Luis Rubio

The young and already internationally renowned economist Jeffrey Sachs called on the then Secretary General of the Organization of Economic Co-operation and Development (OCED), Jean-Claude Paye, immediately after the collapse of the former Soviet Union. Sachs claimed that all that was needed to get the economy moving was to liberate Russia’s animal spirits. Paye demurred, saying that he thought that institutions would matter too. Sachs countered, saying, “But you are French, and so you think that institutions are more important than they really are.” To which Paye replied, “And you are young, and take your institutions too much for granted.” And then he added, almost as an afterthought, “If you do not have good, strong institutions, all you will get will be the mafia.”

If anything reveals the ambience of violence, criminality, marches and, in general, non-institutional behaviors in the country it is the absence of the legitimacy of Mexico’s institutions. The existing ones generate distrust, thus rejection.

What Mr. Paye said to Sachs is perfectly applicable to Mexico. Things worked before, fifty years ago, because it was a much smaller society (nearly one third in population), distant from the economic circuits of the rest of the world, much less informed and, above all, in a much simpler environment. The government was the omnipotent entity and the networks within the society revolved, with greatest frequency, around family, school and diverse private organizations. It’s not difficult to explain how, in that context, that everything appeared to function with normality: order, economic growth and relatively little political conflict.

Since then, all that has changed, inside and out. On the one hand, the economy, Mexico’s as well as the world’s, has experienced a revolution; the growth sources and engines are nothing like those of yesteryear and the complexity is infinitely greater. On the other hand, to the extent that the society grew and that it is achieving some margin of political liberalization, the country began to decentralize. That decentralization embodied the enormous benefit of dispersing the power and decision-making sources, but was so chaotic and disorganized that it was not accompanied by the construction of solid and functional institutions. Finally, while Mexico was undergoing economic crises and experiencing political decentralization (and, what’s key here, decentralization of security entities) the context changed radically. The mix ended up being terrible for the country because it assailed it with a criminal phenomenon without governmental structures capable of containing it: our system of government was (is) of the XIX Century, but the criminal mafias are of the XXI. Paye thus understood it.

The crises –political, financial, security- ended any vestige of trust of the population in its authorities. An East Indian summed up his country in a way that is fully applicable to our context: India, he said, grows by night, when the bureaucracy is asleep. Two scholars, Acemoglu and Robinson, differentiated between inclusive and extractive institutions to illustrate the point: where there are checks and balances (limits to the abusive acts of the government) growth of the economy is possible; in contrast, in instances where there are no effective limits (judicial or legislative) and where rights are not equal for all of the players (and impunity, nepotism and the abuse of power persist), the potential for growth is limited. What’s normal, they say, historically, are extractive institutions where, may I add, mafias proliferate.

It’s not necessary to look very far in Mexico to determine the type of institutions that we have. Michoacán, Chiapas, various ex-governors and the entire gamma of actors and decisions comprise more than enough examples of the nature of the reality. The lesson is clear: if we want to change the reality we have to construct inclusive institutions, that is, transparent ones as basic philosophy of government.

Douglas North, Nobel Prize in Economy, wrote that formal rules (laws) are required but that these are insufficient: just as important are the informal restrictions (norms of behavior, decency, codes of conduct) and, above all, the effectiveness of the mechanisms that make the laws and societal norms be complied with. When the government is weak, partial and dysfunctional, its capacity to fulfill its obligations is minimal while the capacity and disposition of the society to do so (public disgrace, expulsion from private institutions, etc.) is limited to the degree that community spirit is lacking.

An ex-Director of Pemex told me an anecdote that sums up our challenge: one day he asked the president of one of the largest oil enterprises in the world how they dealt with corruption in his company, the presumption being that the phenomenon is ubiquitous in the industry. The oil man answered that corruption is an exceptional phenomenon because when there’s a case of it the company immediately files an accusation before the competent authority (that is, the dissuasive element is enormous), but above all because the society itself penalizes corruption in brutal fashion: when a case comes up, the family is banned from the social club to which it belongs and the children are isolated by their peers at school. That is, the cost of an infraction is so great that very few dare to commit one. At Pemex, concluded the public servant, when an employee transgresses the law, he is “incapacitated”, then returns the following month, with a hero’s welcome, as the representative of some supplier or contractor.

Constructing a regime of legality and trust entails enormous costs, but the benefits are immense.

www.cidac.org

@lrubiof

Luis Rubio

When Adlai Stevenson was contending for the U.S. presidency with Dwight Eisenhower in 1956, a supporter once called out to him: “Governor Stevenson, all thinking people are for you!” And Stevenson, a politico-intellectual, answered him: “That’s not enough. I need a majority.” Tension among groups and social classes is a constant throughout history and no one should be surprised that when some things change, above all if they improve, new sources of conflict and tension appear in the firmament.

One of the paradoxes of our era is that a combination has come about of factors that are, or appear to be, contradictory. On the one hand, it is obvious, and empirically demonstrable, that life has improved for the greater part of the population (and, in fact, of humanity). Today people live longer, there are fewer diseases, quality of life levels have risen, the quality of the products that we consume and utilize improves day by day, the prices of many articles –such as electronics- decrease. Even the most modest family in an urban zone has access to better daily life conditions –such as bathrooms in their home- that even the most famous King of France (Louis XIV) never had.

