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2009
Theorizing business power in the semiperiphery: Mexico Theorizing business power in the semiperiphery: Mexico
1970-2000 1970-2000
Leslie C. Gates
Binghamton University--SUNY
, lgates@binghamton.edu
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Gates, Leslie C., "Theorizing business power in the semiperiphery: Mexico 1970-2000" (2009).
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1
Theorizing business power in the semiperiphery:
Mexico 1970-2000
Leslie C. Gates
Published in: Theory and Society. 2009. Vol. 38:57-95.
Abstract This study explains why the power of neoliberal business over the Mexican state
increased during the last three decades of the 20
th
century. It identifies three sources of increased
neoliberal business power that occurred in conjunction with neoliberal reforms: (1) active
mobilization by neoliberal business, (2) increased access to the state by neoliberal business, and
(3) increased economic power of neoliberal business. It thereby contributes additional evidence
that counters the view of Mexico’s state neoliberalizers as acting autonomously from business.
It further outlines two conditions that were instrumental in bringing about the increased power of
neoliberal business: the onset of economic crisis in the 1970s, and a shift in foreign capital
preferences in Mexico. The analysis demonstrates how Mexico’s sources and conditions of
business power differed from those in advanced industrial societies, and outlines why the
Mexican case may be a good starting point for devising a historically-contingent theory of
business power in the semiperiphery.
The degree to which business has influenced the Mexican state has varied historically. In the
mid- to late-1930s, the Mexican state acted autonomously from business (Hamilton 1982; Knight
2001: 181). During this period, political leaders sought to stabilize Mexico after two decades of
violent social upheaval by institutionalizing “a state ‘above classes’” (Hamilton 1982: 25). They
initiated policies which countered the interests of the private sector, such as the nationalization of
oil and redistribution of land, and restricted the access business had to policymakers to informal
ties (Camp 1989; Vernon 1963). Between 1940 and 1970, the state increasingly incorporated the
“vested, propertied, interests” (Knight 2001: 192), particularly those of bankers (Maxfield
1990:9) and a new generation of small industrialists.
1
However, Mexico’s highly centralized
post-revolutionary state, with its massive bureaucracy and party that excluded business from
policymaking, retained considerable ability to act autonomously from business (Knight
2001:192). Furthermore, the state’s control over vast resources put it in a stronger structural
position vis-a-vis business (Thacker 2000). But, after 1976, the Mexican state inaugurated a
“more openly pro-business stance” (Hamilton 1982:30) in which policy-makers became
increasingly less autonomous, not just from business generally, but from those businesses best
positioned to benefit from neoliberal economic reforms (Fairbrother 2007; Luna 1992; Luna
2004; Puga 1993; Sandoval 2005; Thacker 2000; Tirado 1987; Valdés Ugalde 1997). By the late
1990s, the Mexican state had “relinquished autonomy and assumed a role more closely
corresponding to that of an agent” (Knight 2001:201) of a particular segment of Mexico’s elite.
Why did business power increase so dramatically after 1976? This study identifies the sources of
neoliberal business power and the conditions that facilitated the increased influence of neoliberal
business over the Mexican state. The analysis sheds light on the causal relationship between
1
Some date this more conciliatory orientation towards Mexico’s major industries to the 1940s (Hamilton 1982),
while others date it to the 1960s (Camp 1989:112).
2
increased business power and Mexico’s neoliberal transition, and extends historically-contingent
theories of state-business relations beyond advanced industrial societies.
2
Scholars have recently moved away from debating the state’s absolute autonomy from
business and have increasingly accepted that the degree and sources of business influence over
the state varies over time (Gotham and Staples 1996; Paige 1999; Prechel 1990; Prechel 2003;
Tomaskovic-Devey and Roscigno 1996). Doing so has produced theories that identify the
historical conditions under which business power changes, as well as theories that synthesize
perspectives previously viewed as mutually exclusive (Glasberg and Skidmore 1997; Hooks
1993; Leicht and Jenkins 1998; Liu 1997; McCammon 1994; Mintz and Palmer 2000).
3
Yet,
these advances towards a historically-contingent theory of state-business relations have, for the
most part, been confined to studies conducted in advanced industrial societies. This study
considers if and how historically-contingent theories of business power, drawn principally from
advanced industrial societies, can apply to economies, like Mexico’s, which are not among the
elite group of the world’s wealthy nations.
