Luis Rubio

In his book on inequality, Thomas Piketty obliged the world to confront a politically explosive matter. Although his critics have quashed most of the argument in technical terms, nothing can dislodge the political transcendence that inequality has acquired. Beyond its usefulness for electoral and populist ends, inequality is inherent in human nature; the relevant question from my perspective is whether this has reached such an extreme that it is a menace to stability and if this is so, what should be done about it.

According to Piketty, the proportion of wealth in the hands of a small worldwide elite will continue to grow because the rate of return on the capital is greater than the economic growth rate. His conclusion is that “capitalism generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based”. His solution is to tax the rich.

Ian Morris, a historian, has studied inequality through the last fifteen thousand years (compared with Piketty’s 250). Morris’s conclusion is that each era develops an equilibrium in terms of equality-inequality that ties in with the circumstances and needs of the moment.  “Different economic systems function best with different levels of inequality, creating selective pressures that reward groups moving toward the most effective level and punish those moving away from it.  It is also clear that transitions between systems can be particularly traumatic, and it is possible that we are the verge of such a transition now”.

The main source of inequality at the international level in the last decades appears to arise from a combination of two factors: on the one hand, the accelerated population growth in the seventies and eighties (a period during which the world population doubled), and, on the other, the growing globalization of the economy. Both factors have expedited inequality, above all because, on increasing the reserve of talent worldwide within the context of globalization, each person –from the most modest worker to the most pretentious entrepreneur- was suddenly propelled into a space of competition that had never before existed. In everything relative to standardized production, it is the same whether a product is manufactured in Malaysia or in Guanajuato. On its part, technology facilitates the transfer of services, putting enterprises at the most obscure corners of the planet in competition with each other. In this context, a child born in the northern Mexican city of Hermosillo is competing head to head with another of his same age in Shanghai or in São Paulo. The question is whether he has a similar capacity (or “human capital”) for competing.

In this era, the capacity to compete successfully is reduced to two fundamental factors: costs and human capital. Costs are determined by tangible aspects such as infrastructure and market access, as well as monetary factors, such as exchange rates. Human capital is concerned, essentially, with the education that each person has and his capacity for functioning in niches of high competition, usually determined by the technology itself.

In his book Unequal But Fair, Marc de Vos establishes another dimension. According to him, the accumulation of old money does not determine, as Piketty affirms, future inequality, but rather it has much more to do with the capacities of each individual. De Vos proposes that we are in transit toward an economic system that fuses human with financial capital in which the human element is increasingly becoming dominant. De Vos’s prescription is not to lose oneself in futile attempts to tax the capital but preferably to broaden opportunities for those who are losing ground. This, it appears to me, is the correct focus and the great challenge of the economic development of Mexico.

The inequality in the country stems from two key factors: on the one hand, the enormous polarization that exists in the educative system that tends to preserve (thus, expanding) the inequality. Insofar as a child from the urban middle class retains better opportunities to learn than the son of a farm worker in the southern Mexican state of Oaxaca, the inequality gap grows. In this regard, it is obvious that the core proposal of the educative system –to level the playing field for all children independently of their circumstances or origin- has been an outrageous failure. For many decades, this issue did not seem important because the fatal combination of technological advancement and globalization that has inexorably exacerbated the differences had not yet materialized. Today the challenge is monumental.

The other source of inequality derives from the absence of competition in the Mexican economy, which entails the permanence of sources of wealth of the type that Piketty observes as the engines of a growing gap. A monopoly (or the control of a market) implies that an entrepreneur, union leader or politician does not have to compete, ensuring what economists denominate “rents”, excessive profits that do not derive from the market. In this respect, it is the same for a company that controls a determined service or product, the union leader for whom a percentage of the company’s contracts is guaranteed or the politician with foreknowledge of where an airport is to be built and dedicates himself to buying up land in the area before the fact in order to sell it later at a huge profit.

Inequality in Mexico did not fall from the sky. It was created by individuals of flesh and blood. Thus, it can in turn be dismantled.

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                                                                     Luis Rubio

The need for and importance of an efficient government is obvious and should not be cause for much discussion. However, after reading the fascinating book of Micklethwait and Wooldridge*, it appears evident to me that this will not be achieved as long as basic matters such as what efficient government is and the way that the Mexican State is governed is resolved. While some countries are undergoing what the authors call the “fourth revolution” of the State, in Mexico we haven’t even reached concluding the second, the one that took place at the end of the XVIII and the beginning of the XIX Centuries. Such is the magnitude of our backwardness.

