During the year 1898 there were those who enriched themselves enormously as a consequence of the American advent, but the staple trade of the Colony was generally disrupted by the abnormal circumstances of the period; therefore it would serve no practical purpose to present the figures for that year for comparison with the results obtained in the years following that of the Treaty of Paris.

The tables at the end of this chapter show the increase or decrease in the various branches of export and import trade. Regarded as a whole, the volume of business has increased since the American occupation—to what extent will be apparent on reference to the table of “Total Import and Export Values” at p. 639. When the American army of occupation entered the Islands, and was subsequently increased to about 70,000 troops, occupying some 600 posts about the Archipelago, there came in their wake a number of enterprising business men, who established what were termed trading companies. Their transactions hardly affected the prosperity of the Colony one way or the other. For this class of trader times were brisk; their dealings almost exclusively related to the supply of commodities to the temporary floating population of Americans, with such profitable results that, although many of them withdrew little by little when, at the close of the War of Independence, the troops were gradually reduced to some 16,000 men, occupying about 100 posts, others had accumulated sufficient capital to continue business in the more normal time which followed. Those were halcyon days for the old-established retailers as well as the new-comers; but, as Governor W.H. Taft pointed out in his report to the Civil Commission dated December 23, 1903,1 “The natural hostility of the American business men, growing out of the war, was not neutralized by a desire and an effort to win the patronage and goodwill of the Filipinos. The American business men controlled much of the advertising in the American papers, and the newspapers naturally reflected the opinion of their advertisers and subscribers in the advocacy of most unconciliatory measures for the native Filipino, and in decrying all efforts of the Government to teach Filipinos how to govern by associating the more intelligent of them in the Government.... The American business man in the Islands has really, up to this time, done very little to make or influence trade. He has kept close to the American patronage, and has not extended his efforts to an expansion of trade among the Filipinos.... There are a few Americans who have pursued a different policy with respect to the Filipinos to their profit.”

Governor Taft's comments were only intended to impress upon the permanent American traders, for their own good, the necessity of creating a new clientÈle which they had neglected. The war finished, the wave of temporarily abnormal prosperity gradually receded with the withdrawal of the troops in excess of requirements; the palmy days of the retailer had vanished, and all Manila began to complain of “depression” in trade. The true condition of the Colony became more apparent to them in their own slack time, and for want of reflection some began to attribute it to a want of foresight in the Insular Government. Industry is in its infancy in the Philippines, which is essentially an agricultural colony. The product of the soil is the backbone of its wealth. The true causes of the depression were not within the control of the Insular Government or of any ruling factor. Five years of warfare and its sequence—the bandit community—had devastated the provinces. The peaceful pursuits of the husbandman had been nearly everywhere interrupted thereby; his herds of buffaloes had been decimated in some places, in others annihilated; his apparatus or machinery and farm buildings were destroyed, now by the common exigencies of war, now by the wantonness of the armed factions. The remnant of the buffaloes was attacked by rinderpest, or epizootia, as the Filipino calls this disease, and in some provinces up to 90 per cent. were lost. Some of my old friends assured me that, due to these two causes, they had lost every head of cattle they once possessed. Laudable effort was immediately made by the Insular Government to remedy the evil, for so great was the mortality that many agricultural districts were poverty-stricken, thousands of acres lying fallow for want of beasts for tillage and transport. Washington responded to the appeal for help, and a measure was passed establishing the Congressional Relief Fund, under which the sum of $3,000,000 was authorized to be expended to ameliorate the situation. By Philippine Commission Act No. 738, $100,000 of this fund were appropriated for preliminary expenses in the purchase of buffaloes. Under the supervision of the Insular Purchasing-Agent a contract was entered into with a Shanghai firm for the supply of 10,000 head of inoculated buffaloes to be delivered in Manila, at the rate of 500 per month, at the price of ?85 per head. An agent was sent to Shanghai with powers to reject unsuitable beasts before inoculation, and the Government undertook to remunerate the contractors at the rate of ?40 for every animal which succumbed to the operation. The loss on this process was so great that a new contract was entered into with the same firm to deliver in Manila temporarily immunized buffaloes at the rate of ?79 per head. On their arrival the animals were inspected, and those apparently fit were herded on the Island of Masbate for further observation before disposing of them to the planters. The attempt was a failure. Rinderpest, or some other incomprehensible disease, affected and decimated the imported herds. From beginning to end the inevitable wastage was so considerable that up to November 20, 1903, only 1,805 buffaloes (costing ?118,805) were purchased, out of which 1,370 were delivered alive, and of this number 429 died whilst under observation; therefore, whereas the price of the 1,805 averaged ?65 per head, the cost exceeded ?126 per head when distributed over the surviving 941, which were sold at less than cost price, although in private dealings buffaloes were fetching ?125 to ?250 per head (vide Buffaloes p. 337, et seq.). Veterinary surgeons and inoculators were commissioned to visit the buffaloes privately owned in the planting-districts, the Government undertaking to indemnify the owners for loss arising from the compulsory inoculation; but this has not sufficed to stamp out the disease, which is still prevalent.

Another calamity, common in British India, but unknown in these Islands before the American advent, is Surra, a glandular disease affecting horses and ponies, which has made fatal ravages in the pony stock—to the extent, it is estimated, of 60 per cent. The pony which fully recovers from this disease is an exceptional animal. Again, the mortality among the field hands, as a consequence of the war, was supplemented by an outbreak of Cholera morbus (vide p. 197), a disease which recurs periodically in these Islands, and which was, on the occasion following the war, of unusually long duration. Together with these misfortunes, a visitation of myriads of locusts (vide p. 341) and drought completed the devastation.