The Mexican case suggests that some conditions for business power are consistent both
inside and outside advanced industrial societies. However, it also shows that the proximate
sources of business power (the observable indicators of increased business power) whereby these
conditions increase the influence of business over the state may differ. In Mexico, as in
advanced industrial societies, the condition of economic crisis helped increase business power by
similarly mobilizing business opposition to the state and provoking state actors to restructure in
ways that were advantageous to business. Nevertheless, as my review of leading business
publications (1970-1995) underscores, the condition of economic crisis in Mexico led to a
proximate source of business power not previously identified in studies of advanced industrial
societies: that of divided rather than unified business mobilization.
Furthermore, the Mexican case points to a condition and a proximate source of business
power not highlighted in advanced industrial societies. Changes in foreign capital preferences
have not been identified as a condition of business power in advanced industrial societies. In
contrast, Mexican business power increased under the condition of a substantial shift in foreign
capital investment strategies, from long- to short-term commitments, and from the public to the
private sector. Moreover, this condition increased business power in Mexico via a proximate
source of business power which has not been highlighted in advanced industrial societies: that of
economic power. The change in foreign capital preferences increased the economic power of
business in Mexico by making the threat of capital flight from dominant segments of Mexico’s
private sector more credible (Garrido Noguera and Lopez 1989; Maxfield 1990; Thacker 2000).
After elaborating the proximate sources and conditions of increased business power in
Mexico, I consider to what extent the case may be generalizable beyond advanced industrial
societies. I outline why the Mexican case may illustrate the sources and conditions of business
2
I use the term “advanced industrial societies” as a convenience to refer to the elite group of wealthy societies that
were among the first nations to industrialize, despite the fact that many have recently experienced significant de-
industrialization. I use the term “business” to refer to the private sector rather than “capital,” because some business
may not have very much capital, and because “capital” is often used to refer to the influence the private sector may
have via its structural or economic power as opposed to lobbying or networking (Maxfield and Schneider 1997).
3
In addition to developing historically-contingent theories of state-business relations, political sociologists have
developed historically-contingent theories of how the political process frames business interests (Neuman 1998); the
effect of political opinion on policy (Manza and Cook 2002); the progressiveness of income tax (Jacobs and Helms
2001); and voter turn-out (Winders 1999).
3
power for those economies which share Mexico’s position in the world economy: that of a
middle-income or semiperipheral economy. Not only is Mexico a classic example of a
semiperipheral economy, but the differences between the proximate sources and conditions of
business power in Mexico and those in advanced industrial societies are consistent with the
structural distinctions of semiperipheral economies from the world’s economic core. Thus, I use
the Mexican case to propose a historically-contingent theory of state-business relations in the
semiperiphery. In doing so, I offer an analytical tool better calibrated to the contexts roughly
two thirds of the world’s population call home (Arrighi and Drangel 1986), and which may
increasingly characterize advanced industrial societies. The final section elaborates the potential
of such an approach to helping us better understand the often perplexing panorama of politics
across semiperipheral economies.
Historically-contingent theories of business power (based on advanced industrial societies)
Historically-contingent theories of business power based on advanced industrial societies
elaborate the historically varying “dimensions of [the state’s] relative autonomy” from business
(Prechel 2003:313) and the underlying conditions of these dimensions. The first step in these
historically-contingent theories is to establish whether policies serve business interests, and if so,
which business interests they best serve. But, this is not enough. Historically-contingent
theories interpret policies as the result of a political process shaped by the particular balance of
class forces and concomitant intra- as well as inter-class struggles at a particular historical
juncture.
4
Thus, for them, analyzing the interests served by policies is a necessary but
insufficient step in evaluating historical variations in business power. To fully assess business
power, they combine an assessment of the interests that policies serve with an analysis of the
political process before and during policy implementation. In other words, historically-
contingent theories focus on elaborating the proximate sources of business power and the
conditions under which these sources are more likely to occur. Figure 1 outlines the structure of
a historically-contingent theory of business power. It includes: (1) assessing the degree to which
policies serve business interests, (2) assessing whether policies that serve business interests
correlate with proximate sources of business power, and (3) identifying the underlying
conditions that produce the proximate sources of business power.
