lecture 7 pre-colonial societies and the impact of...

SHELAGH JOSEPH POLB90 LECTURE NOTES of 17

LECTURE 7 Tuesday, October 22, 2013

Pre-colonial Societies and the Impact of Colonization

Post-colonial thinkers alert us that the expansion of Europe had profound impact on the attitudes of the colonized Europeans.

Modernization perspective operated from the premise that simple derivatives making transition. o What happened? Why very developed cities were ‘behind’?

Trading Empires with Complex Administrative Structures

Africa o From 1083 AD, trade between Africa and China

Silver and gold through Mozambique

African trade with India and Arabia

Trading Empires: o In order to become a trading empire, you have to have a complex administrative structure. Keep

order of exports, organize merchants, and regulate trade. Katanga (Zaire) Mexico (Aztecs) India [dynamic and textile industry] China [had gun powder and printing press]

Societies with Significant Technological Advances Example:

The Meroes Empire o 8

th Century BC Engaged in iron work 23 character alphabet Meroitic Finery

Other Examples

Nok Empire (northern Nigeria, 4th

and 5th

centuries

Mali Empire, Africa, 12th

and 13th

centuries o Theory that the Mali Empire was able to sell to America. o Found images of black people in Central America.

Maya, Central America, 11th

century o Had calendar more advanced than the American calendar. o Had written language

India (exporter of textiles)

Sophisticated agricultural systems: India, China, Peru (Inca) o Can’t move on until able to produce agricultural surplus

Features of Some Pre-Colonial Societies

Complex administrative structures o Maintenance required extensive administrative work

Skill and competence counted o It was where you were born and what social group you were born into. o Particularly in pre-colonial societies, competence and skill were taken into account.

Provision of basic needs o Some of them were very good at providing basic needs to people o Stem from concept that disappeared with colonial rules – sharing obligation o No concept of private property (can often interfere with distribution of basic needs and living

standards of lower part of the system)


o Cannot sell or throw lower cast off the land. Moral obligation to ensure the lower cast. o Peru (Inca): land was given to family in accordance to their needs and their ability to

Imperialism o Political control and acquisition of resources of conquered societies

1400: European Expansion begins

Rise of trade, decline of feudal Europe.

Emergence of artisanal industries (particularly in textiles)

Began to expand o Food (soil began to deplete) o Trade routes o Bullion (gold, silver)

Expansion of Europe

1400-1500 – Portugal – North and Northeast Africa o 1480s Portugal took over Indian Motion Trade. o Establish direct trading relations with India o Cohesion required, civilization East of Africa began to decline o Portugal increased taxes. o Trade declines in region due to all the fighting and warfare. o Involved in the Americas (Brazil). Competed with Spain to control America

1500-1600 – Spain – the Americas o Facilitate by

diseases (Americans were not resistant to European diseases) weapons (steel and horses)

Motivations wealth, religious conversion Consequences of the Conquest of the Americas

Destruction of pre-colonial civilizations

Drastic drop in population o Encounter of Spanish and Portuguese.

Emergences of mixed-blood population (mestizo) o Consequence of intermingling of Spanish conquest and indigenous population o Majority of the country are mestizo.

Complete economic re-organization o Mass amount of gold and silver for the European market. o Organize labour to extract all of this. o Emergence of enormous land holdings o Concentration of wealth

Conquest assumed that the conquerors had the right to extract enormous amount of wealth.

Ultimately not Spain, most were shipped to Spain created inflation, manufactured goods pricing went up and couldn’t compete with British manufactures goods. Profits flowed to Britain instead.

1650-1800: British Hegemony and the Slave Trade

Sugar became king. North Brazil became center of sugar production.

Every island in the Caribbean had large plantation and sugar production Triangular Trade:

Manufactures goods to Africa

Slaves to the Americas


Impact of Sugar Production and the Slave Trade

Sugar regions in the Americas ceased to produce food for domestic consumption o Alters the production in these countries. Soil became depleted. o NE Brazil, dynamic center for sugar production. Now poorest place in the world.

New plantation/slave societies emerged in the Caribbean o Indigenous people who eventually died off. o Emergence of societies controlled by white elites and black slaves at the bottom. o Skin colour and degree of pigmentation associated with political power and association. o Consequence of expansion

Slave trade devastated Africa o Had profound implication. Meant people became commodities. o Consequence of crime and debt. o Slave trade produced war and destroyed economies

British and Europe supplied arms and in return, slaves were given. o Removed large numbers of productive people. o Rise to predominance of Africans who would collaborate with Europeans

African slaves benefitted from the slave trade. Distancing between rulers and ruled.

