When the growth engine is stuck in the mire, one should question oneself as to whether the premises sustaining how to start it up again are valid. Bertrand Russell, the great British philosopher, once affirmed that “I think that what needs to be preached in modern industrial countries is significantly different from what always has been preached”. In matters of development, what has always been fostered in Mexico is demand, that is, greater expenditure. It is possible that, in some circumstances, spending could be useful; however, what truly should concern us is why investment is so sluggish.

The governmental perspective, by nature, is from above: the whole is what is viewed and it is very difficult to understand the parts or to act with surgical precision. That is the reason for the failure of the majority of sector-promotion or growth programs in general. Except under very particular circumstances, what favors or inhibits investment is very distinct from what, from above, can be understood by a bureaucrat who, necessarily, must make decisions featuring the whole.

A paper in a Chinese fortune cookie stated it with full clarity and in the vernacular, “Crowded elevators smell different to midgets.” This person, that is, the run-of-the-mill citizen, experiences problems that begin at the door of their establishment but that do not end there. The citizen must deal with garbage on the sidewalk and fluctuations in voltage, scarcity of water, potholes in the street, and the interminable traffic involved in getting anywhere, and what of the violence and insecurity? Before even beginning to think about establishing a business –whether it’s an automobile engine plant or a stand for repairing household steam irons- the potential entrepreneur already sees the world as an uphill climb.

This potential entrepreneur or investor doesn’t even imagine what’s coming: zoning laws; ground use permits; environmental impact evaluations; import red tape; registering before the Ministry of Finance; the municipal government, or the Federal District delegation. If they sit down to plan the integral process, those aspiring to entrepreneurship will be required to contemplate a veritable troupe of lawyers and accountants months prior to production of the first screw. Judging by the tangible reality, the majority of these succumb in the planning stage: ergo, our large informal economy.

Supposing that these are sizeable or multinational businesses, with the capital and capacity to deal with all the red tape and costs inherent in the process, their considerations become yet more practical: how does Mexico compare with countries like Korea, China, Brazil, Hungary, or Taiwan. If the potential market is the U.S., the intrepid investor will begin to research what Mexico offers for their project. The advantages will be evident: proximity and access governed by a bilateral commercial treaty. With this we have a leg up. However, as soon as other things are proffered for comparison, their costs and potential benefits require recalculation.

From the other side of the table, as aspirants to this investment (although it doesn’t always appear to be thus), we would be required to ask ourselves how we compare with nations such as the aforementioned  and at how great a momentum do these two enormous advantages begin to be eroded by the onus of our problems and limitations. In contrast with China or Korea, our infrastructure is pathetic: decrepit; below par in quality; streets chock-full of potholes; permanently chaotic transit (more in some cities than in others), with a bureaucracy whose incentives always privilege the short-term (personal benefits as well as slush funds for public officials) instead of aligning itself with growth of the economy.

What Mexico needs is a change of focus. Ideally, this could emerge at the global level, when a great national leader convinces the collectivity to focus on the future, accompanied by growth and development criteria. Although attractive, judging from what we have witnessed in recent times, a cynosure of this nature seems scarcely realistic. The function and responsibility of the government is to eliminate obstacles, both internal as well as external, to private investment. However, the amount of the obstacles that exist is the equivalent, says Luis de la Calle, of the speed bumps that we car drivers encounter everyday: this comprises the best evidence of underdevelopment because speed bumps are substitutes for what does not exist, that is, respect for the law, traffic lights, and other means that, in theory, should serve to norm development and make it possible.

One way of attempting to right these wrongs would involve a bureaucratic and regulatory revolution that, although conceivable, does not appear possible. However, there are other ways of considering these themes. Perhaps the best achievement of the two PANist administrations of recent years is having made possible the mortgage market that has allowed several millions of families to acquire a home. Instead of seeking to resolve all of the problems that impede the growth of low income housing, Fox summoned together bankers, builders, regulators, and bureaucrats to explain impediments and define options. The solution arising from that did not transform the world, but did indeed resolve the heart of the problem. It seems to me that this should be the model to follow in the future: small but competent solutions to the specific problem.

The true challenge concerning the growth of the economy and employment in the country does not lie in the absence of ideas, projects, and opportunities but rather, in mistaking the focus that supplies the norms for governmental function. Wealth is created by entrepreneurs and it is these who generate employment. The former premise should be understood in the entirety of its dimension: everything that hinders or impedes the development of investors and entrepreneurs reduces growth and job creation. Clear as a bell.

In classic economics, growth was made possible by the “invisible hand” of the market. The problem is that, according to Rafael Fernández-Macgregor, in Mexico this hand is tied behind our back. It is tied there by red tape and the bureaucracy, state-owned energy companies, private political projects, and impunity that, de facto, give free rein to corruption and stagnation. Our problem is not the absence of opportunities or potential entrepreneurs, but the excessive presence of obstacles and impediments that in the last analysis quash even the most persistent of these. The success of countries such as China with the revolution initiated by Deng Xiaoping is not the product of their perfection but rather, of the fact that they accord privilege to those who create wealth. Simple as that.

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Asked how 30,000 Englishmen “subdued” 200 million Indians, Tolstoy responded: “Do not the figures make it clear that it is not the English who have enslaved the Indians, but the Indians who have enslaved themselves?” Something similar appears to be occurring with economic growth in our country.

One of the few issues on which there is near unanimity in Mexico is that of economic growth. We all see the growth of productive activity as a crucial means for creating wealth, generating employment, reducing poverty and inequality, as well as raising the level of the population’s quality of life.Consensus in this sphere is practically universal. However, differences on how to achieve it are as vast as ever.

In the discussion on economic development, there are two great wellsprings: the practical or technical, and the ideological or political.From the technical flank, there is broadconsensus on the type of factors or reforms that could contribute to growth of the economy and the debate focuses on the specific content of the legal initiatives that this would require:the fiscal strategy; the investment regimen; the labor law, etc. Some scholarsin this field, such as Gordon Hanson, affirm that Mexico has carried out many reforms but that it has not achieved raising the growth rateand that probably what is lacking are small adjustments in several circuits more than grand reforms.If something is clear after thirty years of reforms, it is that the problem does not reside in the reforms themselves.

