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Volume 63 / Social Sciences

POLITICAL ECONOMY: MEXICO


PAMELA K. STARR, Senior Fellow in Public Diplomacy and Senior Lecturer in International Relations, University of Southern California

ACADEMIC AND POLICY-BASED ANALYSIS of Mexican political economy has undergone a significant shift of focus in recent years. Gone is the black and white debate over the wisdom of market-based economic reform of the past. Most opponents of economic liberalization have accepted, if grudgingly, that a return to the state-led economic development model of the past is virtually impossible due to economic globalization. This situation is especially true for Mexico given its deep economic integration with the US, the largest market-based economy in the world. At the same time, many proponents of market-based policies have come to accept that this development strategy does indeed have weaknesses, especially in a developing economy such as Mexico. As the publications reviewed in this section demonstrate, the debate between these two schools of thought has shifted into a grey zone in which each attempts to explain why market reform has failed thus far to deliver on the promise of increased growth with equity in Mexico, how economic performance can be improved, and what role the state should play in this reform process.

The first step in examining the failure of reform to foster economic growth and recommendations for improved economic performance is to gain a clear understanding of how market reforms affected the Mexican economy. Economic restructuring during the 1990s did benefit many segments of Mexican society, but at the same time it undermined the well being of others. Several recent studies detail the impact of reform among those segments of the society who were unable to adjust to the new market rules of economic interaction and thereby fell behind (items #bi2006003558# and #bi2007001718#). Other studies help explain why this occurred. They argue that it was partly due to the failings of the market—an absence of banks and hence secure savings and loans in rural areas that would have helped these regions adjust (item #bi2006003574#), low productivity and competitiveness in most small cities which meant they initiated adjustment in a disadvantaged position relative to Mexico's three largest urban regions (item #bi2006003573#), and the migration of educated workers to the US (item #bi2006003572#). The literature also identifies a policy bias in the reform process in favor of large businesses at the expense of small- and medium-sized firms in rural and second-tier urban areas (items #bi2007001718# and #bi2006001746#), precisely those actors who lacked the market expertise, capital, and experience to adjust to the new economic setting. These studies show that this outcome reflected a collective action problem—the large number of micro- and small producers, highly disbursed geographically and without a tradition of cooperation, found it difficult to organize into pressure groups with the capacity to influence government policy, whereas Mexico's small number of tightly integrated, family-owned oligopolies had the experience and the resources to lobby the government effectively.

The largest body of recent research focuses on potential improvements to Mexico's economic performance and strategies for including those who have fallen behind. One of the striking elements of this research is the shared assumption that markets alone will not promote development in Mexico, much less development with equity. Rather, the disagreement among these authors centers on the extent and emphasis of the level of government intervention needed to enhance market efficiency. A pair of two-volume studies, one a compilation of academic writings (item #bi2007001719#) and the other a collection of policy prescriptions authorized by an alliance of business and labor interests opposed to liberalization (item #bi2007001725#), call for a new economic policy that increases markedly the role of the state in promoting development and equity. A second set of studies is more modest in calls for state intervention, limiting this activity to improving the quality and reach of antipoverty programs (items #bi2006003563# and #bi2007001722#) or expanded and revised regional development efforts (item #bi2006003559#). A third group emphasizes the limitations of the institutional structure within which the Mexican economy operates and analyzes how this arrangement has undermined market efficiency. Without further institutional reforms to enhance the rule of law, reduce corruption, and improve education (item #bi2006003572#), and to promote effective citizen participation in economic policy-making (items #bi2007001718# and #bi2006003567#), Mexican development and competitiveness will continue to lag. Yet carrying out reforms of the Mexican judiciary (item #bi2005002614#), public administration (item #bi2006001676#), federal structure (item #bi2006003567#), and political system (item #bi2005003187#) have proven difficult to achieve politically and thus remain incomplete and insufficient.


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