1757 – 1858: British Conquest and Colonization of India

British had an extensive agricultural system produced surplus. 1757: All Indian commerce in the hands of the East India Trading Company

Marked British economic control over India 1813: Its monopoly of trade between India and Europe is abolished But continues to rule India until 1858.

Set of advanced policies, successfully destroyed the Indian textile industry. Economic Impact (Laws, 1768-1784)

The British government o Required the East India Company to bring British goods (mostly textiles) to India o Required the Company to pay a large annual sum to the British government

East India Company had to tax heavily on locals. o Put heavy tariffs on Indian good (textiles) entering Britain

Indian textile were cheaper and better, would threaten the British textile industry o Then banned them altogether. (banned tariffs on British goods entering India)

Building of railways, 19

th century.

British textiles flooded the Indian market.

Indian market was not the only one destroyed by the British (Mexico, Argentina, etc.) The creation of a strata of Indian Collaborators

“Zamindars” o Tax collectors o Allowed to take away land for not paying tax.

Agricultural production began to decline The Social Consequences

Last quarter of 19th

century: 18 famines, 16 million deaths o 1943: Bengal famines – 3.5 million deaths

Average life expectancy dropped from 20 years in 1881 to 23 years y the 1920s o Average life expectancy in Britain in 1920s was 55 years.


1880-1905: The Conquest of Africa

What drove the conquest? o From Britain’s point of view, began to think slavery was not a good idea. Began to support

abolition of slavery, wanted markets where it could sell its manufactures goods. o Europe wanted raw materials, wanted a secure source and markets.

Economic production reorganized Africa to meet European needs. o Various form of direct cohesion. o Tax heavily and forced to work in mines.

Conquest in Africa o Involved actions and military activities of Africans. o Slave trade: Europeans able to build strata of Africans and marshal them into cooperation to

conquer parts of Africa for various European powers. Types of European Rule Indirect Rule: Rule through local institutions, leaders and customary laws.

MOST effective rule.

Utilizes local leader and institutions and customary laws. Utilizes local/indigenous leaders to collect taxes, adjudicate cases and impose punishments.

Least disturbance to the status quo.

Legitimized colonial rule. (People believed in the institution.) o Allowed for extraction (esp. collection of taxes) o Contributed enormously that separated leaders from the population.

Deflected discontent Direct Rule: The imposition of European laws and institutions down to the village level.

LESS effective

Less apparent of who is extracting from you.

Produced much more violence Political Independence

Latin America: first quarter of the 19th

century

Asia and Africa: 1946-1965 o By high level of education and thinking. o Many adopted western way of thinking. Thought of developing.

Franz Fanon (1925-1961)

LECTURE 8 Tuesday, October 29, 2013

Economic Globalization, Debt and Neoliberal reform in the Global Last Week: Franz Fanon(1925 – 1996) Black psychiatrist from Martinique

Involved in the Algerian struggle for independence from France o Became aware psychological and cultural impact of colonialism

What it did was inculcated the notion that everything “European” was superior

Literature had an enormous impact on European views on the Global south Fanon argued that colonized were not only weighted down by economic notions, but the idea of cultural inferiority of the colonized

Most of these colonies retained their ties with former colonial powers o “Hybrid elites” – a result of western educated people and indigenous values o Violent revolutionary struggle was necessary in removing the deep psychological impact of

colonialism would be shaken


The international financial system

Would have a profound impact on what Global South countries could not do in terms of development o Mechanism of control

Definition:

Private commercial banks

IMF

World bank

Various regional development banks The World Trade Organization:

Important influence on development o All of these are linked

The Role of the IMF and World Bank

1948 – Bretton woods

IMF: short term balance payments

Bank: Project lending o Based in Washington

Makes it easily accessible

Developed country dominance o The countries that are the wealthiest have more votes meaning that they have more say o Gives the opportunity for these countries to influence policy making

World Bank:

1960’s supported tariffs

Public lending How and why did these institutions become such heavy advocates of neoliberal reform?

