Class

1
Class 11-12 Mexico

• Single-party development
• Corporatism and clientelism
• Import substitution, industrialization and
  challenges to modernization
• Debt crisis and its implications
• International influence on domestic politics and
  development.

2
Structure of Mexico's Government

• Head of State/Head of Government President
  Felipe Calderon, National Action Party (PAN).
• (note the results of the election were very
  close, Calderon won with 36.38 of the vote, less
  than a 1 victory over the second place
  candidate. His main opponent Andres Manuel Lopez
  Obrador, Party of Democratic Revolution (PRD),
  has refused to accept the results and this has
  led to several large protests.)

3
President

• Head of State, Head of Government, and
  Commander-in-Chief of the Armed Forces.
• Formal powers --
• Initiate legislation
• Lead in foreign policy
• Create government agencies
• Make policy through decree or administrative
  rules and procedures
• Appoint a wide range of public officials.
• Informal powers --
• Manage a vast patronage network through filling
  government positions
• Until recently, presidential initiatives were
  rubber-stamped by the legislature.

4
President

• A unique aspect of Mexico's presidency is a
  deeply held constitutional norm that has been
  upheld since 1940 of the president stepping down
  after one, six year term (a sexenio) and then
  staying off the political stage during the term
  of their successor.

5
Legislature (2 parts)

• Senate 128 seats, 6 year terms 3 from each
  state, 3 from the federal district, and 32 by
  proportional representation (PR).
• Chamber of Deputies 500 seats, 3 year terms
  300 elected in single-member districts (SMP?),
  and 200 by PR.

6
Bureaucracy

• 1.5 million people in the federal bureaucracy.
• Lower level employees are unionized, with strong
  job security and benefits.
• Middle and upper level employees are generally
  low paid and are called confidence appointments
  because they are appointed based on the
  confidence of their superiors. Often staffed
  with younger individuals looking to use the
  position as a stepping stone, or looking to
  benefit from corruption.

7
Para-statal sector

• Semi-autonomous or autonomous government
  agencies, many of which produce goods and
  services.
• Current examples PEMEX (oil production),
  national electricity board, NAFIN (strategic
  investment).
• Also used to control development in sugar, steel
  and many other important industrial sectors.

8
Judiciary

• Code law
• Constitution also includes positive rights --
  entitlements for which the government is
  responsible for guaranteeing (employment, health
  care, etc.)
• Supreme Court nominated by president and
  approved by Senate. Decides most important cases
  in the country on appeal (like US Supreme Court).

9
Sub-national government

• Mexico has a federal system, with each state
  having its own executive, unicameral legislature
  and judicial system.
• However, most of these regional governments are
  poor and rely on transfers from the central
  government. In practice, the central government
  dominates.
• This is changing, as Vicente Fox and the PAN
  party have tried to allocate a greater role to
  the state in the hope of promoting greater
  efficiency.

10
Single-Party Authoritarianism

• Much like the Soviet Union and the People's
  Republic of China, Mexico was under the control
  of a single party (the Institutional
  Revolutionary Party (PRI)) from 1929 to 2000.
• Unlike the Soviet Union and the PRC, there was
  not an overriding ideology that unified the party
  authoritarian, not totalitarian.
• Party was established by Plutarco Elias Calles,
  who brought the many of the most powerful
  contenders for leadership during the Mexican
  revolution together, offering a simple bargain
  contenders for power would accommodate each
  other's interests in the expectation that without
  political violence, the country would prosper
  and they could reap the rewards of power and
  economic spoils.

11
Single-Party Authoritarianism

• Since the party could not rely on an underlying
  ideology or revolutionary goal to justify its
  leadership, it resorted to a number of other
  methods for gaining support.

12
Clientelism

• (or patron-client networks) an informal aspect
  of policymaking in which a powerful patron (for
  example, a traditional local boss, government
  agency, or dominant party) offers resources such
  as land, contracts, protection, or jobs in return
  for the support and services (such as labor or
  votes) of lower-status and less powerful clients
  corruption, preferential treatment, and
  inequality are characteristic of clientelist
  politics.

13
Clientelism

• Similar to patrimonialism, with two main
  differences
• 1. it is usually not attributable to a single
  ruler
• 2. officially, the state is not personal
  property.
• The PRI developed a huge patronage network,
  providing union and ejido leaders with jobs,
  opportunities for corruption, land, and other
  benefits in return for delivering their
  followers' political support.
• These extensive chains of personal relationships
  allowed the party to strengthen its political
  control and limit opportunities for opposition
  parties to organize.