The ideological and political discussion is very different.On the one hand, we find those who protect and defend specific interests and, on the other, those would construct or reconstruct a determined development model, whether that of the past or of other latitudes.Both contingencies have developed a very ambitious and wide-ranging narrative that seeks to justify and legitimatize the interests or values that lie in the background. Something else that is evident after fifty years of crisis and poor economic performance is that the problem is neither one of nationalism nor one of ideology.

Once in a while, a goodread changes the way in which one has been thinking about a determined theme. That happened to me with the book entitled “Bourgeois Dignity”*. Deirdre McCloskey’s argument is that growth is possible not when certain economic and structural conditions come about, but when the creation of wealth acquires legitimacy.

The author reviews the history of numerous countries –such as China, India, Iran, and the Arab nations- that, from theXVIII century, displayed conditions not very distinct from those of England and Holland but that, however, it was in these latter countries that the innovation began that led to capitalist development.The book takes it upon itself to ask why the difference exists and what it is that made the difference possible. The conclusion at which the author arrives is that structural conditions are necessary, but that what makes the difference is legitimacy.Not by chance is the book’s subtitle “Why Economics Can’t Explain the Modern World”. The great change of the last decades,says McCloskey, is that the creation of wealth acquired legitimacy in places such as China and India and this unleashed incommensurable forces and resources that have transformed not only their own nations, but also the world in general.Itis in this sense that the author affirms that the true revolution has taken place in the world of ideas and not in that of specific economic reforms. The latter are useful when the former have been resolved.

If we apply the argument to Mexico it would seem evident that although the reforms of the last decades, good or bad, were necessary, the crucial factor wasnever attended to. In Mexico the concept of wealth does not enjoy legitimacy and those who are responsible for generating it –the entrepreneurs- are perceived more as a blight or as a source of abuse than as the taproot upon which the country’s innovation and development depend.The absence of legitimacy in terms of the entrepreneurial function has many origins but perhaps the most significant is that neither the “technocrats” nor the “ideologues” have been able to revert this order of things.In fact, the narrative of those who advocate more reforms as well as of those who adopt an ideological vision tends to exclude the entrepreneur from the picture.This is what permits and leads to the existing entrepreneur being protected instead of to the creation of an atmosphere of competitiveness that allows the blossoming forth of millions of potential entrepreneurs, including many from the informal economy and “gofers” who, in a different business environment, would have everything to transform the country.

For McCloskey, the idea of a free and worth (in addition to dignified) bourgeoisie is directly correlated with the steam engine, mass marketing, and democracy. It was liberal ideas that created the transformations in the real world because they made possible the existence of a climate of innovation that made the European bourgeoisie flourish,what we now call entrepreneurship. The two central ideas that made the difference according to the author were: that the liberty to hope is a good idea in itself and that a complete economic life should give dignity and even honor to ordinary people.

Markets and innovation have been around from olden times, they are nothing new or novel. What is new in many places is the fact that those who operate in these worlds have acquired legitimacy and the freedom to act. In this regard, the great contribution of this book is that it explains with great perspicuity the manner in which the legitimacy of a social function has the capacity of transforming a nation, much as dogmatism and rigidity (social or political) inhibit it. One of the most interesting and relentless observations of the author is that the liberation that legitimacy entails permits breaking with the social, regulatory, and racial structures that permanently maintain many nations and sectors within their societies poor.Once entrepreneurial creativity acquires legitimacy, everyone can be an entrepreneur and those who take on the challenge end up transforming their lives and their countries.

China began to transform itself when it legitimized capitalism and the entrepreneurial function, even though it did this in oblique fashion. This is the transcendence of the famous saying ofDeng Xiaoping in the sense that what is important is not whether the cat is black or white but whether it hunts down mice or, in this case, produces wealth.The Chinese broke with their self-imposed enslavement. When will we?

*Bourgeois Dignity: Why Economics Can’t Explain the Modern World, Chicago University Press, 2010.

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Beyond the result, what was impacting about the election in Spain two weeks ago was the civility of its contenders. Everything was impeccable: the final results were announced a mere four hours after the voting booths were closed; the losing candidate presented himself to the media to recognize his defeat, to congratulate the winner, and to offer to defend, as a member of the opposition, the constituencies and values of his party; and the winner invited all Spaniards to join together in a great national effort, to recognize their opponents, and to announce what the focus of his government would be from that moment on. There were no disputes, quarrels, or disagreements. The voters had spoken and the contenders had complied. All had subordinated themselves to the rules of the game in form and in substance. Civility.

Although none of this should have surprised us, Mexico’s situation is clearly different. The question that appears central to me is how the Spaniards arrived at the point where there are rules of the game that all actors accept and adhere to. In technical terms, what the Spaniards have achieved is the legitimacy of their system of government, which consists of the belief in the validity and acceptance of the rules of the game. That’s how we differ from them.

The nodular point of the Spanish process took place when, at a meeting on matters of prices and salaries months after the death of Franco, all of the political actors –those who had lived under the dictatorship (or had been part of it) as well as those who had been exiled after the Civil War- accepted the Franquist legality, that is, the existing rules of the game, as a platform for launching the democratic transformation. The fact of accepting this set of rules (off-putting and abusive as they were for the majority of participants at the meeting) implied submitting themselves to a political process that, they trusted, would furnish a new legal framework, a new constitution, and democratic game rules. The so-called “Moncloa Pact” was transcending because it implied consensus with respect to the process, not the result.

In Mexico we’ve been engaged in a circular process for decades because the political actors have not agreed upon (nor much less accepted) a set of rules of procedure, independent of the result. Rather, political actors have made a display of accepting the rules only if the result is favorable to them. The spectacle of López-Obrador in 2006 is a patent example of this, but unfortunately not the only one, as we can observe with the PAN in recent gubernatorial elections in Michoacán.

Acceptance of the rules of procedure is something fundamental to the development of civility. Given its absence in the country, the discussion is centered on the electoral, but the matter is broader. Some years ago I was impressed –actually, mesmerized- on observing how a child, surely no older than 3 or 4 years of age, flew out of a side street on his bicycle into a main thoroughfare in Tokyo without looking: the green light was all he needed to know and certainly was all that his parents had taught him. Behind the green light there was absolute recognition of the fact that all motorists stopped on the most important artery would wait until the lights changed before proceeding. The relevant point is that a society that respects traffic rules and regulations also respects electoral rules and vice versa: they are inseparable.

