Luis Rubio

In his book The Big Short: Inside the Doomsday Machine, recently dramatized in the film of the same name, Michael Lewis describes a complex problem in an easily understandable manner. The 2008 collapse of the financial markets constituted the end of years of development of products increasingly more complex and dependent on variables that, their creators supposed, were not connected. When reality imposed itself, the result was that what under normal conditions was not linked was indeed correlated under critical conditions, magnifying the risk. The problem is that Lewis solely details, with immense grace, the symptoms; he never arrives at its ultimate causes.

The succession of events leading to the collapse, and the instruments involved, is known; however, what this and other books tend to omit is the reason for which those “infernal” instruments were designed. Decades of observing several of the most brilliant actors of the international financial sector have convinced me of two things: their extraordinary intelligence and inventiveness, on the one hand, and their conduct, neatly Pavlovian, on the other. This has to do with a combination that can be extraordinarily beneficial for economic development, but also lethal under certain circumstances. In the language of the economists, when the incentives are misaligned, the risk of mixing intelligence and creativity with perverse objectives can bring forth mammoth crises, such as that of 2008.

The heart of the matter does not lie in the facts themselves, widely recognized at present, but in the circumstances that ushered them in. What was it that prompted the development of such clearly risky products? What we all do know is that the crisis was produced because loans were granted, above all mortgages, which the banks that had supplied them later “securitized” and then resold far and wide. Under normal conditions, the families that had obtained these credits would have paid them off over decades, generating the funds for the proper functioning of the system, and the holders of the securities grounded on those properties would have earned the agreed-upon return. The problem was that many of the families awarded the credit, as ridiculed by Lewis’ book and film, abandoned their mortgaged houses, severing the virtuous circle. What Lewis never provides is an explanation for what brought about the granting of loans to persons plainly without the ability to pay.

Mervyn King,an ex-Governor of the Bank of England, describes the other side of the phenomenon:instead of heroic and self-justifying scenes, typical of this types of books (like Ben Bernanke’s, Chairman of the Federal Reserve System’s Board of Governors at crucial moments), King approaches the transcendental: what occurred for the financial sector to become the Achilles heel of the world economy?

The title of Mervyn King’s book says a lot: The End of Alchemy. King dissects the riddle at the crux of the financial system from ancient times: the fallacy residing in accepting deposits from the public whose payment can be exacted at any time vs. the granting of long-term credit. This, of course, is nothing new: it is the lifeblood of the financial system. King takes it upon himself to spell out the way that bankers have devised complex mechanisms that do not ensure sufficient funds in case of an excessive short-term demand and the risks inherent in those mechanisms.

The deeper issue, argues King, is the innate risk of a financial system that confronts increasingly intricate problems and challenges to financial stability vis-à-vis the operators of the system, gifted individuals without the least incentive to be cautious or to safeguard the stability of the system. That is, King, as an ex-Governor of one of the most important central banks in the world, sees the problem that appears when the incentives are in misalignment from a regulator’s perspective.

At the core of the collapse of 2008 is found political pressure that the financiers dealt with in a highly creative manner but that was at the same time scandalous and riddled with vices. The politicians, especially a U.S. Senator and a Congressperson, had for years pressured the banks to lend money to poor families to purchase a home. Canny, the financiers designed a type of mortgage that entailed minimal payments and no interest charges for three or four years, with these payments to skyrocket dramatically at a later date. Those given credit lived in the houses as long as payment was feasible and abandoned them immediately afterward: utterly rational actors. On their part, the financiers had satisfied the political requisite, securing their bonuses (for allocating many, very profitable, credits), allowing the deluge to come some years afterward. By then all those mortgages had been sold to investors duped into buying them up.

Enormous creativity and enormous risk. As King observes, the phenomenon is perfectly explainable and highly difficult to eradicate because political demands clash with the incentives of very smart and rational financial operators. These are conflicts that never get resolved cut can be mitigated with adequate regulation that stems from the recognition of human nature as it is and not as it might be desirable.

Agustin Cartens, Mexico’s central bank governor, has just been appointed head of the Bank of International Settlements, the most important global regulator in banking matters. His experience and intelligence may well help avert the next crisis. Not a minor source of recognition.

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Luis Rubio

The beautiful thing about libraries, about books, is that they are like cherries. You finish one, and this leads to others, which end up leading you inevitably.

Arturo Pérez Reverte

In 2012, very much in his style, Charles Murray published a provocation that turned out to be predictive of Trump’s victory. In Coming Apart, he devotes himself to analyzing a theme that had concerned him for many years: that of the inequality and public policies that tend to exacerbate it. In previous publications he had looked down upon tedious and politically incorrect terrains such as that of intelligence and the IQ as significant factors in social polarization. In Coming Apart he describes this as the population tending to polarize itself and to aggravate the problem: according to Murray, those that are successful in society have come to concentrate themselves geographically and with respect to activities, to the degree that they eventually live in a bubble that separates them from the rest of society: they watch different television programs, read different literature, go to other schools and are increasingly less similar to the remainder of the population. Murray’s argument throughout his career has been that public policies designed to wage war on poverty and reduce social gaps have been a failure because they do not strike at the heart of the problem and often exacerbate it. In 2016 he published an interactive questionnaire that allows to determine how close a person is to the median American, that is, how similar an individual is to the majority. Although the questionnaire is ethnocentric and not easily applicable to Mexico, it is worthwhile responding to because it is highly instructive: http://www.pbs.org/newshour/rundown/white-educated-and-wealthy-congratulations-you-live-in-a-bubble/