On the other hand, there is income polarization, much of this deriving from the technological advance. Both things –real improvement in quality of life levels and economic polarization- are true, although not linked. In economic terms, the improvement is tangible. However, in political terms the perception has predominated that some have improved while others have not or, in the cheap rhetoric, that some have gotten better because others have gotten worse. This paradox, known for some time, is a pure propellant for electoral disputes, populist rhetoric and all manner of controversy.

As if this were not enough, Yuval Harari, author of the book Sapiens, a “brief history of humankind”, affirms that the unrest under which humanity lives is at the point of multiplying and acquiring forms and characteristics that to date are unknown by the human race. In a discussion with Nobel Economics Prize recipient Daniel Kahneman*, Harari argues that the technological advances of our era are going to create new sources of conflict and tension, new social classes and novel dynamics of the class struggle, just as occurred with the Agricultural Revolution or the Industrial Revolution.

The most clear-cut example that Harari employs is that of the revolution in the field of health. According to Harari, the focus of XX Century Medicine was on curing disease; today, its focus is on improving those who are healthy, a radically distinct perspective. In political and social terms, says the historian, while healing the sick constitutes an essentially egalitarian project because it treats everyone as equals, improving those who are healthy constitutes by definition an elitist undertaking, given that it is not something from which everyone can benefit. Thus, for Harari a potentially enormous source of future conflict lies in differentiated health for rich and poor. Not by chance, the discussion alluded to is entitled: “Death Is Optional”.

If one observes what has in fact taken place with manual labor in the face of the expansion of technology, the scenario that Harari proposes doesn’t sound at all harebrained, however much some specific things could be arguable: the value of manual labor has collapsed in the face of creativity and the increased value added of intellectual capital in factories as well as in finance. In the era of the Industrial Revolution, famous Luddite movements were organized, devoted to destroying machines in order to restore the old ways of producing. However, while this was extraordinarily disruptive to daily life, in the long run, the Industrial Revolution transformed the world for good. It doesn’t seem impossible that this era will also resolve itself in similar fashion, although the process can incidentally be one of great turmoil.

Many of the dislocations that Harari describes are already visible, some resulting from the technology, but many more the product of regulations that discriminate in favor of the wealthiest or better connected. In our ambit, although many entrepreneurs would prefer to close the economy –which would raise the prices of many of the goods consumed the most- liberalization of imports has permitted the overwhelming majority of Mexicans access to clothing, footwear and foods that are much less expensive than in the eighties. Contrariwise, industries that continue to be protected enjoy the dubious privilege of being able to charge much higher prices.

In one exchange, Kahneman makes reference to the type of phenomenon noted in the previous paragraph: “There is a social arrangement that has been around for a long time, for decades and centuries. And they change relatively slowly. So what you bring to my mind, as I hear you, is a major disconnect between rapid technological change and quite rigid cultural and social changes that will not actually keep up”. For Harari, one of the great problems with technology is precisely that it advances at a rhythm highly superior to that of human society.

Harari concludes his argument by saying that what is important in the learning process is that “you will understand that you actually know far, far less, and you come out with a much broader view of the present and of the future”. Be that as it may, what’s certain is that, in the words of the German-British Professor Ralph Dahrendorf, “conflict is a necessary factor in all processes of change.”

*http://edge.org/conversation/yuval_noah_harari-daniel_kahneman-death-is-optional

www.cidac.org

@lrubiof

Alto Nivel – November 2015

                                                                                                                                   Luis Rubio

To announce the surrender of his government in 1945, Emperor Hirohito employed a peculiar linguistic formulation: “The war situation has developed not necessarily to Japan’s advantage”. The phrase suggests the complexity of the moment, but above all the incapacity to understand the circumstances that had led to the defeat. Mexico could easily say the same.

Mexico has advanced a great deal more than it appears at first glance: if one looks back, the magnitude of the change is impacting. Although our way of advancing is unusual (typically two steps forward and at least one step back), the advance is real. The change in Mexico has been more the product of the lack of alternatives than a faultless understanding of the time in which we are living and of the conviction of being able to emerge successful. Mexico has changed to a great degree, but that change has been unwilling and frequently reluctant.

The reform process began in the eighties in a radically different international environment from that of today. Although nobody knew it at the time, the Cold War was about to conclude and globalization released uncontainable forces that few understood then. Today the characteristic of the world is one of growing disorder with strong centrifugal tendencies. The crisis, essentially a fiscal one, of the last years has led innumerable countries to retire into their shells.

None of that, however, changes two essential factors: one, that technology advances incessantly and that nobody can abstract themselves from it or its consequences. The other is globalization that, while subject to governmental regulations that could change, has so profoundly altered the way of producing, consuming and living that its disappearance is unthinkable. That is, however more adjustments could be wrought upon the rules of commerce and relations among countries, it is inconceivable that the world population would stop retaining instantaneous access to information and seek out and demand similarly immediate satisfiers.

