Sugar and politics (2)

THE sugar industry became embroiled in political controversy in the early 1920s for complex reasons. Remember that in 1909, the Payne-Aldrich Tariff Act of 1909 imposed a quota of 300,000 metric tons on Philippine sugar exports to the United States, which the Underwood-Simmons Tariff Act of 1913 promptly removed. Then World War 1 erupted in 1914 and Philippine sugar exports to the United States expanded. In 1916, the Philippine National Bank (PNB) was created through Republic Act 2612 to provide financial support to the country's cash-crop economy. Then things get a bit messy.

In 2007, I published a scholarly article for Ateneo's Philippine Studies journal entitled "Philippine Financial Standing in 1921: The First World War Boom and Bust," where I explained the entire mess. As mentioned, the cash-crop economy was booming because of the war. Sugar hacenderos (planters) and millers borrowed heavily from the PNB, which eagerly approved the massive loans because exports (to the United States) were growing at a dizzying pace. PNB's deposits also soared because the bank became almost the primary depository of the national treasury. Everything was fine until late 1919 when demand for sugar (and cash-crops in general) began to slow down.