Mexico's liberalization strategy, 10 years on: results and alternatives.

Author:Peters, Enrique Dussel

A liberalization strategy began in Mexico during 1988 under the Salinas administration, and since 1994, that strategy has been continued, with minor changes, under President Zedillo. The Mexican economic strategy is an important test case for the success or failure of liberalization strategies, which have been implemented by many nations in the periphery, particularly in Latin America and Eastern Europe. Although the strategy of liberalization has a theoretical background, this has been left out of most academic and policy discussions. As this paper will demonstrate, the strategy of liberalization is closely linked to neoliberalism, but it is, nevertheless, of the utmost importance to define the two concepts and to distinguish between them, both theoretically and historically.

The first part of this paper discusses the theoretical foundation of the liberalization strategy and differentiates this concept from neoliberalism. This is significant since in Latin America, and many other nations, neoliberalism has come to represent the "evil of all evils" and to be held responsible for all problems by people who have no clear notion or definition of what neoliberalism really is. The second part of the paper analyzes the liberalization strategy that has been operating in Mexico since 1988 and briefly evaluates its performance up to 1997. based on these first two parts, the final section of this paper draws conclusions about liberalization strategy and about potential alternatives.

Neoliberalism and Liberalization Strategy

The conceptual and theoretical core of neoliberalism - developed particularly by Friedrich August von Hayek and Milton Friedman during the 1950s and 1960s - is a direct response to the emergence, and subsequent predominance, of Keynesianism in Western capitalist societies and to the socialism that evolved in the former Soviet Union, China, and many other nations following World War II. The neoliberal core is based on three important concepts: imperfect information, individual freedom, and the market.(1) Since, by definition, any science, individuals in general, and society as a whole have imperfect information about past and present developments and events, any strategy or society attempting to plan or make policies despite this uncertainty is ahistorical, irrational, and doomed to fail [Hayek 1981,1]. However, neoliberalism goes further, pointing out that any attempt to plan or construct a society, which attempts to go beyond these natural restrictions, is dangerous for the Great Society and the existing social order. Furthermore, neoliberalism is based on the freedom of, and private ownership by, individuals who seek to maximize their preferences. This apparently natural and unhistorical behavior is particularly important from an economic viewpoint because it leads to political freedom. Thus, individual economic freedom is the basis for any civilized society and is a direct response to totalitarianism or to any form of economic planning. Nevertheless, given the constraints of information, the need for a government derives from the fact that absolute freedom is impossible [Friedman 1962]. Finally, the market is the first and last objective of neoliberalism and of human history; it is a "system of communication . . . which has shown itself to be the most efficient mechanism, consciously created by human beings, for the use of information originating from many different sources" [Hayek 1975, 21-22].(2) The market is the principal economic and social institution within which individuals adjust their preferences according to price signals, in spite of restriction in the available information. Von Hayek and Friedman are aware of the market's limitations, since perfect competition, individual freedom, and private ownership, as well as instantaneous price adjustments, depend on perfect information. The concept of "market" thus becomes a utopia, and yet it is dogmatically defended by neoliberalism against any form of planning or state intervention [Hinkelammert 1984; Gomez 1995].

The framework of neoliberalism, as set out above, has several theoretical and conceptual shortcomings, particularly in its dogmatic and legitimizing ideology, in its bipolar thinking - capitalism vs. socialism; freedom or spontaneous order vs. chaos; critical rationalism vs. constructive rationalism; God or the devil - as well as in its conclusions based on ideas of imperfect information. Nevertheless, the conclusions of this school of thought are very forceful and influential in today's social sciences, particularly in the field of economics. The impossibility and danger of any kind of planning and intervention - i.e., questioning of the state and of any policies that attempt to address market conditions and results, even when these policies explicitly include programs designed to combat poverty and the regressive distribution of income - are highly significant, because imperfect information does not allow for any market intervention, since such intervention would result in a worsening of the initial conditions.(3)

During the 1960s and 1970s, this same neoliberal framework was very influential in Latin America, particularly in South America [Foxley 1988], and was linked to military regimes and the fight against "totalitarianism." In the name of freedom and of being against any form of market intervention, neoliberalism actually legitimized these violent, military regimes.

However, it is important to distinguish between Von Hayek and Friedman in the 1960s and 1970s and the theoretical framework of the liberalization strategy that has been evolving since the 1980s, and which has now become, as this century draws to a close, the apparent predominant theoretical policy framework within economics and economic policy. Since the 1970s, a growing number of authors, particularly in the United States, have been...

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