Neoliberalism and Commodity Production in Mexico

1. The Neoliberal Transformation of Mexico

1 O n e TheNeoliberalTransformationofMexico JamesB.Greenberg,ThomasWeaver,AnneBrowning-Aiken,andWilliamL.Alexander [These are] the same failed ideas that got us into this mess in the first place. —President Barack Obama, referring to neoliberal policies Fort Myers, FL, February 10, 2009 Failed Ideas Neoliberalism, as a form of market fundamentalism, is both seductive and one of those dangerous economic ideologies that seems impervious to the lessons of history (Carrier and Miller 1998). On its seductive side, neoliberalism embraces many of the core values that are at the heart of US society: freedom, democracy, individualism, and entrepreneurship. It is how these goals are pursued that is the stuff of politics, with great differences between liberal and conservative visions of both markets and the role of the state. Despite its name, neoliberalism is a rightwing economic philosophy that emphasizes laissez-faire free markets, free trade, and private property and at the same time is deeply distrustful of government intervention and regulation. With hindsight, it is now abundantly clear that laissez -faire capital left to its own devices (although perhaps vices is more accurate) 2 JamesB.Greenberg,ThomasWeaver,AnneBrowning-Aiken,andWilliamL.Alexander encourages risk and rewards greed, and the price of failures has all too often been paid by the innocent. No one doubts that neoliberal deregulation is responsible for the recent debacles in the mortgage and securities markets, which, as they quickly went global, destroyed more economic assets than any natural disaster. But neither neoliberalism nor its catastrophic consequences are new (Craig and Porter 2006; Phillips 2008; Smith 2005; Soros 2008). This disaster is only the most recent— one could easily find similar problems at the roots of the 1907 and 1929 crashes— in a long history of economic failures in which nascent neoliberal ideologies prior to the post–World War II institutionalization of global neoliberalism , described later in this chapter, have been applied. This book will document the high costs of these failed ideas in Mexico’s experience with neoliberalism, a particularly illustrative example. Nowhere has neoliberalism been more widely implemented or its impacts been more profound than in Mexico. Mexico’s previous political economy, in fact, wasanathematoeverythinginwhichneoliberalsbelieve.TheMexicanRevolution in 1910 was fought in reaction to more than a half century of nineteenth-century liberal policies, which had concentrated wealth, land, and power in the hands of a tiny elite class and reduced vast sectors of the population to abject poverty. The 1917 constitution enshrined rights for Mexico’s peasant and working classes. It restored lands stripped from communities by haciendas and plantations and sought to protect Mexico’s sovereignty over its lands, waters, mineral rights, and so on. The Mexico that eventually emerged from these struggles was a corporate state—a contradictory mix of capitalism, socialism, and fascism. Mexican stateled capitalism racked up impressive growth between 1940 and 1970, with an annual average GDP growth rate of 6.4 percent (World Bank 1986:1). The Big Picture One effective way to understand the implementation of neoliberalism in Mexico is to look at World Bank reports. If we follow the World Bank’s distinctly neoliberal argument, increasingly serious structural problems belied Mexico’s booming economy. Because Mexico’s industry was protected from foreign competition, it became less and less competitive internationally, and by the late 1960s its share of world exports was declining steadily. From the Bank’s point of view, Mexico’s protectionism especially penalized agriculture and mining by skewing incentives and drawing private capital away from investing in these sectors (ibid.:5–6). At the same time Mexico’s export earnings were rapidly losing ground, its continuing imports of capital goods and exports of raw materials were creating chronic trade deficits (ibid.:2). Despite these imbalances, public expenditures accounted for a modest share of the Mexican GDP—on average, about 15 percent annually into the mid- 3 The Neoliberal Transformation of Mexico 1960s. Under President Luis Echevarría (1970–1976), in hopes of ensuring continued economic growth and employment, Mexico embarked on a program of expansion of the public sector, financed largely through foreign borrowing on prospects of oil income. During Echevarría’s administration the number of parastatal companies more than doubled, to 845. Eventually, the bill for this expansion came due. By 1976 the public-sector deficit had reached 10 percent of the GDP; inflation—which had closely followed world trends—rose to 15 percent, and capital flight ensued (ibid.:5–6). Under Echeverría...