Draft 8/14/01
Copyright © 2001 by Arthur Warmoth, Ph.D.

AN INTRODUCTION TO MEXICAN POLITICS
IN THE CONTEXT OF NAFTA

Arthur Warmoth
Sonoma State University
Universidad Autónoma de la Laguna

This essay was prepared for a class on The Politics of the NAFTA Region (Canada, Mexico & the U.S.), to be taught at the University of British Columbia by Gerald & Kathleen Hill. Most of it was written during July, 2001, in Torreón, Coahuila, Mexico. The review of Mexican political and cultural history is based mostly on Enrique Krauze's Mexico: Biography of Power (1997) and Carlos Fuentes' The Buried Mirror (1992). For additional acknowledgements see the Bibliography.

As I began to reflect on the task of discussing Mexican politics for a class on the comparative politics of the NAFTA region, I was struck by a startling insight: Politics, like almost every other Mexican institution, is so different from its Anglo-American counterpart that to call it by the same name can be misleading. In his excellent commentary on the crisis of 1994-95, Jorge Castañeda (now Vicente Fox’ Foreign Minister) observed:

[T]he single element that explains the opacity of Mexican society and politics to so many, is difference: the simple but critical fact that Mexico is radically, substantially, ferociously different from the United States and will remain so for the foreseeable future. The mistake many outside Mexico made was to believe that the highly perceptible differences of the past were superficial enough to be swept away by a modernizing leader and an apparently acquiescent population. The mistake so many inside Mexico committed was to convince themselves (ourselves) that those differences would surface automatically, almost immediately, and work their magic directly in the streets and villages and at the polls. (1995, p. 33)

To resolve this dilemma, I tried to come up with a definition of politics adequate to the challenge:

Politics is a society’s processes for making conscious choices that are expressed in laws and public policies, as implemented by legislative, judicial, and administrative authority (including during much of Mexico’s history, military authority).

In other words, politics is a society’s processes for consciously creating institutions and institutional arrangements. This definition highlights several interesting alternative possibilities. The most obvious is that the relative roles of legislative, judicial, and administrative authority can be very different in different societies, and each of these authorities can have different relationships to democratic electoral accountability. Less obvious, but perhaps more interesting, is the fact that collective choices leading to the creation of institutional arrangements can be either unconscious or enacted through conscious processes that are not experienced as choices. All of these possibilities must be taken into account if we wish to understand "Mexican politics."

The key lies in the fact that Mexican society is more dependent on culture and less on politics than is Anglo-American society. Carlos Fuentes, who spent time as a child in Washington, D.C., where his father was a Mexican diplomat, is uniquely qualified to observe these differences. He argues that culture is the core institutional framework of Latin American society:

Five hundred years after Columbus, we are being asked to celebrate the quincentennial of his voyage&emdash;undoubtedly one of the great events of human history, a turn in events that heralded the arrival of the modern age. But many of us in the Spanish-speaking parts of the Americas wonder whether there is anything to celebrate.

A glance at the Latin American Republics would lead us to reply in the negative. Whether in Caracas or in Mexico City, in Lima or in Buenos Aires, the fifth centennial of the "discovery of America" finds us in a state of deep, deep crisis. Inflation, unemployment, the excessive burden of foreign debt. Increasing poverty and illiteracy; an abrupt decline of purchasing power and standards of living. A sense of dashed hopes and lost illusions. Fragile democracies menaced by social explosion.

Yet I believe that in spite of all our economic and political troubles, we do have something to celebrate. The present crisis throughout Latin America demonstrates the vulnerability of our political and economic systems, which have come crashing down around our heads. But it has also revealed something that has remained standing, something that we were not acutely aware of during the decades of economic boom and political fervor following World War II. Something that, in the midst of our misfortunes, has remained on its own two feet. And that is our cultural heritage&emdash;what we have created with the greatest joy, the greatest gravity, and the greatest risk. This is the culture that we have been able to create during the past five hundred years, as descendants of Indians, blacks, and Europeans in the New World. (1992, p. 9)

Any discussion of Mexican politics must give equal weight to Fuente’s troika of politics, economics, and culture. Culture includes what anthropologists call "customs" and the Spanish philosopher José Ortega y Gasset (1957) calls "usages," as well as the creative activities of art and literature, the reflective activities of philosophy and history, and the practical institutions of commerce, science and technology, and law and politics. Without political self-reflection, culture can perpetuate institutional arrangements received from history. It can also create new arrangements through creative activity that changes beliefs, attitudes and values thereby leading to unintended changes in institutional arrangements and relationships. And culture can respond to external shocks in ways that lead to unintended institutional consequences. The drama of Mexican history is full of creative institution building accomplished by actors playing cultural roles only tangentially related to institutionalized political decision-making.

I. Mexican Politics

Foundations of Mexico’s Political and Cultural History

Mexico meets anthropologist Edward T. Hall’s (1977 ) definition of a "high-context" culture, while the anglophone cultures of the United States and Canada are "low-context." In a high-context culture, any particular act of verbal communication (oral or written) is embedded in a rich array of implicit and non-verbal (expressive and iconic or imaginal) messages that are essential for its proper interpretation. In a low-context culture, verbal meanings are largely self-contained. The low context cultures of anglophone America derive from their historical roots in the legal, economic, and administrative genius of the English tradition. They have been accentuated by Jeffersonian and Madisonian political institutions, and their Canadian counterparts, adapting to the tasks of governing profoundly commercial societies subject to successive waves of culturally diverse immigration.

A high context culture necessarily focuses much attention on the past, as that is the source of much of the context. In describing Mexico, the historian Enrique Krauze observes:

The weight of the past has sometimes been more present than the present itself. And repetition of the past has sometimes seemed to be the only foreseeable future. In certain areas of Mexican life, the past has survived as a legacy of stability and cohesion; at other levels it exists in the form of unresolved, partially repressed conflicts, always ready to burst through the surface of the present. And in Mexico, as in all countries with ancient cultures, our view of the past that was actually experienced is influenced by the past as it came to be remembered, reconstructed, and sometimes, for ideological purposes, invented. (1997, p. xiii)

A low context culture on the other hand, can be more concerned with the future. In the United States and Canada, this has included a predominant focus on explicit strategies for creating the future, a tendency which was reinforced by the "myth of progress" that dominated much of the 19th and 20th centuries.

In attempting to compare the political cultures of Mexico and Anglo-America, it is important to remember that the former simply has more history than the latter. And much of it&emdash;the Mexican baroque period from around 1600 to around 1750&emdash;was dedicated to creating institutions designed for permanence. Hernán Cortés landed in Veracruz in 1519 and Mexico was settled in the 16th century. On the other hand, the colonization of Anglo-America did not take hold until the 17th. And Spanish colonization did not displace either indigenous institutions or populations; it incorporated them. The success of the conversion of Mexico was a result of the assimilation of indigenous practices and iconography. Whereas the language, including the names of saints, was clearly Spanish, the resulting practices and aesthetic resulted in a cultural mestizaje that parallels the racial mestizaje unfolding during the same period. In fact, during the period leading up to the War of Independence, criollo (ethnic Spaniards born in America) Catholic thinkers pointed to parallels between Aztec religion and Catholicism. They even developed a narrative equating Quetzalcóatl with the roving apostle St. Thomas, in order to buttress their claim as the authentic stewards of the Mexican land and patrimony.

The baroque art and architecture of the colonial period, especially the churches and public buildings, still dominate the colonial cities of modern Mexico. They have been modified by the neo-classical tastes of the period of liberal Reform and by the populist aesthetic of the Revolution, especially of the muralists. And they are embellished by the recovery and restoration of pre-Columbian monuments, as well as strong popular traditions of arts, crafts, and music. But the syncretic baroque synthesis has not lost its power. This internalized history of art and ritual gives a deeply rooted foundation to a coherent sense of Mexican national identity.

The hierarchical authority of the viceregal period relied heavily on the authoritarian heritage of Aztec society, as well as on the hierarchical cultural and moral authority of the Catholic church. The Hapsburgs understood this. The fact that the Bourbons did not, and therefore attempted to weaken the political and economic power of the church, was one of the factors that set the stage for the War of Independence. Given the fact that the country remained&emdash;and remains today&emdash;overwhelmingly Catholic, subsequent attempts by liberal reformers to dominate the church, while leading to substantial improvements in the material life of the people, also led to deep and festering tensions in the moral fabric of Mexican society

Mexican society embraces a diversity of cultures as heterogeneous an anything to be found in Canada or the United States. However, this diversity is as much a heritage of pre-Columbian indigenous groups as it is the result of modern waves of immigration. Modern colonies of French, Spanish refugee, German, Middle Eastern, and Asian immigrants must be taken into account. However, it is the pre-Columbian heritage which was filtered with varying degrees of success through the imposition of colonial Spanish institutions and subsequent waves of liberal and revolutionary institution building in the nineteenth and twentieth centuries that has led to the formation of today’s dominant mestizo culture. But that culture governs a nation in which many indigenous cultures are still very much present.

The imposition of Spanish colonial institutions followed a very different course than that of British colonization. To begin with, the Spanish Conquest was largely carried out by men, in contrast with Britain´s policy of settling the "New World" with families. The Spanish were soldiers, who routinely took indigenous women as mistresses while they may or may not have been waiting for acceptable Spanish wives, and priests, who were forbidden to marry, but who nevertheless contributed to the mestizo gene pool. The Spanish were primarily interested in exploiting the land for gold, silver, and other forms of exportable wealth. British settlers were interested in occupying the land as self-sufficient farmers. They tended to displace, and thus effectively to eliminate much of, the Native population. In New Spain, by contrast, agriculture was established on the basis of implicitly or explicitly enslaving, but not exterminating, the indigenous population, primarily to support the extraction of wealth that could be sent back to Spain. [The Spanish kings used much of it to pay their debts to the bankers in the Northern Europe, especially the Low Countries, who financed their military adventures. It thus eventually became the economic foundation of Northern European capitalism. According to Fuentes, "A simple statistic tells the tale. In 1629, according to a Spanish economist of that time, Alonso de Carranza, 75 percent of the gold and silver from American mines had ended up in only four European cities: London, Rouen, Antwerp, and Amsterdam" (1992, p. 157).]

But Spain also sent priests who were committed to converting the indigenous population to Catholicism. Priests such as Bartolomé de las Casas argued passionately for the humanity of the Indian soul. Fray Bernardino de Sahagún devoted thirty years to a deep understanding of the Aztec world. The almost miraculous conversion of the indigenous population coincident with the appearance of the Virgin of Guadalupe on the hill at Tepayac in 1531 led to the emergence of a Mexican Catholicism that is as much pre-Columbian as European. Although Spanish cruelty, and especially Spanish diseases, decimated the indigenous population, the Spanish strategy of conquest and conversion was far less successful than the British strategy of colonization in ghettoizing and eliminating native populations. While the Spanish were able to establish military and economic control of the land and its people, racial and cultural mestizaje (intermingling) resulted in a society that today is dominated by racial and cultural mestizos. And although the Spanish system was able to establish near totalitarian control over the surface of society, it was never able to suppress the class, regional, and tribal cultural differences that have resurfaced periodically in Mexican history, leading to prolonged periods of crisis, innovation, and repression, including the decades long cataclysms of the War of Independence (1810-1821) and the Mexican Revolution (1910-1920, or by other accounts 1910-1940).

