FORBES – Enero 2014 -Luis Rubio

The first year of the government has ended and now comes the time to experience its implications and consequences. The dilemma is clear: after churning up the waters, the government’s entire incentives clamor for restoring the calm, pacifying the losers and the aggrieved and building upon what already exists. That side of the dilemma cries out for a time of peace, tranquility and the reestablishment of the partnerships affected by the legislative reform process. On the other hand, in contrast with developed countries, the legislative process is only just the beginning of the reform. In a civilized and institutionalized nation, the dispute arising from what’s proposed for reform manifests itself within the legislative context: it is there that all of the interests are at play, exert pressure, and procure taking advantage of the situation. Once the legislative process is over, everyone complies with the outcome, like it or not.

The situation is very distinct in Mexico where the end of the legislative process marks barely the beginning of the dispute. The legislators (and, in today’s arena the members of the “Pact for Mexico”) can string themselves up from the chandeliers, but in reality their acting is nothing more than abstract, operating in the stratosphere. The true battle ensues after the legislative part: on occasion on the streets, on others in the ingrained hostilities among interests that procure advancing, modifying or impeding the process of change. The reforms go into effect after this political process. The National Coordination of Education Workers (CNTE), a dissident teachers union, evidenced the case with its mobilization in the streets immediately after approval of the law and it was from that moment on that the real negotiation commenced (and the result was a radical dilution of the provision of the law). From this perspective, with the first year of government the bell was heard that signaled the end of the first round of a 15-round fight. There are still fourteen to go to see the actual result.

What’s to come will have two distinct political frameworks. On the one hand, the implementation process itself which, as illustrated by the “achievements” of the CNTE, is crucial for the proposed reforms to forge ahead or grind to a halt. Each reform entails clienteles and the individuals affected, thus the political dynamic varies (an established corporation is not the same as a pressure group). On the other hand we come upon the problematic that appears to me to be central: Will Mexico be capable of creating the climate necessary for the reforms to be successful, especially the one that the government has identified as core, the energy reform?

Everything suggests that there are two crucial components for the success of an energy reform in an environment of brutal competition, the product of the so-called “revolution” that has  taken hold of the sector, particularly in the U.S., and that implies that there are many projects with which Mexico will compete and few relevant players, i.e. a buyers market. The first component is concerned with the technical factors that the legislation should incorporate and that determine the possibility of a company’s being interested in participating in this market. These involve the possibility of booking the reserves as their own in their balance sheet and the existence of obstacles (such as local content requirements, being in partnership with Pemex or participation of the oil workers union in the new investments). In general terms, if the former is not possible and the latter comprises a condition, potential investors will not be interested.

Supposing that the technical matter is resolved satisfactorily, the remaining component has to do with the energy or hydrocarbon authority invested with the responsibility of regulating the functioning of the industry. That authority would be responsible for contracts, supervision, and administration of oil reserves and, in general, regulation of the hydrocarbon market. The countries that are successful in this matter are those that have achieved the consolidation of a strong and autonomous regulatory authority, one that is independent and with such autonomy that it enjoys the trust of the investors. The constitutional reform did not create such a strong, independent regulator.

This latter is a real problem. If one observes the rest of the economy and the society, Mexicans have been practically incapable of consolidating an institutional system of checks and balances, one likely to achieve that crucial autonomy. Mexicans often speak with pride of institutions such as the Federal Electoral Institute (IFE), the Federal Competition Commission (CFC), the Federal Institute for Access to Information (IFAI) or the Federal Telecommunications Commission (Cofetel), but the reality is that every time one of these does something that upsets the politicians, their board is dismantled and the source of the trouble is eliminated (and this happened in almost all of these instances in 2013). That is, autonomy only lasts until it’s exercised for real. How, within this context, can one suppose that it will be possible to reach this in energy?

There is a reason for optimism: up until the nineties, political parties invested more of their funds in post-electoral processes than in the campaign itself because the latter is where the negotiations took place. Today that’s no longer true: elections are duly supervised and the results respected. The advance has been real. The same can happen with energy, but it won’t be easy.

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                                                                                          Luis Rubio

At the beginning of President Peña’s government the notion in vogue was that this would be a great opportunity for Mexico, the so-called “Mexican moment”, and that all that was needed to consecrate it in reality was an effective government. As a campaign stunt it was powerful and it was convincing for a sufficient proportion of the electorate to ensure its triumph. The experience of the months since then confirms something that all of us Mexicans instinctively know: although governmental effectiveness is necessary (and regardless of how much rhetoric is employed), there is no certainty that the country will achieve development.

Success in development has nothing to do with the country’s potential (infinite), but with its performance and this depends on more than an effective government. Required are strong institutions, a competent government (not the same as effective) and, above all, a consolidated Rule of Law.

At present, Mexico is exhibiting an enormous tendency toward chaos, defining this as corruption, poor government, uncertainty, violence, criminality and volatility. There are regions of the country that are immersed in permanent chaos, which may not impede the functioning of daily life, but does make it impossible to think about development as a real possibility. The same is true for less chaotic regions, but there the essence of the lack of predictability (the sine qua non for the Rule of Law) lies is in the reigning impunity.

Millions of Mexicans have developed an extraordinary capacity for adapting themselves, functioning with a certain degree of normality and being successful. Practically all who achieve success take pride in that their feat was accomplished in spite of the government. At the same time, it is evident that without a competent, reliable and effective government success is always relative, mercurial  and subject to so many circumstances and comings and goings –chaos- that there’s no way of making it endure. The key, then, resides in the conformation of a competent system of government.

An effective government is indispensable for the functioning of a country, provided that effectiveness is not identified with arbitrariness. It is clear that in the country there abides no end of abuses, freeloaders, disorder and criminals, a scenario that demands a strong government, one capable of establishing order, limiting those excesses and creating an environment propitious for development. But that effective government must exist and operate within an institutional context that holds it in check and that avoids its own potential to overstep itself.

A government must be able to count on sufficient attributions to be able to act, and with a margin of discretion that allows it to comply with its duty. However, those powers cannot be so wide-ranging as to permit it flagrant impunity, the old predicament of who takes care of the caretakers.

