LABR 601: Labor and GlobalizationProf. Ian Thomas MacDonald Fall 2012 semester (final ten-page paper) Stephen Cheng

The North American Free Trade Agreement, Primitive Accumulation and Class Formation in Mexico

Introduction

The North American Free Trade Agreement (NAFTA), which the governments of

Mexico, Canada, and the United States of America ratified in 1994 and enforced since

then, contributed to the conversion of the peasantry in Mexico’s countryside into new

members of the nation’s working class. This process of proletarianization in Mexico

unfolded within the greater process of capitalist accumulation. The historical context was

a global era in which the neo-liberal form of capitalism became well-entrenched and

institutionalized since the mid-to-late 1970s and the early-to-mid 1980s. The transition

from the various forms of state-guided or state-influenced capitalism (i.e., Keynesianism,

Social Democracy, “Third World” Stalinism such as Maoism, etc.) to neo-liberal

capitalism was, seemingly for the most part at least, a global process.1 The nation-states

in North America were no exception in this transitory process, as demonstrated by the

signing and passage of NAFTA. However, given the limits of this paper’s discussion, the

political economy of Mexico will be the focus.

From the mid-twentieth century to the present day in the economic history

of Mexico, the capitalist accumulation process operated with two models that constituted

two different chronological phases: the import-substitution industrialization model (el

modelo de importacion substitutiva) that lasted from the 1940s and 1950s to the late

1 This appearance of a vast political-economic shift throughout the world may have been the impetus for the coinage of the term “globalization” by the business-oriented press.

1970s and early 1980s and the export-oriented industrialization model (la

industrializacion orientada a las exportaciones) which took shape during the early- and

mid- 1980s and remains active now. The latter model of capital accumulation became

“official” due to the signing and passage of NAFTA as Mexico, Canada, and the

United States of America joined together in order to establish a common set of “free

market” policies. The result was a North American “free trade” zone of sorts.

An outline of the present discussion

This paper contains a brief discussion on the consequences of NAFTA on

Mexico’s economy in general and the Mexican peasantry in particular. Toward this end,

Mexico’s economic history since the mid-twentieth century onward will serve as the

background and foundation for the argument that capitalist accumulation in Mexico, in

both forms of import-substitution and export-oriented industrialization, entailed the

extension of commodity production and exchange throughout the nation. The countryside

was no exception either – NAFTA expanded commodity production and exchange there

as well. Consequentially, wage labor became more common as the primary and quotidian

economic activity of many peasants. Since the economic impact of NAFTA on the rural

regions of Mexico is the focus of this paper, following sections cover the general

economic history of Mexico during the mid-to-late twentieth century and the specific

effects that the import-substitution and export-oriented industrialization models have had

on the Mexican countryside. The paper concludes with some reflections on the

conversion of the peasantry into a working class and attempts to draw some connections

to theory such as the debate on the origins of capitalism which Robert Brenner initiated

and the similarities and contrasts between the perspectives of Karl Marx and Karl

Polanyi. Connections to other political-economic contexts will be touched upon as well.

From state capitalism and the import-substitution industrialization model to neo-liberal capitalism and the export-oriented industrialization model

The import-substitution model defined the core of the Mexican economy was part

of a system of “state-led capitalism” which, since the 1940s, allowed the country to enter

an “era of stable, long-term growth” lasting for almost thirty years, a period of economic

growth that has been termed the Mexican “economic miracle.”2 Five key features of

Mexican state capitalism included:

1) state enterprises, 2) high external tariffs and import licenses to speed up industrialization, 3) capital-intensive private agricultural sector for export production, 4) land distribution and ejido sector for domestic food production, and5) institutionalization and minimization of class struggle by incorporating workers

and peasants into state-led organizations and legitimating the state as being “revolutionary.”3

These five structural features constituted a state-led, corporatist model of Mexican

capitalism which lasted from the late 1940s to the early 1980s.