The first revolution to which the authors refer concerns the conformation of the State in the XVI Century and that consequently exuded a semblance of order and peace. That was the era of centralization of power, of submitting feudal lordships in Europe and consolidation of the Emperor in China. The function of the government during that stage was exercising power and the legitimacy of that power was measured by the efficiency of its management, above all regarding the security of the population (the reason for which, according to theoreticians of the era such as Hobbes, the latter was disposed to submit itself to a strong government). Monarchs instituted the monopoly of power within their territory, subordinated the sources of authority and power that defied them (including the Church) and conferred enormous power on the great administrators and bureaucrats: the era of Cardinal Richelieu, who constructed efficient administration and a tax collecting system. According to the authors, Europe procured a much stronger system of government than that of India (plagued by its perennial weakness), but one that was concurrently much more decentralized that that of China, sanctioning the proliferation of novel ideas, methods and, in general, boundless creativity.

The second revolution consolidated the liberal State precisely during the epoch of the French Revolution and the Independence of the United States. The new governors ushered in an era of reforms that had the effect of dismantling the systems of patronage of the previous era, incorporating meritocratic systems of bureaucratic promotion and constructing mechanisms of accountability. The result was the conformation of a civil service métier, the systematic attack on cronyism and privilege in the relationship between government and society, economic liberalization and constitutions designed to protect citizen rights. The third revolution was that of the Welfare State, and the fourth entailed the search for an effectiveness that would furnish the extraordinary efficiency of the system of government of Singapore but within a democratic and liberal context.

In Mexico the second revolution never concluded in terms of these authors’ nomenclature: a government was produced that was weak like that of India, but also highly rigid and centralized like that of China (XIX and XX Centuries), both of these inefficient in the extreme. A modern bureaucracy was never consolidated. For its part, in the economic ambit, liberalization was partial and incomplete: exceptions remain the norm, cronyism, parastatal (and private) enterprises that do not compete, protected spaces and distortive subsidies. More importantly, not only were the structures of privilege and patronage not dismantled, but they now began to be recreated and reinforced. The authors write that “Victorians (of Queen Victoria, 1819-1901) believed that governments should solve problems rather than simply collect rents”. The experience of recent telecoms reform, not to mention the fiscal one, situates us prior to the Victorian era…

One of the reasons why there is such dissatisfaction with the government is precisely its lack of efficacy, which in good measure derives from the rationality of a system of government whose focus is on controlling everything while preserving privileges for a few, and the gluttony characterizing it. The authors incorporate a discussion in their book that seems to me to explain much of what takes place in the reality of the country: in Mexico the private sector has had to transform itself in order not to be leveled by the competition and to grow and develop itself. Globalization has obliged it to raise its productivity, improve the quality of its goods and services and to compete for the consumer’s favor. Not so the government which, with the exception of its loss of revenue from declining oil prices, does not confront fundamental challenges.

According to the authors, many governments around the world implicitly assume that the public sector will continue to be immune and intact in the face of the technological advances and forces of globalization that have wreaked deep havoc on the private sector. That is, it’s not by chance that in Mexico we have a first-world private sector and a government system of the fifth.

The question is whether, in this context, it is possible to construct an efficient government such as that which the President proposed in his campaign. The evidence suggests that what permits –and, in fact obligates- the government to transform itself is the existence of forces and ideas that incite the change, just the opposite of what the government has been advancing: centralization, control and subordination. Mexico is clearly in urgent need of an efficient government because that is the condition sine qua non for development. However, as this book attests, efficiency derives from professionalism, the elimination of privileges and perquisites. Will we pole-vault into the fourth revolution or will we stay stuck between the first and the second?

*The Fourth Revolution: The Global Race to Reinvent the State, Penguin Press, 2014.

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 Luis Rubio

Trump ni neumen niti nerazsoden igralec, pokazal je velikansko spretnost pri prevzemanju jeznih volivcev. V vsakem primeru je njegova iracionalnost, kot pri severnokorejskem vodji Kim Jong-unu, sad računice. V nasprotju s poklicnimi politiki zelo slabo pozna javne politične zadeve, toda zaradi tega ni niti iracionalen niti posebno ideološki.

http://www.portalplus.si/1326/donald-trump-severna-koreja/

Luis Rubio

Is Trump as irrational as many brand him? Is he a fascist as other affirm? The evidence to date, as an excellent article by John Cassidy* suggests, is that he is a highly ignorant actor but, at the same time extraordinarily shrewd in the management of public opinion and the media. Reading about the recent explosion of a nuclear bomb in North Korea, it appears to me that Trump is a great poker player, which implies a great capacity of control and calculation. Perhaps a pertinent question is whether we Mexicans will be equally shrewd as players.

