796.001/2–1551

The Ambassador in the Philippines (Cowen) to the Department of State

secret
No. 1194

Ref. Embdes 1009, January 151 and Embdes 1057,1 January 24, 1951

Subject: Countermoves Against Philippine Communist Party

From recently captured Communist documents we have learned much about the intentions of the Philippine Communist Party (CPP). The capture of members of the Politburo Secretariat has put out of action what is undoubtedly one of the ablest revolutionists in the Philippines—José Lava.2 It is to be hoped that he will not be allowed to resume his activities. However, others will take his place—for the Party is constantly training new cadres and upgrading them to take the place of those who are eliminated. Potentially, the greatest importance of the raid resides in the fact that we have learned from captured documents much about the estimates and intentions of the CPP. If this potential value is to be realized, we must take countermeasures designed to correct weak points which the CPP planned to attack, and to thwart its plans by adequate countermeasures. Failure to do so would be inexcusable.

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In suggesting political and other measures which, in the light of the captured documents, we think should be given early attention, we do not wish to convey the impression that we would favor any delay in implementation of economic measures recommended in the Bell Report of October 9, 1950. We are convinced of the essential soundness of that Report. Economic measures resulting, for instance, in increased agricultural yields and improved farm income, will do much to relieve agrarian unrest. We also feel that the amount of $250,000,000 U.S. aid, recommended therein for extension over a period of five years, is a very modest one. (Incidentally, we would point out that certain of the figures of postwar aid which we have seen seem to us to have been arrived at on an unfair basis. The $520,000,000 program of aid authorized under the Philippine Rehabilitation Act was well-administered and from it the Philippines undoubtedly received great benefit; it should be recalled, however, that we had in public statements promised to make good in full the wartime losses of the Philippines and that the Rehabilitation program actually made good only a minor portion of those losses. In addition, we gave the Philippines comparatively modest amounts of military aid, an RFC loan of $60,000,000 and surplus property of high procurement cost but of uncertain peacetime value—which we did not want ourselves and in return for which we exacted certain valuable considerations from the Philippine Government. To convey the impression that we have given the Philippines billions of dollars worth of postwar aid accordingly is to give a false impression.)

The following are suggestions, chiefly political in character, evoked primarily from a study of Communist documents and secondarily by observations by Embassy officers of trends in the Philippines within the past few months. They have been shown to the responsible ECA official in Manila, who agrees with them.

I. Honest and peaceful holding of November 1951 elections.

We should (as soon as the Department may express its concurrence) begin exerting our influence to ensure that the November 1951 elections not only are held, but are held under conditions characterized by an absence of force and fraud.

The following are related considerations: It will be difficult to have honest, peaceful elections unless both parties reach agreement upon a program designed to make them so. Quirino personally was responsible for some of the malfeasance in the last elections; unless convinced of his willingness to behave properly, opposition groups will be likely to seize the initiative and engage in skulduggery in areas where they are strong on the principle that to be deceived once is innocence but to be deceived twice, without paying the enemy back in kind, is stupidity. Perhaps the rival parties could be persuaded to come to agreement if it were pointed out: (a) to Quirino that election of his senatorial slate last time did not ensure to him control of the [Page 1507] candidates once they were elected—witness his troubles with Senators Cabili, Montano, et al; (b) to the opposition that honest, peaceful elections are to their benefit because the Administration could outdo them in the use of force or fraud; (c) to both sides that it is only the Communists who would gain by unfairly-held elections—or by failure to hold them at all (as noted in our despatch 1009, January 15, 1951, the Politiburo Secretariat apparently believed that a mass shift of public opinion in favor of overthrow of the Government by Communist armed force may follow if the elections are not held or, if held, are accompanied by fraud and terror).

We must be careful not to involve Magsaysay in this matter until necessary. However, the Army may need to guard the polling booths in the provinces; if both sides are agreed that it is to do so, and are willing to trust Magsaysay, he can do much to ensure honest, peaceful elections. Conversely, honest elections will be difficult in provinces and areas where temporary police are utilized. Quirino has been quoted as saying he has ordered their disbandment. Such orders should be formalized in an Executive Order and implemented within the next very few months.