Although this model brought together the priorities of developing national

industries and land reform via the establishment of the ejidos and contributed to the

country’s economic progress, this state-led form of capitalism ran into crisis during the

1970s and 1980s.4 By the late 1970s, the import-substitution model began faltering but it

nonetheless remained operational due to revenue from high oil prices. The high rates and

amounts of oil revenue also improved the country’s international credit and increased its

2 Pekka Valtonen, The Politics of Agrarian Transformation in Mexico (Academia Scientarium Fennica, 2000), 104. 3 Valtonen 108 and Wayne Olson, “Crisis and Social Change in Mexico’s Political Economy,” Latin American Perspective 12.3 (July 1985): 7-28. 4 The ejido farming system was a system of public and collective farms which existed because of the land reform policies that were enacted since the Mexican Revolution.

public spending. However, the decrease in oil prices, growing capital flight, and rising

interest rates contributed to increased inflation, which led investors to convert bank

deposits from Mexican pesos to US dollars.5 By August 1982, the Mexican government

declared that it was unable to pay off its debts - debts incurred from loans disbursed by

US banks so as to finance macroeconomic policies that were essential for continuing

economic growth within the confines of the import-substitution industrialization model.6

This combined currency and debt crisis, which plagued Mexico during the 1980s

(hence the term la decada perdida, or “the lost decade,” referring to the years 1982 to

1989) disrupted the accumulation of capital in general.7 As far as the capitalist class in

Mexico was concerned, the model of capital accumulation via import-substitution

industrialization was, in effect, obsolete. The stage was set for the introduction of a new

capitalist accumulation model: export-oriented industrialization.

As export-oriented industrialization became more widespread, measures (to say

nothing of rhetoric) associated with “free trade,” “free markets,” and “globalization”

became more mainstream and prominent. Certainly, so far as the Mexican capitalist class

and state were concerned, the transition amounted to a political paradigm shift as the

ruling party, the Institutional Revolutionary Party (el Partido Revolucionario

Institucional), switched its longstanding ideology of self-supporting economic

nationalism for an ideology based on neo-liberal economic policies and neo-classical

economic theories, especially given that the then-President of Mexico Carlos Salinas de

Gortari (1988-1994) made an announcement (which went public in March 1990) on his

5 Patricia Fernandez-Kelly and Douglas S. Massey, “Borders for Whom?: The Role of NAFTA in Mexico-U.S. Migration,” The Annals of The American Academy of Political and Social Science, 610 (March 2007): 99-101. 6 Rey Acosta Barradas, Los desafios de la globalizacion en Mexico: una perspectiva regional (Xalapa, Veracruz, Mexico: Biblioteca Universidad Veracruzana, 2005), 112-113.7 Barradas 112-113.

pursuance of a free trade agreement with the US government.8 In practice, the

protectionist policies associated with the import-substitution model that defined Mexican

economic nationalism gave way to the end of protectionism (i.e. repeal of tariffs and

other “restrictive” regulations) and the manufacture of commodities for export.

In terms of neo-liberal and neo-classical economic principles in practice, by 1986,

the Mexican government signed the General Agreement on Tariffs and Trade. By 1994, it

agreed to NAFTA’s passage. Concerning NAFTA’s passage, Rey Acosta Barradas

writes,

El TLCAN es un caso unico en el mundo porque vinculo en el acuerdo a dos paises desarrollados y uno en vias de desarrollo. En este sentido, las expectativas creadas por esta experiencia

alrededor del mundo son sustanciales; muchos ojos estan pendientes de la evolucion de esta experiencia. Si el experimento funciona, es posible que la humanidad haya dado un paso

importante hacia adelante para todos los paises del mundo en el camina hacia el desarrollo economico. De ser asi, las perspectivas economicas para America Latina y el Caribe encontraran

mayores posibilidades de exito y el ALBA tendran mas probabilidad de realizacion.

