Earlier, I discussed the role played by banks, the International Monetary Fund (IMF), the World Bank and elites in the global North and South in shaping the continued dependency in the post-colonial period. The next stage of this structured control and manipulation in the post-colonial state took a sharp trajectory after the end of the Cold War and the triumphant march into ‘market economies’ and privatization, which was assisted by concluding the last Uruguay Round of General Agreement on Trade and Tariffs negotiations in 1993. It is in this context and with the introduction of the World Trade Organization that sets in rapid motion the new and highly abusive globalization trend, which continues today.
In the post-Cold War period, the US emerged as the sole remaining superpower without any counter power to offset this unipolar development. The Soviet’s collapse meant that only one world system remained intact and all participants must adhere to its fundamental dictate. Eastern Bloc countries as well as Russia itself embraced capitalism and sought and received admission into the sacred halls of the World Bank and IMF. As expected, countries across the world lined up to join the victor of the Cold War and, as a result, the emerging capitalist opened their economies widely for foreign investments and the opportunity for wealth accumulation. On a global level, the free trade engine set in motion years earlier by Ronald Reagan was humming across the globe, intent on removing restrictions and regulations that might impact or hinder multi-national corporations’ access to world markets.
GATT: The Global Trade Bouncers
The world trade system’s governing body, the General Agreement on Tariffs and Trade (GATT), was set up in 1947 and signed by 23 countries as a multilateral trade institution with the specific task of abolishing quotas and reduction if not total removal of tariff duties. The agreement was signed in Geneva and went into effect on Jan. 1, 1948, but at the time it was considered an interim accord that would be incorporated into a United Nations structure once finalized. Needless to say the UN did not develop such a structure and GATT continued to govern and regulate the international trade system. From its inception, GATT was to look after and protect the global North’s trade interest at the expense of the post-colonial South as well as the Communist Bloc during the Cold War.
Trade liberalization and the removal of quotas and tariffs sounds appealing and might indicate the pursuit and foundation of an equal playing field in the global markets; unfortunately, such equality or opportunity has never been the case and is less likely for the global South in the post-colonial period. GATT’s inception was to cement the new global economic, political, and social order and constitute a controlling agency to project into the future and make permanent the market advantages of the global North over the post-colonial South. How to keep the embedded disadvantages and give them a legal imprint was at the heart of GATT and its many rounds of negotiations.
It was through GATT that differentiated sets of rules were put in place to regulate the market and to make it supposedly more ‘advantages’ for the global South to export raw materials while complicating and instituting tariffs on finished and processed products from the same countries. It is in this way and through the sophisticated GATT international mechanisms that the global South was incentivized not to develop a fully integrated economic system away from raw materials and into finished products, then exporting or using it domestically. By keeping trade favorable for raw materials it was possible to disrupt any incipient economic plans in the post-colonial South while keeping in mind all the other factors discussed in earlier parts of the essay.
When a country trades in raw materials, the economy remains rudimentary, two or three stages from field or mines to the global North markets. Thus, the structure connects the local farmer or small mining operations to big corporate manufacturing interests in the North and through various schemes including, at times, military coups d’état, the raw material supply chain is kept intact. Developing a local processing economy would translate to creating money circulation in the market, increase employment vertically and horizontally, incentivize innovations and foster internal dependency between various parts of the society, which is something that colonialism worked hard to disrupt and prevent and continued in the post-colonial era. The raw material economy that was promoted and protected by GATT—and continues with the World Trade Organization—went a long way to disrupt future horizons of a truly independent and dynamic economy in the global South and in the process provided a long imperial stick to beat into submission the post-colonial subject.
In addition to the raw material trade mechanism is the regulating of payment systems for international trade through the establishment of the basket of hard currencies (US, British, Swiss, German and Japanese currencies), singularly through which commercial transactions can be commissioned between states. Through the hard currency system, it was much easier to control and regulate trade with the global South and have constant leverage over their economies. At the same time, one must account for the basic fact that transacting in these currencies implies by necessity the need to purchase and constitute reserves of these five currencies (the Euro replaced a number of these currencies, but the basic principle still applies), which if understood correctly is one way that the global South subsidies the North by constantly needing to invest in these floating currencies.
