Enough is not enough
Call for urgent change of the Mexican Economic Policy
Saul Escobar Toledo
A group composed by women and men, called Nuevo
Curso de Desarrollo (New Course for Development) based at the National
University of Mexico recently published a document to propose a set of measures
to change the current economic policy in Mexico. This proposal responds to a
diagnosis of the current situation: at this point of the year, the serious
social damage inflicted by the health and economic crisis can already be observed.
As we know, in Mexico as in many other countries, there was a great economic
disruption caused by COVID. Millions of
people ceased to receive income from their work. However, the Mexican
government has not carried out sufficient support measures to compensate for
these losses. The result is easy to guess: many households have been rapidly
impoverished. It is estimated that between 10 and 16 million people in April earned
much less to the point of not being able to acquire the basic food basket , a
situation that has continued for many of
them during May, June and July. And while it is true that more and more workers
are returning to their jobs, the losses caused have not been repaired.
The lack of support has led many people to
abandon their confinement to seek an income for their sustenance. This, in
turn, puts the population in greater danger. The Group considers that this
dynamic can be corrected: contain the
pandemic, protecting sources of employment and revive the economy are goals that can be achieved at the same time,
they are not necessarily contradictory.
The paper recognizes the progress made before
the health crisis: there was a significant increase in minimum and contractual
wages; the right to a basic pension for the elderly was expanded; and support
was extended to other vulnerable groups.
But the situation changed dramatically, and yet the economic policy did
not.
This situation - says this group - must be
corrected. Therefore, an emergency strategy is urgently needed for the
remainder of 2020 and for 2021. This new course could return some of what
families have lost and, above all, make economic reactivation faster.
Since existing social programs are no longer sufficient,
immediate action is required to protect formal workers who have become
unemployed or underemployed, and informal workers who have not got no income at
all.
The Group emphasizes that the reactivation of
the economy cannot rest solely on the dynamics of the market. Both private
consumption and investment will grow very slowly if there is no determined
action from the state. That is, if there is no strong fiscal impulse. So, it is
necessary, and it is now more urgent to launch a program to expand public
spending. This means increasing the
public deficit for 2020 and prepare a larger budget for 2021.
Financing of public expenditure can be covered
by the flexible credit line of low cost available in the IMF and also by the Central
Bank. Additionally, the banking system
can cooperate with the recovery by granting more credit to companies and
individuals and to support the government.
Higher public spending should not necessarily become an unpayable debt
and an unbearable burden for future generations.
In addition, it is required to carry out a set
of legal reforms to implement unemployment insurance; a basic income for the
poorest and most affected ; and the strengthening of development banks
(strangely frozen today), as well as an industrial and regional policy that
does not rely solely and passively on the supposed benefits of the trade
agreement with the United States and Canada.
Additional borrowing should be seen as
transitory and confined to overcome the emergency. Therefore, the document
says, a tax reform cannot be postponed. A reform that lays the foundations for
a new inclusive and sustainable economy. The undeniable political strength of
the president of the republic, granted by elections that took place in 2018,
must and can serve to achieve this agreement.
The government can presume that, despite the
adversity, there is a balanced budget. But what good is that when inequality
and poverty are exacerbated? The Mexican state and, first of all, the federal
government have to recognize that there is a debt more important than the one
recorded in public finances. And that is the income losses suffered by millions
of Mexicans, losses that may last many months more.
If anything has been learned from the crises of
capitalism in the last hundred years, it is that the laws of the market cannot
be trusted. It is, then, time for politics, for decision-making, for a change
of the economic course.
Note: The complete list of members of the Group
and their publications are available at:
http://www.nuevocursodedesarrollo.unam.mx
Saul Escobar Toledo, Economist, Professor at
Department of Contemporary Studies in INAH (National Institute of Anthropology
and History, México) and President of the Board of the Institute of Workers
Studies “Rafael Galvan” (IEORG) a non-profit organization. His recent work :
“Subcontracting: a study of change in labor relations” will be published soon
by Friedrich Ebert Stiftung, Mexico City.