[NAFTA is a unique case in the world because it has linked by agreement two developed countries and one developing country. In this way, the expectations created by this experience around the world are substantial – many eyes are trained on the evolution of this experience. If

the experiment works, it is possible that humanity has made an important step forward for all the countries in the world in the path toward economic development. If such is the case, the

economic perspectives for Latin American and the Caribbean will find greater possibilities of success and ALBA will have a greater chance of realization.]9

Given the historical and economic context, Barradas’s hopeful tone was understandable.

However, whether such optimism turned out to be justified and true is another question

entirely. Indeed, in light of the massive late-twentieth century (and early twenty-first

century) proletarianization of the population of Mexico which coincided with the entry

and transplantation of industrial factories that were originally based in Canada and the

8 Dale Story, “Chapter Eight: Trade Policy and Economic Development in Twentieth Century Mexico” Charles F. Doran and Gregory P. Marchildon (editors), The NAFTA Puzzle: Political Parties and Trade in North America, (San Francisco and Oxford: West View Press, 1994), 173-174.9 Barradas 72-73.

US and the growing trends of northward continental migration, the increasing volume

and velocity of trade across national borders due to the ratification and enforcement of

free trade treaties contributed more so to transnational capitalist accumulation than to

anything else.

Free trade agreements such as NAFTA accelerated and intensified these

socioeconomic conditions in the countryside, thus converting increasingly more self-

subsistent farmers into wage laborers in various capacities (i.e. service industries, factory-

based industries, rural wage work, etc.). As a matter of fact, according to Ronald L. Mize

and Alicia C.S. Swords, peasants from rural Mexico who became workers found

employment in the agricultural industries, non-union manufacturing, service industries,

construction, and transportation, writing, “Increasingly, service-based jobs are heavily

segregated as low-wage, Mexican immigrant workers toil for long hours in unreliable

jobs, such as in restaurants and hotels, for poverty wages.”10

NAFTA’s consequences on Mexican agriculture

Strictly speaking, the expropriation of peasants from the land was not merely

limited to the 1980s and 1990s, when the export-oriented model and NAFTA became the

dominant features of North American neo-liberalism. Indeed, such expropriation, and

thus primitive accumulation, occurred during the import-substitution industrialization

period as well. For instance, although food self-sufficiency in Mexico became a reality in

the early 1960s, David Barkin writes that soon enough “the price support level for maize

was frozen, creating a barrier that gradually forced peasants and rural labourers to seek

additional sources of income from off-farm work, transforming food self-sufficiency

10 Ronald L. Mize and Alicia C.S. Swords, Consuming Mexican Labor: From the Bracero Program to NAFTA (Toronto: University of Toronto Press, 2011), 107.

itself into a theme of national debate and the target of social and political conflict during

the following 20 years.”11 Conceivably, farmers who were separated from the land found

employment in the factories and other related parts of the nascent industrial system of

Mexico. Certainly and likewise, the NAFTA was yet another contributing factor to a

process of primitive accumulation as the nation’s peasants were more and more

integrated into the capitalist system as wage laborers.

In the events leading up to NAFTA, as per the economic policies and stances of

President Salinas, the ejidos underwent a number of changes associated with the process

of transition from the import-subsitution model to the export-oriented model:

1) the distribution of farmland came to a halt, 2) the peasants on the ejidos were able to change the form of landownership to that

of private property, 3) ending the restrictions on the participation of “trading concerns” in the

countryside, 4) giving ejidos the rights of free association and leasing or selling farmland, and 5) the founding of a court for the resolution of land disputes.12

Rey Acosta Barradas weighs in as well as on the capitalization of the ejidos, listing

additional features of the transitional process such as the removal of subsidies, tariffs and

price controls; the opening up of the internal market, which made the importation of

foodstuffs possible; the privatization of credit and technical assistance, etc.13 The more

thorough subjection of the ejidos to capitalist relationships led to the separation of the

peasantry from the farmland.

