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First World Dreams: Mexico since 1989

First World Dreams: Mexico since 1989

by Alexander S. Dawson

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Mexicans have long dreamt of the First World, and in recent times it has landed with a thud. Under the guise of globalization, Mexico opened its borders, reformed its political system, and transformed its economy. The impacts have been paradoxical. In First World Dreams Alexander Dawson explores the contradictions and challenges which Mexico has experienced in


Mexicans have long dreamt of the First World, and in recent times it has landed with a thud. Under the guise of globalization, Mexico opened its borders, reformed its political system, and transformed its economy. The impacts have been paradoxical. In First World Dreams Alexander Dawson explores the contradictions and challenges which Mexico has experienced in embracing the market so wholeheartedly. A vibrant civil society is marred by human rights abuses and violent rebellion. Market reforms have produced a stable economy, economic growth and great fortunes, while devastating much of the countryside and crippling domestic producers. Mexico is today one of the world's largest exporting nations, yet has a perpetually negative trade balance. It is in a constant state of becoming a democracy, a nation where human rights are respected, a modern industrial nation, and a more violent, fragmented place where the chasms of wealth and poverty threaten to undo the dreams of modernity.

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Zed Books
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Global History of the Present
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First World Dreams

Mexico since 1989

By Alexander S. Dawson

Zed Books Ltd

Copyright © 2006 Alexander S. Dawson
All rights reserved.
ISBN: 978-1-84813-671-7


Why 1989?

When Europeans and North Americans talk about globalization, they tend to conjure up a series of familiar images. Proponents rhapsodize about the fall of the Berlin Wall, information flows that allow computer users in Omaha to call help technicians in Bangalore, and recent events like the Ukraine's Orange Revolution. These are images of globalization as a positive force for economic growth and democratic change, producing efficiency and transparency across the planet. By contrast, when critics speak of globalization they talk of turtles protesting the WTO in the "Battle of Seattle," during November 1999, or imagine Indonesian children toiling in brutal conditions to make footballs, running shoes, and Christmas toys, while corporate giants reap huge profits. This imagery renders globalization as the triumph of global capital, a world where unions, social welfare, and popular sovereignty have been sacrificed to business interests, and where inequality and the worst excesses of capitalism – on the wane for nearly a century – are again on the rise.

If we take for granted that both these positions are viable, the logical place to start a history of globalization might be with the end of the Cold War. Each of the phenomena described above is rooted in global transformations since 1989, when the United States emerged as the sole superpower. Moreover, the end of the Cold War produced three distinct types of openings that can explain the variety of experiences that characterize the global era. The first trend has been the ascendance of market economics as the only model for determining the allocation of financial and other resources. Market economics and free trade have in turn changed the way the global economy works, as businesses have moved away from vertically organized companies with centralized production and distribution networks, towards a more complex web of interdependent producers, distributors, and consumers. Firms and capital are much more mobile, and tend today to act as brokers – buying, distributing, and selling over a web of sites of production and consumption (García Canclini 1999).

The second development has been the expansion of liberal democratic ideals on a scale never seen before. The 1990s saw the emergence of more governments based in democratic principles than at any point in the past. In Latin America this transition was particularly striking, as countries like Chile, Argentina, Peru, and Brazil emerged from long dictatorships with new democracies; adopting new forms of government and economic models that underscored the First World dreams of their governing elites. Third, these two trends have been associated with new forms of political and social protest; movements and individuals that embrace new technologies and techniques to globalize their struggles in innovative and sometimes terrifying ways.

And yet the problem with using 1989 as a starting point for the history of globalization is that it tends to reinforce the impression that globalization is something that started in rich, Western, industrialized societies, and spread to other regions. As with other diffusionist theories of civilization, this risks reinforcing the view that globalization is a story in which the West acted on a passive world, and where the center remains in the West. Mexicans in particular find 1989 a curious place to begin the history of their global age. When asked about memorable dates in their recent past, they rarely mention 1989. Instead Mexicans recall 1968 (the year of the massacre at Tlatelolco), 1985 (the Mexico City earthquake), 1994 (the year, as Carlos Fuentes put it, of "living dangerously"), and 2000 (the year seven decades of one-party rule came to an end). For Mexicans these dates tell an often tragic story of their country's bumpy road to democracy, and of the structural and social transformations that accompanied that process. Not coincidentally, these dates also tell the story of Mexico's participation in the global era.

Since Mexicans tend to mark 1968 as a singularly important moment in the recent history of their nation, this seems like a reasonable place to begin this narrative. Moreover, if we choose 1968 instead of 1989 as our starting point, globalization in Mexico seems to be less determined by the end of the Cold War than by a series of other processes. As the students who marched into Tlatelolco on October 2, 1968 could have told you, they were already living in a global community. During their lifetimes Mexico had become a largely urban society, millions of Mexicans had come to own radios or televisions, and the cultural, political, and intellectual currents pulsing through Berkeley, Washington Heights, and Paris were as close as the nearest news-stand. Systems of social control put in place a generation earlier were breaking down; more and more middle-class Mexicans were demanding a life like the one they had seen or heard about in western Europe or the United States. They wanted a free university education, more social spending, and democracy within the university and the nation as a whole.

