Globalization continues to break down its own myths, especially in developing countries.
In Mexico, the promise of more jobs withered shortly after NAFTA went into effect, when it became clear that displacement outpaced job generation. Now, its twin promise—that globalization would create better jobs and improve standards of living—has finally committed public suicide as well.
Ford and General Motors change their operations in Mexico. Ford announced a major investment in Mexico of over $2 billion this week. Alongside the self-congratulatory remarks of industry representatives and government officials, was an interesting tidbit of information.
According to an AP report, at the Ford plant to be expanded in Cuautitlan—on the outskirts of Mexico City where the cost of living has been going up sharply—workers’ wages would be cut in half from their current level of $4.50 an hour. Mexican union leaders stated that this was necessary to compete with China.
The same week, General Motors announced a $1.3 billion investment in its Coahuila, Mexico plant and the creation some 875 jobs (note the low job-to-investment ratio). It also announced the eventual closure of plants in Janesville, Wisconsin and Morraine, Ohio. The Mexican press noted that the company first hinted at the closure of its plant in Toluca, which elicited an immediate promise from the union leadership to accept wage reductions. It soon after announced it will remain open but cut back on operations and lay off some of the workers. Although the new contract terms were unavailable at the time of this writing, the trend is written on the wall.
The companies justified further gouging into the fragile economy of working families by pointing the finger at global competition. As long as China offers wages of as little as $2.00 an hour, Mexico has no choice but to follow suit if it wants to attract investment.
The only legal floor to this race to the bottom is Mexico’s minimum wage of about $5 per day. And the same week, the Mexican government made it clear it has no plans for relief in that area. In classic patriarchal style, Sec. of Labor Javier Lozano explained that raising the minimum wage would trigger “a salaries-prices race and it would be an illusion for workers, it would be deceiving them, since while they might think they have more money to purchase goods, these (prices) would keep going up.”
The problem is that prices are already going up—the price of the basic food staple, the tortilla, went up from 5 pesos at the end of 2006 to 12 pesos in some parts of Mexico today. That alone places Mexico in the growing camp of nations threatened by the global food crisis, where even full-time workers find it difficult to assure a basic diet.
In a June 9 speech at the International Labor Organization in Geneva, Lozano expounded on the perils of granting living wages to the working poor: “The legitimate aspiration of higher wages for workers should come about through increases in productivity and not artificial measures such as generalized price controls or emergency wage hikes.” As Sec. of Labor, you’d think that Mr. Lozano might have seen just one of the dozens of studies that show that Mexican manufacturing has experienced a marked increase in productivity accompanied by a fall in real wages.
But the use of the word “artificial” belies his conviction that anything outside the dictums of the neoliberal market is “unnatural.” So whatever reality serves up that contradicts these dictums continues to be treated as an inconvenient anomaly or ignored completely.
Funny that raising substandard workers’ salaries is presented as the villain in the crusade to control prices for the good of all, whereas other causes—such as monopoly market control—receive no mention whatsoever. Funny, but not in a laughable way. Mexican workers are being urged to resist their lower instincts of wanting to eat regularly and provide a future for their families, and to have faith in the same macroeconomic policies that have failed them for years. That’s a tough order in a society where the cost of basic items rose 47% between December of 2006 and May of 2008 while wages went up a little over 4%.
LAURA CARLSEN is director of the Americas Policy Program www.americaspolicy.org in Mexico City. She can be reached at: lcarlsen(@)ciponline.org