This is a final term paper that I wrote for Professor Ian Thomas MacDonald while at CUNY's School of Professional Studies (also known as the Joseph S. Murphy Institute) during the autumn 2012 semester. In this paper, I focus on the effects of the North American Free Trade Agreement (NAFTA) on the political economy of twentieth century Mexico. I also examine the country's economic history and discuss import-substitution policies, farming, a 1980s-era financial crisis, and neoliberalism -- key aspects that helped lead to Mexico's involvement with NAFTA. I argue that NAFTA was essentially a neoliberal treaty that forced farmers in Mexico to seek work as wage laborers in the maquiladoras and in other countries such as the United States of America, which is also a signatory country of NAFTA. In point of fact, the US, Mexican, and Canadian governments all approved and signed this treaty. Although I wrote this paper in late 2012 when Barack Obama and Mitt Romney competed for the US presidency, it remains relevant in light of Donald Trump's nativist and xenophobic scapegoating of Mexico, which is a key part of his attempt to become the Republican party's presidential candidate for the 2016 elections.

1. LABR 601: Labor and Globalization
Prof. Ian Thomas MacDonald
Fall 2012 semester (final ten-page paper)
Stephen Cheng
The North American Free Trade Agreement, Primitive Accumulation and Class
Formation in Mexico
Introduction
The North American Free Trade Agreement (NAFTA), which the governments of
Mexico, Canada, and the United States of America ratified in 1994 and enforced since
then, contributed to the conversion of the peasantry in Mexico’s countryside into new
members of the nation’s working class. This process of proletarianization in Mexico
unfolded within the greater process of capitalist accumulation. The historical context was
a global era in which the neo-liberal form of capitalism became well-entrenched and
institutionalized since the mid-to-late 1970s and the early-to-mid 1980s. The transition
from the various forms of state-guided or state-influenced capitalism (i.e., Keynesianism,
Social Democracy, “Third World” Stalinism such as Maoism, etc.) to neo-liberal
capitalism was, seemingly for the most part at least, a global process.1
The nation-states
in North America were no exception in this transitory process, as demonstrated by the
signing and passage of NAFTA. However, given the limits of this paper’s discussion, the
political economy of Mexico will be the focus.
From the mid-twentieth century to the present day in the economic history
of Mexico, the capitalist accumulation process operated with two models that constituted
two different chronological phases: the import-substitution industrialization model (el
modelo de importacion substitutiva) that lasted from the 1940s and 1950s to the late
1
This appearance of a vast political-economic shift throughout the world may have been the impetus for
the coinage of the term “globalization” by the business-oriented press.

2. 1970s and early 1980s and the export-oriented industrialization model (la
industrializacion orientada a las exportaciones) which took shape during the early- and
mid- 1980s and remains active now. The latter model of capital accumulation became
“official” due to the signing and passage of NAFTA as Mexico, Canada, and the
United States of America joined together in order to establish a common set of “free
market” policies. The result was a North American “free trade” zone of sorts.
An outline of the present discussion
This paper contains a brief discussion on the consequences of NAFTA on
Mexico’s economy in general and the Mexican peasantry in particular. Toward this end,
Mexico’s economic history since the mid-twentieth century onward will serve as the
background and foundation for the argument that capitalist accumulation in Mexico, in
both forms of import-substitution and export-oriented industrialization, entailed the
extension of commodity production and exchange throughout the nation. The countryside
was no exception either – NAFTA expanded commodity production and exchange there
as well. Consequentially, wage labor became more common as the primary and quotidian
economic activity of many peasants. Since the economic impact of NAFTA on the rural
regions of Mexico is the focus of this paper, following sections cover the general
economic history of Mexico during the mid-to-late twentieth century and the specific
effects that the import-substitution and export-oriented industrialization models have had
on the Mexican countryside. The paper concludes with some reflections on the
conversion of the peasantry into a working class and attempts to draw some connections
to theory such as the debate on the origins of capitalism which Robert Brenner initiated

