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Global Capitalist Crisis and the North American Free Trade Agreement: Reflections 21 Years On

The TPP is just the latest in more than two decades of trade agreements that have opened the world to corporate plunder.

(Image: Lauren Walker / Truthout)

Recent US Senate approval won by President Obama for “fast-track” negotiation of the Trans-Pacific Partnership (TPP) trade deal has thrust “free trade” and capitalist globalization again into the headlines. Often referred to as “NAFTA on steroids,” the TPP is but the latest in more than two decades of “free trade” agreements that have helped open up the world to transnational corporate plunder.

If we want to understand such deals we would do well to reflect on the first of these, the North American Free Trade Agreement, or NAFTA, which went into effect in January 1994. We cannot understand NAFTA without understanding the larger picture of which NAFTA and the TPP form part: the new system of global capitalism and the crisis of that system.

NAFTA, and by extension, capitalist globalization, were outcomes of the last great crisis of world capitalism, that of the 1970s. Emergent transnational capital responded to that crisis by “going global,” which paved the way for NAFTA. To understand NAFTA and the TPP, we must grasp four novel features of world capitalism in this epoch of globalization:

1. The rise of truly transnational capital and the integration of every country into a new globalized production and financial system. NAFTA served as a midwife for Mexico’s integration into this system;

2. The appearance of a new transnational capitalist class, a class group grounded in the new global control over national circuits of accumulation. NAFTA and Mexico’s globalization involved the rise of a powerful group of Mexican capitalists, epitomized by Carlos Slim, currently the richest man in the world. These emergent transnationally oriented Mexican elites led the charge in Mexico’s globalization and used NAFTA to join the ranks of the transnational capitalist class.

3. The rise of transnational state apparatuses, comprised of dense networks of nation-states and supranational and transnational institutions that promote transnational over national accumulation in each country and act as the collective authority of the transnational capitalist class – as the new global ruling class. NAFTA was drawn up and imposed on the peoples of North America by this transnational state;

4. The appearance of novel relations of inequality and domination in global society, including the spread of new transnational class inequalities, the farcical wars on drugs and terrorism, as well as the wars on immigrants, youth “gangs” and social movements, all part and parcel of capitalist globalization in North America and elsewhere.

Capitalist Crises and “Free” Trade

Capitalism experiences major episodes of crisis about every 40 to 50 years as obstacles emerge to ongoing accumulation and profit-making. These are “structural” or “restructuring” crises because the system must be restructured in order to overcome the crisis. As opportunities for capitalists to profitably invest dry up, the system seeks to open up new outlets for surplus capital, typically through violence, whether structural or direct. NAFTA constitutes one such form of structural violence, whereas the “drug wars” and US militarization on both sides of the border are a form of direct violence. Both have the function of opening up new opportunities for capitalist expansion and control in North America.

Structural crises of capitalism involve social upheavals, political and military conflict, and ideological and cultural changes. The last major crisis of world capitalism prior to the 2008 global financial collapse began in the late 1960s and hit hard in the early 1970s.

“Free trade” and neoliberalism are fundamentally programs of transnational capital liberated from the nation-state through globalization.

The year 1968 was a turning point. That year saw the assassination of Martin Luther King Jr. in the United States in the midst of expanding Black and Chicano liberation movements, the countercultural and antiwar movements, and an escalation of militant worker struggles. The Tlatelolco massacre of students took place in Mexico City that same year, at a time of great campesino, worker and student upheavals across the country. Further away, 1968 saw the Prague Spring, the uprising of students and workers in Paris, the height of the Cultural Revolution in China, the Tet Offensive in Vietnam, which marked the beginning of the first major defeat for US imperialism, and the spread of anti-colonial and armed liberation movements throughout Africa and Latin America.

All this reflected a crisis of hegemony for the system – a crisis in its political and cultural domination. Then came the economic dimension. By 1973, the US government had to abandon the gold standard; the recently formed Organization of Petroleum Exporting Countries (OPEC) imposed its oil embargo, which sent shock waves through the world economy; and stagflation (stagnation plus inflation) set in everywhere. This was, in a nutshell, a severe structural crisis of world capitalism, a crisis of 20th century nation-state capitalism.