George Friedman writes thus: “Poker is a game in which fear and greed compete… Part of poker is the player’s self-control, but the most important thing is the manipulation of fear, avarice and the reason of the other players, obliging them to fall into foolishness… The objective of the player is to create a sensation in others that you are an unpredictable soul, not given to calculation but the product of nonsense and carelessness”. According to Friedman, the North Koreans have become masters in the art of irrationality, utilizing it as an instrument of manipulation and blackmail of the orbit’s main powers.

Clearly, Trump is neither in the same league nor of the same rationale as the leader of North Korea, but his skill is nonetheless impacting in terms of exploiting the media and capturing the imagination of a not-at-all irrelevant portion of the American electorate. Trump responds to an electorate that is especially irritated with respect to its present and the future:  “The angriest and most pessimistic people in North America are the people we used to call Middle Americans; middle-class and middle-aged; not rich and not poor; people who are irked when asked to press 1 for English, and who do not understand why ‘white male’ became an accusation instead of a description… White Middle Americans express heavy mistrust of every institution in American society: not only the government, but corporations, unions, even the political party they typically vote for—The Republican Party of Romney, Ryan and McConnell, which they despise as a sad crew of weaklings and sellouts.  They are pissed off.  And when Donald Trump came along, they were the people who told the pollsters, ‘that’s my guy’”.**

Trump does not adhere to any rule, but he is very sure about the priorities of the supporter base that he has been able to woo. The use of Mexico, the Mexicans and the border is, in his logic, absolutely rational. Says Cassidy: “Trump has sought to fan the fear that America is losing its heritage, and that the political establishment is complicit in a betrayal. The image of a big wall at the southern border is central to Trump’s campaign—not just in policy terms but also psychologically. It represents a physical manifestation of the desire to place a large stop sign before the onward march of history”.

Paul Berman wrote a book fifteen years ago*** in which he describes the inability of the political establishment to understand the role of the irrational  in human affairs, above all its failure in accepting the possibility that big groups of persons act in a pathological manner. Although he refers to Islamic radicalism, the proposal of Berman is particularly relevant in this era of political polarization where the extremes come together. In fact, there are analysts who argur that it is not inconceivable that many who historically vote for the Democratic Party might feel equally attracted by the bid to recreating North American grandeur. The extremes feed on each other and unite in their extremism.

How to deal with the resentment and sensation of indignity paining many of the potential voters for Trump? That, of course, is the challenge for the Republican establishment as well as for the people of the U.S. in general; but the challenge is not a lesser one for Mexico and Mexicans. Berman notes that there is a tendency to think that it is possible to persuade the extremists with rational argumentation and correct actions. However, if the motivation of the prospective voters for Trump is emotional or “irrational” in the Friedman sense, rational positions are irrelevant.

Trump is neither a crazy person nor an irrational actor, but he has exhibited enormous adroitness in taking an irate electorate captive. In any case, his irrationality is, as in the example of North Korea’s leader Kim Jong-un, the fruit of calculation.  Trump is a successful businessman who not only knows how to handle suppliers, employees, politicians, bureaucrats and union leaders, but who also understands how the world works in general. In contrast with professional politicians -his rivals for the presidential nomination and for the Presidency-, he surely is very ignorant about public policy issues, as tends to occur with businesspeople who venture into politics, but that does not make him irrational nor particularly ideological.

The challenge for the Mexican Government lies in which approach to employ to establish a bridge of communication without adding additional fuel to the fire. Up to now, the Mexican Government has weathered the Trump storm well, not granting space for confrontation. The government’s risk is to be trapped in its own discourse and anti-U.S. attitude. The logic of an approach would be very simple: it is not to convince him and dissuade him, because that is impossible and unacceptable to him; but as with all candidates of countries that are key for Mexico, the bridges are of the essence.

