State And Capital In Mexico

Development Policy Since 1940

James M Cypher

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9780367288600
• eBook ISBN: 9781000312942
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

For the past twenty-eight years I have traveled to and periodically lived in Mexico. As an extranjero I have enjoyed the advantage of association with nearly every social strata-from descamisados in ciudades perdidas to members of the elite. These have been my maestros, and I owe them a great deal.

1
The Political Economy of the State in Mexico: An Overview

This book analyzes Mexico's state institutions, programs, and policies of industrial development through the prism of political economy. Political economists seek to understand both economic policymaking and the forces behind economic dynamics (cycles, growth, depression, structural change, and so on). Much more than economics (narrowly defined), political economy is concerned with "why" social forces function in a particular way and with "who gets what"—that is, power.

Development economists have been forced to cast their net wider than most because they are concerned with social transformations—by definition "development" demands profound structural change. To be sure, a strong subcurrent in this field has proclaimed that market forces will achieve economic development without the aid of conscious policymaking. And with the recent rise of neoliberalism in the developed nations, the "let the market do it" perspective has become hegemonic within the major development institutions, such as the World Bank and the International Monetary Fund (IMF) (Toye, 1987). Setting aside this recent tendency, which will likely prove to be but a historical aberration, development economics continues to operate within the framework of political economy and thereby retain as its central focus the issue of structural change.

State-led Development

This book examines import-substituting strategies by way of a study of Mexico's development policies between 1940 and 1988. There are at least two common interpretations as to what is meant by "import-substitution" policies—the narrow and the broad. Narrowly defined import substitution is the development by the state of policies designed to close a chronic (or structural) deficit between the export of primary products and the import of manufactured goods. In other words, the narrow definition is constrained to a rather technical balance-of-payments problem that can ostensibly be rectified with marginal changes in tariff patterns and exchange rates.

Broadly defined, import-substitution is a strategy for development which favors the expansion of the internal market, in contrast to orthodox neoclassical doctrines which emphasize development through primary commodity exports (or through following "market forces"). The expansion of domestic industry, then, is to be the motor force of development. The state is to play a crucial role in this process through (among other activities) indicative planning, the construction of state-owned industries in key sectors, the allocation of credit and the shrewd application of temporary protectionist policies in the foreign trade sector. This definition is inextricably tied to the UN's Comisión Económica para América Latina (Economic Commission for Latin America, or CEPAL) created in 1948 and to that institution's principal spokesperson, the late Raúl Prebisch. CEPAL maintained that a complete restructuring of the Latin American economies was necessary. Import-substitution industrialization shifted the central focus of development policy from the international economy to the internal market. Industrialization combined with limited income redistribution, and (secondarily) agricultural modernization became the main policy objectives. Spearheading this structural transformation was the state which would both guide and supplant the market as circumstances dictated (Prebisch, 1950,1981). In this book CEPAL's broad interpretation of what constitutes import-substitution industrialization is employed. Such an approach to development is hereafter defined as being "state-led."

For his heresy against the "laws" of comparative advantage, Prebisch was predictably attacked by orthodox exponents of neoclassical economics. On the Left, Prebisch's ideas were taken much more seriously but very critically. The latter's polemic against CEPAL's notion of a semi-independent and humanistically Keynesian path to capitalist development raised the level of discussion regarding the problems of development (Bemal Sahagún, 1980; Rodríguez Garza, 1983).

