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Mexico’s New President

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Enrique Pena Nietoby Jacob G. Hornberger

Mexico has a new president, 45-year-old Enrique Pena Nieto, who is a member of the PRI, the political party that once held the Mexican people in a monopolistic iron grip for some seven decades.

In 2000, with much hope and change, voters rejected the PRI candidate and elected Vicente Fox, a member of PAN, thereby busting Mexico’s one-party system. Naturally, the Mexican people figured that such a revolutionary political change would finally bring an end to the deep economic impoverishment that has characterized Mexico for centuries.

But it was not to be. The cast had changed, but the results were the same — continued poverty and, even worse, for the past six years a massive death toll of some 60,000 people resulting from Mexico’s military crackdown in the war on drugs.

So, Mexicans have now returned to the PRI by electing Pena.

Will anything change?

Nope, at least not until the Mexican people finally change their economic system. Until that happens, it won’t matter who is elected president. The results will be the same—continued poverty and massive corruption.

And the same goes for the drug war. As long as Mexico continues singing the tune of the U.S. government by keeping drugs illegal, the results will be continue to be the same — death, destruction, and corruption.

I grew up in Laredo, Texas, which is situated on the Mexican border. The city is actually adjacent to the Rio Grande, which is the border between the two nations. Across the river is Nuevo Laredo, Mexico. One way to look at the situation is to think in terms of one gigantic metropolitan area that is separated by a river. Don’t forget that the entire area (and Texas) was once part of Mexico.

When I was growing up in the 1950s, Laredo was ranked by the Census Department as the poorest city in the United States. But as poor as Laredo was, its poverty was nothing compared to that of Nuevo Laredo. Whenever we would cross the river into Nuevo Laredo for shopping or to eat, I was always shocked over how deep and widespread the poverty was on that side of the river.

Why? Why would one part of an enormous metropolitan area be so much poorer than the other part? Was it the Rio Grande that somehow created such a huge disparity in people’s standard of living?

The answer lies in Mexico’s economic system, which has long been based on a combination of socialism, regulation, interventionism, and fascism. The government has always played a dominant role in economic affairs. As part of its socialism, the government imposes a massive array of taxes on people, supposedly with the aim of helping the poor with the money. The entire system is riddled with requirements for permits and licenses as a condition of doing business within the country. Detailed economic rules and regulations enforced by an army of bureaucrats govern economic activity. Government-business partnerships abound.

All of this political interference with economic activity, of course, creates the opportunity for corruption. To get around the taxes, regulations, permits, and other obstacles to business activity, people pay bribes. It’s a rational and efficient way to avoid political interference with economic activity. Obviously, public officials have little incentive to change the system. Without the economic burdens they impose on businesses or the privileges they are able to dole out to businesses, the incentive to pay bribes disintegrates.

It doesn’t really matter who is elected to run the system because the system is fatally flawed. You could get the greatest saint or the best businessman to run the system, and it wouldn’t make any difference. When you’ve got a bad system, it doesn’t matter how many good people are working within the system. The bad system will always trump the good people working within it.

What is the solution to Mexico’s longtime economic woes? A change in Mexico’s economic system — a massive change, a revolutionary change.

To achieve a soaring standard of living for the Mexican people, the government must be prohibited from helping the poor or anyone else. All welfare programs need to be abolished, not reformed.

Enterprise must be freed from government control or regulation. That means no more permits, licenses, minimum-wage laws, price controls, or any other governmental interference with economic activity. People must be able to engage in enterprise free of government control or interference.

Abolish the departments and agencies that govern or regulate economic activity and lay off the personnel into the private sector.

Abolish the taxes that fund all this, especially taxes on income. Leave people free to accumulate unlimited amounts of wealth and decide for themselves what to do with it.

To alleviate poverty in Mexico, the key is to prohibit the Mexican government from waging war on poverty and to prohibit the government from controlling and regulating economic activity.

As part of such a revolutionary transformation, Mexico should also open its borders completely to the free movement of goods and services and people from anywhere in the world. Abolish the customs stations and border patrol offices and lay off all the personnel. Leave foreigners free to enter and leave the country, live and work there without political interference, and spend and invest their money there.

Reject a system of paper money and central banking in favor of one based on sound money. That means abolishing the central bank and letting money be determined by the free market. Or in the words of Nobel Prize winner F.A. Hayek, denationalize money.

As savings are accumulated among the Mexican people, those savings will result in growing amounts of capital, which businesses will invest in tools and equipment, which will make workers more productive, which will lead to higher real wages and soaring economic prosperity.

In other words, the government should simply leave people alone, so long as their activities are peaceful. Or as the French might put it, laissez faire, laissez passer. Let it be. Let it pass.

Why is Laredo, Texas, more prosperous than Nuevo Laredo, Mexico? Because even though the U.S. government has embraced the statist philosophy and the statist programs that characterize Mexico and the rest of the world, the United States hasn’t looted, plundered, and regulated to the same extent that Mexico has. But clearly the U.S. government is doing its best to catch up to Mexico in the areas of socialism, interventionism, regulation, and economic fascism.

Oh, in case it’s not obvious, in the case of the drug war, Mexico should simply legalize drugs, no matter how furious that makes the statists within the U.S. government.

Mexico could lead the world to economic liberty, peace and prosperity, and soaring standards of living for the Mexican people, but that requires a change in systems. Simply electing new faces to run the old system isn’t going to change a thing.

Jacob Hornberger is founder and president of the Future of Freedom Foundation.


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