Ecuador: Anomie, Failed State, and Lumpen-Accumulation. A Marxist Perspective

By Pablo Dávalos

Just days before the general elections in Ecuador, Fernando Villavicencio, the presidential candidate for the right-wing party Movimiento Construye, was assassinated after a political rally in the north-central part of the capital, despite alleged police protection. This assassination radically altered the national political landscape and became
in front-page news even worldwide.

This act adds to a series of crimes against various politicians and elected officials, as well as the wave of assassinations targeting the entire population, widespread crime, kidnappings of citizens, rampant extortion, prison massacres, and the increasingly pervasive presence of organized crime as a defining feature of the country's life in recent years. In just a few years, Ecuador has gone from being a relatively peaceful country to having some of the highest rates of crime and insecurity.

How did a society that once experienced these problems only marginally become a global news story precisely because of the escalating violence it is experiencing? What factors or circumstances deteriorated the country to such an extent that in just a few years its crime rates have made it one of the most dangerous places in the region and the world?

There are, of course, several explanations, readings, and interpretations about what is happening in the country; however, perhaps a reading from the perspective of political economy and from the categories of Marxism is necessary to understand and contextualize the difficult situation that Ecuador is experiencing.

A political economy perspective can situate historical, structural, and geopolitical coordinates with greater precision and scope. To this end, a reflection on the relationship between capital accumulation and organized crime is proposed, based on the category of lumpen-accumulation. The context of economic policy is then analyzed in light of the agreements the country signed with the IMF. Based on this background, it is concluded that the combination of neoliberalism and lumpen-accumulation led the country to a situation of failed state. The reference to a failed state is not to its forms, that is, the state's inability to ensure its most vital functions for itself and its citizens.
citizens, but rather their inability to exercise the legitimate monopoly on violence and process social conflict within the framework of law and institutions. In a failed state, the dispute over the legitimate monopoly on violence is ceded to the illegitimate violence of organized crime.

Capital accumulation and lumpen-accumulation: conceptual clarifications

To better understand the relationship between lumpenproletariat, accumulation, and accumulation patterns, it is necessary to define these concepts more rigorously. pattern of capital accumulation I want to express the general form that establishes, defines and generates the conditions of possibility for different power groups and economic groups to locate profit extraction through specific business models.

In this particular case, the general pattern of accumulation This is due to the dollarization of the economy. Since it is a strong currency used as a unit of account for world trade and belongs to the most important imperialist power in globalization, dollarization becomes the general framework within which economic groups position and maximize their profit expectations.

The relationship between an accumulation pattern and its normative and institutional frameworks I call, in line with the regulation school, as regulation regime of the accumulation patternIn other words, patterns of capital accumulation require institutional forms and regulatory frameworks within which to develop, consolidate, and expand.

In that sense, the dollarization It necessitates the creation of regulatory and legal frameworks for various methods of profit extraction and maximization. The dollarization regulatory regime meant that the monetary and institutional framework of dollarization was managed directly by private banks and financial groups, while the system of relative prices related to dollarization was, in turn, controlled and managed directly by corporate capital dedicated to distribution, marketing, and import. From then on, all other economic groups were able to expand from these pre-existing coordinates.

From the outset, the State was excluded from managing and controlling the monetary framework of dollarization and from any form of regulation over the domestic price system. This was further radicalized by the 2021 legal reforms that defined the independence and autonomy of the Central Bank and even prohibited it from acquiring government-issued bonds. This led to the government being able to borrow only in international capital markets and resulted in the State's complete exclusion from its own financing.

Currently, the most important economic groups managing the monetary and institutional frameworks of dollarization are the country's largest banks and their respective parent companies. On one hand, there is the Banco del Pichincha group, led by Fidel Egas, which manages four major banks (Banco del Pichincha, Banco Diners, Banco de Loja, and Banco Rumiñahui) and more than one hundred trusts and companies. On the other hand, the second largest banking group in the country is the Banco de Guayaquil group (Corporación MultiBG), led by Guillermo Lasso Mendoza and Danilo Carrera. According to 2020 data, the combined assets of these two groups represented 25,14% of the country's GDP that year.

