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Mexico - A neoliberal experiment Introduction Neoliberalism is the dominant economic, social and political model of our time
- the latest phase of capitalism. In the neoliberal era, western-style representative
governments have largely abandoned their (at least theoretical) roles as representatives
of and mediators among a range of social actors. Joachim Hirsch refers to the
"national competitive state" in which government represents the interests
of capital at the expense of popular sectors of society. The role of the state
is limited to administering poverty and managing social discord so that neither
interferes with corporate profits. Disputed social territory - including personal
security, public education, social security, public health programs, environmental
protection, labor rights, etc. - is increasingly left to "market mechanisms,"
as the state abandons its role, however marginal that role may be historically,
as benefactor (promoter of social programs) and protector of those sectors ravaged
by market mechanisms (the homeless, the poor and the unemployed, to name but
a few). Neoliberalism is characterized by easy movement of money and goods across
borders, but strict control of people (or "labor markets" in the logic
of capitalism). The South provides cheap labor, cheap commodities and, increasingly,
cheap industrial products for consumers in Europe and North America. Neoliberalism finds its roots in the so-called Washington consensus, which
is nothing more than a class consensus that extends across borders. Conniving
governments from the South are often representative democracies, but only in
the formal sense of a democracy that can be purchased by local elites and "democracy-building"
programs sponsored by the Agency for International Development (note the 2001
elections in Nicaragua as a recent example of this particular distortion of
democracy). The governments are in deed representative. The problem is who they
represent! Democracy is a principle worth defending and, in fact, worth dieing
for. But the "democracy" that is integral to the Washington consensus
has very little to do with civil society ordering the affairs of a nation, and
everything to do with control of key economic and political decisions by local
elites. There are no better examples than the United States and Mexico. In the
current constellation of forces, neither president (George W. Bush to the north
and Vicente Fox to the south) even won a majority of the vote in their respective
elections - not that voting has a whole lot to do with democracy when nearly
unlimited money can build a surrealistic view of the most important political
issues of the day that often bares little resemblance to reality. In the final
analysis, Enron and the oil barons own George Bush, the Monterrey Group owns
Vicente Fox, and the rest of us are left with precious little to say about the
important affairs of our countries. While military power is occasionally (and from recent experience, increasingly)
necessary to maintain the Washington consensus, economic power exercises day-to-day
control. Corporate-centered globalization, the every day operational face of
the neoliberal model, is impressive in its reach and level of absolute greed.
The neoliberal model has been predominant in this hemisphere for a quarter century
(depending on the country in question) and there is sufficient data available
for an even-handed evaluation. Though the elites throughout the hemisphere exercise their influence through
the mainstream media to obscure reality with platitudes and slogans in an effort
to convince the masses that the neoliberal model is the ONLY and BEST model,
the facts speak eloquently. In the 1970's, countries in this hemisphere averaged
4.5% growth in cumulative gross national product. In the 1980's, average growth
declined to 3.5%, and in the 1990's average growth declined to 2.5%. (Gross
National Product is, at best, an imperfect indicator of improving standards
of living - for example, the environmental disaster caused by the grounding
of the Exxon Valdez in Alaskan waters added to the GNP of the US for several
years because the cleanup generated economic activity. And with increasing concentrations
of wealth in the hands of a small elite, growth in GNP correlates even less
with the economic well-being of the masses. But as a general marker it gives
us an idea of where we're headed. And even by neoliberal standards, we appear
to be headed in the wrong direction!) So why is there a Washington consensus if economic growth is actually slowing?