Stepping back even further in history, at the time of the 1970s crisis, working and popular classes all around the world had accumulated a significant amount of power relative to dominant groups. Why? The world had seen a prolonged period of international conflict involving world wars and social and class struggles from the 1890s into the 1960s. Working and popular classes were able to make social and economic gains in many countries, leading to the so-called social-democratic “class compromise” of the mid 20th century, whereby the capitalist system was forced to make a number of concessions to significant sectors of the international working class. By the early 1970s, a pre-revolutionary situation was percolating in many countries and regions. The popular classes were able to resist attempts by the dominant groups to shift the burden of the 1970s crises on to their shoulders.

But as the crisis intensified, these dominant groups sought ways to liberate themselves from the “class compromise.” Analytically speaking, capital sought to free itself of any reciprocal responsibility to labor in the capitalist system and capitalist states sought to shed themselves of the social welfare systems that were established in preceding decades. Elites in the rich countries also sought ways to integrate emergent Third World elites into the system.

NAFTA was but one small part of a vast restructuring of world capitalism.

These dominant groups launched the “neoliberal counterrevolution,” an attempt to roll back the social welfare state, to resubordinate labor and to reconstitute their hegemony at the global level through a newfound transnational mobility of capital and a transformation of the interstate system. The roots of NAFTA are to be found in this response of economic and political elites to the 1970s crisis.

The model of “savage” global capitalism that took hold in the late 20th century involved a new capital-labor relation based on the deregulation, informalization, deunionization and flexibilization of labor as more and more workers have swelled the ranks of the “precariat” – a proletariat existing in permanently precarious conditions. NAFTA and other trade agreements along with neoliberal policies have played a key role in the subordination of labor worldwide and the creation of this global flexible labor market.

The new model of global capitalism has also involved a renewed round of extensive and intensive expansions of the system. The former socialist countries and the revolutionary states of the Third World were integrated into the world market in the late 20th century. Free trade agreements such as NAFTA and neoliberal programs have lifted restrictions to this expansion of transnational capital. A third aspect of the new model is the creation of a legal and regulatory structure for the global economy, characterized by such agreements as NAFTA and the creation of the World Trade Organization. “Free trade” and neoliberalism are fundamentally programs of transnational capital liberated from the nation-state through globalization.

Opening North America for the Transnational Capitalist Class

US, Mexican and Canadian elites turned to negotiating and implementing NAFTA so as to open up new opportunities for expansion in the face of stagnation and to appropriate resources in Mexico and beyond. Capitalist globalization in North America created outlets for a mass of accumulated capital following the stagnation and decline in the profit rate as a result of the 1970s crisis and helped to reverse the worldwide correlation of social and class forces that throughout the 1960s and 1970s had become adverse to capitalist expansion and elite interests.

Yet NAFTA was but one small part of a vast restructuring of world capitalism. NAFTA and free trade are components of neoliberalism, which in turn is an integral component of the project of transnational elites in North America to restructure the system, restore the class power of an emergent transnational capitalist class, and lift obstacles and barriers to new transnational circuits of accumulation opened up by capitalist globalization. NAFTA must be seen in this larger context of capitalist globalization as an attempt to resuscitate the North American and world economy and to restore capitalist hegemony after the great crisis of the 1970s. It is not separate from other free trade agreements around the world; NAFTA is simply the North American regional variant of the project of capitalist globalization.

“To a certain extent, we are armoring NAFTA.”

As many have documented, global capitalism has produced an unprecedented concentration of wealth in Mexico and the rise of 24 new billionaires, some of the wealthiest people in the world. Carlos Slim’s worth went from $6.6 billion in 1994 to $73 billion in 2014. It generated a high consumption Mexican middle class that identifies more with its counterparts in the United States and elsewhere than it does with the mass of impoverished Mexicans.