Sadly, as students in Prague, and elsewhere, learned during 1968, it did not always matter that the whole world was watching. On October 2, as eight thousand people gathered in the plaza at Tlatelolco, government sharpshooters hidden in the public housing projects that surrounded the square opened fire on the assembled protesters. Official estimates of the dead were twenty, with twenty-five injured, and 2,360 were detained, but witnesses suggest that the dead numbered over three hundred. Immediately afterwards government censors sprang into action, and ensured that almost no news of the massacre was published in the press. After initial news reports indicated that government troops fired on the students, the story was quickly changed to tell of terrorist snipers firing on police, who returned fire in self-defense. Hundreds of the protesters were imprisoned and charged with murder. Televisa, the television monopoly, showed no footage and reported the government account of events word for word. Army tanks rolled onto the campus of the National University (UNAM) to squelch the ongoing protests, and government forces arrested thousands more in the ensuing months. The most unlucky were murdered, their bodies dumped in the ocean.

A generation later, these atrocities would be unimaginable.

Before the global age

The students who demanded democratic openings in 1968 confronted a long history of authoritarian rule. Formally Mexico was a democratic republic. In practice Mexico's ruling elites maintained control by relying on a carefully managed political patronage system (clientelism), periodic social spending, and the occasional use of violence. This logic was particularly important to the state that emerged after the 1910 Revolution, the massive popular revolt that left over a million Mexicans dead. Sometimes called "the perfect dictatorship," the new state that emerged in the 1920s was controlled by the Party of the Institutionalized Revolution (PRI), which remained in power for seven decades through a careful balancing of regional, popular, and elite interests. The PRI was defiantly nationalist in its rhetoric and symbolism, but ideologically heterodox, capable of embracing socialist and capitalist agendas simultaneously. These tensions were often embodied in Mexico's all-powerful president, who could be both father to the peasant or proletarian, and ally to the agro-businessman or industrialist.

The PRI worked through three principal sectors – peasant, worker, and popular – whose organizations endeavored to manage both their friends and enemies in ways that would allow the party to remain in power with only a minimum of physical coercion. Though never democratic, these organizations provided social mobility, access to power, and a variety of other benefits. Peasants, for example, obtained nearly half of Mexico's cultivable land from the revolutionary state in a process that was managed by the National Peasant Confederation (CNC). Unions affiliated with the Confederation of Mexican Workers (CTM) enjoyed protection under Mexico's labor code, and saw regular wage increases and fringe benefits. As members of the National Confederation of Popular Organizations (CNOP), peddlers, artisans, middle-class merchants, and businessmen enjoyed subsidies and preferential treatment from the government. Peasant, labor, and popular leaders who openly opposed the PRI were sometimes jailed or killed, but more commonly the PRI simply tried to stifle dissent without violence, often by purchasing the quiescence of the opposition.

For much of its time in power, the PRI's economic record was almost as impressive as its ability to ensure political stability. Through a program that combined labor peace, a tightly regulated food policy, federal control of natural resources (oil was nationalized in 1938, and electricity is a federal monopoly), and a vast array of subsidies and regulations, between 1940 and 1965 the PRI produced an average annual growth rate in GDP of 6.3 percent. During these years the peso remained relatively stable, and the earnings gap between rich and poor narrowed, a trend that lasted from the 1940s until 1976. During these years the percentage of Mexicans living in poverty gradually fell, reaching its lowest levels in 1981.

Behind these figures was a major transformation in the structure of the Mexican economy. Mexican industry grew from around 18 percent of GDP to over 25 percent, surpassing agriculture in value. This was Mexico's economic miracle, a phenomenon in which industrial development acted as the key to political and social stability. Federal policies subsidized both production and consumption, and aimed to produce a politically loyal urban working class through public housing, education, social security, and food subsidies that kept staple prices low.

At first rural producers were not hurt by these policies, because a complex web of policies provided credit and aid to the peasant farmers who produced grain and maize for the Mexican market. In the 1960s, however, federal officials decided to allow a long-term drop in domestic staple prices (especially maize), favoring urban consumers at the expense of rural producers. Large commercial ventures oriented to agricultural exports received new support from the government, while small producers lost access to credit, irrigation, and fertilizer. Millions of peasants lost access to land under this policy, and as they exited the market domestic maize and grain production was increasingly supplemented with imports from the US. By the early 1980s Mexico was importing about half of its consumption needs in grain.

Federal officials had long wanted to drive rural producers out of peasant agriculture and into the urban working class, but by the early 1970s the domestic economy simply could not absorb rural migrants. Mexico, which saw its population grow from 36 million in 1960 to 80 million in 1985, needed 1 million new jobs per year to meet the needs of a growing urban population, and Mexico's new industries proved incapable of meeting this need. In part this was due to the fact that economic policies tended to promote capital-intensive industries, where increases in production came from technology, and as a result industry did not generate enough employment for a growing population. By the early 1970s unemployment was officially pegged at 10 percent, though underemployment was close to 40 percent.

