Luis Rubio
The story goes that Isaac Newton developed the theory of gravity when an apple fell on his head, and he asked why it fell rather than flew. Although fictitious, the anecdote serves to think about the way Mexico could progress and prosper or retrogress even further. President Sheinbaum has set clear goals for her government that involve raising the rate of economic growth in an inclusive manner, for which she has vowed not only to preserve but to increase the social programs. The question that seems crucial to me is: What would be necessary to make both objectives compatible?
The starting point must be that it is impossible to defy gravity, that is, it is not possible to pursue contradictory objectives in permanent fashion. The former government found that economic growth and the distribution of social benefits were incompatible, leading to its abandonment of the promotion of growth, along the way running out of all the resources, funds and instruments that the government habitually counted on to advance economic development. In plain language, the distributive proposal is praiseworthy (and necessary), but only sustainable within the context of a rapidly growing economy and one that systematically raises its rate of labor productivity. Without these two conditions, distribution is impossible.
The President’s priorities with respect to the government’s role in guiding the economy are clear enough, but not everything depends on her will, much less so in today’s era of interconnectedness. The last few decades have yielded convincing lessons on the failed attempts to advance economic progress. Here are my learnings and observations about this.
- In effect, as the President says, entrepreneurs only look out for their own interests. That is their virtue and their function. The objective should be to achieve that millions of Mexicans become entrepreneurs for them to generate wealth, jobs and opportunities. The government is not there for reviling them but instead for promoting them so that they can garner ever greater benefits for themselves because they are the ones who make development possible.
- The function of the government is to create conditions for the population to develop and that implies establishing clear, reliable and well-known rules of the game to which the government adheres. Among these rules there are those of raising productivity and distributing benefits so that the population progresses simultaneously. At present, the government invents rules daily, destroys those that exist, derides those who produce, and threatens to eliminate constitutional safeguards, all of which engenders a sea of uncertainty. Who is going to save, invest or produce in that context?
- China, whose example entertains such an attraction for the current administration, concentrated on two elements to achieve its impactful transformation: clear rules that were complied with and an implacable, even ruthless, dedication to eliminating obstacles to investment and economic growth. The results speak for themselves. In Mexico the government began with a judicial reform and with the creation of yet more obstacles to growth and investment. It is thus common sensical to expect that the results will not be similar to those that China achieved in the past four decades.
- All countries that have transformed themselves have followed a common rationale, that of looking toward the future, recognizing the obvious: to achieve being able to transform themselves it is necessary to stop doing what does not work. And that evidently includes not only the previous administration but also those of the past four decades. Observing the so-called Asian Tigers, and others like Spain, Chile and nations that are not so distinct from Mexico should make this more than clear.
- Another common denominator of these nations lies in the similarly ruthless search for elevating productivity. The prescriptions for this are obvious, and there is not a sole exception: infrastructure, education, health, meritocracy rather than clientelism. All that in the context of two factors: clear rules and a judiciary that settles disputes. None of these elements appear on the agenda of the government, not the present one nor the past ones.
The Mexican is extraordinarily adaptable, creative and entrepreneurial. It is enough to observe what Mexicans have achieved in the United States. The question is why the same thing does not happen in Mexico and the response is obvious: there, the rules are clear, judicial mechanisms function, and, above all, the incentives are in their totality oriented toward taking advantage of the capacities of individuals to prosper so that, all in all, the country itself comes to prosper. What a great paradox it is that Mexico is benefitted by their remittances instead of by the production occurring here in Mexico of that immense wealth and productivity!
In the last analysis, the crucial factor for development and prosperity is nothing other than the trustworthiness that a government generates not only through its programs, but also the institutions that sustain it and make it work. A country prospers to the degree that the government builds sources of trust and that these are institutionalized. Contrariwise, to the extent that everything -from the rhetoric up to the legislation and implementation of decisions- conspires against predictability, the result will be obvious and, instead of transformation, the country will end up in an involution from which it will not be able to recover.
@lrubiof