Human connectedness, based on nonverbal expression and iconic communication, play a large role in the functional consciousness of Mexican social and political relationships. Feudal relationships based on personal loyalty to personified authority dominated both the secular and ecclesiastical order of New Spain, as they had the order of the Aztec Empire. The stability of the political and ecclesiastical order of New Spain was supported by a grand vision of an eternal order expressed in the rich iconography of Catholic ritual, art, and architecture, a heritage now recognized by UNESCO in its designation of Mexico’s colonial cities as the "patrimony of humanity."

The nonverbal consciousness of Mexico has deep roots in pre-Columbian and Spanish baroque sensibilities. These sensibilities have been refined by the constitutional liberalism of the 19th century Reform, with its neo-classical tastes, and the pragmatic and corporatist institutions of the Revolution, with its populist art. However, Mexico has also been infinitely fragmented throughout its history by class, factional, and regional impulses and movements endemic to a political system in which the authority of law is invested in and dependent on the personal charisma of a particular leader. The periods of the liberal Reform and the Mexican Revolution attempted to create new legal frameworks for social order. The result was that each of these efforts at institution building was ultimately forced to rely on a charismatic strong man to reestablish order. In the liberal period, those leaders were Benito Juárez and Porfírio Díaz (the latter’s increasingly inflexible dictatorship laid the foundation for the Revolution of 1910). Following the Revolution, the novel institution of the Presidency, crafted by, among others, Plutarco Elías Calles and Lázaro Cárdenas, limited firm authoritarian power to a term of six years.

 

The Mexican Revolution

The Mexican Revolution was an orgy of frustration and hope, of cruelty and compassion, and of political theorizing. Initiated by the democratic political vision of the ascetic and even mystical Francisco I. Madero, it was carried out by a large roster of generals. These generals showed varying degrees of political sophistication, but each had a political agenda and a rationale as to why he was best equipped to implement it. Madero’s excessive trust in democracy left him vulnerable to reactionary forces and he was murdered by agents of the usurper Victoriano Huerta, with considerable help from President Taft’s ambassador to Mexico, Henry Lane Wilson. The three most important generals to rise against the government of Huerta were Emiliano Zapata, a peasant leader from the state of Morelos, Francisco "Pancho" Villa, a bandit and sometime rural laborer from the state of Chihuahua, and Venustiano Carranza from a landowning and politically involved family from the state of Coahuila&emdash;Madero’s home state&emdash;where he had just been installed as governor.

The phenomenon of the caudillo, or military strongman, was not new to the Revolution. The history of Mexico in the 19th century, as of Latin America in general, was a saga of the succession of caudillos. The War of Independence was carried out by insurgent caudillos, including the priests Miguel Hidalgo y Costilla and José María Morelos y Pavón. It was finally settled through the accommodation of the criollo general Augustin de Iturbide, who had done most of his fighting in the war against the insurgents, and Vicente Guerrero, a surviving comrade-in-arms of Morelos. The thirty years following independence were dominated by the political antics of the criollo caudillo Antonio López de Santa Anna, who assumed the presidency eleven times between 1833 and 1854. In the end, he lost one leg and half of the country from Texas to California, the latter to the United States, whose claims to "manifest destiny" provoked the War of 1846-48. The second half of the century was dominated by the struggle between Liberals inspired by the political philosophy of the Enlightenment and Conservatives inspired by tradition and Catholicism. The Liberals were characterized by stronger intellectual leadership, but the Conservatives spoke to the Catholic spiritual roots of the people, even to many whose condition would eventually be improved by the triumph of the Liberals in the War of the Reform and the War of the French Intervention.

The caudillo of the Reform period was the Zapotec Indian Benito Juárez. Following the death of Juárez, another military hero from Juárez home state of Oaxaca, Porfírio Díaz, established a military dictatorship dedicated to the ideals of order, progress, and secularization. The ideals of economic progress and secularization were drawn from liberal French political philosophy and were administered by a bureaucratic elite called "los cientificos." But the establishment of order was thought to require authoritarian leadership in the tradition of the Aztec tlatoani, a term that continues to have currency in contemporary discussions of the authoritarian strain in Mexican politics. Díaz established the governing formula of "bread or the bludgeon" (pan o palo) which has continued to inform the political philosophy of the ruling party during most of the 20th century. Unfortunately, the order established did not greatly benefit either peasants or workers. As the Porfiriato became increasingly rigid, and more generous to foreign capital at the expense of the growing Mexican middle class, the latter also found themselves increasingly alienated from the regime. This was particularly true of northern ranchers such as the Madero and Carranza families, who had a strong interest in regional sovereignty.

The military struggle following the overthrow of Huerta in July 1914 pitted the forces of the three caudillos against each other. Emiliano Zapata’s army, based in the state of Morelia, controlled the south central area. Zapata’s preoccupation was the restoration of indigenous peasants’ claims to communal lands. These claims were rooted in land grants of the viceregal period and were the core of Zapata’s Plan de Ayala. Pancho Villa’s Division del Norte controlled most of the north, including his home state of Chihuahua. Villa was the most complex and contradictory personality of the three. He was capable of extremes of tenderness and gratuitous cruelty, and his generals ranged from the humanitarian (Felipe Ángeles) to the sadistic (Rodolfo Fierro). He was also the most charismatic, and his style captured the attention and support of a U.S. public that ranged from President Wilson to Hollywood. His political agenda was less well developed than either Zapata’s or Carranza’s and consisted primarily of justice for the downtrodden and dispossessed. But his military prowess was formidable. It appeared invincible until he was outwitted by the Sonoran general Álvaro Obregón during the time Obregón was aligned with Carranza.

Don Venustiano Carranza was the most politically sophisticated of the three caudillos. He had well developed ideas about Mexico’s need for constitutional government based on his extensive reading of Mexican and European history and his experience as governor of Coahuila. In the fall of 1914, troops loyal to Carranza controlled most of the extreme south of the country and also areas along both coasts. During the subsequent years, Carranza’s generals were able to defeat both Zapata and Villa. Among these generals was a group from the state of Sonora that included future presidents Álvaro Obregón and Plutarco Elías Calles. Under Carranza’s leadership as Primer jefe of the Constitutionalist Army, the Constitutional Convention of 1917 was convened. Although the convention was dominated by extreme liberals and embodied principles far more radical than those endorsed by Carranza, he accepted it as the basis for the legitimacy of his transformation from Primer jefe to Constitutional President of Mexico. According to Krauze:

The involuntary union of the radical and Carrancista programs in the Constitution of 1917 gave birth to twentieth-century Mexico. A purely democratic revolution launched to overthrow a dictatorship ended up by creating an equally authoritarian regime. This marriage of the twentieth century with the colonial past was consummated in Querétaro when, on February 5, 1917, after two months of passionate debate, the new Constitution was proclaimed. (Krauze, 1997, p. 366)

The decisive ascendancy of the Constitutionalist Army began with the triumph of Obregón’s forces over Villa’s in the battles of the Bajío, most notably at Celaya in 1915. However, Zapata´s forces continued to struggle (with diminishing success) until their leader was assassinated in 1919. The last of Villa’s forces lay down their arms in 1920. Carranza´s tenure as President was far from tranquil.

Although 1920 saw the end of war in the sense of combat between established armies, it was far from the end of political violence and sporadic military action, including attempted coups and countercoups. During 1920, the issue of the presidential succession became the downfall of Carranza. The question of presidential succession had been a thorny issue in Mexican politics since Madero in 1910 adopted the slogan that Díaz had used against Juárez, "sufragio efectivo, no reelección" (effective suffrage, no reelection), before abandoning it to succeed himself over a period of thirty-four years. In 1920 the military power of the Revolution was in the hands of a group of Sonoran generals, led by Álvaro Obregón who felt entitled to succeed Carranza. However, with his eye always trained on constitutional history, Carranza decided to try to break the chain of military succession by nominating an obscure civilian, Ignacio Bonilla, the ambassador to the United States. The Sonoran generals rebelled, and Carranza was assassinated while trying to move the national government by train&emdash;lock, stock, and gold bullion&emdash;to the greater safety of Veracruz.

 

The Rise and Fall of the PRI

Some sense of the contrast between the political climate in Mexico and Anglo-America in the early and mid twentieth century can be gained by reflecting on the fact that the last great war on U.S. soil had been the U.S. Civil War of 1861-1865. That war was bloody and fratricidal, involving conflicts between the industrializing North and the agrarian South, and over the moral issue of slavery. But the conflict was contained within the moral ideology of Protestantism and the political ideology of constitutional political institutions that had been developing for almost a century. Canada had an even more peaceful history, although it was involved in the U.S. Revolutionary War and the War of 1812. And the United States, with Canada in its shadow, had emerged from World War I with renewed industrial vigor and economic leadership that were to culminate in the expansive decade of the Roaring Twenties.

Mexico, by contrast, was spiritually and economically exhausted by over a century of civil violence, sometime sporadic and sometimes involving the entire nation. Military rebellion and repression continued to resurface sporadically, particularly in the Cristero wars of 1927-29. The Cristeriada was the response to Calles’ effort to close the churches and prohibit the celebration of mass. Cold blooded murder as an acceptable instrument of political and economic strategy continued, with decreasing force, well into the reign of the PRI. While the political influence and participation of the mafia has not been absent from U.S. politics, mafia style enforcement has never reached the level of political acquiescence achieved, for example, by Gonzalo N. Santos, "cacique of San Luis Potosí, brilliant humorist and raconteur, smooth and effortless murderer" (Krauze, 1997, p. 454).

One of Santos’ many memorable sayings was "Morality is a tree which either feeds you blackberries or isn’t worth a f&emdash;." San Luis Potosí had been his private hunting preserve, where he imposed what he called his "law of the three ierros: "prison (encierro), exile (destierro), and burial (entierro)" He was said to have no need in his state for "administrators, only gravediggers." In 1958, in his old age, he still had much power and wealth, living at his ranch El Gargaleote&emdash;of 87,000 hectares&emdash;with his family and his bodyguards, among them the famous Mano Negra, who prided himself on never leaving "the dead for which he was responsible" fewer than five hundred meters away from the highway. (Krauze, 1997, p. 644)

Santos was a pillar of the PRI through the term of many presidents.

Furthermore, the ideological frameworks active during the Revolutionary period in Mexico spanned extremes ranging from the conservative Catholic sinarquistas to radical Marxism, with little sense that political compromise was desirable or even possible. It is little wonder that the architects of the political system eventually known as the Institutional Revolutionary Party (PRI) believed that political accommodation and progress needed to be imposed by a strong central authority.

