CAPITAL: The Electrical Industry
U.S. companies have played a central role in the economic development of Mexico since the mid-1800s. Over the years, however, the nature of foreign investments and their relationship to the...
...5, Chicano Studies Center Publications, UCLA, 1977...
...Manufac- turing Industry 32 148 602 2,083 2,768 Source: Sepulveda, Chumacero Charts I-III, and Victor Bernal, Table 3. "Thus by 1950 it was obvious that the active role of the Mexican state was not an obstacle to imperialist domination, but rather a necessary condition of foreign investment...
...And since these early exportoriented mine owners, oil concessionaires and manufacturers were primarily British, French and North American, the introduction of electricity greatly increased the influence of foreign capital, which set out to absorb smaller Mexican enterprises and employ ever larger numbers of Mexican workers...
...9. For more on the Magonistas see the recently published, Juan Gomez-Quinones, Ricardo Flores Magon y el partido liberal mexicano: a eulogy and critique, Monograph No...
...What they have earned is ours, it has been paid with by the sweat and hunger of the Mexican people...
...Only a generation before, most of these men and women of the new industrial proletariat had worked the land, but the spread of U.S.-dominated agribusiness had broken up peasant land holdings and pushed them into the quickly growing cities...
...This control produced a growing antagonism toward the foreign trusts on the part of Mexican capitalists, who found themselves subordinated to the foreigners, and of consumers who were angered by high electricity rates...
...Year 1940 1950 1960 1970 1973 TABLE 1 Foreign Investment in Mexico 1940-1973 (millions of dollars) Electri- Electri- cal cal Manufac- Total Power turing 449 141 n.a...
...240...
...Furthermore, under the populist regime of Lazaro Cardenas (1934-40), the government set up the Federal Electrical Commission (CFE) and passed laws which empowered the CFE at first to regulate and eventually to take over the power companies, although the latter did not occur until 1960...
...Ironically, the CFE did not sell the electricity directly to industry and consumers, but instead sold 75 percent of it to the private foreign utilities who still controlled the distribution systems...
...These agitational issues naturally gained them support among broad sectors of the society who saw their economy dominated by a handful of foreign firms...
...And lastly, far from becoming less dependent upon imports, Mexican industry still had to import the more costly "capital goods" such as heavy equipment and technology to produce electrical generators...
...On the other hand, electrification prompted the introduction of heavy machinery and the breakdown of the productive process into smaller tasks, which in turn "simplified" the tasks of individual workers and made them slaves to the "tireless" new machines...
...ambassador to South Vietnam...
...For several reasons, however, the strategy failed to create an "independent" national bourgeoisie - but rather furthered its junior partnership with U.S...
...The domination of Mexlight and Ebasco over Mexico's electric power industry (and their practice of high rates and low wages) deepened contradictions between the companies and the electrical workers...
...The companies themselves responded to the Depression by trying to squeeze higher electric rates from the smaller and medium industries and private consumers, since many of the largest consumers like the mining industry were paralyzed...
...The unions were aided by the need of the government in these years to seek support from labor in its dealings with the foreign companies, and consequently were at times given free rein in their negotiations with the foreign utilities...
...of America [Alcoa] in Mexico) and high interest-bearing government bonds...
...Most importantly, they drew attention to the excessive rates charged consumers, and were the first to call for the nationalization of the companies...
...and Harry Braverman, Labor and Monopoly Capital, especially part II, Monthly Review Press, 1974...
...In the end, its relative weakness forced it to accept accommodations with foreign capital which left the U.S...
...The industry has developed most in the advanced of the new capitalist countries, the United States (American General Electric) and Germany (German General Electric).s Lenin went on to observe that the capitalist combines first gained a monopoly stranglehold in their own countries, then through foreign investment spread their control internationally...
...Miguel S. Wionczek, El nacionalismo mexicano y la inversion extranjera, Siglo XXI, Mexico, 1967...
...Using these two industries as examples, the following pages analyze this shift in the nature of foreign investments and related changes in the role of the Mexican state, in the context of Mexico's increasing integration into the world capitalist system...
...Yet in spite of the nationalistic Revolution, the relationship between the new government and the electrical power companies and foreign investors in general did not change substantially until decades later...
...4 NACLA ReportSet/Ot 17 ELECTRICAL POWER The first electrical power plants in Mexico were set up in the late 19th century, primarily by foreign entrepreneurs who wanted to use this newly discovered source of energy to operate their mines, pump their oil wells, and turn their textile looms, which had been previously dependent upon less efficient water, steam and animal power...
...Once in service, Mexlight (as it was called) undercut the going electricity rates by 50 percent, and was soon able to absorb all its competitors in the Mexico City area and expand to other states...
