Do maquiladoras matter? - implications of runaway shops on the US-Mexico border

While English words have been flooding into Spanish for most of the century, a few words have gone in the opposite direction. Over the past decade working people in the United States have started hearing more and more about 'maquiladoras.' Originally from the Spanish for "multure," a fee for milling grain, the word has come to mean an assembly plant, and especially the sort of plant that dominates the Mexico-U.S. border, where for the past thirty years Mexico has given U.S. and other foreign companies tariff breaks on goods imported for assembly in Mexico.

In other words, maquiladoras are the runaway shops that have been taking over assembly work previously done in the United States - providing U.S. employers with a convenient excuse for cutting wages. Any effort to maintain the living standards our parents enjoyed thirty or forty years ago, we are told, will result in our jobs fleeing to Mexico or to still more exotic places like Indonesia and Vietnam. A study published in June 1997 by Kate Bronfenbrenner of the Cornell School of Industrial Relations reports that 60 percent of union organizing efforts in the U.S. manufacturing sector are now met with management threats to close down operations. This is up from 29 percent before the North American Free Trade Agreement (NAFTA) went into effect on January 1, 1994.(1)

There's considerable exaggeration in these threats, of course. The jobs that leave the United States are for obvious reasons limited to the more mobile industries: textiles, for example, or assembly work for the apparel, electronics and auto industries. The flight of even a large number of plants in these low-paying, labor-intensive industries can only have a limited impact on the overall economy of a first world country. It is true that substantial amounts of U.S. capital are now being invested abroad, but as City College of New York economics professor William K. Tabb notes, "[t]hree-fourths of foreign investment and production by U.S.-based multinationals is in Western Europe, Canada and other high-wage countries." And Doug Henwood editor of the Left Business Observer writes that,"In other words, most of the 'globalizing' action is occurring in countries where wage and benefit levels are equal to or higher than those in the United States."(2)

At the same time, three successive U.S. administrations have put a great deal of effort into bolstering the maquiladora sector in adjacent third world regions, despite that sector's apparently limited importance to a country like the United States. The Reagan administration produced the Caribbean Basin Initiative (CBI); NAFTA was a joint venture of the Bush and Clinton administrations; Clinton is now pushing the Free Trade Area of the Americas (FTAA, or ALCA in Spanish), a sort of hemispheric NAFTA. Congress has revived the main features of the Caribbean Basin Trade Security Act, shelved for political reasons in September 1995. The legislation would extend NAFTA-style tariff breaks to apparel stitched in Central America and the Caribbean. The Clinton administration is doing its part with a "No Sweat" campaign to counter the widespread perception of apparel maquiladoras as sweatshops. Clearly Washington feels there's more to runaway shops than idle threats to close down if workers vote to unionize.

The Neoliberal Laboratory

If we want to understand the actual significance of the maquiladora phenomenon, we have to start by recognizing that it can't be separated from what third world leftists have long since identified as "neoliberalism" - the package of structural adjustments, privatizations and "free trade" that the first world has been imposing on the third world for the past fifteen years.

The neoliberal project provides various traditional imperialistic ways for the world's elites to enrich themselves, such as looting natural resources through privatization or opening up new markets through tariff reductions. What is new about neoliberalism is a sort of primitive accumulation against capitalist and post-capitalist economic forms - against industrial production for the domestic market, against small-scale capitalist or cooperative agriculture (often the result of agrarian reform), and against the tenuous but crucial social safety net that has developed in many third world countries. Just as happened with classic primitive accumulation, the result has been the creation of a vast labor pool of people desperate for jobs, even at wages below subsistence levels.

Mexico has been a sort of laboratory for the neoliberal experiment ever since the country's 1982 debt crisis. The current recession, which started with the peso devaluation of December 1994, has drawn the world's attention, but the process was under way long before that. The purchasing power of the 7-10 percent of Mexican workers who earned the minimum wage (less than $5 a day at that point) had already fallen by about 30 percent in the comparatively prosperous period from 1987 to 1994.(3) The current crisis has brought a more drastic decrease, and not just for the lowest-paid workers. From 1994 to the first half of 1997, Mexicans' real wages lost 26 percent of their purchasing power, according to the Mexican Senate's Commission on Distribution and Management of Consumer Goods; the Mexican Association of Studies for the Defense of the Consumer (AMEDEC) reports that consumption of meat, milk, and chicken fell between 26 and 30 percent during the same period.(4) The formal economy lost 751,041 jobs in the first eight months of 1995, almost exclusively from production for the domestic market, according to Banco de Mexico (Banxico), the national bank.(5) It is not clear how many of these jobs were recovered during the modest subsequent upturn.