Consequent on the total loss of capital invested in live-stock, and the fear of rinderpest felt by the minority who have the wherewithal to replace their lost herds, there is an inclination among the agriculturists to raise those crops which need little or no animal labour. Hence sugar-cane and rice-paddy are being partially abandoned, whilst all who possess hemp or cocoanut plantations are directing their special attention to these branches of land-produce. Due to these circumstances, the increased cost of labour and living in the Islands since the American advent, the want of a duty-free entry for Philippine sugar into the United States, the prospective loss of the Japanese market,2 the ever-accumulating capital indebtedness, and the need of costly machinery, it is possible to believe that sugar will, in time, cease to be one of the leading staple products of the Islands.

With regard to the duty levied in the United States on Philippine sugar imports, shippers in these Islands point out how little it would affect either the United States' revenue or the sugar trade if the duty were remitted in view of the extremely small proportion of Philippine sugar to the total consumption in America. For instance, taking the average of the five years 1899–1903, the proportion was .313 per cent., so that if in consequence of the remission of duty this Philippine industry were stimulated to the extent of being able to ship to America threefold, it would not amount to 1 per cent, of the total consumption in that country.

At the close of the 1903 sugar season the planters were more deeply in debt than at any previous period in their history. In 1904 the manager of an Yloilo firm (whom I have known from his boyhood) showed me statistics proving the deplorable financial position of the sugar-growers, and informed me that his firm had stopped further advances and closed down on twelve of the largest estates working on borrowed capital, because of the hopelessness of eventual liquidation in full. For the same reasons other financiers have closed their coffers to the sugar-planters.

Another object of the grant called the Congressional Relief Fund was to alleviate the distress prevailing in several Luzon provinces, particularly Batangas, on account of the scarcity of rice, due, in a great measure, to the causes already explained. Prices of the imported article had already reached double the normal value in former times, and the Government most opportunely intervened to check the operations of a syndicate which sought to take undue advantage of the prevailing misery. Under Philippine Commission Acts Nos. 495, 786 and 797, appropriations were made for the purchase of rice for distribution in those provinces where the speculator's ambition had run up the selling-price to an excessive rate. Hitherto the chief supplying-market had been the French East Indies, but the syndicate referred to contrived to close that source to the Government, which, however, succeeded in procuring deliveries from other places. The total amount distributed was 11,164 tons, costing ?1,081,722. About 22 tons of this amount was given to the indigent class, the rest being delivered at cost price, either in cash or in payment for the extermination of locusts, or for labour in road-making and other public works. The merchant class contended that this act of the Government, which deprived them of anticipated large profits, was an interference in private enterprise—a point on which the impartial reader must form his own conclusions. To obviate a recurrence of the necessity for State aid, the Insular Government passed an Act urging the people to hasten the paddy-planting. The proclamation embodying this Act permitted the temporary use of municipal lands, the seed supplied to be repaid after the crop. It is said that some of the local native councils, misunderstanding the spirit of the proclamation, made its non-observance a criminal offence, and incarcerated many of the supposed offenders; but they were promptly released by the American authorities.

Under the circumstances set forth, the cultivation of rice in the Islands has fallen off considerably, to what extent may be partially gathered from a glance at the enormous imports of this cereal, which in the year 1901~ were 167,951 tons; in 1902, 285,473 tons; in 1903, 329,055 tons (one-third of the value of the total imports in that year); and in 1904, 261,553 tons. The large increase of wages and taxes and the high cost of living since the American advent (rice in 1904 cost about double the old price) have reduced the former margins of profit on sugar and rice almost to the vanishing-point.

If all the land in use now, or until recently, for paddy-raising were suitable for the cultivation of such crops as hemp, tobacco, cocoanuts, etc., for which there is a steady demand abroad, the abandonment of rice for another produce which would yield enough to enable one to purchase rice, and even leave a margin of profit, would be rather an advantage than otherwise. But this is not the case, and naturally a native holds on to the land he possesses in the neighbourhood, where he was perhaps born, rather than go on a peregrination in search of new lands, with the risk of semi-starvation during the dilatory process of procuring title-deeds for them when found.

Fortunately for the Filipinos, “Manila hemp” being a speciality of this region as a fibre of unrivalled quality and utility, there cannot be foreseen any difficulty in obtaining a price for it which will compensate the producer to-day as well as it did in former times. Seeing that buffaloes can be dispensed with in the cultivation of hemp and coprah, which, moreover, are products requiring no expensive and complicated machinery and are free of duty into the United States, they are becoming the favourite crops of the future.

In 1905 there was considerable agitation in favour of establishing a Government Agricultural Bank, which would lend money to the planters, taking a first mortgage on the borrower's lands as guarantee. In connexion with this scheme, the question was raised whether the Government could, in justice, collect revenue from the people who had no voice at all in the Government, and then lend it out to support private enterprise. Moreover, without a law against usury (so common in the Islands) there would be little to prevent a man borrowing from the bank at, say, 6 per cent.—up to the mortgage value of his estate—to lend it out to others at 60 per cent. A few millions of dollars, subscribed by private capitalists and loaned out to the planters, would enormously benefit the agricultural development of the Colony; and if native wealthy men would demonstrate their confidence in the result by subscribing one-tenth of the necessary amount, perhaps Americans would be induced to complete the scheme. The foreign banks established in the Islands are not agricultural, but exchange banks, and any American-Philippine Agricultural Bank which may be established need have little reason to fear competition with foreign firms who remember the house of Russell & Sturgis (vide p. 255) and also have their own more recent experiences. Philippine rural land is a doubtful security for loans, there being no free market in it.