In Mexico we do not frequently make a distinction between discretionary powers and arbitrariness, but the difference is one that separates an effective government from one bent on impunity. On one occasion I was present at an audit conducted by the U.S. Securities and Exchange Commission (SEC) and two things impressed me: on the one hand, the unlimited discretionary powers of that governmental agency; on the other, however, I was also impacted by the total absence of arbitrariness in its processes. When the result was finally emitted of its probe it delivered a thick stack of bound sheets of paper in which the resolution itself was found on a single sheet at the top of an enormous document. The entire remainder of the latter comprised an explanation of what had motivated the Commission’s decision, why it modified its judgment with respect to existing precedents and what its view was toward the future. That is, although its decision had been severe, there was nary a nanometer of fat in it and all of the actors in the process were precisely clear on what was to follow. This contrasts with the typical resolutions of our regulating agencies (such as the old Federal Competition Commission) where one page resolves the issue at hand with no explanation and independently of whether a decision contradicts prior or later ones. This is a particularly relevant issue in light of the recent energy reform.

To be successful Mexico has to construct solid institutions that bestow certainty on the citizenry: that permit it to trust that there are competent authorities who are not going to act with impunity nor conceal it. A strong institution implies limiting the government’s potential for abuse of authority vis-à-vis the citizenry, without this curtailing its functioning. It is within this context that the architecture of institutions is so transcendental: a poor design –I think back to the recent electoral political imbroglio- may not repress but rather may multiply the corruption of the system.

Another benefit, one not lesser than that of the existence of strong institutions, resides at the core of Mandeville’s book The Fable of the Bees: human societies can prosper if they have proper institutions, as occurs with those of bees, even when some of their members act violently or simply behave badly. That is, the key to a good performance of the country –raising growth, more employment, better salaries, peace and safety- resides in the construction of solid institutional foundations that, without hindering the functioning of the government, impede its excesses.

Another way of saying the same thing is that, to be successful,  Mexicans must construct a normal country, yet one not so exceptional that it makes it impossible to be successful.

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          Luis Rubio

Take a gamble on development or on influence? For developed countries, the great powers, there is no distinction: one leads to the other. For a country yet to achieve development and to satisfy the needs, even the most elemental, of its population, this poses a real quandary. This matter came to mind when a Brazilian won out over Mexican Herminio Blanco for leadership of the World Trade Organization (WTO). Many reproached the government for having concentrated on its foreign economic relations instead of constructing a capacity of influence all over the world. The defeat of the Mexican candidate hurts, but the country had made the correct bet, though without the intensity required.

Paraphrasing Clausewitz, foreign policy is an instrument of internal politics, not an objective in itself. In the eighties, the Mexican government opted for a development strategy centered on the construction of a competitive economy, interjected into the world’s economic, financial, technological and industrial circuits. Recognizing the growing globalization of the world at large, the focus that was adopted then implied breaking with the wager on development based on a closed, protected and subsidy-heavy economy. Rather than high levels of taxes set aside for financing an enormous public expenditure, the country would endeavor to permit the markets to function, the economy to specialize and the average Mexican would come out the winner. NAFTA became the cornerstone of the strategy, in the factor that would confer certainty upon the people and provide permanence of the reforms for businesses and investors.

Twenty years after NAFTA took effect the structure of the economy has undergone an extraordinary transformation that, albeit incomplete, bears significant fruits. First and foremost, it consolidated a stable economy; second, growth rates have been procured that are superior to the world average, although doubtlessly inferior to those most desirable; third, a hypercompetitive industrial platform has been erected that competes with the best in the world; finally, virtually all new investments made are conceived within a logic of competition in the global economy. The country experienced a true revolution that, unfortunately, remained inconclusive. The challenge is not to reconsider the economic model but to wrap up the process in order to leverage future growth on the enormous assets now in existence.

I return to the question at the outset: Would it be better to bet on influence rather than on development? Brazil, the country that trounced us in the match for the WTO, entertains a concept of the world and of itself that is radically distinct from Mexico’s. While Brazilians conceive of themselves as an emerging power, we Mexicans are more introspective and see ourselves more as victims. Brazil has developed a foreign policy that transcends their governments (according to one of Brazil’s ex-presidents, its Foreign Ministry, Itamarati, is so powerful that it imposed its agenda on the president), and is oriented toward projecting the might of the South American giant with a geopolitical vision. In Mexico we have a professional diplomatic corps that does not possess a strategy independent from the government and its vision is held in check by that established by the presidency. The Brazilian influence is noticeable when cases arise such as that of the WTO, in which decades of investment came to fruition. Also, I have no doubt, the Brazilians congratulated themselves for having defeated Mexico, with which they have maintained a peculiar rivalry above all from when Mexico opted for NAFTA.

The relevant response to this query can be none other than development. The average Mexican lives better than the average Brazilian, has better schooling and income levels, and interest rates paid by Brazilians are higher than those paid by Mexicans. Mexican industry has been transformed while a big part of the Brazilian industry continues to be relatively protected. Of course there are some indicators that are in favor of Brazil, but the crux of the matter is very simple: the relevant wager is placed, must be placed, on development and where Mexico has failed is not in the sense of the wager but in the conviction of achieving development and the disposition to do what’s necessary for making it possible. Contrary to what many critics affirm vis-à-vis the strategy of liberalization, the problem is not that a series of prescriptions have been applied in dogmatic fashion, but that these have been applied without conviction and without determination. The result is that the rate of economic growth is much lower to what it could be. This is what we should invest in, not in the elusive international clout that contributes little to the needs of the population.

Nothing better typifies the difference in the Brazilian and the Mexican strategy than the aeronautical industry. Embraer is the signature industry of the southern country: its planes are everywhere and constitute a visible and perceptible icon of the Brazilian and of its influence in the world. For its part, Mexico has built up an impressive aeronautical industry that at present employs more people than the Brazilian one and adds greater value to the Mexican economy than that of Brazil. The difference is that there is no “MexAir” trademark that had there been, would have been visible and would have projected such strength. However, in which country is this industry more successful? which population has the greater probability of accessing wealth? The case is emblematic because it illustrates two radically distinct conceptions of what the two nations are and of their objectives.

