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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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

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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

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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.

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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.

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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.

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