and refused them privileges. Among other restraints, they would be limited to one claim on the same lode. Thus discouraged, American prospectors filed only eight thousand claims during the first decade of U.S. rule, most of them small.
As in every gold-rush story ever told, the luckiest American failed to cash in on his strike. Nils Peterson, a Dane by birth, had tried mining in California before joining the U.S. Army at the outbreak of the war with Spain. Sent to the Philippines, he heard tales of abandoned Spanish lodes awaiting rediscovery, and the yarns rekindled his dream of hitting it rich. He stayed on after the war, trekking the islands for four years in quest of gold. Finally, in the jungles of Benguet province, Igorot tribesmen led him to a spot where they panned the streams for nuggets from which they carved amulets. The site seemed to be promising, and he persuaded Met Clarke, the proprietor of Manila’s popular ice cream parlor, to grubstake him in return for a majority share. By 1911, he had a mine and a simple amalgamation mill working. He also cut out a road to nearby Baguio, and other Americans pledged investments. A series of typhoons then swept the area. The mine crumbled and the mill washed away, along with the offers of money. To top it all, Clarke went broke. His creditors, including a bank owned by the Catholic archdiocese of Manila, liquidated his assets to collect their debts—except for the jinxed mine that nobody wanted. Clarke died poor soon afterward. Peterson, equally penniless, went home in 1917 to rejoin the army as America entered World War I. But instead he succumbed to pneumonia, leaving his widow, Mary, destitute—at least for a time.
Clarke’s creditors had meanwhile turned to “Judge” John W. Haussermann, a Manila lawyer, to save the cursed mine. He agreed—and became the Midas of the Philippines as well as its richest and probably most influential American.
At the peak of his wealth in the 1930s, Haussermann was a portly man with pudgy fingers, silver hair and a white mustache—a patriarchal appearance deliberately cultivated to lend credibility to his lofty pronouncements. The contemporary press canonized him as a Horatio Alger hero who had succeeded through hard work, perseverance and thrift, and even before the Xerox age he always had stacks of fuzzy Photostats of the adulatory articles to hand out to visitors. But he lived modestly despite his immense fortune, professing that he was merely God’s “trustee for the worldly goods that He has given me.” An ardent Republican, he regularly led the party’s Manila delegation to the presidential conventions to lobby against Philippine independence. The natives, he argued, could never recover from “the end of Anglo-Saxon influence” if America withdrew from the archipelago. The Filipinos nevertheless admired his affluence and authority, which had after all contributed significantly to the economy. In 1954, not long before his death at the age of ninety-five, the Philippine government decorated him.
The son of a Cincinnati meat dealer, Haussermann was a young attorney in Kansas when America declared war on Spain. He enlisted, went to Manila as an army lawyer and arrogated for himself the bogus title of “judge.” Electing to remain there in private practice, he had drafted the legal documents for Peterson and Clarke, and accepted shares in their mine in lieu of a fee. So it was logical for their creditors to ask him, as the only solvent stockholder, to salvage the defunct enterprise. He raised fresh capital, resurrected the mine, imported modern equipment, increased production, opened new mines elsewhere in the country and expanded into logging. With much fanfare contrived to gild his benign image, he gave his workers free rice, houses, schools and clinics. Ironically for a Republican, he owed his breakthrough to a Democratic president, Franklin Roosevelt, who in 1933 hiked the price of gold to $35 an ounce. Philippine gold production surged, and so did Haussermann’s profits. By the end of the decade, his company had produced $150 million worth of gold and paid $35 million in dividends—fabulous sums in those lean Depression years.
Haussermann himself piled up millions, and even the heirs of an investor who had fluttered a few hundred dollars at the start would now be millionaires. The corporation, currently Benguet Consolidated, has long been listed on the New York Stock Exchange. Haussermann would be astonished by its present directors—Filipinos in three-button suits and button-down shirts who absorbed their “Anglo-Saxon influence” at Ivy League business schools.
Peterson’s widow, affectionately known to Manila high society as “Aunt Mary,” recouped smartly. She married Jan Marsman, a stout Dutchman who had come to the Philippines in 1920 to sell sugar machinery. Parlaying some of her late husband’s claims into a gold-mining firm that became second only to Benguet, they went into trucking, trading and real estate, and reached out to Hong Kong and Indonesia, then the Netherlands East Indies. Unlike Haussermann, who shunned showiness, Mary draped herself in diamonds at Manila parties. But she was equally at home in dungarees at mining camps, barking orders in the vernacular of a veteran prospector.
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A potent blend of U.S. capital and enterprise, Taft also maintained, would modernize Philippine agriculture. And he felt that, with four fifths of the land in the archipelago in the public domain, Americans should be allowed to purchase or buy tracts of twenty-five thousand acres or more, especially in the sugar regions. It was elementary business. Only large holdings promised the profits that would induce U.S. companies to make large investments. Once again, he ran into snags in Washington.