Mexico’s problem is that it has not yet concluded the revolution that began in the eighties. The country lives on the remains of the former protected system next to a formidable, productive and successful industrial sector totally integrated into the global economy. The fusion has not been a very happy one because it has limited the capacity of the more modern and competitive enterprises, while preserving the old industry that lacks any capacity whatsoever to compete. The dilemma is how to come to grips with these gaps. The tessitura is obvious: press on to development or perpetuate mediocrity.

Twenty years after the beginning of NAFTA it is evident that in politics ––be it in the political arena or in that of economic, social or international policy- long-term investment is what pays dividends. Many of the political avatars of past years, and not a few of our economic difficulties, have been the product of short-terms bets, the very ones that never turn out well. NAFTA is the best example that long term vision is what garners results.

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Luis Rubio

At a conference in the Middle East on the future of the region I came upon a response to one of Mexico’s own dilemmas. This is a region that is superlatively complex, where religious, territorial and geopolitical themes are absolutely contentious and some overlap others. In one of the presentations, a conference participant from Qatar in the forum summed up his perspective in the following manner: “In the recent hearing for the nomination as U.S. Secretary of Defense, Chuck Hagel, he mentioned Iran, Israel and China more times than Canada or Mexico. In fact, those countries were not mentioned even once”. Of course, the speaker’s commentary was directed toward showing the importance of the region for the U.S. But the discussion caused me to meditate on the implications of this statement for Mexico: Is it good or bad? In any case, what are its consequences?

If one recalls, throughout the U.S. presidential campaign of 2012, the not infrequent complaint presented itself about Mexico not being mentioned in the debates among the pre-candidates, in the debates between Obama and Romney, in the President’s inaugural speeches or in his State of the Union speech last February. Beneath the surface, the absence of Mexico is read as a slight or, simply, that Mexico is not important to them (except when they spy on the president). One problem of this way of reading into political discourse is that it entails the expectation that Mexico is dependent on them for solutions to our predicaments or that their power is so great that we are unable to do anything without their go-ahead.

It appears to me that the relevant perspective is distinct. On the one hand, not mentioning us implies that Mexico is not a quarrelsome theme in their reading and diagnosis, and even less so when compared with what is occurring in the rest of the world. Mexico is not a topic that generates discord among political parties or that merits incessant discussions and polemics. The latter does not necessarily mean that the Americans are pleased with Mexico’s situation, only that there is no controversy in this regard. Nonetheless, it is much better for Mexico not to be mentioned at all than to be ranked with North Korea or Iran, to mention two obvious cases.

On the other hand, there are nearly 200 countries in the world, and for the overwhelming majority of these the United States is their prime objective, partner and nation of interest. For each of these countries, the important thing is to achieve advancing their interests with respect to the U.S. Seen through the Americans’ lens, some countries are more important than others, but their concentration is inevitably dispersed due to such a wide demand for attention. Rome’s perspective is not the same as that of the far-flung provinces.

But the distance, and the perception (and, for many, the grievance) of asymmetry is not necessarily such that it implies the impossibility of taking action. Some time ago, Joseph Nye, Harvard professor, made mention of this situation in a reference to Cuba (I quote here from memory): “We have always believed that we have control of the situation, but you know what, in Cuba we are faced with an actor whose vision is doggedly riveted on us and who gives us a black eye time after time”. The key subject matter here is that Mexicans have frequently perceived the asymmetry of power and size (in all senses) with respect to the powerhouse to the North as a calamity, when in reality it can be an enormous opportunity. In fact, it can be a comparative advantage.

As when someone armed with a hammer sees everything in the world as nails, from the perspective of the powerful nation, everyone deserves a similar response. From this conception there have emerged schemes of economic policy as well as strategies of combating crime that are supposed to apply everywhere the same way. As in everything else, some work and other don’t. But the salient point is that the weaker nation in this relationship is not required to accept dogmatically or a-critically all of its proposals nor must a distinct perspective imply a new source of conflict.

In an asymmetric relationship, the weaker nation must define the nature of the linkage and devote itself to expediting this definition permanently and systematically. The size of the powerful nation and the diversity and dispersion of its interests demand that the smaller or less powerful nation defines the agenda and win over the larger and more powerful one. In general terms, Mexico has done precisely the opposite: we have waited for the US to set the agenda and then we have enthusiastically protested.

The great exception, and the best sample of how it should conduct itself, is the North American Free Trade Agreement. There it was Mexico that spelled out the agenda, forced Washington to respond, developed a broad and ambitious strategy for redefining the relationship and devoted itself to “selling it” outright: to its entire public, interest groups and key players.

What was most remarkable about the Mexican proposal to Washington at that moment was its deliberate withdrawal from the forms and practices of the past. Mexico did not attempt to defend the existing order, but to lever a trade deal (and, above all, one of investment) that would jump-start its own development and, in any case, to create a new order. Instead of resorting to the well-worn ploy of venturing to bring the status quo to the table, it dedicated itself to constructing a new one. More to the point, Mexico did not attempt to change the U.S. order of things, demanding modifications in its reality, but rather it aimed at transforming the Mexican economy by means of the instrument that was being negotiated. With this I do not wish to suggest that a country should not call for concrete actions by its counterpart, however powerful, but that it should choose its battles. For example, having attempted to modify the property regimen of its airlines or telecommunications industries or having tried to incorporate the issue of migration (three soar issues in Mexico) at that time and into that negotiation would have opened up so many fronts that it surely would have hampered a favorable conclusion. The point is to keenly keep the goal in sight and embark upon it, on all fronts.

Mexico’s differences with the U.S. Government are relatively minor; the significant ones pertain to special interests that defend them to the death or to groups with a political vision or ideology oriented, typically, toward recreating a now impossible past, the same for the Left as for the Right. None of this impedes that, with the suitable strategy, Mexico can advance its priorities.

In his Leviathan, Thomas Hobbes wrote that “So in the nature of man we find three principal causes of quarrel. First, competition; secondly, diffidence; thirdly, glory. The first maketh man invade for gain; the second, for safety; and the third, for reputation”. The nature of countries is not very distinct. The initiatives that are undertaken should advance our development and not wait for others to impose or limit them. To each his own.

