So Far From God, So Close to Wall
by Jeff Faux
www.thenation.com/, July 15, 2009
This past winter both the outgoing director of the CIA and a separate
Pentagon report declared political instability in Mexico to be
on a par with Pakistan and Iran as top-ranking threats to US national
security. It was an exaggeration; Mexico is not yet a "failed
state." On the other hand, it is certainly drifting in that
A vicious war among narco-trafficking
cartels last year killed at least 6,000 people, including public
officials, police and journalists. The country leads the world
in kidnappings (Pakistan is second). And with the global crisis,
the chronically anemic economy is hemorrhaging jobs, businesses
Not surprisingly, voters turned against
President Felipe Calderón's right-wing National Action
Party (PAN) in the July 5 midterm elections. But the left-wing
Democratic Revolutionary Party (PRD)--which many believe was robbed
of the presidency in the 2006 election--has ripped itself apart
with factional infighting. So frustrated Mexicans gave their Congress
back to the Institutional Revolutionary Party (PRI), whose decades
of corrupt authoritarian rule were supposed to have permanently
ended in 2000. At least, thought many voters, the PRI knows how
to keep order.
Mexicans are of course responsible for
their own country. But geography has always forced them to play
out their history in the shadow of their northern neighbor. "Poor
Mexico," goes the saying. "So far from God, so close
to the United States." Today, Mexico is a prime example of
the socially destructive effects of the neoliberal economics promoted
throughout the world by the US governing class.
The North American Free Trade Agreement--proposed
by Ronald Reagan, negotiated by George Bush I and pushed through
Congress by Bill Clinton in 1993--is both symbol and substance
of neoliberalism. It was sold to the citizens of the United States,
Mexico and Canada with the promise that free trade in goods and
money would transform Mexico into a booming middle-class economy,
dramatically reducing illegal immigration and creating a vast
market for US and, to a lesser extent, Canadian exports.
Fifteen years later, Mexico is still unable
to create enough jobs to employ its people. Out-migration has
doubled, and on both sides of the US-Mexico border labor-market
competition has kept wages down. At the top, income and wealth
have ballooned. It is no accident that among NAFTA's prominent
godfathers were former Treasury Secretary Robert Rubin (Democrat)
and former Federal Reserve chair Alan Greenspan (Republican),
whose fingerprints are all over the current global financial disaster.
I was an opponent of NAFTA. Still, I thought
the best case for it was that efficiencies from economic integration
could at least make US and Mexican businesses more internationally
competitive. But even that argument turned out to be worth no
more than a share of Bernie Madoff's hedge fund.
Several years ago I gave a speech to a
group of businesspeople in Mexico City. Those from the multinational
banks and corporations thought NAFTA was a great success, but
smaller Mexican businessmen saw it differently. You Americans,
said one, promised that with your technology and our cheap labor,
we'd be partners in competing with Asia. Then you opened up your
markets to China and invested there instead. "Sure,"
he said. "We can make TV parts for half what it costs in
the United States. But the Chinese can make them, and ship them,
for a tenth. So instead of closing the gap between Mexico and
the United States by raising wages, we have to narrow the gap
between Mexico and China by lowering them."
When I mentioned the conversation to a
New York investment banker who had lobbied for NAFTA, he conceded
that his side may have talked vaguely about partnership with Mexico.
But he shrugged and added, "Things changed"--that is,
profit opportunities in China dwarfed anything Mexico had to offer.
The Wall Streeters had little interest
in making Mexico more competitive. They also had little interest
in making the United States more competitive. Their purpose was
just the opposite: to disconnect themselves and their corporate
partners from the fate of any particular country. The World Trade
Organization, the opening of the US market to China and a parade
of bilateral trade agreements followed in NAFTA's wake.
In Mexico, the political and financial
elite were willing collaborators. For example, NAFTA opened up
Mexican banks to foreign ownership: political insiders who had
bought the giant Banamex from the government for $3.2 billion
and gotten the government to provide it with permanent subsidies
then sold the firm, with the subsidies, to Citigroup for $12.5
billion. Today roughly 90 percent of the banking system is owned
by US and other foreign investors, who do not have to recycle
Mexicans' deposits, or the Mexican government's money, back into
Mexico but can invest them anyplace in the world.
The Banamex deal was negotiated by Rubin
after he became Citigroup's $17 million-a-year executive committee
chair. In the late 1980s, when he was at Goldman Sachs, Rubin
had midwifed the privatization of Mexico's phone system to Carlos
Slim, a politically connected Mexican businessman. Slim then used
the monopoly profits from his high phone rates to invest all over
the globe--including a substantial ownership stake in the New
York Times. The latest Forbes rating says he's the
world's third-richest man.
Still, as long as the US economy was blowing
dot-com and subprime bubbles, the neoliberal model seemed stable.
US investors got Mexican bank deposits and cheaper labor on both
sides of the border. Through out-migration to the States, Mexico's
oligarchs got rid of frustrated workers who might otherwise have
been politically troublesome. The economy also benefited from
hard-currency remittances migrants sent back home.
Another infusion of cash to the Mexican
economy, unacknowledged in the official statistics, is the roughly
$25 billion in illegal drug exports to the States. Today, with
remittances, oil prices and tourism depressed, the narco trade
is probably Mexico's largest single earner of hard currency.
NAFTA and the neoliberal ideology it represents
are certainly not the root causes of narco-trafficking. But they
have been major factors in its recent monstrous growth. For starters,
the trade agreement created a two-way overland superhighway for
contraband; the Mexican drug lords use the dollars they have earned
from their exports to import guns, aircraft and sophisticated
military equipment from the United States to fight their territorial
wars. By wiping out small Mexican farms that could not compete
with heavily subsidized US agribusiness, NAFTA also expanded the
pool of unemployed young people that provides the narco-traffickers
with recruits. And banking integration under NAFTA made money
laundering much easier.
