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Synthesis/Regeneration 6   (Spring 1993)

U.S. Hegemony in North America

by Michael Hoover, Seminole Community College

Class relations inherent to capitalism have created a world system of unequal nations. While these relations may have initially been imposed in Latin America by more powerful external forces, they became institutionalized through creation of local classes facilitating peripheral subjection to the center. The Latin American capitalist state, therefore, is also a dependent state. It functions to reproduce capitalist relations and as a conduit for international capital.

Two characteristics are pervasive in dependent capitalism: (1) economic activity is externally oriented; (2) vast socioeconomic inequality exists. Social institutions cannot effectively organize more equitable development because no serious conflicts exist between dominant classes in the periphery and those at the center. The former depend upon the latter for capital, goods, and markets. Nor is there a sufficiently large middle-class to buffer the gap between wealth and poverty. US-Latin American relations have been dependent capitalist relations, characterized by imperialism and intervention, creating conditions of daily social and economic exploitation in the Americas.

US & Mexico: Hegemonic/Dependent Capitalism

From the annexation of huge areas of Mexico in the 1840s—territory that would become Arizona, New Mexico, and California—Latin Americans have viewed the US as the "Colossus from the North." US investment and trade grew after 1850 and US military intervention became common by the turn of the twentieth century. Expanding commerce became more important than respecting sovereignty.

The US was Mexico's primary "trading partner" at the time of the Mexican Revolution, "purchasing" 75% of that country's exports and supplying 50% of its imports. US investment in Mexico—primarily in railroads, mining, and oil—represented the majority of foreign capital in the country and was estimated to be greater than that of Mexican capital. Importantly, the US controlled 70% of Mexican oil production.

A "suction-pump" effect remitted profits to the US, weakened Mexico's conditions of trade, increased foreign debt obligations, and siphoned off the nation's monetary reserves.

The Mexican Revolution of 1914 led to a sustained US naval blockage, the occupation of Vera Cruz, and the US troop deployment in northern Mexico. Article 27 of the 1917 Mexican Constitution, governing land reform and foreign investment, provided the opportunity for renewed racist sentiments among US policy-makers and raised talk of further military intervention. Relations remained strained between the two countries for more than a decade before Mexico would agree to pay compensation for expropriation of any US investments. According to James R. Sheffield, US ambassador to Mexico from 1925 to 1927, the problem in dealing with Mexico was the absence of "white blood in the Cabinet."

Despite populist and nationalist rhetoric, Mexico began to reassert itself into the orbit of US capital in the 1940s. This process began through the institutional elimination of democratic politics and with the development of a "state" bourgeoisie committed to economic growth rather than the welfare state. Labor's political role declined following nationalization of the railroads and the oil industry in the 1930s. Mexico's foreign debts were renegotiated and the US advanced further credits during World War Two. Following the war, direct US investment began to rise. A "suction-pump" effect remitted profits to the US, weakened Mexico's conditions of trade, increased foreign debt obligations, and siphoned off the nation's monetary reserves.

While the Mexican government owned or protected much of the nation's industry, US capital penetrated the economy and influenced much of its activity. US investment came to dominate important economic sectors—autos, rubber, chemicals. Mexico emerged as the US' third largest "trading partner" and a strategic supplier of vital raw materials such as oil and uranium.

Accumulated underdevelopment meant growing indebtedness and economic dependence for Mexico. When interest rates rose and oil prices collapsed in the early 1980s, Mexico's foreign debt reached crisis proportions. Billions of dollars borrowed from US banks and US-backed lending agencies in the 1970s could no longer be repaid. The country began restructuring its debt obligations in accordance with neo-liberal austerity and free trade policies. "Reform" was facilitated by Mexico's authoritarian political system and accelerated following Salinas' fraudulent 1988 electoral victory.

Free Trade: Capital Accumulation/Labor Exploitation

The North American Free Trade Agreement (NAFTA) will culminate Mexico's turn to unfettered capitalism. It will expedite and formalize changes—tariff and quota reduction, deregulation and privatization—that have opened Mexico's economy to foreign investment in the last decade. It will increase corporate opportunities to take advantage of Mexico's large labor pool and weak enforcement of environmental regulations. A primary US negotiating objective has been to loosen the Mexican state's monopoly on the petroleum and natural gas industries. While 100% foreign ownership—already legislated for some Mexican businesses—has been thought unlikely in these sectors, the US has won concessions allowing for 100% private financing of certain oil industry projects and minority foreign ownership.

"Comparative advantage" specialization promises jobs and economic growth—in this instance, Mexico in low-technology, labor-intensive consumer goods and the US in high-tech, high-wage capital goods. But a low-wage, export-oriented development strategy will exclude many Mexicans from the benefits of growth that occurs. Mexico's small consumer class is not projected to grow. US exports to Mexico will be primarily in the form of capital goods—machinery and equipment to set up "maquila-type" operations, replacements parts for existing factories, pesticides for agribusiness, and supplies for various service-sector activities.

Capitalism: Creative/Destructive

Capitalism has, from its inception, been global. The post-World War Two era, driven by the Cold War and a need to solve problems associated with stagnant domestic markets, exploded in a matrix of technological development, international activity, and consumer goods and services. The recent merging systems of television, telephones, computers, and satellites have advanced the ability to process such information and to transact business.

Capital's "creative destruction" has meant, among other things, that dynamic expansion has co-existed with social polarization—between capitalist and working classes; between core and peripheral states. US transnational interests dominate the US and the US dominates Latin America. Policymakers have little, if any, interest in debt relief, labor rights for workers, job retraining, or effective health, safety, and environmental standards. Trade agreements should, and could, contain such provisions. They will not so long as working classes remain subjectively divided—nationalistic, protectionistic, and xenophobic.

Today, the globalization of capital is creating an international working class—albeit, one that is stratified in complex ways and is characterized by both an active and a reserve army of labor. The development of an international middle-strata for example, has helped to make capital more mobile. The lifestyle of this element is observable in almost every city in the world—wearing, drinking, and driving the same brands as they watch the same movies and listen to the same music.

Controlling capital will depend upon whether an emerging "class in itself" of international laborers and wage-earners becomes a "class for itself." As Kim Moody and Mary McGinn of Labor Notes have suggested, NAFTA can make it easier for working people in the US and Mexico to identify their common adversaries—transnational corporations and capitalist politicians—and to recognize their common needs. Capitalism may yet sow the seeds of its demise.

For more information, see...

Burns, E. Bradford. Latin America: A Concise Interpretive History. Englewood Cliffs: Prentice-Hall, 1992.

Cockroft, James D. "Mexico," in Ronald H. Chilcote and Joel C. Edelstein (Eds.) Latin America: The Struggle with Dependency and Beyond. Cambridge: Schenckman, 1974.

Gilly, Adolfo. The Mexican Revolution. London: Verso, 1983.

Moody Kim & Mary McGinn. Union and Free Trade: Solidarity vs. Competition. Detroit: Labor Notes, 1992.

Petras James & Morris Morley. Latin America in the Time of Cholera: Electoral Politics, Market Economics and Permanent Crisis. New York: Routledge, 1992.

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