As Patricia Fernandez-Kelly and Douglas S. Massey note, “The privatization of Mexico’s collective farms under neoliberalism and the elimination of agricultural

subsidies under NAFTA also increased the number of displaced peasants seeking

11 David Barkin, “The Reconstruction of a Modern Mexican Peasantry,” The Journal of Peasant Studies, Vol. 30, No. 1, October 2002, 79. 12 Edna Jaime, “Fox's Economic Agenda: An Incomplete Transition” in Luis Rubio and Susan Kaufman Purcell (editors), Mexico Under Fox (Boulder and London: Lynne Rienner Publishers, 2004), 52-53. 13 Barradas 126-128.

economic opportunities elsewhere.”14 Not surprisingly, the opportunities that lie

“elsewhere” tend to be located in the maquiladoras, el Norte (Canada and the US), etc.

Juan M. Rivera draws a similar conclusion,

NAFTA accelerated Mexico’s transition to a more industrialized, open-market economy, but it created a bleak picture for the future of Mexico’s rural households. Gone were the threads of the support net that the Mexican government had created in the past. There were no longer guaranteed prices, soft though limited

credit, cheaper seeds, subsidized fertilizers, or other similar benefits […]15

Although Rivera develops a more concrete picture as to the plight of Mexico’s farmers

due to the turn to neo-liberal capitalism and the lack of previously available government-

provided support, David Bacon has even more concrete observations.

Bacon specifically notes that the inability of Mexico’s government to keep the

country’s domestic coffee market economically viable during the 1990s meant that

farmers in the state of Veracruz had no other choice but to become immigrant workers

and writes more generally that, “But from 1982 through the NAFTA era, successive

economic reforms produced more migrants. Campesinos who lost their land found jobs as

farmworkers.”16As all the above observations by various writers indicate, they provide

images of one of the very dire yet unsurprising and structural consequences of NAFTA

and related measures aimed at the promotion of “free trade.” In brief, the transition from

state capitalism to neo-liberal capitalism entailed the development of a new working class

as farmers found themselves in situations in which they are unable to support themselves

through farming, whether as independent self-subsistent farmers or as members of

collective farms such as the ejidos.

14 Fernandez-Kelly and Massey 98-118.15 Juan M. Rivera, “Conclusions: Mexican Agriculture and NAFTA – The Challenges Ahead,” in Juan M. Rivera, Manuel Chávez Márquez and Scott Whiteford, NAFTA and the Campesinos (Scranton: University of Scranton Press, 2009), 171-180. 16 David Bacon, “Displaced People: NAFTA’s Most Important Product,” NACLA Report on the Americas, Vol. 41, No. 5, September/October 2008, 24-25.

A few concluding thoughts and reflections

The promise of NAFTA had been that its policies could and would contribute to

the general economic prosperity and development of the three treaty nation-states:

Mexico, Canada, and the US. Yet with the enforcement of NAFTA, the consequences

have not amounted to a uniform rise in the wealth of the member countries. Rather, the

general law of capitalist accumulation and its consequences meant that, throughout North

America, geographically, economically, and socially, wealth gathered at one pole

whereas poverty gathered at the other pole. Broken down by nation-state, some of the

negative results of NAFTA, an institution that can be associated with neo-liberal

capitalism, included the “de-industrialization” of the industrial sections of the Canadian

and US economies, the growing prominence and importance of the maquiladoras in

terms of industrial output and the increasing migration from Mexico to the US and

Canada, etc.17 Among other examples, the workforces in the maquiladoras and the

migration patterns certainly show the existence of a new working class.

Such a socioeconomic development highlights the relevance of ongoing questions

and issues in social theory. Certainly, one such relevant area is the debate, or

conversation, between Karl Polanyi and Karl Marx on capitalism, the market, and

commodity-based relationships.18 Yet another area of theoretical interest is the

aforementioned Brenner debate, in which Robert Brenner sets forth argument arose that

capitalism first developed in the English countryside during the last years of feudalism in

17 The policies and effects of free trade agreements have also elicited different responses from the labor movements in Canada and the US, as documented by Tamara Kay in the third chapter (pages 58 to 99) of her book, NAFTA and the Politics of Labor Transnationalism (Cambridge University Press, 2011). The Canadian labor movement developed a “left” or “progressive” form of economic nationalism that had anti-racist and anti-imperialist dimensions whereas the US labor movement was more susceptible to a right-wing variant of economic nationalism that had nativist and racist overtones, as articulated by politicians such as Patrick Buchanan and Ross Perot (pages 75 to 86). 18 Ronaldo Munck, “Globalization, Labor and the ‘Polanyi Problem,” Labor History 45:3 (2004): 251-269.

