Friends: I sent this to the Boston Globe which rejected it; perhaps you will find it of interest An Alternative Vision of Mexican Development David Barkin* As a Mexican academic, temporarily in Cambridge, I am gratified by the excellent coverage that the Boston Globe has been giving to crisis in Mexico. Your stories offer superb coverage of the tragic consequences of more than a decade of mistakes in management by a team of skilled economists. These highly-educated and highly-placed technocrats, as they are labeled, have fallen into the trap of transforming dogma into science, an error that others before them also committed, with similar results: Mexico's peasants and working classes endure declining real incomes and a deteriorating quality of life, while the economy is becoming less capable of supplying the basic needs of our people. Today, the purchasing power of the average wage is less than one-half what it was in 1976 and more than two-thirds of the households have incomes below the nation's poverty level. For the last few years, the pundits have been proclaiming Mexico as the great success story of globalization. Increasing exports and declining reliance on petroleum were said to be indicators of progress, while we were assured that exploding imports strengthened the nation's productive capacity. The virtual flood of foreign capital offered an opportunity for a small elite to enrich itself through speculation and manipulation of the stock market, and for the government to postpone the day of reckoning by offering juicy returns to well remunerated money managers in the world's financial centers. The pundits are now pompously asserting the inevitability of present problems. They are just as audacious in recommending caution today as they were in urging investors into the heady waters of international finance in yesterday's markets. The huge devaluation of the peso will lead to substantial inflation in Mexico, as your reporters have noted, and prices of imported goods will rise quickly and dramatically. Changes of recent years led to a massive displacement of local production by imported goods. Years ago, the technocrats decided that Mexico's peasants and indigenous population were not only too independent but also very inefficient; they had to be removed from the countryside to "free" them from their traditional communities, putting their land at the disposition of more resourceful social groups and making them available for other tasks. Today, some of the corn for our tortillas, milk products, and animal feed, to name only a few essential items, are among the imported goods that were formerly produced at home. Similarly, small and medium sized industries were squeezed and many forced to close. The widely heralded trade "opening" led to an avalanche of cheap imports, a costly and unsustainable way to fight inflation and stimulate competition at the cost of domestic industries and jobs; aggravating the problem, the banking system was too busy fueling the speculative binge in the financial markets to address the complex task of supporting and strengthening the weakening industrial and agricultural base. The bipartisan "rescue" package from the US does not address Mexico's fundamental problems. By throwing "good money after bad", the proposed bailout will only further deepen the crisis, by raising the foreign debt and the cost of debt service. It will offer a very small group of people in Mexico the opportunity to continue to engage in financial acrobatics for personal gain. It will also provide the necessary funds for important financial groups in the US and elsewhere so that they can avoid the embarrassment of paying the real cost of their ill-considered investments: the guarantees will provide funds as a temporary fillip to financial markets that will facilitate an orderly (and profitable) redeployment of foreign assets. The massive injection of new credits into Mexico will also reduce pressures to face up to the urgent task of rebuilding capacity to satisfy our basic needs. To undertake this alternative path, we must mobilize people to plant crops and raise the animals needed for work and food, while artisans and small-scale entrepreneurs are encouraged to rebuild the myriad small industries and workshops to produce other basic consumer goods. This is the only way that we can defend our standard of living: by producing products which create jobs and incomes so that people can buy these products. This alternative cannot be undertaken without a serious democratization of the political arena. In today's world, a strong domestic economy cannot be shaped in isolation; but without explicit policies and resources to define such an approach, international economic integration will surely continue to exclude people from effective participation in governance and erode their capacity to supply their own needs, condemning them to a deteriorating quality of life. This is not an option which Mexicans can continue to accept: the example of Chiapas is still an important part of the Mexican scenario, and one that could be emulated. *David Barkin is Professor of Economics at the Xochimilco Campus of the Metropolitan University in Mexico City on leave as Senior Fellow for Latin America at the Lincoln Institute. His latest book in English is Distorted Development: Mexico in the world economy.