Perhaps most important, NAFTA has helped
maintain the corrupt network of Mexican oligarchs. The 1988 presidential
election--which the then-ruling PRI had to steal from the PRD
to win--shocked the establishment on both sides of the border.
By opening up Mexico to US money and influence, NAFTA was a way,
as the US Trade Representative said to me at the time, "to
keep the Mexican left out of power."
Until the 1980s, Mexican drug (mostly
marijuana) smuggling to the north was modest in scale and generally
tolerated by successive PRI governments. Their message was: we
don't care what you sell to the gringos, but no rough stuff here,
keep it away from our kids and of course share a little of the
profit under the table. But the US-backed neoliberals who took
over the PRI in the 1980s had closer ties with the Mexican cartels.
The brother and father of president and NAFTA champion Carlos
Salinas--hailed in Washington as a good-government reformer--were
widely accused of being connected to the drug business. In Salinas's
first year in office his national police chief was found with
$2.4 million in drug money in the trunk of his car.
In the 1990s, as the geographically better-positioned
Mexican cartels muscled out the Colombians as chief cocaine retailers
to the US market, their profits and political influence grew.
But so did the rivalry among them and their allied government
factions for control of trade routes. Bullet-riddled bodies began
showing up on the streets, making the public nervous.
Seeking legitimacy after his 2006 election
was tainted by charges of fraud, President Felipe Calderón
declared war on the narco-traffickers. It was a popular gesture,
but given that the police, the military and the legal system are
heavily infiltrated by the gangs, it backfired. The narcos reacted
with horrific violence--assassinations, beheadings and mutilations
of police and soldiers as well as thugs, brazenly displayed on
YouTube. Losing control, Calderón appealed to George Bush
II for help. The result: the Mérida Initiative, a $400
million-per-year program to provide aircraft, military equipment
and training to the Mexican police and military.
After decades of keeping its distance
from the United States, the Mexican military--like the armed forces
of Colombia, Honduras and other Latin American countries--is becoming
a Pentagon client. In turn, Mexican society is itself becoming
militarized. Corrupt local police are being replaced by soldiers
who may be slightly less corrupt but who are a greater threat
to human rights and democracy. An April Human Rights Watch report
identified seventeen specific cases of abuse by the Mexican military,
including "killings, torture, rapes, and arbitrary detentions."
To his credit, Barack Obama has acknowledged
what his predecessors failed to: that the US demand for drugs
and its supplying of arms makes it an enabler in the rise of narco
warlords. But he has also made it clear that neither issue is
on his administration's agenda. Moreover, just as Bill Clinton
carried the water for George Bush I's NAFTA, Barack Obama has
endorsed Bush II's Mérida Initiative.
Given the unwillingness of US politicians
to deal with the demand side of the market, the Mérida
Initiative is not likely to be any more successful in eradicating
the drug trade than the $6 billion Plan Colombia has been. The
best one can hope for is some sort of market-sharing deal among
the cartels that would be implicitly endorsed by the Mexican government
while Washington tactfully averts its eyes. Given that in many
areas, drug money is the chief source of campaign financing, a
PRI-dominated Mexican Congress might be just the right forum for
a cynical, but welcome, end to the killings.
Meanwhile, the drug violence has frightened
away tourists and investors, making Mexico's recession even worse.
Most forecasters expect the economy to contract some 6 percent
this year--a huge hit to a country in which 45 percent live on
$2 a day or less. Calderón's response is to tread water--rescuing
big businesses that speculated on Wall Street derivatives and
dribbling out a bit more public spending--while waiting for the
United States to once again suck up Mexico's surplus labor.
But even when the US economy recovers,
it is unlikely to re-create the credit boom that kept the NAFTA
deal afloat. In the post-crash era, the United States will finally
be forced to address its trade deficits and its massive foreign
debt. Americans will have to slow down consumer spending, increase
savings and sell more to--and buy less from--the rest of the world.
If Mexico could not prosper during fifteen years of exporting
goods and people to a bloated US consumer market, it is hard to
believe it will be able to do so when that market has slimmed
The entire relationship must be rethought.
In this regard, Obama's abandonment of his campaign pledge to
renegotiate NAFTA was a missed opportunity. A renewed debate over
the trade deal could have spurred public discussion of the failure
of neoliberal economics, the "war on drugs" and an immigration
policy that ignores conditions in Mexico that drive people across
the border. It could have been a forum to think through the question
of how continental integration can work for working people rather
than just investors. For example, what kind of cooperative transportation,
energy and green industrial policies would make the people of
three nations--now bound together in one market--globally competitive?
Obama's Wall Street advisers have no more
interest in this sort of change than did Bush's. And without a
new economic direction, life for the average Mexican will surely
worsen and social tensions rise. Some Mexican friends point out
that the revolution against Spain erupted in 1810 and the one
against the US-backed dictator Porfirio Díaz in 1910. And
in 2010... ?
In any event, Mexico's growing troubles
will not stay conveniently on the other side of the Rio Grande.
Build a ten-foot wall, and desperate people will find twelve-foot
ladders. Free trade will, of course, continue to flourish; Homeland
Security Secretary Janet Napolitano estimates that Mexican drug
cartels are now operating in 230 US cities.
So, thanks to the people who brought you
the subprime mortgage disaster, the credit freeze and the Great
Recession, the next Mexican revolution may come closer to home
than you think.