At the same time, living conditions for most in Mexico plummeted in the wake of NAFTA’s implementation. From 1992 to 1999, extreme poverty increased from 16 to 28 percent of the total population, and in 2012, the poverty rate stood at 52.3 percent, slightly higher than it was at the time of NAFTA’s approval. Some 2 to 3 million families were thrown off their land in the wake of NAFTA and millions more were made unemployed in urban areas, creating a mass labor force for maquiladoras, agribusiness projects, mining operations and service sectors. A major portion of those displaced became transnational migrants, servicing the US and global economy outside of Mexico.

NAFTA thus generated for transnational corporate capital new pools of exploitable labor and access to vast new reserves of land and resources in Mexico. The treaty opened up new markets in Mexico and access to Mexican resources for the transnational capitalist class, but also allowed this transnational capitalist class to attack the working class throughout the region. It allowed the transnational fraction of the Mexican capitalist class and elite to globalize and consolidate its hegemony over the Mexican political system. In this sense, NAFTA has been an incubator of the transnational capitalist class in Mexico.

The War on Drugs and Immigrants as Counterparts to NAFTA

NAFTA has its counterpart in the ongoing militarization of North America, including the militarization of borders, the drugs wars, the war against immigrants and the repression of social movements. North America is “a shared economic space,” declared then-US Assistant Secretary of State for Western Hemisphere Affairs Thomas Shannon in 2005, when the Security and Prosperity Partnership of North America went into effect. “To a certain extent, we are armoring NAFTA.” In 2007, the Security and Prosperity Partnership was replaced by Plan Merida, also known as Plan Mexico, a more sweeping program for militarizing Mexico, including the country’s southern and northern borders, with hundreds of millions of dollars in US military and security assistance.

The “drug war” has been a critical mechanism for accumulation and social control in both Mexico and the US.

It is noteworthy that the Security and Prosperity Partnership and Plan Merida brought leading transnational corporations, especially from the military-industrial complex, into coordination with US and Mexican military and security forces, and provided new opportunities for militarized accumulation throughout North America.

The so-called “drug war” has been a critical mechanism for accumulation and social control in both Mexico and the United States, and highly functional for the transnational capitalist class. As Canadian journalist Dawn Paley shows in her important new study, Drug War Capitalism, this war is an instrument of primitive accumulation, social cleansing and profit-making through militarization and conflict. It has allowed, among other things, for:

  • the social control of the North American working and popular classes;
  • repression of Mexican social movements;
  • vast profit-making through military forms of transnational corporate accumulation, such as the production and deployment of military equipment and forces, border walls, surveillance systems, prison-industrial and immigrant detention complexes;
  • the expulsion of communities from rural and urban conflict areas, the appropriation of lands, and establishment of agribusiness and mining operations in place of small-scale agriculture;
  • the creation of a system of mass incarceration in the United States disproportionately targeting the African-American population as surplus labor.

This “war on drugs” is reciprocal to the war on immigrants, itself an integral part of the story of NAFTA. The campaign of control and repression against Mexican (and Central American, Asian and other) immigrants in the United States has three key functions for transnational elites. First, it is a system for criminalizing this population, and therefore making it a cheap and tightly controlled labor supply. Second, it allows more generally for control over the transnational working class, including political, cultural and ideological mechanisms of social control; the conversion of immigrants into scapegoats for the crisis; and the sublimation of social tensions that may otherwise be directed against systemic sources of the crisis. And third, together with the farcical wars on drugs and terrorism, the war on immigrants justifies ongoing militarization and “securitization,” generating widespread opportunities for transnational corporate profit-making through militarized accumulation.

NAFTA has had the effect, in sum, of generating an almost limitless supply of immigrant labor for the North American economy, in the context of the restructuring of global labor markets. Criminalization of immigrants in the United States has played a key role in pushing immigrant workers underground, making them more vulnerable to super-exploitation and less able to resist, and keeping them deportable. Racist anti-immigrant laws, the immigrant detention complex and militarized borders all reproduce a reserve army of immigrant labor and at the same time open up new sources of profit-making for the transnational corporations that are actually contracted to build border walls, supply military equipment to the state military and security forces, and establish and run surveillance systems and detention centers.