The key element here is the understanding of the Washington consensus as a class
consensus across borders. While most of us are treading water or getting progressively
poorer, the neoliberal model has resulted in an historically unparalleled concentration
of wealth and power in the hands of transnational corporations, their shareholders,
and the political and technical elites who oversee the system. The US working class fares better, but not by much. Between 1970 and 1992,
real wages in the US decreased by 19%, even in the midst of what most mainstream
economists would consider a period of prosperity. And the poorest half of the
population continues to lose ground. On the other end of the champagne glass (to borrow a common metaphor that portrays
the wealthy at the top enjoying oodles of bubbly while the poor share the dregs
in the confined neck at the bottom), the rich are doing quite well under the
neoliberal model, thank you. In 1997, the richest one-fifth of the world's population
owned an astounding 85% of the world's wealth, though this compares favorably
with the United States where the wealth of the top 1% of households now exceeds
the combined household financial wealth of the bottom 95%. The absolute concentration
of wealth and power at the top is unparalleled. The rich are getting richer,
the poor are getting poorer, and the illusionary "middle class" is
rapidly disappearing. The rich constructed the Washington consensus. The poor
majorities are left only with the consensus that neoliberal "adjustments"
are always accompanied by "pain," and are nearing a consensus that
the pain will be permanent, rather than temporary as neoliberal defenders always
promise. Perhaps we should be asking ourselves, first, why do these wonderful
programs always involve adjustment pains, and second, why are we always the
ones who suffer these pains? The United States and Mexico have been central to the development of the neoliberal
model. We share a 2,000 mile border, the only place in the world where the Global
North meets the South. The US-Mexico border is unique, and the relationship
between the two nations is equally unique. In many ways, this geographic marriage represents the most important relationship
in the world - a laboratory that is defining the neoliberal model. Three historical
markers stand out as central to the development of neoliberalism: the establishment
of free trade zones and maquiladoras in 1965, Structural Adjustment Programs
initiated by the International Monetary Fund in 1982, and the signing of the
North America Free Trade Agreement in 1994. The US-Mexico relationship has been the proving ground for the practical realities of the Washington consensus: production-for-export replacing production for internal consumption, the use of debt as a lever to force structural adjustment programs, loose investment rules that allow hot money to cross borders in seconds, and a trade agreement (read NAFTA) that is the model for a new legal framework that expands the rights of corporations at the expense of civil society. Experiments that "work," from the perspective of transnational capital (and all of the above-mentioned experiments "worked") are exported to other countries. This implies a complete restructuring of the economies, politics and cultures around the world, to make them consistent with the neoliberal vision. Nearly everything is on the table for reform: economic policy, public subsidies, social programs, industrial policy, government procurement, intellectual property rights, patents, banking and financial services, agricultural policy, foreign direct investment, energy policy, labor regulations, environmental protection, public education and health care - and the list goes on. Twenty-first century neoliberalism is a project for world domination, and the US and Mexico are at the center of the vortex. 1965 - Free Trade Zones and Maquiladoras While most observers mark the early 1980s and the Latin American debt crisis
as the beginning of neoliberalism, the seeds were firmly planted in 1965 with
the establishment of free trade zones and maquiladoras (factories that produce
for export) under the Border Industrialization Program (BIP). The BIP represented
an important change in the relationship between labor markets and production,
moving factories to the source of labor rather than the other way around. Initiated
at the end of the Bracero Program (in which Mexico sent cheap labor northward,
mainly to harvest fruits and vegetables, under short-term contracts), Mexican
politicians hoped the BIP would provide jobs for former Braceros, though ultimately
the program, in combination with other neoliberal policies, actually increased
immigration from Mexico to the United States, especially undocumented workers.
Foreign production for the United States market certainly existed before 1965,
but growth after 1965 was staggering. Total US imports grew from $18.7 billion
in 1964 to $1.17 trillion in 2002. In constant 2002 dollars, this represents
more than a ten-fold increase. Today about one-third of everything produced
in Mexico is exported (an amazing statistic, the implications of which take
a moment to fully sink in). Given Mexico's decreasing real wage rates (and decreasing
living standards), this means that Mexico's working class is fighting a losing
battle, each year paying relatively more, measured in hours worked, for imported
goods while selling relatively less in exports. From the perspective of a traditional capitalist model of development, the
BIP marked a clear step backward in the industrialization of Mexico. Production
for internal consumption, also known as import substitution, was Mexico's predominant
economic model from the 1940s to the mid 1960s, and relied heavily on industrialization
led by state intervention. The import substitution model protected strategic
industries with tariffs, and required increasing levels of technology and concomitant
increasing levels of education among workers. In contrast, the production-for-export model, of which maquiladoras are the
centerpiece, rely on cheap labor and low technologies, and the vast majority
of production is exported. It is a model the United States itself pointedly
avoided in its own process of industrialization. While there are a number of
reasons behind the rapid and successful industrialization of the United States,
trade policy has to be considered among the most important. For the better part
of two centuries, US trade policy was characterized by high tariffs and other