These architects were primarily the three revolutionary generals who governed Mexico from 1920 to 1940, Álvaro Obregón, Plutarco Elías Calles, and Lázaro Cárdenas. Following the death of Carranza, Obregón succeeded to the presidency with broad popular support. His administration supported important cultural and educational initiatives, under the leadership of his Minister of Education, José Vasconcelos. He also achieved diplomatic recognition by the United States. Considerable tension surrounded the hot button issues of the Constitution of 1917&emdash;land reform, labor rights, and church-state relations. Obregón temporized by enforcing the letter, but not necessarily the spirit, of the Constitution. In 1924, he selected another Sonoran general, Plutarco Elías Calles, to succeed him. This precipitated a rebellion led by Obregón’s former Finance Minister and fellow Sonoran general, Adolfo de la Huerta, and Obregón himself led the army to suppress the rebels. (Obregón would take up arms one last time in a battle to suppress the Yaqui Indians of Sonora, a group who had fought valiantly in the Revolution based on promises of recognition of their traditional tribal rights, prior to initiating a new reelection campaign for himself in 1927.)

Plutarco Elías Calles was also a successful Revolutionary general, but he had more of the temperament of an educator (he had been a teacher, among many other occupations) and political strategist than Obregón. Unfortunately, his extreme anticlericalism, which partly derived from resentment at the stigma of his own illegitimacy, led to much of his term of office from 1925-28 being dominated by the Cristero rebellion. However, Calles’ true political genius became apparent in the period following Obregón’s assassination in July 1928 during his campaign for a second term of office. Calles was able to defuse the crisis by aligning a group of surviving generals behind the principle of civilian succession for the interim presidency and the launching of a political party that would permanently solve the difficult issue of succession. Emilio Portes Gil was selected as interim president. Calles did not consider reelection, but he did establish himself as the Jefe Maximo of Mexican politics in the role of driving force behind the new National Revolutionary Party (PNR).

Pascual Ortiz Rubio took office in 1930 following the elections of November 1929. If those elections had not been rigged by the PNR, they probably would have been won by José Vasconcelos, the leader of the educational and cultural renaissance under Obregón. Chafing under the domination of Calles, Ortiz resigned in 1932, and the final years of the presidential term that was now six years were filled by Abelardo Rodríguez, who was happy to leave "politics to the politicians" (quoted in Krauze, 1997, p. 431). But Krauze’s overall assessment of Calle’s innovation is positive:

But yet, in those years, the country had made advances toward an institutional life. The "nonreelection" of the President was now a permanent feature of Mexican politics. The Jefe Maximo gave orders, but not as a tyrant. He governed within a framework of broad ideological tolerance, through an institution&emdash;the PNR&emdash;that in fewer than four years had come to dominate the legislative, parliamentary, electoral, and in general the whole political life of the country. Clearly it was not democracy, but it was closer to it than all the previous Revolutionary regimes except for the Government of Madero. Thanks to the PNR, Mexico avoided the militarist destiny of almost all Latin America. Right up to its revamping in 1938, the PNR was a civilized conclave of generals who resolved their differences without drawing their revolvers. It softened and contained violence&emdash;until violence could fall out of fashion. (Krauze, 1997, p. 431)

Lázaro Cárdenas was the President of Mexico from 1934 to 1940. During that time, he consolidated the institution-building phase of the Revolution by supporting the claims of workers and peasants. During the early part of his term, he encouraged the activism and consolidation of the labor movement. The support of the labor movement was an important part of the power base that permitted him in 1939 to send Calles into an exile in southern California that would last into the term of Cárdenas’ successor, Manuel Ávila Camacho. In 1936, the Mexican Confederation of Workers (CTM) was founded, and it subsequently became the vehicle for the integration of the workers into the corporativist structure of the revolutionary party. Cárdenas style had been exceptionally open and approachable since he had been governor of Michoacán, where the Indians affectionately named him "Tata Lázaro (Father Lázaro)." Beginning in 1936, Cárdenas began the redistribution of hacienda lands in the La Laguna region of the state of Coahuila. Ultimately, he redistributed more than 18 million hectares, more than any other president. The principle form of peasant tenancy was the communal ejido. And in 1938, with the ascent of President Roosevelt, Cárdenas accomplished the enormously popular expropriation and nationalization of the oil industry. In the period between 1938 an 1940 Cárdenas reorganized the PNR into the corporativist instrument of power that it remained for more than half a century.

It was during this period that the labor movement was officially assigned a place within the ruling party. Cárdenas reorganized the PNR (renaming the PRM&emdash;Party of the Mexican Revolution) in line with the goals he had expressed when president of the party in 1930-31. What has been primarily a conclave of generals was transformed into a party of the masses: labor, peasants, bureaucrats, the military, all forcibly affiliated not as individuals but through their respective organizations. It was a process of integration, a movement toward the future in terms of rationalizing, controlling, and applying power, for the purpose of "uniting these disparate groups so that they do not act anarchically"; but it was also a strong call from the Mexican past, the voice of the integral State, of the corporativist model. In form it echoed Porfírio Díaz but perhaps more strongly the ancient theocratic-political unity of the Hapsburg colonial period. Thirty years after the beginning of the Revolution a new political father was returning to an ancient, persistent form of government: power as an ordered, architectural structure. (Krauze, 1997, p. 472)

The structures created to support the ejidos turned out not to be up to the task. Since the land was owned by the government on behalf of the ejiditarios, this ultimately became another corporativist pillar of the revolutionary party. However, Cárdenas' open style, his obvious love for the Indians, the symbolic importance of his redistribution of land, and his nationalization of oil gave him a stature and popularity that extended well beyond his death in 1970. It has contributed to his son Cuauhtémoc’s success in breaking away from the PRI and forming the Party of the Democratic Revolution (PRD).

During the period between 1940 and 1958, the consolidation of the party by Cárdenas was translated into the dominance of the economy along a trajectory of centralization, industrialisation, and urbanization that was established by the presidency of Miguel Alemán (1946-1952). (The party was given its current name of the Institutional Revolutionary Party, PRI, in time for Alemán’s campaign in 1946.) Alemán established a pattern of economic growth that was overwhelmingly business oriented. It was based on investment in rapid, protected industrialization and on the urban development of Mexico City, where industrial activity was concentrated. It included highways, urban housing, and public works. Perhaps the most spectacular of the latter is the Ciudad Universitaria, which was constructed in a zone of volcanic rock in the southern part of the city to house the National University (UNAM), which traces it roots back to the 16th century. Alemán’s program also included enriching his friends and key party members through a generous program of favoritism and graft in the administration of government contracts and franchises. Although Alemán was responsible for public investment, including dams, that increased the productivity of agriculture, he also set the pattern of exploiting agricultural productivity in the service of centralized industrial urban development.

Aleman and his successors have been criticised for establishing a centralizing and urbanizing pattern of development that left the vast majority of peasants living on the edge of subsistence and created a vast expanse of urban slums characterized by unemployment and poverty. It has also led to the serious environmental degradation that has only in recent years been internationally recognized as a major unintended consequence of industrialization. However, the economic growth of this period was real. And although the peasants and workers were largely dominated by their respective authoritarian organizations that gave them a place in the corporativist structure of the PRI, the formula of "bread or the bludgeon" did give many of them a marginal share in the growing economy.

The presidential selections by Cárdenas and his immediate followers seem to have been guided by a certain intuitive wisdom. Cárdenas’ policies had strengthened labor and the peasants. He chose as his successor Manuel Ávila Camacho, an experienced and careful politician who further consolidated the organizational structure of the revolutionary party and led Mexico through a period of studied cooperation with the United States during World War II. Camacho "fingered" (the Mexican term for the designation of a presidential successor is the dedazo, or "big finger"). Alemán, who led the postwar development boom described above. With somewhat less insight into what he was doing, Alemán chose the scrupulously honest Adolfo Ruiz Cortinez as his successor. Ruiz Cortines did much to clean up the corruption and favortism of his predecessor. Although he implicitly and explcitly criticized Alemán, he never pursued formal legal action aganst him, thus setting a precedent for the immunity of former presidents. Ruiz Cortines was a consolidator of the party and of the trajectory of industrial urbanization set by Alemán.

Ruiz Cortines was also scrupulous in his respect for the symbolism of his office. In 1920 he had been responsible for returning the "Olive Train" in which Carranza was attempting to transport the National Treasury to Veracruz back to Mexico City. Ruiz Cortines used the same train for all of his presidential travels. He was also a realist with a dry sense of humor, as seen in his observation that "You have to swallow a lot of toads in this business of politics" (quoted in Krauze, 1997, p. 607).

Ruiz Cortines’ successor also appeared to have qualities that complemented the style and substance of his predecessor. Adolfo López Mateos was a gifted orator, and he used his gifts to spread the word about Mexico's achievement of "order, peace, and progress" (Krauze, 1997, p. 658) at home and abroad. His interest in education and culture led to several important initiatives, including the National Commission for Free Textbooks and the National Museum of Anthropology. He also orchestrated an effective foreign policy that included recognizing the sovereignty of Fidel Castro´s Cuba while repudiating Communism, and securing the return of a symbolic piece of real estate, El Chamizal, on the Texas-Mexican border.

But López Mateos also pursued the "bread or the bludgeon" policy with regard to peasants and labor. His vigorous use of the "bludgeon" included sanctioning the death of the peasant leader and follower of Zapata, Rubén Jaramillo, and the imprisonment of several labor leaders along with the outspoken muralist, David Alfaro Siqueiros. His hardline policy toward labor was largely orchestrated by his Minister of the Interior, Gustavo Díaz Ordaz. Díaz was also responsible for orchestrating the Mexican response to the Cuban Missile Crisis, since López Mateos and his Foreign Minister were travelling at the time. Partly by temperament and partly because&emdash;unknown to the public&emdash;he was in poor health, López Mateos came increasingly to rely on Díaz Ordaz, who was a master of detail but also a fanatic for order, to run his government. According to Krauze (1957, p. 674) it was at the time of Díaz Ordaz’ handling of the Cuban Missle Crisis that López Mateos decided to "finger" him for the presidential term to begin in 1964.

According to Krauze’s fascinating narrative, the selection of Díaz Ordaz was the beginning of the unravelling of the political system of the PRI. Díaz Ordaz was the first of s series of presidents whose personalities can only be understood in terms of psychopathology. (Of the remaining presidents of the PRI, only Miguel de la Madrid, who restored some semblance of fiscal sanity after the López Portillo debacle, and Ernesto Zedillo, who definitively established the mechanism for a clean presidential election, were reasonably well grounded in reality.) Many observers date the Tlatelolco massacre of students at the Plaza of the Three Cultures in October 1968, toward the end of Díaz' sexenio, as the defining moment in contemporary Mexico’s quest for democracy and release from the domination of the PRI.

Díaz Ordaz obsession with order and his sensitivity to contradiction and criticism began with the economic instability of his childhood and his mother’s casual characterization of her scrawny child with protruding teeth as "ugly." In compensation, Gustavo became a dedicated student and a master of detail. His personality and education made him the ideal bureaucrat in a system dedicated to the maintenance of both order and power at any cost.