Between the years 1902 and 1904 the Insular Government confiscated the arable lands of many planters throughout the Islands for delinquency in taxes. The properties were put up to auction; some of them found purchasers, but the bulk of them remained in the ownership of the Government, which could neither sell them nor make any use of them. Therefore an Act was passed in February, 1905, restoring to their original owners those lands not already sold, on condition of the overdue taxes being paid within the year. In one province of Luzon the confiscated lots amounted to about one-half of all the cultivated land and one-third of the rural land-assessment in that province. The $2,400,000 gold spent on the Benguet road (vide p. 615) would have been better employed in promoting agriculture.

Up to 1898 Spain was the most important market for Philippine tobacco, but since that country lost her colonies she has no longer any patriotic interest in dealing with any particular tobacco-producing country. The entry of Philippine tobacco into the United States is checked by a Customs duty, respecting which there is, at present, a very lively contest between the tobacco-shippers in the Islands and the Tobacco Trust in America, the former clamouring for, and the latter against, the reduction or abolition of the tariff. It is simply a clash of trade interests; but, with regard to the broad principles involved, it would appear that, so long as America holds these Islands without the consent of its inhabitants, it is only just that she should do all in her power to create a free outlet for the Islands' produce. If this Archipelago should eventually acquire sovereign independence, America's moral obligations towards it would cease, and the mutual relations would then be only those ordinarily subsisting between two nations.

By Philippine Commission Act dated April 30, 1902, a Bureau of Agriculture was organized. The chief of this department is assisted by experts in soil, farm-management, plant-culture, breeding, animal industry, seed and fibres, an assistant agrostologist, and a tropical agriculturist. Shortly after its organization, 18,250 packages of field and garden seeds were sent to 730 individuals for experiment in different parts of the Colony, with very encouraging results. The work of this department is experimental and investigative, with a view to the improvement of agriculture in all its branches.

In Spanish times agricultural land was free of taxation. Now it pays a tax not exceeding .87 per cent. of the assessed value. The rate varies in different districts, according to local circumstances. For instance, in 1904 it was .87 per cent. in Baliuag (Bulacan) and in ViÑan (La Laguna), and .68 per cent. in San Miguel de Mayumo (Bulacan). This tax is subdivided in its application to provincial and municipal general expenses and educational disbursements. The people make no demur at paying a tax on land-produce; but they complain of the system of taxation of capital generally, and particularly of its application to lands lying fallow for the causes already explained. The approximate yield of the land-tax in the fiscal year of 1905 was ?2,000,000; it was then proposed to suspend the levy of this tax for three years in view of the agricultural depression.

The Manila Port Works (vide p. 344), commenced in Spanish times, are now being carried on more vigorously under contract with the Atlantic, Gulf, and Pacific Company. Within the breakwater a thirty-foot deep harbour, measuring about 400 acres, is being dredged, the mud raised therefrom being thrown on to 168 acres of reclaimed land which is to form the new frontage. Also a new channel entrance to the Pasig River is to be maintained at a depth of 18 feet. The Americans maintain that there will be no finer harbour in the Far East when the work is completed. The reclaimed acreage will be covered with warehouses and wharves, enabling vessels to load and discharge at all seasons instead of lying idle for weeks in the typhoon season and bad weather, as they often do now. With these enlarged shipping facilities, freights to and from Manila must become lower, to the advantage of all concerned in import and export trade. The cost of these improvements up to completion is estimated at about one million sterling.

The port of Siassi (Tapul group), which was opened in recent years by the Spaniards, was discontinued (June 1, 1902) by the Americans, who opened the new coastwise ports of Cape Melville, Puerta Princesa, and Bongao (October 15, 1903) in order to assist the scheme for preventing smuggling between these extreme southern islands and Borneo. Hitherto there had been some excuse for this surreptitious trade, because inter-island vessels, trading from the other entry-ports, seldom, if ever, visited these out-of-the-way regions. In February, 1903, appropriations of $350,000 and $150,000 were made for harbour works in CebÚ and Yloilo respectively, although in the latter port no increased facility for the entry of vessels into the harbour was apparent up to June, 1904. Zamboanga, the trade of which was almost nominal up to the year 1898, is now an active shipping centre of growing importance, where efforts are being made to foster direct trade with foreign eastern ports. An imposing Custom-house is to be erected on the new spacious jetty already built under American auspices. Arrangements have also been made for the Hong-Kong-Australia Steamship Company to make Zamboanga a port of call. Here, as in all the chief ports of the Archipelago, greater advantages for trade have been afforded by the administration, and one is struck with the appearance of activity and briskness as compared with former times. These changes are largely owing to the national character of the new rulers, for one can enter any official department, in any branch of public service, from that of the Gov.-General downwards, to procure information or clear up a little question “while you wait,” and, if necessary, interview the chief of the department. The tedious, dilatory time and money-wasting “come later on” procedure of times gone by no longer obtains.