By early 1902, Congress had begun to discuss so-called organic legislation to regulate U.S. rule of the islands. Henry Cabot Lodge, chairman of the Senate Committee on the Philippines, included Taft’s land concept in the bill. Taft personally testified before the committee, explaining that his plan would attract American capital “without bringing about an abuse.” The appeal fell flat.
Democrats like Edward Carmack of Tennessee, a strident anti-imperialist, predictably denounced the proposal as an invitation to “carpetbaggers” to pillage. Republicans whose states had been plundered by predatory real estate syndicates attacked the plan with equal fervor. The idea also aroused the wrath of senators from California, Colorado, Michigan, Nebraska and other beet-sugar-producing areas, which feared Philippine competition. Congress finally limited public land acquisitions by Americans in the islands to thirty-five acres for individuals and about twenty-five hundred acres for a company. Lodge, initially a champion of unchecked American investment in the Philippines, went along—explaining later that, after all, excluding speculators from the archipelago would preserve its “ultimate peace, prosperity and good government.” A vindictive man beneath his jovial exterior, Taft never forgave him for the shift. Lodge, he wrote privately, had resorted to a “subterfuge” to protect his position on Capitol Hill.
So Congress, more out of self-interest than rectitude, saved the Philippines from U.S. agricultural exploitation. During the decade prior to 1913, Americans bought or leased a total of only some forty thousand acres of public land in the archipelago, and their later attempts to amend the curbs were blunted. Harvey Firestone, the tire mogul, had an exemplary experience. He visited Manila in 1926 in an effort to lease a half-million acres on Mindanao, whose location outside the seasonal typhoon corridor made it ideal for growing rubber. General Leonard Wood, at the time U.S. governor, pleaded his case with the Filipinos, who by then had become increasingly nationalistic and would only grant him the statutory twenty-five hundred acres. Similarly, the Goodyear tire company could never get more than a tract of that size on Mindanao, which it used as an experimental station.
But some Americans, operating within the restrictions, earned handsome if unspectacular incomes off the land. One, a Dr. J. W. Strong, was the unofficial potentate of Basilan, a remote island in the Sulu Sea south of Zamboanga. A traveler who visited him during the 1930s found a “serene, amazingly young-looking man” of sixty-five ensconced in a gracious white house framed by palms, tamarinds and flame trees, its lush garden radiant with bougainvillea, hibiscus and a dozen varieties of orchids. Married to a cheerful Filipino woman who had given him a sprawl of children, he warmly welcomed guests with the hospitality of a lonesome expatriate, serving them sundowners on his broad veranda—whose furniture included, along with the usual rattan armchairs and divans, a large refrigerator, which in those days symbolized affluence.
Strong had landed in the Philippines thirty years before as a U.S. Army dentist. Pressed into fighting cholera and typhoid in Zamboanga, he sailed over to nearby Basilan, where he bought two thousand acres for next to nothing and planted rubber. He employed local Muslims known as Yakans, who wore baggy pantaloons and bright turbans. Besides paying their wages, he provided them with food and medical care—but, despite his métier, did nothing to improve their teeth, which they filed down to stubs and painted black. He settled their disputes, and they revered him as their rajah. Though he was the largest single rubber producer in the archipelago, his yield rarely exceeded a million pounds a year—a driblet compared to the millions of tons then exported annually by, say, the French-owned Michelin plantation in Vietnam. He prospered, however, by selling his rubber either in America or in the Philippines under a trade umbrella that protected him against competition.
A few U.S. companies circumvented the restrictive land law, and disclosures of their maneuvers periodically ired Congress. The protests usually came from special-interest groups, but they reflected the extent to which at least some factions in Washington kept a sharp if partisan eye on the islands. Unlike the powerful viceroys who governed Europe’s colonies, U.S. officials in Manila were constantly being held accountable to the authorities back home.
One case involved the former monastic estates purchased by Taft in 1903. Earmarked for sale to their tenants on the installment plan, the tracts had become a drain on the U.S. treasury in Manila, which was paying for their maintenance. Forbes flippantly suggested at one point that it would be cheaper just to give the farms away, but their status was vague under the land legislation. Late in 1909, however, agents for the American Sugar Refining Company secretly bid for fifty-five thousand acres that had previously belonged to the Catholic Church on the Visayan island of Mindoro. The Washington Evening Star broke the story, and a juicy scandal appeared to be brewing amid the familiar Washington swirl of disclosures and denials. Among other possible improprieties, Taft’s brother Henry was a lawyer for the company.
The potential transaction seemed to be stuck in a legal snarl until Taft himself intervened. Though now president, he still regarded the Philippines as his personal preserve, and a major U.S. investment fit his original economic plan for the islands. He approved the sale of the plantation to the American Sugar Refining Company for some $300,000, roughly $40,000 more than he had paid for it. Many Americans saw the deal as a precedent, and rumors spread of other large estates on the market elsewhere in the archipelago. In Congress, however, representatives of the sugar-beet interests demanded an investigation, and they were backed by an assortment of other groups with causes to plead. But there was not enough former church property to make a fight worthwhile. For that reason, too, many U.S. firms were reluctant to become engaged in the dispute. The controversy soon faded away—at least in Washington.
