Student University Tuition Strike, Oaxaca Summer 2002

(lecture follows strike pictures)

**NOTE**The object of this lecture is to briefly recapitulate some macroeconomic and geospatial concerns regarding industrialization, and then speak specifically to the strategy of borderland industrialization through maquilas**

Industrial strategy

As a national industrial strategist, what is your objective?

i. elaborate a national development plan

ii. Construct a comparative advantage?

iii. Develop linkages among national industries

iv. become industrialized!

Combined Strategies:
Linking between transnational industries and Mexican industry

What is the Geographic and industrial configuration that we are looking for?

Locational Geography of Industries:

1. borderlands

2. Central Highlands

3. Port Development

Firm structure:

1. Large firms: multinational and national conglomerates

2. medium-sized firms

3. small and family firms

4. informal sector businesses

What successful configurations exist?

1. large transnationals with imported components make use of local subcontractor networks (and cheap labor)
Example: Border maquila development:

2. Mexico-City centered development: Large corporations buy from medium-sized subcontractors in the area under a 'national contents' policy
International Example: Nissan City

3. Third Italy: Small and medium sized firms organize the production of labor-intensive and knowledge-intensive commodities, government agencies aid this collaborative process
Example: Shoes in San Mateo Atenco

4. Traditional and tourist-oriented development: government coordinates the production of traditional crafts
Next Week: Oaxaca artisans

5. HCI: Heavy and Chemical industrialization: rather than exporting petroleum and other resources, Mexico creates value-added production in the petrochemical sector
Example: Villa Hermosa, Coatzalcoalcos

Which strategy to choose?

i. balance short- versus long-term payoffs

ii. create jobs for over a million new Mexicans each year

iii. create a product mix that meets consumer needs within the context of a very unbalanced income distribution

iv. satisfy environmental and social justice concerns

Review of Background: Anatomy of La Crisis 1982 to Present

Foreign debt climbed to >$100 billion: waves of ISI financing

i. agroexports

ii. oil/debt financing

Finance hunger in era of stingy lending opens door to åhotπ capital

a. bolsa

b. tesobonos denominated in dollars

Chiapas and speculation drive down foreign exchange accounts $29 billion in Feb. to >$7Billion in December 1994

Peso collapse December 1995

Mexico 1990s:

i. Private debt in stock market

ii. No belief in governmentπs ability to guarantee repayment

iii. Politics of government control compromised: Chiapas

Contemporary Policy Framework:

Review: Neoliberalism somewhat replaces Strategic EOI / ISI

Export-Oriented Industrialization (EOI),
Import Substitution Industrialization (ISI)

Neoliberal labor theory predicts an increase in income for the lowest quintile:

increased investment in labor-intensive industry increases labor market åtightnessπ such that wages increase

But, according to Villareal:

Neoliberalization has been associated with sharp declines in income in lowest quintile: income & consumption data demonstrate otherwise

why?

a. other factors necessary, e.g., unions, to organize labor markets (neoliberalism accompanied by union-busting)

b. åslimmingπ of the state results in åbumping-downπ of bureaucrats into lower wage categories, increasing low-wage labor force

c. neoliberalism accompanied by new geography of labor flows

aa. end of producer price subsidies increases peasant exodus

bb. increased low-wage labor movement

cc. end of state subsidies for food, education, medicine increases åconsumerπ migration

d. company flight: when companies come to exploit low wages (country comparative advantage is low wages) they also leave following the low-wage frontier. This both undercuts both natπl govπt efforts to increase wages through minimum wage legislation, and workerπs efforts to organize labor markets through unionization

Neoliberal finance theory also flawed:
Financial liberalization is supposed to aid small firms by freeing capital markets and making cheap credit available:

i. evidence disputes this claim as well, in fact, what is seen is tremendous bankruptcy of small firms
BARZON debtors coalition

ii. Problems with NL hypothesis

a. end of small capital aid programs

b. end of social programs must hurt small shop owners

c. export industries characterized by capital concentration since exporting requires a lot of overhead and specialized human capital skills, small industries lose out

d. in Latin America, end of negative real interest rates creams small producers who already have a debt burden.

If Neoliberal Industrialization Model is so problematic,
how does it come to be the dominant model?

Foreign Intervention:
Clinton lends $US capital based upon several conditions

i. money growth<inflation

ii. maintain åsubstantially positiveπ interest rates

iii. raise $12-$14 billion through privatization

iv. timely bank stats

v. internet info

Mexican Oligarchy promotes policies that benefit them:
Wave of privatization facilitated by Mexican statism: govπt-party fusion allows transition since government party members benefit substantially from privatization

Some Powerful Mexican Civil Social Organizations benefit from Neoliberal policies:

corporativist structure changed (to åneocorporativismπ after Otero).

i. åmediatingπ organizations, e.g., CNC, CROM, CTM (confederacion de trabajadores de Mexico), FNOC lose power.

ii. Solidarity through PRONASOL establishes direct links between government and grassroots organizations:
Paramilitaries

iii. This undercuts left organization by dividing base and esp. by reaching out to areas where left is strongest (usually when accepting PRI control)

iv. Powerful urban merchant capitalists benefit from street vending and fayucas (illegal consumer merchandise trade)

Villareal argues for a continuation of development centered around Mexico's center.

1. The only way to develop an innovative technology sector is to work where human capital is most abundant

2. Innovation requires a combined strategy where foreign capital can develop linkages with Mexican subcontracting firms
Read Nissan city strategy

3. Mexico also presents the possibility of a Third Italy industrial region framework. In this system, household firms