Beginning in the 1970's and continuing today, Latin American
countries have undertaken reforms and restructuring in the mining
sectors of their economies. This process is part of a wholesale
restructuring of the Latin American economies, which in turn, is part of
a continuing global restructuring process. There are several reasons why
these changes have taken place. The standard explanation is that the
previous economic "model" in Latin America, often referred to as
import-substitution or macroeconomic populism, failed or simply
exhausted its potential, leaving Latin America mired in debt,stagnation
and various other economic maladies. In contrast to the orthodox
explanation, I shall argue that the neo-liberal restructuring was a
response or counter-offensive by the dominant classes to the growing
power of the working class through the 1970's. The working class in
Latin America, as elsewhere, had gotten too powerful and needed to be
weakened in order to continually increase capital accumulation. The
dominant classes have, so far, been all too successful in this endeavor.
Beginning in the 1970's and continuing today, Latin American
countries have undertaken reforms and restructuring in the mining
sectors of their economies or have no minimum wage, no welfare benefits,
no unions, no legal protection, and no security. The labor market has
also changed socio-demographically as internal migration increases with
unemployment. People thrown out of their regular jobs must migrate to
where they can find work if they cannot find work in their current place
of residence. This is evident in the huge sprawling shantytowns of
Bolivian cities , the depletion of the population in the mining centers
and the increase in population in the coca producing areas.
The economic restructuring ,sometimes called neo-liberalism,
consists of trade liberalization( i.e. the reduction or elimination of
import and foreign investment controls), privatization of state
enterprises, deregulation( elimination of price controls and subsidies.)
The purpose of these reforms was to control inflation, meet debt
servicing requirements, and open the economy up to international
investment and market forces. As concerns the mining sector,
privatization is the most important of these reforms. Privatization is
often undertaken simultaneously with other reforms( e.g.. legal) to
maximize the desired effect. Most mines in Latin America were
nationalized in the post-world war two period through to the mid-1970's.
The reasons for the nationalizations are numerous yet outside the scope
of this essay.
Privatization contains a strong political-ideological dimension
alongside the pure economic motives. Partisans and advocates of
privatization usually hold that private enterprise is a priori superior
to public or state enterprise. Private firms are everywhere and always
more efficient, productive, profitable and hence more competitive than
are public firms. Thus, making as many public firms private, as
possible, will enhance the general efficiency and competitiveness of the
economy as a whole. Increased profitability means greater capital
accumulation and a greater surplus to reinvest into the economy.
Advocates of privatization often overlook the fact that public firms are
created and exist for different reasons than do private firms. Judging
public firms by the same standards one would judge private firms( i.e.
profitability) is therefore irrelevant.
In the last twenty years, privatization in Latin America has taken
place during or as a result of economic crisis. The most acute of these
crisis' has come to be known as the debt crisis which started in 1982
when Mexico announced it no longer had the foreign exchange necessary to
pay the service on its foreign debt. The international banks and lending
agencies, including most prominently the IMF demanded privatization as a
means of procuring the necessary funds to help the debt service. It
should also be noted that privatization takes place in the extremely
corrupt atmosphere of Latin American politics. The process of
privatization has oftentimes been simply a means by which certain
families and their friends enrich themselves through pilfering publicly
owned wealth. Moreover, privatization's are done to gain favor with
national or international elites, to gain political influence, as
political pay offs etc. The effect of privatization has often been to
strengthen the position of the socio-economic elite.State owned
companies are often sold at below their real value.
To my mind, the most important cause ( and effect) of privatization
has been to strengthen the position of the dominant classes vis-à-vis
the working classes. Privatizations are associated with mass layoffs and
a corresponding boost in the unemployment rate. Bolivia began its
structural adjustment program or "New Economic Policy" in 1985/6 which
included the closing of all state-owned mines which were in debt. The
state-owned COMIBOL mining enterprise laid all but 7000 of its 23,000
miners off. Since 1985, an estimated 45,000 jobs have been eliminated
in the mining sector in Bolivia. The effects of the job losses on the
economy have been various. A whole class and generation of miners and
their militant unions were destroyed. The class power of the Bolivian
workers was decimated by the unemployment. Most who were previously
employed in the mining sector became immersed( coerced?) by economic
necessity into the informal sector of the economy. In Bolivia, this
means employment in some facet of the cocaine economy. Coca and cocaine
production has intensified since 1985. Today it remains the chief pillar
and export of the Bolivian economy ( I no longer think it is
controversial to state this.) Others found "jobs" in Bolivia's huge
urban informal sector( large even by Latin American standards.) A
result is a drastic shift in the composition of the working class and
the labor market in general. In short, jobs in the informal sect growing
regions.
The massive job loss in the mines significantly weakened the
organizational dimension of working class identity. A regression in
class-consciousness and the values associated with it (solidarity) took
place. Accompanying immersion in the informal sector is a change in
subjectivity from a perception of the structure of the economy as one
between classes to a perception of the economy as a relationship between
individuals. In the informal sector, individuals must compete against
each other in order to survive. In short, the effects of privatization
upon the working class has been to move from a position of co-operation
to defection in a multi-player prisoner's dilemma. Lost is the cement or
class consciousness and social identity that solves the prisoner's
dilemma (or collective action problem.)