England, as the enforcement of the policies and laws of “enclosure” forced the once land-

bound peasantry off the land, thus leading to the formation of one of the earliest working

classes in capitalist history.19 Marx documents this process in the last and eighth section

of the first volume of Capital, a process that he refers to as “primitive accumulation.”20

One can also add that Marx was referencing the concept of the “original accumulation” or

the “previous accumulation” of capital – a concept that appears in the works of classical

economists such as Adam Smith and David Ricardo.

Concurrent with the process of primitive accumulation is also the development of

a working class or a proletariat, hence proletarianization. The situation of the Mexican

peasantry serves as a contemporary example, as is the case with the migrant worker

population in the contemporary People’s Republic of China, which in 1978 abandoned

state capitalism in favor of a neo-liberal capitalist direction as part of the process of

“Reform and Opening Up” (改革开放/改革開放/Gǎi3gé2 kāi1fàng4).21 In the case of

Mexico, a similar process more or less began in the early 1980s as the import-substitution

model of economic development entered a crisis. As the capitalist class and the state in

Mexico sought new ways to shore up and continue with the accumulation of capital, the

effects were felt in the countryside. The sobering last words go to Rey Acosta Barradas,

Esta strategia, sin embargo, tiene que ser valorada cuidadosamente contra potenciales costos sociales y economicos. El proceso de reestructuracion economica interno asociado trae consigo la quiebra de muchas empresas pequenas y medianas asi como una excedente creciente de insumos,

principalmente fuerza de trabajo, el cual ha encontrado serias dificultades de empleo en otros

19 Robert Brenner, “Agrarian Class Structure and Economic Development in Pre-Industrial Europe,” in T.H. Aston and C.H.E. Philpin (editors), The Brenner Debate: Agrarian Class Structure and Economic Development in Pre-Industrial Europe (Cambridge: Cambridge University Press, 1987), 48-49.20 Karl Marx, Capital (volume one) (Harmondsworth, Middlesex, England: Penguin Classics, 1990), 873-940. 21 As documented in a recently published book, Scattered Sand: The Story of China’s Rural Migrants, by Hsiao-Hung Pai (London and New York: Verso, 2012), among other books.

sectores de la economia nacional, motivando asi un flujo de migracion masiva hacia los Estados Unidos.

[This strategy, however, must be carefully considered against potential social and economic costs. The process of internal economic restructuring has contributed to the bankruptcy of many small

and medium businesses as well as an oversupply, especially within the labor force which has encountered serious work-related difficulties in other sectors of the national economy, thus

motivating an influx of massive migration to the United States.]22

References

Bacon, David. “Displaced People: NAFTA’s Most Important Product.” NACLA Report on the Americas 41.5 (September/October 2008): 23-27.

22 Barradas 93-94.

Barkin, David. “The Reconstruction of a Modern Mexican Peasantry.” The Journal of Peasant Studies 30.1 (October 2002): 73-90.

Barradas, Rey Acosta. Los desafios de la globalizacion en Mexico: una perspectiva regional. Veracruz, Mexico: Biblioteca Universidad Veracruzana, 2005.

Brenner, Robert. “Agrarian Class Structure and Economic Development in Pre-Industrial Europe” The Brenner Debate: Agrarian Class Structure and Economic Development in Pre-Industrial Europe. Ed. T.H. Aston and C.H.E. Philpin. Cambridge: Cambridge University Press, 1987. 10-63.

Fernandez-Kelly, Patricia and Douglas S. Massey. “Borders for Whom?: The Role of NAFTA in Mexico-U.S. Migration.” The Annals of The American Academy of Political and Social Science 610 (March 2007): 98-118.