II. The Philippine Government should insofar as possible be influenced to follow more enlightened policies.

The weakness in our position here is that we no longer have authority. This leaves us only influence, of which we must make best possible use. ECA technicians can accomplish some of the needed redirection of Philippine Government policies. We should keep in close touch with key ECA men with this in mind. If we are stuck with Quirino, we shall have to redouble our efforts to head off some of his blunders and to get him to correct the worse ones. We know of no Filipino official of Cabinet rank who could serve at his elbow as a “no-man” except Romulo.* We think it would be better to have Romulo here in the Philippines rather than in New York or Washington—granting Romulo’s overweening ambition and a certain undependability, he at least has a good brain.

III. Land redistribution.

The Communist plan is to seize landlord-owned land, redistribute it to poor peasants (who thus automatically are placed outside the law), and arm those peasants. We must anticipate them with a program sufficiently prompt, generous and dramatic to cut the ground from under their feet and gain for our side the positive support of the peasantry. This will cost money—but so does arms aid, and it could create goodwill whereas almost everybody who gets killed or wounded by our arms has relatives and friends who may turn Huk, creating need for more arms aid. Money to finance the program should be available from ECA counterpart funds. A fast-moving program will be imperfect and will arouse cries of “me too” from those left out. We could put the onus on the people in each area themselves—using committees of tenants on the various estates to help in redistributing the land.

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IV. Land reclamation.

If the draining of the Candaba swamp is feasible it should be done and the land distributed to landless peasants. This would be a dramatic program with high propaganda value, which is an important factor. (We want to benefit the economy and get the propaganda-credit for doing so—we could pump in a lot of money without gaining much of the mass support if few individuals can see what they personally have gained.) If we drained Candaba swamp and gave the land to landless peasants, the Government might even dare form local self-defense corps among the peasants, to hold their area against Huks seeking to conscript the grain crops.

V. Labor problems.

According to a captured document the Philippine Communist Party, which in the past devoted a large share of its efforts to overt and semi-overt trade union activity, now intends to concentrate on the organization of secret cells in public utilities and other strategic enterprises. Communist success in organizing such cells and preparing them for action, coupled with substantial extension of the Huk rebellion in the countryside, would present an acute threat to the Philippine Government. It accordingly behooves us to diagnose and attempt to remove or minimize the factors which would facilitate Communist organization of Philippine labor.

These factors include: (1) payment of substandard wages; (2) the racketeering character of many so-called trade union leaders; (3) the ignorance of Philippine workers; (4) inadequacy of present labor legislation; and (5) lack of proper enforcement of existing laws. These unfavorable factors and steps which might be taken to deal with them are set forth in the pertinent sections of the Bell Report. One measure recommended in that Report is the passage of suitable minimum wage legislation; ECA has been addressing itself to the problem of pushing such legislation through the Congress and thereafter should concern itself with the more difficult and important problem of its observance and enforcement. Another key measure is the development of sound Filipino labor union leaders, who should in turn devote attention to the education in labor union practices of the rank and file. The Bell Report recommends that the representatives of three American labor organizations come to the Philippines to develop Filipino union leaders. This recommendation is an extremely important one and should be implemented; if, for some reason, such representatives cannot come to carry out the task, consideration should be given to the possibility of doing the job through technical assistants supplied by ECA.

VI. Reforms of principally financial character.

It seems apparent from the captured documents that the Communists realize that the deterioration in Philippine economic conditions is of very great help to them. Some of the financial measures necessary to halt and reverse that deterioration are outlined below:

(1) Inflation must be brought to a halt or, at least, sharply reduced. Rapidly rising prices are one of the most potent forces creating discontent and thereby providing a fertile field for Communist [Page 1509] propaganda. Direct attacks must be made upon the two factors which are, at present, most responsible for inflation in the Philippines. First, the federal budgetary deficit must be eliminated or sharply reduced, particularly in view of the fact that there is virtually no public market for federal securities and virtually all practical means of financing budgetary deficits in the Philippines involve creation, through the banking system, of additional money in circulation. Secondly, steps should be taken to prevent further large increases in the gold and foreign exchange reserves of the Central Bank and commercial banks; during 1950, such increases (about $106 million) involved an expansion of the money supply by about 212 million pesos, while reflecting an excessive curtailment of imported goods which might otherwise have served to counteract inflationary pressures.