Ronald W. Dworkin is a physician and philosopher who has made inroads into matters of public policy, first those related with health and recently with a book entitled How Karl Marx Can Save American Capitalism.Dworkin’s premise is not new, but it is highly interesting: Marx was an enemy of capitalism but, on exhibiting its defects and limitations, he forced governments to respond, above all in issues such as the abuse of workers and the need for social policies, as well as an integral heath system. At present, says Dworkin, there are new risks that, although distinct in nature from those that capitalism underwent in the XIX century, constitute a new challenge to its survival. Among these, Dworkin cites matters such as social alienation, decreasing birth rates, and the use of drugs for functioning in work life. While the concrete proposals that Dworkin suggests have nothing to do with Marx, what seems relevant to me about this book is its notion that liberal and conservative dogmatisms are useless for solving the problems of today. Specifically, he proposes that the government focus itself, with laser-like precision, on threats to private life without attempting against the factors that permit the good functioning of a market economy.

Anthony de Jasay is a Hungarian economist and philosopher who migrated to Australia and now lives in France. His book, The State, begins with an extraordinary question:  What would you do if you were the State? It is customary, says Jasay, to conceive of the State as an instrument, a means that exists to achieve the common good. However, the author asks, What if we were to suppose that the State has its own ends that are not those of the population? Jasay formulates a lengthy response that follows the history of the State from its original function, with exceedingly modest dimensions, as protector of life and property, until it converts itself into the “agile seducer of democratic majorities, to the welfare-dispensing drudge that it is in many countries today”; he then asks “Is the rational next step a totalitarian enhancement of its power?” The State presents a debatable extrapolation but not an irrelevant or illogical one.

Richard Epstein is a U.S law professor who has been writing for decades on the Constitution of his country. This year he published his masterpiece, The Classical Liberal Constitution, in which he delves into the origin and nature of the United States Constitution and analyzes the manner in which it has evolved over time. Beyond the properly U.S. debates that he treats throughout the book, what appears unsurpassable to me are his reflections on how the nature of the government has been changing, its objectives and the values that, in fact, give it life. Its main proposal is that protections of individual rights have been reduced without solving the essential problems of contemporary society. A profound believer in small and demarcated government, Epstein touches upon many of the themes that invigorate the work of Murray but from a constitutional perspective. His central assertion is that only firm and decided protection of individual rights before the State, guaranteed by the Supreme Court, can create the conditions for economic revitalization. Somewhat in contrast with Murray, his contention is not ideological but rather fundamentally pragmatic: it seems obvious to him that the status quo, while it worked before, does not now. That, notes Epstein, should be enough of a lesson.

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Luis Rubio

It is rare day that our politicians realize the effects of their decisions. Assured of the infallibility and bonhomie of their ideas, they rarely consider the possibility that their choices and actions might give rise to opposite outcomes from those sought or radically different from those imagined.  Politicians think in terms of their own frames of reference (usually access to power and to their next means of livelihood) and not with respect to the consequences of their actions; like a thief who thinks everyone is out to steal from him.

Protected from the mundane complexity of the life of the Mexican everyman, their perspective does not in any way resemble what the citizen needs. The citizenry wants the basics: safety, certainty, services that work, the means to develop their daily life, that is, nothing out of the ordinary: they only want to live and prosper the best way possible. Politicians, however, know better: progress does not consist of having a good life, basic services and everyday safety but rather radical transformations.

The case of “A Day Without the Car” in Mexico City is paradigmatic because everyone, except for its promoters, knew that limiting the use of the automobile for millions of inhabitants without having an effective and reliable means of public transportation in place would engender the inexorable result of causing an increase in the number of vehicles: the population began to buy an additional car to be able to move to work every day. But that case, of a quarter of a century ago and, inexplicably repeated a few months back, is only a sample. The country has changed drastically in the last decades in great measure due to governmental decisions, some on target, many terrifying, which have altered not only the physical aspects and the statistics, but also the populace’s perceptions and expectations. The result is not pleasant.

Although there have been truly transcendental and transformative strategies (for example, the economic liberalization of the eighties and the North American Free Trade Agreement [NAFTA]), the majority have had null effects and, on occasion, have been counterproductive. But beyond the great reforms, what is noteworthy is the absence of the “little” things, those most important ones in day-to-day life. Many are contemptuous of the liberalization of the economy and propose canceling it, but it is obvious that they ignore a very simple fact: the SOLE engine of growth of the Mexican economy at present is NAFTA; the notion of placing it in question is, first, absurd, but after that makes one’s hair stand on end. Thus the concern about Trump.

Perhaps there is no better test of the last four governments’ lack of success than the fact that, however much growth they promised, they did not achieve adding anything to NAFTA and, in contrast, at present, have placed financial stability once again in doubt, the very financial stability that, as we learned in 1994, lies at the heart of economic viability.