Change in the “conventional wisdom” about what constitutes good economic policy John Maynard Keynes – advocate of state intervention in good capitalism

1970’s: the new orthodoxy o Central role to the market

Human beings operate on in their own economic self interest

Prices should not be interfered with o State intervention creates a miscalculation of resources

Economic events:

Rise in petroleum prices

Decline in US competitiveness

The international debt crises o GS countries borrowed heavily

Decline in commodity prices o Poverty and inequality shot up o 1980’s – “the lost decade”

Had permanent implications How did the new thinking become translated to policy?

Policy conditionality o Stabilization agreements (IMF)

Credit restriction Devalue currency Reduction in global spending To repay debt, stimulate exports.

If they didn’t agree, they could not get loans from the World Bank. Results?


Constrict economy o Rising unemployment o No public spending

Then they notices that this policy was not working The Washington consensus

Trade liberalizations

Privatization o Sell off your companies

Deregulation of foreign investment

Labour flexiblization

removal of subsidies

removal of restrictions on capital flow o instrumental in GS

Negative social consequences Repeated economic crisis

The Mexican peso crisis of 1995

The Asian crisis 1997

The Argentine crisis of 2001 The Role of Private Commercial Banks

1970’s: Banks pressure GS to borrow o Due to a rise in petroleum, they had money

Needed a place to invest

They had all this capital to lend out

Country A lends out money in peso’s, the Canadian banking regulations do not apply, no insurance , no credit checks

o Totally unregulated

Lent huge amounts of money o Very much a part of this surge in debt

1982: refuse further lending 1982 on: private banking sector is busy lobbying US government and IFI’s

Lobbied these countries o Had to repay their loans o No regard for the social implications of this o While recognition of insolvency – debt reduction

Informal conditionality o Banks had enormous power, how did they pressure countries to repay?

Struck a committee of the most important private commercial banks

Review the policy of the GS countries and renegotiate their loans

Pushed countries to shape policy in GS that would please loaners.

The debt was not just held in the GS government o Huge loan was on private domestic companies o Commercial banks wanted states of developing countries to take over and pay it off

The consequences: Net capital outflow

Very difficult to get a country to pursue structure (had to say they would do so, otherwise they would get no loans)


Attempts at a debtor’s Cartel Did not work- Mexico opted out and backed out IFI`s provide incentives Sectoral adjustment loans

But debt load was too heavy o Finally debt relief – 1989 o Very much tied to SAP`s

Only when private banks would not suffer losses

Even though many had recognized the need much earlier The role of policy dialogue

More important than anything else to get GS countries to reform o Transmission of new policy culture of market reform o Years of discussions between WB and country officials.

Wasn’t going to happen unless countries actually owned the policies Especially country officials in finance ministries

Rise of technocrats

Facilitated by the debt crisis The undemocratic nature of the process

Discussions were secretive

Only a small group of country officials o Finance ministry officials

Onside with the idea of balancing the budget. SAP’s are unpopular: use of strong arm tactics

Argentina – Presidential decrees and manipulation of trade unions Mexico – repression of labour When you have poor political policy in economic crisis it is the common folk or poor who suffer greatly. The WTO

Role of MNC’s o Example: pharmaceutical companies, trade related property rights (TRIPS)

Industrialised versus GS countries

Agriculture o Financial services

Government procurement Decision making in the WTO

Theoretically democratic, but not in practice o Green room meetings: draft Doha declaration o Divide and rule tactics o Lack of resources of LDC

LECTURE 9 Tuesday, November 5, 2013 Dealing with Social Deficit

Ways in which WTO Restricts Development Policy Choices

Industrial policy o Export promotion subsidies

Copying and adaptation of technology

Tariff protection o Too much tariff protection for too long is probably not a good thing


o Impossible for global south to reduce poverty and inequality through 1900s The Concern for Poverty Reduction

Civil society organizations(CSOs)

All organizations and citizens activity that operates between the individual and the state.

Nongovernmental organizations(NGOs) o Non profit o Service and humanitarian functions o Provide services with the withdrawal of the state o Many are international o They needed to deal with poverty

Social investment funds Main Features

By 1995 these funds functioned in 32 countries / operate in over 90 countries today o Infrastructure , social services microfinance

Started as emergency measures o -1985 started in Bolivia, rapid trade and privatization HUGE unemployment/ increase of poverty.

First case where the WB had intercepted and made an investment.

