AMLO outside the Senate, Monday, October 26

Worker's Party Deputy Mario di Costanzo Tears Apart Carstens Economic Plan

Tuesday, May 27, 2008

Shocking (and Awe-ing)

In her remarkable new book The Shock Doctrine: The Rise of Disaster Capitalism, journalist Naomi Klein blows out of the water the fanciful notion that people around the world in the 70's and 80's spontaneously started waking up with the realization that free markets and free trade were the only way for their countries to go. In fact, Klein argues, free markets - with their associated privatizations and rollback of the social safety net - have always been imposed upon the prior basis of a shock, real or fomented, a shock sufficient in magnitude to disorient the public to the point that a radical, "Chicago Boy" program can then be rammed down their throats under the guise of a bitter but necessary pill. The US-provoked coup d'etat in Chile in 1973, followed by a radical economic revision designed by Milton Friedman himself (who apparently had no qualms about working for dictators), was the Ur-shock, though Klein subsequently guides us through a series of other examples, from the collapse of the Berlin Wall in Eastern Europe to the Asian currency crisis of 1997, the aftermath of Hurricane Katrina in New Orleans and yes, to the Mexican "tequila crisis" in 1995 that unleashed a second, massive wave of privatizations here.

So far, that's two shocks: the original one (coup d'etat, natural or economic disaster, massive societal upheaval) followed opportunely by economic shock therapy. But no public can be fooled forever; people everywhere inevitably start to protest when they catch wind of the implications of what has been done to them. This is when the third shock becomes necessary: repression and torture to break the back of the resistance. Drawing on a careful reading of psychiatric "shock therapy" practices as well as declassified CIA manuals dating back to the 60's, Klein notes that the fundamental goals of such torture (under whatever name it has been given over the years: de-conditioning, counter-insurgency, counter-intelligence) is to induce a regression of the subject to a state of child-like defenselessness: in short, to destroy their personhood. How ironic it is that the twentieth century, supposedly the century of psychoanalysis and the knowing of one's self, witnessed at the same time the widespread use of psychiatric techniques to achieve the exact opposite: the reversing, the canceling-out of psychological development on a mass scale in order to revert persons or peoples to a timorous, uncritical state of passive acceptance...or else.

The parallel with present-day Mexico is exact. After several previous, shock-induced waves of privatization (the first, by Presidents de la Madrid/de Gortari following the peso crisis of 1982 and the second, mentioned above, by Zedillo following the second peso crisis in 1995 which all the previous privatizations obviously did not forestall), the only public institution left that is worth anything to international investors is the big enchildada: petroleum. Whenever the public is objectively asked, however, if they believe oil privatization is a good idea, they overwhelmingly reject it. Calderón, knowing this, has done what any administrator of "disaster capitalism" has by now learned how to do: provoke a crisis - and allow for the torture of those who do not toe the line. His lack of originality, however, has led him to import a hand-me-down shock the neighbor to the north already wore out a generation ago: the "war on drugs". If the ostensible objective of such a program is to eliminate the drug trade, it is failing in Mexico just as it failed in the US and just as every such program that depends on militarism and killing alone will fail. Four thousand Mexicans have died in this futile war in the year-and-a-half since Calderón took office, the same as the number of American soldiers killed in Iraq in five whole years of equally-useless conflict. Viewed from the perspective of "shock therapy", however - the shock needed to disorient the public and ram through oil privatization - it remains to be seen if the "war on drugs" will prove to be, like its antecedent shocks across the world, a perverse success. It is true that the Mexican public has proven itself to be enormously resistant, but is also true that the government's willingness to apply the third shock (torture) is as strong as ever, the disappearance of two members of the EPR, the "white brigades" in Oaxaca that so terrorized the population here and which have gone unpunished at the federal level, the hammering of the population of Atenco into the ground for protesting the location of a planned new airport, and the slew of abuses committed by soldiers all over the country under the current administration are just a few of the most prominent examples. One shudders to think what else is going on unobserved, under the radar, nation-wide, as the militarization of the country (see the latest in the state of Sinaloa) proceeds apace.

Despite such bleakness, Klein points out in an interview available on YouTube ( that there is cause for optimism due to one, simple reason: publics worldwide have not chosen such economic shock programs of their own free will - have needed, precisely, to be shocked into them. If people can learn to psychologically resist the onslaught of shocks exploited or created by those who would use them for their own ends, they still have a chance to reverse the noxious effects these policies have had on society, culture, the economy and the environment. Mexico, that means you.

Wednesday, May 14, 2008

The Dismantling

Would that it were that the pretensions of those who are attempting to privatize Mexico’s oil, both from within and without, were “merely” financial: getting rich on crony capitalism via stakes in the companies who acquire the no-bid spoils provided by the sacking of the state. The grand design, in fact, is not to sack but to dismantle (or rather, to sack while dismantling): that is, to eliminate the Mexican state as a functioning entity in all but name in order for the United States to exercise unlimited dominance over its neighbor’s limited - and therefore all the more vital - natural resources.

