The Global Economic Order and Exclusion in Mexico

Poor family, San Cristóbal de las Casas, Chiapas

U.S. president-elect Donald Trump has targeted Mexico as one of the main sources of job losses in the U.S., leaving many people with the mistaken impression that countries such as Mexico have been the winners in the global competitive game. However, today’s liberal trade and investment order, as I suggested in an earlier blog post, has not, on balance, benefitted Mexico. From 1996 to 2015, the Mexican economy has grown at the average annual growth rate of only 1.2 percent. With such lacklustre growth, the country’s poverty rate increased by 2.9 percent between 2008 and 2014. Inequality has also risen. While the top 10 percent saw their incomes rise, the bottom 50% of the population either failed to see their situation improve, or saw it deteriorate. In 2012, the total household income of the bottom 10 percent of the population was substantially lower than it was in 2008, despite some slight improvement in 2010.

Poverty and Exclusion in Southern Mexico

There is a striking regional and cultural aspect to this high degree of inequality and exclusion. While northern Mexico has very few municipalities with over 20 percent poverty, southern Mexico, where the majority of the indigenous population resides, has the highest levels of both poverty and extreme poverty. According to the Economic Commission for Latin America and the Caribbean, an estimated eighty percent of the country’s indigenous population, the majority of whom live in southern Mexican, live in extreme poverty. Chiapas and Oaxaca have the nation’s poorest municipalities with poverty rates of over 96 percent. The long-standing policy neglect of the south has meant a lack of clean water, schools, adequate sanitation, and health care with the result that average maternal mortality rates, death due to preventable diseases, infant mortality rates, malnutrition, and illiteracy are all higher than the national average. The fact that the states of Oaxaca and Chiapas have the highest proportions of non-Spanish language speakers further reinforces the marginalization of their populations. Even more disturbing is the fact that the country’s much lauded targeted poverty alleviation program (Oportunidades and now optimistically named Prospera) fails to reach the poorest among the indigenous population. This failure has been due to the fact that to qualify for this program, communities must already have educational and health services and many indigenous communities do not even have these basic services.

The deprivation faced by Mexico’s indigenous population arose from a long history of political repression, plunder, and government neglect. As I have argued elsewhere, Mexican poverty and inequality involved a number of highly resilient path dependent processes. Given that under traditional authoritarian PRI (Institutionalized Revolutionary Party) rule, the peasant sector experienced the most coercive form of political control (compared with organized labor and the middle classes), one might have assumed that the arrival of electoral democracy in 2000 would have ushered in material improvements for the poor indigenous population. However, market liberalization brought about even greater hardship.

Economic Liberalization and the Two Mexicos

The remnants of authoritarian political control made it unlikely that indigenous farmers would be able to block the government’s plans to liberalize the agricultural sector. The government withdrew the meagre benefits afforded to peasants in the form of marketing boards and special loan facilities. These measures in combination with declining commodity prices meant that poverty in southern Mexico rose in the late 1980s and early 1990s, even as it declined elsewhere in the country. These circumstances set the stage for the rise of the Zapatistas, an insurgent group seeking social justice for the country’s poor indigenous population. When the government further liberalized the agricultural market and corn imports from the U.S. flowed into the country, the peasants of southern Mexico suffered another blow.

Zapatista March, San Cristóbal de las Casas, 2012

Now, more than ever, there are two Mexicos. Mexico’s enthusiastic adherence to market liberalization and integration with global markets has produced a national regional divide that is much sharper than in the past. While the north of the country has experienced growth and close integration with the U.S. market through participation at the low paid/low technology end of global value chains, the south remains mired in poverty. Resource development in the petroleum regions of the southern states during the 1970s worsened the situation for many of the indigenous population as they saw their land contaminated while gaining only low-skill, low-paid employment. What is required in southern Mexico is investment that benefits local communities and protects the environment. It is, of course, true that the exclusion of the indigenous population is a long-standing problem in Mexico and that the current liberal trade and investment order did not create this very serious problem. However, the regional impact of Mexico’s enthusiastic adoption of market principles will now make it exceedingly difficult to muster the political will to address the marginalization of the country’s indigenous poor.

The Global Order and Regional Inequality

In Mexico, as elsewhere, market-directed trade and investment has contributed to sharp regional divisions and to political polarization. We saw this in the United States in the support of the “rust belt” (the de-industrialized regions of the U.S.) and rural states for Donald Trump and in the support for Brexit among those in England residing outside of London - although there were also demographic factors (gender, age, and education) at work in these cases. Regardless, it is clear that reliance on the market has contributed to the deepening of political divisions, rendering consensus politics and the mitigation of exclusion more difficult. It is also clear that the most costly burdens have been born by the poor of countries such as Mexico whose leaders, mesmerized by the promises of the market, bought into the free trade mythology.