The Poverty of Revolution: The State and the Urban Poor in Mexico

by Susan Eva Eckstein

Overview

The plight of the urban poor in Mexico has changed little since World War II, despite the country's impressive rate of economic growth. Susan Eckstein considers how market forces and state policies that were ostensibly designed to help the poor have served to maintain their poverty. She draws on intensive research in a center city slum, a squatter settlement, and a low-cost housing development.

Originally published in 1977.

The Princeton Legacy Library uses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These editions preserve the original texts of these important books while presenting them in durable paperback and hardcover editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

Product Details

ISBN-13:	9780691633305
Publisher:	Princeton University Press
Publication date:	04/19/2016
Series:	Princeton Legacy Library , #1144
Pages:	382
Product dimensions:	6.30(w) x 9.30(h) x 0.80(d)

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The Poverty of Revolution

The State and the Urban Poor in Mexico

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By Susan Eckstein

PRINCETON UNIVERSITY PRESS

Copyright © 1988 Princeton University Press
All rights reserved.
ISBN: 978-0-691-02282-6

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CHAPTER 1

The State and Society: Inequality in Postrevolutionary Mexico

The Mexican government legitimates itself on the basis of a revolution, calls itself revolutionary, and justifies social change in the name of revolution. Although the revolution with which it associates itself began as a liberal "middle-class" effort to institute free elections, the movement eventually led to the introduction of an agrarian reform that freed Indians from bondage, unequivocally established capitalism as the dominant mode of production, made suffrage universal, and created a mass-based political party. Since the civil strife subsided the economy has diversified and expanded, and the polity has stabilized within an officially democratic rubric. While the specific institutional and organizational structures prevailing since the upheaval are rooted in Mexico's unique historical development, they reflect responses to capitalist forces which had already penetrated the society prior to 1910. The changes represent deliberate policies of a capitalist state, operating in a semidependent capacity within the international capitalist system. As a result, Mexico's social and economic structure in important respects resembles that of other Latin American capitalist countries similarly situated within the world economy. The state, despite its populist roots and populist veneer, acts primarily in the interests of capital, and not merely because it is preoccupied with capital accumulation.

THE STATE AND THE ECONOMY

Mexico is heralded as a model developing country. It enjoyed for a period of time one of the highest growth rates in the world. Agriculture, which now contributes only a small share to the nation's total production, is highly productive by Latin American and Third World standards. The agricultural improvements have been sufficient both to provide raw materials for industry and to earn foreign exchange for financing capital imports for industry. As a result, industrial as well as agricultural production has expanded markedly. However, modern firms, which are assuming increased importance in terms of value added and labor employment, make the most intensive use of capital per worker and have the highest labor productivity. Firms with fewer than fifteen employees are the least productive. In general, production in both agriculture and in industry is highly concentrated: According to studies in the 1960s, 3 percent of the farms produced 55 percent of all agricultural production and .82 percent of all firms accounted for 64.3 percent of industrial production.

Along with a generally favorable attitude toward private capital, the government has directly and indirectly intervened to promote economic expansion in all sectors of the economy. Since the 1930s the state is involved in the economy to a greater extent in Mexico than in most Latin American capitalist countries which have experienced no comparable revolutionary history. Mexico ranks fourth among Latin American countries in the relative importance of government investments among total fixed investments. President Lázaro Cárdenas' nationalization of foreign oil companies in 1938 was an early and dramatic example of state participation in the economy. Since then the Mexican state has come largely to own the electric power industry, to participate in other productive industries, and to provide infrastructure, credit, protection, and guidance for the private sector, although mainly only to large-scale businesses. In the process, both the state and the big-business sector have been strengthened. Recent discoveries of oil fields may further this trend.

Mexico publicly assumes a nationalistic stance, partly because the extreme predominance of foreigners in the Porfirian boom preceding the revolution made a certain degree of suspiciousness toward foreign investment part of the ideological heritage of the revolution. For the emerging local capitalists, ideological predilections were reinforced by the logic of self-interest. As a result, fifty years after the revolution the share of net external financing to total investment was only about 7 percent in Mexico, one of the lowest ratios in all of Latin America. Postrevolutionary governments have emphasized economic nationalism through legislation designed to discourage industrial imports. Legally, Mexican industrialists enjoy preferential fiscal treatment in firms which replace imports, and protection of their industries through import licenses, import tariffs, and export subsidies. The "Mexicanization" decree of 1944 gave the government the power to require, at its discretion, majority Mexican ownership. In 1972 and 1973 the concept of Mexicanization was broadened to include control over the conditions under which foreign technology and management could be imported, and tighter legal restriction on the foreign purchases of equity in Mexican firms.

While domestic capitalism antedates the revolution, it has been expanded and strengthened since then because the government regulates foreign-controlled ventures, and because the government initiated policies conducive to national capitalism at a time when international conditions were favorable to such development. The country's productive capitalism was not an automatic by-product of the revolution. The greatest spurt to domestic enterprises came as a result of Cardenas' (1934-40) successful nationalization efforts and his other direct interventions in the economy, both facilitated by the collapse of international capital during the world Depression. Yet not until World War II did domestic manufacturing significantly expand, thanks to Mexico's increased foreign exchange earnings and a rising demand for industrial goods not available abroad.