In order to understand this, it is important to recognize that Calderon’s privatization proposal comes accompanied with its own escort to the dance of global hegemony: the so-called “Merida Initiative” or “Plan Mexico”, the Bush administration's proposal to provide (for 2008 alone) $500 million dollars in aid for Mexico’s “War on Drugs”. In the same way as with its sister “Plan Colombia,” the Mexican version would commit American aid in the form of weapons and “training” to aid Mexico in its quixotic battle against the very drug problem America itself has created, in the process injecting another jolt into the process of militarization that has had such devastating effects on Mexico since Calderon’s taking over. And the most chilling precedent in all of this is precisely that the “Plan Colombia”, itself beginning with the provision of weapons and training, eventually led to the direct participation of the American military in the country starting in 2003. Once all of North America is militarized through the Bush Administration’s Security and Prosperity Partnership (SPP), it only stands to reason that Mexico, much closer than Colombia and that much more essential for America’s “security”, will be next.

What does the escort have to do with its date? This: once the privatization bill goes through the Mexican Congress (an agreement has already been reached between the upper echelons of the PRI and PAN to pass it once the debates are over, either in the summer or early fall, barring the effects of the national resistance movement), American (Exxon Mobil, Haliburton) and Spanish (Repsol) companies stand to scoop up most of Mexico’s oil refining and transport business. And once they get it, they don't want to ever risk having to give it back, as they already did once in President Lazaro Cardenas’ historic oil expropriation of 1938. This is why Felipe Calderon's privatization proposal gives international courts the final say in the matter of the oil contracts and concessions, incredibly stripping Mexico of the juridical means with which to defend its own Constitution (at least somebody is learning from history: Cardenas’ 1938 expropriation was sparked by a ruling by the Mexican Supreme Court against the foreign oil companies then operating in Mexico). The Courts being cut out, that would leave only the Mexican President and Congress, but if they were ever to try anything so bold as to re-nationalize its own oil, the American military, emboldened by their Plan-Mexico carte blanche, could in the extreme case occupy Mexican oil wells and refineries to protect its “national” interests: read, those of the American companies that will by that point be in operation there. Most likely, they would never have to get to that point, just rattle their sabers a bit from close range until the Mexican President or Congress meekly backed down. Considered as a Latin America-wide strategy, this is much more effective than fomenting coups d’état and installing friendly, right-wing dictators, the preferred US policy through the 1980’s. Direct interventions are bad PR these days, and plus, dictators can die or be overthrown, and their policies reversed by succeeding governments (as in Bolivia and Venezuela). A permanent US military foothold in the country by invitation of the host country’s “democratically-elected” government proves much harder in practice to reverse.

Just as the North American Free Trade Agreement of 1993 sought to lock in by treaty (yes, for Mexico it is a treaty, with all that implies; for the US and Canada it's just an ‘agreement') an economic policy for Mexico that future governments would be bound to follow, the Plan Mexico’s military activities seek to permanently lock in the effects of the concurrent changes to Mexico’s energy policy – as Thomas Shannon, State Department sub-Secretary for Western Hemisphere Affairs, baldly put it, “to a certain extent, we’re armoring NAFTA.” At the same time, the Mexican government would neatly find itself stripped of the financial resources (read my previous post on the Mexican government’s budgetary dependence on oil) with which to maintain any form of real autonomy whatsoever. This, in a word, is treasonous, and as was stated at last week’s forums on petroleum held at the UNAM, Calderon could rightly be brought up on charges for treason against the Mexican state - while there is still anything left of it to betray, that is.

Tuesday, May 6, 2008

Alternatives to Privatization

It has been said over and over and over again, but nevertheless bears repeating over and over again: it is not necessary to privatize Pemex. The only "crisis" Pemex- the world's second most-profitable oil company after Exxon - is in is self-induced, and whatever is self-induced can, logic dictates, be self-uninduced. If Pemex hasn't invested in new technology and new refineries over the last twenty-five years or so, it is not, as privatization mavens disingenuously argue, due to lack of resources or declining oil reserves; it is very simply because the federal government cannibalizes 80% to 90% of its revenues to fund the federal budget, corruption, perks, bloated salaries and campaign funds (read: 2001's Pemexgate), leaving poor Pemex itself with dimes on the dollar to do anything with. And this because the Mexican Feds have become so addicted to sucking on the oil teat (just as their neighbors to the north are addicted on sucking on its counterpart: the military spending teat) that they have never managed to come up with ways to provide an independent tax base for all of the (very dubious, to be sure) ways it has of spending money. Pemex funds 40% of the annual federal budget. Leave it alone to invest its own substantial resources in growth (Mexican oil just topped a $100 dollars a barrel today in international markets; it only costs $4 dollars to extract the same barrel) and it will grow. Imagine doing anything productive yourself if 90% of your blood was consistently sucked dry?

