October 20, 2000
by Jacob G. Hornberger
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?
Could the reason be that Mexicans have a different history and culture? Perhaps, but the American Southwest shares much of the same history and culture, since it was once part of Mexico.
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 and regulatory programs, such as old-age assistance, health care, public education, and occupational licensure.
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 come only from private saving, which in turn makes people more productive. And the less people are taxed, the more they are able to save.
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 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.
Mr. Hornberger is founder and president of The Future of Freedom Foundation (www.fff.org) in Fairfax, Va.