...Secondly, the state subsidies to industry seriously depleted the financial resources of the state and forced it to borrow heavily from abroad...
...1977 7 panies and other employers...
...because of its monopoly on technology...
...This investment doubled to $3.5 billion after World War I as the U.S...
...Ebasco), a GE-controlled holding company...
...economy in general, particularly its foreign investments in Latin America...
...According to one firm, profits from this arrangement alone netted Mexlight over $6 million in 1955.12 Even with this government support, however, profit levels were not high enough to satisfy the foreign power companies, given the government regulations maintaining low rates for industry...
...6 NACLA ReportSent/Oct...
...This reflected a general shift in the emphasis of U.S...
...In the first place, the strategy required cooperation from the transnational corporations (TNCs) who alone possessed the capital goods, financial resources, and technical know-how to set up the new industries...
...The event was hailed as a triumph of the government over foreign interests, and the electrical unions likened then-President Lopez Mateos to Cardenas who had nationalized the oil industry in 1938...
...By 1900 most of the major cities of the republic were purchasing electricity from these mining and textile concerns at inflated prices...
...Mexlight (then 40 percent controlled by the European Sofina group) named George Messersmith, a former ambassador to Mexico, to its board...
...3 Aside from its revolutionary effect of industrialization and imperialist penetration in general, the control of electrical generating plants by foreign capitalists meant that they dominated the new and lucrative industry of producing and selling electricity to others - the electrical power industry...
...capital...
...566 136 7 1,081 15 52 2,822 3 215 4,677 3 n.a...
...national Corporations on Employment and Income: The Case of Mexico...
...The only forces upon which it would have depended in an all-out confrontation with the U.S...
...cit.,p...
...The nationalization of Mexlight and Ebasco finally came in 1960 amid great fanfare and nationalistic enthusiasm...
...imposed its trade embargo on revolutionary Cuba, and this appeased the strong pro-Cuba sentiments among nationalists in Mexico...
...8. See NACLA's LAER, "Harvest of Anger: Anglo-Imperialism in Mexico's Northwest," especially Part I for more on the affect of agribusiness on the peasantry...
...monopolies in the saddle of key industries, among them electrical power...
...The relative power of U.S...
...The companies controlled the supply not only of generators, transformers, engines, turbines and even the light bulbs necessary for electrification, but also of the household appliances and other consumer goods run with electricity...
...the World Bank mounted pressure on the Mexican government for higher electrical rates, but this only aroused resentment among Mexican officials...
...The nationalism which this antagonism engendered in the new industrial bourgeoisie was part of the force behind the 1910 Revolution which toppled the four-decade-old dictatorship of Porfirio Diaz and pushed the Mexican state into 15 years of chaos...
...Juan U elipe Leal, Mexico: estado burocracia v sindicatos, Ediciones Caballito, Mexico, 1975, p. 57...
...Each time there was a contract to negotiate, the unions were able to mobilize thousands of supporters by simply pointing to the foreign ownership and monopoly power of the companies, documenting excessive capital withdrawal from the country in the form of profits, interest payments, executive salaries, etc...
...I, especially chapters 14...
...The first league of electricians was secretly formed in Mexico City in 1907 by employees of the foreign-owned Mexican Gas and Electric Co., and became part of the growing grassroots movement in opposition to the dictatorship ofPorfirio Diaz...
...Thus by as early as 1896, all the power companies in Mexico, including Mexlight, were obliged to purchase their generators, basic technology and even light bulbs from General Electric (U.S...
...The reality, in fact, was quite different...
...GE had a monopoly on the electrical manufacturing and technology market and Mexlight developed a practice of favoring other foreign companies by giving them cheaper rates than those charged to Mexican manufacturers and consumers...
...electrical equipment manufacturers like General Electric and Westinghouse...
...This contributed to the extension of the working day and a higher level of exploitation...
...By the mid-1920s important unions of electrical workers had been formed in both of the foreign-owned electrical companies: the Mexican Electrical Workers Union (SME) in Mexlight and a half dozen smaller unions in the provincial Ebasco system...
...As it had in the developed capitalist nations, the use of electricity spread quickly and brought about the rapid modernization of industry, as well as of the labor force which industrialization created...
...overseas investments in the post World War H period from the extraction of raw materials to the penetration of domestic consumer markets for manufactured goods...
...In the third place, Mexican capitalists, naturally more interested in profits than national sovereignty, found it far more lucrative to invest in stable foreign companies than risk competing with them as independent industrialists...
...Sept./Oct...
...Why was this so...