Explicit in the state-led approach is the reliance upon industrialization as the central focus of the development program. Precisely why industrialization should be the central focus of the development program was never completely clarified by CEPAL. But the following can be surmised: Agricultural wage goods (basic grains and animal products) could be easily expanded given a "surplus" of labor in the countryside and a relatively plentiful supply of land. Small investments in agricultural infrastructure (roads, irrigation, and so on) would yield broad, quick returns. Industry could be promoted by stimulating and deepening simple production processes in wage goods/consumer goods production, such as textiles, food processing, and consumer nondurables. As the industrial labor force expanded, so would the internal market. As the basic goods market was steadily and increasingly supplied by domestic production, the state could shift its policies toward promoting intermediate products—oil, electricity, construction materials, steel, chemicals, and so forth. Later would come capital goods—machinery, machine tools, agricultural implements, trucks, trains and buses, motors, ships, and so on. Agriculture would be swept along by the rising tide of industry, becoming more mechanized, modern, and "efficient." Although the two processes were complementary, industrialization was the cause and agricultural modernization was the effect.

Technology: A Missing Link

Overlooked (or at the very least largely neglected) in the preceding schematic were a number of issues (which will be taken up in the following chapters), particularly technology. Where would the increasingly complex technology necessary to underwrite these great transformations come from? According to institutionalist economists who have long focused on the question of technical change, the relative neglect of the pursuit of technological autonomy was the "Achilles heel" in the "structuralist" approach to industrialization (Dietz, 1988; Dietz and Street, 1987).

As it turned out, at least in the case of Mexico, where state policymaking essentially conformed to the CEPAL approach,¹ the lack of any sustained and serious look at the issue of technological autonomy proved to be a stumbling block in the state's development project. In essence, as the state's policies guided the economy toward relative independence in the production of wage goods/consumer goods and then of intermediate goods, the economy became increasingly dependent on ever-growing amounts of technology embodied in capital goods imports (Boltvinik and Hernández Laos, 1981, 477). Thus, the problem of how to pay for capital goods imports became more acute, leading to profound policy changes that will be discussed in the following chapters.

The neglect of technology is a telling weakness in state-led development. In 1987, for example, Mexico devoted 0.60 percent of its gross national product (GNP) to research and technology. More than one-half of this amount, however, was to pay for imported technology. (Korea devoted 2.0 percent of its GNP to research and development; the United States, 2.7 percent) (M. Aguilar, 1988, 83; CIEN, 1988b, 50). If we compare Mexico's expenditures to those of the developed nations, it is more than likely that a disproportionately high share of such research and development (R&D) money was allocated to a small army of clerks, functionaries, and other "unproductive" personnel. Had all the other problems that could have arisen within the context of state-led development been successfully addressed, the neglect of a coherent strategy regarding technology would have been sufficient in and of itself to derail the state-led project.

Thorstein Veblen, and for the most part his institutionalist followers, placed considerable emphasis on the significance of the creation and amplification of a tool-using culture in the making of modern industrial societies, By the term "tool-using culture," the institutionalists mean that a developing society must have imbedded within it a set of social institutions that develop, encourage, and sustain habits of thought and action that inherently approach questions of technical production processes from a critical, aggressive, and dominating perspective. The tool using culture views every production process as inherently improvable and in the short term sets about to realize the desired change.

Karl Marx made an interesting contribution to the discussion of technical change and economic growth when he drew the distinction between "extensive" and "intensive" forms of labor processes. To Marx, these forms of production help explain the slow transition from pre-capitalist modes of production to a full-blown capitalist society. Under the phase of extensive forms of production, workers deploy the minimum amount of tools and have very low levels of technical training and competence. Many, if not most, workers are first-generation migrants from the countryside and still continue to embrace and express pre-capitalist attitudes toward work and social processes in general. In the extensive phase, profits are derived by way of very low wages, long hours, and the forced speedup of the production process. Labor is offered few, if any, nonwage benefits, such as rights to unionization, disability payment, and retirement. As would be expected, labor tends to respond through a slowdown of production processes, tool breaking, absenteeism, and passivity toward the task at hand.

