The Neoliberal World Order: The View from the Highlands of Guatemala
Abell, John D.
From the perspective of poor rural Guatemalans, the current global crisis has little to do with interest rates or budget deficits. It has everything to do with the fact that policies aimed at...
...The investment guru Peter Lynch emphasizes in his television commercials for Fidelity Investments that there is nothing magical about successful stock-market investing...
...37REPORT ON GLOBAL FINANCE Don Ram6n, the patriarch of the family, patiently explained to me that during his entire lifetime, and that of his father-indeed, he said, for nearly 500 years-Guatemala had been going through an essentially permanent economic crisis...
...Beautiful Lake Ati- tldn, the jewel of Guatemala, was glistening in the dis- tance...
...A survey done by the Association for the Development of San Lucas Tolimin, a highlands community in the heart of the coffee-growing region, indicated that small coffee producers need to receive a price of $28.50 per 100 pounds in order to cover their production costs and to put an adequate diet on the table...
...They only have half an acre of coffee and, because of the age of the trees, will be lucky to harvest a total of 2,500 pounds this year...
...And the system has limited surpluses...
...ach of the 100-pound sacks (referred to as a quintal) that Don Ram6n's sons carried down the mountain that day only brought the family approximately $14...
...With at most six months of work at the subminimum feeding and caring for a typical highlands family of six is nearly impossible...
...The only serious issue that remained this day was the matter of getting a couple of 100-pound sacks of coffee two miles down the side of the Tolimin vol- cano to the coffee-processing plant where they would be weighed and scrutinized for leaves and stems prior to the payout...
...For many highlands residents, however, not only is land an impossible dream, but work itself has become scarce...
...Nevertheless, there is some limited degree of security for the families in this arrangement, no matter how inequitable...
...Most people have no hope of owning their own land...
...The yields are so much lower in the month before and the month after that only 25-30 pounds per day, or $0.62 per day, can be counted on...
...The United States, its largest trading partner, should do likewise, focusing on goods like sport utility vehicles (SUVs), computers and information services...
...Such free-trade policies will be deemed successful as long as they can continue to generate 20% returns year in, year out, in the U.S...
...Nor have I seen any accounts of their visits to the countryside to share a meal and a discussion with the Don Ram6ns of the world for whom the VoL XXXIII, No 1 JULY/AUGUST 1999 0 f i t l $2 30 d f ili i d f i 39REPORT ON GLOBAL FINANCE benefits of trickle-down economics are slow to arrive...
...wheat has swamped the domestic wheat industry such that nearly 100% of all wheat consumed domestically is imported...
...At an average wholesale price for top-end, gourmet coffee of $100 per 100-pound sacks, the landowner would need to produce 250,000 pounds of coffee beans...
...Housing, medical care and schooling become additional complicated financial matters...
...lio performance results from doing one's homework, from carefully scrutinizing those companies that have strong profit potential...
...being called upon more and more these days to do Without land, the poor are forced to work as seasonal their share...
...Treasury Secretary Robert Rubin, the architect of U.S...
...9 The landowner would have to employ approximately 21 workers during a four-month harvest season and pay them approximately $0.23 per hour.1' This would add up to a collective wage bill of about $5,700, or 11% percent of the cost of the SUV...
...It is not an uncommon sight much as 50,000,000 metric tons of wheat and corn per to see a family that cannot afford to send its kids to year.12 Exports, therefore, represent an increasingly school or buy them shoes spending their hard-earned large share of gross domestic product (GDP), having quetzales on Coca-Cola, Chiclets, Doritos or Marlgrown from less than 6% to nearly 15% of GDP in the boro cigarettes...
...Barry, Inside Guatemala, p. 104...
...There is also a secondary financial benefit that comes from releasing hundreds of families into the labor market...
...Eighty-five percent of children under age five experience malnourishment to some degree, and stunted growth affects up to 95% of non-Spanish speaking children in some regions of the country...
...exports from 35% to 45%.13 In countries garchy also faces a contradiction...
