Perspective

In his book entitled The Public Man, Glen Dealy describes the clash of cultures he experienced when he headed a trip with Latin American students. He would inform the group every night of the time they should be ready to leave the following day. Invariably, some arrived on time but others never did. Dealy was beside himself, but however much he implored the students to arrive punctually, the morning scenario was the same day after day. Desperate, he asked one of the youths why his friend didn’t get up earlier. The answer astonished the professor: he wakes up before everyone else but he wants to arrive last. Dealy couldn’t understand the apparent absurdity of the situation. Until he heard the end of the story: the president never enters until the Cabinet members have all arrived. Everything boils down to perspective.
An almost cultural clash, a clash of perspectives, appears to be taking place in the country with respect to the economic situation. Having learned the lesson of 2007 in which the government underestimated the gravity of the problem, it now works against the clock to shield the economy, attempting to anticipate any blow that could present itself. The general perception is a potentially funereal panorama, emanating essentially from the fear that the U.S. economy could shrink again and that would translate into something much worse for Mexico: the (U.S.) sniffles-and-(everyone else gets)pneumonia phenomenon that we’ve heard so much about. That’s how it was in 2008 and 2009, so it’s hard to imagine something different.
Of course, much of what happens will depend on what the Americans do in their own economy and that whatever this is works, the circumstances of which we are mere spectators and nothing more. But the other side of the coin is that, instead of waiting passively, there are many things that we should be doing internally to lessen and even revert the risk. Among these, we could also convince them that there are solutions that could be not only mutually beneficial but also an integral part of the future growth of the region.
As far as the U.S. is concerned, the problem is not only technical but also fundamentally political. Its society is immersed in a profound cleavage that translates not only into conflicting diagnoses, but also into radically disparate readings of the nature of the problem. For some, the crisis can be reduced to a recession to be attacked with a government stimulus: the traditional Keynesian schema. Others argue that the problem is one of excessive debt, of both the government and the society, and that this cannot be resolved with spending but rather with a program consciously committed to reducing the debt. An intermediate version affirms that the problem is that U.S. society stopped consuming with its own resources, maintained growth thanks to the availability of debt and that, therefore, there’s is no conventional solution: neither reduction of expenses nor of debt would resolve the core issue. Be that as it may, the case is that its government would improbably have the capacity of acting until at least 2013, when the next presidential election has come and gone, when voter confidence is back on track again and, most important, when voters have, hopefully, conferred a mandate upon the winner.
For us this is extremely bad news, but not grounds for the pessimism that appears to ride roughshod over the ambience. A saying goes that two prisoners were looking outside through the bars of their cell: one saw muck and mire and the other, stars. Everything depends on the perspective that we decide to adopt.
Mexico’s problem is that we depend on exports to the U.S. If exports plummet, internal demand would collapse, affecting all of the rest, as occurred two years ago. One of our problems lies in that we have accepted this binomial as obvious and, what’s more, perniciously. This has led many to speak of espousing a new industrial policy, one in which we would protect the productive plant and would attempt, in a word, what supposedly worked before. The truth is that thirty years ago we exported practically nothing aside from raw materials and agricultural products. Industrial exports are the result of changes in economic strategy that took place in the eighties in good measure because all of the former accomplished nothing other than to maintain us in recession and at highest inflationary rates.
Thanks to those changes, today we have a formidable export sector that competes successfully. The problem is distinct from what is commonly acknowledged: what keeps the economy depressed is the old productive plant that, thanks to a number of explicit or implicit protective mechanisms, remains uncompetitive. The fall of economic activity in 2009 revealed a serious reality of our traditional industrial sector. Were it not for the existence of such a successful export sector, the country would languish in permanent depression.
The inevitable conclusion at which we must arrive is that it is urgent for Mexico to transform its traditional productive apparatus, both industry and services. In essence, what’s urgent is to force these to compete by eliminating the protection mechanisms to which they are privy. These mechanisms include customs duties, investment limits, Mexican control requirements, and non-tariff barriers of all kinds that consequently impede the plant modernization or that consumers, persons as well as companies, would enjoy from competitive prices in services.
As in the anecdote of cultural patterns, many of the changes that are required go against the values and perceptions that have dominated the discourse and the economic tradition of the country. But that’s no reason to maintain the status quo. A competitive economy brings with it many investment opportunities and more and better paying jobs. It’s not rocket science and recent decades have proved this and then some: it is no coincidence that the export sector creates more jobs and pays better wages. The evidence is overwhelming.
The profile of the Mexican economy is very distinct from that of the U.S. To date, this has led to a division-of-labor schema among companies on both sides of the border, but has not ushered in a strategy of regional competitiveness in its entirety. To turn around, the U.S. must raise its productivity and drastically increase its exports. Mexico can be the key for them to be successful in this transformation. That will be possible if they start to get a move on, but this will only be successful as a development project if we right our own wrongs. In technical terms, there’s no beef. The question is whether we will have the capacity and, above all, the penchant for making it happen.