In the succeeding intensive phase, technical change becomes embedded in the production process and in the wider society. In this phase wages rise and working conditions improve. The overall productive apparatus of society becomes much more tightly integrated, thus making sustained leaps in production a potential possibility and (because the productive apparatus is not planned or controlled) sustained slumps (depressions and recessions) an inevitable eventuality. Although antagonism between labor and capital remains, the labor force is now qualitatively different. It is better trained and much more adaptable, it is capable of completing sustained and repeated technical tasks, and it is aware that the labor process is one of constant small change. The attitude of "We've always done it that way" plays virtually no role in the conceptual apparatus of the work force. The same is true of the capitalists and/or the state managers who run large government institutions, nationally owned (state-owned) industries, and banks.

The institutionalists have taken pains to argue that such changes do not take place overnight or with great ease and fluidity. For institutionalists the movement from the precapitalist forms of production through the extensive stage to the intensive stage is a slow and less than preordained process. Regression, lateral shifts, and dysfunctional combinations of the three logically separable forms of production (precapitalist, extensive and intensive) are conceivable.

Full Capitalism or Disarticulated Production

In Mexico a debate still rages as to where the country should be located in terms of the evolutionary scale sketched here. One widely cited Mexican economist, Alonso Aguilar, dated the transition to full capitalism in Mexico—which presumably meant that Mexico at least entered into the extensive phase of production—to the latter part of the nineteenth century (Aguilar, 1975). In a recent work dedicated to a discussion of Mexico's evolution through these phases of production, Miguel Angel Rivera Rios maintained that only in the 1960s did Mexico enter into the intensive phase. From his perspective, the intensive phase is yet to be completely consolidated across the economy (Rivera Rios, 1986, Ch. 1). The utility of Rivera Rios's research is that it provides a framework in which the observable unevenness among production processes (and conceptual processes) may be understood. In other words, today within Mexico there are semiconnected sectors of the economy that operate on the basis of intensive forms of production. At the same time there are extensive forms of production in many sectors or in subparts of certain sectors (homework in the textile industry being one current example). Meanwhile, precapitalist forms of production are relatively widespread in the countryside and smaller villages of Mexico and within the service sector (more than one-half of the economy), where the ethos of mercantilism still reigns.

As a first approximation, then, Mexico's economy should be described as one suffering from the effects of a profound disarticulation of nonhomogenous forms of production. The pervasive neglect of the creative capacities of the labor force (which are only partially realized when an economy rises to the intensive phase of production) is one of the crucial defining characteristics of the contemporary Mexican economy. The dominant strategy regarding labor is that it should be cheap—in 1988 Mexico reportedly had nearly the lowest paid workers in the world, with an average wage of less than $3.50 per day.

The neglect of technology must penetrate and define (and to a certain degree derive from) the owners and managers of the Mexican economy. In other words, with important exceptions, the dynamics of technical change are not intrinsic norms and rhythms that regulate the very existence of the managerial apparatus of Mexican society (be this apparatus in the financial sector, tourism, industry, agriculture, or government). Rather, such technical change is a somewhat occasional, nonintegrated aspect of Mexican society. Although the direction of current change may well be toward the norms of intensive production, a very considerable residual of precapitalist, mercantilist, and extensive forms of conceiving and doing remains. Labor, for the most part, is simply a cost—and a very cheap one. The expansionary synergism to be found within a form of production that emphasizes labor training and high wages can be glimpsed only rarely in semi-isolated components of the productive apparatus. The inability to create a Critical mass of tool-using workers and managers—be they day laborers, skilled workers, or university-trained managers—is both a constraining and defining characteristic of the economy. The inability to recognize the existence of this characteristic, with few exceptions, is a telling indication of the pervasiveness of conceptual and cognitive problems that define and constrain Mexico's opportunities for economic development.

Three Stages of the Mexican State

It is important to distinguish another "evolutionary" process at work in Mexico: the three stages that the state has passed through since the days of the revolution (1910-1917). The following hypothesis is proposed: In viewing the relationship between the State and the economy in the twentieth century, we encounter first a nationalist-populist state (1934-1940), then a capitalist-rentier state (1940-1982), and most recently a neoliberal state (1982-1988). In this view, the element of "reverse evolution" implicit in this terminology is a persistent and increasing one (which is not to argue that such a tendency is irreversible, particularly given the fragmented nature of the socioeconomic "base" of Mexico).

