In ¿Y ahora que? México ante el 2018.
Penguin Random House
We have been destined to live in a complicated world and in a stage of history in which complexity and change, within and outside of Mexico, are the determinant characteristics of well-being and development.
The pace of change could hardly be exaggerated: technology has transformed not only the way of producing, communicating among ourselves, and interacting, but also but also our way of life. At the same time, the geopolitical changes that we have observed during the last decades –from the fall of the Berlin Wall to the “Great Recession” of 2009 and moving right along past the 9/11 attacks on the U.S., the factotum of world power and our neighbor- have created very distinct surroundings from those that Mexico experienced in the second half of the XX century.
Now that the country finds itself immersed in a new electoral contest, it is imperative to analyze how to take advantage of the current world situation to advance Mexico’s development. What is evident is that, despite the evolving international scenario, the country’s main challenges are to be encountered in its heart of hearts.
Since at least 1815, the world powers of each epoch have attempted to build situations of stability based on a balance of power be it at the world or regional level. For Mexico, the world order emerging from the Second World War allowed it to accelerate its economic growth rate, opening new opportunities for development. This growth generated a strong middle class, enormous urban expansion and an industry that, over time, has become one of the world’s manufacturing powers, above all in the automotive, aviation and electronic sectors. Liberalization of the economy from the eighties on conferred new life on the nation’s economic activity and established the bases for potential development, only to be limited by a complex network of regulations that have made the process of liberalization unequal, thus forestalling the integral progress of the country.
The changes undergone during the post-war order have affected Mexico’s way of functioning, the region in which we live and the world in general. The institutions, national as well as international, have proven inefficient in dealing with the challenges that come to present themselves, engendering recurrent crises and permanent instability both in the internal and external ambit.
At the same time, the proliferation of disruptive technologies has modified the way that societies relate to each other, altering the old forms of governing, converting the citizen into the heart of the economic development process. Old norms and criteria no longer work and, in general terms, a novel manner of visualizing the future has not surfaced.
That is, there are no longer across-the-board rules but rather perennial processes of change, which furnish opportunities as well as risks.
There are contradictions that have become the norm. Hyper-productive companies and employees on the one hand vs. enterprises that go bankrupt. Burgeoning incomes for some segments of the population but declining and uncertain ones for others. Fewer costs for accessing markets, but a greater demand of human capital for achieving success in these markets. Greater income inequality vs. greater chances for development. Obsolete political systems in the face of a citizenry with more information than their governments and a greater capacity of action.
The new norm comprises polarization on all fronts, explaining the electoral phenomena that have materialized worldwide.
For Mexico, the victory of President Donald Trump in the U.S. represents an additional obstacle, since the main motor of economic growth is that of the U.S., in terms of the exportation of industrial goods (including the agro industry) as well as the remittances that Mexican residents in that nation send to their relatives in Mexico.
What is true is that the country evolved during these decades without a socially accepted flight plan. The structural reforms have created new opportunities, opened new markets and spawned previously inconceivable sources of income. In parallel, these reforms have been partial, in many cases insufficient and, in practically all cases, are curbed by the objective to not affect the interests of the traditional political system. Thus it is that, despite the reforms, many of these transcendental, Mexico is not prepared to cope successfully with the hazards of the metamorphosing international scene and the demand for skills that the economy demands in this knowledge era.
The segment of society that has become modernized enjoys opportunities that were never before possible and is well equipped to seize them, but the sector left behind not only does not enjoy those opportunities, but there is not even a plan to help them join the modern economy and society. Perhaps there is no better evidence of the political backlogs than the situation in which the country currently finds itself: Mexico has fallen behind because the political system has closed itself off and has become a hindrance to development.
Past and future
Mexico has been confronting the past with the future for decades, without being able to break through the former to decidedly embrace the latter. The evidence of this is overwhelming and particularly visible in the interminable collection of governmental actions oriented toward pretending to change without desiring any change whatsoever.
