Beginning in the 1970's and continuing today, Latin American countries have undertaken reforms and restructuring in the mining sectors of their economies or have no minimum wage, no welfare benefits, no unions, no legal protection, and no security. The labor market has also changed socio-demographically as internal migration increases with unemployment. People thrown out of their regular jobs must migrate to where they can find work if they cannot find work in their current place of residence. This is evident in the huge sprawling shantytowns of Bolivian cities , the depletion of the population in the mining centers and the increase in population in the coca producing areas.
The economic restructuring ,sometimes called neo-liberalism, consists of trade liberalization( i.e. the reduction or elimination of import and foreign investment controls), privatization of state enterprises, deregulation( elimination of price controls and subsidies.) The purpose of these reforms was to control inflation, meet debt servicing requirements, and open the economy up to international investment and market forces. As concerns the mining sector, privatization is the most important of these reforms. Privatization is often undertaken simultaneously with other reforms( e.g.. legal) to maximize the desired effect. Most mines in Latin America were nationalized in the post-world war two period through to the mid-1970's. The reasons for the nationalizations are numerous yet outside the scope of this essay.
Privatization contains a strong political-ideological dimension alongside the pure economic motives. Partisans and advocates of privatization usually hold that private enterprise is a priori superior to public or state enterprise. Private firms are everywhere and always more efficient, productive, profitable and hence more competitive than are public firms. Thus, making as many public firms private, as possible, will enhance the general efficiency and competitiveness of the economy as a whole. Increased profitability means greater capital accumulation and a greater surplus to reinvest into the economy. Advocates of privatization often overlook the fact that public firms are created and exist for different reasons than do private firms. Judging public firms by the same standards one would judge private firms( i.e. profitability) is therefore irrelevant.
In the last twenty years, privatization in Latin America has taken place during or as a result of economic crisis. The most acute of these crisis' has come to be known as the debt crisis which started in 1982 when Mexico announced it no longer had the foreign exchange necessary to pay the service on its foreign debt. The international banks and lending agencies, including most prominently the IMF demanded privatization as a means of procuring the necessary funds to help the debt service. It should also be noted that privatization takes place in the extremely corrupt atmosphere of Latin American politics. The process of privatization has oftentimes been simply a means by which certain families and their friends enrich themselves through pilfering publicly owned wealth. Moreover, privatization's are done to gain favor with national or international elites, to gain political influence, as political pay offs etc. The effect of privatization has often been to strengthen the position of the socio-economic elite.State owned companies are often sold at below their real value.
To my mind, the most important cause ( and effect) of privatization has been to strengthen the position of the dominant classes vis-à-vis the working classes. Privatizations are associated with mass layoffs and a corresponding boost in the unemployment rate. Bolivia began its structural adjustment program or "New Economic Policy" in 1985/6 which included the closing of all state-owned mines which were in debt. The state-owned COMIBOL mining enterprise laid all but 7000 of its 23,000 miners off. Since 1985, an estimated 45,000 jobs have been eliminated in the mining sector in Bolivia. The effects of the job losses on the economy have been various. A whole class and generation of miners and their militant unions were destroyed. The class power of the Bolivian workers was decimated by the unemployment. Most who were previously employed in the mining sector became immersed( coerced?) by economic necessity into the informal sector of the economy. In Bolivia, this means employment in some facet of the cocaine economy. Coca and cocaine production has intensified since 1985. Today it remains the chief pillar and export of the Bolivian economy ( I no longer think it is controversial to state this.) Others found "jobs" in Bolivia's huge urban informal sector( large even by Latin American standards.) A result is a drastic shift in the composition of the working class and the labor market in general. In short, jobs in the informal sect growing regions.
The massive job loss in the mines significantly weakened the organizational dimension of working class identity. A regression in class-consciousness and the values associated with it (solidarity) took place. Accompanying immersion in the informal sector is a change in subjectivity from a perception of the structure of the economy as one between classes to a perception of the economy as a relationship between individuals. In the informal sector, individuals must compete against each other in order to survive. In short, the effects of privatization upon the working class has been to move from a position of co-operation to defection in a multi-player prisoner's dilemma. Lost is the cement or class consciousness and social identity that solves the prisoner's dilemma (or collective action problem.)
In Chile, a large section of the mining sector, the copper mines, have not been privatized and there are,as yet, no plans to privatize them. CODELCO, the state copper company which accounts for 40 % of Chilean exports has been fairly successful over the last twenty years by orthodox economic standards. Why has it not been privatized when almost all other Chilean state companies have been?