Within this context, countries have no alternative than that of acting proactively in order to prepare their populations for the wave of growth that is imminent and that will be characterized by elements for which we are hardly prepared or, as a society, disposed. For example, it appears obvious that technology will continue advancing in irredentist fashion, that mass markets will no longer exist but rather increasingly specialized (and profitable) niches and that digital commerce, which privileges knowledge and creativity above any other asset, will dominate production and, above all, the generation of added value in the future.

Beyond governments, parties or ideologies, Mexico will be required to focus on engendering conditions for it to be able to arise from its lethargy and afford opportunities to the populace that have been refused them for decades, thanks to a weak and effete system of government and an educative apparatus that favors control over the development of skills and creativity. The challenge that this entails is enormous because it concerns processes that, by definition, take decades to consolidate, implying that every day that is lost delays opportunity, something particularly worrisome given the demographic transition: if today’s young people do not incorporate themselves into the knowledge economy, Mexico will end up in a few decades a nation of elderly poor.

In his inaugural address as Governor of California, Ronald Reagan said something perfectly applicable to today’s Mexico: “For many years now, 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, there are simple answers. They just are not easy ones.”

Luis Rubio

Three categories of institutions lie at the heart of a political system: the State, the Rule of Law and an accountable government. For those who conceive of institutions as the large buildings that personify them, the perspective of Fukuyama* permits the understanding of institutions to a lesser extent as a product of legal structures or of great designs and pacts and to a greater degree as the result of customs and norms that take shape through long-term evolutive processes in which the government as well as the society little by little do their part and achieve a functional equilibrium.

Perhaps what is most interesting about this author’s analysis is his view of the way that traditional societies constructed institutions: first these societies centralized the power, typically in the hands of tribal or military authorities who controlled a determined territory. A second axis arises from daily practice: the authority defends the community against external aggression, all the while responding to economic evolution, protecting the property that over time is being defined by its members. What’s interesting about Fukuyama’s argument is that there is no preconceived plan of political evolution, but rather institutions gradually take shape according to the needs and daily challenges that emerge. In this manner, in the third axis, the growing demands on the part of the society build themselves in order to limit the excesses and abuses of the governor. In piecemeal fashion, those demands come to compel the encoding of practices and agreements, giving rise to written law. Over time representative bodies are organized (assemblies and parliaments) that formalize the obligation of the governor to render accounts to the society. Modern democracy is born when governors accept the formal rules and subordinate themselves to these, which implies limiting their power and sovereignty, recognizing the collective will as expressed in frequently held elections.

The three elements (State, laws, accountability) are functional when they achieve a non-paralyzing equilibrium: each is the counterweight of the others but the coming together of the three arrives at resolutions and decides on core matters. What’s crucial is that the population is added into the process, not because of generosity or altruism but instead because doing this satisfies their needs and attends to their interests. The Rule of Law ends up being the formula of interaction among distinct interests, some conflicting, others simply different.

Not all countries reach a balance. For example, Singapore has a strong State as well as strong Rule of Law but lacks effective account-rendering mechanisms. Russia, says Fukuyama, has a strong State and elections are frequent, but their governors do not feel obliged by the Rule of Law. Afghanistan has a weak government and a fragmented society, incapable of exacting the rendering of accounts. In these terms, it is not difficult to characterize Mexico as a nation that experiences frequent electoral processes, where the law is a poor referent for social interaction and the government as well as the society is relatively weak.

The evolution of each country possesses a relentless genetic signature. In some nations war drove the development of the State, in others war enfeebled it; in some cases it was religion that caused the rise of a strong society that later led to the Rule of Law. Technology, geography, population density and neighborhood are all explanatory factors. The interesting thing about the XX century is that it demonstrated that it is possible, at least under certain circumstances, to break with historical determinism. That opportunity, which nations such as Korea, Spain, Chile and other similar countries took advantage of to transform themselves, should be the model for Mexico to consider for the future.

According to Fukuyama’s conceptual schema, Mexico entertain lacks in the three categories: weak State, defective Rule of Law and a society that has not transcended criticism in order to become a positive and effective counterweight. Our history has a great deal to do with this. The only two times during which the country achieved true economic progress were the Porfiriato and the PRI’s good years. The common denominator of both periods was a government capable of organizing the society and imposing itself on it. When the government overstepped itself (as in the 1970s), it produced chaos; when it managed to get the equilibrium right (as it did between the late 1940s and the mid-1960s), the success was noteworthy.

This history invites many to imagine that Mexico’s problem lies in the decentralization that took place in recent decades, therefore everything would be fixed by returning to the fold. The evidence against this is overwhelming due to the nature of this moment in history, technology and Mexico’s geography.   Rather, the problem resides in the chaos of the decentralization and in the lack of leadership in the construction of institutions and of the mechanisms of accountability that makes institutions possible. That is, it’s not that the state governors must go back to being pawns of the president or that the society must be docile, both unviable propositions. In the absence of a natural equilibrium such as the one described by Fukuyama, what’s lacking is a strategy of decentralization that entails the construction of State capacity (administrative, judicial, the police, etc.) that in turn leads to the construction of a modern country.

What we have today is a deteriorated political system that hasn’t gelled and that, given the track we’re on, never will. Leadership is required that is willing to construct and subsequently self-limit. It’s not easy, but it’s obvious.

