Conclusion

As the history of Mexico's foreign debt crisis reveals, the increasing concentration of capital flow relations mitigates the discretionary powers of the state on several levels. Developing countries saddled with debt must accede to painful and politically inexpedient economic contraction to avoid default. The international community and various national and international institutions are constrained to bail out the banks' loans because default in one of the larger of the troubled developing countries could spell disaster for the world economy. Thus a sovereign government's relative autonomy can, and often is, constrained by the goals of international finance capital. These goals often oppose the state's goals of economic development, health, education, and welfare. Capital flow relations between the state and a structurally unified banking community empower the banks to socially construct the economic and political reality of individual states as well as the global economic system.

Mexico's "rescue" from default bears a striking resemblance to Chrysler's bailout. In both cases a unified banking community elic-

ited state-sponsored bailouts: loan guarantees for Chrysler, and increased IMF quotas and Export-Import Bank special facilities for Mexico. Furthermore, the definitional processes invoked in both cases illustrate two facets of the power of collective purse strings. The banking community's willingness to advance loans allowed Chrysler to operate as a full-line automaker for more than thirty years. The banks' cooperation also enabled Mexico to pay for the development programs of the 1940s and 1950s, the green revolution of the 1960s, and the social welfare programs of the 1970s. Neither Chrysler nor Mexico could have accomplished so much without bank support. But the banking community later turned the same definitional processes against Chrysler and Mexico by defining their situations as crises and then, after the state-sponsored bailouts, as resolvable crises. At each stage only the banks were able to set the definition of the situation.

The structure of the lending consortium unified the banking community in both cases. Chrysler's lending consortium included more than 325 banks. Mexico's involved more than 1,600. The structure of these consortia fused the banks' interests. Moreover, loans to corporations and governments constitute the most lucrative business for banks. Participation in lending consortia is particularly crucial for small U.S. banks, because the law restricts banks from lending more than 10 percent of their assets to a given customer. Since the major commercial banks typically act as lead banks in consortia, small banks depend on good relations with them to ensure inclusion. As we have seen, this dependence empowers the major banks to compel small recalcitrant banks to remain in the consortium and to accept unfavorable terms. This disciplining process guarantees the structural coalescence of the banking community.

The history of Mexico's debt crisis highlights the analytical weaknesses of the pluralist perspective. At no time before, during, or after the crisis was the state a neutral arbiter. Ongoing struggles between private banks, private industry, labor, and the state have always been at the center of Mexico's political-economic processes and have largely determined state policies and practices. Furthermore, participants were clearly unequal in strength and had unequal access to resources. The banking community's privileged access to finance capital enhanced its power over all other actors, including the state. Finally, the state was not insulated at all from

the economic sector. Indeed, it participated directly in the economy, thereby undermining the pluralists' assumption of the separation of the political and economic sectors.

The cases of Chrysler and Mexico both raise the question of the relative autonomy of the state. The literature on this issue does not specify the factors affecting the state's relative autonomy and fails to analyze the effect of capital flow relations. Chrysler's and Mexico's cases suggest that the banking community's collective control of capital flows may compromise the state's autonomy. Because the state cannot generate enough revenue to meet its expenditures, the state itself becomes a major borrower. In addition, the reliance on giant corporations for jobs mitigates the state's relative autonomy from corporations, particularly in periods of state crisis. At such times banks may access at least some of the state's discretionary powers to determine political and economic policies.

Additionally, the struggle over Chrysler's bailout produced an unprecedented reversal in U.S. labor-capital relations. For the first time this century, labor was forced to accede to major wage and benefit concessions. These concessions brought on a long period of concessionary bargaining for all unions and undermined the effectiveness of the strike as a strategy for labor. In Mexico the IMF-imposed austerity program produced a similar reversal of historical labor relations. The conditions of the austerity program included the repression of labor with a no-strike agreement, reductions in the size of the labor force, decreases in wages, the elimination of social welfare expenditures, and the privatization of nationalized industries. In sum, both the austerity program in Mexico and the bailout program for Chrysler placed the major burden of debt renegotiation on the backs of the workers.

Finally, Mexico's crisis illustrates the dialectic of lending relations. Although a reliance on private bank loans initially increased the relative autonomy of the state by enabling Mexico to escape the restrictions of official aid agencies, in the long run it had the reverse effect by forcing Mexico to comply with IMF restrictions. This dialectical relation between the state and the structurally unified banking community is the hinge on which the state's relative autonomy turns, propelled by the process of struggle.

I will analyze the similarities and differences between the corporate and state cases in the concluding chapter.