*New Yorker, December 28, 2015

**David Frum: http://www.theatlantic.com/magazine/archive/2016/01/the-great-republican-revolt/419118/

***Terror and Liberalism

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a quick-translation of this article can be found at www.cidac.org

Luis Rubio

In Greek mythology, Panacea was the goddess of universal remedies: there was no ill she could not cure. That is what the concept of centralized command (mando único) seems like, which in recent years became a mantra: no sooner in position, this one and only police command structure will solve the security problem that the country is undergoing and end of matter.

Let us begin at the beginning: the security problem was not born yesterday and originated in a system of government created nearly one hundred years ago that was never brought up to date. Against what was established as a federal system in the Mexican Constitution of 1917, the political system that in fact emerged with the foundation of the National Revolutionary Party (PRN) in 1929, was a centralized one, pledging to vertical control. The Federal Government made itself responsible for security in view of its decisive weight, utilizing the state governors as mere instruments. Imbued with that same weight it imposed rules on the drug trafficking mafias: more than negotiations, the Federal Government was so powerful that it limited the movement capacity (and damage) of the Narco within the country, with the obvious payment of “donations”. It worked not because Mexico had a modern, professional and functional security structure, but because the Federal Government had the power to control everything.

The country progressed but the system of government continued the same. Progress implied new economic, political and social realities that, de facto, came to limit the capacity of the government, to what we have arrived at today: a dysfunctional government system that does not fit the reality of the country. On the plane of security, the same spirit of control persists but without the instruments to making it effective.

The concept of centralized command at the state level arose from the recognition that the old arrangement had stopped functioning, but it constitutes, in its essence, a reproduction of the old system, albeit at the local level. If conceived as a temporary solution, the centralized command is not a bad solution, but it is far from being perfect because, although it might permit exiting from the immediate crisis, it is not part of a broader plan to transform the system of government. The apparent contradiction is key.

The recent discussion on the centralized command ensued from the assassination of the Municipal President of Temixco and the successive decree to unify the police structure of the state under one command emitted by the Governor of Morelos state. The discussion is peculiar in three respects. First, as soon as “centralized command” is mentioned, an absurd defense surfaces sustained on Article 115 of the Constitution (which establishes the structure of governance of local governments), as if the municipality’s sovereignty were real and, more importantly, as if the great majority of the country’s municipalities were functional in terms of security. Second, the same concept unleashes passions among those who see in the concentration of state power a solution to the problem of security, without realizing the implications of this or the corruption and/or low level of the majority of the state police forces that would be charged with ensuring the security of their states. Finally, the legal weakness of the decree to create the centralized command issued by the Governor is patent, a weakness that, taken to its logical conclusion, would probably be brought down by the Supreme Court if a municipal government chose to challenge it.

Part of the problem lies in that the term ‘centralized command’ is the amalgamation of many other concepts: as if Guadalajara, a big city, were the same as a tiny municipality in the state of Michoacán.  There are many municipalities that possess the size and circumstances that should allow them to see to the problem and take responsibility for it, whether they actually do or not. However, there are innumerable municipalities whose economic and institutional frailty implies that they will never have the capacity of constructing a security system of their own. In addition, there are municipalities, such as that of Cuernavaca (capital of Morelos, next door of Temixco), where everything indicates that, instead of advocating the development of a security system, its new government committed itself to “selling the locality” to the highest bidder, inevitably some coterie of organized crime. The Governor’s decree clearly seeks to respond to this fact, but undertakes this within a flimsy institutional and legal framework and, no less importantly, without a vision for the long term.

In that long term, security cannot be imposed. It must be built from the bottom up. Countries that enjoy faultless security have block or neighborhood police officers who know the residents, and who are recognized by the population. As illustrated by the intervention of the Federal Government in Michoacán, the only thing achieved was stabilizing the situation, not resolving it. That stability should have turned into the foundation to construct a new institutional and police framework, but that did not happen. The solution, at least in municipalities (cities) of a certain minimal importance and up, cannot be other than building a new police and security system, under rules that are compatible with the aim of conferring confidence and security on the population. Of course, municipalities lacking the size and capacity to confront the security problem will have to be taken care of under other rules, but the risk that a governor would abuse his or her powers is not small.

The majority of our governors comprise a conglomeration of satraps who perceive their post as a means to get rich or to use that office to run for the presidency. A centralized command police structure conceived as an end in itself would do nothing other than facilitate their capacity to advance in their personal objectives. That is why it is so important to recognize that the centralized command can only serve as a temporary means for building local government capacity. All the rest is no other than a way of preserving a decrepit system of government that is, at the end of the day, responsible for the insecurity that is rife at present.