In essence, at least on the electoral plane, the matter of rules is a matter of power. It implies agreement on procedures but also especially on their legitimacy. It implies, like the Moncloa Pact, subordination without discussion to the rules, independently of the result. In Mexico we have not achieved resolving the dispute for power and this translates into the propensity for automatically discrediting the rules every time someone loses an election.

In the era of the PRI, the issue of power was resolved through the imposition of two rules that were “unwritten” but evident: on the one hand, the president is everyone’s undisputed and indisputable lord and master; on the other hand, it is valid to compete for succession as long as the first rule is not violated. It was a simple and effective mechanism that, however, did not emerge out of the blue. Its success was the product of the establishment of the rule and the capacity to make it stick. The latter was not automatic: it was only accomplished when Cárdenas exiledPlutarcoElías-Calles and submitted General Cedillo. Once the capacity to exact compliance with the rules was demonstrated, the system went into effect and functioned until the PRI ceased being representative of Mexican society and the unrepresented began to dispute the system’s legitimacy.

The democratic rules that have been adopted over the past decades have not enjoyed legitimacy because there has not been wider agreement among the political forces with respect to the question of power: procedures; the distribution of benefits, and recognizing the opposition as a real factor of representation. At present, whoever is in power disqualifies the opposition and those in the opposition tend to discredit the one in power, beginning with failing to recognize its legitimacy of origin.

I have no doubt that the great challenge of the upcoming years will be that of power. In past decades we have gone from a system founded on unwritten rules to one without rules. Today the challenge is to construct explicit rules to which everyone subordinates himself and this implies a pact on power. Mexico’s problem is not that there are no legislative majorities but one of legitimacy.

On achieving a power pact, everything else that does not function or that eats away at society begins to change. On there being clear rules, the actors can devote themselves to the discussion of the themes that affect us with a distinct focus: instead of life trickling away bit by bit in each discussion, we could enter into serious debates where the only thing up for grabs would be the immediate issue.

Currently, key themes for the development of the country such as public security, energy, and worker rights protection cannot be discussed because one of the actors maintains the force to impose his interests, without recognizing the formal power structure. That is, the so-called de facto powers (including the political parties) can veto or cancel any relevant debate because they are more powerful than the formally established powers. An agreement on formal power (the government) would allow strengthening the State in its entirety, beginning with it the subjugation process of the de facto powers: just like Cárdenas did in the thirties.

As happened in the Maximato (1928-1934), today the government is here, but the one who rules is out there. There is an urgent need for a pact that legitimizes the power of the government and the role of the political parties and that throws open the door, for real, to the stage of the institutional development of the country.

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“Competing pressures”, wrote Kissinger, “tempt one to believe that an issue deferred is a problem avoided; more often it is a crisis invented”. That’s how we are with the continuing postponement of solutions to the issue of economic growth.

A key question for us is why doesn’t the economy grow? Or, in other words, why did the economy grow in the sixties and why are we unable to reproduce those very conditions now? If we ask an economist, the answer would be technical and probably correct, but after diverse attempts to start the economy -many of these contradictory- growth continues to be rachitic. Years of observing this phenomenon have led me to the conclusion that the cause of the relative stagnation (because the economy is currently growing well) is due to the presence of certain key components, but only a few of these are matters of reform. The main problem resides in the absence of certainty.

Understanding the past may perhaps allow us to realize that what made the economy grow in a sustained manner and for long stretches in the fifties and sixties but not now. On posing the problem in this way we will find explanations that transcend the strictly technical. If one observes how economies such as that of Japan or Korea could grow at such high rates for so many years despite their severe internal structural deficiencies, it becomes evident that economic explanations, despite being key, are not sufficient. For there to be growth, there must be more than a healthy structure; there also must be a perception amongbusinesspeople and investors that the country is on a clear course, that this direction is shared, at least in fundamental concerns, by the political forces overall, and that private investment is perceived as necessary and, even more than that, as a crucial component of the development of the country.

In the fifties and sixties, there was a framework of macroeconomic stability that guaranteed a clear platform for growth and impeded frequent exchange crises. More to the point, there was an implicit understanding between the government and the business community, which consisted essentially of a division of labor: the government created conditions that were favorable for growth, particularly through investment in infrastructure, while the private sector made productive investments in factories, services, and others. Of course, we’re speaking of a closed economy in an era in which nearly all economies were closed.  But what is evident when one takes a backward glance is that the key is not what the specifics of the development strategy but rather, the certainty (or uncertainty) that comes along with it.

The key, or a basic key, of the success of the industrialization process of the past resides in the existence of an implicit pact with deep and transcendent moorings: behind the division of labor was found an institutional arrangement, a set of rules that were transparent, albeit sometimes implicit, for all of the participants. These rules not only implied that the government was self-limited in its reach and in the type of policies that it could implement, but also demarcated the sphere of influence in tidy and transparent fashion.

The era of economic growth founded on this kind of implicit arrangement, high profit, and clear and transparent rules of the game collapsed in the seventies in good measure because the government did not recognize the implicit pact and began to change those rules unilaterally: it abandoned an explicit policy of macroeconomic stability; gave wing to an era of inflation; imposed price controls, absurd regulations, subsidies, investment restrictions; and launched a series of expropriations, the most politically charged of which was that of the banking system. All of this violated the implicit terms of the pact that for so many years had afforded strength to the economy and certainty to the private sector. What is amazing is the longevity of the era of distrust engendered from this.

The key issue now is how to recreate the pact that established the tidy game rules and that was fundamental for achieving years of high and sustained economic growth. How, in other words, to construct institutional scaffolding that permits the country to make the decisions that are urgently required for its development in the political as well as the economicambit. Part of the problem today lies in the diversity of authorities exercising jurisdiction over an enterprise’s activity, each with its own logic and motivation, but all demanding of bureaucratic satisfaction. This is what affects the small entrepreneur more than anything else. But perhaps the most important part resides in the perception that there is no long-term direction for the country, that the political forces do not have a commitment with a common objective, thus the country’s viability is always in question. This is not a problem of regulation, but THE central political problem of the country. Perhaps, if the economy were growing, many of today’s political conundrums would be easier to deal with.