Despite the lack of success of the last three administrations as well as the present one, some states and regions have procured something that is not currently recognized: the growth rates of states such as Aguascalientes, Guanajuato and Queretaro are more similar to those of Asia than Latin America. That is, today there are many Mexicans undergoing a radical transformation which distances them from those who, thanks to the worst governments devoted to corruption as their raison d’être, have left their populations in poverty and ruin. Parts of Mexico have come to prosper, others have become poverty-ridden. What is the difference? Quality of government. There is no other answer.

Some local governments have been able to do something out of the usual: they govern. Something as patently obvious is inexistent in the majority of the nation. More common are governors dedicated to power and profit than those committed to development. How unfortunate it is that the majority quest after power and personal gain.

The result is pathetic. For the ordinary citizen what is important is that there is food in the stores, gas at the respective gas stations, safety in public conveyances and certainty in the economy. The reality is another: as if it were a natural and not a political disaster (created by the radical teachers union CNTE), the federal government organized an airlift to transport basic goods to Oaxaca; rather than being the guarantor of safety, it grants privilege to delinquents.

What is the result? Instead of winning over a prosperous, content and satisfied public, the country is characterized by growing uncertainty. The workaday Mexican lives in fear of assaults, robberies at their homes, their children’s safety, uncertainty regarding job permanence and, as if this were not sufficient, the absence of hope. Our politicians do not understand even the most elementary: without stability and trust the future is impossible.

“Broken Windows” was a concept coined by Wilson and Kelling to describe the way a society deteriorates. When no one repairs a building’s broken windows or a city’s potholes, deterioration accelerates because no one cares about the state of things. Little by little, people become accustomed to everything perennially getting worse.

Mexico possesses enormous assets and virtues, but the quotidian reality discloses precisely the opposite. The key question is: who benefits from this?

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 Luis Rubio

Mexico is experiencing a growing universe of “little” civil wars that can end up with it in ruins. By the same token, the dynamic that this is creating could in like manner finally generate a country-wide platform for transformation: it all depends on how these processes are channeled or, more appropriately, whether there is someone in charge willing to lead such a transformational venture.

The open fronts are multiple and implacable. Some have been left ajar by the current administration, others have accumulated from before, but if the criterion to focus on the opportunities and risks is one of stability, viability and peace, all entail consequences. The nation is experiencing a growing civil war, or better said, an ensemble of mini civil wars, each one different in origin, circumstance, and dynamic, but the ensemble nonetheless puts in evidence the weakness of the government and that the propensity for toward anarchy grows. What is pathological about all this is that many of these “little wars” are the product of the incompetence and impaired vision of the promoters of these very wars, in many cases those most committed to exactly the opposite of what they are engendering.

A “snapshot” of the general panorama says more than a thousand words:

• The most useless (and, in fact, ludicrous) of civil wars is that which President Peña fostered with his initiative in terms of egalitarian marriages. I have nothing against each couple resolving their lives as they see fit, but it seems to me that the presidential initiative in the matter was foolhardy, counterproductive for him and for his party but, above all, absolutely unnecessary. The war that the Catholic Church started in the wake of that decision can bring nothing good, and all the more so when, à la Mexicaine, the problem was “solved”: Mexico City permits everything; why change a status quo that works? As the phrase attributed to Talleyrand says, “it was worse than a crime, it was a blunder”. An enormous blunder.
• Corruption corrodes everything, but has opened many fronts, all costly. Above all else, there are the protagonists, first of all the governors, who exhibit not the least decorum: they interpret an electoral triumph as a license to steal and, if they can, to arrive at the presidency. This war is not going to go away, even if the political parties reach an agreement on what corruption is and thus, who goes -or does not- go to jail, and in exchange for what. Justice? Up against the wall. Even worse: it provides incentives for the next breed of corrupt governors.
• Then there are the new Torquemadas, now dedicated to corruption or witch-hunts where the last thing that matters is justice, legality or due process. To denounce, to abuse, to attack and to evidence is the new mantra. What is important is not to eradicate corruption but to light bonfires, many bonfires. López Obrador will thank them profusely.
• The PRD and Morena, the two political parties on the left that split, like Cain and Abel, are undergoing the most Bizarre of the disputes. Everything for power, all of the power of before and all of the power of now, but above all that of the future. What is important is to mutually finish each other off: what that entails for the people in the turfs that they formally “govern” is least in importance. Ask the denizens of Condesa, where a war is brewing between the two currents, throwing open the door to organized crime and all of what that implies: murders, extortion, abductions. Morena trades in the future but is stuck in the past because it has no other option: its “product” is even more archaic than that of the present federal government: a return to the Stone Age. In the meanwhile, the inhabitants of their demarcation pull themselves up by their own bootstraps. What is important is power. Long live corruption.
• The tax “reform” that was promoted three years ago by the federal government spawned a little war with the taxpayers; the government won, but the economy is now stagnant. A Pyrrhic victory. In one of his many extraordinary and unforgettable readings of the reality, Winston Churchill stated that “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” Taxes are necessary, but not as a trade-off for prosperity.

Wars, affirmed Thucydides in his History of the Peloponnesian War, start because of fear, interest or honor. Civil wars, or little civil wars, are not very different, but their essence is quite distinct on one very important regard: instead of adding, they divide.

