In one of the great battles of history, at Cannae in southern Italy, Hannibal the Carthaginian general almost defeated the most powerful and disciplined army in history, the Roman legion. His army, stationed a few days from Rome, could have easily gone on to conquer the city, but Hannibal hesitated. At that, Maharbal, his best general and cavalry commander said: “Hannibal, you know how to achieve victory but you do not know how to use it.” In recent months, the same holds true for President Calderon.

The country is at an impasse that calls for decisive action. Yet our political establishment is paralyzed. Those in charge of deciding and acting are not doing so. Those who are responsible, given our system of separation of powers, of assessing and ratifying or changing the proposals put forth by the executive are going to great lengths to criticize what exists without providing any alternative susceptible of unlocking the current gridlock. The milieu we live in is full of great ideas and suggestions that none of those that are in a position of authority are prepared to push forward. Myths dominate and interests and privileges are the glue that keeps them together. No country can function like this.

A complex time for our economy such as this, both national and global,  a time in which opportunities and threats to the country’s development are being forged,  all we get from our politicians is constant bickering over the budget and the tax snafu that consumed the Legislature for months during last year. While the country needs answers geared towards the future, the perspective of our political leaders is rooted in the past: on what the country was but can no longer be.

Even though large resources were spent (e.g. at the beginning of this decade the governors consumed more than one hundred billion dollars of additional revenue due to high oil prices), very little of this has had a positive impact on the growth rate of the economy as a whole. Instead of investing in the future, our politicians -government and opposition, but most especially the governors- consumed our resources with unusual gluttony. They spend and waste, and the only aggrandizement they can show for is their own self image (and sometimes not even that). They have used government resources to promote themselves and not to improve people’s livelihoods.

The country urgently needs investment, the development of new engines of growth and a strategy that enables both. While the dream of promoting growth through credit and deficit spending is swarming the environment, the truth is that there is no alternative to private investment. Even if it were desirable for the country to go into debt, credit is not available in the amounts that would be needed to jump-start the economy. Moreover, deficit spending would mean more demand which, as we’ve seen over and over in the past decades, would quickly exhaust installed capacity, thus lead to more imports, which in turn would generate a currency crisis. In any case, the government –the current one and all since 1970– has shown a complete inability to generate growth through spending the public purse. Investment will come from the private sector or it won’t come at all.

Investment can come from two sources: from national capital and/or from abroad. The engines of growth can only result from two types of sources: large investment projects promoted by the government for private investors to develop; or those that might result from a new type of association with the new leading sectors of the U.S. economy, those that become successful from the ongoing structural transformation that the U.S. economy today. The strategy to make this possible should include three essential features: a) the open, active and determined promotion of private investment; b) the development of major infrastructure projects that generate domestic sources of demand, especially in the country’s poorest regions; and c) the organization and negotiation of a development agenda with the United States that opens up development opportunities and activates sectors and economic activities to satisfy the demand generated by the American economy. This could include health, education, transportation, technology, energy, and the whole regulatory apparatus required to implement this strategy. The opportunities are there. The question is whether we are willing to turn them into sources of growth, and that depends entirely on us.

As long as this does not happen, until we do not eradicate the myths and sources of permanent distrust and misunderstanding that paralyze us, we will have to limit ourselves to what we have and this, as we know well, does not yield positive results. There is no reason to expect that things will change by themselves, without a fundamental shift in the way our politicians think: ahead and towards the future. An anecdote recounts that when the president visited China he mentioned to the prime minister that our government was very interested in Chinese investment in Mexico. Smiling, and very gently, the prime minister replied: “…they always confuse us, Mr. President, we are Chinese. The kamikaze are Japanese…. ”

Nobody will invest in Mexico while we continue doing all that is needed to repudiate investment. Nobody will take us into account until we know what we want and the politicians succeed in bringing the people behind them. Nobody will see us as more than a lost cause until we are ready to build the scaffolding needed to focus towards development. As the anecdote illustrates, nobody is willing to invest where there are no opportunities, where taxes change daily, where insecurity, both physical and patrimonial, is so high, and where politicians live off the treasury without ever worrying about the country’s development.

If we want to get ourselves out of the rut we are in we must begin to break down the myths that paralyze us. For example, this would entail rethinking the energy issue (including, of course, oil) as a source of opportunity and not as a museum piece at the service of the union and inefficiency. It would also imply the  need to begin privatizing government-held assets that do not contribute to national development. Above all, we have to acknowledge our own paralysis and the fact that it is not the fault of one person, as important as he or she may be, but of all the political interests that are more concerned about protecting privileges than making ours a viable country.

The start of a new year is always a good time to reflect and zero in our batteries, and this would be a good place to start.

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One of the things that impresses me most of the legislative and political processes in all societies is the inevitable contrast between solving problems, finding solutions and the programs or enforceable laws that result from the tortuous process of negotiation. Typically, at the beginning, the proposal or bill tends to be coherent and directly aimed at the issue being addressed, but once it goes through the negotiation process it ends up being less coherent and, in many cases, often falls short of fixing the problem. Sometimes, when the architects of a project try to anticipate critics or opponents, even their first proposal becomes incoherent, tortuous and too complicated. Perhaps there is no alternative, but I keep asking myself what is the point of alleged solutions that have no chance of solving the problem.

Examples abound: we have the highly commended energy reform that has neither a chance to improve the oil monster’s performance or its productivity. There is also the project for a new refinery without it being obvious that there will be oil to refine or that in any case, it would be a profitable venture.

The same could be said of the proposal to reform the Mexican political institutions that the PRI has brought forward in the Senate, starting with the idea of reducing the number of sits by proportional representation in the lower house of Congress. In a system of popular representation, what should exist is a proximity between the representative and the represented. The reform proposals that are beginning to be discussed in the Senate include the possibility of reelection, which would seem to support that purpose. However, to preserve the system of proportional representation, what is advanced on the one hand is backtracked on the other, even if the total number of members of Congress diminishes. The hybrid that characterizes us (what we have right now is 300 by direct representation deputies and 200 by proportionality) hinders accountability and creates a distance between the citizens and the so called representatives. Unless this is the ultimate goal, it would be better to have a system of pure direct representation with redistricting so that all parties have a reasonable chance of achieving presence in the legislature or, in a less optimal scenario, have a system of full proportionality. If the objective is in fact to find a solution, it would be best to get it right from the beginning.