Participation Criticisms of Social Funds

Do not help the extremely poor

Benefits may be captured by local elites

Substitute for government services

Used for political purposes

Who determines who gets what? And when The World Bank and Social Capital

Definition: Set of associations between people consisting of social networks and associated norms

Enters into the discussion of SIFs

Incorporates and tames the notion of societal participation in policy o NGOs deliver services o Supports the idea of “good governance”

Criticism of the Bank’s Notion of Social Capital

Social inequalities are largely ignored by the social capital

Ideal community in which everybody will produce equal outcomes.

Gender inequality social investment funds and social capital depended in women that engage in deliverance of service( volunteer) women in global south countries are already overburden they don’t have time to volunteer

Responsibility for development rests with the poor

Ignores power and politics Conditional Cash Transfer Programs (CCTS)

30 countries with them

WB funds 13 countries o Cash to (Female) heads of households in exchange for certain conditions

Participatory?

Problems o Market will reduce moderate poverty o Sole us of income for inclusion o Can divide families and communities o Ignores the quality of services


Microfinance What is it?

Banking services that are provided to unemployed or low income individuals or groups who would otherwise have no other means of gaining financial services

Grameen Bank, 1983 Muhammed Yunus Who provides funding?

World Bank

UNDP

Regional development banks

Commercial banks

Private companies

Charitable Foundations The Struggle over Meaning

Grameen Bank Philosophy

Credit as a human right

Other supportive services

Training

Food

Housing

CCTS quality of schools

Social goals not just repayment rates financial independence not a goal

World Bank Philosophy and Practice in Microfinance

Establishes norms, metrics ranking…. Practices for microfinance

Consultative group to assist the poor (CGAP) o Aim: to integrate microfinance into global financial markets

Criteria for “success” o Repayment of loans

LECTURE 10 Tuesday, November 12, 2013

Multinational Corporations as Political Actors Criticism of the HIPC initiative

Inappropriateness of macroeconomic criteria for eligibility o Keep exports up o Maintain particular public spenditure

The actual debt reduction is quite small

Only modest increases in social spending

Participation might not be substantial o They do not get to criticize macroeconomic policy

Excludes many needy countries

Fails to address root causes Tanzania, PRSP, 2011 Conditions

Watch over the fiscal deficit o Advocates of export drive

Create and enabling business environment o Promote domestic and foreign investment o Improve infrastructure o Promote domestic and international investment in mining o Promote export processing zones


Multinational Corporations Definition: enterprise which is based in one country but operates and has assets in more than one country

MNC’s have a home base

Ensure their own protection Foreign investment: An investment made by a company, based in one country in another country that involves investment in physical facilities. Economic imperialism/ neo- colonialism: the continued control exercised by outside forces over the economies and politics of the global south. International lobbying activities

UN centre on Transnational Corporations

UN Food and Agricultural Organization (FA0)

UN Conference on Trade and development (UNCTAD)

General Agreement on Trade and Treaties

IMF and the World bank What gives the MNC’s their power?

Their control of the most important economic activities in a countries o Global south leaders do not want to steer away MNC’s o They need these investors o Their enormous political clout with their own government (lobbying power) o Their alliances with domestic elites

Appoint elites to their board of directors

Methods of intervention o Over time the way MNC’s attempt to mitigate opposition has become much more subtle

Why did MNC’s expand into the Global south?

1890- 1900: rapid technological change o Stimulates search for new markets and raw material

Firms really seek ways to minimize risk o Emergence of oligarchical firms

Obtain own sources of raw materials Early Examples

Foreign oil companies- Mexico

De Beers- South Africa

American Fruit Companies – Central America and the Caribbean o Guatemala – overthrow of Jacabo Arbenz, 1954

Lobbied U.S government Land redistribution to citizens were returned Political reform was cancelled

Multinational Agrobuisness

Increased role especially from the 1970’s

Rooted in the Green Revolution of the 1950’s o Beliefs in problems in agricultural sector o Green revolution was the “solution” to improve food productivity

Rockefeller Foundation Produce pesticides, seeds

Small farmers could not afford them and “went under” because they couldn’t compete with the productivity of other farmers

Medium farmers could not use them properly so they went in debt.


