Innovation:
Invest in a modern, cutting edge, industrial sector
1. train workers: construct a comparative advantage in a trained workforce
2. Get capital for investment: methods
a. stimulate domestic capital formation
i.
cheapen labor? how (nominal versus real cheapness)
depress
real wages
depress
nominal wages
cheap
food? how, what kinds of food
import
cheap food PL480
capitalize food production
(irrigation/mechanization, green revolution)
squeeze
peasants
cheap
housing
rent
control
gov¹t
subsidized housing
ii.
primary commodity industrialization
move
labor to agriculture/mining
declining
terms of trade problem
Importation:
Attract foreign capital
Technology transfers: can Third World technology be developed
alongside imported technologies?
i.
turnkey operations
ii.
negotiating with foreign governments
iii.
developing local options
Shoes?
Beer?
iv.
restricting technology imports: political power versus economic/social power
Combined
Strategies:
Linking between transnational industries and Mexican industry
Develop linkages among
national industries
a.
strong state necessary
b.
existing industries often not competitive
c.
world market glut in consumer durables hinders cooperation
d. capital versus
markets:
increase
in domestic capital requires income inequality
income
inequality reduces market size
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 are the possible
configurations?
1. Border maquila development: large transnationals
with imported components
2. Mexico-City centered development: Large
corporations buy from medium-sized subcontractors in the area under a 'national
contents' policy (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
Shoes in San Mateo Atenco
4. Traditional and tourist-oriented development:
government coordinates the production of traditional crafts
5. HCI: Heavy and Chemical industrialization: rather
than exporting petroleum and other resources, Mexico creates value-added
production in the petrochemical sector
You as an industrial
strategist have to figure out how to best industrialize given these
possibilities
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
The Policy Framework:
Review: Neoliberalism versus
Strategic EOI / ISI
Export-Oriented Industrialization (EOI),
Import Substitution Industrialization (ISI)
Two
principal variants of contemporary state development strategy:
Neoliberalism-Free Market deregulation
Strategic ISI/EOI-Free Markets in nonessentials, w/
Government supervision of ŒStrategic¹ Industries
ISI= replacement of imported
goods with nationally produced goods
a. high tariffs
b. state subsidies to heavy industry
c. tendency (consumer politics) to overvalued
currency
EOI= production of goods for export markets
a. low tariffs
b. state subsidies to export industries
c. tendency (producer politics) to undervalued
currency
Paths of
industrialization
i. All newly
industrializing countries (e.g. Mexico, S. Korea, Taiwan, Brazil) include some
combination of the following development strategies:
primary commodity industrialization (PCI)
(Resource rich countries Resource poor countries)
b. Primary ISI
Primary EOI
c. Secondary ISI Secondary
EOI
d. market broadening (new
products) versus
deepening
(backwards/forwards linkages creation)
historic paths:
Mexico: Primary CI >>Primary
ISI>>
Secondary ISI>>Secondary EOI
1960¹s
1968
Tlaltelolco/Technocratic Populism
|
Year |
Political Econ |
Industrial focus |
Agrarian pol |
|
1860-1890 |
Liberalism |
Mexico City, primitive accum |
liberalization |
|
1880-1920 |
Scientific Management: Foreign investment |
Mexico City, National articulation, Elite consumption |
Debt peonage, landlessness, enclosure |
|
1920-1960 |
Market socialism, |
Mexico City, Nationalization Import Substitution |
Agrarian reform, neo-communalism, South-North
redistribution of assets |
|
1968-1980 |
Technocratic populism/ |
Early EOI second cities |
capitalization, minifundio, state control of
agroexports |
|
1982-present |
neoliberalism |
Borders, second cities, ports, |
liberalization |
ISI
reaches point of exhaustion
Economic problem =
political problem
i. anti-agricultural bias: agriculture used to subsidize industrial growth, decline in agriculture results in both subsistence and agroexport sectors
ii. incorporation of elite workers into development coalition fuels disarticulated nature of accumulation
a.
economic inequality\
b.
political inequality, lack of channels through which to challenge economic
marginalization
iii. lack of market widening dooms ISI: too small a base,
iv. tariffs allow ISI, but fail to stimulate competitiveness
Anatomy of Crisis
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 Œhot¹ 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
Debt meltdowns in the 1980s/90s
Latin America mid-80s
i.
supply: petrodollars (Recycling)
ii.
demand: interest rates
i.
low early rates
ii.
sharp increase in rates
iii.
economic structure: capacity to absorb capital
A.
OPEC: small economies
B.
First World:
recession
Economic
leverage: Currency valuation/devaluation
C.
Third World: political economy of investment
x.
patronage
xx.
financing legitimacy
xxx.
capital flight
Mexico 1990s:
i.
Private debt in stock market
ii.
No belief in government¹s ability to guarantee repayment
iii.
Politics of government control compromised: Chiapas
Neoliberalism
qua industrial strategy
Villarreal's
Argument:
Neoliberal restructuring is driven by weak arguments from introductory
economics texts
Neoliberal labor theory predicts
an increase in income for the lowest quintile:
increased investment in labor-intensive industry
increases labor market Œtightness¹ 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. Œslimming¹ of the state results in Œbumping-down¹ 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 Œconsumer¹ 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 nat¹l gov¹t
efforts to increase wages through minimum wage legislation, and worker¹s
efforts to organize labor markets through unionization
Neoliberal finance theory is 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 Œsubstantially positive¹ 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: gov¹t-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 Œneocorporativism¹ after Otero).
i. Œmediating¹ 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