I was in Mexico City this week to present a paper for a session on state reform jointly sponsored by the Inter-American Development Bank and the World Bank, at LACEA (the Latin American and Caribbean Economics Association).
At a dinner for conference participants I got to sit at the table of president elect Felipe Calderon, along with Robert Lucas and Gary Becker who were also giving talks at LACEA. I thought that Calderon was very impressive: intelligent, and committed to the free-market agenda that much of Latin America has given up on. Unfortunately his party the PAN doesn’t have anything close to a majority in the Congress and he will face the same uphill struggle that outgoing president Vicente Fox did. But I get the impression that Calderon is a better politician than Fox—he handled the whole controversy over the election with the Left’s candidate Manuel Lopez Obrador in a way that deflected hostility away from himself quite skillfully, and has been reaching out to the losing parties since he was declared winner.
The LACEA conference was hosted by ITAM, the Instituto Tecnologico Autonomo de Mexico, which was founded 60 years ago by a libertarian group of Mexican entrepreneurs who didn’t like the Marxist bias of the way that economics was taught at UNAM and other Mexican universities. The revolution brought about by private higher education in Mexico is remarkable; presidents Salinas, Zedillo, and Calderon were all economists, and Calderon was a graduate of ITAM. So were three recent finance ministers. The impact of private universities all across Latin America has yet to be fully understood; there would be no serious economics taught, and much less sensible economic policy, but for them.
Lopez Obrador greatly overplayed his hand by contesting the legitimacy of the close election and blockading the Paseo de la Reforma for three months. His behavior confirmed what his enemies said of him, that he represents the old, authoritarian Mexico, making populist appeals while undermining any institutions that blocked his route to power. This is particularly tragic in the case of Mexico’s electoral institutions, which are now very modern and clean and represent one of Ernesto Zedillo’s great contributions to Mexico’s democratic development. Lopez Obrador attacked the impartiality of the Federal Electoral Institute (IFE) and Tribunal where I lectured last year, and in the minds of his hard core supporters these truly modern institutions are tainted.
Mexico City is now dominated by a huge double-deck highway system that Lopez Obrador built when he was mayor. It is a system that benefits the rich primarily who own cars and have reason to want to get quickly from the far end of the city to the airport. But in a huge metropolitan area that lacks basic public services like clean water in many neighborhoods, it seems like an absurd waste of public resources. This is from someone who claims to speak for Mexico’s poor: what Lopez Obrador figured out is how to impress the poor with monumental public works projects, while doing little to help them in the long run.
On the other hand, the last two free-market liberal presidents Zedillo and Fox have presided over one of the most impressive experiments in social policy in Latin America aimed at helping the poor. The Progresa program of conditional cash transfers provided a cash stipend to poor families on the condition that they send their children to school. The program was designed by an economist, who built into it a way of empirically testing its effects by creating control groups that could be used to benchmark its impact. There are a host of econometric studies now documenting how Progresa raised school attendance rates dramatically (though its final impact on long-term educational outcomes is still uncertain). Early success led to the program being extended broadly across Mexico under Fox as the Oportunidades program, where it now reaches into urban neighborhoods. Someone at the conference told me that there is evidence that as much as ten percent of the vote for the Calderon’s conservative party the PAN in last July’s election was due to the popularity of Oportunidades.
Progresa’s success has led to it being copied in other parts of Latin America, like the Red de Proteccion Social program in Nicaragua, the Programa de Asignaciones Familiares in Honduras and the Bolsa Familia in Brazil. The Bolsa Familia was started under pro-market president Fernando Henrique Cardoso and was expanded by his leftist successor Lula. It now reaches some 15 million poor Brazilians, and appears to have had an actual impact in lowering that country’s Gini coefficient (a measure of income inequality, Brazil’s being one of the highest in the world).
In my first post to this blog, I talked about how important it was for friends of democracy to take social policy seriously, and to have an agenda that met the needs of the poor. Conditional cash transfers are one such innovative policy, put into place in the first instance not by parties of the Left, but by free-market liberals. There are clear dangers going down this road: they can become pure entitlements, and lead to the same kind of fiscal bloat that led Latin America to perdition in the debt crisis. In Brazil this past summer I was told that under Lula, enforcement of the requirement that children be sent to school was growing lax, which turns the Bolsa Familia into something more like a traditional patronage program. But given the region’s inequalities, I don’t see how it is possible not to support creative programs like Progresa and Oportunidades.
One important insight I had about the Mexican political system from this trip is how dysfunctional single terms for all elected offices are. This rule was put into the Mexican constitution in reaction to the rule of Porfirio Diaz, who used incumbency to keep himself in power for decades. Lack of reelection greatly reduces accountability by making everyone an instant lame duck, and makes it impossible for legislators to build up any sort of expertise. The current system was made to work during the period of PRI dominance because the party would move its people around from position to position so they could expect extended careers. But now that Mexico has a truly competitive democracy, the system has broken down. The problem is particularly acute at a local level, where governors and state legislators do not expect to be around for more than 3 years.
Many aspects of the Mexican political system have grown dysfunctional with the decline of the PRI. Mexico has a typically weak presidential system, but it didn’t seem like that during the years of PRI hegemony because the PRI controlled both branches of government. Now things are different. For the past six years important reform legislation has been blocked because the presidency and legislature are controlled by different parties. The PRI’s control of the different branches of the federal government as well as state governments, labor unions, and other corporate bodies was what kept the old system going. Now that is gone; the detritus of the old system is still there, but it hasn’t congealed into something that can move forward efficiently. Let’s hope that Felipe Calderon will be able to make some headway dealing with these problems after he is inaugurated on December 1.
