Part 2: The Changing Face of the Institutional Revolution

Radical social democracy to the rescue

It was not until 1931 that labor’s representatives were fully incorporated into the state. This acceptance of the working class as the working class, as a potentially antagonistic class who must be brought into the fold to neutralize their revolutionary impulses, is the basis of the social democracy the Mexican bourgeoisie utilized for decades. (As late as 1988, President Salinas could still trumpet the ‘indestructible pact between the Revolutionary government and the working class.’)

With its proximity to, and integration with, US capital, Mexico was profoundly affected by the Wall Street Crash. By 1934 the bourgeoisie had comprehensively failed to restore stable class relations for the accumulation of capital. Exacerbated by the Depression and the militant recomposition of both the peasantry and the proletariat, revolutionary change from below was once more on the agenda. If American capital-in-general was now reluctantly going along with the New Deal, the solution to the crisis in Mexico had to be far more radical. Most individual Mexican capitals recognized the objectively higher level of class struggle. The nightmare of 1914 haunted them more than ever. As such the Mexican ruling class’s radical solution to the crisis opened up the possibility of fostering a movement that would not go home when it was told to, that could develop in its own direction and rupture forever the fabric of bourgeois society.

This radicalized form of social democracy came through the conduit of Lazaro Cardenas, President from 1934–40. His first and most important task was to sign a pact with the new CGOCM (Confederation of Workers and Peasants). By 1935 half of all Mexico’s organized workers were in CGOCM and strikes were going through the roof. Cardenas immediately recognized the right to strike, poured money into CGOCM patronage and shifted the sympathy of the state’s labor relations boards away from the employer and towards the working class as represented by the unions. In 1936 CGOCM was renamed the CTM (Confederation of Mexican Workers) and recognized as the official national labor movement. The highpoint of the radical social democratic project came in 1938, with Cardenas’s nationalization of the largely US-owned oil industry. Cardenas manipulated the enthusiasm for this measure to generate a spirit of ‘national unity’, which he then used to crush the insurgent workers’ movement.

It was not only the cities the radical party-state had to attend to in order to prevent social revolution breaking out. The countryside had ignited and sustained the Revolution, and could do so again. Cardenas’s solution was a massive redistribution of land the like of which social democracy in Mexico has not been compelled to repeat. Naturally only the worst land was parceled out — the property and interests of the hacendados left intact. While the Cardenas reforms appeared impressive, they not only preserved social relations in the rural areas, they bolstered and expanded commodity relations by creating a new class of small landowners. For the vast majority a small patch was unsustainable and seasonal wage-labor unavoidable. The ultimate result of the land reforms was marginalization for the many, a new network of small competitive farming for some, and the consolidation of the lumbering latifundias.

In fact Cardenas had mobilized the working class in part to discipline those recalcitrant sections of the bourgeoisie who needed to be saved from themselves. After 1940 the bourgeoisie as a whole accepted the necessity of state intervention. Even more crucially, any revolutionary movement from below could be mediated through the now-reliable CTM or the new CNC (National Campesino Confederation). As part of the party-state, these organizations could deliver certain concessions, defuze proletarian and peasant anger through nationalist channels and turn a blind eye to repression if it was needed. The state had solved the crisis it had been mired in since the fall of the Porfiriato, and it has followed the same model until very recently: one party guaranteeing social democracy (peace between the officially-recognized antagonistic classes). Unlike the west, it has not needed the shield of formal bourgeois democracy to do so.

The Economy after 1940

The American Fordist model of accumulation, whereby increased productivity pays for higher wages, which in turn boosts demand, could not be followed in Mexico. The native bourgeoisie was too weak to innovate and had always relied on America for heavy industrial investment. The agricultural sector still lagged far behind that of America. While US capital may not consciously have wanted to keep Mexico underdeveloped, it saw it generally as fit only for natural resource and labor-power exploitation.

Mexico did, though, industrialize rapidly after 1940. The model was state-led capitalism with its own Mexican peculiarities. Investment in infrastructure was the province of the state. Petroleum, rail and communications sectors were all under state control, and the state generally carried out economic development which the private sector thought too risky. The resources of the state were augmented by huge foreign investment. Mexico has always been a natural first stop for America’s foreign-bound surplus value; now it flooded over the border as a result of the postwar boom.