3. and the similarities and contrasts between the perspectives of Karl Marx and Karl
Polanyi. Connections to other political-economic contexts will be touched upon as well.
From state capitalism and the import-substitution industrialization model to neo-liberal
capitalism and the export-oriented industrialization model
The import-substitution model defined the core of the Mexican economy was part
of a system of “state-led capitalism” which, since the 1940s, allowed the country to enter
an “era of stable, long-term growth” lasting for almost thirty years, a period of economic
growth that has been termed the Mexican “economic miracle.”2
Five key features of
Mexican state capitalism included:
1) state enterprises,
2) high external tariffs and import licenses to speed up industrialization,
3) capital-intensive private agricultural sector for export production,
4) land distribution and ejido sector for domestic food production, and
5) institutionalization and minimization of class struggle by incorporating workers
and peasants into state-led organizations and legitimating the state as being
“revolutionary.”3
These five structural features constituted a state-led, corporatist model of Mexican
capitalism which lasted from the late 1940s to the early 1980s.
Although this model brought together the priorities of developing national
industries and land reform via the establishment of the ejidos and contributed to the
country’s economic progress, this state-led form of capitalism ran into crisis during the
1970s and 1980s.4
By the late 1970s, the import-substitution model began faltering but it
nonetheless remained operational due to revenue from high oil prices. The high rates and
amounts of oil revenue also improved the country’s international credit and increased its
2
Pekka Valtonen, The Politics of Agrarian Transformation in Mexico (Academia Scientarium Fennica,
2000), 104.
3
Valtonen 108 and Wayne Olson, “Crisis and Social Change in Mexico’s Political Economy,” Latin
American Perspective 12.3 (July 1985): 7-28.
4
The ejido farming system was a system of public and collective farms which existed because of the land
reform policies that were enacted since the Mexican Revolution.

4. public spending. However, the decrease in oil prices, growing capital flight, and rising
interest rates contributed to increased inflation, which led investors to convert bank
deposits from Mexican pesos to US dollars.5
By August 1982, the Mexican government
declared that it was unable to pay off its debts - debts incurred from loans disbursed by
US banks so as to finance macroeconomic policies that were essential for continuing
economic growth within the confines of the import-substitution industrialization model.6
This combined currency and debt crisis, which plagued Mexico during the 1980s
(hence the term la decada perdida, or “the lost decade,” referring to the years 1982 to
1989) disrupted the accumulation of capital in general.7
As far as the capitalist class in
Mexico was concerned, the model of capital accumulation via import-substitution
industrialization was, in effect, obsolete. The stage was set for the introduction of a new
capitalist accumulation model: export-oriented industrialization.
As export-oriented industrialization became more widespread, measures (to say
nothing of rhetoric) associated with “free trade,” “free markets,” and “globalization”
became more mainstream and prominent. Certainly, so far as the Mexican capitalist class
and state were concerned, the transition amounted to a political paradigm shift as the
ruling party, the Institutional Revolutionary Party (el Partido Revolucionario
Institucional), switched its longstanding ideology of self-supporting economic
nationalism for an ideology based on neo-liberal economic policies and neo-classical
economic theories, especially given that the then-President of Mexico Carlos Salinas de
Gortari (1988-1994) made an announcement (which went public in March 1990) on his
5
Patricia Fernandez-Kelly and Douglas S. Massey, “Borders for Whom?: The Role of NAFTA in Mexico-
U.S. Migration,” The Annals of The American Academy of Political and Social Science, 610 (March 2007):
99-101.
6
Rey Acosta Barradas, Los desafios de la globalizacion en Mexico: una perspectiva regional (Xalapa,
Veracruz, Mexico: Biblioteca Universidad Veracruzana, 2005), 112-113.
7
Barradas 112-113.

