BY JACK BARNES
When U.S. treasury secretary Robert Rubin announced his
planned resignation May 12, the New York Times gushed, "Mr.
Rubin was almost universally praised on Wall Street, Capitol
Hill, and in many foreign financial centers as a stabilizing
influence on the financial markets." A selection from pages
54-58 of Capitalism's World Disorder: Working-Class Politics
at the Millennium, points to the real record of the Clinton
administration and its chief financial officers, as it affects
millions of working people around the world.
This excerpt is from a talk given at a regional socialist conference in Los Angeles over the 1994-95 New Years weekend. On December 20, Mexican president Ernesto Zedillo had announced a devaluation of the peso. Over the following week, the Mexican currency plummeted 40 percent, in a harbinger of the financial crisis that swept much of Asia in 1997.
Capitalism's World Disorder is copyright (c) 1999, reprinted by permission.
The newspapers are now saying that Zedillo will soon announce his "plan" to deal with the crisis. But the terms of a deal have already been worked out and dictated by Wall Street and Washington, with the craven concurrence of the most powerful capitalist families in Mexico.
More of the national patrimony will be put on the auction block. This includes many assets considered off limits to Yankee and other foreign capital since the high point of the Mexican revolution in the second decade of this century and the resurgence of anti-imperialist mobilizations in the late 1930s. The latest plans are already being floated in the press. Finance capital is pressing for bigger openings for U.S., Canadian, German, British, Spanish, and Japanese banks to operate in Mexico, including for the first time to establish outright ownership of Mexican banks. The government had nationalized all banks in 1982 at the height of Wall Street's debt squeeze on Mexico, but had begun reprivatizing them in 1991. And earlier this year Salinas permitted imperialist banks to set up shop in the country for the first time in decades.(1)
Wall Street and Washington are demanding that the Mexican government accelerate the privatization and sale of other previous "untouchables," such as the ports, public utilities, and the railroads and other transportation. Above all, the imperialists want to make inroads against Pemex, the state oil enterprise. Pemex has been regarded by Mexican working people as a symbol of national sovereignty and dignity since the country's petroleum resources were taken back from pillage by British and U.S. monopolies in 1938. Just a few years ago, Salinas had to back off from an initial probe to begin privatizing petrochemical operations. But government and Pemex officials are now using the peso crisis to float a variant of the idea as a trial balloon.(2)
Far from defending the economic and human rights of Mexican working people - on either side of the border - Zedillo and his new finance minister are readying their "anti-inflation" program. Interest rates are being driven up, prices are soaring, and government officials are already predicting that inflation -which had been hovering around 7 percent this year - will reach 15 to 20 percent in 1995; it will actually be a miracle if it is held to that. So the Mexican president is now gravely reminding us that wage hikes are responsible for inflation - a reactionary falsehood - and trying to convince workers that "all of us" must sacrifice for the good of the nation.
The employing class and their government in Mexico are now demanding that the three-way pact, the "Pacto," with the trade unions be renegotiated to guarantee that wage hikes are capped at 7 percent and no more. It does not take a Yale Ph.D. to figure out what is bound to happen to real wages and take-home pay of those who work for a living. Or to know that many more of Mexico's 25 million peasants are going to be driven off the land by rising costs and interest rates.(3) Nor will there be the promised national crusade for universal secondary education. To the contrary, the government will try to slash budget expenditures for schools, hospitals, housing, food subsidies, pensions, and other programs that have been won by workers and peasants, and through which a tiny portion of the wealth they, and they alone, produce is restored to them. In fact, Zedillo and his advisers north and south of the Rio Bravo will undoubtedly soon announce their "discovery" that a too rapid increase in social spending was among the causes of the peso's collapse.