Many of the proposed solutions do not address the underlying problem. Although the rationale is to strengthen institutional structures (certainly a laudable goal), many of the initiatives assume that there is institutional strength rather than attempt to accomplish precisely that. For example, no one can object the proposal to ratify some key members of the presidential cabinet. However, when our main problem is institutional weakness, this proposal would only further weaken the presidency and, therefore, the country’s governance.

Perhaps the main issue at hand is that there is no full recognition that, following the defeat of the PRI in 2000, the country experienced a radical change in the reality of political power, and there has not been an institutional reorganization that meets the new realities. Once “divorced” from the PRI, the presidency becomes flimsy, not only viewed under our own historical standards, but even compared with other nations similar to ours. In the same vein, the actual structure of power has placed state governors at the center of the system, along with the leaders of the political parties. The initiatives being proposed do not seek more than a further weakening of the presidency without improving its ability to act and to govern.

In a country lacking strong institutions that are credible and respectable (and worse, a country prone to undermining those that come close to this paradigm), the notion of incorporating such figures as the referendum and the revocation of mandate, while both politically correct, entails an almost personalized inscription that can always backfire on the promoters of such initiatives. In any case, the latter are clearly instruments of power and not visionary proposals for institutional strengthening. They assume that all political actors would behave in an honest and institutional fashion in a time of crisis. As citizens, we should be very skeptical of such an approach: after what we have experienced in the past decades, at least from 1994 to the present and without forgetting the year 2006, can anyone construe this is as a valid assumption?

At heart, the problem is not the specific proposals or the prospect that in fact realistic and reasonable solutions are put forth. The problem lies in the fact that the frame of reference continues being the struggle for power and not the construction of a new political system, a system that turns the development of the country as a whole into a viable option. We are talking about an introspective and interested vision rather than a broad and ambitious approach of a generation of politicians thinking about the future.

Many of the proposals contained in the draft entitled “the eight Rs of the PRI” touch the core issues, but the approach taken is not meant to build a modern country, but to distribute power in the here and now, along with various specific retaliation schemes against concrete political enemies. Framed like this, the project is not conducive to strengthening the political system or the transformation of the country.

What is wrong is the approach and the apparent ulterior motive, not the concept itself: focused in a different way, the same concepts, or many of them, could become transformational.

For example, one could think not in weakening the presidency but in building a new presidential institution with the attributes that a modern country requires and with a view towards achieving effectiveness in government together with a system of checks and balances. Along the same lines, one could revise relations among the three powers of government, define areas of responsibility, and create institutional, and effective, dispute-settlement mechanisms. The use of money, one of the most contentious issues in recent years, could be framed within a new institutional context where an autonomous entity reviews the budget and creates mechanisms to make the executive (at all levels of government) accountable. The autonomous and independent entities also require upgrading, but with the aim to strengthen them as sources of balance, not as sources of submission.

In other words, the same core project could become a development factor if only these projects focused on building a trans-generational approach. The beginning of the year is a good time to start.

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Nobody can ignore the social inequality that Mexico suffers nor scorn the human cost that it represents or the huge missed opportunity that its sheer existence entails. Inequality goes hand in hand with poverty but it is not the same: they coexist and are the result of structural and historical circumstances. Although it is impossible to change history, the experience around the world is that there are means to combat poverty and to mitigate, if not quite eliminate, the causes of inequality. In fact in recent decades, poverty has diminished by more than 80% around the world. Although something similar has also taken place in Mexico, it is quite obvious that its absolute dimensions are still enormous.

From an analytical standpoint, there are two ways of conceptualizing the problem of poverty and inequality: one is blaming the problem on history and the other is building mechanisms that can in fact reduce it. Both approaches were clearly exemplified in the 2006 elections. In that race it was clear that the country has a contradictory perception of the way in which these ailments have to be addressed. Some take a moral perspective and seek to solve their qualms with historical complaints (along the way attacking the foundations and wisdom of the economic policy that has been pursued in recent years), while others seek ways to correct problems, reduce social costs and attack the more severe manifestations of poverty and inequality.

What is clear of the last several years is that poverty can be reduced, but the obstacles are formidable, not because government policies have been unsuccessful but because the number of obstacles to their implementation are enormous. While it is possible to imagine different ways to tackle social ailments like poverty and inequality, there are proven mechanisms that allow us to discern between quackery (such as increasing public spending or imposing trade restrictions) and appropriate policies to address the problem (including macroeconomic stability and a targeted social policy).

Education is by far the most important mechanism to combat inequality. The experience in this area is overwhelming and quite obvious: children from poorer and disadvantaged families lag behind and have no access to good teachers, the educational programs are not the right ones and what is often called “education” is not much more than a veiled mechanism aimed at controlling people and preserving a system of subordination. All we need to do is compare the overwhelming differences between rural and urban, and public and private, education to recognize a source of abysmal inequality. Many countries face serious problems of inequality; the difference between those that are developed or actually moving in that direction and those that are still relatively poor and backward is that the former have created educational mechanisms so that any child, regardless of social or economic background, has the same chance of making it in life.

The issue is not just Mexican. In his recent book, “The bottom billion,” Paul Collier analyzes what has happened in the world lately. A professor of economics at Oxford, Collier studies the evolution of poverty and inequality in and concludes that a group of countries that endorsed globalization achieved dramatic reductions in poverty. These countries implemented mechanisms aimed at increasing access to education, extending the reach of the most modern infrastructure and procuring equalization of opportunities, an improvement that benefited more than 80% of the world population. The question Collier asks is why the remaining billion people have not improved in any way. His focus is on sub-Saharan African nations, but his analysis can be extrapolated to other nations suffering from similar problems.