What is still most needed to give a stimulus to agriculture and the general material development of the Islands is the conversion of hundreds of miles of existing highways and mud-tracks into good hard roads, so as to facilitate communication between the planting-districts and the ports. The corallaceous stone abounding in the Islands is worthless for road-making, because it pulverizes in the course of one wet season, and, unfortunately, what little hard stone exists lies chiefly in inaccessible places—hence its extraction and transport would be more costly than the supply of an equal quantity of broken granite brought over in sailing-ships from the Chinese coast, where it is procurable at little over the quarryman's labour. From the days of the Romans the most successful colonizing nations have regarded road-making as a work of primary importance and a civilizing factor.

Among the many existing projects, there is one for the construction of railroads (1) from Manila (or some point on the existing railway) northward through the rich tobacco-growing valleys of Isabela and CagayÁn, as far as the port of Aparri, at the mouth of the CagayÁn River—distance, 260 miles; (2) from DagÚpan (PangasinÁn) to Laoag (Ilocos Norte), through 168 miles of comparatively well-populated country; (3) from San Fabian (PangasinÁn) to BÁguio (Benguet), 55 miles; and three other lines in Luzon Island and one in each of the islands of Negros, Panay, CebÚ, Leyte, and SÁmar. A railway line from Manila to Batangas, via Calamba (a distance of about 70 miles), and thence on to Albay Province, was under consideration for many years prior to the American advent; but the poor financial result of the only (120 miles) line in the Colony has not served to stimulate further enterprise in this direction, except an endeavour of that same company to recuperate by feeder branches, two of which are built, and another (narrow gauge) is in course of construction from Manila to Antipolo, via Pasig and Mariquina (vide Railways, p. 265).

Since February, 1905, a Congress Act, known as the “Cooper Bill,” offers certain inducements to railway companies. It authorizes the Insular Government to guarantee 4 per cent, annual interest on railway undertakings, provided that the total of such contingent liability shall not exceed $1,200,000—that is to say, 4 per cent, could be guaranteed on a maximum capital of $30,000,000. The Insular Government is further empowered under this Act to admit, at its discretion, the entry of railway material free of duty. As yet, no railway construction has been started by American capitalists. Projects ad infinitum might be suggested for the development of trade and traffic—for instance, a ship-canal connecting the Laguna de Bay with the Pacific Ocean; another from Laguimanoc to Atimonan (Tayabas); an artificial entry-port in Negros Island, connected by railway with two-thirds of the coast, etc.

Up to the present the bulk of the export and import trade is handled by Europeans, who, together with native capitalists, own the most considerable commercial and industrial productive “going concerns” in the Islands. In 1904 there were one important and several smaller American trading-firms (exclusive of shopkeepers) in the capital, and a few American planters and successful prospectors in the provinces. There are hundreds of Americans about the Islands, searching for minerals and other natural products with more hopeful prospects than tangible results. It is perhaps due to the disturbed condition of the Islands and the “Philippines for the Filipinos” policy that the anticipated flow of private American capital has not yet been seen, although there is evidently a desire in this direction. There is, at least, no lack of the American enterprising spirit, and, since the close of the War of Independence, several joint-stock companies have started with considerable cash capital, principally for the exploitation of the agricultural, forestal, and mineral wealth of the Islands. Whatever the return on capital may be, concerns of this kind, which operate at the natural productive sources, are obviously as beneficial to the Colony as trading can be in Manila—the emporium of wealth produced elsewhere.

There are, besides, many minor concerns with American capital, established only for the purpose of selling to the inhabitants goods which are not an essential need, and therefore not contributing to the development of the Colony.

The tonnage entered in Philippine ports shows a rapid annual increase in five years. Many new lines of steamers make Manila a port of call, exclusive of the army transports, carrying Government supplies, and in 1905 there was a regular goods and passenger traffic between Hong-Kong and Zamboanga. Still, the greater part of the freight between the Philippines and the Atlantic ports is carried in foreign bottoms. The shipping-returns for the year 1903 would appear to show that over 85 per cent, of the exports from the Islands to America, and about the same proportion of the imports from that country (exclusive of Government stores brought in army transports) were borne in foreign vessels. The carrying-trade figures for 1904 were 78.41 per cent, in British bottoms; 6.69 per cent, in Spanish, and 6.65 per cent, in American vessels. The desire to dispossess the foreigners of the carrying monopoly is not surprising, but it is thought that immediately-operative legislation to that end would be impracticable. The latest legislation on the subject confines the carrying-trade between the Islands and the United States to American bottoms from July 1, 1906. It is alleged that the success of the new regulations which may (or may not, for want of American vessels) come into force on that date will depend on the freights charged; it is believed that exorbitant outward rates would divert the hemp cargoes into other channels, and a large rise in inward freights would facilitate European competition in manufactured goods. Any considerable rise in freights to America would tend to counterbalance the benefits which the Filipinos hope to derive from the free entry of sugar and tobacco into American ports. The text of the Shipping Law, dated April 15, 1904, reads thus; “On and after July 1, 1906, no merchandise shall be transported by sea, under penalty of forfeiture thereof, between ports of the United States and ports or places of the Philippine Archipelago, directly, or via a foreign port, or for any part of the voyage in any other than a vessel of the United States. No foreign vessel shall transport passengers between ports of the United States and ports or places in the Philippine Archipelago, either directly, or via a foreign port, under a penalty of $200 for each passenger so transported and landed.”