Statistics about the formal economy tend to understate the devastation of campesino agriculture, which until recently supported about a quarter of Mexico's population. One indicator of what neoliberalism has done to the campo is the estimate that the country imported 10 million tons of grain in 1995, almost double the 5-7 millions tons Mexico had imported in earlier years.(6) Another indicator is, of course, the emergence of at least two rebel armies in the rural areas of southern and central Mexico since 1994.

Mexico is the Caribbean Basin's largest economy, and probably the most resilient. In smaller and weaker countries like Haiti and Nicaragua, the same economic policies translate into unemployment at a rate of more than 50 percent and wages under fifty cents an hour.

Expanding the Global Maquiladora

Common sense tells us that the presence of tens of millions of underpaid and underemployed workers in a region adjacent to the United States will exert a strong downward pressure on U.S. wage scales. The actual flight of jobs to the Caribbean Basin is a relatively small part of the total effect; a more significant factor is probably the flight of Caribbean Basin workers into the United States.

Denied work papers, living under constant threat of deportation, these workers are forced to accept wages far below those paid to their U.S.-born counterparts. There are no reliable figures for the number of "illegal" workers in the United States or their effect on wages. In 1996, Mexico's Colegio de la Frontera Norte estimated that 5 million Mexicans worked in the United States without documents, earning about $30 billion a year, of which they sent $3.6 billion back to family members in Mexico. The Mexican group claimed that these payments were the third largest source of hard currency for Mexico, after $8.423 billion from petroleum exports and $4.924 billion from the maquiladora sector. The number of undocumented Mexican workers in the United States seemed to be growing by about 150,000 a year.(7)

If these figures are roughly accurate, about 10 percent of the total Mexican work force of 50 million has been transformed into some 3 percent of the U.S. work force, now at about 135 million; these "illegals" average a little more than $100 a week, far below minimum wage. And the situation isn't about to change. With no improvement in the economies of the countries the undocumented workers come from, the ferocious anti-immigrant legislation of 1996 will do little to reduce immigration; its real effect will be to reduce even further the ability of immigrants to fight for better pay and working conditions.

But the magnitude of immigration shouldn't obscure the significance of the closely related maquiladora phenomenon, or its underlying dynamic. Between January and October of 1995 - the period in which Mexico's economy lost three quarters of a million jobs - employment in the country's maquiladora sector rose by 20 percent to 648,000, according to the WEFA Group consulting firm. The Mexican National Institute of Statistics (INEGI) reports that the number had risen to 873,748 by April 1997. In 1995 WEFA predicted that the total would reach 943,000 by 2000; that figure now seems conservative.(8) In other words, the Mexican maquiladora sector is expected to have grown by 400,000 jobs - 75 percent - between 1995 and 2000. These maquiladora workers get even less than the Mexicans who immigrate to the north. General Motors workers in Reynoso, near the Texas border in the state of Tamaulipas, say they take home about $40 a week.(9)

A reasonable estimate would be that Mexico by itself provides U.S. business with some 5 million undocumented workers and 750 thousand maquiladora employees; these people work at jobs that would otherwise go to U.S. workers at significantly higher pay scales. Mexico also provides a pool of millions of potential competitors for U.S. jobs. Other countries in the Caribbean Basin have a less significant effect on U.S. wage scales than Mexico does, but this will change if the Clinton administration succeeds in its plan to pull the whole hemisphere into a NAFTA-style trade pact.

Even Clinton's super-NAFTA isn't enough for the masterminds of the neoliberal project. Harvard's Jeffrey Sachs, the architect of neoliberal policies in Bolivia and Eastern Europe, wants to convert the planet's entire tropical region into a vast maquiladora zone. "[T]he frustrating record of tropical agriculture," he writes in The Economist, "may mean that we should begin to accept as normal a situation in which Africa and other tropical regions are fed by temperate-zone exports, and in which the tropics earn their way in the world through manufacturing and service exports rather than primary commodity exports." "My concern is not that there are too many sweatshops," Sachs said at a recent Harvard panel discussion, "but that there are too few."(10)

Globalizing Resistance

The impact of runaway shops on U.S. workers is clearly not as apocalyptic as some people would have us believe; at the same time the maquiladora phenomenon almost certainly exerts a significant and growing downward pressure on U.S. wages. And this is minor compared to the effect the whole neoliberal program is having on the rest of the hemisphere, where the standard of living has fallen precipitously to levels below those of the Great Depression.