measures that protected young industries from international competition. Since
the mid 1960's, the US has taken exactly the opposite position with non-industrialized
nations in the South. Rather than encouraging protective trade policies like
those that assisted US industry, the new neoliberal mentality calls for open
borders and free flows of goods, services and finance. Neoliberal economists
are bothered tremendously by anything that gets in the way of the pure functioning
of open markets - like the annoying needs of real people in their day-to-day
lives. If it weren't for those bothersome people, especially the poor masses
with their constant demands for food, housing, education and health care, the
neoliberal model could work with scientific precision. That's what the textbooks
say! But the real world tells a different story. The results of neoliberalism
have been devastating for the poor majorities and working classes in the Mexico
and as well as the United States. Maquiladoras are at the heart of this new model, marking an important political
change in Mexico from production for internal consumption to production for
export. Maquiladoras often consist of not much more than four walls, a roof,
some benches and a few simple tools, hardly the basis for spurring the industrialization
of the country as proponents claim. About 98% of the inputs used in maquila
production are imported from outside of Mexico. Increasingly these imports come
from Southeast Asia, particularly China, where the lowest industrial wages in
the world are found. Virtually 100% of maquila production is exported from Mexico,
with about 90% destined for the United States. This part of the economic model
is enshrined in law, as maquiladoras are prohibited from selling their production
in-country. Northern consumers won't have to look far to find maquila-produced
goods, from television sets to refrigerators, automobiles to furniture, and
textiles to electronic equipment. The maquiladora model relies on low wages, lax environmental standards, and
an "inviting" tax structure, characteristics that are attractive to
transnational corporations but ultimately damaging to the majority of Mexicans. Low wages are key to the "success" of the maquila model. Industrial
wages in the US average about $17 per hour, while in 2004, the minimum wage
in Mexico is about US$3.96, at current exchange rates, for an eight-hour day.
Maquiladoras typically pay some small multiple of the minimum. Some 60% of the
Mexican workforce has yearly earnings below the poverty level, defined by the
Mexican government as income of less than US$1.90 per day per person in urban
areas and US$1.50 per day in the countryside. A family of five would require
income equivalent to about three minimum wages, after taxes, to escape the official
poverty level (and substantially more to live dignified lives!). Mexico's maquiladora sector suffered dramatic declines from its peak in 2000
(3,703 maquilas) to 3,230 maquilas in July 2003. Job losses totaled about 280,000,
a 21% decline, during this period. Total Foreign Direct Investment (FDI) in
the maquila sector declined by about one-third from 2000 to 2003. Declines in
employment were most severe in electronics assembly, footwear, textiles and
clothing. More sophisticated activities, such as auto parts, remained largely
stable, mainly because of the more extensive investment in infrastructure and
the need for highly trained workers in this sector. Lax environmental regulations attract foreign firms that are tired of seeing
their bottom lines affected by bothersome environmental regulations in their
home countries. It's part of the eternal struggle of the capitalist to externalize
costs and maximize profits. Water, soil and air contamination are often bi-products
of industrial production, and in a sane society, the polluter would be responsible
for cleanup, with the costs reflected in the price of finished products. But
capitalists are always looking for ways to cut corners and force society to
pay for some of the costs of production. In maquiladoras along the US-Mexico
border, pollution is an endemic problem, as local officials collude with transnational
corporations to increase profits (no doubt lining a few political pockets along
the way) while environmental quality suffers. Both low wages and environmental destruction result in social problems. Low
wages force workers to choose among various necessities - food, housing, education,
health care, transportation. Degradation of the environment affects entire communities,
and is especially serious along the border where clean water supplies are limited.
With all of these problems, government offers the solution of last resort. But
maquiladoras pay almost no taxes. Transnational corporations often pit local
and state governments against each other in bidding wars to see who will offer
the largest tax breaks. In an effort to attract more foreign investment in the
maquiladora sector, the Fox administration will phase out payroll taxes in 2004
and most maquiladoras will be exempt from income tax. Without tax income, the
state is unable to address the social problems caused by low wages and environmental
degradation. Corporations get rich while the communities that host maquilas
are degraded - socially, culturally, economically and environmentally. Members of the ruling class often make the argument that maquiladoras provide
jobs, as if a job is a privilege and working people should be thankful for the
opportunity to sell themselves for poverty-level wages. The argument is comparable
to forcing someone into the desert for three days without water, then wondering
why they complain when offered a glass of ice-cold vinegar. The pertinent question
is not "Why aren't they thankful for something to drink?" but rather
"What are they doing in the desert and where's the water?" In relation
to jobs, the pertinent question is not "Why aren't they happy to have jobs?"
but rather "Why are these the only jobs available?" and "What
are the policies that created this situation in the first place?" Unemployment and poverty have both increased in Mexico since the late 1960s, and working class wages in the US have been stagnant or falling - even in the midst of the 1990's "economic boom." The neoliberal model leaves most people poorer, and creates a "race to the bottom" as workers and local governments are forced to compete by offering lower wages, lax environmental standards and low taxes. Early 1980s - Structural Adjustment Programs In many ways this was a godsend for the International Monetary Fund (IMF).