The expenses of the Civil Government are met through the insular revenues (the Congressional Relief Fund being an extraordinary exception). The largest income is derived from the Customs' receipts, which in 1904 amounted to about $8,750,000, equal to about two-thirds of the insular treasury revenue (as distinguished from the municipal). The total Revenue and Expenditure in the fiscal year 1903 (from all sources, including municipal taxes expended in the respective localities, but exclusive of the Congressional Relief Fund) stood thus:—

In 1903, therefore, Government cost the inhabitants the equivalent of about 46 per cent, of the exports' value, against 45 per cent, in Spanish times, taking the relative averages of 1890–94. The present abnormal pecuniary embarrassment of the people is chiefly due to the causes already explained, and perhaps partly so to the fact that the ?30,000,000 to ?40,000,000 formerly in circulation had two to three times the local purchasing value that pesos have to-day.

The “Cooper Bill,” already referred to, authorizes the Insular Government to issue bonds for General Public Works up to a total of $5,000,000, for a term of 30 years, at 4½ per cent, interest per annum; and the municipalities to raise loans for municipal improvements up to a sum not exceeding 5 per cent. of the valuation of the real estate of the municipalities, at 5 per cent. interest per annum. For the purchase of the friars' lands a loan of $7,000,000 exists, bearing interest at 4 per cent. per annum, the possible interest liability on the total of these items amounting to about $2,000,000 per annum.

On November 15, 1901, the high Customs tariff then in force was reduced by about 25 per cent. on the total average, bringing the average duties to about 17 per cent. ad valorem, but this was again amended by the new tariff laws of May 3, 1905. Opium is still one of the imports, but under a recent law its introduction is to be gradually restricted by tariff until March 1, 1908, from which date it will be unlawful to import this drug, except by the Government for medicinal purposes only.

On August 1, 1904, a new scheme of additional taxation came into force under the “Internal Revenue Law of 1904.” This tax having been only partially imposed during the first six months, the full yield cannot yet be ascertained, but at the present rate(?5,280,970.96, partial yield for the fiscal year 1905) it will probably produce at the annual rate of $4,250,000 gold, which, however, is not entirely extra taxation, taking into account the old taxes repealed under Art. XVII., sec. 244. The theory of the new scheme was that it might permit of a lower Customs tariff schedule. The new taxes are imposed on distilled spirits, fermented liquors, manufactured tobacco, matches, banks and bankers, insurance companies, forestry products, valid mining concessions granted prior to April 11, 1899, business, manufactures, occupations, licences, and stamps on specified objects (Art. II., sec. 25). Of the taxes accruing to the Insular Treasury under the above law, 10 per cent. is set apart for the benefit of the several provincial governments, apportioned pro rata to their respective populations as shown by the census of 1903; 15 per cent. for the several municipal governments, provided that of this sum one-third shall be utilized solely for the maintenance of free public primary schools and expenditure appertaining thereto. In the aforesaid distribution Manila City ranks as a municipality and a province, and receives apportionment under this law on the basis of 25 per cent. (Art. XVII., sec. 150).

From the first announcement of the projected law up to its promulgation the public clamoured loudly against it. For months the public organs, issued in Spanish and dialect, persistently denounced it as a harbinger of ruin to the Colony. Chambers of Commerce, corporations and private firms, foreign and native, at meetings specially convened to discuss the new law, predicted a collapse of Philippine industry and commerce. At a public conference, held before the Civil Commission on June 24, 1904, it was stated that one distillery alone would have to pay a yearly tax of ?744,000, and that a certain cigar-factory would be required to pay annually ?557,425. Petitions against the coming law were sent by all the representative trading-bodies to the Insular Government praying for its withdrawal. When the Commissioners retired to their hill-station at BÁguio (Benguet) they were followed up by protests against the measure, but it became law under Philippine Commission Act No. 1189. Since the imposition of this tax there has been a general complaint throughout the civilized provinces of depression in the internal trade, but to what extent it is justified there is no available precise data on which to form an estimate.

As already stated, the American occupation brought about a rapid rise in the price of everything, not of necessity or in obedience to the law of supply and demand, but because it was the pleasure of the Americans voluntarily to enhance established values. To the surprise of the Filipinos, the new-comers preferred to pay wages at hitherto unheard-of rates, whilst the soldiers lavishly paid in gold for silver-peso value (say, at least, double), of their own volition—an innovation in which the obliging native complacently acquiesced, until it dawned upon him that he might demand anything he chose. The soldiers so frequently threw away copper coin given them in change as valueless, that many natives discontinued to offer it. It followed that everybody was reluctantly compelled to pay the higher price which the American spontaneously elected to give. Labour, food, house-rent, and all the necessaries of life rose enormously.3 The Colony soon became converted from a cheap into an expensive place of residence. Living there to-day costs at least three times what it did in Spanish times. Urban property and lands were assessed at values far beyond those at which the owners truly estimated them. Up to 1904 it was not at all uncommon to find the rent of a house raised to five times that of 1898. Retailers had to raise their prices; trading-firms were obliged to increase their clerks' emoluments, and in every direction revenue and expenditure thenceforth ranged on an enhanced scale. It is remarkable that, whilst pains were taken by the new-comers to force up prices, many of them were simultaneously complaining of expensive living! Governor W.H. Taft, with an annual emolument of $20,000 gold, declared before the United States Senate that the Gov.-General's palace at MalacaÑan was too expensive a place for him to reside in. The lighting of the establishment cost him $125 gold a month, and his servants' wages amounted to $250 monthly. He added that he would rather pay his own rent than meet the expenses of the MalacaÑan residence.4

