Monday, March 21, 2005

The Mexico Problem

I've had the opportunity to talk with a well-known Mexican economist and some well-connected people about the situation here in Mexico. I already know a lot more about Mexico and its culture than the average Gringo. But every time I learn more I think I know and understand less.

What is abundantly clear is that, like it or not, we in the U.S. are going to be affected by what happens down here.This goes beyond our current problems with the lack of security along a porous border, rampant illegal immigration and all the economic and cultural damage it causes. It's not hard to imagine why so many Mexicans want to enter the U.S. But it's important to understand why they want to leave Mexico.

That motive is going to increase, because things are going to get worse - probably a lot worse - before they get better.

It started with the Spanish

It is beyond the scope of this post, and beyond my capacity, to give a thorough political history of Mexico. Let me try to sketch a picture for you in order to provide some context.

Americans inherit their culture from Europeans who were smart and motivated enough to leave Europe. Rugged individualism is a vital part of what made the country great. But much of Mexican culture started when they were conquered by Spain. That act of sudden cultural violence left behind a people with a submissive attitude and low self esteem - which is often disguised behind the bluster of eggagerated pride. Mexican culture is extremely class and status-conscious.

Fast forward a few hundred years to the war of independence when the former colony became technically free of Europe. The flag changed colors, but Mexico was still being run by wealthy people of mostly European blood who ran rough-shod over the "Indians". To this day Mexico still elects leaders who look European. Finding a Moreno in a position of authority is rare, and dark-skinned Mexicans have a hard time getting into nightclubs. I have yet to see a light-skinned servant.

In a fit of bad timing Mexico had its revolution at the wrong end of the twentieth century, when Marxism was still considered a science and, even worse, fashionable.

There seemed to be some hope when the new government essentially copied the U.S. constitution and adopted it as their own. Hence the real name of the Republic, Los Estados Unidos de Mexico. But over seventy years of corrupt, single-party rule it has been ammended into something unrecognizable. Mexico has a veneer of democracy, but the best kept secret from its wilfully ignorant neighbors to the north is that it really has been effectively a Marxist country since at least 1939. (Find and read Robbery Under Law for a more complete picture.)

Poverty is an attitude

The two most noxious fruits of generations of Marxism are the rampant and systemic corruption and a culture of dependance: It's noble to be poor, the rich must give because they can, and the government is here to solve my problems.

Into this vacuum gleefully step corrupt politicians who pilllage the country for their own gain. Business faces roadblocks in the form of high taxes, a bloated bureaucracy and sometimes outright looting (they like to call it "nationalization"). Almost without exception any big enterprise that has thrived here has done so via government connections. Becoming a high minister of just about anything is practically a guarantee of getting rich. "Conflict of interest" to these guys just means choosing between the wife and the mistress.

Sadly, most Mexicans seem to accept this state of affairs: That's just the way it is. Now of course there was enough bottled-up desire for change to get Vicente Fox elected. Credit goes, ironically, to his predecessor Ernesto Zedillo for his part in opening Mexico to something other than single-party rule. That is, or should be, a good thing. But I actually heard Americans claim when he won that Fox was a conservative. That shows a dangerous ignorance. Waugh observed in 1939, and it's still true today: There are no conservatives in Mexico.

The more things change

Fox turned out to have a lot more in common with Clinton than with Reagan. He ran a brilliant campaign. And then instead of governing he kept on campaigning. Needless to say, "change" has been little and rarely for the better.

My inlaws just told me about a twelve-year-old boy who won a scholastic prize which included a new suit and a chance to meet the president. He turned it down saying he didn't want to meet such an "uncultured president" who doesn't even like to read. Some folks just don't appreciate a president who wears cowboy boots.

Then there's Armanigate. It's one thing to be an empty suit, but this episode speaks volumes about Fox in particular and Mexico in general.

It seems that he was taken by how good singer Luis Miguel looked in his Armani suits. (Well, duh! Who doesn't?) So Fox's wife trots downtown and buys him twenty or so. When he went to Europe he happened to meet the Armani rep for all of France who took him aside and informed El presidente guapo that his suit was a fake. You can imagine the sudden activity back at the store in Mexico City. Turns out that the owner was importing knock-offs from Hong Kong for $50 each, sewing in the Armani label, and reselling them for $500. At that price alarm bells are ringing for anybody who has ever shopped for an Armani suit. But not for the First Lady of Mexico.

Caught in a trap

To be fair, Fox has made some of the right noises. He's making some effort to shrink the size of govrnment. He talks of privatizing all or some of the petroleum industry. He even talks about lowering taxes.

But, asked my economist friend, why would anybody care about lower taxes when they've never paid any? Mexico has an abysmal tax compliance rate. Millions live, work and die without having paid a single Peso in taxes.

So why does the government let them get away with it? number one, it's great politics to let people pay no taxes. Two, they've got Pemex

Pemex is the petroleum company stolen from British Petroleum in 1939. Excuse me. Nationalized. Like any state-run enterprize it is inefficient and run down. My economist friend projects that Mexico will simply run out of oil by 2021 if they don't start investing in exploration. Meanwhile it is a cash cow which the government "taxes" at a rate of 80%.

Do you see the trap? No private company is going to accept a tax rate that high. Taxpayers, who should be the ones to take up the slack, just aren't in the habit of paying taxes. And since they have their subsidized subway, hospitals and tortillas without paying any, why should they start now?

It's worse than that. There is plenty of capital, but nobody is investing it. It collects in the hands of a few rich who have no rational motive for investing it here. So they put it in the bank or invest abroad and live comfortably off of the 4 or 5 percent it earns. Credit in Mexico is practically nonexistant. Americans who have to fend off refinancing come-ons every day cannot imagine what it is like for Mexicans to save up to buy a house.

Throw into the mix that generations of Mexicans have been taught that if they want something from the government they should just go on strike. Millions are waiting for the government to wave a magic wand and make everything better. Nobody has a "get ahead" mentality. (Well, practically nobody. The economist I spoke to does, but he's thinking of leaving Mexico. That twelve-year-old boy gives me some hope.) The drug that is television - here it truly is an opiate for the masses - is going to wear off some day.

My economist friend says the government is in a no-win situation. The only way out he can see is a painful revolution. My worry is that the cultural weaknesses resulting from everything from the Conquistadores to the PRI will set the stage for an even worse, perhaps openly communist government. No matter what the result, the turmoil will be severe.

What makes me both sad and angry is realizing that it doesn't have to be this way. Few countries are as blessed as Mexico when it comes to climate and natural resources. When it comes to raw materials there's really nothing we have in America that they don't have down here. And they've got labor to, well, export. Mexicans tell a joke about an angel asking God if it was really fair for him to give so much to just one country. "Don't worry," God says. "I'm going to fill it with Mexicans."

Contemplating what seems to be unavoidable turmoil it seems clear that no matter the result for Mexico there will be serious repercussions for us. I hope that our government gains a clear and realistic enough understanding of the interlocked problems faced by our southern neighbors to formulate a policy that protects our interests and even helps Mexico.

Maybe we can convince them to go back to the original version of their constitution. Of course, we'd probably have to start actually respecting our own. But that's a post for another day.