The IMF was founded in 1944, along with the World Bank, at a conference of over
40 countries, most of them aligned with the soon-to-be-victorious "Allies"
in World War II. The goal was to prevent another economic cataclysm like the
Great Depression of the 1930s, which was widely blamed for fuelling the rise
of fascism in Europe. The IMF's original task was to monitor currency values
and help member countries maintain their balance of trade by making small short-term
loans. This role became obsolete in 1973 when the U.S. ended the "dollar-gold"
standard (in which it guaranteed to redeem $35 with an ounce of gold, and all
other currencies were pegged to the dollar). While nominally a special organ of the United Nations, functionally the IMF
is controlled by a few capital-exporting countries, with the United States taking
the leading role. Votes on the governing board are determined neither by population
nor by one-country-one-vote, but rather by the monetary contribution each country
makes to the institution. The United States controls about 18% of the votes
(double the power of the next-largest contributor, Japan) and wields effective
veto power over all IMF decisions. In effect, the US Treasury Department sets
IMF policy. The IMF foundered in the mid-1970s, performing an annual analysis of each member
country's economy, but doing little else. It carved out a new role for itself
with the advent of the Latin American debt crisis in the early 1980s. When Mexico
came close to defaulting on debt payments, the IMF answered the panicked calls
of large private banks and wealthy member governments by assembling a "rescue"
package of loans accompanied by a large number of conditions (called "conditionalities"
or Structural Adjustment Programs (SAPs) in IMF parlance), ostensibly to prevent
future debt problems and to restore the Mexican economy to health. These conditions
included measures to open the economy to foreign corporations, eliminate trade
barriers, restrict access to credit, and cut social spending. Although Mexico
was not the first country to receive an IMF "policy-based loan," it
was here that the IMF first imposed a comprehensive macroeconomic program via
structural adjustment. Mexico's loans became the standard for SAPs that the IMF went on to impose
in over 80 countries during the 1980s and 1990s. The psychological barrier that
prevented the IMF from assuming virtual control of a country's economic policy
was broken in Mexico. Full-scale threats to the global economy, such as the
Latin American debt crisis, were no longer required for the IMF to use the leverage
of debt problems to re-order national economic policy. As the march of structural
adjustment continued across Latin America, the Caribbean, Africa, and much of
Asia, economic policy began to assume a homogenous character throughout the
South. No longer were experiments with "socialism" or "import
substitution" tolerated. Free trade, privatization, low-wage labor in assembly
factories, and export-led economies - in other words, neoliberal policies -
became the global rule. Today Mexico exports fully one-third of everything produced within the borders of the country. Almost 90% of these exports are destined for the United States. The maquiladora sector represents an important part of these exports, but the majority of the exports (and this is true for Latin America as a whole) are raw materials. In the case of Mexico, oil is king, with minerals and "designer vegetables" (broccoli, cauliflower, asparagus, etc.) also important. Water and hydroelectric power from southern Mexico may prove to be the most important exports of the 21st century (see President Fox's Plan Puebla Panama for examples of this). Cheap labor in the form of undocumented workers is also a key "export." Family remittances from migrant workers represent Mexico's second most important source of hard currency, reaching about US$12 billion in 2003 and expected to reach a whopping US$17 billion in 2004. We will see later how neoliberal policies affect labor markets. 1994 - NAFTA · NAFTA provides for the strongest intellectual property rights (patents,
copyrights, and trademarks) in any bilateral or international agreement. This
is particularly favorable for US-based high tech, pharmaceutical and entertainment
companies. · NAFTA prevents governments at all levels from giving preference to procurement from local suppliers or promoting local-content provisions. · NAFTA provides for expedited travel visas for businesspersons wishing to travel between the US and Mexico, but makes no provisions for working class people wishing to travel. · NAFTA eliminates equity and market share restrictions for financial services such as insurance, banking and securities. · Under Chapter 11 provisions, NAFTA permits investors to sue host governments before secret panels made up of trade experts, who are prohibited from considering national laws or traditions in forming their decisions. Deliberations are carried out in secret and civil society is prohibited from presenting testimony. · In preparation for signing NAFTA, the US insisted on over 300 changes in Mexico's constitution and legal structure. Perhaps the most significant was the reform of Article 27 of the constitution, ending land distribution to campesinos under the ejido program. After a decade of NAFTA, the results are obvious - corporations have benefited
handsomely while the working class on both sides of the border suffers declining
