I’ve written at length, by my paltry standards at least, about the Mexican election of late, good copy considering it’s been a real nail-biter. But I don’t think I’ve paid sufficient attention to the long-term significance of the election, so I thought a quiet Friday afternoon was a good time to do that.
I noticed Eugene Robinson’s Washington Post column (“Mexico’s Great Divide”) the other day, especially his comments that “[t]he fact that AMLO [Obrador] was able to finish in a dead heat with Calderon, who vowed to continue the free-market policies of President Vicente Fox, underscores how Latin America as a region is looking to the political left for solutions. For two decades the region followed a set of prescriptions known as the "Washington consensus" -- privatization, free trade, less regulation.” That, then, is the real significance even of an AMLO defeat – a clear sign that neo-liberal economic policy is seriously threatened.
This shouldn’t come as much of a surprise as economic policies are more like fads than honest policies in Latin America – every few years or a decade a new one comes along and everyone jumps on the bandwagon, expecting a panacea for all of their problems. Of course, it doesn’t work. Socialists (or populists, though I associate that term more with Alan Garcia in his 1980s incarnation than Chavez) are the flavor of the month, but are in vogue because they appeal to the masses; it is the poor and the downtrodden that are finding their voices, and finding their demagogues.
That of course was Chavez’s route to power, aided later on by a convenient series of vote-tampering, press-muzzling, and court-tampering schemes, effectively ensuring his continued presidency so long as he desires. A large part of his appeal, as was also the case with his compadre, Evo Morales in Bolivia, was a pledge to reclaim both nations’ energy wealth; that such a goal, and its implicit threat of nationalization, flies in the face of the “Washington consensus.” In Mexico, however, oil wealth is viewed as a national treasure and has been nationalized (the state oil company is Pemex) for decades, having been nationalized in 1938.
The bigger problem in Mexico, then, is not the feeling that oil wealth is flowing mainly into foreign pockets, but rather the feeling that despite promises to the contrary, NAFTA is not delivering for the average Mexican. (Robinson also notes that an electoral map of Mexico finds Calderon’s strongholds in those provinces that have benefited the most from NAFTA).
However, a solution does in fact exist to extend the benefits of neo-liberal economic policy to your average Jose, undercutting the populist and destabilizing appeals of AMLO-esque politicians. What I’m referring to is a two-part adjustment, based on Hernando de Soto’s theory of dead capital and the micro-lending practices of organizations like Opportunity International.
First, de Soto’s theory: In essence, the Peruvian economist estimates that millions, even billions, of dollars in “dead” (i.e. non-fungible) capital are in the hands of the world’s poorest, those in what is described as the informal sector. These people live in homes that are not recognized by the government, run businesses that are neither licensed nor taxed by the government, and exist without the safeguards generally extended to legitimate businesses or homeowners. These people don’t remain in the informal sector because they want to, indeed research shows they’d love to get into the formal sector where contracts are enforceable and insurance is obtainable, despite the fact they’d then be responsible for paying taxes. What keeps them out of the formal sector is the massive amount of red tape and bureaucracy that stands between them and recognized legitimacy. The investment of time and money isn’t just uneconomical for most entrepreneurs in the informal sector, it’s down right unaffordable. If Calderon wants to really reshape Mexico, and extend economic opportunity beyond the northern provinces blessed with NAFTA jobs, he should push for a serious reform of the procedures for incorporating a business or laying claim to a property or home – and thereby unleash the latent wealth of his people.
There is also the micro-lending practices of organizations like Opportunity International which nicely complement de Soto’s theories (de Soto has actually endorsed Opportunity). Micro-lending is, in short, the granting of small financial loans to entrepreneurs to start a business, entrepreneurs who are generally ignored by their local banks because of the small size of the loan and thus the lack of incentive to make the loan. Through careful targeting and practices such as “trust banks” (multiple members of a village or community work together to ensure one another’s loan), the repayment rates on these loans are phenomenal. But even more phenomenal is the way in which these loans improve the lives of the recipients: families are able to move out of poverty or increase their income, allowing them to do things like send their children to school. These loans oftentimes are targeted at women, empowering them and increasing their stature and equality in the eyes of those around them. And in places like Africa, where HIV-AIDS is taking a terrible toll and ripping apart the social fabric, micro-lending is providing a glimmer of hope for the future of that trouble continent. Governments have slowly gotten into the micro-lending act, sometimes in cooperation with groups like Opportunity, sometimes independently. This, too, should be a priority for Calderon, a sort of massive banking reform to benefit his nation’s poorest but also strengthening the whole of Mexico.
These aren’t just idle ideas. Implemented, they would not only be wonderful policy with the potential to reshape Mexico and finally extend the prosperity that, for so many Mexicans, has been out of reach for so long; they would also be fabulous politics, undercutting the traditional base of populists like AMLO, and ensuring further stability in a country that has been short on that precious commodity. Bringing those Mexicans whom prosperity and free trade have left behind (through no malicious intent on behalf of the government or free-trade activists) into the promised land would be bringing those same Mexicans who protested in the streets over the weekend around to a new perspective, one that might again embrace the Washington Consensus whose promise has so long been denied to them.
There is also a role for the United States here, and tangible benefits. The US, both directly and at all levels from conversations between presidents on down, and indirectly, through organizations like US-AID, should encourage Calderon to undertake these policies. If successful, they would no doubt reduce the flow of immigrants from Mexico seeking a better life, as that better life would at last be attainable in their own homes. Fighting poverty and illegal immigration – isn’t this a policy everyone can get behind?