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a quick-translation of this article can be found at www.cidac.org

Luis Rubio

We should “try to be the parents of our future rather than the offspring of our past”, sentenced Miguel de Unamuno, the enlightened Spanish philosopher who confronted the hordes of fascism at the time of the Civil War. The beginning of the year is auspicious for reflecting on how it would be possible to relaunch the national political and economic life –build the future- in the light of the paralysis in which Mexico lives and the irrationality –on occasion not distinct from a civil war- that seems to dominate the current collective unease.

The only thing not in dispute is that the malaise is generalized and cuts across the country’s social classes and regions. The cause of the phenomenon is more complex, but I have no doubt that at its heart lies enormous disenchantment with the government, politics and politicians. Although corruption has become the explanation that many offer for their own dispiritedness, my impression is that there’s much more at stake in the common anima than the corruption factor because the latter is not novel or exceptional in the nation.

Some time prior to rumors running rampant about mansions, contracts, bribes and infrastructure ventures associated with certain construction companies, the country was pressing headlong toward a clash of expectations. The government had initiated its six-year term with flying colors, giving no quarter. Time prior to its inauguration it had already convinced key international publications of its enormous transformative project, pledging things that were never realistic but that, nonetheless, served as self-promotion. The onslaught was multifaceted and generated an immediate assortment of expectation, fear and repudiation. For some the promise of a reformative project indulged the hope that, at last, the country would take a leap forward. For others, media control, forced dismissal of journalists and implicit censure would entail a return to the least sterling times in the life of the country. The changes instituted in the constitutional as well as the fiscal plane led to wide-ranging disavowal in parts of the society. But the government did not slacken its pace.

For me it was evident that there was an overarching problem in the governmental project because there seemed to be no connection between the ambition inherent in its reforms and the political activity necessary for implementing these and guiding them to a successful conclusion. It was clear that in the government it was surmised that, once approved, the reforms would establish themselves. In this manner, the diagnosis appeared to be that the true stumbling block to the reforms was not the reality of each activity or sector but instead the Congress: consequently, by suppressing the Congress the obstacle was eliminated. No sooner said than done, the Congress was obviated and the reforms were passed. The problem is that the reality did not change nor would it ever change if the reforms were not implemented, which would inexorably affect interests, many of these essential to the political coalition that sustains the President.

Thus, the clash was inevitable and crystal-clear. What was surprising to me was the incapacity of the President to respond. In the last analysis, the President had exhibited a prodigious capacity for negotiation in his political life and great astuteness in his strategy of making the presidential candidacy his own. How, within this context, can the paralysis be made intelligible? Time has led me to understand this better.

For many politics is something sullied and unscrupulous, but there is no society in the world and in history that survived without politicians because there are always irreconcilable differences, contrasting objectives and numerous sources of conflict. Politics is an activity that strives to resolve conflicts, channel disputes and reconcile dissonant stances. In a democracy, politics retains the additional function of enticing followers, convincing the populace and currying favor with popular support. That is, democracy exacts not only negotiation among interests but also persuasion of the society and each of its components.

In the eighties Mexico experienced the initiation of the process of the political transition from politics centered on the palace intrigues of the PRIist world to the political hustle and bustle oriented toward winning over popular backing as well as that of the productive sectors, public opinion and diverse social interests. This became necessary because otherwise everything was paralyzed. The process was not smooth but nonetheless uncontainable and all of the politicians had to learn to manage both worlds, some with impressive success.

The current government, as if descended from Mars, sought to return the country to the PRIist primitivism era of the fifties, assuming that participation of the population and its diverse elements were a governmental concession and not a political reality. It is within this context that I have come to understand the paralysis and the government’s incapacity to adapt itself to the XXI century. Therefore, that sinking feeling is not the product of chance but a combination very much sui generis, our own: a government that does not understand and an excessive governmental onus due to its immense capacity to impose itself upon all types of issues thanks to the arbitrary attributions it enjoys. A fatal admixture because it impedes the development of a competent government for the XXI century and because it expedites and endorses corruption.

The big question now is whether, on the one hand, the society is already welded to its anima and, on the other, whether the government will be disposed to change. In an open economy, the government is obliged to explain, convince and join in because that represents the sole possibility of advancing its projects and objectives. So great are the opportunities that it would be regrettable were these to be thrown overboard in the face of the government’s own obstinacy.