According to Collier, the central problem in nations where poverty persists is the political struggle between reformers and corrupt leaders and bosses: where the latter win poverty increases. His analysis shows that the causes of failure in these nations becomes evident in the form of development traps, myths built to protect vested interests and, often, a strong dependence on natural resources. A bit like Lopez Velarde (a Mexican poet of the 19^th century), Collier argues that natural resources tend to distort a nation’s economy and facilitate the longevity of bad governments. A bad government may consist of just that (corrupt officials), but sometimes it has to do with all the factors involved in preserving the status quo that hinders a direct attack at the root causes of poverty.

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Despite his orthodox economic approach, Collier’s book has the great courage of defying both Tyrian and Trojan. For the economically unorthodox he argues that their solutions (stop paying the debt, engage in high public-spending programs, or link inflation with growth) are counterproductive and potentially catastrophic. Any Mexican who was aware at least of the 1995 crisis could not doubt the veracity of this assertion. But Collier also chastises the orthodox: for him, trade, despite its huge overall benefits, is unlikely to benefit the poorest, whose commercial skills are limited. That does not mean, he goes on, that trade should be constrained; rather, his point is that there is a need to seek other means to attack poverty.

Education is particularly prominent among the proposals that Collier advances. An effective government must be able to break the hindrances –social, cultural and political- to ensure that the poor have the same opportunities as the rest of society. The author also proposes a much more aggressive intervention for the poorest nations, including the imposition of European Union sanctions (including direct intervention) to guaranty that measures are implemented against corruption and respect for property rights

One conclusion that is inescapable from this book is that there are no easy ways out for poverty and inequality, but that success in combating these evils is not impossible because the strategies for achieving this are known and available to anyone truly willing to seek them out.  Poverty exists because of political interests that benefit from the status quo. The devil’s holy scriptures of Lopez Velarde end up meeting with Lampedusa (who argued that everything much change so that everything remains the same) to create a corrupt system designed so that nothing changes.

Stalin once said that people who place their vote in the ballot box do not decide anything. According to the Soviet dictator, the true decision makers are the ones who count the votes. The reconfiguration of the IFE (Federal Electoral Institute) in the mid-nineties sought to respond to a quasi-Stalinist reality: the hypothetical Mexican democracy conveyed no certainty to the contenders. With the integration of a citizen-led IFE, Mexican democracy began to flourish in the electoral arena. The IFE achieved what seemed impossible: win the confidence of the electorate. But Mexican democracy was not designed for the citizens.

In current Mexican politics, sovereignty lies with political parties. It is there where the current wrongs we are now experiencing were first shaped. Electoral processes did not need repairs or adjustments because they were fulfilling their objective: the campaigns worked, the media abandoned the historical bias that characterized the system for decades (indeed, the election of 2006 was the most equitable of our history), and vote counting was impeccable, as shown by all the assessments done after the election that year. Regardless, in 2007 the parties launched an electoral reform aimed at controlling the IFE, punish the media and regulate even the most modest procedures in electoral matters.

The 2007 reform would have made Stalin proud. The IFE’s autonomy was left astray, while public debate, electoral propaganda and the freedom to express opinions regarding the election would also be severely restricted. The IFE went from being an independent arbitrator to become a mere audit tool. Now, the IFE’s concerns are no longer centered on the fairness of the election but on the content of the political messages, the duration of spots and the imposition of fines and censorship to a growing number of political actors. In fact in another Stalinist outburst, anybody can now be prosecuted for electoral crimes. Many party leaders themselves have begun to worry about the Frankenstein they had created.

In fact, we are only reaping what was sown. The problem is that those who seeded were planning to regain control of the electoral process and maintain limited access to power, i.e., reduce the freedom of both the IFE and the public. And that is the underlying issue: in Mexican democracy the citizen is nothing more than a mere spectator. Instead of being the heart and raison d’être of politics and elections, its role is to legitimize the outcome, not to use the vote as an instrument, influence the way legislators act or decide who their representatives should be.

Seen from another perspective, the successive electoral reforms may have been inadequate, misleading or awkward, but they were attempts to respond to a complex reality: the old presidential system was dying and Mexico was in urgent need of institutions capable of replacing its functions. A strong presidency made it possible to compensate the onslaught of special interests (including what is now, in the post-presidential system, known as “de facto powers”) and kept at bay various potentially risky players (from guerrillas to drug traffickers). With this I don’t mean to suggest that the presidential chair of that time was infallible, benign or just. But in retrospect it seems clear that the inherent strength that accompanied it served as a counterweight to the institutional weakness that was really behind the appearance of strength vis-à-vis the rest of political actors.

In the absence of that old presidency, the country has to start shaping new institutional mechanisms to restore control over criminal organizations, counter the excesses of governors and make everyday politics viable. In short, Mexico’s real vulnerability lies in the fact that the institutions we have are inadequate to the deal with the formidable challenges they face and too weak to enable effective governance. The PRI dreams to return to the presidency but aside from having better skills for political leadership (no small feat), they could only reconstitute the old centralized system of control that they long for through a set of fundamental institutional reforms. In other words, it is not an issue of an individual’s ability.

This is the main issue: gaining control of the IFE is part of a process designed to recentralize power. It is an attempt to go about building the scaffolding of a strong government capable of decisive action. Along these lines, surely some initiatives consistent with this objective will be seen in the coming months and years. What is not obvious is the feasibility of the re-centralization of power.

The electoral reforms that led to the establishment of an autonomous IFE in the 1990s were not the product of the goodness of the PRI’s political system or the generosity of a president, but more or less ambitious responses to a tangible reality. Specifically, the then opposition parties had managed not only discredit the PRI and its presidents, but jeopardize the government in every election. The electoral issue is just one example of the gaps, increasingly more frequent, between the national reality and its institutions. Mexican society (citizens and interest groups) was challenging the PRI’s legitimacy; the pressures exercised by the governors were undermining presidential power; and local and regional conflicts made it increasingly more difficult to control the country.

The substantive point is that the old centralized structure cannot be reconstituted. Just as centralized power in the old Soviet Union was dismantled, the Mexican reality forced the dismantling of the old presidential power. Just like the political parties and the self-serving electoral reform that they passed, in Russia today one can see the restoration of centralized government, not as powerful as the old one, but certainly more than the one witnessed at the end of the Soviet era. Despite the apparent success in those latitudes, the members of the PRI and the PRD that dream with recreating the old system cannot ignore that Putin without oil is like Lopez Portillo in 1982.