In the two ambits where there has been politico-governmental activism in recent decades, -electoral and economic and trade- the country has been distinguished by massive reforms with relatively poor results, although there are regions that grow at a nearly Asiatic pace.
I doubt whether there are many countries in the world that have undergone so many electoral reforms in so few years and, in spite of their having produced an extraordinarily exemplary and professional system, one that has been imitated around the world, we continue to experience uncontainable electoral disputes and of credibility, every time elections are held.
In the economy, the country has strived to orchestrate commercial agreements all around the world and has carried out ambitious reforms that never come to full fruition or have not been fully implemented.
It would not be an exaggeration to state that, thanks to NAFTA and the job opportunities that the U.S. economy has contributed for decades, the Mexican political class has not had to reorder their customs or cut down on their privileges. While the economic performance has been, to express it mildly, mediocre, it has been sufficient to keep the ship afloat.
But Mexico has advanced much more than it would appear at first glance: if one looks back, the magnitude of the change is impacting. Although our way of advancing is peculiar (two steps forward and at least one step back), the advance is real and can be observed in the powerful industry that has mushroomed, in the urban and rural middle class, in international commerce and, by and large, in the improvement of human development indexes. Mexico has changed a great deal and, as a rule, for the good, but that change has been reluctant and frequently incorporated begrudgingly.
The reform process began in the eighties in a radically distinct international environment from that of the present. While we did not know it then, the Cold War was about to end and globalization unleashed uncontrollable energies that few understood at the time. Today the worldwide trend is toward growing disorder with strong centrifugal forces. The crisis, essentially fiscal, and the technological change undergone in the last years, has led innumerable countries to look inwardly.
None of that, however, changes two basic factors: one, that technology presses on incessantly and no one can detach himself from it or its consequences. The other factor is that, although subject to governmental norms and regulations that have very profoundly altered the manner of production, consumption and living, the disappearance of globalization is unthinkable.
Within this context, Mexico has no alternative other than to move proactively in order to prepare its population for the upsurge of growth to come and that will be hallmarked by elements for which we are hardly prepared or, as a society, willing.
It seems clear that technology will continue to advance, that there are no longer mass markets but instead specialized (and profitable) niches and that the digital revolution, which favors knowledge and creativity, will dominate value generation and production in the future. These realities situate us face to face with Mexico’s central challenge: how to reach the population that has not been able to access opportunities to benefit itself in the new economic, technological and international setting.
The challenge that this entails is vast because it involves processes that, by definition, take decades to consolidate, implying that every day lost postpones the opportunity, something of great concern in view of the ongoing demographic transition: if today’s young people are not incorporated into the knowledge economy, Mexico will end up a country of impoverished old people in a few decades.
Mexico more or less functioned in past decades because NAFTA supplied a source of indisputable certainty, while the U.S. job market diffused social pressure. Whatever happens in terms of the U.S. in the upcoming months (and I believe it will be benign), imported confidence will no longer be reliable.
Now everyone knows that this can disappear and that gives rise to a moment of extreme risk, but also of opportunity: the risk of destroying all that exists (without the penalties inherent in NAFTA) and the opportunity to confront our challenges to build sources of certainty founded on internal political arrangements.
It is important to recapitulate the reason why NAFTA has been transcendental in creating a modern economy. NAFTA was the culmination of a process of change that began in a debate within the government in the second half of the sixties and that, in the seventies, ushered the country to the brink of bankruptcy.
The quandary was whether to open up the economy or maintain it protected, to draw closer to the U.S. or remain distant from it, privilege the consumer or the producer, more government or less government in individual and entrepreneurial decision making.
That is, a debate ensued on the way that we Mexicans should conduct ourselves to achieve development.
In the seventies, the decision had been more government, more spending and more autarchy, and the result was the 1976 and 1982 financial crises. In the mid-eighties, in a milieu of quasi-hyperinflation, it was decided to stabilize the economy and initiate a sinuous process of economic liberalization.