...In the arctic regions of Russia, for example, people whose life savings vaporized in the early days of the ruble crisis faced starvation during one of the worst winters on record...
...But that is not the concern of the coffee companies...
...2. See, for example, the four-part New York Times series "Global Contagion," February 15-18, 1999...
...The new dividing line between richness and poverty," he suggests, "is not between the haves and have-nots, but between the knows and don't knows...
...In Guatemala, just 2% of the population owns 80% of the land...
...Herein lies a core capitalist contradiction...
...If the plantation in this example happened to be among the country's largest, it might be in the vicinity of 600 acres, enabling the owner to buy a fleet of nearly 12 SUVs per year.ll On the other hand, suppose that one of the boss's workers also wanted to purchase a vehicle...
...Good portfoIf there is a glut of coffee on world markets-and if the powerful coffee merchants have their way, there will always be a glut-prices will fall for producers like Don Ram6n, even as cafr latt6 prices hold firmly at fashionable coffee houses...
...An annual income of $715 per year covers about 38% of the cost of the basic diet...
...For every $4 cup of caf6 latt6 sold, Don Ram6n would receive about $0.02-less than 1...
...It had been a productive morning so far...
...It is people treat the indigenous and campesino poor of its counlike Don Ram6n and his highlands neighbors who are try humanely-to share the richness of the land...
...The lower coffee prices are, however, the less food Dofia Ram6n can afford to buy for her family's meals...
...Profits, of course, arise when sales revenues exceed the costs of production...
...Department of Agriculture, USDA Economic Research Service, an online data service...
...Also, developing countries have means exist for the Ram6ns and their neighbors to become increasingly more important as destinations increase their purchases of these products year after year so that the companies that peddle these products can continue to expand...
...Their lives had remained essentially unchanged, they told me, living from day to day, eagerly awaiting the coffee harvest in hopes that it would be profitable enough this year to allow them to keep their kids in school and to pay their medical bills...
...Plus, without land, there is no means to grow one's own food...
...Their presence in the contract labor force helps to put further downward pressure on an already distressed labor market, allowing the owner to pay wages far below the legal minimum...
...To is no tomorrow, much to the detriment of their follow our example, this entails finding markets for as health and well-being...
...The more small growers like him there are around the world, the more coffee is produced...
...U.S...
...A trend begun on the coastal sugar plantations in the 1980s, which is gaining more and more acceptance on the coffee estates of the highlands, is to use seasonal or sometimes daily contract laborers instead of permanent employees...
...For more on this effort and other sustainable projects of the community, see John Abell, "Peace in Guatemala...
...Then, by trading freely with one another, their respective national incomes will be higher than if each country attempted to be self-sufficient in the production of all goods...
...For example, wheat production For the moment, thanks to aggressive advertisexceeds domestic consumption by as much as 50% in ing-as well as high sugar and nicotine contenta given year, corn by 25...
...In spite of all that, Don Ram6n is one of the lucky ones...
...In cerNACIA REPORT ON THE AMERICAS 40REPORT ON GLOBAL FINANCE tain industries such as agriculture, this imbalance is developing world...
...The months of January and February are the peak months and entire families will head up the mountainsides at daybreak to pick coffee for the owner...
...Agricultural data from: U.S...
...For the families, on the other hand, who have been kicked out of the only homes they have ever known for generation upon generation, life takes a turn for the worse...
...Indeed, there is abundant evidence that poverty and suffering is widespread...
...3 ;ors and "ansportation retailers and rmediaries take the ng $3.98...
...Many highlands NACIA REPORT ON THE AMERICAS 38REPORT ON GLOBAL FINANCE 1111Ces survIve or generate I Lons as residential employees of the giant coffee plantations, a throwback to the days of the colonial encomienda, or royal land commissions, where the indigenous were expelled from their own lands and, through a variety of forced-labor laws, made to work on the estates...
...What they find, longer afford to buy these things...
...Yes, everyone agreed, life had improved since the cessation of hostilities in December 1996, if only because the Guatemalan military was no longer dragging their sons off the streets and soccer fields to fight in the counterinsurgency war against the Guatemalan National Revolutionary Unity (URNG...