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Luis Rubio

“One is not who he is because of what he writes, but because of what he has read.” Jorge Luis Borges

I recently had access to a marvelous read, The Book of Disquiet, by the poet and writer Fernando Pessoa. I had read his chronicles and novels that described Lisbon, his city, in exceptional fashion. This book showed me an author who was many authors in one, with distinct stories, positions, ideological visions and even biographies. The book is a compendium of incomplete writings, notes and diverse paragraphs intended to be the autobiography of one of his characters, an alter ego of Pessoa himself. It is like a diary with prose, poetry and narrative that one cannot put down for even a minute.

The Passage of Power is the fourth volume of the biography that Robert Caro writes about Lyndon Johnson, and comprises the period when Johnson becomes the U.S. Senate majority leader until Kennedy’s death, the fact with which Johnson assumed the presidency. What’s extraordinary about the biography is that it is a blood-and-guts study of power: a detailed and punctilious explanation of bona fide politics. Just for illustration, in the first volume Caro devotes 14 pages to describing how Johnson, a young mover and shaker of 17, became the leader of the senatorial assistants by spending five hours in the Senate restrooms where he shaved 57 times while he won over all of his peers. The Caro biography is somewhat the face side of the coin of Memorias by Gonzalo N. Santos: two politicians out to conquer the world.

A World Transformed is a bit sui generis. Written by President Bush Sr. and his then National Security Advisor, Brent Scowcroft, the book deals with the worldwide transformation that this U.S. President was witness to during his mandate. While this former president could have written any one of the memoirs among the thousands that prominent politicians publish, what is extraordinary about this tome is that it reveals the dilemmas that Bush faced and the way he conducted his administration in attempting to achieve a successful landing of the relationship between the United States and Russia after the fall of the Berlin Wall, the German reunification and the demise of the Soviet Union. An enormous geopolitical transformation related as if observed by its two main protagonists. The book is not new (it was published in 1999) but it is a fascinating story recounted with modesty and aplomb.

The Law of the Constitution, a treatise on Rule of Law, originally published by AV Dicey in 1885 and only available thanks to the extraordinary Liberty Fund editorial project, constitutes an opus magnum on the contents and nature, but also the limitations, of Rule of Law. The most riveting part of Dicey’s study for me is the comparison of the English and the French legal systems in terms of Rule of Law. For Dicey, this concerns two systems so foreign to each other in fundamental conception that they start with radically distinct ways to understand and conceive of the relationship of the individual and the State. Protection of property as conferred by administrative law (as Dicey calls the French system) before that which the English “common law” confers entails different treatments for investors, commerce and actions on the part of individuals. These differences explain many of the conflicts we observe in the application, for example, competition law in Mexico, (which is based on the English system) before the general legal system, which derives from Roman law.

Wayne A. Leighton and Edward J. López have written a captivating book on the factors that favor or impede change in a society. Their point of departure is that “political change is as follows: Incentives are shaped by the rules of the game, which economists call institutions, and these institutions in turn are shaped by the ideas in a society. In other words, ideas matter”. From this the authors attempt to respond to three queries: Why do democracies generate policies that impose net costs on society? Why do such policies persist over long periods of time, even if they are known to be wasteful socially and there are better alternatives? And why do certain wasteful policies eventually get repealed, while others endure Their response, in Madmen, Intellectuals and Academic Scribblers, is that change comes about when those who create the ideas, those who argue about these and those who decide on political policies rebel against the existing order and become change-promoting “entrepreneurs”.

The most profound and interesting book I have read so far this year was Margaret Thatcher’s authorized biography*, published posthumously. Beyond the biographical data, what was extraordinary with respect to the stateswoman was that, not being a member of the British elite, she came to revolutionize her country and the world. Her instincts were those of an ordinary person who saw the difficulty and complexity of life from below. The book has the virtue of studying the prime minister under her own circumstances, not with the benefit of time: this perspective allows understanding the decision making process, her determination and the enormous risks she was willing to take. The book is fascinating because it permits the reader to understand the dilemmas of power, and precisely therein lies the enormous grandeur of the subject of the biography: a woman who, in effect, took on the world and defeated it. Although her party’s traditionalists would later remove her from office, by that time she had already changed her country and, without doubt, the world.

Erick Schmidt and Jared Cohen, two key Google actors, analyze how the advance of technology affects the power structures. One of their conclusions is that governments that close in the face of technological change will be forever engaged in combating the forfeiture of control that this closure entails. They study the case of Mubarak in Egypt and how his decision to bar access to the Internet might have precipitated his fall from power and how the Chinese government has constructed mechanisms to utilize that same vehicle –the Internet- as a means of control. The authors explore all manner of scenarios: a fragmented world in which national borders are recreated in cyberspace, mechanisms that charge for access to diverse sites, visa requirement for navigating into some sites, and opportunities for personal development never before seen, such as online education. Of particular importance is their analysis of Internet security and the cyber wars that could be brewing. The New Digital Age is a profound book that leaves behind much food for thought.

* Margaret Thatcher-The Authorized Biography, Volume I: From Grantham to the Falklands

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@lrubiof

Luis Rubio

Lee Kuan Yew, the universal statesman who made possible the transformation of a filthy harbor, saturated with corruption and all sorts of vices, into one of the most modern city-states of the world, Singapore, has spent decades observing and analyzing with enormous depth and vision what is happening in the world. Supposedly retired, he is a frequent visitor of presidents and prime ministers in Beijing, Washington, Davos and other capitals where his wisdom is always appreciated and respected. Recently, three academics interviewed him and gathered all this wisdom in a small volume* for ordinary mortals.

His comments on China and its evolution over the future of that nation are particularly valuable. The following is a summary of that part of the book:

Are Chinese leaders serious about displacing the United States as the number 1 power in Asia? In the world? “Of course. Why not? They have transformed a poor society by an economic miracle to become now the second-largest economy in the world… They have followed the American lead in putting people in space and shooting down satellites with missiles. Theirs is a culture 4,000 years old with 1.3 billion people, many of great talent -a huge and very talented pool to draw from. How could they not aspire to be number 1 in Asia, and in time the world?”