Hundreds of businesses were privatized, the public expenditure was rationalized, the foreign debt was renegotiated and imports were liberalized. The wind change was radical; nonetheless, the much-awaited growth of private investment did not materialize. It was expected that the change in economic strategy would attract new, productive investment likely to raise the economy’s growth rate, thus the growth of employment and incomes.
In the end, NAFTA was the instrument that triggered private investment and, with that, the revolution in industry and exports. But NAFTA was much more than a commercial and investment agreement: it was a window of hope and opportunity.
For the man in the street in Mexico, this became the possibility of constructing a modern country, a society based on the Rule of Law and, above all, an open road to development.
This may explain the strange combination of perceptions regarding Trump in Mexico: on the one hand, disdain for the person, but not, broadly speaking, rampant anti-Americanism among the population. On the other hand, a terrible uneasiness: as if the dream of development was now standing in the pillory.
In “technical” terms, NAFTA complied extensively with its commitment: it has facilitated the growth of productive investment, generated a new industrial sector, impressive export prowess and has afforded investors certainty with respect to the “rules of the game.” Indirectly it also forged a sense of clarity in terms of the future, even for those not participating directly in NAFTA-linked activities. In a word, NAFTA became a portal of access to the modern world. The menace that Trump has imposed upon it gives rise to a threat not only to investment, but also to the vision of the future that the majority of us Mexicans share.
In its essence, NAFTA was a form of limiting the capacity of abuse from the government: on levying new game rules, it established a foundation of credibility in the development model. The effect of that vision made possible the political liberalization that followed which, although wanting, reduced the concentration of power and changed, at least an iota, the relationship of power between the citizenry and the politicians.
At the same time, a paradox allowed the politicians to continue living in their microcosm of privilege, without troubling themselves to perform the elemental functions that correspond to them, such as governing, engendering a modern educative system and guaranteeing the security of the population.
No one knows what will come to pass with NAFTA, but there is no doubt that the blow has been severe. Trump not only exposed the political vulnerabilities typifying Mexico, but he also destroyed the source of certainty that this “ticket to modernity” inherent in NAFTA entailed. While we might end up with a transformed and modernized NAFTA, no one can take away the blow already struck. The perceptions -and, along with that, the hopes and certainties- will not be the same any longer.
It is not by chance that proposals are reappearing to go back to festering within ourselves, take revenge on the U.S. and return to the efficient (?) state of yesteryear. Those recommending the latter do not understand that NAFTA was much more than an economic tool of the trade: it was the golden opportunity for a new and clear cut future.
Mexico’s true dilemma is the same as fifty years ago, but it now looms unavoidable. The country requires a thorough political transformation founded on an effectively represented population, a system of government that responds to it and a government whose purpose comprises that absentee verb: to govern.
The geopolitical challenge of Mexico is internal
The nation’s priority must be development. Our problem is that we have not brought the revolution that commenced in the eighties to a close. Two types of firms coexist –but do not communicate with each other- in today’s Mexico: those that are unviable enterprises and the most productive and successful of enterprises to be found in the globalized economy. The fusion of these has not been a very happy one because it has curtailed the growth capacity of the most modern of the latter, while preserving an old industry with no capacity whatsoever to compete. The predicament is how to correct these gaps. The tessitura is obvious: proceed to development or maintain the mediocrity.
A quarter of a century after NAFTA started it is evident that in politics (as in economic policy) long-term investment is the one that pays dividends. Many of the political avatars of recent years, and not a few of our difficulties, have been the product of short-term gambles, which never turned out well. NAFTA is the best example of that the long term is what yields results. Therefore, it is crucial to recognize that the “philosophy” that shapes it is what is imperative to promote: clear rules, mechanisms for adherence to them and no political interference.
What to do?
The big question is how to focus ourselves on the future? The country is saturated with diagnoses, some good and others bad, all intent upon slashing open a path and demolishing the obstructions to everyday life. It is evident that Mexico needs to refocus its efforts on countless areas, from the educative to the infrastructure, passing through the reform of which no one speaks but that is the most crucial, that of the government.