Two and a half years later General Leonard Wood reported:

“There has been a great increase in the cost of living and in wages in this (Moro) as in other provinces—an increase which has not been accompanied either by improved methods or increased production. The cause of the increase can be traced, in most cases, to the foolishly high prices paid by army officials for labour.”5

Wages steadily advanced as a natural consequence of the higher cost of living, and, under the guidance of a native demagogue, the working classes, for the first time in Philippine history, collectively began to grumble at the idea of labour-pay having a limit. It was one of the abuses of that liberty of speech suddenly acquired under the new dominion. On February 2, 1902, this person organized the malcontents under the title of a “Labour Union,” of which he became the first president. The subscription was 20 cents of a peso per week. The legality of peacefully relinquishing work when the worker felt so inclined was not impugned; but when the strikers sought to coerce violently their fellow-men, the law justly interfered and imprisoned their leader. The presidency of the so-called “Labour Union” was thenceforth (September following) carried on by a half-caste, gifted with great power of organization and fluent oratory. He prepared the by-laws of the association, and fixed the monthly subscription at one peso per man and one peseta (one-fifth of a peso) per woman. About 100,000 members were enrolled in the union, the ostensible aim of which was the defence of the working man's interests. It is difficult to discern what those interests were which needed protection; the position of the labouring class was the very reverse of that existing in Europe; the demand for labourers, at any reasonable wage, exceeded the supply. The idea of a Filipino philanthropically devoting his life to the welfare of the masses was beyond the conception of all who understood the Philippine character. At the end of about eight months, notwithstanding the enormous assets from subscriptions, the “Labour Union” became insolvent, with a deficit of 1,000 or more pesos. Where the assets had gone needed investigation. In the meantime the leader, posing as mediator between the Insular Government and certain notorious outlaws, had endeavoured to negotiate with Governor W.H. Taft for their surrender, on the condition of full pardon. The Government, at length, becoming suspicious of his intentions and the full measure of his sympathy for these individuals, caused the leader to be arrested on May 29, 1903, on the allegations of “founding, directing, and presiding over an illegal association known as ‘The Democratic Labour Union,’” irregularities connected with the foundation and administration of the same, sedition, confederacy with brigands, and other minor counts.

It was clear to every thinking man, American or European, that the control of such a formidable body was a menace to peace. The accused was brought to trial on the chief allegations, and in September, 1903, he was sentenced to four years and two months' imprisonment, but appealed against the sentence to the Supreme Court. Later on he was tried on the other counts, and, although the public prosecution failed, it served the useful purpose of dissolving a league the scope of which was shrouded in obscurity, at a period when the political atmosphere was still clouded by aspirations of impossible and undesirable realization. I followed the course of the trial daily, and I interviewed the accused at his house a week before it ended. Three hundred documents were read at the trial, and 160 witnesses were brought against him. To endeavour to establish a case of conspiracy against him, another individual was produced as his colleague. The first accused was defended by an American advocate with such fervid eloquence, apparently inspired by earnest conviction of his client's innocence, that those who had to decide his fate acquitted him of the charge of conspiracy on May 11, 1904. The defendant's verbal explanation to me of the “Labour Union” led me to the conclusion that its abolition would benefit the community.

The abnormal rise in wages had the bad effect of inducing the natives to leave their pastoral pursuits to flock into the towns. The labour question is still a difficult problem, for it is the habit of the Filipino to discontinue work when he has a surplus in his pocket. Private employers complain of scarcity and the unreliability of the unskilled labourer. Undoubtedly the majority of them would welcome the return of Chinese coolies, whose entry into the Islands is prohibited by the Insular Government, in agreement with the desire of the Filipinos, who know full well that the industrious Chinaman would lower wages and force the Filipinos into activity for an existence.

Consul-General Wildman, of Hong-Kong, in his report for 1900 to the State Department, Washington, said: “There has been, during the past year, quite an investment of Hong-Kong capital in Manila; but it is the general opinion that no investment in mines or agriculture in the Islands will be of any great value until the introduction of Chinese labour is not only permitted but encouraged.”

Section IV. of the Chinese Exclusion Act of 1902 provides that every Chinese labourer rightfully in any insular territory of the United States (Hawaii excepted), at the time of the passage of this Act, shall obtain, within one year thereafter, a certificate of residence, and upon failure to obtain such certificate he shall be deported; and the Philippine Commission is authorized and required to make all regulations necessary for the enforcement of this section in the Philippine Islands. No restriction is placed upon their movement from one island to another of the Philippines, but they cannot go from the Philippines to America.

The regulations established by the Insular Government (Act of March 27, 1903) in conformity with the above-cited Act are as follows: The Chinese can leave the Islands and return thereto within a year. They must obtain a certificate of departure and be photographed. To re-enter the Islands they must procure a certificate of departure at the place of embarkation (usually China) for the Philippines. Thus, during the year ending June 30, 1902, 10,158 Chinese entered Manila, and 11,432 left it with return certificates. Chinese resident in the Islands must be registered. The first banishment for contravention of this regulation took place on January 6, 1905.

For a long time there was a big contraband business done in Chinese. A coolie would pay as much as 400 pesos premium to find himself where he could earn up to 100 pesos per month. The contraband agent in China was an ex-Custom-house officer. The Manila agent was in the Customs service, and the colleagues on the China side were high officials. When the conspiracy was discovered the agent in China came to Manila to answer the charge, and was at once arrested. A prosecution was entered upon; but after a protracted trial, the proceedings were quashed, for reasons which need not be discussed. The Exclusion Act is so rigidly upheld that in the case of a Chinese merchant who died in the Islands leaving a fortune of about 200,000 pesos, his (Chinese) executor was refused permission to reside temporarily in the Colony for the sole purpose of winding up the deceased's affairs.

