John M. Ackerman: Neoliberal Handouts to Address Mexico's Poverty Won't Work John M. Ackerman - La Jornada
go to original January 22, 2013

The new media spectacle of the "National Crusade Against Hunger" will solve absolutely nothing if it is not accompanied by an abandonment of the 'neoliberalism that excludes', which has characterized economic policy for three decades. Hunger and extreme poverty will not end with more handouts or better "coordination" between existing social programs. Instead of deepening the paternalistic and clientelist [practice of giving preferential treatment to a particular interest group in exchange for its support] policies of the past, we must initiate a radical paradigm shift.

The main characteristic of the prevailing neoliberalism is not its commitment to "market principles", but its obsession with keeping control of wealth in few hands. What we have experienced since 1982 has not been the failed implementation of a flawed economic theory, but the successful imposition of a political strategy to expropriate the wealth of the nation in favor of a few. The books of Irma Eréndira Sandova and Dag MacLeod, among others, have documented with great rigor this process as it applies to Mexico. A recent text by George Monbiot  clarifies that what has happened in Mexico is not the exception but the rule internationally.

As a result of the implementation of the neoliberal strategy, today Mexico is one of the most unequal countries in the world. Its Gini coefficient, which measures income inequality in the country, is at 0.51, one of the highest in the world. Zimbabwe, Venezuela, Dominican Republic, China and Ecuador, among other countries, are more fair and just than Mexico.

The scenario is even more serious because inequality is measured in terms of accumulated wealth, rather than just annual income. The abuse of fiscal secrecy and evasion of taxes, unfortunately, does not permit us to have reliable data. Mexicans don't even know the extent of the vast fortunes of our president, his family and his cabinet, much less those of the most powerful businessmen.

However, a diplomatic cable of Wikileaks (reported by La Jornada and available here) revealed that, according to the U.S. embassy, the wealth of the ten richest Mexicans would add up to at least 10 percent of Mexico's GDP. Carlos Slim, Alberto Bailleres, Germán Larrea, Ricardo Salinas Pliego, Jerónimo Arango, Isaac Saba, Roberto Hernández, Emilio Azcárraga, Alfredo Harp Helú and Lorenzo Zambrano are the big winners of the business of neoliberalism.

The other side of the coin is the vast impunity that the major corporations rely on. The refusal of the governments of Barack Obama, Felipe Calderón and Enrique Peña Nieto to initiate criminal proceedings against HSBC officials for their complicity in massive money laundering operations in Mexico is just the latest example. The impunity of senior executives of Wal-Mart, following their involvement in bribing Mexican officials to get construction permits, is another important example. Once again the success of the neoliberal strategy is seen as consolidating a development model based on the absolute power of a few.

The first step for combating neoliberalism, then, should be to attack it in its heart and undertake a strong redistribution of wealth. For example, the imposition of a new tax on wealth or capital of the wealthiest families in the country should be considered. This type of tax goes beyond the ISR [Income Tax], which only charges a percentage of the profits, or the VAT [Value-Added Tax], which is levied on value added in order to collect a percentage of all assets held by an individual. There are already similar taxes in France and Spain, countries with much less inequality than ours. There is no reason not to consider their implementation in Mexico as well.

A tax on wealth would be much fairer than increasing the VAT, since everyone pays the VAT, while only the most privileged would pay the new tax. It would also generate huge amounts of new revenue for the State that later could be used to encourage investment and employment. Further, the resulting redistribution of resources would generate demand and the domestic economic investment necessary for triggering a new phase of development.

The poor do not need more handouts, but more power, wealth and employment in order to be able to participate actively in the economic and political life of the country. The true "crusade" should be in favor of social justice, not for consolidation of the same old palliative patronages. The time has arrived for the richest to return a little of everything that they have stolen from the people during the long neoliberal night.

Go to Spanish original

Posted by Jane Brundage

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