Mexico is enduring an accumulation of grievances and conflicts, some out in the open and others entombed, but all conducive to greater divisions, if not to open war. That is the risk, the one that is exacerbated inasmuch as the federal government disappears from the map. In contrast with other nations (Spain, which functioned quite well without a government for more than a year, is a good example), Mexico cannot live without an active arbiter: an arbiter devoted to propitiating dialogue and social concert. The divisive factor in Mexico is power: without dialogue, conflict lurks just around the corner.

Minxin Pei has just published a book on corruption in China*. His argument is that the Chinese system renders corruption inevitable and that corruption will be the cause of China’s eventual collapse. It is evident, by any reckoning, that there is no proportion vis à vis China: with all of Mexico’s shortcomings and defects, the problems here are aired out and are public. That means they could be dealt with. One must maintain a sense of proportion that allows for a terse transition, whether or not it takes another decade. But someone has to lead it.

*China’s Crony Capitalism

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Luis Rubio

Concern is in vogue with regard to China’s growth rate and its potential implications for the world. However, the same phenomenon can be observed in the U.S., Europe and other nations, including of course Mexico: the pace of economic growth has been descending. The question is why.

The simplest explanation for the tendency toward a lower growth rate is that as societies become wealthier, their incentives and needs that must be satisfied, change. The argument sounds reasonable: it is obvious that what an Indian who lives on less than a dollar a day requires is very distinct from the demands of a Swiss citizen, rendering it natural that India’s growth rate would be superior.

In his famous book The Cultural Contradictions of Capitalism, Daniel Bell affirmed that growth laid the base for its own destruction because it generated people with little hunger for greater growth. In recent years, Edmund Phelps published a book* that follows that argument but leading to a very different conclusion: it is not that people stop having aspirations and needs, but that the environment has changed, making growth increasingly difficult. That is, it is not that capitalism engenders antibodies against growth but that the society tends to develop a form of new corporatism that impedes change.

Phelps’ argument reminded me of what Galbraith said on the subject of the “military-industrial complex”: it tends to paralyze development because it entails arrangements among enterprises and the government that make it difficult to change the status quo, the latter a condition necessary for the growth of the economy. Phelps denominates “corporatist complex” this type of corporatism, in which he includes the government, the legislature, the banks, companies and unions. For Phelps, there an implicit alliance among all of these interests to conspire against competition and innovation.

According to Phelps, there are phenomena known to all that stand in the way of growth and that have a bearing on the companies’ incentives, the conditions for competition, the way in which the granting of bank credit has changed and the search for wealth ad hominem. However, what appears crucial to Phelps, and what is his true contribution to the discussion on growth, is that economic policy (in the broad, not the budgetary sense) is an institution in itself that reflects the values of the society and those very values bestow privilege on the preservation of what is. In a word, people do not want to take risks and that translates into social mechanisms that cause change and innovation to be impossible.

Those values procreate subsidy and protection mechanisms for enterprises and persons that have the effect of hindering the rise of new companies and development projects. In this manner, the laws, the regulations, the taxes, and the pension plans end up protecting what exists, making it unattractive for there to arise entrepreneurial spirits like those that forged wealth in former generations.

Phelps analyzes matters such as the following: bank credit was easier to procure decades ago than it is now, the creativity that is inherent in humans and that translates into the ability to identify new markets, solve problems and explore, does not prosper in an ambience of rigid rules, regulatory requirements and insurmountable fiscal issues; the enterprises that already exist and that have deciphered those pitfalls (typically a long time ago) entertain an incomparable advantage with respect to the individual attempting to create a novel venture. This adds up to people ceasing to be creative and to their adapting to the jobs or opportunities already in place instead of undertaking new ones.

If one were to go back in time to the histories of the growth of the world economies in the XIX century and the beginning of the XX, an era in which there were a lot fewer rules and regulations for everything, it is clear that innovators would run immense risks. An uncluttered comparison between the transportation systems of then and now sheds light on the different conceptions of what is safe:  carts pulled by horses vis-à-vis automobiles equipped with every kind of protection. Phelps’ proposal does not involve returning to that time, but rather to focus attention on the costs implied in that entire world of protections and subsidies that has been constructed and that is, from his perspective, the explanation for the sinking growth rate.

If one extrapolates Phelps’ analysis to Mexico, it would seem obvious that the strange collection of tariffs and subsidies that persist in a broad swath of the industrial sector is a factor that hinders innovation and, thus, growth. However, it is possible that the main explanation for the country’s poor economic performance dwells elsewhere: nobody wants to assume risks because of the low probability of success, a circumstance that become more acute when there is so much uncertainty: part of which is caused by factors of the moment, like the recent American election, but above all by the physical and patrimonial insecurity that characterizes the environment. The pathetic performance of our economy is not the product of chance.

*Mass Flourishing

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Luis Rubio

Western democracies are in crisis. One country after the other undergoes radical changes in the conformation of their electoral structures: voters appear to be fed up with the traditional solutions and begin to opt for alternatives that previously seemed inconceivable. In France, the Extreme Right advances without cease; in Spain the old Spanish Socialist Workers Party–Popular Party (PSOE–PP) duopoly  collapsed and it took more than a year to get a government in place; in England the Radical Left took control of the Labor Party. The U.S. broke all the historical cannons. Beyond the specifics, it is reasonable to ask whether in Mexico we will continue in the “nothing’s going on here” mode or, sooner or later, alternatives impossible or unthinkable until now will see the light.