In fact, the situation south of the border may well be what matters most about maquiladoras. So far U.S. workers have generally reacted to job flight with a combination of fear, resignation, xenophobia and racism - all artfully exploited by right-populists like Pat Buchanan. The picture is quite different if we look at the rest of the Americas. In January 1997, Haitians shut their country down in a one-day general strike explicitly against neoliberalism; in February, Ecuador's clownish neoliberal president Abdala Bucaram was ousted by unionists marching under the slogan "More Bread, Less Circus"; a month later, Nicaraguan farmers protested neoliberal agricultural policies by cutting off supplies to the cities for three days; throughout May and June, Argentines blocked highways in the provinces as a demonstration against the neoliberal programs of local governments; June brought renewed protests against Peruvian president Alberto Fujimori, thought by many to be impregnable after the April bloodbath in the Japanese ambassador's residence; a general strike closed parts of the Dominican Republic in early July. Meanwhile, center-left parties, most of them created in the last 15 or 20 years, are drawing between 25 percent and 40 percent of the vote in much of Latin America; in July a center-left party won the Mexican capital, the largest city in North America.

Many of the workers who are fighting neoliberalism in Latin America and the Caribbean are eager to work with activists in the north. After all, neoliberalism is an attack on wage scales and living standards throughout the world; it once and for all finishes off the old analysis of imperialism - still clung to by NAFTA apologists and a few leftists - as a system whose benefits trickle down to an aristocracy of labor in the mother countries. Every plant that leaves the United States for the south is one more reason for U.S. workers to identify with workers in the third world - and one more opportunity for these workers to organize together.

NOTES

1. "NAFTA: Where's That 'Giant Sucking Sound'?," Business Week, July 7, 1997.

2. William K. Tabb, "Globalization Is an Issue, the Power of Capital Is the Issue," Monthly Review, June 1997; Doug Henwood, "Does Globalization Matter?," In These Times, March 31, 1997.

3. "Mexico's Pact for a Stable Economy," New York Times, September 27, 1994.

4. Mexican Labor News and Analysis, Vol. 2, No. 13, July 2, 1997 from "Cayo 26% el poder de compra del salario respecto al 94," La Jornada, June 27, 1997, and "Dramatica caida en el consumo de basicos," La Jornada, June 19, 1997.

5. "En 8 meses, 751,041 trabajadores quedaron desempleados: Banxico," La Jornada, October 1, 1995.

6. "Mexico: Corn Shortage Forces Farm Shakeup," Reuters, October 23, 1995.

7. "Indocumentados en EE.UU. son una importante fuente de divisas," Diario Las Arnicas, May 29, 1996, from EFE. A joint study by the Mexican and U.S. governments, parts of which were leaked to the New York Times (August 31, 1997), apparently will give much lower figures. The government study is expected to report that there are now 2.3 million to 2.4 million"unauthorized residents" from Mexico in the United States and that the number increased at an average of 105 thousand a year between 1990 and 1996. Anti-immigrant politicians like Pat Buchanan have claimed that the rate of increase is 1 million a year.

8. "Two Years Later, the Promises Used to Sell NAFTA Haven't Come True, but its Foes Were Wrong, Too," Wall Street Journal, October 26, 1995; Mexican Labor News and Analysis, Vol. 2, No. 13, July 2, 1997 from "Aumenta en 20.7% empleo maquiladora," Reforma, June 28, 1997.

9. Action Alert from the Coalition for Justice in the Maquiladoras, July 3, 1997.

10. "The Limits of Convergence: Nature, Nurture and Growth," The Economist, June 14, 1997; "In Principle, a Case for More 'Sweatshops,'" New York Times, June 22, 1997.

David L. Wilson works with the Nicaragua Solidarity Network of Greater New York and the Weekly News Update on the Americas, a news summary reporting on Latin American and the Caribbean.

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