In this dimension, only a political pact that commits to a common objective and to the rules for advancing in this direction could begin to construct the confidence that all societies require to prosper. Some of the participants in a pact like this would perhaps require eliminating or consolidating privileges, but those are diversionary issues. Mexico needs an explicit pact because the implicit ones have given their all. In addition, a pact of this nature would of necessity be coherent with the circumstances and realities of today’s world: that is, it could not negate the fact ofglobalization; the free trade agreements that already exist; and the requirements of the potential investors on whom depend, at the last analysis, the growth of the economy and employment.

Beyond the current problems with the euro, the process of European integration is an irrefutable illustration of that a legal and political environment that is sound and propitious for growth is the best prescription for the integral development of a country. It is evident that we are not European, but it is also evident that the countries that have prospered in recent decades achieved this thanks to their creating a climate of predictability that conferred certainty. There’s nothing without that.

If we aim at recovering the capacity of economic growth, we must create a new political pact and this is only possible by means of a legal framework that is enforced and not subject to abuse. This certainly cannot be constructed overnight, but if we don’t start to develop it, we’ll never get there.

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The businessman wished to develop a strategy for modifying certain regulations and increasing a few customs duties with the purpose of delimiting the capacity of his competitors’ access to the market. In other words, he wanted to create market failures that would benefit his bottom line. The consultant proposed the need to think on a large scale and for the long term: to accept lower profits in the short term in exchange for a bigger business in the future. The businessmanwas pursuing and protecting his interests, attempting to skew the means within his reach to increase the benefit of his company. The consultant was thinking about Mexico and its long-term needs.  The mismatch was evident.

This is a true story that I was witness to some years ago. The head of one of the important companies in Mexico was speaking with a former civil servant, now a business consultant. The advice given by the ex-functionary was serious, solid, responsible, and totally inappropriate for his client. While public officials make their living from thinking about the collective good and how to propitiate greater competition with fewer roadblocks for investors or, in the case of the politician, for contenders, businessmen (like the political parties and the candidates) perennially seek to bias the rules of the game in their favor. These are two normal visions, both necessary in a society, but not the same.

What interests the citizen, in his facet of entrepreneur, intellectual, or candidate, is to win in his own territory and space. What is of concern to a public official is for no one to abuse the situation and for everyone to have the same opportunity for getting ahead. The tension between the two is what makes an economy, a society, and political processes work.

I am not mentioning the names of those involved for obvious reasons, but on witnessing the exchange I realized that the institutional design of the IFE (the Federal Electoral Institute in Mexico) is wrong. What does one thing have to do with the other? Everything. The IFE came into being as a citizen institution because no one trusted the politicians and the moment was unique for naming a group of exceptional persons at a time that, as we have seen, would not repeat itself. Time has demonstrated that this was something unusual and unrepeatable. The first IFE citizen council conferred legitimacy on the elections and expunged, in an amazingly short period, the entire history of electoral abuse. Without the least desire to subtract anything from the council’s merit, an honest and realistic vision of that moment must also include the evident fact that the electoral process was celebrated and the council earned enormous prestige because the politically correct candidate won or, in even more precise terms, because the PRI lost. It is not obvious whether, had the PRI maintained the presidency in 2000, this prestige would have been the same, to say the least. 2006 showed aspects of the other side of the coin.

The irony of that first council is that its success threatened the politicians, that is, those who were indisposed to losing control of an institution so central to the game of politics. As soon as the council achieved obliterating the history of abuse and partisanship at least in appearance, the political parties assigned IFE council seats to individuals close to them and managed this with a strictly partisan criterion. The delay in naming three of the council’s missing members speaks loudly in this regard.

The IFE should be an institution of the State, one which is administered by professional public-service officials. Thus the relevance of the exchange between the entrepreneur and the former functionary: citizens are not the ideal persons to administer a State entity. These institutions, and even more so those who preside over such contentious matters, require the mentality and long-term vision innate in a public functionary and that distinguish the latter from the average citizen.

This is not an issue of a citizen being incapable of or poor at being responsible for a State institution, but his vision and perspective is, by definition, short-term. A citizen -whether an entrepreneur or an intellectual- knows that his mandate is finite and this, inexorably, leads him to contemplate his next means of livelihood (the same as, surely, politicians). In contrast, a permanent functionary has a long-term career that sheathes him and confers upon him the certainty of permanence that is indispensable for administrating with fair criteria and in the general interest. A citizen, however disinterested, will always be pondering his future and will put it at play only to the degree that it will not affect his prestige or perspective for employment.

Also, this is not meant to be a criticism of individuals who have served on institutional councils such as the Federal Electoral Institute or other regulatory instances that have followed a similar path. The dedication and commitment of many of these persons is laudable and absolutely respectable. But, in terms of the country’s development and the construction of institutions that afford strength and permanence to political stability and economic growth, and as human beings, these are people who will always be contemplating their personal future.

The presence of exceptional citizens in entities such as the IFE, the Federal Public Information Access Institute (IFAI), and entities of economic regulation (such as the Federal Competition Commission, Telecommunications, and Energy) has permitted us to deal with and advance through the difficulties and avatars of a complex political and economic transition over the past decades, but has not led to the consolidation of strong, permanent institutions. I entertain not the least doubt that part of the success and smoothness of the transition that we underwent in 2000 was due to this team of citizens who understood the moment as few did. I am also certain that this period is over and that the citizen presence no longer contributes to the institutional development of the nation.

At this new stage we require strengthening of the State and its civil service, granting it permanence and solidity. This is only achieved with career civil servants, independent and non-partisan, with not only the time horizon inherent in the governmental function, but also with the vision of the State, which implies looking after the collective interest, balancing private interests, and creating, and managing,  identical game rules for all. In other words, it is time to construct a State with the capacities and attributes that the country requires for the future. Never could a citizenry, regardless of how altruistic and well-intentioned, achieve this. John Stuart Mill, XIX century philosopher, said that “all political revolutions, not affected by foreign conquest, originate in moral revolution. The subversion of established institutions is merely one consequence of the previous subversion of established opinions”. To carry on with, and above all, to conclude, the transition upon which we have embarked, we should move ahead to the institutional stage, to the strengthening of the State.