Mexico requires institutions that safeguard the country and afford it functionality, not regulation and control mechanisms founded on a rear-view contraption of a not very glorious past. Above all, the country needs means for the citizens to actively work on mechanisms that limit the propensity to abuse that was at the core of the last electoral reform.

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“Flash 18” was the code that a policeman once gave a friend of mine so that nobody would stop her again for having failed to take her car to the twice yearly pollution test. After threatening to take her to the police station, the motorcyclist offered her the traditional alternative: for a small fee he would forgo the traffic ticket and avoid the discomfort, but would also give her a code so that if any other police officer stopped her on that same day, he or she would let her go. The notion that the rule of law can be brought to bear and enforced in a society that already has more laws in the books that nobody can (or will) comply with is utterly absurd. The real question is how in fact this reality could be changed.

The situations of illegality that every ordinary citizen faces on a daily basis are endless. So are the attempts to correct or resolve these problems. For example, in traffic issues, we have had mayors or heads of government that have sought to criminalize any abnormal behavior, as much as those that have forbade their police to impose any fine. The problem that both face is the same and the fact that they have tried opposite solutions shows frustration vis-a-vis reality. In a city where there are no good traffic signs, where in fact it is impossible to comply with all traffic regulations by the very nature of the urban jungle in which we live, the notion of penalizing any violation of the regulation is absurd and lends itself to all sorts of abuse and corruption. The alternative, not to impose any fines, is total surrender:  the authority relinquishing all responsibility.

Some municipalities have opted to negotiate with the anomalies. In Naucalpan, a municipality next to Mexico City, the authorities negotiated with the “viene viene” (the name comes from the words “easy-easy, easy-easy” they use to help people park), men and women who serve a vital function in the absence of spaces for public parking. Local authorities asked them to register and submit to authority. Similarly, the cranes in the service of the city’s government have arrangements with the “franeleros” (called that way for the red flannel they carry to wash cars) of the city. In other words, rather than attempting to enforce the laws and regulations, the very authorities have legalized this modus Vivendi, thus accepting the existence of surreptitious parallel authorities and arrangements. If this is not corruption nothing is. Actions of this nature may solve the immediate problem, but they also imply succumbing, instead of acting as an authority: if you cannot beat, better join them.

The underlying problem is that these are all partial, temporary solutions, and, more importantly, they go against the possibility of building a society of institutionalized rules that allow every citizen to know where he or she stands and what are their rights and obligations. Workarounds like the aforementioned not only undermine the role of authority, but create an environment of irresponsibility and uncertainty. Some will use this lack of rules to commit abuses (as is the case with the informal economy), while others will not be willing to invest in the absence of security, the uncertainty inherent to the law and regulations, and the absolute unwillingness of the authority to enforce them.

None of these problems is new, but it is no use to assert that they are a colonial legacy. The problem is not where the problems come from, even though it might be interesting to know their origin, but to find ways to eliminate them. For decades, perhaps centuries, the country has been working to try to resolve them without actually doing anything: new laws are approved or new regulations are announced but still nothing happens. The problem is clearly not one of laws but of the unwillingness or inability of respective authorities to enforce them. And often, the laws themselves violate the basic rights of citizens, which is hardly an incentive for the people to see them as legitimate.

Some might say it is a cultural problem (“Mexicans are rebellious by nature”), while others might claim that this is a question of immutable traditions. But there are positive examples of transformation in the country, as seen in the northern state of Chihuahua, a state plagued by crime, that suggest that solutions exist if the problem of lack of continuity in the structures of authority is resolved, together with the lack of agreement on the rules that must be enforced.

The lack of continuity in the structures of authority is perhaps one of our greatest vices, one that is also the source of the weakness of our institutions. A new leader takes office, full of spirit. The first thing he does is to repave all the streets in town, starts to tackle the main issues and sometimes finds a successful way to solve a serious problem (as has occurred intermittently in the case of crime), but then he goes on to seek his fortune elsewhere and leaves everything hanging. The next administration comes full of vigor to fight with the former one and does something completely different. Works are left unfinished, projects have no continuity and the whole cycle starts anew. The worst part is that there is nothing the citizens can do about it.

The other side of the coin is the lack of agreement among those in power that are responsible for making decisions: there is no continuity because there is no agreement or incentive for one to exist. Historically, governments come as a gang dedicated to exploit the spoils and that means they do not want any rules to limit them, and alternation of parties in government has not changed this pattern. Sticking to an institutional structure would involve accepting that there are limits to rapacity and that is anathema in the context of the old political system that, unfortunately, has not disappeared, but that “perfects” itself daily.

The history of legality in various countries and societies is not linked to culture or to the existence of an impressive police and judicial apparatus. Countries that have been able to establish legality as a mechanism to regulate life among citizens and guaranty respect for their rights, are those that have succeeded in making society, but especially the politicians and representatives of the people, accept the legal framework as a valid one. This can be seen both in the theories of Rousseau and Locke, as well as in political agreements like the Moncloa Pacts, whereby all Spanish political parties accepted the existing legal framework as a foundation for future development. What matters is that there is a commitment to adhere to a regulatory framework. The Spanish case illustrates that what is important is not the content but the fact: Spain accepted the existent frameworl because the alternative would have been chaos. Using the Moncloa Pacts as a starting point, Spaniards began to change their laws but from within the institutions that recognized the initial covenants. At heart, what Mexico needs is a great political overhaul that makes it possible to adopt a legal framework to which we will all submit ourselves.

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It is time to legalize the informal sector of the economy. For decades, we have lived in the fictitious world that claims that the real world, the good world, and the statistically relevant world is that of the formal, duly registered economy. Reality however, tells us otherwise. The informal economy is dynamic and employs millions of Mexicans that, in truth, are modern and competitive entrepreneurs, all of them willing to assume risks and satisfy their customers. The informal economy is real and is there for all to see. It is time to see life from a different perspective.

Now that taxes are being discussed, why not change the equation? Why not find the way to really pay the taxes that are already in the books, but not with more sanctions, but with less bureaucracy.