[H]e believed, religiously, that the system could not yield a particle of power without losing its very existence, its being. Absolute concentration of power is in itself a tragedy, and a constant peril. But in the case of Díaz Ordaz, the tlatoani was not Hadrian but Commodus or Nero. He was a man who saw enemies or detractors everywhere, and when he did not see them he invented them. The immense jigsaw puzzle of the country [jigsaw puzzles were his hobby] had to be thoroughly solved. There could be no leftover pieces, nothing incomplete. (Krauze, 1997, p. 735)

Things went from bad to worse under Díaz Ordaz' successor, Luis Echeverría. Echeverría was widely believed to have been directly responsible for giving the order for the Tlatelolco massacre. Possibly in order to expiate his sense (or reputation) of guilt, Echeverría attempted to become the most leftist president in modern history, reaching out to incorporate the ideas and professional skills of the intellectuals and university graduates. However, he repeated the tactic of violence against student protest in the massacre of Corpus Christi on Thursday, June 10, 1971. But the problems of his administration seem to have deeper psychological roots than a simple expiation of guilt.

By the end of 1973, [Daniel] Cosió [Villegas&emdash;a distinguished historian] had diagnosed Echeverría as an incurable case of loquacity, monomania, and genuine mental disturbance. (Interestingly enough, another old man&emdash;with no moral authority or intellectual weight but a practical sense of character&emdash;agreed with Cosió Villegas. The aging gunman Gonzalo N. Santos, who knew Echeverría well, confided to his son that he had always thought the man&emdash;though skilled at hiding it&emdash;was loco.) (Krauze, 1997, p. 747)

And the biggest problem of all was his fundamental ignorance of economics. Breaking the tradition of leaving the Ministry of Finance and the Bank of Mexico to the experts, Echeverría took personal charge of the management of the economy. He abandoned the "Stabilizing Development" (El Desarrollo Estabilizador) of Antonio Ortiz Mena, who had been Finance Minster under both López Mateos and Díaz Ordaz, and he began a program of extravagant deficit spending that led to an unprecedented national debt and the first devaluation of the peso since the term of Ruiz Cortines. This began a downward economic spiral that by the early eighties led to a cessation of real economic growth that lasted for two decades.

Echeverría’s successor, José López Portillo, began his term in a level headed fashion and was widely praised for beginning to restore some order to the chaos left by Echeverría. However, two years into his term, the vast extent of Mexico’s newly discovered oil reserves began to be known, and caution went out the window.

The oil deposits (first discovered in 1972) were now showing signs of being far richer than had been expected. Surely the economic problems of the country would prove manageable.

But as López Portillo’s eyes grew wider at the prospect of a black ocean of oil, a new trait (shared like others with the long-ago López [de Santa Anna&emdash;López Portillo was also of colonial criollo ancestry]) began to surface in him. If Santa Anna had thought of himself as "the Napoleon of the West," his successor began to feel that he actually could fill the role of Quetzalcóatl and lead Mexico to the "administration of abundance" down a road of black gold. (Krauze, 1997, p. 757)

The orgy of spending led to a lot of good feeling among the middle class, who were able to buy inexpensive American goods and enjoy foreign travel. But the net result was the squandering of a vast quantity of national wealth with little to show for it in the way of real investment. When the price of oil fell, the game was over. Upon leaving office, López Portillo was greeted in public restaurants by barking citizens commenting on his boast that he would "defend the peso like a dog."

Subsequently, the fiscal policy of the government has been under the sway of neo-liberal economic theory&emdash;the neo-classical economics that has been the conventional wisdom in the United States since President Ronald Reagan. In recent times, the sons of the elite have been sent to study economics and public administration at the better U.S. universities. De la Madrid had experience in banking and government finance and his government made use of U.S. educated technocrats. He was able to restore some level of economic stability, but his administration was characterized by a general lack of political imagination.

His successor, Harvard educated Carlos Salinas de Gortari, suffered from an excess of imagination. He continued to pursue the neo-liberal agenda, with an emphasis on privatization and, in the last years of his term, the North American Free Trade Agreement (NAFTA). Unfortunately, Salinas' version of privatization primarily took the form of a giveaway of state enterprises to his family, friends, and associates. This giveaway had the effect of dissipating the resources for patronage that had been a major source of the political power of the PRI while having only modest results in terms of effective real investment. In addition, the Salinas family appears to have carried not only corruption but political violence to levels reminiscent of earlier days. When asked about his opinion of the Salinas family, the soon-to-be assassinated presidential candidate Luis Donaldo Colosio replied "Have you seen The Godfather?" (quoted in Krauze, 1997, p. 792). The last year of Salinas’ term began with the Zapatista uprising in Chiapas and included the assassinations of Colosio and Francisco Ruiz Massieu, secretary general of the PRI. Although it included the passage of NAFTA, this treaty has not had the expected dramatic effects. The final indignity of the Salinas regime came shortly after the installation of his successor, Ernesto Zedillo Ponce de León, who was immediately forced to devalue the peso. Salinas de Gortari left the country in disgrace.

Zedillo’s term was largely devoted to stabilizing the economy&emdash;the peso has finally gained some strength against the dollar&emdash;and establishing an institutional framework for clean presidential elections, including an independent Federal Election Institute (IFE). This gave the voters an opportunity to vote for change, and they did. On July 2, 2000, the voters chose Vicente Fox Quezada of the National Action Party (PAN) as the next President of Mexico.

 

The Neo-Liberal Politics of Globalization & the Turn Toward Democracy

To a considerable extent, Mexican politics has become the politics of globalization, particularly in relation to the NAFTA zone. José Luis Calva of the National University (investigator in the Institute of Economic Research and professor in the Division of Postgraduate Studies of the Economics Faculty, UNAM) has been tracking the Mexican economy for more than twenty years. He divides the thirty years of disastrous economic management by presidents of the PRI into two phases, the "populist" and the "neoliberal." The first encompasses the administrations of Echeverría and López Portillo, the second began with Miguel de la Madrid. In his book México más allá del neoliberalismo (2001) Calva, with an abundance of statistical data, pronounces the neoliberal experiment of reliance on the free market and reduced government involvement in the economy an empirically documented dismal failure. For example, the accumulated growth of the GNP per capita over the period 1983-1999 was 0.32% in Mexico, while it was 180.9% in the more pragmatically managed economy of South Korea. Furthermore, in spite of the vaunted sophistication of the neoliberal model and the technocrats administering it, the country was subjected to a series of major financial shocks, the most traumatic being the devaluation of 1994. Twenty years of empirical evidence of failure to deliver on promises of economic stability, growth, and trickle-down prosperity is sufficient to suggest that there is something wrong with the theory.

In addition to reduced government spending and reliance on the free market, neoliberal orthodoxy has also promoted a single-minded focus on global competition and export-driven economic development. However, Calva (2001, p. 201) points out that only 6% of the Mexican economy is in export. Jorge Castañeda (1995) takes a somewhat broader view of the economic interdependence of Mexico and its largest trading partner, the United States, which receives the overwhelming majority of Mexico’s exports of agricultural products, manufactured goods, and cheap labor. Castañeda estimates that between 20 and 25% of the Mexican population owes its livelihood to the United States, and this group crosses class, regional, and even ideological lines:

The fracture is not regional, class based, or ideological. Despite a great deal of recent commentary about the North-South divide beginning to sunder Mexico, the cleavage referred to here is much more complex and broadly based. The fate and well-being of vast regions of the Mexican south and east are as directly connected to the United States as Tijuana and Monterrey. It is not a rich-poor cleft; there are myriad Mexican magnates whose wealth and power are totally devoid of any American connection, and there are millions of destitute Mexicans whose meager livelihood depends almost entirely on their association with "el otro lado." Finally, it is not a left-right fissure. Aside from the fact that the crack is emerging regardless of opinions in its favor or against it, many on the left see bonds with the United States as powerful levers to transform the country, while many free-market right wingers in Mexico see American influence in the country as a deadly menace to the nation’s mores and morality. (1995, p. 260)

Either figure emphasizes the fact that it is only a minority of Mexicans who are involved in the global economy. The 6% that is involved in export manufacture is dominated by large scale enterprises whose owners at least are doing very well. However, workers, even in those involved in the interdependent areas of the economy, are not necessarily experiencing much progress. The economy of the country remains polarized into extremes of wealth and poverty. Carlos Fuentes (1966) estimates that 4% of the population owns half of the nation’s wealth, while Guillermo Cantú (2001) estimates that more than 40% of the population is living in poverty. Thus it seems obvious that the economic problems of Mexico cannot be resolved without a clearsighted and sophisticated focus on the country’s domestic economy.

Calva argues that a large part of the recent failure in the management of the Mexican economy flows from a failure to develop specific economic objectives, along with pragmatic strategies designed to achieve these objectives. The development of such objectives and strategies requires an analysis of the complexities of a national economy that are beyond the competence of neoliberal orthodoxy. Calva provides such an analysis and comes up with specific recommendations (2001, pp. 279-287) that can be summarized in two major areas: 1) Macroeconomic management of foreign exchange and balance of trade in order to maintain the competitiveness of Mexico productive capacity and to avoid or cushion disruptive economic shocks, and 2) Increase government participation in the domestic economy in ways that promote social well-being and ecological sustainability. A major feature of this participation would include an industrial policy focusing on the development of industries with the greatest capacity to contribute to balanced and sustained economic growth. It would also include augmenting the government’s capacity to provide essential physical infrastructure in areas such as housing and transportation, and social infrastructure in areas such as education, public health, and social services. And it would promote sustainable agricultural self-sufficiency as well as patterns of growth that are sensitive to the specific needs of Mexico’s very distinctive geographical regions. Perhaps the most controversial of his proposals, in the contemporary political climate, is his suggestion that federal revenue needs to be increased by 10% over the next ten years (1% per year) in order to achieve these goals. He acknowledges that much could be accomplished by increasing the effectiveness and efficiency of public service, including the professionalism and integrity of public servants. But he argues that these goals can only be achieved by increasing the government’s share of the GNP to a level closer to that of other successfully developing countries.

Two writers who have reflected deeply on Mexican history and who have concluded that such changes in Mexican economic policy cannot happen without the democratization of Mexican society are Carlos Fuentes and Jorge Castañeda, now Fox’ Minister of Foreign Affairs. They are both progressive liberals (in the political, not the economic sense). They have both supported the candidacy of Cuauhtémoc Cárdenas of the PRD, but they have also been critical of a certain rigidity and naiveté in his political thought. Both have spent considerable time living, studying, and teaching in the United States and are therefore intimately familiar with U.S. democracy and culture.

Fuentes (1996) and Castañeda (1995) are in broad agreement about the need to include Indians, peasants, and workers as active participants in the political process, in contrast to the traditional role of peasants and workers as political cannon fodder for the PRI. In line with his emphasis on the cultural strengths of Latin America in general, Fuentes has emphasized the cultural, as well as the political, dimension of democratic reform. He has pointed to the medieval Spanish cortes, municipal assemblies, and the indigenous traditions of communal landholding and decision-making as important cultural precedents for grass roots democracy. He criticizes the one-sided emphasis of the neo-liberal economics that dominates both the PRI and the PAN for looking almost exclusively to export driven growth based on successful competition in the global economy as the way to solve Mexico’s problem of poverty.

There is nothing intrinsically wrong in having a new entrepreneurial class that can compete internationally and work in an interdependent world economy. But modernization will be as crippled as our picturesque one-legged dictator Santa Anna, and will give up as much as he did, if it disregards the situation of thousands of small communities and small businesses that still form the backbone of Mexico. Mexico is not a poor country. It is an unjust country. There is much leeway for greater fiscal reform. The upper 4 per cent, who control almost half the nation’s wealth, can pay much more than they do now. A tax reform in Mexico would do wonders for the basic purposes of achieving greater savings, employment, production, and higher salaries.