*Fukuyama, Francis, The Origins of Political Order, Farrar, Straus and Giroux, New York, 2011

www.cidac.org

@lrubiof

Luis Rubio

Argentines employ the term “viveza criolla” (native cunning) and define it as “opportunistic depredation: timeliness in taking maximal advantage of the most minimal opportunity, sparing no effort in making use of either consequences or prejudices for others.” This is not distinct from cutting corners, acquiring a benefit by purchasing the good will of an inspector, the maître d’ at a restaurant, or the police officer on the corner, pretending that there’s no cost involved. The problem is that the cost is enormous because it entails a way of being that is incompatible with the world in which we live in and therein lies a good part of the economic backlog that characterizes us. The cost is exorbitant.

Corruption is not new; what’s new is that it has become extraordinarily dysfunctional. In a traditional rural or industrial economy, the bribe –in any of its means of acceptance- constituted a way of solving problems. The distance inherent in rural life and the on-the-job discipline involved in the industrial workplace favored the controls exercised by the political system and no greater consequences seemed to be involved. In the knowledge economy what adds value is the intellectual work, from computer management to information analysis, whether in the field or factory: today (nearly) everything is information. What was functional before has stopped being so and this is equally true for the lordliest of entrepreneurs as for the most unpretentious farmer.

In my youth I worked for two summers at a land developing company that sold land for credit to persons with very low incomes. The contract established monthly payments and persons who had fallen behind in these ran the risk of losing their land. I reviewed the cases of individuals who came to pay up after various months of delay in their payments. It was impacting to see how they took out bills, all rolled up, obviously the product of their “nest eggs” accumulated little by little. The majority of the cases had a solution and were fixed immediately. What most impressed me was that at least one of three persons who had their matter resolved wanted to give me a few coins as thanks. These were people who were accustomed to having to navigate the turbulent waters of a bureaucracy devoted to abusing the population instead of complying with its most basic responsibility.

Corruption has many faces and entertains many derivatives. Many call for interaction between public and private actors, but others are exclusively one or the other. White collar crime, an employee taking things from his workplace, is not very different from tax evasion. The use of privileged information with respect to public works about to be constructed has been the legendary way that public functionaries have acquired wealth throughout history and does not involve private actors but, in essence, is not very distinct from striking a bargain with constructors that submit a padded bill and divide the spoils among the civil servants responsible.

Some twenty years ago, when the express kidnappings began, I went to the drivers’ licensing office to request a change of address so that mine would not appear. Armed with a copy of a friend’s office’s property tax receipts, I went to request the change. I explained the reason and the response was “one hundred pesos”. Not sure to what the officer referred, I asked for the concept or area involved. The answer was fascinating: “the service costs one hundred pesos, whatever is changed”. I asked, sarcastically, if that included a change of name. “One hundred pesos for any change”.

Traffic police perhaps constitute the most frequent “interphase” between the authority and the citizen. When someone goes through a red light or makes an illegal turn the matter is clear and transparent, not subject to interpretation. However, the great contrast between licenses in Mexico (at least in the Federal District) and the rest of the world is that no driver there knows the traffic rules and regulations. First, these change as if they were shirts: there is no new local government that does not merit a new regulation of its own, usually one more ludicrous than the previous. But in the DF something else happened: in the interest of reducing or eliminating the corruption at play in the issue of drivers’ licenses, the solution of our esteemed bureaucrats was to eliminate the road test and the knowledge and vision examinations. This may have reduced corruption in the administrative process, but I wonder whether it isn’t more corrupt to allow people to drive who do not know how or who never found out that there are rules for driving. Inevitably the police abuse the unwary (and ignorant) driver. Maybe that’s why they keep changing the rule book.

In the State of Mexico, police officers frequently stop cars with license plates from the DF, independently of whether or not a traffic violation existed. It’s sufficient to threaten to impound the driver’s license or the vehicle registration certificate, if not the vehicle’s license plates, “to ensure payment” for the best of us to start to shudder.

The point is that clear rules do not exist, rules that are known to all, that are rigorously applied, key elements in a Rule of Law. Corruption is the product of the entire structure of government created and conceived to control the citizen. When the Federal Government was almighty the worst and most absurd excesses of the wholesale corruption were controlled. Today every police officer and every inspector or functionary has a life of his own and conceives of the post as a means to get rich.

No one should be surprised that the economy is at a standstill and that the citizenry despises the government. The problem is not the State but the system.

www.cidac.org

@lrubiof

Luis Rubio

In 1982, in the middle of the maelstrom that he had precipitated, former Mexican President José López-Portillo affirmed that “I am responsible for the navigating but not for the storm”. It never occurred to him to think that when a ship is piloted directly into a storm the probability of its being swept away increases dramatically. That’s how Mexico wound up in 1982. The risk today is distinct, but none the lesser.