Those in Mexico's relatively sizable new urban middle class and professional layers are being hit hard too. The Mexican bourgeoisie has fostered enlargement of the middle class as a buffer between themselves and the much more rapidly expanding urban proletariat. But Mexico is still far from having the modern class structure that has helped maintain substantial social and political stability in most imperialist countries since the wave of capitalist expansion that began soon after World War II. Salinas's class, nonetheless, stakes a great deal on the solidity and political support of the middle class.
These petty-bourgeois layers have seen their incomes rise over the past decade. They have become used to purchasing increasing amounts of imported goods from the United States, Japan, and Europe. They have gone into debt to buy houses and cars, and they have racked up credit card bills for washing machines, CD players, computers, and other consumer appliances. But now every borrower is feeling the squeeze that comes when interest rates start soaring.
If we tighten our belts, Zedillo and Co. are preparing to announce, then our friends in Washington and Ottawa and the International Monetary Fund have pledged to stand behind us 100 percent. Of course, these "friends" in Washington have no direct interest in "rescuing the peso." They intend to do what is necessary to defend the dollar and make sure that U.S. holders of Mexican bonds - the Yankee ruling families - get paid. And that will undoubtedly bring Mexico's "friends" in Washington into conflict with Mexico's "friends" in Ottawa, London, and elsewhere, who have no interest in "rescuing" either the peso or the dollar.(4)
Footnotes
1. Of the eighteen banks that were privatized, one-half
collapsed and were placed under government control following
the peso crisis. Under new legislation, several Mexican banks
were for the first time taken over by imperialist banks,
including Wall Street's Citibank. An extension of that
legislation in December 1998 authorized 100 percent foreign
takeover even of Mexico's three largest banks, which had
previously been exempted; that same new law ratified a
government "bailout" of the Mexican banking system of some $60
billion - 16 percent of the country's gross domestic product.
Bourgeois propaganda to the contrary, Mexico's banks never "recovered" from the 1994-95 crisis. Their Wall Street bank ratings remain among the world's lowest (an "E" in August 1998, defined as "very weak intrinsic financial strength"). Loans granted by Mexican banks in 1997 remained at about one- tenth the level of several years earlier. And the peso itself has continued to slide, from about 3.5 pesos to the dollar prior to the December 1994 devaluation to roughly 10 pesos to the dollar in late 1998.
2. In mid-1995 the Mexican government announced plans to sell off sixty-one secondary petrochemical plants, at an estimated price of $1.5 billion. In face of mounting nationalist opposition to the planned privatization, the Zedillo regime in October 1996 revised these plans, saying that only a minority stake in these operations would be put up for sale. Only in late 1998 did Mexico's Energy Ministry begin the sell-off of the first of these plants.
3. In fact, the official inflation in 1995 peaked at almost 50 percent in Mexico, and still stood at nearly 19 percent at the close of 1998. Rates on mortgages, car loans, and credit cards ranged as high as 180 percent in the wake of the crisis, and short-term rates remained at nearly 35 percent in November 1998. Class polarization has deepened, as real wages have dropped each year since the 1994-95 crisis. The government-set minimum wage, in real terms, fell by a third between 1990 and the end of 1998.
While inflation soared during 1995 and the first half of 1996, Mexico sank into its worst recession since the 1930s. According to official figures, the gross domestic product fell by 7 percent in 1995. Some two million workers were laid off during the year.
4. In return for a promised $50 billion in "loan guarantees" patched together by Washington, the U.S. rulers wrested agreement from the Mexican government that all Pemex export revenues would be deposited in an account at the Federal Reserve Bank of New York before being transferred to Mexico - or seized in the event of a loan default. Mexico's foreign debt to imperialist-owned banks and financial institutions at the end of 1997 remained at the staggering level of $150 billion. Substantial publicity was given to the Mexican government's early payback in January 1997 of its loan from Washington, including the whopping $580 million in interest extorted by the U.S. Treasury. Less attention, however, was given to the fact that this payback to the U.S. government was financed by other foreign loans, doing little or nothing to lessen Mexico's overall debt slavery to finance capital.