More critically, the basket of five hard currencies represented the New World Order and with it the implied or promoted stability and constant growth that can produce returns on investments. This perceived or, at times, real stability, if measured against the global South rate of return, created the potential for economic turmoil in the post-colonial state South, forcing those countries to invest in the five hard currencies, treasury bounds and various commercial instruments connected to each or, at times, all. Consequently, the structure of global trade under GATT was the exact instrument that led to total control of the post-colonial South economies and structured dependency in the policies and machinations of the global North.
Since the 2008/09 economic crisis, it has become common knowledge that the banking institutions in Europe and US have constantly and regularly manipulated the benchmark interest rate index of the London InterBank Offered Rate (LIBOR) and currency exchange rates so as to increase their profits. The stranglehold through these exchange mechanisms and hard currency requirements is a disturbing reality that rarely receives the much needed scrutiny it deserves though it is an important economic controlling tool.
Suzanne Collins, NAFTA and Mexican Immigration
In her dystopian young adult novel series, and the films that have been made from them, Suzanne Collins describes a post-apocalyptic, fractured North America in which the peoples from the various regions must pay tribute as punishment for rising up to protest and change an abusive system of exploitative government. The Hunger Games (2008), describes the existence—what they have cannot really be called a life—of the people who are not fortunate enough to live in the Capitol City. In these outer districts, the residents are imprisoned, controlled, monitored, and sometimes starved if they step out of line. Each year two children from each district are selected to participate in a fight to the death against each other. There is no opportunity to refuse to fight as the arena in which the games are held is a controlled environment and the players and the elements within can be and are manipulated. It may be useful to think of the scenario of The Hunger Games when considering the consequences of the implementation of NAFTA (and other trade agreements) as described below.
On December 15, 1993, after seven years of negotiation the GATT Uruguay Round was concluded with an agreement between 117 countries in which they pledged to reduce trade barriers and further decrease tariffs. The agreement called for a “substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis” between signatory states. Officially named The Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, the agreement was signed on April 15, 1994 and subsequently ratified by the US Congress on December 1, 1994 and became law on January 1, 1995. If the term “Final Act” conveys anything it is indeed that reality was transformed into the theater of the absurd since free trade in for the global South has always meant structured dispossession and civilized robbery done in daylight and on paper.
Trade liberalization and reducing tariffs, according to its proponents, would bring forth the hoped for better life and create wealth and prosperity across the globe. It was a cheap elixir sold to jubilant crowds that were ready to climb into the fast moving American triumphant bandwagon and try to get rich in a fast and furious way. The signed treaty introduced the World Trade Organization, which was empowered to implement the agreement and oversee all elements related to global trade.
What Reagan started in the US with deregulations, privatization and pro-corporations policies became the new sacred text for the market under the WTO’s promised worldly salvation through free trade. The Democrats in the US joined the trade liberalization and pro-corporation bandwagon with the elections of Bill Clinton, who moved the party to the right so as to appeal to Reagan Democrats in an effort to recapture the White House. Clinton’s shift to the right was a crafty strategy developed through the Democratic Leadership Council, a private outside group to the Democratic Central Committee and founded with the intended goal of reshaping the party away from its traditional base and into a new and improved pro-business and de-regulation advocates. The motto “If you can’t beat them then join them” was Clinton’s and DLC participants’ strategy to unload the party’s political left, social programs, Latino and African American interests.
Clinton—and his surrogates—during the campaign made sure to present himself as being tough on Blacks by instigating a confrontation with Rev. Jesse Jackson at the Rainbow Coalition Conference. The Clinton campaign, through his speech in the Convention, took on the African American poet and activist Sister Souljah by selectively using her remarks concerning the Rodney King/LA Uprising and comparing her to David Duke. Certainly, “Being tough on blacks” was an important message for Clinton in order to appeal to Reagan Democrats, soccer moms and get them to send him to the White House, which they did. And with Clinton’s election, a new Republican-light Democratic Party was born.