While private banks manage and define the monetary framework of dollarization, importers, marketers, and distributors, on the other hand, control and manage the entire system of relative prices in the economy. These include economic groups such as the La Favorita Group (belonging to the Wright family), the Eljuri Group (belonging to the family of the same name), the Corporación El Rosado Group (belonging to the Czarninski family), and the Gerardo Ortiz e Hijos Group, among others. Collectively, the assets of these four large economic groups reached a volume that represented 12,73% of GDP in 2020.

Since there is no state control over relative prices, these economic groups dedicated to importing, marketing and distribution have the ability to impose these prices on society and, in this way, generate income.

These two major accumulation poles – banks and importers-traders – are displacing the traditional economic power groups that, at least in the eighties and nineties of the last century, were hegemonic and based their power, instead, on agricultural exports and the ability to devalue the exchange rate to generate rents and maximize their profit.

Of course, other economic groups exist, such as transnational corporations engaged in extractive industries, or the transformation of agricultural exporters into agribusinesses or construction and service companies, pharmaceutical companies, industries, media outlets, private universities, and others. But fundamentally, the accumulation pattern and the regulatory regime are established through these monetary dynamics and the management of the price system. These definitions allow us to understand, broadly speaking, the forms of capitalist development and capital accumulation in the case of Ecuador.

Lumpen-accumulation and organized crime

Now, the concept of lumpen-accumulation, which already exists in classical political economy and was taken up by Professor André Gunder Frank to define the corrupt, corporate, and clientelistic management of capital accumulation by Latin American elites during the period of industrialization, can now help us to specify the twist in these corrupt practices towards the incorporation of organized crime as a fundamental part of the pattern of capital accumulation and the corresponding regulatory regime.

There is an important piece of information that points to the integration of organized crime as part of the accumulation regime, and that is the presence of a key figure, in this case Danilo Carrera, who allegedly acted as a direct interface between the so-called "Albanian mafia" and economic power groups, and fundamentally, the Banco de Guayaquil-Corporación MultiBG economic group, led by Guillermo Lasso Mendoza, who was also elected President of Ecuador in 2021, according to the investigation carried out by the Ecuadorian National Police in a police report called "Trojan Lion," which was the basis for the third attempt at impeachment and removal of Ecuadorian President Guillermo Lasso Mendoza by the National Assembly in 2023.

It should be remembered that to avoid this political trial and the subsequent investigation of Danilo Carrera for his links to organized crime, President Guillermo Lasso decreed the so-called "cross-death" that dissolved the Assembly and brought forward the general elections.

Therefore, if dollarization is the structuring framework of the capital accumulation pattern in Ecuador, and if the regulatory regime prevented the State from assuming a direct role in defining the monetary and institutional frameworks of dollarization as well as the system of relative prices, and if the floodgates were opened for organized crime to use the country's monetary system, with a currency as important as the American dollar, it is evident that the financial flows of organized crime became intertwined with the dollarization monetary system and that this intertwining implies an integration of organized crime with the most important structures of capital accumulation and the regulatory regime.

If this is the case, then organized crime needs not only to secure its channels with the dollarization monetary system and its institutional frameworks, but also needs spaces of political and institutional control to protect its financial resources and its business model.

I call this articulated integration of the pattern of capital accumulation and its regulatory regime with organized crime, with the connivance of the elites who granted them the political and institutional space to act. lumpen-accumulation.

In that sense, it is necessary to distinguish and separate it, at least analytically, from more traditional lumpen-accumulation behaviors that were more related to corruption and corporate and patrimonial practices, because this time the incorporation of organized crime into the patterns of
Capital accumulation and its regulatory regime require that these criminal groups enter directly into the State; that is, if the regulatory regime of capital accumulation shapes the political and institutional relations of a society and if this time the connivance of the elites allowed the entry of organized crime into the dynamics of capital accumulation, it is to be assumed that organized crime will claim for itself those forms of control of its own monetary flows from a kind of folding of the State towards the lumpen-accumulation of organized crime.

