“In my companies, for no reason will we make new investments in Mexico,” Ricardo Salinas Pliego threatened through Days before and in reaction to the adverse ruling of the Supreme Court, Grupo Salinas criticized what it considers a “rigged and selective” justice that generates uncertainty and undermines investment confidence in the face of the T-MEC discussion. TV Azteca, the Group’s media arm, spread the boss’s story. In short, if it walks, swims and squawks as a capital strike, then it is a capital strike.
The trick is well known on the world political scene. Since the ideological surrender of European social democracy, the entire partisan spectrum seeks to encourage investment by enacting pro-business reforms. The business manual and consensus at the top dictates that the current President urges the creation of private employment, while aggressively promoting trade agreements that favor corporations, cutting corporate taxes and eliminating regulations. To attract capital back from tax havens, presidential candidates seduce with promises of stability and confidence.
Businesspeople routinely influence governments by controlling the resources—jobs, credit, goods, and services—on which society depends. A capital strike can manifest itself in layoffs, divestment or denial of loans. Sometimes a simple threat of credible action is enough, along with a promise to give in once the government reverses course. When the pressure is from unions, through employers’ associations, the effectiveness of the aggression increases.
One of the most infamous capital strikes was that of Chilean extremist groups in collusion with the Nixon government against Salvador Allende. Far from having been a spontaneous event, it was a meticulously organized plot to suffocate the “Chilean path to socialism.” As documented by Mario Amorós in his book Between the spider and the arrow: The civil plot against Popular Unitythis offensive was orchestrated by the economic elite (led by figures such as Agustín Edwards and business unions such as SOFOFA), who financed and coordinated a systematic boycott to “make the economy squeak.” This strategy reached its peak with the October 1972 strike, a massive lockout led by truck owners and businesses, which sought to paralyze the country by cutting off the supply chain. Amorós details how this economic sedition, fueled by million-dollar financing from abroad (including CIA funds) and politically supported by the Christian Democrats and the National Party, deliberately created the conditions of chaos, scarcity and black market necessary to justify military intervention and overthrow the constitutional government.
Mexico has also suffered tangible cases. A “hard” or coordinated example was the capital strike during the six-year terms of Echeverría and López Portillo. Operated mainly through the massive flight of foreign currency and the contraction of private investment in protest against the expansion of public spending, it led to the discreet creation, in 1975, of the Business Coordinating Council (CCE). This entity was born as a united front to defend the interests of the bosses’ leadership (highlighting the Monterrey Group) to confront the Executive. The tension culminated in 1982 with López Portillo, when business distrust led to such an aggressive capital flight—described by the president as “looting”—that it precipitated a balance of payments crisis and motivated the nationalization of the banks as a counteroffensive to what the government interpreted as a deliberate economic boycott.
In quiet times, capital strikes look a lot like corruption. A “soft” or uncoordinated example is when Ricardo Salinas Pliego threatened the governments of Michoacán and Sinaloa with moving the franchise, first from Club Atlético Morelia to Mazatlán FC and then (in alleged sale) to Atlante in Mexico City. Faced with a discontinuity of subsidies disguised as government advertising, tax favors and remodeling of stadiums, Grupo Salinas first pressed the yellow button of threat and then the red button of disinvestment, but not before having obtained income for years from state governments.
Today, Grupo Salinas doubled the bet through a capital strike that is hardly credible as an extortion mechanism. On the one hand, it is unconvincing that the investment to renew branches of Elektra or Banco Azteca stops during the remaining five years of the six-year term; Depreciation would deteriorate current businesses. On the other hand, a real disinvestment would in any case be precipitated by the liquidity pressures that the Group’s companies are currently facing due to the demands of creditors and the treasury, and not by a deliberate act of protest. Finally, Ricardo Salinas Pliego’s political rudeness is far from spreading sympathy with his own skin at stake, and seems more like the angry tantrum of a reprimanded child.
At times, corporate disinvestment, coupled with demands for government reform, constitutes a conscious capital strike with potential influence on political appointments, legislation and policies. At other times, the threat of disinvestment, the mere hint of a drop in business confidence or job creation is enough to achieve these objectives. The problem for Grupo Salinas is that as long as the owner has direct political pretensions, his legitimacy will be diminished and the network of alliances will be chained to electoral luck. Ricardo Salinas Pliego, skilled in crooked business but clumsy in political praxis, forgets that democratic credibility cannot be bought for months without interest, much less can it be seized like an unpaid blender. His experiment with a capital strike, perhaps useful—at best—for generating income, is ineffective for mass politics. In short, the quarrelsome magnate made a mistake that could be capitalized on by his rivals, who by day rub their hands over the gift and by night take note of the anti-democratic drive of an angry far-right.