Result:

Increase polarization in the country side (rich vs. poor)

Induces urbanization

Increased productivity

High tech farming supported by World Bank

Decline in production for food consumption o Increase in export vs. import

The case of Monsanto

Agro bio tech corp- seeds

World bank SAP forces India to open up seed sector in MNC’s o 2002 – Monsanto grows cotton seeds in India

These seeds do not reproduce, sterile Expensive to develop – product sold for high prices

Result:

farmers bough seeds, crop production was less than stellar o initiated protest: 200,000 suicides

farmers were extremely indebted and had crop cultures

Active in getting patent protection for life form in WTO

Harmful effects of WTO rules on agriculture and pressure to open up economy o GN claims they have the right to subsidize agriculture, yet pressure Global south to remove tariffs

on agriculture Subsidy is a form of protection

Massive protest against seeds o 2013 – India decides Monsanto’s cotton seeds are no longer to be used.

MNC’s petroleum and mining Increased awareness that mining has negative effects on nature

The case of Chile – 1970 – 1973 o President Salvador Allende vs. Anaconda Kennecott (U.S owned copper mining companies) o Prior to president bough shared in the company to have legal say

US Attacks Chile

Credit blockade : no long term loans o Influence the world bank to not give Chile loans

CIA financially supported the opposition strikes

Truckers on strike. Nothing was being moved, destabilized economy

US supported military coup leaders How MNC’s contribute to global south countries in Global south countries?

The “Dutch Disease” o Inflow of capital o Country that depends on one resource

Demand for one resource

Inflation – rise in value of local currency o Negative results o Agriculture exporting is too expensive , prices go up o Politics switch to importing o Doesn’t stimulate other sectors – mining is not a big job market o Exception, Norway handles Dutch disease well

Destruction of local economies


Degradation of the environment

State repression to defend interests of MNC’s o The rise of protest groups near petroleum o Shell investment in Nigeria o Environmental degradation induced o Provide funds that prolong conflict

Case of De beers - bought diamonds from both rebel and government groups Colombia: MNC’s, paramilitaries, guerrillas and the state

Context : landlessness, oil and insurgency o Rural areas o MNC’s created and funded paramilitaries o Provide funds to Guerillas – social investments, protection tax,

subcontracts

Lecture 11

Tuesday, November 18, 2013 Mining/ Petroleum / Security MNCs (concluded) and Export Processing Zones

Colombia: MNCs, Paramilitaries Guerillas, and the State (continued)

- Mining development provide some job, not many. Does not provide much in a way of spin offs, doesn’t trigger growth in other parts of the economy

- Funded the Colombian military o MNC contributed to the Colombian’s government’s ability to fund the military

Taxes Subcontracted protection

Pay Colombian military to provide security - Oil companies back U.S. military aid to Colombia (Plan Colombia)

o The U.S. government wanted to a part of it as well o A military aid program to end drug production and trafficking o Involved extracting resources, provided millions of dollars, directly involved the U.S. military

Private Security MNCs (PSMNCs)

- Privately owned companies that provide aid (former police/military personnel) to provide guided protection and offensive action.

- Contracting out of military and security functions o Buy it rather than doing it themselves

- Who hires them? o Governments

U.S. hired private security companies to the drug production in Colombia Becomes a reflection of neoliberalism, don’t’ have to spend much on military

expenditures if able to contract out military functions. o Oil and Mining MNCs

Some have own security divisions within the company. Some don’t, in this case, MNC hire security companies to protect mining installation form the Guerillas.

- Impact o Well equipped, hire highly trained personnel o Contribute to the length of the conflict

New Strategies? - Case of Tanzania: Canadian MNC (Barrette Gold) invested in Mining, when mining gold, create mountains

of residue which contains traces of cold. Everyday poor villagers would come to the installation (which was secured by security) and bribe the security to allow the access and be able to support them.


o The last time the locals tried to bribe the police, shots were fired: 5 dead, many wounded. Gold company stated that it was not their fault; they can’t tell the police what to do.

- Lucrative mining companies surrounded by poor people trying to survive on the residue left by mining companies.

- Shell (Petroleum Company) in Nigeria, facing criticism over many decades. Increasingly mediate tensions through using NGO with relationship of local communities.

o Indirect rule: use intermediaries in order to deflect attention to someone else (e.g. local chief) o Set up regional councils in petroleum area, to dispense compensation to members of the

community that signed the petitions. Make local community committed to Shell’s activities and to persuaded there’s a partnership there: benefit local community.

- Using NGOs as intermediaries o Nigeria o Canada- Harper government

The extractive Sector Corporate Responsibility Counselor, 2009 NGO co-operation with mining companies

6.7 million dollars for 3 partnerships. (one being Barrette Gold with World Vision) The NGO would go into local communities to help with education programs, set up health clinics, and contribute to helping the communities.

