Another Great Adjustment

Luis Rubio

In one of the great gaffs of the Second World War, France assumed that, when a new confrontation would come about, Germany would repeat the invasion pattern of 1914. France prepared with that logic to respond to the failures of the prior confrontation, and ended being invaded. I ask myself whether our focus -of Mexico and of our two North American partners- could be sinking into something similar.

Mexico has become a manufacturing power on a worldwide scale, a circumstance that has permitted the reduction, though not the elimination, of the restrictions that historically had imposed the balance of payments upon us and that were the last cause of many of the financial crises and debacles of the past decades.  Exports have changed the face of Mexico’s economy and have created a powerful growth engine, well-paying jobs and opportunities for development. Those exports, the product of the change of course that the country took in its economy in the eighties and that was consolidated with the North American Free Trade Agreement (NAFTA), have alleviated some of our problems, but this obviously comprised only one element among many that should be attended to in the national panorama.

The strategy of economic liberalization, insertion into the commercial, technological and financial circuits of the world –all of this discernible in the exports- continues in such force today as thirty years ago. Many of the wealthiest nations on the planet have been following that strategy, achieving enormous stability and progress, the latter not limited to nation-states, such as Hong Kong and Singapore, nations totally incorporated into those circuits, but instead including countries like Chile, Korea and Taiwan, in addition to the more developed countries. From this perspective, it is evident that what is required is greater and better incorporation into those circuits and not retraction from them. That is to say, our challenge is to be found in the enlargement of the framework in which the modern economy of the country functions: incorporating the part lagging behind, and those who have not had the opportunity to break with the traditional forms of producing, into the successful part.

The challenge is not merely economic or regulatory, although there is much to solve on those planes, but it also encompasses a massive complexity of situations in ambits such as the educative, the infrastructure and, without doubt, the political. Oaxaca and Chiapas have not fallen behind because of lack of infrastructure and the old Mexican industry that continues to lag has a plethora of political contracts that protect it, thus condemning it.  As in so many other milieus of national life, our main obstacles are internal and, in nearly all cases, perfectly visible and explainable in the form of special interests, benefits and privileges.

However, I fear that the challenge is greater and more complex than what these matters involve. A recent visit to a factory in the northern Mexico led me to reflect on the more generalized version of the triumph of Trump a year ago: according to that narrative, the lower manpower costs in places such as China and Mexico have displaced U.S. manpower. That would imply, to be consequential, that job losses in states like Michigan and Ohio would translate into job wins in other latitudes. Some of that has doubtlessly occurred, but what I observed in the plant that I visited was an impressive proliferation of huge robots that are operated by a handful of workers. The hundreds of thousands of jobs that have been lost in North American industrial regions in recent decades are not in Mexico. No way would the ten or fifteen employees that I saw have had a cascade effect the size of which occurred in the U.S. for the Democratic candidate to have lost in traditionally industrial states.

My point is that the great challenge does not lie in the manufacturing industry in which Mexicans have placed their hopes but rather in that this industry is not going to be the solution to the employment problem, as it has not been in traditionally industrial countries for some time. Manufacturing plants and exports will continue to grow, but not so employment, a distinct affair. That is, the technological change is dragging Mexican employment down as it did before with European and American employment. With things going this way, the question is what are we doing in this respect and, in any case, what should be included in the NAFTA negotiations in order for the region’s three nations to adapt with haste to this new era, without negative political consequences for Mexico.

The digital revolution is imposing itself on Mexico’s economy in unanticipated ways with a population that is not prepared to assume it, to benefit from it and to come out on top.  In contrast to former revolutions, such as the Industrial Revolution, the capacity for adaptation in the digital era entails a new focus not only of the educative and the health apparatus, denominated human capital, but also of the manner in which the person is conceived in political terms. Industrial-era workers were organized into unions, citizens of the digital era employ social networks and are highly mobile.