Modern rural Mexico struggles to increase democracy as well as production. At times invisible, always fighting an uphill battle, at times repressed, at others depressed, Mexico’s rural classes have a history rooted in violence but also in traditions of self-government. Our town halls, whenever given a chance, have proved that Mexicans can rule themselves. The central state invariable intervenes to wipe out these democratic movements. But the Mexican village must now move beyond Zapata and proclaim loud and clear that there will be no good weather in the skies of Mexico if there is not first good weather in the soil of Mexico. (Fuentes, 1996, pp. 81-82)

As mentioned above, Castañeda points out that a fifth to a quarter of the Mexican economy is already integrated into the North American common market through remittances from workers in the United States, U.S. investment in Mexican industry (particularly the maquiladoras), and tourism. However, the remainder of the economy is too large and too unbalanced to follow this route in the foreseeable future. In his view, substantial internal restructuring can be neither reasonably fair nor reasonably efficient without the feedback provided by effective democracy.

Both Fuentes and Castañeda also agree that the revitalization of civic society and its incorporation into the political process is an essential element of democratization. Mexico has developed the useful concept of the "social sector" as a third sector to complement the public-private dichotomy that dominates U.S. political thought. In Mexico, the political economy is seen as divided between the government, the private initiative (big business), and the social sector (which includes small and micro businesses, as well as non-profits and social services). According to Fuentes,

Mexico, besieged by external debt, had to make concessions to creditors yet managed to maintain important zones for her sovereignty. Will she be able to maintain these, not by administering bankrupt enterprises but by finding a balance between the public, the private, and the social sectors? The obligations of the public sector&emdash;infrastructure, human resources, education, defense, foreign policy, monetary and fiscal policies&emdash;can be balanced with those of the private sector&emdash;investment, employment, productivity, commercialization&emdash;only by developing the social sector, the third, or intermediary, sector made up of nongovernmental organizations: feminist and youth movements, gays and grays, rural co-ops, unions, neighborhood associations, religious groups, and volunteers. (1996, p. 84)

Both Fuentes and Castañeda agree that the process of democratization requires the development of solutions grounded in Mexican culture to problems rooted in Mexican history. However, there are some themes that deserve a broader discussion throughout the NAFTA region, as they reflect issues of continental scope in the political effort to come to terms with the social consequences of economic integration.

While the extremes of wealth and poverty may be greater for Mexico than they are for Anglo-America, recent economic forces in the north have been pushing those economies in the direction of greater inequality also. In a perceptive essay on "Mexico and California," Castañeda (1995) argues that the demographics of the aging of the Anglo population combine with the increasing reliance on cheap and disenfranchised Mexican labor to lead to the "dedemocratization" of the state. The affluent elderly who vote are increasingly reluctant to support public spending for the needs of working class families and their children, families that are increasingly multiethnic and who do not or cannot vote. If the political economy of Anglo-America is moving in the direction of the historical Third World class structure of Mexico, there are clearly lessons to be learned from studying the experience of our NAFTA partner, even if we have a ways to go before achieving that degree of economic polarization.

Carlos Salinas de Gortari bet his presidency on NAFTA. NAFTA won, but Salinas lost anyway because neo-liberal economics serves only part of the population even when it is well managed. And it was badly managed by Salinas. Ernest Zedillo was able to restore a modicum of stability, with considerable help from Bill Clinton’s bailout. His economic policy continued to follow neo-liberal orthodoxy, and he has stabilized the peso. But his main success was in the political arena where he presided over the historic election of July 2000.

The man Mexico elected, Vicente Fox, is very much a part of the culture of globalization. He was president of Coca Cola in Mexico prior to becoming politically active. He became active in the liberal wing of the PAN, a party which has a long history of fighting for clean democratic elections and a conservative Catholic social agenda. More recently the PAN has initiated or supported many of the free market initiatives adopted by the PRI. After serving as the Governor of Guanajuato, Fox ran a media-oriented U.S. style campaign based on sophisticated image management. (Cantú, 2001) His platform was an ambitious one including eliminating corruption, supporting large and small business, giving more resources to states and municipalities, reconciling with the Zapatista rebels in Chiapas, and improving the lot of Mexican workers in the United States. Internal contradictions and the inertia of Mexican society make this an agenda that is bound to deliver disappointments, but it will be interesting to see what sorts of accomplishments this energetic president will be able to deliver in his six year term.

II. The Context of NAFTA

Culture in the Political Economy of NAFTA

The economic integration of North America was in full swing prior to NAFTA, but NAFTA has given some advantages to the corporations and individuals who control major assets on both sides of the border. It has also implicitly created a public forum for the political discussion of economic issues that effect the whole continent, including issues such as the environment and workers rights. We would do well to add cultural diversity to the agenda.

The future of NAFTA, and perhaps of a hemispheric common market, may depend on the ability of the societies involved to develop a more sophisticated understanding of the interrelationships between politics, economics, science and technology, and culture. The culture of globalization is driven by a Euro-American&emdash;with an emphasis on "American"&emdash;synthesis of free market capitalism, political democracy, and technological innovation, with a cultural agnosticism that is largely satisfied with the lowest common denominator of pop, consumerist culture. There is an implicit assumption that somehow these institutions form a coherent package, and that they are sufficient for civilized life. The driving force is capital accumulation, a force which exploits technology and natural resources and encourages a rather simple-minded version of democracy and human rights (multiple parties, free elections, freedom of the press and expression) as a way to soften its harsher edges. What is missing is an understanding of the infinite complexity of a society composed of living human beings. (This absence has been made most poignantly visible in the heavy handed effort to sell capitalism and democracy to Russia without an appreciation of the enormously complex social infrastructure the successful practice of capitalism and democracy requires.)

The creation of a civilized social infrastructure requires the orchestration of political, economic, and technical systems in a healthy relationship with the complex psychocultural dynamics of identity and human relationships. (Cf. Warmoth, 2001.) The dominant thrust of globalization assumes a hardwired cultural relationship between material progress, capitalist economics, and democratic politics. Each of these institutional forms owes something to the peculiar genius of Anglo-American culture. However, the leadership of both U.S. politics and many developing societies make two unwarranted assumptions. The first is that these elements constitute an indivisible package. The second is that they imply the inevitable hegemony of mass Anglo-American consumerist culture.

The integration of Mexico into the NAFTA common market poses, in an accentuated form, the issues of the relationship between politics, economics, and culture that Canada has been struggling with for generations in its effort to come to terms with Quebec. U.S. and Canadian democracy have been uniquely successful in creating political institutions, laws, and economic institutions that are effective in promoting scientific and technical creativity and the creation and accumulation of wealth. The political agnosticism of the founding fathers established principles of freedom of expression and freedom of religion that have allowed groups with varying cultural histories, worldviews, and identities to play important roles in the political process and to claim a share of developing prosperity. However, this has come at the cost of a deeply rooted sense of national cultural identity.

For the first two centuries of the republic, the virtues of White Anglo-Saxon Protestantism, which could accommodate both political liberalism and religious fundamentalism, provided a substitute civic religion to which immigrating groups could choose to assimilate. However, this cultural identity often lacked the capacity for self-reflection and what psychologists call "depth." In more recent years, this accommodation has been seriously threatened in the United States by two groups who refuse to assimilate, but who increasingly insist on a plate at the political-economic table. (The non-assimilation of francophone Canada has a deeper history.) African-Americans have been forced to reaffirm their traditional African cultural roots by the fact that American racism has refused them the opportunities for assimilation that have been open to other ethnic groups. Mexican-Americans&emdash;to the extent that they reject assimilation&emdash;are intuitively holding on to a dimension of cultural and historical depth of collective identity that is lacking in the larger U.S. society. And unlike the Irish or Italians, who would have had to cross the Atlantic to recharge their cultural batteries, Mexico is right next door.

The ensuing social conflicts have been referred to as the "culture wars," and the conservative impulse has been to advocate the imposition of cultural homogeneity in proposals ranging from a reaffirmation of the classical canon of Western Civilization in the university to the insistence that the United States is, after all, "a Christian nation." However, a more rational response would be to recognize that in a globally integrating economy, cultural diversity, like biological diversity, is a priceless asset. Mexican and French Canadian cultures have a history of relationships with powerful European and Anglo-American societies that has forced them to develop a deep, self-reflective awareness of the nature and value of culture among their intellectual leaders. African-American and Native American cultures, which have historically clung to their values and beliefs out of a sense of self-preservation, are also developing culturally self-reflective intellectual leadership.

The outcome of these intellectual developments has been a growing awareness that culture is more than arts and entertainment, as it has been traditionally characterized in anglophone America. The arts are important, but so are spiritual values, institutions and practices, along with the customs and usages of daily living. All of these provide an indispensable context for meaningful human relationships and a sense of personal identity.

If culture is a priceless asset, much like clean air and water and a healthy biosphere, it must nevertheless, in the context of the globalizing hegemony of economic ideas and institutions, be assigned a price. Assigning this value becomes an international political decision that will hopefully be made in a climate of democratic decision-making. However, for such a democratic decision to be an informed decision will require a more sophisticated understanding, as suggested above, of the relationship between politics, economics, science and technology, and culture.

NAFTA, therefore, will require an effective multi-cultural politics. The resistance to multiculturalism is often rooted in a deep seated sense of threat to one’s personal identity. However, a genuinely multicultural politics would not require anyone to sacrifice their ethnic identity or worldview anymore than Anglo-American democracy in principle requires anyone to sacrifice their individual identity. All that is required is a willingness to learn from other cultural groups.

The NAFTA common market provides an excellent laboratory for cross-cultural dialogue and discourse. Many of the United States&emdash;particularly states such as California, New York, Texas, and Florida&emdash;are critical laboratories for multicultural politics at the micro level. The evolution of multicultural politics in Anglo-America could be enhanced by an understanding of Paul Ray’s (1996) analysis of the dominant WASP culture as divided into three distinctive subcultures, which he calls the "heartlanders," the "modernists," and the "cultural creatives." The first group, the heartlanders, has the deepest historical roots in traditional Christianity, both Catholic and Protestant. Although these roots can be traced back to the Middle Ages and the Renaissance, they owe their contemporary form largely to an idealized vision of 19th and early 20th century America that still holds way in much of rural America, particularly the interior "heartland."

The second group, the modernists, are the heirs of the Enlightenment and the Industrial Revolution. They are comfortable with modern urban society and with the science and technology that drive the modern economy. And they are more or less consciously heirs to a modernist faith in the inevitability of progress and the ability of technical imagination, capitalist economics, and conventional democratic politics to solve all problems.

The last group, the cultural creatives, are thoughtful, well educated, generally politically liberal individuals who are searching for spiritual values that are more subtle than those embraced by the heartlanders and deeper than those which satisfy the modernists. And, as their label implies, they are more likely to experiment with innovative cultural forms and lifestyles. Ray traces the roots of their spirituality to the esoteric spiritual philosophers of the renaissance and 19th century American transcendentalism, but its most immediate grounding is in the human potential movement of the late 20th century, including humanistic and transpersonal psychology. A majority (60%) are women, and both men and women embrace feminist politics and spirituality. And almost half of this group embrace nature mysticism and green politics.