living standards. NAFTA has been nothing short of a disaster, yet it is proudly
trumpeted by the ruling class as the blueprint for the Free Trade Area of the
Americas, a proposed trade agreement that would include every nation in the
hemisphere except Cuba. Neoliberal proponents promised that NAFTA would increase trade between the
United States and Mexico and would increase foreign investment in Mexico, and
this has generally been the case, though with significant deviations dependent
largely on business cycles. Net US investment was a negative US$41 billion in
1995 (largely a result of capital flight due to the peso crisis) but the roller
coaster turned positive in 1997 and topped out in 2000 at a whopping US$162
billion (much of this due to the purchase of Banamex by Citigroup), only to
fall into negative territory again in 2002. Exports to the US increased from
US$49.4 billion in 1994 to US$161 billion in 2002. Employment in the maquiladora
sector increased from 546,433 in 1994 to 1,291,232 in 2000 (though this number
has decreased to near one million since the 2001 recession). But numbers don't
tell the whole story. Increasing exports can be good, bad or neutral, depending
on the impact on living standards in both countries. Net foreign investment
can be good, but it can also increase dollar-denominated debt, forcing nations
into a perpetual debt treadmill, and short-term "hot money" investments
often do more harm than good. Increases in maquiladora employment must be evaluated
by the quality of jobs and the impact on the rest of the economy. A closer look
reveals substantial negatives on both sides of the border. In 2003, Mexico's foreign debt was a whopping US$140 billion, equivalent to
21.6% of total GNP, and interest payments alone amounted to US$37 billion annually.
All of this debt is dollar-denominated, putting Mexico on a path of continually
increasing exports (with secularly decreasing values) just to service the debt. Foreign investment demands legal structures that insure the "rights"
of investors, and increasingly these structures are transnational, taking the
form of international trade agreements rather than national laws. From the perspective
of capital, international agreements offer several advantages. First, they are
uniform. Corporate legal experts can deal with one-size-fits-all regulations
rather than dealing with a myriad of local and regional regulations designed
to meet local and regional needs. Second, capital exercises powerful influence
over the design of international regulations (more on this in a moment). Third,
international agreements are generally beyond the reach of civil society. For
example, NAFTA supersedes national laws, and disputes are settled in secret
tribunals. NAFTA and other international agreements even exert influence over
local legislation. When NAFTA tribunals rule against, for example, environmental
regulations, they set a precedent that local legislators are bound to follow.
Fourth, since international agreements are generally negotiated with the full
approval of the United States government, their ultimate enforcement lies with
the diplomatic and, if necessary, military power of the United States, generally
a powerful incentive to toe the line no matter what the domestic social consequences. In 2004, the United States is negotiating a plethora of bilateral accords, but the two most important initiatives are the Free Trade Area of the Americas (FTAA) and the Central America Free Trade Agreement (CAFTA). Both are based on the NAFTA structure, though both offer transnational corporations additional rights not included in NAFTA. The FTAA would include the entire western hemisphere except Cuba, while CAFTA is limited to Central America and part of the Caribbean. In the late 90s, the FTAA was at the top of the US trade agenda, but with the election of Lula in Brazil and Chavez in Venezuela, plus the Argentina meltdown, it does not appear that the US will successfully conclude the FTAA any time soon. Official attention is now focused on CAFTA, where the US can count on pliable governments throughout the region. Loss of democracy IMF Structural Adjustment Programs are one of the best examples. The US Treasury Department, in the form of the IMF, is writing economic policy for countries around the world, using foreign debt as leverage to force Southern nations to adopt neoliberal policies. It should be noted that ruling elites in the South, the new "technocrats," many of whom received training at US universities, are generally in agreement with these neoliberal initiatives. After all, they gain almost as much under the neoliberal model as their US counterparts. However, local elites do not enjoy sufficient popular support to initiate neoliberal policies without the "cover" offered by the IMF. The fact that the IMF "forces" these elites to accept these policies is a direct appropriation of democracy. The Chapter 11 provisions of NAFTA that allow corporations to sue governments before secret tribunals are another direct threat to democracy. This legal instrument is relatively new, and in the case of Mexico and the United States, it is the first time that either country has agreed to participate in such a dispute settlement mechanism. Although Chapter 11 has only been in effect for ten years, and corporate legal counsels only recently began to experiment seriously with the mechanism, there are already several cases that are indicative of the dramatic loss of democracy. · In January 1997, Metalclad