Here the authors examine the record of FDI since 1980 when markets were deregulated and capital flows were "liberated from control." Again they cite the notion that economic growth depends on the accumulation of capital, developing countries are deficient in it, and private multinational commercial and investment banks and MNCs will ride to the rescue with FDI. And while capital fuels growth, international trade is "one of its driving forces." Two models are considered. One gives the state an active role, and it worked during the 1940 - 1970 "golden age of capitalism" period. That's when "international development" meant per capita economic growth based on "industrialization, modernization and capitalist development."
That period came to an end in the troubled 1970s, and a "counter-revolution in development thinking and practice" took over. The scheme that became neoliberalism turned capital towards exports and induced governments to cut social benefits to raise levels of savings, productivity, profits and productive investments.
World Bank economists were tasked to create the new model that became its Structural Adjustment Program (SAP) with eight major components:
-- devalued currencies for stability;
-- privatizations;
-- capital market and trade "liberalization" meaning unfettered free market capitalism;
-- deregulation;
-- labor market "reform" meaning lower wages and loss of worker rights;
-- downsizing;
-- decentralizing policy formulation and decision-making; and
-- a free market for capital, goods and services meaning all benefits accrue to the Global North by pillaging developing nations.
Former World Bank economist and neoliberal critic, Joseph Stiglitz, called this package the "steps to hell" two years after he resigned his position in 2000. All the evidence to date proves it with the authors stating "the neoliberal model of capitalist development (is) unsustainable, (it's) both dysfunctional and politically destabilizing." Confirming data and examples are cited throughout the book, but in this chapter Mexico is featured in great detail from 1980 - 2005. It's covered under four presidents with each in his own way outdoing or at least matching the excesses of his predecessor with the people of Mexico the poorer for it.
This review can only touch on that period briefly beginning with Miguel De La Madrid (1982 - 1988) who was the first to begin reversing a state-led approach to relieve the "debt crisis" stemming from the 1976 - 1982 period of over-borrowing. It was IMF to the rescue with its usual package of "reform" measures to "liberalize" capital, encourage exports, deregulate markets, devalue the currency, and demand fiscal discipline and privatizations. De La Madrid obliged.
Next came Carlos Salinas de Gortari (1988 - 1994) who introduced a second round of structural reforms. It included over 1000 more privatizations that sold off the most important state enterprises like the banks and state telephone company, TELMEX. The international financial community loved him, but his term ended in tatters when the economy crashed in 1994.
Ernesto Zedillo Ponce de Leon (1994 - 2000) inherited the mess that broke out right after he took office. With help from a $52 billion US bailout, he responded with a "stabilization program" that included deep social spending cuts and a 43% peso devaluation that caused inflation to rise 52%, thousands of businesses to close, real wages to drop 25%, and two million people to lose jobs. Zedillo was also Mexico's first president under NAFTA that went into effect January 1, 1994. And he continued neoliberal "reforms" and even exceeded his predecessor's commitment to global capitalism.
I am a 72 year old, retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.