Although it seems unlikely that these categories actually capture 100% of the U.S. population, Ray's proportions (heartlanders 29%, modernists 47%, cultural creatives 24%) are plausible. Ray sees these three groups as representing a historical progression of cultural forms. However, the multicultural perspective advocated here would acknowledge that each of these groups has values, insights, and resources to contribute to political dialogue. It would also recognize the potential contribution of Native American, African-American, Latino, Asian, and other ethnic groups.

Vicente Fox’ recent initiatives to position himself as the president of all Mexicans, foreign and domestic, may be a harbinger of a postmodern world in which global communications permit not only planetary economic and ecological politics but also a transnational cultural politics. The British, during the heyday of British colonialism, were accustomed to take their culture with them wherever they went, and they became very upset when their agents colonial agents such as Lawrence of Arabia "went native." The United States’ economic colonialism has led to a similar expectation by its citizens that they will be able to feel at home anywhere in the world, and if necessary, have their personal rights defended by their government. However, Fox’ active support of the political and economic rights of immigrant Mexican workers in the U.S., which was anticipated by the previous administrations legalization of dual citizenship, is an interesting new twist by the leader of a developing&emdash;some would say colonized&emdash;country. Mexico has no aspirations for territorial or economic hegemony in the U.S., and Fox’ initiative appears to reflect a neoliberal commitment to an open labor market as well as to free trade. However, the initiative has the potential side effect of facilitating and encouraging a continuing commitment to Mexican cultural traditions.

In addition to the cultural dramas being enacted at the micro level, Canada, Mexico, and the United States each have collective stores of knowledge to contribute at the macro level. The U.S. has a history of creative economic and social institution building, and it has enormous social capital invested in scientific research and education. Mexico and French Canada have deep historical perspectives on the nature and value of cultural integrity, and all of Canada has a history of wrestling with multiculturalism at the level of national policy. Mexico also offers a radically different labor market, which includes highly skilled technicians and craftsmen, as well as a large pool of willing manual labor. (The structure and dynamics of this labor market deserve to be studied more systematically and in greater depth before succumbing to the assumption that it should eventually evolve into a carbon copy of the Anglo-American labor market.) And Canada has as a sophisticated understanding of the politics of the common welfare or public good. (The common good in Mexico is often dealt with by cultural forms, rather than by the political and legal approach of Anglo-America. Thus the welfare system is largely in the hands of the extended family, and commercial and bureaucratic transactions often require extended periods of interpersonal interaction.)

 

Economic Democracy

If NAFTA needs a multicultural politics, it also needs a democratic economics. Behind all of Mexico's struggles for political democracy, it is economic democracy that the average Mexican really wants. Furthermore, economic democracy is what the United States needs more of, and Canada needs to be aware of how much more economic democracy it has than either the U.S. or Mexico. The primary benefit of modern society has been the progress in our material standard of living based on scientific investigation, the technological results of which have been applied on a broad scale by the organizational creativity of capitalist institutions. In the simplistic and currently fashionable interpretation of the school of economics called in the U.S "neo-classical," and in Latin America "neo-liberal," the required institutional framework consists of free markets and entrepreneurial investors. However, this view of the economic universe overlooks several important facts. One is the tremendous importance of the public economy, which supports the market economy by providing basic research, education, public infrastructure for transportation and commerce, and a legal framework that defines, enables, and provides ethical constraints on, the market economy. Another inconvenient fact is the growing body of scientific knowledge about the negative ecological side effects (externalities) of the energy-intensive modern industrial economy. A third is the importance of a social infrastructure of healthy human relationship to the sustained productivity of any enterprise or society. The latter is the indispensable ingredient that can only be provided by cultural coherence (as recently recognize to a limited extent in the concept of "organizational culture").

The politics of globalization necessarily implies a complementary politics of regionalization. Industrial manufacturing, trade, and finance have been tending toward global integration since the reign of Queen Victoria. The process has been hyperaccelerated by electronic communication and information processing technology. However, there are many other sectors of a healthy economy that must be managed locally. Although they may make use of globally traded products, including high tech products, they rely primarily on mobilizing local human and natural resources. These essential sectors include education, health care, public safety, social services, housing, local agriculture, and the management of land and other natural resources. (Lietaer & Warmoth, 1999).

Furthermore, cultural coherence is both essential for human wealth and well-being and, in a globalizing economy, it is necessarily essentially diverse. If this is true, the experimentation with culturally diverse versions of democracy, as advocated by the Carlos Fuentes (in A New Time for Mexico, 1966) is essential. Economic rights, such as those advocated in the U.N. Declaration on Human Rights, should be politically recognized. And the concept of freedom of religion should be expanded to include the freedom of cultural identity and its collective expression.

A more democratic and culturally diverse version of capitalism is also essential. If the purpose of political economics is the satisfaction of human needs and the enhancement of human wealth and well-being, Abraham Maslow’s (1954) theory of the hierarchy of human needs may serve as a guide to which needs should be addressed by the guarantees of economic rights, and which can better be met by the guarantee of the freedom of (cultural) association. The lower level of Maslow’s hierarchy includes basic needs for physical survival and personal safety. These should be seen as basic, universal human rights (as proposed in the U.N. Declaration). They should be the goal and the guarantee of all political and economic systems.

But the higher needs, once survival is assured, are also absolutely essential for human fulfillment. These needs are defined by Maslow as the needs for belongingness, for esteem and self-esteem, and for self-actualization (which Maslow later defined to include justice, creativity, wisdom, spirituality and other higher aspirations). It should also be the responsibility of political and economic systems to promote the fulfillment of these higher needs, both by guaranteeing the right to basic economic survival for all citizens, and by creating political frameworks that balance the claims of freedom and responsibility while encouraging the individual and collective (or corporate) creativity of civil society to pursue the satisfaction of the higher needs through cultural, rather than political, social contracts.

The creation of a North American Common Market requires a period of creative economic institution building, only some of which can be accomplished by free enterprise. A self-aware and hopefully democratic political process is necessary to create an adequate institutional framework within which free markets can thrive. This creative institution building will require an understanding of economic systems that is more sophisticated than anything offered today by the conventional wisdom of either the left or the right.

Specific issues that the NAFTA region needs a theoretical economic framework to address, all of which are especially critical for the Mexican economy, include:

There is a large literature of proposals for refining capitalism in order to make it more inclusive while avoiding the pitfalls of state ownership and control that are found in radical socialism and communism. These alternatives propose that government create legal frameworks within which voluntary associations can exercise more economic power, and in which long term social and ecological values are given appropriate weight.

Although conventional economics begins with trade, the democratization of the economy requires that we begin with the question "What is money?". Trade&emdash;the consequences of the efficiencies of the division of labor&emdash;was the focus of Adam Smith’s The Wealth of Nations (1976/1776-78). His account of the virtues of the free market was at the heart of his theory, and it remains the starting point for conventional contemporary economic theory. In the trendy case of so-called "neo-classical" economics&emdash;called "neo-liberal" in Latin America&emdash;it also appear to be the ending point. However, the real starting point for economics should be an examination of the nature of money itself.

What is money? Bernard Lietaer’s ground-breaking study of The Future of Money (2001) answers this question in considerable depth. Considering the history of money from Sumerian times (3000 B.C.E.) to the present, Lietaer arrives at a simple definition:

Money is an agreement, within a community, to use something as a means of payment. (2001, p. 41)

It should be noted that the "something" needs to be countable, and that "means of payment" is one of the two major functions of money generally recognized by economists: Money serves as a medium of exchange. (The second conventionally recognized function, money as a store of value, will be discussed below.) This definition describes the function of money at all times and places. It also highlights the fact that its value comes not from the fact that it is a thing, but rather the fact that it is an agreement to use some thing as a measure of value. This is true even in the case of gold or other precious metals, which seem to lend themselves to serving as the basis for such agreements because of their unique thingish density and immutability. Thus the foundation of economics lies in the social psychology of agreements, not in the science or technology of the material world. The invention of money was the discovery of the usefulness of applying quantitative logic to the matrix of human ecology. Furthermore, this application of quantitative logic can take many specific forms. Although all modern national currencies follow the same general design, historically there have been many different monetary systems with very different design characteristics. These different designs have different predictable consequences (both empirically and logically) that need to be more widely understood.

All contemporary national currencies are bank debt-created fiat money (Lietaer, 2001, pp. 32ff). This means that they are created by creating new accounts based on bank debt, issued on the authority of the government (which is responsible for controlling the quantity in circulation, primarily with the twin objectives of providing adequate liquidity for a healthy, growing economy while avoiding an inflation-provoking oversupply). Although governments do print bills and mint coins, most of the money supply actually exists in the form of bank accounts and other financial securities. The primary way in which modern governments create money is to authorize banks to create new accounts, based on interest bearing loans. Banks are required to maintain a certain quantity of capital reserves to partially cover their depositor’s accounts, but that amount only protects a part of the deposits, which is why it is called fractional reserve banking (and why federal deposit insurance became necessary).

The obvious problems with this system is the need to manage the money supply in order to avoid inflation, a task which is assigned in the United States to the Federal Reserve Bank. Too much money in circulation leads to inflated prices, with their obvious disruptive effects; too little means recession. However, there are additional less obvious effects inherent in the design of this system based on interest-bearing loans (Lietaer, 2001, pp. 50-52). 1) Because the money required to repay the interest on the bank loans is never created, conventional money is necessarily scarce (participants in the economy must compete for both profits and credit); the system promotes competition over cooperation. 2) Furthermore, the unfunded interest requirement promotes the concentration of wealth and the inevitability of a certain amount of bankruptcies. 3) Guaranteed compound interest also creates an impossible expectation or assumption of endless (infinite) economic growth. 4) Because interest has the effect of discounting future real economic returns, the system favors short term time horizons over the long term planning horizons required for environmental sustainability (pp. 242-248). 5) Because the system is primarily under the control of national governments, it encourages national consciousness and discourages taking a global perspective.

This system evolved primarily in pre-Victorian England. It evolved, rather than being systematically designed, but its characteristics seem ideally suited to promote capitalism and the industrial revolution. However, there is a serious question, as Lietaer suggests, as to whether the current system can adequately serve a post-industrial globalizing world. While virtually all contemporary money is designed according to one systems model, this is far from an inevitable state of affairs. There are a number of possible alternative, or complementary, forms of monetary system design, some of which are actually succeeding in the real world, that can solve these problems.

Money as a store of value. Lietaer’s analysis focuses on the problems associated with conventional money functioning as a medium of exchange. However, as mentioned above, economic theorists generally recognize two primary functions of money: 1) Money serves as a medium of exchange, and 2) Money serves as a store of value. All modern monetary, banking, and financial services systems and institutions are designed to serve both functions. This has many advantage, but also some significant disadvantages.

