The question to the barking dog that always chases the car is, “what would you do with it if you caught it?” That might be a good question to ask the new PRI government here in Mexico. After 12 years barking at the car under opposition control, on December 1st, the new PRI government assumed power and all are asking, is this the same corrupt, good old boy club PRI that mismanaged the government for the 70+ years prior or is this a new and more progressive, business savvy version. If they are, they will be the long needed builders of what could be a healthy and wealthy Mexican economy and the development of a long overdue middle class in Mexico.
PRI, the conservative business party, finds itself at a crossroad in Mexican history, just as the opposition PAN party did some 12 years ago. A crossroad that, to change the path the country had been following the previous 70 years, required a sharp turn and a choice that, 12 years of hindsight, and the last election seems to indicate, PAN chose not to take. The party will argue that 70 years of mismanagement can’t be repaired in even 12 years and that under their rule, Mexico has made great strides. There is some truth to that. Roads, schools and infrastructure in general have gotten better over the last 12 years and in some areas, a small middle class has even begun to develop. PAN supporters would all say this was because of changes made since PAN took control. Others would argue the progress is in spite of PAN, who did nothing to fix the fundamental problem at the root of all Mexico’s ills; corruption, and that such small improvements elsewhere does not match the gross economic numbers of the Mexican economy.
Make no mistake about it, Mexico is not a poor country. In fact, it is a very wealthy country. It is currently the 13th largest economy in the world and it’s 4% and rising annual growth will allow, according to financial analysts Nomura, to pass Brazil, currently the 7th largest economy in the world, in just 10 years. Forbes wealthiest people list shows 2 Mexicans in the top 7 positions, including the wealthiest in the world, Telmex owner Carlos Slim. The top twenty will show 2 more. Almost every country in the world, 99%, does not have a single person on the top 20 list and Mexico has 4??Again, this is not a poor country!
That is such a misleading statement though. What Mexico is in fact, is a very rich nation full of poor people. One third of the Mexican stock market is owned by just 10 families here! How and why did it become this is something that I took entire semesters to try to figure out as I studied Latin American history in college and is way beyond the scope of this blog posting, that is for sure. However, my belief is that fixing it will require a major ideological shift in Mexico and one I’m not sure they would ever do. The shift is in how the capital owners, and the politicians they control, view the rest of the people.
In the US, our version of capitalism shifted eighty or so years ago from a similar old money oligarchy who’s main concern was also to preserve their power and wealth, into a more dynamic sort of capitalism grounded in the idea of building a middle class of consumers who could better support the capital investors’ companies by buying their goods and services. Our wealthy oligarchy had to be dragged kicking and screaming into that direction through smart and fair regulation that was evenhanded in how it rewarded those who risked their capital, while still managing to spread enough wealth to build a middle class. A very delicate balancing act and one only very smart and benevolent, and one would also argue, politically courageous, lawmakers would ever try.
In the US, the oligarchy adjusted and the investment they made in the expansion of industry, which simply put was lower short-term profits to increase workers pay, thereby expanding the growth of the middle class, became how rich people actually got richer. More well paid fat and happy middle class citizens can buy more products that the capital owner’s companies produced. An oversimplified, but accurate way to describe the dynamo that is US capitalism today. In the process, the largest most prosperous middle class in the history of the planet and an economy to match was built.
Historically, Mexico has embraced a more pure, unregulated form of capitalism, closer to what is today libertarianism in the US, which fosters an economic system that lends itself less to the majority of people, but more to those who are better able to take advantage in a totally unregulated economic environment. The result being, those same capital investors maintain control and power, and consolidate the wealth of the nation. Nothing sinister about it, it is just the way the country evolved and where Mexico finds itself today is the result. Is this new version of the pro-business party PRI ready to move Mexican capitalism in a direction that can build and sustain a middle class of prosperous consumers and build a solid economy in the process? Easier said than done.
However, it is the wealthy capital owners who are the only ones who can do it and will be the ones who, just like the corporations in the US, will get richer. Mexico and it’s economy have lots of room to grow and it is that growth process that will ultimately get them richer. It has a tourism industry for example, the second largest in the country, that uses only a fraction of the tropical shores, which Mexico has more than any other mainland country, to build it into an even larger industry and employ even more people nationwide. Here in Quintana Roo, a small emerging middle class has grown from the tourism and my guess so too has the bank accounts of the Mexican companies who sell their products and services here. Upgrading Pemex to take advantage of Mexico’s vast oil reserves through investment in new technology and equipment is another easy to see answer. (Industry analysts say Mexico could be an oil importer by 2020 because of poor investment in their own oil company) The same for the giant but still room to grow agri-business and so many more. The wealth is here and only the wealthy capital owners, investors and an honorable and benevolent Mexican government can develop that wealth. PRI is the party of business, so they have the capital owners and now they have the government power to go with it. Do they do the smart but difficult task of building a middle class or just go back to business as usual.
That is the crossroads PRI finds itself. Do they continue to keep the government poor and dysfunctional with a disproportional class of poor citizens that are each day watching the world of IPods and laptops, something they want just like everyone else, get further from their reach. Or do they do the hard thing and invest in the building of a middle class of consumers, and one might add, happy Mexican families. Jose 6-pack doesn’t really need an IPad, but a nice home, clothes for his family and an opportunity to send his kids to a school that will prepare them to compete in the global world they will be going into, that would be plenty. Probably not much to ask of such a wealthy country as Mexico. Mexicans are very proud people, rich or poor, so don’t be surprised if we don’t see a change this time around. Viva Mexico!!