“The concern of America is what kind of world they will face when China is able to contest their preeminence… Many medium and small countries in Asia are also concerned. They are uneasy that China may want to resume the imperial status it had in earlier centuries and have misgivings about being treated as vassal states having to send tribute to China as they used to in past centuries. They expect Singaporeans to be more respectful of China as it grows more influential”.

“The Chinese have concluded that their best strategy is to build a strong and prosperous future, and use their huge and increasingly skilled and educated workers to out-sell and out-build all others. They will avoid any action that will sour relations with the U.S. To challenge a stronger and technologically superior power like the U.S. will abort their ‘peaceful rise'”.

“The Chinese have calculated that they need 30 to 40, maybe 50, years of peace and quiet to catch up, build up their system, change it from the communist system to the market system. They must avoid the mistakes made by Germany and Japan. Their competition for power, influence and resources led in the last century to two terrible wars…”

“China will inevitably catch up to the U.S. in absolute GDP. But its creativity may never match America’s, because its culture does not permit a free exchange and contest of ideas. How else to explain how a country with four times as many people as America -and presumably four times as many talented people- does not come up with technological breakthroughs?”

“China faces enormous economic problems -a disparity in income between the rich coastal cities and the inland provinces, and in income within the coastal cities. They have got to watch that carefully or they might get severe discontent and civil disorder. Technology is going to make their system of governance obsolete. By 2030, 70% or maybe 75% of their people will be in cities, small towns, big towns, mega big towns. They are going to have cell phones, Internet, satellite TV. They are going to be well-informed; they can organize themselves. You cannot govern them the way you are governing them now, where you just placate and monitor a few people, because the numbers will be so large”.

“Straight-line extrapolations from such a remarkable record are not realistic. China has more handicaps going forward and more obstacles to overcome than most observers recognize. Chief among these are their problems of governance: the absence of the rule of law, which in today’s China is closer to the rule of the emperor; a huge county in which little emperors across a vast expanse exercise great local influence; cultural habits that limit imagination and creativity, rewarding conformity; a language that shapes thinking through epigrams and 4,000 years or texts that suggest everything worth saying has already been said, and said better by earlier writers; a language that is exceedingly difficult for foreigners to learn sufficiently to embrace China and be embraced by its society; and severe constraints on its ability to attract and assimilate talent from other societies in the world”.

“China is not going to become a liberal democracy; if it did, it would collapse. Of that, I am quite sure, and the Chinese intelligentsia also understands that. If you believe that there is going to be a revolution of some sort in China for democracy, you are wrong. Where are the students of Tiananmen now? They are irrelevant. The Chinese people want a revived China”.

“To achieve the modernization of China, her Communist leaders are prepared to try all and every method, except for democracy with one person and one vote in a multi-party system. Their two main reasons are their belief that the Communist Party of China must have a monopoly on power to ensure stability; and their deep fear of instability in a multiparty free-for-all, which would lead to a loss of control by the center over the provinces, with horrendous consequences, like the warlord years of the 1920’s and ’30s.”

Finally, his rosy thoughts on how he expects China to evolve to 2050: “China discovered that to run a modern state it needed the rule of law. It had a comprehensive set of legal codes by 2035 and found that a stable legal system, together with clear administrative rules, actually strengthened central authority. Erring provincial and local governments were brought to book through due process of law, a method more effective than the endless negotiations that had been the practice before. Also, with the rule of law, ordinary citizens are now protected from the arbitrary authority of officials. Business enterprises are also able to plan large long-term investments. The independence of the judiciary took another 20 years to achieve in practice, because historical tradition, which required magistrates, as officers of the emperor, to carry out imperial orders, was deeply embedded in Chinese officialdom”.

In this book Lee says a lot more, not all commendable, about Mexicans, democracy and globalization. Talented and highly intelligent, he has thought about the key issues of the future on which it is imperative to reflect.

*Allison, Blackwill and Wyne: Lee Kuan Yew: The Grand Master’s Insights on China, The United States and the World, MIT Press, Cambridge, 2013

www.cidac.org
@lrubiof

Luis Rubio

Lee Kuan Yew, the universal statesman who made possible the transformation of a filthy harbor, saturated with corruption and all sorts of vices, into one of the most modern city-states of the world, Singapore, has spent decades observing and analyzing with enormous depth and vision what is happening in the world. Supposedly retired, he is a frequent visitor of presidents and prime ministers in Beijing, Washington, Davos and other capitals where his wisdom is always appreciated and respected. Recently, three academics interviewed him and gathered all this wisdom in a small volume* for ordinary mortals.

His comments on China and its evolution over the future of that nation are particularly valuable. The following is a summary of that part of the book:

Are Chinese leaders serious about displacing the United States as the number 1 power in Asia? In the world? “Of course. Why not? They have transformed a poor society by an economic miracle to become now the second-largest economy in the world… They have followed the American lead in putting people in space and shooting down satellites with missiles. Theirs is a culture 4,000 years old with 1.3 billion people, many of great talent -a huge and very talented pool to draw from. How could they not aspire to be number 1 in Asia, and in time the world?”

“The concern of America is what kind of world they will face when China is able to contest their preeminence… Many medium and small countries in Asia are also concerned. They are uneasy that China may want to resume the imperial status it had in earlier centuries and have misgivings about being treated as vassal states having to send tribute to China as they used to in past centuries. They expect Singaporeans to be more respectful of China as it grows more influential”.

“The Chinese have concluded that their best strategy is to build a strong and prosperous future, and use their huge and increasingly skilled and educated workers to out-sell and out-build all others. They will avoid any action that will sour relations with the U.S. To challenge a stronger and technologically superior power like the U.S. will abort their ‘peaceful rise'”.

“The Chinese have calculated that they need 30 to 40, maybe 50, years of peace and quiet to catch up, build up their system, change it from the communist system to the market system. They must avoid the mistakes made by Germany and Japan. Their competition for power, influence and resources led in the last century to two terrible wars…”

“China will inevitably catch up to the U.S. in absolute GDP. But its creativity may never match America’s, because its culture does not permit a free exchange and contest of ideas. How else to explain how a country with four times as many people as America -and presumably four times as many talented people- does not come up with technological breakthroughs?”