Adam Smith understood that if money is being used only as a medium of exchange, a price auction market will clear itself based on the balance of supply and demand. In the process, it will send signals to producers about the desirability of adjusting the mix of goods and services being produced by increasing the production of some and decreasing the production of others. Under the conditions of free and open exchange among individuals, where market information is readily available, the market is a very efficient mechanism.

However, when we introduce the use of money (and financial instruments) as a store of value, additional complications come into play. The process of saving and investing is the heart of capitalism. The fundamental logic of capitalism argues for the efficiency of private property as encouraging stewardship and for the social utility of creative, entrepreneurial investment. This logic is not inherently undemocratic. However, there are design flaws in the contemporary mechanisms for implementing the capitalist ideal that render it undemocratic and vulnerable to the cycle of boom and bust. These flaws include the basic weaknesses in the design of our specific interest-based monetary system outlined above. But they also include problems in the financial mechanisms and institutions that implement the savings-investment process.

The social psychological character of money dictates that money is nothing if not logical. The French economist Jean-Baptiste Say (1767-1832) recognized the logic inherent in the fact that every expenditure by one individual is another’s income. This is more than an empirical observation; it is a logical tautology. It necessarily follows from the conceptual design of a "medium of exchange." However, when the functions of savings and investment, along with government spending, are added to the equation, this convenient logic no longer holds. As John Maynard Keyes (1935) pointed out, if savings are simply squirreled away in a mattress instead of being translated into a process of active investment, the money supply dries up. Many of the systemic problems of modern economies can be accounted for by the slipping and sliding that goes on in the transfer of money from the first (exchange) to the second (savings) function. And the situation is further complicated by the ability of governments to manipulate their income and expenditures at the macroeconomic level (by printing money, engaging in deficit spending, etc.), since taxes and government spending must also be in balance if inflation and recession are to be avoided. (As Keynes understood, imbalances in the savings-investment mechanisms tend toward recession, while those in the public sector normally tend toward inflation.)

A healthy modern economy requires not only adequate liquidity, but also a balance between savings and investment and between taxation and government spending. The logic of complex modern economic systems requires that all three elements&emdash;production-consumption (supply and demand), savings-investment, and taxation-government spending&emdash;be in balance. In the real world, they often are not, and that leads to three predictable systemic economics problems:

1. The liquidity (currency) problem

2. The savings-investment (asset) problem

3. The "problem of the commons" (public goods)

Adequate solutions to the problems in each of these areas will require more than he application of simple minded economic nostrums. They require rethinking and reinventing deep structural aspects of our economic thought and institutions.

The liquidity (currency) problem. The problem of liquidity is the need to provide adequate liquidity for the smooth operation on markets without generating inflation or recession. Too much currency in circulation creates inflation, as excess currency leads the market to bid up prices. Too little creates recession, as a shortage of currency means that many potential transactions cannot be consummated.

The design of conventional currency makes the alteration of boom and bust (although not necessarily inflation) inevitable. The positive phase of the cycle occurs when economic optimism leads to the expansion of credit, and therefore of the money supply, as investors pursue opportunities which, in the nature of the system, cannot all be realized. Contraction occurs when optimism passes and the accumulated debt is called in, leading to a contraction of liquidity and the concentration of assets. Bill Clinton’s boom was the combined result of good policy&emdash;primarily getting interest rates down&emdash;and good fortune&emdash;primarily the fashionable enthusiasm for high technology investments, of which the dot.com industry concept was the most overblown. The ensuing downturn was eventually inevitable.

However, there are other factors besides the business cycle that can lead to regions or even entire countries finding themselves with acute or chronic shortages of liquidity. Acute liquidity shortages can be associated with the volatility of international currency speculation. Lietaer points out that currently 98% of foreign exchange transactions are speculative, and only 2% relate to real international trade. Recent casualties of this system were Mexico in 1995 and several Asian countries in 1988 (2001, p. 314-6). Chronic shortages can result from mismanagement of the economy, as occurred in Mexico under the last decades of the PRI administration, or simply from being geographically disadvantaged in the global competition for liquidity. The latter is the situation in the underdeveloped world and in various insulated areas of the U.S. economy such as Appalachia and the inner cities. Lietaer predicts that this situation will become more general as large corporations increase their ability to increase production and sales while contracting their work force:

The harsh reality is that the post-industrial economy does not need&emdash; and therefore cannot and will not provide&emdash;jobs for the six billion people on the planet today, not to speak of the eight billion forecast for 2019. Jobless growth for major corporations worldwide is not a forecast but an established trend. The extent to which the writing is on the wall can be comprehended from the statistic quoted by William Greider: the world’s 500 largest corporations have managed to increase their production and sales by 700% over the past 20 years, while at the same time reducing their total workforce. (2001, pp. 11-12)

Lietaer’s solution to the liquidity problem is to create new monetary systems. Since these systems would be designed supplement, not to replace, conventional currencies, Lietaer advocates for the general term "complementary currencies." This is not a new idea. Local currencies, or scrip, were important during the Great Depression of the thirties. Switzerland has enjoyed the benefits of the WIR system, which serves individuals and small businesses, since 1934. Over 2500 community currency systems are currently in operation world wide, particularly in Europe, but also in Japan, Australia, the United States and Canada. Lietaer (2001, Chs. 5 & 6) offers extensive examples of systems that are successful in both enabling work and building community, as well as a comparison of the deisgn features of various systems (p. 232). He also proposes a Global Reference Currency system (the "Terra," Ch. 8) which would promote sustainable long term development and free international trade from the risks associated with the current foreign exchange casino system. 

The savings-investment (asset) problem. The process of converting savings into investments is the source of several major problems that must be solved if capitalism is to become effectively democratic:

1) The problem of access to investment capital

2) The problem of the concentration of the ownership of assets

3) The problem of unproductive investment and excessive speculation ("paper entrepreneurialism," Reich, 1983 ).

The first two problems result from overlaying the banker’s assumption of guaranteed compound interests on top of the capitalist logic of private property and creative investment. The last is a function of the fact that the relative complexity of the system encourages clever individuals to devise clever ways to accumulate wealth&emdash;to exploit the system&emdash;at the expense of other individuals and of the common good.

1. The problem of access to investment capital. The basic concept of investment is simple: Instead of consuming all of today’s resources, use some of them to create tools that will lead to greater productivity&emdash;hence to greater wealth&emdash;in the future. However, in order to participate in the financial investment process one must have access to financial capital. Most players in the contemporary global economy do not have such access. To a certain extent, this is part of the general problem of liquidity. Lietaer’s analysis of the potential of complementary currencies suggests that they could contribute to the solution of this aspect of the problem. However, complementary currencies are usually designed to serve primarily as a medium of exchange and to be somewhat insulated from the potential ravages of speculative investment. Therefore, additional modifications are needed in the institutional arrangements that translate savings into investment.

Many of today’s instruments for converting savings into investment require that the risk be secured not only by the assets to be created but by already existing assets. Others require that the potential return greatly exceed the return on risk-free interest-bearing securities (such as federally insured bank deposits). Both of these requirements tend to exclude a potentially quite profitable arena of small scale investment.

One solution to this problem is the institution of micro-banking originated in 1974 by Muhammed Yunis in Bangladesh. Recognizing that small loans could make a huge difference in the productivity of poor workers, Yunis began making loans as small as $25. In the process he discovered that the poor are actually excellent credit risks, and his bank has become profitable enough to permit him to expand into other ventures. He obtained permission to form his own Grameen Bank, which today serves 2.4 million families. It has a 98% repayment rate, and half of its clients have been able to raise themselves out of poverty. It has contributed substantially to agricultural self-sufficiency, to improving the status of women (who are its principal customers), and to promoting the values of education and smaller families. ("Banking on People, " 2001) Less radical versions embodying similar principles, if on a less grass roots scale, include co-ops and government agricultural banks. All of these institutions are designed to realize the potential economic and social return on efficient small scale investment. The effective democratization of capitalism will require creating a much larger population of grass roots capitalists.

2. The problem of the concentration of the ownership of assets. In the eyes of San Francisco investment banker Louis Kelso, the concentration of ownership is the Achilles’ heel of capitalism. Excessive concentration of wealth can lead to social unrest and a pervading sense of social injustice. It can also lead to diminishing markets as a result of diminished purchasing power. This problem is compounded by automation, which has been hyperaccelerated by the information processing revolution. Conventional wisdom argues that jobs lost in one area will sooner or later be replaced by new ones in another. This worked during the era of Henry Ford capitalism, where Ford saw the wisdom of paying his workers enough to be able to buy his cars. It is also works when economic growth is on a scale that permits both the concentration of wealth and the employment of a growing labor force. However, in Kelso’s view, this assumption has limits. A capitalism designed to systematically replace workers with machines runs the risk of creating a situation in which fewer workers have the means to purchase the output of the productive plant. This problem is underscored by Lietaer’s observation, cited above, that the largest corporations are increasing productivity and sales while decreasing their work force.

Lietaer’s solution is complementary currencies that permit cycles of economic activity in a social sector operating outside of the market for manufactured (especially high tech) goods. Kelso’s solution is to promote worker ownership of the means of production, particularly through the device of the Employee Stock Option (ESOP), and idea that was heavily promoted by Louisiana Senator Russell Long. The ESOP and other recent experiments in the democratization of ownership are reviewed in Jeff Gates book The Ownership Solution (1988). An earlier work with useful and well-detailed ideas for both the individual and collective democratizing of ownership is Shann Turnbull’s Democratising the Wealth of Nations (1975).

3. The problem of unproductive investment and excessive speculation . The complexity of modern economies has encouraged the institutionalization of a variety of forms of unproductive speculation and manipulation that permit some&emdash; particularly those well educated in the intricacies of our financial institutions&emdash;to accumulate wealth at the expense of others less fortunate. The Manichean worldview of the radical left would simply label this "exploitation." However, the liberal economist Robert B. Reich (1983) has come up with the kinder, and perhaps even more accurate, label "paper entrepreneurialism." This does not mean that all speculation is unproductive. A certain amount of institutionalized and legitimized gambling in financial markets can contribute flexibility, liquidity, and risk management to the operation of the economic system. However, the contemporary situation appears to have the tail wagging the dog, for example Lietaer’s observation (cited above) that currently 98% of foreign exchange transactions are speculative, and only 2% relate to real international trade.

The management culture of paper entrepreneurialism involves innovation in "accounting, tax avoidance, financial management, mergers, acquisitions, and litigation" that "involve the manipulation of rules and numbers that in principle represent real assets and products but that in fact generate profits primarily by the cleverness with which they are employed" (Reich, 1983, pp. 140-141). Reich sees the development of these strategies as an extension of the culture of scientific management. that approach served the economy well during the era of high volume mass production, but Reich believes that it is obsolete in an era of global competition and flexible-system production. Writing in 1983, Reich’s concerns included some of the bureaucratic maneuvers characteristic of middle management’s attempts to hold onto the past, efforts which have been largely shaken out of the economy by the downsizing frenzy of the intervening decades. (Such unproductive bureaucracy is also to be found in governments, where it is harder to get rid of; this includes a good deal of the self-serving maneuvering of the declining decades of the PRI.) But it also includes a good deal of the high level wheeling and dealing of top management that is still very much in fashion. The core problem remains the fact that a large amount of current economic activity concentrates wealth rather than creating it. While the economies of the industrialized world are so enormous that we can afford quite a lot of this sort of self-indulgence, there are inherent limits in the wastefulness and instability of such a system, which among other things, is characterized by the acceleration and accentuation of the characteristics of national currencies mentioned above: excessive competition, the need for endless growth, foreshortened time horizons for economic planning, and the concentration of wealth.