...On the other hand, caf6 latt6 prices will hold firmly, or possibly rise a bit at the fashionable coffee houses...
...The United States produces many more goods than it is capable of consuming domestically...
...Also, sleep came a lot easier knowing that the chances of a visit in the middle of the night from a paramilitary death squad were significantly reduced if not entirely eliminated...
...7. In an effort to address poverty in the area, the Association pays small coffee growers who meet exacting quality standards the above market price of $28.50 per 100-pound sack...
...With the goal of increasing global profits, corporations are searching all over the world for new customers like Don Ram6n, promising them unlimited happiness if they would just buy their products...
...Coffee processors and exporters, transportation companies, advertising agencies, roasters, retailers and other intermediaries would take the remaining 99...
...4. Bread for the World, Hunger 1990 (Washington, D.C.: Bread for the World Institute on Hunger and Development, 1990...
...Beyond a basic recognition that the Accords had left land-holding patterns untouched, they were not aware of many details...
...coffee shop...
...If they can avoid the thieves who prey on small producers-lying in wait to take a family's harvest at gun point-they will earn an extra $360, a nice supplement to Don Ram6n's weekly income of $17, but still not yet within striking distance of Guatemala's average annual income of $1,500...
...The occasional odd job-shining shoes, selling prepared foods in the market, or for the desperate, begging or prostitution-brings only a modicum of financial relief...
...Amazingly though, stock market investors continue to place their bets that somehow the multinationals will continue to reach more people throughout the world with their advertising, or convince those already in their grasp to dig deeper into their pockets to buy even more...
...Don Ram6n's eyes would probably glaze over if I told him that there was a fellow by the name of Klaus Schwab who was of the opinion that it did not matter that he was a have-not, and that he could improve his life if he would just take advantage of the "global knowledgeeconomy...
...But how long can this continue...
...Life seemed peaceful for the moment...
...they can afford the products...
...The key, therefore, for lifting people out of poverty, is an improved infrastructure-"procedural, legal and institutional mechanisms"-to help harness the global revolution...
...Guatemala's drinks, snacks and cigarettes to the masses around the producers thus have no choice but to become ever world...
...So how much coffee would a landowner in Guatemala have to produce to be able to afford to purchase the latest $50,000 SUV...
...At any rate, the family's income for the season will be in the vicinity of about $715, an amount that will cover only about a third of the required minimal daily caloric intake of a basic corn and beans diet...
...In Jakarta, fathers who were once gainfully employed have now joined their families in the garbage dumps scrounging for their next meal...
...How could the If Don Ram6n's coffee ended up in the inventory of an upscale U.S...
...5. Tom Barry, Inside Guatemala (Albuquerque: Inter-Hemispheric Education Resource Center, 1992), p. 97...
...5 Since workers are generally poorly educated, not aware of their legal rights, and with no local they can turn, owners can operate with impunity...
...The exact average is 582...
...4 Don Ram6n is luckier still because of his steady $17 per week job as a bee keeper...
...Additional work could conceivably be found on one of the coastal sugar plantations, though the harvest season tends to overlap with that of coffee...
...VoL XXXIII, No 1 JULY/AUGUST 1999 John D. Abell is professor of economics at Randolph-Macon Woman's College...
...If Don Ram6n could speak with Mr...
...The Constitution ostensibly protects modern plantation workers by obligating owners to provide workers with housing, clean water, a minimum wage (currently $2.80 per day), schooling and health carenot a bad deal, on paper...
...It is imperative that these two months go well for the families because nearly 70% of their annual income is earned at this time...
...They are paid by the pound, and with all hands working feverishly they may pick 300 pounds a day...
...Prices around the world are actually able to participate in it-that is, when they fall as a result of the collective attempt to run trade are paid a living wage...
...o my knowledge, former U.S...
...How, he asked, could a country possibly have a healthy economy when most of its people go to bed hungry each night, and when they do not have land or any control over their lives...