Let’s start with the obvious: formality is a bore, if not bureaucratic death. Formality was designed, if that term can be used, for large companies, those able to manage and process the myriad of requirements and regulations involved in the formal economy. Although costly, a large company can devote a small army of accountants and lawyers to register companies, pay taxes, obtain (and renew!) digital signatures, get deductions back, validate receipts and, God forbid, make sure an invoice is still valid (surely a major cause of tax evasion).

No small or startup business can comply with that string of requirements and monthly payments. The sheer weight of regulation renders it ineffective. Given the situation of having to register with the SAT (Tax Administration Service), the Mexican Institute of Social Security (IMSS) and other federal and local bureaucracies, a person who, by decision or lack of options, chooses self-employment, the next logical step is to opt for informality. Moreover, people that chose to live in the informal sector do not live badly either: he or she has access to health insurance (Seguro Popular), which is cheaper than the IMSS and (amazingly) is designed for those who are not part of the formal economy. If his or her daughter wants a scholarship at the UNAM (the National Autonomous University), informality allows them to argue that their income does not exceed the maximum permissible because there is no way to check. In sum, it would appear that living in the world of informality is like paradise compared to the bureaucratic tangle involved in the alternative.

It might seem that informality is benign and free of cost, but this is obviously not the case. Instead of paying taxes, people living in informality have to bribe inspectors, rely on moneylenders and speculators because they are unable to show proof of their income to have access to bank credits; instead of legal certainty they live in a permanent limbo that prevents them from growing even if they have a promising business; they are always stalked by politicians eager to sell favors, develop dependency relationships of patronage and control the flock. Informality can be hell.

Although there is no consensus among scholars of informality, it seems clear that there are certain prototypical characteristics among those living in the informal economy. There is no doubt that a person in the informal sector is willing to take risks in order to improve his or her financial situation. This element immediately sets them apart from those who choose a secure employment, with the many benefits that come associated, even if that means less potential for development. Assuming that a person consciously chooses informality, she knows she is entering a difficult world where life is earned every day of the week and where there are no paid holidays or social protection. Those that do so hope they will achieve a higher income throughout their life. Empirical evidence suggests that most of those who operate in the informal sector are in fact financially more successful.

Speaking of informality often brings to mind the image of a vendor on the street, one of many that sell their wares (from popsicles to meringues), contraband or any type of furniture and objects, as well as food. But informality is infinitely greater, ranging from manufacturers of pirated discs to plumbers, carpenters or distributors of goods next to food vendors at construction sites, those selling juice (some on huge truck racks) and bicycle renters in parks. In addition to all these actors of our everyday national life, there are a number of activities that are prominent in the informal sector. The common denominator is not tax evasion, although it is undoubtedly a universal feature in that world, but the courage, the drive for self-improvement and willingness to take risks. That is, these are the entrepreneurs that Joseph Schumpeter, the great economist of the first half of the twentieth century, might have described.

Formal entrepreneurs tend to despise informal ones, while the latter reject any association with the term “empresario” while, in practice, that is exactly what they are. But the fact that there is this axiological opposition says a lot about our social and political reality. What matters is that everyone can grow and produce for their own benefit as well as that of the country as a whole

The underlying theme is that, on the one hand, formality is not paying off in terms of employment or economic growth while, on the other, informality is hampering the growth of individuals and their businesses and nothing has been done to facilitate their inclusion in the formal economy. In practice, this means that the sector in the economy that could be potentially more dynamic is castrated, while the one that is given full recognition, is not yielding enough growth or the income taxes that the country needs. It’s time to reverse the pyramid and that means understanding and recognizing the dynamics of informality and adjusting the bureaucratic and regulatory paradigm to make it possible for those in the informal economy to cease being there, without annihilating them along the way.

COLOPHON. Far from my nature or purpose is to write an apology on behalf of informality. Obviously, I am not proposing to turning to small, unproductive shops as an alternative to a modern, thriving economy. The objective is no to strengthen or to promote the growth of tiny “changarros”, small, unviable shops, and even less to argur for privileging tax evasion. The opposite: our formal structure not only impedes growth, but makes it impossible to develop a large sector of the economy that, with suitable incentives, could add a exceptional dynamism and value to our economy. With the insertion of the informal sector in the formal economy, in the context of a rational tax structure, perhaps with the 2% that was recently proposed, the Treasury would be the big winner without having to kill the goose that lays the golden eggs. Countries showing the highest rates of economic growth have been able to resolve this mess better than we have and their citizens have better lives.

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Years ago, in a rural area near Calcutta, I watched fascinated a Hindu priest leading a worship ceremony of a cow. The devotee spent hours feeding the animal flower petals and washing its body as if it were a deity. It was a touching scene. In Mexico we have many sacred cows -from oil to no reelection, including a whole range of other issues- but perhaps none has had such a high impact in recent years as the famous “political cost” that politicians invoke when they want to avoid deciding on just about anything.

Political cost has become a virtual deus ex machina, an argument out of nowhere that serves to explain and, above all, to justify just about anything. Because of the alleged political cost, nothing can be reformed or changed. By the magic wand of the alleged political costs, fundamental issues such as the rules governing energy or the urgent need to re conceive tax policy are simply untouchable. Although it is clear that many of the actions, decisions and reforms the country needs entail political costs, it is also true that the term has become an excuse for not doing anything.

Any change or reform inevitably affects people and interests; otherwise there would be no issue. The very idea of reform involves changing the status quo and that, by definition, involves changes in the distribution of costs and benefits. Our problem is that everything is focused on the costs and none is focused on the benefits. The consequence of this attitude is that we are permanently betting on the short term. Instead of carefully evaluating the potential benefits of a particular reform or for legislators and government officials to articulate a communications strategy and develop a stakeholder base for reform and, at the very least, to defend their position and be able to act, everything leads to inaction.

Under that logic, the result cannot be any different from the usual one: the preservation of the status quo which, in our reality, implies ensuring that poverty, privilege and other calamities that characterize the country remain forever. James Freeman Clarke coined the famous phrase that “a politician thinks of the next election — a statesman, of the next generation.” Judging with that yardstick, our politicians have become mere echoes of phrases, negotiators of business interests and careful advocates of the existing order. Instead of investing in a different future -personal, partisan and national- they are staring into the rearview mirror to make sure nobody can ever accuse them of affecting anyone not even touching them even with a rose petal.