“China faces enormous economic problems -a disparity in income between the rich coastal cities and the inland provinces, and in income within the coastal cities. They have got to watch that carefully or they might get severe discontent and civil disorder. Technology is going to make their system of governance obsolete. By 2030, 70% or maybe 75% of their people will be in cities, small towns, big towns, mega big towns. They are going to have cell phones, Internet, satellite TV. They are going to be well-informed; they can organize themselves. You cannot govern them the way you are governing them now, where you just placate and monitor a few people, because the numbers will be so large”.

“Straight-line extrapolations from such a remarkable record are not realistic. China has more handicaps going forward and more obstacles to overcome than most observers recognize. Chief among these are their problems of governance: the absence of the rule of law, which in today’s China is closer to the rule of the emperor; a huge county in which little emperors across a vast expanse exercise great local influence; cultural habits that limit imagination and creativity, rewarding conformity; a language that shapes thinking through epigrams and 4,000 years or texts that suggest everything worth saying has already been said, and said better by earlier writers; a language that is exceedingly difficult for foreigners to learn sufficiently to embrace China and be embraced by its society; and severe constraints on its ability to attract and assimilate talent from other societies in the world”.

“China is not going to become a liberal democracy; if it did, it would collapse. Of that, I am quite sure, and the Chinese intelligentsia also understands that. If you believe that there is going to be a revolution of some sort in China for democracy, you are wrong. Where are the students of Tiananmen now? They are irrelevant. The Chinese people want a revived China”.

“To achieve the modernization of China, her Communist leaders are prepared to try all and every method, except for democracy with one person and one vote in a multi-party system. Their two main reasons are their belief that the Communist Party of China must have a monopoly on power to ensure stability; and their deep fear of instability in a multiparty free-for-all, which would lead to a loss of control by the center over the provinces, with horrendous consequences, like the warlord years of the 1920’s and ’30s.”

Finally, his rosy thoughts on how he expects China to evolve to 2050: “China discovered that to run a modern state it needed the rule of law. It had a comprehensive set of legal codes by 2035 and found that a stable legal system, together with clear administrative rules, actually strengthened central authority. Erring provincial and local governments were brought to book through due process of law, a method more effective than the endless negotiations that had been the practice before. Also, with the rule of law, ordinary citizens are now protected from the arbitrary authority of officials. Business enterprises are also able to plan large long-term investments. The independence of the judiciary took another 20 years to achieve in practice, because historical tradition, which required magistrates, as officers of the emperor, to carry out imperial orders, was deeply embedded in Chinese officialdom”.

In this book Lee says a lot more, not all commendable, about Mexicans, democracy and globalization. Talented and highly intelligent, he has thought about the key issues of the future on which it is imperative to reflect.

*Allison, Blackwill and Wyne: Lee Kuan Yew: The Grand Master’s Insights on China, The United States and the World, MIT Press, Cambridge, 2013

www.cidac.org

@lrubiof

Luis Rubio

“The old is dying and the new cannot be born: in the interregnum a great variety of morbid symptoms will appear”. Thus wrote Antonio Gramsci in his Prison Notebooks. We Mexicans have much experience in these latter because, in the long run we’ve had decades of a series of transitions that have no beginning or end. In contrast to the handful of nations that achieved –due to circumstances or to exceptional leadership- constructing a negotiated transition, Mexico’s course has been a medley of true reforms, prejudices, competition and clashes with interests devoted to undermining the process. The challenges have come equally from Right and Left, bureaucracy and de facto (or veto) powers. On occasion due to apathy, on others due to the absence of vision or capacity for political delivery, the country has gone from being an authoritarian system to an undefined hybrid, steeped in contradictions and incomplete processes. I wonder whether the ongoing complexity in negotiating often ludicrous legislation (as with the political reform) or ideological battles around the energy bill could be explained in this dimension.

There are two examples that seem particularly relevant and on which there is so vast a literature that allows for a dispassionate and revealing reading. China is a country in which its government and party have planned down to even the time the sun comes out and, however, it experiences a process of change that is ever more less under the control of its authorities. The Eastern European countries supply a contrasting example because in these nothing was planned: their national and political evolution was due to a great extent to what happened in another latitude, the Soviet Union. Both cases cast light on the subject.

Robert Kaplan* has for years, and various books, been studying the Chinese evolution. His ideas may be summed up as follows: a) the era of the technocrats is coming to an end, giving rise to that of the politicians, and “politicians, even in liberal democracies, exploit people’s emotions. That could lead to more erratic, more nationalistic leaders”; b) the problem is not the democracy: “the problem in China is a vast and undisciplined State in the messy and decades-long process of liberation”; c) “Democratization in its initial stages in any society means a diminution in the power of the elite, and with the exception of totalitarian states  –which China is not anymore- the fall of the elites may lead to more intemperate policies in the short run”; and d) “the problem with authoritarian states is that if they remain in place for several decades, the only people who end up capable of running ministries and formulating policies are the authoritarian elites themselves. Thus, toppling such systems entails serious risks”.

Anne Applebaum**, expert in Eastern European countries, describes the relative success (or failure) of these nations in the following manner: “The factor most closely linked with stability and growth (in the Eastern European nations) is human: those countries that had an ‘alternative elite’ –a cadre of people who had worked together in the past, who had thought about government and who were at some level prepared to take it over- were far more likely both to carry out radical reforms and to persuade the population to accept them. Hungary, Poland –and, to a lesser extent, the Czech Republic, Slovakia and the Balkan states- all benefited from the presence of people who had been thinking about change, and organizing to carry it out, for a long time”. “Elsewhere, opposition groups had not been so well unified or repression had been much harsher. So when the Soviet Union disbanded, former communists –perhaps dressed up as social democrats or nationalists- took charge again. Some were better, some were worse.  On the whole, they did not press for radical change –because radical change was not in their interest”.

It appears evident that both perspectives offer lessons for Mexico. Like China, Mexico underwent an incomplete change in which, despite the alternation of parties in government, the authoritarian structures of yesteryear have not been dismantled nor has a body of civil servants that grew and developed independently of the old system been incorporated. As in the least successful nations of Eastern Europe, old PRIist functionaries remained in control of the State apparatus, rendering the approval and implementation of significant reforms more difficult. It’s sufficient to recall the way that the unions of the state entities were maintained unimpaired and untouched throughout this period or the way officials of the PRD and the PAN, respectively, adapted to the ancestral, corrupt, ways of governing.

