Mexican Economic Policy: 1970s Shift to Shared Development

Posted on Dec 16, 2024 in Social sciences

An Autocratic Official Diagnosis and a New Development Strategy

In the recent history of Mexican economic policy, the last months of 1970 and early 1971 appear as a singular term. In the framework of the six-year, mind-repeated transmission of power to the president at the time, there was a sudden change of perspective. A vision that rested on the quantitative aspects of growth and economic stability was intended to transition to a perception that privileged the qualitative aspects surrounding the phenomenon of growth, looking away from an abstract and oversimplified view of the operating laws of the economy and incorporating structural and economic policy guidelines.

Upon taking over the presidency of the Republic, Luis Echeverría ruled the world of the “rediscovery of self-criticism” of economic reality, social and political, largely denied the golden image of the country. Under the motto of the “Mexican miracle,” it was widespread at all levels, shapes, and tones in previous years. With uncertainty regarding the power and influence concentrated in the Federal Executive, the new president, in his first address to the nation on December 1, 1970, stated, “If to fulfill the mandates of the constitution it is necessary to change our development strategy, proceed resolutely. (…) Acting on the authority of national sovereignty and go as far as the people want.” Two days later, in a meeting with national and foreign investors, he said, “Now the government has a group of men who think it is necessary to modify the strategy of Mexico’s economic development.”

It was, in perspective and in the official languages, the explicit recognition that the model followed by the Mexican system led the country by a growing distance route for the “social commitment” that the Mexican Revolution won the 1917 constitution.

What was the diagnosis that supported the need for a change of direction?
What was the new economic strategy being proposed?

Consider the first question.

As a key aspect, the uneven nature he had assumed the distribution of the fruits of economic growth earlier was pointed out.

We propose that the polarized distribution of income was not, as had been claimed so far, a condition without growth, but also a potential obstacle to and a source of social injustice and conflict. The specific approach of Luis Echeverría thereon was as follows: “There is an unavoidable dilemma between economic growth and income redistribution. Those who preach that we must first grow and then divide are mistaken or lying out of interest. Indeed, it is required, increasing employment and income faster than at present. To this end, the income should be shared fairly and the domestic market of consumers expanded. It also requires human effort to be more fruitful. To achieve this, it must also distribute welfare, education, and technology.” This was the cornerstone on which it was intended to structure what was soon known as the “shared development strategy.”

Additionally, he emphasized that the dynamics of the income concentrator obeyed, and expressed in, two fundamental imbalances observed in the country’s economic development: sectoral and regional imbalances.

The first was expressed in the differential growth rate of the most important sectors of the productive structure. This was noted as a lag in the rate of expansion of the sectors that make up the primary economic activity so that agriculture, forestry, fishing, and mining grew during the sixties at a rate exceeding that of the population. In terms of its occupational participation regarding the economically active population, it was about 50%. On the contrary, in this period, petroleum, manufacturing, construction, electricity, and trade grew at rates significantly above the average for the economy.

Corresponding to the different rates of expansion, a marked difference in levels of productivity per person employed in the various sectors was deepened. “By 1969, worker productivity in primary activities had fallen to less than a quarter of the average of the economy, a sixth of the manufacturing worker, and a twelfth of the worker’s trade.” It also called attention to the fact that these inequalities coupled with cross both dynamic activities and in the depressed.

With respect to regional imbalances, take into account the existence of localized areas of agricultural and industrial development.

Mexican agriculture was visualized in a division that includes dynamic marking areas where high levels of productivity gain, which dominates the capitalist forms of organization and were the main beneficiaries of the agricultural development policy of the previous administrations. In contrast to depressed regions with very low levels of productivity, an acute poverty situation and the prevailing forms of *minifundiarias* (small landholdings), *ejido* (communal land), and exploitation. On the industrial front, it was indicated that the process of concentration of this activity in the industrial centers of the Federal District and Mexico State, as well as in the northern region, continued its march and led to a growing influx of the population field to those centers with the following social implications. One way has been recognized as major areas of poverty in the states of Guerrero, Chiapas, Oaxaca, Tabasco, Zacatecas, Hidalgo, Durango, Queretaro, and Tlaxcala.

In brief, the backbone of the diagnosis was as follows: the development of a socio-economic deployed ostensibly to undermine the legitimacy of a historically constructed system based on principles of social justice.

In a complementary way, two elements were integrated whose value seemed at first more strategic than cyclical: external imbalances and tax imbalances. The first, caused by an import structure that imposes a high-income elasticity of them, and the existence of a weak export sector primarily located in the primary activities are few opportunities to compete in the manufacturing line, the international situation unfavorable. The second, promoted by a tax system geared to the support of private industrial accumulation and threw low tax ratios for a parastatal sector financial deficit thanks to its inefficiency and a pricing policy aimed at subsidizing other activities and a level of expenditure determined by public draw attention needs increasingly state.