(2) Import and exchange controls should be eliminated or greatly relaxed as fast as practicable. Controls are distorting and injuring the national economy, enriching corrupt officials and alienating the people. The Philippines lacks sufficient honest and technically-qualified men to run a complex set of controls and such controls are, in any case, dangerous governmental instruments inasmuch as they inevitably vest government officials with vast discretionary authority to favor the growth of individual industries or firms (importing industries and firms, directly, and virtually all others, indirectly) at the expense of others and on the basis of questionable criteria such as “essentials versus luxuries,” “public welfare versus profit-making,” etc.… A genuinely democratic society must rely to a maximum upon the free operations of the price mechanism, whereas the essential element of exchange controls, and particularly import controls, is reliance upon governmental discretion. Such governmental discretion feeds upon itself and is likely, sooner or later, to lead to totalitarianism.

Unfortunately, complete elimination of import and exchange controls does not appear possible at this time inasmuch as such action would unquestionably involve a rapid exhaustion of Philippine gold and foreign exchange reserves as a consequence of (a) capital flight, prompted in part by war fears, and (b) excessive imports, prompted in part by speculation based on fears of war, scarcities in the U.S., etc.… and in part by the unrealistic exchange rate.

The proposed legislation now before the Philippine Congress calling for a 25 per cent tax on sales of foreign exchange would undoubtedly, however, do much to ease the pressure on the country’s gold and foreign exchange resources by bringing the effective selling rate for foreign exchange more closely into harmony with Philippine and U.S. prices, while increasing tax revenues and thereby reducing inflationary pressures. In addition, the bill, now passed by both Houses, which provides for increased excise taxes on pertain luxury items should reduce or eliminate the need to limit luxury imports by direct controls. If the gold and foreign exchange resources of the Philippines continue to rise as a result of these measures and, possibly, U.S. supply scarcities or export controls, it may prove possible, in the very near future, to press for considerable relaxation or even elimination of import controls.

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On the other hand, it may prove impossible to take such steps if inflation persists in the Philippines at a rate more rapid than in the United States.

(3) A thorough reform of the income tax enforcement machinery so as to capture the actual tax liabilities of the wealthy Filipinos is essential. This would accomplish many important objectives among which may be included the following: (a) increasing tax revenues, possibly by more than enough to avoid deficit spending, (b) reducing the need for reliance upon various types of unit taxation, including the proposed tax on sales of foreign exchange, and (c) weakening the grip of the landlord-official class upon the Philippines.

(4) Technical assistants in various fields provided by the U.S. Government, besides seeing that funds provided by the United States Government in support of Philippine economic development are used as effectively as possible, and, in addition to establishing procedures to reduce the inefficiency of government, should also devote themselves to reducing the opportunities for, and the practice of, corruption in the Philippine Government.

VII. Military and quasi-military suggestions.

(1) The Communists won in China for many reasons, one of which is that their propaganda and infiltration had drained the Government armies of all will to fight. They intend to carry on such activities here. JUSMAG, with the help of more specialists like Col. Lansdale, should be encouraged to prepare a plan to safeguard the Philippine Armed Forces against the Communists’ propaganda and infiltration. Perhaps this would take the form of special U.S. assistance in building up their intelligence and counter-intelligence work.

(2) JUSMAG should cause the PAF to put great stress on catching Huk “expansionista” units and to wipe out Huks in newly-infected areas before they get the local populace indoctrinated and organized.