The social position of the Chinese permitted to remain in the Islands has changed since the American advent. In former times, when the highest authorities frowned upon the Chinese community, it was necessary to propitiate them with bags of silver pesos. There was no Chinese consul in those days; but Chino CÁrlos Palanca was practically the protector and dictator of his countrymen during the last decade of Spanish rule, and, if a cloud descended upon them from high quarters, he used to pass the word round for a dollar levy to dissipate it. In February, 1900, Chino Palanca was made a mandarin of the first class, and when his spirit passed away to the abode of his ancestors his body was followed to interment by an immense sympathetic crowd of Celestials. This pompous funeral was one of the great social events of the year. Now there is a Chinese consul in Manila whose relations to his people are very different from those between Europeans and their consuls. The Chinese consul paternally tells his countrymen what they are to do, and they do it with filial submission. He has given them to understand that they occupy a higher position than that formerly accorded to the Chinese in this Colony (vide Chinese, Chapter viii).

On my first visit to Manila alter the American occupation I was struck to see Chinese in the streets wearing the pigtail down their backs, and dressed in nicely-cut semi-European patrol-jacket costumes of cloth or washing-stuffs, with straw or felt “trilby” hats. Now, too, they mix freely among the whites in public places with an air of social equality, and occupy stall seats in the theatre, which they would not have dared to enter in pre-American times. The Chinese Chamber of Commerce is also of recent foundation, and its status is so far recognized by the Americans that it was invited to express an opinion on the Internal Revenue Bill, already referred to, before it became law. The number of Chinese in the whole Archipelago is estimated at about 41,000. When an enterprising American introduced a large number of jinrikishas, intending to establish that well-known system of locomotion here, the Chinese Consulate very shortly put its veto on the employment of Chinese runners. The few natives who ran them became objects of ridicule. The first person who used a jinrikisha in Manila, with Chinese in livery, was a European consul. Other whites, unaccustomed to these vehicles, took to beating the runners—a thing never seen or heard of in Japan or in colonies where they are used in thousands. The natural result was that the 'rikisha man bolted and the 'rikisha tilted backwards, to the discomfort of the fool riding in it. The attempted innovation failed, and the vehicles were sent out of the Colony.

Apart from the labour question, if the Chinese were allowed a free entry they would perpetuate the smartest pure Oriental mixed class in the Islands. On the other hand, if their exclusion should remain in force beyond the present generation it will have a marked adverse effect on the activity of the people (vide pp. 182, 411).

At the period of the American occupation the Currency of the Islands was the Mexican and Spanish-Philippine peso, of a value constantly fluctuating between 49 and 37 cents. gold (vide table at p. 647). The shifty character of the silver basis created such an uncertainty in trade and investment transactions that the Government resolved to place the currency on a gold standard. Between January 1 and October 5, 1902, the Insular Treasury lost $956,750.37½ from the fall of silver. A difficulty to be confronted was the impossibility of ascertaining even the approximate total amount of silver current in the Islands. Opinions varied from ?30,000,000 upwards.6 Pending the solution of the money problem, ineffectual attempts were made to fix the relative values by the publication of an official ratio between gold dollar and silver peso once a quarter; but as it never agreed with the commercial quotation many days running, the announcement of the official ratio was altered to once in ten days. Seeing that ten days or more elapsed before the current ratio could be communicated to certain remote points, the complications in the official accounts were most embarrassing. Congress Act of July 1, 1902, authorized the coinage of subsidiary silver, but did not determine the unit of value or provide for the issue of either coin or paper money to take the place of the Mexican and Spanish-Philippine pesos in circulation, so that it was quite inoperative. Finally, Congress Act of March 2, 1903, provided that the new standard should be a peso equal in value to half a United States gold dollar. The maximum amount authorized to be coined was 75,000,000 silver pesos, each containing 416 grains of silver, nine-tenths fine. The peso was to be legal tender for all debts, public and private, in the Islands, and was to be issued when the Insular Government should have 500,000 pesos ready for circulation. The peso is officially alluded to as “Philippine currency,” whilst the popular term, “Conant,” derives its name from a gentleman, Mr. Charles Conant, in whose report, dated November 25, 1901, this coin was suggested. He visited the Islands, immortalized his name, and modestly retired.