Nevertheless, the lesson of NAFTA and that provided by countries that have in effect achieved transforming themselves (including Spain, Chile, Korea, Taiwan, Singapore and China) is a very simple one: development is not a question of specific policies, albeit these would be required, but rather of vision and focus.
Essentially, the dilemma is: go backward or go forward. The dilemma is whether to attempt to solve all the problems from the government’s uppermost level: creating conditions for development to be possible, establishing general conditions and attending to key development problems, such as education and reforming, once and for all, the system of government at the federal level as well as its relationships with the states and municipalities.
The so called “developmentalist” projects of the XX century were centered on a “strong” government and control of the population and of the productive apparatus. The economy grew swiftly in that era (although no more than other similar economies, such as Brazil or Argentina).
Today the key lies in the form of government, very different from that geared to control which characterized the past and that still inspires many of our politicians. Governing does not consist of dictating preferences from above, but of solving problems, bringing about conditions for the progress and prosperity of the citizens. In a word, making it possible for the people to live a better life.
Mexico’s political system was created one hundred years ago to stabilize the country and control the population. Today, one hundred million Mexicans later, that system is totally obsolete and patching it up –like the electoral repairs of recent decades- is no longer sufficient. Mexico has to build a new system of government that confers certainty and obliges those in government to govern and to serve the citizen.
The many reforms will serve for nothing if there is not an ambience conducive for these to advance, and promotion of the internal market will in turn serve for naught if productivity does not escalate. Reforms are mere devices; without a strategy to articulate the reforms, development is impossible.
The two mainstays of development in the last decades, migration and NAFTA, will not bear the same fruits anymore in the future. Migration has changed in part due to that the U.S. workforce demand has diminished, but also because the demographic curve in Mexico has been transformed; in addition, the growing difficulties involved in crossing the border undeniably discourage migration.
For its part, the transcendence of NAFTA has diminished radically: with Trump the notion has disappeared that NAFTA is untouchable and that has caused investment to collapse. Unless we construct internal sources of certainty, NAFTA will no longer be the growth engine that it has been to date. Without investment, the economy will not grow however many reforms are produced or however much the internal market is highlighted. The only thing left as a possibility is the creation of conditions that render development feasible and that is nothing other than heightening productivity.
How can that be done? Productivity is the result of a better use of human and technological resources and that requires an educative system that permits the development of knowledge, skills and capacities for the productive process; that is, education must cease to be at the service of the political control that the unions exercise for their own benefit and must concentrate on the development of human capital to prepare individuals for a productive and successful life.
The same is valid for the infrastructure, for communications, for the way the bureaucracy treats the citizenry and, of course, for the judiciary. The point is that development is not free of charge nor can it be imposed by decree: it is the result of the existence of an environment that makes it possible to raise productivity and everything should be devoted to that.
Procuring the ambience of certainty that development requires implies abandoning the arbitrary nature of the governmental function, i.e., a political revolution.
Our system of government has made development impossible because it is designed for a few to control the key processes that generate power and privilege, as in the case of education. As long as that does not change, the economy will remain in stagnation, whether the project is one of great reforms or of the internal market. It’s all the same.
What has changed is the environment: the subterfuges devised to avoid decisive actions toward development and the future have vanished; we either do the job or stay stuck.
“The best way to predict the future, wrote Peter Drucker, is to create it.”
- With or without NAFTA, Mexico must redefine its relationship with the U.S., which implies internal decisions and global negotiation of the interaction and of the neighborhood.
- It is urgent for Mexico to find internal sources of certainty, that is, it must make its own the objective of institutionalizing Mexican politics, constructing checks and balances and enforcing compliance with the law.
- Mexico should take leave of the XX century and integrally embrace the future, which implies building the institutions and the forms of interaction of a modern country and one that is desirous of being successful.
*from ¿y ahora qué? México ante el 2018, Penguin Random House.