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According to a biblical story, a family lives in a room amidst overcrowded conditions, which generates interminable conflicts. The father decides to consult his rabbi, who tells the afflicted father thathe should put all of his hens in the room and come back after a week. Seven days later, the man can’t stand another minute of it, but the rabbi tells him to put the rest of his animals in the room and to come back in a month. When the month is up, desperate, the father arrives ready to fight the rabbi. The rabbi tells him to take the animals out of the room and to come back in a week. Seven days later, the whole family returns with enormous smiles on their faces: they are all happy because they are living to their hearts’ content in the same room that only a few weeks before had seemed such an uninhabitable place. That appears to be the strategy of the government of the Federal District: turn up the pressure in all ambits –traffic, infrastructure, water, social programs, development plans- to such a intense level that, when the works projects are over and everything’s returned to normal, we, the inhabitants of Mexico City, will feel rejuvenated and happy due to the grandiosity of the governmental actions. As political strategy, this is an unsurpassable project. As a platform for the development of the city, –or of the country- it is nothing more than a mirage. Like the biblical anecdote.

When one hears about the enormous governmental programs and the achievements that have been reached, there’s nothing left but to ask oneself if the citizens live in the same place as our authorities. According to the city’s head of government, the Federal District has resolved the main problems, the bases are being set in place for a stupendous future, and we are well on the road to development. I ask myself, where did the holes in the street, the water shortage, the traffic, and the growing criminality go?

It is evident that a city abandoned for so many decades would be suffering from all types of problems that cannot be solved from one day to the next. Similarly, the hardships generated by the improvement process are high and have no remedy: a street or a Metro line takes time to be constructed, the period from when the work begins and ends is not agreeable nor should it be undervalued and, as much as the citizenship might complain, these are inevitable, thus tolerable, costs. Truth to tell, the population has been more than stoic in its acceptance of the costs and the hardships.

What are disputable are not the problems themselves but the pretension that these are already resolved. Instead of advancing a long-term vision for city development (and, for obvious reasons, for the country), what we city inhabitants have been hearing are grandiloquent statements about achievements that do not exist. The lack of planning is scandalous: there are streets that have undergone important public works programs in recent years (for example, underpasses or bridges) and that are now being newly opened for some other project. It’s not that the project is bad, but rather that there is no continuity in the works, which reveals that instead of vision there is reaction.

Everyday life in a city as complex as the Mexican capital is difficult in itself. The typical inhabitant works far from where they live and this implies wasted hours in getting to work, hours that are multiplied by traffic problems that never seem to resolve themselves. In addition to this, criminality dominates the minds of the inhabitants: the fact that the number of deaths is less than in other parts of the country does not mean that congratulations are in order because they do not exist. The number of abductions, robberies, and assaults continues to be very high and is incongruent with the desire to convert Mexico City into a financial and tourist center and one of knowledge development and scientific research. No capital resident is unaware of the real and potential assets of the city: but it is insufficient to possess these, constructed as they have been over decades, in order to suppose that they are inexorable mainstays for a promising future.

Perhaps the city’s true problem lies in the incompatibility of the system of government with the needs and problems of the huge urban concentration. The city requires a long-term development plan and vision and a professional administration devoted to implementing it systematically. When the administration and the city government change every six years and devote all of their energies to constructing a presidential candidacy, city development is curtailed and never procured. The incentive for the governor lies in concentrating on what is popular or most visible (and to blow one’s horn about it for all it’s worth) rather than devote oneself to an integral long-term project. Despite the latter, it must be recognized that the current city government has sustained projects, such as that of the Supervia (San Jerónimo-Toluca), despite their being unpopular.

The problems of the city are evident: wastefulness of water is extraordinary, to the degree that  it is estimated that more water is wasted in Mexico City than the total water consumption of the city of San Antonio, Texas; public security is an illusion; the quality of the asphalt, even on recently “paved” avenues (such as Reforma) is pathetic. Even problems such as those of the traffic are often due to the bottlenecks produced by improperly parked cars, street vendors, street repairs, and poorly designed traffic loops, which denote a serious problem of the absence of authority. If one were to observe the traffic from above, traffic jams would be seen across the board. Some of these undoubtedly require large works (traffic grid arteries and second-level traffic lanes), but many require small and concrete actions, in addition to willingness to force compliance with the rules.

In addition to “ancestral” assets, a city at the vanguard requires a long-term vision, a population aware and convinced of the project, and the capacity to carry it out. We have at present a paradoxical combination: great assets, a population with no idea of where we’re going (or whether we’re going), and a great capacity for implementation. What a pity that vision and pursuit of conviction are lacking. A population that knows where it’s going and that can trust its authorities to achieve this becomes any government’s best asset, above all when, counter to what many suppose, everything indicates that the future will reside in great cities that are “intelligent”. Without vision, without security, and with the worst of services, none of this is possible. The great projects end up being a mirage.

Mexico City is perhaps at the vanguard of Tapachula, Lima, or Lagos, Nigeria. However, the relevant comparison is Kuala Lumpur, Seoul, or Beijing. In the light of this paragon, it hasn’t even begun.

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Whenever I see or find out about cases of corruption in Mexico, I keep thinking of whether the country has changed or whether everything remains the same. Some things continue being the same for decades if not centuries. Others, contrariwise, change swiftly. What is the real Mexico, the one from before or the one now? If one takes a backward glance, it is evident that we have experienced profound changes, some dramatic and many exceedingly positive. In the same fashion, some things appear to be permanent, immovable. What will remain permanent, that which doesn’t cede or that which has just been built?

Like so many other things in the country, the answers are essentially grey in tone rather than black or white. Before, corruption was a component inherent to the political system. Today we see corruption as an evil, as a distortion in an unfinished process of modernization. The old PRIist saying, “don’t give me anything, put me where there is”, is a faithful reflection of a political system built by the winners of the revolutionary exploit and dedicated to benefit their own. That system, still alive in more than one corner of the country, was constructed under the promise that to those who were loyal and who obeyed the chief du jour, the Revolution would “do justice by him”, that is, would give him or her access to power and/or wealth through corruption.

Perhaps the greatest merit of the PRIist regimen was the achievement of pacifying the country without being excessively harsh. The country proceeded from the extreme violence of the civil war years to a productive peace from the mid-thirties, all this without having constructed the Rule of  Law, but rather, a political structure that, on privileging discipline, maintained peace and stability. This is the world that Graham Greene portrayed in his book The Lawless Roads on the Mexico of the thirties, in which the author describes a desolate place where corruption reigns and the most modest inhabitant has no alternative other than to accept life as it is, a lawless world and one without the possibility of achieving the most minimal respect for his rights.