Corporation of Newport Beach, California, filed a complaint under NAFTA alleging that the state of San Luis Potosí violated NAFTA provisions when it prevented the company from expanding a waste disposal plant. In 1991 Metalclad purchased the facility, which had a history of contaminating local groundwater, with the obligation to clean up pre-existing contaminants. After an environmental impact assessment revealed that the site lies atop an ecologically sensitive underground stream, the Governor refused to allow Metalclad to reopen the facility. Eventually, the Governor declared the site part of a 600,000 acre ecological zone. Although Metalclad never received the necessary local permits, the company claims this action was effectively an expropriation and inhibited the company's ability to make profits. In August of 2000, a secret NAFTA tribunal awarded Metalclad $16.7 million in damages. Apparently the private profits of Metalclad are more important than protection of the community's groundwater. · In April 1997, Canada imposed a ban on the gasoline additive MMT. Some US states also ban MMT, whose primary ingredient, manganese, is a known human neurotoxin. Ethyl Corporation, the main producer of MMT, responded to Canada's public health law with a $250 million lawsuit, claiming the law violated its investor protections under NAFTA. Ethyl argued that the law was an "expropriation" of its assets because it would eliminate expected profits from Canadian sales of the additive. The Canadian government settled the suit, agreeing to pay Ethyl $13 million in damages and cover the company's legal costs. It also proclaimed publicly that MMT is "safe" - contradicting the position of its national environmental protection agency. · The Methanex Corporation of Vancouver produces MTBE, an oxidant used as a gasoline additive to improve combustion efficiency. MTBE is highly carcinogenic, and for several years has been contaminating California groundwater. The California Assembly passed a law prohibiting the use of MTBE, a reasonable response to extensive drinking water contamination by a known carcinogen. Methanex sued the State of California for $970 million, for the loss of potential profits from possible future sales of MTBE in California. As of this writing, the case is still pending, complicated by the fact that former Governor Grey Davis apparently accepted substantial campaign contributions from the ethanol lobby, Methanex's main competitor. If decided in favor of Methanex, it will likely be interpreted as open season for corporations to sue for loss of all kinds of "future profits." Even if Methanex loses, local governments will think twice before approving environmental laws that may offend transnational corporations with deep legal pockets. While the three examples sited above deal with environmental issues, NAFTA rules make almost anything fair game. For example, a city government trying to protect local jobs could be prohibited from offering concessionary loans or preferential purchases to a local company if a transnational corporation wants to compete in the same market. Subsidies (read tax dollars) for public education could be challenged as an unfair business practice if a transnational corporation promoting private schools decides to compete in the same market. The postal system could be threatened as an unfair monopoly, with private companies picking off profitable routes while leaving relatively costly inner city and rural deliveries to the government (this challenge is already being made in Canada by FedEx). NAFTA foretells a world of decreasing public spaces, where private corporations make the vast majority of decisions that affect our lives, not based on a sense of the common good but based solely on the corporate bottom line. Obviously trans-national corporations enjoy important and enforceable new rights under NAFTA, but what about workers? To understand the full extent of NAFTA, let's look at the labor side accords that were tacked on after the AFL-CIO complained loudly. Under the side agreements, known as the North American Agreement for Labor Cooperation (NAALC), workers can file complaints for failure to apply existing labor standards. Of the 21 cases filed to date, one-third deal with health and safety standards that already exist in national law. A review panel investigates the complaint and produces a report. However, the offending corporation can do anything it pleases with the report, including throwing it in the wastebasket if it so chooses. Unlike Chapter 11 provisions, there are no enforcement mechanisms attached to the labor side agreements. While all of the above-mentioned examples are important, the most significant threat to democracy is also the main constituent of the neoliberal model - the corporation. In an ostensibly democratic country like the United States, it has always amazed this author that large segments of the population are willing to live in virtual dictatorships - called corporations - for one-third or more of their waking hours. No institution present in modern society is less democratic than the corporation. A small cabal of directors and managers exercise virtual dictatorial control over a workforce that, for example in the case of WalMart, numbers in the millions. And this same small group of people decides how to invest and spend billions of dollars in profits that are earned because of the hard work of employees. Not even a hint of democracy to be found, yet the corporation