Professor Krugman goes to Mexico
Poor Mexico, so far from God and so close to the United States! Or to paraphrase this well known quote: So far from social justice and so dominated by neoliberalism. Either way, the fundamental cause of the misery, poverty, and insecurity in Mexico should seem clear to even the most casual observer – it’s not a lack of natural resources or the ability of the nation to provide for itself agriculturally, Mexico is fundamentally rich; the core problem, plain and simple, is inequality.
Mexico is one of the most unequal nations on earth, second only to Chile in all of Latin America. The OECD reports that the top 10% grab a massive 36% of total income while the bottom 10% somehow subsist on but 1.3%. The wealthiest tycoon on the planet, Carlos Slim, is Mexican and his estimated net worth is $78,000,000,000, 16.6 million times the median household income of $4,689. The Mexican agency CONEVAL reports that 46.2% of the population is poor, and an additional 34.7% is vulnerable due to either social deprivation or low income. Only one in five Mexicans, they show, has enough income to satisfy basic needs and live without social deprivation.
The elites of this feudal system have no modesty in the degree of their parasitic extractions and the Bank of Mexico plays its part by maintaining an extraordinarily high rate of interest for a nation on a fiat currency. The current short term riskless benchmark rate is a whopping 4%, a transfer of purchasing power to the most powerful of $40,000 per million of wealth, 8.5 times the median income.
While unreported in the American press, I noted today that our very own Paul Krugman visited Mexico the other day and delivered an address to the annual convention of the Aseguradores (insurers) de México in Mexico City. He was one of the three headline speakers, along with, get this, Spain’s former right wing president José Maria Aznar and Rudolph Giuliani.
So, what did the world’s premier conscience of a liberal tell this illustrious, socially undeprived audience about their country?
Well, here’s a few excerpts on Krugman’s presentation via the Mexican paper La Jornada (translated from Spanish here and here). No hint of the inequality problem for this well heeled audience, everything’s essentially ok in fact, let’s wait a few decades and see if better education and a bit of child nutrition bear fruit.
Mexico seems to be a happy story in the context of the international economic crisis. Everything functions very well except the rate of growth, which doesn’t correspond to the policies adopted, suggested Paul Krugman, winner of the 2008 Nobel Prize in Economic Sciences.
Krugman indicated that “there is constant growth, but there is something that doesn’t click” and suggested as an hypothesis that although Mexcio has improved its social policies in support of the most poor, there are tasks, like the quality of basic education and child nutrition, that will take time to bear fruit.
“We don’t understand at what mysterious point in time that Mexico lost its capacity to grow at a faster rate while other countries, equally unregulated, were able to increase their growth in a sustainable way”, he said.
He recommended to have patience in order to permit the changes in the system of basic education to begin to show results, after emphasizing that investments in human capital tend to take 15 or 20 years to impact growth rates.
“I feel optimistic over the long term for Mexico. There are those who think it will be around 2030 when higher rates of growth will arrive and that seems about right”, he said.
What vacuous nonsense! Adam Smith hit the nail on the head on these types of feudal societies back in the 18th century:
Wherever there is great property there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many.
Comparing Krugman’s words to this icon of the right is quite a depressing exercise. But such is the state of 21st century “Keynesianism”.