Government and Growth

November 2, 2025

Luis Rubio

Lord Acton, the 19th-century British historian and politician, once observed that “liberty depends on the division of powers, while democracy tends toward the unity of power.” He added: “liberty rests on the division of power, absolutism in concentration of power.” For any government, the central challenge is how to strike the right balance that allows a nation to progress. Few issues are more complex than finding equilibrium between the forces that drive economic growth: how much should be left to government and how much to the market; what responsibilities should fall to the state—spending, taxation, regulation, investment—and what should be left to private actors. Every society seeks its own balance, but the results show that only a handful manage to succeed. That should be the guiding concern for the government as it prepares for its second year.

Debates on this subject often fall into ideological extremes—between those who call for an all-powerful state and those who want the state reduced to the bare minimum, if not abolished altogether. Yet the evidence is overwhelming: sustainable growth requires a capable government with institutions fit for purpose. That does not mean every country should adopt identical institutions, but rather that each must design arrangements suited to its own circumstances. This explains the sharp contrasts among Asia’s successful nations, and between them and the United States, Chile, or Europe. No two countries share the same institutional blueprint, but every successful one has institutions that do what they are meant to do.

What becomes clear in examining these cases is that growth depends less on abstract models than on whether the essential functions are in place. One key lesson is that modernization and growth require governments able to protect property rights impartially and to resolve disputes fairly. More than democracy itself, it is a functioning state that enables prosperity. That is why the rule of law and accountability are indispensable: without them, government degenerates into dictatorship—efficient in some Asian states, woefully inefficient in parts of Latin America and Africa.

Comparisons among nations highlight the decisive factor: the quality of government—or its absence. Many states wield considerable power yet fail to deliver even the most basic services, as Venezuela shows. A successful democracy, by contrast, requires a strong state, but one firmly constrained by the rule of law and institutional checks and balances. This may sound abstract, especially in the wake of Mexico’s recent judicial reform, but it will not be long before the flaws in that approach are laid bare.

In Political Order and Political Decay, Francis Fukuyama argues that Germany’s success owed much to the creation of a professional bureaucracy before democratization, while Italy and Greece took the opposite route—democratizing without first building a modern state. The result was governments that became engines of corruption and clientelism. Once that dynamic takes hold, Fukuyama warns, it is extremely difficult to reverse. Any resemblance to Mexico, of course, is purely coincidental.

The United States offers a different story. It began as a democracy without first creating an effective state, which made it easy to alternate parties and presidents in power but also left the country mired in widespread political and economic corruption. By the late 19th century, however, business leaders and civil society—so vividly described by Tocqueville decades earlier—pushed for the creation of a merit-based civil service. That reform gave rise to an effective bureaucracy that underpinned both governance and growth. Today, Trump’s challenge to the system is putting the resilience of those institutions to the test.

When Mexico’s so-called “stabilizing development” model began to unravel in the mid-1960s, every government since—except for AMLO’s—has focused on ways to reignite economic growth. Some relied on public spending and debt, others tried to build modern institutions to the same end. There were modest gains, but no sustainable path forward. Now, facing new domestic and global challenges, the real question is whether Mexico will keep experimenting with theories and ideological illusions, or instead draw on the wealth of experience—both at home and abroad—that clearly distinguishes what works from what fails and backfires.

To return to Lord Acton: the real key is “to be governed not by the Past, but by the knowledge of the Past—two very different things.”