By the 1960s, Mexico had been enjoying its economic ‘miracle’ for some time. GDP had risen on average 6–7% annually. Profit flowed into state coffers, paying for an unofficial welfare state of sorts. However social inequality was reaching new extremes. By 1969 the proportion of national income going to the poorest half of the population was only 15%. In rural areas, as agricultural mechanization increased and productive land was concentrated, the number of un- or underemployed was going up. Some, seeking to refuse proletarianization, moved away from the agricultural heartlands and attempted to chip out a living from barely cultivatable land — this being the option many Chiapan Indians took; many moved to the cities to join the reserve army and effectively kept factory and workshop wages down; some became migrant workers following the harvests through Morelos, Oaxaca, San Luis Potosi and Veracruz. Still others crossed the border into the US.[8]

In the towns and cities even the organized industrial proletariat suffered from low wages. While they were relatively well off compared to those in small workshops or the unemployed, struggling to survive in any way that they could, their wages were a fraction of their US counterparts’. Their union organization militated for higher wages, yet this was offset by the absolute corruption of the charros (union bureaucrats), who would often swipe their members’ dues. More than anything being in a strong union meant a guarantee of a job, a buttress against unemployment.

However, for the ‘pillars of society’, those sections of the population incorporated into the party-state, the costs of the reproduction of labor were paid, after a fashion — by the ‘PRI welfare state’. It is difficult to quantify, but the far-reaching web of the PRI guaranteedan existence for those sections of society it needed to perpetuate itself. Whether it be official (wage rises) or unofficial (backhanders, protection or the elimination of a rival), it all had to be paid for. The corruption of the PRI welfare state has certainly retarded the efficiency of Mexican industry, prompting many members of the bourgeoisie to defect to the PAN (National Action Party), the pro-business Catholic party set up in the 1930s to oppose the Cardenist reforms.

The 1959 Movements

1958–59 saw a sustained offensive by the proletariat over both wage levels and the control of union charros.[9] It is difficult to know to what extent working class self-activity was mediated; certainly the railwaymen’s, electricians’ and teachers’ strikes were led by the Communist Party, and all the ideological drag of Stalinism was present. Dissident Marxist leaders were also prominent, but presumably their beliefs were variations on a theme. However, the fact that the Communist Party was proscribed from 1946 to 1977 meant that following them led to an immediate challenge to the law of the land: the 1959 movements led frequently to violent confrontation with the state.

Capital also reacted to 1959. Wary of the working class’s proven power over the railways, much investment now shifted into air freight and automobile production to begin a new round of accumulation — and struggle.

Mexico’s ’68

By the late 60s the inability of the PRI to reform and democratize itself was apparent to many sections of society, and was a major contributing factor to the student revolt of 1968. These students were bent on giving cardiac therapy to the cadaver of the Revolution — determined to rejuvenate the egalitarianism of the 1917 Constitution. The movement, in its concentrated phase of July — October became radicalized through its many violent confrontations with the state. Their numbers were swollen by pissed-off proletarians angry at the spectacle and expenditure of the imminent Olympic Games. Ten days before the Games were due to open, around five hundred students were killed and 2,500 wounded in the Tlatelolco massacre. The army attack, which has been marked every year since by demonstrations, finally blew the lid off the PRI’s claims to revolutionary legitimacy. It also damaged the party-state in more concrete ways: traditionally unconcerned about using clubs and bullets against workers and peasants, the PRI now found itself shooting down middle class students — its the natural constituency for reproduction.

Many students, though, were brought back ‘within budget’ after a time in prison. Those who had moved beyond a critique of the PRI to a wider critique of capitalism were forced out of Mexico City to towns and cities that carried less personal risk. For those being actively pursued by the state, this meant disappearing into Mexico’s vast hinterlands. There is a direct lineage from the Tlateloloco massacre to the many guerrilla groups that appeared in the rural margins in the early 1970s. Tainted by the militarist ideology of Che or Mao, these were all smashed with the help of the CIA by 1975.