Make it look like the local communities are benefitting from the mining companies

Criticisms

Must find NGO that is willing to cooperate. NGOs are often critical of mining companies.

FDI (Foreign Direct Investment) in Manufacturing

- 1950s to 1960s: Production for the Domestic Market o U.S. became the financial and industrial power of the world o High tariffs as a way to industrialized. MNMC jumped the tariffs. o Expansions of many countries and companies into GS countries to meet the demands of the

domestic market - 1970s on: Globalization and the Separation of Production Stages

o Increase Competition U.S. companies in one hand and Japanese and European companies on the other hand

o Technological advances Made it possible to separate production between countries

Greater standardization in both products and in the production of products.

Cheap labour, reduce cost. MNC searching around the world to establish labour production

MNC seek to reduce production costs, especially labour

Encouraged by IFIs and by the policies of GS countries

Contributions of FDI in Manufacturing

Brings in capital for investment

Diffuse modern technology o Contribute in how to bring in technological methods. Directly with the sidurary. o MNC make agreements with local manufacturers and sell license and patents

Stimulate economic growth

Provide employment

Contribute to export earnings/foreign exchange


Export Processing Zones (EPZs/Maquilas)

Definition: Industrial zones offering special incentives for (usually foreign) investors to set up in order to process imported materials and then re-export them

Incentives to encourage investment: o Exemption from some or all import duties and taxes o Repatriation of profits

Whatever profits are made, company can send the $ to anywhere they want not obligated to invest again into the country.

o Use of infrastructure free of charge o Flexible labour regime/waiver of labour law regulations

Want to not have rigid control over hiring/firing, pay as low as possible for labour. Features of EPZs

From garments and electronics to everything else o Also produce in food, pharmaceutical, communication equipment.

Transformation of export profiles o When thinking of GS countries, their economic problems, contribute it to Gunder-Frank idea. o Mexico used to be agriculture and petroleum exports. Now more on manufactured good

Domestic and foreign investors o Initially true, MNC took one stage of processing to another country and established an

enterprise. At same time, becoming increasing advantageous, allow domestic suppliers to supply to them

Bangladesh – garment industry

Offers the cheapest labour in the world Bangladesh Garment and Manufacturers and Exporters Association

Incredibly powerful lobbying group. In the middle, there are middle-person companies, many based in China, establish link

between retailers and producers and ensure pricing and delivery. Export Processing Zones 1975-2006

Product of process of economic globalization

Figures show employments in the millions. When looking at the percentage of total employment, it’s not so great

Employment o A relatively small % of national employment:

Mauritius: 17,7 Mexico: 6 Honduras: 4.7 China: 4.1 South Africa: 2.6

o Mostly female workers Under age of 25, constitutes 90-95% of workers in the EPZ Young and appreciates the opportunity, can pay them less

The Mexican Case

Prior to debt crisis, did have some industrial policies(programs to stimulate growth in particular industry sectors)

o IMF and WB view it as unwanted in the economy. Industry policies are not wanted

The abandonment of any industrial strategy o Policy makers are educated about the efficacy of market organization o Mexico moved away and abandoned its industrial programs.

Greater support to maquilas (EPZs) after 1980 o Expanded privileges to entire country


o All sectors except energy open to FDI Put restrictions on foreign investments, according to market liberalization thinking,

contrary to good economic thinking. o All tariffs to be phased out (NAFTA) o No performance requirements for FDI

Dependency thinking, must make sure that foreign investment is able to contribute to market economy

No local content requirements Cannot require foreign investment purchase domestic product or have certain

proportion constituted to products produced domestically. No export requirements No technology transfer requirements

Result (Mexico)

FDI increase

Exports increased o By 2007, the Maquilas accounted for more than half of the value of all exports and 70% of the

value of manufactured goods

only 6% of employment

after 2001, employment fell o after 2005, Maquila employment increased but never reached its height of 6% o moved to China, where labour is cheaper

from 2005, wages fell

Manufacturing employment overall declined o From 365% to 26% between 2000 and 2008

Significant environmental degradation o Dump chemicals into rivers and streams. A lot of wastes by Maquilas were disposed illegally.

Northern parts of Mexico are covered by dark smoke clouds. Increase rates of cancer and birth defects.

o No strong environmental laws and the laws they do have are not rigorously enforced. Want Maquilas to leave, can’t force them to pay more to dispose waste.