It is worthwhile to look over what happened in the seventies and at the beginning of the eighties because that time is frequently regarded as a great moment of economic development. The Mexican economy had begun to experience structural limits in its growth since the mid-sixties, but it was then-President Echeverría, followed by López-Portillo, who forsook the model of stabilizing development in an attempt to accelerate growth with a swelling public expenditure, financed by foreign debt and inflation. After 12 years, the country was insolvent, to the degree that it took nearly two decades to emerge from the stalemate. In 1994-1995 Mexicans underwent the last crisis of that era and the social costs were enormous because those who have the least are always those who suffer the most, the ones that pay the cost of governmental excesses in the form of rapidly rising prices and unemployment.

It is absolutely logical and reasonable for a government to desire to step up the rhythm of growth and even more so when there is a surplus of capacity for this already in place. The problem, which we have traversed many times in recent decades, is that when the government spends excessively for an excessive amount of time, it exhausts the productive capability of the national plant, which immediately leads to an increase in imports. The latter, in turn, exacerbate the demand for dollars, giving rise to sudden movements in the exchange rate. That is, the reason why deficit spending is dangerous is not theoretical nor ideological but practical.

During these past months, with the drop in income from oil, the government, affected in terms of its own revenue, has seen growing pressure on the fiscal accounts, and the same has occurred with the balance of payments, where a relatively small deficit (of less than 1% of the GDP) went up to more than 2.5% recently. This implies that the demand for dollars is greater than the supply, translating into pressures on the peso. With respect to fiscal accounts, the government’s mushrooming deficit spending is exerting the effect of increasing the debt (that grew from 29% of the GDP to 44% over these past years), precisely when the storm in the rest of the world began to intensify.

When López-Portillo proclaimed that he had no responsibility for the storm he was right, but his argument was no more than a poor excuse to deflect attention from the risk that was approaching. Today Mexico does not find itself in an identical situation because the structure of the economy is very distinct, both because of the huge level of manufacturing exports and due to the fact that the exchange rate is floating (at the time it was fixed). However, the risks are similar, as we have been able to observe in the manner in which the peso has been losing value day in day out.

But the underlying problem is not the fact that more or less is spent, but rather that one person concentrates too much power to decide to engage in this spending without explaining its action and justifying it before a responsible opposition, serious and knowledgeable. In the crisis at the end of 1994, as related by Sidney Weintraub in his diligent study on that devaluation, the great problem was that the outgoing government incurred mammoth risks –it wagered on the stability of the economy- because it was not required to render accounts to anyone. The year 1994 was a particularly complex one for the country due to the political assassinations that characterized it and the Zapatista uprising, circumstances that would have been difficult to manage in the most developed and institutionalized of countries in the world. In Mexico, where we do not enjoy those features, the risk is infinitely greater, which is why 1995 was such a bad year in every regard.

“Democracies”, says Paul Johnson, “work best when the remit of politicians is reined in. The separation of the judiciary from the executive and legislative arms of government is a long-established principle. And in economic policy, too, politicians have begun to realise the value of limiting their own powers”. What seems so obvious to Paul Johnson is something alien to us Mexicans. Here there are no controls or checks of one branch of government over another and the effective faculties of functionaries are excessive, as the foreign-exchange crisis in which we are presently immersed suggests.

There is no doubt that the crisis we are experiencing is foreign-made, but the fact of not being well prepared to deal with it is 100% Made in Mexico.

The classics

In the last two decades the notion has become the vogue in the West, above all in the U.S., that history does not matter and that the past should be judged in the light of today, with present-day criteria. Along the way the classics of history have been forgotten, the lessons that afforded many of us the possibility of understanding the world within its context and as the heritage of the past. Civic-mindedness disappeared from the curriculum and Don Quixote, The Ramayana and The Odyssey, among so many others, even in simplified versions, are no longer read. Miguel Ángel Porrúa has just published a collection of “Classical Readings” for secondary school. Our future would benefit if secondary-school students were to have access to these readings, perhaps the best long-term antidote to the burgeoning international disorder.

www.cidac.org

@lrubiof

Luis Rubio

“Men will never act well except through necessity: but where choice abounds and where license may be used, everything is quickly filled with confusion and disorder”, affirmed Machiavelli in his Discourses. That is what the debate surrounding the legalization of marijuana seems like. It appears to me that three themes are merged and confused here and that they should be understood, each in its proper dimension.

First is the essential matter of the freedom of each person to do with his life whatever he wants whenever it does not affect third parties. This principle should govern any decision in issues of rules, regulations and control, in whatever ambit, and that of drugs is not distinct. There is no reason to prohibit their consumption in that the sole person affected would be the individual who decides to consume them. The project of Supreme Court Minister Arturo Zaldivar that was approved this week is, in this respect, impeccable.

The second matter is the fact that prohibition has not avoided drugs being grown (or manufactured), transported, or consumed. The sole accomplishment of the prohibition of drugs is the development of enormous consortia devoted to the trafficking of narcotics, the very consortia that, in order to function, generate a mega industry of corruption wherever they are and the violence that inexorably accompanies the latter. On the other hand, one thing is the prohibition of the consumption of determined goods and another, very distinct one, comprises the responsibility of a government to maintain its society at peace. Organized crime proliferates in all societies but not only owing to drugs: also at work are abduction, theft, the black market, gaming, and numberless illicit businesses that must be equally fought against. Deleting drugs from the equation would contribute to diminishing the power of organized crime but would in no way change the responsibility of the State to combat it.

