When the state seizes industry

IN EARLY May, Argentina and Bolivia took the next step in their respective drives to nationalize foreign-owned industries. The measures have won broad popular support in each country--to the chagrin of capitalists everywhere.

"Jubilant Argentines flooded the congressional plaza in Buenos Aires on May 3 to rattle tambourines, shake banners and fly balloons emblazoned with the logo of YPF, Argentina's biggest oil company, after Congress had firmly approved its nationalization," scowled the Economist. "The seizure of YPF was the most drastic step yet in the campaign by Cristina Fernández, the president, to bring "strategic" industries back under government control."

The seizure of 50.01 percent of YPF stock, worth as much as $10.5 billion, from the Spanish energy giant Repsol passed easily through both the Senate (63-3) and Congress (207-32) and follows on the heels of previous nationalizations of a private pension fund and an airline in recent years. Argentine President Cristina Fernández de Kirchner announced the move three weeks earlier, celebrating it as a means for the "recovery of sovereignty and control."

Indeed, in the context of a rekindled battle with England over control the Malvinas--the subject of a military conflict in the 1980s--the nationalization of YPF took on an anti-imperialist tinge. Control over oil is back in Argentine hands for the first time since the mid-1990s when a host of neoliberal policies brought the country to near-total economic collapse in 2000. Central to those policies were privatizations of natural resources and state services.

On May 1, two days before Argentina's nationalization of YPF, Bolivian soldiers entered the offices of the central electric company and draped a flag from the front of the building to symbolize the transfer of the Red Electrica from a privately owned Spanish corporation to Bolivian state ownership.

"As fair homage to the workers and Bolivian people who have fought for the recovery of their natural resources and basic services, we nationalize the power transmission company," declared Bolivian President Evo Morales. "Just to make it clear to national and international public opinion, we are nationalizing a company that previously was ours."

In what has become a tradition since Morales and his Movimiento al Socialism (MAS) party came to power in 2006, the state has nationalized industries annually on the May 1 international workers' holiday. In the last six years, Morales has nationalized gas fields, oil refineries, pension funds, telecommunications and important hydroelectric power plants.

NATIONALIZATION IS a wildly popular move for both Kirchner and Morales, who can score points by thumbing their noses at Spain, both countries' former colonial overlord. These are the latest--and in Argentina's case, the most significant--actions against what is sometimes called "La Reconquista." "The Reconquest" was the wave of privatizations that put much of Latin America in the hands of Spanish firms since the 1990s.

For the Spanish government, which is part owner of both Repsol and Red Electrica, the nationalizations come as a blow, further diminishing state revenues at a time when the Spanish economy is already reeling. Spain is about to enter its second recession in three years, has an unemployment rate of 24 percent, and is likely to face demands for austerity measures similar to those that have rattled Greece during the last year.

It remains to be seen what position Spanish workers and unions will take, as Kirchner's and Morales' moves are likely to push Spain's right-wing government closer to the brink.

Under Spanish control, many industries in Latin America have faced systematic under-investment and under-production, providing the impetus for the nationalizations. Since 1997, when Bolivia's electric grid was privatized, for example, the Bolivian state has had to invest $220 million in the grid. Meanwhile, Red Electrica dedicated far less to infrastructure, investing only $81 million. During that same period, Red Electrica made $100 million in profits.

But the nationalizations have also transformed the governments of Argentina and Bolivia into partners in the uglier aspects of energy exploitation.

For instance, one reason for Kirchner's frustration with YPF was the company's resistance to spending more on exploration. But identifying new sources of energy to extract will take a continued toll on the environment.

Hydro-fracking, for instance, is coming to Argentina. According to the U.S. Energy Information Administration, Argentina has "the world's third-largest assessed endowment [of recoverable shale gas], behind only China and the United States." YPF is already partnered with the U.S. corporation Apache, which began fracking in 2010 and has already leased 1 million acres of land for shale recovery. Other foreign corporations, including Total, ExxonMobil and EOG Resources, have also begun investing in the environmentally destructive method of fracking, according to a Source Watch report.

In Bolivia, Morales tried mightily to implement a road project through indigenous lands, only canceling the project after prolonged protest from indigenous groups forced him to abandon his plans.

THERE ARE important differences in how these nationalizations are likely to play out. Argentina is far more developed than Bolivia, allowing Kirchner to pursue more aggressive strategies than Morales.

For example, Bolivian electricity accounted for just 1.5 percent of Red Electrica's sales of $2.1 billion in 2011. That means Bolivia's nationalization represents about $31.4 million of the electrical company's annual revenues. By contrast, Argentina's takeover of YPF's assets cost Respol 21 percent of its business--as much as $10.5 billion. This is more than 300 times the size of Bolivia's nationalization.