US Colonization or Transnational Capitalist Class Conquest?

Some have argued that NAFTA aimed to close off North America from other regions and to allow US capital to face European and Asian competitors. This thesis of “regionalization” and a tripolar world in competition, however, does not correspond to reality over the past 20 years. The evidence shows that NAFTA has served as a platform for ever-greater transnational integration and globalization of North America. Transnational corporations from all over the world have poured into Mexico (as well as the United States and Canada) over the past two decades in order to have direct access to North American labor and consumer markets. NAFTA opened the region to greater integration with Asia. China, in fact, is currently funding the “NAFTA super highway,” that is, the construction of vast new highway and rail networks integrating the entire North American region.

With the collapse of the Doha round of negotiations at the World Trade Organization, the strategy pursued by the transnational capitalist class has been to negotiate a multiplicity of bilateral and multilateral regional and interregional trade deals, the latest of which is the TPP. We have seen an accelerated transnationalization of the entire North American region since NAFTA went into effect.

We have seen an accelerated transnationalization of the entire North American region since NAFTA went into effect.

Others have portrayed NAFTA as a recolonization of Mexico by the United States. But this image, too, is demonstrated to be false. NAFTA allowed the transnational fraction of the Mexican capitalist class to transnationalize. The Mexican contingent of the transnational capitalist class has been just as much a protagonist and beneficiary of NAFTA and capitalist globalization as has its US and Canadian counterparts.

The Mexican-based Cemex conglomerate, the largest producer of cement in the world, not only operates on every continent, but also is the principal supplier of cement to the US market. While mining companies from the United States and Canada, as well as from Asia, Europe and elsewhere, have poured into Mexico over the past two decades, the largest of these companies are actually owned wholly or in part by Mexican capitalists. Carlos Slim’s Grupo Mexico and Grupo Carso conglomerates hold major shares in Saks Fifth Avenue, Best Buy, The New York Times, Philip Morris, Apple and Alcatel, not to mention holdings in companies on every continent.

The case of the “corn tortilla circuit” is instructive. Those who say NAFTA represents a US takeover of Mexico point to how US-based agribusiness subsidized by the US state has flooded the Mexican market with cheap corn and displaced millions of small farmers. This is true. However, these lands have been taken over as much by Mexican and transnational agribusiness, mining and other concerns from around the world as by US-based investor groups. Mexican agro-export and mining capitalist groups have proliferated in Mexico.

Specifically, when NAFTA went into effect, the price of bulk corn dropped – yet the price of tortillas actually rose. This is because NAFTA allowed Mexican transnational capitalists to gain monopoly control of the corn tortilla market. Just two Mexican companies, GIMSA and MINSA, captured 97 percent of the industrial corn flour market in the country, with the help of Mexican state subsidies. These two companies also control major shares of the US tortilla market (e.g. Mission brand is owned by GIMSA). NAFTA facilitated a shift from small-scale to transnational corporate control of the corn tortilla circuit on both sides of the border, with both Mexico and the US, as transnational state apparatuses, subsidizing both Mexican and US members of the transnational capitalist class.

Twenty-one years into NAFTA, world capitalism is again in deep crisis. Globalization, free trade and neoliberalism may have facilitated a renovated round of capitalist expansion, but they have also generated new contradictions that the system has not been able to resolve. These processes have helped to bring about a transnational working class in North America and globally that is increasingly moving from the defensive to the offensive. The great challenge for transnational elites is how to contain the real and potential rebellion of this mass of dispossessed humanity. As the battle heats up around the TPP, reflections on NAFTA 21 years on can be instructive.

This article is an edited version of a speech William I. Robinson gave at the National Autonomous University of Mexico on April 16, 2015. The analysis is drawn from his latest book, Global Capitalism and the Crisis of Humanity (Cambridge University Press, 2014). Thanks to Steven Osuna and Kevin Robinson for their contributions to this article.

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