Conjuring political cost  as a defense of inaction hides not only an unwillingness to act, but also a deep conservatism that borders on reactionary politics. While that may be understandable in established parties of the right, the phenomenon is also observable in the leftist PRD (Partido de la Revolucion Democrática): in sharp contrast to the modern European left, our PRD members oppose any change with the same vehemence that their peers from other parties. Interesting coincidence: all of them swear by paralysis, no matter the cost it entails.

The case of the VAT is particularly striking. PRI members claim they oppose any change in the value added tax because the changes adopted in 1995 (when the tax was raised from 10% to 15% in the middle of a terrible recession) had resulted in the loss of their legislative majority in 1997 and of the presidency in 2000. It might seem clear that if one drew a direct causal line between the decision made on that tax and the profile of votes, this conclusion might be justified. It is also true that the PAN, in one more of its audacious electoral tricks aimed at the very short term, capitalized on the image of PRI members as they partied after passing that law.

However, if one looks at the big picture, the perspective is much more complex. In 1995, when the VAT was approved, the Mexican economy shrank by almost 7% and inflation surpassed 50%. Moreover, these circumstances took place within an exceptional environment in which, for the first time in history, vast numbers of middle-class families had borrowed to buy houses, cars and various consumer goods. The economic contraction resulted in severe loss of jobs and income for millions of Mexicans, while interest rates exceeded 100%. Countless families who felt the country was finally “turning upward” towards development suddenly saw their dreams shattered. Many of these families lost their homes, many others their car and almost all faced all kinds of family disruption.

Politically, the economic crisis came together with a key conflict within the PRI ranks where traditional politicians reclaimed the leadership of the party, displacing the technocrats that had ruled the country since 1982. Although, in economic terms, the development strategy pursued by the Zedillo administration was very similar to that of its two predecessors, the bitter criticism that it aimed at them brought about a deep internal split that only now, without the technocrats, is beginning to heal.

From this perspective, it is absurd to blame PRI’s electoral disaster in 1997 and 2000 on the increase in the VAT. By the mid 1990’s, the PRI had been losing popular support and its legitimacy was increasingly being questioned. For the average Mexican citizen the economic catastrophe of 1995 was infinitely more expensive and imposing than the increased tax rates. As soon as a structure for electoral fairness was put in place (which happened with the so-called 1996 political reform), the population voted against the party which had done nothing but produce one crisis after another since 1970. In all this, the VAT was nothing more than a minor distraction. But for the PRI, the issue of the VAT as the cause of their loss became a myth, a revealed truth that lives on.

For me the obvious lesson of the second half of the nineties is that the governing party increases its vulnerability every time that its actions (or promises) produce a crisis or when the people believe that a crisis can result. On the issue of government finances the Mexican people long ago learned the lesson that fiscal irresponsibility (that the PRI is once again proposing) is much more costly than an increase in the VAT, especially if the rationale for a tax increase is duly and clearly explained and losers are compensated along the road.

The cost of not undertaking the reforms the country needs is every more costly because its absence prevents the economy from growing at an accelerated pace. The paralysis in the country is due not to the VAT but to the myth of “political cost” that serves as an excuse to protect interests and “sacred cows”, both much more pernicious to voters than the risk inherent in reform.

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A legend, allegedly concocted by Voltaire, tells that Isaac Newton formulated his law of gravity when an apple fell on his head and wondered “why did the apple fall?.” Ipso facto his theory was born. Centuries later, the PAN (Partido Accion Nacional) is bent on defying Newton’s law. Instead of devoting themselves to the complex problems of government and, if they wanted to, to assess their recent failures, the panistas are bent on acting a party permanently in the opposition.

The PAN lost its way on two occasions and for two almost opposite reasons: one for having no strategy and another for its excessive rigidity. The first time happened in 2001 when the new PAN administration had the opportunity to redefine the Mexican political system and lay the foundation for a truly democratic change, but the then president, Vicente Fox, proved unable to understand the magnitude of his own success: the forces that were unleashed by the defeat of the PRI or the changes in structure of power that would take place as a consequence. The second took place this year during the midterm elections where the government and its party were lost in their own prejudices, ignoring the dynamic of an intermediate electoral process. Both promise to be defining moments for the future of the country and of the PAN.

Mexicans of the present generation will never get to understand how was it possible for Fox to squander the golden opportunity created by the 2000 election to dismantle the PRI’s power structure. Upon reaching the presidency, Fox had the chance to negotiate a democratic transition that could transcend the electoral dimension. The moment was not only auspicious, but exquisite for two reasons: as could be seen that night at the Angel, the people, including those who did not vote for the PAN, were all behind the new government, eager to enter a new stage in the country’s history. The other reason was key in terms of timing: PRI members were biting their nails off, terrified of being jailed for corruption charges or for any other reason stored in their collective conscience. They were ready and willing to negotiate almost anything.

We can only dream now about what could have been the content of such a pact, but what is clear is that they could have exchanged the sins of the past for a new future. Fox could have proposed an agreement that would lead to a restructuring of the sources of power in exchange for the legitimacy of those involved and peace for society. How much would have been possible is a matter of fiction at this point, but the missed opportunity was monumental. The PAN government initiated the first non-PRI administration imitating the PRI: instead of changing the government, they mimicked it. Today the PAN is increasingly more alike the PRI but without the skills to govern.

Instead of taking the giant leap, Fox was content to sit in the presidential chair and give Sebastian Guillen, aka Subcomandante Marcos, media control. The PAN, embodied in its president, displayed the great limitation of not having experienced senior managers in their ranks. Nine years later, the PAN continues to display an incredible inability to create them.