Decades afterward, the incipient industrial companies that were the product of the imports substitution program, lived with another facet of the same reality: the Ministry charged with supervising and regulating industry was a breeding ground for interminable corruption where everything had a price: import permits; export permits, and authorizations for investment. Businessmen were required to ante up for everything: to obtain the permit or so that his competitor would not obtain it, to accelerate some paperwork, or to paralyze it permanently. Everything was up for sale. A world unto itself.

But a world that ended up changing. When opening to imports and economic liberalization came about they rendered these controls irrelevant, the bureaucracy lost its corruptive power and the Ministry was downsized from more than thirty thousand employees to fewer than three thousand. With the end of controls the possibility of extortion, the value of paper pushers passing documents from one desk to the other and of these procuring the signature of the responsible party disappeared. Although many indirect control mechanisms have returned and the logic of control persists, that bureaucratic corruption disappeared from the spectrum of the prototypical entrepreneur’s considerations. Now what counts are production, quality, and the market.

The example depicts how corruption does not have to be permanent. It also illustrates the nature of our bifurcated reality: although many things have changed, many remain. The old Mexico of corruption has stopped being valid in some ambits but persists in others (those that have not been liberalized and where the bureaucracy is in control). The true issue is this: we have not achieved completing the transition process to modernity, to a space where coexistence is governed by impersonal rules (the law) instead of by personal relationships (where corruption is never far removed).

The existence of the two contrasting yet simultaneous realities describe a country that has changed begrudgingly, without an integral project of modernization and without the capacity or disposition to articulate a consensus regarding an objective likely to enthuse the population. This duality was present when, at the beginning of the nineties, the government recognized that it could not pretend to be modern and, at the same time, maintain the hegemonic party through funds procured directly from the public purse.However, the solution that the government proposed was not at all modern, i.e., that the businessmen who were beneficiaries of the modernity would sustain the party.

The mixture of tradition and modernity, corruption and transparency, has prevailed in these years of change. At least hypothetically, one possible explanation for many of our day-to-day ravages are concerned with precisely that permanent contradiction: where opaque spaces are in the end not annihilated and many of those that should be transparent are far from being so; where competition continues to be an objective rather than a reality, but where advances are attempted with the methods of before; where the spaces of corruption are still too many and return much more quickly than others evaporate.

Many blame the politicians, the businessmen, the unions, and the governors for every type of evil because they can get away with it, that is, because the system lets them. The opposite is also true: until and unless the society desires to live in a regime of transparency and refuses to accept the rules of opacity and corruption, the latter will continue to survive. The reality is that it is convenient for everyone (or at least most perceive it is) to solve a problem with a bribe or to avoid a nuisance with an “outside” arrangement”. The problem is that convenience has its counterpart in corruption and the one cannot be cancelled out without finishing off the other.

The country that Greene described eighty years ago continues to possess underpinnings of reality and this is a tangible demonstration of how much we still have to go. But the example of SECOFI (ministry of trade and industry) in the eighties also illustrates the possibilities held out by a deep structural change. Perhaps the tragedy of the modern Mexico –and I say tragedy because it entails a context that made possible the growth and development of criminal organizations with the end of the old system and the absence of the type of controls that a modern country requires- is that the idea and instruments of modernity have not permeated into the majority of the members of the political class nor into society in general. In addition to being highly improbable, to await a great leader who will change everything and be our savior along the way constitutes an old way of attempting to construct modernity.

The country will continue being corrupt inasmuch as we all continue liking it like this.

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For Lenin, “the organizational question is at the center of everything”. The Russian revolutionary leader was referring to the way that the Bolsheviks should organize themselves, but the principle is similarly applicable to our present reality. The country’s tiller has been inoperative for years, a situation that has been exacerbated by the poor quality of our recent governments but, above all, by the growing violence that intimidates the citizenry and that does away with opportunities for development. The least one should ask is what this situation offers for the future.

The theme exerting the greatest impact is without doubt that of violence and insecurity. Fragmentation of the drug cartels and criminal organizations has done nothing other than raise the number of deaths but, more than anything else, increase crimes against the citizenry. Until some years ago, crime comprised stealing cars, narcotrafficking, piracy, and other issues, all criminal but with relatively little impact on the manin the street.This all has remained in the past: today citizens endure raids, abductions, extortion, and a climate of violence that generates fright and ill feeling. Nothing is of greater concern for a society than this lethal combination.

The objective situation has generated enormous political controversy. The surveys show that a broad majority of Mexicans consider that the country is going badly.Many of the victims and their families clamor forsolutions and politicianson the campaign trail criticize the government. Beyond the specific critiques(how to “do it better”, add “intelligence” or a “better strategy” into the mix), there are no proposals that advocate a radical break with the government’s stance. Undoubtedly, many critics are correct in that the strategy of decapitating the criminal organizations has done nothing more than splinter and multiply them. However, whenever I listen tothe critics as well as to the pathetic governmental explanations, I am left with the sensation that there is more of an enormous desire to return to an idyllic past than a recognition of the true complexity of the situation.

Perhaps there is no more frequent convocation than that of negotiating with the cartelsor returning to the PRIist world where criminality did exist but was administratedand, fundamentally, did not affect the population. In addition to the practical impossibility of adopting an avenue to negotiation (with whom? how to make it stick? in exchange for what?), the reality is that –whatever some gone-astray PRIists say- governments do not negotiate (nor did they in the past) but instead, they established the rules of the game -and were capable of enforcing them. During the years of the hardPRI, the government was very strong and the narcos wanted nothing other than to move merchandise from south to north. There was no territorial theme nor were there high-powered weapons.Something akin this exists in countries like the U.S. and Spain, where drug distribution is tolerated as long as there is no violence.That world disappeared in Mexico for three reasons: first, because power was decentralized (i.e., “democratized”); second, because criminal organizations began to proliferate in the country, taking advantage of the rough-riding river, and third, due to the weakness of our police and judicial power at all levels, but above all, locally.