The term nationalist-populist state is intended to convey the following: The state plays a dynamic role in restructuring the economy (and wider society) by way of innovative interventions that are, by and large, constructive, at least in the long term. Few students of Mexico's political economy care to argue that Lazaro Cardenas's administration (1934-1940) was not the crucial and defining turning point in shifting Mexico's productive apparatus away from colonial and neocolonial forms of production and social organization. It was Cardenas's administration that forged the idea of the "mixed economy"—a mix of the public and the private in which the autonomy of capitalist forces and forms of production would necessarily be constrained and conditioned by the state, which was the "rector" (controlling and guiding force) of the economy. What Cardenas and subsequent Mexican leaders attempted to convey with the "rector" concept is best described in this statement from his inaugural address: "The state alone embodies the general interest, and for this reason only the state has a vision of the whole. The state must continually broaden, increase and deepen its interventions" (Hamilton, 1982, 129).

Porfirio Díaz (1876-1911) was the first to utilize the state as a catalyst in prompting capitalist accumulation in Mexico (Ayala and Blanco, 1981). Yet it was Cárdenas who defined the parameters of the contemporary Mexican state through his emphasis on (1) the creation of parastate (state-owned) firms; (2) state banks, which formented new industries and companies; and, above all, (3) the nationalization of foreign capital.

The nationalist-populist state can be viewed as constructive in the following sense: First, the state carried out an accumulation function. That is, following Jim O'Connor, the state (once again after Díaz and more directly so) sought to facilitate the private and public accumulation of national wealth (O'Connor, 1973, 6). As the quintessential nationalist, Cárdenas sought the creation of an autonomous national industrial bourgeoisie, whereas Díaz had simply emphasized the need for a nationally integrated economic market and a coherent infrastructure. Second (again following O'Connor), Cárdenas sought to make legitimate the state's power and trajectory vis-à-vis the peasantry and the small emerging industrial working class. This legitimation function was fulfilled for the peasantry through a relatively large land reform program. For the working class the state offered the rewriting and enforcement of existing labor laws protecting the right to unionize and the "right" to a "living" wage.

From the 1940s through the 1970s (for reasons advanced in the following chapters), Cárdenas's nationalist-populist project was reoriented toward a capitalist-rentier state. This term is utilized to convey the contradictory nature of the intersection between the state and the national productive apparatus. The "capitalist" elements of the state's project were "progressive" in the sense of developing the forces of production. At the same time, the old "rentier" ethos of the hacendado/merchant capitalist era continued to play a role. Merchant capital—whether it appears as trade capital, bank capital, mining capital, or hacendado capital—seeks its own expansion by way of economic rents and/or unequal exchange. It seeks not to expand, cheapen, or improve its product, but solely to raise its price, Above all, it seeks not to produce but rather to appropriate a portion of the value of what has been produced. In a word, merchant capital is parasitic. Merchant capital thrives in an economy of pervasive monopolies and cartels. It draws nourishment from the state that accompanies its ascendancy. This state is neither a feudal state nor a capitalist state, but something of both. It is a transitional form of the state that first made its appearance in Europe in the fifteenth century. Spain established an economy dominated by merchant capital in Mexico, and the legacy of that era has yet to be completely...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Dedication
• Contents
• List of Tables
• Acknowledgments
• Introduction
• 1 The Political Economy of the State in Mexico: An Overview
• 2 Theories of the Mexican State
• 3 The State and the Macroeconomy in the "Miracle" Years: 1940-1970
• 4 La Docena Trágica: 1970-1982
• 5 The Structure of the State Sector: The Parastate Firms
• 6 President de la Madrid Hurtado's Sexenio: The Crisis and the Neoliberal Ascendancy
• References
• About the Series
• Index