The early 1970s — economic crisis

And there was a new problem. The economic boom stemming from the industrialization process and the PRI employment protection racket, which had partly offset the traditional role of the reserve army, meant the nationalized industries were severely overmanned and inefficient, and run by an entrenched working class accustomed to relatively high wages.

They say that when America sneezes, Mexico catches a cold. Now mired in its own crisis of accumulation, America in the early 1970s was taking Mexico down with it. As capital increasingly freed itself from national boundaries, transforming itself into highly mobile finance capital, investment flooded away from the industrial heartlands of both North America and Mexico to the Pacific Rim economies.

The recession gave the bourgeoisie less scope for conceding the above-inflation wage rises that had headed off trouble in the past. As a result the negotiating position of the charros was considerably weakened. With the ideals — and repression — of the student movement fresh, the working class, particularly from 1973, began a series of strikes, go-slows and demonstrations. Just like 1959, their demands were over wages and the removal of corrupt union leaders: a struggle for autonomy that raised the possibility of going beyond the trade union form as such. The movement organized new unions outside the CTM and formed currents of resistance within it.[10] The fact that the workers had often to physically fight the charros and their goons, who sometimes used the tools of disappearance and assassination, meant that the CTM could easily and visibly be identified as the enemy. While few workers seem to have used this as an opportunity from which to develop a critique of wage-labor, there can be no doubt that the mid ‘70s strike movement increased both the self-confidence of the Mexican working class, and the sense of their being an antagonistic class, the opposition to, and negation of, the bourgeoisie.

The movement reached its height in 1976. The radical electricians’ union, who had brought together new unions, urban squatter groups, and peasant organizations to form the ‘National Front of Labor, Peasant and Popular Insurgency’, now called a national strike. The administration responded by sending the army to occupy every electrical installation in Mexico. This was only the most visible of the many acts of repression which pushed the new labor militancy into defeat.

The state also responded with massive social spending. Foreign investment, however, was flooding out of Mexico. Moreover, state expenditure on unproductive industries staffed by rebellious workers was never going to solve the crisis of accumulation. Then an unexpected and propitious discovery gave the bourgeoisie room to maneuver — oil.

Oil boom — and bust

As a result of the oil boom, the economy was growing at around 8% by the end of the 1970s. Not only had the discovery of new petroleum deposits pulled Mexico out of the recession that had begun in 1973, the growth and concomitant wage rises had served to head off the snowballing class struggle.

The oil still in the ground off the Yucatan peninsula and in Chiapas was used as collateral for huge loans from abroad. Western banks, stuffed with surplus petrodollars as a result of the OPEC oil price hike eagerly lent out these vast sums to Mexico and many other ‘Third World’ nations. The loans were used to cover both the trade and the budget deficits.

The bourgeoisie assumed the price of oil would continue to rise, as it had done since 1973: the extent of their loans was predicated on future oil revenue. However, the price of oil dropped sharply after 1979. Coupled with rising interest rates that pushed the external debt ever higher, Mexico in 1982 was unable to keep to its scheduled repayments. By then, the nation owed $92.4 billion, the third largest international debt after the US and Brazil. In August of that year, Mexico triggered the international debt crisis by declaring a moratorium on its repayments. In so doing it brought the international banking system to the edge of collapse. Western banks were soon refusing loans of any kind to the whole of Latin America which was consequently plunged into a decade-long recession.

In a desperate attempt to stem the hemorrhaging of capital, the then-President Lopez Portillo in almost his final act nationalized the banks. In so doing he followed firmly in the tradition of PRI economic nationalists who blame foreign, and especially US, capital of bleeding their country dry. In fact the bank nationalization was the last time the economic nationalist card was be played with any real content.

The Lost Decade

1982–1992 is sometimes called the Lost Decade in Mexico. The story is a familiar one: having to go to the IMF for money to keep the economy afloat, the PRI found themselves obliged to roll the state back from the arena of capital. This meant bringing the budget deficit under control, removing state subsidies to industry and agriculture, and lowering wages in order to stem the runaway inflation which had been fueled by the oil mirage. State enterprises were privatized by the fistful, usually offloaded at below market value to PRI cronies. And 1986 saw Mexico finally joining GATT after years of protectionism: many companies went bankrupt as a result.