The heart of the disenchantment exhibited by the electorate in the most diverse countries is the same: there is exhaustion, despair and a consequent rejection of traditional politics that promises but doesn’t deliver the goods. Citizens are tired of politicians who steal, provide increasingly less credible explanations, do not solve problems, pass the time dealing merely with ghosts and symptoms, without ever creating the conditions for the economy to satisfy the needs of the population or for democracy to serve as an effective mechanism of representation.

It is entirely possible, even likely, that the solutions adopted by the electorate in any of these countries ends up solving nothing, but the message is clear: patience with poor government has limits.

Over the past few decades, Mexico has undergone increasingly more vice-ridden, petty and dysfunctional electoral reforms that do not even appease the very parties that promote them. And that doesn’t even address the citizenry standing dauntlessly before the spectacle of the political parties’ businesses and their endless waste. It is possible that the El Bronco phenomenon in Nuevo León heralds a new political era, but there is no doubt that what made it popular, above all in the absence of a credible government program was its vow to put the former governor in jail. The spurning of “politics as usual” is patent.

Although each country is very distinct, two ambits dominate the citizenry’s ire: the economy and the corruption. The Mexican economy has for decades been split in two: one functions and grows like a meteor, the other contracts and becomes impoverished. Instead of tackling the causes of these differences, the political debate revolves around the past (that is, abandoning what little there is that does work) or following the same course of action (that is, don’t change anything, even for the better), although this does not fix the problem. With regard to the corruption, scandals accumulate but the responses to these are always rhetorical: new laws are drawn up because in Mexico there is no problem that does not merit a new law that, of course, will never amount to anything relevant or solve the problem.

The peso experiences its greatest devaluation in decades and this is always the fault of others. The problem seems evident but the justification is always the same: the bad international situation. In the past thirty years there have been periods of extraordinary economic growth in the world and others of recession, but in the Mexican economy, with the exclusion of a pair of really bad years, things have continued exactly the same: a pathetic average annual growth rate of around 2%. What is emblematic is that no one is responsible for this: when things go poorly in the outside, the problem is the U.S. or the Chinese economy, the international recession or the oil prices. When things go well elsewhere, the fault is of the previous administrations or of the opposition political parties. There is no lack of excuses but responses and actions likely to confront the problem are non-existent.

The marvelous part is that, when faced with adversity, the Mexican always responds with a joke and in that things have indeed changed: it is affirmed that the difference between dictatorship and democracy lies in that in the former the politicians laugh at the citizens while in the latter it’s the other way around. Measured under this yardstick, the Mexican democracy is a consolidated one:  there is no affair or corrupt practice, however insignificant, which does not occasion a regenerative witticism. Were Mexicans only to devote that creativity to technological innovation, the development of new products or the improvement of productivity, the country would be Switzerland.

Creativity is not absent among politicians either. For decades, the famous quip, now mythical, about when the new president gets stuck, he finds his predecessor had left to him three envelopes. The first says “blame me”; the second, “change your cabinet”; the third reads: “write three envelopes”. The point is clear: do anything but solve the problems.

As illustrated by the electorates of countries like those mentioned at the beginning, the problem is universal in character: the world has changed but governmental and political systems no longer solve the problems.  At the same time, many of the problems are not so difficult to solve because their causes are obvious. Reagan sketched out the problem clairvoyantly: “For many years you and I have been shushed like children and told there are no simple answers to the complex problems which are beyond our comprehension. Well, the truth is that there are simple answers. They just are not easy ones”.

In effect, there are no easy solutions, but the answers are obvious. The question is whether the traditional political system will make them theirs or whether others, outside of the system, will come to try.

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@lrubiof

Luis Rubio

The general tone is one of catastrophe: the world changed and no one is going to be able to save it. The Trump victory may not have been desirable, but it certainly was probable. The manner in which the government and many opinionators have reacted suggest that “the end is near”, but that need not be so. The atmosphere reminds me of one of the passages from War and Peace: “The strongest of all warriors”, Field Marshal Kutuzov explains, are these two:  Time and Patience.” With Napoleon’s army advancing, Kutuzov wisely wanted to wait for reinforcements before engaging in battle. When Russian generals demanded that Kutuzov attack Napoleon at his strongest, the field marshal replied, “When in doubt, do nothing.”

The election of Trump as the president of the world’s superpower and our main trade partner does not furnish us with many options but it obliges us to contemplate, with a cool head, the implications and opportunities that this entails. At this time it is impossible to know what Trump will actually do, but we already know that he will submit NAFTA to an evaluation at the Interstate Trade Commission -an agency with serious analytical capabilities- with an economic, labor and geopolitical mandate, in other words, seriously. Obviously, no one knows what will happen once the government is duly integrated, but nothing is accomplished by speculating. What is certain is that Trump brings with him an enormous sea change, but, once he is functioning in office, the reality of the power and of the institutional structures will sink in and make him recognize that there are limits to his agenda. What is crucial is to work to attempt to remove our issues from the line of fire, something not easy, but not impossible either.

If one reads his “Contract with America,” a pamphlet that was prepared for his campaign, there are no limits to the risks that we are confronting; however, if one analyzes the realities of power and of geopolitics, the options that the new president will face are very distinct from the agenda that he proposed when he faced no restrictions. One thing is the rhetoric and another is the reality, which does not mean moderation.

