Geopolitics

President AMLO's Misguided Nostalgia Creeps Toward Despotism

Mexico's socialist president is determined to restore a 'strong' presidency he believes will put things right in Mexico. To many, he is starting to look like another tropical dictator of sort.

Andres Manuel Lopez Obrador
Luis Rubio

-OpEd-

MEXICO CITY — Napoleon Bonaparte once declared that one must be petty to win power, but high-minded and generous in its exercise. Three years into his presidency, Mexico's Andrés Manuel López Obrador (AMLO) seems only to have grasped the "petty" part. He doesn't — or refuses to — understand the difference.

Instead of governing, which he has said is "so easy," he has devoted himself to dividing Mexicans while he forwards his own agenda. That essentially consists of sweeping away everything pertaining to the last 40 years. It is entirely understandable, as his project clashes head-on with the reform policies and gradual development of state institutions undertaken over four decades.

People protest against Mexican President Andrés Manuel Lopez Obrador in Mexico City — Photo: Jose Pazos Fabian/EFE/ ZUMA

What he wants is to build on his own vision of how this country should work. That means reviving his recollection of Mexican history, and as he remembers it, a society living a golden age in the 1970s, under an all-powerful presidency. In this mental caricature of our recent history, the president could impose his will, which meant the country worked, the economy grew and there was order. Those of us who remember the 1970s know that the decade's two presidents, Luis Echeverría and José López Portillo, were precisely the initiators of a period of economic instability that would soon run out of control.

The author of a book on the palace at Versailles once observed that King Louis XIV had built it, Louis XV enjoyed it, and Louis XVI paid for it. Mexico's history in the mid-20th century isn't so different. Stabilizing development allowed the economy to grow, Echeverría and López Portillo (who presided over the so-called "tragic 12 years') enjoyed its fruits and in the 1980s, Mexicans had to pay for their leaders' frivolity and (personal, political and financial) recklessness.

He isn't just peddling nostalgia, but an extravagant dream that may become a nightmare.

The 1980s were a convulsive period. There was an economic crisis and almost hyper-inflation, excessive debt, tremendous anger and distrust, and repeated attempts to restore a semblance of order and stability in all aspects of national life. Various attempts to return to the period of stabilizing growth failed, until the country finally realized this was no longer possible. This was because the world, and Mexico, had changed; and that led the country into a period of political and economic reforms. These were partial and unequal, but without a doubt restored a measure of political and economic order in the country. Their costs however included loss of control over parts of the country and rising crime.

A key part of those reforms was to build institutions (including a new Supreme Court, an electoral body and an independent rights commission) meant to instill confidence among the public, businesses and other sectors of society. The new institutions were not all equally effective, but had a shared logic: to confer certainty, and act as checks to an all-powerful executive branch. The aim (at least) was to move toward a modern economy and democratic society.

Former U.S. President Jimmy Carter and former Mexican president José López Portillo toast during a luncheon hosted by the President of Mexico in 1979 — Photo: Public Domain

The problem for Mexico is that the presidential vision is sharply at odds with realities and public expectations in the 21st century. Many ordinary folk voted for AMLO, either believing in him or out of disgust at the state of things. Yet he isn't just peddling a nostalgic foray into the past, but an extravagant dream that may become a nightmare. This may well be why the presidential party took a drubbing in recent, regional and legislative elections.

As the Chinese journalist Deng Yuwen has observed, the essence of democracy is to restrict the power of the state, while an unfettered concentration of powers is the ultimate cause of social problems. President AMLO is starting to get a taste of both.

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Economy

Merkel's Legacy: The Rise And Stall Of The German Economy

How have 16 years of Chancellor Angela Merkel changed Germany? The Chancellor accompanied the country's rise to near economic superpower status — and then progress stalled. On technology and beyond, Germany needs real reforms under Merkel's successor.

Chancellor Angela Merkel looks at the presentation of the current 2 Euro commemorative coin ''Brandenburg''

Daniel Eckert

BERLIN — Germans are doing better than ever. By many standards, the economy broke records during the reign of outgoing Chancellor Angela Merkel: private households' financial assets have climbed to a peak; the number of jobs recorded a historic high before the pandemic hit at the beginning of 2020; the GDP — the sum of all goods and services produced in a period — also reached an all-time high.

And still, while the economic balance sheet of Merkel's 16 years is outstanding if taken at face value, on closer inspection one thing catches the eye: against the backdrop of globalization, Europe's largest economy no longer has the clout it had at the beginning of the century. Germany has fallen behind in key sectors that will shape the future of the world, and even the competitiveness of its manufacturing industries shows unmistakable signs of fatigue.