In Manila, though, young Filipino leaders assailed the transaction. What riled them was less the deal itself than the fact that they had not been consulted. They were not so naïve as to deny the need for U.S. investment in the economy. But they contended that, unless they exercised control, big American corporations would carve up the country for their own benefit—and, in the process, block eventual Philippine independence. A rising Filipino politician, Sergio Osmeña, made the point in September 1910 in a lengthy memorandum to Taft’s secretary of war, Jacob M. Dickinson, who was then visiting Manila. Osmeña agreed that “capital from without” was vital to develop the islands. However, “the invasion of that capital” would, “once invested here … be opposed to any change of sovereignty, because it will not consider itself to be sufficiently safe and protected, except under its own.”
Osmeña, and other Filipino politicians then and later, were nationalists rather than agrarian reformers. They were not troubled by large estates as long as the land remained in Filipino hands. Indeed, many were in the pockets of the big property owners. Similarly, Congress did not apply its land curbs to private holdings, nor did U.S. governors in Manila tamper with the rural gentry, the pillars of stability. Thus wealthy Filipino clans, usually of mixed Spanish or Chinese origin, amassed fortunes that their heirs later multiplied.
Some of the biggest Filipino fortunes dated back to the sugar boom of the nineteenth century. During the 1860s, for instance, Eugenio Lopez acquired nine thousand acres of sugarcane fields on the island of Negros, and his descendants today control utilities, newspapers and television stations. The powerful Locsin, Lacson and Ossorio dynasties also grew out of Negros sugar. The Elizaldes, who claimed to be pure Spaniards, were the largest single exporters of Philippine sugar to the United States during the 1930s, and their assets extended into gold mines, insurance firms, timber companies, paint, wax and rope factories, a fleet of interisland ships and a cattle ranch. Corazon Aquino derives her wealth from her great-grandfather, José Cojuangco, a poor Chinese immigrant who by the 1890s had vast sugarcane fields among his fifteen thousand acres in Tarlac province, north of Manila.
The United States thus blocked Americans from plundering the archipelago, but did nothing to prohibit its exploitation by Filipinos. The old dynasties prevail to this day despite years of harassment by Marcos, who created his own oligarchy. They comprise roughly sixty families, which preserve a system that is still largely feudal. “The gap between the entitled few and the masses,” historian David Joel Steinberg has observed, “is comparable to that of eighteenth-century France.”
Taft was correct to argue that U.S. capital would spur Philippine agriculture. Hawaii’s big sugarcane plantations, fueled by American money, became the most efficient in the world. Irrigated and mechanized, they produced record yields and also operated year-round, providing full-time jobs. Philippine sugar estates, by contrast, languished for lack of investment. Reliant on seasonal rains, they could function for only four months a year, leaving their labor idle for long stretches. The tractor symbolized the Hawaiian industry, while a barefoot little boy astride a lazy carabao personified the Philippines—and still does.
If Philippine sugar and other commodities thrived at all, however, it was only because of artificial U.S. trade policies. The sham stimulant superficially appeared to be inspired by American benevolence. But, over the years, it cemented the economy of the archipelago to the United States.
The Republicans, defenders of big business, had erected high tariff walls to shield U.S. enterprise against foreign competition. But Taft, bucking the party line, advocated an exception for Philippine products like sugar, hemp, tobacco and coconut oil. Grant those goods easy access to the United States, he reasoned, and the money to be earned from their cultivation would attract American investors to the islands. There were also political gains to be derived from the trade, he candidly told the Harvard Alumni Association in 1904. If the Filipinos could be made to understand that the American market offered them profits, he explained, they would surely prefer “some sort of bond” with the United States rather than “become independent and lose the valuable business that our guardianship … has brought to them.”
Taft also conceived a formula to grant benefits to U.S. business in exchange. If Philippine agricultural goods were to be given an unlimited market in America, then American manufactured goods deserved an unrestricted market in the Philippines. But the arrangement, subsequently entitled “reciprocal free trade,” transgressed every tenet of free trade. For, by imposing duties on the products of other nations entering the archipelago, it hiked their price and assured U.S. exporters a virtual monopoly in the islands. And all this, ironically, as the United States was piously proclaiming the Open Door policy in an effort to persuade the European powers to respect free trade with China.
The tariff issue was a legal labyrinth. In 1898, as an incentive to Spain to cede the archipelago, the United States had agreed to allow Spanish goods into the Philippines for a ten-year period at the same duties paid by Americans. To cut those duties would mean a serious loss of revenues. So U.S. business would have to wait for its exclusive market in the islands. At the same time, the problem of American tariffs on Philippine imports raised a basic constitutional question: What was the precise relationship between the United States and its new dominion? If the Philippines was a foreign land, its products would face the prevailing duties. But, as an integral part of the United States, its commodities would be exempt. In May 1901, the Supreme Court delivered—or rather evaded—a decision. For tariff purposes, the Philippines was neither “foreign” to nor “incorporated” in the United States. Thus it was the responsibility of Congress to pass special tariff legislation for the archipelago.