Finally, the third issue is public security, by no manner or means a lesser affair and one that, while obviously linked with prohibition, is not the same as nor does it derive from this. Public security is concerned with the quality and strength of the system of government that a society possesses and that is observed in everything: in the continuity of governmental policies and programs, in the state of education, in the quality of the infrastructure, in the administration of justice and in the respect enjoyed by the police. A strong government (large or not) is one that does not bend with the political winds-at-play but rather functions within a context of laws that effectively limit, through checks and balances, the actions of the politicians who enter and exit the realms of power in consistent fashion.

The nodal point is that decriminalization of the consumption of an innervating substance has nothing to do with public security: this depends on the quality of the government. Although it is obvious that the potential decrease in the earnings of the drug traffickers could contribute to less insecurity, this concerns two distinct issues. In our Mexico’s, in order for drug decriminalization to truly exert an impact on public security it would be the Americans who would have to effect this and not only with Cannabis. The overwhelming majority of narcoprofits derive from the U.S. drug market, thus a significant change in violence in Mexico would not be expected. This is not an argument against decriminalization: only one about the expectation that this would contribute to diminishing the violence.

Spain and the U.S. are two nations in which many more drugs circulate (and are consumed) than in Mexico, but neither of the two is characterized by the levels of violence seen in Mexico on a daily basis. The difference does not lie in drugs being legal or illegal in those nations but instead in that in both there is a solid governmental system that looks after the citizenry. While the conception vis-à-vis drugs is radically distinct in those two countries, the common denominator is the existence of solid judicial power, widely respected professional police forces and effective protections for citizen rights. None of these things is true in Mexico.

Mexico’s decriminalization of the consumption of one of various drugs constitutes a step forward with regard to the principle of individual freedom and that is a milestone in itself. But let’s not ask for the impossible.

Supreme Court

In a system of separation of powers the President proposes and the Congress disposes. That’s the golden rule of checks and balances. However, judging by the controversy regarding the two pending nominations, Mexico continues being a dictatorship. The President is upbraided for not appointing his friends or favorites (as, incidentally, his peers in other latitudes do with frequency). This seems to me an absurd proposal: why would one appoint one’s enemies?

The key is not the president but the Senate, whose function as counterweight consists of evaluating the members of the short list submitted by the president and acting in consequence. In a democracy that is the crucial constitutional control.  It is the Senate where all eyes should be focused on to force it to fulfill its crucial mandate and ensure that whoever comes to be a member of the Supreme Court would possess the merit and quality to do so, independently of his friendships. That’s where the society should call to demand democratic accountability. In view of the Court’s recent decision, there may never have been a more momentous time that this.

Harry Truman soon found that “whenever you put a man on the Supreme Court he ceases to be your friend”. That’s the democratic way.

www.cidac.org

@lrubiof

Luis Rubio

According to an anecdote that modernizes a story told by Plutarch in his Lives, an exhausted U.S. banker was found resting in a small fishing village on the Yucatecan Gulf Coast of Mexico.  Every day he watched a fisherman set out to sea at daybreak, returning with a few fish and then he stayed in his hammock, amusing himself by spending time with his children and playing the guitar with his friends. The banker asked the fisherman if he would like him to help him build a great fishing business. The fisherman seemed to be interested, so the banker went on: he could get a group of investors together, you could buy several boats, and you could set up a big fishing business, including processing, canning and distribution. You could strike it rich, but you’d have to move to Mexico City or to Los Angeles. And how long would it take to do all of that, asked the fisherman? About fifteen or twenty years, responded the banker. And then what? That’s the best part, said the banker: when the time is right we will register your business on the stock market and you will become an immensely wealthy man. Millions? And what then? With a big smile, the banker responded:  “Well, with that money you could retire, go out to sea in your boat, spend hours lying in your hammock, amuse yourself spending time with your children and play the guitar with your friends”.

The circularity of the anecdote evokes much of life’s absurdity and obliges one to reflect on the why and wherefore of that life. Although there are thousands of books devoted to this theme, the majority of these self-help, perhaps the last place that one would expect great lessons in this matter is in a text by Adam Smith, the renowned intellectual of capitalism who in 1776 published his famous work The Wealth of Nations. Russ Roberts has just published an amusing book that translates Smith’s concepts presented in a book printed in 1759 entitled The Theory of Moral Sentiments. Roberts’ current book, How Adam Smith Can Change Your Life*, claims Smith’s concepts for modern life.

As one could intuit from the initial anecdote, the entire sense of Smith’s work, seemingly contrary to the myths associated with his most famous book, is the futility of money as the pathway to achieving happiness. Beyond a critique of materialism, Sentiments addresses the capacity that we humans possess to beguile ourselves with the seduction exercised by money, power and fame. “Those seductions never satisfy”. Smith’s great insight, says Roberts, is that “our behavior is driven by an imaginary interaction with an impartial spectator”. We do not judge ourselves by our principles but by what that imaginary companion thinks of our acting. That “spectator” makes us see whatever deviation there is with respect to our own code of behavior.

The core point that Roberts extracts from Smith’s text is that “economics is about something more than money. From there, Smith’s book becomes a roadmap for each individual to find his own happiness. Despite the natural avarice of humans, Smith affirms that man is profoundly moral. “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him”.