...And the chairman of the board and chief executive officer of Mexlight from 1955 to 1959 was none other than General Maxwell D. Taylor, the former U.S...
...This was a complementary policy to the general economic strategy of speeding industrialization by what was called "import substituSept./Oct...
...The essence of the farce was captured by a nationalistic historian who wrote: We owe nothing to the electric energy companies...
...replaced England as the dominant imperial power in the hemisphere...
...1I The strategy designed to keep the wolf away from the door had, in fact, invited him to the dinner table...
...ELECTRICAL INDUSTRY 2. I-or an in-depth discussion of industrialization and the work process see Karl Marx, Capital, Vol...
...The government paid a total of $122 million for the outdated installations, far above their book 8 NACLA ReportSept./Oct...
...MONOPOLIES & NATIONALISM Mexlight and General Electric grew in size and importance from 1900 to 1910...
...It was also during this period (1938) that a volatile dispute erupted between the militant oil workers and the intransigent U.S...
...The full implications of this subordination to international capital are only now becoming clear and will be discussed below...
...Over the years, however, the nature of foreign investments and their relationship to the Mexican bourgeoisie and its state have changed, along with the changing international division of labor within the world capitalist system...
...In 1916, in the midst of the chaotic Revolution, the electrical workers of Mexlight paralyzed Mexico City with a general strike...
...General Electric began manufacturing in Mexico in 1929 to supply the growing market created by Ebasco, and by using the same price-fixing techniques they expanded rapidly together...
...1977 7B NACLA Report tion...
...They formed mutual aid societies and began to talk of trade unionism - influenced by the ideas of anarcho-syndicalism brought by Spanish immigrants and by what they heard of the heroic activities of the Wobblies (IWW) in the neighboring United States and of the Flores Magon movement along the California border.' As real wages declined after 1900, strikes and mobilizations became more frequent, despite the determined opposition of the electrical comGeneral Electric supplied the technology for Mexico's first factories to use electricity, as shown in this 1925 plant...
...The story of the electrical unions' subsequent attempts to unify and their leading role in mobilizing the working class is a crucial one, and is highlighted in Part II of this Report...
...i.e., rather than import manufactured goods from the U.S...
...Secondly, it opened the way for further credit from the international lending institutions for future electrification plans...
...The higher wages and cooperation from the postrevolutionary governments laid the basis for what these trade unionists called "revolutionary nationalism," which characterized the Mexican state as a possible ally in struggles against foreign capital...
...And thirdly, the soft treatment afforded the foreign electrical power companies was proof to all foreign investors that the Mexican government would "play fair" - a necessary concession if Mexico wanted to continue attracting foreign investors...
...were the working class and peasantry...
...Thus by the late 1950s it became clear that new rate increases would not be allowed and so the companies began to consider selling their property to the Mexican government...
...25, 1966...
...Between 1923 and 1928 Ebasco purchased nearly all the electric power companies in Mexico except those held by Mexlight in the Mexico City area - leaving Mexlight and Ebasco the only "competitors" in this crucial and highly monopolized industry...
...One of the largest investors of the period was the Electric Bond and Share Co...
...International Labor Office, Geneva, 1976, p.3 1. 5. V. I. Lenin, Imperialism, The Highest Stage of Capitalism, Foreign Language Press, Peking, 1970, p. 79...
...14 The nationalization did accomplish several things, however, from the perspective of stimulating capitalist development...
...where the CFE loans were negotiated...
...The government at first delayed taking action against the power companies, but was finally forced by popular pressure to reduce the electric rates in 1932...
...It also came immediately after the U.S...
...Aside from strikes, the most effective weapon used by the electrical unions against the companies was public opinion...
...From 1945 to 1959 the CFE, backed by the Mexican government, borrowed some $350 million from the World Bank for major installations...
...And while the new state attempted to build a base of support among these classes through agrarian reforms and progressive labor legislation, the bourgeoisie feared the uncontrolled power of the popular classes more than it feared imperialism...
...Army Chief of Staff and later U.S...
...First it temporarily preserved the internal tranquility of the country, especially by pacifying the electrical unions and the left, which were both calling for the nationalization...
...On the one hand, it multiplied the productive capacity of those capitalists who could afford the costly generators and gave them an enormous competitive advantage over those who couldn't...
...Ebasco was divesting its electri- cal power interests all over Latin America and reinvesting in the more profitable manufacturing companies (including Aluminum Co...
...Thus by 1960 the focus of foreign capital had already switched from decreasingly lucrative sectors such as mining, railroads and utilities to the dynamic and more profitable manufacturing sectors, including the electrical equipment business...
...The United States was the largest investor, with 38 percent of the investment, followed by Britain with 29 percent and France with 27 percent...