In Chile, a large section of the mining sector, the copper mines, have
not been privatized and there are,as yet, no plans to privatize them.
CODELCO, the state copper company
which accounts for 40 % of Chilean exports has been fairly successful
over the last twenty years by orthodox economic standards. Why has it
not been privatized when almost all other Chilean state companies have
been?
CODELCO, as Chilean law dictates must contribute 10% of its revenues
to the Chilean military. This goes a long way in helping finance Chile's
massive military which remains the strongest and most dominant political
institution in the country today. Privatizing CODELCO would deprive the
military of its principal source of funding and would,therefore,
diminish its power both politically and militarily. Chile, because of
its long spell as one of the most brutal military dictatorships of the
twentieth century, was able to impose labor discipline and literally
smash the organizational power of the working class through physical
force and repression. Privatization was thus not necessary to attain and
enforce better labor discipline. To impose control over the working
class, the Chilean state was able to conduct mass layoffs, mass firings,
mass murder and torture without privatizing the company.
A key element of the restructuring process is often called, by
neo-liberal ideologues, restoring "flexibility" to the labor market.
'Flexibility' in this context simply means the removal of all
restrictions on the hiring and firing of workers. Thus, in Chile when
labor militancy became too strong for management, hundreds of militant
workers were simply fired and replaced with peasants who had no
tradition of labor militancy. The reasons for this policy and the
effects of it are several.
The main effect is to increase the power of managers over workers
on the shop floor to
increase the length and intensity of the working day and the reduction
of wages and benefits paid out to the workers. This is done through the
age-old capitalist tactic of fear of falling into destitute poverty
through job loss. One would expect then, with these policies, for the
rate of exploitation(understood here in the Marxian sense) to rise. One
way of measuring, roughly, the rate of exploitation is by looking at
wages as a percentage of value added in the industry under scrutiny.
Value added is a monetary measurement of what workers create, the
difference between the price paid for raw materials and the revenue
earned when a product is sold. Only a small portion of value added goes
into wages, the smaller the portion the greater the rate of
exploitation. By this measure, Chilean workers share of value added has
fallen from 30% in 1973 to 17% today. In Bolivian it has fallen from
43% in 1970 to 19% today. Both of these percentages are among the
lowest in the world. The figures are 36% and 42% for the U.S. and
Germany respectively. Accompanying the restructuring of the mining
sector and the rest of the economy has been a large shift in income and
power from the working class to the capitalists and rentiers with the
resultant rise in inequality and poverty.
Another stated aim of economic reform has been to encourage foreign
investment and to create a better business 'climate'. The chief means of
attracting this foreign investment has been the cheapening of labor. The
means by which labor has been cheapened and subordinated have already
been discussed. The simplifying of legal frameworks, tax incentives and
better infrastructure are also used to build incentives for foreign
investors. Political stability, again related to labor, is also
important.
Many of the companies that were privatized were bought by
multinational corporations. Incidentally, many of these companies have
headquarters in Canada. Cominco, Placer Dome and Barrick are familiar
names here. With the foreign takeovers of mining sectors,
old problems, which the dependencia theorists highlighted so well, once
again come to the fore. The nationalizations were undertaken in part to
try and overcome these problems. The main problem is the tension or
even, one could argue, contradiction between the needs of the foreign
company and the needs of the national economy for development. The main
goals of the companies is to maximize profit and shareholder value,
regardless of the effect on the national economy of the host country.
Foreign companies repatriate profits and hence desperately needed
foreign exchange( needed to for social spending amongst other things.)
The foreign companies, now with the various regional and world trade
agreements, are increasingly given national or domestic treatment i.e.
treated the same way as domestic companies. This treatment is legally
binding. The companies are thus not required or compelled to contribute
to a national development scheme in any way. This means no backward or
forward linkages or domestic sourcing for capital goods. The tax
giveaways and other incentives are damaging to the host country. Many
theorists, most prominently, Theodore Moran, argue that the solution to
these dilemma's will be the renationalization of the mines. We'll see.
A quick look at recent world economic history will show that no
country has gotten rich, escaped third world status or escaped
dependency by liberalizing foreign investment and making foreign
investment the sine qua non of economic development. The recent economic
"success stories" of East Asia including and especially S.Korea,Taiwan
and Japan all had strict and complex laws regarding foreign investment
and the foreign takeover's of their domestic industry. Foreign
investment and profit repatriation were limited and their were laws
against things like capital flight. These economies all undertook
extensive economic and industrial planning and subordinated much
investment both domestic and foreign to a national plan. These
economies, particularly Korea, also featured ferocious repression of
labor. The lesson to be drawn here is that national planning works and
is indeed necessary for economic development and rising living
standards. This has actually been pointed out by the Japanese to the IMF
but their criticisms fell on deaf ears.