Anomie and Failed State

What does this mean? What does it entail? It means that organized crime demands that the State relinquish its monopoly on the legitimate use of force in its favor. This implies that organized crime requires anomie as a condition of possibility and a guarantee of its existence. In the anomie there social nomos (that is, laws and norms) and contractuality descends to its zero degree. Anomie causes
It not only leads to a loss of regulations governing social life but also guarantees impunity, and that is the condition for the existence of organized crime: to ensure its own impunity through direct control of the justice system and, above all, the police.

For organized crime, ensuring impunity represents one of the highest transaction costs in its business model. Putting judges, prosecutors, and police officers on their payroll is a significant expense. But they do it because they know it's part of their business model, given that they operate outside the law.

But if, due to various circumstances, they can maximize their positions within the state and expand areas of impunity at a lower cost—that is, reduce their transaction costs—then of course they will, and they do so through the use of illegitimate violence and the co-opting of the state. For organized crime, the illegitimate violence It is a praxis of its own way of understanding politics and acting on society while concomitantly resolving its problems of transaction costs and competition and collusive market agreements.

I call it as illegitimate violence This excessive violence, which involves brutality and a loss of all ethical and moral considerations, is used to generate a heuristic of terror and fear, allowing those who perpetrate illegitimate violence to maximize their power.
to intimidate their opponents, subdue society, and challenge the State's monopoly on legitimate violence.

Illegitimate violence uses terror and cruelty as a heuristic framework from which to impose its conditions on society, thereby maintaining its business models and minimizing transaction costs. The cruelty exhibited by organized crime is pure fear-based tactics. It is its way of provoking anomie and impunity. It is its way of putting society and its institutions in a bind.

Theoretically, at least, the excessive violence and brutality employed by organized crime is not necessary to maintain its business model. However, they resort to excessive violence precisely to demonstrate their capabilities and intimidate both their competitors and society as a whole. The illegitimate violence of organized crime, in effect, always stems from the logic of excess and demonstration. The most immediate interpretation and reaction to this excess is clear: fear and retreat. Faced with such violence and no possibility of defense, there is no other option. This primal fear is the most immediate tool of their power.

States generally defend themselves against this anomie and the fear heuristic of illegitimate organized crime violence through their institutions, especially their justice system and police. But if these institutions are infiltrated by organized crime, then society has no line of defense against this fear heuristic. When this happens, the social contract fails, the institutions fail, the law fails, the state fails. States become a kind of Gotham CityIn this scenario, the last line of defense lies not in the institutions that have been infiltrated and co-opted by organized crime, but in a factor external to them. Hollywood typically represents this in superheroes.

A failed state is created because this time the state cannot exercise its legitimate monopoly on violence and resolve social conflict within the framework of law and institutions. Organized crime is challenging this legitimate monopoly on violence, and the state cannot defend its society because the last line of defense between society and organized crime—namely, the justice system and the police—has been infiltrated and co-opted by organized crime.

How did we get there? How did lumpen-accumulation also implicate the failed state? Why was it so easy for organized crime to infiltrate the state and cause the collapse of institutions? Because lumpen-accumulation coincided with another related process: the IMF and World Bank's fiscal consolidation and structural reform program.

Failed state and neoliberalism

In March 2019, there was no macroeconomic reason for Ecuador to sign an economic program with the IMF under the name of the Extended Fund Facility. All of the country's economic indicators were relatively positive: economic growth, low levels of public debt, low inflation, low unemployment, and declining poverty rates, among others. However, the IMF and the elites decided it was time to begin a harsh adjustment program with a broad package of structural reforms.