In 2004, a year before Merkel was first elected Chancellor, the British magazine The Economist branded Germany the "sick man of Europe." Ironically, the previous government, a coalition of center-left and green parties, had already laid the foundations for recovery with some reforms. Facing the threat of high unemployment, unions had held back on wage demands.

"Up until the Covid-19 crisis, Germany had achieved strong economic growth with both high and low unemployment," says Michael Holstein, chief economist at DZ Bank. However, it never made important decisions for its future.

Another economist, Jens Südekum of Heinrich Heine University in Düsseldorf, offers a different perspective: "Angela Merkel profited greatly from the preparatory work of her predecessor. This is particularly true regarding the extreme wage restraint practiced in Germany in the early 2000s."

Above all, Germany was helped in the first half of the Merkel era by global economic upheaval. Between the turn of the millennium and the 2011-2012 debt crisis, emerging countries, led by China, experienced unprecedented growth. With many German companies specializing in manufacturing industrial machines and systems, the rise of rapidly industrializing countries was a boon for the country's economy.

Germany dismissed Google as an over-hyped tech company.

Digital competitiveness, on the other hand, was not a big problem in 2005 when Merkel became chancellor. Google went public the year before, but was dismissed as an over-hyped tech company in Germany. Apple's iPhone was not due to hit the market until 2007, then quickly achieved cult status and ushered in a new phase of the global economy.

Germany struggled with the digital economy, partly because of the slow expansion of internet infrastructure in the country. Regulation, lengthy start-up processes and in some cases high taxation contributed to how the former economic wonderland became marginalized in some of the most innovative sectors of the 21st century.

Volkswagen's press plant in Zwickau, Germany — Photo: Jan Woitas/dpa/ZUMA

"When it comes to digitization today, Germany has a lot of catching up to do with the relevant infrastructure, such as the expansion of fiber optics, but also with digital administration," says Stefan Kooths, Director of the Economic and Growth Research Center at the Kiel Institute for the World Economy (IfW Kiel).

For a long time now, the country has made no adjustments to its pension system to ward off the imminent demographic problems caused by an increasingly aging population. "The social security system is not future-proof," says Kooths. The most recent changes have come at the expense of future generations and taxpayers, the economist says.

Low euro exchange rates favored German exports

Nevertheless, things seemed to go well for the German economy at the start of the Merkel era. In part, this can be explained by the economic downturn caused by the euro debt crisis of 2011-2012. Unlike in the previous decade, the low euro exchange rate favored German exports and made money flow into German coffers. And since then-European Central Bank president Mario Draghi's decision to save the euro "whatever it takes" in 2012, this money has become cheaper and cheaper.

In the long run, these factors inflated the prices of real estate and other sectors but failed to contribute to the future viability of the country. "With the financial crisis and the national debt crisis that followed, economic policy got into crisis mode, and it never emerged from it again," says DZ chief economist Holstein. Policy, he explains, was geared towards countering crises and maintaining the status quo. "The goal of remaining competitive fell to the background, as did issues concerning the future."

In the traditional field of manufacturing, the situation deteriorated significantly. The Institut der Deutschen Wirtschaft (IW), which regularly measures and compares the competitiveness of industries in different countries, recently concluded that German companies have lost many of the advantages they had gained. The high level of productivity, which used to be one of the country's strengths, faltered in the years before the pandemic.

Kooths, of IfW Kiel, points out that private investment in the German economy has declined in recent years, while the "government quota" in the economy, which describes the amount of government expenditure against the GDP, grew significantly during Merkel's tenure, from 43.5% in 2005 to 46.5% in 2019. Kooths concludes that: "Overall, the state's influence on economic activity has increased significantly."

Another very crucial aspect of competitiveness, at least from the point of view of skilled workers and companies, has been neglected by German politics for years: taxes and social contributions. The country has among the highest taxes on income in Europe, and corporate taxes are also hardly as high as in Germany anywhere in the industrialized world. "In the long run, high tax rates always come at the expense of economic dynamism and can even prevent new companies from being set up," warns Kooths.

Startups can renew an economy and lay the foundation for future prosperity. Between the year 2000 and the Covid-19 crisis, fewer and fewer new companies were created every year. Economists from left to right are unanimous: Angela Merkel is leaving behind a country with considerable need for reform.

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