Economy

How The New World Order Looks In AMLO's Mexico

Mexico's socialist president is deluded if he thinks he can turn the clock back and restore his vision of the welfare state.

AMLO, showing the way?
AMLO, showing the way?
Luis Rubio

-OpEd-

MEXICO CITY — The past will not return. Mexico and the world have changed, each at its own pace and in its own way, and the only thing we know for sure is that the future looks different. The old order, as it were, is over. We are at a gigantic breaking point in history, and any delay in absorbing this fundamental truth could only make the future worse.

Humanity's most natural propensity is to cling to what exists, to what is familiar. The clearest illustration of that is in our unending, daily efforts to put the genie back into its bottle. Instead of accepting new realities, we dream of returning to what he had: if only the attacks of September 11, 2001 had not happened, candidate X (insert name of choice) had not lost, etc.. It is like trying to force toothpaste back into the tube. So the only question left is: what next?

Amid his struggle for India's independence, Mahatma Gandhi was asked what he thought of Western civilization, to which he reportedly replied, "it would be a good idea." Attaining civilization means achieving a new state of stability, growth and civility, which are the three big elements missing in our current reality. Clearly the path we have taken will not lead to any of these, so Gandhi's response is entirely pertinent to Mexico today. Civilization must be built, not received.

We need to recognize that the juncture at which we find ourselves is not fortuitous, nor the result, originally at least, of the current government. The blame falls on a succession of governments that made changes and implemented reforms without repairing either the societal or political structure in which they were working.

Reforms began in 1983 when the country was at a dead end: the governments of the 1970s had bankrupted Mexico. One may or may not agree with the reforms' direction, but there was no alternative to the urgent need to restructure the government and stabilize the economy. Subsequent governments gave them their own slant, some with a bigger vision and greater abilities, others with greater clarity in direction, and one at least with an utter inability to understand the challenge ahead.

Street scene, Mexico City — Photo: Carl Campbell

Without a doubt it was the last government, of President Enrique Peña Nieto, which failed most of all to understand: firstly why the electorate had given his party, the PRI, a new opportunity; and secondly, the enormous potential placed in its hands. Instead of building a "new state," his project kept to advancing certain reforms (which were not negligible though we shall only see their worth when the country falters in the medium term), while the country was ransacked as never before.

Yes, without Peña's government, Mexico would be a very different country today.

Nobody can blame President Andrés Manuel López Obrador, AMLO, for the causes of his victory. His decisive win was a condemnation and a clear message: voters felt betrayed by the outgoing government and shifted en masse toward the one option that offered something different. And that different thing is the polity being forged today with an eye on the future. This is not just another government, but another way of seeing and understanding the world.

Like in the rest of the world, nothing here is guaranteed to endure.

There is a lot of talk about the end-of-the-world order built after World War II. The reason, as inside our country, is that there are new actors, new power realities and new rules of the game. We are at the end of a cycle where the new powers-that-be will try and impose themselves on different political, socio-economic and electoral sectors and institutions. Gradually, new values and criteria will emerge and affect for better or worse, the way people rise to power, the effective rights of citizens, the way in which the economy is run and how social controls are acquired.

This new order does not necessarily mean less poverty, more equality or an improved economic situation. It only implies new rules that meet the needs of the groups in power. As in the rest of the world, we find ourselves in a moment of change when everything is being remolded and susceptible to change, and nothing around us is guaranteed to endure. All this creates an environment of inexorable uncertainty.

The president has set himself to the task of reassuring the various social interests that his conception of the old Mexico is viable, and like it or not, the country's key actors in business, politics and the trade unions, have heard the message and are trying to adapt. Yet this is a deceptive scenario, a calm before the storm: for the new rulers will in time impose their rules, interests and values. That will be the new order in the world, with no good reason to assume it will be benign.

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Society

Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum

-Analysis-

SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.


It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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