(3) A continuing defect of Government military operations, according to reliable observers with whom we have very recently talked, is disinclination to come into close combat with the Huks. A few Government commanders show a desire to fix and annihilate Huk bands, but many more are inclined to disregard opportunities to do so. Too generally, they do no more than exchange fire with them at a distance until the Huks withdraw. The problem is not simple of solution, but JUSMAG should be encouraged—if it is not already doing so—to check upon unit commanders and to push the promotion to positions of command responsibility of officers showing readiness for combat. It seems to us that the necessary information with respect to various officers can best be obtained by the assignment of substantial numbers of American officers to duty as field observers.

(4) In Iloilo the Government has made the mistake of clearing thousands of people out of interior and mountainous barrios and keeping them in town for long periods; we are informed by responsible observers that this is alienating the local people. The idea was that anybody found in the cleared area could then be treated as a Huk. However, the Huks moved over to Antique, the evacuated citizenry lived under conditions of crowding and hunger such that they became [Page 1511] disgusted with the Government, and numbers of them decided they would rather take the chance that they would be shot in the hills. Such evacuations should be strictly limited as to time. JUSMAG might be able to prevent this sort of thing being carried too far, as it was in Iloilo, and doubtless elsewhere as well.

(5) A program we should be able to carry out with Philippine Government blessing would be an “operation blotter” designed to acquire loose arms and thus keep them from being used in the expansion of Huk forces. There are several caches of arms and ammo left over from surplus depots—if we do not buy them the Communists will do so as fast as they can raise the necessary money. Perhaps this program should be paralleled by one for strict accountability of Government Armed Forces weapons—lest we end up buying and rebuying the same weapons. The Department might be queried whether MDAP or other funds could be used in such a program.

VIII. Use of mass media.

The Communists propose to organize the masses to overthrow the Government. Ideally, the Government should organize the people to freeze out the Communists. This would require a shift in mental attitudes and a cutting-away of the power of the landlord-official class which is badly needed in the Philippines but which would be very difficult of accomplishment. Perhaps the best we can hope for is to push through sufficient reforms to make the majority acquiescent and a substantial minority willing actively to fight for its Government.

However, we should not lose sight of the fact that the Philippine Government and the United States need all the mass support in this country which we can win. There are some things the U.S. is free to do in the Philippines which have the merit of seeking to influence the masses in favor of our way of life. Using USIS, we might, for instance, help finance and influence the content of the adult-education program, supervised by the schoolteachers in their spare time. Much as Dr. James Yen taught Chinese coolie-soldiers to read 1000 characters, we could prepare simple vocabularies with picture illustrations and lessons using those vocabularies. Some lessons might convey practical information (along the lines of the USIS self-help pamphlets, such as “Botyok and His Chicken House” which describes how a peasant built a hen-house of local materials with resulting increase in his output of eggs); these would win the peasants’ goodwill. Other chapters might consist of simple, true lessons on democracy, liberty, independence, and equality. The printed page carries great conviction to a man when he first learns to read.

We might also distribute cheap radio sets tuned for only one wave length and then see that really enjoyable programs are broadcast on that wave length—mostly music and a little news, straight but well selected. (We should not talk our heads off—nobody will listen, and besides we are not selling soap or cigarettes.)

If we are going to train Filipinos under the ECA program, we should let them know why we are training them. The Communists in their training schools teach (1) a technique; and (2) Communism. We should not try to teach anti-Communism but rather Democracy—let our trainees know we are trying to help the Philippines make its [Page 1512] independence and democracy stick in the face of a new international imperialism and old domestic undemocratic attitudes.

Action requested: It would be appreciated if the Department would in consultation as desirable with other agencies of the Government, reach decision with respect to the suggestions outlined above and issue appropriate instructions.

Myron M. Cowen
  1. Not printed.
  2. Not printed.
  3. Believed by the Embassy to have been head of the Secretariat of the CPP at the time of his arrest.
  4. Magsaysay is an able and strong Cabinet officer but due to several circumstances, including his necessarily frequent absences from Manila, he cannot readily perform this function. [Footnote in the source text.]