is at the center of modern society, directing production and consumption patterns, use of natural resources, and public policies (via control of the political process through millions of dollars in donations). What could be more UNdemocratic! The neoliberal model expands the power of corporations by removing economic decisions from the political realm. Less government (read less democracy) is the rallying cry, and many people who wait in long lines to get a drivers license, hate to pay income taxes or find today's political class unpalatable agree. But the implication of less democracy is more corporate control, a result that any thinking being would object to in principle and in fact. The Neoliberal Balance Sheet From a developmental perspective, the answer is clearly no. The statistics sighted above unambiguously demonstrate that the living standards of the majority of people are declining under neoliberalism. The majority of people in this hemisphere are poorer today than 25 years ago. That's a fact that no amount of propaganda can hide from people who live the reality every day. From a broader cultural perspective, the neoliberal model has serious implications. It is a hegemonic model that doesn't allow for a variety of cultural expressions. Neoliberalism is based on certain fundamental values that are inconsistent at best, and diametrically opposed at worst, to cultural values that are alive and well in many parts of Mexico and the United States. Neoliberalism is based on individualism, consumerism, concentration of capital, and centralization of power. In stark opposition we find community-based models in Mexico and the United States that are based on collectivism, environmentalism, equitable distribution of wealth, and democracy. Perhaps the best known example is the Zapatista struggle for autonomy. The Cuban health care system, the indigenous uprising in Ecuador, student movements, ejidos (communally owned agricultural lands in Mexico), cooperatives, the international environmental movement, and the citizen's movement in Argentina are but a few examples of alternatives in this hemisphere. These competing visions are locked in profound struggles throughout the world, but no more so than in Mexico, especially along the US-Mexico border. Next we'll take a look at Mexico's mounting rural crisis, the direct result of three decades of neoliberal policies. Neoliberalism and Mexico's Rural Crisis The roots of the rural crisis are found in the structural mechanisms that capital
uses to appropriate surplus value from the campesino class in the neoliberal
era - the vicious circle of corporate subsidies, free trade regimes, monopoly
markets and vertically integrated corporate structures. For purposes of analysis,
we can enter the circle at any point. As a matter of convenience, we will begin
our analysis with corporate control of international grain markets, in particular
corn. Corn production is at the heart of Mexico's rural economy. About 19 million
people, almost one-fifth of the population, produce corn. About 60% of Mexico's
agricultural land is planted in corn. Neoliberal policies that impact corn production
have ramifications throughout the economy and society. Cargill describes itself as an "international marketer, processor and distributor of agricultural, food, financial and industrial products and services with 97,000 employees in 59 countries." Note that Cargill does not actually produce corn or other agricultural products, but the corporation exercises effective control via production contracts that specify seeds, fertilizer, pesticides, herbicides, etc, all marketed by the contracting company. Production of basic grains is one stage in a vertically integrated process in which every step - production, transportation, processing, marketing and export - is under corporate control. Vertical integration means that profits in one transaction can offset losses in another, giving corporations huge advantages in negotiations with producers and buyers. In addition to monopoly control and vertical integration, Cargill and other US corporations are able to dominate the international corn market because of extensive state subsidies that allowed US exporters to dump corn in Mexico in 2001 at 33% below the actual cost of production. In May 2002, President Bush increased state agricultural spending by 80% over the watershed 1996 Freedom to Farm Act. According to Food First, "Today more than 40 percent of net farm income comes from the federal government. … The top 10 percent of farm-subsidy recipients collect two-thirds of the money, [while] the bottom 80 percent get just one-sixth." We're not talking here about the mythical family farm. Large corporate producers account for most basic grain production. Increasingly the family farmer is converted into a sub-contractor representing little more than cheap labor for corporate farming operations. Subsidies are based on the amount of production, which is why the vast majority of subsidies go to large corporate producers. Corporate producers are not the only recipients of government largesse. According to President Bush, "Today, 25 percent of U.S. farm income is generated by exports." Under the 2002 Farm Bill Market Access Program, a total of $100 million has already been distributed to 67 U.S. trade groups for the purpose of promoting U.S. agricultural products in overseas markets. An additional $1.34 million in federal funds from the Quality Samples Program has been allocated to 