For an author inexorably associated with the ruthless creation of wealth as something not only meritorious but also absolutely legitimate, Sentiments affords a much richer perspective of the vision of Adam Smith. Russ Roberts dedicates his book to explaining the logic of the “book of manners” that Smith wrote through chapters entitled as follows:  “How to know yourself!”, “How to be happy”, “How to not fool yourself”. In his most well-known book, Wealth, Smith writes nothing about altruism, kindness or compassion. How could that be? Roberts asks himself.

The bridge between the two books, and between morality and economics, which Robert discovers is to be found in the notion that selfishness can lead to others being benefited. Men “are led by an invisible hand to make nearly the same distribution of the necessities of life, which would have been made, had the earth have been divided into equal portions among all its inhabitants, and this without intending it, without knowing it, advance the interests of the society, and afford means to the multiplication of the species”. Economics and morality end up being two sides of the same coin that are, in the last analysis, inseparable.

The next president or the National University

For many decades after 1968, the UNAM 6 was abandoned as a place of political turmoil and the government’s objective was no more than to isolate the country from the brewing and permanent conflict rather than building a transcendent educational capacity. A better leadership and thrust over recent years has sought to reconcile the two characteristics of the national university: an institution for the masses with the mandate to educate over two hundred thousand students and the institution of excellence that characterizes many of its research institutes. The next president will be key because he or she will determine whether the UNAM returns to the era of conflict or consolidates what has been achieved and takes the decisive step towards the transformation that education, the economy and the country require to successfully enter the twenty-first century.

Of all the candidates for the presidency only one has the future in his sight and a project to advance it. Sergio Alcocer has extensive experience both in and outside the UNAM and has the cosmopolitan vision that is indispensable to match the professional side of the institution with the labor market demand, while he also understands well the link between basic and applied science.

*How Adam Smith Can Change Your Life, Penguin

www.cidac.org

@lrubiof

Luis Rubio

“The objective is to protect the union, defend its privileges and guarantee the source of support that teachers represent for electoral processes”. I don’t know whether that would be admitted by some PRIist strategist, but that has been the strategy of the Mexican government with respect to the teachers’ union from ancestral times. Education in Mexico was conceived as an instrument for controlling the population and the union became a useful means for achieving and upholding the ideological hegemony that “the system” strived for. The child, the supposed beneficiary of education (free, lay and secular in the PRI mythology) was secondary in the scale of priorities. The same is true of the union: as the “useful idiot” of Soviet political literature, what was important was the control and not the result. Today, nearly a century later, it is possible to appreciate the cost of such irresponsibility

It would not be surprising to anyone who observed the history of the education of the country, ranging from debates on the constitution to the socialist education of Cárdenas, that the prototypical Mexican student obtains less than 1 in average score in the Programme for International Student Assessment (PISA) test, the lowest score of any country participating in this evaluation. Instead of dedicating itself to the child, supposedly the subject of the tutelage, the political system has for nearly a century worked to keep the population quiet, in check and subordinate. The problem is that today’s world does not countenance that reality: the economy does not know how to deal with unavailing subordinates instead of creative persons, who are likely to contribute to the development of a modern economy.

The educative reform, with all of its imperfections, at least attempted to pinpoint the educative problem characterizing the country.  Whether due to fear of failing the evaluation or the corruption of their leaders, the National Coordination of Education Workers (CNTE) as well as the National Union of Education Workers (SNTE) defend an educative schema that implies maintaining a status quo that only serves those leaders: it does not help the children, it does not contribute to the development of the country and does pose a threat to political stability. That is, the educative system engendered to perpetuate stability and the PRiist empire ad hominem has listed to the opposite flank: now the risk of education rendering development (and stability) impossible is real.

What is desirable, rational, would be to accept that the “historical” solution (corporatism oriented toward control rather than development) does not work and has become an unmanageable problem. The political and ideological rationality typifying the regimen’s educative policy –control and subordination- undermines technological development, hastens poverty and prolongs underdevelopment. What appears to be so obvious continues to be anathema for the greater part of the political world. However, until the disappearance of that corporatist view, the country will endure sunken in its vicious circles. The problem is one of essence: it must be acknowledged that what exists does not teach how to think, the key to development, or we will continue to press on toward underdevelopment.

While perhaps exacerbated in Mexico, the problem is not exclusively Mexican. Countless countries face the same challenge: how to remodel education into a key factor, a positive factor, for economic development. All current educative system evaluations exhibit absolute incompetence and the examinations reveal a systemic failure that primordially affects the most vulnerable population: the poor. Instead of education working as a transformer means that opens opportunities for development to children, the former preserves the poverty and vicious circles that characterize us.

The relevant question is what or who should be placed at the heart of the educative system. For almost a century, the two factotums of education in Mexico have been the teachers’ union and the bureaucracy of the Secretariat of Public Education (SEP). The system was never designed to nor did it pretend to educate children.  I ask myself whether it is not time to start there: by positioning the child at the center of the equation.

