The world has been living in the threshold of a crisis around two years and seems we’re finally in a systemic catastrophe. During 2008 the financial system was under big pressure, while real economics was starting to get slower. Nowadays, is a reality that people have left to spend their money, banks have stopped to lend their funds, companies have lost their earnings, many employees their job; in less words, we're living in a global crises. This has made most governments turn back to policies that look more Keynesian (an economical theory that came alive in the latest 1920’s after big depression) than Neoliberal, in order to avoid the contraction of the Economy. However this flashback to Keynesianism looks more as a political movement and is far to represent a new way to organize the Global Economy.
Mexico is a good example of this joint flashback to Keynesianism. Recently, the President Felipe Calderon has announced five main actions to attack the present crisis. This program includes lower prices in energy, funds for companies on bankruptcy, and a huge investment on infrastructure among other actions. This pact is definitely more likely Keynesian than Neoliberal, as the government has tried to be during the last 25 years. This new pact for the economy accepted for the more influents sectors of Mexican Economy is based on a theory (Keynesian) that was misunderstood in Mexico during the seventies, erased in the eighties and criticized for many since then until now.
This could seems like the President has left back the principles of the Mexican neoliberal model, where the government was anything but someone who could scarcely participate in the national Economy. By the moment, seems the Mexican State is decided to spend a strong quantity of money in order to “multiply” its investment and stimulate aggregate demand, as it was theorized by John Maynard Keynes, However the reality may indicate this is only a political movement.
During New Deal in US, Keynesianism represented a new way of driving the economy more oriented to an active State that influenced the economical agents and looked for a social pact with better social services. It meant the change of doing things just after the crisis of 1929 and became consolidated in the Breton Woods agreement in the 1948. However the Mexican version implemented during the fifthies just meant the justification to create a big fat State involved in every aspect of the Economy, from oil to bicycle factories, until Pubs. This model saw his last days in US in the 70’s while in Mexico was dismissed in 1982, just after oil and debt crisis.
As it has been discused in the press this last days, some people may think that Calderon’s plan is going back to a State not that big fat as it was once, but at least more participative in the economy from now and on. Could this mean that México has left back the Neoliberal principles adopted in 1982, that established the non intervention and the maximum reduction of the expenses by the government that implied a minimal participation of the state in the Economy? Many people could be seduced by the idea that neoliberal principles have passed away, defeated for this crisis (as we have read recently in the newspapers) but so far, the answer would be no, they have not.
There are serious differences between the past Mexican State interventions and this "new one" and many situation that avoid efficient State participation in the economy.. In the past the state used to spend overpassing its capacity to do it –usually printing more and more money. Because of that its external debt increased to the level it was unplayable. Nowadays Felipe Calderon and his economical cabinet have left clear that the Mexican Government has enough founds, due to past savings, to increase its investments in the country. And moreover this time they can't just print more money thanks to the autonomy of the Central Bank.
Now, let's focus in the Central Bank's autonomy and the restricted commercial banks' credit policies. There we can find that monetary interventions are truly limited to the Government. Moreover, the only one mission of the central bank is to avoid high levels of inflation not to impulse the economy. That is why it hasn’t changed interest rates -as the FED has done- action needed in order to increase the credit and the money available and push the economy forward.
The result is a State trying to increase its influence on economics but financially restricted for its fiscal equilibrium, and fiscally tied for its low level of incomes. This additionally restricts "Secretaría de Hacienda" to apply any fiscal policy to increase consume or private investment. This situation completed by the restrictive credit policy of mexican commercial banks and a Central Bank nulity to push economy forward, only affirms the perception that we probably won’t see deep changes driven for the State in order to influence the Economy, because it is not powerful enough to do it.
Then, what if we think we’re in an electoral year in México? It results obvious that population wants to hear that the party they voted or the one is governing them is taking actions to face the world crises. Once more seems political regards has resulted more important for Political class than social needs. It is true that some of the points of Calderon’s plan are better than nothing, and maybe more sensate than cutting the quantity of money in the economy as it was doing before when in México there was nothing else but neoliberals alternatives –but it won’t be sure until we see that inflation is still manageable. Nontheless, it is definitely an action driven for the electoral year.
For sure, while the Central Bank do not do anything to impulse real economy and affect expectatives, while commercial banks do not do a thing to stop risky consuption credits and increase productive loans, and while the Goverment keep loooking for electoral regards in the short term; Mexico will be facing a true risk of social and economical inestability in the mid term, definitely increased by the global crises.
The true risk of the Mexican Economy is further than 2009. Do not forget we’re watching Pemex fall, the State company that represents the 40% of Government income - its production has decreased approximately 30% in the last year. At the same time we should not forget we have a private foreign financial system truly inefficient as it is expensive and restricted in credits (not because it is private and foreign but for the way it was privatized and foreigned) Besides we have to think that many people is going to loose his employee during this year, and that many of them have unplayable credit cards. At the same time, the only efforts that Mexican government can do is trying to avoid crises with a negative external balance, a weak fiscal regime and a defficient social insurance net
Mexico should be trying to face crisis, more than an opportunity to have political earnings for some people, as a chance to be part of the global changes that we are going to see, and as an opportunity to re-think many of the things we’re doing and how we’re doing them. México is far far away from a New-New Deal. We do not have a strong State capable to influence in the Economy and efficient enough to create an effective net of social insurance, neither the right conditions to take care of our markets, nor the influence to make private sector to invest in, to lend out or even to pay taxes.
It seems we’re not facing the true risks, the crisis did not came from outside as many people is preaching. Crisis was here; crisis has never left, and won’t go while Mexico is an undeveloped country, and while México is not starting to think in the long term further than just the political impulse and the joint. I'm sure we will forget Calderon's anticrisis plan as soon as it stop be remided by the same political class that have created it, due to its inefficeincy to affront the crises.
