In order to solve a problem, it is necessary to ask the right questions.
During his recent visit to Washington, Mexican President-elect Vicente Fox asked the wrong questions: “How can we narrow the gap in income on both sides of the border?” and “How can we put together a fund for development?”
The questions that Fox should ask instead are: What are the causes of poverty? What are the causes of wealth? Why have the Mexican people always had a lower standard of living than Americans?
I was born and raised in Laredo, Texas, which is situated on the Rio Grande in South Texas. Immediately across the river is Nuevo Laredo, Mexico. Both cities form one big metropolitan area that is separated by a river, much as St. Louis and East St. Louis are separated by the Mississippi.
When I first visited Nuevo Laredo as a child, I was immediately struck by a readily observable fact: There was much more poverty on the Mexican side of the river than there was on the American side. Why? How could a river cause such a large disparity in income and wealth?
Could the reason be that Mexicans have a different history and culture? Perhaps, but before it won its independence from Mexico, Texas was a part of Mexico. Thus, even today Laredoans share much of the same culture and history as Nuevo Laredoans.
Could the reason lie with natural resources? Perhaps, but everyone knows that Mexico has been blessed with enormous reserves of petroleum.
Could education explain the disparities of income and wealth? Perhaps, but in Mexico, as in the United States, the state has established a system of free education for all children in the country.
The real reason for the wealth and poverty of a nation is not a comfortable one for Fox or any other Mexican politician or bureaucrat, which is the primary reason that they would rather not discuss it. The reason for the relative poverty of the Mexican people lies with the Mexican government itself or, more specifically, with the economic system under which the Mexican people have suffered for many decades.
Mexico’s economic system is a combination of mercantilism, socialism, and fascism, all wrapped into one dirty little package, a package that for decades has provided the means by which Mexican public officials have plundered and looted the Mexican people through taxes, licensing fees, permits, regulatory fines, and, of course, good old-fashioned corrupt bribes commonly known as mordidas .
In Mexico, the state is everywhere and taxes and controls everything. And it’s all justified by cradle-to-grave government welfare programs such as old-age assistance, health care, and public education. And the myriad Mexican regulatory agencies are justified in the name of protecting the people from the evils of the “capitalist” marketplace.
Thus, the reason Mexico is poor has nothing to do with history, culture, resources, or education. Mexico is poor because for more than 175 years, the Mexican government has had the power to combat poverty and “help the people” with its bureaucracies, agencies, taxes, welfare, and regulation.
The secret to rising standards of living and the creation of a wealthy society lies in ever-increasing amounts of capital accumulation, which can only come from private saving, which in turn makes people more productive. And the less people are taxed, the more they are able to save.
Thus, the solution to the creation of a wealthy society is a counterintuitive one: Prohibit your government from “helping the people” with welfare, education, health care, and regulation, and abolish the taxation that funds such programs.
Why then does the United States have a higher standard of living than Mexico, when we ourselves have Social Security, welfare, regulation, bureaucracies, Medicare, and public schooling? For one simple reason: we have less of all this than Mexico has. Societies in which there is less taxation and less government intervention in economic affairs are societies that have relatively higher standards of living. That’s why West Berlin had a higher standard of living than East Berlin. And why Hong Kong (which has no natural resources) has a higher standard of living than Cuba.
Mexico’s politicians and bureaucrats, of course, have the most to lose from the dismantling of Mexico’s mercantilist, socialistic, fascist economic system. That’s why the right questions and answers are unlikely to come from them. To finally experience a society in which people’s standard of living is constantly increasing, the Mexican people need to ask themselves the right questions.