[Figure 1 about here]
Thus far, scholars who share the view that business power in advanced industrial societies varies
over time have focused on two historically varying proximate sources of business power: 1)
unified business mobilization and 2) state structures that advantage business. However, as
4
Poultanzas pioneers the logic of a historically-contingent approach to the state in his explanation of the different
forms which capitalist states take (Poulantzas 1976:9). He argues that “the present phase of capitalism” must be
taken into account in order to explain the “forms of regime,” but that the phase of capitalism “does not simply
determine all these forms and changes by itself,…it is only relevant in so far as it determines the conjunctures of
class struggle, the transformations of classes and the internal balances of socio-political forces which alone can
explain these regimes and their evolution” (Poulantzas 1976). In making this argument, Poulantzas differentiates
himself from instrumentalists (Miliband 1969), who have argued that business interests dominated the state via their
direct representation within the state.
4
Prechel (1990:650) maintains: “the key issue to understand when considering capital-state
relations is not whether class segments are united or divided, but rather the conditions under
which the capitalist class is more or less divided.” Thus, they have gone a level deeper and have
identified economic crisis as a condition under which these proximate sources of business power
have most often occurred. Figure 2 summarizes each of these three tiers in historically-
contingent theories of business power derived from advanced industrial societies.
[Figure 2 about here]
As stated above, historically-contingent approaches to the state indicate that unified business
mobilization (arrow 1a in Figure 2) constitutes the first proximate source of business power.
This hypothesis stems from the premise that disparate economic interests of business tend to
make business unity difficult (Poulantzas 1976; Poulantzas 1978a; Zeitlin et al. 1976).
5
Some
have shown that business unity does occur, but that it varies cross-nationally (Wilson 1985) and
over time (Prechel 1990; Vogel 1989; Winders 1999). Furthermore, they find that when business
unifies, it attains greater power. This is reflected in the fact that paradigmatic economic policy
shifts tend to occur when elites reach consensus and are therefore able to form a new power
block based on new economic conditions and balance of class power (Poulantzas 1978a; Prechel
2003:313). The empirical manifestation of this unity and heightened awareness of shared
interests is unified business mobilization. This point is illustrated by studies that show how
unified business mobilization in the U.S. during the 1970s helped defeat the Labor Law Reform
and Consumer Protection Agency bills, and helped ensure the passage of the Economic Recovery
Tax Act, a bill which created more favorable conditions for business (Akard 1992).
Historically-contingent theorists identify economic crisis as a condition likely to provoke
unified business mobilization for two reasons. First, economic crises increase capital
dependence because they threaten the ability of businesses to generate capital internally (Prechel
2003). Both the drive to maximize productivity, (as elaborated by Marx (1977)) and the drive to
define a corporation’s ability to act autonomously (as elaborated by Weber (1978)) illustrate
corporate interests in generating capital internally. Business mobilizes to resolve the problem of
increased capital dependence. Thus, under conditions that increase capital dependence, such as
recessions or depressions (Prechel 1990:651), we would expect unified business mobilization to
occur. Indeed, the falling profit rates of the 1970s unified and mobilized business in both the
U.S. (Akard 1992: 601) and Australia (Tsokhas 1998). Arrow 2a in Figure 2 represents how the
condition of economic crises produce unified business mobilization in advanced industrial
societies via the mechanism of increased capital dependence.
Although scholars have debated the degree of business power during the Great
Depression in the U.S., historically-contingent accounts of the New Deal show that businesses
mobilized politically to help them resolve their problem of increased capital dependence during
this economic crisis (Levine 1988; Quadagno 1988).
6
These accounts demonstrate that both
5
This argument contrasts with those who have argued that business generally tends to act as a united class (Miliband
1969), possibly via an inner-circle of business elite (Useem 1984).
6
They show that both monopoly and non-monopoly segments of business conceded that self-regulation of the
economy had not worked (Domhoff 1996; Quadagno 1988) and that business mobilized through business
associations and networks with policymakers (Domhoff 1990; Levine 1988: 73) to advocate “schemes for economic
rationalization that called for some sort of governmental institutionalized assistance to the capitalist class” (Levine
1988:61).