...For the owners, efficiencies-i.e., cost-savings-from not having to provide year-round wages and benefits far outweigh the uncertainties associated with having to hire and supervise temporary workers...
...What is not mentioned, however, is how those profits come about, and especially how critical the connection is to the developing world...
...Guatemala has gone from essentially being self-sufficient in the production of corn, importing only a negligible amount in the 1960s, to importing 25% of its domestic needs in the 1990s from the United States and other countries...
...So far, no one appears willing to do so...
...The best way to help the poor is to enable them to take advantage of a global knowledge-economy...
...Indeed, the current global crisis has little to do with the fact that Secretary Rubin has not gotten interest rates or exchange rates right, or that the various countries' budget deficits are too high, or some other statistical imbalance...
...In its effort to like Guatemala, the well-to-do have been consuming maintain power, prestige and wealth, it refuses to imports from the United States for years...
...Our discussion at lunch ranged from coffee prices to politics, focusing especially on the recent Peace Accords...
...In order for corporations to Don Ram6n and the remaining 90% in Guatemala provide investors with healthy annual returns, not only who are among the have-nots are obediently condo they need to hold the line on costs, but they also suming soft drinks, snacks and cigarettes like there need to find overseas outlets for their surpluses...
...Here is how that connection works...
...Guatemala's own Ministry of Labor estimates that there is only 15% compliance with payment of the minimum wage in rural areas...
...3. Newsweek International, February 1, 1999, p. 56...
...When this happens, though, is that the oligarchy in nearly every other the system begins to grind to a halt...
...laborers or to assemble clothes in the maquiladoras We have created a system that generates enormous for wages that cannot put food on the table, much less profits for a select few who sell products like soft buy consumer goods or luxury items...
...It has a lot to do with the fact that policies aimed at the developing world are far removed from the needs and realities of the majority of the world's peoples...
...This may help to explain why Klaus Schwab, president of the World Economic Forum, selected "Responsible Globality" as the theme of this year's conference in Davos, Switzerland...
...Such policies, implemented by the rich and powerful, assume a textbook world in which producers and consumers operate at arms length, negotiating until a price and quantity are determined that clear the market and benefit both parties to the transaction...
...Treasury policies, which draw upon free-trade concepts first espoused by the British economist David Ricardo over 200 years ago, are supposed to work like this: Guatemala should produce those products in which it has a comparative advantage, such as coffee, sugar and bananas...
...And with more coffee comes lower production costs for the coffee multinationals...
...for U.S...
...The glitch occurs when the masses can no more dependent on export sales...
...Gissy, eds., Economics of Conflict Resolution and Peace (Brookfield: Ashgate Publishing Co., 1997), pp...
...7 You can be sure that if there is a glut of coffee on world markets-and if the powerful coffee merchants have their way, there will always be a glut-prices will fall for Don Ram6n and his family...
...neoliberal economic policies during the 1990s, and his former deputy and now successor, Lawrence Summers, never invited Don Ram6n or any of the rest of the world's poor campesinos to any of their free-market strategy sessions...
...This assumes each worker can pick on average 100 pounds per day...
...The corporations' hope, on the other hand, is that someone else will pay these customers a high enough wage so that Coffee workers rake out beans to dry on a plantation in San Marcos, Guatemala...
...Had any of the benefits of the Accords on the economy or judicial reform trickled down their way...
...150-178 8. This assumes a ratio of five-to-one raw bean to wholesale (what is known as green coffee...
...More often than not, a daily wage of only $2.10$2.60 is paid...
...It is not hard to see where the high statistics on malnutrition come from when so many families face similar circumstances...
...9. This asumes a yield of approximately 5,000 pounds per acre...
...2 With countries like Malaysia setting a "dangerous" example by establishing restrictions on the movement of foreign capital, there is genuine fear in the establishment that some serious backsliding may be in the offing among those countries that had so eagerly embraced the neoliberal agenda...
...I was thinking about this lesson exporters, tr in real-world economics the next day when I stumbled on an issue companies, of Newsweek devoted to the global other inte financial crisis.' One of the broad themes running through all the sto- would 1 ries was that while calm was returning to financial markets, eco- remainil nomic recovery in the developing world was slow in coming...
