Hornberger's Blog

Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
Here's the RSS feed or subscribe to our FFF Email Update to receive Hornberger’s Blog daily.

Mexicans Will Not Fare Well Under AMLO

by

Despite high hopes among the American people that their new president Andres Manuel Lopez Obrador, also known as AMLO, will fundamentally transform Mexico and finally bring economic prosperity to the country, the sad reality is that it just won’t happen. Mexico will remain mired in the level of deep poverty that it has suffered for centuries.

How do I know that? Because AMLO is a leftist, as in socialist, leftist, progressive — whatever label one wishes to use to describe a person whose philosophy is that government should regulate the economy, own businesses and industries, and confiscate money from those who have it and redistribute to the poor. What socialists just don’t get is that it is their philosophy and programs that are the root cause of economic misery and suffering among the very people they wish to help.

Mexicans have always lived under a governmental system in which the government highly regulates, controls, and taxes economic activity. Naturally, this type of system lends itself to a nice bribery system for people who are able to procure government jobs. To avoid a regulation or tax, people pay bribes. It’s a nice racket for public servants, stretching from the lowly cop on the beat all the way up to the highest reaches of the government.

Among the best examples of this phenomenon is the drug war, which is in essence a massive criminal regulation involving the production and sale of illegal drugs. To avoid getting arrested and prosecuted, drug cartels pay massive amounts in bribes to public officials.

Following a long line of other Mexican politicians, AMLO is committed to rooting out the corruption and getting better people in public office. He’s even setting an example of political honesty and purity by refusing to live in the Mexico White House and instead is choosing to live in an apartment, which has inspired his followers into thinking that this time around, the situation in Mexico is going to be completely different.

It’s not going to happen. AMLO’s reforms are entirely cosmetic. They don’t get to the root of the problem, which is the rotten regulated-economy, welfare-state economic system itself. No matter how many better people AMLO puts into the government, nothing is going to change. As long as Mexicans live under a rotten system, they are going to live in poverty, no matter how many good people are serving in the government.

Again, let’s return to the drug war. As long as the possession and distribution of drugs are illegal, there are going to be drug cartels and bribes. It’s just a principle of economics. It doesn’t matter how much many good cops and better politicians are put in office. As long as drugs are illegal, there are always going to be those who succumb to the temptation of the bribe, especially as it increases in size. If one wants to get rid of drug cartels and drug bribes, there is but one solution: Legalize drugs. Get government out of the drug-enforcement business. Immediately, drug cartels would disappear, along with the drug bribes.

The same holds true for economic regulations. Get rid of the regulations, and the opportunity for bribes goes away. The ideal, of course, is a total separation of economy and the state, one in which the government is absolutely prohibited by the nation’s constitution from regulating, controlling, or taxing economic activity.

Obviously, that’s not going to happen in Mexico under AMLO. Instead, Mexico will continue to operate under a highly regulated, controlled, and taxed economic system. That means continued poverty and bribes, even as AMLO goes to work every day from his apartment rather than from the Mexican White House.

AMLO is also dedicated to maintaining and even expanding the standard socialist welfare-state programs that have long characterized Mexico and, for that matter, Cuba, Nicaragua, Venezuela, and other socialist countries: retirement benefits for seniors (i.e., Social Security); free or inexpensive healthcare for people (i.e., Medicare and Medicaid), public schooling, a central bank (i.e., Federal Reserve), public housing, and government-owned enterprises. What he doesn’t realize is what every leftist fails to realize — that these socialist programs are among the root causes of poverty within the nation.

There are but two ways to increase the overall standard of living in society.

The first method is through the accumulation of capital, as in better better tools and equipment that make workers more productive. More production means the ability of businesses to pay higher wages. A society that is producing ten million dollars worth of goods is going to have higher wage rates than a society that is producing one million dollars worth of goods. A farm where workers are using tractors to produce more wheat is going to be paying higher wages than a farm where workers are using hoes to produce less wheat.

How does capital come into existence? Through savings. As people save a portion of their income, they deposit it in banks, which then lend it to businesses to enable them to purchase better tools and equipment. If people aren’t saving anything because of the government’s high taxes, then capital is not going to come into existence, which means no increase in the overall standard of living.

The second method of raising the standard of living is through trade. In every trade, people give up something they value less for something they value more. Thus, the mere act of trade raises people’s standard of living.

The welfare-state, regulated-economy, welfare-state system tends to destroys both of these wealth-producing methods. By interfering with the ability of people to trade, the state lowers people’s standard of living. The more regulations and controls on economic activity, the more impoverished the citizenry. And by taxing the rich and middle class to provide welfare benefits to the poor, the state prevents people from saving money, which inhibits the growth of productive capital, which suppresses increases in the standard of living.

The key to alleviating poverty in Mexico and everywhere else is to stop government from waging war on poverty. What AMLO should to fundamentally transform Mexico for the better is the following:

(1) Abolish all welfare-state programs, including Social Security, Medicare, public schooling, public housing, the central bank, and all the rest.

(2) Abolish income taxes and all the other taxes that are used to fund these socialist programs.

(3) End all governmental regulation of economic activity, including the drug war.

(4) Place all state-owned enterprises under private ownership.

(5) Open Mexico’s borders to the free movements of goods, services, and people into and out of the country.

We all know that that’s not going to happen. AMLO is a leftist. Obsessed with ending poverty, he remains blissfully unaware of what causes wealth. His prescription for helping the Mexican poor, no matter how well-intended, will consign them to the same poverty under which they have always suffered.

But hey, there is one bright spot about AMLO’s plan to help the poor. So far, surprisingly, he isn’t calling for a $15 per hour minimum wage. Let’s hope he doesn’t start talking to American leftists.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.