Everything indicates that our greatest risk (that Trump might sign a letter annulling NAFTA upon arriving at the White House, a possibility foreseen in Article 2205 of the agreement) has diminished. The assessment by the ITC will be the centerpiece of the process. While that’s settled, the government should maintain -actually, accomplish- unity and discipline of message and clarity of objectives. It also must understand better the panorama of the new team as it takes shape in order to identify opportunities but also to develop strategies that show Mexico’s strengths and chips -which are not few- in this relationship. Managing the political process will be crucial. Of course, we could and should aspire to a much more profound understanding of the immense complexity, diversity and two way benefits inherent to the bilateral relationship –the benefits that both of us derive from this in matters of security, stability and economic development-, but first things first and that is that NAFTA is the only engine of the Mexican economy.

The government can congratulate itself about its foresight (the invitation to today’s President-Elect), but the reality is that this does not change by any means  the disaster and the vulnerability under which the country was placed with an economic and fiscal policy of the seventies that is unsustainable in the globalization era and, maybe, even with the invitation itself.

The second stage will begin, at least formally, as soon as the new government begins to function. That is where will be able to see tensions on various fronts; first, between the two governments due to incompatibility of views, perspectives and objectives. The government might have saved itself from the “punishment” that Clinton probably had planned in the form of a merciless attack in matters of human rights and corruption, but there will indeed come a clash of visions for which Mexico certainly is not prepared. The point is not who is right, but who possesses the capacity to impose an agenda. The key during these months will be to “educate” the new government concerning the importance of the relationship, a principle that includes making them realize, in practice, that they too benefit from the relationship, that it is equitable and that they need Mexico’s cooperation.

However, Mexico’s image in the U.S. will not change until reality changes. Trump took advantage of Mexico because that something easy for his potential voters to understand: that our way of acting -corruption, impunity, bad government, bureaucracy and systematic abuse- are what is visible about Mexico. It does not matter whether that photo is fair or not, what is important is that it is real. Until we do not change our reality, that will be the image that remains in the mind of our neighbors: Trump did not invent the image; he just took advantage of it.

The government has two options: one is to bring itself up to accept the new reality and act consequently; the other would be to let someone else do it because the nation cannot wait.

Cantinflas understood this moment better than anyone: “The most interesting thing in life is its being simultaneous and successive, at the same time.” The question is whether this government has that capacity.

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 Luis Rubio

“History teaches by analogy, not by identity”, noted Kissinger in an interview. His proposal was that there are no two identical historical situations, but that some indeed present important similarities that transcend the time and space in which they have occurred.

It is evident that Trump and Andrés Manuel López Obrador are very distinct in origin, personal profile and political orientation, but their similarities are equally astounding and, now that the U.S. elections have taken place, it is this on which Mexicans will inevitably focus in looking toward the future.

Donald Trump was born in a working class suburb in New York and never left it. His economic plight was transformed but his political conception was forged in the place of his birth; although he was always a businessman, his televised star quality allowed him to express –for decades now- the political postures that he now raised as a candidate: he was always ostentatious and vain, and exceedingly thin-skinned. Everything indicates that he entered this electoral contest in reaction to what he perceived as an attack, an offense by Obama during one the most famous roasting sessions of mutual insults and self-flagellation that U.S. presidents engage in annually with the press.

On his part, López Obrador emerged from a modest background and always focused on social and political mobilization; he has for decades confronted the established powers-that-be, recurring to the media to achieve his task, first in his native state of Tabasco and later as Head of the Government of the Federal District. His activism was always pragmatic: from the construction of the second-level roads in the city to his relationship with businessmen and the Church. When he registered his protest against what he termed a fraudulent election for the governorship of Tabasco, he took over the oil wells of the region, never permitting his followers to touch the valves or other sensitive equipment; it was one thing to protest, another, very distinct one, to engage in unnecessary risks. In that vein, there is nothing more in contrast with Trump than his personality: modest and measured, always flaunting his humility. But likewise there are coincidences and resemblances that cannot be overlooked.

It was not difficult for Mexicans to understand the inherent risks in the Trump discourse. It is not only what he said about Mexico and Mexicans throughout his campaign, but also the context, vision and discursive style. It was his very nature that we Mexicans beheld with consternation and scorn: the rejection of all that exists, his ignorance of the most elementary things, the implicit threat that he must be elected or the arrival of the deluge would transpire and, above all, his willingness to annul what does work, independently of whether there are so many other things that would merit changes. When in the last of the three debates Trump refused to commit to respecting the electoral result, we Mexicans were reminded of the 2006 post-electoral moment when Lopez Obrador took control of the city’s major thoroughfare for months. It would appear to be a caricature, but it is not.

The two personages share a series of very clear values and preferences: their anti-systemic discourse, the absence of specifics in their public stance (they scan solve it alone, as if by magic) and the arrogance inbred in their personality: there is no reason for them to render accounts to anyone. Various journalists have scratched the surface of the discourses of both, finding a Pleiad of practically identical sentences, making up the obvious: it is not that they derive from the same roots, but that they are the same in political proposal and that is the core matter. I doubt that they have ever met, but philosophically they are indistinguishable.