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                         Luis Rubio

Among the few things on which there is no dispute between politicians and economists is the relationship between productivity and economic growth. No one doubts that greater productivity translates into greater growth. It would seem evident that the total national effort should be concentrated on raising productivity. Unfortunately it’s been much easier to determine the problem than to solve it.

Two recent studies illustrate the nature and dimension of the problem as well as a possible response for Mexico’s own reality. In its annual report, the U.S. Council of Economic Advisers (CEA) approaches the study of the economic problem that most affects the politics of that country, the matter that has become the American political mantra: the deterioration of the middle-class income and addresses the explanation of what would have happened had the growth rates of productivity during their Golden Age (1945‒1973) persisted. The conclusion of the CEA report is that the mean income would have doubled.

Although the specific explanation is distinct, the story is similar in Mexico: the economy experienced high rates of economic growth in the Post-War era that dissipated from 1965 on, the year when productivity in the countryside began to decline, essentially because there was no land remaining to parcel out. The year 1965 was the last one that Mexico exported corn, denoting the initiation of a tendency toward increasing deficit in Mexico’s balance of payments. For nearly three decades, the country imported machinery and inputs for internal development, financing those imports with mineral and grain exports. When that binomial ceased being functional, the country entered into the epoch of crises: crises caused by politicians convinced that more spending solves all problems.

The solution that the country would require lies in what the economists have always known: productivity. It wasn’t until the mid-eighties, after various financial and political crises, that the country finally began to advance toward an economic schema that, it was trusted, would drive the growth of productivity. That was the logic of the liberalization of imports in 1985 and, eventually, the negotiation of the North American Free Trade Agreement (NAFTA). The objective of the liberalization strategy was simple and straightforward: utilize private investment and imports to submit the Mexican economy to competition and to oblige it to raise its productivity, which is nothing other than doing more with less. The presumption was that greater private investment within a competitive context would attract better technology, provide an incentive for productive-plant specialization and generate novel sources of growth.

Like so many other things in Mexico, economic liberalization was ambitious but insufficient. It did what was necessary but not everything that would be required to achieve the objective. Even today, thirty years later, a creaky and old productive plant subsists that refuses to adapt itself to global competition and that, protected by successive governments and an assortment of formal as well as informal protective mechanisms, subtracts from the growth and productivity of the economy as a whole.

The good news is that, in that same period, an extraordinary manufacturing plant with strong ties to exportation was established, especially to the U.S., which has become the sole growth engine of the economy. The great difference between the two components of the industrial sector is productivity. While productivity grows rapidly in the modern plant, it diminishes in the other. It would appear obvious that the solution resides in creating mechanisms that stress the growth of productivity, something that the government of President Peña understood from the beginning and incorporated into the public agenda.

The problem is that it isn’t easy to tackle the challenge. Rhetorical solutions (infrastructure, education, research, less bureaucracy and taxes) are valid and desirable, but do not constitute an integral solution. In any case, as illustrated by the way the economy was liberalized from the eighties, we are very poor at creating integral solutions; we always leave behind loose ends that respond to sacrosanct interests. In addition, what really raises productivity is less readily grasped than is apparent: entrepreneurial practices, technology, the functioning of the market and, reigning supreme, a context of trust and stability that the generated by the government.

The other recent study is the “Decade Forecast” of Stratfor, an American intelligence firm. According to this company’s predictions, the U.S. is presently entering into an era of greater insularity that is the product of the recognition of the limits of its own might as well as of the acceptance that there are other less aggressive ways of reaching its objectives than those procured in the last decade. According to Stratfor, the U.S has also come to understand that the North American environment (the three-country triad) is infinitely more important for its own economic success, the reason for its preparing to concentrate its economic stakes on North America, seeking to elevate the productivity of its economy, and with that the earnings of its population.

The message, and the opportunity, looks to be clear: as NAFTA shows, we Mexicans have proven to be exceptionally adept at taking advantage of opportunities when there is a framework of reliable rules that confer long-term certainty. Thus, this might be the moment to accept the limitations of our capacity for setting forth great initiatives because we seem incapable of creating the necessary certainty internally; therefore, it would be worthwhile to review the opportunity that exists in the region. With luck this time the result would change.