The shift to the right was undertaken on the backs of African Americans and Latinos, who are likewise attacked under an anti-immigration campaign that included Democratic leaders. Ending the social welfare state was the sacred mantra for the newly emerging Democrats in Republican skin and de-regulations, free trade and privatization were the way forward internally in the US and Europe. Those of the working and poorer classes were often told either directly or through implication, “You are poor because you are not lifting yourself from your bootstraps and if only you believe in free enterprise and trade, privatization and deregulation then you will become rich and possibly as rich as Trump!” The move to deregulate the financial markets went hand-in-hand with reducing government support for the poor and middle class as well as privatizing everything imaginable including prisons. In retrospect, the internal program can be viewed as a sophisticated structural adjustment program whereby corporations get to devour the economy while the poor and middle class get to pay for it through reduction in support for education, healthcare and social programs as well as tax rate reductions for the rich.
The link between the local and global or the internal and external post-colonial became clearer during this period. Clinton’s first act after being elected was to fast track the signing of the North American Free Trade Agreement (NAFTA) with Mexico and Canada, which was, effectively, anti-labor, anti-small business, anti-family owned farms, anti-environment, yet enormously benefitted multi-national corporations. NAFTA opened the door for movement of capital and goods between the three countries, but not people or labor forces. The economy for the US and Canada was especially comparable and no substantial incentive is at hand to cause mass migration from either country; however, this was not the case for Mexico. The Mexican economy was far behind both other countries and as such would have needed considerable investments and support to bring it up to par with that of the US and Canada.
For Mexico, NAFTA translated into a massive movement of capital from the US to take over small family farms and transform them into an enormous agri-business to supply US markets. The agri-business moved to Mexico to escape and bypass increasing environmental regulations in the US that limited the use of pesticides as well as minimum wage increases and over all labor costs. In addition to the agri-business, the manufacturing business began to relocate its assembly plants and the toxic aspects of its operations on the Mexican side of the border, which provided cheap and captive labor market and no environmental regulations to limit or negatively impact production.
While NAFTA did mention raising the environmental standards in the three countries, no monitoring or enforcement agency within NAFTA itself was put in place to make sure that policies were implemented. Greed was the only environmental standard operating at the corporate level and enforcement of any standard was easily bypassed by means of the always readily available sub-contracting remedy, which was put into masterful play on the Mexican side of the border. The emergence of the Maquiladoras, which are factories on the Mexican side of the border that were set-up by American corporate interests, imported raw materials and produced goods for export to US and other markets. NAFTA made the Maquiladoras into the successful model to be emulated while pointing to the slight improvement in income levels for workers hired in these abusive enterprises.
Moving the production and manufacturing to Mexico opened the multinational corporations’ eyes to the limitless possibilities of reducing labor cost, escaping environmental regulations and reducing their tax bills. NAFTA in Mexico proved to be a successful and profitable corporate model for moving production outside the US and drastically increasing profit margins. In light of the corporate success in Mexico, the US began to negotiate bilateral free trade agreements with various Latin and South American countries as well as continuing to push for global access through the WTO so as to cement the new and improved free market economy.
NAFTA’s untold story is the direct link to the displacement of thousands of peasants and family subsistence farmers who had for generations cultivated public lands and were granted communal titles through the Mexican Constitution. One key demand made by the US and Canada was for a change in land rights in Mexico, which President Carlos Salinas de Gortari moved to modify. The change in Article 27 of Mexico’s Constitution brought to an end the existing land reform gained through the 1917 revolution. Article 27 set the legal framework for distribution of community-owned lands, which are called ejidos; by 1992 almost half of the land in Mexico was in the form of one type of collective or individual ejido status. It would not have been possible for the agri-business and meat industry to take over and penetrate the Mexican market if the ejidos remained intact as they provided a communal shield against massive transfer of land ownership. Before NAFTA, the community, through ejidos, held land titles in perpetuity. However, the Mexican president, in collusion with major business interests, moved to modify Article 27 of the constitution and limit or remove communal rights to the land.
NAFTA and the Constitutional changes caused thousands of existing ejido land claim petitions already on file with the agrarian reform commission to be thrown away, thus making the lands available for sale or government transfer of ownership. The changes to Article 27 nullified all the pending petitions and overnight farmers and communities were left landless with the government moving to auction the land in favor of agri-business and US meat producing companies. It is this Constitutional change that was the primary cause of the Zapatista uprising, which launched its nationwide protest on January 1, 1994, the same day that NAFTA went into effect. The connection between Article 27 and NAFTA was immediate and deliberate. More critically, the immigration from the Mexican countryside to US cities can be located in the changes made to Article 27 that caused the displacement of hundreds of thousands of poor farmers who, for generations, had no other source of income other than the land that was taken from them by government because of NAFTA.