Nonetheless, the government has not always acted in the immediate interests of domestic capital. As recent economic developments have been less impressive than in the immediate postwar years, tensions between the government and certain capitalists have become progressively more apparent. Concerned not merely with generating growth but also with maintaining popular support and legitimacy, President Luis Echeverría (1970-76) instituted a 22 percent wage increase in September 1974, imposed a ceiling on profits, and assumed tighter control over the booming private investment banks.

Such political exigencies are somewhat in conflict with the economic exigencies of the state. Capital flight, affecting the government's revenue base, is an ever present constraint on the government. Entrepreneurial opposition to prolabor government policies was manifest particularly in the industrial city of Monterrey where the local chamber of commerce organized a one-day illegal lockout and threatened to withhold tax payments if strikes against their establishments occurred. Since the government has been lax in enforcing the regulations on capital, initiating only a mild tax reform and no new controls on consumer prices, it obviously still favors business over labor.

The government partly acts against the immediate interests of domestic capital not only by instituting prolabor policies but also at times by favoring foreign over national capital. Transnational industrial corporations, largely formed with U.S. capital, have increasingly penetrated the domestic market, just as they have penetrated other foreign markets in the post-World War II era. The government has allowed foreign firms to maintain complete control of many of their businesses, exempted U.S. "border industries" from ordinary export and import controls, and extended import licenses which have protected certain foreign interests. As a result, over one-fourth of industrial production — especially [TEXT UNREADABLE IN ORIGINAL SOURCE] the most dynamic branches of manufacturing — is generated by multinational corporations; approximately half of the 400 largest industries in Mexico are foreign-owned, predominantly by Americans; there are more subsidiaries of major U.S. multinational manufacturing corporations in Mexico than in any other Latin American country; and foreign corporations increasingly are buying firms founded by Mexicans. Foreign capital is concentrated in the least competitive, most productive and profitable sectors of the economy, while national capital predominates in the competitive sectors.

The experience of Mexico suggests that even when a dependent country adopts a strong nationalist position, in line with a revolutionary heritage, it has difficulty maintaining the upper hand over foreign interests, if capitalism is instituted as the dominant mode of production. Although it was widely believed in the 1940s and 1950s that "import-substitution" would reduce the economy's vulnerability to and dependence on the external sector, dependence on imports actually has grown and domestic industrialization has worsened the balance of payments deficit which increasingly is financed by external sources on progressively less favorable terms.

While Mexico is heavily dependent on its northern neighbor for trade, its export trade is diversified. By the late 1960s Mexico's export product accounted for only 14 percent of total national exports, a lower ratio than in any other Latin American country. Moreover, Mexico had the highest proportion of manufactured goods among its exports of any Latin American country, reflecting its recent promotion of export-oriented industrialization. With respect to imports, Mexico acquires more capital goods than all but one Latin American country. It is freeing itself from the necessity of importing manufactured goods consumed domestically, but it is correspondingly increasing its dependence on imported capital goods.

The distribution of the labor force, however, does not reflect the productive significance of the different sectors of the economy. Since World War II employment in the services, the least productive nonagricultural sector, has been growing most rapidly. While Mexican industrialization had a positive effect on employment in manufacturing in the 1950s, since then large modern firms utilizing capital-intensive technologies have been displacing older and smaller firms, to the extent that the overall rate of increase in industrial jobs has declined. Employing approximately one-fifth of the labor force, the increasingly productive industrial sector absorbs only about 5 percent more of the economically active population than it did at the eve of the revolution. This non-labor-absorbing industrialization reflects the government's policy first of "import-substitution" and, more recently, of "export-substitution'-industrialization, policies which encourage the substitution of capital for labor. The capital-intensive tendency is furthered by national businessmen's bias toward "modern" technology and by direct foreign investments which import mechanized production methods.

While the expansion of industrial and other production, facilitated by such capital-intensive development, has been impressive by international standards, the distribution of the newly generated wealth has not been. According to rough estimates, the poorest 80 percent of the population in Mexico receive only slightly more than 40 percent of the national income,17 and other Latin American countries have comparable or more egalitarian income distribution structures. The revolution does not seem to have given the Mexican masses a significantly larger share of national income, and available income data suggests that they are not increasing their share of the national income as domestic production expands. Regressive fiscal policies and protection of oligopolistic enterprises, together with government inflationary policies, contribute to the high concentration of income.