17 trade groups to increase export sales by expanding into new agricultural markets. Extensive government subsidies have two immediate results. First, Cargill and other exporters can purchase, and sell, basic grains below the cost of production, driving many foreign producers, especially small producers, out of business. Second, subsidies promote overproduction, flooding the market and undercutting prices further. Overproduction is one of the fundamental goals of subsidy programs, and outside the context of a capitalist economy, it makes sense. Food is not like automobiles, cosmetics, refrigerators or a million other products that consumers can live without for short, or even extended, periods of time. Food must be available every day of the year. Political stability depends, in part, on stable food production. In the context of "free markets" and transnational production, food sovereignty is one of the most discussed topics of the 21st century, specifically because of the importance of food for political stability. US subsidy programs promote US production at the expense of production in other countries, to the extent that food becomes useful as a strategic weapon in international disputes. Corn is not the only agricultural commodity affected by low prices, over-production and monopoly markets. The international coffee market is another example of neoliberalism at work. Corporations that control the international coffee market are quite profitable. In fact, retail coffee prices are increasing in recent years, even as wholesale prices decline to 45 cents a pound, well below the cost of production. Coffee is not produced in the United States, but rather in the global South, accounting in large part for the lack of subsidies, price support and political clout of producers. While the World Bank has seen fit to stimulate production over the past decade with extensive low interest loans, particularly to Vietnam, it has not seen fit to defend market prices. The result is hundreds of thousands of coffee producers searching for alternative means to survive. Even if formal US government subsidies for basic grains were to end tomorrow, highly mechanized corporate producers would still enjoy "unaccounted" subsidies paid by the world's population in the form of environmental damage caused by extensive use of fossil fuels, pesticides, herbicides, and chemical fertilizers. The environmental damage is genuine and extensive, yet the cost of repair never shows up in the price of the agricultural products. Rather, the costs are "externalized," eventually to be assumed by society at large. Michael Pollan outlines the extent of environmental damage in one sector of
US agricultural production, cattle ranching, which is closely linked to corn
production: "Growing the vast quantities of corn used to feed livestock
in this country takes vast quantities of chemical fertilizer, which in turn
takes vast quantities of oil - 1.2 gallons for every bushel." According
to Pollan, US corn production is "an 80-million-acre monoculture that consumes
more chemical herbicide and fertilizer than any other crop. Keep going and you
can trace the nitrogen runoff from that crop all the way down the Mississippi
into the Gulf of Mexico, where it has created (if that is the right word) a
12,000-square-mile 'dead zone'." Pollan notes another unaccounted cost:
"corn constitutes … an important link in [the] food chain, …
[part] of an industrial system powered by fossil fuel. (And in turn, defended
by the military - another uncounted cost of 'cheap' food.)" Given the environmental
attitudes exhibited by US leadership in the recent death of the Kyoto Accords,
this unaccounted "subsidy" will most likely continue for the foreseeable
future. In effect, environmentally sound producers, ie, Mexican campesinos,
are providing a subsidy by producing grains at the margin using techniques that
do not damage the environment to nearly the extent of mechanized production.
The corporate model is clearly unsustainable in the long term. Water and soil
contamination and extensive use of non-renewable fossil fuels cannot continue
forever. Some future generation will have to pay the price. Rather than being
rewarded, campesinos are actually penalized for their sustainable practices
in the "logic" of the market. Many campesino producers grow corn both for self-consumption and for local
markets, offering a source of income for products that campesino families are
unable to produce themselves, for example, school supplies, tools, cookware,
medicines, etc. By undercutting prices in local markets, campesinos are forced
to look elsewhere for a source of income, while continuing to produce for self-consumption.
(According to Arturo Leon, Mexican lands dedicated to corn production have actually
increased in the past two decades, while corn imports from the US are also increasing
at staggering rates. Demographic factors cannot account for both increases,
and presumably the vast majority of increased campesino production is for auto-consumption
and is, to some extent, replacing more expensive nutritional sources such as
animal protein.) In the context of neoliberal capitalism, migration to large
cities, border maquiladoras or, increasingly, the United States often offers
the only available alternative. Displaced rural dwellers from central and southern
Mexico are converted into the maquiladora workforce, a process known as proletarianization. |
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