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                                                                                                           Luis Rubio

A variety of readings allow one to think, know and learn about the diversity of the world encircling us. Tolkien, an English poet, said it with his customary brilliance: “Not all who wander are lost”. Here is a sample…

According to historian Fernand Braudel, time could be measured in three ways: long term, made up of lengthy, long-drawn-out changes, such as demographic movements and geography and that are determinant but nearly unperceivable; medium term in which history is portrayed in epic moments that render the rhythm perceivable and that are only understood with the passage of time; and short term, which we all can watch on the daily news.

This year I read two books that fall under the rubric of medium term. In The Coming of the Terror in the French Revolution, Timothy Tackett analyzes the mentality of those who became “terrorists” within the context of the Revolution. The fascinating thing about the book is that the author sets out to attempt to explain how it was possible that the revolutionaries and their Revolution turned out so badly. What is paradoxical, notes the author, is that those who instigated fear as an instrument of control did so because they themselves felt terrorized. Fear, Tackett says, lies at the heart of violence: fear of an invasion from outside, fear of chaos, fear of anarchy, fear of the conspiracies of their own cohorts.  A fascinating history that bequeaths the sensation of how little is learned over the course of time.

Edmund Burke, an English intellectual of the XVIII century, has never been difficult to categorize, even if most place him wrongly. For some he is a liberal, for others a conservative, traditionalist or progressive. A critic of Enlightenment, he was at once secular and a defender of religion. David Bromwich, the author of The Intellectual Life of Edmund Burke, presents a Burke who opposes the French Revolution and later thinks himself vindicated by his judgment when the reign of terror begins. While impossible to pigeonhole in terms of a Left-Right axis such as that existing at present, Burke was, and continues to be, a formidable inspiration for world political leaders, to a good degree because, in subtle fashion, he emphasized equality when it was not a theme of political confrontation. The ironic part is that it is the Conservatives who procure him more often.

The image of North Korea that the international press reflects is that of an uncompromising dictatorship that oppresses a population composed of dehumanized creatures brainwashed by a monolithic government. Daniel Tudor and James Pearson*, two journalists who have observed that country at close range, offer a very distinct perspective. Yes, they say, North Korea is an impoverished country, but the population has access to mobile phones, many listen to the music from South Korea and it is addicted to its soap operas, to which they gain access via electronic means and DVDs from China. Corruption, overseen by the elite themselves, has made this situation possible, which was triggered by the famine of the mid-nineties, because without illegal foodstuffs the country would have collapsed. This tale brought to mind Cuba after the end of the USSR.

Thieves of State is a book by Sarah Chayes, whose thesis is that corruption generates insecurity. The author, a former U.S. Government advisor in Afghanistan, affirms that to the extent that “just a little corruption” is permitted, even a small bribe for something minor, this engenders a culture of permissiveness that sooner or later translates into the physical insecurity of the population. The cleptocracy, into which the Afghan Government installed by the U.S. evolved, says Chayes, generated a governmental structure devoted to the enrichment of its functionaries, alienating the populace and giving rise to loyalties to the Talibans and other extremist groups. This is a polemical argument, above all due to its inherent intransigence, but not for that lacking in substance.

How does moral progress come about? This is an intriguing question above all for someone like me who is rarely given to moral readings or arguments. Kwame Anthony Appiah‘s book The Honor Code caught my attention because it addresses sensitive themes such as slavery, civil rights and democracy. Countercurrent to the predominant orthodoxy, Appiah observed that changes in perception about matters such as these are not set into motion by popular pressure or in legislative changes but rather by honor, this understood as respect for one’s neighbor. The book made me recall the argument of Deidre McCloskey in Bourgeois Dignity: economic growth materializes when entrepreneurs are recognized and respected and their function is understood as the engine of progress. On both fronts Mexico continues to be exceedingly crippled.

Roger Moorhouse** studies the 1939 Stalin-Hitler Pact that, although lasting less than two years, had the effect of granting free rein to both dictators for them in turn to recast borders, assassinate en masse the civilian populations of countries that they mutually conceded to each other, ushering in the era of atrocities that characterized the subsequent years of the Second World War.

In Mirreynato, Ricardo Raphael not only coins a new term (a mix of my darling and government, the government of the children of the wealthy and powerful), but also literally opens Pandora’s Box regarding a phenomenon obvious to all but on which no one has focused or conceptualized as the matter of transcendence that it encompasses: the poor manners and education of the children of the elite, their distance with respect to the national average and their disdain for everything happening in the country or why.

*North Korea Confidential

**The Devil’s Alliance

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 Luis Rubio

 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.

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