Perhaps the main lesson that these examples offer is the fact that, in the absence of an explicit agreement among the elites (Spain, Chile or South Africa) or the total collapse of the former system (Eastern Europe), the future of a nation depends in good measure on the leadership capacity found at the moment. That is, there is an extraordinary element of luck in all of this. China is undergoing a huge process of change on a daily basis and has yet to see what type of landing it will have. For their part, the Eastern European nations have exhibited very distinct politico-economic ways in their transition process, some nations ending up in much better shape than others.

In his study on the (religious) Reform movement, the birth of Protestantism, Patrick Collinson*** affirms that “no revolution, however drastic, has ever involved a total repudiation of what came before it. What do revolutionaries have to work with but the ideas and aspirations that they have inherited? What was Stalin but a new kind of tsar? Thomas Hobbes pronounced “the Papacy is not other than the Ghost of the deceased Roman Empire, seated crowned upon the grave thereof”. “Jesus was not the first Christian, and Luther was not a Lutheran”. The political changes and transitions among systems take time and are never alike.

Mexico will have to find its own way, with the structures, persons and vision available to it. One paradox of our peculiar evolution is that the party that always proffered the radical reform (in the Applebaum sense) did not know how to head it nor did it have the grandeur to attempt it. Now it’s up to the PRI to try it, avoiding running into snags along the way as has occurred with the Chinese government. It is not surprising that when China “hit the wall” in the past few months, its government began searching for a new strategy. Mexico is not too far from experiencing a similar crash against the proverbial wall. As soon as that happens, the government will have to build a way out. The advantage is that a lot of planning doesn’t make the difference. Maybe, after one of these typically-Mexican slapdash ventures, things will turn out well for it.

*The China Puzzle.

**http://www.washingtonpost.com/opinions/anne-applebaum-preparing-for-freedom-before-it-comes/2013/02/07/80729050-70af-11e2-ac36-3d8d9dcaa2e2_print.html

***The Reformation.

www.cidac.org

@lrubiof

Luis Rubio

“Each tells the tale as it went for him at the fair” says a popular old refrain. The same is true for corruption, access to justice and the quality of government. It is not in vain, as GK Chesterton once wrote, that “the poor have sometimes objected to being governed badly, the rich have always objected to being governed at all”. The perspective is important: each citizen finds himself in a distinct place on the social, political and economic value chain in society and this place confers upon him a greater or lesser capacity to influence his own destiny or that of the society. Inevitably, these differences translate into distinct social behaviors. Corruption emanates precisely from these differences and manifests itself in the strangest ways.

Corruption, together with impunity, is one of the ills that the major part of the population identifies as at the heart of our problems. In conversations, tweets or serious discussions, it is impossible to elucidate the generalized perception of the endemic ills to which the population objects and that are, however, immovable, a permanent part of the scenario. At the same time, these same individuals who object not infrequently resort to this self-same corruption to resolve a problem or to confront an everyday situation. Is this a contradiction?

A similar situation can be observed in the way that the application of the law is deliberated. For some the central problem lies in the unwillingness, or inability, of the authority to make the existing regulations stick and, even, in their propensity to modify the laws in order not to have to enforce them. For others, the laws are designed to benefit the powerful and to preserve their interests. Can one and the same law possess these two characteristics, be inherently contradictory?

For its part, the authority, of any type and level, confronts daily realities that become inexorable and defining. Undoubtedly, some governments prefer to privilege antagonistic and even violent groups because of their own political or ideological motivations, but the majority knows that enforcement of the law is often impossible in the terms under which the regulations establish it. The case is not infrequent of a municipal president or a state governor who employs public force as established by the law, only to find himself with a political conflict of enormous scope due to his acting: the original matter shifts to second place and the problem the society identifies as the “real” one ends up being the “repression” or the violence with which the governor acted. John le Carré said it very well in one of his novels: “All power corrupts but some must govern”. How, then, to govern under conditions like these?

There is no doubt that the country is experiencing moments of political and social effervescence that project a society in conflict with itself but also, returning to the original theme, rights and realities are disproportionately biased in favor of those at the pinnacle of the power value chain. The corruption -impunity- that characterizes  the way authorities, some companies and criminals incur are nothing other than the reflection of the excessive differences of power and access to same in this chain.

Corruption is many simultaneous things. In some instances it is the consequence, in others the symptom and, for many, a means to the solution of their problems. It depends on the position on the “value chain” of power where one finds himself. For the run-of-the-mill citizen, corruption is the solution to the authority’s excessive discretional power: a bribe –small or large- allows the citizen to wriggle free from an inspector, a traffic officer or a bureaucrat whose powers are so vast that this ends up being a functional solution. Corruption is symptomatic of a festering political system characterized by the existence of so many laws and rules that confer such broad powers on the authority that the potential for abuse is immense and permanent.

In a word, corruption derives from the existence of such generalized, imprecise and undefined laws and regulations that they open vast spaces of discretional attributions, conferring excessive power –arbitrary- on the authority, at all levels. This excess of authority translates into diverse social evils: inequity in the application of the law, the possibility of rewarding some and punishing others employing the same statute, whether they be union or company bosses or individuals. It translates into impunity -another form of corruption- for those wielding power.

This context is what makes it possible for the “de facto powers” to be nourished and to grow, for delinquents and criminals to appropriate the streets, highways or border crossings and for there to exist an environment of permanent uncertainty regarding people’s security and that of their rights and property. In the country, the most commonplace of inspectors or their peers in other ambits possess such enormous authority that they can decide on the opening or closing of a company or whether a person ends up in jail. In similar fashion, the powers of the regulatory entities are so vast that they can decide on things at will. So much arbitrary power makes it impossible to have a reliable and credible authority. Instead of having clear guidelines, the authority possesses great latitude, opening spaces of enormous impunity, thus arbitrary and illegitimate, and also dysfunctional. These excesses in turn translate into environments that facilitate the entrenchment of monopolistic practices, the taking of buildings or roads and violence. Or passing ludicrous laws. Recognition is key to observing that these elements comprise distinct sides of the same coin.

