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AMLO’s ‘moral economy’ a totally retrograde concept for the economies of the 21st century

The moral economy is a set of mechanisms that seeks to satisfy the basic needs of an entire community through mutual solidarity, based on social relations of reciprocity, a series of principles typical of traditional agricultural societies. A totally retrograde concept for the 21st century.

Much of the blame for Mexico’s lacklustre economic performance has fallen on the shoulders of President Andrés Manuel López Obrador. Business leaders, diplomats and investors say he has been hostile to some foreign companies and complain that his capricious decision-making and authoritarian tendencies are scaring off investment. AS we all know, López Obrador came to power in 2018 on a leftist, nationalist platform.

He dreams of restoring Mexico’s economy to the oil-powered, state-dominated days of the 1970s. His quixotic pledge of a “fourth transformation” of the country — a change he puts on a par with Mexico gaining independence from Spain — promises to eliminate corruption and speed up growth. He wants to create a “moral economy” that puts the poor first, but his regular naming and shaming of multinationals at daily news conferences does little to instil confidence in foreign businesses contemplating forays into Mexico.

Despite his heavy criticism of low growth under previous “neoliberal” governments, in the first three full years of his own administration, Mexico’s gross domestic product contracted overall. It is the only major Latin American economy whose output will still be below pre-pandemic levels by the end of this year, according to estimates from JPMorgan. Mexico’s poor performance is “a direct consequence of . . . Amlo-nomics, which is extremely tight macroeconomic policy coupled with very bad microeconomics,” says Citi’s Revilla, using the acronym that has become the president’s nickname.

“The result is not surprising: it’s very low growth.” Andrés Rozental, a former deputy foreign minister who now works as a consultant, agrees. “We had everything to gain from the global geopolitical situation,” he says. “But it’s all been squandered because of López Obrador’s anti-private sector policies.” The president’s obsession with “republican austerity” — he flies economy class and took a large personal pay cut — has meant salary reductions for top officials. This in turn has led to a brain drain, budget cuts at government agencies and sharply reduced spending on infrastructure.

Mexico has the lowest public investment among OECD countries, spending just 1.3 per cent of GDP in 2019, the first year of López Obrador’s government. Much of what remains is channelled into a handful of grandiose projects championed by the president. The most prominent is a new oil refinery in his home state of Tabasco, whose cost has spiralled to between $16bn and $18bn, according to Bloomberg. López Obrador has repeatedly attacked Mexico’s autonomous regulatory agencies, criticising their decisions, cutting budgets and suggesting that they collude corruptly with business.

“Mexico has a big comparative advantage in farming but there are problems in [agricultural health agency] Senasica,” says Luis de la Calle, an economist who runs a consulting firm in Mexico City. “We are a big exporter of fish and seafood, but the government took away funding from [fishing council] Conapesca. We are a big exporter of medical equipment but they cut money for the certifying body Cofepris. It’s madness.” López Obrador dreams of restoring Mexico’s economy to the oil-powered, state-dominated days of the 1970s

One of López Obrador’s first decisions as president was to shut the government agency ProMéxico, which worked to promote investment in Mexico and had 51 offices overseas. The president said they were “supposedly dedicated to promoting the country, which is ridiculous because there are no ProGermany, ProFrance or ProCanada offices”. In fact, most countries have government agencies to promote foreign investment. “Deep down,” de la Calle says, “as absurd as it may sound, López Obrador believes that economic success is not possible by itself. It is always the result of luck or corruption.”

With information from FT

Mexico Daily Post

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