Three expressions sum up the disagreement characterizing the country’s economy at present and that explain the paralysis (stagnation with a strong propensity toward recession), lack of progress and bad prospects. Presidential rhetoric will camouflage the problematic with grandiose phrases such as “this is not a change of government, this is a change of regime,” “the fourth transformation” or “the poor come first” when, in reality, what is taking place is swift deterioration.
Some of the phrases that have become prototypes of the AMLO government are revealing of its world vision, but especially its clinging to a specific era: “hugs not bullets” and “I have other data” reflect a way of conducting politics and confronting the issues that the country is facing, but none is more indicative than the one the President has expressed numerous times: that “the economy should be subordinated to political decisions.” I do not know of, nor have I observed any politician throughout time, who does not desire the latter: not so many decades ago, governments effectively controlled and managed the principal variables that make the economy function, but that scenario disappeared in the last third of the past century not because of the will of someone in particular, but due to technological change and the sudden emergence of instant communications that has overtaken the world. It is not by chance that, since that fact, there is virtually no country on the planet –including Cuba, North Korea and Vietnam- that is not geared to attracting private investment, doing this not for pleasure but because there is no choice.
I see three key issues that explain the paralysis Mexico is experiencing in economic matters that derive from the latter. First, the nature of the economic world in the XXI century and why it clashes with the governmental strategy; second, the importance of procedures and, more so than anything else, of trust; and, third, the cesspool laid bare by the President himself.
In terms of the economic world, the XXI century reality bears no similarity to that of the mid-XX century in that the government maintained a closed and protected economy. In that era, the government subordinated economic decisions to those of politics, but that disappeared because of the way in which the world’s ways of producing evolved (the so-called globalization and supply chains) and, particularly, due to the ubiquity and availability of information outside of governmental control. Once the economic world was liberalized, it was no longer under the control of governments and there’s no going back, unless there’s a disposition to generate a depression.
From the latter, there derives another fundamental change in the political relations surrounding the economy: from the moment that controls in matters of investment, exports and imports disappeared, the government -all governments- had no greater alternative than that of dedicating itself to convincing their citizens as well as the community of investors, businesses and financiers, both domestic as well as international, of the good of their projects. Once the world became the prime space of economic action, all governments competed for the same investment and the only way to capture it is to create conditions that will make it attractive, together with sources of certainty that generate trust in them. The decision to save and invest passed from the governments to the citizens and investors and there is nothing in this world, and even less so the pretension of a “change in regime,” that will change that. Exactly the same transformation took place in the political arena, i.e., the INE (National Electoral Institute) and the Electoral Tribunal and the Supreme Court.
Finally, the President opened a sewer of which he is not yet aware but that radically affects the present moment. For many years, one government after another constructed institutional mechanisms designed to confer certainty on economic agents and on the society in general. Thus were born the autonomous institutions, each in pursuit of a specific objective: access to information (National Transparency Institute, INAI); regulation of the energy market (CRE), and the National Hydrocarbon Commission, (CNH); the Human Rights Commission (CNDH); trust in the electoral process and regulation of political parties (INE and the Electoral Tribunal); and the resolution of disputes among the branches of government (the Supreme Court).
Today we know, in retrospect, that the validity and transcendence of these institutions was due not to the legitimacy that they enjoyed, but instead to the respect that successive presidents and administrations allocated to them. The easiness with which the President has neutralized or eliminated these institutions illustrates their intrinsic weakness. What the President does not recognize is that, on implicitly declaring “the king has no clothes on,” he did away with key wellsprings of certainty for the citizenry and for investors and savers. Once exposed, that sewer has become Pandora’s Box.
The problem now is to regain the trust that those entities engendered, a task complex in itself, but impossible for a government whose raison d’être is to deny that the problem exists or that it is a valid one. The economic-growth crisis and the way in which the COVID-19 will likely deepen it will force the government to act. The question is whether he’ll act in a constructive or in an authoritarian mode.