Mexico has two economies that almost don’t communicate with each other (at least in terms of what they produce), a circumstance that does not predict a happy ending. The dual economy does nothing but wreak havoc and, the longer their integration is postponed, the worse the impact will be on employment and the well-being of millions of families. The dilemma is evident, but the risks of not acting are growing, above all in that the digital economy flattens everything in its path that existed previously.
The dilemma is not simple: on the one hand, diverse mechanisms of protection and subsidy have allowed the old manufacturing plant, the one installed from the forties on, to continue to plod on. Same is true for the informal economy, that keeps on expanding, mostly the result of a policy of protection, more social than economic, that has the effect of hindering adaptation and thus growth. On the other hand, the export industry competes successfully with the best in the world. The former produces, a rough estimate, 20% of the industrial GDP, but employs 80% of the sector’s workforce. The opposite occurs with the export industry. Although there doubtlessly is corruption in the assignment of subsidies and the determination of duties that (at least partially) isolate the old industry from competition via imports, the reason why this schema is preserved has to do with the perceived risk that would derive from the potential loss of jobs and, needless to add, to the relationships of dependency that this creates and politicians of all breeds happily exploit.
The dilemma is not the exception in today’s world. The digital revolution entails a radical transformation of the labor market: in developing countries there are entire professions that have been wiped off the map, only to be replaced by computers. According to two Oxford professors*, 47% of existing jobs could eventually become automated in the next two decades. Although in the short term Mexico could “snap up” some of these jobs as it has already been doing, sooner or later, inexorably, automation will affect us.
If one reads the history of the Industrial Revolution at the beginning of the XIX Century, what’s striking is how violent, in terms of economic dislocation, transition of agriculture and manual activities was to the automation inherent in the introduction of steam engines**. Two centuries later, it is easy to minimize the depth of the change that took place at that time but everything indicates that what happened then was nothing compared with what’s to come. While I have no doubt that in the long run (nearly) everyone will come out a winner, there’s no way to ignore two evident facts: the disappearance of a multiplicity of fields of work and the snail’s pace at which new opportunities will begin to be engendered. That contrast is the one that is giving rise to enormous apprehension in governments worldwide, but this doesn’t change the fact that, sometime or other, everything will end up adjusting.
It appears to me that there are two key questions: on the one hand, whether it’s possible to fend off the blow that is drawing near and, on the other, whether the types of measures that have been employed in Mexico (subsidies and duties) are the adequate ones.
The first thing that appears evident is that the torrent of change that is approaching will be brutal. Beyond the scenarios that distinct scholars discern, what has already begun to occur in diverse professional activities (accountants, lawyers, some branches of medicine, cashiers, etc.) suggests that the dislocation that will take place in all productive activities will be massive. The true choice eventually becomes attempting to contain the torrential waters that will come or preparing the country and the population to navigate these the best way possible.
There seem to be three phases, at least in the conceptual plan, that have to be sorted out: the first is the automation of activities and processes; second, the growing complexity of the processes and the consequent demand for personnel, at all levels, with exceptional degrees of preparation and skill; and third, the disappearance of whole segments of activities and professions in which there will be no more sources of employment. Each of these phases entails its own consequences, but what is evident is that this requires a clear-minded public policy in place, very focused on giving all Mexicans the opportunity to “make it” in this new global stage.
According to the literature, it is clear that thinking is required with regard to a radical change of strategy, all of this oriented toward achieving quantum leaps in the growth of productivity. For that it will be imperative to see to the productive chains, the market structure, the infrastructure (that of security the well as the patrimonial and physical) and education, above all technical: skills based. The point is to arrive at a generalization of the growth of productivity and not, as it is today, where there are areas that experience huge growth of this with others that subtract from it. Today, as in the first decades of the Industrial Revolution, the benefits of the growth of productivity are consolidated in a few enterprises and regions of the country.
The risk of mass unemployment is evidently the greatest concern. Although history demonstrates that technological change, disruptive as it may be, always generates new opportunities, I have no doubt that there can be moments (on occasion lengthy ones) of dislocation. In the end, the dilemma for the government lies between persisting in, ostrich-like, hiding its head in the sand or beginning to articulate a strategy that makes the next era of growth possible. Reforms are important, but execution is everything. The latter includes the need to anticipate and to foresee, not the most sterling of our qualities.
**A great book on this is The Second Machine Age.