To do that would imply altering all of the mythos of education, beginning with the public variety. In Africa and Asia interesting experiments may be observed with regard to enterprises devoted to education that have achieved at least a consistent and transparent educative system yielding increasingly better results. I’m not proposing ending public education, but rather promoting and favoring the growth of that ogre, the private school, as a means of generating competition and disruption in, feasibly, the last bastion of nearly unmitigated governmental control.

Private education has comprised an exclusive realm of the population with resources, but in Asia and Africa its greatest growth is among the most poverty-stricken, where otherwise interesting innovations are discerned. The best proof that this is viable is that there is practically no family in Mexico that would not prefer a private education for their children were it to have the possibility of defraying the cost of one. A mechanism of school vouchers for financing it would allow for forcing unionized teachers to “get their act together” but also,  –above all- would uncork options for the neediest Mexicans and, in educative terms,  –those left behind.

The problem of education is not budgetary but political. It is time to forsake the objective of keeping the population ignorant and the answer lies in competition, which can only arise from for-profit enterprises committed to education.

www.cidac.org

@lrubiof

Luis Rubio

There is practically no governmental speech or relevant document in which the growth of the economy is not manifest as a cardinal objective. Economic growth is like a happiness elixir because it reduces tensions, solves problems and facilitates daily life, in addition to generating wealth, jobs and opportunities. It is not by chance that everyone wants to achieve it.  The problem is that, as we have seen in the last decades, it is not easy to attain. Diverse strategies have been tested, some more successful than others, but it is clear that a high growth rate and one that is sustained over time has not been procured.

Although there are many explanations for what is lacking, what does exist or what is required is sufficiently plain. For example, no one –or no reasonable person- doubts that productivity comprises a central factor, as is investment; nor is it in dispute that the NAFTA constitutes a key mechanism for attracting investment, increasing exports and solving balance-of-payments predicaments. It is also obvious that none of these factors suffices and, more importantly, that not all of the population has benefited across-the-board.

A comparison may explain the missing ingredients: in 1997 the world awakened to the news that the region of the planet that had experienced the greatest growth for decades, Southeast Asia, was in crisis: devaluations, sudden nosedives in incomes, price increases, loss in value, that is, all the elements that we Mexicans have lived through numerous times, but unknown in that zone. Soon, however, differences became apparent. Korea, for example, immediately understood that the problem has been too much investment in infrastructure and nearly null growth of productivity, leading it to an about-face in its strategy and a prompt return to an approach of sustained growth that has converted its population into a citizenry with one of the fastest growing incomes. Why haven’t Mexicans achieved something similar?

In his study on the growth of the U.S. economy, Robert Higgs* says that there are three types of capital: material, human and intellectual. “In the long run, it is impossible to build up one part of the capital stock without also building up the others… Witless men behind witty machines would be of no use. Understanding these interdependencies is at the heart of understanding the process of economic growth. To build factories is commonly recognized as an investment, but to obtain education, to purchase improved health, to seek new useful knowledge –these too are investments. And the rate of return on investment in a particular kind of capital depends not only on the size of existing stock but also on the available stocks of complementary kinds of capital.”

In other words, for the economy to grow, productivity is key but for this to be achieved, investment is indispensable in the three types of capital: material, human and intellectual. Hernando de Soto adds another component: according to him, what distinguishes developed countries from those that are not is the existence of a transparent property regime. Thus, although his book is entitled “The Mystery of Capital”, in reality there’s nothing that mysterious about it. The great problem is to find the way for all of the ingredients that make growth possible to be present simultaneously in order for it to occur.

Therefore, while it’s not due to chance that the political discourse of the last half century has been saturated with promises of growth –demonstrating the understanding of its importance- it’s also not by chance that governmental action (and the content of the discourse itself) reveals a total lack of understanding of the nature of the phenomenon of growth or an outright absence of willingness or capacity to make it possible.

It is obvious that there has been no dearth of attempts to elucidate the diverse components of the growth equation, but the tangible fact is that this is not being accomplished and part of the reason, it seems to me, is that the element of interdependence of which Higgs speaks has not been understood: the diverse ingredients must be present; none is adequate in itself. The case of Korea is suggestive: while there they are analyzing the requirements that the academic curricula should possess in fifty years, in Mexico we continue to be entrenched in a bureaucratic and union conflict typical of the past century, apparently insoluble. Korea has been attacking all of the components of growth, advancing on each front in the best manner possible. Education is perhaps the most visible of the components, but its transformation in institutional and legal matters is striking; above all, it demonstrates a perfect understanding of the centrality of trust and the diverse type of capital in growth.

In its “zero-based” proposed basis for next year’s budget, the government has opened an unusual opportunity. While it is impossible to alter the entire rationale of a governmental budget in a few months (and it is impossible to do it within the context of the presidential succession that inexorably dominates the national panorama at this moment in time), it is imperative to initiate a sensible discussion in this respect. Part of our problem is how public monies are handled and whether they serve to promote investments in the three types of capital required for growth. Another part deals with the issues of power that lie behind the lack of definition of property rights. None of these affairs is simple or easy to solve, but we should all take the opportunity to debate it seriously because only in this manner might its causes begin to be attacked.

*The Transformation of the American Economy: 1865-1914

www.cidac.org

@lrubiof