Public investment was effectively wiped clean. Aggressive budget cuts were implemented in key areas such as health, education, social inclusion, and the administration of justice. Subsidies were eliminated, and attempts were made to bring gasoline prices in line with international levels, in a country that produces both oil and gasoline. There was an attempt to erase all labor rights and eliminate workers' rights altogether under the pretext of competitiveness.

Along these lines, public companies were eliminated; for example, Ecuador is one of the few countries in the world that does not have a public postal service. Processes for the privatization of social security were also initiated, among other measures.

The structural reforms imposed by the IMF and the World Bank altered the Constitution without complying with the established protocols and norms. The independence and autonomy of the Central Bank were approved in clear contradiction with express provisions of the Constitution that prohibited it. The Central Bank was prevented from acquiring bonds issued by the central government. The autonomy of public enterprises, social security, and decentralized autonomous governments was affected. International reserves were altered to make them guarantees for deposits and transfers in private banks. The public procurement process was manipulated to transform it into a true [unclear - possibly "de facto"].
viacrucis, and thus avoid all fiscal expenditure. In short, it was an intervention in the entire institutional structure of the State, carried out against the Constitution and the entire legal framework of the country. A kind of parallel reality existed between what the Constitution, the legal framework, and the existing institutional architecture established, and the impositions of the IMF and the World Bank that were...
contradiction of that existing legal and institutional order.

This contradiction led to a clash that weakened institutions. In a short time, existing institutions could no longer fulfill their legal obligations because they lacked the resources and because new regulations contradicted their practices. The social and economic decline was evident. Unemployment rose, and with it, poverty. The economy entered a recession. Institutions began to collapse. The justice system was left with minimal resources. The prison rehabilitation system, for example, had to drastically reduce the number of prison guards and suspended all social rehabilitation programs. The customs system reduced its control personnel to a minimum because fiscal austerity policies forced it to do so, leading to a surge in smuggling and turning the country into a safe haven for drug exports. Radar systems designed to prevent the use of clandestine airstrips for smuggling and drug trafficking were dismantled. Several security investment projects were reduced to a minimum and eliminated.
citizen participation by the national police, among other aspects.

Society rebelled against this recessionary and impoverishing program. The social mobilizations were powerful in October 2019 and June 2022, but this did not lead the elites to alter the neoliberal course they had adopted. During the period 2019-2023, they intensified the economic adjustment and strictly adhered to all the conditions imposed by the IMF and the World Bank.

It was the perfect scenario for lumpen accumulation and its escalation through the heuristic of fear. This time, not only did they have a direct gateway to political power thanks to Danilo Carrera and Guillermo Lasso, but the State could no longer confront them because austerity policies had stripped institutions of the resources to do so. Public institutions were being demolished at an ever-increasing pace, and society was subjected to a radical structural adjustment program that left it defenseless and weak.

The IMF and the World Bank weakened the state amidst the lumpen accumulation and allowed organized crime to co-opt the line of defense that society had to protect itself from this illegitimate violence. They acted together and in a synchronized manner in the dismantling of the state.

The first signs that the country was entering a new phase, one that warranted radical state intervention to contain organized crime violence, were the first prison massacres that occurred during the transition between the governments of Lenin Moreno and Guillermo Lasso in 2021-2022. These prison massacres were the way in which disputes between different organized crime groups were resolved through illegitimate violence and the heuristic of terror, but they were already a warning of what was to come for society.

In that situation, the State lacked the financial and institutional resources to resolve these conflicts because the IMF had tied its hands. Economic resources existed, but it was impossible to spend them because the IMF had designed a scheme that generated forced fiscal savings to bolster international reserves, which, in turn, served as a buffer for
The private banks. When those prison massacres occurred and the threat to all of society that would result from not resolving them in time was evident, the government of Guillermo Lasso looked the other way and continued with the program of adjustment, privatization and dismantling of public institutions, and Danilo Carrera, according to information from the Ecuadorian police, strengthened his ties and his business dealings with organized crime.