Under these circumstances, it would be absurd to pretend that more of the same type of regulations, laws or entities could end corruption: laws have consequences. What Mexico requires is to delimit the boundaries of the powers that the laws grant, open spaces of competition in all ambits, eliminate restrictions on trade and imports and, in a word, create conditions so that no one –government, enterprises, unions, political parties- would entertain the possibility of accumulating so much power or the capacity for imposition as happens now. When the playing field of this “power value chain” is more level, less biased and more equitable, the country could flourish.

Corruption and impunity, twin sisters, are the product of our political reality that takes root in laws and regulations. The reality will change when the game preserves from which these emanate are attacked, when bureaucratic faculties are well defined and delimited, eliminating arbitrariness, the mother of all corruption and impunity.

The electoral bill just passed by the Senate is a jewel of incentives for corruption and impunity. It would be desirable that it be dismissed outright by the Congress. If this does not happen, the citizenship better hope that the energy reform (that was exchanged for the electoral bill) at least justifies such an arbitrary law and the anti-democratic features it comes associated with.

www.cidac.org

@lrubiof

Luis Rubio

“Each tells the tale as it went for him at the fair” says a popular old refrain. The same is true for corruption, access to justice and the quality of government. It is not in vain, as GK Chesterton once wrote, that “the poor have sometimes objected to being governed badly, the rich have always objected to being governed at all”. The perspective is important: each citizen finds himself in a distinct place on the social, political and economic value chain in society and this place confers upon him a greater or lesser capacity to influence his own destiny or that of the society. Inevitably, these differences translate into distinct social behaviors. Corruption emanates precisely from these differences and manifests itself in the strangest ways.

Corruption, together with impunity, is one of the ills that the major part of the population identifies as at the heart of our problems. In conversations, tweets or serious discussions, it is impossible to elucidate the generalized perception of the endemic ills to which the population objects and that are, however, immovable, a permanent part of the scenario. At the same time, these same individuals who object not infrequently resort to this self-same corruption to resolve a problem or to confront an everyday situation. Is this a contradiction?

A similar situation can be observed in the way that the application of the law is deliberated. For some the central problem lies in the unwillingness, or inability, of the authority to make the existing regulations stick and, even, in their propensity to modify the laws in order not to have to enforce them. For others, the laws are designed to benefit the powerful and to preserve their interests. Can one and the same law possess these two characteristics, be inherently contradictory?

For its part, the authority, of any type and level, confronts daily realities that become inexorable and defining. Undoubtedly, some governments prefer to privilege antagonistic and even violent groups because of their own political or ideological motivations, but the majority knows that enforcement of the law is often impossible in the terms under which the regulations establish it. The case is not infrequent of a municipal president or a state governor who employs public force as established by the law, only to find himself with a political conflict of enormous scope due to his acting: the original matter shifts to second place and the problem the society identifies as the “real” one ends up being the “repression” or the violence with which the governor acted. John le Carré said it very well in one of his novels: “All power corrupts but some must govern”. How, then, to govern under conditions like these?

There is no doubt that the country is experiencing moments of political and social effervescence that project a society in conflict with itself but also, returning to the original theme, rights and realities are disproportionately biased in favor of those at the pinnacle of the power value chain. The corruption -impunity- that characterizes  the way authorities, some companies and criminals incur are nothing other than the reflection of the excessive differences of power and access to same in this chain.

Corruption is many simultaneous things. In some instances it is the consequence, in others the symptom and, for many, a means to the solution of their problems. It depends on the position on the “value chain” of power where one finds himself. For the run-of-the-mill citizen, corruption is the solution to the authority’s excessive discretional power: a bribe –small or large- allows the citizen to wriggle free from an inspector, a traffic officer or a bureaucrat whose powers are so vast that this ends up being a functional solution. Corruption is symptomatic of a festering political system characterized by the existence of so many laws and rules that confer such broad powers on the authority that the potential for abuse is immense and permanent.

In a word, corruption derives from the existence of such generalized, imprecise and undefined laws and regulations that they open vast spaces of discretional attributions, conferring excessive power –arbitrary- on the authority, at all levels. This excess of authority translates into diverse social evils: inequity in the application of the law, the possibility of rewarding some and punishing others employing the same statute, whether they be union or company bosses or individuals. It translates into impunity -another form of corruption- for those wielding power.

This context is what makes it possible for the “de facto powers” to be nourished and to grow, for delinquents and criminals to appropriate the streets, highways or border crossings and for there to exist an environment of permanent uncertainty regarding people’s security and that of their rights and property. In the country, the most commonplace of inspectors or their peers in other ambits possess such enormous authority that they can decide on the opening or closing of a company or whether a person ends up in jail. In similar fashion, the powers of the regulatory entities are so vast that they can decide on things at will. So much arbitrary power makes it impossible to have a reliable and credible authority. Instead of having clear guidelines, the authority possesses great latitude, opening spaces of enormous impunity, thus arbitrary and illegitimate, and also dysfunctional. These excesses in turn translate into environments that facilitate the entrenchment of monopolistic practices, the taking of buildings or roads and violence. Or passing ludicrous laws. Recognition is key to observing that these elements comprise distinct sides of the same coin.

Under these circumstances, it would be absurd to pretend that more of the same type of regulations, laws or entities could end corruption: laws have consequences. What Mexico requires is to delimit the boundaries of the powers that the laws grant, open spaces of competition in all ambits, eliminate restrictions on trade and imports and, in a word, create conditions so that no one –government, enterprises, unions, political parties- would entertain the possibility of accumulating so much power or the capacity for imposition as happens now. When the playing field of this “power value chain” is more level, less biased and more equitable, the country could flourish.

Corruption and impunity, twin sisters, are the product of our political reality that takes root in laws and regulations. The reality will change when the game preserves from which these emanate are attacked, when bureaucratic faculties are well defined and delimited, eliminating arbitrariness, the mother of all corruption and impunity.

The electoral bill just passed by the Senate is a jewel of incentives for corruption and impunity. It would be desirable that it be dismissed outright by the Congress. If this does not happen, the citizenship better hope that the energy reform (that was exchanged for the electoral bill) at least justifies such an arbitrary law and the anti-democratic features it comes associated with.

www.cidac.org

@lrubiof