State and Finance in the Philippines, 1898–1941: The Mismanagement of an American Colony by Yoshiko Nagano (review)

Yoshiko Nagano has written a book that rigorously documents the emergence of the agricultural banking system in early–twentieth-century Philippines. In tracing the emergence of lending institutions, Nagano is able to locate the origins of many elite families, particularly the so-called sugar barons of Negros. The book is also notable for being the first to examine the banking crisis of the early 1920s using official reports from the US National Archives and Records Administration and the Library of Congress. Because of it, we are now aware of the various actors and positions of a financial elite that designed the colony’s currency system. Through this work Nagano, a professor of International Relations and Asian Studies at Kanagawa University, adds to her substantial contributions to research on the Philippine sugar industry, Negros Island, and Philippine economic history in general.

At its core, however, the book provides an explanation for the crisis triggered by what Nagano calls the “mismanagement” of the Philippine National Bank (PNB). The crux of the book’s argument is simple: Because the American colonial government in the Philippines “deviated from the fundamental principle of the gold exchange standard system, this policy eventually brought confusion to the currency and exchange in the Philippines, and evolved into the grave financial crisis of 1919–1921” (137). The analysis is ostensibly anti-imperial because Nagano blames American administrators from the Bureau of Insular Affairs (BIA) for letting the PNB collapse into financial insolvency when the bank lent agriculturists money from the gold fund currency reserves.

If Nagano’s analysis sounds familiar, it is because defending the stability of a gold standard has been a constant in the rhetoric of American conservatives from the nineteenth century until today: from William McKinley and Theodore Roosevelt to Alan Greenspan and Ron Paul. Nagano’s faith in a “stable” gold standard, ironically, places her in the same camp as the American nationalists and imperialists she deplores.

The book’s line of reasoning partially stems from its methodological focus. Throughout the book, Nagano analyzes the development of the Philippine banking system alongside those of other Southeast Asian countries like Thailand. In this regard, the “area studies” approach is both a strength and a weakness. On the one hand, it allows Nagano to explain certain oddities of the Philippine financial system that experts of “modern” banking may find puzzling. For example, she does a remarkable job of showing why the practice of using crops for loan collateral occurred in the Philippines through comparing its banking system with its similarly agricultural neighbors (114–15). On the other hand, the same approach can be a liability in analyzing the American-era Philippines because it neglects that the colony was, well, American. The Philippine economy served as a laboratory for American policy makers, whose ideas were forged in the context of American domestic politics. Any analysis of Philippine banking in the 1920s, therefore, must also be grounded in an intellectual history of American economics.

Consider ideas about gold. In American conservative thought, gold’s so-called stability turned it into a bulwark against the hordes of agrarian populists, who wished to erode the wealth of the metropolitan elite through inflation either through fiat money or silver (inflation reduced the purchasing power of those with capital, but ensured higher prices and therefore returns on agricultural goods). This populism began with the post–Civil War Greenback movement and was extended into the late nineteenth and early twentieth century by the supporters of the Democrat William Jennings Bryan, who made three failed bids for the presidency against McKinley and Roosevelt. Two of the most salient issues of his campaigns were the gold standard and the annexation of the Philippines, both of which Bryan opposed.

Nagano does not explain why the early Republican imperialist administrators of the Philippines were determined to impose a gold standard on the colony, despite...