Income distribution is particularly inequitable within the commercial sector, dominated economically by large banking and commercial interests but numerically by the rapidly expanding class of shopowners and small merchants, street vendors, and other "penny capitalists," that is, by self-employed people whose labor generates little income. Such "penny capitalists" are subject to market forces over which they have little control. However, government laxity in taxing them, and regulation of government-controlled consumer markets enables some of them to withstand competition from better capitalized, better organized commercial entrepreneurs. But they do so by exploiting their own labor and, when possible, the labor of others. They work long hours with limited compensation per unit of effort expended. As a result, income is perhaps better distributed than it otherwise would be: the sector can absorb persons unable to find other urban or rural employment, including persons displaced during periods of economic retrenchment and mechanization of agriculture and industry.

Desire for legal title to land was a major factor inspiring Mexican campesinos (peasants) to revolt in 1910, especially those associated with the Zapata movement, and the large latifundia landholding economy had to be destroyed for the revolution to occur. Therefore, one might expect the distributive impact of the revolution to be more impressive with regard to land than to income. In fact, land was redistributed to campesinos in conjunction with the agrarian reform provision of the 1917 Constitution. However, because the reform was only partially implemented, land in present-day Mexico is distributed as inequitably as in many Latin American countries which never experienced a comparable peasant-supported revolution. Instead, the revolution brought the country "into line" with other countries on the continent, for by the eve of the 1910 revolt the country had come to have an unusually large proportion of landless peasants. Land has been redistributed mainly in those sections of the country where peasants rebelled most strongly.

The main difference between landholding structures in Mexico and in most other Latin American countries is the form of tenure: Mexico has a sector of agriculture — the ejido sector — which is legally noncapitalist. It represents an old Indian form of landholding which was reinstituted as a consequence of the civil war. Land in this sector is collectively owned but generally parcels are individually operated by ejido families. Ejidal holders are prohibited from selling, mortgaging, or renting their land to persons outside the ejido village community, although many violate or circumvent the law without being punished.

While the ejido system is precapitalist in inspiration, the Mexican government, through deliberate policies, has increasingly promoted a highly productive agrarian capitalism, in the sector of the rural economy not covered by the reform. Non-ejidal agriculturists have more access to private capital, fertile land, and productive public assistance, including infrastructure, irrigation, and marketing assistance. Agrarian capitalists are favored over ejidatarios (recipients of ejido land) not because they are inherently more productive. They are more productive in part because they have more resources, in part because the government makes more resources available to them. There is some evidence that production within the ejido sector compares favorably with that in the private sector, when all inputs are taken into account.

President Echeverría's policy to collectivize ejidos seems to reflect the state's basic commitment to capital, not a break with it. Economically, the program is designed to boost recently faltering agricultural production by increasing output both on inefficient individually operated ejidos and on private lands threatened by peasant invasions. The program also will augment the economic resources of the state, perhaps increasing its autonomy vis-à-vis both peasants and agrarian capitalists.

(Continues...)

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Excerpted from The Poverty of Revolution by Susan Eckstein. Copyright © 1988 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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Table of Contents

• FrontMatter, pg. i
• CONTENTS, pg. vii
• LIST OF ILLUSTRATIONS, pg. x
• LIST OF TABLES, pg. xii
• PREFACE TO THE PAPERBACK EDITION, pg. xiii
• ACKNOWLEDGMENTS, pg. xviii
• LIST OF ABBREVIATIONS, pg. xxi
• INTRODUCTION, pg. 1
• CHAPTER ONE. The State and Society: Inequality in Postrevolutionary Mexico, pg. 13
• CHAPTER TWO. The Rise and Demise of Autonomous Communities, pg. 40
• CHAPTER THREE. The Irony of Organization, pg. 78
• CHAPTER FOUR. Políticos and Priests: Oligarchy and Interorganizational Relations, pg. 108
• CHAPTER FIVE. The Politics of Conformity, pg. 125
• CHAPTER SIX. The Political Economy of the Local Communities, pg. 141
• CHAPTER SEVEN. Occupational Choice and Occupational Fate, pg. 165
• CHAPTER EIGHT. The Poverty of Revolution: Mexican Urban Poor in Cross-National Perspective, pg. 208
• EPILOGUE. Fiscal, Physical, and Political Crisis, pg. 221
• APPENDIX A. Methods and Ethics, pg. 279
• APPENDIX Β. Questionnaire Administered to Sample of Residents, pg. 305
• BIBLIOGRAPHY, pg. 325
• INDEX, pg. 349

What People are Saying About This

From the Publisher

About the epilogue: "Eckstein's study of post-earthquake reconstruction events represents a fine weaving of a complex case study into her larger discussion of politics and urban growth in Mexico. The case study is made much more interesting because of the way in which she links it to larger political trends, and the political analysis is made very real by her showing us how it works itself out through this remarkably interesting story. There is no doubt that the epilogue could stand on its own as an excellent monograph."—Judith Tendler, Massachusetts Institute of Technology

Editorial Reviews

"Any doubts left about how the PRI and the government co-opt and disarm popular discontent will be dispelled by this material. . . . a work of mature scholarship and a valuable contribution to the growing literature on Third World urbanization and development."—-Alejandro Portes, Contemporary Sociology

From the Publisher