In December 1987 the Economic Solidarity Pact was signed by representatives of government, the unions and business. (Many of these union leaders had come to prominence through the struggles of the 1970s). Restraint in wage demands and price controls on consumer goods was agreed. The Pact was nothing less than an attempt to preserve the social fabric so that restructuring could go ahead unfettered. But its very existence raised the possibility of its being wrecked by a new proletarian offensive.

Unfortunately the terrain of struggle had changed. While the struggle for autonomy in the 1970s had ended at the time of the oil boom, capital was now in a much less expansive position. If the crisis of accumulation was to be solved restructuring was essential. The offensive anti-charro struggles of the working class now became purely defensive and economic. As plants were closed or privatized, workers made redundant or had their wages lowered, the struggle oriented itself around sectional bread-and-butter issues, which engendered fragmentation. Better-paid CTM workers were still relatively protected, and the 1970s generation of charros were consequently in a much more credible position to mediate struggle. And if the situation became desperate, there was always the allure of the US border for the desperate proletarian.

Two moments from the 1980s indicate, however, that overt class antagonism had not vanished from the Mexican landscape. The first is to be found in the weeks following the devastation caused by the 1985 Mexico City earthquake. With the government paralyzed, the residents of Mexico City’s barrios formed themselves, initially, into rescue and medical teams, and shortly thereafter into community groups. These groups both rebuilt houses and prevented the incursions of landlords, many of whom wished to use the earthquake as an excuse to evict their tenants and rebuild the neighborhoods with middle class housing at middle class prices. From these autonomous working class formations came a network of self-help groups, groups that make up part of what the Zapatistas call ‘civil society’.[11]

A more dissipated, but nevertheless important response to the austerity program was the Presidential election of 1988. Cuauhtemoc Cardenas, a renegade PRI politician, stood against the PRI — and ‘won’. Soon afterwards he formed the PRD, now the ‘official’ left opposition in Mexico. The PRD is very much old school PRI: for state intervention, increased welfare, a measure of land redistribution, against GATT and NAFTA. Prior to 1988, the PRI had only to manage electoral fraud on a gubernatorial level. The Cardenas challenge was so unexpected and so overwhelming that the party-state panicked and fixed the results in the crudest possible manner. Mexico City was immediately alive with anti-PRI demonstrations. The TV screens showing the polling percentages had simply gone blank for hours, and mountains of votes marked for Cardenas were found piled on the Distrito Federal’s rubbish tips or floating down Mexico’s waterways.

Elections in Mexico often carry such a heavy coercive element that they can be a world away from the pure bourgeois individuality of elections in the West. PRIistas are usually present in gangs around the ballot boxes, and refusal to vote the right way could mean losing a job, having your child barred from school or simply being given a beaten. Thus a refusal to vote PRI is not taken lightly, and is much more likely to occur after discussions and agreement with friends and neighbors. This need to come together collectively immediately and paradoxically raises the possibility of a world beyond democracy.

The Tequila Effect and Beyond

With cheap American commodities just over the border, Mexico is adept at sucking in goods from abroad, leading to periodic crises in the balance of payments which have usually been solved by devaluing the peso. The peso was overvalued in 1994 — but everyone assumed the PRI had sufficient foreign currency reserves to protect it. In fact these reserves had fallen from $33bn in February to only $2.5bn in December, money which had been used to cover the yawning balance of payments deficit. Such a dramatic erosion also shows just how quickly the relatively protected Mexican market was opened up by NAFTA. On the 20^th of December, the new Zedillo administration announced a one-off devaluation of 15%. Panicked foreign investors scrambled to get out of both pesos and Mexico. The PRI used the last of its foreign currency reserves to bolster the peso, but two days later it was forced to float the currency on the markets, where it dropped 40% against the dollar.

