By: Raúl Zibechi
The noisy fall in the price of raw materials closes an economic cycle, but also a political one. The illusion that we’re dealing with a momentary decline is giving way to the conviction that the low prices can drag out for a long time, even 20 years, according to specialists cited by Bloomberg (http://goo.gl/fAFktC).
The reasons for such a decline are debatable. There are those who attribute the drop in gas prices to a U.S. maneuver to affect Russia, Venezuela and Iran, while others maintain that it’s impelled by the Saudi monarchy to render extraction by means of fracking infeasible in that country, which threatens to displace it as the prime global producer global. The lesser demand of China is the most plausible explanation about the fall of other merchandise, without discarding the imprint of financial speculation in all commodities.
What’s certain is that the commodities price index elaborated by Bloomberg, which includes gold, oil and soy, has fallen to half of its historic maximum in the first half of 2011. The multinational Glencore-Xstrata, which controls the largest part of the production of minerals and grains in the world, registers losses on the London Stock Exchange greater than 30 percent in recent weeks, totaling a fall of 74 percent so far this year (http://goo.gl/HTi1Wu). Other multinationals in the sector confront similar situations.
In Latin America this change of cycle anticipates grave problems and some opportunities. All the countries confront fiscal and trade difficulties that lead them to reduce State budgets and public expense. In some countries, like Ecuador, a 5 percent reduction in expenses is contemplated, and next year’s budget will be calculated based on the price of oil at 40 dollars.
As the Ecuador economist Carlos Larrea points out in a recent interview, “that’s all good, but the problem is that it’s not enough. That would be a very good strategy if we have a quick recovery of oil prices, but if that doesn’t happen, as is very probable, then this strategy doesn’t work” (http://goo.gl/LFzxYV).
The new economic cycle is already affecting the social policies that were possible thanks to the surplus due to the high prices of exports. In various countries like Ecuador, there was already a reduction of state functionaries (appointed positions). In the opinion of the economist Eduardo Fagnani in the September IHUOnline magazine, a fiscal adjustment in Brazil “is provoking a grave social regression” (http://goo.gl/D9D4oq).
In the opinion of many economists the best social policy is employment. In Brazil the minimum wage grew 70 percent on top of the last decades’ inflation and unemployment attained a minimum of 4.8 percent in December 2014. But today it’s already situated at 7.5 percent (8.6 million unemployed) and it is estimated that it will end the year at 9 or 10 percent. The social indices are starting to erode in the other countries, still slowly, with increases in the levels of unemployment and poverty.
These are, very briefly, some of the problems derived from the change in the economic cycle that will sharpen if, as everything indicates, the United States Federal Reserve raises the interest rate in the coming months. We are facing a crisis that can take two directions: fiscal adjustments or questioning the extractive model.
In the first case, the governments would suffer a strong erosion of their support base, since a good part of the popular sectors that brought them to power will start to desert. Some can attempt to mobilize again to pressure for their demands, but others can gamble on the conservative parties and the right. Something like that seems to be happening in Brazil, where the adjustment that the government of Dilma Rousseff imposes has provoked a sharp decline in her popularity, which fell to 7 percent of the electorate.
A similar situation cannot be settled, in the medium-term, except with an electoral triumph of the rights, which can also obtain the president’s displacement through the parliamentary path.
We are facing an opportunity to leave the current model; in other words growth based on the export of commodities. For that it is essential to break with the policy of inclusion through consumption, to face structural reforms that as of now have not been realized or have been too timid: tax, agrarian, urban and health reforms, as well as reforms to the political system, the latter still pending in Brazil.
But exiting the extractive model presents, at this conjuncture, two great challenges.
The first is that the global scenario walks in an opposite direction. On the one hand, the dominant classes seem to be pushing societies to return to the 19th Century, through de-modernization and de-democratization, as Aníbal Quijano points out, from the hand of financial capital that is promoting a strong re-concentration of global power. On the other hand, the emerging powers like China gamble on the same extractive model as the empire.
The second challenge is inferred from the first: there is no exit from the model without a political crisis. Exiting the model supposes defeating the financial capital that maintains it and the local elites that implement it. It will be a group of tough battles, as the case of Peru demonstrated, where a new massacre against the communities that resist mining is produced these days in the Andean region of Apurímac.
The subjects for defeating extractivism will be the peoples and the communities organized into movements. The governments and the political parties are more worried about maintaining their privileges than facing the battle against the model. The facts say that the new cycle of struggles that will bring down the model is being championed by the indigenous and campesino communities, followed by the poor from the urban peripheries and the youths and women of the popular sectors.
Originally Published in Spanish by La Jornada
Translation: Chiapas Support Committee
Friday, October 2, 2015