Mexican land was opened to US corporate interests and rapid development took place to relocate agri-business, factories, assembly plants and toxic industrial production, while making sure the existing peasants were driven out. The low income levels and high poverty rate made it possible to create some show-off pieces of progress and the improvement in living standards for the select few, while dispossessing and displacing the many. All types of deals were pursued to bring factories or assembly lines to various Mexican states with each offering every possible incentive to get one of these industrial-looking boxes in the hope of improving employment or, through it, managing to kick start the dormant economy.
This illusory promise of growth and economic opportunity was packaged and sold by US corporate elites who were looking for bigger profit margins and new ways to compete with cheaper Asian products. The Maquiladoras were the initial answer whereby manufacturing was moved to Mexico, thus reducing costs and freeing corporations from any real environmental oversight or labor laws. On the American side of the border, the move to Mexico allowed corporations to extract wage concession from labor unions, reduce or remove local and federal government regulations as well as extend large loans and/or subsidies to keep production in the US.
In this context, NAFTA had its intended outcomes for corporations as it forced US labor to forgo higher wages and come ready to give away existing benefits at regular contract negotiation periods. US labor agreed more than once to forgo pay raises, improvement in work safety conditions, vacation time and job protections. Furthermore, labor agreed to corporate plans to reduce healthcare coverage, limits to company contributions to pension funds as well as at times increasing the retirement age. On both sides of the US-Mexican border, corporations were laughing all the way to the bank and making sizable returns each way.
As NAFTA took hold and displacement of farmers occurred, a flood of Mexican immigrants headed north, to the US, a place where their farming skills and opportunity for employment in labor-intensive jobs are readily available. The arrival of Mexican immigrants hastened further downward pressure on wages at the lower levels of the economy. This arrival of immigrants, which was predictable, made it possible to pressure US labor forces further as well as create racial and class tensions between the new Mexican arrivals and African Americans on the one hand and poor and middle class whites on the other.
Through exploiting these agitated tensions, the political right in both Mexico and US was able to rally patriotic and at times xenophobic sentiments and ride it back again and again into political office. For the US, the racial and ethnic divide is an important one that shaped and continues to influence the directions of political discourses. And, by fanning white poor and middle class resentment, the right wing was and continues to be able to cast itself as defender and promoter of national values and win elections on this basis. Fueling resentment among communities of color was just as important a tool deployed by the Democrats after presiding over the signing of NAFTA and becoming Republican-light and supported by a different set of corporations.
What develops in this period is a global political system divided between the corporate left and corporate right, but to be sure it is a corporate political system. Indeed, we have a world for corporations, and made by corporation, with the good life for the few at the expense and over the bodies and souls of the many. We the corporations hold these truths to be self-evident, that all corporations are created equal, endowed by the 1% to unleash poverty unto the world, endless thievery of natural resources, maximum profits through privatizations schemes and pursuit of death and destruction through war and militarism. We must “Ask not what your country can do for you” but what you can steal and rob from it by buying politicians and controlling the media at all times.
What started in Mexico, and after a short period of time became the prescribed program on how it can be done, the whole global South became one massive and extended Maquiladora system. Country after country and state after state was ready to jump into offering its land and people for the sake of few jobs through the Maquiladora system. We are all presently situated in a never-ending Maquiladora system that dehumanizes all while producing resentment among the impacted people in the global South and the inner cities and rural areas in the global North.
A bidding war ensued across the post-colonial South to locate the next assembly plant to supply Walmart, Nike, Apple, HP, Microsoft, Kmart, etc. with the cheapest labor cost input, free land and build-to-suit schemes, local tax breaks or no taxes for 30 or 50 years, and of course no environmental policies or protection for workers and goods produced for consumers. If one needs it built with no questions asked, then look this way; we have a strong despotic government to make sure everyone is kept in line or at the assembly line with diapers to save time. Indeed, a type of ‘Hunger Games’ for the cheapest labor costs offered to multinational corporations with each state offering its own people, lands, water and dignity as commodities to be sacrificed in the deadly manufacturing efficiency game. Someone is always ready to do it cheaper and more efficiently, which makes the multinationals more emboldened in running these real ‘Hunger Games’ that cost real lives and destroyed many societies on the way.