The “Philippine currency,” or “peso Conant,” is guaranteed by the United States Treasury to be equal to 50 cents of a gold dollar. The six subsidiary coins are 50, 20, and 10 cents silver, 5 cents nickel, and 1 and ½ cent bronze, equivalent to a sterling value of one shilling to one farthing. This new coinage, designed by a Filipino, was issued to the public at the end of July, 1903. The inaugurating issue consisted of 17,881,650 silver pesos, in pesos and subsidiary coins, to be supplemented thereafter by the re-coinage of the Mexican and Philippine pesos as they found their way into the Treasury. For public convenience, silver certificates, or Treasury Notes, were issued, exchangeable for “Conant” silver pesos, to the extent of 6,000,000 pesos' worth in 10-peso notes; another 6,000,000 pesos in 5-peso notes, and 3,000,000 pesos in 2-peso notes, these last bearing a vignette of the Philippine patriot, the late Dr. JosÉ Rizal. On December 23, 1903, the Governor reported that “not till January 1, 1904, can the Mexican coin be demonetized and denied as legal tender value.” A proclamation, dated January 28, 1904, was issued by the Insular Treasury in Spanish and Tagalog to the effect (1) that after October 1, 1904, the Government would only accept Mexican or Philippine pesos at the value of their silver contents, and (2) that after December 31, 1904, a tax would be levied on all deposits made at the banks of the above-mentioned coinage. Notwithstanding the publication of numerous official circulars urging the use of the new peso, the Mexican and Spanish-Philippine dollars remained in free circulation during the first six months of 1904, although rent and certain other payments were reckoned in “Conant” and current accounts at banks were kept in the new currency, unless otherwise agreed. Naturally, as long as the seller was willing to accept Mexican for his goods, the buyer was only too pleased to pay in that medium, because if, for instance, he had to pay 10 Mexican dollars, and only had “Conant” in his pocket, he could call at any of the hundred exchange shops about town, change his 10 “Conant” into Mexican at a 5 to 20 per cent. premium, settle his bill, and reserve the premium. Almost any Far Eastern fractional coins served as subsidiary coins to the Mexican or Spanish-Philippine peso, and during nine or ten months there were no less than three currencies in use—namely, United States, Mexican (with Spanish-Philippine), and “Conant.” It was not practicable to deny a legal-tender value to so much Mexican, and Spanish-Philippine coin in circulation. The retailer was required to exhibit in his shop a card, supplied by the municipality, indicating the exchange-rate of the day, and declaring in Spanish, English, and TagÁlog as follows: “Our prices are in American currency. We accept Philippine currency at the rate of...”; but the reckoning in small-value transactions was so bewildering that, in practice, he would accept any coinage the purchaser chose to give him at face value. From August 1, 1904, when the “Internal Revenue Law” (vide p. 630) came into operation, merchants' and bankers' accounts and all large transactions were settled on the new-currency basis. Many retailers followed the lead, and the acceptance of the new medium thenceforth greatly increased. Still, for several months, provincial natives were loth to part with their old coin at a discount, or, as they plainly put it, lose 10 to 20 per cent. of their cash capital at a stroke. The Insular Treasurer therefore issued another circular in December, 1904, stating that whosoever engaged in business should make use of the old coinage in trade transactions after December 31, 1904, without special licence, would be condemned to pay not only that licence, but a heavy fine, or be sent to prison; and that all written agreements made after October, 1904, involving a payment in old currency, would pay a tax of 1 per cent. per month from the said date of December, 1904. Nevertheless, further pressure had to be exercised by the Civil Governor, who, in a circular dated January 7, 1905, stated that “it is hereby ordered that the Insular Treasurer and all provincial treasurers in the Philippine Islands shall, on and after this date and until February 1, 1905, purchase Spanish-Filipino currency, Mexican currency, Chinese subsidiary silver coins, and all foreign copper coins now circulating in the Philippine Islands at one peso, Philippine currency, for one peso and twenty centavos, local currency.”

As late as March, 1905, there was still a considerable amount of old coinage in private hands, but practically the new medium was definitely established. The total number of “Conant” pesos in circulation in the Islands, in the middle of May, 1905, was 29,715,720 (all minted in America), and “Conant” paper, ?10,150,000.

From the time of the American occupation up to May, 1902, the two foreign banks—the Hong-Kong and Shanghai Banking Corporation and the Chartered Bank of India, Australia, and China (vide Banks, p. 258)—were the only depositaries for the Insular Treasury, outside the Treasury itself. In the meantime, two important American banks established themselves in the Islands—namely, the “Guaranty Trust Company,” and the “International Banking Corporation.” On May 15, 1902, the “Guaranty Trust Company” was appointed a depositary for Philippine funds both in Manila and in the United States; and on June 21 following the “International Banking Corporation” was likewise appointed a depositary for the Insular Treasury, each being under a bond of $2,000,000. These two banks also act as fiscal agents to the United States in the Philippines.7

In 1904 the position of the “Banco EspaÑol-Filipino” (vide p. 258) was officially discussed. This bank, the oldest established in Manila, holds a charter from the Spanish Government, the validity of which was recognized. The Insular Government sought to reduce the amount of its paper currency, which was alleged to be three times the amount of its cash capital. Meanwhile, the notes in circulation, representing the old Philippine medium, ceased to be legal tender, and were exchanged for “Conant” peso-value notes at the current rate of exchange.

For a short period there existed an establishment entitled the “American Bank,” which did not prosper and was placed in liquidation on May 18, 1905, by order of the Gov.-General, pursuant to Philippine Commission Act No. 52 as amended by Act No. 556.

In February, 1909, the terms of Article 4 of the Treaty of Paris (vide p. 479) will lapse, leaving America a freer hand to determine the commercial future of the Philippines. It remains to be seen whether the “Philippines for the Filipinos” policy, promoted by the first Civil Governor, or the “Equal opportunities for all” doctrine, propounded by the first Gov.-General, will be the one then adopted by America. Present indications point to the former merging into the latter, almost of necessity, if it is desired to encourage American capitalists to invest in the Islands. The advocate of the former policy is the present responsible minister for Philippine affairs, whilst, on this work going to press, the propounder of the latter doctrine has been justly rewarded, for his honest efforts to govern well, with the appointment of first American Ambassador to Japan.