CODELCO, as Chilean law dictates must contribute 10% of its revenues to the Chilean military. This goes a long way in helping finance Chile's massive military which remains the strongest and most dominant political institution in the country today. Privatizing CODELCO would deprive the military of its principal source of funding and would,therefore, diminish its power both politically and militarily. Chile, because of its long spell as one of the most brutal military dictatorships of the twentieth century, was able to impose labor discipline and literally smash the organizational power of the working class through physical force and repression. Privatization was thus not necessary to attain and enforce better labor discipline. To impose control over the working class, the Chilean state was able to conduct mass layoffs, mass firings, mass murder and torture without privatizing the company.
A key element of the restructuring process is often called, by neo-liberal ideologues, restoring "flexibility" to the labor market. 'Flexibility' in this context simply means the removal of all restrictions on the hiring and firing of workers. Thus, in Chile when labor militancy became too strong for management, hundreds of militant workers were simply fired and replaced with peasants who had no tradition of labor militancy. The reasons for this policy and the effects of it are several.
The main effect is to increase the power of managers over workers on the shop floor to increase the length and intensity of the working day and the reduction of wages and benefits paid out to the workers. This is done through the age-old capitalist tactic of fear of falling into destitute poverty through job loss. One would expect then, with these policies, for the rate of exploitation(understood here in the Marxian sense) to rise. One way of measuring, roughly, the rate of exploitation is by looking at wages as a percentage of value added in the industry under scrutiny. Value added is a monetary measurement of what workers create, the difference between the price paid for raw materials and the revenue earned when a product is sold. Only a small portion of value added goes into wages, the smaller the portion the greater the rate of exploitation. By this measure, Chilean workers share of value added has fallen from 30% in 1973 to 17% today. In Bolivian it has fallen from 43% in 1970 to 19% today. Both of these percentages are among the lowest in the world. The figures are 36% and 42% for the U.S. and Germany respectively. Accompanying the restructuring of the mining sector and the rest of the economy has been a large shift in income and power from the working class to the capitalists and rentiers with the resultant rise in inequality and poverty.
Another stated aim of economic reform has been to encourage foreign investment and to create a better business 'climate'. The chief means of attracting this foreign investment has been the cheapening of labor. The means by which labor has been cheapened and subordinated have already been discussed. The simplifying of legal frameworks, tax incentives and better infrastructure are also used to build incentives for foreign investors. Political stability, again related to labor, is also important.
Many of the companies that were privatized were bought by multinational corporations. Incidentally, many of these companies have headquarters in Canada. Cominco, Placer Dome and Barrick are familiar names here. With the foreign takeovers of mining sectors, old problems, which the dependencia theorists highlighted so well, once again come to the fore. The nationalizations were undertaken in part to try and overcome these problems. The main problem is the tension or even, one could argue, contradiction between the needs of the foreign company and the needs of the national economy for development. The main goals of the companies is to maximize profit and shareholder value, regardless of the effect on the national economy of the host country. Foreign companies repatriate profits and hence desperately needed foreign exchange( needed to for social spending amongst other things.) The foreign companies, now with the various regional and world trade agreements, are increasingly given national or domestic treatment i.e. treated the same way as domestic companies. This treatment is legally binding. The companies are thus not required or compelled to contribute to a national development scheme in any way. This means no backward or forward linkages or domestic sourcing for capital goods. The tax giveaways and other incentives are damaging to the host country. Many theorists, most prominently, Theodore Moran, argue that the solution to these dilemma's will be the renationalization of the mines. We'll see.
A quick look at recent world economic history will show that no country has gotten rich, escaped third world status or escaped dependency by liberalizing foreign investment and making foreign investment the sine qua non of economic development. The recent economic "success stories" of East Asia including and especially S.Korea,Taiwan and Japan all had strict and complex laws regarding foreign investment and the foreign takeover's of their domestic industry. Foreign investment and profit repatriation were limited and their were laws against things like capital flight. These economies all undertook extensive economic and industrial planning and subordinated much investment both domestic and foreign to a national plan. These economies, particularly Korea, also featured ferocious repression of labor. The lesson to be drawn here is that national planning works and is indeed necessary for economic development and rising living standards. This has actually been pointed out by the Japanese to the IMF but their criticisms fell on deaf ears.