We must not forget that this era of violence began during Carlos Salinas’ term of office.Calderón may have erred regarding the specific strategy of cutting off the heads of organizations,but the problem arose before thisand, I am certain, would have grown much more rapidly had there not been a governmental response. But it is there that the fundamental problem lies: our institutions are not adequate for the challenge confronting them. The PRIist system worked because it was authoritarian, not because it was institutional, and it crumbled because that authoritarianism did not permit growth of the economy, propitiated frequent crises, and was racked with burgeoning illegitimacy.The solution will not come by way of imposition, but rather, by institutional construction.

Five years after the initiation of the war against narcotrafficking, the balance is positive in one aspect and very negative in others. It is positive in that the narcosencounter a decided and decisive government and that they no longer have unrestricted capacity of advancement and growth in their business affairs.It is negative in the numbers of violent acts, in the disintegration of the local equilibrium and, above all, in the proliferation of crimes against persons who are neither in fear of or in debt to the criminal element.

Viewed from a long-term prospective, the country has experienced two successful epochs: the Porfiriato, and the good two to three decades of growth of the PRIist era. The common denominator was centralization of power. PorfirioDíaz centralized power, combated regional caciques, ended decades of instability, uprisings, and revolutions,and gave the country some years of peace for it to prosper. The PRI pacified the country, maintained stability, and achieved an equilibrium that was conducive to growth of the economy. Both periods collapsed under the weight of their own contradictions and limitations. Those who believe that the way to the future resides in the reconstruction of power–by route of a strong, Miguel Alemándevelopmentalist-type government,or by means of repression and manipulation through Putin-like management of the securityservices-,should observe not only the collapse of hard regimes but also the prosperity of those that are democratic and consolidated. No one in their right mind could doubt the inadequacy of an attempt to reconstruct what fell to pieces, even if it were garbed anew.

Re-concentration of power is not the way out because it is adverse to the growth of businesses and the economy, the generation of wealth, and the development of individual creativity, whereinlies the future. The way out can be only one: the development of institutions that confer certainty on the citizenry, on investors, and on individuals in general. Criminality has grown because we do not have strong institutions–police, judicial power, local governments- with capacity of action and that avail themselves of a credible model and authority in the eyes of an incredulous citizenry.In other words, our problem is not criminality and violence, but the absence of State, the dearth of competent governmental institutions capable of maintaining order, imposing rules, and gaining the respect of the citizenry.

As Einstein said, “a perfection of means, and confusion of aims”, seems to be our main problem. What is shocking today, and what is worrisome, is the effrontery and brazenness of those who seek power without taking note of the causes of the disorder and the risks that everything will continue in decline. And, certainly, their responsibility in the origin of the chaos in which we find ourselves ensnared at present.

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When in 1688 the last Jacobite sovereign, King James II, decided to ignore the laws of Parliament, he was promptly deposed, giving birth to modern British democracy and its English Bill of Rights for the citizenry. This revolution also made manifest the essence of the functioning of a political system and its cardinal guarantee of stability: checks and balances.

If a certain politician or interest group abuses this, it is because they can: if there were effective checks and balances, they could not. Checks and balances are the essence of a democratic system of separation of powers. Their existence implies that each of the branches and levels of government possesses limited prerogatives and depends on the others in order to operate. None is effective in itself, but all work together as a whole: when all entities –Congress, the Presidency, the Judicial Branch, the states and municipalities- recognize their limitations and mutual dependency, the system achieves a harmonious operating capacity. In Mexico, we have many powers with the capacity for obstruction, but nearly none with true equipoise. Perhaps the sole exception, albeit incipient, would be the counterbalance that exists between the Federal Electoral Institute (IFE) and the Electoral Tribunal of the Judicial Branch of the Federation  (TRIFE).

While de facto equilibria existed that curbed the worst excesses, or at least rectified them after the fact, the PRIist political system was never characterized by checks and balances. The concept was unintelligible for a structure founded on centralization of power and the force of control and imposition. Had there been checks and balances, we might have observed a more seamless transition: as in Imperial Rome, the excesses of the system –from student repression to economic crises and corruption- became propitious elements of the collapse because there never were, as in XVII-century England, balancing factors that impeded abuse and excesses.

As of 2000, we entered into another stage of national development, in which we ended up in the worst of all worlds: without controls, without equilibria, and without checks and balances. Few nations have achieved a democratic transition without violent turmoil. It is impressive to look at the few that have accomplished this in a nearly imperceptible manner, but the contrary is more common: the old mechanisms of control, which, at any rate, allowed for some functionality, break down, but democratic checks and balances do not evolve. The difference between what there was formerly and what is not yet consolidated is vital, because as our current reality illustrates, there are many impediments to getting things done, but no mechanisms that oblige one to do things without falling into abuse, without extravagant expenditure, and with accountability. When there are no checks and balances, Congress can vote against the president, but the latter possesses no instruments to force Congress to act. Similarly, unions and state governors do not account for the quotas of their confreres and constituents, or for federal monetary transfers.

The absence of checks and balances preserves the status quo and paralyzes the country. Among the many proposals for changing this situation, few are constructive or visionary: instead, the petty and mercenary prevail. What is significant is that the actors in the political system recognize the existence of the problem, but have not known how to solve it. Instead of taking the bull by the horns, they have frequently resorted to the creation of autonomous entities(as if this were synonymous with impartiality or capacity to deliver) or to artificial solutions -imposed coalitions or majorities in congress- as if the capacity to govern could be legislated. What’s needed is a structure of checks and balances that makes it possible to govern while annulling the potential for proliferation of so-called “de facto powers”.

The key lies not in autonomy or an imposed majority, whatever the method, but rather, in the existence of checks and balances, and this can only arise from a great national-level debate resulting in negotiations on the structure of power.  And this, in turn, will only happen when all of the actors come to recognize that no one can function without the legitimate concurrence of the other. This may require another alternation of parties in government or a new crisis, but what is inexorable is that paralysis (and/or abuse) will persist until effective checks and balances are constructed. This is the reality of a society that has decentralized power and that nothing, except for an authoritarian regime, will change.

An effective system of checks and balances obliges everyone to cooperate because everyone knows that their functioning capacity depends on how everyone else functions. This is the basis of the political arrangement that Mexico must procure: one that responds to the most plebian and banal of human realities.Mancur Olson, an American scholar, wrote* that in nations with developed check and balance mechanisms, obstacles of economic growth are minimal, inasmuch as everyone would be affected by their very existence: in these cases, the most self-serving interest in the entire citizenry endeavors to eliminate restrictions to growth, because citizens lose out every time a bureaucrat or a private interest benefits from these restrictions. Everyone knows, says Olson, that prosperity tends to generate conditions for the development of democratic political systems; however, he notes, the opposite is equally so: democracy tends to favor prosperity.