This is about a deeply conservative political vision that does not emerge from the search for social transformation but rather from the protection of losers and the preservation of the old social order; hence their ever-nostalgic manner of thinking: everything worked fine before… In this, both profess an acute nationalism as well as contempt for institutions, the market, international agreements and any rule or law not serving their purposes. In the face of the incompatibility of their discourse with the mundane reality, their response ends up being messianic not only because it entertains no concrete proposals but also because the solution is they themselves. A Messianic perspective allows “ignoring the reality” as often as necessary, building a fantasy sustained on lies that, in their mind, are not.

Now we must wait and see how Trump will react to so brutal a defeat and, above all, how the American institutions will resist the pummeling that he represents. What is certain is that his victory is the result of something we Mexicans understand full well: a series of governments devoted to not governing, to promising but not delivering and, above all, to ignoring the needs, preferences and complaints of the population. Obama’s government has been disastrous and the American people are now paying back.

Mexico’s government refuses to understand a similar reality: that people are fed up with the lack of government response to their needs, with the violence, the constant loss of value of the peso and the lackluster economic performance that affects most people, all of which entails consequences.

I have no doubt but that the worst-case scenario for Mexico would be that of Trump in Washington and AMLO in Mexico: two nationalists seeking to distance their countries from each other, a lethal combination for the Mexican economy.  With its paralysis or, rather, with its disdain and misguided actions, the Peña administration is making the Messianic vision ever more likely.

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@lrubiof

 Luis Rubio

Whatever happens in the U.S. election next Tuesday, it is imperative for us to redefine our way of seeing our neighbor to the North in order for us to never again confront the risks that were evidenced during this long electoral season. The first part of the nightmare ends now, but the true challenge has only just begun.

Trump has been the protagonist of an ill-tempered anti-Mexican narrative, but despite its being insulting and offensive, it entertains a broad base of credibility: it is not an accident of history but a product of the latter; the campaign merely evidenced the symptom of deep rooted issues. That comprises the hazardous venture: one sector of the U.S. citizenry –that which Trump has managed to attract- is direct and blames Mexicans for all types of wrongdoings; but the other, while not finding Mexico and Mexicans blameworthy, coincides in the fact that Mexico is not a democracy. In other words, the story is the same; what changes is the interpretation. In both cases, the Mexican is good, the government bad. Our challenge is to win their respect notwithstanding our differences.

The challenge does not lie in fighting the literal statements of the Republican candidate, but rather in creating a base of legitimacy for Mexico and Mexicans, including of course Mexicans residing, legally or illegally, there. Modifying prejudices and attitudes is not something easy because, as Trump demonstrated, those biases are deeply rooted. Additionally, the prejudices are unilateral: the average American does not view the Mexican as his peer nor does he understand that his or her own well-being is inextricably bound to Mexico and that the more successful Mexico is, the more secure Americans will be and the greater the economic and commercial interaction, accompanied by jobs, low prices and better quality. The success of any strategy that Mexico decides to undertake in the U.S. in the future will be measured in these parameters.

The dominant narrative there, weightier in some ambits, less in others, but ubiquitous in all, is very simple and very clear: Mexico exports drugs, expels Mexicans, consumes subsidies and steals jobs from Americans and does not know how to govern itself. This summary trivializes the argument but it is accurate and constitutes the essence of the rhetoric that Trump articulated and with which he capitalized on the support of a none-too-contemptible share of the U.S. electorate; more than exaggerated, this narrative is meager, all flesh and bones.

It is obvious that each of the components of the narrative can be supplanted in an instant with analytical and rational arguments, but the discussion there has not been rational but instead gut-level and emotional. Even in the most benign quarters, the so-called “sanctuary cities”, where illegal migrants are not prosecuted, the point of departure is that this is about persons with no alternative, who flee the problems of Mexico. In that discussion there is no job market, no recognition of what is most apparent: that migrants go where there are jobs and not because one day they get up in the mood for putting their lives on the line by crossing the river. That perhaps occurs with the Syrian refugees who have no better option for saving their skins, but that is far from constituting a photograph of the North American region.

Nor is there comprehension in the U.S., even the knowledge, of how intimately intertwined the two economies are and how that implies better prices and quality for the U.S. citizen or that the neighborhood of the three nations has achieved the optimal concentration of relative forces to benefit the consumer and that Mexico is the third largest destination for their exports. The same takes place with the matter of security in that Mexico is a key piece, as part of the so-called security perimeter, to secure its southern flank. In sum, Mexico and the U.S. are irredeemably integrated through their peoples and merchandise as well as agreements and projects that are essential for stability and regional security.

After the election, whoever the victor, our commitment should be very transparent and absolute: ensure that never again will Mexico and Mexicans be treated as they have been in this season. To achieve this, it will be necessary to build an intelligent strategy that, far from confrontational as if we were very macho, makes inroads into the U.S. collective subconscious and situates Mexico among the friendly, partnering and legitimate nations.
The challenge is enormous because it implies modifying the premises of that entire narrative that are, at the end of the day, prejudices accumulated over a long time. If one examines the surveys, those prejudices are neither universal nor absolute: there are many differentiating factors. For example, the surveys reveal an exceedingly benevolent attitude toward things Mexican: the culture, the food, the Mexican mind set and friendliness, the pyramids and artisan handwork. Likewise, there is merciless repudiation of everything associated with the government: security, migration, the governing process, corruption.