Kirchner refused to meet with Repsol before Argentina took over its shares, while Morales spoke to executives at Red Electrica, giving them three days' advance notice. So sending soldiers into the Red Electrica building to take it over, after a deal had already been struck, was more an act of political theater than military necessity.

But on the same day he announced the electrical nationalization, Morales inked a deal with Repsol to develop a $528 million natural gas plant. So while Argentina was seizing billions from Repsol, Morales was negotiating his largest foreign investment yet as president--with the very same company! Morales hopes the deal will help Bolivia to triple the amount of natural gas that Bolivia sells to Argentina.

Morales, of course, has much more of a reputation as a radical than Kirchner. Yet Morales used the Repsol deal to wag his finger at the Argentinian president. "We have a great relation of trust with Repsol," said Morales. "Bolivia's experience with Repsol shows that nationalization (Bolivian-style) can be a success, providing an instructive example for Argentina."

Kirchner and Morales have also pursued very different strategies for allocating the new resources flowing into state coffers as a result of their nationalizations of industry. According to Mark Weisbrot writing in the Guardian:

[Over the past nine years], Argentina's real GDP grew by about 90 percent, the fastest in the hemisphere. Employment is now at record levels, and both poverty and extreme poverty have been reduced by two-thirds. Social spending, adjusted for inflation, has nearly tripled. All this is probably why Cristina Kirchner was re-elected last October in a landslide victory.

This stands in sharp contrast to Morales' record--and his swiftly dropping approval ratings.

Since the much-trumpeted nationalization of hydrocarbons on May 1, 2006, Bolivia's take has been $12.4 billion. Ignoring all other nationalizations, that is $2.1 billion a year in additional revenue. But during Morales' early years in power, social spending actually dropped as a percentage of GDP, while Morales consistently chose to save or reinvest the money--to the delight of the International Monetary Fund and international capital.

This is why the Bolivian government's cries of poverty ring hollow among the millions of Bolivians who desperately need a share of that wealth merely to survive.

Take, for example, a recent march of Bolivia's disabled citizens. Dozens of the poorest Bolivians, missing arms and legs, marched 500 miles through the mountains to arrive at the capital city of Paz to draw attention to their miserable condition. They intended to ask for $400 per year in subsidies as well as legal protections against job discrimination. Once they drew near the presidential palace, they were surrounded by rings of riot police, then beaten and pepper-sprayed.

With photographs and video of the state's brutality traveling around the globe, the minister of the economy spoke to the press to explain why it was impossible to meet the protesters' economic demands: "We have emergencies and natural disasters to deal with, then we have social programs that are already underway, and we cannot discontinue them. In sum, it would be a huge blow to the Treasury."

As Latin America expert Tom Lewis observed, workers and campesinos are unlikely to begin seeing the benefits of nationalization, Bolivian-style, any time soon:

[R]ather than appropriating existing refinery and production capacities...the Morales government is apparently waiting until it has accumulated enough state capital to construct its own value-added facilities [i.e., oil refineries]. This tells us two things: 1) the core dynamics of MAS economic policy is capital accumulation; and 2) the majority must wait and suffer deprivations while the minority and--just as significantly--the state itself go about feathering their nests.

Amid all of this, Morales' approval has dropped from 70 percent in January 2010 to 35 percent this past October.

THE RECENT wave of nationalizations represent the potential rollback of neoliberalism, whose legacy has been both profound immiseration and wild instability for working people across Latin America.

The point of development ought to be to provide better lives for people, and the freedom and ability to have greater decision-making power over their own lives.

Rhetorically, Morales invokes these motives for his actions. He has attempted to cloak his embrace of neoliberal practices by using the term socialism, but meanwhile, the struggles against him have become larger and angrier. His response has been to smear his opponents as agents of imperialism and try to pit working people against one another.

When he has succeeded in this divide-and-conquer game, it is because different groups of workers and the poor are indeed competing for scarce resources, made scarcer by a stingy Morales administration. Nevertheless, this seems to be the exact opposite of a Movement Towards Socialism (the English translation of the name of Morales' party Movimiento al Socialism).

Kirchner, on the other hand, has not invoked socialism so much as nationalism. She has drawn attention--and domestic support--for her fierce anti-British stance over the Malvinas Islands and for her nationalization of YPF.

But Argentina has not been immune to the global economic crisis, and she has been forced to raise taxes while limiting wage increases. An anti-terrorism bill was passed earlier this year that was loosely worded enough to worry critics and activists that it might be used politically at some point. And increasing hydro-fracking will mean clashes at some point with people whose water will be poisoned.

None of this means Kirchner's support will disappear overnight. But if nationalization (Bolivian style) can provide an instructive example for Argentina, it is this: No amount of popular approval is enough to guarantee progress for ordinary people without a politically sharp and organized counterweight to the inevitable pressures of capitalism.