If Fox came to power without strategy and vision, the second PAN government, headed by Felipe Calderon, arrived with the opposite attitude: to control everything to the point of excluding everybody other than those personally loyal to the president, regardless of competence. The recent mid-term election is a good example of the consequences of wanting to exert total control. While the PRI articulated a regional strategy for each of the states and districts of the country (because Sonora and its wine orchards is not the same as Oaxaca with its indigenous traditions), the PAN adopted a single national strategy. This made sense in the presidential race where candidates have a national, almost universal presence, but is an absurd strategy when it involves a regional or local dynamic: citizens expect relevant answers to their circumstances. The PRI gave ample promises (and plenty of goods), while the PAN handed criticism to the PRI. The PAN’s loss was its own doing. Looking forward towards 2010 and 2012, there is no reason to believe its performance will be different.

PAN was born as a party of citizens and for the citizenry. Its birth was a reaction to the party of the revolution and an invitation to develop a strong citizenry. Seventy years later, the PAN seems divided, unable to understand power and citizens are deserting it. Their internal feuds, incredibly ideological, are incomprehensible to most voters. Their inability to govern effectively is astonishing. As the recent budget cycle put in evidence, it was the PAN that undermined the president’s bill. Their internecine quarrels as the ruling party, in addition to being expensive and stupid, are striking. What was tolerable nine years ago today has become untenable. There is perhaps no better indicator of the new challenge facing the PAN than the young voters, those that had never voted before: almost none of their votes went to the PAN

The PAN has two options: one is to continue digging its grave in the form of internal bickering, parochial conflicts and rejection of power and their own president; the other is to start building a party of and for power, but from the perspective of its origins: the citizen. The first path, the one it has chosen since assuming office, will inevitably lead to the scaffold. That is the way extremist, and very powerful, groups that conform the party are leading it in a way that is irreconcilable with real politics, the politics of power, where negotiating with all legitimate political forces is a point of departure. Perhaps the young people who in 2009 voted for the Green Party or other options did so because of intense advertising, but it is also possible they did so because they no longer see in the PAN an option capable of governing the country.

The alternative for the PAN is to redefine itself in terms of power: find an arena that allows it to reconcile its original base, the citizen, with the realities of power. Its natural inclination is schizophrenic: on the one hand to repudiate the government while, on the other, negotiating political reforms that imply a betrayal of the citizenship, such as happened in the latest electoral reform and is now being attempted in other political bills. The PAN will never win a presidential election if it remains unable to offer a real choice of power on behalf of the citizenry. Its dilemma is a simple one: the PRI will always be preferable if the PAN strives to be as the PRI but with no ability to govern. The PAN has to show it can govern or it will go back to what appears to satisfy the spirits of its traditional contingents: the opposition.

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The country has undergone radical changes in its political reality and perhaps there is no area in which this change has been greater than in the relative power of the states and their governors. After decades of subordination to the president, governors have become the owners of public expenditures and the main articulators of political power. In principle, this need not be objectionable, except that this power comes with absolute impunity due to the terrible way in which decentralization was carried out:  money was transferred without any accountability.

The issue is not a minor one. The old presidency dominated all aspects of national public life, this was possible because the president had the party, the PRI, on its side to enforce his orders. Once the PRI ceased to be an instrument of the president, which happened with the election of Vicente Fox, the old system collapsed. The PRI stopped being an instrument of the president, PRI members lost their leader; and (almost) all the previous political mindset became irrelevant.

But the losses of some ended up being gains for others. The power that in the past was held by the presidency migrated to the governors, to party leaders in Congress, and to the parties themselves. Today we have a new reality of power, but the institutions of yesteryear remain the same. The result is a huge imbalance. Power has diversified, but no new mechanisms to exert accountability have been established. Instead of reinforcing the institutions, they have been weakened, to the benefit of a few who get rich without any counterweights.

In other terms, power was decentralized, but not federalized. Power flowed from the presidency to other arenas, particularly the governors, but the growth in power was not accompanied with an equivalent responsibility. Governor’s increased their power and, above all, the fiscal resources at their disposal, but that power did not come with a requirement of transparency or accountability. Governors were suddenly awash in tax revenue without having to explain their origin, justify their destination or respond for their use. Most had no idea how to carry out proper spending to benefit the community.

In some cases, such as education and health, the consequences of this process have been pathetic: though these services were decentralized years ago, the federal government continues being responsible for almost everything. Governors organize gala openings of clinics or give away free school supplies without someone ever defining their attributions or obligations. From their perspective, everything is a photo opportunity and nothing else.

The explanation for all of this is simple: the resources are federal but expenditures are a state affair, creating a rift between the source of the resources and the way they are spent. In a properly balanced system, resources would be levied locally and control mechanisms exist at that level. However, it is much easier and politically profitable for the governors to lobby the federal congress and count of the support of the members of Congress from their state that they themselves appointed and help win with those very resources than to invest in people, be accountable for their actions, or have to explain the origin or use of those resources. In short, governors and mayors do not pay any cost for the resources awarded to them, nor do they have any incentive to promote economic growth. Their only interest is spending for self promotion or personal gain.

The country has been subjected to the decentralization, but not the federalization, of power. The difference is absolute. Decentralization involves the transfer of power and resources from the center to other agencies (to governors and political parties alike), but this change does not involve a change in responsibility. Federalism involves a transfer of power and resources to other actors, but with counterbalancing mechanisms so that governors or other actors are forced to respond to the additional power granted to them so that they have no choice but to account for the use of the resources.

Our current reality entails a permanent imbalance both of power and resources. Worse still, the resources are poorly used and often wasted because that is the incentive that governors and members of Congress have before them. The paradox could not be greater: people torment the president for the slow rate of economic growth (i.e., he is seen as the person or power responsible for it), but the resources and the power to decide reside with the governors and in Congress.

The country needs a new political arrangement that redefines responsibilities, generates sources of balance at the state and municipal level, and creates conditions that will actually allow us to revive the economy. Federalism, understood as the simultaneous transfer of power and responsibility, would entail a redefinition of national politics. For example, instead of lobbying the executive, federalization would mean that governors are accountable for their spending and their actions to their own electorate, and not to an ethereal entity such as the federal Congress. Resources would no longer be federal but would become state (or municipal), and would start depending on the local community for their exercise.

What we have had in recent years is an absurd transfer of resources from the federal government to governors without any form of control. Although there are formal control mechanisms (and sometimes laudable efforts by the office of the general auditor when it tries to evidence the extravagant spending that takes place), it is clear that controls are nonexistent in practice: governors do as they please with the existing resources, as we have witnessed in recent years and saw, in “technicolor”, as the old advertisement went, in the recent elections.