5. pursuance of a free trade agreement with the US government.8
In practice, the
protectionist policies associated with the import-substitution model that defined Mexican
economic nationalism gave way to the end of protectionism (i.e. repeal of tariffs and
other “restrictive” regulations) and the manufacture of commodities for export.
In terms of neo-liberal and neo-classical economic principles in practice, by 1986,
the Mexican government signed the General Agreement on Tariffs and Trade. By 1994, it
agreed to NAFTA’s passage. Concerning NAFTA’s passage, Rey Acosta Barradas
writes,
El TLCAN es un caso unico en el mundo porque vinculo en el acuerdo a dos paises desarrollados
y uno en vias de desarrollo. En este sentido, las expectativas creadas por esta experiencia
alrededor del mundo son sustanciales; muchos ojos estan pendientes de la evolucion de esta
experiencia. Si el experimento funciona, es posible que la humanidad haya dado un paso
importante hacia adelante para todos los paises del mundo en el camina hacia el desarrollo
economico. De ser asi, las perspectivas economicas para America Latina y el Caribe encontraran
mayores posibilidades de exito y el ALBA tendran mas probabilidad de realizacion.
[NAFTA is a unique case in the world because it has linked by agreement two developed
countries and one developing country. In this way, the expectations created by this experience
around the world are substantial – many eyes are trained on the evolution of this experience. If
the experiment works, it is possible that humanity has made an important step forward for all the
countries in the world in the path toward economic development. If such is the case, the economic
perspectives for Latin American and the Caribbean will find greater possibilities of success and
ALBA will have a greater chance of realization.]9
Given the historical and economic context, Barradas’s hopeful tone was understandable.
However, whether such optimism turned out to be justified and true is another question
entirely. Indeed, in light of the massive late-twentieth century (and early twenty-first
century) proletarianization of the population of Mexico which coincided with the entry
and transplantation of industrial factories that were originally based in Canada and the
8
Dale Story, “Chapter Eight: Trade Policy and Economic Development in Twentieth Century Mexico”
Charles F. Doran and Gregory P. Marchildon (editors), The NAFTA Puzzle: Political Parties and Trade in
North America, (San Francisco and Oxford: West View Press, 1994), 173-174.
9
Barradas 72-73.

6. US and the growing trends of northward continental migration, the increasing volume
and velocity of trade across national borders due to the ratification and enforcement of
free trade treaties contributed more so to transnational capitalist accumulation than to
anything else.
Free trade agreements such as NAFTA accelerated and intensified these
socioeconomic conditions in the countryside, thus converting increasingly more self-
subsistent farmers into wage laborers in various capacities (i.e. service industries, factory-
based industries, rural wage work, etc.). As a matter of fact, according to Ronald L. Mize
and Alicia C.S. Swords, peasants from rural Mexico who became workers found
employment in the agricultural industries, non-union manufacturing, service industries,
construction, and transportation, writing, “Increasingly, service-based jobs are heavily
segregated as low-wage, Mexican immigrant workers toil for long hours in unreliable
jobs, such as in restaurants and hotels, for poverty wages.”10
NAFTA’s consequences on Mexican agriculture
Strictly speaking, the expropriation of peasants from the land was not merely
limited to the 1980s and 1990s, when the export-oriented model and NAFTA became the
dominant features of North American neo-liberalism. Indeed, such expropriation, and
thus primitive accumulation, occurred during the import-substitution industrialization
period as well. For instance, although food self-sufficiency in Mexico became a reality in
the early 1960s, David Barkin writes that soon enough “the price support level for maize
was frozen, creating a barrier that gradually forced peasants and rural labourers to seek
additional sources of income from off-farm work, transforming food self-sufficiency
10
Ronald L. Mize and Alicia C.S. Swords, Consuming Mexican Labor: From the Bracero Program to
NAFTA (Toronto: University of Toronto Press, 2011), 107.

7. itself into a theme of national debate and the target of social and political conflict during
the following 20 years.”11
Conceivably, farmers who were separated from the land found
employment in the factories and other related parts of the nascent industrial system of
Mexico. Certainly and likewise, the NAFTA was yet another contributing factor to a
process of primitive accumulation as the nation’s peasants were more and more
integrated into the capitalist system as wage laborers.
In the events leading up to NAFTA, as per the economic policies and stances of
President Salinas, the ejidos underwent a number of changes associated with the process
of transition from the import-subsitution model to the export-oriented model:
1) the distribution of farmland came to a halt,
2) the peasants on the ejidos were able to change the form of landownership to that
of private property,
3) ending the restrictions on the participation of “trading concerns” in the
countryside,
4) giving ejidos the rights of free association and leasing or selling farmland, and
5) the founding of a court for the resolution of land disputes.12
Rey Acosta Barradas weighs in as well as on the capitalization of the ejidos, listing
additional features of the transitional process such as the removal of subsidies, tariffs and
price controls; the opening up of the internal market, which made the importation of
foodstuffs possible; the privatization of credit and technical assistance, etc.13
The more
thorough subjection of the ejidos to capitalist relationships led to the separation of the
peasantry from the farmland.
As Patricia Fernandez-Kelly and Douglas S. Massey note, “The privatization of
Mexico’s collective farms under neoliberalism and the elimination of agricultural
subsidies under NAFTA also increased the number of displaced peasants seeking
11
David Barkin, “The Reconstruction of a Modern Mexican Peasantry,” The Journal of Peasant Studies,
Vol. 30, No. 1, October 2002, 79.
12
Edna Jaime, “Fox's Economic Agenda: An Incomplete Transition” in Luis Rubio and Susan Kaufman
Purcell (editors), Mexico Under Fox (Boulder and London: Lynne Rienner Publishers, 2004), 52-53.
13
Barradas 126-128.