Poverty o Low wages, desperate lack of infrastructure o People live in the most desperate shanty towns. o Counter argument: large # of the population migrated to Southern Mexico to the Northern part

to take the job (Southern being the poorest part of Mexico) What has happened?

Integration with the US economy o Mexico has become a part of global production chain that ends in the U.S. o Its economy is integrated with the U.s economy. Mexican economy itself is not integrated. o EPZs are integrated with the retailer or the purchaser. Does not stimulate growth in the rest of

the economy

Decline in integration of the domestic economy o Prior to NAFTA, had some Maquilas in the North, but many of the Maquilas were making

purchases from Mexican companies o Want EPZs/foreign investment to stimulate the rest of the economy and expansion of economic

sectors (more jobs = growth of investment, reduction of poverty) o Drop in integration, company don’t have to purchase inputs form the domestic economy, will

import everything from the U.S., will not buy from Mexican companies o Trade liberalization, many Mexican companies went under, unable to compete. Decline in

employment. o EPZs theoretically only going to drive development.


Does not do much for employment o Yes

There are some exceptions (rare) A country needs to have solid industrial base EPZs was not predominant component of the strategy of growth

Exceptions: Taiwan, South Korea

Unimpeded repatriation of profits Why has it been so difficult to improve wages and working conditions?

Absence of labour rights o Countries with EPZs have exemption from the country’s labour right

Large turnover in workers

Workers without experience in labour organizing o Usually young, female, without experience

Easy to get rid of labor organizers

Easy for firms to pick up and move o Maquilas/export companies can simply leave for another area.

Many countries competing for this type of investment o All countries are encouraged to set up EPZs. o Compete by providing lower wages and more benefits

To Summarize…

Jobs: inadequate in number and low pay

Female and child labour is common

Harm the environment

Do not provide technological transfer o Mexican case: got rid of technological transfer law, meant that Mexican companies couldn’t

compete the sales to MNC. Ended up with low wages and cheap labour.

Although they may increase exports, may in fact drain foreign exchange because they import inputs o Net benefit can be problematic o One stage of production, all inputs are paid for

EPZs are not the solution in most cases o The MNC are seeking out to reduce cost and certain advantages. Only some countries will win

the investment. All GS countries will not get the investment. Some will get investment (e.g. Bangladesh) and become locations for foreign companies to contribute

What can be done?

International labour standards o WTO provides rules that every country is supposed to abide by. o Always a problem of implementation.

Lecture 12 Tuesday, November 26, 2013

Political independence: Control from outside countries (neo- colonialism) The Main Actors:

IMF

The World Bank o Were never set up to deal with Global South problems

Structural adjustment

Stabilization aid did not work


The Commercial banks o Pushed countries to borrow money

Once the debt crisis hit, these banks pushed people to repay debts

Informal conditionality - establishment of committees - would review government policies with indebted country, and tried to renegotiate for more loans

Domestic Technocrats in Global South o Educated in the west – when the debt crisis hit, they were the ones who led the negotiations –

internal advocates of neo- colonialism

The WTO o Establishing the roles of international trade and investment – if you join you must abide by their

rules Highly undemocratic process

Dealing with Social deficit

Social investment funds

Conditional cash transfer programs

Microfinance o As a development tool actually got going in Asia. Removed the social aspect of development as

the world got a hold of it. They have had positive outcomes but doesn’t allow criticisms of macroeconomic sector Criticisms of them as effective over the long term Highly indebted poor countries initiative

Neoliberal reform did not solve the problem of poverty

Countries must follow IMF acceptable economic policy (free market)

Poverty reduction strategy papers o Some of the conditions don’t produce development or jobs and

contribute negatively to politics MNCs

Power and influence at the international level

Leverage with global south country

Leverage with their home government o In the past MNCs were less then subtle in lobbying for change

Began to use more subtle ways of dealing with unrests

Agricultural MNCs

Mining and Petroleum MNCs o Especially problematic o Investment in this does not develop sustained development

Political implications – undermine development of democracies

Investors in EPZs o At least they provide some jobs

Challenges in charting effective development path

Conditionality lives on for the highly indebted

Pressure to adopt the internationally favored reductions programs

WTO rules restrict many effective measures

Pressures to encourage FDI and measures to encourage effectiveness discouraged

Resistance from domestic free marketers

Fears of economic disruption

lecture 7 pre-colonial societies and the impact of...

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