14
Corporatism

• Corporatist state a state in which interest
  groups become an institutionalized part of state
  structures.
• Several types
• Democratic corporatism a set of institutions or
  forums that bring representatives from employers,
  trade unions, and government together to
  negotiate issues affecting work-places, industry
  structure, and national economic policy.
• State corporatism a political system in which
  the state requires all members of a particular
  economic sector to join an officially designated
  interest group. Such interest groups thus attain
  public status, and they participate in national
  policymaking. The result is that the state has
  great control over the groups, and the groups
  have great control over their members.
• Also can have combinations of these two types.

15
Corporatism

• Corporatism is an old idea, loosely based on the
  idea of medieval guilds.
• Usually contrasted with pluralist systems of
  interest group representation, where groups are
  voluntary and competitive.
• Under corporatism, interest groups are
  hierarchically organized within a peak
  organization that has standing in government.
• Most prominent in handling negotiations between
  labor, employers, and the government.

16
Corporatism

• The democratic variant is described by Philippe
  Schmitter and Gerhard Lehmbruch, and is usually
  characteristic of small, open European economies
  (Finland, Sweden, Austria, Norway, Ireland and
  Netherlands).
• In these countries, peak organizations are used
  as a method of economic coordination to (1)
  divide up gains in the economy fairly and (2)
  manage wage restraints in times of inflation.

17
Corporatism

• In the authoritarian variant, like in Mexico
  under the PRI, government-mediated organizations
  become a part of the state structure rather than
  an independent source of advocacy.
• This increases state power, by incorporating
  groups into the state, without allowing them to
  develop independent social bases.
• Some authoritarian regimes use this to greater or
  lesser degrees.

18
Dependency Theory

• What it modernization theory?
• Because many underdeveloped states remained
  underdeveloped, even after the end of
  colonialism, some scholars in the 1970s, like
  former Brazilian President Fernando Cardoso and
  sociologist Immanuel Wallerstein, suggested that
  the international system was set up in such a way
  that underdeveloped states could not catch up to
  developed ones.

19
Dependency Theory

• Advantage of early industrializers no
  competition or little competition, lower initial
  capital investment, low technological barriers to
  entry, and production primarily for the domestic
  market.
• Problems for late industrializers do not have a
  strong domestic market, capital startup costs are
  relatively high, high technology barriers, and
  international competition with well established
  firms.

20
Dependency Theory

• The world is divided into two groups --
• Center the industrialized states, who export
  primarily manufactured goods, and import
  primarily raw materials.
• Periphery the non-industrialized states, who
  export primarily raw materials, and import
  manufactured goods.
• These unequal terms of trade, also called world
  systems theory explain why underdeveloped states
  remain underdeveloped.

21
Import Substituting Industrialization (ISI)

• Several policy aspects
• Encouraging domestic and international
  investment.
• Providing credit and tax incentives to
  industrialists.
• Maintaining low rates of inflation.
• Keeping wage demands low through subsidies.
• Industrialization through state ownership and
  investment.
• High tariffs and import licenses to protect
  domestic industries from foreign competition.

22
Import Substituting Industrialization (ISI)

• Infant industries the idea that new industries
  in underdeveloped states need to be allowed to
  grow by marketing to the domestic market before
  being exposed to international competition.
• State led industrialization the idea that, in
  underdeveloped societies, the state is the most
  likely accumulator of capital, and is therefore
  in the best position to invest in technologies
  that will allow rapid industrial progress
  (Alexander Gerschenkron).

23
Problems with Dependency Theory

• Controversial whether underdeveloped countries
  are disadvantaged by trade, or advantaged by
  lower labor costs and the ability to adopt
  advanced practices (convergence).
• The reasoning behind some types of dependency
  theory verges on conspiratorial.
• A number of countries have made substantial gains
  since the 1960s and 1970s.
• Newly industrializing countries Taiwan, South
  Korea, Singapore, Argentina, Brazil, Malaysia,
  Mexico, and Thailand.

24
Problems with ISI

• Created dependence on the government for
  protection and investment.
• Created powerful lobbying groups to guarantee the
  continuance of protectionist policies, subsidies,
  and favorable tax benefits.
• Infant industries never made the leap from
  domestic to international competition.
• Continued industrialization requires even greater
  investment, raising concerns of greater
  dependency.
• Foreign exchange to purchase foreign-made
  technology becomes scarce (because of over-valued
  money and few exports).

25
Export-oriented Industrialization?

• Many of the Asian Tigers -- South Korea,
  Taiwan, Singapore, Japan, etc.) -- used a
  strategy of export-oriented industrialization,
  which incorporated many of the aspects of ISI,
  but which primarily encouraged investment and
  subsidization for the international export
  market, allowing domestic industries to be
  exposed to international competition.
• Either strategy requires a strong and largely
  non-corrupt government role in the economy.