8. economic opportunities elsewhere.”14
Not surprisingly, the opportunities that lie
“elsewhere” tend to be located in the maquiladoras, el Norte (Canada and the US), etc.
Juan M. Rivera draws a similar conclusion,
NAFTA accelerated Mexico’s transition to a more industrialized, open-market economy, but it created a
bleak picture for the future of Mexico’s rural households. Gone were the threads of the support net that the
Mexican government had created in the past. There were no longer guaranteed prices, soft though limited
credit, cheaper seeds, subsidized fertilizers, or other similar benefits […]15
Although Rivera develops a more concrete picture as to the plight of Mexico’s farmers
due to the turn to neo-liberal capitalism and the lack of previously available government-
provided support, David Bacon has even more concrete observations.
Bacon specifically notes that the inability of Mexico’s government to keep the
country’s domestic coffee market economically viable during the 1990s meant that
farmers in the state of Veracruz had no other choice but to become immigrant workers
and writes more generally that, “But from 1982 through the NAFTA era, successive
economic reforms produced more migrants. Campesinos who lost their land found jobs as
farmworkers.”16
As all the above observations by various writers indicate, they provide
images of one of the very dire yet unsurprising and structural consequences of NAFTA
and related measures aimed at the promotion of “free trade.” In brief, the transition from
state capitalism to neo-liberal capitalism entailed the development of a new working class
as farmers found themselves in situations in which they are unable to support themselves
through farming, whether as independent self-subsistent farmers or as members of
collective farms such as the ejidos.
14
Fernandez-Kelly and Massey 98-118.
15
Juan M. Rivera, “Conclusions: Mexican Agriculture and NAFTA – The Challenges Ahead,” in Juan M.
Rivera, Manuel Chávez Márquez and Scott Whiteford, NAFTA and the Campesinos (Scranton: University
of Scranton Press, 2009), 171-180.
16
David Bacon, “Displaced People: NAFTA’s Most Important Product,” NACLA Report on the Americas,
Vol. 41, No. 5, September/October 2008, 24-25.

9. A few concluding thoughts and reflections
The promise of NAFTA had been that its policies could and would contribute to
the general economic prosperity and development of the three treaty nation-states:
Mexico, Canada, and the US. Yet with the enforcement of NAFTA, the consequences
have not amounted to a uniform rise in the wealth of the member countries. Rather, the
general law of capitalist accumulation and its consequences meant that, throughout North
America, geographically, economically, and socially, wealth gathered at one pole
whereas poverty gathered at the other pole. Broken down by nation-state, some of the
negative results of NAFTA, an institution that can be associated with neo-liberal
capitalism, included the “de-industrialization” of the industrial sections of the Canadian
and US economies, the growing prominence and importance of the maquiladoras in
terms of industrial output and the increasing migration from Mexico to the US and
Canada, etc.17
Among other examples, the workforces in the maquiladoras and the
migration patterns certainly show the existence of a new working class.
Such a socioeconomic development highlights the relevance of ongoing questions
and issues in social theory. Certainly, one such relevant area is the debate, or
conversation, between Karl Polanyi and Karl Marx on capitalism, the market, and
commodity-based relationships.18
Yet another area of theoretical interest is the
aforementioned Brenner debate, in which Robert Brenner sets forth argument arose that
17
The policies and effects of free trade agreements have also elicited different responses from the labor
movements in Canada and the US, as documented by Tamara Kay in the third chapter (pages 58 to 99) of
her book, NAFTA and the Politics of Labor Transnationalism (Cambridge University Press, 2011). The
Canadian labor movement developed a “left” or “progressive” form of economic nationalism that had anti-
racist and anti-imperialist dimensions whereas the US labor movement was more susceptible to a right-
wing variant of economic nationalism that had nativist and racist overtones, as articulated by politicians
such as Patrick Buchanan and Ross Perot (pages 75 to 86).
18
Ronaldo Munck, “Globalization, Labor and the ‘Polanyi Problem,” Labor History 45:3 (2004): 251-269.

