From nationalism to neoliberalism

Stalled growth put Mexico’s neoliberal conversion back on the political agenda in the run up to the latest presidential elections


Managing Mexico: Economists from Nationalism to Neoliberalism
Sarah Babb
2001, Princeton University Press
295 pages

Reviewed by Gavin O’Toole

HE MAY NOT have conjured up images of the Latin American revolutionary of popular imagination from behind his desk at Mexico’s finance ministry, but Francisco Gil Díaz was among the first to storm the barricades in what has been called the “silent revolution”of the 1980s. Trade liberalisation sweeping away the protectionist barriers that had held for a generation followed by radical surgery to bloated, bureaucratic states ushered in a new era of neoliberal reform.

As debates about the merits of neoliberalism intensify across Latin America, Sarah Babb’s fascinating history will be of great interest at a time when political leaders speaking the language of economic populism gain in popularity in Mexico and across the region. Mexico’s economy has stalled under the man who overturned 71 years of single-party rule, President Vicente Fox of the National Action Party, whose initial appointment of Gil Díaz was an emphatic signal that the neoliberal orthodoxy was here to stay.

As the country glided uncomfortably into the long political race to find Mr Fox’s successor, its model of development was up for debate as never before. The inability of neoliberal policies to resolve pressing problems of unemployment and severe poverty provided a fitting backdrop for this epic. Indeed, employment in manufacturing recently declined to the levels of 1994, the year in which the provisions of the neoliberals’ great monument to free trade, the North American Free Trade Agreement (NAFTA) came into force.

Original “Chicago Boy”

Gil Díaz had been Mexico’s original “Chicago Boy” since the 1970s, instrumental in establishing a new conventional economic wisdom in the country and the embodiment of a new generation of Americanised economists who began to dominate policymaking following the severe 1982 debt crisis. Babb’s economic history traces the rise of such characters as economists abandoned the nationalist model cherished by the country’s leftwing academics for a free-market consensus advocated by a camarilla of US-trained technocrats wired into the University of Chicago.

For a generation Mexico’s public universities had schooled economists in a radical tradition influenced by dependency theory, and had inserted them seamlessly into positions of influence within the dominant bureaucracy. But a counter-culture nurtured by conservatives at Mexico’s central bank emerged at the elite private Autonomous Technological Institute (ITAM), which became the forward command post of Chicago school monetarism in Mexico, mirroring a process that had occurred in Chile. The Chicago school eschewed state interference in monetary policy and developmentalism. Gil Díaz, himself a Chicago alumnus, became ITAM’s director of economics in 1973.

Neoliberalism found an audience at a time when obese states precariously built upon populist foundations pursued development policies addicted to debt, and the 1982 debt crisis confirmed its triumph. The pressing need for economists who spoke the language of the IMF and US Treasury in order to manage debt and reduce the size of the state placed the technical financial skills developed at ITAM in great demand. Market reforms were promoted confidently by such figureheads as Gil Díaz, and from 1984-86 Mexico began to dismantle trade barriers and privatise its large, inefficient state-owned industries.

As growth in Mexico has stalled and the weapons in its neoliberal armoury have proved ineffective in resolving pressing questions of poverty and inequality, comparisons with the statist policies that led to the spectacular growth rates of the “Mexican Miracle” have increased. Babb’s fine scholarship illuminates how the retreat from national policies and pressures to adopt universal policymaking norms depoliticised the debate over the form economic development should take in Mexico and beyond. But that debate has become politicised anew and her work will provide a unique reference for those who wish to contribute to it.

Gavin O’Toole is Editor of the Latin American Review of Books

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