The government of Lenin Moreno at the time, and later that of Guillermo Lasso, with their negligence and indifference, demonstrated that they had no intention of resolving these problems between mafias and organized crime groups because, on the one hand, they were committed to the IMF and the World Bank in austerity policies that, in the long run, strengthened the position of the most powerful economic groups.
On the one hand, hegemonic forces were in place; and on the other, during Guillermo Lasso's administration, the floodgates had been opened for organized crime to infiltrate the state. It was in this way that, in a short time, the country became a failed state.

Without the IMF and the World Bank and the economic austerity program, the country might have had more room to maneuver in curbing organized crime and strengthening its defenses. But the moment the elites become entangled with organized crime, then society is at risk.

This was evident from the moment Guillermo Lasso came to power in 2021. Barely elected, the Assembly attempted to impeach him through a political trial that demonstrated his involvement in trusts in tax havens, something punishable by law with removal from office. However, this impeachment attempt failed, due in part to the collusion of various political sectors, including the entrenched political representation within the Pachakutik movement, which had been co-opted by the government, the traditional Christian Democratic Party, the Democratic Left, and others.

The following year, 2022, another attempt was made to remove Guillermo Lasso from office, but it too failed due to the convergence of various sectors in his defense. One of the key figures in defending Guillermo Lasso, who was able to block the attempts to remove him, was the then-President of the National Assembly's Oversight Committee, Fernando Villavicencio.

A provisional conclusion

Lumpen accumulation may be a routine process, but in the case of Ecuador, it reaches its peak because it allows for the integration of organized crime within the state. However, capital accumulation is a dialectical process; that is, it expresses and resolves the historical contradictions of a society. There is no capital accumulation, nor any regime regulating this accumulation, without class struggle, and class struggle is the form in which political conflict is expressed in modern societies. Thanks to the Marxist philosopher Antonio Gramsci, we now know that one of the central elements of this class struggle and this regime regulating accumulation is hegemony, understood as the capacity to create symbolic universes about the structure of the world and reality in order to enable political domination with the consent of the exploited.

However, in Ecuador, the main antagonist of capital accumulation is not the working class, but rather the social and popular movement whose center of gravity lies in the Indigenous movement. Thanks to the Indigenous movement, some of the most aggressive aspects of capital accumulation and its regulatory regime have been curbed, such as the privatization of social security, the elimination of fuel subsidies, and the dismantling of key institutions, among others. Thanks also to the Indigenous movement, constitutional and legal frameworks have been created that protect society from the consequences of the regulatory regime of capital accumulation and neoliberalism.

However, it can be observed that, perhaps paradoxically, the deconstruction of the mobilization capacities of social and popular movements occurs and intensifies when society enters electoral periods. Instead of these election periods becoming strategic opportunities for social struggle to advance and for halting this drift toward lumpen accumulation, the opposite happens. Elections pit the social and popular movement against itself and prevent it from becoming a counter-hegemonic force at that time.

Thus, elections have the virtue of momentarily suspending the class struggle and creating political scenarios that circumvent the most important and strategic definitions regarding the trajectories of capital accumulation. This does not disqualify elections, but rather the inability of social and popular movements to transform them into mechanisms of counter-hegemony and defense of society. In any case, the government of Guillermo Lasso, cornered by the weight of the accusations against him based on evidence of lumpen-accumulation, and facing imminent removal from office by the National Assembly, proceeded to dissolve the Assembly and call for early general elections to complete his term.

But this political maneuver does not resolve the serious problems of lumpen-accumulation and the failed state. One of the most important political tasks of the social and popular movement should be, precisely, the reconstruction of the state and the defense of society. For this, the social movement needs to speak out and articulate a social struggle against the IMF's economic program. It must include in the political debate the fact that it was precisely the economic conditionalities of the IMF and the World Bank that led to the failed state, and that the reconstruction of the state implies, presupposes, and demands the strengthening of institutions, including the justice system and the police, as ways to restore those lines of defense for society that neoliberalism undermined.

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