Jaime, Edna. “Fox's Economic Agenda: An Incomplete Transition.” Mexico Under Fox. Ed. Luis Rubio and Susan Kaufman Purcell. Boulder and London: Lynne Rienner Publishers, 2004. 35-64.

Kay, Tamara. NAFTA and the Politics of Labor Transnationalism. Cambridge: Cambridge University Press, 2011.

Marx, Karl. Capital (volume one). Harmondsworth, Middlesex, England: Penguin Classics, 1990.

Mize, Ronald L. and Alicia C.S. Swords. Consuming Mexican Labor: From the Bracero Program to NAFTA. Toronto: University of Toronto Press, 2011.

Munck, Ronaldo. “Globalization, Labor and the ‘Polanyi Problem.’” Labor History 45.3, (2004): 251-269.

Wayne Olson. “Crisis and Social Change in Mexico’s Political Economy.” Latin American Perspectives 12.3 (July 1985): 7-28.

Pai, Hsiao-Hung. Scattered Sand: The Story of China’s Rural Migrants. London and New York: Verso, 2012.

Rivera, Juan M. “Conclusions: Mexican Agriculture and NAFTA – The Challenges Ahead.” NAFTA and the Campesinos. Ed. Juan M. Rivera, Manuel Chávez Márquez and Scott Whiteford. Scranton: University of Scranton Press, 2009. 171-180.

Story, Dale “Chapter Eight: Trade Policy and Economic Development in Twentieth Century Mexico” The NAFTA Puzzle: Political Parties and Trade in North

America. Ed. Charles F. Doran and Gregory P. Marchildon. San Francisco and Oxford: West View Press, 1994. 173-196.

Valtonen, Pekka. The Politics of Agrarian Transformation in Mexico. Academia Scientarium Fennica, 2000.

A note on language

In this paper, I have included two cited paragraphs that originally appear in Spanish. The translations from Spanish to English are my own, appearing below the original Spanish on pages five and ten. I also included a term that is originally from Mandarin Chinese, which refers to the economic reform process in the People’s Republic of China (PRC). Since Mandarin Chinese in the PRC is written with simplified characters, I made sure to place the simplified characters ahead of the traditional characters, followed by the pinyin transliteration. The translation of that term is widely used to the point of “common knowledge” (“common knowledge,” at least, for those who have a fairly substantial knowledge of twentieth century Chinese politics and history). All errors, of course, are my own.

Comments from professor:

Stephen Cheng

“The North Atlantic (sic) Free Trade Agreement, Primitive Accumulation  and Class Formation in Mexico”

The paper argues that NAFTA was an important moment in a longer  historical process of proletarianization of the Mexican peasantry and  concludes with some theoretical reflections on the Brenner debate and  primitive accumulation.

The introduction is very clearly written and the paper is well  organized overall, with a clear logical progression. The outline is  helpful even if this takes up precious word length.

It is appropriate to begin where you do, with the ISI model of state  capitalist development from Cardenas forward. The shift to  neoliberalism is rooted in the limits and contradictions of this  period, and you make clear that proletarianization preceeds the  neoliberal period. To sustain the paper’s argument that NAFTA  intensified this process, you cite several studies affirming the  point. Here I would have liked to see some more empirical evidence and  attention to geographical differences. My understanding is that  dispossession was stronger in the south of the country, where  traditional land holding patterns persisted longer than in the north  and center of the country. I don’t doubt the conclusions that you  draw, but some data would have made the case more convincing.

The paper turns at the end towards concluding remarks of a theoretical  nature on capitalist development. Here you briefly mention Robert  Brenner’s work along with Marx (but not Polanyi  as promised in the  intro). The comparison with the reform period in China is perhaps more  apropos, and this is where you could perhaps have brought in Polanyi  or discussed Harvey’s concept of accumulation by dispossession.

Overall, this was a well written, well organized paper. The thesis was  clearly argued and supported in a decent literature review for such a  short paper.  Well done! Grade: 90

Ian