How to kill growth | The Economist

Growing up is not a miracle, it is not easy; institutions are required to facilitate it and there is trust in those institutions …

The historical evidence at the world level leaves no doubt in this regard: sustained economic growth is the main source of reducing poverty. As an economy grows driven by the accumulation of capital, physical and human, together with a continuous technological change that increases the productivity of the factors of production, it translates into a higher real return, both for the holders of physical capital and for those with human capital, that is, workers. It is economic growth that allows reaching a higher level of well-being, both at the family level and at the level of society as a whole.

International evidence also allows us to conclude that for an economy to experience a sustained growth process, certain institutional conditions are required to facilitate and promote it. These include an efficient definition of private property rights (including an efficient patent system that protects industrial and intellectual property), an independent and impartial judiciary that guarantees and protects these rights and guarantees compliance with contracts, stability in the purchasing power of the currency, markets for goods, services and efficiently regulated factors of production that tend to operate in competition, including that coming from external sources, for which the economy is required to be open to both international trade and trade. capital and an educational system that results in an accumulation of high-quality human capital.

Growing up is not a miracle, it is not easy; institutions are required to facilitate it and there is trust in those institutions. What is easy is to destroy trust and kill growth, and this is precisely what the president has done since, de facto, he governs as of September 1, 2018.

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The cancellation of the airport in Texcoco in October 2018 based on an illegal and rigged consultation, the cancellation of the brewery in Mexicali with another equally tricky consultation, the capture of regulatory bodies (CRE, CNH), the continuous attacks on autonomous bodies of the State (INE, INAI, IFT, Cofece), the attack against civil society organizations, the cancellation of the educational reform, returning power to the teacher unions, the increasing militarization, the attacks against various media of communication, the approval of various unconstitutional laws with the complicity of a subjugated Legislative Power, the attempt to capture the Federal Judicial Power, the refusal to support private companies and their employees in the face of the shock derived from the pandemic, their open and illegal interference in the ongoing electoral process, the proximity to countries ruled by tyrants (Cuba, Venezuela and more recently China and Russia) and a long etc.

All these acts, individually and collectively, have been undermining the institutional arrangement and trust, essential elements for private investment and growth, and the result is in sight. Gross capital formation by the private sector during the second quarter of 2020 (before the pandemic) was 24% lower than that registered in the second quarter of 2018; As of February of this year, the total gross investment was at a similar level to that of December 2010. With an increasingly smaller private investment and little public investment destined to projects with a socially evaluated negative present value (Dos Bocas, the Mayan Train and the airport in Saint Lucia), have diminished the growth potential of the economy and, consequently, the possibilities of gradually reducing poverty.

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All in less than three years of government.

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Economist and professor

Point of view

Knight of the National Order of Merit of the French Republic. Professional Merit Medal, Ex-ITAM.

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