10. capitalism first developed in the English countryside during the last years of feudalism in
England, as the enforcement of the policies and laws of “enclosure” forced the once land-
bound peasantry off the land, thus leading to the formation of one of the earliest working
classes in capitalist history.19
Marx documents this process in the last and eighth section
of the first volume of Capital, a process that he refers to as “primitive accumulation.”20
One can also add that Marx was referencing the concept of the “original accumulation” or
the “previous accumulation” of capital – a concept that appears in the works of classical
economists such as Adam Smith and David Ricardo.
Concurrent with the process of primitive accumulation is also the development of
a working class or a proletariat, hence proletarianization. The situation of the Mexican
peasantry serves as a contemporary example, as is the case with the migrant worker
population in the contemporary People’s Republic of China, which in 1978 abandoned
state capitalism in favor of a neo-liberal capitalist direction as part of the process of
“Reform and Opening Up” (改革开放/改革開放/Gǎi3gé2 kāi1fàng4).21
In the case of
Mexico, a similar process more or less began in the early 1980s as the import-
substitution
model of economic development entered a crisis. As the capitalist class and the state in
Mexico sought new ways to shore up and continue with the accumulation of capital, the
effects were felt in the countryside. The sobering last words go to Rey Acosta Barradas,
Esta strategia, sin embargo, tiene que ser valorada cuidadosamente contra potenciales costos
sociales y economicos. El proceso de reestructuracion economica interno asociado trae consigo la
quiebra de muchas empresas pequenas y medianas asi como una excedente creciente de insumos,
19
Robert Brenner, “Agrarian Class Structure and Economic Development in Pre-Industrial Europe,” in
T.H. Aston and C.H.E. Philpin (editors), The Brenner Debate: Agrarian Class Structure and Economic
Development in Pre-Industrial Europe (Cambridge: Cambridge University Press, 1987), 48-49.
20
Karl Marx, Capital (volume one) (Harmondsworth, Middlesex, England: Penguin Classics, 1990), 873-
940.
21
As documented in a recently published book, Scattered Sand: The Story of China’s Rural Migrants, by
Hsiao-Hung Pai (London and New York: Verso, 2012), among other books.

11. principalmente fuerza de trabajo, el cual ha encontrado serias dificultades de empleo en otros
sectores de la economia nacional, motivando asi un flujo de migracion masiva hacia los Estados
Unidos.
[This strategy, however, must be carefully considered against potential social and economic costs.
The process of internal economic restructuring has contributed to the bankruptcy of many small
and medium businesses as well as an oversupply, especially within the labor force which has
encountered serious work-related difficulties in other sectors of the national economy, thus
motivating an influx of massive migration to the United States.]22
References
22
Barradas 93-94.