...Globalization is not going away anytime soon, says Schwab...
...However, it seems unlikely that the past ten years...
...6. At current market prices for corn ($0.11 per pound) and beans ($0.54 per pound), it would take $5.20 per day to provide a family of six with the minimal daily required calories (2,900-men, 2,340women, 1,485-children) based on figures from the National Academy of Sciences...
...All hopes will be pinned on a bountiful coffee harvest...
...If he were somehow able to save every single cent of his paycheck it would take him 18 years to accumulate enough money to buy a $5,000 used car...
...surpluses during this period, increasing their Like the global corporations, Guatemala's olishare of U.S...
...The Story of San Lucas Tolimn," in J. Brauer and W.G...
...Income-earning opportunities during the rainy season for families like the Ram6ns are limited...
...Overlooked are the more realistic scenarios whereby Don Ram6n and other small producers receive take-it-or-leave-it prices from agribusiness concerns that control the world's markets...
...The Neoliberal World Order: The View From the Highlands of Guatemala 1. Newsweek International, February 1, 1999...
...Many are beginning to blame the global financial system itself for such outcomes...
...financial markets...
...In other words, developing country is doing the same thing, from the system is sustainable only as long as the masses Brazil to Indonesia to Russia...
...The family I was helping had picked close to 200 pounds of red, ripe coffee beans and we were relaxing around a cooking fire where the women had prepared a feast of beans, tortillas and avocado...
...The Ram6n family is also critical to the revenue side of the equation...
...To the coffee merchants, his family's 2,500 pounds of coffee sold at $14 represents just another cost of doing business...
...Don Ram6n might be amazed to realize just how vital he is to the amassing of global corporate profits-he figures critically in both variables in the profit equation (revenues and costs...
...It is also easy to see why a plot of one's own land is so critical for survival...
...They have little choice but to join the ranks of the seasonal work force...
...Cheap U.S...
...coffee shop, he would receive about $0.02 for every $4 cup of caf6 lattd sold...
...For many people, life-which was never very easy-has become precarious and desperate...
...I asked if they were aware of the global economic crisis that had engulfed Asia, Russia and Brazil, and if they were concerned that Guatemala might be next...
...But the reality is that market prices have not been that high in years...
...It has everything to do with the fact that policies aimed at the developing world are far removed from the needs and realities of the majority of the world's peoples...
...Their wages, which were never totally adequate in the first place, get cut in half or more since seasonal work is just that-seasonal...
...With some luck, the father and possibly an older son may get hired for an extra couple of months for weedir planting on one of the plantations...
...6 In addition, housing, medical care, school and clothing will take as much as a third out of this already strained family budget...
...In reality, many of those services are not provided, including payment of the minimum wage...
...Another way to think about the Ram6n family's precarious position in the global economic order is to suppose that with a bit of luck some of their coffee ended up in the inventory of an upscale U.S...
...The actual day-to-day yield will depend, of course, on the stage in the harvest...
...quite significant...
...Not coincidentally, three-quarters of Guatemalans live in poverty, with nearly 60% of the population unable to meet minimal nutritional needs...
...8 This would entail the use of approximately 50 acres of land...
...To buy an SUV he would have to share the purchase with each of his 21 co-workers and they would each have to save the entirety of their paychecks for nine years...
...Schwab, he would surely tell him that his knowledge of the coffee business is just fine, and that what he needs is not a fancy Internet hookup or a Web page, but rather a higher price for his coffee and more land on which to grow it...
...At a pay scale averaging $0.023 per pound, the family may bring home approximately $6.90 every day during this peak period...
...Bellies were full...
...Coffee latest problems from Asia or wher- process ever make their lives any worse...
...The people who have to tighten their belts sustainability when the people who actually have as a result are not the landowners-they do not want enough disposable income to buy these consumer to give up their SUVs and their country clubs-but goods number less than 10% in most countries of the rather the Don Ram6ns of the world...
Vol. 33 • July 1999 • No. 1