Instead of a Lampedusa type of game that aims at giving the appearance that everything is changing but with the true objective that everything remains the same, the country needs a comprehensive reform in its power structure, one that would bring match power and responsibility.

The essence of federalism lies in attaining a balance. It involves the strengthening of the electorate as a counterbalance factor. It also involves, necessarily, a radical change in the structure of financing public expenditures, where states and municipalities become the source of much of the spending that takes place in their jurisdictions. Centralism in Mexico originated in the source of the resources. If we are to create a stable democracy and a balance of power, we must begin with the essence: the sources of money.

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In Samuel Beckett’s play, two characters, Vladimir and Estragon wait for Godot, but Godot never shows up. The members of the PRI (Revolutionary Institutional Party) are convinced that the Mexican people are eagerly waiting for their return with open arms. The PRI may or may not win the presidency, but it has certainly not shown it has understood the ways in which the country and the world have changed.

It is hard to remember the atmosphere that prevailed when the PAN defeated the PRI. Beyond the election of president Fox, the population overwhelmingly gave a sigh of relief, partly because of the opportunity inherent in alternation of parties in government, but also by the very fact that PRI members had behaved civilly, not making good on the threat that union leader Fidel Velazquez had long made in the sense that “we achieved power with weapons and with them we would defend it.” With otherwise weak anchors, the country thus entered another stage in its history.

Nine years later, the picture has begun to change. British observers have noted that when the Labor Party wins there is great enthusiasm, but when the Conservatives win there is a sense of enormous relief. There is no doubt that we experienced enthusiasm with the PAN victory. The big question today is whether people are ready to vote with relief the return of the PRI.

This year, the PRI harvested the product of their vast organization capabilities when compared with the incompetence of other parties. Their territorial structure allowed them to dominate entire regions, while the memory of the “Peje” (Lopez Obrador’s 2006 show of incivility), and the setbacks of the current government bestowed them almost a majority in Congress. In contrast to the naiveté that characterizes many of the PAN politicians and governors, the PRI governors demonstrated strategy, leadership and political skills. They also displayed an extraordinary array of corrupt practices: co-option, vote buying, threats and distribution of sinecures, all of which continue to be an integral part of their arsenal. Will this combination be enough to lead a government in 2012?

The assets of the PRI are obvious, but so are its liabilities. Its capital lies in the ability and experience of its operatives in government: seventy years in power created a political class most of whose members are able and competent to govern. However, the PRI’s power worked not only because of the capacity of its members, but because of the structure of corruption that accompanied it. Although the PRI criticizes the incompetence of the PAN in the duties of government, its own history is less linear than its members pretend it to be. One cannot forget that the financial crises that began in the seventies were the product of the PRI and its own abuses, that the educational chaos in our midst is the result of a structure designed to control and not to educate, and that the corruption prevailing in entities such as Pemex is inseparable from the history and reality of the PRI.

Nobody can deny the political prowess of the PRI, but it has done nothing to distance itself from the less-than-presentable history. The competition between the pre candidates for the PRI candidacy is prototypical: none of the contestants cares to show better governance, greater productivity in their state or a project that will transform the country. Their vision is the traditional PRI vision and one of an earlier Mexico: for them the world has not changed. As illustrated by the recent revenue law, the PRI continues to have no purpose other than maintaining the status quo.

The PRI has not undergone significant change, it continues to espouse development ideas that are incompatible with the world of today and its members do not even pretend to understand the reality in which they would have to rule. The lack of vision of the PRI contrasts with the Chinese premier who not long ago said that “in a globalized world he who conquers is one who conquers markets, not ideologies.” Where are the markets we intend to win with the PRI? How is PRI planning on giving poor Mexicans the possibility of breaking away from the bonds, almost all of which are a PRI legacy, that block the progress of the country? Their business card is experience and capacity to govern: but, given their track record, these strengths are an insufficient and inadequate response to the challenges facing the country today.

According to some scholars, the American political system “was designed by geniuses to be operated by idiots.” The Mexican political system was designed by pragmatic politicians who were responding to the circumstances of the twentieth century. Nevertheless, for seventy years they mostly managed to keep peace, stability and economic growth. The problem is that the PRI system was dependent on geniuses to operate it because pragmatism is naturally limited. Occasionally an idiot came to power and almost managed to destroy the country. Now the PRI presents itself as the only one able to lead Mexico’s destiny. How will we know if the anointed is a genius or an idiot? The question is not an irrelevant one in a country characterized by weak institutions, easy to subdue, and more so by PRI’s able and experienced politicians.

A party that has not reformed itself and whose business card is reduced to contrasting its history with the ills that characterize the governing party has little to offer in a tight race and even less to convince a population exhausted by decades of misrule. Furthermore, the notion that the future can be better because the PRI is in government is a fallacy. What we need is not only a good driver, assuming that is what the PRI would provide, but also have a vision likely to achieve the transformation sorely needed and that the population demands, but against which so many interests collide, many of them are close to the PRI itself. A proposal that does nothing but repeat the formulas that led us to the crises of the seventies and nineties, and one currently embraced by the PRI, can only be seen as a pathetic aspiration for change. Suffice to contrast that vision (or lack of vision) with nations like China, Korea, Chile and Brazil to perceive how small and limited their project is. Mexico does not need, and has no use for, the old PRI, a party that hides behind a thin veneer of modernity.

The PRI has a great story to share with the electorate but lacks a modern and innovative vision, one able not only to attract votes, but to bring the people to a new stage of development. Looking closely at their stars –like their governors and members of Congress-, it is difficult not to conclude that too many Mexican politicians are paralyzed by a combination of inertia and lack of backbone. Small obstacles are always presented as if they were the Kilimanjaro, and they speak of “political costs” as if dealing with them were not their function and responsibility. The PRI needs a narrative that matches a vision that is different from the one that served it well fifty years ago but that is dead now: the Mexico of today is no longer that of the year 2000 and even less of 1929. Mexico’s future requires something radically different, and better, from what PRI is now proposing.

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