26
Debt Crisis

• OPEC 1
• 1973-1974 oil boom gave some states increased
  revenue that they could not spend.
• This led them to put their money in international
  banks.
• These banks, in turn, gave loans at a more
  favorable interest rate, particularly to third
  world countries.

27
Debt Crisis

• OPEC 2
• In 1979, the US and Europe begin to increase
  interest rates in an effort to fight inflation.
• This also increased debt payments.
• This coincided with a general decrease in the
  price of primary commodities, including oil.
• Debt in the third world balooned.

28
Debt Crisis

• Mexican default
• In August 1982, Mexico's Finance Minister, Jesus
  Silva-Herzog, declared that Mexico would no
  longer be able to service its debt.
• After this, commercial banks stopped issuing new
  loans, which prevented countries from refinancing
  their debt.

29
Effects of Debt Crisis

• Increased borrowing led to the quadrupling of
  debt in Latin America, from 75 billion in 1975
  to 315 billion in 1983, or about half of the
  region's gross domestic product.
• Debt service (payments due on debt) increased
  from 12 billion in 1975 to 66 billion in 1982.

30
Effects of Debt Crisis (post-Mexican Default)

• Per-capita growth dropped by 9 from 1980-85.
• Countries abandoned ISI for export-oriented
  industrialization or economic liberalization.
• Massive capital outflow decreased currency values
  and increased real interest rates.
• Caused instability in authoritarian regimes in
  Brazil and Argentina.
• Increased role of the IMF in debt rescheduling
  and structural adjustment.

31
Current Levels of Latin American Debt

• Brazil -- 221,400,000,000 (2005 est.)
• Mexico -- 174,300,000,000 (2005 est.)
• Argentina -- 119,000,000,000 (2005 est.)
• Chile -- 44,800,000,000 (2005 est.)
• Venezuela -- 39,790,000,000 (2005 est.)

32
Global Impact Debt Outstanding by Region
33
Global Impact Debt to Debt Service Ration by
Region
34
Growth of Debt Crisis
35
Debt Crisis Today

• The very poorest countries (those the World Bank
  characterize as 'low income') have per-capita GDP
  of less than 875 per person, but have a combined
  debt of 412 billion at the end of 2005 and paid
  43 billion in debt service in that year.

36
Structural Adjustment

• IMF and World Bank provide loans for economic
  development and for refinancing current debt, but
  with particular conditions (conditionalities)

37
Structural Adjustment

• These conditionalities usually include
• Austerity
• Focus on direct export and resource extraction
• Devaluation of overvalued currencies
• Trade liberalization
• Increasing the stability of investment
• Balancing budgets
• Removing price controls and subsidies
• Privatization of state-owned enterprises
• Enhancing the rights of foreign investors
• Improved governance and fighting corruption

38
Controversies around Structural Adjustment

• Some structural adjustment policies, such as
  dropping subsidies, can cause instability.
• Policies tend to be generic and do not address
  the needs of the particular country.
• Curbing public spending often involves cutting
  funding for education, health care, and other
  major social programs.
• Free trade is biased.
• Structural adjustment should be unnecessary, most
  third world debt should be forgiven.

39
Defenses of Structural Adjustment

• Reflects the best current economic thinking.
• Crises would be a lot worse if structural
  adjustment programs were not implemented.
• Programs are becoming more country specific.
• The record of debt payment among those countries
  that do not undergo the reforms suggested by the
  IMF is generally poor.
• Debt cancellation would essentially be a reward
  for corrupt and authoritarian regimes and would
  not prevent future borrowing.

40
Influence of Neighboring States

• In political science, political outcomes of
  various states are generally treated as though
  they were independent (fragmentation of country
  experiences).
• Tacitly, however, the field is divided into
  various geographic fields (Latin America, Asia,
  Western Europe, etc.).

41
Influence of Neighboring States

• States tend to undergo the same processes at
  around the same time
• Waves of democratization and authoritarianism
  (Huntington, 1991)
• Ideology (ex. rise of Fascism and Communism)
• Economics (ex. the rise of Keynesianism and
  monetarism, economic downturns)

42
Why is this?

• Conflict
• Competition
• Cooperation
• Modeling
• Interdependence
• Aid
• Migration

43
How do we see this in Mexico's relations with the
US.

• Conflict
• Competition
• Cooperation
• Modeling
• Interdependence
• Aid
• Migration