Independently of the way in which an eventual political arrangement, its foundational element will be required to reside within the structuring of an effective checks and balances system. Although there are many models that can be studied, successful countries have constituted mechanisms appropriate to their circumstances: there are no prefabricated touchstones. Rather, the key lies in the negotiation itself: in the interaction among actors who suffer from and endure the absence of this type of mechanism, and of recognition by current beneficiaries that they themselves could, any day now, be on the other side of the table. Alternation creates opportunity, but only political accord can construct a lasting system.

Once this recognition is attained, creative solutions will begin to emerge that are appropriate for Mexican reality and that will shape the mechanisms of equilibrium for the federal powers as well as for governors. The important thing is not the form, but its functionality.

Building a country that works will require agreements that make possible the existence of checks and balances. For this, we may have to wait until the politicians are worn thin from the abuse of their opposite numbers. That’s the thing about development.

*Power and Prosperity: Outgrowing Communist and Capitalist Dictatorships

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David Lurie, the leading character in the novel Disgraceby CM Coetzee, appears to be devoted body and soul to courting disaster in his life, until he ends up fired from his job as professor and unhinged in his family life. In the face of his fall from grace, he concludes that, “when all else fails, philosophize”. I am tempted to do something like that when I think about a theme that has intrigued and concerned me for some time: the education-employment relationship that characterizes the country.

The problem is very simple: the behavior of the job market in Mexico is exactly the opposite of that in the U.S. and I ask myself why. Here, unemployment of university graduates is higher than the average, while the unemployment rate of persons with a secondary school education is lower. In the U.S. the opposite occurs: average unemployment there is 9%, but the number rises to 15% for those with a high school education or less, while it is 4.3% for those with a university degree.

The topic seems relevant to me for several reasons. Above all, whenever we talk about Mexican migrants to the U.S., we say that this is about a single labor market and that Mexicans who move to that country do so because there are employment opportunities, as witnessed by the empirical evidence (historically, unemployment is virtually zero among illegal immigrants). If it is only one labor market, why does the unemployment index behave so distinctly? A second issuerelates to the profile of university graduates. Why are there so many graduates from social sciences in general (including law, psychology, sociology and the like) with respect to those of engineering and the hard sciences? Finally, what do these factors tell us about the Mexican economy: is there something in the education-employment equation that permits us to better understand the nature of our economic challenges?

In Profesionistas en Vilo*/Professionals on Tenterhooks,Ricardo Estrada studies university enrolment in the country over time and analyzes how the student profile has changed and its relation to the labor market. Assuming the perspective of a student who aspires to become integrated into the job market, this author’s fundamental conclusion is that “the university degree has ceased being a passport to a stable and well-remunerated life” but that, “if the professional education is understood as an investment, the opportunities are as great or greater than before”.

Estrada proposes that part of the university graduates’ unemployment problem resides in that “the profile of the candidates is not attuned to that which employers are seeking… One main concern is that the bulk of professionals have studied majors with few job opportunities”. If this is the case, the question is, why have they majored in areas with little potential of finding employment? I have no answer, but one hypothesis is that majors that are considered “easy” tend to be compatible with simultaneous work/study situations: students opt for a major that allows them to work and study under the premise that the mere degree would enable them to obtain a better job. Another view of the same hypothesis would be that university scholarships have encouraged study to obtain an income (as if it were a job) and not because of a vocation. The “easy” major ends up being very attractive even if it does not lead to a good job. It is also possible that the teaching in secondary school of key subjects such as mathematics is so deficient that those aspiring to a degree in the end reconcile themselves to something that is not necessarily their vocation. The mismatch is evident.

On the side of the employers, two very contrasting worlds rapidly appear. In general terms, the most successful companies are those engaged inthe systematic raising of their productivity as a means of reducing costs and increasing profitability: they tend to contract the most qualified personnel, from whom they expect a clear contribution in order to continue increasing their productivity indices. It is here that we find concentration of the greater part of job offers for university graduates with credentials compatible with the demand for skills (which is the core of the book’s argument).

The perspective is very distinct in the remainder of the economy, whether among industrial or services enterprises. For companies not up against significant competition or that have achieved constructing protective barriers, there is no pressure to raise productivity, reduce costs, or be more competitive. These companies contract the personnel that they require, typically those with lower academic and skill levels: they don’t need more and are not willing to pay more than they need.

What we have is a bifurcated world in which two very distinct economies coexist: one that is exceedingly competitive, which requires the most qualified personnel and those with the best professional credentials; and the other, which has need of manual labor only. Although the former contributes much to the growth of the economy, the latter concentrates the greater number of employed persons. That is, as Macario Schettino says, the majority of Mexican workers are marginally productive; thus, they have low incomes. In the same manner, those that employ them add little value and, therefore, are marginally productive companies and contribute little to the development of the country.

Within this context, the political debate on the future of the economy is pathetic. The theoretical dilemma that we confront would imply choosing between the modern economy that grows but that employs a relatively low percentage of job seekers, or a decrepit economy of the past that today employs the greater number of people. Of course, this is a false dilemma but the surprising thing is the number of politicians who, in rhetoric and in practice, subscribe to the notion of staking their bets on the old and unproductive economy. To me it appears evident that the wager that the country must accept and assume is one for an economy that is modern, competitive, and disposed to generate more jobs, which are more and more productive and can pay higher salaries. The problem, of course, does not lie in that politicians and public officials are unable to understand the dilemma, but rather that their perception is that their own political costs of acting would be too high.

Wagering on a modern productive plant would entail eliminating obstacles to production in order to level the playing field for all of the companies, that is, to eliminate tariff, regulatory, and other types of mechanisms that, in fact, maintain an important part of our industry and of services providers isolated and protected from competition. Contrary to what many may suppose, protection does nothing more than perpetuate an unproductive world that translates into low salaries, uncertainty (for businesses and investors as well as for workers), and permanent havoc for the consumer. The true alternative is between a country that grows and develops and one that gives up the ghost little by little.

*Cidac, 2011

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