The claim to recover some own ideological values of the Mexican Revolution can be detected here, too. Nationalism, in this case, involved the prevention of risks inherent to the continuous deepening of technological, commercial, and financial involvement in the external imbalance and the leading role of the state on the process. It was indicated to suggest the implications that such a route planned to address the growing financial weakening of the state.

New Economic Strategy Proposed

In regard to the new economic strategy being proposed, its main lines are associated in one way or another to the diagnosis and can be summarized as follows:

Economic Growth with Income Redistribution

Promotion of industrial decentralization.
Direct and massive attention to the problems of economically depressed areas.
Channeling more resources into the mechanisms that play a redistributive role (social security system for urban workers and rural public health programs, public housing, and marketing agency).
Disc with a sense redistributive policy.

Strengthening Public Finances

Modernization of the tax system.
Reform the administrative apparatus to prevent tax evasion.
Review of tax policy in industrial development.
Revision of prices of goods and services provided by the parastatal sector.

Reorganization of International Transactions

Promoting the export of both raw materials and manufactured goods, a clear indication that in the long term only industrial goods transactions will be able to balance.
Diversification of products and markets.
Infrastructure development and tourism promotion.
Review of some aspects of tax and tariff policies with the aim to promote productivity and hence international competitiveness.
Promote scientific research to obtain increasing levels of technological autonomy.
Ensure the installation of industrial plants in sizes commensurate with the size of national markets.
Increase in production levels in the primary sector, mainly agriculture and mining.
Control over foreign borrowing so as not to exceed the capacity expected to pay.
Discourage wasteful luxuries and imports.

Reorganization of the Agricultural Sector

Continuation of land distribution.
Strengthening of the *ejido* and modification of forms of productive organization.
Transfer to the field a larger volume of financial resources, both public and private.

Instability and Recession

A comprehensive approach to diagnosis and strategy calls set to raise three considerations:

The diagnosis is not much more than the recovery, at the official level, of a permanent and increasingly condemned by analysts of Mexican reality irrespective acting in an unapologetically mainstream, if not critical. Originality, then, lies not in the content of the diagnosis but in its “self-critical” nature.
It is a partial diagnosis to the extent not explicitly collected and integrated into two key elements to fully understand the political necessity of a change of direction. These elements are the obvious and critical erosion of the political control system, a system whose efficiency in the decades before realized in us as negligible, the possibilities to realize a capital accumulation process smooth and stable, and the relative weakening of the bureaucracy’s political and social entity with respect to a middle class increasingly able to adjust the level of political power to economic power.
The diagnosis is eminently descriptive, interpretive enough content, results in an oversimplified and linear strategy, and even contradictory in some respects: in short, a list of purposes, but not necessarily of possibilities.

Regardless of its obviousness, the considerations listed unfold first two key questions. Why, if some elements of the diagnosis had been detected previously and had a long gestation period especially the dependent nature, marginalizing, and uneven economic process, do the self and the application for change of course emerge at the time they do? Is this a purely political necessity? Second, why do diagnosis and strategy take the form they do?

On the first postulate, the hypothesis, which otherwise is not intended to be original, that there was a pure political necessity, since in the second half of the sixties the Mexican economic system showed unmistakable signs of exhaustion of the model accumulation to support the stabilization phase, and the structural nature of its contradictions and major limitations. That is, in fact, during the second part of the past decade are evidence of what in 1970 would be an obvious reality: fundamental external imbalance and the prospect of a weakening of a long cycle of oligopolistic industrial accumulation, caused by a growing difference in the rates of expansion of productive capacity and the implementation conditions.

The consequences that derive from this approach require an explanation, if only briefly.

At the outset, it should be noted that the behavior of the Mexican economy in the second half of the sixties is more general context the announcement of the exhaustion of the expansionary phase of the central capitalist system experienced from the war. The most direct and obvious consequences of this situation are located in the commercial and financial: the first by the growing international competition and the restrictions imposed by the central capitalist countries to free trade, and the second by the disordering of international capital markets, which impedes access to them.

Internally, one of the most important aspects of the period is the stagnation of the agricultural sector. It is well known the role that the sector fits in the overall process of accumulation, so it is not appropriate to repeat it. Let us note simply that the agricultural product between 1960 and 1964 grew at an average annual rate of 6.2%, and in 1965-1969 it was only 1.2%. In particular, agricultural exports in the first half rose 9% per annum in the second fell to 2.7% per year. If we consider that the middle of the last decade, agriculture represented more than 40% of merchandise export complex, we find here one of the most important elements that make up the picture of the external imbalance.