The problem with the U.S. narrative on Mexico is that, although false in much of what refers to Mexico, it is bolstered by a set of real factors –such as corruption, the lack of competent governance and the insecurity- which will have to be addressed in order to change reality itself, not just perceptions. That is, if we want our image to change, however distorted it may be today, we have to change the reality. As in so many other fronts, the real challenge is domestic.
Culture is Mexico’s major asset and should be taken advantage of as a vehicle to present and project the country positively there. It is not difficult to imagine the essence of a strategy: visitations of the cultural and artistic assets such as chefs, musicians, writers, businesspeople as well as exhibitions, films, Mexican actors in popular televised programs; a social, cultural and academic deployment of our consulates in the U.S. society, etc.

The point is to grasp the nature of the problem in neutral fashion to begin to chip away at it. It will take time, but Mexico must never again be the whipping boy of a candidate for the presidency of that country. We have to start by cleaning house.

www.cidac.org

@lrubiof

Luis Rubio

The election that will be over in nine days has not been the most polarized in history; whoever recalls the Vietnam era knows that there are cycles in this respect, but also an enormous capacity of regeneration. That is one of America’s strengths and characteristics and there is no reason to suppose that something similar would be impossible in the medium-term future. The question is what kind of relationship will ensue between the two nations.

Mexico ended up being an involuntary actor and (nearly) absent in the U.S. elections; many factors came into play to create the current electoral scenario: from technological change to migrants, by way of lousy U.S. support programs to adjust for commercial and technological change and, not at all trifling, the political scorning of the North American Free Trade Agreement (NAFTA) in the U.S. Each and every one of the approaches and outcries that arose in that electoral race –from Sanders to Trump- are analytically disputable, but the political fact is that Mexico was, at the end of the day, an easy target of the criticism.

There are two post-electoral scenarios for Mexico and both are complex. In first place is found the possibility that Mr. Trump will win: this is the least desirable scenario from the Mexican perspective for the simple reason that it entails prodigious uncertainty, the latter aggravated by the explosive and impulsive temperament of the personage-in-question. The principal risk of a possible win by Trump lies in the actions in which he individually, in his character as chief executive, could engage, particularly with regard to NAFTA. If Trump wins and he does not act impulsively in this matter, we would enter into a period of uncertainty that would probably involve extensive negotiations and lobbying within the U.S. and, on a second plane, in bilateral matters, regarding which steps to take.

The second scenario, the Clinton triumph, although more benign, would not be free of risks and complications. Clinton has not headed a proactive campaign, which would deny her what the Americans denominate a “mandate”. In contrast with Trump, her campaign has instead been obscure and defensive, thus (with the possible exception of foreign policy) it would not be distinct from that of Obama and, in that regard, it would become a third presidential term, similar to what occurred with Bush Senior in 1988. Clinton has had long experience with Mexico and understands the complexity of the relationship; therefore we would not have to anticipate much ado except for her obvious wish to penalize the Peña government for the invitation to Trump.

The greatest risk of a Clinton government would reside not in Clinton herself but in the Congress. Were the Democrats to win control of the Senate and, on an extreme scenario, of the Congress, Clinton would fall into the hands of activist legislators determined to step up financial, labor and trade regulations, much of that with potentially grim consequences for NAFTA. Viewed from the most benevolent side, under this scenario it would be conceivable for a migratory reform initiative to prosper.

It seems to me that there are three lessons to be derived from this election. The first is without doubt that the Mexican government should acquire better understanding of our neighbors in order to avoid episodes of maladroitness such as the events that transpired with the Trump invitation to Mexico: there are well-established procedures for contacting candidates, thus eschewing the need to reinvent sliced bread.

The second is that the Mexican government cannot and should not intervene in the internal affairs of another nation, but it definitely should advance its interests. In the case of the U.S., this fine line is somewhat difficult to draw, if not artificial, due to the fact that the two societies and their economies are so profoundly intertwined. Although the Mexican government should articulate a strategy that would redress the poor reputation of Mexico exhibited in this electoral contest, it is clear that it is the Mexican society, and not the government, that should respond to the insults heaped upon us by Trump. It is sufficient to remember that the declarations of Fox as well the invitation issued to Trump inflated his electoral stakes. Better for artists, literati, entrepreneurs and chefs to stalwartly defend and advance a fairer picture of Mexico than our beleaguered -and ignorant-politicians.

The geopolitical reality obliges Mexico to get along and build with the Americans and we are the ones who, in the absence of visionary leadership on their part, will be required to take the initiative. Thus, whatever the electoral scenario of next November 8^th, Mexico will have no alternative to that of seeking out the best way to attenuate electoral broadsides and to correct its own dearth of strategic lucidity in the relationship.

Finally, much of what was addressed in the U.S. elections and its effects (for example, on the peso) have to do with what has not been accomplished within Mexico itself. Mexico continue to be a society dependent on low salaries to be competitive, we have returned to financial policies that render economic stability vulnerable and we have not grown up to the need to agree on a political process to settle disputes in general and over the economy in particular. Hence the unending disputes that consume the country and that proved so dangerous through this campaign. As long as we do not attend to these issues, Mexico will continue to produce risk factors that feed into those originating in the outside.

www.cidac.org

@lrubiof