At the present time, the primary beneficiaries of the technology that promotes the global integration of trade and finance are large global corporations. However, the long term implications of this technology for the economy may turn out to be very different from their short term impact. The primary function of money is managing comparative information about value, and the primary function of economies is the creation and distribution of real goods and services. Therefore, this information processing and communication technology has profound implications for the future design of economic systems. It has already made possible the rapid worldwide expansion of complementary currency systems. However, its long term potential for increasing the efficiency&emdash;the productivity&emdash;of our financial services institutions has barely begun to be explored. Lietaer quotes Citibank CEO John Reed’s view that "banking will become a bit of application software on an intelligent network" (p. 69). Perhaps that is also the fate of most of the accountants, brokers, and analysts that today make up an excessively labor intensive industry that is artificially inflated by the ideology of markets.

In his recent book,The Future of Success, Reich (2001) offers the interesting prediction that the increasing efficiency of markets, particularly labor markets, will put strong downward pressure on the value of marketable goods and services. This lowering of the price of marketables shifts many aspects of health, wealth, and family and community well-being into the collective arena discussed below as "the problem of the commons." It seems reasonable to predict that this downward pressure will also eventually apply to the value of financial goods and services.

The problem of "the commons." The third challenge for economic democracy involves a concept for which we do not even have a good label: the problem of our collective wealth and well-being. Economists speak of "public goods" (which includes public services), but we really need a concept that includes public assets and nongovernmental public productivity as well. Many aspects of our collective well-being are attended to by philanthropy (charity) and the nonprofit (nongovernmental or NGO) sector, and they involve our environmental (ecological) as well as our social welfare. As indicated above, Mexico has the useful concept of the "social sector" that embraces man of these concerns. Perhaps a useful inclusive term is "the commons," popularized by Garret Hardin’s ( ) useful discussion of our tendency to want to enjoy the maximum benefit of common resources while shifting the costs to others.

There are two basic problems involved in an adequate understanding of the economics of the commons. One is to develop an adequate conceptual grasp of the full scope of collective economic activity. The second is to design just methods for assessing and distributing their costs.

The scope of the commons can be defined as all activities and ecological processes that are essential or useful for human wealth and well-being that cannot be produced by and/or distributed to individuals (including legal individuals, i.e. corporations) operating in price auction markets. This includes government services such as public safety, education, transportation infrastructure, public health, and environmental protection. Some important areas, such as education and health care, have a market-oriented component. Individuals are willing to pay something for education, health care, and clean drinking water, but not necessarily for the quantities of those services that would optimize our collective well-being. Many public services are provided by nonprofit organizations funded by both government and philanthropy. Historically, philanthropic support has been the main source of support for the arts and other forms of collective cultural activity, including major private universities. The importance of funding adequate protection for the environment became a major issue in the last quarter of the 20th century as public recognition of the toxic side effects of the industrial revolution become unavoidable. Economists developed the useful concept of "externalities" to describe costs not included in the supply and demand pricing of the free market. The debate continues as to the most efficient method of including these costs in the cycle of economic activity: regulation vs. taxation/public subsidy vs. direct assessment of the actual costs. The one point that cannot be avoided is that all of these goods and services represent real contributions to human wealth and well-being, that is real productivity. The cliché that the private sector produces wealth and the public sector consumes it is simply not true!

Once we come to grips with the actual size of the commons&emdash;the magnitude of our collective economic activity&emdash;which is huge, we are faced with the problem of how to finance it. John Kenneth Galbraith in The Affluent Society (1958) pointed out that American society is awash in consumer goods and starved for public goods. The situation had changed little in the ensuing nearly half century. One of the first barriers to be overcome is the populist attitude expressed by the maxim that "that government governs best which governs least." That attitude was appropriate for the 18th century, where the principle precedent was aristocratic hierarchy, one of whose man functions was to appropriate surplus productivity to its own wastefully luxurious lifestyle, and where most of life’s necessities were produced in local communities. It continues to be reinforced by the popular perception that political power often corrupts in wasteful ways. However, the complexities of modern society make it impossible to avoid taking a good hard look at the economics of the commons.

One of the first steps is to ask the right policy questions. The basic question is not "How do we minimize the size of government," but rather "How do we find the right balance between public and private spending?" What is the right amount or proportion of collective economic activity? In other words, what allocation of society’s resources will optimize the fulfillment of the broad spectrum of human needs across the broad spectrum of the population. Societies make choices about this balance, and some societies&emdash;particularly in Northern Europe&emdash;make very different choices than the ones made in North America. Indeed, the choices made in Canada involve a much larger investment in the common welfare that do the choices made in either the United State or Mexico. It would serve the evolving political conversation of the NAFTA zone to study the consequences of these different choices in some detail.

A second important question is how to make the provision of public goods and services more efficient. There is no question that one of the major virtues of the free market is its economic efficiency. Part of the solution probably lies in providing adequate professional and ethical education for public servants. Another approach, advocated by David Osborne and Ted Gaebler in Reinventing Government (1992) is to promote competition in the provision of public services, while the legislative function is to determine the desirable quantity and quality of the services to be provided. The neo-liberal privatization movement appropriately understands the value of competition in increasing the efficiency and productivity of services, but it misses the fact that the allocation of resources to public purposes is necessarily a collective, that is a political, decision. A clear separation of the political function of resource allocation from the managerial function of the production of goods and services could lead to greater efficiency in the fulfillment of both functions.

A third major policy area is the appropriate balance between compulsory (taxation) and voluntary (charitable or philanthropic) spending in support of the commons. Philanthropy has the important advantages of allowing for the direct expression of priorities and encouraging a personal sense of responsibility for and participation in civic life. For the very wealthy, it provides the rewards associated with noblesse oblige, and perhaps to some extent counterbalances the regressive structure of taxes such as those on sales and social security. However, for reasons well understood by Garret Hardin, voluntary individual spending on our collective store of wealth and well-being will never be sufficient. What is needed is a comprehensive, sophisticated model of financing the commons that includes a mix of philanthropy, user fees, and progressive taxation on both income and assets. Such a model is beyond the scope of this essay, but its development should be an essential component of the political discourse of North America.

The creation of a common framework to support a common market need not (should not) imply centralized economic decision-making. What is needed is a conceptual and legal framework that permits decisions to be made at the regional and local level, since that is where the micromanagement of economic and ecological systems must be carried out. All that is required of the common market framework is that it establish norms for economic behavior and targets for ecologically and socially desirable outcomes that will encourage synergistic local decisions. Such a framework should support regional competition for efficient productivity. But it should discourage regional decisions such as tax or environmental give-aways that offer only temporary advantages and have destructive long term consequences.

Both the Fox and the Bush cabinets are composed largely of globally-oriented business persons (Castañeda being a notable exception). This stacks the odds against adequate recognition being given to the complementary regional economics that is the necessary foundation for democratic and inclusive economic development.

 

Conclusion

The integration of Mexico into the North American Free Trade Zone offers more than cheap, exploitable labor and lax environmental standards. It offers the possibility of a more intimate relationship among the diverse cultures of North America. This relationship is fraught with both challenges and opportunities for a more sophisticated hemispheric politics that can explore in creative ways the complex interrelationships between politics, economics, science and technology, and culture. If the results of this exploration are successful, they could lead to a political and economic framework in which the advantages of global economic integration do not destroy the environment and the cultural fabric of local communities, but rather enhance and sustain these values in a society that combines human fulfillment with a profound sense of ecological humility. Such a hemispheric order would be worthy of the 21st century.


Bibliography

Banking on People. (2001, April 24). The News Hour with Jim Lehrer (PBS).

Calva, José Luis. (2001). México más alla del neoliberalismo: Opciones dentro del cambio global (2nd ed.). Mexico City: Plaza & Janés.

Cantú, Guillermo H. (2001). Asalto a Palacio. Mexico City: Grijalbo.

Casteñada, Jorge. (1995). The Mexican Shock. New York: The New Press.

Fuentes, Carlos. (1992). The Buried Mirror. Boston: Houghton-Mifflin.

Fuentes, Carlos. (1996). A New Time for Mexico. New York: Farrar, Straus and Giroux.

Gates, Jeff. (1988). The Ownership Solution. Reading, MA: Addison-Wesley.

Hall, Edward T. (1977). Beyond Culture. Garden City, NY: Anchor Books (Doubleday).

Hardin, Garrett. (1968) The Tragedy of the Commons. Science, 162: 1243-48.

Keynes, John Maynard. (1935). The General Theory of Employment, Interest, and Money. New York: Harcourt, Brace & World.

Krauze, Enrique. (1997). Mexico: Biography of Power (tr. H. Heifetz). New York: HarperCollins.

Lietaer, Bernard A. (2001). The Future of Money. London: Century.

Lietaer, Bernard A. & Warmoth, Arthur. (1999). Designing Bioregional Economies in the Context of Globalization. In Joseph Kruth & Andrew Cohill, Eds. Pathways to Sustainability. Published online by the Tahoe Center for a Sustainable Future at http://ceres.ca.gov/tcsf/pathways.

Maslow, Abraham. H. (1954). Motivation and Personality. New York: Harper & Bros.

Ortega y Gasset, José. (1957). Man and People. New York: W. W. Norton.

Ray, Paul. (1996, Spring). The Rise of Integral Culture. Noetic Sciences Review, pp. 4-15.

Reich, Robert B. (1983). The Next American Frontier. New York: Times Books.

Reich, Robert B. (2001). The Future of Success. New York: Alfred A. Knopf.

Smith, Adam. (1976). The Wealth of Nations. Chicago: University of Chicago Press (originally published 1776-78).

Turnbull, Shann. (1975). Democratising the Wealth of Nations. Sydney: Company Directors Association of Australia.

Warmoth, Arthur. (2001). Culture, Somas, and Human Development. In press, Somatics Magazine-Journal.

Note

During my stay in Mexico, the bibliographic research for this essay was supplemented by following the daily newspaper El Siglo de Torreón and the weekly news magazines Proceso and Milenio. In addition, I conducted seven interviews of colleagues, family members, and friends. This sample was obviously limited geographically to the La Laguna region and to educated members of the middle class, in addition to being further limited by the scope of my personal network. However, within these limits, a wide range of professions and points of view was represented. Participation of the following individuals is gratefully acknowledged:

Pedro Cárdenas M. (Director of Academic Planning, Universidad Autónoma de la Laguna)

Dr. Manuel Cervantes Reyes (PAN Deputy for the State of Durango)

Jorge Émery González (cotton classifier with an import-export firm)

Tomás González Émery (accountant & bank branch manager)

Pedro H. Rivas (President, Universidad Autónoma de la Laguna)

José Luis Rocha Machaca (attorney, sociologist & retired university professor) & Esther Mijares de Rocha (attorney & notary public)

Jorge Torres Acuña (sociologist & businessman/ import-export broker)