Class and Intraclass Conflict

Mexico's foreign debt crisis involved several layers of conflict. One pervasive element was the banking community's collective intrusion into Mexico's class struggle, a move that ultimately compromised the relative autonomy of the state. The net effect of the banks' collective control of capital flows was the social construction of Mexico's political and economic reality (before and after the debt crisis). Mexico originally relied on foreign debt to pay for its "miraculous" development and growth, the green revolution, Echeverría's job creation program, and the enhanced social welfare expenditures of the early 1970s. Mexico's leaders turned to the oil industry to fund the country's plans for recovery and development. But the sharp drop in the price of oil on the global market in the mid-1980s pushed Mexico once again into a serious cash flow shortage.

The State Versus Labor and the Poor

An ongoing historical struggle between the state, on the one hand, and labor and the poor, on the other, preceded Mexico's 1982 foreign debt crisis. Until that time the state had participated in broad and fairly extensive social welfare programs, including subsidies of tortillas and gasoline, pro-labor wage and benefit agreements, health and housing expenditures, and the nationalization of basic industries such as oil and petroleum. The onset of the state's foreign debt crisis and the consequent devaluations of the peso and flight of dollars from the country did not entirely dissuade the state from this position. López Portillo nationalized the banks and raised wages after the currency devaluations.

At the same time, the state decreased some public spending, increased interest rates to discourage credit spending, and increased prices of tortillas and gasoline by as much as 50 to 100 percent to discourage overconsumption. All these measures antagonized labor. Because the state-initiated austerity measures failed to curb the rampant inflation, currency devaluations, and rising unemployment that plagued the country, the PRI changed policy direction. López Portillo's successor, de la Madrid, quickly raised taxes, reduced public works expenditures, and eliminated state subsidies of domestic consumer products. These moves more than doubled the cost of tortillas and gasoline. The business community applauded de la Madrid's approach, which balanced the greatest burden of the deficit on the backs of the workers.

Banks Versus Labor and the Poor

What the state failed to accomplish in its political struggle with labor, the banking community achieved with its collective control of capital flows. The state's austerity program was limited by its historical political relations and process of struggle with the labor force. The international financial community had no such constraints and was in a stronger position than the state to impose an IMF austerity program that was far more disadvantageous to labor. This program included the strict curtailment of imports, further reductions in social welfare expenditures, and significant decreases in wages. Despite labor's intense opposition, the banks'

collective position remained implacable. There would be no renegotiation of Mexico's debt without compliance with the IMF's austerity program.

Through these various levels of class struggle over Mexico's foreign debt crisis in 1982, the structurally unified international banking community intruded into Mexico's domestic affairs. The subsidies of food staples and gasoline, nationalization of some industries, rising wages, and increasing jobs that labor had won from the state were all possible because of the availability of finance capital. Later, however, the international banking community, backed by the IMF, turned back those policies and shifted the political economy to a free-market orientation that assigned a large proportion of the GNP to debt servicing. Thus the servicing of debt and the austerity program compromised the Mexican state's relative autonomy in mediating and managing its own affairs. The debt crisis and subsequent austerity program successfully turned back the clock on class struggle so that labor would later have to struggle once again for gains it had previously won and now lost.