...What concerns us at this point is what happened to the Federal Electrical Commission and the nationalized electric power industry it came to control...
...This monopolization of the electric power industry in Mexico was but a reflection of capitalism worldwide, Lenin noted in 1916: The electrical industry is the most typical of the latest technical achievements, most typical of capitalism at the end of the nineteenth and beginning of the twentieth centuries...
...industry and fortify the Mexican private sector...
...Along with the electrical generating systems of most Latin American countries, Mexico's electrical power industry was built by foreign monopolies starting at the turn of the century and was directly controlled by foreign capital until it was nationalized in 1960...
...Yet now we are forced to pay a ransom to the kidnappers of our wealth...
...Small industrialists, merchants and citizens formed a national organization to pressure for lower rates, and in some areas where service was cut off because of non-payment, angry consumers organized "defense battalions" to reconnect the lines...
...1977 56 NACLA Report The class which emerged in power after the Revolution was a new industrial bourgeoisie whose conflicts with imperialism were not over the further development of capitalism - that issue was settled - but over who would control that development and how its benefits would be divided...
...Hand in hand with the expansion of electrical power in Mexico grew the investments of U.S...
...But as a class the new bourgeoisie was weak and its emerging state still unstable...
...3. Victor Bernal Sahagun, The Impact of Multi...
...In sum, the nationalization was a move by the state to acquire an industry that was stagnating and at the same time central to its strategy of economic growth...
...2 By 1910, just prior to the outbreak of the Mexican Revolution, foreign investors controlled 76 percent of all major corporations - 100 percent of oil, 98 percent of mining, 96 percent of agriculture, 89 percent of industry...
...The intention was to lessen dependency on U.S...
...Wielding their power to the best advantage, the TNCs moved in after World War II and dominated the new manufacturing sector (see Table 1...
...In an effort to pressure the Mexican government to let them raise the rates, the companies appointed several prominent personalities to their boards of directors who lobbied in Washington D.C...
...Electrical power had become the single largest sector of foreign investment by 1940 and Mexico had built the single largest electrical power utility in Latin America.6 THE INDUSTRIAL WORKING CLASS As foreign capital consolidated its control of the electrical power industry in Mexico, larger numbers of trained laborers and electricians were naturally required to construct and maintain the power plants as well as to connect the electricity to the growing number of factories, trolley-car lines, public lighting and individual consumers...
...Mario Gil, Nuestros buenos vecinos, Edicion Azteca, Mexico, 1972, p. 2 3 8. 13...
...Mario Gil, op...
...Five years later a large British company saw the potential of controlling electric power, and formed the Mexican Light and Power Co., which acquired a presidential concession to build a costly hydroelectric plant at Nexaca near Mexico City...
...All these factors led the foreign electrical power companies to halt further investments for the next ten years...
...6. Businesslnternational, Feb...
...The bankruptcy of many businesses, soaring unemployment, public sentiment against the electric rates and general anti-Yankee nationalism all pressured the government to take some steps towards regulating the foreign power companies...
...13 During their time in Washington D.C...
...15, 17...
...and British-owned oil companies, which led to the nationalization of this industry...
...8 As their numbers grew and the work pace quickened, their collective sense of exploitation led the electrical workers to look to each other for some defense against the companies...
...capital at the time is evidenced by the rapid expansion of the U.S...
...IMPORT SUBSTITUTIONCONTINUED DEPENDENCE The governments representing the ruling class after 1940 quickly abandoned the populism of Cardenas, but they used the strengthened state apparatus to generate more profits for the native and foreign capitalists...
...The following two articles analyze two very different but integrally related industries - electrical power and electrical equipment - both key to industrial development and the formation of the industrial proletariat in Mexico...
...The capital required for the continued expansion of electrical power plants and to maintain the subsidy policy was enormous...
...The Great Depression of 1929 seriously aggravated the developing contradictions among the power companies, the workers and the government and forced the Mexican state to play a much more aggressive role in promoting and stabilizing economic growth...
...The effect of the policy adopted by the state was not to accumulate profits in the state enterprises (oil, electrical power) but to allow for higher profits in the private sector by offering industry cheap rates on oil, railroad transportation and electricity...
...These factors, along with the leverage afforded the electrical workers by the strategic importance of their industry, allowed the electrical unions to win the highest wages in the country with the most favorable contracts...
...1977 9 value, and there is evidence that, at least in the case of Ebasco, the initiative came from the company itself...
...and other industrialized nations, these goods would be produced in Mexico with the aid of state subsidies and protectionist trade barriers - or so the plan was conceived...
Vol. 11 • September 1977 • No. 7