Mexico's industrial sector faced other problems. During the miracle sectors that produced intermediate goods (i.e. fuel and fabric) flourished, while industries making capital goods (technology and heavy machinery) did not. Lacking the ability to create more capital-intensive goods, sophisticated products, or capital goods, Mexico did not develop an integrated manufacturing economy. Instead, the PRI's economic program produced an economy in which industry was inefficient and heavily dependent on government subsidies. This was a rent-seeking economy, in which bureaucrats determined the allocation of resources by issuing permits, licenses, restrictions, subsidies, tax exemptions, and import permits (by the early 1970s there were 13,000 different classifications of import duties in Mexico).

While in the short run these policies created the basis for Mexican industrial growth and greater income equality across the economy, over the long run these practices were not viable. Along with the positive benefits, they also produced unsustainable balance of payments deficits (owing in part to a continued need to import components and parts for Mexican industry), low productivity and quality in industry, and an overvalued peso. These problems could be ignored in the short run, but over time were destined to produce sluggish growth and fiscal crises in the government. Mineral (principally oil) and agricultural exports remained critical to subsidizing industrial development even into the 1970s, but could not perpetually cover the costs of industrial development as deficits ballooned and inflation undermined wages and profitability.

The crisis

The Mexican economy was already veering toward crisis in the mid-1960s. Mexico's trade deficit grew from $367 million in 1965 to almost $1 billion four years later. Confronted by long-term capital shortages, Mexican businesses increasingly borrowed from abroad, accumulating a foreign debt of $3.2 billion by 1970. President Luis Echeverría probably staved off a crisis in the early 1970s by combining an increase in the repression of dissidents with heavy borrowing from international markets to pay for an expansion of social programs and the state sector (he increased the number of state-run firms from eighty-six to 740), but his measures would only make Mexico's economic problems worse in the long run. Mexico's public debt grew from 2 to 7 percent of GDP during his presidency. Foreign borrowing assumed a critical role in financing the deficit, and by 1977 50 percent of public spending was financed through borrowing.

Growing debt and low productivity produced a number of critical problems in the early 1970s. Inflation surged from 3 percent in 1969 to 17 percent by 1975, and the current account deficit grew from less than $1 billion to $4.4 billion. During the Echeverría administration the foreign debt grew from $6.7 billion to $15.7 billion. Not surprisingly, each of these phenomena was also associated with rising unemployment and capital flight. Bowing to growing domestic pressure to reverse these trends, in late 1976 the government reduced spending. The peso was allowed to float freely on the international exchange market in August 1976 for the first time since 1954, and fell from 12.5 per dollar to 26.5 per dollar by October. The fall of the peso was accompanied by widespread land invasions by peasants in Sonora, Jalisco, and Durango, and armed rebellion in Guerrero, as the rural poor made their growing desperation known to the nation. Echeverría would appease some of the peasant activists with land redistributions, but the relatively meager 1976 reforms promised to do little to stem an emerging national crisis.

It was around this time that Mexican and international financiers began hearing rumors that PEMEX, the government-owned national oil monopoly, was sitting on a vast untapped reserve of oil in the Gulf of Mexico. Confirming those rumors, in 1976 PEMEX announced proven oil reserves of 6.3 billion barrels. New discoveries would place the figure at 45.8 billion barrels by 1979. Declaring that he wanted to "sow the petroleum," President José López Portillo (1976–82) launched a massive increase in social spending, created the Mexican Food System (SAM), which was designed to provide all Mexicans with their basic daily nutritional needs, and budgeted at $4 billion in 1980. He planned to pay for these efforts with a massive increase in oil export earnings, which did indeed grow from $311 million to $14 billion between 1976 and 1981. As a result of this boom GDP grew at over 8 percent annually in this period.

And yet Mexico's debt grew at an even more astounding pace. Between 1977 and 1982 Mexico earned $48 billion from oil exports, but borrowed $40 billion from abroad. Middle-class Mexicans remember this as a moment when they believed that their national destiny was suddenly in the First World, and where it seemed that they could rely on oil exports to subsidize any number of social and economic development initiatives. More than a few also saw this as an unprecedented opportunity for personal enrichment. Rumors abounded suggesting that López Portillo's wealth had soared into the hundreds of millions of dollars, though he, like most high-level officials, would never face any real scrutiny for the misappropriation of funds. Mexico City's police chief, Arturo Durazo, was not so lucky, perhaps because his opulence was simply too great to hide or excuse. Supposedly living on a modest salary as police chief between 1976 and 1982, he managed to maintain three mansions in the Federal District, as well as a vacation home in Zihuatanejo. Durazo (known as El Negro) was most famous for the replica of Manhattan's Studio 54 disco which he built in one of his homes. Jailed in 1985, he ultimately served eight years in prison.


Excerpted from First World Dreams by Alexander S. Dawson. Copyright © 2006 Alexander S. Dawson. Excerpted by permission of Zed Books Ltd.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Meet the Author

Alexander Dawson is Associate Professor of Latin American history at Simon Fraser University, in British Columbia, Canada. His research has focused on Indian-State relations in Mexico, and on the impact of globalization in Mexico. His publications include Indian and Nation in Revolutionary Mexico (2004).

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