Vampiric allusions aside, here are some very modest proposals for providing other means of revenue for the 40% of the federal budget oil revenues currently provide:

1.) Cut government spending and waste: top government ministers and judges in Mexico routinely earn $50,000 dollars A MONTH in pay, benefits and perks - think there may be anything to cut there? Calderón, despite having lost the election, now finds himself to be of the world's top-paid "heads of state", and once he retires (or is forced out, which would be preferable), he will keep his fat salary in terms of a fat pension for-life, just like the rest of the nation's already-fantastically-wealthy-so why-in-God's-name-do-they-need-a-public pension ex-presidents. Cutting salaries and waste was exactly, in fact, what Andrés Manuel López Obrador did as Mayor of Mexico City, and was a fundamental (and much poo-pooed) part of his platform in the 2006 Presidential campaign. Far from being the wild-eyed leftist the PAN and complicit media made him out to be, this part of Obrador's plan (along with his insistence on breaking up the big monopolies that strangle the country's economy) should make any true conservative warm to the gills. But in Mexico (and everywhere else, really), it's not about ideaology. Ideaology is just the smokescreen for privileged classes to retain privileged positions which provide them with lots and lots o'privilege. Excessive spending and waste at the federal level has only gotten worse since 2006, by the by.

2.) I am not so naive as to believe that cutting waste and salaries alone will fill the gap. Not to worry, there are plenty of other ways. How about raising the top income tax level bracket back to 35%, where it was before the Fox administration flattened it to 28%? A generation after Reaganomics has been discredited, Fox lowered top income-tax and corporate rates while pushing to extend the IVA sales tax to food and medicines - cutting taxes on the rich and raising them on the poor, making Mexico's generally regressive tax structure even more so. Sound familiar? Not only raise the top bracket back to where it was, then, but at a millionaires' surcharge on top of it of 40%, or even 50% on the top bracket. The top bracket in the US after World War II was 70%, lest we forget, a time of some of the fastest growth in the history of the States. Last I heard, no one has ever accused the US of A of being a communist state. And considering how vast is the wealth of Mexico's top millionaries (amongst the richest people the world has to offer), a higher upper tax bracket would hardly put a nick in their armor...just kick their tax-avoidance accounting departments into overdrive, which is another story.

At the same time, the IVA sales tax should be reduced back to 10%, which it was up until quite recently. This is a regressive tax, and just because it's easier to collect than income and other such taxes is no excuse for a hapless, ineffective system to continue to fund itself on the backs of the poor.

3.) Tax stock market earnings. As I mentioned in a previous post, Mexico does not tax stock-market earnings at all - other capital gains are taxed just like regular income. Apply a genuine capital gains tax, including stock market income, and you could raise plenty. I didn't have the time to crunch the numbers, but will leave that to those who are better able. I hardly imagine people will stop investing in the Mexican stock market - which within Mexico is strictly a wealthy person's game - simply because of a capital gains tax which plenty of other countries with larger and more successful stock markets levy.

4.) Apply a transaction tax on international capital flows. This tax, known as the "Tobin tax," would apply a small tax on currency flows into and out of Mexico. The tax, as economist James Tobin himself has said, would cushion exchange rate fluctuations, which Mexico has historically proven itself to be highly vulnerable to. But beyond that (and beyond Tobin's personal justification for it), the tax - even at a very low rate of 0.1% of the amount of the transaction - would generate necessary income, and require those international traders who make tax-free money off of Mexico, and whose injections and abrupt withdrawals of investment destabilize the economy to the detriment of its citizens - to pay a little for the privilege.

5.) Stop the white-collar bailouts. The FOBAPROA bank bailout (fattening up national banks in order to allow them to be sold off, turning private debt based on some dumb decisions into public debt), the periodic highway rescues, the tax give-backs to companies that do services for the President in turn (to name just one example, the JUMEX juice company's tax exemption for participating in the 2006 campaign in favor of Fox's far-from-first-choice, Calderón; it goes without saying that the President's discretionary power to grant such tax concessions by decree must also be done away with). And at the same time, eliminate the tax exemptions designed to lure companies into the country, only for them to make billions and send all the profits back home. The tax exemptions for the maquiladoras operating along the Mexico-US border constitutes just one scandalous example. And stop making sweetheart deals with companies like Repsol which only raise the prices for the folks at home. Anybody notice the cost of a small tank of natural gas (used by just about everyone in Mexico - who can afford it - for stoves, ovens and boilers for heating water) about to top $200 pesos?

So there, just off the top of my head, are five ways the government can raise the revenue it needs in order to provide Pemex with the budgetary autonomy it needs. Any more suggestions? Send 'em in!