12. Bacon, David. “Displaced People: NAFTA’s Most Important Product.” NACLA Report
on the Americas 41.5 (September/October 2008): 23-27.
Barkin, David. “The Reconstruction of a Modern Mexican Peasantry.” The Journal of
Peasant Studies 30.1 (October 2002): 73-90.
Barradas, Rey Acosta. Los desafios de la globalizacion en Mexico: una perspectiva
regional. Veracruz, Mexico: Biblioteca Universidad Veracruzana, 2005.
Brenner, Robert. “Agrarian Class Structure and Economic Development in Pre-Industrial
Europe” The Brenner Debate: Agrarian Class Structure and Economic
Development in Pre-Industrial Europe. Ed. T.H. Aston and C.H.E. Philpin.
Cambridge: Cambridge University Press, 1987. 10-63.
Fernandez-Kelly, Patricia and Douglas S. Massey. “Borders for Whom?: The Role of
NAFTA in Mexico-U.S. Migration.” The Annals of The American Academy of
Political and Social Science 610 (March 2007): 98-118.
Jaime, Edna. “Fox's Economic Agenda: An Incomplete Transition.” Mexico Under Fox.
Ed. Luis Rubio and Susan Kaufman Purcell. Boulder and London: Lynne Rienner
Publishers, 2004. 35-64.
Kay, Tamara. NAFTA and the Politics of Labor Transnationalism. Cambridge:
Cambridge University Press, 2011.
Marx, Karl. Capital (volume one). Harmondsworth, Middlesex, England: Penguin
Classics, 1990.
Mize, Ronald L. and Alicia C.S. Swords. Consuming Mexican Labor: From the Bracero
Program to NAFTA. Toronto: University of Toronto Press, 2011.
Munck, Ronaldo. “Globalization, Labor and the ‘Polanyi Problem.’” Labor History 45.3,
(2004): 251-269.
Wayne Olson. “Crisis and Social Change in Mexico’s Political Economy.” Latin
American Perspectives 12.3 (July 1985): 7-28.
Pai, Hsiao-Hung. Scattered Sand: The Story of China’s Rural Migrants. London and New
York: Verso, 2012.
Rivera, Juan M. “Conclusions: Mexican Agriculture and NAFTA – The Challenges
Ahead.” NAFTA and the Campesinos. Ed. Juan M. Rivera, Manuel Chávez
Márquez and Scott Whiteford. Scranton: University of Scranton Press, 2009. 171-
180.

13. Story, Dale “Chapter Eight: Trade Policy and Economic Development in Twentieth
Century Mexico” The NAFTA Puzzle: Political Parties and Trade in North
America. Ed. Charles F. Doran and Gregory P. Marchildon. San Francisco and
Oxford: West View Press, 1994. 173-196.
Valtonen, Pekka. The Politics of Agrarian Transformation in Mexico. Academia
Scientarium Fennica, 2000.
A note on language

14. In this paper, I have included two cited paragraphs that originally appear in
Spanish. The translations from Spanish to English are my own, appearing below the
original Spanish on pages five and ten. I also included a term that is originally from
Mandarin Chinese, which refers to the economic reform process in the People’s Republic
of China (PRC). Since Mandarin Chinese in the PRC is written with simplified
characters, I made sure to place the simplified characters ahead of the traditional
characters, followed by the pinyin transliteration. The translation of that term is widely
used to the point of “common knowledge” (“common knowledge,” at least, for those who
have a fairly substantial knowledge of twentieth century Chinese politics and history).
All errors, of course, are my own.

15. Comments from professor:
Stephen Cheng
“The North Atlantic (sic) Free Trade Agreement, Primitive Accumulation
and Class Formation in Mexico”
The paper argues that NAFTA was an important moment in a longer
historical process of proletarianization of the Mexican peasantry and
concludes with some theoretical reflections on the Brenner debate and
primitive accumulation.
The introduction is very clearly written and the paper is well
organized overall, with a clear logical progression. The outline is
helpful even if this takes up precious word length.
It is appropriate to begin where you do, with the ISI model of state
capitalist development from Cardenas forward. The shift to
neoliberalism is rooted in the limits and contradictions of this
period, and you make clear that proletarianization preceeds the
neoliberal period. To sustain the paper’s argument that NAFTA
intensified this process, you cite several studies affirming the
point. Here I would have liked to see some more empirical evidence and
attention to geographical differences. My understanding is that
dispossession was stronger in the south of the country, where
traditional land holding patterns persisted longer than in the north
and center of the country. I don’t doubt the conclusions that you
draw, but some data would have made the case more convincing.
The paper turns at the end towards concluding remarks of a theoretical
nature on capitalist development. Here you briefly mention Robert
Brenner’s work along with Marx (but not Polanyi as promised in the
intro). The comparison with the reform period in China is perhaps more
apropos, and this is where you could perhaps have brought in Polanyi
or discussed Harvey’s concept of accumulation by dispossession.
Overall, this was a well written, well organized paper. The thesis was
clearly argued and supported in a decent literature review for such a
short paper. Well done! Grade: 90
Ian