With the dollar such an important factor in Mexico — companies and the government generally having their loans denominated in dollars — the devaluation now meant the debt burden in the economy had risen massively. International debt default seemed once again to be on the cards. And what was being called the Tequila Effect could spread — for Latin America, only recently recovered from the years of international finance isolation that had resulted from the 1982 default, this would be nothing short of catastrophic. Despite the isolationists in Washington, a $50bn rescue package was put together by the US and IMF, specifically to service short-term debt. In March 1995 the PRI announced an austerity program that included a 10% cut in government spending, increased VAT, fuel and electricity price rises and imposed credit restraints.

Meanwhile, with interest rates soaring at 120%, many businesses and mortgage-owners were unable to keep up their repayments, despite a new government subsidy for the middle class. Seven banks collapsed and needed rescuing by the government. The true cost of this bailout only became apparent in 1999 — $93bn, nearly 20% of GDP! This debt, which is accruing 18% yearly interest, and which the PRI has hidden from public accounts, falls due in 2003. Unless it is restructured soon, the Mexican capitalist class may find themselves in trouble yet again.

The response of the working class to this austerity package was determined by the depth of the recession that followed. Unlike 1987, the CTM refused to sign an economic pact with the government and business. Consequently there was no official policy of wage restraint during this crucial time. But the refusal to endorse austerity was hardly in response to a militant working class movement within the CTM tent. Rather it was because, their social base undermined by privatization, the CTM now found itself in much stiffer competition with independent unions and was compelled to posture a little more credibly. Neither, however, were the independent unions arenas of militant anti-austerity. Shocked by the scale of the 1995 recession — one million out of work, another four million working less than fifteen hours a week — the working class was unable to move beyond the fragmentation wrought by the economy and which the trade union form accepts. Furthermore, the PRIs targeted anti-poverty program PRONASOL, which had come into being as a result of the 1988 election shock, offset some of the very worst effects of the recession.

Some fantasize that the devaluation was a punitive measure directed at the working class lest they become overly-inspired by the Chiapas rebellion; others that Zedillo deliberately elected to expose the economy to crisis and therefore force a period of capitalist restructuring. Neither position is tenable: by December 1994 the Zapatistas’ initial impact had evaporated and the uprising was militarily contained — indeed the PRI had secured a new incumbent in the Presidential Palace. And the depth of the recession, which the PRI could not have forseen, is surely proof that they never intended to engineer more than an simple adjustment in the balance of payments. Rather what we see is a crisis of confidence in the Mexican bourgeoisies’ ability to manage accumulation on the part of global finance capital.

There is no doubt, however, that the recession has vigorously restructured sectors of the Mexican economy. The competitive edge that the devaluation gave to Mexican exports has been sustained. Oil, once such a key export, now accounts for only 10% of the country’s export base. It is this export-led recovery that the capitalist class see as the fruit of the restructuring that has been taking place since the late 1980s, and which superficially appears to be as a result of NAFTA. For the working class, real wages have still not reached their pre-devaluation levels. More wage cuts and job insecurity is on the way as the privatization bandwagon judders on and the old social contract is further destroyed.

The swift economic recovery from 1995 showed how successfully the PRI had reinvented itself as a party of neoliberal economics. They did not attempted to spend their way out of trouble, as they have done in the past. Instead they inflicted the harshest of free market medicines on the population. By stealing their policies, the PRI seemingly marginalized the PAN. Two related contradictions now beset the PRI however. The first was that with the opening up of Mexico to trade liberalization, and the subsequent deluge of American commodities, the PRI could no longer bang the ideological drum of economic nationalism with any coherence. This may not have been a problem: the Mexican bourgeoisie have decades of practice at appearing to be masters of their own fate while having huge sections of their economy subordinated to the interests of American capital.

The second contradiction was more serious. By so dramatically reducing the size of the state sector, the party-state inevitably curtailed its own ability to dispense patronage and do favors.[12] The question for the PRI became: how successful could it be at maintaining its traditional network of influence and power, a network born out of a corrupt and state-led economy, in the face of the new competitiveness the free market demanded. With the PRI unable to solve this problem, a problem which undermined their own social base, Mexico could open up to all sorts of possibilities.